PETITIONER: <NAME> Vs. RESPONDENT: THE STATE OF UTTAR PRADESH ANDOTHERS. DATE OF JUDGMENT: 20/09/1956 BENCH: <NAME>, <NAME>: <NAME>, <NAME>, <NAME>, <NAME>, P. GOVINDA CITATION: 1957 AIR 18 1956 SCR 664 ACT: Tax on circumstances and property--U.P. Town Areas Act, 1914 (U.P. Act II of 1914)-S 14(1)(f)-Nexus-Whether residence within Town Area necessary condition for imposition of tax -Tax imposed under clause (f) of s. 14(1) whether can be justified under clause (d)-Rule 3 whether invalid. HEADNOTE: The appellant was carrying on business, but was not residing within the Town Area of Karhal. The <ORG> imposed a tax of Rs. 25 on him under clause (f) of a. 14(1) of the U.P. Town Areas Act, 1914, being a tax on 'circumstances and property'. The appellant filed a writ application in <ORG> on the ground that there could be no assessment under clause (f) because he resided outside the jurisdiction of <ORG>. <ORG> dismissed the application taking the view that it was unnecessary to consider whether the tax could be legally imposed under clause (f) as the tax imposed could clearly be justified under clause (d) of s. 14(1) which authorised the imposition of a tax on trades, callings or professions. Held, that residence was not a sine qua non for the imposition of the tax under clause (f), that the carrying on of 'business within the Town Area was a sufficient nexus for the imposition of the tax under clause (f) and that the assessment of the tax on the appellant under clause (f) was legally valid. The legality of the tax imposed must be considered with ref- erence to the clause under which the assessment was actually made and a different clause under which the assessment might have fallen cannot be called in aid of the assessment. Rule 3 of the 'Rules regarding the Limitations, Restrictions and Rate subject to which the Circumstances and Property Tax shall be levied by the <ORG>s' framed under s. 39(2) of the Act does not go beyond s. 14(1)(f) and is not invalid. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 224 of 1955.

Appeal by special leave from the judgment and order dated the 7th May 1954 of <ORG> in Civil Miscellaneous Writ No. 133 of 1952.

<NAME> for the appellant.

<NAME> and <NAME> for respondents Nos. I & 2. 1956. September 20. The Judgment of the Court was delivered by <NAME> is an appeal by special leave from the judgment and order of <ORG> at Allahabad dated the 7th of May 1954 by which <ORG> dismissed an application of the appellant for the issue of a writ of certiorari under the provisions of article 226 of the Constitution. The appeal raises the question of the validity of the assessment of a tax on the appellant for the year 1950-51 by <ORG> under the provisions of clause (f) of sub-section (1) of section 14 of the United Provinces Town Areas Act, 1914 (U. P. Act II of 1914), hereinafter referred to as the Act. The appellant resides in the town of Mainpuri and carries on the business of plying a motor bus on hire. The appellant's bus plies on. alternate days between Etawah and. Mainpuri, and the town of Karhal falls on the route between Etawah and Mainpuri. . It is not now disputed that passengers travelling in the appellant's bus used to get down or get in at a bus stand within the town area of Karhal; the appellant had a booking office situate within the Town Area and tickets were issued to passengers and an account of the business was maintained in the said booking office. <ORG> of Karhal imposed a tax of Rs. 25 on the appellant for the year 1950-51 under the provisions of clause (f) of sub-section (1) of section 14 of the Act, being a tax on 'circumstances and property' and assessing the income of the appellant from his business within the  Town Area of Karhal at a sum of Rs. 800 for the year. The appellant preferred an appeal against the assessment of the tax under section 18 of the Act, and the grounds taken by the appellant were (1) that he did not reside within the limits of the Town Area and (2) that he did not carry on any trade or business within that Area. By his order dated the 20th October 1951' the Appeal Officer held that the appellant carried on his trade or business within the limits of the Town Area and was therefore rightly assessed to tax under clause (f) of sub-section (1) of section 14 of the Act. He accordingly dismissed the appeal. It may be stated here that the appellant was asked to submit an account of his income, but no such account was submitted and the assessing officer worked out the income of the appellant at about Rs. 67 a month, that is, about Rs. 800 a year. No question about the amount of the tax has been raised before us, and it is not necessary to say anything further with regard to the quantum of assessment.

The appellant then filed a writ application in <ORG> at Allahabad and the ground taken by him was that there could be no assessment under clause (f) of sub-section (1) of section 14 of the Act, because he resided outside the jurisdiction of the Town Area. The learned Judge, who dealt with the. application of the appellant, took the view that the tax imposed on the appellant could clearly be imposed under clause (d) of sub-section (1) of section 14 of the Act; therefore it was unnecessary to consider whether the tax could be legally imposed under clause (f) of sub-section (1) of section 14 . The learned Judge also expressed the view that residence within the Town Area was not a pre-requisite condition for the imposition of the tax under clause (d), and it was enough if the appellant carried on a trade or business within the Town Area. On these views, the learned Judge dismissed the writ application.

The main point which has been urged before us by learned counsel for the appellant is that the assessment of a tax under clause (f) of sub-section (1) of section 14 on the appellant was. not valid, because residence within the Town Area was a necessary condition for the assessment of a tax under clause (f). Learned counsel also argued before us that the. assessing authority having assessed a tax on the appellant under clause (f), it was not open to the High Court to say that the tax was legally valid under a 'different clause, namely clause (d) of sub-section (1) of section 14 .

With regard to his second point, learned counsel has drawn our attention to sections 15 to 17 of the Act. He has pointed out that under section 15 of the Act a list of persons liable to pay the tax imposed under section 14 and of the amounts to be paid respectively by such persons, has to be prepared; the list may be revised by the District Magistrate and has to be submitted to him for confirmation. When so confirmed., the list can only be altered under sub- section (2) of section 15 by the District Magistrate or in pursuance of an order passed in appeal under the provisions of section 18 . We think that learned counsel has rightly submitted that, so far as the present appellant is concerned, the list prepared under section 15 must have shown him as assessed to a certain amount of tax under clause (f) of sub-section (1) of section 14 and the assessment must have been confirmed on that basis by the District Magistrate. Therefore, the legality of the tax imposed on the appellant must be considered with reference to the clause under which the assessment was actually made, and a different clause under which the assessment might have fallen cannot be called in aid of the assessment. We proceed therefore to consider the legality of the tax imposed on the appellant with reference to clause (f) of sub-section (1) of section 14 of the Act. The short point for consideration in that context is whether residence within the Town Area is a necessary condition for the imposition of the tax under clause

(f). It is necessary -to read here section 14 of the Act so far as it is relevant to the point in question. "14 (1) Subject to any general rules or special orders of <ORG> in this behalf, the taxes which a Committee may impose are the following:

(d) A tax on trades, callings or professions not exceeding such rates as may be prescribed.

