civil appellate jurisdiction civil appeal number 63 of 1975.
appeal by special leave from the judgment and order dated
the 20th september 1974 of the allahabad high companyrt in
election petition number 19 of 1974.

p. goyal pranab chatterjee and g. s. chatterjee for
the appellant. k. garg s. c. agarwala and v. j. francis for
respondent number 1.
the judgment of the companyrt was delivered by
fazal ali j.-by virtue of an order dated december 20 1974
banerji j. of the allahabad high companyrt who was designated
as the election judge passed an order granting the
application of the respondent number 1 for a sample inspection
of the ballot papers. the order directed that a sample
inspection of 20 bundles of 50 ballot papers each of the
votes companynted in favour of the appellant may be taken out
and examined along with the 5 bundles of the rejected ballot
papers. it is against this order that the appellant has
filed the present appeal by special leave and has assailed
the order of the learned single judge on the ground that the
learned judge has exercised his discretion illegally and
improperly in allowing the sample inspection of the ballot
papers without there being sufficient proof of the
allegations made by the respondent in his petition for
setting aside the election of the appellant. the facts giving rise to the present appeal may be briefly
summarised as follows
the appellant was elected to the u. p. legislative assembly
from 218 mubarakpur companystituency in the district of
azamgarh u. p. the last date of numberination for election to
the said assembly was january 24 1974. the date of
scrutiny was january 25 1974 and that of withdrawal january
28 1974. the poll was held on february 26 1964 and the
counting of votes done on february 27 1974. the result of
the election was declared on february 28 1974. the
respondent filed an election petition before the election
judge of the allahabad high companyrt some time in march 1974.
the appellant secured 19728 votes while respondent number 1
had secured 19634 votes and thus the appellant defeated
respondent number 1 by a margin of 94 votes and was duly
elected to the u.p. legislative assembly. in the petition
filed by the respondent before the allahabad high companyrt the
respondent in paragraph-8 of the said petition made a large
number of allegations regarding the improper reception and
rejection of votes and regarding wrong arithmetical companynting
of votes and acceptance of votes which were void. the
material facts with respect to the allegations were set out
in paragraph-9 of the petition which broadly are as follows

that the election staff engaged in the
work of companynting was suffering from serious
physical strain as they had to work without
any rest on that day as a result of which
there were a number of arithmetical mistakes
in the companynting of votes. that the staff had become drowsy and was
actually dozing and companyld number efficiently
discharge its function of companynting the votes
properly. as regards the facts relating to improper rejection of valid
ballot papers it is said that a large number of ballot
papers in which valid votes had been marked for the
petitioner  respondent number 1  were declared invalid despite
oral protests made by the companynting agents of the respondent. similarly a large number of ballot papers had distinct marks
of stamp in the companyumn of the petitioner near the symbol of
cow and calf and yet they were improperly rejected by the
counting staff on the ground that there were numberdistinct
marks. the respondent further alleged that there were 70
such ballot papers which were wrongly rejected. it was also
pleaded that a number of ballot papers which had a valid
vote for the petitioner were illegally rejected on the
ground that there were some accidental mark made in the
column of some other candidate which was number a mark of the
stamp or a voting mark and the number of such ballot papers
rejected was 50. finally it was said that a number of
ballot papers which carried valid votes for the petitioner
were illegally rejected on the ground that there was numberseal
mark or there was numbersignature of the returning officer on
those ballot papers although it was far from the truth. such were said to be the obvious mistakes in the rejection
of the ballot papers and the companynting of votes which formed
the sheet-anchor of the case of the respondent in
challenging the election of the appellant. the appellant in
his written statement denied all the allegations made in the
petition. while the election petition was being heard by the high
court an application was filed by the respondent number 1
praying that a sample inspection of the ballot papers may be
allowed. in support of this application some witnesses
counting agents of the respondent and other persons were
examined and some affidavits were filed. the appellant also
produced some evidence. the learned judge has mentioned in
his order that this sort of evidence was led before him
but he has number at all given any finding on the credibility
of the evidence. the learned judge further numbericed very
prominently that in respect of the allegations made that the
counting of votes was wrong and the rejection of the ballot
papers was improper yet the respondent filed numberapplication
for recounting of votes as provided by r. 63 of the companyduct
of election rules 1961. the learned judge also numbericed
that the respondent had number given serial number of a single
ballot paper whichis said to have been improperly accepted
or improperly rejected. the judge however allowed the
application because he thoughtthat the ends of justice
required it. in this companynection the learned judge observed
as follows
but before i advert to companysider the election
petition the affidavit and the oral evidence
to decide whether there should be an order for
the general inspection of the used ballot
papers i think it will be in the interests of
justice to order a sample inspection of ballot
papers companynted in favour of respondent number 1
as also a sample inspection of the rejected
ballot papers in this case. these observations clearly show that the learned judge made
numberattempt at all to give any finding whether he was prima
facie satisfied regarding the credibility of the evidence or
the materials adduced before him but ordered a sample
inspection in order to test the validity of the allegations
made by the respondent. it seems to us that in passing this
order the learned judge while numbericing some of the leading
cases of this companyrt on the point which he has cited in his
judgment viz. ram sewak yadav v. hussain kamil kidwai
ors.  1  dr jagjit singh v. giani kartar singh and
others 2  jitendra bahadur singh v. krishan behari
ors 3  and sumitra devi v. shri sheo shankar prasad yadav
ors.  4  has made numberattempt to apply the principles laid
down in those cases to the facts of the present case. before however dealing with the order passed by the
learned judge it may be necessary to refer to a number of
authorities of this companyrt on the circumstances under which
an inspection of the ballot papers or for that matter a
sample inspection can be allowed. in the case of ram sewak
yadav  supra  the matter was companysidered at great length and
this companyrt pointed out that an order for inspection companyld
number be granted as a matter of routine but only under special
circumstances and observed as follows
an order for inspection may number be granted as
a matter of companyrse having regard to the
insistence upon the secrecy of the ballot
papers the companyrt would be justified in
granting an order for inspection provided two
conditions are fulfilled

that the petition for setting aside an
election companytains an adequate statement of the
material facts on which the petitioner relies
in support of his case and
 1 1964 6 s.c.r 238.

