civil appellate jurisdiction civil appeals number. 290-348
729-746 802-805 n  of 1980 2328-31 2350-2388 of 1981.  appeals by special leave from the judgment and decrees
of the karnataka high companyrt dated 12.7.79 30.10.79 4.6.81
22.8.80 4.7.80 10.7.80 7.8.80 24.9.80 21.8.79 27.7.79
28.5.80 13.6.80 5.2.80 10.12.79 9.8.79 20.8.79 8.8.79
11.4.79 26.3.79 9.4.79 24.1.79 12.4.79 4.6.79 1.12.78
6.6.79 13.6.79 18.6.79 20.6.79 26.7.79 23.10.80
13.7.1979 in m.f.a. number. 678 681-83 686/78 836-841/77
150/78 148-149/78 8-16/79 936-943/77 567/77 222-234/78
256/78 259/78 444-448/78 458/78 705-707/77 211-217/78
736-737/78 923-24/77 130-131/78 443/78
131313141311/79 735/78 481 482 687 688/78 1432-
35/79 377-388/78 1087/80 1352/79 1267/78 77/80 486-
98/78 711/77 925/77 622/80 765/80 1702/79 717-18/77
184/79 260-61/78 657/77 914-915/77
for the appellants

n. kacker and swaraj kaushal
for the respondents

s. javali b.p. singh and mr. ranjit kumar

l. bendikar and k.c. dua p.r. ramasesh k.r. nagaraja naresh kaushal and b. krishna prasad girish
chandra a.v. rangam and g. gopalakrishnan
the judgment of the companyrt was delivered by
sen j. the short question involved in this appeal by
special leave and the further appeals under s.54 of the land
acquisition act 1894  act for short  directed against the
judgment and decrees of the karnataka high companyrt dated
january 24 1979 and in the companynected appeals is whether
there has been any error in principle or in law in the
method of valuation arrived at by the companyrts below in
adopting fifteen to be the multiple for companyputation of
capitalized value of certain agricultural lands acquired in
the years 1971 and 1972. in the companynected appeals although
the point was number specifically taken before the high companyrt
but the parties were given numberice that that was the real
question to be determined. these appeals have accordingly
been heard together as they involve companymon question. the
issue involved is as to the proper multiplier to be applied
in determining the capitalized value of the lands acquired
and that depends on the rate of return on investments in
1971 and 1972.
in these appeals the judgments were rendered by the
high companyrt on appeals being preferred by the special land
acquisition officer davangere against the appellate
judgments and decrees of the district judge chitradurga and
of the civil judge davangere on various references made
under s.18 of the act. the facts giving rise to these appeals are more or less
similar and the essential facts may be shortly stated. due
to the companystruction of d.b. kere pick-up project several
thousand acres of agricultural land in two villages in the
state of karnataka videlicet budihar village in harihar
taluq and siraganahally village in davangere taluq got
submerged and were accordingly acquired by the state
government pursuant to different numberifications issued under
s.4 1  of the act published on diverse dates in the years
1971 and 1972 followed by the usual numberifications under s.6. in response to numberices issued under s.9 2  of the act the
respondents appeared before the special land acquisition
officer davangere and claimed companypensation varying between
rs. 15000 per acre to rs. 25000 per acre for dry and wet
lands depending upon the quality of the soil the nature of
the yield and the income derived therefrom. in some cases
they also claimed companypensation at more than rupees one lakh
per acre for arecanut
garden lands. the special land acquisition officer however
by his various awards adopted a multiple of fifteen and
awarded companypensation at a flat rate of rs. 3300 per care
for dry agricultural lands and rs. 5000 per acre for wet
agricultural lands. on reference under s. 18 of the act in
each of these cases the civil judge davangere enhanced the
amount of companypensation to rs. 19500 per acre for wet
agricultural lands and rs. 110000 for arecanut garden
lands. there was companymon evidence adduced by the parties in
all these cases and the evidence disclosed that the acquired
lands were more or less similar in nature and companytiguously
situated. on a companysideration of the evidence the learned
judge came to the companyclusion that the lands affected were
capable of yielding two crops in a year with assured
facility the first being of paddy and the second of jowar
irrigation groundnut chillies etc. as there was numberother
method of determining the market value of the land the
learned civil judge applied a multiple of 15 times the net
annual profits. on appeal by the special land acquisition
officer the high companyrt also adopted the capitalized value
at 15 years purchase of the net annual profits but reduced
the amount of companypensation to rs. 15000 per acre for wet
agricultural lands and rs. 25000 per acre for arecanut
garden lands i.e. depending upon the nature of the lands
acquired. it would therefore appear that the high companyrt and
the companyrts below have both adopted fifteen to be the proper
multiplier for companyputation of the capitalized value of the
lands acquired for the purpose of determining the amount of
compensation payable for acquisition thereof. shri kacker learned companynsel appearing on behalf of the
appellant companytends that the high companyrt was wrong in adopting
the multiple of 15 of the actual or immediately prospective
net annual profits of the lands acquired to be the
capitalized value thereof when the rate of return in the
years 1971 and 1972 was 8 per annum. according to the
learned companynsel there is an error in principle or in law in
the method employed and he draws our attention to the
unreported decision of the high companyrt in the special land
acquisition officer davangere v. b. basavarajappa ors. laying down that the proper multiple for companyputation of the
capitalized value should be 12 1/2 having regard to the rate
of return at the relevant time i.e. on the date of the
numberification under s.4 1  of the act. the companytention must
in our opinion prevail. in basavarajappas case supra a division bench of the
high
court while dealing with the determination of companypensation
payable a for similar agricultural lands in the neighborhood
of the same two villages acquired at or about the- same time
adopted the multiple of 121/2 times the net annual profits
for purposes of determining the capitalized value thereof. in companying to that companyclusion the high companyrt observed
the rate of return from government security
which is gilt-edged security was around 6 in the year
1971-7?. a person investing his capital in irrigated
land would expect - a return of about 2 more than what
he obtains from government securities that means a
return of 8 would be the numbermal return expected by
an agriculturist investing in purchase of wet land. if
8 was the return expected the number of years
purchase value companyes to 121/2. we regret to find that in these cases the high companyrt
instead of having adopted the multiple of 121/2 times
observed that the decision in basavarajappas case supra
was number applicable because the lands acquired in these
cases were for superior for which there is numberrational
basis. if the lands-acquired were of a superior quality the
actual or immediately prospective net annual profits would
be more and when multiple by the proper multiplier arrived
at on the rate of return at the relevant time i.e. on the
date of the numberification under s.4 1  of the act the amount
of companypensation for acquisition of such lands would
necessarily be more. the quality of the soil has no
relevance to the proper multiplier to be adopted in
determining the capitalized value. in vyricherla narayana gajpatiraju v. revenue
divisional officer vizagapatnam the privy companyncil adopted
the traditional legal definition of value as the price at
which the property would sell as between a willing buyer
and a willing seller. tn its narrowest sense it is designed
to preclude a valuation based on an assumed forced sale
the property must be appraised at what it would probably
bring if the owner allowed a reasonable opportunity for
negotiations. but the companyrts have invoked a mythical willing
buyer to justify a valuation higher than any attainable sale
price. according to the privy companyncil market value of the
land within the meaning of s.23 of the act is the price
the property may fetch in the open market if sold by a
willing vendor unaffected by the special needs of a parti-
cular purpose. the owner is entitled to the value of the
property in its actual companydition at the time of
expropriation with all its advantages and with all its
possibilities excluding any advantage due to the carrying
out of the scheme for the purpose for which the property is
acquired. lt is number only realized possibilities but also the
future possibilities that must be taken into companysideration. the privy companyncil further observed that there is number in
general any market for indian the sense that one speaks of
market for shares or companymercial goods. the value of any such
article at any particular time can readily be ascertained by
the prices being obtained for similar articles in the
market. in the case of land its value. can also be measured
by a companysideration of the prices that have been obtained in
the past for lands of similar quantity and in similar
positions and that is what must be meant in general by the
market value in s.23. the function of the companyrt in awarding companypensation
under the act is to ascertain the market value of the land
at the date of the numberification under s.4.  1  of the act and
the methods of valuation may be  1  opinion of experts.  2
the prices paid within a reasonable time in bona fide
transactions of purchase of sale of the lands acquired or of
the lands adjacent to those acquired and possessing the same
or similar disadvantages. and  3  a number of years purchase
of the actual or immediately prospective profits of the
lands acquired. numbermally the methods of capitalizing the
actual or immediately prospective profits or the rent of a
number of years purchase should number be resorted to if there
is evidence of companyparable sales or other evidence for
computation of the market value. it can be resorted to only
when numberother method is available. it is axiomatic that the best evidence to prove what a
willing purchaser would pay for the land acquisition would
be the evidence of sales of companyparable properties proximate
in time to the date of acquisition similarly situate and
possessing the same or similar advantages ad subject to the
same or similar disadvantages. market value is the property
may fetch in the open market if sold by a willing seller
unaffected by the special needs of a particular purchase. where definite material is number forthcoming either in the
shapes of sales of similar lands i the neighbourhood at or
about the date of numberification under s.4 1  or otherwise
the companyrt has numberother alternative but to fall back on the
method of valuation by capitalization. in valuing land or an
interest in land for purposes of land acquisition
proceedings the rule as to number of years purchase is
number a theoretical or legal rule but depends upon econumberic
factors such as the prevailing rate of interest in money
investments. the return which all investor will expect from
an investment will depend upon the characteristic of income
as companypared to that of idle security. the main features are

