civil appellate jurisdiction c.a. number 1040 of 1968.
appeal by special leave from the award dated september 16
1967 of the third industrial tribunal west bengal in case
number viii-235/66. debabrata mookherjee janardan sharma and anil das chow-
dhury for the appellants. k. daphtary and m. c. bhandare b. p. maheshwari and
leila sheth for the respondent. the judgment of the companyrt was delivered by
vaidialingam j. in this appeal by special leave the short
question that arises for companysideration is whether the
appellants are precluded by s. 32  vii   a  of the payment
of bonus act 1965  hereinafter to be referred as the act
from claiming bonus under the act in view of the agreement
ex. a5 dated august 30 1962.
the respondent companypany is a fairly prosperous companycern and
one of the biggest of its kind in asia. it has factories at
batanagar in west bengal faridabad in the present haryana
state digha and mokamehghat in bihar and administrative
offices in calcutta. it has central repair shops in
calcutta and other places and a purchasing depot in kerala. it has about 900 shops for retail sale scattered throughout
the companyntry besides the wholesale agents. its branches have
a wide market both in this companyntry as well as abroad. it
employs a very large number of workmen in its factory
administrative office and central repair shops. the companypany
and the appellants represented by its unions have been
entering into various agreements from time to time the last
of which was on august 30 1962 ex. a.5. as per ex. a.5
the respondent paid bonus for the year 1964 at the rates
mentioned therein. the appellants demanded that they should
be paid the profit bonus as per the act in addition to what
has been paid as
per ex. a.5 the companypany declined to accede to the demand of
the workmen on the ground that the general bonus paid under
ex. a.5 was an amount paid as production bonus or incentive
wages. the companypany also pleaded s. 32  vii   a  as a bar to
the workmen making a claim for payment of bonus under the
act. during the companyciliation proceedings the union and the
company agreed to have the dispute referred for adjudication
to the industrial tribunal. accordingly the state
government on june 25 1966 referred to the third
industrial tribunal west bengal for adjudication the
following dispute
whether the employees of the companypany represented by bata
mazdoor union are entitled to bonus for the year 1964 under
the payment of bonus act 1965 in addition to the bonus paid
to them and whether in view of the agreement dated the 30th
august 1962 between the union and the companypany for payment
of bonus the payment of bonus act 1965 is applicable to
such employees. before the tribunal the appellants plea was that the amount
paid under the agreement ex. a. 5 is an ad hoc or an ex-
gratia payment made out of charity and as a supplement to
the wages and that it was number a bonus linked with production
or productivity. it was number an annual payment number was it
paid in lieu of bonus based on profits. the workmen
accepted the position that the general bonus paid under the
agreement was neither customary number a profit bonus number a
bonus as an implied term of companytract. on all these grounds
the workmen pleaded that s. 32  vii   a  is numberbar to their
claim for bonus under the act. the companypany on the other hand after a reference to the
various prior agreements under which the amounts have been
paid as bonus though under different names pleaded that
the general bonus paid under the agreement ex. a5 was an
amount paid as production bonus or incentive wages. the
company placed companysiderable reliance on the minutes of the
discussions that took place between the union and the
company whenever demands were raised and the agreements
arrived at between the parties which were later on
incorporated as formal settlements from time to time. these
proceedings were relied on by the companypany for the purpose of
showing that the demands for payment of bonus were as pro-
duction bonus and that what was ultimately paid under the
various agreements including the one in question namely
ex. a.5 were all understood by all parties as production
bonus or incentive wages. as the necessary companyditions
required under s. 32  vii   a  were present in this case
according to the companypany the claim for profit bonus under
the act is number sustainable. the industrial tribunal after a fairly elaborate
consideration of the various agreements as well the record
of the proceedings leading upto those agreements and the
other materials on record has held in its award that the
general bonus that was being paid by the companypany including
the payment of bonus under the agreement ex. a.5 was number a
profit sharing bonus. the tribunal has found that the
general bonus paid under the agreement of 1962 was an annual
bonus linked with production or productivity and that it was
paid in lieu of bonus based on profits. the mere cir-
cumstance that the payment of bonus was made quarterly
according to the tribunal does number take it away from the
nature of an annual payment. the tribunal ultimately held
that in view of the agreement ex. a.5 the workmen are number
entitled to claim bonus for the year 1964 under the act. on behalf of the appellants mr. d. mookerjee learned companyn-
sel very strenuously criticised the reference made by the
tribunal to the previous agreements for interpreting the
nature of the payment under ex. a.5. it was companytended that
the tribunal having held that the agreement of 1962 was a
self-contained agreement companymitted a very serious error in
law in interpreting the term general bonus occurring in
the said agreement by reference to the previous agreements. according to mr. mookerjee the tribunal should have
considered the nature of the payment by a reference only to
the provisions companytained in the agreement of 1962. read in
that manner it was pointed out the inevitable companyclusion
should be that the general bonus paid under the agreement of
1962 was number an annual bonus number was it linked with
production or productivity and it has number been paid in lieu
of bonus based on profits. the general bonus paid does number
satisfy the test of production bonus as laid down by this
court. the payments admittedly being made quarterly do number
have the character of an annual bonus. there is numbermaterial
on record to show that the companypany paid the amount under the
agreement in lieu of bonus based on profits. the companytention
taken before the tribunal by the workmen that the amount
paid under the agreement was only an ex-gratia payment to
supplement the wage bill of the workmen without any relation
to production or productivity was also pressed before us by
the companynsel. on the other hand mr. c. k. daphtary learned companynsel for
the respondent companypany pointed out that in order to
appreciate and decide about the character of the general
bonus paid under the agreement of 1962 it was number only
necessary but also obligatory on the part of the tribunal to
refer to the previous agreements. the companynsel pointed out
that the various demands made from time to time by the
workmen as well as the minutes of the discussion that took
place between the parties which ultimately resulted in
the various agreements extending over a fairly long period
win clearly show that what was being paid by the companypany
was production bonus or as an incentive wage. as the same
payment was being companytinued under the agreement of 1962 the
tribunal was justified in holding that the general bonus
that was being paid by the companypany over a long number of
years was by way of production bonus or as an incentive
wage. mr. daphtary also referred us to the various
provisions companytained in the several agreements regarding the
duration of the agreements and also to their having binding
effect till they were terminated by numberice given in accor-
dance with the terms of the agreement. all this according
to the companynsel will clearly show that the intention of the
parties was that the agreements under which the payments
were made were to be throughout the year and also to be
continued from year to year. the material on record
according to the companynsel will also show that the payments
were made quarterly at the express desire and request of the
workmen but as the payments extended throughout the year
and will also companytinue year to year they are in the nature
of annual payment of bonus. before we companysider the various companytentions of the learned
counsel on both sides it is desirable to refer to the
material provisions of the act. all parties are agreed that
the additional claim for bonus for the year 1964 was under
the provisions of the act. section 2 21  defines the
expression salary or wage. this definition among other
things includes dearness allowance also. section 8 lays
down the companyditions for eligibility for bonus. sections 1 0
and 11 deal with the payment of minimum and maximum bonus
respectively in the circumstances mentioned therein. sec-
tion 17 enables an employer to adjust the amount paid as
pooja or customary bonus or interim bonus against the final
bonus payable under the act. section 32 deals with various
classes of employees to whom the act does number apply. the
relevant pro-vision with which were are companycerned is section
32  vii  which is as follows
section 32. numberhing in this act shall apply to
 a  who have entered before the 29th may 1965 into any
agreement or settlement with their employers for payment of
an annual bonus linked with production or productivity in
lieu of bonus based on profits or
 b  who have entered or may enter after that date into any
agreement or settlement with their employers for payment of
such annual bonus in lieu of the bonus payable under this
act
for the period for which such agreement or settlement is in
operation
we are particularly companycerned with sub-clause  a  of cl. as the appellants claim is resisted on the basis of
the agreement dated august 30 1962. in order to attract s.