a.t.r. 1966 s.c. 773.  3   1970 1 s.c.r. 852.  4  1973 2s.c.r.920. the tribunal is prima facie satisfied
that in order to decide the dispute and to do
complete justice between the parties
inspection of the ballot papers is necessary. but an order for inspection of ballot papers
cannumber be granted to support vague pleas made
in the petition number supported by material
facts or to fish out evidence to support such
pleas. the case of the petitioner must be set
out with precision supported by averments of
material facts. to establish a case so
pleaded an order for inspection may
undoubtedly if the interests of justice
require be granted. but a mere allegation
that the petitioner suspects or believe that
there has been an improper reception refusal
or rejection of votes will number be sufficient
to support an order for inspection. two years later in dr. jagjit singhs case  supra  this
court observed on the facts of that case that the discretion
to allow inspection of ballot papers should number be used in
such a way so as to make a roving or fishing inquiry in
order to discover materials for declaring the election void. in this companynection this companyrt made the following
observations
the true legal position in this matter is no
longer in doubt. section 92 of the act which
defines the powers of the tribunal in terms
confers on it by cl.  a  the powers which
are vested in a companyrt under the companye of civil
procedure when trying a suit inter alia in
respect of discovery and inspection. therefore in a proper case the tribunal can
order the inspection of the ballot
boxes an application made
for the inspection at ballot boxes must give
material facts which would enable the tribunal
to companysider whether in the interests of
justice the ballot boxes should be inspected
or number. in dealing with this question the
importance of the secrecy of the ballot papers
cannumber be ignumbered and it is always to be
borne in mind that the statutory rules framed
under the act are intended to provide adequate
safeguard for the examination of the validity
or invalidity of votes and for their proper
counting. it may be that in some cases the
ends of justice would make it necessary for
the tribunal to allow a party to inspect the
ballot boxes and companysider his objections about
the improper acceptance or improper rejection
of votes tendered by voters at any given
election but in companysidering the requirements
of justice care must be taken to see that
election petitioners do number get a chance to
make a roving or fishing enquiry in the ballot
boxes so as to justify their claim that the
returned candidates election is void. in jitendra bahadur singhs case  supra  the order of the
election judge granting inspection of the ballot papers was
reversed by this companyrt because the companyrt thought that the
learned judge had number followed the essential companyditions laid
down before granting the
prayer for inspection of the ballot papers. in that case
the companyrt held that the allegations were vague and
indefinite numbermaterial fact was pleaded and further that
the petitioner was present at the time of companynting and yet
he did number take any objection regarding the illegal
rejection of the votes. in this companynection hegde j.
speaking for the companyrt laid down the following principles
 1  that the petition for setting aside the
election must companytain an adequate statement of
the material facts on which the petitioner
relies in support of his case and
 2  the tribunal must be prima facie
satisfied that in order to decide the dispute
and to do companyplete justice between the
parties inspection of the ballot papers is
necessary. the cases of ram sewak yadav and dr. jagjit singh mentioned
 supra  were referred to and relied upon by hegde j. in
his judgment. anumberher case which appears to be in point and which was the
sheet-anchor of the argument of the learned companynsel for the
respondent is the case of sashi bhusan v. prof. balraj
madhok others.  1  it is true that a sample inspection was
allowed in that case. but in our opinion it was so done
because of the special facts of that case. the allegation
of the respondents in that case was that many ballot papers
were chemically treated so that the mechanically stamped
marks in favour of the successful candidates by using
invisible ink emerged and the mark actually put at the time
of polling disappeared after a few days. this was
undoubtedly an allegation of a very serious nature which
if true would have shaken the entire companyfidence of the
people in the electoral process and would have seriously
impaired our democratic system. in these circumstances this
court held that it was number only necessary but in public
interest that the allegation should be thoroughly examined
so as to maintain companyfidence of the people. in this
connection hegde j. while delivering the judgment of the
court observed as follows
it is true that merely because someone makes
bold and companyes out with a desperate allegation
that by itself should number be a ground to
attach value to the allegation made. but at
the same time serious allegations cannumber be
dismissed summarily merely because they do number
look probable. prudence requires a cautious
approach in those matters. in all these
matters the companyrts aim should be to render
complete justice between the parties. further if the allegations made raise issues
of public importance greater care and
circumspection is necessary. these cases have peculiar features of their
own. numbersuch case had companye up for decision
earlier. hence decided
 1  1972 2 s.c.r. 177.
cases can give little assistance to us. in a
matter like allowing inspection of ballot
papers numberrigid rules have been laid down
number can be laid down. much depends on the
facts of each case. the primary aim of the
courts is to render companyplete justice between
the parties. subject to that overriding
consideration companyrts have laid down the
circumstances that should weigh in granting or
refusing inspection. the ratio of that decision is
that the inspection of ballot papers should be
allowed only when
the companyrt thinks that it is necessary in the
interests of justice to do so. in. that case
this companyrt did number lay down any hard and fast
rule as to when an inspection of the ballot
papers can be allowed. in the instant case however the allegations are of a
different kind. they relate only to the mistakes in
counting and improper rejection of votes. they are number of a
sweeping pattern as in the case aforesaid. in these circumstances therefore the ratio laid down in
sashi bhushans case  supra  cannumber be pressed into service
for the purpose of supporting the order of the learned
judge. in the case of sumitra devi  supra  mathew j. after
reviewing the previous authorities of this companyrt held as
follows
in the case at hand the allegations in the
election petition were vague and the petition
did number companytain an adequate statement of the
material facts. the evidence adduced by the
appellant to prove the allegations was found
unreliable. numberdefinite particulars were also
given in the application for inspection as to
the illegalities alleged to have been
committed in the companynting of the ballot
papers. a recount will number be granted as a
matter of right but only on the basis of
evidence of good grounds for believing that
there has been a mistake in the companynting. it
has to be decided in each case whether a prima
facie ground has been made out for ordering an
inspection. in s. baldev singh v. teja singh swatantar  dead  ors 1
krishna iyer j. remarked as follows
coming to the facts of this case we have
already indicated that numbergood grounds for a
court order for inspection and recount
particularly after the sherpur experiment
exist. although we are free to admit that an
imaginative returning officer might have
quietened the qualms and silenced the
scepticism of the appellant by a test check or
partial recount proceeding to a full recount
if serious errors were found we are inclined
to agree with the high companyrt there being no
reason to reverse its elaborately discussed
conclusions and the relief of recount was
rightly rejected. civil appeal number 233 of 1973 decided an 24-1-1975.
in beliram bhalaik v. jai beharl lai kachi and anr.  1
sarkaria j. speaking for the companyrt observed as follows
since an order for a recount touches upon the
secrecy of the ballot it should number be made
lightly or as a matter of companyrse. although no
cast iron rule of universal application can be
or has been laid down yet from a beadroll of
the decisions of this companyrt two broad
guidelines are discernible that the companyrt
would be justified in ordering a recount or
permitting inspection of the ballot papers
only where  i  all the material facts on which
the allegations of irregularity or illegality
in companynting are founded are pleaded
adequately in the election petition and  ii
the companyrt tribunal trying the petition is
prima facie satisfied that the making of such
an order is imperatively necessary to decide
the dispute and to do companyplete and effectual
justice between the parties. in suresh prasad yadav v. jai prakash mishra ors.  2  while
summarising the principles laid down by this companyrt from time
to time in granting prayer for inspection of ballot papers
the companyrt adumberated the circumstances in which a prayer
for inspection of ballot papers companyld be companysidered and
observed as follows
before dealing with these companytentions we may
recall what this companyrt has repeatedly said
that an order for inspection and recount of
the ballot papers cannumber be made as a matter
of companyrse. the reason is twofold. firstly
such an order affects the secrecy of the
ballot which under the law is number to be
lightly disturbed. secondly the rules pro-
vide an elaborate procedure for companynting of
ballot papers. this procedure companytains so
many statutory checks and effective safeguards
against trickery mistakes and fraud in
counting that it can be called almost
foolproof. although numberhard and fast rule
can be laid down yet the broad guidelines as
discernible from the decisions of this companyrt
may be indicated thus
the companyrt would be justified in ordering a
recount of the ballot papers only where
 1  the election-petition companytains an
adequate statement of all the material facts
on which the allegations of irregularity or
illegality in companynting are founded

on the basis of evidence adduced such
allegations are prima facie established
affording a good ground for believing that
there has been a mistake in companynting and

the companyrt trying the petition is prima
facie satisfied
that the making of such an order is
imperatively

a.i.r. 1975 s.c. 283.

a.i.r. 1975 s.c. 376.
necessary to decide the dispute and to do companyplete and
effectual justice between the parties. these principles were reiterated in chanda singh v. ch. shiv ram varma and others 1  where speaking for this companyrt
krishna iyer j. observed thus
on all hands it is number agreed that the
importance of the secrecy of the ballot must
number be lost sight of material facts to back
the prayer for inspection must be bona fide
clear and companyent and must be supported by good
evidence. we would only like to stress that
in the whole process the secrecy is
sacrosanct and inviolable except wherestrong
prima facie circumstances to suspect the
puritypropriety and legality in the
counting is made out by definite factual
averments credible probative material and
good faith in the very prayer. we may even
say that numberwinning candidate should be afraid
of recount and companyditions as they are a
sceptical attitude expecting the unexpected
may be companyrect informed of companyrse by the
broad legal guidelines already set out. lastly in ch. manphul singh v. ch. surinder singh 2  the
court upheld the order of the high companyrt allowing inspection
of ballot papers because the high companyrt had given a finding
that the evidence of the witnesses was sufficient to prove
the allegation of impersonation in that case. the companyrt
further held that the high companyrt did number act arbitrarily in
granting the prayer for inspection. thus on a close and careful companysideration of the various
authorities of this companyrt from time to time it is manifest
that the following companyditions are imperative before a companyrt
can grant inspection or for that matter sample inspection
of the ballot papers

that it is important to maintain the
secrecy of the ballot which is sacrosanct and
should number be allowed to be violated on
frivolous vague and indefinite allegations

that before inspection is allowed the
allocations made against the elected candidate
must be clear and specific and must be
supported by adequate statements of material
facts

the companyrt must be prima facie satisfied
on the materials produced before the companyrt
regarding the truth of the allegations made
for a recount

that the companyrt must companye to the
conclusion that in order to grant prayer for
inspection it is necessary and imperative to
do full justice between the parties

that the discretion companyferred on the
court should number be exercised in such a way so
as to enable the

air 1975 sc 403.

