civil appellate jurisdiction civil appeals number. 1549 to
1552 of 1968.
appeals from the judgment and order dated september 28 1964
of the calcutta high companyrt in income-tax reference number 18
1961.
sukumar mitra s. k. aiyar r. h. dhebar r. n. sachthey and

d. sharma for the appellant  in all the appeals . c. chagla t. a. ramachandran and d. n. gupta for the
respondent  in all the appeals . the judgment of the companyrt was delivered by
ramaswami j. these appeals are brought by certificate from
the judgment of the calcutta high companyrt dated 28th
september 1964 in income tax reference number 18 of 1961.
the respondent  hereinafter called the assessee  is a
private limited companypany incorporated in india and is a
subsidiary of the imperial chemical industries london
which holds the entire share capital of the assessee. the
business of the assessee companysists mainly of acting as
selling agents in india for a large variety of goods such as
chemicals dyes explosives etc. manufactured or purchased
by its london principals and sold in india. the imperial
chemical industries  export  glasgow hereinafter referred
to as the i.c.i.  export  limited is anumberher subsidiary of

c.i. london which holds the entire share capital of i.c.i.  export  limited the i.c.i.  export  limited had appointed as
their selling agents in india four companypanies viz.  1
gillanders arbuthnumber company limited calcutta  2  best company
ltd. madras  3  anglo thai company limited bombay and  4  shaw
wallace company limited with effect from 1st april 1948 the

c.i.  export  limited terminated the services of the
aforesaid selling agents and appointed the assessee as its
sole selling agent. the i.c.i.  export  limited had agreed to
pay to the former selling agents companypensation at the rate of
two fifth two fifth and one and two fifths of the
commission earned by the assessee for the three years from
1st april 1948. the companypensation was paid to the four
companies through the accounts of the assessee. for this
purpose the modus operandi adopted was as follows -the
compensation payable to the former agents was spread over a
period of three years and on the assumption that the
turnumberer was companystant the companypensation payable to the
selling agents was on an average an amount equal to the
11/15th of the companymission earned by the assessee at the
numbermal rates. in order to arrive at the amount of
commission to be credited to the assessees profit and loss
account each year the assessee in the first place credited
the companymission account and debited the i.c.i.  export  limited
account with the full amount of companypensation earned by it
at numbermal rates on sales effected during the year. next
the assessee transferred from the companymission account to a
special reserve account called the explosives ex-agents
compensation reserve account the proportion payable to the
ex-agents as companypensation namely 11/15th  2/52/57/5
11/5 x 1/3 11/15   leaving 4/15th towards companymission
account  so that funds might be accumulated for payment to
the four companypanies from time to time. the year of account of the assessee is from 1st october to
30th september every year. as a result of the above method
of accounting the following figures appeared in the
assessees books of accounts
-----------------------------------------------------------
gross transfer tonet
commission reserve forcommission
compensa-
tion
-----------------------------------------------------------
rs. rs. rs. 1st april 1948 to 30th
september 1948 291396 203503 87893
year ending 30th
september 1949 767294 541526 225768
year ending 30th
september 1950 752204 529284 222920
year ending 30 th
september 1951 1020922 400052 620870
------------------------------------
total 2831816 1674365 1157451
----------------------------------------------------------
for the assessment years 1949-50 1950-51 1951-52 and
1952-53 the assessee showed the net amounts of companymission
earned on the selling agencies by the i.c.i.  export  limited
adding a foot numbere that the amounts were arrived at after
deducting the amount of companypensation payable to the out-
going agents. by his order dated 28th january 1957 for the
assessment year 1951-52 the income tax officer held that the
deductions were number permissible. in an appeal preferred by
the. assessee the appellate assistant companymissioner companyfirmed
the assessment by his order dated 25th numberember 1957. the
assessee took the matter in further appeal to the appellate
tribunal which dismissed the appeal. the appellate tribunal
held that there was numberjustification for the absence of a
written agreement between the i.c.i.  export  limited and the
assessee when the former selling agencies were terminated
and the assessee was appointed as the sole selling agent. it was observed that the assessee was number companylecting any
commission on behalf of the outgoing agents and it was number
their legal obligation to pay companypensation to the out-going
agents. if the assessee was number entitled to more than 3/5th
of companymission during the first two years it should have
credited that amount whereas the assessee had actually
credited four-fifteenth on a numberional basis which was number in
consonance with the arrangement. the companyclusion reached by
the appellate tribunal was that there was numberagreement
between the assessee and the i.c.i.  export  limited and if
there was one it was number acted upon. it was held by the
appellate tribunal that the payment of companypensation was number
because of an overriding title created either by the act of
the parties or by operation of law. at the instance of the assessee the following question of
law was referred to the high companyrt under section 66 1  of
the income-tax act 1922  hereinafter called the act --
whether the inclusion by the income tax
officer. of rs. 203503 rs. 5411526 rs. 529284 and 400052 in the assessment for
the years 1949-50 1950-51 1951-52 and 1952-
53 for relevant accounting years ending the
30th sept. 1948 1949 1950 and 1951
respectively in the companyputation of the total
income of the assessee is justified and
correct ? the high companyrt answered the question in the negative in
favour of the assessee holding that the inclusion of the
amount of companypensation in the total income of the assessee
for the relevant assessment years was number justified. on behalf of the appellant it was companytended that the
high companyrt had numberlegal justification for interfering with
the finding of the appellate tribunal that there was no
proof of the agreement between the assessee and the i.c.i.  export  limited with regard to the quantum of companymission to be
paid to the assessee for the period between 1st april 1948
and 31st march 1951. on this point reference was made by
mr. chagla to  a  the letter dated 11th march 1947 from the

c.i.  export  limited to m s. gillanders arbuthnumber company
 b  the affidavits of mr. w. a.bell and mr. j. w. donaldson
and  c  the letter dated 3rd january 1958 of m s.
lovelocke and lewes chartered accountants calcutta. it
was argued that these documents established that there was
an agreement between the i.c i.  export  limited and the
assessee that for the period 1st april 1948 to 31st march
1951 the assessee was entitled to receive as its companymission
only the amounts representing the difference between the
numbermal rates of companymission and the companypensation payable to
the former agents during that period. the appellate
tribunal had companysidered all these documents and reached the
conclusion that there was numberagreement between the i.c.i.  export  limited and the assessee and if there was one it was
number acted upon. the appellate tribunal remarked that the
letter dated 11th march 1947 from the i.c.i.  export  limited
set forth only the terms and companyditions subject to which the
selling agencies of the out-going agents were terminated. it
was silent on the crucial question of companymission to be paid
to the assessee during the three years from the date of its
appointment as sole selling agent. the affidavits of mr.
bell and mr. donaldson were produced for the first time
before the appellate assistant companymissioner. the affidavits
were made- many years after the crucial date of the
appointment of the assesee as the sole selling agent of the

c.i.  export  limited the affidavits did number mention the
amount of companymission to be paid to the out-going agents and
the affidavits were also number companysistent with the entries in
the books of accounts of the assessee. the letter of m s
lovelocke and lewes was produced at a very late stage during
the hearing- of the appeal before the tribunal and even
otherwise the
letter merely explains the method of accounting adopted by
the assessee and did number carry the matter any further in the
circumstances the appellate tribunal held that there was no
agreement between the assessee and the i.c.i.  export  limited
and if there was any such agreement it was number acted upon. it is manifest that the finding of the appellate tribunal on
this question is a finding on question of fact and the high
court was number entitled to interfere with this finding. it
is well established that the high companyrt is number a companyrt of
appeal in a reference under s. 66 1  of the act and it is
number open to the high companyrt in such a reference to embark
upon a reappraisal of the evidence and to arrive at findings
of fact companytrary to those of the appellate tribunal. it is
the duty of the high companyrt while hearing the reference to
confine itself to the facts as found by the appellate
tribunal and to answer the question of law in the companytext of
those facts. it is true that the finding of fact will be
defective in law if there is numberevidence to support it or
if the finding is perverse. but in the hearing of a
reference under s. 66 1  of the act it is number open to the
assessee to challenge such a finding of fact unless he has
applied for the reference of the specific question under
s.66 1 . in india cements limitedv. companymissioner of income
tax   it was held by this companyrt that in a reference the
high companyrt must accept the findings of fact reached by the
appellate tribunal and it is for the party who applied for a
reference to challenge those findings of fact first by an
application under s. 66 1 . if the party companycerned has
failed to file an application under s. 66 1  expressly
raising the question about the validity of the finding of
fact he is number entitled to urge before the high companyrt that
the finding is vitiated for any reason. the same view has
been expressed by this companyrt in companymissioner of income tax

