PETITIONER: RAI RAMKRISHNA & OTHERS Vs. RESPONDENT: THE STATE OF BIHAR DATE OF JUDGMENT: 11/02/1963 BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N. HIDAYATULLAH, M. GUPTA, K.C. DAS SHAH, J.C. CITATION: 1963 AIR 1667 1964 SCR (1) 897 CITATOR INFO : R 1964 SC 925 (30) F 1964 SC1667 (9) R 1966 SC 764 (28) RF 1968 SC1138 (24) E 1968 SC1227 (4) R 1970 SC 169 (11,12) R 1972 SC2455 (6,10) R 1973 SC1034 (13) E&R 1974 SC 436 (38,39,40,42) F 1976 SC 182 (25) RF 1976 SC 997 (4) F 1980 SC 271 (43,49) E 1984 SC1194 (32) MV 1985 SC 921 (74) RF 1988 SC 191 (30) ACT: Taxing Statute-Tax on passengers and goods-Retrospective operation-Validity-Restrictions, if unreasonable-Fundamental rights, if infringed-State's power of taxation--Constitution of India, Arts. 19(1)(f) and (g), (5), (6), 304(b), Seventh Schedule, List II, Entry 56-Bihar - Finance Act , 1950 (Bihar 17 of 1950)-Bihar Taxation on Passengers and Goods (Carried by Public Service Motor, Vehicles) Act , 1961, (Bihar 17 of 1961) as. 1 (3), 23(b). HEADNOTE: On March 30, 1950, <ORG> passed the Bihar Finance Act, 1950. That Act levied a tax on passengers and goods carried by public service motor vehicles in Bihar. The appellants challenged the validity of the Act and certain provisions of the Act were struck down by this Court. The respondent then issued the Bihar Ordinance No. 11 of 1961 on August 1, 1961. By that Ordinance, the provisions of the Act of 1950 which had been struck down by this Court were validated and brought into force retrospectively from the date when the earlier Act purported to come into force. Later on, the provisions of the said Ordinance were incorporated in the Bihar 898 Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961. As a result of the retrospective operation of the Act of 1961, its material provisions were deemed to have come into force from April 1, 1950, the date on which the Act of 1950 came into force. The appellants challenged the validity of the Act of 1961 but their writ petitions were dismissed by <ORG> which held that the Act in its entirety was valid. The appellants came to this Court by special leave. The appellants conceded in this Court that the Act of 1961 in its prospective operation was perfectly valid and s. 23 (a) which validated the acts done under the Act of 1950 was valid. What was contended by the appellants was that the provisions of s. 23(b) in so far as they referred to proceedings commenced under the Act of 1950 but not completed before the Act of 1961 came into force were invalid. It was also contended that the retrospective operation prescribed by s. 1(3) and a part of s. 23(b) so completely altered the character of the tax proposed to be retrospectively recovered that it introduced a serious infirmity in the legislative competence of <ORG> itself and the retrospective operation was, so unreasonable that it could not be saved either under Art, 304(b) or Art. 19(5) and (6) of the Constitution of India. Held, that if in its essential features a taxing statute is within the competence of the <ORG> which passed it by reference to the relevant entry in the List, its character is not necessarily changed merely by its retrospective operation so as to make the said retrospective operation outside the legislative competence of the said legislature. The challenge to the validity of the retrospective operation of the Act on the ground that the provision was beyond the legislative competence of <ORG>, must be rejected. Held, also that the restriction imposed on the fundamental rights of the appellants under Art. 19(1)(f) and (g) by the retrospective operation of the Act was reasonable within the meaning of Arts. 19(5) and (6) and Art. 304(b). The test of the length of time covered by the retrospective operations cannot by itself be treated as a decisive test. Where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law, but it can also provide for ;he retrospective operation of the said provisions. The legislative power includes the subsidiary or the auxiliary power to validate law which is found to be, invalid. If a law passed by the legislature 899 is struck down by the Courts, it is competent to the appropriate legislature to pass a validating law so as to make the provisions of the earlier law effective from the date when it was passed. The power of taxing people and their property is an essential attribute of Government and the Government can legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be within the legislative competence of the legislature, can be taxed by the legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature. <CITATION> ,  1 S.C.R. 809, <CITATION> ,  1 S.C.R. 491, United Provinces v. Mst. Atiqa Begum  F.C.R. 110, <CITATION> ,  S.C.R. 587, <CITATION> ,  S.C.R. 12, <CITATION> ,  3 S.C.R. 77, <CITATION> ,  1 S.C.R. 220, <CITATION> ,  S.C.R. 1355, <CITATION> ,  S.C.R. 1422, <CITATION> ,  2 S.C.R. 1, and <CITATION> ,  Supp. 2 S.C.R. 1, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 16 and 17 of 1962.

Appeals by special leave from the judgment and order dated September 5, 1962, of <ORG> in Misc. judl. Cases Nos. 916 and 918 of 1961.

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

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

1963. February 11. The judgment of the Court was delivered by GAJENDRAGADKAR,J.-The short question which these two appeals raise for our decision is in regard to the validity of the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 (No. 17 of 1961) (hereinafter called " The Act '). It is true that the two writ petitions Nos. 916/1961 and 918/1961 filed by the appellants <ORG> and <ORG> respectively in <ORG> at Patna along with 18 others under Articles 226 and 227 of the Constitution had challenged the validity of the whole of the Act. <ORG> has held that the Act is valid both in its prospective as well as its retrospective operation. In their appeals brought to this Court by special leave against the said judgment, the appellants do not challenge the conclusion of <ORG> that the Act is valid in so far as its prospective operation is concerned; they have confined their appeals to its retrospective operation. Eighteen other petitioners who had joined the appellants in <ORG> have accepted the decision of <ORG> and have not come to this Court in appeal.

Before dealing with the points raised by the appellants, it is necessary to set out briefly the background of the present dispute : On March, 30, 1950, <ORG> passed the Bihar Finance Act, 1950 (Bihar Act 17 of 1950); this Act levied a tax on passengers and goods carried by public service motor vehicles in Bihar. Nearly a year after this Act came into force, the appellants challenged its validity by instituting a suit No. 60/1951 in <ORG> at Gaya on May 5, 1951. In this suit, the appellants prayed that the provisions of Part III of the said Act were unconstitutional and asked for an injunction restraining the respondent, the State of Bihar, from levying and realising the said tax. It appears that a similar suit was instituted (No. 57/1951) on behalf of the passengers and owners of goods for obtaining similar reliefs against the bus operators. This latter suit was filed by the passengers and owners of goods in a representative capacity under O. 1 r.

8. Both these suits were transferred to <ORG> for disposal. A special Bench of <ORG> which heard the said two suits dismissed them on May 8, 1952. <ORG> found that the said Act of 1950 did not contravene Art. 301 of the Constitution and so, its validity was beyond challenge. The appellants then preferred an appeal to this Court No. 53/1952. Pending the said appealin this Court, a similar question had been decided by this Court in the case of <CITATION> (1), In consequence, when the appellants' appeal came for disposal before this Court, it was conceded by the respondent that the said appeal was covered by the decision of this Court in the case of <ORG>, and that in accordance with the said decision, the appeal had to be allowed. That is why the appeal was allowed and the appellants were granted the declaration and injunction claimed by them in their suit. This judgment was pronounced on December 12, 1960.

The respondent then issued an Ordinance (Bihar Ordinance No. II of 1961) on August 1, 1961. By this Ordinance' the material provisions of the earlier Act Of 1950 which had been struck down by this Court were validated and brought into force retrospectively from the date when the earlier Act had purported to come into force. Subsequently, the provisions of the said Ordinance were incorporated in the Act which was duly passed by <ORG> and received the assent of (1) [1961] 1 S.C.R. 809.

the President on September 23, 1961. As a result of the retrospective operation of this Act, its material provisions are deemed to have come into force on April 1, 1950, that is to say, the date on which the earlier Act of 1950 had come into force. That, in brief, is the background of the present legislation.

The appellants and the other petitioners who had joined by filing several petitions in <ORG> had challenged the validity of the Act on several grounds. <ORG> has rejected all these grounds and has taken the view that the Act in its entirety is valid. <ORG> has found that the provisions of the Act no doubt take it within the purview of Part XIII of the Constitution; but it has held that the Act has been passed with the previous sanction of the President and the restrictions imposed by it are otherwise reasonable, and so, it is saved under Art. 304

(b) of the Constitution. The plea made by the respondent that the taxing provisions of the Act were compensatory in character and were, therefore, valid, was rejected by <ORG>. <ORG> held that the principle that a taxing statute which levies a compensatory or regulatory tax is not invalid which has been laid down by the majority decision of this Court in the case of <CITATION> (1), was not applicable to the provisions of the Act. The argument that the Act was invalid because it required the appellants to act as the Agents of the respondent for collecting the tax from the passengers and from the owners of the goods without payment of any remuneration, was rejected by <ORG>. It was also urged that the Act contravened the provisions of Art. 199 (4) of the Constitution, but <ORG> was not impressed with this argument; and the plea that the matters in dispute between the appellants and-the respondent are really concluded by res judicata, (1)  1 S.C.R. 491.

appeared to <ORG> without any substance. That is how the writ petitions filed by the appellants failed, and so, they have come to this Court confining their challenge only to the validity of the restrospective operation of the Act.

At this stage, it is necessary to refer to the material provisions of the earlier Acts and examine the scheme of the Act impugned. The Finance Act of 1950 was an amending Act; it was passed because it was thought expedient by <ORG> to amend the earlier Bihar Sales Tax Act, 1947, and the Bihar Agricultural Income-Tax - Act, 1948. Section 12 of the said Act levied a tax on passengers and goods carried or transported by public service vehicles and public carriers. Section 12 (1) prescribed the rate of the said taxation @ As.-/2/-in a rupee on all fares and freights payable to owners of such motor cabs, stage carriages, contract carriages or public carriers,, as carried the goods and passengers in question. Sub-section (2) dealt with the cases where any fare or freight was charged in a lump sum either for carrying goods or by way of contribution for a season ticket, or otherwise; and sub-section (3) provided that every owner of the public vehicle shall pay into <ORG> the full amount of the tax due from him under sub-section (1) or sub-section (2) in such a manner and at such intervals as may be prescribed and shall furnish such returns by such dates and to such authority as may be prescribed.

