CASE NO.: Appeal (civil) 7088 of 1999 PETITIONER: MUNICIPAL COUNCIL, AHMEDNAGAR AND ANR. RESPONDENT: <NAME> AND ORS. DATE OF JUDGMENT: 08/12/1999 BENCH: S.B. MAJMUDAR & <NAME> JUDGMENT:

JUDGMENT 1999 Supp(5) SCR 197 The Judgment of the Court was delivered by <NAME>, <NAME> <NAME> granted.

<ORG>, Ahmednagar and another are in appeal against an order of <ORG> (Aurangabad Bench) in Writ Petition No. 1156 of 1993, wherein the Writ Petition filed by the respondent Nos. 1 to 3 herein, <NAME> and two others was allowed and <ORG> was directed to make over vacant possession of the land bearing CTS No. 5761-A situated at Ahmednagar to the petitioners within a period of three months from the date of the Judgment <ORG> further directed the writ petitioners to refund the amount of compensation received by them for the acquired land within a period of four weeks from the date of handing over the possession of the land to them by the respondent <ORG> along with certain consequential orders. The facts for the matter being singularly singular ought to be adverted to at this juncture.

The facts depict that the Writ Petition before <ORG> was filed on 21st October, 1992, for setting aside the Award dated 26th April, 1976 in regard to CTS No, 5761' of Ahmednagar Town. Subsequent thereto, however, the Writ Petition was amended for issuance of a Writ of Certiorari for quashing and setting aside the notification dated 15th May, 1971 issued under Section I26(4)of the Maharashtra Regional and Town Planning Act, 1966 (hereinafter referred to as the Act) read with Section 6 of the Land Acquisition Act, 1994. It is on this petition that <ORG> made the rule absolute and directed making over of the vacant possession of the land under acquisition within a period of three months from the date of the Judgement as noticed above. The appellants on grant of special leave to appeal are before this Court, While issuing notice on 17th December, 1998, this Court was pleased to grant an interim stay of operation of the impugned judgemient of <ORG> and also directed filing of counter and rejoinder affidavits. It is in terms of this direction of the Court that the matter was taken up for hearing on 7.12.1999 and also today.

Upon however, hearing the submissions on behalf of the parties herein, we do feel it expedient to record that the matter can be dealt with finally on a short ground to wit, the time element. While addressing on behalf of the petitioners herein Mr. <NAME> learned Solicitor General severely criticised the judgment of <ORG> and contended that <ORG> should have taken note of the element of delay in moving the Court. Mr. <NAME> pointed out that whereas the notice for acquisition was issued in 1971 and the Award was passed and possession was taken in the year 1976, the Writ Petition was filed in the year 1992 i.e. to say after expiry of 21 years from the date of notification and 16 years from the date of making over possession and the Award.

Incidentally this point of delay and laches was also raised before <ORG> and on this score <ORG> relying upon the decision in <NAME>'s case <CITATION> ,  1 MHLJ 503, observed that it is not an inflexible rule that whenever there is delay, the <ORG> must and necessarily refuse to entertain the petition filed after a period of three years or more which is the normal period of limitation for filing a suit. The Bombay High <ORG> in <NAME> `s case (supra) stated that the question is one of discretion to be followed in the fact arid circumstances of each case and further stated :-

"The real test for sound exercise of discretion by <ORG> in this regard is not the physical running of time such but the test is whether by reason of delay, there is such negligence on the part of the petitioner so as to infer that he has given up his claim or where the petitioner has moved <ORG>, the rights of the third parties have come into being which should not be allowed to disturb unless there is reasonable explanation for the delay".

In the Judgment Impugned in this appeal <ORG> stated :-

"It may be stated that in the instant case the respondent No. 2 not only failed to take steps even after passing of the Award in 1976 but attempted to change the public purpose even thereafter in 1980 and 1993. It can be seen from the discussion of the material placed before the <ORG> by the petitioners that the respondent No. 2 in fact issued a public notice inviting objections to the modification in the development plan in 1993. The petitioners have in fact when realised the possibility of respondent No. 2 taking steps for changing or modifying the development plan to the extent of their land protested and has in fact lodged their objections on similar grounds which re urged in the Writ Petition. Therefore, there is a continuity in process without any break on the part of the respondent No. 2 in changing the public purpose in not giving effect to the purpose for which notification under Section 4(1) of the Act was published by the State government in exercise of its powers and in consequence passing of the Award based on such notification. In the given set of circumstances, we feel that there petitioners have had cause of action even passing of the award in challenging the very initial action on the part of the respondents in acquiring the land. It may be stated that the respondent No. 2 has not raised the contention of delay and laches in the first affidavit in reply filed on 29.6.1966. It is only in the additional affidavit in reply on 28.4 98 and that too in reply to amendment made to the Writ Petition by the petitioners that for the first time a contention is raised as to the delay and laches in filing the petition. We are afraid if the respondent No. 2 is entitled to raise this contention during the course of arguments............................................"

The observations as above, with due respect <ORG> are based on certain misconception of facts. While it is true that the plea of limitation ought to be raised at the first available opportunity but that does not mean and imply that the patty raising it even during the course of hearing would be barred therefrom. Limitation is a mixed question of law and fact. Time barred claim would not even be entertained by a civil court without there being nay opportunity of filing a pleading by the respondents or the defendants in a civil suit. The fact remains that the respondents herein did in fact agitate the point of limitation during the course of hearing and also had taken the peal in their affidavit in reply and prior to the commencement of the hearing of the matter. <ORG> was thus clearly in error in holding without any further factual detail that the cause of action for the challenge to the Notification under the Maharashtra Act of 1966 continues even on the date of filing of the writ petition. Mr. <NAME>, the learned senior counsel appearing for the respondents contended that Since his is a continuing wrong, the question of the claim being time barred or the conduct being barred under the laws of limitation does not and cannot arise. Mr. <NAME> further contended that there are mala fide involved and mala fides ought not to be restricted to be challenged under the garb of limitation.

<ORG> has in fact proceeded on the basis of the equitable principle as it appeared from the observations of <ORG> as set out hereinbelow :-

"In the present case, the respondent No, 2 has in fact did nothing except by passing resolution for modification of the public purpose for which the land was acquired rather than actually making use of the land for which it was acquired or possession of which was taken after passing of the award. On equitable principle me petitioners are entitled to reliefs even if there is delay in filing the Writ Petition. As a matter of fact, the petitioners have explained the circumstances in which they have invoked the extra ordinary writ jurisdiction of this Court under Article 226 of the Constitution of India. Since the petitioners have been successful in establishing the please of legal malice as against the respondent no. 2, we think that the perpetual illegal action of which has causing substantial injustice to the petitioners is required to be remedied by invoking the extraordinary jurisdiction under Article 226 of the Constitution of India in favour of the petitioners. It cannot be overlooked that while exercising the extra-ordinary jurisdiction under Article 226 of the Constitution of India <ORG> may be justified in exercising its powers where justice must appear to have been done and must be done."

Incidentally, the contextual facts depict that the respondents did in fact apply for the execution of the Award in the year 1995. This aspect of the matter, unfortunately, does not find place even in the amended Writ Petition. Significantly, as found from records one I.A. was filed in the present SLP being LA. No. 1 of 1999 for dismissal of the Special Leave Petition on the ground of suppression of fact by <ORG>. But what about the failure to mention the factum of the award in the writ petition? The factum of initiation of the execution proceedings was suppressed even in the amended writ petition. We are at a loss to find as to who ought to be charged with guilt of suppression of facts.

The records depict that by reason of the failure to obtain necessary orders from the trail court, a civil revisional application was filed before <ORG> wherein <ORG> has directed deposit of Rs. 3,20,116 by <ORG> which sum in fact stands deposited till date. While it is trite that <ORG> in the said Civil Revision has directed that further orders as regards the withdrawal of the amount of money can be had only after the disposal of the Writ Petition, but the factum of presentation of the execution application goes however to suggest that the respondents have in fact accepted the Award and wanted its execution.

The factual analysis in short therefore, depicts that the notification for acquisition in terms of the Act was issued in 1971, the Award was published in regard thereto in 1976 and the Writ Petition was filed in 1992. During the pendency of the Writ Petition, the respondent-writ petitioners moved an execution application so far as the Award is concerned and thereafter moved a further civil revision application before <ORG> in 1995 - these factual details in our view go to negate the observations of <ORG> It is significant to note that since the year 1952 this particular property which is under acquisition was reserved for school and playground. In the year 1963 the reservation was further continued and as such, there had not been any development of the plot by any concern since 1952 onwards. Another redeeming feature ought also to be noticed at this juncture, namely, the original Writ Petitioner being the father of the present respondents sent a notice in 1964 to <ORG> to purchase the reserved property or to release the same in favour of the writ petitioner. But there was no assertion of right thereafter and till the issuance of the notification in 1971 and possession being delivered in terms of the award in 1976.

