JUDGMENT

1. The learned Trial Judge in this case, which is a claim by a grandson against his grandmother, was asked to take into consideration a document which purports to be a deed of compromise dated 28th December 1918. In that document, there is a statement that House No. 27 in Thatha Muthiappan Street belonging to the said <NAME>, that is the grandmother, and another house with which nobody in this case is concerned, which are in possession and enjoyment of the said <NAME> from the date of the purchase, shall be enjoyed by the said <NAME> with power to make gift and sell away. The learned Vakils have argued this case with great preciseness and^ Mr. <NAME> Iyer for the appellant does not ask us to say that there is any magic about this document because it is in the nature of a nominal settlement which would excuse it from registration. It has been held by the learned Trial Judge on the argument of the respondent that it does require registration and to test that, I must look at the section of the Registration Act which is material, and' that is Section 17 . By Section 17(1)(b) among documents which require registration are nontestamentaly instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of the value of Rs. 100 and upwards, to or in immoveable property. Now it is said that this part of the document is a declaration of right in immoveable property and that, therefore" by virtue of Section 49 , the document would create no rights in the property in question. It is said, on the other side, that this is not a document which purports to create or modify in any way anybody's title to immoveable property. It is simply a statement of fact, as I said in the course of the argument, that <NAME>'s house is <NAME>'s house. To my mind this matter cannot be put better than in the words of <NAME>, J., in the case of <NAME> v. <NAME> 5 B. 232 : 3 Ind. Dec. (N.S.) 154, where the learned Judge says thus : "Here, however, the document is not itself one which declares a right in immoveable property, in the sense probably intended by Section 17 . There 'declare' is placed along with 'create', 'assign', limit', or 'extinguish', a 'right', 'title' or 'interest' and these words imply a definite change of legal relation to the property by expression of <NAME> embodied in the document referred to. I think this is equally the case with the word 'declare'. It implies a declaration of <NAME>, not a mere statement of fact, and thus a deed of partition, which causes a change of legal relation to the property divided amongst all the parties to it, is a declaration in the intended sense, but a letter containing an admission, direct or inferential, that a partition once took place, does not declare a right within the meaning of the section. It does in one sense 'declare' a right, that is the existence of the right is directly or indirectly stated by the writing, but it is not the expression or declaration of <NAME> by which the right is constituted." I wish to associate myself with all that the learned Judge says on the point. It does not, appear to me that any of the later decisions, whether of <ORG> or of the other <ORG> in India, have, in any way, modified it, and indeed in one case in which in its initial stage I was concerned, the case of <CITATION> 53 Ind. Cas. 901 : 43 M. 244 : (1919) M.W.N. 724 : 10 L.W. 679 : 24 C.W.N. 346 : 38 M.L.J. 313 : 18 A.L.J. 274 : 2 U.P.L.R. (P.C.) 64 : 22 Bom. L.R. 444 : 46 I.A. 285 (P.C.), it appears to me that the judgment of the Board entirely -recognises and proceeds on the principle laid down in the Bombay case by <NAME>, J. Now it is said by Mr. <NAME> Iyer that the document is conclusive of the rights of the parties if not as to moveable property, certainly as to immoveable property and he relies mainly on the decision of <CITATION> 10 Ind. Cas. 477 : 33 A. 356 : 15 C.W.N. 545 : 8 A.L.J. 552 : 13 C.L.J. 575 : 13 Bom. L.R. 427 : 10 M.L.T. 25 : (1911) 1 M.W.N. 432 : 21 M.L.J. 645 : 38 I.A. 87 (P.C.), a <ORG> case. The passage he relied on is a sentence which runs as follows:--"In the present case, <NAME> acquired no right from the daughters of <NAME> for 'the compromise', to use their lordships' language in <NAME> v. <NAME> 1 I.A. 157 : 13 B.L.R. 312 : 3 Sar. P.C.J. 314 (P.C.), 'is based on the assumption that there was an antecedent title of some kind in the parties and the agreement acknowledges and defines what that title is.' "Turning to <NAME> v. <NAME> 1 I.A. 157 : 13 B.L.R. 312 : 3 Sar. P.C.J. 314 (P.C.), I find their lordships say at page 166, after the sentence quoted in <CITATION> 10 Ind. Cas. 477 : 33 A. 356 : 15 C.W.N. 545 : 8 A.L.J. 552 : 13 C.L.J. 575 : 13 Bom. L.R. 427 : 10 M.L.T. 25 : (1911) 1 M.W.N. 432 : 21 M.L.J. 645 : 38 I.A. 87 (P.C.): "The claim does not rest on contract only but upon a title to the land acknowledged and defined by that contract which is part only of the evidence of the appellant to prove her title and not all her case." That seems to me to allow that the document is admissible in evidence either as a contract to acknowledge an existing title or perhaps as evidence in the nature of an admission. At any rate, in my opinion, it is only part of the case of the appellant and it is not a conclusive document on which we can declare rights with regard to immoveable property.

