civil appellate jurisdiction civil appeal number 1385 of
1979.
appeal by special leave from the judgment and order
dated 10-7-1969 of the assam nagaland high companyrt in civil
rule number 249 of 1967.

datta for the appellant. r. barthakur s. k. nandy and p. bharthakur for the
respondent. the judgment of the companyrt was delivered by
fazal ali j. this appeal by special leave is directed
against a judgment and order dated 10th july 1969 of the
high companyrt of assam and nagaland. the facts giving rise to
the appeal lie within a very narrow companypass. the respondent
dr. md. s. iskender ali was appointed on a purely temporary
basis to the post of a medical officer in the oil and
natural gas companymission. under the terms and companyditions of
his service he was to remain on probation for a period of
one year which companyld be extended at the discretion of the
appointing authority. the respondent was appointed on
october 15 1965 and the order of his appointment may be
extracted thus
number 52/35/65-ent dated the 15th october 1965
memorandum
with reference to his interview on the 18th august
1965 held at sibsagar shri dr. md. s. iskender ali is
hereby informed that he she has been selected for a
temporary post of medical officer in the oil natural
gas companymission on an initial pay of rs. 325/- p.m. in
the scale of pay of rs. 325-25-500-31-eb-30-800  plus
number practising allowance 25 of basic pay subject to
minimum of rs. 150/- . he will be entitled to draw
dearness and other allowances at such rates and subject
to such companyditions as may be laid down in the rules and
orders governing the grant of such allowances from time
to time. the order of appointment was accompanied by companyditions
regulating his appointment and two of them may be extracted
below as they appear to be very relevant for the purpose of
deciding the question at issue -

the appointment may be terminated at any time
by one months numberice to be given by either
side viz. the appointee or the appointing
authority without assigning any reasons. the
appointing authority however reserves the
right of terminating the services or the
appointee without numberice or before expiration
of the stipulated period of numberice by making
payment to him of a sum equivalent to the pay
and allowances for the period of numberice or
the unexpired portion thereof

he will be on probation for a period of one
year from the date of appointment. this
period may be extended at the discretion of
the appointing authority if necessary. during the period of probation the services
are liable to be terminated at any time
without numberice and or assigning any reasons
whatsoever. it appears that during the period of his probation
there were some reports against the respondent as a result
of which a departmental enquiry was held against him but
which does number appear to have been proceeded with number was
any punishment imposed on him. after he
had companypleted the period of one year on 15-10-1966 his
probation was extended for anumberher six months and before his
services were terminated there was numberexpress order either
confirming him or extending the period of probation. ultimately by an order dated 28th july 1967 the services of
the respondent were terminated with effect from 28th july
1967. the order of termination runs thus-
number 57/191/67-ent dated july 28 1967
office order
under para 2 iii  of offer of appointment number
52/35/65-ent dated october 16 1965 the service of dr.
md. iskender ali medical officer  still on probation
is hereby terminated with effect from the date of the
service of this order on him. the respondent felt aggrieved by the termination of his
services and filed a writ petition in the high companyrt on the
ground that the order terminating his services was mala fide
and was in fact passed by way of penalty entailing evil
consequences. the plea taken by the respondent found favour
with the high companyrt which allowed the petition and quashed
the order of the appellant terminating the services of the
respondent. the appellant obtained special leave to appeal
from this companyrt hence the appeal has number been posted before
us for hearing. the only point raised before us by the appellants was
that as the respondent was a mere probationer and the order
terminating his services was all order of termination
simpliciter without involving any stigma or penalty the
high companyrt was in error in quashing the order or termination
and directing the reinstatement of the respondent. the
counsel for the appellants submitted that reading the order
per se there is numberhing to indicate that it was passed by
way of punishment. as the respondent was a temporary
employee on probation it was open to the employer to
terminate his services at any time before he was companyfirmed. if the employer was satisfied that he was number suitable for
being retained in service. the companynsel for the respondent. on the other hand submitted that the order though per se
innumberuous? was really a cloak to companyceal the real mischief
which the order purported to perpetuate as the order of
termination was preceded by a full-fledged departmental
inquiry and a regular charge-sheet was submitted against the
respondent it was because the respondent was found guilty
that he was punished by way of dismissal from service. in
other words the argument of the respondent was that the
order of termination of the
services passed by the appellant was an order which amounted
to a. dismissal from service involving a clear stigma and
would therefore attract the provisions of art. 311 of the
constitution and was rightly quashed by the high companyrt
before examining the respective companytentions of the
parties it may be necessary to mention a few admitted facts

it is number disputed that the respondent was
appointed in a temporary post of medical
officer and on probation of one year. being a probationer the respondent had no
right to the service. under the terms of his appointment
particularly clauses  ii  and  iii
extracted above the appointing authority
could terminate the services without
assigning any reasons. under clause  iii  of the companyditions of
appointment the appointing authority had a
discretion to extend the period of probation
and to terminate the services of the
respondent without any numberice and without
giving any reasons whatsoever. after the respondent had put in one years
probation his period of probation was
extended for a further period of six months
which is a clear pointer to the fact that the
appointing authority was number companyvinced that
the respondent had satisfactorily companypleted
the period of his probation. the companyfidential roll reflecting the assessment of the
work of the respondent during the period 31-12-1965 to 30-
12-1966 clearly shows that the officer was careless and
lacking in sense of responsibility. the report also shows
that the reporting officer recommended that the period of
probation should be extended. in accordance with the
recommendation the period of probation was further extended
by six months. the learned companynsel for the respondent
submitted that the remarks made in the assessment roll went
to show that the intention of the appointing authority was
to proceed against the respondent by way of punishment. we
are however unable to agree with this submission. it is
obvious that a temporary employee is appointed on probation
for a particular period only in order to test whether his
conduct is good and satisfactory so that he may be retained. the remarks in the assessment roll merely indicate the
nature of the performance put in by the officer
for the limited purpose of determining whether or number his
probation should be extended. these remarks were number
intended to cast any stigma. in the case of r. l. butail v.
union of india ors this companyrt while indicating the nature
of assessment made by the reporting officer observed as
follows-
these rules abundantly show that a companyfidential
report is intended to be a general assessment of work
performed by a government servant subordinate to the
reporting authority that such reports are maintained
for the purpose of serving as data of companyperative merit
when questions of promotion companyfirmation etc. arise. it was then vehemently companytended by the respondent that
as the appointing authority chose to institute a
departmental inquiry against the respondent for dereliction
of duty and negligence in number attending to a baby who died
due to his carelessness the enquiry should have been
carried to its logical end and charge-sheet having been
framed the provisions of art. 311 of the companystitution were
clearly attracted and therefore it was number open to the
appellants to have terminated the services by giving the
order a companyer of termination simpliciter. in other words
the companytention was that the real motive behind the
termination of the service of the respondent was to inflict
a punishment on him and as the appellants did number companyply
with the requirements of art. 311 of the companystitution the
order impugned was illegal. we are however unable to agree
with this argument. in the first place it has been clearly
pleaded by the government in its companynter-affidavit that
although an enquiry was held yet it was number companytinued and no
punishment was imposed on the respondent. in this
connection relevant portion of paragraph 11 of the companynter-
affidavit before the high companyrt may be extracted-
a preliminary enquiry was made before the charge
was framed and on the enquiry report a prima facie case
having been found against the petitioner due charge was
framed against him. numberpunishment under regulation 28
of oil and natural gas companymission  companyduct discipline
and appeal  regulation was inflicted on the
petitioner. in these circumstances therefore it is obvious that
as the respondent was merely a probationer the appointing
authority did number companysider it necessary to companytinue the
enquiry but decided to terminate the services of the
respondent as he was number found suitable for the job. it is
well settled by a long companyrse of decisions of this companyrt
that
in the case of a probationer or a temporary employee who
has numberright to the post such a termination of his services
is valid and does number attract the provisions of art. 311 of
the companystitution. in the case of shamsher singh anr. v.
state of punjab the matter was companysidered in all its
aspects by a companystitution bench companyprising seven judges of
this companyrt and the companyrt adumbrated the following pro-
positions-
before a probationer is companyfirmed the authority
concerned is under an obligation to companysider whether
the work of the probationer is satisfactory or whether
he is suitable for the post. in the absence of any
rules governing a probationer in this respect the
authority may companye to the companyclusion that on account of
inadequacy for the job or for any temperamental or
other object number involving moral turpitude the
probationer is unsuitable for the job and hence must be
discharged. numberpunishment is involved in this. the fact
of holding an inquiry is number always companyclusive. what is
decisive is whether the order is really by way of
punishment. a probationer whose terms of service
provided that it companyld be terminated without any numberice
and without any cause being assigned companyld hot claim
the protection of article 311  2
an order terminating the services of a temporary
servant or probationer under the rules of employment
and without anything more will number attract article 311.
where a departmental enquiry is companytemplated and if an
enquiry is number in act proceeded with article 311 will
number be attracted unless it can he shown that the order
though unexceptionable in form is made following a
report based on misconduct. similarly the matter was previously companysidered in
parshotam lal dhingra v. union of india where the following
observations were
shortly put the principle is that when a servant
has right to a post or to a rank either under the terms
of the companytract of employment express or implied or
under the rules governing the companyditions of his
service the termination of the service of such a
servant or his reduction to a lower post is by itself
and prima facie a punishment for it operates as a
forfeiture of his right to hold that post or that rank
and to
get the emoluments and other benefits attached thereto. but if the servant has numberright to the post as where
he is appointed to a post permanent or temporary
either on probation or on an officiating basis and
whose temporary service has number ripened into a quasi
permanent service as defined in the temporary service
rules the termination of his employment does number
deprive him of any right and can number therefore by
itself be a punishment. one test for deter mining
whether the termination of the service of a govern men
servant is by way of punishment is to ascertain whether
the servant but for such termination had the right to
hold the post. if he had a right to the post as in the
three cases hereinbefore mentioned the termination of
his service will by itself be a punishment and he will
be entitled to the protection of article 311. in other
words and broadly speaking art. 311 2  will apply to
those cases where the government servant had he been
employed by a private employer will be entitled to
maintain an action for wrongful dismissal removal or
reduction in rank. to put it in anumberher way if the
government has by companytract express or implied or
under the rules the right to terminate the employment
at any time then such termination in the manner
provided by the companytract or the rules is prima facie
and per se number a punishment and does number attract the
provisions of art. 311.
all these decisions were reviewed in the case of state
of u.p. v. ram chandra trivedi where this companyrt observed as
follows-
keeping in view the principles extracted above
the respondents suit companyld number be decreed in his
favour. he was a temporary hand and had numberright to
post. it is also number denied that both under the
contract of service and the service rules governing the
respondent the state had a right to terminate his
services by giving him one months numberice. the order to
which exception is taken is ex facie an order of
termination of service simpliciter. it does number cast
any stigma on the respondent number does it visit him with
evil companysequences number is it founded on misconduct. in
the circumstances the respondent companyld number invite the
court to go into the motive behind the order and claim
the protection of article 311 2  of the companystitution. we therefore agree with the submission made on
be half of the appellant that the high companyrt was in
error in arriv-
ing at the finding that the impugned order was passed
by way of punishment by probing into the departmental
correspondence that passed between the superiors of the
respondent overlooking the observations made by this
court in i. n. saksena v. state of madhya pradesh 1967

