CASE NO.: Appeal (civil) 5519-5520 of 2007 PETITIONER: <ORG> RESPONDENT: <ORG> DATE OF JUDGMENT: 18/05/2007 BENCH: <NAME> & <NAME> JUDGMENT:

J U D G M E N T S.B. SINHA, J :

1. Validity or otherwise of certain provisions of the West Bengal Central Valuation Board (Amendment) Act, 1994 (for short "the Amendment Act ") is in question in these appeals which arise out of a judgment and order dated 24.12.2003 passed by <ORG> of <ORG> dismissing the writ petition filed by the appellant herein and, thus, upholding the impugned provisions thereof.

2. Members of the appellant association are occupiers of lands and buildings situated within the territorial limits of the Bidhannagar Municipality. Annual valuation of lands and buildings for the purpose of assessment of municipal tax indisputably is governed by the provisions of the West Bengal Municipal Act, 1993 (for short "the Municipal Act"). In terms of Section 110 thereof, the annual valuation of lands and buildings is required to be determined by <ORG> (for short "the <ORG>"). The <ORG> was established under the provisions of the West Bengal Central Valuation <ORG> Act, 1978 (for short "the 1978 Act").

3. Valuation of the holdings used to be governed by Sections 10 , 11 and 12 of the 1978 Act. Before we embark upon a detailed analysis of the provisions thereof, we may notice that they provided for publication of the draft valuation list, publication of the final valuation list and amendment of valuation of the list by the <ORG> respectively.

4. Principles of natural justice were to be complied with in terms of Sub- section (3) of Section 10 insofar as upon publication of the draft valuation list, objections were invited and objections, if filed, were required to be considered by the <ORG> for determination thereof upon giving an opportunity of being heard in that behalf. Section 11 provided for publication of the final valuation list together with the amount of consolidated rate payable after determination of the objections filed under Section 10 . The final valuation list, so arrived, could be subject to further review in terms of Sections 14 and 15 of the Act.

5. By reason of the impugned amendment, alterations on three principal fields were made, i.e., the provisions relating to publication of the draft valuation list of lands and buildings and finalization thereof, upon hearing objections thereto were deleted. The West Bengal Central Valuation <ORG> (Valuation of Lands and Building) Rules, 1984 (for short "the 1984 Rules") framed under the 1978 Act were also amended by a notification dated 30.03.1984 wherein provisions pertaining to filing objection petitions against the draft annual valuation and determination thereof were deleted. The effect of the said amendment was that the valuation made by the <ORG> was made final, subject to review as provided for under Sections 14 and 15 of the 1978 Act.

6. Contending that the said Amendment Act is violative of Article 14 of the Constitution of India as it deprived the citizens of being heard which is the essence of the principles of natural justice as also lead to procedural unfairness, a writ petition was filed by the appellant. The said writ petition was allowed by a learned Single Judge of <ORG>. In arriving at its conclusion, the learned Judge took notice of the contentions raised by the respondents in their counter-affidavits as also other factors relevant for determination thereof at some details. An intra-court appeal was preferred thereagainst in terms of Clause 15 of the Letters Patent Appeal of <ORG> and by reason of the impugned judgment dated 24.12.2003, the said appeal has been allowed.

7. <ORG> opined:

(i) The requirements of compliance of principles of natural justice have not completely been taken away.

(ii) No case of substantive unreasonableness has been made out.

(iii) In the matter of collection of debt for the purpose of arriving at a general valuation as also for the purpose of determining the objections by the owners and occupiers of the lands and the buildings, the restrictions put on the power of <ORG> as also the extent to which such power can be exercised do not lead to procedural unfairness; and

(iv) Validity of constitution of <ORG> cannot also be faulted with.

8. Mr. <NAME>, learned senior counsel appearing on behalf of the appellant would submit that <ORG> of <ORG> committed a serious error in construing the provisions of the impugned Amending Act insofar as it failed to take into consideration the following:

(i) The valuation list prepared by the <ORG> and produced in course of the hearing before the learned Single Judge clearly showed that no reason had been assigned in support thereof, and in any event, the same did not bear any real nexus with the factors to be taken into account in the matter of determination of annual valuation as provided under Section 106 of the Municipal Act.

(ii) It may be true that the Amending Act did not exclude the rules of audi alteram partem completely and sought to provide an opportunity of hearing only at the stage of review. However, the provisions thereof would clearly indicate that there is no procedural or substantive observance of the principles of natural justice in the process of determination of annual valuation.

(iii) Opportunity of hearing at the stage of review of the assessment being a post-decisional one, the same does not compensate for the requirements of a pre-decisional hearing.

9. Mr. <NAME>, learned Additional Solicitor General appearing on behalf of the State of West Bengal and Mr. <NAME>, learned senior counsel appearing on behalf of <ORG>, on the other hand, would submit that the procedural fairness as also the principles of natural justice being capable of being read in the provisions of the Amendment Act , <ORG> cannot be said to have committed any error in passing the impugned judgment.

10. Assessment of property tax used to be governed by the Bengal Municipal Act, 1932. However, the State of West Bengal enacted the 1978 Act inter alia for constitution of <ORG> and <ORG> for the purpose of valuation of lands and buildings in West Bengal. By reason of the said provision, the exclusive jurisdiction of the Municipal Committees to make valuation of the lands and buildings which were exigible to levy of property tax was taken away.

11. A Comparative table showing relevant provisions of the 1978 Act and the impugned Amendment Act is as under:

The 1978 Act The Amendment Act

5. Members of the Board: (1) The Board shall consist of a Chairman and two other members to be appointed by the State <ORG>.

(2) The Chairman shall be a person who is or has been an officer of <ORG>. not below the rank of a Secretary.

(3) Of the two other members

(a) one shall be a person who is or has been a member of the judicial service for not less than 7 years and has experience in municipal affairs; and

(b) the other shall be a person holding a degree in Civil Engineering and having knowledge and experience in the work of valuation and assessment for not less than seven years.

(4) The Chairman and the other members of the Board shall hold office for such period not exceeding six years as <ORG> may determine and the terms and conditions of their service including salaries and allowances shall be such as may be prescribed.

5. Members of the Board  (1) The Board shall consist of a Chairman and four other members to be appointed by the State <ORG>.

(2) The Chairman shall be a person who is or has been an officer of <ORG>. (not below the rank of Secretary including ex-officio Secretary).

(3) The four other members shall include the Director of Local Bodies, Government of West Bengal, who shall be the ex-officio member of the Board, and such other officers of <ORG> or non-official experts having knowledge and experience in the field of judiciary, Engineering, Valuation and Assessment of properties, economics or social science as <ORG> may determine.

(4) The Chairman and the other members of the Board shall hold office for such period not exceeding four years as <ORG> may determine and the terms and conditions of their service, including salaries and allowances shall be such as may be prescribed.

(5) The Board shall have a Member-

Secretary who shall be appointed by <ORG> from amongst the members referred to in sub-

section (3) and shall be the Chief Executive Officer of the Board.

5A. Validation  Notwithstanding anything contained elsewhere in this Act, no action of the <ORG> shall be invalid or otherwise called in question merely on the ground of the existence of any vacancy (initial or subsequent) in the office of the members of the <ORG>.

8. Expenditure incurred on account of salaries and allowances  The expenditure incurred by the Board for meeting the salaries and allowances of the Chairman, the other members, the Secretary and Officers and employees serving under the Board shall be defrayed out of the Fund.

8A. The Board shall maintain the prescribed manner a register of registered valuer surveyors (Gr. I) and registered valuer  Surveyors (Gr. II).

8B. Every person who possess such qualifications as may be prescribed shall, subject to such terms and conditions and on payment of such fee, as may be prescribed, be entitled to have his name entered in the register of registered valuer surveyors (Gr. I) and registered valuer  surveyors (Gr. II).

10. Preparation of the draft valuation list  (1) When the valuation under Sec. 9 of the lands and buildings in any area has been completed, the <ORG> shall cause such valuation to be entered in a list.

(2) The Board shall publish the valuation list in such manner as may be prescribed and shall specify a date within which objections to the list may be filed.

(3) After the expiry of the date specified in sub-sec (2) and within the objection shall be determined, after giving the objector an opportunity of being heard by such officer or officers of the <ORG> as it may specify in this behalf.

(4) The objection shall be filed and determined in such manner as may be prescribed.

10. ***

11. Publication of final valuation list  When objections have been determined, the Board shall prepare a final valuation list and shall give public notice of the place or places where such list may be inspected and the valuation (together with the amount of consolidated rate thereon) as recorded in the final valuation list shall, subject to the provisions of Sections 14 and 15 , be conclusive.

11. Publication of final valuation list  When the general valuation of lands and buildings has been made by the <ORG> under Sec. 9, the <ORG> shall prepare a valuation list and shall give public notice of the place or places where the valuation list may be inspected, and the valuation as aforesaid together with the amount of consolidated rate or property tax, as the case may be, payable thereon, as recorded in the valuation list shall, subject to the provisions of Sections 14 & 15 be conclusive. The <ORG> shall give a notice in writing to the owner or to the lessee, sub-lessee or occupier of any land or building, as the case may be, in all case in which the valuation of such land or building is made for the first time or the annual valuation of such land or building as increased:

Provided that the valuation list as aforesaid may be prepared and published in respect of all the holdings of any municipal area or any area within the jurisdiction of a <ORG> specified in the notification under sub-sec (1) of Sec 9 or the holdings of any municipal area within such group of wards or any area within such group of wards within the jurisdiction of a <ORG> as <ORG> may determine.

