PETITIONER: SETH THAWARDAS PHERUMAL Vs. RESPONDENT: THE UNION OF INDIA(and connected appeal) DATE OF JUDGMENT: 24/03/1955 BENCH: ACT: Arbitration Act , 1940, (Act X of 1940), s. 16(1)(c) - Arbitration -Award-Legality thereof-When can be challenged- Arbitrator Condition precedent for his jurisdiction-Award- When final-Both parties specifically referring a question of law for the decision of arbitrator-Cases where question of law specifically referred and cases where decision incidentally material (however necessary) in order to decide the question actually referred-Distinction between-Wrong construction of contract-Error of law-Interest awarded- Contract not providing for it-Requirements of Interest Act, 1839 (Act XXXII of 1839) not fulfilled-Specific type of loss actually contemplated by the parties-Express stipulation that no damage will be payable Parties bound down to the agreement-Agreement on which suit based not found in the written contract but implied under s. 9 of the Indian Contract Act, 1872-Matter not covered by the arbitration clause Error of law apparent on the face of the award, HEADNOTE: The appellant, a contractor, entered into a contract with the Dominion of India for the supply of bricks. A clause in the contract required all disputes arising out of or relating to the contract to be refered to arbitration. Disputes arose and the matter was duly referred. The arbitrator gave an award in the contractor's favour. <ORG>, which by then had displaced the Dominion of India, contested the award on a number of grounds. Held:(1) that it is not enough for the contract to provide for arbitration; more is necessary. An arbitrator only gets jurisdiction when either, both the parties specifically agree to refer specified matters or, failing that, the court compels them to do so under the arbitration clause if the dispute is covered by it; (2) the legality of an award cannot be challenged on facts, but it can be challenged on questions of law provided the illegality is apparent on the face of the award: s. 16(1)(c) of the Arbitration Act; (3) the only exception is when both parties specifically refer a question of law for the decision of the arbitrator. In that event they are bound by his decision on that particular question as well as by his decision on the facts. But a distinction must be drawn between cases in which a question of law is specifically referred and those in which a decision is incidentally material (however necessary) in order to decide the question actually referred. The law about this is the same in India as in England. 1923 A.C. 395 and 1933 A.C. 592, followed. 54 C.W.N. 74 at 79, 50 I.A. 324 at 330 49 331, 54 I.A. 427 at 430, 29 I.A. 51 at 60, 1942 A.C. 356 at 368 referred to and 1950 S.C.R. 792 at 798, explained; <NAME>:-Whether the courts will interfere when a question of law is specifically referred if the arbitrator acts illegally in deciding it, such as deciding on inadmissible evidence or on principles of construction which the law does not countenance. 1923 A.C. 395 at 409, referred to; (4) a wrong construction of the contract is an error of law and can be challenged provided the error appears on the face of the award; (5) so is the awarding of interest when the contract does not provide for interest and the requirements of the Interest Act are not fulfilled:65 I.A. 66, referred to. <NAME>: whether the Interest Act applies to arbitrations; (6) when a specific type of loss is directly contemplated by the parties to a contract and they expressly stipulate that no damages will be payable in respect of it they must be bound down to their agreement and any claim for damages in respect of such loss must be dismissed; (7) when the agreement on which the suit is based is not to be found in a contract which has been reduced to writing but has to be implied under s. 9 of the Contract Act then the matter is not covered by an arbitration clause of the kind referred to above because the dispute in such a case arises out of and relates to the implied agreement and not to the written contract: 1942 A.C. 356 at 371, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 260 of 1953 and connected appeal (C.A. No. 12 of 1954). Appeals from the Judgment and Decree dated the 11th day of May 1951 of <ORG> at Patna in Miscellaneous Appeal No. 253 of 1950 and in appeal from Original Order No. 252 of 1950 arising out of the order dated the 11th day of May 1951 of <ORG>, Dhanbad in Suit No. 34 of 1949 and in Title Suit No. 27 of 1949 respectively.

<NAME>, Advocate-General for the State of Bihar (<NAME> and <NAME>, with him), for the appellant (In Civil Appeal No. 260 of 1953).

<NAME>, Advocate- General for the State of Bihar (<NAME> for <NAME>, with him), for the appellant (In Civil Appeal No. 12 of 1954).

<NAME>, Solicitor-General for India (<NAME> and <NAME>, with him), for the respondent (In both the Appeals).

1955. March 24. The Judgment of the Court was delivered by BOSE J.-This appeal and Civil Appeal No. 12 of 1954, which will also be governed by this judgment, raise the same points though there are some differences in the facts. We will deal with Civil Appeal No. 260 of 1953 first. The suit there related to an arbitration matter. The appellant before us, whom it will be convenient to call the contractor, entered into a contract with the Dominion of India through an Additional Chief Engineer of the <ORG> on 1-11-1945 for the supply of bricks to the <ORG>, a department of <ORG>. Disputes arose about a number of matters. Clause 14 of the agreement provided that all disputes arising out of or relating to the contract should be referred to the Superintending Engineer of the Circle for the time being. Accordingly, there was a reference on 21-1-1949 and an award followed on 8-5-1949. It was filed in <ORG>, Dhanbad, and the contractor prayed that it be accepted and that a decree be passed in terms of it. The Dominion of India filed objections under section 30 of the Arbitration Act, 1940 and prayed that the award be set aside and alternatively that it be modified or corrected. The contractor's application was registered as a suit under section 20(2) of the Act and a decree was passed in terms of the award on 18-3-1950.

By that time the Constitution had come into force and <ORG> replaced the Dominion of India as a defendant. <ORG> filed an appeal to <ORG>. The appeal was allowed in part. The contractor thereupon appealed to this Court.

The dispute that was referred to the arbitrator consisted of 17 heads of claim but only three of them are contested here, namely items 5, 8 and 17.

In the 5th head of claim the contractor claimed Rs. 75,900 as the price of 88 lacs of katcha bricks that were destroyed by rain. These bricks were not the subject-matter of the contract but the contractor put his claim in this way. The contract was for the supply of 2-1/2 crores of pucca bricks which bad to be delivered according to the following schedule-

30 lacs by 25-1-46 50 lacs by 25-2-46 55 lacs by 25-3-46 55 lacs by 25-4-46 60 lacs by 25-5-46.

Delivery was to be at the kiln site. In order to keep to this schedule the contractor bad to think ahead and work to a particular time table. First, he had to prepare katcha or unbaked bricks and place them in his kilns for baking. While this lot was baking be had to prepare and stock another lot of katcha bricks ready to take the place of the baked bricks as soon as they were removed. It was the duty of the <ORG> to remove these bricks as soon as they were ready for delivery,that is to say, as soon as they were fully baked. At a certain stage of the contract the <ORG> failed to remove the baked bricks which were ready for delivery and removal. This caused a jam in the kilns and prevented the contractor from placing a fresh stock of unburnt bricks in the kilns, and in the meanwhile his stock pile of katcha bricks ready for baking kept on mounting up. Had everything been done to time the 2-1/2 crores of bricks would have been delivered before the rains set in. But owing to the default of the <ORG> in not removing the burnt bricks which were ready for removal, delay occurred in the time table and the rains set in with the result that88 lacs of katcha bricks were destroyed by the rains. As this loss was occasioned by the default of the <ORG> the contractor claimed that be should be paid their price. The reply of <ORG> was two-fold. First, it contended that the katcha bricks formed no part of the contract and even if it was at fault in not taking delivery of the burnt bricks in time all that it could be held liable for would be for breach of that contract; and said that the loss that was occasioned by the damage caused to the katcha bricks which formed no part of the contract was too remote. Secondly, that compensation for this loss could not in any event be claimed because this kind of situation was envisaged by the parties when the contract was made and they expressly stipulated that <ORG> would not be responsible. <ORG> relied on additional clause 6 of the agreement which is in these terms:

"The department will not entertain any claim for idle labour or for damage to unburnt bricks due to any cause whatsoever".