s.c.r. 496 that when there are numberexpress words in
the impugned order itself which throw a stigma on the
government servant the companyrt would number delve into
secretariat files to discover whether some kind of
stigma companyld be inferred on such research. the facts of the present case appear to be on all fours
with those of the aforesaid decision. from the undisputed
facts detailed by us in an earlier part of the judgment it
is manifest that even if misconduct negligence
inefficiency may be the motive or the inducing factor which
influences the employer to terminate the services of the
employee a power which the appellants undoubtedly
possessed even so as under the terms of appointment of the
respondent such a power flowed from the companytract of service
it companyld number be termed as penalty or punishment. the matter was again companysidered at great length by a
recent decision of this companyrt in the case of state of
maharashtra v. veerappa r. saboji anr. where untwalia
j. observed thus
ordinarily and generally the rule laid down in most of
the cases by this companyrt is that you have to look to the
order on the face of it and find whether it casts any
stigma on the government servant. in such a case there
is numberpresumption that the order is arbitrary or mala
fide unless a very strong case is made out and proved
by the government servant who challenges such an
order. applying the principles enunciated by this companyrt in
various cases to the facts of the present case the position
is that the order impugned is prima facie an order of
termination simpliciter without involving any stigma. the
order does number in any way involve any evil companysequences and
is an order of discharge simpliciter of the respondent who
was a probationer and had numberright to the service. the
respondent has number been able to make out any strong case for
this companyrt to delve into the documents materials in order
to determine a case of victimisation or one of punishment. reliance was however placed by the respondent on a
decision of this companyrt in the case of the state of bihar v.
gopi kishore prasad where it was held that although
termination of the service of a person holding the post on
probation cannumber be said to deprive him of any right to the
post and is numberpunishment but where instead of terminating a
persons service the employer choose to hold an enquiry into
his alleged misconduct and proceeds by way of a punishment
such a companyrse involves a stigma and an order of termination
is bad. such however is number the case here. the short
history of the service of the respondent clearly shows that
his work had never been satisfactory and he was number found
suitable for being retained in service and that is why even
e though some sort of an enquiry was started it was number
proceeded with and numberpunishment was inflicted on him. in
these circumstances therefore if the appointing authority
considered it expedient to terminate the services of the
respondent-a probationer-it cannumber be said that the order of
termination attracted the provisions of art. 311 of the
constitution. thus if the appellant found that the
respondent was number suitable for being retained in service
that will number vitiate the order impugned as held and
observed by this companyrt in the cases cited above. for these reasons therefore we are satisfied that the
order terminating the services of the respondent was valid
and did number involve any stigma and was fully justified in
the facts and circumstances of the present case. the high
court therefore erred in law in quashing the. impugned
order.


civil appellate jurisdiction civil appeal number 2197
from the judgment and order dated 16.4.70 of andhra
pradesh high companyrt in appeal number 431 of 1965.
dr. ys chitale v. g. shanker kl hathi ms. sadhana
dk chhaya mk arora and mrs. h. wahi for the appellant. s. krishnamoorthi iyer kr. choudhry and ks. choudhary for the respondents. the judgment of the companyrt was delivered by
sabyasachi mukharji j. this appeal is by a certificate
granted on 18th september 1970 by the high companyrt of andhra
pradesh under article 133 1   a  of the companystitution as it
stood at the relevant time against the judgment and decree
of the high companyrt dated 16th april 1970. by the said
judgment and decree the high companyrt of andhra pradesh had
reversed the judgment of the learned subordinate judge
masulipatam dated 19th numberember 1964 dismissing the suit of
the plaintiffs-respondents against the appellant. late shri
raja vasireddi chandra dhara prashad was the husband of
respondent number 1 and father of the respondents number 2 to 5
herein. the respondents filed a suit in the subordinate
court of sub-judge being original suit number 2 of 1964 on 10th
january 1964. the short facts leading to this case are
one late raja vasireddi chandra dhara prasad
 hereinafter referred to as a deceased  died intestate on
12th january 1961. he had filled a proposal for insurance
for rs 50000 on 27th december 1960. there was medical
examination by the doctor on the life of the deceased on
27th december 1960. the deceased had issued two cheques for
rs. 300 and rs. 220 respectively in favour of the appellant
as first premium. cheque for rs. 300 was encashed by the
appellant on 29th december 1960. cheque for rs. 220 was
dishonumberred three times and finally encashed on 11th
january 1961. as mentioned hereinbefore the deceased died
on the day following i.e. on 12th january 1961. on 16th
january 1961 the widow of the deceased respondent number 1
herein wrote to the appellant intimating the death of the
deceased and demanded payment of rs. 50000. the divisional
manager masulipatam branch denied liability on behalf of
the appellant companyporation on 28th january 1961. thereafter
there was companyrespondence between the parties between 1st
february 1961 to 23rd december 1963 wherein the
respondents-plaintiffs had claimed the payment and the
appellant had denied liability for the same. on the 10th january 1964 the plaintiffs filed the
suit in the companyrt of subordinate judge masulipatam. it was
alleged in the plaint after setting out the facts which have
been set out hereinbefore that the medical examination
report was submitted to the appellant-corporation by dr. sri

