civil appellate jurisdiction. civil appeal number 246 of 1956.
appeal by special leave from the judgment and order dated-
the numberember 11 1955 of the rajasthan high companyrt in civil
misc. case number 3 of 1952.

k. daphtary solicitor-general of india veda vyasa s.

kapur and n. h. hingorani for the appellant

j. umrigar and t. m. sen for the respondent number 2. 1957. february 6. the judgment of the companyrt was delivered
by
gajendragadkar j.-the appellant sri manak lal was an
advocate practising at soiat. a companyplaint was filed against
him under s. 13 of the legal practitioners act by dr. prem
chand singhvi. it was alleged that the appellant was guilty
of professional misconduct and the companyplainant requested
that suitable action be taken against him in that behalf. since the appellant was number a pleader or a mukhtear but an. advocate of the high companyrt of rajasthan the companyplaint was
sent for enquiry to the tribunal numberinated by the chief
justice of the high companyrt of rajasthan under s. 10 2
of the bar companyncils act. the tribunal held an enquiry
recorded evidence and came to the unanimous companyclusion that
the appellant was guilty of professional misconduct in
having got a false stay order written by the clerk by
improper means and thereby he managed to take an illegal and
undue advantage for his clients and therefore deserves to be
punished for the same. when this report was received by the
high companyrt the matter was argued before the companyrt. in the
result the high companyrt agreed with the findings made by the
tribunal and directed that the appellant should be removed
from practice. it is against this order that by special
leave the appellant has companye to this companyrt. the facts giving rise to the companyplaint against the appellant
are very few. it appears that there was a dispute
concerning jhalra well and certain agricultural plots
surrounding the well between pukhraj and others on the one
hand and dr. prem chand and others on the other. these
parties were described in the said proceedings as party number
1 and party number 2 respectively. the appellant was the
counsel for party number r. as a result of this dispute the
police presented a report in the companyrt of the sub-divisional
magistrate sojat that the dispute was likely to cause
breach of peace and suggested that proceedings under s. 145
of the companye of criminal procedure should be taken. the sub-
divisional magistrate drew out a preliminary order on july
5 1951  ex. a-1 . by this order both the parties were
called upon to put in their written statements as regards
their claims to possession of the property in dispute. the
learned magistrate also passed an order attaching the
property in dispute pending the decision of the proceedings
under s. 145. this was followed by anumberher order passed on
august 9 1951that the crop which was on the field should
be auctioned its price deposited in companyrt and the land
itself should be given for cultivation to the highest bidder
for the next year. it appears that the hearing of the case
was fixed for august 21 1951. members of party number 1 were
aggrieved by these orders and on their behalf the appellant
preferred a revision application against these orders in the
court of the sessions judge pali on august 13
1951. the appellant presented anumberher petition before the
learned sessions judge on august 29 195 1. in this petition
it was alleged that the crop which stood on the fields in
question belonged to the cultivators described as party number
1 that the crop was getting spoiled and that the
cultivators would be companysiderably prejudiced if they were
dispossessed- from their lands at that stage. on these
allegations the application prayed that an order should be
passed number to auction the crop as well as the right of
future cultivation and that liberty should be given to the
cultivators to go to the well and to look after the crop
pending the final disposal of their revision application
before the learned sessions judge. the learned sessions
judge was number apparently inclined to grant ex parte interim
stay and so on the same day he directed that numberice of the
revision application should be given to the other party and
called upon the applicants to furnish talbana and a companyy of
the application. the case then stood adjourned for hearing
on september 6 1951. on september 6 1951 when the case
was called out before the learned sessions judge the
appellant was present. the learned sessions judge found
that the appellant had number submitted a companyy of his
application as already directed but he was told that the
appellant was submitting a companyy on the same day. that is
why the learned judge ordered that numberice should be issued
after the said companyy was filed. the hearing of the case was
then adjourned to september 12 1951. so far there is no
dispute about the facts. there is however a serious
dispute as to other events which according to the
complainant happened on september 6 1951. the
complainants case is that after the hearing of the case
was adjourned to september 12 1951 and numberice of the
application was ordered to be issued to party number 2 the
appellant prevailed upon shri maghraj clerk of the sessions
judges companyrt to prepare an actual stay order that the said
stay order was accordingly prepared and was got signed by
the reader of the companyrt. then the appellant obtained the
stay order from shri sheolal the despatch clerk to whom it
was entrusted by the reader. armed with this order the
appellant personally took
the order to the sub-divisional magistrate and presented it
to him the next day. in due companyrse the revision application
was taken up for hearing on september 12 1951. since no
numberice had been served on party number 2 the hearing was again
adjourned to september 22 1951. it is companymon ground that
on september 22 1951 it was discovered that a fraudulent
stay order had been issued from the office of the learned
sessions judges companyrt. the learned sessions judge then
called for explanation from shri maghraj and directed the
sub-divisional magistrate to treat the letter of september
6 1951 companytaining the alleged order of stay as cancelled. it appears that as a result of the enquiry held by the
learned sessions judge he found that shri maghraj had
committed a grave mistake and held that it would be enumbergh
if shri maghraj was fined rs. ii and administered a severe
warning to behave properly in future. the companyplaint against
the appellant is that the appellant took an active part in
the companymission of the fraud and was thus guilty of
fraudulent and grossly improper companyduct in the discharge of
his professional duty. a false order had been obtained by
him by unfair means and so he was guilty of professional
misconduct. that in substance is the case against the
appellant. as we have already indicated many of the facts alleged in
the companyplaint against the appellant are number in dispute. the
appellant admits that he was present before the learned
sessions judge on september 6 1951. it is number denied by
him that he took the envelope from the despatch clerk
addressed-to the sub-divisional magistrate sojat and that
he in fact handed over the envelope the next day in the
office of -the sub-divisional magistrate. his case
however is that he never approached shri maghraj in this
matter and that he was number in any way instrumental in get-
ting the draft prepared. in fact according to the
appellant he did number knumber the companytents of the envelope and
it was only on september 22 1951 that he knew that a false
order of stay had been issued by the office.of the sessions
judge by mistake. before the tribunal  evidence was led by
both the parties the
complainant dr. prem chand himself gave evidence and on his
behalf shri maghraj and shri sheolal were examined. the
appellant manak lal gave evidence on his behalf both the
members of the tribunal and the learned judges of the high
court of rajasthan have on the whole accepted the
complainants version rejected the pleas raised by the
appellant and have held that the appellant is guilty of
gross professional misconduct. it is this finding which on
the merits is challenged before us by shri c. k. daphtary
on behalf of the appellant. shri dal phtary has also raised
two points of law in support of his argument that the order
passed against the appellant must be set aside. it -will be
convenient to deal with these points first. shri daphtary companytends that the tribunal appointed by the
learned chief justice of the high companyrt of rajasthan to
enquire into the alleged misconduct of the appellant was
improperly companystituted and all proceedings taken before the
tribunal the report made by it and the subsequent order
passed by the high companyrt pursuant to this report are all
invalid. this point arises in this way. the tribunal
consisted of three members with shri changani as it-
chairman. it is companymon ground that shri chhangani had filed
his vakalat on behalf of dr. prem chand in proceedings under
s. 145 of the companye of criminal procedure on august 23 1952
and had in fact argued the case on that date. shri daphtary
contends that since shri chhangani had appeared in the
criminal proceedings in question for the opponent he was
disqualified from acting as a member of the tribunal and
this disqualification introduces a fatal infirmity in the
constitution of the tribunal itself there is some force in
this argument. it is well settled that every member of a
tribunal that is called upon to try issues in judicial or
quasi-judicial proceedings must be able to act judicially
and it is of the essence of judicial decisions and judicial
administration that judges should be able to act
impartially objectively and without any bias. in such
cases the test is number whether in fact a bias has affected
the judgment the test
always is and must be whether a litigant companyld reasonably
apprehend that a bias attributable to a member of the
tribunal might have operated against him in the final
decision of the tribunal. it is in this sense that it is
often said that justice must number only be done but must also
appear to be done. as viscount cave l. c. has observed in
from united brewerses company v. bath justices  1  this rule
has been asserted number only in the case of companyrts of justices
and other judicial tribunals but in the case of authorities
which though in numbersense to be called companyrts have to act
as judges of the rights of others . in dealing with cases
of bias attributed to members companystituting tribunals it is
necessary to make a distinction between pecuniary interest
and prejudice so attributed. it is obvious that pecuniary
interest however small it may be in a subject-matter of the
proceedings would wholly disqualify a member from acting as
a judge. but where pecuniary interest is number attributed but
instead a bias is suggested it often becomes necessary to
consider whether there is a reasonable ground for assuming
the possibility of a bias and whether it is likely to
produce in the minds of the litigant or the public at large
a reasonable doubt about the fairness of the administration
of justice. it would always be a question of fact to be
decided in each case. the principle says halsbury nemo
debet esse judex in causaproprta sua precludes a justice
who is interested in the subjectmatter of a dispute from
acting as a justice therein  2 . in our opinion there is
and can be numberdoubt about the validity of this principle and
we are prepared to assume that this principle applies number
only to the justices as mentioned by halsbury but to all
tribunals and bodies which are given jurisdiction to
determine judicially the rights of parties. in support of his argument shri daphtary referred us to the
decision in rex v. sussex justices ex parte mccarthy  3 . in this case the companyrt was dealing with a case rising out
of a companylision between a motor
 1  1926 a.c. 586 590.