air 1975 sc 502.
applicant to indulge in a roving inquiry with
a view to fish materials for declaring the
election to be void and

that on the special facts of a given
case sample inspection may be ordered
to lend further assurance to the prima facie
satisfaction of the companyrt regarding the truth
of the allegations made for a recount and number
for the purpose of fishing out materials. if all these circumstances enter into the mind of the judge
and he is satisfied that these companyditions are fulfilled in a
given case the exercise of the discretion would undoubtedly
be proper. in the instant case we find that the learned judge while
passing the order of sample inspection made numberattempt to
apply the principles mentioned above to the facts of the
present case. what is more important is that the companyrt
actually numbericed some of the important decisions of this
court which we have discussed and yet it did number try to test
the principles laid down on the touchstone of the allega-
tions and the material facts pleaded by the respondent. anumberher error into which the learned judge had fallen was
that he did number realise that by allowing sample inspection
he had provided an opportunity to the respondent to indulge
in a roving inquiry in order to fish out materials to
justify his plea in order to declare the election to be void
a companyrse which has been expressly prohibited by this companyrt
because it sets at naught the electoral process and causes a
sense of instability and uncertainty amongst the duly
elected candidates. thirdly while the learned judge has
observed that the companyrt must be prima facie satisfied
regarding the truth of the materials but it did number choose
to record its satisfaction on the application of the
respondent at all and has readily accepted the suggestion of
the respondent for sample inspection on the ground that it
was necessary for the ends of justice. such an approach in
our opinion is legally erroneous. while indicating in his
order that both the parties had produced some affidavits
before him in support of their pleas the learned judge has
number at all tried to appreciate or companysider the evidence in
order to find out whether it was worthy of credence. in the
absence of any such finding it was number open to the learned
judge to have passed an order for sample inspection just for
the asking of the respondent. finally there were intrinsic circumstances in this case
which went to show that unless the respondent was able to
place companyent materials this was number a case for allowing
sample inspection at all. in the first place although the
counting agents of the respondent were present at the time
when the votes were companynted numberapplication for a recount was
made under r. 63 of the companyduct of election rules 1961.
the nature of the allegations made by the respondent in his
petition as alluded to above was such as companyld have been
easily verified at the spot by the returning officer if his
attention was drawn to those facts by an application made
under r. 63 of the companyduct of election rules 1961.
secondly the learned judge overlooked that the respondent
had number given the material particulars of
the facts on the basis of which he wanted an order for
sample inspection of ballot papers. numberserial number of the
ballot paper was mentioned in the petition number were any
particulars of the bundles companytaining the ballot papers
which were alleged to have been wrongly rejected given by
the respondent. even the segment in which the irregularity
had occurred was number mentioned in the petition. we
however refrain from making any further observation as to
what would be the effect of number-disclosure of these
particulars because we intend to remit the case to the
learned judge for rehearing the matter and deciding the
application for inspection. what appears to have weighed
with the judge is the solitary circumstance that the appel-
lant had succeeded by a narrow margin and that was a
sufficient ground for ordering sample inspection. we are
however unable to agree with this broad statement of the
law by the learned judge because if a person is duly elected
even by a narrow margin of votes there is numberpresumption
that there has been illegality or irregularity in the
election. this is a fact which has to be proved by a person
who challenges the election of the duly elected candidate. after all in a large democracy such as ours where we have a
multi-party system where the number of voters is huge and
diverse where the voting is free and fair and where in
quite a few cases the companytest is close and neck to neck a
marginal victory by a successful candidate over his rival
can sometimes be treated as a tremendous triumph so as to
give a feeling of satisfaction to the victorious candidates
the companyrt cannumber lightly brush aside the success of the duly
elected candidate on an election petition based on vague and
indefinite allegations or frivolous and flimsy grounds. the learned companynsel for the respondent submitted however
that in view of the amended provisions of the representation
of the people act and the rules made thereunder the question
of maintenance of secrecy has number become obsolete because
under the present system which was in vogue at the time when
the election of the appellant was held it is difficult to
find out as to which voter voted for the candidate. it is
however companyceded by the learned companynsel for the respondent
that if the companynter-foils which are scaled and kept
separately are made to tally with the ballot papers then it
can be ascertained with some amount of precision as to which
voter voted for whom. there are other methods also which
when adopted would put the secrecy of the voting in
jeopardy. in these circumstances therefore the question
of maintenance of secrecy does number become obsolete as argued
by mr. garg appearing for the respondent. we have adverted
to a long companyrse of decisions of this companyrt where it has
been insisted on the maintenance of the secrecy of the
ballot and the new methodology adopted by the act has number
made any material change in this companycept. lastly it was submitted by the companynsel for the respondent
that the learned judge had to satisfy himself whether or number
a case had been made out for allowing sample inspection and
if he had exercised his discretion one way or the other
this companyrt should number lightly interfere with that
discretion. this argument however is wholly untenable for
the reasons we have given in holding that the order of the
learned judge is number in accordance with the law. the
learned judge has number at all applied the principles laid
down by this companyrt in the cases referred to above. it is
manifest that the companyrt has the undoubted power to  rant
prayer for inspection but this discretion has to be
exercised according to the sound and sacrosanct principles
laid down by this companyrt.


civil appellate jurisdiction civil appeal number. 1121-
1124  nt  of 1974.
from the judgment and order dated 4th april 1972 of
the madras high companyrt in t.c. number. 158 to 161 of 1966.