(f) A tax on persons assessed according to their circumstances and property not exceeding such rate and subject to such limitations and restrictions as may be prescribed: , Provided that such a person is not already assessed under clauses (a) to (e) above".

It will be noticed that the power of <ORG> to impose a tax under clause (f) is subject to,' first, 'any general rules or special orders of <ORG> in this behalf' and, secondly, to (such limitations and restrictions as may be prescribed'. These restrictions and limitations are to be found in the Rules made by <ORG> under section 39(2) of the Act, which are called Rules regarding the Limitations, Restrictions and Rate sub- ject to which the Circumstances and Property Tax shall be levied by <ORG>. These rules were notified by Notification No. 681-T/IX-79T-50 dated July 20, 1950. Two of the rules are important for our purpose, viz., rules 2 and 3. They are in these terms:

"2. The tax shall be assessed on every person on whom it is imposed, in two separate parts, namely (1) on his circumstances and (2) on the property, if any, owned by him, and the aggregate of the sums so determined on both the counts shall constitute the total composite amount payable by him as circumstances and property tax:

Provided that nothing shall render it irregular to assess a person on only one' of the two 'counts aforementioned if he does not fulfil the conditions for liability in respect of that count on which he is not assessed.

3. (1) The tax assessed on the circumstances of an assessee may be imposed on any person residing or carrying on business within the limits of the town area: Provided that such person has so resided or carried on business for a total period of at least six months in the year of assessment.

(2) No tax shall be imposed on any person whose total taxable income is less than Rs. 200 per annum. (3) The rate of the tax shall not exceed one anna in a. rupee on total taxable income.

(4) The total amount of tax assessed on any person shall not, in any year, exceed a sum of s. 250 .

Explanation.-(1) For purposes of this rule 'taxable income' means gross income accruing within the limits of the town area.

(ii) The words 'carrying on business' mean the carrying on of any trade, profession, calling or other practice or activity which yields or is capable of yielding income but do not include service under Government or a local body". The important point which emerges out of these Rules is that under Rule 3 the tax assessed on the circumstances of an assessee may be imposed on any person residing or carrying on business within the limits of the town area; in other words, two, conditions in the alternative are laid down in Rule 3, either the person must reside within the limits of the town area or he must be carrying on business within the limits of the said area. There is a third condition that the residence or carrying on of business must be for a total period of at least six months in the year of assessment. No question regarding the third condition has been raised in this case and it is not necessary to consider that condition here. Therefore, it is clear that if Rule 3 is valid, then the imposition of the tax on the appellant under clause (f) is also valid, because on the finding not now in dispute the appellant carried on a trade or business within the limits of the Town Area of Karhal. It has been argued before us that Rule 3 is invalid because, under clause (f) of sub-section (1) of section 14 , residence within the Town Area of the person to be taxed under that clause is a necessary condition. We are unable to accept this argument. Clause (f) of sub-section (1) of section 14 does not say in express terms that residence within the Town Area is a necessary condition for the imposition of the tax. The Rules make it quite clear that for each of the clauses of sub-section (1) of section 14 there is a 'nexus' between the territorial jurisdiction of <ORG> and the imposition of the tax. So far as clause (d) is concerned, the 'nexus' is that the trade, calling or profession must be carried on within the limits of the Town Area. So far as clause (f) is concerned, Rule 3 makes it quite clear that the 'nexus' is either resi- dence within the limits of the Town Area or carrying on business within the same limits. It is to be remembered that clause (f) was inserted -by an Amending Act , namely, the Uttar Pradesh Town Areas (Validation and Amendment) Act , 1950. Section 1(2) of the Amending Act gave retrospective effect to the amendments. The proviso to clause (f) makes it quite clear that a person who is already assessed under clauses (a) to (e) cannot be assessed again under clause

(f). The proviso is intended to avoid multiple taxation, but it is manifest from the proviso that ,there may be overlapping of the different clauses in sub-section (1) of section 14 ; for example, a person may come under clause (d) as well as clause (f) if he carries on a trade within the limits of the Town Area. Therefore, the proviso was necessary to prevent the same person being taxed more than once under the different clauses of sub-section (1) of section 14 . If residence within the limits of the Town Area were a sine qua non for the imposition of a tax under clause (f), no question of overlapping between clauses (d) and (f) would arise unless the person to be taxed resided as well as carried on a trade within the limits of the Town Area. If the argument of learned counsel for the appellant is correct, then the proviso to clause (f) is meaningless in so far as it envisages an overlapping between clause (d) and clause (f) in other cases. On a proper construction of clause (f), read with the limitations and restrictions embodied in the Rules made under section 39 of the Act, it cannot be held that residence within the Town Area of Karbal was a necessary condition for the imposition of the tax on the appellant.

A reference, was made to sub.;section (4) of section 15-A of the Act. Section 15-A provides for preliminary proposals for the imposition of taxes under section 14 , publication of such proposals and the submission of draft rules. Sub- section (4) states:

"(4) Any, inhabitant of the Town Area may, in the prescribed manner, file an objection in writing on such proposals and the committee shall take into consideration the objections so filed and finally settle its proposals." Under sub-section (4) any inhabitant of the Town Area may file an objection to the preliminary proposals for the imposition of taxes under section 14 . The argument before us was that if an inhabitant of the Town Area alone was entitled to file an objection to preliminary proposals for taxation, then in all the, clauses of sub-section (1) of section 14 residence within the Town Area must be read as a necessary condition for the imposition of the taxes under section 14 . This contention appears to us to be unsound. Firstly, the objection as, to preliminary proposals for taxation is not the same thing as objection to an assessment, and it may well be that the legislature in their wisdom thought fit to confine the filing of objections to preliminary proposals for taxation to the inhabitants of the Town Area. Secondly, there are several other sections of the Act, such as section 20 and section 21 , which show that the imposition of a tax on persons not resident within the Town Area. but having some other nexus within that Area, was permissible. Thirdly, the question of the validity of sub-section (4) of section 15-A does not arise in this case. The appellant was assessed to a tax and he had a right to file an appeal which right he exercised. No grievance was made of the failure to exercise the right under subsection (4) of section 15-A . It is therefore un- necessary for us to make any pronounce ment on the validity or otherwise of sub-section (4) of section 15-A All that is necessary for us to state is that by reason of sub-section (4) of section 15-A , it cannot be held that residence within the Town Area is a necessary condition for the imposition of a tax in all the clauses of sub-section (1) of section 14 of

-the Act.