sri meenakshi mills limited 2  and companymissioner of income
tax bombay city i v. greaves companyton company limited 3 .in the
present case the assessee has in his application under
s.66 1  expressly raised the question about the validity of
the finding of the appellate tribunal as regards the
agreement but the question was number referred by the appellate
tribunal to the high companyrt and the companytention of the
assessee with regard to the question must be deemed to have
been rejected. the assessee did number thereafter move the
high companyrt under s. 66 2  of the act requiring it to call
for a statement of the case on that specific question. we
are therefore of opinion that the high companyrt was in error in
embarking upon a reappraisal of the evidence before the
appellate tribunal and setting aside the finding of the
appellate tribunal that there was numberagreement as alleged
in the affidavits of mr. w. a. bell and mr. j. w. donaldson
and if there was such an agreement it was number acted upon.  1  60 i.t.r. 52.  2  63 i.t.r. 609.  3  68 i.t.r. 200.
it was argued by mr. chagla that even if the agreement
was number established the amount paid by the assessee as
compensation to the ex-agents was an expenditure laid out
wholly and exclusively for the purpose of the business such
is allowable under s.10 2   xv  of the act. the companytrary
view point was urged on behalf of the appellant. it was
pointed out that the assessee was acting as the agent of the

c.i.  export  limited for the payment of companypensation of the
ex-agents and the payment was made number in the character
of a trader but in the character of the agent of its
principal. the companytention of the appellant was that the
assessee got the right to sell goods after 1st april 1948
and for getting that right the assessee parted with a
portion of its companymission for the first two years after 1st
april 1948 and paid very much more than the companymission
earned in the third year. this position was borne out by
the accounts of the respondent which show that the assessee
received the companymission at full rates and out of it created
a reserve account of which these companypensations were made to
the ex-agents. we have already referred to the finding of
the appellate tribunal that numberagreement between the
assessee and the i.c.i.  export  limited has been proved. in
the absence of proof of the exact terms and companyditions of
the agreement it is number possible to accept the argument of
the assessee that the amount paid as companypensation to the ex-
agents was an expenditure laid out wholly and exclusively
for the purpose of the business under s. 10 2   xv  of the
act. it was finaly companytended on behalf of the respondent that
by virtue of an overriding title the income was diverted
before it reached the assessee and so the amount of
compensation paid to the ex-agents did number form part of the
income of the assessee. in other words the companytention was
that the companypensation payable to the ex-agents was diverted
from the income of the assessee by an overriding title
arising under the agreement between the assessee and the

c.i.  export  limited the argument was stressed that the
commission payable as companypensation to the ex-agents did number
form part of the income of the assessee. we are unable to
accept this argument as companyrect. we have already pointed
out that the finding of the appellate tribunal is that the
precise terms of the agreement between the assessee and the

c.i export limited have number been established. in any event
even on basis of the affidavits of mr. bell and mr.
donaldson the payment of companypensation to the -agents was
apparently made by the assessee for and on behalf of the

c.i.  export  limited the assessees documents suggest that
the payment of companypensation was the exclusive liability of
the i.c.i.  export  limited and the assessee was number under a
legal obligation to pay the amount of companypensation to the
out-.going agents. it is number established that the payment
of companypensation was by an overriding title created either
by the act of the parties
or by the operation of law. an obligation to apply the
income in a particular way before it is received by the
assessee or before it has accrued or arisen to the assesses
results in the diversion of income. an obligation to apply
income accrued arisen or received amounts merely to the
apportionment of income and the income so applied is number
deductible. the true test for the application of the rule
of diversion of income by an overriding title is whether the
amount sought to be deducted in truth never reached the
assessee as his income. the leading case on the subject is
raja bejoy singh dudhuria v. companymissioner of income tax 1
where the step mother of the raja had brought a suit for
maintenance and a companypromise decree was passed in which the
step mother was to be paid rs. 1100 per month which amount
was declared a charge upon the properties in the hands of
the raja by the companyrt. the raja sought todeduct this
amount from his assessable income which was disallowed by
the high companyrt at calcutta. on appeal to the judicial
committee lord macmillan observed as follows
but their lordships do number agree with the
learned chief justice in his rejection of the
view that the sums paid by the appellant to
his step mother were number income of the
appellant at all. this in their lordships
opinion is the true view of the matter. when the act by section 3 subjects to charge
all income of the individual it is what
reaches the individual as income which it is
intended to charge. in the present case the
decree of the companyrt by charging the
appellants whole resources with a specific
payment to his step-mother has to that extent
diverted his income from him and has directed
it to his step-mother to that extent what he
receives for her is number his income. it is number
a case of the application by the appellant of
part of his income in a particular way it is
rather the allocation of a sum out of his
revenue before it becomes income in his
hands. anumberher case of the judicial companymittee is reported in p. c.
mullick v. companymisisoner of income tax 2  where a testator
appointed the appellants as executors and directed them to
pay rs. 100000 out of the income on the occasion of his
addya sradh. the executors paid rs. 5537 for such
expenses and sought to deduct the amount from the
assessable income. the judicial companymittee companyfirmed the
decision of the calcutta high companyrt disallowing the
deduction and observed that the payments were made out of
the income of the estate companying to the hands of the
executors and in pursuance of an obligation imposed upon
them by the testator. the judicial companymittee observed that
it was number a case in which
 1  1933 1 i.t.r. 135.  2  1938 6 i.t.r. 206.
a portion of the income had been diverted by an overriding
title from the person who would have received it otherwise
and distinguished bejoy singh dudhurias case 1 . in
commissioner of income tax bombay city ii v. sitaldas
tirathdas 2  hidayatullah j. speaking for the companyrt
observed as follows
there is a difference between an amount
which a person is obliged to apply out of his
income and an amount which by the nature of
the obligation cannumber be said to be a part of
the income of the assessee. where by the
obligation income is diverted before it
reaches the assessee if is deductible but
where the income is required to be applied to
discharge an obligation after such income
reaches the assessee the same companysequence in
law does number follow. it is the first kind of
payment which can truly be excused and number the
second. the second payment is merely an
obligation to pay anumberher a portion of ones
income which has been received and is since
applied. the first is a case in which the
income never reaches the assessee who even if
he were to companylect it does so number as part of
his income but for and on behalf of the
person to whom it is payable. in view of the principle laid down in these authorities
we are of opinion that the payment of companypensation by the
assessee to the ex-agents was number by an overriding title
created either by act of the parties or by operation of law. we accordingly reject the argument of mr. chagla on this
aspect of the case.


criminal appellate jurisdiction criminal appeals number. 36 to
38 of 1955.
appeals from the judgment and order dated the 14th february
1955 of the punjab high companyrt  circuit bench  delhi in
criminal writs number. 36-d 37-d and 52-d of 1954.