<ORG> has thus misplaced the factual details and misread the same. It is now a well-settled principle of law and we need not dilate on this score to the effect that while no period of limitation is fixed but in the normal course of events, the period, the party is required for filing a civil proceeding ought to be the guiding factor. While it is true that this extraordinary jurisdiction is available to mitigate the sufferings of the people in general but it is not out of place to mention that this extraordinary jurisdiction, has been conferred on to the law courts under Article 226 of the Constitution on a very sound equitable principle, Hence, the equitable doctrine, namely, `delay defects equity' has its fullest application in the matter of grant of relief under Article 226 of the Constitution. The discretionary relief can be had provided one has not by his act or conduct given a go-bye to his rights. Equity favours a vigilant rather than an indolent litigant and this being the basic tenet of law, the question of grant of an order as has been passed in the matter as regards restoration of possession upon cancellation of the notification does not and cannot arise. <ORG> as a matter of fact lost sight of the fact that since the year 1952, the land was specifically reserved for public purposes of school playground and roads in the development plan and may reason therefore, the notification to acquire the land has, therefore, been issued under the provisions of the Act as stated above.

Apart from the time element as noticed above another redeeming feature on the factual aspect of the matter has not been considered by <ORG> at all. There are three owners of the land, namely, <NAME>, <NAME> and <NAME>. The first of the two owners amongst the three named above of the land did in fact put forward a claim in regard to the land value and structure before the concerned authority and two owners claimed as below :-

(i) Market Value of Rs. 20 per Sq. ft (ii) Value of Tin shed : Rs. 15,000 (iii) Build up structure : Rs. 30,000

(iv) Damages and severance of the property :, Rs. 35,000

(v) Salatium : 15% of the amount of compensation

(vi) Compensation for loss of; Rs. 13,000 compensation of the strip of land along towards in North side of the land under acquisition

(vii) For losing frontage and benefits : Rs. 50,000 acquiring therein

(viii) Cost of the house acquired : Rs. 40,000 for the right The other owner <NAME>, however, did not put forth any claim for any specific amount but claimed only the market value of the land together with 15 per cent solatium and the cost of the building now standing on the land. Incidentally, the other owner is a resident of England and executed a power of attorney in favour of <NAME> to act on his behalf in the proceeding before the authorities and to receive the amount of compensation. The power of attorney stands recorded in England in February, 1973. While it is true that the evidence rendered by the respondents during the course of hearing was without prejudice qua the reservation of rights to challenge the same but the factual backdrop in its entirety however in our view does not indicate any challenge to the notice of acquisition.

In any event; after the award is passed no writ petition can be filed challenging the acquisition notice or against any proceeding thereunder. This has been the consistent view taken by this Court and in one of recent cases ( <CITATION> , reported in  2 SCC 627. This court observed as below :-

"The admitted position is that pursuant to the notification published under Section 4(1) of the Land Acquisition Act, 1894 (for short "the Act") in GOR No. 1392 Industries dated 17.10.1962, total extent of 6 areas 41 cents of land in Madhavaram Village, Saidapet Taluk, Chengalpattu District in Tamil Nadu was acquired under Chapter VII of the Act for the manufacture of Synthetic Rasiua by <ORG>, Madras. The acquisition proceedings had become final and possession of the land was taken on 10.4.1964. Pursuant to the agreement executed by the company, it was handed over to <ORG> which is a subsidiary of <ORG>, It would appear that at a request made by the said company, 66 cents of land out of one acre 37 cents in respect of which the appellants originally had ownership, was transferred in GOMs No. 816. Industries dated 24.3.1971 in favour of another subsidiary company, <ORG>, the 5th respondent Which is also another subsidiary of the company had requested for two acres 75 cents of land; the same came to be assigned on leasehold basis by the <ORG> after resumption in terms of the agreement in <ORG> dated 10.5.1985. In <ORG> dated 30.3.86, the same came to be approved of. Then the appellants challenged the original <ORG> dated 17.10.62 contending that since the Original purpose for which the land was acquired had ceased to be in operation, the appellants are entitled to restitution of the possession taken from them. The learned Single Judge and <ORG> have held that the acquired land having already vested in the <ORG>, after receipt of compensation by the predecessor-in-title of the appellants, they have no right to challenge the notification. Thus the writ petition and the writ appeal came to be dismissed."

Similar is the view in an earlier decision of this Court in the case of <CITATION> , reported in  11 SCC 501. Incidentally, the decision last noted was also on the land acquisition and requisition under the Maharashtra Regional and Town Planning Act, 1966 and in paragraph 29 of the report, this Court observed :-

It is well settled law mat when there is inordinate delay in filing me writ petition and when all steps token in the acquisition proceedings have become final, the <ORG> should be loath to quash the notifications. <ORG> has, no doubt, discretionary powers under Article 226 of the Constitution to quash the notification under Section 4 (1} and declaration under Section 6 . But it should be exercised taking all relevant factors into pragmatic consideration. When the award was passed and possession was taken, the <ORG> should not have exercised its power to quash the award which is a material factor to be taken into consideration before exercising the power under Article 226. The fact that no third party rights were created in the case is hardly ground for interference. <ORG> of the High <ORG> was not right in interfering with the discretion exercised by the learned Single Judge dismissing the writ petition on the grounds of laches."

Mr. <NAME>, learned senior counsel appearing for one of the respondents, placed strong reliance upon a recent decision of this Court in the case of <ORG> arid <CITATION> , reported in  4 SCC 450. This Court in paragrpah 8 of the report observed as below :-

"Sofar as the contention regarding laches of the respondent in filing the writ petition is concerned, delay, by itself, may not defeat the claim for relief unless the position of the appellant had been so altered which cannot be retracted on account of lapse of time or inaction of the other party. This aspect being dependent upon the examination of the facts of the case and such a contention not having been raised before `<ORG>, it would not be appropriate to allow the appellants to raise such a contention for the first time before us. (Emphasis supplied) Besides, we may notice that the period for which the option of renewal has been exercised has not come to an end. During the subsistence of such a period certainly the respondent could make a complaint that such exercise of option was not available to the appellants and, therefore, the jurisdiction of <ORG> could be invoked even at a later stage. Further, the appellants are not put to undue hardship in any manner by reason of this delay in approaching <ORG> for a relief."

The observations however pertain to the Transfer of Property Act and in particular reference to Section 105 and the facts therein are clearly distinguishable and the sentence emphasised as above depicts the disgust feature. <ORG> case (supra) is not a case for acquisition at all and reliance thereon thus is totally misplaced.

On the wake of the aforesaid, we do feel it expedient to record that <ORG> has dealt with the matter on a totally different perspective and as such clearly fell into an error in passing the order as impugned in this appeal. Not only the length of time but the concept of approbation and reprobation has totally been ignored at <ORG> stage. The appeal therefore, succeeds. The Writ Petition filed by the respondents in <ORG> is dismissed and as such the I.A. No. 1/99 filed in SLP No. 19507 of 1998 also stands dismissed. In view of he dismissal of the writ petition by the present judgment, direction contained in the civil revision permitting the respondents to withdraw the compensation amount will obviously now be complied with. Each party however should pay and hear its own costs.


CASE NO.: Appeal (civil) 5591 of 1999 PETITIONER: <ORG> RESPONDENT: State of Haryana & Ors. DATE OF JUDGMENT: 10/12/2004 BENCH: <NAME> & <NAME> JUDGMENT:

J U D G M E N T With Civil Appeal Nos. 5592, 5593, 5594, 5595, 5596 & 5597 of 1999 SRIKRISHNA, J.

These seven appeals by special leave impugn the common judgment rendered by <ORG> of <ORG> dismissing a group of writ petitions challenging the acquisition proceedings under the Land Acquisition Act , 1894 (hereinafter referred to as the 'Act'). The principal contention in the writ petitions before <ORG> was that the acquisition proceedings were vitiated by discrimination and arbitrariness and, thus, violative of the Fundamental Rights under Article 14 of the Constitution of India. Although, seven appeals have been filed in this Court, the arguments were addressed by the learned senior counsel appearing for the appellant in Civil Appeal No. 5591 of 1999 in the matter of <ORG> v. <ORG>.. The counsel for the other appellants have adopted the arguments addressed in the said case.

Facts:

With a view to achieve the goal of rapid industrialization of the State, the State of Haryana constituted <ORG> as a nodal agency for the development of industrial infrastructure in the State. New integrated industrial parks and estates were developed by the state-Corporation keeping in view the Functional Plan prepared by <ORG> in accordance with the provisions of the National Capital Regional Planning Board Act, 1985.

In order to fulfil the objective set out in the Functional Plan over an area of 30,242 Sq. Kms., of which 13,413 Sq. Kms. fell within the Haryana sub-region, 41 Industrial Estates of Haryana were targeted for rapid industrial development. Kundli Industrial Estate was developed in phases by acquiring land in accordance with the provisions of the Act. For development of Phase-IV, which is located along National Highway No. 1, <ORG> (<ORG>) issued a preliminary notification under Section 4 of the Act for acquisition of 93 kanals 10 marlas of land (including the lands of the appellants) situated in Village Kundli. The appellants filed objections under Section 5A of the Act, opposing the acquisition of their lands on several grounds. The objections raised by the appellants were considered by the Land Acquisition Collector, <NAME>, who by his report dated 17.1.1997, recommended that the lands of these appellants be exempted from acquisition. Being not satisfied with this report, <ORG> forwarded a copy of this report to the Director of <ORG>, Haryana and asked for his comments. Simultaneously, the District Town Planner of <ORG> was also entrusted with the task of examining the report of the Land Acquisition Collector. As a result of this exercise, it was recommended by the Director of <ORG>, Haryana as well as the District Town Planner of <ORG> that the lands of <ORG>, <ORG> and <ORG> may be exempted but the lands of the other persons affected by Section 4 notification be acquired. The Director of <ORG> also addressed a memo dated 23.4.1997 to the Commissioner and Secretary to <ORG>, <ORG>, recommending acquisition of land except in the aforesaid three cases. <ORG>, after considering the reports submitted to it under Section 5A of the Act, made a declaration under Section 6 of the Act. As a result of the decision taken by <ORG>, the lands of only three industrial units, namely, <ORG>, <ORG> and <ORG> were exempted from acquisition and the lands of all the present appellants were included in the declaration under Section 6 for acquisition. The present appellants challenged the acquisition of their lands by individual writ petitions before <ORG>.

