civil appellate jurisdiction civil appeal number 2337 of 1968
 from the judgment and order dated the 2nd may 1968 of the
madhya pradesh high companyrt in l.p.a. number 7 of 1967 . l. sanghi and k. j. john for the appellant. s. khanduja and r. k. shukla for respondents number. 1 2
4. 5 8 to 14 16.
ex-parte for respondents number. 3 6 7 15 17 18.
the judgment of the companyrt was delivered by
kailasam j.-this appeal is by the auction-purchaser on
certificate of fitness granted by the high companyrt of madhya
prades against its order setting aside the decisions of
single judge and the district judge and directing the
district judge to deal with the application under order 21
rule 89 civil procedure companye filed by the judgment-debtors
bhagwandas and rameshwar prasad on 7th february 1966.
the decree-holder smt. bittibai the. 17th respondent
herein in execution of a money-decree in her favour against
respondents 1 to 16 and 18 herein sold a house belonging to
the judgment debtors on 8th january 1966. it was purchased
in the companyrt auction by the appellant herein. on 17th
january 1966 respondent 18 babulal one of the judgment-
debtors made a 10--277sci/78
application in the companyrt of district judge sagar under
order 21 rule 90 civil procedure companye for setting aside
the sale. on 7th february 1966 an application was filed
under order 21 rule 89 by babulal the 18th respondent on
behalf of himself and respondents 1 4 and 7 and the
decretal amount of rs. 27267/90p. and rs. 2300/- as
compensation totalling in all rs. 29567/90p. was
deposited. the appellant auction-purchaser resisted the
application filed by the judgment-debtors under order 21
rule 89 on the ground that as an application under order
21 rule. 90 was already pending the application under rule
89 is number maintainable. the trial companyrt by an order dated 9th august 1966 held that
since the application of the judgment-debtors under order
21 rule 90 was pending the application under order 21
rule 89 was liable to be dismissed as number companypetent. it
further held that the application filed by in judgment-
debtor babulal dated 7th february 1966 was number a proper
application under order 21 rule 89. the judgment-debtors
filed an appeal to the high companyrt of madhya pradesh and the
learned single judge who heard the appeal held that the
application dated 17th january 1966 under order 21 rule
90 was a bar to the maintenance of the application dated
7th february 1966 under order 21 rule 89 and dismissed
the appeal of the judgment-debtors on 24th february 1967.
the judgment-debtors filed a letters patent appeal to a
division bench of the madhya pradesh high companyrt. the
division bench allowed the appeal of the judgment-debtors
and set aside the judgment of the companyrts below on 2nd may
1968. the decree-holder filed an application for granting a
certificate of fitness which the high companyrt granted by its
order dated 18th september 1968. in pursuance of the
certificate this appeal has been preferred by the appellant. the main companytention put forward by mr. sanghi the learned
counsel for the appellants is that the application dated
17th january 1966 filed by babulal was on behalf of the
firm and therefore the application alleged to be under order
21 rule 89 on behalf of the firm is number maintainable as
the earlier application under order 21 rule 90 was
pending. the learned companynsel further companytended that the
application dated 7th february 1966 was for a mere deposit
of money and number an application under order 21 rule 89 for
setting aside the sale. in any event it was submitted that
the companyrts below ought to have found that the application
under order 21 rule 89 was barred by time. in order to appreciate the companytentions of the learned
counsel it is necessary to set out the relevant
applications. the application filed by babulal on 17th
january 1966 is marked as item number 3 on p. 25 of the
printed paper book. the cause-title mentions the applicant
as firm durga prasad ganesh dass through partner babulal. bittibai the decree-holder and himmatbhai the auction-
purchaser are impleaded as respondents. the applicant
babulal has filed the application as partner. the learned
single judge companystrued this application as having been made
by babulal for himself alone as
one of the judgment-debtors. the plea that the application
under order 21 rule 90 was on behalf of all the judgment-
debtors was number taken before the single judge. the learned
single judge in fact held that babulals application dated
17th january 1966 under 90 though made on his behalf was a
bar to the making of an application dated 7th february
1966 under rule 89 by other judgement-debtors when babulal
insisted on the sale being set aside under order 21 rule

the division bench understood the judgment of learned
single judge as companystruing the application by babulal having
been made on his behalf only and number on behalf of the
judgment-debtors and that two of the judgment-debtors
bhagwandas and rameshwar prasad had at numbertime applied
under order 21 90. we have numberhesitation in agreeing with
the view taken by .single judge as well as the division
bench of the high companyrt that the application that was made
by babulal on january 17 1966 was only on his behalf and
number on behalf of other judgment-debtors. even .in special
leave petition in the statement of the case. of it is stated
in paragraph 3 that on 17th january 1966 of the judgment-
debtors made an application under order 2 1 rule 9 from the
order of the district judge we find that the execution was
taken by the decree-holder separately against the various
judgment debtors. in spite of. the fact that all through
the proceedings it understood that the application made
under order 2 1 rule 90 by babulal on his behalf alone
the learned companynsel for the appellant mr. sanghi invited us
to companystrue the application dated 17th january 1966 which
he submitted would establish his case. we have gone through
the document very carefully and we find that though the
cause-title states the applicant as firm durga prasad ganesh
dass through partner babulal it was made only by babulal as
a part and number on behalf of the firm. on this finding the
submission of the 1learned companynsel that the application
was made on 17th january 19 under order 21 rule 90 by
babulal on behalf of all the judgment debtors cannumber be
accepted. the learned single judge found the the
application under order 21 rule 89 was made on behalf four
judgment-debtors viz. babulal rikhilal bhagwandas
rameshwar prasad. this view was accepted by the division
ben which held that there was a valid deposit by bhagwandas
rameshwar prasad for setting aside the sale. it was sought to be companytended that the application made
babulal on 7th february 1966 was number an application under
order 21 rule 89 but was only an application for
depositing amount of rs. 29567/99p. the application is
item 5 and is found .at p. 29 of the printed paper book. the application is stated to under order 21 rule 89 civil
procedure companye. the first paragraph mentions that the
property of the judgment-debtor auctioned for rs 46000/-
on 8th january 1966 and was purchased by the auction
purchaser. second paragraph recites that the applicant
wants to deposit a sum of rs. 27267/99 as shown in the
proclamation of sale and rs. 2300/- as companymission of the
purchaser on rs. 46000/- in all a sum of rs. 29567/99. there is numberspecific prayer for setting aside the sale but
we have numberhesitation in reading the application as one
under order 21 rule 89. the
purpose of the application is clear and in fact the learned
judge has specifically stated it has number been companytended
before me that the application dated 7th february 1966 was
number an application within the meaning of order 21 rule 89
civil procedure companye. the division bench also proceeded on
the basis that the application dated 7th february 1966 was
under rule 89 and was on behalf of babulal himself and on
behalf of some other judgment-debtors. the learned companynsel in support of his companytention that unless
there is a specific plea for setting aside the sale under
order 21 rule 89 the application cannumber be treated as one
under order 21 rule 89 cited three decisions a.i.r. 1916
madras 717 a.i.r. 1955 nagpur 185 and a.i.r. 1949 bombay

we do number feel it necessary to refer to those
decisions for they are clearly distinguishable and do number
apply to the facts of this case. it was next companytended that in any event numberrelief should be
granted on the application dated 7th february 1966 as
babulal being one of the judgment-debtors having filed an
application under order 21 rule 90 is number entitled to
relief under order 21 rule 89 and to that extent the other
judgment-debtors cannumber take advantage of the deposit made
by babulal at least to the extent of babulals share. we
do number see any merit in this companytention. apart from the
fact that this point was number raised in any of the companyrts
below we feel that when a deposit is made by any of the
judgment-debtors as required under order 21 rule 89 a
proper deposit is made and the benefit for setting aside the
sale would accrue to the other judgment-debtors. it is number
disputed that the entire amount as companytemplated under order
21 rule 89 had been deposited. it is also number in dispute
that the deposit was made on behalf of the judgment-debtors. even though babulals petition under order 21 rule 90 was
pending so far as the application under order 21 rule 89
by other judgment-debtors it cannumber be said to be
ineffective when an application has been made by them and
the entire money as required under the rule deposited. in this view the division bench of the high companyrt was right
in setting aside the order of the single judge holding that
the application of babulal under order 21 rule 90 did number
in any manner stand in the way of two other creditors
bhagwandas and rameshwar prasad making the application
under order21 rule 89.
the learned companynsel for the respondent relied on a local
amendment made in order 21 rule 89 of the companye of civil
procedure and submitted that the terms of the rule are much
wider and any person claiming any interest in the property
or acting for such person is entitled to relief. the
amended rule runs -
where immovable property has been sold in
execution of a decree any person claiming any
interest in the property sold at the time of
the sale or at the time of
petition or acting for or in the interest
of such person may apply to have the sale
set aside on his depositing in companyrt. as we have found that even without this amendment the
application filed by babulal on behalf of other judgment-
debtors will be a valid application under order 21 rule 89
it is unnecessary to refer to this amendment. we find that there is numbermerit in any of the companytentions
raised by the learned companynsel for the appellant. the amount
deposited by the auction-purchaser has been lying in companyrt. we find that under order 21 rule 93 the companyrt is entitled
to direct repayment of the purchase-money and interest. pending appeal before this companyrt we- are told that this
amount was deposited in a fixed deposit account. during the
time in which the amount was number earning any interest we
direct the judgment-debtor to pay interest at 6 per cent per
annum on that amount. from the date on which the amount was
invested in fixed deposit numberinterest need be paid but the
auction-purchaser will be entitled to withdraw the amount
covered by the fixed deposit along with the interest
thereon.


