PETITIONER: <NAME> AND COMPANY Vs. RESPONDENT: THE STATE OF ANDHRA.(With Connected Appeal) DATE OF JUDGMENT: 11/03/1954 BENCH: <NAME>, SUDHI RANJAN BENCH: <NAME>, SUDHI RANJAN MAHAJAN, MEHAR CHAND (CJ) MUKHERJEA, B.K. BOSE, VIVIAN HASAN, GHULAM CITATION: 1954 AIR 314 1954 SCR 1117 CITATOR INFO : R 1955 SC 661 (205) R 1957 SC 877 (16) R 1958 SC 538 (12) R 1960 SC1254 (3,9) RF 1992 SC1277 (85) ACT: Constitution of India, art. 14- Government of India Act, 1935, entry 48 in List II of the Seventh Schedule-Madras General Sales Tax Act (IX of 1939)-Whether,ultra vires the Constitution or Government of India Act, 1935-Rule 16(5) framed under the Act-Whether ultra vires s. 5 (vi) of the Act. HEADNOTE: Held, that the Madras General Sales Tax Act (IX of 1939), is not ultra vires the Government of India Act, 1935 as entry 48 in List II of the Seventh Schedule to the Government of India Act, 1936 was wide enough to cover a law imposing 'a tax on the purchaser of goods as well as on the seller. Held, also that inasmuch as there was nothing to suggest that the purchasers of other commodities were similarly situated as the purchasers of bides and skins in the present case the Act 1118 was not void under art. 14 of the Constitution on the ground that the impugned Act singles Out for taxing purchaser of certain specified commodities only but leaves out purchasers of Mother commodities. Article 14 does not forbid classification for legislative purposes provided such classification is based on some differentia having a reasonable relation to the object and purpose of the law in question. Rule 16(5) framed under the Act contravenes the provisions of s. 5(vi) of the Act but this sub-rule is severable and does not affect the validity of the rules which may otherwise lie within the ambit of the Act. <CITATION> ( S.C.R. 869)relied upon. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 187 and 188 of 1953.

Appeals under article 132 of the Constitution of India from the Judgment and Order, dated the 29th August, 1952, of <ORG> at Madras in Writ Petitions Nos. 21 and 41 of 1952.

<NAME> (<NAME> and<NAME>, with him) for the appellant. <NAME> for the respondent.

<NAME>, Advocate-General of Madras (<NAME>, with him) for the intervener (State of Madras). <NAME> and <NAME> for the intervener (State of Travancore-Cochin).

<NAME>, Advocate General Of Mysore (<NAME>, with him) for the intervener (State of Mysore).

<NAME> (<NAME>, with him) for the intervener (State of Bihar).

1954. March 11. The Judgment of the Court was delivered by <NAME> two appeals arise out of Writ Petitions Nos. 21 'and 41 -of 1952, filed in <ORG> at Madras under article 226 questioning the validity of the Madras General Sales Tax Act (IX of 1939) and of the Turnover and Assessment Rules framed under that Act.

<NAME>

The petitioners are tanners carrying, on business in Eluru, West Godawari District, which is now part of the newly created State of Andhra. They make large purchases of untanned hides and skins and after tanning them in their tanneries they export the tanned hides and skins or sell the same to local purchasers. In <ORG> the appellants impugned the Act and the rules on the following grounds :-I

(a) <ORG> had no power under the Government of India Act of 1935 to enact a law imposing a tax on purchasers;

(b) The liability to pay tax on sales is thrown on the purchaser not by the statute but by the rules. This is an unconstitutional delegation by the legislature of its functions to the executive and the imposition of ,the tax is accordingly illegal;

(c) The Act has become void under article 14 of the Constitution, as it singles out for taxation purchasers in some trades and is, therefore, discriminatory; and

(d) The rules framed under the Act are inconsistent with the provisions enacted in the body of the Act and are void.

<ORG> repelled each of the aforesaid grounds except that under item (d). It held that rule 16(5) was ultra vires in that it offended against section 5 (vi) of the Act and dismissed their applications. Hence the present appeals by the appellants under the certificate granted by <ORG> that it was a fit case for appeal to this court.

Learned advocate appearing in support of these appeals has not pressed the objection under item (b) but has insisted on the remaining grounds of objection. In our opinion the decisions of <ORG> on those grounds are substantially well-founded and correct. On the question of legislative competency the learned advocate drew our 'attention to entry 54 in List II of the Seventh Schedule to the Constitution of India and argued that this entry clearly indicated that entry 48 in List II of the Seventh Schedule to the -Government of India Act, 1935; under which the  impugned Act was passed, was much narrower in its scope and could not be read as authorise in a the making of a law with respect to taxes on the purchase of goods. This argument appears to us to be fallacious, for the intention of <ORG> as expressed in entry 54 in List II of the Seventh Schedule to the Constitution cannot be a guide for ascertaining the intention of a totally, different body, namely, <ORG>, in enacting entry 48 in List 11 of the Seventh Schedule to the Government of India Act, 1935. Further, we agree with <ORG> that entry 48 in List II of the Seventh Schedule to the Government of India Act, on a proper construction, was wide enough to cover a law imposing tax on the purchaser of goods as well and that <ORG> in entry 54 of List II in the Seventh Schedule to the Constitution accepted this liberal construction of the corresponding entry 48 and expressed in clearer language what was implicit in that corresponding entry.

The next point urged by the learned advocate was founded on article 14 of the Constitution. The appellants' grievance is that the impugned -Act singles out for taxing purchasers of certain specified commodities only but leaves out purchasers of all other commodities. The principle underlying the equal protection clause of the Constitution has been dealt with and explained in <NAME> v. <ORG> (1) and several subsequent cases and need not be reiterated.It is well,settled that the guarantee of equal protection of laws does not require that the same law should be made applicable to all persons. Article 14 , it has been said, does not forbid classification for legislative purposes, provided that such classification is based on some differentia having a reasonable relation to the object and purpose of the law in question. As pointed out by the majority of the Bench which decided <NAME>'s case, there is a strong presumption in favour of the validity of legislative classification and it is for those who challenge it as (1)  S.C.R.

unconstitutional to allege and prove beyond all doubt that the legislation arbitrarily discriminates between different persons similarly circumstanced. There is no material on the record before us to suggest that the purchasers of other commodities are similarly situated as the purchasers of hides and skins. The majority decision in <NAME> case(1) clearly applies to the case before us and there is no getting away from the position that the appellants before us have not discharged the burden of proof that, according to the majority decision, was upon them to do.

Lastly, the learned advocate urges that rule 16(5) clearly contravenes the provisions of section 5(vi) of the Act. This sub-rule has been held to be ultra vires by, <ORG> and, indeed, the learned Advocate-General of Madras did not in <ORG>, as before ,us, dispute that rule 16(5) was repugnant to section 5(vi). That sub-rule, however, affects only unlicensed dealers and the appellants who are admittedly licensed dealers are not affected by that sub-rule. Further, it has not been suggested before us that the appellants were ever called upon to pay any tax on purchase of hides or skins in respect of Which tax had been previously paid by some prior purchaser. That sub-rule is clearly severable and cannot affect the validity of the rules which may otherwise be within the ambit of the Act. Our attention has not been drawn to any other infirmity in the rules.

In the premises there is no substance in these appeals which must, therefore, be dismissed with costs. Appeals dismissed.

Agent for the respondent and for the interveners, States of Madras, Mysore and Bihar: <NAME>.

(1) [1950] S.C.R. 869.


JUDGMENT <NAME>, J.

1. This and the other applications in the connected suits are on the name and on behalf of the Secretary of <ORG> for India in <ORG> for the purpose of his being added as a party to the suit presumably as party defendant.

2. The main object of such of the suits is to obtain, declaration that the Madras Hindu Religious Endoments Act 1 of 1925 is invalid and ultra vires, and on the basis of such declaration the plaintiff has asked for a relief by way of injunction which is merely a relief consequent on the declaration, of

3. The plaintiff in each of the cases is the head of a mutt or religious endowment and the only defendant to each of the actions is <ORG> for <ORG>, a body, it may be observed in passing, created and constituted by the said Act.

4. The question for determination, therefore, is whether on the application I should direct the Secretary of <ORG> being added as party defendant in these suits. The question is of Considerable importance and of great difficulty though I did not realize the full extent of either till I was more than half way through the hearing. It has been argued with much learning and light and also some little warmth on both sides, and I took time to consider my judgment not only having regard to the importance of the question to the parties, but also to the general principle on which alone it seemed to me that a satisfactory solution can be arrived at. If it had been an ordinary case I should probably have had very little difficulty in presuading the parties to agree to the tarddition of the party on conditions which may be regarded as equitable in the circum-stances.

5. It was with this view that almost at the very commencement of the discussion I asked the learned Advocate-General who appeared for the applicant whether he had any instructions to agree as to any conditions as to coats. He said ho had none Some days thereafter he again appeared before me and intimated that, so far as the applicant was concerned, he had definite instructions not to consent to any conditions. He, however, at the same time intimated that he had received a communication from the President of <ORG> to the effect that in the action the plaintiff should fail, <ORG> would consent to only one set of casts being allowed to the defendants and that they would be willing to allow the Secretary of <ORG> to take such one set. It is obvious that the two things are not and cannot be the same and that in these cases a set of costs to <ORG> must mean something very different to a set of costs to the Secretary of <ORG> at any rate as at present represented in the action. Further I felt that such Order 3 should, if at all, be passed only by consent of all parties. The plaintiff, however, refused to agree to any such arrangement and has asked me to decide the question raised ; and having regard to the great importance of the matter and the likelihood of its being taken up elsewhere, sooner or later, I have deemed it fit to deal with the application directly and dispose of it on its merits.

