CASE NO.: Writ Petition (civil) 159-163 of 1969 PETITIONER: TRILOCHAN MISHRA ETC. RESPONDENT: STATE OF ORISSA & ORS. DATE OF JUDGMENT: 21/01/1971 BENCH: J.C. SHAH (CJ) & G.K. MITTER & K.S. HEGDE & A.N. GROVER & A.N. RAY JUDGMENT:

JUDGMENT 1971 AIR (SC) 733 = 1971 (3) SCC 153 The Judgment was delivered by <NAME>, J. :

<NAME>, <NAME> for the The petitioners in all these petitions under Article 32 of the Constitution pray for a declaration that Sections 3(2)(a), Section 8(1) and Rule 5-B(6), (7), (8), (9) and (16) and Rule 6(3) and Rule 7(1) of the Orissa Kendu Leaves (Control of Trade) Act, 1961, as amended and the rules framed thereunder are violative of the fundamental rights of the petitioners guaranteed under Articles 14, 15 and 19(1) of the Constitution, for a declaration that the "revised policy" as enjoined by the said Orissa Kendu Leaves (Control of Trade) Amendment Act, 1969 and rules framed is arbitrary, discriminatory and mala fide and for a writ or direction in the nature of a mandamus quashing the appointment of Respondents 2 to 108 as purchasers.

2. To appreciate the grievances of the petitioners it is necessary to note in brief how the trade in Kendu leaves has been taken over by the State of Orissa by successive legislation and two decisions of this Court bearing thereupon. Kendu leaves appear to have formed a lucrative source of revenue for the State of Orissa for many years past. After the merger of the Indian States with the Province of Orissa <ORG> passed an order in exercise of the powers under Section 3(1) of the Orissa Essential Articles Control and Requisitioning (Temporary Powers) Act, 1947 by which the Kendu leaves growing areas in the State were divided into units and licences were issued to persons entitled to trade in such leaves. The District Magistrate fixed the minimum rates from time to time and the Order provided that the licensees were bound to purchase Kendu leaves from the pluckers or owners of private trees and forests at rates not below the minimum prescribed. The licensees were however not fettered in the matter of the sales of the leaves after purchase. This was followed by the Orissa Kendu Leaves Control Order, 1960, which effected some changes in the scheme previously adopted. In 1961 Orissa Kendu Leaves (Control of Trade) Act was passed with the object of creating a State monopoly in the trade of these leaves. Section 3(1) of that Act provided that no person other than the <ORG>, an officer of <ORG> authorised in that behalf or an agent in respect of the unit in which the leaves are grown shall purchase or transport Kendu leaves. Sub-section (2) provided for transport of leaves from one place to another within the unit wherein such leaves have grown to any other place in that unit. By sub-section (3) any person desiring to sell Kendu leaves was at liberty to sell them to the aforesaid <ORG> officer or agent at any depot situated within the said unit. Under Section 4 the <ORG> was to fix the price at which the leaves were to be purchased by them or by any Officer or agent from the growers after consultation with <ORG>. Section 5 enabled the <ORG> to divide each district into such number of units as they thought fit. Under Section 7 the <ORG> or their authorised officer or agent were bound to purchase at the price fixed under Section 4 the leaves which were offered to them for sale at the depots. Under Section 3(1) <ORG> was authorised to appoint agents on their behalf in respect of different units for the purpose of purchase of and trade in Kendu leaves in respect of different units and any such agent might be appointed in respect of more than one unit. Under Section 10 Kendu leaves purchased by <ORG> or their officers or agents under the Act were to be sold or otherwise disposed of in such manner as the <ORG> might direct.

3. The whole Act and the notification thereunder were challenged in this Court, particularly Sections 3 and 4 , on the ground that they were in conflict with Articles 19(1)(f) and (g) and 19(6) of the Constitution in <CITATION> . (1963 (2) SCR Supp 691 SC 1047 : 1964 (2) SCR 37.) It was held therein by this Court that the Act was a valid piece of legislation although it created a State monopoly. The validity of Section 3 was upheld as the persons specified in sub-clauses (b) and (c) were intended to work as agents of the Government and all their actions and dealings in pursuance of the provisions of the Act were to be actions and dealings on behalf of the Government and for the benefit of the Government. The validity of Section 4 was also upheld but Rule 7(5) promulgated under the Act was held to be bad because it left in to the sweet will and pleasure of the officer concerned to fix any terms and conditions regarding agents on an ad hoc basis on the ground that the agency permitted under Article 19(6)(ii) of the Constitution had to be an agency in the strict and narrow sense of the term and could only include agents who could be said to carry on the monopoly at every stage on behalf of the State for its benefit and not for their own benefit at all.

4. In effect this Court upheld the creation of a <ORG> monopoly and the employment of agents for carrying on the monopoly business by the <ORG> but Rule 7(5) was held to be invalid for the reasons indicated. According to the petitioner after the judgment of this Court the form of the agreement for agents known as the 'G' form was introduced under the rules and two sets of persons were employed to carry on the business of the <ORG> monopoly, one set known as the 'agents' and the other 'purchasers'. The agents were to purchase and collect Kendu leaves on behalf of the <ORG> and the purchasers were to purchase from the <ORG>, the rates of purchase and the price of sale being fixed by the authorities. On this basis auctions of Kendu leaves were held for the years 1966 and 1967.

5. It appears that early in 1968 letters were addressed to certain traders by the authorities intimating them that it had been decided by <ORG> to renew leases of Kendu leaves held by them for the year 1968 if they accepted the terms set out therein. Under this scheme the <ORG> offered to those licensees who in their view had worked satisfactorily in the previous year and had paid the amounts due from them regularly to continue their licences with the added provision that the agents with whom they had been working in 1967 would also work during 1968. A petition was moved before <ORG> challenging this action of the <ORG> in January 1968. <ORG> withdrew the offers to renew the previous licences and informed the licensees that it had been decided to invite offers for advances purchase from persons who had purchased Kendu leaves from individual units during the year 1967 and had not committed default in payment of the dues. Other writ petitions were filed challenging the legality of the new method adopted by the State <ORG> of offering to enter into agreements for advance purchase of Kendu leaves by private offers in preference to open competition. It was urged on behalf of the petitioners that by entering into agreements of advance purchase contracts for Kendu leaves by private negotiation the State <ORG> sought to support their party interests in preference to public benefit envisaged by a proper scheme of State monopoly. In appeal from the orders of <ORG> ( <CITATION> ( 1969 (3) SCR 74 : 1969 (1) SCC

414.) this Court held the State monopoly could only be administered for the benefit of the general public and any arrangement used as a cloak for conferring private benefit upon a limited class of persons by carrying on business on their own behalf was invalid. The Court also observed :

"... in so far as the right to make tenders for the purchase of Kendu leaves was restricted to those persons who had obtained contracts in the previous year the scheme was open to the same objection. The right to make offers being open to a limited clsdd of persons it effectively shut out all other persons carrying on trade in Kendu leaves and also new entrants into that business. It was ex facie discriminatory and imposed unreasonable restrictions upon the right of persons other than existing contractors to carry on business."