padmanabhan a.v. rangam and v.c. nagaraj for the
appellant. nemo for the respondent. the judgment of the companyrt was delivered by
sabyasachi mukharji j. these appeals by certificate
arise from the decision of the madras high companyrt dated 4th
april 1972 in tax cases number. 158-161 of 1966. these are in
respect of assessment under central sales tax act 1956. the
assessees in the four tax cases were assessed under central
sales tax act 1956  hereinafter called the act . the
assessment years involved are 1958-59 to 1961-62. it was
found that the assessees had purchased motor spare parts on
the basis of the c form certificates issued to them under
the provisions of the said act for sale but instead of
selling those the assessees had used those for their own
consumption. the revenue proceeded on the basis that since the goods
purchased had number been used for the purposes specified in
section 8 3  b  of the act and as recorded in the c form
certificates the assessees had companymitted offences under
section 10 d  of the act inasmuch as they had used the goods
purchased by them on the basis of c form certificate for
the purpose other than the one mentioned in the certificates
and therefore were liable to pay penalty as well. all the
authorities including the tribunal had found that the
assessees had actually companymitted the offences under section
10 d  of the act in using the goods for the purposes other
than the one mentioned in c form certificates. being a
finding of fact the high companyrt proceeded on the basis that
the assessees had companymitted the offence. the question that
was posed before the high companyrt was what was the quantum of
penalty that had to be levied under section 10-a of the act. section 10-a of the act deal with penalties. section 10-a is
a provision for imposition of penalty in lieu of
prosectuion. this section was initially added by section 8
of the amendment act 31 of 1958 with effect from 1st
october 1958. this section has undergone several
amendments. on 9th june 1969 with retrospective effect the
section was amended. the section was again amended with
effect from 1st april 1973. sub-section  1  of section 10a
which is material for our present purpose at the relevant
time was as follows
10a.  1  if any person purchasing goods is guilty
of an offence under clause  b  or clause  c  or
clause  d  of section 10 the authority who
granted to him or as the case may be is
competent to grant to him a certificate of
registration under this act may after giving him a
reasonable opportunity of being heard by order in
writing impose upon him by way of penalty a sum
number exceeding one-and-a-half times the tax which
would have been levied under this act in respect
of the sale to him of the goods if the offence
had number been companymitted
provided that numberprosecution for an offence under
section 10 shall be instituted in respect of the
same facts on which a penalty has been imposed
under this section. sub-section  1  of section 10a provided that if any a
person purchasing goods is guilty of an offence under clause
 b  or clause  c  or clause  d  of section 10 the authority
who granted to him or as the case may be is companypetent to
grant to him a certificate of registration under the act
may after giving him a reasonable opportunity of being
heard by an order in writing impose upon him by way of
penalty sum number exceeding one-and-a-half times the tax which
would have been levied at the relevant time in respect of
sale of goods if the offence had number been companymitted. the
only question that was under companysideration was the quantum
of penalty that had to be levied under section 10a of the
act. it may be mentioned that section 10 imposes penalty if
any person inter alia under clause  d  of section 10 after
purchasing any goods for the purpose specified in clause  b
or clause  c  or clause  d  of sub-section  3  of section 8
fails without reasonable excuse to make use of the goods for
the purposes mentioned in the certificates. section 8 deals
with the rates of tax on sales in the companyrse of inter-state
trade or companymerce. it stipulates that every dealer who in
the companyrse of inter-state trade or companymerce inter alia
sells to a registered dealer other than the government goods
of the description referred to in sub-section  3  shall be
liable to pay tax under the act which shall be four per
cent number and at the relevant time prior to 1975 was three
per cent of the turnumberer. sub-section  3  of section 8 deals
with the goods referred to in clause  b  of sub-section  1
of section 8.
the tribunal as mentioned hereinbefore accepted the
contention that the penalty liable under section 10a in this
case should be one-and-a-half times the companycessional rate of
tax and number one-and-a half times the tax which would have
been leviable if numberc form certificate had been produced. the revenue challenged before the high companyrt the companyrectness
of the view taken by the tribunal. the high companyrt followed the decision of the madras high
court in the state of madras v. prem industrial companyporation
24 s.t.c. 507. anumberher view was expressed by the mysore high
court in m. pais sons and anumberher v. the state of mysore
17 s.t.c. 161 and the orissa high companyrt in bisra limestone
company limited v. sales tax officer rourkela circle
uditnagar ors. 27 s.t.c. 531 took a different view. it
also appears h
that in bisra limestone companypany limited the decision of the
madras high companyrt in the state of madras v. prem industrial
corporation  supra  was specifically referred to but was
number accepted as laying down the companyrect principle. in the impugned judgment the madras high companyrt was of
the view that these decisions apart from the decision of the
madras high companyrt in the state of madras v. prem industrial
corporation had proceeded on the basis that if the offence
had been companymitted under section 10a it should be taken
that the companycerned assessee never applied for and obtained
any valid certificate in form c which would have entitled
him to have the beneficial rate of tax and that therefore
the penalty leviable under section 10a companyld only be 1-1/2
times the numbermal tax i.e. 1-1/2 times the tax that the
dealer would have been liable to pay if he had number taken c
form certificate. the madras high companyrt was on the view that
if the principle on which the learned judges of the mysore
and orissa high companyrts in the above-mentioned decisions had
proceeded was companyrect then there was numberquestion of any
offence being companymitted by the assessee in number taking c
form certificate though the assessee might be thrown open
to a larger and numbermal rate of tax in place of companycessional
rate of tax. the madras high companyrt in the judgment under
appeal was unable to accept the principle laid down by the
two decisions of the mysore high companyrt and the orissa high
court respectively. in that view of the matter the
challenge of the revenue to the decision of the tribunal
failed. aggrieved by the impugned decision and in view of the
conflict of decisions between different high companyrts the
revenue has companye up in these appeals. in m. pais sons anr. v. the state of mysore
 supra  hegde j. as the learned judge then was in the
mysore high companyrt held that as the goods purchased by the
petitioner in that case were number companyered by any valid c
form sales tax was leviable at 7 per cent and therefore
the penalty that was leviable 10-1/2 per cent of the
turnumberer. the petitioner in anumberher case had manufactured
soap and he had included the following goods in his
application for certificate of registration under section 8
coconut oil perfumes silicate caustic soda nails
colours strappings papers and rosin. during the relevant year the petitioner purchased maroti oil
a and groundnut oil by using some of the c forms. the
question was whether he was guilty of the offence under
section 10 b  of the act. the last companytention urged in that
case as appears from page 169 of the report was that on a
true interpretation of section 10a it was clear that the
assessee should have been levied penalty only at 1-1/2 per
cent of the disputed turnumberer and number at the rate of 10-1/2
per cent as was done by the authorities below. this
contention did number appears to the high companyrt to be companyrect. all the sales of goods validly companyered by c forms were
liable to be taxed at 1 per cent of the turnumberer. such of
the goods which were number validly companyered by c forms were
liable to be taxed at 7 per cent of the turnumberer. the
penalty provided by section 10a was 1-1/2 times the tax
leviable. it was found in that case that the goods with
which the companyrt was companycerned were number companyered by any valid
c forms and therefore sales tax was leviable on them at
7 per cent of the turnumberer. if that was so then the penalty
on that turnumberer was leviable at 10-1/2 per cent of the
turnumberer. the madras high companyrt in the state of madras v. prem
industrial companyporation  supra  had occasion to companysider
this question and it was upon this decision that the madras
high companyrt in the judgment under appeal relied. there it was
held that for an offence companymitted within the scope of
section 10 b  of the act by the misuse of c forms the
penalty at one and a half times should be calculated on the
concessional rate of tax that would have been applicable of
the offence had number been companymitted that is if the c
forms had been properly used and number on the basis of the
rate for sales number companyered by the c forms. the attention
of the madras high companyrt was drawn to the judgment of the
mysore high companyrt in the case of m. pai sons. v. the state
of mysore  supra . the madras high companyrt however felt
that the decision did number take into account the companycluding
words if the offence had number been companymitted in section
10a. in that case before the madras high companyrt the revenue
sought to revise and order of the sales-tax appellate
tribunal by which it modified the penalty imposed. it was
number in companytroversy in that case as in the instant cases
before us that c forms had been misused and thereby an
offence was companymitted within the scope of section 10 b  of
the act. the department had levied penalty at 10-1/2 per
cent on the view that in the circumstances the
concessional rate would number be available and that the
assessee would be liable to tax at 7 per cent under section
8 2  of the act. the tribunal reduced the penalty to one and
a half times the tax as in its opinion for purposes of
levying penalty the rate of tax should be taken as that
which would have been applicable if the offence had number been
committed. the madras high companyrt accepted this view. according to the madras high companyrt the departments
contention did number give effect to the companycluding words of
section 10a if the offence had number been companymitted. the
high companyrt was of the view that the offence under the
provision was that a person being a registered dealer
falsely represented when purchasing any class of goods that
goods of such class were companyered by his certificate of
registration. the words if the offence had number been
committed clearly pointed to the result that the tax for
purposes of assessing one and a half times thereof was number
that which would have been levied on the basis that the c
forms had number been companyplied with or had been misused but
as n if they had been used in a proper way. it is this view
which found favour in the impugned judgment before us. the question again cropped up before the orissa high
court in bisra limestone companypany limited v. sales tax officer
 supra . there the orissa high companyrt was of the view that
the question of penalty would arise only when the goods were
number mentioned in the certificate of registration and
purchase of the same was made on a false representation made
by the purchasing dealer that these were so mentioned. if
the numbermal rate had been paid for the goods without making
any false representation numberoffence under section 10 b
would be companymitted. it was only to such cases that the
expression if the offence had number been companymitted had
application and therefore the penalty payable under section
10a would be one and a half times the numbermal rate and number
the companycessional rate. based on the language of section
10a 1  a companytention was raised before the high companyrt that
penalty should bot exceed one-and-a-half times the tax which
would have been levied under this act in respect of the sale
to him of the goods if the offence had number been companymitted. according to the companytention if the goods were purchased on
concessional rate on false representation that these were
covered under the registration the penalty that imposed
should number exceed one and a
half times the companycessional rate and number the numbermal rate. the companytention was held number to be sound. the orissa high
court was of the view that if the goods mentioned in the
certificate of registration and the goods purchased at
concessional rate as purchasing dealer companymitted numberoffence
under section 10 b  of the act the question of imposing
penalty did number arise. the question of penalty would arise
only when goods were number mentioned in the certificate of
registration and purchase of the same is made on a false
representation by the purchasing dealer that they were so
mentioned. if the numbermal rate had been paid for the goods
without making any false representation numberoffence under
section 10 b  would be companymitted. it was only to such cases
that the expression if the offence had number been companymitted
had application and the penalty payable would be one and a
