PETITIONER: COMMISSIONER OF INCOME-TAX, <NAME> Vs. RESPONDENT: <ORG>. DATE OF JUDGMENT: 10/04/1964 BENCH: <NAME>, K. BENCH: <NAME>, K. SHAH, J.C. SIKRI, S.M. CITATION: 1964 AIR 1722 1964 SCR (7) 693 CITATOR INFO : R 1965 SC 321 (15) R 1966 SC1053 (17) R 1966 SC1250 (6) F 1967 SC 444 (12) R 1979 SC1291 (8) F 1982 SC 757 (8) ACT: Income Tax-Assessee treated as agent - Estate duty of non- resident paid by assessee-If an allowable deduction-Ex- pression "for the purpose of the business"-Meaning of Indian Income-tax Act, 1922 (11 of 1922), s. 10(2)(xv)- Estate Duty Act , 1953 , s. 34 . HEADNOTE: For the two accounting periods the assessee, a resident company, incorporated outside India paid -estate duty payable on the death of its certain share holders not domiciled in India and debited the said amounts to revenue in its accounts in ascertaining the profits and gains of its business for the said years. The Income-tax Officer included the said amounts so paid towards estate duty in the profits and gains of the company for the said two accounting periods and assessed the company to income-tax for 1955-56 and 1956-57 on that basis. The appeals by the assessee to the Appellate Assistant Commissioner were dismissed but on further appeal, <ORG> set aside the said orders and held that the assessee was entitled to deduct the said amount in computing its profits. On an application by the Commissioner of Income-tax, the <ORG> stated a case under s. 66(1) of the Act to <ORG> and referred the following question of law for its opinion: "Whether on the facts and in the circumstances ,of the case, the estate duty paid by the company under s, 84 ,of the Estate Duty Act , 1953, is a revenue expenditure deductible in computing the assessee's business income for the ,assessment years in question." <ORG> agreed with the view of the <ORG> and answered the question in the affirmative. On appeal by special leave it was urged on behalf of the appellants, (1) that the sum paid by the assessee under s. 84 of the Estate Duty Act were not expenditure of the assessee company and therefore, they could not be deducted from its profits in computing its assessable income under s. 10(2)(xv) of the Act; and (2) that even if it was revenue expenditure, it was not laid out or expended wholly or exclusively for the purpose of the assessee's business within the meaning of the said sub-clause. Held: (i) There was nothing on the record to show whether in England, where the concerned share holders died, the resident company could recover the amount representing the estate duty paid by it in India from the legal representative of the deceased share holders. Therefore, the assessee who, as a statutory agent paid to the <ORG> the estate duty, could not recover the same from the legal representative of the deceased non-resident share holders. In that situation the company would be out of pocket to the extent it paid the estate duty of the said persons. Therefore, it cannot be held that the amounts paid by the assessee towards estate duty were not expenditure incurred by it, but only amounts paid by it on account with a right to recover the same from the persons on whose behalf it paid. (ii)The expression" for the purpose of the business"in s.10(2) (xv) of the Act is wider in scope than the expression "for the purpose of earning profits". Its range is wide: it may 694 take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre- condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for carrying on the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory; in that event, he pays the amount on behalf of another and for a purpose unconnected with the business. In the present case, the amounts in question were paid by the assessee as a statutory agent to discharge a statutory duty unconnected with the business, though the occasion for the imposition arose because of the territorial nexus afforded by the accident of its doing business in India. Therefore, it must be held that the estate duty paid by the respondent was not an allowable deduction under s. 10(2)(xv) of the Act. Case law reviewed. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 384 and 385 of 1963. Appeals by special leave from the judgment and Decree dated January 19, 1961, of <ORG> in Income-tax Referred case No. 20 of 1959.

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

<NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the res- pondents.

April 10, 1964. The judgment of the Court was delivered by <NAME>, J.-These two appeals by special leave raise the question whether the estate duty paid by the resident <ORG>, hereinafter called the assesses, incorporated outside India, on behalf of members not domiciled in India is deductible from its profits in computing its assessable income under s. 10(2)(xv) of the Indian Income-tax Act, 1922, hereinafter called the Act.

The material facts are not in dispute and they may be briefly stated. The assesses is a resident Company incorpo- rated outside India. Most of its shareholders are in the United Kingdom. During the accounting period ending March 31, 1955, it paid pound 1,302-9-4 and pound 1,303 towards estate duty which was payable on the death of certain share- holders who were not domiciled in India. The assessee debited the said amounts to revenue in its accounts in ascertain-

ing the profits and gains of its business for the said year. Similarly, for the accounting year ending March 31, 1956, it paid a sum of pound 3,809-1-5 towards estate duty payable on the death of certain shareholders and debited the said amount to revenue in its accounts in ascertaining the profits and gains of its business for that year. The Income-tax Officer included the said amounts so paid towards estate duty in the profits and gains of the company for the said two accounting periods and assessed the company to income-tax for 1955-56 and 1956-57 on that basis. The appeals preferred by the assessee to the Appellate Assistant Commissioner were dismissed. On further appeal to <ORG> it held that the assessee was entitled to deduct the said amount in computing its profits; and on that finding it set aside the orders of the Appellate Assistant Commissioner. On an application made by the Commissioner of Income-tax, <ORG> stated a case under s. 66(1) of the Act to <ORG>, and referred the following question of law for its opinion:

"Whether on the facts and in the circumstances of the case, the estate duty paid by the <ORG> under Section 84 of the Estate Duty Act, 1953, is a revenue expenditure deductible in computing the assessee's business income for the assessment years in question?"

<ORG> agreed with the view expressed by <ORG> and answered the question referred to it in the affirmative. The present appeals by special leave have been filed against the said order of <ORG>. Mr. <NAME>, learned counsel for the Commissioner of Income-tax, raised before us the following two points; (1) The sums paid by the assessee under s. 84 of the Estate Duty Act, 1953, are not expenditure of the assesseeCompany and, therefore, they cannot be deducted from its profits in computing its assessable income under s. 10(2)(xv) of the Act; and (2) even if it is revenue expenditure, it is not laid out or expended wholly or exclusively for the purpose of the assessee's business within the meaning of the said sub-clause.

Mr. <NAME>, learned counsel for the respondent, supported the judgment of <ORG> and contended that the said estate duty was revenue expenditure incurred by the assessee as it was put out of pocket to that extent and that it had not been proved that the assessee could legally recover the said amounts from the legal representatives of the deceased shareholders. He further argued that he said expenditure was wholly and exclusively for the pur- pose of the assessee's business within the meaning of s.10(2)(xv) of the Act inasmuch as it discharged its statu- tory obligation in order to preserve the assets of the com- pany.

The question raised turns upon the provisions of s. 10(2)

(xv) of the The act. It reads :

Section 10 . Business-The tax shall be payable by an assessee under the head "Profits and gains of business, profession or vocation" in respect of the profits and gains of any business, profession or vocation carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely:-

(xv) any expenditure (not being an allowance of the nature described in any of the clauses (1) to (xiv) inclusively, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly or exclusively for the purpose of such business, profession or vocation."

The first facet of the argument turns upon the question whether the estate duty paid by the assessee is an expendi- ture incurred by it within the meaning of the said provision. Under s. 5 of the Estate Duty Act the property of every person dying after the commencement of the said Act shall be liable to a duty called "estate duty" at the rates fixed in accordance with s. 35 thereof. Under s. 21 of the said Act there shall not be included in the property passing on the death of the deceased, inter alia, movable property situated outside the territories to which the said Act extends at the time of the death of the person. Under s. 53 of the said Act, where any property passes on the death of the deceased, every legal representative to whom such property so passes for any beneficial interest in possession or in whom any interest in the property so passing is at any time vested and others mentioned in the section shall be accountable for the whole of the estate duty on the property passing on the death. Section 84 thereof is aimed to reach the property of a member of a company dying outside India: the section before amendment read:

Section 84 . Company to furnish particulars of deceased inemberrs to the Controller-

Where a company incorporated outside India carried on business in the territories to which this Act extends and has been, treated for the purposes of the Indian income-tax Act, 1922 (Xi of 1922),as resident for two out of three completed assessments immediately preceding, such company shall, within three months of the receipt of intimation of the death of a member dying after the commencement of this Act, fur- nish to the Controller such particulars as may be prescribed in respect of the shares of the deceased member in the company, and shall be liable to pay estate duty at the rates mentioned in Part III of the Second Schedule, on the principal value of the shares held by the deceased in the company except in cases where the deceased member was a person domiciled in India and the person accountable has obtained a certificate from the Controller showing that either the estate duty in respect thereof has been paid or will be paid or that none is due, as the case may be."

