<NAME>, J.

1. A certain <NAME> has been convicted of the murder of <NAME> and has been sentenced to death. The case comes before us for confirmation of that sentence and also on the appeal of the convict.

2. It appears that about the 22nd of August 1913 the corpse of a man, whose head was almost severed from his body, was found in the village of Haleratti. On making inquiries the police discovered from the neigh bouring villagers that the murdered man had been accompanied by another man and a woman. They were all strangers to that locality. Neither the identity of the murdered man nor his companions was at the time ascertained. About a month later, howeve", the identity of the murdered man came to be suspected. His wife was questioned and thereafter the police were enabled to make complete inquiries. They discovered that the murdered man was one <NAME> and that his companions were the accused and the deceased's wife <NAME>. It was found that <NAME>-<NAME> had for some time been living at Makrabi where the accused also lived, that her husband had been working at another village Magal, that he had taken his wife from Makrabi for a time and that thereafter he and his wife set out to go to Haveri and were joined on the way by the accused. On their journey these three persons crossed the ferry between Bannimatti and Galagnath, whence they proceeded to the place where the corpse was subsequently found. From there <NAME> and the accused returned, spending the night at a village on the way and recrossing the ferry on the following day. This gave the police an opportunity of which they availed themselves of tracing the movements of these persons and identifying the individuality of each. They have been enabled to put before the Court perfectly credible evidence of all the circumstances that I have stated. Then there is the evidence of the dead man's wife <NAME>, who describes how her husband was murdered. It is said that she is an accomplice witness. However that may be, we must, in a case of this kind, regard her evidence with caution, because whether an accomplice or not, she was present at the murder and for weeks thereafter she gave no information about the crime and it is proved that she had illicit intimate relations with the accused. It does not seem to me to matter in the least whether you call her an accomplice or not. Her evidence must be valued in relation to these circumstances. However, in the light of the surrounding circumstances, from the undoubted truth of the facts that the three persons travelled together, that one of them was left dead where his body was found and that the other two returned to their village together there can be little doubt that the man was" murdered by one or both of them. This conclusion is fortified by the sub-sequent conduct of the accused himself who gave an untrue account of his proceedings and had two letters written at intervals of about a fortnight which were designed to induce people to believe that the murdered man was still alive and working in a distant village. Here, again, the evidence is, to my mind, credible and indeed convincing. Taking the circumstances as a whole, they leave no doubt whatever that the accused was the man, whether helped by the woman or not, it does not matter, who killed <NAME>.

3. The credit of the elucidation of these circumstances is mainly due to the promptness and intelligence of the police inquiry and for that inquiry I gather, <NAME>, Sub-Inspector of Haveri, is mainly responsible.

4. For these reasons I confirm the conviction and also the sentence in this case.

5. There has arisen and has been discussed a point as to the meaning of Section 162 of the Criminal Procedure Code. It appears that amongst the villagers who were near the scene of the offence when the murder took place was a boy who happened to see the three persons. The deceased's wife before the Committing Magistrate stated that she had not seen this boy Before <ORG> she stated that she had seen him On this state of facts the defence might very easily and with no other facts bearing on the point known with some force argue that the woman had changed her story, that the earliest known account of the matter which she gave was less favourable to the prosecution case than that she gave to <ORG> and thereon they might very properly found an argument that the witnesses had been tampered with and that the case presented clear indications of that kind of influence which properly ought to raise doubts in the mind of the trying Judge. To rebut an argument of this kind it was proved from the mouth of the investigating police officer that to him the deceased's wife had said that she saw the boy. If what the investigating police officer says be true, then it completely destroys the defence argument. The question argued before us is, whether the police officer could, as the law stands, be allowed to depose to what this woman had said to him for the purpose of corroborating what she said before the Sessions Judge. My own opinion is that the police officer could depose to that effect. I do not propose to discuss the various authorities which have been referred to. Lengthy arguments on this very point find a place in the books. I will only say that I do not think that either by its terms or by its intention Section 162 of the Criminal Procedure Code prohibits the <ORG> from receiving such evidence for such a purpose.

<NAME>, <NAME>

6. I concur. The learned Sessions Judge has examined the evidence with great care in an exhaustive judgment and has considered all the arguments urged in favour of the defence. Substantially the same arguments have been urged before us. Generally speaking I agree with the lower Court in its appreciation of the evidence and with the inferences drawn by it.

7. It is not disputed before us that the deceased whose body was found on the 22nd August last was <NAME>, the husband of <NAME>, and the evidence in the case clearly establishes the fact.

8. I accept the evidence of <NAME> and <NAME> as true in the main. <NAME>'s evidence, no doubt, must be received with caution, though I do not accept the argument that she is an accomplice. She did not give out her present story soon after the occurrence and gave varying accounts from time to time, which was to a certain extent natural under the circumstances. Having regard to the proved circumstances in the case, I am inclined to believe her present account that she saw the accused killing the deceased. As to the evidence of <NAME>, quite apart from the fact whether he was seen by <NAME> or not, I accept it as true, despite the criticism of Mr. <NAME> on his evidence. The fact of the journey of the deceased and <NAME> in the company of the accused is proved by reliable evidence in the case. The subsequent conduct of the accused, which I do not propose to examine in detail, lends strong corroboration to the prosecution story. It is enough to refer to his association with the letters, Exts. 27 and 28. The accused is proved to have taken those letters to <NAME>, which appear on the evidence to have been written at his instance. It is proved that the deceased was never at Amlikop. The obvious inference that arises from the proved conduct of the accused is that he was trying to conceal the death of <NAME>, which was known to him. On a careful consideration of the evidence and the arguments advanced on behalf of the accused, I have no hesitation in coming to the conclusion that the deceased <NAME> was murdered by the accused. The circumstances connected with the crime demand that the sentence should be confirmed.

9. The police investigation in this case appears to me to have been made with unusual ability and thoroughness, and affords a telling illustration of the manner in which a case could be investigated without the aid of a confession.

