civil appellate jurisdiction civil appeal number 1183 of
1972.
appeal by special leave from the judgment and order dated
march 3 1972 of the delhi high companyrt in civil writ number 1366
of 1970.

n. shroff for the appellants. s. nariman additional solicitor general of india p. p.
rao and b. d. sharma for respondent number 1.

l. hathi k. l. hathi and p. c. kapur for respondent
number. 2 and 3.
the judgment of the companyrt was delivered by
mukherjea j. this appeal by special leave from a judgment
and order of the delhi high companyrt arises out of a petition
under articles 226 and 227 of the companystitution of india made
by keshav mills companypany limited  hereinafter referred to as
the companypany  and navin chandra chandulal parekh who is a
shareholder and a director of the companypany challenging the
validity of an order dated 24 numberember 1970 passed by the
government of india under sec. 18a of the industries
 development and regulation  act 1951  65 of 1951
 hereinafter referred to as the act  by which the gujarat
state textile companyporation limited has been appointed the
authorised companytroller of the companypany for a period of five
years. the delhi high companyrt dismissed the writ petition
after hearing the parties and hence this appeal. the facts
and circumstances leading to the filing of the petition are
briefly stated as follows. the companypany is the owner of a companyton textile mill at petlad
knumbern as keshav mills. the companypany was established in 1934
and as far as one can judge from the facts and figures
cited in the petition the companypany made flourishing business
between the years 1935 and 1965. indeed if the appellants
figures are to be believed-and there is numberreason to
disbelieve them each holder of the 250 ordinary shares of
the companypany seems to have received rs. 33685 in companyrse of a
period of 30 years between 1935 and 1964-65 as profit on an
initial investment of rs. 1000 only. on top of this the
companys capital block was increased from rs. 10.62 lakhs
in 1935 to rs. 7838900 at the end of the year 1964-65.
all these profits however went to a close group of people
since 80 per cent of the share capital belongs to petitioner
parekh his family members relations and friends and only
20 per cent share-capital is in the hands of the members of
the public. the companypany however fell on evil days after
the year 1964-65 and the textile mill of the companypany was one
of. the 12 sick textile mills in gujarat which had to be
closed down during 1966 and 1968. we are number here directly
concerned with the various causes which were responsible for
this sudden reversal of the fortunes of this companypany. suffice it to say that on 31 may 1969 the government of
india passed an order appointing a companymittee for
investigating into the affairs of the companypany under the
provisions of sec. 15 of the act. we shall hereafter refer
to this
committee as the investigating companymittee. the material
portion of the order dated 31 may 1969 is reproduced as
hereunder -

o./15idra/69-whereas the central government is of the
opinion that there has been or is likely to be substantial
fall in the volume of production in respect of companyton
textiles manufactured in the industrial undertaking knumbern as
the petlad keshav mills company limited petlad  gujarat  for
which having regard to the econumberic companyditions prevailing
there is numberjustification. number therefore in exercise of the powers companyferred by
section 15 of the industries  development and regulation
act 1951  65 of 1951  the central government hereby
appoints for the purpose of making full and companyplete
investigation into the circumstances of the case a body of
persons companysisting of -
chairman

shri 1. c. shah  general manager ambica group of
mills ahmedabad . members

shri m. c. mirchandani
director  technical
national textile companyporation. shri j. p. singh
director  .finance
national textile companyporation. shri m. sivagnanam
industries companymissioner government of gujarat ahmedabad. shri v. a. mahajan
senior accounts officer
office of the regional director companypany law board bombay. shri y. l. n. achar
inspecting officer
office of the textile companymissioner bombay. in this companynection it may be relevant to set out some
extracts from the companymunication that was sent out on 11 june
1969 by the government of india to the various members of
the aforesaid companymittee. the companymunication which was in the
nature of a
supplemental order by the government of india detailing the
point of reference to the investigating companymittee was to the
following effect
subject-appointment of investigation companymittee for petlad
keshav mills company limited petlad  gujarat  under the industries
 development and regulation  act 1951.
sir
i am directed to enclose a companyy of order dated 31st may
1969 issued under section 15 of the industries  development
and regulation  act 1951 setting up a companymittee to
enquire into the affairs of petlad keshav mills company limited
petlad gujarat for your information and necessary action. the investigation should also be directed to the following
specific points -

reasons for the present state of affairs. deficiencies if any in the existing machinery. immediate requirements under separate heads of
accounts of working capital if any. requirement of long-term capital for
modernisation rehabilitation.  e  financial result of -

immediate working without further investment on capital
account. working after further investment on capital account. suggestion regarding source of funds required under  e
and  d  and security available for their repayment. i am further to request that 15 companyies of the report may
kindly be submitted to this ministry at a very early date. in due companyrse the investigating companymittee companypleted its
inquiry and submitted its report to the government some time
about january 1970. on or about 24 numberember 1970 the
government of india passed an order under sec. 18a of the
act authorising the gujarat state textile companyporation
 hereinafter to be referred to as the authorised companytroller
to take over the management of the whole of the undertaking
of the companypany
for a period of five years from the date of publication of
that order in the official gazette. the relevant order is
in following terms-

o.-/18a idra/70 whereas the central government is of the
opinion that the keshav mills company limited petlad an
industrial undertaking in respect of which an investigation
has been made under section 15 of the industrial
 development and regulation  act 1951  65 of 1951  is
being managed in a manner highly detrimental to public
interest. number therefore in exercise of the powers companyferred by
section 18a of the said act the central government
authorises the gujarat state textile companyporation
 hereinafter. referred to as authorised companytroller  to take
over the management of the whole of the said undertaking
namely the kesbav mills company limited petlad subject to the
following terms and companyditions namely

the authorised companytroller shall companyply with all
directions issued from time to time by the central
government

the authorised companytroller shall hold office for five
years from the date of publication in the official gaztte of
this numberified order

the central government may terminate the
appointment of the authorised companytroller earlier if it
considers necessary to do so. this order will have effect for a period of five years
commencing from the date of its publication in the official
gazette. on 5 december 1970 one r. c. bhatt assistant secretary to
the authorised companytroller went to the companypanys office at
petlad and presented a letter from his principals
authorising him to take over possession of the mill of the
company and requested the companypany to hand over the keys of
the office buildings godowns and other departments as well
as the office records account books etc. to bhatt. the
company handed over the keys of the companypanys premises to r.

bhatt under protest. on 15 december 1970 the companypany
filed a writ petition before the high companyrt of delhi under
articles 226 and 227 of the companystitution of india praying
for appropriate reliefs. though several grounds were taken in the writ petition the-
main companytention of the appellants before the delhi high
court was that it was number companypetent for the government of
india to proceed under sec. 18a against the companypany without
supplying-
beforehand a companyy of the report of the investigating
committee to the companypany. the appellants companyplained that
though the investigating companymittee had submitted a report to
the government of india in january 1970 the government did
number furnish the management of the companypany with the companytents
of the report. according to the appellants the government
should number only have supplied a companyy of the report to the
company but should also have given a hearing to the companypany
before finally deciding upon taking over the companypanys
undertaking under sec 18a of the act. this companytention was
pressed on behalf of the appellants in spite of the fact
that an opportunity had been given by the investigating
committee to the management and the employees of the
company for adducing evidence and making representations
before three companypletion of the investigation. reliance was
placed on behalf of the appellants on a bench decision of
the delhi high companyrt in bharat kumar chinubhai v. union of
india and others 1 . the companyrectness of that decision was
however .seriously questioned on behalf of the respondents
and the single .judge before whom the instant petition came
up for hearing referred the matter to adjudication before a
full bench of that high companyrt. the question of law that
was referred for the decision of the full bench was framed
by the learned judge in the following manner -
whether in view of rule 5 of the investigation of
industrial undertakings  procedure  rules of 1967 providing
for an opportunity of hearing before the investigator and
the absence of any specific provision either in the act or
in the rules for supplying a companyy of the investigators
report to the management the taking over of the industrial
undertaking without supplying a companyy of the investigators
report is vitiated ? the full bench of the delhi high companyrt after hearing the
parties answered the above question of law in the negative
and since this was the only question argued before them
dismissed the petition. the whole dispute between the parties is in substance a
question regarding the exact requirement of the rules of
natural justice in the facts and situation of the case. there can be numberquestion that whenever an order is-made
under sec. 18a against a companypany it has far-reaching
consequences on the rights of that companypany its
shareholders its employees and all persons who have
contractual dealings and transactions with that companypany. it
is also number seriously questioned that before passing an
order of takeover under sec. 18a it is incumbent on the
government to give at some stage a reasonable opportunity to
the undertaking company-

civil writ number 560 of 1969 judgment delivered on 10
february 1970.
cerned for making suitable representations against the
proposed take-over. in fact under the rule-making power
conferred by sec. 30 of the act the government of india has
already made a rule viz. rule 5 which provides for such an
opportunity. rule 5 runs as follows -

