PETITIONER: <ORG> Vs. RESPONDENT: SPECIAL AREA DEVELOPMENT AUTHORITY, KORBA AND ANR. DATE OF JUDGMENT26/11/1981 BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) DESAI, D.A. CITATION: 1982 AIR 697 1982 SCR (2) 1 1982 SCC (1) 125 1981 SCALE (3)1775 CITATOR INFO : D 1983 SC 937 (12) D 1988 SC1369 (14) F 1988 SC1708 (13) D 1988 SC1737 (53) RF 1989 SC 222 (3) RF 1991 SC1676 (47,48,49,53) ACT: Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam (23 of 1973), S 69(d), Madhya Pradesh Municipalities Act 1961, S. 127A and Madhya Pradesh <ORG> Act 1956, Ss. 135, 136. Property Tax-Levy of-Whether special <ORG> has all the powers of taxation which a <ORG> or <ORG> has-Whether incorporation of earlier Act in a later Act or reference to the powers conferred by earlier Acts. Constitution of India 1950, Act 285(1), M.P. Municipalities Act 1961, s. 147 Expln. and M.P. <ORG> Act 1956, s. 141-Property tax on leased lands- Land owned by <ORG>-Taken on lease by Company- Entire share capital of company subscribed by <ORG>-Liability to payment of property tax-Whether arises. Coal Mines Nationalisation Act 1973, s. 5 , Mines & Mineral (Regulation and Development) Act 1957 s. 2 and M.P. Nagar Tatha Gram Nivesh Adhiniyam 1973, s. 69(d) -Power conferred on <ORG> <ORG> to impose property tax whether in conflict with the power to regulate and develop coal mine conferred by Nationalisation Act . HEADNOTE: The Madhya Pradesh Municipalities Act, 1961 by S. 127 (1) (i) empowered a municipal council to impose, in the whole or any part of the municipality, "a tax payable by the owners of houses, buildings or lands situated within the limits of <ORG> with reference to annual letting value of the house, building or land called property tax". The corresponding provision in <ORG> <ORG> Act, 1956 was section 132(1)(a) , and it provided that "the <ORG> shall impose a tax payable by the owners of buildings or lands situated within the city with reference to the gross annual letting value of the building or land called the property tax". The procedure for imposition of taxes was spelt out in section 129 of the Municipalities Act and section 133 of the <ORG> Act. Section 127A was inserted in the Municipalities Act for imposition of property tax and provided by sub-clause (1) that as and from the financial year 1976-77 there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both situated in a municipality at specified rates. Sub-clause (2) exempted properties owned by or vesting in <ORG>, <ORG> or the <ORG> from the levy. Similar 2 provisions were inserted in sections 135 and 136 of the <ORG> Act. Respondent No. 1 was constituted the Special <ORG> under section 65 of <ORG> Nagar Tatha Gram Nivesh Adhiniyam . Clauses (c) and (d) of section 69 of the Act conferred upon <ORG> powers for the purpose of municipal administration and for the purpose of taxation. These clauses were inserted by Ordinance 26 of 1975 which came into force on February 27, 1976. The Ordinance was replaced by <ORG> Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam 1976 . On June 24, 1976 respondent 1 entered into an agreement with the appellant company under which the company agreed to contribute a sum of rupees 3 lakhs annually to the "seed capital" of the <ORG> in consideration of the <ORG> agreeing not to exercise its power of taxation or of levying any other charges on the assets and activities of the company. The agreement was to remain in force for a period of ten years beginning from the calendar year 1976 and the annual payments due from 1977 were to be made in January every year. The appellant company paid the contribution for the year 1976. In the same year the company was called upon by the Sales Tax authorities to pay "the tax on the entry of goods" which was introduced by <ORG> Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh 1976 in substitution of octroi tax. While the company was pursuing that matter with the <ORG>, contending that it was not liable to pay the entry tax by reason of the agreement, on January 4, 1977 respondent 1 made a further demand of Rs. 3 lakhs on the company for contribution for the year 1977. That amount not having been paid as provided in the agreement, respondent 1 terminated the agreement by its letter dated February 4, 1977. By a notice issued under section 65 of <ORG> Nagar Tatha Gram Nivesh Adhiniyam 'Act of 1973' on February 21, 1977 and by another notice issued under section 164(3) of <ORG> Municipalities Act 1961 on April 15, 1977, the Chief Executive Officer of respondent 1 called upon the company to pay a sum of about Rs. 13 lakhs by way of property tax for the year 1976-77. On July 16, 1977 the company was called upon to pay a further sum of about Rs. 13 lakhs as property tax for the year 1977-78. The company disputed its liability to pay on the ground that no tax was leviable on its property since the company was owned wholly by <ORG> and that respondent 1 was estopped from levying the property tax by reason of the agreement of 1976. Having failed to pursuade respondent 1 to accept its point of view, and also having failed in the High Court the appellant company came to this Court in appeal. In the appeals to this Court it was contended: (1) that respondent 1 can exercise only such powers to levy property tax as the <ORG> or the <ORG> had under <ORG> <ORG> Act, 1956 or <ORG> Municipalities Act, 1961 as these Acts stood on February 27, 1976, when clause (d) was inserted in section 69 of the Act of 1973. Section 127A and section 135 which create and levy the charge of property 3 tax having been inserted in the Municipalities Act and the <ORG> Act respectively with effect from April 1, 1976 i.e. subsequent to the insertion of clause (d) in section 69 of the Act of 1973, Respondent 1 was incompetent to exercise the powers of the <ORG> or the <ORG> under section 127A of the <ORG> Act or section 136 of the <ORG> Act; (2) that respondent 1 cannot impose the property tax without following the procedure prescribed by section 129 of the Municipalities Act and section 133 of the <ORG> Act; (3) that Article 285(1) of the Constitution envisages that the property of the <ORG> shall save in so far as <ORG> may by law otherwise provide be exempt from all taxes imposed by a <ORG> or by any authority within a <ORG>. Section 127A(2) of <ORG> Municipalities Act and section 136 of <ORG> <ORG> Act also provide that the property tax shall not be leviable, on "buildings and lands owned by or vesting in <ORG>". The appellant companies being wholly owned by <ORG>, the lands and buildings owned by the companies cannot be subjected to property tax; (4) that the lands having been taken on lease for a period of 30 years by the appellant companies, it is the <ORG> and not the appellant companies who can be called upon to pay the tax; and (5) that <ORG> enacted the Coal Mines Nationalisation Act , 1973 for acquisition of coal mines and utilisation of coal resources to subserve the common good. The lands and buildings on which respondent 1 had imposed the property tax are used for the purposes of and are covered by coal mines. The taxing power of the <ORG> legislature comes in conflict with the power and function of the <ORG> to regulate and develop the mines as envisaged by the Nationalisation Act , and is an impediment since it substantially increased the cost of the developmental activities. Dismissing the appeals, ^ HELD: (i) Section 69(d) of the Act of 1973 must be read to mean that respondent 1 shall have all the powers of taxation which a <ORG> or a <ORG> has at the time when respondent 1 seeks to exercise those powers. [14 A] (ii) The Act of 1973 does not provide for any independent power of taxation or any machinery of its own for exercising the power of taxation. It rests content by referring to the provisions contained in the two Municipal Acts. The three Acts are supplemental, from which it must follow that amendments made to the earlier Acts after the enactment of section 69(d) shall have to be read into that section. Without recourse to such a construction the power of taxation conferred by that section will become ineffectual. [14 B-C] (iii) A reading of the reference to the two earlier Municipal Acts as a reference to those Acts as they stand at the time when the power of taxation is sought to be exercised by respondent 1 will not cause repugnancy between the two earlier Acts on one hand and the Act of 1973 on the other, nor will it cause any confusion in the practical application of the earlier Acts, because the Act of 1973 does not contain any independent provision or machinery for exercising the power of taxation. [14 D] 4 (iv) If an earlier legislation is incorporated into a later legislation, the provisions of earlier law which are incorporated into the later law become a part and parcel of the later law. Therefore, amendments made in the earlier law after the date of incorporation cannot by their own force, be read into the later law. That is because the legislature, cannot be assumed to intend to bind itself to all future amendments or modifications which may be made in the earlier law. [12 D-E] (v) Where a statute is incorporated by reference into a second statute, the repeal of the first statute by a third does not affect the second. Likewise, where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it. [12G-13A] (vi) The broad principle that where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act, is subject to four exceptions, one of which is that the principle will not apply to cases "where the subsequent Act and the previous Act are supplemental to each other". [13 D] Secretary of <ORG> for India in <CITATION> , Limited, 58 Indian Appeals, 259, <NAME> v. <NAME>,  8 Q.B.D. 63 69; <CITATION> .,  3 S.C.R. 786 and <CITATION> ,  1 SCR 6, referred to. In the instant case, subsequent amendments made to the <ORG> Act and the Municipalities Act will also apply to the power of taxation provided for in section 69(d) of the Act of 1973. The Act of 1973 did not by section 69(d) , incorporate in its true signification any particular provision of the two earlier Acts. It provided that, for the purpose of taxation, the Special <ORG> shall have the powers which a <ORG> or a <ORG> has under <ORG> <ORG> Act, 1956 or <ORG> Municipalities Act, 1961. The case, therefore, is not one of incorporation but of mere reference to the powers conferred by the earlier Acts. [13 E-F] 2(i) Section 127A of the Municipalities Act and section 135 of the <ORG> Act create by their own force, the liability to be brought to property tax and the right to levy that tax. Nothing further is required to be done by the <ORG> or the <ORG> in order to impose the property tax. The procedure preliminary to the imposition of other taxes which is prescribed by sections 129 and 133 of the two Acts, can have no application to the imposition of the property tax. [14 F-15 A] (ii) The property tax is imposed by respondent 1 under section 127A of the Municipalities Act and section 135 of the <ORG> Act. It is not imposed under section 127 of the former Act or section 132 of the latter Act. It is, therefore, not necessary to follow the procedure prescribed by sections 129 and 133 of the respective Acts. [15 B-C] 5 3. Even though the entire share capital of the appellant companies has been subscribed by <ORG>, it cannot be predicated that the companies themselves are owned by <ORG>. The companies, which are incorporated under the Companies Act , have a corporate personality of their own, distinct from that of <ORG>. The lands and buildings, are vested in and owned by the companies; <ORG> only owns the share capital. [16 <CITATION> ,  3 S.C.R. 530, 555, <CITATION> ,  3 S.C.R. 995, <CITATION> .  7 S.C.R. 17 & Tamlin v. Hansaford  K.B. 18 referred to. 4. The Explanation to section 147 of the Municipalities Act says that the property tax has to be paid by the owner of the land or building and that a tenant of land or building or both, who holds the same under a lease for an agreed period, shall be deemed to be the owner thereof. Section 141(1) of the <ORG> Act provides that the property tax shall be paid primarily by the owner. By sub-section (2) of section 141 , the property tax levied on the owner can also be recovered from the occupier of the land or the building.[18D-E] 5(i) The power conferred by the <ORG> <ORG> on Special Area Development Authorities to impose the property tax on lands and buildings is not in conflict with the power conferred by the Coal Mines Nationalisation Act on <ORG> to regulate and develop coal mines so as to ensure rational and scientific utilisation of coal resources. [21 G] (ii) The paramount purpose behind the declaration contained in section 2 of the Mines and Minerals (Regulation and Development) Act , 1957 is not in any manner defeated by the legitimate exercise of taxing power under section 69(d) of the Act of 1973. [21 <CITATION> ,  6 S.C.R. 666, <CITATION>  3 SCR 688 and <CITATION> .  3 SCR 331 referred to. <CITATION> .  2 S.C.R. 100, distinguished. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1025-26 of 1978.