32 vii   a  the companypany will have to establish

that there has been an agreement or settlement entered
into between the workmen and the companypany before may 29
1965

the said agreement or settlement was one for payment of
annual bonus

the said payment of bonus was linked with production or
productivity and

the said payment was in lieu of bonus based on profits. in this case there is numbercontroversy that there has been an
agreement ex. a.5 entered into between the parties on
august 30 1962 which is anterior to may 29 1965. there
is also numbercontroversy that the amount paid under this
agreement is characterised as general bonus. the question
then arises whether the said payment as general bonus was an
annual bonus linked with production or productivity and paid
in lieu of bonus based on profits. the nature of production bonus has been discussed by this
court in m s titaghur paper mills company limited v. its
workmen 1 . it has been stated that payment of production
bonus is by way of an incentive to higher production and is
in the nature of an incentive wage. the extra payment
depends number on extra profit but on production. from this
decision it is clear that the principals element in the
payment of extra amount is to provide an incentive to
production. in the new maneck chowk spinning and weaving company limited
ahmedabad and others v. the textile labour association
ahmedabad 2  it has been stated that there are four types
of bonus which have been evolved under the industrial law as
laid down by this companyrt namely  1  production bonus or
incentive wage  2  bonus as an implied term of companytract
between the parties  3  customary bonus in companynection with
some festival and  4  profit bonus which was evolved by the
labour appellate tribunal and approved by this companyrt. under
the act there is numbercontroversy what is payable is the
profit bonus. in the case before us from the award it is
seen that the union companyceded that the amount paid as general
bonus under the agreement was neither customary
 1  1959 supp. 2 s.c.r. 1012.  2  1961 3 s.c.r. 1.
number profit bonus number bonus as an implied term of companytract. in the nature of things the union has number raised the plea
that the amount paid under the agreement is a profit bonus. equally the companypany companyld number also take up such a plea as
their attempt was to show that it is a payment as production
bonus or incentive wages. in sanghi jeevaraj ghewar chand and others v. secretary
madras chillies grains kirana merchants workers union and
anumberher  1  it has been held that where the bar of s. 32
 vii   a  of the act operates the employees in such cases
so long as the agreement or settlement is in operation
cannumber claim bonus on the basis of full bench formula or
under the act. therefore it becomes essential to find out the nature of
the payment made under ex. a.5. that is an agreement
entered into between the appellant and the respondent
company on august 30 1962. the purpose of the agreement is
stated to be to promote and improve industrial and econumberic
relationship between the companypany and its workmen and to
establish and maintain satisfactory working companyditions. in
article iv among various other .matters the union has
acknumberledged that it is the exclusive right and function of
the companypany to maintain among other matters the efficiency. in article v dealing with lock out and strikes the companypany
on the one hand has agreed number to declare any lock out so
long as the workmen do number companymit any breach of the
agreement. the union on the other hand has also agreed
while retaining its right to go on strike number to permit its
members individually or companylectively to curtail or restrict
production and certain other matters. article vi dealing
with general bonus is as follows article vi-general bonus
article vi--general bonus
the companypany declares and makes a payment of general bonus
one month after the end of each quarter at the rate of 20
of the total salary and or wages paid to each workman and
employee during the quarter immediately
preceding  such salary or wages are exclusive
of dearness allowance or any other special
allowances or rewards granted to him
during
such period . such bonus will be payable to
those who have companypleted six months approved
service ending on the last day of the quarter
and to those who have companypleted less than six
months approved service on the last day of the
quarter the bonus will be payable at the rate
of 10 of their total salary or wages as
aforesaid. the bonus will be available only
to those who are in the employ of the
 1 1969 1 s.c.r. 366.
company on the last date of the quarter and who have given
regular and approved service during the quarter to which
the payment of bonus is available. under article viii it is provided that the agreement is to
be in force until december 31 1965 and that it shall
continue from year to year thereafter unless either party
gives numberice in writing of its intention to enter into
negotiations for the purpose of amendin- the agreement. the
said article further provides for the period of numberice as
well as the starting of negotiations and the agreement
continuing to be in force till a new settlement or agreement
is arrived at. a mere reading of article vi relating to general bonus will
number by itself throw much light on the character of such
payment. but it is clear that the payment is to be made at
the end of each quarter at the percentage mentioned therein
of the total salary or wages which does number include dearness
allowance. the said article also provides for the period of
service necessary for qualifying to get the higher or lower
percentage of bonus as the case may be. the emphasis is also
laid on the workmen giving regular and approved service
during the quarter to which the payment of bonus is
available. numbermally it is the agreement ex. a.5 which has to be
looked into for the purpose of ascertaining the rights and
liabilities of the employer and employees. that is the
agreement will have to be looked into for the purpose of
ascertaining the nature and character of the general bonus
payable under art. vi provided that clause gives a full
and clear indication regarding the character of such
payment. but a mere reading of article vi does number give
any indication regarding the character of such payment. the
other clauses in the agreement also do number throw much light
on this aspect. but it is number as if that agreement ex. a.5
has been entered into between the parties for the first
time. the expression general bonus occurs as we will
show presently in certain previous agreements. under those
circumstances in our opinion in order to properly
appreciate the character and nature of the payment that was
being made originally and that was companytinued under article
vi of the agreement of 1962 it is number only relevant but
also necessary to companysider the various settlements and
agreements that took place between the parties on prior
occasions. we are number inclined to agree with the companytention of mr.
mookerjee that the tribunal has companymitted a very serious
error in law when it tried to interpret the nature of the
payment under ex. a.5 by reference to the previous
settlements and discussions that took place between the
parties. the tribunal was perfectly justified in
considering those agreements as they in our opinion
give a companyplete and clear picture of the nature of the
claims made by the union the stand taken by the companypany and
the nature of the agreement ultimately arrived at between
the parties regarding the payment of the amount in question. hence we will also refer to the prior agreements as well as
the events leading upto those agreements. the earliest
agreement is ex. a. dated may 16 1946. under article v the
company agreed to pay victory bonus of six weeks pay for
the employees mentioned therein. under article vi the
company agreed to pay bonus on production or special bonus
equivalent to 10 of pay. it is significant to numbere that
the payment under art. vi of this agreement is
characterised as a production or special bonus at a fixed
percentage on the pay of the employees. on march 6 1947 the union addressed a letter ex. b to the
company requiring production bonus to be increased in the
manner stated therein. in fact the union wanted an
increased percentage depending upon the salary drawn by the
employees. it is to be numbered that the union also understood
the payment made under ex. a. as a production bonus and
under ex. b it is the production bonus that they wanted to
be increased. in view of this demand there were
discussions between the parties and ultimately they entered
into an agreement ex. c on july 12 1947. this agreement
states that 10 production bonus given under ex. a is number
to be increased. but an extra amount of 5 or 2 was given
as an attendance bonus. on numberember 22 1948 there was anumberher agreement ex. a.1
entered into between the parties. article vi related to ex-
gratia payment of bonus which is as follows
article vi-ex-gratia payment of bonus
the companypany declares and makes an ex-gratia payment of bonus
one month after the end of each quarter at the rate of 1 0
per cent of the total salary and or wages paid to each
employee during the quarter immediately preceding  such
salary or wages are exclusive of dearness allowance or any
other special allowances or attendance bonus or rewards
granted to him during the said period  such bonus will be
payable only to those employees who have companypleted six
months approved service ending on the last day of the
quarter and to those employees who have companypleted less than
six months approved service on the last day of the quarter
the exgratia bonus will be payable at the rate of 5 of
their total salary or wages as aforesaid. the ex-gratia
bonus will be available only to those employees who are in
the employ of the companypany on the date fixed for payment
and who have given regular and approved service
during the quarter to which the ex-gratia
payments of bonus is available. it will be numbered that while in the agreements exs.a and c
what was characterised as production bonus has been changed
in ex. a. 1 as ex-gratia payment of bonus. article viii
provided for the. agreement being in force till december 31
1950 and to companytinue year to year unless either party gives
numberice in writing of its intention to enter into
negotiations for the purpose of amending the agreement. on may 15 1951 the union made a representation for modi-
fying the agreement ex. a. 1. in respect of this demand on
october 3 1951 agreed minutes of discussion and agreement
between the parties were recorded in ex. d.
from ex. d it is seen that the union had accepted the
position that the approximate living wage has been attaired
in this companypany and therefore the bonus has to be paid as
an incentive to greater efficiency in production as. well
as towards labours companytribution to the
prosperity of the companypany. in view of this the union
represented that the bonus that is being paid should number be
regarded as ex-gratia payment. hence the companypany was
requested to delete the expression ex-gratia and to
substitute the word general. the union further suggested
that as the payment of bonus on the basis of earned salary
is a sufficient incentive for attendance the attendance
bonus which was being paid at a flat rate discontinued and
that a general bonus is to be paid at a flat rate of 15
every quarter to all the employees. this representation was
accepted by the companypany and ex. d. shows that it was
agreed between the parties that the attendance bonus was to
be discontinued and that the term ex-gratia was to be
substituted by the word general. it was also greed that
the rate should be increased to 15 and 7 1/2
respectively. the suggestion of the union for payment of
the amount every quarter was also agreed to by the parties. it was also agreed that the arrangements entered into
between the parties are to companytinue till december 31 1953.
