PETITIONER: <ORG>. Vs. RESPONDENT: PT. RAM SARUP.(and connected appeal) DATE OF JUDGMENT: 24/10/1956 BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. AIYYAR, T.L. VENKATARAMA DAS, S.K. MENON, P. GOVINDA CITATION: 1957 AIR 82 1956 SCR 916 ACT: Industrial Dispute-Application for permission to dismiss workmen-Jurisdiction of Appellate <ORG>-Scope of enquiry- Interim order of suspension by employer pending enquiry and receipt of permission-If amounts to a lock-out-If amounts to punishment -Prior Permission of <ORG>, if required-Enquiry by General Manager-Non-co-operation by workmen-Enquiry not held within the prescribed time-If a breach of Standing Orders Industrial Disputes (Appellate <ORG>) Act (XLVIII of 1950), ss. 22, 23-Industrial Disputes Act (XIV of 1947), s. 33(a)(b)--Standing Orders, cl. L 12. HEADNOTE: Seventy-six workers of the appellant company resorted to a tools-down strike in sympathy with a dismissed -co-worker. Repeated attempts to persuade them to resume work having failed the General Manager suspended them until further orders. After midday recess the Management sought to prevent the workers from entering the mills but they violently entered the mills and the Police had to be called in by the company to keep the peace. Charges of misconduct and insubordination were thereafter framed against the workers and they were called upon to show cause in an open enquiry to be held by the General Manager why disciplinary action should not be taken against them and the order of suspension was extended pending the enquiry. The workers took up an attitude of total non-cooperation and the atmosphere was tense with the result that the enquiry could not be held within 4 days. The Management decided to dismiss the workers as a result of the enquiry but as an appeal was then pending before <ORG>, the company applied to it under s. 22 -of the Industrial Disputes (Appellate <ORG>) Act of 1950 for permission to do so and extended the period of suspension pending receipt of such permission. The workmen in their turn filed an application under a. 23 of the Act to <ORG> for requisite action to be taken against the company for having contravened s. 22(b) of the Act by resorting to an illegal lock-out and thereby punishing them without its prior permission. <ORG> held that the company had not held the enquiry within the time specified by el. L 12 of the Standing Orders and on that ground dismissed its application. It allowed the application of the workers holding that the wholesale suspension of the workers and preventing them from continuing work. after the mid-day recess amounted to a lock-out 917 and punishment by the company and contravened s. 22(b) of the Act and directed their reinstatement. The company appealed. It was contended on behalf of the company that there had been neither a breach of el. L 12 of the Standing Orders nor a contravention of s. 22(b) of the Act. Hold, that the contentions were correct and the appeals must succeed. The conduct of the company did not come within the definition of a lock-out and even if there was any lock-out it was in consequence of the illegal strike resorted to by the workmen and as such could not be deemed to be illegal by virtue of s. 24(3) of the Industrial Disputes.Act, 1947. Moreover, even assuming that the company declared an illegal lock-out it was not necessary for it to obtain the permission of <ORG> under s. 22 of the Act before it could do so. A lock-out was neither an alteration of the conditions of service within the meaning of el. (a) nor a discharge or punishment by dismissal or otherwise within the meaning of el. (b) of s. 33 of the Industrial Disputes-Act, 1947 or under s. 22 of the Industrial Disputes (Appellate <ORG>) Act, 1950 and no permission was, therefore, required for its declaration. If the lock-out was illegal the workmen had their remedy under s. 26 of the Industrial Disputes Act and in any event they had the right to have the dispute referred for adjudication. <ORG>, Calcutta v. <ORG> ( 11 L.L.J. 344) and <ORG>, Asansol v. <ORG> ( L.A.C. 219), approved. The Company having been declared a public utility concern, the workers had no right to go on strike without giving a notice in terms of s. 22(1) of the Industrial Disputes Act, 1947 and the tools-down strike resorted to by them was illegal and the company was within its rights in suspending them. <CITATION> ., ( S.C.R. 219), referred to. Mere failure to hold an enquiry within the period of four days prescribed by el. L 12 of the Standing Orders could not determine the matter before <ORG> and where, as in the instant case, the delay was due to the conduct of the workers it was sufficiently explained. Where full and free opportunity was given to the workers to be present and defend themselves in a duly notified enquiry and they failed to do so, the Management was quite within its right to come to its own conclusion as to their guilt and the punishment to be meted out to them and it was not open to the workmen thereafter to urge that such enquiry was not fair or impartial or violated the principles of natural justice. 918 There could be no punishment so long as there was no offence and any action of the employer to the detriment of the workers' interest would not amount to punishment. The law did not contemplate anything like a contingent punishment of a worker and, consequently, where there was an interim order of suspension pending an enquiry or the grant of permission by <ORG>, the question of pay for the period of such suspension depending on whether or not the permission would be granted, such suspension would not amount to punishment even where it was of an indefinite duration so as to attract the operation of s. 22 of the In- dustrial Disputes (Appellate <ORG>) Act, 1950. <ORG> and Certain Workmen, ([1952) 1 L.L.J. 554), <ORG>, ( II L.L.J. 221), <ORG> v. <NAME>, ( 11 L.L.J. 328), <ORG> v. <ORG> ( II L.L.J. 656), relied on. Under that section the only thing that <ORG> had to consider was whether a prima facie case had been made out by the employer for lifting the ban imposed by the section and if, on the materials before it, it was satisfied that there bad been a fair enquiry in the circumstances of the case and the Management had bona fide come to the conclusion that the worker was guilty of misconduct with which he had been charged and it would be detrimental to discipline and dangerous in the interests of the company to continue him in its employ, a prima facie case was made out and the <ORG> would be bound to permit the employer to punish the workman. It would be no part of its duty to judge whether the punishment was harsh or excessive, except so far it might bear on the bona fides of the Management, and could only grant the permission as sought for or refuse it and the question of the propriety of the punishment could be decided only by the appropriate <ORG> appointed by the Government for adjudicating the industrial dispute which would ensue upon the action of the management. <CITATION> , ( S.C.R. 780), <CITATION> , ( 1 S.C.R. 1241) <ORG> and Shri Alijan, ( II L.L.J. 629), R.B.S. <ORG> and <ORG>, ( II L.L.J. 787) and Assam Oil Companies' Case, ( L.A.C. 78), referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 244 and 245 of 1954.

Appeals from the judgment and order dated August 19, 1952, of <ORG> (Calcutta) at Allahabad in Miscellaneous Cases Nos, C-91 and 93 of 1952.

<NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the appellant in both appeals.

<NAME>, <NAME> and <NAME>, for respondents in both appeals. <NAME>, Attorney-General for India, <NAME> and <NAME>, for the Intervener.

1956. October 24. The Judgment of the Court was delivered by <NAME> appeals :by special leave arise out of an order of <ORG>, Lucknow Bench, by which it dismissed the application of the appellant under s. 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950, hereinafter referred to as the Act for permission to dismiss the respondents from its employ and allowed the application of the respondents under s. 23 of the Act for reinstatement.