12. Amendment of Valuation list by Board  The Board may, for reasons to be recorded in writing, amend the valuation list at any time before the date specified for filing objections under sub-sec (2) of Section 10 .

12. **** 12A. Alteration or amendment of valuation list  (1) Notwithstanding anything contained in Sec 11, the Board may at any time before the date of hearing of an application for review under Section 14 and for reasons to be recorded in writing, direct any alteration or amendment of the valuation list : -

(a) by inserting therein the name of any person whose name ought to be inserted; or

(b) by inserting therein any land or building previously omitted together with the valuation thereof; or

(c) by striking out the name of any person or any land or building not liable for payment of consolidated rate or property tax, as the case may be; or

(d) by increasing or decreasing the annual valuation of any holding which, in the opinion, of the <ORG>, has been substantially under-valued or over-valued by reasons of fraud, mis-representation, mistake or error.

14. Application for review  (1) The owner or occupier or any other person primarily liable to pay consolidated rate may, if dissatisfied with the valuation of any land or building as entered in the final valuation list, apply to the Board to review the valuation.

(2) The application shall be filed within such time and in such manner as may be prescribed.

(3) Every application presented under sub-sec (1) shall be heard and determined by a Review Committee constituted under Sec 15 in accordance with such procedure as may be prescribed.

(4) No application shall be entertained unless the amount of consolidated rate as recorded in the final valuation list referred to in Sec 11 has been paid or deposited in the office of the <ORG> or the Municipality, as the case may be, before the application is filed and the application shall fail unless amount is continued to be paid or deposited till the application is finally disposed of.

14. Application for review  (1) The owner or occupier or any other person primarily liable to pay consolidated rate for property tax, as the case may be, may if dissatisfied with the valuation of any land or building as entered in the valuation list, apply to the <ORG> or <ORG> concerned to review the valuation.

(4) No application u/sub-sec (1) shall be entertained unless the amount of consolidated rate or property tax, as the case may be, on the previous valuation of land or building as aforesaid has been paid or deposited in the office of the Corporation or Municipality, as the case may be, before the application is filed, and every such application shall fail unless the amount of consolidated rate or property tax as the case may be on the previous valuation as aforesaid is continued to be paid or deposited in <ORG>, as the case may be, till such application is disposed of.

Provided that wherever the previous valuation refers to a valuation made under the Bengal Municipal Act, 1932 (Bengal Act XV of 1932), and in force on the date immediately before the commencement of the West Bengal Municipal Act, 1993 (West Bengal Act XXII of 1993), no application under sub-section (1) shall be entertained unless the amount of consolidated rate on such previous valuation has been paid or deposited or is continued to be paid or deposited in the office of the concerned Municipality.

15. <ORG>  (1) The State Government shall constitute such number of <ORG> as may be considered necessary to hear the applications filed under sub- section (1) of Section 14 .

(2) Each such Review Committee shall consist of two members of whom one shall be its President. The President of each Review Committee shall be appointed by the State <ORG>.

on such terms and conditions and shall possess such qualifications as may be prescribed. The other members of <ORG> shall be, where the matter relates to

(i) any land or building in any Ward in Calcutta or Howrah or Chandranagore, the Councillor of the Ward; or

(ii) any land or building in any Ward in a municipality, the Commissioner of that Ward; or

(iii) any land or building in any area other than the areas mentioned in clauses (i) and (ii), such person as <ORG> may appoint:

Provided that when a Corporation is, or the Commissioners of a Municipality are, superseded, <ORG> shall appoint a person residing in the Ward to which the matter relates as the other member referred in clause (i) or clause (ii).

Provided further that no meeting of <ORG> shall be held if the President is absent:

Provided also that no decision of <ORG> shall be invalid or otherwise called in question merely by reason of any vacancy in the office of the other member or due to absence of such member from any sitting.

(3) <ORG> may confirm, reduce, enhance or annul the valuation of land or building or may direct fresh valuation to be made after such further enquiry as <ORG> may direct.

(4) If there is any difference of opinion between the members of <ORG>, the matter shall be referred to the <ORG> for decision. (5) The decision of <ORG> or of the <ORG>, as the case may be, shall be final and no suit or proceeding shall lie in <ORG> in respect of any matter which has been or may be referred to <ORG> or has been decided by <ORG> or the <ORG>.

15. <ORG>  Every Corporation or Municipality shall, by a resolution constitute <ORG> (s) to hear applications presented under sub-sec (1) of Sec

14. (2) Every Review Committee shall be presided over by the Chairman or the Vice-Chairman of the Municipality and shall consist of two other members, being Councillors of the Municipality, as may be nominated by <ORG>, and another member, who shall be an officer of the Board having knowledge in the assessment of municipal valuation, deputed by the Board:

Provided that in the case of a <ORG>, the Presiding Officer and two other members of <ORG> shall be such persons as may be nominated by the <ORG> from amongst the Councillors by a resolution:

Provided further that no decision of <ORG> shall be invalid or called in question merely by reason of any vacancy in the composition of the <ORG> or absence of any member from a meeting thereof other than the Presiding Officer:

Provided also that the decision of <ORG> shall be unanimous.

Provided also that when a <ORG> or a Municipality is dissolved, <ORG> shall constitute by notification <ORG> consisting of a President and such number of other members as may be specified in the notification for the purpose of hearing applications for review.

(3) <ORG> may confirm, reduce, enhance or annul the valuation of land or building as may direct fresh valuation to be made after such further enquiry as <ORG> may direct.

(4) If there is any difference of opinion amongst the members of <ORG>, the matter shall be referred to the <ORG> for decision. (5) The decision of <ORG> or of the <ORG>, as the case may be, shall be final and no suit or proceeding shall lie in <ORG> in respect of any matter which has been or may be referred to <ORG> or has been decided by <ORG> or the <ORG>.

12. The 1978 Act, as noticed hereinbefore, was amended in the year 1994. By reason of the said Amendment Act , a proviso was added to Section 9 which is in the following terms:

"Provided that the <ORG> may, in accordance with a resolution in this behalf adopted at a meeting of the <ORG> and with the previous approval of <ORG>, require (a valuer - Surveyor Grade I or valuer  surveyor of Grade II) to make, subject to such conditions as may be prescribed, the general valuation of lands and buildings in the area as aforesaid or in any part thereof under the superintendence, direction and control of the <ORG> on payment of such remuneration as the <ORG> may determine, and every such valuation shall be deemed to have been made by the <ORG>."

13. The effect of the said amendments is inter alia to take away the right of an assessee of a pre-decisional hearing. The provisions of the Amendment Act only provide for a review of the valuation made by the <ORG> as pre-decisional hearing is not required to be given. A review contemplated under the 1978 Act is for all intent and purport in the nature of an appeal. The proviso appended to Section 9 of the 1978 Act is an enabling provision in terms whereof general valuation of lands and buildings in the area as aforesaid or in any part thereof made by a Valuer  Surveyor Grade I or Valuer-Surveyor of Grade II, however, shall be under the superintendence, direction and control of the <ORG>. Admittedly, no such exercise had been undertaken.

14. Valuation of lands and buildings is a complex exercise. It requires certain amount of expertise. Valuation is made upon obtaining data prepared from a scientific study. Valuation of a land or building would depend upon several factors. Several methods of valuation may be applied for determination thereof. It is for the expert ordinarily to arrive at a decision as to which mode of valuation having regard to a particular set of factors would entail a correct evaluation. However, in determining the valuation of a land or building, it is not expected of a statutory authority to take recourse to the course of action which may be arbitrary, unscientific or haphazard in nature. Although the proviso appended to Section 9 of the 1978 Act, provided for certain safeguards and as thereby a legal fiction has been created, the same, as noticed hereinbefore, is optional. The Board is not bound to take recourse thereto. Who would be the surveyors eligible for carrying out the survey requires prior approval of the <ORG>. The learned Single Judge in his judgment noticed that in stead and place of appointing experts in the field, only casual employees were recruited by the <ORG>, who made door to door survey of the properties situated within the area of Bidhannagar <ORG> and collected the purported datas of the concerned premises in a field book wherefrom an inspection book was prepared and only on the basis thereof valuation was determined by the Board. Such a course of action was not contemplated by law.

15. Section 9(1) of the 1978 Act provides for survey in specific areas. We may notice that the appellants in their writ petition and in particular Paragraphs 16 to 24 thereof categorically stated in regard to the mode and manner in which the valuation is required to be done and had in fact been conducted. Paragraph 23 thereof is as under:

"23. <ORG> had no infrastructure of its own in survey the building to ascertain the reasonable valuation and they depended entirely upon what the Municipality had conveyed to them which in turn was based on surmise and conjecture is the Municipality did not and/ or could not carry out any house to house survey of all the 17070 holdings in Salt Lake."

16. In their counter-affidavits, the respondents inter alia stated:

"18. The allegations made in paragraph 23 of the said application are categorically denied and disputed and it is stated that it is on the advice of <ORG> that the Municipal authority engaged casual staff who, undertook door to door survey of the holdings on being exhaustively trained by the competent office are of <ORG>. The basic data thus collected have been transferred to the Inspection Book. <ORG> prepared the valuation list on such data and the Municipality thereafter despatched notices signed by the Member Secretary of <ORG> to owner/ occupier etc."

17. The <ORG>, therefore, delegated its power to the Municipality which was impermissible in law. It had no control over the recruitments made by the Municipality. Probably it even did not have any control over their work. Who had been supervising the job of the said casual employees has not been disclosed.

