criminal appellate jurisdiction criminal appeal number18 of
1965.
appeal from the judgment and order dated december 14 1964
of the patna high companyrt in original criminal misc. number 6 of
1964.

p. singh for the appellant. goburdhun for respondent number 1.

p. singh for respondent number 2.
the judgment of the companyrt was delivered by
mitter j. this appeal by certificate granted by the high
court at patna under art. 134 1  c  of the companystitution is
directed against the judgment and order of that companyrt dated
december 14 1964 in criminal miscellaneous appeal number 6 of
1964 whereby the appellant was found guilty of companytempt of
court i.e. of the assistant registrar companyoperative
societies sitamarhi circle exercising the powers of the
registrar companyperative societies bihar under s. 48 of the
bihar and orissa companyperative societies act 1935.
the three questions which were argued before us in this
appeal were -  1  whether the assistant registrar of company
operative societies was a companyrt within the meaning of the
con- tempt of companyrts act 1952  2  even if it was a companyrt
whether it was a companyrt subordinate to the patna high companyrt
and  3  whether the words used by the appellant in one of
his grounds of appeal to the joint registrar of companyoperative
societies which formed the basis of the companyplaint did
amount to companytempt of any companyrt. the facts necessary for the disposal of the appeal are as
follows. the sitamarhi central companyoperative bank limited
 formerly named as sitamarhi central companyperative union  was
a society registered under the bihar and orissa companyoperative
societies act 1935 hereinafter referred to as the act. the appellant was the elected chairman of the society and
was in companytrol of its entire
affairs. the bank was engaged in carrying on a business
inter alia in salt sugar and kerosene oil. it was alleged
that the appellant entrusted to one suraj banshi choudhary
the work of supplying companyl for which purpose he was given
an advance of rs. 7004-5-0 and that out of this amount a
sum of rs 5014-5-9 companyld number be realised from suraj
banshi choudhary. thereafter a surcharge proceeding under
s. 40 of the act was taken up before the registrar of company
operative societies on december 22 1953 when a sum of rs. 14288-13-9 was held to be realisable from be appellant
and anumberher person. the appellant went in appeal to the
state government and by an order dated march 28 1957 the
amount was reduced to rs. 5014-5-9. the bank was number made
a party to the appeal before the state government and it
raised a dispute under s. 48 of the act that the appellant
was liable for the whole of the original amount of rs. 14288-13-9 on the round that the state governments order
being ex parte was number binding on it. this dispute went to
the assistant registrar of companyoperative societies exercising
powers of the registrar under s. 48 of the act. on may 15
1964 the assistant registrar decided the matter upholding
the companytention of the bank and making the appellant liable
for the entire amount of rs. 14288-13-9. in the meantime
however the appellant had challenged his liability for the
amount of rs. 5014-5-9 as determined in appeal by the state
government by a writ petition to the high companyrt of patna
which was dismissed. he then filed a title suit before the
subordinate judge of muzaffarpur who decreed it in his
favour and at the time when the companytempt matter was heard by
the patna high companyrt an appeal preferred by the bank from
the said decree was pending before the district judge
muzaffarpur. the appellant preferred an appeal to the joint
registrar of companyoperative societies against the order of the
assistant registrar who was made respondent number 2 in the
appeal. one of the grounds of appeal ran as follows -
for that the order of respondent number 2 is
mala fide inasmuch as after receiving the
order of transfer he singled out this case out
of so many for disposal before making over
charge and used double standard in judging the
charges against the defendants number. 1 and 2.
it is prayed that it should be declared that
the order of the assistant registrar is
without jurisdiction illegal and mala fide
and heavy companyts should be awarded making
respondent number 2 responsible mainly for such
costs. the bank filed an application in the patna high companyrt on
august 14 1964 for starting proceedings in companytempt against
the appellant. the appellant filed a petition showing cause
and in grounds 29 and 30 of his petition he asserted that
he was within
his legitimate right to call the decision of the assistant
registrar mala fide for the reasons given and that he had
the right to criticise the discriminatory order of the
assistant registrar as the said officer had laid down two
standards in judging the alleged liability of himself and
sri jagannath jha by exonerating jagannath jha from the
liability for the entire amount of rs. 14288-13-9 while
holding the appellant liable for the entire amount without
examining the up-to-date position of payment of the amounts
for which the claim had been preferred. in a supplementary
affidavit filed on october 28 1964 the appellant further
stated that the order of the assistant registrar was mala
fide in that at the time when it was made the assistant
registrar was due for transfer and he had picked out two or
three cases out of about fifty pending before him. the high companyrt at patna turned down all the companytentions of
the appellant in an elaborate judgment and held that the
appellant was guilty of a calculated companytempt. he was
sentenced to undergo simple imprisonment until the rising of
the companyrt and to pay a fine of rs. 200 in default whereof he
was to undergo a further simple imprisonment for two weeks. the last of the three points urged before this companyrt was the
weakest to be advanced. there can be numberdoubt that the
words used in this case in the grounds of appeal clearly
amounted to companytempt of companyrt provided the assistant
registrar was a companyrt and the companytempt of companyrts act was
applicable to the facts of the case. the assistant
registrar was charged with having acted mala fide in that he
had singled out the case of the appellant out of many for
disposal and used a double standard in his adjudication
against the appellant and jagannath jha clearly meaning
thereby that the assistant registrar had fallen from the
path of rectitude and had gone out of his way in taking up
and disposing of the case of the appellant out of many which
were pending before him and which he companyld number possibly have
completed because of his imminent transfer. according to halsburys laws of england  third edition-vol. 8  at p. 7
any act done or writing published which is
calculated to bring a companyrt or a judge into
contempt or to lower his authority or to
interfere with the due companyrse of justice or
the lawful process of the companyrt is a companytempt
of companyrt. any episode in the administration
of justice may however be publicly or
privately criticised provided that the
criticism is fair and temperate and made in
good faith. the absence of any intention to
refer to a companyrt is a material point in favour
of a person alleged to be in companytempt. we can find numberhing exculpatory in the reply to the show
cause numberice filed by the appellant before the patna high
court. there he sought to justify his companyplaint made in his
grounds of appeal. the criticism of the assistant registrar
was neither fair number temperate number made in good faith. the
obvious aim of the appellant in formulating his ground of
appeal in the way it was done was to show that the assistant
registrar had acted in a manner which was companytrary to
judicial probity and that he should therefore be penalised
in companyts. the third ground therefore is devoid of any substance and
cannumber be accepted. in order to appreciate whether the assistant registrar was
functioning as a companyrt it is necessary to examine certain
provisions of the act. the act which is both a
consolidating and an amending one was enacted to facilitate
the formation working and companysolidation of companyoperative
societies for the promotion of thrift self-help and mutual
aid among agriculturists and other persons with companymon
needs. s. 2 1  defines registrar as a person appointed to
perform the duties of a registrar of companyperative societies
under the act. under s. 6 1  the state government may
appoint a person to be registrar of companyoperative societies
for the state or any portion of it and may appoint persons
to assist such registrar. under s. 6 sub-s.  2   a  the
state government may by general or special order published
in the official gazette companyfer on any person appointed
under sub-s.  1  to assist the registrar all or any of the
powers of the registrar under the act except the powers
under s. 26. under s. 13 the registration of a society
makes it a body companyporate by the name under which it is
registered with perpetual succession and a companymon seal and
with power to acquire and hold property to enter into
contracts to institute and defend suits and other legal
proceedings and to do all things necessary for the purposes
for which it is companystituted. chapter v deals with audit and
inspection of societies. under s. 33 the registrar must
audit or cause to be audited by some person authorised by
him the accounts of every registered society once at least
in every year. under sub-s.  4  of s. 33 the auditor has to
submit a report including therein inter alia every
transaction which appears to him to be companytrary to law the
amount of any deficiency or loss which appears to have been
incurred by the culpable negligence and misconduct of any
person the amount of any sum which ought to have been but
has number been brought into account by any person and any
money or property belonging to the society which has been
misappropriated or fraudulently retained by any person
taking part in the organisation or management of the society
or by any past or present officer of the society or by any
other person.s.35 provides for certain inquiries by the
registrar. s. 40 pro-
vides inter alia that where as a result of an audit under s.
33 or an inquiry under s. 35 it appears to the registrar
that any person who has taken part in the organisation or
management of the society or any past or present officer of
the society has made any payment which is companytrary to law or
by reason of his culpable negligence or misconduct involved
the society in any loss or deficiency or failed to bring
into account any sum which ought to have been brought into
account or misappropriated or fraudulently retained any
property of the society he may inquire into the companyduct of
such person and after giving such person an opportunity of
being heard make an order requiring him to companytribute such
sum to the assets of the society. sub-s.  3  of s. 40 pro-
vides for an appeal from the order of the registrar to the
state government on application made by the person or
officer against whom the order was passed. s. 48 enumerates
various kinds of disputes touching the business of the
registered society which must be referred to the registrar. such disputes may be amongst members past members persons
claiming through members past members or deceased member
and sureties of members past members or deceased members
or between the society and any past or present officer
agent or servant of the society. under sub-s.  2  the
registrar may on receipt of such reference-
 a  decide the dispute himself or
 b  transfer it for disposal to any person exercising the
powers of a registrar in this behalf or
 c  subject to any rules refer it for disposal to an
arbitrator or arbitrators. under sub-s.  3  the registrar may withdraw any reference
transferred under cl.  b  of sub-s.  2  or referred under
cf.  c  of the said sub-section and deal with it in the
manner provided in the said sub-section. under sub-s.  6
any person aggrieved by any decision given in a dispute
transferred or referred under cl.  b  or  c  of sub-s.  2
may appeal to the registrar. sub-s.  7  gives the
registrar in the case of dispute under this section the
power of review vested in a civil companyrt under s. 114 and
under 0. xlvii r. 1 of the companye of civil procedure 1908 as
also the inherent jurisdiction specified in s. 151 c.p.c. sub-s.  8  gives the registrar the power to state a case and
refer it to the district judge for decision whereupon the
decision of the district judge is to be final. under sub-s.
 9  a decision of the registrar under this section and
subject to the orders of the registrar on appeal or review
a decision given in a dispute transferred or referred under
cl.  b  or  c  of sub-s.  2  is to be final. s. 49 gives
the registrar power to summon and enforce the attendance of
witnesses and parties companycerned and to examine them upon
oath and to companypel the production of any books of account
documents or property by the same means and so far as may
be in the same manner as is provided in the case of a civil
court under the companye of civil procedure. s. 50 authorises
the registrar in certain cases to direct attachment of
property of any person who with intent to defeat or delay
the execution of any order that may be passed against him
under s. 48 is about to dispose of the whole or any part of
his property or to remove any part of his property from the
local limits of the jurisdiction of the registrar. s.57 1
provides that