The <ORG> found that no explanation had been attempted on behalf of the <ORG> as to why an offer made by well-known manufacturer of Bidis interested in the trade to purchase the entire crop of Kendu leaves for the year 1968 for three crores of rupees was turned down. The plea put forward on behalf of the <ORG> that its action was bona fide was held not to be an effective answer to a claim made by a citizen that his fundamental rights were infringed, by the action of the <ORG>. It however appeared to this <ORG> that during the pendency of the proceedings the entire year for which the contracts were given had expired and the persons to whom the contracts were given were not before the <ORG>. In these circumstances counsel for the appellants agreed that "it would be sufficient if it was directed that the tenders for purchase of Kendu leaves be invited by the <ORG> in the next season from all persons interested in that trade"

. Acting upon this suggestion the <ORG> directed that <ORG> would act in the interest of the general public and not of any class of traders so that in the next season the <ORG> might get the entire benefit of the monopoly in the trade in Kendu leaves and no disproportionate share thereof might be diverted to any private agency.

6. The petitioners' case in this series of petitions is as follows. They claim to be growers of Kendu leaves (which form the wrapper of tobacco smoked as Bidi) in certain districts of the State of Orissa. They also claim to be traders and businessmen by vocation dealing primarily in such leaves. The petitioner in Petition No. 159 of 1969 claims to be a purchaser since 1965 for unit No. 60 in Bolangir Division and claims to have been working as such till the year 1968. He participated in the tender for appointment of purchasers for 1962 and had furnished solvency certificate worth Rs. 75, 000/- had deposited earnest money and complied with all the terms and conditions required under the provisions of the Act and the rules for making a valid tender. His complaint is that although his tender was the highest, i.e., Rs. 213-50 per quintal, it was settled in favour of one <NAME>, a respondent, at the rate of Rs. 200/- only per quintal, a rate below that offered by the petitioner. His main grievance is that he was refused the appointment as purchaser as he was neither willing nor able to pay contribution at Rs. 10/- per bag which amounted approximately to Rs. 15, 000/- for his area to the political fund of <ORG> which happened to be at the relevant time the major partner in <ORG> of Orissa. His case is that a suggestion was made to him for such contribution by a member of <ORG> of <ORG>, <NAME> and also by <NAME>, Minister for Forest belonging to the same party and he was given to understand that his tender would not be considered if he was not prepared to make the payment. According to the petitioner <ORG> tried to wriggle out of the findings of this Court in <NAME> case (supra) by subterfuges in order to implement their policy of conferring the benefit of the trade on a chosen few for political and selfish financial ends of the party in power. It was alleged that as a preliminary to this they amended the Act and the rules framed thereunder. The main attack in the petition is directed against the addition of a provision to Section 3(2) by which a registered grower might be permitted to transport his leaves from any place within the unit wherein such leaves were grown to any other place outside the unit for the purpose of sale to the Government or any agent in respect of the unit for the authorised to purchase the same from him. Complaint was also made about the amendment of Section 8(1) relating to the appointment of agents by the addition of the proviso :

"that the Government may for the purpose of purchase of leaves from the registered growers, appoint an additional agent in respect of one or more units"

Challenge was also made to several clauses in Rule 5-B which provide for disposal of Kendu leaves. These clauses are (6), (7), (8), (9) and (16) which run thus :

"(6) At the time of opening of the tenders, the tenderers shall produce a certificate of solvency for at least one-fourth of the total annual purchase price according to the rate quoted by him, granted by a Revenue Officer not below the rank of a Sub-divisional Officer if the tenderer has landed property at a place, wherein the Orissa Public Demand Recovery Act, 1962, is in force or a Bank guarantee for an equal amount.

(7) Government may accept or reject all or any of the tenders so received for any unit without assigning any reason therefor. The earnest money deposit shall, in case of an unsuccessful tenderer be refunded to him and in case of a successful tenderer, it shall, subject to the provisions of sub-rule (11), be adjusted towards payment of security deposit required by sub-rule (12) :

Provided that in rejecting a tender Government shall take into consideration the following among other grounds :

1. Inadequacy of price offered, 2. Speculative offers, 3. Past conduct of parties in the trade, 4. Transport facilities at the command of the offerer, 5. Solvency of the offerer, 6. Experience in the trade.

(8) If the tenders received for a unit are not considered acceptable, the <ORG> may select as purchaser or purchasers for such unit or units any person or party of persons or parties on such terms and conditions as may be mutually agreed and such unit or units. All the rules applicable to a successful tenderer shall apply mutatis mutandis to persons or parties selected as purchasers under his sub-rule.(9) Notwithstanding anything contained in the foregoing provisions <ORG> may sell or otherwise dispose of Kendu leaves collected by purchase or otherwise by <ORG> or by their officers or agents in such manner as <ORG> may deem proper.

X X X (16) Notwithstanding anything contained in the foregoing provisions, the purchaser who is selected to purchase the Kendu leaves procured through the additional agent of any unit by the <ORG>, shall on selection as such execute an agreement in Form J."

Besides the above the petitioner also challenged the validity of sub-rule (3) of Rule 6 and the new Rule 7 substituting the old rule. Rule 6(3) enabled a registered grower who wished to transport his leaves outside the unit in which he was registered for sale to an additional agent, if any, of the said unit appointed under the proviso to Section 8(1) on an application for a transport permit in Form D to be granted by the Divisional Forest Officer.

7. The above rule is really a complement to the proviso to Section 8(1) in order to allow additional agents to function. Rule 7 in effect provided as follows. Under clause (1) <ORG> was empowered to appoint agents for a unit or units under sub-section (1) of Section 8 and to publish a notice in <ORG> and in such other manner as was thought fit, giving terms and conditions of agency and inviting any applications for such agency, provided that no application need by invited for appointment of the additional agent referred to under the provisions of sub-section (1) of Section 8 and such additional agent might be appointed directly by <ORG> subject to such terms and conditions as might be decided upon, the additional agent having to execute an agreement in Form I. By clause (2) the application for agency was to be in Form E and was to be submitted to such authority by such date and in such manner as may be specified in the notice. Under clause (3) every application was to be accompanied by a treasury challan showing a cash deposit of Rs. 500/- in the name of the Divisional Forest Officer as advance security deposit. The applicant was also to furnish a certificate of solvency for a sum calculated at the rate of Rs. 10/- per bag for the stipulated number of bags for the respective unit, granted by a Revenue Officer not below the rank of a Sub-divisional Officer if the agent had landed property at a place wherein the Orissa Public Demand Recovery Act, 1962, was in force, or a bank guarantee for an equivalent amount. Clause (4) enabled the <ORG> to accept or reject any application without assigning any reason therefor. Under clause (5) <ORG> was empowered in case it was not possible to select suitable agents for the purpose out of those who had applied for appointment as agents, to call for fresh applications, or if the time at their disposal was not sufficient, to appoint a person or party as agent who in the opinion of the <ORG> was suitable for the work. Under clause (6) an agent or party appointed in terms of clause (5) had to execute an agreement in Form G within 15 days of the order of appointment failing which the appointment was liable to be cancelled. Under clause (8) the agent was to maintain registers and accounts as might from time to time be directed by the <ORG> which were to be submitted when called for. Under clause (9) the agent was to furnish a list of persons employed by him within the unit and any such person so appointed if objected to was to be forthwith removed from employment by the agent. Under clause (10) <ORG> was at liberty to grant to the agent renewal of his agency for such period not exceeding one year at a time if it was found during the period of his agency that he had duly observed and performed the terms and conditions to the satisfaction of the <ORG>.The petitioner alleged that -