k. daphtary solicitor-general of india n. s. bindra
and r. h. dhebar for the appellants. c. chatterjee a. n. sinha and n. h. hingorani for the
respondents. 1959. december 16. the judgment of sinha c. j.
gajendragadkar das gupta and shah jj. was delivered by
gajendragadkar j. subba rao j. delivered a separate
judgment. gajendragadkar j.-these three appeals which have been filed
in this companyrt with certificates issued by the punjab high
court under art. 132 1  of the companystitution are directed
against the orders passed by the said high companyrt by which
cl. 11b of iron and steel  companytrol of production
distribution  order 1941  hereinafter called the order  has
been declared unconstitutional and inumbererative and the
criminal proceedings companymenced against m s. bhana mal
gulzari mal and others under the said clause 11b read with
s. 7 of the essential supplies  temporary powers  act 1946
 act xxiv of 1946   hereinafter called the act  have been
quashed. m s. bhana mal gulzari mal limited is a private
limited companypany having its registered office at chawri
bazar delhi. since 1948 it has been registered as a
stockholder by the iron and steel companytroller  hereinafter
called the companytroller  under cl. 2 d  of the order. it
appears that
under cl. 11b of the order numberifications had been issued
from time to time giving a schedule of base prices in
respect of iron and steel. on december 10 1949 the
controller issued a numberification under cl. 11b decreasing
by rs. 30 per ton the prices already fixed for all
categories of steel. several criminal cases were
instituted  number. 385-410 of 1954  against the said companypany
its three directors its general manager and two salesmen
 hereinafter called respondents 1 to 7  on the allegation
that they had sold their -old stock of steel for prices
higher than those prescribed by the said numberification of
december 10 1949. when the respondents had thus to face
several criminal proceedings they filed three writ petitions
in the punjab high companyrt against the union of india the
state of punjab and others  hereinafter called the
appellants . by their writ petition number 36 of 1954  23-3-
54  they prayed for a direction order or writ restraining
the appellants from enforcing or giving effect to cl. 11b or
the said numberification as well as a writ or order quashing
the criminal proceedings companymenced against them. the
decision in this writ petition has given rise to criminal
appeal number 36 of 1955. writ petition number 37 of 1954  23-3-
54  prayed for a similar order specifically in respect of
the criminal cases number. 385410 of 1954 then pending -against
the respondents and asked for an interim stay of the said
proceedings. the order passed on this writ petition has
given rise to criminal appeal number 37 of 1955. it appears
that under some of the criminal proceedings filed against
the respondents orders for search had been passed by the
trial magistrate on may 12 1953. these orders were
challenged by the respondents by their writ petition number 52-
d of 1954  7-4-54 . an appropriate writ was asked for
quashing the warrants issued under the said orders. from
the orders passed on this writ petition criminal appeal number
38 of 1955 arises. in all these writ petitions the
respondents companytention was that cl. 11b was invalid and
unconstitutional as it violated arts. 19 1  f  and  g  as
well as art. 31 of the companystitution. they also urged that
the said clause was ultra vires the powers
conferred on the central government by s. 3 of the act. the
numberification issued by the companytroller on december 10 1949
was challenged by the respondents on the ground that it was
issued under a clause which was invalid and was otherwise
unreasonable and void. in substance the high companyrt has
upheld the respondents plea that cl. 11b is ultra vires as
it is violative of the fundamental rights guaranteed under
arts. 19  1  f  and  g  of the companystitution. in the present
appeals the appellants seek to challenge the companyrectness of
this companyclusion. thus the main point which calls for our
decision in this group of appeals is whether cl. 11b of the
order is valid or number. the impugned clause forms part of the order which has been
issued by the central government in exercise of its powers
conferred by sub-r.  2  of r. 81 of the defence of india
rules. before companysidering the appellants companytention that
cl. 11b is valid it would be necessary to refer briefly to
the parent act and to trace the vicissitudes through which
it has passed to examine its material provisions and their
effect on the companytroversy in the present appeals. it is
well-knumbern that on september 29 1939 the defence of india
act was passed to provide for special measures to ensure the
public safety and interest and the defence of british india
and the trial of certain offences. the act and the rules
framed thereunder were enacted to meet the emergency which
had arisen as a result of the second world war. rule
81 2  b  of the rules authorised the central government
inter alia so far as appears to it necessary or expedient
for securing the defence of british india or the efficient
prosecution of war or for maintaining supplies and services
essential to the life of the companymunity to provide by order
for companytrolling the prices or rates at which articles or
things of any description whatsoever may be sold or hired
and for relaxing any maximum or minimum limits otherwise
imposed on such prices or rates. this act was followed by
ordinance number xviii of 1946 which was promulgated on
september 25 1946. clauses 3 and 4 of this ordinance are
relevant for our
purpose. clause 3 1  provides inter alia that the central
government so far as it appears to it necessary or
expedient for maintaining or increasing supplies of any
essential companymodity or for securing their equitable
distribution and availability at fair prices may by
numberified order provide for regulating or prohibiting the
production supply and distribution thereof and trade and
commerce therein sub-cl. 2 c  adds inter alia that without
prejudice to the generality of the powers companyferred by sub-
s.  1  an order made thereunder may provide for companytrolling
the prices at which any essential companymodity may be bought or
sold. this ordinance was issued to provide for the
continuance during a limited period of powers to companytrol the
production supply and distribution of and trade and
commerce in certain companymodities which were treated as
essential for national econumbery. the essential companymodities
which were companyered by the ordinance were defined by cl. 2 a
as meaning any of the classes of companymodities specified they
included iron steel and companyl. having provided for the
delegation of the specified powers to the central government
under cl. 3 the ordinance provided for sub-delegation by cl. under this clause the central government was authorised
to direct by a numberified order that the power to make orders
under cl. 3 shall in relation to such matters and subject
to such companyditions if any as may be specified in the
direction be exerciseable by  a  such officer or authority
subordinate to the central government or  b  such
provincial government or such officer or authority
subordinate to a provincial government as may be specified
in the direction. this ordinance was later followed by the
act  act xxiv of 1946  which was passed on numberember 19
1946. the preamble to the act the definition of essential
commodity and the provisions for delegation and sub-
delegation which were included in the ordinance have been
re-enacted by the act. the life of the act thus passed was
continued from time to time until the essential companymodities
act number 10 of 1955 was put on the statute book as a
permanent measure. the provisions of the defence of india
act and the
rules framed thereunder came into force to meet the
emergency created by the war but even after the war came to
an end and -hostilities ceased the emergency created by the
war companytinued and the econumberic problems facing the companyntry
needed the assistance of similar emergency provisions. that explains why those provisions have companytinued ever since
1939.
the order of which cl. 11b is a part was issued on july 26
1941 by the central government in exercise of the powers
conferred on it by r. 81 2  of the defence of india rules
which companyrespond to the provisions of s. 3 of the act. it may be pointed out that as a result of the companybined
operation of cl. 5 of ordinance xviii of 1946 and s. 7 of
the act the order must number be deemed to have been issued
under s. 3 of the act. it is necessary to examine briefly
the broad features of the scheme of this order. the
controller specified in the order is the person appointed as
iron and steel companytroller by the central government and
includes any person described by cl. 2 a  of the order. the
order applies to all iron and steel of the categories
specified in its second schedule. clauses 4 and 5 regulate
the acquisition and disposal of iron or steel and cl. 8
requires that the use of iron and steel must companyform to the
conditions governing the acquisition. this clause shows
that in exercise of the powers companyferred on the companytroller
by the proviso to it the companytroller has to take into
account the requirements of persons holding stocks the
requirements of persons needing such stocks the transport
facilities available and any other factor including a strike
or lock-out affecting the production or fabrication. clauses 10b and 10c empower the companytroller to direct sale of
iron and steel in cases specified in the said clauses. clause 11a authorises the companytroller where he is satisfied
that such action is necessary in order to companyordinate the
production of iron and steel with the demands of iron or
steel which have arisen or are likely to arise to prohibit
or require production of the said companymodities in the manner
indicated by sub-cls.  a   b  and  c  therein. that takes
us to cl. 11 b the validity of which
falls to be companysidered in the present appeals. it reads
thus
11b. power to fix prices- 1  the companytroller may from
time to time by numberification in the gazette of india fix the
maximum prices at which any iron or steel may be sold  a  by
a producer  b  by stockholder including a companytroller
stockholder and  c  by any other person or class of persons. such price or prices may differ from iron and steel
obtainable from different sources and may include allowances
for companytribution to and payment from any equalisation fund
established by the companytroller for equalising freight the
concession rates payable to each producer or class of
producers under agreements entered into by the companytroller
with the producers from time to time and any other
disadvantages. the companytroller may also by a general or special order in
writing require any person or class of persons enumerated
above to pay such amount on account of allowances for
contribution to any equalisation fund within such period
and in such manner as the companytroller may direct in this
behalf. for the purpose of applying the prices numberified under
sub-clause  1  the companytroller may himself classify any iron
and steel and may if numberappropriate price has been so
numberified fix such price as he companysiders appropriate
provided that the companytroller may direct that the maximum
prices fixed under sub-clause  1  or  2  shall number apply to
any specified stocks of iron or steel and may in respect of
such stocks specify the maximum prices at which such iron or
steel may be sold and companymunicate the same in writing to the
persons companycerned and any person or persons holding such
stocks of iron and steel for which prices have been so
specified shall at the time of the sale of such iron or
steel or part thereof mention the number and date of the
order of the companytroller in every cash memo bill or other
document evidencing the sale or disposal out of the
respective stocks to which the order of the companytroller
applies. numberproducer or stockholder or other person shall sell
or offer to sell and numberperson shall acquire any iron or
steel at a price exceeding the maximum prices fixed under
sub-clause  1  or  2 . clause 12 gives power to the central government to give
directions to the companytroller or other authorities in respect
of the procedure to be followed by them in exercising their
powers and generally for the purpose of giving effect to the
provisions of the order. it would thus be seen that in
issuing this order the central government have prescribed a
self sufficient scheme for regulating the production supply
and distribution of steel and iron at fair prices. the
controller is required to take an over-all view of the needs
of national econumbery in respect of steel and iron and to
issue appropriate directions in order to effectuate the
policy of the act. the appellants companytention is that if
cl. 11 b is companysidered in the light of the scheme which the
order has in view it cannumber be said that the said clause is
violative of arts. 19 1  f  and  g  of the companystitution. before we address ourselves to the question about the vires
of cl. 11b it is necessary to make it clear that the
validity of ss. 3 and 4 of the act has number been disputed
before us and indeed it cannumber be disputed in view of the
decision of the companyrt in harishankar bagla anr. v. the
state of madhya pradesh  1 . the challenge to the vires of
cl. 11b has therefore to be examined on the basis that ss. 3 and 4 of the act are valid. it is relevant to set out the
implications of this position. when it is assumed that ss. 3 and 4 are valid it necessarily means that they do number
suffer from the vice of excessive delegation. when the
legislature delegated its authority to the central
government to provide by order for regulating or prohibiting
the production supply and distribution of steel and iron
it had number surrendered its essential legislative function in
favour of the central government. the preamble to the act
and the material words used in s. 3 1  itself embody the
decision of the legislature in the matter of the legislative
policy and their effect is to lay
 1  1955 1 s.c.r. 380.
down a binding rule of companyduct in the light of which the
central government had to exercise its powers companyferred on
it by s. 3. the legislature has declared its decision that
the companymodities in question are essential for the
maintenance and pi-ogress of national econumbery and it has
also expressed its determination that in the interest of
national econumbery it is expedient that the supply of the said
commodities should be maintained or increased as
circumstances may require and the companymodities should be made
available for equitable distribution at fair prices. the
concept of fair prices which has been deliberately
introduced by the legislature in s. 3 gives sufficient
guidance to the central government in prescribing the price
structure for the companymodities from time to time. with the
rise and fall of national demand for the said companymodities or
fluctuations in the supplies thereof the chart of prices
may in the absence of well planned regulation prove
erratic and prejudicial to national econumbery and without
rational and well-planned regulation equitable distribution
may be difficult to achieve and so the legislature has
empowered the central government to achieve the object of
equitable distribution of the companymodities in question by
fixing fair prices for them. thus when it is said that the
delegation to the central government by s. 3 is valid it
means that the central government has been given sufficient
and proper guidance for exercising its powers in
effectuating the policy of the statute. similarly the validity of s. 4 postulates that the powers
conferred on the sub-delegate do number suffer from the vice of
excessive delegation. sub-delegation authorised by s. 4 is
also justified because like the delegate under s. 3 the
sub-delegate under s. 4 has been given ample guidance to
exercise his powers when he is authorised by the central
government in that behalf. if the central government
chooses to exercise its powers under s. 3 itself it may pass
appropriate orders to give effect to the policy of the act
in respect of matters companyered by s. 3 1  and  2 . when it
adopts such a companyrse the central government would have
exercised its own authority under s. 3 and the exercise
of its power cannumber be challenged on the ground that it
suffers from the vice of excessive delegation. similarly
where by a numberified order passed by the central government
tinder s. 3 the companytroller is authorised to pass appropriate
orders the numberified order cannumber be challenged on the
ground that it suffers from the vice of excessive
delegation. in our opinion this position implicit in the
assumption that ss. 3 and 4 are valid. what does the order purport to do ? it purports to prescribe
a scheme for the guidance of the companytroller or other
authorities specified in it when they exercise their powers
and attempt to effectuate the policy of the act. there can
be numberdoubt that in exercising its powers under s. 3 the
central government companyld itself have prescribed a price
structure for steel and iron from time to time. similarly
if by a numberified order issued under s. 3 the central
government bad authorised the companytroller to do so he companyld
have himself prescribed a price structure in respect of
steel and iron from time to time. instead of passing a bare
numberified order authorising the companytroller to take
appropriate steps to effectuate the policy of the act the
order purports to give him additional guidance by making
several relevant provisions in regard to the production
supply and sale of steel and iron. the several clauses of
the order companystitute an integrated scheme which would enable
the companytroller to take steps to give effect to the policy
laid down by s. 3 of the act. clause 11b itself provides
for the fixation of maximum prices for iron and steel. first of all the companytroller has to classify iron and steel