Appeals by special leave from the judgment order dated the 15th April, 1978 of <ORG> in Misc. Petition Nos. 61 and 62/78 respectively.

With Civil Appeal No. 213 of 1979 Appeal by special leave from the judgment and order dated the 15th April, 1978 of <ORG> in Misc. Petition o.555 of 1977.

<NAME>, Attorney General, <NAME> and Miss <NAME> for the Appellants.

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

<NAME>, <NAME> and <NAME> for the applicant intervener <ORG> of Delhi.

<NAME> for the applicant intervener State of M.P.

The Judgment of the Court was delivered by CHANDRACHUD, C.J. These appeals by special leave involve the question of the legality of the demand for Property-tax made by respondent 1 on the appellant Companies. Civil Appeal No. 213 of 1979 filed by <ORG> arises out of Misc. Petition No. 555 of 1977 filed by it in <ORG> under Article 226 of the Constitution. Respondent 1 is <ORG>, Korba, District Bilaspur, M.P., respondent 2 is its Chairman and respondent 3 is the State of Madhya Pradesh. Since the three appeals raise similar questions, we will refer to the facts of Civil Appeal No. 213 of 1979 only. Civil Appeals Nos. 1025 and 1026 of 1978 are by <ORG>

The appellant, <ORG>, is a <ORG> Company incorporated under the Companies Act , 1956, the entire share capital being owned by <ORG>. Respondent 1, <ORG>, is constituted under section 65 of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam , referred to hereinafter as 'the Act of 1973'. That Act was passed by <ORG> in order "to make provision for planning and development and use of land; to make better provision for the preparation of development plans and zoning plans with a view to ensuring that town planning schemes are made in a proper manner and their execution is made effective; to constitute <ORG> for proper implementation of town and country development plan; to provide for the development and administration of special areas through <ORG>; to make provision for the compulsory acquisition of land required for the purpose of the development plans and for purposes connected with the matters aforesaid". Chapter VIII of the Act, consisting of sections 64 to 71 , is entitled "Special Areas". Section 64 empowers <ORG> to declare any area as a special area by issuing a notification. Section 55 provides that for every Special Area there shall be a <ORG> consisting of a Chairman and such other members as the <ORG> may determine from time to time. The Chairman and the members of <ORG> are appointed by the <ORG>. Section 68 , which prescribes the functions of <ORG>, lays down by clauses (v) and (vi) that <ORG> shall make provision for the municipal services and municipal management of the Special Area. Section 69 , by clauses (c) and (d), confers upon <ORG> powers for the purpose of municipal administration and for the purpose of taxation. These two clauses of section 69 and clauses (v) and (vi) of section 68 were inserted in their present shape by Ordinance 26 of 1975 which came into force on February 27, 1976. The Ordinance was replaced by the Madhya Pradesh Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam, 1976 .

Section 69(d) of the Act of 1973 reads thus: "69. Powers: <ORG> shall

(d) for the purpose of taxation have the powers which is municipal corporation or a municipal council has, as the case may be, under the Madhya Pradesh Municipal Corporation Act, 1956 (No. 23 of 1956) or the Madhya Pradesh Municipalities Act, 1961 (No. 37 of 1961),

(a) where the municipal corporation of municipal council existed in such area prior to its designation as special area under section 64 , according to the municipal law by which such special area was governed, and

(b) where no municipal corporation or municipal council existed in such area prior to its designation as special area under section 64 , according to such of the aforesaid Acts as <ORG> may direct."

Clauses (a) and (b) above are sub-clauses of clause (d). (They should better have not been so numbered alphabetically since the main clauses themselves are similarly numbered).

Since there was no Municipal <ORG> or <ORG> in the Korba Special Area prior to the constitution of <ORG>, the Government was required under sub-clause (b) above to direct whether the Madhya Pradesh Municipal <ORG> Act, 1956, or the Madhya Pradesh Municipalities Act, 1961, shall apply to the Korba Special Area for the purposes of clauses (v) and (vi) of section 68 and clauses (c) and (d) of section 69 . Such a direction was first issued by Notification dated January 28, 1976 published in the <ORG>, dated February 27, 1976 by which <ORG>, Korba, was directed to exercise the powers and perform the functions of a Class I Municipality constituted under the Madhya Pradesh Municipality Act, 1961. This Notification became effective from February 27,1976 from which date Ordinance No. 26 of 1975 was made effective. By another Notification, dated March 15, 1977, published in <ORG>, dated July 15, 1977, <ORG>, Korba, was directed under the aforesaid clauses of sections 68 and 69 to exercise the powers and perform the functions under the Madhya Pradesh Municipal <ORG> Act, 1956.

