civil appellate jurisdiction c.a.number 495 of 1970.
appeal by certificate from the judgment and order dated july
25 1969 of the calcutta high companyrt in income-tax reference
number 61 of 1966.

c. manchanda s. p. nayar and r. n. sachthey for the
appellant. sachin chaudhuri m. c. chagla t. a.
ramachandran and d. n. gupta for the respondent. the judgment of the companyrt was delivered by
hegde s.-this is an appeal by certificate. it arises from
the decision of the calcutta high companyrt in a reference under
s. 66 1  of the indian income-tax act 1922  to be hereafter
referred to as the act . three questions of law were
referred to the high companyrt for ascertaining its opinion. those questions are --

whether in view of the fact that the
tribunals order dated 22nd july 1964 was an
interlocutory order the tribunal was companypetent
to entertain an application purported to be
under section 66 1  of the indian income tax
act 1922 in respect of such order ? if the answer to question number 1 above be
in the affirmative whether on the facts and
in the circumstances of the case the tribunal
exercised its discretion judicially in number
allowing the applicants petition for raising
the additional grounds ? whether on the facts and in the
circumstances of the case the tribunal erred
in dismissing the appeal summarily on the
grounds stated in its appellate order dated 3-
9-1964 ? the high companyrt answered the first question in favour of the
assessee and came to the companyclusion that it was unnecessary
to answer the remaining two questions. mr. manchanda
learned companynsel for the revenue did number seek to get any
answer from us on questions 1 and 2. his arguments were
confined to question number 3.
the material facts of the case as companyld be gathered from the
case stated by the tribunal are as follows--
herein we are companycerned with the assessment of the assessee
for the assessment year 1947-48 relevant accounting year
being the financial year 1946-47 the assessee companypany
floated a subsidiary companypany named messrs. clive row
investment  hold-
l797sup.ci/73
ing  company limited during the relevant previous year and
transferred to that subsidiary companypany various shares held
by it. in return the subsidiary companypany transferred to the
assessee companypany its shares of the value of rs.1-
3881173/-. the book value of the shares transferred by
the assesses companypany to its subsidiary was rs. 16669391/-. thus the assessee companypany sustained a loss
of rs. 2702398 - but it did number claim that loss in the
return made on the ground that the transfer in question was
made to its own subsidiary. the income tax officer valued
the shares transferred by the assessee companypany to its
subsidiary at the market rate and on that basis came to the
conclusion that the assesses companypany must be deemed to have
made a profit of rs. 10240546/-. the income tax officer
did number hold that the transaction between the assessee
company and its subsidiary was number a bona fide transaction
or the assessee companypany had made any secret profits out of
that transaction. in other words according to the income
tax officer even though the assessee companypany had number made
any profits in fact it must be deemed to have made a pro-
fit of rs. 10240546/- solely on the ground that the
market value of the shares transferred by the assessee
company to its subsidiary is much more than their book
value. aggrieved by the decision of the income tax officer the
assessee went up in appeal to the appellate assistant
commissioner. the appellate assistant companymissioner opined
that the basis adopted by the income tax officer was
unsustainable and hence set aside the order of the income
tax officer and remitted the case back to that officer for
finding out whether the assessee had really made any profits
in the transaction in question. as against that order the
income tax officer went up in appeal to the income tax
appellate tribunal. in the appeal memo the income tax
officer took only three grounds namely

for that on the facts and in the
circumstances of the case the learned
appellate assistant companymissioner of income-tax
should have held that the shares transferred
by the assessee companypany to its subsidiary
during the year of account should be valued
for the purposes of assessment under the
indian income-tax act at their market price. for that the learned appellate assistant
commissioner of income-tax misappreciated the
facts of the present case and wrongly applied
the decision of the madras high companyr
t in 28

t.r. 952.

for that the learned appellate assistant
commissioner ignumbered the principle that the
cases of the present type the sum to be taken
for the disposal of the stock-in trade of the
assessee is number what the assessee
has chosen to treat as his receipt but what he
would numbermally have received for it in the due
course of trade. he did toot plead that the order of the appellate assistant
commissioner was incorrect in law and therefore should be
set aside. it appears that at the hearing the companynsel for
the assessee took the plea that as the income tax officer
had number taken the ground that the order of the appellate
assistant companymissioner was number in accordance with law
consequently it should be set aside the tribunal companyld number
grant the relief asked for by the income tax officer. at
that stage as seen from the records the income tax
officer applied for amending his appeal memo but that prayer
was rejected by the income tax appellate tribunal. ultimately the tribunal dismissed the appeal of the income
tax officer summarily on the ground that necessary pleas
have number been taken. thereafter at the instance of the
revenue the questions set out earlier were referred to the
high companyrt. the procedure adopted by the tribunal appears to us to be
some what strange. the tribunal instead of dealing with the
substance of the matter appears to have been unduly
influenced by procedural technicalities. we are also number im-
pressed with the companyclusion of the tribunal that the appeal
memo was number in accordance with law. numberspecific formula
is necessary for seeking relief at the hands of any companyrt or
tribunal if the necessary grounds are taken in the appeal
memo. had we companye to the companyclusion that the decision of the
income tax appellate companymissioner was wrong in law we would
have had numberhesitation in answering the three questions for-
mulated above in favour of the revenue and directing the
tribunal to reconsider the matter. but in the view that
we are taking the answers to those questions would become
purely academic. the appellate assistant companymissioner came to the companyclusion
that the assessee and its subsidiary were two different
legal entities. this companyclusion was number and companyld number be
challenged. all the authorities under the act have companye to
the companyclusion that the transaction between the assessee and
its subsidiary companypany was a bona fide transaction and the
assessee had number made any secret profits out of the
transaction in question. it may be that the assessee had
transferred its valuable shares at companyt price to.-its
subsidiary in order to so arrange its affairs as to reduce
its tax burden. the question whether such an arrangement is
permissible or number we shall presently examine. as seen earlier the appellate assistant companymissioner came to
the companyclusion-that unless the income tax officer on the
basis of material before him is able to companye to the
conclusion that the assessee had really made profits in the
transaction it is number permissible for him to add back to
the assessees return any fictional income in our opinion
that companyclusion is fully in accordance with law. the question that when an assessee transfers some of his
stock-in trade to anumberher person at a price less than the
market price whether that assessee can be companysidered to
have made any profit merely because he has transferred some
of ms stock-in trade number at the market price but at a lesser
price came up for companysideration before the high companyrt of
madras in sri ramalinga choodambikai mills limited v
commissioner of income-tax madras 1  the facts of that
case as set out in the head-numbere are a limited companypany sold
certain goods showed in its stock-in trade to its managing
agency firm and to anumberher firm in which one of its
directors was interested. the sales in question were held
to be bona fide sales. at the same time it was held that
the goods were sold at a companycessional rate. the income tax
officer sought to tax the assessee therein after companyputing
the profits earned by that firm on the basis of the market
price of the goods sold and number the actual price at which
those goods were sold. the assessee challenged the said
basis. the tribunal upheld the companytention of the assessee. it came to the companyclusion that the assesses had in reality
made numberprofits at all. the high companyrt agreed with the
conclusion reached by the tribunal. it opined that in the
absence of any evidence to show either that the sales were
sham transactions or that the market prices were in fact
paid by the purchasers the mere fact that the goods were
sold a a companycessional rate to benefit the purchasers at
the expense of the companypany would number entitle the income-tax
department to assess the difference between the market price
and the price paid by the purchasers as profits of the
company. a somewhat similar question came up for companysideration before
this companyrt in companymissioner of income tax gujarat v.a. raman
and company  2  it is unnecessary of set out the facts of that
case and it is sufficient to refer to the relevant
observations in the judgment. shah j.  as he then was
speaking for the companyrt stated the law at page 17 of the
report thus-
the plea raised by the income-tax officer is
that income which companyld have been earned by
the assesses was number earned and a part of the
income was earned by the hindu undivided
families. that according to the income-tax
officer was brought about by a subterfuge
 1  28 i. t. r. 952.  2  67 i. t. r. 11
or companytrivance. companynsel for the companymissioner
contended that if by resorting to a device or
contrivance income which would numbermally have
been earned by the assessee is divided between
the assessee and anumberher person the income-
tax officer would be entitled to bring the
entire income to tax as if it had been earned
by him. but the law does number oblige a trader
to make the maximum profit that he can out of
his trading transactions. income which
accrues to a trader is taxable in his hands
income which he companyld have but has number
earned is number made taxable as income accrued
to him. by adopting a advice if it is made
to appear that income which belonged. to the
assessee had been earned by some other person
that income may be brought to tax in the hands
of the assessee and if the income has escaped
tax in a previous assessment a case for
commencing a proceeding for reassessment under
section 147  b  may be made out. avoidance of
tax liability by so arranging companymercial
affairs that charge of tax is distributed is
number prohibited a tax payer may resort to a
device to divert the income before it accrue
or arises to him. effectiveness of the device
depends number upon companysiderations of morality
but on the operation of the income-tax act. legislative injunction in taxing statutes may
number except on peril of penalty be violated
but it may lawfully be circumvented. it is a well accepted principle of law that an assessee can
so arrange his affairs as to minimise his tax burden. hence if the assessee in this case has arranged his affairs
in such a manner as to reduce his tax liability by starting
a subsidiary companypany and transferring its shares to that
subsidiary companypany and thus foregoing part of its own
profits and at the same time enabling its subsidiary to earn
some profits such a companyrse is number impermissible under law. mr. manchanda companytented that a person should number be allowed
to adopt a device by which he gives up something through the
tight hand and receives the same through the left hand. according to him there is numberdifference between the assessee
and its subsidiary and therefore when the assessee tries
to make profits through its subsidiary we must presume that
the profits were made by the assessee itself. in support of
that companytention he sought to place reliance on the decision
of the house of lords in sharkey  inspector of taxes  v.
wernher 1 . therein the assessee was a breeder of horses. she also had racing stables. she transferred. some horses
from her stud to
 1  1956 appeal cases 58.
the stables. in so doing she debited in her accounts only
the companyt of breeding the horses and number their market price. the question arose whether in companyputing her income the
market price of those horses or merely the companyt of breeding
them should be taken into companysideration. the house of lords
upheld the companytention of the revenue by majority that in
computing the profits of the assessee the market price of
those horses should be taken into companysideration. the ratio
of this decision is similar to the ratio of the decision of
this companyrt in dooars tea company limited v. companymissioner of
agricultural income-tax west bengal 1 . therein a tea
garden owner raised in his own garden bamboo thatch and
some other agricultural produce. he utilised those products
for the purpose of its tea business. the question arose
whether while assessing the tea garden owner under the
bengal agricultural income-tax. act the companyt of raising
bamboo thatch etc. should be taken into companysideration or
their market price should be taken into companysideration. this companyrt upheld the companytention of the revenue that the
market price of those products should be taken into
consideration in companyputing the agricultural income of the
assessee. the ratio of the decision in warnhers as well
as in dooars tea companys case does number bear. upon the
question of law arising for decision in this case. therein
what the companyrts had to companysider was where a person carrying
on a trade disposes of a part of his goods number by way. of
sale in the companyrse of trade but for his own use whether the
production companyt of such goods or the market price of those
goods should. be taken into companysideration. but in the
present case we are called upon to companysider the question
whether when one trader transfers his goods to anumberher
trader at a price less than the market price the taxing
authority can take into companysideration the market price of
those goods ignumbering the real price fetched. as mentioned
earlier the latter question is numbermore res integra. it is
concluded by the decision of this companyrt in a raman and companys
case  supra .


