PETITIONER: <ORG> Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, PUNJAB DATE OF JUDGMENT: 09/02/1965 BENCH: <NAME>, K. BENCH: <NAME>, K. DAYAL, RAGHUBAR MUDHOLKAR, J.R. BACHAWAT, R.S. RAMASWAMI, V. CITATION: 1965 AIR 1862 1965 SCR (3) 1 CITATOR INFO : R 1984 SC 420 (45) ACT: Indian Income-tax Act , 1922 (11 of 1922,), s. 2(A) (d)--Distribution on reduction of company's capital to the extent of accumulated profits treated as 'dividend'--Such dividend whether 'income' under Entry 54, List I, Government of India Act, 1935--Section whether ultra vires. Distribution'--Meaning of--Whether synonymous with 'paid' of 'credited' in s. 16(2) of the Income-tax Act --Notional distribution whether takes place on issue of certificate under s. 61(4) of the Indian Companies Act, 1913. HEADNOTE: The appellant .company reduced its capital and the reduction was confirmed by <ORG>. On November 4-, 1954, i.e. during the course of the appellant's accounting year ending November 30, 1954, the Registrar of Companies issued the requisite certificate under s. 61(4) of the Indian Companies Act. The surplus share capital consequent on reduction was, however, not refunded to the shareholders during the said accounting year. It was refunded by actual payment or by credit entries in the next accounting year which ended on November 30, 1955. The Income-tax Officer held that the said distribution to the extent of accumulated profits was 'dividend' under s. 2(6A)(d) of the Indian Income-tax Act, 1922. He further held that the distribution took place in the accounting year ending November 30, 1955, relevant for the assessment year 1956-57. On these findings he calculated the rebate on super-tax in the terms of cl. (i)(b) of the second proviso to paragraph D of Part II of the first schedule to the Finance Act , 1956. The findings of the Income-tax Officer were upheld by <ORG> and <ORG>, and also, in reference, by <ORG>. The appellant came to <ORG> by certificate. It was contended on behalf of the appellant: (1) In defining 'dividend' to include capital receipts resulting from distribution of capital on reduction, the legislature went beyond the ambit of entry 54 List I, Seventh Schedule, Government of India Act, 1935, and s. 2(6A)(d) of the Indian Income-tax Act, 1922 was therefore, ultra vires. (2) The certificate of the Registrar under s. 61(4) of the Indian Companies Act was issued on November 4, 1954 and therefore the 'distribution' under s. 2(6A)(d) took place in the previous year relevant to the assessment year 11955-56. HELD': The expression 'income' in entry 54 List I of the Seventh Schedule to the Government of India Act, 1935, and the corresponding entry 82 of List I of the Seventh Schedule to the Constitution of India must be widely and liberally construed so as to enable the <ORG> to provide by law for the prevention of evasion of Income-tax, [5H; 6A] 2 United Provinces v. Atiqa Begum,  F.C.R. 110, <CITATION> ,  1 S.C.R. 482, <CITATION> ,  2 S.C.R. 983 and <CITATION> ,  1 S.C.R. 909, referred to. A company may on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares. This is a division of profits under the guise of division of capital. If this were permitted there would be evasion of super-tax. Section 2(6A)(d) embodies a law to prevent such evasion and hence it falls within the ken of entry 54 of List I of Schedule Seven to the Government of India Act, 1935. [6H; 7A, G] There is no inconsistency between a receipt being a capital one under the company law and by fiction being treated as taxable under the Income-tax Act . [7F-G] Per Subba Rao. Mudholkar and <NAME>, JJ. The expression 'distribution' connotes something actual and not notional. Like 'paid' or 'credited' in s. 16(2) , distribution' signifies 'the discharge of the company's liability and making the dividend available to the members entitled thereto. [8D, F, G] J. Dalmia v. Commissioner of I.T. Delhi, (1964) 53 I.T.R. 83 and <CITATION> - tax, Bombay City 1, Bombay,  1 S.C.R. 307, relied on. Distribution can ke physical, it can be constructive. One may distribute assets between different shareholders either by crediting the amount due to each one of them in their respective accounts, or by actually paying to each one of them the amount due to him. [8D] Distribution in the above manner may take place partly in one year and partly in another. But the amount of accumulated profits is fixed by the resolution of the company reducing its capital, and the figure does not change with the date of payment or credit. [9D, E] In the present case the payments and credits were actually given during the accounting year ending November 30, 1955. The dividend under s. 2(6A)(d) must be deemed to have been distributed in the said year. The relevant assessment year therefore was 1956-57.[10F] Per <NAME> and <NAME>, JJ. The word distributed', in s. 2(6A)(d) does not mean 'paid' or credited'. Cases under s. 16(2) are not relevant to the issue. [14G-H] The 'distribution' contemplated by s. 2(6A)(d) is distribution at the time of reduction of capital, that is to say, when the resolution of the company reducing the capital takes effect. It means allotment or apportionment of the surplus among the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced. [12F-H] While the distribution as above takes place on a single date i.e. the date of the reduction of capital, the payments to the shareholders either actual or by credit entries in books of account may be made subsequently and on different dates. The successive payments cannot be 'distribution' contemplated by s. 2(6A) (d). [13A-C] 3 In the instant case the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to the shareholder took effect on November 4, 1954. Consequently the distribution of the 'dividend' as defined by s. 2(6A)(d) took place on that date i.e. during the previous year corresponding to the assessment year 1955-56. [15B] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 414 of 1965.

Appeal from the judgment and order dated February 21, 1962, of <ORG> in I.T. Reference No. 9 of 1959.

<NAME> and <NAME>, for the appellant. <NAME>, Attorney-General, <NAME>, <NAME> for <NAME>, for the respondent. The Judgment of <NAME>, <ORG> was .delivered by <NAME>, J. The dissenting Opinion of <ORG> and <ORG> was delivered by <NAME>, J. This appeal by certificate raises the main question whether s. 2(6A)(d) of the Indian Income-tax Act, 1922, hereinafter called the Act, is ultra vires <ORG>.

The assessee, a public limited company, was incorporated on May 23, 1945, under the Indian Companies Act , 1913, with a share capital of Rs. 50 lakhs. On December 15, 1947, at the instance of the appellant <ORG> sanctioned the reduction of the capital of the company from Rs. 50 lakhs to Rs. 25 lakhs. On December 16, 1953, <ORG> sanctioned a further reduction of the share capital from Rs. 25 lakhs to Rs. 15 lakhs. On November 4, 1954, the Registrar of Companies granted the requisite certificate under s. 61(4) of the Indian Companies Act. On November 5, 1954, the appellant issued notices to the shareholders inviting applications for the refund of share capital so reduced. On the receipt of the applications, appropriate debit entries were made in the accounts of the shareholders and the amounts were actually paid to them during the previous year, i.e., December 1, 1954, to November 30, 1955. Under s. 2(6A)(d) of the Act, "dividend" includes any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits, whether such accumulated profits have been capitalised or not. In assessing the income of the appellant-company for the assessment year 1956-57, the Income-tax Officer held that the said dividends were distributed during the accounting year and on that finding he calculated the rebate on super-tax in terms of el.

(i)(b) of the second proviso tO paragraph D of Part I1 of the first schedule to the Finance Act , 1956. If the dividends were distributed during the accounting year. i.e., December I, 1953, to November 30, 1954, the appellant would be entitled to a higher rate of rebate on super-tax under el. (ii) of the first proviso to paragraph D of Part II of the first schedule to the Finance Act , 1956. The Income-tax Officer further held that the assessee's accumulated profits at the time of the reduction of the Capital from Rs. 25 lakhs to Rs. 15 lakhs were Rs. 8,42,337. On appeal the Appellate Assistant Commissioner accepted the said figure arrived at the Income-tax Officer. On further appeal, <ORG>, for the reasons recorded by it in its order, reduced the figure under the said head by a sum of Rs. 3.61,40.5. It was contended on behalf of the assessee that in as much as the certificate from the Registrar for the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs was obtained on November 4, 1954, the distribution of the dividends should be deemed to have taken place during the year 1953-54 and, therefore, the said dividends were not exigible to tax for the assessment year. The Incometax Officer, the Appellate Assistant Commissioner and the <ORG> concurrently rejected that plea and held that, as the actual payment to the shareholders of the refund of the capital and the debit in the accounts of the shareholders were effected in the accounting year, the said dividends must be held to have been distributed in the accounting year.

