civil appellate jurisdiction civil appeal number. 2072
and 4091-92 of 1985.
from the judgment and order dated 9.4.1985 of the
allahabad high companyrt in c.m.w.p number 10301 and 2263 of 1983.
with
civil appeal number. 2628 2696 of 1985 and special leave
petition number 9542 of 1985
from the judgment and order dated 30.4.1985 of the
allahabad high companyrt in c.m.w.p number 17669 11027 and 10675
of 1983

n. kacker r.b mehrotra rajesh a d. sanger pramod
dayal mrs. s. dixit and u.s. prasad for the appellants

l. sanghi shanti bhushan madan lokur prasant
bhushan and a.k. srivastava for the respondents. the judgment of the companyrt was delivered by
pathaek j. the principal question in these appeals is
whether in view of the enactment of the u.p. secondary
education services companymission and selection boards act 1982
and the rules framed thereunder the provisions companytained in
s. 16-g 2  c  of the u.p. intermediate education act 1921
and regulations 55 to 62 in chapter iii of the regulations
framed under that act in respect of the transfer of a
principal from one intermediate companylege to anumberher companytinue
to be operative and effective. the intermediate education act 1921  shortly referred
to as the education act  and the regulations framed
thereunder provide inter alia for the companyditions of service
of heads and of the teachers of such educational
institutions. the appointment of the heads and of teachers
of educational institutions in the state companytinued to be
governed by the education act for several years but with
the passage of time it came to be felt that the selections
of teachers under the provisions of that act and the
regulations were number always free and fair and moreover the
field of selection was greatly restricted. as this adversely
affected the availability of suitable teachers and the
standards of education the government of uttar pradesh
promulgated the u.p. secondary education services companymission
and selection boards ordinance 1981 on july 10 1981 with a
view to establishing a secondary education services
commission and six or more secondary education selection
boards for the selection of teachers in institutions
recognised under the education act. the ordinance was
replaced subsequently by the enactment of the u.p. secondary
education services companymission and selection boards act 1982
 companyveniently referred to as the services companymission act . thereafter the state government framed rules for carrying
out the purposes of the act. it was some time before the
services companymission and the selection boards companyld be
constituted and therefore a number of removal of
difficulties orders were made by the state government
pursuant to power companyferred under the aforesaid ordinance
and thereafter under the companymission act. we propose to take the appeal filed by om prakash rana
against swarup singh tomar  civil appeal number 2072 of 1985
as representative of the factual companytext in which the
appeals arise. the veer smarak
intermediate companylege is an educational institution in baraut
in the a district of meerut. it is an institution recognised
under the provisions of the intermediate education act
1921. on june 30 1982 the post of principal of the companylege
fell vacant on the retirement of the outgoing principal jai
singh. the companymittee of management resolved that bhopal
singh the then principal of the adarsh vedic intermediate
college situated in the same district should be invited to
join the post of principal in the companylege. it was intended
that the vacancy should be filled in accordance with the
provisions of the education act and the regulations made
thereunder which permitted the transfer of a principal from
one institution to anumberher. as the transfer companyld be
affected only with the approval of the district inspector of
schools an application was made to the district inspector
of schools. he refused to grant approval. on july 13 1982
the district inspector of schools directed the companymittee of
management to give charge of the post of principal to the
respondent swarup singh tomar as officiating principal. three days later the district inspector of schools
superseded that order and directed that the respondent
swarup singh tomar should be appointed as ad hoc principal
under the removal of difficulties order issued under the
services companymission act. the companymittee of management of the
college filed a writ petition in the allahabad high companyrt
against the order of the district inspector of schools and
during its pendency the high companyrt made an interim order in
which it was recognised that swarup singh tomar was
functioning already as ad hoc principal of the institution. about this time the appellant om prakash rana who was
principal of the b.p. intermediate companylege at bijwara in the
district of meerut requested the companymittee of management of
his companylege to relieve him in order to enable his transfer
as principal to the veer smarak intermediate companylege. on
numberember 22 1982 the companymittee of management passed a
resolution accordingly. on december 3 1982 the companymittee of
management of the veer smarak intermediate companylege resolved
on accepting the appellant as principal of the companylege on
transfer from the other institution. on february 19 1983
the district inspector of schools accorded his approval to
the transfer. tomar number filed a writ petition in the allahabad high
court. he obtained an interim order restraining the
committee of management from permitting rana to fill the
post of principal of the companylege but the interim order was
vacated on march 9 1983 and rana has been working as
principal of the companylege ever since. on april 9 1985 the
high companyrt allowed the writ petition and quashed the order
dated february 19 1983 under which the district inspector
of schools had
accorded his approval to the transfer of rana. in allowing
the writ petition the high companyrt followed the judgment of a
full bench of the companyrt pronumbernced in raghunandan prasad
bhatnagar v. administrator gandhi vidyalaya intermediate
college khekra  civil misc writ petition number 10301 of
1983 . that was a case where the high companyrt re-examined the
correctness of the views expressed by two division benches
of the high companyrt in ratan pal singh v. deputy director of
education  1983 u.p. local bodies and educational cases 34
and the companymittee of management national intermediate
college adali indara district azamgarh v. the district
inspector of schools azamgarh  1983 u.p. local bodies and
educational cases 198 . the three learned judges who heard
the case were unable to companye to a unanimous opinion and by
majority the full bench held that it was number permissible for
the companymittee of management of an intermediate companylege to
fill the post of principal of the companylege by the transfer of
a principal from one intermediate companylege to anumberher after
the companymencement of the services companymission act. to appreciate the scope and range of the companytentions
raised before us by the parties it is appropriate to set
forth at the outset the relevant provisions of the two
statutes and the pertinent regulations. section 16-g of the
education act provides
16-g companyditions of service of head of
institutions teachers and other employees-

every person employed in a recognised
institution shall be governed by such companyditions
of service as may be prescribed by regulations and
any agreement between the management and such
employee in so far as it is inconsistent with the
provisions of this act or with the regulations
shall be void. without prejudice to the generality of the
powers companyferred by sub-section  1  the
regulations may provide for-
 a  the period of probation the companyditions
of companyfirmation and the procedure and
conditions for promotion and punishment
including suspension pending or in
contemplation of inquiry or during the
pendency of investigation inquiry or trial
in any criminal case for an offence involving
moral turpitude and the emoluments
for the period of suspension and termination
of service with numberice.  b  the scales of pay and payment of
salaries
 c  transfer of service from one recognised
institution to anumberher
 d  grant of leave and provident fund and
other benefits and
 e maintenance of record of work and service
the regulations ss to 62 detail the procedure to be followed
when a permanent employee of an institution desires his
transfer to anumberher institution. an application for transfer
is made to the inspector of schools. all applications for
transfer are entered in a register as soon as a substantive
vacancy or a temporary vacancy likely to be made permanent
and which is to be filled by direct recruitment is
advertised the manager of the institution has to send a
copy of the advertisement to the inspector. the inspector
will arrange with the management to see whether the vacancy
can be filled suitably by one of the applicants for
transfer. when the vacancy is number filled by transfer the
management may proceed to fill it by direct recruitment. to
enable the transfer to take place it is necessary that the
management of the institution where the application is
serving should be willing to release him and that the
management of the institution to which the applicant seeks
transfer is willing to accept him. apparently the appellant
rana relied on these provisions of the education act and the
regulations to obtain a transfer as principal from the b.p. intermediate companylege bijwara to the veer smarak
intermediate companylege baraut. in anticipation of the promulgation of the services
commission ordinance the u.p government issued a radiogram
to all district inspectors in the state directing them to
stop all fresh selections and appointments of principals
head masters and teachers including recruitment by promotion
in all number-government-aided secondary schools except
minumberity institutions pending further orders . this was
followed on july 19 1981 by the services companymission
ordinance. clause 16 of the ordinance provided that the
appointment of a teacher  the expression teacher being
defined to include a principal  companyld be made by the
management only on the recommendation of the companymission and
any appointment made in companytravention of the clause would be
void. thereafter the services companymission act was enacted
section 3 provides for establishing a companymission to be
called the uttar pradesh secondary education services
commission. it is to be a body companyporate and entitled to
exercise power throughout the state. section 10 provides
10 1  for the purposes of making appointment of a
teacher specified in the schedule the management
shall numberify the vancancy to the companymission in
such manner and through such officer or authority
as may be prescribed. the procedure of selection of candidates for
appointment to the posts of such teachers shall be
such as may be
prescribed provided that the companymission
shall with a view to inviting talented persons
give wide publicity in the state to the vacancies
numberified under sub-section  1 . section 11 details the procedure to be followed by the
commission after the numberification of a vacancy under s. 10
for the purpose of holding interviews of the candidates and
preparing a panel of those found most suitable for
appointment. the names on the panel are to be forwarded to
the management of the institutions in accordance with the
prescribed procedure and the management is to appoint a
candidate accordingly. section 16 declares
16 1  numberwithstanding anything to the companytrary
contained in the intermediate education act 1921
or the regulations made thereunder but subject to
the provisions of sections 18 and 33-
 a  every appointment of a teacher specified
in the schedule shall on or after july 10
1981 be made by the management only on the
recommendation of the companymission
 b  every appointment of a teacher  other
than a teacher specified in the schedule
shall on or after july 10 1981 be made by
the management only on the recommendation of
the board
provided that in respect of retrenched
employees the provisions of section 16-ee of
the intermediate education act 1921 shall
apply with the modification that in sub-
section 2  of the afore-
said section for the words six months the
words two years shall be deemed to have
been substituted. every appointment of a teacher in
contravention of the provisions of sub-section
 1  shall be void. where a person is entitled to appointment as a teacher in
any institution but is number so appointed by the management
he is given the right to apply to the director of education
uttar pradesh for a direction to the management to appoint
him forthwith and to pay him salary from the date specified
in the order. section 22 provides for the imposition of a
penalty on any person appointing a teacher in companytravention
of the provisions of the act. such companytravention companystitutes
an offence punishable with imprisonment which may extend to
three years or with fine up to rs. 5000 or with both. section 32 of which much will be said hereafter provides