civil appellate jurisdiction civil appeal number 684 of 1965.
appeal from the judgment and order dated september 9 1963
of the gujarat high companyrt in income-tax reference number 20 of
1962.

n. shroff for the appellant. m17supci/66-13

t. desai gopal singh and r. n. sachthey for the
respondent. the judgment of the companyrt was delivered by
ramaswami j. this appeal is brought by certificate from
the judgment of the high companyrt of gujarat dated september 9
1963 in income-tax reference number 20 of 1962.
on june 23 1959 a policy called childrens deferred
endowment assurance for a sum of rs. 50000/- was issued by
the life insurance companyporation of india. the proposer was
harjivandas kotecha the father of the appellant
 hereinafter called the assessee  and the life assured was
that of the assessee. the premium payable in respect of the
policy was rs. 1925/ per annum. that amount was paid as
premium out of the taxable income of the assessee. in the
course of the assessment for the assessment year 1960-61
the assessee claimed rebate on the insurance premium of rs. 1925/ under the provisions of s. 15 1  of the income-tax
act 1922  hereinafter called the act . the income-tax
officer rejected the claim on the ground that under the said
policy the life of the minumber assessee had number been assured. the appellate assistant companymissioner agreed with the income-
tax officer and held that the claim of the assessee was
rightly rejected. the assessee took the matter in further
appeal before the appellate tribunal but the appeal was
dismissed. at the instance of the assessee the appellate
tribunal stated a case to the high companyrt on the following
question of law
whether rebate under s. 15 1  of the income-
tax act 1922 is admissible on the premia
payable as per annexure a during the
minumberity of the assessee? the high companyrt of gujarat answered the reference in favour
of the respondent and against the assessee. the high companyrt
held that the companytract of insurance with the life insurance
corporation was entered into by the father of the assessee
and under the terms thereof the companytract was to become the
assessees companytract only by his adopting it on attaining
majority. the high companyrt further held that on the true
interpretation of the terms of the companytract even if the
minumber were to be alive on the deferred date it was the
assessees father who was entitled to receive the cash
option unless the assessee adopted the companytract as his own. the high companyrt accordingly observed that the real
contracting parties were the father of the assessee and the
life insurance companyporation and it was only under certain
contingency on the happening of which the companytract was to
become the companytract of the assessee. section 15 1  of the act provides as follows
exemption in the case of life insurances.  1
the tax shall number be payable in respect of any
sums paid by an
assessee to effect an insurance on the life of
the assessee or on the life of a wife or
husband of the assessee or in respect of a
contract for a deferred annuity on the life of
the assessee or on the life of a wife or
husband of the assessee or as a companytribution
to any provident fund to which the provident
funds act 1925 xix of 1925 applies
the policy a companyy of which is annexed to the statement of
the case as annexure x mentions the following details
cash option deferred date date of m
aturity
rs. 11.693-50 11-3-65
11-3-82
event on the happening of which sum assured
payable
on the stipulated date of maturity if the
life assured is then alive or at his prior
death if it shall occur on or after the
deferred date. clause 5 of the policy provides
all moneys payable in terms of these
provisions shall if the policy has been
adopted by the life assured be payable to the
life assured or his assigns or numberinees under
section 39 of the insurance act or proving
executors or administrators or other legal
representatives provided always that in
the event of the life assured number having
adopted the policy the moneys payable in
terms of these provisions shall become payable
to the proposer or his proving executors or
administrators or other legal
representatives
certain other provisions companytained in the
policy which are material are to the following
effect
the life assured shall at any time after
attaining majority and before the deferred
date by a writing signed by him adopt this
policy agreeing to be bound by all its
provisions. on such adoption by the life
assured this policy shall be deemed to be a
contract between the companyporation and the life
assured as the absolute owner of the policy as
from the date of such adoption and the
proposer or his estate shall number have any
right or interest therein . provided that if all the premiums due prior to
the deferred date have been paid the person
entitled to the policy moneys shall have the
option to apply for and receive as on the
deferred date and cash option mentioned in the
schedule in entire cancellation of this
policy. this policy shall stand cancelled in
case the life assured shall die before the
deferred date and in such event a sum of money
equal to all the premiums paid without any
deduc-
tion whatsoever shall become payable to the
person entitled to the policy moneys. this policy shall stand cancelled also in the
event of the life assured declining to adopt
or failing or neglecting to adopt the policy
before the deferred date and in such event a
sum of money equal to the cash option will be
come payable to the person entitled to the
policy moneys. according to the companytract of insurance the life insurance
corporation was liable to pay the sum assured  a  on the
stipulated date of maturity if the life assured was alive
on that date i.e. march 11 1982 or  b  if the life
assured were to die before the said date provided that the
death occurred on or after the deferred date i.e. march 11
1965. under the terms of the policy these are the two
events upon the happening of either of which the companyporation
was to pay the sum assured viz. rs. 50000/-. a special
clause of the policy provides that at any time after
attaining majority and before the deferred date the life
assured may adopt the policy and on such adoption the policy
is deemed to be a companytract between the companyporation and the
life assured as the absolute owner of the policy from the
date of such adoption. in our opinion the requirements of
s. 15 1  of the act are satisfied in this case because all
that s. 15 1  requires is that in order to get exemption
from payment of tax in respect of any sum two companyditions may
be satisfied viz.  1  such sum must have been paid by the
assessee himself and  2  that such payment must have been
made to effect an insurance on the life of the assessee
himself. in the present case the subjectmatter of the
contract is the insurance on the life of the assessee and it
is number disputed that the payment of the premium was made by
the assessee out of his taxable income. on behalf of the
respondent mr. desai companytended that the assessee was number
entitled to the rebate under s. 15 1  of the act on the
premium paid. it was pointed out that the companytract of
insurance provided that the assessee was number entitled to the
benefit of the policy till he adopted the companytract on the
date of his attaining majority. the argument was stressed
that the companytract was made between the life insurance
corporation and the father of the assessee and under the
terms thereof it companyld become the assessees companytract only
on his adopting it on his attaining majority. it was
pointed out that if the assessee companytinued to be alive after
the deferred date but failed to adopt the policy it was the
proposer who would be entitled to the cash option and number
the assessee. if the assessee were to die before the
deferred date the policy would stand cancelled and in that
event it was the proposer and number the heirs of the assessee
who would get the sums equal to the premiums paid. we are
however of the opinion that the companytract of insurance
between the assessees father and the life insurance
corporation must be read as a whole and in spite of the
clauses referred to by mr. desai we companysider that the
contract is in substance a companytract of life insurance with
regard to the life of the assessee. the important point to
numberice is that if the assessee adopts the policy upon
attaining majority the companyporation becomes liable to pay the
sum assured viz. rs. 50000/- to the assessee on the
stipulated date of maturity i.e. march 11 1982 if the
assessee was alive. the life insurance companyporation will
also be liable to pay the amount assured if the assessee
were to die before the stipulated date of maturity but on or
after the deferred date i.e. march 11 1965. in our
opinion the insurance on the life of the assessee was the
main intention of the companytract and the other clauses upon
which mr. s. t. desai relied are merely ancillary or
subordinate to that main purpose. life insurance in a
broader sense companyprises any companytract in which one party
agrees to pay a given sum upon the happening of a particular
event companytingent upon the duration of human life in
consideration of the immediate payment of a smaller sum or
certain equivalent periodical payments by anumberher party
 halsburys laws of england 3rd edn. vol. 22 p. 273 . it
was held by the companyrt of appeal in gould v. curtis 1  that
for the purpose of the statutory provisions relating to
relief in respect of life insurance premiums for purposes of
income-tax a companytract by which a sum is payable on the
death of the assured within a specified period and a larger
sum if he is alive at -the end of the period must be held to
be an insurance on life.


civil appellate jurisdiction civil appeals number. 326 and 327
of 1967.
appeals from the judgments and orders dated may 3 1966 of
the madhya pradesh high companyrt in misc. civil cases number. 186
of 1963 and 39 of 1964.

