PETITIONER: <NAME> Vs. RESPONDENT: THE STATE OF PUNJAB. DATE OF JUDGMENT: 10/12/1952 BENCH: <NAME>, MEHR CHAND BENCH: <NAME>, MEHR CHAND DAS, <NAME>, NATWARLAL H. CITATION: 1953 AIR 76 1953 SCR 418 CITATOR INFO : F 1956 SC 217 (1) R 1956 SC 425 (5) R 1957 SC 216 (12) R 1957 SC 589 (16) RF 1961 SC 715 (7) RF 1962 SC 439 (8) E 1962 SC1239 (14) RF 1963 SC 200 (17) RF 1973 SC2622 (7) R 1974 SC 606 (6) ACT: Criminal Procedure Code , 1898, ss. 342 , 417-Appeal against acquittal-Interference-Guiding principle-Criminal trial-Ex- amination of accused-Duty of Court-Irregular examination- Validity of trial-Question of prejudice. HEADNOTE: After an order of acquittal has been made the presumption of innocence is further reinforced by that order, and that being so, the trial court's decision cannot be reversed merely on the ground that the accused had failed to explain the circumstances appearing against him but only for very substantial and compelling reasons. In an appeal under s. 487 , Criminal Procedure Code , <ORG> has full power to review the evidence upon which the order of acquittal was founded. The duty of a Sessions Judge under s. 342 , Criminal Pro- cedure Code, to examine the accused is not discharged by merely reading over the questions put to the accused in <ORG> and his answers, and by asking him whether he has to say anything about them. It is also not a sufficient compliance with the section to generally ask the accused t hat, having heard the prosecution evidence what he has to say about it. He must be questioned separately about each material circumstance which is intended to be used against him. The, whole object of the section 419 is to afford the accused a fair and proper opportunity of explaining circumstances which appear against him and the questions must be fair and must be couched in a form which an ignorant or illiterate person may be able to appreciate and understand. It is, however, well settled that every error or omission complying with s. 342 does not necessarily vitiate the trial. Errors of this type fall within the category of curable irregularities and the question whether the trial has been vitiated depends in each case upon the degree of error and upon whether prejudice has been or is likely to have been caused to the accused. <CITATION> ( S.C.,R. 729) referred to. JUDGMENT:

CRIMINAL APPELLATE.JURISDICTION: Criminal Appeal No . 67 of 1952. Appeal by special leave from the Judgment and Order dated the 14th September, 1951, of <ORG> at Simla (<NAME> and <NAME> JJ.) in Criminal Appeal No. 361 of 1950, arising out of Judgment and Order dated the 13th May, 1960, of <ORG>, Ferozepore, in Trial No. 28 of 1950 and Case No. 5 of 1950.

<NAME> for the appellant.

<NAME> for the respondent.

1952. December 10. The Judgment of the Court was delivered by <NAME>, a young man of about 22 years of age was tried for the murder of <NAME>, his first cousin, and was acquitted by the Sessions Judge of Ferozepore by his judgment dated 13th May, 1950. On appeal by the State Government, the order of acquittal was set aside by <ORG> and the appellant was convicted under section 304 , Indian Penal Code , and sentenced to ten years' rigorous imprisonment. This is an appeal by special leave against that decision.

One <NAME> had three sons, <NAME>, <NAME> and <NAME>. <NAME> died issueless some years ago and disputes arose between <NAME> and his brother <NAME> in regard to the division of the property of <NAME>. <NAME> was in possession of some of his landed properties and <NAME> obtained a number of decrees against him but <NAME> declined to restore possession of the properties to his brother <NAME>. In view of this litigation the relations between <NAME> and <NAME> were considerably strained and it is said that for some time they were not even on speaking terms. <NAME> is married to Mst. <NAME> and from her he had two sons. One of them <NAME> was murdered and the other, <NAME>, is <NAME>. Accused <NAME> is the son of <NAME> and <NAME> is his real brother. <NAME> is married to <NAME> and <NAME> to <NAME>. It is alleged by the prosecution that on the evening of the 27th January, 1948, <NAME> complained to her fatherin-law that her husband had pawned her ear-rings in order to pay off his gambling debts. On the morning of the 28th <NAME> inquired from <NAME> about this matter and he replied that he had pawned the ear-rings to one <NAME> Mazhbi. Soon after this <NAME>, <NAME> and one <NAME> went to <NAME> Mazhbi and asked him to return the ear- rings but the latter replied that no ornaments had been pawned with him and added that he would give a sum of Rs. 30 to them if <NAME> took an oath that the ornaments had in fact been left with him. It is said that <NAME> was also present when this conversation took place and took up cudgels on behalf of <NAME> Mazhbi and this led to an exchange of hot words between <NAME> and the party of <NAME>'s two sons and their companion <NAME>. The parties, however, dispersed after exchanging hot words but without coming to blows.

At about sunset the same day <NAME> and his brother <NAME> started abusing each other from their respective houses which open out into a common.courtyard. This wordy warfare between the two brothers attracted the attention of <NAME>, <NAME> and one <NAME> who on bearing the noise came to the house of <NAME>.

<NAME> finding himself supported by three others threw out a challenge to <NAME> and told him to come out in the open. It is said that <NAME>, his two, sons <NAME> and <NAME>, and <NAME>, a cousin of theirs, accepted the challenge and rushed out of the house. <NAME> and <NAME> were armed with spears and they made an attack on <NAME> and <NAME> and inflicted on their persons a number of injuries. <NAME>, it is said, was armed with a spear and he plunged his weapon into the chest of <NAME> who collapsed and died almost instantaneously. <NAME> soon after reported this incident at the police station after travelling a distance of about seven miles at 11-45 p. m. He gave to the police substantially the same version as has now been deposed to by him in the witness box. In this report it was stated by <NAME> that it was <NAME> who dealt <NAME> a barchha blow on his chest and that <NAME> fell down at this blow. The police arrested <NAME>, <NAME> and <NAME> but the appellant could not be found. <NAME>, <NAME> and <NAME> were prosecuted under section 302 / 34 but were convicted under section 324 , Indian Penal Code , <NAME> and <NAME> were sentenced to two years' rigorous imprisonment each and <NAME> to six months' rigorous imprisonment. On appeal, <NAME> was acquitted and the sentences imposed on <NAME> and <NAME> were reduced. A lenient view' of the affair seems to have been taken because the fight between these near collaterals took place suddenly and ended promptly. <NAME> died as a result of one blow and injuries on the person of <NAME> and <NAME> were not very serious <NAME> was apprehended on 4th December, 1948, and as above stated, was tried by the learned Sessions Judge of Ferozepore and acquitted, but was convicted by <ORG> on appeal by the State Government.

<NAME>, P. W. 3, father of the deceased, <NAME>, his mother, and <NAME>,his real brother, have given direct evidence about the occurrence. <NAME> whose name is mentioned in the first information report was tendered for cross-examination but no question was put to him about the actual fight, and the manner in which it took place or the part that was taken in it by the accused. One <NAME>, whose shop adjoins the shop of <NAME>, was tendered for cross-examination as P.W.7. He deposed that <NAME> and <NAME> were the only persons when the quarrel about ear-rings took place near his shop. In reexamination he stated that <NAME>, brother of the accused, and <NAME> had come on one side and <NAME> on the other when the quarrel about the ear-rings took place. No direct question was put to the witness about the presence of, <NAME> on that occasion. The learned Sessions Judge considered him a wholly independent witness and accepted his evidence about the incident that took place at <NAME>'s shop on the morning of the 28th. He held that <NAME> was not present at <NAME>'s shop and that <NAME> and <NAME> had falsely implicated him in the quarrel over the ear-rings, and that if the witnesses could falsely involve him in regard to one part of the occurrence, the possibility of his being implicated for the murder of <NAME> merely as a matter of vindictiveness could not be outruled. After examining the evidence of the three eye-witnesses in detail, the learned Sessions Judge reached the conclusion that they had suppressed the facts in order to absolve themselves of all liability for the happenings of the 28th, and had uttered untruths and that no confidence could be reposed in their statements about the part that they had assigned to <NAME>. In the concluding part of the judgment he observed that " the parties were at logger-heads on several issues and in the absence of independent evidence it is difficult to place reliance on the prosecution story in regard to <NAME>." <ORG> appeal minutely reviewed the evidence of these three eye-witnesses and considered that the variations in the statements of witnesses made at-, the two trials and which had weighed on- the mind of the Sessions Judge were of a minor and trifling character and were quite natural as the Statements at this trial had been made 27 months after the occurrence and that the narration of events by <NAME> was substantially the same as had been given by him at the earlier trial and in the first information report. As regards <NAME>, who had resiled from his earlier statement and bad denied that he was armed with a phaura or that <NAME> wag armed with a lathi, it was said that this omission on his part was due to mere lapse of memory and forgetfulness rather than to a deliberate design to improve- upon the prosecution story. It was argued by Mr. <NAME> that in this case there were no compelling reasons for setting aside the order of acquittal and that due proper weight had not been given by <ORG> to the opinion of the trial judge as regards the credibility of witnesses seen and examined by him. The learned counsel submitted that <ORG> was in error in the view that "when a strong prima facie case is made out against an accused person it is his duty to explain the circumstances appearing in evidence against him and` he cannot take shelter behind' the presumption of innocence and cannot state that the law entitles him to keep his lips sealed." We think this criticism is well founded. After an order of acquittal has been made the presumption of inno- cence is further reinforced by that order, and that being so, the trial court's decision can be reversed not on the ground that the accused had failed to explain the circumstances appearing against him but only for ,very substantial and compelling reasons.