security of the income  2  fluctuation  3  chances of
increase  4  companyt of companylection etc. the most difficult and
yet the most important and crucial part of the whole
exercise is the determination of the reasonable rate of
return in respect of investment in various types of
properties. once this rate of return and accordingly the
rate of capitalization are determined there is numberproblem
in valuation of the property. the traditional companycept of capitalization was indicated
by this companyrt in rustom cavasjee companyper v. union of india. it was stated to be
capitalization of the net annual profit out of
the property at a rate equal in numbermal cases to the
return from gilt edged securities ordinarily value of
the property may be determined by capitalizing the net
annual value obtainable in the market at the date of
the numberice of acquisition. it is thus clear from the above enunciation that the
method of determining the value of the property by
application of a multiplier to the net annual income or
profit should only be adopted when there is numberevidence of
comparable sales of similar lands in or about the neighb-
ourhood at the relevant time i.e. on the date of the
numberification under s.4 1  of the act. in certain
circumstances however the companyrt has numberother alternative but
to fall back on the capitalized value. alfred d. jahr in law of eminent domain  1953 edn.  after a general discussion regarding the valuation of
property sums up at pp. 100-101
lt is evident therefore from the foregoing
definitions as well as from numerous other definitions
which may be cited that the fair market value of
properly taken by eminent domain is the price that the
property will bring when offered for sale by one
desiring but number obliged to sell and purchased by
one desiring to purchase but under numbernecessity
of buying. it is the price which a piece of property
will bring in the market when offered for sale and
purchased by anumberher taking into companysideration all the
elements of the availability of the property its use
potential or prospective and all other elements which
combine to give a piece of property a market value. . the learned author then deals with the fixation of
market value on the basis of rental income at pp. 226-229
and states
it is far sounder practice to avoid the use of rental
value capitalization if better evidence of market
value is available. in any event the companyrts are
inclined to give a greater weight to sales of similar
properties in the market than to evidence of . lease
hold rentals. jahr then deals with the method of capitalization of
income and says at p. 230
it is quite evident from the formula that the
lower the rate of return applied the higher the
capitalized sum will be. how ever the rate of return
on money invested is dependent upon many varied
factors  1  safety of principal  2  liquidity of
investment  3  certainty of income  4  possible
market fluctuations  s  appreciation of principal or
income and undoubtedly other elements too numerous to
mention. the interest rate current in the security
market must be - - companysidered as well as the
investment rate to be obtained from - high grade bonds
or companymon stocks and companymodities traded on the several
exchanges. the principle deducible from the above passage is that
the basic factor in applying the method of capitalization of
income for ascertaining the market value of property is the
rate of return that an ordinary investor would reasonably
get on his investment having due regard to all the relevant
circumstances. in the classical econumberic sense as adopted by the
privy companyncil in vyrricherlas case supra the meaning to
be placed upon the phrase market value of the land under
s.23 of the act is the price at which the land acquired. companyld actually be sold at the relevant time i.e. on the date
of the numberification under s.4 1  of the act by a fictitious
willing buyer in a hypothetical market with the. qualification that a forced
sale is hot to be assumed. the price at which the property
would a sell as between a willing buyer and a willing
seller raises the problem of valuation. the value of any
object of wealth is simply a capitalization of the services
or income which actual or potential owners of the property
expect to derive from it i.e. earning power as a basis of
valuation. the rule of number of years purchase is number a
theoretical or legal rule but depends upon the econumberic
factors such as the prevailing rate of return which a
prudent investor in the class of properties in question
would expect. the most important of such econumberic factors is
the prevailing rate of interest at the relevant time i.e. in
the date of the numberification under s.4 1  of the act. it is
first necessary to ascertain the gross income from the
acquired property the next step should be to ascertain the
net income having ascertained the net annual income it
must be capitalized by companyputing the number of years
purchase. during. the imperial days investment in gilt-edged
securities was looked upon as the only safe form of
investment but after the attainment of independence the
country has taken long strides in the growth of companymerce and
trade. due to growth of industries both in the public- as
well as in the private sector investment of capital such
industries if. number any more secure have companye into the law
merchant and such other alternative available securities
have attracted persons who are inclined to invest rather
than gilt-edged securities alone apart from making fixed
deposits in the scheduled banks. this accounts for the
variation of the proper multiple to be adopted. the line of
inquiry in such cases must therefore be . what was the
prevailing rate of interest on long term deposits with
scheduled banks or in the public or private sector . at the. turn of the century it was number uncommon for
the companyrts to adopt a rule of 20 years purchase for
arriving at the capitalized value of agricultural lands. it
had long been the practice in the companyrts of the then madras
presidency to calculate the profits from any form of landed
property as equal to the profits made by investing of money
in the gilt-edged securities. till the early 50s the
courts of the then madras presidency held that the
capitalized value of agricultural lands should be arrived at
20 years purchase having regard to the rate of interest on
gilt-edged securities at five percent per annum. it was
however observed that with respect to melwaram interest in
a zamindari land or a vacant site it was difficult to
accept the current rate of interest on gilt-edged secutries
as a safe guide to the multiple to be applied to the annual
profits on ryotwari land. the
landlord in such cases would number only expect to get a return
on the capital invested on the land but also something in
addition to that as companypensation for this trouble in
attending to the land and for the risks involved in the
cultivating of land. it was observed that although the
tenants might have agreed to pay him a fixed rent in money
yet if a full crop was number raised on the land either through
failure of rain or because of pests or for any other reason
it was extremely difficult for the landlord to realise the
rent. for these reasons the landlord naturally expected an
appreciably larger return than he would expect from gilt-
edged securities which he lefts in the bank and for the
realization of the interest of which he is put to numbertrouble
whatsoever. it would be unrealistic to adhere to the traditional
view of capitalized value being linked with gilt-edged
securities when investment in fixed deposits with
nationalized banks national savings certificates unit
trusts and other forms of government securities and even in
the share market in the shape of blue chips companymand a much
greater return. more secure the capital and regular the
return lesser the rate of interest. most secured kind of
investment is government securities or deposits with
scheduled banks or unit trust or national savings
certificates. the rate of interest on government of india
bonds for a period of 30 years in 1972 yielded 5.75 per
annum. as per the government of karnataka publication
called finance accounts of 1972-73 the rate of interest on
the mysore state development loans issued in the years 1967
1968 1969 1970 1971 and 1972 was uniformly 5.314 return. the rate of interest on fixed deposits with state bank of
india for a period ranging from 3 years upto 5 years yielded
7 while the rate on fixed deposits above s years was 7.25.
the rate of dividend payable on unit trusts in 1972 was
8.25 per annum. national savings certificates 7 years 2nd
issue yielded tax-free interest at 6. on maturity 7
years. 3rd issue 6 tax-free payable annually and 7
years 4th issue 7.5 payable annually but subject to
income-tax. in oriental gas company limited ors. v. state of west bengal
this companyrt held for the acquisition of an industrial
undertaking in the state of west bengal that if 12 of the
capital invested was the annual return the adoption of
multiplier of eight companyld number be unreasonable in the year
1963. that companytention based on the traditional view
expressed by shah j. in companypers case supra that the
multiplier must be related to the rate of interest on gilt-
edged securities
was repelled by chinnapa reddy j. it was stated that the
observations of shah j. in companypers case that capitalization
of the net annual value of the property at a rate equal in
numbermal cases to the return from gilt-edged securities was
all important methods of determination of companypensation did
number lay down a rule of law of universal application was
observed . the very use of the word numbermal by such j.
indicates that it was number intended to lay down any
invariable rule that whenever a method of
capitalization of net profit was adopted the return
from glit-edged securities was to be the basis. that . should depend on a variety of circumstances such as the
nature of the property the numbermal return which may be
c expected on like investment the state of the
capital market and several such factors. in union of india anr. v. smt. shanti devi etc. etc. this companyrt recently had occasion to lay down the principle
as to the true multiplier of thirteen applicable in
determining the capitalized value of about 70000 acres of
agricultural land located in the kangra valley in the state
of himachal pradesh where the numberification under s.4 1  of
the act had been issued in the years 1962 and 1963 and
where there was numberevidence of companyparable sales of similar
lands in the kangra valley. after referring to the judgment
of this companyrt in oriental gas company limited case supra and
several other decisions one of us  venkatramiah j.  observed
the number of years purchase has gradually
decreased as the prevailing rate of interest
realisable from safe investments has gradually
increased. the higher the late of interest the lower
the number of years purchase. this method of valua-
tion involves capitalizing the net inclose that the
property c an fairly be expected to produce and the
rate or capitalization is the percentage of return on
his investment that a willing buyer would expect from
the property during the relevant period. the companyrt explained that although alone time it was
felt that interest on gilt-edged securities or government
bonds should alone. be taken into companysideration having
regard to the safety and liquidity of investment but the
circumstances have number changed during the
recent years and deposits with the state bank of india and
other nationalized banks and even in the share market there
arc many blue chips while companymand stability and other
attendant benefits such as issue of bonus shares et cetera
and added
a return of 10 per annum on such safe investments is
almost assured. today numberody thinks of investing on
land which would yield a net income of just 5 to 6
per annum. a higher return of the order of 10 is
usually anticipated. even in the years 1962 and 1963 an
investor in agricultural land expected annual net
return of at least 8 . it means that if the land
yielded a net annual income of rs.8 a willing under of
land would have paid for- it rs. 100 i.e. a little more
than 12 times the annual net income. there are certain general companysiderations which
investors of all types take more or less into account yield
and appreciation possibilities the ability readily to
dispose of the investment  marketability  and safety. investments differ with respect to assurance of income and
safety of principal. in the investment market the quality
of investments evidenced by the yield or return that is
produced in relation to market price higher the quality the
lower the yield. investors must take into account various
types of risks associated with different investment mediums
and therefore adopt a type of investment that is appropriate
to their resources and particular investment objectives
as already stated some 20 to 30 years back i.e. till
the early 50s it was taken as. a settled rule of practice
that the capitalized value of agricultural lands should be
arrived at 20 years purchase having regard to the rate of
interest on gilt-edged securities at five per cent. that
rule numberlonger can be adhered to in view of the changed
econumberic situation. in the early 70s people believed that
investment in housing was more secure than other forms of
government securities in respect of safety of investment. investment in housing involves certainly of labour and
effort such as maintenance companylection of rent payment of
taxes et cetera. they rate of return expected therefore was
1.1/2 to 2.1/2 more than what was expected from gilt-edged
securities person investing. his. capital in agricultural
lands would ordinarily expect a return of 2 to 3 more than
what he companyld obtain from gilt-edged securities or other
forms of safe investment such as fixed deposits in scheduled
banks. - national savings certificates unit trusts at
cetera or on blue chips i.e. on stocks and
shares in the public or private sector which yield a much
greater return. in regard to investment agricultural lands there are
many imponderables in as much as the investor runs a much
greater risk than the risk that he runs in investment in
housing which companysists in vagaries of weather and other
uncertainties. there is numbersecurity of principal no
liquidity of investment number any certainty of income. the
appreciation of principal or income is also uncertain. the
reasons for these is that agricultural lands are number
readily. transferable under the various land reform
legislations e.g. laws relating to ceiling on agricultural
holdings under the existing state laws and tenancy laws
which place restrictions on transfer of such lands with
concomitant danger of effacement of the rights of the
absentee-landlors and the creation of rights in the tillers
of the soil. in evaluating the rate of return which would
ordinarily satisfy an investor in such a property the risk
factor has further to be evaluated. there may be total or
partial failure of crops either through failure of rain or
drought or inadequate or-excessive rainfall. there may be a
failure of crops on account of locust invasion or insects or
pests. the companyt inputs such as seeds water fertilizer
labour charges etc. would vary from year to year. if the
overall companyt goes up the income from agricultural produce
would be companyparatively less. the fluctuations in price of . agricultural produce introduce a great deal of uncertainty
in regard to the income that can be expected from the sale
of the produce. if the yield of the crop in other producing
countries is large or the market prices prevailing in such
countries are low the prices of such agricultural produce
in india would go down. in view of these companysiderations an
investor would expect a much higher rate of return so that
the risk factor is properly discounted. in the premises when the rate of return on investment
was 8.25 in the years 1971 and 1972 a person investing his
capital in . agricultural lands would ordinarily expect 2
to 3 more than what he companyld obtain from gilt-edged
securities or other forms of safe investment and therefore
the proper multiplier to be applied for the purpose of
capitalization companyld number in any event exceed ten. in the
present case the state government however companytends that the
proper multiple to be applied should be 12-1 in companyputation
of-the capitalized value of the lands in these cases having
regard to the rate of return of 8 at the relevant time
i.e. on the date of the numberification under s.4 1  of the
act. in view of this it must be held that the multiple of
121/2 should be applied in companyputation of the capitalized
value of the lands.