The arbitrator held that this clause was not meant "to absolve the department from carrying out their part of the contract" and so he awarded the contractor Rs. 64,075 under this head.

We are clear that the arbitrator went wrong in law. Government departments have their difficulties no less than contractors. There is trouble with labour, there is the likelihood of machinery breaking down in out of the way places and so forth; there was also the danger of thunder storms and heavy showers of rain in the month of May: it will be remembered that the last date of delivery was 25-5-

46. if, with that in view, <ORG> expressly stipulated, and the contractor expressly agreed, that <ORG> was not to be liable for any loss occasioned by a consequence as remote as this, then that is an express term of the contract and the contractor must be tied down to it. If he chose to contract in absolute terms that was his affair. But having contracted he cannot go back on his agreement simply because it does not suit him to abide by it. This is not to say that <ORG> is absolved from all liability, but all it can be held responsible for is for damages occasioned by the breach of its contract to remove the pucca bricks which it had undertaken to remove. But what would such a breach entail?

The contractor had a duty under section 73 of the Contract Act to minimise the loss, accordingly he would have had the right to remove the bricks himself and stack them elsewhere and claim compensation for the loss so occasioned; and indeed two of his heads of claim (not in dispute here) relate to that. He has been awarded Rs. 11,744-11-0 under claim No. 4 for the extra load in connection with the stacking of I crore 7 lacs of bricks due to the accumulation at the kiln site owing to the department's failure to work to its part of the time table, and in addition, he has been given Rs. 15,500 under claim 13 for the cost of levelling and dressing land to enable him to stack these extra bricks. Alternatively, he could have sold the bricks in the market and claimed the difference in price, but ordinarily he could not have claimed compensation for damage done to the katcha bricks unless he could have shown that that kind of damage, ordinarily too remote, was expressly contemplated by the parties when the contract was made: section 73 of the Contract Act. Here it is clear that this was in their express contemplation and they chose to provide against such a contingency by making clause 6 an express clause in their contract. There can therefore be no doubt that the arbitrator was wrong in his law. His construction of the terms of the contract was at fault. The question now arises whether his decision on this point is final despite it being wrong in law.

In India this question is governed by section 16(1) (c) of the Arbitration Act of 1940 which empowers a <ORG> to remit an award for reconsideration "where an objection to the legality of the award is apparent upon the face of it".

This covers cases in which an error of law appears on the face of the award. But in determining what such an error is, a distinction must be drawn between cases in which a question of law is specifically referred and those in which a decision on a question of law is incidentally material (however necessary) in order to decide the question actually referred. If a question of law is specifically referred and it is evident that the parties desire to have a decision from the arbitrator about that rather than one from the <ORG>, then the <ORG> will not interfere, though even there, there is authority for the view that the <ORG> will interfere if it is apparent that the arbitrator has acted illegally in reaching his decision, that is to say, if he has decided on inadmissible evidence or on principles of construction that the law- does not countenance or something of that nature. See the speech of Viscount <NAME> in <ORG> v. <ORG>) at page 409. But that is not a matter which arises in this case.

The law about this is, in our opinion, the same in England as here and the principles that govern this class of case have been reviewed at length and set out with clarity by <ORG> in <ORG> v. <ORG>) and in <ORG> v. <ORG>). In <NAME> v. <NAME> (3) <ORG> applied the law expounded in <ORG>'s case(2) to India: see also <CITATION> .(4) and <CITATION> kessamal (5). The wider language used by Lord <NAME> in <CITATION> (1) bad reference to the revisional powers of <ORG> under the Civil Procedure Code and must be confined to the facts of that case where the question of law involved there, namely limitation, was specifically referred. An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the Courts provided his error appears on the face of the award The single exception to this is when the parties choose specifically to refer a question of law as a separate and distinct matter.

(1) [1923] A.C. 395.

(2) [1933] A.C. 592.

(3) 54 C.W.N. 74, 79.

(4) 50 I.A. 324, 330 & 331.

(5) 54 I.A. 427, 430.

(6) 29 I.A. 51, 60.

Reference was made to a decision of this <ORG> in <CITATION> (1) where <NAME> quoted a passage from Viscount <NAME>'s speech in <NAME> v. Darwins Ltd.") where the learned Lord Chancellor (Viscount <NAME>) in turn, quoted from Lord <NAME> in another case. It was argued on the basis of this that if you have to have recourse to the contract to establish your case, then the dispute must fall within the arbitration clause. That is undeniable but it is not enough that the dispute should fall within the clause. It is also necessary that the parties should define what the dispute is and agree to refer the dispute so set out and defined to arbitration, or, if they do not, that the <ORG> should compel them to do so: (see Lord <NAME> in <NAME>'s case(1) just cited at pages 369 and 370). If, therefore, no specific question of law is referred, either by agreement or by compulsion, the decision of the arbitrator on that is not final however much it may be within his jurisdiction, and indeed essential, for him to decide the question incidentally. Lord <NAME> of Killowen and Lord <NAME> were both in the earlier case, <ORG> v. <ORG>), as well as in <NAME>'s case(2) and they would have pointed to any distinction had there been a likelihood of conflict; but in fact there is none and we do not read <NAME> judgment as a decision to the contrary.

We have next to see whether the arbitrator was specifically asked to construe clause 6 of the contract or any part of the contract, or whether any question of law was specifically referred. We stress the word "specifically" because parties who make a reference to arbitration have the right to insist that the tribunal of their choice shall decide their dispute according to law, so before the right can be denied to them in any particular matter, the <ORG> must be very sure that both sides wanted the decision of the arbitrator on a point of law rather than that of the <ORG>s and that they wanted his decision oil that point to be final.

(1) 1950 S.C.R. 792 at 798. (2) 1942 A.C. 356 at 368. (3) 1933 A.C. 592.

The clause in the contract that requires disputes about the contract to be referred to arbitration is clause 14 and is in the following terms:

"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specification and instructions here in before mentioned and as to quality of materials or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, specification, instructions, orders or these conditions, or otherwise concerning the supplies whether arising during the progress of delivery or after the completion of abandonment thereof shall be referred to the arbitration of the Superintending Engineer of the <ORG> for the time being in the manner provided by law relating to arbitration for the time being in force who after such investigation as he may think proper shall deliver his award which shall be final, conclusive and binding on all parties to the contract".

The dispute sprang out of a series of claims made in a number of letters written by the contractor to the Additional Chief Engineer, <ORG> and culminated in a petition, Ex. B(1), in which the contractor summarised his claims. The document is not dated. On receipt of this, someone on behalf of the <ORG> invoked the jurisdiction of the arbitrator. That letter has not been filed. The arbitrator then wrote to the contractor and asked him to submit a statement of claim. That letter has not been filed either but reference is made to it in Ex. C(1), the statement claim which the contractor filed in response to that letter. As the material documents setting out the terms of reference are not here, we were asked by both sides to infer what the terms were from this statement of claim and the recitals in the award. The learned counsel for the contractor relied on the following:

In the statement of claim-

"Item 5.-Loss of katcha bricks............ Rs. 75,900. The chief reason of the destruction of these bricks was the failure of the department to lift the monthly quota of bricks The argument of the department that they are not liable to compensate us on this account because of clause 6 of the agreement is not correct. Clause 6 refers to only such cases over which the department has no control. But if the department would have lifted the bricks (this was entirely under their control) then no such loss would have occurred. Also be it noted that clause 6 refers only to 'damage' and not to 'destruction......... Damage means only partial loss.............it cannot mean total destruction.:

The award states-

"The statement of claims submitted by the contractor contains seventeen items in respect of which the contractor claimed a total payment of Rs. 4,76,138-12-0 plus interest i.e., approximate total amount claimed: Rs. 5,03,803-12-0 as detailed below".