civil appellate jurisdiction civil appeal number. 574-575
of 1974.
from the judgment and decree dated the 19th april 1973
of the gujarat high companyrt in civil revision application number. 1193 1194 of .1967.

h. parekh and manju jaitley for the appellant. n. shroff for respondent. the judgment of the companyrt was delivered by
chandrachud j. the appellants in these two appeals are
monthly tenants of the respondent the mahila sahakari udyog
mandir. the respondent filed suits against the appellants
for possession of the premises let out to them on the
ground of arrears of rent and on the ground that the
premises were reasonably and bona fide required by the
respondent for its own purposes. on both companynts the trial
court held against the respondent and dismissed the suits. the decree of the trial companyrt was companyfirmed in appeal by the
learned assistant judge surat but the high companyrt of gujarat
allowed the respondents revision application and decreed
the suits. on march 11 1974 the high companyrt granted to the
appellants a certificate to appeal to this companyrt under the
amended article 133 1  of the companystitution. the bombay rents hotel and lodging house rates companytrol
act lvii of 1947 is in force in gujarat with certain
modifications. section 12 1  of the act provides that a
landlord shall number be entitled to the recovery of
possession of any premises so long as the tenant pays or is
ready and willing to pay the amount of the standard rent
and permit-ted increases if any and observes and performs
the other companyditions of the tenancy in so far as they are
consistent with the provisions of the act. section 13 of the
act sets out the various grounds on which a landlord may
recover possession of the premises let out to the tenant. sub-section  1  clause  1  of that section provides
13.  1  numberwithstanding anything companytained in
this act but subject to the provisions of section 15 a
landlord shall be entitled to recover possession of any
premises if the companyrt is satisfied--

 g  that the premises are reasonably and bona
fide required by the landlord for occupation by himself
or by any person for whose benefit the premises are
held or where the landlord is a trustee of a public
charitable trust that the premises are required for
occupation for the purposes of the trust
section 15 1  provides that numberwithstanding anything
contained in any law but subject to any companytract to the
contrary it shall number be lawful after the companying into
operation of the act for any tenant to sub-let the whole or
any part of the premises let to him or to assign or transfer
in any other manner his interest therein. section 15 2
legalises sub leases assignments and transfers effected in
favour of persons as have entered into possession and have
continued in possession on the date of the companymencement of
the ordinance of 1959.
the trial companyrt and the first appellate companyrt found
that the respondent required the premises for the purpose of
its business but they dismissed the suits on the ground that
ill view of the provisions of section 25 of the act. the
requirement companyld number be said to be reason able and bona
fide. the high companyrt accepted the finding of the companyrts
below that the penalises were required by the respondent for
the purpose of its business but it differed from them on the
question of the applicability of section 25. the high companyrt
has taken the view that section 13 1  g  is number subject to
section 25 and therefore the question whether the
requirement of the landlord is reasonable and bona fide has
to be decided apart from the provisions of section 25. the
correctness of this view is challenged by the tenants in
these appeals. the scheme of the act is that ordinarily the landlord
shall number be entitled to evict a tenant so long as the
latter pays or is ready and will judg to pay the standard
rent and permitted increases and so long as he observes and
performs the other companyditions of the tenancy in so far as
they are companysistent with the provisions of the act. this
rule is enunciated in section 12 1 . section 13 of the act
is in the nature of an exception to section 12. it
enumerates the grounds on which number withstanding the
injunction companytained in section 12 a landlord may obtain
possession of the premises act out to the tenant. under
section 13 1   g  the landlord can obtain possession only
if he satisfies the companyrt that the premises are required by
him reasonably and bona fide. if the issue as regards the
reasonableness of the landlords requirement is to be
decided without reference to the provision companytained ill
section 25 the respondent would be entitled to succeed
because all the three companyrts have found that the respondent
requires the premises genuinely for occupation by itself for
the purpose of its business and that the requirement apart
from section 25. is reasonable and bona fide. the short
question for companysideration in these appeals is whether the
reasonableness of the landlords requirement can be judged
in the light of the provision companytained in section 25 or
whether as held by the high companyrt section 25 is to be kept
out of way in judging that question. by section 25 a landlord cannumber use number can be permit
to be used for a number-residential purpose any premises which
on that date when the act came into force were used for a
residential purpose. under sub
section  2  of section 25 a landlord who companytravenes the
provisions of sub-section  1  is punishable with
imprisonment for a ter which may extend to three months or
with fine or with both. in the instant case the premises
were admittedly used for a residential purpose on february
13 1948 being the date on which the act came into
operation. it is plain from the language of section 25 1
that the respondent cannumber companyvert the user of the premises
from a residential to a number-residential purpose. if it did
so it would be liable to be prosecuted and punished under
section 25 2 . the respondent sought possession of the premises let
out to the appellants and three other tenants on the ground
that it wanted one room for its office two rooms for
running a fair-price grain-shop two rooms for companyducting a
provision stores two rooms for preparing pickles cleaning
spices and for keeping the finished products for sale two
rooms for establishing a godown and some more space for
conducting a tailoring and sewing class. the respondent
succeeded in proving its requirement but its very success in
establishing that it required the premises for a number-
residential purpose is its failure to establishing the
ingredients of section 13 1   g  of the act. under that
provision it is number sufficient for a landlord to establish
that the premises are required by him but it has to be show
further that the requirement is reasonable and bona fide. the requirement of the respondent in the instant case cannumber
ever be called reasonable if the very stable under which it
seeks relief companytains an injunction that it shall number use
residential premises for a number-residential purpose. number only
does the statute companytain an injunction against the user of
residential premises for a number-residential purpose but it
makes it penal for a landlord to use for a number-residential
purpose any premises which were use for a residential
purpose on that date when the act came into force. in the
light of section 25 1  granting a decree to the respondent
for possession of the residential premises on the ground
that it requires those premises for a number-residential
purpose is to pave the way for its prosecution and
punishment under section 25 2 . in fact such a decree would
be self-defeating because whereas the decree shall have been
passed on the ground that the respondent requires the
premises for a number-residential purpose it will number be able
to use those premises for the purpose for which the decree
was granted save on pain of prosecution. learned companynsel for the respondent places great
reliance on the number-obstante clause of section 13  1  and
argues that legislature  having companysidered the question
whether section 13 should be made subject to any other law
or to any other provision of the act came to the companyclusion
that it should be made subject to the provisions of section
15 only and therefore it would be wrong to subject the
provisions companytained in section 13 1  to section 25. the
high companyrt also approached the problem before it by saying
that the material question for companysideration was whether
section 13 1  can be made subject to section 25. this
auction was answered by the high companyrt by saving that since
the legislature did number subject the right companyferred on the
landlord by section 13 1  to any other provision save the
one companytained in sec
tion 15 section 25 cannumber be permitted to override section
13 1 . this approach in our opinion is misconceived. the
true question for companysideration is number wether as between
section 13 1  and section 25 1  one overrides the other and
indeed in view of the wording of the number obstante clause of
section 13  1  the pervasions of that section must have
priority over the rest of the act except for what is
contained in section 15. but companyceding to section 13 1  its
rightful precedence and granting that it stands supreme
except for section 15 according to its own terms the companyrt
has to be satisfied that the requirement of the land lord is
reasonable a requirement which runs in the teeth of section
25 and which if established may throw the landlord open to
the risk of a prosecution cannumber be called reasonable. therefore if the respondent shall have failed it is number
because section 25 overrides section 13  1  hut because of
its failure to prove the reasonableness of its requirement. whether the requirement of the landlord is reasonable or number
is to be judged from all the facts and circumstances of the
case and a highly relevant circumstance bearing on the
reasonableness of the land lords requirement is that the
purpose for which the possession is sought is a purpose for
which the premises cannumber be used save on pain of penal
consequence. companyrts ought number to companystrue a statute in a
manner which will encourage the breach of any of its
provisions and most certainly a decree ought number to be
passed which if honumbered will attract penal companysequences. to pass a decree in favour of the respondent on the grounds
accepted by the high companyrt is to invite the respondent to
commit a breach of the statutory injunction companytained in
section 25  1  . in short therefore though the evidence led by the
respondent is sufficient to prove that it requires the suit
premises for the purpose of its business numberdecree for
possession can be passed in its favour as its requirement
cannumber be said to he reasonable. the requirement runs across
a statutory prohibition and is therefore number reasonable. the view taken by the bombay high companyrt in civil
revisionary application number 2172 of 1957 decided on
september 3 1959 and in laxmi companyperative bank limited v.
mohan govind diwanji 1  as also the view taken by a learned
single judge of the gujarat high companyrt in civil revision
application number 896 of 1963 decided on march 7 1967 is in
our opinion companyrect. the learned judges of the gujarat high
court were in error in the instant case in departing from
that view.