6. The first observation that falls to be made with regard to the present application is that it is one for joinder of a third party as party defendant and made by the third party himself and not by the plaintiff or the defendant in the action, I have felt it necessary to state this because it seems to me that, different considerations should apply to applications for joinder of additional parties when the party sought to be added is party plaintiff or party defendant and also when the application for such joinder is made by the party sought to be added or by either of the parties already on the record and if so, which of them. I will not pause to refer to all such considerations. In such a ease as the present one, however, it is obvious that if a third party's application to be added as party defendant were opposed by both parties, I should have had very little hesitation in rejecting the application unless I were satisfied that the party sought to be added was not only a proper party, but a necessary party Having regard, however, in this ease to the learned and strenuous , argument in support of the application by Mr. <NAME> on behalf of <ORG> I have felt bound to regard it virtually as an application by both. The question thus resolves itself into this : Should the plaintiff in this case be compelled to litigate against not only the defendant of his choice against whom he has prayed for the reliefs consequent on the declaration, but also, against the Secretary of <ORG> ?

7. I did not understand either the learned Advocate-General 'who argued the application on behalf of the applicant the Secretary of <ORG> or even Mr. <NAME> for <ORG> to argue that the applicant was a necessary party to the suit in the sense in which that expression is understood in the law relating to parties to actions, that is to say in other words, as a party without whom there can be no properly constituted suit, having regard to the cause of action alleged and the relief claimed. If it is to be only a question of a permissible party, then on principle it follows that such cannot generally be ordered when it is opposed by the person to fight whom he is so brought on the record. Thus, when A institutes a Suit on title to recover certain property from B, G should not be made additional plaintiff if B should object to it, except perhaps in the case of one possible exception of the title to the property between A and C being alternative in its proper sense. The principle is even stronger in the case of a plaintiff as against whom another defendant is sought to be added. It is the plaintiff that comes to <ORG> alleging a cause of action as against a particular defendant and asking for reliefs against him. The very basic principle of judgment inter partes is that the judgments are not judgments in rem, but declaratory and operative only as between them. The plaintiff being generally dominus litus, I fail to see on what principle of justice he can be compelled to fight against some other litigant not of his own choice unless such a pro cess is required by a positive rule of law.

8. The question thus further resolves itself into this whether in such an action the Secretary of <ORG> is a proper party having regard to the rules relating to the joinder of defendants. It was on this basis that the question was really argued by all the parties. It is Order 1 of the First Schedule to the Civil P.C. that lays down the rules regulating the joinder of parties. Rule 9 no doubt relates to joinder of defendants, but both in form and substance it is merely permissive and relates only to what the plaintiff may do if he were so minded. It is Clause (2) of Rule 10 that applies to the present case. It provides that the <ORG> may, at any stage of the proceedings either upon or without the application of either party and on such terms as may appear to the <ORG> to be just, order that the name of any person who ought to have been joined as defendant or whose presence before the <ORG> may be necessary in order to enable the <ORG> effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added.

9. It has not been suggested in this case that the applicant, the Secretary of <ORG>, is a person who ought to have been added as party defendant in the suit. The contention was that the presence before the <ORG> of the Secretary of <ORG> in this case would be necessary in order to enable the <ORG> effectually and completely to ad-indicate upon and settle all the questions involved in the suit. If the expression in this clause had not been the word "necessary" but merely "desirable" a great deal might have been said for the argument adduced in support of the application. But at no stage of the discussion was I able to understand the learned gentleman that argued in support of the application to make out that the presence before the <ORG> of the Secretary of <ORG> was necessary. The necessity referred to in the clause is for the purpose of enabling the <ORG> effectually and completely to adjudicate upon and settle all the questions involved in a suit. It is obvious that this clause cannot be read as requiring that all persons who have or claim to have or are likely to have any sort of right, title or interest in respect of any portion of the subject-matter of a suit should all be made parties. If it be borne in mind that the suit is by a plaintiff for certain reliefs against certain persons as defendants and that the judgments of civil <ORG>s are not judgments in rem, then it follows that the questions involved in the suit are only questions with regard to the right set up and the relief claimed on the one side and denied or withheld on the other. The expression therefore " all the questions involved in the suit " can only be questions as between the parties to the litigation. The phrase "to enable the <ORG> effectually and completely to adjudicate upon and settle" would seem really to indicate that the addition of the party should be ordered, only if in the opinion of the <ORG> in the; absence of the party it cannot effectually and completely adjudicate and settle all the question.

10. In these cases there is no question of the <ORG> not being able effectually and adjudicate and settle any question. So far as I was able to see, the entire argument in support of the application was based on the position that in the absence of the Secretary of <ORG>, the <ORG> could not completely adjudicate upon and settle all the Questions involved in the suit. In other words, the contention was that the Secretary of <ORG> was a proper party to every suit in which any question was raised with regard in the legality of any statute and that in the absence of the Secretary of <ORG> , as a party in any such suit there can be no completeness of adjudication within the meaning of the rule. I confess that at first I was a little impressed, with this argument. But, as against this there are found heaps of cases in the reports both in this country and elsewhere in which the question of whether a particular legislative enactment was intra or ultra vires was decided merely as between the parties to the litigation without any representation in the suit either of the <ORG> or of the public. But it may, no doubt, be remarked that in none of these oases the question has been raised or decided. The only Case that has been cited before me in which there can be said to be any indication with regard to this matter is the case of Cunnigham v. Homey Homma [1903] A.C.151.

11. The question in that case was whether a particular provision was ultra vires of <ORG> and the Attorney-General of the province was allowed to intervene at some stage. There is no decision in the case as to whether he was either a necessary or proper party and their Lordships of <ORG> do not even refer to it. I am unable, therefore, to regard it as a decision at all bearing on the point.

12. The case of Esquimalt and <ORG> v. <NAME> [1920] A.C. 358 was also cited for the applicant and relied upon. The property which was the subject-matter of that action had been the subject of a grant by the <ORG> and the question that arose was whether in such an action the Attorney-General of the province was a necessary party. At page, 364 Lord <NAME>, who delivered the judgment of their Lordships of <ORG>, observes as follows:

The learned Judges of <ORG> from whose judgment their Lordships feel complled to differ upon this point, do not refer to the rights of the <ORG> which may be affected but base their opinion solely on the ground that the <ORG> is not affected by the result and that consequently a mere declaratory order against the <ORG> would be of no value. But for the reservation of the rights already referred to, their Lordships would have agreed with this Conclusion.

13. At page 368 occurs the following sentence:

It is true that in these circumstances certain rights Which the <ORG> possesses, if the grant be good, will be interfered with.

and at page 369 their Lordships concluded by saying that they Therefore think that the <ORG> is affected in this matter, so that the presence of the Attorney General is proper and necessary for the determination of justice.

14. It is not contended in this case that by reason of any adjudication as between the original parties to the action, the rights of the Secretary of <ORG> would in any manner or mea-sure be affected. It is therefore not a case falling under the rule that the officer representing the <ORG> is a necessary party to every action as the result of which the rights of the <ORG> may be affected.

15. The question would, therefore, have to be determined merely on a consideration of, whether in the absence of the Secretary of <ORG> as a party to the action it is impossible to have a complete adjudication upon and settlement of all the questions involved in the suit. All the learned gentlemen that appeared at the <ORG> and argued the point on behalf of the various parties state that they were unable to find any decision bearing directly on the point.

16. I have therefore to arrive at a conclusion on first impression, and on what I conceive to be the general principles applicable. The conclusion I have thus arrived at is this : If the expression "all questions involved in the suit " should be regarded as absolute and not merely relative to the parties before the <ORG>, then the Secretary of <ORG> may in this case be regarded as a proper party and not otherwise. But it seems to me that there is neither principle for authority that can be discovered of regarding such an expression as "all the questions involved in a suit" appearing in a rule relatiag to joinder not parties as absolute and not relative.

17. The whole scheme of the Civil Procedure seems to me to point to a suit being refered as a suit for relief as against definite defendants, as a trial being one only as between the parties and an adjudication as one only binding them. IS a plaintiff should claim certain property and it should be regarded that the question involved in the suit is generally whether he is the owner of the property and not whether as against any other particular person he is entitled to certain rights over property very serious consequences are sure to ensue and procedure in our Courts of law is certain to become exceedingly complicated and much more disastrously prolonged than it is at present.

18. At this stage I may with advantage refer to two decisions that have been cited at the' Bar. Mr. <NAME> for the plaintiff, referred to the case of <NAME> v. <NAME> [1892] 1 Ch. 487. In that case the plaintiff, the patentee of a machine, brought the action against the defendant for using a machine which he alleged was an infringement of his patent? One <ORG>, the maker and patentee of the defendant's machine, applied to be added as defendant alleging that the judgment in the action would injure him and that the present defendant would not efficiently defend the action. The <ORG> of appeal consisting of Lord Justice <NAME> and Lord Justice <NAME> reversing the decision of the <ORG> below, held that <ORG> not being directly interested in the issues between the plaintiff and the defendant but only indirectly and commercially affected, the <ORG> had no jurisdiction to add him as a defendant. Lord Justice <NAME> at pages 489 and 490 observes as follows:

But reliance is placed on the following words of the rule, which provide for adding the names of parties 'whose presence before the <ORG> may be necessary in order to enable the <ORG> effectually and completely to adjudicate upon and, settle all questions involved in the cause or matter.' But what is the question involved in this action ? The question, and the only question, is whether what <ORG> is doing is an infringement of the plaintiffs patent.

