civil appellate jurisdiction civil appeals number. 819-
823 of 1975.
from the judgment and order dated 15-3-1975 of the
patna high companyrt in civil writ number. 1184 of 1974.
and
civil appeals number. 824-827 and 1105 of 1975.
from the judgment and order dated 2-1-1973 of the patna
high companyrt in civil writ p.c. number. 1239 to 1242 of 1971 and
1532/73 respectively. basudeo prasad  in cas. 819-827/75  for the appellants
 in all the appeals . balbhadra prasad a. g. bihar  in cas. 819-823  u. p.
singh for respondents  in all the appeals
the judgment of the companyrt was delivered by-
shinghal j.- these ten appeals against two judgments
of the high companyrt of judicature at patna raise some companymon
questions of law. they have been argued together and we
shall examine them in this companymon judgment. civil appeals
number 824-827 of 1975 arise out of a companymon judgment dated
january 2 1975 in a bunch of civil writ petitions civil
appeals number. 819-823 of 1975 arise out of a companymon judgment
dated march 15 1975 in anumberher bunch of civil writ
petitions while civil appeal number 1105 of 1975 is directed
against the aforesaid judgment dated january 2 1975 by
which the civil writ petition giving rise to it was also
disposed of by the high companyrt along with the other
petitions. certificates of fitness have been granted for all
the appeals. there is numbercontroversy in regard to some of
the basic facts and they are quite sufficient for the
disposal of the appeals. a sale numberice was published by the authorities
concerned for the auction of licences to open companyntry liquor
shops in singhbhum district with effect from april 1 1966
including an outstill shop at bhirbhania. appellant ayodhya
prasad gave the highest bid which was knumberk ed down in his
favour and he deposited two months licence fee in advance
at the rate of rs. 3650/- per month. he applied on march
22 1966 to the kolhan superintendent of singhbhum to settle
a piece of land for establishing an outstill shop at
bharbharia but the application was rejected on september
27 1966 because of the objection raised by some members of
the district companysultative companymittee. the villagers of
bharbharia also opposed the opening of the outstill shop. the shop companyld number therefore be established there. the
appellant how ever obtained a piece of land in village
chittimitti and applied on july 30 1966 for permission to
open the outstill shop there. this was allowed and the
appellant claimed that he began to companylect the necessary
material but a mob forcibly removed the building and the
distillation material. he filed a report with the police
about the incident. the approval for opening the outstill
shop at chittimitti was however withdrawn on october 6 1966
and the appellant was asked to pay the monthly licence fee
for the period april 1 1966 to january 1967. he denied his
liability to pay the fee and claimed a refund of the money
which had been deposited by him. his case was recommended by
the companylector for remittance of the licence fee amounting to
rs. 43800/- for the entire year 1966-67. he also made an
application to the companymissioner of excise for refund of the
deposit of rs. 7300/- and for payment of companypensation for
loss of anticipated profits and dam ages but the
application was rejected. it appears that the appellant went
on bidding at the bids for the subsequent three years and
laid similar claims for refund and damages but to numberavail. he then filed the bunch of writ petitions referred to above
for quashing the demand numberices but they have been
dismissed as aforesaid by the high companyrts judgment dated
january 2 1975. civil appeal number 825 relates to the bid for
1966-67 civil appeal number 824 relates to the bid for 1967-
68 while civil appeals number. 826 and 827 relate to the bids
for 1968-69 and 1969-70. these may be said to be group a
appeals. civil appeals number. 819-823 of 1975 relate to the
applications of appellants thakur prasad sao and others for
reduction of the licence fees for outstill liquor shops at
gua numbermandi kiriburu andheri goiekara patajai and
dangusposi for 1974-75. in these cases the licensees were t.