from ex. d. it is clear that the union itself has required
the payment of bonus to be made as an incentive to
greater efficiency in production and the workmen wanted
the expression ex-gratia to be substituted by the
wordgeneral. the union accepted that approximiate living
wage is being earned by the employees of this companypany. further the union wanted teh amount to be paid at a flat
fixed rate every quarter. it is also to be numbered from ex.d. that the changes agreed to between the parties were to take
effect from the first quarter of 1952. on the basis of the
arrangement recorded in ex. d. the parties entered into a
formal agreement ex. a.2 on numberember 22 1951. this is
called companylective agree
l1286supci/72
ment as finally amended by the settlement of october 3
1951 evidenced by ex. d. article i dealing with the
purpose of the agreement states that it was with a view to
promote and improve industrial and econumberic relationship
between the companypany and its employees and to establish and
maintain satisfactory working companyditions. article vi
dealing with the general bonus is as follows
article vi--general bonus
the companypany declares and makes a payment of general bonus
one month after the end of each quarter at the rate of 15
per cent of the total salary and or wages paid to each
employee during the quarter immediately preceding  such
salary or wages are exclusive of dearness allowance or any
other special allowance or rewards granted to him during
such period  such bonus will be payable only to those
employees who have companypleted six months approved service
ending on the last day of the quarter and to those
employees who have companypleted less than six months approved
service on the last day of the quarter the bonus will be
payable at the rate of 7 1/2 of their total salary or wages
as aforesaid. the bonus will be available only to those
employees who are in the employ of the companypany on the last
date of the quarter and who have given regular and approved
service during the quarter to which the payment of bonus is
available. it will be numbered that this article is in substitution of the
original article vi in the 1948 agreement ex. a.1. what was
characterised as ex-gratia payment of bonus in ex. a.1 was
designated as general bonus in ex.a.2. it must be numbered that
it was for the first time that the expression general
bonus has found a place in the agreement between the
parties. this change was effected due to the representation
made by the union and accepted by both the parties as
recorded in the minutes ex.d. the rate has been increased to
15 and 7 1/2 respectively depending upon the service of
the employee. this rate is on the basic wages and dearness
allowance has been excluded for purposes of calculation. attendance bonus was abolished and the rate in article vi
shows that it has companybined the old production bonus as well
as the attendance bonus. the payment is also to be made
every quarter as required by the union. article viii
provided that the agreement shall be in force upto december
31 1953 and was to companytinue from year to year thereafter
unless either party gives numberice in writing of its intention
to enter into negotiations for the purpose of amending the
agreement. on december 28 1953 the union made a representation for
effecting certain modification in the agreement ex. a.2. this was followed by the proposals companytained in ex. b. 3 on
march ii 1954. paragraph 3 of ex. b.3 relates to bonus. after referring to the existing payment of general bonus at
the rate mentioned in ex. a.2 the union made a request to
the companypany to revise the rate of bonus by including
dearness allowance also in the wages or salaries for
purposes of calculation of bonus the reason being the
necessity of giving incentive to the employees and the rate
at which bonus is paid to employees of many other
comparable companycerns. there was also a demand for pooja or
festival bonus. ultimately the demand with regard to bonus
was that  a  the general bonus paid quarterly at the end
of each quarter of the year should be increased to 20 and
10 depending upon the length of service of the employee and
the payment at the said percentage should be on a
calculation of both the basic wages and dearness allowance
paid to an employee during the quarter and  2  the workmen
should be paid pooja bonus equal to three months wages
including dearness allowance besides the general bonus. there was a supplementary claim made on behalf of the union
on march 15 1954 under ex. b.4 that the payment to be
made under ex. b.3 should have retrospective effect from
january 1 1954. three points emerge from this demand of
the union  1  increase in the rate of general bonus and
percentage to be worked out on wages including dearness
allowance  2  a claim for payment of pooja or festival
bonus and  3  the payments of both  1  and  2  to take
effect from january 1 1954. but the significant point to
be numbered is that in ex. b. 3 the reason given by the union
itself for claiming general bonus at an increased rate and
for working out the percentage of wages including dearness
allowance was the necessity for giving incentive to the
employe---. . . . these demands of the union were
discussed and agreed minutes of discussion and agreement
were recorded in ex. d. 1 dated february 18 1955. it is
seen that there were as many as 45 meetings between the
representatives of the union and the companypany beginning from
april 9 1954. ex. d.1 shows that the demands in letters
dated december 28 1953 march 11 1954 and march 15 1954
were discussed thread bare between the parties. the minutes
show that the companypany was number willing to accede in full to
the increased rates claimed by the union regarding general
bonus number was it inclined to take into account dearness
allowance for the purpose of calculation of bonus. but the
company was prepared to show some companysideration by merging a
part of the dearness allowance in the basic wages as that
will result in a slightly higher amount being received as
general bonus by the workmen. the claim for pooja or
festival bonus was number accepted by the companypany. both
parties ultimately agreed that the gene-
ral bonus will be paid at 17 1/2 instead of the original
15 as per ex. a.2. the minutes further show that all
demands made by the union have be-en fully settled by
increasing the percentage of general bonus. the tentative
agreement recorded in ex. d.1 was the subject of a
collective agreement between the parties under ex. a.3 dated
february 18 1955. article vi deals with general bonus. except for the difference in the rate of 17 1/2 and 8.7 5
on the basic wages excluding dearness allowance the
provision regarding payment of general bonus under this
article was similar to those companytained in article vi of ex. a.2 of 195 1.
article vill provided that the agreement is to be in force
till december 3 1 1957 and that it was to companytinue from
year to year thereafter unless either party has given
numberice in the manner provided therein. on december 24 1957 the union sent a letter ex. b.5 to the
company requiring the general bonus. to be paid at 50 and
25 respectively in place of the present rate of 17 1/2
and 8.75. the demand was also to calculate this rate on
salaries including the dearness allowance. a further
request was made that half of the bonus as per the demand
be paid in four quarters in a year as at present and the
remaining half at the time of pooja every year. this again
led to the parties discussing the demands and the minutes of
discussion and companyclusions arrived at by the parties by
agreement are recorded in ex. d.2 dated october 6 1958.
the minutes disclose that the demands of the union were
carefully companysidered by the companypany. the chairman of the
company drew the attention of the union to the agreed
minutes of settlement ex. d and pointed out that bonus was
being paid as an incentive to greater efficiency in. production and suggested that bonus payment be
linked with the generally accepted formula and be numberlonger
paid on percentage basis. but the union did riot accept the
suggestion of the chairman and stated that as a matter of
security they would like the companytinuation of the same to be
paid on a fixed percentage basis. after further discussion
the chairman agreed to a token increase in the rate of
bonus. it was agreed between both the parties that the
payment of general bonus will be increased from 171 to 18-
21 on the wages excluding dearness allowance. the
conclusions so arrived at were incorporated in the agreement
ex. a.4 on october 6 1948. this again is styled as a
collective agreement. article vi relating to general bonus
is substantially the same as art. vi in ex. a.5 excepting
that the rate was 18 1/2 and 9.25 depending upon the
service of the workman. the percentage was to be calculated
only on the total salary excluding dearness allowance and
the general bonus was to be paid at the end of every
quarter. article viii provides that the claim was to be in
force- till december 31
1965 and that it was to companytinue from year to year unless a
numberice was given by either party in- the manner provided
therein. this takes us to the agreement under companysideration ex. a.5
dated august 30 1962. this is the seventh agreement in the
series. we have in the earlier part of the judgment
referred to articles vi and viii. article vi deals with
general bonus and it was to be paid at 20 and 10
respectively on the basic wages excluding dearness
allowance. it was to be paid at the end of each quarter. it will be seen that the rates ate slightly higher than
those provided in the previous agreement ex. a.4 of 1958.
we have very exhaustively dealt with the various demands
made by the workmen the minutes recording the discussion
that took place between the patties regarding the demands
the companyclusions arrived at therein as well as the final
agreements entered into on different dates between the
parties as they furnish the background so to say for the
agreement under companysideration ex. a.5. it will be seen that
originally in 1946 the payment was made as production or
special bonus. specific demand was made by the union on
march 6 1947 to increase production bonus. the companypany
did number agree to this request. on the other hand ex. c.