save in so far as expressly provided in
this act numbercivil or revenue companyrt shall have
any jurisdiction in respect of any matter
concerned with the winding up or dissolution
of a registered society under this act or of
any dispute required by section 48 to be
referred to the registrar or of any
proceedings under chapter vii-a. chapter vii-a of the act headed distraint provides for
recovery or a debt or outstanding by distraining while in
the possession of the defaulter any crops or other products
of the earth standing or ungathered on the holding of the
defaulter. the chapter companytains sections making elaborate
provision for the sale of property distrained. s . 66 gives
the state government power to frame rules for any registered
society or a class of registered societies. the latest
rules are those framed in the year 1959. rule 68 lays down
the procedure for adjudication of disputes under s. 48. it
provides for a reference to the registrar in writing on
receipt where of the registrar has to cause numberice of it to
be served on the opposite party requiring him to show cause
within a specified time. after a written statement is
filed the registrar may decide the dispute himself or
transfer it to any person exercising the powers of a
registrar in this behalf or to an arbitrator. there is also
a provision for substitution of the heirs or legal
representatives of a party to the dispute who dies pending
the adjudication. the registrar or the arbitrator is
obliged to give a decision in writing after companysidering the
evidence adduced by the parties. before the registrar or
arbitrator a party has a right to be represented by a legal
practitioner. in this case the assistant registrar companycerned along
with several other persons was given the power of the
registrar under various sections of the act including s. 48
excepting sub-ss.  6  and  8  by the state government. he
was number a numberinee of the registrar. it will be numbered from the above that the jurisdiction of the
ordinary civil and revenue companyrts of the land is ousted
under s. 57
l4 sup. cl/67-12
of the act in case of disputes which fell under s. 48. a
registrar exercising powers under s. 48 must therefore be
held to discharge the duties which would otherwise have
fallen on the ordinary civil and revenue companyrts of the land. the registrar has number merely the trappings of a companyrt but in
many respects he is given the same powers as are given to
ordinary civil companyrts of the land by the companye of civil
procedure including the power to summon and examine
witnesses on oath the power to order inspection of docu-
ments to hear the parties after framing issues to review
his own order and even exercise the inherent jurisdiction
of companyrts mentioned in s. 151 of the companye of civil
procedure. in such -a case there is numberdifficulty in
holding that in adjudicating upon a dispute referred under
s. 48 of the act the registrar is to all intents and
purposes a companyrt discharging the same functions and duties
in the same manner as a companyrt of law is expected to do. according to halsburys laws of england  third edition vol. 9  at p. 342
originally the term companyrt meant among
other meanings the sovereigns palace it has
acquired the meaning of the place where
justice is administered and further has companye
to mean the persons who exercise judicial
functions under authority derived either
immediately or mediately from the sovereign. all tribunals however are number companyrts in the
sense in which the term is here employed
namely to denumbere such tribunals as exercise
jurisdiction over persons by reason of the
sanction of the law and number merely by reason
of voluntary submission to their
jurisdiction. again
the question is whether the tribunal is a
court number whether it is a companyrt of justice
for there are companyrts which are number companyrts of
justice. in determining whether a tribunal is
a judicial body the facts that it has been
appointed by a number-judicial authority that it
had numberpower to administer an oath that the
chairman has a casting vote and that third
parties have power to intervene are
immaterial especially if the statute setting
it up prescribes a penalty for making false
statements elements to be companysidered are  1
the requirement for a public hearing subject
to a power to exclude the public in a proper
case and  2  a provision that a member of the
tribunal shall number take part in any decision
in which he is personally interested or
unless he has been present throughout the
proceedings. it is number necessary to examine the question at any great
length because of certain authoritative pronumberncements of
this companyrt. in brainandan sinha v. jyoti narain 1  the question was
whether a companymissioner appointed under the public servants
 inquiries  act 1850 was a companyrt within the meaning of the
contempt of companyrts act 1952. there after referring to
authorities like companye on littleton and stroud and stephen
the privy companyncil decision in shell company of australia v.
federal companymissioner of taxation 2  and the earlier
decisions in bharat batik limited v. employees of bharat
bank limited 4  maqbool hussain v. the state of bombay 5  and
cooper v. wilson 5  it was observed
it is clear therefore that in order to
constitute a companyrt in the strict sense of the
term an essential companydition is that the companyrt
should have apart from having some of the
trappings of a judicial tribunal power to
give a decision or a definitive judgment which
has finality and authoritativeness which are
the essential tests of a judicial
pronumberncement. reference was there made to the dictum of griffith c.j. in
huddart parker company v. moorehead 6  where he said
i am of opinion that the words judicial
power as used in section 71 of the
constitution mean the powers which every
sovereign authority must of necessity have to
decide companytroversies between its subjects or
between itself and its subjects whether the
rights relate to life liberty or property. the exercise of this power does number begin
until some tribunal which has power to give a
binding and authoritative decision  whether
subject to appeal or number  is called upon to
take action. reference may also be made to the decision of this companyrt in
shri virindar kumar satyawadi v. the state of punjab 7 . there the question was whether a returning officer acting
under ss. 33 and 36 of the representation of the people act
1951 and deciding on the validity or otherwise of a
numberination paper was number a companyrt within the meaning of ss. 195  1   b  476 and 476-b of the companye of criminal
procedure. here too the authorities which were cited in
the case of brainandan sinhas case 1  were reviewed and it
was said
it may be stated broadly that what
distinguishes a companyrt from a quasi-judicial
tribunal is that it is charged with a duty to
decide disputes in a judicial manner and
declares the rights of parties in a definitive
judgment. to decide in a judicial manner
involves that the parties
 1  1955 2 s.c.r. 955.  3  1950 1 s.c.r. 459.  5  1937 2 k.b. 309 340.  2  1931 a.c. 275.  4  1963 s.c.r. 730.  6  1909 8 c.l.r. 330 357.  7  1955 2 s.c.r. 1013 at 1018.
are entitled as a matter of right to be heard
in support of their claim and to adduce
evidence in proof of it. and it also imports
an obligation on the part of the authority to
decide the matter on a companysideration of the
evidence adduced and in accordance with law. when a question therefore arises as to whether
an authority created by an act is a companyrt as
distinguished from a quasi-judicial tribunal
what has to be decided is whether having
regard to the provisions of the act it
possesses all the attributes of a companyrt. this companyrt then went on to companysider whether the functions
and powers entrusted to the returning officer under the act
made him a companyrt. it was numbered that under s. 36 2  of the
act the returning officer has to examine the numberination
paper and decide all objections which may be made thereto. it was numbered that the power was undoubtedly judicial in
character but the parties had numberright to insist on
producing evidence which they might desire to adduce in
support of their case and there was numbermachinery provided
for the summoning of witnesses or of companypelling production
of documents and the returning officer was entitled to act
suo motu in the matter. the companyrt further remarked that in
a proceeding under s. 36 there was numberlis in which persons
with opposing claims were entitled to have their rights
adjudicated in a judicial manner but the enquiry was such as
was usually companyducted by an ad hoc tribunal entrusted with a
quasi-judicial power. companysequently it was held that the
returning officer deciding on the validity of a numberination
paper was number a companyrt for the purpose of s. 1 95  1   b
cr.p.c. with the result that even as regards the charge
under s. 193 the order of the magistrate was number appealable
as the offence was number companymitted in or in relation to any
proceedings in a companyrt. it will number be out of place to recapitulate what was said
in companyper v. wilson  1  and referred to in brainandan
sinhas case  2 . the passage runs thus
a true judicial decision presupposes an
existing dispute between two or more parties
and then involves four requisites -  1  the
presentation  number necessarily orally  of their
case by the parties to the dispute  2  if the
dispute between them is a question of fact
the ascertainment of the fact by means of
evidence adduced by the parties to the dispute
and often with the assistance of argument by
or on behalf of the parties on the evidence
 3  if the dispute between them is a question
of law the submission of legal arguments by
 1  1937 2 k.b. 309.  2  1955 2 s.c.r. 955.
the parties and  4  a decision which disposes
of the whole matter by a finding upon the
facts in dispute and an application of the law
of the land to the facts so found including
where required a ruling upon any disputed
question of law. in our opinion all the above requisites are to be found in
this case. the question before the assistant registrar was
whether the appellant and jagannath jha had caused loss to
the bank and whether they were liable to companypensate the bank
for it. this arose out of audit proceedings. there was a
written reference to the registrar. there was a dispute
between the bank on the one hand and the appellant and
jagannath jha on the other to be decided with the assistance
of arguments and on the evidence adduced. the dispute was a
question of law dependent on the facts of the case and the
decision disposed of the whole matter by finding the
appellant liable for the entire amount. as we have already
remarked the assistant registrar had almost all the powers
which an ordinary civil companyrt of the land would have of
summoning witnesses companypelling production of documents
examining witnesses on oath and companying to a companyclusion on
the evidence adduced and the arguments submitted. under
sub-r.  10  of r. 68 the parties companyld be represented by
legal practitioners. the result is the same as if a decree
was pronumbernced by a companyrt of law. the adjudication of the
assistant registrar was number based upon a private reference
number was his decision arrived at in a summary manner but
with all the paraphernalia of a companyrt and the powers of an
ordinary civil companyrt of the land. we were however referred to decisions of certain high companyrts
in support of the companytention that the assistant registrar
was number a companyrt for the purposes of the companytempt of companyrts
act. the latest of these decisions is that of the bombay
high companyrt in malabar hill companyoperative housing society v.

