JUDGMENT

1. The appellants in appeal No. 408 were four persons named <NAME>, <NAME>, <NAME> and <NAME> alias <NAME>; the latter died after the appeal had been filed and at the present moment the appellants are the three first named persons. In appeal No. 409, the appellants are three in number, namely, <NAME>, <NAME> and <NAME> alias Ram <NAME>. The above named seven persons, along with six others, were tried under Section 120-B, read with Section 420, read with Section 109 of the Indian Penal Code, before the Additional Sessions Judge of Burdwan and a jury. The jury convicted the said seven persons and the learned Judge agreeing with the verdict of the jury, sentenced the said seven persons to various terms of imprisonment as under, viz., the accused <NAME> to three years' rigorous imprisonment; the accused <NAME> and <NAME> to two years' rigorous imprisonment; the accused <NAME> to one year's rigorous imprisonment; and ea oh of the accused, <NAME>, <NAME> and <NAME>, to-one year's rigorous imprisonment.

2. The facts connected with these two-appeals, shortly stated, are as follows : On the 17th July, 1919, one <NAME> (P.W. 67) made an application before the District Magistrate of Burdwan, asking the latter to take action against a number of persons who were in the habit of instituting false cases in <ORG> against innocent persons. Ten persons were named in <NAME>'s petition, which has been tendered as an exhibit in this-case and which is Exhibit 190. The District Magistrate forwarded the petition to-the Superintendent of <ORG> in Burdwan for necessary action. The latter on receipt of the petition passed an order on the 16th August, 1919, for arresting the ten persons mentioned in <NAME>'s petition and for starting a case against them under Section 110 , Cr.P.C . A <ORG> enquiry followed, but although the case under Section 110 , Cr.P.C . was started on the 18th of August, 1919,. the <ORG> did not submit a final report-even up to March, 1920. On the 3rd March, 1920, the Magistrate, before whom the proceedings under Section 110 , Cr.P.C . were pending, being of opinion that inasmuch as the <ORG> report had not been, submitted for a period of nearly eight-months, directed the discharge of the said ten persons. On the 17th of March, 1920, a first information was lodged against the said persons, charging them with having, committed offences punishable under Section 420 read with Section 120-B of the Indian Penal Code. On the 21st June, 1920, the. District Magistrate of Burdwan applied before the <NAME>, first Court, at Burdwan,, for sanction to prosecute five persons named, <NAME>, <NAME>, <NAME>, <NAME> and <NAME> for offences under Sections 193 , 209 , 467 / 114 and 471 and also under some of these sections read with Section 109 and also-under some of these sections read with Section 114 of the Indian Penal Code. In his petition, the District Magistrate statedi that <NAME> was a veteran-litigant and a proclaimed " tout" in the District of Burdwan, and the said other four persons were his creatures and associates, and that all of them with other person or persons unknown, were members-of a criminal conspiracy for the purpose of, amongst others, fraudulently obtaining moneys or properties from innocent persons or depriving them of their lawful rights by instituting false and fraudulent suits against such persons on the basis of forged documents and by committing other offences punishable in law or by doing illegal acts with illegal means in connection with those false claims. Particulars were given by the District Magistrate in his said petition of the false and fraudulent suits alleged to have been brought by the persons, against whom sanction was applied for: On the 25th September, 1920, the <NAME> granted the necessary sanction. There was an application for revision of the order made by the <NAME> before the District Judge of Burdwan and the latter, by his order, dated the 31st of April, 1921, revoked the sanction granted by the <NAME>. While these proceedings were pending, the <ORG> submitted a charge-sheet against certain persons on the 8th of May, 1920. It was alleged that the present accused, along with others, had conspired to cheat people by bringing fraudulent civil suits in Burdwan and in Shahabad and that they were professional swindlers and habitual conspirators.

3. In order to understand the case against the accused persons, it is necessary to mention some of the details of the conspiracies in which they were, according to the <ORG>, engaged. It appears that <NAME>, whose name has already been mentioned, claimed to be the reversionary heir of one <NAME>, who died sometime in 1903, leaving a widow called <NAME>. After <NAME>'s death, it is alleged that <NAME> determined to get hold of <NAME>'s properties and with that view instituted various suits. One <NAME> claimed to be the adopted son of <NAME>, having been adopted by <NAME>, and it is said that he used to look after <NAME>'s properties. <NAME> instituted certain suits against <NAME> in 1910 and 1911. It was alleged that these suits were false and fraudulent. It appears further that <NAME> became involved in debt and mortgaged her lands on the 14th of Agrahayan 1318 F.S. corresponding with the 30th of November, 1910, and executed and registered a deed in favour of <NAME>, <NAME> and <NAME> for a consideration of Rs. 500. <NAME> was a witness who identified <NAME> at the time of the registration of this deed. A few days after this, viz., on the 8th of December, 1910, the accused <NAME> brought a criminal case at Burdwan against <NAME>. Summons was never served on <NAME> in this case and it is alleged that <NAME> became aware of this for the first time when he was arrested in execution of a warrant at Sasgiram. He came to Burdwan and met <NAME> and invoked his assistance. <NAME> demanded Rs. 10. <NAME> paid Re. 1 and promised to pay the balance on return home, which he did. Later on, it is said that <NAME> took <NAME> to a, temple and made him promise that he would not go against <NAME> and said that in that case he would not be put to any trouble. <NAME>, it is further alleged, said that it was at his instance that the case had been instituted. On the 27th of January, 1911, the accused <NAME>, instituted a Small Cause Court Suit No. 45 of 1911, in <ORG> against <NAME> on an alleged note of hand, dated the 28th October, 1908. The suit was decreed and compromised for Rs. 214 on the 20th of February, 1911. It is alleged that <NAME> never came and compromised the suit, nor had he borrowed any money from <NAME> and that <NAME> came to know of this matter for the first time when his lands were sold some three years later in execution of the decree. <NAME>'s name has already been mentioned. He was one of the mortgagees of <NAME> and it is alleged that between 1912 to 1917 certain proceedings were taken by some of the accused against <NAME>. In other words, suits were instituted against <NAME>, <NAME>, <NAME> and <NAME>. The above suits may be classed under one group, being false suits brought by the conspirators in respect of matters in connection with <NAME>'s properties.

4. Evidence as regards two other conspiracies was also adduced. It appears that there was a man called <NAME>, who happened to be a friend of <NAME>. He died leaving a son named <NAME> and a widow named <NAME>. One Nibaran Chandra Roy Was a tenant of <NAME> and there was a person named <NAME>, who used to look after the properties and conduct litigation on behalf of <NAME>. One <NAME> had a joint karbar with <NAME> and <NAME>. It appears that after <NAME>'s death, <NAME> and <NAME> were helped in the joint karbar and in looking after the properties of <NAME> by these three persons, named <NAME>, <NAME> and <NAME>. It is alleged that, on <NAME>'s death, <NAME> wanted to get hold of <NAME>'s properties and of the karbar and with that object a conspiracy was formed some time in 1910 and various suits and proceedings were brought between 1910 to 1916 and the victims of the said conspiracy were <NAME>, <NAME>, <NAME>, <NAME> and <NAME>. <NAME>, it may be mentioned, in passing, waa a witness to a kobala alleged to have been executed by <NAME> in favour of <NAME>.

5. The third conspiracy, in respect of which evidence was given, arose in this way. There was a man called <NAME>, who died leaving a widow called <NAME>. <NAME> had a sister named <NAME>, whose husband was one <NAME>. On <NAME>'s death, <NAME>, it is alleged, wanted to get the house which <NAME> had left. It is alleged, however, that <NAME> had left a daughter and, therefore, <NAME> could on no account get the house of <NAME>. <NAME>'s case, however, was that <NAME> had died child-lass and that the house was the stridhan property of <NAME>'s mother, and therefore, in the usual course of things <NAME>'s sister, <NAME>, would be entitled to got the house. Litigation ensued in respect of this between 1918 to 1920, and it is alleged that the accused were members of a conspiracy formed to get hold of the property of <NAME>.

