PETITIONER: STATE OF PUNJAB & ANR. Vs. RESPONDENT: SHRI SUKH RAJ BAHADUR DATE OF JUDGMENT: 22/02/1968 BENCH: <NAME>, G.K. BENCH: <NAME>, G.K. SHAH, J.C. RAMASWAMI, V. CITATION: 1968 AIR 1089 1968 SCR (3) 234 CITATOR INFO : RF 1970 SC 158 (9) RF 1970 SC 537 (12) R 1971 SC 836 (9) R 1971 SC1011 (3) R 1974 SC 423 (14,15) RF 1974 SC1317 (11) RF 1976 SC1766 (12) R 1976 SC2547 (15,16,21) D 1978 SC 363 (6,11) R 1979 SC 684 (7) R 1984 SC 636 (11) RF 1986 SC1626 (23) ACT: Civil Service-Completion of probation-if probationer entitled to substantive appointment-Reversion to substantive post-When operates as punishment. HEADNOTE: The respondent who was a permanent official in <ORG> was appointed to <ORG> (Executive Branch). He was on probation in the new post for a period of 18 months subject to extension of the period and subject to his completing training. He passed all the departmental examinations. The period of probation expired in July 1954, and there was no extension of it. In January 1957, he received a charge-sheet with a letter from <ORG> asking him to reply to the charge sheet and to, state whether he would like to be heard in person. The respondent replied that be wanted an opportunity of being heard in person. There was however no enquiry at all, and much later, by an order dated 23/26th May 1958, <ORG> reverted him to his substantive post in the Delhi. Administration without making any reference to the- charges. The respondent thereupon challenged the order on the grounds namely (1) that on the expiry of the period of probation and on his passing the departmental examinations he became entitled to a substantive permanent appointment; (2) that the impugned order terminated his service under <ORG> and removed him from the said service, in viola- tion of the provisions of Art. 311(2) of the Constitution; and (3) under r. 9 of <ORG>s (Punishment and Appeal) Rules, 1952, it was mandatory that, before his employment as a probationer could be terminated, be should have been apprised of the grounds of the proposed termination and given an opportunity to show cause against it. <ORG> accepted the second contention and allowed the petition. In appeal to this Court, HELD : (1) Merely because the respondent had passed all the departmental examinations and completed the period of probation fixed, he could not be considered to be holding the post substantively, or as being entitled to it. [239 E- F] (2) The respondent could not complain against the order reverting him to his former post because, the order of reversion was not by way of punishment. [239 F] The circumstances preceding or attendant on the order of termination of service of a public servant have to be examined in each case, f(t determining whether the order was by way of punishment. The motive behind it is immaterial. it is only in a case whether either of the two tests, namely, (a) whether the public servant had a right to the <ORG> or rank. or (b) whether the public servant, no matter whether he was a probationer or a temporary servant, has been visited with evil consequences or an aspersion has been cast on his character or integrity, that the order could be said to be by way of punishment. But the services of a temporary 235 servant or a probationer can be terminated under the rules of his employment and such termination without anything more, will not attract the operation of Art. 311. [240 A; 244 A-B, C-D] Parshotam Lal Dhingra v. Union of India,  S.C.R. 828, <CITATION> ,  1 S.C.R. 606, R. C. Lacy v. State of Bihar, C.A. No. 590 of 1962 dated 23-10- 63, A G. Benjamin v. Union of India-, C.A. No. 1341/66 decided on 13-12-66, followed. <CITATION> ,  3 S.C.R. 716, <CITATION> , A.I.R. 19 S.C. 689 and <CITATION> , A.I.R. 1964 S.C. 449. referred to. (3) As <ORG> had not considered the contention of the respondent based on r. 9 of <ORG>s (Punishment and Appeal) Rules, 1952, the matter should be remanded to <ORG> for consideration of that question. [244 H] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 433 of 1965. Appeal from the judgment and order dated January 7, 1963 of <ORG> in Letters Patent Appeal No. 157 of 1957.

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

<NAME>, <NAME>, <NAME> and <NAME>, for the respondent. The Judgment of the Court was delivered by <NAME>, J. This appeal is by a certificate granted by <ORG> under Art. 133 of the Constitution against its judgment and order dated January 7, 1963 in Letters Patent Appeal. No. 157 of 1959 reversing a decision of a single Judge of that Court who had dismissed a writ petition filed by the respondents on June 7, 1958 to declare that the order of the first appellant reverting him to his permanent post in <ORG> was invalid and to quash the same.

The facts laid in the writ petition are as follows. The petitioner, <NAME>, respondent herein was a permanent official of the office of the Chief Commissioner, Delhi. On December 9, 1952 he was accepted as a candidate for the post of Extra Assistant Commissioner on the Register A-II of <ORG> along with two others, on the advice of <ORG>. He was posted as Inspector, Local Bodies, Jullundur Division and Assistant to Commissioner, Jullundur Division. Later on, he acted as Personal Assistant to the Deputy Commissioner, Amritsar. On being relieved from <ORG> on January 15, 1953 he assumed charge of the post of Personal Assistant to the De-Duty Commissioner, Amritsar in the P.C.S. (Executive Branch Cadre) on January 24, 1953. He passed all the departmental examinations prescribed under rule 21 of the Punjab Civil Service (Executive Branch) Rules, 1930. Under r. 22 of the aforesaid rules, he was to remain on probation for a period of 18 months subject to his completing the training and subject to further extension of the period of probation as the case maybe. In his case, the period of probation expired in July 1954. The same was however not extended by any order of the Governor of Punjab. The petitioner claimed that under r. 24 of the said rules he became qualified for substantive permanent appointment to the P.C.S. (Executive Branch). He received a charge sheet with a letter dated January 14, 1957 from the Secretary to <ORG>, <ORG>, asking him to reply to the charge sheet within a fortnight and to inform whether he would produce defence or whether he would like to be heard in person. The petitioner replied to the charge sheet on January 28, 1957 stating that he wanted an opportunity of being heard in person. By order of <ORG> dated 23/26th May 1958 purporting to be one, under r. 23 of the aforesaid rules, he was reverted by <ORG> Government to his substantive post of Superintendent under the Chief Secretary, <ORG> with immediate effect.

According to the petitioner, the said order of 23/26th May 1958 terminated his service under <ORG> and permanently removed him from <ORG>.

The petitioner also complained that under r. 9 of the Punjab Civil Services (Punishment and Appeal) Rules, 1952, he should have been apprised of the grounds to terminate his employment as probationer for any specific fault or on account of any unsatisfactory record or unfavourable reports implying his unsuitability for service and given an opportunity to show cause against the same. before any orders were passed by the authority competent to terminate the appointment. The petitioner was never apprised of the rounds of any such proposal nor given an opportunity to show cause against it before the order reverting him to the post, of Superintendent mentioned above was made. There was thus a clear breach of r. 23 of the Punjab Civil Service (Executive Branch) Rules. Accordingly the petitioner prayed that the said order of 23/26th May 1958 be quashed and suitable relief be given to him.

The order complained of runs as follows "The Governor of Punjab is pleased to revert <NAME>, Extra Assistant Commissioner, officiating, from P.C.S.

(Executive Branch) to the post of Superintendent under the Chief Secretary, <ORG>, with immediate effect." In the written statement of the respondents to the petition it was stated that the impugned order was not a penalty calling for compliance with the provisions regarding penalty etc. and the Punjab Civil Services (Punish ment and Appeal) Rules were not applicable. It was submitted that he was appointed to <ORG>) as a nominee of the Chief Commissioner, Delhi, who was one of the nominating authorities under r. 8 of <ORG>) Rules, 1930 along with some of the officers of <ORG>. By passing the departmental examinations in November 1956, the petitioner was due for confirmation thereafter. The absence of confirmation implied that the probationary period was extended under r. 22(c) of the Punjab Civil Service Rules. Lastly, it was said that the reversion of a probationer to his substantive rank could not amount to a punishment. It is not necessary to examine the charges which were levelled against the petitioner in the charge sheet. Suffice it to say that they were all of a fairly serious nature.