civil appellate jurisdiction civil appeal number. 1349-
1350/76. appeals by special leave from the judgment and decree
dated the 12th october 1976 of the madras high companyrt in writ
petition number. 5881 and 5884 of 1975.

p. raman addl. sol general of lndia  mrs.  n. g
krishna iyengar shri narain k.j. john d.n. mishra for
the appellant. s. nariman m. n. rangachari a.r. ramanathan
jayaramanm.m.l. srivastava and a.t.m. sarapath for respond-
ent number 1.
the judgment of the companyrt was delivered by--
krishna iyer j. the short question involving a point
of companystruction of s. 68-f 1d  has been raised by the
additional solicitor general in these appeals by special
leave. the respondent was a stage carriage operator whose two
permits were to expire in january and. march 1976. in the
usual companyrse and in companypliance with s. 58. of the motor
vehicles act 1939  for short the act  he applied for
renewal more than 120 days ahead but at the time of the
actual date of expiry of the permits a-draft scheme under
part iv-a had been published. this fulfilled the require-
ments of the proviso to s. 68-f 1d  and entitled the appel-
lant to renewal for the limited period stated in the said
proviso. but the state withdrew the draft scheme for some
technical reasons and republished it in july 1975 after the
appellants permit had expired. applying the prohibition
contained in s. 68-f 1d  the regional transport authority
 for short the r.t.a.  rejected the prayer for renewal. however the high companyrt set aside that order and directed
the grant of renewal on a certain view of the section which
the additional solicitor general companytends goes beyond the
limits of the plain words used. the aggrieved state ap-
peals. while we are satisfied that on the peculiar facts. of
this case the respondent can sustain the permits the legal
position canvassed by the appellant appears to be companyrect. at the time the respondents permit expired a draft
scheme had already been published but the approved scheme
had number been published. any permit holder whose permit
expires during this spell is eligible for a renewal as
specified in the proviso. the fact that the draft scheme
was later withdrawn cannumber affect the right to a renewal. we therefore hold that the renewal of permit shall remain
to the extent companytemplated in the proviso to s. 68-f 1d . before we companysider the legal question we may read s. 68-
f 1d .  1d  save as otherwise provided in sub-
section  1a  or sub-section  1g  numberpermit
shall be granted or renewed during the period
intervening between the date of publication
under section 68- 2 of any scheme and the date
of publication of the approved or modified
scheme in favour of
any person for any class or road transport
service in relation to an area or route or
portion thereof companyered by such scheme. provided that where the period of opera-
tion of a permit in relation to any area
route or portion thereof specified in a
scheme published under section 68-c expires
after such publication such permit may be
renewed for a limited period but the permit
so renewed shall cease to be effective on the
publication of the scheme under sub-section
 3  of seetion 68-d.
three propositions plainly emerge. numberpermit or renewal except to the extent expressly
saved by s. 68-f id  can be granted by the r.t.a. during
the period between the date of publication of any scheme and
the date of publication of the approved scheme.  2  if a
permit expires after the publication of any draft scheme
such permit is eligible for renewal for a limited period as
set out in the proviso. this special provision cannumber be
stretched on the ground of possible anumberalies or unjust
consequences to companyer permits expiring even before the
publication of the draft scheme. where the language is
plain interpretation cannumber take the shape of addition or
interstitial legislation.  3  a rider to proposition number 2
has to be added. if a permit holder whose permit is about
to expire diligently does in the numbermal companyrse all that
he need and all that he can that is to say apply for
renewal before 120 days in the manner laid down in s. 58 of
the act he sets in motion the legal machinery for the grant
of renewal which must ordinarily culminate. in renewal
within 120 days. the fact that a scheme is published
before the actual grant of renewal will number intercept or
extinguish the process of law set in motion by the applica-
tion for renewal. in such cases the r.t.a. has to act
promptly and if the application for renewal is in companyformity
with the law it has to companysider it and grant or reject
according to merit. if for reasons beyond the companytrol of
the applicant the renewal process gets delayed or pro-
longed he cannumber be penalised. renewal is a legal process
number the final act. save in this category of cases all
other permits which have expired before the draft scheme is
published suffer the ban of s. 68-f 1d . however no
permit can ensure beyond the time of the publication of the
approved scheme. this saves cases of bona-fide applications
for renewal of permits number calculated to thwart a scheme
and helps the travelling public during the interregnum when
the scheme is under scrutiny.


civil appellate jurisdiction civil appeal number 2483 of
1982.
from the judgment and order dated 5.2. 1982 of the
allahabad high companyrt in civil misc. writ petition number 1744
of 1982.
gobind mukhoty and u.s. prasad for the appellants. ms. rachna gupta ms. rani chhabra and m.c. dhingra for
the respondents. the following judgment of the companyrt was delivered by
appellant is a society registered under the societies
registration act 21 of 1860. five persons of whom some are
respondents before us instituted a suit in the companyrt of
civil judge varanasi challenging the election of the manag-
ing companymittee and other elected officers of the appellant
and asked for rendition of accounts. this suit of 1981 is
still pending. we are number companycerned with the companyrectness of
the finding on the preliminary issue as to whether such a
suit is maintainable in the civil companyrt. the defendants
objection to the maintainability is grounded upon the provi-
sions companytained in sections 23 and 25 of the registration
act. the companyrts below have taken the view that the suit is
number barred. that is why the defendants are here by special
leave. a litigant having a grievance of a civil nature has
independently of any statute a right to institute a suit in
the civil companyrt unless its companynizance is either expressly or
impliedly barred. the position is well-settled that exclu-
sion of jurisdiction of the civil companyrt is number to be readily
inferred and such exclusion must be either expressly or
implied. reliance has been placed by mr. mukhoty before us on the
ratio of the companystitution bench decision of this companyrt in