As the courts below expressed divergent opinions on the credibility of the prosecution witnesses, we  had to read the evidence adduced in the case with great care and after doing so, we are on the whole inclined to agree with the view expressed by <ORG>. It is difficult to believe that without there being any truth in the fact that the appellant struck <NAME> with a barchha, <NAME> selected the appellant and ascribed to him that part soon after the occurrence. There are no material discrepancies in the statements made by <NAME> on different occasions and in our view the reasons given by the learned Sessions Judge for rejecting his testimony are not convincing. We agree with <ORG> that there are no sufficient reasons for distrusting his evidence. The number of persons who took part in the quarrel was not more than seven or eight and the blows inflicted were few, and in these circumstances <NAME> could have made no mistake as to the identity of the person who struck <NAME> fatally. This part of -his statement is corroborated by the evidence of <NAME> and <NAME>. No cross-examination was directed, against this part of their statements. It seems that the learned Sessions Judge took too exaggerated a view of the minor discrepancies in these statements and read them with a rather hypercritical mind. <NAME>, whose statement considerably impressed him, was only tendered for cross-examination and never made a full statement about the happenings of the 28th morning. The statement made by him is somewhat cryptic and from this it cannot be definitely concluded that <NAME> was not present on the morning of the 28th at the shop of <NAME>. The learned Sessions Judge was not right in rejecting the whole of the prosecution evidence as unreliable merely on the basis of this cryptic statement. <NAME>, the other so-called independent witness, was tendered for cross-examination but the defence did not ask him a single question about the happenings of the 28th. The argument therefore that the prosecution withheld from court independent witnesses who had witnessed the occurrence is without any substance. The learned Sessions Judge was apparently labouring under some misapprehension when he said that the prosecution had withheld from the court independent witnesses of the occurrence. Apart from <NAME> Mazhbi, no one else appears to have been present when the attack was made on <NAME>, <NAME> and Mst. <NAME> by the party of the accused. All that appears in evidence is that after the fight was over a number of persons arrived on the scene but as they did not witness the attack on <NAME> they could give no evidence on this point and their non-production as witnesses cannot have any consequence on the case. It is significant that the defence also led no evidence to prove that the fight took place in a manner different from the one described by the prosecution witnesses, or that <NAME> was not present on the occasion. In -an appeal under section 417 of the Code of Criminal Procedure <ORG> had full power to review the evidence upon which the order of acquittal was founded and we are satisfied that it did not in any way exercise it wrongly The injuries on the person of <NAME> and under <NAME> were not proved to have been inflicted at the time of the occurrence and were of no consequence. The prosecution was under no obligation to explain how they came about. It was next argued that the trial held by the Sessions Judge was vitiated as the examination of the appellant was not in accordance with the provisions of section 342 , Criminal Procedure Code . There is considerable force in the point that the examination of the appellant by the Sessions Judge was detective. All that the Sessions Judge did was, that he read out the examination of the accused in the committal court to him and then recorded the following questions and answers:-

" Q: Did you make before the Committing Magistrate the statement that has-just now been read out to you ? A: Yes.

Q:Now that you have heard the entire evidence against yourself and the charge has been explained to you, do you wish to say anything else ?

A: I am innocent.

Q: Do you wish to produce any evidence indefence ? A: No."

In the committal court the 'questions put to the accused and his answers were these :-

" Q: Did you pawn the, ear-ring of your wife with <NAME> and squander the proceeds on or about 28th January, 1948 ?

A: No. Q : Did <NAME> interfere when you were demanding the ear- rings from said <NAME> on 28th January, 1948, at Nathuwala and remark that the sweeper, i.e., <NAME>, was speaking truth when he denied the transaction ? A: No. Q: Did you on 28th January , 1948, at Nathuwala along with your father <NAME>, <NAME>, and <NAME>, you <NAME> and <NAME> being armed with spears, attack <NAME>, his 'son <NAME> and <NAME> at their house and in furtherance of the common intention of you all, <NAME> and <NAME> caused simple injuries to <NAME> with spears and you caused fatal injuries with a spear to <NAME> deceased?

A No. Q Why this case against you ? A Due to enmity. Q Anything else to say? A No."

The Sessions Judge did not even take care to ask the accused the routine question whether the statement made by him in the committal court was correct. As if bard pressed for time, be simply asked him whether he had made that statement read out to him in the committal court, and was satisfied with an answer, in the affirmative. The, second question asked, is of a general character and.' does not satisfy the requirements of section 342 , Criminal Procedure Code . We are of the opinion that when the Sessions Judge is required by that section to make the examination of the .accused, his duty is not discharged by merely reading over the questions and answers to the accused put in the committing magistrates court and by asking him whether he has to say anything about them. It is not, sufficient compliance with the section to generally ask the accused that having heard the prosecution evidence, what he has to say about it. The accused must be, questioned separately about each material circumstance which is intended to be used against him. It was pointed out by this Court in <CITATION> (1) that the whole object of the section, is to afford the accused a fair and proper opportunity of explaining circumstances which appear against him and that the questions must be fair and must be couched in a form which an ignorant or illiterate person will be able to appreciate and understand. In this particular case at one stage of the argument we were inclined to order a retrial of the accused in view of the defective examination of the accused by the Sessions Judge but on further thought we have reached the conclusion that <ORG> was right in the view that the defective procedure followed by the Sessions Judge in this respect has not occasioned any prejudice to the accused. The facts of the case are free from any complication and the point in issue was a simple one and it cannot be said that the per- functory examination of the appellant did any damage. The only point appearing in the evidence against the accused was that he gave a barchha blow to <NAME>. The witnesses had stated that fact in his face and had been cross-examined on the point by his counsel. He was fully apprised of the- part ascribed to him in the quarrel. His answer to this specific question in the committal court was that he was innocent and that he was being implicated owing to (1)  S.C.R. 729.

enmity. He stuck to that reply in <ORG> after fully understanding what he was asked. It is well settled that every error or omission not in compliance with the provisions of section 342 does not necessarily vitiate a trial. Errors of this type fall within the category of curable irregularities, and, as held in <NAME> case(1), the question, whether the trial is vitiated, in each case depends upon the degree of the error and upon whether prejudice has been or is likely to have been caused to the accused. We are of the opinion that the disregard of the provisions of section 342 in this case is not so gross as would justify our quashing the conviction and ordering a retrial.

The result is that we uphold the judgment of <ORG> and dismiss the appeal.

Appeal dismissed.

Agent for the appellant: <NAME>.

Agent for the respondent: <NAME>.