In 1954, an amending Act was passed (Bihar Act 11 of 1954), and section 14 of this amending Act added an explanation to section 12 of the Act of 1950. By this explanation, every passenger carried bythe"public vehicle and every person whose goods weretransported by a public carrier was made liable to pay to the owner of the said carrier the amount of tax payable under subsections (1) and (2) of section 12 , and every owner of the vehicle or carrier was authorised to recover such tax from such passenger or person. In other words, whereas before the passing of the amending Act, the owners of public vehicles may have been entitled to raise their fares or freight charges in order to enable them to pay the tax levied under s. 12 of the Act of 1950, after the amending Act was passed, they became entitled to recover the specific amounts from passengers and owners of goods by way of tax payable by them under the said section.

After the Act as thus amended was struck down by this Court on December, 12, 1960 an Ordinance was passed and its provisions were included in the impugned Act which ultimately became the law in Bihar on September 25, 1961. The Act consists of 26 sections. Section 1 (3) expressly provides that the Act shall be deemed to have come into force on the first day of April, 1950. Section 2 defines, inter alia, goods, owners, passenger and public service motor vehicle. Section 3 is the charging section. Section 3 (1) provides that on and from the date on which this Act is deemed to have come into force under sub-section (3) of section 1 , there shall be levied and paid to <ORG> a tax on all passengers and goods carried by a public service motor vehicles Then the sub-section prescribes the rate at which the said tax has to be paid. There is a proviso to this sub-section which it is unnecessary to set out. Sub-section (2) lays down that every owner shall, in the manner prescribed in section 9 , pay to <ORG> the amount of tax due under this section, and sub-section (3) -adds that every passenger carried by a public service motor vehicle and every person whose goods are carried by such vehicle shall be liable to pay to the owner the amount of tax payable under this section and every owner shall recover such tax from such passenger or person, as the case may be. There are three more sub-sections to this section which need not detain us. It would be noticed that, the effect of s. 3 is that the passengers and the owners of goods are made liable to pay the tax to the owner of the public service motor vehicle and the latter is made liable to pay the tax to <ORG>, and both these provisions act retrospectively by virtue of s. 1 (3). In other words, the tax is levied on passengers and goods carried by the public vehicles, and the machinery devised is that the tax would be recovered from the owners of such vehicles. Section 4 requires the owners of public service motor vehicles to register their vehicles. Under s. 5 , security has to be furnished by such owners; and returns have to be submitted under s. 6 . Section 7 deals with the procedure for the assessment of tax. Section 8 provides for the payment of fixed amount in lieu of tax, and under s. 9 provision is made for the payment and recovery of tax. Section 10 deals with the special mode of recovery. Section 11 deals with cases of transfer of public service motor vehicle and makes both the transferor and the transferee liable for the tax as prescribed by it. Refund is dealt with by s. 12 ; and appeal, revision and review are provided by ss. 13 , 14 and 15 respectively. Under s. 16 , power is given, subject to such rules as may be made by <ORG> to the Commissioner or the prescribed authority to secure the production, inspection and seizure of accounts and documents and search of premises and vehicles. Section 17 makes the Commissioner and the prescribed authority public servants ; and section 18 deals with offences and penalties. Section 19 deals with compounding of offences. Section 20 prescribes the usual bar to certain proceedings, and section 21 refers to. the limitation of certain suits and prosecutions. Section 22 confers power on <ORG> to make rules. Section 23 is important. In effect, it provides that the acts done under Bihar Act 17 of 1950 shall be deemed to have been done under this Act.

It reads thus :-

"Notwithstanding any judgment, decree or order of any <ORG>, tribunal or authority-

(a) any amount paid, collected or recovered or purported to have been paid, collected or recovered as tax or Penalty under the provisions of Part III of the Bihar Finance Act, 1950 (Bihar Act XVII of 1950), as amended from time to time (hereinafter referred to as the "said Act") or the rules made thereunder during the period beginning with the first day of April, 1950 and ending on the thirty-first day of July, 1961, shall be deemed to have been validly levied, paid, collected, or recovered under the provisions of this Act ; and

(b) any proceeding commenced or purported to have been commenced for the assessment collection or recovery of any amount as tax or penalty under the provisions of the said Act or the rules made thereunder during the period specified in clause (a) shall be deemed to have been commenced and conducted in accordance with the provisions of this Act, and, if not already completed, shall be continued and cornpleted of this Act." in-

accordance with the provisions There is a proviso to this section which is not relevant for our purpose. Sections 24 and 25 deal with repeals and savings; and section 26 provides that if any difficulty arises in giving effect to the provisions of the Act - the State Government may pass an order in that behalf, subject to the limitations prescribed by the said section. That, broadly stated, is the scheme of the Act.

In order to appreciate the merits of the contentions raised by Mr. <NAME> on behalf of the appellants, it is necessary to specify clearly the limited character of the controversy between the parties in appeal. The appellants concede that the Act in its prospective operation is perfectly valid. They also concede that s.23(a) which validates the acts done under the earlier Act of 1950 is valid. It would be noticed that apart from the general retrospective operation of the Act for which a provision has been made by s.1(3), s. 23 itself makes a clear retrospective validating provision and it is not disputed that the acts validated by s.23(a) have been properly validated. With regard to the validating provision contained in s. 23 (b), it has been urged that the said provision in so far as it refers to proceedings commenced under the earlier Act but not completed before the impugned Act came into force, is invalid. The rest of the provisions of s. 23 (b) are also not challenged. In other words, it is not disputed that in its prospective operation, the Art has been validly passed by <ORG> exercising its legislative power under Entry 56 in List II of the Seventh Schedule of the Constitution. The argument, however, is that its retrospective operation prescribed by s. 1 (3) and by a part of s. 23 (b) so completely alters the character of the tax proposed to be retrospectively recovered that it introduces a serious infirmity in the legislative competence of <ORG> itself. Alternatively, it is argued that the said retrospective operation is so unreasonable that it cannot be saved either under Art. 304

(b) or Art. 19 (5) and (6). It is these two narrow points which call for our decision in the present appeals.

In dealing with this controversy, it is necessary: to bear in mind some points on which there, is no dispute. The entries in the Seventh Schedule conferring legislative power on the legislatures in question must receive the widest denotation. This position is not disputed. Entry 56 of the Second List refers to taxes on goods and passengers carried by road or on inland waterways. It is clear that the State Legislatures are authorised to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression "carried by road or on inland waterways" is an adjectival clause qualifying goods and passen gers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers who are carried are taxed under the entry. But, usually, it would be inexpedient, if not impossible, to recover the tax directly from the passengers and so, it would be expedient and convenient to provide for the recovery of the said tax from the owners of the vehicles themselves. That is why it is not disputed by Mr. <NAME> that in enacting a law under en", 56 in respect of taxes imposed on passengers carried by road or on inland waterways, it would be perfectly competent to the legislature to devise a machinery for the recovery of the said tax by requiring the bus operators or bus owners to pay the said tax.

The other point on which there is no dispute before us is that the legislative power conferred on the appropriate legislatures to enact laws in respect of topics covered by several entries in the three Lists can be exercised both prospectively and retrospectively. Where the legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, but it can also provide for the retrospective operation of the said provisions. Similarly, there is no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid. If a law passed by a legislature is struck down by the Courts as being invalid for one infirmity or another, it would be competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed. This position is treated as firmly established since the decision of <ORG> in the case of <ORG>. <NAME> (1). It is also true that though the <ORG> can pass a law and make its provisions, retrospective, it would be relevant to consider the effect of the said retrospective operation of the law both in respect of the legislative competence of the legislature and the reasonableness of the restrictions imposed by it. In other words, it may be open to a party affected by the provisions of the Act to contend that the retrospective operation of the Act so completely alters the character of the tax imposed by it as to take it outside the limits of the entry which gives the legislature competence to enact the law; or, it may be open to it to contend in the alternative that the, restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene his fundamental rights guaranteed under Art. 19 (1) (f)  & (g). This position cannot be, and has not been, disputed by Mr. <NAME> who appears for the respondent, vide <CITATION> (2 ), and <CITATION> (3).

In view of the recent decisions of this <ORG> Mr. <NAME> also concedes that taxing statutes are not beyond the pale, of the constitutional limitations (1) [1940] F.C.R. 110.

(2) [1954] S.C.R. 587, 626.