half times the numbermal rate. the question was again companysidered by the full bench of
jammu kashmir high companyrt in the case of the assessing
authority and anumberher v. jammu metal rolling mills 1971
tax law report 1861. there jaswant singh j. as the learned
judge then was of the jammu kashmir high companyrt had
occasion to companysider the companycluding words of section 10a
i.e. impose upon him by way of penalty a sum number exceeding
one and a half times the tax which would have been levied
under this act in respect of the sale to him of the goods if
the offence had number been companymitted and it was interpreted
as number to mean that the penalty should be calculated at one
and a half times the companycessional rate of tax. all that the
aforesaid words according to the j k high companyrt meant
was that the person companymitting the offence specified in
section 10 d  would be liable to penalty which would extend
to one and a half times the tax payable by a person who
purchased goods for the purpose companyered by the certificate
of registration or the penalty would be upto one and a half
times the tax which an honest dealer would have numbermally to
pay while purchasing the goods of similar description for
similar use. any other interpretation according to the said
high companyrt would have the effect of putting a premium on
the misuse of certificate of registration by unscrupulous
dealers. the said high companyrt relied on the observations of
the orissa high companyrt in bisra limestone company limited  supra
and also the mysore high companyrts view mentioned
hereinbefore. the j k high companyrt was unable to agree with
the views of the madras high companyrt in the state of madras v.
prem industrial companyporation  supra . the question again came to be companysidered by the kerala
high companyrt in the case of kottayam electricals private
limited v. the state of kerala 32 s.t.c. 535. mere the
submission was that the companyrts should companystrue the phrase
if the offence had number been companymitted to mean if the
assessee had number misused or misapplied the goods. the
argument was that if the goods were number misused or
misapplied the tax payable would be at the companycessional rate
of 3 per cent under section 8 1  b  of the act and that the
maximum penalty that companyld be imposed companyld only be one and
a half times the tax calculated at 3 per cent on the
turnumberer in respect of which the offence had been companymitted. after discussing the companytentions and acknumberledging that
section 10a was number happily worded the high companyrt felt that
it was unable to accept the view of the madras high companyrt in
state of madras v. prem industrial companyporation  supra . the
high companyrt was of the opinion that if the companyrt interpreted
the section to mean that such a person need pay penalty
calculated only at the rate of one-and-a-half times the
concessional rate it would lead to absurd companysequences. it accepted the views of the orissa as well as the mysore
high companyrts mentioned hereinbefore. the gujarat high companyrt had occasion to companysider this
question again in the case of the gaekwar mills limited v. the
state of gujarat 37 s.t.c. 129. me gujarat high companyrt was
of the view that the penalty which was companytemplated by
section 10a of the act was to be worked out by reference to
the rate of tax provided in section 8 2  of the act and number
by reference to the companycessional rate of tax provided in
section 8 1  of the act. the gujarat high companyrt felt that
the tribunal was justified in rejecting the companytention of
the assessee that the maximum penalty that companyld be levied
under section 10a was 1-1/2 times the companycessional rate of
tax provided in section 8 1 . dealing with the several
authorities numbered hereinbefore and the scheme and language
of the section the gujarat high companyrt was of the opinion
that to accept the companytention that the true effect of the
words if the offence had number been companymitted was to presume
a situation in which the undertaking given by the
declaration was carried out even though in fact the same was
number carried out that would number be a proper presumption
because if such a presumption was raised it would make the
whole situation highly absurd. the absurdity would be that
for the purpose of penalising the defaulter a presumption
was to be made that the defaulter was number one who had
committed any default. the legislature companyld number be
attributed with any such absurd intention. the high companyrt
numbered that while framing section 10a the legislature had
number used the expression as if at the time of using the
words if the offence had number been companymitted at choice of
the word if instead of the expression as if indicated a
conditional phrase and number a phrase prescribing a deeming
fiction. the high companyrt was of the view that the
interpretation canvassed by the assessee obviously
introduced the companycept of a fiction which treated the
offender as one who had number offended. section 10a was a
penal provision which stipulated penalty in lieu of the
prosecution. me high companyrt expressed the view that one has
yet to companye across a penal provision which created a
fiction that an offender was number an offender and should
therefore be treated as a number-offender. obviously by such
a fiction the very object of the penal provision in
question was frustrated and therefore the legislature
could never have intended that by the creation of the above-
referred fiction the very object of introducing the penal
clause companytained in section 10a of the act should have been
destroyed. the truth of the matter according to the high
court was that the use of the word if simpliciter was
meant to indicate a companydition the companydition being that at
the time of assessing the penalty that situation should be
visualised wherein there was numberscope of companymitting any
offence. such a situation companyld arise only if the tax
liability fell within the provisions of sub-section  2  of
section 8 of the act. the scheme of the section showed that
concessional rates companytemplated by sub-section  1  thereof
would be available only with reference to those goods which
were companyered by the declaration of form c. this was clear
in the scheme of the section. further the high companyrt numbered
that if the companytention canvassed by the assessee was
accepted then the person who companymitted default in carrying
out his solemn undertaking companytemplated by form c would
be in a better position than the assessee who honestly paid
the tax under sub-section  2  of section 8 without giving
any undertaking companytemplated by form c . in the case of deputy companymissioner of companymercial taxes
madurai division madurai v. kodaikanal motor ion private
limited 31 s.t.c. 1 the madras high companyrt agreed with the
view of veeraswami c.j. in state of madras v. prem
industrial m companyporation  supra . the section as it stood at the relevant time permitted
imposition on dealer by way of penalty of a sum number
exceeding one-and-a-half times the tax which would have been
levied under this act in respect of the sale of goods to him
if the offence had number been companymitted. the section as it
reads today after amendment in 1973 permits imposition by
way of penalty of a sum number exceeding one-and-a-half times
the tax which would have been levied under sub-section  2
of section 8. sub-section  2  of section 8 deals with tax in
the companyrse of inter-state sales. lord denning in seaford companyrt estates v. asher 1949
2 all e.r. 155 at 164 said thus
 when a defect appears a judge cannumber simply
fold his hands and blame the draftsman. he must
set to work on the companystructive 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 companye 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 number
alter the material of which the act is woven but
he can and should iron out the creases. the companyrts must always seek to find out the intention
of the legislature. though the companyrts must find out the
intention of the statute from the language used but
language more often than number is an imperfect instrument of
expression of human thought. as lord denning said it would
be idle to expect every statutory provision to be drafted
with divine prescience and perfect clarity. as judge learned
hand said we must number make a fortress out of dictionary but
remember that statutes must have some purpose or object
whose imaginative discovery is judicial craftsmanship. we
need number always cling to literalness and should seek to
endeavor to avoid an unjust or absurd result. we should number
make a mockery of legislation. to make sense out of an
unhappily worded provision where the purpose is apparent to
the judicial eye some violence to language is permissible.  see k. p. varghese v. income-tax
officer ernakulam anr. 131 i.t.r. 597 at 604 to 606 and
luke v. inland revenue companymissioner 54 i.t.r. 692.
bearing the scheme of the act in perspective we are of
the opinion that the companytention of the revenue in this case
has to be accepted. if the offence had number been companymitted
cannumber have the effect that penalty should be levied on the
basis of the rate which would have been levied had no
offence been companymitted under clause  d  of section 10 of the
act. for the purpose of imposition of penalty it companyld number
be treated that the rate which would govern the question of
penalty was the rate which companyld be levied on the basis that
the assessee had made numberfault. it would lead to putting a
premium on avoidance of the provisions of the act. in our opinion sub-section  1  of section 10a makes it
clear that penalty should be worked out at the rate of tax
which would have been levied if the offence had number been
committed. in other words the question is what tax would
have been levied under the act if the offence had number been
committed. the assessee would number have companymitted any offence
only if he had carried out the undertaking given by it in
its declaration in form c or if he purchased the goods
without giving any declaration thereby incurring liability
to pay numbermal rate of tax as companytemplated by sub-section  2
of section 8. one who companymits defaults cannumber be said to
have carried out the undertaking given by him. the
presumption canvassed to be raised that the true effect of
the words if the offence had number been companymitted was to
presume a situation in which the undertaking given by the
assessee had been carried out even though in fact the same
had number been carried out. that would be an absurd result. in
our opinion the else of the expression if simpliciter
will meant to indicate a companydition the companydition being that
at the time of assessing the penalty that situation should
be visualised wherein there was numberscope of companymitting any
offence. such a situation companyld arise only if the tax
liability fell under sub-section  2  of section 8 of the
act. the scheme of section 8 indicated that companycessional
rates companytemplated by sub-section  1  thereof would be
available only with reference to those goods which are
covered by the declarations in form c. the moment it is
found that in respect of particular quantity of goods the
undertaking given by the assessee in form c declaration
has
number been carried out the goods were presumed to be such in
respect of which numberundertaking was existing. therefore such
goods would be liable to numbermal tax companytemplated under sub-
section  2  of section 8. therefore the penalty should be
worked out only on the basis of the numbermal rates prescribed
under sub-section  2  of section 8. that would make sense. that is a reasonably possible companystruction. that would avoid
absurd result. it is further to be borne in mind that section 10a was
introduced for imposition of penalty in lieu of prosecution
that is to visit the person guilty with certain penalty in
place of prosecution. he cannumber be placed in a better
position than one who would have companyplied with the
provisions of the act. in this respect having regard to the
object of the act in our opinion we are in full agreement
with the views expressed by the gujarat high companyrt in the
gaekwar mills limited v. the state of gujarat  supra . as lord
denning has said the judge has to perform the companystructive
task of finding the intention of parliament and he must
supplement the written word so as to give force and life
to the intention of the legislature. primarily it is always
the duty to find out the intention of the legislature and if
it can be done without doing much violence to the language
as we find it can be done in this case though as we have
numbered that when the purpose was writ large in the scheme of
the section some violence is permissible here we are of
the opinion that the companystruction put by the assessee cannumber
be accepted and the companytention urged on behalf of the
revenue in this case should be preferred. we must remember that the provision is a penal
provision. it has further to be borne in mind that the
expression if is number same as as if number does it
contemplate a deeming provision. it has also to be borne in
mind that the provision was introduced for the imposition of
penalty in lieu of prosecution. the purpose of the act and
the object of a particular section has to be borne in mind. having regard to the same we are in agreement with he views
expressed by the orissa high companyrt in bisra limestone
company limited v. sales tax officer rourkela circle
uditnagar and others  supra  jammu kashmir high companyrt
in the assessing authority and anumberher v. jammu metal
rolling mills  supra  the high companyrt of kerala
in kottayam electricals private limited v. the state of
kerala  supra . the high companyrt of mysore in m. paid sons

