CASE NO.: Appeal (civil) 12370 of 1996 PETITIONER: SECRETARY, JAIPUR DEVELOPMENT AUTHORITY, JAIPUR RESPONDENT: DAULAT MAL JAIN DATE OF JUDGMENT: 20/09/1996 BENCH: K, RAMASWAMY & B.L. HANSARIA JUDGMENT:

JUDGMENT 1996 Supp(6) SCR 584 The Judgment of the Court was delivered by K. RAMASWAMY, J. The facts of these eases expose the blatant misuse of public office by Minister of Urban Development, <ORG> as Chairman of the appellant authority; they, in particular demonstrate the danger -involved in entrusting unbridled dual powers in a single individual leading to abuse of office on account of lack of counter check. It would be appropriate to extract from the enquiry report dated November 12, 1992 of the Lokayukta of Rajasthan under Section 10 of the Rajasthan Lokayukta and Uplokayukta Act, 1973 as under ; "In view of' what has been stated above, it is prima facie established that Smt. <NAME>, the then Hon'ble Minister, <ORG> Department, <ORG>-cum-Chair-man <NAME>, Shri <NAME>, <ORG> the then Commissioner, <ORG> and Shri <NAME>, the then Zonal Officer, Lal Kothi Scheme, <NAME> have blatantly misused their official position to favour a few influential and highly placed individuals and have also thereby caused wrongful gain to them and wrongful loss to the <ORG> and the public at large. But Smt. <NAME>, the then Hon'ble Minister, <ORG> Department-cum-Chairman, J.D.A. is not now a public servant as defined in Section 2(1) of the Rajasthan Lokayukta and Up-Lokayukta Act, 1973 (for short, the 'Act') because she has ceased to be a Minister, so investigation is not being commenced against her but the investigation deserves to be commenced against S/Shri <NAME>, <ORG> and <NAME> under Section I of the Act and I order accordingly."

<NAME> as early as in 1780 had lamented the corroding influence of corruption thus : "Corrupt influence, which is itself the peren-nial spring of all prodigality., and of all disorder, which loads us, more than millions of debt; which takes away from our arms wisdom from our councils, and every shadow of authority and credit from the most venerable parts of our constitution."

The facts in nutshell in these cases are as under ; Notification under Section 4 of the Rajasthan Land Acquisition Act, 1953 (for short, the 'Act') was published in <ORG> on June 29, 1960 acquiring land in Bhojpura and Chuck Sudershanpura, Tehsil Jaipur popularly known as Lal Kothi Scheme, which is adjacent to the Jaipur City for urban development, viz., for multipurpose project of constructing Legis-lative Assembly M.LA. quarters etc. After following the procedure, an award was passed on January 9, 1964 and possession taken later on. Therein, apart from awarding compensation to the owners, the Land Acquisition Officer granted plots ranging between 2000 sq. yds. to 1000 sq. yds; to owners, sub-awardees or nominees in the scheme itself. This Court in <CITATION> .,  4 SCC 370, known as <NAME> s case, had held that the Land Acquisition Officer (<ORG>) was devoid of the power and jurisdiction under Section 11 to allot part of the acquired land or any land to the land owners etc. in determining compensation under Section 23(1), It was, therefore, held that the award alloting land was void ab initio and it confered no right on an erstwhile khatedar/owner to claim possession of the land in execution of the award. The award, confirmed in the decree under -Section 26, though had become final, being a nullity, it could be questioned at any stage, when it is sought to be executed/enforced. It was, therefore, held that the execution of such a decree and delivery of the possession in furtherance of the award was invalid, void and inexecutable. These cases spring from the same foul source and being part of the same scheme and same award, are governed by the above judgment. The <NAME> (owner) in these cases is one Chhote Lal whose 14 bighas of land had come to be acquired. The <ORG> awarded 2000 sq. yards to him. He entered into agreements with respon-dents <NAME> and <NAME> to Sell 1000, 500, 250 sq. yds. etc. The sale deeds came to be registered on December-14, 1970. The purchasers were described as sub- awardees or nominees, which terms are unknown to the law of property acquired for public purpose.

Then came into picture the Minister-cum-Chairman and the so-called Committees. It is now the case of the respondents that pursuant to a public policy, the Government had decided in 1978 to allot the lands to the sub- awardees/nominees @ Rs. 8 per sq. yd. Further, the Minister, accepting the same, had directed delivery of the possession and sub-sequently the amount was received @ Rs. 8 per sq. yd. of at revised rates of Rs. 50. per sq. yd,; details thereof being not material for the purpose of this case, are omitted. It would appear-that, subsequently, the lands were further sub- divided to escalate the net by reducing the area of allotment in the proceedings dated September 16, 1980. Lots were drawn for allotment of the plots on December 23, 1980. They came to be. questioned by way of writ petitions in <ORG>. <ORG> came heavily against the illegality committed by the <ORG> and the Minister for such allotments being obnoxious, deflecting the scheme and defeating the public purpose by abusing public office. When it was inquired into by the <NAME>, in the aforestated report, he castigated the persons for the blatant abuse of the power and action was accordingly initiated. It shocks the judicial con- science in that it did not touch even the fringe of "actors". The counsel for respondents, rightly and in the light of the settled legal position, admitted that the respondents did not acquire any title to the lands sold to them under defective and void title. However, they strongly pressed into service the orders of allotment issued by the Minister, the acceptance of payment and the so-called public policy to support their claim for possession.

In this background, the question arises; whether <ORG> was right in directing allotment of the lands to the respondents-since allotment made to others had become final and denial thereof to the respondents would amount to violation of equality clause enshrined in Article 14 of the Constitution, which is now the subject matter of these appeals? In fairness, the learned Judges have held that the allotment of the plots was in violation of the scheme and the award of the <ORG> and did not confer any right to the purchasers, sub-awardees or nominees. Yet the relief has been founded on the premise of violation of equality on par with others who got posses-sion under the void award etc. It directed the appellants to deliver posses-sion of the plots allotted to them on the basis of the sales and letters of allotment thereof. Thus, these appeals arise from the judgment and order of <ORG> of <ORG> made on September 2, 1993 in Writ Petition No. 680 of 92 etc. Dr. <NAME> learned senior counsel appearing in one case and <NAME> appearing in another, contended that in view of the law laid down in <NAME> case, the direction issued by <ORG> is illegal There is no discrimination for perpetration of wrong-ful acts in furtherance of void orders. Extension of the equality in Article 14 for breach of law would aid impetus to perpetrate further illegalities. Article 14 is unavailable in this backdrop.

M/s. G.L. Sanghi, learned senior counsel and <NAME>, learned counsel for fie respondents and <NAME> for the petitioner in the third case, contended that the judgment in <NAME> case is per incuriam since the relevant provisions under the Act and the Rajasthan Land Acquisition Rules had not been brought to the notice of this Court. The <ORG> was empowered under the Rules to allot the lands in lieu of com-pensation; Section 31 of the Central Act which in pan materia with Section 31 of the Act empowers the <ORG> to allot land in lieu of compensation. The policy of 1978 further reiterated it. The <ORG> decided to allot land to the awardees, sub-awardees or nominees of the erstwhile owners of the land. In furtherance thereof, allotment came to be made, directions were given for deposit of the value of the sites pursuant to which the amount came to be deposited The extent of the land purchased by the respondents in 500 sq. yds. and it was further reduced to 400 sq. yd. and 250 sq. yd, etc. The <ORG> had evolved the policy to mete out the problem of the rehabilitation of the awardees, sub-awardees and nominees. The <ORG>, therefore, in implementation of the Scheme had allotted the plots, amounts were deposited in furtherance of the policy, irrespective of the fact whether or not the <ORG> had power to allot the land to the awardees or sub- awardees or nominees. The policy of the <ORG> to allot plots legitimatises the allotment made to the respondents. Therefore, the allotment is valid in law. Since some people were-given possession and some among them had built houses thereon, the respondents cannot be denied of their right to possession. It is further contended that the respon-dents having deposited the amount 20 years ago due to the impugned allotment they were denied the right to apply for allotment elsewhere. Consequentially, the respondents now would be rendered without any remedy for allotment. Interference, at this distance of time, would cause undue hardship to the respondents. Though for different reasons, <ORG>, therefore, was right in holding that the respondents were dis-criminated against due to non-delivery of possession of plots to them for construction of their houses. , The diverse contentions give rise to the first question : Whether the respondents have a right to allotment of the lands? It is an admitted position that they purchased the lands from <NAME> the erstwhile owner, pursuant to the sale deeds executed by him in 1970 or an agreement of sale etc. Their source of title, therefore, is <NAME>, the erstwhile owner. The sales obviously are void since <NAME> had no right, title and interest in the land acquired pursuant to notification under Section 4(1) issued on dated June 29, 1960 and possession taken under Section 16 of the Central Act :and equivalent to Section 16 of the <ORG> Act. The pre- existing right, title and interest had by <NAME> stood ceased and the same were vested in the appellant free from all encumbrances. The nomenclature of sub- awardees or nominees does not get elevated above the source and they had no right, title or interest under void sale except, if at all, only to claim compensation under Section 23(1) of the Act. In <NAME> v. <ORG>,  2 SCC 528 this Court had held that after the notification under Section 4(1) is published, any encumbrances created by the owner of the land does not bind the <ORG>. The agreement of sale, if any, was frustrated by the publication of the notification under Section 4(1) and the declaration under Section 6 . <CITATION> (1995) 8 SC 179 and catena of other decisions, this Court has held that the purchase after notification under Section 4(1) published in the Gazette was not lawful which did not clothe the sale with any colour of title as against the <ORG>. All encumbran-ces stand extinguished by operation of Section 16 of the Act, Therefore, the purchaser gets no title to the acquired land. The sale (being opposed to the public policy) was void under Section 23 of Contract Act. Conse- quentially, the respondents acquired no right, title or interest either under the sale deeds or agreement entered into by them with <NAME>, the erstwhile owner.