Then follow the seventeen items of which item 5 is- "Payment for katcha bricks destroyed by rain: Rs. 75,900". The body of the award deals with this as follows:

" Claim No. 5.

Payment for 88. lacs of katcha bricks destroyed by rain. The contractor argued etc The Executive Engineer stated .........The C.P.W.D. moreover were safeguarded by clause 6 of the contract............ The contractor maintained that clause 6 of the contract could not be invoked when the department was at fault as in this case. Clause 6 was meant to cover contingencies which were not of the department's own making.

I hold that the removal of the bricks in such a manner or to prevent accumulation in excess of 60 lacs was an implied contractual obligation on the part of the <ORG>........ I further hold that the <ORG>. cannot take shelter behind clause 6 of the contract. This clause is not, in my opinion, meant  to absolve the department from carrying out their part of the contract. It is impossible not to admit this without offending the rudiments of common sense reasoning". We are of opinion that this is not the kind of specific reference on a point of law that the law of arbitration requires. In the first place, what was shown to us is no reference at all. It is only an incidental matter introduced by <ORG> to repel the claim made by the contractor in general terms under claim No. 5. In the next place, this was the submission of the contractor alone. A reference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the <ORG> under section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-section (4). In the absence of either, agreement by both sides about the terms of reference, or an order of the <ORG> under section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction. Therefore, when a question of law is the point at issue, unless both sides specifically agree to refer it and agree to be bound by the arbitrator's decision, the jurisdiction of the <ORG>s to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough. The language of Lord <NAME> in <ORG> v. <ORG>), a case similar to this so far as this point is concerned, is apposite here- "There is here no submission of any specific question of law as such and as a specific question of law; no doubt incidentally, and indeed necessarily, the arbitrator will have to decide some questions on the construction of the building contract, but. the two matters submitted are both composite questions of law and fact; there is no express submission of the (1)  A.C. 592, 616.

true effect of the contract on the basis of undisputed facts, as in the Kelantan case(1) or as a separate and distinct matter on facts to be separately assumed or found, as in In re King and Duveen(2)..........The arbitrator was not being asked simply and specifically to decide, upon some agreed or assumed basis of fact, the true interpretation of either clause 26 or clause 30 of the conditions or of both together; he was being required to make an award on the two matters submitted on whatever questions of fact and law might emerge".

Clause 32 of the contract in the <ORG> case was the equivalent of clause 14 in ours. It ran-

"Provided always that in case any dispute or difference shall arise ............. as to the construction of the contract or as to any matter or thing arising thereunder............ such dispute shall be and is hereby referred to the arbitration and final decision of etc." The arbitrator relied on that to invest him with juris- diction to determine,, as a matter of law, the construction of clauses 26-30 of that contract. <ORG> held that in the absence of a specific reference about the construction of the contract the jurisdiction of the <ORG> was not taken away. Lord <NAME> of Killowen put it this way at page 610-

"No specific question of construction or of law was submitted. The parties had, however, been ordered to deliver pleadings, and by their statement of claim the contractor had claimed that the arbitrator should under his powers revise the last certificate issued etc...... It is at this point that the question of the construction of condition 30 arose as a question of law, not specifically submitted, but material in the decision of the matters which bad been submitted. This question of law the arbitrator has decided; but if upon the face of the award he has decided it wrongly his decision is, in my opinion, open to review by the <ORG>".

That is exactly the position here. Simply because the matter was referred to incidentally in the plead- (1) [1923] A. C. 395. (2) [1913] 2 K.B. 32, 36.

ings and arguments in support of, or against, the general issue about liability for damages, that is not enough to clothe the arbitrator with exclusive jurisdiction on a point of law.

The next question is whether the error is apparent on the face of the award. That; in our opinion, is clear from the passages we have quoted from the award.

We hold that clause 6 expressly relieves <ORG> of all liability under this head of claim and that the arbitrator was wrong in awarding any sum on that account.

The next head in dispute is item No. 8 in the statement of claim:

"Cost of additional wages paid to the coolies on account of non-supply of ration and cloth-Rs. 51,495". Here again no specific question of law was referred, so all we have to see is whether there is an error of law apparent on the face of the award.

The contractor put his case as follows in the statement of claim:

"At the time when this work was allotted to us there was rationing system in the locality. As per conditions of contract we were bound not to employ local labour and we had to import coolies from far off places. We had in our employ about 1800 coolies and it was an impossibility to arrange their ration from open market. This difficulty was brought to the notice of the authorities concerned, and they promised us to supply ration. It was only after this promise that we signed the agreement..... From a perusal of these letters it is clear that the department promised us to supply ration............... These circumstantial evidences are sufficient enough to show that there was a mutual understanding between the parties that ration will be supplied. In the eyes of law even circumstantial evidence is sufficient to prove that such a promise was made. Any breach of that promise makes the department legally liable to compensate for that loss.......... Apart from the legal responsibility it was also a moral responsibility for the department to supply ration".

This claim, therefore, was not grounded on any clause of the contract, nor was it said to be implied in the -contract. What was relied on was a collateral promise evidenced, not by the contract, but by two letters written by "the department" and a promise by "the authorities concerned"; and later this promise is turned into a "mutual understanding" and to a "moral responsibility" in addition to a legal one.

The arbitrator dealt with this as follows. He began by saying-

"The contractor stated that when he submitted his tender on 25-9-45 he did so in the bona fide belief that the department would make the necessary arrangements, etc." Then he sets out the following dates. On 1-11-45 the contractor was told that his tender had been accepted. On 9-11-45 the contractor "warned" the Executive Engineer about his "immediate requirements in respect of rations". The contract was finally accepted and signed on 22-11-45. Now it is admitted that the contract contains no clause about rations and it is also evident that the question was not raised when the tender was accepted on behalf of <ORG>. The question was raised in a letter to the Executive Engineer, and the contractor signed the contract without waiting for a reply.

It is well settled that governments can only be bound by contracts that are entered into in a particular way and which are signed by the proper authority. A reference to the agreement, Ex. A(1), will show that it was accepted on behalf of <ORG> by the Additional Chief Engineer and not by an Executive Engineer. A letter written to the Executive Engineer would therefore have no effect and even if it be assumed that the letter was forwarded to the Additional Chief Engineer for consideration, what does it amount to? A tender embodying certain terms is submitted and is accepted on 1-11-45. Both sides are agreed on all matters contained in it and their conduct shows that both sides indicated that the contract should be reduced to writing. Be-

fore the agreement is signed, one party wants to include a further condition in the contract. We will assume that the request was made to the other contracting party. But without waiting for the assent of the other side, both sides accept and sign the contract as it existed before the fresh suggestion was made. It is an error in law to deduce from this that there was acceptance of the fresh proposal. On the contrary, the legal conclusion is that the new suggestion was dropped and that the contractor was content to accept the contract as it was without' this condition. In any case, a person cannot be bound by a one-sided offer which is never accepted, particularly when the parties intend that the contract should be reduced to writing. That is the whole point of insisting on a document. It excludes speculation as to what was and what was not agreed to however much the matter might have been raised by one of the parties during the stage of negotiation. The arbitrator continues that the contractor stated that- "it was a well known and established fact that Sindri was a rationed area; that the <ORG> were giving rations at controlled rates to their employees and contractors through arrangements with the local Civil Supply Authorities; that nobody working under the <ORG> was allowed to make independent arrangements or approach the Civil Supply Authorities direct"

and the contractor contended that the very fact that he tendered such low rates showed that he expected to supply his labourers with rations at controlled rates. The arbitrator then sets out some more of the contractor's contentions and from them concludes that "there was an implied contractual obligation for the C.P.W.D. to make available controlled rations to the contractor and that this obligation was not fulfilled with due diligence and care".