PETITIONER: BHAGWAN DASS JAIN Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT11/02/1981 BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) SEN, A.P. (J) CITATION: 1981 AIR 907 1981 SCR (2) 808 1981 SCC (2) 135 1981 SCALE (1)276 CITATOR INFO : R 1989 SC1949 (8) R 1990 SC 85 (23) R 1990 SC1637 (46) E&D 1990 SC1664 (6) RF 1991 SC1676 (31) ACT: Income-tax Act , 1961, S. 23(2)(1) & Constitution of India 1950, Seventh Schedule List I, Entry 82 and List II, Entry 49-Income-Income from house property-Self-occupied property-Whether amounts to income-Legislative practice- Interpretation of entries in Lists. Words and Phrases-'Income'-Meaning of-Constitution of India, 1950, Seventh Schedule List I, Entry 82. HEADNOTE: Section 22 to 27 of the Income-tax Act, 1961 relate to the levy and computation of tax on income from house property. Section 23(2)(i) states that where the property consists of a house in the occupation of the owner for the purposes of his residence, the annual value of such house shall first be determined in the same manner as if the property had been let and further be reduced to one half of the amount so determined or one thousand eight hundred rupees whichever is less. Where the property consists of more than one house in the occupation of the owner for the purposes of his own residence. Section 23(2)(ii) provides that the provisions of clause (i) shall apply only in respect of one of such houses which the assessee may at his option specify in that behalf. The petitioner, an assessee under the Act, contended before <ORG> in a petition under Article 226 of the Constitution, that inclusion of any amount under section 23(2) of the Act in his income was unconstitutional as there could be no income at all in such a case accruing to him in a true sense of that term and that the liability that was sought to be imposed under the Act in respect of his residential house was in its pith and substance a tax on building falling under Entry 49 of List II of the Seventh Schedule to the Constitution and hence <ORG> could not impose the said liability under a law made in exercise of its legislative power under Entry 82 of List I of the Seventh Schedule which authorised it only to levy 'taxes on income other than agricultural income'. <ORG> rejected the plea and dismissed the Writ Petition. In the Special Leave Petition to this Court it was contended on behalf of the petitioner that as he was not deriving any monetary benefit by residing in his own house, no tax could be levied on him, on the ground that he is deriving income from that house, and that the word 'income' only means realisation of monetary benefit and that in the absence of any such realisation, the inclusion of any amount by way of notional income under section 23(2) of the Act in the chargeable income was impermissible as it was outside the scope of Entry 82 of List I of the Seventh Schedule to the Constitution. 809 ^ HELD : 1. The tax levied under the Income-tax Act is on the income (though computed in an artificial way) from house property and not on house property. Entry 49 of List II of the Seventh Schedule to the Constitution is not, therefore, attracted. The levy in question squarely falls under Entry 82 of List I of the Seventh Schedule to the Constitution. [816 C-D] 2. The expression 'income' means 'a thing that comes in'. Income is also defined as the gain derived from land capital or labour or any two or more of them. Even in its ordinary economic sense, the expression 'income' include not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. That which can be converted into income can be reasonably regarded as giving rise to income. [812 B, 816 B] 3.(i) The Government of India Act, 1935 was enacted when the Indian Income-tax Act , 1922 was in force. Section 9 of the Indian Income-tax Act, 1922 provided for levy of income tax on the basis of the bona fide annual value of the property even when it was in the occupation of the assessee for the purposes of his own residence. While enacting Entry 54 of List I of the Seventh Schedule to <ORG> Act, 1935 the British <ORG> must have had in its view the Indian Income-tax Act , 1922 which was probably the only law relating to tax on incomes in force in British India. Similarly <ORG> while enacting Entry 82 of List I of the Seventh Schedule to the Constitution must have understood that the word 'income' used in that Entry would in any event include within its scope all items which came within the definition of income and were subjected to charge in the Indian Income-tax Act , 1922 which was in force at the time the Constitution was adopted. [815 D-F] (ii) The Constitution makers had the Indian Income-tax Act , 1922 in their view is borne out from Article 270(1) of the Constitution which provides for collection of taxes on income by <ORG> and distribution thereof between the Union and the States. Article 366(i) which defines 'agricultural income' as defined for the purposes of the enactments relating to Indian Income-tax and Article 366(29) which defines 'tax on income' as including a tax in the nature of excess profits tax. In the circumstances it would not be wrong to construe the word income in Entry 82 as including all items which were taxable under the contemporaneous law relating to tax on incomes which was in force at the time when the Constitution was enacted. [815 G- 816 A] 4. This Court in <CITATION> 1955 SCR 829, held that the word 'income' in Entry 82 is capable of a wider meaning than what was given to it in the Indian Income-tax Act , 1922 or the English Act of 1918. [814 H] 5. In Australia the annual value of the tax payers' residence owned by himself or used rent free is taken for consideration for purposes of levy of income tax. In England too in the case of a residence of the assessee, computation of income is on the basis of presumed income. [815 A] <NAME> v. The Federal Commissioner of Taxation, 66 C.L.R. 198 at p. 224 and Governors of <ORG> v. <NAME> (7 T.C. 517 at 586 587) <NAME>'s Income tax (second Edn.) Vol. I p. 502 referred to. 810 6. It is well-settled that the entries in the Lists in the Seventh Schedule to the Constitution should not be read in a narrow or restricted sense and each and every subject mentioned in the entries should be read as including within its scope all ancillary and subsidiary matters which can fairly and reasonably be comprehended in it. Words in the Constitution conferring legislative power should receive a liberal construction and should be interpreted in their widest amplitude. [811 H-812 B] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Special Leave Petition No. 8720 of 1979.

From the Judgment and Order dated 27-10-79 of <ORG> in M.P. No. 636/78.

<NAME>, Mrs. <NAME> and Mr. S. <NAME> for the Petitioner.

The Order of the Court was delivered by VENKATARAMIAH, J.-The short question which arises for consideration in this petition for special leave to appeal filed under Article 136 of the Constitution is whether it is open to the Income-tax Officer while computing the liability of an assessee to tax under the Income-tax Act , 1961 (hereinafter referred to as 'the Act') to include in the income of the assessee any amount calculated in accordance with section 23(2) of the Act in respect of a house in the occupation of the assessee for the purposes of his own residence. The petitioner who is an assessee under the Act contended before <ORG> in a petition filed under Article 226 of the Constitution that inclusion of any amount under section 23(2) of the Act in his income was unconstitutional as there could be no income at all in such a case accruing to him in the true sense of that term, the liability that was sought to be imposed under the Act in respect of his residential house was, therefore, in its pith and substance a tax on building falling under Entry 49 of List II of the Seventh Schedule to the Constitution and hence <ORG> could not impose the said liability under a law made in exercise of its legislative power under Entry 82 of List I of the Seventh Schedule to the Constitution which authorised it only to levy taxes on income other than agricultural income. <ORG> rejected the plea of the petitioner and dismissed the writ petition. The petitioner has now applied to this Court for special leave to appeal against the decision of <ORG>.

When the petition came up for hearing on February 5, 1981 before us, we did not find that there was any ground to grant special leave to appeal but since the case was argued with some persistence, we decided to give reasons for rejecting the prayer of the petitioner which we proceed to give hereunder :

<NAME>

Section 4 of the Act lays down that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of the Act in respect of the total income of the previous year or previous years, as the case may be, of every person. Section 14 of the Act mentions 'income from house property' as one of the heads of income liable to charge. Sections 22 to 27 of the Act relate specifically to the levy and computation of tax on income from house property. Section 22 provides that the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "income from house property". Section 23(2)(i) of the Act states that where the property consists of a house in the occupation of the owner for the purposes of his own residence, the annual value of such house shall first be determined in the same manner as if the property had been let and further be reduced by one-half of the amount so determined or one thousand and eight hundred rupees, whichever is less. Section 23(2) (ii) of the Act provides that where the property consists of more than one house in the occupation of the owner for the purposes of his own residence, the provisions of clause (i) of section 23(2) shall apply only in respect of one of such houses, which the assessee may, at his option, specify in that behalf. There are some other ancillary and incidental provisions in the Act dealing with the computation of the annual value of such property with which we are not concerned in the present petition.

The argument urged on behalf of the petitioner is that as the petitioner is not deriving any monetary benefit by residing in his own house, no tax can be levied on him on the ground that he is deriving income from that house. It is contended that the word 'income' only means realisation of monetary benefit and that in the absence of any such realisation by the assessee, the inclusion of any amount by way of notional income under section 23(2) of the Act in the chargeable income was impermissible, as it was outside the scope of Entry 82 of List I of the Seventh Schedule to the Constitution.

Entry 82 of List I of the Seventh Schedule to the Constitution empowers <ORG> to levy 'taxes on income other than agricultural income'. Now it is well-settled that the entries in the list in the Seventh Schedule to the Constitution should not be read in a narrow or restricted sense and each and every subject mentioned in the entries should be read as including within its scope all ancillary and subsidiary matters which can fairly and reasonably be comprehended in it. Words in the Constitution conferring legislative power should receive a liberal construction and should be interpreted in their widest amplitude.

The expression 'income' according to <ORG> means 'a thing that comes in'. Income may also be defined as the gain derived from land, capital or labour or any two or more of them.

In <NAME> v. <NAME> of Taxation <NAME>, <NAME> of <ORG> observed :

"The subject of the income tax has not been regarded as income in the restricted sense which contrasts gains of the nature of income with capital gains, or actual receipts with increases of assets or wealth. The subject has rather been regarded as the substantial gains of persons or enterprises considered over intervals of time and ascertained or estimated by standards appearing sufficiently just, but nevertheless practical and sometimes concerned with avoidance or evasion more than with accuracy or precision of estimation. To include the annual value of the taxpayer's residence owned by himself or used rent free and to fix it at five. percent of the capital value has not been considered to introduce a new subject [<NAME>'s Case (1917) 23 C.L.R. 119]. To treat part of the undistributed profits earned during the current year as part of the assessable income of the shareholder imports no new subject [<NAME>'s case (1920) 29 C.L.R. 39 cf. <ORG> v. Federal Commissioner of Taxation (1928) 34 A.L.R. 276], nor does it to substitute, in the case of a foreign-

controlled business, for taxable income ordinarily calculated a percentage of gross receipts fixed by the discretionary judgment of the Commissioner [British Imperial Oil Cases (1925) 35 C.L.R. 422; (1926) 38 C.L.R. 153]. (emphasis supplied) In Simon's Income Tax (Second Edition) Volume I, page 502 dealing with the question of computation of income under Schedule 'A' to the English Income-tax Act, which related to tax on the income attributable to property, it is stated as follows:-

<NAME>

"It is now clear however, that (1) income tax is but one tax imposed by the Income Tax Act s;

(2) income tax is a tax upon income; and (3) Sched. A is but one of five Schedules which provide varying methods of estimating the measure of that income from different sources for the purposes of charge to tax.

The theory behind Sched. A is that the possession of an interest in property gives rise to income, a theory which is not always borne out in fact. That there may be no income in fact is disregarded when the assessment is made. The actual or hypothetical income has to be measured by some standard for the purposes of taxation and the standard prescribed is the annual value. This principle has been subject to adverse comment, but once the theory is appreciated, the method may be understood and any confusion of thought, created by the words of the charging section, dispelled. The use to which land is put does not (apart from the excepted concerns mentioned in the proviso to para. 1 of Sched. A above) prevent it from being assessed under Sched. A; but if a trade which is not one of those excepted concerns is carried on property which is owned by the trader and is assessed under Sched. A, an allowance for the annual value is made in computing the profits of the trade". (emphasis supplied) In the Governors of <ORG>, Dublin v.