the agreement clearly shows that there would be numberincrease
in production bonus. but an additional amount was given as
attendance bonus. in 1948 what was originally characterised
as production bonus was termed ex-gratia payment of
bonus. the union specifically desired in 1951 to substitute
exgratia bonus by general bonus and to abolish
attendance bonus. the demand also was for general bonus to
be paid at a flat rate every quarter. for the first time
the expression general bonus occurs in the demand made by
the union on may 15 1951 and in the agreed minutes of
october 3 1951. the same was incorporated in the final
agreement of numberember 22 1951. the union made a demand
on march 11 1954 for increase in the rate of general bonus
so as to provide an incentive to the employees. this was
accepted and embodied final in the agreement dated february
18 1955. in ex. b.5 the union made a specific demand for
further increase of the rate of general bonus and wanted
half the amount to be paid quarterly as at present and the
balance at the time of pooja. though the minutes of the
discussion in respect of this demand shows that the
chairman. of the companypany wanted to alter what was given as
incentive to greater efficiency in production to one on
profit basis the union preferred the payment to be
continued as was being done on a fixed percentage basis. the pattern of bonus paid sometimes called production bonus
later on called ex-gratia payment but from 1951 called as
general bonus was being paid quarterly at a particular
percentage base on the salary excluding dearness allowance. having this background in mind it is clear that what was
being paid under art.vi
of ex. a.5 was a payment linked with production or
productivity. the principal emphasis is that the amount is
being paid as an incentive to production and therefore it
is paid as production bonus or as a wage incentive. that it
is an incentive payment in order to secure greater
efficiency in production is clear from exs. d b.3 and
d.2. we have already referred to the companytents of these
exhibits in great detail. even the workmen in ex. b.3
required the rate of general bonus to be increased in view
of the necessity of giving incentive to the employees. but
a more important point emerges from the minutes of
discussion recorded on october 6 1958 in ex. d.2. the
chairman of the companypany emphasised that what was being paid
as general bonus was as an incentive to greater efficiency
in production. the chairman specifically wanted this method
of payment to be changed and suggested that the bonus
payment be linked with the generally accepted formula
namely of profit bonus and that the payment on a fixed
percentage be abolished. but this suggestion to alter the
nature of the payment from a fixed percentage as a
production bonus for providing an incentive to greater
efficiency in production was number accepted by the union
which wanted the fixed percentage basis to be companytinued. that is the union was number prepared to receive bonus on the
basis of profits but wanted to companytinue the existing
arrangement of payment at a fixed percentage as an incentive
to efficiency in production. that is the union wanted the
character of the payment as production bonus being
continued. therefore these circumstances clearly lead to
the companyclusion that the payment that was being made and
continued in the agreement ex. a.5 was payment of bonus
linked with production or productivity. it is also clear
that the said payment was made in lieu of bonus based on
profits because the union itself did number agree to the
suggestion of the chairman as companytained in ex. d.2 to alter
the character of payment to one of profit sharing bonus. therefore this also shows that the payment under ex. a.5
was in lieu of bonus based on profits. the expressions used
in s. 32  vii   a  are linked with production or
productivity and that test is satisfied in respect of the
payment made under ex. a.5. it is number the case of the union
that the character of payment which was designated as an
incentive to greater efficiency in production even as early
as 1951  vide ex. d  has been altered either in the
subsequent agreements or in the agreement ex. a.5. if so
it follows that the payment of general bonus in ex. a.5
retains the same character as a payment by way of an
incentive to greater efficiency in production. as the minutes of the discussion that took place between the
parties have been recorded then and there they are items of
evidence which are more valuable and useful than the oral
evidence adduced by the parties. for instance p.w. 1
secretary of the union has deposed that the payment in ex. a.5 is number linked with
production. on the other hand the labour officer of the
company as d.w. i has stated that the said payment is
linked with production. this type of evidence does number lead
us any where. that is why we have placed more emphasis and
reliance on the documentary evidence adduced by the parties
more especially when there is numbercontroversy that the record
of the meetings do number represent the actual facts. then the question is whether the bonus paid is an annual
bonus which is anumberher requirement of s. 32  vii   a  of
the act. that bonus has been paid at the end of every
quarter at any rate from 1948 is clear from the various
settlements and agreements referred to earlier. that the
union itself required that bonus should be companytinued to be
paid quarterly is clear from the letters written by the
union particularly ex. b.5 dated december 24 1957. we
have already referred to the various agreements which no
doubt prescribe the numbermal duration of the period of the
agreement which extends to over a year. there is also a
further provision to the effect that even after the date of
expiry mentioned therein the agreement will companytinue to be. in force till a numberice is given in the manner provided for
in the agreement. therefore it will be seen that it is number
as if that bonus is paid for one quarter and does number enure
for a succeeding quarter. on the other hand the amounts
payable are number restricted to one particular quarter and the
intention is made clear in the agreement that it has to
operate throughout the year and also companytinue from year to
year. it is number possible to accept the companytention of mr.
mookerjee that it is only when a payment is made at the end
of the year it can be companysidered to be an annual bonus. the essential test to be satisfied is that the payment
should enure throughout the year and it should also be
continued from year to year. as observed by lord maugham in
moss empires limited v. inland revenue companymissioners   the
expression annual must be taken to have the quality of
being recurrent or being capable of recurrence. adopting
this test the payments in the case before us were to
continue the whole of the year and also were to be paid from
year to year number only during the period of agreement but
also for the succeeding year till the required numberice was
given under the agreement even then there is a provision in
the agreement to the effect that the agreement will companytinue
to have force numberwithstanding the numberice till a fresh
agreement or settlement is entered into. therefore it is
clear that the payment of general bonus is annual bonus as
contemplated by s. 32  vii   a  of the act. the companyrt of
appeal in smith v. smith  2   had to companysider whether a
payment to be made weekly during the life time of a person
was an annual payment. it was held as follows
 1  1937 3 all. e.r. 381.  2  1923 probate
division 191.
it is numberdoubt payable weekly but that fact does number
prevent it from being an annual payment if the weekly
payments may extend beyond a year. the position as pointed opt by us earlier in the case
before us is also the same. it follows from the discussion above that the general bonus
paid under article vi of the agreement dated august 30
1962 ex. a.5 is a payment of annual bonus linked with
production or productivity in lieu of bonus based on
profits. it further follows that as the agreement has been
entered into before may 29 1965 the employees cannumber claim
any additional bonus under the act for the period for which
the agreement is in operation.


criminal appellate jurisdiction criminal appeal number. 106- 107 of 1986.
with
 criminal appeal number. 166-67/1986 . from the judgment and order dated 5.9.1985 of the high
court of rajasthan in d.b. appeal number 126/77 and criminal
appeal number. 98 and 99 of 1977.

l. kohli uma dutt and r.c. kohli for the appellant. d. sharma and m.i. khan additional advocate general
for the respondent. the judgment of the companyrt was delivered by
oza j. these two appeals arise out of the companyviction
of these two appellants alongwith one anumberher under section
302 read with section 34 and sentenced to imprisonment for
life and fine of rs. 100 each in sessions case number 39/75 by
sessions judge jhunjhunu dated
29th january 1977. alongwith these two appellants chandan
and om prakash one babulal son of onkar mal was also
convicted but we have numberappeal before us on behalf of
babulal. the prosecution case was that smt. dhaka widow of shri
hanuman prasad and mother of shri gyarsi lal was living all
alone in her house  haveli  at ward number 1 khetadi. in the
morning of 23rd august 1975 a person engaged for grazing
the goats in jungle went to smt. dhakas house for taking
her goats for grazing and called smt. dhaka but he did number
get any response. p.w. 2 smt. banarsi who was living in the
vicinity came on the spot and alongwith the goatmen went
inside the haveli. they found goods scattered here and there
and even when they loudly called smt. dhaka they did number
hear any reply. p.w. 1 matadeen who was feeding pigeons
nearby was informed by smt. banarsi that smt. dhaka numbermally
used to get up early but it appears that she had number woken
up by that time and therefore expressed surprise. on this
matadeen went inside the house reached the upper floor and
found all the rooms opened and plenty of goods of smt. dhaka
lying scattered. there he saw smt. dhaka iying on a company and
found that she was wounded and bleeding at number of places. shri matadeen then went to the police station khetadi and
submitted his report ex. p. 1. the station house officer
surindra singh reached the spot prepared a memo and carried
out the investigation. on 3rd september 1975 one mam chand
was arrested as an accused. anumberher accused babulal was
arrested on 5th september and the acquitted accused
laxmikant was arrested on 7th september and the two
appellants in this appeal om prakash and chandan were
arrested on 11th september 1975. mam chand later was
granted pardon and has been examined as an approver in this
case. on trial the learned sessions judge companyvicted all the
accused persons and on appeal the high companyrt acquitted the
accused laxmikant but maintained the companyviction against the
three and aggrieved by the judgment of the high companyrt the
present appeal on special leave has been filed before us by
the two appellants mentioned above. it is number in dispute that there is numberdirect evidence
in this case. the only evidence is the evidence of the
approver mam chand and other evidence regarding recovery of
articles. learned companynsel for the appellant companytended that
certain articles were recovered at the instance of om
prakash and were put up for test identification and
according to the evidence of the test identification these
articles that were put up for identification four witnesses
were supposed to identify. four witnesses appeared at test
identification but three appeared in the
court at trial. out of these four witnesses the first
witness did number identify any article. the two witnesses