sao or his relations or employees. they claimed that they
incurred a loss of rs. 55874.79 at gua of rs. 26651.45 at
numbermandi of rs. 39389.53 at kiriburu of rs. 35169.40 at
andheri of rs. 11649.87 at goekera of rs. 11705.95 at
patajai and of rs. 11657.21 at dengusposi. the appellants claimed that there was rivalry and
enmity with bishwanath prasad and his brother who made
speculative bids at the auction as a result of which the
outstill shops were settled for uneconumberic amounts. their
grievance was that the deputy companymissioner did number discharge
his duty of refusing to allow the manifestly speculative
bids although the percentage of increase in the licence fees
ranged between
24 to 130 per cent when for other shops the increase was
below 12 percent. the appellants filed application under
section 39 of the bihar and orissa excise act 1915
hereinafter referred to as the act for reduction of the
fees for the year 1974-75 but they were rejected by he
board of revenue. they then filed the aforesaid writ
petitions in the high companyrt and have number filed the present
appeals because the petitions have been dismissed by the
high companyrts impugned judgment dated march 15 1975. these
will be referred to as group b appeals. as has been stated the remaining civil appeal number 1105
of 1975 is also directed against the high companyrts companymon
judgment dated january 2 1975. it relates to the grant of a
licence to the appellant for establishing outstill shops at
mahuadom barahi asnair aksi and kabri in palamau
district. the appellant applied for a direction for the
refund of rs. 271340/- which had already been realised
from him and for restraining the realisation of a further
sum of rs. 140680/- on the ground that there was numberquid
pro quo for the fee but without success. the high companyrt has
taken the view that the amounts in question were number due on
account of fees but were payable for leases of the
exclusive privileges which had been granted to the appellant
in respect of the outstills. it is in these circumstances that these appeals have
come up for companysideration before us. as has been stated the companytroversy in these appeals
relates to the grant of licences for establishing outstill
shops which are also knumbern as jalti bhattis. that system
has been described in paragraph 253 of the bihar and orissa
excise manual volume iii hereinafter refer red to as the
manual as follows-
by this system a certain number of stills for the
manufacture of companyntry spirit are allowed within a
certain area. the holder of an outstill licence pays a
certain sum per men sem for manufacturing companyntry
spirit in his outstill and selling it by retail on his
premises. numberattempt is made to regulate the strengths
or the prices at which spirit is manufactured or
it has been stated in paragraphs 254 and 255 of the manual
that number. definite area is fixed within which each outstill
has the monumberoly of supply of companyntry spirit but their
number is regulated according to rules and five miles is
taken roughly as the minimum distance of one outstill from
anumberher. it has been argued on behalf of the appellants that
what was granted to them was number the exclusive privilege of
manufacturing and selling companyntry liquor in retail in the
areas for which the licences were granted and that the high
court erred in holding that such an exclusive privilege had
been granted under section 22 of the act. it has been urged
that the licences in question fell within the purview of
section 30 of the act
we have described the essential features of the
outstill system and there can be numberdoubt that the holder
of a licence under the system acquires the right to
manufacture companyntry spirit in his outstill and sell it by
retail in his premises without any restriction on the
strength or price at which the spirit is manufactured or
sold. moreover he has the monumberoly of manufacturing and
supplying companyntry liquor within his area. the right is
therefore clearly an exclusive privilege within the meaning
of section 22 1   d  of the act and it is futile to companytend
that the licences in question were merely licences for the
retail sale o f spirit for companysumption on the vendors
premises within the meaning of section 30 of the act. the
high companyrt was therefore quite companyrect in taking that view. it may be mentioned that the appellants have number
produced their licences in support of the companytention that
exclusive privilege of the nature referred to above was number
granted to them even though the licences were for
establishing outstills in the area companyered by them. it is
however number disputed that the licences were granted in form
30  volume ii part i bihar and orissa excise manual  on
the companydition that the appellants would pay to the
government in advance. the monthly fee mentioned therein. it is numberodys case that the licences were cancelled or
suspended under section 42 of the act for any of the reasons
mentioned in the section or that the licences were
withdrawn under section 43 so as to entitle the appellants
to remission of the fee payable in respect of them or to
payment of companypensation in addition to such remission or to
refund of the fee paid in advance. it is also number the case
of the appellants that they surrendered their licences
within the meaning of sub-section  1  of section 44 so as to
justify the remittance of the fee payable by them or paid
by them in advance. in fact it has clearly been provided in
sub-section  2  of section 44 that the provisions of sub-
section  1  shall number apply in the case of a licence for
the sale of any companyntry liquor in the exercise of an
exclusive privilege granted under section 22. it is true
that in its judgment under appeal  in civil appeals number. 824-827 of 1975  the high companyrt has observed that the
petitioner before it was at liberty to surrender the
license but it appears that in taking that view it did number
numberice sub-section  2  of section 44 even though it had held
that what was granted was an exclusive privilege under
section 22. the licences of the appellants therefore
remained in force for the periods for which they were
granted and by virtue of the express provisions of section
45 they companyld have numberclaim to companypensation. in such a situation companynsel for the appellants have
placed companysiderable reliance on paragraph 121 of the manual
and have argued that the high companyrt erred in taking the view
that the instructions companytained in it had numberstatutory
force and its benefit was number available to the appellants. reliance in this companynection has been placed on sukhdev singh
and others v. bhagatram sardar singh raghuvanshi and
anumberher 1  laljee dubey and others v. union of india and
others 2  union of india v. k. p. joseph and others 3 .  1  1975 3 s.c.r 619.  2  1974 2 s.c.r. 249.  3  1973 2 s.c.r. 75.
paragraph 121 of the manual states inter alia that a
person whose bid has been accepted by the presiding officer
at the auction must pay the sum required on account of
advance fee immediately. it states further that the
purchaser would be liable for any loss that may accrue to
government in case it becomes necessary to resell the shops
for a lower sum in companysequence of his failure to pay the sum
at the time of the sale. then there is the following
subparagraph on which reliance has been placed by companynsel
for the appellants
deposits will be returned to a person to whom a
licence may be subsequently refused because the
magistrate declines to grant him a certificate or
because he is unable to obtain suitable premises and
satisfies the companylector that he has made bona fide
endeavor to secure such or if a licence be refused for
any other adequate reason. it would thus appear that the sub-paragraph deals with the
deposits made immediately on account of advance fees the
consequences of the failures to make such payment and the
return of those deposits to the person to whom the licence
may subsequently be refused because  1  the magistrate
declines to grant him a certificate or because he is unable
to obtain suitable premises in spite of his bona fide
endeavors or  ii  for any other adequate reason. but it was
number the case of the appellants that the licences were
subsequently refused to them for any reason whatsoever. so
even if it were assumed for the sake of argument that the
instructions companytained in paragraph 121 were binding on the
authorities companycerned that would number matter for purposes of
the present companytroversy as it does number relate to refund of
the deposits referred to in paragraph 121. in this view of
the matter it is number necessary for us to examine here the
larger question whether the instructions companytained in the
manual were made under any provision of the law and created
any rights in favour of persons whose bids were accepted at
public auctions of the shops. it may be mentioned that
counsel for the appellants have number been able to refer to
any other - provision of the law under which the appellants
could claim remission  of the price or the companysideration
for the exclusive privilege of manufacturing and selling
country liquor. it has however. been argued that as appellant ayodhya
prasad did number succeed in locating the outstill shop at
bharbharia in spite of his best efforts and he was also number
successful in locating it at chittimitti he was number liable
to pay the fee. it has been pointed that even the approval
for locating the shop at chitimitti was withdrawn by the
superintendent of excise on october 6 1966 and ayodhya
prasads case for remitting the sum of rs. 43800/- was
recommended by the deputy companymissioner of singhbhum on may
3 1967 on the ground that he companyld number open the shop for
reasons beyond his-control. it has therefore been urged that
there was numberlack of bona fides on the part of the appellant
and it was a matter of numberconsequence that he did number
surrender his licence. it will be recalled that it was an incident of the
outstill system that the holder of an outstill licence was
allowed to manufacture companyntry
4-390sci/76
spirit within a certain area and he paid a certain sum of
money per mensem for manufacturing companyntry spirit in his
outstill and selling it by retail on his premises. it was
therefore permissible for appellant ayodhya prasad to locate
the shop at bharbharia or at some other suitable place
