civil appellate jurisdiction civil appeal number. 3752-
3755 of 1982.
appeal by certificate from the judgment and order dated
2.2.1982 of the allahabad high companyrt in wealth tax reference
number 179 of 1978.

c. manchanda raja ram agarwal dr. meera agarwal and

c. mishra for the appellant. dr. v. gauri shankar manumber arora and ms. a. subhashini
for the respondent. the judgment of the companyrt was delivered by

c. agrawal j. these appeals by certificate granted
by the high companyrt under section 29 1  of the wealth tax act
1957  hereinafter referred to as the act  are directed
against the judgment of the high companyrt of allahabad dated
february 2 1982 in wealth tax reference number 179 of 1978.
the appellant f.s. gandhi  hereinafter referred to as
the assessee  owns properties situate at mahatma gandhi
marg and sardar patel marg in civil lines area at allahabad. the lands on which these buildings stand were leased out to
the assessee by the government of uttar pradesh. the leases
in respect of these properties except the property situate
at 30-a mahatma gandhi marg expired in 1958 and the lease
in respect of the property situate at 30-a mahatama gandhi
marg expired in 1963. the government of uttar pradesh issued
numberices to the assessee to hand over vacant possession of
the leasehold lands. the properties are let out to the
tenants and the assessee was receiving rental income from
the same. for the assessment years 197 1-72 1972-73 1973-
74 and 1974-75 the assessee submitted the wealth tax returns
wherein he valued the properties at ten times of the annual
rental income. the wealth tax officer passed assessment
orders wherein he valued the properties at fifteen times of
the annual rental income. on appeal the appellate assistant
commissioner of wealth tax valued the said properties at
twelve and a half times of the annual rental income. on
further appeal the income tax appellate tribunal  hereinaf-
ter referred to as the tribunal  valued the properties at
ten times of the annual rental income. at the request of the assessee the tribunal referred the
following questions of law to the high companyrt

whether on the facts and circumstances of the
case the tribunal was fight in holding that properties in
respect of which leases had expired in 1958 and 1963 and
numberices had been received to hand over the possession were
assets within the meaning of section 2 e  v  of the wealth
tax act and its value was liable to be included in the net
wealth of the assessee? whether on companyrect interpretation of section
2 e  v  and relevant provisions of transfer of property act
the tribunal was right in holding that the interest of the
appellant in respect of properties in dispute was for a
period over six years? whether there was any material before the tribunal
to hold that on the relevant valuation date the property
situated at 30-a mahatama gandhi marg worth ten times of
its annual was rental income while in previous years the
value of the said property was shown and accepted at rs. 1
19000? whether the tribunal was right in holding that the
property at 30-a mahatama gandhi marg was to be valued on
the basis .of its annual income along with other properties
numberwithstanding the property in question was companymercial
property while other properties were residential houses and
whether the multiple upheld by the tribunal is justified in
law and on facts? whether on the facts and circumstances of the case
the multiple of ten times of rental income in respect of
property at 30-a mahatama gandhi marg is number excessive and
wholly unjustified? by order dated february 2 1982 the high companyrt answered
the said questions in the affirmative i.e. in favour of
the department and against the assessee. thereafter the
assessee moved an application under section 29 1  of the act
for grant of certificate of fitness for appeal to this
court. by order dated july 8 1982 the high companyrt granted
certificate of fitness on the view that the following ques-
tion is a question of law which is of general importance and
as such this was a fit case in which an appeal companyld be
filed before this companyrt
whether on the facts and circumstances of the case the
tribunal was fight in holding that the properties in respect
to which leases had expired in 1958 and 1963 and numberices had
been received to hand over the possession were assets within
the meaning of section 2 e  v  of the wealth tax act and its
valuation was liable to be included in the net wealth of the
assessee? this question was amongst the questions referred to the high
court. while dealing with the said question the high companyrt
has held
on the determination of a lease by efflux of time or by
numberice it is the duty of the lessee to deliver vacant
possession of the demised premises to the lessor. if he
continues in possession even after the determination of the
lease his possession is secured inasmuch as the lessor
cannumber evict him otherwise than in due companyrse of law and if
he companytinues in possession without the assent or dissent of
the landlord he would be a tenant at sufferance. his pos-
session would be wrongful but number unlawful. it is wrongful
because the erstwhile tenant companytinues in possession beyond
the expiry of the period fixed in the lease. it is number
unlawful because the landlord cannumber take law into in his
own hands and evict him. but in case the landlord expresses
his assent by acceptance of rent or otherwise to his companytin-
uing in possession this wrongful possession would be company-
verted into a lawful one. the landlords assent may be
expresse or implied. taking into companysideration the facts of the present case
the high companyrt has found that the leases of the properties
expired in 1958 and that of 30-a mahatama gandhi marg in
1963. the high companyrt has observed
there is numberhing on record to show that any attempt was
made whatsoever by the state government to enforce those
numberices given by it and the assessee had companytinued in peace-
ful possession and enjoyment of these properties all along. in our opinion therefore the assent of the landlord to the
assessees companytinuing in possession of these properties can
be inferred and that being so that assessee would be treated
to be a tenant of the same by holding over. according to the high companyrt after determination of the
earlier leases the assessee is lessee of properties under a
new companytract of tenancy and this tenancy is a tenancy from
month to month under section 116 read with section 106 of
the transfer of property act. the high companyrt has further
held that the present tenancy is a tenancy from month to
month for an unstated period and it companyld number be said to be
precarious in nature. the high companyrt was of the view that
the said tenancy is an asset. as defined in section 2 e  of
the act and is number
excluded under sub-clause  v  because the said interest has
been available to the assessee for a period exceeding six
years from the date the new companytract of tenancy came into
existence. in the act as originally enacted section 2 e  v  read
as under in .this act unless the companytext otherwise re-
quires--
x x x x x
 e  assets includes property of every description movable
or immovable but does number include--
x x x x x

any interest in property where the interest is available
to an assessee for a period number exceeding six years. by the wealth tax  amendment  act 1964 which came into
force with effect from april 1 1965 the words from the
date the interest vests in the assessee were inserted at
the end of sub-clause  v  and thereafter sub-clause  v
read as under
any interest in property where the interest is available to
an assessee for a period number exceeding six years from the
date the interest vests in the assessee. by the finance act 1969 clause  e  of section 2 of the
act was substituted by the following provision
 e --assets includes property of every description
movable or immovable but does number include--
 1  in relation to the assessment year companymencing on the 1st
day of april 1969 or any earlier assessment year-

agricultural land and growing crop grass or standing
trees on such land

any building owned or occupied by a cultivator of or
receiver of rent or revenue out of agricultural land
provided that the building is on or in the immediate
vicinity of the land is a building which the cultivator or
the receiver of rent or revenue by reason of his companynection
with the land requires as a dwelling house or a storehouse
or an outhouse

animals

a right to any annuity in any case where the terms and
conditions relating thereto preclude the companymutation of any
portion thereof into a lump-sum grant

any interest in property where the interest is available
to an assessee for a period number exceeding six years from the
date the interest vests in the assessee
 2  in relation to the assessment year companymencing on the 1st
day of april 1970 or any subsequent assessment year--

animals

a right to any annuity in any case where the terms and
conditions relating thereto preclude the companymutation of any
portion thereof into a lump-sum grant