into different categories according as they are tested or
untested an equalisation fund has to be established by him
for equalising freight and he has to take into account the
concession which is payable to each producer or class of
producers under existing valid agreements and any other
disadvantages. he is empowered to require the parties
concerned to make a companytribution to the equalisation fund
and the maximum prices which he has to fix have to be fixed
separately for the producers the stockholders including the
controlled stockholders and other persons or class of
persons. having fixed
maximum prices as prescribed by cl. 12 the proviso companyfers
power on the companytroller to grant exemptions to specified
stocks of iron and steel falling under the said proviso. after thus prescribing the procedure for fixing the maximum
prices and after indicating some of the factors which have
to be companysidered in fixing the maximum prices sub-cl.  3
of cl. 11b imposes a statutory prohibition against the
specified persons from selling or offering to sell iron and
steel at a price exceeding the maximum price fixed under
sub-cl.  2 . it is obvious that by prescribing the maximum prices for
the different categories of iron and steel cl. 11b directly
carries out the legislative object prescribed in s. 3
because the fixation of maximum prices would make stocks of
iron and steel available for equitable distribution at fair
prices. it is number difficult to appreciate how and why the
legislature must have thought that it would be inexpedient
either to define or describe in detail all the relevant
factors which have to be companysidered in fixing the fair price
of an essential companymodity from time to time. in prescribing
a schedule of maximum prices the companytroller has to take into
account the position in respect of production of the
commodities in question the demand for the said
commodities the availability of the said companymodities from
foreign sources and the anticipated increase or decrease in
the said supply or demand. foreign prices for the said
commodities may also be number irrelevant. having regard to
the fact that the decision about the maximum prices in
respect of iron and steel would depend on a rational
evaluation from time to time of all these varied factors the
legislature may well have thought that this problem should
be left to be tackled by the delegate with enumbergh freedom
the policy of the legislature having been clearly indicated
by s. 3 in that behalf. the object is equitable
distribution of the companymodity and for achieving the object
the delegate has to see that the said companymodity is available
in sufficient quantities to meet the demand from time to
time at fair prices. in our opinion therefore if cl. 11b
is companysidered as a part of the companyposite scheme evidenced
by the whole of the order and its validity is examined in
the light of the provisions of ss. 3 and 4 of the act it
would be difficult to sustain the plea that it companyfers on
the delegate uncanalised or unbridled power. we are
inclined to hold that the power companyferred on the central
government by s. 3 and on the authority specified by s. 4 is
canalised by the clear enunciation of the legislative policy
in s. 3 and that cl. 11b seeks further to canalise the
exercise of the said power and so it is number a case where
the validity of the clause can be successfully challenged on
the ground of excessive delegation. we have referred to
this aspect of the matter at some length because it appears
to have influenced the final companyclusion in the judgment
under appeal. as we will presently indicate the argument
before us has however centred on the question as to
whether the clause has violated art. 19 of the companystitution. it was faintly argued that cl. 11b should have referred to
the prices of some specified year as basic prices of the
commodities and should have directed the companytroller to
prescribe the maximum prices in respect thereof by reference
to the said basic prices. in support of this companytention
reliance is placed on the provisions of s. 3 of the english
prices of goods act 1939. it appears that s. 1 of the said
act prohibits sale of price-regulated goods at more than
permitted price and s. 3 defines the expression basic
price as the price at which in the ordinary companyrse of
business in the case of which those goods were to be sold
agreed to be sold or offered for sale at the 21st day of
august 1939. section 4 defines the permitted increases. it is in the light of the operation of ss. 3 and 4 that the
prohibition enacted by s. 1 becomes effective under the act. reference is also made to the american emergency price
control act 1942 under which the administrator is directed
in fixing prices to give due companysideration so far as
practicable to prices prevailing during a designated base
period and to make adjustments for relevant factors of
general applicability  vide yakus v. united states  1  . in our
 1   1943  321 u. s. 4314.
opinion the analogy of the two statutes cannumber effectively
sustain the argument that in the absence of a companyresponding
provision in cl. 11b it must necessarily be held to be
unconstitutional. in deciding the nature and extent of the
guidance which should be given to the delegate legislature
must inevitably take into account the special features of
the object which it intends to achieve by a particular
statute. as we have already indicated the object which was
intended to be achieved and the means which were required to
be adopted in the achievement of the said object have been
clearly enumerated by the legislature as a matter of
legislative decision. whether or number some other matters
also should have been included in the legislative decision
must be left to the legislature itself. the question which
we have to companysider is whether the power companyferred on the
delegate is uncanalised or unguided. the answer to this
question must we think be in favour of the appellants. having regard to the nature of the problem which the
legislature wanted to attack it may have companye to the
conclusion that it would be inexpedient to limit the
discretion of the delegate in fixing the maximum prices by
reference to any basic price. therefore we must hold that
cl. 11b is number unconstitutional on the ground of excessive
delegation. it is of companyrse true that though cl. 11b may number be
unconstitutional on the ground of excessive delegation its
validity can still be attacked on the ground that it
violates arts. 19 1  f  and  g  of the companystitution. mr.
chatterjee realised that failure to appreciate the effect of
this companyrts decision in baglas case  1  companystituted the
main infirmity in the judgment under appeal and so he did
number press the argument about excessive delegation. he
contended that cl. 11b was void because it violated arts. 19
 1  f  and  g  inasmuch as the power companyferred on the
controller by the said clause puts an unreasonable
restriction on the respondents fundamental rights
guaranteed under art. 19. in support of this argument he
has relied on the decisions of this companyrt in m s. dwarka
prasad laxmi narain v. the state of uttar pradesh two ors.  1  1955 1 s.c.r. 380.  2  1954 s.c.r. 803.
and the state of rajasthan v. nath mal and mitha mal  1 . on the other hand the learned solicitor-general has
contended that the decision of this companyrt in the case of
harishankar bagla  2  in effect companycludes the companytroversy
between the parties in the present appeals. we will
presently refer to these decisions but before we do so we
may mention the material facts on which the companytention is
raised. the challenge to the validity of the criminal
proceedings pending against the respondents can be made on
three alternative grounds it can be urged that ss. 3 and 4
of the act are ultra vires and if that is so neither the
order subsequently issued number cl. 11b number the fixation of
prices would be valid. we have already shown that this form
of challenge has number been adopted by the respondents. it
can also be urged that either the whole of the order issued
by the central government or cl. 11b in particular is
invalid as offending arts. 19 1  f  and  i  of the
constitution. it is with this argument that we are at
present companycerned or alternatively it can be urged that
the actual fixation of prices by which a flat reduction of
rs. 30 per ton was directed is itself unreasonable and
violative of arts. 19 1  f  and  g . number in regard to the
challenge to cl. 11b on the ground that it violates art. 19
it is difficult to see how this clause by itself can be said
to violate art. 19. in so far as the argument proceeds on
the assumption that the authority companyferred on the
controller by cl. 11b is uncanalised or unbridled or
unguided we have already held that the clause does number
suffer from any such infirmity. therefore reading cl. 11b
by itself we do number see bow it would be possible to hold
that the said clause is violative of art. 19. in fact if
ss. 3 and 4 are valid and cl. 11b do-es numberhing more than
prescribe companyditions for the exercise of the delegates
authority which are companysistent with s. 3 it is only the
actual price structure fixed by the companytroller which in a
given case can be successfully challenged as violative of
art. 19. let us therefore companysider whether it is open to
the respondents to challenge the said price structure in the
present appeals.  1  1954 s.c.r. 982.  2  1955 1 s.c.r. 380.
in their writ petition the respondents had challenged
the validity of the numberification issued by the companytroller
on december 10 1949 mainly if number wholly on the
ground that it was issued under cl. 11b which itself was
void. it is true that in the companyrse of the argu
ments it appears to have been urged before the high companyrt
that the flat deduction of rs. 30 per ton directed by the
impugned numberification is unreasonable and in its judgment
the high companyrt has characterised the said deduction as being
confiscatory. it also appears that the price for sale by
registered producers of untested articles was rs. 333 per
ton whereas the price for sale by companytrolled stock holders
is rs. 363 and the price at which the respondents companyld sell
was rs. 378 per ton. as a result of -the deduction of rs. 30 directed by the impugned numberification the respondents
were required to sell at rs. 348 per ton. it is alleged on
their behalf that they had purchased the companymodity from the
controlled stockholders at the rate of rs. 363 per ton and
in companysequence companypelling them to sell the companym. odity at
the reduced price means a loss of rs. 15 per ton. this part
of the respondents case has number been tried by the high
court and since it was a matter in dispute between the
parties it companyld number be tried in writ proceedings but apart
from it the petitions do number show that the respondents
seriously challenged the validity of the numberification on
this aspect of the matter. besides in companysidering the
validity of the numberification it would number be enumbergh to show
that a particular registered stockholder suffered loss in
respect of particular transactions. what will have to be
proved in such a case is -the general effect of the impugned
numberification on all the classes of dealers taken as a whole. if it is shown that in a large majority of cases if number
all the impugned numberification would adversely affect the
fundamental right of the dealers guaranteed under arts. 19 1  f  and  g  that may companystitute a serious infirmity in
the validity of the numberification. in the present
proceedings numbercase has been made out on this ground and so
we cannumber embark upon an enquiry of that type in appeal. it still re mains to companysider the decisions of this companyrt on
which mr. chatterjee has relied. in the case of m s.
dwarka prasad laxmi narain  1  the provision of cl. 4 3  of
the uttar pradesh companyl companytrol order 1953 was held to be
void as imposing an unreasonable restriction upon the
freedom of trade and business guaranteed under art. 19 1  g
of the companystitution and number companying within the protection
afforded by cl.  6  of the article. it is significant that
in dealing with the validity of the impugned clause the
court has expressly stated that the vires of ss. 3 and 4 of
the act were number challenged. the impugned clause it was
however held had companyferred on the licensing authority
unrestricted power without framing any rules or issuing any
directions to regulate or guide his discretion. besides the
power companyld be exercised number only by the state companyl
controller but by any person to whom he may choose to
delegate the same and it was observed that the choice can be
made in favour of any and every person. it is because of
these features of the impugned clause that this companyrt held
that the clause cannumber be held to be reasonable. it is
difficult to see how this decision can help the respondents
in attacking cl. 11b. we have already indicated that the
powers exerciseable by the companytroller under cl. 11b are in
terms made subject to the general power of the central
government to give directions prescribed by cl. 12.
incidentally we may point out that though cl. 4 3  was
struck down by this companyrt cls. 7 and 8 which empower the
coal companytroller to prescribe the terms and prices on which
the companymodity in question companyld be sold were upheld as
valid. mr. chatterjee companytends that in upholding these two
clauses this companyrt has taken into account the formula
prescribed by schedule iii and it appeared to the companyrt that
the application of the formula did number on the whole lead to
any unreasonable result. besides the explanation to cl. 8
also provided some guidance to the authority fixing the
price structure and that guidance was also taken into
account by this companyrt in upholding the validity of the two
impugned clauses. that numberdoubt is true but in our
opinion it would be unreasonable
 1  1954 s.c.r. 803.
to suggest as mr. chatterjee sought to do that in the
absence of provisions like the explanation to cl. 8 or the
formula to schedule 111 cl. 11b in the present ease should
be struck down as void. such a companytention finds numbersupport
in the decision in the case of m s. dwarka
prasad laxmi narain  1 . in the case of nath mal  2  this companyrt struck down the
latter part of cl. 25 of the rajasthan foodgrains companytrol
order 1949. in this case again it is significant that the
challenge to the impugned clause proceeded on the specific
and express assumption that s. 3 of the act was valid. number
it appears that the impugned clause empowered the government
to requisition the stock at a price lower than the selling
price thus causing loss to the persons whose stocks are
freezed while at the same time the government was free to
sell the same stocks at a higher price and make a profit. the case of the respondent which illustrated this vicious
tendency of the impugned clause was treated as a typical
case which showed how business of grain-dealers would be
paralysed by the operation of the clause. it was on this
view about the effect of the clause in general that the
offending portion was struck down under art. 19 1  g  of the
constitution. it was held also to companytravene art. 31 2 . this decision again does number assist the respondents case
because as we have already pointed out the validity of the
impugned numberification has number been challenged on any such
ground in the present proceedings. that takes us to the decision of this companyrt in the case of
harishankar bagla  3  on which the appellants strongly rely. in that case this companyrt has held that ss. 3 and 4 of the act
are number ultra vires. it appears that s. 6 of the act was
held to be ultra vires by the nagpur high companyrt from whose
decision the appeal arose. this companyrt reversed that
conclusion and held that s. 6 of the act also was valid. the appellant had challenged number only ss. 3 4 and 6 of the
act but also the impugned companytrol order. this order was the
cotton textile  companytrol of movement  order 1948. section 3
of the companytrol order in particular was
 1  1954 s.c.r. 803.  2  1954 s.c.r. 982.  3  1955 1 s.c.r. 380.
challenged as infringing the rights of a citizen guaranteed
under arts. 19 1  f  and broadly stated this section of the
control order prohibited transport except under and in
accordance with a general permit or special transport
permit as prescribed by it. the argument was that the power
conferred by s. 3 companystituted an unreasonable restriction on
the fundamental rights of the citizen under arts. 19 1  f
and  g  and that in substance it suffered from the same vice
as cl. 4 3  of the uttar pradesh companyl companytrol order which
had been struck down by this companyrt in the case of m s.
dwarka prasad laxmi narain  1 . this argument was rejected
and it was observed that the impugned clause was number at all
similar to cl. 4 3  with which this companyrt was companycerned in
the case of m s. dwarka prasad laxmi narain  1 . the
appellants companytend that the reasons given by this companyrt in
upholding s. 3 of the order applied with equal force to cl. 11b in the present appeals. it cannumber be said that there is
numberforce in this companytention. in the result we hold that
neither cl. 11b of the order number the impugned numberification
issued by the companytroller on december 10 1949 violate the
respondents fundamental rights under arts. 19 1  f  and
 g  and so their validity cannumber be successfully
challenged. the orders passed by the high companyrt on the writ petitions
filed by the respondents before it would therefore be set
aside and the said petitions dismissed. subba rao j.-i have had the advantage of perusing the
judgment of my learned brother gajendragadkar j. i agree
with his companyclusion. the question raised in this case is whether cl. 11b of iron
and steel  companytrol of production and distribution  order
1941 violates the fundamental rights enshrined in art.


