PETITIONER: <ORG>. Vs. RESPONDENT: COMMR. OF INCOME TAX, WEST BENGAL, CALCUTTA DATE OF JUDGMENT27/09/1978 BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. TULZAPURKAR, V.D. CITATION: 1979 AIR 5 1979 SCR (1) 976 1978 SCC (4) 358 CITATOR INFO : RF 1980 SC 680 (11) ACT: Income Tax Act , 1922-Secs. 10(1), 10(2)-Loss occasioned on account of devaluation-Whether deductible as revenue expenditure-Circulating capital and fixed capital. The assessee is a Limited Company having its Head Office in Calcutta. HEADNOTE: It has inter alia a Cotton Mill situated in West Pakistan where it carries on business of manufacturing and selling cotton fabrics. For the accounting year relevant to the assessment year 1954-55, the assessee made a large profit in the unit in West Pakistan. The Pakistan profit, according to the official rate of exchange, which was then prevalent, namely, 100 Pakistani rupees being equal to 144 Indian rupees amounted to Rs. 1,68,97,232 in terms of Indian rupees. Since the assessee was taxed on accrual basis, the sum of Rs. 1,68,97,232 representing the Pakistani profit was included in the total income of the assessee for the assessment year 1954-55 and the assessee was taxed accordingly after giving double taxation relief in accordance with the bilateral agreement between India and Pakistan. On 8th August, 1955, the Pakistani rupee was devalued and parity between Indian and Pakistani rupee was restored. The assessee thereafter succeeded in obtaining the permission of <ORG> to remit a sum of Rs. 25 lakhs in Pakistani rupees out of the Pakistani profit for the assessment year 1954-55. The profit of Rs. 25 lakhs in terms of Pakistani rupees had been included in the total income of the assessee for the assessment year 1954-55 as Rs. 36 lakhs in terms of Indian rupees according to the then prevailing rate of exchange and, therefore, when the assessee received the sum of Rs. 25 lakhs on remittance of the profit of Rs. 25 lakhs in Pakistani rupees during the assessment years 1957-58, the assessee suffered a loss of Rs. 11 lakhs, in the process of conversion on account of appreciation of the Indian rupee qua Pakistani rupee. Likewise, in the assessment year 1959-60, a further sum of Rs. 12,50,000 was remitted by the assesses to India out of the Pakistani profit for the assessment year 1954-55 and suffered a loss of Rs. 5,50,000. The assessee claimed in its assessment for the year 1957-58 and 1959-60 that these losses of Rs. 11 lakhs and Rs. 5,50,000 should be allowed in computing the profit from business. The Income Tax Officer and the <ORG> disallowed the claim. On a reference to <ORG>, <ORG> took the view that no loss was sustained by the assessee on remittance of the amounts from West Pakistan and that in any event, the loss could not be said to be a business loss because it was not a loss arising in the course of business of the assessee but it was caused by devaluation which was an act of <ORG>. <ORG> accordingly answered the question in favour of the <ORG> and against the assessee. Disposing of the appeals by special leave the <ORG>, 977 ^ HELD: The first question that arises is whether the assessee suffered any loss on the remittance of Rs. 25 lakhs and Rs. 12,50,000. These two amounts admittedly came out of the Pakistani profit for the assessment year 1954-55 and the equivalent of these two amounts in Indian currency, namely, Rs. 36 lakhs and Rs. 18 lakhs respectively was included in the assessment of the assessee as part of Pakistani profit but by the time these amounts came to be repatriated to India, the rate of exchange had undergone change on account of devaluation of Pakistani rupee and, therefore, on repatriation, the assessee received only Rs. 25 lakhs and Rs. 12.50 lakhs in Indian currency instead of Rs. 36 lakhs and Rs. 18 lakhs. The assessee thus suffered a loss of Rs. 11 lakhs in one case and Rs. 5.50 lakhs in the other case. The fact that no loss was reflected in the books of the two accounts of the assessee was not a conclusive factor and <ORG> ought not to have relied on it. It is now well- settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. [981 A-D, 982 <CITATION> ., 60 I.T.R. 405 relied on. The question arising in the case is whether the loss sustained by the assessee was a trading loss and if it was a trading loss whether it would be liable to be deducted in computing the taxable profit of the assessee under Sec. 10(1) of the Income Tax Act , 1922. The argument which found favour with <ORG> was that because the devaluation was an act of the sovereign power, it could not be regarded as a loss arising in the course of the business of the assessee or incidental, to such business, is plainly erroneous. It is true that a loss in order to be a trading loss must spring directly from the carrying on of business or be incidental to it, but it would not be correct to say that where a loss arises in the process of conversion of foreign currency which is part of trading asset of the assessee, such loss cannot be regarded as a trading loss because the change in the rate of exchange which occasions such loss is due to an act of the sovereign power. [982 <CITATION> ., 34 I.T.R., 10 relied on. It is not the factor or circumstance which caused the loss that is material in determining the true nature and character of the loss, but whether the loss has occurred in the course of carrying on the business or is incidental to it. If there is a loss in trading asset, it would be a trading loss, whatever be its cause, because it would be a loss in the course of carrying on the business. If the stock in trade of a business is stolen or burnt the loss, though occasioned by external agency or act of God would clearly be a trading loss. Whether the loss suffered by the assessee is a trading loss or not, would depend on the answer to the query whether the loss is in respect of a trading asset or a capital asset. In the former case, it would be a trading loss but not so in the latter. The test may be formulated in another way by asking the question whether the loss is in respect of circulating capital or in respect of fixed capital. It is, of course, not easy to define precisely what is the line of demarcation between fixed capital and circulating capital but there is a well recognised distinction between the two concepts. <NAME> in his 'Wealth of Nations' describes fixed capital as what the owner turns to profit by keeping it in his 978 own possession and circulating capital as what he makes profit of by parting with it and letting in change masters. Circulating capital means capital employed in the trading operations of the business and the dealings with it comprise trading receipts and trading disbursements, while 'fixed capital' means capital not so employed in the business, though it may be used for the purposes of a manufacturing business but does not constitute capital employed in the trading operations of the business. [982 H, 983 A-F] <ORG> v. <NAME>, 18 T.C. 280; approved. <ORG> v. <NAME> 19 T.C. 65; <NAME> v. <ORG> Ltd. 32 T.C. 133; <ORG> v. <NAME>; 25 T.C. 292; referred to with approval. Commr. of Income-tax. <CITATION> . 34 I.T.R. 10 approved. <CITATION> . 63 I.T.R. 308 approved. It is clear from the authorities that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assesses on <ORG> account or as trading asset or as part of circulating capital embarked in the business. But if, on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. [991 B-C] In the present case, no finding has been given by the <ORG> as to whether the sum of Rs. 25 lakhs and Rs. 12.50 lakhs were held by the assessee in West Pakistan on capital account or <ORG> account and whether they were a part of fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If these two amounts were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss of Rs. 11 lakhs and Rs. 5.50 lakhs resulting to the assessee on remission of these two amounts on account of alterations in the rate of exchange, would be a trading loss, but if instead these two amounts were held on capital account and mere part of fixed capital the loss would plainly be a capital loss. [991 C-E] The <ORG> was, therefore, unable to answer the question whether the loss suffered by the assessee was a trading loss or a capital loss. Ordinarily, the <ORG> would have called for a supplementary statement of the case, from the <ORG> but since both the parties agreed that it would be proper that the matter should go back to the <ORG> with a direction to the <ORG> either to take additional evidence itself or to direct the Income Tax Officer to take additional evidence and make a report, the <ORG> made an order accordingly and directed the tribunal to dispose of the case on the basis of the additional evidence and in the light of the law laid down in the Judgment. [991 E-H] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1847- 1848/72.

From the Judgment and Order dated 30-4-1970 of <ORG> in Income Tax Reference No. 128 of 1966.

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

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

The Judgment of the Court was delivered by <ORG> J.-These appeals by special leave are directed against a judgment of <ORG> answering the first question referred to it by the <ORG> in favour of the <ORG> and against the assessee. There were in all five questions referred by the <ORG> but questions Nos. 2 to 5 no longer survive and these appeals are limited only to question No. 1. That question is in the following terms:-

"Whether on the facts and in the circumstances of the case, the assessee's claim for the exchange loss of Rs. 11 lakhs for the assessment year 1957-58 and Rs. 5,50,000/- for the assessment year 1959-60 in respect of remittances of profit from Pakistan was not allowable as a deduction?

Since there are two assessment years in regard to which the question arises, there are two appeals one in respect of each assessment year, but the question is the same. <ORG> will briefly state the facts as that is necessary for the purpose of answering the question.