Learned counsel for the appellant referred us to two decisions of '<ORG>: <CITATION> (1) and <CITATION> (2). The second decision, which was earlier in point of time, arose out of a suit for recovery of 'circumstances and property tax under the U. P. District Boards Act (Local Act X of 1922). The question there was whether <ORG> could impose a tax on the defendants who were not residents within the area of <ORG>. It is worthy of note that under section 114 of the U. P. District - Boards Act , the power of a Board to impose a tax on circumstances and 'property is subject to the condition that the tax may be imposed on any person residing or carrying on business in the rural area within <ORG>. The only question in that Allahabad case was whether the defendants resided within the rural area of <ORG> so as to make them liable for the. tax. The finding Was that they did not reside within the rural area and therefore the imposition of (1) A.I.R. 1948 All. 382.

(2) I.L.R. [1944] All. 611.

the tax was illegal, and section 131 of the U. P. District Boards Act did not bar the suit. This decision does not help the appellant. If it shows anything, it shows that it was open to <ORG> to impose a circumstances and property' tax on any person residing or carrying on business in the rural area.

In the 1948 Allahabad decision, the main question was whether the provisions of section 2 , Professions Tax Limitation Act  affected the powers conferred upon <ORG> by section 108 of the U.P. District Boards Act to levy a tax on circumstances and property'. A subsidiary question was also raised, whether section 131 of the U. P. District Boards Act barred the suit. With regard to the main question, it was pointed out that the name given to a tax did not matter; what had to be considered was the pith and substance of it. It was held that in pith and substance the tax was one which attracted the provisions of section 2 , Professions Tax Limitation Act . A tax on 'circumstances and property' is a composite tax and the word 'circumstances'. means a man's financial position, his status as a whole depending, among other things, on his income from trade or business. From militating against the principle that in considering the circumstances of a person his income from trade or business within the Town Area may be taken into consideration, the decision approves of the principle. In the course of his judgment, <NAME> referred to section 128 , U.P. Municipalities Act, 1916, where 'taxes on circumstances and property' appear as a head distinct from the 'taxes on trades, callings and vocations and employments' and the argument was that the taxes being under different heads should be treated as being entirely different, one from the other It was rightly pointed out that it is no sound principle of construction to interpret expressions used in one Act with reference to their- use in another Act. The meanings of words and expressions used in an Act must take their colour from the context in which  they appear. It is true that in the Act under our consideration the taxes which <ORG> may impose appear under different heads in Sub-section (1) of section 14 . We have already stated that though the clauses are different, the words used in the section show that there may be overlapping between the different clauses, and to prevent the same person being subjected to multiple taxation, a 'proviso was incorporated in clause (f). In view of the words and expressions used in section 14 of the Act, we cannot accept the argument that clause (f) should be read as entirely independent of and unconnected with the other clauses and a different condition, namely residence within the-Town Area, must be read as a necessary part of clause (f). To do so will be to read in clause (f) words which do not occur there. The limitations for the imposition of a tax under clause (f) are given in Rule 3 and 'residence'is only one of the alternative conditions for the imposition of the tax-not a line qua non as is contended by learned counsel for the appellant.

In the result, we hold that the assessment of the tax on the appellant under clause (f) of subjection (1) of section 14 of the Act was legally valid. The appeal fails and is dismissed with costs.

<NAME>


JUDGMENT

1. The two suits against the decrees in which these two appeals are laid were disposed of in one judgment. <NAME>, the appellant in both appeals, was the plaintiff in O.S. No. 20 of 1934. In O.S. No. 24 of 1934 he was defendant 7. His adversary <NAME> was defendant 4 in O.S. No. 20 and the plaintiff in O.S. No. 24. He is the contesting respondent here. In a <ORG> auction, held in pursuance of a mortgage decree, <NAME> through a clerk purchased the mortgage property on 13th October 1924 and was put in possession by the <ORG> on 16th October 1927. But <NAME> was a puisne mortgagee of a major portion of the property and he had not been impleaded in the suit. His interest therefore remained unaffected by the decree. On 30th June 1932, <NAME> filed what is now numbered as O.S. No. 20 of 1934 and on 10th August 1933 <NAME> filed O.S. No. 24. <NAME>'s suit was that the property comprised in the first mortgage be sold again and out of the sale proceeds he should be paid the amount due on that mortgage at that date of the plaint. <NAME>'s suit proceeded on the assumption that the prior mortgage had been for the most part discharged and he prayed for a decree on foot of his mortgage. Implicit in these pleadings is the contention of the appellant that he is not liable to be debited with the profits of the land which accrued after 16th October 1927; and in his defence to the suit of the puisne mortgagee he alleged that on account of the threats of the mortgagors he had never got into possession. On the other hand, the case of the puisne mortgagee is that the profits so accruing have been nearly sufficient to wipe out the prior mortgage. The learned Subordinate Judge has found (1) that the appellant, <NAME>, is entitled to priority in the amount of the prior mortgage calculated up to the date fixed for payment; (2) that this amount is to be arrived at by calculating interest at 12 per cent. and not at the penal rate stipulated in the bond since the latter was penal, usurious and excessive; (3) that the amount so found is to be reduced by the profits of the land from 16th October 1927 at the rate of Rs. 650 per annum. <NAME>'s appeal is (a) that he was not in possession of the land at all; (b) that even if he was, he is not liable to account for the profits; (c) that in any event, he is not liable to account for the profits in a sum more than the amount of interest that accrued due on the mortgage during the time he was in possession; (d) that the profits have been over-estimated by the lower <ORG>; (e) that the amount due to him should be calculated according to the mortgage deed.

2. The puisne mortgagee filed cross-objections in regard to the profits that the lower <ORG> should have estimated them at at least Rs. 1000 per annum. We shall first take up the two questions of fact: Was the lower <ORG> wrong in holding that <NAME> got possession of the lands sold under the decree in the prior mortgage and is Rs. 650 per annum as an estimate of the average annual net profits too high or too low? On the question of possession, it is not denied that <NAME>, the clerk of <NAME>, took delivery of the land through <ORG> on 16th October 1927. The case set up at the trial was that when <NAME> tried to lease the land, he was prevented from doing so by the threats of the mortgagor and the mortgagor's sons. The learned Subordinate Judge has stated that appellant failed to show in what manner the mortgagor and his sons were influential enough to defy the orders of the <ORG>; that appellant has had the patta for the lands transferred to his name and has been paying the revenue due to <ORG> regularly; and that, since the date of the alleged dispossession he has never moved any authority with a view to being put into possession nor complained to any public authority. Moreover, in respect of other lands in the same village purchased by him in <ORG> auction, the appellant has admittedly found no difficulty in enjoying them and reaping the profits from them. Then as regards the oral evidence, the learned Judge found that it was false. Out of seven witnesses only one, as pointed out by the learned Subordinate Judge, is not interested in appellant and this man is an agriculturist who has no lands near the suit lands. We have heard learned counsel on both sides at some length on the question of the value of the evidence adduced by the appellant at the trial and we see no sufficient reason to differ from the opinion of the Judge who saw the witnesses. We observe that in his plaint, although he must have known that the puisne mortgagee would raise the question of profits, the appellant did not declare that he had been dispossessed. We observe also that when in 1928, in a suit for partition coupled with a declaration that the mortgage decree was not binding on them, the sons of the mortgagor declared that the properties continued to be entirely in their possession, this appellant being defendant 5 in that suit replied that this averment was false and that the plaintiffs in that suit were not in possession of the plaint properties. What did the appellant mean by that statement if he did not mean that he the purchaser had got effective possession of the lands?