The case made out by <ORG> Anand Buttons Ltd. (Appellant in Civil Appeal No. 5591 of 1999) was that, it had taken several steps in order to establish an industry and had expended considerable amount of time, energy and money in pursuing its objective of establishment of an industrial unit. It was pointed out that on 4.3.1994 the appellant had purchased land in Village Kundli, Tehsil and District Sonepat for establishing a large and medium sector industrial unit for manufacturing of polyster buttons. On 8.3.1994, the appellant applied to the Director of <ORG> for grant of permission for change of land use from agriculture to industrial. The Director of <ORG> required from the appellants that before grant of such permission, a path way of 33 feet wide strip of land for widening the road, had to be necessarily given up in front of the land in order to enable a connecting road to the industrial estate. This condition was complied with by the appellant company which gifted the said land to <ORG>, as required by the Director of <ORG>. On 22.12.1995, the Director of <ORG>, Haryana, granted land use justification certificate in favour of the appellant. On 2.7.1996, the appellant was granted permission for change of user of land from agriculture to industrial purpose. On 13.8.1996, the appellant submitted building plan for approval of construction of its factory building to <ORG>, Sonepat. On 26.8.1996, <ORG> called upon the appellant to pay certain processing fee for clearance of the building plans. While this matter was under process, on 14.10.1996, a notification under Section 4 of the Act was issued for acquisition of land, which included the land of the appellant, proposed to be developed for the purpose of setting up an industrial unit. On 23.11.1996, the appellant submitted a fresh set of building plans along with requisite processing fee to <ORG>. The appellant also raised its objections under Section 5A of the Act. The Land Acquisition Collector recommended exemption of the appellant's land and submitted his report to the Director of <ORG>. This report was considered and rejected in the case of the appellant. The appellant challenged the acquisition proceedings by its writ petition, C.W.P. No. 4135 of 1998. As already said, this writ petition came to be dismissed by the common judgment of <ORG>. The cases of the other appellants are also similar.

All the appellants had raised objections under Section 5A , mainly on the following two grounds:

(a) That each of them had been persuaded to gift 3 Kanals 11 Marlas of land to <ORG> Kundli for increasing the width of the passage with an understanding that they will be granted permission to change the user of land. Hence, the Director of Industries and <ORG> were estopped from acquiring the land in question.

(b) Each of the appellants objected to the acquisition on the ground that they are desirous of setting up an industrial unit and, since the acquisition was itself intended for setting up of an industrial estate, no purpose would be served by acquiring their lands when all the formalities had been completed.

The principal contention advanced by the appellants against the acquisition proceedings before <ORG> was that the decision of <ORG>, not to grant exemption from acquisition to their lands, was arbitrary, discriminatory and violative of Article 14 of the Constitution.

The appellants contended that, in the case of <ORG> <ORG> and <ORG> Amar Elastomers, exemption had been granted from acquisition, although, they were guilty of raising construction on their lands in violation of the provisions of Punjab Scheduled Roads and Controlled Areas (Restriction of Unregulated Development) Act, 1963. It was urged that the appellants, who had strictly followed the law and applied for requisite permission and were granted permission, were being discriminated against. A subsidiary contention urged was that <ORG> should be estopped from acquiring the land after having persuaded the appellants to give up certain land for a passage as a condition for granting for change of user or land.

<ORG> has carefully considered and evaluated the contentions urged by the petitioners-appellants in the light of the material placed before it. <ORG> noticed that the cases of all the seven units were examined and recommended for exemption from acquisition by the Land Acquisition Collector, who was of the view that, each one of the units had taken considerable steps towards establishment of an industrial unit. The General Manager, <ORG>, Sonepat, after examining the individual cases, reported that the facts found in the report of the Land Acquisition Collector were correct, but made no recommendation with regard to the acquisition proceedings. He reported: "all the parties have been heard in person except the representative of <ORG>, who did not turn up for verification of the facts on the given date." The General Manager, <ORG> pointed out: "all the parties have expressed their desire to set up an industry on this land within a period of two years, if released. But none of them has so far taken up a tangible step on the land. The land of all these parties put together, is surrounded by Industrial Area already existing at HSIDC, Kundli. These parties have also stated that they would not sell the plot further but will themselves set up an industry on it." In the case of <ORG>, however, he suggested that its case deserves a "sympathetical attitude", in view of the land of 3 Kanals and 11 Marlas gifted by it for making a path way. Finally, it was reported, "keeping all these things in view, the <ORG> may take a suitable action."

<ORG> did not file an affidavit in reply to oppose the writ petitions, but, instead, authorized the Director of <ORG> and the District Town Planner of <ORG> to do so. The affidavits filed by these officers showed that <ORG> <ORG>, <ORG> Industrial Roller Co. (who were the subsequent purchasers of land from <ORG> <ORG>) and <ORG> <ORG> had, not only constructed the factory building after obtaining the permission, but had also started manufacturing of goods. In all other cases, including the case of <ORG> Anand Buttons Ltd., there were no tangible steps taken for erection of factory building, much less had industrial production commenced. <ORG> took the view that there was justifiable difference between the cases of <ORG> <ORG>, <ORG> Industrial Roller Co., <ORG> <ORG> on the one hand and those of the present appellants on the other. Although, <ORG> <ORG> was alleged to have carried out a construction in violation of the provisions of the Punjab Scheduled Roads and Controlled Areas (Restriction of Unregulated Development) Act, 1963 and the Rules framed thereunder, the said illegality appears to have been compounded and the construction had been regularized.

The affidavits filed by the Director of <ORG> and <ORG> also suggest that the acquisition of land was for setting up of Phase- IV of Industrial Estate, Kundli, which work was being supervised by <ORG> appointed as the nodal agency by <ORG> for rapid industrialization of the State. <ORG> pointed out that, in these circumstances, the failure of <ORG> itself to file a return would not be fatal, as the nodal agency, who was entrusted with the work, had filed affidavits of the competent officers, who were in the know of facts. It also came to the conclusion that the action of the Director of <ORG>, Haryana, calling upon for comments from <ORG>, and the action of <ORG> in considering their comments before taking a final decision for issuance of the notification under Section 6 of the Act, was neither vitiated, nor illegal. <ORG> also noticed that the land of the present appellants was sandwiched between Phase-I and Phase-II of the Industrial Estate, Kundli. Consequently, leaving a part of the open land would jeopardize the planned development of the industrial establishment.

This reasoning of <ORG> cannot be faulted for the simple reason that the authority, who has to carry out the planned development of the industrial estate, is in the best position to judge as to which land can be exempted from the acquisition without jeopardizing the development scheme. It is not possible for the court to sit in appeal over the exercise of such satisfaction by the authority vested with the task of implementing the development plan.

The learned counsel for the appellants urged that the decision taken for exempting <ORG>, <ORG> <ORG> and <ORG> K.C. Fibre Ltd. was not a principled one and that there was no uniform yardstick applied for exemption of the said units from acquisition. It was urged that, although <ORG> had ostensibly decided to exempt the said three units on the basis of construction put up and industrial units being set up, this was really not true in the case of these three units. In our view, it is unnecessary for us to enter into this controversy. Even if we assume that the three units, who were exempted, did not qualify under the standard adopted by <ORG> for exemption, at the highest, it would make the exemption granted to them vulnerable. None of them was made party to the writ petitions filed before <ORG>, nor was any relief claimed against them. Even assuming that the exemption granted to the said three units was erroneous and illegal, Article 14 does not mandate that the appellants should be granted similar illegal and unjustified relief. As said by this <ORG> in <CITATION> . and Anr. , to which one of us, (<NAME> J.) was a party, (vide Para 13):

"..It is not necessary to deal with that aspect because two wrongs do not make one right. A party cannot claim that since something wrong has been done in another case direction should be given for doing another wrong. It would not be setting a wrong right, but would be perpetuating another wrong. In such matters there is no discrimination involved. The concept of equal treatment on the logic of Article 14 of the Constitution of India (in short "the Constitution) cannot be pressed into service in such cases. What the concept of equal treatment presupposes is existence of similar legal foothold. It does not countenance repetition of a wrong action to bring both wrongs on a par. Even if hypothetically it is accepted that a wrong has been committed in some other cases by introducing a concept of negative equality the respondents cannot strengthen their case. They have to establish strength of their case on some other basis and not by claiming negative equality."

It is trite law that not only land but also structure on land can be acquired under the Act. As to whether in a given set of circumstances certain land should be exempted from acquisition only for the reason that some construction had been carried out, is a matter of policy, and not of law. If after considering all the circumstances, <ORG> has taken the view that exemption of the lands of the appellants would render askew the development scheme of the industrial estate, it is not possible for <ORG> or this Court to interfere with the satisfaction of the concerned authorities. We see no ground on which the appellants could have maintained that their lands should be exempted from acquisition. Even if three of the parties had been wrongly exempted from acquisition, that gives no right to the appellants to seek similar relief.