6. The charge framed against the accused, who are now before us, ran in these terms : "That you between the 27th day of March, 1913, and April, 1920, at Natunganj and Khojnerbar in the town of Burdwan, District Burdwan, and at Konpa, Arrah and Sasaram in the District of Shahabad and at other places in British India, were, along with others, members of a criminal conspiracy to cheat (which conspiracy had continued to exist since about 1903) and as members thereof did conspire with one another and <NAME>, since deceased, <NAME>, since deceased, and other person or persons unknown to commit offences punishable under Section 420 , I.P.C . each of which is a part of the same scheme and transaction), to wit, to deceive unsuspecting Judges of Civil <ORG>s who had tried the suits mentioned in Schedule A, attached hereto, and also Judges of Civil <ORG>s who had ordered execution of such decrees in execution cases mentioned in Schedule B, attached hereto, by a process of your own, namely, firstly, you deceived the first above-mentioned trial Judges to entertain unsuspectingly false claims (on the false allegations that the predecessors-in-title of the defendant or the defendants respectively concerned in the said civil suits had borrowed money or purchased goods on credit or assigned right to receive money from the plaintiffs who were either one or more of your party or a relation or connection of one of your party therein respectively, at places within the local limits of jurisdiction of such above named trial Judges but which places were at great distance from the places of residence of the defendants concerned, and that the debts so alleged to be due to the said respective plaintiffs remained unpaid wholly or in part) and then by causing false evidence to be given before the first abovementioned trial Judges, by one or more of your party, to prove due service of summonses (where summonses and copies of plaints were not served according to law) and claims (which were known by you to be false) deceived the first above-mentioned trial Judges respectively to believe that the claims in the suits aforesaid were true and proved as against the defendants concerned therein, and thereby dishonestly induced or attempted to induce the first abovementioned trial Judges, so deceived, to make valuable securities (to wit, decrees in <ORG> suits declaring that the plaintiffs therein were entitled to get properties or moneys from the victims of the said conspiracy, viz., the defendants concerned in such suits or that the legal rights of some defendants were extinguished) and you thereby obtained or attempted to obtain properties by deceitful means: and nextly, you deceived the said first abovementioned trial Judges to transmit the decrees, which were passed in the suits aforesaid, for execution to last above-mentioned executing Judges (who had ordered execution of such decrees in the execution cases aforesaid and within the local limits of whose jurisdiction the defendants respectively concerned in the said suits resided or had properties), and then deceived such executing. Judges to order execution of the decrees, so transmitted, (on the representation of one or more of your party that the decree-holder was entitled to enforce his decrees with the assistance of the <ORG>) in the execution cases aforesaid, to attach or seize or cause to be attached or seized the bodies or properties of the victim of the said conspiracy viz., the judgment-debtors concerned in the said execution cases respectively or to sell or cause to be sold properties so attached or seized, by <ORG> sale to one or more of your party, and thereby dishonestly induced them respectively to deliver or to cause to be delivered possession of the properties so sold to one or more of your party as auction-purchasers at such sales or to deliver or cause to be delivered moneys realised in such execution cases to one or more of your party as decree-holders, or to consent to the retention of properties so sold or moneys so delivered by one or more of your party as decree-holders and you also deceived the Judges of Civil <ORG>s who had decided the suits mentioned in Schedule C attached hereto and thereby dishonestly induced them or attempted to induce them (respectively to give effect to the false defence set up knowingly by one of your party, and to make valuable securities (to wit decrees in such suits declaring that the plaintiff's in such suits were not entitled to their respective lawful claims or part thereof) and there by committed an offence punishable under Sections 120-B , 420 of the Indian Penal Code, and within the cognizance of the <ORG> of Sessions. And I hereby direct that you be tried by the said <ORG> on the said charge."

7. There are three schedules to the said charge, Schedule A, containing a list of the false and fraudulent suits alleged to have been brought by the members of the conspiracy, Schedule B being a list of the execution cases which followed the decrees in the suits mentioned in Schedule A, and Schedule C being the list of suits in which false and fraudulent defences were set up by the members of the said conspiracies.

8. The matters referred to in the said charge clearly came within the purview of Sections 209 and 210 of the Indian Penal Code and might properly have been made the subject-matters of proceedings against the accused under the provisions of the said two sections. The difficulty, however, in the way of the prosecution lay in the fact that under the provisions of Section 195 of the Code of Criminal Procedure cognizance of any offence punishable under Sections 209 and 210 , among others, could not be taken except with the previous sanction of or on the complaint of a <ORG> in which such an offence has been committed, or of some other <ORG> to which such <ORG> was subordinate, and in this case the sanction which had been granted by the <NAME> had been revoked by the District; Judge, Mr. <NAME>, in April, 1921. The prosecution, therefore, attempted to bring their case against the accused within the four corners of Section 420 of the Indian Penal Code. Section 420 of the Indian Penal Code runs as follows:

Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person or to make, alter or destroy the whole or any part of a valuable security or anything which is signed or sealed and which is capable of being converted into a valuable security shall be punishable with imprisonment of either description for a term which may extend to seven years, and shall also be liable to a fine. Now, in order to bring a case within the four corners of Section 420 , I.P.C . it would have to be seen in the first instance whether the ingredients required by Section 415 , I.P.C ., are present in the facts alleged against the accused. We must, therefore, turn to Section 415 , I.P.C . in the first instance and see what the ingredients required by that section are Section 415 runs as follows:

Whoever by deceiving any person fraudulently or dishonestly induces the person so deceived to deliver any property to any person or to consent that any person shall retain any property or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit, if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat." The ingredients required by this section, therefore, are:

(1) Deception of any person.

(2)(a) Fraudulently or dishonestly inducing that person;

(i) to deliver any property to any person; or

(ii) to consent that any person shall retain any property; or

(b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property.

9. Mr. <NAME>, who has appeared on behalf of the appellants, in support of these two appeals, has assailed the learned Additional Sessions Judge's charge to the jury on various grounds. It is unnecessary for us, in the view we have taken, to refer to all the grounds, urged by Mr. <NAME>, but we shall content ourselves with noticing the more important of Mr. <NAME>'s grounds. In the first place, it is argued that the charge was bad, inasmuch as there was not one conspiracy, which was referred to therein, but evidence was allowed to be given of three conspiracies in which the conspirators were different, the objects of the conspiracies were different, and the conspiracies were held at different times. It is complained that in the charge to the jury the above point was not mentioned and the attention of the jury was not drawn to it. In the second place, it is argued that the learned Judge's charge to the jury was defective inasmuch as the attention of the jury had not been drawn to the following points arising on a charge under Section 420 or 415, I.P.C . In other words, it is argued that it ought to have been put to the jury that in order to make out the offence of cheating, not only should there have been delivery of property, but it had to be proved that it was property to which the accused was not entitled. Nextly it is argued that it ought to have boon put to the jury that passing a decree is not tantamount to delivering property and there was no evidence whatsoever that anybody was deceived and that the person so deceived had delivered any property. It is also argued that there was no evidence as to the ingredients required in the second part of Section 415 of the Indian Penal Code.

10. It is further argued that it should have been put to the jury that there were specific sections in the Indian Penal Code -covering the real offences alluded to in the charge and alleged to have been committed by the accused and that the prosecution, were not entitled to institute the present case complaining of other offences alleged to have been committed by the accuseds when sanction, as a matter of fact, bad been refused in respect of a prosecution for the real offences committed by the accused.

11. It has been represented to us on behalf of the appellants that the case put before the Sessions Judge was wholly different from the one indicated in the first information. In the first information it was alleged that the accused persons conspired to cheat numerous persons by bringing fraudulent civil suits in the Courts at Burdwan and Shahabad. In <ORG>, the prosecution changed; their case and it was alleged that the real offence had been committed against Courts of justice. No sanction for the prosecution of offences against Courts of justice was available after the 30th of April, 1921, when the District Judge revoked the sanction which had been previously granted by the <NAME> and in consequence thereof, the prosecution, it is alleged, had to fall back upon Section 420 , I.P.C ., because it was realised that if the-case could be brought under the provision of Section 420 , I.P.C ., it would not be necessary to rely on any sanction for the institution of the present proceedings.

12. The charge delivered by the learned Additional Sessions Judge of Burdwan to the jury is a very lengthy document. This has been scrutinized on behalf of the appellants for the purpose of showing that the learned Judge misdirected the jury in that he did not draw the attention of the jury to the question as to whether the ingredients required by Section 415 , I.P.C . were present in the facts alleged by the prosecution. The appellants urge that there are various other misdirections, in the charge bearing on the other grounds taken on behalf of the appellants. In the view we take as regards the learned Additional Sessions Judge's charge on the question as to whether the ingredients required by Section 415 , I.P.C ., are or are not present in the case on behalf of the prosecution. It will not be necessary for us to go into the other questions of misdirection argued on behalf of the appellants. We, therefore, propose to confine ourselves to this ground, viz., whether the learned Additional Sessions Judge's charge to the jury can or cannot be assailed on the ground that he had not put before the jury whether on the evidence adduced by the prosecution the ingredients required by Section 415 , I.P.C ., were satisfied. On behalf of the prosecution it has been made clear to us that they did not seek to bring their case within the latter or, the second part of Section 415 , I.P.C . The case for the prosecution is that unsuspecting Judges of Civil Courts were deceived by the appellants, that the persons so deceived were induced by the appellants to pass decrees in certain civil suit and thereby induced to deliver properties, and it is alleged that by reason of these steps having been taken by the appellants, they committed the offence of cheating as defined in Section 415 , I.P.C .