Section 127(1)(i) of the Madhya Pradesh Municipalities Act, 1961 empowers a municipal council to impose, in the whole or any part of the municipality, "a tax payable by the owners of houses, buildings or lands situated within the limits of Municipality with reference to annual letting value of the house, building or land called property tax". The corresponding provision in the Madhya Pradesh Municipal <ORG> Act, 1956 is section 132 (1)(a). It says that "the <ORG> shall impose a tax payable by the owners of buildings or lands situated within the city with reference to the gross annual letting value of the building or land called the property tax". The procedure for imposition of taxes is contained in section 129 of the Municipalities Act and section 133 of the Municipal <ORG> Act.

In 1964, <ORG> had enacted the Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyam, which was made applicable to the whole State, including the urban areas. By section 36 of the aforesaid Adhiniyam, local authorities were prohibited from recovering the property tax from November 24, 1970.

Towards the beginning of 1976, the Government decided to abolish octroi tax and to impose in its place a 'tax on the entry of goods'. To compensate the municipal councils and the municipal corporations for the loss arising from the abolition of the octroi tax, the Government decided to confer powers on these bodies for levying property tax. For conferring powers to levy tax on the entry of goods in place of octroi tax, the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh, 1976 (6 of 1976) was promulgated. For conferring powers to levy property tax, Ordinance No. 4 of 1976 was promulgated. Both of these Ordinances were published in the Madhya Pradesh Gazette, dated April 30, 1976 from which date they came into force. Ordinance No. 4 of 1976 inserted certain provisions in the Municipalities Act and the Municipal Corporation Act. This ordinance was replaced by Act No. 50 of 1976. By section 1(2) of that Act, the provisions inserted in the Municipalities Act and the Municipal Corporation Act, with which we are concerned, were deemed to have come into force with effect from April 1, 1976. Section 127A which was inserted in the Municipalities Act for imposition of property tax reads as follows, in so far as relevant:

"127A. (1) Notwithstanding anything contained in this chapter, as and from the financial year 1976-77, there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both situate in a municipality other than class IV municipality at the rate specified in the table below:

(i) where the annual letting 6 per centum value exceeds Rs. 1,800 of the annual but does not exceed letting value. Rs. 6,000. (ii) X X X X X X (iii)X X X X X X (iv) X X X X X X (v) where the annual letting 20 per centum value exceeds of the annual Rs. 24,000 letting value

(2) The property tax levied under sub-section (1) shall not be leviable in respect of the following properties, namely:

(a) building and lands owned by or vesting in

(i) <ORG>;

(ii) the State Government;

(iii)the <ORG>."

Similar provisions were inserted in sections 135 and 136 of the Municipal Corporation Act.

On June 24, 1976, respondent 1 (<ORG>, Korba) entered into an agreement with the appellant <ORG> under which the <ORG> agreed to contribute a sum of Rupees three lakhs annually to the "seed capital" of the <ORG> in consideration of the <ORG> agreeing not to exercise its power of taxation or of levying any other charges on the assets and activities of the <ORG> under the Act of 1973 as amended from time to time or under any other Act or notification. The agreement was to remain in force for a period of ten years beginning from the calendar year 1976 and the annual payments due from 1977 were to be made in January every year. The appellant <ORG> paid the contribution for the year 1976 as agreed. In the same year, the <ORG> was called upon by the Sales Tax authorities to pay the tax on entry of goods which was introduced in substitution of the octroi tax. While the <ORG> was pursuing that matter with the State Government, contending that it was not liable to pay the entry tax by reason of the aforesaid agreement, on January 4, 1977 respondent 1 made a further demand of Rs. 3 lakhs on the <ORG> for contribution for the year 1977. That amount not having been paid as provided in the agreement, respondent 1 terminated the agreement by its letter dated February 4, 1977. The <ORG> sent a cheque for Rs. 3 lakhs to respondent 1 on April, 28, 1977.

By a notice issued under section 65 of the Act of 1973 on February 21,1977 and by another notice issued under section 164(3) of the Madhya Pradesh Municipalities Act 1961 on April 15, 1977, the Chief Executive Officer of respondent 1 called upon the <ORG> to pay a sum of Rs. 13,22,160 by way of property tax for the year 1976-77. By a letter dated May 21, 1977 respondent 1 reduced the demand by Rs. 3 lakhs being the amount paid by the <ORG> by way of contribution for the year 1977, under the agreement of 1976. On July 16, 1977 the <ORG> was called upon to pay a further sum of Rs. 13,65,673.50 as property tax for the year 1977-78.

The appellant Company disputed its liability to pay the aforesaid amounts on the grounds, principally, that no tax was leviable on its property since the Company was owned wholly by <ORG> and that respondent 1 was estopped from levying the property tax by reason of the agreement of 1976. Having failed to persuade respondent 1 to accept its point of view, the Company filed o Writ Petition in <ORG> asking that the demands be quashed. Civil Appeal No. 213 of 1979 by special leave is directed against the dismissal of the Writ Petition.

In the other two appeals (Nos. 1025 and 1026 of 1978), the appellant, <ORG>, is also a hundred per cent undertaking of <ORG>. That Company has been called upon by respondent 1 to pay property tax for the years 1976-77 and 1977-78 in the sum of Rs. 3,71,461 for each year. The Writ Petitions (61 and 62 of 1978) filed by it were dismissed by <ORG>, following the judgment delivered in the Writ Petition filed by <ORG>

Civil Misc. Petitions Nos. 13211 of 1979 and 3767 of 1980 are for intervention by <ORG> and <ORG> respectively. <ORG> has held in L.P.A. 105 of 1979 that <ORG> has the power to levy property-tax on the property of <ORG>, whose share capital is owned by the State of Jammu and Kashmir and the Union of India in the proportion of 51% and 49% respectively. In Special Leave Petition No. 10688 of 1979 filed against the judgment, the question raised is whether the property of a public corporation owned wholly by <ORG> and <ORG> is exempt from taxes by reason of articles 285 and 289 of the Constitution. We have allowed both the parties to intervene in these appeals.

The learned Attorney General, who appears on behalf of the appellants, has raised four or five principal points, any one of which, if accepted, will result in the success of these appeals. However, we are unable to accept any of these.

The first contention of the learned Attorney General is that respondent I can exercise only such powers to levy property tax as <ORG> or <ORG> had under the Madhya Pradesh Municipalities Corporation Act, 1956, or the Madhya Pradesh Municipalities Act, 1961, as these Acts stood on February 27, 1976, when clause (d) was inserted in its present form in section 69 of the Act of 1973. It is urged that the provisions conferring powers of taxation under the aforesaid two Acts must be taken to have been incorporated in section 69(d) of the Act of 1973 and any subsequent change in those provisions by amendment of the two Acts cannot be availed of by respondent 1. Section 127A and section 135 which, by their own force, create and levy the charge of property tax were inserted in the Municipalities Act and <ORG> Act respectively with effect from April 1, 1976, that is, subsequent to the insertion of clause (d) in section 69 of the Act of 1973. Relying on this, it is argued that respondent 1 was incompetent to exercise the powers of the <ORG> or <ORG> under section 127A of the Municipalities Act or section 135 of <ORG> Act.

The answer to this contention will depend mainly upon whether the provisions of the Municipalities Act and the Municipal Corporation Act were incorporated into the Act of 1973 by its section 69(d) . It is well-settled that if an earlier legislation is incorporated into a later legislation, the provisions of earlier law which are incorporated into the later law become a part and parcel of the later law. Therefore, amendments made in the earlier law after the date of incorporation cannot, by their own force, be read into the later law. That is because the legislature, which adopts by incorporation the existing provisions of another law, cannot be assumed to intend to bind itself to all future amendments or modifications which may be made in the earlier law. In other words, the incorporating Act does nothing more than borrow certain provisions of an existing Act and instead of setting out, verbatim, those provisions in its own creation, refers to them as a matter of convenience in the mode of drafting. (See Secretary of <ORG> for India in <CITATION> ; Craies on Statute Law, 7th Edition, pages 360-361.) The principle, broadly, is that where a statute is incorporated by reference into a second statute, the repeal of the first statute by a third does not affect the second (see <NAME> v. <NAME>). Likewise, logically, where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it. (see Secretary of <ORG> for India in <CITATION> ). (supra) But these rules are not absolute and inflexible. In the case last cited, <ORG> qualified its statement of the law by saying that the principle, that an amendment of the first law which is not expressly made applicable to the subsequent incorporating Act cannot be deemed to be incorporated into the second Act, applies "if it is possible for the subsequent Act to function effectually without the addition" (page 267). Besides, as held by a Constitution Bench of this Court in the <CITATION> . the decision of <ORG> could not be extended too far so as to cover every case in which the provisions of another statute are adopted by absorption (see page 837). Finally, in <CITATION> this Court held, after an examination of the relevant decisions, that the broad principle that where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act, is subject to four exceptions, one of which is that the principle will not apply to cases "where the subsequent Act and the previous Act are supplemental to each other".