The points put forward before the learned single Judge who heard the petition were :

(1) On the expiry of the period of probation and on his passing the departmental examinations, the petitioner became qualified for substantive permanent appointment. (2) The impugned order in fact terminated his services under <ORG> and removed him from the said service. The petitioner was not afforded any opportunity to show cause against the charges contained in the charge'sheet or against the proposed punishment. As such there was violation of the provisions of Art. 311(2) of the Constitution.

(3) The petitioner being a probationer, r. 9 of the Punjab Civil Services (Punishment and Appeal) Rules, 1952 was applicable. The procedure prescribed by the rule was not followed although it was mandatory that before his employment as a probationer could be terminated, he should have been apprised of the grounds of the proposed termination and given an opportunity to show cause against it.

The learned single Judge held that the petitioner bad not acquired the status of a permanent member of <ORG> merely by efflux of time and by reason of his having passed the departmental examinations. He further held that the petitioner continued only in an officiating capacity. The second point also was turned down by the learned Judge holding that the petitioner's case was one of reversion and not of termination of service as the petitioner was never appointed in a permanent capacity and was not visited with any evil consequences. In coming to this conclusion the, learned single Judge relied on several decisions starting from the case of <CITATION> (1).

(1) [1968] S.C.R. 828.

The learned single Judge examined the third point at some length. It was urged before him that the petitioner did not fall within the definition of a 'probationer' in rule 2.49 of the Punjab Civil Service Rules, Volume 1, Part 1. On behalf of the petitioner, reference was made to the definition of 'Government' contained in r. 2.24 of the Punjab Civil Service Rules and the definition of 4 cadre' contained in r. 29 and "it was submitted that if the peti- tioner had held a substantive post in a cadre under <ORG> and had been appointed on probation to another post, then the term 'probationer' would not have covered his case, but since the petitioner held a lien on a post in Delhi State and not under <ORG>, he could not be deemed to fall within the exception contained in the definition of a 'probationer' in r. 2.49." Reference was made to a number of other rules on behalf of both the parties. Ultimately, on examination of the respective contentions of the parties, the learned Judge concluded that the petitioner "could not be regarded as a probationer within the meaning of r. 2.49 of the Punjab Civil Service Rules" and "he could not claim the benefit of r. 9 of the Punjab Civil Services (Punishment-and Appeal) Rules, 1952." He however did not think it necessary to decide whether in the presence of r. 23 of the Punjab Civil Service Rules the Punishment and Appeal Rules would apply at all. Further, even if the said rule applied, the petitioner did not fall within the meaning of the word 'probationer' as given in rule 9. The learned Judge was of the view that there was force in the contention that r. 9 of the Punishment and Appeal Rules could not cover the case of revision as r. 9 only dealt with a case where it was proposed to terminate the employment of a probationer. In the result, he dismissed the application.

The appeal was allowed by <ORG>. It ap- pears that the Bench examined only the second point urged before the learned single Judge and over-ruling his decision allowed the appeal quashing the order reverting the writ petitioner from the P.C.S. (Executive Branch). The Bench relied principally on the judgment of this Court in <CITATION> (1) and <CITATION> (2) . According to the Bench the enquiry started with a notice which expressly stated that it was being made under sub-r. (2) of r. 7 of the Punjab Civil Services (Punishment and Appeal) Rules, 1952. Sub-r. (1) of r. 7 provided that an order of dismissal, removal or reduction should not be passed unless the person concerned had been given reasonable opportunity of showing cause against the action proposed to be taken in regard to him while sub-r. (2) laid down the manner in which the enquiry was to be held. From this the Bench inferred that :

(1) [1963] 3 S.C.R. 716.

(2) A.I.R. 1960 S.C. 689.

.lm15 "When the charge sheet was sent to the appellant (writ petitioner), the object and the intention of the State Government was to punish him either by way of dismissal or removal or reduction in rank, . ....Such an enquiry and any action consequent on such an enquiry would not be covered by principle of <NAME> case, as laid down by <ORG> in <CITATION> (1)."

The Bench however observed that although no enquiry in the proper sense of the word had been held the omission to hold such an enquiry could not be made a ground for saying that the case differed in principle either from <NAME> case or <NAME> case. Accordingly the conclusion reached was that "the reversion of the appellant was by way of punishment and amounted either to reduction in rank or removal from the <ORG> (Executive Branch)" and as "these actions could not be taken without affording the appellant, adequate opportunity of showing cause against the punishment" there was violation of Art. 311(2) of the Constitution.

We find ourselves unable to accept the reasoning or the con- clusion arrived at by the learned Judges of <ORG> of <ORG>. It is not necessary to examine in detail the earlier decisions of this Court which bear on the issue before us. In this case, the respondent did not cease to be a probationer at the time when the impugned order was passed on him. Although the period of probation was fixed at 18 months and although the respondent had passed all the departmental examinations, he could not merely, as a consequence thereof, be considered to be holding a post substantively. Apart from the question as to the right of the respondent under the Punjab Civil Service Rules, the respondent could not complain merely because he had been reverted to the post formerly held by him. He would have cause to complain if he could show that the order of reversion was by way of punishment. As was pointed out in <NAME> (3) case.

"The mere fact that the servant has no title to the post or the rank and the Government has, by contract, express or implied, or under the rules, the right to reduce him to a lower post does not mean that an order of reduction of a servant to a lower post or rank cannot in any circumstances be a punishment. The real test for determining whether the reduction in such cases is or is not by way of punishment is to find out if the order for the reduction also visits the servant with any penal consequences.........the court has to apply the two (1) [1963] 3 S.C.R. 716. (2) A.T.R. 1960 S.C.

689. (3) [1958] S.C.R. 828.

tests mentioned above, namely, (1) whether the servant had a right to the post or the rank or (2) whether he has been visited with evil consequences of the kind hereinbefore referred to ? If the case satisfies either of the two tests then it must be held that the servant has been punished and the termination of his service must be taken as a dismissal or removal from service............."

In the case of <CITATION> (1) the respondent who was a Sub-Inspector of Police on probation in <ORG>, was served with a notice to show cause why he should not be discharged from service "for gross neglect of duties and unsatisfactory Work". He submitted an explanation which was considered by the Deputy Inspector-General of Police as unsatisfactory. The said authority passed an order discharging the respondent from service "for unsatisfactory work and conduct'. The respondent's contention was that the order was invalid because he had not been given a reasonable opportunity to show cause against the proposed action in terms of Art. 31.1(2) and that he was not give an opportunity to be heard nor was any evidence taken on the chaires. It was pointed out by this Court that the enquiry against the respondent was only for ascertaining whether lie was fit to be confirmed, and although "an order discharging a public servant, even if a probationer-, in in enquiry on charges of misconduct, negligence, inefficiency or other disqualifications, may appropriately be regarded as one by way of punishment, an order discharging a probationer following upon an enquiry to ascertain whether he should be confirmed is not of that nature." The Court distinguished <NAME> case on the --round that there the public servant had been discharged from service consequent upon an enquiry into alleged misconduct and the Enquiry Officer had found that the public servant was 'unsuitable for the post'. Finally it was held by this Court in <NAME> case that "...... the fact of the holding of an enquiry is not decisive of the question. What is decisive is whether the order is by way of punishment in the light of the tests laid down in <NAME> (3 ) ."

In the result the appeal of the State was allowed. Reference may also be made to the case of <NAME> v. The State of Bihar- and other(1). In this case the appellant who was working, as in Assistant Professor of Botany in Class IT Bihar Educational Service was temporarily promoted to Class I of the said service against a Permanent post created in April 1949 and (1) [1961] 1 S.C.R. 606. (2) A.I.R. 1960 S.C. 689.

(3) [1958] S.C.R. 828.