Coman which was a case arising from Ireland, Lord <NAME> observed thus :

"It would, I think, be well to bear in mind that, to use Lord <NAME>'s words in his celebrated judgment in <ORG> v. <NAME> (4 T.C. 265) (1901 A.C. 35), "Income Tax.... "is a tax on income". When the amount of the income to be taxed under the Act of 1842 and the Acts amending it comes to be measured, different standards are selected, and the words "profits or gains" are used in reference to all the Schedules in the Act of 1842 to describe the income, the subject of charge. The standard selected as a measure of the amount of the income to be taxed under Schedule A in respect of lands, tenements, hereditaments and heritages capable of occupation is the annual value. If the owner of such pro-

<NAME>

perties as these should be himself in occupation of them, it by no means follows that he will, in fact, derive from them an income equal to this annual value; but, as he has the use and enjoyment of the properties, it is, for the purposes of the Statute, presumed that he does derive from them an income equal in amount to this annual value, and the tax is accordingly, under Schedule A, assessed upon this presumed income". (emphasis supplied).

<CITATION> -

tax, Bombay City(1) while justifying the levy of income tax on capital gains under section 12-B of the Indian Income-tax Act, 1922 enacted by <ORG> in exercise of the power conferred under Entry No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935 corresponding to Entry 82 of List I of the Seventh Schedule to the Constitution, <NAME>, J. (as he then was) having observed at page 837 thus :

"What, then, is the ordinary, natural and grammatical meaning of the word "income"? According to the dictionary it means "a thing that comes in". (See Oxford Dictionary, Vol. V, page 162; <NAME>, Vol. II, pages 14-16). In the United States of America and in Australia both of which also are English speaking countries the word "income" is understood in a wide sense so as to include a capital gain. Reference may be made to <NAME> v. <NAME> (1920) 252 U.S. 189; 64 L.Ed. 521, <ORG> v. <NAME> (1925) 255 U.S. 509; 65 L.Ed. 751, and United States v. Stewart (1940) 311 U.S. 60; 85 L. Ed. 40, and Resch. v. Federal Commissioner of Taxation (1942) 66 C.L.R. 198. In each of these cases very wide meaning was ascribed to the word "income" as its natural meaning" proceeded to hold at page 838 :

"As already observed, the word should be given its widest connotation in view of the fact that it occurs in a legislative head conferring legislative power".

In the above case this Court held that the word "income" in Entry No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935 should be given a meaning wider than the connotation given to it in the English Income-tax Act, 1918 under which income attributable to property was chargeable under Schedule 'A' thereof.

Now coming to the specific question of the charge arising under section 23(2) of the Act it is already seen that in Australia the annual value of the tax payer's residence owned by himself or used rent free is taken for consideration for purposes of levy of income tax. In England too in the case of a residence of the assessee, computation of income is made on the basis of presumed income. <CITATION> which was a case arising under the Indian Income-tax Act , 1922, <ORG> held that under section 9 of that Act the tax was payable by an assessee in respect of the bona fide annual value of the property irrespective of the question whether he received that value or not. <ORG> has also taken the same view in <CITATION> .

There is one other circumstance which persuades us to take the view that computation of income for purposes of levy of income tax in accordance with section 23(2) of the Act is justifiable under Entry 82 of List I of the Seventh Schedule to the Constitution. It is to be borne in mind that the Government of India Act, 1935 was enacted when the Indian Income-tax Act , 1922 was in force. Section 9 of the Indian Income-tax Act, 1922 provided for levy of income tax on the basis of the bona fide annual value of the property even when it was in the occupation of the assessee for the purposes of his own residence. While enacting entry 54 of list I of the Seventh Schedule to the Government of India Act, 1935, the British <ORG> must have had in its view the Indian Income-tax Act , 1922 which was probably the only law relating to tax on incomes in force in British India then. Similarly <ORG> while enacting Entry 82 of List I of the Seventh Schedule to the Constitution must have understood that the word 'income' used in that Entry would in any event include within its scope all items which came within the definition of income and were subjected to charge in the Indian Income-tax Act , 1922 which was in force at the time the Constitution was adopted. That the Constitution makers had the Indian Income- tax Act, 1922 in their view is borne out from Article 270(1) of the Constitution which provides for collection of taxes on income by the Government of India and distribution thereof between the Union and the States, Article 366(1) which defines 'agricultural income' as agricultural income as defined for the purposes of the enactments relating to Indian Income-tax and Article 366(29) which defines 'tax on income' as including a tax in the nature of an excess profits tax. In the circumstances it would not be wrong to construe the word 'income' in Entry 82 as including all items which were taxable under the contemporaneous law relating to tax on incomes which was in force at the time when the Constitution was enacted when as observed by this Court in the case of <NAME> (supra) the word 'income' in Entry 82 is capable of a wider meaning than what was given to it in the Indian Income-tax Act , 1922 or the English Act of 1918.

Even in its ordinary economic sense, the expression 'income' includes not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. That which can be converted into income can be reasonably regarded as giving rise to income. The tax levied under the Act is on the income (though computed in an artificial way) from house property in the above sense and not on house property. Entry 49 of List II of the Seventh Schedule to the Constitution is not, therefore, attracted. The levy in question squarely falls under Entry 82 of List I of the Seventh Schedule to the Constitution.

Hence we do not find any merit in the contentions urged on behalf of the petitioner.

For the foregoing reasons, the leave prayed for is refused and the petition is dismissed.

N.V.K. Petition dismissed.


JUDGMENT <NAME>, J.

1. This appeal is directed against a judgment in an application under Section 34 of the Arbitration Act (Application No. 3299 of 1985) in CS. No. 379 of 1985 to stay the proceedings in C.S. No. 379 of 1985, a suit for winding up a partnership business and for accounts as well as division of assets etc.

2. There as no dispute before us that the partnership was created under an agreement dated 13.4.1973 and was one at will of which the first defendant/ appellant was the managing partner. The plaintiff/ respondent issued a notice on 22.5.1984 demanding rendition of account. The first defendant/ appellant sent a reply to the said notice on 7.6.1984, after which, however, the plaintiff/respondent conveyed by notice dated 13.5.1985 his intention to dissolve the partnership firm and filed the suit for the above reliefs. The defendants, on appearance, filed a petition under Section 34 of the Arbitration Act stating that under Clause 17 of the partnership agreement dated 13.4.1973 any dispute between the parties has to be resolved only with the help of Arbitrators.

3. Clause 17 has been extracted in full in the impugned judgment which reads as follows:

When we decide to dissolve the partnership we shall ascertain the profits or losses upto the date of the dissolution in the usual manner and the same be divided according to our profit sharing ratios as mentioned above. The assets, liabilities, stocks, furniture, machinery, rights and obligations, permits, quotas etc., be shared between us in any manner that may be agreed upon between us either by ourselves or with the help of arbitrators, if need be.

It is conceded before us and it appears that it was so conceded before the learned single Judge that the above clause stipulated an arbitration and the winding up accounts etc., for which the instant suit has been filed is covered by the arbitration agreement. Learned single Judge has clearly recorded a finding in this behalf that the above is an arbitration clause in the agreement, which squarely applies to the suit causes.

4. <ORG> has, however, accepted the contention of the plaintiff/respondent that the application under Section 34 of the Act has been filed beyond the time fixed under the Act, and is, therefore, not maintainable. This finding has been questioned before us on facts as well as law, for, <ORG> has said that the limitation as to filing of the application under Section 34 of the Act is the time allowed for filing written statement and that under the Rules of this Court in its original jurisdiction the written statement has to be filed within two weeks of the service of summons in the suit. In the instant case, the application under Section 34 of the Act has been filed more than two weeks after the service of summons. It is said, however, that after appearance the defendants applied for time for filing the written statement and before filing the written statement they filed the application for stay under Section 34 of the Act. Two citations, (1) a judgment of <ORG> in the case of <CITATION> A.I.R. 1974 Cat. 352 and (2) a judgment of this Court in the case of <CITATION> , 95 L.W. 187 are cited in the judgment for the proposition that a person who had merely entered appearance and asked for time for filing a written statement would be deemed to have taken a step in the proceeding and, therefore, no application for staying the suit could be filed and that it would not be a correct application of Section 34 of the Act if an application is entertained after the expiry of the time for filing the written statement because, on principle there is no difference between a formal application for extension of time to file the written statement and allowing the time for filing the written statement to expire and then make an application for stay under Section 34 of the Arbitration Act, 1940. Section 34 of the Act has made a specific provision that ''at any time before filing a written statement or taking any other steps in the proceeding" any party to an arbitration agreement or any person claiming under him in respect of any matter agreed to be referred to arbitration, may, "apply to the judicial authority before which the proceedings are pending to stay the proceedings". The condition for making an application under Section 34 to stay the legal proceedings and to ask the parties to seek arbitration is that it should be filed before taking any other step in the proceedings, by the party seeking to enforce arbitration. The two judgments that are the basis for the view of the learned Single Judge appeared to state what is stated by <ORG> in the case of <CITATION> . in that case, one <NAME> filed a suit against the State of U.P. and <ORG>, Bijnor for recovery of damages alleging breach of contract. The summons in the suit issued to the State of U.P. was served on the District Government Counsel. On September 2,1966, the District Government Counsel filed an appearance slip in the Court and also put in a formal application praying for one month's time for the purpose of filing written statement. On October 1,1966 the District Government Counsel filed an application under Section 34 of the Act pleading that there was an arbitration clause in the contract between parties to the suit and the State of U.P. being willing to refer the matter to arbitration the suit should be stayed. <ORG> granted the motion for the stay of suit. On appeal <ORG> held that the action of the District Government Counsel in applying for time to file the written statement amounted to taking a step in the proceeding within the meaning of Section 34 of the Act, and set aside the order of <ORG> and rejected the request for stay of proceedings. State of U.P. approached <ORG> against the order of <ORG>. <ORG> observed as under:

To enable a defendant to obtain an order staying the suit, apart from other conditions mentioned in Section 34 of the Arbitration Act, he is required to present his application praying for stay before filing his written statement or taking any other step in the suit proceedings. In the present case the written statement was indisputably not filed before the application for stay was presented. The question is whether any other step was taken in the proceeding as contemplated by Section 34 , and it is this point with which we are directly concerned in the present case. Taking other, steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to the jurisdiction of the <ORG> for the purpose of adjudication of the merits of the controversy in the suit.

