JUDGMENT <NAME>, J.

1. This reference is made by <ORG> under Section 66 (I) of the Indian Income-tax Act of 1922. The material facts are not controverted. The assessee carries on several business activities. He had purchased a piece of land measuring about 13 bighas for the alleged business of setting up a market and making profit. The plot was requisitioned by the military authorities under the Defence of India Rules. There was an agreement between the assessee and the 'military authorities that a sum of Rs. 1,100 per month will be paid to the assessee as compensation for the use of the land. It should be added that the military authorities used the land as a store-yard. For the year 1946-47 the assessee received & total sum of Rs. 13,200 as compensation. After making statutory deductions, the Income-tax Officer held that the net sum of Rs. 9,699 received by the assessee from the military authorities was liable to be taxed. The assessee preferred an appeal to the Appellate Assistant Commissioner and argued that the amount was not liable to be taxed since it was merely compensation from the military authorities for preventing the assessee from making use of his capital asset. This argument was accepted by the Appellate Assistant Commissioner. An appeal was preferred by the Income-tax Officer to <ORG> who reversed the decision of the Appellate Assistant Commissioner and held that the amount was in substance profit derived from the land and so liable to be taxed.

2. At the instance of the assessee <ORG> has referred the following question for being determined by <ORG>, viz., "Whether in view of the facts and the circumstances of the case, the sum of Rs. 9,699 received by the assessee from the military authorities is taxable ? ''

3. On behalf of the assessee Mr. <NAME> stressed the argument that upon the facts of this case it should be held that the amount of Rs. 9,699 was compensation made for sterilisation of capital asset and was therefore not liable to be taxed. In support of his contention the learned Counsel referred to <ORG> v. Commissioners of Inland Revenue (1922) 12 Tax Cas 427 in which the appellant company carried on business as manufacturers of fireclay goods and as merchants of raw fireclay, and was lessee of certain fireclay fields over part of which ran the lines of the Caledonian Railway. In 1908 the railway company, to whom the lands belonged, though not the minerals beneath, instituted an action to restrain the appellant company from working the fireclay under the railway, contending that the fireclay was not a mineral and consequently formed part of the railway company's property. While the action was pending the appellant company was interdicted from working under the railway. In 1911 <ORG> decided against the railway company, which thereupon exercised its statutory powers to require part of the fireclay to be left unworked on payment of compensation. The amount of compensation was settled by arbitration and duly paid to the appellant company in 1913. The question debated before the <ORG> wag whether the amount received for compensation in respect of the fireclay left unworked was profit earned in the course of the company's trade. Upon the facts of the case <ORG> held that the amount received as compensation was not a profit earned in the course of the company's trade but was a capital receipt, being a payment made for the sterilisation of a capital asset. In the present case the facts are manifestly different and it is impossible to hold that on account of requisition made by the military authorities "the capita! asset" of the assessee has been "sterilised", to borrow the language used in the decision of <ORG>. Reference was also made by <CITATION> (1940) I.L.R. 1940 Pat. 186 : 8 I.T.R. 25, in which the assessee had in pursuance of a decree received a certain sum of money as damages for wrongful detention of her movable property and a Special Bench of <ORG> held that such receipt was not " income " within the meaning of the Income-tax Act , 1922, and was not therefore liable to assessment. In my opinion the principle of this case is not of much assistance to the assessee in the present case. <NAME>, J. who pronounced the opinion of the Special Bench pointed out that there was a distinction between a case where damages, pure and simple have been awarded and a case where there is receipt of damages or compensation in the course of business or trade carried on by a trader. Upon the facts of that case the learned Judge held that the receipt of the decretal amount for damages by the assessee for wrongful detention of her movable property was not income within the meaning of the Income-tax Act and was therefore not liable to assessment. It is manifest that the facts are not in any way parallel to the facts of the present case. On the contrary it would seem that the amount of compensation received by the assessed is really a profit derived from the land and it was rightly held by <ORG> that the assessee was liable to be taxed under the Act.

4. Upon these grounds I hold that, in the circumstances of the case the sum of Rs. 9,699 received by the assessee from the military authorities is taxable. The assessee must pay the cost of this reference to the Commissioner of Income-tax. Hearing fee Rs. 250.

<NAME>, J.

5. I agree.


PETITIONER: EXCISE COMMISSIONER. U.P., <NAME> Vs. RESPONDENT: RAM KUMAR DATE OF JUDGMENT05/05/1976 BENCH: <NAME>, JASWANT BENCH: <NAME>, JASWANT RAY, A.N. (CJ) <NAME>, RANJIT <NAME> <NAME>, P.N. CITATION: 1976 AIR 2237 1976 SCR 535 1976 SCC (3) 540 CITATOR INFO : R 1977 SC1691 (7) R 1977 SC2149 (13) RF 1979 SC 621 (29,30) F 1980 SC1285 (12,27,30,31,33,34,44,53) RF 1980 SC2018 (21) D 1981 SC1374 (6) D 1987 SC 993 (12,13) RF 1991 SC 735 (22) R 1992 SC1393 (8,9) R 1992 SC2169 (19) ACT: Evidence Act -Estoppel against <ORG> in exercise of legislative, sovereign or executive powers-U.P. Excise Act 1910-Sec. 24. 28, 31, 33, 40 and 41- Whether excise duty can be levied on unlifted stock of liquor. U.P. Sales Tax Act 1948, sec. 3A and 4-Whether exemption from payment of sales tax can be withdrawn- Estoppel. HEADNOTE: The <ORG> of Uttar Pradesh has under the U.P. Excise Act, 1910. the exclusive right or privilege of manufacturing and selling liquor in that <ORG>. Section ''4 of the Act provides that subject to the provisions of s. 31 the Excise Commissioner may grant to any person a licence for the exclusive privilege of manufacturing or of supplying any country liquor etc. Section 31 provides for the conditions for the grant of licence. Section 33 invests the authority granting a licence to require the grantee to execute a counterpart agreement in conformity with the tenor of the licence. Section 28 authorises imposition of an excise duty or a countervailing duty by The local <ORG> on any excisable article. Sections 40 and 41 of the Act empower <ORG> and the Excise Commissioner subject to the previous sanction of the <ORG> to make rules. Para 38 of the Excise Manual which contains the rules made under the Act shows that there are 4 licence fee systems in vogue. One of such systems is the auction fee system under which the amount of licence fee is determined by competition amongst bidders at an auction. The respondents were the highest bidders at various auctions. Before holding the auctions, the rates of excise duty and prices of different varieties of country liquor and also the conditions of licence were announced. No announcement was made as to whether the exemption from sales tax in respect of sale of country liquor granted by the notification dated 6-4-1959 was or was not likely to be withdrawn. one of the conditions of the licences was that the licensee shall lift each month certain quota of liquor and on the failure to lift the monthly quota the licensee shall be liable to pay compensation to the state <ORG> calculated at the rate of duty per litre on the unlifted quota. On the day following the day when the licences were granted, <ORG> issued a notification under s. 3A and 4 of the U.P. Sales Tax Act, 1948, superseding the earlier notification exempting the payment of sales tax and imposing sales tax on the turnover in respect of country spirit at the rate of 10 P. per rupee. The respondents having failed to lift and sell the minimum quotas of liquor the appellant called upon them to pay by way of compensation the amount; of excise duty on the shortfalls. Aggrieved by the demand, the respondents moved <ORG> under Art. 226 of the Constitution for issue of appropriate writ or direction restraining the appellants from recovering the aforesaid amounts. The respondents in special appeals also challenged the notification issued under the sales Tax Act on the ground that <ORG> did not announce at the time of the action that the earlier notification was likely to be withdrawn and that the appellant informed the respondents at the time of the auction that there was no sales tax on the sale of country liquor. The appellants were, therefore, estopped from making the demand in respect of the sales tax and recovering the same from them. <ORG> allowed all the petitions in toto. On appeal by special leave, 533 ^ HELD: (1) Neither s. 28 nor s. 29 nor any other provisions of the Act authorise the levy of the amounts sought to be recovered from the respondents. The demand made by the appellant though disguised as compensation is in reality a demand for excise duty on unlifted quantity of liquor which is not authorised by the provisions of the Act. [538- <CITATION> ,  1 S.C.R. 844, followed. <NAME> and Ors. etc. v. <ORG> and others,  I S.C.R. 219. distinguished. Appeal dismissed. (2) Sections 3A and 4 of the U.P. Sales Tax Act clearly authorise <ORG> to impose sales tax. The fact that sales of country liquors had been exempted from sales tax by the earlier notification could not operate as estoppel against <ORG> and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the revenues of the <ORG>. There can be no question of estoppel against the <ORG> in exercise of its legislative sovereign or executive powers (case law reviewed). The <ORG> cannot divest itself of the right incidental to its office by conduct which in the case of a private person would amount to estoppel. The six appeals therefore, are partly allowed JUDGMENT:

CIVIL APPELLATE JURISDICTION: CIVIL APPEALS Nos: 276-395 AND 397-404 OF 1975 Appeals by Special Leave from the Judgments and orders dated 21.2.72., 8.3.72., 2].2.72., 10.3.72., 21.3.72., 16.]2.71., 24.3.72., 21.3.72.. 21.3.72., 22.3.72., 25.2.72., 8.3.72., 21.2.72., 10.3.72., 8.3.72. 10.3.72 10.3.72., 18.2.72.,

16.l2.71. 9.3.73., 8.3.72.,25.2.72., 16.12.71., 25.3.72., 15.3.72., 25.3.72., 25.2.72., 25.3.72., 25.2.72., 14.3.72., .14.3.72., 21.3. 2.,14.3.72., 14.3.72. 21.3.72.,21.3.72., 14.3.72., 25.3.72., 25.372., 21.3.72., 21.3.72., 21.3.72, 21.3.72., 24.3.72, 24.3.72., 24.3.72., 24.3.72., 25.3.72., 21.3.72., 3.4.72., 21.3.72., 3.4.70. 24.3.72., 24.3.72 24.3.72., 24.3.72., 24.3.72., 24.3.72, 25.372., 25.3.72., 25.3.72 25.372., 25.372., 3.4.72., 3.4.72., 3.4.72., 3.4.72., 3.4.72., 14-3.72. 3.9.71., 3.9.71., 16.7.71., 14.3.71., 29.3.72., 14.3.72., 14.3.72., 14.3.72, 5.4.72., 5.4.72., 5.1.72., 5.4.72., 18-2-72., 23.2.72., 10.3.72., 20.1.72., 9.1.72., 31.1.72.. 31.1.72., 31.1.72., 31.1.72., 8.3.72., 2.2.72 3.2.72., 25.2.72., 2.2.72., 10.3.72., 4.2.72., 25.9.72., 25.9.72, 6.10.72., 1.2.73., 13.2.73., 30.1.73., 9.4.73., 13.2.73., 14.2.72., 13.3.72., 13.3.72., 24.3.72., 18.7.72., 4.9.73.. 25.2.72, 17.5.71., 21.3.72., 3.4.72., 21.3.72., 16.7.71., 5.4.72., In Special Appeal Nos. 616, 643, 617, 644/74 and Civil Misc Writ Nos 2268,448,2280,2254,2255/69 and Special Appeal Nos 730 752, 647,615,611,648,645605,610/71 and Civil Misc. Writ No. 149/68 and Special Appeal No.86, 796.775/71 and W.P No. 450 69 and Writ No 451, 218, 5706 2915/69,S. A. No..690/71 C. Misc Writ No.3037/69 and S.A. No.613/71 and C. Misc Writ No.2090/69 and Civil Misc. Writ Nos 2094, 2119, 2122, 2172, 2188 2189 -92, 2180 2182, 2187,2256, 2273, 2274,2276-2279, 2282-2284.2334 2347, 2576,2608-2611,2649 2690,2742-2743, 2759,2760,2811,2850, 2916,2918,2919,3075,3400/69 and 543-

546, 786,1039,1246, 1248, 2169,3881, 4035,4428,4563,4821,211,250, 256, 7253, 607, 614,

618.628,7655.691-694, 729. 732. 751, 776, 787, 799. 805171 and Civil Misc. Writ No.1525,1529,3387.7051,7253, 7588, 7575, 7980 and Special Appeal Nos.6,102, 115, 166,309/72 and 1902/73 and Special Appeal No.774171 and Civil Misc. Writ No. 2121/69,2194/69 70,3375/69 and writ Petition No.3627/70,260/71 respectively.

<NAME> and <NAME> for the Appellant.

<NAME>, <NAME> and (Mrs.) <NAME>, for the Respondent in CA 399/75 and 400-405/75.

(Miss) <NAME>, for Respondent in CAs. 310, 312, 238,403,357,and 313/75 <NAME>, for Respondent in CA No. 396/75. The Judgment of the Court was delivered by <NAME>, J.-This batch of 127 appeals by special leave which are directed against various judgments rendered by <ORG> at Allahabad in writ petitions and special appeals and relate to enforcement of certain obligations of licensees for retail vend of country liquor shall be disposed of by this judgment.

The facts leading to these appeals are The State of Uttar Pradesh has,, under the U.P. Excise Act 1910 (Act No. IV of 1910) (herein after referred to as 'the Act') which contains provisions relating to all aspects and manifestations of intoxicating liquors and intoxicating drugs, that is to say, their import, export, transport, manufacture, sale and possession, the exclusive right or privilege of manufacturing and selling liquor in that State. Section 24 of the Act lays down that subject to the provisions of section 31 , the Excise Commissioner may grant to any person a licence for the exclusive privilege-

(1) of manufacturing or of supplying by wholesale, or of both, or (2) of selling by wholesale or by retail, or (3) of manufacturing or of supplying by wholesale, or of both and or selling by retail any country liquor or intoxicating drug within any local area.

Section 31 provides that every licence, permit or pass granted under the Act shall be granted-

(a) on payment of Such fee (if any);

(b) subject to such restrictions and on such conditions;

(c) shall be in such form and contain such particulars, as the Excise Commissioner may direct either generally or in any particular instance in this behalf; and

(d) shall be granted for such period as the State Government may, in like manner, direct.

Section 33 of The Act invests the authority granting a licence under the Act to require the grantee to execute a counterpart a agreement in conformity with the tenor of his licence and to give such security for the performance of such agreement or to make such deposit in lieu of security as such authority may think fit.

Section 28 of the Act which deals with imposition of excise duty or countervailing duty reads:-

"28. (1) Duty on excisable article.-An excise duty or a countervailing duty as the case may be at such rate or rates as the Local Government shall direct, may be imposed, either A generally or for specified local area, on any excisable article-

(a) imported in accordance with the provisions of section 12 (1); or

(b) exported in accordance with the provisions of section 13 ; or

(c) transported; or

(d) manufactured, cultivated or collected under-

any licence granted under section 17 ; or

(e) manufactured in any distillery established, or any distillery or brewery licensed, under section 18 ...."

Section 29 of the Act lays down the manner in which the duty may be levied. One of the ways provided in the section for levy of the duty is by payment upon issue for sale from a warehouse established or licensed under section 18(d) of the Act.

Sections 40 and 41 of the Act empower the State <ORG> and the Excise Commissioner (subject to the previous sanction of the <ORG>) to make rules for the purposes set out therein. These rules are contain in the Excise Manual, Uttar Pradesh (Volume I).

Paragraph 38 of the Excise Manual shows that there are four licence-fee systems in vogue in the State of Uttar Pradesh. One of such systems is 'The auction fee system' under which the amount of licence fees inter alia for the retail sale of' country spirit under the distillery system and for the manufacture and retail sale of country spirit under the outstill system is determined by competition among bidders. According to paragraph 332 licences for the wholesale and retail vend of intoxicants are usually granted for the excise year which commences from April 1 and lasts upto March 31.

In accordance with the requirements of the auction system, auctions were held throughout Uttar Pradesh during the months of February and March, 1969 on various dates and at various places for the grant of licences to sell country spirit by retail at the specified shops during the excise year 1969-70.

Before holding The auctions, rates of` excise duty and prices of different varieties of country liquor as also the conditions of' licences for sale of county spirit for 1969- 7() were announced. No announcement was, however, made as to whether the exemption from sales tax in respect of sale of country liquor granted vide Notification No. ST 1149/X- 802(33)-51 dated April 6,, 1959. issued under section 4 of the U.P. Sales Tax Act, 1948 was or was not likely to be withdrawn. The respondents herein participated in the aforesaid auctions and being the highest bidders were granted licences for retail sale of country spirit for the period beginning from April t, 1969 to the end of March., 1970.

Each one of these licences contained infer alia the following condition:-

"3. (a) The licensee shall lift each month the proportionate quota for the month, if any, fixed for his vend and deposit still head duty realisable thereon. On his failure to lift the monthly proportionate quota in any month, he shall be liable to pay compensation to <ORG> at the rate equal to the rate of still-head duty per litre of spiced spirit and still head duty per litre of plain spirit as may be in the area in which the shop is situated on the quantity falling short of such monthly proportionate quota and such com pensation shall be paid by the 7th of the month following the month to which such shortfall relaters.

(b) He shall be bound to sell the whole quantity of country spirit obtained for the shop from the warehouse on his failure to do so, he shall be liable to pay to <ORG> compensation at the rate equal to the rate of stillhead duty per litre of spiced spirit and stillhead duty per litre of plain spirit as may be in force in the area in which the shop is situated on the unsold quantity of country spirit during the period of the contract to which the licence relates.