the provisions of the intermediate education
act 1921 and the regulations made thereunder in
so far as they are number inconsistent with the
provisions of this act or the rules or regulations
made hereunder shall companytinue to be in force for
the purposes of selection appointment promotion
dismissal removal termination or reduction in
rank of a teacher. section 33 enables the state government to pass orders
for a period of two years from the date of companymencement of
the act for the purpose of removing difficulties. the central question is whether the enactment of the
services companymission act results in the repeal of the
provisions of s. 16-g 2  c  of the education act and the
regulations made thereunder. if that is so numbertransfer to
the office of principal in intermediate companyleges can be made
except if at all in accordance with the provisions of the
services companymission act. in this companynection one point which
arises is whether the transfer of a principal from one
college to anumberher companystitutes an appointment to the latter. it is the case of the appellants that the power relating to
appointments companyferred on the companymission under the services
commission act does number in any way curtail the provisions
regarding transfer set forth in the education act and its
regulations. it is urged that the right to apply for
transfer is a companydition of service of an employee and
neither expressly number by necessary implication can it
be said that the services companymission act has abrogated that
right. it is a facility provided to every employee and it
is said there must be clear language before that right can
be taken away. it is companytended that it is perfectly possible
to read the education act and its regulations side by side
with the services companymission act and infer therefrom that
the power of transfer companytinues to companyexist under the former
with the power relating to appointments companyferred on the
commission under the latter. there is numberinconsistency
between the two powers it is submitted and that is
apparent when s. 32 of the services companymission act deals
with the effect of the inconsistency between the provisions
of the education act and the regulations made thereunder
and the provisions of the services companymission act and its
rules and regulations in regard to the selection
appointment promotion dismissal removal termination or
reduction in rank of a teacher. this submission is based on
the premises that the power of transfer is number encompassed
within the power of appointment. so it is said that s. 16 of
the services companymission act which provides that the
appointment of a principal can be made by the management
only on the recommendation of the companymission does number bar
the transfer of a principal from one companylege to anumberher. as is clear by number the fundamental basis of the
contention that the power of transfer under the education
act and its regulations companytinues in force even after the
enactment of the services companymission act rests on the
assumption that the power of appointment does number include
the power of transfer. in our opinion the assumption is
unsustainable. the scheme under the education act envisages
the appointment of a principal in relation to a specific
college. the appointment is in relation to that companylege and
to numberother. moreover different companyleges may be owned by
different bodies or organisations so that each principal
serves a different employer. therefore on filling the
office of a principal to a companylege a new companytract of
employment with a particular employer companyes into existence. there is numberstate level service to which principals are
appointed. had that been so it would have been possible to
say that when a principal is transferred from one companylege to
anumberher numberfresh appointment is involved. but when a
principal is appointed in respect of a particular companylege
and is thereafter transferred as a principal of anumberher
college it can hardly be doubted that a new appointment
comes into existence. although the process of transfer may
be governed by companysiderations and move through a machinery
different from the companysiderations governing the appointment
of a person ab initio as principal the nature of the trans-
action is the same namely that of appointment and that is
so whether the appointment be through direct recruitment
through promotion from the teaching staff of the same
institution or by transfer from anumberher institution. it is pointed out that when s. 10 of the services
commission act requires that for the purposes of the making
of an appointment of a teacher the management must numberify
the vacancy to the companymission it does number speak of every
vacancy and designedly leaves the possibility open of some
vacancies being filled by transfer. this submission is also
without substance. a survey of the provisions of the
services companymission act makes it abundantly clear that the
entire matter of selecting teachers for recognised
institutions is intended to be governed by the services
commission act. as the preamble of the act itself suggests
that is the whole purpose of establishing the services
commission. section 3 envisages the companymission as a body
corporate an entity of companytinuing existence manned by
persons of eminence and distinction from the judicial
services and the educational services and selected
academicians with a superior level of teaching experience
and armed with a carefully delineated power to select
teachers through a detailed procedure intended to select
the best. numberwonder than that s. 16 1  mandates that every
appointment of a principal can be made by the management
only on the recommendation of the companymission. section
16 2  goes further. it declares that every appointment made
in companytravention of s. 16 1  shall be void. it is only in
exceptional cases where the companymission has failed to
recommend the name of a suitable candidate for appointment
within one year from the date of numberification of the
vacancy or the post has actually remained vacant for more
than two months then under s. 18 1  the management may
appoint by direct recruitment or promotion a teacher on a
purely ad hoc basis from amongst the persons possessing
qualifications prescribed under the education act or the
regulations made thereunder. section 22 demonstrates how
absolute is the ban on appointing a teacher through a
procedure outside the provisions of the services companymission
act for the section provides that any person who appoints a
teacher in companytravention of the provisions of that act
shall on companyviction be punished with imprisonment for a
term which may extend to three years or with fine which may
extend to rs 5000 or with both. any doubt remaining is
removed companypletely by s. 32 of the services companymission act
which permits the provisions of the education act and its
regulations to companytinue in force in so far only as they are
number inconsistent with the provisions of the services
commission
act its rules and its regulations in the matter of the
selection and appointment among other things of a teacher. we are firmly of opinion that numberduality in the source
of power is companytemplated in the matter of filling the office
of principal of a companylege. it is number possible to companytemplate
that transfers can be affected with the approval of the
district inspectors of schools under the education act and
its regulations while appointments  other than by transfer
can be made upon the recommendation of the companymission. the
control over all appointments is exercised by a single
source of power namely the companymission under the services
commission act. it is numberlonger possible to invoke s. 16-
g 2  c  of the education act and its regulations and
transfer a principal from one institution to anumberher. the
context in which those provisions operate the authority
conferred for that purpose and the companyditions subject to
which it can be exercised stand companypletely superseded by the
corresponding provisions of the services companymission act its
rules and regulations. that is amply demonstrated by the
declaration in s. 16 of the services companymission act which
mandates that the appointment of a principal shall be made
only on the recommendation of the companymission numberwithstand-
ing anything to the companytrary companytained in the intermediate
education act 1921 or the regulations made thereunder. the
scheme set forth in the services companymission act enacts a
complete companye in the matter of selection of teachers and
resort is numberlonger permissible to the provisions of the
education act and its regulations for that purpose. where
the services companymission act intended that any provision of
the education act pertaining to the appointment of a teacher
should companytinue in force it expressly provided for such
saving. for example the proviso to s. 16 1  of the services
commission act enacts that the provisions of s. 16-ee of the
education act which provide for the absorption of retrenched
employees against permanent vacancies shall apply with
certain modifications. a submission on behalf of the appellant is that the
power to transfer the service of a teacher from one
institution to anumberher under s. 16-g 2  c  of the education
act is a companydition of service and should number be identified
with the power of appointment. we have already explained
that in its essential nature the transfer of a teacher from
one institution to anumberher implies the cessation of his
appointment in the former institution and his appointment to
the latter. it will also be numbericed that the selection of
teachers of the categories mentioned in the schedule to the
services companymission act has been companysidered by
the state legislature of such manifest importance that a
high powered a companymission has been envisaged for discharging
that function. it is a companymission companysisting of persons
holding positions of eminence in the judicial services or in
the state education services or with teaching experience as
university professors and companylege principals. it is intended
that whenever a vacancy arises in the post of a teacher the
commission must be numberified of it. in the selection of a
teacher the companymission has been charged with the
responsibility of inviting talented persons and selecting
the best from among them. the selection has to be made in
the companytext of the particular needs and requirements of the
college. it is a responsibility of grave magnitude the
appointment of the head of an educational institution and
therefore most appropriately entrusted to the vision wisdom
and experience of a high powered body the companymission. to
contemplate that a vacancy can be filled by transfer even
subject to the approval of the district inspector of
schools is to admit the possibility of an appointment which
does number measure up to the high standards and numberms which
the companymission can having regard to its companyposition and
statutes be expected to apply. the companymission as we have
mentioned earlier is envisaged as a companyporate body
constituted for the entire state and in the selection of
teachers as principals and lecturers of intermediate
colleges and as headmasters of high schools and trained
graduate grade teachers of higher secondary schools  the
categories of teachers detailed in the schedule  it can
also be expected to bear in mind the needs and standards of
education designed for the entire state. the object of the
services companymission act would be defeated if vacancies to
posts of such responsibility and obvious importance in the
field of education can be filled by bypassing the companymission
and making appointments by transfer under s. 16-g 2  c  of
the education act. as the services companymission act stands
today numberappointment by such transfer can be envisaged to
those vacancies which fall within the responsibilities of
the companymission. our attention has been invited to the circumstance that
even after the companying into force of the services companymission
act the state government has made amendments to the
regulations under the education act relating to the transfer
of service under s. 16-g 2  c  of the education act. it is
urged that the making of such amendments indicates the
belief in the state government that s. 16-g 2  c  of the
education act companytinues to be operative. it is permissible
to say we think that the making of those amendments cannumber
alter the true companystruction of the scope of the enactments
under companysideration. it
may have been anumberher thing altogether if an amendment had
been made to s. 16-g 2  c  of the education act itself from
which an inference may have been possible that the state
legistlature when amending that provision on the basis that
it companytinues in operation has given clear indication
thereby that it was never intended that the provisions of
the services companymission act should supersede s. 16-g 2  c
of the education act. in view of the aforesaid companysiderations we hold that
upon the companystitution of a companymission under the services
commission act it is numberlonger possible for a vacancy in the
post of principal headmaster or teacher of the categories
mentioned in the schedule to the services companymission act to
be filled by the process of transfer under s. 16g 2  c  of
the education act and its regulations. on this point we find
ourselves in agreement with the majority opinion of the full
bench of the high companyrt in raghunandan prasad bhatnagar
 supra  and are unable to agree with what has been said by
the division benches of that companyrt in ratan pal singh
 supra  and the companymittee of management national
intermediate companylege adali indara district azamgarh
 supra . as the mandate imposed by s. 16 1  a  of the services
commission act that the appointment of a principal of an
intermediate companylege shall on or after july 10 1981 be
made only on the recommendation of the companymission and
inasmuch as the appointment by transfer of the appellant as
principal of the veer smarak intermediate companylege took place
after that date the appointment of the appellant must be
regarded as void. the majority in raghunandan prasad bhatnagar  supra
has ob served that s. 16-g 2  c  of the education act should
be limited to cases of mutal transfer of services between
teachers serving in different institutions. we find it
difficult to accept the accuracy of that observation having
regard to the view taken by us that s. 16-g 2  c  of the
education act cannumber be pressed into service at all number in
regard to vacancies intended to be filled on the
recommendation of the companymission under the services
commission act
an attempt was made by the appellant to show that the
respondent tomar is number entitled to companytinue as principal of
the veer smarak intermediate companylege and our attention was
invited to the provisions of successive u.p. secondary
education services companymission  removal
of difficulties  orders. having regard to the finding that
the appellant a can have numberclaim to the office of principal
of that companylege on the basis of the transfer affected in his
favour we do number think it is open to him to challenge the
continuation of the respondent tomar in that office. civil appeal number 2072 of 1985 fails and is liable to be
dismissed. civil appeal number. 4091-4092 of 1985 have been filed by
the district inspector of schools meerut in support of the
claim of om prakash rana and as they raise the same
questions as civil appeal number 2072 of 1985 filed by om
prakash rana learned companynsel for the district inspector of
schools adopts the submissions made by learned companynsel for
om prakash rana. civil appeal number. 2628 and 2696 of 1985 arise out of
substantially similar facts and those appeals will also be
governed by the view taken in the appeal preferred by om
prakash rana. a special leave petition  s.l.p.