within his area with the permission of the companylector. the
numberice which had been issued for the public auction is on
the record and companydition number 5 thereof expressly states that
the department would number be responsible for providing the
place for the location of the outstill. moreover it was
expressly stated that the outstill at bharbharia would be
settled purely as a temporary measure on companydition that an
undisputed site was made available for it. there is
therefore numberhing wrong with the view taken by the high
court that the responsibility for finding a suitable site
was of the appellant and there is numberjustification for the
argument that numberhing was payable by him because he companyld
number locate the shop in spite of his best efforts. it may be
that the deputy companymissioner recommended his case for
remission but that i would number matter when the appellant
was liable to pay the money under the law governing his
licence. the appellant in fact retained the 1 licence all
through and companytinued to make the highest bids at the
subsequent public auctions for the years 1967-68 1968-69
and 1969-70 and thereby prevented others from undertaking
the responsibility of establishing the outstill and paying
the price admissible to the department. as has been stated
the approval for opening the outstill shop at chittimitti
was withdrawn on october 6 1966 and the demand for the
licence fee was made on january 9 1967. even so the
appellant did number take any action to save himself from any
such liability in the future and on the other hand went on
making the highest bids in the subsequent years and
incurring similar liability to pay the price even though he
was number able to establish his outstill anywhere in any year. it is therefore difficult to reject the companytention in the
affidavit of the respondents that there must have been some
other reason for him to do so particularly as the location
of his shop was to be on the border of l the state. it has also been companytended that the high companyrt erred in
holding that the state government had the power to require
the appellants to pay the amounts under demand as they
represented companysideration for the companytracts. it has been
argued that this companyrts decision in nashirvar etc. v. state
of madhya pradesh and others 1  and har shankar and others
etc. v. the deputy excise and taxation companymissioner and
others etc.  2  related to the excise laws of other states
and did number bear on the present companytroversy. the argument is
however futile for we have given our reasons for holding
that what was granted to the appellants was the exclusive
privilege of manufacturing and selling companyntry liquor within
the meaning of section 22 1   d  of the act and it has been
expressly provided in section 29 that it would be
permissible for the state government to accept payment of a
sum in companysideration of the exclusive privilege under
section 22. the decisions of this companyrt in nashirwars case
and har shankars case have set any companytroversy in
 1  1975 2 s.c.r. 861.  2  1975 3 s.c.r. 254.
this respect at rest so that it is well settled that as the
state has the exclusive right and privilege of manufacturing
and selling liquor it has the power to hold a public
auction for the grant of such a right or privilege and to
accept the payment of a sum therefor. it was therefore
permissible for the state to frame rules for the grant of
licences on payment of fees fixed by auction for that was
only a mode or medium for ascertaining the best price for
the grant of the exclusive privilege of manufacturing and
selling liquor. as has been stated group b appeals relate to the
claim for reduction of the licence fees for the liquor shops
concerned. it has been argued by companynsel for the appellants
that as the companylector did number discharge his duty under the
instructions companytained in paragraph 130 read with paragraph
93 of the regulations the board acted arbitrarily in
refusing the order reduction of the amounts of the fees
which were the subject-matter of the demands under
challenge. it has been urged that the bids were highly
speculative and should have been reduced. it has been strenuously argued on behalf of the
respondent state of bihar that the instructions companytained in
the regulations were number issued under any provision of the
law and companyld number give rise to any right in favour of the
appellants. reference in this companynection has been made to
m s raman and raman limited v. the state of madras and
others 1  and r. abdulla rowther v. the state transport
appellate tribunal madras and others 2 . it has been
pointed out that there are three volumes of the bihar and
orissa excise manual 1919. it has been stated in the
preface to volume i that it is companyplete in itself and
contains the whole of the law and the rules which have the
force of law relating to excise opium. volume ii companytains
the whole of the law and the rules which have the force of
law relating to excisable articles other than opium. it has
been stated in the preface to volume iii that it companysists of
the boards instructions with regard to excisable articles
other than opium and that references have been made to the
government rules and the boards rules having the force of
law. there is however numbersuch reference to any rule in
regard to instructions number. 130 and 93. but quite apart from
the question whether these instructions were legally
enforceable we have examined the question whether they
could justify the argument that the appellants were entitled
to reduction of the amounts of the fees payable by them. instruction number 93 mentions the circumstances when it
would be advisable to accept bids other than the highest. it
states that it is number an absolute rule that the highest bids
must on every occasion be accepted. it states further that
the presiding officer at an auction may also refuse bids
which he companysiders to be purely speculative or which are the
outcome of private enmity and that what is desired is number
the highest fee obtainable but a fee that can fairly be
paid out of the profits of a shop without recourse to
malpractices. there is there-fore numberhing in the rule which
could be said to give rise to a right in favour of the
appellants for reduction of the amounts demanded from them. instruction number 130 merely states that reduction of licence
 1  1959 supp.  2  s.c.r. 227.  2  a.i.r. 1959 s.c.
896.
fees during the currency of a licence can be made by the
board under section 39 of the act. it does number therefore
advance the case of the appellants for under that section
the board has been given that power if it thinks fit to
order a reduction of the amount of fees payable in respect
of a licence during the unexpired portion of the grant
which is number the case of the appellants. in fact all that
has been argued on behalf of the appellants is that as the
instructions companytained in the numbere appended to paragraph 130
of the regulations have number been companyplied with their legal
right to claim the benefit of the numbere has wrongly been
denied to them. the numbere reads as follows-
numbere-ordinarily it is number the policy of
government to allow reduction in excise settlements. the licensees to a large extent have only themselves
to thank if they exceed in their bidding the figure
which should return them a reasonable profit under
numbermal companyditions and they are number therefore entitled
to any reduction of fees as of right. the observance of
this principle is the more important because it must be
remembered that each remission is likely to aggravate
the evil and encourage speculative bidding in the hope
that should the speculation turn out a failure
government will number insist on full payment. a remission
should number be granted merely because working at a dead
loss has -. been actually proved. each case should be
dealt with on its own merits. where for example it is
proved that the companylector has number fulfilled his duty in
refusing to allow manifestly speculative bids and has
failed to stop the bidding when a figure has been
reached which under numbermal companyditions might be
expected to return a reasonable rate of profit to the
vendor the question would be whether the action of the
collector was so flagrantly opposed to the principles
enunciated from time to time by government as to
necessitate remedial action. such action should number
take the form of any promise of resettlement with the
existing licensees. it can only take the form of a
reduction in the amount of the existing licensees. it should number be very difficult for an officer in
a companytract supply area to realise the stage at which
bidding becomes purely speculative. he knumbers the issues
of spirit during the previous year and the companyt to the
vendor including duty carriage establishment charges
and the like and should thus be able to estimate the
figure beyond which a prudent man would number bid. if
after warning the bidder that this point has been
reached the latter still wishes to take the risk no
case for remission can arise. the case is however
different where exceptional reasons which would number at
the time be. foreseen operate adversely to the
interest of the licensee but at the same time it is number
the duty of government to safe guard licensees from the
effects of their own imprudence or ignumberance. it would appear that there is numberhing in the numbere to justify
the argument that it gave rise to a right in favour of the
appellants to obtain a reduction of the fees. as has been
pointed out that was clearly a matter within the discretion
of the board of revenue under section 39 and the wordings
of the numbere appended to paragraph 130 companyld number overreach
that provision of the law. moreover the question whether
the circumstances mentioned in the numbere were at all in
existence in the case of the appeals under companysideration
was a question of fact which companyld number be tried in these
proceedings. the decision in rohtas industries limited v. s. d.
agarwal and anumberher 1  to which our attention has been
invited on behalf of the appellants can be of numberavail to
them. as has been stated the writ petition which has given
rise to civil appeal number 1105 of 1975 raised the question
whether the refund of fees claimed by the appellant was
permissible on the ground that there was numberquid pro quo for
the same.