2. With regard to moveable property in the suit, no doubt the registration objection would not apply, but I gather from the learned Judge's judgment that, besides the plea of want of registration, it was alleged that the document was executed by the next friend in consequence of a misrepresentation made to her and of her negligence. That being so, I think we must send the case back for re-hearing although the learned Judge has dealt with most of the other evidence. We think that, for this <ORG> satisfactorily to deal with the matter, we ought to have the opinion of the learned Judge on the force of the evidence as a whole and it may be that, considered in the light of documents which we have now held admissible, his former opinion as to the rest of the evidence would perhaps require modification and we think that this is a process which ought to be gone through by the <ORG> of the first instance.

3. We, therefore, remand the case for rehearing. The appellant will have his costs of this appeal and the costs incurred in the <ORG> below will be in the discretion of the Trial Judge.

4. The re-hearing will be confined to Items Nos. 3, 5, 6 of Schedule I and Schedule II. As regards the other items in the plaint Schedule, the decree of the Original Side will be confirmed.

5. The parties will pay and receive proportionate costs.


PETITIONER: <NAME> & ANR. ETC. Vs. RESPONDENT: UNION OF INDIA & ANR. DATE OF JUDGMENT: 23/02/1970 BENCH: <NAME>, M. (CJ) BENCH: <NAME>, M. (CJ) SHAH, J.C. HEGDE, K.S. GROVER, A.N. RAY, A.N. CITATION: 1971 AIR 299 1970 SCR (3) 778 1970 SCC (1) 708 CITATOR INFO : F 1971 SC1594 (2) ACT: Practice and Procedure-Single Judge deciding important questions and suo motu granting certificate under Art. 132(1) of the Constitution Propriety. HEADNOTE: Writ petitions involving important questions of law came up before a single Judge of <ORG>. He was requested by the parties to refer the cases to a Divisional Bench. Instead of doing so he disposed them of himself, and suo motu granted a certificate under Art. 132(1) of the constitution for appeal to this court. HELD : The action of the Judge though technically permissible was improper, because, either the Judge should' have referred the cases to a Bench, or allowed the parties to pursue their right of appeal to a Bench against the decision of the single Judge, without short circuiting the right by passing on the cases to this <ORG>. [779 E-G.] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2634 of 1969 and 63 of 1970.

Appeals from the judgment and order dated December 5, 1969 of <ORG> in Civil Writ Nos. 220 and 725 of 1968.

C.A. No, 2634 of 1969.

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

<NAME>, for respondent No.1.

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

<NAME>, <NAME>, <NAME> and <NAME>, for intervener no. 2.

C.A. No. 63 of 1970.

<NAME>, for the appellants.

<NAME>, for respondent No. 1.

<NAME>, <NAME>, <NAME> and <NAME>,for respondents Nos. 3 and 4.

The Order of the Court was delivered by <NAME>, <NAME> This order will govern the disposal of Civil Appeals Nos. 2634 of 1969 and 63 of 1970. These two appeals arise out of two writ petitions filed in <ORG> which were disposed of by a common judgment delivered by a learned single Judge on December 5, 1969. The appeals have been brought on certificate granted suo motu by the learned single Judge under Art. 132(1) of the Constitution of India. While granting the certificate, the learned single Judge observed that at an earlier stage in the case, request was made to him to refer these two petitions for decision to a Bench, because important questions were involved in them. At that time, the learned Judge felt that since there was a <ORG> decision of <ORG> in <CITATION> (') there was no need to refer the matter to a larger Bench. The learned Judge goes on to say in the order granting certificate that at the time of the hearing, he found that several questions arose before him which were not covered by the Rajasthan decision. He probably felt that as the points which he had to decide were not considered by this Court in any earlier decision and as he had decided the case sitting singly, he should grant certificate suo motu for appeal to this Court.

In our opinion, and we say it respectfully, the learned Judge was in error in not making a reference to a Bench when he found that important questions of law were arising before him. Even if he did not make any reference, he should have allowed the parties to take an appeal in <ORG> itself under the provisions pertaining to appeals against decisions of a single Judge. The practice of deciding the case sitting singly and giving a certificate under Art. 132(1) for appeal to this Court although technically correct, is an improper practice. If is the right of the party to file an appeal in <ORG> itself against the decision of the single Judge and that right should not be short-circuited by passing on the case to <ORG> for decision. We think we should not endorse this practice which would create a bad precedent in India. We accordingly cancel the certificate and leave the parties free to file an appeal in <ORG>, it they so desire. There will be no order as to cost s.