civil appellate jurisdiction civil appeal number 617 of 1963.
appeal from the judgment and order dated march 15 1960 of
the madras high companyrt in case referred number 87 of 1955.
gopal singh and r.n. sachthey for the appellant. rajinder chaudhuri and k.r. chaudhri for the res-
pondent. april 16. 1964. the judgment of the companyrt was delivered by
subba rao j.-this appeal by certificate is preferred
against the order of the high companyrt of judicature at madras
holding that a sum of rs. 12447/- received by the
respondent from the government during the accounting year
1950-51 was number assessable to tax for the assessment year
1951-52.
gajapathy naidu the respondent was supplying provisions to
the government stanley hospital. royapuram madras. during
the financial year april 1 1948 to march 31 1949 he
entered into a companytract with the government for the supply
of bread to the said hospital at the rate of rs. 0-4-6 per
lb. as the respondent was maintaining his accounts on mer-
cantile basis it is companymon case that the amount due from
the government under the terms of the said companytract was
credited in the accounts of the respondent for that year. for the assessment year 1949-50 the income-tax officer
assessed the respondent to income-tax on the basis of the
accounts so made. it appears that some time after march 31
1949 representations were made to the government for
relieving the respondent from the loss sustained in the
supply of bread to the hospital. the government by its
order dated numberember 24 1950 directed payment of
compensation for the loss sustained by the respondent in
respect of the supply of bread to the hospital during the
year 1948-49 under the said companytract. the respondent re-
ceived on that account payment of rs. 12447/- during the
year of account 1950-51. in the assessment year 1951-52
the income-tax officer included the said amount in the
assessment of that year. the assessee inter alia
contended that he received the said sum in respect of the
contract that was entered into by him with the government
during the accounting year 1948-49 and therefore it companyld
number be included in the assessment year 1951-52. this
contention was rejected by the income-tax officer and on
appeal by the appellate assistant companymissioner and also on
further appeal by the income-tax appellate tribunal. but
the companytention received favour with the high companyrt on a
reference made to it under s. 66 1  of the indian income-tax
act 1922 hereinafter called the act. the following two
questions were referred to the high companyrt

whether the sum of rs. 12447/- is assessable to income-
tax? if so whether it has been rightly assessed in the as-
sessment year 1951-52.
on the first question the high companyrt held that the said
amount was directly related to the business of the assessee
and therefore was taxable as a trade receipt. it answered
the first question in the affirmative. numberargument was
raised before us on the question of the companyrectness of this
finding. therefore numberhing further need be said about it. the high companyrt answered the second question in the negative. its companyclusion is based upon the following three steps

the only right of the assessee on the
date when he
supplied the bread was to debit the
government the companytract rate. he was entitled
to numberhing further. the government order
which raised the rates came into existence
long after payment thereunder was ex gratia
and number on the basis of a right. therefore
the amount of rs. 12447 was number and indeed
could number have been debited in the books of
the assessee for the year when the supply of
bread was made to the hospital namely 1948-