It is rightly pointed out by <ORG> that, merely because a representation was made by the Director, <ORG>, that upon gift of certain land to <ORG> for widening of the passage, permission for change of user of land would be granted, such a promise is not one capable of being enforced against the State Government. <ORG> has rightly pointed out that, if the appellants are so desirous, they may seek invalidation of the gifts in favour of <ORG> on the ground of failure of the Director, <ORG> to fulfil his commitment. That, however, does not render the acquisition proceedings illegal.

No other ground has been made out. In our view, therefore, no fault can be found with the judgment rendered by <ORG>. We find no merit in the appeals, which are hereby dismissed.

No order as to costs.


PETITIONER: <ORG>. Vs. RESPONDENT: THE STATE OF WEST BENGAL AND OTHERS DATE OF JUDGMENT: 05/02/1962 BENCH: <NAME>, K. BENCH: <NAME>, K. AIYYAR, T.L. VENKATARAMA SINHA, <NAME> P.(CJ) <NAME>, <NAME> MUDHOLKAR, J.R. CITATION: 1962 AIR 1044 1962 SCR Supl. (3) 1 CITATOR INFO : R 1963 SC 703 (45) R 1966 SC 828 (8) RF 1973 SC2720 (9) F 1976 SC 578 (33) RF 1977 SC1496 (18) RF 1979 SC 248 (5) RF 1990 SC 85 (18) RF 1990 SC1927 (14) ACT: Gas and gas-works-Enactment by State Legislature Constitutional validity-Writ Petition--Locus satandi- Oriental Gas Company Act , 1960 (W.B. 15 of 1960), s.4- Constitution of India Arts. 226, 246, Sch. VII, List II, Entries 24,25. HEADNOTE: By an agreement entered into by the appellant company and <ORG>, the appellant was appointed as Manager of the later company which owned an industrial undertaking for the manufacture and sale of fuel gas in Calcutta with the right to receive remuneration as specified in the agreement. <ORG> passed <ORG> Act , 1960, and s.4 of that Act provided that the said undertaking shall stand transferred to <ORG> for five years for management and control. On October 3, 1960, <ORG> issued three notifications one of which appointed October, 7, 1960, as the date on and from which the management and control of the said undertaking would be taken over by it. The appellant by a petition under Art. 226 of the Constitution impugned the constitutional validity of the said Act and sought for appropriate writs restraining <ORG> for giving effect to it and for quashing the said notifications. <ORG> found against the petitioner and rejected the petition. Held, that <ORG> had the competence to enact the impugned Act and its constitutional validity was beyond question. Article 226 of the Constitution confers a very wide power on <ORG> to issue directions and writs not only for the enforcement of fundamental rights but other legal rights as well. Since the appellant's lawful rights under the agreement had been abridged, if not wholly destroyer by the impugned Act, it had the locus standi to apply under Art. 226 of the Constitution. <CITATION> ,  S.C.R. 28 and <CITATION> of lndia,  C.R. 869, referred to. 2 The entries in the three Legislative Lists are only legis- lative heads or fields of legislation that demarcate the area over which the appropriate legislature operates and it is well settled that the language of the entries should be widely construed. If any entries overlap or are in direct conflict with each other, every attempt should be made to harmonise them, whether the entries belong to the same List or different 'Lists, so that no entry may be robbed of its entire content and made nugatory. In re the Central Provinces and Berar Act , No. XIV of 1938,  F. C. R. 18 and State of Bombay v. <NAME>,  S. C. R. 51, referred to. So construed Entry 24 of List II which is in apparent conflict with Entry 25 of the same list, must be held to cover all industries in a State except Gas and Gas-works which are specifically dealt with by Entry 25 and exclusively allotted to it. It is clear that the express intention of the Constitution was to carve out Gas and Gas-works industry from Entry 24 and bring them under Entry 25 and treat them in normal times as State industries. It would be erroneous to say that such an interpretation would prevent the <ORG> from making laws in respect of Gas and Gas-works during war or other national emergencies. JUDGMENT:

CIVIL APPELLATE JURISDICTION Civil Appeal No. 138 of 1961. Appeal by special leave from the judgment and order dated November 15, 1960, of <ORG> in Matter No. 235 of 1960.

<NAME>, Attorney-General for India, <NAME> and <NAME>, for the appellant.

<NAME>, Advocate-General, West Bengal, <NAME>, <NAME> , <NAME>, <NAME> and <NAME>, for the respondents Nos. 1 to 4.

1962. February 5. The Judgment of the Court was delivered by SUBBARAO, J.-This appeal by special leave is against the Judgment and Order dated November 15, 1960, of <ORG> at Calcutta dismissing the petition filed by the appellant under  Art. 226 of the Constitution, and it raises the con- stitutional validity of the Oriental Gas Company Act , 1960, (W.B, Act XV of 1960), hereinafter called the "impugned Act".

The facts that have given rise to this appeal may be briefly stated. <ORG> was originally constituted by a deed of settlement dated April 25, 1853, by the name of <ORG>, and it was subsequently registered in England under the provisions of the English Joint Stock Companies Act, 1862. By Act V of 1857 passed by <ORG>, it was empowered to lay pipes in Calcutta and its suburbs and to excavate the streets for the said purpose. By Act s of <ORG> passed from time to time special powers were conferred on the said <ORG>. In 1946 Messrs. <NAME>, a firm carrying on business in India, purchased 98 percent of the shares of the said <ORG>. The said firm floated a limited liability <ORG> named <ORG> and it was registered in India with its registered office at Calcutta. On July 24, 1948, under an agreement entered into between <ORG>, and <ORG> the latter was appointed the manager of the former <ORG> in India for a period of 20 years from July 5, 1948. <ORG> is the owner of the industrial undertaking, inter alia, for the production, manufacture, supply, distribution and sale of fuel gas Calcutta. The Calcutta Gas <ORG>, by virtue of the aforesaid arrangement, was in charge of its general management for a period of 20 years for remuneration. <ORG> passed the impugned Act and it received the assent of the President on October 1, 1960. On October 3, 1960, <ORG> issued three notifications- the first declaring that the said Act would come into force on October 3, 1960, the second containing the rules framed under the Act, and the third specifying October 7, 1960, as the date with effect from which the State Government would take over for a period of five years the management and control of the undertaking of <ORG> for 'the purposes of, and in accordance with, the provisions of the said Act.. The appellant, i.e., <ORG>, filed a petition under Art. 226 of the Constitution tn. <ORG> at Calcutta for appropriate writs for restraining the State Government from giving effect to the said Act and for quashing the said notifications. Respondents 1 to 4 to the petition were the State of West Bengal and the concerned officers, and respondent 5 was <ORG> Limited. In the petition, the appellant contested the constitutional validity of the Act on various grounds, and in the counter affidavit. the contesting respondents i.e.. respondents 1 to 4, sought to sustain its validity and also questioned the maintainability of the petition at the instance of the appellant. <NAME>, J., gave the following findings on the contentions raised before him:(1) The appellant has no legal right to maintain the petition; (2) the appellant cannot question the validity of the Act on the ground that its provisions infringed his fundamental rights under Arts. 14, 19 and 31 in view of Art. 31A(1)(b) of the Constitution; (3) <ORG> had the Legislative competence to pass the impugned Act by virtue of entry 42 of List III of the Seventh Schedule to the Constitution; (4) entry 25 of List II also confers sufficient authority and power on <ORG> to make laws affecting gas and gas work ; and (5) even if the Act incidentally trenches upon any production aspect, the pith and substance of the legislation is gas and ,a,,-work within the meaning of entry 25 of List II. The learned Judge rejected all the contentions of the appellant and dismissed the petition by his order dated November 15, 1960. Hence the appeal.

Learned Attorney-General, appearing for the appellant, has repeated before us all the contentions, except that relating to fundamental rights., which his client had unsuccessfully raised before <ORG>. His contentions may be summarized thus : (1) The finding of <ORG> that the appellant has no locus standi to file the petition cannot be sustained, as under the impugned Act the appellant's legal rights under the agreement entered into by it with <ORG> on July 24, 1948 were seriously affected. (2) Under Art. 246 of the Constitution <ORG> has exclusive power to make laws with, respect to any of the matters enumerated in List I : <ORG> in exercise of the said power passed the Industries (Development and Regulation) Act , 1951, by virtue of entry 52 of said List; the two entries in List II, namely, entries 24 and 25, cannot sustain the Act, as entry 24 is subject to the provisions of entry 52 of List I; and entry 25 must be confined to matters other than those covered by entry 24, and, therefore,, <ORG> is not Competent to make a law regulating- the gas industry. (3) Assuming that <ORG> has power to pass the Act by virtue of entry 25 of List II, under Art. 254(1) of the Constitution the law made by <ORG>, namely, the Industries (Development and Regulation) Act , 1951, shall prevail, and the law made by <ORG>, namely, the impugned Act be. void to the extent of repugnancy. And (4) the view of <ORG> that the validity of the Act could be sustained under entry 42 of List III is wrong, as under the impugned Act the <ORG> only takes over the management of the Company and manages it for and on behalf of the Company, whereas the concept of requisition under the said entry requires that the <ORG> shall take legal possession of property of the person from whom it is requisitioned., on its own behalf or on behalf of a petitioner other than the owner thereof.

The learned Advocate-General of West Bengal, and Mr. <NAME>, who followed him, seek to sustain the validity of the impugned Act not only under entry 25 of List II but also under entries 33 and 42 of List III of the Seventh Schedule to the Constitution. They further contend that the appellant was constituted as agent under the said agreement and that, as its rights were preserved by s. 4 of the impugned Act, it has no locus standi to file the petition under Art. 226.