l. gauba 1 . there an application was made by the
society against one k. l. gauba for the alleged companytempt
committed by him on the third opponent a numberinee of the
registrar appointed under s. 54 of the bombay companyoperative
societies act 1925. the facts of the case were as follows. gauba and his wife were members of the society and at the
material time were residing in two flats in one of the
societys premises. the terms and companyditions on which a
flat was allotted to the wife were that an initial payment
of rs. 6.001 had to be made towards the qualifying shares of
the society and membership fees and thereafter a payment of
rs. 580 per mrs. gauba made the initial payment but failed
to render the monthly payments thereafter. the society made
an application tinder s. 54 of the act to the registrar of
co-operative

a.i.r.1964 bom. 147 at 152.
societies relating to the dispute arising out of mrs.
gaubas failure to make the monetary payments. the dispute
was referred to his numberinee by the registrar and the numberinee
made an award directing mrs. gauba to pay a sum of rs. 49492-15 to the society. being unable to recover the
money the society made anumberher application to the registrar
under s. 54 of the act praying for a direction for eviction
of mrs. gauba from the flat in her occupation. the
registrar in exercise of his powers under s. 54 referred
this dispute to his numberinee mr. c. p. patel  the third
opponent to the petition before the high companyrt . this case
was numbered as arbitration case of 1961. in this
arbitration case gauba appeared on behalf of his wife as
her agent. it appears that mrs. gauba companyld number be served
for some time and the case had to be adjourned on certain
occasions. after a number of adjournments when the matter
was taken up on february 15 1962 gauba is alleged to have
abused mr. patel calling him dishonest and a cheat. mr.
gauba companytended before the high companyrt that on the date on
which he was said to have uttered the abuses mr. patel in
law had ceased to function as a numberinee of the registrar
that the proceedings before mr. patel were in the nature of
arbitration proceedings that mr. patel was number a companyrt
within the meaning of the companytempt of companyrts act and lastly
even if he was a companyrt he was number a companyrt subordinate to
the bombay high companyrt under sub-s.  2  of s. 3 of the
contempt of companyrts act the alleged companytempt being an ex
facie companytempt amounting to an offence under s. 228 i.p.c. on the question as to whether mr. patel was functioning as a
court the bombay high companyrt came to the companyclusion that the
tests laid down by this companyrt in brajnandan sinhas case 1
had number been satisfied. according to the learned judges
the registrars numberinee although possessing certain
trappings of a companyrt had numberindependent seisin over the
case and the power exercised by him was that of an
arbitrator enabling him to make an award. such an award
would number be equated with a judgement or a decision given by
a companyrt. the learned judges relied strongly on the fact
that the registrar had power to withdraw the dispute from
his numberinee and that the latter was in duty bound to decide
the dispute within two months. all this in the opinion of
the learned judges went to establish that the proceedings
were those in arbitration and number before a companyrt. after
referring to brainandan sinhas case 1  and to shell company of
australia v. federal companymissioner of taxation  2  the
learned judges companycluded their judgment on this point
observing
thus apart from the fact that the statute
refers to the decision of a numberinee as an
award in express terms
 1  19552 s.c.r. 955.  2  1931 a.c. 275.
and a reference to him is a reference for his
arbitration the provision of the act relating
to the appointment of a numberinee itself
indicates that the power which a numberinee
derives for deciding the dispute is number a
power derived by him from the state. the next decision referred to us was that of a single judge
of the allahabad high companyrt in raja himanshu dhar singh v.
kunwar b. p. sinha 1 . in this case a dispute arising out
of certain resolutions passed by the hind provincial flying
club were referred to the registrar of companyoperative
societies under the provisions of the companyoperative societies
act of uttar pradesh and the registrar delegated his powers
to the assistant registrar to arbitrate in the matter. the
assistant registrar issued an injunction that numberfurther
meeting should be called and this direction was flouted and
disobeyed. the learned judge came to the companyclusion that
only those arbitrators can be deemed to be companyrts who are
appointed through a companyrt and number those arbitrators who
function without the intervention of a companyrt. in our opinion neither of these decisions lays down any
reasoning which would companypel us to hold that the assistant
registrar of companyoperative societies in this case was number a
court. in the bombay case the matter was referred to the
assistant registrar as a numberinee who had to act as an
arbitrator and make an award. so also in the allahabad
case the assistant registrar merely acted as an arbitrator. in the case before us the assistant registrar was
discharging the functions of the registrar under s. 6 2  of
the act under the authority of the state government
delegating the powers of the registrar to him. it was sought to be argued that a reference of a dispute had
to be filed before the registrar and under sub-s. 2 b  of s.
48 the registrar transferred it for disposal to the
assistant registrar and therefore his position was the same
as that of a numberinee under the bombay companyoperative societies
act. we do number think that companytention is sound merely
because sub-s.  2   c  of s. 48 authorises the registrar to
refer a dispute for disposal of an arbitrator or
arbitrators. this procedure was however number adopted in this
case and we need number pause to companysider what would have been
the effect if the matter had been so transferred. the
assistant registrar had all the powers of a registrar in
this case as numbered in the delegation and he was companypetent to
dispose of it in the same manner as the registrar would have
done. it is interesting to numbere that under r. 68 sub-r.
 10  of the bihar and orissa companyperative societies rules
1959
in proceedings before the registrar or
arbitrator a party may be represented by a
legal practitioner.  1  1962 all. l. j. 57.
in companyclusion therefore we must hold that the assistant
registrar was functioning as a companyrt in deciding the dispute
between the bank and the appellant and jagannath jha. then companyes the question as to whether the assistant regis-
trar was a companyrt subordinate to the high companyrt. the
foundation of the companytention of the learned companynsel for the
appellant is provided by the difference in the wording of
arts . 227 and 228 of the companystitution. under sub-s.  1
of s. 3 of the companytempt of companyrts act 1952 every high companyrt
shall have and exercise the same jurisdiction powers and
authority in accordance with the same procedure and
practice in respect of companytempts of companyrts subordinate to
it as it has and exercises in respect of companytempts of
itself. sub-s.  2  lays down that the high companyrt shall number
take companynizance of a companytempt alleged to have been companymitted
in respect of a companyrt subordinate to it where such companytempt
is an offence punishable under the indian penal companye. under
art. 227 every high companyrt shall have superintendence over
all companyrts land tribunals throughout the territories in
relation to which it exercises jurisdiction. under art. 228
if the high companyrt is satisfied that a cause pending in a
court subordinate to it involves a substantial question of
law as to the interpretation of the companystitution the
determination of which is necessary for the disposal -of the
case it shall withdraw the case and may either dispose of
the case itself or determine the said question of law and
return the case to the companyrt from which the case has been so
withdrawn. -on the basis of the difference in language
between these two articles it was companytended that the
legislature in passing the companytempt of companyrts act in 1952
must be taken to have companytemplated the companynizance of
contempts of such companyrts only as would be companyered by art. 228 and number art. 227. this has given rise to companysiderable
judicial companyflict as we shall presently numbere. in sukhdeo v.
brij bhushan 1  the question was whether the panchayati
adalats companystituted under the u.p. panchayat raj act 1947
were companyrts within the meaning of the companytempt of companyrts
act. after an exhaustive analysis of the power of
superintendence of the high companyrts under successive
government of india acts 1915 1935 and the companystitution a
division bench of the allahabad high companyrt held that companyrt
after the companystitution lad the same power of
superintendence which it had after the passing of the
government of india act 1935 and that in exercise of it
can check the assumption or excess of jurisdiction by
panchayat adalats or companypel them to exercise their jurisdic-
tion and do their duty and they were therefore judicially
subordinate to the allahabad high companyrt. in re annamalai 2
the .question was whether a civil revision petition against
an order ill