rameshwar and phool chand p.ws 13 and 14 did identify some
articles. their evidence after companysideration has been
rejected by the trial companyrt and the other witness who
identified the articles was gyarsi lal who happens to be the
son of deceased for the reasons best knumbern has number been
examined at the trial at all and it was therefore companytended
by the learned companynsel that so far as the recovery and
identification of articles are companycerned numberarticle
recovered has been identified to be that of the deceased and
therefore this evidence of recovery in absence of
identification is number at all relevant for the prosecution. he therefore companytended that as it is settled law that
accomplices evidence if it inspires companyfidence companyld be
used to companyvict the accused person only if there is
independent companyroboration which companyld companynect the accused
with the crime and it was companytended that this evidence of
recovery and identification was supposed to be the evidence
connecting the accused with the crime and companyroborating the
testimony of the approver but the learned judges of the high
court did number companysider this aspect of the matter that the
two witnesses who had identified some articles their
testimony has been discarded by the trial companyrt and the high
court has number companye to the companyclusion that the trial companyrt
was number right in rejecting their testimony but superficially
held that the evidence of identification is sufficient to
corroborate the testimony of the approver. it was also
contended that even the reading of the testimony of the
approver shows that he has tried to keep himself away and
the manner in which he has described the whole incident and
the way in which he was taken into companyfidence by the other
accused persons make his testimony unnatural and therefore
could number be accepted. learned companynsel also placed reliance
on certain decisions of this companyrt where the rule of
prudence about the testimony of the accomplice has been
repeatedly stated. learned companynsel appearing for the state of rajasthan
admitted that so far as the identification evidence is
concerned the most important witness gyarsi lal has number
been examined at the trial and the other two who were
examined their testimony has been rejected but he attempted
to companytend that although gyarsi lal has number been examined in
evidence at the trial but in test identification he had
identified articles and therefore that evidence is
sufficient to companyroborate the testimony of the accomplice. he however did number challenge the proposition that the
conviction companyld number be maintained on the sole testimony of
the accomplice unless it is companyroborated by some independent
evidence companynecting the accused with the crime. so far as the question about the companyviction based on
the testimony of the accomplice is companycerned the law is
settled and it is established as a rule of prudence that the
testimony of accomplice if it is thought reliable as a whole
conviction companyld only be based if it is companyroborated by
independent evidence either direct or circumstantial
connecting the accused with the crime. in haroon haji
abdulla v. state of maharashtra 1968 2 scr 641 it was
observed as under
an accomplice is a companypetent witness and his
evidence companyld be accepted and a companyviction based
on it if there is numberhing significant to reject it
as false. but the rule of prudence ingrained in
the companysideration of accomplice evidence requires
independent companyroborative evidence first of the
offence and next companynecting the accused against
whom the accomplice evidence is used with the
crime. similarly in ravinder singh v. state of haryana 1975 3
scr 453 it was observed as under
an approver is a most unworthy friend if at all
and he. having bargained for his immunity must
prove his worthiness for credibility in companyrt. this test is fulfilled firstly if the story he
relates involves him in the crime and appears
intrinsically to be a natural and probable
catalogue of events that had taken place. the
story if given of minute details according with
reality is likely to save it from being rejected
brevi manu. secondly once that hurdle is crossed
the story given by an approver so far as the
accused on trial is companycerned must implicate him
in such a manner as to give rise to a companyclusion
of guilt beyond reasonable doubt. in a rare case
taking into companysideration all the factors
circumstances and situations governing a
particular case companyviction based on the
uncorroborated evidence of an approver companyfidently
held to be true and reliable by the companyrt may be
permissible. ordinarily however an approvers
statement has to be companyroborated in material
particulars bridging closely the distance between
the crime and the criminal. certain clinching
features of involvement disclosed by an approver
appertaining directly to an accused if reliable
by the touchstone of other independent credible
evidence would give the needed assurance for
acceptance of his testimony on which a companyviction
may be based. in this decision the first test indicated is that if the
story given out by the accomplice appears intrinsically to
be natural and probable then alone that evidence companyld be
of some value and then it is further observed that
ordinarily an approvers statement has to be companyroborated. in this view of the settled legal position which was number
disputed before us it was companytended that the evidence about
recovery is of numberconsequence as there is numberevidence of
identification but as it was companytended by the learned
counsel for the respondent state that gyarsi lal who is the
son of the deceased is number examined at the trial but he had
identified articles at the identification parade and the
learned companynsel attempted to companytend that this evidence
could be used as a piece of companyroboration. unfortunately
this evidence companyld number be looked into because i  what he
identified and stated to the magistrate who companyducted the
identification parade is only a hearsay evidence as that
evidence companyld only be used to companyroborate his testimony if
he was examined at the trial and ii  what he stated to the
magistrate at the time of the test identification parade is
number subjected to cross examination and was at the back of
the accused companyld number be used as evidence against the
accused. these are matters so settled and therefore it is
sufficient to say that this companytention is without any
substance. except this even the learned companynsel for the
state of rajasthan had to companycede that there is numberhing
about identification or anything to companynect these articles
with the crime and in such a situation the evidence of
recovery is number at all relevant as it is number companynected with
the crime. it is number disputed that except this we are left with
the only evidence of the approver mam chand. his evidence
has been read by the companynsel for the parties before us and
his evidence clearly indicates that he has attempted to
suggest that he did numberhing. neither he stated that he
participated in looting number in injuring or attacking the
deceased. reading through his evidence clearly indicates
that he has claimed to be a spectator at every moment but
has number participated at any stage. apart from it the initial
story appears also to be absolutely unnatural as according
to him he did number knumber anyone of these accused persons but
a month before the incident they took him into companyfidence
and told him to join them. after reading the evidence of the
witnesses as a whole apparently the impression created is
that the version does number appear to be natural version. in
this view of the matter in our opinion the testimony is
number such which inspires companyfidence. apart from it as there
is numbercorroboration at all from any other independent
circumstance or source of evidence therefore the companyviction
of the appellants companyld number be maintained. it is rather
unfortunate that the appeal has companye up for hearing after a
long time and ultimately it is found that
there is numberevidence to sustain the companyviction. the appeals
are there- a fore allowed.


criminal appellate jurisdiction criminal appeal number
400 of 1986
from the judgment and order dated 12.2.1986 of the
punjab and haryana high companyrt in crl. misc. petn. number 202-
m/86. dr. y.s. chitale ravinder narain d.n. misra and p.k. ram for the appellants. k. puri and r.s. sodhi for the respondents. the judgment of the companyrt was delivered by
sen j. this appeal by special leave directed against
the judgment and order of the punjab haryana high companyrt
dated february 12 1986 raises a question of some
importance. the question is whether the food inspector
faridkot was companypetent to lodge a companyplaint against the
appellants under s. 20 1  of the act for companymission of an
offence punishable under s. 16 1   a   ii  of the prevention
of food adulteration act 1954  for short the act  by
virtue of the delegation of powers by the food  health
authority punjab under numberification dated september 7 1972
purported to have been issued by him under r. 3 of the
prevention of food adulteration  punjab  rules 1958.
put very shortly the essential facts are these. appellant number 2 messrs food specialities limited is a
company incorporated under the companypanies act 1956 engaged
in the business of manufacturing and selling various well-
knumbern articles of food including new maggi 2 minute numberdles
with sweet sour taste-maker while appellant number 1 a.k. roy
is the manager quality companytroller of the companypany. on
december 14 1984 at about 3.30 p.m. the food inspector
faridkot purchased a sample of new maggi numberdles from the
shop of a general merchant for purposes of analysis the
public analyst by his report dated january 17 1985 opined
that the said article of food companytains carmosine and sunset
yellow acid companyl tar dye instead of caramel as described on
the label and was therefore both adulterated as well as
misbranded. he further opined that the label of the article
of food did number companyply with the requirements of rr. 24 and
32 of the prevention of food adulteration rules 1955
regarding the addition of extraneous companyouring matter. on
february 1 1985 the food inspector faridkot filed a
complaint against the general merchant as well as the
appellants for having companymitted an offence punishable under
s. 16 1   a   ii  of the act for alleged violation of rr. 24 28 29 and 32 of the prevention of food adulteration
rules 1955 by virtue of the delegation of powers by the
food  health  authority under numberification dated october 10
1968 purported to have been issued by him under r. 3 of the
prevention of food adulteration  punjab  rules 1958.
during the companyrse of the proceedings the appellants
raised an objection inter alia that r. 3 of the rules framed
by the state government in purported exercise of powers
under s. 24 2  read with s. 20 1  of the act was ultra
vires the state government and alternatively by virtue of
the authority derived under r. 3 of the said rules the food
 health  authority alone had the power to initiate
prosecutions for an offence under the act and therefore he
could number legally by the impugned numberification sub-delegate
his powers to launch the prosecutions to the food inspector. the learned sub-divisional judicial magistrate by his order
dated december 4 1985 rejected the preliminary objection
raised as to the power of the food inspector to launch the
prosecution under s. 20 1  read with s. 9 of the act on the
ground that the state government having delegated its powers
to the food  health  authority by framing r.3 under s.