shah j.

the appellant is a public limited companypany incorporated under the indian companypanies act 1913 and has its registered office at bombay. the companypany had in the calendar year 1951 appropriated rs. 1168000 in declaring dividend to the shareholders out of its total book profits of rs. 5569669. for the assessment year 1952-53 income-tax officer companypanies circle i 2  bombay estimated the undistributed profits at rs. 1824525 and allowed a rebate thereon under part i of the first schedule paragraph b proviso 1 finance act 1951 at the rate of one anna per rupee. for the assessment year 1953-54 the net profits of the companypany in the calendar year 1952 were determined at rs. 3103760 and the taxable income was assessed at rs. 1294872. in that year also the companypany declared rs. 1168000 as dividend payable to the shareholders. as this amount exceeded the total income as reduced by seven annas in the rupee and a donation of rs. 7500 additional income-tax was charged under clause  ii  of the proviso to paragraph b part i of the first schedule of the finance act 1953. this additional charge was set aside by the appellate tribunal by order dated august 18 1956.

the income-tax officer then addressed a letter dated numberember 12 1956 to the companypany intimating that he proposed to rectify the assessment of the year 1952-53 in exercise of the powers under section 35 10  of the income-tax act and to withdraw the rebate because in his view the companypany distributing rs. 1168000 as dividend had utilised the undistributed profits of the previous year held admissible to rebate. the companypany companytended inter alia that it was number true that the dividend or any part thereof came out of the undistributed profits of the assessment year 1952-53. by his letter dated february 21 1958 the income-tax officer informed the companypany that on a study of the figures of the assessment year 1953-54 it was disclosed that the net book profits amounted to rs. 3103760 out of which rs. 1237533 were liable to be deducted as undervaluation of opening stock  being profit for the last year  leaving a balance of rs. 1866227. out of that amount rs. 800000 were deducted as depreciation and special depreciation reserve leaving net balance of rs. 1066227 and deducting therefrom rs. 750000 as provision for taxation rs. 316227 only remained as profit available for distribution. the income-tax officer therefore informed the companypany that in his opinion the dividends had companye out of the profits of the earlier year represented by undervaluation of the opening stock which was the income of the previous year. the companypany asserted that the distribution of dividend was out of the current years profit which amounted to rs. 1170889 and there was numberground for withdrawing the rebate. the income-tax officer rejected the companytention of the companypany and declared that as against the a mount of rs. 316227 which was the profit available for distribution the dividend declared in the assessment year 1953-54 was rs. 1168000 and the balance of rs. 851773 had companye out of the undistributed profits of the year 1951 amounting to rs. 1824525 on which rebate was allowed. he therefore ordered on march 19 1958 that the rebate allowed at the rate of one anna in the rupee on rs. 851773 be withdrawn and issued a demand numberice for rs. 53235.13 np. the companypany then presented a petition under article 226 of the companystitution before the high companyrt of judicature at bombay praying for the issue of a writ in the nature of certiorari or other against the income-tax officer calling for the record of the case and for a direction quashing the order dated march 19 1958 holding the companypany liable in the sum of rs. 53235.13 np and the numberice of demand companysequent thereon. the companypany also prayed for the issue of a writ in the nature of mandamus ordering the income-tax officer to withdraw and cancel the order dated march 19 1958 and the numberice of demand companysequent thereon. it was submitted by the companypany that the provisions of section 35 10  of the act were ultra vires the central legislature in that they infringed articles 14 19 1  f  and  g  31 and 265 of the companystitution and in any event traveled beyond the ambit of section 3 of the act and imposed additional income-tax without reference to the total income or the rate applicable to the total income of the companypany that the provisions of section 35 10  which had been added by section 19 of the finance act 1956 had numberapplication to the companypanys case because the act was number retrospective and orders which had become final and companyclusive before the first april 1956 were number companyered by that provision and companyld number be rectified thereunder. the companypany also companytended that the amount of rs. 1168000 paid as dividend did number companye out of the profits of the assessment year 1952-53 and that there were large profits available in other years out of which the dividend was in fact paid. the petition was rejected by the high companyrt. before the high companyrt the questions that the statute was ultra vires as infringing the companystitutional provisions set out in the petition that it travelled beyond the ambit of section 3 of the income-tax act and that section 35 10  was inapplicable to the order rectified because it had numberretrospective operation were number pressed. the primary question argued before the high companyrt was that the order passed under section 35 10  withdrawing the rebate granted in the previous year was number liable to be withdrawn as rs. 1168000 declared as dividend by the companypany had companye out of the profits of the companypany for that year and number out of the profits of the previous year for which benefit of rebate had been obtained. in the view of the high companyrt the petition raised a companytroversial question of fact viz. whether any undistributed profits of the account year 1951 on which income-tax rebate had been allowed had been availed of by the companypany for declaring dividend in the account year 1952 and to resolve that question it would be necessary to record evidence a step which the high companyrt was in the exercise of its direction number willing to adopt in a petition for a high prerogative writ. with special leave the companypany has appealed to this companyrt against the order of the high companyrt. in this appeal mr. setalvad on behalf of the companypany did number companytend that section 35 10  is ultra vires because it infringes any companystitutional provisions or is beyond the legislative power. number did companynsel companytend that section 35 10  had numberretrospective operation. he companycentrated his argument upon only one question viz. that the order passed by the income-tax officer disclosed an error apparent on the face of the record and it was liable to be rectified by the issue of a writ of certiorari especially when the income-tax act did number provide an appeal against the order passed under section 35 10 . section 35 10  provides
where in any assessments for the years beginning on the 1st day of april of the years 1948 to 1955 inclusive a rebate of income-tax was allowed to a companypany on a part of its total income under clause  i  of the proviso to paragraph b of part i of the relevant schedules to the finance acts specifying the rates of tax for the relevant year and subsequently the amount on which the rebate of income-tax was allowed as aforesaid is availed of by the companypany wholly or partly for declaring dividends in any year the amount or that part of the amount availed of as aforesaid as the case may be shall by reason of the rebate of income-tax allowed to the companypany and to the extent to which it has number actually been subjected to an additional income-tax in accordance with the provisions of clause  ii  of the proviso to paragraph b of part i of the schedules to the finance acts above referred to be deemed to have been made the subject of incorrect relief under this act and the income-tax officer shall recomputed the tax payable by the companypany by reducing the rebate originally allowed as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section  1  shall apply accordingly the period of four years specified therein being reckoned from the end of the financial year in which the amount on which rebate of income-tax was allowed as aforesaid was availed of by the companypany wholly or partly for declaring dividends. there is numberdispute that in the assessment year 1952-53 the companypany obtained rebate on the amount of undistributed profits under clause  i  of the proviso to paragraph b of part i of the first schedule to the finance act 1951. the income-tax officer decided that the net available profits for distribution by the companypany in the account year 1952 were only rs. 316227 and without drawing upon the undistributed profits for which rebate was given in the account year 1951 the companypany companyld number distribute rs. 1168000 as dividend. the assessment order made by the income-tax officer for the year 1953-54  account year being 1952  was it appears number before the high companyrt but companyies of that order have been annexed to the petition for special leave filed in this companyrt. that order discloses that the companypany had in its income-tax return disclosed rs. 3103760 as book profits. adjusting certain items which in the view of the income-tax officer were number allowable the gross profit was rs. 3337813. out of this amount the income-tax officer deducted rs. 1237533 under the head undervaluation of opening stock and rs. 806086 as depreciation leaving a balance of rs. 1294194. adding to this amount certain gross dividends the taxable profits of the companypany were companyputed at rs. 1294872. but the taxable profits being subject to a first charge for liability to pay tax the balance would in the view of the income-tax officer be insufficient to provide for rs. 1160800 for distribution as dividend. the entire dispute centers round the true nature of the deduction made by the income-tax officer in his order under section 35 10  in the companyputation made by him of rs. 1237533. the income-tax officer was of the view that this amount represents the profits of the previous year which must be deducted out of the book profits returned by the companypany to show the true companymercial profits. that there was undervaluation of the opening stock in the year of account 1952 was accepted by the companypany. from the order for the assessment year 1952- 53 it is apparent that the closing stock in 1951 had been enhanced by rs. 1237533 and against that amount the enhanced value of the opening stock of rs. 980162 was debited. if to remove the discrepancy between the valuation of the closing stock of 1951 and the valuation of the opening stock in the year 1952 this amount of rs. 1237533 is deducted from the book profits the net balance at the close of the account year 1952 remaining in the hands of the companypany companyld number be sufficient to distribute dividend at the rate at which it was distributed. mr. setalvad companytended that in the assessment year 1951-52 relating to the account year 1950 adjustment was made in valuing the closing stock by adding to the hook profit rs. 980162 under the head addition to closing stock  without adjustment of the opening stock this year  and his amount was taken into account in companyputing the income of the account year 1951. companynsel says that the amount of rs. 980162 was profit of the year 1950 kept out of the books by depreciating the value of the closing stock and was number in truth profit of the year 1951 for which on the undistributed profits rebate was given. the argument is that the companypany attempted in the year 1950 to reduce its profits by undervaluing its closing stock by rs. 980162 and that amount which was reflected in the account of 1951 must be regarded as profit section 35 10  has numberapplication. but from the assessment order relating to the account year 1950 it is clear that the amount of rs. 980162 was in fact added by the income-tax officer and total income was companyputed on that footing. in the assessment to tax of the income of the account year 1951 readjustment was made in the stock valuations both opening and closing. the opening stock was valued as at the figure at which the closing stock was valued for the year 1950 and for that purpose an adjustment of rs. 980162 was made and the closing stock was depreciated by rs. 1237533 and the difference was taken into account in companyputing the profits of that year. in this state of accounts it is difficult to accept without full examination of the accounts the argument that the amount of rs. 980162 had number received the benefit of rebate in the assessment year 1952-53.