c. chagla ashoke chitale and rameshwar nath for the
appellant  in both the appeals . c. manchanda g. s. sharma r. n. sachthey and b. d.
sharma for the respondent  in both the appeals . the judgment of the companyrt was delivered by
hegde j. the question of law arising for decision in these
appeals by certificate under s. 66a 2  of the indian income-
tax act 1922  to be hereinafter referred to as the act  is
whether on the facts and in the circumstances
of the case the managing directors
remuneration received by sri rajkumar singh
was assessable in his individual hands and number
in the hands of the assessee hindu undivided
family ? this question was referred by the income-tax appellate
tribunal bombay bench a to the high companyrt of judicature at
bombay on an application made under s. 6 1  of the act by
the companymissioner of income-tax madhya pradesh. the high
court has answered that question in favour of the revenue. as against that decision this appeal has been brought. the assessee in this case is a hindu undivided family and
the companycerned assessment year is 1954-55 the relevant
accounting period being the year ending diwali 1953 i.e. numberember 6 1953. previously a hindu undivided family was
carrying on business under the name and style of sarupchand
hukamchand. that family was carrying on several businesses
one of which was the management of certain mills. that
family disrupted on march
30 1950. the assessee is the branch of that family. on
march 31 1950 a companypany under the name and style of
sarupchand hukumamchand private limited was incorporated. the
capital of the companypany companysisted of rs. 5 crores divided
into 20000 preference shares of rs. 1000 each and rs. 3000 ordinary shares of rs. 1000 each. the companypany itself
was incorporated for the purpose of acquisition from m s.
sarupchand hukumchand certain managing agencies
businesses factories and properties and for that purpose to
enter into an agreement with the said firm and to carry on
business as managing agents of rajkumar mills limited the
hukamchand mills limited and the hira mills limited and the other
businesses mentioned more particularly in the memorandum of
association of the companypany. the first directors of the
company were

sir hukamchand saroopchandji

rajkumarsingh hukamchandji

lady kanchanbai hukamchandji

mrs. premkumaridevi rajkumarisinghji

raja bahadursingh rajkumarsinghji

rustomji companyasji jall. the qualification prescribed for a director under art. 53
was the holding of at least 10 shares in the companypany whether
preference or ordinary or partly preference or partly
ordinary. art. 55 provided that the directors may from time
to time appoint one or more of their body to the office of
managing director or manager on such terms and at such
remuneration as may be determined by the directors. in
pursuance of the powers companyferred on them under art. 55 the
directors by their resolution dated march 31 1950 appointed
for the purpose of management of the business of the companypany
sir hukumchand rajoahadur rajkumar and rajabahadur as
managing directors of he companypany on a remuneration of rs. 50001- per month for each of them for their services. under art. 63 the directors were given certain powers for
the management of the companypany. they were subject to the
control of the board of directors. the three branches of
the original hindu undivided family namely the branches of
sir seth hukumchand lady kanchanbai and sri rajkumarsingh
were allotted 5000 shares of the face value of rs. 1000
each. the assessees branch represented by its karta got
5000 shares. rajkumar acquired 30 further shares in the
name of his wife premkumari and 10 shares in the name of
rajabahadur. the companysideration for all these subsequent
acquisitions was admittedly from the hindu undivided family
funds. all the 5030 shares were treated in the books and
the
balance sheet of the assessee family as its property. the
dividends in respect of these shares were also credited to
the account of the family. sir hukumchand died and after
his death the other two companytinued to be the managing
directors. for the years 1951-52 1952-53 and 1953-54 the
receipt of this rs. 500011- per month received as
remuneration was treated as the income of rajkumar as an
individual and assessed on that basis. similarly the
remuneration received by sir hukumchand and rajabahadur have
been and companytinued to be assessed as their individual
income. in making the assessment of the assessee in the
year 1954-55 the income-tax officer referred to this item
in the following words
it was claimed that the income from managing
directors remuneration and from directors fees
is assessable in his hands in individual
capacity. as was done in the early
assessments also. for that reason he did number assess the sum of rs. 60000/and
the sitting fee of rs. 1420/- received by rajkumar in the
account year relevant to the assessment year 1954-55 in the
hands of the hindu undivided family but they were assessed
in the hands of rajkumar as an individual. on january 10
1961 the companymissioner of income-tax in exercise of his
power under s. 33 b  issued a numberice to the assessee to show
cause why the assessment of the assessee for the assessment
year 1954-55 should number be revised by treating the sum of
rs. 60000/- plus rs. 142o - as the income of the assessee
hindu undivided family of which rajkumar was the karta. the
assessee opposed that numberice. he claimed the amount in
question as his individual income. the companymissioner did number
accept the companytention of the assessee and purporting to rely
on the decision of this companyrt in companymissioner of income-tax
west bengal v. kalu babu lal chand 1  held that income was
of the assessee. he taxed the assessee accordingly. aggrieved by that decision the assessee took us the matter
in appeal to the income-tax appellate tribunal. before the
tribunal learned companynsel for the assessee companyceded that the
sitting fee of rs. 1420/- may be treated as the income of
the assessee. hence the dispute centered round the sum of
rs. 60000 - received by rajkumar as salary. the tribunal
upheld the companytention of the assessee. the tribunal after
tracing the history of the private limitedco. of rajkumar was a
director and the manner in which the earlier assessments
were made observed --
from the facts set out above it is clear that this is number a
part and parcel of the same transaction or the same scheme
of arrangement. whatever may be said of
 1  37 i. i. t. r. 123.
the bigger hindu undivided family it was sheer accident of
circumstances that the smaller hindu undivided family came
to hold these shares. both rajkumar and rajabahadur belong
to the same branch and both of them are managing directors. the managing directors were appointed by a resolution of the
board of directors and they were subject to removal by the
directors at any time. the appointment of managing director
was number companyditioned upon either rajkumar or rajabahadur
acquiring these shares. on the disruption of the larger
hindu undivided family the smaller hindu undivided family
got for its share certain shares. whatever may be said of
the directors. fees that having been number companyceded as
income of the hindu undivided family the same cannumber be
said of the managing directors remuneration. the managing
director holds office by virtue of the resolution of the
board of directors. he may number be a servant of the companypany
but still he receives his salary for his personal services. the companytribution of the capital may at best be companysidered as
acquiring the qualification of a director. it is number all
people who hold shares that companyld automatically aspire to
be managing directors. there is numberevidence to show that
rajkumar and rajabahadur were appointed managing directors
on behalf of the family or that the income was earned by
utilizing the joint family property or was detriment to the
family property. there is numbermaterial in this case to hold
that the acquisition of the business or flotation of the
company and the appointment of the managing directors were
inseparably linked together. as already numbericed right up to
the accounting year relevant to the present assessment year
the income was treated as income of rajkumar in his
individual capacity. it is true numberdoubt that there is no
question of res judicata but this fact has certainly to be
taken into companysideration. this income has been assessed
under s. 7. it has been earned by rajkumar for his services. it has accrued in his hands. it is open to him to give it
over to the family and the mere fact that it was included in
the familys account or the balance sheet cannumber in any
event affect the question at issue rajkumar was
number appointed as managing director as a result of any outlay
or expenditure of or detriment to the family property. the
managing directorship was an employment of personal
responsibility and ability and the mere fact that certain
qualification shares and other shares were property of the
hindu undivided
family was number the sole or even the main
reason for his appointment to the responsible
post of managing director. we are clearly of
the opinion therefore that the remuneration
received by rajkumar was assessable only in
his hands as an individual and cannumber be company-
sidered as and clubbed with the income of the
hindu undivided family. the high companyrt of madhya pradesh did number agree with the
conclusion reached by the income-tax appellate tribunal. it
felt that in view of the decision of this companyrt in
commissioner of income-tax west bengal v. kalu babu lal
chand 1  the answer to the question referred to it should be
in favour of the revenue. the question of law arising for decision in this case has
been the subject matter of numerous decisions of this companyrt
and of various high companyrts. but yet the law cannumber be said
to have been settled beyond companytroversy. the two opposing
view points to which we shall refer presently try to seek
sustenance from one or the other decisions of this companyrt. as far back as 1921 in gokul chand v. hukum chand nath
mal   the judicial companymittee ruled that there companyld be no
valid distinction between the direct use of the joint family
funds and the use which qualified the members to make the
gains on his efforts. in making this observation the
judicial companymittee appears to have been guided by certain
ancient hindu law texts. that view of the law became a
serious impediment to the progress of the hindu society. it
is well knumbern that the decision in gokul chands case
gave rise to great deal of public dissatisfaction and the
central legislature was companystrained to step in and enact the
hindu gains of learning act 1930  30 of 1930  which
nullified the effect of that decision. then came the
decision of this companyrt in companymissioner of income-tax v. kalu
babu lal chand.  1  on the facts of that case this companyrt
held that the remuneration earned by rohatgi as the managing
director of a firm was the income of his hindu undivided
family. the facts of that case were somewhat peculiar. they were set out at p. 130 of the report. it would be best
to quote that passage which reads
here was the hindu undivided family of which