The assessee is a limited company having its head office in Calcutta. It has inter alia a cotton mill situate in West Pakistan where it carries on business of manufacturing and selling cotton fabrics. This textile mill was quite a prosperous unit and in the financial year ending 31st March, 1954, being the accounting year relevant to the assessment year 1954-55, the assessee made a large profit in this unit. This profit obviously accrued to the assessee in West Pakistan and according to the official rate of exchange which was then prevalent, namely, 100 Pakistani rupees being equal to 144 Indian rupees, this profit, which may for the sake of convenience be referred to as Pakistan profit, amounted to Rs. 1,68,97,232/- in terms of Indian rupees. Since the assessee was taxed on actual basis, the sum of Rs. 1,68,97,232/- representing the Pakistani profit was included in the total income of the assessee for the assessment year 1954-55 and the assessee was taxed accordingly after giving double taxation relief in accordance with the bilateral agreement between India and Pakistan. It may be pointed out that for some time, after the partition of India. there continued to be parity in the rate of exchange between India and Pakistan but on 18th September 1949, on the devaluation of the Indian rupee, the rate of exchange was changed to 100 Pakistani rupees being equal to 144 Indian rupees and that was the rate of exchange at which the Pakistani profit was converted into Indian rupees for the purpose of inclusion in the total income of the assessee for the assessment year 1954-55. The rate of exchange was, however, once again altered when Pakistani rupee was devalued on 8th August, 1955 and parity between Indian and Pakistani rupee was restored. The assessee thereafter succeeded in obtaining the permission of <ORG> to remit a sum of Rs. 25 lakhs in Pakistani rupees out of the Pakistani profit for the assessment year 1954-55 and pursuant to this permission, a sum of Rs. 25 lakhs in Pakistani rupees was remitted by the assessee to India during the accounting year relevant to the assessment year 1957-58. The assessee also remitted to India during the accounting year relevant to the assessment year 1959-60 a further sum of Rs. 12,50,000/- in Pakistani rupee out of the Pakistani Profit for the assessment year 1954-55 after obtaining the necessary permission of <ORG>. But by the time these remittances came to be made, the rate of exchange had, as pointed out above, once again changed to 100 Pakistani rupees being equal to 100 Indian rupees and the amounts received by the assessee in terms of Indian rupees were, therefore, the same, namely, Rs. 25 lakhs and Rs. 12,50,000. Now, the profit of Rs. 25 lakhs in terms of Pakistani rupees had been included in the total income of the assessee for the assessment year 1954-55 as Rs. 36 lakhs in terms of Indian rupees according to the prevailing rate of exchange of 100 Pakistani rupees being equal to 144 Indian rupees and, therefore, when the assessee received the sum of Rs. 25 lakhs in Indian rupees on remittance of the profit of Rs. 25 lakhs in Pakistani rupees on the basis of 100 Pakistani rupees being equal to 100 Indian rupees, the assessee suffered a loss of Rs. 11 lakhs in the process of conversion on account of appreciation of the Indian rupee qua Pakistani rupee. Similarly, on remittance of the profit of Rs. 12,50,000 in Pakistani currency the assessee suffered a loss of Rs. 5,50,000/-. The assessee claimed in its assessments for the assessment years 1957-58 and 1959-60 that these losses of Rs. 11 lakhs and Rs. 5,50,000/- should be allowed in computing the profits from business. This claim was however rejected by the Income Tax Officer. The assessee carried the matter in further appeal to the <ORG> but the <ORG> also sustained the disallowance of these losses and rejected the appeals. The decision of the <ORG> was assailed in a reference made at the instance of the assessee and Question No. 1 which we have set out above was referred by the <ORG> for the opinion of <ORG>. On the reference <ORG> took substantially the same view as the <ORG> and held that no loss was sustained by the assessees on remittance of the amounts from West Pakistan and that in any event the loss could not be said to be a business loss, because it was not a loss arising in the course of business of the assessee but it was caused by devaluation which was an act of <ORG>. <ORG> accordingly answered the question in favour of the <ORG> and against the assessee. The assessee thereupon preferred the present appeal after obtaining certificate of fitness from <ORG>.

The first question that arises for consideration is whether the assessee suffered any loss on the remittance of Rs. 25 lakhs and Rs. 12,50,000/- in Pakistani currency from West Pakistan. These two amounts admittedly came out of Pakistan profit for the assessment year 1954-55 and the equivalent of these two amounts in Indian currency, namely, Rs. 36 lakhs and Rs. 18 lakhs respectively. was included in the assessment of the assessee as part of Pakistan profit. But by the time these two amounts came to be repatriated to India, the rate of exchange had undergone change on account of devaluation of Pakistani rupee and, therefore, on repartition, the assessee received only Rs. 25 lakhs and Rs. 12,50,000/- in Indian currency instead of Rs. 36 lakhs and Rs. 18 lakhs. The assessee thus suffered a loss Rs. 11 lakhs in one case and Rs. 5,50,000/- in other in the process of conversion of Pakistani currency into Indian currency. It is no doubt true-and this was strongly relied upon by <ORG> for taking the view that no loss was suffered by the assessee-that the books of account of the assessee did not disclose any loss nor was any loss reflected in the balance- sheet or profit and loss account of the assessee. The reason was that though, according to the then prevailing rate of exchange, the equivalent of Pakistani profit in terms of Indian rupee was Rs. 1,68,97,232/- and that was the amount included in the assessment of the assessee for the assessment year 1954-55, the assessee in its books of account maintained at <ORG> did not credit the Pakistani profit at the figure of Rs. 1,68,97,232/-, but credited it at the same figure as in Pakistani currency. The result was that the loss arising on account of the depreciation of Pakistani rupee vis-a-vis Indian rupee was not reflected in the books of account of the assessee and hence it could not figure in the balance-sheet and Profit and Loss Account. But it is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessees has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper accountancy principles, conceal profit or show loss and the entries 10-699SCI/7 made by him cannot, therefore, be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee. Here, it is clear that the assessee earned Rs. 36 lakhs and Rs. 18 lakhs in terms of Indian rupees in the assessment year 1954-55 and retained them in West Pakistan in Pakistani currency and when they were subsequently remitted to India, the assessee received only Rs. 25 lakhs and Rs. 12,50,000/- and thus suffered loss of Rs. 11 lakhs and Rs. 5,50,000/- in the process of conversion on account of alteration in the rate of exchange. It is, therefore, not possible to accept the view of <ORG> that no loss was suffered by the assessee on the remittance of the two sums of Rs.25 lakhs and Rs. 12,50,000/- from West Pakistan. This view which we are taking is clearly supported by the decision of this Court in <CITATION> (1) which we shall discuss a little later.

That takes us to the next and more important question whether the loss sustained by the assessee was a trading loss. Now this loss was obviously not an allowable deduction under any express provision of section 10(2) , but if it was a trading loss, it would be liable to be deducted in computing the taxable profit of the assessee under section 10(1) . This indeed was not disputed on behalf of the <ORG> but the serious controversy raised by the <ORG> was whether the loss could at all be regarded as a trading loss. The argument which found favour with <ORG> was that the loss was caused on account of devaluation of the Pakistani rupee which was an act of the sovereign power and it could not, therefore, be regarded as a loss arising in the course of the business of the assessee or incidental to such business This argument is plainly erroneous and cannot stand scrutiny even for a moment. It is true that a loss in order to be a trading loss must spring directly from the carrying on of business or be incidental to it as pointed out by <NAME>, j., speaking on behalf of this Court in <NAME> v. C.I.T. (2) but it would not be correct to say that where a loss arises in the process of conversion of foreign currency which is part of trading asset of the assessee, such loss cannot be regarded as a trading loss because the change in the rate of exchange which occasions such loss is due to an act of the sovereign power. The loss is as much a trading loss as any other and it makes no difference that it is occasioned by devaluation brought about by an act of <ORG>. It is not the factor or circumstance which causes the loss that is material in determining the true nature and character of the loss, but whether the loss has occurred in the course of carrying on the business or is incidental to it. If there is loss in a trading asset, it would be a trading loss, whatever be its cause, because it would be a loss in the course of carrying on the business. Take for example the stock-in-trade of a business which is sold at a loss. There can be little doubt that the loss in such a case would clearly be a trading loss. But the loss may also arise by reason of the stock-in-trade being stolen or burnt and such a loss, though occasioned by external agency or act of God, would equally be a trading loss. The cause which occasions the loss would be immaterial : the loss, being in respect of a trading asset, would be a trading loss. Consequently, we find it impossible to agree with <ORG> that since the loss in the present case arose on account of devaluation of the Pakistani rupee and the act of devaluation was an act of sovereign power extrinsic to the business, the loss could not be said to spring from the business of the assessee. Whether the loss suffered by the assessee was a trading loss or not would depend on the answer to the query whether the loss was in respect of a trading asset or a capital asset. In the former case, it would be a trading loss, but not so in the latter. The test may also be formulated in another way by asking the question whether the loss was in respect of circulating capital or in respect of fixed capital. This is the formulation of the test which is to be found in some of the English decisions. It is of course not easy to define precisely what is the line of demarcation between fixed capital and circulating capital, but there is a well- recognised distinction between the two concepts. <NAME> in his `Wealth of Nations' describes `fixed capital' as what the owner turns to profit by keeping it in his own possession and `circulating capital' as what he makes profit of by parting with it and letting it change masters. `Circulating capital' means capital employed in the trading operations of the business and the dealings with it comprise trading receipts and trading disbursements, while `fixed capital means capital not so employed in the business, though it may be used for the purposes of a manufacturing business, but does not constitute capital employed in the trading operations of the business. <ORG> v. <NAME>.,(1) If there is any loss resulting from depreciation of the foreign currency which is embarked or adventured in the business and is part of the circulating capital, it would be a trading loss, but depreciation of fixed capital on account of alteration in exchange rate would be a capital loss. Putting it differently, if the amount in foreign currency is utilised or intended to be utilised in the course of business or for a trading purpose or for effecting a transaction on revenue account, loss arising from depreciation in its value on account of alteration in the rate of exchange would be a trading loss, but if the amount is held as a capital asset, loss arising from depreciation would be a capital loss. This is clearly borne out by the decided cases which we shall presently discuss.