(3) [1954] S.C.R. 12, 1390 prescribed by Articles 19 and 14, and he also concedes that the test of reasonableness prescribed by Art. 304(b) is justiciable. It is, of course, true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be within the legislative competence of the legislature can be taxed by the legislature- according to the exigencies of its needs, because there can be no doubt that the <ORG> is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes Art. 19 , courts would naturally be circumspect and cautious. Where for instance, it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory.. <ORG>s would be justified in striking down the impugned statute as unconstitutional. In such cases, the character of the material provisions of the impugned statute is such that the <ORG> would feel justified in taking the view that, in substance, the taxing statute is a cloak adopted by the legislature for achieving its confiscatory purposes. This is illustrated by the decision of this <ORG> in the case of <CITATION> (1), where a taxing statute was struck down because it suffered from several fatal infirmities. On the other hand, we may refer to the case of <CITATION> (1), where a challenge to the taxing statute on the ground that its provisions were unreasonable was rejected and it was observed that unless the infirmities in the (1)  3 S.C.R, 77, (2)  1 B.C.R. 220, impugned statute were of such a serious nature as to justify its description as a colourable exercise of legislative power; the <ORG> would uphold a taxing statute. It is in the light of these principles of law which are not in dispute between the parties before us that we must proceed to examine the arguments urged by Mr. <NAME> in challenging the validity of the retrospective operation of the Act. Mr. <NAME> contends that one has merely to read the provisions of s. 3(3) to realise that the character of the tax has been completely altered by its retrospective operation. It would be recalled that s. 3(3) , inter alia, provides that every passenger carried by a public service motor vehicle shall be liable to pay to the owner thereof the amount of tax payable under the said sub-section because the scheme of the Act is that the tax is paid by the passenger to the owner and by the owner to the <ORG>; and both these provisions are retroactive. However, in respect of passengers carried by the owner between 1.4.1950 and the date of the Act, how can the owner recover the tax he is now bound to pay to the <ORG>, asks Mr. <NAME> ? Prima facie, the argument appears to be attractive, but a closer examination would show that the difficulty which the owner may experience,in recovering the tax from the passengers will not necessarily alter the character of the tax. If the scheme of s. 3 for the levy and recovery of the tax is valid under entry 56 of List II so far as future recoveries are concerned, it is not easy to see how it can be said that the character of the tax is radically changed in the present circumstances, because it would be very difficult, if not impossible, for the owner to recover the tax from the passengers whom he has carried in the past. The tax recovered retrospectively like the one which will be recovered prospectively still continues to be a tax on passengers and it adopts the same machinery for the recovery of the tax both as to the past as well as to the future. In this connection, we ought to bear in mind that the incidence of the tax should not be confused with the machinery adopted by the statute to recover the said tax. Besides, as we will point out later, it is only during a comparatively short period that the owners' difficulties assume a significant form. <ORG>d generally, it may not be unreasonable to assume that from the time when the Act of 1950 was brought into force it was known to all the owners that the legislature had imposed a tax in respect of passengers and -goods carried by them and since then, and particularly after the amendment of 1951, they may have raised their fares and freights to absorb their -liability to pay the tax to the <ORG>. But apart from that, it seems to us that the nature of the tax in the present case is the same both in regard to prospective and retrospective operations, and so, it is difficult to entertain the argument that the tax has ceased to be a tax on passengers and is, therefore, outside Entry 56. The argument that the retrospective operation of the Act is beyond the legislative competence of <ORG> must, therefore, be rejected. In this connection, we cannot ignore the fact that prior to the passing of the impugned Act there was in operation a similar statute since April 1, 1950 which was struck down as unconstitutional on the ground of want of assent of the President. This aspect of the matter, no doubt, will have to be further examined in the context of the appellants' case that tile retrospective operation of the Act introduces a restriction which is unreasonable both under Art. lb (1) (f)"& (g) and Art. 304

(b); but it has no validity in challenging the legislative competence of <ORG> in that behalf. We may, in this connection, incidentally refer to some decisions of this Court where a similar argument was urged in regard to the retrospective operation of some Acts. It appears that in those cases, the argument proceeded on a distinction between direct and indirect taxes. It is well-known that <NAME> made a pointed distinction between direct and indirect taxation and this distinction was reflected in s. 92 (11) of the British North America Act which gave to the Legislatures of the Provinces exclusive power to make laws in relation to direct taxation within the Province. No such distinction can be made in regard to the legislative power conferred on the appropriate legislatures by the respective entries in the Seventh Schedule of our Constitution, and so, it is unnecessary for us to consider any argument based on the said distinction in the present case. However, this argument was urged before this Court in challenging the validity of some Acts by reference to their retrospective operation. <CITATION> , (1), where this Court was called upon to examine the validity of the Bihar Sales Tax Act, 1947 as amended by the Amendment Act of 1948, one of the points urged before this Court was that whereas sales-tax is an indirect tax on the consumer inasmuch as the idea in imposing the said tax on the seller is that he should pass it on to his purchaser and collect it from him, the retrospective operation of the Act made the imposition of the said tax a direct tax on the seller and so, it was invalid. This argument was rejected. A similar objection against the retrospective' operation of the Madras General Sales Tax Act, 1939 as adapted to Andhra by the Sales Tax Laws Validation Act , 1956 was rejected in the case <CITATION> ( 2) <CITATION> (3), the argument that the character of the sales-tax as enacted by the U. P. Sales Tax Act, 1948, was radically altered in its retrospective operation, was likewise rejected. The same argument (1)  S.C.R. 13.55,1377.

(2) [1958] S.C.R, 1422.

(3) [1962] 2 S.C.R. 1.

in respect of an excise tax raised before this Court in the case of <CITATION> (1), was for similar reasons rejected. The position, therefore, appears to be well settled that if in its essential features a taxing statute is within the legislative competence of the legislature which passed it by reference to the relevant entry in the List, its character is not necessarily changed merely by its retrospective operation so as to make the said retrospective operation outside the legislative competence of the said legislature, and so, we must hold that the. challenge to the validity of the retrospective operation of the Act on the ground that the provision in that behalf is beyond the legislative competence of <ORG>, must be rejected. That takes us to the question as to whether the restriction imposed on the appellants' right under Art. 19 (1) (f) add (g) by the retrospective operation of the Act is reasonable so as to attract the provisions of Art. 19 (5) and (6). The same question arises in regard to the test of reasonableness prescribed by Art. 304 (b). Mr. <NAME> contends that since it is not disputed that the retrospective operation of a taxing statute is a relevant fact to consider in determining its reasonableness, it may not be unfair to suggest that if the retrospective operation covers a long period like ten years, it should be held to impose a restriction which is unreasonable and as such, must be struck down as being unconstitutional. In support of this plea, Mr. <NAME> has referred us to the observations (2) made by <NAME>. "Tax statutes", says <NAME>, "may be retrospective if the legislature clearly so intends. If the retrospective feature of a law is arbitrary and burdensome, the statute will not be sustained. The reasonableness of each retroactive tax statute will depend on the circumstances of each case. A statute retroactively (1)  Supp. 2 S.C.R. 1.

(2) Sutherland on Statutes and Statutory Construction, 1943 Ed, Vol. 2 Paragraph 2211 pp. 131-133.

imposing a tax on income earned between the adoption of an amendment making income taxes legal and the passage of the income-tax act is not unreasonable. Likewise, an income-tax not retroactive beyond the year of its passage is clearly valid. The longest period of retroactivity yet sustained has been three years. In general, income taxes are valid although retroactive, if they affect prior but recent transaction." Basing himself on these observations, Mr. <NAME> contends that since the period covered by the retroactive operation of the Act is between April, 1, 1950 and September 25, 1961, it should be held that the restrictions imposed by such retroactive operation are unreasonable, and so, the Act should be struck down in regard to its retrospective operation.

We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of a taxing or other statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional; but the test of the length of time covered by the retrospective operation cannot by itself, necessarily be a decisive test. We may have a statute whose retrospective operation covers at comparatively short period and yet it is possible that the nature of the restriction imposed by it+ may be of such a character as to introduce a serious infirmity in the retrospective operation. On the other hand, we may get cases where the period covered by the retrospective operation of the statue, though long, will not introduce any such infirmity. Take the case of a Validating Act . If a statute passed by the legislature is challenged in proceedings before a <ORG>, and the challenge is ultimately sustained and the statute is struck down, it is not unlikely that the judicial proceedings may occupy a fairly long period and the legislature may well decide to await the final decision in the said proceedings before it uses its legislative power to cure the alleged infirmity in the earlier Act. In such a case, if after the final judicial verdict is pronounced in the matter the legislature passes a validating Act, it may well cover a long period taken by the judicial proceedings in <ORG> and yet it would be inappropriate to hold that because the retrospective operation covers a long period, therefore, the restriction imposed by it is unreasonable. That is why we think the test of the length of time covered by the retrospective operation cannot by itself be treated as a decisive test. Take the present case. The earlier Act was passed in 1950 and came into force on April 1, 1950, and the tax imposed by it was being collected until an order of injunction was passed in the two suits to which we have already referred. The said suits were dismissed on May 8, 1952 but the appeals preferred by the appellants were pending in this <ORG> until December 12, 1960. In other words, between 1950 and 1960 proceedings were pending in court in which the validity of the Act was being examined, and if a Validating Act had to be passed, the legislature cannot be blamed for having awaited the final decision of this <ORG> in the said proceedings. Thus the period covered between the institution of the said two suits and their final disposal by this <ORG> cannot be pressed into service for challenging the reasonableness of the retrospective operation of the Act.