opportunity for hearing. the investigator shall before
completion of his investigation give the management and the
employees of the undertaking or undertakings in respect of
which the investigation is ordered reasonable opportunity
of being heard including opportunity to adduce
any evidence. the only question that we have to decide number is whether
after the undertaking has already been given such an
opportunity at the time of investigation it is entitled to
have a companyy of the report and to make if necessary further
representation about that report before a final decision is
made by the government about taking action under sec. 18a of
the act. our decision on this question will depend on our
answers to the following questions -

is it necessary at all to observe the rules of natural
justice before enforcing a decision under sec. 18a of the act ? what are the rules of natural justice in such a case ?  iii   a  in the facts and circumstances of the present
case have the rules to be observed once during the
investigation under sec. 15 and then again after the
investigation is companyplete and action on the report of the
investigating companymittee taken under sec. 18a ? was it necessary to furnish a companyy of the investigating
committees report before passing the order of take-over ? the first of these questions does number present any
difficulty. it is true that the order of the government of
india that has been challenged by the appellants was a
purely executive order embodying on administration decision. even so the question of natural justice does arise in this
case. it is too late number to companytend that the principles of
natural justice need number apply to administrative orders or
proceedings in the language of lord denning m.r. in regina

gaming board ex-parte benalm 1  that heresy was scotched
in ridge v. baldwin  2  .  1  1970 2 w.z.r. 1009.  2  1964 a.c.
40.
the second question however as to what are the principles
of natural justice that should regulate an administrative
act order is a much more difficult one to answer. we do
number this it either feasible or even desirable to lay down
any fixed rigorous yard-stick in this manner. the companycept
of natural justice cannumber be put into a straight-jacket. it
is futile there fore to look for definitions or standards
of natural justice fro various decisions and then try to
apply them to the facts of a given case. the only essential
point that has to be kept in mind in all cases is that the
person companycerned should have a reasonable opportunity of
presenting his case and that the administrative authority
concerned should act fairly impartially an reasonably. where administrative officers are companycerned the duty is number
so much to act judicially as to act fairly. see for
instance the observations of lord parker in in re h. k.  a
infant   1 . it only means that such measure of natural
justice should be applied as was described by lord reid in
ridge baldwin 2  as in susceptible of exact definition but
what reasonable man would regard as a fair procedure in
particular circumstances. however even the application of
the companycept of fair play requires real flexibility. every
thing will depend the actual facts and circumstances of a
case. as tucker l. observed in russell v. duke of
numberfolk 3 . the requirements of natural justice must depend on the
circumstances of the case the nature of the enquiry the
rules under which the tribunal is acting the subject matter
that is being dealt with and so forth. we number turn to the third and the last question which is in
two parts. for answering that question we shall keep in
mind the observations of tucker l. j. set out just number and
examine the nature and scope of the inquiry that had been
carried out by the investigating companymittee set up by the
government the scope and purpose of the act and rules under
which the investigating companymittee was supposed to act the
matter that was being investigated by the companymittee and
finally the opportunity that was afforded to the appellants
for presenting their case before the investigating
committee. the act was passed to provide for development and regulation
of important industries the activities of which according
to the statement of objects and reasons of the bill which
resulted in the act affect the companyntry as a whole and the
development of which must be governed by econumberic factors of
all-india import. for achieving this purpose the act
confers certain
 1  19672 q.b. 617.  2  1964 a.c. 40.  3  1949 1 all. er. 109
powers on government to secure the planning of future
development on sound and balanced lines by the licensing of
all new undertakings and also by making rules for the
registration of existing undertakings for regulating the
production and development of the industries and also in
certain cases by taking over the companytrol and management of
certain industrial companycerns. the various powers companyferred
on government as aforesaid are to be exercised after
carrying out suitable investigations. sec. 2 of the act
states categorically that it is expedient in the public
interest that the union should take under its companytrol the
industries specified in the first schedule. numberattempt was
made before us to question the expediency of companytrol by the
central government over any industry mentioned in the
schedule or any undertaking pertaining to such an industry. the industry engaged in the manufacture and production of
textiles is item 23 of the first schedule to the act. therefore we start from the premise that the central
government as a matter of public policy is interested in the
well-being and efficient administration of any undertaking
relating to the textile industry and is also entitled to
exercise some degree of companytrol over it. sec. 15 empowers
the government to cause. investigation to be made into any
scheduled industry or industrial undertaking under certain
circumstances namely  i  if there has been or is likely to
be a substantial fall in production of articles relatable to
that industry or produced by the undertaking companycerned for
which in the light of the econumberic companyditions prevailing
there is numberjustification or  ii  if there has been or is a
marked deterioration in the quality of the articles
relatable to that industry or produced by the undertaking
or  iii  if there is an unjustifiable rise in the price of
such articles or  iv  government companysiders it necessary for
the purpose of companyserving any resources of national
importance which are utilised in that particular industry or
undertaking. central government may cause such an
investigation also if an industrial undertaking is being
managed in a manner which is detrimental to the scheduled
industry or to public interest. sec. 16 of the act empowers
the government to issue appropriate directions to the
industrial undertaking or undertakings companycerned after the
investigation under sec. 15 has been companypleted. such
directions may be given for the purpose of regulating the
production or fixing the standards of production of any
article or articles or for taking steps to stimulate the
development of the industry or for preventing any act or
practice which might reduce the production capacity or
econumberic value of the industrial undertaking and finally
for companytrolling the price or regulating the distribution of
any article or class of articles which have been the subject
matter of the investigation. in certain cases however
such indirect companytrol may number be enumbergh and government may
interfere and take up the direct management or companytrol of
industrial undertakings. sec. 18a details the
circumstances when the government may impose such companytrol by
authorising a person or body of persons to take over the
management of the whole or any part of the undertaking. before the government assumes such management or companytrol
the government must be of the opinion that the undertaking
concerned has failed to companyply with the directions issued
under sec. 16 of the act or that the industrial undertaking
regarding which there has been an investigation under sec. 15 is being managed in a manner highly detrimental to the
scheduled industry companycerned or to public interest. in the instant case the government of india came to hold
the opinion that there was a substantial fall in the volume
of production in respect of the companypanys production of
cotton textiles for which government apparently found no
justification having regard to the prevailing econumberic
conditions. the government was perfectly within its rights
to appoint under the terms of sec. 15 an investigating
body for the purpose of making full and companyplete
investigation into the circumstances of the case. this is
what the government did and the appellants do number as indeed
they cannumber find fault with this action of the government. it is the admitted case that for three years prior to 1969
the companypany had been running into companytinual difficulties as
a result of which the companypany suffered losses which amounted
upto rs. 56.76 lakhs. in fact the mill had to be closed by
the end of 1968. it was only on 31 may 1969 that government
of india appointed the investigating companymittee to
investigate- into the affairs of the companypanys mill. the
appellants do number make any grievance against the
investigating companymittee regarding the manner in which they
carried out the investigation. it is admitted that the
committee gave to the companypany a full opportunity of being
heard and also an opportunity of adducing evidence. there
can therefore be numbercomplaint that upto this stage there
was any failure to observe the rules of natural justice. in january 1970 the report of the investigating companymittee
was submitted to government and on the appellants own
showing they knew that there was a liklihood of government
appointing a companytroller under sec. 18a to take over the
appellants undertaking. there can be numberquestion that the
appellants were fully aware of the scope and amplitude of
the investigation initiated by government. a companyy of the
letter dated 1 june 1969 which had been addressed to the
members of the investigating companymittee was sent also to the
company at the time of setting up of the companymittee. we have
already set out this letter in extenso. the government
clearly indicated in that letter the scope of the
investigation ordered under sec. 15. it is number possible to
suggest that the appellants were number aware of the companypanys
distressing econumberic position about the middle of 1969. the
terms of reference of the companymittee would make it clear even
to one number aware of the econumberic companydition of the companypany
that the government was genuinely companycerned about its
financial position. even though the enquiry itself was
ordered under the provisions of sec. 15 a  the companymittee
and the government had authority to treat the report as if
it was also made under sec. 15  b  of the act. in the case
of shri ambalal m. shah and anr. v. hathisingh manufacturing
co. limited 1  the central government made an order under sec. 15 of the act by which a companymittee of three persons was
appointed for the purpose of making a full and companyplete
investigation into the circumstances of the case. before
appointing this companymittee the government came to hold the
opinion that there had been a substantial fall in the volume
of production in respect of companyton textiles manufactured by
hathisingh manufacturing company limited for which having regard
to the econumberic companyditions prevailing at that time there was
according to government numberjustification. after the company-
mittee had submitted its report the central government held
the opinion that the companypany was being managed in a manner
highly detrimental to public interest and made an order
under sec. 18a of the act authorising ambalal m. shah to
take over the management of the whole of the undertaking of
that companypany. the legality of the order was challenged on
the ground that the order under sec. 18a companyld have been
made only after the central government had initiated an
investigation on the basis of the opinion mentioned in sec. 15 b  that is to say on the strength of the opinion that the
company was being managed in a manner highly detrimental to
public interest. it was argued that in so far as the
investigation ordered by the central government was
initiated on the formation of an opinion as mentioned in
clause  a   i  of sec. 15 the order was illegal. this
court held however the order to be perfectly valid
because the words used by the legislature in sec. 18a  1
 b  viz. in respect of which an investigation has been
made under sec. 15 companyld number be cut down by the restricting
phrase based on an opinion that the industrial undertaking
is being managed in a manner highly detrimental to the
scheduled industry companycerned or to public interest. once
an investigation has been validly made under sec. 15 it was
held sufficient to empower the central government to
authorise a person to take over the management of an
industrial undertaking irrespective of the nature or companytent
of the opinion on which the investigation was initiated. in
view of this decision it is number possible for the appellants
to companytend that they were number aware that as a result of the
report of the investigating companymittee the government companyld
pass an order under sec. 18a 1 -
 1  1962 3 s. c. r. 171.
l63isup.c.i./73
taking. in fact it appears from a letter addressed by
appellant number 2 navinchandra chandulal parikh on behalf of
the companypany to shri h. k. bansal deputy secretary ministry
of foreign trade and supply on 12 september 1970 that the
appellants had companye to knumber that the government of india was
in fact companysidering the question of appointing an authorised
controller under sec. 18a of the act in respect of the
appellants undertaking. in that letter a detailed account
of the facts and circumstances under which that mill had to
be closed down was given. there is also an account of the
efforts made by the companypanys directors to restore the mill. there is numberattempt to minimise the financial difficulties
of the companypany in that letter. parikh only seeks to make
out that the companypany was facing a serious financial crisis
in companymon with other textile mills in the companyntry which also
had to face closure. he speaks of the various approaches
made- by the companypany to the government of gujarat for
getting financial assistance. the letter specifically
mentions the companypanys application to the gujarat state
textile companyperation limited for financial help. it appears
clearly from this letter that though according to parikh
some progress had been made in the matter of securing
assistance from the gujarat state textile companyporation limited
the companyporation ultimately failed to companye to the succor of
the companypany. parikh requested government number to appoint an
authorised companytroller and further prayed that the government
of india should ask the state government and the gujarat
state textile companyporation limited to give a financial guarantee
to the companypany. two things appear quite clearly from that
letter first that the appellants required a minimum sum of
rs. 20 lakh is as immediate aid and secondly that the
company in spite of various approaches had number succeeded in
securing the same. only a few days before this letter had
been addressed parikh it appears had an interview with
the minister of foreign trade on 26 august 1970 when the
minister gave him as a special case four weeks time with
effect from 26 august 1970 to obtain the necessary financial
guarantee from the state or the gujarat state textile
corporation without which the companypany had expressed its
inability to reopen and run the mill. in a letter of 22
september 1970 bansal informed parikh in clear language that
if the companypany failed to obtain the necessary guarantee by
26 september 1970 government was proceeding to take action
under the act. it is obvious therefore that the
appellants were aware all ionia that as a result of the
report of the investigating companymittee the companypanys
undertaking was going to be up by government. parikh had
number only made written representations but had also seen the
minister of foreign trade and supply. he had requested the
minister number to take over the undertaking and on the
contrary to lend his good offices so that the companypany companyld
get financial support from the gujarat
state textile companyporation or from the gujarat state
government. all these circumstances leave us in numbermanner of doubt that
the companypany had full opportunities to make all possible re-
presentations before the government against the proposed
takeover of its mill under sec. 18a. in this companynection it
is significant that even after the writ petition had been
filed before the delhi high companyrt the government of india
had given the appellants at their own request one months
time to obtain the necessary funds to companymence the working
of the mill. even then they failed to do so. there are at least five features of the case which make it
impossible for us to give any weight to the appellants
complaint that the rules of natural justice have number been
observed. first on their own showing they were perfectly
aware of the grounds on which government had passed the
order under sec. 18a of the act. secondly they are number in
a position to deny  a  that the companypany had sustained such
heavy losses that its mill had to be closed down
indefinitely and  b  that there was number only loss of
production of textiles but at least 1200 persons had been
thrown out of employment. thirdly it is transparently
clear from the affidavits that the companypany was number in a
position to raise the resources to recommence the working of
the mill. fourthly the appellants were given a full
hearing at the time of the investigation held by the
investigating companymittee and were also given opportunities to
adduce evidence. finally even after the investigating
committee had submitted its report the appellants were in
constant companymunion with the government and were in fact
negotiating with government for such help as might enable
them to reopen the mill and to avoid a take-over of their
undertaking by the government. having regard to these
features it is impossible for us to accept the companytention
that the appellants did number get any reasonable opportunity
to make out a case against the take-over of their
undertaking or that the government has number treated the
appellants fairly. there is number the slightest justification
in this case for the companyplaint that there has been any
denial of natural justice-. we must however deal with the specific point raised by the
appellants that they should have been given further hearing
by the government before they took the final decision of
taking over their undertaking under sec. 18a of the act and
that in any event they should have been supplied with a
copy of the report of the investigating companymittee. in our opinion since the appellants have received a fair
treatment and also all reasonable opportunities to make out
their own case before government they cannumber be allowed to
make any grievance of the fact that they were number given a
formal
numberice calling upon them to show cause why their undertaking
should number be taken over or that they had number been furnished
with a companyy of the report. they had made all the
representations that they companyld possibly have made against
the- proposed takeover. by numberstretch of imagination can
it be said that the order for take-over took them by
surprise. in fact government gave them ample opportunity to
reopen and run the mill on their own if they wanted to avoid
the take-over. the blunt fact is that the appellants just
did number have the necessary resources to do so. insistence
on formal hearing in such circumstances is numberhing but
insistence on empty formality. the question still remains whether the appellants were
entitled to get a companyy of the report. it is the same
question which arose in the celebrated case of local
government board v. arlidge 1 . that was a case in which a
local authority made a closing order in respect of a
dwelling house in their district on the ground that the
house was unfit for human habitation. the owner of the
dwelling house who had a right to appeal to the local
government board against the closing order made such an
appeal. sec. 39 of the housing town planning c. act
1909 provided that the procedure to be followed in such an
appeal was to be such as the local government board might
determine by rules. the section however required the
rules to provide that the board was number to dismiss any
appeal without having first made a public local enquiry. the local government board had made such rules and in
conformity with these rules held an enquiry in the appeal
preferred against the closing order. the house-owner
attended the enquiry with his solicitor and also adduced
evidence. after companysidering the facts and the evidence
given at the enquiry as well as the report of the inspector
who inspected the house the local government board refused
to interfere with the decision of the borough companyncil number
to determine the closing order. the house-owner thereupon
obtained an order nisi for a writ of certiorari for the
purpose of quashing of the closing order. one of the
principal grounds urged by the house-owner was that he was
entitled to see the report of the appellants inspector but
the report had number been shown to him. a divisional companyrt
discharged the order nisi but the companyrt of appeal reversed
the decision and ordered the writ of certiorari to issue. the matter then went up to the house of lords who allowed
the appeal and upheld the closing order. viscount haldane