There is another sum of Rs. 11,687-3-0 received by the appellant as security deposit on account of empty bottles. A question was raised whether the said amount could be considered as capital gains and, therefore, should be excluded from the accumulated profits. <ORG> held in favour of the assessee.

The assessee and the Commissioner of Income-tax filed two applications before the <ORG> for referring questions of law arising out of the <ORG>'s order to <ORG>. The <ORG> referred the following questions of law to <ORG> for its opinion.

(1) Whether the provisions of s. 2(6A)(d) of the Indian Income-tax Act are ultra vires of <ORG>.

(2) Whether the accumulated profits amounting to Rs. 4,69,244-13-0 could be deemed to have been distributed on the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs within the meaning of Section 2(6A)(d) of the indian Income-tax Act .

(3) Whether the amount of Rs. 11.687-3-0 received by the assessee us security deposit on account of empty bottles could be considered as Capital Gains.

(4) Whether the accumulated profits could be considered as dividend deemed to have been distributed in the assessment year 1955-56 in view of the certificate granted by the Registrar of Companies under Section 61(4) of the Indian Companies Act, 1913, or could be considered us dividend deemed to have been distributed in the assessment year 1956-57 because the debits of refunds were actually made in the accounts of the shareholders during the accounting period of the assessment year 1956-57.

<ORG> answered all the questions against the assessee. Hence the appeal.

Mr. <NAME>, learned ,counsel for the assessee, did not contest the correctness of the answer given by <ORG> in 'regard to the third question and, therefore, nothing further' need be said about it.

The first question is whether s. 2(6A)(d) of the Act is ultra vires <ORG>. Sub.section (6A) was inserted in s. 2 of the Act by s. 2 of the Indian Income-tax (Amendment) Act,. 1939 (Act VII of 1939). Section 2(6A)(d) of the Act reads:

"'Dividend' includes any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not."

The said Act VII of 1939 was passed by <ORG> in exercise of its powers conferred under s. 100 of the Government of India Act, 1935, read with entry 54 of List I of the. Seventh Schedule thereof. Entry 54 reads: "Tax on income other than agricultural income." Mr. <NAME> contends that while the said entry 54 enables the appropriate <ORG> to impose a tax on "income", the <ORG> by enlarging the definition of dividend so as to include the amount received by a shareholder towards the share capital contributed by him, which cannot possibly be income, seeks to tax a capital receipt, and, therefore, the said clause is ultra vires <ORG>. Mr. <NAME>, learned counsel for the <ORG>, contends that a legislative entry must receive the widest connotation and should not be interpreted in any narrow or restricted sense, and if so construed the said entry enables the <ORG> to make a law to prevent evasion of tax on income by devious methods and that the <ORG> in the instant case seeks to prevent the growing evil of tax evasion by companies distributing profits under the guise of reduction of capital.

It is well settled rule of construction that entries in the legislative lists cannot be read in a narrow or restricted sense: they should be construed most liberally and in their widest amplitude. In the words of <NAME>, <NAME>, in <ORG>) "each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended by it." This <ORG> in a number of decisions held that the expression "income" in entry 54 of List I of the Seventh Schedule to the Government of India Act, 1935, and the (1) [1940] F.C.R. 110.

corresponding entry 82 of List 1 of the Seventh Schedule to the Constitution of India, shall be widely and liberally construed so as to enable a Legislature to provide by law for the prevention of evasion of income-tax. <CITATION> (1) this Court maintained the constitutional validity of s. 23A(1) of the Income-tax Act, which empowered the Income-tax Officer to impose super-tax in a case where a private limited company distributed less than sixty per cent. of the total income of the company as dividends on the ground that the object of the section was to prevent avoidance of super-tax by shareholders of a company in which the public were not substantially interested. <CITATION> (2) this Court ruled that s. 16(3)(a)(i) and (ii) of the Income-tax Act , which enabled the Income-tax Officer in computing the total income of a person to include the share of the income of his wife and minor sons therein, was constitutionally valid for the reason that it was intended to prevent evasion of tax by persons putting the properties in the names of their wives or minor children, as the case may be. This Court again in <CITATION> (3) sustained the validity of s. 2(6A)(e) of the Indian Income-tax Act, 1922, which included the definition of "dividend", inter alia, payment made by the company by way of advance or loan to a shareholder to the extent to which the company possessed accumulated profits on the ground that it was a measure to prevent private controlled companies adopting the device of making advances or giving loans to their shareholders with the object of evading payment of tax.

The question in the instant case, therefore, is whether the constitutional validity of s. 2(6A)(d) of the Act can be supported on the ground that it was enacted to prevent evasion of income-tax. While an entry delineating a legislative field must be widely and liberally construed, there must be a reasonable nexus between the item taxed and the field so delineated. The said clause deals with the distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits. Accumulated profits of a company may be utilised in the following 3 ways: (1) for increasing the capital stocks; (2) for distributing the same among the shareholders by way of dividends; and (3) for reducing the capital. Ordinarily a company reduces the capital when there is loss or depreciation of assets; in that event there is no question of distribution of profits to the shareholders but the shares are only devaluated. But a company may, on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares. A shareholder though in form gets back the whole (1)  1 S.C.R. 482.

(2) [1962]2 S.C.R. 983. (3)[1965] 1 S.C.R. 909.

or a part of the capital contributed by him, in effect he gets a share of the accumulated profits, which, if a straightforward course was followed, he should have received as dividend. This is a division of profits under the guise of division of capital; a distribution of profits under the colour of reduction of capital. If this was permitted, there would be evasion of super-tax, the extent of the evasion depending upon the prevalence of the evil. The <ORG>, presumably in the interest of the exchequer, enlarged the definition of "dividend" to catch the said payments within the net of taxation. By doing so, it is really taxing the profits in the hands of the shareholders, though they are receiving the said profits under the cloak of capital.

Learned counsel for the appellant contends that under the Companies Act a company can lawful1y reduce the share capital with the sanction of the <ORG>, that there is no prohibition thereunder against such a reduction being made by way of distribution of accumulated profits to the shareholders, that the amounts so paid to them would be in law capital receipts and that, therefore, there could not be in law or in fact any evasion of tax on income. Reliance is placed upon ss. 100 to 103 of the Companies Act. This argument mixes up two aspects--the legal and fiscal. Under Company Law the question of reducing capital is a domestic one for the decision of the majority of shareholders. The <ORG> comes into the picture only to see that the reduction is fair and equitable and that the interests of the minority and the creditors do not suffer. It may not also be concerned with the motive of the general body in resolving to reduce the capital; but the Income-tax law is concerned with tax evasion. Tax can be evaded by breaking the law, or avoided in terms of the law. When there is a factual avoidance of tax in terms of law, the <ORG> steps in to amend the Income-tax law so that it can catch such an income within the net of taxation. There is, therefore, no inconsistency between a receipt being a capital one under the Company law, and by fiction being treated as taxable income under the Income-tax Act .

Therefore, as s. 2(6A)(d) of the Act embodies a law to prevent evasion of tax, it falls within the ken of entry 54 of List I of Schedule Seven to Government of India Act, 1935.

The next question is whether the said dividends were distributed in the year 1953-54, as the appellant contends, or in the accounting year 1954-55, as the respondent argues. The relevant sections of the Act in this context are s. 2(6A)(c1) and s. 16(2) . Section 2(6A)(d) has been already extracted. The relevant part of l 6(2) reads:

"For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or di i b u t e d ..................................................

