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Appeal No 153 of 1956 Appeal from the judgment and order dated November 3 1954 of the Punjab High Court in Civil Writ No 253 D of 1954 Veda Vyasa section K Kapur K K Jain and Ganpat Rai for the appellant H N Sanyal Additional Solicitor General of India H R Khanna and T M Sen for the respondents 935 1960 October 3 The Judgment of the Court was delivered by SUBBA RAO J This appeal by certificate is directed against the order of the High Court of Judicature of the State of Punjab dismissing the petition filed by the appellant under article 226 of the Constitution The facts giving rise to this appeal may be briefly stated The appellant is at present a resident of Barmer in the State of Rajasthan But before 1947 he was living in a place which is now in Pakistan On June 22 1951 the Deputy Superintendent Land Castoms Station Barmer conducted a search of the appellant s house and recovered therefrom the following ten articles Articles seized Weight Estimated value Rs 1 Silver slab 2600 tolas 5200 2 29 Sovereigns 2262 King Ed VII 3 9 pieces of gold bullion 201 tolas and 9 mashas 22193 4 4 pieces of silver bullion 114 tolas 230 5 Uncurrent silver coins numbering 575 865 6 Gold bars 49 tolas and 9 mashas 5475 7 255 Phials of liquid gold 9875 8 Torches 23 9 Playing cards 3 Dozens 400 10Glass beads 48 packets Total 46500 On July 14 1951 the Assistant Collector Ajmer gave notice to the appellant to show cause and explain why the goods seized from him should not be confiscated under section 1678 of the Sea Customs Act and section 7 of the The appellant in his reply 936 stated that items to 5 supra were brought by him from Pakistan after the partition of the country in 1947 and that items 6 to 10 were purchased by him bonafide for value in Barmer On October 27 1951 the appellant appeared before the Collector of Central Excise who made an enquiry and admitted before him that items 6 to 10 were smuggled goods from Pakistan but in regard to the other items be reitera ted his plea that he originally brought them from Pakistan in the year 1947 The Collector of Central Excise held that the appellant bad failed to establish that items 1 to 5 had been brought by him to India in the year 1947 and he also did not accept the plea of the appellant in regard to items 6 to 10 that he was a bonafide purchaser of them In the result he held that all the goods were imported into India in contravention of i section 3 of the Import Export Control Act read with sections 19 and 1678 of the Sea Customs Act ii sections 4 and 5 of the read with section 7 thereof He made an order of confiscation of the said articles under section 1678 of the Sea Customs Act and section 7 of the but under section 183 of the Sea Customs Act he gave him an option to redeem the confiscated goods within four months of the date of the order on payment of a sum of Rs 25000 In addition he imposed a penalty of Rs 1000 and directed the payment of import duty leviable on all the items together with other charges before the goods were taken out of customs control Aggrieved by the said order the appellant preferred an appeal to the Central Board of Revenue The Central Board of Revenue agreed with the Collector of Central Excise that the onus of proving the import of the goods in question was on the appellant In regard to items 1 to 5 it rejected the plea of the appellant mainly on the basis of a statement alleged to have been made by him at the time of seizure of the said articles In the result the appeal was dismissed The revision filed by the appellant to the Central Government was also dismissed on August 28 1953 Thereafter the appellant filed a writ petition under article 226 of the Constitution in the High Court 937 of Punjab but it was dismissed by a division bench of the High Court on November 3 1954 Hence this appeal It would be convenient to deal with this appeal in two parts one in regard to items 1 to 5 and the other in regard to items 6 to 10 The decision in regard to items 1 to 5 turns purely on the question of onus The Collector of Central Excise as well as the Central Board of Revenue held that the onus of proving the import of the goods lay on the appellant There is no evidence adduced by the customs authorities to establish the offence of the appellant namely that the goods were smuggled into India after the raising of the customs barrier against Pakistan in March 1948 So too on the part of the appellant except his statement made at the time of seizure of the goods and also at the time of the inquiry that he brought them with him into India in 1947 no other acceptable evidence has been adduced In the circumstances the question of onus of proof becomes very important and the decision turns upon the question on whom the burden of proof lies This Court has held that a customs officer is not a judicial tribunal and that a proceeding before him is not a prosecution But it cannot be denied that this relevant provisions of the Sea Customs Act and the are penal in character The appropriate customs authority is empowered to make an inquiry in respect of an offence alleged to have been committed by a person under the said Acts summon and examine witnesses decide whether an offence is committed make an order of confiscation of the goods in respect of which the offence is committed and impose penalty on the person concerned see sections 168 and 171A of the Sea Customs Act and sections 5 and 7 of the To such a situation though the provisions of the Code of Criminal Procedure or the Evidence Act may not apply except in so far as they are statutorily made applicable the fundamental principles of criminal jurisprudence and of natural justice must necessarily apply If so the burden of proof is on the customs authorities and they have to 938 bring home the guilt to the person alleged to have committed a particular offence under the said Acts by adducing satisfactory evidence In the present case no such evidence is forthcoming indeed there is no tittle of evidence to prove the case of the customs authorities But it is said that the onus shifted to the appellant for three reasons namely i by reason of the provisions of section 178A of the Sea Customs Act ii by reason of section 5 of the and iii by reason of section 106 of the Evidence Act Section 178A of the Sea Customs Act does not govern the present case for that section was inserted in that Act by Act No XXI of 1955 whereas the order of confiscation of the goods in question was made on January 18 1952 The section is prospective in operation and cannot govern the said order Nor does section 5 of the apply to the present case Under section 51 of the said Act Every person desiring to pass any goods by land out of or into any foreign territory shall apply in writing for a permit for the passage thereof to the Land Customs Officer incharge of a land customs Station By sub section 2 of section 5 of the said Act if the requisite duty has been paid or the goods have been found by the Land Customs Officer to be free of duty the Land Customs Officer is empowered to grant a permit Under sub section 3 thereof Any Land Customs Officer duly empowered by the Chief Customs authority in this behalf may require any person in charge of any goods which such Officer has reason to believe to have been imported or to be about to be exported by land from or to any foreign territory to produce the permit granted for such goods and any such goods which are dutiable and which are unaccompanied by a permit or do not correspond with the specification contained in the permit produced shall be detained and shall be liable to confiscation This section has no bearing on the question of onus of proof This section obviously applies to a case where a permit is required for importing goods by land from a foreign country into India and it empowers the Land Customs Officer who has reason to believe that any 939 goods have been imported by land from any foreign territory to demand the permit and to verify whether the goods so imported correspond with the specification contained in the permit If there was no permit or if the goods did Dot correspond with the specification contained in the permit the said goods would be liable to be detained and confiscated The application of this section is conditioned by the legal requirement to obtain a permit If no permit is necessary to import goods into India the provisions of the section cannot be attracted In the present case the customs barrier was established only in March 1948 that is after the said items of goods are stated by the appel lant to have been brought into India We cannot also accept the contention that by reason of the provisions of section 106 of the Evidence Act the onus lies on the appellant to prove that he brought the said items of goods into India in 1947 Section 106 of the Evidence Act in terms does not apply to a proceeding under the said Acts But it may be assumed that the principle underlying the said section is of universal application Under that section when any fact is especially within the knowledge of any person the burden of proving that fact is upon him This Court in Shambu Nath Mehra vs The State of Ajmer 1 after considering the earlier Privy Council decisions on the interpretation of section 106 of the Evidence Act observed at p 204 thus The section cannot be used to undermine the well established rule of law that save in a very exceptional class of case the burden is on the prosecution and never shifts If section 106 of the Evidence Act is applied then by analogy the fundamental principles of criminal jurisprudence must equally be invoked If so it follows that the onus to prove the case against the appellant is on the customs authorities and they failed to discharge that burden in respect of items 1 to 5 The order of confiscation relating to items 1 to 5 is set aside Before closing this aspect of the case some observations have to be made in respect of the manner in 1 940 which the statement given by the appellant when the goods were seized was used against him by the customs authorities It would be seen from the order of the Collector of Central Excise as well as that of the Central Board of Revenue that they had relied upon the statement alleged to have been made by him at the time the search was made in his house in order to reject his case that he brought some of the items of goods into India in the year 1947 The appellant in his reply to the show cause notice complained that his statement was taken in English that he did not know what was recorded and that his application for inspection and for the grant of a copy of his statement was not granted to him It does not appear from the records that he was given a copy of the statement or that he was allowed to inspect the same In the circumstances we must point out that the customs authorities were not justified to rely upon certain alleged discrepancies in that statement to reject the appellant s subsequent version If they wanted to rely upon it they should have given an opportunity to the appellant to inspect it and at any rate should have supplied him a copy thereof Coming to items 6 to 10 we have no reason to reject as we have been asked to do the statement made in the order of the Collector of Central Excise dated October 27 1951 that the appellant accepted that items 6 to 10 were smuggled goods from Pakistan It would have been better if the customs authorities had taken that admission in writing from the appellant for that would prevent the retraction of the concession on second thoughts That apart it is more satisfactory if a body entrusted with functions such as the customs authorities are entrusted with takes that precaution when its decision is mainly to depend upon such admission But in this case having regard to the circumstances under and the manner in which the said concession was made we have no reason to doubt the correctness of the statements of fact in regard to this matter made in the orders of the customs authorities If so it follows that the finding of the customs authorities that the appellant purchased the said items which were smuggled goods should 941 prevail The order of confiscation of these five items will therefore stand Even so it is contended by the learned counsel for the appellant that the customs authorities went wrong in imposing a penalty on him under section 1678 of the Sea Customs Act The said section reads If any goods the importation or exportation of which is for the time being prohibited or restricted by or under Chapter IV of this Act be imported into or exported from India contrary to such prohibition or restriction such goods shall be liable to con fiscation and any person concerned in any such offence shall be liable to a penalty not exceeding three times the value of the goods or not exceeding one thousand rupees The appellant s argument is that though he purchased the said smuggled goods he is not concerned with the importation of the goods contrary to the prohibition or restriction imposed by or under Ch IV of the Sea Customs Act The offence consists in importing the goods contrary to the prohibition and therefore the argument proceeds a person who has purchased them only after they were imported is not hit by the said section There is some force in this argument but we do not propose to express our final view on the matter as the appellant is liable to the penalty under section 71c of the The said section reads Section 7 1 Any person who caids in so passing or conveying any goods or knowing that any goods have been so passed or conveyed keeps or conceals such goods or permits or procures them to be kept or concealed shall be liable to a penalty not exceeding where the goods are not dutiable fifty or where the goods or any of them are dutiable one thousand rupees and any dutiable goods in respect of which the offence has been committed shall be liable to confiscation In this case the finding is that the appellant with the 120 942 knowledge that the goods had been smuggled into India kept the goods and therefore he was liable to penalty under that section We hold that the penalty was rightly imposed on him It is then contended that the Collector of Central Excise had no jurisdiction to impose conditions for the release of the confiscated goods The Collector of Central Excise in his order says In addition the import duty leviable on all these items together with other charges if any payable should be paid and necessary formalities gone through before the goods can be passed out of Customs Control In Shew pujanrai Indrasanrai Ltd vs The Collector of Customs 1 a similar question arose for consideration of this Court There by an impugned order the Collector of Customs imposed two conditions for the release of the confiscated goods namely 1 the production of a permit from the Reserve Bank of India in respect of the gold within four months from the date of despatch of the impugned order and 2 the pay ment of proper customs duties and other charges leviable in respect of the gold within the same period of four months This Court held agreeing with the High Court that the Collector of Customs had no jurisdiction to impose the said two conditions The learned Additional Solicitor General concedes that the said decision applies to the present case We do not therefore express any view whether that decision can be distinguished in its application to the facts of the present case On the basis of the concession we hold that the conditions extracted above being severable from the rest of the order should be deleted from the said order of the Collector of Central Excise Learned counsel for the appellant then argues that the option given in the said order to the appellant to redeem the confiscated goods for home consumption within four months of the order on payment of Rs 25000 was based upon the validity of the confiscation of all the ten items and as this Court now holds that confiscation was bad in respect of items 1 1 943 to 5 the amount of the penalty of Rs 25000 should proportionately be reduced There is justification for this contention But we cannot reduce the amount as under section 183 of the Sea Customs Act the amount has to be fixed by the concerned officer as he thinks fit But as the basis of the order partially disappears we give liberty to the appellant to apply to the customs authorities for giving him an option to redeem the confiscated goods on payment of a lesser amount having regard to the changed circumstances In the result the appeal is allowed in part and the order of the Collector of Central Excise is accordingly modified in terms of the finding given by us As the parties succeeded and failed in part they are directed to bear their own costs Appeal partly allowed	The term foodstuff is ambiguous In one sense it has a narrow meaning and is limited to articles which are eaten as food for purposes of nutrition and nourishment and so would exclude condiments and spices such as yeast salt pepper baking powder and turmeric In a wider sense it includes everything that goes toto the preparation of food proper as understood in the narrow sense to make it more palatable and digestible Whether the term is used in a particular statute in its wider or narrower sense cannot be answered in the abstract 878 but must be answered with due regard to the background and context Turmeric is a foodstuff within the meaning of cl 3 of the Spices Forward Contract Prohibition Order of 1944 read with s2 aof the Essential Supplies Temporary Powers Act XXIV of 1946 The said order of 1944 falls within the purview of section 5 of Ordinance No XVIII of 1946 which was later reenacted as Act XXIV of 1946 and it is equally saved by section 17 2 of the Act James vs Jones Hinde vs Allmond 87 LJ KB 893 Sainsbury vs Saunders referred to
iminal Appeal No 83 of 1959 Appeal from the judgment and order dated July 25 1958 of the Patna High Court in Criminal Revisions Nos 593 and 594 of 1958 arising out of the judgment and order dated March 3 1958 of the Additional Sessions Judge Monghyr in Criminal Appeal No 286 of 1956 D P Singh and R H Dhebar for the appellant C P Lal for the respondent October 14 The Judgment of the Court was delivered by KAPUR J This is an appeal brought in pursuance of a certificate under article 1341c of the Constitution against the judgment and order of acquittal of the High Court of Patna There were certain disputes between the workmen and the Management of Mankatha Distillery of which the proprietor is the respondent On November 23 1953 a petition was submitted on behalf of the workmen of the Distillery to the Assistant Labour Commissioner Bhagalpur which was signed by one Banarsi Choudhuri on behalf of himself and for and on behalf of the workmen of the Distillery In this petition certain grievances of the workmen were set out Con ciliation proceedings were started and there was an agreement on December 5 1953 which the High Court has described as some sort of agreement On January 12 1954 an application was made for the registration of the Union of the workmen of the Distillery under the Indian Trade Unions Act and the same was registered on March 23 1954 under the 3 name and style of Mankaths Distillery Mazdoor Panchayat The Distillery was closed and the workmen were discharged and thereafter on February 19 1954 the General Secretary of the Mankatha Distillery Mazdoor Panchayat even though it was not registered at the time sent a letter to the Management protesting against the discharge of the workmen without payment of compensation and objecting to the inten tion of the employers to re start the factory after employing other workmen It was also stated therein that the workers who had been discharged had been working for some years and a list of such workmen was attached to the letter The following portion of the letter is relevant for the purposes of this appeal All the persons named below shall work in the factory in legal manner on monthly salary on permanent basis It is not only hoped rather fully believed that you would consider the above facts and gladly accept the same On getting a stisfactory reply all the workers who had been working in your factory since years would report themselves to duty and work according to your orders Although it is addressed to the proprietors of the Dis tillery it seems to have been sent to the Assistant Commissioner of Labour Bhagalpur where it was received on February 25 1954 The following endorsements were made on this letter Discussed with you The management is re quested to attend conciliation proceeding on 10th March 1954 at 11 am The Union is also informed accordingly Another petition dated March 51954 was sent by the General Secretary of the Distillery Mazdoor Panchayat to the Assistant Labour Commissioner in which the names of all the persons who had been freshly employed by the proprietors were mentioned and it was prayed that those who were discharged at the time of the closing of the factory may be reinstated and wages paid and a request was made to the Assistant Labour 4 and get the workmen reinstated The order on this petition was The parties have been called to morrow in my office for conciliation The result of the proceeding may be awaited On March 18 1954 a settlement was arrived at between the management and the workers which is signed by the Conciliation Officer appointed under section 4 of the Act 14 of 1947 hereinafter termed for the sake of brevity the Act This document was signed by the proprietor and the manager of the Distillery and by Banarsi Choudhuri General Secretary of the Workers Panchayat and also by six other members of the Panchayat who were evidently the members of the Executive Committee of the Panchayat The terms of the settlement were as follows 1 It is agreed that the workers named in Schedule A shall be taken to jobs without break in their services The new hands appointed after the closure of the factory shall be discharged If three shifts will start and any other increased opportunity of employment will be available in the factory the management shall employ only those workers who are left to day and who had worked in August 1953 and September 1953 in order of seniority Shri Banarsi Choudhry Balmiki Singh Bhaso Singh and Kaltu Singh are accused in a case pending before the Court at Monghyr The Management agrees that if they will be acquitted from the court they will be given jobs All the workers will be put in permanent basis as they were previously The order putting them in the temporary basis after the opening of the Mill is cancelled The arrears will be paid on monthly basis as before instead of weekly basis as at present after the re opening of the factory The grievances raised by the workers and covered by the agreement dated the 5th December 5 1953 will be decided by the Labour Commissioner Bihar Patna and his decision shall be acceptable to and final for the parties The work of the factory will be resumed immediately The workers will continue to have all the benefits and privileges which are guaranteed by law or usage and custom The workers will not be victimised for their Trade Union activities The prosecution case is that the terms of the settlement were not carried out in that the old workmen were not re employed and the newly employed workmen were not discharged Thereupon the respondent and the manager of the Distillery one Ram Narain Lal were prosecuted on a complaint filed by the Labour Superintendent Mr L D Singh after sanction of the Government of Bihar had been obtained Both the accused persons were convicted and sentenced to a fine of Rs 150 each or in default one month s simple imprisonment The learned Magistrate held that there was an industrial dispute within the meaning of the Act and that the conciliation settlement dated March 18 1954 was a valid settlement and the respondent failed to implement the first term of the settlement Against this order an appeal was taken to the Sessions Court and the Third Add1 Sessions Judge dismissed the appeal He confirmed the findings of the learned Magistrate Against this order of the Sessions Judge an appeal was taken to the High Court by the respondent only and the High Court set aside the order of conviction and acquitted the accused It held that there was no recognised Union though there was some kind of a vague Union existing and that because the Conciliation Officer had visited the Distillery without giving a reasonable notice the decision of the Conciliation Officer on 18 3 1954 must therefore be deemed to be without jurisdiction and that there was no agreement arrived at between the proprietor on one side and the labourers as a whole on the other and it is preposterous to suppose that because some labourers 6 had signed the settlement that it bound all the labourers It seems to me that there is a serious defect in this settlement which is described as a decision of the Conciliation Officer dated 18 3 1954 On the ground therefore that the settlement was not a settlement which was binding on the respondent the conviction was set aside It would be an erroneous view if it were said that for a dispute to constitute an industrial dispute it is a requisite condition that it should be sponsored by a recognised union or that all the workmen of an industrial establishment should be parties to it A dispute becomes an industrial dispute even where it is sponsored by a union which is not registered as in the instant case or where the dispute raised is by some only of the workmen because in either case the matter falls within section 183a and d of the Act See also Newspapers Limited Allahabad vs The State Industrial Tribunal Uttar Pradesh 1 The settlement of March 18 1954 arrived at during the conciliation proceedings was signed by the General Secretary and members of the executive committee of the Union though it was unregistered at the time We cannot therefore give our accord to the decision that the settlement of March 18 1954 was not a settlement binding between the parties The scope and effect of section 112 was raised before us and it was argued that because the conciliation officer did not give any reasonable notice before he came to the Distillery on March 18 1954 the settlement was not a legal settlement and consequently was not binding on the parties and its breach could not fall within the penal consequences of section 29 of the Act Now section 112 provides A conciliation officer or a member of a Board or Court or the presiding officer of a Labour Court Tribunal or National Tribunal may for the purpose of inquiry into any existing or apprehended industrial dispute after giving reasonable notice enter the premises occupied by any establishment to which the dispute relates 1 at 38 7 Section 11 only deals with the procedure and powers of the conciliation officers and sub section 2 authorises the conciliation officer to enter the premises occupied by any establishment to which the dispute relates after giving a reasonable notice This notice is only for the purpose of entering the premises to make an enquiry into any existing industrial dispute or an apprehended industrial dispute and is merely to apprise the establishment that it is the conciliation officer who is coming and not an absolute stranger who has no connection at all with the machinery set up for the purposes of the Act The absence of a notice under section 112 therefore does not affect the jurisdiction of the Conciliation Officer As to what the conciliation officer can and should do is contained in section 12 of the Act Sub section 1 empowers the conciliation officer to hold conciliation proceedings in the case of a public utility service after notice under section 22 whereby a mandatory duty is cast upon him to do so and in other disputes it is his discretion to hold conciliation proceedings in the prescribed manner Under sub section 2 he has to investigate without delay the dispute in all matters affecting the merits of the dispute and he can do such things as he thinks necessary for inducing the parties to come to a fair and amicable settlement Sub section 3 provides that if a settlement of the dispute is arrived at a report thereof shall be sent to the appropriate Govern ment and sub section 4 also provides for the sending of a similar report to the appropriate Government if no settlement is arrived at Sub section 5 deals with the powers of the Government when a report is received as to the non settlement of the dispute and sub section 6 which was relied upon provides section 126 A report under this section shall be submitted within fourteen days of the commencement of the conciliation proceedings or within such shorter period as may be fixed by the appropriate Government Provided that the time for the submission of the report may be extended by such period as may be agreed upon in writing by all the parties to the dispute 8 It was argued that because the report had not been sent to the Government within fourteen days of the commencement of the conciliation proceedings the settlement arrived at was invalid and was not binding This contention must be repelled because any contravention of section 126 may be a breach of duty on the part of the conciliation officer that does not affect the legality of the proceedings which terminated as provided in section 202 of the Act It was so held by this Court in Andheri Marol Kurla Bus Service vs The State of Bombay 1 It cannot be said therefore that the settlement which was arrived at on March 18 1954 was not a legal settlement and that a breach of it would not attract the penal provisions of section 29 of the Act After the case was decided by the Judicial Magistrate the parties arrived at a fresh settlement on October 6 1956 which recited That this settlement made this day the 6th October 1956 at Patna settles all the pending grievances andor demands of workmen whatsoever As a result of this out of the discharged workmen 25 whose names are given in Appendix A attached to the compromise were reinstated with effect from October 8 1956 The claim with regard to the other discharged workmen was withdrawn This settlement was accepted by the Industrial Tribunal by an order dated October 10 1956 This shows that all disputes between the parties have been settled and workmen have been reinstated In view of this in the words of Subba Rao J in the State of Bihar vs Hiralal Kejrilal 2 public interest does not require that the stale matter should be resuscitated Therefore we do not think it necessary to interfere under article 136 with the order of the High Court The appeal is therefore dismissed Appeal dismissed 1 1969 Supp 2 SCR 734 2 1960 SCR 726 736	The appellant was the holder of a personal inam which he had purchased from the original inamdar to whom a Sanad had been issued under Bombay Act No VII of 1863 He was paying Rs 7 as salami and Rs 6 3 0 as quit rent the full assessment of the land being Rs 56 8 0 The land which formed part of the inam was originally in a village but subsequently became a part of the suburbs of the city of Surat and as the land was being used for non agricultural purpose and a large bungalow had been erected on it the Collector decided that it was liable to non agricultural assessment under section 52 Of the Bombay Land Revenue Code 1879 with effect from August 1 1955 in view of proviso b to section 4 Of the Bombay Personal Inams Abolition Act 1952 The appellant challenged the constitutionality of the Bombay Personal Inams Abolition Act 1952 on the grounds inter alia i that the Act was not protected by article 31 A of the Constitution of India as the property which bad been dealt with under the Act was not an estate and no compensation had been provided in the Act for taking away the property of the appellant and 2 that in view of the fact that the holder of the inam was given a Sanad when his inam was recognised it was not open to the State of Bombay to enact a law which would in any way vary the terms of the Sanad The appellant also contended that in any case the Collector s order to the effect that the land should be assessed under section 52 Of the Bombay Land Revenue Code 1879 as non agricultural was incorrect because 1 section 7 Of the Act created an exception to sections 4 and 5 with respect to lands of inamdars used for building or for other non agricultural purposes and therefore the appellant s inam land which was used entirely for non agricultural purposes could not be assessed under section 5 of the Act 2 that section 52 Of the Code which gave power to the Collector to make assessments of lands not wholly exempt from the payment of land revenue did not apply to this case because here the assessment had been fixed under the provisions of Ch VIII A of the Code and section 52 only applied when no assessment had been fixed under Ch VIII A 952 Held i that the Bombay Personal Inams Abolition Act 1952 was valid and was protected by article 31 A of the Constitution of India Gangadharrao Narayanrao Majumdar vs State of Bombay Thakur jagannath Baksh Singh vs United Provinces 1946 FCR III and Maharaj Umeg Singh vs The State of Bombay followed 2 that the exception made in section 7 Of the Act only saved such inam lands as were used for building or other non agricultural purposes by the inamdar from vesting in the Government but they remained subject to the provisions Of sections 4 and 5 of the Act 3 that section 52 of the Bombay Land Revenue Code 1879 when it said that the section would not apply where assessment had been fixed under Ch VIII A of the Code referred to actual assessment under the Chapter and not to what was deemed to be an assessment under that Chapter by virtue of section 117 R and that as the land in the present case was not wholly exempt from revenue and as in fact no assessment had been fixed on the land under Ch VIII A section 52 would apply and the Collector would have power to make an assessment in the manner provided by that section
l Appeals Nos 178 and 179 of 1960 Appeals by Special Leave from the Judgment and Decree dated the 18th December 1958 of the Calcutta High Court in Appeals from Original Orders Nos 108 and 138 of 1957 respectively B R L Iyengar for the Appellants In both the appeals N C Chatterjee and D N Mukherjee for the Respondents In both the appeals October 7 The Judgment of the Court was delivered by IMAM J These are appeals by special leave against the order of a Division Bench of the Calcutta High Court dated December 18 1958 setting aside the order of P B Mukherjea J dated February 8 1957 whereby he rejected the petition of the respondent for amendment of the plaint filed in Suit No 1452 of 1951 in the High Court in exercise of its Ordinary Original Civil jurisdiction The plaint in Suit No 1452 of 1951 was filed in the name of Manilal Sons a firm carrying on business at No 11A Malacca Street Singapore The partners of this firm were five in number They were 1 Manubhai Maganbhai Amin 2 Pravinbhai Dahyabhai Patel 3 Gangabhai Iswarbhai Patel 4 Bachubhai Manibhai Amin and 5 Dahyabhai Trikambhai The defendant was the firm of Purushottam Umedbhai Co now the appellant a firm registered under the Indian Partnership Act 1932 carrying on business at No 55 Canning Street Calcutta In July 1949 there was a contract between the plaintiff and the defendant under which the defendant was to sell to the former subject to certain conditions 950 bales of Heavy Cees gunny bags c i f Singapore to be shipped from Calcutta in August 1949 It was also agreed between the plaintiff and the defendant in July August 1949 that the latter would sell subject to certain conditions 600 bales of Heavy Cees gunny bags c i f Hong Kong to be shipped from Calcutta 985 in August 1949 According to the plaintiff the defendant did not perform the contract entered into by the parties and as a result of the default on the part of the defendant the plaintiff had suffered loss The plaintiff accordingly claimed compensation to the extent of Rs 273864 and Rs 7850 towards expenses incurred in all Rs 281714 The breach of the contract is alleged to have taken place in October and November 1949 The suit was instituted on April 2 1951 The defendant s written statement was filed on or about May 21 1951 The petition for amendment of the plaint was filed on January 31 1957 The amendment sought was to the effect that the name of the firm Manilal Sons as plaintiff be struck off and in its place and stead the names of the five persons who were the partners of the firm may be entered in the plaint as plaintiffs The petitioner also sought the necessary consequential amendments in the body of the plaint According to the petition praying for amendment on January 29 1957 the solicitors of the plaintiff received a letter from the attorney of the defendant to the effect that inasmuch as the firm Manilal Sons was carrying on business at Singapore an objection would be taken on behalf of the defendant that the suit as framed was null and void and not maintainable The suit had been pending in the court of P B Mukherjea J and appeared on the peremptory list for the first time on January 3 1957 According to the petition the petitioner was advised that as the misdescription of the plaintiff was a bona fide one the names of the partners of the firm Manilal Sons should be brought on to the record in order to bring the controversy between the proper parties into clear relief Accordingly the petitioner filed the petition for amendment On a Chamber Summons being taken out Mukherjea J heard the matter and rejected the petition for amendment He was of the opinion that the original plaint was no plaint in law and therefore was a mere nullity of a process The proper course when there is such a mistake is not to amend disregarding the conditions of O I r 10 of the Civil Procedure Code 986 but to seek the Court s permission to withdraw the suit with liberty to file a fresh suit under 0 xxIII r 1 of the Civil Procedure Code on the ground of formal defect and which should be done before limitation In his opinion it was not a case of misnomer or a misdescription It was not a case of a nonexistent firm or a non existent person or of a wrong description but of a legal bar and when a plaint is filed showing that the plaintiff was not a legally recog nised person at all such a plaint must be regarded as a nullity He was also dissatisfied with the explanation given for filing the petition for amendment some six years after the institution of the suit In appeal the Division Bench of the High Court came to the conclusion on a consideration of various decisions of the High Courts in India and the courts in England that the description of a plaintiff by a firm name in a case where the Code of Civil Procedure does not permit a suit to be brought in the firm name should properly be considered a case of description of the individual partners of the business and as such a misdescription which in law can be corrected and should not be considered to amount to a description of a non existent person It also rejected the contention on behalf of the defendant that the Power of Attorney in favour of Dunderdale was insufficient The contention had been that this Power of Attorney did not authorize Dunderdale to act on behalf of the the firm far less the individual members of the firm The Division Bench accordingly allowed the amendment prayed for and permitted the names of the individual partners of the firm Manilal Sons to be substituted as plaintiffs in the place of Manilal Sons The individual partners were permitted either to sign the plaint themselves or through their constituted attorneys The Division Bench allowed this amendment on the condition that all the costs of the appellant before us incurred upto the date of the judgment must be paid to it The Division Bench also allowed the appeal against the decree of P B Mukherjea J dismissing the suit which it set aside Appeal No 179 of 1960 is by 987 special leave against the aforesaid order of the Division Bench It was urged on behalf of the appellants that 1 the plaint as filed was a nullity The suit therefore was incompetent To bring on the record the partners of the firm amounted to addition of new parties and if on the date these partners are added as parties and the period of limitation had elapsed then the entire suit would be time barred 2 even if it be held that the plaint is not a nullity neither the provisions of 0 1 r 10 nor those of 0 VI r 17 have any application to the case 3 having regard to the provisions of section 45 of the Indian Contract Act a suit by only one partner or one promisee is bad to start with There being within the period of limitation no suit by all the partners any amendment if allowed would convert the old suit into a new suit and the new suit would be barred by limitation if the amendment was allowed on a date which was beyond the period of limitation prescribed for such a suit 4 if the amendment was allowed it would be a case of adding or substituting new plaintiffs and as regards them it would be deemed to have been instituted when they were made parties Reference to section 221 Indian Limitation Act was made in this connection In the present case so far as the new plaintiffs were concerned the suit was barred by time at the date when they were sought to be made parties 5 the circmstances of the case indicated that there was no suit in the eyes of the law nor was the plaint verified or signed as required by law Consequently there was no proceeding before the court in which any amendment could be sought and 6 even if it was held that the plaint was not a nullity the plaint had been signed and verified on behalf of the firm Manilal Sons by Dunderdale on a Power of Attorney executed by one of the partners only It was therefore not manifest that all the partners intended to sue Furthermore the Power of Attorney executed in favour of Dunderdale by one of the partners could not be regarded as authorizing him to to act on behalf of the firm of Manilal Sons Very great reliance was placed on the decision of 988 Blackwell J in the case of Vyankatesh Oil Mill Co vs N V Velamahomed 1 where the learned Judge held that the suit was brought by an entity which had no legal existence in the eyes of Indian law and there being no mode of procedure whereby such an entity was permitted to sue in India the suit as framed was not maintainable at all It followed therefore that the amendment asked for could not be treated as an amendment following upon a mere misdeseription but must be treated as an application for the substitution of the individual persons who composed the entity which the law did not recognize This view of Mr Justice Blackwell was not accepted by Beaumont C J inthe case of Amulakchand Mewaram vs Babulal Kanalal Taliwala 2 where he expressed himself as follows I must confess that I have some difficulty in following both the reasons and the conclusions of the learned Judge in that case It was a case of a suit brought in the name of a firm carrying on business outside British India and therefore not justified by the terms of 0 30 Civil P C and the learned Judge expressed the view that the plaintiff firm was a nonexistent entity But the order which he subsequently made giving leave to amend seems inconsistent with that finding He further held But I do not see how 0 30 can affect the question of fact whether a suit brought in the name of a firm in a case not within 0 30 is in fact a case of misdescription of existing persons or a case of a suit brought by a non existent entity In the case of Hajee Sattar Hajee Peer Mahomad vs Khusiram Benarsilal 3 the Calcutta High Court did not accept the view expressed by Blackwell J it referred to the following observation of Farwell L J in Sadler vs Whiteman4 In English law a firm as such has no legal existence partners carry on business both as principals and as agents for each other within the scope of the 1 AIR 1928 Bom 3 ILR 2 AIR 1933 Bom 304 305 4 889 989 partnership business the firm name is a mere expression not a legal entity although for convenience under Order XLVIII A it may be used for the sake of suing and being sued In the case of Mura Mohideen vs VOA Mohomed1 the Madras High Court dissented from the opinion expressed by Blackwell J and the learned Judges stated We are unable to agree with Blackwell J in his view that a foreign firm not being a legal entity which could as such file a suit under the Civil P C by itself determines the question whether the impleading of the members of that firm is the addition of a new party The view of Blackwell J appears to have been concurred in by two decisions reported in Neogi Ghose and Co vs Nehal Singh AIR 1931 Cal 770 F and L N Chettiar Firm vs MPRM Firm AIR 1935 Rang 240 G but we are unable to agree with the soundness of the reasoning in these decisions either of which do not furnish any further reasons in support of the view of Blackwell J The Madras High Court then concluded as follows If however imperfectly and incorrectly a party is designated in a plaint the correction of the error is not the addition or substitution of a party but merely clarifies and makes apparent what was previously shrouded in obscurity by reason of the error or mistake The question in such a case is one of intention of the party and if the Court is able to discover the person or persons intended to sue or to be sued a mere misdescription of such a party can always be corrected provided the mistake was bona fide vide 01 R 10 CPC Such an amendment does not involve the addition of a party so as to attract section 221 Limitation Act Suits by or on behalf of dead persons stand in a different category The principle that a misdescription could be corrected by amendment could not obviously be applied to such a case but this is far from saying that merely because the law does not recognise the firm as being a legal entity the firm 1 AIR 1955 Mad 294 297 299 126 990 name could not indicate or designate the individuals Composing the firm To sum up the situation is analogous to a case where an individual who has an alias or an abbreviated name by which he is sometimes called initially describes himself in that name but subsequently applies to have it rectified so as to describe in the manner in which he is most generally known There cannot be any doubt that by the correction in the name a new plaintiff is not added so as to attract section 221 Limitation Act A trade name either of a person or a group of individuals carrying on business in partnership is in true an alias for the person or the group Before the introduction of O XXX in the Code of Civil Procedure apparently suits were instituted particularly in the Mofussil courts in the name of a firm or were instituted against a firm in the firm name and no objection was generally taken Presumably this practice was largely based on the assumption that the suit concerned was either by all the partners of the firm or against all the partners of the firm If however an objection were to be taken that a suit in the name of a firm was not maintainable because it had no legal entity the courts would have to decide whether the suit had been instituted by non existent persons If so the suit was not maintainable In the case of Kasturchand Bahiravdas vs Sagarmal Shriram 1 which was before the introduction of 0 XXX in the Code the suit had been brought in the name of the firm Kondanmal Sagarmal by its manager Sagarmal Shriram The defendants objected that one Malamchand was also a partner in the firm and should be made a party He was accordingly added as a plaintiff on the 27th of January 1888 The defendant then contended that the suit was barred under section 22 Limitation Act It was held by the Bombay High Court that it was a case of misdescription and not of non joinder for the action was brought in the name of the firm by its manager The introduction of 0 XXX into the Code 1 1892 ILR i7 Bom 991 prevents such an objection being taken because it permits two or more persons carrying on business of the firm to sue or be sued in the name of the firm but the firm must be carrying on business in India The introduction of this provision in the Code was an enabling one which permitted partners constituting a firm to sue or be sued in the name of the firm This enabling provision however accorded no such facility or privilege to partners constituting a firm doing business outside India The existence of the provisions of 0 XXX in the Code does not mean that a plaint filed in the name of a firm doing business outside India is not a suit in fact by the partners of that firm individually Section 4 of the hereinafter referred to as the Act states that Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one another are called individually partners and collectively a firm and the name under which their business is carried on is called the firm name It is clear from this provision of the Act that the word firm or the firm name is merely a compendious description of all the partners collectively It follows therefore that where a suit is filed in the name of a firm it is still a suit by all the partners of the firm unless it is proved that all the partners had not authorized the suit A firm may not be a legal entity in the sense of a corporation or a company incorporated under the Indian Companies Act but it is still an existing concern where business is done by a number of persons in partnership When a suit is filed in the name of a firm it is in reality a suit by all the partners of the firm XXX had not been introduced into the Code and a suit had been filed in the name of a firm it would not be a case of a suit filed by a nonexistent person It would still be a suit by the part ners of a firm the defect being that they were described as a firm In order to clarify matters a court would permit an amendment by striking out the name 992 of the firm and replacing it with the name of the persons forming the partnership It would be a case of misdescription Even if the provisions of 0 1 r 10 and 0 VI r 17 did not strictly apply the amendment could be permitted under section 153 of the Civil Procedure Code because it was not a case of either adding parties or substituting parties The High Court referred to a number of decisions to which no particular reference need be made but they do support the view taken by the High Court that in the present case the plaintiff described in the plaint as the firm of Manilal Sons was a mere misdescription capable of amendment and not a case where a plaint had been filed by a non existent person and therefore a nullity We now refer to certain provisions of 0 XXX CPC Order XXX r 1 CPC states 1 Any two or more persons claiming or being liable as partners and carrying on business in India may sue or be sued in the name of the firm if any of which such persons were partners at the time of the accruing Of the cause of action and any party to a suit may in such case apply to the Court for a statement of the names and addresses of the persons who were at the time of the accruing of the cause of action partners in such firm to be furnished and verified in such manner as the Court may direct 2 Where persons sue or are sued as partners in the name of their firm under sub rule 1 it shall in the case of any pleading or other document required by or under this Code to be signed verified or certified by the plaintiff or the defendant suffice if such pleading or other document is signed verified or certified by any one of such persons This rule enables any party to a suit filed in the name of a firm doing business in India to apply to the court for a statement of the names and addresses of the persons who were at the time of the accruing of the cause of action partners in the firm to be furnished and verified in such manner as the court may direct Order XXX r 2 states 1 Where a suit is instituted by partners in the name of their firm the plaintiffs or their pleader shall 993 on demand in writing by or on behalf of any defendant forthwith declare in writing the names and places of residence of all the Persons constituting the firm on whose behalf the suit is instituted 2 Where the plaintiffs or their pleader fail to comply with any demand made under sub rule 1 all proceedings in the suit may upon an application for that purpose be stayed upon such terms as the Court may direct 3 Where the names of the partners are declared in the manner referred to in sub rule 1 the suit shall proceed in the same manner and the same consequences in all respects shall follow as if they had been named as plaintiffs in the plaint Provided that all the proceedings shall nevertheless continue in the name of the firm This makes it obligatory in the case of a suit instituted by the partners in the name of the firm on demand in writing by or on behalf of any defendant to declare in writing the names and places of residence of all the persons constituting the firm on whose behalf the suit is instituted If the plaintiffs fail to comply with the demand made under sub r 1 of this rule all the pro ceedings in the suit may be stayed on such terms as the court may direct Under sub r 3 if the names of the partners are declared in the manner referred to in sub r 1 the suit shall proceed in the same manner and the same consequences in all respects shall follow as if they had been named in the plaint provided that all the proceedings shall nevertheless be continued in the name of the firm Rule 1 of 0 XXX is a general provision Rule 2 however is confined to a suit instituted by partners in the name of the firm It is clear from this rule that although the suit is filed in the name of the firm a disclosure has to be made on demand in writing by or on behalf of any defendant of names and places of residence of all the persons constituting the firm on whose behalf the suit is instituted The provisions of r 2 would indicate that although the suit is filed in the name of a firm it is nonetheless a suit by all the partners of the firm because if a disclosure of the names of the partners is 994 asked for by any defendant on such disclosure the suit shall proceed as if the partners had been named as plaintiffs in the suit even though the proceedings shall nevertheless be continued in the name of the firm It is clear therefore that the provisions of 0 XXX r 1 and r 2 are enabling provisions to permit several persons who are doing business as partners to sue or be sued in the name of the firm Rule 2 would not have been in the form it is if the suit instituted in the name of the firm was not regarded as in fact a suit by the partners of the firm The provisions of these rules of 0 XXX being enabling provisions do not prevent the partners of a firm from suing or being sued in their individual names These rules also do not prohibit the partners of a firm suing in India in their names individually although they may be doing business outside India Indeed this was not disputed on behalf of the appellant Since however a firm is not a legal entity the privilege of suing in the name of a firm is permissible only to those persons who as partners are doing business in India Such privilege is not extended to persons who are doing business as partners outside India In their case they still have to sue in their individual names If however under some misapprehension persons doing business as partners outside India do file a plaint in the name of their firm they are misdescribing themselves as the suit instituted is by them they being known collectively as a firm It seems therefore that a plaint filed in a court in India in the name of a firm doing business outside India is not by itself a nullity It is a plaint by all the partners of the firm with a defective description of themselves for the purposes of the Code of Civil Procedure In these circumstances a civil court could permit tinder the provisions of section 153 of the Code or possibly under 0 VI r 17 about which we say nothing an amendment of the plaint to enable a proper description of the plaintiffs to appear in it in order to assist the court in determining the real question or issue between the parties Strictly speaking 0 1 r 101 has no application to a case of this kind because the suit has not been instituted in the name 995 of a wrong person nor is it a case of there being a doubt whether it has been instituted in the name of the right plaintiff The provisions of 0 I r 102 also do not apply because it is not a case of any party having been improperly joined whose name has to be struck out or a case of adding a person or a party who ought to have been joined or whose presence before the court is necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the suit The suit has been from its very inception a suit by the partners of the firm and no question of adding or substituting any person arises the partners collectively being described as a firm with a particular name One of the partners Manubhai Maganbhai Amin was the Manager of the firm Manilal Sons He had executed a Power of Attorney in favour of four persons including one Dunderdale By this Power he authorized any one of these persons to sue for recovery of moneys due to the firm from the firm Puru shottam Umedbhai Co the appellant It also empowered these persons to appear and to represent the firm in any court in any jurisdiction civil criminal insolvency original appellate or otherwise and before any official in any suit or proceeding or matter and to make sign verify present and file any plaint Dunderdale had signed and verified the plaint in the present case We have no doubt on a perusal of the Power of Attorney that it authorized Dunderdale to file the plaint on behalf of the firm Manilal Sons and also to verify it It was suggested that this was a Power of Attorney by Manubhai Maganbhai Amin for himself and not for the firm of Manilal Sons As we understand the Power of Attorney that is not so No doubt the Power of Attorney is not signed by all the partners of Manilal Sons but only by Manubhai Maganbhai Amin In our opinion it was not necessary that the Power should have been signed by all the partners of the firm because Manubhai Maganbhai Amin was the manager of the firm Under B 18 of the Act a partner is an agent of the firm for the purposes of the business of the firm Manubhai 996 Maganbhai Amin was therefore the agent of the firm as well as its manager It is to be noticed that under section 192 of the Act instances are stated where in the absence of any usage or custom of trade to the contrary the implied authority of a partner does not empower him to do matters mentioned in cls a to h It is significant that in these clauses there is no prohibition to a partner executing a Power of Attorney in favour of an individual authorizing him to institute a suit on behalf of the firm In these circumstances it cannot be said that at the time the plaint was filed it was defective because the Power of Attorney in favour of Dunderdale was not a Power of Attorney on behalf of the firm and its partners As the High Court has pointed out there is on the record now Powers of Attorney on behalf of all the partners of the firm It seems to us that the Division Bench of the High Court took a correct view in holding that the plaint was not a nullity It was a case of a suit instituted by all the partners of a firm who were misdescribed as Manilal Sons a firm carrying on business at No 11A Malacca Street Singapore and accordingly the learned Judges rightly allowed the plaint to be amended on terms and conditions stated in their order It follows therefore that the High Court was also right in setting aside the decree of P B Mukherjea J dismissing the suit These appeals accordingly fail and must be dismissed but in the circumstances without costs Appeals dismissed	The appellants house was searched on June 22 1951 by the Customs authorities and ten articles were recovered therefrom In the inquiry before the Collector the appellant stated that the first five articles had been brought by him in 1947 from Pakistan after partition and that with respect to the other five articles he was a bona fide purchaser thereof The Collector held that the appellant had failed to establish his case and held that the goods were imported into India in contravention Of section 3 Import Export Control Act read with sections 19 and 1678 Sea Customs Act and sections 4 and 5 Land Customs Act read with section 7 thereof This decision was upheld on appeal by the Central Board of Revenue and by the Central Government on revision The appellant contended that i the onus of proving that the first five articles were smuggled goods was on the department which it had failed to discharge and 2 even if the other five articles which he purchased were smuggled goods he was not concerned with their importation Held that the onus was on the authorities to establish that the first five articles were imported into India after March 1948 when the customs barrier was put up for the first time between India and Pakistan and that the authorities having failed to adduce any evidence to prove this fact the appellant could not be held guilty of any of the offences charged The onus did not shift by virtue Of section 178A Sea Customs Act or section 5 Land Customs Act as the former section was not in operation at the relevant time and the latter section was not applicable to the facts of this case nor did the onus shift by virtue of section 106 Evidence Act as that section could not be used to undermine the well established rule that the burden was on the prosecution and never shifted Shambu Nath Mehra vs The State of Ajmer followed With respect to the other five articles even if the appellant was right in his contention that he was not concerned in their importation he was liable to the penalty under section 71c for keeping the articles knowing them to be smuggled goods
Appeal No 196 of 1958 Appeal by special leave from the judgment and order dated April 27 1953 of the Assam High Court in Civil Rule No 66 of 1953 Sukumar Mitter and Sukumar Ghose for the appel Veda Vyasa and Naunit Lal for the respondents October 18 The Judgment of the Court was delivered by SHAH J The appellants are dealers registered under the Assam Sales Tax Act XVII of 1947 hereinafter referred to as the Act For the account period April 1 1948 to September 30 1948 the appellants submitted a return of their turnover which included sales in Assam of all goods other than jute The Superintendent of Taxes Dhubri summarily assessed the appellants under sub section 4 of section 17 of the Act to pay tax on sales of jute despatched by them to Calcutta during the account period Appeals against the order of assessment to the Assistant Commissioner of Taxes and to the Commissioner of Taxes Assam proved unsuccessful The appellants then applied to the Commissioner of Taxes to refer certain questions arising out of the assessment to the High Court in Assam under section 34 of the Act The Commissioner referred the following questions and another to the High Court of Judicature in Assam 1 Whether in view of the aforesaid facts and circumstances the turnover from 20515 maunds of 6 42 jute mentioned under item i is taxable under the Act 2 Whether in view of the aforesaid facts and circumstances the turnover from 5500 maunds of jute mentioned under item ii is taxable under the Act 3 Whether in view of the aforesaid facts and circumstances the turnover from 25209 maunds of jute mentioned under item iii is taxable under the Act In respect of each of the three questions 1 to 3 the High Court recorded the following answer section Not being a sale within the meaning of sub12 of section 2 of the Act the consignments are riot taxable The High Court however observed As to whether these consignments can hereafter be assessed if they fall within the purview of the Explanation to sub section 12 of section 2 we express no opinion As required by section 328 of the Act the Commissioner of Taxes by his order dated August 1 1952 directed the Superintendent of Taxes to dispose of the case in accordance with the judgment of the High Court The Superintendent of Taxes thereafter issued on January 30 1953 the following notice to the appellants In view of the Hon ble High Court s order in Sales tax Reference No 3 of 1951 the assessment order dated 30th September 1950 for the return period 30th September 1948 has been set aside and you are directed to produce necessary evidence con tract papers account books etc in order to see whether the contract of sale involved in this case come within the purview of the Explanation to subs 12 of section 2 of the Act By their letter dated March 23 1953 the appellants called upon the Commissioner of Taxes to direct the Superintendent of Taxes not to proceed with the notice The Commissioner having failed to direct as requested the appellant petitioned the High Court in Assam under article 226 of the Constitution for a writ 43 prohibiting the Superintendent of Taxes from re opening and proceeding with the assessment of the appellants under the Assam Sales Tax Act and for a writ quashing the order dated August 1 1952 passed by the Commissioner The High Court summarily dismissed the petition Against the order passed by the High Court this appeal is filed with special leave under article 136 of the Constitution The High Court in answering the questions submitted to it was exercising an advisory jurisdiction and could not and did not give any direction to the sales tax authorities to proceed to assess or not to assess the appellants to sales tax it merely recorded its opinion that the transactions referred to in the questions were not sales within the meaning of section 2 sub section 12 of the Act and were accordingly not taxable Pursuant to the opinion of the High Court the Commissioner directed the Superintendent of Taxes to dispose of the case in accordance with the judgment of the High Court but the Superintendent of Taxes thought that he was entitled to re open the assessment proceedings and to assess the appellants in the light of the Explanation to section 2 sub section 12 In so doing the Superintendent of Taxes in our judgment acted without authority The Superintendent had made the assessment and that assessment was confirmed in appeal by the Assistant Commissioner On the questions arising out of that assessment the High Court had opined that the transactions sought to be assessed were not liable to tax The Superintendent of Taxes on this opinion was right in vacating the order of assessment But any further proceeding for assessment which he sought to commence by issuing a notice requiring the appellants to produce evidence contract papers account books etc so as to enable him to determine whether the transactions were taxable under the Explanation to sub section 12 of section 2 had to be supported by some authority under the Act The Superintendent of Taxes has not referred to the authority in exercise of which he issued this notice It is true that tinder section 19 of the Act the taxation Officer if satisfied upon information coming into his possession that any 44 dealer has been liable to pay tax under the Act in respect of any period and has failed to apply for registration and to make the return required of him may at any time within three years of the end of the aforesaid period serve on the dealer a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 16 and may proceed to assess the dealer in respect of such period But admittedly the appellants were registered as dealers and had submitted their returns the power to reassess could not therefore be exercised by virtue of section 19 of the Act Under section 19 A the Commissioner has also power if satisfied upon information coming into his possession that any turnover in respect of sales of any goods chargeable to tax has escaped assessment during the return period to serve at any time within three years of the aforesaid period on the dealer liable to pay the tax in respect of such turnover a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 16 and may proceed to assess or reassess the dealer in respect of such period But the Commissioner bad not issued any such notice under section 19A Nor had the Commissioner in exercise of his revisional authority under section 31 of the Act set aside the original order of assessment The Commissioner merely directed under section 32 sub section 8 that the case be disposed of in accordance with the judgment of the High Court and acting under that direction the Superintendent of Taxes had no power to reopen the assessment and to call upon the appellants to produce documentary evidence with a view to commence an enquiry whether the sales involved in the case fell within the purview of the Explanation to section 2 sub section 12 In any event the account period as has already been observed was April 1 1948 to September 30 1948 and three years from the end of that period expired before the date on which the notice was issued Fresh proceedings for reassessment could not be initiated by the Superintendent of Taxes under section 19 after the expiry of three years from the assessment period assuming that this could be regarded as a case of failure to apply for 45 registration and to make a return required of the appellants In support of his contention that the Superintendent of Taxes had authority to proceed to reassess the appellants in the light of the observations made in the judgment of the High Court counsel for the appellants invited our attention to the judgment of the Privy Council in Commissioner of Income Tax Bombay Presidency and Aden and others vs Bombay Trust Corporation Ltd 1 In that case a foreign company was assessed by the Income Tax authorities in the name of a resident company for profits and gains received by the latter as its agent under sections 421 and 43 of the Indian Income tax Act 1922 In a reference under section 66 of the Income tax Act the High Court at Bombay opined that the assessment was illegal The Commissioner of Income tax thereafter sent back the case with a direction to set aside the assessment and to make a fresh assessment after making such further enquiry as the Income tax Officer might think fit Acting upon that order the Income tax Officer requir ed the resident company as agent of the foreign company to produce or cause to be produced books of account for the year of assessment and also to produce such other evidence on which it might seek to rely in respect of its return and the resident company having failed to produce the books of the foreign company he proceeded to make an assessment under section 234 of the Income tax Act 1922 By its petition under section 45 of the Specific Relief Act filed in the High Court at Bombay the resident company prayed for an order for refund of the taxes already Paid under the original assessment and for an order for disposal of certain proceedings initiated by it before the Assistant Com missioner and the Income tax Officer The High Court made an order directing refund of tax paid and further directing cancellation of assessment In an appeal preferred by the Commissioner of Income tax against the order of the High Court it was observed by the Privy Council that the Commissioner was not obliged to discontinue proceedings against the resident 46 company as agent of the foreign company in respect of the year of assessment and it was within the jurisdiction of the Commissioner under section 332 of the Income tax Act to direct further enquiry if he thought such an enquiry to be reasonable and to be profitable in the public interest The principle of this case has in our judgment no application to the present case The High Court at Bombay in its advisory jurisdiction had declared the assessment already made to be illegal But the Commissioner was under section 33 of the Indian Income tax Act invested with jurisdiction to direct further enquiry and he purported to exercise that jurisdiction The Privy Council rejected the challenge to the exercise of that jurisdiction In the present case no proceedings were started by the Commissioner of Taxes in exercise of his revisional authority The Commissioner of Taxes had directed the Superintendent of Taxes merely to dispose of the case according to the judgment of the High Court and the Superintendent had to carry out that order If he was competent and on that question we express no opinion he could if the conditions precedent to the exercise of his jurisdiction existed proceed to reassess the appellants But the proceedings for reassessment were clearly barred because the period prescribed for reassessment had expired The Superintendent therefore had no power to issue a notice calling upon the appellants to produce evidence to enable him to start an enquiry which was barred by the expiry of the period of limitation prescribed by the Act In the Bombay Trust Corporation case supra the Income tax Officer acted in pursuance of the direction of the Commissioner lawfully given in exercise of revisional authority and reopened the assessment In the present case no such direction has been given by an authority competent in that behalf and the Superintendent had no power to reassess the income under section 19 assuming that the section applied to a case where the assessee though registered had failed to include his sales in a particular commodity in his turnover because the period of limitation prescribed in that behalf had expired 47 The appeal must therefore be allowed and the order passed by the High Court set aside In the circumstances of the case no useful purpose will be served by remanding the case to the High Court We accordingly direct that a writ quashing the proceedings commenced by the Superintendent of Taxes Dhubri by his notice dated January 30 1953 be issued The appellants will be entitled to their costs of the appeal Appeal allowed	A settlement was arrived at between the management of Mankatha Distillery and the workmen s union before the con ciliation officer The Union was not registered under the Indian Trade Unions Act on the date of the said settlement The terms of the settlement not having been carried out by the management the respondent who was the proprietor and the manager of the said distillery were prosecuted and were convicted by the Magistrate The Sessions Court on appeal by the respondent confirmed the Magistrate s order On an appeal to the Patna High Court by the respondent the High Court set aside the order of conviction and acquitted the respondent holding that there was no recognised union and that because the conciliation officer had visited the Distillery without giving a reasonable notice on 18 3 1954 there could be no agreement between the proprietor on one side and the workmen as a whole on the other on the date and it was wrong to suppose that because somu workmen had signed the settlement that it bound all the workmen Held that for a dispute to constitute an industrial dispute it is not a requisite condition that it should be sponsored by a recognised union or that all the workmen of an industrial establishment should be parties to it A settlement arrived at in course of conciliation proceedings falls within section 183a and d of the Industrial Disputes Act and as such binds all the workmen though an unregistered union or only some of workmen may have raised the dispute The absence of notice under section 112 by the Conciliation Officer does not affect the jurisdiction of the conciliation officer and its only purpose is to apprise the establishment that the person who is coming is the conciliation officer and not a stranger Any contravention of section 126 in not submitting the report within 14 days may be a breach of duty on the part of the conciliation officer it does not affect the legality of the proceedings which terminated as provided in section 202 of the Act 1 2 Where a fresh settlement is arrived at between the parties and all disputes are settled then public interest does not require that the stale matter should be resuscitated Newspapers Limited Allahabad vs State Industrial Tribunal Uttar Pradesh referred to Andheri Marol Kurla Bus Service vs The State of Bombay AIR and State of Bihar vs Hiralal Kejrilal 1960 1 SCR 726 approved
Appeal No 408 of 1957 Appeal by Special Leave from the Judgment and Order dated the 28th September 1955 of the former Bombay High Court in Income tax Reference No 5 of 1955 Sanat P Mehta section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the appellant A N Kripal R H Dhebar and D Gupta for the respondent October 18 The Judgment of the Court was delivered by SHAH J To the appellant who was a non resident for the purposes of the Indian Income Tax Act 1922 had accrued in the assessment years 1943 44 194445 1946 47 and 1947 48 certain dividend income within the taxable territory of British India but the appellant did not submit returns of his income for those assessment years In exercise of his powers under section 34 of the Indian Income Tax Act 1922 the Income Tax Officer Bombay City served upon the appellant notices under section 34 read with s 222 of the Act for assessment of tax in respect of those years The notice for the year 1943 44 was served on the appellant on March 27 1952 for the year 1944 45 on February 16 1953 for the year 1946 47 on April 4 1951 and for the year 1947 48 on April 2 1952 The Income Tax Officer completed the assessments in respect of the years 1943 44 1944 45 and 1947 48 on May 6 1953 and for the year 1946 47 on March 19 1952 The orders of assessment were confirmed by the Appellate Assistant Commissioner and by the Income Tax Appellate Tribunal At the instance of 37 the appellant the Income Tax Appellate Tribunal drew up a statement of the case under section 661 of the Income Tax Act and submitted to the High Court of Judicature at Bombay the following two questions I Whether the notices issued under section 222 of the Act read with section 34 of the Act for the assessment years 1943 44 1944 45 1946 47 and 1947 48 were served after the period of limitation prescribed by section 34 of the Act 2 If the answer to Question No 1 is in the affirmative whether the assessments for the years in question were invalid in law The High Court answered the first question in the negative and observed that on that answer the second question did not arise With special leave under article 136 of the Constitution this appeal is preferred by the appellant against the order of the High Court The only question which falls to be determined in this appeal is whether the proceedings for assessment were commenced within the period of limitation prescribed for serving notice of assessment under section 341a of the Act At the material time by section 34 1a the Income Tax Officer was invested with power amongst others to serve at any time within eight years from the end of any year of assessment notice of assessment if he had reason to believe that income profits or gains had escaped assessment by reason of omission or failure on the part of the assessee to make a return of his income under section 22 for that year or to disclose fully and truly all material facts necessary for his assessment of that year In those cases where the Income Tax Officer had in consequence of information in his possession reason to believe that income profits or gains had escaped assessment even though there was no omission or failure as mentioned in el a he could under cl b within four years from the end of the year of assessment serve a notice of assessment Admittedly the notices issued by the Income Tax Officer for the years in question were issued within eight years from the end of the years of assessment and if el 1a of section 34 applied the assessment was not barred by the law of limitation 38 But the appellant contended that the notices for assessment were even though he had not made a return of his income for the years in question governed not by cl 1a of section 34 but by cl 1b of section 34 He contended that being a resident outside the taxable territory in the years of assessment a general notice under section 221 did not give rise to a liability to submit a return and his inaction did not amount to omission or failure to submit a return inviting the applicability of section 341a He submitted that omission or failure to make a return can only arise qua a non resident if no return is filed after service of an individual notice under section 222 In other words the plea is that a notice under section 221 imposes an obligation upon persons resident within the taxable territory and not upon non residents and support for this argument is sought to be obtained from section 1 sub section 2 which extended the Income Tax Act at the material time to British India The expression every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income tax in section 221 includes all persons who are liable to pay tax and there is nothing in the section or in its context which exempts non residents from liability to submit a return pursuant to a notice thereunder The fact that a non resident assessee may not come to know of the general notice issued under section 221 is not a ground for not giving effect to the plain words used in the section In terms the clause read with r 18 requires every person who has taxable income to submit his return and if he fails to do so under section 34 of the Act the Income Tax Officer may commence proceedings for assessment within the period prescribed by cl 1a Section 341b applies only to those cases where there is no omission or failure to make a return of the income or to make a full and true disclosure of facts material to the assessment To the appellant though non resident income bad admittedly accrued in the taxable territory and that income exceeded the maximum amount not chargeable to income tax The appellant not having submitted a return in pursuance of the notice issued under section 221 the Income Tax 39 Officer was competent under section 341a to issue notice at any time within eight years of the end of the year of assessment for assessing him to tax Once a notice is given by publication in the press and in the prescribed manner under section 221 every person whose Th income exceeds the maximum amount exempt from tax is obliged to submit a return and if he does not do so it will be deemed that there was omission on his part to a make a return within the meaning of section 341a There is no warrant for the submission that section 221 applies to residents only and that an obligation to make a return on the part of a nonresident can only arise if a notice under sub section 2 is served Under sub section 2 it is open to the Income Tax Officer to serve a special notice upon any person requiring him to furnish a return in the prescribed form but that provision does not derogate from the liability arising under sub section 1 to submit a return The Income Tax Act extends by section 12 to the taxable territory and not beyond but within that territory the Income Tax Officer has power to tax income which accrues arises or is received and that is not disputed by the appellant If power to tax be granted it is difficult to appreciate the ground on which the plea that the general provision imposing liability upon persons receiving taxable income is subject to an unexpressed limitation that it is to apply only to residents and not to non residents The submission that a person liable to pay tax but resident outside the taxable territory must be served with a special notice under section 222 before his inaction in the matter of making a return may be deemed omission within the meaning of section 341 is without force There is no such express provision made by the statute and none can be implied from the context The High Court was therefore right in holding that the proceedings for assessment were properly commenced within the period of limitation prescribed by section 341a from the close of the year of assessment The appeal fails and is dismissed with costs Appeal dismissed	The respondent a firm carrying on business in Singapore filed a plaint in the firm name against the appellants for the breach of contract The plaint had been signed and verified on behalf of the firm by one D on a power of attorney executed by one of the partners only After about 6 years the respondents made an application for the amendment of the plaint The amendment sought was to the effect that the name of the firm as plaintiff be struck off as it was a misdescription and in its place and stead the names of five partners of the firm should be brought on record in order to bring the controversy between the proper parties into clear relief The amendment petition was rejected inter alia on the grounds that the original plaint was no plaint in law and it was not a case of misnomer or misdescription nor a case of a nonexistent firm or a non existent person but a legal bar as the plaint was a nullity The proper course when there is such a mistake is not to amend disregarding the condition of 0 i r 10 of the Code of Civil Procedure but to seek the Court s permission to withdraw the suit with liberty to file a fresh suit under 0 23 r i of the Civil Procedure Code on the ground of formal defect and which should be done before limitation In appeal the High Court came to the conclusion that the description of a plaintiff by a firm name in a case where the Code of Civil Procedure does not permit a suit to be brought in the firm name should properly be considered a case of description of the individual partners of the business and as such a misdescription which in law can be corrected and should not be considered to amount to a description of non existent person It also rejected the contention that the power of attorney in favour of D was insufficient 983 Held that the word firm or the firm name in section 4 Of the Indian Partnership Act is merely a compendious description of all the partners collectively Where a suit is filed in the name of a firm it is still a suit by all the partners of the firm unless it is proved that all the partners had not authorised the suit The provision of 0 XXX r 1 2 of the Code of Civil Pro cedure are enabling provisions to permit several firms who are doing business as partners to sue or be sued in the name of the firm and do not prevent the partners of a firm from suing or being sued in their individual names nor do they prohibit the partners of a firm suing in India in their names individually although they may be doing business outside India since a firm is not a legal entity the privilege of suing in the name of a firm is permissible only to those persons who as partners are doing business in India Such privilege is not extended to persons who are doing business as partners outside India In their case they still have to sue in their individual names If however under some misapprehension persons doing business as partners outside India do file a plaint in the name of their firm they are misdescribing themselves as the suit instituted is by them they being known collectively as a firm A plaint filed in a court in India in the name of a firm doing business outside India is not by itself a nullity It is a plaint by all the partners of the firm with a defective description of themselves for the purpose of the Code of Civil Procedure A civil court could permit under provisions of section 153 of the Code an amendment of the plaint to enable a proper description of the plaintiffs to appear in it in order to assist the court in determining the real question or issue between the parties Neither r 10i nor r 102 of Order I have any application to a case of this kind as the suit had been from its very inception a suit by the partners of the firm and no question of adding or substituting any person arises the partners collectively being described as a firm with a particular name Held further that it is not necessary that the power of attorney should be signed by all the partners of the firm A partner is an agent of the firm and there is no prohibition to a partner executing a power of attorney in favour of an individual authorising him to institute a suit on behalf of the firm Vyankatesh Oil Mill Co vs Velamahomed AIR 1928 Bom 191 disapproved Amulakchand Mewaram vs Babulal Kanalal AIR 1933 Bom 304 Sadler vs Whiteman Mura Mohideen vs VOA Mohomed AIR 1955 Mad 294 and Kasturchand Bahiravdas vs Sagarmal Shriyam Bom 413 discussed Hajee Sattar Hajee Peer Mohomad vs Khusiram Benarsilal ILR referred to 984
Appeal No 498 of 1958 Appeal from the judgment and order dated February 11 1955 of the Andhra Pradesh High Court in T R C No 120 of 1953 arising out of the judgment and order dated December 29 1952 of the Sales Tax Tribunal Madras in Tribunal Appeal No 857 of 1951 A V Viswanatha Sastri M Ranganatha Sastri and M section K Sastri for the appellants D Narasaraju Advocate General for the State of 15 Andhra Pradesh T V R Tatachari D Venkatappayya Sastri and T M Sen for the respondent October 18 The Judgment of the Court was delivered by AYYANGAR J This appeal on a certificate under article 133 of the Constitution granted by the High Court of Andhra Pradesh raises for consideration principally the question whether hardened or hydrogenated groundnut oil commonly called Vanaspati is groundnut oil within the meaning of Rule 182 of the Madras General Sales Tax Turnover and Assess ment Rules 1939 Tungabhadra Industries Ltd the appellant in this appeal has a factory of considerable size at Kurnool in the State of Andhra Pradesh The company purchases groundnuts and groundnut kernels within the State and manufactures groundnut oil and also refined oil as well as hydrogenated oil all of which it sells The appeal is concerned with the assessment to salestax of this company for the year 1949 50 Section 3 of the Madras General Sales Tax Act 1939 enacts 3 1 Subject to the provisions of this Act a every dealer shall pay for each year a tax on his total turnover for such year and b the tax shall be calculated at the rate of three pies for every rupee in such turnover 2 3 4 For the purposes of this section and the other provisions of this Act turnover shall be determined in accordance with such rules as may be prescribed Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly 5 The taxes under sub sections 1 and 2 shall be assessed levied and collected in such manner and in such installments if any as may be prescribed Provided that i in respect of the same transaction of sale the buyer or the seller but not both as determined by 16 ii where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause i of this proviso he shall not be taxed again in respect of any sale of such goods effected by him Rules were made by virtue inter alia of these provisions entitled The Madras General Sales Tax Turnover and Assessment Rules 1939 Of these those relevant to the present context are Rules 4 5 Rule 4 reads 41 Save as provided in sub rule 2 the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by the dealer 2 In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by the dealer a groundnut The result of the combined operation of section 412 in the case of those who purchased groundnut and having crushed them sold the oil obtained was that they had to pay tax on both their purchases of groundnut and their sales of oil produced therefrom This was considered by the rule making authority to be an unfair burden and relief was accordingly provided by Rules 5 and 18 of the same rules the material portions of which ran 5 1 The tax or taxes under section 3 shall be levied on the net turnover of a dealer In determining the net turnover the amounts specified in clauses a to 1 shall subject to the conditions specified therein be deducted from the gross turnover of a dealer Clause k of this rule reads k in the case of a registered manufacturer of groundnut oil and cake the amount which he is entitled to deduct from his gross turnover under rule 18 subject to the conditions specified in that rule This rule was amended by a notification dated November 9 1951 by the addition of the words 17 groundnut oil but this modification of the rule is not relevant to the present case which is concerned with the assessment of a period anterior to the modification Rule 18 referred to here reads to quote only the material words 18 1 Any dealer who manufactures groundnut oil and cake from groundnut andor kernel purchased by him may on application to the assessing authority having jurisdiction over the area in which he carries on his business be registered as a manufacturer of groundnut oil and cake 2 Every such registered manufacturer of groundnut oil will be entitled to a deduction under clause k of sub rule 1 of rule 5 equal to the value of the groundnut andor kernel purchased by him and converted into oil and cake if he has paid the tax to the State on such purchases Provided that the amount for which the oil is sold is included in his net turnover Provided further that the amount of the turnover in respect of which deduction is allowed shall not exceed the amount of the turnover attributable to the groundnut andor kernel used in the manufacture of oil and included in the net turnover Explanation For the purpose of this sub rulea 143 lb of groundnut shall be taken to be equivalent to 100 lb of kernel b 143 lb of groundnut or 100 lb of kernel when converted into oil will normally be taken to yield 40 lb of oil and c one candy of oil shall be taken to be equivalent to 500 lb of oil Then follow other provisions not relevant for the purposes of the present appeal The appellant was registered as a manufacturer of groundnut oil under r 181 That the appellant purchased the groundnuts the value of which was claimed as a deduction in the turnover within the State and paid tax on such purchase to the State was not in dispute Nor was there any controversy that the sale 18 price of the oil expressed out of and sold either as raw groundnut oil refined oil or hydrogenated oil was included in the turnover of the appellant The Deputy Commercial Tax Officer Kurnool who completed the assessment of the appellant accepted the figures of purchases and sales submitted by it and dealing with the claim for the deduct ion of the purchase price of the groundnuts from the proceeds of the sale of all oil by the company raw refined and hydrogenated granted a deduction in respect of the purchase price of the groundnuts attributable to the unrefined oil sold by the appellant but held that the appellant was not entitled to the deduction claimed in respect of the refined and hydrogenated oil for the reason that it was only unrefined or unprocessed groundnut oil that was connoted by the expression groundnut oil in rule 51k read with rule 181 and 2 of the Turnover and Assessment Rules This order of the Deputy Commercial Tax Officer was affirmed by the Commercial Tax Officer on appeal and the appellant filed a further appeal to the Sales Tax Appellate Tribunal The second appellate authority upfield the contention of the appellant in regard to the sale of refined oil but rejected it in so far as it related to the sales of hydrogenated oil The matter was thereafter brought up before the High Court of Andhra Pradesh by a Tax Revision Case filed under section 13b1 of the Act and the learned Judges upheld the view of the Tribunal and disallowed the claim of the appellant to the deduction claimed in regard to the sales turnover of hydrogenated oil They granted the certificate under article 133 which has enabled the appellant to file an appeal to this Court The claim of the appellant to the deduction under r 182 on the sales of refined groundnut oil is no longer in dispute The ground upon which both the Tribunal as well as the High Court decided against the allowance of the deduction in respect of the sales of hydrogenated oil while upholding the appellants case as regards refined oil may be briefly stated thus The exemption or deduction from the sale turnover under r 182 is on its terms applicable only to the sale of the oil in the form in which it is when extracted 19 out of the kernel When raw groundnut oil is converted into refined oil there is no doubt processing but this consists merely in removing from raw groundnut oil that constituent part of the raw oil which is not really oil The elements removed in the refining process consist of free fatty acids phosphotides and unsaponifiable matter After the removal of this nonoleic matter therefore the oil continues to be ground nut oil and nothing more The matter removed from the raw groundnut oil not being oil cannot be used after separation as oil or for any purpose for which oil could be used In other words the processing consists in the non oily content of the raw oil being separated and removed rendering the oily content of the oil 100 per cent For this reason refined oil continues to be groundnut oil within the meaning of rules 51k and 182 notwithstanding that such oil does not possess the characteristic colour or taste odour etc of the raw groundnut oil But in the case of hydrogenated oil which is prepared from refined oil by the process of passing hydrogen into heated oil in the presence of a catalyst usually finely powdered nickel two atoms of hydrogen are absorbed A portion of the oleic acid which formed a good part of the content of the groundnut oil in its raw state is converted by the absorption of the hydrogen atoms into stearic acid and it is this which gives the characteristic appearance as well as the semi solid condition which it attains In the language of the Chemist an inter molecular or configurational chemical change takes place which results in the hardening of the oil Though it continues to be the same edible fat that it was before the hardening and its nutritional properties continue to be the same it has acquired new properties in that the tendency to rancidity is greatly removed is easier to keep and to transport Both the Tribunal as well as the learned Judges of the High Court held that the hydrogenated oil or Vanaspati ceased to be groundnut oil by reason of the chemical changes which took place which resulted in the acquisition of new properties including the loss of its fluidity In other words 20 they held that Vanaspati or hydrogenated oil was not groundnut oil but a product of groundnut oil manufactured out of groundnut oil and therefore not entitled to the benefit of the deduction under r 182 The arguments of Mr Visvanatha Sastri for the appellants were briefly two 1 The reasons behind the rules 5k 182 which were designed to afford relief against what would amount practically to double taxation of the same assessee both when he purchased and when he sold the goods required that the appellants claim should be allowed 2 Hydrogenated groundnut oil was no less groundnut oil than either refined or even unrefined oil The fact that the quality of the oil had been improved does not negative its continuing to be oil and the materials before the departmental authorities and the Court established that it continued to be oil and was nothing more The argument based on the reason of the rule can not carry the appellant far since in the present case it is an exemption from tax which he invokes and of which he seeks the benefit If the words of the rule are insufficient to cover the case the reason behind the rule cannot be availed of to obtain the relief Nor could it be said to be a case of double taxation of the same goods at the purchase and sale points which is forbidden by section 35 of the Act If the view adopted by the learned Judges of the High Court that hydrogenated groundnut oil is not groundnut oil but a product of groundnut oil were correct learned Coun sel cannot urge that he would still be entitled to the deduction for which provision is made in r 182 Consequently it is the second of the submissions alone which really requires to be examined In doing so it would be convenient to consider the reasoning on the basis of which the view that hydrogenated oil was not groundnut oil was sought to be sustained before us The learned Advocate General of Andhra Pradesh who appeared for the respondent Commercial Tax Officer sought to support the decision of the High Court by two lines of reasoning The first was that 21 the exemption applied only to the sale of the oil as it emerged from the presser and that any processing of the oil including refining in order to remove even the impurities and free fatty acids took it out of the category of groundnut oil as used in the rule In support of this submission he referred us to the Table of Conversion of groundnuts and kernel into oil set out in the Explanation to r 182 extracted earlier and submitted that the 40 lb of oil for every 100 lb of kernel was based on the yield of raw groundnut oil and that this was an indication that nothing other than raw groundnut oil was intended to be covered by the expression groundnut oil in the rule We must however point out that this last submission has no factual basis to support it It is not known whether the proportion of 40 lb of oil for every 100 lb of kernel represents the average weight of oil extractable from different varieties of groundnut kernels or is the average of the different types of oils which may be produced out of different varieties of kernels In the absence of any definite data in this regard it is impossible to accept the argument that the Table of Conversion justifies any particular construction of what was meant by groundnut oil in the main part of the rule Nor is the learned Advocate General well founded in his submission that the processing of the oil in order to render it more acceptable to the customer by improving its quality would render the oil a commodity other than groundnut oil within the meaning of the rule For instance if the oil as extracted were kept still in a vessel for a period of time the sediment normally present in the oil would settle at the bottom leaving a clear liquid to be drawn out The learned Advocate General cannot go so far as to say that if this physical process was gone through the oil that was decanted from the sediment which it contained when it issues out of the expresser ceased to be di groundnut oil for the purposes of the rule If the removal of impurities by a process of sedimentation does not render groundnut oil any the less so it follows that even the process of refining by the 22 application of chemical methods for removing impuri ties in the oil would not detract from the resulting oil being groundnut oil for the purpose of the rule It may be mentioned that processes have been discovered by which even on extraction from the oil mill the oil issues without any trace of free fatty acids It could hardly be contended that if such processes were adopted what comes out of the expresser is not groundnut oil The submission of the learned Advocate General based on a contention that the Tribunal and the learned Judges of the High Court erred in holding that even refined groundnut oil was groundnut oil for the purpose of the rule must be rejected The next question is whether if beyond the process of refinement of the oil the oil is hardened again by the use of chemical processes it is rendered any the less groundnut oil In regard to this the learned Advocate General first laid stress on the fact that while normally oil was a viscous liquid the hydrogenated oil was semi solid and that this change in its physical state was itself indicative of a substantial modification of the identity of the substance We are unable to accept this argument No doubt several oils are normally viscous fluids but they do harden and assume semi solid condition on the lowering of the temperature Though groundnut oil is at normal temperature a viscous liquid it assumes a semi solid condition if kept for a long enough time in a refrigerator It is therefore not correct to say that a liquid state is an essential characteristic of a vegetable oil and that if the oil is not liquid it ceases to be oil Mowrah oil and Dhup oil are instances where vegetable oils assume a semi solid state even at normal temperatures Neither these nor cocoanut oil which hardens naturally on even a slight fall in temperature could be denied the name of oils because of their not being liquid Other fats like ghee are instances where the physical state does not determine the identity of the commodity The next submission of the learned Advocate General was that in the course of hydrogenation the oil 23 absorbed two atoms of hydrogen and that there was an inter molecular change in the content of the substance This however is not decisive of the matter The question that has still to be answered is whether hydrogenated oil continues even after the change to be groundnut oil If it is it would be entitled to the benefit of the deduction from the turnover or to put it slightly differently the benefit of the deduction from the turnover cannot be denied unless the hydrogenated groundnut oil has ceased to be groundnut oil To be groundnut oil two conditions have to be satisfied The oil in question must be from groundnut and secondly the commodity must be oil That the hydrogenated oil sold by the appellants was out of groundnut not being in dispute the only point is whether it continues to be oil even after hydrogenation Oil is a chemical compound of glycerine with fatty acids or rather a glyceride of a mixture of fatty acids principally oleic linoleic stearic and palmitic the proportion of the particular fat varying in the case of the oil from different oil seeds and it remains a glyceride of fatty acids even after the hardening process though the relative proportion of the different types of fatty acids undergoes a slight change In its essential nature therefore no change has occurred and it remains an oil a glyceride of fatty acids that it was when it issued out of the press In our opinion the learned Judges of the High Court laid an undue emphasis on the addition by way of the absorption of the hydrogen atoms in the process of hardening and on the consequent inter molecular changes in the oil The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality and utility But neither mere absorption of other matter nor inter molecular changes necessarily affect the identity of a substance as ordinarily understood Thus for instance there are absorptions of matter and inter molecular changes which deteriorate the quality or utility of the oil and it might be interesting to see if such additions and alterations could be taken to 24 render it any the less oil Groundnut oil when it issues out of the expresser normally contains a large proportion of unsaturated fatty acids oleic and linoleic which with other fatty acids which are saturated are in combination with glycerine to form the glyceride which is oil The unsaturated fatty acids are unstable i e they are subject to oxidative changes When raw oil is exposed to air particularly if humid and warm ie in a climate such as obtains in Madras oxygen from the atmosphere is gradually absorbed by the unsaturated acid to form an unstable peroxide in other words the change involves the addition of two atoms of oxygen which in its turn decomposes breaking up into aldehydes It is this oxidative change and particularly the conversion into aldehydes that is believed to be responsible for the sharp unpleasant odour and the characteristic taste of rancid oil If nothing were done to retard the process the rancidity may increase to such extent as to render it unfit for human consumption The change here is both additive and inter molecular but yet it could hardly be said that rancid groundnut oil is not groundnut oil It would undoubtedly be very bad groundnut oil but still it would be groundnut oil and if so it does not seem to accord with logic that when the quality of the oil is improved in that its resistance to the natural processes of deterioration through oxidation is increased it should be held not to be oil Both the Tribunal as well as the High Court have pointed out that except for its keeping quality without rancidity and ease of packing and transport without leakage hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used Similarly we consider that hydrogenated oil still continues to be groundnut oil notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for 25 those who desire to consume groundnut oil In our opinion the assessee company was entitled to the benefit of the deduction of the purchase price of the kernel or groundnut under r 182 which went into the manufacture of the hydrogenated groundnut oil from the sale turnover of such oil One other point which is involved in the appeal relates to the claim of the appellant to a deduction in respect of the freight charges included in the price of the commodity Under r 51g of the Turnover and Assessment Rules in determining the net turnover of a dealer he is entitled to have deducted from his gross turnover all amounts falling under the following two heads when specified and charged for by the dealer separately without excluding them in the price of the goods sold i freight ii The appellant claimed exemption on a sum of Rs 388377 13 3 on the ground that it represented the freight in respect of the goods sold by the appellant asserting that they had been charged for separately The assessing officer rejected the claim and this rejection was upheld by the departmental authorities and by the High Court in Revision It would be seen that in order to claim the benefit of this exemption the freight should 1 have been specified and charged for by the dealer separately and ii the same should not have been included in the price of the goods sold The learned Judges of the High Court held that neither of these conditions was satisfied by the bills produced by the appellant We consider the decision of the High Court on this point was correct In the specimen bill which the learned Counsel for the appellants has placed before us after setting out the quantity sold by weight 23760 lb the price is specified as 15 annas 9 pies per lb and the total amount of the price is determined at Rs 23 388 12 0 From this the railway freight of Rs 1439 12 0 is deducted and the balance is shown as the sum on which sales tax has been computed 26 From the contents of this invoice it would be seen that the appellant has charged a price inclusive of the railway freight and would therefore be outside the terms of r 51g which requires that in order to enable a dealer to claim the deduction it should be charged for separately and not included in the price of goods sold The conditions of the rule not having been complied with the appellant was not entitled to the deduction in respect of freight The result therefore is that the appeal is allowed in part and the order of the High Court in so far as it denied to the appellant the benefit of the deduction in the turnover provided by r 182 of the Turnover and Assessment Rules is set aside In view of the appellant having succeeded only in part there will be no order as to costs in this appeal Appeal allowed in part	The appellants who were dealers registered under the Assam Sales Tax Act 1947 submitted a return of their turnover for the account period April 1 1948 to September 30 1948 which included sales in Assam of all goods other than jute The Superintendent of Taxes however summarily assessed the appellants under sub section 4 of section 17 of the Act by order dated September 30 1950 to pay tax on sales of jute despatched by them to Calcutta during the account period The order of assessment was confirmed by the Commissioner of Taxes On an application by the appellants the Commissioner referred certain questions of law arising out of the assessment to the High Court which then gave its opinion that as the consignments in question were not sales within the meaning of sub section 12 of section 2 of the Act they were not taxable and that as to whether the sales could thereafter be assessed if they fell within the purview of the Explanation to sub section 12 of section 2 it expressed no opinion On receipt of the opinion the Commissioner directed the Superintendent of Taxes to dispose of the case in accordance with the judgment of the High Court The Superintendent of Taxes then set aside the order of assessment dated September 30 1950 and issued a notice to the appellants on January 30 1953 directing them to produce the necessary evidence in order in the case came within the purview of the Explanation to sub s12 of section 2 of the Act The appellant claimed that the Superintendent had no jurisdiction to commence any further proceeding for assessment as the notice issued to him was beyond three years from the end of the assessment period as provided by section 19 of the Act Held that the High Court in answering the questions referred to it was exercising an advisory jurisdiction and could not and did not give any direction to the sales tax authorities to proceed to assess or not to assess the appellants to sales tax it merely gave its opinion that the transactions were not sales within the meaning of section 2 sub section 12 of the Act and were accordingly not taxable 41 Held further that the Commissioner not having issued any notice under section 19A of the Act or exercised his revisional authority under section 31 but having merely directed the case to be disposed of in accordance with the judgment of the High Court the Superintendent of Taxes had no jurisdiction to initiate fresh proceedings for reassessment under section 19 after the expiry of three years from the assessment period Commissioner of Income Tax Bombay Presidency and Aden and others vs Bombay Trust Corporation Ltd 1936 LR 63 1 A 408 distinguished