18. The result of such an unscientific study may produce a disastrous result and in fact from the pattern of increase in demands by the Bidhanagar <ORG> it appears that the increase in the valuation ranges from 3954%, i.e., 39.5 times to 137%, i.e., 1.4 times. Such exorbitant increase in the tax on the public is, in our opinion, itself indicative of arbitrariness, and hence, violative of Article 14 of the Constitution. In a democracy, the people are supreme, and all authorities must function for the public welfare. Excessive increase in the tax burden on the public is surely not for the public welfare. Also, in the aforementioned context, in our opinion, the very method applied by the <ORG> and <ORG> must be held to be arbitrary in nature and hence violative of the Constitution. <CITATION> [AIR 1978 SC 597], it was held that arbitrariness may be violative of Article 14 of the Constitution.

19. No person was appointed who had an expertise in the field. The casual employees appointed were not trained personnel. Their qualifications are not known. On what basis they could determine the valuation of the buildings and lands has also not been disclosed. They, being not government servants, ordinarily would not have the power to enter into the premises of persons so as to infringe the right of privacy which is otherwise granted to an authority under the 1978 Act.

20. In view of the mode and manner in which the general valuation had been prepared without giving an opportunity of hearing and/ or in any event without even asking the residents of the area in general to have their say, the provisions of the 1978 Act are required to be construed.

21. Section 11 of the 1978 makes such general valuation final. Section 10 has been deleted but the finality clause attached to Section 11 has been retained. By reason of the Amendment Act , the finality clause has been converted to a conclusive one, subject of course to the provisions of Sections 14 and 15 of the 1978 Act. The provision has been made for giving notice only to the lessees and sub-lessees who were occupiers of the buildings where valuation is intended to be made for the first time or the valuation is sought to be increased.

22. Section 12 of the 1978 Act which provided for certain safeguards insofar as it empowered the <ORG> to make amendment of the valuation list has been omitted. Section 13 had been omitted in the year 1984. It is in the aforementioned backdrop, that the provision for review contained in Section 14 is required to be taken into consideration. Before, however, we resort thereto, it may be noticed that in terms of an unamended provision of Section 14 , <ORG> was constituted in terms of Section 15 of the 1978 Act.

23. Under the unamended provision of Section 15 , <ORG> was to constitute a number of review committees which were required to hear applications presented under Sub-section (1) of Section 14 . Such review committees consisted of two members, out of whom the President was required to be appointed by <ORG> on such terms and conditions and who was to possess such qualifications which were prescribed and the other member was to be one of the Councillors concerned. The said provision has no application in the instant case. Sub- section (3) of Section 15 of the Unamended Act had a plenary power to confirm, reduce, enhance or annul the valuation of land or building. <ORG> had the jurisdiction to make further enquiry as it thought fit and proper. It was only the decision of <ORG> which was made final.

24. Under the Amended provisions, however, the power of the <ORG> which was an independent authority, has been taken away. Power to constitute Review Committee has been conferred upon every Corporation or Municipality, as the case may be. Every Review Committee was to be presided by the Chairman or the Vice-Chairman of the Municipality and would consist of two Councillors of the Municipality and an officer of the Board having knowledge in the assessment of municipal valuation.

25. From the plenary and unlimited power of such <ORG>, its power has been curtained only to 25% in the year 2002. The rule of majority has been taken away. The decision under the amended provision is required to be unanimous. In case of difference of opinion, the matter is required to be referred back to the <ORG>.

26. The provisions, in our opinion, are per se unreasonable and arbitrary. <ORG> is not independent of the <ORG> or the <ORG>. Whereas under the 1978 Act, a person having the requisite knowledge was to be appointed by <ORG> as Chairman of <ORG>, the affairs of <ORG> are controlled only by the <ORG> concerned and the <ORG> under the Amendment Act . The <ORG> essentially is interested in increase in valuation of lands and buildings as it would fetch more income to its coffers. It is unthinkable that although the power to make annual valuation is not to be preceded by an opportunity of being heard to the person who would be affected thereby, the power of <ORG> has been curtailed to 25% of the valuation made by the <ORG>. The members are not independent person and each one of them is, in one way or the other, interested in the matter. Even the officer nominated by the <ORG> who is said to be an expert might have something to do with the annual valuation of the area in question. In any event, the effect of the amendment is that annual valuation is to be made by the <ORG>, then the objections are to be heard by a Committee which again consists of members of the <ORG> and the <ORG>, and in the event, the decision is not unanimous, the matter again goes back to the <ORG>.

27. This provision is akin to the well-known doctrine of <NAME> to <NAME>. It per se contravenes the values attached to the principles of natural justice. We must also take notice of the fact that even the jurisdiction of civil court is barred and, thus, the only remedy which would be available to the taxpayer would be to take recourse to judicial review. Its application in the matter of this nature where disputed questions of fact may arise for its determination, would be very limited. It is unfortunate that <ORG> opined, although there was no provision therefor, that in case of any final decision of the <ORG>, the taxpayer can go back to <ORG>.

28. The proviso appended to Section 14 of the 1978 Act makes the situation worse inasmuch as before taking recourse to the review provision a pre-deposit is to be made in terms thereof. A statute which provides for civil or evil consequences must conform to the test of reasonableness, fairness and non-arbitrariness.

29. Ordinarily an order entailing civil consequences should be preceded by an opportunity of being heard. [ <CITATION> ., ] The impugned Act, however, has taken away such a provision which existed in the earlier one.

30. It may be that the legislature thought that while preparing the general valuation, it may not be possible to give an opportunity of hearing as such and, an opportunity of hearing may be given at a later stage. It is true that an order of assessment under the Act is conclusive subject to Sections 14 and 15 of the Act but keeping in view the limited power conferred upon <ORG> thereunder in terms whereof a part of demand is beyond the pale thereof, it is possible that in a given case the entire exercise of review may end in futility. What, thus, was necessary was to provide for an independent and impartial body constituted for the general redressal of the grievance of the taxpayers.

31. The Committee should not have consisted of the authorities of the Municipality and the officers of the <ORG> alone. Section 15 does not provide for any expertise on the part of the Councillors to determine the objections. As many committees as the Municipality likes may be constituted. Rationality in the decision is, thus, not guaranteed.

32. <CITATION> [], this Court held:

"44. In short, the general principle  as distinguished from an absolute rule of uniform application  seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre- decisional stage. Conversely, if the statute conferring the power is silent with regard to the giving of a pre-decisional hear ing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative progress or frustrate the need fo r utmost promptitude. In short, this rule of fair play "must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands". The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, to recall the words of <NAME>, J., the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty pub lic relations exercise."

33. This Court in <CITATION> [], held: "30. The aforesaid ground also does not seem to be acceptable. It is true that burden of tax based on valuation in the assessment is to be borne by the tenant or occupier but as we have examined the provisions, even though the landlord remains inactive by not contesting the assessment proposed, the tenant or occupier has to be vigilant and has the right to object to the same pursuant to the public and written notices. The tenants or occupants who have to shoulder major portion of the tax burden, therefore, have to be vigilant and raise objections pursuant to public and written notices and contest the assessments on valid grounds in their own interest.

50. We have examined the scheme of the Act and we find that in apportioning the burden of tax on landlord and tenant a uniform scheme or tax structure has been evolved under the Act on the basis of actual and notional rental value of the premises. The liability of the landlord towards tax is limited to the valuation based on actual rent received and the assessment made of the tax based on letting value of the premises is the liability of the tenant/sub-tenant or occupier. Merely because the Tenancy Act is attracted to accommodations with rent less than Rs 3000 per month and not to other accommodations having higher rent, does not create any dissimilar situation in application of the Act to various categories of tenants paying rent more or less than Rs 3000. The portion of tax liable to be paid by the occupant or tenant is not directly recovered by the <ORG> from them but is recoverable through the landlord and the landlord has been given right of reimbursement by demanding it from the tenant, sub-tenant or the occupant. For recovering such portion the tax payable by the tenant, sub-tenant or occupant, which has been paid by the landlord, is deemed to be "rent" only for the limited purpose of its recovery. The modes of recovery are by a demand n otice under the Tenancy Act and if necessary, by filing an eviction suit. Resort to remedy before the regular court is also not prohibited. On this aspect of apportionment of tax and mode of recovery of tax, the Act does not make any discrimination between tenants of premises covered by the Tenancy Act and others not covered by the said Act.

51. As a result of the discussion aforesaid, we find no vice in any of the provisions of the Act although we have considered it necessary to interpret the provisions harmoniously for better application of the provisions of the Act and the Tenancy Act. The various legal provisions assailed before us have been interpreted by us and our conclusions are as under:

"( 1 ) In view of specific provisions of the Act and as the provisions of the Act impose burden of tax to an appreciable extent on the tenants, sub-tenants and occupiers and the tax is liable to be recovered from them through the landlord or directly by attachment of rent or other coercive modes, the tenants, sub-tenants and occupants are entitled to an opportunity to participate in the process of valuation and assessment. They are entitled, therefore to written notices apart from public notice for assessmen t, revision of assessment or amendment of assessment of the 'consolidated rate' or tax. It is also made clear that pursuant to the public notice or written notice, the returns submitted by the tenant, sub-tenant or occupier, with regard to determination of annual value shall be considered by the <ORG>. The same procedure would be followed in revision of the annual valuation.

( 2 ) It is further made clear that non-issuance of public notice or notices and/or non-service of written notices to the 'persons primarily liable' would not necessarily invalidate the proceedings of assessment or reassessment or amendment of the valuation for consolidated rate unless it is established by the party aggrieved that a serious prejudice was caused to it for want of notice. ( 3 ) Under the provisions of the Act since the tenant, sub-tenant or occupier have to share the burden of an appreciable portion of 'consolidated rate' exclusive or inclusive of 'surcharge' in relation to properties used for non-residential and commercial purposes and as the Act provides for opportunity of participation to them pursuant to a public notice and written notice in assessment and reassessment of tax, they have a right of appeal provided under the Act. It is made clear that tenants, sub-tenants and occupiers held liable for payment of a portion of tax have a right of appeal on predeposit of a portion of tax levied and made recoverable from them.