"Dividend", with which we are now concerned, is not that which we ordinarily understand by that expression, but dividend by definition. Under s. 2(6A)(d) of the Act it is one of the ingredients of the definition that it shall have been distributed by a company on reduction of the capital to the extent to which the company possesses accumulated profits. Under s. 16(2) of the Act such a dividend shall be deemed to be an income of the previous year in which it is paid, credited or distributed. Unless such a distribution as is mentioned in cl. (d) of s. 2(6A) of the Act had taken place, it would not be a dividend. If it was not so distributed, s. 16(2) of the Act would not be attracted. To put it in other words, if the accumulated profits were distributed, it would satisfy not only the definition of "dividend" in cl. (d) but also would fix the year in which it would be deemed to be income. What then is the meaning of the expression "distribution"? The dictionary meaning of the expression "distribution" is "to give each a share, to give to several persons". The expression "distribution" connotes something actual and not notional. It can be physical; it can also be constructive. One may distribute amounts between different shareholders either by crediting the amount due to each one of them in their respective accounts or by actually paying to each one of them the amount due to him. This <ORG> had to construe the scope of the word "paid" in s. 16(2) of the Act in <CITATION> (1). <NAME>, J., speaking for the <ORG> observed:

"The expression "paid" in s. 16(2) , it is true, does not contemplate actual receipt of the dividend by the member. In general, dividend may be said to be paid within the meaning of section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the member entitled thereto."

This Court again reaffirmed the said principle in <CITATION> 1, Bombay(2) and held that where dividend was not credited to any separate account of the assessee so that he could, if he wished, draw it, it was not "credited or paid" within the meaning of s. 16(2) of the Act. The same meaning must be given to the word "distribution". The only difference between the expression "paid" and the expression "distribution" is that the latter necessarily involves the idea of division between several persons which is the same as payment to several persons.

At this stage the anomaly that is alleged to flow from our view may conveniently be noticed. It is said that there will bedifferent points of time for ascertaining the extent of the accumu lated profits. With the result s. 2(6A)(d) of the .Act becomes un workable in practice or at any rate leads to unnecessary complications. We do not see any justification for this comment.

Distribution is a culmination of a process. Firstly, there will bea resolution by <ORG> of a company for reduction of capital by distribution of the accumulated profits amongst the shareholders; secondly, the company will file an application in the <ORG> for an order confirming the reduction of capital; thirdly, after it is confirmed, it will be registered by the Registrar of Joint Stock Companies; fourthly, after the registration the company issues notices to the shareholders inviting applications for refund of the share capital; and fifthly, on receiving the applications the company will distribute the said profits either by crediting the proportionate share capital to each of the shareholders in their respective, accounts or by paying the said amounts in cash. Out of the said 5 steps, the first 4 are only necessary preliminary steps which entitle the company to distribute the accumulated profits. Credits or payments are related to the said declaration; that is to say, distribution is from and out of the accumulated profits resolved to be distributed by the company. In this view, the accumulated profits to be distributed are fixed by the resolution and the figure does not change with the date of payment or credit. Indeed, a similar process is to be followed in the case of declaration of ordinary dividends; firstly, there will be a resolution by <ORG> of the company declaring the dividends; secondly, thereafter the amounts payable to each of the shareholders are distributed by appropriate credits or payments. Dividends may be paid or credited to different shareholders during. different accounting years; and the shareholders may be assessed in respect of the said payments in different years. Even so, the payments are referable only to the declaration of the dividends out of the profits of a particular year. This <ORG>, as we have noticed earlier, in the decisions cited supra held that the year of credit or payment to a shareholder was crucial for the purpose of assessment and not the date of declaration. Let us see whether this view introduces any complication in the matter of reduction of rebate on super-tax payable by the company. The appellant-Company set up a claim for a rebate on super-tax under el. (ii) of the first proviso to paragraph D of Part II of the first schedule to the Finance Act , 1956. The Company based its claim on the contention that the distribution of dividends on reduction of capital took place during the year ending November 30, 1954, and not during the year ending November 30, 1955, and, therefore, el. (i)(b) of the second proviso to paragraph D of Part II of the first schedule to the Finance Act , 1956, read with Explanation (ii) to paragraph D, which provides for reduction of rebate allowable under cl. (ii) of the first proviso by an amount computed at certain slab rates on the amount of dividends distributed to the shareholders during the previous year. could not be invoked. To put it in other words, the assessee claimed that as the dividents were not distributed in the accounting year, there could not be any reduction of the rebates under cl. (i)(b) of the said proviso. If, as we have held, the distribution was made during the year ending November 30, 1955, i.e., the accounting year when the amounts were paid, the <ORG> would be entitled to reduce the rebate by the amount computed at the prescribed rates on the amount of dividends. Some complication may arise only'if we accept the argument that the date of payment fixes the date for ascertaining the quantum of accumulated profits. But we have rejected that contention. In this view, the claim of reduction of rebate on super-tax provided by the first schedule to the Finance Act , 1956, can be worked out without any confusion or complication. We, therefore, hold that the dividends must be deemed to have been paid or distributed in the year when it was actually, whether physically or constructively, paid to the different shareholders, that is to say when the amount was credited to the separate accounts of the shareholders or paid to them.

What are the facts in the present case? <ORG>, on August 6, 1954, sanctioned the reduction of the capital from Rs. 25 lakhs to Rs. 15 lakhs. On November 4, 1954, the Registrar of Companies issued the certificate under s. 61(4) of the Companies Act. On November 5, 1954, the Company issued notices to the shareholders inviting applications for refunds. In the notice sent to the shareholders they were informed that the share transfer register of the Company would remain dosed from November 16, to November 30, 1954 (both days inclusive) and refund would be made to those shareholders whose names stood on November 15, 1954, in the books of the Company. After the applications were received, the amounts payable to the shareholders were debited in the accounts and refunds were actually granted during the accounting year, i.e., between December 1, 1954, and November 30, 1955. It is clear from the said facts that the amounts were distributed only during the accounting year, when the amounts were both debited and paid. We, therefore, agree with <ORG> that the dividends were distributed to the shareholders during the accounting year, i.e., 1954-55.

In the result, the appeal fails and is dismissed with costs. <NAME>. For the reasons given by brother <NAME>, we agree that s. 2(6A)(d) of the Indian Income-tax Act, 1922 is not ultra vires <ORG>, but we are unable to agree with his conclusion with regard to the fourth question of law referred for the opinion of <ORG>. The fourth question arose because of the claim of the appellant company to a rebate of super-tax under cl. (ii) of the first proviso to paragraph D of part II of the first schedule to the Finance Act , 1956 and its contention that the distribution of dividends on reduction of capital contemplated by s. 2(6A)(d) of the Indian Income-tax Act, 1922 took place during the year ending November 30, 1954, and not during the year ending November 30, 1955, and consequently there could be no reduction of the rebate under cl. (i)(b) of the second proviso to paragraph D of part II of the first schedule to the Finance Act , 1956 read with explanation (ii) to paragraph D.

Now, el. (i)(b) of the second proviso to paragraph D of part II of the first schedule to the Finance Act , 1956 provides for reduction of the rebate allowable under cl.

(ii) of the preceding proviso by an amount computed at certain slab rates on the amount of dividends "in the case of a company referred to in el. (ii) of the preceding proviso which has distributed to its shareholders during the previous year dividends in excess of 6 per cent of its paid- up capital not being dividends payable at a fixed rate", and the explanation (ii) to paragraph D provides that for purpose of paragraph D "the expression 'dividend' shall be deemed to include any distribution included in the expression 'dividend' as defined in el. (6A) of section 2 of the Indian Income-tax Act". Section 2(6A)(d) of the Indian Income-tax Act, 1922 provides that "dividend" includes "any distribution by a company on the reduction of its capital to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the lst day of April, 1933, whether such accumulated profits have been capitalised or not." Obviously, s. 2(6A)(d) contemplates a distribution on reduction of capital under s. 55(1)(c) of the Indian Companies Act, 1913,under which subject to confirmation by the <ORG>, a limited company, if so authorised by its articles, may by special resolution reduce the share capital in any way, and in particular may "either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up capital which is in excess of the wants of the company", and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly. Section 56 of the Act enables the company to apply to the <ORG> for an order confirming the reduction, and under s. 60 of the Act, the <ORG> may make an order confirming,the reduction on such terms and conditions as it thinks fit.Upon compliance with certain formalities, the Registrar of Joint Stock Companies is required under s. 61 of the Act to register the order and a minute approved by the <ORG>, and on such registration, and not before, the resolution for reducing share capital as confirmed by the order so registered shall take effect. Under s. 62 ,the minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company.