We will first refer to the English decisions on the subject for they are quite illuminating. The first decision to which we should call attention is that in <ORG> Simpson(1). There the appellants who carried on business as fur and skin merchants and as agents were appointed sole commission agents of a company for the sale, in Britain and elsewhere, of furs exported from Russia, on the terms, inter alia, that they should advance to the company a part of the value of each consignment. All the transactions between the appellants and the company were conducted on a dollar basis, and owing to fluctuations in the rate of exchange between the dates when advances in dollars were made by the appellants to the company against goods consigned and the dates when the appellants recouped themselves for the advances on the sale of the goods, a profit accrued to the appellants on the conversion of prepaid advances into sterling. The question arose whether this profit formed part of the trading receipts of the appellants so as to be assessable to tax. <NAME>, J., held that the exchange profit arose directly in the course of the appellants' business with the company and formed part of the appellants' trading receipts for the purpose of computing their profits assessable to income tax under Case I of Schedule D. The learned Judge pointed out that "the profit which arises in the present case is a profit arising directly from the business which had to be done, because-the business was conducted on a dollar basis and the appellants had, therefore, to buy dollars in order to make the advances against the goods as prescribed by the agreements. The profit accrued in this case because they had to do that, thereafter as a trading concern in this country re- transferring or re-exchanging into sterling." Since the dollars were purchased for the purpose of carrying on the business as sole commission agents and as an integral part of the activity of such business, it was held that the profit arising on retransfer or re-exchange of dollars into sterling was a trading profit falling within Case I of Schedule D. This decision was accepted as a correct decision by <ORG> in <NAME> v. <ORG> Ltd.(2) We may then refer to the decision of <ORG> in <ORG> v. Kelly(1). That was a case of a company which, in accordance with the usual practice, bought American dollars for the purpose of purchasing in the United States, tobacco leaf. But before tobacco leaf could be purchased, the transaction was interrupted by the outbreak of war and the company had, at the request of the <ORG>, to stop all further purchases of tobacco leaf in the United States. The result was that the company was required to sell to the <ORG> and owing to the rise which had in the mean time occurred in the dollar exchange, the sale resulted in a profit for the company. The question was whether the exchange profit thus made on the dollars purchased by the company was a trading profit or not ? <ORG> held that it was a trading profit includible in the assessment of the company under Case I of Schedule D and Lord <NAME>, Master of the Rolls delivering the main judgment, said :

"The purchase of the dollar was the first step in carrying out an intended commercial transaction, namely, the purchase of tobacco leaf. The dollars were bought in contemplation of that and nothing else. The purchase on the facts found was, as I say, a first step in the carrying out of a commercial transaction,-" "<ORG> having provided themselves with this particular commodity "namely, dollars" which they proposed to exchange for leaf tobacco, their contemplated transactions became impossible of performance, or were not in fact performed. They then realised the commodity which had become surplus to their requirements". When I say "surplus to their requirements" I mean surplus to their requirements for the purpose and the only purpose for which the dollars were acquired."

"In these circumstances, they sell this surplus stock of dollars : and it seems to me quite impossible to say that the dollars have lost the revenue characteristic which attached to them when they were originally bought, and in some mysterious way have acquired a capital character. In my opinion, it does not make any difference that the contemplated purchasers were stopped by the operation of <ORG> or <ORG> orders, if that were the case; nor is the case affected by the fact that the purchase was under a <ORG> requisition and was not a voluntary one. It would be a fantastic result, supposing the Company had been able voluntarily, at its own free will, to sell these surplus dollars, if in that case the resulting profit should be regarded as income, whereas if the sale were a compulsory one the resulting profit would be capital. That is a distinction which, in my opinion, cannot possibly be made."

"To reduce the matter to its simplest elements, <ORG> has sold a surplus stock of dollars which it had acquired for the purpose of affecting a transaction on revenue account. If the transaction is regarded in that light, any trader who, having acquired commodities for the purpose of carrying out a contract, which falls under the head of revenue for the purpose of assessment under Schedule D, Case I, then finds that he has bought more than he ultimately needs and proceeds to sell the surplus. In that case it could not be suggested that the profit so made was anything but income. It had an income character impressed upon it from the very first."

This decision clearly laid down that where an assessee in the course of its trade engages in a trading transaction, such as purchase of goods abroad, which involves as a necessary incident of the transaction itself, the purchase of currency of the foreign country concerned, then profit resulting from appreciation or loss resulting from depreciation of the foreign currency embarked in the transaction would prima facie be a trading profit or a trading loss.

The last English decision to which we may refer in this connection is Davis v. <ORG>, (supra). The <ORG> made a practice of requiring its agents to deposit with the company a sum of money usually in Chinese dollars which was repayable when the agency came to an end. Previously the <ORG> had left on deposit in Shanghai amounts approximately equal to the agency deposits, but because of the hostilities between China and Japan, the <ORG> transferred these sums to the United Kingdom and deposited the sterling equivalents with its parent company which acted as its banker. Owing to the subsequent depreciation of the Chinese dollar with respect to sterling, the amounts eventually required to repay agency deposits in Chinese currency were much less than the sums held by the <ORG> to meet the claims and a substantial profit accrued to the <ORG>. The question arose whether this exchange profit was a trading profit or a capital profit. <ORG> held that it was a capital profit not subject to income tax and the argument which found favour with it may be stated in the words of <ORG>, who delivered the main judgment :

"I find nothing in the facts of this case to divest those deposits of the character which it seems to me they originally bore, that is to say the character of loans by the agents to the company, given no doubt to provide the company with a security, but nevertheless loans. As loans it seems to me they must prima facie be loans on capital, not revenue account; which perhaps is only another way of saying that they must prima facie be considered as part of the company's fixed and not of its circulating capital. As appears from what I have said above, the evidence does not show that there was anything in the company's mode of dealing with the deposits when received to displace this prima facie conclusion.

In my view, therefore, the conversion of company's balance of Chinese dollars into sterling and the subsequent re-purchase of Chinese dollars at a lower rate, which enabled the company to pay off its agents' deposits at a smaller cost in sterling then the amount it had realised by converting the deposits into sterling, was not a trading profit, but it was simply the equivalent of an appreciation in a capital asset not forming part of the assets employed as circulating capital in the trade."

Since the <ORG> took the view that the deposits were in the nature of fixed capital, any appreciation in their value on account of alteration in the rate of exchange would be on capital account and that is why the <ORG> held that such appreciation represented capital profit and not trading profit.

That takes us to the two decisions of this Court which have discussed the law on the subject and reiterated the same principles for determining when exchange profit or loss can be said to be trading profit or loss. The first decision in chronological order is that reported in <CITATION> . (supra). There the assessee, which was a limited company carrying on business of locomotive boilers and locomotives, had, for the purpose of its manufacturing activity, to make purchases of plant and machinery in the United States. <ORG>, New York, a company incorporated in the United States, was appointed by the assessee as its purchasing agent in the United States and with the sanction of <ORG> the assessee remitted a sum of $ 33,850/- to <ORG>, New York for the purpose of purchasing capital goods and meeting other expenses. The assessee was also the selling agent of <ORG> of the United States for the sale of their products in India and in connection with this work, the assessee incurred expenses on their behalf in India and these expenses were reimbursed to the assessee in the United States by paying the amount to <ORG>, New York. The assessee also earned a commission of $ 36,123/- as selling agent of <ORG> and this amount received as commission was taxed in the hands of the assessee in the relevant assessment year on accrual basis after being converted into rupees according to the then prevailing rate of exchange and tax was paid on it by the assessee. Now these amounts paid by <ORG> in reimbursement of the expenses and by way of commission were not remitted by the assessee to India but were retained with <ORG>, New York for the purchase of capital goods with the sanction of <ORG>. The result was that there was a balance of $. 48,572.30 in the assessee's account with <ORG>, New York on 16th September, 1949 when, on devaluation of the rupee, the rate of exchange which was Rs. 3.330 per dollar shot upto Rs. 4.775 per dollar. The consequence of this alteration in the rate of exchange was that the assessee found it more expensive to buy American goods and the Government of India also imposed some restrictions on imports from the United States and the assessee, therefore, with the permission of <ORG>, repatriated $ 49,500/- to India. The repatriation of this amount at the altered rate of exchange gave rise to a surplus of Rs. 70,147/- in the process of converting dollar currency into rupee currency. The question arose in the assessment of the assessee to income tax whether that part of the surplus of Rs. 70,147/-, which was attributable to $ 36,123/- received as commission from <ORG> was a trading profit or a capital profit. The matter was carried to this Court by the <ORG> and in the course of the judgment delivered by <NAME>, J., this Court pointed out that the answer to the question :