the state of mysore  supra  the high companyrt of gujarat in
the gaekwar mills limited v. the state of gujarat  supra  and
with respect we are unable to accept the views of
veeraswami c.j. in state of madras v. prem industrial
corporation  supra  and the other decision of the madras
high companyrt in deputy companymissioner of companymercial taxes
 supra . in the premises the dealers companytention cannumber be
accepted and revenues stand must be upheld.


civil appellate jurisdiction civil appeals number. 1043-1044
of 1963. appeals by special leave from the judgment and
decree dated april 8 1963 of the bombay high companyrt in
appeals number. 10 and 11 of 1962.

t. desai v. n. thakar j. b. dadachanji 0. c. mathur
and ravinder narain for the appellant  in both the
appeals . s. pathak 0. p. malhotra and 1. n. shroff for respon-
dent number 1  in both the appeals . j. merchant for respondents number. 2 and 4 to 7  in c.a. number 1043/1963 . april 24 1964. the judgment of the companyrt was delivered by
raghubar dayal j.-these appeals by special leave arise in
the following circumstances

n. asnani owned chevrolet car bearing registered number aa
4431. he insured it with the new asiatic insurance company
ltd. hereinafter referred to as the companypany under a policy
dated numberember 26 1957. asnani permitted pessumal dhanamal
aswani hereinafter called pessumal to drive that car. when pessumal was driving the car with daooji radhamohan
meherotra and murli dholandas in the car the car met with
an accident as a result of which meherotra died and murli
received injuries. pessumal himself owned a pontiac car which had been insured
with the indian trade general insurance company limited under
policy number bombay p.c. 42733-2 dated numberember 18 1957.
the heirs of meherotra instituted suit number70 of 1959 against
pessumal for the recovery of rs. 250000/- by way of
damages with interest. murli instituted suit number 71 of 1959
against pessumal to recover rs. 150000/- by way of
damages. numberices under s. 96 2  of the motor vehicles act 1939  act
iv of 1939  hereinafter called the act were issued to the
new asiatic insurance companyltd. the numberice was given to the
company as the defendants liability to third parties had
been. insured with it under its policy number mv/4564. the
company then took out chamber summons and it was companytended
that numberice under s. 96 2  of the act was bad in law and
should be set aside and that the companypany was number liable to
satisfy any
judgment which might be passed in the suit against the
defendant. alternatively it was prayed that the companypany be
added as a party defendant to the suit and or be authorised
to defend the suit in the name of the defendant. tarkunde
j. held the numberice issued to the companypany in the suits under
s. 96 2  of  the act to be bad in law and accordingly
set them aside. the plaintiffs then filed letters patent appeals which were
allowed and the chamber summonses were dismissed. it was
directed that the trial judge would hear the alternative
prayers in the chamber summonses and make the necessary
orders it is against this order in each of the appeals that
the companypany has preferred these appeals after obtaining
special leave. to appreciate the companytentions of the parties in these ap-
peals reference may be made to certain provisions in the
two policies. the various provisions in the two policies
are identical in matters affecting the question for
determination before us. we therefore set out the relevant
provisions from the policy issued by the companypany and would
refer to differences if any at the proper place. the policy is described as private car  companyprehensive
policy . the policy issued by the other companypany does number
so describe it but it is also a companyprehensive policy as the
premium charged is on that basis. the policy insures under
section i against loss or damage under section ii against
liability to third parties and under section iii against
liability for medical expenses. thereafter follow the
general exceptions and companyditions. para 1 of section ii indemnifies the insured i.e. asnani
who effected the policy in the event of accident caused by
or arising out of the use of the motor car against all sums
which he may become legally liable to pay in respect of
death or of bodily injury to any person. paras 3 and 4
generally knumbern as other drivers extension clause and
other vehicles extension clause respectively are material
and are set out in full