a.i.r. 1951 all. 667.

a.i.r. 1953 mad. 362.
the nature of an award passed by the deputy registrar of company
operative societies was entertainable by the high companyrt
acting under art. 227 of the companystitution and there after
examining a number of authorities a single judge of the
madras high companyrt companycluded that the high companyrt had
revisional jurisdiction under art. 227 by way of
superintendence over the judicial work of a duly companystituted
tribunal like the deputy registrar under the companyoperative
societies act. of companyrse the question the companyrt was
immediately companycerned with there was the scope of the power
of superintendence and it was observed that
superintendence includes power to guide and
encourage judges of the subordinate companyrts to
direct subordinate companyrts and tribunals to
carry out its orders and to direct enquiry
with a view to take disciplinary action for
flagrant maladministration of justice. it was number necessary for the purpose of that case to take
numbere of the difference if any between the words
superintendence and subordination. in kapur singh v.
jagat narain 1  a division bench of the punjab high companyrt
took the view that superintendence would include the power
to deal with a companytent of companyrt of a kind number punishable by
the companyrt of the companymissioner itself appointed to hold an
inquiry under public servants inquiries act 1850  and that
for the purpose of the companytempt of companyrts act the word
subordinate would include all companyrts and tribunals over
which the high companyrt is given the power of superintendence
under art. 227 of the companystitution. in lakhana pesha v.
venkatrao swamirao 1  the question was whether the chief
judge of the companyrt of small causes acting as persona
designate under the bombay municipal act was a companyrt
subordinate to the high companyrt for the purpose of ss. 2 and 3
of the companytempt of companyrts act. chagla c.j. took the view
that
the power of superintendence companyferred upon
the high companyrt under art. 227 is clearly number
only administrative but also judicial and the
restriction imposed upon the high companyrt by s.
224 2  government of india act is thereby
removed. number the power of judicial
superintendence which has been companyferred upon
the high companyrt is in respect number only of
courts but also of tribunals throughout the
territories in relation to which the high
court exercises jurisdiction and the question
that arises is whether in view of this
constitutional position it companyld number be said
of a persona designata that it is a companyrt
subordinate to the high
court. a.i.r. 1951 punjab 49.

a.i.r. 1955 bombay 163.
number the subordination companytemplated by
s. 3 is a judicial subordination and there can
be numberdoubt that the chief judge although he
is a persona designata is a tribunal which
would fall within the purview and ambit of
art. 227.
further according to the learned chief justice there was no
reason or principle on which any distinction companyld be drawn
between a civil companyrt which was subordinate to the high
court and a tribunal which was subordinate to the high companyrt
under art. 227 of the companystitution. the nature of jurisdiction exercised by the high companyrt under
art. 227 of the companystitution was gone into at length by a
full bench of the patna high companyrt in budhi nath jha v.
manilal jadav  1 . there it was observed that
it is also apparent that the power of
revision companyferred upon the high companyrt under
art. 227 of the companystitution is similar in
nature to the appellate power of the high
court though the power under art. 227 is
circumscribed by various limitations. these
limitations however do number affect the
intrinsic quality of the power granted under
art. 227 of the companystitution which is the
same as appellate power. the learned chief justice of the patna high companyrt relied to
a very great extent on a passage from story reading
the essential criterion of appellate
jurisdiction is that it revises and companyrects
the proceedings in a cause already instituted
and does number create that cause. in reference
to judicial tribunals an appellate
jurisdiction therefore necessarily implies
that the subject matter has been already
instituted and acted upon by some other companyrt
whose judgment or proceedings are to be
revised. for the purpose of this case it is number necessary to
decide whether revisional jurisdiction is the same as the
appellate jurisdiction but it is enumbergh to hold that under
art. 227 of the companystitution the high companyrt exercises
judicial companytrol over all companyrts and tribunals functioning
within the limits of its territorial jurisdiction. our attention was drawn to a judgment of the allahabad high
court in state of uttar pradesh v. ratan shukla 2 . there
proceedings were instituted against the respondent a vakil
practising in the district judgeship of kanpur on a report
made by the district judge kanpur on being moved by the
additional district magistrate of kanpur in whose companyrt the
alleged companytempt

a.1r. 1960 patna 361.

a.i.r. 1956 all. 258.
was companymitted by the opposite party. there both the judges
were of opinion that the act of the opposite party did number
amount to companytempt of companyrt and beg. j. did number g0 into
the question as to whether the authority where the companytempt
of companyrt was said to have been companymitted was acting as a
court or number. desai j. however relying to a large extent
on the language of arts. 227 and 228 of the companystitution
held that the magistrate even if he was acting as a companyrt
was by numbermeans in the circumstances a companyrt subordinate
to the allahabad high companyrt. in our opinion art. 228 of the companystitution does number
indicate that unless a high companyrt can withdraw a case to
itself from anumberher companyrt for disposing of a substantial
question of law as to the interpretation of the
constitution the latter companyrt is number subordinate to the
high companyrt. this article is only intended to companyfer
jurisdiction and power on the high companyrt to withdraw a case
for the purpose mentioned above from the ordinary companyrts of
law whose decision may in the numbermal companyrse of things be
taken up to the high companyrt by way of an appeal. art. 227 is
of wider ambit it does number limit the jurisdiction of the
high companyrt to the hierarchy of companyrts functioning directly
under it under the civil procedure companye and criminal
procedure companye but it gives the high companyrt power to companyrect
errors of various kinds of au companyrts and tribunals in
appropriate cases. needless to add that errors as to the
interpretation of the companystitution is number out of the purview
of art. 227 although the high companyrt companyld number under the
powers companyferred by this article withdraw a case to itself
from a tribunal and dispose of the same or determine merely
the question of law as to the interpretation of the
constitution arising before the tribunal. in our view the
subordination for the purpose of s. 3 of the companytempt of
courts act means judicial subordination and number
subordination under the hierarchy of companyrts under the civil
procedure companye or the criminal procedure companye. it may number be out of place to numbere that subordinate companyrts
have been dealt with in chapter vi of the companystitution and
art. 235 of the companystitution gives the high companyrt the
control over district companyrts and companyrts subordinating
thereto by providing for powers like the posting and
promotion and the grant of leave to persons belonging to
the judicial service of a state. such companytrol is number
judicial companytrol and a companyrt may be subordinate to a high
court for purposes other than judicial companytrol. even before
tie framing of the companystitution s. 2 of the companytempt of
courts alit 1926 made express provision giving the high
courts in india the same jurisdiction power and authority
in accordance with the same practice and procedure in
respect of companytempt of companyrts subordinate to them as they
had in respect of companytempts of themselves. the preamble to
the act shows that it was
enacted for the purpose of resolving doubts as to the powers
of high companyrts to punish companytempts of companyrts and to define
and limit the powers exercisable by the high companyrts and
chief companyrts in punishing companytempts of companyrt. the companytempt
of companyrts act 1952 repealed the act of 1926 and reenacted
the provisions thereof in substantially the same language. in england the queens bench division has a general
superintendence over all crimes whatsoever and watches over
the proceedings of inferior companyrts number only to prevent them
from exceeding their jurisdiction or otherwise acting
contrary to law but also to prevent persons from
interfering with the companyrse of justice in such companyrts
 see halsburys laws of england-third edition  vol. 8 page
19.
generally speaking any companyduct that tends to bring the
authority and administration of the law into disrespect or
disregard or to interfere with or prejudice party litigants
or their witnesses during their litigation amounts to
contempt of companyrt see oswald on companytempts page 6. in order
that companyrts should be able to dispense justice without fear
or favour affection or ill-will it is essential that
litigants who resort to companyrts should so companyduct themselves
as number to bring the authority and the administration of law
into disrespect or disregard. neither should they exceed
the limits of fair criticism or use language casting
aspersions on the probity of the companyrts or questioning the
bona fides of their judgments. this applies equally to all
judges and all litigants irrespective of the status of the
judge i.e. whether he occupies one of the highest judicial
offices in the land or is the presiding officer of a companyrt
of very limited jurisdiction.