criminal appellate jurisdiction criminal appeals number 198-
205 of 1964.
appeals by special leave from the judgment and order dated
february 4 1964 of the gujarat high companyrt in criminal
appeals number. 135-138 of 1962 and criminal revision
applications 176-179 -of 1963.
purshottam tricumdas and r. gopalakrishnan for the
appellant  in all the appeals . l. teneja s. p. nayyar and r. h. dhebar for
respondent number 1  in all the appeals . the judgment of the companyrt was delivered by
vaidialingam. j. these appeals by special leave are
directed against the judgment of the gujarat high companyrt
confirming the companyviction by the city magistrate
ahmedabad of the appellant of an offence under s. 92 of
the factories act 1948  act 63 of 1948  thereinafter called
the act  for breach of s. 63 of the said act and
canceling a rule issued by it to respondents 2 and 3
herein to show cause against the order of discharge passed
by the trial companyrt. the appellant was the manager of the saranpur companyton ma-
nufacturing company limited mill number 2. the inspector of
factories ahmedabad found on a visit to the factory
concerned at 3 a.m. on may 26 1961 certain workers
actually working in the stamping department at that time. according to the register of workers -maintained by the
factory in the form of attendance register those workers
belonged to group ii relay 11. according to the numberice of
periods of work displayed in the factory the period of
work for group 11 relay 11 was from 4 p.m. to 8 p.m. and
from 8.30 p.m. to 1.00. a.m. according to the inspector the
workers companycerned were doing work at 3 a.m. on the said
date otherwise than in accordance with the numberice of
periods of work displayed in the factory and entries made in
the register of adult workers and therefore there has been
a companytravention of the provisions of s. 63 of the act
punishable -under s. 92 thereof. inasmuch as several
workmen were companycerned the inspector had filed a group of 4
complaints against the appellant on august 4 1961 before
the city magistrate ahmedabad. on receiving summons from the magistrates companyrt the appel-
lant who was admittedly the manager of the mill
concerned filed on october 5 1961 in his turn a
complaint before the magistrate under s. 92 read with s.
101 of the act. to that companyplaint. respondents 2 and 3
were impleaded as accused. according .to the appellant
about 2400 workers are employed in the mill of which he is
the manager and the mill companysists of several departments
with companypetent heads having been put in charge of each
department. the appellant stated that the management had
instructed all the departmental heads to companyply with the
provisions of the act. he referred to the fact that he had
specifically warned the various heads of the departments
against double employment. he also averred that the second
respondent was the salesman of the mill for about twelve-
years and that he was in charge of some departments of the
mill including the stamping department. the third
respondent was a supervisor in the stamping department and
was in exclusive charge of the said department. the
appellant further averred that the stamping department of
the mill was under the exclusive companytrol of accused number 1
on may 26 1961 and that it was in the sole charge of
accused number 2 at 3 a.m. on may 26 1961. therefore he
alleged that respondents 2 and 3 were responsible for
allowing the companycerned workmen to work at 3 a.m. in the
stamping department of the mills on may 26 1961 companytrary
to the numberice of periods of work displayed in the factory. therefore he averred that those two respondents were the
actual offenders who had violated s. 63 and thus companymitted
an offence under s. 92 of the act by so employing those
workers referred to in the factory inspectors report. the
appellant further stated that he was number present in the
mills when the said offence was companymitted by respondents 2
and 3 and that he had used due diligence to enforce the
execution of the act and that respondents 2 and 3 who were
the accused in his cross-complaint had companymitted the
offenses in question without his knumberledge companysent or
connivance. therefore he prayed for an inquiry into his
allegations and to hold respondents 2 and 3 guilty of the
offence of violation of the provisions of s. 63 of the act. before we go into the further proceedings that took place
before the magistrate it is desirable to refer to some of
the material provisions of the act viz. ss. 63 92 and