(c) In the event of the licensee being required to pay compensation to State Government under the aforesaid condition due to the short lifting of the quota or non-deposit of such compensation, the amount of said compensation may be realised from the amount of security deposited by him. The resultant deficiency in the amount of security shall be made good by the licensee within seven days of such adjustment. Tn case the short lifting of proportionate monthly quota or short deposit of compensation continues for two consecutive months or the license fails to make up the deficiency in the amount of security within the prescribed period of seven days his licence may be cancelled in addition to the recovery of the deficiency in payment of compensation as arrears of land revenue."

On the day following the commencement of the aforesaid licences i.e. on April 2, 1969, <ORG> issued Notification No. ST-1603/X-900 (12)/67 under section 3-A and 4 of the U.P. sales Tas Act, 1948, superseding the earlier Notification No. ST 1149/X-802 (33)- 51 dated April 6, 1959, issued under section 4 of the U. P. Sales Tax Act, 1948, and imposing sales tax on the turnover in respect of the country spirit at the rate of ten paise per rupee at the point of retail sale with immediate effect.

The respondents herein having failed to lift and sell the minimum quotas of liquor prescribed in their licences were required by the excise authorities of the State to pay, by way of compensation, the amounts of excise duty leviable on the short-falls. Aggrieved by this demand, the respondents moved <ORG> under Articles 226 Of the Constitution for issue of appropriate writ or directions retraining the appellants herein from recovering the aforesaid amounts contending inter alia that the condition of their licences on the basis of which the demand was made was invalid, unconstitutional and unenforceable. The respondents in six appeals Nos. 399 to 404 of 1975 also challenged Notification No. ST-1608/X-900(12)/67 (dated April 2, 1969) (supra) which superseded the earlier Notification No. ST 1149/X-802(33)51 dated April 6, 1959 and imposed sales tax on the turnover in respect of the country. liquor at the rate of ten paise per rupee at the point of retail sale by the vendor with effect from April 2, 1969 on the ground that since the state Government did not announce at the time of the aforesaid auction that Notification No. ST 1149/X-802(33)51 dated April 6, 1959, was likely to be withdrawn and the sales of country. liquor were likely to be subjected to the levy of sales tax during the excise year and in reply to the query made by them at the time of the auction they were told by the authorities that there was no sales tax of the sale of country liquor. the appellants herein were estopped from making the demand in respect of sales tax and recovering the same from them. <ORG> allowed all these petitions in toto. Having failed to secure certificates of fitness from <ORG>, the appellants applied for and obtained special leave to appeal from this Court.

The common question of law that arises for determination in all these appeals is whether the condition incorporated in the licences of the respondents that they would lift the fixed minimum quantity of liquor and sell the same at their allotted shops and in case of their default or failure to d(h so, they would be liable to pay compensation equal to the amount of excise duty leviable on the unlifted quantity is valid and enforceable. This point is no longer res integra. <CITATION> (1) this Court held that:

"No tax can be imposed by any bye-law or rule or regulation unlegs the statute under which the subordinate legislation is made specially authorises the imposition. In the present case, the legislature has levied excise duty or countervailing duty on the excisablc articles which have been either imported. exported. transported, manufactured. cultivated or collected under any licence granted under section 13 ? or manufactured in any distillery or brewery established or licensed number the. Act; and <ORG> has not been empowered to - levy any duty on liquor which the contractors failed to lift. Therefore, <ORG> was exercising a power which it did not possess and hence the rule imposing the condition in the licences and the demand notices are invalid."

Thus the aforesaid question arising for determination by us stands already settled by the ratio of the decision of this Court in <NAME> case (supra.) (1) [1971] 1 S.C.R. 844.

It will also be noticed that neither section 28 nor section 29 nor any other provision of the Act authorises the levy of the amounts sought to be recovered from the respondents.

The decision of this Court is <ORG> etc. v. State of Rajasthan and ors.(1) which is sought to be relied upon on behalf of the appellants is clearly distinguishable. In that case, the contractual obligation of the appellants to pay the guaranteed sum or the stipulate(d sum mentioned in the licences was not dependent on the quantum on liquor sold by them and no excise duty was charged or chargeable on undrawn liquor under the licences. The excise duty there was collected only in relation to the quantity and quality of the country liquor which was drawn.

We have, therefore, not the lightest hesitation in holding that the demand made by the appellants though disguised as compensation, is in reality a demand for excise duty on the unlifted quantity of liquor which is not authorised by the provisions of the Act. This being the sole point involved in appeals other than <ORG> Nos. 399 to 404 of 1975 the former <ORG> cannot succeed. In the result they are dismissed with costs.

Appeals Nos. 399 to 404 of 1975 which raise another point as well viz. the validity of the appellants' demand from the respondents in respect of sales tax at the rate of ten paise per rupee on the retail sales of country spirit made by the latter with effect from April 2, 1969 stand on a slightly different footing. Section 3-A and 4 of the U.P. Sales Tax Act, 1948 clearly authorise <ORG> to impose sales tax. The fact that sales of country liquor had been exempted from sales tax vide Notification No. ST 1149/X-802(33)-51 dated April 6 1959 could not operate as an estoppel against <ORG> and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the Revenues of the <ORG> which are required for execution of the plans designed to meet the ever increasing pressing needs of the developing society. It is now well settled by a catena of decision that there can be on question of estoppel against the <ORG> in the exercise of its legislative, sovereign or executive powers.

While speaking for the Court in <CITATION> (2) the learned Chief justice quoted with approval the following statement contained in American Jurisprudence 2d. at page 783 paragraph 123:-

"In American Jurisprudence 2d at page 783 paragraph 123 it is stated ''Generally. a state is not subject to an estoppel to the same extent as an individual or a private corporation." otherwise, it might be rendered helpless to assert its powers in government. Therefore as a general rule the doctrine of estoppel will not be applied against the <ORG> in its governmental public or sovereign capacity." (1) [1976] t S.C.R. 219 (2) [1973] 2 S.C.C. 650.

<CITATION> .(l) where the respondent company established itself in the State of Kerala for production of rayon cloth pulp on an understanding that the Government would bind itself to supply raw material and later the Government on finding that it was not able to supply the material undertook not to legislate for the acquisition of the private forests for a period of 60 years if the company purchased forest lands for the purpose of its supply of raw material and accordingly, the company did purchase 30,00 acres of private forests from an estate for Rs. 75 lakhs for the aforesaid purpose but the Government enacted Act 26 of 1971 expropriating vast forest areas without paying compensation as a measure of agrarian reform whereupon the respondent company sought to invoke the doctrine of equitable estoppel against the Government, <NAME>, J. delivering the majority judgment observed:-

"We do not see how an agreement of the <ORG> can preclude legislation on the subject. <ORG> 'has rightly pointed out that the surrender by the <ORG> of its legislative powers to be used for public good cannot avail the company or operate against the <ORG> as equitable estoppel."

Approving the decision of <ORG> in <NAME> v. <ORG> ( ') where the observations of Lord <NAME> in <NAME> v. Minister of Pensions (8) that the action of the War office which was an agent of the <ORG> in assuming authority over the matter and assuring the appellant who had been serving on the army that his disability had been accepted as attributable to military service bound the <ORG> and through the <ORG> the Minister of Pensions, who while administering the Royal warrant issued by the <ORG> has to honour all assurances given by or on behalf of the <ORG> were unequivocally disapproved by observing that the character or an act done by an officer of a Government, however high or low in the hierarchy in face of a statutory prohibition, is not affected by the fact that it had been induced by a misleading assumption of authority and neither a Minister. nor any subordinate officer of the <ORG> can, by conduct or representation, bar the <ORG> from enforcing a statutory prohibition. It was held by Bench of this Court ill <CITATION> (4) that <ORG> was not bound by the reply given by the Assistant Custodian to the first respondent's enquiry that the property in question was not an evacuee property.

Following the above decision. <ORG> has in <ORG> v. <ORG> and ors (5). rightly held that .-

"The courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when (1) [1973] 2 s.c.c. 713.

(2) [1951] A.C. 837 (3) [1949] 1 K.B. 227 (4) [1975] 1 S.C C. 21.

(5) A.I.R. 1976 J. & K. 41.

<NAME>

the Government acts in its Governmental, public or sovereign capacity."