3. Next on the point of the quantum of profits. The learned Subordinate Judge has held that neither side adduced reliable evidence on this point; and for his estimate of Rs. 650 he employs several independent data. Fifteen times the land revenue he takes as the gross income and half of this he takes to be the net income. Again he makes an estimate of the net income as a percentage (in this case 6%) of the value of the lands and he estimates the value as Rs. 12,000, relying on the figures adopted by <NAME>, the respondent in his plaint in O.S. No. 24. We think the data used by the learned Subordinate Judge are reliable and further, in spite of arguments of learned counsel on both sides, we agree with him in his opinion of the evidence adduced at the trial. Appellant has himself stated that the profits are one-third of Rs. 2,000, the estimate made by the respondent as plaintiff in O.S. No. 24. Respondent on the other hand as defendant in O.S. No. 20 first entered Rs. 1,000 as the profits but later amended the figure to Rs. 2,000. The mortgagee's sons in their partition suit valued the profits of all family property including those compromised in the first mortgage at Rupees 1,000. We think that the learned Subordinate Judge's estimate of Rs. 650 is correct. This disposes of the main point in respondent's cross-objections. We now come to the main point of contest in the appeal, namely the accountability for profits accruing during the period that the appellant has been in possession, namely from 16th October 1927 up to date. Appellant as we have said takes up two positions: first that he is not accountable at all; secondly that at the most he is accountable only up to the extent that the profits are equal to the interest on the mortgage. We think that the question of accountability in oases like the present is settled beyond all doubt and that the decision taken by the learned Subordinate Judge is the correct decision. A very recent case decided by a Bench of <ORG> (<NAME> and <NAME>, JJ.) states the matter very clearly and we think it appropriate to cite the relevant passages from that judgment:

The first question we have to decide is whether the plaintiff-appellants (the puisne mortgagee) are in law untitled to have the profits of the property purchased by the defendant-respondents in execution of their mortgage decree set off against the interest and, so far as it was in excess of the interest, against the principal. Where a prior mortgagee obtains a decree on foot of his mortgage and purchases the mortgaged property in execution of his own decree to which the puisne mortgagee was not a party, the sale cannot be considered to be of no effect at all. It effectively transfers the mortgagor's right to the prior mortgagee auotion-purchaser . . . . though the sale is not binding on the subsequent mortgagee, who can in spite of it exercise his right of redemption . . . Applying that rule to the facts of the present case, we have to accept the position that the mortgagor's rights were transferred to the defendant-respondents in 1886; but the plaintiff-appellants who were no party are entitled to redeem. In the exercise of their right of redemption, they are entitled to treat the prior mortgages as still subsisting. Not being bound by the decree, they can ignore it. The necessary corollary to this is that account of the mortgage money is to be made up on the basis of the stipulation contained in the mortgage deed. In redeeming the mortgages, they must pay the principal and interest calculated up-to-date. At the same time the prior mortgagees who have been in possession of the mortgaged property by virtue of the auction-sale held in execution of their own mortgage decree should account for the usufruct received by them. They have to do this not because their possession can be traced to anything in the mortgages in their favour, which were simple, but to the fact that the usufruct received by them should be considered to be tantamount to payments made by the mortgagors. In this connexion it should not be overlooked that as between the prior mortgagees and the mortgagors, the latter's rights were assigned to the prior mortgagees under the auction-sale in lieu of the mortgage money. The prior mortgagees have been in receipt of the usufruct as against the mortgagors in consideration of the whole or part of the mortgage money, which as against the mortgagors should be considered to have been wiped out. Any payments which the mortgagor makes to the prior mortgagee enures for the benefit of the puisne mortgagee also. If the prior mortgagees be considered to bo in possession of the mortgaged property under an arrangement made by the <ORG> in the auction-sale on behalf of the mortgagor to the effect that the prior mortgagees may take possession of the mortgaged property and retain it an the owners thereof in full or part satisfaction of the mortgage money subject to the right of the puisne mortgagee's right to redeem, there can be no doubt that the usufruct received by the prior mortgagees under such arrangement should, in relation to the puisne mortgagee, be considered to be payments made by the mortgagor. Otherwise the prior mortgagees would have it both ways. On the one hand they insist on payment of the mortgage money consisting in the principal and interest calculated up to date; and on the other hand they are allowed to appropriate the usufruct which but for this auction sale in their own suit would have been taken by the mortgagor ( <CITATION> AIR 1935 All 692).

4. See also the case <CITATION> AIR 1922 Cal 23 at p. 644:

In our opinion we must deal with the matter as if there had been no suit at all (on the first mortgage) . . . . The mortgagees are entitled to receive the whole of the principal sum with interest from the date of the bond . . . . As regards the actual profits realized since . . . . when the mortgagees obtained possession of the mortgaged property, the learned Judge has without taking any account, simply directed that such realisations be set off against interest payable. This is a rough and ready method which may be adopted with the consent of the parties. But here the respondents object to this course in their cross-objections which must be allowed. The amount of profits should not be taken as an equivalent of the interest due. We therefore direct that an account be taken of what is due to defendant 1 for the principal and interest on the mortgage . . . . allowing credit for all the sums paid to the mortgagees and the actual profits realised by them during the period they have been in possession of the mortgaged property.

5. To the same effect is the decision in <CITATION> AIR 1918 Mad 103, although we shall have occasion presently to refer to some of the observations in that judgment which seem to be inconsistent with the general principle. What then is the foundation for the appellant's contentions? Take his first position that he is not accountable for the profits at all. It is first argued that as purchaser of the mortgagor's right in the land, he steps into the shoes of the mortgagor and the latter of course is not accountable to any one for the profits of the land. This argument is fallacious. It ignores the fact that the purchase was made behind the back of the puisne mortgagee, in pursuance of a decree to which the puisne mortgagee was no party though he ought to have been made a party, in which case the lands would have been sold for their full value and the puisne mortgagee would have been satisfied wholly or in part. In this connexion we observe that though the appellant declared in his plaint in O.S. No. 20 that when he bought the land at <ORG> auction he knew nothing of the respondent's mortgage, as a matter of fact the existence of that mortgage was proclaimed at the time of the auction. The law as settled is that in relation to the puisne mortgagee, the decree on the first mortgage is to be treated as a nullity. The sale which took place in pursuance of that decree is thus a nullity and the purchaser at that sale could not acquire the rights of a mortgagor owner as against the puisne mortgagee. The only right he did acquire against the puisne mortgagee arose from the fact that the purchase money either wholly or in part went to discharge the prior mortgage; so that he is able to revive the prior mortgage and hold it as a shield against the puisne mortgagee when the latter sues to bring the property to sale. As for his possession and enjoyment of the land, that is not to be regarded as transferring ownership at all. The profits he makes out of the land are deemed to be the money of the mortgagor in his hands, and liable to be credited in reduction of the prior mortgage. We do not think it is possible to assail this position by merely designating the <ORG> sale a transfer both of the rights of the prior mortgagee and of the rights of the mortgagor. And that is the opinion of the Judges in the case of this <ORG> last cited. In p. 518 of 41 Mad:

That to our minds is conclusive to show that the mortgage which is revived against the puisne mortgagee though extinguished against the mortgagor is kept alive to the fullest extent as if no action had ever teen brought on it . . . . . It is on this principle that the purchaser in the prior mortgagee's execution sale is required to account for the profits.