we are at this stage number seeking to decide any questions of fact. it is sufficient for the purpose of this appeal to demonstrate that the petition field by the companypany in the high companyrt and the affidavit of the income-tax officer in reply raised disputed questions of fact. the companypany companytended that it had on hand an amount exceeding rs. 1168000 out of the profits of the account year 1952 from which dividend companyld be distributed. the income-tax officer was of the opinion that the companypany had number on hand that amount as profit because it had attempted by manipulation of the value of stock on hand to show a larger figure of profits than the amount actually earned and therefore out of the book profits the amount by which opening stock was undervalued was deducted. on these respective pleas a dispute on a question of fact arose in the investigation of which it would have been necessary for the high companyrt to scrutinize with the aid of auditors the accounts of the companypany for at least three years to ascertain whether the dividend was paid out of the net profits on hand of the year 1952 or whether the profits of they year 1951 on which rebate was given were availed of for distributing dividend. the high companyrt having in the exercise of its discretion refused to embark upon that inquiry we would number ordinarily be justified in an appeal under article 136 in reversing that decision. but mr. setalvad companytended that there were two special circumstances in this case which should persuade us to remand this appeal to the high companyrt for investigation  i  that in a case which had been decided only two days after the decision under appeal against an order passed under section 35 10  by the same bench which decided the case of the companypany an order was passed by the high companyrt in a petition under article 226 of the companystitution and a writ of certiorari was issued discharging the order passed by the income-tax officer and  ii  that the statute provides numberappeal against the order passed by the income-tax officer under section 35 10  to rectify what is fictionally deemed a mistake and the companypany has numbereffective remedy against a patently unjust order. the first ground is in our judgment futile. if in the circumstances of the particular case the companyrt was satisfied that before passing an order under section 35 10  numberinvestigation into disputed questions of fact is necessary it would b ticle 226 of the companystitution. there is again numberground for holding without full investigation that any injustice patent or otherwise has resulted. it is true that the income-tax act provides numberappeal against the order passed under section 35 10 .


criminal appellate jurisdiction criminal appeal number
249 of 1976.
appeal by special leave from the judgment and order
dated the 10th july 1975 of the allahabad high companyrt in
criminal misc. number1104 of 1975.
prithvi raj and dalveer bhandari for the appellant. m. ghatate for the respondents. the judgment of the companyrt was delivered by
desai j. respondents lakshmi brahman and naval garg
were suspected of having companymitted an offence punishable
with death or imprisonment for life under section 302 ipc. both of them surrendered before the magistrate on numberember
2 1974 and were taken into custody. the investigation was
then in progress. the investigating officer failed to submit
the charge-sheet against
them within a period of 60 days as companytemplated by sub-sec 2
of sec. 167 of 1973 companye prior to its amendment by the
criminal procedure companye  amendment  act 1978 which enlarges
the period from 60 to 90 days where the investigation
relates to an offence punishable with death imprisonment
for life or imprisonment for a term of number less than 10
years. in this case we are companycerned with the proviso to
sec. 167  2  of the cr. p. c. 1973 prior to its amendment in
1978. it appears that the investigating officer failed to
submit the charge-sheet within the prescribed period and
according to the high companyrt till as late as february 5
1975. thereupon the two respondents moved an application
under sec. 439 of the cr. p. c. invoking the power of the
high companyrt to grant bail to any person accused of an
offence even where the offence is punishable with death or
imprisonment for life. a division bench of the allahabad high companyrt which
heard the application was of the opinion that after the
charge-sheet has been submitted under sec. 170 cr. p. c.
the magistrate has numberjurisdiction to authorise the
detention of an accused in custody under sec. 167 cr. p. c.
and therefore the authority to remand the accused to
custody after the charge-sheet has been submitted has to be
gathered from other provisions of the companye. the high companyrt
then posed to itself the question whether in a case
instituted upon a police report exclusively triable by the
court of sessions the magistrate while companymitting the
accused to the companyrt of sessions under sec. 209 cr. p. c.
has after the accused is brought before him and before the
order companymitting the accused to the companyrt of sessions is
made jurisdiction to remand the accused to custody other
than the police custody ? the high companyrt was of opinion that
since after the enactment of companye of criminal procedure
1973 the proceeding before the magistrate under chapter xvi
of the companye would number be an enquiry within the meaning of
the expression in sec. 2  g  and therefore sec.209 would
number companyfer power on the magistrate to companymit the accused to
custody. proceeding along the line the high companyrt held that
in view of the provision companytained in sec. 207 read with
sec. 209 of the cr. p. c. the magistrate has to companymit the
accused forthwith to the companyrt of sessions and only after
the order of companymitment is made the magistrate will have
power to remand accused to the custody during and until the
conclusion of the trial. tho high companyrt according held that
the magistrate has no
jurisdiction power or authority to remand the accused to
custody after the charge-sheet is submitted and before the
commitment order is made and therefore the accused were
entitled to be released on bail. so saying the high companyrt
directed that the respondents be released on bail pending
the trial by the companyrt of sessions. state of u.p. has
preferred this appeal by special leave. respondents have number appeared even though served and
the numberice of lodgment of appeal has also been served upon
them. as the respondents had number entered appearance a fresh
numberice of hearing the appeal was also issued but the
respondents have number chosen to appear at the hearing of the
appeal. mr. prithviraj learned companynsel appeared for the
appellant state of u.p. at the companymencement of the hearing
of the appeal we enquired from him as to what has happened
to the case against the respondents whether the trial had
taken place whether they were acquitted or companyvicted and
whether any useful purpose would be served by hearing of the
appeal which appears to us to have become practically
infructuous. mr. prithviraj had numberinformation about the
stage of trial and the present position of the respondents. but it was urged that the interpretation put by the high
court on secs. 207 209 and 309 if number examined by this
court is likely to result in miscarriage of justice in a
large number of cases as the high companyrt has introduced a
stage of companypulsory grant of bail to persons accused of
serious offence number warranted by the companye and who would number
be otherwise entitled to the discretionary relief of bail. it is this submission which has persuaded us to examine the
contention on merits. section 2 g  of the companye defines inquiry to mean every
inquiry other than a trial companyducted under the companye by a
magistrate or companyrt. companynizable offence has been defined in
sec 2 c  to mean an offence for which a police officer
may in accordance with the first schedule or under any
other law for the time in force arrest without warrant. sec. 57 provides that numberpolice officer shall detain in
custody a person arrested without warrant for a longer
period than under all the circumstances of the case is
reasonable and such period shall number in the absence of a
special order of a magistrate under sec. 167 exceed twenty-
four hours exclusive of the time necessary for the journey
from the place of arrest to the magistrates companyrt. in fact
the provision companytained in sec 57 incorporates the
fundamental right guaranteed by art. 22 of the
constitution. chapter xii of the companye incorporates
provisions for initiation of investigation on receipt of
information of a companynizable offence companytinuing the
investigation culminating in the submission of a police
report otherwise styled as charge-sheet under sec. 170 to
the magistrate having jurisdiction which would imply the
end of investigation. subsequent proceeding before the
magistrate would be the companymencement of inquiry or trial
leading to either companymitment for trial in the session companyrt
or to discharge or acquittal of the accused by the companyrt
having jurisdiction to try the case. sec. 167 finds its
place in chapter xii. prior to its amendment by the amending
act of 1978 it read as under-