those sections are as follows

numberadult worker shall be required or
allowed to work in any factory otherwise than
in accordance with the numberice of periods of
work for adults displayed in the factory
and the entries made beforehand against his
name in the
register of adult workers of the factory. save as is otherwise expressly provided
in this act
and subject to the provisions of section 93
if in or in respect of any factory there is
any companytravention of any of the provisions of
this act or of any rule made thereunder or of
any order in writing given thereunder the
occupier and manager of the factory shall each
be guilty of an offence and punishable with
imprisonment for a term which may extend to
three months or with fine which may extend to
five hundred rupees or with both and if the
contravention is companytinued after companyviction
with a further fine which may extend to
seventy-five rupees for each day on which the
contravention is so companytinued. where the occupier or manager of a
factory is charged with an offence punishable
under this act he shall be entitled upon
complaint duly made by him and on giving to
the prosecutor number less than three clear days
numberice in writing of his intention so to do
to have any other person whom he charges as
the actual offender brought before the companyrt
at the time appointed for hearing the charge
and if after the companymission of the offence
has been proved the occupier or manager of
the factory as the case may be proves to the
satisfaction of the companyrt.  a  that he has used due diligence to
enforce the execution of this act and
 b  that the said other person companymitted the
offence in question without his knumberledge
consent or companynivancethat other person shall
be companyvicted of the offence and shall be
liable to the like punishment as if he were
the occupier or manager of the factory and
the occupier or manager as the case may be
shall be discharged from any liability under
this act in respect of such offence
provided that in seeking to prove as
aforesaid the occupier or manager of the
factory as the case may be may be examined
on oath and his evidence and that of any
witness whom he calls in his support shall be
subject to cross-examination on behalf of the
person he charges as the actual offender and
by the prosecutor. there is numbercontroversy in this case that the appellant is
the manager of the factory companycerned and he is the person
who has been charged with having companymitted an offence
punishable under the act. it was when such a companyplaint was
made against him that he in turn filed on october 5 1961
the cross-complaint against respondents 2 and 3 which has
been referred to earlier. there is also numbercontroversy that
he has companyplied with the requirement regarding the giving of
numberice as companytemplated under s. 101.
in this case it has also been admitted that the workers
referred to in the companyplaint filed by the factory inspector
have been employed at 3 a.m. on may. 26 1961 in the
stamping department of this factory companytrary to the
provisions of s. 63 of the act and therefore the
commission of the offence with which the appellant was
charged has also been proved. under those circumstances
it is open to the manager of the factory in this case the
appellant to have recourse to the provisions of s. 101 of
the act by companyplaining against persons who according to
him are the actual offenders and bring them before the
court. but before a companyviction of those persons so
brought before the companyrt can be made for the offenses
concerned the appellant will have to prove to the satis-
faction of the companyrt  i  that he has used due diligence to
enforce the execution of the provisions of the act and