Appeal No 277 of 1955 Appeal from the judgment and order dated April 27 1954 of the Rajasthan High Court in Civil Mis Writ No 11954 N C Chatterjee Suresh Agarwal and Ganpat Rai for the appellant RK Rastogi and K L Mehta for the respondents October 19 The Judgment of the Court was delivered by IMAM J The appellant was the Jagirdar of Thikana Rakhi in the Marwar Jodhpur area of the State of Rajasthan Within Thikana Rakhi was the 49 village of Khakharki He had a number of tenants under him in the village who paid rent on the basis of a certain share of the produce of the land held There was an Act in force in the Marwar area called the Marwar Tenancy Act of 1949 hereafter refer red to as the Tenancy Act which had been passed by His Highness the Maharaja of Jodhpur before the integration of the State of Jodhpur in the State of Rajasthan That Act now stands repealed but we are concerned with a period when it was in force Section 78 of that Act provides that when rent is payable by a division of the produce or is based on an estimate or appraisement of the standing crop the landlord or the tenant may apply to the Tahsildar for making the division estimate or appraisement when this could not be done amicably Section 79 of the Tenancy Act lays down the procedure to be followed at the hearing of such an application and provides that any amount found due as rent by the Tahsildar on that application shall have the effect of a decree for arrears of rent On October 31 1950 the appellant who had some difficulty in realising the rent from his tenants in village Khakharki made an application under section 78 of the Tenancy Act to the Tahsildar Merta within which the village Khakharki was situate Before this application was finally disposed of the Government of Rajasthan issued a Notification under section 85 of the Tenancy Act which is set out below Jaipur February 22 1951 No F 474 Rev1 51 Whereas it has been made to appear that the cultivators of the villages mentioned in the Schedule below have refused to pay rent to the persons entitled to collect the same Now therefore in exercise of the power conferred by sub sec 1 of sec 85 of the Marwar Tenancy Act 1949 No XXXIX of 1949 the Government of Rajasthan is pleased to declare that such rents may be recovered as arrears of land revenue 7 50 by order of His Highness the Rajpramukh H D Ujwal Secretary to the Government of Rajasthan Revenue Department This Notification was published in the Official Gazette on March 3 1951 and one of the villages mentioned in the Schedule to it was Khakharki In view of the Notification the appellant became entitled under section 85 the terms of which will be set out later to have the rents due to him from the tenants of Kbakharki realised as arrears of land revenue Accordingly on March 9 1951 he filed an application under that section in the Court of the Collector Nagaur within whose jurisdiction lay the village of Khakharki for recovery as arrears of land revenue of the rents due to him for 1950 51 from those tenants of Khakharki who had refused to pay them Subsequently on March 26 1951 the appellant s application under section 78 of the Tenancy Act was dismissed for reasons which it is not necessary for the purpose of this appeal to state On March 29 1951 the tenants filed an application in the Court of the Collector of Nagaur stating that the notice of the appellant s application under section 85 of the Tenancy Act should be served on them and they should be heard on that application as this was required by the rules framed under the Rajasthan Revenue Courts Procedure and Jurisdiction Act of 1951 hereinafter referred to as the Revenue Courts Act which governed that application The Revenue Courts Act was an Act passed by the Rajpramukh of the State of Rajasthan with which the State of Jodhpur had integrated prior thereto and it applied to the whole State of Rajasthan including the Marwar area This Act came into force on January 31 1951 This application by the tenants was rejected by the Collector Thereafter on April 5 1951 the Collector passed an order by which a total sum of Rs 38587 30 was found due to the appellant from the tenants on account of rent other charges and court fees The 51 Collector then sent the order to the Tahsildar of Merta for recovering that sum as arrears of land revenue The tenants filed an appeal before the Additional Commissioner Jodhpur challenging the validity of the order of the Collector dated April 5 1951 This appeal was dismissed by the Additional Commissioner on November 2 1951 The tenants then went in revision to the Board of Revenue Rajasthan The Board of Revenue took the view that the Revenue Courts Act had not affected the procedure to be followed on the hearing of an application under section 85 of the Tenancy Act but it remanded the case to the Additional Commissioner as the tenants contended that the Additional Commissioner had not decided other points that arose in the appeal to him The Additional Commissioner heard the tenants on the other points and again dismissed their appeal on July 71952 The tenants moved the Board of Revenue in revision against the order of July 7 1952 also Before the Board of Revenue could decide the revision case the Government of Rajasthan on November 1 1952 published another Notification rescinding the earlier Notification dated February 22 1951 issued under section 85 of the Tenancy Act One of the points argued before the Board of Revenue in this revision case was that in view of the rescission of the Notification no further proceedings could be taken under section 85 of the Tenancy Act for recovery of rent as arrears of land revenue The Board of Revenue rejected this and all other contentions raised on behalf of the tenants and dismissed the revision case on September 29 1953 Fortythree of the tenants filed a petition in the High Court for Rajasthan for a writ of certiorari to quash the orders of the Collector the Additional Commissioner and the Revenue Board earlier mentioned The High Court allowed the petition and quashed and set aside these orders and held that the Notification under section 85 of the Tenancy Act having been cancelled no further proceedings for realisation of arrears of rent as arrears of land revenue could be taken by the Collector of Nagaur The High Court however granted a certificate that the case was a fit one for appeal 52 to the Supreme Court Hence the present appeal The rent found due has not been realised yet by the Tahsildar presumably in view of the pending proceedings The respondents to the appeal are the State of Rajasthan and various Revenue Officers of that State and the tenants This appeal has been contested only by some of the tenants and the other respondents have not appeared before us Section 85 of the Tenancy Act is in these terms section 85 1 In case of any general refusal to pay rent to persons entitled to collect the same in any local area the Government may by notification in the Official Gazette declare that such rents may be recovered as arrears of land revenue 2 In any local area to which a notification made under sub sec 1 applies a landlord or any other person to whom an arrear of rent is due may notwithstanding anything to the contrary in this or any other enactment for the time being in force instead of suing for recovery of the arrear under this Act apply in writing to the Deputy Commissioner to realise the same and the Deputy Commissioner shall after satisfying himself that the amount claimed is due proceed subject to the rules made by the Government to recover such amount with costs and interest as an arrear of land revenue 3 The Deputy Commissioner shall not be made a defendant in any suit in respect of an amount for the recovery of which an order has been passed under this section 4 Nothing herein contained and no order passed under this section shall debar a a landlord from recovering by suit or application any amount due to him which has not been recovered under this section b a person from whom any amount has been recovered under this section in excess of the amount due from him from recovering such excess by suit against the landlord or other person on whose application the arrear was realised The first point raised on behalf of the respondents in the High Court was that section 85 of the Tenancy Act 53 had itself been repealed by the Revenue Courts Act and no action under that section could be taken after the latter Act had come into force The Revenue Courts Act was repealed in 1955 after the judgment of the High Court was delivered but this does not affect the question before us The long title of the Act states that the Act is intended to provide for and regulate the jurisdiction and procedure of Revenue Courts and Officers in Rajasthan The preamble states Whereas it is expedient pending the enactment of a comprehensive law for the whole of Rajasthan relating to agricultural tenancy land tenures revenue rent survey record settlement and other matters connected with land to provide for and regulate the jurisdiction and procedure of revenue courts and officers in relation to such matters arising under the laws in force in the covenanting States of Rajasthan Jodhpur was one of the covenanting States and one of the laws in force there was the Tenancy Act This Act continued to apply to the territories belonging to the former Jodhpur State which since the integration formed part of the State of Rajasthan till that Act was repealed as hereinbefore stated Section 2 of the Act provides On and from the coming into force of this Act all existing laws shall in so far as they relate to matters dealt with in this Act be repealed It is said that the effect of section 2 of the Revenue Courts Act is to repeal section 85 of the Tenancy Act The High Court was unable to accept this contention and we think rightly Section 85 of the Tenancy Act would be repealed only if the Revenue Courts Act contained any provision dealing with the matter covered by it We find no such provision in the Revenue Courts Act The Revenue Courts Act deals with matters of jurisdiction and procedure of Revenue Courts It does not deal with any substantive right This is clear from the provisions of the Revenue Courts Act and indeed is not in dispute Quite clearly section 85 creates on the requisite notification being issued a substantive right in a landlord to have the rent due to him recovered as arrears of land revenue We do not find any provision 54 in the Revenue Courts Act dealing with the substantive right created by section 85 of the Tenancy Act There is therefore no foundation for the argument that that section has been repealed by section 2 of the Revenue Courts Act A reference to schedule 1 to Revenue Courts Act which gives a list of suits and applications triable by a Revenue Court and prescribes the periods of limitation applicable to and court fees payable on them can usefully be made now The schedule is divided into several groups of which group C contains a list of applications triable by a Collector Item 2 of this group concerns applications for realisation of rent as land revenue on the general refusal to pay rent In regard to the period of limitation for such applica tions it is stated there that none exists We have no doubt that item 2 of group C in the schedule does not confer a substantive right to make an application for realisation of rent as land revenue at all The purpose of the schedule appears from sections 7 9 and 10 of the Act which respectively provide that the jurisdiction of the various revenue courts the periods of limitation for proceedings maintainable in these Courts and the court fees payable thereon are as stated in the schedule The schedule is not operative by itself So item 2 of group C in the schedule does not confer any right to apply for collection of rent as arrears of land revenue On the other hand the mention of such an application in the schedule clearly indicates that the Revenue Courts Act recognises that such an application is competent Since the Revenue Courts Act itself does not authorise such an application it must be so competent under other existing laws reference to which has been made in the preamble and section 2 of the Act One of such laws is section 85 of the Tenancy Act Therefore it seems to us that the Revenue Courts Act instead of repealing section 85 of the Tenancy Act contemplates its continuance in force It is necessary before leaving this part of the case to refer to Ch XIII of the Tenancy Act which deals with procedure and jurisdiction It consists of sections 118 to 144 Section 118 says that all suits and applications of the nature specified in the second schedule to 55 the Act shall be heard and determined by a Revenue Court Section 124 states that all suits and other proceedings especified in the second schedule shall be instituted within the time prescribed for them in that schedule Section 129 provides that a Deputy Commissioner shall have power to dispose of applications specified in group E of the second schedule It is not necessary to refer to the other sections in this Chapter Turning to second schedule we find that group E is concerned with applications triable by a Deputy Commissioner Item 4 of this group deals with applications under section 85 for collection of rent as land revenue in the event of general refusal to pay The period of limitation for such applications is stated there to be so long as notification remains in force and this period is stated to commence from the time when the notification under the section is published in the Official Gazette Now the Revenue Courts Act provides by section 7 that all suits and applications of the nature specified in the first and second schedules shall be heard and determined by a revenue court A revenue court is defined in section 4xvi of this Act as including among others the Board of Revenue the Commissioners and the Collectors We have earlier stated that item 2 of group C in the first schedule to this Act refers to an application under section 85 of the Tenancy Act and provides that there shall be no period of limitation for making such an application and that it shall be made to a Collector Therefore for an application under section 85 of the Tenancy Act the Revenue Courts Act specifies a new revenue court namely the Collector in the place of the Deputy Commissioner mentioned in section 85 of the Tenancy Act and also makes it free of the bar of limitation It follows that sections 7 and 9 of the Revenue Courts Act deal with matters dealt with in sections 118 124 and 129 of the Tenancy Act By virtue of section 2 of the Revenue Courts Act sections 118 124 and 129 of the Tenancy Act will have to be taken as repealed There would also consequently be a repeal of item 4 of group E in the second schedule to the Tenancy Act The position then is that since the coming into force of 56 the Revenue Courts Act there is no period of limitation prescribed for making an application under section 85 of the Tenancy Act and that application has to be made to a Collector The application under section 85 by the appellant in the present case had been made to the Collector as at the date when it was made the Revenue Courts Act was in force The repeal of sections 118124 and 129 of the Tenancy Act does not however affect section 85 of this Act except as hereinbefore stated Next it is said that even though section 85 of the Tenancy Act may not have been repealed the procedure to be followed in respect of an application made under it is in view of r 114 in Ch IV of the rules framed under the Revenue Courts Act is that laid down in Ch 11 of these rules and that that procedure was not followed This it is contended constitutes an error apparent on the face of the orders passed by the revenue authorities in this case and renders them liable to be set aside A reference has now to be made to the rules framed under section 85 of the Tenancy Act These rules so far as relevant for our purpose prescribe that an application by the landlord under the section shall be accompanied by a list in a prescribed form in which is to be stated the dues of the landlord for canal charges rent interest and court fees Rule 34 provides that the Deputy Commissioner shall check the lists by examining the Patwari or by any other suitable method and thereafter enter in the appropriate column in the form the amounts passed by him as due to the landlord Under r 35 he has thereafter to send the list to the Tahsildar who shall then proceed to realise the amount stated in the list by the Deputy Commissioner to be due to the landlord It is said on behalf of the tenants that the rules under section 85 lay down the procedure for the disposal of an application made under that section and that these rules have been repealed by section 2 of the Revenue Courts Act read with r 114 of the rules framed under that Act It is contended that the revenue authorities committed an error in following the rules framed 57 under section 85 of the Tenancy Act and not those prescribed in Ch 11 of the rules made under the Revenue Courts Act Now Ch IV of the rules framed under the Revenue Courts Act consists only of r 114 That rule provides that the procedure laid down in Ch II of the same rules shall be followed so far as it can be made applicable in all proceedings in revenue courts In view of section 7 of the Revenue Courts Act an application under a 85 of the Tenancy Act must since the coming into force of the former Act be heard and determined by a revenue court Such an application there fore gives rise to a proceeding in a revenue court and such a proceeding must it is said in view of r 114 be according to the procedure prescribed by Ch 11 of the rules framed under the Revenue Courts Act It is enough for our purposes to say that Ch II lays down a procedure for a contested matter that is to say it requires that notice of the proceedings should be issued to the respondent to it and he should be given a hearing It is unnecessary to refer to the detailed procedure prescribed in this chapter for as no notice of the application had in fact been given to the tenants in this case and they had not been heard on it it must be held that the procedure laid down in that chapter had not been followed The High Court accepted the contention of the tenants that the rules framed under section 85 of the Tenancy Act had been repealed and that the rules in Ch II of the rules framed under the Revenue Courts Act applied and should have been followed It therefore held that there was an error apparent on the face of the record and thereupon set aside the orders of the revenue authorities challenged by the tenants We have given our anxious consideration to this question but have been unable to agree with the view taken by the High Court It seems to us that the rules made under section 85 of the Tenancy Act had not laid down any special procedure The only rule relevant in this connection is r 34 to which we have earlier referred All that that rule does is to require 8 58 the Deputy Commissioner to check the list a duty which under the section itself he has to perform and also makes it necessary for him to examine the patwari for the purpose The rules do not indicate how the application is to be heard that is whether ex parte or on notice It seems clear to us that a 85 itself requires an application made under it to be heard ex parte First the section does not say that a notice of the application has to be served on the tenant concerned Secondly an application under the section can be made only after the notification prescribed has been issued That notification decides that there has been a general refusal by tenants to pay rent Therefore the section could not have contemplated that the question whether a tenant had so refused would be heard again on notice to him Thirdly in proceedings for recovery of land revenue the persons liable are not heard and therefore when rent is directed to be recovered as land revenue it is not contemplated that the tenants should be heard It is of the essence of such proceedings that there shall be a summary and quick decision If the procedure laid down in Ch 11 of the rules framed under the Revenue Courts Act has to be followed the entire object of section 85 of the Tenancy Act would in our view be defeated It seems to us that section 85 would then really become redundant for then it would contemplate an application for realisation of rent giving rise to a contested proceeding governed by the procedure of a suit and would be a duplication of section 78 of the Tenancy Act earlier referred to or of section 80 of the same Act which provides for a suit in a revenue court for the recovery of rent both of which have to be heard as contested proceedings in the presence of the other side Fourthly c1 b of sub sec 4 of section 85 of the Tenancy Act plainly indicates that the proceeding on an application under that section is to be ex parte That clause contemplates a suit against a landlord by a tenant from whom an amount in excess of what is legally due has been recovered under the section Now the amount recovered cannot of course exceed the amount 59 passed as due by the Deputy Commissioner So the suit contemplated in section 854b would really be one to contest the correctness of the finding of the Deputy Commissioner as to the amount due It would be inconceivable that such would be contemplated under the section if the amount has to be decided by the Deputy Commissioner after hearing the tenant It is clearly not necessary that two contested proceedings one after the other in respect of the same question between the same parties should be provided for It seems therefore quite clear to us that section 85 of the Tenancy Act contemplates that the application made under it shall be heard and determined in the absence of the tenant Indeed this is not really questioned for the contention on behalf of the tenants is that the procedure followed is wrong Dot because that is not the procedure laid down in the Tenancy Act but because the Revenue Courts Act and the rules made thereunder had replaced the ex parte procedure provided by the Tenancy Act by the procedure of a Contested proceeding laid down in Ch 11 of the rules framed under the Revenue Courts Act and this is the procedure which should have been followed Now once it is found as we have found that section 85 of the Tenancy Act has not been repealed by the Revenue Courts Act except to the extent that an application under it has now to be made to a Collector and not to a Deputy Commissioner as provided in it the whole of it has to be given effect to The procedure contemplated by the section is an integral part of the right granted by it and one cannot be separated from the other The application made under it has therefore still to be heard and determined ex parte Rule 114 of the rules framed under the Revenue Courts Act earlier referred to can be of no assistance to the tenants in the present context It does not in terms purport to repeals 85 of the Tenancy Act We have earlier said the Revenue Courts Act contemplated the continuance in force of section 85 of the Tenancy Act and hence no rule framed under the former Act 60 could intend by implication to repeal that section Rule 114 may apply to applications under other provisions of existing laws which are not required by them to be heard ex parte In our view for the reasons aforesaid the application under that section was properly and correctly heard and determined without notice to the tenants Such hearing does not disclose any error at all Then it is said that after the rescission of the Notifi cation dated February 22 1951 no further proceeding could be taken under section 85 of the Tenancy Act This contention also found favour with the High Court and with this view again we are unable to agree Subsection 1 of that section provides for the issue of a notification declaring that certain rents may be recovered as arrears of land revenue Sub section 2 states that in any local area to which a notification made under sub section 1 applies a landlord to whom an arrear of rent is due may apply in writing to the Deputy Commissioner to realise the same and the Deputy Commissioner shall after satisfying himself that the amount claimed is due proceed to recover such amount as an arrear of land revenue It is contended that the words in any local area to which a notification made under subsection 1 applies govern both the application by the landlord and the action of the Deputy Commissioner following thereon and therefore the Deputy Commissioner cannot after the rescission of the notification take any action under the section at all It seems to us that this contention of the tenants is not warranted by the language of the section The words in any local area to which a notification made under sub section 1 applies are concerned with the area and not with the time during which the notification remains in force That follows from the words in any local area There is no reference anywhere to the currency of the notification in point of time Item 4 of group E in schedule 11 to the Tenancy Act earlier referred to leads to the same conclusion That item provides that the period of limitation for an application under section 85 is so long as notification 61 remains in force It is clear that if in sub sec 2 the words in any local area to which a notification applies meant during the currency of the notification in point to time there would have been no need to specify a period of limitation in schedule 11 We have also earlier pointed out that item 4 of group C in schedule II has been repealed by the corresponding provisions in the Revenue Courts Act Since the latter Act came into force the position is that there is no period of limitation for an application under section 85 of the Tenancy Act It is impossible therefore to contend that the words in any local area to which a notification made under sub section 1 applies indicate that the Deputy Commissioner s power to act when an application under that section is made exists only so long as the notification remains in force It also seems to us that the Deputy Commissioner s power to act arises on an application having been duly made under sub see 2 of section 85 Even if that application had to be made within the period that the notification remained in force there would be nothing in sub sec 2 to lead to the conclusion that the Deputy Commissioner s power to act on the application would also depend on the notification remaining in force It may be stated here that in the present case the application had been made before the Notification had been rescinded Once the notification under section 85 is issued power is certainly vested in the appropriate Revenue officers to deal with and dispose of an application made under that section at a time the notification was in force and applied to the particular area Subsequent cancellation of the notification would not divest the appropriate authority of the power already vested in him to dispose of the application which was properly and duly made under section 85 In our view steps can be taken under section 85 of the Tenancy Act by the appropriate Revenue Officer for realisation of rent found due as arrears of land revenue even after the notification under that section has been rescinded Reliance is placed by the learned advocate for the respondents on Crown vs Haveli 1 In that case it 1 AIR 1949 Lah 62 was held that further proceedings under a temporary Act could not be continued after it had expired It is contended that section 85 of the Tenancy Act was really a temporary Act for it was brought into operation only upon a notification which notification was clearly not intended to be of permanent operation We are unable to accept this view The fact if this be so that section 85 is brought into operation by a notification and that that notification may not be of permanent operation does not make the section a temporary enactment We do not think that the principles applicable to interpretation_ of temporary Acts apply to the case of a provision like section 85 of the Tenancy Act reliance is also placed on cla of sub sec 4 of s85 of the Tenancy Act It is said that this clause by permitting suits for recovery of rents which have not been recovered under the section indicates that after the rescission of the Notification further proceedings cannot be taken under the section It is contended that cl a contemplates that it may so happen that when a notification is rescinded the whole amount of rent in respect of which the application under section 85 had been made had not been recovered and that cl a permits suit to be filed in respect of the amount which remained unrealised at the date the notification is rescinded This argument seems to us to beg the question for it proceeds on the basis that the suit contemplated by el a is for the amount of rent which cannot be recovered under the section any more because of the rescission of the notification Clause a however may clearly apply to a case where in spite of a notification under the section the landlord whether during its currency or later chooses to proceed by way of a suit under the other provisions of the Tenancy Act It is then contended on behalf of the tenants that the Notification of February 22 1951 was not a valid notification because out of 125 tenants in village Khakharki 82 had paid rent and the remaining 43 who are the respondents in this appeal were willing to pay but could not pay as the appellant was asking 63 for larger sums than what were legitimately due to him It is contended that on these facts it could not be said that there was a general refusal to pay rent within the meaning of section 85 of the Tenancy Act Hence it is said that the Notification was ultra vires the section and inoperative We do not think that the tenants can be allowed to raise this point in this Court It does not appear to have been raised in the High Court The High Court s judgment makes no mention of it Whether it is open for a Court to go behind the notification issued under section 85 and decide its validity or not this contention of the tenants raises a question of fact as to how many tenants had refused to pay rent It also raises a question of interpretation of the words general refusal to pay in section 85 None of these questions was raised at any earlier stage We are therefore not inclined to allow the tenants to raise them now In the result we allow the appeal with costs here and below Appeal allowed	The appellant a non resident for the purposes of the Indian Income tax Act did not submit returns of certain dividend income accruing to him within the taxable territory The Income tax Officer served upon him notices under section 34 read with section 222 of the Act for assessment of tax in respect of those years The notices in question were issued within eight years from the end of the years of assessment and were within the period prescribed by section 34ia The appellant contended that notices for assessment were governed by cl ib of section 34 and not by cl ia even though the appellant had not made a return of his income for the years in question as a general notice under section 221 did not give rise to a liability to submit a return and his inaction did not amount to omission or failure to submit a return as he was a non resident and the assessment proceedings were barred by limitation Held that the expression every person in section 22 1 of the Indian Income tax Act 1922 includes all persons who are liable to pay tax and non residents are not exempted from liability to submit a return pursuant to the general notice thereunder Once a notice is given by publication in the prescribed manner under section 22i every person whether resident or non resident whose income exceeds the maximum amount exempt from tax is obliged to submit a return and if he does not do so 36 it will be deemed that there was omission on his part to make a return within the meaning of section 34ia of the Indian Income tax Act Section 341b applied only to those cases where there was no omission or failure to make a return of the income or to make a full and true disclosure of facts material to the assessment In the instant case the proceedings for assessment were pro perly commenced within the period of limitation prescribed by section 341a
minal Appeal No 130 of 1960 Appeal by special leave from the judgment and order dated April 28 1960 of the Allahabad High Court in Criminal Revision No 1865 of 1959 N C Chatterjee D P Singh T section Venkataraman R K Garg section C Agarwal and M K Ramamurthi for the appellants G section Pathak O C Mathur and C P Lal for the respondent October 25 The Judgment of the Court was delivered by SHAH J Appellant No 1 is the editor and appellant No 2 is the printer and publisher of the New Age an English Weekly news sheet published in Delhi On May 15 1959 the Public Prosecutor Kanpur filed a complaint in the Court of Session Kanpur against the appellants charging them with having published a news item in the issue of the New Age dated November 16 1958 knowing or having good reasons to believe the same to be false and defamatory of the Chief Minister of the State of Uttar Pradesh in order to harm his reputation in the eyes of 65 the public in general and among his acquaintances in particular With this complaint was filed an order under the signature of the Home Secretary to the Government of Uttar Pradesh sanctioning under a 198B3b of the Criminal Procedure Code the filing of a complaint by the Public Prosecutor for an offence under section 500 Indian Penal Code against the appellants in respect of the news item published on November 16 1958 under the caption Explosive situation in Kanpur The learned Sessions Judge took cognisance of the complaint After six witnesses were examined on behalf of the prosecution he framed a charge against the appellants for the offence of defamation in that they had published the news item under the caption Explosive situation in Kanpur intending to harm or knowing that they were likely to harm the reputation of the Chief Minister of Uttar Pradesh The appellants then applied to the High Court of Judicature at Allahabad praying that the order of the Court of Session framing a charge for the offence of defamation be set aside They submitted that there was no evidence that the Home Secretary to the Government of Uttar Pradesh had applied his mind to the facts of the case before sanctioning prosecution of the appellants that in any event the publication was not defamatory of the Chief Minister in respect of his conduct in the discharge of his duties as Chief Minister and that the complaint filed by the Public Prosecutor not having been signed by the Chief Minister who was the aggrieved person the Sessions Judge had no jurisdiction to entertain the complaint The High Court rejected all the contentions raised by the appellants Against the order rejecting the contentions this appeal with special leave under article 136 of the Constitution is preferred by the appellants We may state that the observations made by the High Court that whether the publication of the news item in the issue of the I New Age dated November 16 1958 under the caption Explosive situation in Kanpur was defamatory of the Chief Minister in respect of his conduct in the discharge of his duties 66 deciding the application in revision submitted to them and were not intended to record a final decision as to the defamatory character of that publication It will be for the Trial Judge when the case is tried before him to arrive at a conclusion on the materials placed before him whether the publication is defamatory of the Chief Minister in respect of his conduct in the discharge of his public functions The plea that the sanction was accorded by the Home Secretary to the filing of the complaint without applying his mind is without substance Siddiqi an assistant in the Home Department to the Government of Uttar Pradesh has deposed that he bad received the papers in connection with the sanction for the prosecution of the two appellants from the Superintendent Rome Department with notings that he had taken the notings and the relevant papers including the offending issue to the Deputy Secretary that the Deputy Secretary had also made his note on those papers and that thereafter he the witness had taken those papers to M G Kaul Home Secretary who had perused the notings and the note of the Deputy Secretary as also the article in question and after looking into the papers had approved the draft sanction It is not disputed that the Home Secretary was authorised to sanction a complaint for defamation of a Minister of the Government of Uttar Pradesh The evidence clearly discloses that the Home Secretary had applied his mind to all the material facts before him and had then granted the sanction Mere production of a document which sets out the names of the persons to be prosecuted and the provisions of the statute alleged to be contravened and purporting to bear the signature of an officer competent to grant the sanction where such sanction is a condition precedent to the exercise of jurisdiction does not invest the court with jurisdiction to try the offence If the facts which constitute the charge do not appear on the face of the sanction it must be established by hose facts were laced 67 before the authority competent to grant the sanction and that the authority applied his mind to those facts before giving sanction In the present case the facts constituting the charge appear on the face of the sanction and evidence has also been led that the facts were placed before the sanctioning authority that the authority considered the facts and sanctioned the prosecution Section 198B which deals with a certain category of the offences of defamation of high dignitaries of the State and of Ministers and public servants in respect of their conduct in the discharge of public functions was incorporated in the Code by Act XVI of 1955 Prior to the incorporation of section 198B the only condition precedent to the entertainment of a complaint of defamation by a court competent in that behalf was prescribed by section 198 viz that there had to be a complaint by the person aggrieved before the court took cognisance of that offence By section 198B several conditions precedent to the trial of offences falling within that section are prescribed The material clauses of section 198B are sub sections 1 3 and 4 1 notwithstanding anything contained in this Code when any offence falling under Chapter XXI of the Indian Penal Code Act XLV of 1860 other than the offence of defamation by spoken words is alleged to have been committed against the President or the Vice President or the Governor or Rajpramukh of a State or a Minister or any other public servant employed in connection with the affairs of the Union or of a State in respect of his conduct in the discharge of his public functions a Court of Session may take cognisance of such offence without the accused being committed to it for trial upon a complaint in writing made by the Public Prosecutor 3 No complaint under sub section 1 shall be made by the Public Prosecutor except with the previous sanction ain the case of the President or the Vice President or the Governor of a State of any Secretary to the Government authorised by him in this behalf 68 b in the case of a Minister of the Central Government or of a State Government of the Secretary to the Council of Ministers if any or of any Secretary to the Government authorised in this behalf by the Government concerned c in the case of any other public servant employed in connection with the affairs of the Union or of a State of the Government concerned 4 No Court of Session shall take cognisance of an offence under sub section 1 unless the complaint is made within six months from the date on which the offence is alleged to have been committed This section provides for a special procedure for the trial of the offence of defamation of certain specified classes of persons The conditions necessary for the applicability of sub section 1 of section 198B are 1 that the defamation is not by spoken words 2 that the offence is alleged to have been committed against the President or the Vice President or the Governor or Rajpramukh of a State or a Minister or any other public servant employed in connection with the affairs of the Union or of a State 3 that the defamation is in respect of the person defamed in the discharge of his public functions 4 that a complaint is made in writing by the Public Prosecutor 5 that the complaint is made by the Public Prosecutor with the previous sanction of the authorities specified in sub section 3 and 6 that the complaint is made within six months from the date on which the offence is committed The Court of Session may entertain a complaint of defamation of the high dignitaries and of Ministers and public servants in respect of their conduct in the discharge of their public functions only if these conditions exist Section 198 require that a complaint for defamation may be initiated by the person aggrieved and no period of limitation is prescribed in that behalf Such a complaint can only be entertained by a Magistrate of the First Class But section 198 B in the larger public interest has made a departure from that rule the accusation is to be entertained not by a 69 Magistrate but by the Court of Session without a committal within six months of the date of the offence on a complaint in writing by the Public Prosecutor with the previous sanction of the specified authorities It is manifest that by the non obstante clause notwithstanding anything contained in this Code in subs 1 the operation of diverse provisions of the Code relating to the initiation and trial of the offence of defamation is excluded and prima facie section 198 is one of those provisions It is however urged on behalf of the appellants that sub section 13 of section 198 B makes the provisions of section 198 applicable to a complaint for defamation of persons specified in section 198 B1 and provides that cognisance of the offence of defamation cannot be taken by a court except upon a complaint by the person aggrieved and that the Chief Minister of Uttar Pradesh alleged to be the party aggrieved not having signed the complaint the Court of Session Kanpur had no jurisdiction to take cognisance of the complaint Sub section 13 provides that the provisions of this section shall be in addition to and not in derogation of those of section 198 In our judgment this clause is enacted with a view to state ex abundanti cautela that the right of a party aggrieved by publication of a defamatory statement to proceed under section 198 is not derogated by the enactment of section 198 B The expressions in addition to and not in derogation of mean the same thing that section 198 B is an additional provision and is not intended to take away the right of a person aggrieved even if he belongs to the specified classes and the offence is in respect of his conduct in the discharge of his public functions to file a complaint in the manner provided by section 198 Derogation means taking away lessening or impairing the authority position or dignity and the context in in which sub section 13 occurs clearly shows that the provisions of section 198 B do not impair the remedy provided by section 198 It means that by section 198 B the right which an aggrieved person has to file a complaint before a Magistrate under section 198 for the offence of defamation even if the aggrieved person belongs to the specified classes and the defamation 70 is in respect of his conduct in the discharge of his public functions is not taken away or impaired If sub section 13 be construed as meaning that the provisions of section 198B are to be read as supplementary to those of section 198 the non obstante clause with which sub section 1 of section 198B commences is rendered wholly sterile and unless the context compels such an interpretation the court will not be justified in adopting it There is again inherent indication in sections 198 and 198B which supports the view that section 198B was not intended to be supplementary to section 198 but was intended to provide an alternative remedy in the case of defamation of persons set out in that section The expression complaint as defined in section 4 cl h of the Code means the allegation made orally or in writing to a Magistrate with a view to his taking action under this Code that some person whether known or unknown has committed an offence Every complaint of an offence has to be made to a Magistrate competent to take cognisance thereof and not to a Court of Session A Court of Session under the Code of Criminal Procedure unless otherwise expressly provided is not competent to entertain a complaint it can only try a criminal case committed to it The expression complaint in section 198 is manifestly used in the meaning as defined by section 4h Even a superficial examination of the contention raised by the appellants reveals that if effect be given to it the utmost confusion would result in working out the provisions of the Code If beside the complaint filed by the Public Prosecutor under section 198B there must also be a complaint by the person aggrieved two courts would simultaneously be seized of two distinct complaints for the same offence The complaint by the Public Prosecutor under section 198B would undoubtedly lie in the Court of Session and the complaint under section 198 would lie in the court of a Magistrate because it is a Magistrate who alone can take cognisance of the offence of defamation under section 198 Thereafter the complaint under section 198 may have to be committed to the Court of Session by the Magistrate and it is only after the 71 compliant filed by the Public Prosecutor the case may proceed The Legislature could not have intended that in respect of the same offence there should be two complaints one in the Court of Session and another in the court of a Magistrate and either both should be tried or the proceedings should be consolidated after committal Reliance was placed on behalf of the appellants upon sub sections 6 to 11 of section 198B which provide for the award of compensation to the person accused if the court is satisfied that the accusation is false and either frivolous or vexatious and it was submitted that the Legislature could not have intended that a person who was not the complainant and who was not directly concerned with the proceedings may still be required if so ordered by the court to pay compensation But sub section 5 which provides that a person against whom the offence is alleged to have been committed shall unless the court for reasons to be recorded otherwise directs be examined as a witness for the prosecution clearly indicates that the question whether the complaint was false and either frivolous or vexatious may fall to be determined only if the person complaining to be defamed actively supports the complaint It cannot therefore be said that section 198B provides for compensation being awarded against a person who is not concerned with the complaint Section 198B is enacted to provide machinery for vindicating the conduct of high dignitaries Ministers and public servants when they are exposed to defamatory attacks The section contemplates the institution of proceedings for defamation of two different classes of persons 1 high dignitaries like the President the Vice President the Governors and Rajpramukhs and 2 Ministers and public servants it is not disputed that a provision which enables a prosecution to be launched by the State and at State expense for defamation of members of the first class having regard to their status in public life is pre eminently designed in the public interest and it would be entirely appropriate that any question of awarding compensation should be raised even if the complaint for defamation 72 be found to be false and frivolous or vexatious There can be no doubt that in a democratic set up in order to maintain purity of public behaviour and administration charges of improper conduct against persons in the second class in so far as such charges relate to the discharge of their public functions should be investigated It is also in the public interest that in vindicating his character or conduct the person defamed should not ordinarily be called upon to bear the burden of what may turn out an expensive and long drawn out proceeding nor for obvious reasons should he have control over the proceeding In the vindication of the character or conduct of a private individual who is defamed the State is primarily not concerned the party aggrieved may if he is so minded take proceedings for obtaining relief But in the investigation of defamatory charges against Ministers and public servants in the discharge of their public functions the State is as vitally concerned as the individual defamed The Legislature has therefore authorised the State to take upon itself the power in appropriate cases to prosecute the offenders But lest this procedure be abused provision has been made for the examination of the person defamed and for awarding against him compensation if it be found that the complaint was false and frivolous or vexatious Normally a Minister or a public servant defamed in respect of his conduct in the discharge of his public functions would himself move the Government under which he functions for taking proceedings for vindicating his character or conduct The complaint eo nomine in cases under section 198B is undoubtedly the Public Prosecutor but the complaint may when the person defamed is a Minister or a public servant properly be regarded as filed at the instance of such Minister or public servant He has in any case to support the accusation by evidence and his conduct is exposed to judicial scrutiny In this context it would be difficult to hold that a person who has either been instrumental in the initiation of a complaint or in any event has to support it by his evidence has no concern with the lodging of the complaint The court 73 would obviously award compensation only if it is satisfied that the claim made by the person posing to be aggrieved is false and either frivolous or vexatious Section 198B does not provide that before taking cognisance of a complaint the complaint shall be signed by any person other than the Public Prosecutor In terms it contemplates a complaint in writing by the Public Prosecutor and of no one else and it would be an unwarranted addition to sub section 1 of the words and also by the person aggrieved if the contention urged on behalf of the appellants were ac cepted The Legislature not having chosen to provide that the complaint of the Public Prosecutor shall also be signed by the person aggrieved we will not be justified in the absence of compelling reasons to so hold The observation made by Mr Justice Bavdekar in C B L Bhatnagar vs The State 1 What section 198B13 means is that any complaint which may be made under section 198B must also satisy the provisions of section 198 that is the complaint will have to be made both by the person aggrieved and by the Public Prosecutor and by Mr Justice Raman Nayar in R Sanker vs The State 2 that a complaint by a person aggrieved is not dispensed with even in regard to cases falling under section 198B do not in our judgment correctly interpret subs 13 of section 198B In the view taken by us this appeal must fail and is dismissed Appeal dismissed 1 AIR 1958 Bom	The appellant purchased groundnuts out of which it manu factured groundnut oil it also refined the oil and hydrogenated it converting it into Vanaspati It sold the oil in all the three states Under the Madras General Sales Tax Act 1939 and the Turnover and Assessment Rules for determining the taxable turnover the appellant was entitled to deduct the purchase price of the groundnuts from the proceeds of the sale of all groundnut oil The High Court held that the appellant was entitled to the deduction in respect of the sales of unrefined and refined groundnut oil but not in respect of the sales of hydrogenated oil on the ground that Vanaspati was not groundnut oil but a product of groundnut oil Held that the appellant was entitled to the deduction in respect of the sales of hydrogenated groundnut oil also The hydrogenated groundnut oil continued to be groundnut oil notwithstanding the processing which was merely for the purpose of rendering the oil more stable To be groundnut oil two conditions had to be satisfied it must be from groundnut and it must be oil The hydrogenated oil was from groundnut and in its essential nature it remained an oil It continued to be used for the same purposes as groundnut oil which had not undergone the process A liquid state was not an essential characteristic of a vegetable oil the mere fact that hydrogenation made it semisolid did not alter its character as an oil
Appeal No 755 of 1957 Appeal by special leave from the judgment and order dated March 23 1955 of the former Nagpur High Court in Misc Civil Case No 240 of 1953 10 K N Rajagopal Sastri R H Dhebar and D Gupta for the appellant Veda Vyasa section N Andley J B Dadachanji_ Rameshwar Nath and P L Vohra for the respondent October 17 HIDAYATULLAH J This appeal with special leave has been filed against the judgment of the Nagpur High Court in a reference under section 661 of the Indian Income tax Act 1922 by which the High Court answered the following question in the negative Whether the proportionate profits on the goods of the value of Rs 410785 were received or were deemed to be received in British India in the year of account by or on behalf of the assessee Company within the meaning of Section 41a of the Indian Income tax Act 1922 The Commissioner of Income tax Madhya Pradesh and Bhopal is the appellant and the Bhopal Textiles Ltd Bhopal is the respondent For the assessment year 1944 45 the Company which was non resident was treated as resident and ordinarily resident under section 41c of the Income tax Act In the year of account it had supplied its manufactured articles either to the Government of India or its nominees at Agra Allahabad and Delhi Under the orders of the Government the goods were sent direct to the persons nominated who made the payment against the goods The goods were all sent for Bhopal and the railway freight and other charges were to be borne by the buyers to whom the railway receipts made out in the name of the consignees were sent by the Company through the Imperial Bank at Bhopal The Bhopal Branch sent the railway receipts to branches of the Bank at Agra Allahabad and Delhi which collected the amounts due from the buyers and transmitted them to the Imperial Bank Bhopal to the credit of the Company On these facts a total sum of Rs 440373 was held by the Department to have been received in British India of that sum an amount of Rs 29588 which represented the receipts 11 for supplies direct to Government is no longer in dispute The balance represents the sum which was the subject matter of the reference The usual appeals followed and the contention of the Company that the money was not received in British India was not accepted by the Tribunal The Tribunal did not decide about the place of accrual A reference was then made by the Tribunal of the question quoted above The High Court in deciding the reference went into the question of passing of property under the Indian and came to the conclusion that since the property in the goods had passed to the buyers the Imperial Bank of India Bhopal must be deemed to have received the railway receipts as agents of the buyers Continuing the reason the learned Judges observed So also the branches of the Bank at Agra Allahabad and Delhi acted as the agents of the buyers when they collected the money from them and transmitted it to the Bhopal branch In this view the profits cannot be said to be received by the assessee Company in British India It received the money only when it reached the Bhopal branch as a credit to its own account and that was not in British India at the material time The case was not decided by the Tribunal on the basis of accrual of the income profits or gains to the Company It was decided on the fact of actual receipt whether it was in British India or in Bhopal which was then outside the taxable territories We need not therefore concern ourselves with the problem whether property in the goods could be said to have passed absolutely to the buyers without any right of disposal being reserved by the Company It is a matter of some doubt whether the goods were absolutely at the disposal of the buyers after the rail way receipts were handed over to the Bank It is in evidence and has been adverted to by the Incometax Officer that the Company when it handed over the railway receipt to the Imperial Bank at Bhopal did so along with a covering letter in which it asked the Bank to deliver the railway receipt and the bill to 12 the buyers against payment of the bill amount plus collection charges In this view of the matter though we do not express any final opinion we doubt whether the right of disposal was parted with by the Company A railway receipt is a document of title to goods and for all purposes represents the goods When the railway receipt is handed over to the consignee on payment the property in the goods is transferred In this case it is a matter of considerable doubt whether the property in the goods can be said to have passed to the buyers by the mere fact of the railway receipts being in the name of the consignees as has been held by the High Court Since we are not deciding the question of accrual we do not elaborate the point Coming now to the question as to where the amount was received we have no doubt that the view of the Tribunal was correct This income was received at Agra Allahabad or Delhi from the buyers by the Imperial Bank acting as the agent of the Company The Company had handed over the railway receipts to the Bank and asked the Bank not to hand over the railway receipts to the buyers unless payment was received This was sufficient to make the Bank an agent of the Company The buyers could not have countermanded the instructions given by the Company to the Bank which they would indubitably have been able to do if the Bank was their agent This was laid down by this Court in The Commissioner of Income tax vs P M Rathod and Company 1 Mr Veda Vyasa contends that the case is distinguishable on the ground that the railway receipts there were to self whereas here the railway receipts were made out in the name of the consignee Nothing turns upon this distinction The document of title to goods was still the property of the Company till payment for it was received and it was handed over In this view of the matter we are of opinion that the ruling in question app lies Mr Veda Vyasa finally contended that the agreement between the parties was that the goods were to 1 13 be sent for Bhopal and that the price was also to be paid there He contended that the handing over of the railway receipts to the Bank at Bhopal was in furtherance of the agreement that the money was ultimately obtained by the Bank and handed over at Bhopal also and that thus the money must be deemed to have been received there This in our opinion does not truly represent the character of the transaction No doubt under the agreement payment was to be made at Bhopal but the circumstances show that that was departed from and the ordinary mercantile practice of handing over the railway receipts to one s own bankers with a request to hand over the receipts against payment to the buyers was followed The Bank as we have shown above was thus the agent of the sellers as was laid down in the ruling of this Court and the fact of payment to the agent determines the place where the money can be said to be received by the Company That place was at Agra Allahabad or Delhi In this view the income profits or gains must be deemed to have been received in the taxable territories and the answer to the question ought to have been in the affirmative We accordingly allow the appeal and answer the question in the affirmative The appellant will be entitled to his costs here and in the High Court Appeal allowed	The Marwar Tenancy Act 1949 now repealed but which was in force in the State of jodhpur at the relevant period by section 85 authorised the Government in case of any general refusal by tenants to pay rent to declare by notification that such rents might be recovered as arrears of land revenue A notification having been issued by the Government of Rajasthan under that section the appellant a jagirdar applied to the Collector thereunder for the recovery of rents due to him from his tenants The tenants also applied to the Collector stating that notice of the said application should be served on them and they should be given a hearing as required by the rule framed under the Rajasthan Revenue Courts Procedure and jurisdiction Act 1951 The Collector rejected the tenants application and passed an order directing the recovery of the sum found to be due to the appellant as arrears of land revenue The Additional Commissioner on appeal and the Board of Revenue in revision upheld the Collector s order But before the Board passed its order the 48 Government rescinded the notification The High Court on an application under article 226 of the Constitution held that although section 85 of the Tenancy Act had not been repealed by the Revenue Courts Act 1951 the rules framed under that section had been and the non compliance with the rules framed under the latter Act which should have been followed was an error on the face of the record and quashed the orders directing that since the notification under section 85 of the Tenancy Act had been rescinded no further action thereunder should be taken by the Collector Held that there could be no doubt that section 2 of the Rajasthan Revenue Courts Procedure and jurisdiction Act 1951 had not repealed section 85 of the Marwar Tenancy Act 1949 and that the former Act contemplated its continuance unfettered by the bar of limitation and subject to this modification that an application under the section was no longer to be made to the Deputy Commissioner but to the Collector Section 85 of the Tenancy Act clearly contemplated that an application thereunder shall be heard and determined in the absence of the tenant The right given by the section was a summary one and the application must be heard ex parte It was not therefore necessary to serve any notice on the tenants It would not be correct to hold that the procedure of a con tested proceeding as prescribed by Ch II of the Rules framed under the Revenue Courts Procedure and jurisdiction Act 1951 could apply to the application for to apply them would be to wholly defeat its object Once a notification under the section had been issued and an application duly made subsequent rescission of the notification could not divest the appropriate authority of the power already vested in him to dispose of the application
l Appeals Nos 152 167 and 167 A of 1951 Appeal from the Judgments dated April 25 and May 1 1950 of the High Court of Judicature for Patiala and East Punjab States Union at Patiala Teja Singh C J and Chopra J in T P A R I A O No 34 of 1950 and Civil Appeals Nos 493494 of Samwat 2005 Rang Behari Lal Ram Nivas Sanghi with him for the appellants in Civil Appeals Nos 167 and 167 A Udai Bhan Chaudhuri for the appellant in Civil Appeal No 152 Lachhman Das Kaushal for the respondent in Civil Appeals Nos 167 and 167 A Ram Nivas Sanghi for the respondent in Civil Appeal No 152 October 24 The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J These appeals are connected and raise a common question of law They come before us on special leave granted by the Pepsu High Court at Patiala under sub clause e of clause 1 of article 133 of the Constitution 754 The facts in Civil Appeal No 152 of 1951 are different from those in the other two appeals and the consequences are different also The proceedings arise out of the liquidation of two companies called the Marwari Chamber of Commerce Ltd in Civil Appeal No 152 of 1951 and the Aggarwal Chamber of Commerce Ltd in the other two appeals The Official Liquidator settled the list of contributories and after various steps taken before the Liquidation Judge of the High Court by way of objection on grounds of law as well as on merits there were payment orders on 4th June 1946 in Civil Appeal No 152 of 1951 and on 18th January 1949 in the latter two appeals The correctness and the validity of the payment order in Civil Appeal No 152 of 1951 was challenged in appeals taken to the High Court by the Official Liquidator and the contributory The order of the Liquidation Judge was modified in favour of the Liquidator and as against a sum of Rs 4762 13 3 ordered to be paid there was an order for the payment of Rs 24005 7 3 On further appeal by the contributory to the Judicial Committee it was held that the appeal to the Division Bench was barred by time and consequently the judgment of the Bench was set aside and that of the Liquidation Judge restored This was on 6th December 1949 In the other two appeals an application for removal of the name of the contributory was granted by the Liquidation Judge but on appeal a Division Bench of the High Court reversed this order On further appeal taken by the company the Judicial Committee Patiala remanded the case for retrial and the Liquidation Judge made an order for payment of Rs 8191 0 9 on 18th January 1949 as aforesaid On 2nd February 1950 the firm Murari Lal Hari Ram appellant in Civil Appeal No 152 of 1951 filed an application under section 152 Civil Procedure Code for amendment of the order of the Liquidation judge Kartar Singh J alleging that there was a 756 clerical or arithmetical error arising from an accidental slip or omission in that a sum of Rs 24005 7 3 was taken as due by the firm instead of the correct figure of Rs 21805 7 3 This application was dismissed by the learned Judge on 16th March 1950 The firm applied to him for a certificate for leave to appeal but this again was dismissed An appeal was preferred from the order dismissing the amendment petition but it was thrown out on the ground of want of a certificate from the Single Judge This order is dated 1st May 1950 and is couched in these terms We have recently held in Ganpat Rai Hira Lal vs Aggarwal Chamber of Commerce Ltd LPA Nos 493 and 494 of Samvat 2005 Pepsu that no appeal lies from an order of a Single Bench to a Division Bench without a certificate by the Single Judge that the case is a fit one for further appeal In this case it is admitted that the appellants made an application for a certificate to the Single Bench from whose decision he is appealing but the same was refused The appeal is therefore not competent and is dismissed in limine The reference in the order to the case of Ganpat Rai Hira Lal vs Aggarwal Chamber of Commerce Ltd LP A Nos 493 and 494 of Samvat 2005 Pepsu is to the order made by the High Court in the connected matter which has given rise to the two Appeals Nos 167 and 167 A of 1951 There an appeal was lodged from the payment order of the Liquidation Judge but it was dismissed on the same ground namely want of a certificate from the Single Judge In Civil Appeal No 152 of 1951 the argument for the appellant is that no certificate front the Single Judge is necessary as the matter is governed not by Ordinance X of 2005 of the Patiala State but by the Patiala States Judicature Farman Shahi 1999 Bikarmi under which no certificate is necessary It is true that under section 44 of the earlier Farman a certificate that the case is a fit one for appeal is required only if the judgment decree or order sought to be appealed is wade in the exercise of civil 98 756 appellate jurisdiction It is however clear that we are not governed by this provision The amendment application was made on 2nd February 1950 as stated already No appeal is provided under the Civil Procedure Code from an order amending or refusing to amend a judgment decree or order though an appeal would lie from the amended decree or order There is no warrant for the view that the amendment petition is a continuation of the suit or proceedings therein It is in the nature of an independent proceeding though connected with the order of which amendment is sought Such a proceeding is governed by the law prevailing on its date which admittedly is Pepsu Ordinance X of 2005 and which provides in section 52 for a certificate The section is in the following terms Subject to any other provision of law an appeal shall lie to the High Court from a judgment decree or order of one Judge of the High Court and shall be heard by a Bench consisting of two Judges of the High Court Provided that no such appeal shall lie to the High Court unless the Judge who decides the case or in his absence the Chief Justice certifies that the case is a fit one for appeal So far as the appellant firm is concerned there is no question of any right of appeal vested in it which is sought to be taken away by giving retrospective effect to the Ordinance which came into force in August 1948 The order of the High Court holding that no appeal lies from an order of a single Judge without a certificate by him that the case is a fit one for appeal is in our opinion right In the other two Appeals Nos 167 and 167 A of 1951 different considerations come into play The payment order of the Liquidation Judge was on 18th January 1949 and the appeal was preferred on 19th February 1949 In the meantime as there was some doubt on the question the appellants took the precaution of applying to the Judge for a certificate but this was dismissed on 3rd March 1949 On the relevant dates the Patiala States Judicature Farman 1999 was in force and the appellants hood a right of 757 appeal from the payment order without a certificates They could not be deprived of this right by a subsequent change in the law unless the later enactment provides expressly or by necessary implication for retrospective effect being given The learned Judges of the High Court conceded this in their order but they thought that section 116 of Ordinance X of 2005 1948 49 contained an express provision to the contrary The section is in these terms Notwithstanding anything contained in this Ordinance all suits appeals revisions applications reviews executions and other proceedings or any of them whether civil or criminal pending in the Courts and before judicial authorities in any Covenanting State shall be continued and concluded respectively in Courts or before judicial authorities of the like status in the Union and the Courts or authorities in the Union shall have the same jurisdiction in respect of all such suits appeals revisions reviews executions applications and other proceedings or any of them as if the same had been duly commenced and continued in such Courts or before such authorities It is fairly obvious that this is a transitory regula tion providing for a change over of proceedings from one set of Courts in the Covenanting State to others of like status in the Union and for their continuance etc in the latter Courts It does not say that the proceedings must be treated as having freshly commenced What is contemplated in the latter part of the section is a notional commencement if such a term could be used The section obviously means that all rights which arose or are likely to arise in the future shall remain intact notwithstanding the new set up and that they would be dealt with by the Union Courts in place of the Courts of the Covenanting State There is nothing in the section to justify the view that any taking away of a vested right of appeal retrospectively was intended The decision in Colonial Sugar Refining Co vs Irving1 clearly applies to the facts and the order of the High Court that 1 758 the appeals are not competent is in our opinion erroneous The result is that Appeal No 152 of 1951 is dismissed with costs throughout while Appeals Nos 167 and 167A of 1951 are allowed with costs throughout Appeal No 125 dismissed Appeals Nos 167 and 167A allowed Agents for the appellants in Appeals Nos 167 and 167A Mohan Behari Lal Agent for the appellant in Appeal No 152 Kundan Lal Mehta Agent for respondents in Appeals Nos 167 and 167A Naunit Lal Agent for respondent in Appeal No 152 Mohan Behari Lal	The Public Prosecutor Kanpur filed a complaint in the Court of Session Kanpur charging the appellants with having published a news item which was false and defamatory of the Chief Minister of Uttar Pradesh The complaint complied with the requirements of section 198 B Code of Criminal Procedure The appellants contended that the complaint should have complied with the requirements of section 198 of the Code also and as it was 64 not signed by the Chief Minister the Sessions judge had no jurisdiction to entertain it Held that it was not necessary for the Chief Minister also to sign the complaint filed by the Public Prosecutor The nonobstante clause notwithstanding anything contained in this Code in sub section 1 of section 198 B excludes the operation of the other provisions of the Code relating to initiation and trial of the offence of defamation including section 198 Sub section 13 of section 198 B which provides that the provisions of section 198 B shall be in addition to and not in derogation of section 198 merely preserves the right of the person defamed to file a complaint under section 198 The two sections provide alternative remedies The provisions in section 198 B relating to the award of compensation to the accused in case of false and frivolous or vexatious accusation do not affect this conclusion Normally it is the public servant who moves the Government for taking proceedings and under subs 5 he is required to be examined as a witness to support the prosecution and it cannot be said that he has no concern with the lodging of a complaint under section 198 B C B L Bhatnagar vs The State AIR 1958 Bom 196 and R Sankar vs The State ILR 1959 Kerala 195 disapproved
Appeal No 375 of 1959 Appeal from the Judgment and Order dated the 12th August 1958 of the Assam High Court in First Appeal No 11 of 1958 L K Jha and Sukumar Ghose for appellants Nos 1 to 3 G section Pathak and Naunit Lal for respondents Nos 1 and 2 1960 October 27 The Judgment of the Court was delivered by WANCHOO J This is an appeal on a certificate granted by the Assam High Court in an election matter An election was held in the double member constituency of Goalpara to the Assam Legislative Assembly Nomination papers were filed on the 19th January 1957 by a number of persons including Anirara Basumatari hereinafter called the appellant He was a candidate for the seat reserved for scheduled tribes The nomination paper of the appellant was rejected by the returning officer on the ground that he was disqualified under section 7b of the Representation of the People Act No XLIII of 1951 hereinafter called the Act The polling took place on February 251957 and Khagendranath and Hkim Chandra Rabha were elected the latter being a member of a scheduled tribe Thereupon an election petition was filed by an elector challenging the election of the two successful candidates on a number of grounds of these grounds however only two are now material namely 1 that the nomination paper of the appellant was wrongly rejected and 2 that a corrupt practice was committed by the successful candidates inasmuch as voters were carried on mechanically propelled vehicles to the polling booths The election tribunal held on the first point that the nomination 135 paper of the appellant had been improperly rejected On the second point it hold that the corrupt practice alleged had not been proved In the result the election was set aside Thereupon there was an appeal by the two successful candidates to the High Court The High Court was of the view that the nomination paper of the appellant was properly rejected further on the question of corrupt practice the High Court agreed with the conclusion of the tribunal In the result the appeal was allowed and the election petition was ordered to be dismissed There was then an application to the High Court for a certificate to appeal to this Court which was granted and that is how the matter has come up before us The main contention on behalf of the appellant is that the High Court was wrong in coming to the conclusion that the nomination paper of the appellant was properly rejected under section 7b of the Act That provision lays down that a person shall be disqualified for being chosen as a member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State if he is convicted by a court in India of any offence and sentenced to imprisonment for not less than two years unless a period of five years or such less period as the Election Commission may allow in any particular case has elapsed since his release The appellant in this case was convicted under section 4b of the Explosive Substances Act No VI of 1908 and sentenced to three years rigorous imprisonment on July 10 1953 The nomination paper in this case was filed in January 1957 and the election was held in February 1957 and therefore five years had not elapsed since his release But though the appellant was sentenced to three years rigorous imprisonment his sentence was remitted by the Government of Assam on November 8 1954 under section 401 of the Code of Criminal Procedure and he was released on November 14 1954 The contention of the appellant before the election tribunal was that in view of this remission his sentence in effect was reduced to a period of less than two years and therefore he could not be said to have incurred disqualification within the meaning of s7b This contention 136 was accepted by the tribunal and that is why it held that the nomination paper of the appellant was improperly rejected When the case came to be argued in the High Court on behalf of the successful candidates two arguments were addressed in support of the plea that the nomination paper of the appellant was properly rejected In the first place it was urged that in view of the provisions of Articles 72 73 161 and 162 of the Constitution read with section 401 of the Code of Criminal Procedure the State Government had no authority to remit the sentence of the appellant and secondly even if the remission was properly granted it would not affect the sentence imposed by the Court though the appellant might not have had to undergo part of the sentence after the date of the remission order The High Court did not decide the question as to the power of the State Government to grant remission in this case as it had not full materials before it because the matter was not raised before the tribunal though it was inclined to the view that the State Government might not have such power But the High Court was of the opinion that a remission of sentence did not have the same effect as a free pardon and did not have the effect of reducing the sentence passed on the appellant from three years to less than two years even though the appellant might have remained in jail for less than two years because of the order of remission What section 7b lays down is that there should be a conviction by a court in India for any offence and a sentence of imprisonment for not less than two years in order that a person may be disqualified for being chosen as a member of either House of Parliament or of Legislative Assembly or of Legislative Council of a State In terms therefore the provision applies to the case of the appellant for he was convicted by a court in India and sentenced to imprisonment for more than two years Further the period of five years had not expired after his release The appellant had applied to the Election Commission for removing the disqualification but it had refused to do so The main question therefore that falls for consideration is 137 whether the order of remission has the effect of reducing the sentence in the same way in which an order of an appellate or revisional criminal court has the effect of reducing the sentence passed by the trial court to the extent indicated in the order of the appellate or revisional court Now it is not disputed that in England and India the effect of a pardon or what is sometimes called a free pardon is to clear the person from all infamy and from all consequences of the offence for which it is granted and from all statutory or other disqualifications following upon conviction It makes him as it were a new man See Halsbury s Laws of England Vol VII Third Edition p 244 para 529 But the same effect does not follow on a mere remission which stands on a different footing altogether In the first place an order of remission does not wipe out the offence it also does not wipe out the conviction All that it does is to have an effect on the execution of the sentence though ordinarily a convicted person would have to serve out the full sentence imposed by a court he need not do so with respect to that part of the sentence which has been ordered to be remitted An order of remission thus does not in any way interfere with the order of the court it affects only the execution of the sentence passed by the court and frees the convicted person from his liability to undergo the full term of imprisonment inflicted by the court though the order of conviction and sentence passed by the court still stands as it was The power to grant remission is executive power and cannot have the effect which the order of an appellate or revisional court would have of reducing the sentence passed by the trial court and substituting in its place the reduced sentence adjudged by the appellate or revisional court This distinction is well brought out in the following passage from Weater s Constitutional Law on the effect of reprieves and pardons vis a vis the judgment passed by the court imposing punishment at p 176 para 134 A reprieve is a temporary suspension of the 18 138 punishment fixed by law A pardon is the remission of such punishment Both are the exercise of executive functions and should be distinguished from the exercise of judicial power over sentences The judicial power and the executive power over sentences are readily distinguishable observed Justice Sutherland 1 To render a judgment is a judicial function To carry the judgment into effect is an executive function To out short a sentence by an act of clemency is an exercise of executive power which abridges the enforcement of the judgment but does not alter it qua judgment Though therefore the effect of an order of remission is to wipe out that part of the sentence of imprisonment which has not been served out and thus in practice to reduce the sentence to the period already undergone in law the order of remission merely means that the rest of the sentence need not be undergone leaving the order of conviction by the court and the sentence passed by it untouched In this view of the matter the order of remission passed in this case though it had the effect that the appellant was re leased from jail before he had served the full sentence of three years imprisonment and had actually served only about sixteen months imprisonment did not in any way affect the order of conviction and sentence passed by the court which remained as it was Therefore the terms of section 7b would be satisfied in the present case and the appellant being a person convicted and sentenced to three years rigorous imprisonment would be disqualified as five years had not passed since his release and as the Election Commission had not removed his disqualification We may now refer to a number of cases on which reliance has been placed on behalf of the appellant In Venkatesh Yeshwant Deshpande vs Emperor 1 Bose J as he then was observed as follows at p 530 The effect of an order of remission is to wipe out the remitted portion of the sentence altogether and not merely to suspend its operation suspension 1 AIR 1938 Nag 139 is separately provided for In fact in the case of a pardon in England statutory and other disqualification following upon conviction are removed and the pardoned man is enabled to maintain an action against any person who afterwards defames him in respect of the offence for which he was convicted That may not apply in full here but the effect of an order of remission is certainly to entitle the prisoner to his freedom on a certain date It is urged that if the effect of an order of remission is to wipe out the remitted portion of the sentence altogether it means that the sentence is reduced to the period already undergone and the order of remission has the same effect as an order of an appellate or revisional court reducing the sentence to the period already undergone That case however dealt with a different point altogether namely whether a remission having been granted and having taken effect it could be cancelled thereafter It was in that context that these observations were made Even so the learned judge was careful to point out that there was a difference between a pardon and a remission and the effect of an order of remission is to entitle the prisoner to his freedom on a certain date That case is no authority for the view that the order of remission amounts to changing the sentence passed by a competent court and substituting therefor the sentence of imprisonment already undergone up to the date of release following the order of remission Reference was also made to a number of election cases in which the view which has been urged on behalf of the appellant seems to have been taken We may refer to only one of them namely Ganda Singh vs Sampuran Singh 1 which has specifically dealt with this point In that case an order was passed by the Maharaja of Nabha granting amnesty to all political prisoners detained or convicted under the Punjab Public Safety Act 1947 as applied to Nabha State and releasing them unconditionally The same order also provided for grant of remission to persons convicted for offences other than political offences on 1 140 a certain scale The successful candidate in that case was sentenced to more than two years rigorous imprisonment under the Punjab Public Safety Act as applied to Nabha State and was thus a political prisoner He was therefore released before he had served two years imprisonment The main plank of the election petition in that case was that the successful candidate was disqualified under section 7b of the Act in view of his conviction and sentence and the election tribunal held that remission by government executive authority has the same effect as an order passed by a court of law in appeal or on revision and that under section 7 of the Act the court has to look to the amount of sentence imposed on a person and it made no difference whether the sentence was reduced by a court of law on appeal or by revision or by the powers of the government reserved for it under section 401 of the Code of Criminal Procedure as the effect in both cases was the same We are of opinion that this view is incorrect though perhaps on the facts of that case the order of the tribunal was right for it seems that political prisoners had been granted a pardon by the Ruler of Nabha and not a mere remission under section 401 of the Code of Criminal Procedure We cannot agree that remission by government has the same effect as an order passed by a court of law in appeal or on revision It is true that under section 7b of the Act one has to look at the sentence imposed but it must be a sentence imposed by a court Now where the sentence imposed by a trial court is varied by way of reduction by the appellate or revisional court the final sentence is again imposed by a court but where a sentence imposed by a court is remitted in part under section 401 of the Code of Criminal Procedure that has not the effect in law of reducing the sentence imposed by the court though in effect the result may be that the convicted person suffers less imprisonment than that imposed by the court The order of remission affects the execution of the sentence imposed by the court but does not affect the sentence as such which remains what it was in spite of the order of remission It is also well to remember that 141 section 7b speaks of the conviction and sentence passed by a court of law it does not speak of the period of imprisonment actually suffered by the convicted person The other election cases to which our attention was drawn by the learned counsel for the appellant are similar and they are all in our opinion wrongly decided We are therefore of opinion that the High Court was right in the view that the nomination paper of the appellant was properly rejected The next contention on behalf of the appellants is that both the High Court and the tribunal were wrong in holding that a corrupt practice within the meaning of section 1001b read with section 1235 had not been proved in this case The case of the appellant was that voters were carried by mechanically propelled vehicles to the polling booths by Birendra Kumar Nath who was in charge of the electioneering campaign on behalf of the Congress Party and Bholaram Sarkar who was president of the Primary Congress Committee of Dhupdhara The successful candidates were both contesting the election as nominees of the Congress Party and therefore these two persons who carried electors in mechanically propelled vehicles to the polling booths did so as agents of the successful candidates and with their consent The High Court as well as the election tribunal hold that though Birendra Kumar Nath and Bholaram Sarkar might be deemed to be the agents of the successful candidates for purposes of the election and though the hiring of mechanically propelled vehicles by the agents for conveyance of electors to polling booths had been proved there was no proof that this was done with the consent express or implied of the successful candidates The High Court pointed out that consent express or implied of the candidates was necessary for purposes of section 1001 b and was of the view that on the facts proved in this case such consent could not be inferred and the circumstances did not convincingly lead to an inference that the corrupt practice in question was committed with the knowledge and consent of the successful candidates In view of this concurrent finding of the High Court and the 142 tribunal on this question namely whether there was consent express or implied of the successful candidates to the commission of this corrupt practice it is in our opinion idle for the appellant now to contend that there was consent express or implied as required by section 1001b The inference whether there was consent or not from the facts and circumstances proved is still an inference of fact from other facts and circumstances and cannot be a question of law as urged by learned counsel for the appellant Reference in this connection may be made to Meenakshi Mills Madurai vs The Commissioner of Income tax Madras1 where it was held that a finding of fact even when it is an inference from other facts found on evidence is not a question of law and that such an inference can be a question of law only when the point for determination is a mixed question of law and fact In the present case the only question is whether the corrupt practice was committed with the consent of the candidates whether express or implied and the question whether such consent was given in the circumstances of this case is a question of fact and not a mixed question of law and fact and therefore the finding of the High Court as well as the tribunal that there was no consent either express or implied in our opinion concludes the matter There is no force in this point either The appeal therefore fails and is hereby dismissed with costs Appeal dismissed	Respondent a non resident company in the accounting year supplied goods which were sent F O R Bhopal to the buyers in British India The railway receipts were handed over to a Bank in Bhopal with instructions to hand over the railway receipts to the buyers who were named as consignees only on receipt of payment of the bill and collection charges The branches of the Bank within the taxable territory collected the amounts due from the buyers and transmitted them to Bhopal to the credit of the respondent The question was whether the profits in the goods were received or deemed to be received in British India Held that the decision of this Court in Commissioner of Income tax vs P M Rathod Co applied to this case and the income profits or gain must be deemed to have been received within the taxable territory The fact of payment to the agent determines the place where the money can be said to be received by the seller Since in the instant case the railway receipts were not to be handed over to the buyers by the Bank as per instructions of the seller unless payment for the value of the goods were received by the Bank which instructions the buyers could not countermand this was sufficient to make the Bank an agent of the seller Held also that a railway receipt is a document of title to goods and for all purposes represents the goods When the railway receipt is handed over to the consignee on payment the property in the goods is transferred The Commissioner of Income tax vs P M Rathod and Co relied on
Appeal No 372 of 1956 Appeal from the judgment and order dated January 18 1956 of the Allahabad High Court in Special Appeal No 43 of 1955 G C Mathur for the appellant G P Singh and K P Gupta for the respondent section P Sinha and P C Agarwala for Intervener No 1 Radheylal Agarwala and PC Agarwala for intervener No 2 Frank Anthony and M I Khowaja for Intervener No 3 1960 October 26 The Judgment of the Court was delivered by WANCHOO J This is an appeal on a certificate granted by the Allahabad High Court The respondent is carrying on the trade of hulling rice milling grains and extracting oil in village Nandganj within the area of Gaon Sabha Barapur He obtained licences for the three trades under the United Provinces Rice and Dal Control Order 1948 as also under the Uttar Pradesh Pure Food Act 1950 Further the Gaon 83 of Rs 8 on each mill within its jurisdiction and the respondent had been paying that as well In 1953 the District Board Ghazipur in which district the village is situate enforced bye laws for the regulation and control of flour rice and oil mills in the rural areas of the district under which a licence has to be obtained by such mills on payment of Rs 20 as licence fee per year per mill When the respondent was served with a notice to take out a licence for each mill and to pay the licence fee he objected to the legality and validity of the levy and thereafter filed a writ petition in the High Court under article 226 of the Constitution His contention in this connection was three fold namely i After the constitution of Gaon Sabha Barapur under the U P Panchayat Raj Act No XXVI of 1947 the District Board had been divested of its power and jurisdiction in the matter of regulation and control of trade under the relevant provisions of the U P District Boards Act No X of 1922 ii the respondent had paid the necessary licence fees under the UP Rice and Dal Control Order 1948 and the U P Pure Food Act 1950 and could not be asked to pay the licence fees over again under the District Boards Act and iii in any case the levy was too high and not in proportion to the actual and probable expenses which the District Board would have to incur in controlling or regulating trade and was meant to augment the general revenues of the District Board The writ petition was heard by a learned Single Judge of the High Court who appears to have dismissed it in limine by a reasoned judgment negativing all the three contentions raised by the respondent The respondent then went in appeal and the Appeal Court allowed the appeal holding that in view of section 111 of the Panchayat Raj Act the District Board had lost its power to make bye laws for the regulation and control of trade under section 174 of the District Boards Act The Appeal Court was further of the view that the levy was not out of proportion to the expenses to be incurred by the District Board in the matter of regulation and control and was not a tax It did not decide the third point raised on behalf of the 84 respondent The District Board then applied for a certificate to appeal to this Court which was granted and that is how the matter has come up before us The main question which falls for consideration in this appeal is whether the view of the Appeal Court that the District Board has lost its power to make bye laws under section 174 of the District Boards Act for regulation and control of trade in view of section 111 of the Panchayat Raj Act is correct Learned counsel for the appellant puts his argument on this point in two ways In the first place he urges that the Panchayat Raj Act does not contain any provision by which the Gaon Sabha or the Gaon Panchayat has been given the power to regulate or control trade and therefore even if the Panchayat Raj Act is to prevail over the District Boards Act where the two deal with the same matter this particular power remains in the District Board as it is not included within the powers exercisable by Panchayats under the Panchayat Raj Act In the alternative he urges that the intention of the legislature was not that those provisions of the District Boards Act which are common in the two Acts should be repealed by necessary implication and therefore the District Board s power to control and regulate trade would remain whatever may be the provision of the Panchayat Raj Act We shall therefore examine the first contention raised on behalf of the appellant under this head for if the Panchayat Raj Act has not provided for the control and regulation of trade by the Gaon Sabha or the Gaon Panchayst there will be no question of any inconsistency between the District Boards Act and the Panchayat Raj Act and therefore no question of the later Act i e the Panchayat Raj Act prevailing over the earlier Act i e the District Boards Act Section 91 of the District Boards Act provides for what may be called compulsory duties of District Boards and cl q of this section lays down that every board shall make reasonable provision within the district for regulating offensive dangerous or obnoxious trades callings or practices Section 106 of the District Boards Act gives power to the Board to charge a fee 85 to be fixed by bye law for any licence sanction or permission which it is entitled or required to grant by or under the District Boards Act Section 174 gives power to the District Board to frame bye laws consistent with the Act and with any rules framed by the State Government for the purpose of promoting or maintaining the health safety and convenience of the inhabitants of the area and for the furtherance of the administration of the district under the Act In particular power is given by section 174 2 k to the District Board to frame bye laws for regulating slaughter houses and offensive dangerous or obnoxious trades callings or practices and prescribing fees to defray the expenditure incurred by it for this purpose It is not in dispute that the District Board has power under these provisions to frame bye laws for regulation of these trades namely hulling rice milling grains and extracting oil Therefore unless this power is taken away expressly or by necessary implication by any provision of the Panchayat Raj Act the District Board would be entitled to frame the bye laws which it did in 1953 and charge licence fees thereunder Turning now to the Panchayat Raj Act we find that section 15 of this Act provides for what may be called the compulsory duties of a Gaon Panchayat while section 16 provides for what may be called its optional dutiee Section Ill gives power to the prescribed authority to make bye laws for a Gaon Panchayat within its jurisdiction consistent with the Act and the Rules made thereunder for the purpose of promoting or maintaining the health safety and convenience of persons residing within the jurisdiction of a Gaon Panchayat and for furtherance of the administration of Gaon Panchayats under the Act The prescribed authority in this case is the Executive Committee of the District Board see section 56 of the District Boards Act which may be assumed for present purposes to be different from the District Board as such The contention on behalf of the appellant is that reading sections 15 and 16 together with section 111 it is obvious that regulation or control of trades callings and practices is not within the purview of the Panchayat Raj Act There 86 is no doubt that neither section 15 nor section 16 contains any provision corresponding to section 91q of the District Boards Act Therefore prima facie the Panchayat Raj Act has nothing to do with the regulation or control of offensive dangerous or obnoxious trades callings or practices and this power of the District Board is unaffected by anything in the Panchayat Raj Act Learned counsel for the respondent however urges that though there is no specific provision relating to such regulation or control in the Panchayat Raj Act in sections 15 and 16 this matter of regulation and control is impliedly covered by el c of section 15 of the Panchayat Raj Act which enjoins on a Panchayat the duty to make reasonable provision for sanitation and taking curative and preventive measures to remove and to stop the spread of an epidemic It is urged that sanitation must be given a very wide meaning and that meaning will include the regulation of offensive dangerous or obnoxious trades It may be that on the widest meaning of the word sanitation such regula tion may be included in it but looking to the scheme of the District Boards Act as well as the Panchayat Raj Act it is in our opinion not correct to give the widest possible connotation to the word sanitation in cl c of section 15 Section 91m of the District Boards Act provides for public vaccination sanitation and the prevention of disease but in spite of this entry relating to sanitation there are other provisions in section 91 which deal with what would be covered by sanitation if it were to be given the widest possible meaning as for example cl e relating to construction and repair of public wells etc and drainage works and the supply of water from them el n relating to provision of a sufficient supply of pure and wholesome water where the health of the inhabitants is endangered by the insufficiency or unwholesomeness of the existing supply guarding from pollution water used for human consumption and preventing polluted water from being so used cl r relating to dissemination of knowledge on such matters as disease hygiene sanitation etc This will show that the word sanitation in cl m of section 91 is not used in its widest sense 87 Similarly in section 92 which provides for optional duties of District Boards cl c refers to reclaiming unhealthy localities and cl i to conserving and preventing injury or contamination to or pollution of rivers and other sources of water supply which matters would be covered within the wide meaning of sanitation It is obvious therefore that when the word sanitation is used in the District Boards Act it is used in a restricted sense Similarly in the Panchayat Raj Act cl c of section 15 mentions sanitation Clause g relates to regulation of places for the disposal of carcases and of other offensive matters which would clearly be covered by sanitation in its widest sense and would have been unnecessary if sanitation was to be given its widest meaning in this section Clause k of section 15 provides for regulation of sources of water supply for drinking purpose which would again be included within the widest meaning of the word sanitation Clause r provides for allotment of places for storing manure which would again be embraced within the widest meaning of the word sanitation and need not have been separately provided for if sanitation in cl c had the wide meaning urged for it on behalf of the respondent Further section 16 which deals with discretionary functions of a Gaon Panchayat provides in cl c for filling in of insanitary depressions and levelling of land a clause which would be unnecessary if sanitation has the widest possible meaning Clause 1 of section 16 provides for regulating the collection removal and disposal of manure and sweepings and making arrangement for the disposal of carcases of animals which again would be covered by el c if sanitation is to be given the widest possible meaning Clause m provides for prohibiting or regulating the curing tanning and dyeing of skins within 220 yards of the abadi which again would be covered by the word sanitation if it had the wide meaning urged on behalf of the respondent It would thus be clear that both in the District Boards Act as well as in the Panchayat Raj Act when the word sanitation has been used it has not been used in its widest sense it seems to have been used in its ordinary meaning i e the improvement of sanitary 88 conditions specially with regard to dirt and infection and would thus be confined to matters of conservancy and drainge and the like In the context therefore of both the District Boards Act and the Panchayat Raj Act it seems to us that the word sanitation as used in section 91 of the District Boards Act and A 15 of the Panchayat Raj Act is confined to its ordinary meaning in relation to conservancy and drainage and the like with reference to the necessity of avoiding dirt and disease and cannot be given such a wide meaning as to include control or regulation of trades callings or practices Section 18 of the Panchayat Raj Act gives a clear indication that it is the ordinary meaning that is intended by the word sanitation in cl c of section 15 Section 18 deals with improvement of sanitation and provides that a Gaon Panchayat may by notice direct the owner or occupier of any land or building to close remove alter repair cleanse disinfect or put in good order any latrine urinal water closet drain cesspool or other receptacle for filth sullage water rubbish or refuse and so on to cleanse repair cover fill up drain off deepen or to remove water from a private well tank reservoir pool pit depression or excavation therein which may appear to be injurious to health or offensive to the neighbourhood to clear off any vegetation undergrowth prickly pear or scrub jungle and to remove any dirt dung nightson manure or any noxious or offensive matter therefrom and to cleanse the land or building It must therefore be held that the Panchayat Raj Act does not provide for control and regula tion of trades callings or practices like section 91 q of the District Boards Act It is however urged that even though sections 15 and 16 do not specifically deal with control and regulation of trades callings or practices section Ill is in very general terms and gives powers to the prescribed authority to frame any bye laws relating to promotion or maintenance of health safety and convenience of persons residing within the jurisdiction of a Gaon Panchayat It is true that these words in section III are of wide amplitude but they cannot in our opinion be widened 89 beyond the duties imposed on a Gaon Panchayat or Gaon Sabha under as 15 and 16 or any other provi sion of the Panchayat Raj Act The bye laws framed under section 111 which are for the promotion or maintenance of health safety and convenience have also to be in furtherance of the administration of Gaon Panchayats under the Act Therefore if Gaon Panchayats have administrative functions under as 15 and 16 or any other provision of the Act bye laws can be framed under a 111 for these purposes in order to further the administration of Gaon Panchayats But if as we have held Gaon Panchayats are not invested with the duty to control and regulate trades callings and practices there can be no question of framing bye laws in that behalf under section 111 on the basis of the wide words used therein The power to frame bye laws under section 111 is in our opinion conditioned by the duties and functions imposed on a Gaon Panchayat under sections 15 and 16 as well as other provisions of the Panchayat Raj Act It is not in dispute that there is no other provision of the Panchayat Raj Act which imposes a duty on Gaon Panchayats to control or regulate trades callings or practices and therefore the power under section 111 does not extend to prescribing bye laws for that purpose The only other section to which our attention is drawn is section 37d by which a Gaon Sabha has been given the power to impose a tax on trades callings and professions not exceeding such rate as may be prescribed This in our opinion has nothing to do with the regulation of trades callings and practices and levying of licence fees in that behalf What this provision refers to is what is provided in item 60 of List II of the Seventh Schedule and not fees properly so called We are therefore of opinion that as the Panchayat Raj Act does not provide for control or regulation of the nature mentioned in section 91q of the District Boards Act there is no question of the power of the District Board under section 174 to frame bye laws and to prescribe fees in that behalf being taken away by section 111 of the Panchayat Raj Act It seems that this aspect of the matter was not argued in the High Court at all and it 90 appears to have been assumed there that the Panchayat Raj Act also provided for the same matter as was covered by section 91q of the District Boards Act and it was probably on that basis that the High Court held that section Ill of the Panchayat Raj Act prevailed over section 174 of the District Boards Act In the view we have taken it is not necessary to consider the alternative argument raised on behalf of the appellant in respect of this point This brings us to the point which was not considered by the Appeal Court though the learned Single Judge had dealt with it and held against the respondent That contention is that certain fees are being levied on the respondent in respect of these mills under the U P Rice and Dal Mills Control Order 1948 and the U P Pure Food Act and therefore the District Board cannot levy any further licence fee under section 91q of the District Boards Act read with section 174 As pointed out by the learned Single Judge the fees levied under the Control Order of 1948 which depends for its existence on the Essential Supplies Act and under the U P Pure Food Act are for different purposes of those Acts The fee charged by the District Board is for regulation of obnoxious trades and the purpose of this regulation is different from the purpose for which fees are levied under the Essential Supplies Act and the Pure Food Act Under these circumstances we see no reason for striking down the regulatory provisions made under the District Boards Act and the licence fee charged thereunder The fact that there may be some overlapping between the regulatory provisions made under the U P Pure Food Act and those made under the District Boards Act can have no relevance on the validity of the bye laws and the licence fee charged under them In this view of the matter the appeal is allowed the order of the Appeal Court set aside and the writ petition dismissed However as the point on which the appellant has succeeded in this Court was not specifically raised in the High Court we order the parties to bear their own costs throughout Appeal allowed	Section 116 of the Pepsu Ordinance X of 2005 1948 1949 is a transitory regulation providing for a change over of proceedings from one set of courts in the covenanting State to others of like status in the Union and for their continuance etc in the latter courts It does not mean that the proceedings must be treated as having freshly commenced What is contemplated in the latter part of the section is a notional commencement and the section means that all rights which arose or are likely to arise in future shall remain intact not with standing the new set Lip and that they would be dealt with by the Union courts in place of the courts of the covenanting State There is nothing in the section to justify the view that any taking away of a vested right of appeal retrospectively was intended Under the Patiala States Judicature Farman of 1999 a certificate was necessary for an appeal to a Division Bench from an order of a single Judge of the Patiala High Court only in respect of judgments and orders made in the exercise of civil appellate jurisdiction Under the Pepsu Ordinance X of 2005 1948 49 a certificate was necessary in all cases In Appeal No 152 an application made on 2nd February 1950 for amendment of an order made by a Liquidation Judge in 1946 was dismissed and an appeal from the order of dismissal to a Division Bench was dismissed on 1st May 1950 for want of a certificate In appeals Nos 167 and 167A the payment orders were made on the 18th January 1949 and appeals from those orders were dismissed on 3rd March 1949 for want of a certificate Held i that as a petition for amendment was not a continuation of the earlier proceedings but was in the nature of an 753 independent proceeding though connected with the order sought to be amended it was governed by the law prevailing on its date viz the Pepsu Ordinance of 2005 under which a certificate was necessary and in Appeal No 152 the dismissal of the appeal to the Division Bench for want of a certificate was right iithat with regard to Appeals Nos 167 and 167 A as the law in force on the relevant dates was the Patiala States Judicature Farman of 1999 the appellants had a right to appeal from the payment order without a certificate this vested right could not be taken away by a subsequent change in the law unless the later enactment expressly or by necessary implication was retrospective in operation and deprived them of such a right that there was nothing in section 116 of the Ordinance to show that it was intended to have retrospective effect and the order of the High Court dismissing the appeals as incompetent was therefore erroneous Colonial Sugar Refining Company vs Irving referred to