13. It is argued on behalf of the prosecution that when Judges of Civil <ORG> passed decrees in suits brought by the appellants or some of them, or when they passed orders in execution proceedings instituted by the appellants or some of them they made valuable securities within the meaning of the definition contained in Section 30 , I.P.C ., and that they thereby delivered properties, and, further, they would not have delivered properties if they had not been fraudulently deceived by the appellants or some of them and that if that is so, the case is brought within the four corners of Section 415 , I.P.C . For the moment we will leave aside orders made in execution proceedings and confine ourselves to decrees. Now, "valuable security" as defined in Section 30 , I.P.C . denotes a document which is, or purports to be, a document whereby any legal right is created, extended, transferred, restricted, extinguished or released, or whereby any person acknowledges that he lies under a legal liability or has not a certain legal right. The word "decree" has been defined in the Civil Procedure Code and it means the formal expression of an adjudication which, so far as regards the <ORG> expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit. Let us see therefore whether a decree satisfies the definition of a valuable security. In our opinion a "decree" does not come" within the definition of a "valuable security" a decree merely declares the existence of legal rights or the extinguishment, extension, transfer or restriction of legal rights, etc.; the rights are there, etc., and all that the decree does is that it formally expresses the adjudication by the <ORG> on the rights of the parties. Therefore a "decree" is not a "valuable-security," but even if a "decree" did satisfy the definition of a "valuable security," there was no delivery of property within the meaning of Section 415 , I.P.C . When the <ORG> passes a decree, it does not deliver any property, because the original decree remains in <ORG> and the term "valuable security," assuming that the term is wide enough to include a decree, can only apply to the original document and not to any copy of a decree which may be supplied on application to the s parties. The same arguments would apply to orders in execution. In the next place, who are the persons deceived according to the prosecution? They must be "unsuspecting Judges" of Civil <ORG>, according to-the prosecution. No evidence has been adduced by calling the "unsuspecting Judges" of Civil <ORG> to speak to the fact that they were deceived, because the language of Section 415 , I.P.C ., requires that the persons deceived must have delivered properties, etc., and in circumstances of this case the fact that these Judges were deceived could only have been spoken to. by the Judges themselves.

14. As has been slated above, the prosecution made it clear before us that they did not rely upon the second part of Section 415 , I.P.C . it is therefore not necessary for us, to enquire as to whether on any conceivable view of the matter, this case could have been brought within the second part of Section 415 , I.P.C . If it were necessary to do so, we might point out that the charge as framed does not cover a case coming within the second part of Section 415 , I.P.C . an ok that the evidence adduced does not satisfy the ingredients of the second part of Section 415 , I.P.C .

15. The learned Additional Sessions Judge's charge to the jury is defective in that it omitted to point out to the jury the matters to which we have drawn attention; there was, therefore, misdirection of a very, grave character, and in the circumstances, we are constrained to set aside the verdict of the jury. We are satisfied that on no conceivable view of the matter could the case of the prosecution be brought within the four corners of Section 415 , I.P.C . and, therefore, also of Section 420 of the Indian Penal Code. In the view, therefore, which we have taken, it is not necessary for us to go into any details in respect of the other grounds taken by Mr. <NAME> on behalf of the appellants. It is not to be understood, however, that the other grounds of Mr. <NAME> are not substantial. The materials on the record and especially the learned Additional Sessions Judge's charge to the jury, leave no other alternative to us but to come to the conclusion to which we have come. The prosecution was conducted during a very lengthy period and at great public expense; that it should have been conducted in the manner in which it has been done, is regrettable; but these appeals must stand or fall on the question of misdirection in the learned Additional Sessions Judge's charge to the jury. As has been stated above, we are satisfied that there has been misdirection and we are, therefore, bound to set aside the verdict of the jury and to direct the acquittal of the appellants, which we do. The bail bonds will be cancelled.


JUDGMENT Mrs. <NAME>, J.

1. This is a reference under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee-company. The relevant assessment year is 1969-70, for which the previous year was from April 1, 1968, to March 31, 1969. During the relevant previous year, the assessee had valued its opening stock on the basis of costs plus overheads which was the method adopted by the assessee in the years prior thereto, so that the value of the closing stock for the year ending March 31, 1968, was carried forward as the value of the opening stock on April 1, 1968. The assessee, however, decided to change its method of valuation by valuing the stock at cost price only excluding the overheads. The assessee accordingly valued it closing stock for the assessment year in question, i.e., as on March 31, 1969, at cost price. The Income-tax Officer increased the gross profit rate in view of the difference in the method of valuation of opening stock and closing stock.

2. The assessee took the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner recalculated the valuation of the closing stock by adding over heads to cost and determined the profit accordingly. In appeal before the <ORG>, the <ORG> held that the correct profit can only be arrived at by valuing the opening stock and closing stock at cost price excluding overhead expenses. It, however, directed the Income-tax Officer to redetermine the value of the opening stock at cost price after excluding all overheads.

3. From the decision of the <ORG>, the following question is referred to us :

"Whether the tribunal was right in directing <ORG> to revise and determine the value of the opening stock as on April 1, 1968, by excluding all overhead expenses ?"

4. It is not in dispute that under section 145 of the Income-tax Act, 1961, the assessee can adopt a method of valuation which has to be followed by it regularly. It is an accepted principle of accountancy that the value of the stock can be determined at cost price or market price, whichever is lower. In the present case, the assessee had adopted the cost price as a basis for valuing its stock. For the earlier previous years, however, the assessee determined the cost price by adding overheads to the cost of the stock, while in the relevant assessment year, it decided to change this methods by determining the cost price without taking into account overheads.

5. We are not here concerned with whether this is the correct method or an acceptable method for determining cost price. At no stage of the proceedings was the question ever raised as to whether it was permissible for the assessee to revalue its stock by not including in the cost price overhead expenses. The <ORG> has not dealt with this aspect, viz., the manner in which the closing stock has been valued in the present case. Therefore, the decision of <ORG> in the case <CITATION> . , is not attracted to the question before us for consideration. The decision of the <ORG> is on the footing that since the closing stick was valued by adopting a certain method, the same method should be adopted in valuing the opening stock. In other, words, the change in the method of valuation, according to the <ORG>, should commence with is to be adopted for valuing the opening stock of nay previous year by the new method which is to be adopted for valuing the closing stock as well. The assumption so made by the <ORG> appears to be contrary to the normally accepted accounting principles. Mr. <NAME> has drawn our attention to a booklet called "Valuation of stock and Work-in-Progress - Normally Accepted Accounting Principles" - brought out by <ORG> and written by <NAME>. At page 4 of this booklet there is a discussion about change from one valid basis to another valid basis. It states :

"2. Where a change from one valid basis to another valid basis as accepted certain consequences normally follow. The opening stock of the base year of valued on the same basis as the closing stock whether the change is to a higher level or to a lower level, the <ORG> normally does not seeks to revise to valuation of earlier years. It neither seek to raise additional assessment, nor does it admit relief under the error or mistake provisions.

3. It is not possible to define with precision what amounts to a change of basis. It is a convenience, both to the taxpayer and to the <ORG>, not to regard every change in the method of valuation as a change of basis. In particular, the <ORG> encourage the view that change which involves no more than a greater degree of accuracy, or a refinement, should not be treated as a change of basis, whether, the change results in a higher or a lower valuation. In such cases the new valuation is applied at the end of the year without amendment of the opening valuation."

6. The same principle has been adopted by <ORG> in <CITATION> . . It has said (headnote) :

"The two principles applicable with regard to the valuation of stock are that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and that the closing stock must be the value of the opening stock in the succeeding year. It is thus, clear, that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price, whichever is lower, provided the change is bona fide and followed regularly thereafter."