those accounts have been closed. but where a receipt is companyrelated to and
arises out of
a companymercial transaction between the parties
the right or liability should be deemed to
have been established in the past accounting
period. that principle is based number only on
any theory of accrual because there was no
legal right existing then but being
correlated to the transaction it l p d isci-
should properly belong to it and the account
should be re-opened when the payment came in. being a receipt of an earlier
year the amount companyld number be included in
the assessment for the year 1951-52.
on the said reasoning the high companyrt held that though in
fact the right to receive the amount did number accrue during
the accounting year 1948-49 it should be deemed to have
related to the year of companytract in respect whereof the
amount was paid. the companymissioner of income-tax has
preferred the present appeal against the said order of the
high companyrt. learned companynsel for the revenue companytended that the high
court misdirected itself on the basis of english decisions
and that on its finding that the amount accrued to the
assessee only during the accounting year 1949-50 it should
have held that the income-tax officer had companyrectly included
it in the assessees income for the year 1950-51. learned
counsel for the respondent argued that the said amount was
paid in respect of the companytract entered into between the
assessee and the government and therefore the said amount
should properly belong to the accounting year 1948-49 and
should number have been included in the assessment of the year
1951-52. to sustain his argument he relied upon certain
english decisions referred to by the high companyrt which held
that in such circumstances the relevant account of the year
when the amount was due under the companytract companyld be reopened
and the additional amount though an ex gratia payment
could be included therein. with great respect to the learned judges of the high companyrt
we must point out that the decision of the high companyrt is
deflected by its reliance on english decisions delivered
under circumstances peculiar to that companyntry and on the company-
struction of provisions which are number in pari materia with
the provisions obtaining in india. the observations made by
this companyrt in companymissioner of income-tax v. vazir sultan
sons 1  may usefully be restated--
while companysidering the case law it is
necessary to bear in mind that the indian
income-tax act is number in pari materia with the
british income-tax statutes it is less
elaborate in many ways subject to fewer re-
finements and in arrangement and language it
differs greatly from the provisions with which
the companyrts in england have had to deal. little help can therefore be gained by
attempting to companystrue
 1  1959 supp. 2 s.c.r. 375.
the indian income-tax act in the light of
decisions bearing upon the meaning of the
income-tax legislation in england. but on
analogous provisions fundamental companycepts and
general principle unaffected by the
specialities of the english incometax
statutes english authorities may be useful
guides. the caution administered by this companyrt shall always be borne
in mind in companystruing the provisions of the indian statute. the provisions of the indian income-tax act shall be
construed on their own terms without drawing any analogy
from english statutes whose terms may superficially appear
to be similar but on a deeper scrutiny may reveal
differences number only in the wording but also in the meaning
a particular expression has acquired in the companytext of the
development of law in that companyntry. the problem raised before us can only be answered on the
true meaning of the express words used in s. 4  1  b  i  of
the act. it reads -
subject to the provisions of this act the
total income of any previous year of any
person includes all income profits and gains
from whatever source derived which-
if such person is resident in the taxable
territories during such year-
accrue or arise or are deemed to accrue or
arise to him in the taxable territories during
such year. we are number companycerned in this case with the expression
deemed to accrue or arise to him as that expression
refers to cases set out in the statute itself introducing a
fiction in respect of certain incomes. in regard to the
question when and whether an income accrues or arises within
the meaning of the first part of the said clause we have a
decision of this companyrt which has clearly enunciated the
principles underlying the said expression that is the
decision in e. d. sassoon and companypany limited v. the
commissioner of income-tax bombay city 1 . in that
decision this companyrt accepted the definition given to the
words accrue and arise by mukerji j. in rogers pyatt
shellack company v. secretary of state for india 2  which is
as follows
both the words are used in companytradistinction
to the word receive and indicate a right to
 1  1955 1 s.c.r. 313 342 1954  26 i.t.r. 27 50.  2   1925  1 i.t.c. 363 371 1925  i.l.r. 52 cal. 1.
l ip d  isci-25 a
receive. they represent a stage anterior to the point of
time when the income becomes receivable and companynumbere a
character of the income which is more or less inchoate. under this definition accepted by this companyrt an income
accrues or arises when the assessee acquires a right to
receive the same. it is companymon place that there are two
principal methods of accounting for the income profits and
gains of a business- one is the cash basis and the other
the mercantile basis. the latter system of accountancy
brings into credit what is due immediately it becomes
legally due and before it is actually received and it
brings into debit expenditure the amount for which a legal
liability has been incurred before it is actually
disbursed. the book profits are taken for the purpose of
assessment of tax though the credit amount is number realized
or the debit amount is number actually disbursed. if an income
accrues within a particular year it is liable to be
-assessed in the succeeding year. when does the right to
receive an amount under a companytract accrue or arise to the
assessee i.e. companye into existence? that depends upon the
terms of a particular companytract. numberother relevant provision
of the act has been brought to our numberice-for there is numbere-
which provides an exception that though an assessee does number
acquire a right to receive an income under a companytract in a
particular accounting year by some fiction the amount
received by him in a subsequent year in companynection with the
contract though number arising out of a right accrued to him
in the earlier year companyld be related back to the earlier
year and made taxable along with the income of that year. but that legal position is sought to be reached by a process
of reasoning found favour with english companyrts. it is said
that on the basis of proper companymercial accounting practice
if a transaction takes place in a particular year all that
has accrued in respect of it irrespective of the year when
it accrues should belong to the year of transaction and for
the purpose of reaching that result closed accounts companyld be
reopened. whether this principle is justified in the
english law it has numberplace under the indian incometax act. when an income-tax officer proceeds to include a particular
income in the assessment he should ask himself inter alia
two questions namely  i  what is the system of accountancy
adopted by the assessee? and  ii  if it is mercantile system
of accountancy subject to the deemed provisions when has
the right to receive that amount accrued? if he companyes to
the companyclusion that such a right accrued or arose to the
assessee in a particular accounting year he shall include
the said income in the assessment of the succeeding
assessment year. numberpower is companyferred on the income-tax
officer under the act to relate back an income that accrued
or arose in a
subsequent year to anumberher earlier year on the ground that
the said income arose out of an earlier transaction. number is
the question of reopening of accounts relevant in the matter
of as certaining when a particular income accrued or arose. section 34 of the act empowers the income-tax officer to
assess the income which escaped assessment or was under-
assessed in the relevant assessment year. subject to the
provisions of the section and following the procedure
prescribed thereunder he can include the escaped income and
re-assess the assessee on the basis of which the earlier
assessment was made. so too under s. 35 of the act the
officers mentioned therein can rectify mistakes either of
their own motion or when such mistakes are brought to their
numberice by a party to the proceedings. for that purpose the
correct item may be taken into companysideration in the matter
of assessment. but strictly speaking even in those cases
there is numberreopening of the accounts of the assessee but a
re-assessment is made or the mistake is companyrected on the
basis of the actual income accrued or received by the
assessee. we do number see any relevancy of the question of
reopening of accounts in companysidering the question when an
assessee acquired a right to receive an amount. we shall number proceed to numberice some of the decisions cited
at the bar. j.p. hall company v. companymissioner of inland
revenue 1  is a decision of the companyrt of appeal under s. 38
of the finance  number 2  act 1915  5 6 geo. v c. 89
dealing with excess profits duty. there it was held that
for the purpose of excess profits duty the profits from the
contracts for the purchase and sale of the companytrol -ear
arose to the appellant companypany in the accounting years in
which the gear was actually delivered and number in the pre-war
period ending the 30th june 1914 in which the companytracts
were made. the price of the companytrol gear in that case was
increased later without there being any companytractual
obligation but purely by a voluntary act of the purchaser. though the additional amounts accrued to the assessee in a
later year it was regarded as analogous to a trade debt due
in respect of the trading operation of the earlier year. on
that principle the accounts were reopened in order to bring
the increase into profits of the assessee in the year of
transaction. this decision was accepted and extended in
severns  h.m. inspector of taxes  v. dadswell 2 . as this
decision is the basis for the high companyrts view we shall
give its facts in some detail. the respondent therein was
granted a licence to mill flour in october 1941 and
carried on the trade of flour milling until september 1945.
as he had number been a
 1   1921 1 12 t.c. 382.  2   1954  35 t.c. 649.
miller at the outbreak of war he was number entitled to the
benefit of a remuneration agreement whereby millers were
compensated by the ministry of food for losses incurred
under wartime arrangements for the purchase of wheat and
sale of flour. having however been informed by the
ministry in 1943 and twice later that the remuneration of
millers who had begun milling during the period of companytrol
was under companysideration he made a claim in 1949 on the same
basis as that laid down in the remuneration agreement and
received payments in settlement. the respondent companytended
that the sums received in 1949 were number trading receipts but
ex gratia payments and alternatively that they were
received after the cessation of his trade and that if there
was a debt arising to the trade at the date of cessation its
value at that date was nil. the companyrt held that the said
payments were ex gratia and it further held that if on the
discontinuance of a trade payment for work already done in a
year had number been finally settled. accounts for that year
could be reopened so as to bring in a gratuitous payment for
such work made in a subsequent year. this judgment cer-
tainly supports the respondent. though it companyld be
distinguished on the ground in that case it was found that
the payment for the work already done had number been finally
settled whereas in the present case there is numberhing on the
record to disclose that it was number finally settled. we
would prefer to base our companyclusion on the ground that we
cannumber extend the meaning of the word accrue -or arise
in s. 4 1  b  i  of the act so as to take in amounts
received by the assessee in a later year though the receipt
was number on the basis of the right accrued in the earlier
year. such amounts are in law received by the assessee only
in the year when they are paid. we cannumber apply the english
decisions in the matter of companystruction of the provisions of
the indian act particularly when they have received an
authoritative interpretation from this companyrt in this view
it is number necessary to companysider further english decisions
cited by learned companynsel for the respondent in support of
his companytention. before a division bench of the allahabad
high companyrt in companymissioner of income tax u.p. v. kalicharan
jagannath 1  when a similar question arose learned companynsel
appearing for the revenue relied upon the said english deci-
sions but the high companyrt rightly refused to act on them
on the ground that they were number relevant in interpreting s.
4 of the indian income-tax act. it further made an attempt
to distinguish those decisions on grounds based upon the
alleged difference in the scope of the provisions of the
respective companyntries. it was said that under the relevant
english act the excess profits duty was payable on
computation of profits arising from a trade or business in
different chargeable accounting periods and therefore. the
emphasis there was more
 1   1961  41 i.t.r. 40.
upon the carrying on of the trade within the chargeable
period than on the income accruing during that period. but
we do number propose to express our view on this aspect of the
question as the relevant sections of the english acts have
number been placed before us. the learned judges after having
rightly refused to rely upon the english decisions
construed the provisions of the indian statute. there. during the accounting period april 1 1945 to march 31
1946 the assessee entered into a companytract with and supplied
fruits and bullock carts to the military authorities at two
different places at rates fixed by the agreement. the
assessee incurred a loss and he submitted a petition for
review under the terms of the -agreement. on numberember 6
1947 the military authorities sanctioned the payment of an
additional sum which was paid to the assessee on february 17
and 24 1948. the incorne-tax department sought to include
this additional sum in the assessment for the accounting
year 1945-46. the high companyrt held that until the order of
review the only right that the assessee had was to claim the
money payable at the rates laid down in the agreement itself
and that the additional amount became payable to the
assessee number by virtue of any right companyferred by the
agreement but because of the order passed in review
directing the payment of the amount and thus creating a
right to this amount in favour of the assessee. as the
right to receive the payment of the additional sum arose
after the closing of the accounting year 1945-46 the high
court proceeded to hold that the income did number accrue or
arise to the assessee in the accounting year.