V.P.S. Certificate Cancelled. (1) A.I.R. 1969. Raj. 281.


<NAME>, J.

1. The assessee is carrying on agricultural operations on a very large scale. In his field he produces sugar-cane, ground-nut, til, cotton, kardi, onion, wheat, tobacco and fruits. He sells the produce at the two offices maintained by him one at Kopargaon and the other at Shrirampur in the district of Ahmednagar. As the sugar-cane cannot after cutting be kept without deterioration for a long time, he extracts juice and prepares gur out of it and sells it at his office. The question which arose before <ORG> was whether he is, in the circumstances, a dealer within the meaning of section 2(6) of the Bombay Sales Tax Act, 1953.

2. The expression "dealer", so far as it is material, is defined by section 2(6) of the Bombay Sales Tax Act as meaning any person who carries on business of selling goods in the State of Bombay whether for commission, remuneration or otherwise. That definition is followed by an explanation which is not material for the purpose of this case. There is an exception to the definition which provides that an agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally shall not be deemed to be a dealer within the meaning of the clause. An "agriculturist" is defined in section 2(2) of the Act as meaning a person who cultivates land personally. That the assessee is cultivating the land personally is undisputed. He is therefore an agriculturist. He is also selling his agricultural produce but because of the circumstances that one of the items of his agricultural produce, viz., sugar-cane, is converted into gur for the purpose of transportation and preventing deterioration, it is urged on behalf of the revenue that the assessee is a dealer within the meaning of the definition. It is true that gur cannot be regarded as an agricultural produce grown on land. But if gur is prepared out of the agricultural produce which is grown on land, in the absence of any indication to the contrary suggesting that the agricultural produce must be sold in the form in which it is grown, we will we justified in holding that an agriculturist who is exclusively selling agricultural produce grown on the land either in the form in which it is grown or in the form in which it is converted for the purpose of transportation or preventing deterioration is within the exception provided by section 2(6). In the present case, with a view to prevent deterioration and for the purpose of facilitating transportation the assessee converted the sugar-cane grown by him into gur and sold it. In our view, the taxing authorities and <ORG> were in error in holding that the assessee is a dealer within the meaning of the definition in section 2(6).

3. The <ORG> has submitted the following question for determination :-

"Whether on the facts and in the circumstances of this case the applicant can be held to be an agriculturist falling within the exception to sub-section (6) of section 2 of the Act of 1953 ?"

4. But it is not disputed that the assessee is an agriculturist within the meaning of the Act; and section 2(6) does not define an agriculturist. The question in our judgment does not bring out the real matter in dispute between the taxing authorities and the assessee. We therefore reframe the question as follows :-

"Whether on the facts and in the circumstances of the case, the applicant can be regarded as a dealer within the meaning of section 2(6) of the Bombay Sales Tax Act, 1953 ?"

5. To the reframed question, our answer for reasons already set out will be in the negative.

6. The <ORG> to pay the costs of the assessee.

7. There will be only one set of costs in these three references.

8. References answered accordingly.


JUDGMENT <NAME> and <NAME>, <NAME>.

1. The plaintiff brought this suit to recover possession of the property in dispute under a bill of sale executed by defendant No. 6 on the 3rd Bhadro 1281. He was evicted by the defendant No. 1, who claimed a right in the property in dispute under a conditional bill of sale by the defendant No. 2 in the month of September 1865.

2. It is not disputed that the property in suit became the property of one <NAME> by purchase on the 27th May 1865. <NAME> sold it to defendant No. 2 in the month of August of the same year and, a few months later, that is to say, in the month of September, defendant No. 2 executed the conditional bill of sale in favour of the defendant No. 1, the respondent before us.

3. After having executed this conditional bill of sale, defendant No. 2, in the month of June 1867, sold the property in dispute to defendants Nos. 3, 4, and 5, and these defendants, in August 1874, sold it to the defendant No. 6, the immediate vendor of the plaintiff appellant.

4. The <NAME> decreed the plaintiff's suit being of opinion that the conditional bill of sale of September 1865 upon which the defendant, respondent, relied, was not a genuine instrument. The <NAME> found that the plaintiff's title as set out above was established to his satisfaction.