44 of 1958 Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights Naunit Lal and Gopal Singh for the petitioners H N Sanyal Additional Solicitor General of India N section Bindra K R Choudhri and R H Dhebar for the respondent October 27 The petitioners have moved this Court under article 32 of the Constitution for a writ of mandamus against the respondent to verify the claims put forward by the petitioners and to grant compensation in respect thereof but there is little merit to commend the acceptance of the petition The petitioners are displaced persons from West Punjab which is now known as West Pakistan and have taken up their residences in different parts of India They put forward certain claims in regard to village houses which they had left in West Pakistan and which were situate in different villages The petitioners have in their petition set out their respective claims which were rejected by the Rehabilitation authorities It is unnecessary to give details of the properties in the various villages in regard to which claims were made It is sufficient to say that the claims were put forward and they were for amounts above Rs 20000 in the case of petitioners Nos 1 and 2 and above Rs 10000 in the case of petitioners Nos 3 The petitioners challenge the vires of two rules Rule 5 under the Act 12 of 1954 and r 65 of the Rules made under the Displaced Persons Compensation and Rehabilitation Act Act 44 of 1954 The challenge is on the ground of violation of article 14 of the Constitution It is necessary at this stage to set out the various Acts and regulations which were passed in regard to displaced persons dealing with 122 verification of their claims and the giving of compensation to them On April 1 1948 the East Punjab Refugees Registration of Claims Act 1948 East Punjab Act 8 of 1948 was passed and this was followed by the East Punjab Refugees Registration of Land Claims Act 12 of 1948 In the latter Act land was defined in section 2b to mean land which is not occupied as the site of any building in a town or village and is occupied or let for agricultural purposes or for purposes subservient to agriculture or for pasture and includes i the sites of buildings and other structures on such land Under section 2a claim was defined as a statement of loss or damage suffered by a refugee since the first day of March 1947 in respect of his land within the territory now comprised in the Province of Punjab in Pakistan North West Frontier Province Sind or Baluchistan or in any State adjac ent to the aforesaid Provinces and acceding to Pakistan Section 41 of that Act made provision for submission for registration of claims in respect of land abandoned by a refugee On November 19 1949 East Punjab Displaced Persons Land Settlement Act 1949 East Punjab Act 36 of 1949 was passed By section 2b of this Act the word allottee was defined and by section 2d land was defined This definition which was slightly different from the definition in the East Punjab Act Act 12 of 1948 was as follows section 2d Land means land which is not urban land and is not occupied as the site of any building in a town or village and is occupied or let for agricultural purposes or for purposes subservient to agriculture or for pasture and includes i the sites of buildings and other structures on such land On May 181950 another Act the Displaced Persons Claims Act 44 of 1950 was passed by the Central Legislature In this Act claim was defined in 123 section 2a as the assertion of a right to the ownership of or to any interest in ii such class of property in any part of West Pakistan other than in any urban area as may be notified by the Central Government in this behalf in the Official Gazette This Act was in force for two years and then lapsed Under section 2aii the Central Government issued a notification on May 27 1950 specifying the property in respect of which claims might be submitted The properties were 1 Any immoveable property in West Pakistan which forms part of the assets of an industrial undertaking and is situate in an area other than an urban area 2 Any other immoveable property in West Pakistan comprising of a building situated in an area other than an urban area the estimated cost of construction of which at present prevailing rates is not less than Rs 20000 3 Any agricultural land in any part of West Punjab This shows that claims could only be submitted in regard to building in a rural area which was valued at not less than Rs 20000 and there was no such restriction in regard to urban area This notification was amended by a notification dated September 13 1950 Clause 2 of the previous notification was substituted by a new clause 2 Any other immoveable property in West Pakistan comprising of a building situated in an area other than an urban area provided that where the person making the claim hag been allotted any agricultural land in India a where the gricultural land so allotted exceeds 4 acres the value of the building in respect of which the claim is made shall not according to the present estimated cost of construction be less than Rs 20000 b where the agricultural land so allotted is 4 acres or less the value of the building in respect of which the claim is made shall not according to the 124 present estimated cost of construction be less than Rs 10000 Explanation 1 Explanation 11 For the purpose of this clause a person shall be deemed to have been allotted agricultural land in India if he is allotted such land in any manner whatsoever whether on temporary or quasipermanent basis On March 23 1954 the of 1954 was passed and a 12 provided for the making of rules Rule 5 was made in the following terms R 5 The classes of property in respect of which claims may be verified under these rules shall be the same as under the principal Act and the rules made thereunder that is to say 1 any immoveable property situated within an urban area in West Pakistan 2 any immoveable property in West Pakistan which forms part of the assets of an industrial undertaking and is situated in any area other than an urban area 3 any other immoveable property in West Pakistan comprising of a building situated in any area other than an urban area Provided that where a claimant has been allotted any agricultural land in India and that a where the agricultural land so allotted exceeds four acres the value of the building in respect of which the claim is made shall not according to the present estimated cost of construction be less than Rs 20000 b where the agricultural land so allotted does not exceed four acres the value of building in respect of which the claim is made shall not according to the present estimated cost of construction be less than Rs 10000 Explanation II is in the same terms as in the notification of September 13 1950 On October 9 1954 the 44 of 1954 to be hereinafter termed Act 44 of 1954 was enacted by Parliament Section 2a defines compensation pool 125 which is constituted under section 14 Section 2e defines verified claim as follows Verified claim means any claim registered under the Displaced Persons Claims Act 1950 44 of 1950 in respect of which a final order has been passed under that Act or under the but does not include Section 4 provided for application for payment of compensation Section 7 for the determination of the amount of compensation and section 40 for the making of rules Rules were made under this Act by a notification No section R O 1363 dated May 21 1955 Rule 2h defines urban area and a 2f rural area which means area which is not an urban area Rule 16 provides for the scale of compensation which is set out in appendix 8 or 9 Under r 18 compensation was to be determined on the total value of all claims which included all kinds of properties other than agricultural land left by claimants in West Pakistan Rule 44 deals with allotment of acquired evacuee houses in rural areas in lieu of compensation Under sub section 3 of this rule houses in rural areas were graded and under r 47 payment of compensation was to be made subject to r 65 Rule 57 provided for allotment of houses in addition to agricultural land This rule provided R 57 A displaced person having a verified claim in respect of agricultural land who has settled in a rural area and to whom agricultural land has been allotted a house in addition to such land in accordance with the following scale 1 Claimants allotted land up to Ten Standard acres Grade H 2 Claimants allotted and exceeding Ten Standard acres but not exceeding fifty standard acres Grade G provided that if such person holds a verified claim in respect of any rural building and that claim has been satisfied wholly or partially before the allotment of such land the provisions of rule 65 shall not be 126 applicable in his case but he shall not be entitled to the allotment of a house or a site and building grant in lieu thereof Explanation 1 Where no house is available in the same village an allottee may be granted a if he has been allotted agricultural land not exceeding ten standard acres a site measuring 400 square yards and a building grant of Rs 400 and b if he has been allotted agricultural land exceeding ten standard acres but not exceeding fifty standard acres a site measuring 600 square yards and a building grant of Rs 600 Explanation II The reference to grades in this rule is to the grades of houses specified in rule 44 Rule 61 deals with refusal of acceptance of allotment and is as under Rule 61 Where any person refuses to accept the allotment of any agricultural land offered to him the claim for compensation of the allottee shall be deemed to have been satisfied to the extent of the value of the allotted land and such land shall be available for allotment to any other claimant The impugned rule 65 provided 1 Any person to whom more than four acres of agricultural land have been allotted shall not be entitled to receive compensation separately in respect of his verified claim for any rural building the assessed value of which is less than Rs 20000 2 Any person to whom four acres or less of agricultural land have been allotted shall not be entitled to receive compensation separately in respect of his verified claim for any rural building the assessed value of which is less than Rs 10000 It was argued on behalf of the petitioners that the object of the various Acts and the rules made thereunder was to rehabilitate displaced persons but by the rules a classification had been made which was discriminatory as neither the classes were based on any intelligible differentia nor was there a rational nexus between that differentia and the object sought to be achieved The classification according to the argument was 1 between urban population and rural 127 population 2 between refugees from rural areas who owned lands and those who owned only rural houses and 3 between those who had quasi permanent and permanent allotments In order to determine the question raised it is necessary to trace in chronological order the various steps taken to rehabilitate the millions of persons who were forced to migrate into India leaving behind properties worth varyingly large amounts When displaced persons came from West Punjab and other provinces of India which became Pakistan the authorities allotted to every agricultural family certain area of agricultural land the object being 1 to give temporary shelter to the displaced persons and 2 to preserve whatever crops bad been left by persons who went away to Pakistan At an Inter Dominion Conference between the Governments of India and Pakistan held at Karachi between January 10 and 13 1949 a permanent Inter Dominion Commission was set up to consider the question of administration sale and transfer of evacuee property in both the dominions In pursuance of this decision the question in respect of shops and houses in rural areas was considered by the Commission at New Delhi on March 11 and 13 1949 It was recommended at this meeting that buildings in rural areas of the value of Rs 20000 or more should be considered to be substantial buildings and the buildings which were of lesser value than that were to be treated as appendages of agricultural land and as such were to be treated as agricultural properties vide the minutes of that meeting at p 242 of a compilation known as Documents concerning Evacuee Property of the years 1947 51 Chapter IX of the Land Resettlement Manual for Displaced Persons by Mr Tarlok Singh a book of undoubted authenticity and value deals with allotment of rural houses and sites Rule 3 shows how the equitable distribution of houses was to be effected In order to ensure fairness the size of the land allotment made to a displaced person and the type of house abandoned by him were considered to be major factors For each standard acre allotted 128 one mark was to be given and subject to a maximum of 20 marks houses abandoned in West Punjab were valued at the rate of one mark for each one thousand of the value of the house and houses above the value of Rs 20000 were excluded for allotment as they were to be dealt with according to the terms of an earlier agreement between India and Pakistan In each village after their relative rights had been valu ed the allottees could choose houses according to the village list In appendix 11 of that book is set out the summary of principles of allotment of rural evacuee houses Evacuee houses of kamins menial servants artisans etc were to be given to displaced artisans and evacuee shops to evacuee shopkeepers Rule 3 provided that temporary allotment did not create any rights of allotment on quasi permanent basis but subject to this allottees were not to be disturbed if they are otherwise qualified for similar accommodation in the villages Elaborate rules are given in that Chapter as to how these allotments were to be made including partition of houses where two or more families could be accommodated Rule 20 is important and may be quoted Rule 20 Where necessary evacuee abadi sites should be extended to suit the layouts of model villages The Additional Deputy Commissioner should endeavour to persuade the allottees to surrender a part of their holdings in exchange for land out of the common pool or out of areas excluded from allotment Rule 21 gave effect to another Inter Dominion agreement and therefore houses of the value of Rs 20000 or more which were liable to exchange or sale were excluded from allotment Thus according to these instructions contained in that book every effort was made to allot houses to persons who were allotted lands and in this manner compensation was sought to be given to displaced persons By rule 97 made under Central Act 44 of 1954 rehabilitation grants to allottees of agricultural land of less than 4 acres were to be given as follows 129 R 97 Any person who has been allotted four acres or less of agricultural land and whose claim in respect of rural buildings left in West Pakistan has by virtue of such allotment been totally rejected may be given a rehabilitation great Provided that a he has not accepted such allotment of the agricultural land or such allotment has been cancelled b he does not hold a verified claim in respect of any other kind of property that is to say for any substantial rural building and Provided further that where any such person is given a rehabilitation grant under rule 97 A he shall not be given a rehabilitation grant under this Rule 97 A provided Any person who has been allotted two standard acres or less of agricultural land in the State of Punjab or Patiala and East Punjab States Union under any notification specified in Section 10 of the Act may be given a rehabilitation grant at the rate of Rs 450 per standard acre of the area allotted to him Provided that a he has not accepted such allotment of the agricultural land or such allotment has been cancelled b he does not hold a verified claim in respect of any other kind of property that is to say for any urban property or for any substantial rural building By Rule 57 which has already been quoted houses of all grades were allotted to persons who were allotted certain areas of land and provision was made for building sites and payment of building grants where no houses were available in the villages These rules made under Act 44 of 1954 and those set out in Land Resettlement Manual by Mr Tarlok Singh show that every one was allotted or was given building sites and money for the purpose of houses in rural areas The rule in regard to filing of claims for houses valued at Rs 10000 or more where allotment of land was up to 4 acres and Rs 20000 or more where allotment of land was in excess of 4 acres was also in pursuance of an Inter Dominion Agreement between the 17 130 two Governments which has received recognition in article 315biii Thus it appears that rules made in regard to fixing of the value of the houses for claim of Rs 10000 in one case and Rs 20000 in the other was a policy decision arising out of an agreement at a meeting of the Inter Dominion Commission with regard to evaluation of evacuee property Rules which have been framed are only restatement of what was contained in the notifications of May 27 1950 and September 13 1950 which themselves were the result of decisions arrived at the meetings of the Inter Dominion Commission Under article 14 of the Constitution the State shall not deny to any person equality before the law or the equal protection of the laws within the territories of India By judicial decisions the doctrine of classification has been incorporated in the equality clause but the classification cannot be arbitrary but must be based upon differences pertinent to the subject in respect of the purpose for which it is made There must be a reasonable nexus between the classification and the object sought to be achieved The object of the impugned provisions read with the relevant Acts is to rehabilitate the evacuees on an equitable basis To implement the scheme of rehabilitation the evacuee law has classified evacuees under different categories Broadly speaking the main division is between persons who were residing in Pakistan in rural areas with agriculture as their avocation and those persons who were residing in urban areas in Pakistan Persons from rural areas have been divided into two categories namely persons who owned agricultural land with a building as part of the holding and persons who held agricultural land with an independent building which cannot be described as part of the holding Separate treatment is given to rural areas and urban areas In the rural areas land with a building is treated as one unit but when the building is of a substantial value it is put in a different category and separately compensated for This classification has certainly a reasonable relation to the object of rehabilitation for it cannot be denied that the three categories require separate treatments for the purpose of 131 resettlement on new lands and for the payment of compensation It cannot be seriously disputed that a house in a rural area and that in an urban area cannot be treated alike but the real grievance of the petitioners is in respect of the distinction between houses in rural areas As to what is a substantial building has to be ascertained and a line must be drawn somewhere Here the question arises whether the classification has been made arbitrarily and without any sound basis It may perhaps appear odd to say that a property worth Rs 9999 in one case or a property worth Rs 19999 in another would be a building of unsubstantial character or that the extent of the land namely four acres in one case and above four acres in another have any relevant bearing on the substantiality of the building This perhaps may lend support to the plea of discrimination but an unprecedented situation bad to be faced and provision made for the rehabilitation of such a vast multitude of humanity who had been uprooted from their homes This necessitated an equitable treatment for them all and an equal distribution of the available evacuee properties left in India In order to lighten the heavy burden undertaken an Inter Dominion adjustment became necessary and the two Dominions entered into an agreement presumably based upon the relevant circumstances in regard to the treatment of rural house property The reasonableness of the classification must therefore be judged after taking these surrounding circumstances and the conditions then prevailing into consideration The basis of the classification must be judged by the fact that compensation is given in every case Rules 57 and 97 A framed under Act 44 of 1954 afford a reasonable justification for the classification Under the Rules every displaced person who has settled in a rural area is allotted a house in addition to such land if no house is available in the same village the allottee is given a site and a building grant But where his claim for a house is rejected he is given 132 a rehabilitation grant But under the impugned provisions separate compensation is given for a rural house of value above a prescribed limit It will therefore be seen that the classification is not arbitrary but is based upon sound principles and on equitable considerations A distinction between a rural house which is part of a holding and one which is not a part of a holding but an independent unit is made and different principles of rehabilitation are applied to meet different situations The hardship which the division into two categories must cause is diluted by providing to the claimant falling on the wrong side of the line a rural house or a rehabilitation grant The attack on the ground of want of intelligible differentia must fail Appendix XI of Land Resettlement Manual by Mr Tarlok Singh illustrates the principles of allotment of rural evacuee houses and the elaborate system of marking which was done in order to either give houses to allottees of land or to give them building sites with subsidy to build houses and finally in r 97 and r 97 A of the rules made under Act 44 of 1954 detailed provisions were made for rehabilitation grants including grants to those allottees of agricultural land whose claim for rural property had been rejected or who had refused to take land allotted to them Similarly r 57 which has been quoted above shows that a provision has been made for giving sites as well as subsidy for building houses It cannot be said therefore that the rules suffer from any infirmity on the ground of discrimination In the result this petition fails and is dismissed with costs of Petition dismissed	The appellant s nomination paper for election to the Assam Legislative Assembly was rejected by the Returning Officer on the ground of disqualification under section 7b of the Representation of the People Act 195 in that he had been convicted and sentenced to three years rigorous imprisonment under section 4b of the Explosive Substances Act VI of 1908 and five years had not expired after his release The appellant had applied to the Election Commission for removing the said disqualification but it had refused to do so The appellant s sentence was however remitted by the Government of Assam under s 401 of the Code of Criminal Procedure and the period for which he was actually in jail was less than two years The Election Tribunal held that the nomination paper had been improperly rejected and set aside the election but the High Court taking a contrary view dismissed the election petition Held that the High Court was right in holding that the appellant was disqualified under section 7b of the Representation of the People Act and that his nomination paper had been rightly rejected That section speaks of a conviction and sentence by a Court and an order of remission of the sentence under section 401 of the Code of Criminal Procedure unlike the grant of a free pardon cannot wipe out either the conviction or the sentence Such order is an executive order that merely affects the execution of the sentence and does not stand on the same footing as an order of Court either in appeal or in revision reducing the sentence passed by the Trial Court Venkatesh Yeshwant Deshpande vs Emperor AIR 1938 Nag 513 distinguished Ganda Singh vs Sampuran Singh over ruled Held further that an inference as to whether a successful candidate was a consenting party to the corrupt ractice under 134 section 100ib of the Act from facts found on evidence was a question of fact and not a mixed question of fact and law Meenakshi Mills Maduyai vs The Commissioner of Income tax Madyas referred to
Appeal No 357 of 1958 Appeal from the judgment and order dated April 24 1957 of the Patna High Court in Misc Judicial Case No 57 of 1955 A V Viswanatha Sastri and I N Shroff for the appellant K N Rajagopal Sastri and R H Dhebar for the respondent October 25 The Judgment of the Court was delivered by SHAH J The appellant executed a deed of trust settling certain lands described in schedule A and the rents of lands described in schedule C for the maintenance of certain temples and Thakoorbaries The material terms of the deed of trust are cl 6 And whereas the declarant feels that a Declaration of Trust should be made whereby the income of a part of the Raj properties may be earmarked and specially devoted to the maintenance of the aforesaid institutions as also the Declarant may as hitherto treat himself and be treated by others as a legal Trustee of the said institutions and the properties out of the income of which the said maintenance is being and will be provided for cl 7 The declarant declares that henceforth he holds and will hold the properties detailed at the foot thereof in Schedule A in trust for religious purposes of maintaining the religious institutions more fully described in Schedule B annexed here to cl 8 The declarant further declares that in all lands now held by him in the aforesaid properties as Bakast or proprietor s private lands as in the schedule C which are in direct khas cultivation of the Declarant shall henceforth be or continue to be his tenancy lands for which the Declarant shall pay the rental as noted against such lands annually to the trustee for the use and benefit of the aforesaid institutions and the rights of the Declarant in them 76 shall be those of a rayat under the Bihar Tenancy Act The net income of all the lands set out in Schedule A after providing for the expenses of management and the taxes payable thereon was estimated at Rs 181717 and the net rental of the properties described in Schedule C was estimated at Rs 10208 and from the aggregate of these two amounts after deducting 15 as trustee s remuneration the balance of the income estimated at Rs 163136 4 0 was to be utilised for the objects of the trust In the assessee s income determined by the Income Tax Officer for the assessment year 1950 51 Rs 6000 were included as income from non agricultural properties of the trust In the view of the Income tax Officer the trust was not a public religious trust and the income derived from properties not used for agriculture was not exempt from liability to pay tax in the hands of the appellant In appeal against the order of assessment the Appellate Assistant Commissioner held that the income coming to the hands of the appellant from the trust properties was not taxable as private income of the appellant but in his view the remuneration amounting to Rs 21274 computed at the rate of 15 on the net income of the trust properties in the year in question not being agricultural income in the appellant s hands was liable to be taxed In appeal to the Income tax Appellate Tribunal Patna Bench Patna the order passed by the Appellate Assistant Commissioner in so far as it related to remuneration received by the appellant was affirmed The High Court of Judicature at Patna thereafter at the instance of the appellant directed the Income tax Appellate Tribunal to submit a statement of the case on five questions set out in the order The fifth question which is the only question material in this appeal was as follows Whether in the facts and the circumstances of the case the amount of Rs 21274 being the amount paid to the assessee in his character of a Shebait of the Trust properties should have been held to be exempted from taxation on the ground that it is agricultural income 77 The High Court agreed with the Tribunal that the remuneration was received by the appellant under a contract and it was not agricultural income merely because the source of the money was agricultural income The High Court accordingly answered the fifth question against the assessee This appeal is filed by the appellant with leave under section 66A2 of the Indian Income tax Act granted by the High Court limited to the question whether the amount received by the appellant from the trust property in his character as a shebait was exempt from liability to pay The material part of the definition of Agricultural income in section 21 is as follows Agricultural income means a any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such b Agricultural income falling under cl a ought manifestly to be received as rent or revenue derived from land used for agricultural purposes The income received from agricultural properties of the trust by the appellant as trustee was indisputably agricultural income in his hands and it was by virtue of section 43viii exempt from liability to pay tax The appellant claims that the remuneration which by the convenant contained in the deed of trust he has received is also exempt under section 43viii because when he appropriated a fraction of the rent or revenue of agricultural lands towards his remuneration the original character of the income was not altered The appellant has no beneficial interest in the lands which are the subject matter of the trust nor is he given under the trust a right to receive and appropriate to himself the income of the properties or a part thereof in lieu of any beneficial interest in that income The source of the right in which a fraction of the net income of the trust is to be appropriated by the appellant as his remuneration is not in the right 78 to receive rent or revenue of agricultural lands but rests in the covenant in the deed to receive remuneration for management of the trust The income of the trust appropriated by the appellant as remuneration is not received by him as rent or revenue of land the Character of the income appropriated as remuneration due is again not the same as the character in which it was received by the appellant as trustee Both the source and character of the income are therefore altered when a part of the income of the trust is appropriated by the appellant as his remuneration and that is so notwithstanding that computation of remuneration is made as a percentage of the income a substantial part whereof is derived from lands used for agricultural purposes The remuneration not being received as rent or revenue of agricultural lands under a title legal or beneficial in the property from which the income is received it is not income exempt under section 43 viii We may briefly refer to the authorities which illustrate the meaning of agricultural income in section 21 of the Income tax Act In Nawab Habibulla vs Commissioner of Income Tax Bengal1 the Privy Council held that the remuneration received by a mutwalli of a wakf estate not depending on the nature of the properties or assets which constitute the wakf nor on the amount of income derived from the wakf estate is not agricultural income within the meaning of section 21 of the Indian Income tax Act even though the income derived by the wakf estate is from properties used for agricultural purposes In Premier Construction Co Ltd vs Commissioner of Income Tax Bombay City 2 it was held by the Privy Council that income received by an assessee not itself of a character to fall within the definition of agricultural income does not assume the character of agricultural income by reason of the source from which it is derived or the method by which it is calculated But if the income received falls within 1 1943 LR 70 IA 14 2 1948 LR 75 IA 246 79 the definition of agricultural income it earns exemption in whatever character the assessee receives it In that case the remuneration payable to a managing agent of a company in consideration of services to be rendered was a minimum annual salary of Rs 10000 payable irrespective of whether the company made any profit but if 10 of the profits made by the company exceeded Rs 10000 the agent was to get an additional remuneration calculated as a percentage upon the profits of the company without regard to the source from which those profits were derived One of the sources of income of the company was agricultural income It was held by the Privy Council that the assessee received no agricultural income as defined by the Act he received remuneration under a contract for personal service calculated on the amount of profits earned by the employer In Commissioner of Income Tax Bihar and Orissa vs Kameshwar Singh1 income received by a mortgagee who went into possession of properties mortgaged to him was held to be agricultural income but that was because under the deed of mortgage the mortgagee was to be in possession of the properties and in his relation to the cultivators of the soil he stood in the position of landlord dealing directly with them and collecting the rents The mortgagee had to pay Government revenue cesses and taxes and his name was registered in the Land Registration Department He alone was able to sue for rent whether current or arrears to sue for enhancement or for ejectment and was able to settle lands with raiyats and tenants in all the properties in fact he was in a position to take all proceedings which the mortgagor would have been able to take in the ordinary course if the lands leased and mortgaged had remained in the mortgagor s possession The mortgagee received the income because of the legal ownership vested in him and even though under the covenant of the mortgage deed he was required to appropriate the income towards his dues the income in his hands did not cease to be agricultural income In Kameshwar Singh s case 1 the court was called upon to consider 1 1935 LR 62 IA 215 80 the nature of the primary receipt by the mortgagee and not of the appropriation made under the coven ant of the deed of mortgage In K B Syed Mohammad Isa and another vs Commissioner of Income Tax Central and United Provinces 1 the assessee was a mutwalli appointed under two deeds Under both the deeds he was to receive agricultural and non agricultural income and to utilise the same for purposes of the trust Under one of the two deeds of trust the balance was to be retained by the mutwalli for his personal expenses and in the other in lieu of his services It was held by the Allahabad High Court that the residue of the amounts retained by the mutwalli under both the deeds of trust was as agricultural income exempt from liability to pay tax In the view of the court though the language used in the two deeds of trust was different the intention of the settler was the same the mutwalli was required to perform the functions of his office and so long as he did so he was entitled in consideration of this service to appropriate the residue of the profits But in each case the mutwalli was a beneficiary with an obligation attached to his enjoyment of the benefit and had therefore two capacities one as mutwalli and the other as beneficiary The court on those facts held that the balance of the income from the zamindari went through the mutwalli to the beneficiary by virtue of an obligation imposed under the terms of the trust deed itself upon the income of the property The mutwalli was the channel through which the beneficiary received the money and the beneficiary was to all intents and purposes the direct recipient of the income and there was no change of source and no alteration in the character of the income It remained agricultural income after it had passed into the hands of the beneficiary In the present case the appellant has no beneficial interest in the trust property The appellant so far as his remuneration is concerned is again not the direct recipient of the income of the 1 ILR 1942 All 425 81 both altered when agricultural income is appropriated under the covenant in the deed of trust as remuneration for services rendered In this view the appeal fails and is dismissed with costs Appeal dismissed	The appellant framed bye laws for the regulation and control of flour rice and oil mills under which a licence had to be obtained on payment of licence fee for running a mill The bye laws were framed under section 174 of the U P District Boards Act 1922 The respondent contended that the bye laws were ultra vires and void as the District Boards had been divested of their powers to regulate and control trade under the District Boards Act on account of section III of the P P Panchayat Raj Act 1947 which operated in the same field Held that the bye laws had been validly made and that the District Boards were not divested of their powers to regu late and control trade under the District Boards Act 1922 by the provisions of U P Panchayat Raj Act 1947 Section 91q of the District Boards Act cast a duty on the District Boards to make provisions for regulating offensive dangerous or obnoxious trades callings or practices and section 1742k specifically empowered District Boards to make bye laws in this respect There was no similar duty or power conferred upon Village Panchayats under the Panchayat Raj Act and consequently the question of the later enactment prevailing over the former did 82 not arise The reference to sanitation in section 15c of the Panchayat Raj Act did not cover regulation and control of trade Though the word sanitation in its widest connotation was capable of including this it was not used in its widest sense in section 15c but only in its ordinary sense in relation to conservancy drainage and the like Section III of the Panchayat Raj Act was in general terms but bye laws could be framed under it only in respect of the functions and duties imposed upon a Gram Panchayat under sections 15 and 16 Held further that the licence fee charged by the District Board could not be struck down on account of fees being charged from the respondent in respect of his mills under the U P Rice and Dal Mills Control Order 1948 and the U P Pure Food Act The licence fee charged by the District Board was for the regulation of obnoxious trades and the purpose of this regulation was different from the purpose for which fee was charged from the respondent under the Essential Supplies Act and the Pure Food Act
Appeals Nos 202 and 203 of 1958 Appeals from the judgment and decree dated October 5 1956 of the Patna High Court in Misc Judicial Cases Nos 330 and 331 of 1955 K D Chatterjee section N Andley and J B Dadachanji for the appellants D P Singh for the respondents October 26 The Judgment of the Court was delivered by AYYANGAR J These two appeals are from a common judgment of the High Court of Patna dated October 5 1956 in two petitions under article 226 of the Constitution and have been filed pursuant to a certificate granted by the High Court under article 132 The Tobacco Manufacturers India Ltd the appellants in the above appeals are an incorporated company manufacturing cigarettes and tobacco in their factory at Monghyr in the State of Bihar and these 109 appeals are concerned with the legality of the levy of sales tax under the Bihar Sales Tax Act hereafter referred to as the Act on the appellants in respect of sales effected during the financial years 1949 50 and 1950 51 The point urged in these appeals is a very narrow one and relates to the proper construction to be placed on certain orders of the Board of Revenue passed in regard to the tax properly leviable for these two years The facts relevant to this point are briefly these The assessment of the appellants for both the years was completed by the Superintendent of Sales Tax Monghyr on May 7 1952 and the total tax liability was determined in the sum of Rs 644940 2 6 and Rs 746876 1 3 for the two assessment years 1950 51 and 1951 52 respectively Before the assessing officer the appellants contended that all sales effected by them as a direct result of which the goods were delivered outside the State of Bihar were exempted from tax liability under article 2861a of the Constitution This objection was overruled the reason assigned being that the sales were completed in Bihar and that the entire turnover of the appellants was therefore subjected to tax under the Act In taking this view the assessing authority followed a previous ruling of the Board of Revenue of the State in the Bengal Timber case Case 61 of 1952 An appeal preferred to the Deputy Commissioner of Sales Tax Bihar by the appellants was dismissed on October 8 1952 on the same grounds The appellants paid the tax demanded for both the years and invoked the revisional jurisdiction of the Board of Revenue In their petitions to the Board the appellants pointed out that the sales of goods delivered for consumption outside the State of Bihar which involved a tax liability of Rs 123813 0 2 in the earlier year and Rs 710185 12 0 in the later year were made up of two types of transactions a those in which the goods thus delivered were for consumption in the State of first delivery or first destination b those in which the goods thus delivered were 110 for consumption not in the State of first delivery but in other States These two classes would be referred to hereafter for convenience as typo a and type b respectively The appellants claimed that on the proper construction of article 2861 2 they were entitled to have both these types of sales excluded from their taxable turnover By the date of the hearing of these petitions by the revisional authority this Court had rendered the decision in State of Bombay vs United Motors India Ltd and Others 1 expounding the scope of the explanation to article 2861a and its inter relation to the exemption under article 2862 and naturally this decision was brought to the attention of the member of the Board at the hearing Without examining whether the decision cited did or did not cover both the two a b types of sales effected by the appellants the Board passed on August 28 1953 a laconic order in these terms The two points urged in this Court were among those points urged in the Lower Court and they are i No tax should have been levied on the Company s canteen sales ii that despatches outside the State for consumption in other States should not have been taxed for the period after the Constitution came into force As regards the admitted despatches of goods out side the State after the 26th January 1950 when the Constitution came into force the learned Lower Court has been guided by the decision of the Board in the Bengal Timber case Case No 61 of 1952 But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motor s case According to the decision of the Supreme Court no tax can be levied on despatches to the places outside the State after the 26th January 1950 and on this point the petition are allowed and the 1 111 sales tax officer directed to recalculate the amount of tax payable by the assessee Apparently the appellants understood this order as meaning that all sales whereunder goods were delivered outside the State whether or not for consumption in the State of first delivery ie both types a b were exempted from the tax levy The sales tax authorities however took the order to mean that only those sales in which deliveries were made outside the State for consumption in the State of first destination i e those of type a were intended to be exempted and these rival interpretations were put forward in the correspondence that passed between the appellants and the sales tax authorities The appellants made an application for the refund of the amount of tax attributable to all the sales under which goods were delivered outside the State but the tax authorities sticking to their interpretation of the order of the Board and of their interpretation of the decision of this Court in the United Motors case 1 refunded the tax collected on the sales falling within type a but refused to refund Rs 20923 15 2 for the 1st year and Rs 129823 50 for the later year these amounts representing the tax on sales of type b The appellants however persisted in pressing their claim for the refund of these amounts also In this state of affairs the State of Bihar moved the Board of Revenue to review its order dated August 28 1953 or at any rate clarify it so as to confine its operation to sales falling within type a urging that this would bring it in accord with the interpretation of article 2861 by this Court in the United Motors case 1 The appellants objected to the jurisdiction of the Board of Revenue to review its previous decision and on April 25 1955 it passed the following order These are what appear to be two miscellaneous petitions filed on behalf of the State of Bihar seeking certain clarifications regarding the interpretation of the Board s order dated 28 8 1953 in Cases Nos 514 of 1952 After argument was heard it was conceded 1 112 by both parties that there is no provision in the Act under which the parties concerned may move the court to clarify or explain the order passed this function essentially being a matter of legal advice It was also agreed that no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motor s case The petitions are therefore rejected If the order of the Board dated August 28 1953 was laconic and ambiguous the later order dated April 25 1955 was if anything more obscure The appellants however considered it an order in their favour because the petition by the State for clarification of the first order on the lines of the interpretation put upon it by the tax authorities had been dismissed and when the refusal to refund the two sums of tax referred to earlier was continued they filed two petitions in the High Court of Patna under article 226 of the Constitution for the issue of writs of mandamus to compel the refund of the tax on the principal ground that a duty to do so had been imposed by the orders of the Board of Revenue though the petition made an incidental reference to the appellants being entitled to such refund on a proper construction of article 2861 2 of the Constitution even apart from the order of the Board of Revenue The learned Judges of the High Court however in the main considered the question whether on a proper interpretation of the relevant Articles of the Constitution sales under which goods were delivered outside Bihar but for consumption not in the State of first delivery were exempt from tax under the Bihar Sales Tax Act and decided the point against the appellants They next dealt with the central point urged in the petitions viz that the Board of Revenue by its order dated August 28 1953 had allowed the appellant s revision in regard to the second point which included sales of all categories whether or not for the purpose of consumption in the State of first destination outside Bihar and directed the Sales tax Officer to recompute the tax by allowing this exemption and that the officer was therefore statutorily bound to 113 give effect to the order of the Board be the same right or wrong particularly when the Board refused to vary or modify it so as to exclude particular types of sales from the scope of the exemption when moved to do so by the State Government In regard to this point after stating that the orders of the Board of Revenue were ambiguous the learned Judges proceeded to answer the question on the assumption that the Board of Revenue had directed the officer to recompute the tax on the basis that all the outside sales both the a and the b types were exempted from liability The learned Judges then pointed out that the order of the Board would be clearly erroneous in regard to the b type sales and that the petitioner in a writ of mandamus could not insist on a manifestly wrong order being enforced The petitions were therefore dismissed The appellants applied to the High Court for certificates under articles 132 and 133 but the learned Judges granted a certificate under article 132 alone and it is on the strength of these certificates that the appeals are before us The principal point that Mr Chatterjee learned Counsel for the appellants argued before us related to the duty of the tax authorities to obey the orders of the Board of Revenue and give effect to them and he submitted that the High Court erred in denying his clients the relief of mandamus on the ground that that order was erroneous In support of this argument learned Counsel sought reliance on a recent decision of this Court in Bhopal Sugar Mills V Com missioner of Income tax 1 in which it was held that when an order was made by a superior tribunal in that case the Income tax Appellate Tribunal directing the Income tax Officer to compute the income of an assessee on a particular basis and that order had become final the subordinate officer had no right to disregard the direction because it was wrong and that the High Court when approached by the assessee for the issue of a writ of mandamus was bound to 1 1961 1 SC R 474 15 114 enforce the final order of the superior Tribunal and could not refuse to do so because it considered the order of the Tribunal to be wrong This Court pointed out that when the order which the Tribunal had jurisdiction to pass became final it bound all parties to it and its correctness could not be challenged collaterally in proceedings for enforcing that order The attempt of learned Counsel for the appellants was to bring this case within the scope of the above ruling The ratio of this decision is to be found in this passage By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him Such refusal is in effect a denial of justice and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior tribunal yet held that no manifest injustice resulted from such refusal To attract the principle thus enunciated it is necessary that there should be an order of a superior tribunal clear certain and definite in its terms and with out any ambiguity to which the subordinate authority or officer to whom it is addressed could give effect We are clearly of the opinion that the decision referred to cannot apply to the situation in the present case Taking the earlier order of the Board first it is to put it at the mildest ambiguous The Board referred to the Bengal Timber case which had been followed by the lower authorities in disallowing the appellants claim to exemption to both the a and b type salesinvolving out of State deliver A reference was then 115 made to the decision of this Court in the State of Bombay vs United Motors India Ltd and others 1 as superseding the previous decision of the Board adding that according to the decision of this Court no tax could be levied on despatches outside the State after the 26th January 1950 and on that point the petitions were allowed It will be noticed that the member did not set out the precise extent to which the ruling of this Court superseded the previous decision of the Board and this was left in a state of uncertainty It was suggested by learned Counsel for the appellants that Mr Bakshi the member of the Board drew no distinction between sales of type a or b and bad included both of them as falling within a single category of sales in which delivery had taken place outside the State for consumption in other States and for that reason we should hold that the member had rightly or wrongly treated the decision in the United Motors case as applicable to all such sales We find ourselves unable to agree in this construction of the order We cannot presume that Mr Bakshi did not peruse the judgment in the United Motors case when he referred to it in his order nor that he did not acquaint himself with the terms of the Explanation to article 2861a of the Constitution the scope and significance of which was analysed and elaborated in that decision We are rather inclined to agree with the construction which the member himself put on this order in April 1955 that he left it to the Sales tax Officer to decide for himself the relief to which the appellants were entitled on that officer s interpretation of the judgment of this Court It may be that this was not a satisfactory method of disposing of the revision petition leaving the point which arose for decision by the member of the Board of Revenue to be decided by the Sales tax Officer but we are now only concerned with the simple question whether Mr Bakshi had or had not determined the true scope and effect of the judgment of this Court and decided it as meaning that all sales as a result of which goods were delivered outside the State 1 116 of Bihar were within the Explanation and so were exempt from the tax liability Notwithstanding the cryptic language used by the Member of the Board we are clearly of the opinion that he did not intend to decide this point in favour of the appellants in the manner contended for by them It is now common ground that when the Board of Revenue was approached by the State Government to review or clarify this order Mr Bakshi by his order dated April 25 1955 expressed himself as having decided earlier that he had directed the sales tax officer to give effect to the judgment of this Court in the United Motors case and had done nothing further Learned Counsel for the appellants strongly pressed before us that the member of the Board having accepted the preliminary objection that there was no provision in the Bihar Sales tax Act by which a party concerned might move the Board to clarify or explain the order he had no jurisdiction to effect any clarification of his previous order and that whatever was said by the Board on the second occasion could not be held to modify the earlier order or deny the appellants such benefits as were granted to them by the earlier order of August 28 1953 But as against this it has to be noted that before the Board both the parties ie the State Government as well as the appellants agreed that clarification was not needed because of the specific reference to the judgment of the Supreme Court in the United Motors case As this observation was embodied in the later order with the consent of both the parties we consider that it is too late now for the appellants to raise any technical objection to this sentence being given effect to In view however of the conclusion that we have reached as to the construction of the earlier order of August 1953 it is unnecessary to pursue the matter any further If therefore as a result of the order or orders passed by the Board the sales tax officer was directed to give effect to the judgment of this Court in the United Motors case it followed that the interpretation of the judgment was left to that officer We have already pointed out that to such a situation the principle of 117 the decision of this Court in Bhopal Sugar Mills vs Commissioner of Income Tax 1 is inapplicable We might also point out that even if the decision applied and the High Court issued an order in the nature of mandamus to the sales tax officer it could only take the form of a direction to effect the reassessment in the light of the decision in the United Motors case 2 an order which would leave the appellants in the same position in which they now find themselves without such an order by the High Court The next question for consideration is whether on a proper construction of the decision in the United Motors case 2 the exclusion of type b sales from those exempted under article 2861 was erroneous Mr Chatterjee learned Counsel for the appellants sought to establish that this Court had decided in the United Motors case three points 1 that sales as a result of which goods were delivered in a State for consumption in such State ie the sales falling within the Explanation to article 2861 were fictionally inside that State for all purposes and so within the taxing power of the State in which such delivery took place 2 that sales which by the fiction created by the Explanation were inside a particular State were outside all other States and so exempt from tax levy by all such other States 3 that further and beyond this all sales which did not satisfy the terms of the Explanation but in which goods were delivered outside the State in which title passed were outside sales over which no State would have power to levy a tax In other words the argument was that this Court had laid down that every sale which was not an Explanation sale and therefore not an inside sale within a particular State was an outside sale for all States and therefore exempt from the levy of sales tax by every State in India In support of this submission learned Counsel relied on a passage in the judgment of the learned Chief Justice at page 1081 of the Re port which ran The authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving 1 1961 1 SCR 474 2 118 inter State elements which would avoid the doubts and difficulties arising out of the imposition of salestax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution This they did by enacting Clause 1a with the Explanation and clause 2 of Article 286 Clause 1a prohibits the taxation of all sales or purchases which take place outside the State but a localised sale is a troublesome concept for a sale is a composite transaction involving as it does several elements such as agreement to sell transfer of ownership payment of the price delivery of the goods and so forth which may take place at different places To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated and that is what in our opinion the Explanation was intended to do It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place notwithstanding the property in such goods passed in another State An outside sale or purchase is explained by defining what is an inside sale and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test Are the goods actually delivered in the taxing State as a direct result of a sale or a purchase for the purpose of consumption therein Then such sale or purchase shall be deemed to have taken place in that State and outside all other States The latter States are prohibited from taxing the sale or purchase the former alone is left free to do so Multiple taxation of the same transaction by different States is also thus avoided In our opinion this passage explains the scope of the Explanation and deals with what might be termed Explanation sales If there is a sale falling within the terms of the Explanation it is inside the State of delivery cum consumption and that State alone can levy the tax Such a sale is outside all other 119 States which are prohibited from taxing such a sale by reason of any territorial nexus however close or cogent The passage extracted however does not deal with cases where the sale in question does not satisfy the requirements of the Explanation leading to the fixation of the fictional situs of the sale deter mining the State by which the tax might be levied Whether any and if so which is the State which can levy a tax on a sale not covered by the Explanation is not dealt with by this decision at all From this it would follow that sales of type a would be exempt from the levy of tax under the Bihar Sales Tax Act by reason or their being inside sales within the State of delivery cum consumption and therefore being outside sales quoad the State of Bihar Sales of type b however not having been dealt with by the decision in the United Motors case it would follow that on the orders of the Board of Revenue the previous decision of the Board in the Bengal Timber case would have still held the field and the transactions would be liable to the levy of tax and the tax levied on those sales would continue to be valid Learned Counsel for the appellants was certainly right in his submission that as the orders of the Board of Revenue had became final as between the parties the liability to tax must be determined on the basis of these orders be they right or wrong It is therefore unnecessary to consider whether apart from the decision of this Court in the United Motors case the appellants would be entitled to any further relief on the basis of any other decision of this Court interpreting article 2861 2 As already stated the appellants have already been granted a refund in regard to the tax collected in respect of the sales falling within type a As in our opinion the appellants were not on the orders of the Board of Revenue entitled to a refund of the tax on transactions falling within type b the judgment of the High Court dismissing their petitions is clearly right The appeals fail and are dismissed but in the circumstances of the case there will be no order as to costs Appeals dismissed	The petitioners who were displaced persons from West Pakistan put forward certain claims in regard to village houses which they had left there but which were rejected by the Rehabilitation authorities The claims were for amounts above Rs 20000 in the case of some of the petitioners and above Rs 10000 in the case of the others By r 5 framed under the claims could be verified provided inter alia that where a claimant had been allotted any agricultural land in India and such land so allotted exceeded four acres the value of the building in respect of which the claim was made shall not be less than Rs 20000 and where it did not exceed four acres the claim made was not less than Rs 10000 Rule 65 of the provided that any person to whom more than four acres of agricultural land had been allotted shall not be entitled to receive compensation separately in respect of his verified claim for any rural building the assessed value of which was less than Rs 20000 and any person allotted four acres or less was not entitled to receive compensation where the value was less than Rs 10000 The petitioners challenged the validity of the aforesaid rules as being discriminatory and thereby contravening article 14 of the Constitution of India on the grounds that the object of the various Acts and the rules made thereunder was to rehabilitate displaced persons but by the rules classifications had been made with reference to houses in rural areas which were discriminatory as neither the classes were based on intelligible differentia nor was there a rational nexus between that differentia and the object sought to be achieved It was found that the impugned rules were made in pursuance of an Inter Dominion Agreement between the two Governments with regard to evaluation of evacuee property which had received recognition in article 315 biii of the Constitution Held that the impugned rules afforded a reasonable justifi cation for the classification and did not contravene article 14 of the Constitution
Appeal No 287 of 1958 Appeal from the Judgment and Order dated the 10th September 1956 of the former Travancore Cochin in Original Petition No 191 of 1955 Sardar Bahadur for the Appellants K P Abraham P George and MR Krishna Pillai for the Respondent 1960 October 31 The Judgment of the Court was delivered by AYYANGAR J This is an appeal from the judgment of the High Court of Travancore Cochin on a certificate of fitness granted by it under article 1331 of the Constitution and raises for consideration the liability of the respondent The Cochin Coal Company Ltdto sales tax under the United State of Travancore and Cochin General Sales Tax Act 1125 1950 The following are briefly the facts which it is necessary to state in order to appreciate the points in controversy in the appeal The Cochin Coal Company Ltd which will be referred to as the respondent Company are as their name indicates dealers in coal The commodity the sales of which have given rise to the dispute in this appeal is what is known as Bunker coal The company have their offices at a place called Fort Cochin which was formerly within the State of Madras They import and keep stocks of bunker coal stacked at a place called Candle Island which at the date relevant to these proceedings was also within the State of Madras Part of the activities of the respondent company consist in the supply of bunker coal from their depots in Candle Island to steamers arriving in or calling at the port of Cochin in the State of Travancore Cochin for the outward voyage of the steamers from the said port The usual procedure by which bunker coal was thus supplied by the respondent company was briefly 221 this Before the arrival of the steamers the steamer agents would enter into contracts with the respondent company for trimming coal into the bunker of the steamer As soon as a steamer arrived in Cochin port the steamer agents would inform the respondent company and these agents after securing the necessary papers from the customs and the port authorities for the loading of the coal into the steamer would take these papers to the respondent company s office in Fort Cochin for enabling the latter to perform their part of the contract The respondent company would thereupon send the goods ordered to the steamer through their transport contractor Delivery orders would be issued to the transport contractor on the strength of which goods would be released from their stock in Candle Island Coal would then be taken to the steamer berthed in the port in Travancore Cochin State waters The Chief Engineer of the steamer would inspect the coal and when the same was to his satisfaction as regards quality the coal would be per mitted to be trimmed into the bunkers of the ships The price of the coal would thereafter be paid to the respondent company on bills drawn on the steamer agent The above being the nature of the transactions conducted by the respondent company sales tax was claimed on the sales of bunker coal by the Travancore Cochin State The assessment years with which this appeal is concerned are 1951 52 and 1952 53 and the assessment therefore was completed on February 2 1954 by the sales tax officer Circle Mattancherry The respondent company s contention that no sales tax could be levied on the value of the bunker coal supplied since the sale was either in the course of export or in the course of inter State trade and therefore exempted from taxation by the State under sub cl 1b or 2 of article 286 was rejected by the assessing officer for the reason that the sales in question fell within the Explanation to article 286 1a and were therefore inside the State of Travancore Cochin since the delivery in pursuance of the sale took place within the State and the goods were delivered for the purpose of consumption within 222 the State and that notwithstanding that there was an inter State element involved in the sale by the goods being moved from Candle Island the same did not affect the power of the delivery State to levy the tax The point urged by the company that the same sales had been assessed to tax in Madras State as sales actually taking place there was also rejected as irrelevant The respondent company thereafter filed an appeal to the Appellate Assistant Commissioner who allowed the appeal of the company holding that the sales were in the course of export within article 2861b and that even if they were not such but were inside sales falling within the Explanation to article 2861a of the Constitution still a notification by the State Government dated February 5 1954 exempting such sales from tax operated for the benefit of the assessee Thereafter the Deputy Commissioner of sales tax who was the Revisional authority took up the matter suo motu called upon the assessee to show cause why the appellate order should not be set aside and the entire turnover assessed to sales tax as the sales had taken place inside the State only After hearing the assessee company the order of the appellate Assistant Commissioner was set aside and that of the Sales Tax Officer restored The respondent company then moved the High Court of Travancore Cochin under articles 226 and 227 of the Constitution to set aside the order in revision and the learned Judges of the High Court ordered accordingly They however granted a certificate under article 1331 of the Constitution to enable the State Government to file an appeal to this Court and that is how the matter is now before us Though the respondent company appear to have presented before the High Court several lines of argument in support of their contention that they were entitled to exemption from sales tax in respect of bunker coal trimmed by them into steamers in the waters of Travancore Cochin the learned Judges rested their decision in favour of the respondent company on practically a single ground Their reasoning was briefly as follows Following the Bengal Immunity case 1 the learned Judges held that the bans 1 223 imposed by cls 1a and 2 of article 286 were independent and that the sale of the coal by the respondent company which was in the course of inter State trade was covered by the ban contained in article 2862 of the Constitution notwithstanding that the sale might satisfy the terms of the Explanation to sub cl 1a The learned Government Pleader however had submitted that if the exemption was derived from article 2862 the same would not assist the assessee since the validity of the tax was saved by the Sales tax Law Validation Act 1956 The learned Judges how ever held that the validation Act could not avail the State because on their construction of section 26 of the Travancore Cochin General Sales Tax Act 1125 corresponding to section 22 of the Madras Sales Tax Act 1939 no tax had been levied or was leviable on sales in the course of inter State trade or commerce and that the Validation Act having validated only taxes already levied could not enable the State to levy a tax which had not been imposed by the State s Sales tax Act There is no doubt that the transaction of sale in the present case was in the course of inter State trade and would be covered by the ban on taxation imposed by article 2862 But the view of the learned Judges of the High Court regarding the construction of section 26 of the Travancore Cochin General Sales Tax Act must now be held to be incorrect in view of the decision of this Court in M P V Sundararamier Co vs The State of Andhra Pradesh 1 If therefore the assessee company could rely only on article 2862 for claiming relief it must be held to be not available to them since the Sales Tax Validation Act 1956 would have validated the levy Before us however learned Counsel for the respondent company urged two grounds to sustain the decree of the High Court in its favour The first was that as the coal trimmed into the steam ships were meant to be carried outside the territory of India the sale was in the course of export within article 286 1b of the Constitution and was therefore exempt from the levy of sales tax by the State This contention however has to be rejected in view of the decision 1 224 of this Court in Burmah Shell Oil Storage Distributing Co of India Ltd vs The Commercial Tax Officer 1 in which it was held that in the context and setting in which the expression export out of the territory of India occurs in Part XIII of the Constitution it was not sufficient that goods were merely moved out of the territory of India but that it was further necessary that the goods should be intended to be transported to a destination beyond India so that they were in the course of import into some other locality outside India and accordingly that aviation spirit sold to an aircraft for enabling it to fly out of the country was not exported out of the country The reason was that there was no destination at which it could be said that the spirit was imported and that a mere movement of the goods out of the country following a sale would not render the sale one in the course of export within article 286 1b of the Constitution In other words the concept of export in article 286 postulates just as the word import the existence of two termini as those between which the goods are intended to move or between which they are intended to be transported and not a mere movement of goods out of the country without any intention of their being landed in specie in some fore ign port The other point urged by learned Counsel was that in any event the sale fell within the Explanation to article 2861a inasmuch as the delivery of the coal was effected in the State of Travancore Cochin for the purpose of consumption in that State There is no doubt that the goods having originally been located in Candle Island in Madras State were moved out of that State by reason of the contract of sale into the territory of Travancore Cochin It had therefore an interState element which rendered the Explanation applicable The delivery was admittedly effected in the State of Travanoore Cochin as a direct result of that sale and was trimmed into the steam ships in the Cochin waters If the purpose of the delivery was 1 CA 751 of 1957 CA 10 of 1958 Unreported 225 not export as we have held earlier it must follow that in the circumstances of this case it was for the purpose of consumption in the State since the delivery was to the ultimate consumer who was to use the goods for his own purposes and not for the purpose of re export or with a view to other transactions of a commercial character in the goods It would be noticed that the ultimate buyer the steam ship company could if it desired consume the goods in the sense of exhaust the goods by consumption within the State or it could take it outside the State and consume it there but that was a matter of its choice dependent on its will and pleasure This would not therefore detract from the delivery to it being for consumption within the State Goods might be consumed either by destruction or by way of use depending on the nature of the goods Thus edible articles are generally consumed in a literal sense while other articles like clothing or furniture etc are consumed by being used though they are not destroyed by such use If edible articles are sold and delivered to an ultimate consumer within a State it is delivered for the purpose of consumption within the State notwithstanding that the buyer may not choose to consume the whole of his purchase within the State but takes part of it outside the State and consumes it there If for instance a vehicle is sold to the actual user and the sale is not in the course of export or with a view to further commercial transactions in it by the purchaser by way of resale etc the delivery to the user is for the purpose of his consumption within the State The fact that such a purchaser might in the exercise of the enjoyment of his property by way of use or consumption drive the vehicle to other States does not detract from the original delivery to him falling within the Explanation to article 2861a In the present case the coal having been delivered into the ship for being consumed by it it was open to the master of the vessel to use the coal while the ship was in the waters of Travancore Cochin or if he so chose take it outside those limits The position might be 29 226 different if the buyer were obliged by contract or by law not to use or consume the goods sold within the State of delivery ie where he has no choice to consume it there In the case on hand part of the coal delivered could and would certainly have been used by the ship during the period of her stay in the harbour for loading and if such stay were prolonged owing to unforeseen causes even the entire coal might have been exhausted and of course it would have to be used till the ship left the limits of the port and the limits of State territory The crucial fact therefore was that the coal was delivered to the actual consumer who was at liberty to consume it wherever he desired the choice depending on his convenience and necessity In the circumstances therefore learned Counsel for the respondent was right in his submission that the sale of the bunker coal by the assessee company fell within the Explanation to article 2861a If there were nothing more and the liability of the assessee had to be judged with reference to the charge imposed by the Sales tax Act of the State read in the light of the Constitution the tax liability of the respondent company would not have been open to doubt or dispute But the submission of learned Counsel was that the State Government had power to exempt sales of any particular designated type from tax liability under section 6 of the Sales Tax Act and that the Government had by a notification dated February 5 1954 and published in the official Gazette exempted sales such as by the respondent company in the present case from the levy of sales tax during the assessment years now in question The exemption under this notification was no doubt not referred to by the learned Judges of the High Court but had been one of the grounds on which the sales tax appellate authority had set aside the tax imposition by the Sales tax Officer and the point had been specifically urged in the petition filed in the High Court under article 226 and the respondent cannot therefore be denied the benefit of the notification if it applied Section 6 of the Travancore Cochin Sales tax Act enacts 227 The Government may by notification in the Gazette make an exemption in respect of any tax payable under this Act i on the sale of any specified class of goods at all points or at any specified point or points in the series of sales by successive dealers or ii of any specified class of persons in regard to the whole or any part of their turnover It is not necessary to set out the rest of the section In the Travancore Cochin Gazette dated February 16 1954 the following notification dated February 5 1954 appeared According to the interpretation given by the Supreme Court to article 2861 of the Constitution in their judgment in the State of Bombay vs United Motors India Ltd certain categories of inter State transactions come within the taxing powers of the State Government While the judgment enables the Government of Travancore Cochin to levy sales tax on certain categories of non resident dealers selling goods for delivery and consumption in Travancore Cochin State from the 1st April 1951 the Government have after due consideration decided to levy sales tax on such transactions only from the 1st April 1953 the date immediately following that on which the Supreme Court delivered its judgment and to forego the levy prior to that date Then followed provisions detailing the interim arrangements for submission of returns of declarations to be filed and the manner in which the tax should be assessed and paid Though the learned counsel for the appellant State urged that the notification could not have the statutory effect of granting exemption we are clearly of the opinion that this was and must be deemed to be one issued in exercise of the power conferred on the State Government by section 61 whose relevant terms we have already extracted Besides this is rather a curious submission to make in view of what had transpired earlier The appellate Assistant Commissioner who set aside the assessment of the respondent company stated in his order Even if it is considered that the sale is for 228 consumption in this State the company need not pay tax on the turnover since Government have exempted from payment of tax on the sales which took place before April 1 1953 When this appellate order was set aside by the Deputy Commissioner acting suo motu in revision there is no reference made to the notification in the order and it was not stated that it had no statutory effect In its petition to the High Court under article 226 the respondent company claimed the benefit of the exemption granted by the notification dated February 5 1954 and published in the Gazette of February 16 1954 relating to the assessment for the period April 1 1951 to April 1 1953 and it added that the assessment in question came within the exemption contained in the Gazette notification In answer to this a counter affidavit was filed by the sales tax officer who said The notification referred to in the petitioner s affidavit has no application to the case as the sales in question did not come within their orbit In other words the objection was not that the notification was not a statutory exercise of the power under section 61 and effective to grant an exemption to the cases covered by it but that the transactions of the respondent company were not covered by the notification The extract we have quoted from the notification shows that it is specially designed to afford relief to cases of non resident dealers engaged in inter State transactions which were held to be intra State transactions by reason of the application of the Explanation to article 2861a to such sales by the decision of this Court in the United Motors Case As the respondent company s transactions in question clearly fall within the notification by reason of their nature as well as the assessment years concerned the respondent company would be entitled to the benefit of the tax exemption conferred by the notification The result is that the appeal fails and is dismissed with costs Appeal dismissed	The appellant executed a deed of trust settling some of his lands for the maintenance of certain temples and Thakoorbaries He was to be the trustee of the institutions and was to get 15 of the net income of those lands as trustee s remuneration Before the income tax authorities the appellant claimed that as the income received from agricultural properties of the trust by him as trustee was agricultural income in his hands and was by virtue of section 43viii of the Indian Income tax Act 1922 exempt from liability to pay tax the remuneration which by the covenant contained in the deed of trust he received was also exempt under that section because when he appropriated a fraction of the rent or revenue of agricultural lands towards his remuneration the original character of the income was not altered Held that the source of the right in which a fraction of the net income of the trust was to be appropriated by the appellant as his remuneration was not in the right to receive rent or revenue of agricultural lands but rested in the covenant in the deed to receive remuneration for management of the trust and the character of the income appropriated as remuneration was not the same as the character in which it was received by the appellant as trustee Consequently the remuneration not being received as rent or revenue of agricultural lands under a title legal or beneficial in the property from which the income was received it was not agricultural income within the meaning of section 21 of the Indian Income tax Act 1922 and was not exempt from taxation under section 43viii of the Act Nawab Habibulla vs Commissioner of Income tax Bengal 1943 LR 7D IA 14 and Premier Construction Co Ltd vs Commissioner of Income tax Bombay City 1948 LR 75 IA 246 relied on Commissioner of Income tax Bihar and Orissa vs Kameshwar Singh 1935 LR 62 IA 215 distinguished
59 of 1960 Petition under Article 32 of the Constitution of India for enforcement of Fundamental Rights A section R Chari section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the Petitioners section M Sikri Advocate General for the State of Punjab H section Doabia Additional Advocate General for the State of Punjab M section Punnu Deputy Advocate General for the State of Punjab and D Gupta for the Respondents October 28 The Judgment of the Court was delivered by section K DAS J This is a writ petition The three petitioners before us are 1 R P Kapur a member of was serving as a Commissioner in the State of Punjab 2 Sheila Kapur his wife and 3 Kaushalya Devi his mother in law They have moved this Court under article 32 of the Constitution for the enforcement of their rights under articles 14 and 21 of the Constitution which rights they say have been violated by the respondents who are the State of Punjab Sardar Pratap Singh Kairon Chief Minister thereof and certain officials police administrative and magisterial who have been conducting or are connected with the investigation or inquiry into a number of criminal cases instituted against the petitioners We shall refer to some of these officials later in this judgment in relation to the part which they have played or are playing in those criminal cases Briefly stated the case of the petitioners is that petitioner No 1 had the misfortune to incur the wrath of the Chief Minister of the State It is alleged that the Chief Minister was annoyed with petitioner No 1 because the latter did not show his readiness to give evidence for the prosecution in a case known as the Karnal Murder Case later referred to as the Grewal case in which one D section Grewal then Superintendent of Police Karnal and some other police officials were along with others accused of some serious offences That case was transferred by this Court to a Special 145 Judge at Delhi who commenced the trial sometime in MayJune 1959 Petitioner No 1 was at the time Com missioner of Ambala and he alleges that he was told by the Chief Minister that it was proposed to cite the Deputy Commissioner and the Deputy Inspector General of Police as prosecution witnesses in the said case and it would be in the fitness of things that petitioner No 1 should also figure as a prosecution witness to this suggestion petitioner No 1 gave a somewhat dubious reply to the effect that his appearance as a prosecution witness might or might not help the prosecution Another reason for the displeasure of the Chief Minister as alleged in the petition related to certain orders which petitioner No 1 had passed as Commissioner Patiala Division in a revenue case known as the Sangrur case We shall presently give more details of that case but it is enough to state here that the allegation is that in that case petitioner No 1 passed certain orders involving the disposal of properties worth about Rs 9 lacs which were adverse to one Surinder Kairon son of the Chief Minister It is stated that as a result of the displeasure which petitioner No 1 bad incurred for the two reasons mentioned above a special procedure was adopted in the investigation of the criminal cases instituted against the petitioners and some new cases were started through the instrumentality of the C 1 D Police with a view to subject the petitioners to harassment and persecution The substantial allegation to quote the language of the petition is that a special procedure or rather a technique has been devised for circumventing the mandatory provisions of the law meaning the Code of Criminal Procedure as regards the petitioners two of whom are ladies and who are being dragged about unnecessarily because they happen to be related to petitioner No 1 It is stated that there has been a deliberate departure from the normal and legal procedure in the matter of institution and investigation of criminal cases against the petitioners a departure said to be the result of an evil eye and unequal hand which the petitioners allege constitutes 146 a denial of the right of equal protection of the laws guaranteed to them under article 14 of the Constitution The special procedure or technique of which the petitioners complain is said to consist of several items such as 1 entertainment of a criminal complaint personally by the Chief Minister 2 institution of complaints by the C 1 D police 3 registration of first informations after such complaints 4 investigations in advance of the complaints 5 investigation by specially chosen hand picked as learned Counsel for the petitioners has suggested CID officials not necessarily of high rank who have no power to investigate 6 the arrangement of a special CID squad to unearth something against the petitioners etc In the petition four criminal cases were referred to as illustrative of the special procedure said to be unwarranted by law adopted against the petitioners and in a supplementary petition filed on June 9 1960 some more cases were referred to After we had conveyed to learned Counsel for the petitioners that we could not consider the supplementary petition which the respondent had no opportunity of meeting the supplementary petition was withdrawn Therefore we do not propose to say anything about the cases which are referred to in the supplementary petition The four cases mentioned in the original petition are 1 FIR No 304 of 1958 given by one M L Sethi referred to hereinafter for brevity as Sethi s case 2 FIR No 39 of 1959 instituted on the complaint of one M L Dhingra called hereinafter as Dhingra s case 3 FIR No 135 of 1959 instituted on the complaint of the Civil Supply Officer Karnal the accused in this case being the State Orphanage Advisory Board of which petitioner No I was Vice President at the relevant time and Kartar Singh farm manager of Kaushalya Devi called the Orphanage case and 4 FIR No 26 of 1960 instituted on the complaint of Daryao Sing DSP CID Karnal one of the respondent police officials in which there are three 147 accused persons including petitioner No 1 called for brevity the Ayurvedic Fund case We may say at once that we are not concerned with the merits of any of the aforesaid cases that is a question which will fall for consideration if and when the cases are tried in Court Therefore nothing said in this judgment shall be construed as affecting the merits of the cases Two questions have been posed before us in relation to these cases one is if in the matter of institution and investigation of these cases a special procedure unknown to law has been adopted and the other is if the petitioners have been singled out for unequal treatment in administering the law relating to the institution and investigation of criminal cases in the State The two questions are in one sense connected for if a special procedure unknown to law has been adopted against the petitioners that by itself will be a denial of the right of the equal protection of the laws Learned Counsel for the petitioners has however argued the second question somewhat independently of the first question and he has submitted that even if the procedure adopted against the petitioners is warranted by law it is a departure from the normal procedure and has been adopted with an evil eye and unequal hand so as to put the petitioners to harassment and persecution We shall consider both these questions in relation to the procedure adopted in the four cases referred to above It is necessary to state that the petition has been contested by the respondents The Chief Minister has himself made no affidavit in respect of the allegations made against him but affidavits in reply have been made by the Chief Secretary and the Home Secretary to the Punjab Government and some of the respondent officials To these affidavits we shall advert later in somewhat greater detail We shall also have something to say about the failure of the Chief Minister to make an affidavit It is enough to state here that the respondents have seriously contested both the allegations made on behalf of the petitioners namely 1 that a special procedure unknown to law was 148 adopted against them or 2 that the procedure adopted was motivated by an evil eye and unequal hand so as to persecute and harass the petitioners The respondents have said that the procedure adopted was warranted by law and the employment of the C 1 D officials in the investigation of the cases against the petitioners was due to the special nature of the cases The respondents have also contested the correctness of the allegation that petitioner No 1 had incurred the displeasure of the Chief Minister on account of the two reasons stated in the petition In brief the claim of the respondents is that there has been no violation of the rights of the petitioners guaranteed under articles 14 and 21 and there are no grounds for interference by this Court under article 32 of the Constitution It has been stated on behalf of the respondents that in the two cases called Setbi s case and Dhingra s case the petitioners had moved the High Court without success for quashing the proceedings and in Sethi s case an appeal to this Court against the order of the High Court also proved unsuccessful It is also pointed out that a petition made by petitioner No 1 in the High Court for proceeding by way of contempt of court against the Chief Minister on some of the allegations now raised or allegations similar in nature was dismissed in limine and the learned Advocate General of the Punjab has taken us through the order of the High Court in respect of some of the allegations made Having stated the respective cases of the parties before us we shall proceed now to a more detailed examination of the procedure adopted in the four cases instituted against the petitioners But before we do so it is necessary to say a few words about Grewal s case and Sangrur case which are stated to furnish the reasons why petitioner No 1 incurred the displeasure of the Chief Minister It is alleged that in Grewal s case petitioner No 1 was asked to give evidence for the prosecution but he gave a dubious reply which displeased the Chief Minister It is worthy of note however that the trial in Grewal s case began in May June 1959 Sethi s complaint was made in 149 December 1958 and Dhingra s in February 1959 Obviously those two cases could not be the result of any refusal by petitioner No 1 to give evidence in Grewal s case On May 28 1959 petitioner No 1 wrote to the Chief Secretary about Sethi s case and Dhingra s case but no allegation was made therein against the Chief Minister What the petitioner wanted then was that an opportunity should be given to him to explain his position On June 9 1959 petitioner No 1 again wrote to the Chief Secretary about the complaints of Sethi and Dhingra again there was no allegation against the Chief Minister On June 29 1959 petitioner No 1 filed two petitions in the Punjab High Court for quashing the proceedings in Sethi s case and Dhingra s case in this petition an allegation was made that powerful influences were operating against the petitioner to harm him and debar him officially and Sethi s case and Dhingra s case were the result of such influences but there was no specific mention of Grewal s case and of any request to the petitioner to give evidence in that case It was for the first time on July 20 1959 when the petition for contempt proceedings was filed that a specific allegation against the Chief Minister was made in paragraphs 35 to 37 thereof this is annexure 1 to the present petition This petition was dismissed in limine the High Court saying that it was not prima facie satisfied that the allegation was made out We do not think that petitioner No 1 has been able to advance his case any further in spite of the fact that the Chief Minister has made no affidavit a matter to which we shall advert later As to the Sangrur case that was also referred to in the petition of July 20 1959 and the High Court did not accept the allegation of petitioner No 1 What happened in that case was this The late Sardar Mukan Sing of Sangrur left two widows Sardarni Pritam Kuar and Sardarni Pavitar Kaur Sardarni Pavitar Kaur had three daughters one of whom was married to Surinder Singh Kairon son of the Chief Minister The Sangrur estate was in charge of the Court of Wards that is the Financial Commissioner Punjab On June 150 19 1958 the Court of Wards decided to release the estate after partitioning the immovable property between the two widows At one time a question arose as to whether the immovable properties should be partitioned into five equal shares for the two widows and three daughters or into two shares only for the two widows Sometime before May 6 1959 it was decided that the partition would be of two shares only and thereafter a detailed mode of partition was agreed to between the parties This is clear from the note of petitioner No 1 dated May 6 1959 Thereafter there was no more dispute left and the case of petitioner no1 that he was arrested on July 18 1959 because he dictated an adverse order some days previously which had been typed but not yet signed does not prima facie appear to be correct apart altogether from the question whether petitioner No 1 was acting merely as the channel between the Deputy Commissioner and the Financial Commissioner the latter being the only authority competent to pass final orders in the matter We have therefore come to the conclusion that the petitioners have not established what they have alleged namely that R P Kapur one of the petitioners had incurred the displeasure of the Chief Minister by reason of what happened in the Grewal case and the Sangrur case Whether there were other reasons administrative or otherwise for the displeasure of the Chief Minister is a matter which is not germane to the present case In the affidavits filed before us some reference has been made to the past record of R P Kapur We consider it unnecessary to refer to that record firstly because it is not rele vant to the case before us and secondly because we think that it is not fair to refer to the confidential record of an officer unless the circumstances in which certain adverse remarks were made are known We proceed now to consider the four criminal cases pending against the petitioners or some of them in relation to the two points urged 1 whether in the institution and investigation of these cases a special procedure unknown to law has been adopted and 2 151 if the petitioners have been singled out for unequal treatment in administering the law relating to the institution and investigation of criminal cases in the State The first two cases namely Sethi s case and Dhingra s case need be dealt with at some length Sethi s case started on a complaint which it was said was sent direct to the Chief Minister Four material allegations about fraudulent misrepresentation were made in that complaint It was alleged that R P Kapur had fraudulently misrepresented to Sethi that a particular piece of land which he had sold to Sethi had been purchased by him at Rs 10 per square yard that he had fraudulently concealed from Sethi the pendency of certain proceedings before the Land Acquisition Collector Delhi and of the acquisition of the said land under section 17 of the relevant Act that he had made a fraudulent misrepresentation as regards the scheme of housing with regard to the area in which the land lay Though the complaint was dated December 10 1958 it appears to have been made over to the Additional Inspector General of Police on December 23 1958 The Additional Inspector General of Police then appears to have passed an order to the following effect Register a case and investigate personally This was addressed to Sardar Hardayal Singh D section P Thereupon Sardar Hardayal Singh Deputy Superintendent of Police CID Amritsar appears to have drawn up a first information report The original complaint which Sethi filed has not been produced before us What was produced before us was a carbon copy and on that carbon copy was the order of the Additional Inspector General of Police to which we have already made a reference The allegation of the petitioners was that the original complaint had been sent to the Chief Minister and the Chief Minister had passed certain orders thereon On behalf of the petitioners it was suggested that the original was not produced in order to conceal from the Court the orders which the Chief Minister had passed thereon We have stated earlier that the Chief Minister had filed no affidavit in respect of these allegations An affidavit has been filed by AN Home Secretary 152 to the Government but obviously he was not in a position to say anything about the allegations made against the Chief Minister We therefore proceed on the basis that so far as Sethi s case is concerned a complaint was made or sent to the Chief Minister who thereupon sent it to the Additional Inspector General of Police who in his turn sent it to Sardar Hardayal Singh Deputy Superintendent of Police C I D at Amritsar The short question before us is does this amount to adopting a procedure unknown to law or even to unequal treatment so as to attract article 14 of the Constitution Learned Counsel for the petitioners has taken us through the relevant provisions in Part V Chapter XIV of the Code of Criminal Procedure and has submitted that under section 154 of the Code every information relating to the commission of a cognizable offence should be given to an officer in charge of a police station and under section 156 any officer in charge of a police station may without the order of a Magistrate investigate any cognizable case which a Court having jurisdiction over the local area would have power to inquire into or try under the provisions of Chapter XV relating to the place of inquiry or trial He has also referred to section 157 under which the officer in charge of a police station shall forthwith send a report of the first information to a Magistrate empowered to take cognizance of the offence and shall proceed in person or shall depute one of his subordinate officers not being below such rank as the State Government may by general or special order prescribe in this behalf to proceed to the spot to investigate the facts and circumstances of the case and if necessary to take measures for the discovery and arrest of the offender It is contended that the provisions of sections 154 156 and 157 of the Code have been violated in the case against the petitioners and thus the petitioners have been subjected to a special procedure unknown to law or at any rate to unequal treatment treatment different from that of other persons against whom informations of a cognizable offence ape made We are unable to accept these contentions as 153 correct First of all section 154 Code of Criminal Procedure does not say that an information of a cognizable offence can only be made to an officer in charge of a police station That section merely lays down inter alia that every information relating to the commission of a cognizable offence if given orally to an officer in charge of a police station shall be reduced to writing by him or under his direction and be read over to the informant and every such information shall be signed by the person giving it and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in that behalf Section 156 gives power to an officer in charge of a police station to investigate without the order of a Magistrate any cognizable case which a Court having jurisdiction in the local area etc would have power to inquire into or try sub section 2 of section 156 lays down that no proceeding of a police officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was not empowered under this section to investigate There has been some argument before us as to the meaning of the expression any such case occurring in sub section 2 of section 156 As we are not resting our decision on sub section 2 of section 156 Code of Criminal Procedure we consider it unnecessary to embark upon a discussion as to the true scope and effect of sub section 2 of section 156 Section 157 of the Criminal Procedure Code lays down the procedure which an officer in charge of a police station must follow where information of a cognizable offence is made Now there is another important provision in the Code which is of great relevance in this case and must be read That provision is contained in section 551 which is in these terms section 551 Police officers superior in rank to an officer in charge of a police station may exercise the same powers throughout the local area to which they are appointed as may be exercised by such officer within the limits of his station The Additional Inspector General of Police to whom 20 154 Sethi s complaint was sent was without doubt a police officer superior in rank to an officer in charge of a police station Sardar Hardayal Singh Deputy Superintendent of Police CID Amritsar was also an officer superior in rank to an officer in charge of a police station Both these officers could therefore exercise the powers throughout the local area to which they were appointed as might be exercised by an officer in charge of a police station within the limits of his police station It is not disputed that the jurisdictional area of the Additional Inspector General of Police was the whole of the State As to the jurisdictional area of the Deputy Superintendent of Police CID the contention on behalf of the respondent State is that though he was posted at Amritsar his jurisdictional area extended over the whole State The learned Advocate General for the respondent State has drawn our attention to Police Rule 2128 in the Punjab Police Rules 1934 Vol III issued by and with the authority of the State Government under sections 7 and 12 of the Police Act V of 1861 That rule lays down that the Criminal Investigation Department has no separate jurisdiction and the Deputy Inspector General of Police Criminal Investi gation Department may decide to take over the control of any particular investigation himself or depute one or more of his officers to work directly under the control of the Superintendent of Police of the district Police Rule 2132 enumerates some of the cases in which the assistance of the Criminal Investigation Department may be sought Police Rule 2514 says that the Criminal Investigation Department is able to obtain expert technical assistance and in cases where such assistance is required the assistance of the Criminal Investigation Department may be obtained In the affidavit made by Sardar Hardayal Singh he has stated that he was entrusted with the investigation of Sethi s case because of its technical nature and also because his sphere of duty as a Gazetted Officer attached to the Criminal Investigation Department was the whole of the State in view of the memorandum No 9581 H 517912 dated October 155 26 1951 That memorandum shows that the Deputy Inspector General CID and all gazetted officers of the Criminal Investigation Department have jurisdiction extending over the whole of the Punjab State This is also supported by the affidavit made by Shamshere Singh Additional Inspector General of Police Learned Counsel for the petitioners has pointed out that Sethi s case involved no technical questions and the ground stated in the affidavits of Shamshere Singh and Sardar Hardayal Singh is not therefore correct The question before us is not whether the reason for which the investigation was made over to Sardar Hardayal Singh is correct or not The question before us is whether in making over the investigation to Sardar Hardayal Singh a special procedure unknown to law was adopted or the law as to the investigation of cases was administered with an evil eye or unequal hand If the police officer concerned thought that the case should be investigated by the C 1 D even though for a reason which does not appeal to us it cannot be said that the procedure adopted was illegal We are unable to agree with learned Counsel for the petitioners that any of these two contentions has been made out in the present case We are satisfied that the Inspector General of Police CID had power to deal with Sethi s complaint and had further power to direct investigation of the same by Sardar Hardayal Singh who as a police officer superior in rank to an officer incharge of a police station could exercise powers of an officer in charge of a police station in respect of the same It cannot therefore be said that the procedure adopted was unknown to law Nor are we satisfied that the procedure adopted was motivated by any evil purpose though we are not quite impressed by the reason given by Shamshere Singh or Sardar Hardayal Singh that Sethi s case was of a technical nature and therefore required the assistance of the CID Even if it was not of a technical nature it was open to the Additional Inspector General of Police to make over the investigation to a Deputy Superintendent of Police in view of the status of the petitioners In paragraph 31 of his affidavit 156 A N Kashyap Home Secretary has said that the Inspector General of Police on receiving the complaint from Sethi ordered on his own the registration of the case without any order or direction from the Chief Minister The correctness of this statement has been very seriously commented on In the absence of any affidavit from the Chief Minister and of the original complaint we have preferred to proceed in this case on the footing that the Additional Inspector General of Police got the complaint from the Chief Minister and then passed necessary orders thereon Even on that footing we are unable to hold that there has been any violation of legal procedure or that an unfair discrimination has been made against the petitioners Learned Counsel for the petitioners has relied on certain observations made by this Court in H N Rishbud and Inder Singh vs The State of Delhi 1 The observations occur at page 1160 of the report and are to the effect that it is of considerable importance to an accused person that the evidence collected against him during investigation is collected under the responsibility of an authorised and competent investigating officer These observations were Made in a case where the question that fell for decision was whether the provisions in section 54 and the proviso to section 3 of the Prevention of Corruption Act 1947 Act II of 1947 and the corresponding section 5A of the Prevention of Corruption Second Amendent Act 1952 Act LIX of 1952 were mandatory or not It was held that they were mandatory and an investigation conducted in violation thereof was illegal It was also held that an illegality committed in the course of an investigation did not affect the competence and jurisdiction of the Court for trial but if any breach of the mandatory pro visions relating to investigation were brought to the notice of the Court at an early stage of the trial the Court would have to consider the nature and extent of the violation and pass appropriate orders for such re investigation as might be called for We do not think that the observations made and the decision are of any 1 157 assistance to the petitioners We have held that there has been no violation of any mandatory provisions as to investigation in Sethi s case against the petitioners and the investigation procedure followed is legal Our attention has been drawn to King Emperor vs Nilkantha 1 On a certificate by the Advocate General the case was considered by a Full Bench of the Madras High Court and one of the questions for decision was Is an Inspector of the Criminal Investigation Department an authority legally competent to investigate the facts within the meaning of section 157 Evidence Act The question was answered in the affirmative by the majority of judges Abdur Rahim J and Sundara Ayyar J dissenting In the course of the arguments before their Lordships one of the questions mooted was whether Inspectors of the Criminal Investigation Department were appointed to any local area within the purview of section 551 Code of Criminal Procedure Some of the Judges held that the whole Presidency was their local area some held that that was not so On the materials before us we have no hesitation in holding that the Deputy Superintendent of Police entrusted with the investigation of Sethi s case bad the necessary authority to hold the investigation The decision in Pulin Bihari Ghosh vs The King1 on which also some reliance has been placed does not appear to us to be in point that was a case section 202 and section 1563 Code of Criminal Procedure and it was held that proceedings under section 202 and investigation under rb 1563 could not proceed simultaneously it was further held that a direction under section 1563 could only be made to an officer in charge of a police station No question arose there of the exercise of powers under section 551 Code of Criminal Pro cedure and the decision does not establish what the petitioners are seeking to establish in the present case More in point is the decision in Textile Traders Syndicate Ltd vs State of U P 3 where it was held that an Inspector of Police in the Criminal Investigation Department was superior in rank to that of an 1 ILR 2 ILR 3 AIR 1959 All 158 officer in charge of a police station and under section 551 Code of Criminal Procedure he could exercise the powers of an officer in charge of a police station throughout the State Turning now to Dhingra s case the position is this Admittedly a complaint dated February 27 1959 was sent to the Chief Minister with a covering letter in which it was stated that R P Kapur had already started tampering with the evidence and 1 therefore request that orders be passed that the Police should take in hand investigation immediately and collect all material evidence The Chief Minister wrote on this Inspector General Police is sick Will Add1 Inspector General please take immediate action in taking over papers from Government departments concerned and the papers with Sri Dhingra Please give a prima facie report The Additional Inspector General then made the following endorsement Please take immediate necessary action Depute one of your officers to contact Sri Dhingra and get the necessary records from him Immediate action may be taken to take over the record from the various departments A case may be registered I have informed Chief Secretary and he agrees with this This was addressed to the Deputy Inspector General CID and the latter wrote Case should be regis tered and investigated by Bir Singh DSP under your supervision Immediate steps should be taken to get the salient records of Sri Dhingra This was addressed to Ujager Singh Superintendent of Police CID The case was then registered by Sardar Sampuran Singh Inspector of Police Police Station Chandigarh and the investigation was in charge of Sardar Bir Singh Deputy Superintendent of Police CID The legal position as to the institution of Dhingra s case and its investigation is the same as in Sethi s case The legal sanction for both is section 551 Code of Criminal Procedure and the reasons which we have given for holding that the procedure followed in instituting and investigating Sethi s case is legally valid apply to Dhingra s case also On behalf of the 159 petitioners it has been submitted that the hand of the Chief Minister is no longer concealed in respect of Dhingra s case It is pointed out that in 1959 a complaint is made in respect of offences alleged to have been committed about five years ago in 1954 and the Chief Minister without any enquiry whatsoever says Please give a prima facie report and the same CID machinery is again set in rapid motion as in Sethi s case and this at a time when Sethi s case was kept hanging as a sword over the petitioners It has been further submitted that the direction as to the seizure of papers was not justified in law as the Chief Minister had no legal power to give such a direc We do not think that these submissions establish what the petitioners have to establish in order to succeed on their writ petition namely that in the institution of Dhingra s case and its investigation a procedure unknown to law has been followed or that the petitioners have been singled out for an unfair and discriminating treatment We do not know what reasons led the Chief Minister to make the endorsement on the complaint of Dhingra as he did and why instead of referring the complaint to the officer in charge of the police station concerned a reference was made to the Additional Inspector General or the Criminal Investigation Department These are matters within his special knowledge and he has chosen to throw no light on them Shamshere Singh has said in his affidavit that he dealt with Dhingra s case in exercise of his powers under section 551 Code of Criminal Procedure Sardar Bir Singh has said in his affidavit that this case was also of a technical nature and so the investigation was entrusted to him As we have said in Sethi s case this reason does not appear to us to be a convincing reason but the Police officers concerned may honestly have thought that the case should be investigated by the Criminal Investigation Department We are not called upon to express any opinion on the merits of Dhingra s case and all that we say now is that the petitioners have failed to establish either of their two contentions 1 that the procedure adopted was illegal or 2 that the petitioners were unfairly discriminated against 160 We go now to the remaining two cases the Orphanage Case and the Ayurvedic Fund case One was instituted on the complaint of the Civil Supply Officer Karnal and the other on the statement of Daryao Sing Deputy Superintendent of Police C 1 D Karnal The Orphanage case is against the Orphanage Advisory Board of which R P Kapur was the Vice President at the relevant time and Kartar Sing farm manager of Kaushalya Devi It related to the alleged violation of certain Control Orders in the matter of a brick kiln The Ayurvedic Fund case is against R P Kapur and certain other persons who are not petitioners before us It alleged criminal breach of trust etc in respect of certain funds in the hands of the persons accused therein As we are not deciding these cases on merits it is unnecessary to give further details of the allegations made in those cases No specific illegality has been brought to our notice with regard to the institution of the Orphanage case except some allegations of high handedness in the matter of seizure of records of the Orphanage in spite of the protest of the General Manager of the Orphanage and some allegations against Choudhuri Ram Singh who was then Deputy Inspector General Ambala Range These allegations be they true or not do not establish any such illegality as would lead us to quash the investigation As to the Ayurvedic Fund case Daryao Sing said in his affidavit I say that the Audit Report contained details of meddling with Orphanage funds and of having made payments to one Kartar Sing an employee of the petitioner no1 and the attorney of Shrimati Kaushalya Devi It appears that there was excess and double payment of funds There were purchases of timber and wood without calling for any quotations It disclosed the issue of Orphanage funds to Madhuban Co operative Society and that the materials like cement iron and steel which were under control were also used in the construction of private building of Shri Kapur and his family and the use of such materials went up to 20000 Rupees 161 Here again we do not express any opinion as to the correctness or otherwise of the allegations made All that need be said at this stage is that the institution of the case is not illegal nor is its investigation vitiated by discrimination It is indeed true that the investigation of these cases has been entrusted to certain officers of the Criminal Investigation Department whether for good reason or not we cannot say But that circumstance does not by itself make the investigation bad in law The officers can exercise their powers of investigation under section 551 Code of Criminal Procedure Daryao Singh it may be stated was an Inspector of the Criminal Investigation Department at Karnal and became a Deputy Superintendent of Police C I D in December 1959 He also could exercise the powers under section 551 Code of Criminal Procedure For the reasons given above we have come to the conclusion that the petitioners are not entitled to succeed and the writ petition must be dismissed in the circumstances of this case there will be no order for costs Before parting with this case we consider it necessary to make some observations with regard to a matter which has caused us some anxiety and concern Serious allegations have been made against the Chief Minister in this case He is a party respondent and had notice of the allegations made In Sethi s complaint it was alleged that he had passed certain orders on the original complaint which was sent to the Additional Inspector General of Police with those orders The original complaint was not made available to us on the ground that it could not be traced The Additional Inspector General of Police said in his affidavit that on receiving the complaint from Sri M L Sethi he ordered the investigation of the case without any order or direction from the Chief Minister He did not specifically say if he received the complaint direct from Sethi or through the Chief Minister In Dhingra s case the Chief Minister passed an order which might either mean that he ordered the 21 162 submission of a prima facie report or merely directed that a report should be submitted if a prima facie case was made out It is not clear why he ordered the seizure of papers before even a prima facie report was given in respect of an offence said to have been committed five years ago These are all matters on which the Chief Minister alone was in a position to enlighten us In view of the allegations made against him we consider that the Chief Minister owed a duty to this Court to file an affidavit stating what the correct position was so far as he remembered it We recognise that it may not be possible for a Chief Minister to remember the circumstances in which a document pass through his hands there must be many papers which a Chief Minister has to deal with in the day to day business of administration If the Chief Minister did not remember the circumstances it would have been easy for him to say so If he remembered the circumstances he could have refuted the allegations with equal ease This is not a case where the refutation should have been left to Secretaries and other officers who could only speak from the records and were not in a position to say why the Chief Minister passed certain orders The petitioners are obviously suffering from a sense of grievance that they have not had a fair deal We have held that there is no legal justification for that grievance but in an executive as well as judicial administration justice must not only be done but it must appear that justice is being done An affidavit from the Chief Minister would have cleared much of the doubt which in the absence of such an affidavit arose in this case Petition dismissed	The appellants who were manufacturers of cigarettes and tobacco in the State of Bihar contested the levy of sales tax on sales effected by them during the financial years 1949 5o and 1950 51 on the ground that as a direct result of every sale effected by them the goods concerned were delivered outside the State of Bihar and were therefore exempted from tax liability under article 286ia of the Constitution Both the Superintendent of sales tax and the Deputy Commissioner of sales tax Bihar overruled the objection of the appellants and following a previous ruling of the Board of Revenue of Bengal in a case known as the Bengal Timber Case 61 of 1952 held the appellants liable to pay the tax The appellants paid the tax demanded but filed an application in revision to the Board of Revenue claiming a constitutional exemption from tax on every sale effected by them as a result of which goods were delivered outside the State of Bihar whether the delivery was for consumption in the State of first delivery or not The Board passed the following order on the revision petition As regards the admitted despatches of the goods outside the State after the 26th January 1950 when the Constitution came into force the learned lower court has been guided by the decision of the Board in the Bengal Timber Case No 61 of 1952 But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motors Case According to the decision of the Supreme Court no tax could be levied on despatches to the places outside the state after the 26th January 1950 and on this point the petitions are allowed and the sales tax officer directed to recalculate the amount of tax payable by the assessee The appellants taking the above order to be in their favour claimed refund of the tax already paid by them and the sales tax authorities contested the position and claimed that they were bound to refund the tax only on those sales wherein the goods were delivered outside the State for consumption in the State of first delivery The department thereafter sought clarification of the above order The Board refused to clarify or explain its order and passed an order saying that no further clarification was really required in view of the specific reference to the judgment of the Supreme Court in the United Motors Case Thereafter as the authorities still refused to refund the balance of the tax the appellants filed two applications in the High Court for the issue of a writ of mandamus to compel the refund The High Court held that the Board s decision that sales in which the goods were delivered outside the State for consumption not in the State of first delivery but in other States were also exempted from tax was wrong and that the appellants were not entitled to a writ of mandamus for enforcing a wrong order On appeal by special leave Held that the proper construction of the Board s orders was that the sales tax officer was directed to decide the relief that 108 should be given to the assessee on the officers interpretation of the decision of this Court in the United Motors Case The Board did not determine the effect of that judgment and did not decide that every sale in which the goods were delivered outside the State of Bihar was exempted from liability to tax The principle that a subordinate tribunal should not refuse to carry out the directions of a superior tribunal was therefore not applicable to the instant case Bhopal Sugar Mills vs Commissioner of Income tax 1961 1 SCR 474 held inapplicable The United Motors Case merely decided that sales in which goods were delivered outside the State for consumption in the State of first delivery would fall under the Explanation to article 2861 of the Constitution and would therefore be exempted from tax liability but it did not deal with other sales in which the goods thus delivered were for consumption not in the State of first delivery but in other states Such sales would on the order of the Board of Revenue which was binding on the appellant be liable to tax in accordance with the previous decision of the Board of Revenue in the Bengal Timber Case State of Bombay vs United Motors India Ltd and Ors explained and applied Board of Revenue of the State in the Bengal Timber Case 61 of 1952 referred to