Under this section in the circumstances mentioned therein a company is liable to pay estate duty in respect of the shares of the deceased member of the company on the princi- pal value of the share held by the deceased in the company: under this section a statutory obligation is imposed on the company to pay the estate duty on the shares of a deceased non-resident member. If such a member of the company had died in India, subject to the conditions mentioned in the section, the company would not be liable to pay the estate duty payable on the shares held by the deceased. In substance the company is made a statutory agent to pay the said duty payable in respect of property belonging to another. Section 77 of the Estate Duty Act enables a person authorised or required to pay estate duty in respect of any property to transfer the said property for the purpose of paying the duty. This section cannot have extra-territorial operation. Prima facie the company cannot transfer the shares or the property of a person domiciled in a country outside India. Nor sub-s. (2) of s. 77 , which says that a person having an interest in any property, who pays the estate duty in respect of that property, shall be entitled to the like charge, as the estate duty in respect of that property had been raised by means of a mortgage to him, has application, for it cannot be said that the company has any legal interest in the shares owned by a third party. That apart, -the said sub-section also cannot have extra- territorial operation. Nothing has been placed before us to enable us to ,.come to the conclusion whether in England, where the concerned shareholders died, the resident company could recover the amount representing the estate duty paid by it in India from the legal representatives of the deceased share- holders. We, therefore, assume that the assessee who, as a statutory agent pays to the <ORG> the estate duty, cannot recover the same from the legal representatives of the deceased non-resident shareholders. In that situation the company would be out of pocket to the extent it paid the estate duty of the said persons. We cannot, therefore, accede to the contention of the learned counsel for the appellant that the amounts paid by the assessee towards estate duty were not expenditure incurred by it, but only amounts paid by it on account with a right to recover the same from the persons on whose behalf it paid. The next question is whether the said expenditure was expended wholly and exclusively for the purpose of the business of the assessee within the meaning of s. 10(2)(xv) of the Act. The crucial words of the section relevant to the present enquiry are "for the purpose of such business." Subsection (2) cl. (xv) is a residuary clause which provides for allowing the items of business expenditure not covered by the other clauses of sub-s. (2) of s. 10 of the Act. Beforethe Amending Act of 1939, the language of the predecessor of this clause read thus:

" not being in the nature of capital gains incurred solely, for the purpose of earning such profits or gains."

The Amending Act of 1939 substituted the present clause and made it more comprehensive by using the expression "for the purpose of such business". Some of the decisions cited at the <ORG>, both English and Indian, throw some light on the construction of the said expression and we would, therefore, briefly notice them.

<ORG> in Strong and Company of Romsey, Limited v. <NAME>) construed a corresponding provision in the Income-tax Act of the United Kingdom, the, relevant part whereof read: "money wholly and exclusively laid out or expended for the purposes of such concern."' There, a brewing company, which also owned licensed houses in which it carried on the business of innkeepers, incurred damages and costs to the amount of pound 1,490 on account of injuries caused to a visitor staying at one of its houses by falling in of a chimney. <ORG> held that the damages and costs were not allowable as a deduction in computing the company's profits for income-tax purposes. The learned Lord Chancellor said:

"They cannot be deducted if they are mainly incidental to some other vocation, or fall on the-, (1) (1906) 5 T.C. 215, 219, 220.

trader in some character other than that of a trader."

Lord <NAME>, whose dictum was the basis for some of the subsequent decisions in that country, referring to the expression "for the purpose of trade" observed as follows:

It is not enough that the disbursement is made in the course of, or arises out of , or is connected with, the trade or is made out of the profits of the trade. It must be made for the purpose of earning the profits."

Lord <NAME>'s definition appears to be much narrower than that of the Lord Chancellor, for the former restricts the expression to mean that the expenditure should have been made only for the purpose of earning profits. <NAME>, J., in <NAME> v. <ORG>), noticed that the qualifictaion "for the purpose of earning profits" was a slight expansion of the words of the statute, though he ex- pressed the view that it brought out the real import of the relevant section. <CITATION> )(2), in disallowing the deduction claimed by a company of a sum set aside for the relief of ,the invalid employees, <NAME>, J., applied the test whether the said expenditure incurred by the company was for the purpose of earning profits. In <NAME> v. <ORG>), the court allowed a deduction in respect of sums paid by the respondent-firm in discharging the liabilities of the business outstanding at the date of the said respondent purchased the business from a third party on the ground that the said expenditure, having been incurred for the purpose of preserving the goodwill and for ensuring the continuity of supply of raw-material and labour, was wholly and exclusively laid out for the purpose of its business. After referring to earlier decisions, <ORG>, made the following observation:

Here is a payment made in the circumstances of this case in order to ensure a supply of leather for the business, a payment made in order to ensure a continuance of labour willing to be employed in this business, and payment for rent in order to ensure that the landlord's consent to assignment of the premises, of the premises in which the business was carried on, should not be re- fused. I find it quite impossible to say that there is no evidence to justify those findings."

(1) 17 T.C. 59. 65. (2) (1924) 8 T.C. 678. (3) (1949) 30 T.C. 460. 466.

Here it will be noticed that the learned Judge went beyond the limited scope given by Lord <NAME> to the expression in the statute and did not confine it to the amounts spent only for earning profits, but to expenditure incurred in connec- tion with the business. Where a company incurred an ex- penditure in defending its title to property, it was held in <ORG>) v. <ORG>) that the said amount was spent wholly and exclu-- sively for the purpose of the company's trade and was, therefore, an allowable deduction for the purpose of com- puting the profits of the company for income-tax purposes. This decision gives a more liberal meaning to the expression "for the purpose of the trade" than that given by Lord <NAME>. "Purpose" of the trade includes the purpose to pro- tect the assets of the company carrying on the trade. <ORG> resurveyed the legal position in <ORG>) v. <ORG>) in the context of the questions whether the expenditure incurred by a com- pany engaged in sugar refining in a propaganda campaign to oppose the threatened nationalization of the industry was, an admissible deduction. Lord <NAME>, after referring to the relevant case-law and to Lord <NAME>'s formula, made the following observations:

"..........this seeems to me to be an assumption wholly unwarranted by the evidence. There is no evidence that a transfer of the assets to a national body or authority would not destroy or adversely affect the company's business................. It is clear on the authorities that Lord <NAME>'s formula includes expenditure for the purpose of' preventing a person from being disabled from carrying on and earning profits in the trade."

Lord <NAME> laid down the relevant test thus:

"A general test is whether the money was spent by the person assessed in his capacity of trader or in some other capacity-whether on the one hand the expenditure was really incidental to the trade itself or on the other hand it was mainly incidental to some other vocation or was made by the trader in some other capacity than that of trader."

This decision also restated the two tests namely (i) that the expenditure should be for carrying on the business to earn profits in the trade, and (ii) that the expenditure shall' be incurred by the assessee in his capacity of a person (1) (1942) 10 T.T.R. (Suppl.) 1, S.

(2 ) (1954) 26 I.T.R. 195, 205, 206, 219.

carrying on the business. <NAME>, M.R., in <ORG> v. Keene(1) reaffirmed the second test in the following words:

"I find, however, in <ORG> case(2) what appears to me to be a clear answer to the present appeal. It is, I think, a matter not of dictum but of decision in that case that an expense is not deductible if it falls on a trader in some character other than that of a trader. This was the ground of the opinion of Lord <NAME>, L.C., with which Lords <NAME> and <NAME> agreed. Their Lordships held that the expense there in question fell upon the appellants in their character not of traders but of householders."

In <NAME> v. <ORG>), the question was whether a brewery company, which was owner and lessee of a number of licensed premises where business was carried on on the tide-house basis, was entitled to deduct for the purposes of income tax its liability in respect of compensation fund charges under the, Licensing Act, 1904. It was contended by the <ORG> that the liability to which the <ORG> became subject was in its capacity as landlord of the property and not as trader carrying on the trade of brewer. When the case ultimately came up before <ORG>, the <ORG> was equally divided. The view of two of the members who agreed with the view of <ORG> prevailed. The basis of the judgment was that the liability was wholly and exclusively related to the carrying on of the company's business, because on the facts of that case the company had assumed the position of landlord for the purpose of its trade. If the finding was that the company paid the tax in its capacity as landlord as opined by the learned Lords who dissented, the result would have been the other way. In <ORG> (Buenos Aires) Ltd. v. <NAME> (H.M. Inspector of Taxes)(4), <NAME>, J., covered the entire ground over again in the context of a question whether the appellant-company therein which was incorporated and resident in the United Kingdom and carrying on the business of a large general stores in Buenos Aires, having paid in Argentina a tax known as the "substitute tax" to which it was liable, could claim deduction under the Income-tax Act , 1952 (15 and 16 Geo. VI and 1 Eliz. 1, c. 10, s.137 (a)). The learned judge held on the facts of that case (1) (1947) 30 T.C. 298, 316. (2) (1905) 5 T.C. 215. (3) (1910) 5 T.C. 568.

(4) Appeal No. 2048 (Ch. D.) decided on 25th March, 1963 (unreported).

that incurring liability for that tax was a pre-condition of the Company's earning profits in the Argentina, for without incurring liability for that tax the Company could not carry on business in the Argentina at all. On that finding the learned Judge came to conclusion that it was a liability which the Company had undertaken for the purpose of its trade, and was, therefore, a payment made wholly and ex- clusively for the purpose of the company's trade. It will be seen that in that case the tax was paid by the Company in its capacity as company doing business and unless that tax was paid the company could not carry on its business. The two tests laid down are satisfied.

Pausing here, we shall briefly recapitulate the legal posi- tion in England. The relevant wordings of section with which the English Judges were concerned are, in effect, similar to the terms of s. 10(2)(xv) of the Indian Income-tax Act, 1922. The test laid down by Lord <NAME> in <ORG> v. <NAME>), namely, the disbursement must be made for the purpose of earning profits, has been accepted and followed throughout, though the content of that test has been expanded to meet diverse situations. Broadly, the English courts applied two tests to ascertain whether a deduction was permissible or not, namely. (i) whether the expenditure was incurred for the purpose of carrying on of the business and for removing obstacles and impediments in the conduct of the business, and (ii) whether the assessee paid the amount in his capacity as businessman or in his personal capacity. Now coming to the Indian decisions, a Devision Bench of <ORG> in <CITATION> (2 ) held that the share of bonus voluntarily paid by a company, which held the managing agency of another company, to some of the officers of the managed company was a permissible deduction under s.10(2)(xv) of the Act. The reason for the conclusion is stated thus:

"But having considered the whole case and the question submitted to us I am satisfied that looking purely at it from the point of view of commercial principles what the assessee company has done is something which had as its object increasing the profits of <ORG> nd thereby increasing its own share of the commission."