(a) As a result of the judgment in <NAME> case (supra) the profit which could go to the agents was greatly reduced and they could have little interest in the scheme. The purchasers therefore set up their own men as agents and the pretended dichotomy between agents and purchasers was a mere eyewash. The agents were not really agents of the Government. A table shown as Annexure B to the petition purported to show how the agents were related to the purchasers.

(b) By virtue of the verious amendments to the Act and Rules and by the conduct of the Government no outsider or no one other than the existing purchasers could and did submit tenders.

(c) The provisions relating to the solvency certificate and the provision for appointment of additional agents and additional purchasers at the discretion of the <ORG> and the power to authorise registered growers to transport their leaves outside the unit in which they were grown were all aimed at confining the business in the hands of a chosen few completely ousting others.

(d) No principle was followed in accepting tenders. The claims of highest bidders were ignored to accommodate favourites of authorities. Appointments were in some cases made of persons whose tenders were lower than the highest ones offered. In some cases areas were settled with persons who had never submitted any tender for the area and in others settlement was made with a non-tenderer at a lower price.

8. Before us, learned counsel for the petitioners limited himself to the following objections -

1. Agents could not be allowed to be nominees of purchasers. They ought to be independent contractors.

2. The provision for appointment of additional agents under the proviso to Section 8 and Rule 7(1) were unreasonable and arbitrary.

3. The appointment of purchasers who were not the highest tenderers was also arbitrary and mala fide. Rule 5-B(7) which allowed the <ORG> to accept or reject all or any of the tenders without assigning any reason therefor was gravely objectionable in that it permitted the <ORG> to make discrimination in favour of men of their choice and allowed the extraction of money for party funds. The demand for production from tenderers of a certificate of solvency for at least 1/4th of the total annual purchase price from a Subdivisional Officer if the tenderer had landed property in Orissa or a bank guarantee in the case of others was also discriminatory. It was said that the power to appoint additional agents and additional purchasers after the auction had been held was for the purpose of <ORG> benefiting anyone it liked to the detriment of the interest of the general public and the interest of the <ORG>.

9. Our attention was drawn to the special forms which had been incorporated in the rules and the differences between them, as for instance, Forms G and H which applied in the case of an agent and purchaser and Forms I and J which applied to the cases of additional agents and additional purchasers.

10. It was submitted that the scheme as envisaged after the amendment of the Act in 1969 was not really in aid of establishing a State monopoly and it left loopholes for patronage by the party in power in <ORG> of their own favourites by the extraction of money for party funds and otherwise. further submitted that agents if they were nominees or relations of purchasers, were really not bona fide agents of the <ORG>. He drew our attention to the activities of the agents before the leaves were sold to show that a good deal of money had to be invested and quite a number of operations performed before the leaves could be put up for auction and it was submitted that if they were the nominees of the purchasers they really acted in the latter's interest and not that of the <ORG>. Under the terms of the agreement in Form G the agents had to open depots and storage godowns at such centres within the unit as directed by the Sub-divisional Officer and he could transport his leaves from the collection depot to the storage godowns. They were also prevented except with the permission of the Divisional Forest Officer from moving the <NAME> leaves to places outside the unit.

11. We are not satisfied that there can be any legitimate grievance against the amendment of the Act and the promulgation of new rules set forth above. They all appear to be necessary to enable the <ORG> to control the business in <ORG> leaves effectively. Nothing was shown to us as to how any of these provisions of Form G for the appointment of agents and Form I for the appointment of additional agents worked against the interest of the <ORG> working a monopoly business. The provision for appointment of additional agents and additional purchasers are not per se bad. The exigency of business may require such appointments. Further we find ourselves unable to appreciate the points sought to be made on the basis that some of the agents were nominees or relations of the purchasers. We do not see how this can affect the scheme of <ORG> monopoly. An agent had to purchase <ORG> leaves from growers at prices fixed by the <ORG> under Section 4(1) and he had to deliver processed <ORG> leaves to such persons as were to be directed by the Forest Officers. He was to be entitled to verious charges including -

(1) a fixed sum per bag of processed leaves towards costs incurred for collecting the leaves, storage, transport, packing and other charges, and (2) remuneration at the rate fixed for each bag of processed leaves which he secured by selection or purchase.

He had also to pay collection charges to persons for collecting the leaves from <ORG> forests and lands as may be specified in writing by the <ORG>. It may be that on the actual rates fixed by <ORG> the agents could not secure much profit. It is also possible that purchasers would rather deal with agents who carried out the processing and storing business in a manner which was conducive to production of good finished products than with strangers whose business methods were not known to them. But by itself such a course of dealing could not affect the interest of a <ORG> running the monopoly business.

12. In the counter-affidavits filed herein there is a denial by the Minister concerned and by <NAME> that any suggestion was ever made to any of the petitioners that they would have to pay Rs. 10/- for each bag if they wanted their tenders accepted. On the face of this we are not in a position to hold that the grievance of the petitioners as regards choice of persons as purchasers who were willing to contribute to party funds has been proved.

13. With regard to the appointment of additional agents, the counteraffidavits show that only <ORG> had been appointed such an agent. It goes without saying that the appointment of such a corporation as an additional agent can in no way detract from Government monopoly. The counter-affidavits also show that no additional purchasers had been appointed.

14. With regard to the grievance that in some cases the bids of persons making the highest tenders were not accepted, the facts are that persons who had made lower bids were asked to raise bids to the highest offered before the same were accepted. Thus there was no loss to <ORG> and merely because the <ORG> preferred one tenderer to another no complaint can be entertained. <ORG> certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. Moreover, <ORG> is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tenderer.