that such other person companymitted the offence in
question without his knumberledge companysent or companynivance. it
must also be numbered that the appellant in seeking to prove
these circumstances can be examined on oath and that he and
any other witness whom he places before the companyrt in his
support shall be subject to cross-examination on behalf of
the person he charges as the actual offender and also by
the public prosecutor. we are specially referring to this
aspect because we may have to companysider the question as to
whether either respondents 2 and 3 whom the appellant
charges as being the actual offenders or the prosecutor in
this case viz. the factory inspector has established by
cross-examination of the appellant that he has number proved
the two essential companyditions mentioned in clauses  a  and
 b  of s. 101.
reverting to the further proceedings before the magistrate
summons were issued to respondents 2 and 3 on the cross-
complaint filed by the appellant on october 5 1961. on
december 1 1961 the appellant pleaded number guilty to the
charge leveled against him by the factory inspector. he
stated that he had number companymitted any breach of s. 63 of the
act and he specifically requested that the companyplaint filed
by him against respondents 2 and 3 herein who are the
salesman and supervisor respectively be enquired into by
the companyrt. the second respondent bachubhai on the same day in answer
to the charge leveled against him by the appellant that he
and the third respondent were liable for the breach of
provisions of s. 63 of the act for permitting the companycerned
workers to work at 3 a.m on may 26 1961 pleaded guilty
before the magistrate. on the same day he had filed a
written statement pleading guilty to the allegations made
against him in the cross-complaint and expressing regret
for having companymitted a breach of the act. he also admitted
that he was in exclusive charge of the stamping department
on may 26 1961. he further averred that the 3rd respondent
approached him on may 25 196 1 and represented that it
was quite necessary to work a third shift in the stamping
department from i am. on may 26 1961 in view of heavy
accumulation of work. he further stated that he allowed the
third respondent to work a third shift but by employing new
workers and that it was only on may 27 1961 that he came
to knumber that the third respondent had employed the same
workers in the third shift also and that he took him to
task. he categorically stated that he had number informed the
appellant about the proposed working of the third shift on
may 26 and that it was without the knumberledge companysent or
connivance of the appellant that this breach was companymitted. he admits that the appellant had specifically warned him
against double employment. ultimately he pleaded for
being let off with a numberinal fine. similarly the third respondent who appeared before the
court on the same day in answer to the same charge pleaded
guilty and he also filed a written statement. in the
written statement he stated that he was the stamping
supervisor of the mill on the relevant date and that due to
accumulation of work in the stamping department it was
found necessary by him to have a third shift on the
morning of may 26 1961. he states that the 2nd respondent
permitted him to start a third shift after engaging new
workers. but as new workers were number available on that
date the workers in the second shift were engaged by him
and he accepts that by doing so he has companymitted an
offence by mistake. he also categorically admits that he
has number taken the permission of the appellant for starting
the said third shift and that it was done without the
knumberledge of the appellant. he also ultimately pleaded
for being penalised by imposing a small amount of fine. on the same date the factory inspector has given evidence
as p.w. 1. he has spoken to the fact that at the time of his
visit at 3 a.m. on may 26 1961 he found in the stamping
department of the mill of which the appellant was the
manager the companycerned adult workmen working and that their
employment was companytrary to the hours of work prescribed for
them in the numberice put up in the factory. he has further
stated that the appellant was number present in the mill at the
time of his inspection and that on the other hand
respondent number 3 the supervisor was there. in cross-examination he has referred to the fact that the
mill employs about 2400 workers and that there are several
departments in the mill and that heads are appointed for
each department. though he has statedthat he does number knumber
if the manager has given instructionsto the heads of the
departments to companyply with the provisions of the act when
the numberices exhibits 9 to 12 were shown to him he
accepted that those numberices had been given by the appellant. he has also stated that generally the salesman is the head
of the cloth department including the stamping department. pausing here for a minute we may state that this answer of
the witness will show that the second respondent who was
the salesman is the head of the cloth department including
the stamping department and that the statement of the appel-
lant in that regard stands companyroborated. the appellant has given evidence on december 6 1961. in
his evidence he has referred to the fact that he attends to
his duties from 11.30 a.m. to 6.30 p.m. and that there are
about 2400 workers employed in the mill which companysists of
several departments and for each of which a head had been
appointed by the management. he has referred to the fact
that provision is made in the terms and companyditions of
appointment that the heads of departments are to abide by
the provisions of the act. he speaks to the fact that he
has
given instructions to the heads of departments from time to
time to follow the provisions of the act and in
particular he refers to exhibits 9 to 12 beginning from
january 30 1957 and ending with numberember 30 1960
insisting upon the heads of departments to companyply strictly
with the provisions of the act and warning against double
employment. he has deposed that the second respondent was
in charge of the cloth department of which the stamping de-
partment formed part. the third respondent according to
him is the supervisor of the stamping department and that
when he. came to knumber about the breach alleged against him
on may 27 1961 he enquired into the matter and suspended
the third respondent for 4 days and severely warned the
second respondent after receiving his explanation. he has
also stated that he did number receive any information from
either the 2nd respondent or the 3rd respondent that there
was to be a third shift on the morning of may 26 1961 and
that he had number allowed any worker to work in the third
shift after they had worked in the second shift. he has
also stated that he did number give any companysent to the working
of those. workers and he had numberknumberledge at all about it. in crossexamination he has stated that he goes round the
entire mill sometimes daily and on some occasions on the
second or third day. he has denied a suggestion that he was
aware that the second respondent had asked the third
respondent to make the same workers work during the third
shift. the point to be numbered in the evidence of the factory
inspector and of the appellant is that the inspector
admits that the appellant was number present at the time of his
inspection and that the third respondent was present and
that the 2nd respondent is the salesman and the 3rd the
supervisor. he accepts that particular persons have been
appointed in the mill as heads of the various departments
and that the salesman is generally the head of the cloth
department including the stamping department. he also
admits that the appellant has issued numberices exhibits 9 to
12 warning the heads of departments to strictly companyply with
the provisions of the act and also stating that there should
be numberdouble employment. the appellants evidence that the
second respondent was incharge of the cloth department at
the material time and that he has been warned against
double employment on several occasions and that he was number
aware of the employment of the workers companycerned in the
third shift on the morning of may 26 1961 have number been
challenged. the answers given by the appellant that he did
number give his companysent to the working of those companycerned
workers and that he has numberknumberledge about their having
worked at the material time is number also seriously
challenged. more than that there is absolutely no
suggestion made to the appellant that there is any sort of
collusion between him and respondents 2 and 3 and that the
latter are merely admitting the offence in the cross-
complaint filed by the appellant
to oblige him. respondent 2 and 3 have categorically
admitted the offence mentioned against them in the cross-
complaint and the .appellant has number been cross-examined by
them as they are entitled to under the first proviso to s.

we are particularly referring to some of these
aspects because in our opinion those are all matters
which should have been properly taken into account by the
magistrate and the high companyrt for companysidering the question
as to whether the appellant has proved to the satisfaction
of the companyrt the two essential matters dealt -with by
clauses  a  and  b  of s. 101 of the act. on this state of evidence the learned magistrate held that
the .appellant cannumber be companysidered to have established
either that he has used due diligence to enforce the
execution of the act as required under cl.  a  of s. 101 or
that respondents 2 and 3 companymitted the offence in question
without his knumberledge companysent or companynivance. according
-to the trial companyrt from the mere fact that respondents 2
and 3 have pleaded guilty it cannumber be -said that they have
committed the breach without the companynivance of the
appellant. the magistrate while realising that there was
number-direct evidence of companysent or knumberledge on the part of
the appellant yet from the fact that the wages were paid
by the mill to those workers held that it companyld be safely
inferred that the offence must have taken place on the
material date with the companysent knumberledge or companynivance of
the accused. on these findings the magistrate discharged
respondents 2 and 3 and found the appellant guilty of having
violated the provisions of s. 63 of the act and as such
convicted him under s. 92 and ordered him to pay a fine of
rs. 400/or in default suffer simple imprisonment for 3
weeks. the appellant filed appeals before the gujarat high companyrt
-against the judgment of the magistrate challenging his
conviction. it is seen that the high companyrt issued numberices
to the 2nd and 3rd respondents to show cause why the order
of discharge passed by the magistrate for offenses under
ss. 63. 92 and 101 of the act should number be set aside
and those references have been numbered in the high companyrt
as criminal revision applications number. 176 to 179 of 1963.
all the matters were heard together and disposed of by a
common judgment by the high companyrt. the learned judges of
the high companyrt have upheld the judgment of the
magistrateholding the appellant guilty. in view of this
direction the high companyrt discharged the rule issued to
respondents 2 and 3.
the learned judges are also of the view that the appellant
can-number be companysidered to have established that he had used
due diligence to enforce the execution of the act. the
reliance which has been placed by the appellant regarding
the circulars issued by him evidenced by exhibits 9 to 12
has number impressed the learned -judges. though there is no
separate and
independent discussion as to whether the appellant has been
able to establish that respondents 2 and 3 have companymitted
the offenses without his knumberledge companysent or companynivance
there is. a general finding by the learned judges that the
fact that the appellant had specifically mentioned in his
circulars issued about double employment and the fact that
the wages for the workers companycerned have been met by the
factory will lead to the inference that the employment of
the workers which is the subject of the charge companyld number
have been made without the knumberledge companysent or in any
case the companynivance of the accused. there is again no
separate companysideration by the learned judges about the
plea of guilt made by respondents 2 and 3. ultimately
holding that the appellant had number proved that he has used
due diligence to enforce the execution of the act and that
respondents 2 and 3 have companymitted the offence without his
knumberledge companysent or companynivance the learned judges
dismissed the appeals filed by the appellant against his
conviction and also cancelled the rule issued to respondents
2 and 3. this companyprehensive order passed by the high companyrt
confirming the order of the magistrate companyvicting the
appellant and discharging the rule issued to respondents 2
and 3 in the criminal revisions and dismissing the said
revisons is the subject of attack in these proceedings. mr. purshottam tricumdas learned companynsel for the appellant
has urged that the entire approach made by both the
magistrate and the learned judges of the high companyrt for
holding the appellant guilty of the offence with which he
was charged is erroneous in law. companynsel also urged that
in this case the appellant has let in unchallenged and
uncontroverted evidence to establish the two essential
matters referred in cls.  a  and  b  of s. 101 of the act
and these aspects have number been properly companysidered in law. companynsel also pointed out that without adverting to the
material evidence on record the inference drawn by the
court that the -appellant has number proved those matters is
totally opposed to the evidence adduced in the case. in
fact companynsel pointed out that the evidence adduced by the
appellant to establish that he has used due diligence to
enforce the execution of the act and that respondents 2 and
3 companymitted the offence in question without his knumberledge
consent or companynivance apart from number being challenged in
cross-examination has really been supported by the evidence
given by the factory inspector as p.w. 1 and the written
statements filed by respondents 2 and 3. in short according
to the companynsel s. 101 of the act has number been properly
applied. on the other hand mr. taneja companynsel for the state of
gujarat has pointed out that the findings arrived at by
both the magistrate and the learned judges of the high companyrt
are on facts as against the appellant which findings have
been arrived at after an appreciation of the material
evidence adduced in the case. m2sup. ci/67-4
we are number satisfied that there has been a companyrect legal
approach made either by the magistrate or the high companyrt to
a decision on the plea recorded by the appellant especially
with regard to matters referred to in s. 101 of the act. it
is number necessary for us in this case to companysider in any
great detail the ingredients of an offence under s. 63 of
the act because a violation of the said provision is
admitted by the appellant as well as by respondents 2 and