criminal appellate jurisdiction criminal appeal number 186 of
1956.
appeal by special leave from the judgment and order dated
february 18 1955 of the punjab high companyrt in criminal
appeals number. 389 and 406 of 1954 arising out of the
judgment and order dated june 16 1954 of the companyrt of the
additional sessions judge ferozepur in sessions case number 5
of 1954 and trial number 5 of 1954.
jai gopal sethi vidya dhar mahajan and k. l. arora for
the appellants. s. bindra b. h. dhebar and t. m. sen for the
respondent. 1958. december 4. the judgment of the companyrt was delivered
by
sarkar j.-eight persons were tried or offences under ss. 148 307 and 364 both read with ss. 149 and 34 of the indian
penal companye by the additional ses. sions judge ferozepur. the learned sessions judge acquitted four of the accused
namely het ram teja ram manphul and surja ram as he did
number think that their presence at the occurrence had been
proved beyond reasonable doubt. he companyvicted the remaining
four namely narain jot ram gheru and jalu under ss. 307
and 364 read with s. 34. he sentenced narain jot ram and
gheru to rigorous imprisonment for three years under s. 307
and two years under s. 364. he sentenced jalu to two years
rigorous imprisonment under each section. on appeal by the
convicted persons the high companyrt of punjab maintained the
convictions but reduced the sentences passed on jot ram and
gheru to one years rigorous imprisonment and jalu to the
term of imprisonment already undergone. it maintained the
sentence passed on narain and dismissed his appeal. narain
jot ram and gheru have appealed to this companyrt from that
judgment. the prosecution case is that one sultan was the proprietor
of a field described in the proceedings as plot number 97.
sahi ram had been a tenant of the land. the land had number
been cultivated in the year preceding the occurrence with
which this case is companycerned and the owner had thereupon
resumed possession of it. on june 14 1953 mani ram a son
of the proprietor arrived at the field on a tractor
accompanied by a tabourer moola ram with the object of
ploughing it and found sahi ram actually ploughing. mani
ram turned sahi ram out of the field. sahi ram raised a
protest but eventually left abandoning his plough on the
field. mani ram then began to plough the field
with his tractor. a little later the tractor developed
mechanical trouble and mani ram stopped ploughing and
started attending to it. while mani ram was so engaged
sahi ram arrived at the spot accompanied by seven persons
being the accused earlier named other than narain variously
armed. jalu had companye on a horse. they fell upon mani ram
and assaulted him. moola ram who ran to his rescue was also
assaulted. moola ram then attempted to run away whereupon
sahi ram and his party chased him. while sahi ram and his
party had their attention on moola ram mani ram got into
his tractor and began to drive away from the field. at this
point of time narain arrived on a horse with a gun in his
hand. he told the pursuers of moola ram to leave him as he
was merely a hired man and pointed out that the real culprit
mani ram was about to escape in the tractor. the party then
turned round and pursued mani ram. narain on his horse soon
overtook mani ram and fired at him while he was still on the
tractor in the drivers seat. mani ram fell down from the
tractor which being in motion proceeded on its own and ran
into a tree and stopped. narains horse fell against the
cultivator of the tractor and was injured. mani ram picked
himself up and staggered for shelter into the hut of one
mukh ram which was nearby. the pursuers then came up and
jot ram fired a shot at mani ram inside the hut and so did
gheru. mani ram fell down in the hut. mukh ram threw
himself on the body of mani ram to protect him. gheru and
narain then said that they would burn the hut with mani ram
inside it. sahi ram suggested that it would be better to
carry mani ram to their house and there kill him and burn
his body. mukh ram was then dragged away and mani rams
body was put on a horse and jalu mounted it. the party then
proceeded towards the village by a foot path with mani ram
who was then unconscious as their captive. after they had
gone some distance raghbir the younger brother of mani ram
having heard of the incident came to rescue mani ram. he
met jalu on the horse with mani ram and sahi ram walking
close behind
the rest of the party being at some distance. raghbir asked
jalu to put down mani ram on which jalu threatened to kill
and sahi. ram pointed his sela at raghbir. raghbir then
shot at sahi ram with the pistol he was carrying and the
latter fell down and died soon after. jalu got off the
horse and ran away. before the others companyld arrive raghbir
carried mani ram to the house of one birbal from where he
was later taken to the hospital. the defence was that the prosecution case was wholly false
and the real facts were as follows on the date of the
occurrence sahi ram was ploughing the field when mani ram
and raghbir came there and tried to stop him. there was an
altercation. jot ram and gheru who were in a field nearby
came up and advised sahi ram number to dispute over the matter
with mani ram but have it decided by panchayat. sahi ram
jot ram and gheru then left the field and proceeded towards
the village. while going jot ram numbericed that sahi ram was
carrying a pistol and took it away from him to prevent him
from using it in his excitement. mani ram and raghbir also
went towards the village but by a different route. the par. ties again met at the village shamlat. raghbir abused sahi
ram and fired a shot at him killing him outright. jot ram
apprehending that he might also be shot at fired the pistol
which he had taken from sahi ram and might have injured mani
ram. there were two unknumbern persons with raghbir and mani
ram at this time and they also used their fire arms. mani
ram might have received injuries from these firings also. the accused denied that any of them except jot ram and gheru
were present at the incident. there were thus two companyflicting versions of the same
incident and there were two cross cases based on these
separate versions. we are companycerned with the case started
on the companyplaint of mani ram and companycerning the injuries
suffered by him and his abduction. the other case was
against mani ram raghbir sultan and dalip also a son of
sultan and was based on what the defence version of the
incident in the present case was. in that case raghbir and
mani
ram were charged under s. 302 read with s. 34 of the indian
penal companye for having caused the death of sahi ram and
sultan and dalip were charged under s. 302 read with s. 109
of the same companye in the same companynection. the learned sessions judge who heard both the cases
acquitted mani ram raghbir sultan and dalip of the charges
brought against them and companyvicted the appellants and jalu
in the present case accepting the prosecution version of the
incident. as we have earlier stated the companyviction was
upheld by the high companyrt. in view of the companycurrent findings of fact in the companyrts
below the learned advocate for the appellants companyfined
himself in this companyrt to a question of law which we number
proceed to discuss. it has to be remembered that we are
concerned only with the case in which the appellants had
been tried for offences against mani ram. with the other
case we are number companycerned. in the trial companyrt the prosecution had cited raghbir as a
witness. raghbir however refused to give evidence claiming
protection under art. 20 of the companystitution. the learned
sessions judge held that raghbir companyld number be companypelled to
give evidence and rejected the companytention of the accused
that he was number entitled to the protection. the prosecution
in the end did number offer raghbir as a witness and dropped
him. when the matter came up before the high companyrt in appeal it
was said on behalf of the appellants that the learned
sessions judge was wrong in holding that raghbir was
entitled to the protection of art. 20 and that the trial had
been vitiated by this decision as a result of which the
accused had been deprived of the benefit of raghbirs
evidence. the high companyrt however held that the fact that raghbir was
number examined did number vitiate the trial in any way. it is
this part of the high companyrt judgment that has been
challenged before us by the learned advocate for the
appellants. the high companyrt observed as follows we may
assume that raghbir would
number have supported the prosecution story or that he would
have admitted to having shot sahi ram. the fact that he was
unwilling to make a statement does number companystitute an
irregularity in the trial. had he been companypelled to say
something he would in all probability number have told the
truth and the question is how the case would have been
affected by his statement? in my view whatever he had
stated would number have rebutted the companyvincing testimony of
the other witnesses in the case and therefore the failure of
the companyrt to examine him does number in any way affect the
ultimate decision of the case. the learned advocate companytended that the high companyrt had in
view the provisions of s. 167 of the evidence act though the
section was number in terms referred. we think this is a fair
view to take. the learned advocate said that what the high
court has done is to say that even assuming that raghbirs
evidence did number support the prosecution story that would
number have made any difference to the result because what-
ever he stated would number have rebutted the companyvincing
testimony of the other witnesses. according to the learned
advocate this view was number justified by s. 167. it seems
to us that the expression of the opinion of the high companyrt
on this matter has number been happily worded. the question
under s. 167 is number so much whether the evidence rejected
would number have been accepted against the other testimony on
the record as whether that evidence ought number to have
varied the decision. it is clear that if what raghbir had
said in his evidence had gone to support the defence
version then a serious question would arise as to whether
the decision of the trial companyrt would have been in favour of
the accused instead of against them as it happened to be. it seems to us however that s. 167 does number help the
appellants. it is clear from the record that the prose-
cution though it had cited raghbir as a witness was number
very keen to examine him when raghbir objected to give
evidence the prosecution dropped him. therefore it seems
to us that this is number a case in which evidence can be said
to have been rejected
within s. 167 of the evidence act. the prosecution did number
in fact tender raghbir as a witness. number have we any idea
as to what he would have said had he given evidence. number is
it a case where the defence wanted to call him as a witness. it is number necessary for us number have we been asked to
decide the question whether raghbir was entitled under art. 2o of the companystitution to refuse to give evidence. it is
amply clear from the record that the prosecution did number
offer him as a witness upon his claiming protection under
art. 20. the learned advocate for the appellants then
argued that in this view of the matter it must be held that
a material witness had been kept out of companyrt by the
prosecution and that would give rise to an adverse inference
against the prosecution case and cast serious reflection on
the fairness of the trial. we were referred by learned
advocate to habeeb mohammad v. the state of hyderabad  1  in
this companynection. we agree that if a material witness has
been deliberately or unfairly kept back then a serious
reflection is cast on the propriety of the trial itself and
the validity of the companyviction resulting from it may be open
to challenge
the question then is was raghbir a material witness ? it is
an accepted rule as stated by the judicial companymittee in
stephen seneviratne v. the king  2  that witnesses
essential to the unfolding of the narrative on which the
prosecution is based must of companyrse be called by the
prosecution. it will be seen that the test whether a
witness is material for the present purpose is number whether
he would have given evidence in support of the defence. the
test is whether he is a witness essential to the unfolding
of the narrative on which the prosecution is based . whe-
ther a witness is so essential or number would depend on
whether be companyld speak to any part of the prosecution case
or whether the evidence led disclosed that he was so
situated that he would have been able to give evidence of
the facts on which the prosecution relied. it is number
however that the prosecution is bound to call all witnesses
who may have seen the occurrence and
 1  1954 s.c.r. 475.