We may as well refer here to the celebrated decision Of <ORG> of the United States in <ORG> v. <NAME>). In that case where the agents of the petitioner a wholly <ORG> owned <ORG>, created by the Federal Crop Insurance Act to insure producers of wheat against loss in yields due to unavoidable causes including drought, advised the respondents in ignorance of and contrary to the duly promulgated controlling regulation which expressly precluded insurance coverage of spring, wheat re-seeded on winter wheat acreage that their entire 460 acres spring wheat crop including the spring wheat which had been reseated on winter wheat acreage in the 1945 crop year was insurable by the <ORG> and recommended to the <ORG> ranch office acceptance of the respondents formal application which, however, did not disclose that any part of the insured Crop was reseeded and the <ORG> accepted the application and a few months later, most of the respondents' crop was destroyed by drought, and the <ORG> on the loss being notified to them refused to pay the loss on the ground that the wheat crop insurance regulations expressly prohibited the insurance of spring wheat which was re-seeded on winter wheat acreage, the <ORG> by majority held that though a private insurance <ORG> would be bound on similar facts. the same was not true of a <ORG> <ORG> engaged in the insurance field and the latter was not estopped from repudiating the liability.

The following observations made by the court in <ORG> v. <NAME> (supra) are worth quoting:-

"It is too late in the day to urge that the Government is just another private litigant, for purposes of charging it with liability, whenever it takes over a business therefore conducted by private enterprise or engages in competition with private ventures.. Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority...."Men must turn square corners when they deal with the Government", does not reflect a callous outlook. It merely expresses the duty of all courts to observe, the conditions defined by <ORG> for charging the public treasury."

In his Treatise on the Law of Estoppel, <NAME>

<ORG> has stated that in <ORG> v. Williams,(2) <ORG> v. Bevars,(2) and <ORG>) it has been held that estoppel does not operate against the <ORG> or its assignee.

(1) 332 U.S. 380-92 L cd. 10.

(2) 94 N.Car. 891.

(3) 86 N. Car. 588.

(4) 10 Ird. 110.

<ORG> was, therefore, clearly in error in ignoring that the Government cannot divest itself of the right incidental to its office by conduct which, in the case or a private person, would amount to estoppel and in characterizing the demand for sales tax made by the appellants as illegal. Accordingly Appeals Nos. 399 to 404 of 1975 are partly allowed, and it is held that the demand made by the appellants from the respondents in these appeals in respect of sales tax on the turnover of sales of' country spirit made by them between April B, 2, 1969 and March 31, 1970 was valid and could not be struck down. The parties in these six appeals shall pay and bear their own costs.

P.H.P. Appeals partly allowed.


JUDGMENT <NAME>

1. Special leave granted in this bunch of petitions.

2. These appeals are directed against the common judgment and order dated 22.2.90 passed by a Division Bench of <ORG> in a batch of writ petitions, preferred before it in the years 1983 and 1984, excepting one in the year 1988, whereby declaration under Section 6 of the Land Acquisition Act ('the Act') dated 16/18.3.83 was quashed and the case remitted to <ORG> for further proceedings under two heads.

3. The appellants herein are a few members of <ORG>, a society registered way back i the year 1973, under the Bihar and Orissa Cooperative Societies Act . Its members, the appellants state, are about 400 in number. It was stated to have been floated by members of <ORG> who were landless and did not own any residential plot or house in the city of Patna. Statedly, its membership was not confined to the members of <ORG> alone but was open to everyone who was similarly landless. The Society was organised and knit to secure from <ORG> land by acquisition so that the society could give plots to its members or build houses and give them to its members. For the purpose, in 1973, itself it put a proposal to <ORG> to acquire 59.95 acres of land in the revenue estate of village kUmhrar, a part of the city of Patna. After some steps, <ORG> issued a notification under Section 4 of the Act on 21.4.81 inviting interested persons to file their objections received from interested persons, and disposed of by the Additional Land Collector, and on report submitted, declaration under Section 6 of the Act was made to acquire land to the extent aforementioned except 5 acres which were set apart for allotment to persons likely to be disturbed by the acquisition. On writ petitions filed, <ORG> quashed the declaration under Section 6 remitting back the matter to <ORG> for reconsideration on two counts, one such count being violation of the mandatory provisions of Section 5A . This is how the matter has come before us in appeal.

4. It prominently needs to be mentioned, at this stage, that both the notifications under Sections 4 and 6 were issued in the state of law as was existing prior to the passing of the Land Acquisition (Amendment) Act , 1984 (Act No. 68/1984). This law on the subject rather was substituted and amended by various Bihar legislative enactments. It is to the law as applicable in the State of Bihar shall we henceforth advert to for deciding this matter.

5. Section 4 of the Land Acquisition Act as applicable to Bihar provides as follows:

Sub-section (1):- Whenever it appears to the appropriate Government or the Collector that land in any locality is needed or is likely to be needed for any public purpose, a notification to that effect shall be published at the office of the Collector, at the office of the sub-divisional officer, at the offices of the smallest revenue administrative unit and <ORG>, if any, constituted under the Bihar Panchayat Raj Act, 1974 (Bihar Act VII of 1948), and at some conspicuous place in the village in which the land is situated; and the Collector shall cause copies of the notification to be served on all persons known or believed to be interested in the land.

Explanation:- For the purpose of the section the expression "smallest revenue administrative unit" shall mean "the revenue administrative unit next below that of a sub-division whether known for the time being as N.E.S. Block, Circle, Anchal or otherwise.

Sub-section (2):- Thereupon it shall be lawful for any officer, either generally or specially authorised by such Government or the Collector in this behalf, and for his servants and workmen, to enter upon and survey and take lands of any land in such locality....

6. By virtue of Clause (c) of Section 3 , the expression 'Collector' means the Collector of a district and includes a Deputy Commissioner, Additional Collector, Additional Deputy Commissioner and any officer specially appointed by the appropriate Government to perform the functions of a Collector under this Act except the functions under Sections 4 , 5A , 6 , 35 and 38 .

7. By virtue of Clause (f) of Section 3 the expression "public purpose" includes provision for or in connection with:

(i) sanitary improvements of any kind, including reclamation; and

(ii) the laying out of village-sites, townships or the extension, planned development or improvement of existing village-sites or townships.

Sub-section (1) of Section 5A as in Bihar provides that any person interested in any land which has been notified under Section 4 , Sub-section (1), as being needed or likely to be needed for a public purpose or for a Company may, within thirty days from the date of the publication of the notification referred to in the said sub-section at some conspicuous place in the village in which the land is situated or of the service of the copy thereof on him, whichever is later, object to the acquisition of the land or of any land in the locality, as the case may be.

8. Sub-section (2) substituted in Bihar provides that every objection under Sub-section (1) shall be made in writing to the Collector who shall give the objector an opportunity of being heard either in person or by pleader and shall, after hearing all such objections and making such further enquiry, if any, as he thinks necessary, decide the objection: Provided that the appropriate Government may, either of its own motion or on the application of any person interested in the land call for the record of the proceedings held by the Collector and pass such order as it thinks fit; and further that the order of the appropriate Government and subject to such order, the decision of the Collector, under Clause (i) shall be final.

9. At the pre- Section 6 stage, besides the mode of publications at various places where the land is situated, personal service of the copy of the notification is prominently required to be made oil the person interested so that he can make objections in writing to the Collector, and on objections being made, the Collector is obliged to give to the objector opportunity of being heard either in person or by pleader. The Collector is further obliged to hear all such individual objection, make such further enquiries as necessary and then required to make an appropriate decision reporting the same to the <ORG>, The decision of the Collector is supposedly final unless the appropriate <ORG> chooses to interfere therein and cause affectation, suo motu or on the application of any person interested in the land. These requirements obviously lead to the positive conclusion that the proceeding before the Collector is a blend of public and individual enquiry. The person interested, or known to be interested, in the land is to be served personally of the notification, giving him the opportunity of objecting to the acquisition and awakening him to such right. That the objection is to be in writing, is indicative of the fact that the enquiry into the objection is to focus his individual cause as well as public cause. That at the time of the enquiry, for which prior notice shall be essential, the objector has the right to appear in person or through pleader and substantiate his objection by evidence and argument. And lastly, since the decision of the Collector may turnout to be final, unless interfered with by the <ORG>, suo motu or on application, the Collector's decision is that of a quasi-judicial authority, arrived at by quasi-judicial methods.

10. That the compliance of provisions of Section 5A is mandatory, is beyond dispute. See in this connection 1975 (4) SCC 298- <CITATION> . and - <CITATION> of opportunity of being heard to the objector is a must. The provision embodies a just and wholesome principle that a person whose property is being, or is intended to be, acquired should have the occasion to persuade the authorities concerned that his property be not touched for acquisition. This right is not absolute, however, if the appropriate <ORG>, in its discretion, choses to dispense with its applicability by invoking urgency provisions of 17 of the Act. But once Section 5A is kept applicable, there is no cause to treat its provisions lightly or casually.