7. Thus, the value of the closing stock of the preceding year must be the value of the opening stock of the next years. The change, therefore, has to be effected by adopting the new method for valuing the closing stock which will, in its turn, become the value of the opening stock of the next year. If, instead, a procedure is adopted for changing the value of the opening stock, it will lead to a chain reaction of changes in the sense that the closing value of the stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. This was pointed out by <ORG> in the case of <CITATION> . . In the case before <ORG> also the valuation of opening stock had been done by the company on the basis of valuation for the closing stock to "direct cost", i.e., cost without overheads. This change in method was made bona fide and the assessee said that it would be adopting this method consistently in the future just as in the present case. The court in that case held :

"The change was a bona fide one and was a permanent arrangement which was to be followed year after year, the change would have to be accepted notwithstanding the fact that during the assessment year in question, which was the first year when the change of method was brought about, a prejudice or detriment might be caused to the revenue, because the opening stock was valued at total cost while stock was valued at direct cost."

8. It said (headnote) :

"If the assessee is called upon to apply the new method of valuation to the opening stock of the accounting year as well, the value of the closing stock of the year previous to the accounting year will also have to get altered which is result in a modification of the assessment of that previous year."

9. The same reasoning has been adopted by <ORG> in the case of <CITATION> . . Before <ORG> also, the assessee was valuing its closing stock, in the past years, by what is known as total cost method in which the proportionate over heads for administrative expenses, selling expenses and interest in stock valuation, were taken into account, for the assessment year in question, the assessee adopted the works cost system where the administrative overheads were not taken into account. The court held :

"Change in the method had to be effected with change in the at valuation of the closing stock of the first year and that the <ORG> was right in holing that opening stock should be revalued, was incorrect."

10. Similar question was dealt with by <ORG> in the case of <CITATION> , in a similar manner.

11. Reliance was placed by the <ORG> on a decision of <ORG> in the case of <CITATION> . . In the case before <ORG> both the opening and closing stock were undervalued. The Privy council observed in this connection :

"Mistake cannot be rectified by raising valuation of closing stock only, the valuation of both the opening and closing stock had to be raised."

12. This decision has no application to the question before us which deals with the change method of valuation and the manner in which such change has to be brought about. Whenever, there is a change in the method of valuation. There is bound to be some distortion in the calculation of profit in the year in which the change takes place. But if the change is brought about bona fide and is no reason why such a change should not be permitted. Undoubtedly, the proviso to section 145 of the Income-tax Act, 1961, lays down that :

"Provided that in any case where the accounts are correct and complete to the satisfaction of the assessing Officer but the method employed is such that, in the opinion of Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing officer may determine."

13. This is not such a case. The only question is whether the opening stock is also required to be revalued by excluding all overhead expenses when the assessee has been permitted to revise the method of valuing the closing stock for that year, as the assessee has decided to adopt this new method of valuation henceforth.

14. For the reason set out above, the direction given by the <ORG> to revise and determine the value of opening stock also by excluding all overhead expenses, is not justified. We are not called upon to decide whether the method adopted for valuing the closing stock is in accordance with law and/or accounting practice. The question referred to us is, therefore, answered in the negative and in favour of the assessee. No order as to cost.

15. Certified copy be expedited.


PETITIONER: SIR CHUNILAL V. MEHTA AND SONS, LTD. Vs. RESPONDENT: <ORG> LTD. DATE OF JUDGMENT: 05/03/1962 BENCH: <NAME>, J.R. BENCH: <NAME>, J.R. SINHA, <NAME> P.(CJ) KAPUR, J.L. HIDAYATULLAH, M. <NAME>, J.C. CITATION: 1962 AIR 1314 1962 SCR Supl. (3) 549 CITATOR INFO : F 1963 SC 361 (8) RF 1979 SC 798 (9) ACT: <ORG> Appellate Jurisdiction of--Appeal against decree of affirmance--Substantial question of law--Construction of agreement, if such a question--Breach of contract--Liquidated damages--Constitution of India, Art. 133(1). HEADNOTE: The appellants were appointed managing agents of the respondents for 21 years. Under cl. 10 of the agreement the appellants were entitled to a remuneration equal to 10% of the gross profits of the respondents subject to a minimum of Rs. 6,000 per month. Clause 14 provided that if the agree- ment was terminated otherwise in accordance with the provi- sions thereof the appellants would be entitled to liquidated damages "of not less than Rs. 6,000" per month for the unexpired portion of the agreement. The respondent wrong- fully terminated the agreement before the expiry of the stipulated period. The appellants filed a suit for recovery of damages for breach of contract on the basis of 10% of the gross profits of the respondents. The trial judge granted a decree for Rs. 2,34,000 calculating the amount at Rs. 6,000 per month. On appeal by the appellants <ORG> affirmed the decree. The appellants applied 'to <ORG> for a certificate of fitness for appeal to the <ORG> but it declined to grant the same on the ground that though the question involved in the case relating to the interpretation of the agreement was a question of law it was not a substantial question of law as required by Art. 13(1) of the Constitution. Held, that the case involved a substantial question of law and the appellants were entitled to the certificate as of right. A substantial question of law is one which is of general public importance or which directly and substantially affects the rights of the parties and which have not been finally settled by the <ORG>, <ORG> or <ORG> or which is not free from difficulty or which calls for discussion of alternative views. The question involved in the present case as to the construction of the agreement was not only one I of law but' it was neither simple nor free from doubt and was a substantial question of law within the meaning of Art. 133(1). 550 <CITATION> .,(1948) I.Bom. L. R. 744 ; <NAME> v. Deputy Commissioner of Partapgarh, (1927) 54 1. A. 126 and <NAME> v. <NAME>, f. L. R. (1949) Nag. 224, referred to. <CITATION> . 1952 Mad. 264, approved. Held, further that upon a proper construction of cl. 14 of the agreement the appellants were entitled to damages at the rate of Rs. 6,000 per month only. The words "not less than Rs. 6,000" in cl. 14 could not be construed as meaning 10% of the gross profits as provided in cl. 10. When in cl. 14 the parties named a sum of money to be paid as liquidated damages, it excluded the right to claim an unascertained sum as damages. JUDGMENT:

CIVIL APPELLATE JURISDICTION :Civil Appeal No. 417 of 1957. Appeal by special leave from the judgment and decree dated March 14, 1956, of <ORG> in Appeal No. 94 of 1955.

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

<NAME>, Attorney General of India, <NAME> <NAME>, for the respondent.

<NAME> and <NAME>, for the Intervener. 1962. March 5. The Judgment of the Court was delivered by MUDHOLKAR, J.-This is an appeal by special leave against the Judgment of <ORG>Bombay in an appeal from the judgment of a single Judge of that Court. The claim in appeal before <ORG> was for about 26 lakhs of rupees. Being aggrieved by the decision of <ORG>, the appellant applied for a certificate under Art. 133(1)(a) of the Constitution. The judgment of <ORG> in appeal was in affirmance of the judgment of the learned single Judge dismissing the appellant's suit for damages and therefore, it was necessary for the appellant to establish that a substantial question of law was involved in the appeal. On behalf of the appellant it was contended that the question raised concerned the interpretation to be placed on certain clauses of the managing agency agreement upon which their claim in the suit was founded and that as the interpretation placed by the appeal court on those clauses was erroneous and thus deprived them of the claim to a substantial amount the matter deserved to be certified by <ORG> under Art. 133(1)(a) of the Constitution. The learned Judges dismissed the application without a judgment apparently following their previous decision in <CITATION> . (1). The appellants, therefore, moved this Court under Art. 136 of the Constitution for grant of special leave which was granted. In the application for special leave the appellant had raised a specific contention to the effect that the view taken by <ORG> with regard to the application for certificate under Art. 133 (1)

(a) of the Constitution was wrong, that the appellant was entitled to appeal to this Court as a matter of right and that while considering the appeal this question should also be decided. The appellant pointed out that the view taken by <ORG> on the point as to what is a substantial question of law runs contrary to the decision of <ORG> in <NAME> v. Deputy Commissioner of Partabgarh (2) and the decision of some High Courts in India and that therefore, it is desirable that this Court should pronounce upon the question in this appeal and set the matter at rest. We think that it is eminently desirable that the point should be considered in this appeal.

It is not disputed before us that the question raised by the appellant in the appeal is one of law because, which the, appellant is challenging is the interpretation placed upon certain clauses of the (1) (1948) L. Bom. L.R. 744.

(2) (1927) 54 I.A. 126, 128.

managing agency agreement which are the foundation of the claim in suit. Indeed it is well settled that the construction of a document of title or of a document which is the foundation of the rights of parties necessarily raises a question of law.