Applying these principles, we are of the opinion that in the instant case, subsequent amendments made to the Municipal Corporation Act and the Municipalities Act will also apply to the power of taxation provided for in section 69(d) of the Act of 1973. The Act of 1973 did not, by section 69(d) , incorporate in its true signification any particular provision of the two earlier Acts. It provides that, for the purpose of taxation, <ORG> shall have the powers which <ORG> or <ORG> has under the Madhya Pradesh Municipal Corporation Act, 1956 or the Madhya Pradesh Municipalities Act, 1961. The case therefore is not one of incorporation but of mere reference to the powers conferred by the earlier Acts. As observed in <NAME>, there is a distinction between a mere reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions of one enactment and making them part of another, so much so that the repeal of the former leaves the latter wholly untouched.

Section 69(d) of the Act of 1973 must accordingly be read to mean that respondent 1 shall have all the powers of taxation which <ORG> or <ORG> has for the time being, that is to say, at the time when respondent 1 seeks to exercise those powers.

The Act of 1973 does not provide for any independent power of taxation or any machinery of its own for exercising the power of taxation. It rests content by pointing its finger to the provisions contained in the two Municipal Acts. The three Acts are therefore supplemental, from which it must follow that amendments made to the earlier Acts after the enactment of section 69(d) shall have to be read into that section. Without recourse to such a construction, the power of taxation conferred by that section will become ineffectual. A reading of the reference to the two earlier Municipal Acts as a reference to those Acts as they stand at the time when the power of taxation is sought to be exercised by respondent 1, will not, possibly, cause repugnancy between the two earlier Acts on one hand and the Act of 1973 on the other, nor indeed will it cause any confusion in the practical application of the earlier Acts, because the Act of 1973 does not contain any independent provision or machinery for exercising the power of taxation. The first contention of the Attorney General must therefore fail.

The second contention is that assuming that section 127A of the Municipalities Act or section 135 of the Municipal Corporation Act, which were introduced by an amendment made after the enactment of section 69(d) , can be invoked for levying the property tax, respondent 1 cannot impose that tax without following the procedure prescribed by sections 129 and 133 of the aforesaid Acts, respectively. This contention is devoid of substance. Sections 127A and 135 create, by their own force, the liability to be brought to property tax and the right to levy that tax. They provide:

Notwithstanding anything contained in this chapter, as and from the financial year 1976-77, there shall be charged, levied and paid for each financial year a tax on the lands or buildings or both.......at the rate specified in the table below:"

Nothing further is required to be done by the Municipality or <ORG> in order to impose the property tax and therefore the procedure preliminary to the imposition of other taxes which is prescribed by sections 129 and 133 of the two Acts, can have no application to the imposition of the property tax. Apart from this the position is put beyond doubt by the language of sections 129 and 133 of two Acts. Section 129 of the Madhya Pradesh Municipalities Act prescribes the procedure for "the imposition of any tax under section 127 ". Similarly section 133 of the Madhya Pradesh Municipal Corporation Act prescribes the procedure for "the imposition of any tax under section 132 ". The property tax is imposed by respondent 1 under section 127A of the Municipalities Act and section 135 of <ORG> Act. It is not imposed under section 127 of the former Act or section 132 of the latter Act. It is therefore not necessary to follow the procedure prescribed by sections 129 and 133 of the respective Acts. This position is made clear, out of abundant caution, by clause (4) of section 133 of <ORG> Act, which provides that nothing contained in section 133 shall apply to the tax mentioned in clause (a) of sub-section (1) of section 132 , which shall be charged and levied in accordance with section 135 . Section 132(1)(a) refers to property tax.

The learned Attorney General contends that the taxing authority must all the same apply its mind to the question whether it wants to bring to tax the land or the building or both. It is not possible to accept this submission because sections 127A and 135 of the two Acts in question leave no such choice open to the taxing authority. The obligation which the statute places upon it is to impose tax on lands where there are lands only and they can be taxed, on buildings where buildings alone can be brought to tax and on both lands and buildings where lands are built upon and both can be brought to tax. This is not, as said by the Attorney General rationalising the taxing power. What we have said is the plain meaning of the taxing provision.

The third contention of the Attorney General flows from the provisions of article 285(1) of the Constitution which says that the property of the <ORG> shall, save in so far as <ORG> may by law otherwise provide, be exempt from all taxes imposed by a <ORG> or by any authority within a <ORG>. Section 127A(2) of the Madhya Pradesh Municipalities Act and section 136 of the Madhya Pradesh Municipal Corporation Act also provide that the property tax shall not be leviable, inter alia, on "buildings and lands owned by or vesting in the <ORG> Government". Relying on these provisions, it is contended by the Attorney General that since the appellant companies are wholly owned by <ORG>, the lands and buildings owned by the companies cannot be subjected to property tax. The short answer to this contention is that even though the entire share capital of the appellant companies has been subscribed by <ORG>, it cannot be predicated that the companies themselves are owned by <ORG>. The companies, which are incorporated under the Companies Act , have a corporate personality of their own, distinct from that of <ORG>. The lands and buildings are vested in and owned by the companies: <ORG> only owns the share capital. In <NAME> v. <ORG> of India (The Banks Nationalisation case) it was held:

"A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the <ORG> is not the property of the shareholders. A shareholder has merely an interest in the <ORG> arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit."

In <ORG> v. The State of Bihar & Ors., <ORG> was incorporated under the Companies Act and its entire share capital was contributed by <ORG>. It was therefore a Government Company under section 617 of the Companies Act. On the question as to whether the <ORG> carried on an industry under the authority of <ORG> within the meaning of section 2(a) of the Industrial Disputes Act, 1947, it was held by this Court that an incorporated company has a separate existence and the law recognises it as a juristic person, separate and distinct from its members. The mere fact that the entire share capital of the respondent company was contributed by <ORG> and the fact that all its shares were held by the President and certain officers of <ORG> did not make any difference to that position.

The decision of this <ORG> in the <CITATION> . puts the matter beyond all doubt. In that case, <ORG> claimed exemption from taxation under article 289 of the Constitution by which, the property and income of a State is exempt from union taxation. This <ORG>, while rejecting the <ORG>'s claim, held that though it was wholly controlled by <ORG> it had a separate entity and its income was not the income of <ORG>. <NAME>, C. J., while speaking for the <ORG>, referred to the judgment of Lord <NAME> in <NAME> v. <NAME> in which the learned Judge observed:

"In the eye of the law, the corporation is its own master and is answerable as fully as any other person or corporation. It is not the <ORG> and has none of the immunities or privileges of the <ORG>. Its servants are not civil servants, and its property is not <ORG> property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government".

In Pennington's Company Law, 4th Edition, pages 50-51, it is stated that there are only two decided cases where the court has disregarded the separate legal entity of a company and that was done because the company was formed or used to facilitate the evasion of legal obligations. The learned author, after referring to English and American decisions, has summed up the position in the words of an American Judge, Sanborn, J. to the effect that as a general rule, a corporation will be looked upon as a legal entity and an exception can be made "when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime", in which case, "the law will regard the corporation as an association of persons". In cases such as those before us, there is no scope for applying the doctrine of lifting the veil in order to have regard to the realities of the situation. The appellant companies were incorporated under the Companies Act for a lawful purpose. Their property is their own and it vests in them. Under section 5(1) of the Coal Mines (Nationalisation) Act, 26 of 1973, which applies in the instant case, the right title and interest of a nationalised coal mine vest, by direction of <ORG>, in the <ORG> company. If the lands and building on which respondent 1 has imposed the property tax cannot be regarded as the property of <ORG> for several other purposes like attachment and sale, there is no reason why, for taxing purposes, the property can be treated as belonging to that <ORG> as distinct from the company which has a juristic personality.