Appeal No 280 of 1959 Appeal by special leave from the judgment and order dated the 22nd August 1956 of the former Bombay High Court in Income tax Reference No 17 of 1956 B Ganapathy Iyer and D Gupta for the Appellant Sanat P Mehta section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the Respondent 1960 November 1 The Judgment of the Court was delivered by HIDAYATULLAH J The Commissioner of Incometax Bombay Circle II has filed this appeal after obtaining special leave against the judgment of the High Court of Bombay in an Income tax reference 231 under section 662 of the Income tax Act The National Syndicate Bombay referred to in this judgment as the respondent was a firm consisting of three partners This firm acquired on January 11 1945 a tailoring business as a going concern from one Chambal Singh for Rs 89321 Included in this amount was the consideration paid for sewing machines Rs 72000 and a motor lorry Rs 8000 The assessment concerns the year of account of the respondent January 11 1945 to February 28 1946 The business of the respondent was to prepare garments for Government departments and during the war years this appears to have been a profitable business Immediately after the respondent acquired this business the last war came to an end and the respondent found it difficult to continue the business It therefore closed its business in August 1945 Between August 16 1945 and February 14 1946 sewing machines were sold at a loss of Rs 41998 The motor lorry was also sold on February 141946 at a loss of Rs 3700 The respondent closed its account books on February 28 1946 showing the two losses and writing them off For the assessment year 194647 the respondent claimed a deduction of Rs 45698 under section 102vii of the Indian Income tax Act The Income tax Officer disallowed this deduction holding that the loss was of a capital nature and that inasmuch as the business of the respondent was not carried on after August 1945 section 102vii was not applicable This order of assessment was confirmed by the Appellate Assistant Commissioner who also held that the loss represented capital loss as the machines and the motor lorry were sold after the closure of the business On appeal the Appellate Tribunal Bombay also confirmed the order holding that the sales of machines and the motor lorry were made in the course of the winding up of the assessee s business after the business had been stopped and that therefore the deduction could not be claimed under section 102Xvii The respondent asked the Tribunal to refer the questions of law arising from its order but the request was refused It then moved the High Court and 232 obtained an order under section 662 of the Income tax Act and the following two questions were referred 1 Whether the Tribunal was justified in law in holding that the Petitioner had carried on its business only till twenty eighth day of August one thousand nine hundred and forty five 2 Whether on the facts and circumstances of the case the Income tax Appellate Tribunal was justified in law in not allowing the sum of Rs 41998 Rupees forty one thousand nine hundred and ninety eight on sale of machines and Rs 3700 Rupees three thousand and seven hundred on the sale of lorry as a deduction from the total income of the applicant The High Court answered the first question in the affirmative holding that there was evidence on which the Tribunal could reach the conclusion that the business had in fact been continued only till August 28 1945 On the second question the High Court was of the opinion that the business having been carried on for at least a part of the account year section 102vii was applicable and that therefore this allowance had to be made under that clause The High Court therefore answered the question in the negative The High Court refused to grant a certificate to appeal to this Court but the Commissioner of Income tax applied for and obtained special leave and this appeal has been filed Before we deal with the question whether section 102 vii of the Indian Income tax Act is applicable to the facts of this case we may mention that during the course of the argument Mr section P Mehta counsel for the respondent sought to re open the first question According to him there was no evidence on which the Tribunal or the High Court could reach the conclusion that the business of the respondent had come to a close in August 1945 We however did not permit him to raise this contention partly because in our opinion such a contention could not be allowed to be raised at this stage in an appeal by the Department and partly because in our opinion there were adequate materials for the High Court to have based its conclusion Inasmuch as we were in agreement 233 with the High Court on the question of the applicability of section 102vii we also felt that no useful purpose would be served in examining the matter to find out whether the business had in fact closed on August 28 1945 or had continued till the end of the account year We are really concerned in this appeal with the interpretation of section 102vii and its applicability to the facts of the case It may be assumed for the purposes of this case that the business did in fact close down on August 281945 even though some in comings and outgoings were taking place for the rest of the year and the books of account were not finally closed till February 28 1946 The Commissioner contends that an allowance could only be claimed if the sale of machines etc took place when the business was being continued and not if the business had come to a close The respondent on the other hand submits that section 102vii would be applicable in a case where the business continued for a part of the account year even though the sale of the machinery plant etc took place after the closure of the business during the course of the account year Section 102vii reads as follows 102 Such profits or gains shall be computed after making the following allowances namely vii in respect of any such building machinery or plant which has been sold or discarded or demolished or destroyed the amount by which the written down value thereof exceeds the amount for which the building machinery or plant as the case may be is actually sold or its scrap value Provided that such amount is actually written off in the books of the assessee The Commissioner emphasises the word such in the clause and states that this takes us back to cl iv where the words used for the purposes of the business occur It is therefore contended that if the business itself comes to an end before the sale takes place the sale is not during the continuance of the 30 234 business but is during the course of the winding up of the business and the condition precedent to the application of section 10 is that the business must be is carried on by the person claiming the benefit of sub section Reference in this context is made to the first sub section of section 10 where it is provided that the tax shall be payable by an assessee under the head Pro fits and gains of business in respect of the profits or gains of any business etc carried on by him The Department relies upon a decision of this Court reported in The Liquidators of Pursa Limited vs Commissioner of Income tax Bihar 1 The respondent also relies upon the same ruling and contends that it supports the case set up by it The respondent also relies on a recent decision of the Madras High Court in Commissioner of Income tax vs Express Newspapers Ltd 2 These two cases were decided under the second proviso to section 102vii before its amendment in 1949 The second proviso reads Provided further that where the amount for which any such building machinery or plant is sold whether during the continuance of the business or after the cessation thereof exceeds the written down value so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place The words underlined above were inserted by section 11 of the Taxation Laws Extension to Merged States and Amendment Act 1949 In both the cases the business had admittedly closed down before the sales took place and it was held applying the proviso as it was before the amendment of 1949 that such receipts were not taxable The amendment now renders these cases obsolete Reliance is however placed on certain observations in these oases and it is contended that the same reasoning must be applied to a case of loss as to a case of profits We shall therefore refer briefly to them In The Liquidators of Pursa Limited vs Commissioner of Income tax Bihar 1 the year of assessment 235 was 1945 46 which corresponded to the accounting year October 1 1943 to September 30 1944 Pursa Limited were manufacturers of sugar and sold the business on August 9 1943 including buildings machinery and plant but excluding manufactured sugar worth about Rs 600000 This sugar was sold till June 1944 but throughout the accounting period the machinery plant or buildings were not used Pursa Limited went into voluntary liquidation on June 20 1945 In the sale of the buildings machinery and plant there was an excess such as is described in the second proviso and that amount of excess was sought to be taxed This was negatived by this Court on two grounds They were a If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under clause vii in respect of them and the second proviso also does not come into operation and b that the intention of the company was to discontinue its business and the sale of the machinery and plant was a step in the process of winding up of its business The sale of the machinery and plant was not an operation in furtherance of the business carried on by the Company but was a realisation of its assets in the process of gradual winding up of its business which eventually culminated in the voluntary liquidation of the Company Counsel differ as to the ratio of the case The Commissioner contends that the ratio is that no sale whether at a loss or at a profit can be said to fall within respectively cl vii or the second proviso if it takes place after the closure of business and during the process of winding up while the respondent contends that the real ratio was that during the account year the machinery and plant were not at all used No doubt this Court did give two reasons for its decision but the primary consideration was the second ratio quoted above This is clear from the following passage towards the end of the judgment Even if the sale of the stock of sugar be regarded as carrying on of business by the Company and not a realisation of its assets with a view to winding up the 236 machinery or plant not being used during the accounting period at all and in any event not having had any connection with the carrying on of that limited business during the accounting year section 102vii can have no application to the sale of any machinery or plant Learned Counsel for the respondent relies upon the passage last quoted and urges that where the buildings machinery or plant have been used for a part of the accounting period the ruling cannot apply and draws attention to the words at all used twice in the judgment He argues that if the machinery or plant had been used for a part of the accounting year the result would have been different It is not possible to say how the case would have been decided in the changed circumstances but it is obvious that the case is distinguishable on more than one ground The proviso is in a language different from cl vii as a fiction is introduced and such profits are taxed to take back what had been given away for depreciation which did not really take place But more of it later Express Newspapers Ltd case 1 is also distinguishable In that case the Free Press of India Madras Ltd resolved on August 31 1946 to transfer the right of printing and publishing its daily newspapers to Express Newspapers Ltd They rented out their machinery etc to the new Company which took possession on September 1 1946 The year of account ended on December 31 1946 The Free Press went into voluntary liquidation on October 31 1946 and on November 1 1946 its building machinery and plant were sold to the new Company at a price which exceeded the written down value by Rs 608666 made up of Rs 214090 being the excess of the original cost price over the written down value and Rs 394576 being the excess over the original cost price One question among others was whether the second proviso to section 10 2vii applied The Madras High Court ob served 1 237 in the present case the sale of the machinery took place during the year of account and it was used by Free Press Company for at least a part of the year This would be sufficient to attract liability The learned counsel for the assessee is on a firmer ground when he contended that the sale being made in the process of winding up of the company section 102vii will not apply The second proviso to section 102vii would be invoked only where the sale was one made in the course of business carried on by the predecessor Where the sale is a closing down sale that profit could not be brought to tax In Liquidators of Pursa Ltd V Commissioner of Income tax 1 the Supreme Court held that where in a case the sale of machinery and plant was a step in the process of winding up of its business the intention of the company having been to discontinue the business such sale was not an operation in furtherance of the business carried on by the company but was only a realisation of its assets in the process of gradual winding up of its business which eventually terminated in the voluntary liquidation of the company and provision of section 102vii would not apply In the present case the formation of the new company was to take over the business of the old company The lease of the machinery the transfer of the right to carry on the business of publishing newspapers and the ultimate sale of the machinery were part of the same scheme for winding up the Free Press Company The sale of machinery was undoubtedly a closing down sale and the profit earned therein could not come in for assessment under section 102vii These two cases deal with the second proviso to section 102Xvii Clause vii deals with loss and the second proviso with profits but the proviso is not an exact counterpart of the clause The proviso enacts a fiction which the main clause does not enact The reason for the introduction of the fiction in the proviso appears to be this Loss in business may take place in various ways If the business requires more to run it than it produces there is loss Loss in 1 238 business may also take place if the equipment with which business is done is lost destroyed or depreciates or suffers in value The law takes note of the loss and provided it has been computed and brought into the books of the business and written off it can be claimed as a deduction Profit in business on the other hand primarily means profit earned in the business But if an allowance had been claimed as depreciation and had been allowed and if the sale of the building machinery or plant on which depreciation allowance was claimed in the past shows that there was in fact no depreciation but an accretion in value the law deems that a profit has been made The fiction thus converts that which may not be strictly profit of the business in a narrow sense into a profit for purposes of assessment Formerly it was a matter of doubt whether even this accretion could be deemed a profit when the business had closed down but now the legislature has amended the law by saying that this fictional profit must be brought to tax irrespective of the fact that the sale took place during the continuance of the business or after the cessation thereof But it is to be noticed that no such amendment was made in cl vii to exclude loss over buildings machinery or plant after the clospre of the business It is thus clear that the principles which govern the proviso cannot be used to govern the main clause because profit or loss arise in different ways in business The two rulings do not therefore apply to the facts here We must thus restrict ourselves to the scheme of the Indian Income tax Act and the clause in question The scheme of the Income tax Act as was pointed out by Lord Porter in Indian Iron Steel Co Ltd vs Commissioner of Income tax Bengal 1 is that income tax is assessed and paid in the next succeeding year upon the results of the year before It is the income of the previous year which is brought to tax in the succeeding year which is called the year of assessment For the purpose of assessment the Indian Income Tax Act divides the sources of income profits 1 336 239 and gains into six heads in section 6 The fourth head is Profits and gains of business profession or vocation Sections 7 8 9 10 12 12A and 12B lay down the rules of computation under the different heads Profits and gains of business are dealt with in section 10 The first subjection of that section provides The tax shall be payable by an assessee under the head I Profits and gains of business in respect of the profit or gains of any business carried on by him In Commissioner of Income tax vs Shaw Wallace Co Ltd 1 it was pointed out by the Judicial Committee that the words carried on by him were an essential constituent of that which is to produce the taxable income it is to be the profit earned by a process of production It was further pointed out that business had been defined in the Income tax Act to include any trade commerce or manufacture or any adventure or concern in the nature of trade commerce or manufacture and that it involved a fundamental idea of the continuous exercise of an activity It was however pointed out that the source was not necessarily one which was expected to be continuously productive but one whose object was the production of a definite return excluding anything in the nature of a mere windfall and that capital in most cases was hardly more than an element in the process of production We agree with this analysis of the Income tax Act and indeed these observations were also applied in the Pursa Limited case 2 to which we have already referred It thus follows that capital may in the process of production depreciate get used up or lost The Income tax Act while taxing income profits or gains takes note of and makes allowance for such eventualities If the profits or gains of a business for a particular year are to be taxed they must be computed for the whole year taking into account losses incurred during the same year Now the first condition precedent appears to be that the business must have been 1 1932 LR 59 IA 206 2 240 carried on by the assessee This is to be found in the first sub section of section 10 The second condition is that the building machinery or plant must have been used for the purposes of the business This is to be found in of iv of the second sub section of section 10 The third condition is that the sale etc should have taken place during the year of account This follows from the nature of the tax which is assessed and levied on the profits of the working of the previous year The fourth condition is that the loss should have been brought into the books of the assessee and written off This is provided by the first proviso There is no other condition to be found expressly in the section or in the Act It is nowhere stated that the business of the assessee should have been carried on for the whole year or that the machinery or plant should have been used for the whole of the accounting period There are no words which would show that if the assessee works only for a part of the year and then sells out the loss that he incurs is not a business loss or that he must pay tax on the small profit that he might have made and bear the lose in addition We have shown above that the case of profit referred to in the second proviso stands on a different footing altogether since profit and loss arise in different ways The law has thus treated the two subjects differently and the legislature has amended the proviso but not the clause In view of what we have said above we are of opinion that the judgment of the High Court was correct in all the circumstances of this case and this appeal must be dismissed with costs Appeal dismissed	The respondent stocked bunker coal at Candle Island in the State of Madras They sold the coal to steamers calling at the port of Cochin in the State of Travancore Cochin and delivered it there The respondent was assessed to sales tax on such sales for the year 1951 52 and 1952 53 The respondent contended that no sales tax could be levied on these sales since they were either sales in the course of export or in the course of inter State trade exempt from sales tax under sub cl 1 b or cl 2 of article 286 of the Constitution and in the alternative that they were exempt from tax under a notification dated February 5 1954 issued by the appellant State under which sales failing within the Explanation to article 2861a made during the period 4 1 1951 to 31 3 1953 were exempted from liability to pay tax Held that the sales were exempt from tax under the Government Notification The coal was delivered to the actual consumer i e the steamships in Travancore Cochin and they were at liberty to consume it wherever they desired either within the State or outside the choice depending on its convenience and necessity The delivery was for consumption within the State and the sales fell within the Explanation to Aft 2861a Though the sales were in the course of inter State trade which were covered by the ban on taxation imposed by article 2862 the levy was validated by the Sales Tax Validation Act 1956 M P V Sundararamier Co vs The State of Andhra Pra desh relied on The sales were not made in the course of export and were not covered by the ban imposed by article 2861b For article 2861b to apply it was not sufficient that the goods merely moved out of the territory of India but it was further necessary that the goods should be intended to be transported to a destination beyond India The concept of export in article 286 postulated the existence of two termini between which the goods were intended to be transported 220 Burmah Shell Oil Storage Distributing Co of India Ltd vs The Commercial Tax Officer CA 751 of 957 CA 10 of 1958 Unreported followed
Appeal No 197 of 1954 Appeal from the Judgment and Order dated the 25th March 1953 of the Calcutta High Court in Appeal from Original Order No 54 of 1953 Sachin Chaudhury Sukumar Mitter section N Mukherjee and D N Ghosh for the appellant 244 K N Rajagopal Sastri and D Gupta for the respondents November 1 The Judgment of section K Das K C Das Gupta and N Rajagopala Ayyangar JJ was delivered by K C Das Gupta J M Hidayatullah J and J C Shah J delivered separate Judgments DAS GUPTA J This appeal is against an appellate decision of a Bench of the Calcutta High Court by which in reversal of the order made by the Trial Judge the Bench rejected the present appellant s application under article 226 of the Constitution The appellant is a private limited company incorporated under the Indian Company s Act and has its registered office in Calcutta It was assessed to income tax for the assessment years 1942 43 1943 44 and 1944 45 by three separate orders dated January 26 1944 February 12 1944 and February 15 1945 respectively These assessments weremade under section 233 of the Indian Income tax Act upon returns filed by it accompanied by statements of account The first two assessments were made by Mr L D Rozario the then Income tax Officer and the last one by Mr K D Banerjee The taxes assessed were duly paid up On March 28 1951 three notices purporting to be under section 34 of the Indian Income tax Act 1922 were issued by the income tax Officer calling upon the company to submit fresh returns of its total income and the total world income assessable for the three accounting years relating to the three assessment years 1942 43 1943 44 and 1944 45 The appellant company furnished re turns in compliance with the notices but on September 18 1951 applied to the High Court of Calcutta for issue under article 226 of the Constitution of appropriate writs or orders directing the Income tax Officer not to proceed to assess it on the basis of these notices The first ground on which this prayer was based was mentioned in the petition in these terms The said pretended notice was issued without the existence of the necessary conditions precedent which confers jurisdiction under section 34 aforementioned whether 245 before or after the amendment in 1948 The other ground urged was that the amendment to section 34 of the Income tax Act in 1948 was not retrospective and that the assessment for the years 1942 43 1943 44 and 1944 45 became barred long before March 1951 The Trial Judge held that the first ground was not made out but being of opinion that the amending Act of 1948 was not retrospective he held that the notices issued were without jurisdiction Accordingly he made an order prohibiting the Income tax Officer from continuing the assessment proceedings on the basis of the impugned notices The learned Judges who heard the appeal agreed with the Trial Judge that the first ground had not been made out They held however that in consequence of the amendment of section 34 in 1948 the objection on the ground of limitation must also fail A point of constitutional law which appears to have been raised before the appeal court was also rejected The appeal was allowed and the company s application under article 226 was dismissed with costs The Company has preferred the present appeal on the strength of a certificate issued by the High Court under article 1331a of the Constitution The only point raised before us is that the courts below were wrong in holding that the first ground that the notices were issued without the existence of the necessary conditions precedent which confers jurisdiction under section 34 had not been made out As it is no longer disputed that section 34 as amended in 1948 applies to the present case we have to consider the section as it stood after the amendment in 1948 in deciding this question of jurisdiction The relevant portion of the section was in these words 34 Income escaping assessment 1 If a the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year income profits or gain chargeable to income tax have escaped assessment for that year or have been 246 under assessed or assessed at too low a rate or have been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed or b notwithstanding that there has been no omission or failure as mentioned in clause a on the part of the assessee the Income tax Officer has in consequence of information in his possession reason to believe that income profits or gains chargeable to income tax have escaped assessment for any year or have been under assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act or that excessive loss or depreciation allowance has been computed He may in cases falling under clause a at any time within eight years and in cases falling under clause b at any time within four years of the end of that year serve on the assessee or if the assessee is a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or reassess such income profits or gains or recompute the loss or depreciation allowance and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided that i the Income tax Officer shall not issue a notice under this subsection unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice ii the tax shall be chargeable at the rate at which it would have been charged had the income profits or gains not escaped assessment or full assessment as the case may be and iii where the assessment made or to be made is an assessment made or to be made on a person deemed to be the agent of a non resident person under section 43 this sub section shall have effect as if for the periods of eight years and four years a period of one year was substituted 247 Explanation Production before the Income tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income tax Officer will not necessarily amount to disclosure within the meaning of this section To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years but within a period of eight years from the end of the relevant year two conditions have therefore to be satisfied The first is that the Income tax Officer must have reason to believe that income profits or gains chargeable to income tax have been under assessed The second is that he must have also reason to believe that such under assessment has occurred by reason of either i omission or failure on the part of an assessee to make a return of his income under section 22 or ii omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year Both these conditions are conditions precedent to be satisfied before the Income tax Officer could have jurisdiction to issue a notice for the assessment or re assessment beyond the period of four years but within the period of eight years from the end of the year in question No dispute appears to have been raised at any stage in this case as regards the first condition not having been satisfied and we proceed on the basis that the Income tax Officer had in fact reason to believe that there had been an under assessment in each of the assessment years 1942 43 1943 44 and 1944 45 The appellant s case has all along been that the second condition was not satisfied As admittedly the appellant had filed its return of income under section 22 the Income tax Officer could have no reason to believe that under assessment had resulted from the failure to make a return of income The only question is whether the Income tax Officer had reason to believe that there had been some omission or failure to disclose fully and truly all material facts necessary 248 for the assessment for any of these years in consequence of which the under assessment took place Before we proceed to consider the materials on record to see whether the appellant has succeeded in showing that the Income tax Officer could have no reason on the materials before him to believe that there had been any omission to disclose material facts as mentioned in the section it is necessary to examine the precise scope of disclosure which the section demands The words used are omission or failure to disclose fully and truly all material facts necessary for his assessment for that year It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment What facts are material and necessary for assessment will differ from case to case In every assessment proceeding the assessing authority will for the purpose of computing or determining the proper tax due from an assessee require to know all the facts which help him in coming to the correct conclusion From the primary facts in his Possession whether on disclosure by the assessee or discovered by him on the basis of the facts disclosed or otherwise the assessing authority has to draw inferences as regards certain other facts and ultimately from the primary facts and the further facts inferred from them the authority has to draw the proper legal inferences and ascertain on a correct interpretation of the taxing enactment the proper tax leviable Thus when a question arises whether certain income received by an assessee is capital receipt or revenue receipt the assessing authority has to find out what primary facts have been proved what other facts can be inferred from them and taking all these together to decide what the legal inference should be There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee To meet a possible contention that when some account books or other evidence has been produced there is no duty on the assessee to disclose further facts which on due diligence the Income tax 249 Officer might have discovered the Legislature has put in the Explanation which has been set out above In view of the Explanation it will not be open to the assessee to say for example I have produced the account books and the documents You the assessing officer examine them and find out the facts necessary for your purpose My duty is done with disclosing these account books and the documents His omission to bring to the assessing authority s attention these particular items in the account books or the particular portions of the documents which are relevant amount to omission to disclose fully and truly all material facts necessary for his assessment Nor will he be able to contend successfully that by disclosing certain evidence he should be deemed to have disclosed other evidence which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed The Explanation to the section gives a quietus to all such contentions and the position remains that so far as primary facts are concerned it is the assessee s duty to disclose all of them including particular entries in account books particular portions of documents and documents and other evidence which could have been discovered by the assessing authority from the documents and other evidence disclosed Does the duty however extend beyond the full and truthful disclosure of all primary facts In our opinion the answer to this question must be in the negative Once all the primary facts are before the assessing authority he requires no further assistance by way of disclosure It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn It is not for somebody else far less the assessee to tell the assessing authority what inferences whether of facts or law should be drawn Indeed when it is remembered that people often differ as regards what inferences should be drawn from given facts it will be meaningless to demand that the assessee must disclose 32 250 what inferences whether of facts or law he would draw from the primary facts If from primary facts more inferences than one could be drawn it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority How could an assessee be charged with failure to communicate an inference which he might or might not have drawn It may be pointed out that the Explanation to the sub section has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income tax Officer could have discovered them from the facts actually disclosed The Explanation has not the effect of enlarging the section by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Income fax Officer We have therefore come to the Conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts it does not extend beyond this The position therefore is that if there were in fact some reasonable grounds for thinking that there had been any non disclosure as regards any primary fact which could have a material bearing on the question of under assessments that would be sufficient to give jurisdiction to the Income tax Officer to issue the notice under section 34 Whether these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the court s investigation In other words all that is necessary to give this special jurisdiction is that the Income tax officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non disclosure of material facts Clearly it is the duty of the assessee who wants the court to hold that jurisdiction was lacking to establish that the Income tax Officer had no material at all before him for believing that there had been such 251 non disclosure To establish this the company has relied on the statements in the assessment orders for the three years in question and on the statement of Kanakendra Narayan Banerjee in the report made by him to the Commissioner of Income tax for the purpose of obtaining sanction to initiate proceedings tinder section 34 and also on his statement in the affidavit on oath in reply to the writ petition The report is in these words Profit of Rs 548002 on sale of shares and securities escaped assessment altogether At the time of the original assessment the then ITO merely accepted the company s version that the sale of shares were casual transactions and were in the nature of mere change of investments Now the results of the company s trading from year to year show that the company has really been systematically carrying out a trade in the sale of investments As such the company had failed to disclose the true intention behind the sale of the shares and as such section 341a may be attracted The only nondisclosure mentioned in the report is that the company had failed to disclose the true intention behind the sale of the shares Mr Choudhury contends that this is not an omission to disclose a material fact within the meaning of section 34 The question whether sales of certain shares were by way of changing the investments or by way of trading in shares has to be decided on a consideration of different circumstances including the frequency of the sales the nature of the shares sold the price received as compared with the cost price and several other relevant facts It is the duty of the assessee to disclose all the facts which have a bearing on the question but whether the assessee had the intention to make a business profit as distinguished from the intention to change the form of the investments is really an inference to be drawn by the assessing authority from the material facts taken in conjunction with the surrounding circumstances The law does not require the assessee to state the conclusion that could reasonable drawn from the primary facts The 252 question of the assessee s intention is an inferential fact and so the assessee s omission to state his true intentions behind the sale of shares cannot by itself be considered to be a failure or omission to disclose any material fact within the meaning of section 34 Indeed an assessee whose contention is that the shares were sold to change the form of investment and not with the intention of making a business profit cannot be expected to say that his true intention was other than what he contended it to be Dealing with this question the learned Chief Justice has said The expression that the Respondent had failed to disclose the true intention behind the sale of shares may lack directness but that deficiency of language is not sufficient to enable the Respondent to contend in view of the circumstances alleged that no failure to disclose facts was being complained of On the facts as stated by the Income tax Officer it is clear that there had been a failure to disclose the fact that the Respondent was a dealer in shares and what the Income tax Officer meant by the language used by him was that the Respondent had not disclosed that the sale of shares had been of the nature of a trading sale made in pursuance of an intention to make a business profit and not of the nature of a change of investment made in pursuance of an intention to put certain capital assets into another form If that be so it is equally clear that the Income tax Officer who by the way was a successor to the officers who had made the original assessments was not merely changing his opinion as to facts previously known but was taking notice of a new fact The learned Chief Justice seems to have proceeded on the basis that when from certain facts inferences are to be drawn there is a duty on the assessee to state what the correct inference should be and if he has made a wrong statement as regards the inferences to be drawn that also is an omission or failure to disclose a material fact For the reasons given earlier we do not think that this is the correct position in law It is clear therefore that if one looked at this report 253 only it would not be possible to say that the Income tax Officer had any non disclosure of material facts by the assessee in mind when he assumed jurisdiction It has to be remembered however that in sending a report to the Commissioner the Income tax Officer might not fully set out what he thought amounted to a non disclosure because it is conceivable that the report may not be drawn up carefully and may not contain a reference to all the non disclosures that operated on his mind We have however on the record an affidavit sworn by the same Income tax Officer who started the section 34 proceedings It is reasonable to expect that in this affidavit which was his opportunity to tell the court what non disclosure he took into consideration he would state as clearly as possible the material facts in respect of which there had not been in his view a full and true disclosure Mr Banerjee s statements in this matter are contained in paras 5 6 and 7 of his affidavit They are in these words It 5 With reference to paragraphs 2 and 3 of the said petition I crave reference to the assessment orders therein mentioned The assessment order dated the 15th February 1945 was made by Sri Kali Das Banerjee now Income tax Officer Companies District II and the other two assessment orders were made by L D Rozario who is now in the employment of Ms Lovelock Lewes I find from the notes made by me in the order sheet of the assessment year 1944 45 and my order dated the 7th July 1944 that Mr Smith of Ms Lovelock Lewes attended before me and stated that the profits of the company arising out of dealings in shares were not taxable as the company was not a dealer in shares and securities Subsequently on the 18th August 1944 Ms Lovelock Lewes wrote a letter to me setting out the contentions of their clients and inter alia stated that throughout the whole history the company bought no shares what so Sri K D Banerjee was accordingly led to believe that the dealings in shares were casual transactions and were in the nature of mere change in investments and the profits resulting therefrom were 254 not taxable The assessment orders were made on the basis that the petitioner did not carry on any business dealings in shares A copy of the said letter dated the 18th August 1944 as also the relevant portion of the note sheet are included in the schedule hereto annexed and marked 6 In the assessments for 1945 46 and 1946 47 which were completed in April 1950 the profits on sale of shares were included in the total assessable income of the company it having been then discovered that the petitioner was in fact carrying on business in shares contrary to its representation that it was not The company filed appeals before the Appellate Assistant Commissioner which were rejected in September 1950 and the assessments were confirmed The company thereafter filed a second appeal before the In come tax Tribunal which appeals are now pending With reference to para 5 of the said petition I deny that I pretended to act under section 34 of the Income tax Act as alleged I have reasons to believe that by reason of the omission or failure of the company to disclose fully and truly all material facts necessary for its assessments the income pro fits and gains chargeable to income tax had been under assessed I recorded my reasons and made three reports one for each year in the prescribed form and submitted them before the Commissioner of Income tax and the latter was satisfied that it was a fit case for issue of a notice under section 34 of the Income tax Act Thereafter I issued the prescribed notices under section 34 of the Income tax Act The said reports were made and notices issued in respect of all the three years mentioned in the petition and copies of the report and notice for one of such years are included in the schedule hereto annexed and marked A The report and notices for the two other years are exactly similar It appears from this that the statements made by or on behalf of the company which the assessing authority considered to amount to non disclosure of material facts were these i the company was not 255 whole of its history the company bought no shares whatsoever It has not been suggested before us that in fact at any time up to the conclusion of the assessment proceedings for the years 1942 43 1943 44 and 1944 45 the company did in fact make a single purchase of shares Clearly therefore the Income tax Officer had no reasonable ground for thinking that anything as regards the purchase of shares had not been disclosed The company does not dispute that the statement was made on its behalf that it was not a I dealer in shares and securities It appears clear that the Income tax Officers who made the assessments for the years 1942 43 1943 44 and 1944 45 proceeded on the basis that this was an investment company and considered the question whether in spite of its being an investment company certain sales of shares wherefrom the company made a profit were by way of trading in shares and not by way of changing the form of investment Whether these sales by an investment company should in law be treated as trading transactions and the profits made from the sales trading profits liable to tax was the matter which it was the Income tax Officer s task to decide No duty lay on the company to admit that these transactions were by way of trade The fact that on behalf of the company Mr Smith of Lovelock Lewes stated that the company was not a dealer in shares and securities does not therefore amount to an omission to disclose fully and truly any material fact To ascertain whether the Income tax Officer could have had in mind any non disclosure as a ground for thinking that by reason of such non disclosure an under assessment had occurred apart from what was mentioned in the affidavit we enquired from respondent s counsel whether he could suggest any other non disclosure that might have taken place Mr Sastri suggested two One is that the sales had not been disclosed the other that the memorandum and articles of association of the company had not been shown This suggestion is against the record and we have no hesitation in repelling it Not only is it not the ground set out by the Income tax Officer at any 256 stage not even in the affidavit in court but the matters mentioned by the officer that the assessee had claimed that the profits realised were of a casual nature obviously indicate that the assessee disclosed that a surplus resulted from the sales which were also disclosed The assessment orders it is true do not mention the details of the sales They state however that the audited accounts of the company were furnished The sales of shares were expressly mentioned in the report In these circumstances it is reasonable to believe that as regards sale of shares full details were in fact disclosed Nor can we believe that the two Income tax Officers L D Rozario and K D Banerjee concluded the proceedings without referring to the memorandum and articles of association of the company These officers known well that the company was claiming to be an investment company only They had to consider the question whether sales were of the nature of trade or of the nature of change of investment It is unthinkable that they would not examine the memorandum of association Besides it is pertinent to note that in para 4 of his affidavit Kanakendra Narayan Banerjee refers to the Memorandum and articles of Association and states that by its memorandum of association the company has been authorised to carry on the various kinds of business which have been specified in sub section 1 and 2 of cl 3 of the said memorandum of associations He does not say that the articles or the memorandum of association were not shown during the assessment proceedings for the years 1942 43 1943 44 and 1944 45 If he had any reason to believe that these were not shown he would have certainly mentioned that fact For that would undoubtedly to non disclosure of a material fact It must therefore be held that the Income tax Officer who issued the notices had not before him any non disclosure of a material fact and so he could have no material before him for believing that there had been any material non disclosure by reason of which an under assessment had taken place 257 We are therefore bound to hold that the conditions precedent to the exercise of jurisdiction under section 34 of the Income tax Act did not exist and the Income tax Officer had therefore no jurisdiction to issue the impugned notices under section 34 in respect of the years 1942 43 1943 44 and 1944 45 after the expiry of four years Mr Sastri argued that the question whether the Income tax Officer had reason to believe that under assessment had occurred by reason of nondisclosure of material facts should not be investigated by the courts in an application under article 226 Learned Counsel seems to suggest that as soon as the Income tax Officer has reason to believe that there has been under assessment in any year he has jurisdiction to start proceedings under section 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in assessment proceedings It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction The scheme of the law clearly is that where the Income tax Officer has reason to believe that an under assessment has resulted from non disclosure he shall have jurisdiction to start proceedings for re assessment within a period of 8 years and where he has reason to believe that an under assessment has resulted from other causes he shall have jurisdiction to start pro ceedings for re assessment within 4 years Both the conditions i the Income tax Officer having reason to believe that there has been under assessment and ii his having reason to believe that such under assessment has resulted from nondisclosure of material facts must co exist before the Income tax Officer has jurisdiction to start proceedings after the expiry of 4 years The argument that the Court ought not to investigate the existence of one of these conditions viz that the Income tax Officer has reason to believe that under assessment has resulted from 33 258 non disclosure of material facts cannot therefore be accepted Mr Sastri next pointed out that at the stage when the Income tax Officer issued the notices he was not acting judicially or quasi judicially and so a writ of certiorari or prohibition cannot issue It is well settled however that though the writ of prohibition or certiorary will not issue against an executive authority the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment the High Courts it is well settled will issue appropriate orders or directions to prevent such consequences Mr Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question viz whether the Income tax Officer had reason to believe that under assessment had resulted from non disclosure of material facts before the Income tax Officer himself in the assessment proceedings and if unsuccessful there before the appellate officer or the appellate tribunal or in the High Court under section 662 of the Indian Income tax Act The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action In the present case the company contends that the conditions precedent for the assumption of jurisdiction under section 34 were not satisfied and come to the court at the earliest opportunity There is nothing in its conduct which would justify the refusal of proper relief under article 226 When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons In the present case we can find no reason for which relief should be refused 259 We have therefore come to the conclusion that the company was entitled to an order directing the Income tax Officer not to take any action on the basis of the three impugned notices We are informed that assessment orders were in fact made on March 25 1952 by the Income tax Officer in the proceedings started on the basis of these impugned notices This was done with the permission of the learned Judge before whom the petition under article 226 was pending on the distinct understanding that these orders would be without prejudice to the contentions of the parties on the several questions raised in the petition and without prejudice to the orders that may ultimately be passed by the Court The fact that the assessment orders have already been made does not therefore affect the company s right to obtain relief under article 226 In view however of the fact that the assessment orders have already been made we think it proper that in addition to an order directing the Income tax Officer not to take any action on the basis of the impugned notices a further order quashing the assessment made be also issued In the result we allow the appeal set aside the order made by the appellate Bench of the Calcutta High Court and restore the order made by the Trial Judge Bose J The assessment orders made in the proceedings started under section 34 of the Income Tax Act are also quashed The appellant will get its costs here and below HIDAYATULLAH J I have had the advantage of reading the judgments prepared by my brethren Das Gupta and Shah JJ The point involved in the case is a very short one and the answer as it appears to me equally so The appellant Company s income profits and gains for the assessment years 1942 43 1943 44 and 1944 45 were duly assessed and taxed The orders were respectively passed on January 26 1944 February 12 1944 and February 15 1945 On March 28 1951 three notices under section 34 of the Indian Income tax Act were issued calling upon the appellant Company to submit fresh returns in respect 260 of the previous years relative to each of the assessment years above mentioned Since this action was taken after more than four years the matter fell to be governed by section 341a of the Indian Income tax Act as amended in 1948 The clause provided an extended period for sending a notice calling for a return for the purpose of assessing or reassessing income profits and gains which had escaped assessment or had been under assessed for any year within eight years if the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year the income profits or gains chargeable to income tax have escaped assessment etc In the present case the appellant Company which is an investment Company had produced in the back years a list of the shares sold by it the statements of profit and loss account and I am prepared to assume also the Memorandum and Articles of Association But the appellant Company gave out that the sales of shares were casual transactions of change of investments This statement was accepted though it was found that in later years the Company was dealing in stocks and shares as a business venture and its statement which was accepted was not perhaps true The Income tax Officer reported the matter to the Commissioner and stated as follows Profits of Rs 548002 on sale of shares and securities escaped assessment altogether At the time of the original assessment the then ITO merely accepted the company s version that the sales of shares were casual transactions and were in the nature of mere change of investments Now the results of the company s trading from year to year show that the company has really been systematically carrying out a trade in the sale of investments As such the company has failed to disclose the true intention behind the sale of the shares and as such section 341a may be attracted The appellant Company applied to the Calcutta 261 High Court for a writ Under article 226 which was granted by a learned single Judge but the order was reversed on appeal in the High Court The appellant Company has now appealed on a certificate under article 1331c of the Constitution The contention of the appellant Company is that all the facts necessary to be disclosed were in fact disclosed that it was not required further to concede that it was trading in shares which was a matter of inference from the proved facts for the Income tax Officer to draw and that there was thus no question of any non disclosure This argument overlooks the addition of the Explanation to the section which explains cl a of the first sub section It reads Explanation Production before the Income tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income tax Officer will not necessarily amount to disclosure within the meaning of this section This means quite clearly that the mere production of evidence is not enough and that there may be an omission or failure to make a full and true disclosure if some material fact necessary for the assessment lies embedded in that evidence which the assessee can uncover but does not If there is such a fact it is the duty of the assessee to disclose it The evidence which is produced by the assessee discloses only primary facts but to interpret the evidence certain other facts may be necessary Thus questions of status agency benami nature of transactions the nature of trading and like matters may not appear from the evidence produced unless disclosed If it be merely a question of interpretation of evidence by an Income tax Officer from whom nothing has been hidden and to whom everything has been fully disclosed then the assessee cannot be subjected to section 34 merely because the Income tax Officer miscarried in his interpretation of evidence But it is otherwise if a contention which is contrary to fact is raised and the Income tax Officer is set to discover the hidden truth for himself In the latter case there is suppression of material fact or in 262 other words that lack of full and true disclosure which would entitle action under section 34 of the Act The following example explains the meaning Taking the present case I set below two statements one involving full disclosure and a contention and the other only a contention with a material fact suppressed 1 We are a trading company and our business is according to our memorandum of association to acquire hold exchange sell and deal in shares stocks etc These sales however were not business sales but only change of investments into trustee securities as decided by the trustees 2 We changed industrial shares into trustee securities because I in or about 1934 the trustees decided to convert the Indian Industrial Shares held by the appellant into trustee securities If the first is decided in favour of the assessee there is an inference or decision by the Income tax Officer from a full and true disclosure If the second is decided in favour of the assessee the question would arise if there was full and true disclosure In the present case the question whether the transactions were casual transactions of changing investments or regular trading in stocks and shares involves not merely an inference because the inference depends upon the fact that the appellant Company was formed to trade in stocks and shares It was open to the appellant Company to contend that in spite of its business a particular transaction was this and not that But if the appellant Company was an investment Company dealing in stocks and shares and knowing this for a fact did not disclose the fact the statement was neither full nor true as it involved a suppression of a material fact necessary for the assessment The Explanation is quite obviously meant to reach an identical situation The appellant Company might have placed the evidence before the income tax Officer but the Income tax Officer had reason to believe that the disclosure was neither full nor true because the fact that the Company was and shares 263 was not disclosed The Income tax Officer in his report meant no more than this He therefore felt that prima facie there was not only concealment of a fact but on the contrary maintaining of a falsehood and this was sufficient to bring this matter within the extended period Every contention contrary to the Income tax Officer s opinion is not necessarily concealment of a material fact but some contentions made with a mental reservation as to the true state of affairs may amount to such concealment if they involve non disclosure of facts related to other facts and known to the assessee The Company still persists that the sales of shares were casual transactions and this contention will no doubt be decided hereafter But the question will be decided after taking into consideration the nature of the business of the Company and till that is done the Income tax Officer believes that the contention raise before and persisted in is not a mere contention but maintenance of a falsehood about the nature of the transactions and the business of the Company The existence of such a belief is sufficiently established by the report of the Income tax Officer and the satisfaction of the Commissioner and this has not been gainsaid In my opinion the Divisional Bench of the High Court rightly refused a writ in the circumstances and I would dismiss this appeal with costs SHAH J I regret inability to agree with the judgment delivered by my learned brother Mr Justice Das Gupta The facts which give rise to this appeal have been fully set out by my learned brother and it is not necessary to reiterate the same Sub section 1 of section 34 of the Indian Income Tax Act 1922 in so far it is material stood at the relevant date when the proceedings were commenced as follows section 34 1 If a the Income tax Officer has reason to believe that by reason of the omission or failure on the part of an 264 for any year or to disclose fully and truly all material facts necessary for his assessment for that year income profits or gains chargeable to income tax have escaped assessment for that year or have been under assessed or assessed at too low a rate or have been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed or b notwithstanding that there has been no omission or failure as mentioned in cl a on the part of the assessee the Income tax Officer has in consequence of information in his possession reason to believe that income profits or gains chargeable to income tax have escaped assessment for any year or have been under assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act or that excessive loss or depreciation allowance has been computed he may in cases falling under cl a at any time within eight years and in cases falling under cl b at any time within four years of the end of that year serve on the assessee or if the assessee is a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or re assess such income profits or gains or re compute the loss or depreciation allowance and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided that i the Income tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice ii the tax shall be chargeable at the rate at which it would have been charged had the income profits or gains not escaped assessment or full assessment as the case may be and iii where the assessment made or to be made is 265 an assessment made or to be made on a person deemed to be the agent of a non resident person under section 43 this sub section shall have effect as if for the periods of eight years and four years a period of one year was substituted Explanation Production before the Income tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income tax Officer will not necessarily amount to disclosure within the meaning of this section This section provides machinery for assessment or reassessment if it be found that income profits or gains have escaped assessment or have been under assessed or assessed at too low a rate or have been made subject to excessive relief under the Act or excessive loss or depreciation allowance has been computed which expression may for convenience of reference be compendiously referred to as are or have been under assessed Notice under section 341a may be issued if the Income Tax Officer has reason to believe that income in any year has been under assessed by reason of the failure on the part of the assessee to make a return of his income or to disclose fully and truly all material facts necessary for assessment for the year in question The authority of the Income Tax Officer is manifestly circumscribed by certain conditions and may be exercised only if those conditions exist and not otherwise In the case in hand we are concerned with the operation of cl 1a of section 34 If that clause does not apply notices of reassessment having been served more than four years after the end of the relevant year of assessment must fail On an analysis of the relevant provisions the material conditions proscribed for the exercise of the power to commence proceedings for reassessment under section 341a are these 1 The Income Tax Officer has reason to believe a that income profits or gains have been underassessed b that this under assessment is by reason of 266 omission or failure to make a return under section 22 or by reason of failure to disclose fully and truly all material facts necessary for assessment for any year 2 that a notice containing all or any of the requirements of section 222 is served on the assessee within eight years from the end of the year of assessment 3 that the Income Tax Officer has recorded his reasons for issuing the notice and the Commissioner is satisfied on such reasons recorded that it is a fit case for issue of such notice The notices issued by the Income Tax Officer in the case before us undoubtedly fulfil conditions 2 and 3 Notices of reassessment were served before the expiry of eight years of the end of the relevant years of assessment The Income Tax Officer also recorded his reasons in the reports submitted by him to the Commissioner and the Commissioner was satisfied that they were fit cases for the issue of such notices The dispute in the appeal relates merely to the fulfilment of the two branches of the first condition and that immediately raises the question about the true import of the expression has reason to believe in section 341a The expression reason to believe postulates belief and the existence of reasons for that belief The belief must be held in good faith it cannot be merely a pretence The expression does not mean a purely subjective satisfaction of the Income Tax Officer the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer If it be asserted that the Income Tax Officer had reason to believe that income had been underassessed by reason of failure to disclose fully and truly the facts material for assessment the existence of the belief and the reasons for the belief but not the sufficiency of the reasons will be justiciable The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief in other words the Income Tax Officer must on information at his disposal believe that 267 income has been underassessed by reason of failure fully and truly to disclose all material facts necessary for assessment Such a belief be it said may not be based on mere suspicion it must be founded upon information That the Income Tax Officer has reason to believe that there was under assessment in the material years was not challenged by the appellant and in our opinion rightly There are on the record the reports of the Income Tax Officer in which the belief is expressly set out It also appears from the assessment orders for the years 1945 46 and 1946 47 that tax has been assessed on the profits made by sale of shares by the company in those years Had the Income Tax Officer reason to believe that by reason of failure to disclose fully and truly all material facts necessary for assessment for the three years in question there had resulted underassessment The learned Trial judge after setting out the evidence held that the Income Tax Officer had materials before him showing that the company s trading from year to year disclosed that it had been systematically carrying on a trade in the sale of shares and securities He observed Whether the materials were sufficient or not or whether the belief or opinion is erroneous or not cannot be enquired into by the court If the Income Tax Officer has made a wrong decision as to the existence of the conditions precedent the remedy is by way of appeals as provided by the Income Tax Act and by stating a case under section 66 of the Act In appeal the High Court confirmed the order The High Court observed that the use of the expression the true intention behind the sale of shares used in the report made by the Income Tax Officer under section 34 to the Commissioner may lack directness but that deficiency of language was not sufficient to enable the company to contend in view of the circumstances alleged that there was no failure to disclose facts being complained of The High Court also observed On the facts as stated by the Income Tax Officer it is clear that there had been a failure to 268 disclose the fact that the respondent was a dealer in shares and what the Income Tax Officer meant by the language used by him was that the respondent had not disclosed that the sale of shares had been of the nature of a trading sale made in pursuance of an intention to put certain capital assets into another form If that be so it is equally clear that the Income Tax Officer who by the way was a successor to the officers who had made the original assessments was not merely changing his opinion as to facts previously known but was taking notice of a new fact Prima facie the finding recorded by the Court of First Instance and confirmed by the Court of Appeal is one on a question of fact and this court would not be justified in entering upon a reappraisal of the evidence But it is contended on behalf of the company that the finding is based on no materials and to that plea I may advert By section 22 of the Income Tax Act a duty is imposed upon every tax payer whose total income exceeds the maximum which is not chargeable to income tax to make a return in the prescribed form and verified in the prescribed manner setting forth his total income during that year If the tax payer making the return fails to disclose fully and truly all material facts necessary for the assessment of the year in question the jurisdiction of the Income Tax Officer to reassess is invited The company in its petition for the issue of a writ contended by paragraph 7 that the notices were ultra vires and illegal and that the Income Tax Officer was not invested with jurisdiction to proceed thereunder inter alia for the reason that the pretended notice was issued without the existence of the necessary conditions precedent which confers jurisdiction under section 34 aforementioned whether before or after amendment in 1948 The Income Tax Officer by his affidavit submitted Para 4 The statements made in paragraph 1 of the said petition are substantially correct By its Memorandum of Association the company has been authorised to carry on the various kinds of business which have been specified in sub cls 1 to 32 of cl 3 of the said Memorandum of Association 269 Para 5 With reference to paragraphs 2 and 3 of the said petition I crave reference to the assessment orders therein mentioned The assessment order dated the 15th February 1945 was made by Shri Kali Das Banerjee now Income Tax Officer Companies District in II and the other two assessment orders were made by Mr L D Razario who is now in the employment of Ms Lovelock Lewis I find from the notes made by me in the order sheet of the assessment year 1944 45 and my order dated the 7th July 1944 that Mr Smith of Messrs Lovelock Lewis attended before me and stated that the profits of the company arising out of dealings in shares were not taxable as the company was not a dealer in shares and securities Subsequently on the 18th August 1944 Messrs Lovelock Lewis wrote a letter to me setting out the contentions of their clients and inter alia stated that throughout the whole of its history the company bought no shares whatsoever Shri K D Banerjee was accordingly led to believe that the dealings in shares were casual transactions and were in the nature of mere change in investments and the profits resulting therefrom were not taxable The assessment orders were made on the basis that the petitioner did not carry on any business dealing in shares A copy of the said letter dated the 18th August 1944 as also the relevant portion of the note sheet are included in the schedule hereto annexed and marked A Para 6 In the assessments for 1945 46 and 1946 47 which were completed in April 1950 the profits on sale of shares were included in the total assessable income of the company it having been then discovered that the petitioner was in fact carrying on business in shares contrary to its representation that it was not The company filed appeals before the Appellate Assistant Commissioner which were rejected in September 1950 and the assessments were confirmed The company thereafter filed a second appeal before this Income tax Tribunal which appeals are now pending Para 7 With reference to paragraph 5 of the said petition I deny that I pretended to act under 270 section 34 of the Income Tax Act as alleged I have reasons to believe that by reason of the omission or failure of the company to disclose fully and truly all material facts necessary for its assessments the income profits or and gains chargeable to income tax had been underassessed I recorded my reasons and made 3 reports one for each year in the prescribed form and submitted them before the Commissioner of Income Tax and the latter was satisfied that it was a fit case for issue of a notice under section 34 of the Income Tax Act Thereafter issued prescribed notices under section 34 of the Income Tax Act The said reports were made and notices issued in respect of all the three years mentioned in the petition and copies of the report and notice for one of such years are included in the schedule hereto annexed and marked A The report and notices for the two other years are exactly similar By these averments the Income Tax Officer asserted a that he had reasons to believe that by reason of the omission or failure of the company to disclose fully and truly all material facts necessary for the assessment income chargeable to income tax has been underassessed and that he had recorded his reasons in that behalf in the three reports submitted by him to the Commissioner b that in the course of the assessment proceeding for the year 1944 45 it was represented on behalf of the company that the sales of shares in that year were casual transactions and were in the nature of mere change in investments c that in the orders of assessment for the years 1945 46 and 1946 47 passed in April 1950 profits earned by sale of shares held by the company were included in the total assessable income of the company it having been discovered that the company was in fact carrying on the business of selling shares contrary to its earlier representations and d that by its Memorandum and Articles of Association the company was authorised to carry on the business of diverse kinds specified in sub cls 1 to 32 of cl 3 thereof Whereas by a mere bald assertion made by the company in its petition it was averred that the conditions precedent to the exercise of jurisdiction to 271 re assess did not exist the Income Tax Officer stated in his rejoinder that he had reasons to believe that income bad been underassessed and he also set out the grounds on which that belief was founded The existence of the reasons to believe that income was underassessed has as already observed not been challenged nor is the court concerned with the question whether the materials may be regarded by a court before which a dispute is raised sufficient to sustain the belief entertained by the Income Tax Officer It is clear that the Income Tax Officer asserted on oath that when he issued the notice for reassessment he had reasons to believe that income of the company had been underassessed and he set out the reasons in support of the belief Counsel for the company submitted that all the material facts necessary for the assessment were fully and truly disclosed in the course of the assessment for the years in question and if the Income Tax Officer did not draw the correct inference the jurisdiction to reassess could not be invoked He urged that it was for the Income Tax Officer on the preliminary facts disclosed to him to raise his inference of fact and to base his conclusions on the preliminary as well as the inferential facts and if in arriving at his conclusion on the preliminary and the inferential facts the Income Tax Officer committed an error he could not seek to commence proceedings for reassessment on being apprised of the error It was said that the Income Tax Officer knew that the company was an investment corporation that the shares held by the company were sold from time to time and that profits were earned by the sale of those shares and that on these materials the Income Tax Officer might have held that the company was a dealer in shares but if he did not draw that inference the under assessment if any was not by reason of failure to disclose fully and truly all material facts Counsel submitted that the condition of the exercise of jurisdiction under section 34 is failure to disclose fully and truly all material facts necessary for assessment and not failure to 272 instruct the Income Tax Officer about the legal inference to be drawn from the facts disclosed The duty imposed by the Act upon the tax payer is to make a full and true disclosure of all material facts necessary for the assessment he is not required to inform the Income Tax Officer as to what legal inference should be drawn from the facts disclosed by him nor to advise him on questions of law Whether on the facts found or disclosed the company was a dealer in shares may be regarded as a conclusion on a mixed question of law and fact and from the failure on the part of the company to disclose to the Income Tax Officer this legal inference no fault may be found with the company But on the evidence in the case the plea raised by the company that all material facts were disclosed cannot be accepted The Income Tax Officer has in para 6 of his affidavit referred to the assessment of the years 1945 46 and 1946 47 he has also referred to the Memorandum and Articles of Association of the company therein In the assessment order for the year 1945 46 the Income Tax Officer has set out cls 1 and 2 of the Memorandum and Articles of Association of the company They are 1 To acquire hold exchange sell and deal in shares stocks debenture stock bonds obligations and securities issued or guaranteed by any company Government or public body constituted or carrying on business in British India or elsewhere 2 Generally to carry on business as financiers and to undertake and carry out all such operations and transactions except the issuing of policies of assurances on human life as an individual capitalist may lawfully undertake or carry out The Income Tax Officer in his order of assessment for that year observed that those clauses indicated the purposes for which the company was formed and also that whenever the shares were first acquired these became the commodities which could either be held or sold according to the best interests of the company that whenever such a commodity is sold it comes within the activities or properly speaking the profit making scheme as enumerated in the object 273 clauses stated above These shares sold in course of ten or twelve years whenever opportunities occurred for earning profits on making the sales This company was not an ordinary trader investing its surplus funds in shares and securities quite unconnected with its regular course of business so that the profit or loss also on sale of such shares or securities may be treated as not arising out of its regular business carried on On the other hand it is an Investment company of which the very first object clause is to hold and deal in shares Profit on sale of such shares therefore arises out of its regular course of business and it must be taxable From that order of assessment it is manifest that the Assessing Officer held that the company was formed with the object of acquiring holding exchanging selling and dealing in shares that the shares acquired became the trading assets of the company to be disposed of when opportunities occurred for earning profits and that the activities of selling shares in which surplus assets of the company were invested were a part of the regular business carried on by the company There is no evidence that the Memorandum and Articles of Association referred to in para 4 of the affidavit were produced in the course of the assessment of the relevant years nor is there evidence to show that it was disclosed that the acquisition of shares was incidental to the business activities and out of the surplus assets of the company and that the same were sold at profit as opportunities arose There is also no ground for assuming that these facts must have been known to the Income Tax Officer Counsel for the company suggested somewhat casually that under the Income Tax Rules and the practice prevailing with the Income Tax Officer the Memorandum and Articles of Association of every company which was being assessed to tax are to be filed with the Income Tax Officer But our attention has not been invited to any rule or any material to support the existence of a practice requiring a private limited company to file with the Income Tax Officer the Memorandum and Articles of Association 274 The plea raised by counsel for the company must be examined in the light of the Explanation to sub section 1 of section 34 The Explanation provides that Production before the Income Tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income Tax Officer will not necessarily amount to disclosure within the meaning of the section If pro duction of documents or other evidence from which material facts could with due diligence have been discovered does not necessarily amount to disclosure it would be difficult to hold that a presumption about the production of a document at sometime in the past and its possible existence in the files of the Income Tax Officer relating to earlier years may be regarded as sufficient disclosure Disclosure of some facts but not all though the facts not disclosed may have come to the knowledge of the Income Tax Officer if he had carefully prosecuted an enquiry on the facts and materials disclosed will not amount to a full and true disclosure of all material facts necessary for the purpose of assessment A tax payer cannot resist reassessment on the plea that non disclosure of the true state of affairs was due to the negligence or inadvertence on the part of the Income Tax Officer and but for such negligence or inadvertence a full and true disclosure of all material facts necessary for the assessment would have been resulted There is no evidence on the record that the Memorandum and Articles of Association were ever produced before the Income Tax Officer in the course of proceedings for assessment Again the report of the Income tax Officer discloses that his predecessor in office was told that the sales of shares effected by the company were casual transactions and were in the nature of a mere change of investments This was not strictly accurate The record therefore clearly shows that the company bad failed to disclose fully and truly all material facts in relation to assessment in two respects 1 that it failed to produce the Memorandum and Articles of Association showing the purposes for which the company was incorporated and 275 2that the shares were acquired as part of the business of financiers The company also made a statement which is partially untrue when it stated that sales were mere casual transactions There were materials before the Income Tax Officer on which he had reason to believe that by reason of the failure of the company to fully and truly disclose material facts its income was underassessed Whether on these facts a conclusion that in fact the company was carrying on the business of trading in shares could be founded is at this stage entirely immaterial If there was reason to believe the alleged inadequacy of the materials on which the belief could be founded is of no moment The Income Tax Officer has commenced proceedings for reassessment by issuing notices against the company and he has placed all the materials before the court on which it could be said that he had reason to believe that income of the company had been underassessed by reason of failure on the part of the company to disclose fully and truly all material facts relating to the assessment and if on those materials the Income Tax Officer could hold the belief which he says he did the court in seeking to hold an enquiry into the question whether the Income Tax Officer notwithstanding his affidavit and materials placed in support thereof had reason to hold the requisite belief would be arrogating to itself jurisdiction which it does not possess If the conditions precedent do not exist the jurisdiction of the High Court to issue high prerogative writs under article 226 of the Constitution to prohibit action under the notice may be exercised But if the existence of the conditions is asserted by the authority entrusted with the power and the materials on the record prima facie Support the existence of such conditions an enquiry whether the authority could not have reasonably held the belief which he says he had reason to hold and he did hold is in my judgment barred In that view the proper order to pass in this appeal would be one of dismissal with costs BY COURT In view of the majority opinion the appeal is allowed with costs here and below	One S sent a complaint against the first petitioner to the Chief Minister who sent it to the Additional Inspector General of Police who in his turn sent it to the Deputy Superintendent of Police CID with the endorsement Register a case and investigate personally The Deputy Superintendent of Police drew up a first information report There were also three other cases instituted against the petitioners or some of them which were being investigated into by the CID Police officers The petitioners contended that the respondents had violated the provisions of sections 154 156 and 157 of the Code of Criminal Procedure and had adopted a procedure unknown to law and had thus singled out the petitioners for unequal treatment in viola tion of article 14 of the Constitution Held that the procedure adopted was authorised by section 551 of the Code and in the first case the Inspector General had power to deal with the complaint and to direct investigation of the same by the Deputy Superintendent of Police Even if the reason given for the Inspector General making over the investigation to the Deputy Superintendent of Police that the case was of a technical nature was not correct it was open to him to make over the investigation to the Deputy Superintendent of Police in view of the status of the petitioners The procedure adopted in the other three cases was also not illegal and there was no unequal treatment of the petitioners in the matter of the institution or investigation of the cases so as to entitle them to invoke in aid article 14 of the Constitution H N Rishbud and Inder Singh vs The State of Delhi King Emperor vs Nilkantha ILR Pulin Bihari Ghosh vs The King ILR and Textile Traders Syndicate Ltd vs The State of U P AIR 1959 All 337 referred to Since allegations were made against the Chief Minister by the petitioners he owed a duty to the Court to file an affidavit stating what the correct position was so far as he remembered it 144