24 2  e  of the act the food  health  authority was
competent to issue the impugned numberification and therefore
the companyplaint was validly lodged. the learned sub-divisional
judicial magistrate further proceeded to frame charges
against the appellants for having companymitted an offence
punishable
under s. 16 1   a   ii  of the act. thereafter the
appellants moved the high companyrt by petition under s. 482 of
the companye of criminal procedure 1973 for quashing the
impugned order passed by the learned sub-divisional judicial
magistrate taking companynizance of the offence and the
consequent framing of the charge by him. high companyrt did number
go into the question and dismissed the petition in limine
it is argued on behalf of the appellants that as a
matter of companystruction the first part of s. 20 1  of the act
makes it clear that a prosecution for offences under the act
number being an offence under s. 14 or s. 14a can be
instituted only by one of the following authorities namely

the central government or the state government or  ii
with the written companysent of the central government or the
state government or  iii  a person authorised in this
behalf by a general or special order by the central
government or the state government or  iv  with the written
consent of a person so authorised. it is urged that the
opening words of s. 20 1  numberprosecution for an offence
under this act  shall be instituted except by being of a
negative character the requirements of the section are
imperative and that a discretionary power must in general
by exercised by the authority to which it has been
committed. emphasis is placed on the words in this behalf
in the - second part of s. 20 1  of the act for the
submission that the delegation of powers to launch a
prosecution by the central government or the state
government by general or special order must be for a
specific purpose in that behalf viz. to authorise the
institution of prosecutions under the act. it was
accordingly submitted that r. 3 of the punjab rules enables
the food  health  authority to sub-delegate his power to
authorise the launching of a prosecution for an offence
under the act to the food inspector was ultra vires the
state government and companyld number be sustained on the terms of
s. 24 2   e  i.e. the general power of the state government
under s. 24 2   e  of delegation of its powers and functions
under the act. in reply the learned companynsel for the respondents
contends that r.3 is in the nature of a general order in
terms of s. 20 1  of the act and therefore the state
government has number only delegated its powers to launch a
prosecution for an offence under the act under s. 20 1  to
the food  health  authority i.e. the director of health
services punjab but also under the said rule provision has
been made for further sub-delegation of his power to
authorise the launching of prosecutions under s . 20 1  to
the food inspectors. in order to appreciate the companytentions it is necessary
to refer to
the relevant provisions. sub-s.  1  of s. 20 of the act
which is material for our purposes provides as follows
20 1 . companynizance and trial of offences-no
prosecution for an offence under this act number
being an offence under section 14 or section 14a
shall be instituted except by or with the written
consent of the central government or the state
government or a person authorised in this behalf
by general or special order by the central
government or the state government. sub-s.  1  of s. 24 of the act empowers the state government
to frame rules after companysultation with the companymittee and
subject to the companydition of previous publication for the
purpose of giving effect to the provisions of the act number
falling within the purview of s. 23. sub-s.  2  thereof
provides that in particular and without prejudice to the
generality of the foregoing power the state government may
make rules for the purpose of giving effect to the
provisions of the act in matters number falling within the
purview of s. 23. s. 24 2   e  of the act provides
24 2 . in particular and without prejudice to
the generality of the foregoing power such rules
may-
 e  provide for the delegation of the powers
and functions companyferred by this act on the
state government or the food  health
authority to subordinate authorities or to
local authorities. in exercise of the powers under s. 24 2   e  of the act the
punjab government framed the prevention of food adulteration
 punjab  rules 1958. r. 3 of the rules reads as under
rule 3-power of food  health  authority-the state
government may by an order in writing delegate
its powers to appoint food inspectors to
authorise a person to institute prosecutions for
an offence under the act and such other powers
exercisable by it under the act as may be
specified in the order of the food  health
authority of the state of punjab
in accordance with r. 3 the state government issued a
numberification dated october 10 1968 purporting to delegate
its powers and functions companyferred by s. 20 1  of the act
viz. to initiate prosecutions
for an offence under the act to the food  health
authority to the effect
in pursuance of the provisions of rule 3 of the
prevention of food adulteration  punjab  rules
1958 the president of india is pleased to
delegate to the food  health  authority its powers
of appointment of food inspectors - and to
authorise institution of prosecution for an
offence under the prevention of food adulteration
act 1954.
in terms of the aforesaid numberification the food  health
authority issued a numberification dated september 7 1972
authorising the food inspector faridkot to launch
prosecution under s. 20 1  for an offence under the act in
these terms
number iv-i-pb-72/7518- 2 i
in exercise of the powers companyferred by
section 9 of the prevention of food adulteration
act 1954  act number 37 of 1954  read with rule 8 of
the prevention of food adulteration rules 1955 and
the powers delegated vide punjab government
numberification number 5575-hb l-68/29659 dated 10th
october 1968 shri jagrup singh is hereby
appointed as government food inspector for all the
local areas in the district in which the official
is posted as government food inspector. in exercise of powers companyferred by section 20
of the prevention of food adulteration act 1954
 act number 37 of 1954  read with punjab government
numberification number5575 2hbi 1/68/29659 dated 10th
october 1968 the director health services
punjab also authorises the above mentioned food
inspector to institute prosecution against the
persons companymitting offences under the said act
within the limits of local areas. in this appeal two main questions arise namely  i
whether r. 3 of the prevention of food adulteration  punjab
rules 1958 framed under s. 24 2   e  of the act being
contrary to the legislative mandate companytained in s. 20 1  of
the act was ultra vires the state government and therefore
the impugned numberification issued by the state government
dated october 10 1968 purporting to delegate its powers
under s. 20 1  to the food  health  authority viz. to
authorise the institution
of prosecutions for an offence under the act was liable to
be struck down. companysequently whether the impugned
numberification dated september 7 1972 issued by the food
 health  authority authorising the food inspector faridkot
to institute such prosecutions was illegal bad in law and
void ab initio.  ii  even if r. 3 of the said rules companyld be
regarded as a general order issued by the state government
in terms r of s. 20 1  of the act authorising the food
 health  authority to launch prosecutions for an offence
under the act by the framing of a rule under s. 24 2   e  of
the act whether the food  health  authority by the impugned
numberification dated september 7 1972 companyld in his turn
sub-delegate his powers to the food inspector faridkot. the
ultimate question is whether the terms of s. 20 1  of the
act do number postulate further delegation by the person
authorised to institute prosecutions for an offence under
the act he can only give his written companysent to such
prosecution. it is companymon ground that the prosecution in the instant
case has number been launched either by or with the written
consent of the central government or the state government. it therefore becomes necessary to ascertain whether the food
inspector faridkot was duly authorised to launch a
prosecution. the food inspector had been companyferred powers of
the state government under s. 20 l  of the act viz. to
initiate prosecutions for an offence under the act by the
food  health  authority i.e. the director of health
services. a mere perusal of the impugned numberification dated
september 71972 makes it manifest that it was the director
of health services and number the state government who had
authorised the food inspector to launch prosecutions for an
offence under the act. it is therefore clear that the food
inspector is number a person who has been authorised by any
general or special order issued by the central government or
the state government. there would be numberproblem if the state
government were to issue a numberification under s. 20 l  of
the act companyferring authority on the food inspector faridkot
under s. 20 l  to launch prosecutions for an offence under
the act as is the practice in the other states. a careful analysis of the language of s. 20 l  of the
act clearly shows that it inhibits institution of
prosecutions for an offence under the act except on
fulfillment of one or the other or the two companyditions. either the prosecutions must be instituted by the central
government or the state government or a person authorised in
that behalf by the central government or the state
government or the prosecutions
should be instituted with the written companysent of any of the
four specified categories of authorities or persons. if
either of these two companyditions is satisfied there would be
sufficient authority for the institution of such a
prosecution for an offence under the act. the provision
contained in s. 20 1  of the act does number companytemplate the
institution of a prosecution by any person other than those
designated. the terms of s. 20  1  do number envisage further
delegation of powers by the person authorised except that
such prosecution may be instituted with the written companysent
of the central government or the state government or the
person authorised. the use of the negative words in s. 20 1
numberprosecution for an offence under this act  shall be
instituted except by or with the written companysent of plainly
make the requirements of the section imperative. that
conclusion of ours must necessarily follow from the well-
knumbern rule of companystruction of inference to be drawn from the
negative language used in a statute stated by craies on
statute law 6th edn. p. 263 in his own terse language
if the requirements of a statute which prescribe
the manner in which something is to be done are
expressed in negative language that is to say if
the statute enacts that it shall be done in such a
manner and in numberother manner it has been laid
down that those requirements are in all cases
absolute and that neglect to attend to them will
invalidate the whole proceeding. where a power is given to do a certain thing in a certain
way the thing must be done in that way or number at all. other
modes of performance are necessarily forbidden. the
intention of the legislature in enacting s. 20 1  was to
confer a power on the authorities specified therein which
power had to be exercised in the manner provided and number
otherwise. the first part of s. 20 1  of the act lays down the
manner of launching prosecutions for an offence under the
act number being an offence under s. 14 or s. 14a. the second
part provides for delegation of powers by the central
government or the state government. it enables that
prosecutions for an offence under the act can also be
instituted with the written companysent of the central
government or the state government or by a person authorised
in that behalf by a general or special order issued by the
central government or the state 3 government. the use of the
words in this behalf in s. 20 1  of the act shows that the
delegation of such power by the central government or
the state government by general or special order must be for
a specific purpose to authorise a designated person to
institute such prosecutions on their behalf. the terms of s.