The respondents are 76 employees of the appellant, a limited company of <ORG>, situated in village Chitauni in the district of Deoria and were working in the engineering department of the mills in the mill house, boiling-house and the workshop sections. There were disputes between the appellant and its workmen and, on the date in question, i.e., May 27, 1952, there was pending before <ORG> an appeal which was registered as Cal- 101/51. It appears that one <NAME>, an employee of the appellant, had been dismissed by it sometime prior thereto and he had been inciting the workmen to make common cause with him, and, at a meeting held the previous night, some sort of action had been decided upon. When the workmen of the appellant entered the mills on the morning of May 27, 1952, these 76 workmen, though they entered their respective sections of the engineering department, did not commence any work from 7 a.m. as they should have done. The sectional engineers in-charge asked these workmen as to why they did not commence their work and became a ware of their intention to resort to a tools-down strike. They reported the fact to the Chief Engineer who sent a slip to the General Manager informing him that the workers had gone on a tools down strike. The General. Manager thereupon personally went to the workshop, mill house and -the boiling house and asked these workmen not to resort to such strike but the latter did not pay any heed to his advice. -The General Manager then asked the Chief Engineer to persuade these workmen to commence the work, give them time for about 2 hours till 10-30 a.m. and report to him if, in spite of his persuasions, they did not commence work. The persuasions of the Chief Engineer and also of the section engineers proved of no avail and the 76 workmen persisted in their attitude with the result that the section engineers made their reports to the General Manager through the Chief Engineer giving the names of the workmen belonging to their respective sections who had resorted to the tools-down strike with effect from 7 a.m. that day. These reports were endorsed by the Chief Engineer and passed on to the General Manager who,in his turn, passed an order at about 10-30 a.m. suspending these 76 workmen till further orders. The order for suspension was communicated to these workmen through their sectional heads and was also pasted on the notice board of the mills. There was a recess between 11 a.m. and 1 p.m. and when the gates were opened at 1 p.m. these 76 workmen, in spite of the warnings of the gatekeepers and Jemadar to the contrary, rushed into the mills, entered their respective sections and adopted a threatening attitude. The sectional engineers made reports to the General -Manager in regard to this occurrence and these reports also were endorsed by the Chief Engineer and passed on by him to the General Manager. The situation which was created by these workmen by forcibly entering their respective sections and continuing there threatening violence was explosive and the management had to call in the police in order to avert violence and damage to the property. The police came in at 5 p.m. and order appears to have been restored. There was no untoward incident that day but the management appears to have viewed the situation with, seriousness and approached the Regional Conciliation Officer the next day in order to ask for advice in regard to the dismissal of these workmen. The Regional Conciliation Officer, however, pointed out to the General Manager that, in view of the pendency of the appeal before <ORG> late Tribunal, he had no jurisdiction to entertain any application for such permission and referred the General Manager to <ORG>. The workmen, on the other hand, got a letter dated May 28, 1952, addressed to the General Manager by the General Secretary of <ORG> to the effect that they had gone to the gates of 'the mills as usual at 7 a.m. that day to attend to their work but they were not allowed to enter the mill pre- mises. They charged the management with the intention to victimise them -on the charge of a tools down strike and stated that they had neither struck nor intended to strike but had been prevented from attending to their work and had therefore been advised to go back to their quarters with a view to maintain peace. The last paragraph of that letter was very significant. The General Manager was told that if he did not mend his illegal mistakes and did not take the workmen back on duty he would be responsible for any breach of peace.

After receipt of that letter it was evident that the workmen would resort to violent measures in order to attend to their work and a breach of peace was apprehended. The management evidently continued the police precautions and, after having waited for some time, the General Manager furnished to these 76 workmen on June 2, 1952, a charge-sheet wherein he charged them with having committed misconduct within the meaning of cl. L. I (a) and (b) and wailful insubordination within the meaning of el. L. I (a), (b) and (w) of the Standing Orders. He called upon them to show cause within 24 hours of the receipt of the charge-sheet why disciplinary action should not be taken against them and gave them intimation that an open enquiry in connection with the said charges  would be held by him at 8 a.m. on June 6, 1952. He also intimated that if all the workmen arranged to present themselves earlier than June 6, 1952, he would take up the said enquiry earlier provided, however, an intimation was received to that effect from them or from their <ORG>. The workmen were to remain suspended till the enquiry was finished.

The workmen addressed uniform letters to the General Manager denying that there was any tools down strike on May 27, 1952, and alleging that the sectional heads and the Chief Engineer bad conspired together "under some mysterious preconceived plans" and stated that no useful purpose would be served by holding an enquiry on the 1 1 th day of their suspension. They pointed out that such indefinite period of suspension during the pendency of the appeal before <ORG> was illegal and unjustified and was in utter disregard of the Standing Orders. By their further letter dated June 5, 1952, similarly addressed to the General Manager, they voiced their apprehension that they would not get any justice from an enquiry held by the management itself and asked for investigation by an impartial tribunal. The management, however, held the enquiry as intimated at 8 a.m. on June 6, 1952. The workmen non-co-operated and did not present themselves at the enquiry.

The General Manager immediately addressed a letter to these workmen putting on record that- in spite of the orders conveyed by him earlier the workmen had disobeyed the. same and had not appeared at the appointed time and place for the enquiry into the tools-down strike. He pointed out that by not appearing in this manner they had made themselves liable to dismissal for insubordination, and intimated that the management was applying to the proper authorities for permission to dismiss them pending receipt of which the workmen would remain under suspension. This letter was received by the workmen at 9 a.m. that day and they replied through the General Secretary of <ORG> repeating that a demand had been made for an investigation by an impartial tribunal and in so far as no impartial tribunal had been appointed they were not agreeable to present themselves and submit their defence at the enquiry which was conducted by the management itself. The appellant thereafter made the necessary application under s. 22 of the Act before <ORG>, Lucknow Bench, for permission to dismiss these 76 workmen. In the affidavit which was filed in support of that application, all the facts herein before mentioned were set out in extenso and it was pointed out that the management, after giving full consideration to the explanations and offering every possible opportunity to these workmen to explain their conduct coupled with the unreasonable attitude adopted by them, had adjudged them guilty of misconduct under cl. L. I (a), (b) and (w) of the Standing Orders and considered that any further employment of these workmen would be extremely detrimental to discipline and dangerous in the interests of the industry. The workmen, in their turn, filed on June 9, 1952, an application under s. 23 of the Act for requisite action to be taken against the appellant for having contravened s. 22(b) of the Act by inflicting on them the punishment in the shape of harassment by resorting to an illegal lookout for an indefinite period with effect from May 27, 1952, without obtaining the prior permission of <ORG> and "thereby acting contrary to law and resorting to mala fide actions in direct violation of the provisions of the Standing Orders in continuation of the management's anti-trade (Union) activities".

Counter-affidavits were made by the workmen as also the management in reply to both the above applications. <ORG> held that the appellant did not act in strict compliance with cl. L. 12 of the Standing Orders and was, therefore, not entitled to ask for permission to dismiss the 76 workmen. It accordingly dismissed the appellant's application under s. 22 of the Act. In regard to the application of the workmen under s. 23 of the Act, it held that the wholesale suspension of the 76 workmen and their prevention from resuming work at I p.m. after the lunch hour amounted to a lockout and that this conduct of the appellant amounted to punishment of the workers whether by dismissal or otherwise and was, therefore, in contravention of s. 22(b) of the Act. It accordingly ordered the reinstatement of the workmen if they presented themselves at the office of the General Manager during office hours on any day within 15 days of the order and also ordered payment of half the salary and allowances for the period of non-payment, viz., from the date of their suspension up to the date on which they were taken back in service.

<NAME> for the appellant before us has strenuously urged that the workmen had resorted to the tools-down strike which was an -illegal strike and that the appellant was well within its rights in suspending the pending enquiry and also pending the application for permission to dismiss them made before <ORG>. Even if it be held that the appellant had declared a lockout, such a lockout was in consequence of the illegal strike resorted to by the workmen and could not be deemed to be illegal. He further urged that the management had held an enquiry into the illegal strike which had been resorted to by the workmen and found that the workmen were guilty of misconduct and insubordination within the meaning of cl. L. I (a), (b) and (w) of the Standing Orders and the appellant rightly came to the conclusion that any further employment of these workmen would be extremely detrimental to discipline and dangerous in the interests of the indus- try. He also contended that the delay in holding the enquiry was not unreasonable and the suspension of the workmen pending enquiry for more than four days was due to sufficient reason, the atmosphere created by the non- cooperation of the workers being so tense as not being appropriate for the holding of an enquiry within those four days, that there was no breach of cl. L. 12 of the Standing Orders and that <ORG> was in error when it refused to grant the application under s. 22 of the Act. Civil Appeal No. 245 of 1954 which is directed against the order of <ORG> under s. 23 of the Act may be disposed of at once. <ORG> was of opinion that the conduct of the appellant in preventing the workmen from continuing work after I p.m. on May 27, 1952, came within the definition of a lockout and the workmen being employed in a public utility concern such lockout would be illegal without a proper notice. It was further of opinion that this conduct amounted to punishment of a worker whether by dismissal or otherwise and was, therefore, in contravention of s. 22(b) of the Act. This conclusion of <ORG> was, in our opinion, based on a misapprehension of the whole position. The position had been summed up by <ORG> in the following words:-

"As a matter of fact the management never thought of a lockout. Their idea was to suspend the suspected persons pending enquiry for which they gave a notice". If this was the correct position, the conclusion reached by <ORG> that the conduct of the management came within the definition of a lockout was absolutely unjustifiable. <ORG> recorded its inability to come to a definite finding as to what was the position which obtained on May 27, 1952. It observed-