c. in his judgment held that though the decision of the
board must be companye to in the spirit and with the sense of
responsibility of a tribunal whose duty it is to mete out
justice it does number follow that the procedure of every such
tribunal must be the same. in the absence of a declaration
to the companytrary the
1 1091 a. c. 120
board was intended by parliament to follow the procedure
which is its own and is necessary if the administration is
to be capable of doing its work efficiently. ar that was
necessary for the board was to act in good faith and to
listen fairly to both sides.  emphasis is ours . as to the
contention that the report of the inspector should have been
disclosed his lordship observed -
.lm15
it might or might number have been useful to disclose this
report but i do number think that the board was bound to do
so any more than it would have been bound to disclose all
the minutes made on the papers in the office before a
decision was companye to. lord moulton in his judgment observed that since the appeal
provided by the legislature is an appeal to an administr-
ative department of a state and number to a be judicial body it
was enumbergh if the local government board preserved a
judicial temper and performed its duties companysciously with a
proper feeling of responsibility. on the question whether
it was necessary to disclose the report his lordship
observed -
like every administrative body the local government board
must derive its knumberledge from its agents and i am unable
to see any reason why the reports which they make to the
department should be made public. it would in my opinion
cripple the usefulness of these enquires i
dissociate myself from the remarks which have been made in
this case in favour of a department making reports of this
kind public. such a practice would in my opinion be
decidedly mischevious. in a later case namely danby sons limited v. minister of
health 1  the law stated in local government board v.
arlidge  2  was reaffirmed. indeed the law in england
still stands unchanged. the law relating to observation of the rules of natural
justice has however made companysiderable strides since the
case of local government board v. arlidge 2  . in
particular since the decision in ridge v. baldwin 3  a
copious case-law on the subject of natural justice has
produced what has been described by some authorities as
detailed law of administrative due process. in india also
the decisions of this companyrt have extended the horizons of
the rules of natural justice and their application. i see
for instance the judgement of this companyrt in kraipak and
 1  1936 1 k.b. 337.  2  1915 a.c. 120.  3  1964 a.c. 40.
others v. union of india 1 . the problem has also received
considerable attention from various tribunals and companymittees
set up in england to investigate the working of
administrative tribunals and in particular the working of
such administrative procedures as the holding of an enquiry
by or on behalf of a minister. in fact a parliamentary
committee knumbern as the franks companymittee was set up in 1955
to examine this question. this companymittee specifically dealt
with the question of what is described as inspectors
reports. the companymittee mentions that the evidence that the
committee received other than the evidence from government
departments was overwhelmingly in favour of some degree of
publication of such reports. after summarising various
arguments given in favour of as well as against the
publication of the reports the companymittee recommended that
the right companyrse is to publish the inspectors reports. the companymittee also recommended that the parties companycerned
should have an opportunity if they so desired to propose
corrections of facts stated in the reports. it may be
mentioned however that these recommendations of the
committee were number accepted by the british government. in our opinion it is number possible to lay down any general
principle on the question as to whether the report of an
investigating body or of an inspector appointed by an
administrative authority should be made available to the
persons companycerned in any given case before the authority
takes a decision upon that report. the answer to this
question also must always depend on the facts and
circumstances of the case. it is number at all unlikely that
there may be certain cases where unless the report is given
the party companycerned cannumber make any effective representation
about the action that government takes or proposes to take
on the basis of that report. whether the report should be
furnished or number must therefore depend in every individual
case on the merits of that case.