( 4 ) It is also made clear that to enable the tenant, sub-tenant or occupier as 'person liable' to pay 'consolidated rate', they would have a right to obtain necessary information on payment of requisite fee in accordance with Section 178 of the Act and corporation authorities are legally bound to furnish such requisite information." [See also Paras 32 to 34 and 40]

34. The 1978 Act or even the Amending Act have not provided any guidelines. Guidelines are provided in the Municipality Act. When a statute does not provide for procedural fairness, it may be ultra vires.

35. <CITATION> [], this Court held:

"It is indeed strange that the assessing authorities should have declined to assess the rateable value of 494 properties in South Delhi on the basis of standard rent determinable on the principles laid down in sub-section (1)(A) (2)( b ) or (1)(B)(2)( b ) of Section 6 , merely on the ground that in the opinion of the assessing authorities "the assessees failed to produce the documentary evidence as regards the aggregate amount of reasonable cost of construction and the market price of land comprised in the premises on the date of commencement of the construction". If the assessees failed to produce the documentary evidence to establish the reasonable cost of construction of the premises or the market price of the land comprised in the premises, the asse ssing authorities could arrive at their own estimate of these two constituent items in the application of the principles set out in sub-section (1)(A) (2)( b ) or (1)(B)(2)( b ) of Section 6 . But on this account, the assessing authorities could not justify resort to sub-section (4) of Section 9 . It is only where for any reason it is not possible to determine the standard rent of any premises on the principles set forth in Section 6 that the standard rent may be fixed under sub-section (4) of Section 9 and merely because the owner does not produce satisfactory evidence showing what was the reasonable cost of construction of the premises or the market price of the land at the date of commencement of the construction, it cannot be said that it is not possible to determine the standard rent on the principles set out in sub-section (1)(A) (2)( b ) or (1)( b )(2)( b ) of Section 6 . Take for example a case where the owner produces evidence which is found to be incorrect or which does not appear to be satisfactory; can the assessing authorities in such a case resort to sub- section (4) of Section 9 stating that it is not possible to determine the standard rent on the principles set out in sub-section (1)(A)(2)( b ) or (1)(B)(2)( b ) of Section 6 . The assessing authorities would obviously have to estimate for themselves, on the basis of such material as may be gathered by them, the reasonable cost of construction and the market price of the land and arrive at their own determination of the standard rent. This is an exercise with which the assessing authorities are quite familiar and it is not something unusual for them or beyond their competence and capability. It may be noted that even while fixing standard rent under sub-section (4) of Section 9 , the assessing authorities have to rely on such material as may be available with them and determine the standard rent on the basis of such material by a process estimation."

36. In <NAME> v. <ORG>, <ORG> and Others [(2005) 11 SCC 524], this Court held:

"6. It is true that the order of the respondent Authorities dated 14-11-1996 records that the appellant had appeared and requested for rectification of ex parte assessment dated 9-11- 1993 and had also produced documents. However, it appears that the basis for arriving at the market price of the land had not in fact been disclosed to the appellant nor was the appellant given any opportunity of meeting the same. Accordingly, we set aside the impugned order dated 14-11-1996 and direct the authorities concerned to redetermine the rateable value for the period from March 1989 to 31-3-1994."

37. When a substantive unreasonableness is to be found in a statute, it may have to be declared unconstitutional.

38. <CITATION> [], emphasising the need to comply with principle of natural justice, it was held: "Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under Section 269-UD , not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XX-C and in the words of Judge <NAME> of the United States of America "to make a fortress out of the dictionary". Again, there is no express provision in Chapter XX-C barring the giving of a show-cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XX-C which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fair play in action. In our view, therefore, the requirement of an opportunity to show cause being given before an order for purchase by <ORG> is made by an appropriate authority under Section 269-UD must be read into the provisions of Chapter XX- C. There is nothing in the language of Section 269- UD or any other provision in the said Chapter which would negate such an opportunity being given. Moreover, if such a requirement were not read into the provisions of the said Chapter, they would be seriously open to challenge on the ground of violations of the provisions of Article 14 on the ground of non-compliance with principles of natural justice. The provision that when an order for purchase is made under Section 269-UD  reasons must be recorded in writing is no substitute for a provision requiring a reasonable opportunity of being heard before such an order is made.

31. The recording of reasons which lead to the passing of the order is basically intended to serve a two-fold purpose:

(1) that the "party aggrieved" in the proceeding before ( sic the appropriate authority) acquires knowledge of the reasons and, in a proceeding before <ORG> or <ORG> (since there is no right of appeal or revision), it has an opportunity to demonstrate that the reasons which persuaded the authority to pass an order adverse to his interest were erroneous, irrational or irrelevant, and (2) that the obligation to record reasons and convey the same to the party concerned operates as a deterrent against possible arbitrary action by the quasi-judicial or the executive authority invested with judicial powers.

39. <CITATION> . [], this Court held:

"51. In the result, we allow the appeals and hold as under:

( 1 ) Section 116(3) is declared invalid as it delegates unguided and uncanalised legislative powers to the Commissioner to declare any plant or machinery as part of land or building for the purpose of determination of the rateable value thereof"

[See also <CITATION> []

40. In a case of this nature, provision for review was in effect and substance a provision for appeal. But, when a provision for appeal has been laid down, the same should, for all intent and purport, must provide for an effective remedy.

41. This Court in <ORG> vs. <NAME> etc. [AIR 1985 SC 1416], held:

"The second condition necessary for the valid application of clause (b) of the second proviso is that the disciplinary authority should record in writing its reason for its satisfaction that it was not reasonably practicable to hold the inquiry contemplated by Article 311(2). This is a constitutional obligation and if such reason is not recorded in writing, the order dispensing with the inquiry and the order of penalty following thereupon would both be void and unconstitutional."

42. The said dicta was affirmed by a Three Judge Bench of this Court in <CITATION> [], stating that principle of natural justice cannot be dispensed with on mere ipso dixit. [See also <NAME> vs. State of Punjab & Ors. (Civil Appeal No.1489 of 2004), decided on 25th January, 2006, <CITATION> ., 2006 (11) SCALE 28 and <CITATION> [2006 (12) SCALE 58]

43. Principles of natural justice are based on two basic pillars:

(i) Nobody shall be condemned unheard (audi alteram partem)

(ii) Nobody shall be judge of his own cause (nemo debet esse judex in propria sua causa)

44. Duty to assign reasons is, however, a judge made law. It is considered to be a third pillar. [ <CITATION> , 2006 AIR SCW 4911]

45. <ORG> being a quasi judicial body was required to fulfill the requirements of the three conditions. There is furthermore no reason whatsoever as to why the power of <ORG> was curtailed only to the extent of 25%. It is furthermore beyond any logic as to why rule of simple majority in a multi-member committee could not be applied.

46. In the case of <CITATION> for <ORG>  EWCA Civ 16, before the impugned amendment came into force, <ORG> had taken the form of a right to appeal against a decision of the Secretary of <ORG> to an adjudicator, with a further right of appeal with leave to <ORG>. The jurisdiction of the <ORG> was not limited to points of law. By the Nationality, Immigration and Asylum Act 2002, appeals from an adjudicator to the <ORG> were restricted to appeals on points of law ( section 101(1) ) and conventional judicial review of a refusal of leave to appeal to the <ORG> was replaced by statutory review of the leave decision ( section 101(2) ). The words "fairly, quickly and efficiently" formed the crux of the debate which were derived from under section 106(1A) of the 2002 Act. The court, while finding fault with the impugned amendment, observed:

"I have come to the conclusion that Rule 62(7) is fundamentally flawed. The significance of <NAME> is in its demonstration of the role of the courts and the <ORG> in ensuring that the United Kingdom does not fall foul of the Refugee Convention, even where an obvious point of Convention law has been missed by the practitioners. It surely applies on the same basis to the <ORG>, where the argument is even stronger because, by section 6 of the Human Rights Act 1998, it is unlawful for a public authority to act in a way which is incompatible with an <ORG> right and courts and the <ORG> are "public authorities" for this purpose: section 6(3)(a) . There is then a further logical stage in the argument. If it is incumbent upon the <ORG> to consider and decide <NAME> obvious points which have not been advanced by the appellant notwithstanding Rule 62(7), given the rationale of <NAME> there is no rational basis for excluding and deciding points of equal force which the appellant draws to the attention of the <ORG>, even though they were not embraced in the grounds of appeal sanctioned by the <ORG>. For these reasons, I consider that, when he promulgated Rule 62(7), the Lord Chancellor fell into legal error and the Rule cannot survive the <NAME> challenge."

47. We, therefore, for the aforementioned reasonshave no other option but to hold that the provisions for review conferred in terms of the statute for all intent and purport are illusory ones and do not satisfy the test of Article 14 of the Constitution of India. No statute which takes away sombody's right and/ or imposes duties, can be upheld where for all intent and purport, there does not exist any provision for effective hearing.

48. It is one of those statutes where a decision is rendered by a body which may have an institutional bias although same is not ordinarily contemplated in the case of an individual member being a part of a body.

49. In Dr. <NAME>'s case [8 Co Rep 113 at 118], <ORG>, CJ declared a statute ultra vires where a body empowered to impose a levy was itself to be benefited thereby. The said decision was rendered despite the doctrine of parliamentary sovereignty existing in the United Kingdom.