The next question is ; whether there is any public policy allotment of the land to the respondents independent of the colour ;of their title? It is seen from the record that the premise on which the Minister and the Committee headed, by the Minister had proceeded to allot the lands to the respondents and other, was the void award made by the <ORG> giving land to the erstwhile owners, sub-awardees or nominees, apart from compensa-tion given under Section 23(1) . That premise was knocked of its bottom in <NAME> case. It would be a mockery to call it a policy of the <ORG>, much less a public policy.

The Governor calls upon the leader of a political party/groups that command majority in the <ORG> to form the Government and appoints him as Chief Minister. On later's advice he appoints other Ministers. Business of the Government gets allocated and is run as per business rules framed under Article 166(3). The executive power of the State Government extends over which the legislature has power to make law. The Government runs <ORG> with the aid and advice of the Chief Minister and <ORG> which exercise the powers and performs its duties by the individual Ministers as public officers with the assistance of the bureaucracy working in various Departments and Cor-porate sectors etc. Though they are expressed in the name of the Governor, each Minister is personally and collectively responsible for the actions, acts and policies. They are accountable and answerable to the people. Their powers and duties are regulated by the law and the rules. The legal and moral responsibility or liability for the acts done or omissions, duties performed and policy laid down rest solely on the Minister of the Depart- ment. Therefore, they are indictable for their conduct or omission, or misconduct or misappropriation. <ORG> are jointly and severally responsible to the <ORG>. He/they is/are also publicly ac- countable for the acts or conducts in the performance of duties.

The Minister holds public office though he gets constitutional status and performs functions under constitution, law or executive policy. The acts done and duties performed are public acts or duties as holder of the public office. Therefore, he owes certain accountability for the acts done or duties performed. In a democratic society governed by rule of law, power is conferred on tie holder of the public office or the concerned authority by the Constitution by virtue of appointment. The holder of the office, therefore, gets opportunity to abuse or misuse the office. The politician who holds public office must perform public duties with the sense of purpose, and a sense of direction, under rules or sense of priorities. The purpose must be genuine in a free democratic society governed by the rule of law to further socio-economic democracy. The executive Government should frame its policies to maintain the social order, stability, progress and morality. All actions of the Government are performed through/by individual persons in collective or joint or individual capacity. Therefore, they should morally be responsible for their actions.

When a Government in office misuses its powers figuratively, we refer to the individual Minister/Council of Ministers who are constituents of the Government The Government acts through its bureaucrats, who shapes its social economic and 'administrative policies to further the social stability and progress socially, economically and politically. Actions of the Government, should be accounted for social morality. Therefore, the ac- tions of the individuals would reflect on the actions of the Government. The actions are intended to further the goals set down in the Constitution, the laws or administrative policy. The action would, therefore, bear neces- sary integral connection between the 'purpose' and the end object of public welfare and not personal gain. The action cannot be divorced from that of the individual actor. The end is something aimed at and only individuals can have and shape the aims to further the social, economic and political goals. The ministerial responsibility threat comes into consideration. The Minister is responsible not only for his actions but also for the job of the bureaucrats who work or have worked under him. He owes the respon- sibility to the electors for all his actions taken in the name of the Governor in relation to the <ORG> of which he is the head. If the Minister, in fact, is responsible for all the detailed workings of his <ORG>, then clearly ministerial responsibility must cover a wider spectrum than mere moral responsibility : for no minister can possibly get acquainted with all the detailed decisions involved in the working of his <ORG>. The Ministerial responsibility, therefore, would be that the Minister must be prepared to answer questions in the <ORG> about the actions of his department and the resultant enforcement of the policies. He owes them moral responsibility. But for actions performed without his concurrence also, he will be required to provide explanations and also bear respon- sibility for the actions of the bureaucrats who work under him. Therefore, he bears not only moral responsibility but also in relation to all the actions of the bureaucrats who work under him bearing actual responsibility in the working of the <ORG> under his ministerial responsibility.

All purposes or actions for which moral responsibility can be at-tached are actions performed by individual persons composing the Depart-ment. All Government actions, therefore, means actions performed by individual person to further the objectives set down in the Constitution, the laws and the administrative policies to develop democratic traditions. Social and economic democracy are set down in the Preamble, Part III and Part IV of the Constitution. The intention behind the Government actions and purposes is to further the public welfare and the national interest. Public good is synonymous to protection of the interests of the citizens as a territorial unit or nation as a whole. It also aims to further the public policies. The limitations of the policies are kept along with the public interest to prevent the exploitation or misuse or abuse of the office or the executive actions for personal gain or for illegal gratification.