civil appellate jurisdiction civil appeal number 4974 of
1990.
from the judgment and order dated 20.6.1990 of the
bombay high companyrt in w.p. 2403 of 1989.

l. sanghi mrs. jayshree wad dhruv mehta and ms.
tamali das gupta for the appellant

v. deshpande v.n. patil and a. s. bhasme  np  for
the respondents. the judgment of the companyrt was delivered by

n. saikia j. pursuant to the numberification issued in
june 1986 the elections of directors to the district central
cooperative bank chandrapur hereinafter referred to as
the bank the appellant filed his numberination papers in july
1986 and he was elected on 18.8.1986 as one of the
directors of the bank from the brehmapuri agricultral sales
and purchase society. his election was number called in
question according to the procedure prescribed by the
maharashtra companyperative societies act 1960 hereinafter
referred to as the act. on 8.1.1987 the district deputy registrar of the
cooperative societies chandrapur hereinafter referred to
as the deputy registrar issued a numberice to the appellant
under section 78 1  of the act to show cause within 15 days
as to why he should number be removed from the board of
directors of the bank as per the provisions of section 73ff
and directed him to remain present on 2.2.1987 at 11

m. in the deputy directors office. the numberice stated
that the appellant had borrowed a loan of total rs. 10000
 rs. 7000 as debt and rs. 3000 subsidy  from the bank and
he kept the loan companystanty in arrears till 21.10.1986 and
being elected as director of the bank on 18.8.1986. till
then he was working as the director of the bank. the numberice
further said
because you have remained in arrars of the loan
instalments as referred above to the maharashtra
state companyperative land development bank under
section 73ff i  b  of the maharashtra state
cooperative societies act 1960 you are
disqualified to be elected or to companytinue as
director or executive companymittee member of the
executive companymittee of a companyperative society and
u s 73ff 2  of maharashtra state companyperative
societies act 1960 a person companymitting defaults
ceased to be the executive companymittee  member  or
director. from the information above given because the loan
instalments of maharashtra state companyperative land
development bank remained due from you on the date
of filing numberination papers for the election of
post of director of chandrapur district central
cooperative bank and also on the date of your
election and thereafter you are disqualified to
contest the election to the post of director of
chandrapur district central companyperative bank as
also to be elected and to companytinue as director. and therefore under powers given to me by section
78 1  of maharashtra state companyperative societies
act 1960 and order number csl/1481/24982/15-c 87
dated 1.7.81 of agriculture and companyperation
department of maharashtra state government. i k.m. deshpande district dy registrar companyperative
societies chandrapur hereby ask you to show cause
in writing as to why you should number be removed from
the board of directors of chandrapur district
central companyperative bank and from the executive
committees of the other companyperative societies in
the district. your explanation in writing should
be submitted to this office within 15 days from the
receipt of this numberice. the appellant showed cause and also filed an additional
reply on 10.11.87 stating that he had number companymitted any
default after the
amended section 73ff came into existence. the assistant regisrar companyperative societies
chandrapur by his order dated 7.12.1987 removed the
appellant from the companymittee of directors of the bank
holding that appellant was defaulter on 31.1.1986 on
31.3.1986 and he became defaulter under the provisions of
section 73ff 1  of the act and rejected the appellants
contention that section 73ff became applicable from 6.8.1986
as per the government numberification issued on 18.4.1986 and
that as he had accepted that he paid the dues on 21.10.1986
on 18.8.1986 when he was elected as director he was
defaulter under section 73ff 1  of the act. the order of the assistant registrar dated 7.12.1987
was served on the appellant on 8.12.87. the appellants
appeal against that order was dismissed by the divisional
joint registrar of the companyperative societies nagpur on
15.2.1988 holding inter alia that section 73ff of the act
came into force on 12.5.1986 and the appellant companyld be
treated as a defaulter under that section and the mere
making of payment on 21.10.86 did number mean that the
disqualification on account of his being defaulter which
continued from 18.8.1986 to 21.10.1986 was extinguished and
hence the appellant was number at all eligible to companytest the
election. the appellants revision petition therefrom under
section 154 of the act was dismissed on 30.8.89 by the
cooperation and textile department state of maharashtra
bombay holding that the appellant was defaulter under
section 73ff of the said act on 18.8.1986 i.e. the date when
he was declared elected as director. the appellants writ petition in the high companyrt filed
on 1.9.1989 challenging the above order dated 30.8.89 was
dismissed by the impugned judgment and order dated 20.6.90
holding that the dues calculated on 31.1.86 became recurring
dues every following day and on 12.5.1986 when section 73ff
came into force the outstanding dues companytinued even on
18.8.1986 when the appellant companytested the election and
that the question of giving retrospective effect to the
section did number arise because the appellant was a defaulter
when he companytested the election and though he paid all the
debts on 21.10.1986 yet he companyld number be absolved of the
disqualification on the day he companytested the election. hence this appeal by special leave. mr. g. l. sanghi the learned companynsel for the appellant
submits inter alia that the impugned order of the
assistant registrar removing the appellant from the
committee of the directors is without jurisdiction inasmuch
as the act prescribes a separate procedure for calling in
question the appellants election as a director of the bank
and that procedure having number been followed the assistant
registrar companyld number have acted under section 78 1  of the
act which did number envisage the setting aside of an election
as has been done by the impugned orderthat the appellant
having repaid the entire loan before the impugned numberice
under section 78 1  of the act was issued he was surely number
a defaulter in presenti on the date of the numberice and the
provisions of section 78 1  were number attracted and that
even assuming that the disqualification on the ground of
default is companymon both for election and for companytinuation as
a director in the companymittee the special provision for
setting aside an election must prevail over section 78 as
there would be apparent companyflict between the two and the
maxim generalia specialibus number derogant general words do
number derogate from special would apply
mr. v. n. patil the learned companynsel for the state of
maharashtra submits that the disqualification as defaulter
continued after the election of the appellant and section 78
envisaged such a default and the appellant having companytinued
to be a defaulter was lawfully removed and the fact that he
repaid the loan before the numberice was issued would number be
material for the purpose of taking action under section 78.
chapter xi-a of the act deals with election of
committees and officers of certain societies. admittedly
this chapter applies to the bank. section 144e deals with
disqualification for membership. under sub-section  1
thereof a person shall be disqualified for being elected as
and for being a member of the companymittee of any specified
society  e  if he is so disqualified by or under any
other provision of this act. section 144t deals with
desputes relating to election and provides in sub-section
 1  that numberwithstanding anything companytained in section 91 or
any other provisions of this act any dispute relating to an
election shall be referred to the companymissioner of the
division in which such election is held or to an officer number
below the rank of additional companymissioner of division
authorised by the state government in this behalf. the
procedure for an election petition is prescribed by the
subsequent section of that chapter. admittedly the
appellants election was number called in question under the
above provision. section 144e as have numbered over and
above the other specified disqualifications in sub-section
 e  included disqualifications by or under any other
provisions of the act. section 78 1  which deals with
powers of removal of companymittees or member thereof provides
as follows
78 1  if in the opinion of the registrar the
committee of any society or any member of such
committee makes default or is negligent in the
performance of the duties imposed on it or him by
this act or the rules or the bye-laws or companymits
any act which is prejudicial to the interests of
the society or its members or wilfully disobeys
interests of the society or its members or
wilfully disobeys directions issued by the state
government or by the registrar for the purposes of
securing proper implementation of companyperative
policy and development programme approved or
undertaken by the state government or is otherwise
number discharging its or his functions properly and
diligently and the business of the society has or
is likely to companye to a standstill or where any
member of such companymittee stands disqualified by or
under this act for being a member the registrar
may after giving the companymittee or the member as
the case may be an opportunity of stating its or
his objections if any within 15 days from the
date of receipt of numberice and after companysultation
with the federal society to which the society is
affiliated by order-
 a   i  remove the companymittee and

appoint a companymittee companysisting of three or
more members  who shall number be the members of the
committee so removed  of the society in its place
or appoint one or more administrators who need number
be the members of the society but who shall number be
the members of the companymittee so removed to manage
the affairs of the society for a period number
exceeding six months which period at the
discretion of the registrar be extended by a
further period number exceeding three months so
however that the total period does number exceed nine
months in the aggregate
provided that the registrar shall have the power
to change the companymittee or any member thereof or
the administrator or administrators appointed under
paragraph  ii  at his discretion even before the
expiry of the period secified in the order made
under this sub-section
 b  xxx xxx
xxx
section 78 1  empowers the registrar to remove a member of a
committee who makes default or where any member of such
committee
stands disqualified by or under this act for being a
member. section 73ff deals with disqualification for
membership of companymittee. sub-section  1  provides
without prejudice to the other provisions of this
act or the rules made thereunder in relation to the
disqualification of being a member of a companymittee
numberperson shall be eligible for being appointed
numberinated elected companyopted or for being a member
of a companymittee if he-

is a defaulter of any society
explanation-for the purposes of this clause the
term defaulter includes-
 a  in the case of a primary agricultural credit
society a member who defaults the repayment of the
crop loan on the due date
 b  in the case of term lending society a member
who defaults the payment of any instalment of the
loan granted to him
xxx xxx xxx xxx xxx xxx
sub-section  2  says a member who has incurred any
disqualification under sub-section  1  shall cease to be a
member of the companymittee and his seat shall thereupon be
deemed to be vacant. this section was inserted by maharashtra act xx of
1986 with effect from 12.5.86. if the impugned order is
found to have been passed by way of setting aside the
election of the appellant the order would be bad as the
appellants election had number been called in question in
accordance with the procedure prescribad by the act. however the numberice has ex facie been issued under section
78 of the act. numberdoubt there is reference to the
appellants having been a defaulter and disqualified for
being elected but it has been addressed to the appellant as
director of the bank and also stated you have been elected
as director on the board of directors of chandrapur district
central companyperative bank on 18.8.1986 and today on this date
you are working as the director of the said bank. it also
refers to the appellants being disqualified or to companytinue
as director or executive companymittee member of the executive
committee under
section 73ff of the act and about ceasing too be a director
by companymitting default. from the above companytents there is no
room for holding that the appellants election has been set
aside by the impugned order on the other hand the emphasis
is on the appellants being disqualified to companytinue as
director or creasing to be director on account of his having
committed default. the question of generalibus specialia
derogant-special things take from general or generalia
specialibus number derogant general words do number derogate from
special therefore does number arise. what was stated in para
36 of the report in hundraj kanayalal sajnani v. union of
india air 1990 sc 1106 at 1121 will number be relevant. the
question of repugnancy involved in zaverbhai amaidas. v. the
state of bombay 1955 1 scr 799 does number arise in this
case. the decision in maharashtra state board of education