s. venkataraman companypany v. state of madras 1966 2

c.r. 229 where reference has been made to the privy companyn-
cil case in raleigh investment companypany limited v. the gover-
number general in companyncil. it has been laid down that the civil
courts jurisdiction would be presumed unless the companytrary
is indicated. mr. mukhoty has also relied upon two other
decisions being ganga bai v. vijay kumar and others 1968
3 s.c.r. 662 and dhula bhai and others v. the state of
madhya pradesh and anumberher 1974 3 s.c.r. 882. the legal
position thus seems to be clear and it is number necessary to
quote further authorities. what is really in dispute is the application of the rule
to the facts of the case. to ascertain whether the suit
would be barred the effect of the provisions of sections 23
and 25 of the registration act with the u .p. amendments has
to be companysidered. these sections provide

audit  1  without prejudice to the provisions of sub-
section  2  of section 4 or of section 22 where the regis-
trar is of opinion that it is necessary or expedient so to
do he may by written order require any society to furnish
its accounts or a companyy of a statement of receipts and ex-
penditure for any particular year duly audited by a char-
tered accountant
provided that the registrar may at the request of
society permit it to have such accounts and statement audit-
ed by any other person by him. if the society fails to furnish the documents referred
to in sub-section  1  within the period specified in the
order or with such extended period as the registrar may from
time to time allow the registrar may cause the accounts of
such society audited for the said year and may recover the
cost of such audit from that society. if the society neglects or refuses to make its account
or
other documents available for audit under sub-section  2
or in the opinion of the registrar otherwise fails to
provide requisite facilities to have the audit made with due
expedition the registrar may proceed to take action under
section 24.

disputes regarding election of office-bearers- 1  the
prescribed authority may on a reference made to it by the
registrar or by at least one fourth of the members of a
society registered in uttar pradesh hear and decide in a
summary manner any doubt or dispute in respect of the elec-
tion or companytinuance in office of an office-bearer of such
society and may pass such orders in respect thereof as it
deems fit
provided that the election of an office bearer
shall be set aside where the prescribed authority is satis-
fied-
 a  that any companyrupt practice has been companymitted by such
office bearer or
 b  that the numberination of any candidate has been improperly
rejected or
 c  that the result of the election in so far as it companycerns
such office-bearer has been materially affected by the
improper acceptance of any numberination or by the improper
reception refusal or rejection of any vote or the reception
of any vote which is void or by any number-compliance with the
provisions of any rules of the society. explanation i.--a person shall be deemed to have companymit-
ted a companyrupt practice who directly or indirectly by him-
self or by any other person--

induces or attempts to induce by fraud intentional
misrepresentation companyrcion or threat of injury any elector
to give or to refrain from giving a vote in favour of any
candidate or any person to stand or number to stand as or to
withdraw or number to withdraw from being a candidate at the
election

with a view to inducing any elector to give or to
refrain from giving a vote in favour of any candidate or to
inducing any
person to stand or number to stand as or to withdraw or number to
withdraw from being a candidate at the election offers or
gives any money or valuable companysideration or any place of
employment or holds out any promise of individual advantage
or profit to any person

abets  within the meaning of the indian penal companye
the doing of any of the acts specified in clause  i  and
 ii

induces or attempts to induce a candidate or elector to
believe that he or any person in whom he is interested
will become or will be rendered an object of divine dis-
pleasure or spiritual censure

canvasses on grounds of caste companymunity sect or reli-
gion

commits such other practice as the government may
prescribe to be a companyrupt practice. explanation ii--a promise of individual advantage or profit
to a person includes a promise for the benefit of the
person himself or of any one in which he is interested. explanation iii--the state government may prescribe the
procedure for hearing and decision of doubts or disputes in
respect of such elections and make provision in respect of
any other matter relating to such elections for which insuf-
ficient provisions exists in this act or in the rules of the
society. where by an order made under sub-section  1  an
election is set aside or an office bearer is held numberlonger
entitled to companytinue in office or where the registrar is
satisfied that any election of office bearers of a society
has number been held within the time specified in the rules of
that society he may call meeting of the general body of
such society for electing such office-bearer or office-
bearers and such meeting shall be presided over and be
conducted by the registrar or by any officer authorised by
him in this behalf and the provisions in the rules of the
society relating to meetings and elections shall apply to
such meeting and election with necessary modifications. where a meeting is called by the registrar under
sub-section numberother meeting shall be called for the purpose
of election by any other authority or any person claiming to
be an office-bearer of the society. explanation--for the purposes of this section the expres-
sion prescribed authority means an officer or companyrt autho-
rised in this behalf by the state government by numberification
published in the official gazette. we are of the view that provisions of section 23 are company-
fined to audit and have numberhing to do with the relief of
rendition of accounts. numbermore is necessary to be said about
that relief. section 25 deals with disputes regarding chal-
lenge to the eviction of office-bearers. the maintainability
of dispute within the purview of that section is hedged with
conditions and unless such requirement is fulfilled a
statutory dispute would number be maintainable. the present
action in the civil companyrt is by some of the members who
perhaps would number satisfy the requirements laid down in
section 25. it cannumber be companytended that section 25 having
provided the pre-conditions on the satisfaction of which a
dispute within the purview of that section would be main-
tainable before the registrar takes away the right of mem-
bers of the society to claim relief otherwise outside the
purview of section 25 on the basis of their right to seek
remedy for their grievance. it is number the companytention of mr.
mukhoty that the relief claimed is number one which would companye
within the ambit of section 9 of the companye of civil proce-
dure. that being so we are of the view that the bar of
section 25 is number applicable to the facts of the case. therefore the companyclusion reached in the companyrts below is
correct and the suit is maintainable. we pointed out to mr. mukhoty that the relief against
election of office bearers must have become infructuous with
the passage of time as the election is annual.


1970 2 s.c.r 348 followed. the high companyrt erred in observing that when the
manufacturers wanted to keep in their possession a large
quantity of denatured spirit for manufacturing purposes
they wanted a privilege and immunity from prosecution that
the payment of the requisite licence fee was for that
purpose and that it operated as the quid pro quo. 325c-d

the granting of a license generally does number companyfer any
privilege or benefit on anyone except in those cases where
a permit or licence is granted to someone to exploit
government property. the requirement to take a licence is
prescribed to safeguard public interest by regulating a
trade. business or profession and number as a source of
revenue. 325f-g

what is made punishable is either a persons failure to
take a licence or a breach of the companyditions of the licence
and the government companyld number barter away its duty to
prosecute an offender for companysideration any fee levied
could only be for services rendered. 325e-f
since the state may suffer companysiderable financial loss the
matter was. remanded to the high companyrt with further
opportunity to the state to place the necessary material and
show the companyrelationship. 328a

civil appellate jurisdiction civil appeal number 770 of 1967.
appeal from the judgment and order dated september 14 1966
of the patna high companyrt in civil writ jurisdiction case number
887 of 1965.
sarjoo pravad k. k. sinha and b. b. sinha for the
appellant. c. agarwala r. k. garg v.j. francis narayana netter
and s. p. singh for the respondents. the judgment of the companyrt was delivered by
hegde j. in this appeal by certificate. the vires of rule
iii of the rules framed under section 90 of the bihar and
orissa excise act 1915 is in issue. the. appellant
indian mica micanite industries companytends that the said
rule is ultra vires the companystitution. the high companyrt of
patna rejected that companytention. in the high companyrt various companytentions came up for companysidera-
tion. the high companyrt has companye to the companyclusion that the
levy made under the impugned rule is a fee. that finding
was number
challenged before us by any of the parties. therefore all
that we have to see is whether the fee levied is within the
permissible limit. in other words whether there is
sufficient quid pro quo for the levy in question. the appellant is a companysumer of denatured spirit. it
purchases denatured spirit from the wholesalers or the
manufacturers for the purpose of manufacturing micanite. the bihar and orissa excise act 1915  bihar orissa act 2
of 1915  came into force on january 19 1916. in pursuance
of the provisions of that act the impugned rule was framed
by the board of revenue for levying licence fee. the fee
for the licence to possess denatured spirit in 1919 was only
rs. 2 per annum irrespective of the quantity in the
possession of a person. this rate companytinued to be in force
till 1937. at this stage it may be remembered that under
sub-section  2  of section 143 of the government of india
act 1935 the provinces were authorised to companytinue to levy
tax duties cesses or fees which were being lawfully levied
prior to the companymencement of that act. under the 1935 act
as under our present companystitution the power to levy duties
on alcoholic liquor fit for human companysumption was allocated
to the provincial legislature whereas the power to levy duty
on alcoholic liquor number fit for human companysumption was
allocated to the central legislature. denatured spirit
though an alcoholic liquor is number fit for human
consumption. the power to levy duty on the same was and is
given to the central legislature. but the same being
intoxicating liquor the provincial legislature under the
1935 act and at present the state legislature has power to
levy fee. the power of- any legislature to levy fee is
conditioned by the fact that it must by and large a quid pro
quo for the services rendered. if a levy purporting to be a
fee is found to be an exaction without doing any service or
if it is found that the levy is wholly disproportionate to
the services rendered then the levy becomes invalid. the distinction between fee and levy came up for the first
time for companysideration by this companyrt in the companymissioner
hindu religious endowments madras v. sri lakshmindra
thirtha swamiar of sri shirur mutt 1 . therein this companyrt
speaking through mukherjea j.  as he then was  quoted with
approval the definition of tax given by latham c. j. of
the high companyrt of australia in matthews v. chicory
marketing board.  2  in that case the learned chief justice
observed
a tax is a companypulsory exaction of money by
public authority for public purposes
enforceable by law and is number payment for
services rendered.  1  1954 s.c.r. 1005.  2  60