(1) (1906) 5 T.C. 215.

(2) (1950) 18 I.T.R. 460, 472.

<CITATION> (1), where the agent of the assessee misappropriated his money and the assessee claimed the part of the amount misappropriated and not recovered from the agent as a deduction under s. 10(2)(xv) of the Act for the purpose of income-tax, this Court held that it was not allowable under s. 10(2)(xi) or s.10(2)(xv) of the Act. <NAME>j., observed :

"The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2) , whether it is admissible or not will depend, on whether having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and to be incidental to it."

This decision, though not direct in point, lays down the principle that an expenditure can be deducted only if it arises out of the carrying on of the business and is incidental to it. <CITATION> . (2), this Court held that s. 10(2) (xv) of the Act enacted affirmatively what was stated in the negative form in the English statute and was substantially in pari materia with the English enactment and the courts might consider the English authorities as aids to the interpretation thereof. The decision of this Court in <CITATION> (3), though, turns upon the provisions of s. 10(1) of the Act, gives some assistance in deciding the question raised. One of the questions raised was whether the tax paid by the assessee-firm as an agent of the non-resident principle could be claimed as a bad debt or a trading loss. In the words of <NAME>, J., "the loss which the appellant has incurred is not in its own business but the liability arose because of the business of another person and that is not permissible deduction within s. 10(1) of the Act". It is true that this decision did not arise under s. 10(2)(xv) of the Act, but the principle that the expenditure incurred by the assessee in his capacity as agent of another is not a deductible item equally applies to the present case. This Court in The Commissioner of Income tax, <CITATION> (1) had to consider the question whether an expenditure incurred by a race club for the purpose of training jockeys of the club was an allowable deduction within the meaning of s. 10(2)(xv) of the Act. (1)  S.C.R. 690.

(2) (1959) 37 I.T.R. 66.

(3) [1961] 2 S.C.R. 949.

(4) [1961] 2 S.C.R. 729, 735-736.

<NAME>,<NAME>, speaking for the <ORG> , after considering the relevant decisions, concluded thus:

"Applying the law, as laid down in those cases, to the present case the conclusion is that the amountn dispute was laid out wholly and exclusively for the purpose of the respondent's business because if the supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent's business."

This decision gives a liberal interpretation to the relevant expression. -In M/s. <NAME> and <NAME> v. The Commissioner of Income-tax, Bombay City II(1), this <ORG> disallowed deduction of the amount paid by a firm as penalty to release the consignment confiscated by the <ORG> authorities. In coming to the conclusion, <NAME>, J., speaking for the <ORG>, observed:

have been construed in <ORG> v. <ORG>) to mean "for the purpose of keeping the trade" going and of making it pay.,, After considering the relevant decisions, the learned Judge proceeded to state thus:

"They cannot be deducted it they fall on the assessee in some character other than that of a trader. Therefore, where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business."

No doubt this judgment is really based upon the fact that an expense which is paid by way of penalty for breach of law cannot be said to be an amount wholly and exclusively laid out for the purpose of the business; but the observations in the decision go further and indicate that the expenditure, if incurred by the trader in some character other than that of a ,trader, is not an allowable deduction. (1) [1961] 2 S.C.R. 651, 657, 663.

(2) [(1925] 12 T.C. 803. 813.

The expression "for the purpose of the business" is wider in scope than the expression "for the purpose of earning profits". Its range is wide: it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measure for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile titles; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory; in that event, he pays the amount on behalf of another and for a purpose unconnected with the business. In the present case, the company, as a statutory agent of the deceased owners of the shares, paid the sums payable by the legal representatives of the deceased shareholders. The payments have nothing to do with the conduct of the business. The fact that on his default, if any, in the payment of the dues the <ORG> may realise the amounts from the business assets is a conse- quence of the default of the assessee in not discharging his statutory obligation, but it does not make the expenditure any the more expenditure incurred in the conduct of the business. It is manifest that the amounts in question were paid by the assessee as a statutory agent to discharge a statutory duty unconnected with the business, though the occasion for the imposition arose because of the territorial nexus afforded by the accident of its doing business in India. We, therefore, hold that the estate duty paid by the respondent was not an allowable deduction under s. 10(2)(xv) of the Act. We answer the question in the negative. The order of <ORG> is wrong and is set aside. In the result, the appeals are allowed with costs. One set of hearing fees.

Appeal allowed


ORDER A.M. <NAME>, J.

1. The land belonging to the petitioner-society formed part of a large chunk of land admeasuring 2243.52 acres which came to be acquired for the establishment of a military cantonment at <NAME>. The notification under Section 4(1) and the declaration under Section 6 of the Land Acquisition Act, 1894 (hereinafter referred to as the 'Act') were issued and published in <ORG> on October 9, 1974 and October 10, 1974, respectively. Thereafter, notices were issued under Section 9 and after hearing the objectors the Land Acquisition Officer made his Award granting compensation at rates varying between Rs. 4,500/- and Rs. 16,000/- per acre, depending on the situation of the lands which were divided into three belts A, B and C by the Land Acquisition Officer. As many as 161 references were made by the Land Acquisition Officer under Section 18 of the Act to the Additional District Judge, <NAME> who while up holing the belting increased the compensation. The compensation awarded in the references ranged between Rs. 5,625/- and Rs. 20,000/- per acre. Against this Award appeals were filed in <ORG>. The learned Single Judge who heard the appeals divided the lands into two belts and awarded compensation for the first belt up to the depth of 500 meters from the road at Rs. 15 per square yard i.e. 72,600/- per acre and fixed a flat rate of Rs. 25,000/- per acre for the remaining area. In addition, ht awarded solatium at 15% and interest at 6% per annum. While passing that order the learned judge gave the following direction;

All this, however, is subject to the claims made by them in their memorandum of appeals and cross-objections and the court fee paid thereon.

Some of the claimants filed Letters Patent Appeals against the Award made by the learned Single Judge. These appeals were partly allowed in that the compensation awarded at the flat rate of Rs. 25,000/- was raised to Rs. 8 per square yard i.e. Rs. 38,720/- per acre. While making that order it was observed as under:

However, the enhancement would not exceed the amount claimed in these appeals on which court fee has already been paid.

2. The petitioners had filed R.F.A.No. 274 of 1981 against the decision of the Additional District Judge, <NAME> in the reference made under Section 18 of the Act. In paragraph 11 of the memo of appeal the petitioner had stated as under:

That though the market price of the acquired land is not less than Rs. 80,000/- per acre but the appellants arc not in a position to pay a huge amount of court fee. Thus the appellants now claim an enhancement of Rs. 4,00,000/- on the whole of their land over and above what has been paid by the learned Additional District Judge, <NAME>.

It was, therefore, prayed that the petitioners be paid an additional sum of Rs. 4,00,000/- over and above the compensation awarded by the Additional District Judge, <NAME> with 15% solatium and interest as permitted by law from the date of taking possession till actual payment. In view of the direction contained in the order of the learned Single Judge extracted above, the additional compensation awarded in appeal to the petitioner-society was restricted to Rs. 4,00,000/- in respect of which court fee of Rs. 6248/- was paid. The decision of the learned Single Judge was rendered on November 10,1981. Thereafter the matter rested there. But, after a lapse of almost six years the petitioner-society preferred an application, being Civil Misc.No. 75-C/l of 1987 in R.F.A.No. 274 of 1981 purporting to be under Sections 149 , 152 and 153 read with Section 151 of the Code of the Civil Procedure, praying that the society be allowed to make good the deficiency in the court fee and the judgment and decree dated November 10, 1981 in R.F.A.No. 274 of 1981 be so amended as to grant additional compensation with enhanced solatium and interest as per the amendment made in the Act by Act No. 68 of 1984. Several such claims made by those whose lands were acquired came up for hearing before <ORG> of <ORG>. Before <ORG> the observations of this <ORG> in <CITATION> were pressed into service. The flow of similar fresh applications persuaded <ORG> to take the view that having regard to the importance of the question, it would be desirable if a larger bench were to examine the same; more so because there was a conflict of opinion expressed by members constituting the bench while sitting singly in certain other cases Accordingly, the learned Chief Justice of <ORG> before whom the papers were laid constituted <ORG> which was presided over by him. The decision of <ORG> was rendered on May 17, 1988. All such applications were dismissed. While dismissing the applications, <ORG> took note of certain directions given by this <ORG> but refused to exercise its inherent jurisdiction on the apprehension that such relief, if granted, will encourage the practice of not paying the court fee in the hope that as and when the valuation is determined in appeal they will invoke the jurisdiction under Section 151 of the Code for paying court fee and receiving enhanced compensation. <ORG> thought that such an undesirable practice should not be encouraged but should be put an end at the earliest. At the same time, <ORG> conceded that if the claimants were to file an appeal before this <ORG>, this <ORG> may perhaps exercise its jurisdiction and grant relief. It, therefore, felt that 'the Government should take notice of this situation and grant the compensation as prayed for by them after determining the same in accordance with the judgment of this case and pay the same assign ex-gratia payment' instead of driving the parties to the Supreme <ORG>. <ORG> hastened to add that this observation will not be treated as a precedent or ratio decided and shall be restricted cases arising under the notification dated October 9, 1974.

3. On the basis of the above <ORG> decision when the petitioner-society's application came up before the <ORG> it passed the following order on May 17, 1988.

C.Misc. No. 75/C-1-fr in R.F.A.No. 274 of 1981 is dismissed subject to the observations recorded in C.Misc. No. 1512 of 198s in L.P.A.No. 235 of 1982.