In the instant ease, the issued, subscribed and paid-up capital the company was Rs. 25 lakhs, consisting of 5 lakhs shares of Rs. 5 each. On December 16, 1953, the company passed a special resolution for reducing its share capital from Rs. 25 lakhs to Rs. 15 lakhs and for payment of Rs. 2 per share to the existing share-holders under s. 55(1)(c) of the Indian Companies Act, 1913.On May 10. 1954, the company applied to the <ORG> for an order confirming the reduction. On August 6, 1954, <ORG> made an order confirming the reduction. On November 4, 1954,the order and the minute approved by the <ORG> were duly registered with the Registrar, and on the same date, the Registrar issued a certificate of registration. On November 5, 1954, the notice of registration was duly published. On the same day, the company issued a circular notice to its shareholders stating that the refund of Rs. 2 per share will be made on receiving confirmation of the registration and requesting the shareholders to send their share certificates to the company at an early date for necessary endorsement and refund of share capital and stating that the refund would be made to the shareholders, whose names stood on November 15, 1954 in the books of the company, the share transfer register would remain closed from November 16 to November 30, 1954, and the refunds would be made to the shareholders whose names stood on November 15, 1954 in the books of the company. The balance ,sheet for the year ending November 30, 1954 did not show the reduction, and the capital of the company in this balance sheet was shown to be Rs. 25 lakhs. The necessary book entries and the payments of dividends to the shareholders were not made during the year ending November 30, 1954. The book entries with regard to the reduction and refund were made, and the refunds were given to the shareholders during the year ending November

30. 1955 and the reduction was shown in the balance sheet for the year ending November 30, 1955.

The point in issue is when does the distribution contemplated by s. 2(6A)(d) of the Income-tax Act. 1922 take place? Section 2(6A)(d) speaks of dividend in the shape of any distribution by a company amongst its shareholders on reduction on its capital to the extent of accumulated profits possessed by it. We reject the contention that this distribution takes place when the dividend is paid or credited to the shareholders. The distribution contemplated s. 2(6A)(d) is a distribution by a company "on the reduction of its capital". The word "on" has no fixed meaning, but in the context of the sub-section, it must be given the meaning "at the time of". as "on entering", "on the 1st of the month". The distribution contemplated by the sub-section is therefore, distribution at the time of the reduction of its capital, that is to say, when the resolution for reduction of its capital under s. 55(1)(c) of the Indian Companies Act, 1913 takes effect. As soon as the resolution for reduction of capital and consequential refund of the surplus capital to the shareholders takes effect, the capital stands reduced, the surplus ceases to be capital and stands allotted to the shareholders, each shareholder obtains a vested right to the refund of his share of the surplus, and a liability arises on the part of the company to make the refund. This liability arises as soon as the reduction of capital takes effect, and it matters not that the company has not made the necessary book entries showing the reduction of capital and the transfer of the surplus to the account of the shareholders. The word "distribution" has several dictionary meanings. In the context of s. 2(6A)(d) , it means allotment or apportionment of the surplus amongst the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced.

A close scrutiny of s. 2(6A)(d) reveals that (a) the distribution takes place on a single date and (b) the expression "accumulated profits" means profits accumulated up to the date of the distribution. These two basic ideas which are implicit in s. 2(6A)(d) are forcibly brought out in the explanation to the corresponding s. 2(22) of the Income-tax Act, 1961. We thus find firstly that the entire distribution of the surplus amongst the shareholders takes place on a single date. Now if the distribution is to have a certain date, that date can only be the date when the reduction of capital becomes effective. The payments to the shareholders either actual or notional by credit entries in the books of account are made subsequently. The payments need not be made on one date; they may be and often are made on several dates. The successive payments cannot be the distribution contemplated by s. 2(6A)(d) . We find secondly that the accumulated profits are to be ascertained on the date of the distribution. But we find independently for reasons mentioned hereafter. that the accumulated profits must be ascertained on the date of the reduction of capital. Thus the two events, namely, the distribution and the reduction of capital must synchronise, and the accumulated profits must also be ascertained at the same point of time. The synchronisation is also obvious on a plain reading of the abridged text "any distribution on the reduction of capital to the extent of accumulated profits". The artificial dividend under s. 2(6A)(d) must be fixed by reference to the accumulated profits on the date of the reduction of capital and not by reference to the accumulated profits on the successive dates of the payments. If the amount of the dividend were to be fixed by reference to the accumulated profits on the several dates of the payments, the result might well be that some payments would be dividends to their full extent, some would be dividends to a limited extent and some would not be dividends at all. Take a case where the accounting year of the company ends on November 30, a resolution for the reduction of its capital to the extent of Rs. 10 lakhs and for refund of Rs. 2 for each share of Rs. 5 takes effect on June 30, 1954 and payments of rupees one, six and three lakhs are made respectively on October 30, 1954, October 30, 1955 and October 30, 1956; and assume that the extent of the accumulated profits is rupees ten lakhs on June 30, 1954 and on October 30, 1954, rupees two Iakhs on October 30, 1955 and rupees two lakhs on October 30, 1956. If the amount of the dividend were' to be fixed by reference to the accumulated profits on the dates of the payments, the result would be that the payment of rupees one lakh would be dividend to the full extent, the payment of rupees six lakhs would be dividend to the extent of one third and the payment of rupees three lakhs would not be dividend at all. It is reasonable to think that the legislature did not contemplate such a result. The character of the distribution is determined by the extent of the accumulated profits on the date when the reduction /B(D)2SCI--3 of capital becomes effective and is not altered by any subsequent increase or decrease of the accumulated profits, and all subsequent payment of the capital so distributed share alike the original character of the distribution. It is argued that in the case of a normal dividend, a comparable distribution takes place, a declaration of dividend out of the profits of a particular year is made, and is followed by payment of the dividend, and decided cases under s. 16(2) show that the distribution takes place on payment and not on the declaration of a dividend. We think this comparison of the normal dividend with the artificial dividend in s. 2(6A)(d) in the shape of distribution to the extent of the accumulated profits is misleading, and the assumptions on which this comparison is made are not correct. The declaration of a normal dividend may be made out of accumulated profits, and need not necessarily be made out of the profits of any particular year. Section 2(6A)(d) does not contain any definition of a normal dividend. In the case of a normal dividend, the question of ascertaining the accumulated' profits to the extent of which the distribution amounts to dividend does not arise. This problem would have arisen, had s. 2(6A) defined normal dividend as "any distribution by a company on the declaration of dividend to the extent to which the company possesses accumulated profits". On such a definition, the only possible interpretation would have been that the accumulated profits are ascertained and the distribution takes place on the date of the declaration of the dividend.

The argument based upon the decided cases under s. 16(2) is misconceived. Section 16(2) dealt with the question when the dividend shall be deemed to be the income of the shareholders. By s. 16(2) the dividend was deemed to be the income of the shareholders when it was paid, credited or distributed. An artificial dividend' under s. 2(6A)(d) is either distributed or paid, whereas the normal dividend is either paid or credited, and in the case of <CITATION> (1) and <CITATION> (2) it was held that the normal dividend is neither paid nor credited by reason of the fact that the dividend is declared. In this case, we are not concerned with the problem of construction of s. 16(2) or the interpretation of the word "paid" or "credited". The word "distributed" is not synonymous with the word "paid" or "credited". The three words are used in the Act in different senses. Moreover, the policy of the legislature on the question of the taxability of the dividend in the hands of the shareholders has varied from time to time. Subsection (2) of s. 16 was repealed and in its place, sub- s. (IA) of s. 12 was introduced by the Finance Act , 1959 with effect from April 1, 1960, and the corresponding provision is to be found in s. 8 of the Income-tax Act, 1961. Under s. 12(IA) of the Incometax Act, 1922 and s. 8 of the Income-tax Act the declaration of  53 I.T.R. 83, 90. (2)  1 S.C.R.

307. dividend is crucial even for purposes of assessment of the shareholders. The legislature thus recognises now that the distribution of the normal dividend takes place on the declaration of the dividend.