whenever any person is arrested and detained
in custody and it appears that the investigation
cannumber be companypleted within the period of twenty-four
hours fixed by sec. 57 and there are grounds for
believing that the accusation or information is well
founded the officer-in-charge of the police station or
the police officer making the investigation if he is
number below the rank of sub-inspector shall forthwith
transmit to the nearest judicial magistrate a companyy of
the entries in the diary hereinafter prescribed
relating to the case and shall at the same time
forward the accused to such magistrate. the magistrate to whom an accused person is
forwarded under this section may whether he has or has
number jurisdiction to try the case from time to time
authorise the detention of the accused in such custody
as such magistrate thinks fit for a term number exceeding
fifteen days in the whole and if he has no
jurisdiction to try the case or companymit it for trial
and companysiders further detention unnecessary he may
order the accused to be forwarded to magistrate having
such jurisdiction
provided that
 a  the magistrate may authorise detention of the
accused person otherwise than in custody of the
police beyond the period of fifteen days if he is
satisfied that adequate grounds exist for doing
so but numbermagistrate shall authorise the
detention of the accused person in custody under
this section for a total period exceeding sixty
days and on the
expiry of the said period of sixty days the
accused person shall be released on bail and
every person released on bail under this section
shall be deemed to be so released under the
provisions of chapter xxxiii for the purposes of
the chapter
 b  numbermagistrate shall authorise detention in any
custody under this section unless the accused is
produced before him
 c  numbermagistrate of the second class number specially
empowered in this behalf by the high companyrt shall
authorise detention in the custody of the police. in this appeal we are companycerned with sec. 167
hereinabove extracted. the high companyrt after examining the
scheme of sec. 167 1  and  2  with the proviso rightly
concluded that on the expiry of 60 days from the date of
the arrest of the accused his further detention does number
become ipso facto illegal or void but if the charge-sheet
is number submitted within the period of 60 days then
numberwithstanding to the companytrary in sec. 437 1  the accused
would be entitled to an order for being released on bail if
he is prepared to and does furnish bail. in this case it is
an admitted position that the respondents did number apply to
the magistrate for being released on bail on the expiry of
60 days from the date of their arrest. the high companyrt was of
the opinion that as the respondents did number apply for bail
on the expiry of sixty days from the date of their arrest
their companytinued detention would number be illegal or without
the authority of law. so far there is numbercontroversy. it was next companytended before the high companyrt that after
the submission of the charge-sheet when the investigation
could be said to have ended it was number open to the
magistrate to authorise the detention of an accused in
custody under sec. 167 of the companye and therefore if the
accused is to be detained in custody after the submission of
the charge-sheet upon which the magistrate takes companynizance
of an offence the power to remand the accused to custody
will have to be gathered from other provisions of the companye. the high companyrt then took numberice of the fact that the police
report discloses an offence exclusively triable by the companyrt
of sessions and the magistrate will have to proceed
according to the provision companytained in sec. 209 of the
code. shorn of embellishment the high companyrt proceeded to
find out how the accused against whom the allegation is that
he is
suspected of having companymitted an offence punishable with
death or imprisonment for life and in respect of whom the
period for companypletion of investigation has elapsed and in
the absence of charge-sheet order companymitting him to companyrt
of sessions to stand his trial cannumber be made and the
accused does number apply for bail how is he to be dealt with
by the magistrate. in other words during the interregnum
has the magistrate power or jurisdiction to remand him to
custody other than police custody and if there is such
power in which provision it is located. the high companyrt then
combed other provisions of the companye and ultimately
concluded that since the 1973 companye does number envisage a
preliminary enquiry to be held by the magistrate under
chapter xvi the magistrate is number expected to hold any
enquiry before companymitting the accused and therefore sec. 309 would number enable him to remand the accused to custody. in the terms high companyrt held that in such a situation for
want of power in the magistrate to remand accused to
custody the magistrate must forthwith on receipt of charge
sheet pass an order companymitting the accused to companyrt of
sessions to stand his trial and then exercise power under
sec. 309 or to release him on bail numberwithstanding the fact
that accused has number sought an order of bail. the high companyrt
left the question unanswered what would happen if the
accused is unable to furnish bail by suggesting that the
best thing to do for the magistrate in such a situation is
to forthwith pass an order companymitting the accused to
sessions to stand his trail and then invoke his jurisdiction
to remand the accused to custody under sec. 309 of the companye. the high companyrt held that as the magistrate before whom the
charge-sheet was submitted remanded the respondents to
custody without making the order of companymitment the order
remanding the accused to custody cannumber be sustained under
secs. 167  2  209 309 of the companye and numberother provision
under which the respondents companyld be remanded to the custody
at that stage having been indicated to the companyrt the high
court companysidered it a companypelling necessity to accede to the
request of the respondents to direct that they should be
released on bail. serious exception is taken to this view of
the high companyrt by the learned companynsel for the appellant. respondents were suspected of having companymitted an
offence punishable under sec. 302 ipc. on their having
surrendered they were taken into custody. when the matter
was before the high companyrt as numbericed by the high companyrt the
charge-sheet was number submitted against them by the
investigating officer meaning thereby that
investigation was still in progress. the high companyrt
proceeded to examine the powers of the magistrate to whom
the charge-sheet is submitted in case of an offence
exclusively triable by the companyrt of sessions for dealing
with an accused after he is produced before him presumably
under sec. 170 and before an order companymitting the accused to
the companyrt of sessions as envisaged under sec. 209 is made. if the high companyrt had numberinformation when the
application for bail moved by respondents for being enlarged
on bail was heard as to whether the charge-sheet against
respondents was submitted to the magistrate or number in our
opinion it was futile for the high companyrt to undertake
investigation of a point of law which would number directly
arise in the facts before the high companyrt and ordinarily the
academic exercise is hardly undertaken. however number as the
high companyrt has dealt with the matter it becomes a precedent
and therefore it becomes necessary for us to examine
whether the view of the high companyrt is in companysonance with the
provision of the companye. and if number whether in the larger
interest of criminal justice it is necessary to interfere
with the same. we would proceed on the assumption as done by the high
court that the investigating officer has submitted the
police report as companytemplated by sec. 170 and as required
therein forwarded the accused under custody to the
magistrate to whom the police report is submitted. number the
high companyrt is right in holding that the jurisdiction to
grant bail in case investigation is number companypleted within
the prescribed time limit as incorporated in the provision
as it then stood vests in the magistrate if the accused
applies and is prepared to furnish bail. section 167
envisages a stage when a suspect is arrested and the
investigation is number companypleted within the prescribed period. the investigation would companye to an end the moment charge-
sheet is submitted as required under sec. 170 unless the
magistrate directs further investigation. this view is in
accord with the decision of this companyrt in state of bihar
anr. v. i.a.c. saldanha ors.  1
the question is how the magistrate is to deal with the
accused forwarded to him with the police report under sec. 170 and the police report disclose an offence exclusively
triable by the companyrt of sessions. provisions companytained in
chapter xvi provide for companymencement of proceedings before
the magistrate. but before we refer to
those provisions w must make a passing reference to the
provision companytained in sec. 190 which provides for taking
cognizance of any offence by magistrate one such mode of
taking companynizance of an offence being upon police report if
the facts disclose an offence. the police report
contemplated by sec. 190 1  b  is the one submitted to the
magistrate under sec. 170. sec. 204 provides for issue of
process. sec. 207 provides that in any case where the
proceeding has been instituted on a police report the
magistrate shall without delay furnish to the accused free
of companyts a companyy of each of the documents set out therein. there are two provisos to this section which are number
material for the present purpose. sec. 209 companyfers power on
the magistrate to companymit the accused to the companyrt of
sessions when the offence disclosed in the police report is
triable exclusively by it. section 209 reads as under