4. We may first deal with the contention based on the newly added Section 28A inserted by Amending Act 68 of 1984 with respective operation from April 13, 1982. Under this provision where compensation awarded by the Collector under Section 11 is enhanced by the Court in reference under Section 18 , the persons interested in the acquired land who were not parties to the reference may, by a written application to the Collector made within three months from the date of the award of the court, request the Collector to re determine the amount of compensation payable to them on the basis of the amount awarded by the Court. On receipt of such an application the Collector is expected to conduct an inquiry and make an award predetermining the amount of compensation payable to the applicants. Any person who does not accept the award so made may, by written application to the Collector, require that the matter be referred for the determination of the court whereupon the provisions of Sections 18 and 28 shall, so far as may be, apply to such reference as they apply to a reference under Section 18 . It is obvious on a plain reading of Sub-section (i) of Section 28A that it applies only to those claimants who had failed to seek a reference under Section 18 of the Act. The redetermination has to be done by the Collector on the basis of the compensation awarded by the Court in the reference under Section 18 of the Act and an application in that behalf has to be made to the Collector within 30 days from the date of the award. Thus only those claimant who had failed to apply for a reference under Section 18 of the Act are conferred this right to apply to the Collector for redetermination and not all those like the petitioners who had not only sought a reference under Section 18 but had also filed an appeal in <ORG> against the award made by the reference court. The newly added Section 28A , therefore, clearly does not apply to a case where the claimant has sought and secured a reference under Section 18 and has even preferred an appeal to <ORG>. This view, which we take on a plain reading of Section 28A , finds support from the judgment of this Court in <NAME> (deceased) by his Lrs. and <CITATION> through the Land Acquisition Collector, Gurgaon .

5. The second contention is based on the observations of this Court in <NAME> and <NAME>. (supra). In that case also the appellants had restricted their claim in the first appeal to <ORG> by paying lesser court fee. After the judgment of the learned Single Judge, the appellants realised that they were entitled to the benefit of enhanced compensation which was denied to them as they had restricted their claim by paying a lesser court fee. They kept the matter alive by filing a Letters Patent Appeal along with several others who too were dissatisfied with the amount awarded by the learned Single Judge. <ORG> of <ORG> affirmed the judgment of the learned Single Judge in regard to the rate of compensation for the land comprising the belt having proximity to the road, but with regard to the land situate in the owner belt, it enhanced the compensation to Rs. 38.720/- per acre as stated earlier. Since <ORG> also restricted the benefit of the enhanced compensation to claimants who had paid the proper court fee, the appeal preferred by the appellants was dismissed. The appellants did not rest there but carried the matter to this Court by way of special leave. It will be clear from the above facts that unlike the present petitioner-society the appellants in that case kept the matter alive. In the Civil Appeal arising out of the, said special leave petition this Court made the following observations on which considerable reliance is placed:

We are of the view that when the learned Single Judge and <ORG> took the view that the claimants whose land was required by the State of Punjab under the notifications issued under Sections 4 and 6 of the Act were entitled to enhanced compensation and the case of the appellants stood on the same footing the appellants should have been given an opportunity of paying up deficit court fee so that like the other claimants they could also got enhanced compensation at the same rate as the others. The learned Single Judge and <ORG> should not have, in our opinion, adopted a technical approach and denied the benefit of enhanced compensation to the appellants merely because they had not initially paid the proper amount of court fee.

This Court pointed out that since the case was not between two private parties and the claim was directed against the Government for payment of compensation for expropriated land <ORG> was bound to pay compensation on the basis of the marked value of the acquired land and if according to the judgments of the learned Single Judge and the Division Bench the market value was higher than that awarded by the Collector or the reference court there was no reason to deny to the appellants the benefit of payment of that market value because to deny the same would tantamount to permitting <ORG> to acquire land at a rate below the market value. On this line of reasoning this Court allowed the appellants to pay the deficit court fee and receive compensation at the higher rate. In the present case however, the petitioner-society while preferring the appeal stated in paragraph 11 of the Memo of Appeal that their claim for enhanced compensation was restricted to Rs. 4,00,000/- over and above the amount awarded by the reference court. It is further stated in that paragraph that according to the appellants the market value of the land is not less than 80,000/- per acre but as the appellants are not in a position to pay the huge court fee, they arc restricting their claim to Rs. 4,00,000/-. This was a conscious decision on the part of the present appellant. The averment in that paragraph about their incapacity to pay the court fee is doubtful having regard to the fact, that the appellants had received a substantial amount by way of compensation under the award made by the Collector as well as the reference court. Be that as it may, the fact remains that though the appellants were aware that the market value was higher, they deliberately restricted their claim to Rs. 4,00,000/- and after the appeal was disposed of by the learned Single Judge on November 10, 1981 they allowed the matter to rest and did mot carry the same by way of an appeal to the Division Bench. It was long after the decision rendered by this Court in <NAME> case that the appellants filed an application in 1987 to permit them to pay the deficit court fee and claim the benefit of the difference in higher rate of compensation awarded by the learned Single Judge. Possibly they were inspired by the afore- quoted observations of this Court in <NAME> case. As stated earlier, <NAME> had kept their matters alive by preferring Letters Patent Appeals and thereafter approaching this Court under Article 136 of the Constitution. On the other hand the present petitioners rested content with the amount claimed and received by them in paragraph 11 of their Memo appeal even after the decision of the learned Single Judge. Therefore, the case of the petitioners is clearly distinguishable on facts from the case of <NAME> and <ORG>. on which reliance is placed.

6. In <NAME> (supra) the appellants preferred special leave petitions, though belatedly, to seek enhanced compensation on the basis of this Court's decision in <NAME> and <NAME>. v. State of Haryana and <NAME> and <NAME>. v. State of Haryana Civil Appeals Nos. 1251 and 1252 of 1982, both decided, on April 1, 1982. <NAME> petition was delayed by 1079 days, <NAME> petition was delayed by 1146 days and <NAME> petition was delayed by 1098 days. This Court observed that since the appellants had allowed the Judgment of <ORG> to become final they were evidently satisfied with the enhanced compensation awarded by <ORG> and merely because this Court had further enhanced the compensation in the said two cases, it did not furnish a ground for condo nation of delay under Section 5 of the Limitation Act. Therefore, in similar circumstances this Court did not condone the delay which was shorter than the delay in this case as the link had snapped since the appellants had acquiesced in the judgment of <ORG> and had allowed it to become final. The petitioners herein were satisfied with the amount of Rs. 4,00,000/-and did not apply to pay the deficit court fee soon after the judgment of the learned Single Judge was rendered in 1981 but did so after a lapse of almost six years in 1987. The Full Bench of <ORG>, therefore, rightly held that to permit payment of deficit court fee for recovering enhanced compensation after a lapse of almost six years under its inherent jurisdiction would encourage the practice of not paying the court fee in the hope that as and when the valuation is determined in appeal the jurisdiction of the court can be invoked under Section 151 of the Code and the benefit of enhanced compensation can be reaped by making good the deficit court fee. We think in the facts and circumstances of the case this view taken by <ORG> of <ORG> cannot be assailed.

7. Lastly, it may be mentioned that a demand for solatium and interest at the higher rate allowed by the amended provisions of the Act was made but in view of the recent judgment of this Court in <CITATION> (dead) by Lrs. etc. , the submission could be not pressed as in the present case the matter had concluded long before April 13, 1982.

8. In view of the above we do not see any merit in this petition and dismiss the same with no order as to costs.

9. Before we part, we may point out that the petitioner-society comprises of members belonging to the Scheduled Caste. Their land was expropriated for a public purpose. In law we are unable to entertain their claim as that would open up flood gates for similar applications in innumerable cases which may have become final. Nonetheless, as pointed out by <ORG> of the High Court, the Government is not precluded from paying the balance amount ex-gratia to the society whose members belong to the economically deprived segment of the society. A copy of this judgment may be sent to the concerned department by a letter pointing out these observations for appropriate action.