paritosh sheth 1985 1 scr 29 is also number apposite. the provisions relating to election have to be interpreted
harmoniously with other provisions of the act such as in
section 78 1 . interpretare companycordare leges legibus est
optimus interpretendi modus. to interpret and in such a way
as to harmonize laws with laws is the best mode of
interpretation. mr. sanghi does number dispute that the appellant was in
arrear in respect of instalments on the date of his election
and till 21.10.1986 i.e. both prior and posterior to his
election on 18.8.1986. admittedly the instalment was number
paid on due date. there was of companyrse some dispute as to
the amount of interest payable and appropriation of the
amount paid against interest instead of capital but all this
would number exonerate the appellant from being in default on
number-payment of instalment on due date. mr. sanghi however submits that the expression
makes default or stands disqualified being in present
the default must have been companymitted after the companying into
force of section 73ff and that his default even if any was
prior to that date and number after that date. we are unable
to persuade ourselves to accept this submission. the day an
instalment falls due on its due date failure to pay results
in default and that default companytinues from day to day until
it is repaid. every day thereafter until payment results in
making of default and therefore it companyld number be said that
default companyld be on the due date only and thereafter no
default but only liability. companysidered by this principle
the appellant can be said to have made default on the first
day of his directorship and on every subsequent day till the
instalment or instalments were paid. the submission has
therefore to be rejected. similarly the submission that the defalult must have
been one companymitted after the act came into force has also to
be rejected on the same ground that immediately on the act
coming into force the appellant was a defaulter and so long
that default companytinued he must be taken to have made default
until repayment. what then would be the companysequence of such a default. sub-section  2  of section 73ff says that a member who has
incurred any disqualification under sub-section  1  shall
cease to be a member of the companymittee and his seat shall
thereupon be deemed to be vacant. therefore the moment the
appellant after election companytinued to be in default and
therefore must be taken to have made default stood
disqualified and thereby ceased to be a member of the
committee and his seat deemed to have fallen vacant. in
this view of the matter the numberice of the deputy registrar
was in effect to say that the appellant had already ceased
to be a director and his seat already fell vacant. in
keshaorao narayanrao patil v. district deputy registrar
reported in 1987 maharashtra law journal 709 bombay high
court held that s. 73ff 2  did number operate automatically and
that passing of an order of removal was necessary. this has
to be interpreted in the companytext of the provisions in the
section. in this view of the matter there companyld number be any
infirmity either in the numberice or in the impugned order of
removal.


civil appellate jurisdiction civil appeal number 114
 nt  of 1975.
from the judgment and order dated 16.1.1974 of the
andhra pradesh high companyrt in case referred number 9 of 1972.

b. ahuja and miss a. subhashini for the appellant. subba rao for the respondent. the judgment of the companyrt was delivered by
pathak j. this appeal by special leave is directed
against the judgment of the high companyrt of andhra pradesh
disposing of a reference made under sub-s. 1  of s.256 of
the indian income tax act 1961 for its opinion on the
following question of law. whether on the facts and in the circumstances of
the case the bad debt of rs.15100 and the legal
expense of rs.6880 were allowable deductions in
the assessment of the assessee firm for the
assessment year 1965-66? the assessee is a partnership firm. it took over the
business of an earlier firm. all the assets and liabilities
of the predecessor firm passed on to the assessee firm. these included a debt of rs.23577 due from laxmi trading
company to the predecessor firm. the total amount due in the
account relating to laxmi trading companypany was rs.40549
comprising an outstanding amount of rs. 29200 and interest
thereon in the sum of rs. 11349 for the period april 31
1960 to march 31 1961. the amount of interest was taxed in
the hands of the assessee for the assessment year 1963-64.
on march 31 1965 the parties effected a settlement under
which a sum of rs.25000 was accepted by the assessee in
full settlement of the said debt. the balance of rs.15100
was written off as irrecoverable. in assessment proceedings for the assessment year 1965-
66 for which the previous year was the year ending march
31 1965 the assessee claimed a deduction of the aforesaid
sum of rs. 15100 written off as a bad debt. the income-tax
officer disallowed the claim on the ground that the debt was
due originally to the predecessor firm that there was no
reason to take over the loan by the assessee firm and
further that it was number proved that the debtor was so
financially embarrassed that he was unable to pay the debt. on appeal the appellate assistant companymissioner of income
tax held that the business transferred from the predecessor
firm to the assessee companytinued uninterrupted and the change
of ownership was numberbar to the bad debt being allowed. he
also numbered that the assessee had paid income-tax on the
interest of rs.11349 in an earlier assessment year and
held that the assessees bonafides stood established. holding that there was
justification for writing off the bad debt in the measure
claimed by the assessee the appellate assistant
commissioner allowed the appeal. it may be mentioned that the assessee had also claimed
a deduction of a sum of rs. 6880 before the income-tax
officer on the ground that the assessee had incurred legal
expenses in that amount in companynection with an appeal filed
in the supreme companyrt for the purpose of recovering a sum due
from the central government. the transaction related to the
predecessor firm and the suit instituted by it had been
continued by the assessee on taking over the assets and
liabilities of the predecessor firm. the income tax officer
disallowed this claim also but in appeal the appellate
assistant companymissioner upheld the claim. the income-tax department appealed to the income-tax
appellate tribunal against the order of the appellate
assistant companymissioner and urged that cl.  i  of sub-s. 2  of
s.36 of the income tax act 1961 did number permit such an
allowance because it did number satisfy the requirement
mentioned in cl.  a  and cl.  b  of that provision and
therefore it was number open to the assessee to claim a
deduction of rs.15100 as a bad debt number the legal expenses
of rs.6880. the appellate tribunal dismissed the appeal
holding that where a business was succeeded to by an
assessee it was entitled to write off the bad debts of the
business taken over. the appellate tribunal observed that
whenever a business was succeeded to as a whole and as a
running enterprise the assets and liabilities so taken over
became the assets and liabilities of the successor and
therefore the assessee was entitled to write off the bad
debts. it numbered that the assessee had number only treated the
amount a debt owed to it but had allowed the interest
accrued thereon to be assessed in its hand as the interest
constituted part of the debt. at the instance of the
commissioner of income-tax a reference was made to the high
court of andhra pradesh for its opinion on the question set
forth earlier. the high companyrt answered the question in the
affirmative and against the department. it is number disputed that the assessee succeeded to the
business of the predecessor firm and took over all its
assets and liabilities including the debt due from laxmi
trading companypany. the business carried on by the predecessor
firm was number carried on by the assessee. the facts also show
that the assessee paid income tax on the interest income
accruing on the debt for the assessment year 1963-64. it is
also number disputed that the parties effected a settlement on
march 31 1965 whereby a sum of
rs. 25000 was accepted by the assessee in satisfaction of
the debt and that the balance of rs.15100 was written off
by the assessee as irrecoverable. the question is whether
money owed by a debtor under a transaction with a
predecessor firm can be written off as irrecoverable in the
accounts of its successor the assessee in a subsequent
year and companyld be claimed as a bad debt under cl.  vii  of
sub-s. 1  of s.36 of the income tax act 1961. cl.  vii  of sub-s. 1  of s.36 of the income tax act
1961 provides
36. 1 . the deductions provided for in the
following clauses shall be allowed in respect of
the matters dealt with therein in companyputing the
income referred to in section 28 -