6. The second argument in support of the appellant's plea that he is not accountable at all is based on the fact that the price he paid for the mortgaged property was more than the amount due on the mortgage. He paid Rs. 7,000 and the amount due on the mortgage including costs of the suit and poundage was Rs. 6,660. It is contended on the strength of certain observations of the learned Judges in <CITATION> AIR 1918 Mad 103, that when this is the case the purchaser is not accountable for the profits accruing during the time he is in possession. These observations are at p. 517 of 41 Mad. The exact words are:

If the purchaser obtains possession on sale from the owner, he must account for the profits at least in cases where the price he pays is not more than sufficient to pay the mortgage sued on; for in such a case the purchaser pays nothing for the equity of redemption and the profits of the land are to be regarded as the money of the mortgagor placed in the hand of the purchaser to discharge the mortgage pro tanto. If beyond the value of the mortgages a price is paid for the equity of redemption and the purchaser gets possession from the owner of the equity of redemption . . . . . it may be the purchaser would not be bound to account for the profits [Jones on Mortgages, Vol. 2, Section 1118(a)], but we think that justice requires that there should be an apportionment of the profits between the value of the mortgage and of the equity of redemption.

7. With all respect, we must confess ourselves unable to follow the argument in this passage from the judgment in <CITATION> AIR 1918 Mad 103. We do not think it necessary to discuss it as the opinions expressed there were not necessary for a decision of the case. Coming to the next position contended for by the appellant that in any case he is not liable to account for profits to an extent greater than the interest which accrued on the prior mortgage during the time the profits were earned, we do not think we need add anything to the decision in <CITATION> AIR 1918 Mad 103 on p. 519 and following pages. It is clear from that decision that the point is concluded by the highest authority. See also the later and very recent decision of <ORG>, the relevant portions of which we have set out above. Though we must record an appreciation of the skill and learning with which Mr. <NAME> has pressed the appellant's case, we must hold that the appellant is accountable for the profits to the full extent.

8. The decision in <CITATION> AIR 1935 Mad 360 has been much relied on by Mr. <NAME> and much canvassed in the arguments. But we do not think it is useful in the present connexion, since the facts it deals with are quite different. There, in execution of a money decree property was purchased which was subject to three mortgages. The purchaser subsequently discharged some part of the two first mortgages. The suit was by the third mortgagee and the question debated was whether the purchaser was entitled to be reimbursed in what he had paid towards the prior mortgagee with interest and if so whether he was liable to account for the profits. The fact which distinguishes the case from the present is that the purchaser came into possession of the mortgaged property by virtue of a sale which the mortgagees were not entitled to ignore, while here the possession of the purchaser derived from a sale which the puisne mortgagee is entitled to treat as a nullity. The appellant's case on this point depends on the assumption that if the purchaser is accountable for the profits at all, he is accountable because the profits of the mortgaged land which he purchased at Court auction are substituted for the interest on the mortgage money; so that, if the purchaser receives the interest from a puisne mortgagee or other person untitled to discharge the mortgagor, he is hound to restore the profits that he has earnad but only so much of them as is equivalent to the interest. This method of reasoning ignores the puisne mortgagee's right to be put in the same position as he would have occupied if the sale had never taken place. In order that that may be done, the purchaser must restore the benefit he got by sale. He can stand on the mortgage which was discharged by the sale and can get all that is due on that but he is not entitled to anything else as against the puisne mortgagee. The authorities have all been referred to and explained in <CITATION> AIR 1918 Mad 103, and it is unnecessary for us to cite them again. We say again that we respectfully agree with the conclusion arrived at in that ease.

9. We have come to the last main point in these appeals, namely whether the lower Court was wrong in departing from the stipulations in the prior mortgage bond in calculating the amount of the mortgage payable to the appellant. The bond provides an initial rate of interest at 10½ per cent. per annum. But it is stipulated that if there is failure to pay the interest or principal on the due dates, the interest shall be at 18 per cent. The appellant's claim included interest at 10½ per cent. for the first year and 18 per cent. for the subsequent period. The learned Subordinate Judge held that this contract was unconscionable for reasons which he has set out at length and re. opened the contract, purporting to act under the Usurious Loans Act 1918, and awarded interest at a uniform rate of 12 per cent. It is objected that the Usurious Loans Act applies only to suits on loans contracted subsequent to the Act and this mortgage was in 1914. We think that this objection must prevail. But the learned Subordinate Judge's procedure may be supported on other grounds. The stipulation for increased interest from the date of default may be considered to be a stipulation by way of penalty. It is so enacted in the Explanation of Section 74 , Contract Act . If we regard it as such, then the enhanced interest cannot be levied directly under the contract. The lender is only entitled to receive reasonable compensation. It is urged that in the suit upon the mortgage the mortgagors did not seek to be relieved from the penal stipulation and that the puisne mortgagee should not be allowed to seek that indulgence now. But we think that the puisne mortgagee who was no party to the suit may be allowed to put forward such defences now as would have been available to him if he had been a party to the suit. In other words, he can claim that the prior mortgagee to whose rights the appellant is subrogated is only entitled to reasonable compensation and not to the full amount of interest at the enhanced rate. Such being the case, are we justified in holding that the stipulation for increased interest was a stipulation by way of penalty? And if so, is the appellant reasonably compensated by the rate of 12 per cent. awarded by the learned Subordinate Judge? We think both questions should be answered in the affirmative. The learned Subordinate Judge held that the security for the loan--which was only Rs. 3,000--was excellent and that the borrowers were induced to consent to the high rate of interest because they were hard pressed by creditors. In his opinion the stipulation of interest at 18 per cent. on a mortgage of this kind was itself sufficient evidence that the transaction was substantially unfair; and the learned Subordinate Judge must be held to speak with knowledge of local conditions. In this view we think that the stipulation for increased interest from the date of default was a stipulation by way of penalty and that the rate of 12 per cent. awarded by the learned Subordinate Judge is fair compensation. The appeal and cross objections are dismissed with costs.