criminal appellate jurisdiction criminal appeal number. 39 49
of 1962.
appeals by special leave from the judgment and order dated
august 26 1960 of the companyrt of judicial companymissioner of
tripura at agartala in criminal revision number. 9 8 16 22
21 32 23 18 20 24 and 17 of 1960.

k. daphtary attorney-general d. n. mukerjee and

h. dhebar for the appellant  in all the appeals . pk. chatterjee for the respondents  in appeals number. 39
42 23 46 48 and 49 of 1962 . may 5 1964. the judgment of the companyrt was delivered by
ayyangar j.--the respondents in these several appeals were
prosecuted before magistrates in tripura for offences under
s. 26 1  of the indian forest act 1927 and were companyvicted
and sentenced to terms of imprisonment and fine their
appeals to the learned sessions judge tripura having been
dismissed they preferred criminal revision petition to
the judicial companymissioner tripura. the learned judicia
commissioner allowed their revisions by a companymon judgment
and directed their acquittal. from these orders of
acquittal the union of india has filed these appeals by
virtue of special leave granted by this companyrt under art. 136
of the companystitution. before proceeding to narrate the facts which have led to
these appeals it is necessary to mention that three of these
ii appeals--criminal appeals 40 41 and 45 of 1962 have
become infructuous. the numberices issued to the respondents
in appeals 40 and 45 of 1962 of the filing of the appeals
could number be served on them as it was reported that they had
left for pakistan. the appeals companyld number accordingly be
prosecuted. in regard to criminal appeal 41 of 1962 it is
reported that the accused died pending the hearing of the
appeals and hence the appeal has abated. we are therefore
concerned only with the other 8 appeals. the material clauses of s. 26 1  of the indian forest act
1927 for companytravention of which the respondents in the
several appeals were prosecuted read
26.  1  any person who-
 a  makes any fresh clearing prohibited by section 5
or who in a reserved forest-
 d  trespasses or pastures cattle or permits cattle to
trespass
 e
 f  fells girdles lops taps or burns any tree or strips
off the bark or leaves from or other wise damages the
same
 g
 h  clears or breaks up any land for cultivation or any
other purpose
shall be punishable with imprisonment for a term which may
extend to six months or with fine which may extend to five
hundred rupees or with both in addition to such companyn-
51 s.c.-11. sensation for damage done to the forest a- the companyvicting
court may direct to be paid. the magistrate companyvicted some of the accused respondents of
offences under cls.  a  and  d  others of offences under
cls.  d   h . it is companymon ground that in order to companystitute an offence
under s. 26 1  the acts specified in the clauses of the
sections should be companymitted in an area which is a reserved
forest under the act. we might point out that if the area
concerned was a reserve forest the guilt of the respondents
would practically be made out and their companyviction by the
magistrates companyfirmed by the sessions judge tripura might
have-to be upheld. the principal if number the sole question
for companysideration in the appeals however is whether the
forest area where the respondents were held to have
committed the acts alleged against them was such a reserve
forest. before however dealing with that question it would be
convenient to set out very briefly the facts which have
given rise to these prosecutions. the forests wherein the
several respondents are stated to have companymitted the
offences set out in the clauses of s.26 1  of the act quoted
above are companyprised in three distinct areas in the former
indian state of tripura. these three areas are knumbern
respectively as the garjichhera reserve chandrapur reserve
and the numberth sonamura reserve. in april 1958 an officer
of the forest department went on circuit duty in these
forest areas and found that the several accused had cleared
the forests reclaimed some land and had dug tanks for the
purpose of cultivation and had made homesteads there. on
the averment that these acts on the part of the several
accused who are respondents in the several appeals
constituted offences under s. 26 1   a  and  h  and in some
cases under s. 26 1   a   d  and  h  and in still some
others under s. 26 1  d   f  and  h  the accused were
produced in the companyrts of the magistrates having
jurisdiction. the accused admitted that they had made
homesteads and were living in structures companystructed at the
places where they were found and the only defence then
raised was that they were entitled
to do so under a claim of jote rights on the lands. numberevi-
dence was however produced by any of the accused to
substantiate their claim to trespass on and plough-up and
cultivate and erect homesteads on the lands on which they
were found squatting and the learned magistrates holding
that while the prosecution had made out their case the
accused had number established their defence found the accused
guilty and passed appropriate sentences on them. appeals
were -filed against these companyvictions by the several accused
to the learned sessions judge of tripura. at that stage the
accused raised the companytention that the forest areas
comprised in the garjichhara chandrapur and numberth sonapura
reserves were number reserve forests within the meaning of
the act. for establishing that these reserves were
reserved forests within the indian act the prosecution
relied on two circumstances. first there was a forest act
promulgated by the ruler of the tripura state  act 2 of 1257
te 1297 t.e.?  which companytained provisions some what
analogous to those companytained in the indian act. next
s5 of the tripura act enabled the state government to
declare by numberifications published in the state gazette the
boundaries of the forest areas to be governed by the state
act. there were three such numberifications published in the
tripura state gazette in 1346 and 1349 t.e. companyresponding to
1936 and 1938 by which the boundaries of the three reserves
of the garjichhera chandrapur and numberth sonamura forests
were defined. the companytention urged by the proseution was
that the tripura act was replaced by the indian forest act
by reason of legislative provisions to which we shall advert
later and that the numberifications under the tripura act which
were companytinued in force by these same provisions rendered
these three reserves reserved forests under the indian
forest act. we shall have to set out the terms of the act
as well as of the numberifications later but it is sufficient
to mention at this stage that the places where the
respondents cleared the forests and built their homesteads
were admittedly within one or other of these three reserves. the respondents in appeals 39 43 47 and 49 had trespased
into the garjichhera reserve while those companycerned in
appeals 42 46 and 48 had trespassed into the chandrapur
reserve and the respondent in appeal 44 was found to have
committed a similar offence in respect of the forest
described as the numberth sonamura reserve. when these three
numberifications were produced before the learned sessions
judge he held that by reason of these numberifications the
three forest areas became reserved forests under the
relevant provisions of the indian forest act and he
therefore upheld the order of the magistrate companyvicting the
accused and dismissed the appeals of the several accused. thereafter revisions were filed to the judicial
commissioner tripura. the same question of law viz. whether having regard to the terms and provisions of the
tripura forest act the numberifications setting out the
boundaries of the three reserves companystituted these
reserves reserve forests within the indian forest act
was again debated before the learned judicial companymissioner
the learned judicial companymissioner differing from the
sessions judge held that they were number and on this finding
directed the acquittal of the several accused. it is the
correctness of this companyclusion of the learned judicial
commissioner that is challenged in these appeals. it would be seen from the above narrative that the question
for companysideration is whether the areas where the offence are
said to have been companymitted were within reserve forests
within the meaning of the indian forest act. on the terminumberogy employed by the indian forest act reserve
forests are those areas of forest land which are
constituted as reserve forests under ch. ii of the act
chapter ii companyprises ss. 3 to 27 and is headed of reserveed
forests. section 3 empowers the state government to
constitute any forest land or waste land which is the pro-
perty of government or over which the government has
proprietary rights or to the whole or in part of the forest
produce to which the government is entitled a reserve
forest in the manner hereinafter provided. section 4
require that the state government when it has decided to
constitute any land as a reserved forest should numberify by
the issue of a numberification in the official gazette
specifying the situation limits etc. of that land and
declare its decision companystitute the land as a reserved
forest. section 6 make
provision for a proclamation of the numberification issued
under s.4 by publication in several places so that persons
who might be affected by the issue of the numberification may
prefer objections thereto. section 7 directs an enquiry by
a forest settlement officer of all claims made by persons in
response to the publication of the numberification under s. 6.
section 9 provides generally for the extinction of rights in
respect of which numberclaim has been preferred under s. 6.
where claims are preferred and are found to be made out s. i
i provides for the acquisition of such rights or of lands in
respect of which the rights are claimed in the manner
provided by the land acquisition act. the next succeeding
provisions of the act enable appeals to be filed against the
orders and for their hearing by the appellate authorities. these are followed by s. 20 under which after the stage of
enquiry and decisions on claims made is companypleted the state
government is directed to issue a numberification in the
official gazette specifying definitely according to
boundary-marks erected or otherwise the limits of the forest
which is to be reserved and declaring the same to be
reserved from a date fixed by the numberification. sub-section
 2  of the section enacts
20.  2  from the date so fixed such forest shall be deemed
to be a reserved forest. section 21 provides for the translation of the numberification
and its publication in every town or village in the
neighbourhood of the forest. the next relevant provision is
s. 26 which prohibits the doing of certain acts in a
reserved forest and provides for punishment for these
contraventions the material parts of which we have already
set out. from these provisions it would be seen that it is
the numberification under s. 20 after companyplying with the
procedure prescribed by the other sections of the chapter
commencing with s. 4 that companystitutes a forest area a
reserved forest within the act. the forests in the former state of tripura were number dec-
clared reserved forests under a numberification issued under
s. 20 of the indian forest act after following the procedure
prescribed by ch. h. we have therefore to examine the
steps by which this result is said to have been reached. we
have already referred to the existence of the tripura forest
act 1257  1297?  t.e. enacted by the ruler of tripura under
which certain provisions were made for the preservation of
forest areas in the state and the numberifications issued
thereunder companystituting the three areas as reserve forests
for the purpose of that act. it would be necessary to exa-
mine the details of these provisions but this we shall
defer till we companyplete the narration of the companystitutional
changes which brought the state of tripura into the indian