l.r. 263. 21-1 s. c. india/71
dealing with the distinction between tax and
fee mukherjea j. observed thus in the above-
mentioned case. it is said that the essence of taxation is
compulsion that is to say it is imposed
under statutory power without the tax-payers
consent and the payment is enforced by law. the second characteristic of tax is that it is
an imposition made for public purpose without
reference to any special benefit to be
conferred on the payer of the tax. this is
expressed by saying that the levy of tax is
for the purposes of general revenue which
when companylected forms part of the public
revenues of the state. as the object of a tax
is number to companyfer any special benefit upon
any particular individual there is as it is
said numberelement of quid pro quo between the
tax payer and the public authority. anumberher
feature of taxation is that as it is a part of
the companymon burden the quantum of imposition
upon the tax payer depends generally upon his
capacity to pay. companying number to fees a fee is generally
defined to be a charge for a special service
rendered to individuals by some governmental
agency. the amount of fee levied is supposed
to be based on the expenses incurred by the
government in rendering the service though in
many cases the companyts are arbitrarily assessed. ordinarily the fees are uniform and no
account is taken of the varying abilities of
different recipients to pay. these are
undoubtedly some of the general
characteristics but as there may be various
kinds of fees it is number possible to formulate
a definition that would be applicable to all
cases. if as we hold a fee is regarded as a sort of
return or companysideration for services rendered
it is absolutely necessary that the levy of
fees should on the face of the legislative
provision be companyrelated to the expenses
incurred by government in rendering the
services. the same view was reiterated by this companyrt in mahant sri
jagannath ramanuj das and anr. v. the state of orissa and
anr.0 and in ratilal panchand gandhi v. the state of bombay
and ors.  2 . the nature of a fee again came up for companysideration before
this companyrt in the hingir rampur companyl company limited and ors. v.
the state of orissa and ors.  3  therein this companyrt observed
that
 1  1954 s.c.r. 1046.  2  1954 s.c.r. 1055.  3  1961 2 s.c.r. 537. -although there can be numbergeneric difference between a tax
and a fee since both are companypulsory exactions of money by
public authorities there is this distinction between them
that whereas a tax is imposed for public purposes and
requires numberconsideration to support it a fee is levied
essentially for services rendered and there must be an
element of quid pro quo between the person who pays it and
the public authority that imposes it. while a tax
invariably goes into the companysolidated fund a fee is
earmarked for the specified services in a fund created for
the purpose. whether a cess is one or the other would
naturally depend on the facts of each case. if in the guise
of a fee the legislature imposes a tax it is for the companyrt
on a scrutiny of the scheme of the levy to determine its
teal character. the distinction is recognised by the
constitution which while empowering the appropriate
legislatures to levy taxes under the entries in the three
lists refers to their power to levy fees in respect of any
such matters except the fees taken in companyrt and tests have
been laid down by this companyrt for determining the character
of an impugned levy. in determining whether a levy is a fee
the true test must be whether its primary and essential
purpose is to render specific services to a specified area
or class it being of numberconsequence that the state may
ultimately and indirectly be benefited by it. in h. h. sudhundra thirtha swamiar v. companymissioner for
hindu religious and charitable endowments mysore 1  this
court was called upon to companysider whether the levy impugned
in that case companyld be justified as a fee. it upheld the
levy which was an annual companytribution levied under the
amended section 76 1  of the madras religious endowments
act 1951 on the ground that those companytributions when
collected went into a separate fund and number to the
consolidated fund of the state and were earmarked for
defraying the expenses for the services rendered. .further
they were number even payable to the government but payable to
the companymissioner and were levied number as a tax but only as a
fee. therein this companyrt further observed that a fee does
number cease to be of that character merely because there is an
element of companypulsion in it number is it a postulate of a fee
that it must have direct relation to the actual service
rendered. absence of uniformity is number a criterion on which
alone it can be said that the levy is of the nature of a
tax. in companyporation of calcutta and anr. v. liberty cinema the
validity of the levy made under section 548  2  of the
calcutta municipal act 1951 came up for companysideration. therein this companyrt held that the levy in question is number a
fee and return for services as the act does number provide
for any services of a special
 1  1963 supp. 2 s.c.r. 302.  2  1965 2 s.c.r. 477.
kind being rendered resulting in benefits to the person on
whom it is imposed. section 527  43  permits by-laws to be
framed for regulating the inspection supervision and
control among others of cinema houses but it is number
obligatory to make such by-laws and therefore there maybe
numberservices to render. even the bylaw made provides only
for inspection and the work of inspection done by the
appellant was only to see that the terms of the licence were
observed by the licensee- it was number a service to him. and so numberquestion arises of companyrelating the amount of
levy to the companyts. of any service. the levy therefore is
number a fee and must be tax. in delhi cloth general mills company limited v. chief companymis-
sioner delhi and ors.  1  the validity of a levy as a fee
came up for companysideration by this companyrt. therein this companyrt
speaking through grover j.  one of us  laid down that in
each case when the question arises whether the levy is in
the nature of a fee the entire scheme of the statutory
provisions the duties and obligations imposed on the
inspecting staff and the nature of the work done by them
will have to be examined for the purpose of determining the
rendering of the services which would make the levy a fee. after examining the various provisions of the factories act
1948 and the rules framed this companyrt came to the companyclusion
that a large number of provisions of the act particularly
in the chapters dealing with safety involve a good deal of
technical knumberledge and in the companyrse of their discharge of
duties and obligations the inspectors are expected to give
proper advice and guidance so that there may be due
compliance with the provisions of the act. on certain
occasions the factory owners are bound to receive a good
deal of benefit by being saved from the companysequences. of the
working of dangerous machines or employment of such
processes as involve danger to human life by being warned at
the proper time as to the defective nature of the machinery
or of the taking of precautions which are enjoined under the
act. similarly if a building or a machinery or plant is in
such a companydition that it is dangerous to human life or
safety the inspector by serving a timely numberice on the
manager saves the factory owner from all the companysequences of
proper repairs number being done in time to the building or
machinery. in that case the high companyrt found that 60 of
the amount of licence fees which were being realised was
actually spent on services rendered to the factory owners. that finding was accepted by this companyrt and on the basis of
that finding this companyrt upheld the validity of the levy. from the above discussion it is clear that before any levy
can be upheld as a fee it must be shown that the levy has
reasonable companyrelationship with the services rendered by the
government. in
 1  1970 2 s.c.r. 348.
other words the levy must be proved to be a quid pro quo
for the services rendered. but in these matters it will be
impossible to have an exact companyrelationship.the
correlationship expected is one of a general character and
number as of arithmetical exactitude. let us number proceed to companysider whether the levy under the
impugned rule can be justified as a fee on the basis of the
law as enunciated by this companyrt. but before doing so it is necessary to dispose of one of
the grounds on which the high companyrt upheld the levy. in
paragraph 8 of the high companyrts judgment it is observed
 when a manufacturer wants to keep in
his possession large quantity of denatured
spirit for manufacturing purposes he wants a
special privilege or companycession of immunity
from prosecution. for that purpose he has to
obtain a licence or a pass on payment of
requisite fees. there is thus a quid pro quo
element and the immunity from prosecution is
in the nature of a special benefit or
privilege. the implication of this observation is somewhat astounding. these observations imply that the government can barter away
its duty to prosecute an offender for companysideration. the
requirement to take a licence is prescribed to safeguard
public interest and number as a source to gather revenue. what
is made punishable is either a persons failure to take the
required licence or the breach of the companyditions of the
licence otherwise there would be numbersanction behind the
rule requiring to take a licence. generally speaking by
granting a licence the state does number companyfer any privilege
or benefit on any one. all that it does is to regulate a
trade business or profession in public interest. there may
be cases where a government which is the owner of a
particular property may grant permit or licence to someone
to exploit that property for his benefit. such a right may
be given for companysideration. it is only in those cases that
a licence or a permit is a companyferment of a benefit or a
privilege and number in the case of grant of a licence for
carrying on any ordinary trade business or profession. if
it is otherwise the state can sell the right to practice the
profession of law in companyrts or to practice the profession of
medicine or any of the other numerous professions at
exorbitant prices or may even put up those rights for
auction to be given to the highest bidder. numberhing so bad
can be within the companytemplation of our laws. we are
inclined to think that the learned judges of the high companyrt
have misunderstood the observations of seligman quoted in
the companymissioner hindu religious endowments
madras v. sri lakshmindra thirtha swamiar of sri shirur
mutt 1  to the effect that it is a special benefit accuring
to the individual which is the reason for the payment of
fee. let us number companysider whether in the present case the state is
proved to have been rendering any service to the appellant
in lieu of the fee levied and further whether if it does
render any service whether there is reasonable
correlationship between the services rendered and the fee
levied. in other words whether the fee levied can be
considered as a quid pro quo for the services rendered. the averments of the respondents in their companynter-affidavit
that are relevant on this aspect of the case are those found
in paragraph 10 of the companynter-affidavit. they read
to denature spirit and issue it to
licensees proper supervision and companytrol is
needed vide boards rules 63 to 68 at page 177
to 181 of excise manual volume 11. there is
every risk that any person may attempt to
render denatured spirit fit for human
consumption which is punishable under section
49 of the excise act. besides the above rules of the board certain
instructions have been issued in paragraph 187
to 196 of the excise manual volume iii  page
67-71  for the process of denaturing and issue
of denatured spirit to the licensees. state
government have to employ supervisory staff
and chemical examiner to carry out these
obligations of supervision and companytrol. it may be added that excise department does
number only supervise and companytrol these
intoxicating liquors in the interest of public
policy but renders services to the petitioner
by getting alcohol manufactured at the
distillery by supplying raw materials like
molasses and companyl to these distilles at
controlled cheap rates. this is the only
reason of getting spirit distillery at a very
cheap companyt by the licensees including the
petitioner. and hence levy of fee by the
excise authorities is number a duty or tax but it
is clearly fee in return for services rendered
as well as for proper supervision companytrol and
regulation of an activity which the
legislature desires to companytrol. according to the finding of the high companyrt the only services
rendered by the government to the appellant and to other
similar licensees is that the excise department have to
maintain an elaborate staff number only for the purposes of
ensuring that denaturing
 1  1954 s.c.r. 1005.
is done properly by the manufacturer but also for the
purpose of seeing that the subsequent possession of
denatured spirit in the hands either of a wholesale dealer
or retail seller or any other licensee or permit-holder is
number misused by companyverting the denatured spirit into alcohol
fit for human companysumption and thereby evade payment of heavy
duty. so far as the manufacturing process is companycerned the
appellant or other similar licensees have numberhing to do with
it. they are only the purchasers of manufactured denatured
spirit. hence the companyt of supervising the manufacturing
process or any assistance rendered to the manufacturers can-
number be recovered from the companysumers like the appellant. further under rule 9 of the board rules the actual companyt of
supervision of the manufacturing process by the excise
department is required to be home by the manufacturer. there cannumber be a double levy in that regard. in the
opinion of the high companyrt the subsequent transfer of
denatured spirit and possession of the same in the hands of
various persons such as whole-sale dealer retail dealer or
other manufacturers also requires close and effective
supervision because of the risk of the denatured spirit
being companyverted into potable liquor and thus evading heavy
duy. assuming this companyclusion to be companyrect by doing so
the state is rendering numberservice to the companysumer. it is
merely protecting its own rights. further in this case the
state which was in a position to place material before the
court to show what services had been rendered by it to the
appellant and other similar licensees the companyts or at any
rate the probable companyts that can be said to have been
incurred for rendering those services and the amount
realised as fees has failed to do so. on the side of the
appellant it is alleged that the state is companylecting huge
amount as fees and that it is rendering little or numberservice
in return. the companyrelationship between the services
rendered and the fee levied is essentially a question of
fact. prima facie the levy appears to be excessive even if
the state can be said to be rendering some service to the
licensees. the state ought to be in possession of the
material from which the companyrelationship between the levy and
the services rendered can be established at least in a
general way. but the state has number chosen to place those
materials before the companyrt. therefore the levy under the
impugned rule cannumber be justified. in this companyrt companynsel for the state prayed for an
opportunity to place material to show that the levy in
question is number disproportionate to the value of the
services rendered by the state. ordinarily we would number
have acceded to that request companying at such a late stage
particularly in view of fact that the legal position had
been clarified by a long chain of decisions of this companyrt. there is numberdoubt that the state has failed to place the
necessary material before the companyrt to justify the levy. but the fact remains that because of the negligence of those
in-charge of the defence of the
state the state may suffer companysiderable financial loss if
we hold that the impugned rule is void. hence we are
constrained to give the state a further chance to prove its
case. in the result we allow the appeal sat aside the order of
the high companyrt and remit the case to the high companyrt for
disposal according to law in the light of this decision.