The so-called public policy cannot be a camouflage for abuse of the power and trust entrusted with a public authority or public servant for the performance of public duties. Misuse implies doing of something improper. The essence of impropriety is replacement of a public motive for a private one. When satisfaction sought in the performance of duties is for mutual personal gain, the misuse is usually termed as corruption. The holder of a public office is said to have misused his position when in pursuit of a private satisfaction, as distinguished from public interest, he has done something which he ought not to have done. The most elementary qualification demanded of a Minister is honesty and incorruptibility. He should not only possess these qualifications but should also appear to possess the same. In the Encyclopedia of Democracy by <NAME>, Vol. 1, page 310, in the Chapter "Corruption'', it is stated that corruption is an abuse of public resources for private gain. The occasions for political corruption increases when control On the activity of public administrators are fragile and the division of power between political actors and the public bureaucrats, as well as between the <ORG> and the middle man, is Unclear, It is difficult to discover and punish cases of corruption. Research has shown that political corruption tends to be more widespread in authoritarian or totalitarian regimes and when public opinion and the press are unable to denounce corruption. Corruption developes because of con-fusion about the borders between <ORG> and society and between traditional and modern values. It can be expected to grow during phases.of transition. Corruption should disappear in modern stable democratic societies. In-stead, it is growing. Since <ORG> intervention in economic and social life has increased the occasions for political corruption, new technologies have increased the cost of electoral campaigns and the professionalisation of political careers has increased the number of those who have to make a living from politics rather than living for politics. Corruption has not disappeared. Corruption has dangerous consequences for politics. Al-though political corruption is more widespread in non-democratic regimes, it is particularly dangerous for democracy because' it undermines two of the major principles on which democracies are based; the equality of citizens' rights and the transparency of the political decision-making process; Bribes open the way for access to the <ORG> for those who are willing to pay and can afford the price. The situation may leave non-corrupt citizens with the belief that one "counts" only if one has the right personal contacts with those who hold power. Because of its illegal nature, corrup-tion increases the range of public decision that are made in secrecy: It was suggested that internal controls on public bureaucracies through ad-ministrative controls and accounting procedures as well as ombudsman systems for public complaints, are remedies to control political corruption. The rules of Code of Conduct for political executives, public servants and private entrepreneurs, emphasising merit and regulated system of appoint-ment in state bureaucracy and Stimulating pride in public service, would generate remedies for political corruption. In Director of Public Prosecutions v. <NAME> Director of Public Prosecu-tions v. <NAME>, (1977) 1 All ER 316 (<ORG>), the expression 'public body' came up for consideration. The applicability of Prevention of Corruption Act was not restricted to local authorities but referred to any public body having public or statutory duties to perform and which earned on activities of public interest. In that behalf, <ORG>, had held that the Prevention of Corruption Act was not restricted to local authorities; it was applicable to any body which has public and statutory duties to perform and bodies which perform those duties and carry out their transactions for the benefit of the public and not for private profit. Accordingly, it was held that the persons who perform public functions are liable to prosecution for corruption. Similar views were expressed in R v. <ORG>., (1972) 1 AII ER 65; <ORG> v. <ORG>, (1972) 2 W.L.R. 1041 (<ORG>); <NAME> v. <NAME>, (1960) 2 W.L.R. 164 (<ORG>); and R v. <NAME> R v. <NAME>, (1983) 2 All ER 87 (<ORG>). The court, therefore, would be required to consider whether the policy sought to be relied on and directed by the Minister was to further public good or was a means to fritter away the public property for personal gain or to misuse public power. The object of publication of the notification under Section 4(1) in the Official Gazette is to give notice to the owner that the land is needed for public purpose and he is prevented to create any sort of encumbrance on the land with effect from that date etc. The land, if ultimately acquired, vests in the <ORG> under Section 16 or 17(2) of the Act free from all encumbrances. The public policy of the Govern-ment should only be to further the public purpose and issue of declaration is the conclusive proof of public purpose under Section 6(1) or any other similar public purpose, Limited public purpose given under Section 31(3) , by operation of Which, the <ORG>/Collector is empowered, after the sanction is accorded by the appropriate <ORG>, with the liberation of non obstante clause, is to allot any other land, in lieu of money compensation only, to such persons having a limited interest in such land, either by the grant of some other lands in exchange or remission of land revenue on other lands held under the same title, or in such other way as may be equitable "having regard to the interest" of the persons having limited interest in the land. In other words, the public policy under the Act is that the acquired land should be used only for public purpose declared under Section 6(1) of the Act or any other public purpose and, under no circirumstances, for any private purpose. The limited relaxation of public power entrusted with the <ORG> is to allot any other land if available to the owner with limited interest or remission of land revenue when limited interest is acquired for purpose. We may at this juncture dispose of the contention that the ratio in <NAME> case is per incuriam. The basic postulate of the contention is the omission to refer to Rules 31 and 36 of the Rajasthan Land Acquisi-tion Rules, 1956. Rule 31 was made to guide the exercise of power of the Collector (<ORG>) under Section 31(3) of the Act. As seen the <ORG> has empowered the Collector to allot "any other land" in lieu of money compensation only when the land acquired belongs to a person having "limited interest in the land", like widow's estate or minor's estate, <NAME> etc. In that behalf, Rule 31 amplifies the exercise of the power by the authorised <ORG>. It says that "the Collector cannot force a party to take land in lieu of cash, Where, however, the interest of the party is so limited as in the case of a trustee of a wakf property or a Hindu widow, as to make it extremely difficult, if not impossible, to arrive at an adequate cash estimate of its value or where, from the circumstances of a case, it is impossible to place the parties concerned by cash compensation in the same or nearly the same position as before acquisition, sub-section (3) enables the Collector to arrange to award land (subject to the same limitation of interest) in lieu of cash. In <NAME> case the scope of sub-section (3) of Section 31 has been considered and explained in extenso. Rule 31 is only to elongate the discretion which the <ORG> is expected to exercise in awarding land in lieu of cash consideration and the circumstan-ces in which it would be done. Equally, Rule 36 deals with disposal of the excess land acquired by the Collector for a company and imposition of the conditions for sanction of transfer of excess land. Therefore, the absence :of reference of them does not make any dent into the principle of law laid in <NAME> case. That apart, these two rules merely emphasise the limited power given to the <ORG> and to the <ORG> to impose the conditions and restric-tions to attain the public purpose for which the land is acquired and is not intended to fritter away public property for private purposes or gain or illegal gratification. The" Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974, were made in exercise of power under Rajasthan Urban Improve-ment Act, 1959. Therein elaborate procedure has been provided to grant lease, restrictions thereunder, assessment of the ground rent, preparation of the scheme, sale or disposal of the land, reservation of the land for residential plot or allotment of non-residential plots at concessional rates to the specified categories, reservation of non- residential lands, fixation of the premium, reserved prices or fixed prices, assigning allotment and sale of non-residential land, allotment of residential plots at concessional rates, priorities, categories, procedure, size, the procedure for recovery of cost of the land, resale of the plot to recover-for non-compliance of conditions, allotment of land to public or charitable institutions, to institutions other than charitable and public institutions, grant of sale deeds, etc. Allotment to the respondents obviously was not under these Rules nor is it their case. Therefore, there was no policy laid by the <ORG> and it cannot be laid contrary to the aforestated rules and to such power was given to individual minister by executive action, as the land was already notified Conclusively under Section 6(1) for public purpose, namely, earmarked scheme. Since the persons whose land was acquired were not Owners having limited interest therein, qua the owners having lost right title and interest therein, the sub-awardees or nominees, after the acquisition under Section 4(1) , would acquire no title to the land nor such ultra vires acts of the Minister would bind the <ORG> The actions, therefore, taken by the Minister- cum-Chairman of the appellate authority and bureaucrats for obvious reasons would not clothe the respondents with any vestige of right to allotments. Acceptance of the contentions of the respondents would be fraught with dangerous consequences. It would also bear poisonous seeds to sabotage the schemes defeating the declared public purpose. The record discloses that such allotment in many a cases was in violation of the Urban Land Ceiling Act which prohibits holding the land in excess of the prescribed ceiling limit of the urban land. In some instances, a person whose land of 500 square yards was acquired, was compensated with allotment of 2000 square yards and above, which is against the public policy defeating even the Urban Land Ceiling Act . Would any responsible Mini-ster or a bureaucrat, with a sense of public duty and responsibility, transfer such land to sabotage the planned development of the scheme? Answer has obviously to be in the negative. The necessary inference is that the policy does not bear any insignia of a public purpose, but appears to be a devise to get illegal gratification or distribution of public property defeating the public purpose by misuse of public office. There is no iota of evidence placed on record that under the so-called policy, anyone from general public could equally apply for allotment of the plots or was eligible to apply for such allotment nor any such general policy was brought to our notice, The allotment has benefitted only a specified class, namely, the awardees, sub- awardees of nominees and none else. The decision by the Minister or the actions of the beaurocrats was limited to the above class which included the respondents. Legitimacy was given to the void acts of <NAME>, the erstwhile owner as well as the <ORG>. Directions were given by the Minister and the bureaucrats acted to allot the land under the very void acts. They are ultra vires the power. These acts are in utter disregard of the statute and the rules. Therefore, by no stretch of imagination it can be said to have the stamp of public policy; rather it is a policy to feed corruption and to deflect the public purpose and to confer benefits on a specified category, as described above. The question then is : whether the action of not delivering possession of the land to the respondents is on par with other persons who had possession is ultra vires act and Violates Article 14 of the Constitution? We had directed the appellants to file an affidavit explaining the actions taken regarding the allotment which came to be made to others. An affidavit has been filed in that behalf by <NAME>, Deputy Commissioner, that allotments in respect of 47 persons were cancelled and possession was not given. He listed various cases pending in this <ORG> and the High <ORG> and executing court in respect of other cases. It is clear from the record that as and when any person had gone to the court to get the orders of the <ORG> enforced, the appellant-authority resisted such actions taking consis-tent stand and usually adverse orders have been subjected to decision in various proceedings. Therefore, no blame of inaction or favouratism to others can be laid at the door of the present set up of the appellant-authority. When the Minister was the Chairman and had made illegal allotments following which possession wad delivered, no action to unsettle any such illegal allotment could have been taken then. That apart, they were awaiting the outcome of pending cases. It would thus be clear that the present set up of the bureaucrats has set new standards to suspend the claims and is trying to legalise the ultra vires actions of Minister and predecessor bureaucrats through the process of law so such so that illegal and ultra vires acts are not allowed to be legitimised nor are to be per-petuated by aid of Article 14. The apart, Article 14 has no application or justification to legitimise an illegal and illegitimate action. Article 14 proceeds on the premise that a citizen has legal and valid right enforceable at law and persons having similar fight and persons similarly cir-cumstanced, cannot be denied of the benefit thereof. Such person cannot be discriminated to. deny the same benefit. The rational relationship and legal back up are the foundations to invoke the doctrine of equality in case of persons similarly situated. If some person derived benefit by illegality and had escaped from the clutches of law, similar persons cannot plead nor court can countenance that benefit had from infraction of law and must be allowed to be retained. Can one illegality be compounded by permitting similar illegal or illegitimate or ultra vires acts? Answer is obviously no. In <NAME> case (supra), it was contended that one of the person whose land was acquired, had the benefit of exemption from the acquisition; writ petition was filed seeking similar benefit. When it was contended that it was violative of Article 14 , this court in paragraph 5 had held that "a wrong exemption under wrong action taken by the authorities will not clothe others to get the same benefit nor can Article 14 be pressed into service on the ground of invidious discrimination." <CITATION> .,  Supp SCC 457, it was held in paragraph 13, that wrong decision in favour of any party does not entitle any other party to claim the benefit oh the basis of the wrong decision. In that case, one of the items was excluded from the schedule, by wrong decision, from its purview. It was contended that authorities could not deny benefit to the appellant, since he stood on the same footing with excluded company. Article 14 , therefore, was pressed into service. This <ORG> had held that even if the grievance of the appellant was well founded, it did not entitle the appellant to claim the benefit of the notification. A wrong decision in favour of any particular party does not entitle another party to claim the benefit on the basis of the wrong decision. Therefore, the claim for exemption on the anvil of Article 14 was rejected. In <ORG> v, <NAME>,  1 SCC 745, allotment of the sites was subject matter under several proceedings in the High <ORG>; ultimately some persons had the benefit of allotment while others were denied of the same. When Article 14 was pressed into service, this <ORG> in paragraph 8 at page 750 had held, that the basis of the principle, if it can be called one, on which the writ petition had been allowed to be taken, was unsustainable in law and indefensible in principle. The mere fact that the respondent- authority had passed a particular order in the case of another person similarly situated, can never be the ground for issuing a writ in favour of petitioner on the plea of discrimination. The order in favour 6f the other person might be legal and valid or it might not be. That has to be investigated first before it can be directed to be followed in the case of petitioner. If the order in favour of the other person is found to be contrary to law or not warranted in the facts and circumstances of his case, it is obvious that such illegal or unwarranted order could not be made the basis of issuing a writ compelling the respondent-authority to repeat the illegality to cause another unwar-ranted order. The extraordinary and discretionary power of the High <ORG> under Article 226 cannot be exercised for such a purpose. A host of other decisions in that context have laid the same principle. It is not necessary to burden the judgment any further. Suffice to hold that the illegal allotment founded upon ultra vires and illegal policy of allotment made to some other persons wrongly, would not form a legal premise to ensure it to the respondent or to repeat or perpetuate such illegal order, nor could it be legalised. In other words, judicial process cannot be abused to perpetuate the illegalities. Thus considered, we hold that the High <ORG> was clearly in error in directing the appellants to allot the land to the respondents: It is then contended that the respondents have been deprived of right to apply for allotment of a plot of land in this or any other scheme right from 1970, in view of the long lapse of time and the escalation of the prices, it would be impossible for the respondents to purchase any site. To permit the authorities to cancel the allotment made in favour of the respondents Would cause great injustice. Therefore, it is not a fit case for this <ORG> to interfere under Article 136. We have given our considered thought to the fervent and persuasive plea of <NAME> There are two aspects of the matter. The first is that this <ORG> has the duty to correct all obvious ultra vires or illegal exercise of power or misuse of the same. Failure to do so send wrong signals that the court legitimise wrong actions. There is, however, force in the conten-tion of <NAME> that if allotments would be cancelled by this <ORG>, it would be virtually impossible for the respondents to acquire residential plots any where now in a city like Jaipur in view of the great increase in prices of land in the meantime. We have not been able to overlook or ignore this facet of the case; more so, because it may be that the respon-dents herein had not obtained the allotments by taking recourse to any illegal means. So, we have felt persuaded to agree with <NAME> that we may not invoke our power under Article 136 to undo the impugned order of the High <ORG>, even if the same be illegal, according to us. So, we have decided not to disturb the direction of the High <ORG>, as a very special case. We would, however, modify the same in two respects. First, the respondents would be given allotment in some other scheme. Secondly, the area of the land to be allotted would be uniform. In similar cases, this <ORG> has favoured uniformity as regards the area. As the plot would be needed for residential purpose we think an area of 250 sq. yds. would be enough and proper. We therefore order for an allotment of plot measuring about 250 sq. yds. to each of the two respondents in some other scheme of the <ORG>. This would, however, be at the rate which was prevailing when the allotments were first made tp them. Since we laid down the law for the first time, we have hot interfered with the direction of the High <ORG> but have suitably modified it. This direction, therefore, will not be used as a precedent. Appeals arising out of SLP(C) Nos. 20857/93, 20936/93 an CC No. 25107/94 are disposed of accordingly. Appeals arising out of SLP(C) No. 2492/90, which is by <NAME> against the judgment of the High <ORG> in <NAME> and connected cases is, however, dismissed. There would be no order at to costs.