The next question is whether the interpretation of a document of the kind referred to above raises a substantial question of law. For, Art. 133(1) provides that where the judgment, decree or final order appealed from affirms the decision of the court immediately below in any case other than a case referred to in sub-cl. (c) an appeal shall lie to this Court if <ORG> certifies that the appeal involves some substantial question of law. To the same effect are the provisions of s. 110 of the Code of Civil Procedure. In the old <ORG> the view was taken that a substantial question of law meant a question of general importance. Following that view its successor, <ORG>, refused to grant a certificate to one <NAME> whose appeal it had dismissed. The appellant, therefore, moved <ORG> for special leave on the ground that the appeal raised a substantial question of law. <ORG> granted special leave to the appellant and while granting it made the following observation in their judgment:

"Admittedly here the decision of the <ORG> affirmed the decision of the <ORG> immediately below, and, therefore, the whole question turns upon whether there is a substantial question of law. There seems to have been some doubt, at any rate in the old <ORG> of Oudh, to which the present <ORG> succeeded, as to whether a substantial question of law meant a question of general importance. Their Lordships think it is quite clear and indeed it was conceded by Mr. <NAME> that that is not the meaning, but that "substantial question of law" is a substantial question of law as between the parties in the ease invol- ved."

Then their Lordships observed that as the case had occupied <ORG> for a very long time and on which a very elaborate judgment was delivered the appeal on its face raised as between the parties a substantial question of law. This case is reported in <NAME> v. Deputy Commissioner of Partabgarh(1). What is a substantial question of law as between the parties would certainly depend upon the facts and circumstances of every case. Thus for instance, if a question of law bad been settled by the highest court of the country the question of law however important or difficult it may have been regarded in the past and however much it may affect any of the parties would cease to be a substantial question of law. Nor again, would a question of law which is palpably absurd be a substantial question of law as between the parties. <ORG>, however, in their earlier decision already adverted to have not properly appreciated the test laid down by <ORG> for ascertaining what is a substantial question of law. Apparently the judgment of <ORG> was brought to their notice though they do not make a direct reference to it, they have observed as follows:

"The only guidance that we have had from <ORG> is that, substantial question is not necessarily a question which is of public importance. It must be a substantial question of law as between-the parties in the case involved. But hero again it must not be forgotten that what is contemplated is not a question of law alone; it must be a sub- stantial question. One can define it nega- tively. For instance, if there is a well established principle of law and that principle is (1)(1927) 54 1. A. 126, 128, applied to a given set of facts, that would certainly not be a substantial question of law. Where the question of law is not well settled or where there is some doubt as to the principle of law involved, it certainly would raise a substantial question of law which would require a final adjudication by the highest <ORG>."

One of the points which the learned judges of <ORG> had to consider in this case was whether the question of construction to be Placed upon a decree was a substantial question of law. The learned Judges said in their judgment that the decree was undoubtedly of a complicated character but even so they refused to grant a certificate under s. 110 of the Code of Civil Procedure for appeal to <ORG> because the construction which the <ORG> was called upon to place on the decree did not raise substantial question of law. They have observed that even though a decree may be of a complicated character what the <ORG> has to (lo is to look at its various provisions and draw its inference therefrom. Thus according to the learned Judges merely because the inference to be drawn is from a complicated decree no substantial question of law would arise. Apparently in coming to this conclusion they omitted to attach sufficient weight to the view of <ORG> that a question of law is "a substantial question of law" when it affects the rights of the parties to the pro- ceeding. Further the learned Judges seem to have taken the view that there should be a doubt in the mind of the <ORG> as to the principle, of law involved and unless there is such doubt in its mind the question of law decided by it cannot be said to be "a substantial question of law" so as to entitle a party to a certificate under a. 1 10 of the Code of Civil Procedure. It is true that they have not said in so many words that such a doubt must be entertained by the <ORG> itself but that is what we understand their judgment to mean and in particular the last sentence in the portion of their judgment which we have quoted above. As against the view taken by <ORG> there are two decisions of the High <ORG>s in India to which reference was made before us. One is <NAME> v. <NAME> (1). In that case applying <ORG>'s decision the High <ORG> held that a question of law is substantial as between the parties if the decision turns one way or another on the particular view taken of the law. If the view taken does not affect the decision then it cannot be substantial as between the parties ; but it would be otherwise if it did, even though the question may be wholly unimportant to others. It was argued before the High <ORG> on the basis of certain decisions that no question of law can be substantial within the meaning of s. 110 of the Code of Civil Procedure unless the legal principles applied in the case are not well defined or unless there can be some reasonable divergence of opinion about the correctness of the view taken and the case involves, a point of law such as would call for fresh definition and enunciation. Adverting to those cases <NAME>, (as he then was) whom Delivered the judgment of the <ORG> observed as follows :

"In the first case cited, it was also held that a misapplication of principles of law does not raise any substantial question of law so as to attract the operation of s. 1

There can be no doubt that that is a view which has been held by various <ORG> in India, but the decision cited' omit to consi-

der two decisions of' their Lordships of <ORG> on this very point which. in our (1) 1. L. R. (1949) Nag. 224 opinion, very largely modify the views taken in the cases cited and which of course it is impossible for us to ignore." (p. 226) Referring to <ORG> case the learned Chief Justice observed as follows :

"In the Lucknow case the only question was whether the defendant there obtained an absolute interest or a limited interest under a will. That again was a question which was of no interest to anyone outside the parties to the suit. Nevertheless, their Lordships considered in both cases that the questions were substantial questions of law because they were substantial as between the parties. We can only consider this to mean that a question of law is substantial as between the parties if the decision turns one way or another on the particular view taken of the law. If it does not affect the decision then it cannot be substantial as between the parties. But if it substantially affects the decision then it is substantial as between the parties though it may be wholly unimportant to others." (p. 228) It maybe that in the case before it, <ORG> was justified in granting certificate because of the points involved was the construction of a deed of compromise and <ORG> had interpreted that deed differently from the court below. But it seems to us that some of the obser-

vations of <NAME>, are a little too wide. We are prepared to assume that the learned Chief Justice did not intend to say that where a question of law raised is palpably absurd it would still be regarded as a substantial question of law merely because it affects the decision of the case one way or the other. 'But at the same time his observation that the view taken in the cases cited before him requires to be modified in the light of the <ORG> decision would imply that a question of law is deemed to be a substantial question of law even though the legal principles applicable to the case are well defined and there can be no reasonable divergence of opinion about the correctness of the view taken by <ORG>. If we, have understood the learned Chief Justice right, we think that he has gone further than was warranted by the decision of the <ORG> in <NAME> case (1). The other case relied upon was <CITATION> (2). In that case the test of the kind suggested by <NAME> 'C.J., was rejected on the ground that logically it would lead to the position that even a palpably absurd plea raised by a party would involve a substantial question of law because the decision on the merits of the case would be directly affected by it. What was, however, said was that when a question of law is fairly arguable, where there is room for difference of opinion on it or where the <ORG> thought it necessary to deal with that question at some length and discuss alternative view, then the question would be a substantial question of law. On the other hand if the question was practically covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to the particular fact of the case it would not be a substantial question of law.

We are in general agreement with the view taken by <ORG> and we think that while the view taken by. <ORG> is rather narrow the. one taken by the former <ORG> is too wide. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it (1) (1927) 54 I.A. 126. 128.

(2) I.L.R. 1952 Mad. 264.

directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by <ORG> or by <ORG> or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general. principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. Applying the tests it would be clear that the question involved in this appeal, that is, the construction of the <ORG> agreement is not only one of law but also it is neither simple nor free from doubt. In the circumstances we have no hesitation in saying that <ORG> was in error in refusing to grant the appellant a certificate that the appeal involves a substantial question of law. It has to be borne in mind that upon the success or the failure of the contention of the parties, they stand to succeed or fail with respect to their claim for nearly 26 lakhs of rupees. Now as to the merits. The relevant facts may be briefly stated. <ORG>, Bombay were appointed Managing Agents of the respondent company for a term of 21 years by an agreement dated June 15, 1933. By a resolution passed by the respondent company in October 1945, <ORG>, were permitted to assign the benefits of the aforesaid.agreement to the present appellant, Sir <NAME> Ltd. On April 23, 1951, <ORG> of the Company terminated the agreement of 1933 and passed a resolution removing the appellant as Managing Agents on April 23, 1951. The appellant thereupon filed a suit on the original side of <ORG> claiming Rs. 50 lakhs by way of damages for wrongful termination of the agreement. Eventually with the permission of the Court it amended the plaint and claimed instead Rs. 28,26,804/-. The company admitted before the Court that the termination of the appellants' employment was wrongful and so the only question which the learned Judge before whom the matter went had to decide was the quantum of damages to which the appellant was entitled. This question depended upon the construction to be placed upon cl, 14 of the <ORG> agreement.