The first question that falls to be considered is whether the appellant has locus standi to file the petition under Art. 226 of the Constitution. The argument of learned counsel for the respondents is that the appellant was only managing the industry and it had no proprietary right therein and, therefore, it could not maintain, the application. Article 226 confers a very wide power on <ORG> to issue directions and writs of the nature mentioned therein for the enforcement of any of the rights conferred by Part III or for any other purpose. It is, therefore, clear that persons other than those claiming fundamental right can also approach the court seeking a relief thereunder. The Article in terms does not, describe the classes of persons entitled to apply thereunder ; but it is implicit in the exercise of the extraordinary jurisdiction that the relief asked for must be one to enforce a legal right. <CITATION> (1) this Court has ruled that the existence of the right is the foundation of the exercise of jurisdiction of the court under Art. 226 of the Constitution. <CITATION> (2), it has been held by this Court that the legal right that can be enforced under Art. 32 must ordinarily be the right of the petitioner himself who complains of infraction of such right and approaches the court for relief. We do not see any reason why a different principle should apply in the case of a (1)  S C.R. 28.

(2) [1950] S.C.R. 869.

petitioner under Art. 226 of the Constitution. The right that can be enforced under Art. 226 also shall ordinarily be the personal or individual right of the petitioner himself, though in the case of some of the writs like habeas corpus or quo warranto this rule may have to be relaxed or modified. The questions therefore, is whether in the present case the petitioner has a legal right, and whether it has been infringed by the contesting respondents. The petitioner entered into an agreement dated July 24, 1948, with respondent No. 5; in regard <ORG>. Under the agreement,the appellant was appointed as Manager and the general management of the affairs of the Company was entrusted to it for a period of 20 years. The appellant would receive thereunder by way of remuneration for its services, (a) an office allowance of Rs. 3,000/- per mensem,

(b) a commission of 10 per cent, on the net yearly profit of the Company, subject to a minimum of Rs. 60,000/- per year in the case of absence of or inadequacy of profits and (c) a commission of Re. 1/- per ton of all coal purchased and negotiated by the Manager. In its capacity as Manager, the appellant-Company was put in charge of the entire business and its assets in India and it was given all the incidental powers necessary for the said management. Under the agreement, therefore, the appellant had the right to manage <ORG> for a period of 20 years and to receive the aforesaid amounts toward its remuneration for its services. Section 4 of the impugned Act reads:

"With effect from the appointed day and for a period of five years thereafter.-

(a) the undertaking of the Company shall stand transferred to <ORG> for the purpose of management and control ;

(b) the Company and its agents, including managing agents, if any, and servant shall cease to exercise management or control in relation to the undertaking of the company;

(c) all contracts, excluding any contract or contracts in respect of agency or managing agency, subsisting immediately before the appointed day and affecting the undertaking of the Company shall cease effect or to be enforceable Company, its agents or any to have against the person who was a surety thereto or had guaranteed the performance thereof and shall be of as full force and effect against or in favour of the State of West Bengal and shall be enforceable as fully and effectively as if instead of the Company the State of West Bengal had been named therein or had been a party thereto:"

Under the said section, with effect from the appointed day and for a period of five years thereafter, the management of the <ORG> shall stand transferred to <ORG>, and the <ORG>, its agents and servants shall cease to exercise management or control of the same. Under cl. (c) of the section, the contracts of agency or managing agency are not touched, but all the other contracts cease to have effect against the <ORG> and are enforceable by or against the <ORG>. It is not necessary in this case to decide whether under the said agreement the appellant was constituted as agent or managing agent or a servant. of the Oriental Gas <ORG>. Whatever may be its character, by reason of s. 4 of the impugned Act, it was deprived of certain legal rights it possessed under the agreement. Under the agreement, the appellant had the right to manage the Oriental Gas <ORG> for a period of 20 years and to receive remuneration for the same. But under s. 4 of the impugned Act, it was deprived of that right for a period of five years. There was certainly a legal right accruing to the appellant under the agreement and that was abridged , if not destroyed, by the impugned Act. It is, therefore, impossible to say that the legal right of the appellant was not infringed by the provisions of the impugned Act. In the circumstances, as the appellant's personal right to manage the <ORG> and to receive re- muneration therefore had been infringed by the provisions of the statute, it had locus standi to file the petition under Art. 226 of the Constitution.

To appreciate the rival contentions in regard to the other points, it would be convenient and necessary to notice briefly the provisions of the Industries (Development and Regulation) Act , 1951, hereinafter called the "' Central Act .", and the impugned Act. The Central Act was, passed, as its long title shows, to provide for the development and regulation of certain industries. Under s. 2 of the Central Act, it is declared that it is expedient in the public interest that the <ORG> should take under its control the industries specified in the First Schedule. Under beading 2 of the First Schedule, item (3) is "fuel gases-(coal gas, natural gas and the like)".. ,Industrial undertaking" is defined to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including <ORG> ; and "factory" is defined to mean any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on. Section 9 authorizes the <ORG> to levy and collect a cess from the industries : Chapter III provides for the regulation of scheduled industries : section 15 empowers the <ORG> to make or cause to be made a fall and complete investigation of the affairs of any scheduled industry, if- it is of opinion that there is a likelihood of substantial fall in the volume of production or a marked deterioration in the quality of any article produced, or there is likely to be a rise in the price of any article produced, therein, or that an undertaking is being managed in a manner highly detriment- to the scheduled industry concerned; and s.16 authorizes the Central <ORG>, after making the said investigation to issue such directions to the industrial undertaking or undertakings concerned as may be. appropriate in the circum- stances in order to regulate the production of any article or articles and fix the standards of production, to require it to take such steps to stimulate the development of the industry, to prohibit from resorting to any act or practice which might reduce its production capacity or economic value, or to control the prices or regulate the distribution of articles produced therein. Chapter III A confers power an the Central <ORG> to assume management or control of an industrial undertaking in certain cases: section 18A enables it to take control of an industrial undertaking, and s. 18B(1), inter alia, provides that on the issue of the notified order under s. 18A, all persons in charge of management, including persons holding office as managers or directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their offices as such, and that any contract of management between the industrial undertaking and any managing agent or any director thereof holding office as such immediately before the issue of the notified order shall be deemed to have been terminated and the person or persons appointed under the Act shall be empowered to take over the management and conduct the affairs of the Company in the place of the previous management. Chapter IIIB enables the Central <ORG> for securing the equitable distribution and availability at fair prices of any article or class of articles relatable to any hanreeetd industry, and for controlling and ugsdlciulg the supply, distribution, and price of the said articles. Section 20 of the Act declares that after the commencement of the Act, it shall not be competent for any State <ORG> or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force which authorizes any such <ORG> or local authority so to do. Briefly' stated, the Central Act declares that it is expedient, in the public interest to take under its control the scheduled industries; its provisions are designed to provide for the development and regulation of the, said industries; it enables the Central <ORG>, for the purpose of promoting and regulating the said industries, to investigate into the affairs of an undertaking, to regulate its production, supply and distribution, arid, if necessary, to take over the management of the undertaking.

Coming to the impugned Act, its provisions are confined only to the affairs of <ORG>. Its long title shows that it was passed to provide the taking over for a limited period of the management and control, and the .subsequent acquisition of the undertaking of <ORG>. Its preamble says that it was thought expedient to provide for the increase of the production of gas and improving the quality thereof for supply to industrial undertakings, hospitals and other wel- fare institutions, to local authorities for street lighting and to the public in general for domestic consumption and for that purpose to provide for the taking over for a limited period of the management and control, and the subsequent acquisition, of the undertaking. Under s. 4 , with effect from the appointed day and for a period of five years thereafter the undertaking of the Company shall stand transferred to <ORG> for the purpose of management and control. Under s. 6 , the undertaking of the Company shall be run by <ORG> and shall be used and utilised by <ORG> for purposes of Production of gas and supply thereof to public institutions mentioned therein and for other purposes. Sections 8 and 9 provide for payment of compensation for taking over the said management. It would be seen that the impugned Act intends to serve the same purpose as the Central Act , though its operation is confined to <ORG>. Both the Act s are conceived to increase ,-he production, quality and supply pertaining to an industry, and for that purpose to enable the appropriate <ORG>, if necessary, to take over the management for regulating the industry concerned to achieve the said purposes. The impugned Act occupies a part of the field already covered by the Central Act . The question is whether <ORG> has constitutional competency to encroach upon the said field. At this stage it would be convenient to read the relevant Articles of the Constitution.

Article 246. (1) Notwithstanding anything in clauses (2) and (3) Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the ,Union List").

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

List I-Union List Entry 7. Industries declared by <ORG> by law to be necessary for the purpose of defence or for the prosecution of war.

Entry 52. Industries, the control of which by the <ORG> is declared by <ORG> by law to be expedient in the public interest.

List II-State List Entry 24. Industries subject to the provisions of entries 7 and 52 of List I.

Entry 25. Gas and gas-works.

Entry 26.1 Trade and commerce within the State subject to the provisions of entry 33 of List III.

Entry 27. Production, supply and distribution of goods subject to the provisions of entry 33 of List Ill.