(4) Civil Appeal No. 590/1962 decided on 23-10-63.

appointed Professor of Botany in the college where he was working. He was informed that <ORG> would consider him for permanent appointment depending on the efficiency with which he ran the department, the extent to which he enjoyed the goodwill of his colleagues and the devotion to research work that he revealed during the course of the year. In April 1950 the appellant moved the <ORG> for confirmation in Class I. The <ORG> however decided to continue his temporary service in Class I for another year with the concurrence of <ORG>. Following an incident on February 9, 1951, the Commissioner of <ORG> was appointed to make an enquiry into the same. The report of the enquiry was against the appellant. On August 21, 1951, the <ORG> passed an order reverting the appellant to his substantive post in Class 11 and trans- ferred him from <ORG> to <ORG>. The appellant filed a suit which was dismissed by the Subordinate Judge. Losing appeal before <ORG>, the appellant came to this Court by special leave. It was contended on his behalf that the order of 21st August, 1951 amounted to infliction of punishment. In dismissing the appeal, it was pointed out by this Court that "the enquiry which was held by the Commissioner in this case was in the nature of a preliminary enquiry to enable the <ORG> to decide whether disciplinary action should be taken against the appellant. . . . It is clear however that the <ORG> did not decide to hold any enquiry for the purpose of taking disciplinary action against the appellant, for no enquiry officer was appointed, no charges were framed and no regular departmental enquiry as envisaged by the rules and Art. 311(2) of the Constitution Was ever held."

According to this Court the action of the Government was in pursuance of its right to revert an officer holding, a higher post temporarily if he was not found. fit for the purpose.

<CITATION> (1) the termination of the appellant's service was held to be in violation of Art. 311(2) of the Constitution. There the appellant, <NAME>, was appointed an Inspector of <ORG> "on temporary basis and terminable with one month's notice". He was served with a charge sheet to the effect that he had received illegal ratification and called upon to show cause why disciplinary action should not be taken against him. The appellant submitted his explanation and the Settlement Officer who had sent out the charge sheet submitted his report to the Deputy Commissioner that the charge relating to receipt of illegal gratification had been proved. Thereupon the Deputy Commissioner ordered that the services of <NAME> be terminated forthwith and that in lieu of notice he would receive one month's (1)  3 S.C.R. 716.

pay as required by the rules. It was held by this Court that the enquiry made by the Settlement Officer was with the object of ascertaining whether disciplinary action should be taken against the appellant for his misdemeanour and the purpose of the enquiry was to take punitive action including dismissal or removal from service if the charge was substantiated. After discussing <NAME>, the conclusion arrived at was that "Such an enquiry and order consequent upon the report made in the enquiry will not fall within the principle of <NAME>."

In the result, the appeal was allowed.

<CITATION> (1) this Court allowed the appeal of the appellant who was appointed as a temporary second division clerk in <ORG>, Lahore for a period of six months in October 1946. His appointment was continued from time to time when the impugned order was passed terminating his services. It was pointed out by this Court that even before discharging a temporary servant the authority may have LO examine the question about the suitability of the said servant to. be, continued and:

"a acting bona fide in that behalf, the authority may also give a chance to the servant to explain, if any complaints are made against him, or his competence, or suitability is disputed on some grounds arising from the discharge of his work; but such an enquiry would be held only for the purpose of deciding whether the temporary servant should be Continued or not. There is no element of punitive proceedings in such an enquiry; the idea in holding such an enquiry is not to punish the temporary servant but just to decide whether he deserves to be continued in service or not............... in some cases, the authority may choose to exercise its power to dismiss a temporary servant and that would necessitate a formal departmental enquiry in that behalf. If such a formal enquiry is held, and an order terminating the services of a temporary servant is passed as a result of the finding recorded in the said enquiry, prima facie the termination would amount to the dismissal of the temporary servant."

The <ORG> however was careful to add that considerations of the motive operating in the mind of the authority had to be eliminated in determining the character of the termination of service of a temporary servant and that the form in which the order terminating his services was expressed would not also be decisive. If a (1) [1961] 1 S.C.R. 606.

(2) A.I.R. 1964 S.C. 449.

formal departmental enquiry had been held in which findings were recorded against the temporary servant and as a result of the said findings, his services were terminated, the fact that the order by which his services were terminated, ostensibly purported to be a mere order of discharge would not disguise the fact that in substance and in law the discharge in question amounted to the dismissal of the temporary servant. The order of discharge of the appellant ran as follows :

"<NAME>, a temporary <ORG> Clerk of this office, having been found undesirable to be retained in <ORG> service is hereby served with a months notice of discharge with effect from November 1, 1949."

According to this Court, the order cast an aspersion on the temporary servant and in substance it amounted to an order of dismissal.

The last decision to which we may refer is the one in <NAME> v. <ORG>). In this case, the appellant was temporarily employed as Stores Officer in <ORG>. As he was not a confirmed government servant, his services could be terminated under r. 5 of the Central Civil Service (Temporary Service) Rules, 1949 with one month's notice on either side. The services of the appellant were terminated on April 23, 1954. There. had been certain complaints against him in respect whereof the Chairman of <ORG> sent a notice to him asking him to show cause why disciplinary action should not be taken against him and an Enquiry Officer was appointed, but before the enquiry could be completed, the Chairman recommended that the services of 'the appellant should be terminated under r. 5 observing in his note to the Secretary that :

"The departmental proceedings will take a much longer time and we are not sure whether after going through all the formalities we will be able to deal with the accused in the way he deserves."

Acting upon this suggestion the appellant was served with the order complained of. The order was to the effect that the appellant was being informed that his services were no longer required in the organisation and the same were terminated with effect from the date on which the notice was served on him. He was further informed that in lieu of the notice one month's pay and allowances due to him, he would be given the same for that period. This Court distinguished the facts in this case from those in <NAME> (2 ) case and held that the principle of that case could not be applicable.

(1) Civil Appeal No. 1341/1966 decided on 13-12-1966. (2) (19631 3 S.C.R. 76.1 On a conspectus of these cases, the following propositions are clear:

1. The services of a temporary servant or a probationer can be terminated under the rules of his employment and such termination without anything more would not attract the operation of Art. 31 1 of the Constitution.

2. The circumstances preceding or attendant on the order of termination of service have to be examined in each case, the motive behind it being immaterial.

3. If the order visits the public servant with any evil consequences or casts an aspersion against his character or integrity, it must be considered to be one by way of punishment, no matter whether he was a mere probationer or a temporary servant.

4. An order of termination of service in unexceptionable form preceded by an enquiry launched by the superior authorities only to ascertain whether the public servant should be retained in service, does not attract the operation of Art. 311 of the Constitution.

5. If there be a full-scale departmental enquiry envisaged Art. 311 i.e. an Enquiry Officer is appointed, a charge sheet submitted, explanation called for and considered, any order of termination of service made thereafter will attract the operation of the said article.

In this case the departmental enquiry did not proceed beyond the stage of submission of a charge sheet followed by the respondent's explanation thereto. The enquiry was not proceeded with, there were no sittings of any Enquiry Officer, no evidence recorded and no conclusion arrived at on the enquiry. In these circumstances, the principle in <NAME> case or <NAME> (2) case will not be applicable. The case is in line with the decisions of this Court in <CITATION> (3). <NAME> v. The State of Bihar(3) and <NAME> v. <ORG>).

In this view of the matter. we are unable to concur with the opinion of <ORG> of <ORG>. This does not however conclude the matter. The respondent also complained against the non-observance of the Punjab Civil Services (Punishment and Appeal) Rules. The learned single Judge of <ORG> does not appear to have expressed himself definitely on the third point canvassed before him although he observed that the contention of the Advocate General about the inapplicability of r. 9 was not without force, The learned Judges of <ORG> did. not consider this (1) [1963] 3 S.C.R. 716. (2) A.I.R. 1964 S.C. 449. (3) [1961] 1 S.C.R.606. (4) C.A. No. 590/1962 (5) C.A No. 1341/66 dated 13-12-66.decided on 23-10-68.

question at all. We therefore allow the appeal and set aside the judgment of <ORG> and remand the matter to that court for consideration of the respective contentions of the parties based on Punjab Civil Services (Punishment and Appeal) Rules, 1952. The costs of this appeal will abide by the decision of <ORG>. <ORG>

Appeal allowed and case remanded.