10. I desire to allude to a point which has been raised before us in connection with <NAME>'s evidence. It has been pointed out that though she stated before the Committing Magistrate that she did not see any Kurbar boy then, she now denies having made that statement, and says that she had seen a boy from Haleritti. It is urged that the statement before the Committing Magistrate represents the truth. Even then I do not think that the main conclusion in the case is affected in any way. It is urged on behalf of the prosecution, however, that the argument is based upon a misapprehension of facts, and that the Sub-Inspector has been examined to show that <NAME> stated before the police that she did see a boy at the time. The question of law that arises is whether the prosecution can be allowed to adduce oral evidence in proof of her statement before the police in order to corroborate her testimony at the trial. Her statement to the police was admittedly reduced to writing, and it is common ground that such writing cannot be used as evidence. Mr. <NAME> contends and not without force that it would be unreasonable to allow any oral evidence of the statement to be given, when the writing containing the statement cannot be proved. On the other hand it is argued on the strength of Section 157 of the Evidence Act that the right of the prosecution to prove any statement to corroborate the testimony of any witness under that section is not taken away by Section 162 of the Code of Criminal Procedure which only provides that the writing shall not be used as evidence. The point is not free from difficulty which is sufficiently reflected in the diversity of judicial opinions bearing on the question. The judgment of <NAME> in <NAME> v. King-Emperor (1910) 7 A.L.R. 468. and the observations of <NAME> in <CITATION> represent one side of the question and the judgment of <NAME> in the case of <NAME> v. King Emperor (1910) 7 L.J.R. 468. and the decisions in <CITATION> (1908) I.L.R. 36Cal. 281, <CITATION> (1912) I.L.R. 35 Mad. 247. and <CITATION> (1912) I.L.R. 35 Mad. 397 represent the other side. I have carefully considered the question, and on the whole I incline to the view that looking to the plain language of Section 162 , Criminal Procedure Code , the writing only is excluded from evidence but the right to prove any statement made to the police by oral evidence to corroborate the testimony of any witness is not taken away by that section. This conclusion derives support from or is at least in consonance with the view taken by this <ORG> in <CITATION> . in which the <ORG>, while directing a retrial, ordered that the Chief Constable should be examined as to the statements made to him by the witnesses during the police investigation. Such an order would be inappropriate, if the oral evidence of the statements were inadmissible. The anomaly, if any, can be remedied by the <ORG>. Our duty plainly is to construe the section without unduly straining the language used by the <ORG>. I think, therefore, that the evidence of the Sub-Inspector was rightly admitted on this point. At the same time, I think that under ordinary circumstances the admission of the oral evidence of the statements made to the police when they are reduced to writing is not in keeping with the spirit of Section 162 , Criminal Procedure Code , and the existence of exceptional circumstances would be absolutely necessary to give any appreciable value to such evidence. In this case, for instance, <NAME>'s statement in question at the trial deserves to be credited not simply because the Sub-Inspector says that she had made a statement to that effect to him, but mainly on the additional ground that though it was suggested in her cross-examination that she had made a contradictory statement before the Committing Magistrate, it could not be suggested to her that her earlier statement to the police on this point was in conflict with her present version, and that the Sessions Judge did not ask her any question on this point, though she was recalled on the 8th January, after the Sub-Inspector was examined and questions on other points, arising out of her statement reduced to writing before the police, were put to her by the <ORG>.


JUDGMENT <NAME>, J.

1. This is a second appeal filed by the plaintiff (decree-holder) against the order passed on his E.P. No. 218 of 1922 in S. S. No. 26 of 1908 on the file of the Deputy Collector of Bandar. There is no appearance for the respondent (judgment-debtor) in this appeal. The facts are briefly as follows:

S.S. No. 26 of 1908 was filed for the recovery of arrears of rent under Section 77 of the Madras Estates Land Act 1 of 1908, and a decree was passed in plaintiff's favour on 16th September, 1910. The present E.P. No. 218 of 1922 was filed on 12th September, 1922 for the execution of that decree by attachment and sale of the defendant's immoveable property. This petition was dismissed by <ORG> on 17th May, 1923 as no fresh petition for the appointment of a guardian for the minor defendant was filed. Against that order of dismissal an appeal was preferred to <ORG>. The learned District Judge rightly held that the order of dismissal passed by the executing <ORG> was wrong and could not be upheld. I am in entire agreement with that view for there was no justification for the dismissal of the execution petition, for the non-filing of a fresh petition for the appointment of a guardian when the petition filed for that purpose was still pending and no orders had been passed on it. But the District Judge, however, dismissed the appeal as he was of opinion that an appeal does not lie.

2. The correctness of this view is challenged on the appellant's side. It seems to me that the learned District Judge has misconstrued Sections 189 and 192 of the Estates Land Act. Section 189 provides that <ORG> (and not <ORG>) has jurisdiction to try and hear all suits and applications of the nature specified in Parts A and B of the Schedule, and the decrees and orders passed in such suits and applications shall be subject to appeals as provided in the sixth column. Section 192 enacts that subject to the other provisions of this Act and subject to the modifications and additions mentioned in that section itself, the provisions of the Civil Procedure, Code shall apply to all suits, appeals and other proceedings under this Act. The order in question is one passed by <ORG> on a petition put in for executing its decree in a suit filed under Section 77 of the Act. It is not an application of the nature specified in Part B of the Schedule, and therefore an order passed on it is not subject to an appeal as provided in the sixth column of Part B of the Schedule. What we have to see is, whether the application now in question (E.P. No. 218 of 1922) is governed by the provisions of the Civil Procedure Code. This application is not covered by Section 189 of the Act and consequently is not governed by the provisions of that section. There is no provision in the Act either expressly or impliedly prohibiting an appeal against an order on an execution application passed by <ORG>. Section 192 of the Act makes the provisions of the Civil Procedure Code applicable to all suits, appeals and other proceedings under this Act subject to the restrictions set forth in that section. Section 47 of the new Code (which corresponds to Section 244 of the old Code of 1882) is not one of the sections mentioned in Sub-clause (a) of Section 192 of the Act. There is no doubt that the order dismissing E.P. No. 218 of 1922 (which was filed under Order 21, Rule 11(2) of the Civil Procedure Code) is an order falling under Section 47 of the Code. Such an order could be a decree as defined in Clause (2) of Section 2, of the Code, and therefore an appeal lies under Section 96 as also a second appeal under Section 100 of the Code. It is <ORG> which is authorised to hear an appeal against the decree of <ORG> in a suit filed under Section 77 of the Act (vide the sixth column appertaining to Serial No. 8 in Part A of the Schedule). Consequently by virtue of Section 96 of the Code the appeal lies to <ORG> against an order passed in execution of that decree. The learned District Judge says that it would be inconsistent with the provisions of Section 189 of the Estates Land Act to allow an appeal in the present case. As I have pointed out above, that section does not cover the present case at all, and therefore there would be no violation of the provisions of that section if an appeal is allowed in the present case. By virtue of Section 192 of the Estates Land Act the provisions of Sections 2, 47, 96 and 100 of the Civil Procedure Code apply to a petition filed for the execution of a decree given by <ORG> in a suit filed under Section 77 of the Estates Land Act. If the view taken by the learned District Judge should be adopted as correct, the result would be that no orders passed in execution of such a decree by <ORG> would be appealable to any Court, though the decree itself is subject to appeal. I am unable to uphold that view.

3. The appeal is allowed and E.P. No. 218 of 1922 is remanded to the executing <ORG> for restoration to file and dispose according to law. The costs of the first and second appeals will abide the final result of the petition.


JUDGMENT <NAME>, J.

1. The facts found and/or admitted in these proceedings are shortly as follows :

<ORG>, Calcutta, is the Indian subsidiary of <ORG> <ORG>, a non-resident company incorporated in the United Kingdom. At the material period the assesses was engaged in executing a contract awarded by <ORG>, a <ORG> of India undertaking. In executing the said contract the funds of the assessee to the extent of over Rs. 24 lakhs became blocked. In the circumstances, the assessee approached its parent company for a loan of 37,500 being about Rs. 5 lakhs in Indian currency at that time. The foreign principal company agreed to advance the amount to the assessee and in its letter dated the 14th January, 1965, wrote to the assessee as follows :

"With reference to your application for financial assistance, we conefirm that this company would agree to make you an interest-free loan of Rs. 5 lakhs ( 37,500) for a period of one" year, to enable you to finance the large Government contracts on which you are currently engaged.