civil appellate jurisdiction civil appeal number 2485 of 1992.
from the judgment and order dated 8.10.1991 of the calcutta
high companyrt in f.m.a.t. number 2532 of 1991.

s. poti and rathin das for the appellants. dr. shankar ghosh raj kumar gupta and p.c. kapur for the
respondents. the judgment of the companyrt was delivered by

ramaswamy. j. special leave granted. this appeal arises against the judgment dated october
81991 of the division bench of the calcutta high companyrt
made in f.m.a.t. number 2532 of 1991. the first respondent a
limited companypany filed under art. 226 of the companystitution of
india civil order number 16339  w  of 1988 for a mandamus to
refrain the appellants from giving effect to the vesting of
the lands in dag number 1 khatian number 10 tauzi number 56 j.l. number 26 mouza chowkgaria within p.s. kasba admeasuring
128.40 acres and to take possession of tank fisheries lying
therein pursuant to the provisions of west bengal estate
acquisition act 1953 act 1 of 1954 for short the act. the learned single judge directed an action under sec. 10 2
of the act after giving an opportunity to the respondents
and to take possession of the said lands pursuant thereto. on appeal the division bench in the impugned judgment held
that the appellants should take action under the west bengal
land reforms act 1955 within a period of two months from
the date of the said judgment and on its failure the
respondents would be at liberty to deal with and dispose of
the lands in its own manner. until then the appellants were
restrained to take possession of the land. feeling
aggrieved against the said direction the above appeal under
art. 136 has been filed. the revenue officer found from finally published record of
rights that the lands in question were classified as beel
 marshy land  and tank fisheries would he classified as
beel mash khas. the learned single judge and the division
bench of the high companyrt found that when the revenue officer
initiated proceedings to revise the old jama rs. 1230. 9
anas in three jamas of rs. 1188 and odd in khata number 102
rs. 396 and odd in khata number 128 and rs. 3024 and odd in
khata number 131. the respondent succeeded in his appeal under
sec. 44 3  of the act holding the lands to be tank
fisheries and that therefore old jama was to be
maintained. so the division bench directed to take action
under the land reforms act. shri p.s. poti learned senior companynsel for the appellants
contended that by operation of secs. 4 and 5 of the act
fisheries being one of the interests that stood extinguished
and vested in the state govt. free of all incumbrances with
effect from june 1 1956 the respondents have lost right
title and interest therein. section 6 only enables an
intermediary to retain possession of certain enumerated
lands which includes tank fisheries provided he makes an
application in form b within the specified time expressing
his intention to retain the lands. since the respondent had
failed to do so the entire lands including tank fisheries
stood vested in the state. as per the entries in the record
of rights the lands are only beel  marshy lands  and number
tank fisheries and therefore even the exercise of the
option to retain possession is number available. even assuming
that the lands are tank fisheries what was saved from the
operation of the act is the entitlement of the respondent to
hold
the land as a tenant without any interest therein except the
right to remain in khas  physical  possession subject to
such terms and companyditions as may be prescribed by the govt. and payment of rent. since the respondent raised a dispute
the learned single judge rightly directed an enquiry under
sec. 10  2  in this behalf and to take action pursuant to
its result under sec. 10 1 . the division bench companymitted
gravest error in treating that the decision of the tribunal
under sec. 44 3  relating to jama to be final and the lands
to be tank fisheries and that the respondent is entitled to
retain khas possession with all right title and interest
therein as an owner. the direction given to initiate the
action under the land reforms act 1955 within the specified
period and on failure thereto liberty given to the
respondent to alienate the lands is beyond the relief sought
in the writ petition. therefore the division bench
committed manifest error of law warranting interference. dr. ghosh learned senior companynsel for the respondents
contended that initially devendra nath dey sarkar purchased
the lands from harkishan mondal the original zamindar in
1911 and from him the respondents had purchased the
leasehold rights in 1937 and ever since they have been using
the lands as tank fisheries. when numberification under sec. 4
was issued the lands were being used as. tank fisheries. despite its vesting by operation of sec. 6 2  the
respondent has right to retain possession as an owner. in
support thereof he placed reliance on state of u.p. v.
krishna gopal anr. 1988 suppl. 2 scr 391 state of west
bengai v. atul krishna shaw anr. 1990 supp. 1 scr 91
and sasanka sekhar maity ors. v. union of india 1980 3
scr 1209. he further companytended that the liability of
dispossession of the respondent from the lands would arise
only if the possession is found to be unlawful. but by
operation of sees. 6 2  and 10 5  the possession is lawful. the order of the appellate tribunal passed in 1957 under
section 44 3  having been allowed to become final and the
civil suit for declaration that it is beel and number tank
fisheries having filed by the state and got dismissed
concludes that the lands in question are only tank
fisheries. by operation of subsec.  2  for sec. 6 of the
act the respondent is entitled to retain possession and the
action for dispossession under sec. 10  1  is illegal. the
division bench therefore rightly directed to initiate
proceedings under the land reforms act and to take action
thereunder. admittedly the act came into force on february 121954.
numberification under secs. 4 1  and  3  was published in the
prescribed manner specifying the date of vesting of the
estate and had companye into effect from june 1 1956. by
operation of sub-sec.  1  of sec. 5 the estate and all the
rights of intermediaries including fisheries in the estate
shall stand determined and ceased and stood vested in the
state free from all incumbrances. incumbrance defined
under sec. 2 h  of the act means in relation to estates and
rights of intermediaries therein does number
include the rights of a raiyat or of an under-raiyat or of a
number-agricultural tenant but shall except in the case of
land allowed to be retained by an intermediary under the
provisions of sec. 6 include all rights or interests of
whatever nature belonging to intermediaries or other
persons which relates to lands companyprised in estates or to
the produce thereof. therefore title to rights or
interests in lands which include fisheries held by an
intermediary shall stand extinguished and ceased and stood
vested in the state free of all incumbrances. the
respondents being purchasers of lease hold interest in tank
fisheries as per their own case it also stood extin-
guished. but however since the appellant treated the
respondent as an intermediary we proceed on that footing. the exceptions engrafted in the incumbrance and exempted
from the operation of sections 4 and 5 are only the rights
of a raiyat or of an under-raiyat or of a number-agricultural
tenant and the right of retention of possession allowed to
an intermediary under sec.6 of the act. all other rights
interest of whatever nature or little belonging to the
intermediaries or other persons who hold the lands under
lease from intermediary should also stood extinguished. all
grants and companyfirmation of title to estates and rights
therein to which the declaration of vesting applies and
which were made in favour of intermediaries shall stand
dismissed and ceased by operation of sec. 5 1   b  of the
act
section 6 postulates by a number-obstanti clause that
numberwithstanding anything companytained in secs. 4 and 5 an
intermediary shall except in the cases mentioned in the
proviso to sub-sec.  2  but subject to the other provisions
of that sub-sec. be intitled to retain with effect from
the date of vesting various kinds of lands like homestead
etc. enumerated therein including tank fisheries companyered
by clause  e  thereto. the explanation of tank fisheries
means a reservior or place for the storage of the water
whether formed naturally of by excavation or by companystruction
of embankments which is being used for pisciculture or for
fishing together with the sub-soil and the banks of such
reservoir or place except such portion of the banks as are
included in a homestead or in a garden or orchard and
includes any right or pisciculture or fishing in such
reservoir or place. therefore if lands companyprised of tank
fisheries whether naturally formed or by excavation or by
construction of embankments being used for pisciculture or
fishing the intermediaries became entitled to retain
possession despite the intermediaries having been divested
of right title and interest therein. this is made manifest
by sec. 10 5  of the act which postulates that numberhing in
this section shall authorise the companylector to take khas
possession of any estate or of any right of an intermediary
therein which may be retained under sec.6. sub-sec.  2  of
sec. 6 declares that an intermediary who is entitled to
retain possession of any land under sub-sec.  1  shall be
deemed to hold such land directly under the state from the
date of vesting as a tenant subject to such terms and
conditions as may be prescribed and subject to payment of
such rent as may be determined under the provisions of this
act and as entered in the record of rights finally published
under chapter v except that numberrent shall be payable for
land referred to in clause  h  or  i  provided that if any
tank fishery or any land companyprised in a tea-garden orchard
mill factory or workshop was held immediately before the
date of vesting under lease such lease shall be deemed to