PETITIONER: <ORG>, DELHI Vs. RESPONDENT: <NAME> RANJIT SINGH DATE OF JUDGMENT: 07/12/1967 BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. MITTER, G.K. CITATION: 1968 AIR 933 1968 SCR (2) 548 CITATOR INFO : F 1974 SC 280 (6) R 1987 SC2055 (6) R 1989 SC1141 (19) ACT: Delhi and Ajmer Rent Control Act (38 of 1952), s. 13(1) proviso (b), (c) and (k)-Hotel premises Constituents of sub- letting-Knowledge of sub-letting, if waiver. HEADNOTE: The respondent-landlord of a hotel filed a suit for eviction of his tenant-appellant under s. 13(1) proviso (b) and (c) of the Delhi and Ajmer Rent Control Act, 1952 on the allegation that the appellant had sub-let several rooms. These occupants were doing business, which were not confined to the residents of the hotel. The occupants were given ex- clusive possession of the rooms occupied by them. The appellant did not retain any control and dominion over these rooms. It was not a condition of the grants that the keys would be left at the reception counter, or that the keys would be retained by the appellant. The occupants were at liberty to take away the keys if they liked. The occupants availed themselves of the services of the hotel sweeper for their own convenience. The appellant retained control of the corridor, but the entrance to the corridor was open day and night. The occupants paid monthly sums to the appellant as the consideration of the sub-leases. The appellanttenant denied the allegations and pleaded that the respondent- landlord had waived the breaches, if any. The suit was decreed which <ORG>, in appeal maintained HELD : The landlord was entitled to the decree for eviction. [558 B] On the question whether the occupier of a separate apartment in a premises is a licensee or a tenant, the test is has the landlord retained control over, the apartment Normally, an occupier of an apartment in a hotel is in the position of licensee as the hotel-keeper retains the general control of the hotel including the apartment. But it is not a necessary inference of law that the occupier of an apartment in a hotel is not a tenant. A hotel-keeper may run a first class hotel without sub-letting any part of it. Where as in this case, the hotel-keeper retained no control over the apartment, the occupier was in the position of a tenant. The onus to prove sub-letting was on the respondent. The respondent discharged the onus by leading evidence showing that the occupants were in exclusive possession of the apartments for valuable consideration. The appellant chose not to rebut this prima facie evidence by proving and exhibiting the relevant agreements. [553 D; 554 C-D, F-H; 555 C; 556 E] Under s. 2(g) "premises" does not include " a room in a hotel or lodging house". The sub-lessee of a room in a hotel is, therefore, not a tenant and cannot claim protection under s. 13 from eviction, nor can he ask for fixation of standard rent. But, because a room in a hotel is not premises, it does not follow that the room is not a part of the hotel premises or that a sub-letting of the room is not a contravention of cls. (b) and (c) of the proviso to s. 13(1). [555 F-G 556 <CITATION> , 1 S.C.R. 368, followed. <ORG> & Anr. v. <NAME> and <NAME>.  1 QB. 513 and <NAME> v. <ORG>,  2 K.B. 335,referred to. 549 A waiver is an intentional relinquishment of a known right. There can be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights and of facts enabling him to take effectual action for the enforcement of such rights. Assuming that the landlord can waive the requirement as to consent, it was not shown that the respondent waived it. It is said that the respondent knew of the sub-lettings as be frequently visited the hotel up to 1953 and he must have known of the occupation of some of the occupants. But he came to know of the other lettings in 1958 only. Moreover, the precise nature of the grant was -never communicated to the respondent. [557 B-D] <NAME> v. <NAME>,  11 C.W.N. 852, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1249 of 1967.

Appeal from the judgment and decree dated July 21, 1967 of <ORG> in Regular First Appeal No. 166-D of 1965.

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

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

The Judgment of the Court was delivered by <NAME>, J. This appeal arises out of a suit for ejectment instituted by a landlord against a tenant. It is common case that the suit is governed by the provisions of' the Delhi and Ajmer Rent Control Act, 1952 (Act No. 38 of 1952) hereinafter referred to as the Act. The material provisions of s. 13(1) of the, Act are as follows :

"13. (1) Notwithstanding anything to the contrary contained. in any other law or any contract, no decree or order for the recovery of possession of any premises shall be passed by any Court in favour of the landlord against any tenant (including a tenant whose tenancy is terminated) : Provided that nothing in this sub-section shall apply to any suit or other proceeding for such recovery of possession if the Court is satisfied-

(b)that the tenant without obtaining the consent of the landlord in writing has, after the commencement of this Act,-

(i)sub-let, assigned or otherwise parted with the possession of the whole or any part of the premises; or

(ii) used the premises for a purpose other than that for which they were let; or,

(c) that the tenant without obtaining the consent of the landlord has before the commencement of this Act,-

(i)sub-let, assigned or otherwise parted with the possession of, the whole or any part of the premises;, or

(ii)used the premises for a purpose other than that for which they were let; or

(k)that the tenant has, whether before or after the commencement of this Act, caused or permitted to be ,caused substantial damage to the premises, or notwithstanding previous notice has used or dealt 'with the premises in a manner contrary to any condition imposed on the landlord by the <ORG>, or <ORG> while giving him a lease of the land on which the premises are situated;" The respondent constructed the building known as the Hotel Imperial, New Delhi, on land leased to him by the Secretary of <ORG> for India in Council under a perpetual lease deed dated July 9, 1937. By a deed dated August 18, 1939, he leased to the appellant the hotel premises together with fittings and furniture for a term of 20 years commencing on September 15, 1939. On January 28, 1958, the respondent instituted the present suit alleging that in breach of the express conditions of the lease dated August .18, 1939, the appellant sub-let portions of the premises and made unauthorised additions and alterations in the premises, that on such breaches he was entitled to determine the lease and he did so, by notice in writing dated January 6, 1958. He claimed eviction of the appellant on the grounds mentioned in cls. (b), (c) and (k) of the proviso to s. 13(1) of the Act. The appellant filed its written statement on April 3, 1958 denying most of the material allegations in the plaint. The appellant also pleaded that the respondent had waived the breaches, if any, of the conditions of the lease by accepting rents with knowledge of such breaches and particularly by accepting rent on or about January 3, 1958. On April 24, 1958, <NAME>, counsel for the appellant, made the following statement before <ORG> :

"The plaintiff can seek ejectment of the defendant only under section 13 of Act 38 of 1952. In case the plaintiff succeeds in establishing the liability of, the defendant for ejectment on any of the grounds given in . section 13 of the Rent Act, the defendant would not seek any protection under the terms of the lease deed dated 18th August, 1939 executed between the parties, as regards the period of lease fixed therein. . ."

Having regard to the pleadings and statement of counsel, the <ORG> settled the following issues on May 12, 1958 : "1. Whether the defendant had sublet, assigned or otherwise parted with possession, of any part of the suit premises before the commencement of Act 38 of 1952 ?

2. If so, was the same done with express or implied consent of the plaintiff ?

3. Whether the defendant had sublet, assigned or otherwise parted with possession of any part of the suit premises after the commencement of Act 38 of 1952 ?

4.If so, was the same done with the prior consent in writing of the plaintiff ?

5.Whether the defendant has used the tenancy premises for a purpose other than that for which they were let ?

6. Whether the defendant has caused substantial damage to the tenancy premises ?

7. Whether the defendant notwithstanding previous notice has been. using and dealing with the tenancy premises in a manner contrary to the conditions imposed on the plaintiff by, the Government while giving him lease of the site of the tenancy premises ?

8. Is the defendant entitled to special cost ?

9. Whether the plaintiff is estopped or has waived his right to seek ejectment of the defendant on any of the grounds mentioned above ? If so, what and to what effect ?

10.Whether the defendant is entitled to sublet any part of the hotel premises even when there was a clause to the contra in the lease dated the 18th August, 1939. and in face of statutory provisions under the Rent Control Act (for reasons given in para 16 of the amended written statement) ?"