15. We may in this connection refer to the manner in which the contracts current at the time of the filing of the petition had been settled. The counter-affidavit on behalf of the State of Orissa shows that forest and other lands producing Kendu leaves were divided into 180 units for the years 1969, 1970 and 1971. Three units out of these were reserved for <ORG>; the remaining 177 units for the public tender. Out of these 167 units were settled at the highest prices offered. 139 out of 167 were settled in favour of persons who actually made the highest tenders. 29 units were settled at the highest prices offered but in favour of other tenderers on consideration such as past experience, clean past records etc. One unit was settled by negotiation at a price higher than the highest tender received. In the case of 5 units persons who had offered inflated and speculative prices did not turn up and the units were settled with the next best tenderers. In the case of one unit on the highest tenderer withdrawing his tender it was settled in favour of another tenderer who was to pay the next highest price. In the case of another unit the highest tenderer who had been a defaulter in the previous year had his tender rejected and the unit was settled in favour of the tenderer who had offered the next highest price. In the case of one unit on the highest tenderer failing to furnish bank guarantee it was settled in facour of the next highest tendere. In the case of still another unit the claims of the sole tenderer who had filed a forged bank guarantee was not considered and the unit was settled by negotiation at the highest available price. Lastly in the case of six units no tenders had been received and these were settled by negotiation at the best available prices. The five writ petitions concerned only seven units in respect of which tendetrs which tenders of the petitioners had not been accepted.

16. In our view, the counter affidavit showing the manner in which the units were disposed of completely demolishes suggestions of fraudulent preference of one tenderer to another. As the petitioners have not been able to satisfy us that the amendments effected in 1969 either in the Act or in the rules are against the exercise of a monopoly in the business of Kendu leaves by <ORG> and as they have further failed to make out any case of arbitrary or mala fide action on the part of the State authorities, the petitions must be dismissed with costs.


PETITIONER: JULLUNDUR RUBBER GOODS MANUFACTURERS'ASSOCIATION Vs. RESPONDENT: UNION OF INDIA & ANR. DATE OF JUDGMENT: 25/08/1969 BENCH: <NAME>, A.N. BENCH: <NAME>, A.N. SHAH, J.C. RAMASWAMI, V. CITATION: 1970 AIR 1589 1970 SCR (2) 68 1970 SCC (2) 644 CITATOR INFO : R 1984 SC 420 (47) RF 1986 SC 649 (28) ACT: Rubber Act , s. 12 and Rules 33, 33A and 33D- Duty leviable from users of rubber-If violative of Art. 14 and Entry 84 of List I of VII Schedule of the Constitution. HEADNOTE: The appellants, an 'association of rubber chappal manufacturers who were using rubber in their manufacturing process, filed a petition in <ORG> challenging the levy and collection from the manufacturers of chappals, of a duty under s. 12 of the Rubber Act, 1947 aS amended by Rubber Amendment Act , 1960. The grounds of challenge were: (1) that the imposition on the appellants was outside the ambit of Entry 84 of List I of VII Schedule of the Constitution, which deals with the duties which can be levied on goods manufactured or produced in India; (2) Section 12(2) which provides the machinery for levy and collection has given uncontrolled and unbridled discretion to <ORG> and no guiding principle or policy was laid down in the Act to enable the <ORG> to choose between the owners of estates of rubber or the users of the rubber; and (3) the rules framed under the section do not indicate with sufficient clarity and precision on whom the levy was to be made. <ORG> dismissed the petition. In appeal to this Court, HELD: (1) (a) The excise duty could be imposed at the stage which was found to be most convenient and lucrative as that is a matter relating to the machinery of collection and did not affect the essential nature of the tax. Therefore, merely because the incidence of tax is shifted to the users of rubber under s. 12(2) which provides for the method of collection, the tax would not cease to be one falling within Entry 84.[73 B--C;F G] R.C. fall v. <ORG>,  Supp. 3 S.C.R. 436, followed. Re: the Central Provinces and Berar Act , 14 of 1938,  F.C.R. 18, applied. (b) If the duty is not excise duty because it is imposed on the user <ORG> would even then have legislative competence to provide for its collection from users, whatever be its nature, under Entry 97 of List I read with Art. 248 of the Constitution. [73 H; 74 A B] (2) The task of subordinate legislation necessary for implementing the purpose and objects of an enactment can be delegated, so long as the law has provided the method by which the. delegate can be controlled, there is a guidance for fixing rates of tax and there is a provision to see that reasonable rates are fixed. [74 <CITATION> ,  3 S.C.R. 251, followed. In the present case, the Act was enacted for the purpose of development of rubber industry under the control of the Union <ORG> has 69 enacted that <ORG> can levy and collect the duty either from the owner of the rubber estate or the user of the rubber. But the <ORG> is enjoined to do so in accordance with the Rules made by <ORG> under s. 25(1) (a) of the Act and which are placed before each House of <ORG> for approval. The <ORG> itself is a high powered body and all interests are represented among its members 'and all its acts are subject to the control of the <ORG> under s. 22 . [74 H; 75 Ii; 78 C] Further. the <ORG> is vitally interested in the collection of the duty and it has to see that such duty is collected without undue delay and proper expedition. The objects and reasons of the Amending Act (which can be taken into consideration for the purpose of seeing if there is any alleged infringement of Art. 14 ) show that the <ORG> was finding it difficult to levy and collect the duty from the owners and it was considered that it would be much more easy to collect it from the users, in accordance with the rules. Thus it is necessary that it should be left to the rule making authority to indicate the cases and the circumstances in which the duty was to be collected from the owner or user. [75 C; 77 H; 78 A B] Since the policy of the Act has been enunciated with sufficient clarity, and guidance has been furnished as to how the <ORG> should exercise its powers in the matter of levy, there is no discrimination and Art. 14 is not violated. <CITATION> ,  1 S.C.R. 65 and <CITATION> ,  3 S.C.R. 547, referred to. (3) A combined reading of rr. 33, 33A and 33D indicates that a definite provision is made with regard to the category of persons on whom the collection of the duty is to be made, namely, the users of rubber. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1220 of 1966. Appeal by special leave from the judgment and order dated April 6, 1965 of <ORG>, Circuit Bench at Delhi in Letters Patent Appeal No.. 58-D of 1966. <NAME>, <NAME> and <NAME>, for the appellant.

<NAME>, Attorney-General, <NAME>, <NAME> and <NAME>, for respondent No. 1. <NAME>, Attorney-General, <NAME>, <NAME>, <NAME> and <NAME>, for respondent No. 2. <NAME>, <NAME> and <NAME>, for the interveners.

The Judgment of the Court was delivered by <NAME>, J. This is an appeal by special leave from a judgment of <ORG> (Circuit Bench) Delhi in which the validity and legality of the levy of cess by way of excise duty on the rubber used by manufacturers of chappals under the provisions of the Rubber Act 1947, (Act XXIV of 1947) as amended, hereinafter called the Act, have been assailed.