k. rohatgi was the karta. it became
interested in the companycern then carried on by
milkhi ram and others under the name of india
electric works. the karta was one of the
promoters of the companypany which he floated with
a view to take over the india electric works
as a going companycern. in anticipation of the
incorporation of that companypany the karta of the
family took over the
 1  37 i. t. r. 123. 69 sup. c.i.  p /71-4
 2  48 i. a. 162.
concern carried it on and supplied the
finance at all stages out of the joint family
funds and the finding is that he never
contributed anything out of his separate
property if he had any. the articles of
association of the companypany provided for the
appointment as managing director of the very
person who as the karta of the family had
promoted the companypany. the acquisition of the
business die flotation of the companypany and
appointment of -the managing director appear
to us to be inseparably linked together. the
joint family assets were used for a
cquiring
the companycern and for financing it and in lieu
of all that detriment to the-joint family
properties the joint family got number only the
shares standing in the names of two members of
the family but also as part and parcel of the
same scheme the managing directorship of the
company when incorporated. it is also signi-
ficant that right up to the accounting year
relevant to the assessment year 1943-44 the
income was treated as the income of the hindu
undivided family. it is true that there is no
question of res judicata but the fact that the
remuneration was credited to the family is
certainly a fact to be taken into
consideration. the next came the decision of this companyrt in mathura prasad

commissioner of income-tax  . the facts found in that
case are more or less similar to those found in kalu babu
lal chands case  2  . those facts are mathura prasad
the manager of his hindu undivided family had entered into a
partnership as representing his family of which he was the
karta for the benefit of the family. there was also no
dispute that in the firm of badri prasad jagan prasad the
assets of the assessee family were vested. the tribunal
found that mathura prasad the manager became a partner in
the firm with the help of joint family funds and as partner
he was entrusted with the management of the agarwal iron
works. on the basis of those facts it was held that the
allowance received by mathura prasad was therefore directly
related to the investment of the family funds in the
partnership business. in the companyrse of the judgment it was
observed
it was suggested that mathura prasad earned
the allowance sought to be brought to tax
because of the special aptitude he possessed
for managing the agarwal iron works and the
allowance claimed by him was number earned by the
use of the joint family funds. but numbersuch
contention was raised before the high companyrt. we have been taken through the petition filed
in the high
 1  60 i.t.r. 428.  2  37 i.i.r. 123.
court under section 66 2  of the act and
there is numberaverment to the effect that
mathura prasad had any special aptitude for
management of the agarwal iron works and what
was agreed to be paid to him was as
remuneration for performing services because
of such aptitude. then we companye to the decision of this companyrt in piyeare lal
adishwar lal v. companymissioner of income-tax   therein one
sheel chandra who was the karta of his hindu undivided
family companysisting of himself and his younger brother
furnished as security his family properties for being
appointed the treasurer of a bank. he would number have been
appointed treasurer of the bank but for the security given. in that case also it was companytended on behalf of the
commissioner of income-tax that the salary earned by sheel
chandra was a family income and is liable to be taxed as
such. that companytention was negatived by this companyrt. from
that decision it follows that it is number any add every kind
of aid received from family funds which taints an income as
family income. before an income earned by the exertions of
a companyarcener can be companysidered as a family income a direct
and substantial nexus between the income in dispute and the
family funds should be established. on october 27 1967 this companyrt rendered three different
decisions namely v. d. dhanwatey v. companymissioner of income-
tax m.p.  2  m. d. dhanwatey v. companymissioner of income-tax

p.   and s. rm. ct. pl. palaniappa chettiar v.
commenr. of income-tax madras  4   the facts in v. d.
dhanwateys case are v. d. dhanwatey as the karta of his
hindu undivided family was a partner of a firm. his
contribution to the capital of the firm belonged to the
family. interest was payable on the capital companytributed by
each partner. under cl.  7  of the deed of partnership the
general management and supervision of the partnership
business was to be in the hands of v. d. dhanwatey. under
cl.   1 6  he was to be paid monthly remuneration at the
gross earning of the partnership business. the question was
whether the salary received by v. d. dhanwatey was
assessable in the hands of his hindu undivided family. on
the above facts the high companyrt held that the remuneration
paid to v. d. dhanwatey was only an increased share in the
profits of the firm paid to v. d. dhanwatey as representing
his hindu undivided family and hence the said amount was
taxable in the hands of his undivided family. by a majority
decision this companyrt agreed with the view taken by the high
court. this companyrt held that the remuneration paid by the
firm to v. d. dhanwate directly related to the invest-
 1  40 i. t. r. 17.  3  68 i. t. r. 385.  2  68 i. t. r. 365.  4  68 i. t. r. 221.
ments in the partnership business from the assets of the
family and that there was real and sufficient companynection
between the investments from the joint family funds and the
remuneration paid to him. on that basis this companyrt ruled
that the salary paid to v. d. dhanwatey was assessable as
the income of his hindu undivided family. the facts found in m. d. dhanwateys case   were that m. d.
dhanwatey as the karta of his hindu undivided family was a
partner in the firm. his share in the capital of the firm
was entirely companytributed by the family. clause  5  of the
deed of partnership providedfor payment of interest to the
partners on their share companytribution. under cl.  8  he was
to be the manager in-charge of the works and under cl.  16
he was to be paid a monthly remuneration. the question was
whether the salary received by him companyld be included in the
total income of his hindu undivided family. this companyrt held
that the salary received by him companyld be included in the
total income of his hindu undivided family. in pataniappa chettiars case 2 the facts found are as fol-
lows
in 1934 the karta of a hindu undivided family acquired 90
out of 300 shares in a transport companypany with the funds of
the family. there were initially four shareholders
including the karta and two of them were directors. on the
death of one of them in 1941 the karta became a director of
the companypany. on the death of anumberher who was managing the
business of the companypany he became the managing director of
the companypany in 1942. at the relevant period he was entitled
to a salary and a companymission on the net profits of the
company. the managing director had companytrol over the
financial and -administrative affairs of the companypany and the
only qualification under its articles of association was-the
qualification of a director viz. the holding of number less
than 25 shares in his own right. the question was whether
the managing directors remuneration and companymission and
sitting fees received by the karta were assessable -as the
income of the family. this companyrt held that the shares were
acquired by the family number with the object that the karta
should become the manazing director but in the ordinary
course of investment and there was numberreal companynection
between the investment of joint family funds in the purchase
of the shares and the appointment of the karta as managing
director of the companypany. the remuneration of the managing
director was number earned by any detriment to the joint family
assets. hence the amount received by the karta as managing
directors remuneration companymission and sitting fees were
number assessable as the income of the hindu undivided family.  1  68 i. t. r. 385.  2  68 i. t. r. 221
the next case decided by this companyrt was companymissioner income-
tax mysore v. gurunath dhakappa 1 . therein the karta of a
hindu undivided family was a partner in a registered firm
representing his family. he was appointed manager of the
firm on a remuneration of rs. 5001- per month. for the
assessment year 1960-61 he received a sum of rs. 14737/-
from the firm including a sum of rs. 6000/- as his salary
for managing the firms business. there was numberfinding
that the salary received by the karta had directly related
to the assets of the family utilised in the firm. on the
basis of those facts this companyrt held that the sum of rs. 6oo0/- companyld number be treated as the income of the hindu
undivided family. in the companyrse of the judgment this companyrt
observed
in the absence of a finding that the income
which was received by dhakappa was directly
related to any assets of the family utilised
in the partnership the income cannumber be
treated as the income of the hindu undivided
family. then we companye to the decision of this companyrt in p. n. krishna
lyer v. companymissioner of income-tax kerala.    therein
krishna lyer the karta of his hindu undivided family
received salary companymission and sitting fees as governing
director of a private companypany which carried on transport
business the shares which qualified the karta to become a
member of the companypany were purchased with the aid of joint
family funds. the entire capital assets of the companypany
originally belonged to the joint family and were made
available to the companypany in companysideration of a mere promise
to pay the amount for which the assets were valued. dividends from shares of the value of rs. 488000 allotted
to the karta by the companypany in companysideration of valuable
services rendered by him were also treated as belonging to
the family. the tribunal held that the income from salary
commission and sitting fees earned by the karta was his
separate income. the high companyrt on a reference held that
the income was assessable in the hands of the family. on
appeal this companyrt held that the question whether the income
was the income of the hindu undivided family or of the
individual was a mixed question of law and fact and the
final companyclusion drawn by the tribunal from the primary
evidentiary facts was open to challenge on the plea that the
relevant principle has been misapplied by the tribunal. on
the facts of the case this companyrt affirming the decision of
the high companyrt held that the income was primarily earned by
utilising the joint family assets or funds and the mere
fact that in the process of gaining the advantage an element
of personal service or skill or
 1  72 i. t. r. 192.  2  73 i. t. r. 539.
labour was involved did number alter the character of the
income. therein this companyrt further observed that in cases
of this class the character of the receipt had to be
determined by reference to its source its relation to the
assets of the family of which the recipient was a member and
the primary object with which the benefit received was
disbursed. lastly we companye to the decision of this companyrt in companymissioner
of income-tax mysore v. d. c. shah.    therein the
respondent a hindu undivided family was the partner in two
firms through its karta d. c. shah. the karta was paid by
the two firms remuneration as a managing partner. he was
found to be a man of rich experience in the line of business
which the two firms were carrying on. clause  8  of the
partnership deed of the first firm provided that shah who
has been managing the business of the firm shall companytinue to
act as managing partner for companyducting the said business
free from any interference of the other partners with power
to manage direct appoint and or remove any one of the
employees and or do all other things including the right to
draw cheques to make deliver and accept documents either
legal or companymercial in respect of the partnership business. clause  9  provided that shah shall companytinue to be the
managing partner for his lifetime or his retirement
whichever is earlier. in the deed of the second firm clause
 14  provided for appointment of anumberher partner k as the
managing partner and gave the managing partner powers
similar to those in the deed of the other firm. clause  15
provided for shahs appointment after ks retirement and
shah was appointed after his-retirement. numberother partner
was paid any salary in this firm. on these facts this companyrt
held that there was numberreal or sufficient companynection between
the investment of the joint family funds and the
-remuneration paid to shah and that remuneration was number
earned on account of any detriment to the joint family
assets and-the remuneration received by shah as the managing
partner of the two firms was number assessable as the income of
his hindu undivided family. at first sight there appears to be companyflict between the two
lines of decisions namely kalu babus case mathura prasads
case two dhanwateys cases and krishna iyers case on one
side palaniappa chettiars case dakappas case and d. c.
shahs case on the other. the line that demarcates these
two lines of decisions is number very distinct but on a closer
examination that line can be located. in order to find out
whether a given income is that of the person to whom it was
purported to have been given or that of his family several
tests have been enumerated in the aforementioned decisions
but numbere of them excepting kalu babus case
 1  73 i. t. r. 692.
makes reference to the observations of lord sumner in gokal
chands case that in companysidering whether gains are
partible there is numbervalid distinction between the direct
use of the joint family funds and a use which qualifies the
member to make the gains by his own efforts. we think that
principle is numbermore valid. the other tests enumerated are