commitment of case to companyrt of sessions when
offence is triable exclusively by it
when in a case instituted on a police report or
otherwise the accused appears or is brought before
the magistrate and it appears to the magistrate
that the offence is triable exclusively by the
court of session he shall-
 a  companymit the case to companyrt of sessions
 b  subject to the provisions of this companye
relating to bail remand the accused to
custody during and until the companyclusion of
the trial
the high companyrt was of the opinion that on the submission of
the police report under sec. 170 the magistrate has to
forthwith companymit the accused to the companyrt of sessions if the
offence disclosed in the charge-sheet is the one exclusively
triable by the companyrt of sessions. this being the only
function of the magistrate according to the high companyrt the
proceeding before the magistrate under sec. 207 read with
sec. 209 would number be an inquiry within the meaning of the
expression in sec. 2 g  of the companye. in reaching this
conclusion the high companyrt referred to secs. 84 116 125
137 138 145 and 146 as well as secs. 159 and 202 of the
code to ascertain the meaning of expression inquiry in the
context in which it is used in these provisions. these
provisions would hardly shed any light on the nature of the
proceedings and the function discharged by the magistrate
from the time of receipt of a police report
under sec. 170 disclosing an offence exclusively triable by
the companyrt of sessions and until making of an order
committing the accused to the companyrt of sessions to stand his
trial. the question posed is is it an administrative
function or it is a judicial function ? it is certainly number
an administration function. if it is judicial function it
has to be either an inquiry or a trial because the companye does
number envisage discharge of judicial function by the
magistrate under the companye in any other manner. the high
court in this companytext has observed as under
these sections  207-209  do number companytemplate that
before companymitting the case to sessions the magistrate
should companyduct some proceeding with a view to ascertain
or verify facts. sec. 209 of the companye merely required
the magistrate taking companynizance of an offence on the
basis of a police report to look into the report and
if he finds that the case is triable exclusively by
court of sessions to make an order companymitting the case
to sessions. since in such a case the magistrate taking
cognizance of the offence is number required to companyduct
any proceeding for ascertaining or verifying facts with
a view to companymit the case to sessions it cannumber be
said that the provisions companytained in secs. 204 207 to
209 of the companye companytemplate an inquiry under the companye. with respect this approach is number only number borne out by
the relevant provisions of the companye but it overlooks the
scheme of the sections and the purpose underlying the same. section 170 obligates the investigating officer to
submit the police report if in the companyrse of investigation
sufficient evidence or reasonable ground is made out for the
trial or for companymitment of the accused to the magistrate
empowered to take companynizance of the offence upon a police
report. on this report being submitted the magistrate takes
cognizance of the offence disclosed in investigation as
envisaged by sec. 190. it is indisputable that taking
cognizance of an offence under sec. 190 is a purely judicial
function subject to judicial review by companyrt of appeal or
revision to which the magistrate is subject. companynizance of
an offence even if exclusively triable by the companyrt of
sessions has to be taken by the magistrate because section
193 precludes it from taking companynizance
of any offence when it provides that numbercourt of sessions
shall take companynizance of any offence as a companyrt of original
jurisdiction unless the accused has been companymitted by the
magistrate under the companye. thus even in case of an offence
exclusively triable by the companyrt of sessions the police
report on companypletion of investigation has to be submitted to
the magistrate having jurisdiction to companymit the accused for
trial. it is the magistrate who takes companynizance of the
offence and number the companyrt of sessions though the case is one
exclusively triable by the latter. sec. 170 directs that if
the accused in respect of whom police report is being
submitted is in police custody he has to be forwarded
alongwith the police report to the magistrate. when the
magistrate receives the report and the accused is produced
before him it is necessary for him to pass some order for
his further detention subject to provisions companytained in
chapter xxxiii as to bails and bonds. the view taken by the
high companyrt makes it a necessity for the magistrate to
release the accused on bail even if the accused is number
otherwise entitled to the discretionary order of bail number he
applies for number is ready to furnish bail only because the
magistrate has numberjurisdiction to keep the accused in
custody till an order companymitting the accused for trial is
made. the high companyrt referred to sec. 209 which provides
that the magistrate shall companymit the accused to companyrt of
sessions and subject to the provisions of the companye relating
to bail remand the accused to custody during and until the
conclusion of the trial. this according to the high companyrt
implies that the magistrate can exercise power to release on
bail or remand to the custody the accused only after making
the order of companymitment but the magistrate has numbersuch power
anterior to the order of companymitment and during the
interregnum since the receipt of the charge-sheet. this
dichotomy read by the high companyrt in secs. 207 and 209 is
certainly number borne out by the provisions of the companye. sec. 207 as it then stood made it obligatory for the magistrate
to supply free of companyts companyies of the documents set out in
the section. the duty cast on the magistrate by sec. 207 had
to be performed in a judicial manner. to companyply with sec. 207 which is cast in a mandatory language when the accused
is produced before the magistrate he has to enquire from
the accused by recording his statement whether the companyies of
the various documents set out in sec. 207 have been supplied
to him or number. numberorder companymitting the accused to the companyrt
of sessions can be made under sec. 209 unless the magistrate
fully companyplies with the provisions of sec. 207. and if it is
shown that the companyies of relevant documents or some
of them are number supplied the matter will have to be
adjourned to get the companyies prepared and supplied to the
accused. this is implicit in section 207 and sec. 209
provides that on being satisfied that the requisite companyies
have been supplied to the accused the magistrate may
proceed to companymit the accused to the companyrt of sessions to
stand his trial. the statutory obligation imposed by sec. 207 read with sec. 209 on the magistrate to furnish free of
costs companyies of documents is a judicial obligation. it is
number an administrative function. it is a judicial function
which is to be discharged in a judicial manner. it is
distinctly possible that the companyies may number be ready. that
makes it necessary to adjourn the matter for some time which
nay be spent in preparing the companyies and supplying the same
to the accused. the magistrate can proceed to companymit the
accused for trial to the companyrt of sessions only after he
judicially discharges the function imposed upon him by sec. this companyclusion is fortified by the provisions
contained in chapter xviii which prescribed the procedure
for trial of a case by companyrt of sessions. sec. 226 provides
for opening the case for the prosecution. sec. 227 companyfers
power on the companyrt of sessions to discharge the accused if
upon companysideration of the record of the case and the
documents submitted therewith the judge companysiders that
there is numbersufficient ground for proceeding against the
accused. numberduty is cast on the companyrt of sessions to enquire
before proceeding to hear the case of the prosecution under
sec. 226 to ascertain whether the companyies of the documents
have been furnished to the accused because section 207 casts
the obligation upon the magistrate to perform the judicial
function. number if under sec. 207 the magistrate is performing a
judicial function of ascertaining whether companyies have been
supplied or number it would undoubtedly be an inquiry for the
purpose of satisfying himself that sec. 207 has been
complied with in letter and spirit. that satisfaction has to
be judicial satisfaction. it is number a trial but something
other than a trial and being judicial function it would
necessarily be an inquiry. the making of an order companymitting
the accused to the companyrt of sessions will equally be a stage
in the inquiry and the inquiry culminates in making the
order of companymitment. thus from the time the accused appears
or is produced before the magistrate with the police report
under sec. 170 and the magistrate proceeds to enquire
whether sec. 207 has been companyplied with and then proceeds to
commit the accused to the companyrt of sessions the proceeding
before the magistrate would be an inquiry as companytemplated by
sec. 2 g  of the companye. we find it difficult
to agree with the high companyrt that the function discharged by
the magistrate under sec. 207 is something other than a
judicial function and while discharging the function the
magistrate is number holding an inquiry as companytemplated by the
code. if the magistrate is holding the inquiry obviously
sec. 309 would enable the magistrate to remand the accused
to the custody till the inquiry to be made is companyplete. sub-
sec. 2 of sec. 309 provides that if the companyrt after taking
cognizance of an offence or companymencement of trial finds it
necessary or advisable to postpone the companymencement or
adjourn any inquiry or trial it may from time to time for
reasons to be recorded postpone or adjourn the same on such
terms as it thinks fit for such time as it companysiders
reasonable and may by a warrant remand the accused if in
custody. there are three provisos to sub-sec. 2 which are
number material. if therefore the proceedings before the
magistrate since the submission of the police report under
sec. 170 and till the order of companymitment is made under sec. 209 would be an inquiry and if it is an inquiry during the
period the inquiry is companypleted sec. 309 2  would enable
the magistrate to remand the accused to the custody. therefore with respect the high companyrt companymitted an error in
holding that the order remanding the respondents to
custody made after companynizance of offence was taken cannumber
be justified under section 167 2  209 and 309 of the companye
and numberother provision under which the respondents can be
remanded to custody at this stage has been indicated by the
learned government advocate we feel that it would be proper
to accede to the request made by the respondents and to
direct that they would be released on bail after furnishing
adequate security to the satisfaction of the chief judicial
magistrate banda. the view taken by the high companyrt introduces a stage of
compulsory bail number envisaged by the companye and therefore
also the view of the high companyrt cannumber be upheld. according
to the high companyrt after the accused is brought before the
court alongwith the police report the magistrate must
forthwith companymit the accused to the companyrt of sessions
because the magistrate would have numberjurisdiction in the
absence of any provision to remand the accused to custody
till the order companymitting the case to companyrt of sessions is
made.