CASE NO.: Appeal (civil) 3112 of 1990 Transfer Case (civil) 3 of 1998 PETITIONER: STATE OF A.P. Vs. RESPONDENT: <ORG> & ORS. DATE OF JUDGMENT: 22/04/2002 BENCH: <ORG>, R.C.Lahoti, <NAME>, <NAME> & <NAME> JUDGMENT:

<NAME>, J.

<ORG> at Hyderabad has, by its impugned judgment dated April 11, 1990, allowed the writ petition filed by the respondent <ORG> (hereinafter '<ORG>', for short) and declared that the levy of duty by the State of Andhra Pradesh on the sales of electrical energy generated by the Corporation-respondent No.1 at its thermal power station set up at Ramagundam, within the State of Andhra Pradesh, and sold to <ORG> of Karnataka, Kerala, Tamil Nadu and the State of Goa in pursuance of contracts of sales occasioning inter-State movement of electricity is incompetent and outside the power of <ORG>. Consequently, the tax levied and collected has also been held to be without authority of law, hence liable to be refunded in accordance with law. On a prayer made by the learned Advocate General on behalf of the State of Andhra Pradesh, <ORG> certified that the case involves a substantial question of law as to the interpretation of Constitution under Article 132. The appeal has been filed pursuant to the certificate so granted by <ORG>. On 4.10.1991, a bench of two learned Judges directed the appeal to be placed for hearing before a Constitution Bench, as required by Clause (3) of Article 145 of the Constitution.

At a point of time when this Court was seized of the appeal filed by the state of Andhra Pradesh, <ORG> moved a petition under Article 139A of the Constitution seeking withdrawal of Writ Petition No.1941 of 1996 <ORG> Vs. State of Madhya Pradesh & Others pending in <ORG> at Jabalpur to this Court. The prayer was allowed vide order dated 13.10.1997 and on receipt of the records from <ORG> the same has been registered here as T-C-3/1998.

The State of Madhya Pradesh and newly formed State of Chhattisgarh with effect from 1.11.2000, during the pendency of the petition were noticed and the parties thereto have been heard analogously with the hearing in C.A.No.3112/1990. However, for convenience sake we will refer to States of Madhya Pradesh and Chhattisgarh as State of M.P. only as admittedly until the formation of new State the two power stations in question were situated therein only.

Facts in C.A. No.3112/1990 Andhra Pradesh Electricity Duty Act, 1939 provides for levy of duty on certain sales and consumption of electricity by licensees in the State of Andhra Pradesh. The definition of the term 'licensee' specifically includes <ORG> (respondent No.1) or any other <ORG> engaged in the business of supplying energy. Section 3 of the Act is the charging section, the relevant part whereof reads as under:-

"3. Levy of a duty in certain sales of electrical energy.__ (1) Save as otherwise provided in sub- section (2), every licensee in the State of Andhra Pradesh shall pay every month to <ORG> in the prescribed manner, a duty calculated at the rate of four paise per unit of energy, on and in respect of all sales of energy, except sales to <ORG> for consumption by that Government or sales to <ORG> or a railway company operating any railway for consumption in the construction, maintenance or operation of that railway effected by the licensee during the previous month, at a price of more than twelve paise per unit and on and in respect of all energy which was consumed by the licensee during the previous month for purposes other than those connected with the construction, maintenance and operation of his electrical undertaking and which, if sold to a private consumer under like conditions, would have fetched a price of more than twelve paise per unit.

Provided that no duty under this sub-section shall be payable on and in respect of sale of energy effected:-

(a) by <ORG> to any other licensee;

(b) by <ORG> to <ORG>."

A bare reading of the provision shows that duty is leviable at the prescribed rate on 'all sales of energy' effected by the licensee during the previous month at a price of more than 12 paise per unit. Duty is also leviable on all energy consumed by the licensee. There are certain categories of sales and consumption saved and excluded from what would otherwise have been dutiable. However, in the present case, we are not concerned with those exclusions, nor with levy of duty on consumption. The limited question arising for our consideration is __ whether sales of energy by <ORG>, the respondent No.1, to several <ORG> situated outside the State of Andhra Pradesh and to the State of Goa, attract the incidence of taxation under Section 3 of the Act.