He accordingly awarded Rs. 40,000 as compensation under this head.

The error is apparent. -Facts must be based either on evidence or on admissions; they cannot be found to exist from a mere contention by one side especially when they are expressly denied by the other. The inference from the facts stated above is that the contractor entered into the agreement with his eyes open and whatever his one-sided hopes may have been he was content to enter into the agreement as it stood without binding the other side to the new conditions and without even waiting to ascertain the reaction of the other side to his further proposals. It has to be remembered that rationing was not a matter that was under the direction and control of <ORG>. It was a local matter handled by the then <ORG> authorities and under their direction and contract. The <ORG>, as a department of <ORG>, was not concerned with rationing except that its employees had to submit to rationing like everybody else in the Sindri area. This confusion between <ORG> and <ORG> occurs in the arbitrator's opening sentence under this head where he sets out the contractor's contention that "commodities such as rations and cloth which were absolutely essential for the maintenance of his labourers and which were under <ORG> control". As the arbitrator bases solely on the contractor's contentions it is evident that he failed to appreciate the fact that <ORG> and the <ORG> rationing authorities were separate entities distinct from one another. The position accordingly reduces itself to this: two persons, neither of which is a part of <ORG> or has any control over rationing, chose to enter into an agreement for work in a rationed area. They insisted that their contract should be reduced to writing, and that indeed was essential, this being a contract with <ORG> which was incapable of contracting in any other way; they agreed upon and concluded all their terms; then, at the last minute, one side raised a point about rationing but without waiting for a reply and without having the term entered in the contract, he signed the contract as it stood before-the point was raised even during the negotiation. It is an error in law to hold that any contractual obligation can be inferred or implied from these circumstances. Then there is still another error. If this implied agreement about rations and cloth does not spring out of the written contract but is to be inferred collaterally as a distinct and subsidiary contract, and we gather that that is the finding, especially as reference was made to section 9 of the Contract Act, then that is not a contract to which the arbitration clause can apply. Wide though it is, clause 14 is confined to any matter relating to the written con- tract and if ration and cloth are not covered by the written contract, they are not matters that relate to it. If parties choose to add a fresh contract in addition to or in substitution for the old, then the arbitration clause cannot cover the new contract. See Lord <NAME> in <ORG>).

The last item in dispute in this appeal is claim No. 17 about interest. The statement of claims sets out "Item 17-Interest on the amount of money involved in this claim at the rate of Rs. 6 percent.Rs. 27,665. This work was finished in May 1946 and it was proper for the department to have decided all our claims at least by 31st December 1947........................ But this was not done. Due to this a heavy amount remained blocked up and we were compelled to take money from our bankers on interest. We therefore pray for interest for 16 months from 1-1-48 to 31-4-49".

The arbitrator held--

"The contractor's contention that his claims should have been settled by January 1948 is, in my opinion, reasonable. I therefore award interest at 6% for 16 months on the total amount of the awards given i.e., Rs. 17,363". Then the arbitrator sets out the amounts awarded under each head of claim. A perusal of them shows that each bead relates to a claim for an unliquidated sum. The Interest Act , 1839 applies, as interest is (1)  A.C. 356 at 371.

not otherwise payable by law in this kind of case (see <CITATION> (1)), but even if it be assumed that an arbitrator is a "court" within the meaning of that Act, (a fact that by no means appears to be the case), the following among other conditions must be fulfilled before interest can be awarded under the Act:- (1) there must be a debt or a sum certain;

(2) it must be payable at a certain time or other- wise;

(3) these debts or sums must be payable by virtue of some written contract at a certain time;

(4) There must have been a demand in writing stating that interest will be demanded from the date of the demand. Not one of these elements is present, so the arbitrator erred in law in thinking that he had the power to allow interest simply because he thought the demand was reasonable.

It was suggested that at least interest from the date of "suit" could be awarded on the analogy of section 34 of the Civil Procedure Code, 1908. But section 34 does not apply because an arbitrator is not a "court" within the meaning of the Code nor does the Code apply to arbitrators, and, but for section 34 , even a <ORG> would not have the power to give interest after the suit. This was, therefore, also rightly struck out from the award.

We pause to note that there was only a delay of five days at the outside in the over-all picture. The last date for removal of the last instalment of bricks was 25-5-46 and the contractor says under this head that the whole contract was completed by the end of May, 1946. It is difficult-to see how 88 lacs of bricks could have been damaged by rain in the last five days of May, and if the damage occurred before it would have occurred anyway, for on the contractor's case he had to have a large stack of unbaked bricks on hand ready to enter the kilns in order to keep pace with his time table. However, that was a (1) 65 I.A. 66.

matter within the jurisdiction of the arbitrator and is not a matter in which the <ORG> can interfere. That concludes Civil Appeal No. 260 of 1953 and we now turn to the other appeal, Civil Appeal No. 12 of 1954. Only two items are in dispute here. Heads 4 and 17 of the claim. The over-all pattern of the claim is the same as in the other case. There was a contractor and he entered into an agreement containing the same terms and conditions, except about the details of supply. It was signed on the same day as the other and by the same authority on behalf of <ORG>., and the matter went before the same arbitrator and the award in this case was given on 1-5-1949, one week before the other award. Here also, no specific question of law was referred and we need not cover the same ground. Our decision is the same here as there. The fourth head of claim is about cloth and rations. The claim here., and <ORG>'s reply, is the same as in the other case, but the award in this case is not based on an implied contractual obligation but on "a moral and implied obligation". The error here is even greater than before. The sum claimed was Rs. 51,495 and the amount awarded was Rs. 30,000.

The seventeenth head of claim was about interest. The contractor claimed Rs. 27,665 and the arbitrator awarded Rs. 9,954. There is the same error of law apparent on the face of the award.

<ORG> was right in dismissing the claims made under the heads in dispute here. The two appeals fail and each is dismissed with costs in this Court.

Appeals dismissed.


JUDGMENT

1. This is an appeal on behalf of the plaintiff against a decree in a mortgage suit whereby a decree previously made therein under Section 90 of the Transfer of Property Act has been discharged.