PETITIONER: <ORG> & <ORG>. Vs. RESPONDENT: <ORG> AND ORS. DATE OF JUDGMENT18/12/1975 BENCH: <NAME>, V.R. BENCH: <NAME>, V.R. CHANDRACHUD, Y.V. GUPTA, A.C. CITATION: 1976 AIR 425 1976 SCR (3) 12 1976 SCC (2) 82 CITATOR INFO : R 1980 SC1896 (80) R 1988 SC1340 (7) D 1990 SC1426 (31) ACT: Constitution of India Article 226 and 226(1A)- Powers of <ORG> to issue Writ against arbitrators under section 10A of Industrial Disputes Act- Arbitration Act-Error apparent on the face of the record-Speaking award- Error of Law. Industrial Disputes Act , 1947-Secs. 2(k) 10-A, 23, 24, 33C- Whether employers can be awarded compensation for loss of profit due to illegal strike under Industrial Disputes Act -Industrial Dispute-Enforcement of special rights created by special statute whether confined to remedies provided by the statute. HEADNOTE: During the year 1948, the respondent, workmen working with both the appellants went on illegal strike on account of Trade Union rivalry. The workmen were not paid wages for the strike period and the appellants lost their profit during the period. The employers and the workmen entered into an agreement during the pendency of the conciliation proceedings and referred the claims of workmen for salaries during the strike period and the claims of the employers for compensation for loss due to the strike to the joint arbitration of two retired <ORG> Judges and one retired Member of <ORG> under section 10-A of the Industrial Disputes Act 1947. The arbitrator delivered their award and held that the workmen participating in the strike were not entitled to wages for the strike period. The arbitrators however, awarded huge compensation to the employers against the workmen for the losses incurred by the employers during the strike period. The workmen challenged the award as illegal and void by filing two writ petitions in the <ORG>. The <ORG> upheld that part of the award which directed that the workmen participating in tho strike were not entitled to wages. The <ORG> however, quashed the part of the award which directed payment of compensation by the workers to the management. In appeal by Special Leave under Article 136 , the appellants contended:- 1. The award under section 10-A of the Act savours of a private arbitration and is not amenable to correction under Article 226 of the Constitution. 2. The award of compensation by the arbitrators suffers from no vice which can be regarded as recognised grounds for the <ORG> interference. ^ HELD: (1) The expansive and extraordinary powers of the <ORG> under Article 226 , as wide as the amplitude of the language used, indicates and so can affect "any person", even a private individual and be available for "any other purpose", even one for which another remedy may exist. The insertion of Article 226(1A) reiterates that writ power can be exercised against any person by reference to the residence of such person. It is one thing to affirm the jurisdiction and another to authorise free exercise. This Court has spelt out wise and clear restraints on the use of this extraordinary remedy and <ORG>s will not go beyond those wholesome inhibitions except where the monstrosity of the situation or other exceptional circumstances cry for timely judicial interdict or mandate. [17C-E] 2. An arbitrator exercising powers under section 10A can bind even those who are not parties to the reference or agreement and the whole exercise under section 10A as well as the source of the force of the award on publication derive from the statute. It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign's dispensation of justice, thus falling within the rainbow of statutory tribunals amenable to judicial review. The award in the present case is not beyond the legal reach of Article 226. [18B-C] 13 3. The answer to the question whether the <ORG> should have exercised its powers under Article 226 in the present case will depend upon whether the arbitrator has tied himself down to obviously unsound legal proposition in reaching his verdict appearing from the face of the award. The arbitrator may not state the law such, even- then such cute silence confers no greater or subtler: immunity on the award than plain speech. The need for speaking order, where considerable numbers are affected in their substantial rights, may well be a facet of natural justice or fair procedure although in this case we do not have to go so far. The law sets no premium on juggling with drafting the award or hiding the legal error by balancing out. The inscrutable face of the sphinx has no better title to invulnerability than a speaking face which is a candid index of the mind. [19D. 20F-H] 4. According to the arbitrators, the strike was illegal being in violation of section 24 of the Act. the illegal strike was animated by inter-union power struggle and that it inflicted loss on the management by forced closure and that the loss flowing from the strike was liable to be recompensed by award of damages. In this chain of reasoning the question of law whether an illegal strike causing loss of profit justifies award of damages is necessarily involved. The arbitrator held in the affirmative and according to us it is an unhappy error of law. In the present case the arbitrators have made a sufficiently speaking award both on facts and on law. After coming to the conclusion that the strike was illegal they held that compensation necessarily follows based on the rule of English common law. The English cases laying down the rule of common law were a response to the requirement of Industrial civilization of the 19th Century England. Trade and industry on the laissez faire doctrine flourished and the law of torts was shaped to serve the economic interests of the trading and industrial community. Whatever the merits of the norms, violation of which constituted 'conspiracy' in English Law, it is a problem for creative Indian Jurisprudence to consider how far a mere combination of men working for furthering certain objective can be prohibited as a tort according to the Indian value system. Our constitution guarantees the right to form associations, not for gregarious pleasure, but to fight effectively for the redressal of grievances. Our constitution is sensitive to workers rights. English history, political theory and life style being different from Indian conditions where the Father of the Nation organised boycotts and mass satyagrahas we cannot incorporate English conditions without any adaptation into Indian Law. [21B-C, 22A, B-C, D] 5. Even in England, till recently it could not be said with any certainty that there was any such tort as conspiracy. The tort is unusual because it emphasizes the purpose of the defendants rather than the result of their conduct. Even when, there are mixed motives liability will depend on ascertaining which is the predominant object of the true motive or the real purpose of the defendant. The motive of an illegal strike may be to advance the workers' interest or steal a march over a rival union but never or rarely to destroy or damage the industry. However if some individuals destroy the plant and machinery willfully to cause loss to the employer such individuals will be liable for the injury so caused. Sabotage is no weapon in workers' legal armoury. It is absolutely plain that the tort of conspiracy necessarily involves advertence to the object of the combination being the infliction of damage on The plaintiff. The strike may be illegal but if the object is to bring the employer to terms with the employees or to bully the rival trade union into submission there cannot be an actionable combination in tort. In the present case, the arbitrators did not investigate the object of the strike. The arbitrators assumed that if the strike is illegal the tort of conspiracy is made out. The counsel for the appellants fairly conceded that the object of the strike was inter-union rivalry. There is thus a clear lapse in the law on the part of the arbitrators manifest on the face of the award. [22F, 231B-C, E, H. & 24A-B] 6. It is common case that the demand for the wages during the strike period constitutes an industrial Dispute within section 2(k) of the Act. It is agreed by both the sides that section 23 read with section 24 makes the strike in question illegal. An illegal strike is the creation of the statute and the remedy for the illegal strike and its fall, out has to be sought within the statute and not de hors 14 it. No other relief outside the Act can be claimed on general principles of jurisprudence. The case of <ORG> followed. [25 B-C] 7. The enforcement of a right or obligation under the Act must be by a remedy provided in the Statute. The right of the management to claim compensation is not provided by the Act, and, therefore, the arbitrators Committed an ex facie legal error. The consent of the parties cannot create arbitral jurisdiction under the Industrial Disputes Act . The claim for compensation cannot be a lawful subject for arbitration because it is not covered within the definition of Industrial Disputes in section 2(k) . We are unable to imagine a tort of liability or compensation based on loss of business being regarded as an industrial dispute as defined in the Act. Section 33 provides for speedy recovery of money due to a workman from an employer under a settlement or award. It does not provide for recovery of money by the employer from the workman. Obviously because the workman belongs to the weaker section. Claims by employers against the workmen on grounds of tortious liability have not found a place in the pharmacopeia of Indian Industrial Law. [26 D, 27A, C, D-E] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1721- 1728 of 1969.

Appeals by Special Leave from the Judgment and order dated the 2nd May 1962 of <ORG> at Patna, in M.J.C. Nos. 475 and 498 of 1959.

<NAME>, <NAME> and <NAME> for the Appellants (in both the appeals).

<NAME>, <NAME>, <NAME>, <NAME> and <NAME> for Respondent 1 (In C.A. 1727) and Respondents 1-3 (In CA 1728).

<NAME>, <NAME> and <NAME> for respondents 7 and 8 (In CA 1727 and Respondent 4 in (1728/69).

The Judgment of the Court was delivered by <NAME>, J.-We permit ourselves a few preliminary observations disturbingly induced by the not altogether untypical circumstances of these two appeals, before proceeding to state the facts, set out the submissions and decide the points.

Industrial law in India has not fully lived up to the current challenges of industrial life, both in the substantive norms or regulations binding the three parties- the <ORG>, <ORG> and <ORG>-and in the processual system which has baulked, by dawdling dysfunction, early finality and prompt remedy in a sensitive area where quick solution is of the very essence of real justice. The legislative and judicial processes have promises to keep if positive industrial peace, in tune with distributive economic justice and continuity of active production, were to be accomplished. The architects of these processes will, we hopefully expect, fabricate creative changes in the system, normative and adjectival.

The two appeals before us, passported by special leave under Art. 136 , relate to an industrial dispute with its roots in 1948, meandering along truce union rivalry and the like, into strikes and settlements, the last of which led to an arbitration award in 1959 which, in turn, prompted two writ petitions before <ORG>. After a spell of a few years they ripened into a judgment. Appeals to this Court followed and, after long gestation of six years for preparation of papers and a like period the cases are ready for final hearing or parturition, in all 12 years after the grant of leave. By this cumulative lapse of time the generation of workers who struck work two decades ago have themselves all but retired, the representative <ORG> itself which sponsored the dispute has, the other side faintly states, ceased to command representative character, the <ORG> themselves have, out of many motives, disclaimed the intention to recover the huge sums awarded to them by the arbitrators and the only survival after death, as it were, is a die-hard litigation tied up to a few near-academic, but important, legal points for adjudication by the highest Bench! On this elegiac note we will enter the relevant area of facts and law since we must decide cases brought before us, however stale the lis.

At this stage we may mention our strong feeling that where the superior courts, after hearing full arguments, are clearly inclined to, affirm the judgment under appeal for substantially similar reasons as have weighed with the lower Court, there is no need to give lengthy reasons for dismissing the appeal. Brevity, except in special cases, may well fill the bill where the fate is dismissal. On this score we are disposed to make short shrift of the appeals with stating but the necessary facts and focusing on the larger legal facets. Nevertheless, the significance and plurality of the points pressed have defeated condensation. D The facts Two connected managements of industries in the same locality, who figure as appellants before us, had a running industrial dispute with their workers, which has had a long history moving in a zigzag course and sicklied over by alleged internecine trade-union strife. There were two trade unions which were perhaps of competitive strength and enjoying recognition. One of them, <ORG> (for short, <ORG>) was the representative union during the relevant period while the other, <ORG> (for brevity, <ORG>) is not a party before this Court and so we are not concerned with it except for the purpose of noticing its presence in the settlement of the dispute which starts the story so far as the litigation is concerned. There was a strike in the <ORG> (for our purposes this expression embraces both the appellants) which came to an end by virtue of a memorandum of agreement dated October 2, 1957, to which not merely the management but also the two registered unions aforementioned and the two unregistered unions which had a lesser following, were party. The terms of the said agreement provided inter alia that :

"The employees' claim for wages and salaries for the period of strike and the company's claim for compensation for losses due to strike shall be submitted for arbitration of Sri <NAME> and Sri <NAME>, <ORG> and Ex Members of <ORG> as joint arbitrators and their decisions on the two questions shall be final and binding on all the parties."