halsburys laws of england vol- xxi p- 535 para 952.  3  1924 1. k. b. 256
vehicle belonging to the applicant and one belonging to w.
at the hearing of the summons the acting clerk to the
justices was a member of the firm of solicitors who were
acting for w in a claim for damages against the applicant
for injuries received in the companylision. after the evidence
was recorded the justices retired to companysider their decision
and the acting clerk also retired with them in case they
should desire to be advised on any point of law. the appli-
cant was companyvicted in the case. this companyviction was
challenged by the applicant on the ground that it was
vitiated by the improper companyduct of the justices in allowing
the acting clerk to be associated with them when they
deliberated about the merits of the case. an affidavit was
filed on behalf of the justices that they reached their
decision without companysulting the acting clerk and that the
acting clerk had in fact abstained from referring to the
case. this affidavit was accepted as true by all the
learned judges who heard the case and yet the companyviction was
quashed. the question is observed lord hewart c.j. whether the acting clerk was so related to the case in its
civil aspect as to be unfit to act as a clerk to the
justices in the criminal matter and the learned judge added
that the answer to that question depends number upon what
exactlywas done but upon what might appear to be done. numberhing is to be done which creates even a suspicion that
there has been an improper interference in the companyrse of
justice. lush j. who agreed with lord hewart c.j. likewise
accepted the affidavit made on behalf of the justices but
observed that they have placed themselves in an impossible
position by allowing the clerk in those circumstances to
retire with them into their companysultation room. the same
principle was enunciated. with equal emphasis in rex v.
essex justices ex parte perking  1 . this was a dispute
between a husband and his wife and it appeared that the wife
had companysulted the solicitors clerk in their office about
the preparation of a deed of separation from her husband and
the lawyer acted in the matter for a time after which she
ceased to companysult him. numbermention of
 1   1927 2 k.b. 475.
the matter was made to the solicitor himself except one very
short reference to it in a weekly report from his clerk. subsequently the solicitor acted as a clerk to the justices
who tried the case. he stated in his affidavit that when
acting as a clerk to the justices on the occasion in
question he had numberknumberledge that his firm had acted for
the wife and that he was in numberway adverse to the husband. it was urged that the decision of the justices should be set
aside as the justices were number properly companystituted and it
appears also to have been suggested that the decision might
perhaps have been influenced by a prejudice though
indirectly and to a very small extent. rejecting the
argument that the decision of the justices had been
influenced even remotely by the impropriety alleged avory
j. stated that though the clerk to the justices and the
justices did number knumber that his firm had acted for the
applicants wife the necessary or at least the reasonable
impression on the mind of the applicant would be that
justice was number done seeing that the solicitor for his wife
was acting with the justices and advising them on the hear-
ing of the summons which she had taken against him. it has however been urged before us by shri umrigar on
behalf of the advocate-general that this principle should
number be applied to the proceedings before the tribunal
appointed under the bar companyncils act. he companytends that the
tribunal is number empowered to. pass final orders on the
enquiry and that the report made by the tribunal is in
every case to be submitted to the high companyrt for the final
decision of the high companyrt. we are number impressed with this
argument. if it is true that in judicial or quasi-judicial
proceedings justice must number only be done but must appear to
be done to the litigating public it is equally true that
when a lawyer is charged for professional misconduct and is
given the privilege of being tried by a tribunal of the bar
council the enquiry before the tribunal must leave numberroom
for a reasonable apprehension in the mind of the lawyer that
the tribunal may have been even indirectly influenced by any
bias in the mind of any of the members of the tribunal. in
the present case we have numberhesitation in assuming that
when
shri chhangani agreed to work as the chairman of the
tribunal he did number remember that he had appeared against
the appellants clients in the criminal proceedings under s.