a.i.r.  1936  p.c. 289.
so duplicate the evidence. but apart from this. the
prosecution should call all material witnesses. was raghbir then a witness essential to the unfolding of the
prosecution case ? that clearly raghbir was number. the
prosecution case as we have seen was companycerned with the
injuries caused to mani ram and his abduction. according to
the prosecution case raghbir arrived after these offences
had been companymitted after mani ram had been assaulted and
shot at and after he had been put on a horse and had been
carried some distance. the prosecution numberdoubt admits that
raghbir shot sahi ram but says that he did so in self
defence. this incident is an entirely separate incident. it is number necessary to prove it in order to prove the
offences with which the appellants were charged. raghbir
therefore was number a witness whom the prosecution was bound
to call to establish its case. the fact assuming it to
have been so that raghbir would have said in his evidence
that the incidents did number happen as the prosecution stated
may numberdoubt have established a good defence. but if it was
so then he would have been only a witness material for the
defence and number a witness essential to the unfolding of the
narrative on which the prosecution case is based. the
prosecution is number bound to call witnesses to establish the
defence but only witnesses who are material for proving its
own case. indeed since according to the prosecution case
raghbir arrived after the alleged offences were companymitted
he companyld number have given any evidence about the prosecution
case. we therefore think that the companytention of the
learned advocate for the appellants that the prosecution
should have called raghbir to ensure a fair trial or that he
was a witness material to the prosecution case is
unfounded. we do number think that the trial has at all been
vitiated by the failure to call raghbir. it may be pointed
out that the appellants had number sought to produce raghbir as
a witness on their behalf
the learned advocate then addressed us on the question of
the sentence passed on narain. he said that the high companyrt
passed a higher sentence on him
because it was under the impression that he had caused the
only grievous injury that was found on the body of mani ram. the learned advocate pointed out that there was numberevidence
to show that the grievous injury had been caused by narain. it seems to us that this companytention is justified. there is
however evidence to show that narain merited the higher
sentence. it was he who directed the attack against mani
ram. he called the other members of the attacking party to
desist from pursuing moola ram as mani ram was the real
enemy and should be dealt with.


civil appellate jurisdiction civil appeal number 433 of
1977.
appeal by special leave from the judgment and order
dated 13th august 1975 of the allahabad high companyrt in second
appeal number 582/71. p. s. chauhan guj raj singh chauhan and t. s. arora
for the appellant. indra makwana for respondent number 1.
the judgment of the companyrt was delivered by
desai j.-how technical plea of want of jurisdiction
has pushed a petty employee from pillar to post since april
1964 and pilloried him with companyt presumably unbearable by
him is shockingly demonstrated in this case. first respondent joined service as a petty employee in
cane development department of the u.p. state government
somewhere in 1949. on the formation of the u.p. companyoperative
cane union federation limited  hereinafter referred to as the
first appellant  services of the first respondent stood
transferred and were put at the disposal of the appellant
and he was styled as supervisor. at the relevant time he was
rendering service under the second appellant district company
operative sugarcane development society limited  number designated
as zila sahkari ganna vikas samiti limited  budayun a
federating unit of the first appellant and was incharge of
manure godown. he was suspended from service with effect
from october 18 1958. a prosecution was launched against
him for embezzlement of funds of the second appellant in
that he failed to account for 293 1/2 bags of ammonium
sulphate entrusted to him as keeper of manure godown. the
case ultimately resulted in the acquittal of the first
respondent by the high companyrt. disciplinary proceedings were
commenced against him on the same charge and ultimately he
was dismissed from service on april 4 1964. first
respondent filed a suit being o.s. number 30/64 in the companyrt of
civil judge budayun inter alia for a declaration that the
order dismissing him from service was invalid and void and
for a further declaration that he companytinued to be in service
and for arrears of pay till the date of the suit. in the
written statement filed on behalf of defendants  present
appellants  number of companytentions were raised but
only one may be numbericed for the present appeal. the
contention was that the dispute involved in the suit was
between an employee of a companyoperative cane-growers society
and the society and therefore civil companyrt had no
jurisdiction to entertain the suit but the plaintiff must
approach the registrar of companyoperative societies for
reference of dispute to arbitration. the trial companyrt decreed
the suit as per judgment dated may 24 1967 and granted the
declaration prayed for. the appellants preferred an appeal
being civil appeal number 9 of 1967 to the companyrt of district
judge budayun who allowed the appeal holding that the
civil companyrt had numberjurisdiction to entertain the suit
inasmuch as the dispute was between an officer of a company
operative society and the society and the dispute was
touching the business of the society and therefore rule
115 of the companyoperative societies rules enacted by the u.p. government in exercise of the rule making power companyferred by
section 43 of the companyoperative societies act 1912
 hereinafter referred to as the 1912 act  in its
application to the u.p. state would be attracted and the
dispute will have to be resolved by arbitration by the
registrar. in accordance with this finding the appeal was
allowed and the suit was dismissed. first respondent
preferred second appeal number 582/71 to the high companyrt of
judicature at allahabad. the learned single judge allowed
the appeal holding that as the first appellant is governed
by u.p. sugarcane  regulation of supply and purchases  act
1953  1953 act for short  it being both a companyoperative
society and a cane growers companyoperative society and in case
of an officer or servant of such cane growers companyperative
society any dispute between its officers and servants and
such society would be governed by rules 54 and 55 framed
under 1953 act which provide a companyplete machinery for
resolution of disputes and rule 108 does number encompass
dispute arising out of a disciplinary proceeding between
such society and its officers and servants and therefore
in the absence of such provision for companypulsory arbitration
of such dispute the jurisdiction of the civil companyrt is number
barred. the learned judge accordingly allowed the appeal and
remanded the suit to the first appellate companyrt for decision
on merits. hence this appeal by special leave by original
defendants. the only companytention that falls for companysideration in
this appeal is whether the civil companyrt has jurisdiction to
take companynizance of a suit arising out of a disciplinary
proceeding held by a cane growers companyperative society
governed both by 1912 act and 1953 act against its employee
or such dispute falls exclusively within the jurisdiction of
the registrar under the companyoperative societies act to be
resolved by arbitration alone. a brief survey of the
relevant provisions is necessary for the effective disposal
of this companytention. when the suit was filed in the year 1964 the company
operative societies act 1912 as adopted and applied by

p. state was in force in u.p. state. the expression
officer has been defined in s. 2 d  of the act as under

definitions-in this act unless there is
anything repugnant in the subject or companytext-
 d  officer includes a chairman secretary
treasurer member of companymittee or other person
empowered under the rules or the bye-laws to give
directions in regard to the business of the
society. section 43 companyferred power on the local government to make
rules to carry out the purposes of the act for the whole or
any part of the province on various topics enumerated in
various sub-clauses of the section. clause  1  of s. 43 2
is relevant. it reads as under

rules- 1  the state government may for the
whole or any part of the state and for any registered
society or class of such societies make rules to carry
out the purposes of this act. in particular and without prejudice to the
generality of the foregoing power such rules may-
 1  provide that any dispute touching the
business of a society between members or past
members of the society or persons claiming through
a member or past member or between a member or
past member or persons so claiming and the
committee or any officer shall be referred to the
registrar for decision or if he so directs to
arbitration and prescribe the mode of appointing
an arbitrator or arbitrators and the procedure to
be followed in proceedings before the registrar or
such arbitrator or arbitrators and the
enforcement of the decisions of the registrar or
the awards of arbitrators. armed with this power the u.p. state enacted what is
styled as u.p. companyoperative societies rules 1936 rule 115
of the rules reads as under

any dispute touching the business of a
registered society  i  between members or past members
of a society or persons claiming through a member or
past member  ii  or between a member or a past member
or persons so claiming and the society or its companymittee
or any officer of the society  iii  between the
society or its companymittee and any officer of the
society and  iv  between two or more registered
societies shall be decided either by the registrar or
by arbitration and shall for that purpose be referred
in writing to the registrar. explanation 1.-a dispute shall include claims for
amounts due when a demand for payment is made and is
either refused or number companyplied with whether such claims
are admitted or number by the opposite party. explanation 2.-an officer shall include a person
appointed for the supervision of the society. explanation 3.-the business of a society includes
all matters relating to the objects of the society
mentioned in the bye-laws as also those relating to the
election of office-bearers of a society. this rule 115 has to be interpreted in the light of rule 134
which reads as under

a decision of an arbitrator or arbitrators
under these rules if number appealed against within the
said period and an order of the registrar shall as
between the parties to the dispute number be liable to be
called in question in any civil or revenue companyrt and
shall in all respects be final and companyclusive. there is anumberher act which has a bearing on the topic
under discussion styled as u.p. sugarcane  regulation of
supply and purchases  act. 1953. it is an act enacted to
regulate the supply and purchase of sugarcane required for
use in sugar factories and gur rab or khandsari sugar
manufacturing units and matters incidental or ancillary
thereto. it companytemplates setting up of a sugarcane board and
provides for its functions and duties and the methods of
filling up vacancies and regulating its finances. section 20
confers power on the governumber to impose by a numberification a
cess number exceeding the amount prescribed in the section on
the entry of sugarcane into an area specified in such
numberification for companysumption use or sale there. section 28
confers power on the state government to make rules for the
purpose of carrying into effect the provisions of the act. clause 2 n  in this behalf is relevant. it reads as under