Appeal No 210 of 1959 Appeal by special leave from the judgment and order dated January 16 1958 of the Patna High Court in Mis Judicial case No 156 of 1957 B C Ghose and P K Chatterjee for the Appellant section P Varma for Respondents Nos 1 to 5 R C Dutta for Respondents Nos 6 to 20 1960 November 7 The Judgment of Hidayatullah Das Gupta and Ayyangar JJ was delivered by Ayyangar J and that of section K Das and Shah JJ was delivered by Shah J AYYANGAR The sole question which arises in this appeal which comes by way of special leave is as to whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination are exempt from the levy of sales tax by the Bihar State by virtue of article 2861a of the Constitution as it stood before the recent amendment The India Copper Corporation Ltd referred to hereafter as the assessee company carries on business in copper and various other materials and mineral pro ducts and the office of its General Manager is in the district of Singhbhum in Bihar The period covered by the assessment now in dispute is January 26 1950 to March 31 1950 The normal practice of the assessee company was to deposit sums of money from time to time provisionally towards payment of sales tax in advance and have the amount finally adjusted after the completion of the assessment of each year The assessee company followed this practice in respect of the amount of sales tax due by it for the year 1949 50 For the financial year April 1 1949 to March 31 1950 the Superintendent of Sales tax Singhbhum 278 computed the tax liability of the company in the sum of Rs 360703 4 0 by an order of assessment dated November 131950 and the company made payment of the amount due by it beyond the sums already paid It would be noticed that this financial year comprised two periods 1 before the Constitution viz April 1 1949 to January 25 1950 and 2 the post Constitution period from January 26 1950 to March 31 1950 There is now no controversy as regards the sales tax payable in respect of sales effected during the pre Constitution period The assessee company however raised a dispute that in respect of the post Constitution period it was not liable to pay any sales tax in respect of sales to buyers under which though the property in the goods passed within the State delivery of the goods was effected outside the State of Bihar for consumption outside that State on the ground that such sales were exempted from tax by article 2861a of the Constitution as it originally stood It addressed a formal letter to the Commissioner of Commercial Taxes Bihar on December 30 1952 making this demand enclosing a statement showing full particulars of the goods sold the bill numbers the date and the amount etc to enable the refund claimed to be calculated The assessee company followed it up by a formal petition for review of the assessment order by filing a revised return under section 122 of the Bihar Sales tax Act together with an application for refund The departmental authorities rejected these applications by order dated July 20 1953 Further proceedings before the department by way of revision etc failed to secure to the assessee company the relief which it claimed and thereafter it filed an application under articles 226 and 227 of the Constitution before the High Court of Patna praying for the issue of a writ to quash the order of assessment dated November 30 1950 and the orders rejecting the prayers for review reassessment and refund and for a direction to the departmental authorities to refund the sum realised by them in so far as the tax related to sales as a result of which goods were delivered outside the State of Bihar 279 The learned Judges of the High Court held that the order of the Superintendent of Sales tax Singhbhum dated November 13 1950 should be set aside and that the matter should go back to the Superintendent to make a reassessment according to law for the post Constitution period A further direction was added requiring the respondent to refund to the assessee so much of the tax as had been paid in excess of the amount of reassessment to be made by the Superinten dent in accordance with the law as laid down by the Court In formulating the law applicable the learned Judges drew a distinction between sales as a direct result of which goods were delivered in a State outside the State of Bihar and consumed in that State and those cases in which the goods thus delivered were not consumed in the State of first destination but were re exported from the State of first destination to other States They held that the first category of sales were covered by the Explanation to article 286 1a of the Constitution and were inside the State of first delivery and consequently outside the State of Bihar within the meaning of the Article and therefore exempt from tax by the Bihar State In regard however to the second category of sales it was held that they were not within the Explanation and were therefore outside the constitutional exemption under article 2861a The assessee company not being satisfied filed an application to the High Court for a Certificate of fitness under articles 132 and 133 of the Constitution but this having been rejected they applied to and obtained special leave from this Court under article 136 of the Constitution and that is how the appeal is now before us Three points were urged before us by Mr B C Ghose learned Counsel for the appellants 1 that on a proper construction of article 2861a and the Explanation thereto as it stood before the Article was amended by the Constitution Sixth Amendment Act 1956 every sale as a direct result of which goods were delivered for consumption outside the State was not within the taxing power of the State in which the 280 goods were at the time of the sale and in which property passed as a result thereof and that it was immaterial whether the delivery was for the purpose of consumption in the State of first destination or whether the delivery in such State was not for the purpose of consumption therein but for re export to other States 2 that even if article 2861a exempted only sales in which as a direct result of the sale the goods were delivered for the purpose of consumption in the State of first destination on the pleadings and the evidence before the Court the assessee company must be taken to have established that all the sales effected by it and in regard to which exemption from payment of tax was claimed conformed to this requirement 3 a narrower submission that even it be that to fall within the Explanation the delivery has to be for the Purpose of consumption in the State of first destination the learned Judges of the High Court erred in requiring the assessee company to prove not merely that the goods were delivered for the purpose of consumption but further that the goods so delivered were actually consumed within that State We shall now deal with these points in that order Article 2861a together with the Explanation on whose construction the first point depends ran in these terms Article 2861 No law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place a outside the State or b Explanation For the purposes of sub clause a a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State The scope and the purpose of this Explanation was 281 discussed and explained by this Court in The State of Bombay vs Unitea Motors India Ltd 1 and it is the passage in this judgment extracted below on which reliance was placed by the learned Counsel in support of his submission The authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving inter State elements which would avoid the doubts and difficulties arising out of the imposition of sales tax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution This they did by enacting clause 1 a with the Explanation and clause 2 of Article 286 Clause 1a prohibits the taxation of all sales or purchases which take place outside the State but a localised sale is a troublesome concept for a sale is a composite transaction involving as it does several elements such as agreement to sell transfer of ownership payment of the price delivery of the goods and so forth which may take place at different places To solve the difficulty an easily applicable test for determining what is an outside sale had to be formulated and that is what in our opinion the Explanation was intended to do It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place notwithstanding the property in such goods passed in another State An outside sale or purchase is explained by defining what is an inside sale and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test Are the goods actually delivered in the taxing State as a direct result of a sale or purchase for the purpose of consumption therein Then such sale or purchase shall be deemed to have taken place 1 1081 36 282 in that State and outside all other States The latter States are prohibited from taxing the sale or purchase the former alone is left free to do go Multiple taxation of the same transaction by different States is also thus avoided It might be mentioned that this portion of the judgment is unaffected by the dissent expressed in the later decision in The Bengal Immunity Company Ltd vs The State of Bihar 1 The argument based upon this passage was broadly on these lines Article 286 1a imposes a ban on the legislative power to levy a tax on sales which are outside the taxing State What sales are outside is not easy to decide because that depends upon the situs of a sale which cannot in most cases be located in any one place with certainty being dependent on a variety of factors which might or might not converge The Constitution makers did not directly define what was meant by a sale that was outside the State but achieved the same purpose by explaining an inside sale with the result that what was not an inside sale should be held to bean outside sale It must however be pointed out that it was not disputed that the terms of the Explanation would not be satisfied unless the delivery was for the purpose of consumption therein ie in the State of first destination If the terms of the Explanation were satisfied the State of delivery cum consumption to coin a convenient expression to designate the State in which goods are delivered as a direct result of the sale for the purpose of consumption therein used in the Explanation would have power to tax the sale as being one fictionally inside it In such an event all the other States in India barring that State would be prevented from taxing that sale because the sale would be outside those States This however it was urged would not exhaust the operation of the Explanation but further that the Explanation was exhaustive of what the Constitution makers conceived to be a sale which alone may be the subject of tax by a State The deduction learned Counsel made from these premises was twofold 1 that 1 283 in cases where goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first destination the conditions of the Explanation were satisfied and the sales being outside the State of Bihar could not be taxed by that State So far there is no dispute and indeed the learned Judges of the High Court have subject to a matter of detail to which reference will be made later accepted the contention of the assessee 2 a further consequence that in cases where goods were delivered as a result of the sale outside the State of Bihar but not for the purpose of consumption in such State of first destination the terms of the Explanation were no doubt not satisfied and consequently the sale was not inside such State of delivery and indeed not inside any State in India within the Explanation but that such sales also must be held to be outside every State in India within article 286 1a The learned Judges of the High Court repelled this contention and in our opinion correctly The passage in the judgment of the United Motors case extracted earlier dealt with Explanation sales and with none else When the terms of the Explanation were satisfied such sales were by a fiction deemed to be inside the State of delivery cum consumption and therefore outside all other States In such cases therefore only the State inside which the sale is deemed to take place by virtue of the Explanation is exempt from the ban imposed by article 2861a All other States would be subject to that ban in respect of such sales The learned Chief Justice however did not in the passage extracted deal with the case of sales which did not satisfy the terms of the Explanation The situs of what might be termed 1 non Explanation sales has therefore to be determined independently of the terms of the Explanation Such sales would be exempt from tax only if the sale took place outside the State but not otherwise The next question is does a sale take place outside the State where as a result of the contract of 284 sale the property in the goods passes to the purchaser within the State in other words is a sale completed by the passing of property within the State not inside a State for the more reason that as a direct result of the sale the goods are delivered outside the State The answer depends on the meaning to be attributed to the words a sale or purchase which has taken place outside the State occurring in the body of article 286 1 The expression outside the State is capable of being understood in more senses than one It could be understood as comprehending cases where no element or ingredient which constitutes a sale takes place within the State in other words as applying solely to those cases where there exists no territorial nexus between the State imposing the tax and the sale Obviously this could not have been intended to be incorporated in article 2861 because the tax in such cases would be beyond the legislative power of the State under Entry 54 of the State List read with article 246 of the Constitution The expression outside has therefore to be understood not as a sale so outside as not to have any territorial connection between the State in question and the sale but in a somewhat narrower sense The real difficulty arises in ascertaining the precise content of the narrower sense in which the word is used as meaning a sale in substance outside the State though there might be some elements of the sale which if the exemption under article 2861a were not enacted would enable a State to levy a tax on the sale on the ground that it was within the legislative power of the State under article 246 read with Entry 54 As already pointed out the situs of a sale is not easy to determine and several factors which constitute a completed transaction of sale including the delivery of the goods lay claim to be considered as in themselves constituting sufficient next to justify their being treated as determining the locus of a sale Thus merely by way of illustration the place where the goods are at the time of the contract of sale the place where the contract of sale is concluded the place where the property in the goods passes and that 285 in which the delivery takes place compete for recognition as constituting the locus of a sale Before the Constitution these and other similar factors were treated as affording sufficient territorial connection to endow the State in which any of the events occurred with legislative competence to tax the sale This led to a multiplicity of the taxation of the same transaction of sale by a plurality of States with the result that the consumer was hard hit and trade itself and national economy suffered in the process It has been pointed out that article 2861a was designed to counteract that state of affairs If a single State was designed to have the power to tax any particular transaction of sale the question that next falls to be considered is the determination of that State in regard to which it could be predicated that the sale in question was not outside that State or in other words the determination of the particular State in regard to which it could be said that the sale was inside that State The key to the problem is afforded by two indications in the Article itself 1 the opening words of Article 2861 which speak of a sale or purchase taking place and 2 the non obstante clause in the Explanation which refers to the general law relating to sale of goods under which property in the goods has by reason of such sale or purchase passed in another State These two together indicate that it is the passing of property within the State that is intended to be fastened on for the purpose of determining whether the sale in question is inside or outside the State and therefore subject to the operation of the Explanation that State in which property passes would be the only State which would have the power to levy a tax on the sale As was explained in the recent decision of this Court in Burmah Shell Oil Storage Distributing Co of India Ltd vs The Commercial Tax Officer 1 By sale here article 2861a is meant a completed transaction by which property in the goods passes Before the property in the goods passes the contract 1 CA 751 of 1957 CA 10 of 1958 Unreported 286 of sale is only executory and the buyer has only a chose in action The Constitution thinks in terms of a completed sale by the passing of property and not in terms of an executory contract for the sale of goods Notwithstanding that is not an outside sale the power of the State to tax might be negatived by the operation of the Explanation which by its non obstante clause shifts the situs of the sale and renders the sale transaction one within the delivery cum consumption State ie as the State in which the sale transaction must be deemed to take place Where the terms of the Explanation are satisfied the sale transaction will by a legal fiction created by it be deemed to take place inside the State of delivery and therefore outside the State in which the property passes The conclusion reached therefore is that where the property in the goods passes within a State as a direct result of the sale the sale transaction is not outside the State for the purpose of article 2861a unless the Explanation operates We need also add that the power of the State to impose the tax might still not be available unless the transaction in question is unaffected by the other bans imposed under sub cl 1b 2 and 3 of article 286 The submission therefore of learned Counsel for the appellants that in respect of non Explanation sales the State of Bihar has no power to levy a tax by reason of such sales being outside the State within article 2861a must be rejected The second contention urged by the learned Counsel for the appellant was that even assuming he was wrong on the first point all the sales by the assessee company fell within the terms of the Explanation to article 2861a being sales as a direct result of which the goods were delivered for consumption in the State of first destination and that the learned Judges of the High Court were in error in considering that some of the sales did not conform to this requirement In support of this submission learned counsel drew our attention to two matters He first referred us to the application dated December 30 1952 made on behalf 287 of the assessee company to the Commissioner of Commercial Taxes Bihar Patna in which the claim for refund of the tax paid was rested on the following ground After getting out that the tax on sales effected between the period January 26 1950 to March 31 1950 was not assessable by virtue of article 286 of the Constitution the application stated Total sales of raw materials of copper and brass sheet and circles sold by us and despatched under railway receipts for buyers consumption are as follows Then followed the sales effected and the tax paid in respect of the sales The claim in this form was annexed to and made part of the petition to the High Court under article 226 and 227 of the Constitution and in paragraph 9 of the petition this letter was referred to and a copy thereof was incorporated and marked as 1A In this paragraph which was the other matter relied on the claim for refund was said to be on sales made to buyers outside Bihar State for consumption Learned Counsel strongly pressed upon us that paragraph 9 and the annexure had clearly asserted that the sales which were the subject of the claim for refund involved a delivery of the goods outside the State of Bihar for consumption in the State of first destination and the State of Bihar not having filed any counter affidavit challenging the correctness of these allegations the High Court should have held that the terms of the Explanation were satisfied and should have ordered the refund claimed We however consider that this submission is without force Neither in the claim put forward in Exh A nor in para graph 9 of the petition was any distinction drawn between sales under which deliveries were effected outside the State of Bihar for the purpose of consumption in the State of first destination and those in which the deliveries outside the State were effected for the purpose of consumption not in the State of first destination but in other States In fact this was made clear in the later paragraphs of the petition to the High Court from which it is apparent that the assessee company made a claim for tax exemption in 288 respect of sales in which the delivery took place outside the State of Bihar whether the delivery was for the purpose of consumption in the State of first destination or otherwise In paragraph 171 of the petition to the High Court the assessee stated the petitioner was not liable to pay tax on goods delivered outside the State of Bihar which was also for consumption outside the State of Bihar and again in clause iii of the same paragraph this was repeated the goods being outside the State of Bihar delivered outside the State of Bihar and consumed outside the State of Bihar were not liable to sales tax by the State of Bihar and similarly in cl v of the same paragraph a reference was made to goods delivered outside the State of Bihar for consumption outside the State of Bihar The same idea is emphasized in paragraph 19 also which contained the prayer of the petition On these averments it is clear that the claim made by the assessee was that to invoke the exemption contained in article 2861a it was sufficient that the goods were delivered outside the State of Bihar and that it was immaterial whether the delivery was for the purpose of consumption in the State of first destination or otherwise This involved the same argument which was raised by the learned Counsel that we have dealt with earlier The learned Judges of the High Court were therefore right in drawing a distinction between the two types of sales which we have already indicated The last point that was urged by the learned Counsel was that the learned Judges of the High Court erred in requiring the assessee to prove that the goods delivered outside the State of Bihar were actually consumed in the State of first destination before the exemption from tax could be availed of In their judgment now under appeal the learned Judges have stated The petitioner would not be entitled to exemption if the goods were not consumed in the State of first destination but were re exported from the State of first destination to other States Learned Counsel for the appellant complained that 289 under the Explanation to article 2861a there need be no proof of actual consumption of the goods delivered in the State of first destination but that the Explanation was satisfied if the purpose of the delivery tinder the sale was for consumption in that State If after a sale that satisfied that requirement viz for the purpose of consumption in the State of first destination the buyer under such a sale for his own purposes reexported the goods that was not a matter with which the seller was concerned and would not affect the character of the sale as one falling within the Explanation to article 2861a Learned Counsel therefore urged that the learned Judges of the High Court went wrong in requiring proof on the part of the assessee that the goods were actually consumed within the State of first delivery outside Bihar and that this was an unwarranted addition to the requirements of the Explanation We consider this submission well founded and indeed the learned Counsel for the respondent did not dispute that the actual order of the High Court went beyond the terms of the Explanation to article 2861a The order of the High Court will therefore be modified by making it clear that if the goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery the assessee would be entitled to exemption of the sales tax imposed and that it would not be necessary for the assessee to prove further that the goods so delivered were actually consumed in the State of first destination Subject to this modification the appeal fails but in the circumstances of the case there will be no order as to costs SHAH J We agree with the conclusion of Mr Justice Rajagopala Ayyangar J but because our approach to the question is somewhat different we propose to record our reasons separately The Bihar Sales Tax Act 1947 was enacted in exercise of legislative authority conferred upon the Provincial Legislatures by entry 42 in List II read 37 290 with section 1003 of the Government of India Act 1935 By section 2g of the Act sale was defined in so far as it is material as meaning any transfer of property in goods for cash or deferred payment or other valuable consideration provided provided further that notwithstanding anything to the contrary in the Indian Sales of Goods Act 1930 the sale of any goods i which are actually in Bihar at the time when in respect thereof the contract of sale as defined in section 4 of that Act is made or ii which are produced or manufactured in Bihar by the producer or manufacturer thereof shall wherever the delivery or contract of sale is made be deemed for the purposes of this Act to have taken place in Bihar Under entry 42 of List II of the Government of India Act 1935 the Provincial Legislatures could tax sales by selecting some fact or circumstance which provided a territorial nexus with the taxing power of the State even if the property in the goods sold passed outside the Province or the delivery under the contract of sale took place outside the Province Legislation taxing sales depending solely upon the existence of a nexus such as production or manufacture of the goods or presence of the goods in the Province at the date of the contract of sale between the sale and the Legislating Province could competently be enacted under the Government of India Act 1935 see the Tata Iron and Steel Co Ltd vs The State of Bihar and Poppatlal Shah vs The State of Madras 2 By article 286 of the Constitution certain fetters were placed upon the legislative powers of the States as follows article 286 1 No law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place a outside the State or b in the course of the import of the goods into or export of the goods out of the territory of India 1 2 291 ExplanationFor the purposes of sub cl a a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State 2 Except in so far as Parliament may by law otherwise provide no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter State trade or commerce Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall notwithstanding that the imposition of such tax is contrary to the provisions of this clause continue to be levied until the thirty first day of March 1951 3 No law made by the Legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent With a view to impose restrictions on the taxing power of the States under the pre Constitution statutes amendments were made in these statutes by the Adaptation of Laws Order By the Adaptation of Laws Order 1951 in the Bihar Sales Tax Act was incorporated with retrospective operation from January 26 1950 section 33 which provided 1 Notwithstanding anything contained in this Act a a tax on the sale or purchase of goods shall not be imposed under this Act i where such sale or purchase takes place outside the State of Bihar or 292 ii where such sale or purchase takes place in the course of import of the goods into or export of the goods out of the territory of India b a tax on the sale or purchase of any goods shall not after the 31st day of March 1951 be imposed where such sale or purchase takes place in the course of inter State trade or commerce except in so far as Parliament may by law otherwise provide 2 The Explanation to cl 1 of article 286 of the Constitution shall apply for the interpretation of sub cl 1 of cl a of sub section By this amendment on the taxing power of the Bihar State the same restrictions were engrafted on the pre Constitution statute as were imposed by article 286 of the Constitution upon post Constitution statutes This court has held in the Bengal Immunity Co Ltd vs The State of Bihar 1 that the operative provisions of the several parts of article 286 namely cl 1 a 1b and 2 and cl 3 were intended to deal with different topics and one could not be projected or read into another Therefore by the incorporation of section 33 in the Bihar Sales Tax Act read with article 286 notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale a cumulative fetter of triple dimension was imposed upon the taxing power of the State The Legislature of the Bihar State could not since January 26 1950 levy a tax on sale of goods taking place outside the State or in the course of import of the goods into or export of the goods out of the territory of India or on sale of any goods where such sale took place in the course of inter State trade or commerce By the Explanation to article 2861a which is incorporated by sub section 2 section 33 of the Bihar Sales Tax Act a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in another State In the State of Bombay vs The United Motors India Ltd 2 it was held that 1 2 293 since the enactment of article 2861a a sale described in the Explanation which may for convenience be called an Explanation sale is taxable by that State alone in which the goods sold are actually delivered as a direct result of sale for the purpose of consumption in that State The right to tax arises because the sale is deemed to take place in that State and outside all other States and the latter States are prohibited from taxing the sale the former alone is left free to do so The Bihar Sales Tax Act enacted in exercise of the power conferred by entry 42 of List II of the Government of India Act 1935 upon the Provincial Legislatures is saved by article 372 of the Constitution as existing law but by the combined operation of sub sections 1 and 2 of section 33 the Bihar State is incompetent to tax sales of goods in the course of imports into and exports out of the territory of India and after March 31 1951 sales of goods in the course of inter State trade or commerce In view of the exposition of the content of the Explanation to article 2861a by this court in the United Motors case 1 the Bihar State is also incompetent to tax Explanation sales where the goods are delivered in another State as a direct result of the sale for consumption in that State By this last ban to the extent provided by subs 1ai and sub section 2 of section 33 the State of Bihar is deprived of its power to tax sales but the ban does not wholly extinguish the power of the State to tax sales relying upon a real territorial nexus between the sale and the State In other words by enacting that a tax shall not be imposed under the Act when the sale takes place outside the State of Bihar in section 331ai only the power to tax Explanation sales which do not take place within the State of Bihar in taken away but not the power to tax non Explanation sales in which though under the general law of sale of goods the property passes outside the State there exists between the taxing power of the State and the sale a nexus as contemplated by the definition of sale in section 2g If the sale is one in which the goods have been delivered outside the State of 1 294 Bihar but not as a direct result of the sale or not for the purpose of consumption in the State of first delivery the sale will not be covered by the Explanation and the right to tax the sale if arising otherwise under the Act relying upon the territorial nexus will not be impaired by the prohibition imposed by cl 1ai of section 33 The right of the State of Bihar to tax a sale relying upon a real territorial nexus not being impaired by section 33 of the Act all sales as defined by section 2g of the Bihar Sales Tax Act are liable to be taxed except those falling within section 331aii section 332 and Explanation sales outside the State of Bihar The appellant company carries on the business of manufacturing copper and other mineral products in the State of Bihar It has its registered office and its place of business in the District of Singhbhum in the State of Bihar and is registered as a dealer under the Bihar Sales Tax Act 1947 The appellant company sent out its products to various places in India in the year of assessment ending on March 31 1950 and has paid the tax assessed by the Sales Tax Officer The appellant is now seeking to obtain a refund of the tax paid for the period between January 26 and March 31 1950 on the plea that the tax was paid under a misapprehension of the law The High Court in an application under article 226 of the Constitution directed the Sales Tax authorities to refund so much of the tax as was not proved to have been paid in respect of sales of goods delivered and consumed in the State of first destination On the goods delivered and consumed in the State of first destination outside Bihar the appellant could not be called upon to pay sales tax That is undisputed The appellant also claimed that on the goods delivered for consumption in the State of first delivery outside Bihar it was not liable to pay sales tax even if there was no evidence to prove that the goods were in fact consumed in such State In our judgment the High Court was in error in directing that the exemption provided by article 2861a read with the Explanation which was at the material time incorporated by section 33 in the Bihar Sales Tax Act by the Adaptation of 295 Laws Order 1951 only applied to all sales of goods delivered and consumed in the State of first destination If the goods were delivered for consumption it is immaterial whether they were in fact consumed in the State where they were delivered The power of the State to levy sales tax relying upon the territorial nexus between the taxing power of the State and the sale is impaired for reasons already set out to the extent to which it is restricted by the incorporation of article 2861ai and the Explanation thereto in that Act Therefore sales effected on or after January 26 1950 where goods are as a direct result of the sale delivered in another State for consumption in that other State are not liable to be taxed The directions issued by the High Court will therefore be modified as follows The order of the Superintendent of Taxes is set aside He is directed to grant refund of tax paid in the light of this judgment The appellant will be entitled to exemption from payment of tax if the goods are as a direct result of the sale delivered in another State for the purpose of consumption in that State Appeal dismissed subject to modification	The National Syndicate a Bombay firm acquired on January 11 1945 a tailoring business as a going concern for Rs 89321 which included the consideration paid for sewing machines and a motor lorry Soon after the purchase the respondent found it difficult to continue the business therefore closed its business in August 1945 Between August 16 1945 and February 14 1946 sewing machines and the motor lorry were sold at a loss The respondent closed its account books on February 28 1946 showing the two losses and writing them off For the assessment year 1946 47 the respondent claimed a deduction under section 102Vii of the Indian Income Tax Act The Appellate Tribunal held that the sales of machines and the motor lorry were made in the course of the winding up of the assessee s business after the business had been stopped and that therefore the deduction could not be claimed under section 102Vii Respondent moved the High Court and obtained an order under section 662 of the Income Tax Act and the following two questions were referred 1 Whether the Tribunal was justified in law in holding that the petitioner had carried on its business only till twenty eight day of August One Thousand Nine Hundred and Forty Five 2 Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in law in not allowing the sum of Rs 41998 Rupees forty one thousand nine hundred and ninety eight on sale of machines and Rs 3700 Rupees three thousand and seven hundred on the sale of lorry as a deduction from the total income of the applicant The High Court answered the first question in the affirma tive and the second question in the negative The Commissioner of Income tax questioned the finding of the High Court and came up in appeal by special leave and con tended that an allowance could only be claimed if sale of machines etc took place when the business was being continued and not if the business had come to a close The respondent on the other hand submitted that section 102Vii would be applicable 230 in a case where the business continued for a part of the account year even though the sale of machinery plant etc took place after the closure of the business during the course of the account year Held that if the profits or gains of a business for a particular year are to be taxed they must be computed for the whole year taking into account losses incurred during the same year provided that the business had been carried on by the assessee the building machinery or plant had been used for the purpose of the business the sale etc had taken place during the year of account and the loss had been brought into the books of the assessee and written off There is no other condition to be found expressly in the section or in the Act It is nowhere stated that the business of the assessee should have been carried on for the whole year or that the machinery or plant should have been used for the whole of the accounting period There are no words which would show that if the assessee worked only for a part of the year and then sold out the loss that he incurred was not a business loss or that he must pay tax on the small profit that he might have made and bear the loss in addition The Liquidators of Pursa Limited vs Commissioner of Income Tax Bihar Commissioner of Income tax vs Express Newspapers Ltd distinguished Indian Iron Steel Co Ltd vs Commissioner of Incometax Bengal Commissioner of Income tax vs Shaw Wallace Co Ltd 1932 LR 59 IA 206 referred to
ases Nos 20 and 21 of 1950 Appeals under article 1321of the Constitution of India from the judgment and order dated the 19th May 1950 of the High Court of Judicature at Bombay Dixit and Shah JJ in Confirmation Case No 4 of 1950 and Criminal Appeals Nos 190 and 199 of 1950 arising out of judgment dated the 13th March 1950 of the Court of the Special Judge at Ahmedabad in Special Cases Nos 2 and 3 of 1949 NC Chatterjee and Ram Lal Anand Hardyal Hardy and SL Chibber with them for the appellants 712 MC Setalvad Attorney General for India G N Joshi with him for the respondent AA Peerbhoy and JB Dadachanji lot the Intervener May 20 The judgment of Mehr Chand Mahajan Mukherjea Das and Chandrasekhara Aiyar JJ was deliv ered by Das J Patanjali Sastri delivered a separate dissenting judgment PATANJALI SASTRI CJ I regret I am unable to a gree with the reasoning and conclusion of my learned brother Das J whose judgment I have had the advantage of reading The appellants were convicted and sentenced to death and varying terms of imprisonment by the Special Judge Ahmeda bad on charges of murder and other offences under the Indian Penal Code the Arms Act and the Bombay Police Act The Special Judge was appointed by a notification issued under the Bombay Security Measures Act 1947 hereinafter referred to as the impugned Act and on August 6 1949 the State Government in exercise of the powers conferred by section 12 of the impugned Act directed the Special Judge to try the case of the appellants who were implicated in what was known as the Central Bank Robbery Case Charges were framed on January 13 1950 without any preliminary enquiry and committal by a Magistrate which had been dis pensed with by the impugned Act and seventeen witnesses for the prosecution were examined before January 26 1950 when the Constitution came into force The proceedings continued and after the examination of sixty witnesses in all ended in the conviction of the appellants on March 13 1950 Separate appeals were preferred by the present appel lants to the High Court which however confirmed the con viction and sentence in each case An objection that the trial was illegal as the impugned Act was void under article 13 1 of the Constitution read with article 14 was over ruled on the ground that 713 those provisions had no retrospective operation and did not affect proceedings already started in the Court of the Special Judge the learned Judges followed the decision of a Special Bench of their own Court in In re Keshav Madbar Menon1 which has since been affirmed by this Court in It is urged on behalf of the appellants that the deci sion relied on by the High Court is distinguishable and that the present case is governed by the decision of this Court in The State of West Bengal vs Anwar Ali Sarkar2 to the effect that section 5 of the Bengal Act which is in identi cal terms with section 12 of the impugned Act is discrimi natory and void in so far a any rate as it empowers the State Government to direc cases to be tried by a Special Court under a special procedure Accordingly it was claimed that the Special Judge had no jurisdiction to try the appellant applying the special procedure prescribed by the impugned Act Granting however that section 12 of the impUgned Act must in view of the decision in Anwar Ali Sarkar case 2 be held to be discriminatory and void in so far as it empow ers the State Government to refer individual cases to a Special Judge for trial it does no seem to me to follow that the trial of the appellants which had validly started before the Special Judge who had been duly empowered to try the case is vitiated by reason of the Constitution subse quently coming into force It is to be noted that the West Bengal case2 was argued on the basis that article 12 of the Constitution was applicable to the proceeding from their inception although the notification directing the trial of some of the persons accused in that case was issued on the day before the commencement of the Constitution The posi tion here is different The appellant s case was sent to the Special Judge for trial by notification dated 6th August 1949 and the Judge took cognisance of it framed the charges and proceeded with the trial to a considerable extend before the commencement of the Constitution on 26th 1 1950 52 Born LR 540 2 5952 SCR 284 714 January 1950 There could be no question therefore of the appellants fundamental right under article 14 being in fringed up to that point as it has been held by this Court in Keshavan Madhava Menon s case1 that the provisions of the Constitution relating to fundamental rights have no retrospective operation and do not affect a criminal prose cution commenced before the Constitution came into force On and after 26th January 1950 the appellants no doubt had the right to the equal protection of the law but as has been repeatedly pointed out that right only meant that the State including the executive and the legis lature should apply the same law substantive and procedur al to all persons alike in the same situation without discrimination It is said that after the commencement of the Constitution persons who commit the same offences with which the appellants stood charged would according to Anwar All Sarkar s case 2 not be liable to be tried by the Special Judge under the special procedure and if so the trial of the appellants too could not be continued by the Special Judge under such procedure after 26th January 1950 because such of the departures from the normal procedure of trial under the Criminal Procedure Code as were applied to the appellants during the rest of their trial being disad vantageous to them in some respects involved discrimination against them It is therefore claimed that the continued application of such discriminatory procedure after the Constitution came into force rendered the trial and the resulting conviction illegal I am unable to agree In the first place as already pointed out equal protection of the laws postulates persons in the same situation and in the same circumstances claiming that the same law should be applied to them Can it be said that the appellants whose trial by the Special Judge had been lawfully com menced and was pending at the commencement of the Constitu tion were in the same situation with persons who committed the same offences after the Constitution came into 1 2 715 force It seems to me that the situation and circumstances are different in the two cases and no complaint of dis criminatory treatment by reason only of the trial having been continued under the special procedure can be sustained even assuming that the ordinary procedure under the Crimi nal Procedure Code became applicable to the appellants on and after 26th January 1950 Such assumption however seems to be open to ques tion Section 1 sub section 2 of the Criminal Procedure Code enacts that Nothing herein contained shall affect any special jurisdiction or power con ferred or any special form of procedure prescribed by any other law for the time being in force The juris diction conferred on the Special Judge by the impugned Act which as pointed out already was perfectly valid and fully operative down to the 26th January 1950 thus remained unaffected and application to the appellants of the ordinary procedure prescribed by the Code was excluded It cannot therefore be said that on the 26th January 1950 the appellants were in a position to claim that they were enti tled to be tried under the ordinary procedure like those who committed the same offences after that date or who having committed them before such date had not been direct ed to be tried by the Special Judge It was said that sec tion 1 2 of the Criminal Procedure Code pre supposes a valid law conferring a special juris diction or prescribing a special form of procedure and inasmuch as such parts of the special procedure as could still be applied to trials continued after the commencement of the Constitution are void under article 131 read with article 14 section 12 of the Code could not stand in the way of the appellants being tried under the ordinary procedure This argument seems to me to beg the question It assumes that the special procedure is discriminatory and void to the extent to which it could have been applied to the trial of the appellants after 26th January 1950 But the assumption would not be valid unless the appellants could be tried 716 under the normal procedure after 26th January 1950 in which case alone they could say Why not try us under the Code why discriminate But having regard to section 1 2 of the Code the normal procedure would become applica ble only if the special procedure is excluded as being discriminatory and void The argument thus proceeds in a circle Again it is difficult to see on what principle the jurisdiction of the Special Judge validly created and exercised over the appellants case could cease to continue on and after 26th January 1950 According to the appel lants contention the special procedure prescribed by the impugned Act became discriminatory and void after 26th Janu ary 1950 and therefore inapplicable to what remained of their trial But could this circumstance affect the compe tence of the Special Judge to try their case of which he had validly taken cognisance In Keshoram Poddar vs Nundo Lal Mullick1 the Judicial Committee of the Privy Council held that the cessation of the jurisdiction of a Rent Control Tribunal after 31st March 1924 over properties beyond a certain rental value did not affect its power to deal with a case after such cessation if the case was within its juris diction when it was filed and related to a period prior to such cessation Their Lordships observed The application of the Act is when the parties begin to move under it This was done in the present case before March 1924 The rest is merely the working out of the application The position here seems to me to be closely analogous The Special Judge was competent to try the appellants case when the trial commenced before 26th January 1950 and the impugned Act was validly applied to the case The rest was merely working out the application of the impugned Act I find it diffi cult to see why the competency of the Special Judge to try the case should cease after 26th January 1950 any more than that of the Rent Control Tribunal to deal with a pend ing matter after 31st March 1924 when its jurisdiction was restricted 1 1927 54 IA152 717 If then the jurisdiction of the Special Judge to continue the trial of the appellants remained unaffected by the advent of the Constitution it would be impracticable for the Judge to switch the pending trials to a different procedure from 26th January 1950 so as to give effect to the equal protection claims of under trial prisoners The impugned Act for instance enacts that Notwithstanding anything contained in the Code the trial of offences before a Special Judge shall not be by jury or with the aid of assessors section 20 The trials having been held so far without a jury or assessors as the case may be it would obviously be impossible in such cases to continue them after 26th January 1950 with a jury or with the aid of asses sors where such trials are required to be so conducted under the ordinary procedure Again the impugned Act provides that no case shall be transferred from any Special Judge a necessary consequence of the exclusive jurisdiction of the Special Judge and the special mode of proceeding prescribed for him If a right of transfer under section 526 of the Code were to be recognised as accruing after 26th January 1950 to persons undergoing trial before the Spe cial Judge the scheme of trial by Special Courts may well break down The alternative courses open to the Court would therefore seem to be either to hold that article 131 read with article 14 does not affect pending trials even in respect of procedural matters as it has been held not to affect such trials in respect of substantive rights and liabilities accrued before the date of the Constitution in Keshavan Madhava Menon s case1 or to go back on that decision and give those provisions of the Constitution retrospective effect I am clearly of opinion that the principle of the above said decision must rule the present case That principle has been stated thus Article 131 cannot be read as obliterating the entire operation of the inconsistent laws or to wipe them out altogether from the statute book for to do so will be to give them retrospec tive effect which we have said they do not possess Such laws exist for all past transactions and for enforcing all 1 718 rights and liabilities accrued before the date of the Con stitution Italics mine Indeed the last few words are apt to cover the present case though as a party to that decision I am sensible that we did not have in mind a case precisely like the one now before us But it is well to remember that over fine distinctions sometimes lead to unsuspected traps In the foregoing discussion I have assumed that such departures from the normal procedure as were still applica ble to what remained of the appellants trial after the 26th January 1950 were so materially prejudicial to them as to amount to a denial of the equal protection of the laws within the meaning of article 14 of the Constitution I am however by no means satisfied that that is the position One of these deviations relates to the recording of evi dence 1 he SpeCial Judge is empowered to record only a memorandum of the substance of the evidence of each witness examined whereas the Criminal Procedure Code requires the evidence to be recorded in full Another relates to the summoning of witnesses for the defence the Special Judge being given a discretion to refuse to summon a witness if satisfied after examination of the accused that the evidence of such witness will not be material section 13 while under section 2571of the Code the Magistrate has the discretion to refuse to summon witnesses if he considers that the application for the issue of process for compelling the attendance of any witness is made for the purpose of vexa tion or delay or for defeating the ends of justice And lastly the impugned Act provides that no court shall have jurisdiction to transfer any case from any Special Judge section 18 3 whereas transfers under section 526 of the Code are allowed on certain specified grounds The more important departures from the procedure under the Code such as dispensation of preliminary enquiry and committal and the elimination of jury and assessors had already been applied and validly applied to the trial of the appellants before the Constitution came into force and there can be no ques tion of such departures vitiating the trial I am unable to regard the 719 procedural variations in the recording of evidence and the summoning of witnesses as so serious as to amount to a denial of the equal protection of the laws within the mean ing of article 14 Even if the appellants were to be tried under the normal procedure of the Code after 26th January 1950 the omission to record the evidence in full and the refusal to summon a witness in the circumstances mentioned in section 13 may well be regarded as mere irregularities curable under section 537 of the Criminal Procedure Code As regards transfer it does not as already pointed out fit in with the scheme of trial before a Special Judge and unless any system of trials by Special Courts is to be condemned as violative of article 14 the decision of this Court in Kathi Raning Rawat vs The State of Saurashtra1 shows that it can be validly instituted in appropriate circumstances a prohibition of transfer cannot be regarded as falling within the inhibition of article 14 I have emphasised elsewhere and I do so again that in applying the dangerously wide and vague language of the equality clause to the concrete facts of life a doctrinaire approach should be avoided In all the circumstances of this case I do not feel impelled to set aside the trial and conviction of the appel lants and I accordingly dismiss the appeals DAs J These two appeals are from the judgment of a Division Bench of the Bombay High Court Dixit and Shah JJ dated May 19 1950 dismissing the appeals preferred by the appellants against the order made by Shri MS Patti on March 13 1950 as the Special Judge appointed under the Bombay Public Security Measures Act 1947 whereby he con victed and sentenced them to death and to different terms of imprisonment under the different charges The prosecution case is shortly as follows On the morning of May 26 1949 between the hours of 10 30 am and 11 am in the city of Ahmedabad the two appellants with another companion after injuring by gunshot the driver and a peon of the Central 1 720 Bank of India Ltd forcibly removed motor van No BY 4388 belonging to the bank in which a large sum of money was being carried from its head office at Gandhi Road to its branch office at Maskati After abandoning the motor van at a distance of threefourths of a mile the three gunmen forcibly took possession of the bicycles of some persons who were riding the same and continued their escape In course of their flight they fired and injured several people Eventually however the two appellants were arrested by the police but their companion made good his escape The driver and the peon of the bank who had been injured succumbed to their injuries one dying on the spot and the other in the hospital on the next day After investigation the Ahmedabad Police on July 19 1949 submitted to the City Magistrate Ahmedabad two charge sheets Nos 183 and 188 A against the two appellants and the then unknown absconder in respect of several of fences committed in course of the transaction that took place on May 26 1949 The charge sheet No 183 was in respect of offences under sections 394 397 302 307 read with section 84 of the Indian Penal Code section 19 e of the Arms Act and section 68 1 of the Bombay District Police Act The charge sheet No 183 A was in respect of offences punishable under sections 307 392 read with sec tion 84 of the Indian Penal Code section 19 e of the Arms Act and section 68 1 of the Bombay District Police Act In each of these charge sheets there was appended a note to the effect that the District Superintendent of Police Ahmedabad City had requested the District Magistrate Ahmedabad to move the Government of Bombayor the constitu tion of a Special Court to hear the cases and that the said charge sheets might be transferred to the Special Court as and when one was so constituted In view of this note the City Magistrate did not hold any enquiry but only re manded the appellants By a Notification dated August 6 1949 the Government of Bombay exercising its powers under section 10 ofthe Bombay Public Security Measures Act 1947 721 constituted a Special Court of criminal Jurisdiction for the Ahmedabad District and under section 11 of that Act appoint ed Shri MS Patil District and Sessions Judge Ahmedabad as a Special Judge to preside over the Special Court By another Notification made on the same date the Government of Bombay in exercise of powers conferred by section 12 the Act directed the Special Judge to try two particular cases namely the Postal Van dacoity case in which there were 9 accused and the Central Bank robbery with murder case in which the two appellants before us were the accused under the two charge sheets In view of the above Notification the City Magistrate Ahmedabad transferred the two cases against the appellants to the Court of the Special Judge and they came to be numbered as cases Nos 2 and 3 respectively of 1949 On December 31 1949 the Government of Bombay directed that the trial of the appellants should be held by the Special Judge in the Ahmedabad Central Prison There was no order of committal by any Committing Magistrate nor was there any preliminary enquiry by the Special Judge On January 13 1950 the Special Judge consolidated the two cases against the appellants with a view to holding a joint trial On the same day he framed five several charges namely four under different sections of the Indian Penal Code and one under section 19 e of the Indian Arms Act and section 68 1of the Bombay District Police Act On January 19 1950 the first prosecution witness was examined and up to January 25 1950 seventeen prosecution witnesses were examined The Constitution came into operation on January 26 1930 The hearing proceeded thereafter and the deposi tion of the last witness was recorded on February 9 1950 Altogether sixty two witnesses were examined The two appellants were examined under section 342 of the Code of Criminal Procedure on February 10 1950 One handwriting expert was examined as a Court witness on February 13 1950 and arguments for the prosecution commenced on the following day After the conclusion of the 722 arguments for the defence on February 23 1950 the Special Judge delivered his judgment on March 13 1950 According to his findings both the appellants had committed eleven different offences punishable under several penal provisions of law as specified by him and he convicted both the appel lants of the said eleven offences and sentenced both of them to death under section 30234 Indian Penal Code and to transportation for life under section 30734 Indian Penal Code and to various terms of imprisonment under various other sections of the Indian Penal Code Arms Act and Bombay District Police Act The capital sentences were of course subject to the confirmation by the High Court Both the appellants appealed to the Bombay High Court The appeals along with the reference for the confirma tion of the sentences of death were heard together by Dixit and Shah JJ who by their judgments dated May 19 1950 dismissed the appeals and confirmed the sentences of death The appellants applied to the High Court for certificates under articles 132 1 and 134 1 c of the Constitution to enable them to appeal to this Court The High Court Bhagwati and Dixit JJ however granted the appellants a certificate only under article 132 1 but declined to issue any under article 134 1 c The appellants thereupon filed the present appeals pursuant to the certificate under article 132 1 A petition was filed before us under arti cle 132 3 for leave to urge as an additional ground that the trial was vitiated by reason of misjoinder of charges No such ground was actually advanced before the High Court and as this Court did not think fit to permit the appellants to raise a new point at this stage it disallowed that peti tion Accordingly these appeals must be limited to attack ing the judgment of the High Court on the ground that a substantial question of law as to the interpretation of the Constitution has been wrongly decided The only substantial question of law as to the interpre tation of the Constitution urged before us is that 723 the Bombay Public Safety Measures Act 1947 or at any rate that part of section 12 of that Act which authorises the State government to direct specific cases to be tried by a Special Judge appointed under that Act offends against the equal protection of law guaranteed by article 14 of the Constitution and is as such void under article 13 on the principle laid down by this Court in the cases of The State of West Bengal vs Anwar Ali Sarkar1 and Kathi Raning Rawat vs The State of Saurashtra2 In order to appreciate the point in issue it is necessary to consider in some detail the provisions of the impugned Act The Act came into force on March 23 1947 It was then instituted as An Act to consolidate and amend the law relating to public safety maintenance of public order and the preservation of peace and tranquillity in the Province of Bombay The preamble recited the expediency of consoli dating and amending the law relating to those several mat ters By section 9 3 the Act was to remain in force for a period of three years The Act was amended by Bombay Act I of 1950 and amongst other things the words security of the State maintenance of public order and maintenance of supplies and services essential to the community in the State of Bombay were substituted for the words public safety maintenance of public order and the preservation of peace and tranquillity in the Province of Bombay occurring in the long title and preamble of the Act The word six was substituted for the word three in section 23 The remaining sections of the Act are grouped under several heads Thus sections 3 A1 to 5B are grouped under the heading Restrictions of movements etc A contravention of an order made under some of these sections is made an offence punishable as mentioned therein The subject of collective fines is dealt with under that heading in section 6 Control of camps etc and uniforms are covered by sections 7 and 8 each of which makes a contra vention 1 2 94 724 of any order made under it an offence Section 9 prescribes whipping as a punishment for certain offences under certain Acts in addition to any other punishment to which the of fender may be liable under those Acts Section 9A is set down under the heading Control of Publications etc and section 9B under the heading Control of Commodities etc Each of those sections makes a contravention of any order made thereunder an offence punishable as provided therein Sections 10 to 20 which are collected under the heading Special Courts are material for the purposes of the point in issue before us and will have to be carefully noted The rest of the sections are set out under the headings Miscel laneous and Amendments to Acts Turning to the group of sections under the heading Special Courts it will be noticed that section 10 like section 3 of the West Bengal Special Courts Act 1950 and section 9 of the Saurashtra State Public Safety Measures Ordinance 1948 authorises the government by notification in the Official Gazette to constitute Special Courts of criminal jurisdiction for such area as may be specified in the notification Section 11 which corresponds to section 4 of the West Bengal Act and section 10 of the Saurashtra Ordinance empowers the government to appoint as a Special Judge to preside over a Special Court any person possessing the requisite qualifications mentioned therein Section 12 is expressed in precisely the same terms in which section 51of the West Bengal Act and section 11 of the Saurashtra Ordinance are expressed namely A Special Judge shall try such offences or class of offences or such cases or class of cases as the Provincial Government may by general or special order in writing direct It will be noticed that the offences mentioned in the above section are not limited to offences created by this Act only but also cover offences under any other law eg the Indian Penal Code Section 13 runs thus 725 13 1 A Special Judge may take cognizance of of fences without the accused being committed to his Court for trial 2 A Special Judge shall ordinarily record a memoran dum only of the substance of the evidence of each witness examined may refuse to summon any witness if satisfied after examination of the accused that the evidence of such witness will not be material and shall not be bound to adjourn any trial for any purpose unless such adjournment is in his opinion necessary in the interests of justice 3 In matters not coming within the scope of sub sections 1 and 2 the provisions of the Code in so far as they are not inconsistent with the provisions of sections 10 to 20 shall apply to the proceedings of a Special Judge and for the purposes of the said provisions the Court of the Special Judge shall be deemed to be a Court of Session Under section 14 the Special Judge may in his discretion direct the evidence of a person who is not in a position to attend the Court to be recorded on commission Enhanced punishments are provided for certain offences by section 15 as follows Notwithstanding anything contained in the Indian Penal Code whoever commits an offence of attempt to murder may in lieu of any punishment to which he is liable under the said Indian Penal Code be punishable with death and whoever commits an offence of voluntarily causing hurt by stabbing may in lieu of any punishment to which he is liable under the said Indian Penal Code be punishable with death or transportation for life Section 16 authorises the Special Judge to pass any sentence authorised by law and section 17 prescribes a special rule of procedure for recovery of fines Section 18 gives a right of appeal to a person convicted on a trial held by a Special Judge within a period of fifteen days from the date of sentence and also empowers the High Court to call for the records of the proceedings of any 726 case tried by a Special Judge and in respect of such case exercise any of the powers conferred on a Court of appeal by sections 423 426 and 428 of the Code Sub section 3 of section 18 runs thus No Court shall have jurisdiction to transfer any case from any Special Judge or to make any order under section 491 of the Code in respect of any person triable by a Spe cial Judge or save as herein otherwise provided have jurisdiction of any kind in respect of proceedings of any Special Judge Thus the right to apply for transfer of the case and the right to apply for revision are denied to an accused who is tried by a Special Judge Ordinary law is by section 19 made applicable in so far as it is not inconsistent with the provisions of sections 10 to 20 Section 20 provides as follows Notwithstanding anything contained in the Code the trial of offences before a Special Judge shall not be by jury or with the aid of assessors Thus besides providing for enhanced punishment and whipping the Act eliminates the committal proceedings section 13 1 permits the Special Judge to record only a memorandum of the evidence confers on him a larger power to refuse to summon a defence witness than what is conferred on a Court by section 2571 of the Code of Criminal Proce dure and also deprives the accused of his right to apply for a transfer or for revision That these departures from the ordinary law cause prejudice to persons subjected to the procedure prescribed by the Act cannot for a moment be denied This Court has by its decisions in the State of West Bengal vs Artwar Ali Sarkar supra and in Kathi Raning Rawat v The State of Saurashtra supra recognised that article 14 condemns discrimination not only by a sub stantive law but also by a law of procedure and that the procedure prescribed by the corresponding provisions in the West Bengal Special Courts Act and the Saurashtra Ordinance which introduced similar departures from the ordinary law of procedure constituted a discrimination 727 against persons tried by the Special Judge according to procedure prescribed by those pieces of legislation and finally that in any event section 5 1 of the West Bengal Act and section 11 of the Saurashtra Ordinance both of which corresponded to section 12 of the Bombay Public Secu rity Measures Act in so far as they authorised the govern ment to direct specific and particular cases to be tried by the Special Judge was unconstitutional and void In view of the departures from the ordinary law brought about by the Bombay Public Safety Measures Act 1947 which are noted above it cannot but be held on a parity of reason ing that at any rate section 12 of the Act in so far as it authorises the Government to direct particular cases to be tried by a Special Judge is also unconstitutional Learned Attorney General appearing for the State of Bombay does not controvert the legal position as discussed above but he points out that the offences were committed in May 1949 that the Special Court was constituted and the Special Judge was appointed in August 1949 and these cases were directed to be tried by the Special Judge in August 1949 that the Special Judge actually framed charges against the appellants on January 13 1950 and that the depositions of seventeen witnesses had been taken before the Constitution came into force and when the Bombay Public Safety Measures Act 1947 was valid in its entirety He contends on the authority of the decision of this Court in Keshavan Madhava Menon vs The State of Bombay1 that the Constitution has no retroactive operation and that it does not affect the rights acquired or the liabilities incurred under laws which before the advent of the Constitution were valid and quoting from the jud ment of the majority of the Bench in that case that such laws exist for all past transactions and for enforcing all rights and liabili ties accrued before the date of the Constitution he urges that the legal proceedings commenced before the Constitution came into 1 728 operation are in no way affected by it and may well be proceeded with In Keshavan Madhava Menon s case the appellant was the Secretary of People s Publishing House Ltd of Bombay In September 1949 he was alleged to have published a pamphlet which according to the Bombay Government authorities was a news sheet within the meaning of section 2 6 of the Indian Press Emergency Powers Act 1931 On December 9 1949 he was arrested and a prosecution was started against him in the Court of the Chief Presidency Magistrate at Bombay for having published the pamphlet without the author ity required by section 151 of the Act and for having thereby committed an offence punishable under section 18 of that Act During the pendency of the proceedings the Con stitution of India came into force on January 26 1950 On March 3 1950 the petitioner filed a written statement submitting inter alia that the definition of news sheet as given in section 26 of that Act and sections 15 and 18 thereof were inconsistent with article 191a and as such void under article 13 of the Constitution This was followed up by a petition filed in the High Court on March 7 1950 under article 228 of the Constitution The Bombay High Court considered it unnecessary to deal with the ques tion whether sections 15 and 18 were inconsistent with article 191a but held that Assuming that they were inconsistent the proceedings commenced under section 18 before the commencement of the Constitution could neverthe less be proceeded with The High Court took the view that the word void was used in article 131 in the sense of repealed and that consequently it attracted section 6 of the General Clauses Act which by article 367 was made ap plicable for the interpretation of the Constitution The High Court having dismissed the applicant the appellant came up on appeal before this Court after having obtained a certificate granted by the High Court under article 132 1 of the Constitution the majority of this Court held that the Constitution and no retrospective effect but was wholly prospective 729 in its operation and as the existing laws in so far as they were inconsistent with the fundamental rights were rendered void only to the extent of their inconsistency they were not void for all purposes but were void only to the extent they came into conflict with the fundamental rights In other words the majority of this Court held that while on and after the commencement of the Constitution no existing law could by reason of article 13 1 be permitted to stand in the way of the exercise of any of the fundamental rights that article could not be read as wiping out the inconsistent law altogether from the statute book and as obliterating its entire operation on past transactions for to do so would be to give it retrospective effect which it did not possess Such law it was held existed for all past transactions and for enforcement of rights and liabilities accrued before the date of the Constitution To the same effect were the observations of Mahajan J who delivered a separate but concurrent judgment namely that a provision that with effect from a particular date an existing law would be void to the extent of the repugnancy had no retro spective operation and could not affect pending prosecutions or actions taken under such law and there was in such a situation no necessity for introducing a saving clause and that it did not need the aid of a legislative provision of the nature contained in the Interpretation Act or the Gener al Clauses Act According to him not being retrospective in its operation the Constitution could not therefore in any way affect prosecutions started for punishing offences that were complete under the law in force at the time they were committed It will be noticed that in that case the prose cution was started according to the ordinary law of proce dure The only question there was whether a criminal pro ceeding instituted for a contravention of the provisions of the Indian Press Emergency Powers Act which amounted to a completed offence before the date of the Constitution could be continued after the Constitution came into force where no change in procedure was involved The result of that deci sion iS that although 730 the acts which before the Constitution constituted an of fence under that Act would not if done after the date of the Constitution amount to an offence nevertheless as the Constitution had no retrospective operation it did not obliterate the offence completed before the date of the Constitution and the offender could therefore be proceeded against after the Constitution came into force It was in this sense that it was stated in Keshavan Madhava Menon s case that the law existed for the past transactions and for enforcing all rights acquired or liabilities incurred before the date of the Constitution If the law did not exist the offence created by it would ipso facto disappear and no question of punishing the non existing offence could arise The observations made in that case related to the substan tive rights acquired or liabilities incurred under the Act before the Constitution came into force Under what proce dure the rights and liabilities would be enforced did not come up for consideration in that case as the procedure adopted throughout was the same namely the procedure prescribed by the Code of Criminal Procedure The law of procedure regulates legal proceedings gener ally from its inception up to its termination and usually connotes a continuous process he Bombay Public Safety Measures Act 1947 by sections 10 to 70 under the heading Special Courts prescribes a special procedure for the trial by the Special Judge of such offences or class of offences or cases or class of cases as the government may by general or special order in writing direct The offences or cases so directed to be tried by the Special Judge need not be or relate to the special offences created by the Act itself but may be or relate to any offence under any law eg Indian Penal Code Arms Act and the Bombay District Police Act It has been seen that the special procedure prescribed by the impugned Act constitutes a departure from the ordinary law of procedure and is in some important respects detrimental to the interest of the persons subjected to it and as such is discriminatory The 731 discrimination does not end with the taking of cognizance of the case by the Special Judge without the case being commit ted to him but continues even in subsequent stages of the proceedings in that the person subjected to it cannot even at those subsequent stages have the benefit of having the evidence for or against him recorded in extenso may not get summons for all witnesses he wishes to examine in defence only on the ground that the Special Judge does not consider that such evidence will be material and cannot exercise his right to apply to a superior Court for transfer of the case even though the Special Judge has exhibited gross bias against him or to apply for revision of any order made by the Special Judge As the Act was valid in its entirety before the date of the Constitution that part of the pro ceeding before the Special Judge which up to that date had been regulated by this special procedure cannot be questioned however discriminatory it may have been but if the discriminatory procedure is continued after the date of the Constitution surely the accused person may legitimately ask Why am I to day being treated differently from other persons accused of similar offences in respect of proce dure It is stated in Maxwell s Interpretation of Statutes 9th Edn p 232 No person has a vested right in any course of proce dure He has only the right of prosecution or defence in the manner prescribed for the time being by or for the Court in which he sues and if an Act of Parliament alters that mode of procedure he has no other right than to proceed according to the altered mode If in the absence of any special provision to the con trary no person has a vested right in procedure it must follow as a corollary that nobody has a vested liability in matters of procedure in the absence of any special provision to the contrary If this is the position when the law of procedure is altered by statute why should the position be different when the Act prescribing the discriminatory proce dure becomes 732 void by reason of its repugnancy to the equal protection clause of the Constitution Although the substantive rights and liabilities acquired or accrued before the date of the Constitution remain enforceable as held in Keshavan Madhava Menon s case nobody can claim after that date that those rights or liabilities must be enforced under that particular procedure although it has since that date come into con flict with the fundamental right of equal protection of laws guaranteed by article 14 It is said in reply that in this case there is in law no discrimination which can be said to be within the mischief sought to be prevented by article 14 The appel lants are persons whose cases had been properly sent for trial to the Special Court before the Constitution came into force and therefore they cannot complain if the procedure prescribed by the Act is continued to be applied to their cases although such procedure cannot be applied to cases which had not been referred to the Special Court up to that date for the appellants cannot claim to be similarly situ ated with persons whose cases had not been directed to be tried by the Special Court before the date of the Constitu tion or who committed similar offences after that date In the circumstances the continued application of the proce dure laid down in the impugned Act to the cases of the appellants cannot it is contended amount to discrimination in the eye of the law and is therefore not within the inhibition of the equal protection clause of the Constitu tion Article 14 being thus out of the way the procedure laid down in the impugned Act continues to be valid in law as regards the persons whose cases had been subjected to it before the advent of the Constitution I and so far as those persons are concerned there has been no change in the procedure and therefore their cases must continue to be regulated by that procedure We are unable to accept this argument as sound It is now well established that while article 14 forbids class legislation it does not forbid reasonable Classification for the purposes of legis lation In 733 order however to pass the test of permissible classifica tion two conditions must be fulfilled namely i that the classification must be founded on an intelligible dif ferentia which distinguishes persons or things that are grouped together from others who are left out of the group and ii that differentia must have a rational relation to the object sought to be achieved by the Act What is necessary is that there must be a nexus between the basis of classification and the object of the Act To take an exam ple Under section 11 of the Contract Act persons who have not attained majority cannot enter into a contract The two categories are adults and minors The basis of classifica tion is the age That basis obviously has a relation to the capacity to enter into a contract Therefore the section satisfies both the requirements of a permissible classifica tion In the present case although the first part of section 12of the Bombay Act like section 5 1of the West Bengal Actor section 11 of the Saurashtra Ordinance may indicate and imply a process of classification the section in so far as it authorises the government to direct particu lar cases to be tried by the Special Court does not purport to proceed upon the basis of any classification at all Further the supposed basis of the alleged classifica tion namely the fact of reference to the Special Court before the Constitution came into effect has no reasonable relation to the objects sought to be achieved by the Act The avowed objects of the Act recited in the preamble are the expediency of consolidating and amending the law relat ing to the security of the State maintenance of public order and maintenance of supplies and services essential to the community in the State of Bombay If the consideration of the security of the State or the maintenance of public order requires the application of the special procedure there is no obvious reason why it should be applied to cases already referred and not to cases not yet referred at the date of the Constitution The same consideration applies equally to both categories of cases It is there fore clear that there is no nexus 734 which connects the basis on which the supposed classifica tion is founded with the objects of the Act for the object of the Act is wide enough to cover both categories of cases Therefore it is not a permissible classification Indeed it is an instance of fanciful classification which has no rational basis at all We see no particular reason why the special procedure should be applied to the appel lants cases any more than it should be applied to cases not referred to the Special Court up to the 26th January 1950 No special or peculiar circumstances have been shown to exist which may make the appellants cases specially suited to this special procedure In the absence of a rational basis of classification as explained above there can be no justification after the advent of the Constitu tion for depriving the appellants of the right to move the Court for transfer or for revision or to obtain process for the attendance of defence witnesses or of having the evi dence of the witnesses recorded as in an ordinary trial which is available to other persons accused of similar offences and prosecuted according to the ordinary procedure laid down in the Code of Criminal Procedure It is there fore clear that in this case the discrimination continued after the Constitution came into force and such continuation of the application of the discriminatory procedure to their cases after the date of the Constitution constituted a breach of their fundamental right guaranteed by article 14 and being inconsistent with the provisions of that article the special procedure became void under article 13 and as there is no vested right or liability in matters of proce dure the appellants are entitled to be tried according to the ordinary procedure after the date of the Constitution Their complaint is not for something that had happened before 26th January 1950 but is for unconstitutional discrimination shown against them since that date Their grievance their cause of action as it were is post consti tution and therefore must be scrutinised and examined in the light of their constitutional rights So viewed there can be no doubt or 735 question that they have been discriminated against after the date of the Constitution in the matter of procedure It has already been held in the West Bengal and the Saurashtra cases that discrimination can lie in procedure just as much as in a substantive law Therefore the continuation of the trial after that date according to the discriminatory proce dure resulting in their conviction and sentence cannot be supported Indeed in a sense the Special Judge s jurisdic tion came to an end for he was enjoined to proceed only according to the special procedure and that procedure having become void as stated above he could not proceed at all as a Judge of a Special Court constituted under the impugned Act The learned Attorney General relied on the decision of the Privy Council in Keshoram Poddar vs Nundo Lal Mallick1 The Calcutta Rent Act 1920 enabled the land lord or tenant of premises in Calcutta to obtain from the Controller of Rents a certification of the standard rent of the premises and also gave a right to apply to the President of the Calcutta Improvement Tribunal for revision of the order of the Controller The Act was originally to be in force for a period of three years which was subsequently extended until the end of March 1924 and finally the figure 1927 was substituted for 1924 with a proviso that after 31st March 1924 this Act shall cease to apply to any premises the rent of which exceeded Rs 250 a month The appellant was let into possession on 1st June 1920 but the rent payable was not then fixed He remained in possession until March 1923 and the question raised by the case was what rent ought to be paid for that period of occupation Disputes having arisen the appellant applied to the Con troller and on 23rd October 1922 the Controller fixed the rent at Rs 4500 per month On 25th November 1922 the appellant appealed to the President of the Improvement Tribunal to revise that decision The revision application could not be taken up by the President until long after 31st March 1924 and when it was eventually 1 ILR 54 IA 152 736 posted before him on 3rd August 1924 he held that had no jurisdiction to determine the matter for the Act had ceased to apply to the premises It will be observed that the application to the President was made long before 31st March 1924 and that the period for which the rent had to be determined was between June 1920 and March 1923 The Privy Council held that the application of the Act was when the parties began to move under it and that was done before March 1924 and that the President accordingly had jurisdiction to decide it That decision appears to us to have no application to the facts of the present case for the problem before us does not relate to a period anterior to the Constitution when the Act was good and the Special Judge had authority to apply the special procedure The point for decision now is whether the continuation of the procedure prescribed by the Act after the Constitution came into force operates to the prejudice of the appellants and as such offends against their newly acquired fundamental right of equal protection of law guaranteed by article 14 The Constitution has no retrospective operation to invali date that part of the proceedings that has already been gone through but the Constitution does not permit the special procedure to stand in the way of the exercise or enjoyment of post constitutional rights and must therefore strike down the discriminatory procedure if it is sought to be adopted after the Constitution came into operation To that situation the decision of the Privy Council referred to above can have no application For reasons Stated above the conviction of the appel lants on trial held by the Special Judge after the date of the Constitution according to the special procedure pre scribed by the impugned Act and the sentences passed on them cannot be supported and these appeals must therefore be allowed and the convictions and sentences must be set aside The appellants are entitled after the Constitution not to be discriminated against in matters of procedure and are entitled to be tried according to law We therefore 737 direct that they be tried for the offences alleged to have been committed by them according to law and in the meantime they be retained in custody as undertrial prisoners Appeals allowed Agent for the intervener Rajinder Narain	The appellant a private limited company was assessed to income tax for the assessment years 1942 43 1943 44 and 1944 45 by three separate orders dated January 26 1944 February 12 1944 and February 15 1945 under section 233 of the Indian Income Tax Act on returns filed by it with statements of account On March 28 1951 three notices under section 34 of the Act were issued calling upon it to submit fresh returns for the said assessment years The appellant filed the returns but thereafter applied to the High Court under article 226 of the Constitution for writs restraining the Income tax Officer from initiating assessment proceedings on the basis of the said notices on the ground inter alia that he had no jurisdiction to issue the said notices In his report to the Commissioner of Income tax for obtaining sanction to initiate the said proceedings the Income tax Officer had stated as follows Profit of Rs 546002 on sale of shares and securities escaped assessment altogether At the time of the original assessment the then I T O merely accepted the company s version that the sale of shares were casual transactions and were in the nature of mere change of investments Now the results of the company s trading from year to year show that the company has really been systematically carrying out a trade in the sale of investments As such the company had failed to disclose the true intention behind the sale of the shares as such section 341a may be attracted The question for determination was whether in the circum stance the Income tax Officer was right in issuing notices on the assessee under section 341a of the Act Held per section K Das K C Das Gupta and N R Ayyangar jj that before the Income tax Officer could issue a notice under 341a of the Indian Income tax Act two conditions precedent must co exist namely that he must have reason to believe i that income profits or gains had been under assessed and 2 that such under assessment was due to non disclosure of material facts by the assessee 242 Although what facts would be necessary and material for the assessment in a particular case must depend on the facts of that case there could be no doubt that the burden of disclosing all the primary facts must invariably be on the assessee The Explanation to section 341 made it clear that that burden could not be fully discharged by simply producing the account books and other documents but the assessee must also disclose such specific items or portions thereof as are relevant to the assessment But once he has done so it is for the Income tax Officer to draw the proper inferences of fact and law therefrom and the assessee cannot further be called upon to do so for him The Explanation does not enlarge the scope of the section so as to include the disclosure of such inferences The question whether by the sale of shares the assessee in the instant case intended to change the form of investment or to make a business profit was one of an inferential fact and the failure to disclose such intention could not by itself amount to a failure or omission to disclose a material fact within the meaning of section 341a of the Act Where however the Income tax Officer has prima facie reasonable grounds for believing that there has been a non disclosure of a primary material fact that by itself gives him the jurisdiction to issue a notice under section 34 of the Act and the adequacy or otherwise of the grounds of such belief is not open to investigation by the Court It is for the assessee who wants to challenge such jurisdiction to establish that the Income tax Officer had no material for such belief Since in the instant case there was no non disclosure of a primary material fact which the assessee was bound to disclose under section 341a of the Act the Income tax Officer had no jurisdiction to issue the notices in question It is incorrect to say that the question of under assessment by reason of non disclosure of a material fact was relevant only for the purpose of applying either the longer or the shorter period of limitation prescribed by the section and not for jurisdiction and therefore not a proper matter for investigation under article 226 of the Constitution The High Courts have ample powers under article 226 of the Constitution and are in duty bound thereunder to issue such appropriate orders or directions as are necessary in order to prevent persons from being subjected to lengthy proceedings and unnecessary harassments by an executive authority acting without jurisdiction Alternative remedies such as are provided by the Income tax Act cannot always be a sufficient reason for refusing quick relief in a fit and proper case Per Hidayatullah J The Explanation to section 341 of the Indian Income tax Act clearly indicates that the duty of the assessee thereunder does not end by merely producing evidence or disclosing the primary facts but also extends to the disclosure 243 of such other facts relating to status agency benami nature of the transaction the nature of the trading and the like which he knows but do not appear from the evidence and which may be necessary for interpreting the evidence If the evidence produced hides nothing and discloses everything the assessee cannot be subjected to section 34 merely because the Income tax Officer misinterprets such evidence But it is otherwise if the assessee raises a contention that is contrary to fact and requires the Income tax Officer to discover the truth for himself for that would be to suppress a material fact that would attract the section Since in the present case an investment company dealing in stocks and shares not only knowingly suppressed that fact but contended otherwise there was non disclosure of a material fact necessary for its assessment and sufficient to attract section 341 a of the Act Per Shah J The expression has reason to believe in section 341a of the Indian Income tax Act does not mean a purely subjective satisfaction of the Income tax Officer but predicates the existence of reasons on which such belief has to be founded That belief therefore cannot be founded on mere suspicion and must be based on evidence and any question as to the adequacy of such evidence is wholly immaterial at that stage Whether all the material facts necessary for the assessment had or had not been fully and truly disclosed in a particular case has to be examined in the fight of the Explanation to section 341a If there is disclosure of some facts but not all a tax payer cannot resist reassessment on the plea that such non disclosure was due to the negligence or inadvertence on the part of the Income tax Officer to scrutinise the materials before him Where the existence of reasonable belief that there bad been under assessment due to non disclosure by the assessee which is a condition precedent to exercise of the power under section 341a is asserted by the assessing authority and the record prima facie supports its existence any enquiry as to whether the authority could reasonably hold the belief that the under assessment was due to non disclosure by the assessee of material facts necessary for the assessment must be barred
Appeal No 387 of 1960 Appeal by special leave from the judgment and order dated February 12 1960 of the Andhra Pradesh High Court in Writ Petition No 5 of 1960 P A Choudhuri and K R Choudhuri for the appellants P Ram Reddy for respondents Nos 1 2 and 6 to 11 1960 November 7 The Judgment of Gajendragadkar Subha Rao Wanchoo and Mudholkar JJ 38 298 was delivered by Subba Rao J Sarkar J delivered a separate judgment SUBBA RAO J This appeal by special leave is directed against the judgment of the High Court of Judicature at Hyderabad dismissing the petition filed by the appellants under article 226 of the Constitution to issue a writ of quo warranto against respondents 1 to 10 directing them to exhibit an information as to the authority under which they are functioning as members of the Vicarabad Municipal Committee and to restrain them from selling certain plots of land belonging to the Municipality to third parties Vica rabad was originally situate in the Part B State of Hyderabad and is now in the State of Andhra Pradesh The Municipal Committee of Vicarabad was constituted under the Hyderabad Municipal and Town Committees Act XXVII of 1951 In the year 1953 respondents 1 to 10 were elected and five others who are not parties before us were nominated to that Committee On November 27 1953 the Rajpramukh of the State of Hyderabad published a notification under the relevant Acts in the Hyderabad Government Gazette Extraordinary notifying the above persons as members of the said Committee Presumably with a view to democratize the local institutions in that part of the country and to bring them on a par with those prevailing in the neighbouring States the Hyderabad District Municipalities Act 1956 XVIII of 1956 hereinafter referred to as the Act was passed by the Hyderabad _ Legislature and it received the assent of the President on August 9 1956 Under section 320 of the Act the Hyderabad Municipal and Town Committees Act 1951 XXVII of 1951 and other connected Acts were repealed As a transitory measure under the same section any Committee constituted under the enactment so repealed was deemed to have been constituted under the Act and the members of the said Committee were to continue to hold office till the first meeting of the Committee was called under section 35 of the Act Under that provision respondents 1 to 10 and the five nominated members continued to function as members 299 of the Municipal Committee In or about the year 1958 the said Committee acquired land measuring acres 15 7 guntas described as Varad Raja Omar Bagh for Rs 18000 for the purpose of establishing a grain market gunj For one reason or other the Municipal Committee was not in a position to construct the grain market and run it departmentally The Committee therefore after taking the permission of the Government resolved by a requisite majority to sell the said land to third parties with a condition that the vendee or vendees should construct a building or buildings for running a grain market There after the Committee sold the land in different plots to third parties but the sale deeds were not executed in view of the interim order made in the writ petition by the High Court and subsequently in the appeal by this Court In the writ petition the appellants contended inter alia that the respondents ceased to be members of the Municipal Committee on the expiry of three years from the date the new Act came into force and that therefore they had no right to sell the land and that in any view the sale made by the Committee of the property acquired for the purpose of constructing a market was ultra vires the provisions of the Act The respondents contested the petition on various grounds The learned Judges of the High Court dismissed the petition with costs for the following reasons 1 The old Committee will continue to function till a new Committee comes into existence Section 76 contemplates that property vested in it under section 72f 73 and 74 should be transferred only to Government Here the transfer is not in favour of the Government That apart we are told that in this case sanction of the Government was obtained at every stage It cannot be predicated that the purpose for which the properties are being disposed of is not for a public purpose It is not disputed that the properties are being sold only to persons who are required to build grain market The act now opposed is not in any way in conflict with the provisions of sections 244 245 and 247 300 4 It looks to us that the petitioners lack in bona fides and that this petition is not conceived in the interests of the public The present appeal as aforesaid was filed by special leave granted by this Court Mr P A Chowdury learned counsel for the appellants canvassed the correctness of the findings of the High Court His first argument may be summarized thus Under section 320 of the Act any Committee constituted under the repealed enactment shall be deemed to have been constituted under the Act and the members of the said Committee shall continue to hold office till the first meeting of the Committee is called under section 35 of the Act Under section 35 of the Act the first meeting of the Committee shall not be held on a date prior to the date on which the term of the outgoing members expires under section 34 Section 34 of the Act provides that the members shall hold office for a term of three years Therefore the term of the members of the Committee deemed to have been constituted under section 320 is three years from the date on which the Act came into force If the term fixed Under section 34 does not apply to the members of the said Committee the result will be that the said members will continue to hold office indefinitely for the first meeting of the Committee could not be legally convened under the Act as section 16 which enables the Collector to do so imposes a duty on him to hold a general election within three months before the expiry of the term of office of the members of the Committee as specified in section 34 and as no definite term has been prescribed for the members of the Committee under section 320 the election machinery fails with the result that the members of the deemed Committee would continue to be members of the said Committee indefinitely On this inter pretation learned counsel contends that the section would be void for the following reasons 1 section 3201a of the Act would be ultra vires the powers of the State Legislature under article 246 of the Constitution read with entry 5 List II VII Schedule 2 the said section deprives the appellants of the right to equality and protection of the laws guaranteed under article 14 301 of the Constitution 3 section 320 would be void also as inconsistent with the entire scheme of the provisions of the Act Let us first test the validity of the construction of section 320 of the Act suggested by the learned counsel The material part of section 320 reads 1 The Hyderabad Municipal and Town Committees Act 1951 XXVII of 1951 is hereby repealed provided that a any Committee constituted under the enactment so repealed hereinafter referred to in this section as the said Committee shall be deemed to have been constituted under this Act and Members of the said Committee shall continue to hold office till the first meeting of the Committee is called under section 35 The terms of the section are clear and do not lend any scope for argument The section makes a distinction between the said Committee and the Committee elected under the Act and says Members of the said Committee shall continue to hold office till the first meeting of the Committee is called under section 35 Though the word Committee is defined in section 25 to mean a Municipal or Town Committee established or deemed to be established under the Act that definition must give way if there is anything repugnant in the subject or context As the section makes a clear distinction between the said Committee and the Committee elected under the Act in the context the Committee in section 320 cannot mean the Committee elected under the Act The term fixed for the members of the Committee constituted under the Act cannot apply to the members of the Committee deemed to have been constituted under the Act Section 32 which provides for the culminating stage of the process of election under the Act says that the names of all members finally elected to any Committee shall be forthwith published in the official Gazette Section 34 prescribes the term of office of the members so elected Under it except as is otherwise provided in this Act members shall hold office for a term of three years Section 3201a provides a different term for the 302 members of the Committee deemed to have been constituted under the Act Thereunder the term is fixed not by any number of years but by the happening of an event The Committee constituted under section 320 clearly falls under the exception But it is suggested that the exception refers only to section 28 whereunder a member of a Committee ceases to be one by a supervening disqualification Firstly this section does not fix a term but only imposes a disqualification on the basis of a term fixed under section 34 secondly assuming that the said section also fixes a term the exception may as well cover both the deviations from the normal rule That apart sub section 2 of section 34 dispels any doubt that may arise on the construction of sub section 1 of the section Under sub section 2 the term of office of such members shall be deemed to commence on the date of the first meeting called by the Collector under section 35 Section 35 directs the Collector to call a meeting after giving at least five clear days notice within thirty days from the date of the publication of the names of members under section 32 This provision clearly indicates that the members of the Committee mentioned in section 34 are only the members elected under the Act and not members of tile Committee deemed to have been elected under the Act for in the case of the latter Committee no publication under section 32 is provided for and therefore the provisions of section 35 cannot apply to them It is therefore manifest that the term prescribed in section 34 cannot apply to a member of the deemed Committee Let us now see whether this interpretation would necessarily lead us to hold that the members of the deemed Committee under section 3201a would have an indefinite duration This result it is suggested would flow from a correct interpretation of the relevant provisions of section 16 of the Act The judgment of the High Court does not disclose that any argument was addressed before that Court on the basis of section 16 of the Act But we allowed the learned counsel to raise the point as in effect it is only a link in the chain of his argument to persuade us to hold in his favour on the construction of section 320 303 Before we consider this argument in some detail it will be convenient at this stage to notice some of the well established rules of Construction which would help us to steer clear of the complications created by the Act Maxwell On the Interpretation of Statutes 10th Edn says at p 7 thus if the choice is between two inter pretations the narrower of which would fail to achieve the manifest purpose of the legislation we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result It is said in Craies on Statute Law 5th Edn at p 82 Manifest absurdity or futility palpable injustice or absurd inconvenience or anomaly to be avoided Lord Davey in Canada Sugar Refining Co vs R provides another useful guide of correct perspective to such a problem in the following words Every clause of a statute should be construed with reference to the context and the other clauses of the Act so as so far as possible to make a consistent enactment of the whole statute or series of statutes relating to the subject matter To appreciate the problem presented and to give an adequate answer to the same it would be necessary and convenient to notice the scheme of the Act as reflected in the relevant sections namely sections 16 17 18 20 32 34 and 320 The said scheme of the Act may be stated thus Under the Act there are general elections and elections to casual vacancies The general elections may be in regard to the first election after the Act came into force or to the subsequent elections under the Act Section 5 imposes a duty on the Government to constitute a Municipal Committee for each town and notify the date when it shall come into existence Section 17 enjoins on the Government to issue a notification calling upon all the constituencies to elect members in accordance 1 304 with the provisions of the Act on or before such date or dates as may be specified in the said notification Section 16 imposes a duty upon the Collector to hold a general election in the manner prescribed within three months before the expiry of the term of office of the members of the Committee as specified in section 34 of the Act Sub section 2 of section 16 provides for a bye election for filling up of a casual vacancy Section 18 enables the Collector with the approval of the Government to designate or nominate a Returning Officer Section 19 imposes a duty upon such an officer to do all such acts and things as may be necessary for effectually conducting the election in the manner provided by the Act and the rules made there under Section 20 authorizes the Collector to issue a notification in the Official Gazette appointing the dates for making nominations for the scrutiny of nominations for the withdrawal of candidatures and for the holding of the poll After the elections are held in the manner prescribed the names of all the members finally elected to any Committee shall be published in the Official Gazette Except as otherwise provided in the Act section 34 prescribes the term of three years for a member so elected As a transitory provision till such an election is held section 320 says that the members of the previous Committee constituted under the earlier Act shall be deemed to be constituted under the Act and the members thereof shall hold office till the first meeting of the Committee is called under section 35 of the Act It is clear from the aforesaid provisions that the Government notifies the dates calling upon all the constituencies to elect the members before such date or dates prescribed the Collector holds the election and fixes the dates for the various stages of the process of election the Returning Officer appointed by the Collector does all acts and things necessary for effectually conducting the election On the general scheme of the Act we do not see any legal objection to the Collector holding the first elections under the Act The legal obstacle for such a course is sought to be raised on the wording of section 161 305 Every general election requisite for the purpose of this Act shall be held by the Collector in the manner prescribed within three months before the expiry of the term of office of the members of the Committee as specified in section 34 The argument is that the Collector s power to hold a general election is confined to section 161 and as in the case of the members of the Committee deemed to have been constituted under the Act the second limb of the section cannot apply and as the Collector s power is limited by the second limb of the section the Collector has no power to hold the first general election under the Act If this interpretation be accepted the Act would become a dead letter and the obvious intention of the Legislature would be defeated Such a construction cannot be accepted except in cases of absolute intractability of the language used While the Legislature repealed the earlier Act with an express intention to constitute new Committees on broad based democratic principles by this interpretation the Committee under the old Act perpetuates itself indefinitely In our view section 161 does not have any such effect Section 161 may be read along with the aforesaid other relevant provisions of the Act If so read it would be clear that it could not apply to the first election after the Act came into force but should be confined to subsequent elections So far as the first general election is concerned there is a self contained and integrated machinery for holding the election without in any way calling in aid the provisions of section 161 Section 17 applies to all elections that is general as well as bye elections It applies to the first general election as well as subsequent general elections The proviso to that section says that for the purpose of holding elections under sub section 1 of section 16 no such notification shall be issued at any time earlier than four months before the expiry of the term of office of the members of the Committee as specified in section 34 The proviso can be given full meaning for it provides only for a case covered by section 161 and as the first general election is outside the scope of section 161 39 306 it also falls outside the scope of the proviso to section 17 Under section 17 therefore the Government in respect of the first general election calls upon all the constituencies to elect members before the date or dates fixed by it Under section 20 the Collector fixes the dates for the various stages of the election The Returning Officer does all the acts and things necessary for conducting the election and when the election process is completed the names of the members elected are published All these can be done without reference to section 161 for the Collector is also empowered under section 20 to hold the elections In this view there cannot be any legal difficulty for conducting the first election after the Act came into force If so the term of the members of the Committee deemed to have been elected would come to an end when the first meeting of the Committee was called under section 35 The Legislature in enacting the law not only assumed but also expected that the Government would issue the requisite notification under section 17 of the Act within a reasonable time from the date when the Act came into force The scheme of the Act should be judged on that basis if so judged the sections disclose an integrated scheme giving section 320 a transitory character It is conceded by learned counsel that if section 3201a is constructed in the manner we do the other points particularised above do not arise for consideration Before leaving this part of the case we must observe that the difficulty is created not by the provisions of the Act but by the fact of the Government not proceeding under section 17 of the Act within a reasonable time from the date on which the Act came into force This is a typical case of the legislative intention being obstructed or deflected by the inaction of the executive Mr Ram Reddy learned counsel for the respondents states that there are many good reasons why the Government did not implement the Act There may be many such reasons but when the Legislature made an Act in 1956 with a view to democratize municipal administration in that part of the country so as to bring it on a par with that obtaining in other 307 States it is no answer to say that the Government had good reasons for not implementing the Act If the Government had any such reasons that might be an occasion for moving the Legislature to repeal the Act or to amend it If the affected parties had filed a writ of mandamus in time this situation could have been avoided but it was not done We hope and trust that the Government would take immediate steps to hold elections to the Municipal Committee so that the body constituted as early as 1953 under a different Act could be replaced by an elected body under the Act Even so learned counsel for the appellants contends that the Municipal Committee had no power to sell the land acquired by it for constructing a market To appreciate this contention it would be convenient to notice the relevant provisions of the Act Under section 72f all land or other property transferred to the Committee by the Government or the District Board or acquired by gift purchase or otherwise for local purposes shall vest in and be under the control of the Committee Section 73 enables the Government in consultation with the Committee to direct that any property movable or immovable which is vested in it shall vest in such Committee Section 74 empowers the Government on the request of the Committee to acquire any land for the purposes of the Act Under section 76 the Committee may with the sanction of the Government transfer to the Government any property vested in the Committee under sections 72f 73 and 74 but not so as to affect any trust or public right subject to which the property is held Learned counsel contends that as the land was acquired by the Committee for the construction of a market the Committee has power to transfer the same to the Government only subject to the conditions laid down in section 76 and that it has no power to sell the land to third parties This argument ignores the express intention of section 77 of the Act Section 77 says Subject to such exceptions as the Government may by general or special order direct no Committee shall transfer any immovable property except in pursuance of a resolution passed at a meeting by a 308 majority of not less than two third of the whole number of members and in accordance with rules made under this Act and no Committee shall transfer any property which has been vested in it by the Government except with the sanction of the Government Provided that nothing in this section shall apply to leases of immovable property for a term not exceeding three years This section confers on the Committee an express power couched in a negative form Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statute imperative If the section is recast in an affirmative form it reads to the effect that the Committee shall have power to transfer any immovable property if the conditions laid down under the section are complied with The conditions laid down are 1 there shall be a resolution passed at a meeting by a majority of not less than two third of the whole number of members of the Committee 2 it shall be in accordance with the rules made under the Act 3 in the case of a property vested in it by the Government the transfer can be made only with the sanction of the Government and 4 the sale is not exempted by the Government by general or special order from the operation of section 77 of the Act It is not disputed that the relevant conditions have been complied with in the present case If so the power of the Committee to alienate the property cannot be questioned Learned counsel contends that the provisions of section 76 govern the situation and that section 77 may apply only to a property vested in the Committee under provisions other than those of sections 72f 73 and 74 and that further if a wider interpretation was given to section 77 while under section 76 the transfer in favour of the Government would be subject to a trust or public right under section 77 it would be free from it if it was transferred to a private party The first objection has no force as there are no sections other than sections 72 73 and 74 whereunder the Government vests property in a Committee The second objection also has no merits for the trust or public right mentioned in section 76 309 does not appear to relate to the purpose for which the property is purchased but to the trust or public right existing over the property so alienated by the Committee Further the proviso to section 77 which says nothing in this section shall apply to leases of immovable property for a term not exceeding three years indicates that the main section applies also to the property vested in the Committee under the previous section for it exempts from the operation of the operative part of section 77 leases for a term not exceeding three years in respect of properties covered by the preceding section and other sections This interpretation need not cause any apprehension that a Com mittee may squander away the municipal property for section 77 is hedged in by four conditions and the conditions afford sufficient guarantee against improper and improvident alienations In this context learned counsel for the appellants invoked the doctrine of law that an action of a statutory corporation may be ultra vires its powers without being illegal and also the principle that when a statute confers an express power a power inconsistent with that expressly given cannot be implied It is not necessary to consider all the decisions cited as learned counsel for the respondents does not canvass the correctness of the said principles It would therefore be sufficient to notice two of the decisions cited at the Bar The decision in Elizabeth Dowager Baroness Wenlock vs The River Dee Company 1 is relied upon in support of the proposition that when a corporation is authorised to do an act subject to certain conditions it must be deemed to have been prohibited to do the said act except in accordance with the provisions of that Act which confers the authority on it Where by Act 14 15 Viet a company was empowered to borrow at interest for the purposes of the concerned Acts subject to certain conditions it was held that the company was prohibited by the said Act from borrowing except in accordance with the provisions of that Act Strong reliance is placed on the decision in Attorney General vs Fulham Corporation 1 2 310 There in exercise of the powers conferred under the Baths and Wash houses Acts the Metropolitan Borough of Fulham propounded a scheme in substitution of an earlier one whereunder it installed a wash house to which persons resorted for washing their clothes bringing their own wash materials and utilised the facilities offered by the municipality on payment of the prescribed charges Sarjant J held that the object of the legislation was to provide for persons who became customers facilities for doing their own washing but the scheme provided for washing by the municipality itself and that therefore it was ultra vires the statute In coming to that conclusion the learned Judge after considering an earlier decision on the subject applied the following principle to the facts of the case before him That recognises that in every case it is for a corporation of this kind to show that it has affirmatively an authority to do particular acts but that in applying that principle the rule is not to be applied too narrowly and the corporation is entitled to do not only that which is expressly authorised but that which is reasonably incidental to or consequential upon that which is in terms authorized The principle so stated is unobjectionable The correctness of these principles also need not be canvassed for the construction we have placed on the provisions of the Act does not run counter to any of these principles We have held that section 77 confers an express power on the Municipal Committee to sell property subject to the conditions mentioned therein Therefore the impugned sales are not ultra vires the powers of the Committee In view of the said express power no prohibition can be implied from the provisions of section 76 Learned counsel further contends that the statutory power can be exercised only for the purposes sanctioned by the statute that the sales of the acquired land to private persons were not for one of such purposes and that therefore they were void The principle that a statutory body can only function within the statute is unexcecutionable but the 311 Legislature can confer a power on a statutory corporation to sell its land is equally uncontestable In this case we have held that the statute conferred such a power on the Municipal Committee subject to stringent limitations Many situations can be visualized when such a sale would be necessary and would be to the benefit of the corporation of course the price fetched by such sales can only be utilised for the purposes sanctioned by the Act The last point raised is that the learned Judges of the High Court were not justified in holding on the materials placed before them that the appellants lacked bona fides and that the petition filed by them was not conceived in the interests of the public We do not find any material on the record to sustain this finding Indeed but for the petitioner appellants the extraordinary situation created by the inaction of the Government in the matter of implementing the Act affecting thereby the municipal administration of all the districts in Telangana area might not have been brought to light We cannot describe the action of the appellants either mala fide or frivolous In the result the appeal fails and is dismissed but in the circumstances without costs SARKAR J The first question is whether the first ten respondents are still members of the Municipal Committee of Vicarabad These persons had been elected to the Committee in the elections held in 1953 under the Hyderabad Municipal and Town Commit tees Act 1951 Hyderabad Act XXVII of 1951 hereafter called the repealed Act That Act was repealed by the Hyderabad District Municipalities Act Hyderabad Act XVIII of 1956 hereafter called the new Act which came into force in August 1956 The appellants who are rate payers of the Municipality contend that on a proper reading of the new Act it must be held that these ten respondents have ceased to be members of the Committee and they seek a writ of quo warranto against the respondents Section 320 of the new Act provides that any Committee constituted under the repealed Act shall be deemed to have been constituted under the new Act 312 and its members shall continue to hold office till the first meeting of the Committee is called under section 35 of the new Act The ten respondents contend that as admittedly the meeting under section 35 has not been called their term of office has not yet expired Now section 35 so far as is material provides that the first meeting of the Committee shall be called by the Collector within thirty days of the date of publication of the names of members under section 32 Section 32 states that the names of members finally elected to any Committee shall be forthwith published in the official Gazette It is quite clear therefore that the Committee mentioned in this section is a Committee constituted by an election held under the new Act It would follow that the meeting contemplated in section 35 is a meeting of a Committee constituted by an election held under the new Act The provisions of that section put this beyond doubt In order therefore that a meeting of the Committee contemplated in section 35 may be held there has first to be an election under the new Act to constitute the Committee No such election has yet been held It is the provision concerning election in the new Act that has given rise to the difficulty that arises in this case Section 16 sub section 1 gives the power to hold the general elections It is in these words Every general election requisite for the purpose of this Act shall be held by the Collector in the manner prescribed within three months before the expiry of the term of office of the members of the Committee as specified in section 34 Section 34 in substance states that except as other wise provided members of the Committee shall hold office for a term of three years and that term of office shall be deemed to commence on the date of the first meeting called under section 35 It would therefore appear that the members whose term of office is sought to be specified by section 34 are members elected under the new Act for their term is to commence on the date that they first meet under section 35 and as earlier stated the meeting under section 35 is a meeting of members elected under the new Act 313 The contention for the appellants is that if a 34 is construed in the way mentioned above the first general election under the new Act cannot be held under section 16 for an election can be held under that section only within three months before the expiry of the term of office of members elected under the new Act and in the case of first election there are ex hypothesi no such members It is said that as there is no other provision in the new Act for holding a general election the Act would then become unworkable for if the first general election cannot be held no subsequent election can be held either The result it is contended is that the Committee elected under the repealed Act would continue for ever by virtue of section 320 Such a situation it is said could not have been intended by the new Act It is therefore suggested that section 34 should be construed as specifying a term of office of three years from the commencement of the new Act for members elected under the repealed Act who are under section 320 to be deemed to form a Committee constituted under the new Act If section 34 is so construed then the first general election under the new Act can properly be held under section 16 It is on this basis that the appellants contend that the ten respondents term of office expired in August 1959 and they are in possession of the office now without any warrant There is no doubt that the Act raises some difficulty It was certainly not intended that the members elected to the Committee under the repealed Act should be given a permanent tenure of office nor that there would be no elections under the new Act Yet such a result would appear to follow if the language used in the new Act is strictly and literally interpreted It is however well established that Where the language of a statute in its ordinary meaning and grammatical construction leads to a manifest contradiction of the apparent purpose of the enactment or to some inconvenience or absurdity hardship or in justice presumably not intended a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence 40 314 Where the main object and intention of a statute are clear it must not be reduced to a nullity by the draftsman s unskilfulness or ignorance of the law except in a case of necessity or the absolute intractability of the language used Nevertheless the courts are very reluctant to substitute words in a Statute or to add words to it and it has been said that they will only do so where there is a repugnancy to good Bense see Maxwell on Statutes 10th ed p 229 In Seaford Court Estates Ltd vs Asher 1 Denning L J said when a defect appears a judge cannot simply fold his hands and blame the draftsman He must set to work on the constructive task of finding the intention of Parliament and then he must supplement the written word so as to give force and life to the intention of the legislature A judge should ask himself the question how if the makers of the Act had themselves come across this ruck in the texture of it they would have straightened it out He must then do as they would have done A judge must not alter the material of which the Act is woven but he can and should iron out the creases I conceive it my duty therefore so to read the new Act unless I am prevented by the intractability of the language used as to make it carry out the obvious intention of the legislature Now there does not seem to be the slightest doubt that the intention of the makers of the new Act was that there should be elections held under it and that the Municipal Committees should be constituted by such elections to run the administration of the municipalities The sections to which I have so far referred and the other provisions of the new Act make this perfectly plain Thus section 5 provides for the establishment of municipal committees and section 8 states that the committees shall consist of a certain number of elected members The other sections show that the Committees shall have charge of the administration of the municipalities for the benefit of the dwellers within them It is plain 1 164 351 that the entire object of the new Act would fail if no general election could be held under it The question then is How should the Act be read so as to make it possible to hold general elections under it I agree with the learned advocate for the appellants that the only section in the new Act providing for general elections being held is section 161 In my view section 20 does not authorise the holding of any general election it only provides for a notification of the date on which the poll shall if necessary be taken There is no doubt that under section 161 the second and all subsequent general elections can be held in regard to such general elections no difficulty is created by the language of the section It would be curious if section 20 also provided for general elections for then there would be two provisions in the Act authorising general elections other than the first Then I find hat all the sections referring to general elections refer to such elections being held under section 161 and not under section 20 Thus section 31 provides that if at a general election held under section 16 no member is elected a fresh election shall be held It would follow that if in an election under section 20 assuming that that section authorises an election no member is elected no fresh election can be held There would be no reason to make this distinction between elections held under section 16 and under section 20 Again the proviso to section 17 requires a certain notification to be issued within a prescribed time for holding elections under section 161 If an election can be held under section 20 no such notification need be issued for there is no provision requiring it This could not have been intended For all these reasons it seems to me that section 20 does not confer any power to hold any election I have earlier said that the suggestion for the appellants is that the best way out of the difficulty is to read section 34 as specifying a term of office of three years commencing from the coming into force of the new Act for the members elected under the repealed Act who are to be deemed under section 320 to be a committee constituted under the new Act It seems to me that this is not a correct solution of the problem First 316 the object of continuing the members elected under the repealed Act in office is clearly to have what may be called a caretaker committee to do the work of the Municipality till a committee is constituted by election under the new Act It could not have been intended that the committee of the members elected under the repealed Act would function for three years after the new Act has come into operation nor that such members would have the same term of office as members elected under the new Act Secondly I do not find the language used in section 34 sufficiently tractable to cover by any alteration a member elected under the repealed Act To meet the suggestion of the appellants a new provision would have really to be enacted and added to section 34 and this I do not think is permissible It would be necessary to add to the section a provision that in the case of members elected under the old Act the term of office of three years would start running from the commencement of the new Act a provision which is wholly absent in the section as it stands Lastly so read section 34 would come into conflict with section 320 which expressly provides that the term of office of the members elected under the repealed Act would continue till the first meeting of the committee constituted under the new Act is held under section 35 This portion of section 320 would have to be completely struck out It seems to me that the real solution of the difficulty lies in construing section 161 so as to authorise the holding of the first general election under it and remove the absurdity of there being no provision directing the first general election to be held Now that section applies to every general election requisite for the purpose of this Act It therefore applies to the first and all other general elections The clear intention hence is that the first general election will also be held under this provision But such election cannot be held within the time mentioned therein for that time has to be calculated from the expiry of the term of office of the Committee elected under the Act and in the case of the first general election under the new Act there is no such Committee The requirement 317 as to time cannot apply to the first general election The section has therefore to be read as if there was no such requirement in the case of the first general election It will have to be read with the addition of the words provided that every general election excepting the first general election shall be held between the words prescribed and within That would carry out the intention of the legislature and do the least violence to the language used So read there would be clear power under the Act to hold the first general meeting There would of course then be no indication as to when this election is to be held but that would only mean that it has to be held within a reasonable time of the commencement of the new Act The course suggested by me is not without the support of precedents Thus in Salmon vs Duncombe 1 the Judicial Committee in construing a statute omitted from it the words as if such natural born subject resided in England because the retention of those words would have prevented the person contemplated getting full power to dispose of his immovable property by his will which it was held the object of the statute was he should get With regard to the other point argued in this appeal namely whether the Municipal Committee even if properly constituted has power to sell the land mentioned in the petition I agree for the reasons mentioned in the judgment delivered by the majority of the members of the bench that it has such power and have nothing to add The appeal therefore fails Appeal dismissed	The appellant effected sales during the period 26 1 1950 to 31 3 1950 whereunder the property in the goods passed in the State of Bihar but delivery was effected outside Bihar for consumption outside Bihar In some of these sales the goods were delivered in the State of first destination for consumption therein whilst in other cases the goods were not for consumption in the State of first delivery of destination The appellant contended that both these categories of sale were exempt from tax under article 2861a as they were outside sales Held per Hidayatullah Das Gupta and Rajagopala Ayyangar JJ that the sales where delivery in the State of first destination was for consumption therein were outside the State of Bihar within the Explanation to article 2861a and Bihar could not tax them but the sales where delivery in the State of first destination was not for consumption therein were not Explanation Sales and were not outside sales and Bihar could tax them Where the property in the goods passed within the State as a direct result of the sale the sale was not an outside sale for the purpose of article 2861a unless it fell within the Explanation In the first category of sales the appellant was entitled to the exemption and it was not necessary for it to prove that the goods delivered for consumption in the State of first destination were actually consumed therein The State of Bombay vs United Motors India Ltd and Bengal Immunity Company Ltd vs The State of Bihar referred to Burmah Shell Oil Storage Distributing Co of India Ltd vs The Commercial Tax Officer C A No 751 of 57 and C A No 10 of 1958 Unreported relied on Per section K Das and Shah Jj Section 33 introduced in the Bihar Sales Tax Act by the Adaptation of Laws Order 1951 engrafted the same restrictions on the taxing power of the State on the pre Constitution statutes as were imposed by article 286 upon post Constitution statutes Section 331a1 of the Act took away only the power to tax Explanation Sales but not the power to tax non Explanation Sales A sale in which goods had been delivered outside Bihar but not as a direct result of 277 the sale or not for the purpose of consumption in the State of first delivery was not covered by the Explanation and the right to tax the sale if it arose otherwise under the Act was not impaired by section 331ai