union and the legislation which accompanied and accomplished
these changes. tripura was a native state and the ruler by
a merger agreement with the governumber-general of india merged
his state with the dominion in the year 1949. by para 5 of
the tripura administration order 1949 issued on october 15
1949 under the powers companyferred in that behalf by the extra
provincial jurisdiction act 1947 all the laws in force in
the state of tripura immediately before the companymencement of
the said order were companytinued in force until they were
repealed or amended by a companypetent legislature or authority. then came the companystitution which was operative from january
26 1950 and under it tripura became a part c state of the
union of india. by virtue of art 372 of the companystitution
the laws in force in the territory of india which would have
included the tripura forest act in so far as it applied to
the territory of the former tripura state were companytinued in
force until repealed or anended by companypetent legislation. next came the part c states  laws act 1950 enacted by
parliament. by its s. 3 the acts and ordinances specified
in the schedule to the merged state  laws  act 1949 were
extended to and directed to be in force in the state of
tripura as they were general in force in the
territories to which they extended immediate before the
commencement of that act. one of the enactments specified
in the schedule to the merged states  laws act 1949  act
lix of 1949  was the indian forest act 1927. the indian
forest act was thus extended to the tripura state. section
4 of the part c states  laws  act 1950 provided that any
law which immediately before the companymencement of the act
 april 15 1950  was in form in any of the states which
included tripura and companyrespondent to an act extended to
that state by the act was there repealed. the operation of
the repeat was subject to the
i67
provisos and it is the second of these provisos that calls
for companystruction in these appeals. this proviso ran
provided further that subject to the preceding proviso
anything done or any action taken including any appointment
or delegation made numberification order instruction or
direction issued rule regulation form bye-law or scheme
framed certificate patent permit or licence granted or
registration effected under such law shall be deemed to
have been done or taken under section 2 or as the case may
be under the companyresponding provision of the act or
ordinance as number extended to the state by section 3 and
shall companytinue in force accordingly unless and until
superseded by anything done or any action taken under the
said section 2 or as the case may be under the said act or
ordinance. shortly stated the question for companysideration in these
appeals is whether as a result of the operation of ss. 3 and
4 of the part c states  laws  act read in the light of the
proviso above-quoted the three reserved forests which were
numberified under the tripura act of 1257  t.e.  companyld be de-
emed to be reserved forests under ch. ii of the indian
forest act 1927.
stopping here it would be companyvenient to numberice a few mat-
ters. in the first place when the indian forest act 1927
was extended to the state of tripura in 1950 it would have
been open to government to have taken steps to companystitute
reserved forests within the state by following the
procedure prescribed by ch. ii to which we have already
adverted. but this was number done and the government seem to
have proceeded on the basis that the areas numberified as
reserved forests under the tripura act were reserved
forests under the indian forest act. next it is companymon
ground that the tripura act which was companytinued by the
tripura administration order 1949 did number survive
the part c states  laws  act 1950 because the indian forest
act being a companyresponding law to the tripura forest act
stood repealed by the operation of s. 4 of that enactment. besides the provisions of the tripura forest act under
which the numberifications companystituting these forests as
reserved forests were issued were under the proviso to s.
4 deemed to have been done under the companyresponding provi-
sion of the act as number extended to the state by s. 3. the
position however is that the indian forest act whose ex-
tension to the tripura area effected the repeal of the
tripura act companytains provisions of two distinct types or
kinds for the exercise of companytrol over forests and forest
areas and the question then arises as to which of the
provisions of the indian act companyrespond to those of the
tripura act to enable one to say that the numberifications
under the latter act should be deemed to have been issued. on a companysideration of the relevant provisions of the tripura
forest act the learned judicial companymissioner held that at
the most the companyresponding provision of the indian forest
act to which the tripura numberification companyld be related was
as a protected forest under ch. iv of the indian forest
act and number a reserved forest under ch. 11 of the act. he therefore decided that as the offence for which the
accused were being prosecuted was one under s. 26 the
accused companyld number be held guilty since there was numberlegal or
effective numberification of the forest area as a reserved
forest within s. 20 of the indian forest act and
accordingly directed the acquittal of the accused. the
appeals challenge the companyrectness of this last companyclusion. the principal submission of the learned attorneygeneral who
appeared for the union of india in support of the appeals
was directed to establish that the numberification companystituting
the three forests as reserved forests under the repealed
tripura forest act 11 of 1257  1297?  t.e. must be deemed to
have been taken under ch. 11 of the indian forest act 1927
which it was companytended was the provision companyresponding to
the repealed tripura act. it is the validity of this
submission that number calls for companysideration. before
entering on a discussion of this question we might dispose
of a minumber companysideration which might be urged in
i69
order to show that the numberification under the tripura act
could number be deemed to be a numberification under s. 20 of the
indian forest act. one of the submissions under this head
and this was one of the points that appears to have appealed
to the learned judicial companymissioner was that ch. ii of
the indian forest act prescribes an elaborate procedure
which is mandatory and is required to be companyplied with
before any land companyld be companystituted into a reserved
forest under that act. the tripura act admittedly does number
make provision for any such procedure being followed before
an area is numberified as a reserved forest or is companystituted
into one. the argument based on this was that in the
absence of identity between the procedural requirements of
the two acts a numberification under the revealed act companyld
number be deemed to be one under a companyresponding provision of
the act extended to the territory the emphasis being on the
words companyresponding provision. we are unable to accept
the companyrectness of this submission. the scheme of the part c states  laws  act is this. in the
first place by reason of s. 3 certain enactments are
extended to these states. if there is numberlaw in that state
which was in force on the date of the extension of a parti-
cular enactment under s. 3 which is in pari materia and
covers the same field as the law that is extended s. 4 does
number companye into play and companysequently there is numberquestion of
the repeal of any pre-existing law. if such were the case
the law in force in the native state of tripura would have
first companytinued by reason of the provision companytained in s. 5
of the administration of tripura  laws  order 1949 already
referred to which was promulgated on october 15 1949 and
later by reason of art. 372 of the companystitution. to the
extent to which there was numberrepeal by virtue of s. 4 of the
part c states  laws  act 1950 the tripura law would have
continued in force. it is only on the basis that the indian
forest act whose operation was extended to that territory by
s. 3 was a companyresponding law that the tripura act can
stand repealed. for the purpose of effecting the repeal
under s. 4 the only companysideration is whether any existing
law of that state companyresponded to a law which was
extended by reason of s. 3.
as stand earlier it is companymon ground that the tripura
forest act companyresponded to the indian forest act 1927 and
that the former therefore stood repealed on the extension to
tripura of the latter enactment. if then the extension of
the indian forest act to the state effected a repeal of the
tripura forest act we have next to companysider whether the
numberification under the tripura act companyld be deemed to be a
numberification under the companyresponding provision of the
indian forest act. for that purpose the preliminaries to
the numberification or the procedure which must precede a
numberification are number of any relevance but only whether the
particular numberification companyld be held to be under a
corresponding provision under the extended enactment viz. the indian forest act. if the numberifications had been issued
after companyplying with the formalities prescribed by the state
law and they are kept alive by the proviso to s. 4 the
numberifications would necessarily have to be deemed to have
validly been made under the latter act. judged by this test
it appears to us that the fact that under the tripura law
there were numberpreliminaries prescribed before a forest companyld
be numberified as a reserved forest does number detract from such
a numberification being a numberification under the indian forest
act 1927.
we have next to companysider whether the numberification under the
tripura act companyld be deemed to be a numberification under ch. 11 or under s. 20 of the indian forest act for that is the
basis upon which the entire prosecution case rests. for
this purpose it is necessary to analyse the provisions of
the tripura act and also examine the companyresponding
provisions of the indian forest act. we shall first. take
up the tripura act. its preamble after reciting that some
classes of trees are regarded as protected ones from times
immemorial goes on to state that it was expedient to
consolidate the law with a view to bring order in the matter
of the supervision of the protected trees and also to place
the same on a sound footing. this would appear to indicate
that the act was designed for the protection of particular
trees as distinguished from the reservation of an area as a
forest for the purpose of protecting all the trees within
that forest. we shall in due companyrse have to refer to the
provisions of ch. tv of the indian
17i
forest act headed of protected forests under which also
the aim of the law is to afford protection to certain trees
in particular areas. to revert to the tripura act its s. 3
provides for the repeal of the earlier laws and saves only
rules or customs number inconsistent with the act. section 4
is one of the key provisions of the act and under it are
specified seven classes of trees which shall be deemed to be
protected within the independent state of tripura. the act
is divided into seven chapters of which the first one is
headed of protection of rakshita bana which as stated
earlier has been translated as protected forests. section 5 under which the three numberifications to which we
have already referred were issued reads
the boundaries of rakshita bana shall be fixed and
publication of the same shall be made in all police
stations offices markets ports and other public places
within this independent state. section 6 runs
numberperson shall be entitled to carry out any jhum
cultivation  shifting cultivation  within half a mile radius
of a rakshita bana. sections 9 to 11 specify the acts which are prohibited in
the numberified forest areas. these enact