5. On appeal the Subordinate Judge has upheld the finding of the <NAME> as regards the plaintiff's title; but he has come to a conclusion different from that of the <NAME> as regards the conditional bill of sale in favour of the defendant, respondent. The Subordinate Judge is of opinion that the aforesaid document has been proved to his satisfaction. Having come to these conclusions he has dismissed the plaintiff's suit, inasmuch as the conditional bill of sale of the defendant No. 1 is of prior date to the conveyance in favour of the defendants 3, 4 and 5.

6. In this second appeal the only point that has been urged before us is that under Section 50 of the Registration Act of 1877, the plaintiff's conveyance must take effect against the conditional bill of sale of the month of September 1865 which is unregistered.

7. It has been held by a Pull Bench of <ORG> in <CITATION> . 2 All. 851 that "in the case of a document executed while Act VIII of 1871 was in force, the registration of which under that Act was optional, and which was not registered thereunder, and of a document executed after Act III of 1877 had come into force, the registration of which under that Act was compulsory, and which was registered thereunder, both documents relating to the same property, under the provisions of Section 50 of Act III of 1877, the registered document took effect as regards such property against the unregistered document, the provisions of Section 6 of Act I of 1868 notwithstanding."

8. This case has been followed by this Court in <NAME> v. Joha Bux I.L.R. 7 Cal. 570 : 9 C.L.R. 224. Now, the only difference between the case before us and the case before <ORG> is, that in the former the unregistered document was executed at a time when the Registration Act of 1871 was in force; while in the case before us the unregistered document was executed when Act XVI of 1864 was in operation. But that is a non-essential difference because, according to the explanation to Section 50 of Act III of 1877, "cases where Act XVI of 1864 or Act XX of 1866 was in force in the place and at the time in and at which such unregistered document was executed, 'unregistered' means not registered according to such Act, and, where the document is executed after the first day of July 1871, not registered under Act VIII of 1871 or this Act." In this case therefore the defendant's mortgage deed having been executed when Act XVI of 1864 was in operation, the document in question is an "unregistered document" within the meaning of Section 50 of Act III of 1877. No doubt, the words, "if duly registered" means registered under the Act of 1877; and, in this case, the plaintiff's document was registered under that Act. It is therefore quite clear that under Section 50 , the plaintiff's kobala must take effect against the unregistered document of the defendant No. 1.

9. In the course of the argument a doubt arose in our minds whether Section 50 would entitle the plaintiff to a decree in this case against the defendant No. 1, because the plaintiff is not claiming directly from the same vendor. From the facts of the case given at the outset of the judgment, it is clear that the plaintiff is claiming directly from defendant No. 6 who was the purchaser of this property from defendants Nos. 3, 4 and 5, and they purchased it from defendant No. 2. The document in favour of defendant No. 1 was executed by defendant No. 2.

10. But we do not think that under Section 50 it is necessary for a person who seeks the benefit of it to show that he is claiming from a common vendor. The section does not say so. All that it says is, that "every document of the kind mentioned in Clauses (a), (b), (c) and (d) of Section 17 , and Clauses (a) and {b) of Section 18 , shall, if duly registered, take effect as regards the property comprised therein, against every unregistered document relating to the same property." All that a person seeking the benefit of this section is required to prove is that his document is a document of the kind mentioned in the clause aforesaid; that it has been duly registered under the Act of 1877; and that it covers the same property as that covered by any unregistered document against which it is contended that his document shall take effect.