It is, however, urged that the retrospective operation of the Act during the period covered by the orders of injunction issued by <ORG> in the said two suits must be held to be unreasonable, and the argument is that in regard to the said period the retrospective operation should be struck down. Similarly,- it is urged that the said retrospective operation should be struck down for the period between December 12, 1960 when this Court struck down the earlier Act and August 1, 1961 when Ordinance 11 of 1961 was issued. We do not think it would be appropriate in the present case to examine the validity of the retrospective operation by reference to particular periods of time covered by it in the manner suggested by Mr. <NAME>; and so, we are not prepared to accept his argument that the retrospective operation of the Act is invalid so far as the period between December 12, 1960, when the earlier Act was struck down by this Court, and August 1, 1961, when the Ordinance was issued, is concerned. It would be realised that in such a situation there 'would always be some time lag between the date when a particular Act is struck down as' unconstitutional and the date on which a retrospective validating Act is passed. Besides, the circumstances under which the orders of injunction were passed by <ORG> cannot be altogether ignored. Mr. <NAME> contends that the two suits filed by the appellants and the passengers and the owners of goods respectively disclose a common design and can be treated as friendly suits actuated by the same motive, and we do not think that this contention can be rejected as Wholly unjustified. Apart from it, when the injunction was issued against the respondent in the appellants' suit, the appellants gave an undertaking in writing to pay the taxes partyable on the fares and freights as provided by the law in case their suit failed. As we have already seen their suit was dismissed by <ORG> on May 8, 1952, so that it was then open to the respondent to call upon the appellants to pay the taxes for the period covered by the orders of injuction and to require them to pay future taxes because the earlier Act under which the taxes were recovered was held to be valid by <ORG>. It is no doubt suggested by Mr. <NAME> that the spirit of the undertaking required that no recovery should be made until the final disposal of the proceedings between the parties. We do not see how this argument about the spirit of the undertaking can avail the appellants. As soon as their suit against the respondent was dismissed, the respondent was at liberty to enforce the provisions of the Act and the dismissal of the suit made it possible for the respondent to claim the taxes even for the period covered by the order of injunction. We do not think that in the context, the dismissal of the suit can legitimately refer to the final disposal of the appeal filed by the appellants before this Court. In any event, having regard to the agencies, of the two suits, the nature of the orders of Injunction issued in them and the character of the undertaking given by the appellants, we do not think it would be possible to sustatain Mr. <NAME>'s argument that for the period of the injunction the restrospective operation of the Act should be held to be invalid. In this connection, it would be relevant to refer to another fact which appears on the record. Along with the appellants, <ORG> other bus owners had filed writ petitions challenging the validity of the Act. These petitioners have not appealed to this Court presumably because their cases fall under the provisions of s. 23 (a) of the Act. It is likely that they had paid the amounts, and since the amounts paid under the provisions of the earlier Act are now deemed to have been paid under the provisions of this Act, they did not think it worthwhile to come to this Court against the decision of <ORG>. Apart from that, it is not unlikely that other bus owners may have made similar payments and the appellants have, therefore, come to this Court because they have made no payments and so, their cases do not fail under s. 23 (a), or may be, their cases fall under s. 23 (b). The position, therefore, is that the retrospective operation of s. 23 (a) & (b) cover respectively cases of payments actually made under the provisions of the earlier Act, and cases pending inquiry, and the retrospective operation of s. 3 (3) read with s. 1 (3) only applies to cases of persons who did not pay the tax during the whole of the period, or whose cases were not pending ; and it is this limited class of persons whose interests are represented by the appellants before us. Having regard to the somewhat unusual circumstances which furnish the background for the enactment of the impugned statute, we do not think that we could accept Mr. <NAME>'s argument that the retrospective operation of the Act imposes restrictions on the appellants which contravenue the provisions of Art. 19 (1) (f)  & (g). In our opinion, having regard to all the relevant facts of this case, the restrictions imposed by the said retrospective operation must be held to be reasonable and in the public interest under Art. 19 (5) and (6) and also reasonable under Art. 304

(b).

There is only one more point to which reference must be made. We have already noticed that <ORG> has rejected the argument urged on behalf of the <ORG> that the tax imposed by the Act is of a compensatory or regulatory character and therefore, is valid. Mr. <NAME> wanted to press that part of the case of the <ORG> before us. He urged that according to the majority decision of this Court in the case of <ORG> (1), it must now be taken to be settled that "regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Art. 304 (b) of the Constitution." (p. 1424). On the other hand, Mr. <NAME> has argued that this doctrine of compensatory or regulatory or taxation which is mainly based on Australian decisions cannot be extended to the present case, and he contends that if the doctrine of regulatory or compensatory taxes is very (1)  1 S.C.R. 491.

liberally construed, it would tend to cover all taxes, because in a -loose sense, all taxes raised by the State can ultimately be said to be compensatory in a farfetched manner, and in that way, the well-recognised constitutional difference between a tax and a fee will be obliterated and the provisions of Part XIII of the Constitution will lose all their significance. Part XIII contains provisions which constitute a self-contained 'Ode and we need not really travel outside the said provision in determining the validity of the tax imposed by the Act. Since we have come to the conclusion that the challenge to the validity of the retrospective operation of the Act cannot be sustained, we do not think it necessary to pursue this matter any further. In the result, the appeals fail and are dismissed with costs.

Appeal dismissed.


<NAME>, Acting C.J.

1. This is an appeal under Clause 15 of the Letters Patent from the judgment of Mr. Justice <NAME> in a suit for recovery of possession of land upon declaration of title, The subject-matter of the litigation is an occupancy holding which belonged to one <NAME>. the plaintiff purchased it in 1910 in execution of a decree, and the sale was made expressly subject to a mortgage in favour of one <NAME>. <NAME> subsequently sued to enforce his security; but in that suit the original mortgagor alone was joined as a party; the plaintiff, for some unexplained reason, was not joined as a defendant. A. decree was obtained in due course by the mortgagee and at the execution sale, which followed, the mortgagee became the purchaser. Subsequently he transferred the property to the third defendant, from whom the plaintiff now seeks to recover possession.

2. The <ORG> of first instance held that the plaintiff was entitled to a decree for possession without redeeming the purchaser at the mortgage sale. Upon appeal, the District Judge reversed that decision and held that although the title of the plaintiff as the holder of the equity of redemption might be declared, his claim for possession must be rejected as he had not offered to redeem the purchaser at the mortgage-sale. On appeal to this <ORG> Mr. Justice <NAME> has reversed the decision of the District Judge and has restored the decree of the <ORG> of first instance on the authority of the decisions in the cases of <NAME> v. <NAME> 4 C.W.N. 452 and <NAME> v. <NAME> 6 C.L.J. 609. We are of opinion that this decree cannot be supported.

3. On the facts stated, it is plain that the plaintiff is the purchaser of the equity of redemption while the contesting defendant is the purchaser at the mortgage-sale. The plaintiff, as holder of the equity of redemption, is not entitled to recover possession, after the mortgage sale has taken place, The fact that he was left out of the mortgage suit does not nullify the decree in that litigation. The true result is, as was pointed out, upon a review of the earlier decisions, in <NAME> v. <NAME> 6 C.L.J. 612 : 12 C.W.N. 107 that the omission to make the plaintiff a party to the mortgage-suit leaves unaffected his right to redeem [of. Brojonath Koondco Chowdry V. Khelut Chunder Ghose 14 M.I.A. 144 : 8 B.L.R. 104 (P.C.) : 16 W.R. 33 (P.C.) : 2 Suth. P.C.J. 480 : 2 Sar. P.C.J. 711 : 20 E.R. 740, Umes Chunder Sircar v. Zahur tatima 18 C. 164 : 17 I.A. 201 : 5 Sar. P.C.J. 507 : 9 Ind. Dec. (N.S.) 110; <CITATION> anam Misser 21 C. 70 : 20 I.A. 165 : 16 Ind. Jur. 536 : 6 Sar. P.C.J. 356 : 10 Ind. Dec. (N.S.) 679; the Hnyin v. <NAME> 5 Ind. Cas. 151 : 37 C. 239 : 14 C.W.N. 214 : 11 C.L.J. 166 : 3 Bur. L.T. 27 : 12 Bom. L.R. 234 : 20 M.L.J. 153 : 37 I.A. 19 (P.C.). It is not necessary for our present purpose to consider whether the mortgagee can still sue the plaintiff on his mortgage [of. <NAME> v. <NAME> 30 C. 599 : 7 C.W.N. 766 (F.B.); <CITATION> 9 Ind. Cas. 513 : 21 M.L.J. 213 : 9 M.L.T. 431 : (1911) 1 M.W.N. 165 . It is abundantly clear that he need not sue again on his mortgage Ganga Das Bhattar v. <NAME> 5 C.L.J. 315 : 11 C.W.N. 403 and is not bound to deliver up possession to the plaintiff till he has been redcemed by the latter on the footing of the mortgage decree. This view is supported by the decisions in <CITATION> 32 C. 891 : 9 C.W.N. 728 : 1 C.L.J. 371; <NAME> v. <NAME> 4 C.W.N. 266 and <CITATION> 44 Ind. Cas. 52 : 22 C.W.N. 543 : 28 C.L.J. 256. The cases of <NAME> v. <NAME> 4 C.W.N. 452 and <NAME> v. <NAME> 6 C.L.J. 609 may perhaps be difficult to reconcile with those just mentioned, but their correctness is open to doubt.

4. The plaintiff respondent has at this stage offered to redeem the defendant but for this, we would have directed that the decree should declare his right to redeem and disallow his claim for recovery of possession.

5. The result is that this appeal is allowed, the decree made by Mr. Justice <NAME> set aside, and the case remitted to the District Judge so that a decree may be made in favour of the plaintiff as if this were framed as a suit for redemption. An account will betaken by the District Judge of the amount due on the mortgage decree, including interest thereon up to the date when the mortgagee purchaser was placed in possession by the <ORG>, The interest due thereafter will be set off against the profits received from the land by the mortgagee purchaser. <NAME> v. <NAME> 5 C.L.J. 315 : 11 C.W.N. 403. The plaintiff must pay the contesting defendants their costs in all the <ORG>s, which will be added to the sum due under the mortgage decree. If the aggregate sum so calculated is deposited by the plaintiff in <ORG> to the credit of the contesting defendants, within six months from the date when the decree is drawn up by the District Judge pursuant to this judgment, the plaintiff will recover possession upon redemption. If the plaintiff fails to make the deposit as directed, the suit will stand dismissed with costs in all the <ORG>s.

Fletcher, J.