A tenant holding premises under a subsisting lease is pro- tected by the lease and needs no protection under the Rent Act . It was open to the appellant to contend that it was protected by the terms of the lease dated August 18, 1939, that the breaches, if any, of the conditions of the lease had been waived by the respondent and that the lease had not determined. But the appellant deliberately elected to seek protection under s. 13 of the Act only. The appellant's counsel made a' formal statement in <ORG> that the appellant would not seek any protection under the terms of the lease deed as regards the period of the lease fixed therein. The Court accordingly settled the ten issues. Issue No. 8 was not pressed. All the other issues relate to thegrounds of eviction mentioned in cls. (b), (c) and

(k) raises the question- of waiver of the respondent's right to seek ejectment on those grounds. Thus, the only questions in issue between the parties was whether the appellant was entitled to protection from eviction under s. 13 and whether any ground for eviction under the Act was made out. The case was tried and decided on this footing. We have come to this conclusion after a close examination of the 'pleadings, particulars, statement of counsel, issues and the judgment of <ORG>. No issue was raised on the question whether the breaches of the express conditions of the lease had been waived by the respondent, and whether the lease was still subsisting. The appellant sought to raise this plea in <ORG> and also in this Court Having regard to the deliberate stand taken by the appellant in <ORG>, the appellant cannot be allowed to raise the plea at a later stage. The lease determined by efflux of time on September 15, 1959. Had the appellant taken the plea that the lease had not determined by forfeiture on the date of the institution of the suit, it is possible that the respondent might have filed another suit for ejectment of the appellant immediately after September 15, 1959. Because of the stand taken by the appellant, it was not necessary for the respondent to file another suit. This appeal must be decided on the footing that the lease had determined by forfeiture on the date of the institution of the present suit. The respondent is entitled to a decree for eviction if any of the grounds mentioned in cls. (b), (c) and (k) of the proviso to s. 13(1) is made out.

<ORG> answered issue No. 5 in the negative. With regard to all the other issues, <ORG> found in favour of the respondent, and held that the grounds of eviction mentioned in cls. (b)(1), (c)(i) and (k) were proved. With regard to the ground of eviction mentioned in cl. (k), <ORG> held that the appellant was entitled to relief on certain conditions. <ORG>, however, held that the respondent was entitled to an unconditional decree, for eviction on the ground of sub- letting mentioned in cls. (b)(i) and (c)(i). The appellant preferred an, appeal to <ORG>. <ORG> agreed with all the findings of <ORG>, and dismissed the appeal.

The two <ORG>s- concurrently found that the appellant had sub-let several rooms, counters, showcases -and garages. The two <ORG>s found that the appellant had sub-let rooms to (1) <ORG>, (2) <ORG>, travel agents, (3) <ORG>, dealers in curios and jewellery, (4) <ORG>, dealers in jewellery, (5) <ORG>, hairdressers, (6) <ORG>, travel agents and (7) <ORG>, dealers in saris and curios. The businesses of the sub- lessees were not confined to the residents of the hotel. The letting to <ORG> and <ORG> were before the commencement of the Act and the lettings to <ORG>, <ORG>, and <ORG> were after the commencement of the Act. <ORG> and <ORG> were inducted as tenants after the institution of, the suit. The entrances to the rooms were in ,the main corridor of the hotel on the ground floor. The concurrent finding is that the occupants were given exclusive possession of the rooms occupied by them. The appellant did not retain any control and dominion over the rooms. It is possible that the keys of the apartments were sometimes left at the reception counter, but the evidence on this point was not convincing. It was not a condition Of the grants that the keys would be left at the reception counter, or that the duplicate keys would be retained by the appellant. The occupants were at liberty to take away the keys if they liked'. The occupants availed themselves of the services of the hotel sweeper for, their own convenience. The appellant retained control of the corridor, but it is common case before us that the entrance to the corridor was open day and night. The occupants paid monthly sums to the appellant as the consideration of the sub-leases. The consideration though described as license fee was in reality rent. The portion occupied by <ORG> has an interesting history. It was formerly sub-let to <ORG> <NAME>. <CITATION> (1), this <ORG> held by a majority on a construction of the grant to R. N. <NAME> that he was a lessee and not a licensee. <ORG> began to occupy this portion of the premises from February, 1955. According to the appellant, the agreements with <ORG>, <ORG> and <ORG>, were in writing. The appellant produced several documents in <ORG> at an early stage of the suit. The appellant's case was that these documents were the relevant agreements. According to the respondent, the documents were not genuine and the real agree-

(1) [196] 1 S.C.R. 36F meats were being withheld. The stamp auditor noted on the documents the deficiency-in stamps and penalty leviable on them on the footing that they were lease deeds. The appellant did not contest this note nor paid the penalty and deficiency as directed by the trial <ORG>. -The surprising feature of the case is that the appellant did not attempt to prove any of the documents. Where the agreement is in writing, it is a question of construction of the agreement whether the grant is a lease or a license. It was for the appellant to prove the written agreements, and the <ORG> could then construe them. The appellant has not brought before the <ORG> the best and the primary evidence of the terms on which the apartments were being occupied. The onus to prove sub-letting was on the respondent. The respondent discharged the onus by leading evidence showing that the occupants were in exclusive possession of the apartments for valuable consideration. The appellant chose not to rebut this prime facie evidence by proving and exhibiting the relevant agreements. The documents formed part of the appellant's case. The appellant bad no right to withhold them from the scrutiny of the <ORG>. In the absence of the best evidence of the grants, the <ORG>s below properly inferred sub-lettings from the other materials on the record.

The test of exclusive possession, though not conclusive, is a very important indication in favour of tenancy, see <ORG> and <NAME>. v. <NAME> and Ors.(1) The argument is that as the landlord is living in the premises, that fact raises the presumption that he intends to retain the control of the whole of the premises and that the occupation of the other parts is that of a lodger or inmate and not that of a tenant, and reliance was placed on <NAME> v. <ORG>) and the cases referred to therein. Those cases consider what constitute rateable occupation. In the case last cited, <ORG> said that a person who is regarded as a lodger for rating purposes need not necessarily be a lodger for the purposes of the Rent Restriction Acts, while Evershed L.J. seems to have expressed a contrary opinion. Normally, an occupier of an apartment in a hotel is in the position of a licensee as the hotel-keeper retains the general control of the hotel including the apartment. But it is not a necessary inference of law that the occupier of an apartment in a hotel is not a tenant. Where, as in this case, the hotel-keeper retains no control over the apart- ment, the occupier is in the position of a tenant. In Halsbury's Laws of England, Vol. 23, Art. 1028 , p. 433, the law is accurately summarised thus "A lodger who has no separate apartment is only a licensee, and, even though he has a separate apart-

(1) [1958] 1 Q.B. 513, 525.

(2) [1949] 2 K.B. 335.

ment, he has not in law an exclusive occupation, and is therefore in the position of a licensee, if the landlord retains the general control and dominion of the house, including the part occupied by the lodger; but, if in fact the landlord exercises no control over that part, the occupier is a tenant. The occupier does not, however, become a lodger merely by reason of the fact that the landlord resides on the premises and retains control of the passages and staircases and other parts used in common." On the question whether the occupier of a separate apartment in a premises is a licensee or a tenant, the test is-has the landlord retained control over the apartment ? The fact that the apartment is a room in a hotel may lead to the inference that the hotel-keeper retains the general dominion of the en-tire hotel including the apartment and that the occupier is in the position of a lodger or inmate. But the inference is not a necessary inference of law. Where, as in this case, the best evidence of the -rant was withheld from the scrutiny of the <ORG>, the inference was rightly drawn that the occupiers were tenants.

At the hearing of this appeal, the appellant moved an appli- cation for reception of the documents as additional evidence. The genuineness of the documents was disputed by the respondent. In the Courts below, the appellant made no attempt to prove these documents. We found no ground for directing a new trial. Having regard to all these facts, we dismissed the application.

The hotel building constitutes premises within the meaning of s. 2(g) of the Act.' It is because the hotel building constitutes Premises that the appellant can claim protection from eviction under the Act. A room in a hotel is a part of the hotel premises. A sub-letting of a room in a hotel in contravention of cls. (b) and (c) of the proviso to s. 13 (1 ) is a ground for eviction under the Act. Section 2(g) provides that 'premises' does not include " a room in a hotel or lodging house." The sub-lessee of a room in a hotel is, therefore, not a tenant and cannot claim protection under s. 13 from eviction, nor can he ask for fixation of standard rent. see <CITATION> (1). If the interest of the tenant of the hotel premises is determined, the sub-tenant to whom a room in the hotel has been lawfully sublet becomes under s, 20 a direct tenant of the landlord, It may be that when the sub-tenant of a room in a hotel becomes a direct tenant under s. 20 he enjoys the protection of the Act because the room is no, longer a room in a hotel. But that point does not arise and need not be decided. Because a room in a hotel is not (1)  1 S.C.R. 368.

premises, it does not follow that the room is not a part of the hotel premises or that a sub-letting of the room is not a contravention of cls. (b) and (c) of the proviso to s. 13(1) .