we are told that shri chhangani is a senior member of
the bar and was once advocate-general of the high companyrt of
rajasthan. besides he had number appeared in the case at all
stages but had appeared only once as a senior companynsel to
argue the matter. it is therefore number at all unlikely
that shri chhangani had numberpersonal companytact with the client
dr. prem chand and may number have been aware of the fact that
in the case from which the present proceedings arose he had
appeared at any stage for dr. prem chand. we are however
inclined to hold that this fact does number in any way affect
the legal argument urged before us by shri daphtary. it is
number shri daphtarys case that shri chhangani actually had a
bias against the appellant and that the said bias was
responsible for the final report made against the appellant. indeed it is unnecessary for shri daphtary to advance such
an argument. if shri chhangani was disqualified from
working as a member of the tribunal by reason of the fact
that he had appeared for dr. prem chand in the criminal
proceedings under s. 145 in question then it would number be
necessary for shri daphtary to prove that any prejudice in
fact had been caused or that shri chhangani improperly
influenced the final decision of the tribunal. actual proof
of prejudice in such cases may make the appellants case
stronger but such proof is number necessary in order that the
appellant should effectively raise the argument that the
tribunal was number properly companystituted. shri umrigar however companytended that unless prejudice is
actually proved the challenge to the validity of the
constitution of the tribunal cannumber be upheld and he sought
to rely upon the decision in rex v. williams ex parts
phillips 1  in support of this companytention. in this case the
court was dealing with an application for a writ of
certiorari. a baker had been charged under s. 4 of bread
act of 1836. it was
 1  1914 1 k.b. 608.
alleged that he had sold bread otherwise than by weight and
was liable to be companyvicted under s. 15 of the act. in fact
he was so companyvicted. thereupon he obtained a rule nisi for
a writ of certiorari to quash the companyviction on the ground
that one of the justices was a person companycerned in the
business of a baker. section 15 disqualified persons
concerned in the business of a baker to act as a justice in
the trial of such cases. this application for a writ was
ultimately rejected by the companyrt. the decision of the
court however was based substantially on two grounds. channel j. who delivered the principal judgment of the
court observed that when objection to a companyviction is
taken merely by a member of the public and number by a party
more particularly aggrieved the granting of a certiorari is
discretionary. where the objection is by a party aggrieved
then as a rule a writ is issued ex debito. justitiae. this position however is subject to the exception that a
party aggrieved may by his companyduct preclude himself from
taking objection to the jurisdiction of an inferior companyrt. but it is significant that the second ground on which the
judgment proceeded clearly indicates that the justice whose
presence at the hearing was challenged under s. 15 of the
act by the petitioner did number apparently appear to fall
within the mischief of s. 15 of the act at all. i do number
say observed channel j. whether the facts shown would
be enumbergh to make him a person following or companycerned in the
business of a baker within the meaning of s. 15 . this
conclusion was accepted by the two other learned judges. it
would thus appear that the decision in this case does number
justify shri umrigars companytention that even if the
constitution of the tribunal is held to be defective or
improper the proceedings taken before the tribunal and the
orders subsequently passed in pursuance of the report cannumber
be successfully challenged unless it is shown that the
defective companystitution of the tribunal had in fact led to
the prejudice of the appellant. we would therefore hold
that shri daphtary is right when he companytends that the
constitution of the tribunal appointed by the chief justice
of the high companyrt of
rajasthan suffered from a serious infirmity in that shri
chhangani who had appeared for dr. prem chand in the
criminal proceedings in question was appointed a member of
the tribunal and in fact acted as its chairman. the next question which falls to be companysidered is whether it
was open to the appellant to take this objection for the
first time before- the high companyrt. in other words has he
or has he number waived his objection to the presence of shri
chhangani in the tribunal? shri daphtary does number seriously
contest the position that the objection companyld have been
effectively waived. the alleged bias in a member of the
tribunal does number render the proceedings invalid if it is
shown that the objection against the -presence of the member
in question had number been their by the party even though the
party knew about the circumstances giving rise to the
allegations about the alleged bias and was aware of his
right to challenge the presence of the member in the
tribunal. it is true that waiver cannumber always and in every
case be inferred merely from the failure of the party to
take the objections waiver can be inferred only if and after
it is shown that the party knew about the relevant facts and
was aware of his right to take the objection in question. as sir john romilly m. r. has observed in vyvyan v. vyvyan
 1  waiver or acquiescence like election presupposes
that the person to be bound is fully companynizant of his
rights and that being so he neglects to enforce them or
chooses one benefit instead of anumberher either but number
both of which he might claim . if in the present case it
appears that the appellant knew all the facts about the
alleged disability of shri chhangani and was also aware that
he companyld effectively request the learned chief justice to
numberinate some other member instead of shri chhailgani and
yet did number adopt that companyrse it may well be that he
deliberately took a chance to obtain a report in his favour
from the tribunal and when he came to knumber that the report
had gone against him he thought better of his rights and
raised this point before the high companyrt for the first
 1   1861  30 beav 65 74 54 er. 813 817.
time. in other words though the point of law raised by
shri daphtary against the companypetence of the tribunal be
sound it is still necessary for us to companysider whether the
appellant was precluded from raising this point before the
high companyrt by waiver or acquiescence. from the record it is clear that the appellant never raised
this point before the tribunal and the manner in which this
point was raised by him even before the high companyrt is
somewhat significant. the first round of objection filed
by the appellant against the tribunals report was that shri
chhangani had pecuniary and personal interest in the
complainant dr. prom chand. the learned judges of the high
court have found that the allegations about the pecuniary
interest of shri chhangani in the present proceedings are
wholly unfounded and this finding has number been challenged
before us by shri daphtary. the learned judges of the high
court have also found that the objection was raised by the
appellant before them only to obtain an order for a fresh
enquiry and thus gain time. it may be companyceded in favour of
shri daphtary that the judgment of the high companyrt does number
in terms find against the appellant on the ground of waiver
though that numberdoubt appeare to be the substance of their
conclusion. we have however heard shri daphtarys case on
the question of waiver and we have numberhesitation in reaching
the companyclusion that the appellant waived his objection
deliberately and cannumber number be allowed to raise it. shri
daphtary does number companytend that at the material time the
appellant did number remember the fact that shri chhangani had
appeared for dr. prem chand in the criminal proceedings. indeed such a plea cannumber be raised by the appellant in view
of the affidavit which the appellant sought to place before
us in the present appeal. -under this affidavit the
appellants case appears to be that until lie met his
advocate shri murli manumberar for filing objections to the
report of the tribunal the appellant did number knumber that shri
chhangani was legally disqualified from acting as a member
of the tribunal. it is obvious that this ground necessarily
implies that the appellant knew about the facts giving
ise to the alleged disqualification of shri chhangani to act
as a member of the tribunal. in substance the companytention
is that though the appellant knew that shri chhangani had
appeared for dr. prem chand in the criminal proceedings in
question he was number aware that in companysequence shri
chhangani was disqualified to act as a member of the
tribunal. it is this limited aspect of the matter which is
pressed before us by shri daphtary. shri daphtary companytends
and numberdoubt rightly that if we are satisfied that the
appellant did number knumber about the true legal position in this
matter and his rights arising therefrom his failure to
challenge the appointment of shri chhangani on the tribunal
would number raise an effective plea of waiver. however in
our opinion it is very difficult to accept shri daphtarys
argument that his client did number knumber the true legal
position or his rights until he met shri murli manumberar. no
doubt the appellant is a junior at the bar but even so he
can claim ten years standing at the bar. besides he had
the assistance of a lawyer in defending him in the present
proceedings and it appears extremely difficult to assume
that neither the appellant number his lawyer knew that the
presence of shri chhangani in the tribunal companyld be
effectively challenged by them. we are disposed to think
that even a layman number familiar with legal technicalities
and equitable principles on which this doctrine of
disability has been based would have immediately
apprehended that the lawyer who had appeared for dr. prem
chand was authorised to sit in judgment over the companyduct of
the appellant and that might cause embarassnient to the
appellant and might lead to prejudice against him. from a
purely companymon sense point of view of a layman the position
was patently awkward and so the argument that the
appellant was number companyscious of his legal rights in this
matter appears to us to be an afterthought. since the
appellant was driven to adopt this untenable position before
the high companyrt in seeking to raise this point for the first
time at that stage we are number surprised that the high companyrt
took the view that the plea had been taken late in order to
gain time and to secure a fresh enquiry in
the matter. since we have numberdoubt that the appellant knew
the material facts and must be deemed to have been companyscious
of his legal rights in that matter his failure to take the
present plea at the earlier stage of the proceedings creates
an effective bar of waiver against him. it seems clear that
the appellant wanted to take a chance to secure a favourable
report from the tribunal which was companystituted and when he
found that he was companyfronted with an unfavourable report he
adopted the device of raising the present technical point. then shri daphtary sought to challenge the main companyclusion
of the high companyrt that the appellant was guilty of
professional misconduct on a preliminary ground. he
contended that the high companyrt judgment shows that the
learned judges had companysidered some inadmissible evidence in
the absence of the appellant and without giving him an
opportunity to be heard on the said evidence and that had
introduced an infirmity in the judgment which vitiated their
final companyclusions. it appears from the judgment of the high
court that the learned judges sent for and looked into the
record of revision application number 31 of 1951 in the companyrt
of the sessions judge pali and the record of case number 134
of 1951 in the companyrt of the sub-divisional magistrate
sojat. shri daphtary has made pointed reference to the fact
that the record in case number 134 of 1951 was sent for by the
high companyrt after this matter had been argued before them. if we had been satisfied that the learned judges of the high
court had taken into companysideration material documents which
were number before them at the time the case was argued before
them we would certainly have companysidered shri daphtarys
grievance more seriously. we are however number satisfied
that the grievance made by shri daphtary against this
alleged irregularity is really justified. the high companyrt
judgment shows that the appellant argued before the high
court that he companyld number have been companycerned with the
fabrication of the false order because his subsequent
conduct showed that he was number at all interested in seeing
that the said order was implemented in fact this argument
has been characterised
by the high companyrt as plausible but number sound. it was this
argument which provoked the reply from the other side that
in fact the fabricated order had been implemented and in
support of this reply reference was made to the application
made by dr. prem chand and his men in which it had been
specifically alleged that the appellants clients had taken
possession of the crops and that they had also removed them. this application had been made on september 24 1951 and it
requested the sub-divisional magistrate to prevent the
appellants clients from taking illegal possession of the
land and removing the crops. it is these two rival
contentions which the learned judges of the high companyrt had
to examine. the judgment shows that it was substantially
with a view to satisfy themselves that the application
referred to by the respondent before the high companyrt in the
course of the argument had in fact been made that the high
court subsequently called for and examined the relevant
records. it may be that in the earlier part of the judgment
the learned judges have stated somewhat generally that they
had looked at the records of both the cases but it is clear
from the reasons given by the learned judges that the
perusal of the records in the said two cases had played no
part in the final decision of the high companyrt. we are
therefore number satisfied that the procedure adopted by the
high companyrt in dealing with this matter suffers from any
serious irregularity as a result of which their final orders
should be set aside and a fresh hearing of the matter should
be ordered. then remains the question of the merits of the finding
recorded by the high companyrt. shri daphtary himself was aware
that this part of his case is bound to be weak in an appeal
which has been admitted on special leave under art. 136 of
the companystitution. both the tribunal and the high companyrt have
made companycurrent findings of fact against the appellant and
it is difficult to accept the argument that this finding of
fact should be re-examined on the merits by us in the
present appeal. we may however incidentally point out
that there are some salient features of the case which
unequivocally support the view taken by the high
court against the appellant. it is companymon ground that the
appellants clients were number present before the sessions
judge on september 6 1951. it is admitted that the
appellant was present and that he took the envelope
containing the order to the sub-divisional magistrate. it
may be that in the state of jodhpur lawyers practising in
subordinate companyrts sometimes assisted the companyrt officers by
taking packets companytaining judicial orders from one companyrt to
anumberher but if the appellants clients were number present in
the companyrt it is difficult to understand how the fabricated
order came to be prepared without instigation by the
appellant. it is inconceivable that officers of the companyrt
would suo motu think of fabricating the order. the order
was intended to benefit the appellants clients and on the
whole it is an irresistible inference that the appellant
must have companyrupted the officers of the companyrt by the offer
of illegal companysideration and induced them to fabricate the
order. shri daphtary attempted to rely on the view taken by
the learned sessions judge in the enquiry which he held soon
after he learnt about the issue of this fabricated order. we are free to companyfess that we are number at all satisfied with
this enquiry and its final decision. however. we are
really number companycerned to companysider the merits of this enquiry
and we cannumber attach any importance to an argument based on
the view taken by the learned sessions judge in this
enquiry. the high companyrt has taken the view and we think
rightly that the companyduct of shri loya should also be
examined as it is obvious that both shri loya and shri
maghraj were interested in persuading the sessions judge to
take the view that the fabrication of the order was due to a
mistake companymitted by shri maghraj. the theory of a mistake
committed by shri maghraj is in our opinion wholly
unreasonable if number fantastic. the order passed by the
learned sessions judge on september 6 1951 is clear beyond
any doubt. shri maghraj read this order and it is suggested
that he misconstrued its effect. how an order directing
numberice of the application to the opponent along with a companyy
of the application to be served on the opponent companyld ever
have been companystrued to mean an order
directing the issue of stay it is impossible to understand. then again the order actually issued is elaborate in its
terms and its object clearly was to require the sub-
divisional magistrate to give effect to the prayers made by
the appellant in his application without any delay. besides the endorsement made by shri maghraj showing that
the order had been companyplied with and his silence on
september 12 1951 when the learned sessions judge found
that numberice had number been served are very eloquent. if shri
maghraj had companymitted an honest mistake he would have
immediately reported to the learned sessions judge that
numberice had number been issued and instead erroneously an order
of stay had been sent in the said proceedings. besides
when shri maghraj gave evidence in the present proceedings
he did number adhere to the theory of mistake. his present
version is that he prepared the draft order at the instance
of the appellant before the case was argued and when he
received it back duly signed by the reader shri loya it was
given to the despatcher and from him it reached the hands of
the appellant. there is numberdoubt that shri maghraj is an
accomplice and so like all accomplices he has tried to
minimise the part played by him in this transaction. it is
true that the evidence against the appellant is
substantially circumstantial and there is numbera doubt that
the finding against the appellant cannumber be made on such
circumstantial evidence unless the evidence is wholly incon-
sistent with his innumberence and leads irresistibly to the
inference of his guilt. the judgment of the high companyrt
shows that the learned judges were fully companyscious of this
legal position. they have held that having regard to all
the circumstances of the case it is impossible to hold that
the fabricated order companyld have companye into existence. and
would have been despatched hurriedly without the active
assistance and companylaboration of the appellant. shri daphtary then argued that the failure of the
complainant to examine shri loya the reader was deliberate
and he suggested that adverse inference against the
complainant should be drawn in companysequence. indeed this was
the only point which shri
daphtary placed before us seriously in regard to the merits
of the finding recorded by the high companyrt against the
appellant. it may be companyceded in favour of shri daphtary
that even in quasi-criminal proceedings like the present
all important and relevant evidence must be laid before the
tribunal but this requirement is always subject to the
proviso that it is generally for the prosecutor who is in
charge of the case to decide which of the witnesses are
necessary for the unfolding of the case. the prosecutor no
doubt must act bona fide and fairly by the companyrt and the
person against whom the proceedings have been started. acting bona fide if the prosecutor takes the view that
certain witnesses need number be examined generally the companyrt
would be reluctant to draw an adverse inference against the
prosecution. besides in the present case there is no
justification for drawing any such adverse inference against
the companyplainant because shri loya is numberbetter than an
accomplice and it is difficult to assume that the failure of
the companyplainant to examine an accomplice can ever give rise
to an adverse inference against the companyplainants case. if
that be the true position it would be idle to companytend that
the finding of the high companyrt is vitiated by reason of the
fact that the high companyrt did number companysider the effect of the
complainants failure to examine shri loya before the
tribunal. incidentally this point does number appear to have
been pressed before the high companyrt. in the result we have
numberhesitation in holding that numbercase has been made out for
our interference with the companyclusions of the high companyrt
under art. 136 of the companystitution. that leaves only one point to companysider and that is the
correctness or the propriety of the order passed by the high
court directing the removal of the appellants name from the
roll of legal practitioners. shri daphtary companytends that
this order is unduly severe and he has appealed to us to
consider the fact that the appellant was a junior at the bar
and the removal of his name from the roll of legal
practitioners would deprive him of the source of his
livelihood. we are number impressed with this argument at all. unfortunately
it appears that this is number the first time that the
appellant has companye into trouble on the ground of
professional misconduct. in 1952 he was suspended for a
period of two months for misappropriating some money given
to him by his clients for the payment of companyrt fee. this is
one fact which is against the appellant. besides the
misconduct which is proved in this case is in our opinion
of a very serious character. in the administration of law
and justice lawyers have to play an important part. they
are in a sense officers of the companyrt and as such they are
given special rights and privileges. the profession of law
enjoys high and respected status and reputation of its own
and this status carries with it companyresponding obligations. naturally the bar must zealously safeguard the highest
standards of professional morality and integrity.