19. And again later on that eminent Judge says:

Can it be said that the rule prevents the plaintiff from proceeding against a defendant Without having to litigate with everybody who may be in any way affected, however indirectly, by the action ? It appears to me that it does not. The counsel for the applicant grounded his argument on the allegation that <NAME>' interest would be affected by the decision in this action. It is true that his interest may be affected commercially by a judgment against the 'defendant, but can it be said that it would be legally affected ? Can we stretch the rule so far as to say that whenever a person would be incidentally affected by a judgment he may be added as a defendant ?

20. And Lord Justice <NAME> at pages 491 and 492 observes as follows:

No doubt the judgment in the present ease may indirectly affect <NAME>' patent; but the answer to that is, that whether it would affect it or not, this rule does not apply to such a case. <NAME> says that the defendant will not con-test the case properly, and will not conduct the defence so energetically as he would. But we cannot help that.

21. It seems to me that if ever a case can be conceived which would fall directly within the words of the rule already referred to this was such a case. There was a defendant, who when sued 'by the plaintiff for infringement of a patent right sought to justify his action on the patent right of a third party and if the terms of Clause (2) of Rule 10 should be taken absolutely as contended for, it would have seemed to be a clear case in which for the purpose of effectually and completely adjudicating upon and settling all questions involved with regard to the patent right of the plaintiff it was not only proper but necessary that this other patentee should have been added as a party defendant. But <ORG> said "No" and decided that he was not a proper party on the ground, I', take it, that the words of the rule should be construed not absolutely but relatively. It is a very strong case and I confess almost repugnant to common-sense. But the words of the statute that their Lordships of <ORG> were considering were identical with the words which I have to consider and it has not been shown that this decision of the learned Judges has ever been overruled or even questioned. It must also be observed that their Lordships' refused to make the other patentee a party to the action though they came to the conconlusion that by reason of the dicision the commercial interest of the other party would be seriously affected.Mr. <NAME> referred to Norris v. <NAME> [1877] 2 C.P.D. 80 It was an action on a bill of exchange against the acceptor originally and the defendant sought to add the name of a company which he alleged was the party really liable and which had also in the same matter a counter claim against the plaintiff. Chief Justice <NAME> makes in that case an observation which I may here reproduce. At page 83 that learned Judge observes:

Now, this, although it is not a case of making a parson a plaintiff in respect of a defendant as to whom he does not desire to be plaintiff without and against his will, is certainly the case of, making a person a plaintiff consent.

22. Again that learned Judge at page 84 lays down that:

the defendant to be added must be a defendant against whom the plaintiff has some cause of complaint which ought to be determined in the action and that it was never intended to apply where the person to be added as defendant is a person against whom the plaintiff has no claim, and does not desire to prosecute any.

23. He proceeds thus:

It seems to me that this application is answered, and that it was not intended that persons in the position of this company should1 be' added as defendants, merely for the convenience of another defendant...It seems to me that it is, the more important to construe this rule strictly because it is obvious the, in many cases, if the defendant's contention is right its provisions might be made use of in a manner, exceedingly harassing to plaintiffs, by forcing them to include in their actions persons against whom they do not seek to proceed, and to mix up their rights as against one person, with questions on a highly complicated nature arising between themselves and the others.

24. At page 85 Justice <NAME> says:

I am quite clear, however, that the <ORG> ought not to bring in nay person as defendant against whom the plaintiff does not desire to proceed unless a very strong case is made out, showing that in the particular case justice cannot be done without his being brought in.

25. The foregoing observations seem up me to lay down in very clear and unmistakable terms the principle applicable to' such a case as the present. On these principles I cannot possibly see my way to add the applicant as a party defendant to the action. I am further unable-to understand why the Secretary of <ORG> is sought be made a party to the action at all. The only suggestion on which such a joinder can be supported is that it is necessary that the declaration that the Act is ultra vires should be obtained in the presence of the Secretary of <ORG>. But the Secretary of <ORG> so far as the Civil Procedure Code is concerned represents merely the Government or the sovereign and can under the present system be regarded if at all only as part of the legislative machinery. There is no principle for even suggesting that any declaration as against him will be effectual and binding as against all other possible persons such as committees and other bodies and officers that may be constituted or created under the Act now in question.

26. There is no cause of action alleged against the applicant, and no relief whatever claimed against him. On a proper construction of the rule I feel constrained to hold that the applicant is not la proper party to the suit. The plaintiffs have complained of certain actions by <ORG> which would undoubtedly be unlawful but for the Endowments Act . They therefore ask for an injunction on the ground that the Act which is held up as a shield by the defence is really not available to them because it is illegal and ultra vires.

27. The declaration therefore a against the defendants must be regarded as merely ancillary to the relief claimed. On principle and authority I have therefore come to the conclusion that the Secretary of <ORG> is neither a necessary nor a proper party and that as the plaintiffs oppose his being joined as additional defendant I would not be justified in adding him as a party defendant even as a person brought in merely to look on and see fair play to use the words of Lord <NAME> in the case of Duke of Bedford v. <NAME> [1901] A.C. 1. Even as a Sort of harmless and permissible party I am satisfied he could not be added when such addition is opposed by the plaintiff and more so when on behalf of the applicant there has been an express refusal to submit to any condition as to costs.

28. Having regard to the number and variety' of legislative bodies and authorities in the country at the present day, paramount, imperial, local, delegated, subordinate, etc,, I feel that questions,, of ultra vires are certain to be raised in the <ORG> in increasingly large numbers of cases and I refuse to contemplate with equanimity the prospect of the Secretary of <ORG> for India being required by every defendant to be made a party in every one of them.

29. In the result the application must be dismissed with taxed costs for the plaintiffs in each of the cases and it is ordered accordingly.


JUDGMENT <NAME>, J.

1. The plaintiffs and defendants are rival claimants for the ownership of the property which is referred to in the plaint. The plaintiffs claim that they are entitled to it under a sale deed dated 27-7-1901; the defendants claim to be purchasers in a <ORG>-sale in execution of a decree.

2. The learned District Judge has held that the plaintiffs are barred from suing on their title by the operation of Section 283 of the Civil Procedure Code 1882. He held that the plaintiffs were parties against whom an order (which is Exhibit II in the case) had been passed in previous execution proceedings in 1903 and that the suit not having been brought within one year from those proceedings, it is barred under Article 11 of the first schedule to the Limitation Act .

3. Exhibit II was an order passed in Civil Miscellaneous Petitions Nos. 440 and 451 of 1903 by the District Judge of <NAME> on the 22nd September 1903. The order was that the attachment sought to be raised by the petitioners should be raised. It would therefore appear that Exhibit II cannot be interpreted as being an order against the plaintiffs within the meaning of Section 283 . Exhibit II did that which the plaintiffs then desired to be done, namely, that the attachment should be raised. It is true that in the course of Exhibit II the learned Judge expressed an opinion adverse to the grounds on which the plaintiffs then relied, and he no doubt came to the conclusion that those grounds were not well founded. That does not make the plaintiffs " the party against whom an order was passed under Sections 280 , 281 or 282" for as I have said the order was that the attachment should be raised. The order in Exhibit II must on the face of it be construed as one joint order dealing with the two petitions for the attachment being raised. It cannot be construed on the basis of its being three orders. It may be conceded that if the Judge had in fact desired to pass three distinct orders, one on the contention of each of the two petitioners, and a third on the contention 6f the then 4th defendant in that case the order he would have passed on the plaintiffs' petition would have been against their claims. The contention on behalf of the defendants is that the interpretation of Exhibit II to which I have first referred is not correct. In this connection certain proceedings in <ORG> of a later date are relied upon by the respondent. These proceedings were considered irrelevant by <ORG> but have been admitted by the consent of both sides before us. These proceedings, it is argued, preclude us from putting on Exhibit II the interpretation which I have just stated; alternatively it is said that other Judges of this Court have already interpreted Exhibit II with reference to points now arising and that we ought not to take a different view. Before I can deal with this argument, it will be necessary to state somewhat fully the facts out of which the present appeal arises. I shall as far as possible speak of the plaintiffs and defendants meaning thereby the present plaintiffs and the present defendants irrespective of their designation in the previous proceedings.