The learned Attorney General resisted the taxation on the lands by contending that they belong to <ORG> and were taken on lease for a period of 30 years by the appellant companies. It is urged that if at all the lands can be subjected to property tax, it is <ORG> and not the appellant companies who can be called upon to pay that tax. This contention does not appear to have been taken before the assessing authority. No documents seem to have been filed before it to bear out facts which are sought to be placed before us nor indeed have we evidence before us to show that the lands belong to <ORG>. The appellants may, if so advised, raise this particular point in future assessments. We would, however, like to draw attention to the Explanation to section 147 of the Madhya Pradesh Municipalities Act which says that though the property tax has to be paid by the owner of the land or building, as the case may be, for the purposes of that section a tenant of land or building or both, who holds the same under a lease for an agreed period with a convenant for its renewal thereafter, shall be deemed to be the owner thereof. Section 141(1) of the Madhya Pradesh Municipal Corporation Act provides that the property tax shall be paid primarily by the owner. By sub-section (2) of section 141 , the property tax levied on the owner can also be recovered from the occupier of the land or the building. These provisions shall have to be borne in mind by the appellants before any attempt is made before the assessing authority to transfer or avoid the impost of the property tax.

Finally, the learned Attorney General raised a contention of fundamental importance which was not raised in <ORG>. The lands and buildings on which respondent 1 has imposed the property tax are used for the purposes of and are covered by coal mines. Basing himself on that consideration the Attorney General argues:

(1) By virtue of the declaration contained in section 2 of Mines and Minerals (Development and Regulation) Act , 1957, the legislative field covered by Entry 23, List II passed on the <ORG> by virtue of Entry 54, List I.

(2) The <ORG> enacted the Coal Mines Nationalisation Act , 1973 for acquisition of coal mines with a view to reorganising and reconstructing such coal mines so as to ensure the rational, coordinated and scientific development and utilisation of coal resources as best to subserve the common good.

(3) Under section 5 of the Nationalisation Act, the acquired properties were vested in a Government Company in order to carry out more conveniently the object of that Act, and for that purpose, the properties were freed from all encumbrances by section 6 of the Act.

(4) The taxing power of the State legislature must be construed as limited in its scope so as not to come in conflict with the power and function of the <ORG> to regulate and develop the mines as envisaged by the Nationalisation Act . (5) The impugned tax is manifestly an impediment in the discharge of the aforesaid function since it substantially increases the cost of the developmental activities. The tax is not in the nature of a fee.

Apart from the fact that there is no data before us showing that the property tax constitutes an impediment in the achievement of the goals of the Coal Mines Nationalisation Act , the provisions of the M.P. Act of 1973, under which <ORG> are constituted afford an effective answer to the Attorney General's contention. Entry 23 of List II relates to "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the <ORG>". Entry 54 of List I relates to "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the <ORG> is declared by <ORG> by law to be expedient in the public interest". It is true that on account of the declaration contained in section 2 of the Mines and Minerals (Development and Regulation) Act , 1957, the legislative field covered by Entry 23 of List II will pass on to <ORG> by virtue of Entry 54, List I. But in order to judge whether, on that account, the State legislature loses its competence to pass the Act of 1973, it is necessary to have regard to the object and purpose of that Act and to the relevant provisions thereof, under which <ORG> are given the power to tax lands and buildings within their jurisdiction. We have set out the objects of the Act at the commencement of this judgment. one of which is to provide for the development and administration of Special Areas through <ORG>, Section 64 of the Act of 1973, which provides for the constitution of the special areas, lays down by sub-section (4) that: Notwithstanding anything contained in the Madhya Pradesh Municipal Corporation Act, 1956, the Madhya Pradesh Municipalities Act, 1961, or the Madhya Pradesh <ORG>s Act, 1962, <ORG>, <ORG>, <ORG> or a <ORG>, as the case may be, shall, in relation to the special area and as from the date <ORG> undertakes the functions under clause

(v) or clause (vi) of section 68 cease to exercise the powers and perform the function and duties which <ORG> is competent to exercise and perform under the Act of 1973. Section 68 defines the functions of <ORG>, one of which, as prescribed by clause (v), is to provide the municipal services as specified in sections 123 and 124 of the Madhya Pradesh Municipalities Act, 1961. Section 69 , which defines the powers of the <ORG>, shows that those powers are conferred, inter alia, for the purpose of municipal administration. Surely, the functions, powers and duties of Municipalities do not become an occupied field by reason of the declaration contained in section 2 of the Mines and Minerals (Development and Regulation) Act , 1957. Though, therefore, on account of that declaration, the legislative field covered by Entry 23, List II may pass on to the <ORG> by virtue of Entry 54, List I, the competence of <ORG> to enact laws for municipal administration will remain unaffected by that declaration.

Entry 5 of List II relates to "Local Government, that is to say, the constitution and powers of municipal corporations and other local authorities for the purpose of local self-Government". It is in pursuance of this power that <ORG> enacted the Act of 1973. The power to impose tax on lands and buildings is derived by <ORG> from Entry 49 of List II: "Taxes on lands and buildings". The power of the municipalities to levy tax on lands and buildings has been conferred by the State Legis-

lature on <ORG>. Those authorities have the power to levy that tax in order effectively to discharge the municipal functions which are passed on to them. Entry 54 of List I does not contemplate the taking over of municipal functions.

<NAME>, who appears on behalf of the respondents, has drawn our attention to the judgment of a Constitution Bench of this Court in <CITATION> , which provides a complete answer to the Attorney General's contention. In that case, under the terms of a mining lease, the lessee worked the mines and bound himself to pay a dead rent if he used the leased land for the extraction of iron ore and to pay surface rent in respect of the surface area occupied or used by him. Demands were made upon the lessee for successive years for the payment of land cess under sections 78 and 79 of the Madras District Boards Act, 1920. Those demands were challenged by the lessee on the ground, inter alia, that the provision imposing the land cess quoad royalty under the mining leases must be held to have been repealed by the Central Act viz. the Mines and Minerals (Regulation and Development) Act , 1958, and the Mines and Minerals (Regulation and Development) Act , 1957. This contention was repelled by this Court by holding that sections 78 and 79 of the Madras District Boards Act had nothing to do with the development of mines and minerals or their regulation. The proceeds of the land cess were required to be credited to the District fund which had to be used for everything necessary for or conducive to the safety, health, convenience or education of the inhabitants or the amenities of local area concerned. It was further held by the Court that the land cess was not a tax on mineral rights but was in truth and substance a "tax on lands" within the meaning of Entry 49 of the State List. The reasoning adopted in this decision shows that it is not correct to say that the property tax provided for in the Act of 1973 is beyond the legislative competence of <ORG>; that tax has nothing to do with the development of mines. The power conferred by <ORG> on Special Area Development Authorities to impose the property tax on lands and buildings is therefore not in conflict with the power conferred by the Coal Mines Nationalisation Act on <ORG> to regulate and develop the Coal mines so as to ensure rational and scientific utilisation of coal resources. The paramount purpose behind the declaration contained in section 2 of the Mines and Minerals (Regulation and Develop-

ment) Act, 1957 is not in any manner defeated by the legitimate exercise of taxing power under section 69(d) of the Act of 1973.

The decision of this Court in <CITATION> ., on which the learned Attorney General relies, is distinguishable. In that case, the Bihar Government demanded dead rent, royalty and surface rent from the appellant contrary to the terms of his lease on the strength of the amended section 10(2) of the Bihar Land Reforms Act, 1950, and the amended Rule 20 of the Bihar Rules. This Court held that the pith and substance of the amended section 10(2) fell within Entry 23 although it incidentally touched land and that, therefore, the amendment was subject to the overriding power of <ORG> as declared in section 15 of the Mines and Minerals (Regulation and Development) Act , 1957. By the aforesaid declaration and the enactment of section 15 , the whole of the field relating to minor minerals had come within the jurisdiction of <ORG> and no scope was left for the enactment of the second proviso to section 10 of the Bihar Land Reforms Act. The second sub-rule added to Rule 20 was held to be without jurisdiction for the same reason.

That the declaration in section 2 of the Mines and Minerals (Regulation and Development) Act , 1957 does not result in invalidation of every State legislation relating to mines and minerals is demonstrated effectively by the decision in <CITATION> . <ORG> passed the Haryana Minerals (Vesting of Rights) Act, 1973, under which two notifications were issued for acquisition of right to saltpeter, a minor mineral, and for auctioning certain saltpeter bearing areas. It was held by this Court that the Haryana Act was not in any way repugnant to the provisions of the Act of 1957 made by <ORG> and that the ownership rights could be validly acquired by the State Government under the State Act .