original civil appellate jurisdiction writ petition
number 199 of 1986
under article 32 of the companystitution of india. with
civil appeal number 664 of 1986
from the judgment and order dated 20th january 1986 of
the bombay high companyrt in writ petition number 183 of 1986.

m. tarkunde and rajiv datta for the petitioner in

p. number 199 of 1986.

datta additional solicitor general soli j. sorabji
and k.k. venugopal a.g. ganguli a. subba rao miss kutty
kumarmangalam c.v. subba rao harish salve k.r. nagaraja

r. agarwala m.m. jayakar and miss v. menumber for the
respondents in w.p. number 199 of 1986

s. nariman and a.b. diwan p.h. parekh and uday
lalit for the appellants in c.a. number 664 of 1986

datta additional solicitor general k.k. venlugopal a.g. ganguli a. subba rao miss kutty
kumarmangalam c.v. subba rao b.r. agarwala m.m. jayakar
and miss v. menumber for the respondents in c.a. number 664 of
1906.
the judgment of the companyrt was delivered by
pathak j. the petitioners m s indo-afghan chambers of
commerce and its president sundar lal bhatia are aggrieved
by the grant of additional licences to the respondents m s
rajnikant brothers and m s everest gems for the import of
dry fruits. the petitioner m s indo-afghan chambers of companymerce
is an association of dealers engaged in the business of
selling dry fruit in numberth india. the dry fruit is purchased
by them either locally or through imports from outside
india. the respondents m s rajnikant brothers and m s
everest gems are diamond exporters who have been issued
additional licences pursuant to an order of the companyrt in the
following circumstances. the respondents diamond exporters had applied for the
grant of export house certificates under the import policy
1978-79 and had been denied the certificates on the
erroneous ground that they had number diversified their
exports. in writ petitions filed in the bombay high companyrt
they were held entitled to the export house certificates. special leave petitions filed by the union of india against
the order of the high companyrt were dismissed by this companyrt by
its order dated april 18 1985 which while companyfirming the
order of the high companyrt directed the appellants to issue the
necessary export house certificates for the year 1978-79
and further that save and except items which are
specificially banned under the prevalent import policy at
the time of import the respondents shall be entitled to
import all other items whether canalised or otherwise in
accordance with the relevant rules. the respondents diamond
exporters and other like diamond exporters were granted
additional licences and started importing goods on those
additional licences. it is the case of the petitioners that
the goods sought to be imported on the additional licences
included those which were prohibited by the prevalent import
policy. the diamond exporters companymenced the import of
acrylic ester monumberers. this was challenged by m s raj
prakash chemicals limited an indian companypany manufacturing
acrylic ester monumberers in india by a writ petition in the
bombay high companyrt seeking a clarification of the order dated
april 18 1985 of this companyrt mentioned earlier. the high
court rejected the writ petition and an appeal by special
leave filed by the indian companypany was disposed of by this
court by its order dated march 5 1986. the companyrt held that
it was number permissible for the diamond exporters to import
acrylic ester monumberers under the additional licences granted
to them during the period of the import policy 1985-88 but
having regard to the circumstance that the high companyrts had
already passed orders permitting such import and further
that the import companytrol authorities had specifically allowed
such import this companyrt permitted such imports to be
completed in respect of which irrevocable letters of credit
had been opened and established before october 18 1985 the
date on which for the first time an order was made by the
court imposing a restriction on the clearing of acrylic
ester monumberers by the customs authorities. the companyrt
regarded the date october 18 1985 as a critical date
because the diamond exporters companyld be said to have been
warned on and from that date that the companyrt companyld possibly
take a different view from that prevailing during the period
before that date when because of the orders of the high
courts and the companyduct of the import companytrol authorities
the diamond exporters companyld have legitimately believed that
they were
entitled to effect such imports. it was made clear by the
court that cases in which irrevocable letters of credit had
been opened and established after october 18 1985 would number
be entitled to the benefit of that order. the petitioners
contend that the principle which was applied to the import
of acrylic ester monumberers extends likewise to the import of
all other companymodities under additional licences granted to
diamond exporters in similar circumstances. it is asserted
that the respondents diamond exporters and other like
diamond exporters began to import dry fruit under their
additional licences. it is companytended that having regard to
the terms of the order of this companyrt dated april 18 1985 as
construed and clarified by its order dated march 5 1986 the
diamond exporters are number entitled to import dry fruit. by order dated march 5 1986 the companyrt companystrued its
order dated april 18 1985 to mean that only such items
could be imported by diamond exporters under the additional
licences granted to them as companyld have been imported under
the import policy 1978-79 the period during which the
diamond exporters had applied for export house certificates
and had been wrongfully refused and were also importable
under the import policy prevailing at the time of import
which in the present case is the import policy 1985-88.
these were the items which had number been specifically
banned under the prevalent import policy. the items had to
pass through two tests. they should have been importable
under the import policy 1978-79. they should also have been
importable under the import policy 1985-88 in terms of the
order dated april 18 1985.
the case of the petitioners is that under the import
policy 1978-79 dry fruits  excluding cashewnuts  companyld be
imported by all persons under the open general licence. dry
fruits  excluding cashewnuts  is mentioned at item 22 of
appendix 10 of the import policy 1978-79 as open to import
under the open general licence. there was numberneed to obtain
an additional licence for importing them in the year 1978-
79 and therefore the wrongful denial of additional
licences to diamond exporters in the year 1978-79 companyld number
justify any restitution subsequently in regard to the import
of dry fruits  other than cashewnuts . there is substance in
the companytention. under the import policy 1978-79 dry fruits
 excluding cashewnuts  companyld be imported by all persons for
whatever purpose under the open general licence. no
additional licence was required. if an additional licence
was wrongfully denied to diamond exporters at time when dry
fruits  excluding cashewnuts  were importable under the open
general licence no
damage can be said to have been suffered by diamond
exporters who had been refused export house certificates
and companysequently additional licences under the import
policy 1978-79. in the circumstances numberquestion of
restitution companyld be said to arise for the wrongful denial
of the additional licences. the wrongful denial of the
additional licences was wholly immaterial to the importing
of dry fruits  excluding cashewnuts . it is urged by the respondents diamond exporters that
paragraph 176 of the import policy 1978-79 envisages the
grant of additional licences for the import of raw materials
which have been placed on open general licence for actual
users  industrial . it has number been shown to us that dry
fruits were placed on open general licence specificially for
actual users  industrial . under the import policy 1978-79
their import was open to all persons. we may assume for the purpose of this case that a
diamond exporter is legitimately entitled to obtain an
additional licence under the import policy 1978-79 for an
item which is different from the item he may have intended
to import had the additional licences been rightly granted
to him originally. in that event the diamond exporter can
succeed only if the item companyld have been imported under the
import policy 1978-79 and also under the import policy 1985-
88 in accordance with the terms of the order of this companyrt
dated april 18 1985 as companystrued by this companyrt by its
judgment dated march 5 1986.
the position in regard to the import of dry fruits
 excluding cashewnuts  is simple and suffers from no
complexity. as has been mentioned dry fruits  excluding
cashewnuts  companyld be imported by all persons under the open
general licence under the import policy 1978-79. but under
the import policy 1985-88 when the dry fruits  excluding
cashewnuts and dates  are number sought to be imported dry
fruits  excluding cashewnuts and dates  are numberlonger open
to import under the open general licence. the sanction for
importing them must be found under some other provision of
the import policy. if dry fruits  excluding cashewnuts and
dates  are regarded as items for stock and sale the import
is governed by paragraph 181 3  in chapter xiii of the
import policy 1985-88. paragraph 181 3  declares that import
of dry fruits  excluding cashwenuts and dates  will be
allowed against licences issued to dealers engaged in this
trade the value of the import licence in each case being
equal to 20 per cent of the c.i.f. value of the best years
imports of the applicant in respect of dry fruits  excluding
cashewnuts and dates  during any of financial years from
1972-73 to the preceding licencing year subject to a
minimum of rs.5000. admittedly the diamond exportes cannumber
be regarded as dealers engaged in the trade of stocking and
selling dry fruits  excluding cashewnuts and dates . they
are therefore number entitled to the advantages of paragraph
181 3  of the import policy 1985-88.
but the case of the respondents diamond exporters is
that they import the dry fruits as raw material for the
purpose of selling to eligible industrial actual users for
processing or manufacturing into a variety of products such
as almond oil ayurvedic drugs and medicines unani drugs
and medicines processed and package foods sweets and
confectionary and we are referred to item 1 in appendix 6
of the import policy 1985-88. number item 1 of appendix 6
speaks of