(Clause 7 of agreement) This agreement was admittedly arrived at during conciliation proceedings contemplated by the Industrial Disputes Act , 1947 (for short, the Act) and the reference to arbitration spelt out in clause 7 directly and. admittedly fell under s.

10 A of the Act .

It is apparent that the arbitrators were seized of two questions: (a) the claim of the workers for wages for the period of strike; and (b) the claim of the management for compensation for its losses flowing from the strike. <ORG> of arbitrators, two retired Judges of <ORG>-held extensive hearings spread over a year and a half, made a lengthy award marshalling the evidence, adducing the reasons, discussing the law and recording its decision on the two vital issues. At the end of the detailed and reasoned record of conclusions, the award runs thus :

"Our award accordingly is:-

(1) That the workmen participating in the strike are not entitled to wages and salaries for the period of the strike.

(2) That the company do recover from the workmen participating in the strike, compensation assessed at Rs. 80,000(rupees eighty thousand). (3) That the workmen jointly and severally do pay to the company one eighth of the total costs of the arbitration. In default of payment the company will be at liberty to recover the same in such manner as it thinks fit. Subject to this the parties do bear their respective costs."

The workmen were deprived of their wages during the period of the. strike on the score that it was an illegal strike. Both sides seem to have accepted this finding after an unsuccessful challenge in <ORG> and happily industrial peace is said to be prevailing currently. What did hurt <ORG> more and what the management did try to have and to hold as a bonanza was the second finding that the strikers, apart. from forfeiting wages, do pay compensation in the huge sum of Rs. 6,90,000/- in one case and Rs. 80,000/- in the other, for the loss of profits suffered by the manufacturing business of the management, a pronouncement unusual even according to counsel for the appellant, although sustainable in law, according to him. For the workers this unique direction of industrial law is fraught with ominous consternation and dangerous detriment. <ORG> challenged the award as illegal and void by filing two writ petitions but <ORG> quashed that part of the award which directed payment of compensation by the workers to the management and, as earlier pointed out, both sides have chosen to abide by the award in relation to the denial of wages during the strike period. The Main Points Urged The short but important issue, which has projected some serious questions of law, is as to whether the impugned part of the award has; been rightly voided by <ORG>. We may as well formulate them but highlight the only major submission that merits close examination, dealing with the rest with terse sufficiency. In logical order, counsel for the appellant urged that (1) (a) an award under s. 10A of the Act savours of a private arbitration and is not amenable to correction under Art. 226 of the Constitution. (b) Even if there be jurisdiction, a discretionary desistance from its exercise is wise, proper and in consonance with the canons of restraint this Court has set down. (2) The award of compensation by the arbitrators suffers from no vice which can be regarded as a recognised ground for <ORG>'s interference. (3) The view of law taken by <ORG> on (1) the supposed flaw in the award based on 'mixed motives' for the offending strike; (ii) the exclusion of remedies other than under s. 26 of the Act; and (iii) the implied immunity from all legal proceedings against strikers allegedly arising from s. 18 of the Trade Unions Act, 1926 is wrong. A few other incidental arguments have cropped up but the core contentions are what we have itemised above. (1)-(a) & (b) The expansive and extraordinary power of <ORG>s under Art. 226 as wide as the amplitude of the language used indicates and so can affect any person-even a private individual-and be available for any (other) purpose- even one for which another remedy may exist. f The amendment to Art. 226 in 1963 inserting Art. 226(1A) reiterates the targets of the writ power as inclusive of any person by the expressive reference to 'the residence of such person'. But it is one thing to affirm the jurisdiction, another to authorise its free exercise like a bull in a China shop. This Court has spelt out wise and clear restraints on the use of this extra-ordinary remedy and <ORG> will not go beyond those wholesome inhibitions except where the monstrosity of the situation or other exceptional circumstances cry for timely judicial interdict or mandate. The mentor of law is justice and a potent drug should be judiciously administered. Speaking in critical retrospect and portentous prospect, the writ power has, by and large, been the people's sentinel on the qui vive and to cut back on or liquidate that power may cast a peril to human rights. We hold that the award here is not beyond the legal reach of Art. 226 , although this power must be kept in severely judicious leash.

Many rulings of <ORG>, pro and con, were cited before us to show that an award under s. 10A of the Act is insulated from interference under Art. 226 but we respectfully agree with the observations of <NAME>, (as he then was) in <CITATION> (1) which nail the argument against the existence of jurisdiction. The learned Judge clarified at p. 640:

" Article 226 under which a writ of certiorari can be issued in an appropriate case, is, in a sense, wider than Art. 136 , because the power conferred on the High <ORG> to issue certain writs is not conditioned or limited by the requirement that the said writs can be issued only against the orders of <ORG> or <ORG>. Under Art. 226(1 ), an appropriate writ can (1)  Supp. I S.C.R. 625.

be issued to any person or authority, including in appropriate cases any <ORG>, within the territories prescribed. Therefore even if the arbitrator appointed under section 10A is not <ORG> under Art. 136 in a proper cases, a writ may lie against his award under Art. 226". (p. 640) We agree that the position of an arbitrator under s.

10 A of the Act (as it then stood) vis a vis Art. 227 might have been different. Today, however, such an arbitrator has power to bind even those who are not parties to the reference or agreement and the whole exercise under s. 10A as well as the source of the force of the award on publication derive from the statute. It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign's dispensation of justice, thus falling within the rainbow of statutory tribunals amenable to judicial review. i This observation made en passant by us is induced by the discussion at the bar and turns on the amendments to s. 10A and cognate provisions like s. 23 , by Act XXXVI of 1964.

Should the <ORG> invoke this high prerogative under Art. 226 in the present case ? That depends. We will examine the grounds on which the High <ORG> has, in the present case, excised a portion of the award as illegal, keeping in mind the settled rules governing judicial review of private arbitrator's awards. Suffice it to say, an award under s. 10A is not only not invulnerable but more sensitively susceptible to the writ lancet being a quasi-statutory body's decision. Admittedly, such an award can be upset if an apparent error of law stains its face. The distinction, in this area, between a private award and one under s. 10A is fine, but real. However it makes slight practical difference in the present case; in other cases it may. The further grounds for invalidating an award need not be considered as enough unto the day is the evil thereof.

(2) Thus, we arrive at a consideration of the appellants second submission, perhaps the most significant in the case, that <ORG> had no legitimate justification to jettison the compensation portion of the award. Even here, we may state that counsel for the appellants, right at the outset, mollified possible judicial apprehensions springing from striking workers being held liable for loss of management's profits during the strike period by the assurance that his clients were inclined to abandon realisation of the entire compensation, even if this <ORG> up held that part of the award in reversal of the judgment of <ORG> a generous realism. He fought a battle for principle, not pecunia. We record this welcome fact and proceed on that footing.

The relevant law which is beyond controversy now has been clearly stated in Halsbury's Laws of England thus :

"Error of law on the face of award: An arbitrator's award may be set aside for error of law appearing on the face of it, though the jurisdiction is not lightly to be exercised. . . The jurisdiction is one that exists at common law independently of statute. In order to be a ground for setting aside the award, an error in law on the face of the award must be such that there can be found in the award, or in a document actually incorporated with it, some legal proposition which is the basis of the award and which is erroneous. ....where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator's decision cannot be set aside only be cause the court would itself have come to a different conclusion; but if it appears on the face of the award that the arbitrator has proceeded illegally, as for instance, by deciding on evidence which was not admissible, or on principles of construction which the law do s not countenance, there is error in law which may be ground for setting aside the award.

(para 623, p. 334, Vol. 2, Fourth Edn) We adopt this as sound statement of the law. Not that English law binds us but that the jurisprudence of judicial review in this branch is substantially common for Indian and Anglo-American systems and so <ORG> has considerable persuasive value. The wider emergence of common canons of judicial review is a welcome trend towards a one world public law. Indeed, this <ORG> has relied on the leading English decisions in several cases. We may content ourselves with adverting to <ORG>) and to the unreported decision <NAME>). In simple terms, the <ORG> has to ask itself whether the arbitrator has not tied himself down to an obviously unsound legal proposition in reaching his verdict as appears from the face of the award. <NAME>, speaking for the majority, in <ORG>) stated the law:

"It is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does not record his reasons and does not indicate the principles of law on which he has proceeded, the award is not on that account vitiated. It is only when the arbitrator proceeds to give his reasons or to lay down principles on which he has arrived at his decisions that the <ORG> is competent to examine whether he has proceeded contrary to law and is entitled to interfere if such error in law is apparent on the face of the award itself."

(p. 640-641) In <ORG> (8) dealing with a private award and the conditions necessary for exercise of writ jurisdiction to correct an error of law apparent on the record, did not lay down the law differently from what we have delineated.

In one of the leading English cases <ORG> (4) followed in India, Lord <NAME> defined 'error of law on the face of the award' as 'where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award' and said that then only the error of law therein would warrant judicial correction. The Law Lord expressed himself lucently when he stated:

"An error in law on the face of the award means, in their Lordships' view, that you can find in the award . . . some legal (1) [1967] 1 S.C.R.633. (2) C.A.107 of 1966 decided on 5-12-68.

(3) A.I.R 1967 S.C. 361. (4) 50 I.A. 324.

proposition which is the basis of the award and which you can, then say is erroneous."