In the instant case, the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to its shareholders took effect on November 4, 1954. Consequently. the distribution of the dividend as defined by s. 2(6A)(d) took place on November 4. 1954, i.e. during the previous year corresponding to the assessment year 1955-56. It is true that during the accounting year ending November 30, 1954. the company did not pay any dividends, nor make any book entries with regard to reduction of capital or with regard to refund or payment of surplus capital. But the company incurred on November 4, 1954 the legal liability to make the refunds and the distribution must be deemed to have taken place on November 4, 1954, though n0 book entries were made and no payments were made on that date. In view of the fact that the distribution took effect on November 4, 1954, the company was bound to make necessary entries in their books on November 4, 1954 showing the reduction of capital, and was also bound to show the reduction in its balance sheet for the year ending November 30, 1954. Irrespective of its method of book-keeping, the company incurred on November 4, 1954, the legal liability to make the refunds. The method of bookkeeping is not relevant, but, were it so, it is pertinent to remember that the accounts of the company were kept on the mercantile basis. That system of accounting brings into debit an expenditure the amount for which a legal liability has been incurred before it is actually disbursed. <CITATION> - tax, Bombay(1).

In conclusion, we must point out that the revenue authorities should have, but in fact have not fixed the amount of the dividend by reference to the accumulated profits on November 4, 1954. when the resolution for reduction of capital became effective, or by reference to the accumulated profits brought forward on December 1, 1953 at the commencement of the accounting year during which the reduction of capital took effect. Instead, the revenue authorities took into account the accumulated profits on December 1, 1954, that is to say, the date of the commencement of the subsequent accounting year during which the dividends were paid. The amount of the accumulated profits as on December 1, 1954 was fixed by the Income-tax Officer at Rs. 8,42,337, and was subsequently reduced by the <ORG> to Rs. 4,69,244-13-0. The revenue authorities rightly assumed that the distribution and the ascertainment of the accumulated profits to the extent of which the distribution is deemed to be dividend under s. 2(6A)(d) took place during the same accounting year, but they erred in holding that the accounting year commencing on December 1, 1954 is the relevant year.

In our opinion, <ORG> was in error in holding that dividends under s. 2(6A)(d) were distributed during the previous year corresponding to the assessment year, 1956-

57. We think that the dividends, if any, under s. 2(6A)(d) were distributed in the previous year corresponding to the assessment year 1955-56. and the fourth question should be answered accordingly. The appeal is allowed in part to this extent. In view of the divided success, we direct that the parties will pay and bear their own costs in this <ORG> and in the <ORG> below.

ORDER BY COURT In accordance with the majority Judgment, the appeal fails and is dismissed with costs.


JUDGMENT <NAME>, C.J.

(1) This is a petition filed by a successful candidate at an election held for a seat in <ORG> from the Erandol Taluka Constituency. A petition was filed by opponent 1 challenging the petitioner's election. Seven nominations were received for this election. Opponent 7, although he was duly nominated, withdrew from the contest. The scrutiny of the nominations was held on 27-11-1951, and on 28-11-1951, the Returning Officer published the list of valid nominations. The election took place on 7-1-1952, the counting of votes took place on 12-1-1952, and the result of the election was declared on 19-1-1952, and as already pointed out the petitioner was declared to be duly elected. The first opponent filed his election petition on 25-3-1952, and it reached <ORG> on 27-3-1952. <ORG> referred the petition to <ORG> which was appointed for the trial of the petition, and the petitioner has now come before us for a writ directed against the <ORG> calling upon the <ORG> to dismiss the election petition.

(2) Mr. <NAME> who appears for the petitioner has pointed out various defects which appear in the petition. It is pointed out that when the petition was presented it was not properly verified, and Section 83(1), Representation of the People Act , provides that an election petition shall contain a concise statement of the material facts on which the petitioner relies and shall bo signed by the petitioner and verified in the manner laid down in the Code of Civil Procedure for the verification of pleadings. Admittedly, the verification of the petition as presented to <ORG> did not comply with the provisions of the Code. A list was also furnished to the <ORG> in accordance with Section 83(2) and that sub-section provides that the petition shall be accompanied by a list signed and verified in like manner setting forth full particulars of any corrupt or illegal practice which the petitioner alleges, including as full a statement as possible as to the names of the parties alleged to have committed such corrupt or illegal practice and the date and place of the commission of each such practice. The verification of this list was not also in accordance with the Civil Procedure Code. A further additional list was also sent to the <ORG> and the <ORG> in referring the petition to the <ORG> also forwarded with the petition the list and the additional list which was submitted to it.

(3) In the first place, it is contended that <ORG> should have dismissed the petition and should not have appointed <ORG> for the trial of the petition under Section 86 of the Act. Section 85 of the Act provides that if the provisions of Section 81 , Section 83 or Section 117 are not complied with, <ORG> shall dismiss the petition. Mr. <NAME> contends that inasmuch as the petition and the list were not verified as required by Section 83(1) and Section 83(2) , it was obligatory upon <ORG> to dismiss the petition. Now, this petition is not directed against <ORG>. The petitioner does not require any mandamus against <ORG> to discharge its statutory obligation. The election petition is directed against the <ORG>, and what we have to consider in this petition is not the statutory obligations of <ORG> but the statutory obligations of the <ORG>. If <ORG> failed to dismiss the petition, assuming that it was under an obligation to do so under Section 35 , even so, once the election petition is referred to <ORG>, the duty of the Election <ORG> is to dispose of it according to law. It is not open to the Election <ORG> to challenge the competence of <ORG> to appoint the <ORG> or to refer the election petition to it for trial.

(4) It is then urged that if the <ORG> failed to dismiss the petition, the <ORG> itself under Section 90(4) should have dismissed the petition. What the <ORG> has done is that on 30-10-1952, it has made an order by which it has allowed the petition and the list to be amended by these two documents being properly verified, and Mr. <NAME> contends that this order of the <ORG> was without jurisdiction, because it was obligatory upon the <ORG> to dismiss the petition under Section 90 (4). That subsection provides that notwithstanding anything contained in Section 85 , the <ORG> may dismiss an election petition which does not comply with the provisions of Section 81 , Section 83 or Section 117 . It will be immediately apparent that whereas in Section 85 dealing with the Election <ORG> the <ORG> has used the expression "shall dismiss", in Section 90 (4) the <ORG> has used the expression ''may dismiss". It is obvious therefore that no obligation is cast upon the <ORG> under Section 90 (4) to dismiss an election petition which does not comply with the provisions of Section 83 . Mr. <NAME> asks us to construe "may" as "shall" and he says that there is no reason why the same obligation should not be cast upon the <ORG> as has been cast upon the commission. When we find in the same statute with regard to the same subject matter the <ORG> using in one case the expression ''shall" and in the other case "may", it is impossible to hold that these two expressions were used with the same meaning and connotation. The <ORG> obviously wanted to make a distinction between these two expressions, and therefore whereas in the one case the <ORG> wanted to cast an obligation upon the <ORG> to dismiss the petition, in the other case the <ORG> has given a discretion to the <ORG> whether to dismiss or not to dismiss the petition. Therefore, in our opinion, there is no statutory obligation upon the <ORG> to dismiss a petition which does not comply with the provisions of Section 83 .

(5) It is then contended that the Act confers no power upon the Tribunal to amend the pett-

tion. Section 90 regulates the procedure before the <ORG> and Sub-section (2) provides:

"Subject to the provisions of this Act and of any rules made thereunder, every election petition shall be tried by the <ORG>, as nearly as may be, in accordance with the procedure applicable under the Code of Civil Procedure, to the trial of suits."

Section 92 confers certain powers upon the <ORG>-bunal and these are powers which are vested in a <ORG> under the Code of Civil Procedure when trying a suit, and the powers under Section 92 are enumerated and they deal with discovery and inspection, enforcing the attendance of witnesses, compelling the production of documents, examining witnesses on oath, granting adjournments, reception of evidence taken on affidavit, and issuing commissions for the examination of witnesses. Mr. <NAME>'s contention is that the <ORG>bunal cannot exercise any power which a <ORG> can exercise under the Code of Civil Procedure, unless that power is specifically conferred upon it under Section 92 . Mr. <NAME> says that if the object of the <ORG> was to confer upon the <ORG>bunal all powers under the Civil Procedure Code, then it was not necessary to enumerate certain powers under Section 92 and confer those powers specifically upon the <ORG>bunal.