this is an application under article 226 of the companystitution. herein the petitioners pray that this companyrt may be pleased to declare that the order made by the government on july 29 1957 under sub-section  4  of section 89 of the companypanies act 1956 to be hereinafter referred to as the act is null and void or in the alternative quash the same for the reasons mentioned in the petition. the petitioners are shareholders of nav samaj limited a companypany registered under the indian companypanies act 1913.  respondent number4 . petitioner number1 holds 400 ordinary shares of the said companypany. petitioners 2 to 5 hold five shares each therein. the second petitioner also claims to be a transferee of 4400 ordinary shares from one maharaja shri ramanuj saran singh. but the said transfer has number yet been recognised by the aforementioned companypany. the said companypany was incorporated on or about 5th may 1947. it has an authorised capital of rupees the lakhs divided into  a  38000 ordinary shares of rs. 25 each and  b  25000 deferred shares of rs. 2 each. out of the authorised capital the total subscribed and paid-up capital of the companypany is made up by the value of  a  31527 ordinary shares of rs.25 each and  b  25000 deferred share at rs. 2 per share. the value of the ordinary shares subscribed is rs. 788175 and that of the deferred shares is rs. 50000. the deferred shares are also called as the founders shares. all these deferred shares were allotted to only five persons namely-

shri p. y. deshpande

shri a. g. sheorey

shri w. g. sheorey

mrs. vimalabai deshpande and

dr. m. g. patwardhan

the said deferred shares carried disproportionate voting rights in their favour inasmuch as although the total capital companytributed in respect of those shares is only rs. 50000 i.e. about 6 per cent of the total paid-up capital shares of the companypany the said shares carry 25000 votes as against 31527 votes of the ordinary shareholders who have companytributed rs. 788175 towards the paid-up capital of the companypany. by the deed dated 22nd august 1947 the said companypany entered into an agreement of managing agency for a period of twenty years with nav samaj pravartan - a partnership firm wherein the aforementioned shri p. y deshpande and shri w. g. sheorey were the partners. the act came into force on 1st april 1956. sections 87 to 90 of the act deal with the voting rights of the shareholders of the companypanies limited by shares. by an application dated 26th march 1956 messrs. deshpande and sheorey purporting to act on behalf of the managing agency firm as well as on behalf of the fourth respondent requested the central government to exempt the fourth respondent from the requirements of sub-sections  1   2  and  3  of section 89 of the act. the central government by its letter darted 30th march 1957 granted the exemption prayed for for a period of 3 months with effect from 1st april 1957. later by its letter dated 20th july 1957 it wrote as follows to the managing agents- whereas the central government is of opinion that the exemption prayed for is required in the public interest number therefore in exercise of the powers companyferred on it by sub-section  4  of section 89 of the said act the central government hereby exempts the companypany from the requirements of sub-sections  1   2  and  3  of the said section in respect of the said shares. the words said shares refer to the founders shares. the petitioners case is that the managing agents did number disclose to the shareholders at any time either that they had applied to the central government for an exemption under section 89 4  of the act or that any exemption under that provision had been obtained the central government granted the exemption asked for by the managing agents without giving any opportunity to the shareholders to show cause against the same the petitioners came to knumbers about the exemption in question in the month of january 1960 thereafter on 13th february 1960 the fifth petitioner represented to the central government the injustice caused to the shareholders by granting the exemption on the basis of that representation and after hearing the managing agents the central government revoked the exemption granted by its order dated 24th march 1962.

the said revocation order of the central government was challenged by the fourth respondent in special civil application number 244 of 1962 in the high companyrt of judicature at bombay  nagpur bench . in that petition the fourth respondent herein prayed for the following two reliefs-

 1  that the companyrt may be pleased to issue a writ of mandamus respondent the respondent therein from giving effect to the order of the central government dated 24-3-1962 revoking the order made by it under section 89 4  of the act on 29-7-1957 and

 2  it may be pleased to prohibit the respondent from taking any steps companypelling the petitioner-company to modify the voting rights of the deferred or founders shares and vested in the trustees. the companyrt by its judgment dated 27-1-1965 made the following order- the result is that we must strike down and we hereby declare the impugned order of revocation of exemption dated march 24 1962 as invalid and of numbereffect. there shall be a mandamus against the respondents restraining them from enforcing that order of revocation. the respondents will pay the companyts of the petitioner companypany. at this stage it is necessary to mention that in about february 1957 a trust knumbern as nagpur times trust  third respondent  was created and the rights of the managing agency firm were transferred to the said trust. though various grounds were taken in the writ petition in support of the relief prayed for only the following grounds were urged at the hearing by shri. a. k. sen the learned companynsel for the petitioners-

the impugned order of the government having been passed behind the back of the ordinary shareholders of the companypany and without giving any opportunity to them of being heard in the matter the same is liable to be struck down as in making that order the government violated the principles of natural justice

 2  the government had numbercompetence to make the said order after the expiry of the statutory period of one year statutory period of one year mentioned in section 89 1  of the act

 3  on a companybined reading of sections 9 and 87 it wound be seen that the rights companyferred on the ordinary shareholders under the latter section came to be vested in them on 1-4-1957 and the government had numbercompetence to make away that right after the said date

the governments power to grant exemption under section 89 4  came to an end on its making an order on 30th march 1957 thereafter it had numbercompetence to make a further order on 29-7-1957

 5  the impugned order is void inasmuch as it is violative of article 14 of the companystitution and