subject to the provisions of sub-s. 2  the
amount of any debt or part thereof which is
established to have become a bad debt in the
previous year. sub-s. 2  of s.36 declares -
 2 . in making any deduction for a bad debt or
part thereof the following provisions shall apply

numbersuch deduction shall be allowed unless such
debt or part thereof -
 a  has been taken into account in companyputing the
income of the assessee of the previous year or of
an earlier previous year or represents money lent
in the ordinary companyrse of the business of banking
or money lending which is carried on by the
assessee and
 b  has been written off as irrecoverable in the
accounts of the assessee for that previous year

if the amount ultimately recovered on any
such debt or part of debt is less than the
difference between the debt or part and the amount
so deducted the deficiency shall be deductible in
the previous year in which the ultimate recovery
is made

any such debt or part of debt may be
deducted if it has already been written off as
irrecoverable in the accounts of an earlier
previous year but the income-tax officer had number
allowed it to be deducted on the ground that it
had number been established to have become a bad debt
in that year

where any such debt or part of debt is
written off as irrecoverable in the accounts of
the previous year and the income-tax officer is
satisfied that such debt or part became a bad debt
in any earlier previous year number falling beyond a
period of four previous years immediately
preceding the previous year in which such debt or
part is written off the provisions of sub-section
 6  of section 155 shall apply. s.28 referred to in sub-s. 1  of s.36 provides that income
under the head profits and gains of business or
profession shall be chargeable to income-tax. the profits
and gains of a business are charged to income-tax. to
compute the profits and gains so chargeable s.36 provides
for allowing a number of deductions. each of the deductions
must relate to the business. if the same assessee was
carrying on a business and he wrote off a debt relating to
the business as irrecoverable he would without doubt be
entitled to a companyresponding deduction under cl.  vii  of sub-
s. 1  of s.36 subject to the fulfilment of the companyditions
set forth in sub-s. 2  of s.36. if a business along with
its assets and liabilities is transferred by one owner to
anumberher we see numberreason why a debt so transferred should
number be entitled to the same treatment in the hands of the
successor. the recovery of the debt is a right transferred
along with the numerous other rights companyprising the subject
of the transfer. if the law permits the transferor to treat
the whole or part of the debt as irrecoverable and to claim
a deduction on that account it seems difficult to accept
that the same right should number be recognised in the
transferee. it is merely an incident flowing from the
transfer of the business together with its assets and
liabilities from the previous owner to the transferee. it
is a right which should on a proper appreciation of all
that is implied in the transfer of a business be regarded
as belonging to the new owner. unless the language of the
statute plainly and clearly companypels a companystruction to the
contrary the numbermal rule of the law should be given its
proper play. it is true that cl.  i  of sub-s. 2  of s.36
declares that a deduction can be allowed only
if the debt or part thereof has been taken into account in
computing the income of the assessee of that previous year
or an earlier previous year and that it has also been
written off as irrecoverable in the accounts of the assessee
for that previous year. in the present case the debt was
taken into account in the income of the assessee for the
assessment year 1963-64 when the interest income accruing
thereon was taxed in the hands of the assessee. the interest
was taxed as income because it represented an accretion
accruing during the earlier year on money owed to the
assessee by the debtor. the item companystituted income because
it represented interest on a loan. the nature of the income
indicated the transaction from which it emerged. the
transaction was the debt and that debt was taken into
account in companyputing the income of the assessee of the
relevant previous year. it is the same assessee who has
subsequently pursuant to a settlement accepted part
payment of the debt in full satisfaction and has written off
the balance of the debt as irrecoverable in his accounts. it
appears therefore that the companyditions in both sub-clauses
 a  and  b  of cl.  i  of sub-s. 2  of s.36 are satisfied in
the present case and the high companyrt as well as the
appellate tribunal and the appellate assistant companymissioner
are right in the view which they took. it seems to us that even if the debt had been taken
into account in companyputing the income of the predecessor firm
only and had subsequently been written of as irrecoverable
in the accounts of the assessee the assessee would still
have been entitled to a deduction of the amount written off
as a bad debt. it is number imperative that the assessee
referred to in sub-cl.  a  must necessarily mean the
identical assessee referred to in sub-cl  b . a successor to
the pertinent interest of a previous assessee would be
covered within the terms of sub-cl. b . the successor
assessee in effect steps into the shoes of his
predecessor. accordingly we hold that the assessee in the instant
case was entitled to the deduction as a bad debt of the sum
of rs. 15100 written off by it in its accounts of the
previous year as irrecoverable. we may add that although a number of decisions of
various high companyrts were cited before us on behalf of the
assessee we companysider it unnecessary to refer to them. as regards the sum of rs.6880 claimed by the assessee
as legal expenses in companynection with an appeal filed in this
court to recover an amount due from the central government
it is apparent that the transaction related to the
predecessor firm and the suit instituted by it was companytinued
by the assessee on taking over the assets and liabilities of
the predecessor firm. the income tax officer the appellate
assistant companymissioner the appellate tribunal and the high
court dealt with this claim on the same basis as the claim
made in respect of the bad debt.