2. The plaintiff sued to enforce a mortgage security and obtained a decree on the 28th January 1897. This was not merely the usual decree for sale but also a personal decree against the defendant-mortgagor in the event of non-satisfaction of the mortgage dues by sale of the mortgage properties. That this decree was not in strict conformity with the provisions of the Transfer of Property Act is clear from a long series of judicial decisions: <CITATION> 26 C. 166 : 3 C.W.N. 8; <NAME> v.IndraNarayan 33 C. 990 : 10 C.W.N. 862; <NAME> v. <NAME> 31 B. 244 : 8 Bom. L.R. 199; <CITATION> 22 A. 404 and Abbake v. <NAME> 32 M. 534 : 5 M.L.T. 246 : 4 Ind, Cas. 1120. The decree, for sale, was, however, repeatedly executed, and the mortgage properties were exhausted. The decree-holder then proceeded, in one instance at least, to execute the personal decree, apparently without objection on the part of the mortgagor judgment-debtor. Thereafter, the judgment debtor died. For some unexplained reason, the decree-holder did not take any further steps to execute the decree he held; but at a time when an application for execution of that decree would have been successfully met by the plea of limitation, he applied under Section 90 of the Transfer of Property Act for a personal decree against the infant representatives of the judgment-debtor, then living under the protection of their maternal aunt. It is a matter for controversy between the parties, whether notice of this application was duly served upon the infants and their proposed guardian as it ought to have been served, on the principle explained in <NAME> 35 C. 767. The Subordinate Judge has found that the story of service of notice is an invention; but it is not necessary for our present purpose to pronounce any opinion upon that question, because even if we assume that the notice was duly served, it is obvious that the proceedings under Section 90 were wholly infructuous as against the infants. The proposed guardian did not enter appearance, and did not accept the office of guardian. The result was that the infants, even if it be assumed that they were duly served, were not represented at the hearing, yet a decree under Section 90 was made against them. They subsequently applied to the <ORG> to cancel this decree as improperly made; this application was granted, and the decree was discharged. We are now invited to hold that the decree ought not to have been set aside. It is impossible, in our opinion, to accede to this contention. No effective steps were taken for the representation of the infants in the proceeding under Section 90 , which was essentially a proceeding in a pending suit for a supplementary decree. <CITATION> 4 C.L.J. 141 : 33 C. 867; <CITATION> 6 C.L.J. 119 : 34 C. 672 : 11 C.W.N. 674. Where the proposed guardian did not enter appearance, the <ORG> ought to have been asked by the plaintiff to appoint one of its officers as the guardian ad litem of the infants. This was not done and the infants were wholly unrepresented at the hearing of the application. That a decree, made under these circumstances, is absolutely null and void, in so far as the infants are concerned, is clear from the case of <CITATION> 15 C L.J. 3: 13 Ind. Cas. 414 where the earlier decisions on the point will be found analyzed and reviewed. This decree, which does not bind the infants and cannot be executed against them, has, consequently, been very properly discharged. This conclusion is sufficient for the disposal of the appeal. But, if the appeal be dismissed on this ground alone, the decree-holder will still be free to revive his application under Section 90 of the Transfer of Property Act and proceed with it after he has taken steps for the proper representation of the infants. We are of opinion, however, that this litigation should not be farther protracted, and we, therefore, proceed to examine the grounds mentioned in the judgment of the Subordinate Judge.

3. It has been argued on behalf of the decree-holder that as this mortgage decree was not in conformity with the provisions of the Transfer of Property Act , it is open to him to repudiate that decree and to ask for a personal decree against the judgment-debtor or his representatives in terms of Section 90 . This position is clearly untenable. The original decree, though not strictly in conformity with the provisions of the Transfer of Property Act , is a good and valid decree as between the parties,thereto: <CITATION> 10 C.L.J. 91 : 1 Ind. Cas. 677. At any rate, the decree-holder who has obtained that decree and has executed it, cannot now be permitted to turn round and contend that the decree is inoperative. It is further clear that the decree under Section 90 of the Transfer of Property Act cannot be made in the present case. As was pointed out in the case of <CITATION> 4C.L.J. 141 : 33 C. 867 three essential elements must be established before a decree under Section 90 can be obtained, namely, first, that though there has been a decree for sale and the mortgaged property has been exhausted thereunder, the sale-proceeds have proved insufficient to pay the amount due to the plaintiff; secondly, that the balance is legally recoverable from the mortgagor otherwise than out of the property sold; and, thirdly, that a personal decree has not previously been made. If the decree-holder has obtained a personal decree against the judgment-debtor, he cannot subsequently invite the <ORG> to repeat the operation already performed and thus obtain a second personal decree against the mortgagor: <NAME> v. <NAME> 7 C.W.N. 744; <NAME> v. Maharaja of Benares 29 A. 12 : 3 A.L.J. 606 : A.W.N. (1906) 251. In this view also, the decree under Section 90 , which was made notwithstanding the personal relief granted by the original decree, has been rightly set aside.

4. The result is that the decree of the lower Court is affirmed and this appeal dismissed with costs.

5. It is conceded that this order will govern R.A. No. 352-2 of 1909, which is accordingly dismissed with costs.

6. As there was a consolidation order, there will be one hearing fee in the two <ORG>. 352-1 and 352-2.

7. The Appeal No. 368 of 1909 against the order in proceedings in execution of the decree under Section 90 , necessarily fails and is dismissed with costs. We assess the hearing fee at two gold mohurs.


<NAME>, <NAME>

1. This appeal is by certificate from the Judgment dated 8 May, 1968 of <ORG> of Patna.

2. The appellants challenged the validity of land acquisition proceedings in Land Acquisition Case No. 63 of 1961-62 initiated by the Collector of Patna on 27 July, 1961. The acquisition proceedings related to about 64.49 acres of land for what came to be known as Boring Road Scheme.

3. <ORG> prepared a scheme called 'Boring Road Development Scheme'. The Scheme was approved by the Government in the month of December, 1959. In the month of November, 1959 a notification was issued by the State Government under Section 4 of the Land Acquisition Act (hereinafter referred to as the Act.)

4. Respondent No. 4 <ORG> requested the <ORG> to acquire land for the purpose of providing land to doctors, lawyers, <ORG> servants and journalists for building purposes. 25.08 acres were acquired under the normal procedure inviting objections under Section 5A of the Act. This acquisition was completed on 11 July, 1962. Possession was taken and compensation was paid.

5. The <ORG> wanted to acquire another block of 32 48 acres. This acquisition was under Section 4(1) read with Section 17(4) of the Act issued on 2 November, 1959. This acquisition was struck down by <ORG> at Patna on 2 April. 1960. <ORG> however said that the <ORG> could initiate fresh proceedings under the Act for acquisition of 31.48 acres of land in accordance with law.

6. Thereafter the Scheme of the <ORG> was approved on 17 December, 1960. The Government gave permission to the <ORG> to acquire 64.49 acres of land. It appeared that 32.48 acres of land which the <ORG> wanted to acquire fell within the area of the Scheme of the <ORG>. The Government decided that the land of 64.49 acres be acquired by the <ORG> and developed by it and then an area of 32.48 acres be handed over to the <ORG>. The <ORG> agreed.

7. The Collector of Patna issued a notification under Section 4 of the Act read with Bihar Act No. XI of 1961 The notification was signed by the Collector on 17 July, 1961 and was issued on 6 August, 1961.

8. The Bihar Act XI of 1961 made certain amendments to the Land Acquisition Act . Under Section 4(1) of the Act the <ORG> alone had the authority to issue a notification in the Gazette that land in any locality is needed for public purpose. As a result of the Bihar amendment to Section 4 the Collector was given concurrent power to issue such a notification. The Collector's notification was not required to be published in the Gazette but could be validly published in the office of the Collector. Section 17 of the Act contains certain provisions which are described as emergency provisions. The Bihar Act effected certain amendments to Section 17 . The provisions of Section 17 of the Act, as applicable to Bihar, state that in case of urgency, whenever the <ORG> so directs, the Collector though no such award has been made, may on the expiration of fifteen days from the publication of the declaration mentioned in Section 6 , take possession of any waste or arable land needed for public purposes or for a Company. The important provision in Section 17 is that the Collector can not take recourse to the provisions without an appropriate direction from the <ORG> as stated in that section.

9. On 6 August, 1961 a notice was published in the <ORG>. The notice stated that in exercise of powers conferred by Section 17(4) of the Act the local <ORG> decided that, in view of the urgency of the project, provisions of Section 5A shall not apply. The notifications is short records that the acquisition was in the opinion of the <ORG> one of urgency and the <ORG> give direction in that behalf and, therefore, the provisions of Section 5A were not applicable.

10. On 5 October, 1961 <ORG> issued a declaration under Section 6 of the Act in respect of the same area stating the public purpose.

11. On 5 February, 1962 an area of 57.71 acres covered by the aforesaid notification and declaration was handed over by the Land Acquisition Officer to the Trust.