<ORG>, in the case of <NAME> v. Verne(1) hit the nail on the head by using the telling test as firmly established, viz., 'where the question of law necessarily arises on the face of the award'. In this view the enquiry by the <ORG> before venturing to interfere is to ascertain whether an erroneous legal proposition is the basis of the award. Nay, still less. Does a question of law (not even a proposition of law) necessarily arise on the award followed by a flawsome finding explicit or visibly implicit? Then the <ORG> can correct.

<NAME>, in <NAME> (2) formulates the law to mean that if the award were founded on a finding which admits of only one proposition of law as its foundation and that law is erroneous on its face, the <ORG> has the power and, therefore, the duty to set right. While the Judge cannot explore, by changing subterranean routes or ferret out by delving deep what lies buried in the unspoken cerebration of the arbitrator and ` interfere with the award on the discovery of an error of law by such adventure, it is within his purview to look closely at the face of the award to discern the law on which the arbitrator has acted if it is transparent, even translucent but lingering between the lines or merely wearing a verbal veil. If by such an intelligent inspection of the mien of the award-which is an index of the mind of the author-an error of law forming the basis of the verdict is directly disclosed, the decision is liable to judicial demolition. In <NAME> (2), the issue was posed with considerable clarity and nicety. If, at its face value, the award appears to be based on an erroneous finding of law alone, it must fail. The clincher is that the factual conclusion involving a legal question must necessarily be wrong in point of law. Even though the award contains no statement of the legal proposition, if the facts found raise 'a clear point of law which is erroneous on the face of it', the <ORG> may rightly hold that an error of law on the face of the award exists and invalidates.

Let us put the proposition more expressively and explicitly. What is important is a question of law arising on the face of the facts found and 'F its resolution ex facie of sub silentio. The arbitrator may not state the law as such. Even then such cute silence confers no greater or subtler immunity on the award than plain speech. The need for a speaking order, where considerable numbers are affected in their substantial r t rights, may well be a facet of natural justice or fair procedure, although, in this case, we do not have to go so far. If, as here, you find an erroneous law as the necessary buckle between the facts found and the conclusions recorded, the award bears its condemnation on its bosom. Not a reference in a narrative but a clear legal nexus between the facts and the finding. The law sets no premium on juggling with drafting the award or hiding the legal error by blanking out. The inscrutable face of the sphinx has no better title to invulnerability than a speaking face which is a candid index of the mind. We may, by way aside, express hopefully the view that a minimal judicialisation by statement, laconic or lengthy, of the essential law that guides the decision, is not only reasonable and desirable but has, over the ages, been observed by arbitrators and quasi-judicial tribunals as a norm of processual justice. We (1) [1857] 3 C.B. (N.S.) 189, (2) [1944]1 K.B.

566. do not dilate on this part of the argument as we are satisfied that be the test the deeply embedded rules to issue certiorari or the traditional grounds to set aside an arbitration award 'thin partition do their bounds divide' on the facts and circumstances of the present case.

The decisive question now comes to the fore. Did the arbitrators commit an error of law on the face of the award in the expanded sense we have explained ? The basic facts found by the arbitrators are beyond dispute and admit of a brief statement. We summarise the fact situation succinctly and fairly when we state that according to the arbitrators, the strike in question was in violation of s. 24 of the Act and therefore illegal. This illegal strike animated by inter-union power struggle, inflicted losses on the management by forced closure. The loss flowing from the strike was liable to be recompensed by award of damages. In this 2chain of reasoning is necessarily involved the question of law as to whether an illegal strike causing loss of profit is a delict justifying award of damages. The arbitrators held, yes. We hold this to be an unhappy error of law-loudly obtrusive on the face of the award. We may as well set out, for the sake of assurance, the simple steps in the logic of the arbitrators best expressed in their own words which we excerpt:

"(a) It is argued that strike is a legitimate weapon in the hands of workmen for redressal of their grievances and if they are made liable for loss on account of strike then the basic idea of strike as a means for having the grievances redressed will be taken away. The fallacy in this argument is that it presupposes the strike not to be illegal and unjustified. In the pre sent case we found the strike to be otherwise. The workmen have got no right of getting their grievances redressed by resorting to illegal means which is an offence.

(b) It has been argued that the claim for compensation is not an industrial dispute as defined in the Industrial Disputes Act . Considering the issue of compensation in a water-tight compartment the argument might appear to be attractive. But, in our opinion, in this case the claim for compensation by the company is a consequence flowing from an admitted industrial J dispute, which in this case is whether the strike was illegal and/or unjustified and as against the condition of service as laid down in the certified standing order on which point our finding has been against the workmen. ."

The award of the <ORG>, in its totality, is quite prolix the reasons stated in arguing out its conclusions many and thus it is just to state that in the present case the arbitrators-two retired Judges of <ORG>-have made a sufficiently speaking award both t on facts and on law. They have referred to the strike being illegal with specific reference to the provisions of the Act, but faulted them selves in law by upholding a case for compensation as axiomatic, necessarily based on a rule of common law i.e., English common law. The rule of common law thus necessarily arising on the face of the award is a clear question of law.

What is this rule of common law? Counsel for the appellants inevitably relied on the tort of 'conspiracy' and referred us to <ORG>); <NAME> v. Floor(2); <NAME> v. <NAME>) and <NAME> v. <NAME> (4). These decisions of <ORG> are a response to the societal requirements of the industrial civilisation of the 19th Century England. Trade and Industry on the laissez faire doctrine flourished and the law of torts was shaped to sene the economic interests of the trading and industrial community. Political philosophy and economic necessity of the dominant class animate legal theory. Naturally, the British law in this area protected business from the operations of a combination of men, including workers, in certain circumstances. Whatever the merits of the norms, violation of which constituted 'conspiracy' in English law, it is a problem for creative Indian jurisprudence to consider, detached from anglo-phonic inclination, how far a mere combination of men working for furthering certain objectives can be prohibited as a tort, according to the Indian value system. Our Constitution guarantees the right to form associations, not for gregarious pleasure, but to fight effectively for the redressal of grievances. Our Constitution is sensitive to workers' rights. Our story of freedom and social emancipation led by the Father of the Nation has employed, from the highest of motives, combined action to resist evil and to right wrong even if it meant loss of business profits for the Liquor vendor, the brothel keeper and the foreign-cloth dealer. Without expatiating on these seminal factors, we may observe that English history, political theory and life-style being different from Indian conditions replete with organised boycotts and mass satyagrahas, we cannot incorporate English torts without any adaptation into Indian law. A tort transplant into a social organism is as complex and careful an operation as a heart- transplant into an individual organism, law being life's instrumentality and rejection of exotics being a natural tendency. Here, judges are sociological surgeons.

Let us examine 'conspiracy' in the English Law of Torts to see if even there it is possible to hold that an illegal strike per se spells the wrong. We may state that till recently it could not be said with any certainty that there was any such tort as 'conspiracy'. <NAME> thought that there was not (See <NAME>-Law of Torts-p. 505, 15 s Ed.). It is interesting that in Edition of <NAME>, Mogul is linked up by the learned author with a capitalist economy. Be that as it may, the common law of England today is more or less clear, some rumblings notwithstanding.

"A combination wilfully to do an act causing damage to a man in his trade or other interests is unlawful and if damage in fact is caused is actionable as a conspiracy. To this there is an exception where the defendants' real and predominant purpose is to advance their own lawful interests in a matter in which they honestly believe that those interests would directly suffer if the action against the plaintiff was not taken. In truth, the <NAME> case has made section 1  1 , (1)  A.C. 25. (2)  A.C. 1.

(3) [1901] A.C. 495. (4) [1925] A.C. 700.

of the Trade Disputes Act, 1906, largely unnecessary, for there will now be few conspiracies arising out of trade disputes which are not protected at common law." (pp. 508-509, 15th Edn., <ORG>) (emphasis, ours) The essence of actionable conspiracy is best brought out by <NAME>:

"The tort is unusual because it emphasises the purpose of the defendants rather than the results of their conduct."

(p.513, 15th Edn., <ORG>) (emphasis, ours) Even when there are mixed motives, 'liability will depend on ascertaining which is the predominant object or the true motive or the real purpose of the defendant. Mere combination or action, even if it be by illegal strike, may be far away from a 'conspiracy' in the - sense of the law because in all such cases, except in conceivably exceptional instances, the object or motive is to advance the workers' interests or to steal a march over a rival union but never or rarely to destroy or damage the industry. It is difficult to fancy workers who live by working in the industry combining to kill the goose that lays the golden eggs. The inevitable by-product of combination for cessation of work may be loss to the management but the obvious intendment of such a collective bargaining strategy is to force the employer to accept the demand of the workers for betterment of their lot or redressal of injustice, not to inflict damage on the boss. In short, it is far too recondite for an employer to urge that a strike, albeit illegal, was motivated by destruction of the industry. A scorched earth policy may, in critical times of a war, be reluctantly adopted by a people, but such an imputed motive is largely imaginary in strike situations. However, we are clear in our minds that if some individuals destroy the plant or damage the machinery wilfully to cause loss to the employer, such individuals will be liable for the injury so caused. Sabotage is no weapon in workers' legal armoury.

The leading case of <NAME> v. <NAME> (supra) emphasizes that a combination of two or more persons for the purpose of injuring a man in his trade is unlawful and, if it results in damage to him, is actionable. The real purpose of the combination is the crucial test between innocence and injury. It may well be that even where there is an offending object, it may be difficult for a court to hold that there is a tort if one may read into the facts an equal anxiety for the defendants to promote their success which produces the plaintiff's extinction. There is a penumbral region, as Lord <NAME> pointed out in <NAME> (Supra): ` "How any definite line is to be drawn between acts whose real purpose is to advance the defendant's interests, and acts, whose real purpose is to injure the plaintiff in his trade, is a thing which I feel at present beyond my power."