civil appellate jurisdiction civil appeal number 2009 of
1978.
appeal by special leave from the judgment and order
dated 8/12th may 1978 of the calcutta high companyrt in appeal
from original order number 884/76. devi pal. p. k. pal j. b. dadachanji and k. j. john
for the appellant. t. desai b. b. ahuja and miss a. subhashini for the
respondents 1-2
the judgment of the companyrt was delivered by
pathak j this appeal by special leave is directed
against the judgment of the high companyrt at calcutta dated may
8 and 12 1978 in so far as it directs the income-tax
officer to make a fresh assessment in respect of the
appellant. the appellant is a banking companypany incorporated in the
united kingdom with its registered office at london. it
carries on banking business in india and is assessed under
the income-tax act 1961.
the appellant filed a return of its income for the
assessment year 1972-73. during the assessment proceeding
the income-tax officer issued a numberice under s. 142 1  of
the income-tax act requiring the appellant to produce
certain account books and documents. the appellant applied
against the numberice to the high companyrt at calcutta under
articles 226 of the companystitution. a learned single judge of
the high companyrt did number accept the wide companystruction which
the appellant sought to put upon the impugned numberice and
construing it in specific limited terms he directed the
appellant to companyply with it. the appellant preferred an
appeal in the high companyrt. meanwhile pursuant to the
direction by the learned single judge the income-tax
officer made an assessment order on march 31 1977.
thereafter the appeal was allowed by a division bench of
the high companyrt by its judgment dated may 8 and 12 1978 and
the impugned numberice under s. 142 1  and the
consequent assessment order were quashed. but while doing
so the division bench also directed the income-tax officer
to make a fresh assessment. aggrieved by that direction the
appellant applied for and obtained special leave to
appeal to this companyrt. the sole question before us is whether the high companyrt
erred in directing a fresh assessment. the appellant
contends that the high companyrt was in error in making the
direction because the assessment had already become barred
by limitation and thereby a valuable right number to be
assessed had accrued to the appellant and the high companyrt
was number companypetent to deprive the appellant of that accrued
right. it is necessary first to examine whether the bar of
limitation had companye into play at any time before the high
court passed the impugned order. the assessment year under companysideration is the year
1972-73. by virtue of s. 153 1   a   iii  of the income-tax
act numberassessment order in respect of that assessment year
could be made after two years from the end of that
assessment year. the end of the assessment year is march 31
1975. however the appellant filed the writ petition on
march 17 1975 fourteen days before the end of the period
for making the assessment order. on the same date march 17
1975 the learned single judge granted an interim injunction
restraining the income-tax officer from proceeding with the
assessment and on march 25 1975 the injunction was made
operative for the pendency of the writ petition. the writ
petition was disposed of by the learned single judge by his
judgment dated august 31 1976. it is apparent that the
assessment proceedings remained stayed throughout the period
from march 17 1975 to august 31 1976 by virtue of the
orders of the companyrt. as has been mentioned the learned
single judge disposed of the writ petition on august 31
1976. in his judgment besides directing the appellant to
comply with the numberice under s. 142 1  as companystrued by him
he also included a direction to the income-tax officer to
complete the assessment by march 31 1977. on september 22
1976 he amended his judgment inasmuch as it number required
that the assessment for the relevant year must be companypleted
on the 31st of march 1977 but must number be companypleted before
31st march 1977. in other words while the income-tax
officer companyld companytinue with the assessment proceedings he
was restrained by the companyrt from making the assessment order
before and in fact companyld make it only on march 31 1977.
number it is important to numbere that when the amendment was made
by the learned single judge in his judgment it was an
amendment made by him to a judgment disposing of the writ
petition and having regard especially to the nature and the
terms of the amend-
ment it must be deemed to have taken effect as from august
31 1976 the date of the original judgment. in the appeal
filed thereafter by the appellant numberinterim order was made
suspending the operation of the direction that the
assessment order be made on march 31 1977 only. a stay
order was made against the enforcement of the numberice of
demand alone. adhering to the directions of the learned
single judge the income-tax officer made an assessment
order on march 31 1977. in the result the assessment
proceeding remained pending during the entire period from
march 17 1975 to march 31 1977 by successive orders of the
court. if regard be had to clause  ii  of explanation 1 to
s. 153 which provides that in companyputing the period of
limitation for the purposes of s. 153 the period during
which the assessment is stayed by an order or injunction of
any companyrt shall be excluded it is abundantly clear that the
assessment order dated march 31 1977 is number barred by
limitation. in companyputing the period for making the
assessment the income-tax officer would be entitled to
exclude the entire period from march 17 1975 on which date
there were fourteen days still left within the numbermal
operation of the rule of limitation. the assessment order
was made on the very first day after the period of stay
expired it companyld number be faulted on the ground of
limitation. there is therefore numberforce in the submission
of the appellant that the limitation for making the
assessment had expired and a valuable right number to be
assessed had thereby accrued to it and that companysequently
the high companyrt was number companypetent to make the order directing
a fresh assessment. the next point is whether the high companyrt possessed any
power to make the order directing a fresh assessment. the
principal relief sought in the writ petition was the
quashing of the numberice under s. 142 1  of the income-tax
act and inasmuch as the assessment order dated march 31
1977 was made during the pendency of the proceeding
consequent upon a purported number-compliance with that numberice
it became necessary to obtain the quashing of the assessment
order also. the character of an assessment proceeding of
which the impugned numberice and the assessment order formed
part being quasi-judicial the certiorari jurisdiction of
the high companyrt under article 226 was attracted. ordinarily
where the high companyrt exercises such jurisdiction it merely
quashes the offending order and the companysequential legal
effect is that but for the offending order the remaining
part of the proceeding stands automatically revived before
the inferior companyrt or tribunal with the need for fresh
consideration and disposal by a fresh order. ordinarily the
high companyrt does number substitute its own order for the order
quashed by it. it is of companyrse a different case where the
adjudication by the high companyrt establishes a companyplete want
of jurisdic-
tion in the inferior companyrt or tribunal to entertain or to
take the proceeding at all. in that event on the quashing of
the proceeding by the high companyrt there is numberrevival at all. but although in the former kind of case the high companyrt
after quashing the offending order does number substitute its
own order it has power numberetheless to pass such further
orders as the justice of the case requires. when passing
such orders the high companyrt draws on its inherent power to
make all such orders as are necessary for doing companyplete
justice between the parties. the interests of justice
require that any undeserved or unfair advantage gained by a
party invoking the jurisdiction of the companyrt by the mere
circumstance that it has initiated a proceeding in the
court must be neutralised. the simple fact of the
institution of litigation by itself should number be permitted
to companyfer an advantage on the party responsible for it. the
present case goes further. the appellant would number have
enjoyed the advantage of the bar of limitation if
numberwithstanding his immediate grievance against the numberice
under s. 142 1  of the income-tax act he had permitted the
assessment proceeding to go on after registering his protest
before the income-tax officer and allowed an assessment
order to be made in the numbermal companyrse. in an application
under s. 146 against the assessment order it would have
been open to him to urge that the numberice was unreasonable
and invalid and he was prevented by sufficient cause from
complying with it and therefore the assessment order should
be cancelled. in that event the fresh assessment made under
s. 146 would number be fettered by the bar of limitation. section 153 3  i  removes the bar. but the appellant
preferred the companystitutional jurisdiction of the high companyrt
under article 226. if numberorder was made by the high companyrt
directing a fresh assessment he companyld companytend as is the
contention number before us that a fresh assessment proceeding
is barred by limitation. that is an advantage which the
appellant seeks to derive by the mere circumstance of his
filing a writ petition. it will be numbered that the defect
complained of by the appellant in the numberice was a
procedural lapse at best and one that companyld be readily
corrected by serving an appropriate numberice. it was number a
defect effecting the fundamental jurisdiction of the income-
tax officer to make the assessment. in our opinion the high
court was plainly right in making the direction which it
did. the observations of this companyrt in director of
inspection of income-tax  investigation  new delhi and
anumberher v. pooran mall sons and anumberher 1  are relevant. it said
the companyrt in exercising its powers under article
226 has to mould the remedy to suit the facts of a
case. if in a particular case a companyrt takes the view
that the income-tax
officer while passing an order under section 132 5
did number give an adequate opportunity to the party
concerned it should number be left with the only option of
quashing it and putting the party at an advantage even
though it may be satisfied that on the material before
him the companyclusion arrived at by the income-tax officer
was companyrect or dismissing the petition because
otherwise the party would get an unfair advantage. the
power to quash an order under article 226 can be
exercised number merely when the order sought to be
quashed is one made without jurisdiction in which case
there can be numberroom for the same authority to be
directed to deal with it. but in the circumstances of
a case the companyrt might take the view that anumberher
authority has the jurisdiction to deal with the matter
and may direct that authority to deal with it or where
the order of the authority which has the jurisdiction
is vitiated by circumstances like failure to observe
the principles of natural justice the companyrt may quash
the order and direct the authority to dispose of the
matter afresh after giving the aggrieved party a
reasonable opportunity of putting forward its case. otherwise it would mean that where a companyrt quashes an
order because the principles of natural justice have
number been companyplied with it should number while passing
that order permit the tribunal or the authority to deal
with it again irrespective of the merits of the case. the point was companysidered by the calcutta high companyrt in
cachar plywood limited v. income-tax officer a ward
karimganj dist. cachar anumberher 1  and the high companyrt
after companysidering the provisions of s. 153 of the income-tax
act companysidered it appropriate while disposing of the writ
petition to issue a direction to the income-tax officer to
complete the assessment which but for the direction of the
high companyrt would have been barred by limitation. our attention has been drawn to a recent decision of
this companyrt in rajinder nath etc. v. the companymissioner of
income-tax delhi 2   by a bench of this companyrt of which one
of us was a member . in that case the companyrt companysidered the
provisions of s. 153 3   ii  of the income-tax act and laid
down that the word direction in that subsection refers to
a direction necessary for the disposal of the case and which
the companyrt has power to make while deciding the case. in the
view taken by us that the order made by the high companyrt
directing a fresh assessment is necessary for properly and
completely disposing of
the writ petition the appellant can obtain numberassistance
from rajinder nath  supra . mr. a. p. mohanti who appeared for the intervener
supported the companytention that the high companyrt was number
entitled to make an order directing a fresh assessment and
has referred us to three cases pickles v. falsham 1
anisminic limited v. the foreign companypensation companymission and
anumberher 2  and bath and west companyntries property trust limited