12. On 23 January, 1962 some of the dispossessed owners filed a petition in <ORG> challenging the validity of the acquisition proceedings. The writ petition was withdrawn by those petitioners in the month of July, 1964. The petitioners thereafter moved <ORG>. The State Government stayed the acquisition proceeding by its order dated 3 May, 1965. On 27 November, 1965 the Government vacated the stay and directed the Collector to proceed with the acquisition proceedings.

13. On 7 April, 1965 the <ORG> deposited a sum of Rs. 10,39,360/- through the <ORG> representing the cost of acquisition of 32.48 acres. On 27 April, 1967 the <ORG> passed a resolution that 25.09 acres of land already in possession of the <ORG> and a further area of 32.48 acres acquired by the <ORG> be made over to the <ORG> after deducting such area as might be required for common facilities such as roads, parks etc. It was also resolved that a contiguous piece of land measuring 57 57 acres be handed over to the <ORG> subject to the <ORG> making full payment for the development.

14. The appellants filed the petition under Article 226 on 19 December, 1967. The appellants challenged the acquisition proceedings in <ORG> on three grounds. First, the <ORG> did not decide to apply the emergency provisions under Section 17 of the Act and did not give any decision of the Collector to attract those provisions and take possession of the lands. The preliminary notice under Section 4 of the Act which incorporates the decision of the <ORG> under Section 17 is invalid The omission to comply with the provisions of Section 5A therefore rendered the subsequent notification under Section 6 of the Act bad. Second, the <ORG> is a company and therefore the procedure prescribed in Part VII of the Act should have been followed. Third, the Collector was himself interested in securing a plot for himself and he acted malafide.

15. <ORG> rejected the allegation of malafide. <ORG> held that there is no invalidity in the notification under Section 4 . The appellants could not establish that the <ORG> did not give their approval to the application of emergency provisions contained in Section 17(1) read with Section 17(4) of the Act for the purpose of acquisition. <ORG> held that it was not necessary to comply with the provisions of Section 5A of the Act.

16. Counsel for the appellants formulated the contentions on four heads. <NAME>, no order under Section 17(1) read with Section 17(4) of the Act for the application of emergency provisions was made. On 15 July, 1961 a proposal for emergency provisions was made by the Land Acquisition Officer. The Collector signed the notice on 17 July, 1961 and sent his letter on 20 July, 1961 to the Government seeking directions for application of the provisions contained in Section 17(4) of the Act. No such direction came. Therefore, Section 6 notification is bad because Section 5A is nor attracted in the absence of directions under Section 17 of the Act, Second, Section 4 notification mentions satisfaction of the local Government. Section 4 of the Act as applicable to Bihar states that satisfaction is required either of the local Government or of the Collector. The Collector spoke about the satisfaction of the Local Government Therefore, it was not a valid notification. Third, Section 6 notification is not by the Collector but by the local Government, and, therefore, it is bad. Fourth, the notification is for <ORG> but it appears that it is for the Samiti The Samiti paid the money, but the provisions of Part VII of the Act have not been followed.

17. The Solicitor General rightly contended that no arguments had been advanced before <ORG> with regard to notification not being by the Collector, and that there was no satisfaction of the Collector with regard to Section 4 notification. He rightly submitted that the Government would have given answers on facts, and, therefore, this <ORG> is not, only deprived of facts but also of <ORG> on these aspects. We are, therefore, unable to allow the appellants to canvass those two grounds.

18. Counsel for the appellants submitted that the allegation in the petition was that the Collector on 20 July, 1961 asked the authority to publish notification under the emergent procedure dispensing with the provisions of Section 5A of the Act. The notification was published under the signature of the Collector on 17 July, 1961 Thesefore, there was no decision of the local Government under Section 17(1) read with Section 17(4) of the Act and the requirements of Section 5A could not be dispensed with.

19. <ORG> said that the <ORG> was unable to produce the file conveying the decision of the <ORG>. <ORG> said that the "non-traceability of the <ORG> order in the <ORG> file must in the circumstances be attributed to the deliberate destruction of the relevant papers by the interested parties". <ORG> further said that acquisition proceedings had been initiated in 1961 under the instructions of the <ORG>. But for the "intervention of influential person" it is highly improbable that the <ORG> would have ordered stay of the entire land acquisition proceeding on 3 May, 1965.

20. The facts found by <ORG> are these. <ORG> requested that the emergency provisions of the Act should be applied. The Deputy Collector in Charge pointed out to the Collector that the draft notification must be sent to the Government in <ORG> which could apply the emergency provisions and dispense with the compliance of Section 5A of the Act The Collector prepared a draft notification, signed it and sent it to the Government along with the letter dated 20 July, 1961. The notification was actually published on 6 August, 1961. On that very day the Deputy Collector directed a copy of the notification to be sent to the persons interested. On 4 September, 1961 the Deputy Collector again recorded that notification had issued under the emergent procedure. There are indications of the receipt of the letter of the Collector in the <ORG> on 22 July, 1961. On 26 July, 1961 the note in the <ORG> file referred to the receipt of the letter. <ORG> on these facts held that the circumstances led to the inescapable conclusion that the Government must have passed the necessary orders.

21. <ORG> referred to the certified copy of the order sheet of the Land Acquisition Case from 14 July, 1961 to 14 October, 1961 in support of the conclusion reached by <ORG>. The order sheet dated 15 July, 1961 shows that the Chairman, <ORG> wanted 64 49 acres to be acquired under the emergent procedure. The Deputy Collector after personal inspection was satisfied that the lands were waste and arable lands and there was no objection to their acquisition under the emergent procedure. The Deputy Collector suggested to the Collector that a draft notification for that purpose should be prepared and sent to the Deputy Secretary to the Government in <ORG> for permission. The draft was approved by the Collector and was signed by him on 17, July, 1961 It was sent to the Government by the Collector with letter dated 20 July, 1961. Then the notice dated 6 August, 1961 was published The notice mentions that the Government gave its decision under Section 17(4) of the Act. On 4 September, 1961 the note in the order sheet states that a notification under Section 4(1) of the Act under the emergent procedure has been published on 6 August, 1961. The further note in the order sheet dated 4 September, 1961 states that the draft declaration under Section 6 of the Act along with declaration plan has been prepared and is submitted for approval.

22. On these facts <ORG> held that the appellants did not establish that the Government did not give their approval to the application of emergency provisions of Section 17(1) read with Section 17(4) of the Act. <ORG> was right in repelling the suggestion of the appellants that the Government did not give their approval to the application of emergency provisions for the purpose of acquisition

23. <ORG> held that the appellants were guilty of delay and laches. <ORG> relied on two important facts. First, that there was delivery of possession. The appellants alleged that it was paper transaction. <ORG> tightly rejected that contention. Secondly, <ORG> said that the <ORG> invested several lakhs of rupees for the construction of roads and material for development purposes. The appellants were in full knowledge of the same. The appellants did not take any steps. The Court rightly said that to allow this type of challenge to an acquisition of large block of land piecemeal by the owners of some of the plats in succession would not be proper. If this type of challenge is encouraged the various owners of small plots will come up with writ petitions and hold up the acquisition proceedings for more than a generation. <ORG> rightly exercised discretion against the appellants. We do not see any reason to take a contrary view to the discretion exercised by <ORG>.

24. For the foregoing reasons the appeal fails and is dismissed. The appellants will pay costs to the respondents.


PETITIONER: <NAME> (DEAD) THROUGH LRS. ETC. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, WEST BENGAL DATE OF JUDGMENT: 23/04/1996 BENCH: B.P. JEEVAN REDDY, K.T. THOMAS ACT: HEADNOTE: JUDGMENT:

J U D G M E N T B.P. JEEVAN REDDY.J.