That clause runs thus "In case the Firm shall be deprived of the office of Agents of the Company for any reason or cause other than or except those reasons or causes specified in Clause 15 of these presents the Firm shall be entitled to receive from the Company as compensation or liquidated damages for the loss of such appointment a sum equal to the aggregate amount of the monthly salary of not less than Rs. 6,000/- which the Firm would have been entitled to receive from the Company, for and during the whole of the then unexpired portion of the said period of 21 years if the said Agency of the Firm had not been determined."

In order to appreciate the arguments advanced before us it would, however, be desirable to reproduce the two earlier clauses cls. 10 and 12. They run thus

10.The Company shall pay to the Firm by wry of remuneration for the services to be performe d by the Firm as such Agents of the Company under this Agreement a monthly sum of Rs.

6,000/- provided that if at the close of any year it shall be found that the total 0remuneration of the firm received in such year shall have been less than 10 per cent of the gross profits of the <ORG> for such year the <ORG> shall pay to the Firm in respect of such year such additional sum by way of remuneration as will make the total sum received by the Firm in and in respect of such year equal to 10 per cent of the gross profits of the <ORG> in that year. The first payment of such remuneration , shall be made on the first day of August 1933.

"12. The said monthly remuneration or salary shall accrue due from day to day but ,shall be payable by the company to the Firm monthly, on the first day of the month immediately succeeding the month in which it shall have been earned."

The learned trial judge upon the interpretation placed by him on el. 14 awarded to the, appellant a sum of Rs. 2,34,000/-, calculating the amount it Rs. 6,000/- p.m. for the unexpired period of the term of the <ORG> agreement and also awarded interest thereon. Now according to Mr. <NAME> for the appellants, the interpretation placed upon el. 14 by the trial judge and <ORG> is erroneous in that it makes the words "not less than" in el. 14 redundant. Learned counsel contends that on a proper construction of el. 14 the appellants are entitled to compensation computed on-the basis of the total estimated remuneration under cl. 10 for the unexpired period. Under that clause, he contends, the appellants are entitled to 10% of the profits of the company subject to a minimum of Rs. 6,000/- p.m. Alternatively learned counsel contends that el. 14 is not exhaustive of the appellant's right to compensation and the right to be compensated in respect of contingent remunera-

tion based on 10% of profits is left untouched by that clause.

A perusal of el. 14 clearly shows that the parties have themselves provided for the precise amount of damages that would be payable by the Company to the Managing Agents if the Managing Agency agreement was terminated before the expiry of the period for which it was made. The clause clearly states that the Managing Agent shall receive from the Company as compensation or liquidated damages for the loss of appointment a sum equal to the aggregate amount of the monthly salary of not less than Hs. 6,000/- for and during the whole of the unexpired portion. of the term of Agency. Now, when parties name a sum of money to be paid as liquidated damages they must be deemed to exclude the right to claim an unascertained sum of money as damages. The contention of learned counsel is that the words "not less than" appearing before "Bs. 6,000/-" in cl. 14 clearly bring in el. 10 and, therefore, entitle the appellant to claim 10% of the estimated profits for the unexpired period by way of damages. But if we accept the interpretation, it would mean that the parties intended to confer on .the Managing Agents what is in fact a right conferred by a. 73 of the Contract Act and the entire clause would be rendered those. Again the right to claim liquidated damages is enforceable under is. 74 of the Contract Act and where such a right is found to exist no question of ascertaining damages really arises. Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they, at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of' money which was not ascertained or ascertainable at the date of the breach. Learned counsel contends that upon this view the words "not less than" would be rendered otiose. In our opinion these words, as rightly-pointed out by <ORG>, were intended only to emphasise the fact that compensation will be computable at an amount not less than Rs. 6,000 p.m. Apparently, they thought it desirable to emphasise the point that the amount of Rs. 6,000 p.m. was regarded by' them as reasonable and intended that it should not be reduced by the court in its discretion.

Mr. <NAME> argued that what the appellants were entitled to was remuneration and remuneration meant nothing but salary. The two words, according to him, have been used interchangeably in the various clauses of the agreement. If, therefore, salary in el. 14 is the same as remuneration, which according to him it is, then as indicated in el. 10 it would mean 10% of the gross profits of the Company subject to a minimum of Rs. 6,000/-p.m. In support of the argument that the two words wherever used in the agreement mean one and the same thing learned counsel relies on cl.12 which says that the monthly remuneration or salary shall accrue due from day to day. Then undoubtedly the two words clearly mean the same thing. But from a perusal of the clause it would appear that remuneration there could mean nothing other than Rs.6,000/-p.m. For, that clause provides that the amount shall accrue from day to day and be payable at the end of the month immediately succeeding the month in which it had been earned. Now, whether a company had made profits or not and if so what is the extent of the profits is determinable only at the end of its accounting year. To say, therefore, that the remuneration of 10% of the gross profits accrues from day to day and is payable every month would be to ignore the nature of this kind of remuneration. Therefore, in our opinion, when the remuneration and salary were equated in el. 12 nothing else was meant but Rs. 6,000/-and when the word salary was used in el. 14 we have no doubt that only that amount was meant and no other. It may be that under el. 10 the appellant was entitled to additional remuneration in case the profits were high upto a limit of 10% of the gross profits. That was a right to claim something over and above Rs.6,000/-and could be characterized properly as additional remuneration and not fixed or normal remuneration which alone was apparently in the minds of the parties when they drew up el. 14. In our opinion, therefore, <ORG> was right in the construction placed by it upon the clause. Coming to the alternative argument of Mr. <NAME>, we appreciate that the right which the appellant had of claiming 10% of profits was a valuable right and that but for cl. 14 he would have been (entitled in a suit to claim damages estimated at 10% of the gross profits. We also appreciate his argument that a party in breach should not be allowed to gain by that breach and escape liability to pay damage to a very much larger sum than the compensation payable under cl. 14 and that we should so interpret cl. 14 as to keep alive that right of the appellants. Even so, it is difficult, upon any reasonable construction of cl. 14, to hold that this right of the appellants were intended by the parties to be kept alive. If such were the intentions of the parties clearly there was no need whatsoever of providing for compensation in cl. 14. If that clause had not been there the appellant would indeed have been entitled to claim damages at the rate of 10% for the entire period subject to minimum of Rs. 6,000/- p.m. On the other hand it seems to us that the intention of the parties was that if the appellants were relieved of the duty to work as Managing Agent and to put in their own money for carrying on the duties of managing agents they should not be entitled to get anything more than Rs. 6,000/- p.m. by way of compensation. Clause 14 as it stands deals with one subject only and that is compensation. It does not expressly or by necessary implication keep alive the right to claim damages under the general law. By providing for compensation in express terms the right to claim damages under the general law is necessarily excluded and, therefore, in the face of that clause it is not open to the appellant to contend that that right is left unaffected. There is thus no substance in the alternative contention put forward by the learned counsel.

Accordingly we affirm the decree of <ORG> and dismiss the appeal with costs.

Appeal dismissed.