6. I agree.


PETITIONER: <ORG> Vs. RESPONDENT: THE STATE OF ORISSA AND OTHERS(And Connected Appeal) DATE OF JUDGMENT: 24/03/1961 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. AIYYAR, T.L. VENKATARAMA DAS, S.K. KAPUR, J.L. HIDAYATULLAH, M. CITATION: 1961 AIR 1438 1962 SCR (1) 549 CITATOR INFO : R 1962 SC1230 (5) D 1964 SC 922 (6) R 1964 SC 925 (25) D 1971 SC 946 (4,8) RF 1973 SC1461 (218) RF 1977 SC2279 (57) R 1985 SC 218 (17,18,19,20) D 1985 SC 901 (10) F 1987 SC 27 (4) ACT: Sales Tax-Tax imposed on sales outside the State-Refund, claimable by dealer or purchaser-Assessee's fundamental right-Reasonable restriction-Orissa Sales Tax Act, 1947 (XIV of 1947), ss. 9B. cl. (3), 14-Orissa Sales Tax (Amendment) Act, 1958 (28 of 1958), s.14A-Constitution of India, Art, 19(1)(f). HEADNOTE: The appellants who were registered as dealers under the Orissa Sales Tax Act, 1947, used to collect sales tax from the purchasers on all sales effected by them including sales to dealers in other states. They were assessed to and paid tax on their turnover which included sales outside the State of Orissa, but after the decision of this Court in <CITATION> .,  S.C.R. 1069, they applied under s. 14 of the Act for refund of tax paid on the ground that sales outside the State were not taxable under cl. (1)(a) of Art. 286 of the Constitution read with the Explanation. Refund was refused by <ORG> and <ORG>. In petitions moved by the appellants for writs of certiorari and Mandamus against the orders of <ORG> <ORG> ordered refund of tax paid for certain periods and refused it in regard to other periods. The Orissa Sales Tax Act was, however, amended in 1958 with retrospective effect incorporating S. 14-A which provided that refund could be claimed only by the person from whom the dealer had realised the amount by way of sales-tax or otherwise. 550 Held, that under S. 14-A of the Orissa Sales Tax (Amendment) Act, 1958, refund of tax which the dealer was not liable to pay could 'be claimed by the person from whom the dealer had actually realised it whether as sales tax or otherwise, and not by the dealer. The legislature was competent to legislate for granting )IS refund of sales tax improperly collected; there, is no reason to exclude the power to declare that refund shall be claimable only by the person from whom the dealer has realised the amount as sales-tax or otherwise. Under s. 9B, cl. 3 of the Act, if the amount realised by the assessee exceeded the amount payable as tax such amount must be deposited in the Government treasury, and the assessee having no beneficial interest in such amount the enactment that the amount shall be claimable only by the persons who paid the amounts to the dealers as sales-tax is a reasonable restriction imposed on the right of the assessee to obtain refund in the interest of the general public, and does not infringe the provisions of Art. 19(1)(f) of the Constitution. If the assessees discharge their statutory obligation to deposit the amount collected by them as sale tax in the Government treasury they cannot be exposed to any claim for refund by the persons from whom the tax is collected, even though such persons were in the first instance not liable to pay the tax. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 273 to 277 of 1960.

Appeals by special leave granted by <ORG> by its order dated December 15, 1958, from the judgment and order dated February 4, 1957, of <ORG> in O. J. C. Nos. 184 to 188 of 1955.

<NAME>, Additional Solicitor-General of India and <NAME>, for appellants (In C. As. Nos. 273 and 274 of 1960) and respondents (In C. As. Nos. 275-277 of 1960). <NAME>, Solicitor-General of India, <NAME> and <NAME>, for respondents (In ('J. As. Nos. 273 and 274 of 1960) and appellants (In C. As. Nos. 275-277 of 1960).

1961. March 24. The Judgment of the Court was delivered by SHAH, J.-The <ORG>, thereinafter called the assessees-are a public limited company having their registered office at Brajrajnagar in the district of Sambalpur, Orissa State. The assessees are manufacturers of paper and paper-boards and are registered as dealers under the Orissa Sales Tax Act, 1947-hereinafter referred to as the Act. The assessees used to collect tax from the purchasers on all sales effected by them including sales to dealers in other States. For the quarters ending March 31, 1950, June 30, 1950, September 30, 1950, December 31, 1950 and March 31, 195 1, the assessees paid Sales-tax which they were assessed by the Assistant Collector of Sales-tax to pay, on their turnover which included sales outside the State of Orissa.

After this court delivered the judgment in <CITATION> (1) the assessees applied for refund under s. 14 of the Act of tax paid in respect of goods despatched for consumption outside the State of Orissa contending that according to the law expounded by this court, the transactions of sales outside the State were not taxable under the Act because of the prohibition imposed by Art. 286(1) (a) of the Constitution read with the Explanation. Refund was refused by the Assistant Sales Tax Officer and the order was confirmed by <ORG>. In the view of the taxing authorities, the orders of assessment in respect of the five periods had become final on the diverse dates on which they were made and were not liable to be reopened merely because the law applicable to the transactions was not correctly appreciated by the taxing authorities. In petitions moved by the assessees for writs of certiorari and mandamus against the orders of <ORG>, <ORG> held that the only restriction upon the right of a dealer to apply for refund which "is found within the four corners of s. 14 of the Act" being the law of limitation prescribed by the proviso to than section, transactions in question not being liable to tax as they were interstate transactions, the tax collected must be refunded on applications submitted within the period prescribed. <ORG> then proceeded to hold that the recovery of tax paid for the first two (1)  S.C.R. 1069.

quarters was barred by limitation but not recovery of tax paid for the remaining three quarters, and issued id. an order in the nature of mandamus directing refund of tax in respect of the last three quarters. <ORG> and the assessees have appealed with special leave against the judgment of <ORG> by these five appeals. Counsel for the State of Orissa contends that no refund could be granted because the orders of assessment had become final and s. 14 of the Act applied only to cases of refund in which a superior taxing authority in appeal or revision against the order of assessment directs or declares that the tax has not been properly collected, and it does not apply to cases of assessment which have become final, even if made on an erroneous view of the law. The assessees support the view of <ORG> that s. 14 applies to all claims for refund and also contend that the recovery of tax paid for the first two quarters was not barred by the law of limitation.

It is unnecessary for the purposes of these appeals to consider the respective contentions of the parties. In our view the claim of the assesses must fail because of the retrospective amendment of the Act by <ORG>. By s. 14A which was incorporated by the Orissa Sales Tax (Amendment) Act, 28 of 1958, it was provided:

"Notwithstanding anything contained in this Act where any amount is either deposited by any person under sub-section (3) of s. 9B or paid as tax by a dealer and where such amount or any part thereof is not payable by such person or dealer, a refund of such amount or any part thereof can be claimed only by the person from whom such person or dealer has actually realised such amounts whether by way of sales-tax or otherwise and the period of limitation provided in the proviso to s. 14 shall apply to the aforesaid claims."

In terms, the section provides that refund of tax "id which the dealer was not liable to pay can' only be claimed by the person from whom the dealer has actually realised it whether as sales-tax or otherwise.

The section therefore deprives the assessees of the common law right to claim refund of the amounts paid as tax under an error of law that it was recoverable by the taxing authority. Counsel for the assessees does not dispute that by the amending provision, the right to obtain refund of tax is denied to him by the <ORG>. He contends that the Act is beyond the competence of the State <ORG>, and in any event, it is void because it imposes an unreasonable restriction upon the assessees' fundamental right guaranteed under Art. 19(1)(f) of the Constitution.

By item 54 of List II of Schedule 7 to the Constitution, <ORG> was indisputably competent to legislate with respect to taxes on sale or purchase of papers and paper-boards. The power to legislate with respect to a tax comprehends the power to impose the tax, to prescribe machinery for collecting the tax, to designate the officers by whom the liability may be enforced and to prescribe the authority, obligations and indemnity of those officers. The diverse heads of legislation in the Schedule- to the Constitution demarcate the periphery of legislative' competence and include all matters which are ancillary or subsidiary to the primary head. <ORG> of the Orissa State was therefore competent to exercise power in respect of the subsidiary or ancillary matter of granting refund of tax improperly or illegally collected, and the competence of the <ORG> in this behalf is not canvassed by counsel for the assessees. If competence to legislate for granting refund of sales-tax improperly collected be granted, is there any reason to exclude the power to declare that refund shall be claimable only by the person from whom the dealer has actually realised the amounts by way of sales-tax or otherwise We see none. The question is one of legislative competence and there is no restriction either express or implied imposed upon the power of the <ORG> in that behalf.

Art. 19(1)(f) of the Constitution prescribes the right to freedom of citizens to acquire, hold and dispose of property; but the right is by cl. (5) subject to tile  operation of any law, existing or prospective, in so far as it imposes reasonable restrictions on the exercise of that right in the interest of the general public. Assuming that by enacting that refund of tax shall only be made to the purchasers from whom the tax has been collected by the dealers and not to the dealers who have paid the tax the fundamental right under Art. 19(1)(f) is restricted, we are unable to hold that the restriction imposed by s. 14A of the Act is not in the interest of the general public. The <ORG> by s. 9B(1) of the Act authorised registered dealers to collect tax from the purchasers which they may have to pay on their turnover. The amounts collected by the assessees therefore primarily belonged not to the assesssees but to the purchasers. On an erroneous assumption that tax was payable, tax was collected by the assessees and was paid over to the <ORG>. Under s. 9B, cl. (3) of the Act as it stood at the material time, the amounts realised by any person as tax on sale of any goods shall, notwithstanding anything contained in any other provision of the Act, be deposited by him in a Government treasury within such period as may be prescribed if the amount so realised exceeded the amount payable as tax in respect of that sale or if no tax is payable in respect thereof. As the tax collected by the assessees was not exigible in respect of the sales from the purchasers, a statutory obligation arose to deposit it with the <ORG> and by paying that tax under the assessment, the assessees must be deemed to have complied with this requirement. But the amount of tax remained under s. 9B of the Act with <ORG> as a deposit. If with a view to prevent the assessees who had no beneficial interest in those amounts from making a profit out of the tax collected, the <ORG> enacted that the amount so deposited shall be claimable only by the persons who had paid the amounts to the dealer and not by the dealer, it must be held that the restriction on the right of the assessees to obtain refund was lawfully circumscribed in the interest of the general public.

Counsel for the assessees contended that they stood in danger of being compelled at the instance of the purchasers to repay the amount collected as tax even after it is deposited with or paid by them to the <ORG>, Government, and a statutory provision which deprives them of their right to claim refund amounts to an unreasonable restriction, because they are under an obligation to pay the amount to purchasers but they cannot reimburse themselves by recourse to the <ORG> which holds the amounts. But by s. 9B, the assessees were liable to deposit the amount in excess of what was lawfully recoverable from the purchasers as tax' When under the orders of assessment they paid amounts to the <ORG>, requirements of s. 9B were complied with and the amount remained with the <ORG> in deposit, subject to the obligation, if a demand was made within the period prescribed, to restore the same to the persons from whom the assessees had recovered it. We do not think that there is any reason to hold that the assessees would be exposed to any enforceable claims at the instance of the purchasers to refund the tax collected by them if they have deposited it with the <ORG> in discharge of the statutory obligation incurred by them.