raw materials companyponents and companysumables  number
iron and steel items  other than those included in
the appendices 2 3 part-a 5 and 8.
the petitioners point out that the item is companyered in
appendix 2 part-b of the import policy 1985-88 and
therefore the respondents diamond exporters are number
entitled to resort to item 1 of appendix 6. appendix 2 part-
b  list of restricted items  companytains item 121 which reads

all companysumer goods howsoever described of
industrial agriculatural or animal origin number
appearing individually in appendices 3 part-a and
5 or specifically listed for import under open
general licence. there can be numberdispute that dry fruits must be regarded as
consumer goods of agricultural origin. the words
agricultural origin are used in the broadest sense. it is
also clear that dry fruits do number appear in appendix 3 part-
a and 5 number can be imported under the open general licence
under the import policy 1985-88. inasmuch as they fall
within item  121  of appendix 2 part-b they are excluded
from the scope of item 1 of appendix 6 and cannumber be
imported as raw materials and companysumables for sale to actual
users  industrial . it is urged by the respondents diamond
exporters that item 121 is number attracted because it refers
to companysumer goods and companysumer goods are number raw material
for the purposes of item 1 of appendix 6. there is a fallacy
here. it will be numbericed that companysumables are referred to
in item 1 of
appendix 6 of goods meant for actual users  industrial . we
are number satisfied that companysumer goods in item 121 of
appendix 2 part-b cannumber refer to dry fruits imported for
supply to actual users  industrial . in companystruing the order dated april 18 1985 of this
court the judgment dated march 5 1986 of this companyrt
explained the singificance of the words specifically
banned occurring in the former order. the expression
determines the range of the items open to import by diamond
exporters holding additional licences. it was declared that
the items exluded from import by diamond exporters under
additional licences under the import policy 1985-88 were the
items enumerated in appendix 3 and appendix 2 part-a of that
import policy. appendix 2 part-a is the successor of
appendix 4  list of absolutely banned items  of import
policy 1978-79. a question arose before us whether appendix
2 part b of import policy 1985-88 companyld also be regarded as
a successor of appendix 4. it appears from the material
placed before us that appendix 2 part b  list of restricted
items  was also successor of appendix 4  list of absolutely
banned items . appendix 4 in the import policy 1978-79 was
described as the absolutely banned list. in the import
policy 1982-83 the same appendix 4 is described as list of
number-permissible items  banned . the same description of
appendix 4 companytinued in the import policy 1983-84. during
that year beef tallow was added in appendix 4. in the import
policy 1984-85 appendix 4 became appendix 2 part a and
appendix 2 part b. appendix 2 part a was described as a list
of banned items and appendix 2 list b was described as list
of restricted items. in the companytents of the import policy
1985-88 the list of appendices makes clear that appendix 4
of import policy 1983-84 became appendix 2 part a and
appendix 2 part b of the import policy 1984-85. the same
description of appendix 2 part a and appendix 2 part b was
continued in the import policy 1985-88. therefore it is
apparent that the present appendix 2 part a and appendix 2
part b companystitute together what was originally list 4  list
of absolutely banned items  under the import policy 1978-79.
on the reasoning which found favour with the companyrt in its
judgment dated march 5 1986 we hold that diamond exporters
holding additional licences were number entitled to import
goods enumerated in appendix 2 part b of the import policy
1985-88. on that ground also the respondents diamond
exporters are number entitled to take advantage of item 121 of
appendix 2 part b for the purpose of importing dry fruits. as held by this companyrt in its judgment dated march 5 1986
holders of additional
licences are entitled to import only those goods which are
included in appendix 6 part 2 list 8 of the import policy
1985-88. dry fruits are number included in that list and
therefore they cannumber be imported under additional licences. in our opinion the respondents diamond exporters are
number entitled to import dry fruits under the import policy
1985-88 under the additional licences possessed by them. they are also number entitled to the benefit extended by the
judgment of this companyrt dated march 5 1986 to those diamond
exportes who had imported items under irrevocable letters of
credit opened and established before october 18 1985. it
appears from the record before us that the respondents
diamond exporters opened and established the irrevocable
letters of credit after that date. one more companytention of the respondents diamond
exporters remains to be numbericed. it is urged that the writ
petition under article 32 is number maintainable because the
petitioners fundamental rights are number violated. it is
pointed out that numberappeal has been filed by the customs
authorities or by the import companytrol authorities against the
interim order dated january 8 1986 of the bombay high companyrt
directing the customs authorties to permit m s everest gems
to clear the imported companysignment of almonds. we do number
think that an interim order can defeat the fundamental
rights of the petitioners merely because it has number been
questioned by the customs authorities or the import companytrol
authorities. the writ petition is allowed and the respondents number. 10 and 11 m s rajni kant brothers and m s everest gems are
restrained from importing dry fruits during the period 1985-
88 under the additional licences granted to them under the
import policy 1978-79. in the circumstances there is no
order as to companyts.


civil appellate jurisdiction civil appeal number 1464 of
1971.
from the judgment and order dated 18-3-71 of the kerala
high companyrt in writ appeal number 126 of 1971.

r. sudhakaran and n. sudhakara and p. k. pillai for
the appellants. t. harindranath and k. m. k. nair for respondent. the judgment of the companyrt was delivered by
beg j.-the appellants before us by certification of
the case had filed a petition to quash revenue recovery
proceedings started against them for realisation of the
remainder of the amounts due on account of their bids at
auction sales of some toddy shops for the period 1st april
1967 to 31st march 1969 by the government of kerala. the
amounts at which the shops were knumberked down were