M/s. Jullundur Rubber Goods <ORG> is an association of rubber chappal manufacturers at Jullundur in the State of Punjab. Its members, who manufacture chappals, are stated to use. about 15 to 20% of rubber in the process of their manufacture while the rest 'of the material used by them consists of various other articles. A petition was filed under Arts. 226 & 227 on behalf of the aforesaid <ORG>, the second petitioner being its Secretary, challenging the levy and collection from the manufacturers of chappals under the provisions of the Act, the Rules framed and the relevant notification issued thereunder of a duty as a result of the amendment made in s. 12 of the Act by the Rubber Amendment Act of 1960. A learned Single Judge dismissed the writ petition and his judgment was affirmed by a division bench of <ORG>.

The contentions which have been raised are: (1 ) the duty sought to be imposed under s. 12 as amended being outside the ambit of Entry 84 of List I in the Seventh Schedule to the Constitution is beyond the legislative competence of the <ORG>; (2) Section 12(2) suffers from the vice of excessive delegation. It confers uncontrolled and unrestricted discretion upon <ORG> to levy upon and collect duty of excise from either the owners of the rubber producing estates or the users so called manufacturers (of rubber) without specifying the circumstances under which it should be imposed upon the one or the other nor has any guiding policy or principle been laid down in the Act for making a choice. (3) In any case, the Rules which have been framed do not satisfy the provisions of s. 12(2) of the Act and do not indicate with sufficient clarity and precision on whom the levy is to be made and from whom the duty is to be collected as between the owners of the estates and the manufacturers. The relevant statutory provisions may first be noticed. In 1947 the Central legislature enacted The Rubber (Production and Marketing) Act, 1947. Its name was changed to Rubber Act 1947 by the Rubber (Production and Marketing) Amendment Act, 1954. The Act was enacted to provide for the development under the control of the Union of the rubber industry. Under s. 4 <ORG> was to be constituted. The functions of the <ORG> were enumerated in s. 8. It was to be its duty to promote by such measure as it thought fit development of the rubber industry. Under s. 10 it was obligatory on every person owning land planted with rubber plants to get himself registered as an owner by applying to the <ORG>. Section 12 provided for the imposition of rubber cess. Under s. 14 no person could sell or otherwise dispose of or buy or otherwise acquire rubber except in accordance with the terms of general or special license issued by the <ORG>. <ORG> was given the over-all control over the acts of the <ORG> by s.

22. Section 25 empowered <ORG> to make Rules. Prior to the amendment made by the Rubber Amendment Act of 1960 (Act XXI of 1960) the duty of excise was payable under s.12(2) by the owners of the estates on which rubber was produced and it was to be paid by' them to the <ORG> within one month from the date on which they received a notice of demand. By Act XXI of 1960 an important change was made which affected the manufacturers and the duty could be collected by the <ORG> either from the owners of the estates or from the manufacturers by whom the rubber is used.

At this stage the relevant provisions of the Act with which we are concerned may be reproduced :--

S. B(e) "manufacturer" means any person engaged in the manufacture of any article in the making of which rubber is used;"

(h) "rubber" means--

(i)

(ii)

(iii) latex, (dry rubber content) in any state of concentration, and includes scrap rubber, sheet rubber, rubber in powder and all forms and varieties of crepe rubber, but does not include. rubber contained in any manufactured article;"

S. 4(3 ) "The Board shall consist of-

(a) a Chairman to be appointed by the Central Government;

(b) two members to represent the State of Madras, one of whom shall be a person representing rubber producing interests;

(c) eight members to represent the State of Kerala, six of whom shall be persons representing the rubber producing interests, three of such six being persons representing the small growers;

(d) ten members to be nominated by <ORG> of whom two. shall represent the manufacturers and four labour; and

(e) three members of Parliament of whom two shall be elected by <ORG> and one by <ORG>; and

(f) the Rubber Production Commissioner, ex-Officio."

S. 12(4)"For the purpose of enabling the Board to assess the amount of duty of excise levied under the section--

(a) the <ORG> shall, by notification in the Official Gazette, fix a period in respect of which assessments shall be made; and

(b) without prejudice to the provisions of section 20 , every manufacturer shall furnish to the Board a return not later than fifteen days after the expiry of the period to. which the return relates, stating-

(i) in the case of an owner, the total quantity of rubber produced on the estate in each such period; Provided that in respect of an estate situated only partly in India, the owner shall in the said return show separately the quantity of rubber produced within and outside India;

(ii) in the case of a manufacturer, the total quantity of rubber used by him in such period out of the rubber produced in India."

The contention raised on behalf of the appellant- association is that under Entry 84 of List I in the Seventh Schedule to the Constitution the duties can be levied on goods manufactured or produced in India. Excise duty, it is pointed out, can be levied only on the actual producers and manufacturers of rubber but in the very nature of such duty it could not be imposed on users o.r consumers of that commodity. It is suggested that sub-s. (1 ) of s. 12 is the charging section and sub-s. (2) provides for the machinery for levy and collection of tax. But sub-section (2) cannot alter the substantive provision in the charging sub-section (1) and since the <ORG> has employed the words ':duty of excise" which have a well understood meaning the incidence of tax would fall only on the actual producers. Once the incidence of tax was shifted to the users the tax would cease to be one which would fall within Entry 84. In re the Central Provinces and Berar Act No.. XIV of 1938(1) Gwyer C.J. described "excise duty" thus:

"But its primary and fundamental meaning in English is still that of a tax on articles produced or (1) [1939] F.C.R. 18, 40-41.

manufactured in the taxing country and intended for home consumption".

The learned Chief Justice, however, proceeded to add that there could be no reason in theory why such duty should not be imposed even on the retail sale of an article if the taxing .Act so provided. It could obviously be imposed at the stage which was found to be most convenient and lucrative as that was a matter of the machinery of collection and did not affect the essential nature of the tax. Referring to this decision of <ORG> and several other cases it was observed in <CITATION> (1) at page 451:

"Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to-the machinery of collection for administrative convenience. Whether in a particular case the tax ceases to be in essence an excise duty, and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on a fair construction of the provisions of a particular Act".

The above statement of law in no way supports the argument that the excise duty cannot be collected from persons who are neither producers nor manufacturers. Its incidence certainly falls directly on the production or manufacture of goods but the method of collecting will not affect the essence of the duty. In our opinion sub-s. (2) of s. 12 provides for the method of collection as the excise duty can be collected either from the producers or from the manufacturers as defined by the Act which would include members of the appellant association who use rubber in the manufacture of chappals.

It seems to us that if the provisions of Entry 97 in List I in the Seventh Schedule as also the provisions of Art. 248 of the Constitution are kept in view the <ORG> would have legislative competence even with regard to the imposition of a tax which does not fall within Entry 84. It will be a kind of non-descripts tax which has been given the nomenclature of a duty of excise.

(1) [1962] Supp. 3 S.C.R. 436.

Sup. CI/70--6 Counsel for the appellant-association quite properly has not challenged this position but has merely sought to lay emphasis on sub-s.-( 1 ) being the charging section. We find it difficult to endorse the reading of sub-s. (1 ) and sub-s. (2) of s. 12 in isolation. Not only the statute but also, the section have to be read as a whole and together, and in our judgment whatever be the nature of duty, <ORG> would undoubtedly have legislative competence under Entry 97 of List I in the Seventh Schedule read with Art. 248 of the Constitution.