(6) The further contention of Mr, <NAME> is that whereas Section 90 (2) deals with procedure, Section 92 deals with the powers of the <ORG>, and Mr. <NAME> further contends that Section 90 (2) only comes into play after the hearing of the petition has actually commenced. Mr. <NAME> says that under this sub-section the <ORG> has only those powers which the <ORG> enjoys under the Code under Order 18 of the Code and subsequent Orders which deal with the trial of suits. In our opinion, the trial of suits does not mean the same thing as the hearing of a suit. Order 18 in terms speaks of the hearing of a suit and not the trial of a suit. A <ORG> is concerned with the trial of a suit from the time when it is instituted. The hearing of a suit is only a part of the trial of the suit and the hearing is concerned with what happens in open <ORG> when witnesses are examined and cross-examined, addresses are delivered by counsel and judgment is delivered. But a great many things go on after a suit is instituted which are all concerned with the trial of a suit, and, there is no reason why Sub-section (2) of Section 90 should be limited and confined to procedure which applies only at the hearing of the suit and not outside that hearing. Therefore the power conferred upon the <ORG> to try a petition in accordance with the procedure applicable under the Code of Civil Procedure is a power much wider than merely applying procedure which would be applicable to the hearing of a suit. But even so Mr. <NAME> wants to distinguish between procedure referred to in Sub-section (2) of Section 90 and the powers referred to in Section 92 . Undoubtedly there is considerable force in Mr. <NAME>'s contention, but on the other band Mr. <NAME> has drawn our attention to the fact that whereas Sub-section (2) of Section 90 is made subject to not only the provisions of the Act "out of any rules, made thereunder, Section 92 is not made subject to any rules, and Mr. <NAME> suggests that the scheme of the Act is that the powers conferred upon the <ORG> under Section 92 are minimum powers which cannot be taken away My any rules framed under the Act, whereas the general power of procedure given to the <ORG> under Section 90 (2) is a power which is subject to the rules and the rules may modify, limit or restrict the power that a <ORG> may exercise similar to the power exercised by a <ORG> under the Civil Procedure Code.

In our opinion, Mr. <NAME> is right, because on principle it is difficult to make a distinction between procedure and the powers of a <ORG> as suggested by Mr. <NAME>. The whole of the Civil Procedure Code, as its very name implies, deals with procedure, in the course of procedure the <ORG> always exercises powers and when the <ORG> is exercising its powers, it is exercising them in order to carry out the procedure laid down in the Code. Therefore procedure and powers in this sense are really interchangeable terms and it is difficult to draw a line between procedure and power. The power conferred under Section 92 is not any substantive power, it is a procedural power, a power intended for the purposes of carrying out the procedure before the <ORG>. Therefore, in our opinion, the <ORG> was right when it took the view that it had the power to amend the petition under Sub-section (2) of Section 90 of the Act. It is also difficult to believe that when dismissing a petition is not made obligatory upon the <ORG> under Section 90 (4), the <ORG> should not have given the power to the <ORG> to amend the petition and to bring it into conformity with Section 83 . If the intention of the <ORG> was that every petition that did not comply with the provisions of Section 83 must be dismissed and no amendment should be permitted, then the <ORG> would have used appropriate language and would have cast an obligation upon the <ORG> to dismiss the petition. But the very fact that the <ORG> has left it to the discretion of the <ORG> clearly goes to show that the <ORG> conferred the power upon the <ORG> in proper cases to amend a petition and to bring it in conformity with Section 83 so that it need not be dismissed.

(7) The more substantial opposition that has been presented to the order made by the <ORG> is that the <ORG> has added a party to the petition when it had no Jurisdiction to do so. tHE party came to be added under the following circumstances. Opponent 7, as had already been pointed out, was duly nominated a candidate for this election at <ORG>, but before the valid nominations were published he withdrew his candidature and therefore his name did not appear in the list of valid nominations. When opponent 1 presented this petition to the <ORG>, he did not make opponent 7 a party to the petition. He then applied before the <ORG> that he should be made a party and the <ORG> has made an order making opponent 7 a party to the petition, and Mr. <NAME>'s contention is that this order is also without jurisdiction. According to Mr. <NAME>, in the absence of opponent 7 the petition was not maintainable and the <ORG> should have dismissed the petition and should not have proceeded with it. The relevant provision as regards parties to the petition are to be found in Section 82 and that section provides that a petitioner shall join as respondents to his petition all the candidates who were duly nominated at the election other than himself if he was so nominated. A petition can be presented under. Section 81 either by a candidate at such election or any elector, and the first question that we have to consider is as to what is the correct interpretation of the expression "all the candidates who were duly nominated at the election". Mr. <NAME>'s submission is that the candidates referred to in this expression are the candidates who were duly nominated and even though a candidate may have withdrawn from the candidature, and although his name may not have appeared in the list of valid nominations, he still was a candidate who was duly nominated, and therefore he is a necessary party to the petition. Mr. <NAME> says that there is a distinction between a candidate who is duly nominated and a candidate who is validly nominated. A candidate is validly nominated after his name appeals in the list of nominations published by the Returning Officer, whereas a person is duly nominated whose nomination paper has been accepted as laid down under the law. Therefore the fact that a duly nominated candidate withdraws his candidature does not relieve the petitioner of his obligation to make him a party to the petition.

(8) Now, the expression used by the <ORG> is not "all the candidates who were duly nominated", but "all the candidates who were duly nominated at the election", and proper meaning and significance is to be given to the expression "at the election". If the intention of the <ORG> was that the petitioner should join as parties all candidates whose nominations were accepted, irrespective of the fact whether they congested the election or not and irrespective of the fact whether they were candidates at the election or not, it i: difficult to understand why the expression "candidates who were duly nominated" is qualified by the expression "at the election". It is clear that there is a vital distinction between a candidate for an election and a candidate at an election. You are a candidate for an election long before the election takes place. You may cease to be a candidate for that election and you may not be a candidate at the election. "At the election" emphasises the point of time when the election takes place. It emphasises the fact that you are a contestant at the ejection and that the voters have a right to vote for that candidate. It also emphasises the fact that the candidate has not withdrawn and has no right to withdraw and in law he must be considered to be a person who is contesting the election along with other candidates. The distinction between a candidate "for an election" and "at an election" is brought out by Section 32 . That section provides that any person may be nominated as a candidate for an election to fill a seat in any constituency if he is qualified to be chosen to fill that seat under the pro 1-sions of the Constitution and this Act. Therefore at that stage a person is nominated as a candidate for an election. Then Section 33 provides for presentation of nomination paper and requirements for a valid nomination. Section 36 provides for the scrutiny of nominations, and Section 37 provides for the withdrawal of candidature. After that time is passed, Section 38 provides for the Returning Officer preparing and publishing a list of valid nominations. Once this has been done and once the right of the candidate to withdraw has disappeared, then the candidate becomes a candidate at an election and it is this candidate who has got to be made a party to the petition. If the other view was accepted, the view pressed for by Mr. <NAME>. it is difficult to understand how a candidate who has withdrawn from the contest is in any better position than any other elector he has no rights other than the rights enjoyed by an elector: and why the <ORG> should have taken the view that a candidate who has withdrawn should be made a party to the election petition is difficult to understand. The <ORG> might as well have provided that all electors to an election should be made parties to the petition. The object of Section 82 is that all parties who were concerned with the actual election and who conte-ted the election should be before the <ORG>, but a person who did not contest the election and who withdrew from the fight does not stand in the same position as candidates who not only were duly nominated but who were candidates at the election. Therefore, in our opinion, the construction suggested by Mr. <NAME> is not only the proper construction according to the plain natural language used by the <ORG>, but it is also more consistent with the principle underlying the section. Therefore, if respondent 7 was not a necessary party to the petition at all, the fact that the <ORG> has added him as a party is a mere surplusage and no further question can arise as to the jurisdiction of the <ORG>.