4. The property in question belonged to four families, from whom the plaintiffs or their predecessors in title (to all of whom I shall refer as the plaintiffs) claim to have purchased under the sale deed dated 27th July 1901. The first and second defendant obtained a decree, it is alleged, against <NAME> representing one of the four families to whom the property, according to the plaintiffs orginally belonged. In execution of that decree the property was attached in April 1903 ; and the plaintiffs then put in a claim petition M. P. No. 451 objecting to that attachment and claiming that the property belonged to them and not to the judgment debtor. There was another petition M. P. No. 440 by persons claiming to be the mortgagees of the property and claiming that the attachment should be subject to their mortgage claims. Both those petitions were dealt with at the same time by the District Judge in Exhibit II. At the hearing of those petitions one <NAME> also objected to the attachment. He belonged to and apparently represented the other of the four families, and claimed that the attachment should be raised, because the property was joint family property and previous to the attachment it had by the law of survivorship passed out of the ownership of the judgment debtor (then deceased) and devolved upon himself. This contention was accepted by the learned District Judge who disposed of the claim in Exhibit II. But from Exhibit II it also appears as I have already had occasion to say, that the plaintiffs did not in the opinion of the learned judge make out their claim to be considered as the bona-fide purchasers of the property attached. In the Order, the opinion was also expressed on the other hand that the other petitioners were entitled to rely upon the mortgage put forward by them. In the result he passed one order, namely, that the attachment should be raised. Against that order an appeal was taken to <ORG> being appeal against order No. 3 of 1904. To that appeal neither of the two petitioners were parties, the learned Judges (<NAME> and <NAME>, JJ.) after stating that fact said that the order raising the attachment was set aside " so far as the 4th defendant was concerned." This order cannot, therefore, be said to affect the rights of the present plaintiff as they stood prior to the appeal. If I am right, therefore, in holding that the order under Exhibit II must be considered to be one joint order to the effect that the attachment should be raised, then that order, so far as the plaintiffs are concerned, was not affected by judgment in appeal against order No. 3 of 1904. That judgment is dated the 4th October 1904. After that judgment the execution was proceeded with. There was an application for a warrant of sale in pursuance of which finally the property was sold on the 5th of October 1909. But in the meantime the plaintiffs put in a petition M. P. No. 441 of 1906 applying that the sale should be stopped. They relied upon Exhibit II which, they claimed, was final and conclusive as regards their rights, because the defendants had not within a year thereof instituted a suit for setting aside the order raising the attachment. This contention of the plaintiffs was, on the 18th of July 1906, accepted by the then District Judge and he decided that the defendants' application for sale must be dismissed. In other words he held that the sale could not be proceeded with. Against that order of the District Judge Civil Revision Petition No. 549 of 1906 was put in. The petition was dealt with in the first instance by Mr. Justice <NAME> on the 12th February 1908. According to Mr. Justice <NAME>'s view Exhibit II ought to be construed as three orders and it ought to be construed as including an order that the present plaintiffs had no claim to the property; in other words that they were parties against whom such an order was passed as is referred to in Section 283 of the Civil Procedure Code. The logical result of Mr. Justice <NAME>'s interpretation of Exhibit II would be not only (1) that the sale could not then have been stopped by the plaintiffs but (2) it might also imply that the plaintiffs' rights, if any, in the property were lost by the fact that they had not instituted a suit within a year of Exhibit II. If that interpretation of Exhibit II is correct and if both the results to which I have referred must follow from that interpretation, then of course the plaintiffs must fail in their present suit. Even on <NAME> J's construction of Exhibit II Mr. <NAME> argues that the suit is not barred. For reasons which I shall indicate later, it is unnecessary in my view to deal with that construction of Exhibit II and with Mr. <NAME>'s argument on this basis. There was an appeal from Mr. Justice <NAME>'s judgment and in that appeal Mr. Justice <NAME> and Mr. Justice <NAME> decided on the 7th September 1908 that the question whether or not the plaintiffs had lost their right to establish their claim to the property by a suit by their having failed to do so within a year of Exhibit II was a question which it was unnecessary to decide in those proceedings. They held further that the defendants were not bound to institute a suit within a year of Exhibit II. On that point and so far as the further defendant in those proceedings were concerned, it seems to me that there could not be any question that the sale could proceed after the judgment of <NAME> and <NAME> JJ. allowing the appeal and permitting the sale to be proceeded with. However that be, the question whether the plaintiffs were barred from putting forward a claim on the basis of the sale deed to them dated the 27th of July 1901 was expressly not decided by <ORG>, and it is clear that the question was not before them which we have to decide, vis., whether it was for the plaintiffs to institute a suit under Section 283 of the Civil Procedure Code within a year after Exhibit II. All they had to consider was whether it was for the defendants to institute a suit. It is true that they agree with <NAME> J's view that the effect of Exhibit II was to disallow the claim of the plaintiffs. But that view was expressed in considering whether the effect of Exhibit 11 was to necessitate a suit by the defendants under Section 283 . On the other hand they expressly refer to the question whether the plaintiffs should put in a claim petition in the sale proceedings and decline to consider the appeal as such a claim. There is no doubt that the question is complicated by the fact that Exhibit II was one joint order dealing really with three claims, and by the further fact that in the appeal to <ORG> against that order the plaintiffs were not parties and yet the order was reversed. Though the plaintiffs were interested in having it confirmed, yet the order was reversed and the plaintiffs were not bound by the reversal as their rights would not be affected by proceedings to which they were not parties.

5. Before considering whether owing to these proceedings I ought to take a view different from that which I have expressed as appearing to me to be the prima facie interpretation of Exhibit II or whether the effect of Exhibit II was modified by any of the proceedings to which I have referred, I think it necessary to consider some of the decisions to which we have been referred.

6. The general principle underlying those decisions, as I understand it, seems to be governed by the fact that the proceedings under Section 278 and the following sections which are referred to in Section 283 are primarily for the purpose of dealing with attachments in execution proceedings.

7. In so far as any decision on the claims of parties other than the judgment-debtor is necessary for the continuance of the execution proceedings, that decision has to be promptly given by the authorities entrusted with the execution proceedings in the exercise rather of administrative than judicial function; and in so far as on their decision the execution proceedings are carried out, the parties who are affected by their decision have a short period of limitation within which that decision can be contested. The decisions during the course of the execution ate necessary for the execution proceedings being carried through and it is necessary that such proceedings shall not be delayed, nor their effect kept in suspense, after they have been acted upon. If, however, for any reason the execution proceedings are not pursued to their end, and if the parties are, owing to the arrest of such proceedings, left in the same state in which they were prior to the attachment, then the whole of the proceedings arising out of the attachment and the claim petition are, so to say wiped out, and the petitioner is not concerned with what may have been incidentally held with a view to that being effected which ultimately was not given effect to though it may be cessation of the attachment and the execution proceedings following it was not brought about by circumstances controlled by the unsuccessful claimants.

8. This seems to me to be the principle on which <NAME> v. <NAME> (1888) I.L.R. 13 B. 72 Gopal Purushotam v. Bai Divcili (1893) I.L.R. 18 B. 241 <CITATION> (1903) I.L.R. 31 C. 228 and <NAME> v. <NAME> (1888) I.L.R. 15 C. 674 were decided. Thus in <CITATION> (1888) I.L.R. 13 B. 72 the attachment was withdrawn though on the application not of the claimant but of another person, and it was held that the attachment being withdrawn it was unnecessary for the plaintiff to institute a suit as the object of the suit would have been to get the property released from attachment and that object had already been effected though through the agency of other parties. That decision was followed in <NAME> v. Bai Divali (1893) I.L.R. 18 B. 241 and it was there laid down that the withdrawal of the attachment replaced the parties in status quo ante. The principle on which the case of <CITATION> (1882) I.L.R. 8 O. 279 proceeded seems to me to have been the same. In that case it is stated at page 281; " But it appears that no sale was held, because the judgment-debtor paid off the amount of the decree. The effect of that was that the attachment ceased and any right which the plaintiff's mother acquired by purchase even though pending the attachment became valid, and nothing , having accrued to injure her right, if any, she had no occasion to bring any suit. The judge of the Court below says that the fact that the decree in execution of which the property was attached was paid off by the judgment-debtor makes no difference whatever. In this view we think that he is mistaken. The payment by the judgment debtor of the decretal amount did away with the necessity for a sale and the attachment being withdrawn the purchased right of the plaintiff's mother stood good. See also <NAME> v. <NAME> (1888) I.L.R. 15 C. 674.

9. In this connection I think it necessary to deal with a remark in <CITATION> (1906) I.L.R. 29 M. 225 which may seem to be inconsistent with the principle that I consider to underlie the decisions. There in dealing with an argument, which the Court did not accept it was said at page 228: "The argument was that the decree having been eventually satisfied there was no reason for the plaintiffs to bring a suit, and the fact that it was not satisfied until after expiration of a year from the date of order was immaterial. The contention was that the order was only conclusive against the plaintiffs, if they failed to bring a suit so as to bar them from denying the right of the judgment-creditor to sell the land which he had attached and the right of a purchaser claiming under a sale in execution proceedings. " And then later on at page 229 the court deals with this contention in the following terms ; " We are of opinion, however, that the payment off not having been made within a year after the date of the order, the order is conclusive as between the claimants (plaintiffs) and the defendants. To hold otherwise would lead to uncertainty of title and would be inconsistent with the policy of the legislature in prescribing a short period of limitation for suits by parties against whom an order has been made in claim proceedings. To hold that the right of the unsuccessful claimant to bring a suit remains a state of suspended animation for an indefinite period after the expiration of a year from the date of the order against him, liable to be revived at any moment by the payment off of the amount of the decree, would lead to great inconvenience. On the facts of the case we are of opinion that the order under Section 283 was conclusive as between the plaintiffs and the defendants, and the order of the lower <ORG> cannot be supported on the ground that it was not."