No doubt you will obtain the necessary permission from the Indian Government to repay this loan in sterling, at the expiration of one year, or earlier if funds become available."

2. Thereupon, the assessee by its letter dated the 18th January, 1965, sought the approval of <ORG> for the said loan of Rs. 5 lakhs ( 37,500) from the parent company with permission to repatriate the amount when required after one year or earlier if funds would become available.

(a) By the said letter <ORG> was, inter alia, informed that the loan amount was needed to finance the said contract of <ORG>.

(b) An amount of Rs. 24.34 lakhs was lying blocked in the contract and the assessee's overdraft with its bankers had reached the maximum limit and there was no alternative for the assessee but to obtain the said loan from the United Kingdom.

(c) Funds were required immediately to meet a taxation liability of Rs. 10 lakhs in January and February, 1965, apart from the continuous requirements in the said contract.

(d) The approval of <ORG> for the loan was required immediately so that the assessee could meet the urgent taxation liabilities without default.

3. Necessary permission was granted by <ORG> for the aforesaid loan and the assessee received the loan on the 25th February, 1965, The loan was not repaid at the expiry of one year and remained outstanding in the books of the assessee up to the 6th Jane, 1966, on which date the Indian rupee was devalued. As a result of such devaluation the asses-see found that it had to arrange for a sum of Rs. 7,87,692 to repay the original loan of 37,500, and consequently an extra amount of Rs. 2,87,692 was necessary to repay the original loan of Rs. 5 lakhs.

4. After deducting a gain of about Rs. 4,078 on the assessee's sterling deposit in a London bank the assessee debited its profit and loss account with a sum of Rs. 2,83,614 for the assessment year 1967-68 and claimed deduction of this amount. The <ORG> rejected the claim of the assessee on the ground that the increase of liability arising from devaluation on account of the sterling loan was of a capital nature and could not be allowed as a revenue expense.

5. Being aggrieved, the assessee preferred an appeal and contended before the <ORG>, inter alia, that the loan in question was not raised for acquiring any capital asset and the extra amount of Rs. 2,83,614 payable against the loan on account of devaluation of Indian rupee was a revenue expenditure and should have been allowed as deduction in computing the assessee's business income. The <ORG> held that the loss on account of devaluation in connection with a loan could not under any circumstances be considered to be a revenue loss. Accretion in the amount of the borrowing was not admissible as a deduction. He also held that the assessee not being a dealer in foreign exchange, the loss was not incidental to its business or in the carrying on of that. Accordingly, the <ORG> confirmed the disallowance of the loss.

6. The assessee preferred further appeal to the <ORG>. It was contended on behalf of the assessee in the appeal that the said amount should have been allowed as a deductible expenditure under Section 37(1) of the I.T. Act, 1961, as a loss incidental to the business. It was contended further that, although the loan had not been repaid during the year in question as the assessee's accounts were kept according to the mercantile system, the liability having arisen in the year by reason of the devaluation, it was in the nature of an expenditure incurred by the assessee and, therefore, allowable under Section 37 . It was contended that the expenditure for the purpose of business included the payment of the assessee's statutory dues and taxes. It was submitted that the loan had been taken by the assessee for the. purposes of its business and the loss occasioned by devaluation was suffered in the business.

7. The revenue on the other hand contended that the alleged expenditure and/or loss was not allowable inasmuch as : (a) no expenditure had been incurred ; (b) even if such expenditure was incurred it had not been laid out or expended wholly or exclusively for the purpose of the assessee's business; and (c) the expenditure and/or loss was capital in nature inasmuch as it went to increase the amount of loan which the assessee was required to pay to its principal. It was contended that, in any event, the loss arising out of devaluation could not be allowed as a loss incidental to business. It was finally submitted that the loss, if any, was of a capital nature. There was no change in the amount of loan and the provision for a higher amount for repaying the loan could not be called a revenue expenditure as it was related to capital and was connected with the return thereof.

8. The <ORG>, inter alia, noted that no evidence had been adduced to show the probable date of repayment of the said loan. On the date of the devaluation the original period for repayment, i.e., one year, had already expired. Accordingly, the <ORG> held that the assessee was not required to repay the loan on the 6th June, 1966, or that any liability for the expenditure of the extra amount of Rs. 2,83,614 arose on that date. The <ORG> held further that the liability to pay the extra amount, if any, was a contingent liability.

9. On the authority of <ORG> in Indian Molasses Co. (P.) <CITATION>  37 ITR 66, the Tribunal held that the assessee did not actually incur any expenditure which would qualify for allowance under Section 37 .

10. The <ORG> also found that the assessee required additional funds and obtained the said loan not only for financing its business but also to meet an immediate taxation liability of Rs. 10 lakhs as admitted in the letter dated 18th January, 1965, addressed to <ORG>. There being no evidence as to which part of the taxation liabilities was met out of the loan, the <ORG> concluded from the said letter that the major requirement of the assessee was to meet the taxation liabilities. Following a decision of this court in <CITATION>  58 ITR 84 (Cal), the <ORG> held that the expenditure it incurred was in connection with the payment of tax and could not be allowed under Section 37 .

11. The Tribunal held that, as no repayment was made to the principal-

company in the assessment year, there was no question of claiming any loss in that year. The <ORG> also held, following a decision of this court in <CITATION> , that the loss in exchange having arisen due to devaluation, which was an act of the <ORG> and an act of the Sovereign, was not a loss springing directly from the carrying on nor incidental to the carrying on of the business of the assessee and, therefore, could not be allowed also on this ground,

12. On the application of the assessee under Section 256(1) of the I.T. Act, 1961, and also Section 18 of the Companies (Profits) Surtax Act, 1964, the <ORG> has drawn up a statement of case and has referred the following questions for the opinion of this court as questions of law arising from its order :

Under the Income-tax Act , 1961:

"1. Whether, on the facts and in the circumstances of the case, and on a proper construction of the assessee's letter of 18th January, 1965, the <ORG> was right in holding that the assessee's major requirement for its loan was to meet its taxation liabilities ?

2. Whether, on the facts and in the circumstances of the case, the <ORG> was right in holding that the amount of Rs. 2,83,614 was not deductible in computing the assessee's profits and gains of business ?"

Under the Companies (Profits) Surtax Act , 1964 :

"Whether, on the facts and in the circumstances of the case, the <ORG> was right in holding that the amount of Rs. 2,83,614 was not deductible in computing the chargeable profits for the purposes of the surtax assessment for the year 1967-68 ?"

13. Mr. <NAME>, learned counsel for the assessee, in his submissions on question No. 1 before us contended that on a proper construction of the assessee's letter dated the 18th January, 1965, it could not be said that the major requirement of the assessee in obtaining the said loan was to meet its taxation liabilities as on that date. He contended that it was clearly seen from the letter of the foreign principal that the loan was being advanced to the assessee to enable it to finance the current <ORG> contract and not to meet the assessee's taxation liabilities. In the assessee's letter to <ORG> it was also reiterated that the loan was necessary for the purpose of financing the contract. It also appeared from the said letter that the subject of the loan was broached prior to the 17th June, 1964, and prior to the taxation liability of 1965. On a proper construction of the said letter, which was a question of law, Mr. <NAME> submitted that it could not be said that the major requirement of the assessee for the loan was for meeting taxation liability.