Before construing the said entries it would be useful to' notice some of the well settled rules of interpretation laid down by <ORG> and this <ORG> in the matter of construing the entries. The power to legislate is given to the appropriate Legislatures by Art. 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation : they demarcate the area over which the appropriate Legislatures can operate. It is also well settled that widest amplitude should be given to the language of the entries. But some of the entries in the different List or in the same List may overlap and sometimes may also appear to be in direct conflict with each other. It is then the duty of this <ORG> to reconcile the entries and bring about harmony between them. When the question arose about reconciling entry 45 of List I, duties of excise, and entry 18 of List II, taxes on the sale of goods, of Government of India Act, 1935, <NAME>, C. J., in ln re The Central Provinces and Berar Act No. X IV of 1938 (1), observed:

"A grant of the power in general terms, standing by itself, would no doubt be construed in the wider sense; but it may be qualified (1) (1939) F. C. R. 18, 42, 44, by other express provisions in the same enactment, by the implication of the context, and even by considerations arising out of what appears to be the general scheme of the Act."

The learned Chief Justice proceeded to state ".......... an endeavor must be made to ,solve it, as <ORG> have said by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, arid, where necessary, modifying the language of the one by that of the other. If indeed such a reconciliation should prove impossible, then, and only then, will the non-obstante clause operate and the federal power prevail."

<ORG> in that case held that the entry "taxes on the sale of goods" was not covered by the entry "duties of excise" and in coming to that conclusion, the learned Chief Justice observed:

"Here are two separate enactments, each in one aspect conferring the power to impose a tax upon goods; and it would accord with sound principles of construction to take the more general power, that which extends to the whole of India, as subject to an exception created by the particular power, that which extends to the provinced only. it is not perhaps strictly accurate to speak of the provincial power as being excepted out of the federal power, for the two are independent of one another and exist side by side. But the underlying principle in the two cases must be the same, that a general power ought not to be so construed as to make a nullity of a particular power conferred by the same Act and operating in the same field, when by reading the former in a more restricted sense effect can be given to the latter in its ordinary and natural meaning."

The rule of construction adopted by that decision for the purpose of harmonizing the two apparently conflicting entries in the two Lists would equally apply to an apparent conflict between two entries in the same List. <NAME>, J., as he then was, hold in <CITATION> (1) that the words "administration of justice" and (,constitution and organization of all courts" in item one of List II of the Seventh Schedule to the Government of India Act, 1935, must be understood in a restricted sense excluding from their scope "jurisdiction and powers of courts" specifically dealt with in item 2 of List II. In the words of the learned Judge, if such a construction was not given "the wider construction of entry 1 would deprive entry 2 of all its content and reduce it to useless lumber." This rule of construction has not been dissented from in any of the subsequent decisions of this <ORG>. It may, therefore, be taken as a well settled rule of construction that every attempt should be made to harmonize the apparently conflicting entries not only of different Lists but also of the same List and to reject that construction which will rob one of the entries of its entire content and make it nugatory.

With this background let us construe the aforesaid entries. There are three possible constructions, namely, (1) entry 24 of List II, which provides for industries generally, covers the industrial aspect of gas and gas-works leaving entry 25 to provide for other aspects of gas and gas-works; (2) entry 24 provides generally for industries, and entry 25 carves out of it 'the specific industry (1) [1951] S.C.R.51.

of gas. and gas-works, with the result that the indus try of gas and gas-works is excluded from entry 24 ; and (3) the industry of gas and gas-works falls under both the entries, that is, there' is a real overleaping of the said entries. Having regard to the aforesaid principle while giving the widest scope to both the entries, we shall adopt the interpretation which reconciles and harmonizes them. The first question that occurs to one's mind is, what is the meaning of the expression ",indus. try" in entry 24 of List II ? Is it different from the meaning of that expression in entry 52 of List I ? Whatever may be its connotation, it, must bear the same meaning in both the entries for the, two entries are so interconnected that conflicting or different meanings given to them would snap the connection Entry 24 is subject to the provisions of entry 7 and entry 52 of List I. Entry 7 of List I provides for industries declared by <ORG> by law to be necessary for the purpose of defence or for the prosecution of war; and entry 52 for industries the control of which by the <ORG> is declared by <ORG> by law to be expedient in the public interest. Therefore ordinarily industry is in the field of State legislation ; but, if <ORG> by law makes a relevant declaration or declarations, the industry or industries so declared would be taken off its :field and passed on to <ORG>. In the promises, the expression "industry" in all the entries must be given the same meaning. Now, what is the meaning of word "industry"? <CITATION> the expression "industries" is defined to mean the process of manufacture or production and does not include the raw materials used in the industry or the distribution of the products of the industry. It was Contended that the word "industry" was P. word of wide (1)  S.C.R. 393.

import and should be construed as including not only the process of manufacture or production but also activities antecedent thereto such as acquisition of raw materials and subsequent thereto such as disposal of the finished products of that industry. But that contention was not accepted. It is not necessary in this case to attempt to define the expression "industry" precisely or to state exhaustively all its ingredients. Assuming that the expression means only production or manufacture, would it take in its sweep production or manufacture, of gas? Entry 24 in List II in its widest amplitude takes in all industries, including that of gas and gas-works. So too, entry 25 of the said List comprehends gas industry. There is, therefore, an apparent conflict between the two entries and they overlap each other. In such a contingency the doctrine of harmonious construction must be invoked. Both the learned counsel accept this principle. While the learned Attorney-General seeks to harmonize both the entries by giving the widest meaning to the word "industry" so as to include the industrial aspect of gas and gas-works and leaving the other aspects to be covered by entry 25, learned counsel for the contesting respondents seeks to reconcile them by carving out gas and gas-works ill all its aspects from entry 24. If industry in entry 24 is interpreted to include gas and gas- works, entry 25 may become redundant, and in the context of the succeeding entries, namely, entry 26, dealing with trade and commerce, and entry 27, dealing with production, supply and distribution 4 of goods, it will be deprived of all its contents and reduced to ",useless lumber". If industrial, trade, production and supply aspects are taken out of entry 25, the substratum of the said entry would disappear : in that event we would be attributing to the authors of the Constitution ineptitude, want of precision and tautology. On the other hand, the alternative contention enables entries 24 and 25 to operate fully in their respective fields : while entry 24 covers a very wide field, that is, the field of the entire industry in the <ORG>, entry 25. dealing with gas and gas-works, can be confined to a specific industry, that is,the gas industry. There may be many good reasons for the authors of the Constitution giving separate treatment to gas and gas- works. If one can surmise, it may be that, as the industry of gas and gas-works was confined to one or two <ORG>s and was not of all India importance, it was carved out of entry 24 and given a separate entry, as otherwise if a declaration by law was made by <ORG> within the meaning of entry 7 or entry 52 of List I, it would be taken out of the legislative power of <ORG>s. Be it as it may, the express intention of the Constitution is to treat it, in normal times, as a state subject and it is not in the province of this Court to ascertain and scrutinize the reasons for doing so. It is suggested that this interpretation would prevent <ORG> to make law in respect of gas and gas-works during war or other national emergency. Apart from the relevancy of such a consideration, the apprehension has no justification, for under Art. 249 <ORG> is enabled to take up for legislation any matter which is specifically enumerated in List II whenever the Council of <ORG>s resolves by two-thirds majority that such a legislation is necessary or expedient in the national interest. So too, under Art. 250 <ORG> can make laws with respect to any of the matters enumerated in the <ORG> List, if a Proclamation of Emergency is in operation. Article 252 authorizes the <ORG> to legislate for two or more <ORG>s, if <ORG> of those :<ORG>s give their consent to the said course. Subject to such emergency or extra- ordinary powers, the entire industry of gas and gas-works is within exclusive legislative competence of a <ORG>. It is, therefore, clear that the scheme of harmonious construction suggested on behalf of the <ORG> gives' full and effective scope of operation for both the entries in their respective fields, while that suggested by learned counsel for the appellant deprives entry 25 of all its content and even makes it redundant. The former interpretation must, therefore, be accepted in preference to the latter. In this view,' gas and-gas works are within the exclusive field allotted to the <ORG>s. On this interpretation the argument of the learned Attorney- General that, under Art. 246 of the Constitution, the legislative power of <ORG> is subject to that of <ORG> ceases to have any force, for the gas industry is outside the legislative field of <ORG> and is within the exclusive field of the Legislature of the <ORG>. We, therefore, hold that the impugned Act was within the legislative competence of <ORG> and was, therefore, validly made.

In this view the alternative argument advanced on behalf of the <ORG>, namely, that the impugned Act was made by virtue of entry 33 and entry 42 of List III need not be considered. We should not be understood to have expressed our view one way or other on this aspect of the case.

Nor is the contention of learned Attorney General that s. 20 of the Central Act Would still be valid vis-a-vis gas industry has any force. Under s. 20 of the Central Act, "After the commencement of this Act, it shall not be competent for any State <ORG>or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force which authorizes any such <ORG> or local authority so to do."