10. There, no doubt, it was held that, if a claim petition is decided against the petitioner and that decision is not questioned by a suit instituted within a year, then the petitioner's right to the property is barred notwithstanding that as a matter of fact the attachment may not be proceeded, with. But in that case there was a decision directly against the claimant and the decision was that the attachment should continue and that the execution should proceed. In this state of circumstances it may well have seemed to the court that it is not permitted to the unsuccessful claimant to wait and see whether the execution is proceeded with nor is the one year's period of limitation necessarily made subject to active steps being taken for proceeding with the execution by Sale of the property or otherwise ; and that on the other hand the attaching creditor and the other parties concerned may well think that the decision will not be questioned by the unsuccessful claimant after the lapse of a year following the decision that the claimant had no right to intervene and that the execution proceedings may continue irrespective of any hindrance on the part of the unsuccessful claimant. I need only say with regard to this decision that the main fact on which it proceeds namely, a decision in the claim petition that the execution may proceed irrespective of the petitioner's alleged claim does not exist in the present case. I do not think on the other hand that it was intended that the principle on which the cases to which I have referred were decided should be disregarded. On the contrary those cases were carefully considered and distinguished ; and if I am right in extracting the principle that I have extracted from those cases, then it seems to me that the case of <NAME> v. <NAME> (1905) I.L.R. 29 M. 225 does not apply to the circumstances with which we have to deal under Exhibit II in so far as the present question is concerned.

11. For these reasons I consider that on principle no less than on the construction of Exhibit II it ought to be held that after execution proceedings were arrested by that order, those parties who were instrumental in getting the proceedings arrested, were not bound by reason of any opinion expressed in Exhibit II to institute a suit for the purpose of contesting the correctness of that opinion. I am also of opinion that the judgments of <ORG>. and of <ORG> do not affect the position of the plaintiffs as regards the present suit. There being no order against the plaintiff in Exhibit II the suit is not barred, and it must be remanded to the lower <ORG>, for being disposed of on the merits in accordance with law. The costs will be costs in the cause.

Spencer, J.

12. I agree.


JUDGMENT <NAME>, J.

1. These are appeals and cross-appeals against a decision of <ORG> which modified a decision of <ORG>. Two separate suits for maintenance had been brought in the lower Court against the zamindar of Challapalli by his two younger brothers, respectively; but all the proceedings in the two cases were identical and the observations of their Lordships upon the one case will be equally applicable to the other.

2. The appellant, the defendant in the lower Court, is the eldest son of <NAME>, late zamindar of <NAME>, who died on the 6th of April 1875, leaving three sons, viz., the defendant and the two plaintiffs. Not long after their father's death quarrels arose between the brothers, and in April 1880 one of the younger brothers brought an action for partition against the present appellant in <ORG>, That Court decided that the <NAME> estate was impartible, but awarded to the then plaintiff one-third of certain property not forming part of she <NAME> estate. That judgment was reversed by <ORG>, but on appeal to Her Majesty in Council, the judgment of <ORG> was reversed on the 1st May 1890 and that of <ORG> was restored. In April 1891 the two younger brothers instituted the present suits for maintenance. The plaints claimed (i) maintenance at the rate of Rs. 2,000 per month; (ii) Rs. 5,31,938 for arrears of maintenance; (iii) Rs. 12,000 towards the marriage expenses of the plaintiffs' children; (iv) the provision of suitable houses, land, utensils and furniture for the plaintiffs; and (v) an order declaring that the arrears and future maintenance constitute a charge upon the <NAME> estate or such portion thereof as may seem proper to the Court. <ORG> by its judgment decreed future maintenance at the rate of Rs. 750 per month and arrears of maintenance for twelve years at the rate of Rs. 500 per month, the whole to be a charge upon the <NAME> estate. The District Judge found that the claim for maintenance was not affected by the decree in the partition suit and was not barred by limitation. In regard to the claim for arrears of maintenance, he held that although no demand had been made, maintenance had been practically withheld and could be recovered for a period of twelve years immediately preceding the institution of the suit. Against this judgment the zamindar appealed while the plaintiffs filed objections. The Judges of <ORG> agreed with the lower Court upon all points except as to arrears of maintenance, and as be the maintenance being a charge upon the whole of the <NAME> estate. They held that the arrears were not. claimable except a certain sum actually received by the plaintiffs under a previous order of <ORG>, and they reduced the amount of arrears from Rs. 56,000 to Rs. 23, 000. As to the question whether the maintenance decreed should be a charge upon the whole of the <NAME> they say: "We think that the zamindar is justified in objecting to the decree as framed by the District Judge inasmuch as it letters him unnecessarily in the disposition of his property. It is sufficient that the decree should make the maintenance chargeable on certain villages." The defendant now appeals against the judgment of <ORG> in so far as it allows any maintenance at all while, on the other hand, the plaintiffs respectively cross-appeal against that part of the judgment which refuses further specific relief and reduces the amount of the arrears of maintenance.

3. Their Lordships fully agree with <ORG> that the family of the parties to the present action has not become a divided one in consequence of the proceedings in the previous suit to which reference has already boon made. It is true that in that suit a decree was made for the partition of a portion of the family property, but it was a very inconsiderable portion and had no relation whatever to the <NAME>i estate. As to the <NAME>i estate, this Board held that it was impartible and the consequence is that the plaintiffs, as the younger brothers of the <NAME>, retain such right and interest in respect of maintenance as belong to the junior members of a raj or other impartible estate descendible to a single heir [<NAME> v. <NAME> (1887) L.R. 15 I.A. 61 : I.L.R. 10 All. 272 at p. 285. In regard to the amount of maintenance the Judges of <ORG> very properly refused to disturb the finding" of the District Judge whose experience in the district they fully recognise.

4. The only question upon which there has been any serious argument before their Lordships is whether the arrears of maintenance awarded by the lower Court ought to have been reduced by <ORG>. The plaintiffs no longer object to the arrears being limited to the period of twelve years, but they claim that for that period at all events they should receive the amount awarded to them. Among their reasons for the view that arrears of maintenance are not claimable the learned Judges of <ORG> state the following: "The District Judge has granted arrears at the rate of Rs. 500 per mensem for twelve years prior to the institution of the suit. In this we think he was wrong. The right be maintenance is primarily a right to be maintained out of the current income of the property in the enjoyment of the party chargeable. The circumstance, however, that a person entitled to maintenance has not, in fact, been maintained by the person chargeable, does not necessarily give him a right of action for arrears, On proof of failure be maintain, without more, he cannot be said to become a creditor of the person in default. It is incumbent on him to prove that there has been a wrongful withholding of the maintenance to which he is entitled." In support of this view the learned Judges refer to two oases [Jivi v. <NAME> (1879) I.L.R. 3 Bom. 207 and <CITATION> (1862) I.L.R. 6 Mad. 83 but these cases by no means support the conclusions at which <ORG> has arrived. The first of them, decided by <ORG> of Bombay in 1879, was a case in which a Hindu widow sued her late husband's undivided brother for four years' arrears of maintenance. <ORG>, reversing the judgment of <ORG>, held that the widow had a legal right, irrespective of demand and refusal, to maintenance and may recover arrears for any period not excluded by the law of limitation. The question raised in the second case, which was decided by <ORG> of Madras in 1882, was whether a Hindu widow entitled to maintenance can have the payment thereof secured by a charge on part of the inheritance in the hands of the heir, The question was decided in the affirmative and the learned Judges in the course of their judgment made the following remarks, page 84: "It is argued that the claim to past maintenance ought to have been disallowed, but we are unable to assent to this view.... Although no previous express demand is necessary to sustain a claim to past maintenance, and it is only evidence of a wrongful with holding of maintenance, which, as observed by <ORG> in <NAME> v. Ramabai L.R. 6 I.A 114 : I.L.R. 3 Bom. 415 at p. 421, is the ground of liability--the Subordinate Judge has also found in this case that demands were made but not complied with since 1876." The case before this Board to which reference was made in the case last cited was decided in 1879. Three questions were raised before their Lordships, namely, whether the suit of the plaintiff, a Hindu widow, for maintenance and arrears under a will is barred by limitation on the expiration of twelve years from the testator's death, whether she had disentitled herself to maintenance by living apart from the son, and whether the suit could be maintained notwithstanding that there had been no demand and refusal of the maintenance. Their Lordships answered the two first questions in the negative, and as to the third question they made the following observations: "It was said that no action could be maintained because a demand and refusal had not been proved. There is no evidence that a specific demand was made for the maintenance, but the Subordinate Judge has found, and <ORG> have not disagreed with him, that the maintenance was refused; and taking all the circumstances of this family into consideration, their Lordships do not doubt that there was a withholding of this maintenance by the son under circumstances which would amount to a refusal of it." Among the circumstances thus taken into consideration was the antecedent litigation which showed the state of hostility between the members of the family and accounted for the withholding of the maintenance. The case is no authority for the proposition that in order to recover arrears of maintenance it is necessary to prove a demand for each year's maintenance as it became payable. On the contrary, the fair deduction from this and other cases cited is that, while the learned Judges of <ORG> were right in holding that non-payment of maintenance to a person entitled thereto does not necessarily give him a right of action for arrears, it constitutes prima facie proof of wrongful withholding. It is only upon a full consideration of all the circumstances of each particular case that it is possible to decide whether such prima facie proof has been rebutted. The only case which might appear to conflict with this view is that of <NAME> v. Bai Kashi 1892 I.L.R. 17 Bom. 45. In that case the learned Judges of <ORG> of Bombay admitted that a withholding of maintenance might be proved otherwise than by a demand and refusal, and if they intended moreover to decide that nonpayment ' of maintenance when due does not constitute prima facie proof of such withholding, their Lordships are unable to agree with the decision. In the present case it is said that the claim for maintenance is inconsistent with the claim for partition in the previous action, and in one sense this may be true, but it by no means follows that the right to arrears of maintenance was forfeited in consequence It is not alleged that the plaintiff did not act in perfectly good faith in instituting his suit for partition and the fact that there was considerable diversity of opinion in the different <ORG> which had successively to decide the case shows that the plaintiff's claim for partition was not wholly baseless. So long as that action was pending, the plaintiff could not well claim maintenance except as a provisional means of support pending the appeal to Her Majesty in Council. The defendant, on the other hand, if he had been willing to allow full maintenance in lieu of a partition, might have made an unconditional offer of a reasonable amount of maintenance or he might have set aside a certain sum for the purpose. It is true that, in an affidavit, he made a vague admission of his liability,--but he never went any further. It is reasonably clear from the proceedings in the present suit that he would not have been willing to provide maintenance at the rate of Rs. 750 per month, if that sum had been demanded in the previous suit instead of a decree for partition. One of the express grounds Stated by him for his appeal in the present suit to <ORG> was that "even granting that the plaintiff is entitled to maintenance the rate of maintenance awarded to him is excessive. And among his grounds of appeal to Her Majesty in Council are the following: "(4) <ORG> failed to notice that it is for the plaintiff to set up and prove any custom entitling him to maintenance, and that he has not done so. (5) <ORG> erred in thinking that there was any admission by the defendant of his liability for maintenance. (10) The amount of maintenance awarded is excessive." After these objections, and in view of the strained relations between the brothers aver since their father's death, it is impossible to believe that the defendant would have paid maintenance at the rate of Rs. 750 per month or at any other rate if it had been demanded from him in the first instance. He not allege, in his defence, nor is there any evidence, that he was in any way prejudiced by the form of the previous action. It may well be that, if he had been misled into the belief that the claim for maintenance was abandoned and had in consequence not sot aside any portion of his annual income to meet such a claim, ha would have had a good defence to the present action. But, without some such ground of defence, it is impossible to hold that the younger brothers of the defendants have forfeited an undoubted right merely because they were, in the first instance, advised to institute a wrong suit and did not claim their maintenance as it fell due. <ORG>, therefore, properly held that the younger brothers were entitled to recover arrears for any period not excluded by the law of limitation.