However, a Bench of three Judges of <ORG> has taken a view that Section 34 of the Act prescribes a mode and method of enforcing the arbitration agreement when a party to the agreement has filed a suit for breach of the agreement and the other party to the agreement is dragged to the <ORG>, by staying the suit at the instance of the other party so dragged to the <ORG> and the first party consequently would be forced to honour the arbitration agreement. But before the other party to the arbitration agreement is entitled to enforce the arbitration agreement by stay of the suit it must disclose its unequivocal intention to abide by the agreement and, therefore, Section 34 obliges such a party to ask for stay of the proceedings before such a party takes any steps which may unequivocally indicate the intention to waive the benefit of the arbitration agreement. Abandonment of a right to seek resolution of dispute as provided in the arbitration agreement must be clearly manifested by the step taken by such party. Once such unequivocal intention is declared or abandonment of the right to claim the benefit of the agreement becomes manifest from the conduct, such party would then not be entitled to enforce the arbitration agreement because there is thus a breach of the agreement by both the parties disentitling both to claim any benefit of the arbitration agreement. Section 34 provides that a party dragged to the <ORG> as defendant by another party to the arbitration agreement must ask for stay of the proceedings before filing the written statement or before taking any other step in the proceedings. That party must simultaneously show its readiness and willingness to do all things necessary to the proper conduct of the arbitration. The legislature by making it mandatory on the party seeking benefit of the arbitration agreement to apply for stay of the proceedings before filing the written statement or before taking any other steps in the proceedings unmistakably pointed out that filing of the written statement discloses such conduct on the part of the party as would unquestionably show that the party has abandoned its rights under the arbitration agreement and has disclosed an unequivocal intention to accept the forum of the <ORG> for resolution of the dispute by waiving its right to get the dispute resolved by a forum contemplated by the arbitration agreement. When the party files written statement to the suit it discloses its defence, enters into a contest and invites the <ORG> to adjudicate upon the dispute. Once the <ORG> is invited to adjudicate upon the dispute there is no question of then enforcing an arbitration agreement by forcing the parties to resort to the forum of their choice as set out in the arbitration agreement. This flows from the well settled principle that the <ORG> would normally hold the parties to the bargain (see <CITATION> . After saying as above, on the underlying intendment of Section 34 of the Act, <ORG> in this judgment has proceeded to examine what other steps did the legislature contemplate as being taken in the proceedings which would disentitle the party to the suit from obtaining stay of the proceedings which would have the effect of enforcing the arbitration agreement and has said:

General words 'taking any other steps in the proceedings' just follow the specific expression 'filing a written statement' and both are used for achieving the same purpose. Therefore, the latter general expression must be construed ejusdem generis with the specific expression just preceding to bring out the ambit of the latter. Expression 'written statement' is a term of specific connotation ordinarily signifying a reply to the plaint filed by the plaintiff. Therefore, the expression 'written statement' in Section 34 signifies a specific thing, namely, filing an answer on merits to the plaint filed by the plaintiff. This specific word is followed by general words 'taking any other steps in the proceedings'. The principle of ejusdem generis must help in finding out the import of the general words because it is a well established rule in the construction or statutes that general terms following particular ones apply to such persons or things as are ejusdem generis with these comprehended in the language of the legislature.

The above case sufficiently indicates the principle. But, <ORG> has made it more explicit by saying:

That some other step must indisputably be such step as would manifestly display an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration. Each and every step taken in the proceedings cannot come in the way of the party seeking to enforce the arbitration agreement by obtaining stay of proceedings but the step taken by the party must be such step as would clearly and unmistakably indicate an intention on the part of such party to give up the benefit of arbitration agreement and to acquiesce in the proceedings "commenced against the party and to get the dispute resolved by the <ORG>. A step taken in the suit which would disentitle the party from obtaining stay of proceeding must be such step as would display an unequivocal intention to proceed with the suit and to abandon the benefit of the arbitration agreement or the right to get the dispute resolved by arbitration".

Giving the expression 'taking any other steps in the proceedings' such wide connotation as making an application for any purpose in the suit such as vacating stay, discharge of the receiver or even modifying the interim orders would work hardship and would be inequitous to the party who is willing to abide by the arbitration agreement and yet be forced to suffer the inequity of ex pane orders. Therefore, the expression 'taking any other steps in the proceedings' must be given a narrow meaning in that the step must be taken in the main proceeding of the suit and it must be such step as would "clearly and unambiguously manifest the intention to waive the benefit of the arbitration agreement and to acquiesce in the proceedings.

Commenting on the precedents <ORG> in this judgment has quoted the above observation in <CITATION> and has said:

The view herein taken not only does not run counter to the view we have taken but in fact clearly supports the view because the pertinent observation is that taking step in the proceeding which would disentitle a party to obtain a stay of the suit must be doing something in aid of the progress of the suit or submitting to the jurisdiction of the <ORG> for the purpose of adjudication of the merits of the controversy in the suit. In other words, the step must necessarily manifest the intention of the party to abandon or waive its right to go to arbitration or acquiesce in the dispute being decided by <ORG>.

<ORG> has in this judgment then said:

Having thus critically examined both on principle and precedent the meaning to be given to the expression 'taking steps in the proceedings', we are clearly of the view that unless the step alleged to have been taken by the party seeking to enforce arbitration agreement is such as would display an unequivocal intention to proceed with the suit and acquiesce in the method of resolution of dispute adopted by the other party, namely, filing of the suit and thereby indicate that it has abandoned its right under the arbitration agreement to get the dispute resolved by arbitration, any other step would not disentitle the party from seeking relief under Section 34 . It may be clearly emphasised that contesting the application for interim injunction or for appointment of a receiver or for interim relief by itself without anything more would not constitute such step as would disentitle the party to an order under Section 34 of the Act.

Thus it is clear from what has been stated as the law on the subject by <ORG> that there is no authority as such for making an application under Section 34 of the Act only until the time prescribed for the filing of the written statement. Filing of the written statement alone would show the unequivocal intention to proceed with the suit. In Section 34 it is so stated that application for stay should be filed before the filing of the written statement and not thereafter. Taking any other steps in the proceedings' has been interpreted by <ORG> also to mean that it should be such as would display an unequivocal intention to proceed with the suit and to give up the right to have the matter disposed of by arbitration and thereby to indicate that it has abandoned its right under the arbitration agreement to get the dispute resolved by the arbitration. Any other step would not disentitle the party from seeking relief under Section 34 . It will be, therefore, necessary to examine any such case not in the light of what has been said in the judgment of <ORG> in the case of <CITATION> or the judgment of this Court in the case of <CITATION> , 95 L.W. 187. There is nothing in the language of Section 34 as has been clarified by <ORG> in the case of <CITATION> A.I.R. 1982 S.C. 1302, that a definite period is contemplated for filing the petition under Section 34 of the Act. There is also no intention to keep or fix the time limited to the statutory declarations of the period of filing the written statement but actual filing of the written statement or taking any other step which may give the basis to hold that the defendant has intended to give up his right under the agreement. We have also difficulty in accepting that the period for the filing of the written statement is fixed by law. Order 5, Rule 1 of the Original Side Rules of this Court says:

If the defendant intends to defend the suit, he shall, within the period limited by the summons served on him, file in Court a written statement setting out the grounds of his defence in the form prescribed by the Code, and also stating his address for service: Provided that a defendant may "file his written statement within a further period of five days if the plaintiff or his advocate consents and signifies such consent by endorsement on the written statement The costs of obtaining and granting consent shall be costs in the cause. The defendant shall, within the said period, give notice to the plaintiff that he has filed a written statement, and of his address for service.

The limitation aforementioned for the filing of the written statement is expanded subject to the leave of the <ORG> to be obtained against summons under Rule 5 of Order 5 of the Original Side Rules of this <ORG> which says:

After the expiration of the time limited by Rule 1 or Rule 3 of this order, a written statement shall not be filed without leave of the <ORG> to be obtained on Master's summons. The application shall be accompanied by an affidavit "stating the grounds of defence and the application may be granted on such terms as the Master thinks fit.