"We have got a number of affidavits in support of the parties' case and there is oath against oath. We do not find ourselves in a position to hold definitely as to what was the exact situation. But it does appear to us that a mountain has been made of a mole hill and conclusions have been arrived at without going deep into the matter". Even if the parties had made a mountain of a mole hill and had reached conclusions without going deep into the matter, it was certainly the business of <ORG> itself to record a finding of fact in regard to the situation as it obtained on that day. This unfortunately <ORG> did not do and it came to record its conclusion, that the conduct of the management came within the definition of a lockout without realizing that such conclusion was inconsistent with what it' had stated a little earlier that the management as a matter of fact never thought of a lockout. -We have been taken through the whole evidence by the learned counsel for the appellant and there is clear documentary evidence to show that the 76 workmen resorted to a tools-down strike from 7 a.m. on May 27, 1952. The reports which were made by the section engineers and sent to the General Manager through the Chief Engineer were clear and categoric in regard to such tools-down strike having been resorted to by the workmen in question and the list of the 76 workmen which was prepared by the General Manager ordering their suspension was based on those reports. The further reports which were made by the section engineers again sent by them to the General Manager through the Chief Engineer in the afternoon of May 27, 1952, also were clear and categoric in regard to the said workmen having been asked not to enter the workshop, the boiling house and the mill house at 1 p.m. but their having entered the same threatening violence. A faint attempt was made to charge the section engineers and the Chief Engineer with having conspired "under some mysterious preconceived plans" but the same rested merely on a bare allegation and was not substantiated by any tangible evidence. Even though there was some conflict of evidence in regard to the time when the notice of suspension was given by the General Manager to these workmen and when the notice in that behalf was pasted on the notice-board of the appellant, it is abundantly clear on the documentary evidence above referred to that the 76 workmen resorted to a tools down strike from 7 a.m. on the morning of May 27, 1952, that they were suspended till further orders immediately after the receipt by the General Manager of the first series of reports from the section engineers, that they were prevented from entering the premises at I p.m. but entered the same threatening violence. If this is the true position it follows that there was no lockout declared by the appellant, much less an illegal lockout. The workmen bad resorted to an illegal strike and the General Manager rightly ordered that the workmen indulging in such strike should be suspended pending further orders which obviously meant pending enquiry into their conduct and the obtaining of the permission to. dismiss them as a result of such enquiry if the management thought fit. If there was thus no illegal lockout at all, the conclusion reached by <ORG> in that behalf was absolutely unjustified. Even if there had been a lockout as concluded by <ORG> the same was in consequence of the illegal strike which had been resorted to by these workmen and could not by virtue of s. 24(3) of the Industrial Disputes Act, 1947, be deemed to be illegal. There is, however, a more fundamental objection that, even if the appellant be held responsible for having declared an illegal lockout, the lockout would not come within the ban of s. 22 of the Act. <ORG> had before it an earlier decision of its own in <ORG>, Calcutta v. <NAME>), in which the same question had beed considered with reference to s. 33 of the Industrial Disputes Act, 1947. In that case, a lockout had been declared which involved 4,000 workers of the company and a preliminary contention was urged that there was no contravention of the provisions of s. 33 of the Industrial Disputes Act, 1947. <ORG> considered the question whether the lockout had (1) in fact altered the conditions of service of the workmen to their prejudice, or (2) had the effect of discharge, or (3) amounted to punishment of the workmen. It came to the conclusion that a lockout had not the effect of a discharge, for a lockout does not automatically terminate the services of the workmen. It did not also amount to punishment, for punishment presup-

(1) [1951] II L.L.J. 344.

poses an offence or misconduct. A lockout is generally adopted as a security measure and may in certain cases be used as a weapon corresponding to what the employees have in the shape of a strike and that, therefore, a. 33(b) would not be contravened by the company by. declaring a lockout. <ORG> then considered whether a lockout would attract the operation of s. 33(a) . It was of opinion that no automatic termination of the services of the employees was brought about by a lockout and the question was whether any of the conditions of service was altered thereby to their prejudice. The contention of the Union was that the conditions of service were altered to the prejudice of the workmen because those employees did, not in fact get their pay during the period of the lockout with the possibility of losing it. This contention was negatived and <ORG> was of opinion that the conditions of their service would be altered by the lockout if the employees lost their right to receive their pay during the period of lockout in 'all circumstances but the question whether they would be entitled to get their pay during that period could not be postulated with certainty for that would depend on a variety of considerations.. In the opinion of <ORG> to bring a case within s.-33(a), the questioned act of the employer must directly and in fact alter the conditions of service to the prejudice of the workmen concerned, that is to say, the moment the lockout was declared. The possibility that they may or may not get their pay meant that the lockout may or may not alter the conditions of their service to their prejudice. Section 33(a) would not, therefore, be attracted by the mere fact of a lockout. <ORG> thus came to the conclusion that -neither s. 33(a) nor s. 33(b) would be contravened by the company in de- claring the lockout.

This decision of <ORG> was followed in <ORG>, Asansol, v. <ORG>) and the Labour (1) 11952] L A.C. 219.

<ORG> there held that a lockout did not come within the ambit of s. 33 and, therefore, no permission under that section was required for declaring a lockout. We agree with the reasoning adopted in the above cases and are of opinion that a lockout is neither an alteration to the prejudice of the workmen of the conditions of service applicable to them within the meaning of cl. (a) nor a discharge or punishment whether by dismissal or otherwise of the workmen within the meaning of cl. (b) of s. 33 of the Industrial Disputes Act) 1947, or s. 22 of the Industrial Disputes (<ORG>) Act, 1950, and that, therefore, no permission of the Conciliation Officer, <ORG> or <ORG> as the case may be is necessary to be obtained before a lockout can be declared. If the lockout is legal, no question can at all arise. If, on the other hand,, the lockout is illegal, a remedy is provided in s. 26 of the Industrial Disputes Act, 1947. The employees affected by a lock-out would in any event be entitled to refer the industrial dispute arising between themselves and the employer for adjudication by adopting the proper procedure in regard thereto.

<ORG> was, therefore, clearly in error when it came to the conclusion that the conduct of the appellant came within the definition of a lockout and that it amounted to punishment of the workmen whether by dismissal or otherwise and was, therefore, in contravention of s, 22(b) of the Act. The application of the respondents under s. 23 of the Act was accordingly liable to be dismissed and should have been dismissed by <ORG>. Civil Appeal No. 245 of 1954 will, therefore, be allowed and the order of <ORG> reinstating the respondents in the service of the appellant will be set aside.

Coming now to Civil Appeal No. 244 of 1954, the first question to determine is whether the respondents had resorted to an illegal strike. We have already pointed out the circumstances under which the 76 workmen resorted to the tools-down strike from 7 a.m. on May 27, 1952, and recorded the finding  that they not only resorted to such strike but persisted in their attitude in spite of the persuasions of the Chief Engineer and the General Manager of the appellant. The appellant having been declared a public utility concern, the workmen were not entitled to resort to such strike without giving to the appellant notice of the strike in terms of s. 22(1) of the Industrial Disputes Act, 1947, and the tools- down strike which was resorted to by them was, therefore, an illegal strike. The fact that the strike was of a short duration viz., from 7 a.m. till 10-30 a.m. would not exculpate the respondents from the consequence" of having resorted to such illegal strike, the avowed intention of the strikers being not to resume work until their pre-concerted plan conceived at, the meeting held on the previous night was carried out. The strike resorted to by the workmen was of an indefinite duration. and the management, having failed in its attempts to persuade the workmen to resume their work was well within its rights to suspend these workmen pending further orders. ( <CITATION> .(1)). <ORG> did not decide this issue at all but only considered the alleged non-compliance by the appellant of cl. L. 12 of the Standing Orders as determinative of the whole enquiry before it observing that "although the delay (in holding the enquiry) was not unreasonable, there was no doubt that the management did violate the letter of the rule". It further observed that there was no sufficient reason indicated for extending the period of suspension beyond the period of four days provided in cl. L. 12 of the Standing Orders, the tension created by the non-co-operation of the workers not having been considered sufficient to preclude the management from collecting materials for conducting the enquiry within the said period of 4 days, This reasoning of <ORG> was unsound. Having once come to the conclusion that the delay was not unreasonable, there was no justification for the further (1)  S.C.R. 219.