50. We may notice that even this Court in <CITATION> [] has applied the test of non-arbitrariness while striking down Section 303 of the Indian Penal Code. Although the Court may not go into the question of a hardship which may be occasioned to the taxpayers but where a fair procedure has not been laid down, in our opinion, the validity thereof cannot be upheld. [See <NAME> v. <ORG> (<ORG> intervening), (2006) 3 All ER 593]

51. For the reasons aforementioned, the judgment of <ORG> of <ORG> is set aside and that of the learned Single Judge is restored. The impugned Act is declared unconstitutional being violative of Article 14 of the Constitution. These appeals are allowed. No costs.


JUDGMENT <NAME>, J.

1. These four taxation cases arise out of four assessment orders passed against the same assessee in respect of four assessment years, 1966-67, 1967-68, 1968-69 and 1969-70. In all the four cases similar question has been referred by <ORG> (hereinafter to be referred to as "the <ORG> ") under Section 256(1) of the I.T. Act, 1961 (hereinafter to be referred to as "the Act"), for the opinion of this court, and, as such, they are being disposed of by a common order. . In Taxation Cases Nos. 28 and 29 of 1974, the question referred to this court for opinion is as follows :

"Whether, on the facts and in the circumstances of the case, the <ORG> was correct in cancelling the orders under Section 263 of the Income-tax Act for the assessment years 1966-67 and 1967-68 ?"

2. Same question has been referred in the other two taxation cases for the other two assessment years.

3. I shall first take up Taxation Case No. 28 of 1974. For the assessment year 1966-67, return was filed on behalf of the assessee on October 7, 1966, before the ITO, <ORG>, Dhanbad. Later on, this file was transferred to the ITO, <ORG>, who passed the assessment order aforesaid on May 27, 1969. On May 7, 1971, the Addl. Commissioner of Income-tax issued notice to the assessee informing him that he intended to pass an order under Section 263(1) of the Act as, according to him, the assessment order passed in respect of the aforesaid year was prejudicial to the interests of the <ORG>. The Addl. Commissioner heard the assessee and passed an order on May 21, 1971 cancelling the aforesaid order of assessment dated May 27, 1969, made by the ITO, D-Ward, and directed a fresh assessment to be made for that assessment year by the ITO, Ward-B who had the jurisdiction over the assessee at the relevant time. This order was passed, because the ITO, Ward-D, had no jurisdiction over the asssessee at the relevant time and the assessment order could have been passed only by the ITO, Ward-B, Against that order, the assessee filed an appeal before the <ORG>. According to the <ORG>, the power under Section 263(1) of the Act could have been exercised only if the Addl. Commissioner had come to the conclusion that the assessment order in question was prejudicial to the interests of the <ORG>. The <ORG> pointed out that the Addl. Commissioner had not at all shown in what respect underassessment had been made and how the assessment made was prejudicial to the interests of the <ORG>. According to the <ORG>, no materials had been mentioned in the order of the Addl. Commissioner on the basis of which the aforesaid conclusion could have been arrived at. On the aforesaid view, the <ORG> cancelled the order of the Addl. Commissioner. On an application being filed on behalf of the <ORG>, reference has been made to this court, as already stated above.

4. Learned standing counsel for the <ORG>, Mr. <NAME>, submitted that when the <ORG> has found that on the relevant date the <ORG>, Ward-D, had no jurisdiction over the assessee in question, then there was no occasion for the <ORG> to cancel the order passed by the Addl. Commissioner under Section 263(1) cancelling the order of assessment of the <ORG>.

5. In view of Section 124(1) , the <ORG>s have to perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct. Sub-section (3) of Section 124 says that within the limits of the area assigned to him the <ORG> shall have jurisdiction in respect of any person carrying on a business or profession, if the place at which such person carries on his business or profession is situate within the area. Sub-section (4) thereof is a provision under which if there is any dispute on the question as to whether an <ORG> has jurisdiction to assess any person, it can be decided by the Commissioner. Sub-section (5) of Section 124 , which is relevant, is as follows :

"(5) No person shall be entitled to call in question the jurisdiction of an Income-tax Officer-

(a) after the expiry of one month from the date on which he has made a return under Sub-section (1) of Section 139 or after the completion of the assessment, whichever is earlier ;

(b) where he has made no such return, after the expiry of the time allowed by the notice under Sub-section (2) of Section 139 or under Section 148 for the making of the return."

6. The counsel for the assessee has placed reliance on Sub-section (5) of Section 124 aforesaid in support of his contention that an order passed by an <ORG> in respect of an assessee over whom he had no jurisdiction shall not be a nullity in the sense that in the eye of law it does not exist. According to the learned counsel, if an order passed by an <ORG> in respect of an assessee, who is carrying on business at a place which is beyond the area allotted to such an <ORG>, was to be a nullity, then there was no occasion to make a provision like Sub-section (5) saying that no person shall be entitled to call in question the jurisdiction of an <ORG> after the period prescribed under that sub-section, because an order, or a proceeding, which is a nullity can be challenged at any time. Learned counsel further urged that an order wholly without jurisdiction in the sense being non est cannot become a valid order after the expiry of a period fixed, within which an objection could have been entertained. However, the learned counsel for the assessee submitted that for the purpose of the present case even if it is assumed that an order passed by an <ORG> in respect of the assessee who is not within his jurisdiction is an illegal order, still on that ground itself the Commissioner cannot set aside the order in question in exercise of the power conferred on him by Section 263 of the Act, unless the Commissioner is also satisfied that the assessment order of the <ORG> is erroneous "in so far as it is prejudicial to the interests of the <ORG>".

7. Sub-section (1) of Section 263 of the Act, which is relevant for the present case, is as follows :

"263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the <ORG>, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment."

8. On a plain reading, this sub-section vests a supervisory power in the Commissioner to enable him to call for and examine the record of any proceeding under the Act and to pass any order which the circumstances of the case may justify, including cancellation of the assessment order. But before that he must be satisfied that the order in question is erroneous in so far as it is prejudicial to the interests of the <ORG>.

9. Now the question which has to be examined is as to whether the expressions "in so far as it is prejudicial to the interests of the <ORG>" have to be read in context with the loss of revenue to the <ORG>. In other words, can the Commissioner exercise the power under Section 263 in cases where on examination he is satisfied that the assessment order has been properly made so far as the assessee in question is concerned, but the <ORG> who made the assessment had no jurisdiction over the assessee in question ? The primary object of the section is to vest a supervisory power in the Commissioner to modify, or cancel any order, including an assessment order made by an <ORG>, if he is of the opinion that such an order is erroneous in so far as it is prejudicial to the interests of the <ORG>. This prejudice to the interests of the <ORG> may be either an immediate one or in future. As such, before the power under Sub-section (1) of Section 263 is exercised, the Commissioner must be satisfied on the materials on record that the order has caused prejudice to the interests of the <ORG> or was likely to cause such a prejudice. It is true that Sub-section (1) of Section 263 vests power in the Commissioner in subjective terms, but it has been pointed out by <ORG> in a series of judgments that even when an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers necessary", that does not mean that it is a matter of only a subjective satisfaction and such authority has not to judge the circumstances in an objective manner. Reference in this connection may be made to the well-known cases of <CITATION>  36 Comp Cas 639 ( <CITATION>  40 Comp Cas 916 ( <CITATION> , AIR 1970 SC 1896, and <CITATION> , AIR 1974 SC 2249. The <ORG> has pointed out that the Addl. Commissioner having held that the <ORG> concerned had no jurisdiction over the assesses during the relevant year of assessment, has not pointed out as to how the order of assessment was prejudicial to the interests of the <ORG>. Learned counsel for the assessee has drawn our attention to that part of the order of the Addl. Commissioner. It appears to me that the Addl. Commissioner never examined the assessment order in the light as to whether the assessment order was prejudicial to the interests of the <ORG>. In para. 5 of the order he has simply observed that there was question of underassessment and/or wrong computation of income in the case. He has then observed that the <ORG> "appears to have made an under-assessment if one looked to the assessee's records and profits shown by others in the same line". But, he has not pointed out how it was a case of underassessment. I am inclined to agree with the view expressed by the <ORG> that the condition precedent to the exercise of jurisdiction under Section 263(1) is that the Commissioner must be satisfied on materials that the order in question was erroneous in so far as it was prejudicial to the interests of the <ORG>. While setting aside the assessment order and directing reassessment, the Commissioner is expected to point out briefly as to how the order in question was prejudicial to the interests of the <ORG>. The <ORG> has pointed out that there was nothing in the order or on the record of the case on the basis of which the Commissioner could have exercised the power tinder that section.

10. In the case of <CITATION>  112 ITR 445 (P & H), the Tribunal had pointed out that the Commissioner had failed to indicate the material or the nature of the evidence before him on the basis of which he came to the conclusion that the order of the <ORG> was erroneous and prejudicial to the interests of the <ORG>. The Tribunal had also observed in that case that the Commissioner had not given any reason to justify his satisfaction that the order passed by the <ORG> was prejudicial to the interests of the <ORG>. Justice <NAME> (as he then was) observed (p. 447) :

"It was necessary for the Commissioner to state in what manner he considered that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the <ORG> and what the basis was for such a conclusion. After indicating his reasons for such a conclusion, it would certainly have been open to him to remand the matter to the Income-tax Officer for such other investigation or enquiry as might be necessary. But that was not the course which the Commissioner pursued. The <ORG> was, therefore, justified in setting aside the order of the Income-tax Commissioner."