We may next deal with the question whether s. 12(2) suffers from the vice of excessive delegation and whether there has been violation of Art. 14 as uncontrolled and unbridled discretion has been conferred on the <ORG> to levy and collect the tax from either the producer or the manufacturer (the user of rubber). It is pointed out that there is no guiding principle or policy laid down in the Act to enable the <ORG> to make a choice between the two categories. The principles governing such questions have been laid down in several decisions of this Court. It is well established that essential legislative functions consist of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature. What can be delegated is the task of subordinate legislation necessary for implementing the purpose and objects of an enactment. Where legislative policy is enunciated with sufficient clearness or a standard is laid down the 'courts will not interfere. It will depend on consideration of the provisions of a particular Act including its preamble as to the guidance which has been given and the legislative policy which has been laid down in the matter. In a taxing statute the guidance may take the form subjecting the rate to be fixed by the local body to the approval of the Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature. The reasonableness of the rates may be ensured by providing Safeguards laying down the procedure for consulting the wishes of the local inhabitants. So long as the law has provided the method by which the local body can be controlled and there is a provisions to see that reasonable rates are fixed it can be said that there is guidance in the matter of fixing the rates for local taxation; vide <NAME>, C.J. in <CITATION> .(1) In s. 12(2) the <ORG> has made it quite clear that the <ORG> can levy and collect the duty of excise either from the owner of a rubber estate on which the rubber is produced or from the manufacturer by whom such rubber is used. The <ORG> has (1)  3 S.C.R. 251 at pp. 269-270.

further been enjoined to do so in accordance with Rules made in this behalf. The <ORG>, as constituted under s. 4 , has to be a high powered body and among its members those representing the rubber producing interests, the small growers, the manufacturers and the labour are included. It can, therefore, keep in view the interests of all concerned. AccOrding to the preamble of the Act it was meant for the development of the rubber industry under the control of the <ORG>. That is the main purpose for which the <ORG> has to function. All amounts paid to the <ORG> by <ORG> under s. 12(7) of the Act have to go to the general fund of the <ORG> under s. 9A . Section 12(7) provides that the proceeds of the duty of excise collected has first to be credited to <ORG> reduced by the cost of collection and then it has to be paid over by <ORG> to the <ORG>. The <ORG> is thus vitally interested in the collection of the duty and it has to see that such duty is collected without undue delay and proper expedition. It has also to look to the best possible method of realization. In the light of this scheme as embodied in the Act it is difficult to sustain the challenge on the ground of excessive delegation. The policy of the Act has been enunciated with sufficient clarity and the guidance has been furnished by the provisions to which reference has been made as to how the <ORG> should exercise its powers in the matter of levy and collection of tax. There is also another important safeguard which is contained in s. 22 of the Act. All acts of the <ORG> by virtue of that section shall be subject to the control of <ORG> which may cancel, suspend or modify any action taken by the <ORG>.

The provision in s. 12(2) that the <ORG> shall levy and collect the duty, in accordance with the Rules is another important safeguard against the <ORG> acting arbitrarily in the matter of collection of duty from the owners of the rubber estates or the manufacturers. These Rules are to be framed by <ORG> under s. 25(1)(xxa) which is to the following effect:

"the cases and circumstances in which the duty of excise under section 12 shall be payable by the owner and the manufacturers respectively, the manner in which the duty may be assessed, paid or collected, the regulation of the production, manufacture, transport or sale of rubber in so far as such regulation is necessary for the proper levy, payment or collection of duty;"

Section 25(3) makes it obligatory on <ORG> to place every rule before <ORG> for a specified period of 30 days and those Rules can be subject to criticism and can be modified or even be abrogated. Thus it is not possible to hold that the <ORG> has abdicated its functions in enacting s. 12(2) of the Act.

Learned Attorney General has relied on certain decisions of this Court according to which it can be left to the authority which has to levy and collect the tax to decide whether to collect from one category of persons or the other category where persons in both categories can be subjected to tax. In M.M. Ipoh & Ors. Income-tax Madras(1) the validity of s. 3 the Income-tax Act, 1922 was challenged on the ground that it was violative of Art. 14 of the Constitution. That section invested the taxing authority with an option to assess to tax the income collectively of the association of persons. The argument raised was that that Act set no principles and disclosed no guidance to the Income-tax Officer in exercising the option. The scheme of the Income-tax Act was considered and it was observed that the duty of the Income-tax Officer was to administer its. provisions in the interest of public revenue and to prevent evasion of tax and his function was mainly quasi- judicial. The decision of bringing to tax either the income of the association collectively or the shares of the members of the association separately was not final and was subject to appeal. It was held that the very nature of the authority exercised by the Income-tax Officer and his duty to prevent evasion or escapement of liability constituted adequate enunciation of principles and policy for his guidance. <CITATION> (2) the validity of certain provisions of the Forward Contracts (Regulation) Act , 1952 was assailed. In regard to s. 15 of that Act the argument was that it conferred unguided and arbitrary power upon <ORG> to choose any commodity it liked and bring the Act into operation in respect of the commodity which the <ORG> chose at any time it pleased. In this manner the interest of the traders could be vitally affected by rendering illegal a contract which was. perfectly legal when it was entered into. This Court referred to the Report of the Expert Committee on the Bill which became an Act, dealing with the economic implications of forward trading and for the necessity of regulating such- contracts in particular goods. It was observed that the suitability of a commodity for forward trading depended on factors which were far from static and which were subject to variations over a period of, time. A continuous assessment was required of all elements which would necessitate regulation. All this could not. be specified in a statute. It was for that reason that <ORG> had been constituted on whom the duty had been cast of advising the <ORG> on the situation as it existed from time to time. The following observations are pertinent and may be reproduced: (1)  1 S.C.R. 65. (2)  3 S.CR.

"In our opinion, the selection of the commodity the regulation of forward trading in it or of prohibition such trading can only be left to the Government and the purpose for which the power is to be used and the machinery created for the investigation furnish sufficient guidance as to preclude any challenge on the ground a violation of Art.

In the statement of objects and reasons appended to Bill No. 32 of 1960 when amendments were made in s. 12 of the Act by the Rubber Amendment Act , 1960, it was stated inter alia:

"This method of collection of the cess provided under the Act has led to considerable evasion of cess by the owners of the estates, either by evasion of registration or by failure to submit correct returns or any returns at all. There are about 26,000 estates under production in the country and most of them are small holdings. Many of them do not render returns of production to <ORG> and thus evade payment of duty. From October, 1947 to December 1954, it was found that 20,608 tons of rubber escaped assessment and the <ORG> suffered during the period a loss Rs. 2,30,805. The Rubber <ORG> estimates that under the present system there is no likelihood of more than 65 per cent of the potential revenue being realised each year.