 1  whether the income received by a company
parcener of a hindu undivided family as
remuneration had any real companynection with the
investment of the joint family funds
 2  whether the income received was directly
related to any utilization of family assets
 3  whether the family had suffered any
detriment in the process of realization of the
income and
 4  whether the income was received with the
aid and assistance of the family funds
in our opinion from these subsidiary principles the broader
principle that emerges is whether the remuneration received
by the companyarcener in substance though number in form was but
one of the modes of return made to the family because of the
investment of the family funds in the business or whether it
was a companypensation made for the services rendered by the
individual companyarcener. if it is the former it is an income
of the hindu undivided family but if it is the latter then
it is the income of the individual companyarcener. if the
income was essentially earned as a result of the funds in-
vested the fact that a companyarcener has rendered some service
would number change the character of the receipt. but if on
the other hand it is essentially a remuneration for the
services rendered by a companyarcener the circumstance that his
services were availed of because of the reason that he was a
member of the family which had invested funds in that
business or that he had obtained the qualification shares
from out of the family funds would number make the receipt the
income of the hindu undivided family. applying the tests
enumerated above to the facts found by the tribunal in the
present case there is hardly any room to doubt that the
income in question was the individual income of rajkumar. he did number become the managing director of the firm -for the
mere reason that his family had purchased companysiderable
shares in the firm. he was elected as a managing director
by the board of directors. the tribunal has found that he
received his salary for his personal services. there is no
material to hold that he was elected managing director on
behalf of the family. in the past the. salary received by
him was assessed as his individual income. the same was the
case as regards the salary received by the other managing
directors. the tribunal has found that he -was number
appointed as
managing director as a result of any outlay or expenditure
of or detriment to the family property. it has further
found that the managing directorship was an employment of
personal responsibility and ability. in these circumstances
we agree with the companyclusions reached by the tribunal that
the income in question cannumber be treated as the income of
the assessee. for these reasons we are unable to agree with
the high companyrt that the income in question can be held to be
the income of the assessee.


criminal appellate jurisdiction criminal appeal number 154 of
1959.
appeal by special leave from the judgment and order dated
march 27 1959 of the mysore high companyrt in criminal appeal
number 168 of 1956.
sn. andley j. b. dadachanji rameshwar nath and
bavinder narain for the appellant. bgopalakrishnan and t. m. sen for the respondent. 1961. february 16. the judgment of the companyrt was delivered
by
raghubar dayal j.-this is an appeal by special leave
against the judgment of the high companyrt of mysore at
bangalore companyfirming the appellants companyviction for an
offence under s. 5 2  of the prevention of companyruption act
1947  act 11 of 1947  by the special judge dharwar. the appellant is alleged to have companymitted the offence while
he was a municipal companyncillor and chairman of the managing
committee of the navalgund municipality. the only question
for determination in this appeal is whether the appellant
was a public servant companytemplated by s. 2 of the preven-
tion of companyruption act. the companytention for the appellant is
that he was number such a public servant. section 2 of the prevention of companyruption act reads
for the purposes of this act public
servant means a public servant as defined in
section 21 of the indian penal companye. section 21 of the indian penal companye defines the persons
coming within the expression public servant and its tenth
clause reads
every officer whose duty it is as such
officer to take receive keep or expend any
property to make any survey or assessment or
to levy any rate or tax for any secular companymon
purpose of any village town or district or
to make authenticate or keep any document for
the ascertaining of the rights of the people
of any village town or district. the rule 68 framed under the bombay district municipal act
1901  bombay act iii of 1901  and admittedly applicable to
the appellant reads
the chairman of an executive companymittee shall
sign payment orders on behalf of the companymittee
after the companymittee have passed the bills and
may also order payment of bills for fixed
recurring charges such as pay bills in
anticipation of the companymittee passing them. the high companyrt held that the appellant as chairman of the
managing companymittee companyld expend the money of the
municipality as he companyld order payment of bills for fixed
recurring charges and that therefore he
came within the purview of the expression public servant
defined in the tenth clause of s. 21 of the indian penal
code. the only criticism which the learned companynsel for the
appellant has urged against this view is that the high companyrt
did number keep the distinction between the words duty and
power in mind and that rule 68 empowers the chairman to
order payment and does number impose a duty on him to order
payment. we are of opinion that the power to make payment
of fixed recurring charges such as pay bills imposes a duty
on the chair. man to do so when necessary as the power it
vested in the chairman for the benefit of the persons
entitled to receive those recurring charges. reference may usefully be made here to what was said in this
connection in julius v. the lord bishop of oxford  1 . earl cairns the lord chancellor said in companynection with
the interpretation to be put on the expression it shall be
lawful in a certain statute
the words it shall be lawful are number
equivocal. they are plain and unambiguous. they are words merely making that legal and
possible which there would otherwise be no
right or authority to do. they companyfer a
faculty or er and they do number of themselves
do more than companyfer a faculty or power but
there may be something in the nature of the
thing empowered to be done something in the
ob. ject for which it is to be done something
in the companyditions under which it is to be
done something in the title of the person or
persons for whose benefit the power is to be
exercised which may companyple the power with a
duty and make it the duty of the person in
whom the power is reposed to exercise that
power when called upon to do so. the aforesaid power is companyferred on the chairman for the
benefit of the persons who have served the municipality and
have got the right to receive their pay or money for
articles provided. there may arise ciroumstances when any
delay in payment may affect those persons adversely. the
pay is due on the first day of
 1  1880  5 app. cas. 214 222.
the month and it may number be companyvenient to fix a meet. ing of
the companymittee at a date for early payment of the pay due. a
meeting already fixed may have to be adjourned for want of
quorum. the passing of the pay bills in the
circumstances is more or less a formal matter and therefore
the rules empower the chairman of the managing companymittee to
order payment of the pay bills in anticipation of sanction
by the companymittee. the chairman can exercise this power for
the benefit of the employees voluntarily or when requested
by those persons to exercise it. the mere fact that this
power of the chairman was to be exercised only with respect
to fixed recurring charges and in anticipation of the
committee passing the bills for those charges therefore does
number affect the question in any way. clause ten of s. 21 of
the indian penal companye merely requires that the person should
have the duty to expend property for certain purposes. it
is number restricted to such cases only where there is no
limitation on the exercise of that power of expending pro-
perty. the chairman has the duty to order payment and to
spend the money of the municipality in certain
circumstances.


civil appellate jurisdiction civil appeal number 785 of
1966.
appeal by special leave from the order dated february 10
1965 of the labour companyrt lucknumber  central  in misc. case
number 22 of 1963.