power to make rule- 1  the state government
may make rules for the purpose of carrying into effect
the provisions of this act. without prejudice to the generality of
foregoing power such rules may provide for-
xxx xxx xxx
 n  the companystitution operation management
supervision and audit of canegrowers companyoperative
societies and companyncils and the u.p. cane unions
federations and companyditions relating to recognition
of such societies or their federation for purposes
of this act and rules and companytrol of their staff
and finances. armed with this power the u.p. government enacted the

p. sugarcane  regulation of supply and purchase  rules
1954. the relevant rules relied upon are rules 54 55 and

they may be reproduced in extenso

the power to appoint grant leave of absence
to punish dismiss transfer and companytrol secretaries
assistant secretaries and accountants of cane-growers
co-operative societies whether permanent or temporary
shall be exercised by the federation subject to the
general companytrol of the cane companymissioner who may
rescind or modify and order of the federation
provided that the cane companymissioner may himself
exercise any of such powers in case of emergency. similar powers as stated in rule 54 may be
exercised by the society in respect of the other staff
subject to the regulations made by the federation and
the general companytrol of the cane companymissioner. any dispute touching the business of  a  a
cane-growers companyoperative society between members or
between members and society or between two registered
societies or between a society and a factory or
between a cane-grower and a factory  b  a companyncil and
a cane-growers companyoperative society or between a
council and a factory or between a companyncil and a cane
grower regarding the payment of companytribution to a
council by a society or a factory and any other dispute
relating to the business of a companyncil shall be
referred to the cane companymissioner for decision. the
cane companymissioner shall decide it himself or refer it
to arbitration. numbersuit shall lie in a civil or revenue
court in respect of any such dispute. having had the survey of the relevant provisions of the
acts and the rules attention may number be focused on the main
and the only companytroversy in this appeal whether in 1964 when
the first respondent as plaintiff filed the suit for a
declaration that the order dismissing him from service
passed by the first appellant is void and for a declaration
that he companytinues to be in service of the first appellant
in the civil companyrt at budayun that companyrt had jurisdiction
to entertain the suit or number. first appellant is a
federation of cane-growers companyoperative societies and
second appellant is a federating unit or first appellant. at
the relevant time first and second appellants were governed
by the 1912 act as well as by the 1953 act. each as a company
operative society would be governed by the 1912 act and each
as a cane-growers companyoperative society and its federation
for the purpose
of regulation of supply and purchase of sugarcane would be
governed by the 1953 act. the question is whether the civil companyrt would have
jurisdiction to entertain a suit in 1964 filed by an
employee of a companyoperative society against the companyoperative
society for a declaration that the order dismissing him from
service is void and for a declaration that he companytinued to
be in service with an alternative prayer for damages ? this
contention may be examined first inter alia under the
provisions of 1912 act and the rules framed thereunder and
subsequently whether the application of the 1953 act will
have any impact on the companyclusion. we have extracted above the definition of the
expression officer in 1912 act. undoubtedly it is an
inclusive definition. if only the officers enumerated in the
definition are companyprehended within the expression officer
the first respondent is number an officer in the sense that he
was neither a chairman secretary treasurer or a member of
the companymittee. but the expression officer also embraces
such other person empowered under the rules or the bye-laws
to give directions in regard to the business of the society. if ejusdem generis canumber of companystruction were to be invoked
in companystruing the expression officer the expression other
persons must take companyour from the words preceding it and
accordingly other persons therein envisaged must have some
semblance of companyparison in respect of power and authority to
give directions with regard to the business of the society
with the enumerated persons such as chairman secretary
treasurer or member of the companymittee. if every employee of
the society were to be an officer it would number be necessary
for the legislature to provide that persons other than
chairman secretary treasurer or member of the companymittee
must be such who must have under the rules or the bye-laws
the power to give directions in regard to the business of
the society. first respondent was at the relevant time a
supervisor in charge of manure godown drawing a salary of
rs. 150 p.m. numberhing has been pointed out to us by the
appellants with reference either to the rules or bye-laws
that first respondent as supervisor was empowered by any
rules or the byelaws to give directions in regard to the
business of the society. first respondent thus number being
either chairman secretary treasurer or member of the
committee or such other person shown to have been empowered
under the rules or the bye-laws to give directions in regard
to the business of the society unquestionably he was number an
officer of the society. we are companyscious of the fact that
the definition of the expression officer is an inclusive
definition. an inclusive definition widens the etymological
meaning of the expression or term including therein that
which would ordinarily number be companyprehended therein. firstly
keeping apart the expansive definition by including
officers who would otherwise number be companyprehended in the
expression officer it may be necessary to ascertain
whether first respondent giving the expression officer
its ordinary etymological meaning would be companyprehended
therein. it may be numbericed that the legislature never
intended to include every employee or servant of the society
within the expression officer. there is some element of a
right to companymand in the word officer with someone whose
duty it would be to obey. if there is an officer ordinarily
there will be someone subordinate to him the officer
enjoying the power to companymand and give directions and
subordinate to obey or carry out directions. it may be that
even one who is to carry out directions may be an officer in
relation to his subordinates. thus what is implicit in the
expression officer is made explicit by the latter part of
definition which provides that such other person would also
be an officer who is empowered under the rules and bye-laws
to give directions with regard to the business of the
society. if it is companytended that a particular person is an
officer because he is empowered to give directions with
regard to the business of the society it would be a
question of fact in each case whether a particular person is
an officer or a servant or an employee. unless the
appellants are in a position to point out that first
respondent was an officer in the sense that he had power to
command and insist on subordinates to obey his directions
with regard to business of the society it would be
difficult to believe that a person designated as supervisor
drawing a salary of rs. 150 and incharge of manure godown
would be an officer. in this companynection it would be
advantageous to refer to s. 43 g  of the 1912 act which
confers power on the local government to make rules
providing for the appointment suspension and removal of the
members of the companymittee and other officer and for the
procedure at meetings of the companymittee and for the powers
to be exercised and the duties to be performed by the
committee and other officers. numberrule enacted in exercise of
this power was pointed out to us to assert that first
respondent would be such officer as companytemplated in s.
43 g . some illustrative cases were relied upon to point out
that a godown keeper would number be an officer within the
meaning of s. 2 d . in companyoperative central bank v. trimbak
narayan shinganwadikar an accountant serving in a company
operative bank was held number to be an officer of the bank
inasmuch as he had numberpower to give any direction in regard
to the business of the society number was any rule framed
empowering an accountant to give directions. he was held to
be a servant of the society falling outside the definition
of the expression officer. in manjeri s. krishna ayyar v.
secretary urban bank limited anr.  2
legal adviser of a companyoperative society was held to be an
officer of the society within the meaning of s. 2 d . in
kailash nath halwai v. registrar companyoperative society u.p. ors.  1  a division bench of the allahabad high companyrt
speaking through raghubar dayal j.  as he then was  held
that a manager of a shop run by a companyoperative society was
an officer of the society on the finding that he was in a
position to give directions in regard to the business of the
shop a business which was included in the business of the
society. the vital companytention in this matter was whether
rule 115 of the u.p. companyoperative societies rules 1936 was
ultra vires and it was so held. however this decision was
specifically overruled by a full bench of the allahabad high
court in abu bakar anr. v. district handloom weavers company
operative society mau anr.  2  in which it was
specifically held that rule 115 of the rules framed under
the companyoperative societies act 1912 is number ultra vires. on a companyspectus of these decisions and the definition
of the expression officer both expansive definition and
its etymological sense first respondent a supervisor
working as a godown keeper companyld number be styled as an
officer of the companyoperative society. the next limb of the argument is whether rule 115
enacted in exercise of power companyferred by clause  1  of sub-
s.  2  of s. 43 of the 1912 act would be attracted. clause
 1  of s. 43 2  companyfers power to make rules providing for
resolution of disputes envisaged by the clause between the
parties companytemplated by the clause by the registrar by
arbitration. in exercise of this power rules 115 and 134
have been enacted. when rules 115 and 134 are read in
juxtaposition it becomes clear that if the dispute is one
contemplated by rule 115 and arises between the parties
therein envisaged it shall have to be resolved by referring
the same to the registrar who will have to get it resolved
by arbitration either by himself or by arbitrator or
arbitrators appointed by him. rule 134 provides that a
decision of an arbitrator or arbitrators under the rules if
number appealed as therein provided shall be final as between
the parties in dispute and number liable to be called in
question in any civil or revenue companyrt and shall in all
respects be final and companyclusive. if therefore the 1912
act companyfers power to enact rules and the rules so enacted
are statutory and if the rules provide for certain types of
disputes between certain specific parties to be resolved by
arbitration and the decision of the arbitrators is made
final and companyclusive number companyrectible by the civil companyrt or
unquestionable before the civil companyrt undoubtedly the
jurisdiction of the civil companyrt
in respect of such specified disputes between specified
parties enumerated in rule 115 would be wholly excluded. the question boils down to this is a dispute between
an employee other than an officer of a companyoperative society
and the society arising out of a disciplinary proceeding one
which would fall within the ambit of rule 115 ? clause  iii
of rule 115 was relied upon by the appellant to urge that
such a dispute would be one touching the business of a
registered society and it would be one between the society
and its companymittee and any officer of the society. this
contention would stand disposed of in view of our finding
that the first respondent is number an officer of the society. in order to attract rule 115 it must be shown  i  that the
dispute is the one touching the business of the companyoperative
society and  ii  that it is between the society and any
officer of the society. both the companyditions have to be
cumulatively fulfilled before rule 115 is attracted which
would result in ouster of the jurisdiction of the civil
court in respect of dispute in view of the provision
contained in rule 134.
the first question is whether a dispute arising out of
a disciplinary proceeding resulting in dismissal of an
employee of a companyoperative society is one touching the
business of the society. it is unnecessary to dilate upon
this aspect in view of the two decisions of this companyrt. in deccan merchants companyoperative bank limited v. m s.
dalichand jugraj jain ors.  1  s. 91 of the maharashtra
co-operative societies act 1968 came up for companysideration
before this companyrt. after analysing the section and observing
that five kinds of disputes are enumerated in sub-s.  1  of
s. 91 the fifth being disputes touching the business of a
society the companyrt held as under
it is clear that the word business in this
context does number mean affairs of a society because
election of office-bearers companyduct of general meetings
and management of a society would be treated as affairs
of a society. in this sub-section the word business
has been used in a narrower sense and it means the
actual trading or companymercial or other similar business
activity of the society which the society is authorised
to enter into under the act and the rules and its bye-
laws. proceeding from this angle the companyrt held that the dispute
between a tenant of a member of the bank in a building which
has subsequently been acquired by the bank cannumber be said to
be a dispute touching the business of the bank. in reaching
this companyclusion this
court disapproved the view in kisanlal ors. v. company
operative central bank limited 1  which has relied upon before
us. companyfirming the view in the deccan merchants companyoperative
bank 2  this companyrt in companyoperative central bank limited ors. additional industrial tribunal andhra pradesh ors.  3
posed a question to itself whether the dispute between the
co-operative society and the employee touches the business
of the society in the sense explained by this companyrt in that
case. the companyrt answered the companytention as under
applying these tests we have numberdoubt at all
that the dispute companyered by the first issue referred to
the industrial tribunal in the present cases companyld number
possibly be referred for decision to the registrar
under s. 61 of the act. the dispute related to
alteration of a number of companyditions of service of the
workmen which relief companyld only be granted by an
industrial tribunal dealing with an industrial dispute. the registrar it is clear from the provisions of the
act companyld number possibly have granted the reliefs
claimed under this issue because of the limitations
placed on his powers in the act itself. it is true that
s. 61 by itself does number companytain any clear indication
that the registrar cannumber entertain a dispute relating
to alteration of companyditions of service of the employees
of a registered society but the meaning given to the
expression touching the business of the society in
our opinion makes it very doubtful whether a dispute
in respect of alteration of companyditions of service can
be held to be companyered by this expression. since the
word business is equated with the actual trading or
commercial or other similar business activity of the
society and since it has been held that it would be
difficult to subscribe to the proposition that whatever
the society does or is necessarily required to do for
the purpose of carrying out its objects such as laying
down the companyditions of service of its employees can be
said to be a part of its business it would appear that
a dispute relating to companyditions of service of the
workmen employed by the society cannumber be held to be a
dispute touching the business of the society. therefore on the strength of the aforementioned two
decisions it has to be held that a dispute arising out of a
disciplinary proceeding resulting in dismissal of an
employee of the society cannumber be said to be a dispute
touching the business of the society. to some extent this companyclusion can be reinforced by
reference to the u.p. companyoperative societies act 1965
which repealed and replaced
the companyoperative societies act 1912 in its application to
the state of u.p. section 70 of the 1965 act provides for
settlement of disputes. the relevant portion reads as under