It is absolutely plain that the tort of conspiracy necessarily involves advertence to and affirmation of the object of the combination being the infliction of damage or distraction on the plaintiff. The strike 3-L390SCI/76 may be illegal but if the object is to bring the employer to terms with the employees or to bully the rival trade union into submission, there cannot be an actionable combination in tort. In the present case, it is unfortunate that the arbitrators simply did not investigate or pass upon the object of the strike. If the strike is illegal, the tort of conspiracy is made out, appears to be the proposition of law writ tersely into the award. On the other hand, it is freely conceded by counsel for the appellant that the object was inter-union rivalry. There is thus a clear lapse in the law on the part of the arbitrators manifest. , on the face of the award.

We have earlier referred to the need for a fresh look at conspiracy F as a tort when we bodily borrow the elements of English law and apply them to Indian law. It is as well that we notice that even in England considerable criticism is mounting on the confused state of 1 the law of conspiracy. <NAME> has argued (in 1965 Vol. 28 Modern Law Review p. 448) that:

"experience has already shown that conspiracy is a hydra perfectly capable of growing two heads to replace an amputated one, and the authorities contain material which could be used to impose liability in very wide and varied circumstances. It is time, therefore, to consider what form legislation should take, and to urge that the proper answer is to remove the tort of conspiracy from the law altogether, and with it the <NAME> v. <NAME> version of intimidation, and to put in its place a different basis of liability.

(CONSPIRACY AND INTIMIDATION: An Anti-Meta-physical Approach) The author complains that the fundamental basis is unsatisfactory and uncertain and demands that a complete re- writing of the principles on which the tort of conspiracy and intimidation is necessary.

We may as well suggest that, to silence possible mischief flowing from the confused state of the law and remembering how dangerous J it would be if long, protracted, but technically illegal strikes were to be followed by claims by managements for compensation for loss of profits, a legislative reform and re-statement of the law were under taken at a time when the <ORG> is anxious for industrial harmony consistent with workers' welfare, This rather longish discussion has become necessary because the problem is serious and sensitive and the law is somewhat slippery even in England. We are convinced that the award is bad because the error of law is patent.

<ORG> has touched upon another fatal frailty in the ten ability of the award of compensation for the loss of profits flowing from the illegal strike. We express our concurrence with <ORG> that the sole and whole foundation of the award of compensation by the arbitrators, ignoring the casual reference to an ulterior , motive of inter-union rivalry, is squarely the illegality of the strike, The workers went on strike claiming payment of bonus as crystalized by the earlier settlement (d/2-10-1957). There thus arose an industrial dispute within s. 2(k) of the Act. Since conciliation proceedings were pending the strike was ipso jure illegal (ss. 23 and 24,. The consequence, near or remote, of this combined cessation of work caused loss to the management. Therefore the strikers were liable in damage to make good the loss. Such is the logic of the award.

It is common case that the demands covered by the strike and the wages during the period of the strike constitute an industrial dispute within the sense of s. 2(k) , of the Act. Section 23 , read with s. 24 , it is agreed by both sides, make the strike in question illegal. An 'illegal strike' is a creation of the Act. As we have pointed out earlier, the compensation claimed and awarded is a direct reparation for the loss of profits of the employer caused by the illegal strike. If so, it is contended by the respondents, the remedy for the illegal strike and its fall- out has to be sought within the statute and not de hors it. If this stand of the workers is right, the remedy indicated in s. 26 of the Act, viz., prosecution for starting and continuing an illegal strike, is the designated statutory remedy. No other relief outside the Act can be claimed on general principles of jurisprudence. The result is that the relief of compensation by proceedings in arbitration is contrary to law and bad.

The <ORG> Case(1) settles the legal issue involved in the above argument. The industrial Disputes Act is a comprehensive and self-contained Code so far as it speaks and the enforcement of rights created thereby can only be through the procedure laid down therein. Neither the civil court nor any other <ORG> or body can award relief. <NAME>, speaking for an unanimous court, has, n <ORG> (<ORG>) observed:

"The object of the Act, as its preamble indicates, is to make provision for the investigation and settlement of industrial disputes, which means adjudication of such disputes also. The Act envisages collective bargaining, contracts between <ORG> representing the workmen and the management, a matter which is outside the realm of the common law or the Indian law of Contract."

After sketching the scheme of the Act, the learned Judge stated the law thus.

". . . <ORG> will have no jurisdiction to try and adjudicate upon an industrial dispute if it concerned enforcement of certain right or liability created only under the Act."

* * * * * "In Deo v. Bridges (1831 1B and Ad, 847 (2)- (1898)) A.C. 387 at p. 859 are the famous and of quoted words of Lord <NAME>, <NAME>, saying: "where an Act creates an obligation and enforces the performance in a specified manner, we take it to be a general rule that performance cannot be enforced in any other."

(1) [1976] 1 S.C.R. 427.

<NAME> v. <ORG>), decided by <ORG> is telling, particularly Lord <NAME>'s statement of the law at p. 622:

"The right and the remedy are given uno flatu and one cannot be dissociated from the other." In short, the enforcement of a right or obligation under the Act, must be by a remedy provided uno flatu in the statute. To sum up, in the language of <ORG> (<ORG>):

"If the industrial dispute relates to the enforcement of a right or an obligation created under the Act, then the only , remedy available to the suitor is to get an adjudication under the Act."

Since the Act which creates rights and remedies has to be considered as one homogeneous whole, it has to be regarded uno flatu, in one breath, as it were. On this doctrinal basis, the remedy for the illegal strike (a concept which is the creature not of the common law but of s. 24 of the Act) has to be sought exclusively in s. 26 of the Act. The claim for compensation and the award thereof in arbitral proceedings is invalid on its face'on its face' we say because this jurisdictional point has been considered by the arbitrators and decided by committing an ex-facie legal error.

It was argued, and with force in our view, that the question of compensation by workers to the management was wholly extraneous to the Act and therefore, outside the jurisdiction of a voluntary reference of industrial dispute under s. 10 A. While we are not called upon to pronounce conclusively on the contention, since we have ex pressed our concurrence with <ORG> on other grounds, we rest content with briefly sketching the reasoning and its apparent tenability. The scheme of the Act, if we may silhouette it, is to codify the law bearing on industrial dispute. The jurisdictional essence of proceedings under the Act is the presence of an 'industrial dispute'. Strikes and lock-outs stem from such disputes. l he machinery for settlement of such disputes at various stages is provided for by the act. The statutory imprimatur is given to settlement and awards, and norms of discipline during the pendency of proceedings are set down in the Act. The proscriptions stipulated, as for example the prohibition of a strike, are followed by penalties, if breached. Summary procedures for adjudication as to whether conditions of service etc., of employees have been changed during the s pendency of proceedings, special provision for recovery of money due to workers from employers and other related regulations, are also written into the Act. Against this backdrop, we have to see whether a claim by an employer from his workmen of compensation . consequent on any conduct of theirs, comes within the purview of the Act. Suffice it to say that a reference to arbitration under s. 10 A is restricted to existing or apprehended industrial disputes. Be it noted that we are not concerned with a private arbitration but a statutory one governed by the Industrial Disputes Act , deriving its validity, enforceability and protective mantle during the pendency of the proceedings, from 10 A. No industrial dispute, no valid arbitral (1)  A.C. 615.

reference. Once we grasp this truth, the rest of the logic is simple. What is the industrial dispute in the present case? Everything that overflows such disputes spills into areas where the arbitrator deriving authority under s. 10 A has no jurisdiction. The consent of the parties cannot create arbitral jurisdiction under the Act. In this perspective, the claim for compensation can be a lawful subject for arbitration only if it can be accommodated by the definition of 'industrial dispute' in s.2 (k) . Undoubtedly this expression must receive a wide coll- notation, calculated as it is to produce industrial peace. Indeed, the legislation substitutes for free bargaining between the parties a binding award; but what disputes or differences fall within the scope of the Act? This matter fell for the consideration of <ORG> in <ORG>). Without launching on a long discussion, we may state that compensation for loss of business is not a dispute or difference between employers and workmen 'which is connected with the employment or non- employment or the terms of employment or with the conditions of labour, of any person'. We are unable to imagine a tort liability or compensation claim based on loss of business being regarded as an industrial dispute as defined in the Act, having regard to the language used, the setting and purpose of the statute and the industrial flavour of the dispute as one between the management and workmen.

In this context, we are strengthened in our conclusion by the provisions of s. 33C which provides for speedy recovery of money due to a workman from an employer under a settlement or an award, but not for the converse case of money due to an employer from workmen. There is no provision in the Act which contemplates a claim for money by an employer from the workmen.- And indeed, it may be a little startling to find such a provision, having regard to workmen being the weaker section and Part IV of the Constitution being loaded in their favour. The new light shed by the benign clauses of Part IV must illumine even pre- Independence statutes in the interpretative process. As yet, and hopefully, claims by employers against workmen on ground of tortious liability have not found a place in the pharmacopoeia of Indian Industrial Law. However, as earlier stated, we do not pronounce finally as it is not necessary.

There was argument at the bar that <ORG> was in error in relying on s. 18 of the Trade Unions Act, 1926 to rebuff the claim for compensation. We have listened to the arguments of <NAME> in support of the view of <ORG>, understood on a wider basis. Nevertheless, we do not wish to rest our judgment on that ground. Counsel for the appellants cited some decisions to show that an award falling outside the orbit of the Indian Arbitration Act can be enforced by action in court. We do not think the problem so posed arises in the instant case.

We dismiss the appeal but, in the circumstances, there will be no order as to costs.

P.H.P. Appeal dismissed. (1) [1949] I L. L. J. 245.