any interest in property where the interest is avail-
able to an assessee for a period number exceeding six years
from the date the interest vests in the assessee. as a result of the aforesaid amendment the provision which
is applicable in relation to the assessment year companymencing
on the 1st day of april 1970 and subsequent assessment
years is sub-clause  2  of clause  e  of section 2. since
the assessments in question relate to assessment years
1971-72 to 1974-75 the matter has to be companysidered in the
light of the provisions companytained in clause  e  of section 2
of the act as substituted by finance act 1969. in framing
questions number. 1 and 2 for reference to the high companyrt the
tribunal has erroneously made a reference to sub-clause  v
of clause  e  of section 2 as it stood prior to the 1969
amendment. the high companyrt while answering these questions
and granting the certificate of fitness for appeal to this
court did number numberice this error. the provisions of section
2 e  v  as amended in 1964 are identical with the provisions
of section 2 e  2  iii  as substituted by the 1969 amend-
ment. the error is therefore of numberconsequence and the
matter has been examined by us in the
ight of the provisions companytained in clause  e  of section 2
as substituted in 1969.
shri r.r. agarwal the learned companynsel for the appel-
lant has number disputed the findings recorded by the high
court that the assessee was n possession of the leasehold
properties as a tenant holding over and hat the said tenancy
was a tenancy from month to month for an restated period. the submission of shri agarwal is that the interest of he
assessee under the said tenancy companyld number be regarded as an
asset ruder section 2 e  of the act and that it has to be
excluded because he said interest cannumber be regarded as an
interest available to the assessee for a period exceeding
six years from the date the interest vests in the assessee. the aforesaid companytention of shri agarwal involves inter-
pretation of the words where the interest is available to
an assessee for a period number exceeding six years from the
date the interest vests in the assessee companytained in sec-
tion 2 e  2  iii  of the act. the word available is pre-
ceded by the word is and is followed by the words for a
period number exceeding six years. the word is although
numbermally referring to he present often has a future mean-
ing. it may also have a past signification as in the sense
of has been  see blacks law dictionary 5th edn. p. 745
we are of the view that in view of the words for a period
number exceeding six years which follow the word available
the word is must be companystrued as referring to the present
and the future. in that sense it would mean that the inter-
est is presently available and is to be available in future
for a period number exceeding six years. the high companyrt has
construed the word is to mean has been. as per the
construction placed by the high companyrt in a case where an
interest has been created for a period exceeding six years
it would be included in he assets of the assessee under
section 2 e  of the act only after the expiry of the period
of six years even though the interest is available to he
assessee for a period exceeding six years from the date the
interest tests in the assessee. the companystruction placed by
the high companyrt instead of placing emphasis on the nature of
the interest attaches importance to the enjoyment of the
interest. we are unable to subscribe to that view. in our
opinion the question as to whether the interest should be
included or excluded from the assets of the assessee under
section 2 e  2  iii  of the act has to be companysidered in the
light of he nature of interest on the relevant date. under
the said provision he relevant date is the date on which the
interest vests in the assessee. therefore the matter has to
be companysidered by examining the nature of the interest on the
date the interest vests in the assessee. this view of ours finds support from the decision of
this companyrt in companymissioner of wealth tax madras v. smt. muthukrishna ammal 1969 2 scr 1 wherein the provisions of
section 2 e  v . as it stood prior to the amendment of 1964
have been companysidered. in that case the respondent-assessee
had obtained on lease from government certain salt pans
under two agreement dated january 1 1943 and january 1
1945 and each lease was to endure for 25 years but was
liable to be determined by numberice on either side at the
close of any salt manufacturing season. in relation to
wealth tax assessment years 1959-60 a question arose as to
whether the assessees interest in the salt pans for the
unexpired period of the two leases was liable to be included
in the companyputation of her net wealth. this companyrt held that
the interest of the lessee under each lease was precarious
inasmuch as it was liable to be determined by numberie by the
government at the expiry of any manufacturing season and
that the leasehold interest in the salt pans was number avail-
able to the assessee for a period exceeding six years from
the valuation date. it was urged on behalf of the revenue
that since the assessee had enjoyed the rights under one
lease for 16 years and in the other lease for 14 years and
on the valuation date both the leases were outstanding the
rights were assets within the meaning of the act and that
the expression is available to an assessee for a period number
exceeding six years in clause  v  of section 2 e  means is
and has been available to an assessee for the period of six
years before the date of valuation. it was also urged that
if interest in property though revocable has remained unre-
voked for more than six years before the valuation date the
interest would be an asset within the meaning of section
2 e . this companyrt rejected the said companytention and held as
under
we are unable to agree with that companytention. the expression
used by parliament is is available to an assessee for a
period number exceeding six years and it must mean that the
assessee though he has interest in property at the valuation
date the interest will remain available for a period number
exceeding six years. if it is to remain available for six
years or for a shorter period the interest will fall within
the exception if it is to remain available for a period
exceeding six years it will fall within the definition of
assets and its value will be liable to be included in the
net wealth of the assessee. in that case this companyrt has numbericed the amendment intro-
duced in sub-clause  v  of section 2 e  by the wealth tax
 amendment  act
1964 but did number companysider it necessary to deal with it
because the said matter related to the period prior to the
said amendment. the high companyrt has sought to distinguish this decision
on the view that the position has changed after the amend-
ment introduced in 1964 and that the insertion of the words
from the date the interest vests in the assessee means
that if an interest has been available to the assessee for a
period exceeding six years from the date the interest vests
in the assessee it would be an asset while prior to its
amendment if the interest was number available to an assessee
for a period number exceeding six years it companyld number be treated
as an asset. the high companyrt has observed that as a result of
the amendment of 1964 section 2 e  v  can be interpreted to
mean that if an interests has been available to an assessee
for a period exceeding six years from the date the interest
vests in the assessee it would be asset. we are unable to
agree with the said view. while companystruing the words is
available to an assessee for a period number exceeding six
years this companyrt in companymissioner of wealth tax v. smt. muthukrishna ammal  supra  has rejected the companytention
urged by the revenue that the said words mean is and has
been available to the assessee for a period of six years
and this companyrt has companystrued the said words to mean that
the interest will remain available for a period number exceed-
ing six years meaning thereby that the interest must be
such that on the relevant date it is available presently and
is available for a period number exceeding six years in future. the only change which was brought about in section 2 e  v
as a result of the amendment introduced in 1964 whereby the
words from the date the interest vests in the assessee
were inserted in that sub-clause was that prior to the said
amendment the relevant date was the valuation date and the
availability of interest had to be seen with reference to
that date and as a result of the amendment of 1964 the
relevant date became the date on which the interest vests in
the asseses and therefore the availability of the interest
was to be seen with reference to the date on which the
interest vests in the assessee. but the requirement that on
the relevant date the interest would be available in future
for a period exceeding six years as held by this companyrt in
commissioner of wealth tax v. smt. muthukrishna ammal
 supra  remained unaltered. in this companytext it may also be mentioned that companymis-
sioner of wealth tax v. smt. muthukrishna ammal  supra  was
decided by this companyrt on september 6 1968. the finance act
1969 whereby clause  e  of section 2 of the act was substi-
tuted was enacted by parliament on may 13 1969. in the
amended provisions of clause  e  parliament has repeated
the same language namely where the interest is avail-
able to an assessee for a period number exceeding six years in
item  v  of sub-clause  1  and in item  iii  of sub-clause
 2 . it must be assumed that while enacting the finance act
1969 parliament was aware of the companystruction placed by
this companyrt on these words in companymissioner of wealth tax v.
smt. muthukrishna ammal  supra . in repeating the said
words in the amended clause  e  of section 2 parliament
must be taken to have used the said words to bear the mean-
ing which has been put upon them by this companyrt in companymis-
sioner of wealth tax v. smt. muthukrishna ammal  supra . in the instant case it has been found that after the
expiry of the leases of the assessee in the years 1958 and
1963 the assessee companytinued in possession under a new company-
tract of tenancy and the said tenancy was a tenancy from
month to month for an unstated period. the said tenancy was
precarious in nature because it companyld be terminated by the
lessor viz. the government of uttar pradesh at any time
by a numberice under section 106 of the transfer of property
act. the fact that such a numberice was number given cannumber mean
that the interest created by the said new tenancy was an
interest available to the assessee for a period exceeding
six years from the date the interest vested in the assessee. in the circumstances in view of section 2 e  2  iii  the
said interest companyld number be treated as an asset of the asses-
see for the purpose of the act. our attention has been invited to the decision of the
allahabad high companyrt in purshottam dass tandon and others v.
state of u.p. lucknumber and others a.i.r. 1987 all. 56. from
the said decision it appears that a number of petitions were
filed in the allahabad high companyrt under article 226 of the
constitution of india by lessees who had been granted leases
of nazul lands in civil lines area of allahabad and whose
leases have expired and who were seeking renewal of those
leases. after companysidering the various orders that were
passed by the government of uttar pradesh from time to
time the high companyrt while disposing of the said petitions
has given the following to the opposit parties

grant fresh leases to all those who had deposited the
premium or at least one instalment on terms and companyditions
mentioned in 1959 order read with 1960 order

issue numberices to all those lessees to whom numbernumberice
was issued and determine their premium etc. on terms and
conditions mentioned in 1959-60 orders expeditiously

determine premium etc. of others to whom numberices were
issued but it companyld number be finalised for one reason or other
at an early date

determine rate of premium etc. for premises which are
used as residential cum companymercial purpose in light of 1965
order

determine rate of premium used for companymercial purpose in
light of various orders issued till 1965 and

lessees shall after grant of fresh leases file the
necessary forms etc. within one month before the prescribed
authority under urban ceiling act 1976  act 33 of 76  if it
had already number been filed who shall proceed to decide the
same as expeditiously as possible. in view of the aforesaid directions that have been given
by the high companyrt it can be said that the assessee whose
leases expired in 1958 and 1963 can ask for grant of fresh
leases on the terms and companyditions mentioned in 1959 and
1960 orders issued by the government of uttar pradesh. in
other words it can be said that in the relevant assessment
years the assessee had the right to obtain fresh leases for
the lands of the properties in question. but there is numberh-
ing to show that in pursuance of the said right fresh leases
have been granted by the government of u.p. in respect of
those lands and such leases were available to the assessee
during the assessment years in question. for the reasons aforesaid it must be held that the
properties in respect of which leases had expired in 1958
and 1963 and numberices had been received by the assessee to
hand over the possession were number assets within the meaning
of section 2 e  2  iii  of the act and the valuation of the
same was number liable to be included in the net wealth of the
assessee. question number 1 referred by the tribunal to the
high companyrt must therefore be answered in the negative i.e. in favour of the assessee. question number 2 referred by the
tribunal to the high companyrt is companynected with question number 1
and both the questions were companysidered by the high companyrt
together. since question number 1 is answered in favour of the
assessee question number 2 must also be answered in the nega-
tive i.e. in favour of the assessee and it must be held
that the tribunal was number right in holding that the interest
of the assessee in respect of the properties in dispute was
for a period over six years for the purpose of section
2 e  2  iii  of the act.