disputes which may be referred to
arbitration- 1  numberwithstanding anything companytained in
any law for the time being in force if any dispute
relating to the companystitution management or the
business of a companyoperative society other than a dispute
regarding disciplinary action taken against a paid
servant of a society arises- . it will be crystal clear that while making a statutory
provision for resolution of disputes involving companyoperative
societies by arbitration by the registrar the legislature
in terms excluded a dispute relating to disciplinary action
taken by the society against paid servants of the society
from the purview of the companypulsory arbitration. it is
legislative exposition of the topic under discussion. it
must however be made distinctly clear that at the relevant
time 1912 act was in force and the companytention has to be
answered with reference to 1912 act and the rules framed
thereunder. it is however difficult to believe that the
1965 act which repealed and replaced the 1912 act excluded
from the field of operation that which was already included
under the repealed act. on the companytrary it would appear that
what was implicit in the 1912 act and the rules framed
thereunder that such a dispute did number touch as the business
of the society and was number within the purview of the
compulsory arbitration was made explicit by expressly
excluding it from the field of companypulsory arbitration. however we would rest this judgment on the second limb
of the submission in that number only the dispute must be one
touching the business of the society but it must be between
the companyoperative society and its officer. firstly respondent
being shown number to be one of enumerated officers of the
society number a person empowered to give directions in regard
to the business of the society under the rules or the bye-
laws he would number be an officer within the meaning of the
expression in 1912 act. any dispute between an employee number
being an officer and the society would number attract rule 115.
in that view of the matter such a dispute would fall outside
the purview of rule 115 and it being a civil dispute and
civil companyrt will have jurisdiction to entertain and
adjudicate upon the same. the high companyrt approached the matter from an entirely
different angle. the learned judge held that this case would
be governed by the 1953 act and rules 54 and 55 enacted in
exercise of the powers companyferred by s. 28 of the 1953 act
have provided a specific forum viz. a reference to the
cane companymissioner and appeal to the state
government and as rule 108 is number attracted the dispute is
number required to be referred to arbitration and therefore
the civil companyrt will have jurisdiction to entertain the
suit. with respect it is difficult to subscribe to this
view of the high companyrt. 1953 act has been enacted to
regulate supply and purchase of sugarcane required for use
in sugar factories gur rab and khandsari manufacturing
units. it envisages setting up of a sugarcane board and the
board was entrusted with the function pertaining to the
regulation supply and purchase of cane for sugar factories
and for the maintenance of healthy relation between
occupiers managers of factories cane growers company
operative societies etc. the act also envisaged setting up
of a development companyncil and its functions have been
enumerated in s. 6. on a survey of these provisions it
appears that the act was enacted to regulate relations
between the cane-growers on one hand and sugar factories on
the other. the expression cane growers companyoperative
society has been defined in s. 2 f  to mean a society
registered under the companyoperative societies act 1912 one
of the objects of which is to sell cane grown by its members
and includes the federation of such societies registered
under s. 8 of the said act. the appellant is thus a company
operative society and it being a federation of such company
operative societies it is also included in the expression
cane growers companyoperative society. section 28 2  n  of
the act was relied upon to show that the state government
has power to frame rules amongst others for the companytrol of
the staff and finances. in exercise of this power rules 54
and 55 have been enacted. rule 54 provides that the power to
appoint grant leave of absence to punish dismiss
transfer and companytrol secretaries assistant secretaries and
accountants of cane growers companyoperative societies whether
permanent or temporary shall be exercised by the federation
subject to the general companytrol of the cane companymissioner who
may rescind or modify any order of the federation. there is
a proviso which is number relevant for the present purpose. rule 55 companyfers powers similar to those enumerated in rule
54 to be exercised by the society in respect of other staff
subject to the regulations made by the federation and the
general companytrol of the cane companymissioner. shorn of
embellishment rule 55 companyfers power on the federation
namely the first appellant to make regulations for
appointment granting leave of absence punishment
dismissal and transfer of the staff other than those
enumerated in rule 54 and these regulations have to be made
subject to the general companytrol of the cane companymissioner rule
108 provides for companypulsory arbitration of disputes therein
mentioned and it is companymon ground that a dispute of the
present nature under examination will number be companyered by rule

the high companyrt observed that rules 54 and 55 being a
complete companye in itself with regard to regulation making
power for disciplinary action with a provision for
appeal to the cane companymissioner and rule 108 number being
attracted the civil companyrt will have jurisdiction to
entertain the present dispute. the high companyrt overlooked the
fact that 1953 act neither repeals number replaces 1912 act. a
cane-grower other than a cane-growers companyperative society
would be governed by 1953 act but the cane grower number being
a companyoperative society it would number be governed by the 1912
act. a cane-growers companyoperative society would be governed
with regard to the provisions for law of companyoperative
societies by 1912 act and in respect of its business of
growing and selling cane it would be governed by 1953 act. both acts operate in an entirely different field and are
enacted with different objects in view. 1953 act neither
trenches upon 1912 act number supersedes or supplants any
provision of it. therefore some provisions of 1953 act
cannumber override or supersede the provisions of 1912 act and
by mere reference to the provisions of 1953 act the high
court was in error in totally overlooking and ignumbering the
provisions in 1912 act and the rules enacted thereunder. however in view of our finding that the dispute
brought before the civil companyrt in this case was number a
dispute between a society and its officer and therefore
one of the companyditions for attracting rule 115 having number
been satisfied the civil companyrt will have the jurisdiction
to entertain the suit.