5. The result is that, in the opinion of their Lordships, the defendant's appeals should be dismissed and the plaintiff's cross-appeals allowed to this extent that the judgment of <ORG> for arrears be restored and the defendants ordered to pay the plaintiff's costs of appeal to <ORG> and their Lordships will humbly advise Her Majesty accordingly. The costs of these appeals will also be paid by the defendant, but the Registrar will be directed not to include in such costs any expenses occasioned by the printing of irrelevant or unnecessary matter in the bulky record presented to their Lordships.


PETITIONER: COMMISSIONER OF INCOME TAX, <NAME> Vs. RESPONDENT: STERLING FOODS, <NAME> DATE OF JUDGMENT: 15/04/1999 BENCH: <NAME>, <NAME>, JUDGMENT:

<NAME>

The Judgment and order under appeal (190 ITR 274) was pronounced by a Division Bench of <ORG> on a reference made by the assessee, and the <ORG> is in appeal. <ORG> answered in favour of the assessee the following question:

"Whether, on the fact and circumstances of the case, the <ORG> was justified in law in holding that the receipt from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under Section 80HH of the Income-tax Act, 1961?"

The identical question had arisen in respect of the same assessee for an earlier year and <ORG> had then answered the question against the assessee (150 ITR

293). The assessee had not carried the matter further Ordinarily, therefore, <ORG> hearing the assessee's appeal for the later assessment year would have been bound by the earlier decision. However, it chose not to do so relying upon the fact that Section 28 of the Income Tax Act, 1961 had been amended in the meanwhile by the Finance Act , 1990 with effect from 1st April, 1962 by insertion of clause (iiia) and clause (iiib) with effect form April 1, 1967, which read as follows:

(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 off 1947).

(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of <ORG>.

As we shall point out, these amended provisions have no relevance to the point at issue and <ORG> was in error in relying thereon and not following the earlier judgment.

The facts are :

The assessee firm is engaged in processing prawns and other sea food, which it exports during the Assessment Years 1975-76 and 1976-77. It also earned some import entitlements granted by <ORG> under an Export Promotion Scheme. The assessee was entitled to use the import settlements itself or sell the same to others. It sold the import entitlements that it had earned to others. Its total income for the aforementioned assessment years included the sale proceeds for such import entitlements and it claimed relief under Section 80HH of the Act in respect also of the sale proceeds of the import entitlements.

Section 80HH , so far as it is relevant, read at all relevant times thus:

"80HH, Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. (1) where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, he allowed, in computing the total income of the assessee, a deduction from such profits and against of an amount equal to twenty per cent thereof."

To analyses the provision so far as it is relevant here, if the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, the assessee is entitled to be allowed, in the computation of his total income, a deduction from the profits and gains derived from the industrial undertaking of an amount equal to 20% thereof.

The question, therefore, was whether the income derived by the assessee by the sale of the import entitlements was profit and gain derived from its industrial undertaking of processing sea food. <ORG> of <ORG> came to the conclusion that the income which the assessee had made by selling the import entitlements was not a profit and gain which it had derived from its industrial undertaking. For that purpose, it relied upon the decision of this <ORG> in <CITATION> (113 ITR 84). It was there held that the expression "attributable to" was wider in import than the expression "derived from". The expression of wider import, namely, attributable to was used when the legislature intended to cover receipts from sources other than the actual conduct of the business. <ORG> of <ORG> observed that to obtain the benefit of Section 80HH the assessee had to establish that the profits and gains were derived from its industrial undertaking and it was just not sufficient that a commercial connection was established between the profits earned and the industrial undertaking. The industrial undertaking itself had to be the source of the profit. The business of the industrial undertaking had directly to yield that profit. The industrial undertaking had the direct source of the profit and not a means to earn any other profit. Reference was also made to the meaning of word "source", and it was held that the import entitlements that the assessee had earned were awarded by <ORG>. under the Scheme to encourage exports. The source referable to the profits and gains arising out of the sale proceeds of the import entitlement was, therefore, the Scheme of <ORG>. and not the industrial undertaking of the assessee.

The question arose, as aforestated again for the Assessment Year 1979-80 and <ORG> of <ORG> then basing itself on the amendment to Section 28 referred to above, decided otherwise. The relevant portion of the judgment and order under appeal reads thus :

"We have already extracted what was decided by this court. It cannot be said that that decision is incorrect. What has happened is that that decision as a binding precedent is of little value in the light of amendments made to section 28 retrospectively. If it is not binding on us, then at the time we are called upon to answer a question for the subsequent assessment year, we must look at the law as it was, at the relevant time that is relevant for the assessment year 1979-80. Both the amendments have been effected from 1962-63 and therefore, in 1979-80, the income received from <ORG> by sale of import licences and incentives for export was income within the meaning of Section 28 assessable to tax as income from profits and gains of business or profession. It is in that light that we have to answer the question."

It appears to us that the later <ORG> did not fully appreciate what had been held by the earlier <ORG> and to what had so held the provision of Section 28 as amended made no difference. Therefore, in our view, the judgment under appeal would have to be set aside in as much as it did not follow an earlier binding judgment of <ORG> itself.

But learned counsel for the assessee submitted that he was entitled to urge since this matter related to a different assessment year, that the earlier <ORG> judgment of <ORG> was erroneous. Since we are of the view that the earlier judgment was not erroneous, it is not necessary to decide whether the assessee could so urge.

In learned counsel's submission, the profits and gains were derived from the assessee's industrial undertaking and were, therefore, entitled to the deduction prescribed by Section 80HH . Learned counsel cited the judgment of <ORG> in <CITATION> . (107 ITR 168) which, no doubt, is squarely on the point and holds in favour of the assessee. To quote what would be fully explanatory, "In the fast place as we pointed out already, the receipt by way of subsidy and the receipt by way of the profits due to the sale of import entitlement are directly referable to the export of the cycle rims made by the assessee and consequently they can be said to be profits and gains derived from the export of cycle rims even on the basis of any theory of proximity."

Our attention was also invited to the judgment of this Court in <CITATION> (106 STC 467). The relevant portion of the judgment is contained in paragraphs 10,11,& 12 and they read thus:

"10. The dictionaries state that the word "derive" is usually followed by the word "from", and it means : get to trace from a source; arise from, originate in; show the original or formation of.

11. The use of the words "derived from" in item 11-AA(2) suggests that the original source of the product has to be found. Thus, as a matter of plain English, when it is said that one word is derived from another, often in another language, what is meant is that the source of that word is another word, often in another language. As an illustration, the word "democracy" is derived from the Greek word "demos", the people and most dictionaries will so state. That is the ordinary meaning of the words "derived from" and there is no reason to depart from that ordinary meaning here.