According to the facts found by <ORG>, <ORG>, a Government Company, wholly owned by <ORG>, has set up several super thermal power stations in different parts of the country normally located near coal-pit heads. One such super thermal power station is set up in Ramagundam in Karimnagar District of the State of Andhra Pradesh. There are various transmission lines and sub-stations through which the power generated at Ramagundam station is transmitted to the purchasers. The power generated is fed into the southern grid and is made available to the several <ORG> and the State of Goa. These facts are not in controversy and sufficient to be taken note of for the purpose of this appeal. During the course of hearing, by reference to certain documents, it was sought to be pointed out where the meters are located __ within the State of M.P. or within the territories of buyer states or at both the places, by reference to reading whereof the quantum of energy sold, exported or imported is fixed and the price calculated. We do not propose to state the facts and contending submissions in that regard in details as it is unnecessary.

The controversy centres mainly around the question as to under which entry Andhra Pradesh Electricity Duty Act, 1939 is covered and whether the sales of electricity by <ORG>, the respondent No.1, to <ORG> situated outside the State of Andhra Pradesh and to the State of Goa, can be construed as inter-State sale or intra- State sale.

Facts in T-C-3/98 The relevant facts of this writ petition are briefly set out in what follows. The erstwhile <ORG> enacted the CP and Berar Electricity Duty Act, 1949 which having been adapted in the State of Madhya Pradesh has come to be known as M.P. Electricity Duty Act, 1949 and extends to the whole of Madhya Pradesh. The Preamble to the Act, as amended by <ORG>, provides that it is an Act for the levy of duty on sale or consumption of electrical energy. The expression "distributor of electrical energy" is defined in Clause (b) of Section 2 to specifically include therein <ORG>. Section 3 provides that every distributor of electrical energy and every producer shall, subject to certain exceptions, pay every month to <ORG> a duty calculated at the rates specified in the table appended thereto on the units of electrical energy sold or supplied to a consumer or consumed by himself for his own purposes or for purposes of his township or colony during the preceding month. The table appended to Section 3 prescribes different rates of duty depending on the purpose for which electrical energy is sold, supplied or consumed, the details whereof are not relevant for our purpose. There is yet another legislation, namely, the Madhya Pradesh Upkar Adhiniyam 1981 (No.1 of 1982) which provides for levy of certain cesses. Sub-section (1) of Section 3 thereof provides that every distributor of electrical energy shall pay to <ORG> an energy development cess at the rate of certain paise per unit on the total units of electrical energy sold or supplied to a consumer or consumed by himself or his employees during any month. <ORG> has two power projects located in the State of Madhya Pradesh (i) Korba Super Thermal Power Station at Pragati Nagar, District Bilaspur, known as Korba Station (presently in the State of Chhattisgarh) and (ii) Vindhyachal Super Thermal Power Station situated at Vindhya Nagar, District Sidhi of Madhya Pradesh known as Vindhyachal Station. The electricity generated by it at these two stations, is fed into Northern grid and supplied to several States outside the State of Madhya Pradesh pursuant to contracts entered into between the parties, that is, the seller and the buyers. On 30.11.1994, the Chief Engineer (Electricity Duty) and Chief Electrical Inspector, <ORG> issued a letter annexed by a tabulated statement raising a demand of Rs.2,74,01,59,535/28 paise for the period commencing October, 1984 and expring March, 1996. The demand is on account of electricity duty at the rate of 2 paise per unit and cess at the rate of 1 paise per unit calculated on the units sold to <ORG> of other States.

In the counter-affidavit on behalf of the States of Madhya Pradesh and Chhattisgarh reliance has been placed on the definition of 'consumer' engrafted into the M.P. Electricity Duty Act, 1949 by M.P. Act No.46 of 1984 with effect from 1.10.1984 which reads as under:-

"Consumer" means any person who receives electrical energy sold or supplied by a distributor of electrical energy or a producer and includes a person receiving electrical energy in bulk for onward distribution.

By the same amendment "distributor of electrical energy" was defined so as to include therein <ORG>, as already stated. It is admitted by the States of M.P. and Chhattisgarh that the power generated at the two power stations is sold and supplied to various electricity boards/electricity departments situated in other States but as the generating stations are located in the State of Madhya Pradesh the sale is not an inter-State sale. The situs of sale is within the State of M.P. Transaction of sale is complete in the State of M.P. and the buyers carry the electricity to their respective States when property in electricity sold has already passed to them. Reliance has been placed on the several clauses of the bulk power supply agreement entered into between <ORG> and buyers, one of which entered into between <ORG> and <ORG> (<ORG>) having its office at Andheri East, Bombay, has been filed and quoted in the counter affidavit, according to which (a) Metering is within the State of M.P.; (b) Transmission loss from Madhya Pradesh to the Home State of the buyer is to the account of the buyer; (c) Wheeling loss from Madhya Pradesh to the Home State of the buyer to the account of the buyer; (d) Transmission charges for transmission from Madhya Pradesh to the Home State of the buyer to the account of the buyer; (e) Wheeling charges from Madhya Pradesh to the Home State of the buyer to the account of the buyer; (f) Delivery of <ORG> in Madhya Pradesh; (g) <ORG> ceases to have control over the electrical energy once it is delivered to <ORG> within State of M.P.; (h) Payment made by the Bulk Beneficiaries is in respect of quantum of electrical energy supplied/delivered at metering point in State of M.P. Similar are the agreements entered into with other outside-State buyers.

It is not disputed that the power generated at the abovesaid two stations is fed into transmission system of <ORG> and the transmission systems of other bulk power beneficiaries wherefrom the buyers draw the power purchased by them. Great emphasis was laid on the fact that the points for metering are installed within the State of Madhya Pradesh. It was submitted that the transaction under scrutiny in the case of State of M.P. is different from the one under scrutiny in the case of State of Andhra Pradesh.

Relevant Provisions We proceed to notice the relevant provisions of the Constitution and other statutory provisions.

Changes of far reaching implications were made in the Constitution by the Constitution (Sixth Amendment) Act, 1956 with effect from September 11, 1956. To enable a convenient comparative reading, we set out the provisions as under:-

"246. Subject-matter of laws made by <ORG> and by the Legislatures of States.__ (1) Notwithstanding anything in clauses (2) and (3), <ORG> has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the "Union List").

(2) Notwithstanding anything in clause (3), <ORG> and, subject to clause (1), the <ORG> of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the "Concurrent List").

(3) Subject to clauses (1) and (2), the <ORG> of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List').

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List."

Seventh Schedule List I Union List xxx xxx xxx xxx 92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.

(inserted by Sixth Amendment) List II - State List Entry 52 Taxes on the entry of goods into a local area for consumption, use or sale therein.

Entry 53 Taxes on the consumption or sale of electricity.

Entry 54 :

(Before Sixth Amendment)

54. Taxes on the sale or purchase of goods other than newspapers (After Sixth Amendment)

54.Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.

Before 11.9.56 After 11.9.56

269.The following duties and taxes shall be levied and collected Taxes levied and by the Government of collected by the India but shall be assig-

Union but assig- ned to the States in the ned to the States. manner provided in clause (2), namely :-

(a) duties in respect of succession to property other than agricultural land;

(b) estate duty in respect of property other than agricultural land;

(c) terminal taxes on goods or pass-

ngers carried by railway, sea or air.

(d) taxes on railway fares and freights;

(e) taxes other than stamp duties on transactions in stock-exchanges and future markets;

(f) taxes on the sale or purchase of newspapers and on advertise-

ments published therein.

(2) The net proceeds in any financial year of any such duty or tax, except in so far as those proceeds represent proceeds attributable to States specified in Part C of the first Schedule, shall not form part of <ORG>, but shall be assigned to the States within which that duty or tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by <ORG> by law.

269.(1)The following duties and taxes shall be levied and collected Taxes levied and by the Government of collected by the India but shall be assig-

(c) terminal taxes on goods or passn-

gers carried by railway, sea or air;

ments published therein.

(g) taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.

(h) taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-

State trade or commerce;

(2) The net proceeds in any financial year of any such duty or tax, except in so far as those proceeds represent proceeds attributable to Union territories shall not form part of <ORG>, but shall be assigned to the States within which that duty or tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by <ORG> by law.

(3)Parliament may be law formulate principles for determining when a sale or purchase of or consignment of goods takes place in the course of inter-State trade or commerce.

Before 11.9.56.