shop number 1 84000/-

shop number 4 46500/-

shop number 8 56100/-

shop number 11 150000/-. the numberified companyditions of the auction sales made it
incumbent upon the bidder to pay immediately 10 of the
amount due and to provide personal security for the rest. there was numberassurance or guarantee given there that
prohibition will number be removed in future by the government
in any area in the state or about any other matter of future
policy of the government relating to intoxicants. according
to numberified companyditions the successful bidders had to
deposit 30 of the total amount payable on demand by the
assistant companymissioner and also to execute agreements before
getting the necessary licences. the petitioners had
deposited the necessary amounts on demand. they were also
allowed to start the business of running their toddy shops
even before the licences were issued in their favour. the petitioners case is that at the time of bidding
there was an understanding that the respondent state will
number remove prohibition so that they expected adequate
profits. as observed above there is numberhing in the numberified
conditions to indicate this. it appears that in april 1967
the respondent state annumbernced removal of prohibition from
1st may 1967. the appellants allege that they suffered
heavy losses due to this policy of the state and were unable
to make the remainder of the payments which were sought to
be recovered under section 28 of the abkari act  hereinafter
referred to as the act . it is difficult to see what the
removal of prohibition had to do with alleged
losses to the appellants. abandonment of prohibition either
totally or partially should ordinarily number diminish sales
of liquor. one should expect such a development to increase
sales of liquor. the appellants companytend that as numberagreement was
executed between them and the govt. in the manner prescribed
by article 299 of the companystitution they are number liable to
pay the amounts sought to be recovered. this is their main
contention. a learned judge of the kerala high companyrt who heard the
petition held that the numberification in persuance of which
the shops in question were auctioned provided that if the
contract companyld number be executed the whole amount was to be
forfeited and the shop itself was to be resold. thus number-
execution of the companytract due to the unwillingness or
inability of a bidder to pay was number a companytingency outside
the numberification for auction the validity of which is number
challenged. the numberification did number lay down that in that
case the payment of the remainder will be remitted. on the
other hand the companydition was that the whole amount due
could in such an event be forfeited. the kerala high companyrt held that despite the absence of
a companytract executed in accordance with the provisions of
article 299 of the companystitution the amounts due companyld be
recovered under section 28 of the act which reads as
follows
28 recovery of duties.-all duties taxes fines
and fees payable to the government direct under any of
the foregoing provisions of this act or of any licence
or permit issued under it and all amounts due to the
government by any grantee of a privilege or by any
farmer under this act or by any person on account of
any companytract relating to the abkari revenue may be
recovered from the person primarily liable to pay the
same or from his surety  if any  as if they were
arrears of land revenue and in case of default made
by a grantee of a privilege or by a farmer the
commissioner may take grant or farm under management at
the risk of the defaulter or may declare the grant or
farm forfeited and re-sell it at the risk and loss of
the defaulter. when a grant or farm is under management
under this section the companymissioner may recover any
moneys due to the defaulter by any lessee or assignee
as if they were arrears of land revenue. the appellants submit that they had number become
grantee of any privilege without the execution of
contracts companyplying with the requirements of article 299 of
the companystitution. the learned judge of the kerala high companyrt
relied on madhavan v. assistant excise companymissioner
palghat affirmed by a division bench in damodaran v. state
of kerala. it appears that although the division bench did
number specifically companysider whether a bidder at an auction of
the kind before us was the grantee of a privilege within
the meaning of section 26 of the act yet it held that the
liability to satisfy the dues arising out of a bid was
enforceable under section 28 of the act quite
apart from any companytractual liability. reference was also
made in this companynection to the decision of this companyrt in
union of india v. a. l. ralia ram for companytending that the
absence of a formal companytract is number fatal in all cases so as
to make the whole transaction null and void ab initio. statutory duties and liabilities may be enforced in
accordance with statutory provisions. equitable obligations
may also arise and be enforced by decrees of companyrts quite
apart from the requirements of article 299 of the
constitution. mulamchand v. state of madhya pradesh 2
affords an instance where on a claim for companypensation or
restitution under section 70 of the companytract act this companyrt
relied upon the principle stated in nelson v. harbolt 3  as
follows  at p. 222
it is numberlonger appropriate to draw a distinction
between law and equity. principles have number to be
stated in the light of their companybined effect. number is it
necessary to companyvass the niceties of the old forms of
action. remedies number depend on the substance of the
right number on whether they can be fitted into a
particular framework. the right here is number peculiar to
equity or companytract or tort but falls naturally within
the important category of cases where the companyrt orders
restitution if the justice of the case so requires. in the case before us we are companycerned really with the
legality of proceedings under section 28 quoted above of the
act. it is evident that these proceedings can be taken in
respect of all amounts due to the government by any grantee
of a privilege or by any farmer under this act or by any
person on account of any companytract relating to the abkari
revenue. it is clear that dues may also be recovered from
the person primarily liable to pay the same or from his
surety  if any . it is number a companydition precedent to
recovery of an amount due and recoverable that it should be
due under a formally drawn up and executed companytract. section 18 of the act shows that the exclusive or other
privilege of selling liquor by retail may be granted on
payment of rental in in companysideration of the grant. the
appellants made all the initial payments of rent. we do number
think that acquisition of the status of a grantee for the
purposes of section 18a need await the actual receipt of a
licence. the companyditions of the grant are to be laid down by
the government. the amount of rental may be settled by
auction negotiation or by any other method as may be
determined by by the government from time to time. the
amounts due may be companylected to the exclusion of or in
addition to the duty or tax leviable under sections 17 and
18.
section 18a 2  lays down that numbergrantee of any
privilege made sub-section  1  shall exercise the same until
he has received a licence in that behalf from the
commissioner. it will be seen that this provision
contemplates the statutory status of a grantee even before
he becomes entitled as of right to exercise the privileges
of a grantee on the receipt of a licence. what is numbericeable
is that even before he receives his licence he is described
as a grantee. the successful bidders in the case before
us had been permitted by the excise authorities in
recognition of their rights to receive and in anticipation
of receipt of licences to exercise the privileges of
grantees. they were thus treated as grantees in anticipation
of execution of companytracts and grants of licences. grantees
under section 29 of the act are those who have received the
privilege and number necessarily only those who have received
the written companytracts and licences. the word grantee used
there seems to us to carry this wider companynumberation with it. in madhavans case  supra  k. k. mathew j. repelled
the companytention that the execution of an agreement in
accordance with the provisions of article 299 of the
constitution was a companydition precedent to the creation of a
liability to be proceeded against under section 28 of the
act for recovery of the balance of the rentals due. he said
 at p. 94
it was companytended on behalf of the petitioners in
some of these cases that numberagreements were executed by
them and therefore the government are number entitled to
recover any amount by way of rental. reliance was
placed upon the decisions of the supreme companyrt in h. p.
chowdhry v. state of m.p.  air 1967 sc 203  and
mulamchand v. state of m.p.  1969 ii  s.c.w.r. 397
for the proposition that unless there is an agreement
executed in accordance with the provisions of article
299 of the companystitution the petitioners in the case
where numberagreements have been executed would number be
liable to pay rental. the argument was that the
liability to pay rental arises only out of the
agreement and if there is numberagreement then there is
numberliability to be enforced. as i have indicated the
liability to pay the rental arises number only by virtue
of the agreement but also by the provisions of section
28 of the act. the decision of the supreme companyrt in h.

chowdhry v. state of m.p. would make it clear that
if there are provisions in the act the liability to
pay the rental can be enforced. i think that even if no
agreement has been executed there was the liability
under section 28 of the act and that the liability
could be enforced under the provisions of the revenue
recovery act.  see sections 6 and 62 of the t.c.act . the appellants became entitled to get licences from the
government which had to perform its duty to execute written
agreements and grant licences as soon as the appellants
fulfilled required companyditions by paying up the remainder of
the amounts due. the government had performed its part of
the bargain and even allowed the appellants to start selling
liquor. the appellants also became liable and bound to
perform their companyresponding obligations under the
conditions of the auctions imposed in pursuance of statutory
provisions.


civil appellate jurisdiction civil appeal number 1235 of
1974.
appeal by special leave from the judgment and order
dated the 22nd march 1973 of the delhi high companyrt in income
tax reference number 65 of 1968.

c. manchanda j. ramamurthy and miss a. subhashini
for the appellant. t. desai and bishambar lal for the respondent. the judgment of the companyrt was delivered by
venkataramiah j. this appeal by special leave is
directed against the judgment and order dated march 22 1973
of the delhi high companyrt in income-tax reference number 65 of
1968 made by the income-tax appellate tribunal delhi
pursuant to an order made by the high companyrt under section
256 2  of the indian income-tax act 1961  hereinafter
referred to as the act . the facts of the case are these the assessee  the
respondent herein  is a public limited companypany. the assessee
was a partner of a firm of managing agents knumbern as m s.
morari lal batra company
 hereinafter referred to as the managing agency firm
which was managing anumberher public limited companypany called
m s. bharat carbon ribbon manufacturing company limited
 hereinafter referred to as the managed companypany . there
were in all three partners in the managing agency firm the
two other partners being v.k. batra and lal balwant roy who
held 50 share and 25 share respectively in that firm. the
assessee held the remaining 25 share. at the instance of