In the counter that plaintiff/respondent filed in the suit to show what steps taken by the defendants/appellants according to him were indications of unequivocal intention to proceed with the suit, he has stated as follows:

They (the applicants) have taken steps to file counter on a number of occasions in the Application No. 2633. of 1985 for appointing a receiver and this amounts in law to taking steps. The steps taken by the petitioner indisputably show that there was intention in unequivocal terms, to proceed with the suit and this would give us the right to have the matter disposed of by arbitration. The petitioners/applicants wanted a set of pleadings and documents from the respondent/plaintiff and have taken the documents for the purpose of preparing written statement and this amounts to taking of proper steps.

and further, The applicants/defendants 1 and 2 cannot be heard to contend that they are ready and willing to go ahead with arbitration in view of their misconduct/latches proved duly. For filing counter in the application for appointment of receiver, they took time from <ORG> on three occasions, ultimately filed it only after the <ORG> positively told that the <ORG> would not grant any further extension of time. Moreover, for filing a written statement, as contemplated under the Original Side Rules under Order 4, Rule 5, having expired, the application for stay of the proceedings under Section 34 is besides being barred by time highly belated and the request for stay cannot be countenanced. It is also submitted that the defendants entered appearance into petition was listed for orders, and the vakalath was filed in this suit and therefore he should have filed the written statement within two weeks thereof and the applicant's failure to file an "application under Section 34 seeking stay within the time allowed by law for filing the written statement precludes him from getting the stay.

We have thus seen that there is no rigid time limit and a discretion is given to <ORG> to suitably cause to extend the time for filing the written statement. We have also seen that as held by the Supreme <ORG>, it should not be easily inferred that any other step taken by the party is a display of its unequivocal intention to proceed with the suit. It should be only the steps taken to signify that the party has chosen to enter into a contest and invited the <ORG> to adjudicate upon the dispute on merits that the <ORG> should refuse to stay the proceedings in the <ORG>. Otherwise the <ORG> must ask the parties to abide by the arbitration agreement.

5. Our task in the instant appeal, however, has been made easier by the parties and their respective counsel, who have filed their respective affidavits agreeing to the arbitration as well as to the appointment of the Arbitrators. The plaintiff/ respondent and the second defendant/respondent, who are brothers, have appointed Mr. <NAME>, son of <NAME>, retired District Judge, now residing at No. 14, "Anu Apartments", 35, Circular Road, Kodambakkam, Madras as their Arbitrator. The defendants 1 and 3, who are appellants 1 and 2, who are father and son, have appointed Mr. <NAME> son of <NAME> of Kamala Street, Chokkikulam, Madurai, as their Arbitrator. The parties have agreed that the Arbitrators appointed by them shall together conduct the proceedings and give award on all matters in dispute between them for which purpose after inspection of records etc., they may file their respective claims before the Arbitrators. The two Arbitrators, to avoid any difference of opinion, have in terms of the agreement between the parties, appointed Mr. <NAME> son of <NAME> residing at No. 1, Nagarathinam Colony, Mylapore, Madras-4 as the <ORG>. The parties have agreed that in the event of any difference of opinion between the Arbitrators on their giving separate awards, the unresolved dispute shall be placed before the <ORG> nominated by the Arbitrators appointed by them and the <ORG>'s award shall be final. The Arbitrators and the <ORG> have filed their affidavits signifying their consent.

6. Pursuant to a previous order by us the appellants have filed several ledgers etc., in all 88 original account books relating to the partnership firm, <ORG>, in Court, which are in the custody of the Additional Registrar, <ORG>, <ORG>, Madras. Any party seeking inspection may do so in the presence of the Additional Registrar, <ORG> or any officer appointed by him within one week after which, all the records must be forwarded to the Arbitrators by the Additional Registrar, <ORG>, at such place and address as they furnish to the Court. The Arbitrators are directed to proceed expeditiously and dispose of the proceedings within a period of three months. In case any dispute is referred to the <ORG>, the <ORG> shall dispose of the same within two months of the reference by the Arbitrators. In view of the agreement as aforementioned, we see no objection to the appointment of the Arbitrators and the <ORG> and to issue directions as above. We accordingly direct for the appointment of Mr. <NAME>, son of <NAME>, retired District Judge residing at No. 14, 'Anu Apartments', 35, Circular Road, Kodambakkam, Madras and Mr. <NAME>, son of <NAME> residing at Kamala Street, Chokkikulam, Madurai,. as Arbitrators to dispose of the disputes within three months. The parties must file their respective claims before the Arbitrators within two weeks from today. In case the Arbitrators are not in agreement on any issue and they deliver separate awards, they are directed to make a reference of the same to the <ORG> within the said period of three months and on receipt of the references, the <ORG> is directed to give his award within two months. The Additional Registrar, <ORG>, is directed to remit the records to the Arbitrators after one week during which period, the parties must complete their inspection. The costs of the suit and the fees of the Arbitrators and the <ORG> etc., are left for settlement by them. Orders if any in this behalf shall be passed, after the award.


PETITIONER: <NAME> Vs. RESPONDENT: UNION OF INDIA AND OTHERS DATE OF JUDGMENT05/11/1973 BENCH: SARKARIA, <NAME> BENCH: SARKARIA, <NAME> KHANNA, <NAME>, V.R. CITATION: 1974 AIR 130 1974 SCR (2) 178 1974 SCC (3) 554 CITATOR INFO : E&R 1974 SC1084 (6) RF 1986 SC2045 (67) R 1990 SC1080 (13,14,15,17) ACT: Payment of Wages Act , 1936-S. 15(2)-Limitation when commences- The date on which deduction from wages was made or the date on which, the payment of wages was due to be made. Running allowance whether part of wages. HEADNOTE: The appellant, a Railway Guard, was convicted and sentenced for an offence under s. 509 , I.P.C . <ORG> uphold his conviction. On appeal <ORG> set aside.the conviction and acquitted him. In the meanwhile the appel- lant, was dismissed from service with effect from 31st March, 1956. The appellant impugned the order of dismissal in <ORG> which held that his dismissal was wholly void and ineffective. Thereupon the appellant was reinstated and was informed that the matter of his back wages for the period between the date of his dismissal and the date of reinstatement would be decided later. By another letter he was informed that this period was treated as leave due. He was paid Rs. 81.51 as his wages for the entire period ending on March 7, 1959. The appellant made an application under s. 15(2) of the Payment of Wages Act, 1936 claiming Rs. 9,016.60 plus ten times the said amount as compensation. In addition, he first claimed 'traveling allowance' but later sought to amend the application by replacing 'traveling allowance by 'running allowance This was rejected by <ORG>. The <ORG> allowed a part of the claim but the appellant preferred an appeal to the Appellate <ORG> under the Act. The Appellate <ORG> held that the claim was barred by time as limitation had commenced from the date of dismissal from service and not from the date of reinstatement Or the date on which it was decided to treat the period of dismissal as leave due. On the question (i) whether the. claim application filed by the appellant tinder s- 15(2) was time-barred and (ii) whether he was entitled to running allowance. Allowing the appeal, HELD : (i) the first proviso to sub-ss. (2) of s. 15 indicates two alternative starting points for limitation, namely, (i) the date on which deduction from wages was made or (ii) the date on which the payment of the wages was due to be made. [183-A] From a reading of s. 15 it is clear that the legislature has deliberately used, first. in sub-s. (2) and then in sub-s. (3). the expressions "deduction of wages" c and "delay in payment of wages' as two distinct concepts. Terminus a quo (i) in the proviso expressly relates to the deduction of wages, while (ii) is referable to the delayed wages. If both these terminii were always relatable to the same Point of time, then there would be nor point in mentioning terminus a quo (i) and the legislature could have simply said that limitation for a claim under s. 15(2) would always start from the date on which the wages "fall due" or "accrue" as has been done under Article 102 of the Limitation Act which applies only to suits for recovery of wages. The very fact that two distinct starting points of limitation referable to two distinct concepts have been stated in the proviso. shows that the legislature had visualised that the date of deduction of wages and the due date of delayed wages. may not always coincide. Conjunction "or" which in the context means "either" and the phrase "as the 179 case may be" at the end of the proviso are clinching indicate of this interpretation. They are not mere surpluses and must be given their full effect. The legislature is not supposed to indulge in tautology; and when it uses analogous words or phrases in the alternative, each may be presumed to convey a separate and distinct meaning. the choice of either of which may involve the rejection of the other. To hold that the two expressions "wages deducted" and "wages delayed" though used in the alternative. carry the same meaning, and in the proviso are always referable to one and the same point of time, would be contrary to this primary canon of interpretation. (183B-E] Ordinarily where an employee was dismissed on one date and reinstated on another, the deduction of wages may synchronize with the act of reinstatement. In the instant case the deduction did not take place on the date of reinstatement because the order of reinstatement expressly stated that decision with regard to his wages for the period would be taken later. Therefore the deduction would coincide with the decision deducting the wages. Such a decision was taken on February, 18, 1959 and limitation under the first part of the proviso commenced from that date. [183G- <CITATION>  3 S.C.R. 642; Divisional Superintendent. <ORG> v. <NAME> Dutt Sharma (1967] 14, F.L.R. 204; held inapplicable. (ii) Running allowance was counted towards average pay in those cases only where the leave did not exceed one month. Travelling allowance or running allowance was eligible if the officer had travelled or run, not otherwise. it could not be said that running allowance was due to the appellant as part of his wages for the entire period of his inactive service. [185H; 186A] Per <NAME> (Concurring) In this country the <ORG> is the largest litigant today and the huge expenditure involved makes a big draft on the public exchequer, In the context of expanding dimensions of <ORG> activity and responsibility, it is not unfair to expect finer sense and sensibility in its litigation policy, the absence of which in the present case had led the <ORG> callously and cantankerously to resist an action by its own employee. a small man, by urging a mere technical plea which had been pursued right up to the highest court and had been negatived, It was not right for a welfare <ORG> like ours to be Janus-faced and while formulating the humanist project of legal aid to the poor contest the claims of poor employees under it pleading limitation and the like, [186-E] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1898 of 1967. Appeal by Special Leave from the Judgment and Order dated the 4th November, 1965 of <ORG> in Civil Miscellaneous Petition No. 2491 of 1965. <NAME> and <NAME>, for the appellant. <NAME> and <NAME>, for respondents Nos. 1 & 2. The Judgment of the Court were delivered by- <NAME> appeal by special leave is directed against the order dated November 4, 1965, of <ORG> at Allahabad dismissing the appellant's writ petition under Article 226 and 227 of the Constitution in limine.