14. Mr. <NAME>, learned counsel for the revenue, contended on the other hand, that the finding of the <ORG> that the major requirement of the assessee was to meet the taxation liabilities was a finding of fact which had not been challenged in these proceedings as perverse or based on no evidence. He submitted that construction of ordinary correspondence did not give rise to questions of law which could arise only where legal documents Were being construed. In the instant case the <ORG> has drawn a factual conclusion from the letter.

15. It appears to us that the question No. 1 is an academic question. In the earlier part of its order the <ORG> records as follows : ".........The above facts as emerged from the letter dated 18-l-65 go to show that the major requirement before the company was to meet the taxation liabilities". But in the latter part of the order it is recorded as follows ; "17. Besides, as we have already stated above, the loss has arisen, if not substantially at least to a great extent, in the discharge of the assessee's income-tax liabilities......" The latter part of the <ORG>'s order which does not mention the assessee's major requirement has not been challenged and, therefore, the challenge to the earlier construction of the letter by itself does not advance the assessee's case further.

16. For the reasons given above we decline to answer question No. 1. On question No, 2 Mr. <NAME> for the assessee contended first that the extra amount of Rs. 2,83,614, which the assessee had to provide as a result of devaluation, was in the nature of an ordinary business expenditure. It was as much an expenditure as bank or postal charges which might have had to be incurred by the assessee if the amount was remitted by post or through bank for repayment of the loan. In terms of sterling the amount of loan remained fixed but in obtaining the foreign currency the assessee had to incur an extra expenditure in rupees. This, according to Mr. <NAME>, was a normal and proper business expenditure allowable under Section 37 of the Act.

17. Mr. <NAME> submitted next that as the assessee at the relevant time maintained its accounts under the mercantile system, this expenditure was incurred during the relevant year. The moment devaluation took place, the liability for the extra amount was incurred by the assessee and had to be debited in the assessee's profit and loss account in that year. Alternatively, in providing for the extra amount on account of the devaluation, the assessee suffered a loss and such loss was connected with, incidental to and was incurred for the purpose of the assessee's business. It was a loss of a revenue nature and not of a capital nature.

18. Mr. <NAME>, lastly, submitted that even if it was admitted that the object of the assessee in obtaining the loan was to meet its income-tax liabilities, the extra expenditure incurred in connection with such loan would also come within the ambit of the expression "purpose of the assessee's business" in Section 37 of the Act. Mr. <NAME> submitted that by reason of the subsequent decisions of <ORG>, the decision of this court in <NAME> case  58 ITR 84 (Cal) was no longer good law.

19. Mr. <NAME>, for the revenue, has contended to the contrary. He submitted first that the assessee did not incur any expenditure. Expenditure meant an actual and current disbursement. In the facts of the instant case, the assessee not having determined any particular date for repayment of the loan, no question arose of its spending anything.

20. Mr. <NAME> next contended that the loss of the assessee, if any, by reason of the devaluation was not the loss suffered in the year. In any event, assuming that the assessee suffered a loss, the same was a capital loss and not a revenue loss and the assessee was not entitled to any deduction thereof.

21. Lastly, Mr. <NAME> submitted that <NAME> case [1965] 58 ITR 84 (Cal) was still good law and the assessee having obtained the loan with the object of meeting its income-tax liabilities did not incur any expenditure solely or exclusively for the purpose of its business nor suffered any loss therein and, therefore, was not entitled to any deduction of the extra amounts repaid on account thereof.

22. In support of the respective contentions of the parties a large number of decisions were cited at the <ORG>. We shall refer to the following which in our opinion are of relevance in the present reference.

(a) <CITATION>  23 ITR 230. This decision of <ORG> was cited on behalf of the assessee for the following observations of Bhagwati J. at page 239 on mercantile system of accounting :

"The mercantile system of accounting or what is otherwise known as the double entry system......brings into credit what is due, immediately it becomes legally due and before it is actually received and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed."

(b) <CITATION>  37 ITR 1. This decision of <ORG> was also cited by the assessee on mercantile system of accounting.

In this case the assessee had sold land in plots for building purposes undertaking to develop them by laying out roads, providing a drainage system and installing lights, etc. The purchaser paid only a portion of the price and undertook to pay the balance in instalments. The assessee in its turn undertook to carry out the development within six months. In the relevant accounting year the assessee in accordance with the mercantile system of accounts adopted by it, credited its accounts with the full sale price of the lands though it incurred only a part and at the same time debited an estimated sum by way of expenditure for the development undertaken though nothing had been actually spent. On these facts <ORG>, inter alia, held as follows at page 10 of the report 3 :

"....we find that the sum of Rs. 24,809 represented the estimated expenditure which had to be incurred by the appellant in discharging a liability which it had already undertaken under the terms of the deeds of sale of the lands in question and was an accrued liability which according to the mercantile system of accounting the appellant was entitled to debit in its books of account for the accounting year as against the receipts of Rs. 43,692-11-9 which represented the sale proceeds of the said lands."

(c) <ORG> v. C1T [1959] 37 ITR 66. This decision of <ORG> was also cited on behalf of the assessee for the following observations at page 76 :

"Thus, in finding out what profits there be, the normal accountancy practice may be to allow as expense any sum in respect of liabilities which have accrued over the accounting period and to deduct such sums from profits. But the income-tax laws do not take every such allowance as legitimate for purposes of tax. A distinction is made between an actual liability in praesenti and a liability de future which, for the time being, is only contingent. The former is deductible but not the latter......What a prudent trader sets apart to meet a liability, not actually present but only contingent, cannot bear the character of expense till the liability becomes real."

(d) <CITATION>  73 ITR 53. This decision of <ORG> was cited by the assessee. It was held in this case that an estimated liability, amounting to a contingent liability and not a debt under the W.T. Act, if it could be properly ascertainable and its present value could be fairly discounted, would be deductible from the gross receipts while preparing the profit and loss account.

(e) <ORG> v. IRC [1924] 12 TC 773. This English decision was cited on behalf of the revenue. The facts in this case were that the accounting period of the assessee ended on the 30th April, 1921. Prior to that date the assessee had entered into contracts to purchase quantities of goods to be delivered between November, 1920, and December, 1921. After the contract was entered into prices fell. The assessee had received only a portion of goods by the 30th April, 1921, but in the computation of excess profits duty the assessee claimed to deduct the difference between the contract price and the market price of the undelivered goods as estimated loss. On these facts it was held on a reference that loss plaimed was only an apprehended future loss and not one suffered during the accounting period and, therefore, the deduction claimed was inadmissible.

(f) Whimster & Co. v. <ORG> [1925] 12 TC 813. This decision was also cited on behalf of the revenue. Here the loss claimed by the assessee on unexpired time-charter of ships on the basis of an anticipated fall of freight was disallowed as a deduction.