conclusion reached by <ORG> that the tension created by the non-co-operation of the workers was not a sufficient reason for extending the period of such suspension. The workmen had forcibly entered the premises of the mills in spite of the warnings of the watchmen and the Jemadar and had also entered the workshop, the boiling house and the mill house and continued to stay there threatening violence. In their letter dated June 3, 1952, they had also threatened the General Manager that if he did not mend his illegal mistakes and did not take the workmen back on duty be would be responsible for any breach of peace. This was enough evidence of their mentality and the management naturally enough apprehended breach of peace at the hands of these workmen. If this was the tense atmosphere created by the non-co-operation of the workmen, the management was perfectly justified in postponing the enquiry by a few days and continuing the workmen under sus- pension. The delay which was thus caused in furnishing the charge-sheets and giving notice of the enquiry to these workmen on June 2, 1952, was, therefore, sufficiently explained and if there was any one responsible for this. delay it was the workmen and not the management. It did not then lie in the mouth of the workmen to protest against this delay in the enquiry and trot out their suspension for a period exceeding four day's as an excuse for abstaining from the enquiry. As a matter of fact, the management intimated to the workmen that -in spite of June 6, 1952, having been fixed as the date for the open enquiry, the management would be prepared to take up the enquiry earlier provided an intimation was received either from the workmen or from their <ORG> to that effect. Instead of responding to this gesture of the appellant the workmen persisted in asking for an independent enquiry and non-co-operated with the management in the enquiry which was ultimately held by it as notified at 8 a.m. on June 6, 1952. We are of opinion that under the circumstances the appellant was not guilty of having contravened el. L. 12 of the Standing Orders and <ORG> was in error when it came to the contrary conclusion and dismissed the application of the appellant under s. 22 merely on that ground without making any further enquiry into the circumstances of the case. It appears that <ORG> was driven to take this step because it found itself unable to hold definitely as to what was the exact situation on May 27, 1952. We shall only observe that if <ORG> had really ap- plied its mind to the question it would have come -to the conclusion that the respondents in fact did resort to the illegal strike from 7 a.m. on May 27, 1952, and that there was no contravention of cl. L. 12 of the Standing Orders by the appellant.

The next question that falls to be determined is whether the enquiry which was held by the management on June 6, 1952, was a fair enquiry and whether the General Manager observed the principles of natural justice in the conduct of that enquiry Due notice of the enquiry was given to the respondents by the letter of the management addressed to them on June 2, 1952, and if the respondents did not avail themselves of the opportunity of presenting themselves and defending their action at the enquiry they had only themselves to blame for it. It was within the province of the management to hold such an enquiry after giving due notice thereof to the respondents and to come to its own conclusion as a result of such enquiry whether the respondents were guilty of the charges which had been leveled against them. If full and free opportunity was given to the respondents to present themselves at the enquiry and defend themselves it could not be said that the enquiry was anything but fair. No principles of natural justice were violated and the management was at liberty to come to its own conclusions in regard to the culpability of the respondents and also to determine what punishment should be meted out to the respondents for the misconduct and insubordination proved against them. If the ban which is imposed by s. 22 of the Act had not been in existence, the management would have been entitled to impose the punishment on the respondents and dismiss them without anything more, if it honestly came to the conclusion that dismissal of these workmen was the only punishment which should be meted out to them in all the circumstances of the case. The respondents would no doubt then have been entitled to refer the industrial dispute which arose out of their dismissal for adjudication by adopting the proper procedure set out in the Industrial Disputes Act , 1947, and <ORG> appointed by the <ORG> for the adjudication of such dispute would have been in a position to thrash out all the circumstances and award to them the appropriate relief This course was, however, not open to the appellant by reason of the pendency of the appeal before <ORG> and the only thing which the appellant could do, therefore, was, after coming to its own conclusion as a result of such enquiry, to apply to <ORG> under s.22 of the Act for permission to dismiss the respondents and this the appellant did on June 8, 1952. It was not open to the respondents then, having regard to the attitude which they had adopted throughout in relation to the said enquiry, to urge that the enquiry was not fair or impartial or that the principles of natural justice had been violated by the General Manager of the appellant in the conduct of the enquiry.

It was, however, urged on behalf of the respondents that the suspension for an indefinite period beyond the period of four days provided in cl. L. 12 of the Standing Orders was a punitive measure and the appellant was not justified in imposing that punishment on them without the permission of <ORG>. It was contended that such suspension involved loss of pay by the respondents and being of an indefinite duration inflicted such harassment on them that it could not be deemed to be anything except a punishment. We do not accept this contention. It has been rightly held by <ORG> that suspension without pay pending enquiry as also pending permission of the <ORG> under the relevant section could not be considered a punishment as such suspension without payment would only be an interim measure and would last till the application for permission to punish the workman was made and the <ORG> bad passed orders thereupon. If the permission was accorded the workman would not be paid during the period of suspension but if the permission was refused he would have to be paid for the whole period of suspension. There is nothing like a contingent punishment of a workman and therefore such suspension could not be deemed to be a punishment of the workman at all. Such suspension would of necessity be of an indefinite duration because to get a written permission of the <ORG> would mean delay and no <ORG> would likely issue any order without notice and without hearing all the parties concerned. Orders for suspension were meant only as security measures or precau- tionary ones taken in the interest of the industry itself or its employees in general. These measures were sometimes called for immediately after an incident and any delay, however small, might defeat the purpose for which such measures were intended. It would therefore be necessary to adopt these measures immediately and to suspend the workman pending the enquiry as also the permission to be obtained from the appropriate <ORG> for dismissing him if as a result of the enquiry the, management thought fit to inflict such punishment upon him. The suspension., however, would not be a punishment by itself. The ordinary dictionary meaning of the word "Punish" is "to cause the offender to suffer for the offence" or "to inflict penalty on the offender" or "to inflict penalty for the offence" (Concise Oxford Dictionary, 4th Ed.). Punishment can be otherwise defined (Vide Law Lexicon by P.R. Aiyar, 1943 Ed.) as penalty for the transgression. of law, and the word cc punish" denotes or signifies some offence committed by the person who is punished. Any action of the employer to the detriment of the workman's interest would not be punishment so long as no offence was found to have been committed by the workman. The suspension under such circumstances, therefore, could not be a punishment even though it may be of an indefinite duration and would not attract the operation of s. 22 of the Act. It could not be contended, therefore, that suspension without pay even for an indefinite period pending enquiry or pending the permission of the appropriate <ORG> to dismiss the workman would be a punishment which would require permission under s. 22 of the Act before the same could be meted out to the workman. (<ORG> And Certain Workmen(1); Joint Steamer Companies And Their Workmen(2); <ORG> v. Appalswami(3); <ORG> v. <NAME>, M. O.(4)). The scope of the enquiry before <ORG> under s. 22 of the Act has been the subject-matter of decisions by this Court in <CITATION> (5) and <CITATION> (6). The <ORG> before whom an application is made under that section has not to adjudicate upon any industrial dispute arising between the employer and the workman but has only got to consider whether the ban which is imposed on the employer in the matter of altering the conditions of employment 'to the prejudice of the workman or his discharge or punishment whether by dismissal or otherwise during tile pendency of the proceedings therein referred to should be lifted. A prima facie case has to be made out by the employer for the lifting of such ban and the only jurisdiction which the <ORG> has is either to give such permission or to refuse it provided the employer is not acting mala fide or is not resorting to any unfair practice or victimization. It cannot impose any conditions on the employer before such permission is granted nor can it substitute another prayer for the one which the employer has set out in his application. If the permission is granted, the ban would be lifted and the employer would be at liberty, if he so chooses thereafter, to deal out the (1)  I L.L.J. 554.

(2) [1954] II L.L.J. 328. [1953] S.C.R. 780. (4) [1951] II L.L J. 221.

(5) [1954] II L.L.J. 656.

(6) [1965] 1 S.C.R. 1241, punishment to the workman. On such action being taken by the employer the workman would be entitled to raise an industrial dispute which would have to be referred to the appropriate <ORG> for adjudication by the <ORG> on proper steps being taken in that behalf. When such industrial dispute comes to be adjudicated upon by the appropriate <ORG>, the workman would be entitled to have all the circumstances of the case scrutinized by the Tribu- nal and would be entitled to get the appropriate relief -at. the hands of the <ORG>. If, on the other hand, such permission is refused, the parties would be relegated to the status quo and the employer would not be able to deal out the punishment which he intends to do to the workman. Even then an industrial dispute might arise between the employer and the workman if the workman was not paid his due wages and other benefits. Such industrial dispute also would have to be referred to the appropriate <ORG> by the <ORG> and the <ORG> would award to the workman the appropriate relief having regard to all the circumstances of the case. The <ORG> before whom such an 'application for permission is made under s. 22 of the Act would not be entitled to sit in judgment on the action of the employer if once it came to the conclusion that a prima facie case had been made out for dealing out the punishment to the workman. It would not be concerned with the measure of the punishment nor with the harshness or otherwise of the action proposed to be taken by the employer except perhaps to the extent that it might bear on the question whether the action of the management was bona fide or was actuated by the motive of victimization. If on the materials before it the <ORG> came to the- conclusion that a fair enquiry was held by the management in the circumstances of the case and it bad bona fide come to the conclusion that the workman was guilty of misconduct with which he had been charged a prima facie case would be made out by the employer and the <ORG> would under these circumstances be bound to give the requisite permission to the employer to deal out the punishment to the workman. If the punishment was harsh or excessive or was not such as should be dealt out by the employer having regard to all the circumstances of the case the dealing out of such punishment by the employer to the workman after such permission was granted would be the subject-matter of an industrial dispute to be raised by the workman and to be dealt with as aforesaid. The <ORG>, however, would have no jurisdiction to go into that question and the only function of the <ORG> under s. 22 of the Act would be to either grant the permission or to refuse it. (<ORG> And Shri Alijan(1); <ORG> And <ORG>) <ORG> case(3)).