"..... depends on whether the act of keeping the money, i.e., $ 36,123/02, for capital purposes after obtaining the sanction of <ORG> was part of or a trading transaction. If it was part of or a trading transaction then any profit that would accrue would be revenue receipt; if it was not part of or a trading transaction, then the profit made would be a capital profit and not taxable. There is no doubt that the amount of $ 36,123.02 was a revenue receipt in the assessee's business of commission agency. Instead of repatriating it immediately, the assessee obtained the sanction of <ORG> to utilise the commission in its business manufacture of locomotive boilers and locomotives for buying capital goods. That was quite an independent transaction, and it is the nature of this transaction which has to be determined. In our view it was not a trading transaction in the business of manufacture of locomotive boilers and locomotives; it was clearly a transaction of accumulating dollars to pay for capital goods, the first step to the acquisition of capital goods. If the assessee had repatriated $ 36,123.02 and then after obtaining the sanction of <ORG> remitted $ 36,123.02 to the U.S.A., Mr. <NAME> does not contest that any profit made on devaluation would have been a capital profit. But, in our opinion, the fact that the assessee kept the money there does not make any difference specially, as we have pointed out, that it was a new transaction which the assessee entered into, the transaction being the first step to acquisition of capital goods."

This Court held that the act of retaining $ 36,123/- in the United States for capital purposes after obtaining the sanction of <ORG> was not a trading transaction in the business of manufacture of locomotive boilers and locomotives, but it was clearly a transaction of accumulating dollars to pay for capital goods, the first step in the acquisition of capital goods and the surplus attributable to $ 36,123/- was, therefore, capital accretion and not profit taxable in the hands of the assessee. It would, thus, be seen that the test applied by this Court was whether the appreciation in value had taken place in a capital asset or in a trading asset or in other words, in fixed capital or in circulating capital and since the amount of $ 36,123/-, though initially a trading receipt, was set apart for purchase of capital goods and was thus converted into a capital asset or fixed capital, it was held that appreciation in its value on conversion from dollar currency to rupee currency was a capital profit and not a trading profit. The position was the same as if the assessee had repatriated $ 36,123/- in the relevant assessment year in which it was earned and then immediately remitted an identical amount to the United States for the purchase of capital goods and profit had accrued on subsequent repatriating of this amount on account of alteration in the rate of exchange.

The other decision to which we must refer is the one in <CITATION> .(1). The assessee in this case was a public limited company carrying on the business of banking in India and it had opened a branch in Karachi on 15th November, 1946. After the partition in 1947, the currencies of India and Pakistan continued to be at par until the devaluation of the Indian rupee on September 18, 1949. On that day the Karachi branch of the assessee had with it a sum of Rs. 3,97,221/- belonging to its Head Office. As Pakistan did not devalue its currency, the old parity between Indian and Pakistani rupee ceased to exist. The exchange ratio between the two countries was, however, not determined until 27th February, 1951 when it was agreed that 100 Pakistani rupees would be equivalent to 144 Indian rupees. The assessee did not carry on any business in foreign currency in Pakistan and even after it was permitted to carry on business in Pakistani currency on 3rd April, 1951, it carried on no foreign exchange business. The amount of Rs. 3,97,221/, which was lying with the Karachi branch remained idle there and was not utilised in any banking operation even within Pakistan. On July 1, 1953, <ORG> granted permission for remittance and two days later, the assessee remitted the amount of Rs. 3,97,221/- to India. This amount, in view of the difference in the rate of exchange became equivalent to Rs. 5,71,038/- in terms of Indian currency and in the process, the assessee made a profit of Rs, 1,73,817/- . The question arose in the assessment of the assessee whether this profit of Rs. 1,73,817/- was a revenue receipt or a capital accretion. <NAME>, J., speaking on behalf of this Court, pointed out that the amount of Rs. 3,97,221/- was lying idle in the Karachi branch and it was not utilised in any banking operation and the Karachi branch was merely keeping that money with it for the purpose of remittance to India and as soon as the permission of <ORG> was obtained, it remitted that money to India. This money was "at no material time employed, expended or used for any banking operation or for any foreign exchange business". It was, to use the words of <NAME>, J., "blocked and sterilised from the period of the devaluation of the Indian rupee upto the time of its remittance to India". Therefore, even if the money was originally stock- in-trade, it "changed its character of stock-in-trade when it was blocked and sterilised and the increment in its value owing to the exchange fluctuation must be treated as a capital receipt". Since the sum of Rs. 3,97,221/- was, on the finding of fact reached by the <ORG> authorities, held on capital account and not as part of the circulating capital em-

barked in the business of banking, it was held by this Court that the profit arising to the assessee on remittance of this amount on account of alteration in the rate of exchange was not a trading profit but a capital accretion.

The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. Now, in the present case, no finding appears to have been given by the <ORG> as to whether the sums of Rs. 25 lakhs and Rs. 12,50,000/- were held by the assessee in West Pakistan on capital account or <ORG> account and whether they were part of fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If these two amounts were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss of Rs. 11 lakhs and Rs. 5,50,000/- resulting to the assessee on remission of these two amounts to India. On account of alteration in the rate of exchange, would be a trading loss, but if, instead, these two amounts were held on capital account and were part of fixed capital, the loss would plainly be a capital loss. The question whether the loss suffered by the assessee was a trading loss or a capital loss cannot, therefore, be answered unless it is first determined whether these two amounts were held by the assessee on capital account or on revenue account or on revenue account or to put it differently, as part of fixed capital or of circulating capital. We would have ordinarily, in these circumstances, called for a supplementary statement of case from the <ORG> giving its finding on this question, but both the parties agreed before us that their attention was not directed to this aspect of the matter when the case was heard before the <ORG> Authorities and the <ORG> and hence it would be desirable that the matter should go back to the <ORG> with a direction to the <ORG> either to take additional evidence itself or to direct the Income Tax Officer to take additional evidence and make a report to it, on the question whether the sums of Rs. 25 lakhs and Rs. 12,50,000/- were held in West Pakistan as capital asset or as trading asset or, in other words, as part of fixed capital or part of circulating capital in the business. The <ORG> will, on the basis of this additional evidence and in the light of the law laid down by us in this judgment, determine whether the loss suffered by the assessee on remittance of the two sums of Rs. 25 lakhs and Rs. 12,50,000/- was a trading loss or a capital loss.

We accordingly set aside the order of <ORG> and send the case back to the <ORG> with a direction to dispose it of in accordance with the directions given by us and in the light of the law laid down in this judgment. There will be no order as to costs of the appeal. <ORG> allowed and case remanded.


CASE NO.: Special Leave Petition (civil) 10653 of 1998 Special Leave Petition (civil) 12013 of 1998 Special Leave Petition (civil) 16740 of 1998 PETITIONER: STATE OF BIHAR & ORS. Vs. RESPONDENT: <NAME> & ANR. DATE OF JUDGMENT: 27/04/2000 BENCH: <NAME>, & <NAME>. JUDGMENT:

SETHI, J.

L...I...T.......T.......T.......T.......T.......T.......T..J The respondents <NAME> and <NAME> and one <NAME> were directly recruited as Sub-Inspectors of Police on 2.1.1966. <NAME> was promoted as Inspector of Police on officiating basis on 16.7.1971 with a clear stipulation that he will not get seniority in the rank of Inspector till selected by the IG's Board. Consequently he actually joined on 22.7.1971. <NAME> was promoted as Inspector on 8.7.1972 in terms of Rule 616(c) of the Bihar Police Manual Rules (hereinafter referred to as "the Rules") as he had been awarded gallantry award. On 2.7.1978 <NAME> was promoted as Inspector after selection under Rule 649 and was confirmed as such on 1.4.1982. The aforesaid respondent filed Writ petition No.6873 of 1990 in <ORG> of Patna praying for direction to the respondents therein to consider his case for promotion to the post of Dy.SP treating his date of promotion to the post of Inspector of Police as 27.7.1971, the date when he joined as Inspector of Police consequent upon his initial promotion on officiating basis. The aforesaid writ petition was disposed of by <ORG> on 30th November, 1990 directing <NAME> to file representation and the petitioner-State to dispose of the same within three months. On 14.5.1991 the Director General of Police directed seniority of the aforesaid respondent in the rank of Inspector to be reckoned with effect from 27.7.1971. However, on 13.4.1993 the DGP modified the aforesaid order and directed confirmation of <NAME> in the rank of Inspector with effect from 2.7.1978 when he was substantively promoted under Rule 649 of the Rules and placed him at Sl.No.86 Ka in the seniority list of Inspectors. Feeling aggrieved, the aforesaid respondent filed Writ Petition No.4108 of 1991 in <ORG> which was allowed on 8.4.1994 with a direction of reckoning his seniority as Inspector with effect from 27.7.1971 and grant of all consequential benefits to him. As the directions were not complied with, contempt petition being MGC No.1360 of 1994 was filed in <ORG> and according to the petitioners the order of <ORG> passed in Writ Petition No.4108/91 was implemented allegedly under the threat of contempt.