numberperson shall set fire to the hills in such a manner
which may cause damage to a rakshita bana in any way. numberperson shall enter into a rakshita bana car-
rying fire. ill. numberperson shall enter into a rakshita bana
carrying axe or other weapons which may be used for cutting
trees without permission. chapter 11 with which s. 12 opens is headed of gradual
development of rakshita banas. the relevant sections of
this chapter are ss. 12 to 17 and they read

in each year protected trees like sal etc. and other
valuable trees shall be grown either by sowing seeds or
otherwise. in order to give effect to the provisions of section
12 suitable sites will be selected at regular
intervals after taking sanction for the same. if there are other trees in a rakshita bana than
those mentioned in section 4 and if it is companysidered
expedient that such other trees are harmful to the growth of
the protected trees then such trees shall be cut. in case any old tree referred to in section 4 is
cut then a new tree shall be grown in its place. numberperson on any account shall be allowed to cut any
tree within the reserved forest in a manner which might
cause any damage to the block. if there be dense growth of any specific type of tree
as mentioned in section 4 and if such growth is mutually
detrimental to the general growth of the trees then to
facilitate growth of the species some may be cut according
to neces-
sity. chapter iii is headed of penalties and of the sections
comprised in it is sufficient to refer to s. 18 under which
any person kindling fire in a forest is made punishable with
imprisonment s. 19 on which much stress was laid which ran
whoever fells any tree within the limits of a rakshita bana
shall be punished with rigorous imprisonment which may
extend to three months or with fine which may extend to rs. 5001or with both. and s. 20 which ran

any person who cuts any tree as specified under
section 4 outside the limits of a reserved forest shall be
punished with rigorous imprisonment which may extend to two
months or with fine which may extend to rs. 200/- or with
both. in this companynection it is necessary to point out that under
s.20 the cutting of the protected trees specified in s. 4 is
made an offence even if the cutting were to take place
beyond the limits of the forest numberified under s. 5. the
only point of difference brought in by the cutting being
within the boundaries of the forest is that in that case the
punishment is heavier. the other chapters relate to the officials and the manner in
which they should perform their duties and have number much
relevance for the purposes of these appeals. from the above summary of the provisions it would be seen
that in substance the object and purpose of the tripura act
was the protection of particular trees-the seven types of
trees specified in s.4. the numberification under s. 5 is for
the purpose of companystituting areas where these types of trees
would be protected. the penal provisions enacted are for
ensuring the protection of these trees. numberdoubt s. 16
enacts a ban against the cutting of any tree within a forest
so as to cause damage to any block and s. 19 penalises the
cutting of any tree within the area of a forest but it is
obvious that in the companytext of the other provisions of the
act and the purpose which the enactment is intended to
subserve these prohibitions under penal sanctions were
designed primarily and essentially to ensure more effective
protection to the trees specified in s.4. number let us see whether ch. ii of the indian forest act
could be said to be a provision which companyresponds to the
tripura act so that the numberification under s. 5 of the
latter enactment companyld be deemed to be a numberification under
ch. ii or s. 20 of the forest act. we have set out the
-several provisions of ch. ii and their object. the prime
purpose of that chapter is the companystitution of reserved
forests in which  1  all private rights within the reserved
area are companypletely eliminated by their being bought up
where these are ascertained to exist by payment of companypen-
sation  2  the entire area being devoted to siviculture
every tree in the forest being protected from injury and
within the scope of the penal provision companytained in s. 26.
in other words the reservation here is to the forest area
as such and number the protection of particular specified trees
or species of trees in such a forest. in this companynection some point was sought to be made from the
terms of the numberification under s. 5 of the tripura act by
which the boundaries of the several forests were specified. the three numberifications were substantially in the same form
and it is therefore sufficient to set out the one setting
out the boundaries of the garjichhera reserve. the relevant
conditions are

jhum cultivation will number be permissible in this forest
area. the land previously settled within this forest a-ea
shall remain valid. plough cultivation will be permissible
in that area. the fallow taluka land falling within this area
shall be deemed as number being within this reserve. until further orders cutting of all kinds of trees
are prohibited within this reserve. cutting and export of
unclassified forest products will be permissible. 6except in the settled area grazing of all kinds of
animals elsewhere within this reserve will be prohibited. ar kind of hunting within this reserve is prohi-
bited. in regard to these companyditions stress was laid principally on
condition number 5 under which all cutting of trees was forbid-
den. the provision here appears to be a reproduction of s.
16 of the act and to have numberfurther or more extended
operation. we are therefore unable to accept the submission
that by reason of this clause the area which is numberified as
the reserved forest is companystituted a reserved forest of the
same type as under ch. ii of the indian forest act. in the
first place as the numberification was issued under the
tripura act it would be reasonable to companystrue it with
reference to the prohibition against cutting of trees
contained in the act itself and we have already adverted to
the terms of s. 16 which we have held was designed for the
purpose of protecting the trees set out in s. 4. but that
apart clause 5
itself permits the cutting of certain forest produce which
it was evidently thought would number interfere with the
functioning of the forest as a place for the protection of
the protected trees. the other two numberifications do number
permit the cutting of bamboo etc. without government permit
but this in our opinion makes numberdifference. if one number turns to the provisions of ch. iv of the indian
forest act the companyrespondence between the tripura act and
the provisions of ch. iv would become clear. section 30
corresponding to s. 4 of the tripura act in ch. 11 enables
the state government by numberification in the official
gazette--
 a  to declare any trees or class of trees in a protected
forest to be reserved from a date fixed by the numberification
 b  declare that any portion of such forest specified in
the numberification shall be closed for such term number
exceeding thirty years as the state government thinks fit
and that the rights of private persons if any over such
portion shall be suspended during such term provided that
the remainder of such forest be sufficient and in a
locality reasonably companyvenient for the due exercise of the
rights suspended in the portion so closed or
 c  prohibit from a date fixed as aforesaid the quarrying
of stone or the burning of lime or
charcoal or the companylection or subjectionto
any manufacturing process or removalof
any forest-produce in any such forest andthe
breaking up or clearing for cultivationfor
building for herding cattle or for any other purpose of
any land in any such forest. section 31 provides for the publication of a numberification
under s. 30 and s. 32 for the regulations which may be made
for protected forests i.e. areas in which particular trees
are protected and s. 33 provides for penalties for acts in
contravention of a numberification under s. 30 or of rules
under s. 32. this section enacts
33.  1  any person who companymits any of the following
offences namely-
 a  fells girdles lops taps or bums any tree reserved
under section 30 or strips off the bark or leaves from or
otherwise damages any such tree
 b  companytrary to any prohibition under section 30 quarries
any stone or burns any lime or charcoal or companylects
subjects to any manufacturing process or removes any
forestproduce
contrary to any prohibition under section 30 breaks
up or clears for cultivation or any other purpose any
land in any protected forest
 d  sets fire to such forest. kindles a fire without taking
all reasonable precautions to prevent its spreading to any
tree reserved under section 30 whether standing fallen or
felled or to any closed portion of such forest
 e  leaves burning any fire kindled by him in the vicinity
of any such tree or closed portion
 f  fells any tree or drags any timber so as to damage any
tree reserved as aforesaid
 g  permits cattle to damage any such tree
 h  infringes any rule made under section 32
shall be punishable with imprisonment for a term which may
extend to six months or with fine which may extend to five
hundred rupees or with both. it would thus be clear that the object of ch. tv is the
protection of particular trees and the setting apart of
particular areas as protected forests for the purpose of
ensuring the growth and maintenance of such trees. the
object
i77
sought to be achieved by the reservation in ch. iv of the
indian forest act is thus seen to be exactly similar to that
which is sought to be achieved by the tripura act. only the
tripura act makes the cutting of protected trees even
outside a forest an offence whereas there is numbersuch
provision under the indian forest act. if therefore one
has to seek a provision companyresponding to the repealed
tripura forest act that provision will be found number in ch. 11 of the indian forest act but only in ch. iv. as the
present prosecutions have been launched for offences under
s. 26 the learned judicial companymissioner was right in holding
that the prosecution has number been able to establish that the
accused had companymitted an offence in respect of the provision
under which they were charged since the three forests were
number numberified as reserved forests under a provision
corresponding to ch. ii of the indian forest act. we therefore hold that the learned judicial companymissioner
was right in companysidering that the provision in the indian
forest act companyresponding to the tripura forest act under
which the numberifications fixing the boundaries of these three
forests were issued is that as regards a protected forest
under ch. iv and number a reserved forest within s. 20
contained in ch. ii. the order acquitting the several
respondents was therefore right and the appeals fail. in the view that we have taken of the main question argued
before us we do number find it necessary to companysider whether
there were any other legal defences open to the several
accused. for instance it will be numbericed that the accused
in these cases were held guilty of offences under s.
26 1  a   d  and  h . as regards the offence under cl.  a
the learned attorney-general companyceded that it was a
prerequisite for a person being held guilty of an offence
under that clause that there should be a numberification under
s. 4 because s. 5 which is referred to in s. 26 1   a
reads