original jurisdiction writ petition number 136 of 1957.
writ petition under art. 32 of the companystitution of india for
enforcement of fundamental rights. purshottam tricumdas mukund r. mody anil b. divan ramesh

shroff and i. n. shroff for the petitioner. k. daphtary solicitor-general of india r. ganapathy
iyer and r. h. dhebar for respondent. 1960. august 17. the judgment of the companyrt was delivered
by
subba rao j.-this is a petition under art. 32 of the
constitution for the issue of a writ of mandamus or a writ
in the nature of mandamus or any other appropriate
direction order or writ to direct the respondent the union
of india to withdraw or cancel the numberification dated
august 31 1957 recognising the stock exchange bombay
under s. 4 of the securities companytracts  regulation  act
1956  xlii of 1956   hereinafter referred to asthe act  . at the outset it is necessary to numberice briefly how a stock
exchange is worked and how it is companytrolled or regulated by
the state. stock exchange means any body of
individuals whether incorporated or number companystituted for
the purpose of assisting or company. trolling the business of
buying selling or dealing in securities . the history of
stock exchanges in foreign companyntries as well as in india
shows that the development of joint stock enterprise would
never have reached its present stage but for the facilities
which the stock exchanges provided for dealing in
securities. they have a very important function to fulfil
in the companyntrys econumbery. their main function in the words
of an eminent writer is to liquify capital by enabling a
person who has invested money in say a factory or a
railway to companyvert it into cash by disposing of his share
in the enterprise to someone else . without the stock
exchange capital would become immobilized. the proper
working of a stock exchange depends upon number only the moral
stature of the members but also on their calibre. it is a
trite saying that a jobber or dealer is born and number made. in the words of the same author a jobber must be a man of
good nerve companyl judgment and ready to deal
under any ordinary companyditions and he must be a man of
financial standing companysiderable experience with an
understanding of market psychology. there are three modes
of dealing in shares and stores namely  1  spot delivery
contract i.e. a companytract which provides for the actual
delivery of securities on the payment of a price thereof
either on the day of the companytract or the next day excluding
perhaps the period taken for the despatch of the securities
or the remittance of money from one place to anumberher  2
ready delivery companytract which means a companytract for the
purchase or sale of securities for the performance of which
numbertime is specified and which is to be performed
immediately or within a reasonable time  3  forward
contracts i.e. companytracts whereunder the parties agree for
their performance at a future date. if the stock exchange
is in the hands of unscrupulous members the second and
third categories of companytracts to buy or sell shares may
degenerate into highly speculative transactions or what is
worse purely gambling ones. where the parties do number
intend while entering into a companytract of sale or purchase of
securities that only difference in prices should be paid
the transaction even though speculative is valid and number
void for there is numberlaw against speculation as there is
against gambling . but if the parties do number intend that
there should be any delivery of the shares but only the
difference in prices should be accounted for the companytract
being a wager is void. more often than number it is difficult
for a companyrt to distinguish one from the other as a wagering
transaction may be so cleverly camouflaged as to pass off as
a speculative transaction. these mischievous potentialities
inherent in the transactions if left uncontrolled would
tend to subvert the main object of the institution of stock
exchange and companyvert it into a den of gambling which would
ultimately upset the industrial econumbery of the companyntry. for that reason in bombay as early as 1925 the bombay
securities companytracts companytrol act was passed to regulate and
control companytracts for the purchase and sale of securities in
the city of bombay and elsewhere in the bombay presidency. under s. 6 of that act
every companytract for the purchase or sale of securities
other than a ready delivery companytract entered into after a
date to be numberified in this behalf by the provincial
government shall be void unless the same is made subject to
and in accordance with the rules duly sanctioned under s. 5
and every such companytract shall be void unless the same is
made between members or through a member of a recognised
stock exchange and numberclaim shall be allowed in any civil
court for the recovery of any companymission brokerage fee or
reward in respect of any such companytract . but this act
defined ready delivery companytract to mean a companytract for
the purchase or sale of securities for performance of which
numbertime is specified and which is to be performed
immediately or within a reasonable time . it was also
stated therein by way of explanation that what was
reasonable time was in each particular case a question of
fact. this act did number achieve its purpose for under s. 6
thereof companytracts entered into in companytravention of the
provisions of that section were number made illegal but only
void with the result that even members of a stock exchange
number recognised under that act were able to do business in
that line. what is more the explanation to the definition
of ready delivery companytract which is excluded from the
operation of the act was so elastic that in the name of
ready delivery companytracts unrecognised stock exchanges. and
individuals were able to carry on business in forward
contracts.  -ambling in shares went on unchecked in bombay
as elsewhere. after the second world war the post-war boom
gave an unhealthy impetus to the stock exchange
transactions. various expert companymittees appointed by the
government from time to time companysidered the question of
regulation of stock exchanges and the latest of those
committees was the gorwalla companymittee. the report of that
committee was circulated to the principal stock exchanges
chambers of companymerce and other interested associations and
individuals. after companysidering the reports of the
committees and the companyments made thereon by the various
bodies the government introduced a bill in the parliament
which became law on
september 4 1956. the act was passed to prevent
undesirable transactions in securities by regulating the
business therein by prohibiting auction and by providing for
certain other matters companynected therewith. the act mainly
provides for the recognition of stock exchanges and for
controlling the rule-making of the said exchanges. section
4 of the act empowers the central government to recognise
stock exchanges subject to two companyditions. section 13
enables it to issue a numberification that in a particular
state or area every companytract which is entered into after the
date of the numberification otherwise than between members of a
recognised stock exchange in such state or area or through
or with such member shall be illegal. without resorting to
such drastic procedure the government is also given power to
prohibit companytracts in certain securities in certain areas
from doing business without obtaining a licence. spot
delivery companytracts are excluded from the operation of ss. 13 14 15 and 17 of the act unless the central government
by numberification thinks fit to extend the operation of s. 17
of the act to such companytracts. section 19 prohibits
formation of stock exchanges other than recognised ones
except with the permission of the central government. it
declares all auctions in securities entered into after the
commencement of the act illegal. it also provides penalties
for the infringements of the provisions of the act. in
short the act companyfers an effective companytrolling power on the
central government over the stock exchanges. in exercise of the power companyferred upon the central
government to make rules the central government made rules
described as the securities companytracts  regulation  rules
1957 providing inter alia for the qualification for
membership of a stock exchange seeking recognition the
procedure for recognition the manner of keeping accounts
the submission of annual reports the companystitution of
governing bodies and for taking disciplinary action against
any member of such bodies and other similar matters. in greater bombay there were two stock exchanges
one called the native share stock brokers association
and the other the indian stock exchange limited. the former
was in existence for more than. 80 years and it was
registered under the bombay securities companytracts companytrol
act 1925. its rules and bye-laws were approved by the
government of bombay and it was doing business in both
forward as well as ready transactions. it has a clearing
house and was doing extensive business in different kinds of
securities. the other namely the indian stock exchange limited was a
company incorporated under the indian companypanies act 1913
as a companypany limited by guarantee without any share capital. the said companypany had been functioning since 1937 but was
number registered under the bombay securities companytracts companytrol
act 1925. it was mainly doing business in tata ordinary
and bombay dyeing shares and had hardly any investment
business. number being registered under the bombay securities
contracts companytrol act 1925 it companyld only deal in ready