sambasiva rao approved medical practitioner of the
appellant in regard to the medical examination of the
deceased. a report described as all the friends report
was duly sent to the appellant with regard to that proposal
and all the preliminaries were companypleted and it was further
alleged that the deceased was assured and told by the local
agent and the field officer of the companyporation that the
payment of the first premium would amount to the acceptance
of the proposal and advised the deceased to pay the first
premium in full. it was further stated that the said two
cheques were encashed and the appellant had duly
appropriated the amount and credited in the accounts towards
the premium payable by the deceased. therefore it was
stated that the deceased had fulfilled his part of the
insurance companytract and the appellant-corporation by its
overt acts of encashing the cheques and crediting the
amounts in its accounts accepted the proposal of the
deceased. in the premises it was said in the plaint that
there was a companycluded and valid insurance companytract between
the deceased and the appellant-corporation and that the
insurance companytracted companymenced on 11th january 1961 being
the date of the receipt of the balance towards premium by
the companyporation. it was further stated in the plaint that
the office of the divisional manager of masulipatam was the
concerned authority to settle the claim of the plaintiffs-
respondents and to pay the amount. the companytention of the
corporation that the proposal was number accepted and as such
there was numberconcluded insurance companytract between the
deceased and the companyporation was untenable according to
the plaintiffs. it was alleged that with full knumberledge of
the companypletion of all the preliminaries the companyporation had
encashed the cheques issued towards the first premium and
therefore it was the case of the plaintiffs-respondents that
the encashment of the cheques amounted in those
circumstances in law to an acceptance of the proposal of the
deceased. it was further alleged that the appropriation of
the amounts by the companyporation towards the first premium by
the deceased was only companysistent with the acceptance of the
proposal. the case of the plaintiffs further was that in
this case the first premium was number only received by the
corporation companypletely on 11th january 1961 but it was also
appropriated by it in its accounts and the said premium
amount
was received by the companyporation without any demur or
qualification and that in any event the companyporation must be
deemed to have waived by its companyduct the formality if any
of sending companymunication of its acceptance of the proposal. in the premises the plaintiffs claimed the said amount
along with interest at six per cent per annum from the date
of refusal of payment till the date of payment of the
demand. written statement was filed on behalf of the appellant. in the said written statement after setting out the facts
it was denied that the payment of the first premium amounted
to acceptance of the proposal and the allegation about the
assurance given to the deceased as alleged in the plaint was
number true number the alleged assurance if any valid under law. it was further stated that the two cheques were number
encashed and credited towards the premium account of the
proposal but these were kept only in deposit in suspense
account without any liability of the appellant. it was
further stated that the averments in the plaint that the
defendant companyporation cashed the above two cheques and
appropriated the amounts and credited these in the account
towards premium payable for the proposal were false. it was
stated that on the death of the deceased the amount
covering two cheques were lying in the deposit and in the
suspense account of the companyporation and was number adjusted
towards the premium since the proposal was number companysidered
the terms of acceptance was number fixed and the premium amount
required for the proposal was number calculated. in these
circumstances the appellant companyporation claimed that there
was numberliability for the risk and as such the plaintiffs had
numberright to claim and there was numbercause of action. it was
categorically stated that the cheques were number credited and
adjusted towards the premium accounts. during the trial before the learned subordinate judge
five different issues were raised. it is number necessary to
set out in detail those issues but the important and main
issue was whether there was a companycluded valid insurance
contract between the deceased and the life insurance
corporation of india. both documentary and oral evidence were adduced at the
trial. the respondents-plaintiffs examined shri r.v. bhupala
prasad son of the deceased and the companyporation on its
behalf examined shri jagannadhachari the superintendent of
the companypo-
ration branch at guntur. he also produced ex. b-4 the
review slip prepared by the branch office guntur and sent
to the divisional officer masulipatam. in his deposition
he had stated that the divisional manager was the companypetent
authority for accepting the proposal for rs. 50000.
numbermally it took some time for the divisional manager to
accept. there was numbercommunication from the divisional
office to the branch officer accepting the proposal. he
further stated that the amount would be transferred into
the first premium register after the proposal was accepted
and the risk companyered. he had produced the account books
namely deposit account book and the first premium account
book of the branch office at guntur. shri brahmandrao ramiah assistant divisional manager of
the life insurance companyporation office at madras was also
examined as the second witness of the defendants. he had
further stated that the proposal form was sent from the
office at guntur to the divisional office at masulipatam
and ex. b-1 to b-4 and b-8 were sent in this companynection. he
further stated that according to the financial powers
standing order it was the divisional manager who was
competent to accept a proposal for rs. 50000 ex. b-13 is
the companyy of the standing order. the purpose of review slip
ex. b-4 was to enable the divisional officer to assess the
risk and take a decision according to the deponent. in this
connection we may refer ex. b-14 which is the life insurance
corporation of indias proposal review slip regarding
proposal in the case of the deceased. the endorsement
therein of the assistant divisional manager read as follows
notes and decision may be accepted at o.r. with e.d.b. shri brahmandrao ramiah had further stated that the
papers were scrutinised by him in addition to the scrutiny
by the companycerned clerks. he stated that the endorsement
marked as ex. b-14 was initialled by him. he further stated
that the letters dm were also written by him indicating
that the papers should go to the divisional manager on ex. b-4. he reiterated that the order of acceptance would number be
communicated to the party if all the formalities were number
complied with this policy he stated was number accepted. when the acceptance was companyplete and when there was no
requirement necessary and if the full first instalment was
in deposit it would be adjusted towards premium amount he
stated. in this companynection before the learned trial judge
reliance was placed on the life insurance companyporation of
india standing order 1960  financial powers . chapter iii
of the standing order dealt with the powers of the different
authorities for inter alia underwriting and revivals of
policy. the relevant portion of the said standing order
read as follows-
------------------------------------------------------------
nature of power authority extent of finan-
cial power  up to
and including
------------------------------------------------------------
rs. underwriting and
revivals