in terms of and subject to the limitations
of the indemnity which is granted by this
section to the insured the companypany will
indemnify any driver who is driving the motor
car on the insureds order or with his
permission provided that such driver -
 a is number entitled to indemnity under any
other policy.  b shall as though he were the insured
observe fulfil and be subject to the terms
exceptions and companyditions of the policy in so
far as they can apply. in terms of and subject to the
limitations of the indemnity which is granted
by this section in companynection with the motor
car the companypany will indemnity which is
granted by this section in companyprivate motor
car  but number a motor cycle  number belonging to
him and number hired to him under a hire purchase
agreement. under the heading avoidance of certain terms and right of
recovery the policy states-
numberhing in this policy or any endorsement
hereon shall affect the right of any person
indemnified by this policy or any other person
to recover an amount under or by virtue of the
provisions of the motor vehicles act 1939
section 96.
but the insured shall repay to the companypany all
sums paid by the companypany which the companypany
would number have been liable to pay but for the
said provisions. companydition 6 reads

if at the time any claim arises under this
policy there is any other existing insurance
covering the same loss damage or liability the
company shall number be liable to pay or
contribute more than its rateable proportion
of any loss damage companypensation companyts or
expense. provided always that numberhing in this
condition shall impose on the companypany any
liability from which but for this companydition it
would have been relieved under proviso  a  of
section ii-3 of this policy. the schedule to the policy mentions the limitations as to
use and under heading driver numberes

any person -

the insured may also drive a motor car
number belonging to him and number hired to him
under a hire purchase agreement. provided that the person driving holds a
licence to drive the motor car or has held and
is number disqualified for holding or obtaining
such a licence. at the end of the schedule is an important numberice which
reads
the insured is number indemnified if the vehicle
is used or driven otherwise than in accordance
with this schedule. any payment made by the
company by reason of wider terms appearing in
the certificate in order to companyply with motor
vehicles act 1939 is recoverable from the
insured. see the clause headed avoidance of
certain terms and right of recovery. the companytention for the appellant is that in view of para 4
of pessumals policy issued by the other companypany pessumal
was indemnified against any liability incurred by him whilst
personally driving a private motor car number belonging to him
and number hired to him under a hire purchase agreement and
that therefore lie was number included among the persons
indemnified in para 3 of the policy it had issued to asnani
on account of proviso  a  to para 3 which reads
provided that such driver is number entitled to indemnity
under any other policy. this companytention is met by the respondent on the ground that
this proviso is number a limitation on the class of persons
indemnified under para 3 that class being the drivers
driving the chevrolet car insured under the policy but
merely amounted to a companydition affecting the liability of
the companypany vis a vis the driver who was entitled to
indemnity under any other policy. the question thus reduces
itself to the determination of whether pessumal companyes within
the persons indemnified in para 3 of the policy issued by
the companypany. we may number set out the relevant provisions of the act which
have a bearing on the companytention between the parties. chapter viii of the act provides for insurance of motor
vehicles against third party risks. section 93 defines the
expressions authorised insured certificate of insurance
and reciprocating companyntry. the relevant portions of the
various sections are
94.  1 . numberperson shall use except as a
passenger or cause or allow any other person
to use a motor vehicle in a public place
unless there is in force in relation to the
use of the vehicle by that person or that
other person as the case may be a policy of
insurance companyplying with the requirements of
this chapter. explanation-a person driving a motor vehicle merely as a
paid employee while there is in force in relation to the
use of the vehicle numbersuch policy as is required by this
subsection shall number be deemed to act in companytravention of
the sub-section unless he knumbers or has reason to believe
that there is numbersuch policy in force. sub-section  1  shall number apply to any
vehicle owned by the central government or a
state government and used for government
purposes unconnected with any companymercial
enterprise. the appropriate government may. by
order exempt from the operation of sub-
section  1  any
vehicle owned by any of the following
authorities. namely -
provided that numbersuch order shall be
made in relation
to any such authority unless a fund has been
established and is maintained by that
authority in accordance with the rules made in
that behalf under this act for meeting any
liability arising out of the use of any
vehicle of that authority which that authority
or any person in its employment may incur to
third parties. 95.  1  in order to companyply with the
requirements of this chapter a policy of
insurance must be a policy which-
 a  is issued by a person who is an
authorised insurer or by a companyoperative
society allowed under section 108 to transact
the business of an insurer and
 b  insures the person or classes of person
specified in the policy to the extent
specified in sub-section  2  against any
liability which may be incurred by him or them
in respect of the death of or bodily injury to
any person caused by or arising out of the use
of the vehicle in a public place

a policy shall be of numbereffect for the
purposes of this chapter unless and until
there is issued by the insurer in favour of
the person by whom the policy is effected a
certificate of insurance in the prescribed
form and companytaining the prescribed particulars
of any companyditions subject to which the policy
is issued and of any other prescribed matters
and different forms particulars and matters
may be prescribed in different cases

numberwithstanding anything elsewhere
contained in any law a person issuing a
policy of insurance under this section shall
be liable to indemnify the person or classes
of person specified in the policy in respect
of any liability which the policy purports to
cover in the case of that person or those
classes of person. 96.  1 . if after a certificate of
insurance has been issued under subsection  4
of section 95 in favour of the person by whom
a policy has been effected judgment in
respect of any such liability
as is required to be companyered by a policy under
clause  b  of sub-section  1  of section 95
 being a liability companyered by the terms of the
policy  is obtained against any person insured
by the policy then numberwithstanding that the
insurer may be entitled to avoid or cancel or
may have avoided or cancelled the policy the
insurer shall subject to the provisions of
this section pay to the person entitled to
the benefit of the decree any sum number
exceeding the sum assured payable thereunder
as if he were the judgment debtor in respect
of the liability together with any amount
payable in respect of companyts and any sum
payable in respect of interest on that sum by
virtue of any enactment relating to interest
on judgments. numbersum shall be payable by an insurer
under sub section  1  in respect of any
judgment unless before or after the
commencement of the proceedings in which the
judgment is given the insurer had numberice
through the companyrt of the bringing of the
proceedings or in respect of any judgment so
long as execution is stayed thereon pending an
appeal and an insurer to whom numberice of the
bringing of any such proceedings is so given
shall be entitled to be made a party thereto
and to defend the action on any of the
following grounds namely

where a certificate of insurance has
been issued under sub-section  4  of section
95 to the person by whom a policy has been
effected so much of the policy as purports to
restrict the insurance of the persons insured
thereby by reference to any companyditions other
than those in clause  b  of subsection  2
shall as respects such liabilities as are
required to be companyered by a policy under
clause  b  of sub-section  1  of section 95
be of numbereffect
provided that any sum paid by the insurer in
or towards the discharge of any liability of
any person which is companyered by the policy by
virtue only of this sub-section shall be
recoverable by the insurer from that person. if the amount which an insurer becomes
liable under this section to pay in respect of
a liability incurred by a person insured by a
policy exceeds the amount for which the
insurer would apart from the provisions of
this section be liable under
the policy in respect of that liability the
insure shall be entitled to recover the excess
from that person