Appeal No 790 of 1957 Appeal from the judgment and decree dated February 10 1954 of the Allahabad High Court in Civil Misc Writ No 280 of 1950 C B Aggarwala G C Mathur and C P Lal for the appellants G section Pathak and D N Mukherjee for the respondent No 1 1960 November 11 The Judgment of the Court was delivered by MUDHOLKAR J This is an appeal by the State of Uttar Pradesh against the decision of the Full Bench of the Allahabad High Court in a writ petition In the writ petition the respondents challenged certain orders made by the Government of Uttar Pradesh under section 3 cl b of the United Provinces XXVIII of 1947 requiring the respondents to pay bonus at certain rates for the years 1947 48 and 1948 49 to their workers and also payment of retaining allowances to the skilled seasonal workmen and clerical staff The circumstances under which the orders were made are briefly these 333 The Indian National Sugar Mills Workers Federation Lucknow served notices on various sugar factories in Uttar Pradesh on December 15 1949 in which they made six demands We need however mention only one of them as that alone is in controversy in this appeal That demand related to the bonus for the year 1948 49 and to the restoration of the reduction which had been made in the previous year s bonus By that notice the Federation threatened a strike in the industry with effect from January 16 1960 if the demands were not met by the sugar factories Since this situation brought into existence an industrial dispute the Government of Uttar Pradesh in exercise of the power conferred by sections 6 and 10 of the XIV of 1947 appointed a Court of Inquiry and referred the dispute to it The notification also stated the points which were referred to the Court of Inquiry That notification was twice amended but nothing turns on those amendments A full enquiry was held by the Court of Inquiry at which the representatives of both the employers as well as the employees were represented and material was placed before the Court of Inquiry by both the sides The Court of Inquiry submitted its report to the Government on April 15 1950 On receipt of this report the Government of Uttar Pradesh published the report in the Uttar Pradesh gazette on May 8 1950 as provided for in section 17 of the On July 5 1950 the Government of Uttar Pradesh in exercise of the powers conferred by section 3b of the Uttar Pradesh issued a notification directing the various sugar factories to pay bonus to their workmen for the year 1948 49 as well as to pay certain amounts as bonus for the year 1947 48 A further direction was made in the notification for payment of retaining allowance to the skilled seasonal workmen and clerical staff with effect from the off season in the year 1950 Thereupon the Indian Sugar Millers Association which is an Association of sugar factories in India and is registered under the Trade Union Act made a petition before the High Court at Allahabad under 334 article 226 of the Constitution for the issue of a writ against the Government of Uttar Pradesh prohibiting the Government from enforcing the notification The writ petition was dismissed by the High Court on September 14 1950 on the ground that the Association had no legal interest in the matter Thereupon various sugar mills preferred separate writ petitions before the High Court the respondents before us being one of them As many as fourteen grounds were taken on their behalf in their writ petition We are however concerned with only three of them to which Mr G section Pathak who appears for the respondents confined his arguments Before we refer to those grounds we would complete the narration of facts The High Court of Allahabad allowed the writ petitions in so far as the question of payment of bonus was concerned though Sapru J one of the judges constituting the Full Bench expressed a doubt as to the correctness of the view that the order of the State Government as regards the payment of bonus was invalid After the decision of the High Court the State of Uttar Pradesh applied for a certificate under article 1331b and article 1331c of the Constitution The High Court having granted the certificate the present appeal has been brought to this Court In order to appreciate the points raised by Mr G section Pathak it is necessary to set out the provisions of section 3 of the Uttar Pradesh They are as follows If in the opinion of the State Government it is necessary or expedient so to do for securing the public safety or convenience or the maintenance of public order or supplies and services essential to the life of the community or for maintaining employment it may by general or special order make provision a for prohibiting subject to the provisions of the order strikes or look outs generally or a strike or lock out in connection with any industrial dispute b for requiring employers workmen or both to observe for such period as may be specified in the order such terms and conditions of employment as may be determined in accordance with the order 335 c for appointing industrial courts cc for appointing committees representative both of the employer and workmen for securing amity and good relations between the employer and workmen and for settling industrial disputes by conciliation for consultation and advice on matters relating to production organization welfare and efficiency d for referring any industrial dispute for conciliation or adjudication in the manner provided in the order e for requiring any public utility service or any subsidiary undertaking not to close or remain closed and to work or continue to work on such conditions as may be specified in the order f for exercising control over any public utility service or any subsidiary undertaking by authorising any person hereinafter referred to as an authorised controller to exercise with respect to such service undertaking or part thereof such functions of control as may be specified in the order and on the making of such order the service undertaking or part thereof such functions of control as may be specified in the order and on the making of such order the service undertaking or part as the case may be shall so long as the order continues to be carried on in accordance with any directions given by the authorised controller in accordance with the provisions of the order and every person having any functions of management of such service undertaking or part thereof shall comply with such directions g for any incidental or supplementary matters which appear to the State Government necessary or expedient for the purposes of the order Provided that no order made under clause b i shall require an employer to observe terms and conditions of employment less favourable to the workmen than those which were applicable to them at any time within three months preceding the date of the order ii shall if an industrial dispute is referred for adjudication under clause d be enforced after the decision of the adjudicating authority is announced be or with the consent of the State Government 336 The view taken by the High Court was that clause b of section 3 of the Uttar Pradesh is prospective in operation in that thereunder it is open to the State Government to ask an employer or an employee to observe a term or a condition of employment in future and that consequently it is not competent thereunder to require an employer to pay bonus to workmen in respect of a period of employment which is already past The view of the High Court was challenged before us on behalf of the State According to the State the provisions of the aforesaid clause are wide enough to permit the making of such a direction to the employer because by doing so the State Government would only be imposing a condition of employment in future In answer to this contention Mr Pathak has as already stated raised three points and they are as follows 1 Clause b of section 3 does not operate retrospectively and must be construed as having a prospective operation only 2 This clause does not apply at all where an industrial dispute has arisen and that the appropriate provision under which the State Government can take action where an industrial dispute has arisen is cl 3 If cl b is susceptible of the interpretation that it is applicable even when an industrial dispute has arisen then it is ultra vires in as much as it would enable the State Government to discriminate between an industry and an industry or an industrial unit and another industrial unit or between a workman and a workman by referring some cases for adjudication to an industrial court under cl d and passing executive order itself in respect of others The provisions of cl b according to him are violative of article 14 of the Constitution Further according to him they are also violative of the provisions of article 191g of the Constitution in as much as they confer an arbitrary power on the State Government to require an employer to pay whatever it thinks fit to an employee and thus place an unreasonable restriction on the rights of the employer to carry on his business 337 We entirely agree with the learned judges of the Allahabad High Court that cl b of section 3 cannot be given a retrospective effect But we are unable to agree with them that the State Government in making a direction to the employers to pay bonus for the years in question purported to give a retrospective operation to the provisions of that clause The order made by the State Government in regard to bonus is to the effect that it shall be paid for the year 1947 48 to those persons who worked during that year and for the year 1948 49 to those persons who worked in that year This payment was directed to be made within six weeks of the making of the order By giving this direction the State Government did no more than attach a condition to the employment of workmen in the year 1950 51 in sugar factories affected by the order That is all that it has done Mr Pathak contended that bonus has certain attributes of a wage and wage being a matter of contract can only be a term of employment agreed to between the employer and the employee but could not be a condition of employment which could be imposed by a statute or which could be imposed by a Government acting under a statute We agree that normally wage is a term of contract but it would be futile to say that it cannot be made a condition of employment The Minimum Wages Act provides for the fixation of a statutory minimum wage payable to a worker in respect of certain types of employments and is an instance of wage being made a condition of employment That apart whether wage or bonus is a term of a contract or a condition of employment it is clear that section 3 empowers the State Government to require the employers and workmen or both to observe any term or condition of employment for a specified period Since the law enables the State Government to impose a term it is apparent that the legislature which enacted that law did not import into that word a con sensual sense We cannot therefore accept the argument that under cl b it was not open to the State Government to make the payment of bonus to 338 workmen a condition of their employment in future and thus augment their past wages Mr Pathak then referred to the following observations in the judgment of Bhargava J s Obviously there can be no question of requiring any one to observe for a future period terms and conditions of employment which have already remained effective and have already been carried out by those persons According to Mr Pathak the effect of the order of the Government is to add a new term or a condition with regard to employment for a period which is already over We would again point out that this is not the effect of the order of the Government The effect of that order is merely to require the employer to pay an additional sum of money to his employees as a term and condition of work in future Mr Pathak however said that this would involve payment of bonus even to new employees that is those who had not participated in earning the profits in the past and that this would be contrary to the very conception of bonus The answer to that is that under the order of the Government such bonus is payable only to those workers who had worked during the years in question and not to new employees It is further to be borne in mind that in the dispute in question the employees were bargaining in their collective capacity and therefore the question whether the personnel forming the employees of the factories in July 1950 when the order was made by the Government and in the years 1947 48 and 1948 49 to which the dispute relates was the same is quite immaterial As has been rightly pointed out by Sapru J The employees might well have taken in the industrial dispute the line that the payment of bonus in respect of the years 1947 48 and 1948 49 to the workmen employed in those years was regarded by those who were employed in future as a preliminary and essential condition for not only the settlement of the industrial dispute in progress but also for carrying on their future work in sugar factories We also concur with the observations of the learned judge that by coming 339 conceded the State Government was not passing an order which will have retrospective effect but was passing an order which was to ensure that the work men to be employed in the year 1950 would work in a contented manner It must not be forgotten that the dispute was in the present that is it existed when the impugned order was made though its origin was in the past What the order did was to resolve that dispute and this it could only do by removing its cause Mr Pathak then relied upon the following observations of Bhargava J in L D Sugar Mills vs U P Government 1 The expression 1 to observe for such period as may be specified such terms and conditions of employment as may be determined gives an indication that clause b of section 3 of the U P is meant for the purpose of passing orders by which the Government gives directions about what the terms and conditions of employment should be and not how a particular term and condition of employment already in existence should be acted upon Bhargava J s decision was however reversed in Ram Nath Koeri and Another vs Lakshmi Devi Sugar Mills and Ors 2 by a division bench of the Allahabad High Court in Letters Patent Appeal brought against Bhargava J s decision We agree with the view taken by the Appellate Bench In our opinion therefore there is nothing in cl b of section 3 of the Act which prohibited the State Government from making a direction to the sugar factories with regard to the payment of bonus for the years 1947 48 and 1948 49 in their order of July 7 1950 and that by making such a direction the State Government was not giving a retrospective effect to the provisions of that clause In this connection it is relevant to remember that any direction as to payment of bonus must inevitably be based on the available surplus and such surplus can be determined only at the end of a given year Therefore what the impugned 1 AIR 1954 All 705 714 2 1956 II L L J 11 340 order purports to do is to require the employers to pay specified amounts in future though the said amounts are fixed by reference to the profits made in the two preceding years If a direction as to payment of bonus can be issued under section 3b it cannot therefore be said to be retrospective The next argument of Mr Pathak appears at first sight to be more formidable He points out that undoubtedly an industrial dispute had arisen and indeed it is upon that basis that the State Government proceeded to appoint a Court of Inquiry Therefore according to Mr Pathak resort could be taken by the State Government only to the special provisions of cl d and not to the more general provisions of cl b of section 3 In other words where there is an industrial dispute the appropriate thing for the Government to do is to refer it for conciliation or adjudication under the provisions of cl d and not to deal with the matter by an executive order as it has done in this case Mr Pathak then refers to a further passage from the judgment of Bhargava J just cited which is as follows It appears from the language that this provision was not meant for the purpose of dealing with individual disputes arising out of the application of a term or condition of employment and no power was granted to the State Government under this provision of law to sit as an adjudicator to decide a dispute that might have arisen relating to the working and actual application of terms and conditions of employment already in force The provision was for the purpose of enabling the State Government to vary the agreed terms and conditions of employment for purposes specified in a 3 of U P under the pressing necessities or expediency justifying such course of action We entirely agree with Mr Pathak that the normal way of dealing with an industrial dispute under the Act would be to have it dealt with judicially either by conciliation or by adjudication and that judicial process cannot be circumvented by resort to executive action The proceeding before a conciliator or an 341 adjudicator is in a sense a judicial proceeding because therein both the parties to the dispute would have the opportunity of being heard and of placing the relevant material before the conciliator or adjudicator But there may be an emergency and the Government may have to act promptly for securing the public safety or convenience or the maintenance of public order or supplies and services essential to the life of the community or maintaining employment It was therefore necessary to arm it with additional powers for dealing with such an emergency Clause b of section 3 was apparently enacted for this purpose An order made thereunder would be in the nature of a tempor ary or interim order as would be clear from the words for such period as may be specified appearing therein and from the second proviso to section 3 Under this proviso where an industrial dispute is referred for adjudication under cl d an order made under cl b cannot be enforced after the decision of the adjudicating authority is announced by or with the consent of the State Government It would therefore follow from this that where the Government has made an executive order as it did in this case under cl b of section 3 it is open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under cl d of section 3 Mr Pathak however stated that under this section the Government has a discretion whether or not to refer a dispute for conciliation or adjudication under cl But in our opinion where once the Government has acted under cl b on the ground that it was in the public interest to do so it would not be open to the Government to refuse to refer the dispute under cl d for conciliation or adjudication Mr C B Agarwal who appeared for the State of Uttar Pradesh conceded and we think rightly that this would be so and added that in case the State Government was recalcitrant it could be forced to do its duty by the issue of a writ of mandamus by the High Court under article 226 of the Constitution There is a further argument of Mr Pathak which must be noticed and that argument is that there is 342 nothing in cl b which limits its operation to an emergency and that it is therefore not open to us to place a construction thereon of the kind we are placing The opening words of section 3 themselves indicate that the provisions thereof are to be availed of in an emergency It is true that even a reference to an arbitrator or a conciliator could be made only if there is an emergency But then an emergency may be acute Such an emergency may necessitate the exercise of powers under cl b and a mere resort to those under cl d may be inadequate to meet this situation Whether to resort to one provision or other must depend upon the subjective satisfaction of the State Government upon which powers to act under section 3 have been conferred by the legislature No doubt this result is arrived at by placing a particular construction on the provisions of that section but we think we are justified in doing so As Mr Pathak himself suggested in the course of his arguments we must try and construe a statute in such a way where it is possible to so construe it as to obviate a conflict between its various provisions and also so as to render the statute or any of its provisions constitutional By limiting the operation of the provisions of cl b to an emergency we do not think that we are doing violence to the language used by the legislature Further assuming that the width of the language could not be limited by construction it can be said that after the coming into force of the Constitution the provisions can by virtue of article 13 have only a limited effect as stated above and to the extent that they are inconsistent with the Constitution they have been rendered void In our view therefore the provisions of cl b of section 3 are not in any sense alternative to those of cl d and that the former could be availed of by the State Government only in an emergency and as a temporary measure The right of the employer or the employee to require the dispute to be referred for conciliation or adjudication would still be there and could be exercised by them by taking appropriate steps Upon the construction we place on the 343 provisions of cl b of section 3 it is clear that no question of discrimination at all arises Similarly the fact that action was taken by the Government in an emergency in the public interest would be a complete answer to the argument that that action is violative of the pro visions of article 191g The restriction placed upon the employer by such an order is only a temporary one and having been placed in the public interest would fall under cl 6 of article 19 of the Constitution Upon this view we hold that the High Court was in error in issuing a writ against the State Government quashing their order in so far as it related to payment of bonus The appeal is allowed and order of the High Court is set aside Costs of this appeal will be paid by the respondents Appeal allowed	Held per MAHAJAN MUKHERJEA DAs and CHANDRASEKHARA AIYAR JJ PATANJALI SASTRI CJ dissenting Section 12 of the Bombay Public Safety Measures Act 1947 in so far at any rate as it authorises the Government to direct particular cases to be tried by a Special Judge appointed under the Act does not purport to proceed on any classifica tion and therefore contravenes article 14 of the Constitution and is void under article 13 on the principles laid down in the cases of State of West Bengal vs Anwar Ali Sarkar 1952 SCR 284 and Kathi Raning Rawat vs Tht State of Saurash tra 1952 SCR 435 The appellants who were accused of having committed murder and other serious offences were directed by the Government of Bombay by an order made on the 6th August 1949 to be tried under the Bombay Public Safety Measures Act by a Special Judge appointed under the Act charges were framed against them on the 13th January 1950 and they were convicted in March 1950 On appeal it was contended before the High Court that the trial and conviction were illegal as the Bombay Public Safety Measures Act was void under article 13 read with article 14of the Constitution which came into force on the 26th January 1950 but the High Court held that as the proceedings against the accused had commenced before the Constitution the provisions of articles 13 and 14 did not apply and the conviction was not illegal Heldby a majority that although substantive rights and liabilities acquired or accrued before the date of the Constitution remain enforceable it cannot be held that after that date those rights or liabilities must be en forced under the particular procedure that was in force before that date although it has since that date been repealed or come into conflict with the fundamental right to equal protection of the laws guaranteed by the 711 Constitution as there is no vested right in procedure The fact of reference of cases to the Special Judge before the Constitution came into force has no reasonable relation to the objects sought to be achieved by the Act the discrimi nation therefore continued after the Constitution came into force and such continuation of the application of the dis criminatory procedure to the cases of the appellants after the date of the Constitution constituted a breach of the fundamental right guaranteed by article 14 and the appellants were therefore entitled to be tried under the ordinary procedure after the date of the Constitution PATANJALI SASTRI CJ contra Granting that section 12 of the Bombay Act must in view of the decision in Anwar Ali Sarkar s case be held to be discriminatory and void in so far as it empowers the State Government to refer individual cases to a Special Judge for trial the trial of the appel lants which had validly started before the Special Judge who had been empowered to try the case cannot be vitiated by the Constitution subsequently coming into force The provisions of the Constitution relating to fundamental rights have no retrospective operation and do not affect a criminal prose cution commenced before the Constitution came into force The jurisdiction of the Special Judges validly created and exercised before the Constitution and their competence to try the cases referred to them cannot be affected by the special procedure becoming discriminatory The correct view is that article 14 does not affect pending trials even in matters of procedure Moreover the appellants against whom proceedings had been commenced before the Special Judge were not in the same situation as others and there was nothing discriminatory in a law which permits them to be tried under the special procedure which was applicable to them when the proceedings were started against them
Criminal Appeal No 1731956 Appeal from the judgment and order dated May 23 1956 of the Punjab High Court in Criminal Revision No 10581954 K L Arora for the appellant N section Bindra and R H Dhebar for the respondent November 11 The Judgment of the Court was delivered by AYYANGAR J This appeal on a certificate under articles 132 and 1341 of the Constitution granted by the High Court of Punjab raises for consideration the constitutionality of section 71 of the Punjab Trade Employees Act 1940 The appellant Manohar Lal has a shop at Ferozepore Cantt in which business is carried on under the name and style of I Imperial Book Depot Section 7 of the Punjab Trade Employees Act 1940 hereinafter called the Act enacts 7 1 Save as otherwise provided by this Act every shop or commercial establishment shall remain closed on a close day 2i The choice of a close day shall rest with the occupier of a shop or commercial establishment and shall be intimated to the prescribed authority within two months of the date on which this Act comes into force to extract the provision relevant to this appeal The 345 appellant had chosen Friday as the close day ie the day of the week on which his shop would remain closed The Inspector of Shops and Commercial Establishments Ferozepore Circle visited the appellant s shop on Friday the 29th of January 1954 and found the shop open and the appellant s son selling articles Obviously if section 71 were valid the appellant was guilty of a contravention of its terms and he was accordingly prosecuted in the Court of the Additional District Magistrate Ferozepore for an offence under section 16 of the Act which ran Subject to the other provisions of this Act whoever contravenes any of the provisions of this Act shall be liable on conviction to a fine not exceeding twenty five rupees for the first offence and one hundred rupees for every subsequent offence The appellant admitted the facts but he pleaded that the Act would not apply to his shop or establishment for the reason that he had engaged no strangers as employees but that the entire work in the shop was being done by himself and by the members of his family and that to hold that section 71 of the Act would apply to his shop would be unconstitutional as violative of the fundamental rights guaranteed by articles 14 191f and g of the Constitution The additional District Magistrate rejected the plea raised by the appellant regarding the constitutionality of section 71 in its application to shops where no employees were engaged and sentenced him to a fine of Rs 100 and simple imprisonment in default of payment of the fine since the appellant had been convicted once before The appellant applied to the High Court of Punjab to revise this order but the Revision was dismissed The learned Judges however granted a cer tificate of fitness which has enabled the appellant to file the appeal to this Court Though the validity of section 71 of the Act was challenged in the High Court on various grounds learned Counsel who appeared before us rested his attack on one point He urged that the provision violated the 44 346 appellant s right to carry on his trade or business guaranteed by article 191g and that the restriction imposed was not reasonable within article 196 because it was not in the interest of the general public Learned Counsel drew our attention to the long title of the Act reading An Act to limit the hours of work of Shop Assistants and Commercial Employees and to make certain regulations concerning their holidays wages and terms of service and pointed out that the insistence on the appellant to close his shop in which there were no employees was really outside the purview of the legislation and could not be said to subserve the purposes for which the Act was enacted In short the submission of the learned Counsel was that the provision for the compulsory closure of his shop for one day in the week served no interests of the general public and that it was unduly and unnecessarily restrictive of his freedom to carry on a lawful trade or business otherwise in accordance with law as he thought best and in a manner or mode most con venient or profitable We are clearly of the opinion that the submissions of the learned Counsel should be repelled The long title of the Act extracted earlier and on which learned Counsel placed considerable reliance as a guide for the determination of the scope of the Act and the policy underlying the legislation no doubt indicates the main purposes of the enactment but cannot obviously control the express operative provisions of the Act such as for example the terms of section 71 Nor is the learned counsel right in his argument that the terms of section 71 are irrelevant to secure the purposes or to subserve the underlying policy of the Act The ratio of the legislation is social interest in the health of the worker who forms an essential part of the com munity and in whose welfare therefore the community is vitally interested It is in the light of this purpose that the provisions of the Act have to be scrutinized Thus section 3 which lays down the restrictions subject to which alone I young persons defined as those under the age of 14 could be employed in any shop or commercial establishment is obviously with a view to 347 ensuring the health of the rising generation of citizens Section 4 is concerned with imposing restrictions regarding the hours of work which might be extracted from workers other than young persons Section 41 enacts Subject to the provisions of this Act no person shall be employed about the business of a shop or commercial establishment for more than the normal maximum working hours that is to say fifty four hours in any one week and ten hours in any one day bringing the law in India as respects maximum working hours in line with the norms suggested by the International Labour Convention Sub clauses 4 and 5 of this section are of some relevance to the matter now under consideration 4 No person who has to the knowledge of the occupier of a shop or commercial establishment been previously employed on any day in a factory shall be employed on that day about the business of the shop or commercial establishment for a longer period than will together with the time during which he has been previously employed on that day in the factory complete the number of hours permitted by this Act 5 No person shall work about the business of a shop or commercial establishment or two or more shops or commercial establishments or a shop or commercial establishment and a factory in excess of the period during which he may be lawfully employed under this Act It will be seen that while under sub cl 4 employers are injuncted from employing persons who had already worked for the maximum number of permitted hours in another establishment sub cl 5 lays an embargo on the worker himself from injuring his health by overwork in an endeavour to earn more From this it would be apparent that the Act is concerned and properly concerned with the welfare of the worker and seeks to prevent injury to it not merely from the action of the employer but from his own In other words the worker is prevented from attempting to earn more wages by working longer hours than is good 348 for him If such a condition is necessary or proper in the case of a worker there does not seem to be anything unreasonable in applying the same or similar principles to the employer who works on his own business The learned Judges of the High Court have rested their decision on this part of the case on the reasoning that the terms of the impugned section might be justified on the ground that it is designed in the interest of the owner of the shop or establishment himself and that his health and welfare is a matter of interest not only to himself but to the general public The legislation is in effect the exercise of social control over the manner in which business should be carried on regulated in the interests of the health and welfare not merely of those employed in it but of all those engaged in it A restriction imposed with a view to secure this purpose would in our opinion be clearly saved by article 196 Apart from this the constitutionality of the impugned provision might be sustained on another ground also viz with a view to avoid evasion of provisions specifically designed for the protection of workmen employed It may be pointed out that acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable if the same were necessary to secure the efficient enforcement of valid provisions The inclusion of a reasonable margin to ensure effective enforcement will not stamp a law otherwise valid as within legislative competence with the character of unconstitutionality as being unreasonable The provisions could therefore be justified as for securing administrative convenience and for the proper enforcement of it without evasion As pointed out by this Court in Manohar Lal vs The State 1 when the appellant challenged the validity of this identical provision but on other grounds The legislature may have felt it necessary in order to reduce the possibilities of evasion to a minimum to encroach upon the liberties of those who would not otherwise have been affected To require a shopkeeper who employs one or two men 1 675 349 to close and permit his rival who employs perhaps a dozen members of his family to remain open clearly places the former at a grave commercial disadvantage To permit such a distinction might well engender discontent and in the end react upon the relations between employer and employed We have therefore no hesitation in repelling the attack on the constitutionality of section 71 of the Act The appeal fails and is dismissed Appeal dismissed	The respondents were the elected members of the Vicarabad 296 Municipal Committee constituted in 1953 under the Hydera bad Municipal and Town Committees Act 1951 That Act was repealed by section 320 of the Hyderabad District Municipalities Act 1956 which came into force in 1956 That section provided that the committee constituted under the repealed enactment was to be deemed to have been constituted under the Act and the members thereof should hold office till the first meeting of the committee was called under section 35 of the Act No election was held under the new Act the old committee which continued to function after duly passing a resolution and obtaining the necessary sanction from the Government sold certain municipal lands to third parties The appellants who were rate payers of the said Municipality moved the High Court for the issue of a writ of quo warranto challenging the said sales under article 226 of the Constitution The High Court dismissed the petition The contention of the appellants in this Court was that the members of the said committee were functus officio on expiry of three years from the commencement of the Act for section 34 of the Act prescribed a term of three years and section 320 of the Act did not provide any definite term for them But if section 34 was held to be inapplicable neither could the first general election under the Act for which section 16 of the Act was the only provision be held nor could the first meeting of the committee called under section 35 of the Act and the result would be that the old committee would continue indefinitely Held that the contention must be negatived The word committee in section 320 of the Hyderabad District Municipalities Act 1956 did not mean a committee elected under the Act and the term of three years prescribed by section 34 of the Act could not therefore apply to it Construed in the light of well recognised principles of interpretation of statutes and the scheme as envisaged by sections 16 17 18 20 32 34 and 320 of the Act section 320 of the Act could be no more than a transitory provision and it would be unreasonable to suggest that the Legislature which repealed the earlier Act with the express intention of constituting committees on broad based democratic principles intended to perpetuate old committees constituted under the repealed Act Section 161 of the Act properly construed was clearly inapplicable to the first general election under the Act and could apply only to subsequent elections So far as the first general election under the Act was concerned sections 17 and 20 of the Act provided a self contained and integrated machinery therefor independent of section 161 of the Act Canada Sugar Refining Co vs R referred to The Legislature in enacting the new Act assumed and expected that the Government would within a reasonable time issue notifications for holding the first general election under section 17 of the Act and its failure to do so and thus implement the 297 Act and not any inherent inconsistency in the Act itself prolonged the life of the old committee Since section 77 of the Act expressly authorised the Municipal Committee to sell municipal property subject to the conditions specified therein no prohibition could be implied from the provisions of s 76 of the Act and the impugned sales effected in conformity with the conditions precedent laid down by section 77 of the Act could not be said to be ultra vires the powers of the committee Elizabeth Dowager Baroness Wenlock vs The River Dee Company and Attorney General vs Fulhan Corpora tion considered Per Sarkar J It is well settled that where the language of a statute leads to manifest contradiction of the apparent purpose of the enactment as the language of section 16i does in the present case the Court has the power so to read it as to carry out the obvious intention of the Legislature The intention of the Legislature in enacting the new Act clearly was that elections should be held and committees constituted under it Seaford Court Estates Ltd vs Asher referred to Section 161 is the only section of the Act which authorises the holding of a general election but since the requirements as to time in section 16i of the Act could not apply to the first general election that section must be read to carry out the obvious intention of the Legislature as if there was no such requirement in the case of the first general election under the Act Although this would not indicate when that election was to be held the obvious implication would be that it must be held within a reasonable time of the commencement of the Act Section 20 of the Act does not authorise the holding of a general election Salmon vs Duncombe referred to
Appeal No 5 of 1959 Appeal from the judgment and order dated February 16 1954 of the former Hyderabad High Court in Reference No 347B 52 of 1953 54 C K Daphtary Solicitor General of India K N Rajagopala Sastri and D Gupta for the appellant Sanat P Mehta and J B Dadachanji for the respondent November 8 The Judgment of the Court was delivered by section K DAS J This is an appeal on a certificate of fitness granted by the High Court of Judicature at Hyderabad under s66 A 2 of the Indian Income tax Act 1922 The Commissioner of Income tax Hyderabad is the appellant before us The respondent is Dewan Bahadur Ramgopal Mills Ltd a public limited company incorporated in the erstwhile State of Hyderabad The respondent company was assessed under the Hyderabad Income tax Act in respect of the assessment years 1357 F 1358 F and 1359 F In the assessment for those years depreciation allowance was given to it on the basis of the written down value of its assets such as buildings machinery plant etc in accordance with the provisions of cl c of section 125 of the Hyderabad Income tax Act That clause provided that in the case of assets acquired before the previous year and before the commencement of the Act the written down value would be the actual cost to the assessee less i depreciation at the rates applicable to the assets calculated on the actual cost for the first year since acquisition and for the next year on the actual cost diminished by the depreciation allowance for one year and so on for each year upto the commencement of the Act and ii depreciation actually allowed to the assessee on such assets for each financial year after the commencement of the 321 Act The erstwhile State of Hyderabad merged in the Union of India on January 26 1950 and became a Part B State The Finance Act 1950 by section 13 thereof repealed the taxation laws in force in Part B States except for certain purposes not relevant to this case and by section 3 extended the Indian Income tax Act 1922 to the whole of India except the State of Jammu and Kashmir In exercise of the powers conferred by section 12 of the Finance Act 1950 the Central Government was pleased to make the Taxation Laws Part B States Removal of Difficulties Order 1950 hereinafter referred to as the Removal of Difficulties Order 1950 by a notification dated December 2 1950 Paragraph 2 of the said Order in so far as it is relevant to this case was in these terms Computation of aggregate depreciation allowance and written down value In making any assessment under the Indian Income tax Act 1922 all depreciation actually allowed under any laws or rules of a Part B State relating to Income tax and Super tax or any law relating to tax on profits of business shall be taken into account in computing the aggregate depreciation allowance referred to in sub clause c of the proviso to clause vi of sub section 2 and the written down value under clause b of sub section 5 of sec 10 of the said Act For the assessment year 1951 52 which was in respect of the account year ending June 30 1950 the respondent was assessed for the first time under the Indian Income tax Act 1922 read with paragraph 5 of the Part B States Taxation Concessions Order 1950 Basing its claim on paragraph 2 of the Removal of Difficulties Order 1950 the respondent asked for depreciation allowance in respect of its assets such as buildings machinery plant etc to the tune of Rs812244 It worked out the value of the assets at their inception and deducted therefrom such depreciation as was allowed for the three assessment years in which the respondent was assessed under the Hyderabad Income tax Act and calculating the written down 322 value in that manner it claimed depreciation according to the prescribed rates By his order dated November 30 1951 the Income tax Officer disallowed this claim He held that the claim of the respondent was against the principle inherent in granting depreciation allowance which must decrease from year to year and further held that the word allowed in paragraph 2 of the Removal of Difficulties Order 1950 should be construed as meaning considered only Accordingly he took the figures of the written down value from the income tax proceedings of 1359 F and allowed depreciation at the prescribed rate on those figures Against the order of the Income tax Officer the respondent went in appeal to the Appellate Assistant Commissioner Hyderabad Division That Officer by an order dated May 23 1952 upheld the view of the Income tax Officer and dismissed the appeal Then there was an appeal to the Income tax Appellate Tribunal which was heard by the Bombay Bench of the said Tribunal By its order dated December 12 1952 the Appellate Tribunal held that in view of the pro visions in paragraph 2 of the Removal of Difficulties Order 1950 the contention of the respondent must prevail and it pointed out that the words used in paragraph 2 were depreciation actually allowed under any laws or rules of a Part B State and those words did not mean the aggregate allowance for depreciation taken into account in computing the written down value under the Hyderabad Act therefore the respondent was entitled to the depreciation allowance which it claimed It directed the Income tax Officer to compute the written down value on the basis of the actual cost to the assessee of the assets in question minus the depreciation allowance actually allowed to the assessee under the Hyderabad Income tax Act The appellant herein then moved the Appellate Tribunal for a reference to the High Court under section 661 of the Indian Income tax Act In the meantime that is on March 9 1953 the Central Government purporting to exercise its powers conferred by section 60 A of the Indian Income tax Act 1922 added an Explanation 323 to paragraph 2 of the Removal of Difficulties Order 1950 Explanation said Explanation For the purpose of this paragraph the expression all depreciation actually allowed under any laws or rules of a Part B State means and shall be deemed to have always meant the aggregate allowance for depreciation taken into account in computing the written down value under any laws or rules of a Part B State or carried forward under the said laws or rules The Explanation in terms gave effect to the contention urged on behalf of the Department and said that what has to be allowed is the aggregate allowance for depreciation taken into account in computing the written down value under any law or rules of a Part B State In support of the application for a reference the appellant relied on the aforesaid Explanation and contended that in view of the Explanation the respondent could not claim depreciation allowance on the basis of actual cost minus the depreciation allowances actually allowed under the Hyderabad Income tax Act On this application the Tribunal expressed the view that if the Explanation applied to the case on hand then the contention of the Department was correct and must be upheld It said however that it had no power to review its own order and therefore considered it unnecessary to express any opinion whether the Explanation was valid and affected the case before it It said finally that the following question of law did arise out of its order and accordingly stated a case thereon Whether in making the assessment for the year 1951 52 under the Indian Income tax Act is the assessee company entitled to claim depreciation allowance on the basis of the written down value computed at the time of the assessment for the year 1359 F or is to be computed on the basis of the actual cost minus the depreciation allowances granted under the Hyderabad Income tax Act The reference was then heard by the High Court of Judicature at Hyderabad which by its order dated February 16 1954 held that the Explanation added 324 to paragraph 2 of the Removal of Difficulties Order 1950 by the notification dated March 9 1953 was void on certain grounds one of which was that the Explanation was ultra vires the powers of the Central Government under section 60 A of the Indian Income tax Act Therefore it answered the question in favour of the respondent The appellant then obtained the necessary certificate of fitness and preferred the present appeal In the meantime there was a further change of law On May 8 1956 the Central Government made a notification No section R O 1139 in exercise of the powers conferred on it by section 12 of the Finance Act 1950 whereby an Explanation in identical terms as the earlier Explanation made under section 60 A of the Indian Income tax Act was added to paragraph 2 of the Removal of Difficulties Order 1950 The arguments before us have proceeded on the basis of the Explanation added by the notification aforesaid and it is not disputed that if the Explanation is valid and applies to the present case then the appeal must be allowed and the question of law answered in favour of the appellant If on the contrary the Explanation is not valid or it does not apply to the present case then the appeal must be dismissed We proceed now to a consideration in detail of the different contentions urged before us on behalf of the appellant and the respondent We may first read section 12 of the Finance Act 1950 under which notification No section R O 1139 dated May 8 1956 was made Section 12 reads If any difficulty arises in giving effect to the provisions of any of the Acts rules or orders extended by section 3 or section 11 to any State or merged territory the Central Government may by order make such provision or give such direction as appears to it to be necessary for removing the difficulty On behalf of the appellant it has been argued that the notification was validly made in exercise of the powers conferred on the Central Government under section 12 aforesaid that it does not suffer from any of the defects pointed out by the High Court in regard 325 to the earlier notification of 1953 made under section 60 A of the Income tax Act and that it adds an Explanation which in terms gives effect to the contention of the appellant and this Court must consider the change in law made thereby and give effect to it in answering the question of law arising out of the Tribunal s order On the other hand the validity of the notification has been very strenuously contested before us by learned Counsel for the respondent He has challenged its validity and also its applicability to the present case on the following grounds 1 that it is ultra vires the powers conferred on the Central Government by section 12 2 that it can have no retrospective effect and 3 that it contravenes article 14 of the Constitution We shall consider these arguments in the order in which we have stated them The first question is whether the notification is validly made under section 12 or is it ultra vires the powers conferred on the Central Government by that section On behalf of the respondent it is urged that a condition for the exercise of the power under section 12 is contained in the opening clause which says If any difficulty arises in giving effect to the provisions of any of the Acts rules or orders extended by section 3 or section II to any State etc The contention is that no difficulty arose in giving effect to the provisions of any of the Acts rules or orders referred to in the opening clause to any State etc and therefore the condition for the exercise of the power is not fulfilled and on that ground the notification is invalid We are unable to accept this argument as correct Section 10 of the Income tax Act says in its first subsection that the tax shall be payable by an assessee in respect of the profits or gains of any business profession or vocation carried on by him Sub section 2 thereof says that such profits or gains shall be computed after making certain allowances and one of these allowances is in respect of the depreciation of such buildings machinery plant etc as are used for the purpose of the business cl The depreciation except in certain cases is calculated on the written down value which expression is explained 326 in sub section 5 of section 10 Clause b of the sub section states S105 a b In the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act repealed thereby or under executive orders issued when the Indian Income tax Act 1886 11 of 1886 was in force It is obvious that in applying cl b to an assessee in a Part B State there would be an initial difficulty in as much as prior to 1950 when the Indian Income tax Act came into force in a Part B State no depreciation could have been actually allowed to such an assessee under the Income tax Act or under any Act repealed thereby for example the Hyderabad Income tax Act was repealed by the Finance Act 1950 and not by the Income tax Act and would not therefore be covered by cl Such and other difficulties led to the Removal of Difficulties Order 1950 which has not been seriously challenged before us Indeed the High Court said that it was not open to the respondent to challenge the validity of the Removal of Difficulties Order 1950 because such a point was not taken before the Tribunal Learned Counsel for the respondent has then submitted that what ever initial difficulty there might have been in giving effect to the Indian Income tax Act in a Part State that difficulty was solved by paragraph 2 of the Removal of Difficulties Order 1950 and in any view there was no fresh difficulty which could necessitate the addition of an Explanation in 1953 or 1956 Here again we think that the submission is not correct The basic and normal scheme of depreciation under the Indian Income tax Act is that it decreases every year being a percentage of the written down value which in the first year is the actual cost and in suc ceeding years actual cost less all depreciation actually allowed under the Income tax Act or an Act repealed thereby etc The Hyderabad Income tax Act not having been repealed by the Income tax Act but by the Finance Act 1950 there was a difficulty in 327 allowing depreciation to an assessee in a Part B State in the first year of assessment under the Indian Income tax Act This difficulty was sought to be removed by paragraph 2 of the Removal of Difficulties Order 1950 If however depreciation actually allowed under the Hyderabad Income tax Act was taken into account in computing the aggregate depreciation allowance and the written down value an anomalous result would follow as in the present case namely depreciation allowance to be allowed to the assessee in the accounting year under the Indian Income tax Act would be more than what was allowed in previous years under the Hyderabad Income tax Act This would create a disparity and be against the scheme of the Indian Income tax Act It was therefore necessary to explain paragraph 2 of the Removal of Difficulties Order 1950 to assimilate or harmonise the position regarding depreciation allowance and the Explanation added in 1953 or 1956 was obviously intended to remove the difficulty arising out of that disparity or disharmony Furthermore the true scope and effect of section 12 seems to be that it is for the Central Government to determine if any difficulty of the nature indicated in the section has arisen and then to make such order or give such direction as appears to it to be necessary to remove the difficulty Parliament has left the matter to the executive but that does not make the notification of 1956 bad In Pandit Banarsi Das Bhanot vs The State of Madhya Pradesh Ors 1 we said at page 435 Now the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws such as the selection of persons on whom the tax is to be laid the rates at which it is to be charged in respect of different classes of goods and the like We are therefore of the view that the notification of 1956 was validly made under section 12 and is not ultra vires the powers conferred on the Central Government by that section The second question is does the notification apply 1 328 to the assessment in the present case which is an assessment for the year 1951 52 The notification was made in 1956 and it added an Explanation to paragraph 2 of the Removal of Difficulties Order 1950 It says that a particular expression occurring in that paragraph means and shall be deemed always to have meant the aggregate allowance for depreciation taken into account in computing the written down value etc under any law of a Part B State The argument on behalf of the respondent is that the law which governs an assessment for the assessment year 1951 52 is the law in force at the time when the Finance Act 1951 came into force accordingly so the argument proceeds paragraph 2 of the Removal of Difficulties Order 1950 as it stood on April 28 1951 when the Finance Act 1951 came into force will apply in the present case We consider this argument to be unsound The Explanation though added in 1956 explains the meaning of paragraph 2 of the Removal of Difficulties Order 1950 and says in express terms that the paragraph shall be deemed always to have had that meaning Section 12 by the very nature of its intent and purpose confers on the Central Government power to make an order to remove a difficulty which has already arisen and the power to re move the difficulty must necessarily include the power to remove the difficulty from the time it arose The Central Government has therefore the power to make an order or give a direction so as to remove the difficulty from the very beginning and that is what the notification of 1956 does It applies to the assessment of 1951 52 indeed it applies to all assessments made under the Indian Income tax Act in which paragraph 2 of the Removal of Difficulties Order 1950 operates The last challenge to the validity of the notification of 1956 is that it contravenes article 14 of the Constitution because it discriminates between different classes of tax payers Learned Counsel for the respondent has asked us to consider the cases of assessees in three different areas which subsequently come in a Part B State in one area there was no law relating to 329 income tax in the second there was a law relating to income tax under which written down value was computed on the basis of depreciation actually allowed year after year while in the third the written down value was computed in the manner provided under the Hyderabad Income tax Act it is pointed out that on the extension of the Indian Income tax Act read with paragraph 2 of the Removal of Difficulties Order 1950 and the Explanation to those areas the assessee in the first area will get depreciation allowance on the actual cost in the second area he will get such allowance on the basis of actual cost less depreciation actually allowed and in the third area he will get such allowance on the actual cost less depreciation taken into account It is contended that this resultant discrimination is arbitrary and without any rational justification We think that learned Counsel for the respondent has ignored one essential consideration which clearly vitiates his argument In the matter of depreciation allowance the assessee in the three areas in the example given by him do not stand on the same footing they are not situated alike so as to be entitled to be treated alike It is obvious that an assessee from an area where there was no income tax law at all can never say that in the matter of depreciation allowance as respects buildings machinery plant etc he is on a par with a person in an area where there was a law relating to income tax allowing depreciation on such buildings machinery plant etc The same would be the position with regard to areas where the previous law as to depreciation was different Indeed to treat all these persons alike would be tantamount to unequal treatment In our view the notification of 1956 creates no unequal treatment of persons in a like situation it applies to all who are in a like situation namely all those to whom paragraph 2 of the Removal of Difficulties Order 1950 applies We consider that the challenge to the notification based on article 14 is wholly unsubstantial It has not been disputed before us that a change in 42 330 law validly made and applicable to a case pending in appeal must be considered and given effect to by the Appellate Court The conclusion we have reached is that the notification of 1956 was validly made and applies to the present case In view of this conclusion we have considered it unnecessary to examine the notification of 1953 or the reasons for which the High Court held that notification to be bad For the reasons given above we allow this appeal and set aside the judgment and order of the High Court dated February 16 1954 The question referred to the High Court is answered in favour of the appellant The appellant has succeeded by reason of the notification of 1956 and taking that circumstance into consideration we direct that there will be no order for costs for the hearing in this Court Appeal allowed	The Government of U P appointed a Court of enquiry under sections 6 and 10 of the United Provinces and referred to it the present dispute The Court of enquiry submitted its report to the Government whereupon the Government issued a notification in July 1950 directing the various sugar factories to pay bonus to their workmen for the years 1948 49 as well as to pay certain amounts as bonus for the years 1947 48 331 Court against the Government prohibiting it from enforcing the notification The State Government came up in appeal urging that the provisions of cl b of section 3 of the United Provinces were wide enough to permit it to issue such a direction to the employer because by doing so the State Government would be imposing a condition of employment in future The respondents inter alia contended that 1 clause b of section 3 of the Act does not operate retrospectively 2 bonus could only be a term of employment by agreement and could not be imposed by statute 3 where there was an industrial dispute cl d and not cl b of section 3 of the Act would apply and 4 if cl b was applicable it was ultra vires being discriminatory and violative of article 14 of the Constitution and also violative of article 19i of the Constitution as it confers arbitrary powers on the State Government Held that i though cl b of section 3 of the United Provinces could not be given a retrospective effect yet there was nothing therein which prohibited the State Government from giving a direction with regard to the payment of bonus and by giving such a direction the State Government was not giving retrospective effect to the provisions of that clause nor did it add a new term or a condition for a period which was over it merely required the employer to pay an additional sum of money to their employees as a term and condition of employment in future ii though normally wage is a term of contract it can be made a condition of employment by statute and it was open to the State Government under cl b of section 3 to make the payment of bonus to workmen a condition of their employment in future iii where the employees bargained in their collective capacity the fact that the personnel of the factory when the order for the payment of bonus was made by the Government and in the year to which dispute related were not the same did not affect the power of the Government as the order would apply only to those employees who had worked during the period in question and not to new employees iv the normal way of dealing with an industrial dispute would be to have it dealt with judicially and not by resort to executive action but cl b of section 3 empowers the Government to act promptly in case of an emergency and arms it with additional powers to deal with such an emergency in the public interest v when the Government had made an executive or per under cl b of section 3 on the ground that it was in the public interest to do so it was open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under cl b of section 3 of the Act 332 vi the provisions of cl b of section 3 are not in any sense alternative to those of cl d and the former could be availed of by the State Government only in an emergency and as a temporary measure The right of the employer or the employee to require the dispute to be referred for conciliation or adjudication would still be there and could be exercised by them by taking appropriate steps vii clause b of section 3 of the Act is not violative of the provisions of article 191g of the Constitution as it permits action to be taken thereunder by the Government only in an emergency and in the public interest The restriction placed upon the employer is only a temporary one and having been placed in the public interest falls under cl 6 of article 19 of the Constitution Ram Nath Koeri and Anr vs Lakshmi Devi Sugar Mills and Ors approved L D Mills vs U P Government AIR 1954 All 705 overruled
Appeal No 429 of 1959 Appeal by special leave from the judgment and order dated December 6 1957 of the former Bombay Sales Tax Tribunal in Appeal No6 of 1956 C K Daphtary Solicitor General of India H R Khanna and R H Dhebar for the appellant N A Palkhivala section P Mehta J B Dadachanji Rameshwar Nath and P L Vohra for the respondents November 15 The Judgment of the Court was delivered by HIDAYATULLAH J The State of Bombay has appealed to this Court with special leave against an order of the Sales Tax Tribunal Bombay dated December 6 1957 by which the Tribunal allowing the appeal before it set aside an order of the Collector of Sales Tax passed under section 27 of the Bombay Sales Tax Act 1953 The respondents Ratilal Vadilal Bros are commission agents doing business as clearing and transport contractors On June 25 1954 they applied to the Collector of Sales Tax Bombay under sections 27a b and c of the Act describing the nature of their business citing one instance thereof for determination of the question whether they could be called dealers within the Act The Collector by his order held that they were dealers and were required to register themselves under the Act On appeal the Tribunal held otherwise and hence this appeal by the State of Bombay 369 It appears that no action was taken to ask for a reference to the High Court of Bombay under section 341 read with sections 301 and 2 of the Act We have frequently noticed that all the remedies which are open to an appellant are not first exhausted before moving this Court Ordinarily this Court will not allow the High Court to be bypassed in this manner and the proper course for an appellant is to exhaust all his remedies before invoking the jurisdiction of this Court under article 136 In the present case however the matter is simple and the learned counsel for the respondent requested us to determine the question stating that his client who was a small trader and who made the application for the clarification of the law would be dragged through Courts once again if we were to decide this appeal on this short point In view of this though we decide this appeal we must not be held to lay down a cursus curiae for this Court The matter relates to a time after the Colliery Control Order 1945 came into force Under that Order no person could acquire or purchase coal from a colliery except under authority of the Central Government for which purpose he had to obtain a priority certificate from the State Coal Controller Under the scheme of the Order del credere agents were allowed to act and to charge a commission of one rupee per ton of coal One Nanalal Karsandas a brick manufacturer was allotted a priority certificate in respect of 22 tons of coal on June 17 1954 He dealt with Ms SC Rungta Colliery Burhar through the respondents The consignment was in the name of Karsandas but the bill was sent by the Colliery to the respondents and the respondents in their turn made out a bill in which they charged in addition to the amount of the bill of the Colliery a sum of Rs 22 as their commission The liability to pay the Colliery rested upon the respondents but they claimed to be acting as mere middlemen between the Colliery and Karsandas The respondents stated that their business was along these lines with other constituents also and asked the Collector to determine whether they could be described as dealers within the Act and required registration 370 Dealer in the Bombay Sales Tax Act 1953 is defined as follows dealer means any person who carries on the business of selling goods in the State of Bombay whether for commission remuneration or otherwise Explanation omitted It would appear that to be a dealer the person must carry on the business of selling goods in the State of Bombay The short question in this case therefore was whether the respondents were carrying on such a business in respect of coal The scheme of the Control Order shows that no sale of coal could take place except to a person holding a certificate A sale otherwise was in contravention of the Control Order The certificate which has been produced in the case though made out in the name of the respondents shows the consumer as the consignee It is thus plain that there was no sale by the Colliery to the respondents but directly to Karsan das though through the agency of the respondents The respondents also when they made out the bill to Karsandas mentioned that he was the consignee and that they were only charging their middlemen commission In these circumstances it is difficult to hold that the Colliery sold coal to the respondents and that they in turn sold it to Karsandas There were no two sales involved there was only one sale and that was by the Colliery to the consumer The respondents never became owners by purchase from the Colliery because the Colliery would not have sold coal to them nor could they have bought it unless they had obtained a certificate The position of the respondents was merely that of agents arranging the sale to a disclosed purchaser though guaranteeing payment to the Colliery on behalf of their principal In view of what we have said no business of selling coal was disclosed in the instance cited before the Collector and the order of the Tribunal was correct on the facts placed before it In the result the appeal fails and will be dismissed with costs Appeal dismissed	The appellant who was a shopkeeper was convicted for the second time by the Additional District Magistrate for contravening the provisions of section 71 of the Punjab Trade Employees Act 1940 under which he was required to keep his shop closed on the day which he had himself chosen as a close day He raised the plea that the Act did not apply to his shop as he did not employ any stranger but that himself alone worked in it and that the application of section 71 to his shop would be violative of his fundamental rights under articles 14 191f and g of the Constitution and also that the restriction imposed was not reasonable within article 196 as it was not in the interest of the general 344 public The High Court dismissed his application for revision of the Magistrate s order On appeal on a certificate of the High Court Held that the main object of the Act was the welfare of the employees and to protect their as well as the employers health by preventing them from over work Such a restriction being in the interest of the general public was reasonable within the meaning of article 196 of the Constitution The provisions of section 71 were constitutionally valid and were justified as for securing administrative convenience and avoiding evasion of those provisions designed for the protection of the workmen Manohar Lal vs The State referred to
Appeal No 761 of 1957 Appeal by special leave from the judgment and order dated February 24 1955 of the former Bombay High Court in ITR 48X of 1954 Hardayal Hardy and D Gupta for the appellant N A Palkhivala and I N Shroff for the respondent November 17 The Judgment of the Court was delivered by SHAH J The Income Tax Appellate Tribunal Bombay Bench A referred under section 661 of the Indian Income Tax Act 1922 hereinafter referred to as the Act the following question Whether the sum of Rs 15608 should have been included in the assessee Company s profit for the purpose of determining whether the payment of a larger dividend than that declared by it would be unreasonable The High Court answered the question in the negative Against the order of the High Court with special leave under article 136 of the Constitution this appeal is preferred Ms Bipinchandra Maganlal Co Ltd hereinafter referred to as the Company is registered under the Indian Companies Act The Company is one in 495 which the public are not substantially interested within the meaning of section 23A Explanation of the Act Its paid up capital at the material time was Rs 20800 made up as follows 20 shares of Rs 50 each fully paid up and 1980 shares of Rs 50 each Rs 10 being paid up per share In December 1945 the Company purchased certain machinery for Rs 89000 and sold it sometime in March 1947 for the price for which it was originally purchased In the books of account of the Company the written down value of the machinery in the year of account 1946 47 April 1 1946 to March 31 1947 was Rs 73392 The trading profits of the Company as disclosed by its books of account for the year 194647 were Rs 33245 At the General Meeting held on October 21 1947 the Company declared a dividend of Rs 12000 for the year of account In assessing tax for the year of assessment 1947 48 the Income Tax Officer computed the assessable income of the Company for the year of account 1946 47 at Rs 48761 after adding back to the profit of Rs 33245 returned by the Company Rs 15608 realised in excess of the written down value of the machinery sold in March 1947 The Income Tax Officer passed an order under section 23A of the Act that Rs 15429 being the undistributed portion of the assessable income of the Company as reduced by taxes payable shall be deemed to have been distributed as dividend amongst the shareholders as at the date of the General Meeting and the proportionate share of each shareholder shall be included in his total income Appeals preferred against his order to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal proved unsuccessful but the Appellate Tribunal at the instance of the Company referred the question set out hereinbefore to the High Court at Bombay under a 661 of the Act Section 23A1 of the Act as it stood at the relevant time in so far as it is material was as follows Where the Income Tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company upto the end 496 of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than 60 of the assessable income of the company of that previous year as reduced by the amount of income tax and super tax payable by the company in respect thereof he shall unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made the payment of a dividend or a larger dividend than that declared would be unreasonable make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share holders as at the date of the general meeting aforesaid Clearly by section 23A the Income Tax Officer is required to pass an order directing that the undistributed portion of the assessable income of any company in which the public are not substantially interested shall be deemed to have been distributed as dividends amongst the shareholders if he is satisfied that i the company has not distributed 60 of its assessable income of the previous year reduced by the Income tax and super tax payable ii unless payment of a dividend or a larger dividend than that declared having regard to a losses incurred by the company in the earlier years or b the smallness of the profits made in the previous year be unreasonable The total assessable income of the Company for the year of account was Rs 48761 and the tax payable thereon was Rs 21332 60 of Rs 27249 assessable income reduced by the income tax and super tax due exceeded the dividend declared by Rs 4458 The first condition to the exercise of jurisdiction by the Income Tax Officer under section 23A was therefore indisputably fulfilled But the Income Tax Officer had 497 still to be satisfied whether having regard to the smallness of the profit there is no evidence in this case that loss was incurred by the Company in earlier years it would be unreasonable to distribute dividend larger than the dividend actually declared The Income Tax Officer did not expressly consider this question he rested his decision on the rejection of the contention raised by the Company that the difference between the price of the machinery realised by sale and the written down value in the year of account could not be taken into account in passing an order under section 23A He it seems assumed that if that difference be taken into account distribution of larger dividend was not unreasonable and the Tribunal proceeded upon the footing that the assumption was correctly made Counsel for the Revenue submits in support of the appeal that the expression smallness of profit means no more than smallness of the assessable income and that in any event in the computation of profits the amount realised by sale of the machinery in the year of account in excess of its written down value was liable to be included in considering whether the condition relating to smallness of profit was fulfilled At the material time section 26C of the Act defined income as inclusive amongst others of any sum deemed to be profits under the second proviso to cl vii of sub section 2 of section 10 By section 10 in the computation of profits or gains of an assessee under the head Profits and gains of business profession or vocation carried on by him the amount by which the written down value of any building machinery or plant which has been sold discarded or demolished or destroyed exceeds the amount for which the building machinery or plant is actually sold or its scrap value is to be allowed as a deduction This allowance is however subject to an exception prescribed by the second proviso to el vii sub section 2 of section 10 that where the amount for which any building machinery or plant is sold exceeds the written down value so much of the 63 498 excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profit of the previous year in which the sale took place In computing the profits and gains of the Company under section 10 of the Act for the purpose of assessing the taxable income the difference between the written down value of the machinery in the year of account and the price at which it was sold the price not being in excess of the original cost was to be deemed to be profit in the year of account and being such profit it was liable to be included in the assessable income in the year of assessment But this is the result of a fiction introduced by the Act What in truth is a capital return is by a fiction regarded for the purposes of the Act as income Because this difference between the price realized and the written down value is made chargeable to income tax its character is not altered and it is not converted into the assessee s business profits It does not reach the assessee as his profits it reaches him as part of the capital invested by him the fiction created by section 102vii second proviso notwithstanding The reason for introducing this fiction appears to be this Where in the previous years by the depreciation allowance the taxable income is reduced for those years and ultimately the asset fetches on sale an amount exceeding the written down value ie the original cost less depreciation allowance the Revenue is justified in taking back what it had allowed in recoupment against wear and tear because in fact the depreciation did not result But the reason of the rule does not alter the real character of the receipt Again it is the accumulated depreciation over a number of years which is regarded as income of the year in which the asset is sold The difference between the written down value of an asset and the price realized by sale thereof though not profit earned in the conduct of the business of the assessee is nationally regarded as profit in the year in which the asset is sold for the purpose of taking back what had been allowed in the earlier years A company normally distributes dividends out of its business profits and not out of its assessable income 499 There is no definable relation between the assessable income and the profits of a business concern in a commercial sense Computation of income for purposes of assessment of income tax is based on a variety of artificial rules and takes into account several fictional receipts deductions and allowances In considering whether a larger distribution of dividend would be unreasonable the source from which the dividend is to be distributed and not the assessable income has to be taken into account The Legislature has not provided in section 23A that in considering whether an order directing that the undistributed profits shall be deemed to be distributed the smallness of the assessable income shall be taken into account The test whether it would be unreasonable to distribute a larger dividend has to be adjudged in the light of the profit of the year in question Even though the assessable income of a company may be large the commercial profits may be so small that compelling distribution of the difference between the balance of the assessable income reduced by the taxes payable and the amount distributed as dividend would require the company to fall back either upon its reserves or upon its capital which in law it cannot do For instance in the case of companies receiving income from property even though tax is levied under section 9 of the Act on the bona fide annual value of the property the actual receipts may be considerably less than the annual value and if the test of reasonableness is the extent of the assessable income and not the commercial profit there may frequently arise cases in which companies may have to sell off their income producing assets The Legislature has deliberately used the expression smallness of profit and not smallness of assessable income and there is nothing in the context in which the expression smallness of profit occurs which justifies equation of the expression profit with assessable income Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in the light of total receipts actual or fictional This view appears to have been taken by the High Courts in India without any dissentient 500 opinion see Sir Kasturchand Ltd vs Commissioner of Income Tax Bombay City 1 Ezra Proprietary Estates Ltd vs Commissioner of Income Tax West Bengal 2 and Commissioner of income Tax Bombay City vs F L Smith Co Bombay Ltd 3 By the fiction in section 102vii second proviso read with section 26C what is really not income is for the purpose of computation of assessable income made taxable income but on that account it does not become commercial profit and if it is not commercial profit it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable In our judgment the High Court was right in holding that the amount of Rs 15608 was not liable to be taken into account in considering whether having regard to the smallness of the profit made by the Company it would be unreasonable to declare a larger dividend The appeal therefore fails and is dismissed with costs Appeal dismissed 1 1940 XVII ITR 493 2 1950 XVIII ITR 762 3 1959 XXXV ITR 183	Prior to January 26 1950 when the erstwhile State of Hyderabad merged in the Union of India and became a Part B State the respondent company was assessed to income tax under the Hyderabad Income tax Act by which depreciation allowance was given to it on the basis of the written down value of its assets such as buildings machinery plants etc in accordance with cl C of section 125 of that Act which provided that in the case of assets acquired before the previous year and before the commencement of the Act the written down value would be the actual cost to the assessee less 1 depreciation at the rates applicable to the assets calculated on the actual costs for the first year since acquisition and for the next year on the actual cost diminished by the depreciation allowance for one year and so on for each year upto the commencement of that Act and ii depreciation actually allowed to the assessee on such assets for each financial year after the commencement of the Act After the merger of Hyderabad with the Union of India by sections 3 and 13 of the Finance Act 950 the taxation laws in force in the State were repealed and the Indian Income tax Act 1922 was extended to that area and in exercise of the powers conferred by section 12 of the Finance Act 1950 the Central Government issued a notification dated December 2 1950 called the Taxation Laws Part B States Removal of Difficulties Order 1950 Paragraph 2 of the Order provided that in making any assessment under the Indian Income tax A ct 1922 all depreciation actually allowed under any laws or rules of a Part B State shall be taken into account in computing the aggregate depreciation allowance referred to in proviso c to section 102vi and the written down value under section 105b of the said Act For the assessment year 1951 52 the respondent was assessed for the first time under the Indian Income tax Act and basing its claim on para 2 of the aforesaid Order it asked for 319 the value thereof at their inception and deducting therefrom such depreciation as was allowed for the three assessment years in which it was assessed under the Hyderabad Income tax Act 7 By order dated November 30 1951 the Income tax Officer disallowed the respondent s claim on the ground that it was against the principle inherent in granting depreciation allowance which must decrease from year to year The matter was taken up to the Supreme Court and while it was pending there on May 8 1956 the Central Government issued a notification in exercise of its powers conferred on it by section 12 of the Finance Act 1950 whereby an explanation was added to the aforesaid para 2 as follows For the purpose of this paragraph the expression all depreciation actually allowed under any laws or rules of a Part B State means and shall be deemed to have always meant the aggregate allowance for depreciation taken into account in computing the written down value under any laws or rules of a Part B State or carried forward under the said laws or rules The respondent challenged the validity of the notification of 1956 and also its applicability to the present case on the grounds 1 that it was ultra vires the powers conferred on the Central Government by section 12 of the Finance Act 1950 2 that it contravened article 14 of the Constitution and 3 that in any case it could have no retrospective effect Held 1 that the true scope and effect of section 12 was that it was for the Central Government to determine if any difficulty of the nature indicated in the section had arisen and then to make such order or give such direction as appeared to it to be necessary to remove the difficulty the legislature having left the matter to the executive Pandit Banarsi Das Bhanot v The State of Madhya Pradesh and Others relied on In the present case a difficulty had arisen because if depreciation actually allowed under the Hyderabad Income tax Act was taken into account in computing the aggregate depre ciation allowance and the written down value an anomalous result would follow namely depreciation allowance to be allowed to the assessee in the accounting year under the Indian Income tax Act would be more than what was allowed in previous years under the Hyderabad Income tax Act Consequently the Central Government was within its power under section 12 in making the notification dated May 8 1956 2 that the notification of 1956 applied to all those to whom para 2 of the Taxation Laws Part B States Removal of Difficulties Order 1950 was applicable and created no unequal treatment of persons in the like situation Accordingly the notification did not contravene article 14 of the Constitution 3 that the Central Government had the power under section 12 of the Finance Act 1950 to make an order or give a direction so as to remove difficulties which arose in the very beginning 320 and therefore the notification though added in 1956 was valid and was applicable to the assessment of 1951 52
Appeal No 761 of 1957 Appeal by special leave from the judgment and order dated February 24 1955 of the former Bombay High Court in ITR 48X of 1954 Hardayal Hardy and D Gupta for the appellant N A Palkhivala and I N Shroff for the respondent November 17 The Judgment of the Court was delivered by SHAH J The Income Tax Appellate Tribunal Bombay Bench A referred under section 661 of the Indian Income Tax Act 1922 hereinafter referred to as the Act the following question Whether the sum of Rs 15608 should have been included in the assessee Company s profit for the purpose of determining whether the payment of a larger dividend than that declared by it would be unreasonable The High Court answered the question in the negative Against the order of the High Court with special leave under article 136 of the Constitution this appeal is preferred Ms Bipinchandra Maganlal Co Ltd hereinafter referred to as the Company is registered under the Indian Companies Act The Company is one in 495 which the public are not substantially interested within the meaning of section 23A Explanation of the Act Its paid up capital at the material time was Rs 20800 made up as follows 20 shares of Rs 50 each fully paid up and 1980 shares of Rs 50 each Rs 10 being paid up per share In December 1945 the Company purchased certain machinery for Rs 89000 and sold it sometime in March 1947 for the price for which it was originally purchased In the books of account of the Company the written down value of the machinery in the year of account 1946 47 April 1 1946 to March 31 1947 was Rs 73392 The trading profits of the Company as disclosed by its books of account for the year 194647 were Rs 33245 At the General Meeting held on October 21 1947 the Company declared a dividend of Rs 12000 for the year of account In assessing tax for the year of assessment 1947 48 the Income Tax Officer computed the assessable income of the Company for the year of account 1946 47 at Rs 48761 after adding back to the profit of Rs 33245 returned by the Company Rs 15608 realised in excess of the written down value of the machinery sold in March 1947 The Income Tax Officer passed an order under section 23A of the Act that Rs 15429 being the undistributed portion of the assessable income of the Company as reduced by taxes payable shall be deemed to have been distributed as dividend amongst the shareholders as at the date of the General Meeting and the proportionate share of each shareholder shall be included in his total income Appeals preferred against his order to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal proved unsuccessful but the Appellate Tribunal at the instance of the Company referred the question set out hereinbefore to the High Court at Bombay under a 661 of the Act Section 23A1 of the Act as it stood at the relevant time in so far as it is material was as follows Where the Income Tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company upto the end 496 of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than 60 of the assessable income of the company of that previous year as reduced by the amount of income tax and super tax payable by the company in respect thereof he shall unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made the payment of a dividend or a larger dividend than that declared would be unreasonable make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share holders as at the date of the general meeting aforesaid Clearly by section 23A the Income Tax Officer is required to pass an order directing that the undistributed portion of the assessable income of any company in which the public are not substantially interested shall be deemed to have been distributed as dividends amongst the shareholders if he is satisfied that i the company has not distributed 60 of its assessable income of the previous year reduced by the Income tax and super tax payable ii unless payment of a dividend or a larger dividend than that declared having regard to a losses incurred by the company in the earlier years or b the smallness of the profits made in the previous year be unreasonable The total assessable income of the Company for the year of account was Rs 48761 and the tax payable thereon was Rs 21332 60 of Rs 27249 assessable income reduced by the income tax and super tax due exceeded the dividend declared by Rs 4458 The first condition to the exercise of jurisdiction by the Income Tax Officer under section 23A was therefore indisputably fulfilled But the Income Tax Officer had 497 still to be satisfied whether having regard to the smallness of the profit there is no evidence in this case that loss was incurred by the Company in earlier years it would be unreasonable to distribute dividend larger than the dividend actually declared The Income Tax Officer did not expressly consider this question he rested his decision on the rejection of the contention raised by the Company that the difference between the price of the machinery realised by sale and the written down value in the year of account could not be taken into account in passing an order under section 23A He it seems assumed that if that difference be taken into account distribution of larger dividend was not unreasonable and the Tribunal proceeded upon the footing that the assumption was correctly made Counsel for the Revenue submits in support of the appeal that the expression smallness of profit means no more than smallness of the assessable income and that in any event in the computation of profits the amount realised by sale of the machinery in the year of account in excess of its written down value was liable to be included in considering whether the condition relating to smallness of profit was fulfilled At the material time section 26C of the Act defined income as inclusive amongst others of any sum deemed to be profits under the second proviso to cl vii of sub section 2 of section 10 By section 10 in the computation of profits or gains of an assessee under the head Profits and gains of business profession or vocation carried on by him the amount by which the written down value of any building machinery or plant which has been sold discarded or demolished or destroyed exceeds the amount for which the building machinery or plant is actually sold or its scrap value is to be allowed as a deduction This allowance is however subject to an exception prescribed by the second proviso to el vii sub section 2 of section 10 that where the amount for which any building machinery or plant is sold exceeds the written down value so much of the 63 498 excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profit of the previous year in which the sale took place In computing the profits and gains of the Company under section 10 of the Act for the purpose of assessing the taxable income the difference between the written down value of the machinery in the year of account and the price at which it was sold the price not being in excess of the original cost was to be deemed to be profit in the year of account and being such profit it was liable to be included in the assessable income in the year of assessment But this is the result of a fiction introduced by the Act What in truth is a capital return is by a fiction regarded for the purposes of the Act as income Because this difference between the price realized and the written down value is made chargeable to income tax its character is not altered and it is not converted into the assessee s business profits It does not reach the assessee as his profits it reaches him as part of the capital invested by him the fiction created by section 102vii second proviso notwithstanding The reason for introducing this fiction appears to be this Where in the previous years by the depreciation allowance the taxable income is reduced for those years and ultimately the asset fetches on sale an amount exceeding the written down value ie the original cost less depreciation allowance the Revenue is justified in taking back what it had allowed in recoupment against wear and tear because in fact the depreciation did not result But the reason of the rule does not alter the real character of the receipt Again it is the accumulated depreciation over a number of years which is regarded as income of the year in which the asset is sold The difference between the written down value of an asset and the price realized by sale thereof though not profit earned in the conduct of the business of the assessee is nationally regarded as profit in the year in which the asset is sold for the purpose of taking back what had been allowed in the earlier years A company normally distributes dividends out of its business profits and not out of its assessable income 499 There is no definable relation between the assessable income and the profits of a business concern in a commercial sense Computation of income for purposes of assessment of income tax is based on a variety of artificial rules and takes into account several fictional receipts deductions and allowances In considering whether a larger distribution of dividend would be unreasonable the source from which the dividend is to be distributed and not the assessable income has to be taken into account The Legislature has not provided in section 23A that in considering whether an order directing that the undistributed profits shall be deemed to be distributed the smallness of the assessable income shall be taken into account The test whether it would be unreasonable to distribute a larger dividend has to be adjudged in the light of the profit of the year in question Even though the assessable income of a company may be large the commercial profits may be so small that compelling distribution of the difference between the balance of the assessable income reduced by the taxes payable and the amount distributed as dividend would require the company to fall back either upon its reserves or upon its capital which in law it cannot do For instance in the case of companies receiving income from property even though tax is levied under section 9 of the Act on the bona fide annual value of the property the actual receipts may be considerably less than the annual value and if the test of reasonableness is the extent of the assessable income and not the commercial profit there may frequently arise cases in which companies may have to sell off their income producing assets The Legislature has deliberately used the expression smallness of profit and not smallness of assessable income and there is nothing in the context in which the expression smallness of profit occurs which justifies equation of the expression profit with assessable income Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in the light of total receipts actual or fictional This view appears to have been taken by the High Courts in India without any dissentient 500 opinion see Sir Kasturchand Ltd vs Commissioner of Income Tax Bombay City 1 Ezra Proprietary Estates Ltd vs Commissioner of Income Tax West Bengal 2 and Commissioner of income Tax Bombay City vs F L Smith Co Bombay Ltd 3 By the fiction in section 102vii second proviso read with section 26C what is really not income is for the purpose of computation of assessable income made taxable income but on that account it does not become commercial profit and if it is not commercial profit it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable In our judgment the High Court was right in holding that the amount of Rs 15608 was not liable to be taken into account in considering whether having regard to the smallness of the profit made by the Company it would be unreasonable to declare a larger dividend The appeal therefore fails and is dismissed with costs Appeal dismissed 1 1940 XVII ITR 493 2 1950 XVIII ITR 762 3 1959 XXXV ITR 183	One Nanalal Karsandas who was a brick manufacturer held a priority certificate for purchasing coal under the Colliery Control Order and purchased a certain quantity of coal from Ms section G Rungta Colliery through the respondents who were commission agents The respondents applied to the Collector for determining whether they could be described as dealers under the Bombay Sales Tax Act 1953 The Collector held that they were dealers but the Sales Tax Tribunal held otherwise No step was taken thereafter for a reference to the High 368 Court under sections 341 and 301 of the Act On appeal by the State of Bombay by special leave Held that the respondents could not be described as dealers under the Act as the nature of their business as disclosed by them did not show that they were carrying on the business of selling goods in the State of Bombay but were only commission agents arranging sales to other persons The proper course for the appellant was to move the High Court and exhaust all his remedies before invoking the jurisdiction of this court under article 136 of the Constitution