11. The other count on which <ORG> made the remand was the supposal violation of Section 40 of the Act and Rule 4 of the Land Acquisition (Companies) Rules, 1963 (hereinafter referred to as 'the Rules') framed by <ORG> in exercise of the power conferred by Section 55 of the Act. To appreciate this aspect of the matter, it would have to be cleared as to what is the status of the cooperative society of which the appellants are the members. The cooperative society (which by now stands impleaded as a respondent but due to the <ORG>'s procedural objection application for its transposition as appellant has not been heard) is a company by the thrust of Sub-section (e) of Section 3 . It provides that the expression "company" means a company registered under the Indian Companies Act , 1982 or under the English Companies Act, 1862 to 1890, or incorporated by an Act of Parliament of the United Kingdom or by an Indian law or by Royal Charter or Letters Patent and includes a society registered under the Societies Registration Act 1860, and a registered society within the meaning of the Cooperative Societies Act , 1912 or any other law relating to cooperative societies for the time being in force in any <ORG>. This definition in the Act is qualified with nothing repugnant to be found in the subject or context. A separate chapter in the Act as Part VII is provided for acquisition of lands for companies. Section 39 provides the previous consent of the appropriate <ORG> for the purpose, and execution of an agreement between the <ORG> and the <ORG> is necessary if land was being acquired by the <ORG> for the company. The prohibition is to the effect that the provisions of Section 6 to 37 (both inclusive) shall not be put in force in order to acquire land for any company unless with the previous consent of the appropriate <ORG>, nor unless the company shall have executed the agreement hereinafter mentioned. Proceedings up to the conclusion of the result of objections under Section 5A could, all the same, go on with the <ORG> <ORG> cooperating but the provisions of Section 6 onwards till Section 37 (both inclusive) can only be deployed in order to acquire land for any company on the satisfaction of two conditions, that is, (i) the previous consent of the appropriate <ORG> for the purpose, and (ii) the company having executed the agreement of the kind mentioned in the succeeding Sections. Section 40 provides that the consent of the appropriate <ORG> shall not be available unless it is satisfied either on the report of the Collector under Section 5A Sub-section (2) or by an enquiry of the kind conceived of was held as provided in Section 40 itself. Either of the two reports, that is, one made by the Collector under Sub-section (2), of Section 5A and the other as a result of the deliberations under Section 40 , are at par for adoption by the appropriate <ORG> to give consent under Section 39 . The enquiry conceived of under Section 40 could be through an officer appointed by the appropriate <ORG>, held at appointed time and place in order to determine which out of the following three objects of acquisition are sought to be achieved by the company:

(a) that the purpose of the acquisition is to obtain land for the erection of dwelling houses for workmen employed by the company or for the provision of amenities directly connected therewith, or (aa) that such acquisition is needed for the construction of some building or work for a company which is engaged or is taking steps for engaging itself in any industry or work which is for a public purpose; or

(b) that such acquisition is needed for the construction of some work and that such work is likely to prove useful to the public.

The officer appointed to hold the enquiry is empowered under Sub-section (3) of Section 40 to summon and enforce attendance of witnesses and compel the production of documents by the same means and, as far as possible, in the same manner as is provided by the <ORG> in the case of <ORG>.

12. Thereupon Section 41 mentions that if the appropriate <ORG> is satisfied after considering the report, if any, of the Collector under Section 5A , Sub-section (2)(and there may be none in an urgent acquisition) or on the report of the officer making an inquiry under Section 40 , that the proposed acquisition is for any of the purposes referred to in Clauses(a), (aa) or (b) of Sub-section(1) of Section 40 it shall require the company to enter into an agreement with the appropriate <ORG>, providing to the satisfaction of the appropriate <ORG> for the following matters, namely:

(1) the payment to the appropriate Government of the cost of the acquisition;

(2) the transfer, on such payment, of the land to the company;

(3) the terms on which the land shall be held by the company;

(4) where the acquisition is for the purpose of erecting dwelling houses or the provision of amenities connected therewith, the time within which, the condition on which and the manner in which the dwelling houses or amenities shall be erected or provided;

(4A) where the acquisition is for the construction of any building or work for a company which is engaged or is taking steps for engaging itself in any industry or work which is for public purpose, the time within which, and the condition on which, the building or work shall be constructed or executed;

(5) where the acquisition is for the construction of any other work the time within which and the conditions on which the company shall be entitled to use the work.

13. It is thus plain from the language of the Section 41 that unless the proposed acquisition is of the three kinds mentioned in Clauses (a), (aa) and (b) of Section 40 and is found to be needed for one or the other of those purposes, neither is the appointed officer, to whom the enquiry is entrusted, empowered to verdict in favour of a company and nor is the <ORG> without recording such satisfaction expected to give consent. The agreement is then required under Section 42 of the Act to be published in the official <ORG> as soon as may be after execution and thereupon (so far as regards the terms on which the public shall be entitled to use the work) have the same effect as if it had formed part of the Act. The right of the public to use the work being pervasive in the consideration of and acceptance of report by the <ORG>, signified by consent, goes to show the dominant purpose of public utility governing the deliberation and decision. Section 44A imposes the restriction on transfer of any land acquired under Part VII by sale, mortgage, gift, lease or otherwise except with the previous sanction of the appropriate <ORG>. And finally, Section 44B distinguishes between a private company and a <ORG> company providing that notwithstanding anything contained in the Act, no land shall be acquired under this Part, except for the purpose mentioned in Clause (a) of Sub-section (1) of Section 40 , for a private company which is not a <ORG> company. The explanation added thereto says that "Private Company" and "<ORG> Company" shall have the meaning respectively assigned to them in the Companies Act , 1956.

14. Now when we direct ourselves to the provision of the Companies Act , Section 2(10) provides that a company means a company as defined in Section 3 . Section 3 defines company to be company formed and registered under the Companies Act or an existing company as defined therein. "Private company" has been defined to mean a company by articles of which the right to transfer its shares, if any, is restricted and the number of its members is limited to fifty, but not including some persons detailed therein, and prohibits any invitation to the public to subscribe for any shares in, or debentures of the company. In contrast, "Public Company" residually means a company which is not a private company. "<ORG> Company" under Section 2(18) means <ORG> company within the meaning of Section 617 , which in turn says that <ORG> means any company in which not less than 51 per cent of the paid-up share capital is held by <ORG> or by any State <ORG> or <ORG>s or partly by <ORG> and partly by one or more State <ORG>s and includes a company which is a subsidiary of <ORG> as thus defined. So understood, the society of which the appellants are members could never be <ORG> for no <ORG> has subscribed to its share capital. The society could not also be a private company for it has more than 50 members, the figure of membership put at 400. Since the society is neither a government company nor a private company, the impediment of Section 44B towards confining the choice of acquisition for a private company for one purpose is out. Since the society is not a private company, by process of exclusion it becomes under Section 3 of the Companies Act, a "public company" even though not formed and registered under the said Act but only by the statutory inclusion in <CITATION> of the Land Acquisition Act bringing in a cooperative society registered under a state law to be definitely a company as if a company registered under the Companies Act . All the same, the society as a public company would require to satisfy in an enquiry under Section 40 of the Act that it requires the land of or any of the purposes mentioned in Clause (a), (aa) and (b) before it can obtain consent of the appropriate <ORG> on the basis thereof and enter into an agreement as envisaged under Section 41 before switching on to have the role of Section 6 onwards till Section 37 of the Act played. The importance of such enquiry and report as contemplated under Section 40 , in the light of Section 41 , is to serve a double purpose as it may steer an acquisition if Section 5A was dispensed with because of urgency under Section 17 and secondly to provide a safe alternate should there be any fault in the conduct of enquiry under Section 5A of the Act. So one or the other must be kept handy and if per chance one is defective, when both existing, the other can be deployed to satisfy the requirement of law.

15. But that is not the be-all and end-all for the company. In order to approach the <ORG> with a request for acquisition the company has to satisfy the provisions of the Rules also. Rule 4 enjoins as under:

4. Appropriate Government to be satisfied with regard to certain matters before initiating acquisition proceedings:-(1) Whenever a Company makes an application to the appropriate Government for acquisition of any land, that Government shall direct the Collector to submit a report to it on the following matters, namely-

(i) that the company has made its best endeavour to find lands in the locality suitable for the purpose of acquisition;

(ii) that the company has made all reasonable efforts to get such lands by negotiations with the persons interested therein on payment of reasonable price and such efforts have failed;

(iii) that the land proposed to be acquired is suitable for the purpose;

(iv) that the area of land proposed to be acquired is not excessive;

(v) that the company is in a position to utilise the land expeditiously; and

(vi) where the land proposed to be acquired is good agricultural land, that no alternative suitable site can be found so as to avoid acquisition of the land.