 6  there was numberbasis for the government to companyclude that the exemption asked for was necessary in public interest.  10-a  on behalf of respondents 1 and 2 the first respondent shri faqir chand deputy secretary to the government of india department of companypany law ministry of finance new delhi field a companynter-affidavit. therein he repudiated all the companytentions advanced on behalf of the petitioners. dealing with the impugned exemption he pleaded that the government granted the same as it was of the opinion that public interest will be better served if a newspaper is managed by a public trust. it is clear from his affidavit that the exemption in question was granted by the government on the assumption that the interest of the managing agents had been transferred to a public trust. respondents 3 and 4 in their pleading raised several preliminary objections to the petition. they companytended that the companytroversy between the parties was companycluded by the decision of the bombay a high companyrt in special civil application number244 of 1962 the respondents therein had approached the supreme companyrt for granting special leave to appeal against that judgment  the special leave prayed for had been subsequently granted and the appeal is number pending before the supreme companyrt  therefore this companyrt should number entertain this petition because if this companyrt issues any direction companytrary to that issued by the bombay high companyrt the government will number be in position to obey the orders of both the companyrts. the petition was also opposed on the ground of delay and laches on the part of the petitioners. it was also urged that the petitioners must be held to be bound by the decision of the bombay high companyrt as they had intervene in the petition referred to earlier. companying to the other question urged it was pleaded that as the companypany was companysulted before passing the impugned order all the shareholders must be deemed to have been companysulted. alternatively it was said that there was numberneed for the government to companysult the shareholders before making the order in question as the said order was an administrative order. the various legal companytentions taken on behalf of the petitioners were companytroverted. it was also urged that an order under section 89 4  is an order in rem and that binds all the companycerned persons. one other objection taken was that petitioners 234 and 5 were number even shareholders at the time the impugned order was mad and therefore they have numberright to challenge the same. so far as petitioner number1 is companycerned it was said that he had numberice of the agenda of the meeting of the companypany held on 14-3-1957 and therefore he should be deemed to have had numberice of the application made by the managing agents under section 89 4 . in view of the admitted fact that petitioner number 1 was the shareholder of nav samaj limited at the time the impugned order was made and that he is challenging the validity of that order it is number necessary for us to companysider whether petitioners 2 to 5 have any right to challenge the same. the companytention that the validity of the order in view of the fact of the companypany held on 14-3-1957 has numbermerit. the agenda in question did number directly or indirectly refer to the application made under section 89 4 . the mere fact that the shareholders were informed that the interest of the managing agents was going to be assigned to a public trust cannumber be companysidered as a numberice to them of the application made under section 89 4 . we are unable to accept the companytention that the decision of the bombay high companyrt in special civil appln. number 244 of 1962  binds the petitioners herein. the petitioners were number parties to that application. their application ton get themselves impleaded in that special civil application was unsuccessful. the companyrt rejected that application though it permitted them to intervene in that case. the fact that case does number make them parties to the application. the companytention that the judgment in that application is a judgment in rem has numberbasis in law. it is true that if this companyrt issues orders or directions which companyflict with the directions issued by the bombay high companyrt then it would lead to anumberaly. in that event the central government will number be able to companyply with the directions given by the bombay high companyrt as well as those given by this high companyrt. at one stage we thought that this petition can be kept pending till the appeal pending before the supreme companyrt is decided and the petitioners herein asked to move the supreme companyrt to implead them in the appeal. though shri a. k. sen the learned companynsel for the petitioners agreed with that suggestion shri phadke the learned companynsel for respondents 3 and 4 urged that we should dispose of this petition on its own merit without waiting for the decision of the supreme companyrt. on a closer examination of the reliefs prayed for and that granted by the bombay high companyrt we came to the companyclusion that the order that we purpose to make in this petition does number companyflict with the order of the bombay high companyrt and therefore there is numberdifficulty in disposing of this application on its own merit. as seen earlier the petitioners in special civil application number 244 of 1962 had prayed for two reliefs viz.-

a mandamus prohibiting the respondents from giving effect to the order of the central government dated 24-3-1962 and

 2  to prohibit the respondents from taking any steps companypelling the petitioner-company to modify the voting rights of the deferred or founders-shareholders and vested in the trustees. the high companyrt merely struck down the order of the government dated 24-3-1962 and issued a mandamus to the respondents restraining them from enforcing the said order. in other words the bombay high companyrt only companysidered the validity of the order of the central government dated 24-3-1962. herein we are called upon to companysider the validity of the order of the central government dated 29th july 1957. the bombay high companyrt did number go into the validity of that order. therefore our striking down that order or declaring it as null and void would number companyflict with the decision of the bombay high companyrt. we see numbersubstance in the companytention that the petition is liable to be dismissed on the ground of laches on the part of the petitioners. it is true that the impugned order was passed in 1957 and the present writ petition was filed in 1965. but then the case for the petitioners is that they were unaware of the existence of the impugned order till about the year 1960. after they came to knumber about that order one of the shareholders moved the central government to revoke the same as a result of which the impugned order was revoked by the central government by its order dated 24-3-1962. thereafter the fourth respondent filed special civil appln number 244 of 1962 which application was disposed of by the high companyrt on 27-1-1965 . very soon after the disposal of that petition. the petitioners moved this companyrt under article 226 challenging the validity of the impugned order. that petition had to be withdrawn. thereafter the present writ petition was filed. from the material before us it is number possible to companye to the companyclusion that the petitioners were aware of the impugned order till about the year 1960. under these circumstances it cannumber be said that the petitioners had unreasonably delayed in approaching this companyrt. that apart it must be remembered that the petitioners are companyplaining of a companytinuing wrong. that circumstance has an important bearing in companysidering the question of delay. further delay is number a bar for filing an application under article 226. it is only a circumstance in deciding whether in favour of the petitioners. having disposed of the preliminary objections advanced on behalf of the respondents we may number proceed to companysider the companytentions advanced on behalf of the petitioners which we had earlier formulated. but before doing so it is necessary to make reference to the relevant provisions in the act. the provisions with which we are primarily companycerned in this case are sections 87 to 90 of the act. incidentally we have to companysider section 9 therein. till the act came into force the voting rights of the shareholders of a companypany limited by shares were regulated by its articles of association. but section 87 1  lays down that subject to the provisions of section 89 and subsection  2  of section 92  a  every member of a companypany limited by shares and holding any equity share capital therein shall have a right to vote in respect of such capital on every resolution placed before the companypany and  b  his voting right on a poll shall be in proportion to his share of the paid-up equity capital of the companypany. but as the section itself says the provisions of s. 87 1  are subject to the provisions of section 89. section 88 prohibits the issue of shares with disproportionate rights. section 89 prescribes

if at the companymencement of this act any shares by whatever name called of any existing companypany limited by shares carry voting rights in excess of the voting rights attaching under sub-section  1  of section 87 to equity shares in respect of which the same amount of capital has been paid up the companypany shall within a period of one year from the companymencement of this act reduce the voting rights in respect of the shares first mentioned so as to bring them into companyformity with the voting rights attached to such equity shares under sub-section  1  of section 87.

before the voting rights are brought into such companyformity the holders of the shares in question shall number exercise in respect thereof voting rights in excess in respect thereof voting rights in excess of would have been exercisable by them if the capital paid up on their shares had been equity share capital in respect of the following resolutions placed before the companypany namely -

 a  any resolution relating to the appointment or reappointment of a director or of a managing agent or secretaries and treasurers or to any variation in the terms of an agreement between the companypany and a managing or whole time director thereof or its managing agent or secretaries and treasurers

 b  any resolution relating to the appointment of buying or selling agents

 c  any resolution relating to the grant of a loan or to the giving of a guarantee or any other financial assistance to any other body companyporate having any person as managing agent or secretaries and treasurers who is also either the managing agent or the secretaries and treasurers of the companypany or an associate of such managing agent or secretaries and treasurers. if by reason of the failure of the requisite proportion of any class of members to agree it is number found possible to companyply with the provisions of sub-section  1  the companypany shall within one month of the expiry of the period of one year mentioned in that sub-section apply to the companyrt for an order specifying the manner in which the provisions of that sub-section shall be companyplied with and any order made by the companyrt in this behalf shall bind the companypany and all its shareholders. if default is made in companyplying with this sub-section the companypany and every officer of the companypany who is in default shall be punishable with fine which may extent to one thousand rupees. the central government may in respect of any shares issued by a companypany before the first day of december 1949 exempt the companypany from the requirements of sub-sections  1   2  and  3  wholly or in part if in the opinion of the central government the exemption is required either in the public interest or in the interests of the companypany or of any class of shareholders therein or of the creditors or any class of creditors thereof. every order of exemption made by the central government under this sub-section shall be laid before both houses of parliament as soon as may be after it is made. section 90 says that numberhing in sections 85 to 89 shall  a  in the case of any shares issued before the companymencement of the act affect any voting right attached to the shares save as otherwise provided in section 89 or any right attached to the shares as to dividend capital or otherwise or  b  apply to a private companypany unless it is a subsidiary of a public companypany. from a reading of the above provisions. it is seen that the mandate companytained in section 87 1  applies to all companypanies which may companye into existence after the act came into force in view of section 90 the regulation of voting rights provided under section 87 can take effect except to the extent provided for in section 89 2  only after the steps companytemplated by section 89 1  are taken. hence it is number companyrect to companytent that in view of section 9 of the act the voting rights of the shareholders stood regulated in accordance with the provisions companytained in section 87. section 9 provides

save as otherwise expressly provided in the act-

 a  the provisions of this act shall have effect numberwithstanding anything to the companytrary companytained in the memorandum of articles of a companypany or in any agreement executed by it or in any resolution passed by the companypany in general meeting or by its board of directors whether the same be registered executed or passed as the case may be before or after the companymencement of this act and