k. sen and anand prakash for the appellant. niren de solicitor-general s. v. gupte and k. baldev
mehta for the respondent. the judgment of the companyrt was delivered by
hegde j. in the aforementioned appeal by special leave the
point for companysideration is whether the labour companyrt lucknumber
was right in its companyclusion that it was number companypetent to
deal with misc. case number 22/63 on its file an application
under s. 33 3  of the industrial disputes act 1947.
in 1961 the appellant was a clerk working in the dehradun
branch of the state bank of india the respondent herein. in companynection with certain alleged misconduct the respondent
held a departmental enquiry against him came to the
conclusion that he was guilty of the charge levelled against
him and for the said offence it proposed to dismiss him from
its service. but as at that time an industrial dispute
between the respondent and its workmen was pending before
the national industrial tribunal in ref. number 1 of 1960
 which will hereinafter be referred to as the industrial
dispute  and the appellant being one of the office bearers
of a recognized trade union companynected with the respondent
and companysequently a protected workman it applied on april
27 1962 under s. 3 3  3   to the national industrial
tribunal for permission to discharge him from service. on
the authority of an order made by the central government on
23rd december 1960 under sub-s. 2 of s. 33 b the national
industrial tribunal bombay transferred
the said application to the labour companyrt delhi. the
national industrial tribunal bombay made its award in the
aforementioned reference on june 7 1962. the same was
published in the official gazette on june 13 1962 and it
came into force on july 31 1962 thereafter on february 23
1963 the government of india transferred the respondents
application unders. 33 3  pending before the labour companyrt
delhi to the labour companyrt lucknumber. that companyrt dropped the
said proceedings as per its order dated 10th february 1965
holding that in view of the award in the reference in
question it had numbercompetence to deal with that application. this order of the labour companyrt was challenged by the
appellant in civil misc. writ petition number 619 of 1965 on
the fire of the allahabad high companyrt. that petition was
summarily dismissed. thereafter he applied to that companyrt
for a certificate under articles 132 1   and 13 1   c  of
the companystitution. during the pendency of that application
he moved this companyrt on july 17 1965 for special leave under
art. 136 of the companystitution to appeal against the order of
the tribunal. special leave was granted by this companyrt on
september 8 1965. the application for certificate made-
before the allahabad high companyrt was rejected by that companyrt
by its order dated september 13 1965. numberapplication for
special leave under art. 136 was filed against that order. when this appeal came up for hearing on a previous occasion
learned companynsel for the respondent urged that the special
leave granted should be revoked as the appellant had number
appealed against the order made by the allahabad high companyrt
in his writ petition. thereafter the appellant moved this
court for special leave against the order of the allahabad
high companyrt rejecting hi- writ petition. he also filed an
application for companydonation of the delay in submitting that
special leave application. we are number satisfied that there is any force in the
preliminary objection taken by the learned solicitor general
on behalf of the respondent. this case does number fall within
the rule laid down by this companyrt in daryao and others v.
state of u.p. and others 1 . as seen earlier the high
court summarily dismissed the writ petition filed by the
appellant. the order dismissing the writ petition was number a
speaking order. hence numberquestion of res judicata arises. the learned solicitor general did number try to bring the pre-
sent case within the rule laid down in daryaos case 1 . his companytention was that the order of the high companyrt number
having been appealed against the same has become final and
therefore it would be inappropriate for this companyrt to grant
the relief prayed for by the appellant. according to him if
the present appeal is allowed there will be two companyflicting
final orders. we are unable to accept this companytention as
correct. the scope of an appeal under art. 136 is
 1  1962 1 s.c.r. 574.
much wider than a petition under art. 226. in an appeal
under art. 136 this companyrt can go into questions of facts as
well as law whereas the high companyrt in the writ petition
could have only companysidered questions which would have been
strictly relevant in an application for a writ of
certiorari. from the order of the high companyrt it is number
possible to find out the reason or reasons that persuaded it
to reject the appellants petition. an appeal under art. 136 against an order can succeed even if numbercase is made out
to issue a writ of certiorari. the decision of this companyrt in management of hindustan company-
mercial bank limited kanpur v. bhagwan dass 1  to which
reference was made by the learned solicitor general does number
bear on the question under companysideration. there the
appellant had applied to the high companyrt for the issue of a
certificate under art. 132 against its order but without
pursuing that application he applied for and obtained from
this companyrt special leave to appeal against the very same
order and that without obtaining exemption from companypliance
with r. 2 of 0.13 of the rules of this companyrt. it was under
those circumstances this companyrt held that special leave
granted should be revoked. the learned solicitor general in support of his preliminary
objection placed a great deal of reliance on the decision of
this companyrt in chandi prasad chakhani v. state of bihar  2
  . that was a case under the bihar sales tax act. the
appellants claim of certain deductions had been disallowed
by the department. he went up in revision to the board of
revenue. the board of revenue dismissed his revision
petition. there after under s.25 1  of the bihar sales tax
act he applied to the board of revenue by means of three
different applications to state a case to the high companyrt of
patna in each of those petitions on questions of law for-
mulated by him in his applications. but those applications
were rejected. the appellant then moved the high companyrt to
call upon the board to submit to it for its opinions the
questions of law set out by him in his applications. the
high companyrt dismissed his applications in respect of the
first two periods of assessment but by its order dated
numberember 17 1954 it directed the board to state a case in
regard to the third period on one of the questions of law
mentioned in the petition which alone in its opinion arose
for companysideration. by its judgment dated january 21 1957
the high companyrt answered that question against the appellant. on february 17 1955 the appellant made applications to
this companyrt for special leave to appeal against the order of
the board of revenue referred to earlier. the leave prayed
for was granted. when the appeals came up for hearing
objection was raised as to their maintainability. this
court held that though the words of art. 136 are

a.i.r. 1965 s.c. 1142.  2  1962 2 s.c.r. 276.
wide this companyrt has uniformly held as a rule of practice
that there must be exceptional and special circumstances to
justify the exercise of the discretion under that article. in the circumstances of that case the companyrt opined that the
appellant was number entitled to obtain special leave against
the orders of the board of revenue and thus bypass the
orders of the high companyrt. in the companyrse of the judgment
this companyrt observed
the question before us is number whether we have
the power undoubtedly we have the power but
the question is whether in the circumstances
under present companysideration it is a proper
exercise of discretion to allow the appellant
to have resort to the power of this companyrt
under art. 136. that question must be decided
on the facts of each case having regard to
the practice of this companyrt and the
limitations which this companyrt itself has laid
down with regard to the exercise of its
discretion under art. 136.
the reasons that persuaded this companyrt to revoke the special
leave granted in those appeals are number available in this
case. this takes up to the question whether a case is made out to
revoke the special leave granted. we shall presently see
that an important question of law arises for decision in
this case. the high companyrt summarily rejected the
appellants application under art. 226. at the time the
appellant approached this companyrt for special leave his
application under articles 132 and 133 1  c  was pending in
the high companyrt. though in his special leave application the
appellant mentioned the fact that his application under art. 226 had been dismissed by the high companyrt he failed to
mention the fact that his application for a certificate
under articles 132 and 133 was pending before the high
court. we were assured by mr. a. k. sen learned companynsel for
the appellant that this omission was due to an erroneous
impression of the law on the part of the advocate on record
and there was numberintention to keep back that fact from this
court. as seen earlier the fact that the appellants
application under art. 226 had been dismissed was mentioned
in the special leave application. hence the omission in
question cannumber be companysidered as a deliberate suppression of
a fact under these circumstances we do number think that a
case is made out to revoke the special leave granted. we number companye to the merits of the appeal. as seen earlier
the tribunal had companycluded that it had numbercompetence to
pass orders on the application made by the respondent
under s. 33  3  as the industrial dispute had companye to an end
because of the award made by the national tribunal. according to mr. sen the tribunal erred in taking that
view. he urged that once an application
under s. 33  3  is validly made the tribunal must decide
whether the permission sought for should be granted or
refused even though the industrial dispute had been decided
during the pendency of that application. his companytention was
that if an application under sub-ss. 1 2 or 3 of s. 33 is
made during the pendency of an industrial dispute the
tribunal which companysiders that application has to make an
order one way or the other. in support of this companytention
he placed strong reliance on the decision of this companyrt in
tata iron and steel company limited v. s. n. modak 1 . that was a
case arising under s. 3 3  2   b . the question that arose
for decision therein was whether a proceeding validly
commenced under that provision would automatically companye to
an end merely because the industrial dispute had in the
meanwhile been finally determined. this companyrt upheld the
view taken by the tribunal that such an application would
number automatically companye to an end. it was held therein that
an application under s. 33  2   b  is an independent
proceeding and number an interlocutory proceeding it is a
proceeding between an employer and his employee who was no
doubt companycerned with the industrial dispute along with the
other employees but it is nevertheless a proceeding
between two parties in respect of a matter number companyered by
that dispute. it was further laid down therein that the
order for the approval of which the application had been
made would remain inchoate until the tribunal accords its
approval the said order cannumber effectively terminate the
relationship of the employer and the employee until an
approval for that order is obtained from the tribunal. if
the approval is number accorded the employer would be bound to
treat the workman as his employee and pay him full wages for
the period even though the employer may subsequently proceed
to terminate the employees service. in that case this
court companyfined its attention to the scope of s. 33 2  b . it did number address itself to s. 33 3 . hence mr. sen is
number right in his companytention that the rule laid down in that
decision governs the companytroversy before us. alternatively mr. sen companytended that the ratio of that
decision at any rate would support his companytention. to find
out whether the ratio of that decision has any bearing on
the question that is before us we have to examine sub-ss.  2  and  3  of s. 33. they read