(9) But we arc prepared to assume in favour of Mr. <NAME> that opponent 1 was a necessary party to the petition and that he was not made a party when the petition was presented. The question is, what is the effect in law? It is rather significant that Section 85 , which confers the power upon <ORG> to dismiss a petition, does not provide that a <ORG> should dismiss the petition if there is non-compliance with the provisions of Section 82 . Therefore, whereas the <ORG> attached importance to the provisions of Sections 81 , 83 and 117 , it did not attach the same importance to the question of joining parties, and when we come to Section 90(4) the position is the same. When discretionary power is given to the <ORG> to dismiss the petition for non-compliance of certain provision of the Act, that power was not given to the <ORG> if there was non-compliance with the provisions of Section 82 . Therefore the <ORG> advisedly did not desire a petition to be dismissed became there was non-joinder of parties. Mr. <NAME> is at the outset confronted with this difficulty that there is neither a statutory obligation nor even a statutory discretion vested in the <ORG> to dismiss a petition for nonjoinder of parties. Therefore, far from our ordering the <ORG> to dismiss the petition, we would have to restrain the <ORG> if it were to dismiss a petition for non-joinder. If tho <ORG> does not exercise it; discretion to dismiss a petition under Section 90 (4). its statutory duty is to decide the petition on merits and it can only dismiss a petition under Section 98 at the conclusion of the trial of the election petition. It is clear that under Section 98 the power given to the <ORG> to dismiss the election petition is not on any preliminary or technical ground; the power given is to dismiss the petition on merits; and we do not think that Mr. <NAME> can seriously contend that dismissing a petition for nonjoinder would be a dismissal on merits. Therefore, it is only after the merits have been gone into that the power of a tribunal would arise to dismiss the petition.

(10) It is then urged by Mr. <NAME> that the <ORG> has no power to add a party to the petition and that argument is based on the same contentions as were advanced in the case of amendment of the petition. It is urged that Section 92 does not confer the power upon the <ORG> to add a party, and Section 90 (2) does not deal with a case of addition of parties. Our answer to this contention is the same as our answer to the contention with regard to amendment of the petition. In our opinion, the power to add parties is derived from the wide language used by the <ORG> in Section 90 (2).

(11) It is then urged by Mr. <NAME> that even assuming that the <ORG> has the power to add opponent 7 as a party to the petition. opponent 7 was made a party beyond the period of limitation and therefore the petition is liable to be dismissed. The petition has to be presented within the time provided by Section 81(1) and this petition was so presented. But Mr. <NAME>

<NAME> says that inasmuch as opponent 7 was brought on the record on 30-10-1952, which was long after the due date for the presentation of the petition, by virtue of Section 22 , Limitation Act , the petition must be deemed to have been preferred against opponent 7 only on that date, and as Section 82 requires that the petition must contain all the parties, the petition as a whole or rather the proper petition must be deemed to have been presented not on the date when it was presented but on 30-10-1932 and therefore Mr. Pat<NAME> says that the proper petition as required by law was not before the <ORG> and the <ORG> should have dismissed it. The law with regard to limitation only provides that if a party is added after the period of limitation, the suit must be deemed to have been instituted as against him when he was made a party, and assuming that that principle applies to the present case, all that can be said is that the petition must be deemed to have been presented against opponent 7 at the date when he was made a party. It does not follow that because a party to a suit or to an application or to a petition is brought on the record at a later stage and even beyond the period of limitation that the suit, application or petition must fail as a whole. It is for the <ORG> to consider what is the effect of non-joinder. If relief can be granted to the plaintiff in the absence of the party who is not before the <ORG> during the period of limitation, the <ORG> is not bound to dismiss the suit as a whole; the plaintiff may be given a limited relief. In this very case, assuming Mr. Pat<NAME> is right, it would be for the <ORG> to consider whether the petitioner is entitled to any relief by reason of the fact that opponent 7 was not brought on the record within the period or limitation. It would be for the <ORG> to consider whether the petition should be wholly dis-missed or whether opponent 7 was merely a 'pro formal party and that the right of opponent 1 to obtain relief against the petitioner was in no way affected by the absence of opponent 7 from the record of the petition. But that question cannot arise at this stage. At this stage the only question that arises is whether the <ORG> acted with jurisdiction in bringing opponent 7 on the record of the petition. As we hare pointed out. in our opinion opponent 7 was not a necessary party at all under Section 82 , and assuming he was a necessary party, we have held that the <ORG> had the jurisdiction to bring him on record.

(12) It is then urged by Mr. <NAME> that the list which has got to be filed under Section 83(2) was not a proper list at all and that it did not contain the full particulars as required by that sub-section. In our opinion, that is not a question that we have to consider. It is either for the <ORG> at the earlier stage or for the <ORG> to decide whether the list complies with the provisions of Section 83(2) or not. Apparently, the view taken both by the <ORG>, inasmuch as it did not dismiss the petition under Section 85 , and also by the <ORG> is that the list does comply with the provisions of Section 83(2) and what the <ORG> has done is, it has allowed opponent 1 to give further particulars and to amend the particulars given in the list by treating the additional list as falling under Section 33(3) . These are matters of merit into which we are not entitled to go on a petition for a writ. But the central point that arises on this petition and which we have to decide apart from all these refinements is whether there 13 anything in the Act which casts a duty upon the <ORG> under the circumstances alleged by the petitioner to dismiss the petition. It is only if we are satisfied that there is such a clear and unequivocal statutory obligation upon the <ORG> that we can issue a writ and direct the <ORG> to dismiss the petition. In our opinion, no such stautory obligation appears on a plain reading of the statute, and therefore apart from any other consideration the petition must fail and is dismissed with costs.

(13) Petition dismissed.


JUDGMENT <NAME>, J.

1. Since both the matters are interconnected and the points arising in both the cases are the same, they are dealt with together.

2. W.A. No. 59 of 1982 is against the dismissal of W.P. No. 9704 of 1981 filed by one <NAME> against the order of suspension pending enquiry by <NAME>, J., and W.A. No. 336 of 1982 is against the order of <NAME>, J., in W.P. 8641 of 1981 allowing the writ petition filed by one <NAME> against whom a similar order of suspension has been passed by the Commissioner, Corporation of Madurai.

3. <NAME>, the petitioner in W.P. No. 9704 of 1981 was functioning as Manager, in <ORG> from October, 1976. He was in charge of the stationery department and <NAME>, the petitioner in W.P. 8641 of 1981 was the Chief Accountant who is said to have been in charge of the stationery department as manager for one day in the absence of <NAME>. On the ground that certain acts of malfeasance and misfeasance occurred in the year 1976 which came to light in the year 1979, by an order, dated 2nd July, 1979, both of them had been suspended pending enquiry into allegations of misconduct in the stationery department. The order of suspension proceeded on the as is that certain allegations had been made with reference to the transactions in the stationery department when both of them functioned as managers, that an enquiry into the same is going to be conducted and that in the interests of administration they should be placed under suspension. The said orders of suspension have been questioned by each of them in their respective writ petitions. According to the petitioners (1) they had been kept under suspension indefinitely without any indication of its finality, and though the suspension order was passed on 2nd July, 1979 no charges had been framed and, therefore, the orders of suspension are liable to be quashed; and (2) as per G.O.Ms. No. 211, Personnel and Administrative Reforms (Personnel) Department dated 27th February, 1980, the time limit of three months has been fixed as the normal duration of order of suspension and that no person can be kept under suspension pending enquiry beyond three months and in cases where the contemplated enquiry is not completed within the said period officers should be restored to duty, that the principle contained in the said G.O. has been applied to persons on the establishment of <ORG> in G.O.Ms. 1988 R.D. and L.A. department, dated 24th December, 1980 and as three months have elapsed by 2nd October, 1979, the petitioners should be restored to duty with full wages for the period beyond 2nd October, 1979 on the ground that the order of suspension imposed on both of them should be deemed to have been revoked in view of the said two Government Orders; (3) that the petitioners sent representations to <ORG> on various dates for setting aside the orders of suspension but there is no response from the Government though the Government has entertained similar representations from one <NAME> who had also functioned as Manager in <ORG> during the year 1976 and who had been earlier suspended pending enquiry, and on his representation the order of suspension has been revoked by the Government and the inaction on the part of the Government with reference to their representations are concerned should be taken to amount to a hostile discrimination; (4) that they have not committed any illegality or irregularity when they were functioning in the stationery department and as such the orders of suspension which do not indicate how the petitioners are involved in the irregularities subsequently found in the stationery department, and (5) whatever be the allegations of misconduct or the charges framed in relation thereto, the continuous suspension of the petitioners for a period of more than two years, cannot at all be justified.