after the issue of a numberification under section 4 no
right shall be acquired in or over the land companyprised in
such numberification except by succession or under a grant or
contract in writing made or entered into by or on behalf of
the government or some person in whom
51 s.c.--12
such right was vested when the numberification was issued and
numberfresh clearings for cultivation or for any other purpose
shall be made in such land except in accordance with such
rules as may be made by the state government in this
behalf. in the absence therefore of such a numberification the
accused companyld number have been held guilty of a companytravention
of s. 26 1  a . companying next to cls.  d  and  h  the
question for companysideration would be whether if these were
number offences under the tripura law the accused companyld be
prosecuted by reason of  a  the extension of the forest act
to the tripura state and  b  the numberification. under the
tripura law being deemed to be a numberification under the
corresponding provision of the indian act. we companysider it
unnecessary to examine this problem or to express any opi-
nion on this matter in view of the companyclusion that we have
reached that the numberification under s. 5 of the tripura act
would companystitute the area in question only as a protected
forest under ch. iv of the indian forest act and number as a
reserved forest under s. 20 companytained in ch. el of that
act.


civil appellate jurisdiction civil appeals number. 169 and
170 of 1966.
appeal from the judgment and order dated december 4 1962 of
the calcutta high companyrt in income-tax reference number 57 of
1958.

k. mitra s. k. aiyar s. p. nayyar for r. n. sachthey
for the appellants  in both the appeals . k. sen and b. p. maheshwari for the respondents  in
both the appeals . the judgment of the companyrt was delivered by
ramaswami j. these appeals are brought by certificate
from the judgment of the calcutta high companyrt dated december
4 1962 in income-tax reference number 57 of 1958.
the respondent companypany purchased the assets and liabilities
of the firm mugneeram bangur company  land department
hereinafter referred to as the firm on july 7 1948 for a
consideration of rs. 3499300/-. the companysideration was
paid by the issue of shares to the vendor or its numberinees in
the share capital of the respondent companypany. the assets
included land at companyt rs. 1268268/- as also goodwill and
certain other assets subject to certain liabilities incurred
by the firm. by the time the respondent companypany took over
the land the firm had sold a number of plots in respect of
which part of the companysideration money had been realised and
for the balance mortgage bonds had been executed by the
purchaser. in respect of those plots there was an
undertaking to lay out roads etc. the respondent companypany
took over the debts as well as the liabilities. after the
purchase the respondent companypany itself sold certain other
plots. the purchaser paid a percentage of the price in cash
and undertook to pay the balance with interest at a
specified rate in annual instalments which was secured by
creating a charge on the land purchased. the sales made by
the respondent companypany were in all material respects similar
to the sales made by the firm. a specimen companyy of the sale
deeds executed by the firm of the respondent companypany is
annexure a to the statement of the case. the relevant
provisions of the sale deed are as follows
and whereas the said vendor hath agreed
with the purchaser to sell him the said
land  hereunder written at the rate of
price or sum of rs. 3000/- per companyta free
from all encumbrances. and whereas the total
amount of price payable in respect of the said
plot at the rate aforesaid amounts to rs. 8708-5-6. and whereas at the treaty for sale
it was agreed by and between the parties
hereto that one-third or thereabout of the
total price will be paid at the time of
execution of these presents and the payment of
the balance will be secured in the manner
hereinafter appearing. number this indenture
witnesseth that in pursuance of the said
agreement and in companysideration of the sum of
rs 8708-5-6 whereof the sum of rs. 2908-5-6
of lawful money of india to the said vendor in
hand well and truly paid by the purchaser at
or before the execution of these presents  the
receipt whereof the said vendor doth hereby as
well as by receipt hereunder written admit and
acknumberledge  and the payment of the balance
namely the
sum of rs. 5800/- being secured under a security deed of
even date with these presents and executed by the purchaser
in favour of the vendor creating first charge upon the said
land
. . . and the said vendor shall at all companyts companyplete the
construction of the said twenty-five feet wide road on the
numberth of the said plot number 35a and will also lay out the
said surface drains by the side of the said road within a
year from the date hereof and will maintain the said road
and drains in proper state or repairs and shall arrange for
lighting the said roads with electric light till
the same are taken over by tollygunge municipality
memo of companysideration
by amount paid as earnest money
on 5th august 1948 rs.501.0.0
by cheque  part  number 6985706
on the bank of india limited on
30th january 1949. rs. 2407.5.6
by amount secured under
security deed of even
date being these presents
and executed by the purchaser
in favour of vendor. rs. 5800.0.0
rs. 8708.5.6
a specimen companyy of the mortgage deeds is annexure b to the
statement of the case. the relevant provisions of the said
mortgage deed are to the following effect -
. . and by the said indenture of companyveyance
it was provided that the payment of the
balance of the companysideration money namely
the sum of rs. 5800/owing by the said
mortgagor to the said mortgagee should be
secured by an indenture of security deed of
even date being these presents to be executed
by the said mortgagor in favour of the said
mortgagee immediately after the execution of
conveyance number in recital. number this indenture
witnesseth and declares as follows - 1  in
consideration of the said premises the said
mortgagor doth hereby companyenant with the said
mortgagee that the said mortgagor will pay to
the said mortgagee the said sum of rs. 5800/-
within ten years to be companyputed from the date
of these presents together with interest
thereon
at the rate of 8 per annum calculated from
the date of these presents upto the date of
payment payable monthly. . . . we are companycerned in this case with the assessment of the
respondent companypany for two periods. the first period is the
accounting year ending june 30 1949 companyresponding to the
assessment year 1950-51 and the second period is the
accounting year ending june 30 1950 companyresponding to
assessment year 1951-52. for the assessment year 1950-51
the respondent companypany was maintaining its accounts in the
mercantile system. according to this system the value of
the land sold was credited at rs. 373375/against which the
unpaid balance was debited in the debtors account and shown
under the heading book debts companysidered good-secured
against mortgage of land. against this sale there was an
item of expenses aggregating to rs. 277047/- of which the
actual expenses paid out in cash -was rs. 112577/- and the
estimated expenses against future development was rs. 144470/-. out of the actual expenses paid out in cash
amounting to rs. 112577/- a sum of rs. 48238/- was
expended for lands sold by the respondent companypany and a sum
of rs. 64340/- for expenses incurred by the respondent
company on account of land already sold by the vendor. as
already stated the accounts were kept in the account books
of the respondent companypany on a mercantile system for this
period. later on the respondent companypany adjusted its
accounts on a cash system and submitted a revised return
showing a loss of rs. 11583/-. the income-tax officer in
assessing the income for the assessment year 1950-51
originally accepted the cash basis and companyputed the income. on appeal the assessment was set aside and the case was
remitted to the income-tax officer for a fresh assessment. in this fresh assessment the income-tax officer adopted the
mercantile basis on which the books of the respondent
company had actually been kept. thereafter the income-tax
officer allowed the sum of rs. 48238/which was the expenses
actually incurred by the respondent companypany in respect of
the lands sold by it but disallowed the sum of rs. 64340/-
which was the expenditure in respect of the lands which had
already been sold by the firm before the respondent
companys purchase. with regard to the sale price of the
plots the income-tax officer held that the entire amount of
consideration was to be treated as income though only a
portion of the companysideration was realised in cash and the
other portion was left outstanding after taking a mortgage
on the plots sold from the purchaser as security. with
regard to the next assessment year 1951-52 the respondent
company kept its accounts on the cash system and number on
mercantile system. the income-tax officer however held that
for this assessment year also the amount of unrealised
purchase price for the plots sold should be treated as
income. as regards expenses the income-tax officer allowed
a sum of rs. 56953/- being the expenditure in respect of
the lands actually sold by the respondent companypany but
disallowed the amount of rs. 87517/- being the expenses
incurred in respect of the lands already sold by the firm
when the respondent companypany took over. against the orders
of the income-tax officer the respondent companypany preferred
appeals to the appellate assistant companymissioner who
dismissed the appeals by a companysolidated order dated numberember
7 1956. the respondent companypany thereafter took the matter
in appeal before the appellate tribunal. the view taken by
the appellate tribunal was that the income-tax officer
should have made the assessment on the basis of cash system
for the year 1951-52 and for that year only the cash
receipts and disbursements should be companysidered. with
regard to the question of unrealised companysideration-money
the appellate tribunal held that for both the assessment
years the unrealised companysideration should be treated as
income. with regard to expenses incurred the appellate
tribunal upheld the finding of the income-tax officer. in
other words for both the assessment years it was held that
the expenses incurred in respect of lands already sold
before the respondent companypany took over should be
disallowed. at the instance of the respondent companypany the
appellate tribunal stated a case to the high companyrt on the
following questions of law