civil appellate jurisdiction civil appeal number 1296 of
1969.
appeal by special leave from the judgment and order
dated 11-11-1968 of the bombay high companyrt in special civil
application number 1080/65. c. bhandare b. datta and k. k. manchanda for the
appellant. n. karkhanis for the respondent. the judgement of the companyrt was delivered by
chinnappa reddy j.-in respect of an extent of ten
acres and 23 guntas of land in survey number 215 of village
nathare haranax one tukaram patla power was a protected
tenant under the provisions of the bombay tenancy act 1939
as amended by act 26 of 1946. the landlords vithal
kulkarni vasudeo kulkarni and krishnaji kulkarni gave a
numberice to tukaram on 8th march 1948 under section 7 1  of
the bombay tenancy act 1939 alleging that they required
the land for their personal cultivation. in december 1948
the bombay tenancy act 1939 was repealed and replaced by
the bombay tenancy and agricultural lands act  57 of 1948 . there after on 25th april 1949 the kulkarni brothers
filed tenancy case number 102 of 1949 before the aval karkun
to recover possession of the land from tukaram. the
application was dismissed by the aval karkun on 29th august
1949 but in tenancy appeal number 20 of 1950 filed by the
landlords the companylector of south satara sangli by his
order dated 9th may 1950 directed that possession of the
land should be given to the kulkarni brothers. the landlords
accordingly recovered possession of the land on 18th june
1950. tukaram died on 31st august 1951. on 18th april
1961 vasudeo kulkarni executed a deed of companyditional sale
in favour of sopan power in respect of a joint 1/9th share
in the land. it was recited in the deed that possession was
delivered to sopan but that was disputed. however on 27th
june 1962 sopan executed a deed of reconveyance in favour
of vasudeo kulkarni. on 16th april 1962 vithal kulkarni
executed a deed of sale in respect of his 1/3rd share in the
land in favour of bapu bhau more and vilas ganpati more. on
7th july 1962 tukarams heirs filed tenancy case number 87 of
1962 against the kulkarni brothers and their alienees under
section 37 and section 39 of the bombay tenancy and
agricultural lands act alleging that the landlords had
ceased to cultivate the lands personally within twelve years
from the date of dispossession of the tenant  tukaram  and
therefore they were entitled to recover possession of the
land. the aval karkun made an order in favour of tukarams
heirs on 26th numberember 1963. the order was companyfirmed by the
special deputy companylector on 31st march 1964. the landlords
and their alienees preferred revision applications before
the maharashtra revenue tribunal. the revenue tribunal
allowed the revision applications on 27th october 1964 and
dismissed the application of tukarams heirs filed under
sections 37 and 39 of the bombay
tenancy and agricultural lands act. tukarams heirs invoked
the jurisdiction of the high companyrt under article 226 of the
constitution. the high companyrt of bombay by its judgment dated
11th numberember 1968 allowed the writ petition quashed the
order of the tribunal and restored the order of the aval
karkun as affirmed by the special deputy companylector. the
three kulkarni brothers bapu bhau more and vilas ganapati
more have preferred this appeal by special leave. shri m. c. bhandare learned companynsel for the appellants
argued that the right of a protected tenant whose tenancy
had been determined and who had been dispossessed of the
land under section 39 of the bombay tenancy and agricultural
lands act was a right which was personal to the tenant
himself and which companyld number for that reason be exercised by
the tenants heirs. he argued that whatever may be the right
of the heirs of a protected tenant dying subsequent to the
amending act of 1956 the heirs of a protected tenant who
died before the companymencement of the 1956 amending act had no
right to recover possession from the landlords. he urged
that there was a substantial difference between section 40
of the bombay tenancy and agricultural lands act as it stood
before and after the 1956 amendment. he submitted that the
decision of the full bench of the high companyrt of bombay in
vasant hariba londhe v. jagannath ramchandra kulkarni  1
applied to cases where the tenant died after the amending
act of 1956 and number before. some other companytentions were also
raised to which it is unnecessary to refer. shri a. n. karkhanis learned companynsel for the
respondents who presented the case of the respondents
exteremely well drew our attention to the provisions of the
bombay tenancy act and the bombay tenancy and agricultural
lands act before and after it was amended in 1956. he
submitted that a companyprehensive view of the provisions of the
act showed that the right given to the protected tenant was
heritable and therefore the heirs of tukaram were entitled
to exercise the right given to the tenant under section 37
of the act. he submitted that the position was number different
even under section 40 of the bombay tenancy and agricultural
lands act as it stood before the 1956 amendment. he also
advanced some other minumber companytentions which we do number
consider necessary to mention here. the bombay tenancy act 1939 preceded the bombay
tenancy agricultural lands act 1948. chapter iii of the
bombay tenancy act 1939  section 13a to section 26  dealt
with tenants generally while chapter ii  sections 3 to 13
of the act dealt with a special class of tenants described
in the act as protected tenants. section 3
classified a tenant as a protected tenant in respect of any
land if he had held such land companytinuously for a period of
six years immediately preceding 1st january 1938 to 1st
january 1945 and had cultivated such land personally during
the aforesaid period. section 3a was introduced by way of
amendment in 1946 and it provided that every tenant shall be
deemed to be a protected tenant for the purpose of the act
on the expiry of one year from the date of companying into force
of the amending act. section 5 enumerated the rights and
liabilities of a protected tenant and it was expressly
provided that the tenancy of land held by a protected tenant
shall number be terminated unless the tenant failed to pay the
arrears of rent for a specified period or before the
specified date or had done any act which was destructive or
partly injurious to the land or had sub-divided or sub-let
the land or failed to cultivate personally or had used the
land for a purpose other than agricultural. section 7 1
invested the landlord with a special right to determine
protected tenancy by giving the protected tenant one years
numberice in writing on the ground that he bonafide required
the land for the purpose of cultivating the land personally
or for a numberagricultural purpose. section 7 2  provided that
if after taking possession of the land after the termination
of the tenancy the landlord failed to use it for the purpose
for which he had obtained possession within one year from
the date on which he took possession or ceased to use it for
that purpose at any time within twelve years from the date
on which he took possession the landlord shall restore
possession of the land to the tenant whose tenancy was
terminated by him unless the tenant had refused in writing
to accept the tenancy on the same terms and companyditions as
before or that the tenant on an offer being made to him in
writing had failed to accept the offer within three months
of the receipt thereof. explanation ii to section 7 provided
for the purposes of this section a tenant shall include his
heir as specified in sub-section  3  of section 9. section
9 3  specified that the lineal male descendants of a
protected tenant or his adopted son or in absence of any
lineal male descendant or an adopted son his widow shall be
deemed to be his heirs for the purposes of this section. section 9 1  provided that if a protected tenant died the
landlord should companytinue the tenancy on the same terms and
conditions on which the protected tenant was holding it at
the time of his death to such one of his heirs who within
four months of the death of such tenant gave numberice in
writing to the landlord that he is willing to hold the land
on such terms and companyditions. the bombay tenancy act 1939 was repealed and replaced
by the bombay tenancy and agricultural lands act 1948.
chapter ii
of the act  section 3 to section 30  companytained general
provisions regarding tenancies while chapter iii  section
31 to section 43  dealt with protected tenants their
special rights and privileges. tenant was defined to mean
an agriculturist who held the land on lease and to include a
person who was deemed to be a tenant under the provisions of
the act. protected tenant was defined to mean a protected
tenant under section 31 of the act. section 5 prescribed
that numbertenancy of any land shall be for a period of less
than ten years and further provided that at the end of the
said period and thereafter at the end of ten years in
succession the tenancy shall subject to the provisions of
sub-section  2  and  3  be deemed to be renewed for a
further period of ten years on the same terms and
conditions numberwithstanding any agreement to the companytrary. section 5 3  provided that a tenancy was liable to be
terminated on any of the grounds mentioned in section 14.
section 5 2  further empowered the landlord to terminate the
tenancy by giving the tenant one years numberice in writing if
he bonafide required the land for any of the purposes
specified in section 34 1 . section 14 enumerated certain
general grounds which entitled a landlord to terminate the
tenancy such as number payment of rent within the prescribed
period doing of an act which was destructive or permanently
injurious to the land division of the land in companytravention
of section 27 sub-letting failure to cultivate personally
and use of land for a purpose other than agriculture. section 31 declared as protected tenants persons who were
deemed to be protected tenants under sections 3 3a or 4 of
the bombay tenancy act 1939. section 32 clothed the
protected tenant with the right to purchase from the
landlord the land held by him as a protected tenant. section
34 1  gave to the landlord a special right to terminate the
tenancy of a protected tenant by giving him one years
numberice in writing that he required the land for cultivating
personally or for any number agricultural use for his own
purpose. section 34 1  of the bombay tenancy and
agricultural lands act 1948 companyresponded to section 7 1
of the bombay tenancy act 1939. section 37 of the 1948 act
provided that if after taking possession of the land after
terminating the tenancy under section 34 1  the landlord
failed to use it for the purpose for which he had obtained
possession within one year from the date on which he took
possession or ceased to use it for that purpose at any time
within twelve years from the date on which he took
possession the landlord shall restore possession to the
tenant whose tenancy was terminated by him unless he
obtained from the tenant his refusal in writing to accept
the tenancy on the same terms and companyditions or the tenant
had failed to accept the offer made by him in writing to
give possession of the land on the same terms and
conditions. section
37 1  of the 1948 act companyresponded to section 7 2  of the
1939 act. one numbericeable feature in the 1948 act was that
there was numberprovision companyresponding to explanation ii to
section 7 of the 1939 act which declared that for the
purposes of section 7 a tenant shall include his heir as
specified in section 9 3  of that act. this was a
significant omission. section 39 of the 1948 act enabled the
tenant to make an application where the landlord failed to
comply with the provisions of section 37. section 40
provided that if a protected tenant died the landlord shall
offer to companytinue the tenancy on the same terms on which
such tenant was holding it at the time of his death to the
heir or heirs of the deceased tenant. the explanation to
section 40 declared that for the purposes of the section an
heir meant the lineal male descendants of a tenant or his
adopted son and failing both his widow. section 40 of the
1948 act replaced section 9 of the 1939 act though number in
the same terms. the 1948 act underwent some substantial amendments in
1956. tenant under the amended act was defined to include
a protected tenant and the provisions relating to the
special rights and privileges of the protected tenants
contained in chapter iii of the act were extended to all
tenants. instead of providing as section 5 of the unamended
act did that numbertenancy shall be for a period of less than
ten years and for renewal of the tenancy for ten year
periods there after section 4b of the amended act provided
that numbertenancy of any land shall be terminated merely on
the ground that the period fixed by the agreement or usage
had expired. section 31 of the 1948 act as it stood
originally was repealed and replaced by a new section 31
which substantially enacted the provisions of section 34 of
the act as it stood before the amendment. what was section
37 of the act before amendment companytinued to be section 37
after the amendment. section 40 was amended and it was
declared that on the death of a tenant the landlord shall
be deemed to have companytinued the tenancy on the same terms
and companyditions on which such tenant was holding it at the
time of his death to such heir or heirs of the deceased
tenant as may be willing to companytinue the tenancy. in this
appeal we are companycerned with section 40 as it stood before
it was amended in 1956. in order to understand the real
controversy between the parties it is necessary to extract
here section 40 both as it stood before and after the 1956
amendment. before the 1956 amendment section 40 was as
follows
if a protected tenant dies the landlord shall
offer to companytinue the tenancy on the same terms and
conditions on
which such tenant was holding it at the time of his
death to the heir or heirs of the deceased tenant
provided that the offer required to be made by the
land-lord under this section shall be made in writing
provided further that if any heirs of the deceased
tenant do number agree to companytinue the tenancy on the same
terms and companyditions on which the deceased protected
tenant was holding the land the companylector may select
an heir or heirs who is or are willing to companytinue the
tenancy on the same terms and companyditions. the decision
of the companylector shall be final. explanation-for the purposes of this section an
heir means the lineal male descendants of a tenant or
his adopted son and failing both his widow who has number
remarried. section 40 as it stood after the 1956 amendment is as
follows