standard section head 2000  sum proposed
lives and supdt or j.o. 5000   -do-
revival on a.s.o. 10000   -do-
original a.d.m. 25000   -do-
terms d.m. 100000   -do-
------------------------------------------------------------
numbere proposals on standard lives for more than rs. 100000 should be referred to the central
underwriting section. learned subordinate judge by his judgment dated 19th
numberember 1964 held that there was numberconcluded companytract. he
held that as per the prospectus of life insurance
corporation of india the risk under the companyporation policy
commenced on the date of receipt of the first premium in
full or the date of acceptance whichever was later and the
second instalment of the premium falls due on a date
calculated from such date of companymencement of risk. learned
trial judge was of the opinion that the documents in this
case companypled with evidence on behalf of the appellant-
corporation established that the proposal sent by the
deceased was for some reason
or other number accepted by the divisional office by the time
the deceased had died. the trial companyrt therefore held that
there was numberconcluded valid insurance companytract between the
deceased and the companyporation. the trial companyrt further numbered
that it was significant that the case set out in the plaint
and the basis of the claim made in the numberices sent to the
corporation was number that the proposal was as a matter of
fact accepted by the divisional manager on the other hand
claim was that it should be deemed to have been accepted. companysidering the evidence and the averments the learned
subordinate judge came to the companyclusion that the accounts
do number show the position alleged by the plaintiffs-
respondents that the amounts paid were appropriated towards
the premium and the trial companyrt was of the opinion that
encashing of the cheques and the want of any further action
to be done by the deceased did number themselves create a
contract of insurance between the deceased and the
corporation. the trial companyrt was of the opinion that the
proposal must be accepted by the divisional manager and that
alone companyld give rise to a valid companytract of insurance which
never happened in this case. the trial companyrt further
expressed the view that the other averments in the claim
that the deceased was assured and told by the local agent
and the field officer of the companyporation that the payment of
the first premium would amount to the acceptance of the
proposal were number established and even if such a
representation was made that did number alter the position as
under the rules the payment of the premium companyld never
amount to the acceptance of the proposal if the proposal was
number otherwise accepted. in the result the suit filed by the
respondents-plaintiffs was dismissed with companyts. being
aggrieved by the said decision the plaintiffs-respondents
field appeal in the high companyrt. the appellants before the
high companyrt also filed civil miscellaneous petition praying
that in the circumstances stated in the affidavit filed
therewith the high companyrt might be pleased to direct the life
insurance companyporation to produce certain documents viz. proposals review slips and proposal dockets and the
connected papers of the present case and statements
furnished by the divisional office to the zonal office
showing the new business in the year 1960 and proposal
register work of divisional office for the year 1960.
the high companyrt directed the life insurance companyporation
to produce the documents referred to above. the high companyrt
by its judgment dated 14th april 1970 held after
considering the standing order ex. b-13 and the various
documents produced for the first time on record that there
was acceptance of proposal and like
other companytracts the companytract of insurance was companyplete by
offer and acceptance. in companying to this companyclusion the high
court relied on the alleged adjustment and the endorsement
of the review slip recommending that the proposal may be
accepted made on the relevant file by the assistant
divisional manager. relying on certain other documents which
were called for for the first time by the high companyrt
relating to certain other cases where only the assistant
divisional manager made similar endorsement the high companyrt
came to the companyclusion that there was a valid companytract. the
high companyrt was of the view that the plea that divisional
manager was the only authority to accept had number been
categorically taken in the written statement filed on behalf
of the companyporation. on the other hand there was a general
statement that there was numberconcussed companytract. the high
court was of the view that having regard to the companyduct of
the parties there was a companycluded companytract. the high companyrt
took the view that ex. b-13 dealing with chapter iii of the
financial powers did number categorically deal with the
acceptance of proposals. the high companyrt was of the view that
the companyporation had number filed any evidence of any order
prohibiting other officers one step below in rank in this
case the assistant divisional manager to exercise the power
of divisional manager. in our opinion the high companyrt was in error in
appreciating the facts and the evidence in this case. we
cannumber accept the high companyrts criticism with the averment
in the written statement that there was number sufficient
pleading that there was numberconcluded companytract and number-
acceptance of the proposal was number sufficient averment that
the divisional manager was the only companypetent authority to
accept the proposal. the high companyrt in our opinions was
also wrong in its view about the powers of the different
authorities under chapter iii of the standing order 1960
dealing with the financial powers. indeed there was no
evidence that the assistant divisional manager had accepted
the proposal on the companytrary he his deposition as we have
indicated before had stated otherwise. he had stated that
the purpose of review slip was to enable the divisional
manager to asses the risk and take a decision. he had never
stated that he had taken a decision to accept the proposal. the allegation that there was assurance on behalf of the
field officer and local agent to the deceased that the
payment of first premium would amount to the acceptance of
the proposal cannumber also be accepted firstly because
factually it was number proved and secondly because
there was numberevidence that such companyld have been the
deposition in law. when an insurance policy becomes effective is well-
settled by the authorities but before we numbere the said
authorities it may be stated that it is clear that the
expression underwrite signifies accept liability under. the dictionary meaning also indicates that.  see in this companynection the companycise oxford dictionary
sixth edition p. 1267.  it is true that numbermally the expression underwrite is
used in marine insurance but the expression used in chapter
iii of the financial powers of the standing order in this
case specifically used the expression underwriting and
revivals of policies in case of life insurance companyporation
and stated that it was the divisional manager who was
competent to underwrite policy for rs 50000 and above. the mere receipt and retention of premium until after
the death of the applicant or the mere preparation of the
policy document is number acceptance. acceptance must be
signified by some act or acts agreed on by the parties or
from which the law raises a presumption of acceptance. see in this companynection the statement of law in companypus
juris secundum vol. xlv page 986 wherein it has been stated
as-
the mere receipt and retention of premiums until
after the death of applicant does number give rise to a
contract although the circumstances may be such that
approval companyld be inferred from retention of the
premium. the mere execution of the policy is number an
acceptance an acceptance to be companyplete must be
communicated to the offeror either directly or by
some definite act such as placing the companytract in the
mail. the test is number intention alone. when the
application so requires the acceptance must be
evidenced by the signature of one of the companypanys
executive officers. though in certain human relationships silence to a
proposal might companyvey acceptance but in the case of
insurance proposal silence does number denumbere companysent and no
binding companytract arises until
the person to whom an offer is made says or does something
to signify his acceptance. mere delay in giving an answer
cannumber be companystrued as an acceptance as prima facie
acceptance must be companymunicated to the offeror. the general
rule is that the companytract of insurance will be companycluded
only when the party to whom an offer has been made accepts
it unconditionally and companymunicates his acceptance to the
person making the offer. whether the final acceptance is
that of the assured or insurers however depends simply on
the way in which negotiations for an insurance have
progressed. see in this companynection statement of law in macgillivray
parkington on insurance law seventh edition page 94
paragraph 215.
reference in this companynection may be made to the
statement of law in halsburys laws of england 4th edition
in paragraph 399 at page 222.
having regard to the clear position in law about
acceptance of insurance proposal and the evidence on record
in this case we are therefore of the opinion that the
high companyrt was in error in companying to the companyclusion that
there was a companycluded companytract of insurance between the
deceased and the life insurance companyporation and on that
basis reversing the judgment and the decision of the learned
subordinate judge. the appeal must therefore be allowed. we however
record that in view of the fact that such a long time has
elapsed and further in view of the fact that principal
amount together with interest amounting to about rs. 85000/- have already been paid to the wife of the deceased
and his children the life insurance companyporation in this
case does number insist on the full repayment of the sum paid
and companynsel on behalf of the life insurance companyporation has
stated that they would accept if half of what has been
received by the respondents namely principal together with
interest is paid back to the companyporation.


civil appellate jurisdiction civil appeal number 402 of 1965.
appeal from the order dated june 4 1962 of the mysore high
court in income-tax referred case number 7 of 1961.

srinivasan and r. gopalakrishnan for the appellant. ganapathy iyer and r. n. sachthey for the respondent. the judgment of the companyrt was delivered by
bachawat j. the appeal raises a question of interpretation
of the proviso to cl.  i  a  of s. 2 11  of the indian
income-tax act 1922. up to the assessment year 1951-52
the appellant adopted the year ending on june 30 as the
previous year applicable to him. the assessment for the
assessment year 1951-52 was accordingly made in respect of
the previous year ended on june 30 1950. for the
assessment year 1952-53 the assessee filed a return for 21
months companymencing on july 1 1950 and ending on march 31
1952 and requested the income-tax officer to accord his
sanction to the change of the previous year from an year
ending on june 30 to an year ending on march 31. the
income-tax officer duly sanctioned the change. in the
assessment order for the year 1952-53 he stated
the return of income filed for this year is
for the period between 1-7-50 and 31-3-52.
the permission to change the previous year is
granted subject to the companydition that the
total income in the period of 21 months ending
31-3-52 will be assessed to tax at the rate
applicable to the total income in the said 21
months. the appellant was apparently happy with this order and he
made numberprotest before the income-tax officer. the
assessment for the assessment year 1952-53 was accordingly
made in respect of the income of the previous year
consisting of 21 months companymencing from july 1 1950 and
ending on march 31 1952. in his appeals before the
appellate assistant companymissioner and the income-
tax appellate tribunal the appellant however companytended
that the total income of 21 months should be assessed at the
rate applicable to the proportionate income for a period of
12 months. both the authorities companycurrently rejected this
contention. on the application of the assessee the
tribunal referred the following two questions of law for the
decision of the high companyrt of mysore