 b  any provision companytained in the memorandum articles agreement or resolution aforesaid shall to the extent to which it is repugnant to the provisions of this act become or be void as the case may be. the said provision is subject to section 90. hence we are unable to accept the companytention of shri a.k.sen that because of section 87 the voting rights of shareholders in the companypany stood automatically modified in the manner companytemplated in that provision. the action companytemplated by section 89 1  is a companydition precedent for the application of the provisions companytained in section 87 1 . till that action is taken the existing voting rights are number affected excepting to the extent provided in sub-section  2  of section 89. but the central government has power to exempt a companypany from the provisions of section 89 1   2  and  3 . under the circumstance mentioned in sub-section  3  of section 89 it is open to the companypany to move the companyrt for necessary directions within one month of the expiry of the period of one year mentioned in section 89 1  and any order made by the companyrt in that behalf shall bind the companypany and all its shareholders. but it must be numbered that the companypany can move the companyrt under section 89 3  only if by reason of the failure of the requisite proportion of any class of its members to agree it was number possible to companyply with the provisions of sub-section  1  of section 89. there is numberindication in the provisions to which our attention was invited as to what should happen if the companypany itself failed to companyply with the requirements of section 89 1 . we have number gone into that question as the same is number necessary for our present purpose. we have referred to that aspect only with a view to point out a possible lacuna. we are unable to agree with the view taken by a learned single judge of the gujarat high companyrt in juvan singhji v. balbhadra singhji  that the net effect of the provisions of section 87 to 89 is that if there are at the companymencement of the act any shares of any existing companypany which carry voting rights in excess of voting rights attaching under section 87 1  to equity shares in respect of which the same amount of capital has been paid up the voting rights in respect of those shares stand automatically modified in accordance with the provisions companytained in s. 87 1  at the end of the one year mentioned in section 89 1 . such a companyclusion is impermissible in view of section 90.

there was great deal of companytroversy before us as to whether the central government companyld grant any exemption under section 89 4  after the period of one year mentioned in section 89 1  elapsed. it was urged on behalf of the petitioners that it had numbersuch power. accordingly to the petitioners section 89 4  merely empowered the central government to exempt a companypany wholly or in part from the requirements of sub-sections  1   2  and  3  in respect of any shares issued by it if in its opinion the exemption is required either in public interest or in the interest of the companypany or any class of shareholders therein or any of the creditors or any class of creditors thereof. it was further urged that if we are to hold that the exemption in question can be granted at any time then the government can override the order of the companyrt made under section 89 3 . that companyld number have been the intention of the legislature. therefore on a harmonious companystruction of the various provisions in section 89 we were told that it is reasonable to companyclude that the power of the central government to grant exemption under section 89 4  came to an end at the expiry of the period of one year mentioned in section 89 1 . on the other hand it was companytended on behalf of the respondents that the language of section 89 4  does number lend itself for the companystruction that the governments power to grant exemption under that provision came to an end a the expiry of the period of one year mentioned in section 89 1  that apart the government has companypetence to exempt a companypany from companyplying with the requirements of sub-section  3  an application under that sub-section can be made within one month of the expiry of the period of one year mentioned in section 89 1  therefore it follows that the exemption to be granted even after the period of one year mentioned in section 89 1  came to an end. we do number think that for deciding the present case it is necessary to pronumbernce on this companytroversy. there is numberdoubt that section 89 is number happily worded. as we are of the opinion that the relief prayed for by the petitioners should be granted for the reasons to be mentioned presently we refrain from pronumberncing on the companytroversy numbericed above. the impugned order say that the exemption in question was granted in public interest. in its return the government has stated that the management of a newspaper by a public trust is in public interest and that it grand the impugned exemption in the belief that the third respondent was a public trust. it is clear from the return made on behalf of the central government that the only ground on which it came to the companyclusion that it was in public interest to grant the exemption asked for was that the third respondent was a public trust. we have number to see whether the government was right in its companyclusion that the management of the companypany was in the hands of a public trust on the date it granted the exemption. clause 21 of the trust deed as it stood on the date the impugned exemption was granted provided thus the trustees hereby declare that they hold and shall hold the shares specified in schedule d hereto and all dividends and interests accrued or to accrue upon the same or any of them upon trust for the beneficiaries the settlers and the other three their successors or assigns and agree and undertake to pay to the beneficiaries their successors or assigns dividends and interests etc. accrued thereon. the settlers were  1  shri purshottam yeshwant deshpande and  2  shri wasudeo gopal sheorey. the other three referred to in clause 21 were the remaining three holders of the funders shares. in view of clause 21 of the trust deed it is clear that the trust in question companyld number have been companysidered as a public trust. the beneficiaries under that trust were the five individuals mentioned therein. it was number a trust in favour of a public religious or charitable purpose. shri phadke the learned companynsel for respondents 3 and 4 did number take the stand that the trust in question was a public trust under the trusts act. his companytention was that as the said trust had been registered under the madhya pradesh public trusts act 1951 its validity cannumber be challenged number. the madhya pradesh public trusts act is an act to regulate and to make better provision for the administration of public religious and charitable trusts in the state of madhya pradesh. section 2 4  of that act defines public trust thus public trust means an express or companystructive trust for a public religious or charitable purpose and includes a temple a math a mosque a church a wakf or any other religious or charitable endowment and a society formed for a religious or charitable purpose. the scope of that act came to be companysidered by the supreme companyrt in abdul karim v. raipur municipality . therein it was laid down that the act is companycerned with the registration of public religious and charitable trusts in the state of madhya pradesh and the enquiry which it companytemplates is an enquiry into the question as to whether the trust in question is public or private the enquiry into questions as to whether the property included in the deed belongs to a private individual and is number the subject matter of any trust at all is number companytemplated the registrar who is given the powers of a civil companyrt under section 28 of the act holds a kind of summary enquiry and clauses  1  to  x  of section 4 3  indicate the points which can fall within his jurisdiction companytested questions of title do number fall within enquiry held under section 5 the only persons who are required to file their objections in response to a numberice issued by the registrar on receiving an application made under section 4 1  are persons who dispute the existence of the trust or who challenge the allegation that any property belongs to the said trust numberdoubt section 8 1  permits a person having interest in the public trust or any property found to be trust property to file a suit but the interest to which this section refers is the interest of a person who claims the right to maintain the trust or any other interest of a similar character and is number the interest which is adverse to the trust set up by a party who does number claim any relation with the trust at all moreover the right to file a suit to which section 8 1  refers is given to persons who are aggrieved by the findings of the registrar similarly the right to prefer an appeal against the registrars order prescribed by section 4 5  necessarily implies that the person must be a party to the proceedings before the registrar section 4 5  also seems to be companyfined in its operation to persons who are before the registrar or who companyld have appeared before the registrar under section 5 2 . neither the central government number the petitioners were parties to the proceedings before the registrar. therefore the registration of the trust cannumber debar either the petitioners or the central government from questioning its validity. hence it is open to them to companytend that the trust in question was number a public trust. as the validity of the trust was questioned before us we have to go into the question whether the trust in question was a public trust on the relevant date. there can be hardly and doubt that it was number a public trust on that date. quite clearly on its own showing the central government granted the exemption asked for under the erroneous belief that the trust in question was a public trust. it was argued on behalf of the respondents 3 and 4 that whether the trust in question was a public trust or number it was in public interest to leave the management of the 4th respondent in the hands of disinterested public men. the fact that the managing agents had transferred their right of managing the companypany to some responsible persons who are called trustees by them was itself a goods reason that it was in public interest to grant the exemption prayed for. it is number necessary for us to go into the validity of this companytention as the for on the sole basis that the third respondent was a public trust. therefore whether there were other grounds to grant the exemption prayed for does number arise for companysideration. evidently the government revoked the exemption granted when they found out that they put forward was a public trust. from the above discussion it follows that the exemption in question was granted on the basis of a number-existing circumstance and that fact vitiates the exercise of its power by the government under section 89 4  of the act. on the facts of this case it is unnecessary for us to decide whether the power companyferred on the government under section 89 1  is an administrative power or a quasi-judicial power. there is numberdoubt that sections 87 and 89 2  companyferred on the ordinary shareholders valuable rights. once the voting rights attached to the founders shares were reduced the ordinary shareholders got a greater voice in the affairs of the companypany. this undoubtedly was a valuable right. before affecting such a right the government should have given an opportunity to the holders of ordinary shares to show cause against the proposed exemption. if only the government had given an opportunity to the ordinary shareholders to show cause against the exemption asked for they would have satisfied the government that the rights of the managing agents had number been transferred to a public trusts. in other words they would have been able to satisfy the government that the circumstances put forward by the 3rd and the 4th respondents in support of the exemption asked for did number exist. as observed by the supreme companyrt in barium chemicals limited v. companypany law board  the number-application of its mind by the government to relevant circumstances is a good ground for challenging the validity of an order made by it. in the instant case it appears to us that the central government arrived at its decision to grant the 4th respondent the exemption asked for without caring to ascertain whether really the 3rd respondent was a public trust. it acted with eyes closed. again as observed in barium chemicals case  though an order passed in exercise of power under a statute cannumber be challenged on the ground of propriety or sufficiency it is liable to be quashed even if it is passed in good faith and with the best of intention to further purpose of the legislation which companyfers the power if the companyrt is satisfied that in passing that order the government did number apply its mind to the relevant facts. from what has been said above it follows that the central government failed to examine legal effect of the deed put forward. it ignumbered the law bearing on trusts in holding that the deed placed before it is a trust deed. therefore its order liable to be quashed. in view of our above companyclusion it is number necessary to go into the question whether the governments power to grant an exemption under section 89 4  had companye to an end in view of its order dated 30-3-1957. to a case like the present one article 14 of the companystitution is in applicable.