In the circumstances of the present case, once the appellant succeeded in establishing that the workmen had resorted to an illegal strike from 7 a.m. on May 27, 1952, that a fair enquiry into the alleged misconduct and insubordination of the workmen had been held by the management without violating any principles of natural justice, that the management had as a result of such enquiry found that the workmen had been guilty of misconduct and insubordination with which they had been charged -and that the management had come to the bona fide conclusion that continuing the workmen in its employ was detrimental to discipline and dangerous in the interests of the appellant, <ORG> ought to have held that a prima facie case for the dismissal of the workmen had been made out by the appellant and ought to have granted the appellant the permission to dismiss the workmen.

We are, therefore, of opinion that <ORG> was clearly in error in rejecting the application of the appellant under s. 22 of the Act and refusing it the permission to discharge the respondents from its employ. Civil Appeal go. 244 of 1954 will, therefore, be allowed and the order of (1)  II L.L.J. 629. (2)  II L.L.J. 787, (8)  L.A.C. 78.

<ORG> dismissing the application under s. 22 of the Act will be set aside. The appellant will be granted permission under s. 22 of the Act to discharge the respondents from its employ. Under the orders of the <ORG>, one-half of their salary has been already paid by the appellant to the respondents from May 27, 1952, onwards. As a result of this decision, the appellant would be entitled to recover the same back from them. <NAME> appearing on behalf of the appellant has, however, stated that the appellant would forego the recovery of that amount and would also keep the respondents on the reserve list to be employed in the mills as and when there were vacancies in their permanent cadre. We hope that the respondents will take this offer in the true spirit with, which it has been made on behalf of the appellant and behave better in the future. <NAME> has also left the question of costs of both these appeals to us and we do order that, in all the circumstances of the case, it would be proper that each party do bear and pay its own costs of both these appeals.

Appeals allowed.


IN THE HIGH COURT OF KERALA AT ERNAKULAM Crl.Rev.Pet.No. 2594 of 2009() 1. P.S.NANDAKISHORE, ... Petitioner Vs 1. GOPINATH.P., S/O CHANDRADAS, ... Respondent 2. STATE OF KERALA, REPRESENTED BY For Petitioner :SRI.P.VIJAYA BHANU For Respondent : No Appearance The Hon'ble MR. Justice THOMAS P.JOSEPH Dated :12/08/2009 O R D E R THOMAS P. JOSEPH, J. -------------------------------------- Crl.R.P.No.2594 of 2009 -------------------------------------- Dated this the 12th day of August, 2009. ORDER

Notice to respondent No.1 is dispensed with in view of the order I am proposing to pass in this revision which is not prejudicial to him. Public Prosecutor takes notice for respondent No.2.

2. Faced with a concurrent finding as to the due execution of a cheque for the discharge of a legally enforceable debt/liability, conviction and sentence petitioner has come up in revision. He faced trial in the court of learned Judicial First Class Magistrate-II, <NAME> in S.T.No.676 of 2005 for offence punishable under Section 138 of the Negotiable Instruments Act (for short, "the Act"). According to respondent No.1, petitioner borrowed Rs.40,000/- from him undertaking to repay the same with interest at the rate of 12% per annum and issued three cheques for the discharge of that liability. Exts.P1 and P2 are two of those cheques for a total sum of Rs.20,600/-. Dishonour of those cheques for insufficiency of funds is proved by Ext.P3. Service of statutory notice on petitioner is proved by Ext.P4 series. Petitioner did not send reply nor pay the amount. Respondent No.1 gave evidence as PW1 and testified to the transaction. According to the petitioner, he had given the cheques to one <NAME> with whom he had some other transaction. Petitioner did not prove or probabilise that contention. Courts below found that Crl.R.P.No.2594/2009 there is no reason to disbelieve the evidence of respondent No.1. I find no reason to differ from that finding.

3. While confirming the direction for payment of compensation of Rs.20,600/- and default sentence of imprisonment for one month, learned Sessions Judge modified substantive sentence as simple imprisonment till rising of the court. There is no reason to interfere with the substantive sentence as modified by the appellate court or the direction for payment of compensation and default sentence as confirmed by that court, at the instance of petitioner.

4. Learned counsel contended that petitioner is involved in other similar cases, that petitioner is in a financially difficult situation and is unable to raise the amount immediately. Counsel requested that petitioner may be granted six months' time to deposit compensation and that petitioner may be permitted to pay compensation directly to respondent No.1. Considering the circumstances stated by learned counsel I am inclined to grant time to the petitioner till 21.12.2009 to deposit compensation.

Resultantly, this revision petition fails. It is dismissed. Petitioner is granted time till 21.12.2009 to deposit compensation in the trial court. It is made clear that it will be sufficient compliance of the direction for deposit of compensation if petitioner paid compensation to respondent No.1 through his counsel in the trial court and respondent No.1 filed a statement in the trial court through his counsel acknowledging receipt of compensation within the above Crl.R.P.No.2594/2009 said period. Petitioner shall appear in the trial court on 22.12.2009 to receive the sentence. Until then execution of warrant if any against the petitioner will stand in abeyance.

<NAME>, Judge.

cks


PETITIONER: <NAME> Vs. RESPONDENT: THE COMMISSIONER OF <ORG>,BOMBAY CITY. DATE OF JUDGMENT: 01/11/1954 BENCH: <NAME>, <NAME> BENCH: <NAME>, <NAME> MAHAJAN, <NAME> (CJ) HASAN, <NAME>, <NAME>, <NAME> CITATION: 1955 AIR 58 1955 SCR (1) 829 CITATOR INFO : F 1958 SC 560 (10) R 1959 SC 459 (13) R 1959 SC 582 (7) RF 1960 SC 424 (11) R 1960 SC 751 (4) R 1960 SC1073 (10) RF 1961 SC 652 (10) R 1962 SC1563 (10) R 1963 SC1241 (68) RF 1964 SC 572 (8) R 1965 SC1375 (9,22,24,25,27,35,36) RF 1965 <NAME> (12) MV 1966 <NAME> (55) R 1967 <NAME> (40) E 1968 SC1286 (6) R 1971 SC 792 (4) R 1972 SC 425 (30) D 1978 SC 449 (26,41,42) F 1978 SC 771 (58) R 1981 SC 907 (10,13) R 1984 SC 981 (8) RF 1986 SC1272 (79) RF 1990 SC 781 (13) E 1990 SC1637 (16-A,38) E 1990 SC1664 (6) ACT: Indian Income-tax Act (XI of 1922) s. 12-B -Government of India Act, 1935 (26 Geo. 5 CH. 2) Seventh Schedule, List I, Item 54-Tax on capital gains, if ultra vires--Capital gains, if income -Legislative practice-Interpretation of words- Words used in Constitution Act . HEADNOTE: Section 12-B of the Indian Income-tax Act, 1922 (inserted by Act XXII of 1947) which imposed tax on 'Capital gains' is not ultra vires the Government of India Act, 1935. The term 'Capital 106 830 gains' comes well within the meaning of the word 'income' used in item No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935. It is incorrect to say that income cannot signify 'Capital gains' and it is equally an incorrect approach to hold that there is a legislative practice which recognises a clear line of demarcation between income and capital. What is relied on here as a legislative practice is nothing but the judicial interpretation given to the word 'income' as used in the income-tax and fiscal statutes. Such interpretation does not necessarily cut down the ordinary natural meaning of the word 'income' as used in item No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935. Cardinal rule of interpretation is that the words should be read in their ordinary natural and grammatical meaning. But the words in a constitutional enactment conferring legislative powers should however be construed most liberally and in their widest amplitude, <CITATION> . 59 I.A. 206); <NAME> v. <NAME> and <NAME> v. <NAME> (1923) 8 T.C. 521; <ORG> Reduced) v. <NAME> (1904) 5 T.C. 159; <CITATION> . 75 I.A. 86: (1948) F.C.R. 1 : 16 I.T.R 2401 ; Croft v. <NAME> L.R. 1933 A.C. 156; <CITATION> . 70 I.A. 180: (1943) 11 I.T.R. 513] ; In re The Central Provinces and Berar Act No. -XIV of 1938 (1939) F.C.R. 18; United Provinces v. Atiqa Begum (1940) F.C.R. 110; <CITATION> (1951) S.C.R. 682 ; Eisner v. <NAME> (252 U.S. 189 : 64 L. Ed. 521) <ORG> v. <NAME> (255 U.S. 509: 65 L. Ed. 751) ; United States v. <NAME> (311 U.S. 60: 85 L. Ed. 40) and <NAME> v. Federal Commissioner of Taxation (66 C.L.R. 198), referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 194 of 1952. Appeal from the Judgment and Order, dated the 7th day of September, 1951, of <ORG> at Bombay in Income-tax Reference No. 46 of 1950.