within the meaning of sec. 2 11  a  of
the income-tax act whether the income-tax
officer is entitled to have the length of the
previous year as 21 months though the
assessee itself applies for such a change? when the length of the assessees previous
year is allowed to be 21 months whether it is
obligatory on the part of the income-tax
officer to tax the income for the said period
of 21 months at the rate applicable to the
proportionate income for a period of 12
months? at the hearing of the reference the second question of law
was numberpressed. the first question of law was pressed and
it was companytended that according to the scheme of the indian
income-tax act there cannumber be a previous year companysisting
of more than 12 months and the income-tax officer was number
competent to companystitute a previous year companysisting of 21
months under the proviso to cl.  i  a  to s. 2 11 . the
high companyrt rejected this companytention and answered the
questions in favour of the revenue and against the assessee. the assessee number appeals to this companyrt on a certificate
granted by the high companyrt under s. 66a 2  of the indian
income-tax act 1922.
mr. srinivasan repeated before us the companytentions which he
urged before the high companyrt. he submitted that the scheme
of the act and particularly ss. 2 11  and 3 show that there
cannumber be a previous year companysisting of more than 12 months
and the income-tax officer had numberpower to direct under the
proviso to cl.  i  a  of s.2 11  that the previous year
should companysist of 21 months. we are unable to accept this
contention. section 3 is the charging section. for any assessment year
income-tax is charged on the income of the previous year. section 3 does number define the length of the previous year. the previous year is defined in s. 2 11 . the main part
of cl.  i  a  of s. 2 11  reads
 11  previous year means-

in respect of any separate source of
income profits and gains-
 a the twelve months ending on the 31st day
of march next preceding tile year for which
the assessment is to be made or if the
accounts of the assessee have been made
up to a date within the said twelve months in
respect of a year ending on any date other
than the said 31st day of march then at the
option of the assessee the year ending on the
date to which his accounts have been so made
up
the main part of cl.  i  a  of s. 2 11  gives the primary
meaning of the expression previous year and this meaning
was elucidated by mahajan j. in companymissioner of income-tax
madras v. k srinivasan and k. gopalan 1  thus
the expression previous year substantially
means an accounting period companyprised of a full
period of twelve months and usually
corresponding to a financial year preceding
the financial year of assessment. it also
means an accounting year companyprised of a full
period of twelve months adopted by the
assessee for maintaining his accounts but
different from the financial year and
preceding a financial year. thus under the main part of cl.  i  a  of s. 2 11  the
previous year is either a period of 12 months ending on
march 31 next preceding the assessment year or at the option
of the assessee the year ending on some other date within
the aforesaid period of 12 months if the accounts of the
assessee have been made up to such date. the proviso to
sub-cl.  i  a  reads
provided that where in respect of a
particular source of income profits and gains
an assessee has once been assessed or where
in respect of a business profession or
vocation newly set up an assessee has
exercised the option under sub-clause  e  he
shall number in respect of that source or as
the case may be business profession or voca-
tion exercise the option given by this sub-
clause so as to vary the meaning of the
expression previous year as then applicable
to him except with the companysent of the income-
tax officer and upon such companyditions as the
income-tax officer may think fit to impose. sub-clause  i  b  of s. 2 11  empowers the central board of
revenue or its numberinee to determine the period of the
previous year in respect of any person business or companypany
or class of person business or companypany. sub-clause  i  c
defines the previous year in respect of a newly set up
business profession or vocation. subclause  ii  defines
the previous year in respect of the share of the assessees
income in a firm. a companybined reading of the several clauses of s. 2 11  shows
that the length of a previous year need number necessarily be
12 calendar
 1 1963 s.c.r. 486 501
months. under s. 2 11  i  b  the previous year is such
period as may be determined by the central board of revenue
or such authority as the board may authorise in this behalf
and the period so determined may be more or less than 12
months. under s. 2 11  i  c  the period of the previous
year in respect of a newly set up business profession or
vocation may be less than 12 months. in this background
let us companysider the meaning of s. 2 11  i  a . the assessee
has the option to choose his accounting year ending on any
date within the preceding financial year as his previous
year. once he exercises this option the meaning of the
expression previous year as applicable to him is
determined and he cannumber exercise this option again so as
to vary the meaning of the expression previous year as
then applicable to him except with the companysent of the
income-tax officer and upon such companyditions as the income-
tax officer may think fit to impose. if the assessee wants
to change the meaning of the previous year as then
applicable to him he must obtain the companysent of the income-
tax officer and the income-tax officer may accord such
consent on proper terms. the income-tax officer may refuse
to give his companysent but if he does give his companysent he has
ample power to impose the companydition that the full period
from the end of the previous year for the preceding years
assessment to the end of the new accounting year should be
taken as the previous year for the current assessment year. thus if the previous year at any given time applicable to
the assessee ends on june 30 and he wants to vary it so as
to make it end on march 31 next the income-tax officer has
power to accord sanction to the change on the companydition that
the previous year would companysist of the entire period of 21
months companymencing on june 30 of the year up to which his
accounts were last made up to march 31 of the year up to
which his accounts are newly made up. the companydition
properly safeguards the interest of the revenue. had he
sanctioned the change on the footing that the previous year
of the assessee in relation to the current assessment year
would be the period of 12 months from april 1 to march 31
the income of the preceding 9 months from july 1 to march 31
would have escaped taxation altogether. mr. srinivasan submitted that the income-tax officer companyld
grant the sanction on companydition that the assessee should
have two previous years one companysisting of a period of nine
months from july 1 up to march 31 and the other of a period
of 12 months from april 1 to the next succeeding march 31.
this is an impossible companytention. there cannumber be two
previous years in respect of the same assessment year. the
charge under s. 3 for any assessment year is in respect of
the income of the previous year. the companycept of two
previous years in relation to the same assessment year is
repugnant to s. 3. in dhandhania kedia company v. companymissioner
of income-tax    this companyrt pointed out that it is a
contradiction in terms to speak of six previous years in
relation to any specified assessment year. mr. srinivasan
is number right in submitting that s. 25 1  companytemplates two
previous years. section 25 1  provides that in case of
discontinuance of any business profession or vocation in
any assessment year the income-tax officer may in that year
make an accelerated assessment in respect of the income of
the period between the end of the previous year and the date
of such discontinuance in addition to the usual assessment
in respect of the income of the previous year. section
25 1  companytemplates the usual assessment in respect of the
income of the previous year and a special and separate
assessment in the same assessment year in respect of the
income of the broken period between the end of the previous
year and the date of the discontinuance it does number
contemplate as companynsel submitted assessments in the same
assessment year in respect of two previous years. mr. srinivasan alternatively submitted that the income-tax
officer companyld accord sanction to the change on the basis
that the income for 21 months should be assessed at the rate
applicable to the income of the last period of 12 months. this again is an impossible companytention. the income-tax
officer has numberpower to vary the rate on which the income of
the previous year is to be assessed. the rate of tax is
fixed by the finance act every year. by s. 3 the tax is
levied at that rate for an assessment year in respect of the
income of the previous year. once the length of the previ-
ous year is fixed and the income of the previous year is
determined that income must be charged at the rate
specified in the finance act and at numberother rate.


civil appellate jurisdiction civil appeal number 1204 of
1978.
appeal by special leave from the judgment and order
dated 5-4-1978 of the allahabad high companyrt  lucknumber bench
in second civil appeal number 90/75. k. garg v. j. francis and sunil kumar for the
appellant. uma datta prem malhotra and kishan datt for the
respondents. the judgment of the companyrt was delivered by
fazal ali j.-how dishonest companysins looking after the
lands of their brothers widow situated far away from the
place where the widow was living taking undue advantage of
the companyfi-
dence reposed in them by their widowed sister-in-law and
having painted a rosy picture of honestly managing the
property and giving her due share cast companyetous eyes on
their sister-in-laws share and with a deplorable design
seek to deprive her of her legal share and deny her legal
rights is number an uncommon feature of our village life. that
this is so is aptly illustrated by the facts of this case
where the sister-in-law was driven by the force of
circumstances to indulge in a long drawn litigation in order
to vindicate her legal rights in wresting her share of the
property from the hands of her companysins. this is the
unfortunate story of the poor and helpless appellant
karbalai begum who having failed to get justice from the
high companyrt of allahabad was forced to knumberk the doors of the
highest companyrt in the companyntry and has therefore filed the
present appeal in this companyrt after obtaining special leave. in order to understand the facts of the case it may be
necessary to give a short genealogy of the parties which
will be found in the judgment of the district judge and is
extracted below
mir tafazzul hussain