<NAME> who was promoted as Inspector out of turn on the basis of gallantry award in terms of Rule 616(c) of the Rules had been promoted as Dy.SP with effect from 25th October, 1975. Alleging that the aforesaid <NAME> was junior to him, the respondent <NAME> filed writ petition No.697 of 1995 claiming promotion with effect from the date when <NAME> was promoted as Dy.SP. The aforesaid writ petition was allowed on 26th July, 1995 directing promotion of <NAME> as Dy.SP with effect from 25th October, 1975. The Letters Patent Appeal filed against the aforesaid judgment was dismissed by a Division Bench of <ORG> on 22nd March, 1996 vide the judgment impugned in the SLP 12013/98.

There being delay of 679 days in filing the SLP, the appellants have also filed Application being IA No.1/98 seeking condonation of delay in filing the SLP. It is submitted in the application that the order of <ORG> of <ORG> could not be challenged earlier allegedly due to the fear of contempt and various coercive orders passed by <ORG> against the <ORG> and its officials. It is contended that as consequent upon the judgment of <ORG> in <NAME> case, a number of writ petitions have been filed in <ORG> of Patna for the grant of similar benefits, the <ORG> had no option left except to approach this Court. It is contended that the judgment impugned has been passed in violation of the provisions of law and the rules applicable and it has become a havoc in the <ORG> and <ORG> is facing great trouble in compliance of such type of directions for conferment of uncalled for benefits. It is submitted that if the impugned judgment is not rectified or set aside, the interests of more than 250 officers would be adversely affected. By promoting <NAME> a number of senior officers are stated to have already superseded for no fault of theirs. If promotions are given in terms of the directions of <ORG>, the same is likely to upset the entire cadre of Dy.SP of Police as well as Inspectors of Police in the <ORG> of Bihar. If not stopped, the consequence would be uncalled for litigation with heavy financial burden upon the <ORG>.

<NAME> respondent in the SLP 10653 of 1998 filed a writ petition in <ORG> praying for issuance of directions to the appellants to assign him seniority in the rank of Inspector of Police over <NAME> and thereafter provide him with all consequential benefits. He claimed to have been appointed along with <NAME> as Sub Inspector of Police in January, 1966. His name was shown above the name of <NAME> in the cadre of Sub Inspectors. Both of them passed the <ORG> training together. He claimed that his case for substantive appointment of Sub Inspector was placed before <NAME> along with the cases of <NAME> and others. <ORG> which held its meetings on 17th and 18th August, 1978 is stated to have declared both the respondents as fit for officiating promotion on the higher post of Inspector of Police. On the basis of the recommendations made by the Board a Gazette Notification is stated to have been issued on 6th October, 1978 by which both the aforesaid respondents were promoted on officiating basis to the higher post of Inspector of Police. However, despite notification <NAME> could not join the post of Inspector till 3rd March, 1981. Both the aforesaid respondents were stated to have been confirmed with effect from 1.4.1982. In the seniority list published on 18th May, 1988, the said <NAME> was shown senior to <NAME> by being placed at Sl.No.224 and <NAME> at Sl.No.225. He then referred to the filing of the writ petition by respondent <NAME> to which he was not made a party. He claimed that after the promotion of <NAME> he could not be denied the relief claimed. Allowing the writ petition on 3rd July, 1997, the learned Single Judge of <ORG> directed the petitioners herein to treat the said respondent as senior to <NAME> as Inspector of Police and provide him with all consequential benefits including promotion to the next higher post, if he otherwise was found fit. It was, however, made clear that the judgment of the Court would not affect the interest of <NAME> in the matter of promotion to the post of Dy.SP and SP which was noticed to have been already granted to him. LPA filed against the judgment of the learned Single Judge was dismissed on the ground of unexplained delay of 174 days, vide the judgment impugned in this petition.

<NAME> and others who were intervenors in <ORG> filed an application with the submission that as they were likely to be adversely affected by the impugned judgment passed by the learned Single Judge and confirmed by the appellate Bench, their interests be protected and the court should ensure by giving the benefit to the writ petitioners that the interest of the intervenors would not be adversely affected. Their application was dismissed holding:

"However, those persons are neither party in the present <ORG> nor they were party in the writ applications referred to above. Even if they have bonafide grievance, the same cannot be appreciated and considered in this <ORG>."

They have also sought the condonation of delay mainly on the ground of not being aware of the judgment passed by <ORG> which ultimately and eventually adversely affected their interests.

We have heard the arguments of the learned counsel appearing for the parties and have perused the records.@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ Appearing for the petitioners <NAME>, Senior Advocate has submitted that under the circumstances of the case and for the reasons detailed in the applications sufficient grounds have been made out for condoning the delay in filing the petitions. He has further submitted that the judgments impugned are contrary to law and totally in violation of the rules applicable in the case and if not set right, are likely to adversely affect a number of other officials who are admittedly senior than the respondents herein. According to the learned counsel 14 similar writ petitions and three contempt petitions are pending before <ORG> wherein all the petitioners have claimed similar relief as was given to <NAME>, on the ground of admittedly being senior to him. Besides 15 representations for similar reliefs are stated to be pending before the <ORG>. <NAME> is stated to have superseded 168 Inspectors by getting an order to give him seniority with effect from 27.7.1971. In the cadre of Dy.SP <NAME> is stated to have superseded 407 officers by virtue of the judgment of <ORG> in the second round claiming promotion as Dy.SP with effect from 25th October, 1975, when <NAME> was promoted. It is contended that <ORG> has committed an error of law by directing the conferment of benefits upon the respondent on the alleged ground of equality. No court can grant relief to a citizen by applying the concept of negative equality. Only because the <ORG> had committed a mistake by giving <NAME> seniority with effect from 27.7.1971 as Inspector and under the threat of contempt, promotion with effect from 25th October, 1975, the others who claimed to be similarly situated cannot force the <ORG> to commit the same mistake and upon denial approach <ORG> for issuance of appropriate directions.

<NAME>, Learned Senior Advocate appearing for the respondents has, however, submitted that as the <ORG> slept over its rights and felicitated the judgment in <NAME> case become final, they are now not entitled to seek the condonation of unexplained delay. It is further submitted that <NAME> and <NAME> have already been conferred the benefits of the judgment and consequently promoted. By setting aside the judgments at this belated stage would not only adversely affect their interests but subject the aforesaid respondents to humiliation of demotion besides suffering of the monetary loss. The learned senior counsel has even denied the claim of Mr.<NAME> regarding supersession of 168 Inspectors and 407 <ORG>.SPs. It is contended that in view of the settled law the present petitions are liable to be dismissed.

Mr.<NAME> and other advocates who appeared for the intervenors submitted that if the impugned judgments are not set aside, their clients along with others are likely to suffer for no fault of theirs. It is contended that in the absence of parties likely to be affected consequent upon the prayers made were necessary parties and in view of the fact that they have not been impleaded as party-respondents, the impugned judgments cannot adversely affect the interests of any senior officer.

Power to condone the delay in approaching the court has been conferred upon the courts to enable them to do substantial justice to parties by disposing of matters on merits. This Court in <CITATION> .[1987 (2) SCR 387] held that the expression 'sufficient cause' employed by the legislature in the Limitation Act is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice - that being the life purpose for the existence of the institution of courts. It was further observed that a liberal approach is adopted on principle as it is realised that:

"1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.

2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.

3. 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.

4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.

5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.

6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so."

After referring to the various judgments reported in <CITATION> [1975 (2) SCC 840], <CITATION> [AIR 1917 PC 156], <CITATION> [1969 (1) SCR 1006], <CITATION> [1979 (4) SCC 365], <CITATION> [1969 (2) SCC 770], <CITATION> [1981 Supp SCC 72], <CITATION> [1982 (3) SCC 366 O.p. <CITATION> [1984 (4) SCC 66], Collector, Land Acquisitionv. Katiji [1987 (2) SCC 107], Prabha v. Ram Parkash Kalra [1987 Supp. SCC 339], <CITATION> [1988 (2) SCC 142], <CITATION> [1991 (1) SCC 174], <CITATION> [1993 (1) SCC 572], <CITATION> [1993 Supp (1) SCC 487], <CITATION> [1994 Supp (2) SCC 507] and <CITATION> [1995 Supp (1) SCC 37; this Court in <CITATION> . [1996 (3) SCC 132] held:

"It is notorious and common knowledge that delay in more than 60 per cent of the cases filed in this <ORG> - be it by private party or the <ORG> - are barred by limitation and this <ORG> generally adopts liberal approach in condonation of delay finding somewhat sufficient cause to decide the appeal on merits. It is equally common knowledge that litigants including the <ORG> are accorded the same treatment and the law is administered in an even-handed manner. When the <ORG> is an applicant, praying for condonation of delay, it is common knowledge that on account of impersonal machinery and the inherited bureaucratic methodology imbued with the note-making, file pushing, and passing-on-the buck ethos, delay on the part of the <ORG> is less difficult to understand though more difficult to approve, but the <ORG> represents collective cause of the community. It is axiomatic that decisions are taken by officers/agencies proverbially at slow pace and encumbered process of pushing the files from table to table and keeping it on table for considerable time causing delay - intentional or otherwise - is a routine. Considerable delay of procedural red-tape in the process of their making decision is a common feature. Therefore, certain amount of altitude is not impermissible. If the appeals brought by the <ORG> are lost for such default no person is individually affected but what in the ultimate analysis suffers, is public interest. The expression 'sufficient cause' should, therefore, be considered with pragmatism in justice-oriented process approach rather than the technical detention of sufficient case for explaining every day's delay. The factors which are peculiar to and characteristic of the functioning of pragmatic approach in justice oriented process. The court should decide the matters on merits unless the case is hopelessly without merit. No separate standards to determine the cause laid by the <ORG> vis-à-vis private litigant could be laid to prove strict standards of sufficient cause. The <ORG> at appropriate level should constitute legal cells to examine the cases whether any legal principles are involved for decision by the courts or whether cases require adjustment and should authorise the officers to take a decision to give appropriate permission for settlement. In the event of decision to file the appeal needed prompt action should be pursued by the officer responsible to file the appeal and he should be made personally responsible for lapses, if any. Equally, the <ORG> cannot be put on the same footing as an individual. The individual would always be quick in taking the decision whether he would pursue the remedy by way of an appeal or application since he is a person legally injured while <ORG> is an impersonal machinery working through its officers or servants."

To the same effect is the judgment of this Court in <CITATION> [1996 (10) SCC 634].

<CITATION> [1995 (6) SCC 614] this Court under the peculiar circumstances of the case@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ condoned the delay in approaching this Court of about 31@@ JJJJJJJJJJJJJJJJJJJJJJJ years. <CITATION> [1998 (7) SCC 123] this Court held that the purpose of Limitation Act was not to destroy the rights. It is founded on public policy fixing a life span for the legal remedy for the general welfare. The primary function of a Court is to adjudicate disputes between the parties and to advance substantial justice. The time limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. The object of providing legal remedy is to repair the damage caused by reason of legal injury. If the explanation given does not smack malafides or is not shown to have been put forth as a part of dilatory strategy, the court must show utmost consideration to the suitor. In this context it was observed:

"It is axiomatic that condonation of delay is a matter of discretion of the court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to a want of acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory. Once the court accepts the explanation as sufficient, it is the result of positive exercise of discretion and normally the superior court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse. But it is a different matter when the first court refuses to condone the delay. In such cases, the superior court would be free to consider the cause shown for the delay afresh and it is open to such superior court to come to its own finding even untrammelled by the conclusion of the lower court."

Looking into the facts and circumstances of the case, as noticed earlier and with the object of doing substantial@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ justice to all the parties concerned, we are of the opinion@@ JJJJJJJJJJJJJJJJJJJ that sufficient cause has been made out by the petitioners which has persuaded us to condone the delay in filing the petitions. Dismissing the appeals on technical grounds of limitation would not, in any way, advance the interests of justice but admittedly, result in failure of justice as the impugned judgments are likely to affect not only the parties before us, but hundreds of other persons who are stated to be senior than the respondents. The technicalities of law cannot prevent us from doing substantial justice and undoing the illegalities perpetuated on the basis of the impugned judgments. However, while deciding the petitions, the reliefs in the case can appropriately be moulded which may not amount to unsettle the settled rights of the parties on the basis of judicial pronouncements made by the courts regarding which the <ORG> is shown to have been careless and negligent. It is paramount consideration of this Court to safeguard the interests of all the litigants and persons serving the Police Department of the <ORG> of Bihar by ensuring the security of the tenure and non disturbance of accrual of rights upon them under the prevalent law and the rules made in that behalf. Accordingly delay in filing the petitions is condoned.

Leave granted.

The facts as noticed earlier are not seriously disputed. The respondent <NAME> had filed Writ Petition No.1556/90 praying therein that he be given the same benefit as was given to the writ petitioners in Writ Petition No.563 of 1985. He contended that similar benefits had been conferred upon many police officers and he had allegedly been discriminated. The writ petition was dismissed as withdrawn on 31st July, 1990 with the observation that "however, this shall not prejudice the petitioners in pursuing a remedy, if any, available to him or pursuing his representation which we are informed is pending with the State". As his representation dated 4.6.1988 had not been considered, <NAME> filed writ petition No.6873 of 1990 in which he prayed:

"Under the above facts and circumstances it is, therefore, prayed that your lordships be graciously pleased to admit this application issue rule NISI and after both parties and there show causes if any allow this application by issuing a writ of directing the respondents to give promotion and other consequential benefits to the petitioner from the post of Inspector of Police to the post of Deputy Superintendent of Police from the date the petitioner is found in legal entitle considering the case for promotion to the post of Deputy Superintendent of Police by treating as confirmed Inspector of Police with effect from 27.7.71 i.e. the date of continuous officiation in the rank of Inspector of Police in the event of judgments and order passed by <ORG> relying on judgment of <ORG> contained in Annexure 1, 2 and 3 of this writ application or pass such other order or orders as to your lordships may be pleased fit and proper."

As the Director General modified his order dated 14th May, 1991 vide his subsequent order dated 13.4.1993, <NAME> filed Writ Petition No.4108 of 1994 wherein he alleged that his seniority had not been fixed correctly in the rank of Inspectors. A learned Single Judge of <ORG> vide his interim order directed appellants herein to issue a regular order of promotion and if so advised to determine the seniority of the writ petitioners in the cadre of Dy.SP of Police. It examined the legality of the order of the Director General of Police dated 13.4.1993 and held:

"The petitioner's seniority once determined in the rank of Inspector with effect from 27.7.1971 cannot be legally altered without notice nor is any justification for the alteration pointed out by the learned <ORG> counsel.

Therefore, his seniority in the rank of Inspector has to be reckoned with effect from 27.7.1971. The date of confirmation, in these circumstances, would, therefore, not to relevant for determining the seniority of the petitioner in the rank Inspector, and is necessary, his confirmation on the post of Inspector would have to as made afresh treating the petitioner to have been placed on probation in the rank of Inspector from 27.7.1971. Further consequential revisions, if necessary, shall also be made in the gradation list of the Deputy Superintendent of Police where the petitioner has been placed at Serial Number 399."

The impugned order was quashed and a direction issued to the appellant to reckon the seniority of the writ petitioners in the rank of Inspectors with effect from 27.7.1971 with all consequential benefits as a result of revision of his seniority in the rank of Inspector as well as that of Dy.SP of Police. Admittedly, this order was not appealed against and ultimately implemented by the authorities of the appellant- State. By order dated 1st October, 1994 the respondent <NAME> was held entitled for promotion to the post of Dy.SP with effect from 11th July, 1981 and not with effect from 25th October, 1975. He again filed writ petition No.697 of 1995 submitting therein that having been confirmed to the lower post of Inspector of Police from 1st March, 1975 his seniority should be counted from the date of confirmation i.e. 25th October, 1975. It was noticed that <NAME> who was allegedly junior to him had been promoted to the post of Inspector with effect from 8th July, 1972. <NAME> claimed to be senior to said <NAME> on the ground of having been promoted as Inspector on officiating basis on 27.7.1971. The learned Single Judge held:

"Having heard the parties, my considered view is that the impugned order dated 1st October, 1994 is completely illegal. The same is against the order and direction of this Court dt.8th April, 1994, passed in CWJC No.4108/91, wherein this court categorically held and directed the respondents to provide the petitioner with the seniority in the rank of Inspector of Police with effect from 27th July, 1971. By the impugned order, as contained in annexure-12, the respondents cannot superseded and/or alter the aforesaid finding of this Court, in fact, Annexure-12 is contemptions.

Apart from the aforesaid fact, numerous decisions, including the decision given by <ORG>, as reported in AIR 1977 SC 2051, it has been held that the seniority of a person cannot be dependent on confirmation, if confirmation itself is fortuitous in nature. In the present case I have taken into note that confirmation of the petitioner and <NAME> to the post of Inspector of Police itself was fortuitous in nature, the same having not been made on the assessment of merit. Such being the position, the impugned order dated 1st October, 1994 cannot be sustained in the eye of law."

The order dated 1st October, 1994 in so far as it related to the writ petitioner was set aside with a direction to the authorities of the appellant-State to consider the case of the writ petitioner for promotion to the post of Dy.SP with effect from 25th October, 1975 i.e. the date when his alleged junior <NAME> was promoted. It was further directed that in case the writ petitioner was found fit for promotion with effect from 25th October, 1975 he would shift back the date of promotion to the post of Dy.SP from 11th July, 1971 to 25th October, 1971. The appellants were further directed to provide all consequential benefits to the petitioners.

Rule 649 deals with the promotion of Sub Inspectors to Inspectors and Reserve Sub-Inspectors to Reserve Inspections and provides:

"649. Inspectors and Reserve Inspectors-- (a) The promotion of Sub-Inspectors to Inspectors, and Reserve Sub-Inspectors to Reserve Inspectors will be made by the Inspector-General on the advice of the Inspector General's Selection Board [Appendix 72(1)] (For period of probation, See Rule 668).