The Courts below concurrently found that the sub-lettings after the commencement of the Act were made without obtaining the consent of the landlord in writing, and the sub-lettings before the commencement of the Act were made without obtaining the consent of the landlord either orally or in writing. We are not inclined to interfere with this concurrent finding.

It is said that by the lease deed dated August 18, 1939 the respondent impliedly consented to this sub-letting. Clauses 21 .and 22 of the lease are in these terms "21. That the lessee shall not be entitled to either transfer or sub-lease the premises or any part thereof to any other party without the written consent of the lessor and on such transfer, both the transferee and the lessee shall be liable for the payment of rent to the lessor and responsible to deliver,possession of the building and equipments in the same condition as when taken.

22.That the lessee will use the premises only for the purpose of running a first class hotel."

It is -,aid that for the purpose of running a first class hotel it was necessary to sub-let the apartments. It is impossible to accept the contention. A hotel-keeper may run a first class hotel without sub-letting any part of it. Clause 21-clearly provided that the lessee shall not sub- lease the hotel premises or any part thereof. In the teeth of cl. 21, it is impossible to read in cl. 22 an implied consent to sub-letting.

Reliance is placed on the correspondence passed between the Land Development Officer, New Delhi and the respondent bet- ween April 1948 and February 1949 for establishing that the respondent gave written consent to the sub-lettings. The Land and Development Officer was then complaining of the occupation of portions of the premises by <ORG> and other persons. By his letters dated November 4, 1948 and February 23, 1949, the respondent requested <ORG> to regularise the matter adding that in an first class hotels counters of air-lines and show-rooms of jewellery and curios were always provided. These letter,.; do not amount to a consent in writing to sub-lettings of portions of the hotel to the persons mentioned therein. Moreover, the consent, if any, 'was to the sub-lettings made before 1949 and not to the sub- lettings made thereafter. It is not possible to infer from these letters a general consent to all sub-lettings.

It is argued that the respondent waived the requirement of consent to the sub-letting. Any subletting in breach of the provisions of cl. (b) of the proviso to S. 13 ( 1) is an offence punish-able under s. 44 . Assuming that the landlord can waive the requirement as to consent, it is not shown that the respondent waived it. A waiver is an intentional relinquishment of a known right., There can be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights and of facts enabling him to take effectual action for the enforcement of such rights. See <NAME> v. <NAME>). It is said that the respondent knew of the sub-lettings as he frequently visited the hotel. It appears that he visited the hotel up to 1953 and he must have known of the occupation of <NAME>, <ORG> and <ORG>. But he came to know of the other lettings in January 1958 only. Moreover, the precise nature of the grant was never communicated ,to the respondent. The Courts below rightly held that the respondent did not waive his right to evict the appellant on the ,-rounds mentioned in cls. (b) and (c) of the proviso to s. 13 (1).

We are therefore satisfied that the respondent is entitled to evict the appellant on the ground of sub-letting of the rooms. The Courts below held that the appellant had also sublet several counters, show-cases and garages to various persons. We express no opinion on the question whether there was any sub-letting of the counters, show-cases and garages. The sublettings of the rooms are sufficient grounds of eviction tinder cls. (b) and (c) of the proviso to s. 13(1) .

Clause 2(v) of the head lease granted by the <ORG> to the respondent provided that the respondent would not, without the previous consent in writing of the Chief Commissioner.. Delhi or a duly authorised officer, erect or suffer to be erected on any part of the demised premises any building other than the buildings erected there on the date of the lease. The appellant had due notice of the conditions of the head lease. Notwithstanding such previous notice, the appellant dealt with the premises in a manner contrary to the conditions imposed by cl. 2 (v). The Courts below found that contrary to this condition, the appellant made several unauthorised constructions without obtaining the requisite consent. To give one illustration, the appellant admittedly constructed a room 16 ft. 6 in X 19 ft. 6 in. with R.C.C. slab and brick masonry walls. This newly constructed room was -let to <NAME> and Co. On the ground of unauthorised construction of this room alone it must-be held that the appellant in contravention of cl. (k) of the proviso to s. 13 (1), notwithstanding previous notice, dealt with the premises in a manner contrary to (1) (1907) 11 C.W.N. 848, 852.

a condition imposed on the respondent by the <ORG> while ,giving him a lease of the land on which the premises are situated. The notice of the conditions imposed by the head lease was sufficient notice for the purposes of cl.

(k). The ground of eviction under cl. (k) was thus made out. The Courts below also held that the appellant caused substantial damage to the premises. We express no opinion on it, and this question is left open.

It follows that the respondent is entitled to evict the appellant on the grounds mentioned in cls. (b) (i), (c) (i) and (k) of the proviso to s. 13(1) .

In the result, the appeal is dismissed with costs. The execution of the decree is stayed for a period of six months from today. The appellant through Mr. <NAME> gives an undertaking that the appellant will hand over to the respondent, on the expiry of six months, vacant possession of the entire hotel premises except the portion in the possession of sub-lessees.

<ORG> dismissed.


PETITIONER: UNION OF INDIA Vs. RESPONDENT: DELHI CLOTH & GENERAL MILLS DATE OF JUDGMENT: 12/10/1962 BENCH: <NAME>, K.C. DAS BENCH: <NAME>, K.C. DAS SINHA, <NAME> P.(CJ) GAJENDRAGADKAR, P.B. <NAME>, K.N. <NAME>, J.C. CITATION: 1963 AIR 791 1963 SCR Supl. (1) 586 CITATOR INFO : E 1967 SC1895 (30) RF 1968 SC 922 (14) D 1971 SC2333 (5) R 1973 SC 225 (21) R 1973 SC 425 (8) R 1982 SC 127 (8) RF 1984 SC 420 (13) RF 1985 SC 746 (14) D 1986 SC 281 (8) RF 1986 SC 662 (23,24) RF 1986 SC1097 (6) RF 1986 SC1730 (11) RF 1988 SC 871 (4) R 1988 SC1164 (4) R 1988 SC2176 (4) R 1988 SC2223 (11) R 1988 SC2237 (6) APL 1989 SC 79 (2) R 1989 SC 516 (17,18) F 1989 SC 622 (4) F 1989 SC1153 (6,7) RF 1990 SC 59 (3) R 1990 SC1579 (37) R 1990 SC1676 (11) R 1990 SC1893 (4) RF 1991 SC2222 (17,23) RF 1992 SC 224 (15) RF 1992 SC2055 (6) ACT: Excise Duty-Manufacture of Vanaspati-'Refined oil' if an intermediate product-Liability-'Manufacturing' and 'processing'-Distinction-Central Excises and Salt Act , 1944 , s. 2 (f )-First Schedule, Item 23. HEADNOTE: The respondents, who were manufacturers of Vegetable products known as Vanaspati, were assessed to excise duty under item 23 of the First Schedule to the Central Excises and Salt Act ,' 1944. on what the taxing authorities called the manufacture of refind oil from raw oil 'Which according to them fell within the description of 'vegetable non- essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The common case made by the respondents in their petition under Art. 226 of the Constitution challenging the imposition was that for the purpose of manufacturing Vanaspati they purchased groundnut and til oil from the market and subjected them to different processed before applying hydrogenation to produce Vanaspati and that nothing that they produced at any stage was covered by that item. Affidavits by experts were filed by both the parties and <ORG> found in favour of the respondents and allowed the petitions. <ORG> appealed. It was urged on its behalf that before finally producing Vanaspati the respondents produced at an intermediate stage what was known as refined oil' in the market and although they might not sell it and although Vanaspati, when produced, was liable to excise duty under another item, that could not affect their liability. Held, that excise duty being leviable on the manufacture of goods and not on their sale, the petitioners would no doubt be liable if they produced refined oil', as known in the market, at an intermediate stage. But it was clear that there could be no ,refined oil' as known in the market without deodorisatio,n according to the specification of <ORG> and the affidavits of the experts. Since, however, the process 587 of, deodorisation was admittedly applied in the respondents'. factories only after hydrogenation was' complete,' they could not said to produce 'refined oil' at any stage. Nor could the respondents be held to manufacture kind of non -essential vegetable oil'. Processing- cannot be equated to manufacture' which means bringing into existence a new substance. The <ORG> by defining the word 'manufacture' in s.2(f) of the Act did not intend to make the 'mere processing of goods liable to duty. The words "all sorts" in item 23 are intended only-,Po make it clear that vegetable non-essential oils. whether raw or refined, from whatever raw material produced, will be liable to excise duty. JUDGMENT:

CIVIL APPELLATE, JURISDICTION :Civil. Appeals Nos. 168-170 of 1960.