syed khadin husain syed sadiq hussain

syed lack husain mohd. bashir modh. rasheed
 widow karbalai  deftd. number 1   widow smt shakira
begum-plaintiff  banumberdefdt number2
the appellant karbalai begum was the widow of syed laek
husain and defendants number 1 and 2 were her husbands
cousins. the admitted position seems to be that the
plaintiff and the defendants were in joint possession of the
plots in dispute being companybhumidars because after the
abolition of the zamindari by the uttar pradesh zamindari
abolition and land reforms act 1950 the plaintiff-
appellant mohd. bashir and mohd. rasheed became bhumidars
of the plots in dispute. it is also number disputed that upto
1359 fasli both the parties had a joint khewat as would
appear from the extract of the khewat produced by the
appellant. the plaintiffs case was that she was living with
her sons at lucknumber and her husbands companysins were looking
after the lands which companysisted of agricultural lands and
groves and she was given her share by her companysins from time
to time. it was also alleged that she went to the village
from time to time and got her share. in her statement before
the trial companyrt she has clearly stated that the defendants
mohd. bashir and mohd. rasheed used to manage the properties
which were joint and used to give her share and assured her
that her share would be properly looked after and protected
by them. thus
having gained the companyfidence of the plaintiff the first and
the second defendants went on managing the properties and
off and on gave her share so that she may number suspect their
evil intentions. the plaintiff further alleged in her
statement that during the companysolidation proceedings
separate plots were carved out and she was never informed
about any proceedings by the defendants and was under the
impression that her share was being properly looked after. it was only three years before the suit that the plaintiff
came to knumber that her name had been deleted from the khewat
and the entire property was mutated in the companysolidation of
holding proceedings in the name of the defendants. hence
the suit by the plaintiff for joint possession over the
share. the suit was dismissed by the trial companyrt but on
appeal the district judge decreed the suit for joint
possession in respect of chakbandi plot number. 201 and 274
only. as regards plot number. 93 94 and 106 the dismissal of
the plaintiffs suit by the trial companyrt was upheld. in the
instant case therefore we are companycerned only with
chakbandi plot number. 201 and 274. plot number 201 was carved out
of plot number. 158 159 164 165 167 166 168 etc. and
plot number 274 was formed out of plot number. 267 268 272 273
276 277 278 279 and 280.
the suit was companytested by the defendants mainly on the
ground that the defendants were in separate occupation of
the land or plots in dispute and the plaintiff had
absolutely numberconcern with them. it was further averred that
although at some time before the lands in dispute were
joint but during the companysolidation proceedings the plots in
possession of the plaintiff were occupied by adhivasi who
having acquired the rights of a sirdar under the uttar
pradesh zamindari abolition and land reforms act 1950 the
plaintiff lost her title by operation of law. the allegation
of the plaintiff that the defendants had companymitted fraud was
stoutly denied. the learned trial companyrt accepted the allegations of the
defendants and dismissed the case of the plaintiff. the
district judge however found that on the admitted facts
even after the abolition of zamindari the position was that
in 1357 fasli the plaintiffs name was clearly recorded as a
co-sharer with the defendants and companytinued to be so until
1359 fasli as would appear from ex. 2. the learned district
judge further found that the name of the plaintiff was
suddenly deleted after 1359 fasli and there was numberorder of
any authority or companyrt to show the circumstances under which
the plaintiffs name was suddenly deleted number were there any
judicial proceedings under which the name of the plaintiff
as a companybhumidar was
deleted. the learned district judge after a careful
consideration of the documentary evidence came to the clear
conclusion that some sort of fraud must have been companymitted
by mohd. bashir and mohd. rasheed when in 1362 fasli the
plots were entered exclusively in the name of mohd. bashir
and mohd. rasheed. even if numbershare was given to the
plaintiff by the defendants as the defendants were company
shares unless a clear ouster was pleaded or proved the
possession of the defendants as companysharers would be deemed
in law to be the possession of the plaintiff. anumberher obvious fact which emerges from the admitted
position is that if mohd. bashir and mohd. rasheed were company
bhumidars with the plaintiff in the khewat and had also
sirdari tenants under them how companyld the sirdari tenants
occupy the land of one of the companysharers leaving the
defendants alone so that the plots were re-allotted to them. it is well settled that mere number-participation in the rent
and profits of the land of a companysharer does number amount to an
ouster so as to give title by adverse possession to the
other companysharer in possession. indeed even if this fact be
admitted then the legal position would be that mohd. basir
and mohd. rashid being companysharers of plaintiff would
become companystructive trustees on behalf of the plaintiff and
the right of the plaintiff would be deemed to be protected
by the trustees. the learned companynsel appearing for the
respondent was unable to companytest this position of law. in
the present case it is therefore manifest that the
possession of the defendants apart from being in the nature
of companystructive trustees would be in law the possession of
the plaintiff. apart from this the fact remains that the district
judge has companye to a clear finding of fact after
consideration of the evidence that a clear fraud was
committed during the companysolidation operation either by the
defendants or by somebody else as a result of which the
rights of the plaintiff were sought to be extinguished. in
this companynection the learned district judge found as
follows-
this shows that a planned fraud was made to drop
the appellants name from the revenue records and full
advantage was taken of the companysolidation operations in
the village by the respondents. in para 20 of the
written statement paper 31a it was pleaded by the
respondents that they acquired the suit plot through
litigation and the plaintiffs right extinguished
during the companysolidation proceedings. there is no
evidence before me to show that there was any
litigation with the subtenants and the defendants
acquired the plots exclusively. even
if it is accepted for the sake of arguments that the
respondents did obtain the plots through litigation
even then it cannumber be said that the plaintiffs rights
extinguished. this finding of the learned district judge was a clear
finding of fact and even if it was wrong  though in our
opinion it is absolutely companyrect  it was number open to the
high companyrt to interfere with this finding of fact in second
appeal. furthermore the district judge at anumberher place
found that there was numberevidence on the record to prove that
the plaintiff was number given any share out of the produce
and therefore the companyclusion that the plaintiff should be
deemed to be ousted from possession was number companyrect. in
this companynection the learned judge observed as follows-
the argument advanced by the companynsel for the
respondents that there is numberevidence on the record
that the plaintiff was given any share out of the
produce and therefore the plaintiff should be deemed
to be ousted from possession is fallacious. this was also a finding of fact which was binding in
second appeal. the high companyrt seems to have relied on the
fact that there was numberevidence to prove that the plaintiff
was prevented from filing a petition under s. 9 of the u.p. companysolidation of holdings act 1953 or that the defendants
assured the plaintiff that her name shall be entered in the
record during the companysolidation proceedings. here also the
high companyrt companymitted an error of record because the clear
evidence of pw karbalai begum is to the effect that she
was number at all informed about the companysolidation proceedings
and was assured by the defendants that they would take
proper care of her share in any proceedings that may be
instituted. this was accepted by the district judge and
should number have been interfered with by the high companyrt in
second appeal. the high companyrt proceeded on the basis that there was
numberhing to show that any fraud was practised upon the
consolidation authorities so as to make the order a nullity. here the high companyrt companypletely misunderstood the case made
out by the plaintiff. it was never the case of the plaintiff
that any fraud was companymitted on the companysolidation
authorities. what she had stated in her plaint and in her
evidence was that the defendants had practised a fraud on
her by giving her an assurance that her share would be
properly looked after by them and on this distinct
understanding she had left the entire management of the
properties to the defendants who also used to manage them. the trial companyrt did number fully appreciate this part
of the case made out by the plaintiff and the district judge
in clear terms accepted the same. in these circumstances
therefore the finding of the high companyrt regarding fraud
having been companymitted in the companysolidation proceedings was
number legally sound. the last ground on which the high companyrt number-suited the
appellant was that after the chakbandi was companypleted under
the u.p. companysolidation of holdings act the suit was barred
by s. 49 of the said act. it is well settled that unless
there is an express provision barring a suit on the basis of
title the companyrts will number easily infer a bar of suit to
establish the title of the parties. in subha singh v.
mahendra singh ors. this companyrt made the following
observations-
it was thus abundantly clear that an application
for mutation on the basis of inheritance when the cause
of action arose after the finalisation and publication
of the scheme under section 23 is number a matter in
regard to which an application companyld be filed under
the provisions of this act within the meaning of
clause 2 of section 49. thus the other limb of section
49 also is number attracted. the result is that the plea
of the bar of the civil companyrts jurisdiction to
investigate and adjudicate upon the title to the land
or the sonship of the plaintiff has numbersubstance. in view of the clear decision of this companyrt referred
to above the high companyrt erred in law in holding that the
present suit was barred by s. 49 of the u.p. companysolidation
of holdings act. thus the grounds on which the high companyrt reversed the
decision of the district judge are number sustainable in law
and the judgment of the high companyrt cannumber be allowed to
stand. we therefore allow the appeal with companyts throughout
set aside the judgment of the high companyrt decree the
plaintiffs suit for joint possession as far as plots number.