PETITIONER: <ORG>. Vs. RESPONDENT: H. R. DEB & ORS. DATE OF JUDGMENT: 02/04/1968 BENCH: <NAME>, M. (CJ) BENCH: <NAME>, M. (CJ) RAMASWAMI, V. VAIDYIALINGAM, C.A. HEGDE, K.S. GROVER, A.N. CITATION: 1968 AIR 1495 1968 SCR (3) 614 CITATOR INFO : RF 1970 SC 694 (6) E 1976 SC2283 (12) RF 1988 SC 404 (6) RF 1992 SC1213 (24) ACT: Industrial Disputes Act , ss. 7(3)(d) and 2- "Judicial <ORG>", if includes <ORG> of Magistrate-Writ of Quo Warranto-Insuance. HEADNOTE: Section 7(3) (d) of the industrial Disputes Act provides that no person shall be qualified for appointment as the presiding officer of <ORG>, unless he has held any judicial <ORG> for not less than seven years. Since 1940 the first respondent held the <ORG> of Sub-Deputy Collector and was vested with Magisterial powers. In 1959 he was appoint the presiding officer of <ORG> and he gave an award against the appellant. The appellant questioned the appointment on the ground that the first respondent had not held 'judicial office' for 7 years prior to his appointment. HELD : A Magistrate holds a judicial office. That his dudes are partly judicial and partly other does not in any way detract from the position that while acting as a Magistrate he is a judicial officer. An office means no more than a position to which certain duties are attached. A public office is one which entities a man to act in the affairs of others without their appointment or permission. The office of a Magistrate is a correct expression in English and in law. The word 'office' has been applied to Magistrates. The Judicial <ORG>rs Protection Act , is intended to protect not Civil Judges alone but also Magistrate. [620 F-621 C]. The functions of <ORG> are of great public importance and quasi civil in nature. Men of experience on the civil side of the law are more suitable than Magistrates. Persons employed on multifarious duties and in addition performing some judicial functions may not truly answer the requirement of s. 7 . For it cannot be denied that the expression "holding a judicial office" signifies more than discharge of judicial functions while holding some other office. The phrase postulates that there is an office and that office is primarily judicial. In this case the distinction was unsubstantial because the Magistrate was holding a fixed position for nineteen years and performing functions primarily of judicial character. [622 B-D]. Even if there be some doubt that is to be resolved in favour of upholding the appointment on the ground that the legislature itself by s. 9 contemplates that such appointments should not be called into question. Although the provisions of s. 9 cannot shut out an inquiry (if there is a clear usurpation) for purposes of a writ of quo warranto at least in an. unclear case the intent of the legislature is entitled to great weight. <ORG> in a quo warranto proceeding should be slow to pronounce upon the matter unless there is a clear infringement of the law. [621 D-F]. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 647 of1967.

Appeal from the judgment and order dated January 5, 1967 of <ORG> in Appeal from Original Order No. 1.34 of 1966.

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

<NAME> and <NAME>, for respondent No. 2. <NAME>, <NAME> for <NAME>, for respondent No. 3.

The Judgment of the <ORG> was delivered by <NAME>, <NAME> This appeal on certificate arises from a petition under Art. 226 of the Constitution of India filed in <ORG> at Calcutta by the appellant, <ORG> This company prints and publishes daily and weekly newspapers and undertakes general printing work at Calcutta. By that writ petition the <ORG> asked for a writ of certiorari against <ORG>, West Bengal with a view to quashing an award, 21 September 1960, reinstating one <NAME>, one of its employees. The <ORG> had dismissed the said <NAME> after holding an inquiry but <ORG> ordered his reinstatement with half wages for the period of his 'forced unemployment'. The writ petition was heard by <NAME> and by his order, 15 February, 1962, the petition was granted and the order of the <ORG> was quashed. The workmen who had sponsored the case of <NAME> appealed in <ORG>. During the course of the appeal an application was filed by the <ORG> stating that the <ORG> presided over by Mr. <NAME> was not qualified in law to adjudicate upon the dispute inasmuch as the appointment of Mr. <NAME> was in violation of the provisions of S. 7 (3) (d) of the Industrial Disputes Act , 1947. On June 16, 1964 by another affidavit the particulars of the services of Mr. <NAME> were stated to show that Mr. <NAME> had not held a 'judicial office' in India for not less than 7 years and as this was a condition precedent his appointment was illegal and the award made by him was a nullity. The <ORG> stated that this was, so held in another matter (Matter No. 120/1961 decided on July 28, 1965 between <ORG> v. <NAME> and others. The appeal was heard and allowed and the order of <NAME> was set aside but liberty was given to the <ORG>, on terms as to costs, to amend the original petition and the learned Judge was directed to hear and determine the amended petition. The amendment was effected on August 5, 1964. On September 3, 1964 <ORG> in <ORG> case delivered judgment. Two separate judgments were delivered. <NAME> held that the provisions of S. 7 (3) (d) of the Industrial Disputes Act were directory while <NAME>, J. held them to be mandatory. <NAME> also held that even if the appointment of Mr. <NAME> was not regular, the doctrine of de facto determination by a <ORG> apparently possessed of jurisdiction applied and the order could not be questioned. <NAME> J. held to the contrary. The matter was then referred to <NAME> (as he, then was) who held that (a) Mr. <NAME> had not held judicial office for 7 years prior to his appointment; (b) that s. 7 (3) (d) of the Industrial Disputes Act was mandatory; (c) a writ of quo warranto must therefore issue, against him; (d) that the de facto doctrine applied; and (c) proceedings for a writ of certiorari was collateral and, therefore, not available to quash the award of Mr. <NAME>.

The case of <ORG> as decided by the Full Bench was followed in the present writ petition by <NAME> on June 6, 1966 and the writ petition was dismissed. The Company appealed against the judgment of <NAME> Sinha C.J.- and <NAME> dismissed the appeal, January 5, 1967 but ,-ranted a certificate and this appeal is the result.

Although this appeal is quite separate from the <ORG> case, the decision in that case was the one canvassed before us. After hearing the arguments in the case we are satisfied that the appeal must fail on the ground that Mr. <NAME> was competent to exercise jurisdiction and his appointment cannot be called in question. In this view of the matter the very interesting and learned discussion of the de facto doctrine need not detain us and we express no opinion about it.

The question falls to be considered on the words and scheme of s. 7 and some other sections. To approach the problem we may first see some other provisions. The Act is intended to make provision for the investigation and settlement of industrial disputes. Chapter II names the authorities under the Act. They are <ORG> (s. 3), Conciliation Officers (S. 4),Boards of, Conciliation (s. 5), <ORG> (s. 6), <ORG> (s. 7), <ORG>s (s. 7A), <ORG> (s. 7B). Each of these sections prescribes the qualifications of the persons fit to be appointed. They are either wholly or partially different as we shall see presently. Section 7C , however lays down that no person shall be appointed to, or continue in, the office of the presiding officer of <ORG>, <ORG> or National <ORG> if (a) he is not an. independent person; or (b) he has attained the age of 65 years. Section 8 deals with vacancies and then comes s. 9 laying down the finality of orders constituting Boards etc. We shall read it presently.

We are concerned with s. 7 which provides for the constitu- tion of <ORG> and prescribes the qualifications for appointment. The section may be read here "7. <ORG>."

.lm15 (1) The appropriate Government may, by notification in the Official Gazette, constitute one or more <ORG> for the adjudication of industrial disputes relating to any matter specified in the Second Schedule and for performing such other functions as may be assigned to them under this Act.

(2) <ORG> shall consist of one person only to be appointed by the appropriate Government. (3) A person shall not be qualified for appointment as the presiding officer of <ORG>, unless-

(a) he is, or has been, a Judge of <ORG>, or

(b) he has, for a period of not less than three years, been a District Judge or an Additional District Judge or

(c) he has held the office of the chairman or any other member of <ORG> constituted under the Industrial Disputes (Appellate Tribunal) Act, 1950, or of any tribunal, for a period of not less than two years; or

(d) he has held any judicial office in India for not less than seven years; or

(e) he has been the presiding officer of <ORG> constituted under any Provincial Act or State Act for not less than five years."

This matter is covered only by cl. (d) of the third sub- section. It may, however, be noticed that no special qualifications are prescribed for <ORG> Committees, Conciliation Officers, <ORG> and <ORG> such as are to be found in s. 7 quoted here. Special qualifications of the members are to be found only in respect of- <ORG>, <ORG> and National <ORG>. These are one-man bodies and the qualification of the member is stated. In the case of <ORG> the qualification is :

"7A. Tribunals.

(1) (2) (3) A person shall not be qualified for appointment as the presiding officer of a Tribunal unless--

(a) he is, or has been, a Judge of <ORG>; or

(b) he has, for a period of not less than three years, been a District Judge or an Additional District Judge; or

(b) he has held the office of the chairman or any other member of <ORG> constituted under the Industrial Disputes (Appellate <ORG>) Act, 1950, or of any <ORG>, for a period of not less than two years."

and in the case of National Tribunals the qualifications are "7B. National Tribunals.

(3)...A person shall not be qualified for appointment as..the presiding officer of <ORG> unless-

(b)...he has held the office of the chairman or any other member of <ORG> constituted under the Industrial Disputes (Appellate Tribunal) Act, 1950, for a period of not less than two years."

The selection thus is most restricted in the case of <ORG>, and in varying degree less and less restricted as we pass to <ORG> and <ORG>. Thus <ORG> can be presided over only by a person who is or has been a Judge of <ORG> or has held the office of the chairman or any other member of <ORG> for a period of not ,less than two years. These qualifications do not admit of any ,doubt or exception since the incumbent's qualifications are quite 'clearly set down. In the case of <ORG> the range of selection is made wider by including a District Judge or an Additional District Judge, who has held this office for a period of not less than 3 years. The selection is made still wider in the case of <ORG> by making competent in addition presiding officers ,of <ORG> constituted under any Provincial Act or <ORG> for not less than 5 years, and persons holding judicial office for not less than seven years. There is, however, no definition of judicial office and here the difficulty arises.