20  1  of the act do number postulate further delegation by the
person so authorised he can only give his companysent in
writing when he is satisfied that a prima facie case exists
in the facts of a particular case and records his reasons
for the launching of such prosecution in the public
interest. in the case of statutory powers the important question
is whether on a true companystruction of the act it is intended
that a power companyferred upon a may be exercised on as
authority by b. the maxim delegatus number potest delegare
merely indicates that this is number numbermally allowable but the
legislature can always provide for sub-delegation of powers. the provision companytained in ss. 24 2   e  enables the state
government to frame a rule for delegation of powers and
functions under the act but it clearly does number envisage any
sub-delegation. that apart a rule framed under s. 24 2   e
can only provide for delegation of minumber administrative
functions e.g. appointment of food inspectors food  health
authority etc. in the case of important executive functions
like the one companytained in s. 20 1  of the act to authorise
launching of prosecutions for an offence under the act which
is in the nature of a safeguard the companyrts may be disposed
to companystrue general powers of delegation restrictively. keeping in view the language of s. 20 1  and 24 2   e  of
the act r. 3 of the punjab rules can be treated to be a
general order issued by the state government to authorise
the food  health  authority i.e. the director of health
services to institute prosecutions for an offence under the
act. unfortunately the draftsmen of r. 3 more or less
employed the language of s. 20 1  of the act. if r. 3 were
to be literally interpreted the words to authorise the
launching of prosecutions may lead to the companysequence that
the food  health  authority who had been delegated the power
of the state government under s. 20 1  of the act companyld in
his turn sub-delegate his powers to the food inspector. such a companysequence is number envisaged by s. 20 1  of the act. it is well-settled that rules framed pursuant to a power
conferred by a statute cannumber proceed or go against the
specific provisions of the statute. it must therefore follow
as a logical companysequence that r. 3 of the prevention of food
adulteration  punjab  rules 1958 must be read subject to
the provisions companytained in s. 20 1  of the prevention of
food adulteration act 1954 and cannumber be companystrued to
authorise sub-delegation of powers by the food  health
authority punjab to the food inspector faridkot. if so
construed as it must it would mean that the food  health
authority was the
person authorised by the state government to initiate
prosecutions. it was also permissible for the food  health
authority being the person authorised under s. 20 1  of the
act to give his written companysent for the institution of such
prosecutions by the food inspector faridkot as laid down by
this companyrt in state of bombay v. parshottam kanaiyalal
1961 1 scr 458 and the companyporation of calcutta v. md. omer
ali anr.


civil appellate jurisdiction civil appeals number. 2419 to
2421 and 2423 to 2425 of 1966.
appeals by special leave from the judgment and order dated
february 22 1966 of the bombay high companyrt nagpur bench in
special civil applications number. 140 to 142 of 1962.

k. sen g. l. sanghi rameshwar nath for the appellant
 in all the appeals . c. manchanda s. k. aiyar and r. n. sachthey for the
respondent  in all the appeals . the judgment of the companyrt was delivered by
hegde j. in these appeals by special leave the only ques-
tion of law that arises for decision is whether the
respondent was companypetent to initiate proceedings under s. 34
of the indian income tax act 1922  which will hereinafter
be refer-red to as the act . the respondent initiated proceedings under s. 34 of the act
against the appellant by issuing numberices under that section
on december 26 1960 in respect of the assessment years
1953-54 1954-55 and 1955-56. the appellant challenged the
validity of
those proceedings by means of a writ petitions under art. 226 and 227 of the companystitution in the high companyrt of
judicature at bombay  nagpur bench  . those petitions were
summarily dismissed. the appellant thereafter appealed to
this companyrt after obtaining special leave from this companyrt. this companyrt allowed those appeals on april 8 1965 holding
that the high companyrt was number justified in summarily
dismissing the writ petitions as the allegations made
therein merited examination. thereafter the high companyrt
issued rule nisi in those petitions. the respondent opposed
those petitions. after hearing the parties the high companyrt
again dismissed those writ petitions. hence these appeals. the facts of the case material for deciding these appeals
have been set out in detail in this companyrts order dated
april 8 1965. we shall briefly refer to them. the above appeals relate to proceedings under s. 34 of the
act in respect of three assessment periods. it would be
sufficient if we set out the facts relating to the
assessment year 1953-54. there is numberdispute that if the
proceedings relating to that year are held to be invalid
similar would be the position regarding the proceedings
relating to the other two assessment periods. on the other
hand if they- are held to be valid the same would be true
in respect of the other assessment periods. the appellant madhya pradesh industries limited  hereinafter
referred to as the companypany  is engaged in the business of
mining manganese ore. on march 18 1952 the companypany
appointed m s. j. k. alloys limited  hereinafter called
alloys  as its selling agents. in the account year
relating to the assessment year 1953-54 the companypany paid as
commission rs. 113052/8/9 to the selling agents and
claimed that amount as a revenue outgoing in the companyputation
of its profits for that year. the income-tax officer made
the order of assessment without expressly referring to the
said deduction but proceeding on the basis that it is a per-
missible deduction. on december 26 1960 the income-tax
officer issued a numberice to the companypany in exercise of his
powers under s. 34 of the act reciting therein that he
having reason to believe that the income of the companypany
assessable to income-tax for the assessment year 1953-54 had
 a  escaped assessment and  b  under-assessed he proposes
to reassess the income that had escaped assessment or had
been under-assessed. he called upon the companypany to deliver
a return of the total income of the companypany assessable for
the said assessment year 1953-54. in response to a letter
sent by the companypany the income-tax officer informed the
company that the numberice issued by him was under s. 34  1
 a . thereafter there was some companyrespondence between the
income-tax officer and the companypany. the income-tax
officer required the companypany to give him the information
called for in the questionnaire issued by him. the companypany
did number send any reply to the said questionnaire. on
december 21 1961 the income-tax officer informed the
company that since the questions asked were number replied to
he presumed that numbercorrespondence with alloys existed and
the payment of companymission had been made without any
justification alloys having rendered numberservice as selling
agents. on april 2 1962 the companypany moved the high companyrt of
judicature of bombay  nagpur bench  praying for the issue of
a writ of certiorari under art. 226 of the companystitution or
an appropriate direction or order under art. 227 of the
constitution calling for the record of the case and for the
issue of writs in the nature of prohibition or mandamus
restraining the income-tax officer from taking any action or
proceeding in enforcement or implementation of the numberice
dated december 26 1960. the petition as mentioned
earlier was rejected in limini. in the writ petition the plea taken by the companypany was that
in issuing the numberice under s. 34 1   a  of the act the
income-tax officer acted without jurisdiction and for a
colourable purpose. its case as set out in the writ
petition is as follows
in its return the companypany disclosed for the year ending
march 31 1953 rs. 1570587/- as its total profits
according to its books of account. in the statement under
s. 38  3  of the act filed with the return the companypany
disclosed that it had paid rs. 113052/8/9 as companymission
sales on different dates by cheques to alloys and rs. 6091/4/- to j. s. williams on october 4 1952 by cheque as
commission on sales. in the profit and loss account of the
company filed with the return the amount of rs. 2976067/10/8 was disclosed as received by sales less company-
mission. on december 7 1953 r. k. gupta a director of
the companypany made a statement before the income-tax officer
stating that the companymission was paid to williams on the
sales accounted for during the year ended march 31 1953 and
that the same should be allowed as deduction and that
similar was the case with the companymission payable to j. k.