The appellant was a Guard 'C' Grade in <ORG>. He was confirmed in that post in 1952. On April 3, 1955, an incident took place at Railway Station, Kalka, as a result of which, he was prosecuted for an offence under s. 509 , Penal Code . The Additional District Magistrate, Ambala convicted and sentenced him on December 29, 1955 to three months simple imprisonment. His appeal was dismissed by <ORG>. In Revision, <ORG>, on March 5, 1956, maintained his conviction but reduced the sentence.

On April 2, 1956, the appellant received a communication from the Divisional Personnel Officer, <ORG> that he had been dismissed by the Divisional Superintendent from service w.e.f. March 31, 1956.

In Appeal by special leave, this Court, set aside the conviction ,of the appellant and acquitted him by its judgment dated March 7, 1957. Thereafter, the appellant filed a writ petition in <ORG> under Article 226 of the Constitution impugning the order <ORG> by its judgment, dated of his dismissal. September 2, 1958, issued the, writ directing the respondents to treat the dismissal of the appellant wholly void and ineffective. Pursuant to that direction, on December 26, 1958 the appellant received a letter from the Divisional Personnel Officer that he had been reinstated to the post of Guard 'C' Grade and that the matter of his back wages for the period between the date of his. dismissal and the date of reinstatement would be decided later on. By another letter of February 13, 1959, the same officer informed the appellant that the period from the date, of his dismissal to the date of his reinstatement would be treated as leave- due. The appellant, on March 11, 1959, was paid Rs. 81.51 as his entire wages for the period ending March 7, 1959.

On August 13, 1959, the appellant made an application under S. 15(2) of the Payment of Wages Act (Act 4 of 1936) (here- inafter referred to a$ the Act) before the prescribed authority claim-in-, a sum of Rs. 9015.60 plus 10 times of, the said amount as compensation from the respondents. In addition, Traveling Allowance was claimed. Later, an attempt was made to amend the application and replace 'Traveling Allowance' by 'Running Allowance'. The <ORG> did not permit the appellant to do so as- he had failed to amend in time despite the order of the Court. The respondents resisted the appellant's claim on various grounds including that of limitation. By an order dated August 7, 1963, the <ORG> directed respondent No. 1 (Union of India), in its capacity as employer, to refund the sum of Rs. 4863.20, (plus Rs. 100/- as costs) to the appellant holding that the same had been illegally deducted from his wages. The <ORG> disallowed the remaining claim including that of the Running Allowance. Against the order of the <ORG>, two appeals were carried to the Appellate <ORG> (Additional District Judge)-One by the appellant and the other by the respondents. The Appellate <ORG>- held that the appellant's claim was barred by time as limitation had commenced from the date of dismissal from service and not from the date of reinstatement or the date on which it was decided to treat the period of dismissal as leave due. It upheld the dismissal of the appellant's claim to the Running Allowance, inter alia for the reason that he had, despite the order of the <ORG>, failed to amend the petition within the period indicated in 0.6, R.18 of the Code of Civil Procedure. The Appellate <ORG> further found that <ORG> was competent to treat the period of appellant's inactive service from April 1, 1956 to February 17, 1959, as leave due and to deduct his wages for that period in accordance with rule 2044 of the <ORG> Establishment Code; and in view of s. 7 (2) (h) of the Act, no refund of the deducted wages could be allowed. It further held that in the case of <ORG>, the Divisional Superintendent named as Pay Master was res- ponsible for the payment of wages of the <ORG> employees, and consequently, the direction of the <ORG> requiring <ORG> to make payment to the claimant was illegal. In the result, the Appellate <ORG> allowed the respondent's appeal and dismissed the appellant's claim. The appellant's writ petition impugning this order of the Appellate <ORG> was, as already stated, dismissed by <ORG>. Hence this appeal.

The first question that falls to be considered is, whether the claim application filed by the appellant under s. 15(2) of the Act was time barred?

Mr. <NAME>, learned Counsel for the appellant contends that the case falls under the first part of the proviso (1) to s. 15(2) which relates to deduction of wages and limitation would start from March 11, 1959 when the wages for the period of the appellant's inactive service were actually deducted and he was paid Rs. 81.51 only for the entire period ending March 7, 1959., Even on a stricter view, according to the learned Counsel, limitation would not start earlier than the date, February 13, 1959, when constructive deduction took place and it was decided to treat the period of his inactive service as leave due (which meant leave without pay). Since the appellant's claim application had been presented within six months of either of these dates, it was well within time.

Learned Counsel for the respondents does not dispute that this is a case of deduction of wages. His argument, however, is that irrespective of whether the case was one of deduction or of non-payment of wages, the starting point of limitation would be the same viz., the date on which the wages fell due or accrued. The argument is that the concepts of 'deducted wages' and .'delayed wages' are so integrated with each other that the events relatable to them always synchronise furnishing the same cause of action and the same start of limitation. It is pointed out that the wages of a <ORG> employee fall due every month; wages of one month being payable by the 10th of the succeeding month. Since the dismissal of the Appellant was declared void and non-est by <ORG>-it is urged-his right to claim wages continued to accrue every month even during the period of Ills dismissal. In the view propounded by the learned Counsel, limitation for making the application under s. 1 5 (2) started from January 3, 1956, the date of the dismissal and the application made by the appellant more than three years thereafter, was clearly time-barred. Reference has been made to this <ORG>'s decision in <CITATION> (1).

We shall presently see that while the contentions of the learned Counsel for the respondents cannot, those canvassed by the learned Counsel for the appellant must prevail. .

The material part of s. 15 of the Act reads "15(1) 15(2) Where contrary to the provisions of this Act any deduction has been made from the wages of an employed person or any payment of wages has been delayed, such person himself, or any legal practitioner or any official of a registered trade union authorised in writing to act on his behalf, or any Inspector under this Act, or any other person acting with the permission of the authority appointed under sub-section (1) may apply to such authority for a direction under sub-section (3) Provided that every such application shall be presented within (twelve months) from the date on which the deduction from the wages was made or from the date on which the payment of the wages was due to be made, as the case may be: Provided further that any application may be admitted after the said period of twelve months when die applicant satisfies the authority that he had sufficient cause for not making the application within such period. 15(3) When any application under sub-section (2) is entertained, the authority shall hear the applicant and the employer or other person responsible for the payment of wages under section 3 , or give them an opportunity of being heard, and, after such further inquiry' (if any) as may be necessary, may, without prejudice to any other penalty to which such employer or other person is liable under this Act, direct the refund to the employed person of the amount deducted, or the payment of the delayed wages, together with the payment of such compensation as the authority may think fit, not exceeding ten times the amount deducted in the former case and not exceeding twenty-five rupees in the latter, and even if the amount deducted or the delayed wages are paid before the disposal of the application direct the payment of such compensation, as the authority, may think fit, not exceeding twenty-five rupees :......

The question of limitation turns on an interpretation of the first proviso to sub-s. (2) of S. 15 . This proviso ex facie indicates two

1. [1969] 3 S.C.C. 642.