With a view to improving the efficiency of collection, it is proposed to amend section 12 of the Act so as to enable the cess to be collected either from the owners or the manufacturer who ultimately consumes the rubber produced in the estates. There are at present 347 registered rubber manufacturers in the country. It is felt that it would be far more easy to collect the cess from a small number of manufacturers than from about 26,000 producers whose number will increase year by year. The proposed amendment of section 12 in the amending Bill is an enabling measure for the administrative change in the method of collection being contemplated."

Although it may not be permissible to take the statement of objects and reasons into consideration for construing the provisions of an Act the facts contained in such a statement can certainly be looked at for the purpose of seeing any alleged infringement of Art. 14. It is quite clear from the data given that <ORG> was finding it difficult to levy and collect the duty from the owners of rubber estates and it was considered that it would be much easier to collect the same from the manufacturers. The <ORG> was, therefore, to collect the duty in accordance with the rules made in this behalf by <ORG>. Thus it was necessary, in view of the entire facts and circumstances stated before, that it should be left to the rule-making authority to indicate the cases and the circumstances in which the duty of excise was to be collected from the owner or the manufacturer respectively. It was open to the rule making authority to vary the rules according to the changing circumstances and conditions. The <ORG> which was a high powered body was mainly responsible for collection of the duty and the rules would naturally be made in consultation with it from time to time. We are unable to see how the challenge on the ground of discrimination under Art. 14 can be sustained in view of all these reasons. It does not appear that the <ORG> can 'discriminate in an arbitrary manner between owners of rubber estates and the manufacturers or between persons inter se of the same category.

<ORG> has framed rules pursuant to the power conferred by s. 25 of the Act. Unfortunately the rules relating to furnishing of returns and collection of duties are not properly worded and suffer from lack of clarity. Under Rule 33 the <ORG> can call for information and documents from owners of rubber estates or any licensed dealer or manufacturer relating to the stock of rubber held and sale of rubber etc. Under el. (e) all manufacturers have to submit half yearly returns in form M showing the total quantity of all rubber purchased or otherwise acquired and consumed or used in the process of manufacture. Rule 33A provides for production of accounts by an owner if he fails to furnish in time the return referred to in sub-s. (4) of s. 12 or if he furnishes a defective return. The <ORG> can, after checking the amounts and after, making such further enquiry as it may deem fit assess the amount payable under sub-s.(2) of s. 12 . Similar provision is made with regard to manufacturers by Rule 33B. Rule 33D, however, is material and may be reproduced:

(1 ) "Every manufacturer shall by demand notice sent through registered post or in such other manner as the <ORG> may direct be intimated of the amount assessed on the quantity of rubber acquired during the periods specified in rule 33(e). On receipt of such notice, the manufacturer shall pay to the <ORG> the amount specified therein either in cash at the <ORG>'s office at Kottayam or by money order or by bank draft or .cheque duly crossed and payable at Kottayam to the Secretary of the <ORG> within 30 days of the receipt of the said notice.

(2) On such demand being made, if a manufacturer fails to pay the amount within the due date, the Board may take steps to report the fact to the Central Government or <ORG> concerned for recovery of the outstanding amount as an after of land revenue."

Now the above rule seems to contemplate the filing of return both by the owners of rubber estates and manufacturers. But under Rule 33D the demand notice can be sent only to a manufacturer on receipt of which he must make payment to the <ORG> of the amounts specified therein. On his failure to make such payment the <ORG> can take steps for recovery of the amounts due as arrears of land revenue by reporting to <ORG> or <ORG> as the case may be There is no such procedure prescribed with regard to owners of estates. It would follow that under the rules the demand notice is to be sent only to the manufacturers and the amounts of duty are to be realised from them alone. The substantive provisions of sub-ss. (4), (5) and (6) of s. 12 also contemplate assessment being made with regard to the returns to be furnished by owners and manufacturers. Any person aggrieved by an assessment has been given the right of appeal to the District Judge. But as pointed out before, there is no provision either in the statute or in the rules for a demand to be made and a coercive process to be employed in the event of failure to make the payment. That is done by Rule 33D alone from which it would be reasonable to conclude that under the rules it is only the manufacturers who are liable to pay the amount of duty. The rules can, therefore, be said to make a definite provision with regard to the category of persons from whom the collection of the duty is to be made, namely, the manufacturers.

For all the reasons given above the appeal fails and it is dismissed with costs.

<ORG> dismissed.


JUDGMENT <NAME>, J.

1. This is an appeal by special leave arising out of a land acquisition proceeding. The land measuring 28 bighas and 18 biswas situated within the municipal limits of the town of Muzaffarnagar in the State of Uttar Pradesh was sought to be acquired by a notification issued on the 25th November, 1948 under Section 4 of the Land Acquisition Act. The land was needed for <ORG>. Out of the acquired are a of the land a portion measuring 1 bigha and 4 biswas belonged to one <NAME>; the rest belonged to appellant <NAME>. The total area belonging to the said appellant (hereinafter in this judgment he alone will be referred to as the appellant) was 67, 872 sq. yards. Out of this, land measuring 61, 012 sq. yards was in possession of the tenants and the balance 6, 860 sq. yards was in khas possession of the appellant. The appellant in the year 1942 pursuant to an agreement of sale executed by his vender had purchased the land @ 2 annas per sq. yard. But there was a lot of litigation between the parties as a subsequent purchaser came into the scene and ultimately the appellant succeeded in this Court in getting the land after a lot of expenses. The Collector's award determined the compensation payable at 2 annas per sq. yard. Reference were asked for by the appellant, the tenants as else by said <NAME>. <NAME> had purchased his land by sale deed dated May 15, 1946 Ext. 7 @Rs. 1/6/per sq, yard. In his reference the District Judge allowed him compensation at the said rate and since the amount involved in his case was small, he did not go up in appeal to <ORG>. The learned District Judge of Muzaffarnagar who decided the reference fixed 6 anaas per sq. yard as the value of the appellant's land both in his khas possession and in possession of his tenants. The value of 61,02 sq. yards of tenants land at the said rate came to Rs. 22,869/8/- and the share of appellant <NAME> @ 10 annas in a rupee was fixed at Rs. 14,296/11/- and that of the tenants at 6 annas in a rupee came to Rs. 8,579/13. The value of 6,860 sq. yards of Khuskasht of the appellant at 6 annas per sq. yard came to Rs. 2,572/8/-. Thus the total value to which the appellant was held entitled came to Rs. 16, 872/3/. Adding 15% to this amount the total amount payable to <NAME> came to Rs. 19.403/-. Deducting the amount already awarded by the Collector the balance payable under the judgment of the District Judge came to Rs. 9, 525/7/-. It was directed that he was entitled to get interest @ 6% per annum from the date of his dispossession i.e. 1st May, 1951 to the date of payment.