After 11.9.56.

286. (1) No law of a State shall impose or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place__

(a)

(b) (a) outside the State; or

(b) (b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation __ For the purposes of sub-

clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.

(2) Except in so far as <ORG> may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce:

Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951.

(3) No law made by <ORG> imposing, or authorizing the imposition of, a tax on the sale or purchase of any such goods as have been declared by <ORG> by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.

286. (1) No law of a State shall impose, or authorize the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place__

(a)

(b) (a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

* * * * * (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or authorizes the imposition of,. __

(a) a tax on the sale or purchase of goods declared by <ORG> by law to be of special importance in inter-State trade or commerce; or

(b) (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366 , be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as <ORG> may be law specify.

Out of the several changes introduced by the Constitution (Sixth Amendment) Act, only a few are relevant and material for our purpose. In Article 269 , Sub-Clause (g) was added in clause (1) and a new Clause (3) was added. The Forty-Sixth Amendment substituted the words 'sale or purchase of, or consignment of, goods' in place of 'sale or purchase of goods' as was occurring in Clause (3) inserted by Sixth Amendment. Such Forty Sixth Amendment has no relevance for the present controversy. In Article 286 subsequent to the Sixth Amendment, Clause (3) has been brought in the present form by Forty

-Sixth Amendment which again is not relevant for the present controversy. What is relevant for our purpose is the deleting of former explanation appended to Clause (1) and substitution of Clause (2) in the present form in Article 286 by Sixth Amendment.

As to the several relevant entries quoted hereinabove, it may be noted that Entry 92A in List-I of Seventh Schedule was added by Sixth Amendment. Entry 54 in List-II in the present form was substituted by Sixth Amendment. Entries 52 and 53 in List-II remain unaffected by Sixth Amendment.

The Central Sales Tax Act , 1956 was enacted to formulate principles for determining __ when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sale of goods in the course of inter-State trade or commerce etc., as the Preamble to the Act states. Clause (d) of Section 2 defines 'goods' (unless the context otherwise requires) to include all materials, articles, commodities and all other kinds of moveable properties, but not including newspapers, actionable claims, stocks, shares and securities. Section 3 of the Act, placed in Chapter II thereof, provides as under:-

"CHAPTER II FORMULATION OF PRINCIPLES FOR DETERMINING WHEN A SALE OR PURCHASE OF GOODS TAKES PLACE IN THE COURSE OF INTER-STATE TRADE OR COMMERCE OR OUTSIDE A STATE OR IN THE COURSE OF IMPORT OR EXPORT

3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.__ A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase__

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation 1.__ Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2. __ Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State."

At this juncture it would be appropriate to have a view of the legislative history. Explanation to clause (1) of Article 286 generated some controversy which led to the constitution of a larger Bench (7- judge strength) in <ORG> - 1955 (2) SCR 603. The larger bench ruled by majority that an inter-<ORG> sale or purchase continues to be so irrespective of the <ORG> where the sale can be held to be located under the general law or by the fiction created by the explanation appended to clause (1) of Article 286. The situs of a sale or purchase is wholly irrelevant so far as its inter-<ORG> character is concerned. The larger bench further ruled that until <ORG> by law made in exercise of the powers vested in it by clause (2) of Article 286 provides otherwise, no <ORG> can impose or authorize the imposition of any tax on sale or purchases of goods when any sales or purchases take place in the course of inter-<ORG> trade or commerce. To put in other words, it was held that explanation to Article 286(1) as it existed prior to the Sixth Amendment could not be applied for the purpose of interpreting clause (2) of Article 286.

The issue attracted the attention of <ORG> 1953-54 (<ORG>, for short). In its report, Volume III, Chapter 4, vide para 30, the <ORG> observed, inter alia, that Clause (1) of Article 286 links the sales-tax to one of the two parties, viz., the consumer and lays down that no <ORG> shall levy tax on a sale which results in delivery for consumption in another <ORG>. While making recommendations for consideration of future policy regarding sales tax, it opined that the system should contain provisions whereby certain constitutional restrictions on the <ORG>s and certain powers of levy and control by the <ORG> are introduced. The <ORG> observed that the Constitution, in effect, divides sales of goods in India into (a) goods delivered for consumption in particular <ORG>s and (b) other sales, which dichotomy is imperfect from the point of view of tax administration. It suggested division, both useful and effective, of all sales of goods into two, namely (a) those in the course of inter-<ORG> trade and commerce, and (b) those not in the course of such trade and commerce; while the former should be the sphere of the <ORG> and the latter in the sphere of the <ORG>s. It appears that so far as the electricity duty is concerned, though the subject was separately dealt with by the report, in the then circumstances the <ORG> did not comprehend inter-<ORG> sale of electricity and, therefore, did not make any recommendation specifically in that regard. However, that does not make any difference.

Pursuant to the recommendations made by <ORG> the <ORG> incorporated certain amendments in the Constitution by enacting the Constitution (Sixth Amendment) Act, 1956 which we have already noticed briefly.

We have very briefly stated the legislative history for it has been noticed in details in a recent <ORG> decision of this Court in 20th Century Finance Corporation Ltd. & <ORG>. Vs. State of Maharashtra (2000) 6 SCC 12 and earlier in <NAME> etc. Vs. Union of India & <ORG>. (1983) 3 SCC 529, and therefore, we have deemed it not necessary to repeat or re-state the same in details. The Central Sales Tax Act , 1956 was enacted by the <ORG> as authorized by the Constitution. We have already reproduced Section 3 of the CST Act hereinabove. By Section 6 of the Act <ORG> was empowered to levy tax on all sales of goods effected by a dealer in the course of inter-State trade or commerce. However, by the Central Sales Tax (Amendment) Act , 1972, which came into force with effect from 1.4.1973, the language of Section 6 was suitably amended so as to confine the levy of tax under Section 6 on all sales "of goods other than electrical energy". The Statement of Objects and Reasons for this amendment was so stated "Exemption from Central sales-tax Act on inter-State sales of electrical energy is now dependent on the exemption from tax by a State Government on local sales of electrical energy. It is now proposed to provide specifically that inter-State sale of electrical energy would not be liable to Central sales tax." (see Gazette of India Extraordinary Part II, at page 522). The purpose behind referring to this amendment and the SOR is that in the understanding of the <ORG> also the inter-State sale of electrical energy was liable to central sales-tax under Section 6 of the Act and but for the amendment such tax was capable of being levied by <ORG>.

Electricity, what it is Before we deal with the constitutional aspects let us first state what electricity is, as understood in law, and what are its relevant characteristics. It is settled with the pronouncement of this Court in Commissioner of Sales Tax, Madhya Pradesh, <NAME> Vs. <ORG>, Jabalpur- 1969 (2) SCR 939 that electricity is goods. The definition of goods as given in Article 366 (12) of the Constitution was considered by this Court and it was held that the definition in terms is very wide according to which "goods" means all kinds of moveable property. The term "moveable property" when considered with reference to "goods" as defined for the purpose of sales-tax cannot be taken in a narrow sense and merely because electrical energy is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be moveable property when it has all the attributes of such property. It is capable of abstraction, consumption and use which if done dishonestly is punishable under Section 39 of the Indian Electricity Act, 1910. If there can be sale and purchase of electrical energy like any other moveable object, this Court held that there was no difficulty in holding that electric energy was intended to be covered by the definition of "goods". However, <NAME>, J. speaking for three- Judge Bench of this Court went on to observe that electric energy "can be transmitted, transferred, delivered, stored, possessed etc. in the same way as any other moveable property". In this observation we agree with <NAME>, J. on all other characteristics of electric energy except that it can be 'stored' and to the extent that electric energy can be 'stored', the observation must be held to be erroneous or by oversight. The science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored.

Another significant characteristic of electric energy is that its generation or production coincides almost instantaneously with its consumption. To quote from <NAME>'s Law Lexicon (Second Edition, 2000) __ 'Electricity in physics is "the name given to the cause of a series of phenomena exhibited by various substances, and also to the phenomena themselves." Its true nature is not understood. Imperial Dict. (quoted in <NAME> v. <ORG>, 54 Wis. 433, 442, 11 NW 894, where the court, quoting from the same authority, said, "We are totally ignorant of the nature of this cause whether it be a material agent or merely a property of matter. But as some hypothesis is necessary for explaining the phenomena observed, it has been assumed to be a highly subtle, imponderable fluid, identical with lightning, which pervades the pores of all bodies, and is capable of motion from one body to another.' This characteristic quality of electric energy was judicially noticed in <ORG>. Vs. State of Kerala & Ors. (1996) 7 SCC 637. Vide para 25 this Court has noted, "Continuity of supply and consumption starts from the moment the electrical energy passes through the meters and sale simultaneously takes place as soon as meter reading is recorded. All the three steps or phases (i.e. sale, supply and consumption) take place without any hiatus. It is true that from the place of generating electricity, the electricity is supplied to the sub-station installed at the units of the consumers through electrical higher-tension transformers and from there electricity is supplied to the meter. But the moment electricity is supplied through the meter, consumption and sale simultaneously take place." "as soon as the electrical energy is supplied to the consumers and is transmitted through the meter, consumption takes place simultaneously with the supply. There is no hiatus in its operation. Simultaneously sale also takes place." These properties of electricity as goods are of immense relevance as we would state hereafter.