These appeals are preferred against the Judgment of <ORG> answering the three questions referred to it under Section 256(1) of the Income-Tax Act against the assessee and in favour of the <ORG> the three questions are:

"1. Whether, on the facts and in the circumstances of the <ORG> was correct in law in holding that the return of income furnished by the assesses by virtue of the provisions contained in sub-section (4) of Section 139 of the Income Tax Act, 1961 beyond the time allowed under sub-section (1) or sub-section (2) of the said section, could not be construed as a return furnished under either of the later sub-section and in that view holding that view holding that the assesses was not entitled to file the revised return under sub- section (5) of Section 139 of the Income Tax act, 1961?

2. Whether, on the facts and in the circumstances of the case, the assessment made by the Income Tax Officer for the assessment years 1964-65 and 1965-66 were section the time limit prescribed in section 153(1) (b) of Income Tax Act , 1961?

3 Whether, on the facts and in the circumstances of the case, the tribunal was correct in law in holding that the cases for the assessment years 1964-65 and 1965- 66 were such as `failing within clause (c) of sub-section (1) of section 271 ?"

While Question No.1 was referred at the instance of the <ORG>, Questions 2 and 3 were referred at the instance of the assessee. The two assessment years concerned herein are 1964-65 and 1965-66.

For the assessment year 1964-65, the assessee did not furnish a return within the period prescribed by sub-section (1) of Section 139 . No notice under sub-section (2) of Section 139 was served upon him. The assessee submitted a return or August 13, 1964 disclosing a total income of Rs.42,131/-. This return, it is not in dispute, was filed under, and taking advantage of the provision contained in, sub-section (4) of Section 139 . On January 18, 1969 he filed a revised return disclosing a total income of Rs.40,388/-. The assessee also disclosed in this revised return a capital loss of Rs.1,60,672/- on the sale of a plot of land. The Income Tax Officer did not complete the assessment within four years of the expiry of the assessment year 1964-65 i.e., on or before 31.3.1969. He made the assessment order on January 15,1970. He also initiated penalty proceedings under Section 271(1)(c) and referred the same to Inspecting Assistant Commissioner as required by law in force at that time.

In respect of the assessment Year 1965-66 also, the assessee did not file a return within the period prescribed by Section 139(2) was served upon him. He filed a return under Section 139(4) on December 17, 1965 disclosing an income of Rs.3,76,628/- which included a capital gain of Rs.3,52,420/-. On July 17, 1969 the assessee filed a revised return showing the total income at Rs.2,50,719/-. This figure was arrived at after reducing the capital gains form Rs.2,52,420/- (as disclosed in original return) to Rs.2,52,119/- The income Tax Officer deed not completes the assessment before the expiry of four years form the end of the assessment year 1965-66 i.e., on or before 31st March, 1970. He made the assessment order only on July 6, 1970. In this year too, the Income Tax Officer initiated penalty proceedings and referred the same to Inspecting Assistant` Commissioner.

Against the orders of assessment in respect of both the assessment Commissioner. In these appeals he disputed the vary validity of the assessment orders on the ground that they have been made beyond the prescribed period of four years. He submitted that the revised returns filed by him inadmissible in law and therefore could not serve to extend the period for marking the assessment as provided by Section 153 (1) (c). He also disputed the correctness of various additions made by the Income Tax Officer. The Appellate Assistant Commissioner allowed the appeals on the ground that the assessment or orders having been made beyond of four years prescribed by Section 153(1)(a)(i) (as in force at the relevant time), they are bed in law. He held that inasmuch as the returns in both the assessment years ware filed under Section 139 (4), no revised that sub-section (5) of Section 139 permits a revised return to be filed only where the return is filed under sub-section (1) or sub- section (2) of Section 139 but not where the returns is filed under sub-section (4) of Section 139 . In this view of the matter, the Appellate Assistant Commissioner held, the Income Tax Officer cannot claim the benefit of extended provided by clause (c) of subsection (1) of Section 153 .

The <ORG> challenged the decision of the Appellate Assistant commissioner before the <ORG>. The <ORG> agreed with the Appellate Assistant Commissioner that no revised return can be filed by an assesses who has field the return under Section 139(4) and that, therefore, the so- called revised returns filed by the assesses were not valid in law . The <ORG>, however, allowed the appeals filed by the <ORG> on the ground the assessment orders must be held to have been made within the time prescribed by clause

(b) of sub-section (1) of Section 153 . in other words, the <ORG> was of the opinion that since their was prima facie case for initiating action under Section 271(1)(c) , the assessment order could have been made within a period of eight years from the end of the relevant assessment year, as provided by clause (b) of subsection (1) of Section 153 , as stood at the relevant time.

At the request of <ORG> and the assessee, as stated above, three questions were referred by the <ORG> under Section 256 (1). <ORG> discussed the legal position at length and held that even in the case of a return filed under Section 139 (4), a revised return is permissible in law. Accordingly, <ORG> held, the assessment orders made must be deemed to have been made within the period of limitation provided by Section 153 (1)(c). <ORG> also held that the <ORG> was right in holding that in the facts and circumstances of the case, the larger period of eight years provided by clause (b) of sub-section (1) of Section 153 was also attracted in this case and that on this count also, the assessment orders must be held to have been made within the period of limitation prescribed by the Act.

Mr. <NAME>, learned for the assessee seeks to canvass the correctness of the view taken by <ORG>.

It would be appropriate to set out the relevant provisions of the Act as obtaining at the relevant time for a proper appreciation of the questions arising herein. Sub- sections (1), (2), (4) and (5) of Section 139 read thus:

"139. Return of income.- (1) Every persons, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed -

(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of six months from the end of the previous year or where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later;

(b) in the case of every other person, before the 30th day of June of the assessment year) (proviso omitted as unnecessary).

(2) In the case of any person who, in the Income-tax Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income or such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

(Proviso omitted as unnecessary). [4(a) Any person who has not furnished a return within the time allowed to him under sub-section (1) or sub-section (2) may before the assessment is made furnish the return for any previous year at any time before the end of the period specified in clause (b), and the provisions of clause (iii) of the proviso to sub-section (1) shall apply in every such case. [Subs. by Finance Act No. 19 of 1968 (w.e.f. 1.4.1968)].

(b) The period referred to in clause (a) shall be-

(i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year;

(ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year;

(iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment years.] (5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made."

Sub-section (1) of Section 153 , which alone is relevant for our purposes read thus:

"153. Time-limit for completion of assessments and re-assessments.

- (1) No order of assessment shall be made under Section 143 or Section 144 at any time after - [(a) the expiry of -

(i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967;

(ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968;

(iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or] [Subs. by Finance Act , 1968 (w.e.f. 1.4.1969)].

(b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of Section 271 ; or

(c) the expiry of one year from the date of the filing of return or a revised return under sub-section (4) or sub-section (5) of Section 139 , whichever is latest."

-------------------- Section 271 (1) (c) ran thus: "271. Failure to furnish returns, comply with notices, concealment of income. etc. - (1) If the Income- tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person -

(clause (a) and (b) omitted as unnecessary)

(c) has concealed the particulars of his income or [* * *] (The word "deliberately" omitted by Finance Act , 1964 (w.e.f. 1.4.1964)] furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- ...................................