11. In the case of <CITATION> . CIT  109 ITR 229 (Cal), it was pointed out (p. 242) :

"... there must be material before the Commissioner before he passes the order to come to the conclusion that the order sought to be rectified was erroneous in so far as it was prejudicial to the interests of the <ORG>. To such a conclusion the Commissioner can come on relevant material facts in respect of which reasonable opportunity must be given to the person sought to be affected and such reasonable opportunity again, on the principles of natural justice, requires that the person to be affected should be given intimation of the materials."

12. On behalf of the <ORG>, it was submitted that once it is established that the <ORG> in question had no jurisdiction to pass the assessment order on the relevant date, that itself shall make the assessment order erroneous and prejudicial to the interests of the <ORG>. According to Mr. <NAME>, in such cases, for the exercise of power under Sub-section (1) of Section 263 of the Act the Commissioner need not examine as to how that assessment order is erroneous on any other ground or it is prejudicial to the interests of the <ORG>. In support of this contention, reliance was placed on a judgment of <ORG> in the case of <CITATION>  67 ITR 84. In that case. assessment had been made under the old Act, i. e., the Indian I.T. Act , 1922. Under the exercise of the power under Section 33B , which was a provision parallel to Section 263 of the present Act, the Commissioner had cancelled the said assessment order on the grounds that from the enquiries made it was revealed that the assessee concerned did not reside nor carried on any business at the place mentioned in the return. It was further pointed out by the Commissioner in that case that the <ORG> was not justified in accepting the initial capital, the gift received and the sale of jewelleries, the income from business, etc., without any enquiry or evidence whatsoever. A writ was filed against that cancellation order. That writ was dismissed by <ORG>, taking the view that sufficient opportunity had been given to the assessee to show cause against the proposed order of cancellation, and there were materials on which the Commissioner could have proceeded under Section 33B . <ORG>, while affirming the order of <ORG>, observed that the order of the Commissioner was a detailed order in which it had also been pointed out that the <ORG> who passed the assessment order had no jurisdiction over the assessee, because the assessee never resided nor carried on any business at the place mentioned in the return. <ORG> further approved the reason mentioned by the Commissioner as well as by <ORG> for cancelling the assessment order in question, that the <ORG> without making any enquiry to satisfy himself regarding the declaration given by the assessee in respect of initial capital, ornaments and presents received at the time of marriage, other gifts received from her father-in-law and without making any enquiries to satisfy himself had passed the assessment order in question. It was also pointed out that the assessee had not produced any bank account or any proper books of account before the <ORG>; no evidence whatsoever was produced in respect of the money-lending business and the interest shown to have been received by the assessee; no names were given as to the parties to whom the loans were advanced, with amounts and rate of interest and as to when the interest income was received. On the basis of all the aforesaid reasons given by the Commissioner and <ORG>, <ORG> approved the order passed under Section 33B aforesaid. According to Mr. <NAME>, this judgment should be read to lay down that no sooner it is found that an order of assessment has been passed by an <ORG> who had no jurisdiction over the assessee, that by itself shall amount to an erroneous order which is prejudicial to the interests of the <ORG>. In my opinion, <ORG> never purported to lay down anything like that in the aforesaid case. <ORG> has clearly pointed out that not only the assessment order was without jurisdiction, but at the same time it had been passed without taking into consideration the relevant materials and in a hurry which was bound to be prejudicial to the interests of the <ORG>.

13. Mr. <NAME> also placed reliance on another judgment of <ORG> in the case of <CITATION>  88 ITR 323. In that case also it had been found that the <ORG> had no jurisdiction to make the order as it related to an area which was not within his jurisdiction. <ORG> while considering the question as to whether the Commissioner could have exercised the power under Section 33B of the old Act, held that the order was erroneous and it was prejudicial to the interests of the <ORG>. The main emphasis given by <ORG> was on the fact that the <ORG> concerned had no jurisdiction to pass the assessment order in question. <ORG> while affirming the view of <ORG>, gave other reasons as well. It will appear from p. 328 of the report that <ORG> observed as follows :

"Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist some one else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the <ORG>. If so--and we think it is so--the Commissioner under Section 33B has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof."

14. In my opinion, <ORG> in the said case did not hold the order of assessment erroneous and prejudicial to the interests of the <ORG> merely on the ground that the <ORG> had no jurisdiction to make the order. <ORG> also pointed out that as the assessee in that case wanted to be assessed in order to assist someone else who would have been assessed to a larger amount, such assessment was certainly erroneous and prejudicial to the interests of the <ORG>.

15. It is true that when a power has been vested under Section 124 in the Commissioner to direct different ITOs to perform their functions in respect of different areas or different classes of persons, they are bound by such directions. But, merely because there has been a contravention on that account, the power under Section 263(1) cannot be exercised by the Commissioner unless he is also satisfied that the assessment order in question is prejudicial to the interests of the <ORG>. He has to point out, while cancelling such orders, on materials on record as to how the order is prejudicial to the interests of the <ORG>.

16. Mr. <NAME> then submitted that on many occasions it may not be advisable while setting aside an assessment order to record categorical findings as to how it was prejudicial to the interests of the <ORG> because that itself may prejudice the assessee when the matter is again heard by the <ORG>. It is true that while setting aside an order of assessment and directing a subordinate authority to reconsider the matter afresh, the appellate or revisional authority should not record conclusive findings on the questions involved, but at the same time it cannot be held that the orders passed by the subordinate authorities should be set aside without indicating the reasons, in exercise of the power which is circumscribed by the conditions mentioned in the very section. If in the instant case, the Commissioner had indicated some material on the basis of which he was satisfied that not only the order was without jurisdiction, but at the same time, it was prejudicial to the interests of the <ORG>, there would have been no difficulty. In such a situation, I am left with no option but to answer the question in the affirmative and against the <ORG>.

17. So far as the remaining three taxation cases, Taxation Case Nos. 29, 60 and 61 of 1974 are concerned, the orders of the Addl. Commissioner and the <ORG> are identical, the only difference being that they relate to the subsequent assessment years as mentioned above and the dates of the different orders are different. As such, identical questions framed in those cases are also-answered in the affirmative and against the <ORG>.

18. There shall be no order as to costs.

<NAME>, J.

I agree.


PETITIONER: THE STATE OF ORISSA AND ANOTHER Vs. RESPONDENT: RAM NARAYAN DAS DATE OF JUDGMENT: 08/09/1960 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. DAS, S.K. HIDAYATULLAH, M. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA CITATION: 1961 AIR 177 1961 SCR (1) 606 CITATOR INFO : RF 1962 SC 794 (8) E 1963 SC 531 (6,8) RF 1963 SC1552 (5) R 1964 SC 449 (17) RF 1964 SC 600 (13,138) R 1964 SC1854 (18) R 1968 SC1089 (10,11,13,17) R 1974 SC 423 (14) F 1974 SC2192 (65,158) RF 1976 SC1766 (6,12) RF 1976 SC2547 (11,14,21) D 1978 SC 363 (11) RF 1987 SC2135 (1) R 1987 SC2408 (10) ACT: Public servant-Probationer Sub-Inspector-Discharge from service for unsatisfactory work and conduct-If amounts to dismissal-constitution of India, Art. 311(2). HEADNOTE: The respondent was appointed a Sub-Inspector on probation in <ORG>. A notice was served on him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ". He submitted his explanation and asked for opportunity to cross-examine certain witnesses. The Deputy Inspector- General of Police considered the explanation unsatisfactory and passed an order discharging the respondent from service " for unsatisfactory work and conduct ". The respondent contended that the order was invalid on two grounds: (i) that he was not given a reasonable opportunity to show cause against the proposed action within the meaning of Art. 311(2 ), and (ii) that he was not afforded an opportunity to be heard nor was any evidence taken on the charges. Held, that the order of discharge did not amount to dismis- sal and did not attract the protection of Art. 311(2) of the Constitution and was a valid order. The services of the respondent,' who was a probationer, were terminated in accordance with the rules and not by way of punishment. He had no right to the post held by him and under the terms of his appointment he was liable to be discharged at any time during the period of his probation. The notice given to the respondent was under Rule 55-B of the Civil Services (Classification, Control and Appeal) Rules which made it obligatory to give such notice before terminating the services of a probationer. The enquiry was merely for ascertaining whether he was fit to be confirmed. <NAME> v. The State of U. P.,  1 S.C.R. 26 and <CITATION> ,  S.C.R. 828, referred to. <CITATION> , A.I.R. 1960 S.C. 689, distinguished. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 61/1959. Appeal by special leave from the judgment and order dated December 4, 1957, of <ORG> in O.J.C. No. 449 of 1956.

<NAME>, Solicitor-General of India, <NAME> and <NAME>, for the appellants. The respondent did not appear.

1960. September 8. The Judgment of the Court was delivered by <NAME> respondent was appointed in the year 1950 a Sub- Inspector on probation in the Orissa Police force. In view of the adverse reports received against him on July 28, 1954, notice was served on the respondent calling upon him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ". In the notice, ten specific instances of neglect of duty and two instances of misconduct-acceptance of illegal grati- fication and fabrication of official record were set out. By his explanation, the respondent submitted that action had already been taken against him by the Superintendent of Police in respect of instances of neglect of duty set out in the notice and no further action in respect thereof could on that account be taken against him, because to do so would amount to imposing double punishment. He denied the charge relating to misconduct and submitted that it was based on the uncorroborated statements of witnesses who were inimical to him. He also asked for an opportunity to cross-examine those witnesses. The Deputy Inspector General of Police considered the explanation and observed: "I have carefully gone through the representation of the probationary S. I. His argument that he has already been punished by the S. P. for specific instances of bad' work does not help him very much since all these instances of bad work during the period of probation have to be taken together in considering his merits for confirmation or otherwise. The S. 1. has already had long enough of chance to work under different S. Ps. though in one District, but he has not been able to procure a good chit from anyone. He has also been adversely reported against after the representation dealt with therein was submitted. It  is, therefore, no good retaining him further in service. He is discharged from the date on which this order is served on him ".