(b) In July the Deputy Inspector-General will call for nominations for promotion to reach him on the date fixed. The form of nomination and the list of enclosures are given in P.M. Form No.102.

(c) At least 14 days before nominations are sent to the Deputy Inspector General the names of the nominees shall be published by the nominating authority in district orders so that those who are not nominated may have an opportunity of representing their cases before the nominations are actually submitted. Officers, having such representation to make, should be given interviews and their cases examined with them.

In case their representations are rejected, those who have been superseded may file representation before Deputy Inspector General. Such representation shall be submitted within 14 days of receipt of information and this shall be forwarded soon to Deputy Inspector General, so that additional nominations may be sent on the orders of Deputy Inspector General.

In forwarding the nominations a certificate must be given of the dates on which the lists were published and intimations sent to those not nominated. In selecting Sub-Inspectors and Reserve Sub Inspectors for promotion, preference should be given to those who have received special commendation for integrity of character and good defective work.

(d) <ORG> [Appendix 72(3)] shall scrutinize the district nominations and shall select from among them in order of merit those whose nominations are to be sent before <ORG> [Appendix 72(1)] on a date to be fixed by the Inspector- General.

(e) <ORG> [Appendix 72(1)] shall scrutinize the nominations of <ORG> and compile a list of selections which should ordinarily be in order of seniority for promotion as vacancies occur. If an officer is placed higher in the list than his seniority warrants a full note giving reason shall be recorded. This list shall be of as many Sub-Inspectors as there are vacancies plus few anticipatory vacancies depending on averages of last few years. Promotions by the Inspector-General under clause (a) shall be confined to this list but if any one does not get appointed from the list, his case shall be reviewed again at the time of preparation of the next year's list and if found fit, he shall be placed above the selected nominees of that year."

The respondent <NAME> is stated to have been promoted as Inspector in terms of the said Rule on@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 2nd July, 1978. Rule 660(c) deals with the out of turn@@ JJJJJJJJJJJJJJJJJ promotions and reads: "Selection Boards may recommend out of turn promotion of officers with outstanding records of service and competent authorities may order such promotion in deserving cases as they deem fit and proper with the approval of next higher authority.

Officers so promoted should be placed below the officers of the approved existing list of respective rank prepared by <ORG> and be confirmed against substantive vacancies as and when vacancies arise in the order of the list.

Criteria taken together for determining outstanding records of service will be as follows:

i) Award of President's Police Medal and Indian Police Medal, for gallantry and distinguished service.

ii) Should not have been awarded any major punishment till the date of consideration and order of out of turn promotion.

iii) Very good entries in permanent Character Roll.

iv) Citation regarding high standard of investigation, detection and control of crime and intelligence work.

v) Should have ability for shouldering higher responsibilities consonant with the proposed promotion [See <ORG>, dated 12th May, 1976].

<NAME> was promoted under the aforesaid rule on 8.7.1972. The respondent <NAME> prayed his promotion to be made effective from 27th July, 1971 when he jointed as Inspector consequent upon his promotion on officiating basis. The order of his promotion read as:

"Following Sub-Inspectors are promoted to officiate as Inspector w.e.f. the date they join their place of posting noted against each. They will not get the advantage of the previous contained in GOM VII/1966 towards their seniority in the rank of Inspector till they are finally selected by I.G.'s Board.

<NAME> - P.S. <NAME> as usual he will function as Cr.O for Sadar Sub-division....." This Court in <CITATION> ., etc. [1993 (2) SCR 919] held that to enable seniority to be counted from the date of initial appointment and not according to the date of promotion, the incumbent of the post has to be initially appointed "according to the rules". Where the initial appointment is only adhoc and not according to the rules and made as a stop gap arrangements, the officiation on such post cannot be taken into account for considering the seniority. In that case the Court relied upon the judgment of the Constitution Bench in <CITATION> . [1990 (2) SCR 900] wherein it was held that:

"(A) Once an incumbent is appointed to a post according to rule, his seniority has to be counted from the date of his appointment and not according to the date of his confirmation.

The corollary of the above rule is that where the initial appointment is only adhoc and not according to rules and made as a stop gap arrangement, the officiation in such post cannot be taken into account for considering the seniority.

(B) If the initial appointment is not made by following the procedure laid down by the rules but the appointee continues in the post uninterruptedly till the regularisation of his service in accordance with the rules, the period of officiating service will be counted.

(C) When appointments are made from more than one source, it is permissible to fix the ratio for recruitment from the different sources, and if rules are framed in this regard they must ordinarily be followed strictly.

(D) If it becomes impossible to adhere to the existing quota rule, it should be substituted by an appropriate rule to meet the needs of the situation. In case, however, the quota rule is not followed continuously for a number of years because it was impossible to do so the inference is irresistible that the quota rule had broken down.

(E) Where the quota rule has broken down and the appointments are made from one source in excess of the quota, but are made after following the procedure prescribed by the rules for the appointment, the appointees should not be pushed down below the appointees from the other source inducted in the service at a later date.

(F) Where the rule permits the authorities to relax the provisions relating to the quota, ordinarily a presumption should be raised that there was such relaxation when there is a deviation from the quota rule.

(G) The quota for recruitment from the different sources may be prescribed by executive instructions, if the rules are silent on the subject.

(H) If the quota rule is prescribed by an executive instruction, and is not followed continuously for a number of years, the inference is that the executive instruction has ceased to remain operative.

(I) The posts held by the permanent Deputy Engineers as well as the officiating Deputy Engineers under the State of Maharashtra belonged to the single cadre of Deputy Engineers.

(J) The decision dealing with important questions concerning a particular service given after careful consideration should be respected rather than scrutinised for finding out any possible error. It is not in the interest of service to unsettle a settled position."

It is thus evident that <NAME> having been promoted on officiating basis with a clear stipulation that he will not get seniority in the rank of Inspector till finally selected could not have preferred a claim regarding his seniority on the basis of promotion of <NAME>, though initially junior to him yet substantively promoted in accordance with Rule 660C on 8.7.1972 whereas <NAME> was promoted after selection under Rule 649 in 1978. <ORG> totally ignored the basic principles governing the service rules and the mandate of law. There was, therefore, no justification of issuing the directions to direct the promotion of <NAME> while deciding the writ petition No.697 of 1995 and dismissing the LPA No.1018/95 vide the judgment impugned in this appeal filed against <NAME>.

It appears that <ORG> totally lost sight of the fact that in his petitions filed from time to time <NAME> had not impleaded any of his seniors as party-respondents. In the absence of persons likely to be affected by the relief prayed for, the writ petitions should have normally been dismissed unless there existed specific reasons for non impleadment of the affected persons. Neither any reason was assigned by the writ petitioner nor the court felt it necessary to deal with this aspect of the matter. Ignoring such a basic principle of law has resulted in the supersession of 168 Inspectors and 407 <ORG>.SPs. The writ petition filed by <NAME> being totally misconceived, devoid of any legal force and prayers made being in contravention of the rules applicable in the case deserved dismissal, which was unfortunately not done with the result that the interests of many seniors have been threatened, endangered and adversely affected. The appeal of the State has, therefore, to be allowed by setting aside the impugned judgment.

<NAME> respondent in his petition has preferred his claim of promotion on the ground of promotion@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ of his junior <NAME> who was impleaded as@@ JJJJJJJJJJJJJJJJJJJ respondent No.6. He had specifically submitted:

"That from the facts, law and circumstances stated above it is clear that the petitioner was at all material times senior to the respondent No.6 and the respondent NO.6 illegally scored a march over him therefore on the principles of recognised service jurisprudence on next below rule, the petitioner should be assigned seniority from 27.7.71 and be confirmed with effect from 2.7.78 and the petitioner be put just above the respondent no.6 in the seniority list of Inspector of Police."

He had prayed that:

"For issuance of appropriate writ, order or direction to direct the official respondents to assign seniority in the rank of Inspector just above the respondent No.6 and to confirm on the post of Inspector with effect from 2.7.78 when his junior respondent no.6 has been confirmed and for grant of all consequential benefits." The writ petition was disposed of holding <NAME> as senior to <NAME> as Sub Inspector of Police having been confirmed as Inspector on 1.4.1982 with observeation: "Subsequently, whatever the advantage, the respondent No.6 has derived in pursuance of different orders of this Court, including the orders/judgments passed in CWJC No.6873/90; 4108/91 and 6975/95, were so obtained by him without impleading the petitioner as part-respondent therein.

In this background, while I do not doubt the decisions given by this Court in different cases of respondent No.6, <NAME> and while I do not doubt the consequential orders which have been issued by the respondents on the basis, I hold that the petitioner cannot suffer for the same and he is entitled for seniority over the respondent No.6 as Inspector of Police, though not promoted, while the Respondent No.6 was granted officiating promotion by way of stop gap arrangement on 27th July, 1971.

Accordingly, the respondents are directed to treat the petitioner as senior to the respondent No.6 as Inspector of Police and provide him with the consequential benefit of the same, including promotion to the next higher post, if the petitioner is found fit for the same."