11. We therefore set-aside the judgment of the lower <ORG>, and restore that of <ORG> with costs in all the <ORG>.


PETITIONER: STATE OF TAMIL NADU Vs. RESPONDENT: V. KRISHNNASWAMI NAIDU & ANR. DATE OF JUDGMENT03/05/1979 BENCH: KAILASAM, P.S. BENCH: KAILASAM, P.S. FAZALALI, SYED MURTAZA CITATION: 1979 AIR 1255 1979 SCR (3) 928 1979 SCC (4) 5 CITATOR INFO : R 1984 SC 718 (34) ACT: Criminal Law (Amendment) Act , 1952 -Special Judge- Whether can exercise power under S. 167 Cr. P. C. to authorise detention of an accused in police custody. HEADNOTE: The Criminal Law (Amendment) Act , 1952  was enacted on 28-7-52 to further amend the Indian Penal Code , 1860 and the Criminal Procedure Code , 1898 and to provide for a more speedy trial of offence. Section 6 of the Act enables <ORG> by notification in the official gazette to appoint Special Judges to try offences punishable under Sections 161-165A of the Indian Penal Code or Section 5 of the Prevention of Corruption Act, 1947. The Special Judge thus appointed shall not be qualified for appointment as a Special Judge under the Act unless he is or has been a Sessions Judge or an Addl. Sessions Judge or an Asstt. Sessions Judge under the Code of Criminal Procedure 1898. Section 7 provides that notwithstanding anything contained in the Code of Criminal Procedure 1898 or in any other law, the offence specified in Sub-section 1 of Section 6 shall be triable by a Special Judge only. By Section 8 the Special Judge is empowered to take cognizance of an offence without the accused being committed to him for trial and in trying the accused persons he is required to follow the procedure prescribed by the Code of Criminal Procedure in the trial of warrant cases by Magistrates. Section 8(A) empowers the Special Judge to try certain offences in a summary way and the provisions of Section 262 to 265 of the Criminal Procedure Code are made applicable so far as they may apply. The respondents were arrested by <ORG> of <ORG> for alleged offence under the Prevention of Corruption Act . They were produced before the Special Judge on the following day. The respondents' application for enlargement on bail was dismissed by the Special Judge. The Police moved the Special Judge for committing the respondents to police custody for 15 days. Thorgh the application was rejected another one was filed. The respondents there upon moved <ORG> for (1) a direction that they should be kept in judicial custody pending investigation of the crime and (2) for quashing the application before the Special Judge by the police for committing them to police custody; contending that Special Judge is not a Magistrate as defined in the Criminal Procedure Code and as such not empowered to act under Section 167 of the Criminal Procedure Code and to place the accused in police custody. <ORG> accepted the contention and granted relief. Allowing the appeal, 929 ^ HELD : 1. The Special Judge notified under s. 6 the Criminal Law (Amendment) Act 1952 can exercise the power conferred on a Magistrate under s. 167 of the Criminal Procedure Code to authorise detention of the accused in the custody of the police. [936C] 2. Section 8 of the Criminal Law (Amendment) Act, specifically empowers the Special Judge to take cognizance of the offence without the accused being committed to him for trial. In taking cognizance of an offence without the accused being committed to him he is not a Sessions Judge for Section 193 Cr. P.C. provides that no Court of Sessions Judge shall take cognizance for any offence as a Court of original jurisdiction unless the case has been committed to it by a Magistrate under the Code . Strictly he is not a Sessions Judge for no Sessions Judge can take cognizance as a Court of Sessions without committal. [934C-D] 3. The Criminal Law (Amendment) Act being an amending Act the provisions are intended to provide for a speedy trial of certain offences. The Criminal Law (Amendment) Act is not intended to be a complete Code relating to procedure. The provisions of the Cr.P.C . are not excluded unless they are inconsistent with the Criminal Law (Amendment) Act . Thus read there can be no difficulty in coming to the conclusion that the Criminal Procedure Code is applicable when there is no conflict with the provisions of the Criminal Law (Amendment) Act . [934 E] 4. If a Special Judge who is empowered to take cognizance without committal is not empowered to exercise powers of remanding an accused person produced before him or release him on bail, it will lead to an anomalous situation. A Magistrate other than a Magistrate having jurisdiction cannot keep him in custody for more than 15 days and after the expiry of the period if the Magistrate having jurisdiction to try the case does not include Special Judge, it would mean that he would have no authority to extend the period of remand or to release him on bail. So also if the Special Judge is not held to be a Magistrate having jurisdiction, a charge sheet under s. 173 cannot be submitted to him. [934F-G] 5. The General Clauses Act , s. 32 defines a 'Magistrate' as including every person exercising all or any of the powers of a Magistrate under the Code of Criminal Procedure for the time being in force. Section 3 of the Criminal Procedure Code provides that any reference without any qualifying words. to a Magistrate, shall be construed, unless the context otherwise requires in the manner stated in the sub-sections. If the context otherwise requires the word, 'Magistrate may include Magistrates who are not specified in the section. Read along with the definition of Magistrate in the General Clauses Act there can be no difficulty in construing the Special Judge as a Magistrate for the purpose of s. 167 . [934H-935B] 6. <ORG> was in error in applying the decision of this Court in <CITATION> ,  2 SCR 195 relating to Rule 3 which is framed under s. 549 of the Criminal Procedure Code. The Magistrate contemplated under rule 3 is a Magistrate who is empowered to inquire with a view to committal which cannot apply to a Special Judge. [936B] 930 JUDGMENT:

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 292 of 1976.

From the Judgment and Order dated 22-4-1976 of <ORG> in Criminal M.P. No. 1592 and 1605/76.