The Deputy Inspector General of Police on December 11, 1954, in discharging the respondent from service, passed a formal order as follows:

" Probationary <NAME> of Cuttack District is discharged from service for unsatisfactory work and conduct with effect from the date the order is served on him ". The respondent then presented a petition under Art. 226 of the Constitution in <ORG>, Orissa, challenging the validity of the order passed and praying for the issue of a writ in the nature of certiorari or any other writ quashing the order of discharge. Inter alia, the respondent urged, (1) that the order of discharge was invalid since he was not given a reasonable opportunity to show cause against the action proposed to be taken in regard to him within the meaning of Art. 311(2) of the Consti- tution, (2) that the order of discharge was invalid since he was not afforded an opportunity to be heard nor was any evidence taken on the charges framed.

<ORG> by order dated December 4, 1957, set aside the order of discharge. In the view of <ORG>, the Deputy Inspector General of Police had taken into consideration allegations of corruption in passing the impugned order and also that he had refused to give to the respondent an opportunity to cross-examine witnesses on whose statements the charge of misconduct was made. <ORG> observed that by discharging the respondent from service without holding an enquiry as contemplated by r. 55 of the Civil Services (Classification, Control and Appeal) Rules and without complying with the requirements of Art. 311(2) of the Constitution, an " indelible stigma affecting his future career " had been cast. Against the order issuing the writ quashing the order discharging the respondent from service, this appeal has been preferred by special leave.

The respondent was undoubtedly at the time when proceedings were started against him and when he was discharged from service, a probationer, and had no right to the post held by him. Under the terms of his appointment the respondent was liable to be( discharged at any time during tile period of his probation. By r. 668 of the Police Manual of the Orissa State, in so far as it is material, it is provided :

" All officers shall in the first instance be appointed or promoted on probation. Where the period of probation is not otherwise provided for in the Rules, it shall be for a period of two years in the case of executive officers...... The authority empowered to make such appointment or promotion may at any time during such probation period and without the formalities laid down in Rule 820 remove an executive officer directly appointed or revert such an officer promoted who has not fulfilled the conditions of his appointment or who has shown himself unfitted for such appointment or promotion ".

Rule 681 of the Police Manual by cl. (b) in so far as it is material provides, " Those promoted from the rank of Assistant Sub-Inspector shall be confirmed (Rule 659(e)) and those appointed direct shall be on probation for a period of two years. At the end of that period, those pronounced competent and fit will be confirmed by the Deputy Inspector-General. The others will be discharged by the same authority ".

Rule 55-B of the Civil Services (Classification, Control and Appeal) Rules, in so far as it is material provides : " Where it is proposed to terminate the employment of a probationer, whether during or at the end of the period of probation, for any specific fault or on account of his unsuitability for the service, the probationer shall be apprised of the grounds of such proposal and given an opportunity to show cause against it, before orders are passed by the authority competent to terminate the employment".

Notice to show cause whether the employment of the respondent should be terminated was, by r. 55-B made obligatory. The Deputy Inspector General of Police who had appointed the respondent apprised him by notice of the grounds on which the order of discharge was proposed to be made and required him ,,to show cause why action as proposed should not be taken. The notice consisted of two parts, (1) relating ;to ten heads of " gross neglect of duty and unsatisfactory work " and (2) " suspicious and un police man-like conduct " in which specific instances of fabrication of public records and acceptance of illegal gratification were set out. The Deputy Inspector General of Police by his order which ha; been set out hereinbefore, expressly observed that he had, in considering the case of the respondent for confirmation, to take into account the reports received by him. The formal order communicated to the respondent also stated that the respondent was discharged from service for unsatisfactory work and conduct. The reasons given in the order clearly indicate that the notice served upon the respondent was under r. 55-B of the Civil Services (Classification, Control and Appeal) Rules for ascertaining whether he should be confirmed or his employment terminated. Prima facie, the order is one terminating employment of the respondent as a probationer, and it is not an order dismissing him from service. <ORG> has however held that the order of discharge amounted to imposing punishment, because the respondent had been " visited with evil consequences leaving an ineligible stigma on him affecting his future career ".

The respondent has not appeared before us to support the judgment of <ORG>, but the learned Solicitor General who appeared in support of the appeal has very fairly invited our attention to all the materials on the record and the relevant authorities which have a bearing on the case of the respondent.

<CITATION> (1), it was held that compulsory retirement under the Civil Services (Classification, Control and Appeal) Rules of an officer did not amount to dismissal or removal within the meaning of Art. 311 of the Constitution. In that case, the public servant (1)  1 S.C.R. 26.

concerned was served with a notice to show cause in respect of three specific items of misdemeanor as a public servant to which he submitted his explanation. Thereafter, the President, after considering the case and the recommendation of the commission appointed to investigate the case, decided that the public servant should be retired forthwith from service ". This order was challenged by a petition under 226 of the Constitution filed in <ORG> at Allahabad. In an appeal against the order dismissing the petition, this court held that the order compulsorily retiring the public servant involved " no element of charge or imputation " and did not amount to dismissal or removal within the meaning of Art. 311(2) of the Constitution and the order of the President was not liable to be challenged on the ground that the public servant had not been afforded full opportunity to show cause against the action proposed to be taken in regard to him.

<CITATION> (1) this court by a majority held that if an officer holding an officiating post had no right under the rules governing his service to continue in it, and such appointment under the general law being terminable at any time on reasonable notice, the reversion of the public servant to his substantive post did not operate as a forfeiture of any right: that order " visited him with no evil consequences " and could not be regarded as a reduction in rank by way of punishment. <NAME>, J., who disagreed with the majority observed that the real test was whether evil consequences over and above those that ensued from a contractual termination, were likely to ensue as a consequence of the impugned order: if they were, Art. 311 of the Constitution would be attracted even though such evil consequences were not prescribed as penalties under the Rules. In that case, <NAME>; C. J., in delivering the judgment of the majority, entered upon an exhaustive review of the law applicable to the termination of employment of public servants and at pp. 861.863 summarised it as follows: (1)  S.C.R. 828.

" Any and every termination of service is not a dismissal, removal or reduction in rank. A termination of service brought about by the exercise of a contractual right is not per se dismissal or removal, as has been held by this court in <CITATION> (1). Like-wise the termination of service by compulsory retirement in terms of a specific rule regulating the conditions of service is not tantamount to the infliction of a punishment and does not attract Art. 311(2) as has also been held by this court in <CITATION> (2)....... In short, if the termination of service is founded on the right flowing from contract or the service rules then, prima facie, the termination is not a punishment and carries with it no evil consequences and so Art. 311 is not attracted. But even if the <ORG> has, by contract or under the rules, the right to terminate the employment without going through the procedure prescribed for inflicting the punishment of dismissal, or removal or reduction in rank, the <ORG> may, nevertheless, choose to punish the servant and if the termination of service is sought to be founded on misconduct, negligence, inefficiency or other disqualification, then it is a punishment and the requirements of Art. 311 must be complied with. As already stated, if the servant has got a right to continue in the post, then, unless the contract of employment or the rules provide to the contrary, his services cannot be terminated otherwise than for misconduct, negligence, inefficiency or other good and sufficient cause. A termination of the service of such a servant on such grounds must be a punishment and, therefore, a dismissal or removal within Art. 31 1 , for it operates as a forfeiture of his right and he is visited with the evil consequences of loss of pay and allowances. It puts an indelible stigma on the officer affecting his future career....... But the mere fact that the servant has no title to the post or the rank and the <ORG> has, by contract, express or implied, or under the rules, the right to reduce him to a lower post does not mean that an order of reduction of a servant (1)  S.C.R. 655.

(2) [1955] 1 S.C.R. 26.

to a lower post or rank cannot in any circumstances be a punishment. The real test for determining- whether the reduction in such cases is or is not by way of punishment is to find out if the order for the reduction also visits the servant with any penal consequences....... The use of the expression, " terminate " or " discharge " is not conclusive. In spite of the use of such innocuous expressions, the court has to apply the two tests mentioned above, namely, (1) Whether the servant had a right to the post or the rank or (2) Whether he has been visited with evil consequences of the kind hereinbefore referred to ? If the case satisfies either of the two tests then it must be held that the servant has been punished and the termination of his service must be taken as a dismissal or removal from service.........."

The respondent had no right to the post held by him. Under the terms of his employment, the respondent could be discharged in the manner provided by r. 55-B. Again mere termination of employment does not carry with it " any evil consequences " such as forfeiture of his pay or allowances, loss of his seniority, stoppage or postponement of his future chances of promotion etc. It is then difficult to appreciate what " indelible stigma affecting the future career " of the respondent was cast on him by the order dis- charging him from employment for unsatisfactory work and conduct. The use of the expression " discharge " in the order terminating employment of a public servant is not decisive : it may, in certain cases amount to dismissal. If a confirmed public servant holding a substantive post is discharged, the order would amount to dismissal or removal from service; but an order discharging a temporary public servant may or may not amount to dismissal. Whether it amounts to an order of dismissal depends upon the nature of the enquiry, if any, the proceedings taken therein and the substance of the final order passed on such enquiry. Where under the rules governing a public servant holding a post on probation, an order terminating the probation is to be preceded by a notice to show cause why his service should not be terminated, and a notice is issued asking the public servant to show cause whether probation should be continued or the officer should be discharged from service the order discharging him cannot be said to amount to dismissal involving punishment. Undoubtedly, the Government may hold a formal enquiry against a probationer on charges of misconduct with a view to dismiss him from service, and if an order terminating his employment is made in such an enquiry, without giving him reasonable opportunity to show cause against the action proposed to be taken against him within the meaning of Art. 311(2) of the Constitution, the order would undoubtedly be invalid.