Appeal No 53 of 1958 Appeal by special leave from the Decision dated February 28 1957 of the Labour Appellate Tribunal Bombay in Appeal No 111 160 of 1956 section P Varma for the appellants 360 L K Jha Janardan Sharma R C Prasad and Maqbool Ahmad Khan for the respondents November 14 The Judgment of the Court was delivered by GAJENDRAGADKAR J This appeal by special leave arises from an industrial dispute between the appellant Messrs Swadeshi Cotton Mills and the respondents its employees and the short preliminary question which is raised for our decision is whether an order should not be passed in this appeal in terms of the compromise agreement alleged to have been reached between the appellant and the respondents It appears that on December 28 1955 an industrial dispute between the parties was referred by the Government of Uttar Pradesh to the Industrial Tribunal U P Allahabad for adjudication under sections 3 4 and 8 of the U P UP Act XXVIII of 1947 and in pursuance of the provisions of cl 11 of G O No U 464LLXXXVI B 257 LL1954 issued on July 14 1954 The dispute thus referred was whether the existing rates of wages of jobbers mentioned in the annexure employed in the weaving department of the appellant need any revision if so with what details and from what date The Tribunal tried this issue and came to the conclusion that no case for revision had been made out by the respondents Against this decision of the Tribunal the respondents preferred an appeal before the Labour Appellate Tribunal Their appeal succeeded and the Appellate Tribunal directed that the award of the original Tribunal should be set aside and that the appellant shall introduce from the date of reference a uniform rate of two annas in both the old and new sheds irrespective of the number of looms assigned to the line jobbers It would be noticed that as a result of this decision the existing rates have been revised and the revision has been ordered to take effect retrospectively from the date of reference It is against this decision of the Labour Appellate Tribunal that the appellant has preferred the present appeal by special leave 361 Pending this appeal in this Court the appellant purported to enter into a compromise with the respondents and the terms of the compromise were reduced to writing and in pursuance of the said compromise an application was made to this Court on February 261958 signed by Mr Bagla on behalf of the appellant in his capacity as a Director of the appellant and Mr Maqbool Ahmad Khan for the respondents in his capacity as the General Secretary of the Suti Mill Mazdoor Sabha Kanpur This application set out the material terms of the compromise One of the terms of the compromise is that the revised rate should take effect not from December 28 1955 which is the date of reference but from July 1 1957 Certain other modifications have also been made in the decision under appeal Before the appeal could be placed on the Board for passing orders in terms of this compromise an application was made on behalf of some of the respondents alleging that the General Secretary Mr Khan had no authority or power to enter into any compromise as a representative of the respondents and that the compromise alleged to have been entered into by him with the appellant was not acceptable to the respondents In support of this case the application referred to a resolution passed by the General Council of the Mazdoor Sabha whereby it was declared that no office bearer could conclude an agreement with an employer about an industrial dispute without the consent of the General Council and reliance was also placed on the relevant provisions in the constitution of the Mazdoor Sabha Thereafter the petition for compromise was placed before this Court for hearing on April 10 1960 and the Court directed that the application for recording compromise as well as the appeal itself should both be placed together for hearing before the Court as soon as the parties file their respective statements of the case After the statements were filed the appeal and the petition were placed before this Court on May 5 1960 and the Court by an interlocutory judgment 46 362 sent two issues to the Tribunal with a direction that the Tribunal should hear the parties on those issues and make its findings thereon The two issues were 1 Has the compromise set up by the appellant taken place between the parties 2 If yes is the compromise valid In pursuance of this order the Tribunal has recorded evidence heard the parties and made its findings It has found that the compromise in fact has taken place as alleged in the petition made before this Court in that behalf and that the said compromise is valid In dealing with the first question of fact the Tribunal has considered the evidence exhaustively in the light of the background of the dispute between the parties it has found that negotiations went on between the parties for a fairly long time during which period the parties discussed the pros and cons of the compromise that during these negotiations Mr Khan was watchful of the interests of the respondents that the compromise had been approved by the workmen concerned that on the whole it is to their advantage and does not at all militate against the accepted principles of industrial adjudication and what is more it has been acted upon and has not remained a mere paper transaction It has explained that the opposition to the compromise proceeded sub stantially from the dispute between Mr Khan the Secretary and Mr Bajpai the President and the Tribunal felt no doubt that the compromise was the result of bona fide attempt on the part of both the parties to settle the dispute amicably in order to create goodwill and co operation amongst the employer and the employees On the question of law raised by the second issue the Tribunal has held that the compromise is perfectly valid It has considered the relevant provisions of the constitution of this Sabha the practice prevailing in regard to such compromises and to several agreements of compromise entered into consistently with the said practice It was urged before the Tribunal that the compromise is invalid under section 6 B of the UP as well as section 2vi c of the Act 4 of 1936 363 These contentions have been rejected by the Tribunal In the result the findings recorded on both the issues are in favour of the compromise After these findings were received in this Court the appeal and the compromise petition have now come before us for final disposal The finding of fact recorded by the Tribunal on the first issue has not been and cannot be challenged before us It must therefore be taken to have been established that at the relevant time Mr Khan was the General Secretary of the respondents Sabha and as such was entitled to represent them and did represent them during the course of the present adjudication proceedings and that the compromise reached between him and the appellant is the result of mutual discussions carried on for some time and its terms on the whole are beneficial to the respondents The practice prevailing in this Sabha and a large number of precedents which are consistent with the said practice indicate clearly that the Secretary of the Union who represents the workmen in industrial disputes has always been authorised and has exercised his authority to settle such disputes when it was thought reasonable and proper to do so As we have often indicated it is always desirable that industrial disputes should be amicably settled because such settlement conduces to happy industrial relationship and encourages co operation between the parties That is why when industrial disputes are brought before this Court under article 136 of the Constitution this Court generally appreciates attempts made to settle disputes amicably and in proper cases encourages such settlements Mr Jha for the respondents however contends that though amicable settlement of industrial disputes may otherwise be desirable in law such settlement or compromise is illegal If we come to the conclusion that compromise of industrial disputes pending an appeal is prohibited by law or is otherwise inconsistent with such provisions it may be necessary to hold that the present compromise is bad in law however much amicable settlement of industrial disputes may otherwise be desirable Therefore the question which arises for our 364 decision on the present compromise petition is Is the contention raised by Mr Jha correct that the compromise is invalid in law The first point urged by Mr Jha in support of this argument is that the present compromise is prohibited by a 23 of the This Act has been passed to regulate the payment of wages to certain classes of persons employed in industry and there is no doubt that the wages as revised by the Labour Appellate Tribunal in the present case would constitute wages under section 2 vi of this Act Section 23 provides that any contract or agreement whether made before or after the commencement of this Act whereby an employed person relinquishes any right conferred by this Act shall be null and void in so far as it purports to deprive him of such right The relevant provisions of this Act require the fixation of wage periods provide for the time of payment of wages authorises certain deductions and permits the imposition of fines only subject to the conditions specified in that behalf Section 15 of the Act provides for the determination of claims arising out of deduction of wages or delay in payment of wages and penalty for malicious or vexatious claims Section 16 prescribes for the making of an application in which such claims can be set up and a 18 provides for the powers for the authorities appointed under the Act Mr Jha contends that the revised wage structure directed by the Labour Appellate Tribunal entitles the respondents to claim the respective amounts there indicated as their wages and the effect of the impugned compromise is that the respondents are relinquishing a part of their right in that behalf Mr Jha con tends that in giving up their claim for the retrospec tive operation of the decision of the Labour Appellate Tribunal for a substantial part of the period the res pondents are required to contract themselves out of their legal rights conferred by the award and there fore referable to this Act and that makes the compromise invalid This argument is misconceived because it fallaciously assumes that the decision under appeal has become final and that the rights accruing under 365 the said decision would not be and cannot be affected by any compromise The most significant fact to remember in this connection is that the decision on which the alleged rights are based is itself subject to an appeal before this Court and in that sense it is not a final decision at all it is liable to be reversed or modified and that being so the rights claimable under the said decision are also liable to be defeated or materially affected In such a case the industrial dispute would undoubtedly be pending before this Court and it would be idle for Mr Jha to contend that an attempt to settle such a dispute and not to invite a decision of this Court contravenes the provisions of a 23 of this Act Just as an industrial dispute could have been settled between the parties either before it was referred for adjudication to the Industrial Tribunal or after it was referred and before the award was pronounced by the Tribunal so would it be open to the parties to settle the dispute so long as it was pending either before the Labour Appellate Tribunal or before this Court The provisions of section 23 of this Act postulate certain definite rights which are not likely or liable to be modified or reversed in any pending judicial proceedings and since this factor is absent in cases where an appeal is pending before this Court it would not be reasonable to rely on the said provisions and contend that they in substance prevent or prohibit amicable settlement of disputes The other argument urged against the validity of the compromise is based on the provisions of section 6 C of the U P This section corresponds substantially to section 19 of the XIV of 1947 It provides inter alia that an award shall in the first instance remain in operation for the period of one year or such shorter period as may be specified therein and gives the State Government power to extend the period of operation from time to time if it thinks fit It also provides that the State Government either on its own motion or on the application of any party bound by the award shorten the period of its operation if it is shown that there has been a material change in the circumstances 366 on which the award was based The argument is that any modification in the award can only be made by adopting the procedure prescribed by section 6 C In our opinion there is no substance in this argument Section 6 C undoubtedly confers upon the State Government certain powers to fix the duration of the operation of the award but there can be no doubt that the section can have no bearing on the powers of this Court in dealing with an industrial dispute brought before it under article 136 of the Constitution The award to which section 6 C refers is an award which has become final in the sense that it is no longer subject to consideration by any Tribunal or Court So long as an award is pending before a Tribunal or a Court the jurisdiction of the Tribunal or the Court to deal with it in accordance with law is not affected by section 6 C and the competence of the parties to settle their dispute pending before the Tribunal or the Court is also not affected or impaired by the said section In other words what we have said about the argument based on the provisions of section 23 of the applies with equal force to the present argument as well Then it is contended that the impugned compromise is a settlement within the meaning of section 2t of the U P Act and as such it can be executed only in the manner prescribed by the Act Section 2t defines a settlement as one which is arrived at in the course of conciliation proceedings and as including a written agreement between the employer and the workmen arrived at otherwise than in the course of conciliation proceedings when such an agreement has been signed between the parties thereto in such manner as may be prescribed and a copy thereof has been sent to the State Government and the conciliation officer Rule 51 of the U P Industrial Disputes Rules 1957 prescribes the procedure for recording a settlement as defined by section 2t It is true that this procedure has not been followed but it is difficult to understand how section 2t or the procedure prescribed by r 51 can have any application to a compromise agreement which has been entered into between the parties pending the 367 appeal in this Court The compromise in question is intended to be filed in this Court for the purpose of enabling the parties to request this Court to pass an order in terms of the said compromise The procedure for obtaining such an order which has to be followed is the procedure prescribed by the rules of this Court just as if a compromise was reached before the Tribunal the procedure to be followed before it would be the procedure prescribed by its rules Therefore we have no doubt that the compromise in question cannot attract the procedure prescribed by r 51 The result is that the finding recorded by the Tribunal that the compromise in question is valid is obviously right and must be confirmed Since it is found that the compromise in fact has taken place and is otherwise valid we have no hesitation in directing that an order should be drawn in terms of the said compromise in the present appeal Order accordingly	The respondent company purchased certain machinery for Rs 89000 and sold it for the same value but in the books of account the written down value of the machinery was shown in the year of account as Rs 73392 The Income Tax Officer in computing the assessable income of the company added the difference ie Rs 15608 between the actual value and the written down value to the profit of the company The Income Tax Officer also passed an order under section 23A of the Income Tax Act and directed that the undistributed portion of the assessable income shall be deemed to have been distributed amongst the shareholders as dividend Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 661 Whether the sum of Rs 15608 should have been included in the assessee company s profit for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable The High Court answered the question in the negative On appeal by special leave Held that the view taken by the High Court was correct 494 By the fiction in section 102Vii second proviso read with s26C what is really not income is for the purpose of computation of assessable income made taxable income but on that account it does not become commercial profit and if it is not commercial profit it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable Smallness of profit should not be equated with smallness of assessable income but should be determined in accordance with commercial principles Sir Kasturchand Ltd vs Commissioner of Income tax Bombay City 1949 XVII ITR 493 Ezra Proprietary Estates Ltd vs Commissioner of Income tax West Bengal 1950 XVIII ITR 762 and Commissioner of Income tax Bombay City vs F L Smith Co Bombay Ltd 1959 XXXV ITR 183 referred to
Appeal No 4 of 1960 Appeal by special leave from the Judgment and Order dated January 28 1959 of the Punjab High Court in Letters Patent Appeal No 52 of 1958 arising out of the Judgment and Order dated February 17 1958 of the said High Court in Civil Writ Application No 124 of 1957 C B Aggarwala Daya Swarup Mehra and R section Gheba for the appellants section M Sikri Advocate General for the State of Punjab NS Bindra and D Gupta for respondent No 1 CK Daphtary Solicitor General of India and section N Andley for Respondent No 2 CK Daphtary Solicitor General of India and TM Sen for the Attorney General for India Intervener 1960 November 16 The Judgment of the Court was delivered by SINHA C J This appeal by special leave granted on May 29 1959 is directed against the decision of the Letters Patent Bench G D Khosla C J and Dulat J dated January 28 1959 affirming that of the learned single Judge Bishan Narain J dated February 17 1958 whereby he dismissed the 461 appellants Writ Petition under article 226 of the Constitution It appears that the appellants are the owners of what is said to be agricultural land measuring about 86 bighas odd in village Munda Majra Tehsil Jagadhari in the district of Ambala On October 27 1954 the Additional District Magistrate of Ambala ordered the land aforesaid to be requisitioned under the Punjab Requisitioning Acquisition of Immoveable Property Act XI of 1953 for the construction of houses by members of the Thapar Industries Co operative Housing Society Ltd Yamuna Nagar Possession of the land was taken on November 5 1954 The appellants at once instituted a suit on November 14 1954 in the Court of the Subordinate Judge Jagadhari challenging the requisition proceedings The suit was ultimately decreed by the Court on June 21 1955 and the possession of the property in question was restored to the petitioners On May 27 1955 the first respondent i e the State of Punjab through the Secretary Labour Department issued a notification under section 4 of the Land Acquisition Act 1 of 1894 which hereinafter will be referred to as the Act The notification under section 4 is in these terms No 4850 S LP 5514144 Whereas it appears to the Governor of Punjab that land in the locality hereunder specified is likely to be needed by the Government for a public purpose namely for the construction of a Labour Colony under the Government sponsored Housing Scheme for the Industrial Workers of the Thapar Industrial Workers Co operative Housing Society Limited Jamna Nagar District Ambala it is hereby notified that the land described in the specifi cations below is likely to be required for the above purpose This notification is made under the provisions of Section 4 read with section 17 of the Land Acquisition Act 1894 as amended by the Land Acquisition Punjab Amendment Act 1953 to all to whom it may concern and the Collector shall cause public notice of the substance of this notification to be given at convenient places in the said locality 462 In exercise of the powers conferred by the aforesaid sections the Governor of the Punjab is pleased to authorise the President of the above said Society with the members and servants to enter upon and survey any land in the locality and do all other acts required or permitted by that section Further in exercise of the powers conferred by sub section 4 of Section 17 of the said Act the Governor of Punjab is pleased to direct that on the grounds of urgency the provisions of Section 5a of the said Act shall not apply in regard to this Acquisition Later the same day another notification under section 6 of the Act was issued This notification under section 6 states that it appeared to the Governor of Punjab that the land is required to be taken by Government for a public purpose namely for the construction of a Labour Colony under the Government sponsored Housing Scheme for the Industrial Workers of the Thapar Industrial Workers Co operative Housing Society Limited which is the second respondent in this case It also says that under the provisions of section 7 of the Act the Collector Ambala is directed to take order for the acquisition of the land The Patwari effected delivery of possession of the lands in question to the second respondent on August 21 1955 Even before the delivery of possession had been effected the appellants promptly instituted their suit on August 20 1955 in the Court of the Subordinate Judge Class 1 Jagadhari for a perpetual injunction restraining the second respondent from entering upon or taking possession of the land in question or making any construction thereon The trial Court dismissed the suit on June 25 1956 on the preliminary ground that the suit was not competent in the absence of a previous notice under section 59 of the Punjab Co operative Societies Act 1955 XIV of 1955 The appellants appealed to the Senior Sub Judge Ambala who dismissed their appeal upholding the decision of the trial Court that the notice was a condition precedent to the institution of the suit Their second appeal was dismissed by the Punjab High Court on February 61957 During the pendency of the civil litigation aforesaid in spite of the fact that the second respondent had 463 obtained delivery of possession through Government agency by an Order of Injunction issued by the Court construction had been stayed As soon as the High Court decided the suit in favour of the respondents the second respondent started making huge constructions on the land in dispute in a very speedy manner as alleged by the appellants in their petition under article 226 of the Constitution which they filed on February 13 1957 From the High Court also they obtained similar Stay Orders whereby building operations were stopped In their Writ Petition the appellants as petitioners in the High Court challenged the acquisition proceedings on a number of grounds of which it is only necessary to notice the one which has formed the subject matter of decision in the High Court namely that the proceedings were void for want of compliance with the procedure laid down in Chapter VII mistake for Part VII of the Act It is not necessary to refer to the other contentions raised in the Writ Petition because it is common ground before us that the whole controversy must be determined by the answer to the question whether or not the proceedings were vitiated by reason of the admitted fact that no proceedings under Part VII of the Act had been taken in making the acquisition The matter was heard in the first instance by Bishan Narain J The learned Judge dismissed the petition holding that the acquisition was by the Government for a public purpose namely of construction of tenements for industrial workers under a schempeal against the order to the Collector of the district or such other officer as may by notification be authorised in this behalf by the State Government 629 Section 6 imposes a restriction on the transport of agricultural cattle for slaughter and reads section 6 No person shall transport or offer for trans port or cause to be transported any agricultural cattle from any place within the State to any place outside the State for the purpose of its slaughter in contra vention of the provisions of this Act or with the knowledge that it will be or is likely to be so slaugh tered Section 7 prohibits the sale purchase or disposal otherwise of certain kinds of animals It reads section 7 No person shall purchase sell or otherwise dispose of or offer to purchase sell or otherwise dis pose of or cause to be purchased sold or otherwise disposed of cows calves of cows or calves of she buffaloes for slaughter or knowing or having reason to believe that such cattle shall be slaughtered Section 8 relates to possession of flesh of agricultu ral cattle and is in these terms section 8 Notwithstanding anything contained in any other law for the time being in force no person shall have in his possession flesh of any agricultural cattle slaughtered in contravention of the provisions of this Act Section 10 imposes apenalty for a contravention of section 4la and section 11 imposes penalty for a contraven tion of any of the other provisions of the Act On behalf of the petitioners it has been pointed out and rightly in our opinion that cl a of sub section 2 of section 4 of the Act imposes an unreasonable restriction on the right of the petitioners That clause in its first part lays down that the cattle other than cows and calves must be over 20 years of age and must also be unfit for work or breeding and in the second part it says or has become permanently incapacitated from work or breeding due to age injury deformity or an incurable disease It is a little difficult to understand why the two parts are juxtaposed in the section In any view the restriction that the animal must be over 20 years of age and also unfit for work or breeding is an excessive or unreasonable restriction as we have 80 630 pointed out with regard to a similar provision in the Uttar Pradesh Act The second part of the clause would not be open to any objection if it stood by it self If however it has to be combined with the age limit mentioned in the first part of the clause it will again be open to the same objection if the animal is to be over 20 years of age and also permanently in capacitated from work or breeding etc then the age limit is really meaningless Then the expression due to age in the second part of the clause also loses its meaning It seems to us that cl a of sub section 2 of section 4 of the Act as drafted is bad because it imposes a dis proportionate restriction on the slaughter of bulls bullocks and buffaloes it is a restriction excessive in nature and not in the interests of the general public The test laid down is not merely permanent incapa city or unfitness for work or breeding but the test is something more than that a combination of age and unfitness Learned Counsel for the petitioners has plac ed before us an observation contained in a reply made by the Deputy Minister in the course of the debate on the Bill in the Madhya Pradesh Assembly see Madhya Pradesh Assembly Proceedings Vol 5 Serial No 34 dated April 14 1959 page 3201 He said that the age fixed was very much higher than the one to which any animal survived This observation has been placed before us not with a view to an interpre tation of the section but to show what opinion was held by the Deputy Minister as to the proper age limit On behalf of the respondent State our atten tion has been drawn to a book called The Miracle of Life Home Library Club in which there is a state ment that oxen given good conditions live about 40 years Our attention has also been drawn to certain extracts from a Hindi book called Godhan by Girish Chandra Chakravarti in which there are statements to the effect that cows and bullocks may live up to 20 or 25 years This is an aspect of the case with which we have already dealt The question before us is not the maximum age upto which bulls bullocks and buffaloes may live in rare cases The question before us is what is their average longevity and at what age 631 they become useless On this question we think that the opinion is almost unanimous and the opinion which the Deputy Minister expressed was not wrong Section 5 in so far as it imposes a restriction as to the time for slaughter is again open to the same ob jection as has been discussed by us with regard to a similar provision in the Uttar Pradesh Act A right of appeal is given to any person aggrieved by the order In other words a member of the public if he feels aggrieved by the order granting a certificate for slaughter may prefer an appeal and hold up for a long time the slaughter of the animal We have pointed out that for all practical purposes such a restriction will really put an end to the trade of the petitioners and we are unable to accept a restriction of this kind as a reasonable restriction within the meaning of cl 6 of article 19 of the Constitution Section 6 standing by itself we think is not open to any serious objection It is ancillary in nature and tries to give effect to the provision of the Act prohibiting slaughter of cattle in contravention of the Act Section 7 relates to the prohibition of sale purchase etc of cows and calves and inasmuch as a total ban on the slaughter of cows and calves is valid no ob jection can be taken to section 7 of the Act It merely seeks to effectuate the total ban on the slaughter of cows and calves both of cows and she buffaloes Sec tion 8 is also ancillary in character and if the other provisions are valid no objection can be taken to the provisions of section 8 Sections 10 and 11 impose penal e subsidised by the Government out of public funds that Part VII of the Act had no application to the present proceedings and that therefore the noti fication under section 6 was not invalid The appellants preferred an appeal under the Letters Patent The Letters Patent Bench dismissed the appeal but for different reasons After an examination of the precedents of the different High Courts bearing on the controversy in this case the Bench came to the conclusion which may better be expressed in its own words There is thus considerable authority for the 464 view advanced by the learned counsel for the appellants that compliance with the provisions of Part VII is obligatory in the case of all acquisitions for a company In the present case the acquisition was undoubtedly for the benefit of a company I have given this matter my most anxious consideration and with great respect to the learned Judges whose decisions have been noted above I find myself unable to subscribe to the views expressed by them It seems to me that their views were coloured by the background of the provisions of the Constitution Article 31 of the Constitution prohibits compulsory acquisition of property for anything except a public purpose Therefore acquisition for anything which is not a public purpose cannot now be done compulsorily but it has never been disputed that before the Constitution came into force land could have been acquired compulsorily by Government for a purpose which was not public There is nothing in the Land Acquisition Act to warrant the assumption that the embargo placed by Article 31 of the Constitution found place in the Act It seems to me that the Land Acquisition Act contem plates two categories of acquisitions After an examination of the provisions of the Act the High Court observed that the Land Acquisition Act came into force when there was no bar to compulsory acquisition for private purposes Such a bar was only imposed for the first time by article 31 of the Constitution After the Constitution came into force Part VII of the Act became redundant or null and void But in its view the present acquisition proceedings were saved from all attack based on non compliance with the provisions of Part VII of the Act The reason for this conclusion according to the High Court was that as the land was acquired for a public purpose there was no need to comply with the provisions of Part VII even though the Company is to bear all the expenses for the acquisition It is manifest that the main point for determination in this appeal is Whether or not the acquisition proceedings had been vitiated by reason of the admitted fact that there was no attempt made by the 465 Government to comply with the requirements of Part VII of the Act It is equally clear that the Letters Patent Bench of the High Court was misled in its conclusions because all the provisions of article 31 of the Constitution had not been brought to their notice It is not correct to say that Part VII of the Act had become redundant or null and void as suggested by the High Court because that Part provided for acquisition for a private purpose As held by this Court in a recent decision in the case of Babu Barkaya Thakur vs The State of Bombay 1 the Act deals with two kinds of acquisitions 1 for a public purpose at the cost of the Government and 2 for a purpose akin to such a purpose at the cost of a Company and to the latter class of acquisition the provisions of Part VII are attracted It was further held in that case that acquisition of a site for building residential houses for industrial labour was a public purpose and that the Land Acquisition Act was immune from attack based on the provisions of article 312 of the Constitution in view of the provisions of cl 5a of that Article which saved an existing law of the nature of the Act in question As will presently appear the conclusion of the High Court is entirely correct but the process of reasoning by which it has reached that conclusion is erroneous That process suffers from the initial error arising from the fact that the provisions of article 315 of the Constitution had not been brought to the notice of that Bench If the Bench were cognizant of the true legal position that the Land Acquisition Act in its entirety including Part VII dealing with the acquisition of Land for Companies was not subject to any attack under article 312 of the Constitution it would not have based that conclusion on that ratio Otherwise there would be no answer to the contention in which the appellants had persisted throughout the long course of litigation in which they have indulged in their vain effort to save the land from being used for the public purpose aforesaid The Letters Patent Bench has also fallen 1 59 466 into another error in assuming that the compensation was paid in its entirety by the Company It is better to clear the ground by showing that this assumption is not well founded in fact In their Writ Petition as originally filed in the High Court it was not categorically stated by the appellants that the compensation in respect of the land in question was paid or was to be paid by the Company It may be stated here by the way that it is common ground that the second respondent is a Company within the meaning of the Act being a registered society under the Co operative Societies Act It is also common ground that the purpose for which the land was being acquired was for erecting residential quarters for industrial labour which had organised itself into the Co operative Housing Society the second respondent It was only at a later stage of the proceedings in the High Court that is to say in the replication filed on behalf of the appellants to the Written Statement filed by the Government in answer to the appellant s Writ Petition that for the first time it was alleged by the appellants that the entire amount of compensation has been borne by the res pondent society This allegation has not been either supported or countered by evidence on either side But it has been pointed out by the learned single Judge that it was clear from the Government Housing Scheme that a substantial amount to be expended on this Scheme comes out of the Revenues in the form of subsidies and loans It was stated at the Bar with reference to the terms and conditions of the Government Housing Scheme that 25 to 50 of the cost of land and structures to be built upon the land was to be advanced by Government out of public funds in the shape of subsidy and loan It would thus appear that the High Court was not right in the assumption made as aforesaid It is clear from the statement of facts on record that the respondent No 2 is a Company within the meaning of the Act that the land is acquired for the benefit of the Company and at its instance and that a large proportion of the compensation money was to 467 come out of public funds the other portion being supplied by the Company or its members There is also no doubt that the structures to be made on the land would benefit the members of the Co operative Society But the private benefit of a large number of industrial workers becomes public benefit within the meaning of the Land Acquisition Act In this connection it may be mentioned that section 17 of the Act was amended by the Land Acquisition Punjab Amendment Act 11 of 1954 in these terms 172b Whenever in the opinion of the Collector it becomes necessary to acquire the immediate possession of any land for the purpose of any library or educational institution or for the construction ex tension or improvement of any building or other structure in any village for the common use of the inhabitants of such village or any godown for any society registered under the II of 1912 or any dwelling house for the poor or the construction of labour colonies under a Government sponsored Housing Scheme or any irrigation tank irrigation or drainage channel or any well or any public road the Collector may immediately after the publication of the notice mentioned in sub section 1 and with the previous sanction of the appropriate Government enter upon and take possession of such land which shall thereupon vest absolutely in the Government free from all encumbrances It will appear from the amended section 172b quoted above that the construction of labour colonies under a Government sponsored Housing Scheme has been included in the category of works of public utility As already indicated even apart from the indication given by the amended section 17 quoted above this Court has held in the recent decision 1 that building of residential quarters for industrial labour is public purpose Hence even apart from the amended provisions of section 17 it is clear on the authorities that the purpose for which the land was being acquired was a public purpose 1 468 Having cleared the ground it now remains to consider the terms of section 6 on which great reliance was placed on behalf of the appellants There is no doubt that as pointed out in the recent decision of this Court 1 the Act contemplates acquisition for a public purpose and for a Company thus conveying the idea that acquisition for a Company is not for a public purpose It has been held by this Court in that decision that the purposes of public utility referred to in sections 40 41 of the Act are akin to public purpose Hence acquisition for a public purpose as also acquisitions for a Company are governed by considerations of public utility But the procedure for the two kinds of acquisitions is different in so far as Part VII has made substantive provisions for acquisitions of land for Companies Where acquisition is made for a public purpose the cost of acquisition for payment of compensation has to be paid wholly or partly out of Public Revenues or some fund controlled or managed by a local authority On the other hand in the case of an acquisition for a Company the compensation has to be paid by the Company But in such a case there has to be an agreement under section 41 for the transfer of the land acquired by the Government to the Company on payment of the cost of acquisition as also other matters not material to our present purpose The agreement contemplated by section 41 is to be entered into between the Company and the Appropriate Government only after the latter is satisfied about the purpose of the proposed acquisition and subject to the condition precedent that the previous consent of the Appropriate Government has been given to the acquisition The previous consent itself of the Appropriate Government is made to depend upon the satisfaction of that Government that the purpose of the acquisition was as laid down in section 40 It is thus clear that the provisions of sections 39 41 lay down conditions precedent to the application of the machinery of the Land Acquisition Act if the acquisition is meant for a Company Now section 6 itself contains the prohibition to the making of the necessary declaration under that section in these terms 1 1961 1 SCR 128 469 Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a Company or wholly or partly out of public revenues or some fund controlled or managed by a local authority Section 6 is in terms made subject to the provisions of Part VII of the Act The provisions of Part VII read with section 6 of the Act lead to this result that the declaration for the acquisition for a Company shall not be made unless the compensation to be awarded for the property is to be paid by a company The declaration for the acquisition for a public purpose similarly cannot be made unless the compensation wholly or partly is to be paid out of public funds Therefore in the case of an acquisition for a Company simpliciter the declaration cannot be made without satisfying the requirements of Part VII But that does not necessarily mean that an acquisition for a Company for a public purpose cannot be made otherwise than under the provisions of Part VII if the cost or a portion of the cost of the acquisition is to come out of public funds In other words the essential condition for acquisition for a public purpose is that the cost of the acquisition should be borne wholly or in part out of public funds Hence an acquisition for a Company may also be made for a public purpose within the meaning of the Act if a part or the whole of the cost of acquisition is met by public funds If on the other hand the acquisition for a Company is to be made at the cost entirely of the Company itself such an acquisition comes under the provisions of Part VII As in the present instance it appears that part at any rate of the compensation to be awarded for the acquisition is to come eventually from out of public revenues it must be held that the acquisition is not for a Company simpliciter It was not therefore necessary to go through the procedure prescribed by Part VII We therefore agree with the conclusion of the High Court though not for the same reasons The appeal accordingly is dismissed with costs Appeal dismissed	The respondent company purchased certain machinery for Rs 89000 and sold it for the same value but in the books of account the written down value of the machinery was shown in the year of account as Rs 73392 The Income Tax Officer in computing the assessable income of the company added the difference ie Rs 15608 between the actual value and the written down value to the profit of the company The Income Tax Officer also passed an order under section 23A of the Income Tax Act and directed that the undistributed portion of the assessable income shall be deemed to have been distributed amongst the shareholders as dividend Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 661 Whether the sum of Rs 15608 should have been included in the assessee company s profit for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable The High Court answered the question in the negative On appeal by special leave Held that the view taken by the High Court was correct 494 By the fiction in section 102Vii second proviso read with s26C what is really not income is for the purpose of computation of assessable income made taxable income but on that account it does not become commercial profit and if it is not commercial profit it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable Smallness of profit should not be equated with smallness of assessable income but should be determined in accordance with commercial principles Sir Kasturchand Ltd vs Commissioner of Income tax Bombay City 1949 XVII ITR 493 Ezra Proprietary Estates Ltd vs Commissioner of Income tax West Bengal 1950 XVIII ITR 762 and Commissioner of Income tax Bombay City vs F L Smith Co Bombay Ltd 1959 XXXV ITR 183 referred to
Appeal No 337 of 1960 Appeal by special leave from the judgment and order dated January 19 1960 of the Punjab High Court in Civil Revision No 596 of 1959 N section Bindra and D Gupta for the appellant Gopal Singh for the respondent H M Seervai Advocate General for the State of Maharashtra and R H Dhebar for the Intervener November 15 The judgment of B P Sinha C J P B Gajendragadkar J and K N Wanchoo J was delivered by P B Gajendragadkar J J L Kapur J and K Subba Rao J delivered separate judgments 375 GAJENDRAGADKAR J This appeal raises for our decision a question of law of general importance under sections 123 and 162 of the hereafter called the Act Originally the same point had been raised in another civil appeal before this Court Civil Appeal No 241 of 1955 The said appeal was the result of a dispute between Dowager Lady Dinbai Dinshaw Petit on the one hand and the Union of India and the State of Bombay on the other Having regard to the importance of the point raised by the said appeal a Division Bench of this Court before whom it first came for hearing directed that it should be placed for disposal before a Constitution Bench and accordingly it was placed before us The appellant and the respondent in the present appeal then applied for permission to intervene because the same point arose for decision in this appeal as well that is how this appeal was also placed before us to be heard after the Bombay appeal After the Bombay appeal was heard for some days parties to the said appeal amicably settled their dispute and a decree by consent was passed In the result the point of general importance raised by the said appeal fell to be considered in the present appeal and so the appellant and the respondent in the said appeal asked for permission to intervene in the present appeal and we directed that the arguments urged by Mr Viswanatha Sastri and Mr Seervai for th appellant and the State of Bombay respectively should be treated as arguments urged by interveners in the present appeal Mr Bindra who appears for the appellant State of Punjab in the present appeal and Mr Gopal Singh who represents the respondent Sodhi Sukhdev Singh have substantially adopted the arguments urged by Mr Seervai and Mr Sastri respectively and have also addressed us on the special facts in their appeal that is how the point of law in regard to the scope and effect of sections 123 and 162 of the Act has to be decided in the present appeal This appeal has been brought to this Court by special leave granted by this Court and it arises from a suit filed by the respondent against the appellant on May 5 1958 It appears that the respondent was 376 a District and Sessions Judge in the erstwhile State of Pepsu He was removed from service on April 7 1953 by an order passed by the President of India who was then in charge of the administration of the said State The respondent then made a representation on May 18 1955 This representation was considered by the Council of Ministers of the said State on September 28 1955 because in the meantime the President s rule had come to an end and the administration of Pepsu was entrusted to the Council of Ministers The Council expressed its views in the form of a Resolution on the representation of the respondent but before taking any action it invited the advice of the Public Service Commission On receiving the said advice the Council again considered the said representation on March 8 1956 and views on the merits of the representation were expressed by the Members of the Council These were recorded in the minutes of the proceedings Finally on August 11 1956 the representation was considered over again by the Council and it reached a final conclusion in respect of it In accordance with the said conclusion an order was passed which was communicated to the respondent The order read thus Reference his representation dated the 18th May 1955 against the order of his removal from service the State Government have ordered that he may be re employed on some suitable post After this order was communicated to him the respondent filed the present suit against the appellant and claimed a declaration inter alia that his removal from service on April 7 1953 was illegal void and inoperative and prayed for the recovery of Rs 62700 6 0 as arrears of his salary The appellant disputed the respondent s claim on several grounds Issues were accordingly framed by the trial judge on January 27 1959 Meanwhile the respondent had filed an application under O 14 r 4 as well as O 11 r 14 of the Civil Procedure Code for the production of documents mentioned in the list annexed to the application The trial court issued notice against the appellant for the reduction of the said documents 377 In reply to the notice Mr E N Mangat Rai Chief Secretary of the appellant made an affidavit claiming privilege under section 123 of the Act in respect of certain documents whose production had been ordered and gave reasons in support of the claim On the same day Mr Mangat Rai made another affidavit in which he gave reasons for claiming similar privilege in respect of certain other documents The statements made in these affidavits were challenged by the respondent who submitted a counter affidavit After the affidavits had thus been filed by the parties the trial court heard their arguments on the question of privilege and on August 27 1959 it upheld the claim of privilege made by the appellant for the production of some documents and accepted the reasons given by Mr Mangat Rai in support of the said claim of privilege The respondent then moved the High Court of Punjab under section 115 of the Code of Civil Procedure and article 227 of the Constitution for the quashing of the said order The petition for revision C R 596 of 1959 first came up for decision before D K Mahajan J at Chandigarh The learned judge took the view that the question raised by the petition was of considerable importance and so he ordered that the papers should be placed before the learned Chief Justice to enable him to direct that the matter be decided by a larger Bench Thereupon the petition was placed for decision before Dulat and Dua JJ who after hearing the parties reversed the order under revision in respect of four documents and directed that the said documents be produced by the appellant The appellant then applied to the High Court for a certificate under article 133 but its application was dismissed It then came to this Court and applied for and obtained special leave to challenge the validity of the order passed by the Punjab High Court and in the appeal the only question which has been urged before us is that having regard to the true scope and effect of the provisions of as 123 and 162 of the Act the High Court was in error in refusing to uphold the claim of 48 378 privilege raised by the appellant in respect of the documents in question The question thus posed will naturally have to be answered on a fair and reasonable construction of the two statutory provisions of the Act It has how ever been very strenuously urged before us by Mr J Seervai that before proceeding to construe the said provisions it is necessary that the Court should bear in mind the historical background of the said provisions His argument is that sections 123 and 162 as they were enacted in the Act in 1872 were intended to introduce in India the English Law in regard to what is commonly described as the Crown privilege in the same form in which it obtained in England at the material time and so he has asked us to determine in the first instance what the true state of English Law was in or about 1872 A D In order to decide this question three representative English decisions must be considered In Home vs Lord F C Bentinck 1 the Court was dealing with a claim made by H who had sued the president of the enquiry for a libel alleged to be contained in the report made by him It appears that H was a commissioned officer in the Army and the Commander in Chief of the said Army had directed an assemblage of commissioned military officers to hold an enquiry into the conduct of H According to H the said report contained libellous matter and so he had sued the president of the enquiry At the trial H desired that the report submitted by the court of enquiry should be produced and this request was resisted by the defendant on the ground that the document in question was a privileged commu nication This plea was upheld Dallas C J referred to the precedents relevant to the decision of the point and observed that the basis of the said precedents was that the disclosure would cause danger to the public good He then considered the nature of the enquiry which had been directed against H and observed that in the course of the enquiry a number of persons may be called before the court and may give information as witnesses which they would not choose to 1 379 have disclosed but if the minutes of the court of enquiry are to be produced on an action brought by the party they reveal the name of every witness and the evidence given by each Not only this but they also reveal what has been said and done by each member of the existing court of enquiry and according to the learned judge the reception of the said minutes would tend directly to disclose that which is not permitted to be disclosed and so independently of the character of the court the production of the report was privileged on the broad rule of public policy and convenience that matters like those covered by the report are secret in their nature and involve delicate enquiry and the names of persons who ought to stand protected The next decision to which our attention has been invited is Smith vs The East India Company 1 In that case the dispute with which the Court was concerned had arisen with respect to a commercial transaction in which the East India Company bad been engaged with a third party and privilege was claimed in regard to the correspondence which had been carried oil by the defendant with the Board of Control It was held that the said correspondence was on the ground of public policy a privileged communication and so the Company were not bound to produce or set forth the contents of it in answer to a bill of discovery filed against them by the third party in relation to the transaction to which it referred Lord Lyndhurst upheld the claim of privilege not because the correspondence purported to be confidential nor because it was official but because of the effect of the provisions of c 85 of Act 3 4 W 4 on which the claim of privilege was founded It was noticed that the Company had been prohibited from carrying on any commercial transactions except for the purpose of winding up their affairs or for the purposes of the Government of India and it was held that the result of the relevant provisions and particularly of is 29 was that the Directors of the East India Company were required to make communication of all their 1 1841 1 Ph50 41 ER Chancery 550 380 acts transactions and correspondence of every description to the Board of Control That is why a claim for privilege in respect of the said correspondence was upheld This decision shows that a claim for privilege could have been made even for correspondence which had reference to a commercial transaction in circumstances similar to those in that case The last decision on which considerable reliance has been placed by Mr Seervai is the case of Beatson vs Skene 3 It may incidentally be pointed out that Chief Baron Pollock s observations in this judgment are frequently cited in judicial decisions where the question of privilege falls to be considered In that case the plaintiff had been a general who commanded a corps of irregular troops during the war in Crimea Complaint having been made about the insubordination of troops the corps was placed under the superior command of V Thereupon the plaintiff resigned his command V directed S to inspect and report upon the state of the corps and referred S for information to the defendant who was a Civil Commissioner The defendant in a conversation with S made a defamatory statement respecting the conduct of the plaintiff The plaintiff brought an action against the defendant for slander The defence set up against the plaintiff s claim was that what had passed between the defendant and S was a privileged communication The jury had found a verdict for the defendant A new trial was claimed by the plaintiff inter alia on the ground that the learned judge had declined to compel the production of certain documents It appeared that the Secretary for War had been subpoenaed to produce certain letters written by the plaintiff to him and also the minutes of the court of enquiry as to the conduct of S in writing the letter to V The plea for a new trial was rejected on the ground that the Court was of the opinion that the non production of the said documents furnished no ground for a new trial There was a difference of opinion among the members of the Court on the question as to whether Bramwell J was justified in upholding the claim of privilege Pollock 3 381 C B Bramwell B and Wilde B held that the claim for privilege was properly upheld whereas Martin B took a contrary view Dealing with the claim made that the production of the documents would be injurious to the public service Pollock C B observed that the general public interest must be considered paramount to the individual interest of a suitor in a Court of Justice and he posed the question How is this to be determined Then Pollock C B proceeded to observe that the question must be determined either by a presiding judge or by the responsible servant of the Crown in whose custody the paper is and he remarked that the judge would be unable to determine it without ascertaining what the document is and why the publication of it would be injurious to public service an enquiry which cannot take place in private and which taking place in public may do all the mischief which it is proposed to guard against He further held that the administration of justice is only a part of the general conduct of the affairs of any State or nation and we think is with respect to the production or non production of a State paper in a Court of Justice subordinate to the general welfare of the community Martin B however was of the opinion that whenever the judge is satisfied that the document may be made public without prejudice to the public service the judge ought to compel its production notwithstanding the reluctance of the head of the department to produce it It would thus be seen that according to the majority view the question as to whether any injury to public interest would be caused by the production of the document could not be determined by the Court because such an enquiry would tend to defeat the very purpose for which privilege is claimed whereas according to the minority view it was for the Court to hold an enquiry and determine whether any injury would follow the production of the document Mr Seervai contends that these decisions correctly represent the legal position in regard to the Crown privilege in England in the second half of the Nineteenth Century and according to him when the 382 was drafted by Sir James Fitzjames Stephen he intended to make provisions in the Act which would correspond to the said position in the English Law In other words the argument is that sections 123 and 162 are intended to lay down that when a privilege is claimed by the State in the matter of production of State documents the total question with regard to the said claim falls within the discretion of the head of the department concerned and he has to decide in his discretion whether the document belongs to the privileged class and whether its production would cause injury to public interest It is in the light of this background that Mr Seervai wants us to construe the relevant sections of the Act In support of this argument Mr Seervai has also referred us to the draft prepared by Sir James Fitzjames Stephen at the instance of Lord Coleridge for adoption by the English Parliament and has relied on article 112 in the said draft article 112 provides inter alia that no one can be compelled to give evidence relating to any affairs of State or as to official communications between public officers upon public affairs unless the officer at the head of the department concerned permits him to do so It also refers to some other matters with which we are not concerned This part of article 112 as framed by Sir James Fitzjames Stephen seems to include the provisions of sections 123 and 124 of the Act It is significant that there is nothing in this Article which corresponds to section 162 of the Act Mr Seervai concedes that the draft prepared by Sir James Fitzjames Stephen was not adopted by Parliament and even now there is no statutory law of evidence in England even so he contends that the intention which Sir James Fitzjames Stephen had in drafting the relevant sections of the must have been similar to his intention in drafting article 112 and that is another fact which we may bear in mind in construing the relevant sections of the Act We ought however to add that though Mr Seervai elaborately argued this part of his case he fairly conceded that recourse to extrinsic aid in interpreting a statutory provisions would be justified only 383 within well recognised limits and that primarily the effect of the statutory provisions must be judged on a fair and reasonable construction of the words used by the statute itself Let us now turn to section 123 It reads thus No one shall be permitted to give any evidence derived from unpublished official records relating to any affairs of State except with the permission of the officer at the head of the department concerned who shall give or withhold such permission as he thinks fit This section refers to evidence derived from unpublished official records which have a relation to any affairs of State and it provides that such evidence shall not be permitted to be given unless the head of the department concerned gives permission in that behalf In other words as a result of this section a document which is material and relevant is allowed to be withheld from the Court and that undoubtedly constitutes a very serious departure from the ordinary rules of evidence It is well known that in the administration of justice it is a principle of general application that both parties to the dispute must produce all the relevant and material evidence in their possession or their power which is necessary to prove their respective contentions that is why the Act has prescribed elaborate rules to determine relevance and has evolved the doctrine of onus of proof If the onus of proof of any issue is on a party and it fails to produce such evidence section 114 of the Act justifies the inference that the said evidence if produced would be against the interest of the person who withholds it As a result of section 123 no such inference can be drawn against the State if its privilege is upheld That shows the nature and the extent of the departure from the ordinary rule which is authorised by section 123 The principle on which this departure can be and is justified is the principle of the overriding and paramount character of public interest A valid claim for privilege made under section 123 proceeds on the basis of the theory that the production of the document in 384 that where a conflict arises between public interest and private interest the latter must yield to the former No doubt the litigant whose claim may not succeed as a result of the non production of the relevant and material document may feel aggrieved by the result and the Court in reaching the said decision may feel dissatisfied but that will not affect the validity of the basic principle that public good and interest must override considerations of private good and private interest Care has however to be taken to see that interests other than that of the public do not masquerade in the garb of public interest and take undue advantage of the provisions of section 123 Subject to this reservation the maxim silus populi est supreme les which means that regard for public welfare is the highest law is the basis of the provisions contained in section 123 Though section 123 does not expressly refer to injury to public interest that principle is obviously implicit in it and indeed is its sole foundation Whilst we are discussing the basic principle underlying the provisions of section 123 it may be pertinent to enquire whether fair and fearless administration of justice itself is not a matter of high public importance Fair administration of justice between a citizen and a citizen or between a citizen and the State is itself a matter of great public importance much more so would the administration of justice as a whole be a matter of very high public importance even so on principle if there is a real not imaginary or fictitious conflict between public interest and the interest of an individual in a pending case it may reluctantly have to be conceded that the interest of the individual cannot prevail over the public interest If social security and progress which are necessarily included in the concept of public good are the ideal then injury to the said ideal must on principle be avoided even at the cost of the interest of an individual involved in a particular case That is why Courts are and ought to be vigilant in dealing with a claim of privilege made under section 123 If under section 123 a dispute arises as to whether the 385 evidence in question is derived from unpublished official records that can be easily resolved but what presents considerable difficulty is a dispute as to whether the evidence in question relates to any affairs of State What are the affairs of State under section 123 In the latter half of the Nineteenth Century affairs of State may have had a comparatively narrow content Having regard to the notion about governmental functions and duties which then obtained affairs of State would have meant matters of political or administrative character relating for instance to national defence public peace and security and good neighbourly relations Thus if the contents of the documents were such that their disclosure would affect either the national defence or public security or good neighbourly relations they could claim the character of a document relating to affairs of State There may be another class of documents which could claim the said privilege not by reason of their contents as such but by reason of the fact that if the said documents were disclosed they would materially affect the freedom and candour of expression of opinion in the determi nation and execution of public policies In this class may legitimately be included notes and minutes made by the respective officers on the relevant files opinions expressed or reports made and gist of official decisions reached in the course of the determination of the said questions of policy In the efficient admit of public affairs government may reasonably treat such a class of documents as confidential and urge that its disclosure should be prevented on the ground of possible injury to public interest In other words if the proper functioning of the public service would be impaired by the disclosure of any document or class of documents such document or such class of documents may also claim the status of documents relating to public affairs It may be that when the Act was passed the concept of governmental functions and their extent was limited and so was the concept of the words affairs of State correspondingly limited but as is often 386 said words are not static vehicles of ideas or concepts As the content of the ideas or concepts conveyed by respective words expands so does the content of the words keep pace with the said expanding content of the ideas or concepts and that naturally tends to widen the field of public interest which the section wants to protect The inevitable consequence of the change in the concept of the functions of the State is that the State in pursuit of its welfare activities undertakes to an increasing extent activities which were formerly treated as purely commercial and documents in relation to such commercial activities undertaken by the State in the pursuit of public policies of social welfare are also apt to claim the privilege of documents relating to the affairs of State It is in respect of such documents that we reach the marginal line in the application of section 123 and it is precisely in determining the claim for privilege for such border line cases that difficulty arises It is however necessary to remember that where the Legislature has advisedly refrained from defining the expression affairs of State it would be inexpedient for judicial decisions to attempt to put the said expression into a strait jacket of a definition judicially evolved The question as to whether any particular document or a class of documents answers the description must be determined in each case on the relevant facts and circumstances adduced before the Court Affairs of State according to Mr Seervai are synonymous with public business and he contends that section 123 provides for a general prohibition against the production of any document relating to public business unless permission for its production is given by the head of the department concerned Mr Seervai has argued that documents in regard to affairs of State constitute a genus under which there are two species of documents one the disclosure of which will cause no injury to public interest and the other the disclosure of which may cause injury to public interest In the light of the consequence which may flow from their disclosure the two species of documents can be described as innocuous and noxious respectively According to Mr Seervai the effect of section 123 387 is that there is a general prohibition against the pro duction of all documents relating to public business subject to the exception that the head of the department can give permission for the production of such documents as are innocuous and not noxious He contends that it is not possible to imagine that the section contemplates that the head of the department G would give permission to produce a noxious document It is on this interpretation of section 123 that Mr Seervai seeks to build up similarity between section 123 and the English Law as it was understood in 1872 In other words according to Mr Seervai the jurisdiction of the Court in dealing with a claim of privilege under section 123 is very limited and in most of the cases if not all the Court would have to accept the claim without effective scrutiny On the other hand it has been urged by Mr Sastri that the expression documents relating to any affairs of State should receive a narrow construction and it should be confined only to the class of noxious documents Even in regard to this class the argument is that the Court should decide the character of the document and should not hesitate to enquire incidentally if necessary whether its disclosure would lead to injury to public interest This contention seeks to make the jurisdiction of the Court wider and the field of discretion entrusted to the department correspondingly narrower It would thus be seen that on the point in controversy between the parties three views are possible The first view is that it is the head of the department who decides to which class the document belongs if he comes to the conclusion that the document is innocuous he will give permission to its production if however he comes to the conclusion that the document is noxious he will withhold such permission in any case the Court does not materially come into the picture The other view is that it is for the Court to determine the character of the document and if necessary enquire into the possible consequences of its disclosure on this view the jurisdiction of the Court is very much wider A third view which does not 388 accept either of the two extreme positions would be that the Court can determine the character of the document and if it comes to the conclusion that the document belongs to the noxious class it may leave it to the head of the department to decide whether its production should be permitted or not for it is not the policy of section 123 that in the case of every noxious document the head of the department must always withhold permission In deciding the question as to which of these three views correctly represents the true legal position under the Act it would be necessary to examine section 162 Let us therefore turn to that section Section 162 reads thus A witness summoned to produce a document shall if it is in his possession or power bring it to Court notwithstanding any objection which there may be to its production or to its admissibility The validity of any such objection shall be decided on by the Court The Court if it sees fit may inspect the document unless it refers to matters of State or take other evidence to enable it to determine on its admissibility The first clause of section 162 requires that a witness summoned to produce a document must bring it to the Court and then raise an objection against either its production or its admissibility It also authorises the Court and indeed makes it its obligation to decide the validity of either or both of the said objections It is significant that the objections to the production or admissibility of evidence specified in section 162 relate to all claims of privilege provided by the relevant sections of Chapter IX of Part III of the Act Section 123 is only one of such privileges so that the jurisdiction given to the Court to decide the validity of the objections covers not only the objections raised under section 123 but all other objections as well Take for instance the privilege claimed under section 124 of the Act which provides that no public officer shall be compelled to disclose communications made to him in official confidence when he considers he considers that the public interest 389 would suffer by the disclosure It is clear and indeed it is not disputed that in dealing with an objection against the production of a document raised under section 124 the Court would have first to determine whether the communication in question has been made in official confidence If the answer to the said question is in the negative then the document has to be produced if the said answer is in the affirmative then it is for the officer concerned to decide whether the document should be disclosed or not This illustration brings out the character and the scope of the jurisdiction conferred on the Court dealing with an objection raised under section 162 The second clause of section 162 in terms refers to the objection as to the admissibility of the document It seems to us that this clause should be construed to refer to the objections both as to the production and the admissibility of documents otherwise in the absence of any limitation on its power the Court would be justified in exercising its authority under and discharging its obligation imposed by cl 1 of section 162 by inspecting the document while holding an enquiry into the validity of the objection raised against its production under section 123 and that would be inconsistent with the material provision in cl 2 of section 162 That is why we hold that the second clause covers both kinds of objections In other words admissibility in the context refers both to production and admissibility It may be added that matters of State referred to in the second clause are identical with affairs of State mentioned in section 123 Reading this clause on this assumption what is its effect It empowers the Court to inspect the document while dealing with the objection but this power cannot be exercised where the objection relates to a document having reference to matters of State and it is raised under section 123 In such a case the Court is empowered to take other evidence to enable it to determine the validity of the objection Mr Seervai contends that the first part of cl 2 which deals with the inspection of the document is confined to the objection relating to the production of the document 390 and on that basis he contends that since inspection is not permissible in regard to the document falling under section 123 the Court can do nothing else but record its approval to and uphold the validity of the objection raised by the head of the department In regard to the objection as to the admissibility of the said document however he concedes that the Court can take other evidence if necessary and then determine its validity According to him such evidence would be necessary and permissible when the objection to admissibility is based for instance on want of stamp or absence of registration In our opinion this con struction though ingenious is not supportable on a plain and grammatical construction of the clause read as a whole it breaks up the clause artificially which is plainly not justified by rules of grammar We are satisfied that the Court can take other evidence in lieu of inspection of the document in dealing with a privilege claimed or an objection raised even under section 123 If the privileged document cannot be inspected the Court may well take other collateral evidence to determine its character or class In other words the jurisdiction conferred on the Court to deal with the validity of an objection as to the production of a docu ment conferred by the first clause is not illusory or nominal it has to be exercised in cases of objections raised under section 123 also by calling for evidence permissible in that behalf It is perfectly true that in holding an enquiry into the validity of the objection under section 123 the Court cannot permit any evidence about the contents of the document If the document cannot be inspected its contents cannot indirectly be proved but that is not to say that other collateral evidence cannot be produced which may assist the Court in determining the validity of the objection This position would be clear if at this stage we consider the question as to how an objection against the production of document should be raised under section 123 it is well settled and not disputed that the privilege should not be claimed under section 123 because it is apprehended that the document if produced would defeat the defences raised by the State Anxiety 391 to suppress a document may be natural in an individual litigant and so it is checked and kept under control by the provisions of section 114 of the Act Where however section 123 confers wide powers on the bead of the department to claim privilege on the ground that the disclosure may cause injury to public interest scrupulous care must be taken to avoid making a claim for such a privilege on the ground that the disclosure of the document may defeat the defence raised by the State It must be clearly realised that the effect of the document on the ultimate course of litigation or its impact on the head of the department or the Minister in charge of the department or even the government in power has no relevance in making a claim for privilege under section 123 The apprehension that the disclosure may adversely affect the head of the department or the department itself or the Minister or even the government or that it may provoke public criticism or censure in the Legislature has also no relevance in the matter and should not weigh in the mind of the head of the department who makes the claim The sole and the only test which should determine the decision of the head of the department is injury to public interest and nothing else Since it is not unlikely that extraneous and collateral purposes may operate in the mind of the person claiming the privilege it is necessary to lay down certain rules in respect of the manner in which the privilege should be claimed We think that in such cases the privilege should be claimed generally by the Minister in charge who is the political head of the department concern ed if not the Secretary of the department who is the departmental head should make the claim and the claim should always be made in the form of an affidavit When the affidavit is made by the Secretary the Court may in a proper case require an affidavit of the Minister himself The affidavit should show that each document in question has been carefully read and considered and the person making the affidavit is satisfied that its disclosure would lead to public injury If there are a series of documents included in a file it should appear from the affidavit that each one of the documents whose disclosure is objected to has been 392 duly considered by the authority concerned The affidavit should also indicate briefly within permissible limits the reason why it is apprehended that their disclosure would lead to injury to public interest This last requirement would be very important when privilege is claimed in regard to documents which prima facie suggest that they are documents of a commercial character having relation only to commercial activities of the State If the document clearly falls within the category of privileged documents Do serious dispute generally arises it is only when Courts are dealing with marginal or border line documents that difficulties are experienced in deciding whether the privilege should be upheld or not and it is particularly in respect of such documents that it is expedient and desirable that the affidavit should give some indication about the reasons why it is apprehended that public interest may be injured by their disclosure It is conceded by Mr Seervai that if the affidavit produced in support of the claim for privilege is found to be unsatisfactory a further affidavit may be called and in a proper case the person making the affidavit whether be is a Minister or the Secretary should be summoned to face cross examination on the relevant points Mr Seervai however contends that the object of such cross examination must be limited to test the credibility of the witness and nothing more We do not see why any such a limitation should be imposed on cross examination in such a case It would be open to the opponent to put such relevant and permissible questions as he may think of to help the Court in determining whether the document belongs to the privileged class or not It is true that the scope of the enquiry in such a case is bound to be narrow and restricted but the existence of the power in the Court to hold such an enquiry will itself act as a salutary check on the capricious exercise of the power conferred under section 123 and as some of the decisions show the existence of this power is not merely a matter of theoretical abstraction Vide for instance Ijjat Ali Talukdar vs Emperor 1 1 393 Thus our conclusion is that reading ss123 and 162 together the Court cannot hold an enquiry into the possible injury to public interest which may result from the disclosure of the document in question That is a matter for the authority concerned to decide but the Court is competent and indeed is bound to hold a preliminary enquiry and determine the validity of the objections to its production and that necessarily involves an enquiry into the question as to whether the evidence relates to an affair of State under section 123 or not In this enquiry the Court has to determine the character or class of the document If it comes to the conclusion that the document does not relate to affairs of State then it should reject the claim for privilege and direct its production If it comes to the conclusion that the document relates to the affairs of State it should leave it to the head of the department to decide whether he should permit its production or not We are not impressed by Mr Seervai s argument that the Act could not have intended that the head of the department would permit the production of a document which belongs to the noxious class In our opinion it is quite Conceivable that even in regard to a document falling within the class of documents relating to affairs of State the head of the department may legitimately take the view that its disclosure would not cause injury to public interest Take for instance the case of a document which came into existence quite some time before its production is called for in litigation it is not unlikely that the head of the department may feel that though the character of the document may theoretically justify his refusing to permit its production at the time when its production is claimed no public injury is likely to be caused It is also possible that the head of the department may feel that the injury to public interest which the dis closure of the document may cause is minor or insignificant indirect or remote and having regard to the wider extent of the direct injury to the cause of justice which may result from its non production he may 394 decide to permit its production In exercising his discretion under section 123 in many cases the head of the department may have to weigh the pros and cons of the problem and objectively determine the nature and extent of the injury to public interest as against the injury to the administration of justice That is why we think it is not unreasonable to hold that section 123 gives discretion to the bead of the department to permit the production of a document even though its production may theoretically lead to some kind of injury to public interest While construing sections 123 and 162 it would be irrelevant to consider why the enquiry as to injury to public interest should not be within the jurisdiction of the Court for that clearly is a matter of policy on which the Court does not and should not generally express any opinion In this connection it is necessary to add that the nature and scope of the enquiry which in our opinion it is competent to the Court to hold under section 162 would remain substantially the same whether we accept the wider or the narrower interpretation of the expression affairs of State In the former case the Court will decide whether the document falls in the class of innocuous or noxious documents if it finds that the document belongs to the innocuous class it will direct its production if it finds that the document belongs to the noxious class it will leave it to the discretion of the head of the department whether to permit its production or not Even on the narrow con struction of the expression affairs of State the Court will determine its character in the first instance if it holds that it does not fall within the noxious class which alone is included in the relevant expression on this view an order for its production will follow if the finding is that it belongs to the noxious class the question about its production will be left to the discretion of the head of the department We have already stated how three views are possible on this point In our opinion Mr Seervai s contention which adopts one extreme position ignores the effect of section 162 whereas the contrary position which is also extreme in character ignores the provisions of section 123 The view 395 which we are disposed to take about the authority and jurisdiction of the Court in such matters is based on a harmonious construction of section 123 and section 162 read together it recognises the power conferred on the Court by cl 1 of section 162 and also gives due effect to the discretion vested in the head of the department by section 123 It would thus be clear that in view of the provisions of section 162 the position in India in regard to the Court s power and jurisdiction is different from the position under the English Law as it obtained in England in 1872 It may be true to say that in prohibiting the inspection of documents relating to matters of State the second clause of section 162 is intended to repel the minority view of Baron Martin in the case of Beatson 1 Nevertheless the effect of the first clause of section 162 clearly brings out the departure made by the Indian Law in one material particular and that is the authority given to the Court to hold a preliminary enquiry into the character of the document That is why we think that the arguments so elaborately and ingeniously built up by Mr Seervai on the basis of the background of the breaks down in the light of the provisions of section 162 We may add that in substance and broadly stated the consensus of judicial opinion in this country is in favour of this conclusion Vide eg Kaliappa Udayan vs Emperor 2 R M D Chamarbaugwala vs Y R Parpia 3 Governor General in Council vs H Peer Mohd Khuda Bux Ors 4 The Public Prosecutor Andhra vs Venkata Narasayya 5 and ljjat Ali Talukdar vs Emperor 6 Therefore we think it is unnecessary to refer to these decisions in detail or to examine the reasons given by them in support of the conclusion reached by them There are however two decisions which have struck a note of dissent and so it is necessary to examine them In W section Irwin vs D J Reid 7 it appears that the Court was incidentally dealing with 1 2 AIR 1937 Mad 3 AIR 1950 Bom 4 AIR 1950 East Punjab 228 5 AIR 1957 Andhra 486 6 ILR 1944 1 Cal 410 7 192I ILR 396 the scope and effect of section 123 of the Act In that case the plaintiff was one of the members of the committee known as the Champaran Agrarian Enquiry Committee and as such member he had effected a settlement between the indigo planters and the tenants about the partial refund of tawan or remission of sarabeshi The defendant Irwin wrote three letters to the members after the settlement which taken together would import that his consent to the settlement was obtained by misrepresentation and all facts were not disclosed to him Thereupon Reid filed a suit claiming Rs 50000 as damages against Irwin for making the said defamatory statements which according to him greatly injured his credit and reputation and had brought him into public odium and contempt It appears that at the trial an attempt was made to compel the production of the minutes of the com mittee The said attempt failed because the Government of Bihar and Orissa claimed privilege under section 123 In appeal it was urged that the privilege should not have been upheld but the appellant s plea was not accepted by the Court The public officer concerned observed Mookerjee A C J and not the judge is to decide whether the evidence referred to shall be given or withheld If any other view were taken the mischief intended to be avoided would take place as the judge could not determine the question without ascertaining the contents of the document and such enquiry if it did take place must for obvious reasons take place in public In support of this decision the learned judge referred to some English decisions amongst them was the case of Beatson vs Skene 1 It would be noticed that in making these incidental observations the Court has not considered the true effect of the provisions of section 162 Indeed no reference was made to the said section and the matter does not appear to have been seriously argued and naturally because the point was not directly raised for decision In this connection we ought to point out that in a subsequent decision of the said High Court in Ijjat Ali Talukdar s case 2 a contrary view has been 1 2 ILR 1944 I Cal 397 taken and it is the subsequent view which has prevailed in the Calcutta High Court thereafter In Khawaja Nazir Ahmad vs The Crown 1 the High Court of Judicature at Lahore has held that when a privilege is claimed under section 123 the Court simply gives effect to the decision of the head of the department by adding its own command to it but the Court has no power to examine the document in order to verify the correctness of the allegations or the grounds on which the privilege is claimed Abdur Rahman J who delivered the judgment of the Bench in that case has considered the relevant Indian and English decisions and has based his conclusion substantially on the judgment of the House of Lords in Duncan vs Cammell Laird Co Ltd 2 to which we will presently refer The learned judge appears to have con strued section 162 in the manner suggested by Mr Seervai In fact Mr Seervai s argument was that the construction placed by Abdur Rahman J on section 162 had not been considered by the other Indian decisions when they brushed aside his conclusion I feel convinced said Abdur Rahman J that the objection as to the production of the document apart from its admissibility for want of registration or contravening the rule as to when secondary evidence of a document can be admitted if the document is merely a copy and not original can only be decided by its inspection by the Court followed as it must necessarily have been by an order of production although not in the sense of its contents having been disclosed to the party summoning the document at any rate at that stage We have already indicated our reasons for not accepting this artificial construction of the second clause in section 162 This decision also has been dissented from by a Full Bench of the Lahore High Court in Governor General in Council vs H Peer Mohd Khuda Bux Ors 3 and the view taken by the Full Bench in that case prevails in the Punjab High Court ever since In the course of arguments before us a large number of English decisions have been cited by the learned 1 Lah 2 3 AIR 1950 East Punjab 228 398 counsel appearing for both the parties Having regard to the fact that our decision ultimately rests as it must on the construction of the relevant provisions of the Act we do not think it necessary to refer to all the cases to which our attention was drawn we propose to confine ourselves to three decisions which have made a substantial contribution to the discussion of the problem and which represent three distinct and different trends of judicial opinion on the point with which we are dealing The first case to which we would refer is the decision of the Privy Council in Robinson vs State of South Australia In that case the appellant had brought an action in the Supreme Court of South Australia against the respondent State claiming damages for alleged negligence in the care of wheat placed in the control of the State under the Wheat Harvests Acts 1915 17 Upon an order for discovery the respondent State by an affidavit made by a civil servant claimed privilege in respect of 1892 documents tied in three bundles and stated to be State documents comprising communications between officers administering the department concerned There was exhibited to the affidavit a minute by the responsible Minister stating inter alia that the disclosure of the documents would be contrary to the interests of the State and of the public The claim for privilege had been upheld by the Australian Courts but it was rejected by the Privy Council which held that the minute was inadequate to support the claim it was too vague in the circumstances of the case and was not a statement on oath showing that the Minister had himself considered each of the documents or indicating the nature of the suggested injury to the interests of the public The Privy Council therefore directed that the Supreme Court of South Australia should exercise its power under O 31 r 14 sub r 2 to inspect the documents because it thought that the said course was less likely to cause delay than an order for a further and better affidavit of documents The litigation in that case had been preceded by another litigation and on the 1 399 facts thus disclosed the Privy Council was satisfied that the action in question was one of a large number which were then pending and against which a similar relief was claimed all being alike dependent for success upon the establishment of the same facts That is how full discovery by the respondent had become the immediately vital issue between the parties Dealing with the merits of the privilege the Privy Council cited with approval Taylor s observation that the principle of the rule is concern for public interest and the rule will accordingly be applied no further than the attainment of that object requires1 Lord Blanesburgh who delivered the judgment of the Board observed that it cannot be assumed that documents relating to trading commercial or contractual activities of the State can never be claimed to be protected under this head of privilege but he added that the cases in which this is so must in view of the sole object of the privilege and especially in time of peace be rare indeed Then he referred to the fact that in view of the increasing extension of State activities into the spheres of trading business and commerce and of the claim of privilege in relation to the liabilities arising therefrom which were frequently put forward it is necessary for the Courts to remember that while they must duly safeguard genuine public interests they must see to it that the scope of the admitted privilege is not in such litigation extended The judgment then proceeds to add that in truth the fact that documents if produced might have any such effect upon the fortunes of the litigation is of itself a compelling reason for their production one only to be overborne by the gravest considerations of State policy or security Then the power of the Court to call for the production of documents for which privilege was claimed was examined in the light of previous decisions and in the light of the provisions of O 31 r 14 sub r Where as in the present case it was observed the State is not only sued as defendant under the authority of statute but is in the suit bound to give discovery there seems little if any 1 Taylor on Evidence s939 400 reason why the Court in relation to this privileged class of its documents should have any less power than it has to inspect any other privileged class of its documents provided of course that such power be exercised so as not to destroy the protection of the privilege in any case in which it is found to exist The procedure which should be adopted in claiming the privilege was then considered and it was held that the affidavit produced which in its sweep covered no fewer than 1892 documents in number was of the vaguest generality and as such unsatisfactory The Privy Council then considered the question as to whether a further opportunity should be given to the State to make a better affidavit but it thought that it would be inexpedient to adopt such a course because it would involve further serious delay without it may be advancing any further the final solution to the question at issue That is why the Supreme Court was asked to exercise its power under the relevant rule to inspect the documents and then decide whether the privilege should be upheld or not It is significant that even when giving such a direction their Lordships took the precaution of adding that the judge in giving his decision as to any document will be careful to safeguard the interest of the State and will not in any case of doubt resolve the doubt against the State without further enquiry from the Minister It only remains to add that so far as Australia is concerned it does not appear that there is any statutory provision corresponding to section 162 of the Act and so even after this judgment was pronounced by the Privy Council Courts in India have not given effect to the operative part of the order in regard to the inspection of the document by Courts having regard to the statutory prohibition imposed by section 162 in that behalf This pronouncement of the Privy Council was subsequently criticised by the House of Lords in Duncan Anr vs Cammell Laird Co Ltd 1 It appears that the submarine Thetis which had been built up by the respondents under contract with the Admiralty was undergoing her submergence tests in Liverpool Bay and while engaged in the operation of a 401 trial drive sank to the bottom owing to the flooding of her two foremost compartments and failed to return to the surface with the result that all who were in her except four survivors were overwhelmed This unfortunate accident gave rise to a large number of actions against the respondents for damages for negligence Pending the trial of the said claims the plaintiffs wanted discovery of certain specified documents to which the defendants objected and the objection of the defendants was supported by Mr Alexander who was the First Lord of the Admiralty in his affidavit made in that behalf The documents to the production of which an objection was thus raised included either in original or as a copy the contract for the hull and machinery of the Thetis and other letters and reports The Master before whom the objection was raised refused to order inspection His decision was confirmed by Hilbery J sitting in Chambers and the Court of Appeal unanimously confirmed the judge s order The plaintiffs however were given leave to appeal to the House of Lords that is how the matter reached the House of Lords Viscount Simon L C who pronounced a composite judgment on behalf of himself and on behalf of Lord Thankerton Lord Russel of Killowen and Lord Clauson exhaustively considered the whole law on the subject of Crown Privilege and in his speech he made the categorical statement that in his opinion the Privy Council was mistaken in regarding the Australian rule of procedure as having any application to the subject matter and in ordering the inspection of the documents which were in question before the Privy Council Viscount Simon began his speech with the consideration of the previous decisions of the House of Lords and held that the matter in substance was concluded by previous authorities in favour of upholding the objections He observed that the common law principle is well established that where the Crown is a party to a suit discovery of documents cannot be demanded from it as a matter of right though in practice for reasons of fairness and in the 51 402 interests of justice all proper disclosure and production would be made As a result of the examination of the several decisions Viscount Simon deduced the principle which has to be applied in such cases in these words Documents otherwise relevant and liable to production must not be produced if the public interest requires that they should be withheld This test may be found to be satisfied either a by having regard to the contents of the particular document or b by the fact that the document belongs to a class which on grounds of public interest must as a class be with held from production In this connection he stated that public interest may be damnified where disclosure would be injurious to national defence or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service Then he proceeded to examine the question as to whether when objection has been duly taken the judge should treat it as conclusive and his answer was that an objection validly taken to production on the ground that this would be injurious to public interest is conclusive but of course he proceeded to make pertinent observations for the guidance of those who are entrusted with the power to make a claim It would be noticed that even this decision would not be of material assistance to us because as we have repeatedly pointed out our decision must ultimately rest on the relevant statutory provisions contained in the and so the conclusion that a valid certificate issued by the Minister in charge is conclusive may not be strictly applicable to a claim for privilege similarly made by a Minister in charge in India As we have already indicated the preliminary enquiry contemplated by the first clause of section 162 has to be held by the Court and it is after the Court has found in favour of the character of the document pleaded by the State that the occasion arises for the head of the department to exercise his discretion conferred by section 123 Incidentally we may point out that Lord Thankerton and Lord Russel of Killowen who were parties to this 403 decision were also parties to the decision of the Privy Council in the case of Robinson 1 In regard to the decisions in the cases of Robinson 1 and Duncan 2 respectively it may be permissible to make one general observation In both these cases the nature of the documents for which privilege was claimed the time at which the dispute arose and the other surrounding circumstances were very unusual and special though in different ways and so as often happens the shift in emphasis from one aspect of the same principle to another and the strong language used took colour from the nature of the special facts Incidentally we may also add that the epilogue to the decision in Robinson s case 1 illustrates what untoward consequences may follow from an erroneous decision or a miscalculation as to the injury to public interest which may be caused by disclosure Nearly five years after the judgment in Duncan s case 2 was pronounced the Crown Proceedings Act 10 11 Geo 6 c 44 was passed in 1947 and the Crown Privilege recognised under the common law of England is now regulated by section 28 of the said Act Section 28 which deals with discovery provides in substance that subject to the rules of court in any civil proceedings there specified the Crown may be required by the Court to make discovery of documents and produce documents for inspection and that in such proceedings the Crown may also be required to answer interrogatories This legislative invasion of the Crown s prerogative is however subject to the proviso that the said section shall be without prejudice to any rule of law which authorises or requires the withholding of any document or the refusal to answer any question on the ground that the disclosure of the document or the answering of the question would be injurious to public interest It would be noticed that section 28 read with the proviso confers on the Courts specified by it powers which are much narrower than 1 2 For a graphic account of the aftermath of the enquiry held by the Supreme Court of South Australia pursuant to the Privy Council s decision in Robinsons s case i see Law and Orders by Sir C K Allen 2nd Ed P 374 foot note 5a 404 those which are conferred on the Indian Courts under cl 1 of section 162 of the Act In the decision in Duncan s case 1 Viscount Simon had assumed that the law as laid down by the said decision was equally applicable to Scotland This assumption has been seriously challenged by another decision of the House of Lords in Glasgow Corporation vs Central Land Board 2 In that case Viscount Simonds has referred to a large number of earlier decisions dealing with the relevant law as it is administered in Scotland and commented on the decision in Duncan s case 1 by saying that the observations in the said case in so far as they relate to the law of Scotland must be regarded as obiter dicta In the course of the present appeal added Lord Simonds we have had the advantage of an exhaustive examination of the relevant law from the earliest times and it has left me in no doubt that there always has been and is now in the law of Scotland an inherent power of the Court to override the Crown s objections to produce documents on the ground that it would injure the public interest to do so though he added that very rarely in recent times has this inherent right been exercised Lord Radcliffe who agreed with the conclusion of the House with some reluctance has made strong comments on the plea of privilege which is raised on behalf of the Crown in such matters Adverting to the contention that the public interest may be injured by the production of the document Lord Radcliffe observed that more than one aspect of the public interest may have