Appeals Nos. 273 and 274 of 1960 will therefore be dismissed and Appeals Nos. 275 to 277 of 1960 will be allowed. As the <ORG> succeeds relying upon a statute enacted after the judgment was pronounced by <ORG>, we direct that there shall be no order as to costs of the appeals in this court.

Appeals Nos. 273 and 274 of 1960 dismissed. Appeals Nos. 275 to 277 of 1960 allowed.


PETITIONER: UNION OF INDIA Vs. RESPONDENT: KAMLABHAI HARJIWANDAS PAREKH & OTHERS DATE OF JUDGMENT: 07/09/1967 BENCH: <NAME>, <NAME>: <NAME>, G.K. WANCHOO, K.N. (CJ) BACHAWAT, R.S. RAMASWAMI, V. <NAME>, K.S. CITATION: 1968 AIR 377 1968 SCR (1) 463 CITATOR INFO : RF 1968 SC1138 (9) RF 1969 SC 634 (42) RF 1970 SC 564 (96) F 1972 SC2464 (8) R 1990 SC1277 (29) ACT: Requisitioning and Acquisition of Immovable Property Act, 1952, s. 8(3)(b)-- Compensation-Arbitrator given option to fix market value of property at the date of acquisition or twice the market value of the property at the time of requisition whichever was less -Section whether void as violative of Constitution of India, Art. 31(2). HEADNOTE: A plot of land in Bombay belonging to the husband of the first respondent was requisitioned by <ORG> for military purposes in 1942 under r, 75A(1) of the Defence of India Rules. In 1952 a notification was issued under s. 7(1) of the Requisitioning and Acquisition of Immovable Property Act enacted on March 14, 1952. According to the notification the land was to be acquired by <ORG> and would vest in the <ORG> from the date of the noti- fication. In the absence of an agreement between the parties as to compensation, the Chief Judge of <ORG>, Bombay was appointed as arbitrator under s. 8 of the Act. Shortly thereafter the first respondent preferred a petition in <ORG> wherein it was prayed that s. 8(3) of the Act should be declared ultra vires and the arbitrator should be directed to forbear from awarding compensation on the principles laid down in the section. Under the impugned section the -arbitrator could award as compensation the market value of the property at the date of acquisition or twice the market value of the property at the time of requisition, whichever was less. After the hearing before <ORG> the challenge was limited to s. 8(3)(b) only. <ORG> held s. 8(3)(b) to be ultra vires Art. 32 of the Constitution and as such void. <ORG> appealed with certificate under Art. 133(1)(b). HELD:(i) The Act was passed before the Fourth Amendment Act of the Constitution in 1955. Its vires were to be decided on the anvil of the Constitution as it stood before the said amendment. [467H] (ii)The mode prescribed in cl. (b) of s. 8(3) is arbitrary. It has no relation to the value of the land on the date of the notice under s. 7 which may be many years after the date of requisition. It is impossible to say that the date of requisition has or can have any connection with the date of acquisition under s. 7 . In assessing the just equivalent of the value of the property at twice the price which the requisitioned property would have fetched in the open market had it been sold on the date of requisition, the arbitrator would be acting arbitrarily inasmuch as he would be proceeding on a formula for which there is no rational basis. [472D-473B] Clause (b) of s. 8(3) leaves no choice of assessing the value in terms of cl. (a). The expression 'have regard to' in sub-cl. (c) of sub-s. (1) of s. 8 therefore did not give the arbitrator any freedom of considering the two modes laid down in sub-s. (3) and accepting the one which he thought fair. [473C] <CITATION> .,  S.C.R. 558; <CITATION> ,  6 S.C.R. 936; <CITATION> ,  464 1 S.C.R. 614; <CITATION> ,  1 S.C.R. 636: and <CITATION> . 70 I.A. 129, considered. <CITATION> ,  2 S.C.R. 747, distinguished. In holding that the petitioner before it -,,,-as not guilty of any laches <ORG> was deciding a matter within its discretion. This Court will not normally interfere with the exercise of such discretion. [475C] Zacharia v. Republic of Cyprus  A.C. 634, referred to. JUDGMENT:

CiviL, APPELLATE JURISDICTION Civil Appeal No. 1564 of 1966. Appeal from the judgment and order dated August 7, 1964 of <ORG> in Misc. Petition No. 378 of 1962. <NAME>, <NAME> for <NAME>, for the appellant.

<NAME>, <NAME>, <NAME> and <NAME> for respondent No. 1.

<NAME>. for intervener No. <NAME> for intervener No. 2.

The Judgment -of the Court was delivered by <NAME>, J. This is an appeal by a certificate under Art. 133(1)(c) of the Constitution granted by <ORG> against the judgment of that court dated August 7, 1964 in Miscellaneous Petition No. 378 of 1962 declaring cl.

(b) of sub-s. (3) of S. 8 of the Requisitioning and Acquisition of Immovable Property Act, 1952 (Act 30 of 1952) including the words "whichever is less" ultra vires Art. 31(2) of the Constitution and as such void. The facts are as follows. On May 2. 1942 a plot of land bearing S. No. NA-29-A of Juhu, Bombay, was requisitioned for the purposes of <ORG> under r. 75-A(1) of the Defence of India Rules for military purposes. It is common case that this plot of land was acquired for the construction of a road leading to a military aerodrome at Juhu during the last war. The land originally belonged to the husband of the first respondent who claims to have succeeded to it by virtue of a will. The owner of the plot was receiving compensation for the requisition until December 29, 1952 when a notification was issued under s. 7(1) of the Requisitioning and Acquisition of Immovable Property Act enacted on March 14, 1952, hereinafter referred to as the Act. The notification was to the effect that the land was being acquired I by <ORG>, <ORG>, that it would vest in the <ORG> from the date of the notification and there was a declaration of vesting in the notification itself. As a result of the notification. the owner of the land became entitled to claim compensation. The second res- pondent, hereinafter referred to as the Collector of Bombay, offered compensation at the rate of Rs. 11 per sq. yard on February 20, 1961. The petitioner, the first respondent herein, claimed at the rate of Rs. 100 per sq. yard plus the usual 15 % solatium for compulsory acquisition. In the absence of an agreement between the parties, the Chief Judge, <ORG>, Bombay, was appointed as arbitrator under s. 8 of the Act. The arbitrator gave notice to the petitioner to put in her claim and also to <ORG> to put in its statement of valuation. The petitioner claimed compensation at the rate of Rs. 75 per sq. yard plus 15% solatium for compulsory acquisition while the offer of the State was only Rs. 11 per sq. yard without any solatium. Before the arbitrator could make much headway in the matter, the first respondent preferred a petition in <ORG> on September 18, 1962 wherein the main prayers were (1) a declaration that the provisions of s. 8(3) of the Act were unconstitutional as infringing Arts. 31(2). 19(1)(f) and 14 of the Constitution of India, and (2) the issue of an appropriate writ directing the arbitrator to forbear from awarding compensation on the principles laid down in s. 8(3) 'of the Act and commanding him to award just and proper compensation in accordance with law.

<ORG> filed an affidavit in opposition affirmed by an Executive Engineer of <ORG> wherein many and diverse objections were raised to the petition. Before <ORG>, counsel for the petitioner confined the challenge to the validity of s. 8(3) of the Act to cl. (b) only. The arguments advanced on behalf of <ORG> were : (1) that s. 8(3) of the Act did not infringe any of the Articles of the Constitution mentioned in the petition and (2) that the petitioner was entitled to no relief because of the delay in presentation of the petition to <ORG>.

<ORG> negatived the contentions put forward oil behalf of <ORG> and allowed the petition holding that cl. (b) including the words "whichever is less" of sub-s. (3) of s. 8 of the Act was ultra vires Art. 31 of the Constitution and as such void. The court gave a direction that the assessment of compensation would have to be made subject to this declaration. Hence the appeal. In order to appreciate the contention put forward on behalf of <ORG>, it is necessary to refer to a few sections of the Act. The preamble shows that it was an Act to provide for the requisitioning and acquisition of immovable property for the purposes of the <ORG>. As originally enacted. it was to remain in force for a period of twelve years from the date of its institution, but subsequently its life has been prolonged till the 14th of March 1970. S. 24 of the Act repealed several enactments therein mentioned, but any property which immediately before such repeal J(N)6SCT-4 was subject to requisition under the provision of any of the said Acts was to be deemed to be property requisitioned under s. 3 of the Act and all the provisions of the Act were to apply accordingly. It is agreed between the parties that the property which was originally requisitioned in 1942 was to be treated as requisitioned under s. 3 of the Act. Under s. 7(1) it became competent to <ORG>, if it was of opinion that it was necessary to acquire the property already subjected to requisition for a public purpose, to acquire the same by publishing in <ORG> a notice to the effect that <ORG> had decided to acquire the property in pursuance of the section.The proviso to this sub-section is to the effect that before such a notice is issued <ORG> must call upon the owner or other persons interested in the property to show cause why the same should not be acquired and the order under the section could only be made after considering the cause, if any, shown and giving the parties an opportunity of being heard. Under sub-s. (2) of the section, "When a notice as aforesaid is published in <ORG>,, the requisitioned property shall, on and from the beginning of the day on which the notice is so published, vest absolutely in <ORG> free from all encumbrances and the period of requi- sition of such property shall end."

Sub-s. (3) of the section mentions the circumstances which must obtain for a property to be acquired under the section. S.8 of the Act has a marginal note "principles and method of determining compensation". Under cl. (a) of sub-s. (1) of s. 8 compensation is to be paid in accordance with the agreement, if any, reached between the owner and the <ORG>. If no such agreement can be reached, an arbitrator has to be appointed for the purpose in terms of cl. (b). Under cl. (c) it is open to the Central <ORG> to nominate a person having expert knowledge as to the nature of the property requisitioned or acquired to assist the arbitrator in which case the person to be compensated has a similar right of nominating his assessor. Under cl.