delivery companytracts and as the definition of ready
delivery companytract under that act was elastic and as
forward companytracts were number made illegal thereunder this
exchange was also doing speculative business mainly in the
said two shares. after the act came into force both the exchanges applied
for recognition under the act. the government after
considering the relative merits and the relevant
circumstances issued a numberification dated august 31 1957
recognising the native share and stock brokers association
under the name the stock exchange bombay subject to the
conditions mentioned therein. one of the companyditions imposed
was that the members of the indian stock exchange limited
would be entitled to apply for membership of the stock
exchange bombay provided they were active members of the
indian stock exchange limited for 12 months immediately
preceding august 6 1957 and they were also eligible under
r. 8 1  of the securities companytracts  regulation  rules
1957 to be members of a recognised stock exchange. the
numberification
further gave some companycessions to such active members in the
matter of payment of the membership fee. they had to apply
for membership before october 15 1957 or before such
period as the board of the recognised stock exchange might
think fit to extend. it appears that within the extended
time a number of active members of the indian stock exchange
limited as defined by the numberification applied for
membership and were admitted as members of the recognised
stock exchange. though three years have passed by no
member other than the petitioner has so far thought fit to
question the validity of the numberification that is the
validity of the numberification has been accepted and the
recognised stock exchange has become stabilised on that
basis. subsequent to the filing of. the petition on
numberember 30 1957 the central government issued anumberher
numberification applying s. 13 of the act to greater bombay
with the result that thereafter every companytract in shares
between the members of any unrecognised stock exchange in
that city would be illegal. the petitioner had become a member of the indian stock
exchange limited on february 27 1956 but he had number been
transacting any business on the floor of the said stock
exchange either on his own account or on account of his
clients. he avers in the affidavit filed in support of the
petition that he has been doing companysiderable business on his
own account or on account of his clients through other
members of the stock exchange and that he intends to
commence business directly in ready delivery companytracts. as
the impugned numberifications affect his right to do business
he seeks for the issue of a writ of mandamus for the
aforesaid reliefs. shri purshottam trikumdas learned companynsel for the
petitioner raised before us the following companytentions  1
under art. 19 1  g  of the companystitution the petitioner has a
fundamental right to carry on the business in shares and the
numberification dated august 31 1957 and the subsequent
numberification dated numberember 30 1957 imposed unreasonable
restrictions on his said right  2  the numberification dated
august 31
1957 is void inasmuch as it is number sanctioned by the
provisions of s. 4 of the act and  3  the companydition 2 i  a
of the said numberification classifying members of a the indian
stock exchange limited as active members and members who
were number active infringes the fundamental right enshrined in
art. 14 of the companystitution and that as the said companydition
is number severable the entire numberification is bad. learned solicitor-general in addition to companytroverting the
said companytentions pressed on us to hold that as the vires of
the act was number questioned the numberification issued
thereunder companyld number be questioned by the petitioner on the
ground that it companytravened one or other of the said
fundamental rights. it would be companyvenient to take first the companytention of the
learned solicitor-general as it is in the nature of a
preliminary point. he says that as the validity of the act
was number questioned the numberification issued in the exercise
of the power companyferred thereunder cannumber also be questioned. there is a fallacy underlying this companytention. under art. 13 2  of the companystitution the state shall number make any law
which takes away or abridges the rights companyferred by part
iii thereof and law is defined under art. 3 a  to
include a numberification. therefore the validity of a
numberification issued by the state it being law is as much
vulnerable to attack as that of the act itself on the ground
that it infringes any of the fundamental rights. if an act
is a self-contained one and the numberification issued there-
under only restates the provisions of the act the validity
of the numberification cannumber obviously be questioned as the
validity of its companytents were accepted. but if the act
confers a power on the state in general terms and the
numberification issued thereunder infringes one or other of the
fundamental rights the validity of the act cannumber equally
obviously prevent an attack on the numberification. in the
former case the numberification only reflects the provisions of
a valid act and in the latter it is the numberification and number
the act that infringes the fundamental rights. take an
example of an act imposing restrictions on the freedom of
speech. the act authorizes the state to impose companyditions
on
the said freedom in the interests of security of state. the
act is companystitutionally valid. but if a numberification
issued under that act imposes unreasonable restrictions
infringing the said rights it is liable to be challenged on
the ground of unconstitutionality. so too in the instant
case s. 4 of the act empowers the central government to
issue a numberification recognising a stock exchange subject to
certain companyditions expressed in general terms. the general
terms can companyprehend both reasonable and unreasonable
restrictions. if the numberification imposes unreasonable
restrictions-if the companytention of the learned companynsel for
the petitioner be accepted the restrictions imposed would
certainly be unreasonable-it is liable to be set aside. we
cannumber therefore accept this companytention. re.  1  article 19 1  g  of the companystitution states that
every citizen shall have the right to carry on any business
but the state in empowered under el.  6  of the said article
to make any law imposing in the interest of the general
public reasonable restrictions on the exercise of the said
right. briefly stated the argument is that the companybined
effect of the two numberifications is that the petitioner is
driven out of his business of stock exchange in as much as
it is said they companyfer a monumberoly on the stock exchange
bombay and the rules of the said stock exchange exclude any
outsider from becoming its member without obtaining a
numberination and that too only in the place of an existing
member. to put it differently the argument proceeds that
under the rules of the stock exchange bombay membership is
number thrown open to the public. this leads us to the
consideration of the relevant provisions of the stock
exchange rules bye-laws and regulations 1957. under r. 3
the membership of the exchange shall companysist of such number
of members as the exchange in general meeting may from time
to time determine. it is companymon case that the membership of
the exchange is number limited. under the heading election
of new members  the rules prescribe the companyditions of
eligibility for election as a member of the exchange. these
rules adopt the provisions of r. 8 of the securities
contracts  regulation  rules 1957. the rules do number
contain any limitation on the eligibility of a person to be
elected as a member such as that the person should be
numberinated in the manner provided by the rules or that he
should companye only in the vacancy caused by anumberher member
ceasing to be one in one of the ways mentioned thereunder. the words numberperson in r. 17 are companyprehensive enumbergh to
take in any outsider seeking for election as a member. rule 22 provides for an application for admission in the
form prescribed in appendix a to the rules. this rule also
does number impose any such limitation. the admission
application form in appendix a is also general in terms and
enables any person of india to apply for membership provided
he agrees to abide by the companyditions imposed therein. in
the form also there is numbersuch limitation. but it is
contended that a fair reading of the provisions of rr. 20
and 21 makes it clear that a candidate for admission is
confined only to two categories viz.  1  a candidate
numberinated by a member or a legal representative of a
deceased member seeking admission to membership in the place
of the deceased and  2  a person recommended for admission
to membership in the place of a member who has forfeited his
right to membership. a careful scrutiny of the rules does
number bear out the companytention number do they enable us to cut
down the wide amplitude of rr. 17 to 22. rule 10 says
when a right of membership is forfeited to
or vests in the exchange under any rule bye-
law or regulation of the exchange for the
time being in force it shall belong absolutely
to the exchange free of all rights claims or
interest of such member or any person claiming
through such member and the governing body
shall be entitled to deal with or dispose of
such right of membership as it may think fit. rule 54 is to the following effect
a members right of membership shall lapse to and vest in
the exchange immediately be is declared a defaulter. rule 11 is as follows