alternative termini a quo for limitation, namely : (i) the date on which deduction from wages was made, or, (ii) the date, on which the payment of the wages was due to be made. From a reading of s. 15 , it is clear that the legislature has deliberately used, first, in sub-s. (2), and then in sub-s. (3) the expressions "deduction of wages" and "delay in payment of wages" as two distinct concepts. Terminus a quo (i) in the proviso expressly relates to the deduction of wages, while (ii) is referable to the delayed wages. if both these terminii were always relatable to the same point of time, then there would be no point in mentioning terminus a quo (i), and the, <ORG> could have simply said that limitation for a claim under s. 15(2) would always start from the date on which the wages "fall due" or "accrue" as has been done under Art. 102 of the Limitation Act which applies only to suits for recovery of wages. The very fact that two distinct starting points of limitation referable to two distinct concepts, have been stated in the proviso, shows that the <ORG> had visualised that the date of deduction of wages and the due date of delayed wages, may not always coincide. Conjunction "or", which in the context means "either", and the phrase "as the case may be" at the end of the Proviso are clinching-indicia of this interpretation. They are not mere suplusages and must be given their full effect. The <ORG> is not supposed to indulge in tautology; and when it uses analogous words or phrases in the alternative, each maybe presumed to convey a separate and distinct meaning, the choice of either of which may involve the rejection of the other. To hold that the two expressions "wages deducted", and "wages delayed", though used in the alternative, carry the same meaning, and in the Proviso are always referable to one and the same' point of time, would be contrary to this primary canon of interpretation "Deduction from wages" has not been defined in the Act. Some illustrations of such deductions are, however, to be found in ss. 7 and 13 . One of them in s. 7 (2) (b) is "deductions for absence from duty" which indicates that such deduction can be a total deduction, also. That is to say "deduction from wages" may be 'the same thing as "deduction of wages". The deduction in the instant case is akin to this category covering the entire deficiency for the period of absence, the only difference being that here, the appellant absence from duty was involuntary. Such absence in official parlance is euphemistically called "in active service', if the employee is later on reinstated. The point to be considered further is when did such deduction ofwages take place ? Ordinarily in a case like the present where the employee was dismissed on one date and reinstated on a later date, the deduction of wages may synchronise with the act of reinstatement. But on the peculiar and admitted facts of this case, the deduction did not take place on the date of reinstatement (26-12-1958) because the order of reinstatement expressly stated that "decision with regard to his wages to be paid for that period will be taken later on". In the case in hand, therefore, the "deduction' will coincide with the decision impliedly or expressly deducting the wages. Such a decision was taken and put in the course of a communication to the appellant on February 18, 1959 whereby he was informed that the period from 3-1-1956 to 17-3-1959, would be treated as 'leave due' Which, it is conceded, meant leave without pay. Thus, deduction from his wages for the entire period of his 'inactive service' took place on February 18, 1959. and limitation under the first part of the Proviso commenced from that date. The application was made on August 13, 1959, within six months of that date and was thus within time.

in <NAME> case (supra), the, interpretation of the first Proviso to s. 15(2) never came up for consideration. Therein, the <ORG> was concerned only with the construction of the expression "accrue/due" in Art. 102 of the Limitation Act , 1908 which does not govern applications under S. 15(2) of the Act. That case, therefore, is of no assistance in determining the precise issue before us.

It may be observed in passing that the, rule in <CITATION> ,(1) relied on by the Additional District Judge, was not followed by the same <ORG> in <CITATION> (2), as is had ceased to be good law in view _of the decision of this Court in <ORG> v. <NAME>). In <NAME> case (supra), the application under s. 15 (2) of the Act was filed within six months of the date on which the dismissal of the employee was set aside by the court in second appeal. The employee's application would have been within time irrespective of whether his case was treated as one of "wages deducted" or "wages delayed". Therefore, the necessity of examining the comparative mean- ing and distinction between "deduction from wages" or "delay in payment of wages due" and the two alternative starting points of limitation relatable to these expressions, did not arise in that case.

In the light of the above discussion, we reverse the finding of the Additional District Judge and hold that the application filed by the appellant under S. 15(2) of the Act having been made within six months of the date of deduction from his wages, was within time.

The second ground on which the order of the, Additional District Judge proceeds, is that since the deduction of the wages for the period of his inactive service from April 1, 1956 to February 17, 1959, had been made under the order of a co mpetent authority passed in accordance with rule 2044 of the Railway Establishment Code, in view of S. 7 (2) (h) of the Act no order could be made for the refund of the deducted amount. Both the learned Counsel before us are agreed that in view of the pronouncement of this Court in <NAME>; <CITATION> .(4), this ground is not sustainable. In <NAME>'s case (supra), this Court was construing rule 54 of the U.P. Government Fundamental Rules, the language of which is substantially the same as that of rule 2044 of the Railway Establishment Code. It (1) A.I.R. 1962 All. 144.

(2) [1959] All Law Journal p. 225.

(3) [1967] 14, F.L.R. 204.

(4) [1962] Supp. S.C.R. 315.

was held therein, that r. 54 enables <ORG> to fix the pay of a public servant when his dismissal is set aside in departmental appeal. But that rule has no application to cases in which dismissal is declared invalid by a decree of civil court and he is, in consequence, reinstated.

Mr. <NAME> next contends that the prescribed <ORG> had wrongly disallowed the claim of the appellant to "Running Allowance' which he had mis-described as "Traveling Allowance" in his claim application. The point pressed into argument is, that once the <ORG> had allowed the appellant to amend his application for converting the claim of "Traveling Allowance" into "Running Allowance", it had no discretion left thereafter to prevent him from carrying out the amendment, on the technical ground that the period indicated by Order 6, Rule 18, Code of Civil Procedure, for this purpose, has expired. The Code of Civil Procedure, it is urged, does not govern amendment of applications under s. 15(2) of the Act.

The contention is untenable. While it is true that Rule s 17 and 18 of Order 6 of the-Code do not, in terms, apply to amendment of an application under s. 15(2) , the <ORG> is competent to devise, consistently with the provisions of the Act and the Rules made thereunder, its own procedure based on general principles of justice, equity and good conscience. One of such principles is that delay defeats equity. The <ORG> found that the applicant was guilty of gross negligence. He took no steps whatever to carry out the amendment for several months after the order permitting the amendment, and thereafter, when the case was at the final stage, he suddenly woke up, as it were, from slumber, and sought to amend his application. In the circumstances, the <ORG> rightly refused to put a premium on this delay and laxity on the part of the appellant. In the view we take on the claim to running allowance we need not pronounce finally on whether an amendment to the relief once granted requires to be formally carried out in the petition, as in a pleading in court, less rigidity being permissible in quasi- judicial proceedings.

Mr. <NAME> further contends that Running Allowance was a part of the pay or substantive wages. In support of this argument he has invited our attention to rule 2003 of the <ORG> Establishment Code, clause 2 of which defines 'average pay'. According to the second proviso to this clause in the case, of staff entitled to running allowance, average pay for the purpose of leave salary-shall include the average running allowance earned during the 12 months immediately preceding the month in which a <ORG> servant proceeds on leave subject to a maximum of 75 per cent of average pay for the said period, the average running allowance once determined remaining In operation during the- remaining part of the financial year 1 cases of leave not exceeding one month. The crucial words, which have been underlined. show that such Running Allowance is counted towards 'average pay' in those cases only where the leave, does not exceed one month. It cannot, therefore, be said that Running Allowance was due to the appellant as part of his wages for the entire period of his inactive ser-

vice. Traveling allowance or running allowance is eligible if the officer has traveled or run, not otherwise. We therefore negative this contention.

For the foregoing reasons, we allow this appeal, set aside the order of <ORG> and restore that of <ORG>. The appellant shall have his costs throughout.

<NAME>, J.-The judgment just delivered has my full concurrence but I feel impelled to make a few observations not on the merits but on governmental disposition to litigation, the present case being symptomatic of a serious deficiency. In this country the <ORG> is the largest litigant to-day and the huge expenditure involved makes a big draft on the public exchequer. In the context of expanding dimensions of <ORG> activity and responsibility, is it unfair to expect finer sense and sensibility in its litigation policy, the absence of which, in the present case, he led the <ORG> callously and cantankerously to resist an action by its own employee, a small man, by urging a mere technical plea which has been pursued right up to the summit court here and has been negatived in the judgment just pronounced ? Instances of this type are legion as is evidenced by the fact that then <ORG> in a recent report(1) on amendments to the Civil Procedure Code has suggested the deletion of s. 80 , finding that wholesome provision hardly ever utilised by Government, and has gone further to provide a special procedure for government litigation to highlight the need for an activist policy of just settlement of claims where the <ORG> is a party. It is not right for a welfare' <ORG> like ours to be Janus-faced, and while formulating the humanist project of legal aid to the poor, contest the claims of poor employees under it pleading limitation and the like. That the tendency is chronic flows from certain observations I had made in the Kerala High Court decision(2) which I may usefully excerpt here "The <ORG>, under our Constitution, undertakes economic activities in a vast and widening public sector and inevitably gets involved in disputes with private individuals. But it must be remembered that the <ORG> is no ordinary party trying to win a case against one of its own citizens by hook or by crook; for, the <ORG>'s interest is to meet honest claims, vindicate a substantial defence and never to score a technical point or overreach a weaker party to avoid a just liability or secure an unfair advantage, simply because legal devices provide such an opportunity. The <ORG> is. a virtuous litigant and looks with unconcern on immoral forensic successes so that if on the merits the case is weak, government shows a willingness to settle the dispute regardless of prestige and other lesser motivations which move, private parties to fight (1) <ORG>, .54th Report- Civil Procedure Code.

(2) <NAME> backer v. <ORG> :

A.I.R. 1972 Ker. 103 : 107 para 5.

in court. The lay-out on litigation costs and executive time by the <ORG> and its agencies is so staggering these days because of the large amount of litigation in which it is involved that a positive and wholesome policy of cutting back on the volume of law suits by the twin methods of not being tempted into forensic show-downs where a reasonable adjustment is feasible and ever offering to extinguish a pending proceeding on just terms, giving the legal mentors of government some initiative and authority in this behalf. I am not indulging in any judicial homily but only echoing the dynamic national policy on <ORG> litigation evolved at a Conference of Law Ministers of India way back in 1957. This second appeal strikes me as an instance of disregard of that policy."

All these words from the Bench, hopefully addressed to a responsive <ORG>, may, if seasonable reactions follow, go a long way to avoidance of governmental litigiousness and affirmance of the image of the <ORG> as deeply concerned only in Justic-Social Justice. The phyrric victory of the poor appellant in this case is a sad justification, for the above observations.

P.B.R. Appeal allowed-