Appeals from the judgment and order dated 10, 1958, of the Circuit Bench of the Punjab, <ORG> at Delhi in Civil Writs Nos. 301, 302. a d. 347 of 1956.

<NAME>, <NAME> and <NAME>, for the appellants. <NAME>, <NAME> and, <NAME>, for the respondent (in C.A. No. 168/60).

<NAME>, <NAME>, <NAME> and <NAME>,' for the respondent in (C.A. No. 169/60). <NAME>, <NAME>, and <NAME>, for the respondents (in C.A. No. 170 60).

N. A.: :Palkhivala, <NAME> and <NAME>, for the Interveners (in all the appeals.) 1962. October 12. The judgment of the <ORG> was delivered by <NAME>, J.-These , three appeals are against the orders of the Punjab, High <ORG> all three petitions under Art' 226 of the. Constitution. The three petitions are by three different companies manufacturing vegetable products known as Vanaspati and they challenge the legality of the imposition of Excise duty on, what was called by the taxing authorities as the manufacture of "refined" from raw oil. These petitions raise a common question of law. as regards the- liability to <ORG> duty under item 23 of the first schedule to the Central Excises and Salt Act 1 of 1944, on similar facts. The petitions were heard together and disposed' of by a common judgment allowing the appeals and directing the. <ORG>' authorities to withdraw the impugned.demand of <ORG> duty on the petitioners. The present appeals have also been heard together.

The facts alleged in the three separate petitions filed by the three petitioners the manufacturers of Vanaspati, are practically the same. It is said that for the purpose of manufacturing Vanaspati the petitioners purchased groundnut and (the respondents herein) til oil from the open market or directly from the manufacturers of such oil. The oils thus purchased are subjected to different processes in order to turn them into Vanaspati. It is their case that the only finished product they manufacture from the raw materials thus purchased is Vanaspati which is liable to exciseduty as a vegetable product. They, contend that at no stage do they produce any new product which can come within the item described in the Schedule as " vegetable non-essential, oils.. all sorts in or in relation to the manufacture of which any process is ordinarily carried on with the aid of Power." Accordingly, it is, said, the demand for excise duty on the ground that they produce from the raw oils purchased a product which is liable., to duty under item 23 of the Schedule (now item 12) is illegal.

In resisting these petition <ORG> contended, in substance, that in the course of the manufacture of Vanaspati, the vegetable product form raw groundnut and til oil, the petitioners bring into to existence at one stage, after carrying out some 'process" with the aid of power, what is known to market as "'refined oil". This "refined oil" falls within the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power," and so is liable to excise duty. The affidavit filed. by Mr. <NAME>, Chief Chemist, <ORG>, <ORG>,<ORG>, in support of this contention of the appellant, describes the process by which raw oil is manufactured into Vanaspati thus :-

"The manufacture of vegetable product consists in hydrogenating oils using a catalyst. The catalyst is a sensitive material and is liable to be poisoned and made ineffective if certain impurities, like mucilaginous, matter, free oxidised fatty acid and moisture are present.

In order therefore, to successfully manufacture vegetable product the

hydrogenation has to be done on a refined vegetable non-essential oil. 'The refined vegetable non-essential oil (an oil free from major impurities mentioned in paragraph 2 above) is the penultimate raw material for the manufacture of vegetable product. The vegetable non-essential oils as obtained by crushing containing the impurities mentioned ,earlier are raw vegetable nonessential oils. The process of refining them consists in adding. an aqueous solution of an alkali which will combine with the free fatty acids to form a soap and settle down with it a large amount of suspended and mucilaginous matter; after *settling the clear supernatant layer is drawn off and treated with an Appropriate quantity of bleaching earth and carbon is then filtered. In this process the colouring matter is removed and the moisture that was originally present in the neutralised oil will also be removed. At this stage the oil is a refined oil and is suitable for hydrogenation into vegetable product. This process of refining generally involves the use of power and machinery." He then goes on to say "'Depending upon the quality of the seed used for crushing and that of the original raw oil this refined oil will now generally be suitable for edible purposes of discriminating users and for the manufacture of toilet goods like hair oils and high class soaps. For certain users who are even more discriminating this oil may be subjected 'to a further process of deodorisation.

The difference between raw vegetable non- essential oils and refined vegetable oils will clearly be seen on examination of the two 'products. The refined oil will generally be colourless or only slightly coloured. ' It will be perfectly clear and in many cases it may have no odour. The raw oil, on the other hand, will have a certain amount of turbidity or sediment at the bottom and will also be somewhat deep in colour. I further say that sometimes refined oil obtained above is subjected to a process of further deodorization. Such oil can be correctly described as refined and deodorised oil. As far as known to me, the two grades of oils are separately marketed in the country; as for' example, groundnut' oil' and 'refined groundnut oil' the latter generally with a distinctive label when marketed in containers of approximately 4 gallons or less."

The experts who have filed affidavits in support of the petitioners' case agree with Mr. <NAME> that common oils, like groundnut, sesame, mustard cottonseed, etc. in their raw stage always contain varying amounts of impurities and these impurities have to be removed by different processes before hydrogenation for the purpose of producing Vanaspati can be applied. There is however this important difference between the view of Dr. <NAME> who has filed an affidavit in support of the petitions, and that of Mr. <NAME> that while according to Mi. <NAME> the raw oil which has been freed from impurities but not deodorised is sold in the market as refined oil, Dr. <NAME> is definite in his statement that refined oil for edible purposes, as understood by the manufacturers as well as by the trade, is oil to which all the three processes, viz., neutralization, bleaching and deodorisation have been applied. He goes on to say: "In fact I would not regard any oil as refined oil unless it was also deodorised, since the failure to deodorise oil leaves behind in the oil certain impurities in the shape of compounds which give off bad odours." (Vide para. 5 of his affidavit in the petition filed by <ORG>).

As already stated <ORG> accepted the petitioners' contention that the oil in their hands after some amount of refinement in the course of being converted into Vanaspati was not liable to excise duty under item 23 (Now item 12) and so allowed the petitions.

In support of the appeals, Mr. <NAME> has advanced a two- fold argument. He first argues that the respondent concerns after they buy the raw oil with all its impurities, manufacture by the application of certain processes of refinement, a refined oil which is the same as the refined oil available in the market, and the aid of power is taken in some of these processes; and that it is "refined oil" thus produced that becomes after further processes "vegetable product". When the vegetable product comes into existence it becomes liable to excise duty as vegetable product under the present cl. 13, which appears to be the same as old cl. 11. That however cannot alter the position that at an earlier stage. these same respondents have manufactured refined oil" as is known to the market. That substance comes squarely within cl. 23 (now cl. 12) and is therefore liable to duty under this clause; and the fact that they do not put this "refined Oil" on the market but use it to produce a finished product known as vanaspati product cannot affect this liability. Excise duty is on the manufacture of goods and not on the sale. Mr. <NAME> is therefore right in his contention that the fact that the substance produced by them at an intermediate stage is not put in the market would not make any differences If from the raw material has been brought into existence a new substance by the application of processes one or more of which are with the aid of power and that substance is the same as "refined oil" as known to the market an excise duty may be leviable under Item 23 (the present item 12). But has it been shown that the substance produced by the petitioners is at any intermediate stage before <ORG> comes into existence, "refined oil" as known to the market? We are not satisfied that this has been shown. As already stated, a summary of the numerous processes necessary to turn the raw groundnut or til oil 'into vegetable product has been given in the affidavits sworn to by the experts on both sides., It does not appear to be disputed that the process of deodorisation is applied in the petitioners' factory after hydrogenation is complete. The appellant's case is that before hydrogenation has started the substance in the hands of these petitioners is "refined oil" as known to the market. That raises the important question whether any oil is known as "refined oil' in the market before deodorization has taken place. As already indicated, the appellant's case is that deodorization is not necessary for "refined oil" to come into existence; the respondents' case on the other hand is that without deodorisation the substance is not "refined oil".