(g) Alien v. Farquharson Brothers & Co. [1932] 17 TC 59 (KB). This decision was cited by the revenue for the following observations of Finlay J. at page 64 of the report to illustrate the distinction between an expenditure and a loss :

"Now a case might be put in which it was not very easy to say whether a thing was a disbursement or expense or was a loss. It is conceivable--such things sometimes happen--that there may be cases in which a thing might fall alternately......But, none the less, I do think that there is a distinction to be drawn between the two. (a) relates to disbursements ; that means something or other which the trader pays out ; I think some sort of volition is indicated. He chooses to pay out some disbursement; it is an expense; it is something which comes out of his pocket. A loss is something different. That is not a thing which he expends or disburses. That is a thing which, so to speak, comes upon him ab extra."

(h) <CITATION>  55 ITR 716 was cited by the revenue for an observation of <ORG> similar to the above as follows :

"The word 'expenditure' in rule 6 of the Schedule to the Indian Income-tax Act , 1922, meant 'disbursement' and did not include depreciation."

(i) Landes Brothers v. <NAME> [1934] 19 TC 62 (KB). This decision was cited on behalf of the revenue. In this case the assessee, the sole commission agent of a company for sale in Britain, which imported furs under the terms of the agency, had to advance to its principal a part of the value of each consignment to be adjusted after the sale thereof. The transactions were conducted on dollar basis and when the assessee recouped itself for the advances a profit accrued as a result of fluctuation in the rate of exchange. Such profits were held to be a part of the trading receipts of the assessee arising in the course of its business and hence taxable.

(j) <ORG> v. IRC [1938] 22 TC 106 (CA). This decision was cited on behalf of the assessee. The facts in this case were that an English company was granted a licence to distribute within a definite territory the films of an American company. The agreement provided that the English company would pay to its American company 70% of the gross receipts less certain stipulated deductions but was silent as to the exchange basis which was to govern the transactions. At an earlier stage, the English company had been instructed to keep the accounts on the basis of a fixed rate of exchange and the difference between that rate and the rate prevailing at the end of the week in which the transaction took place was directed to be passed on to a suspense account. The books of the English company were maintained throughout on this basis. Owing to a delay in the adjustment of accounts between the two companies and a fall in the value of sterling in relation to dollar large adverse differences were shown in the suspense account. The English company was initially assessed to income-tax without regard to the suspense account but subsequently preferred claims for relief on the ground that the adverse differences in exchange as shown in the suspense account were deductible in computing its profits. It was held by <ORG> that the contractual relationship of the parties established that the English company's debts to the American company were dollar debts and, therefore, the reliefs claimed should be allowed.

(k) Davies v. Shell Company of China Ltd. [1952] 22 ITR (Supp) 1; [1951] 32 TC 133 (CA). In this case, cited by the revenue the assessee was a British company which carried on business of sale and distribution of petroleum products in China through agents from whom the assessee obtained deposits at the termination of the agency. When hostilities between China and Japan broke out the assessee transferred the amounts of deposits to the United Kingdom and retained the same in sterling. Owing to subsequent depreciation of Chinese dollars in relation to sterling, the amounts eventually required to repay the deposits in Chinese currency were much less than the amounts held by the assessee and a substantial profit accrued to the latter. It was held that such profits were capital profits and hence not taxable. The relevant observations in the judgment of <ORG> at pages 147 and 156 are set out as follows :

"The sum paid is a deposit...It is not however a payment in advance...It has the character of a loan in that it is repayable at the determination of the agency by the company, and also in that it has to carry interest at a fixed rate per cent. per annum. "

P. 156 : "It is to be available during the period of the agency for making good the agent's defaults in the event of any default by him ; but otherwise it remains, as I see it, simply as a loan owing by the company to the agent and repayable on the termination of the agency ; and I do not see how the fact that the purpose for which it is given is to provide a security against any possible default by the agent can invest it with the character of a trading receipt."

(l) <CITATION> . The facts in this case cited by the revenue were that the assessee who carried on business in yarns received from its customers sums which they claimed to be "borrowed money" within the meaning of the Excess Profits Tax Act and as such not chargeable to excess profits tax. The revenue authorities, the <ORG> and <ORG> rejected the contentions of the assessee. On a final appeal, <ORG>, however, found that a part of the deposits from the customers of the assessee had no connection with the price of the yarn to be supplied, but were to be held as security for due performance of the contract and that the assessee had to pay the interest on the amounts. Ultimately, unless there was adjustment against liability, the amount had to be returned.

<ORG> held that the transaction was essentially a contract of loan. <ORG> considered <ORG> [1952] 22 ITR (Supp) 1; [1951] 32 TC 133 (CA), and noted that similar deposits were treated as capital receipts and profits thereon by reason of fluctuation of the exchange rate would be capital gain.

(m) <CITATION>  35 ITR 519 was also cited by the revenue, where <ORG> again considered Shell Company of China Ltd.  22 ITR (Supp) 1;  32 TC 133 (CA) and construed it in the same manner as in <ORG> .

(n) <CITATION> was cited on behalf of the assessee. It was contended that this decision had a departure from Shell Company of China Ltd.  22 ITR (Supp) 1 ;  32 TC 133(CA).

In this case, the assessee spent a substantial sum towards stamp duty, registration fees, lawyer's fees, etc., in obtaining a loan from <ORG> secured by a charge on its fixed assets. <ORG> upheld the assessee's claim that the said expenditure was deductible as a revenue expenditure (p. 63) :

"...we are of the opinion that : (a) the loan obtained is not an asset or advantage of an enduring nature ; (b) that the expenditure was made for securing the use of money for a certain period ; and (c) that it is irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure within Section 10(2)(xv) . "

(o) <CITATION> .  71 ITR 761 (Bom). This decision of <ORG> was cited by the assessee. In the relevant assessment year the assessee, an insurance company, claimed deduction of a loss. It was alleged that such loss had been incurred by reason of devaluation of the Pakistan currency on the 31st July, 1955. On that date an amount in Pakistan rupees was due from the Pakistan Government to the assessee on account of advance payment of income-tax. An amount was also due and payable to the assessee under the double taxation avoidance agreement between India and Pakistan. As a result of devaluation the amounts so due and payable were reduced. The assessee alleged that it had suffered a loss and claimed a deduction thereof from its business income. <ORG> held as follows (p. 797):

"It is clear, therefore, that when the difference arose it was a difference which was entirely independent of the volition of the assessee. At no stage did the assessee intend to lay out this amount for any expenditure but, on the other hand, it was fortuitous circumstance that Pakistan devalued its currency that resulted in this difference. It was, therefore, upon the tests laid down in the authorities, clearly a business loss which the assessee incurred."