Mr. <NAME>, the incumbent of the office in the present case, had at his back the following career :

(a)Sri <NAME> was first appointed on 23rd January 1940 as a Sub Deputy Collector on probation and on 24th January 1940 was appointed as Sub-Deputy Collector and Circle Officer.

(b)...On 1st July 1940 he was vested with, power of a third class Magistrate. He was confirmed in the post of a Sub-Deputy Collector on 23rd January, 1941.

(c)...On 1st July 1950 the said <NAME> was vested with Powers of a Second class Magistrate and on 1st April 1951 he was vested with powers of a First Class Magistrate ... On July 27, 1959 Mr. <NAME> was appointed the presiding officer of <ORG> by Notification No. 3422-IR/IR/ 3A-9/59. The notification read :

"In exercise of power conferred by Sub- sections (2) and (3) of S.T. of the Industrial Disputes Act 1947 read with S. 7C of the said Act, the Governor is pleased to appoint <NAME> who is an independent person and has not attained the age of 65 years and has held a judicial office in India for not less than 7 years to be the Presiding Officer of <ORG> constituted under <ORG> notification No. 1727-IR/IR/3A-1/58 dated 26th April 1958 vide Shri <NAME> (Calcutta Gazettee, 6th August 1959)".

The notification took into account the provisions of S. 7C already analysed by us and also declared that he was qualified under s. 7 (3) (d). <ORG> apparently considered the office held by him from January 23, 1940 to July 27, 1959 as a judicial office necessary for appointment. Since, the period for which he held his earlier office is well in excess of 7 years the only question is whether it was a 'judicial office'. If it was then undoubtedly Mr. <NAME> was qualified. If there be a dispute then the matter falls to be considered. In doing so we must take into further account the provisions of s. 9 of the Act as substituted by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act , 1936 . That amending Act also recast S. 7 in its present form and added ss. 7A, 7B and 7C. Section 9 may now be read but it is not necessary to read beyond the first sub-section "9. Finality of orders constituting <ORG>s, etc. (1)...No order of the appropriate <ORG> or of the Central <ORG> appointing any person as the chairman or any other member of a <ORG> or <ORG> or as the Presiding officer of a Labour <ORG>, <ORG> or National <ORG> shall be called in question in any manner; and no act or proceeding before any <ORG> or <ORG> shall be called in question in any manner on the ground merely of the existence of any vacancy in, or defect in the constitution of, such <ORG> or <ORG>."

L7 Sup.CI/68-15.

It may be noticed that the first part refers to the appointment of any person as the chairman or any other member of a <ORG> or <ORG> or as the presiding officer of a Labour <ORG>, <ORG> or National <ORG>. The second part deals with <ORG> or <ORG> and 'in view of the definition of '<ORG>' 'and '<ORG>' in s. 2(c) and (f) refers to a <ORG> of conciliation or <ORG> of Inquiry constituted under the Act. With these we are not concerned and the second part of s. 9 , therefore-' has no bearing although in the High <ORG> that part alone was considered and the first part ignored.

Now the points for us to decide are, first whether Mr. <NAME> held a 'judicial office' and next even if our Opinion be that he did not can we declare his appointment to be invalid when s. 9 prohibits the calling in question of an appointment by Government ? Before we deal with these points in the, light of the arguments addressed to us, we may say a few words about how these points were viewed by <ORG>.

<NAME> who first heard the <ORG> case made a distinction between 'judicial office' and 'judicial function' and came to the conclusion that although magistrates Perform judicial functions, they could not be said to hold 'judicial office'. <NAME> distinguished between 'judicial office' and 'judicial service'. He referred to the provisions of the Constitution bearing upon the appointment of Judges of <ORG> and the District and subordinate courts, where these expressions occur and demonstrated the difference. In his view magistrates could be said to occupy judicial office, but they did not belong to judicial service. The approach of <NAME> and <NAME>, was the same as that of <NAME>, although the matter was stated with great elaboration and copious references to the Criminal Procedure Code , and English and American cases, and text books.

It is not necessary to go over this field. All learned Judges seem to agree that a magistrate exercises judicial functions. This does not admit of any doubt and no reasons are required. That his duties are partly judicial and partly other does not in any way detract from the position that while acting as a magistrate lie is a judicial officer. The dispute, therefore, really reduces itself to this : Does the magistrate hold an "office". An office means no more than a position to which certain duties are attached. According to Earl Jowitt's Dictionary a public office is one which entitles a man to act in the affairs of others without their appointment or permission. The 'office of a magistrate' is a correct expression in English and in law. Indeed the well-known maxim of <NAME> on Littleton (234a) officia magistratus non debent-esse venalia (the offices of a magistrate ought not be saleable) clearly brings out that the word office can be, applied to magistrates. Thus there may be an office of a judge (officii judicis) which in ecclesiastical law at least was said to be promoted when criminal proceedings were taken. But there may be also the office of a magistrate. <NAME> in his De Legibus and De officiis makes no difference between a magistratum and a judex. His famous saying Magistratum legem esse loquentem, legem autem mutum magistratum (The Magistrate is a speaking law, but the law is a silent magistrate) was intended to apply to all judges of all kinds. The word 'office has been applied to magistrates by <NAME>, <NAME> and others. <NAME> has given many references to bear out the meaning we have given and has very -pertinently pointed out that the Judicial Officers Protection Act , is intended to protect not Civil Judges alone but also Magistrates. The distinction between judicial function and judicial office in this context is artificial and unsubstantial. We agree with <NAME>, that a magistrate holds a judicial office. Once this is so held the appeal must fall. But we cannot overlook the fact that even if there be some doubt that is to be resolved in favour of upholding the appointment on the ground that the <ORG> itself contemplates that such appointments should not be called into question. Although the provisions of s. 9 cannot shut out an inquiry (if there is a clear usurpation) for purposes of a writ of quo warranto but at least in an unclear case the intent of the legislature is entitled to great weight. The <ORG> has created the conditions of appointment and with its last voice his shut out inquiry. The provisions of s. 7 (3) (d) therefore, are not so absolute as to be wholly mandatory in the same, way as the provisions of other clauses are since they admit of no doubt, and therefore do not require construction. <ORG> a quo warranto proceeding should be slow to pronounce upon the matter unless there is a clear infringement of the law. If a station master were appointed we can readily question the appointment but when a person exercising judicial functions is appointed one cannot be too astute to say that the person does not hold a judicial office when it must at least be conceded that he holds ,in office of some kind. Nor does the argument that magistrates will claim to be appointed Judges of <ORG> need detain us. The scheme of Chapter V of Part VI of the Constitution its own affect on the meaning of the expressions 'judicial office' and 'judicial service'. In any case the use of the same expression in any other enactment not in pari materia can have no bearing upon the Industrial Disputes Act and vice versa. In the Constitution these words must bear the meaning which the context dictates and in that connection the history of appointment of Judges cannot be overlooked. Lest our meaning be extended by <ORG> to cases un- deserving of saving under S. 9 , we wish to make it clear that the intention of the <ORG> really is that men who can be described as independent and with sufficient judicial experience must be selected. The mention of <ORG> Judges and District Judges earlier in the same section indicates that ordinarily judicial officers from the civil judiciary must be selected at last so long as the separation of judiciary from the Executive in the public Services is not finally achieved. The appointment of a person from the ranks of civil judiciary carries with it an assurance which is unique. The functions of <ORG> are of great public importance and quasi civil in nature. Men of experience on the civil side of the law are more suitable than Magistrates. Persons employed on multifarious duties and in addition performing some judicial functions, may not truly answer the requirement of s. 7 and it may be open in a quo warranto proceeding to question their appointment on the ground that they do not hold essentially a judicial office because they primarily perform other functions. For it cannot be denied that the expression "holding a judicial office" signifies more than discharge of judicial functions while holding some other office. The phrase postulates that there is an office and that that office is primarily judicial. Office means a fixed position for performance of duties. In this case the distinction was unsubstantial because the Magistrate was holding a fixed position for nineteen years and performing functions primarily of a judicial character. The case was not fit for interference by a writ in view of the provisions of s. 9 of the Act. In the result we are of opinion that the judgment under appeal is right although the, reasons justifying the conclusion 'are different from those accepted by <ORG> from the- earlier case of the same Court. The appeal fails and will be dismissed with costs.

<ORG> dismissed.