The Solicitor General invited our attention to a recent judgment of this court, <CITATION> (1)in which, delivering the judgment of the court, the learned Chief Justice extracted five propositions from the authorities and particularly from <NAME> case (2), dealing with the termination of employment of temporary servants and probationers. The third proposition set out in the judgment is as follows: " But instead of terminating such a person's service without any enquiry, the employer chooses to hold an enquiry into his alleged misconduct, or inefficiency, or for some similar reason, the termination of service is by way of punishment, because it puts a stigma on his competence and thus affects his future career. In such a case, he is entitled to the protection of Art. 311(2) of the Constitution ". This proposition, in our judgment, does not derogate from the principle of the other cases relating to termination of employment of probationers decided by this court nor is it inconsistent with what we have observed earlier. The enquiry against the respondent was for ascertaining whether he was fit to be' confirmed. An order discharging a public servant, even if a probationer, in an enquiry on charges of misconduct, negligence, inefficiency or other disqualification, may (1) A.I.R.  S. C. 689.

(2) [1958] S.C.R. 828.

appropriately be regarded as one by way of punishment, but an order discharging a probationer following upon an enquiry to ascertain whether he should be 0 confirmed, is not of that nature. In <NAME> case (1), the public servant was discharged from service consequent upon an enquiry into alleged misconduct, the Enquiry Officer having found that the public servant was " unsuitable " for the post. The order was not one merely discharging a probationer following upon an enquiry to ascertain whether he should be continued in service, but it was an order as observed by the court " clearly by way of punishment ". There is in our judgment no real inconsistency between the observations made in parshottam. <NAME> case (2) and <NAME> case (1). The third proposition in the latter case refers to an enquiry into allegations of misconduct or inefficiency with a view, if they were found established, to imposing punishment and not to an enquiry whether a probationer should be confirmed. Therefore the fact of the holding of an enquiry is not decisive of the question. What is decisive is whether the order is by way of punishment, in the light of the tests laid down in Parshottam <NAME> case (2).

We have carefully considered the evidence and the authorities to which our attention has been invited and we are definitely of opinion that <ORG> was in error in holding that the order discharging the respondent from service amounted to dismissal which attracted the protection of Art. 311(2) of the Constitution.

In that view of the case, this appeal will be allowed and the petition for a writ dismissed. There will be no order as to costs throughout.

Appeal allowed.

(1) A.I.R. 1960 S.C. 689.

(2) [1958] S.C.R. 828.


ORDER <NAME> and <NAME>, JJ.

1. This is an appeal preferred by <ORG> against the judgment of <ORG> dated 3-6-92 in FAO No. 860/91. By the said judgment of <ORG> has set aside the decree passed by the Senior Sub-Judge, Patiala, on 6-3-91. The learned Senior Sub-Judge had set aside the Award dated 10-6-88 made by the Chief Engineer, Research and Arbitration, <ORG>, Chandigarh. The result of the judgment of <ORG> is that the Award was held valid and was directed to be made a Rule of Court.

2. Aggrieved by the said judgment, <ORG> and Chief Engineer have preferred this appeal.

3. There was a purchase order-cum-contract agreement entered into between the appellant <ORG> and the respondent dated 21-7-84 under which the respondent was to supply 41,500 poles of 8 meter long @ Rs. 353.00 per pole and another set of 3750 poles each 9 meter long @ Rs. 440.00 per pole. The terms and conditions of the contract stipulated that the prices were to be firm and were subject to "no variation whatsoever on any account". The payment, schedule of delivery thereof was also specified. It was, however, stated that the prices would be paid and excise duty was not applicable put if excise duty was levied, the prices would be Rs. 353/- per pole subject to production of documentary proof alongwith certain certificates, under Clause-9 of the contract 95% of the contract value was to be paid against receipt and balance 5% of the contract value of each consignment should be paid within 30 days of the receipt of material/acceptance by the consignee in good condition. Clause-9 related to the mode of delivery of goods. Delivery was to commence after 45 days after the receipt of the firm order and the whole quantity was to be completed within 12 months thereafter. Clause-13 stated that during the pendency of the contract/ purchase order if any performance in whole/ part by either party was delayed for the specified cause mentioned therein, or on account of any other cause beyond their reasonable control, neither of the two parties shall be made liable for losses or damages.

4. The respondent, it is alleged failed to supply and that therefore the appellant deferred supplies up to 22-4-85. On 30-3-86 the respondent requested the appellant to increase the price of the poles as the prices of raw material had also increased and the respondent requested the appellant to enhance the rate of the poles of 8 meter long at Rs. 50 per pole and Rs. 75 per pole of 9 meter long. On 22-4-85 the appellant Board decided to lift the ban imposed on the respondent. On 9-5-85 the appellant wrote to the respondent that prices in the purchase order were firm and subject to "no variation the whatsoever on any account" and that request of respondent for enhancement in prices of poles could not be acceded to. On 17-10-85 the respondent claimed payment of excise duty as per the increase made in the budget of that year. On 7-12-87 the respondent issued a notice to the appellant on various disputes.

5. Thereafter, the matter was referred to the arbitration in accordance with the terms of agreement. On 16/18-1-88 the respondent filed its claim statement before the arbitrator seeking a sum of Rs. 18.75 in Claim No. 1 in respect of increase in value of the poles. There were other claims. The total claim was for Rs. 39.50 lakhs. The appellant Board filed its reply refuting the claim of the respondent and also contended that disputes were not arbitrable to there was no liability.

6. The Arbitrator passed an award on 10- 6-88 for a sum of Rs. 17.71 lakhs with interest. Objections were filed by the appellant to the said award. The learned Sub-Judge by his judgment dated 6-3-91 set aside the award. But <ORG> allowed the respondent's appeal on 3-6-92 and directed the award to be made a rule of court.

7. It is this judgment against which the <ORG> has preferred this appeal.

8. In this appeal, we have heard learned Counsel for the parties. Learned Counsel for the appellant contended that Claim No. 1 which consisted of two parts in respect of which the respondent made a claim of Rs. 16.50 lacs and Rs. 2.25 lacs, related the increase in the price of the poles and that in view of the definite Clause in the contract the arbitrator had no jurisdiction to go into the question of increase of the price or award for any excess amount. So far as Claim No. II relating to excise duty is concerned, he contended that the difference in a sum of Rs. 0.95 lacs alone was payable. So far as Claim No. III for Rs. 12.00 lacs and Claim No. IV for Rs. 4.00 lacs are concerned, counsel contended that no case is made out for grant of damages. So far as Claim No. V is concerned, counsel contended that respondent is not entitled to any relief. Claim No. VI is relating to interest.

9. Learned Counsel for the appellant contended that the award was not a reasoned award and that it was not possible to find out if the total amount of Rs. 17.71 lakhs as awarded by the arbitrator related to Claim No. I which according to the appellant was not within the purview of the arbitrator. It is also not known on what basis any of the other claims were awarded and whether any amount was awarded for items for which arbitrator had no jurisdiction. Learned Counsel in that connection relied upon <CITATION> . and contended that such an award granting a lumpsum amount without reasons where some of the items are not arbitrable, was liable to be set aside.

10. Learned Counsel for the respondent, however, contended that certain calculations were made by the arbitrator. Counsel produced some record of the said computations but we find that it only related to Claim No. I. It was also stated that award could be passed for Claim No. I as the clause not permitting a higher rate would have been applicable only if the original delivery schedule was not postponed by the appellant. The award is not a reasoned one and it could not be interfered with by the <ORG>.

11. After hearing counsel on both sides, we are of the view that the award is liable to be set aside because when it is a non-speaking one, it is not known whether any part of the Award made by the arbitrator related to Claim No. I. In our view, the price of the poles was firm and not liable to be increased. The fact that the delivery schedule was changed cannot be a ground to get over the clause prohibiting increase in the price of the poles. Once Claim No. I is not tenable, the award has to be set aside inasmuch as it is not possible to say that the award did not relate to Claim No. I. This is a sufficient reason for setting aside the award and remitting the matter back to the abitrator.

12. We, therefore, set aside the judgment of <ORG> and we also set aside the judgment of the Senior Sub-Judge, we remit the matter to the arbitrator for his decision on the other claims, i.e. other than Claim No. I.

13. We are of the view that the Arbitrator who is now to deal with the matter afresh, must pass a reasoned award after taking into consideration the points raised in the Claim Petition of the respondent (other than Claim No. I) and the objections raised by the appellant in its reply filed before the Arbitrator. The parties are also agreed that a retired judge of <ORG> would be now appointed as a Arbitrator.

14. We hereby appoint Justice <NAME>, retired judge of <ORG>, Modern Housing Complex, Manimajra, Chandigarh, as Arbitrator to deal with the dispute between the appellant and the respondent as per the reference already made in the case earlier.

15. The Arbitrator is requested to complete the award expeditiously as this is an old dispute between the parties which has been pending for quite long time. We request the arbitrator as far as possible to complete the award within four months from the date of the first hearing. It will be for the arbitrator to stipulate his fee for the conduct of the arbitration proceedings and for passing the award. The award is to confine other than Claim No. I (Part I and II). The arbitrator will pass the reasoned award on the basis of the material already on record.

16. The appeal is allowed accordingly. There shall be no order as to costs.