C.M.A. No. 215 of 1935.

10. C.M.A. No. 215 of 1935 is against the order of the lower Court passed after decree refusing to appoint a receiver of the property at the instance of the appellant. Following our decision that the appellant is in possession of the property, that appeal is dismissed with costs. No orders are necessary in C.M.P. 2243 of 1935.


JUDGMENT <NAME> C.J.

1. This appeal raises the question whether it was within the competence of <ORG> to order the reversion of the petitioner to his substantive rank of <ORG> upon charges which he has had no opportunity to hear or defend.

2. The petitioner in this case is one <NAME> who is holding the rank of a Tahsildar in a substantive permanent capacity. He was appointed to <ORG> on the 3lst May 1945 and was reverted to the post of Tahsildar on the 20th May 1952. He presented a petition under Article 226 of the Constitution in which he complained that his attempted reduction to the post of Tehsildar wag unlawful as it was effectuated without notice or hearing. The Learned Single Judge before whom the petition came up [or consideration granted a direction that the State should forbear from putting into execution the order complained of without complying with the provisions of Article 311 of the Constitution. The <ORG> is dissatisfied with the order of the Learned Single Judge and has preferred an appeal under clause 10 of the Letters Patent.

3. the petitioner was promoted to <ORG> under the provisions 6f the Punjab Civil Service (Executive Branch) Rules 1930. These rules empower the Governor of the Punjab to appoint members of the service from time to time as required from among accepted candidates whose names have been duly entere in one or other of the registers of accepted candidates to be maintained under these rules (Rule 5).

All such appointments are in the first instance either officiating, or substantive provisional (Rule 17). Candidates appointed from Register A-I or Register A-II are to remain on probation for a period of 18 months, but the Governor is at liberty, if he thinks fit, to extend the period of probation of any candidate (Rule 22). On completion of the period of probation prescribed or extended a member of the service becomes qualified for substantive permanent appointment. These rules clearly provide for a probationary period that must be served before the person appointed to the service becomes a regular or permanent member thereof.

4. the notification of the 5th June 1945 by which the petitioner was appointed to <ORG> in the following terms :

"The Governor cf the Punjab is pleased to make the following appointments and transfers with effect from the dates mentioned:-

_____________________________________________________________________________________________ Name Rank Appointed Posted or transferred Remarks to__ _____________________________________________________________________________________________ <NAME> <NAME> Extra Assistant Ferozpur with effect from On first appointment to the Phillaur. Commissioner. 31st May, 1945. <ORG>. ____________________________________________________________________________________________

5. It is contended on behalf of the petitioner (hat he was appointed to <ORG> in a substantive permanent capacity as the expression 'Extra Assistant Commissioner' appearing in column 3 of the above notification is not qualified by the words 'on probation' or 'officiating' and as certain other officers who were appointed to this service previously were gazetted as having been appointed on probation. This contention cannot, in my opinion, bear a moment's scrutiny.

The learned Advocate-General has stated at the bar that the practice of gazetted officers as on probation has been discontinued and that all officers who are appointed to the service are placed as probationers in the first instance and are later confirmed if their work in the probationary period is found to be satisfactory. I am satisfied with this explanation. In any case the failure of <ORG> to designate the petitioner's" appointment as for a probationary term could have-no effect on the nature of the petitioner's tenure, for the rules provide quite clearly all appointments in the service are probationary. The Governor of the Punjab had no discretion in the matter and had no power even if he had desired, to appoint the petitioner except as a probationer. It seems to me therefore that in the present case the probationary condition is implied as a matter of law.

6. Again it is contended that as the petitioner was not removed from, the service immediately on the completion of the probationary period of 18 months and as he was allowed to continue in his appointment for several years thereafter without an express order extending the period of probation, it must be assumed that he was appointed substantively to <ORG> on the conclusion of the period of probation. This contention is sought to be supported by the rule which provides that on completion of the period of probation a person of the service becomes qualified for appointment in a substantive permanent capacity.

I regret I am unable to concur in this contention. I am aware of no rule by which the petitioner's conditions of service are regulated which would enable us to hold that the probationary period had ripened into a permanent appointment by efflux of time. Nor am I in a position to subscribe to the proposition that as soon as the petitioner became qualified for substantive appointment he must be deemed to have been automatitically confirmed. The petitioner could not acquire the status of a permanent member of the service automatically: he could have acquired this status only if the competent authority had chosen to perform a positive or affirmative act.

7. It was submitted in the course of arguments that the petitioner's original appointment to the service was in a substantive provisional capacity, but this allegation did not appear in the petition. Itself and the petitioner never alleged as a fact that he had been appointed substantive proivisionally. The question whether he was appointed to the service in a substantive provisional capacity or in some other capacity is a doubtful and disputed question of fact which cannot be determined in these proceedings.

The object to be accomplished by a writ of mandamus is not to determine controversies: it is simply to enforce a clear and specific legal right when such right depends solely on questions of law.

8. The question now arises whether the Petitioner who was holding the higher post in an officiating capacity was entitled to the privileges conferred by Article 311 of the Constitution. This Article is in the following terms :-

"311. (1) No person who is a member of a civil service of the <ORG> or an all-India service or a civil service of a state' or holds a civil post under the <ORG> or a <ORG> shall be dismissed or removed by an authority subordinate to that by which he was appointed.

(2) No such person as aforesaid shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him."

9. the language which the framers of the Constitution have chosen to employ is of such wide generality that it comprehends in its terms the whole class of Government servants, including Government servants who are holding their posts temporarily pr on probation or in an officiating capacity or in accordance with the terms of their respective contracts. If the <ORG> were to confine themselves to the literal and strict meaning of the constitutional terminology it would be impossible to order the removal of any Government servant without notice or hearing even after he has attained the age of superannuation, or after he has completed 25 years service, or after the expiration of the probationary period, or after the expiration of the term for which he was appointed under the terms of his contract.

The framers of the Constitution could not have contemplated such a situation, and it seems to me therefore that if the words were given their usual or natural meaning the true Intention of the lawmakers would be completely defeated. The duty of the <ORG> is not to defeat but to effectuate the intention of the <ORG>. It is of the utmost importance therefore that the language of the Article should be limited, restrained and restricted by constitutional construction, for a person who considers merely the letter of an instrument goes but skin deep into its meaning.