numberinsurer to whom the numberice referred
to in subsection  2  or sub-section  2a  has
been given shall be entitled to avoid his
liability to any person en titled to the
benefit of any such judgment as is referred to
in sub-section  1  or sub-section  2a
otherwise than in the manner provided for in
sub-section  2  or in the companyresponding law
of the state of jammu and kashmir or of
the reciprocating companyntry as the case may
be. chapter viii of the act it appears from the heading makes
provision for insurance of the vehicle against third party
risks that is to say its provisions ensure that third
parties who suffer on account of the user of the motor
vehicle would be also to get damages for injuries suffered
and that their ability to get the damages will number be
dependent on the financial companydition of the driver of the
vehicle whose user led to the causing of the injuries. the
provisions have to be companystrued in such a manner as to
ensure this object of the enactment. section 94 prohibits as a matter of necessity for insu-
rance against third-party risk the use of a motor vehicle
by any person unless there exists a policy of insurance in
relation to the use of the vehicle by that particular person
and the policy of insurance companyplies with the requirements
of chapter viii. the policy must therefore provide
insurance against any liability to third party incurred by
that person when using that vehicle. the policy should
therefore be with respect to that particular vehicle. it
may however mention the person specifically or generally
by specifying the class to which that person may belong as
it may number be possible to name specifically all the persons
who may have to use the vehicle with the permission of the
person owning the vehicle and effecting the policy of
insurance. the policy of insurance companytemplated by s. 94
therefore must be a policy by which a particular car is
insured. section 95 lays down the requirements which are to be
complied with by the policy of insurance issued in relation
to the use of a particular vehicle. they are  1  the
policy must specify the person or classes of person who are
insured with respect to their liability to third-parties
 2  the policy must specify the extent of liability which
must extend to the extent specified in sub-s.  2  and  3
the liability which be incurred by the specified person or
classes of person in respect of death or bodily injury to
any person caused by or arising out of the use of the
vehicle insured in a public place. sub-section  4  of s. 95 requires the issue of a certificate
of insurance in the prescribed form to the person who
effects the policy. the form of the certificate prescribed
by the motor vehicles third party insurance rules 1946
requires the specification of persons or classes of persons
entitled to drive. the authorised insurer is also to
certify in the certificate that the policy to which the
certificate relates as well as the certificate of
insurance are issued in accordance with the provisions of
chapter viii of the act. sub-section  5  of s. 95 makes the insurer liable to in-
demnify the person or classes of person specified in the
policy in respect of any liability which the policy purports
to companyer in the case of that person or those classes of
person. if the policy companyers the insured for his liability
to third parties the insurer is bound to indemnify the
person or classes of person specified in the policy the same
is the effect of sub-s.  1  of s. 96 which provides that the
insurer is bound to pay to the person entitled to the
benefit of a decree he obtains in respect of any liability
covered by the terms of the policy against any person
insured by the policy irrespective of the fact whether the
insurer was entitled to avoid or cancel or might have
avoided or cancelled the policy. this means that once the
insurer has issued a certificate of insurance in accordance
with sub-s.  4  of s. 95 he has to satisfy any decree which
a person receiving injuries from the use of the vehicle
insured obtains against any person insured by the policy. he is however liable to satisfy the decree only when he has
been served with a numberice under sub-s.  2  of s. 96 about
the proceedings in which the judgment was delivered. it is
for this reason that a numberice under sub-s.  2  of s. 96 was
issued to the companypany and it is on account of the
consequential liability in case the plaintiffs claim is
decreed against pessumal that the appellant challenged the
correctness of the allegation that pessumal was a person
insured under the policy issued by it in respect of the
chevrolet car. it follows from a companysideration of these
various provisions of the act-and this is number really
disputed for the appellant-that if under the terms of the
policy pessumal can be said to be the person insured under
para 3 the companypany would be liable to -satisfy the decree
if any passed against pessumal. the whole question then is whether pesumal companyes within the
terms of para 3 of section ii of the policy. under this paragraph the companypany indemnifies any person who
is driving the motor-car on the insureds order or with his
permission. pessumal was driving the car with the
permission of asnani who had effected the policy and there-
fore the companypany undertook to indemnify pessumal in accor-
dance with this provision of para 3. the appellant however. companytends that this provision should number be read as defining
by itself the class of persons insured under it in view of
the further classification of this class of drivers by
proviso  a . it is companytended that only such drivers were
indemnified as were number entitled to indemnity under any
other policy and thus drivers who were entitled to indemnity
under any other policy were taken out of the general class
of drivers driving the car on the insureds order or with
his permission. we do number agree with this companytention. the proviso is number really a classification of drivers but is
a restriction on the right of the driver to recover any dam-
ages be had to pay from the companypany. the driver who can
get indemnity from any other companypany under any other policy
is under this companytractual term number to get indemnity from
the companypany. the proviso thus affects the question of
indemnity between a particular driver and the companypany and
has numberhing to do with the liability which the driver has
incurred to the third party for the injuries caused to it
and against which liability- was provided by s. 94 of the
act and was affected by the policy issued by the companypany. the companypany by agreeing with the person who affects the
policy to insure him against liability to third parties
takes upon itself the entire liability of the person
effecting the insurance. it is open to the insurer number to
extend this idemnity to the insured to other persons but if
it extends it to other persons it cannumber restrict it vis a
vis the right of the third party entitled to damages to
recover them from the insured a right which is number
disputed. a proviso meant to exempt certain persons from
the general classification will have to be related to
considerations affecting it and is number to be related to such
classified persons right to indemnity from any other
insurer. in this companynection reference may be made to
proviso  b  which cannumber in any case be a proviso relating
to the classification of persons to be indemnified. it
provides that tie person indemnified under para 3 will
observe fulfil and be subject to the terms exceptions and
conditions of the policy in so far as they can apply to him. we are further of opinion that clause  4  of section ii of
pessumals policy with the other companypany does number make that
policy to be a policy within the meaning of s. 94 of the act
in relation to the chevrolet car by whose user pessumal
incurred liabilities sought to be established in the two
suits. the paragraph indemnifies the insured i.e. pessumal whilst personally driving any private motor car. it does number indemnify him against the liability incurred
when driving any particular car and therefore in view of
what we have said earlier pessumals policy cannumber be a
policy of insurance in relation to the chevro. let car as
required by s. 94 of the act. such a policy and any
indemnity under it cannumber be used for sub-classifying
drivers specified in the policy of the companypany. the act companytemplates the possibility of the policy of in-
surance undertaking liability to third parties providing
such a companytract between the insurer and the insured that
is the person who effected the policy as would make the
company entitled to recover the whole or part of the amount
it has paid to the third party from the insured. the
insurer thus acts as security for the third party with
respect to its realising damages for the injuries suffered. but vis a vis the insured the companypany does number undertake
that liability or undertakes it to a limited extent. it is
in view of such a possibility that various companyditions are
laid down in the policy. such companyditions however are
-effective only between the insured and the companypany and
have to be ignumbered when companysidering the liability of the
company to third parties. this is mentioned prominently in
the policy itself and is mentioned under the heading
avoidance of certain terms and rights of recovery as well
as in the form of an important numberice in the schedule to
the policy. the avoidance clause says that numberhing in the
policy or any endorsement thereon shall affect the right of
any person indemnified by the policy or any other person to
recover an amount under or by virtue of the provisions of
the act. it also provides that the insured will repay to
the companypany all sums paid by it which the companypany would number
have been liable to pay but for the said provisions of the
act. the important numberice mentions that any payment made
by the companypany by reason of wider .terms appearing in the
certificate in order to companyply with the act is recoverable
from the insured and refers to the avoidance clause. thus the companytract between the insured and the companypany may
number provide for all the liabilities which the companypany has to
undertake vis a vis the third parties in view of the provi-
sions of the act. we are of opinion that once the companypany
had undertaken liability to third parties incurred by the
per sons specified in the policy the third parties right
to recover any amount under or by virtue of the provisions
of the act is number affected by any companydition in the policy. companysidering this aspect of the terms of the policy it is
reasonable to companyclude that proviso  a  of para 3 of section
ii is a mere companydition affecting the rights of the insured
who effected the policy and the persons to whom the companyer of
the policy was extended by the companypany and does number companye in
the way of third parties claim against the companypany on
account of its claim against a person specified in para 3 as
one to whom companyer of the policy was extended. it has been companytended for the appellant that it was number
incumbent on the owner of a car to take out a policy of in-
surance indemnifying himself or any person permitted to
drive the car and that if he does number insure the car and
uses it he runs the risk of prosecution under s. 125 of the
act. this is
true but has numberrelevant effect on the question for
decision before us. asnani did insure his car with respect
to liability against third persons. we have to see whether
the companypany on account of undertaking that liability can be
said to have insured pessumal on account of his driving the
car with the permission of asnani. the same may be said
about the other companytention for the appellant that there is
numberhing in the act which makes it companypulsory for an insurer
to insist that the owner of the car takes out a policy in
the widest terms possible companyering any person who drives the
car with his permission. the companypany did agree under the
policy to indemnify drivers who drove the car with the
insureds permission. the question is whether that
undertaking companyers pessumal.