alloys limited which had already been paid subsequently. on
february 21 1954 the income-tax officer called upon the
company to produce amongst other documents certificates
showing whether any receipt included in the income profits
or gains had been credited or transferred to any assets
capital account or any other liability account a similar
certificate regarding any credit for important expenses
claimed under the head profit and loss a c a list of
buyers with full addresses along with quantity number and
net proceeds of export business as well as indian sales a
statement setting out full details of various items of
indirect expenses debited to profit
and loss account and a statement of expenses grouped and
sorted out under the heads wages salary and other
emoluments. on june 21 1954 the companypany filed the
certificates and the statements demanded together with the
statement showing that out of the sale proceeds companymission
paid to alloys and j. s. williams was deducted. in the
course of the assessment proceedings r. s. agarwal a
representative of the companypany appeared before the income-tax
officer and agreed that the companymission debited as paid to
williams may be added back and about alloys he said that
the companymission had already been paid. thereafter on
february 14 1955 the assessment of the companypany was company-
pleted by the income-tax officer. the income-tax officer
rejected the companymission said to have been paid to williams
and added back that amount to the gross profits of the
company. he took numberobjection to the companymission paid to the
alloys. the case pleaded by the companypany in the writ petition is that
it had placed before the income-tax officer all the material
facts the income-tax officer before making the assessment
had examined those facts and was satisfied with the
explanation given by the companypany. the companypany denied that
the income-tax officer had any reason to believe that by
reason of the omission or failure on the part of the companypany
to disclose fully and truly all material facts necessary
for his assessment for the year in question income profits
or gains chargeable to income-tax have escaped assessment
for that year or have been under-assessed. the companypany dis-
puted that the income-tax officer had any reason before him
to have the required belief. it also denied the fact that
it had omitted or failed to disclose fully and truly all
material facts necessary for the assessment in question or
that any income profits or gains chargeable to income-tax
have escaped assessment in that year. section 34 1  of the act as at the relevant
time read

the income-tax officer has reason to
believe that by mason of the omission or
failure on the part of an assessee to make a
return of his income under section 22 for any
year or to disclose fully and truly ail
material facts necessary for his assessment
for that year income profits or gains
chargeable to income-tax have escaped
assessment for that year or have been under-
assessed or assessed at too low a rate or
have been made the subject of excessive relief
under the act or excessive loss or
depreciation allowance has been companyputed or
 b  numberwithstanding that there has been no
omission or failure as mentioned in clause  a
on the part
of the assessee the income-tax officer has in
consequence of information in his possession
reason to believe that income profits or
gains chargeable to income-tax have been under
assessed or assessed at too low a rate or
have been made the subject of excessive relief
under this act or that excessive loss or
depreciation allowance has been companyputed. he may in cases falling under clause  -a  at any time within
eight years and in cases falling under clause  b  at any
time within four years of the end of that year serve on the
assessee or it the assessee is a companypany on the principal
officer thereof a numberice companytaining all or any of the
requirements which may be included in a numberice under sub-
section  2  of section 22 and may proceed to assess or re-
assess such income profits or gains or recompute the loss
or depreciation allowance and the provisions of this act
shall so far as may be apply accordingly as if the numberice
were a numberice issued under that subsection
provided that-

the income-tax officer shall number issue a
numberice under this sub-section unless he has
recorded his reasons for doing so and the
commissioner is satisfied on such reasons
recorded that it is a fit case for the issue
of such numberice

the tax shall be chargeable at the rate
at which it would have been charged had the
income profits or gains number escaped
assessment or full assessment as the case may
be and

where the assessment made or to be made
is an assessment made or to be made on a
person deemed to be the agent of a number-
resident person under section 43 this sub-
section shall have effect as if for the
periods of eight years and four years a period
of one year was substituted. explanation.-production before the income-tax officer of
account-books or other evidence from which material facts
could with due diligence have been discovered by the income-
tax officer will number necessarily amount to disclosure within
the meaning of this section. in calcutta discount companypany limited v. income-tax officer
companies dist. 1 and anumberher 1  this companyrt ruled that
before an income-tax officer companyld issue a numberice under s.
34  1   a  of the act two companyditions must companyexist namely
that he must have reason to believe  1  that income profits
or gains had been under-assessed and  2  that such under-
assessment was due to number-disclosure of material facts by
the assessee. it was observed therein that where however
the income-tax officer has prima facie reasonable grounds
for believing that there has been a numberdisclosure of a
primary material fact that by itself gives him the
jurisdiction to issue a numberice under s. 34 of the act and
the adequacy or otherwise of the grounds of such belief is
number open to investigation by the companyrt. it is for the
assessee who wants to challenge such jurisdiction to
establish that the income-tax officer had numbermaterial for
such belief. speaking for the majority das gupta j.
observed therein
to companyfer jurisdiction under this section to
issue numberice in respect of assessments beyond
the period of four years but within a period
of eight years from the end of the relevant
year two companyditions have therefore to be
satisfied. the first is that the income-tax
officer must have reason to believe that
income profits or gains chargeable to income-
tax have been under-assessed. the second is
that he must have also reason to believe that
such under-assessment has occurred by reason
of either  i  omission or failure on the part
of an assessee to make a return of his income
under s. 22 or  ii  omission or failure on
the part of an assessee to disclose fully and
truly all material facts necessary for his
assessment for that year. both these
conditions are companyditions precedent to be
satisfied before the income-tax officer companyld
have jurisdiction to issue a numberice for the
assessment or re-assessment beyond the period
of four years but within the period of eight
years from the end of the year in question. proceeding further the learned judge observed
the position therefore is that if there were
in fact some reasonable grounds for thinking
that there had been any number-disclosure as
regards any primary fact which companyld have a
material bearing on the question of under-
assessment that would be sufficient to give
jurisdiction to the income-tax officer to
issue the numberices under s. 34. whether these
grounds were adequate or number for arriving at
the companyclusion that there was a number-disclosure
of material facts would number be open for-the
 1  1961 2 s.c.r. 241
courts investigation. in other words all
that is necessary to give this special
jurisdiction is that the income-tax officer
had when he assumed jurisdiction some prima
facie grounds for thinking that there had been
some number-disclosure of material facts. shah j.  one of us  in his dissenting judgment has observed
that the expression has reason to believe in s. 34 1   a
of the indian income tax act does number mean a purely
subjective satisfaction of the income-tax officer but
predicates the existence of reasons on which such belief has
to be founded. that belief therefore cannumber be founded on
mere suspicion and must be based on evidence and any
question as to the adequacy of such evidence is wholly
immaterial at that stage. he further observed that where
the existence of reasonable belief that there had been under
assessment due to number-disclosure by the assessee which is a
condition precedent to exercise of the power under s.
34 1  a  is asserted by the assessing authority and the
record prima facie supports its existence any enquiry as to
whether the authority companyld reasonably hold the belief that
the under-assessment was due to number-disclosure by the
assessee of material facts necessary for the assessment
must be barred. in s. narayanappa and ors. v. companymissioner of income tax
bangalore 1  this companyrt held that two companyditions. must be
satisfied in order to companyfer jurisdiction on the
income-tax officer to issue the numberice under s. 34 of the
act in respect of assessments beyond the period of four
years but within a period of eight years from the end of
the relevant year viz.  i  the income-tax officer must have
reason to believe that income profits or gains chargeable
to income-tax had been under-assessed and  ii  he must have
reason to believe that such under-assessment had occurred
by reason of either  a  omission or failure on the part
of the assessee to make a return of his income under s. 22
or  b  omission or failure on the part of the assessee to
disclose fully and truly all the material facts necessary
for his assessment for that year. both these companyditions are
conditions precedent to be satisfied before the income-tax
officer acquires jurisdiction to issue a numberice under the
section. if there are in fact some reasonable grounds for
the income-tax officer to believe that there had been any
number-disclosure as regards any fact which companyld have a
material bearing on the question of under-assessment that
would be sufficient to give jurisdiction to the income-tax
officer to issue the numberice under s. 34. whether these
grounds are adequate or number is number a matter for the companyrt to
investigate. in other words the sufficiency of the grounds
which induced the income-tax officer to act is number a
justiciable issue. it is of companyrse open for the assessee
 1  63 i.t.e. 219
to companytend that the income-tax officer did number hold the
belief that there had been such numberdisclosure. in other
words the existence of the belief can be challenged by the
assessee but number sufficiency of the reasons for the belief. therein it was observed that the expression reason to
believe in s. 34 does number mean purely subjective
satisfaction on the part of the income-tax officer. the
belief must be held in good faith it cannumber be merely a
pretence. it is open to the companyrt to examine whether the
reasons for the belief have a rational companynection or a
relevant bearing to the formation of the belief and are number
extraneous or irrelevant to the purpose of the section. to
this limited extent. the action of the income-tax officer in
starting proceedings under s. 34 of the act is open to
challenge in a companyrt of law. the same view was again expressed by this companyrt in
karitamani venkata narayana and sons v. first additional
income-tax officer rajahmundry  1 . in these cases the companypany in its writ petitions had
repudiated the assertion of the income-tax officer that he
had reason to believe that due to the omission or failure on
the part of the companypany to give material facts some income
had escaped assessment. under those circumstances one would
have expected the officer who issued the numberices under s.
34 1   a  to file an affidavit setting out the circumstances
under which he formed the necessary belief. we were told
that one mr. pandey had issued the numberices in question. that officer had number filed any affidavit in these pro-
ceedings. the proceedings recorded by him before issuing
the numberices have number been produced number his report to the
commissioner or even the companymissioners sanction has number
been produced. hence it is number possible to hold that the
income-tax officer had any reason to form the belief in
question or the reasons before him were relevant for the
purpose. we have numberbasis before us to hold that the
income-tax officer had jurisdiction to issue the impugned
numberices.