12. Crude petroleum is refined to produce raw naphtha. Raw naphtha is further refined, or cracked to produce the said products. This is not controverted. It seems to us to make no difference that the appellants buy the raw naphtha from others. The question is to be judged regardless of this and the question is whether the intervention of the raw naphtha would justify the finding that the said products are not derived from refining of crude petroleum. The refining of crude petroleum produces various products at different states. Raw naphtha is one such stage. The further refining, or cracking of raw naphtha results in the said products. The said products must therefore, be held to have been derived from crude petroleum."

We do not think that the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be <ORG> of <ORG>. whereunder the export entitlements become available. There must be for the application of the words "derived from", a direct nexus between the profits and gains and the industrial undertaking. In the instant case the nexus is not direct but only incidental. The industrial undertaking exports processed sea food. By reason of such export, <ORG> applies. Thereunder, the assessee is entitled to import entitlements, which it can sell. The sale consideration therefrom cannot, in our view be held to constitute a profit and gain derived from the assessees' industrial undertaking.

In the result, the appeals are allowed. The judgment under appeal is set aside. The question is answered in the affirmative and in favour of the <ORG>. No order as to costs.


PETITIONER: <NAME> Vs. RESPONDENT: <NAME>, FACTORY MANAGER, <ORG>. DATE OF JUDGMENT: 22/11/1965 BENCH: SATYANARAYANARAJU, P. BENCH: SATYANARAYANARAJU, P. GAJENDRAGADKAR, P.B. (CJ) <NAME>, K.N. RAMASWAMI, V. CITATION: 1966 AIR 907 1966 SCR (2) 660 CITATOR INFO : D 1973 SC1227 (55) F 1975 SC2025 (6) ACT: Central Province and Berar Industrial Disputes Settlement Act, 1947 (Act 23 of 1947), s. 16--Dismissal within exemption in force--Withdrawal of exemption- Application to Labour Commissioner for reinstatement--If lies. HEADNOTE: The State of Bombay by a notification under the Bombay Relief Undertakings (Special Provisions) Act 1958 declared a <ORG> a 'relief undertaking' and exempted it from the applicability of s. 16 of the C.P. and Berar Industrial Dispute& Settlement-Act, 1947. During the period the exemption was in force, the appellants-employees of the <ORG> abstained from work and were dismissed for joining an illegal strike. After the exemption was withdrawn and was no longer in operation, the employees filed applications before the Labour Commissioner claiming reinstatement with back wages. The Labour Commissioner allowed the applications. The <ORG> preferred revisions to <ORG> which were allowed. In writ petitions filed by the employees, <ORG> confirmed the finding of <ORG>, that the employees had no right to file applications under s. 16 and the applications filed by them before the Labour Commissioner were not maintainable. In appeal to this Court. HELD : <ORG> was in error in holding that the applications were not maintainable. The right of an employee to claim reinstatement on a wrongful dismissal existed de hors s. 16 of the Central Provinces and Berar Industrial Disputes Settlement Act. Section 16 provides a forum for a dismissed employee to claim reinstatement but does not create a right. The effect of an exemption granted by the notification issued under the Bombay Relief Undertakings (Special Provisions) Act, is not to destroy the right but to suspend the remedy prescribed by s. 16 for enforcing that right during the period when the exemption remains in force. The right can be enforced by a dismissed employee by restoring to the provisions of s. 16 of the Act provided he makes the application within six months from the date of his dismissal. [668 E] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 156 of 1965.

Appeal by special leave from the judgment and order dated August 12, 1963 of <ORG> (Nagpur Bench) in Special Civil Application No. 315 of 1962.

<NAME> and <NAME>, for the appellants.

<NAME>, <NAME>, <NAME> and <NAME>, for respondents Nos. 1 and 3.

<NAME> and <NAME>, for respondent No.4.

The Judgment of the Court was delivered by <NAME>, J. This is an appeal, by Special Leave,, against the judgment of <ORG> of <ORG> dismissing an application for the issue of a Writ of certiorari under Art. 226 of the Constitution to quash the order of <ORG> at Nagpur.

For a proper appreciation of the questions that have been raised in the appeal, it would be necessary to state the material facts. <ORG>, Nagpur (hereinafter referred to as the <ORG>) is a public limited company incorporated under the Indian Companies Act . On July 18, 1959, in exercise of the powers conferred by s. 18-A of the Industries (Development and Regulation) Act , 1951, <ORG> took over the management of the <ORG> and appointed the 3rd respondent as the authorised Controller of the <ORG>. On March 25, 1960 the State of Bombay (now the State of Maharashtra), in exercise of the powers conferred by ss. 3 and 4 of the Bombay Relief Undertakings (Special Provisions) Act, 1958 (hereinafter referred to as the Bombay Act) made a notification declaring the <ORG> to be a ' "relief undertaking" for a period of one year commencing from March 26, 1960 and ending with March 25, 1961. The appellants, eight in number, were, at the relevant time, the permanent employees of the <ORG>. It would be convenient to refer to them as "employees". On December 15, 1960, when the notification made by <ORG> under the Bombay Act was in force, the employees abstained from work. Thereupon, the 1st respondent who is the Factory Manager of the <ORG> issued notices to the employees to show cause why they should not be dismissed from service for joining an "illegal strike". On January 6, 1961 the Factory Manager passed orders dismissing the employees from service. On January 12, 1961 the employees filed an application in <ORG> for the issue of a writ of mandamus directing the employees to be reinstated in service. On April 4, 1961, the exemption of the <ORG> from the application of s. 16 of the Central Provinces and Berar Industrial Disputes Settlement Act (XXIII of 1947) (herein- after called the State Act ) was made. On April 25, 1961 the employees filed applications before the Assistant Commissioner Sup.CI./76-12 of Labour claiming reinstatement with back wages. <ORG> dismissed the Writ Petition filed by the employees with liberty to file a fresh petition, if necessary, since they were prosecuting their applications for relief of reinstatement before the Assistant Commissioner of Labour. In and by his order dated September 29, 1961, the Assistant Commissioner allowed the applications filed by the employees. He held that as there was no illegal strike the orders of dismissal were unsustainable and should be set aside. He directed that the employees should be reinstated with back wages. Against the orders passed by the Assistant Commissioner, the <ORG> preferred applications in revision to <ORG>. By its order dated February 16, 1962, <ORG> allowed the revision applications filed by the <ORG> on the ground that the applications before the Assistant Commissioner were not maintainable. On the merits, <ORG> agreed with the Assistant Commissioner that there was no illegal strike. Aggrieved by the orders of <ORG>, the employees filed an applicaton under Arts. 226 and 227 of the Constitution for the issue of a writ of certiorari to quash the orders of dismissal passed by the Factory Manager and to direct their reinstatement with back wages. By its judgment dated August 12, 1963 <ORG> dismissed the Writ Petition filed by the employees.

<ORG> has held that the right to claim reinstatement is not a right which is available to an employee under the Common Law and that the relief of reinstatement is a special right which has been conferred on an employee under S. 16 of the State Act. In the opinion of <ORG>, the essential pre-condition for an employee to claim relief under S. 16 is that he is an employee in an industry to which that section is applicable and in respect of which a notification under S. 16(1) also has been issued. <ORG> has reached this conclusion by reason of the fact that <ORG> issued a notification exempting the <ORG> from the operation of S. 16 of the State Act and that the exemption was withdrawn only on April 4, 1961 while the employees were dismissed on January 6, 1961. In the opinion of <ORG>, by reason of the fact that s. 16 of the Act was not applicable, the dismissal of the employees even if it was wrongful did not give them a right to claim TV instatement and that to hold otherwise would be to give retrospective operation to S. 16 of the State Act which became applicable to the <ORG> on and from April 4, 1961 by reason of the withdrawal of the exemption. in the result, <ORG> confirmed the finding of <ORG> that the employees had no right to file applications under s. 16 of the State Act and the applications filed by them before the Assistant Commissioner were not maintainable.

Now it is contended by Mr. <NAME> on behalf of the employees that though the industry was exempt from the operation of certain sections including s. 16 of the Act, on the date when the appellants were dismissed, there was an existing industrial dispute relating to an industrial matter between the employees and the <ORG> on April 4, 1961, when the notification withdrawing the exemption in favour of the <ORG> from the operation of s. 16 of the State Act was issued by the <ORG>, that on the date when the employees filed an application under s. 16 before the Commissioner of Labour, the period of six months provided by that section had not elapsed and that therefore the employees could invoke the provisions of s. 16 and claim reinstatement. The learned counsel for the <ORG>, Mr. <NAME>, has endeavoured to support the judgment of <ORG> and the reasons on which its conclusions were rested.

The questions which arise for determination in this appeal are :

1. Whether the right of a dismissed employee to claim reinstatement, in appropriate cases, exists. de hors s. 16 of' the State Act ?

2. Whether by reason of <ORG> exemption of the industry from the operation of s. 16 on the date when the employees were dismissed from service, their right to apply for reinstatement ceased to exist ?

For a proper determination of the above questions, it is necessary to refer to the material statutory provisions. The <ORG> Act became law on June 2, 1947. S. 15 of the <ORG> Act empowers <ORG> to appoint any person as Labour Commissioner for the <ORG> and he shall exercise all or any of the powers of the Labour Commissioner. Now s. 16 of the <ORG> Act as it stood at the relevant date provides as follows:

"(1) Where the State Government by notification so directs, the Labour

Commissioner shall have power to decide an industrial dispute touching the dismissal, discharge, removal or suspension of an employee working in any industry in general or in any local area as may be specified in the notification.