(d) <ORG> and the person to be compensated must state what in their respective opinion is a fair amount of compensation, at the commencement of the proceedings. As the main contention hinges on the interpretation of sub-cl.

(e) of sub-s. (1) read with sub-ss. (2) and (3), it is necessary to set out the same in extensor S. 8(1)(e) reads as follows:

"Where any property is requisitioned or acquired under this Act, there shall be paid compensation the, amount of which shall be determined in the manner and in accordance with the principles hereinafter set out, that is to say,-

(a) to (d) .. .. .. .. .. .. ..

(e)the arbitrator shall, after hearing the dispute, make an award determining the amount of compensation which appears to him to be just and specifying the person or persons to whom such compensation shall be paid-, and in making the award, he shall have regard to the circumstances of each case and the provisions of sub-sections (2) and (3), so far as they are applicable;"

Sub-ss. (2) and (3) read:

"(2) The amount of compensation payable for the requisitioning of any property shall consist of-

(a) a recurring payment, in respect of the period of requisition, of a sum equal to the rent which would have been payable for the use and occupation of the property if it had been taken on lease for that period: and

(b) such sum or sums. if any, as may be found necessary to compensate the person interested for all or any of the following matters. namely:-

(i) pecuniary loss due to requisitioning;

(ii) expenses on account of vacating the requisitioned premises;

(iii) expenses on account of reoccupying the premises upon release from requisition; and

(iv) damages (other than normal wear and tear) caused to the property during the period of requisition, including the expenses that may have to be incurred for restoring the property to the condition in which it was at the time of requisition'.

(3) The compensation payable for the acquisition of any property under section 7 shall be-

(a) the price which the requisitioned property would have fetched in the open market. if it had remained in the same condition as it was at the time of requisitioning and been sold on the date of acquisition, or

(b) twice the price which the requisitioned property would have fetched in the open market if it had been sold on the date of requisition, whichever is less."

The Act was passed before the Fourth Amendment Act of the Constitution in 1955. Its vires is to be decided on the anvil of the Constitution as it stood before the said amendment. Several decisions of this Court have laid down the principles for testing the vires of State Act s providing for compensation for acquisition of land for public purposes.

<CITATION> (1) the Court examined the question as to what compensation for property acquired meant under Art. 31(2) of the Constitution. There the impugned West Bengal Act of 1948 in effect provided that in determining the amount of compensation to be awarded for land acquired in pursuance of the Act, the excess of the market value of the same on the date of the publication of the notification under sub-s. (1) of S. 4 of the Land Acquisition Act for the notified area over its market value on 31st December 1946, shall not be taken into consideration. Virtually this meant that no matter when the property was acquired, the owner could get compensation which was equivalent to its value on 31st De- cember, 1946. This date was taken in view of the fact that large scale immigration at people from East Bengal to West Bengal had taken place round about that date. There, the Attorney General had argued that the word "compensation" in the context of Art. 31(2) read with entry 42 of List III did not mean in any rigid sense equivalence in value but had a reference to what the legislature might think was a proper indemnity for the loss sustained by the owner. Negativing this argument <NAME>, C. J. at p. 563:

"While it is true that the legislature is given the discretionary power of laying down the principles which should govern the determination of the amount to be given to the owner for the property appropriated, such principles must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to legislative judgment as to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the court."

The <ORG> held that the fixing of the market value on Decem- ber 31, 1946, as the ceiling on compensation, without reference to the value of the land at the time of the acquisition was arbitrary and not in compliance with the requirements of Art. 31(2). The learned Chief Justice went on to add:

"The fixing of an anterior date for the ascertainment of value may not, in certain circumstances, be a violation of the constitutional requirement as, for instance, when the proposed scheme of acquisitio n becomes known before it is launched and prices rise sharply in anticipation of the benefits to be derived under it, but the fixing (1) [1954] S.C.R. 558.

of an anterior date, which might have no relation to the value of the land when it is acquired, may be, many years later, cannot but be regarded as arbitrary.................. Any principle for determining compensation which denies to the owner this increment in value cannot result in the ascertainment of the true equivalent of the land appropriated."

<CITATION> (1) the provi- sion as to compensation for compulsory acquisition of land under Madras Lignite (Acquisition of Land) Act, 1953 came up for consideration by this <ORG>. The point canvassed before the <ORG> with which we are concerned was, whether the provision with regard to compensation to be assessed on the market value of the land prevailing as in August 28, 1947 and not on -the date on which notification was issued under s. 4(1) of the Land Acquisition Act was in violation of Art. 31(2). On the assumption that April 28, 1947 was the date on which lignite deposits were discovered in the area to which the Act was extended, the <ORG> observed:

"........ there is no true relation between the acquisition of the lands in these cases and fixation of compensation based on their value on the market rate prevailing on April 28, 1947. Fixation of compensation for compulsory acquisition of lands notified many years after that date, on the market value prevailing on the date on which lignite was discovered is wholly arbitrary and inconsistent with the letter and spirit of Art. 31(2) as it stood before it was amended by the Constitution (Fourth Amendment) Act, 1955. If the owner is by a constitutional guarantee protected against expropriation of his property otherwise than for a just monetary equivalent, a law which authorises acquisition of land not for its true value, but for Value frozen on some date anterior to the acquisition, on the assumption that all appreciation in its value since that date is attributable to purposes for which the <ORG> may use the land at some time in future, must be regarded as infringing the fundamental right".

As learned counsel for the appellant relied on certain ob- servations in this judgment at page 944, the same may be quoted here :

"The right which is guaranteed is undoubtedly the right to a just indemnification for loss, and appreciation in the market value of the land because of the proposed acquisition may in assessing compensation be ignored. Even the Land Acquisition Act provides for assessment of compensation on the basis of market value of the land not on the date on Which interest of the owner of land (1) [1964] 6 S.C.R. 936.

is extinguished under s. 16 , but on the basis of market value prevailing on the date on which the notification under s. 4(1) is issued. Whether this rule in all cases irres- pective of subsequent developments ensures just indemnification of the expropriated owner so as to be immune from attack, does not call for comment in this case. But any principle for determination of compensation denying to the owner all increments in value between a fixed date and the date of issue of the notification under s. 4(1) , must prima facie, be regarded as denying to him the true equivalent of the land which is expropriated and it is for the <ORG> to show that fixation of compensation on the market value on an anterior date does not amount to a violation of the Constitutional guarantee."

After noting that it was a matter of common knowledge that land values had risen steeply after the last world war, the judgment proceeded :

"To deny to the owner of the land compensation at rates which justly indemnify him for his loss by awarding him compensation at rates prevailing ten years before the date on which the notification under S. 4(1) was issued amounts in the circumstances to a flagrant in- fringement of the fundamental right of the owner of the land under Art. 31(2) as it stood when the Act was enacted."

On October 5, 1964 judgments were delivered in two cases where the law on the subject came to be examined again. <CITATION> (1) it was said at p. 625:

"It may, therefore, be taken as settled law that under Art. 31(2) of the Constitution before the Constitution (Fourth Amendment) Act, 1955, a person whose land was acquired was entitled to compensation i.e. a "just equivalent" of the land of which he was deprived."

It is to be noted that in <NAME> case(1) the Constitutional validity of the Land Acquisition (Madras Amendment) Act, 1961 (Act 23 of 1961) was before this Court. <CITATION> (-) the requisite notification under s. 4 of the Land Acquisition Act was issued in May 1948 and that under s. 6 in August 1949, the possession of the land being taken in December 1949. The Land Acquisition Officer and <ORG> awarded compensation in accordance with the Land Acquisition (Bombay Amendment) Act, 1948 on the basis of The value of the lands as on January 1, 1948 and not upon (1)  1 S.C.R. 614.

(2) [1965] 1 S.C.R. 636.

the value on the date of the s. 4 notification. A reference was made,, to the earlier cases and it was said that <NAME> case(1) laid down the following principles : (1) The expression "compensation" in Art. 31(2) of the Constitution meant just equivalent of what the owner has been deprived of; (2) The principles laid down by the legislature shall be only for the determination of the compensation so defined; (3) Whether the principles have taken into account the relevant elements to ascertain the true value of the property acquired is a justiciable issue; and (4) The fixation of an anterior date for the ascertainment of the value of the property acquired without reference to any relevant circumstances which necessitated the fixing of an earlier date for the purpose of ascertaining the real value is arbitrary. With regard to Art. 31(2) a twofold argument was put up before us by learned counsel for the appellant. It was argued that cl. (b) of <CITATION> should be construed with reference to <CITATION> . It was urged that the first portion of sub-s. (1) cl. (e) reading "the arbitrator shall, after hearing the dispute, make an award determining the amount of compensation which appears to him to be just and specifying the person or persons to whom such compensation shall be paid;"

was mandatory while the succeeding portion reading:

"and in making the award, he shall have regard to the circumstances of each case and the provisions of subsections (2) and (3). so far as they are applicable;"

was merely directory. It was said that the use of the expression " shall have regard to" so far as sub-ss. (2) and (3) were concerned ,only indicated that the arbitrator was to keep the said provisions .in mind but he was not bound to guide himself strictly thereby. According to the shorter <ORG> the phrase "have regard to" is used when 'reference to a person or thing' is' intended. The exact significance of this phrase will depend on the context and the setting in which it is used. The phrase finds a place in numerous sections of the Madras Estates Land Act discussed -elaborately in <CITATION> (2) There it was observed by <ORG> that the expression "have regard to" or expressions very close to this were scattered throughout this Act, but the exact force of each phrase must be considered in relation to its context :and to its own subject matter. Consequently in considering the matters to which the arbitrator appointed under <CITATION> of the Act is to have regard, we must examine the language of the provision to find out whether a mere reference to the matter mentioned is aimed at or whether the legislature wanted the arbitrator to be guided rigidly thereby.