We have expressed the view that the <ORG> of a State has the exclusive power to make law in respect of gas industry by virtue of entry 25 of List II, and that entry 24 does not comprehend gas industry. As we have indicated earlier, the expression "industry" in entry 52 of List I bears the same meaning as that in entry 24 of List II, with the result that the said expression in entry 52 of List I also does not take in a gas industry. If so, it follows that the Central Act , in so far as it purported to deal with the gas industry, is beyond the legislative competence of <ORG>. Section 20 is an integral part of the Central Act , and if it is taken out of the Act, it can only operate in vacuum. The said section was introduced for the effective implementation of the provisions of the Central Act . It was also enacted by virtue of entry 52 of List I of the Seventh Schedule to the Constitution. If the Act was constitutionally void in so far as it purported to effect the gas industry, for the aforesaid reasons, s. 20 would equally- be void to the same extent for the same reasons. In this context two decisions of this <ORG>, namely <CITATION> (1), and <CITATION> (

2) may usefully be consulted, for in the said decisions this court held that ancillary provisions enacted for carrying out the objects of a main Act would fall with the main Act on the ground that they were enacted only to subserve the purpose of the main Act. Section 20 , therefore, will not avail the appellant to question the validity of the State action.

In the result, we agree with <ORG> that the impugned Act was within the legislative competence of <ORG> and was validly made. The appeal fails and is dismissed with costs of respondents 1 to

4. Appeal dismissed.

(1) [1959] Supp. (1) S.C.R. 478.

(2) A.I.R. 1962 S.C. 50.


PETITIONER: <NAME>, LTD., ALLEPPEY Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX,(BANGALORE) KERALA DATE OF JUDGMENT: 25/10/1962 BENCH: <NAME>, J.L. BENCH: <NAME>, J.L. DAS, S.K. SARKAR, A.K. HIDAYATULLAH, M. DAYAL, RAGHUBAR CITATION: 1964 AIR 569 1963 SCR Supl. (2) 608 ACT: Income Tax-Deduction-Bad debt-Expenditure-Amount advanced for purchase of shares- Indian Income-tax Act , 1922 , ss. 10(2) (xi) and (xv). HEADNOTE: The assessee company was incorporated in 1935 and its Memorandum of association authorised it, inter alia, to promote and to undertake the formation and establishment of other companies and to assist any company financially or otherwise. There was another company known as <ORG> and Mr. <NAME> was director of both these companies. In 1948 <ORG> began the promotion of a company to be known as <ORG>, with a view to buying up a Mill known as <ORG>. The assessee company made an advance of Rs. 6 lakhs odd to the promoter for the purchase of 6000 shares of the new company. The public took no interest in the new company and the whole project failed. No application for shares was made on behalf of the assesee company and no share was acquired. <ORG>, however, did not return the entire amount. On December 7, 1951, it paid back only Rs. 2 lakhs which was received in full satisfaction. The balance of Rs. 4,05,071- 8-6 was written off on December 31, 195 1, which was the close of the year of account of the assessee company. For the assessment year 1952-33 the assessee company claimed a deduction of that amount as a bad debt actually written off, or alternatively as an Expenditure, not of a capital nature laid out or expended wholly and exclusively for the purpose of its business. 777 Held, (1) that the amount advanced for the purchase of shares was of a capital nature and, therefore, the balance was not allowable as an expenditure under s 10 (2) (xv) of the Indian Income-tax Act , 1922, as it was not the business of the assessee company to buy agencies and sell them; and in any event the amount was expended in 1948 and not in the year of account ending December 31, 1951. (2) that it was not a bad debt under s. 10 (2) (xi). A debt in such cases is an outstanding which is recovered would have swelled the profits. It is not money handed over to some one for purchasing a thing which that person has failed to return even though no purchase was made. <NAME> v. <ORG>, (1925) 9 Tax Cas. 319, <CITATION> , (1936) L. R. 63 I. A. 233, <CITATION> - tax,  S. C. R. 690 and Commissioner of Income-tax v. <NAME>,  2 S.C.R. 949, relied on. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 214 of 1962. Appeal from the judgment dated July 8, 1960 of <ORG>, Emakulam, in Income-tax Referred Case No. 10 of 1957.

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

1962. October 25. The judgment of the Court was delivered by HIDAYATULLAH, J.-The assessee, <ORG>, Alleppey, claimed a deduction of Rs. 4,05,072-8-6 in the assessment year 1952-53 as a bad debt which was written-off in its books of account on December 31, 1951. This claim was disallowed. After sundry procedure, the following question was considered by <ORG> and answered against the assessee company :-

"Whether on the facts and the circumstances of the case, the <ORG> was correct in holding that the amount of Rs. 4,05,071-8-6 claimed by the assessee <ORG> as a deduction was not admis- sible either under section 10(2) (xi) or 10(2)

(xv) ?"

<ORG> certified the case as fit for appeal to this Court and this appeal has been filed by the assessee company. The Commissioner of Income-tax (Bangalore) Kerala, is the respondent.

The assessee company was incorporated in 1935 and, as is usual with companies, its Memorandum of Association, authorised it to do multifarious businesses. According to clauses 1, 5, 18 and 23, it was authorised "to be interested in, to promote, and to undertake the formation and establishment of other companies", to make investments and to assist any company financially or otherwise. At the material time the assessee company had three directors, whose names are given below

1. <NAME>

2. <NAME> and

3. <NAME>.

There was another private limited company known as <ORG>, Pondicherry, and its directors were :--

1. <NAME>

2. S. S. Natarajan, and

3. C, <NAME>.

There was a mill in Pondicherry known as Rodier Textile Mill belonging to <ORG>, Pondicherry. The assessee company averred that <ORG>, took up in 1948 the promotion of a limited company to be known as <ORG>, Pondicherry, with a view to buying and developing the Rodier Textile Mill. The assessee company, so it was stated, financed <ORG>, Pondicherry, by making over funds aggregating to the sum of Rs. 6,05,071-8-6. This amount was not given directly by the assessee company but at its instance by <ORG>, Madras. The assessee company further stated that though an entry in its own books dated December 31, 1948, showed this amount as an advance for purchase of 6,000 shares of Rs. 100 each in <ORG>, the main intention of the assessee company was to assist and finance <ORG> within the terms of the assessee company's Memorandum. The subscription list for the <ORG> remained open from January 5 to January 20, 1949. No application for shares was made on behalf of the assessee company and the shares were not acquired. The public took no interest in the new company which was being promoted and the whole project tailed.

On September 1, 1950, the assessee company approved of the action of Mr. <NAME> in making the said advance and on September 18, 1950, a resolution was passed by <ORG> of The assessee company that the amount of Rs. 6,00,000 should be shown as an advance for purchase of shares in <ORG> (in formation) and the balance of Rs. 5,072-8-5 be shown under sundry advances due from the promoters of the new company. <ORG> however, did not return the' entire amount. On December 7, 1951, it paid back Rs. 2,00,000 which appears to have been received in full satisfaction. Though as late as June 12, 1951, the advance was considered to be good and recoverable, the balance was written off on December 31, 1951, which was the close of the year of account of the assessee company. It was this amount which was claimed in the assessment year 1952-53 as a bad debt actually written off, or alternatively as an expenditure, not of a capital nature, laid out or expended wholly and exclusively for the purpose of the assessee company's business.

The Income-tax Officer, <NAME>, held that the debt was written off at a time when it was neither bad nor doubtful and the claim to write it off was premature. He, therefore, disallowed it. An appeal was taken to the Appellate Assistant Commissioner and he upheld the order of the Income-tax Officer though on a different ground. He held that the advance was made for the purpose of purchasing shares of the new company then in formation and it was thus made for the acquisition of a capital asset, which was either the control of the new company or ""to gain its good- will likely to result in the grant of agency rights" to the assessee company. According to the Commissioner, the loss, if any, was of a capital nature and the question whether the claim of bad debt was premature or otherwise did not arise for consideration. The Appellate Assistant Commissioner also held that the deduction could not be claimed as an allowance under s. 10(2)(xv) of the Income-tax Act. The assessee company appealed to the <ORG>. The <ORG> upheld the order of the Appellate Assistant Commissioner but on a third ground. The <ORG> accepted that one of the objects of the assessee company was the promotion and financing of other companies for gain but this advance of Rs. 6,00,000 was not made by the assessee company in the normal course of its business. It was rather a transaction "actuated only by personal motives". In reaching this conclusion the <ORG> observed that the advance was made- to <ORG> which was not a company promoted by the assessee company, that between these two companies there was no previous business connection and at the assessee company had no expectancy of a financial benefit. The <ORG> held that <ORG>,, Pondicherry, was not being financed or promoted by the assessee company and that the statement by the assessee company that it would have received some agency right was not supported by evidence. The <ORG> was of the opinion that this advance was probably due to the " substantially common ownership of the assessee company and the <ORG>, of two individuals, namely, <NAME> and <NAME>." The <ORG> thus held that this deduction could not be claimed as it was given out of "'personal motives" and not as a part of the business of the assessee company.

The assessee company demanded a case but it was refused by the <ORG>. The assessee company in its application for the case had propounded three questions as under :-

"(i) Whether on the facts and in the circums- tances of the case, the sum of Rs. 4,05,072-8- 5 can be claimed by the assessee as a bad debt written off under the provisions of Section 10(2) (xi) of the Act,

(ii) Whether on the facts and in the circums- tances of the case, the assessee can claim the sum of Rs. 4 '.05,072-8-5 as permissible deduction under Section 10(2) (xv) of the Act, and

(iii) Whether co the facts and in the circums- tances of the case, the assessee is permitted to claim the deduction of the said sum of Rs. 4,05,072-8-5 as a proper debit and charge it to the Profit and Loss account of the assessee company."