<NAME> (<NAME> and <NAME>, with him) for the appellant.

<NAME>, Attorney-General for India (<NAME>, with him) for the respondent.

1954. November 1. The Judgment of the Court was delivered by DAS J.

DAS J.-This appeal is directed against the judgment pronounced on the 7th September, 1951, by <ORG> at Bombay on a reference made at the instance of the appellant under section 66(1) of the Indian Income-tax Act, 1922. By an, assessment order dated the 31st March, 1948, the appellant was assessed by <ORG>, Bombay, for the assessment year 1947-1948 on a total income of Rs. 19,66,782 including a sum of Rs. 9,38,011 representing capital gains assessed in the hands of the appellant under section 12-B of the Act. The said amount of capital gains was earned by the appellant in the following circumstances. The assessee had a half share in certain immovable properties situate in Bombay which were sold by the assessee and his coowners during the relevant accounting year which was the calendar year ending on the 31st December, 1946, to a private limited company known as <ORG> The profits on the sale of the said properties amounted to Rs. 18,76,023 and the appellants half share therein came to the sum of Rs. 9,38,011 which was included in the assessment under section 12-B .

In April, 1948, the appellant appealed from the said order to the Appellate Assistant Commissioner contending that section 12-B of the Act authorising the levy of tax on capital gains was ultra vires <ORG>. The Appellate Assistant Commissioner by his order dated the 5th April, 1949, dismissed the appeal. A further appeal to <ORG> was dismissed by its order dated the 30th June 1950.

Being aggrieved by the order of <ORG> the appellant applied to it under section 66(1) of the Act for raising certain questions of law. <ORG> agreeing that certain questions of law did arise out of its order drew up a statement of the case which was agreed to by the parties and referred to <ORG> the following questions:-

(1) Whether the imposition of a tax under the head " capital gains " by <ORG> was ultra vires (2) Whether the imposition was in any way invalid on the ground that it was done by amending the Indian Income-tax Act ?

After hearing the reference <ORG> following ,its judgment in Income-tax Reference No. 18 of 1950, <CITATION> , answered the first question in the negative and expressed the opinion that it was not necessary to answer the second question. In that reference the two learned Judges gave the same answer to the first question but on different grounds as elaborated in their respective judgments.

The principal question that was discussed before <ORG>, as before us, was whether section 12-B which authorised the imposition of a tax on capital gains was invalid being ultra vires <ORG>. Section 12-B was inserted in the Act by the Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 (XXII of 1947) which was a Central Act . Under section 100 of the Government of India Act, 1935, <ORG> was, empowered to make laws with respect to matters enumerated in List I in the Seventh Schedule to that Act. The only entries in List I on which reliance could be placed to uphold the impugned Act were entries 54 and 55 which were as follows:

" 54. Taxes on income other than agricultural income.

55. Taxes on the capital value of the assets,exclusive of agricultural land, of individuals and companies, and taxes on the capital of companies."

<NAME> held that the enactment of Act XXII of 1947 which inserted section 12-B was well within the scope of the legislative powers of <ORG> as it fell within entry 55 and was valid either as a whole or, in any case, to the extent that it applied to individuals and companies. Although it was unnecessary for the learned Chief Justice to decide whether the Act could be supported as a valid piece of legislation falling within the scope of entry 54 yet in deference to the arguments advanced before the <ORG> the learned Chief Justice expressed the view that it could not be so supported. <NAME>, on the other hand, held that Act XXII of 1947 was wholly intra vires <ORG> as it fell within entry 54 and in this view of the matter he did not consider it necessary to discuss whether the legislation was covered by entry 55 in List I of the Seventh Schedule. In our opinion the view taken by <NAME> with respect to entry 54 is correct and well- founded.

In the course of a lucid argument advanced with his usual ability and skill Mr. <NAME> submitted that entry 54 which deals with "taxes on income" does not embrace within its scope tax on capital gains. "Income", according to him, does not signify capital gains either according to its natural import or common usage or according to judicial interpretation of relevant legislation both in England and in India. He submitted that the learned Chief Justice was entirely right in the view that there was a clear line of demarcation that had always been observed by English lawyers and English jurists between income and capital, that the English legislative practice had always recognised this difference and that as the word had come to acquire a certain meaning and a certain -connotation by reason of such legislative practice in England, the British <ORG> which enacted the Government of India Act, 1935, must be regarded as having understood and used that word " income " in entry 54 in that sense. Our attention has not, however, been drawn to any enactment other than fiscal statutes like the Finance Act and the Income-tax Act where the word "income" has been used and, therefore, it is not possible to say that the critical word had acquired any particular meaning by reason of any legislative practice. Reference has been made to several cases where the word "income" has been construed by the <ORG>. What is, therefore, described as legislative practice is nothing but judicial interpretations of the word " income " as appearing in the fiscal statutes mentioned above. A perusal of the those cases, however, will reveal at once that those decisions were concerned with ascertaining the meaning of that word in the context of the Income-tax legislation. Thus the observation of their Lordships of <ORG> in <CITATION> .(1), laid down the connotation of the word "income" as used "in this Act." The passage in the judgment of <ORG> in <NAME> v. <NAME> and <NAME> v. Honeywill(2), quoted by the learned Chief Justice in his judgment and strongly relied on by Mr. <NAME>, refers to profits or gains "as used in these Acts." In <ORG>Limited and Reduced) v. Harris(3), Lord Justice Clerk refers to the enhanced price realised on sale of certain things over the cost price thereof as not being profits "in the sense of Schedule D of the Income Tax Act of 1842." These guarded observations quite clearly indicate that they relate to the term "income" or "Profit" as used in the Income-tax Act . There is no warrant for saying that these observations out down the natural meaning of the ordinary English word "income" in any way. The truth of the matter is that while Income-tax legislation adopts an inclusive definition of the word "income" the scheme of such legislation is to bring to charge only such income as falls under certain specified heads (e.g., the 5 Schedules of the English Act of 1918 and our section 6 read with the following sections) and as arises or accrues or is received or is deemed to arise or accrue or to be received as mentioned in the statute. The <ORG>s have striven to ascertain the meaning of the word "income" in the context of this scheme. There is no reason to suppose that the interpretation placed by the <ORG>s on the word in question was intended to be exhaustive of the connotation of the word "income" outside the particular statute. If we hold, as we are asked to do, that the meaning of the word "income" has become rigidly crystallized by reason of the judicial interpretation of that word appearing in the Income-tax Act then logically no enlargement of the scope of the Income-tax Act , by amendment or otherwise, will be permissible in future. A conclusion so extravagant and astounding can scarcely be contemplated or (1) (1932) L.R. 59 I.A. 206 at page 212.

(2) (1923) 8 T.C. 521 at page 525.

(3) (1904) 5 T.C. 159 at page 165.

<NAME>

countenanced. We are satisfied that the cases relied on by Mr. <NAME> and referred to in the judgment of the learned Chief Justice do not, as we read-them, establish the broad proposition that the ordinary English word "income" has acquired a particularly restricted. meaning. The case of <CITATION> (1) was not concerned with ascertaining the meaning of the word "income" at all. The problem there was whether the foreign income of an English company which was a partner in a firm carrying on business in Bombay and whose Indian income was greater than its foreign income could be treated as a resident within the meaning of section 4-A . It was in that context said in that case that in determining the scope and meaning of the legislative power regard was to be had to what was ordinarily treated as embraced within that topic in the legislative practice of the United Kingdom. The problem there was not to ascertain the meaning of the word "income" so much as to ascertain the extent of the application of the Act to the foreign income. That case, clearly, does not establish that the word "income" had acquired any special or narrow meaning. The same remarks apply to the case of <NAME> v. Dunphy(1), referred to by Lord <NAME> in delivering the judgment of <ORG> in <ORG> case (supra). In <NAME> v. Commissioner of Income-tax(,), Lord <NAME> observed :-

" Income, it is true, is a word difficult and perhaps impossible to define in any precise general formula. It is a word of the broadest connotation. "

After making the above observation his Lordship referred to the observations of Sir <NAME> in <CITATION> . (supra), where an attempt was made to indicate the connotation of the word "income" as used "in this Act." It is, therefore, clear that none of the authorities relied on by Mr. <NAME> establish what may be called a legislative practice indicating the connotation of the (1) (1948) L.R. 75 I.A. 86;  F.C.R. 1 ; 16 I.T.R.