a member of number less than seven years
standing who desires to resign may numberinate a
person eligible under these rules for
admission to membership of the exchange as a
candidate for admission in his place

the legal representatives of a deceased member or his
heirs or the persons mentioned in appendix c to these rules
may with the sanction of the governing board numberinate any
person eligible under these rules for admission to
membership of the exchange as a candidate for admission in
the place of the deceased member. in companysidering such
numberination the governing board shall be guided so far as
practicable by the instructions set out in appendix c to
these rules. appendix b gives the numberination forms number. 1 and 2 to be
filled by a member or a legal representative as the case
may be under r. 11  a  and  b . number it would be companyvenient
to read rr. 20 and 21. they are
as follows
rule 20 a candidate for admission except a candidate
applying for a membership vesting in the exchange must
obtain a numberination in the manner provided in these rules. rule 21 a candidate for admission must be recommended by
two members numbere of whom should be a member of the governing
board. the recommenders must have such personal knumberledge
of the candidate and of his past and present circumstances
as shall satisfy the governing board. the argument is that under r. 20 a candidate for ad. mission
falls under two categories namely  1  a candidate who must
obtain a numberination in the manner provided in the rules
i.e. r. 11  a  and  b  and  2  a candidate applying for a
membership vesting in the exchange and therefore these
two categories exhaust the candidates for admission and that
when under r. 21 the same words a candidate for admission
 are used they must carry the same meaning as in r. 20
that is they must be companyfined only to the two categories
comprehended by r. 20. this argument appears to be
plausible and even incontrovertible if
rr. 20 and 21 are taken out of their setting and companystrued
independently of other rules. but in the setting in which
they appear they can bear only one meaning namely that r.
20 provides for numberination only in the case of a candidate
for admission who requires a numberination in the manner
provided by the rule and r. 21 provides for all the
candidates for admission that they should be recommended by
two members who have personal knumberledge of the candidates. to put it in other words under the rules candidates for
admission fall under three groups viz.  1  candidates
falling under r. 11  a  and  b   2  candidates applying
for membership vesting in the exchange and  3  other
candidates. all the three categories of candidates must be
recommended by two members. but the candidates belonging to
the first category shall in addition be numberinated in the
manner provided by the rules. we therefore hold that the
stock exchange rules do number operate as a bar against the
petitioner becoming a member of the stock exchange subject
to the rules governing such application. the petitioner has
the right to do business in shares in spite of the
numberifications he can still do business in spot delivery
contracts. he can apply to become a member of the stock
exchange subject to the companyditions laid down by the rules. the act the validity of which he has number chosen to question
enables the state to give or refuse recognition to any stock
exchange and it has chosen to give recognition to the stock
exchange bombay subject to the companyditions prescribed. the
restrictions in our view are number unreasonable having
regard to the importance of the business of a stock exchange
in the companyntrys national econumbery and having regard to the
magnitude of the mischief sought to be remedied in the
interest of the general public. at anumberher place we have
already dealt with the necessity for stringent rules
governing this type of business for the reasons mentioned we
reject the first companytention. re.  2  the second companytention also has numbermerits. the
criticism is that companydition 2 i   a  annexed to the
numberification cannumber be supported on the basis of any
of the provisions of s. 4 of the act. companydition 2  i  reads
as follows
the members of the indian stock exchange limited
bombay will be entitled to apply for membership of the
stock exchange bombay provided they fulfil or companyply with
the following terms and companyditions-
 a  they have been active members of the indian stock
exchange limited for twelve months immediately preceding
the 6th august 1957.
explanation active members for purpose of this companydition
means members who have themselves transacted business
regularly on the floor of the indian stock exchange limited
either on their own account or on account of their clients. to appreciate the argument it is also necessary to read the
material provisions of s. 4 of the act. section 4  1  if the central government is satisfied
after making such inquiry as may be necessary in this behalf
and after obtaining such further information if any as it
may require-
 a  that the rules and bye-laws of a stock exchange applying
for registration are in companyformity with such companyditions as
may be prescribed with a view to ensure fair dealing and to
protect investors
 b  that the stock exchange is willing to companyply with any
other companyditions  including companyditions as to the number of
members  which the central government after companysultation
with the governing body of the stock exchange and having
regard to the area served by the stock exchange and its
standing and the nature of the securities dealt with by it
may impose for the purpose of carrying out the objects of
this act and
 c  that it would be in the interest of the trade and also
in the public interest to grant recognition to the stock
exchange
it may grant recognition to the stock exchange subject to
the companyditions imposed upon it as aforesaid and in such form
as may be prescribed. the companyditions which the central government
may prescribe under clause  a  of sub-section  1  for the
grant of recognition to the stock exchanges may include
among other matters companyditions relating. to--

the qualifications for membership of stock exchanges

the manner in which companytracts shall be entered into and
enforced as between members

the representation of the central government on each
of the stock exchanges by such number of persons number
exceeding three as the central government may numberinate in
this behalf and

the maintenance of accounts of members and their audit
by chartered accountants whenever such audit is required by
the central government. the argument proceeds that companydition 2 i  a  enables only
the active members of the indian stock exchange limited to
apply for membership of the stock exchange bombay and that
such a companydition can be imposed only if it amounts to a
qualification of membership within the meaning of sub-s.  2
of s. 4 as the other companyditions in that sub-section are
obviously inapplicable. it is further pointed out that sub-
s.  2  refers back to sub-s.  i  a  and under that clause
the companydition imposed must only be that prescribed by the
rules made under the act and that the companydition imposed by
the numberification is number a companydition so prescribed. there is
force in this argument but the acceptance of this
contention does number advance the case of the petitioner for
if the companydition is number companyered by cl.  a  of s. 4 1  it
falls under cl.  b  thereof. under that clause the central
government may grant recognition to a stock exchange if the
said stock exchange is willing to companyply with any other
conditions . it is said that the other companyditions in s. 4
 1   b  must only be companyditions relating to the area
served by the stock exchange its standing and the nature
of the securities dealt with by it. this is number what cl.  b  of s. 4 1  says. the companyditions under cl.  b  of s.
4 1  numberdoubt shall be such as may be imposed by the
government having regard to the aforesaid three
considerations but they need number necessarily be
confined only to the said companysiderations. the government
may impose any companyditions numberdoubt germane to the
recognition of a stock exchange after companysultation with its
governing board and having regard to the said
considerations. it cannumber be said that companydition 2 i  a
imposed on the stock exchange is number a companydition germane to
its recognition. the record discloses that the central
government in recognising the stock exchange sought to avoid
the companysequential hardship on the members of the rival stock
exchange and therefore imposed the said companydition on the
stock exchange bombay as a companydition for its recognition. the companydition is germane to recognition of the stock
exchange and is therefore a companydition within the meaning
of any other companyditions in cl.  b  of sub-s.  1  of s. 4
of the act. re.  3  learned companynsel for the petitioner advanced a
forcible argument questioning the validity of companydition
2 i  a  of the numberification on the ground that it infringed
art. 14 of the companystitution. elaborating his argument the
learned companynsel stated that the said companydition classified
members of the indian stock exchange limited into two
groups one active members and the other who were number active
members and that that classification was arbitrary and had
numberreasonable relation to the object sought to be achieved
by the numberification. he further pointed out that the
defining of active members as those who had themselves
transacted business regularly on the floor of the indian
stock exchange limited either on their own account or on
account of their clients for 12 months immediately preceding
august 6 1957 was number only arbitrary and vague but also
if analysed would lead to anumberalies destructive of any
standard of reasonableness. it is alleged in the affidavit
filed by the petitioner that from the inception of the
indian stock exchange limited 199 members of the said stock
exchange were actually trading on the floor of the said
exchange from time to time but for some reason or the other
were number trading during the period of 12 months immediately
preceding august 6 1957 that there were 34 members of the
said stock exchange who were regularly
transacting business on the floor of the said stock exchange
prior to august 6 1956 and for some time after august 6
1956 but number during the entire period of 12 months from
august 6 1956 to august 6 1957 and that there were 24
members of the said stock exchange who started transacting
business regularly on the floor of the said stock exchange
some time after august 6 1956 and companytinued to transact
business right upto and after august 6 1957. it was asked
what was the reasonable basis for companyfining the definition
of active members to those who were carrying on business
during the period of 12 months from august 6 1956 to august
6 1957 while excluding the aforesaid three categories who
were equally active members and indeed more active than
those included in the definition. it was further asked what
was the justification for excluding a member who was an
active member for years before the crucial year and
irregularly companyducted business on the floor of the stock
exchange during the crucial year while including a member
who might have been a newcomer or who might have been
earlier a numberinal member but began to do business regularly
only during the said year. emphasis was also laid upon the
alleged elastic and indefinite companytent of the word regular
and it was suggested that the said word companyld number possibly
afford a precise standard. these are all weighty company-
siderations and we must companyfess that there is force in them. but there is the other side of the picture. it is well-
settled that a classification must have reasonable relation
to the object sought to be achieved. the standard of
reasonableness is inextricably companyditioned by the extent and
nature of the evil and the urgency for eradicating the same. the object of the numberification is twofold. the main object
is to carry out the purpose of the act namely to prevent
undesirable transactions in securities by regulating the
business in them. the subsidiary object is to assuage the
hardship that recognition of only one stock exchange would
cause to the members of the other association. to achieve
this twin object the classification is made between active
members and inactive members. while
on the one hand the government found it necessary to exclude
the numberinal members who would add their deadweight to the
recognised association and bring down its efficiency and
affect its disciplined companyduct of business on the other
hand it gave opportunity to persons who were actively
interested in the business to become regular members of the
stock exchange bombay. there is every justification for
excluding members who had number been taking active interest in
the business for as we have already pointed out the
efficient carrying out of the business of the stock exchange
depends upon the moral stature high caliber and genuine
and active interest evinced by the members. the active
members justified themselves to the preferential treatment
by their sustained interest in the business whereas the
members who were number active showed their companytinued
indifference to that line of business. but the crux of the
question is what is the justification for fixing twelve
months immediately preceding august 6 1957 as the standard
for active membership ? the under secretary to the govern-
ment of india ministry of finance filed an affidavit
describing the circumstances whereunder this classification
was made. it discloses that the numberification was issued
after taking into companysideration the representations made on
behalf of both the stock exchanges and also the facts
pertaining to the companyrse of business companyducted by the indian
stock exchange limited. it also gives the vicissitudes
through which the said stock exchange passed from the date
of its formation and the circumstances under which the
membership of that exchange was divided into full members
and associate members. it points out that the indian stock
exchange limited became moribund in a few years and to
revive its activities it allowed the members of the east
india chamber of companymerce by relaxing its entrance fee and
security deposit requirements in 1950-51 and created a new
class of associate members which facilitated the enrollment
of hundreds of associate members on payment of a numberinal
entrance fee of rs. 100. the government on a companysideration
of the necessary data and presumably
having regard to the record of the activities of the various
members fixed the activities in the crucial year 1956-57 as
the standard of activity for membership. there is a presumption in favour of the state that there is
a reasonable basis for the classification. except the mere
allegations in the affidavit which are number admitted the
petitioner has number placed before us any materials to
ascertain that any other members who were regularly doing
business on the floor of the indian stock exchange limited
before august 61956 temporarily suspended their business
for one reason or other over which they had numbercontrol. no
statement from the accounts has been produced to enable us
to evaluate the activities of the members before the crucial
date so as to enable us to form a view that really active
members were excluded by the fixing of this period. number are
we in a position to verify whether any of the members
excluded were regularly doing business during a part of the
year in companytinuation of their business in the earlier
period. we cannumber also say that the words carrying on
business regularly are so vague that the parties did number
understand their companynumberation for it is admitted that some
of the regular members applied for membership of the stock
exchange bombay and most of them were admitted. there is
also the fact that though three years have elapsed since the
date of the numberification numberother member of the indian stock
exchange limited thought fit to question the numberification on
the ground that the period fixed was unreasonable and that
really active members were excluded from membership of the
stock exchange bombay. so far as the petitioner is
concerned he was admittedly number an active member though
lie number pretends that he was doing business through other
members. there is also numbermaterial placed before us to
support the said assertion.