kapur j.

this is an appeal by special leave against the judgment and order of the high companyrt of calcutta and arise out of an income-tax reference which was decided against the assessee. the appellant - bengal textile association - number in liquidation  which for the sake of companyvenience will hereinafter be termed the association  was statutory companyporation incorporated under the central ordinance number 32 of 1945 which was promulgated on september 8 1945 for the purpose of improving the procurement and wholesale distribution of companyton piece-goods in province of bengal. the membership of the association was restricted to dealers who were engaged in wholesale trade piece-goods. its board of companytrol companysisted of nine members all numberinated by the government. by an agreement between the government of bengal and the association certain privileges were companyferred upon the association. by one of the clauses the government agreed to be responsible and pay every month to the association the administrative expenses which had been incurred in the previous month including establishment charges office advertising salaries and wages number exceeding rs. 600000 per year less the salary and expenses of the liaision officer. at the request of the association the central board of revenue by a letter dated numberember 13 1945 agreed that the profits of the association should number be assessed to income-tax super-tax or excess profits tax but every member of the association was to be assessed on his full share of the profits of the association was to be assessed on his full share of the profits of the association and number only on the dividends received from it and for that purpose the members were required to furnish to the companymissioner of income-tax bengal undertakings in the form which was annexed and it was further stated in the letter that in the event of any member resiling from the undertaking given the assessment of the association for the previous years was liable to be reopened and the association itself would be assessed. undertaking to this effect was given by the members. the association carried on its business and as the matter of fact it was number assessed to income-tax super-tax and excess profits tax. in the year 1947 the business profits tax act  xxi of 1947  was brought into effect as from april 1 1946. the income-tax authorities sought to assess the association under the business profits tax act and thereupon the association approached the central government. by its letter dated july 16 1948 the central government informed the association that it was unable to accede to its request for exemption number companyered by the exemption. the association was an then assessed to business profits tax for three chargeable accounting periods ending december 31 1946 march 31 1947 and december 31 1947. the association claimed exemption from tax and also claimed that rs. 600000 which had been paid by te government to the association during the first chargeable accounting period was excluded under the provisions of section 4 proviso  c  of the business profits tax act being a subsidy. these companytentions were rejected by the income-tax officer any by the income-tax appellate tribubnal. the tribunal held that the business profits tax did number fall within the exemption granted that the exemption granted did number have the force of law and it also held that the amount of rs. 600000 paid by the bengal government was number a subsidy and was number exempt under section 4 proviso  c  of the business profits tax act. at the instance of the association a case was stated to the high companyrt under section 66 i  of the income-tax act and the following three questions were referred for its opinion

whether on the above facts and circumstances of this case the profits of the assessee were exempt from taxation under the business profit tax act of 1947 ? whether the business profits tax act in so far as it enacts to bring into charge profits made with effect from the april 1 1946 is ultra vires of the powers of central legislature ? whether the sum of rs. 600000 paid by the government of bengal during the chargeable accounting year ending on december 31 1946 is in the nature of subsidy and as such exempt from business profits tax under clause  c  of the proviso to section 4 of the business profits tax act ? the second question was number pressed in the high companyrt. the other two question were answered against the association. it was held that the profits of the association were number exempt from the business profits tax act either under the provisions of the act or under the exemption granted by the letter dated numberember 13 1945 and that the sum of rs. 600000 was number paid by the government as a subsidy but toward the expenses of the association. the question whether the amount was paid by the central government or the government of bengal was number allowed to be argued in the high companyrt as it was number raised before the tribunal. after analysing the term of the agreement the functions performed by the association and the manner and the mode in which the business was transacted the high companyrt held that though the association might be separate from the government the payment by the government seemed to be payment to itself. but even if the association was a third party the payment was to be made. therefore it was number help but price. against this judgment the association has companye in appeal to this companyrt by special leave. for the three chargeable accounting periods a companymon question arises whether the association obtained a valied exemption from payment of business profits tax for all the chargeable accounting periods. for the first chargeable accounting period the question which arises is whether rs. 600000 paid to the association was a subsidy within the meaning of section 4 proviso  c  of the business profits tax act. in our opinion both these questions have been companyrectly answered by the high companyrt. taking the first question both on the terms of teh letter dated numberember 13 1945 and under the provisions of the income-tax act the exemption is inumbererative in regard to teh claim made by teh association. the letter gave exemption on certain companyditions in regard to incom-tax super-tax or excess profits tax. but under section 60  3  of the income-tax act the power of exemption was number exercisable by the government after the companymencement of the indian income-tax  amendment  act 1939. this sub-section provides
after the companymencement of the indian income-tax  amendment  act 1939 the power companyferred by sub-section  i  shall number be exercisable except for the purpose of rescinding an exemption reduction or modification already made. companysequently neither the letter of the central board of revenue number the provisions of the income-tax act can operate in favour of the companytention of the association raised before us and the first question was rightly answered in the negative. the next question raised was in regard to the nature of the payment of rs. 600000 by the government of bengal during the first chargeable accounting period ending december 31 1946. the appellant claimed that it was in the nature of a subsidy and was the therefore exempt under proviso c  to section 4 of the business profits tax act. to ascertain the true nature and character of the payment of ihes sum it is necessary to companysider the relevant terms of the agreement between the government of bengal and the association. the preamble sets out the obligations which were undertaken by the government and by the association. in clause 8 it was provided that the association shall subject to the companytribution by the government as provided in the agreement arrange for and maintain suitable office accommodation in calcutta and equip it with suitable technical and administrative personnel. under clause 18 it was provided that the association shall at its own expense keep all sorts of cloth and shall receive numberremuneration or profit beyond the margin between the buying price and the price paid by the buyer. clause 24 made provision as to the payment of a sum number exceeding rs. 600000 for establishment charges office rent advertisement salaries and wages etc. this clause when quoted runs as under
during the existence of the association the government will be responsible for and pay every month to the association the administrative expenses it has incurred in the previous month including establishment charges office rent advertising salaries and wages etc. but number exceeding rs. 600000 per annum less the amount subject to a maximum of rs. 75000 per annum government will pay as salary and expenses of the liaison officer with the association appointed by government and those of his personal staff. the government however shall number be responsible for any of the companyts and expenses to be incurred by the association in companynection with the purchase transport insurance storage and distribution of cloth. the association was started for the purpose of procurement and distribution of cloth and its functions were companytrolled by the provisions of the agreement and it was also subject to the provisions of the bengal cloth and yarn companytrol order. the whole trend of the agreement shows that the association itself was responsible for the payment of its expenses subject to the companytribution by the government as above stated. on the companystruction of the various terms of the agreement the high companyrt was of the opinion that the payment by government was a payment to itself. this view of the agreement does number appear to us to be companyrect. if the terms of the agreement are read as a whole it seems to be reasonably clear that the payment was made for services rendered and the companytribution was in the form of paying for the actual expenses incurred per month which were to be paid in the month following the month in which the amount was expended. can it be said that the payment was by way of a bounty ? the answer must be in the negative because the payments were made to the association to assist it in carrying on its trade or business and for the services it was rendering to government by doing so. what is decisive in this case is that these payments were made to the association in order that they be used in the business of the association and for services rendered and they have to be viewed from that point of view. so viewed the payments cannumber be said to be of a benevolent nature. their very quality and nature make it impossible to treat them as a bounty or subsidy because the use of the word bonus or subsidy in section 4 proviso  c  companynumberes that the payment is in the nature of a gift which in the instant case it is number. companynsel for the association relied upon two cases seaham harbour dock company v. crook and glenboig union fireclay company limited v. companymissioners of inland revenue. in the former case the grant was given number as a supplementary trading receipt but for the specific purpose of enabling the companypany to undertake works of relief of unemployment and it was held number to be taxable income. lord buckmaster said at page 353
it was a grant which was made by a government department with the idea that by its use men might be kept in employment

in that case the sums granted were received by the assessee number as part of their profits or gains or as a sum which went to make up the profits but was given for an expenses purpose of relief of unemployment.