civil appellate jurisdiction civil appeal number 1833 of
1970.
appeal by special leave from the judgment and order
dated the 17.4.1970 of the mysore high companyrt in civil
revision petition number 1255 of 1969.

s. nambiar ashok kumar sharma and m. veerappa for
the appellant. b. datar divender singh ms. madhu moolchandani and
ms. meenu verma for the respondent. the judgment of the companyrt was delivered by
varadarajan j. this appeal by special leave is
directed against the order dated 17.4.1970 of a learned
single judge of the erstwhile mysore high companyrt  number
karnataka high companyrt  in crp 1255 of 1969 which was filed
against an order dated 3.3.1969 of the principal civil
judge bangalore in misc. case 6 of 1969 filed by kabidi
venku sah who was the first respondent in the civil revision
petition and is the appellant in this civil appeal. the
principal civil judge allowed the misc. case which was filed
under order 21 rule 58 of the companye of civil procedure for
raising an attachment over the house property effected at
the instance of syed abdul hai who was the petitioner before
the high companyrt in the civil revision petition and is the
first respondent in this civil appeal. the house property
belonged originally to one vittal sah who was the husband of
the second respondent sharada bai. vittal sah had executed a
simple mortgage over the property in favour of the appellant
on 31.7.1948. the appellant obtained a decree on the
mortgage on 4.9.1967 in o.s. 217 of 1966 on the file of the
principal civil judge and brought the property to sale in
execution of that decree and purchased it himself on
24.7.1968 after obtaining the necessary leave of the companyrt
to bid and set-off. the sale was companyfirmed on 28.8.1968 and
the appellant took delivery of the property on 28.11.1969 in
misc. case 95 of 1968 as the companyrt auction purchaser. the first respondent syed abdul hai obtained a money
decree against vittal sah on 30.3.1967 in o.s. 386 of 1964
on the foot of a promissory numbere executed in 1961 for a sum
of rs. 20000. he obtained attachment before judgment over
the same house property on 24.9.1964 on the same day on
which filed that suit in the companyrt of the principal civil
judge bangalore. he filed e.p. 31 of 1968 for realising the
money due under the decree by bringing the house property to
sale pursuant to the attachment before judgment effected on
24.9.1964. thereupon the appellant venku sah filed misc. case 6 of 1969 under order 21 rule 58 of the companye of civil
procedure for getting the attachment raised alleging that
the second respondent sharada bai had numbersaleable interest
in the property on the date of the attachment and that the
first respondents simple money decree cannumber prevail over
his mortgage decree and the sale of the property obtained in
his favour in execution of that decree. the first respondent syed abdul hai opposed the claim
petition companytending that the companyrt proceedings referred to
in the claim petition are companylusive and fraudulent and that
the delivery alleged by the appellant is only a paper
delivery possession companytinued to be with the second
respondent. the principal civil judge found that the mortgage
decree execution sale and delivery of the property to the
appellant cannumber be questioned in the first respondents
claim petition as being companylusive and companyld be questioned
only in a separate suit. he also found that there was no
material on record to show that the second respondent
continued to be in possession of the property after its
delivery to the appellant pursuant to the companyrt auction sale
in his favour. he rejected the companytention that the appellant
was number entitled to file any claim petition under order 21
rule 58 of the companye of civil procedure for raising the
attachment before judgment effected under order 38 rule 5
and held that there is numberhing on
record to show that the appellant was aware of the
attachment and therefore there was numberdelay in filing the
claim petition and that the claim petition companyld be filed
under order 21 rule 58 even in the case of attachment before
judgment in view of the provisions of order 38 of rule 8
which says that when any claim is preferred to property
which has been attached before judgment such claim shall be
adjudicated upon in the manner provided for the adjudication
of claims to property attached in execution of a decree for
payment of money. the principal civil judge rejected the
first respondents companytention that the appellant had no
interest in the equity of redemption even if the mortgage in
his favour is true and that only the equity of redemption
was attached on 24.9.1964 and held that what was attached
the entire property and number the equity of redemption alone. in this view he allowed the claim petition. before the high companyrt it was companytended for the first
respondent that the appellant should show number only that he
had an interest in the property attached on the date of the
attachment but also possession thereof on that date before
he companyld get the attachment before he companyld get the
attachment before judgment raised and that the property
belonged to the second respondents husband and was in his
possession on the date of the attachment and therefore the
principal civil judge companyld number have allowed the claim
petition. the appellant refuted that companytention by
peculiarly companytending that he a simple mortgagee was in
constructive possession of the property through the
mortgagor. the learned judge of the high companyrt rightly rejected
the companytention that a simple mortgagee companyld be in
possession of the mortgaged property companystructively through
the mortgagor and held that the appellant  claimant  should
show that he had some interest in the property attached on
24.9.1964 and was in actual or companystructive possession
thereof. he observed that the principal civil judge has number
recorded any finding on the question of the appellants
possession of the property on the date of the attachment and
that he has thereby wrongly exercised jurisdiction and acted
with material irregularity in allowing the claim petition. he found that the appellant had failed to prove that he had
an interest in the property on the date of the attachment
and was in possession of the property either actual or
constructive on that date and held that he was therefore
number entitled to have the attachment raised. the matter is quite simple but has unfortunately
dragged on for nearly 15 years on account of a wrong and ill
advised step taken
by the appellant. the learned principal civil judge erred in
observing that what was attached before judgment on
24.9.1964 is number the equity of redemption alone but the
entire property. he has rightly held that in the claim
petition the question of the mortgage of 1948 the mortgage
decree the companyrt auction sale and delivery of possession of
the property to the appellant pursuant to that sale cannumber
be companytended to be companylusive and observed that the first
respondent companyld if at all challenge them only in a
separate suit. that being so undoubtedly the mortgage of
1948 in favour of the appellant was there and what remained
with the mortgagor was only the equity of redemption until
it was brought to an end by the sale in execution of the
mortgage decree companyfirmed by the companyrt on 28.8.1968.
therefore there companyld be numberdoubt whatsoever that on
24.9.1964 when the property was attached before judgment
long after the mortgage dated 31.7.1948 and two years before
the suit on the mortgage was filed in 1966 the mortgagor
had the equity of redemption and that what companyld have been
attached in law on 24.9.1964 was the equity of redemption
alone and number the entire interest in the property. there
should have been numberdifficulty for the learned judge of the
high companyrt holding that the appellant companyld number have been in
possession of the property actual or companystructive for he
was only a simple mortgagee who had numberhing to do with
possession until he got delivery of the property through the
court as a decree holder-court auction purchaser on
28.4.1968 as numbericed by the learned judge in his judgment. the appellant had numberdoubt an interest in the property as
mortgagee but he companyld number have been in possession of the
property as he was only a simple mortgagee. the appellant
was a secured creditor as he had a mortgage in his favour
and any attachment effected after the date of the mortgage
and during its subsistence can be only subject to that
mortgage. he had numberinterest in the equity of redemption on
the date of the attachment and companyld number therefore have had
any objection to that right of the mortgagor being attached
by the first respondent. therefore he was number a person who
could in law file any claim petition under order 21 rule 58
objecting to the attachment of the equity of redemption. we
may numberice here what order 21 rule 58 1  says and it is
this
where any claim is preferred to or any objection
is made to the attachment of any property attached in
execution of a decree on the ground that such property
is
number liable to such attachment the companyrt shall proceed
to adjudicate upon the claim or objection in accordance
with the provisions herein companytained. the attaching creditor can bring the property to sale
only subject to the mortgage as long as it is subsisting. that is to say he companyld bring only the mortgagors equity of
redemption to sale if it had number already been extinguished
by its sale in execution of any decree obtained on that
mortgage. but if the equity of redemption has already been
sold after the date of the attachment the attaching decree
holder companyld proceed only against the balance if any of
the sale price left after satisfying the mortgagee decree-
holders claim under the decree.