(2) The Collector shall, after giving the company a reasonable opportunity to make any representation in this behalf, hold an enquiry into the matters referred to in Sub-rule (1) and while holding such enquiry he shall-

(i) in any case where the land proposed to be acquired is agricultural and consult the Senior Agricultural Officer of the district whether or not such land is good agricultural land;

(ii) determine, having regard to the provisions of Sections 23 and 24 of the Act, the approximate amount of compensation likely to be payable in respect of the land, which, in the opinion of the Collector, should be acquired for the Company; and

(iii) ascertain whether the company offered a reasonable price (not being less than the compensation so determined), to the persons interested in the land proposed to be acquired.

Explanation-For the purpose of this rule "good agricultural land" means any land which, considering the level of agricultural production and the top pattern of the area in which it is situated, is of average or above average productivity and includes a garden or grove land.

(3) As soon as may be after holding the enquiry Sub-rule(2) the Collector shall submit a report to the appropriate Government and a copy of the same shall be forwarded by the Government to the Committee.

(4) No declaration shall be made by the appropriate Government under Section 6 of the Act unless-

(i) the appropriate Government has consulted the <ORG> and has considered the report submitted under this rule and the report, if any, submitted under Section 5A of the Act; and (ii) the agreement under Section 41 of the Act has been executed by the company.

16. Under Rule 3, <ORG> is constituted for the purpose of advising the appropriate <ORG> in relation to acquisition of land under Part VII of the Act, which is required to tender its advice within one month from the date of which it is constituted though the time can be extended by two months. Here again the Collector is required to hold an enquiry in a quasi-judicial sense and would give not only to the company a reasonable opportunity to make good its representations in that behalf but would also, to fulfill the needs of rules of natural justice, give sufficient opportunity to the land owners to refute the case of the company at least in so far as the matter like negotiation of price is concerned, as also on other relevant matters. That Rule 4 is mandatory and essential to be complied with has been ruled by this Court in various decisions. Reference may be made to some of them being: <CITATION> and <ORG>. , <ORG> v. <NAME> and <ORG>. , and <ORG> and <CITATION> . .

17. <ORG>, in the facts and circumstances, has, however, held that no report of the enquiry under Sub-Rule (2) of Rule 4 was forwarded by <ORG> to <ORG> and it consented to the acquisition in violation of the command of law. <ORG> has also gone on to say that the consent of <ORG> violated Sub-Rule (3) of Rule 4. On the aspect of Section 40 of the Act, <ORG> has even gone on to hold that the writ petitioners were not given opportunity to dispel the needs of the company by holding a proper enquiry. It seems innately to be entertaining the view that the Government would not have gone on to give consent unless it could in the contemplated enquiry get a finding that the object of the acquisition was one of those as mentioned in Section 40 . And lastly, <ORG> has concluded that enquiry under Section 5A was vitiated inasmuch as interested persons were not sent personal notices of the notification as required under the law, those who received such notices and had objected were not given proper opportunity of being heard, the file of objection summoned revealed a casual observance of the procedure, no proper opportunity was given to the objectors to place material before the officer and that when the officer had himself obtained a report of spot inspection, he did not given opportunity to the objectors to dispel his impressions thereon. Apart from that <ORG> suspected certain interpolations in the file. Thus impelled, <ORG> went on to remand on account of vitiation of the enquiry under Section 5A of the Act and violation of the mandatory provision of Rule 4, and its compliance as a condition precedent to the employment of Section 6 of the Land Acquisition Act.

18. The picture will not be complete without the uncontroverted plea of the appellants being noted that by January 1984, after the agreement under Section 41 was signed and published on 4th March 1983, and after the issuance of the declaration under Section 6 on 18th March 1983, an award was prepared for Rs. 89,28,663/- which sum stood deposited with the government by the society by January 1984. The society claims that the possession of the land was given to it on 2.8.84 and many plots stood distributed amongst its members by proper registered documents. On the latter aspect, there was a dispute of fact. The writ petitioners who too were some cooperative house building societies, original land-owners and transfers of land, had been asserting that they were in possession, and some of them had claimed to have either erected or be in the process of erecting buildings. <ORG> had, as an interim measure, ordered status quo to be maintained. <ORG> in its final verdict posed the question as to which cooperative society could have dominance, as on both sides cooperative societies were pitted against each other, both having the avowed object of housing, and which one need be preferred was a baffling question. Learned Counsel for the parties, besides canvassing their respective points of view on law, ventured to show us documents about the enquiry supposedly held to satisfy the requirements of Section 40 or/and of Rule 4 of the Rules as also of proceedings under Section 5A of the Act, for and against the governmental action. On the layers and layers of common facts, leaving aside individual facts, <ORG> steered a common course to effect a remand. In the circumstances, we feel that it was a possible view which <ORG> could have taken but this view put settlement of the dispute beyond sight. Here <ORG> seems to have erred in not, at least, restricting the terms of the remand. Persons who had not gone before <ORG> in writ petitions need not have been given relief. The remand should have been confined to the interests of those who were the objector writ petitioners before <ORG>. There should not have been a remand as wholesome as it is. The declaration under Section 6 should have been allowed to be sustained pertaining to land in other than the land of the writ petitioners, and so far as the writ petitioners are concerned, their cases individually on both aspect need to have been seen by <ORG> itself. And delay, if any, in the facts and circumstances of each case, in approaching <ORG> could have had a determinative effect.

19. Instantly the Notification under Section 4 is couched in terms that land is required to be taken over by the <ORG> for a public purpose, that is, for <ORG>, on the cost of <ORG>. Though Section 4 above-quoted requires the appropriate government to notify its intention to acquire land which is needed or is likely to be needed for any public purpose, it nowhere makes it incumbent at that stage to specify as to whether the public purpose would be achieved by some activity of the government or would it be passed over to a company. Now here the intention of the government, as expressed, was to achieve the public purpose for providing the <ORG>, at the cost of the <ORG>, land for its avowed purposes. The interested persons moving objections under Section 5A were made alive to the nature of the acquisition. Finally while issuing Section 6 notification, declaration was made to acquire land for the same public purpose. This declaration was in consonance with Sub-section (1) of Section 6 as substitutedly applicable in Bihar, which is as follows:

(1) Subject to the provisions of Part VII of the Act, where the appropriate <ORG> is satisfied after considering the Collector's report, if any, under the proviso to Sub-section (2) of Section 5A or the Collector is satisfied after hearing the objection, if any, under Section 5A , particular land is needed for a public purpose, or for Company, a declaration shall be made by the appropriate <ORG> or the Collector, as the case may be, to that effect in writing:

Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by the <ORG> or wholly or partly out of <ORG> or some fund controlled or managed by a local authority.

20. Now here the distinction is made between a public purpose and a purpose for the company. The acquisition of land for a company is in substance for a public purpose as all those activities mentioned in Section 40 such as constructing dwelling houses and providing amenities for the benefits of workmen employed by it and construction of some work for public utility etc. serve the public purpose. The acquisition for the company and the purpose for it, can well be investigated under Section 5A or Section 40 , necessarily after the notification under Section 4 . Reference may usefully be made to <CITATION> (now Maharashtra) and Ors. . It was the conceded case before <ORG> that there could be no acquisition for the respondent-<ORG> without provisions of Section 40 of the Act being involved and complied with. In <NAME> case supra too, this Court has taken the view that as provided in Section 39 , the machinery of the Land Acquisition Act beginning with Section 6 and ending with Section 37 shall not be put into operation unless two conditions precedent are fulfilled, namely, (i) the previous consent of the appropriate government has been obtained and (ii) an agreement in terms of Section 41 has been executed by the Company. Such consent could be given if it was satisfied on the report of the enquiry envisaged by Section 5A(2) or enquiry held under Section 40 itself that the purpose of the acquisition is for purposes as envisaged in Section 40 . In this state of law, the plea set up on behalf of the appellants that when their <ORG> could not be treated either as a private or a government company, was no company at all so as to remain bound to comply with Chapter VII of the Act, is of no substance. The <ORG> as a company is bound to satisfy the requirements of Section 40 before taking aid of Section 6 to 37 of the Act to promote its needed acquisition.