23. In the facts of this case as found we are unable to accept the contention of the revenue that notionally the expenditure, if any, incurred by or any loss accruing to the assessee by reason of the devaluation did not arise in the year of assessment. The assessee admittedly maintained its accounts on mercantile basis. On devaluation of the Indian currency the liability of the assessee immediately increased to the extent the rupee was devalued and the assessee became liable to pay and/or spend an extra amount in rupees in order to pay its dues. This liability accrued during the relevant period. In the event this debt would be remitted or would become irrecoverable from the assessee in future then under Section 41 of the I.T. Act, 1961, the same would again be treated as income accruing to the assessee. The liability of the assessee during the relevant period cannot be said to be a contingent liability or an anticipated future loss. On such facts the instant case is clearly distinguishable from the decisions cited by the revenue, i.e., <ORG>  12 TC 773 and <ORG>12 TC 813 and the principles laid down in the said decisions have no application in the instant case.

24. The enquiry as to whether by reason of the devaluation the assessee has incurred an expenditure or has suffered a business loss is, in our view, of little relevance. No doubt, an expenditure is something which directly goes out or is deemed to go out of the pocket or till and a loss may fall on a business without any immediate liability to pay or disburse anything. There also may be cases where a loss arising from causes ab extra may necessitate immediate expenditure. But in all such cases, the expenditure as also the losses, if they are business losses, have to be taken into account and deducted in determining the profit. Therefore, the distinction between loss suffered without any immediate disbursement and an expenditure incurred would be of not much significance.

25. The question which in our view is of real importance in the instant case is whether the loss or expenditure of the assessee as a result of the devaluation is of a capital nature or of a revenue nature. Mr. <NAME>, for the assessee, has contended in the course of his submissions that a loss has to be considered in a different way from a gain in computing business profits. There may be cases where a loss de hors the business is allowed as a business loss, whereas a gain arising in similar circumstances will never be a business gain. In our view this distinction again is of little significance as the gain or the loss, as the case may be, has to be connected with the business before the same can enter into the computation of profits.

26. On a scrutiny of the facts of the instant case it appears to us that as a result of the devaluation which befell the assessee, it became immediately liable to an extra liability in terms of its rupee assets for repayment of its debts. This extra expenditure, deemed or otherwise, or this loss, is inextricably connected with the assessee's indebtedness and did not arise de hors the indebtedness nor was it incurred for the purposes of the loan and it was, as, if, from the date of the devaluation the dues from the assessee to its creditors in rupees were increased. We are unable to accept the contentions of Mr. <NAME> that the extra amount which the assessee had to provide for as a result of the devaluation is to be considered as extra expenditure to be incurred for meeting the debt just as postal expenses or bank charges or this extra expenditure which would result in a business loss of a revenue nature.

27. In our view, the propositions laid down in the case of <ORG> [1952] 22 ITR (Supp.) 1 ; [1951] 32 TC 133 (CA) apply on all fours to the instant case. If there would have been a devaluation in favour of the rupee as a result of which the assessee had to pay less to its creditors, the surplus arising would have been of capital nature and could not have been assessed in the hands of the assessee as a business profit. Conversely as a result of the exchange rate going against the assessee the loss which the assessee incurred cannot be held to be a revenue loss. <ORG> considered <ORG> [1952] 22 ITR (Supp.) 1 ; [1951] 32 TC 133 (CA) in K.M.S. Lakshmanier & Sons and <ORG> . The ratio in the said English decision and the principle laid down therein were accepted and approved by <ORG>. The instant case can also be distinguished from the decision of <ORG> in <ORG> . It was decided in that case that any expenditure incurred for securing the use of money for a certain period, i.e., for the purpose of obtaining a loan which was not an asset or advantage of an enduring nature, was a revenue expenditure, and that the purpose for which the loan was obtained was irrelevant in deciding whether such expenditure would be a capital expenditure or a revenue expenditure. In the instant case it is not contended by the assessee that it had incurred the extra expenditure in order to secure the loan. The loan had already been obtained. It is at the point of repayment that the assessee has to provide an extra amount in rupees by reason of the devaluation.

28. For the reasons given above We answer question No. 2 in the affirmative and in favour of the revenue.

29. A large number of decisions were cited and extensive submissions were made on the aspect whether an expenditure incurred or a loss suffered in respect of money borrowed for the purpose of payment of income-tax would be deductible as a business expenditure or a business loss. Inasmuch as we hold that the loss suffered or expenditure incurred is not deductible as it is of capital nature, it is not necessary for us to consider this aspect of the matter any further.

30. The question referred to under the Companies (Profit) Surtax Act, 1964, is a question consequential to question No. 2. By reason of the answer given to question No. 2, we answer this question also in the affirmative and in favour of the revenue. There will be no order as to costs.

<NAME>, J.

31. I agree.


JUDGMENT <NAME>, C.J.

1. By this petition the petitioner, who is the Controller of <ORG>, <ORG>, seeks for a writ of certiorari against the <ORG> under the Payment of Wages Act . Respondent No. 2 was an employee of <ORG>. He was employed on May 19, 1944. On January 6, 1960, the District Controller of <ORG> made an order suspending him from service with effect from January 7, 1950, and on February 4, 1950, the District Controller of <ORG> passed an order removing respondent No. 2 from service. On April 10, 1950, respondent No. 2 filed an application in the Court of the <ORG> under the Payment of Wages Act for a direction to the petitioner under Section 15 of the Act to pay a sum of Rs. 253-10-0 as delayed wages for the period February 4, 1950, to March 81, 1950. Subsequent to that other applications were filed for the payment of delayed wages by respondent No. 2 for periods subsequent to March 31, 1950. An objection was taken on behalf of the petitioner that the <ORG> under the Payment of Wages Act had no jurisdiction to decide the applications of respondent No. 2 in view of the contentions raised by the petitioner. That contention was rejected and the <ORG> adjudicated upon the claim of respondent No. 2 and passed orders directing the petitioner to pay wages as claimed by respondent No. 9.

2. In this case the contention of the petitioner is that the contract of service between respondent No. 2 and <ORG>. was validly terminated on February 4, 1950, and the petitioner's further contention is that after February 4, 1950, respondent No. 2 ceased to be a servant of <ORG>., and the relationship of master and servant between them came to an end or, in other words, after February 4, 1950, there was no subsisting contract of service between <ORG>. and respondent No. 2. The contention of respondent No. 2, on the other hand, was that he being a <ORG> servant his tenure in office was protected and he could not be dismissed in the manner in which <ORG>. had purported to dismiss him. Therefore, he contended that he continued to be in the service of <ORG>. and he was entitled to payment of wages.

3. The question which arises for our consideration is whether looking to the terms of the Payment of Wages Act (iv of 1936), it is competent to the <ORG> under the Payment of Wages Act to direct payment of wages when it is disputed that there is a subsisting contract of service between the employer and his employee. Is it open to the <ORG> to decide whether a contract of service has been properly and validly terminated? Is it open to him to decide that the dismissal of a servant by his master is wrongful? In order to decide this question, it is necessary to look at the purpose of the Payment of Wages Act and also its general provisions. As the preamble itself says, the purpose of the Act was to regulate the payment of wages to certain class of persons employed in the industry, and the application of the Act was restricted to wages payable in respect of a wage period which over such wage period averaged Rs. 200 a month or less. "Wages" are defined as meaning all remuneration capable of being expressed in terms of money which would, if the terms of the contract of employment expressed or implied were fulfilled, be payable whether conditional upon the regular attendance, good work or conduct or other behaviour of the person employed or otherwise to a person employed in respect of his employment or of work done in such employment. Therefore it is clear that as far as this part of the definition is concerned wages are to be construed as remuneration due to a person who is employed and it is remuneration which is payable under the terms of the contract whether express or implied. The definition goes on to mention certain other attributes which according to the <ORG> would also constitute remuneration to a person as wages, and that further inclusive definition is :

"Wages includes any bonus or other additional remuneration of the nature aforesaid which would be so payable and any sum payable to such person by reason of the termination of his employment."