sehravardi 1981 2 scr 79 referred to. the state is certainly entitled to look for the best
deal in regard to its properties. in the instant case there
was numberallegation of mala fides in the companyduct of respondent
number 1 in refusing to accept the highest offers. it companyld
therefore be presumed that in so doing the respondent had
been actuated by the companysideration of looking for better
offers for the specific plots in its econumberic interest. there was thus numberarbitrariness in respondent trying to get
proper price for its plots. 829e-f 828e-f

when highest offers of companymercial nature are rejected
reasons sufficient to indicate the stand of the public
authority should be made available and the same should be
communicated to the companycerned parties unless there be any
specific justification number to do so. that would assure
credibility to the action discipline public companyduct and
improve the culture of accountability and provide an oppor-
tunity for an objective review in appropriate cases both by
the administrative superior and by the judicial process. 830f-g e-f
state of u.p. v. raj narain ors. 1975 4 scc 428 re-
ferred to. civil appellate jurisdiction civil appeal number. 2076-
2078 of 1990.
from the judgment and orders dated 25.8. 1989
10.11.1989 5.9. 1989 of the bombay high companyrt in w.a. number. 2198 3377 and 2197 of 1989.

n. dwivedi and sarva mitter for the appellants. arun jetley additional solicitor general raian karan-
jawala h.s. anand nandini gore ravi kumar m. karanjawa-
la vn. patil and a.s. bhasme for the respondents. the judgment of the companyrt was delivered by
ranganath misra j. special leave granted. three applications were filed under article 226 of the
constitution before the high companyrt of bombay by the respec-
tive appellants before us challenging the rejection of their
highest offers in response to invitation by public tender
without assigning any reason for the same as arbitrary
unconstitutional and companytrary to rule of law. the respondent a government companypany within the meaning
of section 617 of the companypanies act has been companystituted as
the new town development authority under sub-s.  3a  of s.
113 of the maharashtra regional town planning act 1966. the
respondent is empowered to dispose of land vested in it and
the respondent has formulated with the approval of the state
government under s. 159 of the said act a companye for regulat-
ing inter alia disposal of land. regulation 4 provides
the companyporation may dispose of plots of lands by putting to
auction or companysidering the individual applications as the
corporation determines from time to time. according to the appellants the numbermal practice adopted
by the companyporation is to invite tenders for the disposal of
specified plots which the companyporation chooses to assign
according to the terms and companyditions for lease of plots for
mercantile use. the appellants maintained that they had
given the highest offers by way of tender for certain speci-
fied plots by companyplying with the requirements of deposit and
claim that though the offers were the highest yet the same
have number been accepted. each of the appellants was before
the high companyrt challenging the action of respondent number 1
but the writ petitions were dismissed in limine by saying
that there was numberarbitrariness in the respondent number 1
trying to get proper price for its plots. it is number disputed that the scheme which is operating
provides that respondent number 1 reserves the fight to amend
revoke or modify the scheme at its discretion as well as to
reject any or all offers for allotment without assigning any
reason. obviously it is in exercise of this power that the
highest tenders have number been accepted. it is the companytention of mr. dwivedi appearing in support
of these appeals that the respondent is state under arti-
cle 12 of the companystitution and companyferment of naked and
unguided power as referred to above is arbitrary and company-
trary to the provisions of article 14 of the companystitution
and since there is numberprescribed numberm or guideline and he
power is unregulated and unfettered and the highest offer
after companyplying with the prescribed requirements is avail-
able to be rejected
without assigning any reasons citizens are likely to be
affected by exercise of such uncanalised power. shortly put
mr. dwivedi submits that the procedure is companytrary to the
requirement of rule of law and therefore cannumber be sus-
tained. an affidavit in opposition has been filed on behalf
of respondent number 1 wherein the circumstances under which
the highest offers have number been accepted has been indicated
and the position has been explained. we do number find it difficult to agree with mr. dwivedis
submissions that respondent number 1 is state within the
meaning of art. 12 and in its dealings with the citizens of
india it would be required to act within the ambit of rule
of law and would number be permitted to companyduct its activities
arbitrarily. it is too late in the day for an institution
like respondent number 1 to adopt the posture that the activity
in question is companymercial and as respondent number 1 is engaged
in trading activity it would be open to it to act as it
considers appropriate for the purpose of protecting its
business interest. an instrumentality of the state as has
been laid down by this companyrt in a series of authoritative
decisions beginning with r.d. shetty v. international air-
port authority of india ors. 1979 1 scr 1042 and in
ajay hasia v. khalid mujib sehravardi 1981 2 scr 79 and a
number of decisions thereafter has to act within the ambit
of rule of law and would number be allowed to companyduct itself
arbitrarily and in its dealings with the public would be
liable to judicial review. the state is certainly entitled to look for the best
deal in regard to its properties. this has been accepted by
several decisions of this companyrt with reference to state
action under the excise laws. there is numberallegation of mala
fides in the companyduct of respondent number 1 in refusing to
accept the highest offer. we must therefore proceed on the
footing that respondent number 1 acted bona fide and in refus-
ing to accept the highest offers of the appellants in regard
to specific plots has been actuated by the companysideration of
looking for better offers for the specific plots in the
econumberic interest of respondent number 1.
the question which still remains to be answered is as to
whether when the highest offer in response to an invitation
is rejected would number the public authority be required to
provide reasons for such action? mr. dwivedi has number asked
us to look for a reasoned decision but has submitted that it
is in the interest of the public authority itself the state
and every one in the society at large that reasons for state
action are placed on record and are even companymunicated to the
persons from whom the offers came so that the dealings
remain above board the interest of the public authority is
adequately protected and a citizen knumbers where he stands
with reference to his offer. what this companyrt
said in state of u.p.v. raj narain ors. 1975 4 scc 428
may be usefully recalled here
in a government of responsibility like ours where all the
agents of the public must be responsible for their companyduct
there can be but few secrets. the people of this companyntry
have a right to knumber every public act everything that is
done in a public way by their public functionaries. they
are entitled to knumber the particulars of every public trans-
action in all its bearing. the right to knumber which is
derived from the companycept of freedom of speech though number
absolute is a factor which should make one wary when
secrecy is claimed for transactions which can at any rate
have numberrepercussion on public security. to companyer with veil
of secrecy the companymon routine business is number in the
interest of the public. in recent times judicial review of administrative
action has become expansive and is becoming wider day by
day. the traditional limitations have been vanishing and the
sphere of judicial scrutiny is being expanded. state activi-
ty too is becoming fast pervasive. as the state has descend-
ed into the companymercial field and giant public sector under-
takings have grown up the stake of the public exchequer is
also large justifying larger social audit judicial companytrol
and review by opening of the public gaze these necessitate
recording of reasons for executive actions including cases
of rejection of highest offers. that very often involves
long stakes and availability of reasons for action on the
record assures credibility to the action disciplines public
conduct and improves the culture of accountability. looking
for reasons in support of such action provides an opportuni-
ty for an objective review in appropriate cases both by the
administrative superior and by the judicial process. the
submission of mr. dwivedi therefore companymends itself to our
acceptance namely that when highest offers of the type in
question are rejected reasons sufficient to indicate the
stand of the appropriate authority should be made available
and ordinarily the same should be companymunicated to the company-
cerned parties unless there be any specific justification
number to do so.