[(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished."] The first question is whether a person who files a return under Section 139(1) is entitled to file a revised return before the assessment is made. We think not. The furnishing of a revised return is provided by sub-section (5) of Section 139 . According to this sub-section "any person having furnished a return under sub-section (1) or sub-section (2)" may furnish a revised return at any time before the assessment is made if he discovers any omission or any wrong statement in the original return. The very fact that this right is given to a person who has filed a return under sub-section (1) or sub-section (2) of Section 139 means by necessary implication that such a right is denied to a person who files the return under Section 139 (4). <ORG> has, however, taken the other view relying upon the language of clause (c) of sub-section (1) of Section

153. Sub-section (1) of Section 153 prescribes the time limits for completing the assessment. In the present case, it is not in dispute, the period allowed for making the assessment is four years from the end of the relevant assessment year as provided by Section 153(1)(a)(i) . Section 153 (1)(c) provides an alternate period of limitation. It says that if the assessment is made before "the expiry of one year from the date of the filing of return or a revised return under sub-section (4) or sub-section (5) of Section 139 " it would yet be within limitation notwithstanding the fact that it may be barred under other provisions contained in sub-section (1) of Section 153 . <ORG> is or the opinion that language employed in clause (c) of Section 153(1) contemplates the filing of a revised return even in a case where original return is filed under sub-section (4). We find it difficult to agree. Clause (c) employ both the expressions return and revised return and refers to both the sub-sections (4) and (5) of Section 139 . Reasonably read it means the return filed under sub-section (4) and the revised return file under sub-section (5) of Section 139 . It would not be reasonable to construe the said clause as indirectly conferring a right which is not conferred directly by sub- section (5) of Section 139 . <ORG> has drawn a distinction between a revised return and a rectified return. May be, there is a distinction. We are not concerned here with a rectified return but what was avowedly a revised return and which was in truth a new return. We find it equally difficult to agree with the rest of the reasoning of <ORG> on this aspect. We are, therefore, of the opinion that no revised return can be filed under sub- section (5) of Section 139 in a case where the return is filed under Section 139 (4). Once this is so the revised returns filed by the assessee for both the said assessment years were not valid in law and could not have been treated and acted upon as revised returns contemplated by sub- section (5) of Section 139 - which means that Section 153(1)(c) was not attracted in this case. Indeed this is the view taken by all <ORG>s as conceded by Mr. <NAME> <CITATION> (129 I.T.R. 379 <CITATION> (136 I.T.R. 559 <CITATION> (155 I.T.R. 593- <CITATION> (168 I.T.R. 26 - Kerala). Only the Calcutta High Court has taken the contrary view with which we are unable to agree.

The understanding of clause (b) of sub-section (1) of Section 153 , however, appears to be a difficult one, because of the ambiguous language employed therein. It says that "in a case falling within clause (c) of sub-section (1) of Section 271 ", the period for making an order of assessment is eight years. Now what do the words "in a case falling within clause (c) of sub-section (1) of Section 271 " mean? Different High Courts have spoken in different voices. Broadly speaking there are two streams of thought. The first one is this: within the period of four years (or whatever the applicable period of limitation), the Income Tax Officer must either initiate proceedings under Section 271 (1)(c) or record his opinion that it is a case falling under Section 271(1)(c) ; unless any such step is taken, it cannot be said that it is a case falling under Section 271(1)(c) ; if this safeguard is not provided, the Income Tax Officer would be armed with a dangerous weapon and the assessee would be at his mercy; the <NAME>'s sword would be kept hanging over the head of the assessee all the time. (This was said in the context of the provisions of 1922 Act where, in such a situation, no period of limitation was prescribed). An Income Tax Officer - the argument runs further - who is remiss in performance of his duties and does not make an order of assessment within the period prescribed, would make an assessment thereafter and start proceedings under Section 271(1)(c) to justify the making of the order of assessment beyond the prescribed period. As against this, the second stream of thought runs thus: the power conferred by Section 153 (1)(b) is a power conceived in the interest of public and is designed to curb concealment of income by the assesses; while construing the said provision, the possibility of abuse or misuse should not be the guiding consideration; the law presumes, and the Court must also presume that every power would be used fairly and for advancing the purposes which the provision seeks to achieve. There are not words in the clause, - this argument runs further - which indicate by necessary implication that either the proceedings under section 27(1)(c) should be initiated or that some order should be passed or record made by the Income Tax Officer within the period of four years to indicate that it is a case falling under Section 271(1)(c) ; imposing such a requirement would in effect amount to amending the clause and reading words into it which are not there; if in a given case, the Income Tax Officer invokes the said provision without justification, the assessee is not without a remedy; the Act provides adequate remedies by way of appeals, revisions and reference to rectify any misuse of abuse of powers by the Income Tax Officer; if an Income Tax Officer makes an assessment order after the expiry of four years and within eight years relying upon Section 271(1)(c) and if it is found by the higher authorities that is was not a case falling within Section 271(1)(c) , it is obvious, the assessment order will be set aside, besides quashing the penalty proceedings. It is, therefore, not necessary, - it is argues - that within the period of four years (or the other applicable period of limitation as the case may be), the Income Tax Officer should issue a notice or pass an order or make a record that it is a case falling within Section 271(1)(c) and that the validity of the assessment order should be judged with reference to the date on which the assessment order is made.

We find that both the streams of thought aforesaid are equally attractive. Each has an appeal of its own. We are, however, relieved or making a choice in the matter because of the decision of this Court in <CITATION> [(1991) 68 I.T.R. 297]. It was an appeal against the decision of <ORG> in <CITATION> [(1977) 108 I.T.R. 746]. <ORG> discussed this problem at length (at pages 752 and 753), but ultimately did not express any final opinion for the reason that it was not necessary to do so in view of the facts of an findings recorded in that case. We do not think it necessary to set out the entire reasoning of <ORG>. It is sufficient to state that it espouses the first stream of thought mentioned above. On appeal, this Court purported to affirm the said line of thought which is evident from the following observations in the judgment, which, in effect, is practically the whole of the judgment:

"<ORG> referred the following question to <ORG> :

'Whether, on the facts and in the circumstances of the case, the <ORG> was right in holding that the assessment made by the Income-

tax Officer was barred by limitation.' <ORG>, on a detailed consideration of the facts and circumstances of the case, held that the <ORG> was right in holding that the case was not one to which the provisions of section 271(1)(c) of the Income-tax Act, 1961, corresponding to section 28(1)(c) of the old Act apply inasmuch as the Income-tax Officer had not recorded any finding or brought any material on record within a period of 4 years to show that it was a case of concealment. <ORG> agreed with the findings recorded by the <ORG> that the assessment was clearly time-barred.

After hearing learned counsel for the appellant, we do not find any good reason to take a different view. The appeal fails and is, accordingly, dismissed. There will be no order as to costs."

Since this Court has already taken one view and because the said view is one of the two possible views of the matter, we follow the same and accordingly uphold the first stream of thought mentioned above.

Applying the above understanding of Section 153(1)(b) , it must be held in this case that the assessment is barred by time. Admittedly the Income Tax Officer had not initiated the providing under Section 271(1)(c) within a period of four years prescribed by Section 153(1)(a)(i) (which is applicable provision herein) nor had be made any order or record or a note in the relevant file indicating that it is a case falling under Section 271(1)(c) . [(f he made any such order of note in the file as aforesaid, he should have communicated it to the assessee - the expression "communicated" being understood as explained by this Court in <CITATION> [1970 (2) S.C.R. 657].* In such a situation it must be held that the orders of assessment in respect of both the assessment orders concerned herein are barred by time and must be held to be invalid in law.

For the above reasons, the appeals are allowed. Question No. 1 is answered in the affirmative holding that in case of a return filed under sub-section (4) of Section 139 , a revised return contemplated by sub-section (5) of Section 139 cannot be filed. Question No. 2 is answered in the negative. It is held that the orders of assessment made in respect of the said two assessment years are barred and are not saved by Section

------------------------------------------------------------ * Which means that it is enough if it is put in the course of transmission before the expiry of the relevant period; it is not necessary that it should also be received by the assessee or his representative within the said period. 153(1)(b). Question No. 3 is really consequential to Question No. 1. Once we hold that no revised returns could be filed by the assessee for the said two assessment years, the assessments made beyond the prescribed period of four years (but within five years) are not saved by Section 153(1)(c) .

There shall be no order as to costs.