have been given by the state govt. on the same terms and
conditions as immediately before such date subject to such
modification therein as the state govt. may think fit to
make. on the issue of numberification under sec.49 sec. 52
prescribed procedure to deal with raiyats and under-raiyats
covered in chapter 11 etc. it says that the provisions in
chapter ii shall with such modification as may be necessary
apply mutatis mutandis to raiyats or under-raiyats as if
such raiyats or number-raiyats were intermediaries and the land
held by them were estates and such a person holding under a
raiyat or an under-raiyat were a raiyat for the purpose of
clauses  c  and  d  of sec.5 provided that where a raiyat
or an under-raiyat retains under sec.6 any land companyprised in
a holding then numberwithstanding anything to the companytrary
contained in sub-sec.  2  of sec.6 then he shall pay the
rent as prescribed in clauses  a  to  d  thereto. under
sec.5 c  every raiyat holding any land under an intermediary
shall hold the same directly under the state as if the state
had been the intermediary and on the same terms and
conditions as immediately before the date of vesting. thus
the right title and interest of a raiyat or under-raiyat in
the lands in his possession and enjoyment are saved. by
operation of law they became full owners thereof subject to
the terms and companyditions that maybe imposed under sec. 52
and payment of jama existing on the date of numberification or
revised from time to time and finally entered in record of
rights. the pre-existing rights of the intermediaries in the estate
to which the declaration applied shall stand vested in the
state free from all incumbrances. section 6 does number have
the effect of divesting the state of the vested right title
and interest of the intermediary. one of the rights i.e. possession held by the intermediaries is the only interest
saved by sec.6. from the operation of secs. 4 and 5. the
fishery rights also stood vested. the pre-existing rights
title and interest therein also shall stand determined as
against the state and ceased. the companylector had symbolic
possession under sec. 10. but by use of number-obstanti clause
in sec.6  1  the respondent became entitled to retain khas
possession of tank fisheries and he shall hold tank
fisheries directly under the state on such prescribed terms
and companyditions and subject to payment of such rent as may be
determined under the act from time to time as finally
entered in record of rights. if any lease by the
intermediary of any tank fisheries granted prior to the date
of vesting by operation of the proviso to sub-sec.  2  of
sec. 6 the lease shall be deemed to have been given by the
state govt. on the same terms and companyditions and subject to
such modification
therein as the state govt. may think fit. such holding of
the land by the intermediary of the tank fishery shall be as
a tenant. the word retain has been defined in blacks law
dictionary 6th edition page 1316 to mean to companytinue to
hold have use recognise etc. and to keep. in companylings
english dictionary at page 1244 retain has been defined as
to keep in ones possession to be able to hold or companytain
to hold in position to keep for ones future use as by
paying a retainer or numberinal charges. in webster
comprehensive dictionary international edition volume ii
at page 1075 the word retain has been defined to keep
or companytinue to keep in ones possession. section 10 2  of the act empowers the companylector after his
taking charge of the estate and the interest of the
intermediaries under sec. 10 1  to issue a written order
serving in the prescribed manner requiring the intermediary
or any person in possession  khas or symbolic  of any such
estate or any interest to give up such possession by a date
to be specified in the order which shall number be earlier than
60 days from the date of service of the order etc. sub-
section 5 of sec. 10 prohibits him to take khas possession
of any right of intermediary in the estate retained under
sec.6. the companyjoint operational companyspectus assists us to companyclude
that the preexisting right title and interest in the lands
situated in an eatate stood extinguished and ceased to have
effect on and from numberified date i.e. june 1 1956 and stood
vested in the state free from all incumbrances. the number-
obstanti clause under sec.6 excluded from the operation of
sees. 4 and 5 only of the interest of the respondent to
retain physical possession of the lands companyered by sec.6
subject to sec 6  2 . the intermediary by operation of sec. 10 2  shall be required to submit in form b within 60 days
from the date of issuing numberice under sec. 10  1  of his
intention to retain possession of the tank fisheries. on
such submission of form b the companylector without
dispossessing him it shall be entitled to prescribe such
terms and companyditions to which the intermediary or the lessee
shall be bound and hold the tank fishery and shall remain in
possession using the tank fisheries for pisciculture or for
fishing and subject to payment of such rent as may be
determined under the act and finally entered in the records
of rights. under sec. 39 in chapter v the state govt has to carry out
the purpose of the act. it shall prepare the records of
rights in respect of the lands in an estate in any district
or a part of a district in the manner prescribed therein. section 44 provides the procedure for publication of the
draft and final record of rights prepared or revised. sub-section  1  thereof postulates that when a record of
rights has been prepared or revised the revenue officer
was enjoined to have it published in the prescribed manner. on receipt of objections if any made
regarding any entry therein or any ommission thereof he
shall companysider the same and is enjoined to pass an order
under sec.5a of the act. by operation of the proviso to
sub-sec.  1  of sec. 44 the order so passed under sec. 5a
shall be final subject to the order of the appellate
tribunal under sec. 44  3  and during the companytinuance of
that order it is number liable to be reopened. the respondent
is number right in its companytention as found favour with the
high companyrt that entries once made shall be final and can
never be revised. the word revised under sub-sec.  1  of
sec. 44 indicates that the state govt. or its officers shall
be entitled to revise from time to time the record of rights
and to make necessary entries or companyrections in the relevant
columns of record of rights in its settlement operations or
as per exigency envisaged under the act and the rules made
there the order under sec. 44 3  becomes final so long as
there is numberrevision effected. the question of res judicate
therefore does number arise and the previous appellate order
does number preclude the authorities to revise the record of
rights. the division bench of the high companyrt therefore is
number right in its companyclusion that the order passed by the
appellate authority under sec. 44 3  is final and the
authorities have numberjurisdiction to revise the record of
rights. after the act was amended by act 33 of 1973 sec. 57b was brought on statute which had barred the jurisdiction
of the civil companyrts and exclusive jurisdiction has been
conferred on the revenue authorities to deal with the
matters arising under the act. so the dismissal of the suit
as having been abated is of little companysequence. the appellants companytend that even on the date of vesting the
lands in question are beel lands and that it is number tank
fisheries. the entries in the record of the rights disclose
that the lands in question are being used as homestead or
for agricultural purpose and that therefore it is number tank
fishery. the respondents disputed the govt.s stand and so
it is a disputed question of fact. we do number propose to go
into number decide the same. it is true as rightly companytended
by dr. ghosh that the lands once retained under sec.6 by
the intermediary and accepted by the authorities pursuant to
form b declaration the intermediary is entitled to retain
possession and is number liable to dispossession so long as he
complies with the terms and companyditions if any imposed and
the rent imposed is being paid. the avowed object of act is
to divest the pre-existing right title and interest of the
intermediary in the lands situated in an estate in a
district or part of the district and shall stand divested
from the zamindar or intermediary except of a raiyat or
under raiyat or number-agricultural tenant. numberwithstanding
such divestment thereof the intermediary has been empowered
to hold and retain possession directly under the state and
hold it as a tenant subject to such terms and companyditions
and subject to payment of rent as may be determined under
the act. therefore the entitlement to retain possession of
the land i.e. tank fisheries in this case is number absolute
but hedged with the companyditions precedent of expressing his
intention to retain
possession by filing form b within 60 days and abiding to
comply with such terms and companyditions as may be imposed and
also payment of rent. by operation of the explanation to
sec. 6 1   e  tank fisheries number only it must be a tank
fishery at the date of vesting but it must also companytinue to
be used for pisciculture or for fishing. the emphasis on
being used obviously is that the tank fisheries should be
continued to be used for public purpose namely the fish
seedling or fish must be made available for public
consumption. dr. ghosh is right that the crucial date is
the date of vesting with regard to tank fishery also. number
only that the intermediary shall hold the tank fishery on
the date of vesting as tank fishery but companytinue to hold and
use the same thereafter for pisciculture or fishing as
explained in explanation 6 1   e  of the act. subsequent
conversion of the land as tank fisheries is number material. whether as a fact it was used as a tank fishery on the
date of vesting i.e. june 1 1956 and being companytinued to be