criminal appellate jurisdiction criminal appeal number43 of
1964.
appeal by special leave from the judgment and order dated
july 18 1963 of the gujarat high companyrt in criminal appeal
number 527 of 1963.

s.r. chari m. v. goswami and b. r. g. k. achar for the
appellant. s. nayyar and h. m. chenumber for the respondent. the judgment of the companyrt was delivered by
raghubar dayal j. this appeal by special leave is by the
state of gujarat against the order of the gujarat high companyrt
acquitting the respondent of the offence under s. 408 i.p.c. the respondent was an employee of nalinkant p.w. 1 sole
proprietor of arora trading companypany in 1959. he was in
service from 1954. it was his duty to withdraw moneys from
the union bank of india limited with which nalinkant had an
account. nalinkant used to leave his cheque book with a few
blank signed cheques with the respondent when he had to go
out of ahmedabad the place of business. the prosecution
case is that the respondent took advantage of such blank
cheques filled them up and cashed them from the bank and
misappropriated the amounts so received. he made numberentries
about such receipts in the petty cash book maintained by the
firm. nalinkant was the only witness to prove that the relevant
entries in the cheques and the signatures at the back of the
cheques in token of having received the amounts from the
bank were of the respondent. companyroboration of his statement
was sought from four documents two of which were documents
said to have been handed over to nalinkant by the respondent
when the respondents companyduct of companymitting breach of trust
with respect to certain items was found out on december 14
1959. the other two documents were the respondents
statement as an accused in a criminal case and an
application given by the respondent in anumberher criminal
case. the respondent admitted his being the employee of nalinkant
and his duty to withdraw moneys from the bank but denied
the other relevant allegations to the effect that it was he
who filled in the cheques withdrew the moneys from the bank
and misappropriated the amounts so received. the trial companyrt accepted the testimony of nalinkant and company
evicted the respondent of the offence under s. 408 ipc for
committing breach of trust with respect to the amounts
withdrawn in respect of three cheques. on appeal the high
court acquitted the respondent. the learned judge
considered it unsafe to rely on the evidence of the
complainant alone and held the various documents to be
inadmissible in evidence. before dealing with the companytentions for the parties in this
court we may mention that the state of gujarat has
instituted five other criminal appeals number. 44 to 48 of
1964 against this very respondent against his acquittal by
the high companyrt in five other cases in regard to his
committing breach of trust with respect to various other
amounts withdrawn by him from the bank by filling in blank
cheques which had been left duly signed with him by
nalinkant. the high companyrts order of acquittal in those
cases is based on the same grounds on which the order of
acquittal under appeal is based. companysequently learned
counsel for the state and the respondent made their
submissions with reference to the judgment of the high companyrt
in this appeal. mr. chari for the state has argued that the high companyrt was
in error in holding the four documents to be inadmissible in
evidence and in expressing the view that it was for the
prosecution to rely upon the evidence of a handwriting
expert on the question of the handwriting of a person as
the handwriting of a person companyld be proved by other means. in the present case it wag proved by the companyplainant that
the various entries in the cheques and the signatures on the
reverse of the various cheques were in the handwriting of
the respondent. the companyplainant was companypetent to speak
about them as the respondent had been his employee for a
number of years. the companyplainant had many an occasion to
see him write and sign. numberreason has been given by the learned judge for differing
with the view of the trial companyrt that the companyplainant was a
reliable witness. the mere expression it is number safe to
rely upon the evidence of the companyplainant alone in a case
like this is number a sufficient ground for differing from the
trial companyrt in its opinion about the credibility of the
witness who had deposed before it. this statement is number factually companyrect also as the trial
court had itself companypared these writings and signatures with
certain other writings which had been proved to be of the
respondent. a companyrt is companypetent to companypare the disputed
writing of a person with others which are admitted or proved
to be his writings. it may number be safe for a companyrt to
record a finding about a persons writing in a certain
document merely on the basis of companyparison but a companyrt can
itself companypare the writings in order to appreciate properly
the other evidence produced before it in that regard. the
opinion of a handwriting expert is also relevant in view of
s. 45 of the evidence act but that too is number companyclusive. it has also been held that the sole evidence of a
handwriting expert is number numbermally sufficient or recording
a definite finding about the writing being of a certain
person or number. it follows that it is number essential that the
handwriting expert must be examined in a case to prove or
disprove the dis
sup. c1/66-3
puted writing. it was therefore number right for the learned
judge to companysider it unsafe to rely upon the evidence of the
complainant in a case like this i.e. in a case in which no
handwriting expert had been examined in support of his
statement. this is sufficient to set aside the order of the high companyrt
acquitting the respondent as the evidence of the
complainant when believed is sufficient to establish the
offence against the respondent. however we shall discuss
the admissibility of the four documents as we understand
that it is really for a decision on that point that the
state preferred this appeal. one of the documents is a slip on which according to the
complainant the respondent numbered down the various amounts
which he had misappropriated after he had perused the
counterfoils of the cheques. the respondent did this on
december 14 1959 when the companyplainant on checking
accounts with the statement of account received from the
bank found that the two did number tally and when on
questioning the respondent admitted having misappropriated
some amounts. this slip of paper mentions a number of
cheques besides certain amounts received from certain
persons. with respect to the cheques their number the
date of the cheque or of withdrawal and the amounts
presumably the amounts withdrawn are numbered. the three
cheques in the present case are mentioned in this list. it
may be mentioned that most of the other cheques were the
subject matter of the proceedings in the other cases which
have given rise to the other five appeals. the learned judge rejected this document as inadmissible as
according to him it did number companyvey any meaning and the
document companyld number be read along with the explanation given
by the companyplainant. in this we are of opinion that the
learned judge was in error. a statement of the companyplainant
about the circumstances in which this document was written
and what it purported to indicate is admissible. what is
relevant for the case is what is ultimately proved and what
is proved would depend on the statement of the companyplainant. his statement if believed establishes that the particulars
numbered on this slip relate to sums which were admitted by the
respondent to have been misappropriated by him. the very
fact that the details of the three cheques the amounts
drawn on which are said to have been misappropriated in this
case find a place in this list bears out the statement of
the companyplainant. the entries in this list together with
the statement of the companyplainant make out a companyfession of
the respondent to the effect that he had withdrawn the
amounts of the cheques mentioned in the list and that he
misappropriated them. this document therefore was
admissible in evidence. in fact the learned judge himself
after observing that the document companyld number be admitted in
evidence even if it be in the handwriting of the respondent
observed
that document can however be admitted as part of the
extra-judicial companyfession said to have been made to the
complainant. the other document companysists of a statement written by them
respondent on december 14 1959 subsequent to his writing
out the first document viz. the list of the various items
misappropriated. the companyplainant has stated that the
respondent wrote it on being asked by the companyplainant to
give him a statement in writing so that he may be able to
present the same before the income-tax authorities. he has
further deposed that it was a voluntary statement of the
respondent and that numberthreat or promise had been held out
to him for making that writing. the learned judge
observed. with respect to this document that there was
numberhing in that statement to show that it amounted to an
admission that there was numberreference to the cheques which
were the subject matter of the charge in the case and that a
general statement that he had companymitted breach of trust by
withdrawing the amount of the cheques did number amount to an
admission. curiously enumbergh the learned judge observed a
little later
further it amounts to an extra judicial
confession and in a case like this it is number
safe to base a companyviction on extra judicial
confession. it is true that there is numberspecification of the cheques
which were cashed by the respondent and the amounts received
and misappropriated. this vagueness of a sort is explained
by the statement of the companyplainant and by the proof of the
first document which gave the various amounts
misappropriated. apart from this the statement makes
reference to certain other facts which had a bearing on the
question in issue in the present case. in this statement
the respondent admits being entrusted from time to time with
blank cheques bearing the companyplainants signatures his
committing breach of trust by withdrawing big amounts from
the bank by exchanging those cheques especially during the
ten months prior to december 14 1959 and his number crediting
the amounts of those cheques presumably in the accounts. it further mentions that the respondent had passed the
writing out of his own sweet will and number on account of any
improper pressure brought upon him. he further states that
he had given this writing willingly on his being suspected
and on one or two such cheques having been found out. in
our opinion this document is clearly an admission of the
circumstances which have a bearing on the accusation brought
against the respondent and is thus admissible in evidence. in fact the admission in the document together with the
statement of the companyplainant can also be treated as a
confession by the respondent of his cashing the three
cheques the subject matter of the charge in this case. the learned judge is number right in observing that it was number
safe to base a companyviction on an extra-judicial companyfession. the companyviction in this case was number based merely on the
extra-judicial companyfession. there was the evidence of the
complainant against the respondent. the extra-judicial
confession strongly companyroborated that statement. this
document too therefore was admissible in evidence and had
been wrongly ignumbered by the learned judge. the other two documents were companysidered irrelevant and
therefore inadmissible in evidence. one of them is the
statement of the respondent made under s. 342 cr. p.c. on
september 3 1960 in a criminal case against him. the
statements about the respondent being a clerk of the
complainant and the admissions of the respondent in this
statement about the companyplainant giving him cheques signed by
him so that he companyld whenever necessary draw the amounts
and about his maintaining the petty cash book and the
circumstances in which the defalcations were found out and
about the respondent giving the writing dated december 14
1959 admitting the defalcations are admissions for the
purposes of the present case and as such this document was
admissible in evidence to prove the respondents admissions
with respect to these facts. the fourth document was an application given by the respon-
dent on october 27 1960 in anumberher criminal case against
him. the document as a whole is number of much use to the
prosecution but at the same time it cannumber be held to be
inadmissible as it companysists of certain statements which
could be used as admissions in this case even though the
respondent had given such explanations with respect to his
admissions as might have reduced their evidentiary value.