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

<NAME> and <NAME> for the Respondent. The Judgment of the Court was delivered by <NAME>, J. The question that arises in this appeal is whether the Special Judge under the Criminal Law (Amendment) Act , 1952 can exercise the power conferred on a Magistrate under section 167 of the Criminal Procedure Code to authorise detention of the accused in the custody of the police.

This appeal by certificate is preferred by the State of Tamil Nadu against an Order of <ORG> in C.M.Ps. Nos. 1582 and 1605 of 1976 dated 22-4-1976.

The first respondent <NAME> is the son of the second respondent <NAME>. The first respondent was the Gazetted Personal Assistant to the former Minister for Health, State of Tamil Nadu. He and the second respondent were arrested by the <ORG> and Anti- corruption unit of <ORG> on April 2, 1976 for alleged offence under the Prevention of Corruption Act . They were produced before the Special Judge on the next day i.e. 3-4-1976. The respondents moved Special Judge for enlargement of bail. The petition was dismissed. The inspector of police (<ORG>) moved the Special Judge for committing the respondents to police custody for a period of 15 days. That application was also rejected. Inspite of the rejection of this application the police filed Cr. M.P. No. 617 of 1976 before the Special Judge for directing the respondents to be placed under the police custody for a period of 15 days. The respondents moved before <ORG> Cr.M.P. No. 1587 of 1976 for a direction that the respondent should be kept in judicial custody pending investigation of the crime. The respondents also filed another Cr. M.P. No. 1605 of 1976 for quashing the application Cr. M.P. No. 617 of 1976 before the Special Judge by the <ORG> for commiting the respondents to police custody on the ground that the Special Judge is not a Magistrate as defined in the Criminal Procedure Code and as such not empowered to act under section 167 of the Criminal Procedure Code and to place the accused in police custody.

In order to appreciate the contention raised in this appeal it is necessary to examine the relevant provisions of the Criminal Law Amendment Act of 1952 and the relevant provisions of the Criminal Procedure Code Act of 1974. The Criminal Law Amendment Act 66 of 1952 was enacted on 28-7-1952 to further amend the Indian Penal Code and the Criminal Procedure Code 1898 and to provide for a more speedy trial of offences. It may be noted that the Act is in the nature of an Amending Act in respect of the Indian Penal Code and the Code of Criminal Procedure, 1898. Section 6 of the Act enables <ORG> by notification in the official gazette to appoint as many Special Judges as may be necessary for such area or areas as may be specified in the notification to try offences punishable under section 161 , 162 , 163 , 164 , 165 or 165A of the Indian Penal Code or Section 5 of the Prevention of Corruption Act, 1947, and also in conspiracy to commit or in attempt to commit or in abetment of any of the offences specified. The Special Judge thus appointed to try the offences mentioned shall not be qualified for appointment as a Special Judge under the Act unless he is or has been a Sessions Judge or an Additional Sessions Judge or an Assistant Sessions Judge under the Code of Criminal Procedure 1898. Section 7 of the Act provides that notwithstanding anything contained in the Code of Criminal Procedure, 1898 or in any other law the offence specified in sub-section 1 of Section 6 shall be triable by a Special Judge only. By section 7(1) , therefore, the jurisdiction to try offences mentioned in Section 6(1) is conferred on the Special Judge only. Section 8 is important for the purpose of our discussion and may be extracted in full. The Special Judge is empowered under this section:

(i) to take cognizance of offence without the accused being committed to him for trial; and

(ii) in trying the accused persons he is required to follow the procedure prescribed by the Code of Criminal Procedure in the trial of warrant cases by Magistrates.