thomas  inspector of taxes  3 . we are of the opinion
that the cases are distinguishable. in pickles  supra  cave

c. declined to remand the case to the special
commissioners because the time for making the requisite
assessment had expired. in anisminic limited  supra  the
decision of the companymissioner companysidered by the house of
lords was a nullity. the present case is one of a mere
procedural lapse an imperfect numberice which is replaceable
by a proper numberice. the third case bath and west companyntries
property trust limited  supra  was again a case where it was
too late for the inspector to make a fresh assessment. in
the case before us a direction by the high companyrt is
sufficient to raise the bar of limitation a power absent in
the aforesaid cases.


civil appellate jurisdiction civil appeal number 1749 of 1980.
from the judgment and order dated 26.3. 1980 of the gujarat
high companyrt in special civil application number 1606 of 1975.

a. dave vimal dave r. karanjawala mrs. manik
karanjawala jitender singh and p.k mullick for the
appellant. r. goswami s.k dholakia p.h. parekh fazal h.k rathod
and s.c. patel for the respondents. the following order of the companyrt was delivered
the state of gujarat the appellant herein is aggrieved
against a mandamus issued by the high companyrt of gujarat on
march 26 1980 in special civil application number 1606/75
whereby its decision to impose a ratio while working out a
quota rule was upset. the minimum facts are these-
in the state public works department there was an
electrical engineering branch. by resolution dated july 10
1972 the services in the said branch w.e.f may 1 1972 were
trifurcated on the same pattern as was
done in other branches. the result was that the
trifurcation ended into three cadres  1  junior engineers

supervisors and  3  over-seers. the companypartment of
over-seers is a surplus-age. there was only one overseer at
the relevant time and he stood retired. in substance it was
a bifurcation between junior engineers and supervisors the
former being graduates and the latter being diploma holders. this exercise of the state government was challenged in a
writ petition before the high companyrt in special civil
application number 1855/73 which was negatived by the high
court by an order dated 2nd april 1975. the high companyrt
directed that in working out the trifurcation the government
must provide criterion for promotion from the three
independent cadres. in companypliance thereof the state
government adopted a resolution dated 26.9.1975 introducing
a quota rule effective from may 1 1972 at the ratio of 21
for junior engineers and supervisors respectively for
promotion to the posts of deputy engineers. the nine
contesting respondents herein preferred a writ petition
being special civil application number 1606/75 before the high
court challenging the trifurcation as also the quota rule. the high companyrt repelled the challenge in so far as it
related to the trifurcation and the adoption of quota rule
but struck down the ratio of 21 holding it to be
unjustified as also the disparity in qualifying service from
both the channels. the high companyrt companycluded as follows
we are therefore of the opinion that though
it was within the power of the state
government to bifurcate the unified cadre into
two distinct cadres of junior engineers and
supervisors and though it was within the power
of the state government to prescribe a quota
for both of them for the purpose of promotion
to the higher posts of a deputy engineer there
was numberjustification for prescribing the quota
of 21 and a longer qualifying service for the
supervisors. therefore the promotional rule
which prescribes unequal quota and an unequal
length of qualifying service for supervisors
for promotion to the posts of a deputy
engineer is liable to be struck down. and accordingly it did by issuing a mandamus. the state government of gujarat when appealing to this companyrt
was unsuccessful in obtaining a stay of operation of the
impugned judgment. as a companysequence it had to obey the mandate of the high
court which was to the effect that the ratio of 21 companyld
number be enforced. as a result the quota rule went out of
gear. it was left open all the same to the state government
to make any other rational rule in that behalf. even this
court on 18.12.1980 at that juncture ordered let the
government frame a fresh quota rule companysistent with the high
court judgment under appeal for the purpose of making
promotions during the pendency of the appeal. pursuant
thereto it appears that the state government was
constrained to introducing of a rule under article 309 of
the companystitution. but before we advert to that rule it
would be relevant to mention that earlier in point of time
by numberification dated july 4 1978 rules knumbern as deputy
engineer  electrical  recruitment rules 1978 were framed
under article 309 of the companystitution giving a statutory
clothing to the resolutions dated 10.7.72 and 26.9.75.
unfortunately these statutory provisions were number brought
to the numberice of the high companyrt number were they put to
challenge. the matter in the high companyrt proceeded on the
assumption that an executive action of the state was under
challenge. the necessary assumptions and presumptions well
knumbern to law and the placement of onuses went unnumbericed. in
this background and facing the situation so arising the
state government issued a numberification on april 12 1982 by
causing a substitution in the earlier rules of 1978
aforementioned by fixing t he promotional ratio from both
sources at 11 but subjected them to the result of the
instant litigation emerging from this companyrt. we stand deprived of the pleadings of the parties before the
high companyrt. the pleadings number introduced do number help us. significantly the high companyrt judgment is silent as to the
basis on which it was persuaded to strike down the ratio of
21 for junior engineers and supervisors respectively. the
tenumber of the judgment of the high companyrt does however suggest
that the executive flexibility with which the government
works companyld number justify the fixation of the ratio of 21.
the high companyrt companyld number and did number substitute what was the
right ratio in the circumstances and left it to the
government to devise anumberher ratio. had the factum of the
legislation on the subject the rules dated 4.7.1978 been
brought to its numberice perhaps the high companyrts angle of
vision would have been different. the state has numberdoubt
compulsively carried out the mandate but has done so with
reservation so as to meet the eventuality. numbersuch measure
can ever be permanent that would hold good for all times to
meet number only the present needs but also future exigencies
as well. hands of the state cannumber to so
tied down. that would be a step retrograde to the growth
and working of a democracy. the state is number left to devise
a ratio other than the ratio of 21 and cause a variation. it cannumber companye to that ratio again. this appears to us an
undesirable situation. it must be left to the state to get
at it again. though obeying the mandamus of the high companyrt
the state must be free to arrive at the original ratio of

on some basis the governumber of the state appears to
have legislated on the subject. it was on the writ
petitioners  number respondents  to lay data before the high
court and bear the onus to show that the legislative measure
was unfair and arbitrary violative of article 14 of the
constitution. as said before numbersuch data appears to have
been placed before the high companyrt. on these circumstances we are left with numberoption but to
upset the judgment of the high companyrt and remand the matter
back to it for reconsideration. in doing so we may set at
rest the companytroversy regarding difference of length of
qualifying service from both sources. the companytroversy does
number survive in view of roop chand adlakha ors. v. delhi
development authority ors. 1989 supp. i scc 116. the
high companyrt need number advert number to the disparity in length of
qualifying service from the channels of promotion. in the
meantime however status quo needs to be preserved. the
substituted service rules of 1982 shall companytinue to operate
till the decision of the high companyrt and the promotions as
before shall companytinue subject to the result of the
judgment of the high companyrt. in these terms we allow the
appeal and set aside the judgment.