240. (2) L.R. [1933] A.C. 156.

(3) (1943) L.R. 70 I.A. 180; [1943] 11 I.T.R. 513.

term "income", apart from the Income-tax statute. In our view, it will be wrong to interpret the word "income" in entry 54 in the light of any supposed English legislative practice as contended for by Mr. <NAME>. It ,is interesting to note that in the English Income Tax Act of 1945 (8 and 9 Geo. VI, C. 32, sections 37 and 38 ) capital gains have been included as taxable income.

In should be remembered that the question before us relates to the correct interpretation of a word appearing in a Constitution Act which, as has been said, must not be construed in any narrow and pedantic sense. <NAME> in In re The Central Provinces and Berar Act No. XIV of 1938(1), observed at pages 36-37 that the rules which apply to the interpretation of other statutes apply equally to the interpretation of a constitutional enactment subject to this reservation that their application is of necessity conditioned by the subject-matter of the enactment itself It should be remembered that the problem before us is to construe a word appearing in entry 54 which is a head of legislative power. As pointed out by <NAME> in The United Provinces v. Atiqa Begum(2) at page 134 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. Itis,therefore,clear-anditisacknowledged by Chief Justice <NAME>-that in construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. Reference to legislative practice may be admissible for cutting down the meaning of a word in order to reconcile two conflicting provisions in two legislative Lists as was done in The C. P. and Berar Act case (supra), or to enlarge their ordinary meaning as in <CITATION> (3). The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in (I)  F.C.R. 18.

(2) [1940] F.C. R. 110.

(3) [1951] S.C. R. 682.

construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude.

What, then, is the ordinary. natural and grammati-: cal meaning of the word "income" ? According to the dictionary it means "a thing that comes in". (See Oxford Dictionary, Vol. 11, page 162; <NAME>, Vol. 11, pages 14-16). In the United States of America and in Australia both of which also are English speaking countries the word "income" is understood in a wide sense so as to include a capital gain. Reference may be made to Eisner v. <NAME>), <ORG> v. <NAME>), and United States v. Stewart(3), and <NAME> v. Federal Commissioner of Taxation(

4). In each of these cases very wide meaning was ascribed to the word "income" as its natural meaning. The relevant observations of learned Judges deciding those cases which have been quoted in the judgment of <NAME> quite clearly indicate that such wide meaning was put upon the word "income" not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word "income." Its natural meaning embraces any profit or gain which is actually received. This is in consonance with the observations of Lord <NAME> to which reference has already been made. Mr. <NAME> concedes that the word "income" is understood in the United States and Australia in the wide sense contended for by the learned Attorney-General but he maintains that the law in England is different and, therefore, entry 54 which occurs in a Parliamentary statute should be construed according to the law of England. We are again brought back to the same argument as to the word having acquired a restricted meaning by reason of what has been called the legislative practice (1) (1920) 252 U.S. 189; 64 L. Ed. 521.

(2) (1925) 255 U.S. 509 ; 65 L. Ed. 75 1 (3) (1940) 311 U.S. 60 ; 85 L. Ed. 40.

(4) (1942) 66 C.L.R. 198.

in England an argument which we have already discarded. The argument founded on an assumed legislative practice being thus out of the way, there can be no difficulty in applying its natural and grammatical meaning to the ordinary English word "income." As already observed, the word should be given it widest connotation in view of the fact that it occurs in a legislative head conferring legislative power. For reasons stated above we are of opinion that Act XXII of 1947 which amended the Indian Income-tax Act by enlarging the definition of the term income in section 2 (6-C) and introducing a new head of income in section 6 and inserting the new section 12-B is intra vires the powers of <ORG> acting under entry 54 in List I of the Seventh Schedule of the Government of India Act, 1935. In this view of the matter it is unnecessary for us to consider or express any opinion as to the meaning, scope and ambit of entry 55 in that List. The appeal is accordingly dismissed with costs.

Appeal dismissed.


<NAME>, J.

1. In this appeal, and in another appeal (No. 86 of 1930) in which the same parties are concerned, the relevant facts cover much common ground, and they were accordingly heard together.

2. <NAME> (who will be referred to as the testator) was a shareholder in a company (herein called the company) named <ORG>, which was incorporated under the Indian Companies Act , 1913, on August 23, 1921. He carried on business under the style of <NAME> at Calcutta and under the style of <NAME> at Delhi.

3. On February 23, 1922, he entered into a contract in writing with the company (modified in some respects at a later date) by which he agreed to supply large quantities of tramway construction material to the company. Clause 16 of this contract was in the following terms :-

The company shall pay to the contractors by way of advance when the contractors have placed the orders in accordance with the terms of paragraph No. 6" above, twenty-five per cent, of the value of such materials for which firm orders shall have been placed as aforesaid by the contractors. Any amount of advance or advances so paid shall be deducted from the final payments for the respective materials as in paragraph No. 13 above.

4. On the same date a sum of Rs. 27,000 was paid to the testator, and a letter was written to him, signed by one <NAME>, as managing agent on behalf of the company, in which it was stated that:-

We have to-day paid you Rs. 27,000 (rupees twenty-seven thousand) by way of an advance and this amount will be deducted from your bill for the second shipment. Your receipt for the above amount will be understood to have been given on acceptance of these terms.

5. A receipt dated February 23, 1922, was given on behalf of the testator for this sum of Rs. 27,000, "being the amount of advance for the order for rails placed with us by them in terms of their letter...dated February 23, 1922. This amount is to be adjusted hereafter from our bills for supply of rails.

6. Some correspondence took place later in the year between the parties relative to this sum, but the contract between the parties in relation, thereto must, their Lordships think, be sought only in the documents of February 23, 1922.

7. On August 12, 1922, a conversation took place between the testator and <NAME>, as a result of which the testator signed or authorised the signature on his behalf of two forms (dated August 12, 1922) applying for further shares in the company. By one form he applied for 10,000 ordinary shares of Rs. 10 each ; by the other he applied for 250 preference shares of Rs. 100 each. It will be sufficient to set out the terms of the application form for the ordinary shares. It was addressed to the directors of the company and ran thus :-

Having paid to the company's agents, the Messrs, <NAME>, the sum of Rupee one per share on ten thousand ordinary shares of Rs. 10 each in the above company, I request you to allot me that number of shaves, upon the terms of the company's prospectus, dated August 15, 1921, and I hereby agree to accept the same or any smaller number of shares that may be allotted to me, and to make further pay<ORG>nts thereon in accordance with the prospectus, and I authorize you to register <ORG> as the holder of the said shares.

8. Although the forms state that moneys have been paid, no payment in respect of the shares was in fact made until September 13, 1922.

9. What exact agreement was come to on August 12, 1922, can only safely be gathered from the terms of the following letter (No. 3452/M.H.), which is dated September 13, 1922, addressed to the testator's firm, and signed by the secretary of the company :-

With reference to the arrangements arrived at in Calcutta, with your principal, <NAME>, when the latter agreed to bake additional shares of the face value of RS. 1,25,000, the applications for which you have already submitted in consideration for the same, we hereby agree to place our orders for materials required for the tramway through you and to give you consideration of all reductions which may be obtained either by you or by us on any tender submitted to our Consulting Engineers for the respective materials aforesaid.

It is understood that you will pay us now the application and allotment money for these shares and that the balance of money on these shares will be payable by you on or after April 1923, either by giving us credit in the invoices for materials or by cash payments. The orders for the material aforesaid will not be placed by you unless and until our Consulting Engineers approve of the respective firms or suppliers. All other conditions relating to this agreement will be the same as already exist between us by virtue of the agreement dated February 23, 1922.

This arrangement includes orders to be placed by us for the proposed extension between our present terminus at Mussoorie and the Library. It is understood that the proposed extension will be carried out as and when the company decides.