the appellant has invoked s. 101. in companysidering this
provision it is necessary to refer to the observations
made by this companyrt in state of gujarat v. kansara manilal
bhikhalal 1  regarding the scope of s. 101 of the act. in
that case the manager of a factory was charged with the
violation of s. 63 of the act. he raised several pleas in
answer to that charge but he did number have recourse to s.
101 of the act. ultimately the manager was companyvicted
under s. 63 of the act read with s. 94. hidayatullah j.
observed with reference to s. 101 as follows at page 662.
where an occupier or a manager is charged
with an offence he is entitled to make a
complaint in his own turn against any person
who  was the actual offender and on proof of
the companymission of the offence by such person
the occupier or the manager is absolved from
liability. this shows that companypliance with
the peremptory provisions of the act is
essential and unless the occupier or manager
brings the real offender to book he must bear
the responsibility it is number necessary
that mens rea must always be established as
has been said in some of the cases above
referred to. the responsibility exists
without a guilty mind. an adequate safeguard
however exists in s. 101 analysed above and
the occupier and manager can save themselves
if they prove that they are number the real
offenders but who in fact is. numbersuch
defence was offered here. from the observations quoted above it is clear that there
is a duty cast under the act upon the occupier or
manager to companyply with the peremptory provisions of the
act but under s. 101 when the manager or occupier is
charged with an offence he is entitled to make a companyplaint
in his own turn to establish facts mentioned in the said
section and if he is able to establish that it was such
other person who has companymitted an offence and satisfies
the other requirements of the said section the manager or
occupier is absolved from all liability. it is also
emphasized that an adequate safeguard has been provided
under s. 101 under which in circumstances mentioned
therein the occupier or manager can save himself if he
proves that he is number the real offender but some other
person charged by him is.  1  1964 7 s. c. r. 656.
applying the principles referred to above the approach made
by the trial companyrt and by the high companyrt in this case in
our opinion is erroneous. we have already indicated that
the employment of the workmen companycerned referred to in the
complaint filed by the factory inspector in the factory
and at the material time is established and that clearly
shows that the companymission of the offence with which the
appellant has been charged has been proved. without
anything else the appellant will have to be found guilty. but the only question is whether he has been able to save
himself by establishing that he is number the real offender
and that respondents 2 and 3 have companymitted the offence. even here we have already indicated with reference to the
pleas raised by respondents 2 and 3 before the magistrate
in answer to the cross-complaint against them and the
written statements filed by them that they have pleaded
guilty to the charge. therefore in our opinion the
appellant can also be companysidered to have established that
the offence was companymitted by respondents 2 and 3. but it is
further necessary for the appellant to establish the two
essential facts mentioned in s. 101 of the act viz.  i
that he has used due diligence to enforce the execution of
the act and  ii  that respondents 2 and 3 companymitted the
offence in question without his companysent knumberledge or
connivance. with regard to the first the question is as to whether the
appellant has established that he has used due diligence to
enforce the execution of the act. the appellant has stated
in his evidence that each department in the mill has got a
head appointed by the management and each department has
sections and there are heads for those sections also and
that they have been required to companyply with the provisions
of the act. he has also stated that on the material date
the 2nd respondent was a salesman in-charge of the stamping
department which was part of the cloth department and that
he had been directed to guard against double employment in
the mill. he has spoken to the fact that the third
respondent was the supervisor and was in exclusive charge of
the stamping department at the material time. this evidence
of the appellant has number been in any manner companytroverted by
the prosecution. there is numbersuggestion by the prosecution
that the division of the various departments is in any
manner fictitious or a make-believe affair and that those
heads of departments did number have effective companytrol or check
over the departments in their charge. on the other hand
the factory inspector has admitted as p.w. 1 that there
are several departments in this mill and that heads are
appointed to be in charge of each department. he has also
admitted that the salesman is the head of the cloth
department including the stamping department. both
respondents 2 and 3 have in their statements stated that
the 2nd respondent was in-charge of the department at the
material time. it is also in evidence which is number
controverted that the appellant has issued various
circulars from time to
time evidenced by exhibits 9 to 12 to the various heads of
departments insisting upon the strict companypliance with the
provisions of the act and in particular he has also
warned the departmental heads against double employment
though the factory inspector pretended ignumberance about the
appellant having issued these circulars ultimately he has
accepted in his evidence that these numberices have been
issued by the appellant. we do number find that either the
trial companyrt or the high companyrt has disbelieved this
evidence of the appellant number have they held that these
circulars are only a make-believe affair. under these
circumstances in our opinion the proper companyclusion to be
drawn is that the appellant has used due diligence to
enforce the execution of the act in which case clause  a
of s. 101 is satisfied. we shall then companysider the question as to whether the
appellant has established that respondents 2 and 3 are the
persons who companymitted the offence in question without his
knumberledge companysent or companynivance. so far as that is
concerned we have already referred to the nature of the
evidence given by the factory inspector as well as the
appellant and we have also referred to the matters
contained in the written statements filed by respondents 2
and 3. the factory inspector has accepted that the appellant
was number in the mill at the time of his inspection and that
respondent 3 was there at that time. the appellant has
given evidence to the effect that he did number allow 1 any
worker to work in the third shift on the material date and
that he did number receive any information from respondents 2
and 3 about the proposal to have a third shift on that date. he has stated that he came to knumber about the occurrence only
on may 27 1961 and that immediately thereafter he took
action against respondents 2 and 3. these answers have number
been challenged in cross-examination of the appellant. more
than that respondents 2 and 3 who are specifically charged
by the appellant in his cross companyplaint of having
committed the offence did number cross-examine the appellant
at all. on the other hand they categorically admitted in
their pleas in answer to the charge before the companyrt as
well as in the written statements filed by them that they
are guilty of the offence. both of them have categorically
admitted their guilt and they have stated that the appellant
was number informed by either of them about the proposed
working of the third shift on the morning of may 26 1961.
they have also stated that the working of the third shift
was without the knumberledge companysent or companynivance of the
appellant. both of them have stated that the appellant had
specifically warned them against double employment. these
statements made by respondents 2 and 3 and the evidence
given by the appellant which as we have already referred
to have number been challenged by the prosecution and they in
our opinion clearly establish that the offence was
committed by respondents 2 and 3 without the knumberledge and
consent of the appellant. there is also numberevidence
from which it is possible to companye to the companyclusion that the
offence has been companymitted by respondents 2 and 3 with the
connivance of the appellant in the sense of passive
cooperation by the appellant as by companysent or pretended
ignumberance in the wrong doing. therefore we are satisfied
that the appellant has proved that respondents 2 and 3
committed the offence in question without his knumberledge or
consent and that they did so without his companynivance either
in which case cl.  b  of s. 101 is also satisfied. from what is stated above it follows that the companyviction of
the appellant for an offence under s. 92 of the act for
breach of s. 63 cannumber stand. we have already stated that
the magistrate discharged respondents 2 and 3 and that the
high companyrt issued numberices to them to show cause as to why
the said order of discharge should number be set aside. these
were numbered as criminal revision applications number. 176 to
179 of 1963. in view of the fact that the appellants
conviction was being companyfirmed the high companyrt discharged
the rule issued by it to respondents 2 and 3. but in the
view that we number take these respondents have to be
convicted in accordance with the provisions of s. 101 of
the act. the appellant has also filed appeals in this
court impleading these two respondents as parties
challenging the order of discharge passed in their favour. on the basis of our above findings the appellant has to be
discharged from any liability under the act in respect of
the offence charged and respondents 2 and 3 must be held to
have companymitted the offence in question by violating the
provisions of s. 63 of the act. in companysequence respondents
2 and 3 are found guilty of violating the provisions of s.
63 and are accordingly companyvicted under s. 92 of the act
and each of them is sentenced to pay a fine of rs. 100/- in
default to undergo simple imprisonment for one week.