The decision of a Constitution Bench of this Court in <CITATION> ., is even more to the point. In that case, 12 sugar undertakings stood transferred to and were vested in a <ORG> undertaking under the U.P. Sugar Undertakings (Acquisition) Ordinance, 1971, which later became an Act. It was contended on behalf of the sugar undertakings that since sugar is a declared industry under the Industries (Development and Regulation) Act , 1951, <ORG> alone was competent to pass a law on the subject and <ORG> had no competence to pass the impugned Act by reason of Entry 52, List I read with Entry 24, List II. The majority, speaking through one of us, <NAME>, held that the legislative power of the <ORG> under Entry 24, List II, was eroded only to the extent to which control was assumed by the Union <ORG> pursuant to the declaration made by the <ORG> in respect of a declared industry and that the field occupied by such enactment was the measure of the erosion of the legislative competence of the <ORG> legislature. Since the Central Act was primarily concerned with the development and regulation of declared industries and not with the ownership of industrial undertakings, it was held that the <ORG> legislature had the competence to enact the impugned law. Justice <NAME> and Justice <NAME>, who gave a separate judgment concurring with the conclusion of the majority, preferred to rest their decision on the circumstance that the impugned legislation fell within Entry 42, List III- 'Acquisition and requisition of property'- and was therefore within the competence of <ORG>.

These are the main points argued by the learned Attorney General on behalf of the appellant <ORG>. In <ORG>, an additional point was taken, based upon the agreement dated June 24, 1976, which was entered into between the appellant <ORG> and respondent 1. It was contended in <ORG> that respondent 1 had waived its power of taxation by that agreement and, therefore, the imposition of property tax was invalid. <ORG> has given weighty reasons for rejecting that argument and we endorse those reasons. We adopt, particularly, the reasoning of <ORG> that in the meeting of January 29, 1976, respondent 1 had decided to give up its right to impose the Octroi tax only. The Chairman of respondent 1, therefore, acted beyond the scope of his authority in entering into the agreement with the appellant <ORG>, under which respondent 1 bound itself not to impose any tax whatsoever.

For these reasons the appeals fail and are dismissed with costs.

N.V.K. Appeals dismissed.


JUDGMENT <NAME>, J.

1. This appeal arises out of an order passed by <ORG> (District Judge), <NAME>, awarding compensation in a sum of Rs. 4,500 to the first respondent who sustained an injury, in an accident which occurred on 24th December, 1961, while he was returning from Nagore to Madras in the delivery van of the second respondent <ORG>, Ltd., <ORG> 6134, driven by one <NAME>, and which van has been insured with the appellant, M/s. <ORG>, Madras, under a comprehensive policy including third party risk.

2. <ORG>, have preferred the appeal, on the grounds that they are not liable to pay compensation to the first respondent, that their obligations rest only with recompensing the insured company for the loss or damage caused to the insured car, that the accident did not occur while the first respondent was in the course of his employment and that the injured person was not a third party as per the provisions of the Motor Vehicles Act . They further contend that the injured person being a passenger is not a third party and there is no statutory liability on the part of <ORG> to give compensation to the injured person and that the policy itself does not cover risk to the passenger of the car.

3. In the appeal before me, learned Counsel for the appellant took me through the relevant provisions of the terms of the policy. Section 11 of the terms of the Policy deals with liability to third parties. Clause 1 is as follows;

Subject to the limits of liability the <ORG> will indemnify the <ORG> against all ,surri9 including claimant's costs and expenses which the <ORG> shall become legally liable to pay in respect of,

(i) death of or bodily injury to any person caused by or arising out of the use...of the motor vehicle;

(ii) ....

Provided always that:

(a) ....

(b) Except so far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939, the <ORG> shall not be liable in respect of death of or bodily injury to any person in the employment of <ORG> arising out of and in the course of such employment.

(c) Except as far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939, in relation to liability under the Workmen's Compensation Act , 1923, the <ORG> shall not be liable in respect of death of or bodily injury to any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon or entering or mounting or alighting from the motor vehicle at the time of the occurrence of the event out of which any claim arises.

4. Learned Counsel for the appellant contends that <ORG> is not liable to pay compensation, according to the provisions of the Policy, to the injured person, even assuming that the accident arose out of and in the course of his employment. Further, the injured person is not either a driver or conductor or any person in pursuance of contract of employment travelling in the vehicle at the time of the accident.

5. It is usual for the insurance companies to insert the abovesaid provisions, that is the customary exclusions under the third party liability, as stated by <NAME> and <NAME> in their book ' Motor Insurance' (Third Edition) at page 182. Learned Counsel for the appellant has contended that under the provisions of the Policy, the liability of the third party is completely excluded not only under the terms of the contract but also under Section 85(2) of the Motor Vehicles Act. The injured person has no claim against <ORG>. He has to look for his compensation to the employer that is the insured and he has to take appropriate proceedings under the Workmen's Compensation Act . It is further contended that when there is a definite contract between the insured and <ORG> to exclude certain persons who are employed under him, then such injured persons cannot claim compensation from <ORG> in respect of injuries caused to them. There may be some force in the contention urged by learned Counsel for the appellant; still, we have to consider and examine the provisions in the Motor Vehicles Act which provide for the insurance of third parties. In this connection, it is useful to refer to the provisions of Section 95 of the Act:

(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which-

(a) ....

(b) insures the person or classes of persons specified in the policy to the extent specified in Sub-section (2) against any liability which may be incurred by him or them in respect of the death of, 6r bodily injury, to, any person caused by or arising out of the use of the vehicle in a public place:

Provided that a policy shall not be required (i) to cover liability in respect of the death A.I.ing out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment, other than a liability arising under the Workmen's Compensation Act , 1923, in respect of the death of, or bodily injury to any such employee....

6. Learned Counsel for the first respondent stresses on the words, " other than a liability arising under the Workmen's Compensation Act , 1923, in respect of the death of, or bodily injury to any such employee ". Sub-section (2)(a) of Section 95 is as follows:

Subject to the proviso to Sub-section (1), a policy of insurance shall cover any liability insured in respect of any one accident up to the following limits, namely:

(a) where the vehicle is a goods vehicle, a limit of twenty thousand rupees in all, including the liabilities, if any A.I.ing under the Workmen's Compensation Act , 1923, in respect of the death of, or bodily injury, to employees (other than the driver) not exceeding six in number, being carried in the vehicle;

7. This section has been introduced by the Amending Act C of 1956. The injured person can always get a remedy in the common law to claim compensation for tortious liability. He has also got a further right to claim compensation under the Workmen's Compensation Act . In the instant case when the injured man is employed under one who has insured his vehicle and when he sustains an injury in the course of an accident to the vehicle, though he has right to get compensation under the Workmen's Compensation Act , it is not necessary for him to go to <ORG>, when he had the right to claim compensation along with his employer under the Motor Vehicles Act . Though the employer has got a liability under the general law to pay compensation to the injured person, since the employer happens to be the insured as in this case, as per the provisions of the Motor Vehicles Act , <ORG> has to indemnify the employer, in spite of the fact that there are provisions in the Policy to exclude a liability of this kind. It has been specifically stated that under Section 95 of the Act in order to comply with the requirements of the Chapter relating to insurance of Motor Vehicles against third parties, the policy of insurance must be a policy which should comply with the requirements of the Act. Therefore no useful purpose will be served by inserting in the Policy the condition that they are not liable to pay compensation to the persons employed who would be entitled to get compensation under the Workmen's Compensation Act . In effect, if the employee is injured in an accident arising out of his employment under the employer the Insurance company is liable to pay compensation not only to the owner of the vehicle for the loss or damage but also to pay compensation to the injured person who will be entitled to get compensation under the Motor Vehicles Act . I am therefore of opinion that under the provisions of the Motor Vehicles Act , <ORG> is liable to pay compensation both to the insured and the injured, of course within the limited liability prescribed under the Act.