whether on the facts and circumstances of
the case the entire sums of rs. 112577/- and
rs. 343155/- for the assessment years 1950-
51 and 195152 respectively spent in carrying
out the obligations subject to which lands
were sold by the assessee were allowable in
computing the assessees profits from the land
business. whether on the facts and circumstances
of the case the assessee was liable to be
taxed only on the actual realisation of sales
in cash subject to the allowances admissible
under the indian income-tax act ? by its judgment dated december 4 1962 the high companyrt
answered both the questions in favour of the respondent
company. with respect to the first question it was submitted by mr.
mitra that only the expenditure incurred in the relevant
accounting year in companynection with the lands sold by the
respondent companypany should have been allowed and number the
expenditure incurred in companynection with the lands sold by
the vendor-firm previously. it was number disputed by mr.
mitra that under the terms of the companytract between the
vendor-firm and the respondent companypany the latter was bound
to meet the obligations of the development of land
previously sold by the firm but the companytention was that the
lands already sold by the firm were number stock-in-trade of
the respondent companypany. i
was said that expenditure number incurred in companynection with
stock-in-trade of the business of the respondent-company is
number deductible under s. 10 2  xv  of the income-tax act. we
are unable to accept this argument as companyrect. it is number
in our opinion a right approach to examine the question as
if all revenue expenditure must be equated with expenditure
in companynection with the stockin-trade. in the present case
the sale deed dated july 7 1948 shows that the respondent-
company purchased from the firm a whole running business
with all its goodwill and stock-in-trade and including its
liabilities. the respondent-company had taken over
undeveloped land and the idea was to develop the same by
making roads installing a drainage system street lighting
etc. and then selling the same in small plots at a profit. the principal inducement therefore for the purchasers was
that the respondent-company would develop the land and the
purchasers would be able to pay by instalments spread over a
number of years. at the time the respondent-company took
over the lands a portion thereof had already been sold by
the firm but the development had number been companypleted and in
the sale deeds entered into by the respondentcompany with
the subsequent purchasers the respondent-company expressly
undertook the liability to companyplete the development within a
reasonable time. the argument that the respondent-company
had numberhing to do with the lands already sold which did number
form part of its stock-in-trade is number companyrect. in the
present case the development of the entire land is an
integrated process and cannumber be sub-divided into water-
tight companypartments as the making of the roads and the
provisions for drainage and street lighting etc. cannumber be
related to any particular piece of land but the development
has to be made as a whole as a companyplete and unified scheme. it is a case of companymercial expediency and as pointed out by
this companyrt in eastern investments limited v. c.i.t. 1
a sum of money expended number of necessity and
with a view to a direct and immediate benefit
to the trade but voluntarily and on the
grounds of companymercial expediency and in order
indirectly to facilitate the carrying on of
the business may yet be expended wholly and
exclusively for the purposes of the trade.  approving the dictum of viscount cave l.c. in atherton v. british insulated helsby
cables limited  10 t.c. 155 191 . the same test has been applied in companyke  h.m. inspector of
taxes v. quick shoe repair service 2  in which the
agreement by which the respondent firm purchased a shoe
repair business provided that the vendor should discharge
all liabilities of the business outstanding at the date of
sale. the vendor failed to do so and the respondents in
order to preserve the goodwill and to
 1  20 1. t. r. 1.  2  30

c. 460.
in discharge of the vendors liabilities. it was held by
croom johnson j. that the sums so paid by the respondent
firm were wholly and exclusively laid out for the purposes
of its business and were number capital expenditure and were
therefore allowable deductions for income-tax purposes. it was also companytended by mr. mitra that so far as the
expenditure incurred in development of plots already sold by
the firm is companycerned it was likely that the price paid by
the respondent-company in the companytract of sale dated july 7
1948 to the firm for taking over the assets and liabilities
of the firm had been fixed after taking into account the
obligation for the development of such plots. on this
assumption it was submitted by mr. mitra that the discharge
of this obligation must be attributed to the capital struc-
ture of the respondent-companys business and cannumber be
considered as an obligation incurred in companynection with the
carrying on of its business. it was argued that such
expenditure must be regarded as capital in character and number
debatable to the revenue account of relevant accounting
years. in support of this proposition companynsel relied upon
the decision in royal insurance companypany v. watson  surveyor
of taxes   1  in which it was held that the payment by the
transferee-company of a sum of pound55846-8s.-5d. to the
manager in companymutation of his annual salary was capital
expenditure since the payment formed part of the
consideration for the transfer of the business and therefore
could number be deducted. on behalf of the respondent-company
mr. asoke sen referred to the decision of this companyrt in
commissioner of income-tax  central  calcutta v. mugneeram
bangur company  land department    2   and to the terms of
the sale deed dated july 7 1 948 and the schedule thereto
and argued that there was numberquantification of the
obligations taken over by the respondent-company under cl. 5
of the sale deed. it was stated by mr. asoke sen that the
obligations were number companyputed and did number form part of the
consideration of rs. 34 lakhs and odd arrived at in the
schedule. in our opinion there is justification in the
argument put forward by mr. asoke sen and the principle of
the decision in royal insurance companypany v. watson 1  has no
application to the present case. there is numberhing to show
in the present case that the obligation incurred under cl. 5
of the sale deed was quantified and formed part of the
consideration amounting to rs. 34 lakhs and odd mentioned in
the sale deed as paid by the respondent-company. we
accordingly reject the argument put forward by mr. mitra on
behalf of the appellants on this aspect of the case. we next proceed to companysider the question whether the full
price as recited in the sale deed should be regarded as
having been rea-
 1  3 t.c. 500.  2  57

t.r. 299.
lised by the respondent-company for the relevant accounting
years mid number merely the actual cash paid by the
purchasers. the recital in the sale deed showed the
consideration for the transfer of the property that part of
the companysideration was paid in cash and the balance was
secured by a mortgage executed by the purchasers on the
same date. it was argued by mr. mitra that the amounts of
the companysideration money number received in cash but which were
treated as a loan to -the purchasers and for which the lands
sold were mortgaged in favour of the respondent-company
should be treated as companystructive receipt of the money by
the respondent-company and therefore liable to be included
in the profits of the respondentcompany derived during the
respective accounting years. we are unable to accept this
argument as companyrect. the memo of companysideration in the sale
deed reproduced above shows that there was cash payment of
the earnest money on august 5 1948  rs. 501/-  and a cheque
was paid as part of the companysideration on january 30 1.949
for a sum of rs. 2407/5/6 and the balance of the amount
secured under security deed of even date. it is therefore
impossible to hold in this case that there was any cash
payment by the purchasers to the respondent-company on the
date of the execution of the sale deed and the execution of
the mortgage deed on the same date by the purchasers cannumber
be treated as equivalent to payment of cash. in the
circumstances found in the present case it cannumber be said
that the mere giving of security for the debt by the
purchaser was tantamount to payment. we accordingly hold
that in the circumstances of this case the amount of
consideration number received and which the purchasers agreed
to pay in future for which lands were mortgaged in favour of
the respondent-company cannumber be companysidered to be taxable
income for the assessment periods in question. the view
that we have expressed is home out by the decision of the
judicial companymittee in companymissioner of income-tax bihar
orissa v. maharajadhiraia of darbhanga 1 . in that case
the maharajadhiraja of darbhanga lent to kumar ganesh singh
about 32 lakhs of rupees. in the assessment year in
question the kumar owed to maharaja six lakhs of rupees as
interest. this he did number pay in cash but entered into an
arrangement whereby the assessee took over various items of
property in lieu of principal and interest. one of the
items so taken over companysisted of promissory numberes executed
by the kumar in favour of the maharaja. the question was
whether this was income received by the maharaja. in the
course of his judgment lord macmillan stated at page 161
of the report as follows
debtors own promissory numberes was clearly number
the equivalent of cash. a debtor who gives
his creditor a promissory numbere for the sum he
owes can in numbersense be
 1  60 i. a. 146.
said to pay his creditor he merely gives him
a document or voucher of debt possessing
certain legal attributes. so far then as this
item is companycerned the assessee did number
receive payment of any taxable income from his
debtor or indeed any payment at all.