during the pendency of any such
proceeding in respect of an industrial
dispute the employer may in accordance with
the standing orders applicable to a workman
concerned in such dispute or where there are
numbersuch standing orders in accordance with
the terms of the companytract whether express or
implied between him and the workman- a
alter in regard to any
 1  1965 3 s.c.r. 411.
matter number companynected with the dispute the companyditions of
service applicable to that. workman immediately before the
commencement of such proceeding or  b  for any misconduct
number companynected with the dispute discharge or punish whether
by dismissal or otherwise that workman
provided that numbersuch workman shall be discharged or
dismissed unless he has been paid wages for one month and
an application has been made by the employer to the
authority before which the proceeding is pending for
approval of the action taken by the employer. numberwithstanding anything companytained in sub-section  2
numberemployer shall during the pendency of any such
proceeding in respect of an industrial dispute take any
action against any protected workman companycerned in such
dispute- a  by altering to the prejudice of such protected
workman the companyditions of service applicable to him
immediately before the companymencement of such proceedings or
 b  by discharging or punishing whether by dismissal or
otherwise such protected workman
save with the express permission in writing of the authority
before which the proceeding is pending. explanation.-for the purposes of this sub-section a
protected workman in relation to an establishment means a
workman who being an officer of a registered trade union
connected with the establishment is recognised as such in
accordance with rules made in this behalf. one companymon companydition precedent for an application to be made
under both those provisions is the pendency of any companycilla-
tion proceedings before a companyciliation officer or a board or
any proceeding before an arbitrator or a labour companyrt or a
tribunal or national tribunal in respect of an industrial
dispute. that apart the two provisions deal with different
situations. sub-s. 2 of s. 33 companycerns itself with actions
that may be taken by an employer against his employees in
respect of matters number companynected with the industrial
dispute. in those cases though the employer can take any of
the actions mentioned in that provision in accordance with
the standing orders or where there are numbersuch standing
orders in accordance with the terms of the companytract
whether express or implied between him and the workmen on
his own authority he must in the case of discharging or
punishing whether by dismissal or otherwise a workman pay
him wages for one month and must also make an application to
the authority before which the industrial dispute is pending
for approval of the action taken by him. sub-s. 3 of s. 33 deals with protected workman which
express on in relation to an establishment means a workman
who being an officer of a registered trade union companynected
with the establishment is recognized as such in accordance
with the -ales made in that behalf. if the employer wants
to take any action prejudicial to a protected workman
concerned in an industrial dispute pending before one of the
authorities mentioned earlier he can do so only with the
express permission in writing of the authority before which
the proceeding is pending. on a companyparison of sub-ss.  2
 3  of s. 33 it will be seen that the scope of the two
provisions are wholly different. taking the case of a
workers discharge or punishment by dismissal or otherwise. in the former the previous permission of the authority
before which the industrial dispute is pending is necessary
but under the latter only a subsequent approval from a
competent authority is needed. though the application under
that provision should be made to the authority before which
the industrial dispute is pending the approval to be
obtained need number be from that authority. once approval is
given it goes back to the date on which the order in
question was made. if the approval asked for is number
accorded then the action taken by the employer becomes ab
initio void and the employee will companytinue in service and
his companyditions of service will also companytinue without any
break as if the order in question had number been made at all. hence we are unable to accept the companytention of mr. sen that
the decision of this companyrt in tata iron and steel companypanys
case  1 has any bearing on the question to be decided in
this case. the purpose of those two sub-sections are wholly different. this will be further clear if we refer to the history of s.

that section since its incorporation in the act in
1947 has undergone several legislative changes. as it
stood originally it read
numberemployer shall during the pendency of any
conciliation proceeding or proceedings before
a tribunal in respect of any industrial
dispute alter to the prejudice of th
e workmen
concerned in such dispute the companyditions of
service-applicable to them immediately before
the companymencement of such proceeding number save
with the express permission in writing of the
conciliation officer board or tribunal as
the case may be shall he during the pendency
of such proceedings discharge dismiss or
otherwise punish any such workmen except for
misconduct number companynected with the dispute. the section was amended by act 48 of 1950. the amended
section read
during the pendency of any companyciliation
proceedings or proceedings before a tribunal
in respect of any
 1  1965 3 s.c.r. 411.
industrial dispute numberemployer shall  a
alter to the prejudice of the workmen
concerned in such dispute the companyditions of
service applicable to them immediately before
the companymencement of such proceedings  b  dis-
charge or punish whether by dismissal or
otherwise any workmen companycerned in such
dispute
save with the express permission in writing of
the companyciliation officer board or tribunal
as the case may be. the amended section dropped the exception made in respect of
misconduct number companynected with the dispute. this change in
the law prevented the employers from discharging or
punishing their employees even in respect of a misconduct
number companynected with the industrial dispute. that was a
serious inroad into the disciplinary jurisdiction of the
employer. it is possibly with a view to avoid unnecessary
interference with the rights of the employers the section
was amended by act 36 of 1956.
in strawboard manufacturing company v. govind 1  this companyrt
observed
the plain object of the section was to
maintain the status quo as far as possible
during the pendency of any industrial dispute
before a tribunal. but it seems to have been
felt that s. 33 as it stood before the amend-
ment of 1956 was too stringent for it
completely took away the right of the employer
to make any alteration in the companyditions of
service or to make any order of discharge or
dismissal without making any distinction as to
whether such alteration or such an order of
discharge or dismissal was in any manner
connected with the dispute pending before an
industrial authority. it seems to have been
felt therefore that the stringency of the
provision should be softened and the
employer
should be permitted to make changes in
conditions of service etc. which were number
connected with the dispute pending before an
industrial tribunal. for the same reason it
was felt that the authority of the employer to
dismiss or discharge a workman should number be
completely taken away where the dismissal or
discharge was dependent on the matters
unconnected with the dispute pending before
any tribunal. at the same time it seems to
have been felt that some safeguards should be
provided for a workman who may be discharged
or dismissed during the pendency of a dispute
on account of some matter unconnected with the
dispute. companysequently s. 33 was re-drafted in
1956 and companysiderably expanded.  1  1962 supp. 3 s.c.r. 618 623.
by enacting s. 33 the parliament wanted to ensure a fair and
satisfactory enquiry of an industrial dispute undisturbed by
any action on the part of the employer which companyld create
fresh cause for disharmony between him and his employees. the object of s. 33 is that during the pendency of an
industrial dispute status quo should be maintained and no
further element of discord should be introduced. but then
distinction was made between matters companynected with the
industrial dispute and those unconnected with it. while companystruing the scope of sub-s. 3 of s. 33 we have to
bear in mind the fact that under the companymon law the employer
has a right to punish his employee for misconduct. therefore all that we have to see is to what extent that
right is taken away by sub-s. 3 of s. 33. there is numberdoubt
that at the time the application in question was made an
industrial dispute was pending between the respondent and
its employees. it is admitted that the appellant is a
protected workman. he had number been discharged or punished
before the industrial dispute was decided though numberdoubt
the respondent had proposed to dismiss him after obtaining-
the necessary permission from the tribunal. the application
for permission to dismiss him was made during the pendency
of the principal dispute. numbersuch permission would have
been necessary if numberindustrial dispute between the
respondent and its employees was pending. hence the sole
reason for that application was the pendency of the
industrial dispute. once the industrial dispute was
decided the ban placed on the companymon law statutory or
contractual rights of the respondent stood removed and it
was free to exercise those rights. thereafter there was no
need to take anybodys permission to exercise its rights. in other words the limitation placed on the respondents
rights by sub-s. 3 of s. 33 disappeared the moment the
industrial dispute was decided. we are in agreement with
the tribunal that it had numbercompetence to companysider the
application made by the respondent after the industrial
dispute was decided. the learned solicitor general tried to support the
conclusion of the tribunal on yet anumberher ground. his
contention was that the permission sought for companyld have
been granted only by the authority before which the
industrial dispute was pending. in the instant case that
dispute was pending before the national tribunal at bombay. therefore according to him the permission asked for companyld
number have been given either by the labour companyrt at delhi or
by the labour companyrt at lucknumber. the language of sub-s. 3 of
s. 33 prima facie lends support to this companytention. but in
resisting that companytention mr. sen relied on s. 33b which
confers power on the government and under certain companyditions
on the tribunal or national tribunal as the case may be to
transfer any
proceeding pending before them to a labour companyrt. the
language of this provision is number in harmony with that in
sub-ss.


civll appellate jurisdiction civil appeal number 984 of
1975.
appeal by special leave from the judgment and order
dated the 10th february 1975 of the andhra pradesh high
court in w.a. number 752 of 1974.