List II, Entries 53 and 54, how to be read:

We now come to the question on the interpretation of Entry 53 in List II of Seventh Schedule. It provides for taxes on the consumption or sale of electricity. The word 'sale' as occurring in Entry 52 came up for the consideration of this <ORG> in <ORG> Vs. The Belgaum Borough Municipality 1963 Supp.(2) SCR 216. It was held that the act of sale is merely the means for putting the goods in the way of use or consumption. It is an earlier stage, the ultimate destination of the goods being "use or consumption". We feel that the same meaning should be assigned to the word 'sale' in Entry 53. This is for a fortiorari reason in the context of electricity as there can be no sale of electricity excepting by its consumption, for it can neither be preserved nor stored. It is this property of electricity which persuaded this <ORG> in <ORG> case (supra) to hold that in the context of electricity, the word 'supply' should be interpreted to include sale or consumption of electricity. Entry 53 should therefore be read as 'taxes on the consumption or sale for consumption of electricity'.

With these two things in mind, namely, that electricity is goods, and that sale of electricity has to be construed and read as sale for consumption within the meaning of Entry 53, the conflict, if any, between Entry 53and Entry 54 ceases to exist and the two can be harmonized and read together. Because electricity is goods it is covered in Entry 54 also. It is not disputed that duty on electricity is tax. Tax on the sale or purchase of goods including electricity but excluding newspapers shall fall within Entry 54 and shall be subject to provisions of Entry 92A of List I. Taxes on the consumption or sale for consumption of electricity within the meaning of Entry 53 must be consumption within the State and not beyond the territory of the State. Any other sale of electricity shall continue to be subject to the limits provided by Entry 54. Even purchase of electricity would be available for taxation which it would not be if electricity was not includible in the meaning of term 'goods'. A piece of legislation need not necessarily fall within the scope of one entry alone; more than one entry may overlap to cover the subject-matter of a single piece of legislation. A bare consumption of electric energy even by one who generates the same may be liable to be taxed by reference to Entry 53 and if <ORG> may choose to impose tax on consumption of electricity by the one who generates it, such tax would not be deemed to be a tax necessarily on manufacture or production or a duty of excise, as held by Constitution Bench in <ORG>, Birlanagar, Gwalior Vs. State of Madhya Pradesh 1962 Supp.(1) SCR 282. A mere consumption of goods (other than electricity), not accompanied by purchase or sale would not be taxable under Entry 54 because it does not provide for taxes on the consumption and Entry 53 does not speak of goods other than electricity. Thus in substance Entries 53 and 54 can be and must be read together and to the extent of sale of electricity for consumption outside the State, the electricity being goods, shall also be subject to provisions of Entry 92A of List I. This, in our opinion, is the best way of reading the two entries. In C.P. Motor Spirit Act re., AIR 1939 FC 131, it was held that two entries in the lists may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this <ORG> to reconcile the entries and bring about harmony between them. The <ORG> should strive at searching for reasonable and practical construction to seek reconciliation and give effect to all of them. If reconciliation proves impossible the overriding power of <ORG> operates and prevails. <NAME>, <NAME> observed "A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified by other express provisions in the same enactment, by the implication of the context, and even by considerations arising out of what appears to be the general scheme of the Act." And again he said, "an endeavour must be made to solve it, as <ORG> have said, by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying the language of the one by that of the other. If needed such a reconciliation should prove impossible, then and only then, will the non-obstante clause operate and the federal power prevail." In <ORG> Vs. The State of West Bengal & Ors., 1962 Supp (3) SCR 1, <ORG> has held that the same rules of construction apply for the purpose of harmonizing an apparent conflict between two entries in the same list.

What is inter-State sale?

It is well settled by a catena of decisions of this Court that a sale in the course of inter-State trade has three essential ingredients:

(i) there must be a contract of sale, incorporating a stipulation, express or implied, regarding inter-State movement of goods; (ii) the goods must actually move from one State to another, pursuant to such contract of sale; the sale being the proximate cause of movement; and

(iii) such movement of goods must be from one <ORG> to another <ORG> where the sale concludes. It follows as a necessary corollary of these principles that a movement of goods which takes place independently of a contract of sale would not fall within the meaning of inter-<ORG> sale. In other words, if there is no contract of sale preceding the movement of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the <ORG> and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an inter-<ORG> element. Precedents are legion; we may briefly refer to some of them. In <ORG> Vs. Deputy Commercial Tax Officer, 1977 (1) SCR 631, this Court held that when the movement of the goods from one <ORG> to another is an incident of the contract it is a sale in the course of inter-<ORG> sale and it does not matter which is the <ORG> in which the property passes. What is decisive is whether the sale is one which occasions the movement of goods from one <ORG> to another. In Union of India Vs. <ORG>, (1979) 2 SCC 242, it was observed that a sale would be an inter-<ORG> sale even if the contract of sale does not itself provide for the movement of goods from one <ORG> to another provided, however, that such movement was the result of a covenant in the contract of sale or was an incident of the contract. Similar view was expressed in <ORG> and <NAME>. Vs. Commercial Tax Officer and Others (1985) 4 SCC 173. In <ORG> Vs. The Regional Assistant Commissioner of Sales-tax, Jabalpur 1976 (4) SCC 124, after referring to <NAME> Vs. <ORG> of Orissa, (1976) 2 SCC 44, it was observed that so far as Section 3 (a) of the C.S.T. Act is concerned there is no distinction between unascertained or future goods and goods which are already in existence, if at the time when the sale takes place these goods have come into actual existence.

Effect of Entry-53, List-II, having remained unamended Having seen the properties of electricity as goods and what is inter-<ORG> sale, let us examine the effect of Entry 53, List II, having been left unamended by Sixth Amendment from another angle. Sixth Amendment did not touch Entry 53 in List-II and so the contents of Entry 53 were not expressly made subject to the provisions of Entry 92 A of List I and arguments were advanced, with emphasis, on behalf of the <ORG>s of Andhra Pradesh and Madhya Pradesh contending that such omission was deliberate and therefore the restriction which has been placed only in Entry 54 by making it subject to the provisions of Entry 92A of List I should not be read in Entry 53. It was submitted that so far as sale of electricity is concerned even if such sale takes place in the course of inter-<ORG> trade or commerce the <ORG> can legislate to tax such sale if the sale can be held to have taken place within the territory of that <ORG> or if adequate territorial nexus is established between the transaction and <ORG> legislation. For the several reasons stated hereinafter such a plea cannot be countenanced.

The prohibition which is imposed by Article 286(1) of the Constitution is independent of the legislative entries in Seventh Schedule. After the decision of larger Bench in <ORG> (supra) and Constitution Bench decision in <ORG> Vs. Asst. Commissioner of Sales Tax & <NAME>., 1955 (2) SCR 483, there is no manner of doubt that the bans imposed by Articles 286 and 269 on the taxation powers of the <ORG> are independent and separate and must be got over before a <ORG> legislature can impose tax on transactions of sale or purchase of goods. Needless to say, such ban would operate by its own force and irrespective of the language in which an Entry in List-II of Seventh Schedule has been couched. The dimension given to field of legislation by the language of an Entry in List-II Seventh Schedule shall always remain subject to the limits of constitutional empowerment to legislate and can never afford to spill over the barriers created by the Constitution. The power of <ORG> legislature to enact law to levy tax by reference to List II of the Seventh Schedule has two limitations : one, arising out of the entry itself; and the other, flowing from the restriction embodied in the Constitution. It was held in <ORG> Bombay Vs. S.R. Sarkar and <NAME>. - 1961 (1) SCR 379 (at pages 387 and 388) that field of taxation on sale or purchase taking place in the course of inter-<ORG> trade or commerce has been excluded from the competence of the <ORG> Legislature. In 20th Century Finance Corporation Limited (supra) <ORG> (majority) made it clear that the situs of the sale or purchase is wholly immaterial as regards the inter-<ORG> trade or commerce. In view of Section 3 of the Central Sales Tax, 1956 all that has to be seen is whether the sale or purchase (a) occasions the movement of goods from one <ORG> to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one <ORG> to another. If the transaction of sale satisfies any one of the two requirements it shall be deemed to be a sale or purchase of goods in the course of inter-<ORG> trade or commerce and by virtue of Articles 269 and 286 of the Constitution the same shall be beyond the legislative competence of a <ORG> to tax without regard to the fact whether such a prohibition is spelled out by the description of a legislative entry in Seventh Schedule or not.