8. It is contended, and rightly in my view, by learned Counsel for the first respondent that the appellant is not entitled to question the award of compensation given by <ORG>, in view of the recent decision of <ORG> in <CITATION> (1960) S.C.J. 44 : (1960) 1 An. W.R. (S.C.) 6 : (1960) 1 M.L.J. (S.C) 6 : (1960) 1 S.C.R. 168. It is true that Section 96 of the Act gives <ORG> the right to be made a party to defend the action. But <ORG> cannot avoid its liability, except by establishing such defences as are catalogued in Sub-section (2). In the instant case, I do not think that the appellant could defend on any of the grounds mentioned in Section 96(2) . The principle that has been laid down in <ORG> decision is that, on the construction of Section 96(2) , <ORG>, whenever they are made a party in a claim petition, have only the defences enumerated in Section 96(2) and beyond that they cannot question the award of compensation. I am, therefore, of opinion that the appellant is liable to pay compensation not only to the owner of the vehicle but also to the employee who is injured in an accident arising out of his employment, the employee being a person who is entitled to get compensation under the Workmen's Compensation Act .

9. In the result, the appeal is dismissed.

10. The injured employee, the first respondent in the main appeal, has preferred a cross-appeal. There appears to be no reason to interfere with the quantum of compensation awarded by the <ORG>. The cross-objector has claimed enhanced compensation to the extent of Rs. 55,500 on various heads, viz., expenses incurred and liable to be incurred in regard to the injury, pain and suffering inflicted on the victim, loss of time during the cure and permanent injury and consequent pecuniary loss. It is true that the injured person could claim under the Workmen's Compensation Act , under the various heads mentioned in his appeal, as against his employer but not as against <ORG>. Having got a relief under the Motor Vehicles Act , it is not open to him to claim under the Workmen's Compensation Act . Further, he has sailed with his employer in preferring a claim against <ORG>, the liability of which company is limited to the extent prescribed under Section 95(2)(a) of the Motor Vehicles Act. The cross-appeal is also dismissed. There will be no order as to costs in both the appeal and the cross-appeal.


PETITIONER: <NAME> Vs. RESPONDENT: M/S. AIR FRANCE CALCUTTA DATE OF JUDGMENT: 15/02/1963 BENCH: <NAME>, K.N. BENCH: <NAME>, K.N. GAJENDRAGADKAR, P.B. HIDAYATULLAH, M. GUPTA, K.C. DAS SHAH, J.C. CITATION: 1963 AIR 1756 1964 SCR (2) 104 CITATOR INFO : R 1972 SC 171 (13) R 1973 SC1404 (4) R 1976 SC1760 (8,10,12,13) R 1978 SC1004 (10) RF 1979 SC1022 (11) RF 1980 SC1896 (180) ACT: Industrial Dispute--Dismissal--lndustrial Disputes Act, 1947 (14 of 1947), s. 33. HEADNOTE: The appellant was 'Charged with gross dereliction of duty. The appellant in answer to the charge sheet admitted the mistakes and contended that he was over-worked and that it was the duty of others also to check the load sheet and balance chart prepared by him. Enquiry was held by the Station Manager to whom the Appellant objected on the ground of bias. On the findings of the enquiry the appellant was dismissed by the Regional Representative of the respondent company and was given one month's wages and was informed that the approval of the action taken was being sought from <ORG> before whom some industrial disputes were pending. The order of dismissal was communicated to the appellant on May 30, and the application for approval was made the same day. An application under s. 33A was made on June 3, 1960, by the appellant challenging the order of dismissal. The appellant objected to the maintainability of the application for approval but the <ORG> accorded approval to the action taken by the respondent and dismissed the application of the appellant under s. 33-A, on appeal by special leave. <NAME>, that the application for approval was in accordance with the proviso of s. 33 and properly made. 105 <ORG>, Saharanpur v. <NAME>, [1962] Supp. 3 S. C. R. 618, referred to. <NAME>, further that in the absence of any positive action amounting to recognition of the appellant as a protected person by the respondent (and the appellant had produced no such evidence) he could not be held to be a protected workman for dismissing whom previous sanction was necessary under s. 3 3 (3). <NAME>, further, that assuming that the Station Manager who held the enquiry was biased though the order of dismissal was passed by the Regional Representative against whom no such allegation was made, the <ORG> was entitled to go into the question whether the dismissal was justified on the evidence laid before it. <CITATION> .  1 S.C.R. 32, referred to. <NAME>, further, that the dismissal of the appellant did not amount to victimisation <NAME>, also that even if the domestic enquiry was defective provided that there is a prima facie case for dismissal and a bonafide conclusion is reached that the employee is guilty of misconduct, and if <ORG> in dealing with the application under s. 33 (2) and after considering for itself the evidence adduced before it gives its approval it would relate back to when the employer came to the conclusion after the enquiry that the dismissal is a proper punishment. <CITATION> ,  Supp. 2 S. C. R. 836, distinguished. <CITATION> ,  Supp. 2 S C. R. 719, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 419 of 1962. Appeal by special leave from the Award dated June 22, 1961, of' <ORG>, West Bengal in Case No. 97/33A of 1960.

<NAME>, for the appellant.

<NAME>, Solicitor General of India and <NAME> for the respondent.

1963. February 15. The judgment of the Court was delivered by <ORG> J.-This appeal by special leave challenges the order of <ORG>, West Bengal, relating to the dismissal of the appellant, who was in the service of the respondent company. A charge-sheet was issued to the appe- llant on April 23, 1960 under the signature of the Station Manager of the respondent-company. The charge-sheet contained two charges of gross dereliction of duty inasmuch as the appellant. had made mistakes in the preparation of a load-sheet on one day and a balance chart on another day, which mistakes might have led to a serious accident to the aircraft. The appellant gave his reply to the chargesheet on April 26 1960 in which he admitted the mistakes that had been made. He, however., contended that he was over-worked and further that it was the duty of others also to check the load-sheet and balance chart prepared by him. 9th May 1960 was fixed for inquiry by the Station Manager. The appellant objected to the inquiry being held by Station Manager on the ground that the Station Manager was biased against him on account of the evidence which he had given against the Station Manager in a customs case which was partly responsi- ble for the infliction of a fine on the Station Manager. His objection was however over-ruled and the inquiry was held by the Station Manager and completed on May 10, 1960. Thereafter it appears that the Station Manager forwarded his findings and recommendations to the Regional Representative of the respondent-company. The appellant was dismissed on May 28, 1960 by the Regional Representative; the order of dismissal provided for payment of one month's wages to the appellant and also stated that an application was being made before <ORG>, West Bengal, for approval of the action taken, apparently as some industrial dispute was pending before that tribunal. It appears that the order of dismissal was communicated to the appellant on May 30, and one month's wages were also tendered to him. The same day the respondent filed an application before <ORG>, West Bengal, seeking approval of the action. On June 3, 1960, the appellant made an application under s. 33-A of the Industrial Disputes Act NO.XIV of 1947, (hereinafter referred to as the Act), challenging the legality of the action taken on a large number of grounds.

These grounds were considered by <ORG> and all of them were substantially decided against the appellant. <ORG> held that the dismissal of the appellant was justified and therefore accorded approval for such dismissal. In particular, dealing with the various points raised on behalf of the appellant, <ORG> held that the application under s. 33 (2) (b) of the Act was validly made even though it had been made after the order of dismissal had been passed. It further held that the case was not covered by s. 33 (1) of the Act and it was not necessary to obtain the precious permission of the tribunal before dismissing the appellant. It also held that the appellant was not a protected workman. Further as to the charge that the Station Manager was biased and therefore there was violation of the principles of natural justice, <ORG> was of the view that the contention of the appellant that the Station Manager was biased against him because of the evidence he had given in the customs case could not be brushed aside lightly. But it went on to hold that even if there was some violation of the principles of natural justice in as much as the Station Manager was biased against the appellant, the respondent had adduced all the evidence before it in support of its action and it had to decide on that evidence whether the action was justified and approval should be granted. In this connection.. <ORG> relied on the decision of this Court in <ORG> v. Its workmen (1).