Emphasis is laid on behalf of the respondents on the expression 'any sum payable to such person by reason of the termination of his employment.' Now "such person" is the person employed, and any sum which is payable by reason of the employment of such person coming to an end is also wages for the purpose of this Act. Looking' to the whole scheme of the Act and looking to the earlier part of the definition, in my opinion, the sum payable by reason of the termination of his employment is not any damages or compensation to which a servant would be entitled on a wrongful termination of his service. The sum payable here referred to is only a sum payable under the terms of the contract. A term of the contract may well provide that a servant is entitled to a salary for a month on the termination of his contract without notice. If the contract so provides, then the sum payable to the employee on termination of his service without notice would be wages in lieu of that one month's notice and such a sum payable to him would undoubtedly come under the definition of wages as amplified by the subsequent part of Section 2(vi) . Such remuneration in lieu of notice may even be an implied term of the contract of service. If it is an implied term it would be as much wages within the meaning of this definition. Then Section 3 provides for responsibility for payment of wages and it deals with cases where the employer is directly responsible and cases where a person other than an employer may be made responsible for payment of wages. Then Section 5 deals with time for payment of wages. Section 7 deals with deductions which may be validly made from the payment of wages. Sections 8 to 33 deal with different kinds of deductions. Section 14 deals with Inspectors with which we are not concerned. Then we come to Section 15 which is the section directly in question, and that provides :

"<ORG> may, by notification in the Official Gazette, appoint any Commissioner for Workmen's Compensation or other officer with experience as a Judge of <ORG> or as a stipendiary Magistrate to be the authority to hear and decide for any specified area all claims arising out of deductions from the wages, or delay in payment of the wages, of persons employed or paid in that area."

Therefore the jurisdiction of the <ORG> appointed under this section is clearly limited to (1) all claims arising out of deductions from wages and (2) delay in payment of the wages. It must be borne in mind that Section 22 ousts the jurisdiction of civil Courts in respect of all claims which can be entertained by the <ORG> under Section 15 . Therefore, the scheme of the Act is to set up a special tribunal, confer a special jurisdiction upon that tribunal, and to the extent that special jurisdiction is conferred upon that tribunals to oust the jurisdiction of ordinary civil Courts. Therefore the jurisdiction conferred upon the special tribunal must be strictly construed, and Section 15 itself clearly limits the jurisdiction only to the two points to which reference has just been made, and this jurisdiction conferred upon the authority under Section 15 must be read in the light of the previous sections of the Act. Jurisdiction with regard to delay in payment of the wages must be read in connection with Section 5 which lays down the time for payment of wages. Therefore if there is delay in reference to the paint of time indicated in Section 5 , then an employee is entitled to make a grievance of that fact and the <ORG> is entitled to order wages which have not been paid and which should be paid in accordance with Section 5 . Farther, there is jurisdiction to adjudicate with regard to deductions from the wages and this must again be read with reference to Section 7 which permits certain deductions and which makes it illegal for the employer to make deductions other than those provided in the Act. Therefore if an employer makes certain deductions from the wages of an employee, he is entitled to go to the <ORG> and complain of unauthorised deductions and get an order from the authority compelling the employer to make good the deductions wrongly made by the employer. There is also a provision for appeal under Section 17 , but that right is restricted to cases where the total sum directed to be paid by way of wages and compensation exceeds "Rs. 300. In cases where the payment is less than Es, 300, there is no right of appeal at all and the decision of the <ORG> is final.

4. Now, what is contended by Mr. <NAME> on behalf of the <ORG> and supported by Mr. <NAME> on behalf of respondent No. 2 is that it is competent to the <ORG> to decide whether a contract of service was terminated or not, because if he comes to the conclusion that the contract of service was not validly terminated, then the employee continues in service, and what the <ORG> directs the employer to pay his wages within the meaning of the definition in the Act. It is further pointed out that in this particular ease the employee is a <ORG> servant and in the light of decisions of <ORG> if the proper procedure is not followed for termini-ting the services of a <ORG> employee, the <ORG> employee continues in service and he is entitled to the payment of his salary. There, fore, what is urged is that all that the <ORG> has decided in this case is that the employee being a <ORG> servant and proper procedure not having been followed in terminating his services, he continues to be a <ORG> servant still employed by <ORG>. and as such servant he is entitled to the payment of wages, and as there has been delay in payment of wages, the employer is bound to pay those wages.

5. Now, if that were the true construction of Section 15 , I must say that the <ORG> has used most inappropriate language to convoy that intention. Delay in payment of wages can only mean delay in payment of wages which are admitted. Wages are due but for some reason or other those wages have not been paid at the time when they should have been paid under the law. Mr. <NAME> wants us to read "delay in payment of wages" as if it meant the same thing as refusal to pay wages. In this case there is no delay on the part of the petitioner to pay wages. He has refused to pay wages, rightly or wrongly, contending that respondent 2 is not his employee; he has dismissed him and therefore nothing is due to him. Therefore, the issue which really arises and which the <ORG> ha3 assumed jurisdiction to decide is whether the refusal of the petitioner to pay wages is justified or is valid in law. If the <ORG> wanted to confer such a jurisdiction upon the <ORG>, it would certainly have done so by appropriate language. Really Mr. <NAME> goes to the utmost length by suggesting that all questions arising out of a contract of personal service and all questions arising out of relationship of master and servant, have all been transferred from the civil <ORG> to this special tribunal. Mr. <NAME> says that the expression "any sum payable to such person by reason of the termination of his employment" is wide enough even to cover a claim for damages for wrongful dismissal. If the intention of the <ORG> was what Mr. <NAME> says it is, nothing could have been easier than for the <ORG> to have indicated in clear explicit language that the jurisdiction of civil <ORG> to adjudicate upon the quantum of wages, to adjudicate upon the question whether a contrast of service has terminated or not, the jurisdiction to adjudicate upon the question whether a dismissal by a master of his servant was wrongful or not and the jurisdiction to adjudicate upon the damages which the servant is entitled to on a wrongful dismissal, all these questions and all these jurisdictions have been transferred from the civil <ORG> to the special tribunal set up under the Act. As I said before, one would have expected very different language, much more appropriate language, to oust the jurisdiction of the civil <ORG> and to confer that jurisdiction upon the special tribunal. The jurisdiction of a special tribunal cannot be inferred by implication. Jurisdiction must be expressly given and we must find from the language of the statute itself that there is express ouster of the jurisdiction of the civil <ORG> and an express conferment of such jurisdiction upon the special tribunal set up under the Act.