10. On the same day the company wrote two other letters to the testator, agreeing to give him ten per cent. commission on certain tramcars and equipments for which orders had already been placed elsewhere. On the same day there was paid to the testator out of the company's funds a sum of Rs. 35,000, for which a receipt was given in the following terms;-

Received from <ORG>, the sum of Rs. 35,000 (Rupees thirty-five thousand) only, being advances for orders placed with us as per their letter No. 3452/M.H. of date. "Dated September 13, 1922.

11. On September 13, 1922, the application and allotment moneys payable in respect of the shares covered by the application forms were paid to the company by the testator. The shares were allotted, and the testator was entered in the share register of the company as the holder of said 10,000 ordinary shares and 250 perference shares, which will be hereafter referred to as the shares now in question.

12. The company failed to perform its obligations under either of the contracts above referred to, with the result that in the month of August 1924, the testator instituted in <ORG> a suit (No. 2251 of 1924) claiming damages and other relief in respect of the breaches by the company of the said contracts. Before this suit came to trial the company was ordered to bo wound up by <ORG>, the commencement of the winding up being January 29, 1926.

13. The testator died on September 5, 1926. The five appellants in the appeal No. 86 of 1930 are his executors.

14. On November 25, 1926, the official liquidators of the company served a notice on the testator's executors that the list of contributories of the company would be settled on January 7, 1927, and that the executors were included in the list in respect of the shares now in question.

15. In January, 1927, the executors applied to <ORG> asking (1) for permission to continue the suit No. 2251 of 1924, and (2) that their names should not be put on the list of Contributories until that suit had been disposed of. On July 19, 1927, the application, in both its branches, was refused.

16. The executors, therefore, brought forward their claims for breaches of contract in the liquidation. Judgment on them was delivered on May 14, 1929, by <NAME> and Young JJ. In respect of the claim to damages for breach of the earlier contract there was awarded to the claimants as damages a sum of Rs. 7,884, with interest at twelve per cent. per annum from July 1, 1923, to the date of the winding up of the company. In respect of the claim to damages for breach of the later contract, the learned Judges held that the contract was an illegal agreement, being in contravention of Section 105 of the Indian Companies Act, 1913, with the result that, although there had been a breach on the part of the company, the claimants could recover no damages.

17. Meanwhile, on March 26, 1928, the official liquidators of the company had made an application in the winding up against the executors, by which they sought to recover from them as debtors to the company (amongst other sums) the said two sums of Rs. 27,000 and Rs. 35,000, and, in addition, a sum of Rs. 7,703-13-0, balance shown to be due on an account in the books of the company, which included as debits against the testator the said two sum of Rs. 27,000 and Rs. 35,000.

18. Judgment on this application was delivered by the same learned Judges on May 14, 1929. They held, apart from the question whether any part of the claim was barred by limitation, (1) that the sum of Rs. 27,000 was only an advance towards price and not a deposit or earnest money, that the liquidators were entitled to recover it, but that the executors were entitled to set off against it the damages awarded to them as aforesaid; (2) that the sum of Rs. 35,000 was paid also by way of an advance towards price and not as a deposit or earnest money, and that the liquidators were entitled to recover it; and (3) that they were also entitled to recover the balance on account of Rs. 7,703-13-0

19. Upon the questions of limitation their findings were as follows : As to the sum of Rs. 27,000, they held that it became repayable at the end of June 1923, when the company made default in taking delivery of goods, and that accordingly the period of limitation (whatever it might be) commenced to run on July 1, 1923 ; that Article 51 of the first schedule to the Indian Limitation Act applied and that accordingly the period of limitation would not expire until July 1, 1926. As regards the sum of Rs. 35,000, they held that the contract under which it was paid being illegal, the money became immediately repayable as money had and received on September 18, 1922. If the company had known of the transaction, then Article 62 would apply and the period of limitation would expire on September 13, 1925. They found, however, that the company was never aware of the payment, and that either Article 95 or Article 120 applied, with the result that the period of limitation would not expire at the earliest until September 13, 1928. As regards the balance of Rs. 7,703-13-0, they held that the period of limitation began to run on March 81, 1924, the end of the year of account with the result that under Article 85 the period did not expire until March 31, 1927.

20. It will be observed that in the case of each of the three items the learned Judges found that the period of limitation had not expired, but was still current at the date of the commencement of the winding up, viz., January 29, 1926. Upon that footing they held that all three sums were recoverable, upon the ground that the rule of limitation would cease to apply to any debt not already barred at the commencement of the liquidation. "If any claim happens to be within limitation when the winding up commenced, there would be no further application of the rule of limitation." In the result they allowed the claims of the official liquidators for recovery of the three sums, amounting altogether to Rs. 69,703-13-0, with simple interest at nine per cent. per annum, from March 31, 1924, to the: date of the claim, with interest upon the aggregate amount (viz., Rs. 94,710-2-0) at six per cent, per annum until realisation.

21. The next event was a petition presented to <ORG> at Allahabad by the executors, praying that their names might be removed from the list of contributories of the company with regard to the shares now in question, and further praying that the sum of Rs. 31,250 paid as application and allotment moneys with regard thereto might be paid to the executors, with interest thereon at twelve per cent. per annum.

22. The foundation for this application was (not unnaturally) the fact' that the <ORG> had already adjudicated upon the agreement entered into on August 12, 1922, and September 13, 1922, and had in proceedings between the same parties pronounced it to be illegal and void. Judgment was pronounced by <NAME> and <NAME> on November 20, 1929. The learned Judges held that the application was out of time, not having been made within thirty days of July 19, 1927, being the date on which the <ORG> had refused the application of the executors to postpone the placing of their names upon the list of contributories until their suit in the High <ORG> of Calcutta had been disposed of. This decision turned upon a question of construction of the Allahabad High <ORG> Rules under the Indian Companies Act . The application was, however, also considered on the merits and dismissed, upon the ground that there existed a valid contract to take the shares to which the illegal agreement was only collateral.

23. The two appeals which have been presented to His Majesty in Council, and have been argued before the <ORG>, may now be defined. The one (No. 127 of 1930) was presented by four of the testator's executors against the liquidators and the remaining executor, and seeks to reverse <ORG> decree dismissing the application in regard to the list of contributories. The other (No. 86 of 1930) was presented by all the executors against the liquidators, and seeks to reverse the decree of <ORG> passed in accordance with the judgment which allowed the claims of the liquidators to the three sums of Rs. 25,000, Rs. 37,000 and Rs. 7,703-13-0.

24. There has been no appeal from <ORG> decree upon the claims of the executors in the liquidation for damages for breaches of contract.

25. Their Lordships have deemed it advisable to reserve further consideration of appeal No. 86 of 1930, but they do not consider it necessary to delay dealing with appeal No. 127 of 1930.

26. Upon that appeal it was contended (1) that it had been decided as between the parties in other litigation that the arrangements of August 12, 1922, and September 13, 1922, constituted one indivisible contract, which was illegal and void ; (2) that these matters were res judicata, and (3) that since the contract to take shares was void, the executors were under no liability in respect of the shares, but were entitled to have their names removed from the list of contributories, and to have the application and allotment moneys repaid.

27. Other arguments were advanced, but, in their Lordships' opinion, this appeal should be dismissed upon one short but sufficient ground. They will assume in favour of the appellants that the matters claimed to be res judicata were res judicata within the Code of Civil Procedure, but although they are prepared to make this assumption, they desire to state clearly that they do not assent to the view of <ORG> that the contract in question contravened the provisions of Section 105 of the Indian Companies Act. But even with this assumption made in their favour, the appellants cannot, in their Lordships' view, succeed. Whatever may have been the rights and liabilities of the testator before the winding up intervened, the position was altered by the happening of that event. At the commencement of the winding up he was and had for over three years been entered on the register of shareholders as the holder of the shares now in question, with his full knowledge and assent. On the winding up, Section 156 of the Indian Companies Act came into play. His liability under that section in respect of the shares was absolute and flowed from the fact of his being on the register in respect of those shares. The original contract may supply the reason for his name having been placed on the register in respect of the shares, but after the winding up his liability in respect of the shares arose ex lege and not ex contractu. It was conceded that the position of the executors was no better than that of the testator. In their Lordships' opinion, this point disposes of the first appeal, which should accordingly be dismissed. This view renders it unnecessary to consider whether the application was out of time. Their Lordships, however, think it right to state that, as at present advised, they are unable to understand how the period of thirty days mentioned in Rule 58 of the Rules before mentioned can have commenced to run unless and until the notice contemplated by Rule 57 had been served. This admittedly was never done.

28. Their Lordships will humbly advise His Majesty that this appeal (No. 127 of 1930) should be dismissed. The appellants will pay the costs of the appeal.