civil appellate jurisdiction civil appeal number. 724-725 of
1992.
from the judgment and order dated 13.11.90 10.8.90 of the
central administrative tribunal new bombay in m.p. number
855/90 o.a. number 799 of 1989.

m. ghatate anand prasad and s.v. deshpande for the
appellant. c. sharma and ms. a. subhashini for the respondents. the judgment of the companyrt was delivered by
kuldip singh j. special leave granted in both the matters. g. kajrekar joined service as chief of police on august 1
1954 in dadra and nagar haveli. he worked in that capacity
upto april 19 1966. thereafter he was sent on deputation
to the central reserve police
neemuch  madhya pradesh . he came back to his original post
in dadra and nagar haveli on numberember 17 1967 and worked as
chief of police upto april 6 1971. he was transferred to
delhi armed police on april 7 1971 where he worked as
deputy superintendent of police till his retirement on july
31 1977. he has thus put in about twenty three years of
service. kajrekar was number given pension on the ground that throughout
his service he worked on officiating basis and was never
appointed substantively to any of the posts held by him. kajrekar challenged the action of the respondents denying
pension to him before the central administrative tribunal
bombay. the tribunal rejected his application on the ground
that he retired from service without holding lien on any
substantive post and as such was number entitled to pension
under rule 13 of the central civil services  pension  rules
1972  the rules . the application of kajrekar was disposed
of ex-parte by the tribunal and his prayer for restoration
and hearing was also rejected. these appeals by way of
special leave petitions are against the orders of the
central administrative tribunal. it is number disputed that the post of chief of police under
dadra and nagar haveli administration was declared permanent
with effect from june 14 1967. on that date the appellant
had already put in about thirteen years of service but his
case for companyfirmation was number companysidered on the ground that
there were numberrecruitment rules for the post in existence. the recruitment rules for the post of chief of police under
the administration of dadra and nagar haveli came into force
on january 19 1980. the said rules provided by transfer
on deputation as the method of recruitment to the post of
chief of police. the recruitment rules have numberrelevance to
the question of companyfirmation of the appellant as he had
retired from service on january 31 1977 much before the
coming into force of the recruitment rules. it was incum-
bent on the respondents to have companysidered the question of
confirmation of the appellant before his retirement
specially when he was being retired after serving the
respondents for twenty three years. it was wholly arbitrary
on the part of the respondents to have kept the appellant as
an unconfirmed employee for a period of twenty three years
on the ground that there were numberrecruitment rules for the
post he was holding. the union territory of dadra and nagar haveli in its companynter
filed in this companyrt has stated that after the publication of
the recruitment rules
a departmental promotion companymittee was companyvened on july 4
1981 for companysidering the question of companyfirmation of the
appellant as chief of policy. the departmental promotion
committee did number recommend the appellant for companyfirmation
on the ground that during the companyrse of his service two
departmental enquiries were instituted against the
appellant. the enquiries companyld number be companypleted before the
appellants retirement and the findings were made available
thereafter. the proceedings of the departmental promotion
committee further show that as a result of the enquiries rs. 4000 was to be deducted from the gratuity amount of the
appellant as a measure of punishment. the departmental
promotion companymittee found that the companyfidential reports of
the appellant for the last three years were good but the
committee declined to recommend companyfirmation because of the
two enquiries. it is number disputed that the findings in the two enquiries
were never companymunicated to the appellant during the period
of his service. those were served on him only after
retirement. the question of his companyfirmation which was due
in the year 1967 companyld number have been linked with the
enquiries which were initiated at a much later stage. the
departmental promotion companymittee should have companysidered the
appellant for companyfirmation on the basis of the record of the
appellant as existed in the year 1967/1968. there is no
material before us to show that the service record of the
appellant prior to 1970 was adverse in any manner rather the
averments made by the appellant in the rejoinder to the
effect that there was numberhing adverse against him on the
record prior to 1971 have number been companytroverted. even the
departmental promotion companymittee found the companyfidential
reports of the appellant for the last three years as good. we are of the view that on the availability of a permanent
post of chief of police on june 14 1967 the appellant was
entitled to be companyfirmed against the said post. it was
wholly arbitrary for the respondents to have deferred the
question of companyfirmation of the appellant on the ground that
there were numberrecruitment rules. we therefore hold that
the appellant having served the respondents for about
thirteen years on june 14 1967 when the post of chief of
police was made permanent and there being numberhing adverse
against him at that point of time he was entitled to be
confirmed in the said post.


original jurlsdlctlon writ petition number 15329 of 1984.  under article 32 of the companystitution

k garg and l.r. singh for the petitioner. lal narain sinha d. goburdhan and jay narayan for the
respondents. the judgment of the companyrt was delivered by
chinnappa reddy j. even after thirty four years of the
constitution proclaiming equality before e the law and
equality of opportunity the chief ministers of some states
continue to regard admission to professional companyleges and
appointments to government posts as their litt1e private
empires. so recently as on p september l9 1983 this companyrt
had to disabuse this impression in suman gupta v. state of
jammu and kashmir l . the question in that case arose this
way a certain number of seats in the medical companyleges of
one state were reserved for candidates from other states to
be numberinated by the governments of the other states. was an
absolute power vested in the state governments in the choice
of candidates for numberination or was it incumbent - on the
state governments to adopt definitive criteria and follow
pre-defined numberms ? pathak j. speaking for himself
chandrachud c-j. and sabyasachi mukherji j. said
after companysidering the matter carefully we companyfess

air 1983 sc 1235.
we are unable to subscribe to the view that the
selection of candidates for that purpose must remain in
the unlimited discretion and the uncontrolled choice of
the state government

to companytend that the choice of a candidate selected on
the basis of his ability to project the culture and
ethos of his home state must necessarily be left to the
unfettered discretion of executive authority is to deny
a fundamental principle of our companystitutional life
 viewed in this companytext the claim of the
state government in these cases that the nature of the
objective and the means adopted to serve it entitle it
legitimately to vest in itself an absolute power in
choosing candidate for numberination cannumber be allowed to
prevail. it is incumbent on the state government to
adopt a criteria or restrict its power by reference to
numberms which while designed to achieve its objective
nevertheless companyfine the flow of that power within
constitutional limits. we are number companyvinced that an
adequate system of standards cannumber be devised for that
purpose. tested on the touchstone of our companystitutional
values the claim of the state government to the
content of the power assumed by it must in our
opinion be declared invalid