It is well settled, and hardly needs any authority to support the proposition, that several entries in the three lists of Seventh Schedule are legislative heads or fields of legislation and not the source of legislative empowerment. [To wit, see <ORG> The State of West Bengal & Ors. (supra)]. Competence to legislate has to be traced to the Constitution. The division of powers between <ORG> and <ORG> to legislate by reference to territorial limits is defined by Article 245. The subject-matters with respect to which those powers can be exercised are enumerated in the several entries divided into three groups as three Lists of Seventh Schedule. Residuary powers of legislation are also vested by Article 248 in the <ORG> with respect to any matter not enumerated in any of the lists in Seventh Schedule. This residuary power finds reflected in Entry 97 of List I. If an Entry does not spell out an exclusion from field of legislation discernible on its apparent reading, the absence of exclusion cannot be read as enabling power to legislate in the field not specifically excluded, more so, when there is available a specific provision in the Constitution prohibiting such legislation.

It is by reference to the ambit or limits of territory by which the legislative powers vested in <ORG> and <ORG> are divided in Article 245. Generally speaking, a legislation having extra territorial operation can be enacted only by <ORG> and not by <ORG>; possibly the only exception being one where extra territorial operation of a <ORG> legislation is sustainable on the ground of territorial nexus. Such territorial nexus, when pleaded, must be sufficient and real and not illusory. In Burmah Shell Oil Storage & Distributing Co.India Ltd.(supra), which we have noticed, it was held that sale for use or consumption would mean the goods being brought inside the area for sale to an ultimate consumer, i.e. the one who consumes. In Entry 53, 'sale for consumption' (the meaning which we have placed on the word 'sale') would mean a sale for consumption within the <ORG> so as to bring a <ORG> Legislation within the field of Entry 53. If sale and consumption were to take place in different <ORG>s, territorial nexus for the <ORG>, where the sale takes place, would be lost. We have already noticed that in case of electricity the events of sale and consumption are inseparable. Any <ORG> legislation levying duty on sale of electricity, by artificially or fictionally assuming that the events of sale and consumption have taken place in two <ORG>s, would be vitiated because of extra territorial operation of <ORG> legislation.

In 20th Century Finance Corporation's case, <ORG> by reference to the definition of "tax on the sale or purchase of goods" (which too has been inserted as clause (29-A) in Article 366 by Sixth Amendment) opined that the situs of sale can be fixed either by the appropriate legislature or by Judge made law and no settled principles for determining situs of sale can be laid down. Further, the <ORG> legislature cannot by law, treat sales outside the <ORG> and sales in the course of import as "sales within the <ORG>" by fixing the situs of sales within its <ORG> in the definition of sale, as it is within the exclusive domain of the appropriate legislature, i.e. <ORG> to fix the location of sale by creating legal fiction or otherwise. The, majority has clearly opined that the <ORG> where the goods are delivered in the transaction of inter-<ORG> sale, cannot levy a tax on the basis that one of the events in the chain has taken place within the <ORG>; so also where the goods are in existence and available for the transfer of right to use, there also that <ORG> cannot exercise power to tax merely because the goods are located in that <ORG>. Then it was observed that in case where goods are not in existence or where there is an oral or implied transfer of the right to use the goods, such transactions may be effected by the delivery of the goods in which case the taxable event would be on the delivery of goods. However, we are dealing with the case of electricity as goods, the property whereof, as we have already noted, is that the production (generation), transmission, delivery and consumption are simultaneous, almost instantaneous. Electricity as goods comes into existence and is consumed simultaneously; the event of sale in the sense of transferring property in the goods merely intervenes as a step between generation and consumption. In such a case when the generation takes place in one <ORG> wherefrom it is supplied and it is received in another <ORG> where it is consumed, the entire transaction is one and can be nothing else excepting an inter-<ORG> sale on account of instantaneous movement of goods from one <ORG> to another occasioned by the sale or purchase of goods, squarely covered by Section 3 of C.S.T. Act.

Sale of electricity by <ORG> In both the cases before us, contracts have been entered into between parties to the transaction, that is, the sellers and the buyers (in other States) prior to the generation of electricity. The <ORG> generates electricity and pursuant to these contracts supplies the same from its power stations situated in the States of A.P. or M.P. to the buyers in other States where it is received and consumed. There is no hiatus between generation, sale, supply, transmission, delivery and consumption. The inter-State movement of electricity is pursuant to contracts of sale. Such sales can be held only as inter-State sales.

Though it may be permissible to fix the situs of sale either by appropriate <ORG> legislation or by Judge made law as held by the majority opinion in 20th Century Finance Corporation case, we would like to clarify that none of the two can artificially appoint a situs of sale so as to create territorial nexus attracting applicability of tax legislation enacted by any <ORG> <ORG> and tax an inter-<ORG> sale in breach of Section 3 of the CST Act read with Articles 286 (2) and 269(1) and (3) of the Constitution. No <ORG> legislation, nor any stipulation in any contract, can fix the situs of sale within the <ORG> or artificially define the completion of sale in such a way as to convert an inter-<ORG> sale into an intra-<ORG> sale or create a territorial nexus to tax an inter-<ORG> sale unless permitted by an appropriate central legislation. But this is exactly what the definition of 'consumer' in Clause (2)(a) of the M.P. Electricity Duty Act, 1949 has done. The definition of consumer has been artificially extended to include any person who receives electrical energy (without regard to its consumption) and also to include a person who, receiving the electrical energy in bulk, forwards it onwards for distribution, (without regard to the fact whether it transmitted outside the <ORG> and whether the electricity is or is not consumed within the <ORG>). The same definition has been adopted in M.P. Upkar Adhiniyam, 1981. This definition of consumer shall have to be read down as including within it only such persons who receive the electricity for consumption or distribution for consumption within the <ORG>. Without such reading down, the definition of 'consumer' would be rendered ultra vires of Articles 286 and 269 of the Constitution read with Section 3 of the Central Sales Tax Act, 1956.

Consequences on free flow of trade Yet another reason why we cannot accept the line of reasoning advanced on behalf of the States of Andhra Pradesh and Madhya Pradesh is that the same runs counter to the scheme of constitutional provisions and specially the Sixth Amendment. As has been found by the Division Bench of Andhra Pradesh High Court in its impugned judgment, if the reasoning suggested on behalf of the State of A.P. was accepted, the State where the dealer supplying the electricity is located and the electricity originates for sale, as also the States in which the purchaser of electricity is located and it is delivered, shall both subject the electrical energy to taxation, by relying on the theory of territorial nexus. Such a situation would be the one which was obtaining in the country with respect to sales tax prior to coming into force of the Constitution and which led to complications and difficulties in administration of sales tax legislation and therefore, was taken care of by the Sixth Amendment. Such multiple taxation would result in hampering free movement of electricity between the States, and therefore, would be prejudicial to freedom of trade, commerce and intercourse throughout the territory of India, and for the unity and integrity of the country. That would give rise to the same situation which was sought to be remedied by the Constitution and the Sixth Amendment.

On behalf of the States of A.P. and M.P., it was submitted that subject of electricity has been specifically dealt with by Articles 287 and 288 of the Constitution and by implication the Articles, other than 287 and 288, should be read as not dealing with electricity. This submission is stated only to be rejected. These articles make some provisions for electricity and water or electricity in the special context dealt with by those articles and do not exclude applicability of other articles where electricity has been dealt with as goods.

For the foregoing reasons, we are of the opinion that no fault can be found with the judgment of <ORG> which is affirmed and Civil Appeal No. 3112 of 1990 is dismissed with costs. Civil Writ Petition T.C. No.3 of 1998 is allowed with costs and the demand raised by the Chief Electrical (Electricity Duty) and Chief Electrical Inspector, <ORG> vide its letter dated 30.11.1995 is directed to be quashed.

. . . . . . .. . . . . . . . . . . . . . . . . . . . . CJI . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .J.

( R.C. Lahoti ) . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .J.

( N. Santosh Hegde ) . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .J.

( Ruma Pal ) . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .J.

( <NAME> ) April 22, 2002.