These questions show that the deduction was claimed (i) as a loss in the doing of the business under s. 10(1); (ii) as a bad debt actually written off under s. 10(2)(xi) ; and (iii) as an expenditure laid out wholly and exclusively for the purpose of the business under s. 10(2)(xv) of the Income-tax Act. The assessee company applied to <ORG> and <ORG> directed a reference on the single question which has been quoted. That question shows that <ORG> did not direct the case under s. 10(1) of the Act. The <ORG> had considered the case from the point of view of the business and had held that this was not an advance in the normal course of business but one out of ""personal motives". <ORG> apparently had not accepted that the matter could be considered under s. 10(1) and framed the question under cls.

(xi) and (xv) of s. 10(2) . The question as propounded and considered by <ORG> related to the two clauses only. An attempt was made before us to raise the issue under s. 10(1) and to claim the deduction as an ordinary business loss. We disallowed the argument because in our opinion the question as considered in <ORG> does not embrace it. The assessee company should have requested <ORG> at some stage to frame a question that there was no material for the <ORG> to reach the conclusion that this was not a business transaction but a case of an advance out of personal motives. It was contended before us that <ORG> in calling for a reference on the single question had stated that that question would cover three matters. The first two 'here mentioned in the question and the third which was said to be implicit was whether the <ORG> was competent to decide a case which had not been made out by the <ORG> at an earlier stage. But this was not the same thing as saying that the <ORG> had no material before it on which it could reach the conclusion that this was not an advance in the ordinary course of business by the assessee company. No doubt, <ORG> in its order calling for a statement of the case has observed that there was no dispute at any earlier stage that this was not in the ordinary course of business, but that conclusion of <ORG> in the order it made under s. 66(2) can have no relevance or binding force. Indeed, <ORG> was in error in giving a finding of its own and it is not surprising that the <ORG> protested against this finding. It was open to <ORG> to frame a question whether there was any material to support the finding of the <ORG> and to ask the <ORG> to state a case thereon. Not having done so, the question as framed drives the assessee company to prove its case either under s. 10(2)(xi) or under s. 10(2)(xv) and it is from these two angles that the case will be considered by us. Clauses (xi) and (xv) of s. 10(2) read as follows :-

"(2) Such profits or gains shall be computed after making the following allowances, namely x x x a

(xi) when the assessee's accounts in respect of any part of his business, profession or vocation are not kept on the cash basis, such sum, in respect of bad and doubtful debts, due to the assessee in respect of that part of his business, profession or vocation, and in the case of an assessee carrying on a banking or money-lending business, such sum in respect of loans made in the ordinary course of such business as the Income-tax Officer may estimate to be irrecoverable but not exceeding the amount actually written off as irrecoverable in the books of the assessee : (Proviso omitted)

(xv) any expenditure (not being an allowance of the nature described in any of the clauses

(i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses) laid out or expended wholly and exclusively for the purpose of such business, profession or vocations".

In support of its case, the assessee company stated that as there was no dispute about the facts that this was an advance in the ordinary course of business it should be treated as a trading loss or alternatively as a bad debt or an expenditure claimable under s. 10(2)(xv) . The assesses company relied strongly upon certain <ORG> entries of <ORG> in the books of the assessee company. These have been marked as Annexures A. 1 to A. 3. <ORG> also referred to these accounts and they have been construed as showing, that there was an attempt by the assessee company to acquire a capital asset. These accounts began in 1948 and ended on December 31, 1951. The accounts are headed "Personal <ORG>." In December, 1948, sundry amounts totalling Rs. 6,05,071-8-5 are shown as amounts "paid to you by <ORG>, Madras, towards purchase of shares." On January 1, 1949, the account opened with a debit balance of Rs. 6,05,071-8-5. Nothing appears from the accounts who this "'you" was. A number of reversing entries were made in respect of certain amounts and then on December 31, 1949, the amount was shown as follows :-

By advance for sundry expenses due from the promoters of new company debited to this trans-

ferred 5,071-8-5 By balance 6,00,000-0-0 1950 opened with entry on January I- To Balance 6,00,000-0-0 and closed with an entry By Amount paid to <ORG>, 6,00,000-0-0

This was shown as an opening balance on January 1, 1951. On December 7, a payment of Rs. 2,00,000 was shown and Rs.

4,00,000 were transferred for writing off. On December 31., 1951, Rs. 4,00,000 were written off and so also the amount of Rs. 5,072-8-5. The last amount included a sum of Rupee 1, hire for carriage which was also written off after the entry had been reversed.

From these accounts it is quite clear that to begin with the amount was shown as an advance for purchase of shares of <ORG> If this was the purpose, it was not an expenditure on the revenue side. <ORG> correctly pointed out that it was not the business of the assessee company to buy agencies and sell them. The shares were being acquired by the assessee company so that it might have the lucrative business of selling agency and similar other agencies from <ORG>. As late as December 15, 1952, the Chairman of the assessee company stated in his speech as follows :-

"You are aware that an advance was made to <ORG> to acquire for us shares in <ORG> It was felt that when the promotion and working of <ORG>, became a fait ac compli, our company stood considerably to gain by securing their agency for handling their goods."

This clearly shows that the assessee company intended to acquire a capital asset for itself This purpose takes the case of the assessee company out of S. 10(2)(xv) of the Income-tax Act, because no expenditure can be claimed under that clause which 'is of a capital nature. By the declaration of the Chairman of the assessee company the case under s. 10(2)(xv) becomes completely untenable. In any event, the amount was not expended in the year of account ending with December 31, 1951 : it was expended in 1948. It remains to consider the case under s. 10(2)(xi) . In this connection, we were referred to the Memorandum of Association to show that it was one of the objects of the assessee company to promote other companies and this amount was paid to <ORG> to promote <ORG> There is no doubt that the objects mentioned in the Memorandum of Association of the assessee company include the promotion and financing of other companies. A Memorandum, however, is not conclusive as to the real nature of a transaction. That nature has to be deduced not from the Memorandum but from the circumstances in which the transaction took place. Here, the different versions given in the books of account of the assessee company belie the assertion that this was an amount paid to promote <ORG> Even though this money was available on December 31, 194 8, and the subscription list for the shares remained open from January 5 to 20, 1949, no application for a single share was made on behalf of the assessee company. The entry till the end of 1949 was that the amount was laid out for purchase of shares. It was only subsequently that it was shown to be an advance to the <ORG> In fact, the entry comes only at the end of 1950 when it is set down "By Amount paid to <ORG>"

The assessee company raised three contentions in support of the case that this became a bad and doubtful debt which was actually written off : (a.) that the High Court was wrong in saying that before the assessee could claim the deduction under s. 10(2)(xi) it must prove that it had in the past purchased and sold agencies, (b) that the object of the assessee company was to apply for shares but as it did not apply for shares the transaction between it and <ORG> remained an advance in the ordinary course of business, and (c) <ORG> having failed to give back the money the assessee company was within its rights to write off this bad and doubtful debt.

Now, a question under s. 10(2)(xi) can only arise if there is a bad or doubtful debt. Before a debt can become bad or doubtful it must first be a debt. What is meant by debt in this connection was laid down by <NAME>, J., in <NAME> v.1. & <ORG>,(1) at p. 330 as follows :--

"When the Rule speaks of a bad debt it means a debt which is a debt that would have come into the balance sheet as a trading debt 'in the trade that is in question and that it is bad. It does not really mean any debt which, when it was a good debt, would not have come in to swell the profits."

A debt in such cases is an outstanding which if recovered would have swelled the profits. It is not money handed over to someone for purchasing a thing which that person has failed to return even though no purchase was made. In the section a debt means something more than a mere advance. It means something which is related to business or results from it. To be claimable as a bad or doubtful debt it must first be shown as a proper debt. The observations of <NAME>, J., were applied by <ORG> in <CITATION> of income-tax(2), at p. 245, where their Lordships observed as follows:-

"Their Lordships moreover can give no countenance to a suggestion that upon a dissolution of partnership a partner's share of the losses for several preceding years can be accumulated and thrown into the scale against (1) (1925) 9 Tax Cas. 319, 330.

(2) (1936) L. R. 63 I. A. 233, 245 the income of another partner for a particular year. No principle of writing off a bad debt could justify such a course, whether in the year following the dissolution or., as logic would permit, in some subsequent year in which the partner's insolvency has crystallised. The ;'bad debt" would not, if good, have come in to swell the taxable profits of the other partner."

This <ORG> also approved the dictum of <NAME>, J., in <CITATION> (1) at p. 550 and referred to the observations of <NAME>, J., in <CITATION> ,-tax, (2) where the learned judge speaking for this <ORG> said that a business debt "springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business." Section 10(2)(xi) is in two parts. One part deals with an assessee who carries on the business of a banker or money-lender. Another part deals with business other than the aforesaid. Since this was not a loan by a banker or money-lender, the debt to be a debt proper had to be one which if good would have swelled the taxable profits. Applying these tests, it is quite obvious that an advance paid by the assessee company to another to purchase the shares cannot be said to be incidental to the trading activities of the assessee company. It was more in the nature of a price paid in advance for the shares which <ORG> had a right to allot in <ORG> This cannot, therefore, be described as a debt and indeed the changes in the books of account of the assessee company clearly show that the assessee company itself was altering the entries to convert the advance into a debt so as to be able to write it off and claim (1)  2 S.C.R. 949, 954.

(2) [1959] S.C.R. 690.

<NAME>

the benefit of s. 10 (2) (xi). In our opinion, s. 10(2)(xi) was inapplicable to the facts of this case. In the result the appeal must fail and it is dismissed. The assessee company shall pay the costs of the respondent. Appeal dismissed.