It may be noted that the Special Judge is not a Sessions Judge, Additional Sessions Judge or an Assistant Sessions Judge under the Code of Criminal Procedure though no person can be appointed as a Special Judge unless he is or has been either a Sessions Judge or an Additional Sessions Judge or an Assistant Sessions Judge. The Special Judge is empowered to take cognizances of the offences without the accused being committed to him for trial. The jurisdiction to try the offence by a Sessions Judge is only after committal to him. Further the Sessions Judge does not follow the procedure for the trial of warrant cases by Magistrates. The Special Judge is deemed to be a Court of Sessions only for certain purposes as mentioned in Section 8(3) of the Act while the first part of sub section 3 provides that except as provided in sub sections (1) and (2) of Section 8 the provisions of the Code of Criminal Procedure, 1898 shall so far as they are not inconsistent with this Act, apply to the proceedings before the Special Judge. The sub-section further provides that "for the purpose of the said provisions, <ORG> shall be deemed to be a Court of session trying cases without a jury or without the aid of assessors and the person conducting a prosecution before a special judge shall be deemed to be a public prosecutor". The deemed provisions has to be confined for the purposes mentioned in the subsection. Section 8(2) enables the Special Judge to tender a pardon to a person with a view to obtaining evidence supposed to have been concerned for the commission of an offence and the pardon so tendered was for the purposes of Section 339 and 339(a) of the Code of Criminal Procedure, 1898. This sub section was enacted because Special Judge not being a Court to which a commitment has been made can not tender pardon under the provisions of Section 338 and so this section is introduced to enable the Special Judge to tender a pardon. Sub- section 3(a) has made the provisions of section 350 and 549 applicable to proceedings before a Special Judge and for the purposes of the said provisions a Special Judge shall be deemed to be a Magistrate. Section 350 of the Code of Criminal Procedure enables a succeeding Special Judge to act on the evidence recorded by his predecessor or partly recorded by his predecessor and partly recorded by himself. Section 549 empowers a Magistrate when any person is brought before him charged with an offence for which he is liable to be tried by a Court to which this Court applies or by a Court-martial, the Magistrate shall deliver him to the Commanding Officer of the Regiment for the purpose of being tried by the Court-martial. This provision also is made speciffically applicable to the Special Judge. Section 8(A) empowers the Special Judge to try certain offences in a summary way and the provisions of section 262 to 265 of the Criminal Procedure Code is made applicable so far as they may apply.

It will be thus seen that section 8(1) empowers the Special Judge to take cognizance of offence without committal and directs that in trying the accused persons it shall follow the procedure prescribed by the Code of Criminal Procedure. Sub- section 3 deems a special judge to be <ORG> for certain purposes while sub- section (2) empowers the Special Judge to grant a tender of pardon. Sub- section 3(a) makes the provisions of Section 350 and 549 of the Code of Criminal Procedure applicable to the Special Judge and for the purposes of those provisions the Judge is deemed to be a Magistrate. Under section 8(A) the Special Judge is empowered to try cases summarily which are triable by the Magistrate. The Special Judge in the Criminal Law (Amendment) Act is thus for some purposes deemed to be a Sessions Judge and for some other purposes deemed to be a Magistrate and some powers exercised by the Magistrate are conferred on him. It is necessary to note that Special Judge is empowered to take cognizance without the accused being committed and in trying the accused persons he is required to follow the procedure for trial of warrant cases by a Magistrate. Under section 8(3) except as regards the provisions in sub-section (1) and (2) the provisions of Code of Criminal Procedure is made applicable in so far as they are not inconsistent with the Criminal Law (Amendment) Act . This taken alongwith the fact that the Criminal Law (Amendment) is an Amending Act so far as a Criminal Procedure Code and Indian Penal Code is concerned the provisions of Cr. P.C. should be considered to be in force unless there are certain provisions in the Criminal Law (Amendment) Act which is inconsistent with the provisions of the Criminal Procedure Code .