The appeal filed against this judgment was dismissed on the ground of delay and without consideration of the pleas raised on facts. The concept of equality as envisaged under Article 14 of the Constitution is a positive concept which cannot be enforced in a negative manner. When any authority is shown to have committed any illegality or irregularity in favour of any individual or group of individuals other cannot claim the same illegality or irregularity on ground of denial thereof to them. Similarly wrong judgment passed in favour of one individual does not entitle others to claim similar benefits. In this regard this Court in <CITATION> . [1996 (2) SCC 459] held that citizens have assumed wrong notions regarding the scope of Article 14 of the Constitution which guarantees equality before law to all citizens. Benefits extended to some persons in an irregular or illegal manner cannot be claimed by a citizen on the plea of equality as enshrined in Article 14 of the Constitution by way of writ petition filed in <ORG>. The Court observed:

"Neither Article 14 of the Constitution conceives within the equality clause this concept nor Article 226 empowers <ORG> to enforce such claim of equality before law. If such claims are enforced, it shall amount to directing to continue and perpetuate an illegal procedure or an illegal order for extending similar benefits to others. Before a claim based on equality clause is upheld, it must be established by the petitioner that his claim being just and legal, has been denied to him, while it has been extended to others and in this process there has been a discrimination."

Again in <CITATION> . [1997 (1) SCC 35] this Court considered the scope of Article 14 of the Constitution and reiterated its earlier position regarding the concept of equality holding:

"Suffice it to hold that the illegal allotment founded upon ultra vires and illegal policy of allotment made to some other persons wrongly, would not form a legal premise to ensure it to the respondent or to repeat or perpetuate such illegal order, nor could it be legalised. In other words, judicial process cannot be abused to perpetuate the illegalities. Thus considered, we hold that <ORG> was clearly in error in directing the appellants to allot the land to the respondents."

<CITATION> [1997 (3) SCC 321] this Court observed:

"The doctrine of discrimination is founded upon existence of an enforceable right. He was discriminated and denied equality as some similarly situated persons had been given the same relief. Article 14 would apply only when invidious discrimination is meted out to equals and similarly circumstanced without any rational basis or relationship in that behalf. The respondent has no right, whatsoever and cannot be given the relief wrongly given to them, i.e., benefit of withdrawal of resignation. <ORG> was wholly wrong in reaching the conclusion that there was invidious discrimination. If we cannot allow a wrong to perpetrate, an employee, after committing mis-appropriation of money, is dismissed from service and subsequently that order is withdrawn and he is reinstated into the service. Can a similarly circumstanced person claim equality under Section 14 for reinstatement? The answer is obviously "No". In a converse case, in the first instance, one may be wrong but the wrong order cannot be the foundation for claiming equality for enforcement of the same order. As stated earlier, his right must be founded upon enforceable right to entitle him to the equality treatment for enforcement thereof. A wrong decision by the Government does not give a right to enforce the wrong order and claim parity or equality. Two wrongs can never make a right."

In view of our finding that the judgment of <ORG> in the case of <NAME> being contrary@@ JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ to law was not sustainable and liable to be dismissed, the@@ JJJJJJJJJJJJJJJ impugned judgment in the case of <NAME> case cannot be upheld. The aforesaid respondent is, therefore, not entitled to any relief as prayed for by him on the analogy of the judgments passed and directions given in <NAME>'s case.

We do not agree with the submissions of the respondents that the question of law raised by the appellants in regard to determination of seniority could not be permitted to be raised as allegedly the said point had not been pleaded before <ORG> and is altogether a new point taken for the first time in this Court. As noticed earlier, <ORG> had dismissed the LPAs only on the ground of limitation without deciding the other pleas raised by the appellants. A perusal of LPA No.1018 of 1995 (Annexure P-6) shows that in para 9 the appeallant <ORG> had submitted that the Home Secretary of the <ORG> had filed a counter affidavit in the writ petition No.697 of 1995 stating therein:

"...it is not correct to say that the petitioner (respondent in this appeal) is validly entitled to be promoted to the rank of Deputy Superintendent of Police from earlier date when junior to him namely <NAME> joined as inspector on 8.7.1972 has been promoted to the rank of Deputy Superintendent of Police. The promotion of the petitioner in the rank of Inspector is different from <NAME>. The petitioner was promoted to the rank of Inspector on adhoc basis with effect from 27.7.71 and has been confirmed with effect from 1.3.1975 on availability of permanent vacancy alongwith those Inspectors who were officiated on or before 27.7.1971, whereas <NAME> was promoted in the rank of Inspector out of turn on 8.7.1972 on probation on the basis of Presidents Police Medal from gallantry. After expiry of probation of two years he (<NAME>) had been confirmed with effect from 8.7.1974 and promoted to the rank of Deputy Superintendent of Police, with effect from 25.10.1975, alongwith others. As such petitioner is not validly entitled for promotion to the rank of Deputy Superintendent of police from the earlier date when Sri <NAME> was promoted to the rank of Deputy Superintendent of Police with effect from 25.10.1975."

In the memo of appeal, the appellant herein submitted that the promotion case of the respondent was different from that of <NAME>. It was pleaded:

"....The petitioner was promoted to the rank of Inspector on adhoc basis with effect from 27.7.1971 and later on he was given officiating promotion from that very date, i.e. 27.7.1971 and was confirmed with effect from 1.3.1975 on the availability of permanent vacancy alongwith those Inspectors, who were officiating on or before 27.7.1971 and promoted to the rank of Deputy Superintendent of Police with effect from 11.7.1981 according to seniority. As stated earlier <NAME> was promoted out of turn in the rank of Inspector on 8.7.1972 on the basis of gallantry award by the <ORG>. and the period of probation was treated by the government from 8.7.1972 itself. After expiry of probation of two years he was confirmed with effect from 8.7.1974 and promoted in the rank of Deputy Superintendent of Police from 25.10.1975. It was an exceptional case. This is not followed in general officiating officers are confirmed on availability of permanent vacancy and not put on probation from the date of officiation. If this respondent is put on probation with effect from 27.7.1971 i.e. from the date of officiation so many police officers will be superseded."

The State also submitted that the learned Single Judge of <ORG> had committed a mistake of law by not considering all aspects of the matter before allowing the writ petition on 26th July, 1975 which required to be interfered with by the Division Bench of <ORG> in the LPA. When specific plea regarding facts and law had been raised in the LPA, the arguments of the respondents cannot be accepted that such a plea had been raised by the appellant for the first time in this Court. It is further contended that as the respondent was, in the meantime, appointed/promoted in the <ORG> Cadre and as per requirements of <ORG> he has already submitted his resignation from <ORG>, the acceptance of the appeal and setting aside the directions of <ORG> would result in great hardship to him and amount to unsettling his settled service rights particularly when his promotion/appointment to the <ORG> cadre has not been challenged and is not in dispute. Such a plea by itself cannot be accepted as a ground to dismiss the appeal filed against an order which we have held to be illegal being contrary to law and the Service Rules applicable in the case. Once the judgment is set aside, the consequences have to follow and a person taking advantage or benefit of the wrong orders is to suffer for his own faults which cannot be attributed to anybody-else. However, in appropriate cases this Court can mould the relief to safeguard the interests of a person wherever required. For doing complete justice between the parties, appropriate directions can be given to protect the interests of a person who is found to have been conferred the benefits on the basis of judicial pronouncements made in his favour. As the appellant-State has been found to be careless and negligent in defending its cases, we feel and are inclined to protect the interests of <NAME>, respondent. We are convinced that the interests of justice would be served by holding that despite setting aside the judgments of <ORG> his interests be protected by not disturbing his promotions made from time to time. However, judgments passed in his favour cannot be permitted to be made a basis for conferment of similar rights upon other persons who are shown to have filed writ petitions or representations which, if accepted, are likely to adversely affect the interests of more than 150 Inspectors and 400 Officers in the rank of Dy.SP. Similarly, if any benefit has been conferred upon any other person who has superannuated, no useful purpose would be served by directing his demotion retrospectively and recovery of the excess emoluments paid to him. Under the circumstances, the appeals are allowed/disposed of with the@@ JJJ directions that: (1) Judgments of the learned Single Judge@@ JJJJJJJJJJJJJJJJJ and of the LPA Bench passed in the case of <NAME> impugned in Civil Appeal arising out of SLP (C) No.12013 of 1998 are set aside. (2) Similarly the judgments passed in <NAME> case by the Single Judge and the LPA Bench which are impugned in this appeal arising out of SLP (C) NO.10653/98 are also set aside. (3) In view of setting aside the judgments in both the appeals mentioned above no orders are required to passed in Civil Appeal arising out SLP (C) NO.16740/98. (4) It is, however, made clear that despite setting aside of the impugned judgments the service benefits conferred upon <NAME> consequent upon the judgments of <ORG> shall not be withdrawn and his appointment/promotion in the <ORG> cadre not disturbed. (5) Consequent upon this judgment the appellant-State shall also not take any action against a person conferred with similar benefits as were conferred upon <NAME> if that person has retired and is no more in service. Parties to bear their own costs.