.lm15 (2) Any employee, working in an industry to which the notification under sub-section (1) applies, may, within six months from the date of such dismissal, discharge, removal or suspension, apply to the Labour Commissioner for reinstatement and payment of compensation for loss of wages. The different powers that could be exercised by the Labour Commissioner are then set out in sub-s. (3) : "On receipt of such application, if the Labour Commissioner, after such enquiry as may be prescribed, finds that the dismissal .... was in contravention of any of the provisions of this Act or in contravention of a standing order.... he may direct that the employee shall be reinstated forthwith or by a specified date and paid for the whole period from the date of dismissal .... to the date of the order of the Labour Commissioner".

It is common ground that s. 16 is made applicable to the textile industry with effect from. March 1, 1951 by a notification dated February 22, 1951. The provisions of s. 16 were thus applicable to the <ORG> till March 25, 1960, on which date, however, <ORG> issued a notification in exercise of the powers conferred under ss. 3 and 4 of the Bombay Act declaring the <ORG> to be a 'relief undertaking'. The notification directed that the provisions of S. 16 of the State Act and Chapter V-A of the Industrial Disputes Act (XIV of 1947) (Lay-off and Retrenchment) shall not apply to the <ORG> and that it shall be exempt therefrom. This notification was extended by <ORG> on March 8, 1961 for a further period of one year. A subsequent notification dated April 4, 1961 issued by the State of Bombay amended the earlier notification by withdrawing the exemption in so far as it related to s. 16 of the State Act.

The alleged participation by the employees in an illegal strike occurred on December 15, 1960 and the 1st respondent dismissed the employees in and by his order dated January 6, 1961. It was during the period between March 25, 1960 and April 4, 1961 when the exemption was in force that the incident which resulted in the <ORG> framing a charge against the employees happened and the subsequent orders of dismissal were passed.

It is submitted by the learned counsel on behalf of the <ORG> that the right of an employee to claim reinstatement has been granted by s. 16 of the State Act and since the <ORG> were exempt from the provisions of that section on the material dates the employee had no right to claim reinstatement. The Industrial Disputes Act (XIV of 1947) came into force on April 1, 1947. For our present purposes, it is not necessary to consider whether the right to claim reinstatement by a dismissed employee existed before the Central Act became law. The question about the jurisdiction of <ORG> to direct reinstatement of a dismissed employee was raised as early as 1949, before <ORG> in <CITATION> (1). In that case, <ORG> considered the larger question about the powers of industrial tribunals in all its aspects and rejected the argument of the employer that to invest the tribunal with jurisdiction to order reinstatement amounts to giving it authority to make a contract between two persons when one of them is unwilling to enter into a contract of employment at all. This argument, it was observed, "overlooks the fact that when a dispute arises about the employment of a person at the instance of a trade union or a trade union objects to the employment of a certain person, the definition of industrial dispute would cover both those cases. In each of those cases, although the employer may be unwilling to, do, there will be jurisdiction in the tribunal to direct the employment or non-employment of the person by the employer". <ORG> also added "The disputes of this character being covered by the definition of the expression 'industrial disputes', there appears no logical ground to exclude an award of rein- statement from the jurisdiction of <ORG>.

For nearly two decades the decision of <ORG> has been accepted without question. Therefore, after the Industrial Disputes Act , 1947, at any rate, the right of a dismissed employee to claim reinstatement in proper cases has been recognised. It is no doubt true that under the Central Act the right to claim reinstatement has to be enforced in the manner laid down by that statute, whereas under the State Act it is open to an employee to claim reinstatement without the intervention of the appropriate <ORG>. This would not however make any difference. It is argued that by reason of the exemption granted by the Bombay State when it declared the <ORG> to be a relief undertaking, rights and obligations which accrued to the employees or were incurred by the <ORG> during the period of exemption, stood (1)  F.C.R. 321.

abrogated. This takes us to the question as to the legal effect of 'the exemption granted by the State of Bombay. The notification issued by the State of Bombay is in the following terms :

"<ORG> hereby directs that in relation to the said relief undertaking and in respect of the said period of one year for which that relief undertaking continues as such, the provisions of (i) Sections 16 , 31 and 37 , section 40 (in so far as it relates to lock-out) and section 51 and section 61 [in so far as it relates to clauses

(b) and (c) of Rule 36 of the Central Provinces and Berar Industrial Disputes Settlement Rules, 1949] Central Provinces and Berar Act No. XXIII of 1947 and (ii) Chapter V-A of the Industrial Disputes Act, 1947 (XIV of 1947) shall not apply and the said relief undertaking shall be exempt from the aforesaid provisions of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947 (Central Provinces and Berar Act No. XXIII of 1947) and the Industrial Disputes Act , 1947 (XIV of 1947)."

The contention urged on behalf of the <NAME> proceeds on the assumption that the right to claim reinstatement has been granted by S. 16 of the State Act. As we have already stated, S. 16 only recognises the right of a dismissed employee, in appropriate cases, to claim reinstatement but does not confer the right. The section provides the procedure for enforcing the right. In this view, the right of the dismissed employee to claim reinstatement was in existence even during the period of exemption, but only it could not be enforced under S. 16 . Once the exemption is withdrawn the status quo ante is restored and it is open to the employee to file an application for reinstatement provided, however, his application is within the period of six months from the date of his dismissal.

Under S. 4 ( 1 )(a), on a notification being made, the industry becomes a relief undertaking and the laws enumerated in the Schedule to the Bombay Act shall not apply. The Schedule specifies Chapter V-A of the Industrial Disputes Act and S. 16 of the State Act. Section 4 ( 1 )(a)

(i) also provides that the relief undertaking shall be exempt from the operation of the Acts mentioned in the Schedule.

Learned counsel drew a distinction between the expressions exemption' and 'suspension' by relying upon the meanings given to these words in the Oxford Dictionary. 'Exempton' means 'immunity from a liability' whereas the word 'suspension' means 'put it off'. Basing himself on the dictionary meanings, learned counsel for the <ORG> has contended that the word 'exemption' is of a wider connotation than 'suspension' and means that the industry shall be immune from the liabilities arising under the statutes specified in the Schedule and that the order of dismissal having been passed while the exemption was in force, the <ORG> were immune from liability to reinstate the employees on their dismissal being held to be wrongful.

The order dismissing the employees was passed on January 6, 1961 when the notification was in force. The employees filed applications before the Commissioner of Labour on April 25, 1961. On the date of their applications, the exemption granted to the <ORG> by <ORG> was no longer in operation. The decision in <ORG> v. Modak(1) has firmly established the principle that for a dispute which originated before the Industrial Disputes Act came into force but was in existence on the date when that Act became law, the Act applied to the dispute since it was in existence and continuing on that date and no question of giving retrospective effect to the Act arose. At p. 22 1, the learned Chief Justice, <NAME>, who spoke for the Court stated thus :

"In my judgment, the Act of 1947 clearly applies to the present dispute without any question arising of giving the Act any retrospective effect. It is true the dispute arose before the Act was passed, but on April 1, 1947, when the Act came into force, the dispute was in existence and continuing. The employees were on strike and the strike actually continued until May 19, that is, five days after the Government made the order referring the dispute to arbitration. In my judgment, the Act must apply to any dispute existing after it came into force, no matter when that dispute commenced. There is nothing in the Act to suggest that it should apply only to disputes which originated after the passing of the Act. On the contrary, the opening words of s.10 of the Act make it clear that the Act would apply to all disputes existing when it came into force. The opening words of s. 10(1) are---

If any industrial dispute exists or is apprehended, the appropriate <ORG> may, by order in writing etc. (1) L.L.R. [1948] 2 Cal. 209.

It seems to me that these words make it abundantly clear that the Act applies to any industrial dispute existing when it came into force and, therefore, the Act applies to this dispute."

It is argued by Mr. <NAME> that the, notification dated April 4, 1961 withdrawing the exemption is only prospective and no retrospective effect can be given to it. This argument proceeds on a fallacy. There is no question of the notification withdrawing an exemption being prospective or retrospective.

It is finally submitted by learned counsel for the <ORG> that the validity of the order passed by the Factory Manager dismissing the employees from service has not been determined by <ORG> and that the matter must be remitted to that Court for a consideration of that question. We may point out that the Assistant Commissioner of Labour has held that the dismissal is wrongful. This conclusion is affirmed by <ORG>. The validity of the dismissal was therefore finally concluded in favour of the employees. There is therefore no question of the validity of the dismissal order now being considered by <ORG>.

We may now summarise the conclusions reached by us as a result of the above discussion. The right of an employee to claim reinstatement on a wrongful dismissal exists de hors s. 16 of the State Act . Section 16 provides a forum for a dismissed employee to claim reinstatement but does not create a right. The effect of an exemption granted by the notification issued under the Bombay Act is not to destroy the right but to suspend the remedy prescribed by s. 16 for enforcing that right during the period when the exemption remains in force. The right can be enforced by a dismissed employee by resorting to the provisions of s. 16 of the Act provided he makes the application within six months from the date of his dismissal. In the present case, the appellants filed their applications within the period specified in S. 16 of the State Act. <ORG> was in error in holding that the applications were not maintainable.

In the result the judgment of <ORG> and the order of <ORG> are set aside and the award made by the Assistant Commissioner of <ORG> is restored. The appeal is allowed and the appellants will have their costs in this <ORG> paid by respondent No. 1.

Appeal allowed.