<ORG> then went in-to the evidence tendered before it. It pointed out that the appellant had admitted the two mistakes which were the basis of the charge. It also held that the mistakes were of a serious nature which might have resulted in 'an accident to the aircraft. It said that the fact that other people were also responsible for checking loadsheets and balance-charts would not mitigate the mistakes committed' by the appellant who was primarily responsible for preparing them. It also repelled the charge of victimisation raised on behalf of the appellant on account of the delay in giving him the charge- sheet. Finally, it came to the conclusion that the mistakes committed by the appellant were serious involving possible accident to the aircraft and possible loss of human life. It was not prepared to accept the plea of over-work and other pleas raised on behalf of the appellant to mitigate the mistakes committed by him. It pointed out that the mistakes being of a serious nature the punishment of dismissal inflicted by the respondent could not be said to be unconscionable or entirely out of proportion to the gravity of the offence. It, therefore, dismissed the application of the appellant unders. 33- A of the Act and accorded approval to the action taken by the respondent. This decision of <ORG> is being challenged by the present appeal by special leave.

The main point which was raised in this appeal is now concluded by the decision of this Court in <ORG>, Saharanpur v. <NAME> (2 ). This Court has held in (1) [1960] 1 S.C.R. 32, (2) [1962] Supp. 8 S.C.R. 618 that case that the proviso to s.33 (2)(b)contemplates the three things mentioned therein, namely,(i) dismissal or discharges(ii) payment of wages, and (iii) making of an application for approval, to be simultaneous and to be part of the same transaction so that the employer when he takes the action under s. 33 (2) by dismissing or discharging an employee, should immediately pay him or offer to pay him wages for one month and also make an application to the tribunal for approval at the same time". It was further held that "the employer's conduct should show that the three things contemplated under the proviso, are parts of the same transaction; and the question whether the application was made as part of the same transaction or at the same time when the action was taken would be a question of fact and will depend upon the circumstances of each case". In the present case the order of dismissal was passed by the Regional Representative on May 28, 1960 and was communicated to the appellant on May 30th. The wages were offered to the appellant at the same time when the order was communicated to him., though he did not accept them. The respondent also made the application under s. 33 (2) (b) to the industrial tribunal the same day.In these circumstances we are of opinion that <ORG> was right in holding that the application under s. 33 (2) (b) was in accordance with the proviso to that section and was properly made. Learned counsel for the appellant has further raised some points which were raised on behalf of the appellant before <ORG>. In the first place, he contends that the appellant was a protected workman and <ORG> was not right when it held that the appellant was not a protected workman. We are of opinion that the question whether a particular workman is a protected workman or not is a question of fact, and the finding of <ORG> on such a question will generally be accepted by this Court as conclusive. Besides, <ORG> has pointed out that the mere fact that a letter was written to the Manager of the respondent company by the Vice-President of the union in which the name of the appellant was mentioned as a joint secretary of the union and the manager had been requested to recognise him along with others mentioned in the letter as protected workmen would not be enough. The company had replied to that letter pointing out certain legal defects therein and there was no evidence to show what happened thereafter. <ORG> has held that according to the rules framed by <ORG> as to the recognition of protected workmen, there must be some positive action on the part of the employer in regard to the recognition of an employee as a protected workman before he could claim to be a protected workman for the purpose of s. 33 . Nothing has been shown to us against this view. In the absence therefore of any evidence as to recognition, <ORG> rightly held that the appellant was not a protected workman and therefore previous permission under s. 33 (3) of the Act would not be necessary before his dismissal.

Then it is urged that after <ORG> held that the Station Manager who held the inquiry was baised and there had been violation of the principles of natural ..justice, it was not open to <ORG> to consider the question whether the appellant was rightly dismissed itself. On the other hand it has been urged on behalf of the respondent that the Station Manager could not in the circumstances of this case be said to have violated the principles of natural justice because the mistakes were admitted by the appellant and the inquiry was really formal and_ all that the Station Manager had to do was to recommend what he considered suitable punishment for the misconduct, which had taken place. It is also pointed out that the actual punishment was awarded by the Regional Representative and not by the Station Manager. There is some force in these contentions on behalf of the respondent in the circumstances of the present case. But we do not think it necessary to pronounce finally on the question whether in such circumstances there would be violation of natural justice. It is now well settled by a number of decisions of this <ORG> that it is open to the tribunal to go into the propriety of an order of dismissal itself, when there is a defect in the domestic inquiry. In these circumstances even if it be held that the Station Manager was biased and therefore there was some violation of the principles of natural justice inasmuch as the inquiry was field by him, <ORG> would be entitled to go into the question whether the dismissal was justified on the evidence led before it and this is exactly what <ORG> did relying on the judgment of this <ORG> in Phulbari Tea Estate (1). The contention therefore on behalf of the appellant that <ORG> was not entitled to go into the question whether the dismissal was justified once it held that the domestic inquiry was defective, must be rejected.

Then it is urged that <ORG> was wrong in holding that victimisation had not been proved. We however find no reason to differ from the finding of <ORG> on the question of victimisation, apart from the fact that a finding of victimisation is generally a question of fact and cannot be agitated in this Court. <ORG> has pointed out that the plea of victimisation on the ground that there was some delay in giving the charge-sheet to the appellant cannot be sustained, because the Station Manager came to know about the mistakes only a few days before the charge-sheet was given, though the mistakes had actually been committed in January and March, and also because the appellant admitted the mistakes and there could be no doubt therefore that he had committed them.

(1) [1960] 1 S. C R. 82.

We agree with <ORG> that in the face of the appellant's admission of the mistakes there could be no question of victimisation in this case.

Finally it is urged that as the domestic inquiry was defective, there could be no approval of the action taken in consequence of such an inquiry and <ORG> even if it held that the dismissal was justified should have ordered the dismissal from the date its award would become operative. In this connection reliance was placed on the decision of this Court in Messrs. <CITATION> , (1), where the following observations occur at p. 845 -.-

"...... as the management held no inquiry after suspending the workmen and proceedings under s. 33 were practically converted into the inquiry which normally the management should have held before applying to <ORG>, the management is bound to pay the wages of the workmen till a case for dismissal was made out in the proceedings under s. 33."

We are of opinion that those observations cannot be taken advantage of by the appellant. That was a case where an application had been made under s. 33 (1) of the Act for permission to dismiss the employees and such permission was asked for though no inquiry whatsoever had been held by the employer and no decision taken that the employees be dismissed. It was in those circumstances that a case for dismissal was made out only in the proceedings under s. 33 (1) and therefore the employees were held entitled to their wages till the decision of the application under s. 33 . The matter would have been different if in that case an inquiry had been held and the employer had come, to the conclusion that dismissal was the proper punishment and then (1)  Supp. 2 S.C.R. 836, had applied under s. 33 (1) for permission to dismiss. In those circumstances the permission would have related back to the date when the employer came to the conclusion after. an inquiry that dismissal was the proper punishment and had' applied for removal of the ban by an application under s. 33 (1) : (see the <CITATION> (1). The present is a case where the employer has held an inquiry though it was defective and has passed an order of dismissal and seeks approval of that order. If the inquiry is not defective, <ORG> has only to see whether there was a prima facie case for dismissal, and whether the employer had come to the bona fide conclusion that the employee was guilty of misconduct. Thereafter on coming to the conclusion that the employer had bona fide come to the conclusion that the employee was guilty i. e. there was no unfair labour practice and no victimisation, <ORG> would grant the approval which would relate back to the date from which the employer had ordered the dismissal. If the inquiry is defective for any reason, <ORG> would also have to consider for itself on the evidence adduced before it whether the dismissal was justified. However on coming to the conclusion on its own appraisal of evidence adduced before it that the dismissal was justified its approval of the order of dismissal made by the employer in a defective inquiry would still relate back to the date when the order was made. The observations in Messrs. <ORG> case (2), on which the appellant relies apply only to a case where the employer had neither dismissed the employee nor had come to the conclusion that a case for dismissal had been made out. In' that case the dismissal of the employee takes effect from the date of the award and so until then the relation of employer and employee continues in law and in fact. In the present case an inquiry has been held which is said to be defective in one respect and dismissal has been ordered. The (1)  Supp. 2 S.C.R. 719. (2)  Supp. 2 S.C.R.

836. respondent had however to justify the order of dismissal before <ORG> in view of the defect in the inquiry. It has succeeded in doing so and therefore the approval of <ORG> will relate back to the date on which the respondent passed the order of dismissal. The contention of the appellant therefore that dismissal in this case should take effect from the date from which <ORG>'s award came into operation must fail. There is no force in this appeal and it is hereby dismissed. In the circumstances we pass no order as to costs. Appeal dismissed.