10. Many and various are the rules which have been framed by the <ORG> for ascertaining the intention of the <ORG>, for as pointed out by Chief Justice <NAME> ''where the mind labours to discover the design of the <ORG>, it seizes everything from which aid can be derived". The <ORG> may look to the subject-matter of the enactment and the purpose for which it was enacted; it may examine the historical background and the attending conditions or circumstances at the time of the adoption of the law; it may consider the policy which induced its enactment or which was designed to be promoted thereby; it may examine the results which flow from one construction or another and accept a construction which produces' convenient results & discard one which produces Inconvenient results, The <ORG> should endeavour to construe words to the sense in which they were understood at the time when the statute was enacted and should resolve any ambiguity in the language in favour of an equitable operation of law arid to avoid results which are manifestly absurd or ridiculous, When a statute is capable of two constructions, one of which is in harmony with the pre-existing body of law and the other not, that construction should be adopted which will preserve the existing law.

11. Let us now examine the circumstances in which Article 311 came to be enacted. Prior to the year 1919 the conditions of service of a Government servant were regulated by an infinite variety of executive instructions, several of which were framed by the Secretary of <ORG> in <ORG> and most of which were embodied in the compilation known as the Civil Service Regulations.

These provisions did not afford sufficient protection to the legitimate rights and interests of the civil services, for rules could be changed and modified at the sweet will and pleasure of the rule making power and the protection afforded by them completely withdrawn. <ORG> which was about to transfer a large measure of control to Indian hands by the enactment of the Government of India Act, 1919, was anxious to secure to the members of the public services all rights provided for them by the pre-existing rules end to safeguard their legitimate interests. They accordingly declared in Section 96B that (1) subject to the provisions of Act 1919 and all the rules made thereunder, every person in the civil service of the <ORG> holds office during His Majesty's pleasure;

2. that no such person shall be dismissed by any authority subordinate to the authority by whom he was appointed ;

3. that the Secretary of <ORG> in <ORG> shall be at liberty to make rules for regulating his conditions of service ; and

4. that the rules in operation at the time of the passing of the Act of 1919 shall be vested with statutory authority.

A statutory rule provided that no member of a public service shall, be dismissed or reduced without being given formal notice of any charge made against him and an opportunity of defending himself.

12. These provisions do not appear to have achieved the object which the law makers had in view, for they broke down completely on the very first occasion on which their efficacy was tested In a Court of law. Their Lordships of <ORG> were constrained to hold that the statute of 1819 conferred no right of action to enforce the rules made thereunder ( <CITATION> , AIR 1937 PC 27) (A), for it contained only a statutory and solemn assurance that the tenure of office though at pleasure would not be subject to capricious and arbitrary action but would be regulated by rule.

They added, however, with the object doubtless of softening the blow which had been inflicted' on the public services, that ''supreme care should be taken that this assurance should be carried out in the letter and the spirit" and "that the rules should be strictly adhered to" <CITATION> , AIR 1937 P. C. 31 (B).

13. If the rules containing guarantees and safeguards in such essential matters, as arbitrary dismissal arid removal could not be enforced in a Court of law and if a Government servant was to be left completely at the mercy of the appointing power, the protection afforded by Section 96B of the Government of India Act was wholly meaningless and the policy of safeguarding the vital interests of public services was foredoomed to failure.

This state of affairs could not be tolerated for long and when the new Government of India Act was enacted in the year 1935 it was expressly declared in the body of the statute that no Government servant shall be dismissed or reduced in rank unless he has been afforded a reasonable opportunity of showing cause against the action which is proposed to be taken in regard to him. Provisions on the same lines find a place in the new Constitution. Indeed, the Constitution of India has gone a step further by enacting that this protection would be available not only to persons who are dismissed or reduced in rank but also to persons who are ^removed from service. This provision enables the <ORG> to intervene and to compel the performance, when refused, of the duty imposed by Article 311.

14. The history of this legislation makes it quite clear that the framers of the Constitution had no intention of overturning . departmental rules and procedures which had for long regulated the relationship between the <ORG> and its employees. They had no desire to confer any greater rights or privileges on Government servants than had been conferred on them by the rules by which their conditions of service were regulated.

They appear to have intended that the rules regulating the conditions of service should be strictly adhered to, that the expression 'member of a civil service' appearing in Article 311 should mean a permanent member of a civil service, that the expression 'holds a civil post' appearing in the same Article should mean holds in a substantive capacity, that the expressions 'dismissal', 'removal' and 'reduction in rank' should have the same meaning when used in Article 311 as they have when used in the service rules, that a Government servant should be removed or reduced in rank without charges or hearing if the rules so require, and indeed that Article 311 should confer no greater rights or privileges in the matter of re-instatement than have been conferred by the corresponding provisions in the service rules.

They were anxious only to provide that the procedural guarantees secured by the rules in such essential matters as dismissal, removal and reduction in rank should be converted into constitutional guarantees, that persons aggrieved by the high-handedness, of their official superiors should foe at liberty to seek redress at the hands of Courts of law and that Courts of law should have power to require the performance of duties set out in Article 311. They endeavoured merely to place beyond the reach of hostile legislation the method of dismissing, removing or reducing members of civil services and holders of civil posts.

In other words they appear to have intended that a <ORG> servant who has been dismissed, removed or reduced in rank without charges or hearing should be entitled to re-instatement or restoration only if he has a clear and specific legal right to re-instatement or restoration under the rules by which his conditions of service are regulated and only if he is within the protection of a statute or statutory rule forbidding such removal of reduction. It seems to me therefore that Article 311 should Be read as if it were subject to the implied proviso that nothing contained in the said Article shall be deemed to limit or abridge the power of a competent authority to order the removal or reduction in rank of -any <ORG> servant without notice or hearing if the rules by which his conditions of service are regulated authorise the competent authority so to do.

15. the Fundamental Rules and the Civil Services (Classification, Control and Appeal) Rules were made by the Secretary of <ORG> under Section 96B of the <ORG> of India Act and were continued in force by Section 276 of the <ORG> of India Act, 1935, and Article 372 of the Constitution of India. One set of rules specifies the circumstances in which a person may acquire a clear legal right to hold a permanent post. Fundamental Rule 12-A, for example, provides that unless in any case it be otherwise provided by these rules, a <ORG> servant on substantive appointment to any permanent post acquires a lien on that post, that is a title to hold substantively the permanent post to which he has been appointed substantively.

The acquisition of a lien creates an indissoluble tie between the post and the holder of the post--a (in which can be severed only in circumstances clearly envisaged by the rules. Another set of rules protect a <ORG> servant from removal or reduction in rank. They declare that save in special circumstances a permanent <ORG> servant shall not be removed or reduced in rank. R. R. 14-A, for example, provides that except as provided in clause (c) of that Rule and Rule 97 a <ORG> servant's lien on a post may in no circumstances be terminated, even with his consent, if the result will be to leave him without a lien or a suspended lien upon a permanent post. R. R. 15 provides that a <ORG> servant holding a permanent post in a substantive capacity shall not be transferred to a post carrying less pay than the pay of the said permanent post.