to be surveyed in reviewing the question whether a document which would be available to a party in a civil suit between private parties is not to be available to the party engaged in a suit with the Crown According to Lord Radcliffe it was not unreasonable to expect that the Court would be better qualified than the Minister to measure the importance of such principles in application to the particular case that is before it It is on that assumption that the Scottish Law has reserved to the Courts the duty of making some assessment of the relative 1 2 1956 Soots Law Times Reports 41 405 claims of the different aspects of public interest where production of a document is objected to by the Crown Then in his characteristic style Lord Radcliffe has observed I should think it a very great pity indeed if a power of this kind a valuable power came to be regarded as a mere ghost of theory having no practical substance and the Courts abdicated by disuse in the twentieth century a right of control which their predecessors in the earlier centuries have been insistent to assert The learned law Lord has also made some strong comment on the formula which has been evolved by Viscount Simon in Duncan s case 1 and had stated that the phrase necessary for the proper functioning of the public service is a familiar one and I have a misgiving that it may become all too familiar in the future The result of this decision appears to be that in Scotland where the common law doctrine of the Crown Privilege is not strictly enforced a privilege can be claimed by the Minister on grounds set forth by him in his affidavit The certificate would be treated as very strong presumptive evidence of the claim made but the Court would nevertheless have inherent power to override the said certificate It is unnecessary for us to consider the true nature and effect of this power because in India in this particular matter we are governed by the provisions of section 162 which confer power on Courts to determine the validity of the objection raised under section 123 and so there would be no occasion or justification to exercise any inherent power Though we do not propose to refer to the other decisions to which our attention was invited we may incidentally observe that the decision in Duncan s case 1 has been followed by English Courts but sometimes the learned judges have expressed a sense of dissatisfaction when they are called upon to decide an individual dispute in the absence of relevant and material documents Vide Ellis vs Home Office 2 Before we part with this topic we may also indicate that it appears that in the long history of reported judicial decisions only on three occasions the right to 1 2 406 inspect documents has been either theoretically asserted or actually exercised in England In Hennessy vs Wright 1 Field J observed that he would consider himself entitled to examine privately the documents to the production of which the Crown objected and to endeavour by this means and that of questions addressed to the objector to ascertain whether the fear of injury to public service was the real motive in objecting In point of fact however the learned Judge did not inspect the documents From the judgment of the Court of Appeal in Asiatic Petroleum Co Ltd vs Anglo Persian Oil Co Ltd 2 it appears that Scrutton J had inspected the documents to the production of which an objection was raised The learned judge has however added that having seen the documents he thought that the government may be right in the view that they ought not to be produced to others and that he would not take the res ponsibility of ordering them to be produced against the wishes of the government In Spigelmann vs Hocker Anr 3 Macnaghten J inspected the document to the production of which an objection was raised The result of these decisions is that in England a valid certificate issued by the Minister in support of the privilege claimed is conclusive while in Scotland though it would normally be treated as such Courts reserve to themselves an inherent right to revise or review the certificate in a proper case It now remains to consider whether the High Court was right in holding that the privilege claimed by the appellant in respect of the four documents in question was not justified and that takes us to the consideration of the relevant facts in the present appeal The documents of which discovery and inspection were claimed are thus described by the respondent 1 Original order passed by Pepsu Government on September 28 1955 on the representation dated May 18 1955 submitted by Sodhi Sukhdev Singh 2 Original order passed by the Pepsu Government 1 2 3 1933 34 1 Times LR 87 407 on March 89 1956 reaffirming the decision passed on September 28 1955 referred to above 3 Original order passed by the Pepsu Government in their cabinet Meeting dated August 11 1956 revising their previous order on the representation of Sodhi Sukhdev Singh dated May 18 1955 and 4 Report of the Public Service Commission on the representation of Sodhi Sukhdev Singh dated May 18 1955 after the Pepsu Government s decision on September 28 1955 In dealing with this question and in reversing the order passed by the trial court by which the privilege had been upheld the High Court has purported to apply the definition of the expression affairs of State evolved by Khosla J as he then was in the case of Governor General in Council vs H Peer Mohd Khuda Bux Ors 1 It is therefore sufficiently clear said the learned judge that the expression affairs of State as used in section 123 has a restricted meaning and on the weight of authority both in England and in this country I would define affairs of State as matters of a public nature in which the State is concerned and the disclosure of which will be prejudicial to the public interest or injurious to national defence or detrimental to good diplomatic relations It is this definition which was criticised by Aft Seervai on the ground that it purported to describe the genus namely affairs of State solely by reference to the characteristics of one of its species namely documents whose disclosure was likely to cause injury to public interest Having adopted this definition the High Court proceeded to examine whether any injury would result from the disclosure of the documents and came to the conclusion that it was difficult to sustain the plea that the production of the documents would lead to any of the injuries specified in the definition evolved by Khosla J On this ground the High Court allowed the contention of the respondent and directed the State to produce the documents in question We have already held that in dealing with the 1 AIR 1950 East Punjab 228 408 question of privilege raised under section 123 it is not a part of the Court s jurisdiction to decide whether the disclosure of the given document would lead to any injury to public interest that is a matter for the head of the department to consider and decide We have also held that the preliminary enquiry where the character of the documents falls to be considered is within the jurisdiction and competence of the Court and we have indicated how within the narrow limits prescribed by the second clause of a 162 such an enquiry should be conducted In view of this conclusion we must hold that the High Court was in error in trying to enquire into the consequences of the disclosure we may add that the decision of the High Court suffers from the additional infirmity that the said enquiry has been confined only to the specified classes of injury specified by Khosla J in his definition which cannot be treated as exhaustive That being so we think the appellant is justified in complaining against the validity of the decision of the High Court Let us then consider whether the documents in question do really fall within the category of documents relating to affairs of State Three of the documents the discovery of which the respondent claimed are described as original orders passed by the Pepsu Cabinet on the three respective dates It is difficult to understand what was exactly meant by describing the said documents as original orders passed on those dates but quite apart from it the very description of the documents clearly indicates that they are documents relating to the discussions that took place amongst the members of the Council of Ministers and the provisional conclusions reached by them in regard to the respondent s representation from time to time Without knowing more about the contents of the said documents it is impossible to escape the conclusion that these documents would embody the minutes of the meetings of the Council of Ministers and would indicate the advice which the Council ultimately gave to the Rajpramukh It is hardly necessary to recall that advice given by the 409 Cabinet to the Rajpramukh or the Governor is expressly saved by article 163 sub article 3 of the Constitution and in the case of such advice no further question need to be considered The same observation falls to be made in regard to the advice tendered by the Public Service Commission to the Council of Ministers Indeed it is very difficult to imagine how advice thus tendered by the Public Service Commission can be excluded from the protection afforded by section 123 of the Act Mr Gopal Singh attempted to argue that before the final order was passed the Council of Ministers had decided to accept the respondent s representation and to reinstate him and that according to him the respondent seeks to prove by calling the two original orders We are unable to understand this argument Even if the Council of Ministers had provisionally decided to reinstate the respondent that would not prevent the Council from reconsidering the matter and coming to a contrary conclusion later on until a final decision is reached by them and is communicated to the Rajpramukh in the form of advice and acted upon by him by issuing an order in that behalf to the respondent Until the final order is thus communicated to the respondent it would be open to the Council to consider the matter over and over again and the fact that they reached provisional conclusions on two occasions in the past would not alter the character of the said conclusions The said conclusions provisional in character are a part of the proceedings of the Council of Ministers and no more The report received by the Council from the Public Service Commission carries on its face the character of a document the disclosure of which would lead to injury of public interest It falls in that class of document which on grounds of public interest must as a class be withheld from production Therefore in our opinion the conclusion appears inescapable that the documents in question are protected under section 123 and if the head of the department does not give permission for their production the Court cannot compel the appellant to produce them We should have 52 410 stated that the two affidavits made by the Chief Secretary in support of the plea of the claim of privilege satisfied the requirements which we have laid down in our judgment and no comment can be effectively made against them The argument that in its pleadings the appellant accepted the description of the respondent that the document contained orders is hardly relevant or material The affidavits show what these documents purport to be and that leads to the inference which irresistibly follows from the very descrip tion of the documents given by the respondent himself in his application by which he called for their production and inspection Before we part with this appeal we may incidentally refer to another point which was argued at some length before us by both the learned counsel for interveners Mr Viswanatha Sastri contended that the provisions of section 162 can be invoked only where a witness has been summoned to produce a document and a privilege is claimed by him in respect of it According to him the said provisions cannot be invoked where the Court is called upon to decide the validity of the claim of privilege at the stage of inspection of the documents In other words where the State is a party to the suit and an application for inspection of documents is made against it by its opponent and a claim for privilege is put forward by the State the Court is entitled under 0 11 r 19 sub a 2 to inspect the documents for the purpose of deciding as to the validity of the claim of privilege That is the clear provision of 0 11 r 19 sub r 2 and the power conferred on the Court by the said provision is not subject to section 162 of the Act This position is seriously disputed by Mr Seervai The procedural law in regard to discovery production and inspection of documents is contained in 0 11 rr 12 21 It is true that 0 11 r 19 sub r 2 provides that in dealing with a claim of privilege it shall be lawful for the Court to inspect the document for the purpose of deciding the validity of the claim of privilege The question is what is the effect of this provision when it is considered along with section 162 of the Act 411 Before briefly indicating our conclusion on this point we may observe that this contention does not appear to have been raised in any judicial decisions to which our attention was drawn Indeed it appears generally to have been assumed that in the matter of deciding a claim for privilege made by the State the provisions of section 162 of the Act would apply whether the said claim is made at the earlier stage of inspection or later when evidence is formally tendered That however is another matter It is true that section 162 in terms refers to a witness who is summoned to produce a document and provides for the procedure which should be adopted and the powers which should be exercised in dealing with a privilege claimed by such a witness but there is no doubt that the provisions of the Act are intended to apply to all judicial proceedings in or before any Court that in terms is the result of section 1 of the Act and the proceedings before the Court under 0 11 r 19 are judicial proceedings to which prima facie section 162 would apply Similarly section 4 sub section 1 of the Code of Civil Procedure provides inter alia that in the absence of any specific provisions to the contrary nothing in the Code shall be deemed to limit or otherwise affect any special or local law in force that is to say in the absence of any provisions to the contrary the Evidence Act would apply to all the proceedings governed by the Code Besides it would be very strange that a claim for privilege to which 0 1 1 r 19 sub r 2 refers is allowed to be raised under a 123 of the Act whereas the procedure prescribed by the Act in dealing with such a claim by section 162 is inapplicable If section 123 of the Act applies and a claim for privilege can be raised under it prima facie there is no reason why section 162 should not likewise apply But apart from these general considerations the relevant scheme of the Code of Civil Procedure itself indicates that there is no substance in the argument raised by Mr Sastri Order 27 prescribes the procedure which has to be adopted where suits are filed by or against the government a plaint or written statement proposed to be filed by the government has to be 412 signed under r 1 by such person as the government may by general or special order appoint in that behalf which means that the government can only act through its agent duly appointed in that behalf The Minister who is the political head of the department or the Secretary who is its administrative head is not the government and so whenever the government sues or is sued and makes its pleadings it always acts through its duly authorised agents The scheme of the relevant rules of 0 27 is consistent with this position Section 30 of the Code empowers the Court either on its own motion or on an application of a party to issue summonses to persons whose attendance is required either to give evidence or produce document and to order that any fact may be proved by an affidavit Order 4 r 5 contemplates that at the time of issuing the summons the Court has to determine whether the summons should be for the settlement of issues only or for the final disposal of the suit and the relevant form of the summons No 1 in First Schedule Appendix B shows that in the case of a suit against the government of a State a summons can be issued to compel the attendance of any witness and the production of any document This shows that where the State is a party a summons may have to be issued to its appropriate officer calling upon him to produce the documents for inspection The provisions of rr 14 15 and 16 of 0 11 show that affidavits have to be filed by the parties and the filing of affidavits which is permitted by 0 19 is undoubtedly one mode of giving evidence Order 16 r 1 provides for the issue of a summons to persons whose attendance is required inter alia to produce documents and r 21 of the said order expressly provides that where any party to a suit is required to give evidence or to produce a document the provisions as to witnesses shall apply to him so far as are applicable Thus there can be little doubt that where a privilege is claimed at the stage of inspection and the Court is required to adjudicate upon its validity the relevant provisions of the Act 413 under which the privilege is claimed as well as the pro visions of section 162 which deal with the manner in which the said privilege has to be considered are equally applicable and if the Court is precluded from inspecting the privileged document under the second clause of section 162 the said prohibition would apply as much to a privilege claimed by the State through its witness at the trial as a privilege similarly claimed by it at the stage of inspection It is hardly necessary to point out that a contrary vie would lead to this manifestly unreasonable result that at the stage of inspection the document can be inspected by the Court but not at the subsequent stage of trial In our opinion the provisions of 0 11 r 19 sub r 2 must therefore be read subject to section 162 of the Act The result is that the appeal is allowed the order passed by the High Court set aside and that of the trial court restored with costs throughout KAPUR J I have read the judgment prepared by my learned brother Gajendragadkar J and agree with the conclusion but in my opinion the Court cannot take other evidence in regard to the nature of document for which privilege is claimed and my reasons are these In India the law of privilege in regard to official documents is contained in section 123 of the which has to be read with section 162 of that Act The various kinds of privileges claimable under the Evidence Act are contained in Chapter IX two sections amongst these are sections 123 and 126 the former dealing with state privilege relating to affairs of State and the latter with communications with a legal adviser In section 123 the opening words are no one shall be permitted and in the latter no barrister etc shall at any time be permitted In the other sections dealing with privilege the opening words are no person shall be compelled This difference in language indicates that the legislature intended to place the privilege of the State in regard to official documents on a different footing than the other forms of privileges mentioned in the 414 Act in so far as it put a ban on the court permitting any evidence of the kind mentioned in section 123 from being given so that if unwittingly any evidence mentioned therein was sought to be given the court would not permit it unless the other conditions were satisfied In section 123 the provision is against the giving of evidence which is derived from unpublished official records relating to any affairs of State except when the head of the department concerned in his discretion gives permission for the evidence to be given The important words are derived unpublished and affairs of State The word derived means coming out of the source and therefore refers to original as well as secondary evidence of documents whether oral or documentary The words unpublished official records are not very difficult of interpretation and must depend upon the circumstances of each case If the record is shown to have already been published it ceases to be an unpublished record But the difficulty arises as to the meaning of the words affairs of State because the ban is put on evidence derived from official documents relating to affairs of State At the time when the was enacted affairs of State were confined to governmental or political activities of Government but with the expanding of the activities of the State which because of the changed concept of the State comprise also socioeconomic commercial and industrial activities the words affairs of State must necessarily have a much wider meaning than it originally had But the language of the sections remains the same and so also the limitation on the giving of evidence derived from such documents and therefore what was considered to be within the discretion of the head of the department to disclose or not to disclose still remains within his discretion and merely because the scope of the words affairs of State had been extended the extent of the discretion has not thereby decreased or become limited and the words who shall give or withhold such permission as he thinks fit indicate that the discretion to remove the ban vests in the head of the department and no one else 415 The real difficulty arises in the interpretation of the words affairs of State What are they How is the meaning of the words to be determined and by whom When a claim is made by a proper authority in a proper form is that conclusive of the nature of the document or has the court to proceed to determine the efficacy of the claim by taking other evidence as to its nature or the effect of its disclosure It was contended that the decision whether the document belongs to the category falling within the expression affairs of State or not has to be of the court and not of the official mentioned in the section In a way that is correct because the conduct of the trial must always remain in the hands of the court but what is implied in the contention raised was that the court must first decide whether the document belongs to the class comprised in the expression affairs of State and then the official concerned may give or withhold his consent It was also submitted that in order to enable the court to determine the validity of the claim of privilege the official concerned when making the claim may have to state the nature of the document or at least the nature of the injury to the public interests or to the efficient working of the public service as the case may be which the disclosure of the document or evidence derived therefrom would result in Section 162 of the Evidence Act was relied upon in support of the above contention That section applies to all documents in regard to which claim of privilege of any kind may be claimable including that falling under section 123 and therefore the language of section 162 had necessarily to be wide It has been described as not being clear by Bose J as he then was in Bhaiya Saheb vs Ram Nath Bampratap Bhadupote 1 The section requires a witness summoned to produce a document to bring it to the court in spite of any objection which he may take to it production or to its admissibility and the court is empowered to decide both the questions It is the next part which is relied upon in support of the contention that the court can 1 ILR 247 416 take other evidence to decide both the questions of production and the question of admissibility The words are the court if it sees fit may inspect the document unless it refers to matters of State or take other evidence to enable it to determine on its admissibility It was argued that this part of the section empowered the court to take other evidence not only to decide the question of admissibility of the document but also its production The language of this part of the section does not lend support to this contention because it gives discretion to the court to inspect the document or take other evidence to enable it to determine the admissibility of the document The interposing of the words unless it refers to matters of State has reference to privilege under section 123 and therefore it disentitles the court to inspect the document The sequence envisaged by the section is that a witness summoned to produce a document is bound to bring it to the court He may then take objection to its production under any of the sections viz 121 to 131 or he may object to its admissibility and both these objections have to be decided by the court Then comes the second part of the section If the document refers to matters of State there is no distinction in the meaning of the word matters and affairs of State then the court may not inspect the document but if the document is not of that class then the court can inspect it and if it finds any objection to the admissibility it may take other evidence to determine its admissibility To take a concrete case if a document is produced which is compulsorily registerable and it is not so registered it would not be admissible in evidence under section 49 of the Registration Act but evidence may be led as to its admissibility for certain purposes eg section 53 A of the Transfer of Property Act If it refers to that class of documents then the second part of section 162 becomes applicable ie the court may inspect the document which will help it in deciding the question of privilege and admissibility But if a claim is properly made by a proper official on the ground that it refers to matters of State the court will stay its hands and refrain from inspecting it 417 The words or to take its admissibility on their plain language do not apply to production and consequently the taking of evidence must have reference to the admissibility of the document All the High Courts in India are in accord that the Supreme court will not inspect the document if it relates to matters of State If that is so it would be difficult to sustain the contention that it can decide the question whether the matter relates or does not relate to affairs of State If the original cannot be inspected no other evidence can be produced as to its contents The effect of this prohibition is not only as if the document had been destroyed but as if it never existed If that is the position then it becomes difficult to see how the question of its production can be decided by the court by taking other evidence or how the court can decide whether a particular document falls within the prohibition imposed by section 123 of the Evidence Act In this connection the words of Lord Kinnear in The Lord Commissioner of the Admiralty vs Aberdeen Steam Trawling Fishing Co Ltd 1 are quite apposite It was there said I think it is not improbable that even if an officer of the department were examined as a witness we should not get further forward because the same reasons which induced the department to say that the report itself ought not to be produced might be thought to preclude the department from giving explanation required If the court cannot inspect the document if no secondary evidence can be given as to its contents and if the necessary materials and the circumstances which would indicate the injury to the public interests or detriment to the proper functioning of the services cannot be before the court it cannot be in a position to decide whether the document relates to affairs of State or not and the logical conclusion would be that the court is debarred from overruling the discretion of the head of the department concerned because the court cannot say whether the disclosure or non disclosure would be detrimental or not If on the other 1 343 53 418 hand the contention is accepted that the court can decide by taking other evidence as to whether the document relates to the affairs of State then the discretion to ban its production by the head of the department must necessarily become illusory If the court takes upon itself the task of deciding the nature of the document then it will be taking upon itself the very grave duty of deciding a vital question as to what are the affairs of State without having the necessary material before it or without knowing the exigen cies of the public service or the effect of the disclosure of the State secret or how far the disclosure will injure the public interests and it may thus unwittingly become the instrument of giving publicity to something which the head of the department considered injurious to the public interests the law having given to the head of the department concerned to make this determination No doubt the discretion is wide and covers all classes of documents which may fall within the phrase affairs of State some noxious and others innocuous and may even appear to be unduly restrictive of the rights of the litigant but if that is the law the sense of responsibility of the official concerned and his sense of fair play has to be trusted The second part of section 162 therefore cannot be said to permit the taking of other evidence ie other than the document to determine the question of its production when it is of the category falling under section 123 That part does not entitle the court to determine the nature of the document or the adequacy of the reasons which impelled the proper official to claim privilege It would be relevant Co quote the observations of Isaacs J in Marconi s Wireless Telegraph Co vs The Common wealth I distinctly adverted to the necessary fact that the right of discovery given to the litigant for the furtherance of public justice must be subject to the still higher consideration of the general welfare that the order to make proper discovery does not destroy the privilege of public interest and that the ground of public policy may intervene and prevent the injury to 1 1913 16 CLR 178 201 419 the community which coercive disclosure might produce If that were not so every gun in every fort and every safe in the Treasury would be open through the medium of the Court to the observation of any plaintiff of any nationality who could make a prima facie case of the infringement to which it was relevant One of the authorities to which I referred in that connection was the judgment of Turner L J in Wadeer vs East India Co at p 191 and that judgment is I think of great value in this case also It will be helpful to refer to the law on the subject in England as laid down in English cases because the basis of the Indian Law is the law of that country The question of privilege has been described by Viscount Simon L C in Duncan vs Cammell Laird Co Ltd 1 as a question of high constitutional importance because it involves a claim by the Executive Government to restrict the material which might otherwise be available for the court trying the case and this description was repeated by the House of Lords in the Scottish case Corporation of Glasgow vs Central Land Board 2 It may be the material which a party to the litigation may desire in its own interest and without which equal justice may be prejudiced The question of privilege may not only arise in cases where the State is party to the suit but may equally arise where the contestants in a suit are private parties and whether as a party to the suit or not the State may decline to produce a document In Dun can s case 1 the privilege of the crown though it was described as not a happy expression was upheld on the ground that the interest of the State must not be put in jeopardy by the production of a document which would injure it and which is also a principle to be observed in administering justice quite unconnected with the interests or claims of the particular parties in litigation and indeed is a rule upon which the Judge if necessary insist even though no objection is taken at all The sort of grounds to afford justification for withholding the documents weregiven by Viscount Simon as follows 1 2 1956 SC I HL 420 It would not be a good ground that if they were produced the consequences might involve the department or the government in Parliamentary discussion or in public criticism or might necessitate the attendance as witnesses or otherwise of officials who have pressing duties elsewhere Neither would it be a good ground that production might tend to expose a want of efficiency in the administration or tend to lay the department open to claims for compensation In a word it is not enough that the minister or the department does not want to have the document produced The minister in deciding whether it is his duty to object should bear these considerations in mind for he ought not to take the responsibility of with holding production except in cases where the public interest would otherwise be damnified eg where disclosure would be injurious to national defence or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service Thus the documents which are protected from production are those the production of which would be prejudicial to the public interests or those which belong to that class which as a matter of practice are kept secret for the proper maintenance of the efficient working of the public service Objection has been taken to the authority of this rule enunciated by Viscount Simon L C on the ground that it is in serious conflict with another principle that the proper administration of justice is also a matter of public interest i e fiat justitia ruat caelum but as was said by Viscount Simonds in Glasgow Corporation vs Central Land Board 1 The paramountcy of the public interest has been recognized and preserved This principle which was re enunciated by Viscount Simon L C had been the law of England for over a century before Duncan s case 2 In Earl vs Vass 3 it was held that public officers are not entitled or compellable to produce written communications made by them officially relative to the character and conduct of a party applying 1 2 3 421 for a public office when the production is demanded in an action for damages against the writer Lord Eldon L C at p 230 observed I apprehend in all cases in which it has been held upon the principle of public policy that you shall not be compellable to give evidence of or produce s such instruments that is wherever it is held you are not on grounds of public policy to produce them you cannot produce them and that it is the duty of the judge to say you shall not produce them Lord Eldon referred with approval to the decision in Home vs Lord William Bentinck 1 which was of the year 1820 The principle there laid down was that production of instruments and papers must be shut out if it was against public policy At p 919 the learned Chief Justice said It seems therefore that the reception of the minutes would tend directly to disclose that which is not permitted to be disclosed and therefore independently of the character of the court I should say on the broad rule of public policy and convenience that these matters secret in their nature and involving delicate enquiry and the names of persons stand protected The injury to public service was recognized in Beatson vs Skene 2 where Pollock Q B said It appears to us therefore that the question whether the production of the documents would be injurious to the public service must be determined not by the Judge but by the head of the department having the custody of the papers and if he is in attendance and states that in his opinion the production of the document would be injurious to the public service we think the Judge ought not to compel the production of it The administration of justice is only a part of the general conduct of the affairs of any State or Nation and we think is with respect to the production or non production of a State paper in a Court of Justice subordinate to the general welfare of the community If indeed the head of the 1 2 422 department does not attend personally to say that the production will be injurious but sends the documents to be produced or not as the Judge may think proper or as was the case in Dickson vs The Earl of Wilton beford Lord Campbell reported in Foster and Finla son s N P Rep p 425 where a subordinate was sent with the document with instructions to object but nothing more the case may be different Martin B did not entirely agree with the view of the other three learned Barons and he was of the opinion that if the document could be produced without prejudice to public service he ought to compel its production notwithstanding the reluctance of the head of the department to produce it It was pointed out by Pollock C B that this might apply to extreme cases and extreme cases throw little light on the practical rules of life In Smith vs East India Company 1 which related to a commercial transaction as to the liability to pay freight a similar privilege was upheld It was argued that communications between officials and communications between Directors and Board of Control were official correspondence and were privileged On appeal the Lord Chancellor held that in order that superintendence and control should be exercised effectively and for the benefit of the public it was necessary that unreserved communication should take place between the East India Company and the Board of Control In Homer vs Ashford 2 which was of the year 1825Best C J said The first object of the law is to promote public interest the second to preserve the rights of individuals In this connection it may not be out of place to recall the striking language of Knight Bruce V C quoted at p 401 of Macintosh vs Dun 3 in the judgment of Lord Macnaughten Truth like other good things may be loved unwisely may be pursued too keenly may cost too 1 1841 1 Ph 50 2 539 3 423 much And then he points out that the meanness and the mischief of prying into things which are regarded as confidential with all the attending consequences are too great to pay for truth itself Thus the law as stated in these old English cases shows that what was injurious to the public interest or prejudicial to the proper functioning of the public services was not to be disclosed and if the objection was based on these grounds it must prevail As to who was to determine this the judge or the official Pollock C B decided in favour of the official because the enquiry could not be held in private and if it was held in public the mischief would have been done Beatson vs Skene 1 It was with this background of the state of the English law that Sir James Fitzjames Stephen drafted the law of evidence which was enacted into the Act 1 of 1872 Scrutton T in Asiatic Petroleum Company Ltd vs Anglo Persian Oil Company Ltd 2 which was a case between private parties inspected the document to the production of which objection was taken and having seen it he said that he would not take the responsibility of ordering it to be produced against the wishes of the Government When the matter was taken in appeal Swinfen Eady L J was of the opinion that the rule was not confined to documents of political or administrative character The foundation of the rule was that the information cannot be disclosed without injury to the public interest and not that the document was confidential or official and that if the production would be injurious to the public service the general public interest must be considered paramount to the individual interest of the suitor This was a document which was written by the defendants who owned a pipeline from Persia to their refinery in the Persian Gulf to their agents in Persia which contained confidential information from the Board of Admiralty The Scottish cases have also upheld the privilege of the Crown in regard to production although it has 1 2 424 been stated that the inherent power of the court to itself see the document and to override but not to review the certificate of the official of the department concerned has always existed in Scottish courts In Duncan s case 1 Viscount Simon L C quoted with approval the observation of Lord Dunedin the Lord President in the Lord Commissioners of the Admiralty vs The Aberdeen Steam Trawling Fishing Co Ltd 2 That was a case where a Government department objected to the production of the document on the ground that the production would be prejudicial to public services and it was held that the view of the government department was final and the court will refuse production even in action in which the Government department was a party The objection there was taken on an affidavit At p 340 the Lord President Dunedin said It seems to me that if a public department comes forward and says that the production of a document is detrimental to the public service it is a very strong step indeed for the Court to overrule that statement by the department The Lord Ordinary has thought that it is better that he should determine the question I do not there agree with him because the question of whether the publication of a document is or is not detrimental to the public service depends so much upon the various points of view from which it may be regarded and I do not think that the Court is in possession of these various points of view In other words I think that sitting as Judges without other assistance we might think that something was innocuous which the better informed officials of the public department might think was noxious Hence I think the question is really one for the department and not for your Lordships And Lord Kinnear agreed with Lord Dunedin and at p 343 said I agree that we cannot take out of the hands of the Department the decision of what is or what is not detrimental to the public service There are only two possible courses We must either say that it is a good 1 2 343 425 ground of objection or we must overrule it altogether I do not think that we should decide whether it would be detrimental to the public service or not and I agree with what both your Lordships have said as to the position of the Court in reference to that question We do not know the conditions under which the production of the document would or would not be injurious to the public service I think it is not improbable that even if an officer of the Department were examined as a witness we should not get further for ward because the same reasons which induced the Department to say that the report itself ought not to be produced might be thought to preclude the Department from giving the explanations required A department of Government to which the exigencies of the public service are known as they cannot be known to the Court must in my judgment determine a question of this kind for itself and therefore I agree we ought not to grant the diligence In a later Scottish case Henderson vM Gown 1 where in a suit between private parties income tax returns were sought to be produced the court held that it had the power in the exercise of its discretion to order production of documents in the custody of a public department in spite of its objection but in the circumstances it did not order production as it was unnecessary Lord Johnston said at p 826 That is not to say that the court never can and never will overrule such a statement but merely that it would be a very strong step and therefore a step for which the Court would require very grave justification The Admiralty and the War Office are charged with the duty of providing for the safety of the realm and if either say that the production of a document in their hands would be prejudicial to the public interest I think that we should naturally implicitly accept the statement But there are distinctions between public departments The interest of such a department as the Inland Revenue is that the public should be able to rely on all returns to them and 1 54 426 communications made to them being treated as confidential This also is the public interest The latest Scottish case relied upon is a decision of the House of Lords in Glasgow Corporation vs Central Land Board 1 In that case privilege was claimed by the Central Land Board on the ground that its production would adversely affect the public interests The question for decision was whether Scottish courts were bound to give effect to the certificate of the Secretary of State or whether the court had an inherent jurisdiction not to review the certificate but to override it The House of Lords was of the opinion that Duncan s case 2 did not affect the Law of Scotland and the Scottish courts possessed the inherent power to override the objections of the Minister and it did not exclude the court from making an order of production but in that case the power was not exercised Viscount Simonds L C said at p 10 that Duncan s case 2 had settled that according to the Law of England an objection validly taken to production of documents on the ground that this would be injurious to the public interest is conclusive but to cite the case of Lords Commissioners of the Admiralty 3 as authoritative without regard to the earlier cases and the later case of Henderson vs M Gown 4 must give an imperfect view of the law of Scotland But even in Scotland the power had been rarely very rarely exercised by the courts its exercise had been refused even where the result had been the prejudice of the private individual and the paramountcy of the public interest had been recognised and preserved p II Lord Normand observed that for a 100 years the uniform track of authority asserted the inherent power of the court to disregard the crown s objection but the power had been seldom exercised only the courts had emphatically said that it must be used with the greatest caution and only in special circumstances In this connection Lord Normand said at p 16 It was also a firmly established rule that the courts could not dispute the certificate and that the 1 2 3 343 4 427 question whether production would be contrary to public interest was for minister or the department concerned Lord Radcliffe in his speech said that Duncan s case ought not to be treated as a decision which affected the law of Scotland Dealing with the case before the court and the power reserved to the court to overrule the crown objection he said at p 18 I do not understand that the existence of the power involves that in Scotland any more than in England it is open to the court to dispute with the minister his view that production would be contrary to the public interest is well founded or to arrive at a view contradictory of his that production would not in fact be at all injurious to that interest If weight is given to the argument that the Minister in forming his view may have before him a range of considerations that is not open to the Court and that he is not under any obligation to set out these considerations in public I think that it must follow that the Minister s view must be accepted by the Court as incapable of being displaced in by its own opinion The view expressed in Admiralty Commissioners vs Aberdeen1 was dissented from After referring to another aspect of public interest that impartial justice should be done in the courts of law not least between citizen and Crown the Lord Normand observed If in the past the power to disregard the objection has hardly ever been exercised that has been due I think to a very proper respect for the Crown s position and to a confidence that objections of this nature would not be advanced or at any rate persisted in unless the case was one in which production would involve material injury to the public welfare Thus as was said by Lord Normand there is a difference between the law of England and the law of Scotland on an important constitutional question But in practice the difference was little as the exercise of the inherent power by the Scottish Courts had been rare 1 2 343 428 As the Privy Council judgment in Robinson s case 1 was from Australia it will be useful to refer to two Australian cases In Marconi s Wireless Telegraph Company Limited vs The Commonwealth2 where inspection was claimed of wireless telegraphic apparatus Isaacs J in his minority judgment at p 205 enunciated the following propositions which are relevant for the purpose of the present case 1 The rule of exclusion of State secrets applies necessarily without distinction to the facts documents and other objects This was admitted by Mr Irvine and is established by such cases as B vs Watson at p 148 B vs Hardy at col 753 R vs Watson at cols 100 101 2The rule proceeds on the same grounds whether the parties called on to produce the documents c are or are not parties to the suit that is on the grounds of the prejudice to the public interests which production would occasion per Turner L J in Wadeer s case section D M G 1882 Admiralty Commissioners vs Aberdeen Trawling Co 1909 Sess Ca 335 3 The right to protection depends upon the character of the documents c ib 4 If the documents c are prima facie private as where they are in private hands then in the absence of Ministerial claim for protection the Court in case of objection by the private defendant on the ground of public policy will ascertain their character that is whether they are really governmental and if they are the next succeeding paragraph applies Smith vs East India Company I Ph 50 5 If the documents are of a political that is a governmental character then even in the absence of any Ministerial claim for protection it is the duty of the Court on objection by private person holding them to ascertain whether public prejudice will or may ensue from production and if it appears that public policy requires confidence between the objector and the Government they are presumed 1 2 1913 16 CLR 178 201 429 prima facie to be confidential Smith vs East India Company I Ph 50 and per Wills J in Hennessy vs Wright 21 QBD 509 518 519 6 If either by proof or undisplaced presumption confidence is required then it is a rule of law not of discretion that the documents shall be excluded Marks vs Beyfus at pp 498 500 Stace v Griffith at p 428 7 If the documents c are in fact State documents that is in possession of a government department and the Minister having custody of them assures the Court that public prejudice will or may ensue from production that in the absence of what are called extreme cases and are practically negligible is conclusive evidence of their character that is that they are confidential public documents and that such prejudice will or may ensue and the Court must act upon it Stace vs Griffith LR 2 PC 420 at p 428 Beatson vs Skene The Bellerophon Hughes vs Vargas 9 R 661 Halsbury s Laws of England Vol XI p 85 Taylor on Evidence 10th ed pp 673 674 Powell on Evidence 9th ed p 273 Conclusiveness in such a case is not unique Even a private claim for privilege in an ordinary affidavit of documents is with certain exceptions immaterial here taken as conclusive with respect even to the grounds stated for claiming privilege See Halsbury s Laws of England Vol XI p 61 and Morris vs Edwards 15 App The learned Judge dealing with the matter of privilege in public interest and the principles based on prevention of injury to the community observed at p 203 Such a doctrine is inherent in all systems of law for the first requirement of every organised society is to live and so far as possible to live securely and the next is to live with the greatest advantage to the community at large and to these essentials the strict administration of justice in particular cases amongst members must yield Thus the principle is that private inconvenience must yield to public interest in other words Fiat justitia 430 ruat coelum is not always the right of a suitor because the proper maxim applicable is salus populi suprema est lex which transcends all other considerations The majority of the Court in that case had held that there was nothing to warrant the conjecture that the inspection could disclose anything that could reasonably be called secret in any sense of the word The matter was taken to the Privy Council but special leave to appeal was refused The Lord Chancellor there said See Griffins case 386 Of course the Minister s statement or certificate must be conclusive on a particular document How can it be otherwise If the Minister certifies quite specifically his certificate is to be taken as conclusive The ground on which special leave to appeal was refused in that case appears to have been that having regard to the form of the order which carefully limited the right of inspection and reserved liberty to apply it was not a convenient case in which to raise a great question of principle In Griffin vs The State of South Australia 1 objection to the production for inspection of documents was upheld on the ground that the statement of the Attorney General for the State that their production for inspection would be prejudicial to the public interest is conclusive That was a case in which inspection of documents was sought in an action brought in the High Court of Australia by the plaintiff against the State of South Australia to recover damages for negligent storage of wheat Knox C J in the course of his judgment referred to the observations of the Lord Chancellor in Marconi s case 2 which have been quoted above Isaacs J reiterated his previous opinion Starke J was doubtful and he was of the opinion that there was no reason why the courts should not use the power confided in them for discovery If some real doubt was established as to the accuracy of the Minister s statement there was no reason for refusing the power in a proper case particularly when the commercial activities of the Government were becoming more and more extensive and 1 2 1913 16 CLR 178201 431 the sphere of political and administrative action correspondingly wider He was also of the opinion that the courts should be able to fully protect the public interests and do nothing to imperil them The learned Judge in that particular case was not fully satisfied with the affidavit of the Minister The matter of privilege in Australia was taken to the Privy Council in Robinson vs State of South Australia 1 This case arose out of an action similar to Griffin s case 2 and a similar privilege was claimed The Privy Council was of the opinion that the Minister s minute was inadequate to support the claim of privilege but it had not been lost by the inefficiency of the form in which it was claimed and the matter was a proper one for the court to exercise its power of inspection for which privilege was sought in order to determine whether their production will be prejudicial to public interest or to the efficient working of the public services Lord Blanesburgh said at p 714 As the protection is claimed on the broad principle of State policy and public convenience the papers protected as might have been expected have usually been public official documents of a political or administrative character Yet the rule is not limited to these documents Its foundation is that the information cannot be disclosed without injury to the public interests and not that the documents are confidential or official which alone is no reason for their nonproduction See Asiatic Petroleum Co vs Anglo Persian Oil 829 830 and Smith vs East India Co 1 Ph 50 and at p 715 it was observed It must not be assumed from these observations of the Lord Justice that documents relating to the trading commercial or contractual activities of a State can never be claimed to be protected under this head of privilege It is conceivable that even in connection with the production of such documents there may be some plain overruling principles of public interest concerned which cannot be disregarded 1 2 432 After referring to various cases that have been set out above the Privy Council was of the opinion that the court was entitled to prescribe in any particular case the manner in which the claim of privilege should be made It may accept unsworn testimony of the Minister in one case but in another where the circumstances seems to be to so require call for an affidavit from him It may be that objection merely on ground of public policy may not be sufficient but it ought to appear that the mind of a responsible Minister had been brought to bear on the question of expediency in the public interest of giving or refusing the information asked for This would be a guarantee that the opinion of the Minister which the court is asked to accept is one which has not been expressed inadvisedly or as a matter of mere departmental routine but is one put forward with the solemnity necessarily attaching to the sworn statements and that the privilege could not be asserted in relation to documents the contents of which had already been published In that particular case the Minister had merely stated that he had considered this mass of documents and not that he had read them and considered each one of them Lord Blanesburgh said at p 722 In view specially of the fact that the documents are primarily commercial documents he should have condescended upon some explanation of the particular and far from obvious danger or detriment to which the State would be exposed by their production Above all and especially in view of the last paragraph of the minute the claim was one which should have been put forward under the sanction of an oath by some responsible Minister or State official Continuing it was observed that there may be some among the scheduled documents to which privilege may be genuinely attached and to give inspection of which without more would destroy the protection of the privilege and therefore it would or might be contrary to public interest to deprive the State of opportunity of regularising its claim to protection The Board would have given this advice had it not been for the fact that it would have involved serious delay 433 without advancing further the final solution of the question The case was therefore remitted to the Supreme Court with a direction that it was a proper one for the exercise by that court of the power of inspecting documents The Privy Council was careful to add that the Judge in giving his decision as to any document would safeguard the interests of the State and would not resolve the doubt against the State without further enquiring from the Minister In that case also the paramountcy of the consideration of public interest was recognized but as the privilege was not properly claimed and the document related to commercial activities of the State and it would have involved unnecessary prolongation of the action the Privy Council remitted the case for the court to exercise its power of inspection under the Rules and Orders of the court but with the further direction of safeguarding the interest of the State In Duncan vs Cammell Laird Co 1 the Court of Appeal held that the affidavit of the First Lord of Admiralty was conclusive if it stated that such production would be contrary to public interest and the order for production was therefore refused Du Parcq L J pointed out that the Privy Council case Robinson s case 2 was not the final word on the subject in regard to production The House of Lords in appeal did not agree with the judgment of the Privy Council and it is significant that two of the seven Law Lords in the House of Lords were parties to the Privy Council judgment The House of Lords held that the affidavit of the Minister was conclusive and that inspection of a document by a court in private would be communicating with one party to the exclusion of the other and it accepted the principle that if it was prejudicial to the public interests or the document belonged to that class of documents which are kept secret for the proper functioning of the public services the production of the document would be refused It was recognized in that case that it is the Judge who is in control of the trial and not the executive but the proper ruling for the judge to give 1 2 55 434 would be that an objection validly taken to the production on the ground of its being injurious to public interest is conclusive The English cases which were decided after the pronouncement of the House of Lords in Duncan s case 1 naturally followed the decision of the House of Lords In Ellis vs Home Office 2 where a prisoner who had been attacked in jail by another prisoner who was a mental case asked for certain reports and privilege was claimed the privilege was upheld but it was said that although it was essential that Government department should be entitled to claim privilege against disclosure of documents on the ground of public interest the ambit of privileges should be carefully scrutinized and each document should be examined It may be mentioned that in that case Devlin J felt grave concern about the claim of this privilege because the result was that documents were to be treated as destroyed and no secondary evidence could be led and this concern of the trial judge was shared by the Court of Appeal In Broome vs Broome 3 which was a defended suit for divorce the wife wanted certain documents of the Soldiers Sailors and Airmen s Families Association but the Secretary of State issued a certificate in which he stated that the production would not be in public interest It was held that Crown privilege from disclosure attached to all documents irrespective of where they originated or in whose custody they reposed provided that they had emanated from or came into the possession of some servant of the Crown In Auton vs Rayner Ors 4 it was pointed out at page 572 that the sole concern of the Minister was whether the interests of the State in the sphere for which he was responsible would be affected and therefore the documents or evidence should be withheld from the court It was added that the Minister should accept and recognize that the proper administration of justice would be impeded or may be unattainable if any document or any evidence was withheld In that case an action was brought against the 1 2 3 4 435 defendants one of whom was a Police Officer charging them with conspiracy to injure and defraud him false imprisonment and malicious prosecution The documents required by the plaintiff were reports made by the Police Officer to his superior officers and the communication which passed between the Metropolitan Police Force and other police force and the Secretary of State swore an affidavit indicating that the document should be withheld from production and that he had formed an impartial judgment that in the public interest and for the proper functioning of the public services the document should be withheld The Court of Appeal held that the determination of the Secretary of State ought reasonably to be accepted and that the affidavit was in the circumstances conclusive The law in England may thus be summed up 1 That a document need not be produced for inspection either on discovery or at the trial when objection is taken by the Minister that disclosure of the document would be contrary to public policy or detrimental to public interest or services This privilege attaches irrespective of where the document originates or in whose custody it is provided it emanated from or came into possession of some servant of the crown 2 the privilege can be claimed or waived by the authority of the Minister or the head of the department 3 secondary evidence may not be given of a document for which privilege is established 4 official correspondence per se is not privileged on the ground of its being confidential or official nor is it a valid ground that production would involve the Government in criticism or expose want of efficiency in the administration or open up claims to compensation but the ground for privilege is that the production would be detrimental to the interest of the public or interfere with the efficient working of the public service or it belongs to class of documents which it is the practice of the department to keep secret 5 the minister s objection may be conveyed by a letter or by the official who attends at a trial but 436 the court may require an affidavit by or the attendance of the Minister 6 before a privilege is claimed it is desirable that each document should be examined by the department concerned and inspection permitted of all documents which cannot harm the public interest 7 if a minister claims privilege the court will accept his statement and ought not to examine the document to see if the objection is well founded 8 public interest must not be put in jeopardy by the production of a document which could injure it and the court should if necessary prohibit the production even though no objection has been taken by the Government department It may be pointed out that the privilege was expressly reserved when by the Civil Proceedings Act 1947 the Crown was made liable to give discovery in civil proceedings It is no doubt true and it must be recognized that the administration of public justice is also a part of public interest but as was pointed out by Viscount Simon L C in Duncan s case 1 the interest of the State is the interest of the citizen and if the former suffers the interest of the litigant also suffers and therefore public interest transcends the individual interest of a citizen In Duncan s case 1 it was emphasised that the Minister in deciding whether it was his duty to object should bear in mind the considerations which justify withholding production ie the public interest would otherwise be damnified ie the disclosure would be injurious to national defence or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the pro per functioning of the public service And that is the safeguard which both in England and India the law seems to have found sufficient for the protection of an individual s rights Even in Scotland where the inherent right of the courts to override official discretion has been recognized the occasions for the exercise of that power have indeed been rare and even in the 1 1942 AC 624 437 latest case Glasgow Corporation vs Land Board 1 that position was reiterated Although the consensus of opinion in India is that under the second part of section 162 the court will not inspect the document if it relates to matters of State yet there is a track of decision which has taken the view that it is not for the head of the department claiming the privilege but for the court to decide whether the document falls within the category mentioned in section 123 But in some other cases a different view has been taken A reference to cases which fall on both sides of the line will be helpful In Irwin vs Reid 2 Mukherjea A C J held that the language of section 123 showed that the court cannot be invited to discuss the nature of the document and the public official concerned and not the court is to decide whether the evidence referred to shall be given or withheld If any other view were taken the mischief intended to be averted would take place as the judge could not determine the question without ascertaining the contents of the document and such inquiry if it did take place must for obvious reasons take place in public Beatson vs Skene 3 Hennessy vs Wright 4 Jehangir vs Secretary of State 5 The result practically is that if the objection is raised by a proper authority the court cannot compel disclosure by primary or by secondary evidence The Lahore High Court in Khawja Nazir Ahmad vs Emperor 6 held that the head of the department who is in possession of the documents is the sole judge of the fact whether the documents should be protected from production on the ground of their being related to affairs of State and therefore though the decision would be that of the court it would have to rule in favour of the privilege claimed by the head of the department It was also held that the interests of the State must not be put in jeopardy by production of documents which would injure them and that was a principle to be observed in administering justice and 1 L 2 Cal 3 4 5 160 6 ILR 438 indeed a rule on which the judge should insist even though no objection is taken at all In that case there were certain confidential files of the Special Enquiry Agency containing notes correspondence etc relating to the case and containing a record of statements of various persons and a proper affidavit had been filed by the head of the department stating that the production would be injurious to public interests Abdul Rahman J said I feel convinced in my mind that the objection as to its production apart from its admissibility eg for want of registration or contravening the rule as to when secondary evidence of a document can be admitted if the document is merely a copy and not original can only be decided by its inspection by the Court followed as it must necessarily have been by an order for its production although not in the sense of its contents having been disclosed to the party summoning the document at any rate at that stage If the Court is debarred under the statute from inspecting it I cannot see how the objection as to its production can otherwise be decided In I M Lal vs Secretary of State 1 this privilege was upheld In that case it was held that section 162 divided the privilege of documents into two categories At p 212 Abdul Rashid J as he then was observed The Court can inspect documents for the purpose of deciding the question of privilege only if those documents do not refer to matters of State In other words an exception is made in respect of documents that refer to matters of State Such documents cannot be inspected by the Court while all other documents for which privilege is claimed are open to inspection by the Court for the purpose of deciding the validity of the objection regarding privilege The Bombay High Court in re Mantubhai Mehta in construing sections 123 124 and 162 has held that the officer summoned to produce the document is bound to bring it and if he takes objection to its production it is for the court to decide whether the objection is well founded or not but the court is not entitled to inspect it This track of reasoning suffers from the 1 AIR 1944 Lah 2 ILR 439 same difficulty that has been pointed out that without looking at the document and taking into consideration the wide words of section 123 it becomes difficult to hold that the court can decide as to whether the document relates to affairs of State and whether it should or should not be produced In that Bombay judgment the learned Judge referred to the observations of Viscount Simon LC in Duncan s case 1 Besides the learned Judge also referred to section 124 the effect of which is not the same as of section 123 of the Evidence Act Bhagwati J as a Judge of the Bombay High Court in RMD Chamarbaghwala vs Y R Parpia 2 held that the court cannot inspect the document in order to determine whether they are unpublished official records relating to any affairs of State but its jurisdiction to determine is not taken away by section 162 and it is for the court to decide the question of production by taking all the circumstances into consideration barring inspection of the document The learned Judge mainly referred to Robinson s case 3 and it appears that the learned Judge was not satisfied as to the documents being unpublished but the criterion he laid down was that only such documents are privileged which relate to affairs of State and the disclosure of which would be detrimental to public interest The question really is the same as to who is to decide whe ther it is matters of affairs of State The Calcutta High Court in a later judgment in Ijjat Ali Talukdar vs Emperor 4 took a contrary view different from its older view and held that the court is to decide whether conditions precedent to sections 123 124 have been established That was a case under the Excise Act and the Excise Commissioner was called upon to produce certain documents The Commissioner claimed privilege under section 123 on the ground that the files contained unpublished official records relating to affairs of State and Das J as he then was was of the opinion that the occasion for claiming privilege under section 123 arose when it was sought to give evidence derived from unpublished official records 1 2 AIR 1950 Bom 3 4 ILR 440 relating to any public affairs which was a condition precedent He then referred to section 124 of the Evidence Act The second part of section 162 provided the method or means to enable the court to decide the question namely by inspecting the document or by taking other evidence Although the court was disentitled from inspecting the document the duty of deciding the question was still on the court At p 419 the learned Judge observed In case of documents relating to affairs of State it may be difficult for the Court to decide the question yet it need not be necessarily impossible for the Court to do it Ordinarily no difficulty will arise because heads of departments or public officers are not expected to act capriciously and ordinarily the Court will accept their statement If necessary the Court will require the officer to claim the privilege in the manner indicated in the Judgment of Lord Blanesburgh in the Australian case If however the Court finds that an over zealous officer is capriciously putting forward a claim of privilege the Court will decide as best as it can by the means available to it whether the claim is well founded As has already been said above the second part does not afford the means or methods to the Court to decide the question of privilege The only method is inspection and that is denied to the court in cases falling under section 123 The second case which is on the other side of the line is the judgment of Bose J as he then was in Bhaiya Saheb vs Ramnath Rampratap Bhadupote 1 In that case the learned Judge was of the opinion that the insertion of the words unless it refers to matters of State in the middle of the paragraph seemed to indicate that the court might not inspect the document in respect of which the privilege was claimed until it had opportunity of determining upon its admissibility and for that purpose it could take other evidence which meant evidence other than the document produced This line of reasoning is similar to that adopted in Ijjat Ali s 2 case 1 ILR 247 2 ILR 441 The Andhra Pradesh High Court in Public Prosecutor Andhra vs Damera Venkata Narsayya 1 was of the opinion that when an objection under section 123 is taken the court has no power to inspect the document but may take other evidence for the purpose of deciding the objection and if it comes to the conclusion that the evidence will be derived from the unpublished records relating to the affairs of the State the objection will have to be upheld and it will be left to the head of the department to give or withhold the permission and the criterion for the head of the department was whether or not the disclosure would cause injury to public interest and he was the sole judge of the matter with which the court cannot interfere This case does not support the contention of the respondent The Patna High Court in Lakhuram Hariram vs The Union of India 2 held that the head of the department must first examine the document and he may then raise an objection but he is not absolved from the obligation of appearing in court and satisfying the court that the objection taken is valid and the court may require him to give an affidavit or further questions may be put in regard to the validity of the claim but the court is not entitled to inspect the docu ment A P Srivastava J in Tilka Ors vs State 3 held that under section 162 of the Evidence Act the court may inspect a document unless it relates to affairs of State and in such a case it will have to take other evidence relating to the nature of the document The words of section 123 are very wide and the discretion to produce or not to produce a document is given to the head of the department and the court is prohibited from permitting any evidence to be given which is derived from any unpublished documents relating to affairs of State Section 162 does not give the power to the court to call for other evidence which will indicate the nature of the document or which will 1 ILR 1957 And Prad 174 2 AIR 1960 Pat 3 AIR 1960 All 56 442 have any reference to the reasons impelling the head of the department to withhold the document or documents In the very nature of things when the original cannot be looked at and no secondary evidence is allowable the court will only be groping in the dark in regard to the nature of the document or the evidence The correct way of looking at the Indian statute therefore is to interpret in the manner which is in accord with the English law ie the court has not the power to override ministerial certificate against production It is permissible for the court to determine the collateral facts whether the official claiming the privilege is the person mentioned in section 123 or to require him to file proper affidavit or even to cross examine him on such matters which do not fall within the enquiry as to the nature of the document or nature of the injury but he may be cross examined as to the existence of the practice of the department to keep documents of the class secret but beyond that ministerial discretion should be accepted and it should neither be reviewed nor overruled For these reasons I concur in the decision that this appeal must be allowed SUBBA RAO J I have perused the judgments prepared by my learned brethren Kapur and Gajendragadkar JJ I agree with them in maintaining the claim of privilege in regard to the three items described as original orders passed by the PEPSU Government but regret my inability to agree with them in regard to the report of the Service Commission This appeal raises the question of the scope and content of the law of privilege attached to affairs of State and the procedure to be followed for ascertaining it The facts are fully stated in the said judgments and I need not restate them but I would prefer to give my own reasons for my conclusion It would be convenient at the outset to clear the ground The arguments at the Bar have covered a wide field but we are not concerned here with the law of privilege pertaining to the field of discovery and inspection of documents We are called upon only to decide its 443 scope during the trial of a suit when a witness who is summoned to produce a document claims privilege on the ground that the document relates to affairs of State I should not be understood to have expressed any opinion on the difficult question whether when the defendant is a State the Court is not entitled to inspect the documents under 0 XI rule 192 Code of Civil Procedure The question falls to be considered on a true construction of two of the provisions of the hereinafter called the Act namely sections 123 and 162 They read Section 123 No one shall be permitted to give any evidence derived from unpublished official records relating to any affairs of State except with the permission of the officer at the head of the department concerned who shall give or withhold such permission as he thinks fit Section 162 A witness summoned to produce a document shall if it is in his possession or power bring it to Court notwithstanding any objection which there may be to its production or to its admissibility The validity of any such objection shall be decided on by the Court The Court if it sees fit may inspect the document unless it refers to matters of State or take other evidence to enable it to determine on its admissibility If for such a purpose it is necessary to cause any document to be translated the Court may if it thinks fit direct the translator to keep the contents secret unless the document is to be given in evidence and if the interpreter disobeys such direction he shall be held to have committed an offence under section 166 of the Indian Penal Code 45 of 1869 The relevant parts of the foregoing sections may be summarized thus Section 123 prohibits the giving of any evidence derived from unpublished official records relating to affairs of State except with the permission of the officer at the head of the department while section 162 enjoins on a witness summoned to produce a document to bring it to Court and empowers 444 the Court to decide on the validity of any objection raised in respect of its production or admissibility The argument of the Advocate General is that the words affairs of State mean the business of State and therefore evidence derived from any unpublished official document relating to that business cannot be given as evidence except with the permission of the head of the department concerned and that the Court under section 162 of the Act must automatically accept the affidavit filed by the head of the department claiming such a privilege Learned counsel for the respondent on the other hand defines the words affairs of State only to take in documents whose production would be against public interest confines the power of the head of a department to permit or withhold the user of such a document in evidence and sustains the Court s power to decide the question of privilege in respect of such a document on relevant materials without inspecting the document The crucial words in section 123 are unpublished official records relating to any affairs of State Under that section no one shall be permitted to give any evidence derived from such records except with the permission of the officer at the head of the department concerned The words affairs of State have not been defined Though in section 123 the words used are affairs of State in section 162 the words used are matters of State There does not appear to be any practical difference between the two sets of words In Shorter Oxford Dictionary III edition 1956 matter has been defined as a thing affair concern and affairs of State as public business These Dictionary meanings do not help to decide the content of the said words The content of the said words therefore can be gathered only from the history of the provision It has been acknowledged generally with some exceptions that the was intended to and did in fact consolidate the English Law of Evidence It has also often been stated with justification that Sir James Stephen has attempted to crystallize the principles contained in Taylor s work into substantive propositions In case of doubt or 445 ambiguity over the interpretation of any of the sections of the Evidence Act we can with profit look to the relevant English common law for ascertaining their true meaning In English common law the words affairs of State do not appear The basis of the doctrine of Crown privilege is the injury to the public interests The Judicial Committee in Robinson vs State of South Australia 1 says at p 714 The principle of the rule is concern for public interest and the rule will accordingly be applied no further than the attainment of that object requires The House of Lords in Duncan vs Cammell Laird Co 2 restated the same idea when it observed that the State should not withhold the production of documents except in cases where the public interest would otherwise be damnified The earlier decisions of the English courts indicate that the Crown privilege was sustained only in regard to documents pertaining to matters of administration defence and foreign relations whose disclosure would be against the public interest see Home vs Lord F C Bentinck 3 Smith vs The East India Company 4 and Beatson vs Skene 5 The decisions of the High Courts in India over a long period of time consistently gave the same meaning to the said words It may also be stated that in and about the time when the Evidence Act was passed the concept of a welfare State had not evolved in India and as such the words affairs of State could not have been at that time intended to take in the commercial or the welfare activities of the State But when the words are elastic there is no reason why they should not be so construed as to include such activities also provided the condition of public injury is also satisfied It is therefore clear that the words affairs of State have acquired a secondary meaning namely those matters of State whose disclosure would cause injury to the public interest 1 2 3 4 1841 1 Ph 50 41 ER Chancery 550 5 446 The learned Advocate General contends that this construction if accepted would give a meaning to the provisions of section 123 of the Act which would be contrary to its tenor He classifies documents relating to affairs of State into noxious and innocuous documents and contends that documents whose disclosure would affect the public interest are noxious documents and that if the records which relate to the affairs of State mean only noxious documents the said construction would bring out a result directly opposite to that contemplated by the section When the section intends to prohibit the disclosure of noxious documents the argument proceeds the construction enables their disclosure if the head of the department permits it Shortly stated his contention is that the expression affairs of State that is business of State is the genus and the document the disclosure of which is against the public interest is the species and that the head of the department is only empowered to permit the disclosure of documents falling outside the said species This argument is apparently logical and rather attractive but it is an oversimplification of the problem and is based upon a disregard of the legislative history and the long track of decisions of this country If accepted it enlarges the scope of the said privilege to such an extent that in effect and substance the control of the admissibility of documents shifts from the Court to the State or its subordinate officers for every document relating to the business of State would be a privileged document unless the head of the department in his discretion permits the giving of evidence derived therefrom Nor can I accept the construction that an absolute privilege is attached to every noxious document ie to every State document the disclosure of which may cause injury to the public interest This is giving too narrow a meaning to the words public interest If the non disclosure of a particular State document is in public interest the impartial and uneven dispensation of justice by Courts is also in public interest They are indeed two aspects of public interest There is no conflict or dichotomy between the two In particular 447 circumstances one aspect may be paramount and in a different set of circumstances the other may be given precedence In the last analysis it is the question of balancing of the two aspects having regard to the circumstances of a particular case The head of a department may as well permit the disclosure of a document even if ordinarily its disclosure affects public interest if in his opinion the counter balancing circumstances are in favour of disclosure rather than non disclosure I cannot therefore give a wide meaning to the words records relating to affairs of State so as to take in every unpublished document pertain ing to the entire business of State but confine them only to such of the documents whose disclosure would be injurious to public interest The next question is who is empowered to decide the said question whether a particular document relates to affairs of State whether it is the Court or the State That is found in section 162 of the Act The learned Advocate General contends that the first part of section 162 makes a distinction between the production of a document and the admissibility of a document and that the first limb of the second part of the section provides for the production of a document and the second limb for its admissibility He illustrates his argument thus privilege may be raised in respect of production of a document on the ground that it pertains to matters of State or on the ground that it is inadmissible for want of registration deficiency of stamp or similar other defects The first clause of the second part of section 162 the argument proceeds enables the Court to inspect a document when the objection is to its production unless the document refers to a matter of State and the second clause thereof empowers the Court to take evidence only when the objection is not to its production but to its admissibility If this contention be accepted it will lead to an anomaly for grammatically construed the two limbs of the second part can be applied only to the question of admissibility and in that event on the hypothesis suggested by the learned counsel the Court will be entitled to look into a document even if it relates to a 448 matter of State if the objection is only to its production and not to its admissibility The more reasonable construction of the section is to give a wider meaning to the word admissibility so as to comprehend both production as well as admissibility for the question of admissibility arises only after the document is produced and a party seeks to get it admitted in evidence In this view the second part of section 162 can only mean that when an objection is raised either to the production or to the admissibility of a document a Court can inspect the document and if it thinks necessary other evidence may be taken to decide on the objection raised By the express terms of the section the Court is precluded from inspecting a document if it refers to matters of State But in other respects the jurisdiction of the Court to decide on the objection raised is not different from that it possesses in respect of other privileged documents If so understood there cannot be any ambiguity in the scope of section 162 of the Act It says in express terms that when an objection is raised to the production of a document or to its admissibility the validity of any such objection shall be decided by the court The second part of the section states the material on the basis of which such an objection can be decided It can either inspect the document or take other evidence to enable it to decide the validity of any objection raised The only limitation in the case of a document referring to matters of State is that the court cannot inspect it It is implicit in the limitation that in the case of documents pertaining to matters of State the court is precluded not only from inspecting the documents but also from permitting parties to adduce secondary evidence of their contents The other evidence must necessarily be de hors the contents of the documents Even in England there is no divergence of view on the question who has to decide when an objection to the production of a document is raised on the ground of privilege the validity of the objection In Robinson s case 1 the Judicial Committee observed at p 716 thus 1 449 The result of the discussion has been wherein effect he concludes that the Court has in those cases always had in reserve the power to inquire into the nature of the documents for which protection is sought and to require some indication of the nature of the injury to the State which would follow its production The existence of such a power is in no way out of harmony with the reason for the privilege provided that its exercise be carefully guarded so as not to occasion to the State the mischief which the privilege where it exists is designed to guard against The House of Lords in Duncan s case 1 also recognized this power though it whittled down its scope by holding that the judge had to accept automatically the affidavit filed by a minister Viscount Simon L C states at p 642 as follows Although an objection validly taken to production on the ground that this would be injurious to the public interest is conclusive it is important to remember that the decision ruling out such documents is the decision of the judge It is the judge who is in control of the trial not the executive but the proper ruling for the judge to give is as above expressed On the other hand in Scotland the inherent right of courts to override official discretion is recognized The House of Lords in Glasgow Corporation vs Land Board 2 gave a clear exposition of the law of that country Viscount Simonds derives the principle of the court s power from the fact that the fair administration of justice between subject and subject and the Crown is a public interest of higher order and the protection is the care of the courts Lord Radcliffe finds it on the doctrine that the interest of the Government for which the minister should speak with authority does not exhaust the public interest for another aspect of that interest is seen in the need that impartial justice should be done in courts of law These judgments of the high authority also recognized the fact that it is the court that has to decide an objection 1 2 57 450 raised by the State on the ground of privilege There is a strong current of Indian decisions taking the same view see Khawja Nazir Ahmad vs Emperor 1 re Mantubhai Mehta 2 B M D Chamarbaugwala vs Y R Parpia 3 Lijat Ali Talukdar vs Emperor Bhaiya Saheb vs Ramnath Rampratap Bhadupote Public Prosecutor Andhra vs Damera Venkata Narasayya Lakhuram Hariram vs The Union of India Tilka vs State 8 In a few cases a different view is expressed It may therefore be stated without contradiction that the preponderance of authority is in favour of a court deciding the question of State privilege Some objections are raised in decided cases in England and restated in Duncan s case 9 against conferring such a power on courts Apart from the fact that the statute expressly confers such a power there are no merits in the objections raised The objections are i the judges are not well qualified to appreciate the highly technical matters which may arise with regard to some kinds of State secrets ii if a judge is allowed to decide on evidence the question of privilege it may prejudice a fair trial and iii it is a first principle of justice that the judge should have no dealings on the matter in hand with one litigant save in the presence of and to the equal knowledge of the other The objections raised have no substance The first objection if accepted disqualifies a judge from deciding complicated technical questions that arise before him A judge is trained to look at things objectively and can certainly decide without inspecting the documents on the material supplied whether the production of a document will affect the public interest having regard to the circumstances of each case Nor are there any merits in the second objection In the words of Sir C K Allen a judge worthy of his office can put out of his mind all issues except those which are raised and decided by the forensic process It is common place that a judge is trained to decide a case only on 1 ILR 2 IL R 3 AIR 1950 Bom 4 ILR 5 ILR 1940 Nag 240 6 ILR 7 ALR 1960 Pat 8 AIR 1960 All 543 9 1942 AC 624 451 the admissible evidence actually adduced before him and not on any extraneous considerations The third objection also has no basis in fact So long as a judge takes care to rule out any question on the contents of a document in respect whereof privilege is claimed he can certainly decide the question in the presence of both the parties The objections have therefore no substance On the other hand there is every reason why the duty to decide on the question of State privilege must be left to a judge and not to the State That is the reason why the legislature rightly conferred that power on the court A judge is as much a part of a department of the State as an executive officer But unlike the executive officer a judge is trained to decide cases objectively not only between indi viduals inter se but also between the State and individuals He can therefore be trusted to decide impartially on the question whether the production of a document in a case will affect the public interest State documents in a secretariat I presume will be looked into by many officers dealing with the said documents sometimes from the lowest to the highest in the department It would be unrealistic to suggest that the disclosure of a State document to any one of those officers would not affect the public interest whereas the decision of its character by a judge would do so It is therefore the duty of the court whenever an objection is raised on the ground of State privilege to decide on relevant evidence whether the document relates to affairs of State Even if the wide construction of the words affairs of State namely business of State be accepted the result will not be different The section says that no one shall be permitted to give any evidence derived from unpublished official records relating to affairs of State except with the permission of the officer at the head of the department concerned The expression affairs of State in its ordinary significance is of the widest amplitude and will mean the entire business of State It takes in the routine day to day administration and also highly confidential acts involving defence and foreign relations and also in modern times 452 the multifarious activities of a welfare State The object of the section is simply to prohibit the use of undisclosed documents of State in evidence by persons who in the course of their duties deal with or look into those documents without the permission of the officer at the head of the department concerned The words used in the section as he thinks fit confer an absolute discretion on the head of the department to give or withhold such permission The section does not lay down that the head of the department concerned should refuse permission only if the disclosure injures public interests though ordinarily he may refuse permission on such matters affecting the State One can visualize a situation when the officer in exercise of his absolute discretion refuses to give permission for the use of not only noxious documents but even of innocuous ones The only limitation on his power is his reason and experience The absolute discretion is capable of giving rise to mistake or even conscious abuse The section does not really involve any doctrine of State privilege but is only a rule of commonsense and propriety If the officer gives permission there is an end of the matter but if he refuses the party affected may take out necessary summons to the State Government to produce the document The State Government may depute one of its officers to produce the document in court Then only the occasion for raising the question of privilege arises and section 162 governs that situation An overriding power in express terms is conferred on a court under section 162 of the Act to decide finally on the validity of the objection raised on the ground of privilege The court will disallow the objection if it comes to the conclusion that the document does not relate to affairs of State or that the public interest does not compel its non disclosure or that the public interest served by the administration of Justice in a particular case overrides all other aspects of public interest This conclusion flows from the fact that in the first part of section 162 of the Act there is no limitation on the scope of the court s decision though in the second part the 453 mode of enquiry is hedged in by conditions In England in the absence of a provision or a rule of common law similar to that of section 162 there was room for conflict of views on the scope of the court s power On the other hand in Scotland the common law corresponding to section 162 was invoked and the House of Lords recognized the inherent power of the Court to reject a claim of Privilege if the Court comes to a conclusion that the paramount interest of the administration of justice demands or compels such a disclosure Section 162 of the Act in terms confers a similar power on courts and though it may have to be used with circumspection it is a real and effective power There is no conflict between section 123 and section 162 of the Act the former confers a power on a head of a department to withhold permission from the stand point of State administration whereas section 162 recognizes the overriding power of a court in the interest of higher public interest to overrule the objection of privilege The next point is what is the procedure to be followed by a judge for deciding on the said objection When an officer of the State is summoned as a witness to produce a document if the State seeks to take a plea of privilege then it is the duty of the minister in charge of the department concerned to file an affidavit at the first instance The affidavit so filed shall ex facie show that the minister concerned has read and considered each of the documents in respect of which the privilege is claimed It shall also contain the general nature of the document and the particular danger to which the State would be exposed by its production If the court is not satisfied with the contents of the affidavit to enable it to decide whether the document in question refers to the affairs of State it can summon the minister to appear as a witness In effect and substance the said procedure has been suggested in Robinson s case 1 at p 722 The same procedure is also indicated in Duncan s case 2 at p 638 In the second case above referred Viscount Simon LC says at p 638 thus 1 1931 AC 704 2 454 If the question arises on subpoena at the hearing it is not uncommon in modern practice for the minister s objection to be conveyed to the court at any rate in the first instance by an official of the department who produces a certificate which the minister has signed stating what is necessary I see no harm in that procedure provided it is understood that this is only for convenience and that if the court is not satisfied by this method it can request the minister s personal attendance It may be suggested that this procedure may cause some inconvenience to the minister concerned But if one realizes that every act of the exercise of the right of privilege detracts from the fair disposal of a case before the court and that the administration of justice is also part of the general conduct of the affairs of any State and that its impartiality and purity are as important as any other public interests one will also appreciate that the requirement of the personal attendance of a minister if necessary to support his affidavit would be to a large extent a guarantee against unjust objections that may other wise be raised It is suggested that an affidavit of the head of a department such as the Secretary would do as well as that of a minister but there is an essential distinction between a Secretary and a minister the former may be frequently tempted to take the opposite view particularly in cases where a claim against the State seems to him to be harsh or unfair while the latter being the political head subject to parliamentary control may be expected if he carefully scrutinizes a particular document not to take such objection which obstructs the cause of justice unless absolutely necessary I would therefore hold that the affidavit which states that a particular document relates to affairs of State must be sworn to only by a minister in charge of the department wherefrom the document or documents are summoned The next point is what are the well established rules which help the court to decide whether a particular document pertains to affairs of State or not The following relevant rules may be extracted from 455 the decision of the Judicial Committee in Robinson s case 1 1 the privilege is a narrow one most sparingly to be exercised 2 the principle of the rule is concern for public interest and the rule will accordingly be applied no further than the attainment of that object requires 3 as the protection is claimed on the broad principle of State policy and public convenience the papers protected as might have been expected have usually been public official documents of a political or administrative character 4 its foundation is that the information cannot be disclosed without injury to the public interests and not that the documents are confidential or official which alone is no reason for their non production 5 even in the case of documents relating to the trading commercial or contractual activities of a State it is conceivable that there may be some plain overruling principle of public interest concerned which cannot be disregarded though in times of peace such cases must be very rare The House of Lords in Duncan s case 2 has laid down the following negative and positive tests for deciding the question of privilege of the State The negative tests are 1 it is not a sufficient ground that the documents are State documents or official or marked confidential 2 it would not be a good ground that if they were produced the consequences might involve the department or the government in parliamentary discussion or in public criticism or might necessitate the attendance as witnesses or otherwise of officials who have pressing duties elsewhere 3 neither would it be good ground that production might tend to expose a want of efficiency in the administration or tend to lay the department open to claims of compensation The positive test is where the public interest would otherwise be damnified for example where disclosure would be injurious to national defence or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service The last test has given rise to mild but definite protests within the limits of judicial propriety by the learned judges who 1 2 456 had the occasion to deal with the question of privilege and to vehement protests from jurists Sir C K Allen in his book Law and Orders 2nd edition has observed at p 384 thus Everybody is agreed that public security and foreign relations are necessary heads of privilege Both are wide in scope and it is doubtful whether any other head needs to be specified It would be of great advantage if statute could put an end to the pernicious doctrine that privilege can be claimed for classes of documents The argument of the learned Advocate General is based upon an apprehension which in my view is unfounded that the court may always refuse the affidavit of a minister and insist on his personal attendance The unpublished documents relating to defence foreign relations and other documents of great public importance rarely come before municipal courts Occasionally documents of day to day administration of the State may be relevant evidence but very often documents pertaining to mercantile or welfare activities of the State would be summoned to establish a particular claim In the case of documents of undoubted public importance when the minister swears to an affidavit that in his discretion their production is against public interest it may reasonably be expected that the judge would accept the statement But the real difficulty is in the case of other documents where the interests of private individuals and the State come into conflict the judge should be in a position to examine the minister and others to ascertain by evidence collateral to the contents of the documents whether the assertion of the minister is justi fied The aforesaid discussion yields the following propositions 1 under section 162 of the Evidence Act the court has the overriding power to disallow a claim of privilege raised by the State in respect of an unpublished document pertaining to matters of State but in its discretion the court will exercise its power only in exceptional circumstances when public interest demands that is when the public interest served by the 457 disclosure clearly outweighs that served by the non disclosure One of such instances is where the public interest served by the administration of justice in a particular case overrides all other aspects of public interest 2 The said claim shall be made by an affidavit filed by the minister in charge of the department concerned describing the nature of the document in general and broadly the category of public interest its non disclosure purports to serve 3 Ordinarily the court shall accept the affidavit of a minister but in exceptional circumstances when it has reason to believe that there is more than what meets the eye it can examine the minister and take other evidence to decide the question of privilege 4 Under no circumstances can a court inspect such a document or permit giving of secondary evidence of its contents 5 Subject to the overriding power of the court to disallow the claim of privilege in exceptional cases the following provide working rules of guidance for the courts in the matter of deciding the question of privilege in regard to unpublished documents pertaining to matters of State a records relating to affairs of State mean documents of State whose production would endanger the public interest b documents pertaining to public security defence and foreign relations are documents relating to affairs of State e unpublished documents relating to trading commercial or contractual activities of the State are not ordinarily to be considered as documents relating to affairs of State but in special circumstances they may partake of that character d in cases of documents mentioned in c supra it is a question of fact in each case whether they relate to affairs of State or not in the sense that if they are disclosed public interest would suffer Bearing the aforesaid principles in mind I shall construe the nature of the documents in respect of which privilege is claimed in the present appeal The so called order of the PEPSU Government is really the minutes recorded in the course of cabinet discussions Under article 1633 of the Constitution the question 58 458 whether any and if so what advice was tendered by ministers to the Governor shall not be inquired into in any court In view of the constitutional protection and the reason underlying such protection I hold that in the present case the district court was right in sustaining the claim of privilege in regard to the said document In regard to the report of the Service Commission on the assumption that it is a relevant document I cannot see how public interest suffers by its disclosure Service Commission is a statutory body constituted with definite powers conferred on it under the Constitution Under article 3203c of the Constitution the State Public Service Commission shall be consulted on all disciplinary matters affecting a person serving under the Government of a State This is one of the constitutional protections conferred on public servants I cannot visualize how public interest would suffer if the report submitted by the Service Commission to the Government is disclosed and how the disclosure of such a report prevents the Service Commission from expressing its views on any other case in future passes my comprehension It may expose the Government if it ignores a good advice but such an exposure is certainly in public interest The Constitution does not put a seal of secrecy on the document nor in my view public interest demands such secrecy In a conflict between the administration of justice and the claim of privilege by the State I have no hesitation to overrule the claim of privilege Before closing I must notice one fact In this case the Chief Secretary filed an affidavit But in my view the minister should have done it The respondent did not object to this either in the district court or in the High Court In the circumstances I would not reject the claim of privilege on the basis of this procedural defect In the result I would allow the appeal in respect of the minutes of the cabinet and dismiss it in other respects As the parties have succeeded and failed in part I direct them to bear their own costs throughout 459 BY COURT In accordance with the opinion of the majority this appeal is allowed the order passed by the High Court is set aside and that of the trial court restored with costs throughout Appeal allowed	While this appeal by special leave relating to an industrial dispute was pending in this Court a Director of the appellant employer and a representative of the respondents employees made an application to the Court praying that an order might be passed in terms of a compromise since an agreement was alleged to have been entered into by the appellants and the respondents Some of the respondents contested this compromise and the court sent issues to the Tribunal for finding whether the alleged com promise actually took place between the parties and if so was it valid The Tribunal returned findings to the effect that the compromise did actually take place and was valid Those findings were contested in the appeal Held that a compromise agreement seeking to settle an industrial dispute which was still pending decision in this Court would not contravene the provisions of section 23 of the Payment of Wages Act which contemplated rights not likely to be modified or reversed in any judicial proceedings The procedure prescribed by section 6 C of the U P and the provisions thereof did not affect the powers of this Court or the competence of the parties to amicably settle a dispute pending before it The procedure for obtaining an order in terms of the com promise entered into between the parties pending the appeal in this Court is prescribed by its own rules and the provisions of section 2t of the U P and rule 51 of the Rules made thereunder have no application to such case