2. An appeal was taken to <ORG> from the decision of the District Judge. Although the appellant had claimed in the reference the value of the land @ Rs. 6/- per sq.yard. in appeal the total extra claim was limited to Rs. 1,25,000/- over and above the sum of Rs. 19.403/- determined by the District Judge as the sum payable to the appellant. In other words, roughly speaking, in <ORG> the appellant confined his claim as regards the value of the land to Rs. 2/12/- per sq. yard claiming the full amount for his Kbudkasht land and 10 annas in a rupee in respect of the tenants' land. On that basis adding 15% the total claim came to Rs. 1,44,403/-thus the value of the appeal was confined to Rs. 1,25,000/ only.

3. <ORG> has dismissed the appeal of the appellant in toto. In our opinion it was a fit case where the appeal ought to have been substantially allowed and by committing obvious error in appreciation of the legal position and the facts and circumstances of the case <ORG> maintained the valuation fixed by the District Judge.

4. The site plan which is a part of the record of the case shows that the land in question is situated to the North of Bhopa Bijnor Road and to the East of the Railway line which runs North to South crossing the said road at a point which is near Plot No. 110 to its West and Plot No. 220 to its East. The main Basti is to the West of the Railway line. But more and more land were required for building purposes due to the extension of the town as also due to influx of a large number of refugees from Pakistan in the year 1947. They came to the town of Muzffarnagar in large numbers. At the relevant time the land to the East of the Railway line was mostly agricultural and there was little habitation. Very near the North of the land there was a bungalow of <ORG>, It will appear from the <ORG>'s application dated March 11, 1947 as also from the report of the Sub-Divisional Officer who was the Land Acquision Officer that the land was class to the inhabited area of New Mandi and was the best of all other available lands from the point of its hygienic conditions and healthy enviranments, The Sub-Divisional Officer had summed up his report thus:

...I have come to the conclusion that due to the acute housing problem in this thickly populated town which is not only a big commercial and business center of the western districts of U.P. but has also attracted substantially a large number of refugees there is a great dearth of houses and the acquisition of the land in question is essential as it is just in the heart of ever growing locality of this town....

5. As noticed by <ORG> the land had certain disadvantages also. The level of the land was lower than the level of the Bhopa Road: during rainy season water collected on it. There were some pits here and there, which needed filling up. Nonetheless the value fixed by the <ORG> below, in our judgment is too and unjust. If these defects would not have been there the value of the land would have been not less than Rs. 5/- per sq. yard. In any event we shall immediately show that the value cannot be less than Rs. 2/6/- per sq. yard.

6. The market value of the land had to be fixed as prevailing on the date of the notification under Section 4 of the Land Acquisition Act, which as already stated, was issued on November 25; 1948. It would appear from the site plan that <NAME> land was not abutting the Bhopa Road although it was near it. It was land looked as it was surrounded on all sides by the appellant's land in question. <NAME> had purchased his land by Ext. 7 the sale deed dated 15-5-1946 @ Rs. 1/6/- per sq. yard. We find from the records that land comprised in plot No. 110 which is adjacent west to the Railway line was purchased by sale deed dated 15-6-1945 Ext. 11 @ Rs. 5/- per sq. yard. It was resold by sale deed dated 4-10-1948 Ext. 12 - Rs. 10/- per sq. yard. It would thus be seen that the price of the land in the locality was doubled in the course of three years near about the time the notification under Section 4 had been issued. Thus the value of the land in question could be taken at Rs. 2/12/- per sq. yard on the basis of <NAME> sale deed. But we are taking not the double figure because the doubling of the price in regard to plot No. 110 was in respect of a land which was to the west of the Railway line. Ext. 40 is a sale deed dated 15-2-1947 which is in respect of a small piece of land to the South of the Bhopa Road but very near the land in question. This sale deed shows the sale price of the land at Rs. 10/- per sq. yard. We leaving this sale deed out of consideration ,as the area covered by it very small being only 424 sq. yards. But <ORG> was not right in completely brushing aside the sale deed dated 11.3.1948. Ext. 9 by which about 5 bighas of land in plot no 220 was sold approximately @ Rs. 7/- per sq. yard. This sale deed has been rejected on the ground that plot No. 220 is near the Railway crossing, it contained a mango grove and that It was a small plot compared to the land in question. We are not impressed by any of these reasons. Since the plot is to the east of the Railway line its nearness to the Railway crossing cannot bring about a huge difference in value in comparison with the appellant's land. So also the existence of the mango grover cannot justify the large difference between Rs. 7/- per sq. yard and 6 annas per sq. yard. It is not a small plot of land. Although it is smaller in area than the appellant's land, yet it is big enough for throwing light on the prevailing market value of the land in the locality at the relevant time.

7. Appellant <NAME> was Vice-President and Secretary of <ORG>, Muzaffarnagar. For the purpose of the <ORG> a large chunk of his land situated further east was acquired in the year 1955. The appellant agreed before the Acquisition Officer to accept the price of the land for the purpose of the <ORG> @ 5 annas per sq. yard. This seems to have heavily weighed , with the <ORG> below in fixing 6 annas per sq. yard as the value of the land in question. But in our opinion wrongly. The appellant and family were interested in the establishment of the <ORG>. <NAME> was the Vice President and the Secretary Obviously, therefore, he therefore, he accepted a nominal price by way of compromise before the Land Acquisition Officer as a good gesture and benevolent disposition. He did contest the valuation matter nor did he ask for any reference. In respect of the land in question he had already started making his claim by way of reference and claimed Rs. 6/- per sq. yard. It does not stand to reason, therefore, that he would accept 5 annas per sq. yard for the <ORG> land thinking that was the proper market value of the land in or about the year 1955.

8. For the reasons stated above we fix the market value of the land in question prevailing at the relevant time at Rs. 2/6/- per sq. yard that is to say the appellant is entitled over and above the amount fixed by the District Judge an extra rate of Rs. 2/- per sq. yard. In respect of his land. The value of his Khuskasht land measuring 6,860 sq. yards will be Rs. 13, 720/-. The value of 61,012 sq. yards, the tenants land, will be Rs. 1,22,024/-. Calculating it at the rate of 10 annas in a rupee the value of the appellant's share will be Rs. 76,265/-. The total value of this land thus comes to Rs. 89,985/-. Solatium of 15% on the said amount comes to Rs. 13,497/75 paise. Thus the total extra amount awarded by us over and above the amount awarded by the <ORG> below comes to Rs. 1,03,482. 75 paise. Thus the total extra amount awarded by us over and above the mount awarded by the <ORG> below a comes to Rs. 1.03,482.75 paise. The appellant will be entitled to interest on this amount also @ 6% per annum from the date of dispossession i. e. 1st may, 1951 till the date of payment. The appeal is accordingly allowed in part and the judgments of the <ORG> below are modified. The appellant will also be entitled to get his proportionate costs in <ORG> as also in this <ORG>.