21. Having thus clarified the law governing the field, we would open doors for streams of equities and discretions to enter in the exercise of power by <ORG> under Article 226 of the Constitution. As observed earlier, we are of the view that <ORG> should not have upset the notification under Section 6 of the Act as a whole and should have individualised justice vis-a-vis each writ petitioner before it, having regard to the equities interplaying in each case and to the regulation of its discretion keeping in view host of other factors which weigh with <ORG> to deny, grant or mould relief even when illegalities in procedure keep staring. Thus for the view afore-expressed, we allow these appeals set aside the impugned orders of <ORG> and remit all these matters back to it with the request that though it may take them up as a batch, it may give individual attention to each case, view the illegalities pointed by the writ petitioner in its right perspective having regard to the time factor and confine the relief, if due, to him separately. We shall not be taken to have controlled the discretion of <ORG> in administering individualised justice and amongst others it may, with the cooperation of the <ORG> and of <ORG>, as also the writ petitioners examine the possibility of as equitable solution so that the fist of law and the discretion of the <ORG> do not hurt unbearably. We thus remit the matters to <ORG> without any order as to costs.


JUDGMENT APPEAL, from <NAME> On February 23, 1967, <ORG> issued a notification to each of the plaintiffs, <NAME> and <NAME>, in accordance with section 28(4) of the Finance Act, 1960, that they had reason to believe that the section applied in respect of certain transaction. on March 23, 1967, the commissioners received statutory declarations from the plaintiffs stating the facts and circumstances upon which in their opinions the section did not apply.

The commissioners considered the declarations and decided to submit the matter under section 28(5) to the tribunal constituted for the purpose of that section to ascertain whether there was a prima facie case. The <ORG> solicitor was instructed to prepare a counter-statement but the matter had not been submitted to the tribunal.

In a letter dated May 12, 1967, the plainfiffs informed the registrar of the tribunal that they wished to be represented by counsel at the hearing and would like copies of the certificate and counter-statement of the commissioners made under section 28 .

The registrar refused the plaintiffs request, explaining that it would not be in accordance with the practice of the tribunal when considering whether or not there was a prima facie case.

The plaintiffs then issued an originating summons asking the court whether (1) the tribunal was bound to give the <NAME> an opportunity to deal with the commissioners statement and counter-statement and to address argument and adduce evidence before the tribunal and (2) the procedure which the tribunal intended to adopt was in accordance with the rules of natural justice.

The defendants, the members of the tribunal (<NAME>, Sir <NAME>, Sir <NAME>, <NAME> and <NAME>) and the commissioners, took out motions to strike out the summons as disclosing no reasonable cause of action.

On July 18, 1967, <ORG> held 1 that the summons did not raise any question which was open to serious argument and ordered that it be struck out.

The plaintiffs appealed on the grounds, inter alia, that the judge misdirected himself in holding that <ORG> originating summons did not raise any question open to serious argument in <ORG> and that he ought to have held that the summons raised such a question and to have dismissed the motions.

The facts are further stated in the judgment of Lord Denning M. R.

<NAME>, <NAME> and <NAME> for the plaintiffs. The substantial issue is whether the tribunal was bound to apply the rules of natural justice and whether <NAME> was right. He relied on evidence which is not within the terms of R. S. C. (Rev. 1965), Ord.18, r.19(2). Section 28 of the Finance Act, 1960, deals with "tax advantages." The dispute between the parties is whether, before the tribunal comes to a determination, the taxpayer is entitled to see the counter-statement. A hearing involves being given an opportunity of commenting on any case made against one.

<ORG> has set up what it describes as "a tribunal" for the purpose of section 28 of the Act of 1960 : see subsections (5) and (7). In subsection (5) the expression "take into consideration" and "determine" are used, which are particularly apt to the judicial function. So prima facie the court will presume that, although parliament intended the tribunal to set up its own procedure, it did not intend it to disregard the rules of natural justice : see per Diplock L. J. in <CITATION> 1.

Although the rules of natural justice, if they are applied, need not involve an oral hearing they must give a party a fair opportunity to correct or contradict any relevant prejudicial statement : see per Lord Loreburn L. C. in <CITATION> 2 and <NAME> v. <ORG> 3.

In the nature of the case here, the commissioners see the taxpayers case in terms of the statutory declaration. Unless the plaintiffs are correct in their contentions, the taxpayer has no chance to challenge the contents of the commissioners counter-statement. <ORG> must have intended fairness in this respect.

<NAME> attached too much importance to the word "hearing" and based himself on the belief that the plaintiffs were asking for a trial or nothing. The fact that the procedure under section 28 is for the benefit of the taxpayer is no reason for depriving him of natural justice. The procedure could also be for the benefit of the revenue. <ORG> must be presumed to have intended justice and not injustice. The plaintiffs are entitled to take the statute as entitling them to natural justice unless it is expressly excluded. The interests of the <ORG> and that of the general body of taxpayers ought to be identical.

Although there must be a "hearing" with both sides entitled to state their case, the tribunal can make its own procedure. But the plaintiffs ought to be allowed to know the case which is made against them and to comment on it.

[DIPLOCK L. J. What about the grand jury ?] The grand jury was abolished partly for that reason. From 1848 the grand jury had acted side by side with the committing justices. In committal proceedings, which are more analogous, the rules of natural justice are fully provided for .

Section 28 must be looked at and the rules of natural justice can only be excluded if if is clear that <ORG> intended them to be excluded. The matter should certainly not be dealt with on a striking-out motion. Time and money is saved if the rules of natural justice are accepted in preliminary proceedings and at the final determination. The real essence of <NAME> v. Housing Appeal Tribunal 1 is that it does not matter whether you are dealing with a preliminary issue or not, the rules of natural justice must be applied. Unless parliament deprives a tribunal of this elementary right, it must be applied.

As to what is involved in "consideration", see <ORG> v. Minister of Health. A matter can only be considered if both sides are given an opportunity of giving their views. Once you have a tribunal or a minister under a duty to consider something, both parties must know what is said against them. [Reference was made to <NAME> v. <ORG>.] All the case have to be considered in their context. Reliance is put on <NAME> v. Minister of Health and the words "any inquiry of a judicial character" in the judgment of <ORG> in <NAME> v. city of <ORG> committee, Ex part <ORG> An ex parte application is not a judicial inquiry. Here the ex part application having been made, the revenue is allowed to put in a lot more facts and the taxpayer cannot know what they are. Reliance is also put on what <ORG> said in <NAME> v. <ORG> as to the intention of the legislature. <NAME> v. <ORG>, Ex parte Jagger shows the width of the principle.

[EDMUND DAVIES L.J. Have you found any case where this principle was applied where a prima facie had to be made out ?] <NAME> v. <ORG> has an attractive statement by <NAME>.

<NAME> in Reg. v. Deputy Industrial Injuries Commissioner, Ex parte Mopre emphasised the need for the procedure before the deputy industrial injuries commissioner being in accordance with natural justice. The general principle had been stated in <NAME> v. Minister of Health.

Here is something described as a tribunal. It is told to consider and determine. For the purpose of its interlocutory function the contention for the <ORG> is that the tribunal need not disclose documents to the taxpayers. The presumption is the other was as in the case of committing justices. The elementary consideration is that the principle stated by Lord <NAME> in <CITATION> applies. The obligation is the same as that of committing justices.

<NAME>, <ORG> for the first five defendants, the tribunal, and <NAME> for the sixth defendant, <ORG>, were not called on to argue.

<NAME> We need not trouble you, Mr. <NAME>.

Some years ago the plaintiffs, Mr. and Mrs. <NAME>, had a transaction in securities. Quiet recently the revenue authorities decided to put into operation section 28 of the Finanace Act, 1960. They say that Mr. and Mrs. <NAME> obtained a tax advantage in that transaction : that it was not an ordinary commercial transaction : and they propose to make an adjustment to counteract that tax advantage. In order to cancel a tax under section 28(3) specifying the adjustment which they propose to make. I will call it a " section 28 notice." On receiving that notice the taxpayer can appeal to the special commissioners under section 28(6) and thence to the special tribunal set up under section 28(7) .

But it is provided that before the section 28 notice is given, the commissioners are to carry certain preliminaries provided by subsections (4) and (5) of section 28 . These preliminaries are specifically inserted to protect the taxpayer. They are designed to ensure that the taxpayer is not harassed by a section 28 notice unless the circumstances justify it. Subsection (4) requires that the commissioners are not to give a section 28 notice until they have "notified" the taxpayer that they have reason to believe that section 28 applies to him. That is what I may call the preliminary "notification". If the taxpayer is of opinion that the section does not apply to him, he can within thirty days make a "statutory declaration" to that effect, stating the facts and circumstances upon which his opinion is based. If the taxpayer makes such a "statutory declaration", the commissioners must consider whether to take further action in the matter. They may decide to take no action, in which case the taxpayer goes clear. But they may decide to take further action. In that case they must send to the special tribunal a "certificate" saying they propose to take further action. They may also send with it a "counter-statement" if they so wish. Then there is this important provision :

"The tribunal shall" in any such case "take into consideration the declaration" (that is the statutory declaration) "and the certificate" (that is the certificate of the commissioners) "and the counter-statement, if any" (that is the counter-statement of the commissioners) "and shall determine whether there is or is not a prima facie case for proceeding in the matter..."