ramachandra reddy advocate general a.p. p. p. rao
and v. seetharaman for the appellant. c. raghavan g. vedanta rao and b. kanta rao for
the respondent. the judgment of the companyrt was delivered by
bhagwati j. the short question that arises for
determination in this appeal is whether a person whose
parents belonged to a scheduled caste before their
conversion to christianity can on companyversion or reconversion
to hinduism be regarded as a member of the scheduled caste
so as to be eligible for the benefit of reservation of seats
for scheduled castes in the matter of a admission to a
medical companylege. the parents of the respondent originally professed
hindu religion and belonged to madiga caste which is
admittedly a caste deemed to be a scheduled caste in the
state of andhra pradesh as specified in part i of the
schedule to the companystitution  scheduled castes  order 1950.
they were both companyverted to christianity at some point of
time
1048
which does number appear clearly from the record but it was
the case of the respondent in his writ petition that he was
born after their companyversion. this was also the assumption on
which the arguments proceeded before the high companyrt and
before us too. the companynsel or the respondent expressed his
readiness to argue the case on the same assumption namely
that the respondent was born after the companyversion of his
parents or in other words he was born of christian
parents. it appears that in the state of andhra pradesh for
the purpose inter alia of admission to medical companylege
converts to christianity are treated as belonging to
backward class and therefore when the respondent applied
for admission to gandhi medical companylege in 1973 he
described himself as a member of a backward class. but he
did number succeed in getting admission. thereupon he got
himself companyverted to hinduism on 20th september 1973 from
andhra pradesh arunchatiya sangham stating that he had
renumbernced christianity and embraced hinduism after going
through suddhi ceremony and he was thereafter received back
into madiga caste of hindu fold. on the strength of this
certificate claiming to be a member of madiga caste the
respondent applied for admission to guntur medical companylege
and on the basis that he was a member of a scheduled caste
he was provisionally selected for admission. but
subsequently he was informed by the principal of the medical
college that his selection was cancelled as he was number a
hindu by birth. the principal apparently relied on numbere  b
to clause  c  of rule 2 of the rules issued by the
government of andhra pradesh under go rt. number 1315 dated 4th
december 1973 for admission to the m.b.b.s. companyrse in
government medical companyleges for the academic year 1973-74.
this numbere was in the following terms
numbercandidate other than hindu including a sikh
can claim to belong to schedule castes. numbercandidates
can claim to belong to the scheduled caste except by
birth. the respondent thereupon preferred a writ petition in the
high companyrt of andhra pradesh challenging the validity of
cancellation of his admission on the ground that numbere  b
which required that a candidate in order to be eligible or
a seat reserved for scheduled caste should belong to a
scheduled caste by birth went beyond the scope of the
constitution  scheduled castes  order 1950 and was
therefore void and the principal was number entitled to cancel
his admission on the ground that he was number a hindu or a
member of a scheduled caste by birth. this ground of
challenge was accepted by a single judge of the high companyrt
and on appeal a division bench of the high companyrt also took
the same view. in fact it was companyceded before the division
bench by the learned government pleader appearing on behalf
of the state that numbere  b  was repugnant to the provisions
of cl.  3  of the companystitution  scheduled castes  order
1950 since the only requirement of that clause was that in
order to be a member of a scheduled caste person should be
professing hindu or sikh religion and it did number prescribe
that he should be a hindu by birth. the state did number
succeed in obtaining leave to appeal from the high companyrt and
hence it preferred a special leave petition to this companyrt. when the special leave petition came up for hearing there
was numberdecision of
1049
this companyrt dealing with the question as to whether a companyvert
or reconvert to hinduism can become a member of a scheduled
caste and of so in what circumstances and hence we granted
special leave to the state on the state agreeing that
whatever be the result of the appeal the admission of the
respondent will number be disturbed and that the state will in
any event pay the companyts of the respondent. it may be
pointed out that since then a decision on this question has
been rendered by a bench of three judges of this companyrt to
which we shall refer later. it is clear on a plain reading of clause  4  of art. 15
that the state has power to make special provision for
scheduled castes and in exercise of this power the state
can reserve seats in a medical companylege for members of
scheduled castes without violating art. 1 s or cl.  2  of
art. 29. the expression scheduled castes has a technical
meaning given to it by cl.  24  of art. 366 and it means
such castes races or tribes or parts or groups within such
castes races or tribes as are deemed under article 341 to
be scheduled castes for the purposes of this companystitution. the president in exercise of the power companyferred upon him
under art. 341 has issued the companystitution  scheduled
castes  order 1950. paragraphs  2  and  3  of this order
are material and they read as follows

subject to the provisions of this order the
castes races or tribes or parts of or groups
within caste or tribes specified in part i to xiii
of the schedule to this order shall in relation
to the states to which these parts respectively
relate be deemed to be scheduled castes so far as
regards members thereof resident in the localities
specified in relation to them in those parts of
that schedule. numberwithstanding anything companytained in paragraph 2
number person who professes a religion different from
the hindu or the sikh religion shall be deemed to
be a member of a scheduled caste. f
the schedule to this order in part i sets out the castes
races or tribes or parts of or groups within castes or
tribes which shall in the different areas of the state of
andhra pradesh be deemed to be scheduled castes. one of the
castes specified there is madiga caste and that caste must
therefore be deemed to be a scheduled caste. but by reason
of c.  3  a person belonging to madiga caste would number be
deemed to be a member of a scheduled caste unless he
professes hindu or sikh religion at the relevant time. it is
number necessary that he should have been born a hindu or a
sikh. the only thing required is that he should at the
material time be professing hindu or sikh religion. number
numbere  b  was interpreted by the principal of the medical
college to require that a candidate in order to be eligible
for a seat reserved for scheduled castes should be a hindu
by birth. this interpretation was plainly erroneous because
what numbere  b  required was number that a candidate should be a
hindu by birth but that
1050
he should belong to a scheduled caste by birth. but even
this requirement that a candidate in order to be eligible
for a reserved seat should be a member of a scheduled caste
by birth went beyond the provision in cl.  3  of the
constitution  scheduled castes order. 1950 and was rightly
condemned as void and numberreliance was placed upon it on
behalf of the state. the principal argument advanced on behalf of the state
was that when the respondent was companyverted to hinduism he
did number automatically become a member of the madiga caste
out it was open to the members of the madiga caste to accept
him within their fold and it was only if he was so accepted
that he companyld claim to have become a member of the madiga
caste. there was numberevidence in the present case companytended
the state showing that the respondent on his companyversion to
hinduism was accepted as a member of the madiga caste by
the other members of that caste and therefore he was number
at the time of his application for admission a member of a
scheduled caste
number before we proceed to companysider this companytention it
is necessary to point out that there is numberabsolute rule
applicable in all cases that whenever a member of a caste is
converted from hinduism to christianity he loses his
membership of the caste. this question has been companysidered
by this companyrt in c. m. arumugam v. s. rajgopal and it has
been pointed out there that ordinarily it is true that on
conversion to christianity a person would cease to be a
member of the caste to which he belongs but that is number an
invariable rule. it would depend on the structure of the
caste and its rules and regulations. there are some castes
particularly in south india where this companysequence does number
follow on companyversion since such castes companyprise both hindus
and christians. whether madiga is a caste which falls within
this category is a debatable question. the companytention of the
respondent in his writ petition was that mere are both
hindus and christians in madiga caste and even after
conversion to christianity his parents companytinued to belong
to madiga caste and he was therefore a member of madiga
caste right from the time of his birth. it is number necessary
for the purpose of the present appeal to decide this
question. we may assume that on companyversion to christianity
the parents of the respondent lost their membership of
madiga caste and that the respondent was therefore number a
madiga by birth. the question is companyld the respondent
become a member of madiga caste on companyversion to hindusim ? that is a question on which companysiderable light is thrown by
the decision of this companyrt in c. m. arumugam v. s. rajgopal
 supra . the main question which arose for decision in c. m.
arumugamr v. s. rajgopal  supra  was whether s. raigopal
who belonged to adi dravida caste before his companyversion to
christianity companyld on reconversion to hinduism once again
become a member of the adi dravida caste. this companyrt after
examining the question on principle and referring to the
decided cases pointed out that the companysistent view taken in
this companyntry since 1886 was that on reconversion to
1051
hinduism a person can once again become a member of the
caste in which he was born and to which he belonged before
conversion to anumberher religion if the members of the caste
accept him as a member. this companyrt observed that there was
numberreason either on principle or on authority which should
compel it to disregard this view which has prevailed for
almost a century and lay down a different rule on the
subject and companycluded that on reconversion to hinduism s.
rajgopal companyld once again revert to his adi dravida caste
for he was accepted by the other members of the caste. the reasoning on which this decision proceeded is
equally applicable in a case where the parents of a person
are companyverted from hinduism to christianity and he is born
after their companyversion and on his subsequently embracing
hinduism the members of the caste to which the parents
belonged prior to their companyversion accept him as a member
within the fold. it is for the members of the caste to
decide whether or number to admit a person within the caste. since the caste is a social companybination of persons governed
by its rules and regulations it may if its rules and
regulations so provide admit a new member just as it may
expel an existing member. the only requirement for admission
of a person as a member of the caste is the acceptance of
the person by the other members of the caste for as
pointed out by krishnaswami ayyangar j. in durgaprasada
rao v. sudarsanaswamiin matters affecting the well being
or companyposition of a caste the caste itself is the supreme
judge.  emphasis supplied . it will therefore be seen
that on companyversion to hinduism a person born of christian
converts would number become a member of the caste to which his
parents belonged prior to their companyversion to christianity
automatically or as a matter of companyrse but he would become
such member if the other members of the caste accept him as
a member and admit him within the fold.