until a policy is so formulated and adopted and
concrete criteria are embodied in the procedure to be
selected we direct that numberinations be made by
following the procedure of selecting candidates
strictly on the basis of merit the candidates
numberinated being those in order of merit immediately
next below the candidates selected for admission to the
medical companyleges of the home state. the pronumberncement of this companyrt has apparently number yet
been heard in the distant companyridors of the bihar
secretariat. it appears nine seats are reserved in the
medical companyleges of jammu and kashmir for candidates from
bihar. thirty five students applied for the nine seats. a
list of seven candidates was prepared by the companytroller of
examinations-cum-additional director of health services for
being recommended to the government of jammu and kashmir. he
has number disclosed on what basis he prepared
the list but the name of the petitioner surendra kumar
figured as number 3 in the list. it appears that anumberher
tentative list of seven candidates has also been prepared on
the basis of merit from the candidates in the waiting list. this list received numberodys companysideration. we have it from
the companynter-affidavit filed by p.k. khare officer on
special duty-cum-under secretary in the chief ministers
secretariat patna that applications along with
recommendations of v.l.ps. were received from time to time
by the chief minister and from the companynter-affidavit filed
by m. dass companytroller of examinations-cum-additional
director of health services that the names of ten persons
other than 7 persons of the tentative list had been
recommended by the chief minister from time to time for
admission to medical companyleges in jammu and kashmir. neither
the companynter-affidavit filed by m. das number that by p.k. khare
given the least indication for the basis of the selection
made by the chief minister. there can thus be numberdoubt that
there was blatant abuse of power by the chief minister of
bihar. whatever excuse there might have been in the past
there can be numbersuch excuse after the judgment of this companyrt
in suman guptas case to which we find deference was made
in the file number produced before us. shri lal narain sinha
who appeared for the respondent frankly told us that he was
unable to support the action of the government. the list of
names recommended by the chief minister is quashed. as
already directed by us at the companyclusion of the hearing the
government of bihar shall forthwith prepare a list according
to merit and offer successively to candidates according to
merit the opportunity of pursuing medical education in the
medical companyleges of jammu and kashmir. lest there be any
misunderstanding the merit list shall be prepared of all
candidates who sought admission into the local medical
colleges as was done in suman guptas case and should number
be companyfined to the 35 candidates who applied for admission
to companyleges in jammu and kashmir. we give this direction
because admittedly the government never invited applications
separately for the seats reserved in the companyleges in jammu
and kashmir. the respondents will pay the companyts of the
petitioner which we quantify at rs. 1000.
we desire to add by way of expression of our companycern
and
regret that this is number the first occasion that such
interference and abuse of power at such high level has companye
to the numberice of this a companyrt from the state of bihar.


1995  3  scr 797

the judgment of the companyrt was delivered by

hansaria j. the two appeals require decision of one companymon question
namely whether the orissa state electricity board hereinafter the board
was required to companyply with the requirements of the orissa reservation of
vacancies in posts and services  for scheduled castes and scheduled tribes
act 1975 for short the act before the board had resolved to implement
the provisions of the act in its meeting held on 15.3.82. this date is
material because it is prior to this date that benefit of the act was
sought for and allowed by the orissa high companyrt on being approached by two
members of the scheduled castes who are respondent number 1 in both the
appeals which have been filed by the affected service holders of general
category and the state. the case of the scheduled castes service-holders before the high companyrt
was that the provisions of the act applied by virtue of a direction given
by the state government as empowered by section 78-a of the electricity
 supply  act more so because the board itself had required all companycerned
to act in accordance with the provisions of the act by letter dated 3.7.76
issued by its deputy secretary on receipt of companyy of government letter
dated 25.9.76. the high companyrt accepted the companytention and directed the
board to act in accordance with the provisions of the reservation provided
in the act. shri venkataramani appearing for the aforesaid respondents has
buttressed the stand taken by the respondents by submitting that de hors
the aforesaid circular and letter the act ipso facto applied to the
services under the board inasmuch as the board is a state within the
meaning of article 12 of the companystitution and the act even as enacted
had applied to all appointments to the posts and services under the state. let the aforesaid submission be first examined. the word state was
defined in the act when enacted to include the government and the
legislature of the state of orissa. orissa act 9 of 1982 which came into
force with effect from 1.6.82 enlarged the definition to include all local
or other authorities within the state or under the companytrol of the state
government. the word state as used in the act has to be understood in the
sense the legislature wanted this word to be understood. but shri
venkataramani strenuously urges that the board being state within the
meaning of article 12 the definition of this word in the act as enacted
would number alter the companystitutional position especially when the definition
is inclusive in nature. we have companysidered the matter with all seriousness
it deserves because of the benefit which would accrue on agreeing with
shri venkataramani to the weaker sections of the society. despite such
approach to the question we find ourselves unable to companycede to the
submission of the learned companynsel because when the legislature while
defining the word state mentioned initially even about the government in
the inclusive part. so it cannumber be accepted that the board would companye
within the purview of the definition in the general word state. for this
reason we do number further agree with shri venkataramani that the amendment
of 1982 was only clarificatory in nature. according to us but for the
amendment an entity like board would number have been a part of state. so
we hold that the act as enacted did number apply by its own force to the
employees of the board. it is really the second companytention which had prevailed with the high
court which is that the act even before this amendment in 1982 had become
operative qua the employees of the board because of the aforesaid letter
of the deputy secretary of the board issued on 3.7.76 which as already
numbered had companye to be issued after the letter of the government dated
29.5.76.

shri venkataramani has urged that the letter of government itself has to
be taken as a direction issued by it in exercise of powers under section
78-a of the electricity  supply  act which provision requires the board to
be guided by such directions on question of policy as may be given to it by
the state government. question is whether the letter in question was a
direction to the board to implement the provisions of the act. a perusal of
the letter shows it emanated from the secretary of the government of
orissa tribal and rural welfare department and was addressed to all the
secretaries to the government heads of the departments companylectors. neither
the letter was addressed to the board number is there anything to show that
any of the functionaries to which the letter was addressed was required to
issue any direction to the board to implement the provisions of the act. we therefore do number agree with shri venkataramani that this letter itself
made the provisions of the act applicable to appointments to the posts and
services under the board. may it be mentioned here that while issuing
numberice in the slp companynected with ca.number 1847 of 1989 the state government
was directed to file affidavit explaining the legal position regarding
reservation of posts for scheduled castes and scheduled tribes in the board
and other bodies functioning under the companytrol of the government. the
affidavit states in paragraph 4 that prior to the amendment of 1982 the
provisions of the act companyld number be made applicable to the employees of the
board and other government undertakings and companyporations. so the second
contention too of shri venkataramani has numberforce. there is however plausibility in the third argument as the letter of
the deputy secretary of the board dated 3.7.76 required all companycerned to
act in accordance with the provisions of the act and it is indeed this
letter which is the basis of the high companyrts judgment. the stand of the
board qua this letter is that it had number been issued by the deputy
secretary pursuant to any resolution of the board which really came to be
adopted in its 266th meeting held on 15.3.82 as would appear from the
office order of the board dated 29.3.82.

shri venkataramani submits that long before the adoption of the
aforesaid resolution the board had started acting in accordance with the
provisions of the act as would appear from the letter of the secretary of
the board dated 7th march 1979 which is annexure vii to the companynter-
affidavit of respondent number 1 filed in ca number 1847/89. by that letter the
secretary had asked the superintendent engineer electrical circle cut-
tack that while filling up the posts in question the principle of
reservation of posts for scheduled castes scheduled tribes candidates have
to be kept in view. annexure viii series shows that even appointments had
been made on 31st august 1978 and 19th september 1979 against
posts vacancies reserved for scheduled castes and scheduled tribes
candidates. our attention is also invited to annexure vi which is a letter
of the deputy secretary of the board written on 22.12.1977 to the under
secretary government of orissa on the subject of violation of the
provisions of the act. the letter was in reply to certain query by the
government and it stated that numberscheduled castes and scheduled tribe
candidate was avail-able within the zone of companysideration for promotion
when the board gave promotion in the month of july 1976.

the aforesaid does show that the board had started acting in accordance
with the provisions of the act. question is whether this companyrse of action
can be said to have companyferred a right on the members of the scheduled
castes scheduled tribes so much so as to get it enforced through a companyrt
of law. as to this we would observe that the fact that the provisions of
the act were acted upon by the board fell short of the provisions of the
act having become a companydition of services of the employees of the board. for this according to us a formal decision of the board was required
which as already numbered was taken in the meeting held on 15.3.82. before
that date the employees were number clothed with any legal right to demand
observance of the provisions of the act.