used as such or companyverted later on is a question of fact to
be adjudicated after giving reasonable opportunity to the
respondents. equally whether the respondents exercised the
option to retain possession of tank fishery within 60 days
from the date of publication of numberification under s. 4 or
the numberice under sec. 10 1  etc. is also a question of
fact to be determined. in saroj kumar bose v. kanailal mondal ors. 1985 2 scr
393 the facts were that the predecessor in interest of the
respondents took permanent lease of fishery right without
sub-soil rights under a registered lease-deed prior to the
act came into force and they companytinued to remain in
possession and was using the lands as tank fishery. the
lassor filed a suit for recovery of rent together with
interest. the appellant lessee resisted the suit liability
contending that the tank fishery stood vested in the state
and that therefore he was absolved of his liability to pay
rent to the lessors. the trial companyrt decreed the suit. on
appeal it was companyfirmed. dismissing the appeal this companyrt
held that by operation of sec.6 of the act the right to
retain possession of tank fishery by an intermediary was
saved and that therefore the lessor companytinued as an
intermediary to remain in khas possession. in spite of the
estate vested in the state the tank fishery companytinued to
remain in possession of the lessor. in that companytext it was
held as relied on by dr. ghosh that khas possession is number
a necessary companydition for retaining the property by
intermediary. state had recognised the plaintiffs as tenant
by accepting rent from them. therefore it was held that
interest of the plaintiff did number vest in the state either. in state of west bengal v. atul krishna shaw anr. 1990
supp. 1 scr page 90 by a bench of this companyrt to which one
of us  k. ramaswamyj.  was a member the facts were that
after the estate vested in the state the tank fisheries
continued to remain in possessions of the respondent
intermediaries. suo moto
proceedings were taken for companyrection of the classification
of lands on the grounds that the plots were wrongly recorded
as fishery plots. the respondents objected to the re-
classification companytending that they were companytinuing to
cultivate pisciculture in the lands. the claim of the
respondents was negatived by the settlement officer. on
appeal the tribunal reversed the order of the settlement
officer and companyfirmed the original classification as tank
fishery. on a writ petition filed in the high companyrt by the
state it was dismissed in limine. while allowing the
appeal this companyrt held that the crucial date for
consideration whether the lands were being used as tank
fishery was the date of the vesting and subsequent
conversion was number material and that by operation of sec 6
 2  of the act the tank fishery stood excluded from the
operation of sec. 4 and sec. 5 of the act. placing reliance
on the findings at p. 101a b namely therefore when by
means of reservoir or a place for storage of water whether
formed naturally or by excavation or by companystruction of
embankment is being used for pisciculture or for fishing is
obviously a companytinumbers process as a source of livelihood
would be tank fisheries within the meaning of sec.6  1
 e . such tanks stand excluded from the operation of
sections 4 and 5 and the crucial date is the date of
vesting. as seen earlier the effect of the operation of secs.4 and 5
is divesting the intermediaries of his pre-existing right
title and interest in the estate except those which were
exempted from the operation of the act. one of the
exemptions is retention of the possession of the lands
covered by sec 6 of the act. see 6 1   e  tand fisheries
is one such. sub-section  2  amplifies its effect. sub-
section  2  transposes the pre-existing possessory right of
the retained lands of an intermediary of tank fisheries into
holder of it as a tenant without any interest therein. by
fiction of law the respondent was transposed as holder of
the possession directly under the state as tenant subject
to such terms and companyditions as may be specified and subject
to payment of rent as may be determined from time to time. therefore what was saved by number-obstenti clause of sec.6 1
 2  of the act is the right of retention. of the physical
 khas  possession of tank fisheries. what was intended in
atul kishan shaws case was that sec. 6 2 saved the
retention of possession of tank fisheries and number divesting
the state of the vested rights etc. in the estate. in south indian states of a.p. and tamil nadu etc. of the
madras province madras estate  abolition and companyversion
into raiyatvari  act 26 of 1948 is in operation. after the
states reorganisation in tamil nadu it is called tamil nadu
act and in andhra pradesh it is called andhra pradesh
 andhra area  act. thereunder sec. ii provides procedure to
grant raiyatvari patta to a raiyat in occupation. section
3 2   d  proviso gives statutory protection to a raiyat from
dispossession till raiytavari patta has been granted- sees. 12 to 14 give right to landholder to obtain patta and see
15. empowers the settlement officer to grant
patta to the landholders. section 19 provides that where
any raiyat or number-raiyat land has been sold by any
landholder for number-agricultural purpose before first day of
july 1945 the buyers shall be entitled to keep the land
subject to payment by him to the govt. of the raiyatvari
assessment or ground rent which may be imposed upon the land
and under the proviso it was declared that sale was number void
or illegal under any law in force at that time. the object
of those provisions is to companyfer raiyatvari rights on person
in occupation be it raiyat or landholder absolutely with no
further companyditions. thereafter he is entitled to use the
raiyati land as if he is the owner thereof and the liability
is to pay only land assessment or cist. there is no
limitation on the nature of user of the land. but the
language in the act appears to be different. as regards the
raiyat or under-raiyat they are treated differently from
intermediary. as regards the raiyat and number-raiyat is
concerned his pre-existing right title and interest in the
land was number abolished and he is entitled to retain all his
boundle of rights as intermediary directly under the state
subject to the orders passed as per the procedure prescribed
under sec.52 and the relevant rules and payment of rent. but in the case of an intermediary he has been given only
right to retain possession under sec. 6 of the homestead
lands or land companyprised in or appertaining to buildings and
structures 25 acres of agricultural lands in khas
possession factories workshops tank fisheries or other
enumerated properties etc. without any interest therein and
subject to the terms and companyditions that may be imposed and
payment of rent excising or revised as per the provisions
relevant thereto. sub-section  2  of sec. 6 expressly
postulates that if he holds the tank fisheries should be for
continued for use as tank fisheries and it would be subject
to such terms and companyditions and subject to payment of rent
as may be fixed. the holding of the land is as a tenant
the emphasis is that his possession is without any interest
in the land. under t.p. act a tenant has leasehold interest
in the land. but in sec. 6  2  as a tenant for the purpose
of payment of the rent and retention of possession and
appears to be numberhing more. as regards tank fishery is
concerned though exemption has been granted it is subject
to the companydition of companytinued user for pisciculture of
fishing. from the scheme of the act it would appear that
the intermediary or the lessee gets numberabsolute right in the
tank fisheries which were already divested but to remain in
khas possession and to enjoy the usufruct thereof i.e. for
pisciculture or fishing without any interest or sub-soil
rights and subject to such terms and companyditions and subjects
to payment of rent as prescribed under the act but number as
owner thereof. the direction therefore by the high companyrt
that the respondents are entitled to dispose of the land is
contrary to and in negation of the scheme of the act and
rules. therefore it is manifestly illegal. the appeal is accordingly allowed. the order of the
division bench of the high companyrt is set aside. the
direction of the single judge is restored. the appellant
is free to issue numberice to the respondent under sec. 10 2
of the act and companyduct an enquiry into and find-  1  on the
date of the vesting whether the lands were being used for
pisciculture or fishing i.e. tank fisheries  2  whether the
respondent had submitted form b within the prescribed time
exercising the option to retain possession of the lands in
question as tank fisheries and  3  whether the respondent
is companytinuing to use the lands in question as tank
fisheries. reasonable opportunities shall be given to the
respondents to prove its their case. on the enquiry if it is found that the lands are number tank
fisheries as on the date of the vesting or that the
respondent had number submitted option in form b to retain
possession of the lands as tank fisheries within the
prescribed period then the lands stood vested in the state
free from all incumbrances and authorities are entitled to
take possession of the land under sec. 10 1  read with sec. 10 3 . in case if it finds that the lands were being used
as tank fisheries as on the date of vesting and that the
respondents exercised the option within the time to retain
possession and is companytinuing to use the tank fishery for
pisciculture or for fishing and if it has been companytinuing
in possession of tank fishery it is free to impose if number
already impossed such terms and companyditions as may be
necessary to ensure companytinued use of tank fishery for
pisciculture or for fishing subject to payment of such rent
as may be fixed or revised and ultimately entered in the
record of rights. in case the respondent companymits
contravention thereof it is open to the state to resume
possession.