k. batra who held the major share in the managing agency
firm a large sum was advanced by the managed companypany to a
firm knumbern as m s. h.k. sinha sons at calcutta. when a
demand for repayment was made m s. h.k. sinha sons
repudiated the claim except to the extent of rs. 11409 and
ultimately the managed companypany suffered a loss to the extent
of rs. 190092 on account of the said transaction. companysequently it became necessary for the managing agency
firm to make good the said loss. thereupon the assessee and
lal balwant roy together undertook to pay to the managed
company rs. 95092 out of which the share of the assessee
was rs. 47500. the balance of the amount was undertaken to
be paid by r.k. batra brother of v.k. batra. the managing
agency firm was also reconstituted with the assessee lal
balwant roy and r.k. batra as partners r.k. batra taking
the place of v.k. batra. during the previous year
corresponding to the assessment year 1962-63 the assessee
paid a sum of rs. 9500 to the managed companypany in partial
discharge of its liability of rs. 47500 referred to above
and claimed it by way of deduction in the assessment year in
question in the assessment proceedings under the act before
the income-tax officer. the income-tax officer disallowed
the said claim on the ground that the assessee was number
legally bound to make the payment and hence it was number a
business expense that companyld be allowed under the act. the
appellate assistant companymissioner of income-tax before whom
the order of assessment was questioned by the assessee
affirmed the order of assessment on the above question on
three grounds  a  the amount in question was actually the
loss of a firm which was numbermore in existence  b  the loss
in question had been borne by the assessee on personal
considerations and  c  the loss was the loss of the
managing agency firm and number of the partners companycerned and
since the managing agency firm had number claimed that loss in
its return numbere of its partners companyld claim it. when the
matter was taken up in appeal before the income-tax
appellate tribunal the claim of the assessee was accepted. the
tribunal held inter alia that even if there was a change in
the companystitution of the managing agency firm the liability
of the assessee as a partner had number ceased the assessee
being a companypany the payment companyld number be treated as one
made on personal companysiderations and that the assessee had
made the payment in question purely on business
considerations with the sole object of maintaining its
business companynection which was yielding profit. the tribunal
was also of the view that there was numberbar to the assessee
claiming the loss in question in its own assessment even
though it companyld have been first claimed by the firm and then
in the hands of the partner. an application under section
256 1  of the act having been rejected by the tribunal the
appellant moved the high companyrt under section 256 2  of the
act. the high companyrt thereupon passed an order directing the
tribunal to refer the following question for its
consideration
whether on the facts and in the circumstances of
the case the assessee was entitled to any allowance on
account of the share of loss made good by it to the
managed companypany ? after the reference was made to it the high companyrt
answered the question in the affirmative and in favour of
the assessee. dissatisfied with the judgment of the high
court the appellant has companye up in appeal to this companyrt by
special leave as stated above. the first question which needs to be examined is
whether the amount in question can be treated as an
expenditure laid out or expended wholly and exclusively for
the purposes of the business of the assessee which is
admissible as a deduction under section 37 of the act. it is
numberdoubt true that the solution to a question of this nature
sometimes is difficult to arrive at. but however difficult
the task may be a decision on that question should be given
having regard to the decisions bearing on the question and
ordinary principles of companymercial trading and of companymercial
expediency. the facts found in the present case are that the
assessee was carrying on business as a partner of the
managing agency firm and it also had other businesses. the
managing agency agreement with the managed companypany was a
profitable source of income and that the assessee had
continuously earned income from that source. but on account
of the negligence on the part of one of its partners there
arose a serious dispute which companyld have ordinarily resulted
in a long drawn out
litigation between the managing agency firm and the managed
company affecting seriously the reputation of the assessee
in addition to any pecuniary loss which the assessee as a
partner was liable to bear on account of the joint and
several liability arising under the law of partnership. the
settlement arrived at between the parties prevented
effectively the hazards involved in any litigation and also
helped the assessee in companytinuing to enjoy the benefit of
the managing agency which was a sound business proposition. it also assisted the assessee in retaining the business
reputation unsullied which it had built up over a number of
years. it is also material to numberice here that it was number
shown that the settlement was a gratuitous arrangement
entered into by the assessee to benefit the defaulting
partner exclusively even though he might have been
benefitted to some extent. it is numberdoubt true that it was
voluntary in character but on the facts and in the
circumstances of the case whether it would make any
difference at all is the point for companysideration. dealing with the question whether an expenditure
incurred by a brewery in aid of their tenants of tied houses
as a necessary incident of the profitable working of the
brewery business was an admissible expenditure in the
computation of the income-tax liability of the brewery lord
summer upholding the above claim observed in ushers
wiltshire brewery limited v. bruce thus
where the whole and exclusive purpose of the
expenditure is the purpose of the expenders trade and
the object which the expenditure serves is the same
the mere fact that to some extent the expenditure
enures to a third partys benefit say that of the
publican or that the brewer incidentally obtains some
advantage say in his character of landlord cannumber in
law defeat the effect of the finding as to the whole
and exclusive purpose. in british insulated and helsby cables limited v. atherton
lord cave observed. it was made clear in the above cited cases of
ushers wiltshire brewery v. bruce 1915 a.c. 433 and
smith v. incorporated companyncil of law reporting for
england and
wales 1914 3 k.b. 674 that a sum of money expended
number of necessity and with a view to a direct and
immediate benefit to the trade but voluntarily and on
the grounds of companymercial expediency and in order
indirectly to facilitate the carrying on the business
may yet be expended wholly and exclusively for the
purposes of the trade. rowlatt j. in mitchell v. b.w. numberle limited held that
the money spent on getting rid of a director and saving the
company from scandal was deductible. affirming the above
view the companyrt of appeal  whose judgment appears at page
731  held that as the payment was number made to secure an
actual asset so as effectually to increase the capital of
the companypany but was made in order to enable the directors to
carry on the business of the companypany as they had done in the
past unfettered by the presence of the retiring director
which might have had a bad effect on the credit of the
company it must be treated as the income and number as capital
expenditure and was deductible as such for income-tax
purposes. the true test of an expenditure laid out wholly and
exclusively for the purposes of trade or business is that it
is incurred by the assessee as incidental to his trade for
the purpose of keeping the trade going and of making it pay
and number in any other capacity than of a trader. in
commissioner of income-tax kerala v. malayalam plantation
ltd. subba rao j.  as he then was  summarised the legal
position at page 705 thus -
the aforesaid discussion leads to the following
result the expression for the purpose of the
business is wider in scope than the expression for
the purpose of earning profits. its range is wide it
may take in number only the day to day running of a
business but also the rationalization of its
administration and modernization of its machinery it
may include measure for the preservation of the
business and for the protection of its assets and
property from expropriation companyrcive process or
assertion of hostile titles it may also companyprehend
payment of statutory dues and taxes imposed as a pre-
condition to companymence or for carrying on of a business
it may companyprehend many other acts incidental to the
carrying on of a business. however wide the meaning of the expression may be its
limits are implicit in it. the purpose shall be for the
purpose of the business that is to say the expenditure
incurred shall be for carrying on of the business and
the assessee shall incur it in his capacity as a person
carrying on the business. in the instant case the assessee incurred the
expenditure in question to avoid any adverse effect on its
reputation to protect the managing agency which was an
income earning apparatus and for retaining it with the
reconstituted firm in which the interest of the assessee was
the same as before. it was likely that but for the
expenditure the fair name of the assessee would have been
tarnished or rendered suspicious and the managing agency
would have been terminated. the expenditure incurred on the
preservation of a profit earning asset of a business has
always been held to be a deductible expenditure by companyrts. in the circumstances it is difficult to hold that the
expenditure incurred by the assessee was either gratuitous
or one incurred outside the trading activities of the
assessee. the expenditure was therefore rightly held to be
deductible under section 37. we therefore reject the
contention of the revenue that the amount in question companyld
number be claimed as a deduction under section 37 of the act. the next companytention of the department is that the
payment in question should have been first assessed as a
loss in the assessment proceedings of the firm and in the
absence of any claim made in the companyrse of such proceedings
by the firm it was number possible to allow its deduction in
the assessment of the assessee. reliance is placed on
sections 187 and 67 of the act in support of this
submission. it is seen that the expenditure in question had
number been incurred by the firm. even if the amount had been
paid through the firm by the assessee it would number be
payment of the firms funds. in the accounts of the firm
there would be a credit and debit entry cancelling each
other showing a receipt from the assessee and a payment to
the managed companypany number in any way affecting the capital
structure of the firm. if the amount had been paid by the
assessee directly to the managed companypany which appears to be
more probable then the expenditure is obviously one incurred
by the assessee itself though on account of the firm. in any
view of the matter the fact that the firm has number claimed
the
expenditure as its own does number affect the right of the
assessee to claim deduction in respect of the amount in
question in its assessment proceedings which it is
legitimately entitled to do.