4. In the counter-affidavit filed in both the writ petitions, the Commissioner, <ORG>, has taken up the stand that in the year 1979 certain allegations of misconduct came to be made against the petitioner and <NAME> and others who were working in the stationery department, that on the basis of the said allegations the Accounts Officer was deputed to probe into the affairs of the said department, that he had submitted a report bringing to light serious irregularities and lapses on the part of the petitioners and others in passing the requirement of papers for printing registers required for the <ORG> and issue of papers thereby causing a loss of Rs. 1,35,495.56 to the <ORG>. Thereafter the matter was reported to the police who are investigation into the matter. Having regard to the fact that the allegations were of grave nature, the petitioners and other were kept under suspension pending enquiry into the said allegations and the police authorities had already started their investigations. He has also stated that the the time-limit fixed in G.O.Ms. No. 211 Personnel and Administrative Reforms (Personnel) Department, dated 27th February, 1980 and G.O.Ms. No. 1980 R.D. & L.A. Department, dated 24th December, 1980 will not apply to the case of the petitioners as criminal complaint has been filed against them and the matter is under investigation, and therefore, the petitioners cannot seek the aid of the said <ORG> orders or invalidating the orders of suspension. So far as the petitioner's allegation that similar order of suspension passed against one <NAME> had been set aside by the <ORG> and that similar protection had not been given to the petitioners, the Commissioner, <ORG> has stated in his counter-affidavit that <NAME> was not functioning in the Madurai <ORG> at the time of suspension but was functioning as the Commissioner of some other Municipality and therefore, it might have been felt by the <ORG> that even without his suspension the investigation will not be handicapped. As regards the contention of the petitioners that they are not responsible for any loss of <ORG> funds or for misappropriation of the same and therefore the orders of suspension cannot be legally sustained, the counter-affidavit proceeds to state that the extent to which they are involved in the misconduct is being investigated by the police and it can be ascertained only after the trial and at this stage on cannot presume that the petitioners are not involved in the matter. As regards the petitioner's complaint of long and inordinate delay in framing the charges and the continued suspension, the contention of the <ORG> is that the delay is due to the prolonged investigation by the police, that the case involves going through voluminous records to determine the extent of involvement of the petitioners in the various transactions and, therefore, the delay cannot be avoided.

5. The writ petition filed by <NAME> came to be heard by <NAME>, J., who by his order, dated 20th January, 1982, held that the time-limit fixed in the two Government orders referred to by the petitioners cannot apply and as the petitioner is suspected to have misappropriated the funds of <ORG> and actually a police complaint has been preferred and a First Information Report has been recorded and that as the charge-sheet is about to be filed, it is not desirable to direct restoration of the petitioners to office, revoking the order of suspension and that instead, without unduly prolonging the agonising situation in which the petitioner is placed, he directed the police to file the charge-sheet within three months from the date of the order. In that view, he dismissed the writ petition with the above directions.

6. The order writ petition filed by <NAME> came to be heard by <NAME>, J., who by his order, dated 18th June, 1982, held that the order for suspension has been issued on the contemplation of departmental enquiry and, therefore, the <ORG> cannot take advantage of the fact that they had made a complaint to the police, that even if the order of suspension is taken to be based on a criminal complaint, the charge-sheet should have been filed within a reasonable time and that it is not open to the <ORG> to keep the petitioner under suspension beyond three months under the pretext of pending criminal investigation. It was also held that the Government having set aside a similar order of suspension passed against one <NAME> who is similarly placed as the petitioner, the same treatment should be given to the petitions also and the orders of suspension against them should have also been vacated. The learned Judge relied on a judgment of a Division Bench of this Court in <CITATION> , <CITATION> . 461 of 1979) in support of his view that the <ORG> had no justification to keep the petitioner under suspension indefinitely without his knowing what his future is as no charge-sheet has been filed so far and no further indulgence should be given to the <ORG> by continuing the suspension till the filing of the charge-sheet. But, the learned Judge has, however, stated :

"I make it clear that my quashing the order of suspension will not exonerate the petitioner in the event of the department deciding to prosecute the petitioner in a criminal court or taking any departmental action. I further make it clear that once the respondent reaches a definite stage as to the action to be taken against the petitioner, my order in this writ petition will not prevent them from placing the petitioner under suspension if the fact and circumstances so warrant."

7. The learned counsel appearing for the appellant in W.A. No. 59 of 1982, <NAME> v. Secretary to <ORG> and another, questions the validity of the order passed by <NAME>, J., dismissing the writ petition and contends that the order passed by <NAME>, J., is the proper one in the circumstances of the case. The learned Advocate General appearing for the appellants in W.A. No. 336 of 1982, on the other hand questions the correctness of the order of <NAME>, J. and contends that in the circumstances of the case the view taken by <NAME>, J., is the proper one.

8. It cannot be disputed that more than three years have passed as on date since the order of suspension was passed on 2nd July, 1979. Till now no departmental proceedings have been initiated before <ORG> by filing a charge-sheet. No doubt it is now said by the learned counsel appearing for the <ORG> that the charge-sheet is ready to be filed by it could not be filed in view of the interim order passed in W.A. No. 59 of 1982, granting interim suspension of the order of <ORG> which directed the police to file the charge-sheet within three months, and therefore, the non-filing of the charge-sheet after <ORG>, dismissed the writ petition on 20th January, 1982 cannot amount to a delay on the part of the police and in fact the police is ready to file the charge-sheet within a week or two. The question is whether on the facts and circumstance of this case the continued suspension of the petitioner in the writ petitions should be taken to be justified.

9. It is no doubt true the Government Orders referred to above cannot strictly be applied to cases of <ORG> servants against whom criminal proceedings have been initiated, for, in paragraph 8 in G.O.Ms. No. 1989 R.D. and L.A. Department, dated 24th December, 1980 it is stated that the time-limit ordered in the above paragraphs will not be applicable to the cases of <ORG> servants against whom criminal proceedings have been initiated. The question is even if the said Government Orders do not apply to the cases of the petitioner, whether they can be kept under suspension indefinitely without any time-limit awaiting framing of the charges for the departmental enquiry of filing of the charge-sheet by the <ORG>. Even assuming that the investigation by the police takes a longer time than the time taken at the departmental enquiry to frame charges, as the police may need a longer time for investigating into the matter, there years period taken by the police in this case cannot be said to be reasonable. The order of suspension is penal in nature and it is for this reason the Government in the above two orders have directed that the cases of suspension have to be reviewed within a period of three months and continue the suspension beyond three months only if the circumstance warrant and that too for another period of three months. The submission of the <ORG> that the police was ready to file the charge-sheet after the direction given by <NAME>, J., but could not be filed because of the interim directions made by this Court in W.A. No. 59 of 1982 cannot be accepted as a proper explanation for not filing the charge-sheet. The <ORG> should have moved the Court to vacate the interim order or seek permission to file the charge-sheet without prejudice to the pendency of the writ appeal. Not having taken any such steps, the police cannot take that as an excuse for not filing the charge-sheet even though they were ready to file the same. Whatever be the reason for non-filing or the charge-sheet for nearly three years, that is a factory that should be taken by this Court for quashing other order of suspension as has been done by <NAME>, J. However, we have to make it clear that the quashing of orders of suspension passed against the petitioner in the writ petitioner will not stand in the way of the <ORG> of Madurai taking any departmental action or prosecuting them in any criminal court and that once the charge-sheet is filed before the criminal court of the charges framed in departmental action, the <ORG> is at liberty to place them under suspension if the facts and circumstances so warrant.

10. In this view, we allow W.A. No. 59 of 1982, and dismiss W.A. No. 336 of 1982. There will however be no order as to costs.