(1) [1954] S.C.R. 550 (2) 70 I.A. 129 From the language used in <CITATION> , learned counsel for the ap- pellant Wanted to draw the inference that the expression "have regard to" only meant that the arbitrator was to keep the matters referred to in mind or be conscious of the same but that he was not compelled to guide himself thereby. In other words, the contention was that although the arbitrator had to consider the various circumstances mentioned in sub- s. (2) and modes prescribed in sub-s. (3), those circumstances or modes nowhere fettered his powers of awarding compensation. We cannot accept this proposition. The circumstances mentioned in sub-s. (2) are not related at all to the just equivalent for the land compulsorily acquired. These are only incidental to the requisitioning of the property and provide for the expenses, loss or damage to which the owner may be put as a result thereof; the measure of a just equivalent is indicated in sub-s. (3) alone. This sub-section leaves no choice to the arbitrator as to which of the two modes of assessing the compensation he is to accept. The words of sub-s.(3)are mandatory and compel the arbitrator to accept only the smaller figure arrived at after assessment on the two modes of valuation. No exception is taken to the mode prescribed in cl. (a) of sub-s. (3) but the mode prescribed in cl. (b) must be held to be arbitrary. It has no relation to the value of the land at the date of the notice under s. 7 which may be many years after the date of requisition. In the present case, the original requisition was made in 1942. By the deeming provision of s. 24 of the Act the property was to be treated as requisitioned under s. 3 of the Act The notice under s. 7 was given on April 2. 1953. No grounds were shown and no circumstances were brought to our notice which necessitated the fixing of the date of requisition as the one for ascertaining the real value of the property. The property might have continued in requisition for years and it is impossible to say that the date of requisition has or can have any connection with the date of acquisition under s. 7 . In <NAME> case(1) is also in the other cases mentioned, viz., <CITATION> (2), <CITATION> (:') and <CITATION> (4), the date for the assessment of compensation was mentioned in the Act itself. In this case it is not so mentioned but such date is dependent on the original requisition. In any case it does not give the person to be compensated a just equivalent of the property he was losing at the date of acquisition. In this case too, it can be said that the just equivalent was frozen at the minimum of twice its value on, the date of requisition. It is common knowledge that all over India there has been a spiralling of land prices after the conclusion of the last world war although the inflation has been greater in urban areas, specially round about the big cities. than in the (1)  S.C.R. 558.

(2) [1964] 6 S.C.R. 936.

(3) [1965] 1 S.C.R. 614 (4) [1965] 1 S.C.R. 636 mofussil. .Land values in post-war India are many times the corresponding values before the conclusion of the last war. In assessing the just equivalent of the value of the property at twice the price which the requisitioned property would have fetched in the open market if it had been sold on the date of requisition, the arbitrator would be acting arbitrarily inasmuch as he would be proceeding on a formula for which there is no rational basis.

Clause b) of sub-s. (3) of <CITATION> leaves the arbitrator no choice of assessing the value in terms of cl. (a) even if he was of opinion that the mode fixed thereunder afforded a just equivalent of the property to its owner. He had to make his assessment in terms of cl. (b). The expression "have regard to" in sub-cl. (e) of sub-s. (1) of <CITATION> therefore does not give the arbitrator any freedom of considering the two modes laid down in sub-s. (3) and accepting the one which he thought fair.

The first point about the opening portion of cl. (e) being mandatory and the latter portion being directory cannot therefore be accepted. So far as sub-s. (3) is concerned. it is couched in terms which are mandatory. The second head of argument of learned counsel for the ap- pellant that the impugned clause stood by itself and satisfied Art. 31(2) and the tests formulated in <NAME> case(1), is of no Substance. The passage in the judgment of this Court in <CITATION> (2) at p. 944 where reference was made to the fact that even under the Land Acquisition Act of 1894 notification under s. 4 might be followed by a long interval before acquisition under s. 16 took place does not support the contention of the appellant. There this Court observed that the fixing of an anterior date for arriving it the market value of the land did not ispo facto invalidate the acquisition, but that there might be circumstances which would justify such a fixation; and it was there pointed out that it was for the <ORG> to show that fixation of compensation at the market value of an anterior date did not, amount to violation of the constitutional guarantee. This. in our opinion, the appellant has signally failed to do.

This case cannot be compared with the case of <CITATION> (3) where the person to be compensated was given the right to choose among several methods of valuation prescribed by s. 5 of the Madras Electricity Supply Undertakings (Acquisition) Act of 1954. In that case also, the validity of the Madras Act had to be examined with reference to Art. 31(2) before its amendment in 1955. Section 5 of the Madras Act provided that the compensation payable to a licensee on whom an order had been served under s. 4 or whose (1)  S.C.R. 558 (2)  6 S.C.R. 936.

(3) [1963] 2 S.C.R. 747.

undertaking had been taken over before the commencement of the Act<ORG> would be determined under any of the Bases A<ORG> B and C specified by the section as might be chosen under <CITATION> . Then followed detailed provisions about these three Bases. The <ORG> found that "in none of the three bases does the <ORG> refer to the market value of the undertaking." But according to the <ORG><ORG> "that itself cannot justify the argument that what is in.tended to be paid by way of compensation must necessarily mean much less than the market value. The failure ;of the legislature to refer to the fair market value cannot<ORG> in our opinion<ORG> be regarded as conclusive or even presumptive evidence of the fact that what is intended to be paid under <CITATION> does not amount to a just equivalent ;Of the undertaking taken over. After all<ORG> in considering the question as to whether compensation payable under one or the other of the Bases amounts to just equivalent<ORG> we must try to assess what would be payable under the <ORG><ORG>said basis."

The argument on behalf of the appellant that tile basis did not provide for the payment of just equivalent could not be accepted by this Court because of the fact that the appellant had produced no material on which its plea could be sustained. In this case, however there is no such difficulty. Clause (a) of <CITATION> lays down a principle aimed at giving the owner of the land somethin- which approximates its just equivalent on the date of acquisition. Clause (b) however directs the arbitrator to measure the price arrived at in terms of cl. (a) with twice the amount of money which the requisitioned property would have fetched if it had been sold on the date of requisition and to ignore the excess of the price computed in terms of cl. (a) over that in terms of cl. (b). The position bears a close similarity with the facts in <NAME> case(1), where the legislature directed that the excess of the value of the land arrived at in terms of the Land Acquisition Act over the value as on the 31st December, 1946 was to be ignored. The basis provided by cl. (b) has nothing to do with the just equivalent of the land on the date of acquisition nor is there any principle for such a basis. We cannot therefore accept the proposition that the impugned clause satisfies the requirements of Art. 31(2) of the Constitution.

The only other contention which remains to be noted is that ..<ORG> should have refused relief on the ground of delay in making the. application under Art. 226 of the Constitution. This was turned down by <ORG> and it was pointed out that although the original acquisition was made on 4th April 1953, so far as compensation was concerned, the arbitrator was appointed on 21st June, 1961. We were informed that the Collector assessed (1)  S.C.R. 558.

the compensation on July 2 1962 and the petitioner approached the Court on September 18, 1962. It was held by <ORG> that in the case of an infringement of a fundamental right under the Constitution, mere delay would hardly affect the maintainability of the petition. <ORG> was not satisfied that there was delay and said:

"In any case having regard to the importance of the points raised and, assuming that there was delay, we would certainly condone the delay."

In appeal we do not feel disposed to take a different view. If <ORG> had any discretion in the matter-and it is not suggested that it had not-the exercise of such discretion ought not to be over-ruled by US Unless we are satisfied that <ORG> had "acted on some wrong principle or committed some error of law or failed to consider matters which demand consideration". This is-the principle which <ORG> in England have always followed as observed by Viscount <NAME> in <NAME> v. <ORG>) and nothing has been shown to us as to why we should adopt a different principle. The appeal therefore fails and is dismissed with costs.

Appeal dismissed.

<NAME>

(1) [1963] A.C. 634 at 661.


<NAME>, J.

1. This is an application in revision arising out of proceedings taken at the instance of the applicants under Section 476, Criminal Procedure Code . There was a civil suit No. 352 of 1942, decided by the court of Munsif, Shikohabad, for ejectment from a house and arrears of rent. The suit was decreed on 30-9-1943, Thereafter the plaintiffs filed an application under Section 476 , Cr. P. C., against four of the defendants and eight others for their prosecution under Section 193 and other sections of the Penal Code . On 25-5-1946 this application was allowed ex parte and an order for the prosecution of the opposite praties was made.

They went up in appeal to the District Judge who, however, dismissed the appeal for default of appearance on 11-12-1948. The defendants then filed an application for setting aside the ex parte order of dismissal and for restoration of the case to its original number. This application was allowed. In the present application in revision the plaintiffs contend that the court below had no jurisdiction to restore the appeal dismissed for default because the Criminal Procedure Code does not provide for the same.

As the proceedings initiated under Section 476 Gr. P. C., arose out of civil proceedings and were heard by a civil court and as an appeal under Section 476B of the Criminal Procedure Code also lay to the civil court, the proceedings must be treated as civil pro-ceedings to which the Civil Procedure Code applies and not criminal proceedings to which the Criminal Procedure Code will apply, barring of course Sections 476 , 476A and 476B of the Criminal Procedure Code, vide -- ' <CITATION> ', AIR 1946 All 245 (A), -- 'Nawab Ali v. Madhuri', AIR 1927 Oudh 14 (B); and -- '<NAME> v. <NAME>', AIR 1924 Rang 54 (C).

If these were civil proceedings and the Civil Procedure Code applies, then although the appeal is provided for in Section 476B , Criminal P. C., its procedure for hearing would be governed by Order 41, C. P. C., and as such when the appeal is dismissed for default and an application for its restoration is made under Order 41, Rule 19, C. P. C., the lower court has jurisdiction to restore the appeal;

2. There is no force in this revision. It is accordingly dismissed. The opposite parties are entitled to their costs of this revision.