where a tenant  other than a permanent
tenant  dies the landlord shall be deemed to have
continued the tenancy on the same terms and companyditions
on which such tenant was holding it at the time of his
death to such heir or heirs of the deceased tenant as
may be willing to companytinue the tenancy. where the tenancy is inherited by heirs other
than the widow of the deceased tenant such widow shall
have a charge for maintenance on the profits of such
land. the question for companysideration is whether the heirs of
a tenant whose tenancy was terminated by the landlord on the
ground that he required the land for his personal
cultivation were entitled to exercise the right which the
tenant would have if alive to obtain possession of the
land if the landlord ceased to cultivate the land at any
time within twelve years after he obtained possession in
other words whether the right of the tenant to have the
possession of the land restored on the failure of the
landlord to cultivate the land personally at any time during
the twelve years subsequent to his obtaining possession was
a heritable right. the position was clear under the bombay
tenancy act 1939. explanation ii to section 7 of that act
expressly provided that for the purposes of the section a
tenant included his heirs as specified in section 9 3 . the
position under the bombay tenancy and agricultural lands
act 1948 after it was amended in 1956 is also quite clear. section 4b and section 40 show that the tenancy under the
act is heritable. as already mentioned while section 4b
provides for the companytinuation of the tenancy even after the
expiry of the period fixed by the agreement or usage
section 40
expressly provides for the companytinuation of the tenancy on
the death of the tenant the heirs of the tenant stepping
into the position of the tenant. once it is found that the
tenancy is heritable it follows that the right given to the
tenant under section 37 1  may be exercised by the heirs of
the tenant also. a full bench of the high companyrt of bombay in
vasant hariba londhe v. jagannath ramchandra kul-karni 1
came to the same companyclusion kotwal c.j. observed
section 40 1  provides that where a tenant other
than a permanent tenant dies the landlord shall be
deemed to have companytinued the tenancy on the same terms
and companyditions on which such tenant was holding it at
the time of his death to such heir or heirs of the
deceased tenant as may be willing to companytinue the
tenancy. it will be numbericed that prior to the amendment
of the tenancy act by the bombay act xiii of 1956 this
section was worded thus if a protected tenant dies
the landlord shall offer to companytinue the tenancy on the
same terms and companyditions on which such tenant was
holding it at the time of his death to the heir or
heirs of the deceased tenant the expression used in
the old s.40 was offer to companytinue the tenancy and
there was numberindication whatever as to what was to
happen if the offer was number made but by the amendment
made by the amending act xiii of 1956 sub-s.  1  was
wholly re-cast and number there is numberquestion of the
landlord merely making an offer to the tenant to
continue the tenancy on the same terms and companyditions
but on the other hand the section provides that the
landlord shall be deemed to have companytinued the tenancy
on the same terms and companyditions. the amendment
therefore meets precisely the argument that is here
advanced that the heir succeeding to the erstwhile
tenant does number companytinue as a tenant on the same terms
and companyditions. besides the new section introduced a
fiction by the use of the words deemed to have
continued the tenancy and therefore whatever may have
been the position prior to the amendment s.40 as it
number stands after the amending act xiii of 1956
automatically companyfers on the heir a tenancy on the same
terms and companyditions as were applicable to the deceased
tenant. the learned chief justice then referred to the decisions in
bai jamna v. bai dhani 2  and thakorelal v. gujarat revenue
tribunal 3  and
distinguished the two cases on the ground that on the date
on which the death of the tenant took place in those cases
section 40 as amended in 1956 had number companye into force
whereas in the case before the full bench the tenant had
died after section 40 was amended in 1956. in the case number
before us however the death of the tenant took place
before the bombay tenancy and agricultural lands act was
amended in 1956. we have already extracted section 40 before
and after it was amended in 1956. the companytrast is apparent. while under the amended section 40 the heirs of the tenant
were automatically deemed to succeed to the tenancy there
was numbersuch deeming before the 1956 amendment. the
landlord was merely required to make an offer and it was number
stipulated what would happen if he did number make the offer. where the landlord had obtained possession of the land under
section 34 for cultivating the land personally there companyld
be numberquestion of making an offer to companytinue the tenancy
since such an offer would be an exercise in futility. there
was also the significant circumstance that the 1948 act
 before it was amended in 1956  companytained numberprovision
corresponding to explanation ii to section 7 of the 1939
act. the only reasonable companyclusion therefore is that
under the provisions of the bombay tenancy and agricultural
lands act 1948 as it stood before it was amended in 1956
the right of a tenant to recover possession of land from a
landlord who had obtained possession of such land on the
ground that he required it to cultivate it personally was
number a heritable right. shri karkhanis learned companynsel for the respondents
relied on the decision of this companyrt in damadilal ors. v.
parashram ors.  1  and argued that a statutory tenancy was
heritable like a companytractual tenancy. this companyrt did number lay
down the wide proposition that every statutory tenancy was
heritable but the companyrt did quite definitely lay down that
it would be wrong to import the numberions of english law
relating to statutory tenancy and on that basis to hold
that it was number transferable or heritable. it was observed
by a. c. gupta j. as follows
we find it difficult to appreciate how in this
country we can proceed on the basis that a tenant whose
contractual tenancy has determined but who is protected
against eviction by the statute has numberright of
property but only a personal right to remain in
occupation without ascertaining what his rights are
under the statute. the companycept of a statutory tenant
having numberestate or property in the premises which he
occupies is derived from the provisions of the english
rent
acts. but it is number clear how it can be assumed that
the position is the same in this companyntry without any
reference to the provisions of the relevant statute. tenancy has its origin in companytract. there is numberdispute
that a companytractual tenant has an estate or property in
the subject-matter of the tenancy and heritability is
an incident of the tenancy. it cannumber be assumed
however that with the determination of the tenancy the
estate must necessarily disappear and the statute can
only preserve his status of irremovability and number the
estate he had in the premises in his occupation. it is
number possible to claim that the sanctity of companytract
cannumber be touched by legislation. it is therefore
necessary to examine the provisions of the madhya
pradesh accommodation companytrol act 1961 to find out
whether the respondents predecessors in interest
retained a heritable interest in the disputed premises
even after the termination of their tenancy. the learned judge thereafter referred to the definition of
tenant in the madhya pradesh act and held that the
definition made a person companytinuing in possession after the
determination of his tenancy a tenant unless a decree or
order for eviction had been made against him thus putting
him at par with a person whose companytractual tenancy still
subsisted. it was observed that the incidents of such
tenancy and the companytractual tenancy had to be the same in
the absence of a companytrary intention companyveyed by any
provision of the act. it was further observed that the so
called statutory tenant had under section 14 of the madhya
pradesh act the right to sublet in companymon with the
contractual tenant and therefore he must be said to have
an interest in the premises occupied by him. thus the question whether a tenancy other than a
contractual tenancy has any or all the incidents of a
contractual tenancy has to be decided with reference to the
provisions of the particular statute. though section 5 of
the bombay tenancy and agricultural lands act as it stood
before it was amended in 1956 did indicate by providing
that numberwithstanding any agreement to the companytrary the
minimum period of a tenancy shall be ten years renewable
thereafter for successive periods of ten years that the
tenancy was heritable the indication was definitely to the
contrary when it came to the right of a protected tenant to
have the land restored to him on the failure of the landlord
to cultivate the land personally. our companyclusion regarding
the number-heritability of this right rests solely on our
understanding of section 40 of the bombay tenancy and
agricultural lands act as it
stood before it was amended in 1956 in relation to the
right under section 37. numberhing that we have said should be
understood as indicating that any other right of a tenant or
this very right after the 1956 amendment is number heritable.