If the tribunal determine that there is no prima facie case, the tax-payer goes clear. But if they decide that there is a prima facie case, the commissioners can then proceed to give a section 28 notice, stating the adjustments necessary to counteract the tax advantage. An illustration of this procedure is given in <ORG> v. <NAME>.  2 W.L.R. 1271;  2 All E.R. 48, H.L.(E.).

In the present case the commissioner have given the preliminary "notification." The plaintiff taxpayers have made the "statutory declaration." The commissioners have decided to take further action. They have sent to the tribunal a "certificate" and a "counter-statement,"

Now at this stage the plaintiffs have taken out an originating summons. They claim that, before the tribunal determines whether or not there is a prima facie case, they are entitled to be heard; or, if not to be heard, at least to see the counter-statement of the commissioners and to correct any statement in it to which they object. In short, to see the case against them and to put in an answer to it. They contend that, although section 28 does not so provide, nevertheless natural justice requires it. Before the judge it was contended that the plaintiffs were entitled to be represented before the tribunal and to adduce argument and evidence. That was clearly untenable, and the judge rightly so held. Before us Mr. <NAME> put the case much ,ore moderately and effectively. He reminded us of the words of Lord <NAME> in <CITATION>  A.C. 179, 182; 27 T.L.R. 378, H.L.(E.)., that statutory tribunals "have no power to administer an oath, and need not examine witnesses. They can obtain information in any way they think best, always giving a fair opportunity to those who are parties in the controversy for correcting or contradicting any relevant statement prejudicial to their view."

They can determine their own procedure. If they so determine, they can dispense with an oral hearing, and allow written representation only. They must, however, always give a party fair opportunity for correcting or contradicting any relevant statement prejudicial to his view.

Mr. <NAME> has presented, clearly as always, the principles and authorities to us. But I must say there is a great difference between, on the one hand, a tribunal which has to decide on the rights and wrongs of the parties, and on the other hand, a tribunal which has to determine simply whether there is or is not a prima facie case. In seeing whether there is a prima facie case, a tribunal has, of course, to consider the case presented by one side : but it need not at that stage hear the other side <ORG> reminded us of grand jury. They had to decide whether there was a true bill, that is, a prima facie case. They only heard one side. They did not hear the accused. We have canvassed other instances, such as an ex parte application to serve a writ out of the jurisdiction. The master has to see if there is a prima facie case or a good arguable case : and he does so without, at that stage, hearing the other hand, in committal proceedings before magistrates, the accused must be present and be heard to argue there is no prima facie case.

In this case the question is to my mind resolved by the words of the statute. It says that the tribunal are to take into consideration : "the declaration," that is the declaration of the taxpayer,"the certificate," that is the certificate of the commissioners; "and the counter-statement, if any," that is the counter-statement of the commissioners; "and shall determine whether there is or is not a prima facie case." When <ORG> thus expressly states the matters which are to be taken into consideration. If the tribunal were, at this stage, empowered to make a final determination, the courts would readily imply that the taxpayer ought to be given a fair opportunity to see the counter-statement and to correct anything in it prejudicial to his interests. But as the enquiry is only to see if there is a prima facie case, there is no reason to make any such implication. Natural justice does not require it : because a prima facie case decides nothing except that there is enough to call for an answer. If the tribunal decide that there is a prima facie case, the taxpayer will have full opportunity to see the counter-statement and to make his case before the special commissioners and the tribunal.

I may add, as <NAME> did, that section 28 reproduces a procedure which has been in force for over thirty years. It is the procedure about surtax directions in the Finance Act , 1927. In those cases there never has been anything in the nature of a hearing. The board of referees have only the documents which are specified in the statute, and nothing else. They too have only to decide whether there is a prima facie case.

I agree with <ORG> that this originating summons discloses no cause of action and should be struck out. I would dismiss this appeals.

<NAME> I agree, and but for the fact that the argument in this court has been largely based on some observations of mine in <CITATION> should be content to say no more than that.

I should, however, point out that the observations in the Anisminic case were directed to the jurisdiction of a tribunal to make a determination whether a described situation existed or not; that determination when made being final, subject to any appeal that might be provided therefrom, the observations were in no way concerned with a preliminary decision whether a prima facie case had been made out that a described situation existed which merited further inquiry as to whether or not it did. Where such a jurisdiction is conferred by statute upon a person or a tribunal one must in my view look at the statute to see what are the materials upon which that preliminary decision is to be based. There is no prima facie presumption that <ORG> intended that the rules of natural justice applicable to final determinations, whether subject to appeal or not, have to look far in the practice of this court to see that that kind of inquiry is dealt with frequently ex parte, and I need only mention an application for leave to serve a writ out of the jurisdiction under R.S.C., Ord. 11, r. 4, or an application for leave to apply for an order of prohibition, mandamus or certiorari under Ord. 53, r. 1. All these and many similar ones are dealt with without hearing the other side at all upon material which is produced by the applicant.

When one examines the procedure laid down in section 28 of the Finance Act, 1960, it is in my view quite apparent that the kind of determination with which we are concerned at this stage is the latter kind of determination, that is to say a preliminary one made on the application ex parte of <ORG>. Subsection (4) requires the commissioners in the first instance to notify the taxpayer of their intention to serve a notice and entitles the taxpayer, if he so wishes, to make a statutory declaration of his opinion that the section does not apply to him, stating the facts and circumstances on which his opinion is based. If he does that, then <ORG>, if they wish to proceed further in the matter (which they need not do), make an application under subsection (5), which is plainly an ex parte application, to the tribunal to determine whether there is or is not a prima facie case for proceeding in the matter. The material which the subsection lays down shall be put before the tribunal are the statutory declaration of the taxpayer, a certificate and a counter-statement, if <ORG> desire to submit one. It is that material which the tribunal is required by the express words of the statute to take into consideration, and no other material.

The question to which they have to address their minds is : do these documents disclose a case which merits further inquiry as to whether the circumstances described in subsection (1) of the Act exist in the case of that taxpayer ? There is in my view no room in this procedure, and in the face of the express words of the statute, for the application of the well known doctrine to which Mr. <NAME> has referred, that you must give to the other side an opportunity of commenting upon the material on which a tribunal intends to act which is adverse to a particular party. That kind of case has got nothing to do with this present case : nor was it being dealt with in any way in the Anisminic case which has been relied upon.

<NAME> Although I find myself in agreement with my brethren, for once that fact does not induce in me a state of unbridled happiness. Even though we are here concerned with the material upon which the tribunal should determine simply whether a prima facie case for issuing a section 28(3) notice has been made out, rather than a final determination of the rights of the parties, if the taxpayer equally with the Commissioners of Inland Revenue (a) knew what material was being placed before the tribunal, and (b) had an opportunity of commenting upon that material, I entertain no doubt that greater satisfaction would enure to the taxpayer than under the present one-sided system, and might well result in a saving of costs on both sides. These are important considerations which might well be considered in another place hereafter. But, having said that, I find myself compelled, by the wording of section 28(5) , to agree to the dismissal of this appeal. That provision required that "the tribunal shall take into consideration the (statutory) declaration and the certificate and the counter-statement," and nothing else. It is upon those documents alone that the tribunal has to "determine whether there is or is not a prima facie case for proceeding in the matter," and I do not think that the tribunal can look at other material outside that specified.

However desirable in some respects it might be that the taxpayer should have an opportunity of making his own comments upon the commissioners counter-statement, I do not consider that the rules of natural justice demand that the provisions of section 28 should be so expanded or interpreted as to give the taxpayer a legal right to that opportunity. It is not without significance that, despite the mountain of authorities which have almost completely obscured our view of counsel and the many reported decisions relating to the requirements of natural justice, not a single authority has been cited to this court which applies the audi alteram partem rule to the determination of whether a prima facie case exists. <NAME> v. <ORG>, upon which Mr. <NAME> very understandably -and commendably - sought to rely, was quite unlike the present case in at least two important respects : (1) the court was there dealing with the nature of the material upon which the tribunal was to arrive at a final determination as to the legal position of the parties; and (2) the relevant statutory rules there required the appeal tribunal to consider, in addition to the specified documents, ". . . any further particulars which may have been furnished by either party."

I am not oppressed by the fact that the machinery of section 28 is virtually identical with that which has existed for forty years, for the operation of that machinery is apparently now being subjected to judicial scrutiny for the first time. But, having been so scrutinised, I do not consider that the law requires its condemnation. Accordingly, though with no enthusiasm, I agree that this appeal should be dismissed.

Appeal dismissed with costs.

Leave to appeal to <ORG> refused Solicitors : <ORG>; <ORG> Solicitor; Solicitor of <ORG>.