16. A third set of rules empowers the competent authority to impose certain punishments including the punishment of dismissal, removal and reduction in rank (rule 49 of the Civil Services (Classification, Control and Appeal) Rules, but declares that order of dismissal removal or reduction in rank shall be passed on a Government servant unless he has been informed in writing of the grounds on which it is proposed to take action and unless he has been afforded an opportunity of defending himself (Rule 55 of the Civil Services (Classification, Control and Appeal) Rules). Rule 65 of the Civil, Services (Classification, Control and Appeal) Rules and Article 311 of the Constitution contain a general prohibition against a person being dismissed or removed or reduced in rank without notice or hearing.

17. On the other hand there are certain other rules which empower a competent authority to order the removal of a Government servant without notice or hearing. Thus a person may be removed without charges or hearing on his attaining the age of superannuation, or on the expiry of the term for which he was appointed under a contract, or on the expiry of the period of probation, or on the completion of 25 years' service. In none of these cases can the order of removal be deemed to be unlawful for the rules themselves empower the appropriate authority to make an order of removal without affording the person concerned an opportunity of defending himself. These rules are in the nature of special provisions & they must be read as exceptions to the general provisions embodied in Rule 65 of the Civil Services (Classification, Control and Appeal) Rules and to the constitutional provisions contained in Article 311 , for it is a well-known rule of construction that where there is in the same statute a general prohibition of a thing, and a special permissive recognition of the existence of the same thing under regulation, the particular specified intent on the part of the <ORG> overrides the general. intent incompatible with the specific one, <ORG> v. <NAME>, (1873) 14 American Reports 471 (O).

The provisions of Article 311 and Rule 55 are attracted only if the removal or reduction is ordered in violation of a statutory rule applicable to the person concerned at the time of his removal and only if the illegality of his removal is clearly and indisputably established.

18. If a competent superior officer proposes to order, without notice or hearing, the removal or reduction of a permanent <ORG> servant from a post to which the said <ORG> servant has been appointed substantively, ho must find his authority in some positive Provision of a statutory rule. Conversely, a person who seeks the intervention of this <ORG> on the ground that he has been unlawfully removed or reduced in rank must establish to the satisfaction of the <ORG> :

(a) that prior to his removal Or reduction he had a clear and specific legal right to hold the office in question, that is a right guaranteed him by a statute or a statutory rule ;

(b) that he is within the protection of a statute or a statutory ruling forbidding such removal or reduction;

(c) that this case is not covered by a rule which empowers the competent authority to order the removal or reduction without notice or hearing; and

(d) that he has a clear and indisputable right to re-occupy the said office.

19. the rule which protects a Government servant from reduction in rank is embodied in Clause (a) of F. R. 15 which is in the following terms :

"F. R. 15 (a) -- The Governor-General in Council may transfer a Government servant from one post to another; provided that, except :

1. on account of inefficiency or misbehaviour, or

2. on his written request, a Government servant shall not be transferred substantively to, or, except in a case covered by Rule 49, appointed to officiate in a post Carrying less pay than the pay of the permanent post on which he holds a lien, or would hold a Hen had his lien not been suspended under Rule 14."

20. This rule enunciates the broad general proposition that although <ORG> have full power to transfer a <ORG> servant from a higher to a lower post or from a lower to a higher post or from a higher post in one grade to an equivalent post in the same grade, it has no power to transfer a person who is holding a post in a substantive capacity to a post which is carrying less nay than the pay of the permanent post on which he holds a lien.

It appears to draw a distinction between an officer who is holding a permanent post in a substantive capacity and an officer who is holding a permanent post in an officiating or some other capacity. An officer of the first category cannot be transferred from a higher to a lower post Without charges or hearing, for he has a clear legal right to hold substantively the post to which he has been appointed substantively, and he Is within the protection of a statutory rule which forbids his reduction in rank.

Any such transfer in his case must therefore be regarded as a reduction in rank which cannot be effected without complying with the constitutional formalities. If therefore it is intended to demote any such officer without his consent it is essential that he should be afforded a reasonable opportunity of defending himself and this essential formality must be complied with whatever may be the reasons which actuate Government in contemplating, this action. He can no more be denied the opportunity of being heard when it is proposed to order his reduction on grounds of ill-health than when it is proposed to order his reduction on grounds of misconduct or on any other grounds,

21. The protection afforded by Fundamental Rule 15 is not available to a person who is employed on probation or to a person who is merely officiating in a permanent post. He has no legal hold on. his office, he has no clear and specific right or title to hold the post in question and he is not within the protection of a statute or statutory rule forbidding his removal from the said post. On the contrary, Fundamental Rule 15 itself provides that he may be transferred from a higher post to a lower post without cause assigned.

A transfer from a higher post to a lower post must in his case be regarded merely as a transfer & not as a demotion. The power to transfer carries with it the power to transfer at any time, or for any reason, or to any post or in any manner deemed best with or without notice. When a competent authority has a discretion as to the circumstances in which it will exercise its official function, this discretion cannot be controlled by Courts of law.

It follows as a corollary that if a <ORG> servant holds his office in an officiating capacity and no statutory rule protects him against reduction, the <ORG> will not be able to restore him to his place however unjustly or arbitrarily his reduction was ordered. He may be transferred from a higher post to a lower post without cause assigned either in the ordinary course, or on grounds of misconduct, or on grounds of ill-health, or on any other ground, without interference by <ORG> of law.

The Courts have no more right to examine the grounds on which a transfer has been ordered than to examine the reasons for transferring a person from one station to another.

22. I am not unaware of the authorities in which a contrary view has been taken, but those authorities do not appear to take notice of F.R. 15 which invests Government with a discretionary power to transfer a person who is holding office in an officiating capacity from a higher to a lower post whenever in the exercise of its judgment Government considers it necessary to do so. So far as I can judge the power is unlimited and the discretion unfettered and even if it be exercised with manifest injustice the <ORG> are incompetent to interfere.

23. As the petitioner in the present case was reverted to a substantive post under the provisions of a rule corresponding to Fundamental Rule 15 it was not necessary to consult <ORG>. No penaJty was imposed upon him, for he was transferred by Government in exercise of the power conferred upon it by a statutory rule. He Was only transferred from one post to another, & a transfer if it is authorised by the rules cannot be regarded as a penalty. In any case the provisions of Article 320 of the Constitution are directory and not mandatory.

24. For these reasons I would allow the. appeal and set aside the order of the learned Single Judge. The parties will bear their own costs.

<NAME>, <NAME>

25. I agree with my Lord the Chief Justice, for reasons given by him, that respondent <NAME> was officiating in the cadre of Extra Assistant Commissioners, while he was a permanent Tehsildar, and that <ORG> had the power, having regard to his conditions of service in officiating capacity, to put him back to his permanent position. I would rest my judgment upon these considerations alone. I, therefore, agree that the appeal be allowed and the order of the learned Single Judge be set aside.