6. We would like to make it clear, as the matter is of considerable importance, as to what we think is the jurisdiction of the <ORG> under the statute. It is certainly competent to the <ORG> to construe the terms of the contract of employment in order to determine what wages are to be paid, and even if the contract of employment has been terminated, it is open to him to construe its terms in order to determine whether any sums are payable by reason of the termination. It would also be open to him to determine whether a person has been employed or not, because the question of contract of employment and the terms of the contract can only arise provided the person seeking relief was employed. The mere denial of the factum of employment cannot oust the jurisdiction of the <ORG>. If the employer denies or disputes the fact that the servant was employed by him, it will be for the <ORG> to decide that question, and it is only after the question of employment has been decided that the question would arise as to what are the terms of the contract and what is the liability of the master under the terms with regard to wages. It has been suggested by Mr. <NAME> that this construction of the statute really confines the jurisdiction of the <ORG> only to cases where wages are admitted, and Mr. <NAME> says that if the <ORG> intended that the <ORG> should only try cases of admitted wages, there was nothing easier than for the <ORG> to have so stated. It is not correct that our decision leads to the conclusion that the jurisdiction of the <ORG> is so limited or restricted because there may be various cases within its jurisdiction where the liability to wages is denied or disputed and which the <ORG> would still be competent to decide. The question as to whether X amount or Y amount is due under the terms of the contract is a case where wages may not be admitted. The employer may say that X amount is due and the servant might say that Y amount is due, and the <ORG> would have to decide on a true construction of the terms of the contract as to what is the amount due. Therefore, the jurisdiction of the <ORG> really is to determine the terms of the contract in so far as they relate to the payment of wages and in so far as he has to decide the liability of the employer to pay wages under the terms of the contract. But that jurisdiction does not extend to determining the question as to whether the contract has terminated as alleged by the employer or the contract is still subsisting as alleged by the servant.

7. Mr. <NAME> has contended that this petition is not maintainable inasmuch as a specific legal remedy was open to the petitioner and he should have availed himself of that remedy rather than come to this Court on a petition for a writ of certiorari, and reliance is placed on Article 227 of the Constitution which confers upon the <ORG> powers of superintendence not only over all <ORG> but also over all tribunals throughout the territories in relation to which the <ORG> exercises jurisdiction. We have already taken the view that the superintendence of the <ORG> is not confined to administrative superintendence, it also includes judicial superintendence, and undoubtedly the <ORG> has power to correct any decision of a tribunal within its jurisdiction through its powers of superintendence. But in order that a petition for a writ of certiorari would not lie, the petitioner must have a specific legal remedy, and specific legal remedy in this context can only mean that he must have a right to approach a Court and he must have a right to a remedy if his case was just. Article 227 only deals with the power of the <ORG> and not with tbe rights of litigant. A litigant may approach the <ORG>, but he has no right to do so, nor has he a right to a remedy because the <ORG> may refuse a remedy under Article 227. Therefore the mere power of superintendence conferred upon the <ORG> does not disentitle a petitioner seeking a writ of certiorari from coming to this Court and asking for that writ. It cannot be said under the circumstances of the case that he had an alternative specific legal remedy open to him which he should have availed of before he asked for a prerogative writ.

8. The result is that in our opinion the order passed by the <ORG> was an order without jurisdiction. Therefore, that order must be corrected by a writ of certiorari. We, therefore, direct the issue of a writ of certiorari.

9. Mr. <NAME> very fairly stated to the <ORG> that as this was a test case and respondent 1 wanted a decision on the point raised which was of considerable importance, he himself should bear the costs of this petition. We, therefore, order that respondent 1 should pay the costs of the petition.


JUDGMENT <NAME>, J.

1. The respondent was a temporary Tax Sub-Inspector in <ORG> of the erstwhile Patiala and East Punjab States Union. On the formation of the State of Punjab he continued in Service in the new State. A charge was framed against the respondent by <ORG>. <ORG> in which the respondent was accused of dereliction of duty and gross negligence. The memorandum accompanying the chargesheet informed the respondent that action under Rule 7 of the Punjab Civil Services (Punishment and Appeal) Rules, 1952 was proposed to be taken agninst him and he was asked to state in writing within three weeks from the receipt of the memorandum whether he admitted the truth of all or any of the charges and what explanation or defence if any he had to offer and whether he desired to be heard in person. The respondent filed his written statement replying to the charges. Thereafter by a communication dated May 28, 1963 addressed to the respondent the Excise and Taxation Commissioner. Punjab, terminated his services by giving him one month's notice. On receipt of this order the respondent made a representation to the then Chief Minister of the State. The Chief Minister called for a report and directed that in the meantime the respondent should continue in service. On June 16, 1964 the Chief Minister after considering the report ordered that in view of the respondent's previous good record, he did not deserve the "punishment of termination of service only on account of a few bad reports" and that the respondent should "continue in service and his case should be reviewed after he has earned another report from the present E. T. C. (Excise and Taxation Commissioner) for the year 1964-65". However, on October 27, 1964 the Excise and Taxation Commissioner without waiting for the report as directed by the Chief Minister made an order terminating the services of the respondent. The order was in these terms :

In terms of the conditions of your services you are hereby given one month's notice where after your services shall stand terminated.

2. The respondent instituted a suit in <ORG> senior Subordinate Judge, <NAME> on June 8, 1965 for a declaration that the order dated October 27, 1964 was illegal and void having been made without giving him an opportunity as required by Article 11(2) of the Constitution and that he should be deemed as continuing in service and therefore entitled to all rights, benefits and privileges available to members of that service. The trial court considering the circumstances of the case was of opinion that the services of plaintiff were terminated by way of punishment and the impugned order was based on misconduct and inefficiency on the part of the plaintiff." The trial court further held that on the facts, stated above, the provisions of Article 311(2) of the Constitution were attracted and the impugned order was void, having been passed in violation of that Article. On this view the trial court decreed the suit quashing the order of termination and also granted the other declarations prayed for. On appeal by the State of Punjab and Additional District Judge, <NAME>, on a consideration of the material on record observed: "I have no doubt left in my mind that the plaintiff was visited with evil consequences due to an alleged misconduct". The Additional District Judge accordingly dismissed the appeal. On may 24, 1967 a learned Judge of <ORG> dismissed in limine the second appeal preferred by the State of Punjab. On July 28, 1967 an aplication for leave to prefer letters Patent appeal was also dismissed. The present appeal by the State of Punjab is by special leave from the order refusing the petition for leave to file letters patent appeal.

3. An order terminating the services of a temporary servant or a probationer, if it is by way of punishment, will attract Article 311 of the Constitution; the form (if the order is not conclusive, it is the substance of the matter that has to be looked into. Whether or not an order of termination is by way of punishment would depend on the facts and circumstances of each case. This well established position has been reiterated by this Court recently in the case of <ORG> v. <ORG> and <ORG>. on a review of the earlier decision on the point. The trial court and the first appellate court both took the view that the order of termination in the instant case was by way of punishment. <ORG> dismissed the second appeal in limine apparently in view of this concurring finding. The application for leave to file a Letters Patent appeal must therefore be held to have been rightly dismissed, there being no ground on which leave could have been granted. This appeal has no merit and is dismissed with costs.