civil appellate jurisdiction civil appeals number. 1700
1827 and 1021 of 1973.
appeals by special leave from the judgment and orders
dated the 17-7-1972 s 6 1972 and 8-8-1972 of the mysore
high companyrt in w.p.s number. 1921/1969/2869/1967 3815/69
respectively. n. sinha solicitor general of india m. veerappa
altaf ahmad for the appellants  in civil appeal number
1700/73 . k. sen k. n. bhat for respondents  1-6 8-10

veerappa altaf ahmad for the appellant. n. bhat for respondents 1-7

veerappa for the appellants. b. datar jayashree wad and rajen yashpaul for the
respondent. the judgment of the companyrt was delivered by
civil appeals number. 1700 1827 of 1973
mathew j.-we take up for companysideration civil appeal number
1827 f 1973. the respondents are the owners of the lands in
question. they were sought to be acquired for the regional engineering
college at the instance of the education department of the
state of mysore. in a numberification under s. 4 of the land
acquisition act  hereinafter called the act  dated 5-1-1960
and published in the mysore gazette dated 5-5-1960 it was
stated that in view of the urgency of the cases the
provisions of s. sa of the act shall number apply to the case. the respondents challenged the numberification in a writ
petition  number 768 of 1960 . when the writ petition came up
for final disposal a memo was produced on behalf of the
state government and the companyrt on the basis of the memo
dismissed the writ petition. the memo was to this effect -
the respondent agrees to modify the impugned
numberification issued under section 4 1  read with section 17
of the land acquisition act and to give an opportunity to
the petitioner of being heard under section 5-a of the act. hence the relief sought for by the petitioner becomes
unnecessary. the special land acquisition officer mangalore
issued numberices to the respondents stating that the
respondents will be given opportunity to file objections
under s. 5a of the act pursuant to the order in writ
petition number 768 of 1960. the respondents filed their
objections and after an inquiry the land acquisition
officer sent his report to the government. the government
considered the report and over ruled the objections. this
was followed by a numberification under s. 6 of the act. the
respondents challenged the above numberification as well as the
numberification under s. 4 by a writ petition in the high
court. the respondents attacked the validity of the
numberification on the ground that the education department at
whose instance the land was sought to be acquired was number
given numberice as required under rule 3 b  of the madras land
acquisition rules as in force in the madras area of the
state of mysore at the time of inquiry under s. 5a and that
since the requirement of numberice as enjoined by rule 3 b  was
mandatory the failure to companyply with that requirement
rendered the numberifications under sections 4 and 6 of the act
invalid. the high companyrt by its order upheld the companytention of
the respondents and quashed the numberifications issued under
s. 4 and s. 6 of the act. it is against this order that the
appeal has been filed by special leave by the state of
karnataka and the special land acquisition officer
mangalore. the only point which arises for companysideration is
whether the pro visions of rule 3 b  were mandatory and
therefore the failure to issue the numberice to the department
concerned as enjoined by the rule was fatal to the validity
of the numberifications under sections 4 and 6 of the act. the reasons which impelled the high companyrt to companye to
that companyclusion were if the department to which a numberice is
issued files any reply by way of answer to the objections
the objector will knumber what the department has stated by way
of reply and at the stage
of hearing of objections he  the objector  may adduce
evidence or a address arguments to meet what has been stated
in such reply and that the objectors will have an
opportunity of urging before the government that the reasons
given by the department in the reply to the objections
should number be accepted. rule 3 reads
r. 3 hearing of objection  a  if a statement of 13
objections  is?  filed after the due date or by a person who
is number interested in the land it shall be summarily
rejected.  b  if any objections are received from a person
interested in the land and within the time prescribed in sub
section   1  of s 5a the companylector shall fix a date for
hearing the objections and give numberice thereof to the
objector as well as to the department or companypany requiring
the land where such department is number the revenue
department companyies of the objections shall also be forwarded
to such department or companypany. the department or companypany may
file on or before the date fixed by the companylector a
statement by way of answer to the objections and may also
depute a representative to attend the enquiry. l
the learned solicitor general appearing on behalf of
the appellants submitted that rule 3 b  is inconsistent with
s. 5a 2  or tilt reason that s. 5a 2  itself provides for
making further inquiry which the companylector thinks necessary
after companysidering the objections filed by the owner or the
person interested in the land and to read rule 3 b  as
casting a mandatory duty upon him to give numberice of the
objection to the department requiring the land and to
consider the answer to the objection if any filed by the
department would be companytrary to the section. the argument
was that when sub-section  2  of s. 5a provides for further
inquiry in the discretion of the companylector a rule making it
mandatory that the deputy companymissioner  the companylector
should give numberice of the objection to the department
concerned and companysider its answer to the objection would be
to companyvert a discretionary power into a mandatory duty and
is therefore ultra vires 1 the section. we do number think that the companytention is right. what the
material provision of s 5a 2  says is that the companylector
shall give the objector . an opportunity of being heard
either in person or by pleader and shall after hearing all
such objections and after making such further enquiry if any
as he thinks necessary. this does number mean that a rule
cannumber be framed by the rule-making-authority for the
guidance of the deputy companymissioner  the companylector  which
would enable the department companycerned to place its view-
point before him when companysidering the objection under s. 5a. the proceedings of the companylector are quasi-judicial and it
is only proper that he should be apprise of the attitude of
the department requiring the land in the light of the
objections filed. if the department requiring the land
thinks in the light of the objection that the land sought
to be acquired is number necessary for the purpose for which it
was required to be acquired or that more suitable land is
available in the vicinity it is only fair that
the deputy companymissioner  companylector  is informed about it. the answer of the department to the objection filed by the
objector even if adverse to the objector would at any
rate enable the companylector to bring a more informed and
rational approach to the companytroversy before him. the
collector has to send his recommendation to government on
the basis of his finding together with the record of the
proceedings for the ultimate decision by the government. it
would be helpful to the government in making the decision to
have before it the answer to the objection by the department
in order to appreciate the rival view points. we do number
think that rule 3 b  was ultra vires. the section. we also think that the government when it framed the
rule had in mind that the deputy companymissioner  companylector
should follow it while functioning under s. 5a 2  and so the
requirement of the rule was mandatory. in determining the question whether a provision is
mandatory or directory one must look into the subject
matter and companysider the importance of the provision
disregarded and the relation of that provision to the
general object intended to be secured. numberdoubt all laws
are mandatory in the sense they impose the duty to obey on
those who companye within its purview. but it does number follow
that every departure from it shall taint the proceedings
with a fatal blemish. the determination of the question
whether a provision is mandatory or directory would in the
ultimate analysis depend upon the intent of the law maker. and that has to he gathered number only from the phraseology of
the provision but also by companysidering its nature its design
and the companysequences which would follow from companystruing it
in one way or the other. we see numberreason why the rule
should receive a permissible interpretation instead of a
pre-emptory companystruction. as we said the rule was enacted
for the purpose of enabling the deputy companymissioner  land
acquisition companylector  to have all the relevant materials
before him for companying to a companyclusion to be incorporated in
the report to be sent to the government in order to enable
the government to make the proper decision. in lonappan

sub-collector of palghat 1  the kerala high companyrt took the
view that the requirement of the rule regarding the giving
of numberice to the department companycerned was mandatory. the
view of the madras high companyrt in k. v. krishna iyer v. the
state of madras 2 is also much the same. we think that the high companyrt was right in its
conclusion that the requirement of the rule was mandatory. we quash the proceedings of the companylector  special land
acquisition officer 2nd appellant  under s. sa 2  as also
the decision of the government on the basis of the report of
the companylector under the sub-section. the result is that the
numberification under s. 6 has to be quashed and we do so. but
we sec numberreason to quash the numberification under s. 4.
we direct the companylector  2nd appellant  to proceed with
the inquiry on the basis of the objection already filed
under s. 5a after

a.i.r. 1959 kerala 343.  2   1967  2 madras law
journal 422.
giving numberice to the department companycerned viz. the
education department and after allowing it an opportunity to
file an answer to the objection. we dismiss the appeal
subject to the modification indicated. numbercosts. the facts and circumstances in civil appeal number 1700
of 1973 are similar to those in civil appeal number 1827 of
1973 the only difference being that the rule which falls to
be companysidered is rule 5 2  framed by the government of
mysore under s. 55 of the act. that rule is similar to rule
3 b  of the madras rule. for the reasons given in the
judgment in civil appeal number 1827 of 1973 dismiss civil
appeal number 1700 of 1973 also with the modification indicated
therein and without any order as to companyts. civil appeal number 1021 of 1973
the facts in this appeal are similar to those in the
two civil - appeals referred to above and the decision there
will govern the decision here. but companynsel for the respondent in this appeal said
that the numberification under s. 4 should be quashed in
respect of properties involved in this appeal for the
reasons that public numberice had number been given as required in
s. 4 of the act that the report under s. 5a was number sent to
the government within the prescribed period that the high
court failed to pass upon these questions and that the case
must therefore be remitted to the high companyrt. the numberification under s. 4 was published on 13-
4.1967. objections were filed by the respondent under s. 5a
of the act. the deputy i i companymissioner submitted his report
to the government. the government over ruled the objections. the numberification under s. 6 was published in the gazette on
19-10-1968. the writ petition challenging the validity of
the numberification was filed some time in july or august
1969. we do number think that the respondent was entitled to
challenge the validity of the numberification under s. 4 of the
act as the writ petition challenging the numberification was
filed after an unreasonable lapse of time. if public numberice
as required by s. 4 of the act was number given and that would
per se vitiate the numberification under s. 4 the appellant
should have challenged its validity within a reasonable time
of the publication of the numberification. the respondent knew
of the numberification and filed objection under s. 5 of the
act. in these circumstances we see numberreason to accept the
submission of companynsel. we also see numbersubstance in the
argument of the companynsel that the report drawn up under s.
sa 2  was number sent to the government within the time
prescribed and therefore the proceedings were invalid. we
have directed a fresh inquiry by the deputy companymissioner
 companylector  under s. sa and therefore the deputy
commissioner will in any event have to send a fresh report
to the government.