We have already referred to the affidavits on this question as sworn to by Mr. <NAME> on behalf of the appellant and Dr. <NAME> on behalf of the respondents petitioners. In his affidavit Dr. <NAME> has also referred to the specification of "refined oil" by <ORG> and has given these in an annexure to his affidavit. From this annexure we find the following specification by <ORG>

"Refined groundnut oil:-Groundnut oil which has been refined by neutralisation with alkali bleached with fuller earth and/or Activated Carbon', and deodorised with steam, no other chemical agent being used.

refined by neutralisation with alkali, bleached with alkali, bleached with fullers' earth and/or Activated Carbon and Deodorised."

This specification by <ORG> furnishes very strong and indeed almost incontrovertible support for Dr. <NAME>'s view and the respondents' contention that without deodorisation the Oil is not "'refined oil" as is known to the consumers and the commercial community. Further support, if any was needed, is found in the several affidavits of several concerns who market refined groundnut oil under the brand names-Falika, Tripti, Kitchen, Kiran, Temple, Sovereign, Lotus, Nirmal, Dilkhus, Kamdhenu, Radio, Deer, Dog, Sepoy, Cocogem Tushar and Ginutol. They agree in, asserting that the oil is always deodorised before it is marketed as refined oil under these brand names. As against this if has to be noticed that the appellant could not produce evidence of one single case of marketing of refined oil without deodorisation. Instead of that Mr. <NAME> produced before us copies of extracts of a book by. <NAME> of the name "Cottonseed and Cottonseed Products" and another book by the same author of the name "Industrial Oil and Fat Products" and a third book of the name "Vegetable Fats and Oil" by <NAME>. Mr. <NAME>'s statement does not at all make it clear that refined oil is put on the market without deodorisation. Mr. <NAME> appears to have stated in his book on "Industrial Oil and Fat Products" that the term "refining" refers to any purifying treatment designed to remove free fatty acids, phosphatides or mucilaginous material, or other gross impurities in the oil; it excludes "bleaching" and also "deodorisation". The extracts from this book also do not clearly show that before deodorisation the oil which has been refined by the purifying treatment, is put on the market. The extract from <NAME>'s book on "Cottonseed and Cottonseed Products" contains a passage in these words :-

"In a discussion of the composition and characteristics of cottonseed oil, three kinds of oil are to be distinguished. They are :

(a) crude oil, which is the oil as it is expressed from the seed, and the commodity shipped from the oil mills; (b) refined oil, or oil Which has been freed of most of its nonglyceride constituents by treatment with alkali, with or without subsequent bleaching or deodorisation, and (c) hydrogenated oil."

Mr. <NAME> has relied on <NAME> 's statement that the oil which has been freed of most of its nonglyceride constituents by treatment with alkali, with or Without subsequent bleaching or deodorization is refined oil", for his contention that even without deodorisation the oil is known as "refined oil". It will be unsafe however to base any conclusion on this extract without knowing the entire context in which the statement has been made or what has been made or what has been said in other parts of the same 'book. The book itself was not produced before us. It is worth noticing that while the above statement is made by Mr. <NAME> in respect of cottonseed oil, the oil with which we are concerned is produced from groundnut oil and tit-neither of which is cottonseed. Apart from all this we are of opinion that the view :,of <ORG> as regards what is refined oil as known to the trade in India must be preferred to the opinion of this author. In this con- nection' it has also to be mentioned that the affidavits filed on behalf of the respondents are clear and cate- gorical, while <NAME>'s affidavit on which reliance was placed on behalf of the appellant is somewhat vague, halting and not categorical.

On a consideration of all these materials we have no doubt about the correctness of the respondents' case that the raw oil purchased by the respondents for the purpose of manufacture of Vanaspati does not become at any stage "refined oil" as is known to the consumers and the commercial community. The first branch of Mr. <NAME>'s argument must therefore be rejected.

The other branch of Mr. <NAME>'s argument is that even if it be held that the respondents do not manufacture "refined oil" as is known to the market they must be held to manufacture some kind of "non,essential vegetable oil" by applying to the raw material purchased by them, the processes of neutralisation by alkali and bleaching by activated earth and/ or carbon. According to the learned Counsel "manufacture" is complete as soon. as* by the application of one or more processes, the raw material undergoes some change. To say this is to equate "'processing" to "manufacture" and for this we can find no warrant in law. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus :-

'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use."

It is helpful to consider also in this connection the ordinary meaning of the word "'goods". For, by the very words of the: Central Excises and Salt Act , 1944, excise duty is leviable on "'goods". The Act itself does not define "goods" but defines "excitable goods" as meaning "goods specified in 'the First Schedule as being, subject to a duty of excise and includes salt." On the meaning of the word "goods" an interesting passage is quoted in the Words and Phrases, Permanent Edition, Vol. 18, from a judgment of <ORG> thus:

"The first exposition I have found of the word 'goods' is in Bailey's Large Dictionary of 1732, which defines it simply 'Merchandise'-, and by <NAME>, who followed as the next lexicographer, it is defined to be movables in a house; personal or immovable estates; warn,; freight; merchandise,,"

<ORG> defines the word "'goods" thus :- "Goods, noun' plural, (1) movables; household, furniture; (2) Personal or movable estate, as horses, cattle, utensils, etc., (3) Wares; merchandise; commodities bought and sold by merchants and traders."

These definitions make it clear that to become "goods" an. article must be something which can ordinarily come to the market to be bought and Sold.

This consideration of the meaning of the word "goods" an provides strong support for the view that "manufacture" which is liable to excise duty under the Central, Excises and Salt Act , 1944, must be the "bringing into existence of a new substance known, to the market." "But," says the learned Counsel, "look at the definition of 'manufacture' in the definition clause of the Act and you will find that 'manufacture' is defined thus: 'Manufacture' includes any process incidental or ancillary to the completion of a manufactured product (s.2(f)". We are unable. to agree with the learned Counsel that by inserting this definition of the word ',manufacture,, in s. 2 (f) the legislature intended to equate "processing" to "manufacture" and intended 'to make mere "Processing" as distinct from "manufacture" in the: same, sense of bringing into existence of a new substance known to the market, liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word 'manufacture' has been used to mean a process incidental to the manufacture of the article. Thus in the very item under which the excise duty is claimed in these cases, we find the words : "in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The definition of "manufacture' as in s. 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definition of the word 'manufacture' in the definition section and not with a view to make the 'mere "processing" of goods as liable to excise duty. Mr. <NAME> wanted to derive some assistance, for his argument from the words "all sorts" as used in the clause. According to him, the words "all sorts" will be superfluous unless interpreted to mean "whether bringing into existence a new substances or not." The reasoning is clearly fallacious. The words "all sorts" have been used to make it clear: that "vegetable non-essential oils" whether raw or refined and from whatever raw material produced will be liable to excise duty. Refined oil is one sort; raw oil is another sort. But as the duty is on the manufacture of goods, that is, on the bringing into existence a new substance known to the market, the raw oil or the refined oil must be some substance known to the, market before it can be subjected to duty.

We are therefore of opinion that <ORG> was right in, its conclusion that there was no legal basis for the demands of excise duty which were made. on the petitioners and in directing the authorities to withdraw these demands. The appeals are accordingly dismissed with costs. Appeals dismissed.