We will now examine the provisions of Section 167 of the Criminal Procedure Code. Section 167 of the Criminal Procedure Code requires that whenever any person is arrested and detained in custody and when it appears that the investigation cannot be completed within a period of 24 hours the police officer is required to forward the accused to the Magistrate. The Magistrate to whom the accused is forwarded if he is not the Magistrate having jurisdiction to try the case may authorise the detention of the accused in such custody as he thinks fit for a term not exceeding 15 days on the whole. If he has no jurisdiction to try the case and if he considers that further detention is necessary he may order the accused to be forwarded to any Magistrate having jurisdiction. The Magistrate having jurisdiction may authorise the detention of the accused person otherwise than in custody of the police beyond the period of 15 days but for a total period not exceeding 60 days. In the present case the accused were produced before the Special Judge who admittedly is the person who has jurisdiction to try the case. The contention which found favour with <ORG> is that the words 'Magistrate having jurisdiction' cannot apply to a Special Judge having jurisdiction to try the case. No doubt the word 'Special Judge' is not mentioned in section 167 but the question is whether that would exclude the Special Judge from being a Magistrate having jurisdiction to try the case. The provisions of chapter XII Cr.P.C . relate to the information to the police and their powers of investigation. It is seen that there are certain sections which require the police to take directions from the Magistrate having jurisdiction to try the case. Section 155(2) requires that no police shall take up non-cognizable case without an order of the Magistrate having power to try such case or commit the case for trial. Again Section 157 requires that when the police officer has reason to suspect the commission of an offence which is empowered under section 156 to investigate, he shall forthwith send a report of the same to a Magistrate empowered to take cognizance of such offence upon a police report. Section 173 requires that on the completion of every investigation under the Chapter the Officer-in-charge of the police station shall forward to a Magistrate empowered to take cognizance of the offence a police report as required in the form prescribed. Section 8 of the Criminal Law Amendment Act specifically empowers the Special Judge to take cognizance of the offence without the accused being committed to him. In taking cognizance of an offence without the accused being committed to him he is not a Sessions Judge for section 193 . provides that no Court of Sessions Judge shall take cognizance for any offence as a Court of original jurisdiction unless the case has been committed to it by a Magistrate under the Code . Strictly he is not a Sessions Judge for no Sessions Judge can take cognizance as a Court of Session without committal. The Criminal Law (Amendment) Act being an amending Act the provisions are intended to provide for a speedy trial of certain offences. The Criminal Law (Amendment) Act is not intended to be a complete code relating to procedure. The provisions of the Cr.P.C . are not excluded unless they are inconsistent with the Criminal Law (Amendment) Act . Thus read there could be no difficulty in coming to the conclusion that the Cr.P.C . is applicable when there is no conflict with the provisions of Criminal Law (Amendment) Act . If a Special Judge who is empowered to take cognizance without committal is not empowered to exercise powers of remanding an accused person produced before him or release him on bail it will lead to an anomalous situation. A Magistrate other than a Magistrate having jurisdiction cannot keep him in custody for more than 15 days and after the expiring of the period if the Magistrate having jurisdiction to try the case does not include the Special Judge, it would mean that he would have no authority to extend the period of remand or to release him on bail. So also if the Special Judge is not held to be a Magistrate having jurisdiction, a charge sheet under section 173 cannot be submitted to him. It is relevant to note that the General Clauses Act  section 32 defines a Magistrate as including every person exercising all or any of the powers of a Magistrate under the Code of Criminal Procedure for the time being in force. Section 3 of the Criminal Procedure Code provides that any reference without any qualifying words, to a Magistrate, shall be construed, unless the context otherwise requires in the manner stated in the sub-sections. If the context otherwise requires the word 'Magistrate' may include Magistrates who are not specified in the Section. Read alongwith the definition of the Magistrate in the General Clauses Act there can be no difficulty in construing the Special Judge as a Magistrate for the purposes of Section 167 .

In coming to the conclusion that the Special Judge is not a Magistrate <ORG> strongly relied on a decision of this <ORG> reported in [1962] 2 S.C.R. page 195 Major <NAME> versus State of Bombay. This <ORG> in construing rule 3 made under section 549 of the Criminal Procedure Code held that the rule was applicable to only a Magistrate and not to a Special Judge who is not a Magistrate within the meaning of rule 3. Section 549 of the Code of Criminal Procedure empowers <ORG> to make rules as to cases to which persons subject to military, naval or air-force shall be tried by the <ORG> to which this Code applies, or by a <ORG>-martial. <ORG> made rules in exercise of the powers conferred on it under this section. Rule 3 which is considered by the <ORG> runs as follows:-

"Where a person subject to military, naval or air-force law is brought before a Magistrate and charged with an offence for which he is liable to be tried by a Court- martial, such Magistrate shall not proceed to try such person or to inquire with a view to his commitment for trial by <ORG> or <ORG> for any offence triable by such Court, unless,

(a) he is of opinion, for reasons to be recorded that he should so proceed without being moved thereto by competent military, naval or air-force authority; or

(b) he is moved thereto by such authority."

Rule 3 it will be seen provides that the Magistrate shall not proceed to try such persons or inquire with a view to his commitment for trial by <ORG> unless he is of opinion that he should so proceed without being moved thereto by such authority. The sub-section, therefore, contemplates a Magistrate who can try the offence himself or inquire with a view to commitment. This part of the section is not applicable to a Special Judge as he cannot inquire with a view to his commitment. Therefore, the Magistrate referred to under rule (3) cannot include a Special Judge. This <ORG> observed that Section 549 is not one of the sections in chapter 21 of the Code  of Criminal Procedure and that it does not empower to Central Government to modify the warrant procedure and that rule 3 would not be applicable and further it cannot be said that by reason of the procedure to be followed by a Special Judge he would be a Magistrate empowered to try such a person within the meaning of rule 3. Relying on this decision the learned Judge held that the same ratio would govern the facts of the present case. The learned Judge was in error in applying the decision of this <ORG> relating to rule 3 which is framed under section 549 to section 167 of the . The Magistrate contemplated under rule 3 is a Magistrate who is empowered to inquire with a view to committal which cannot apply to a special judge.

In the result on consideration of the relevant provisions of the Criminal Law (Amendment) Act and the Cr.P.C . we have no hesitation in coming to a conclusion that a Special Judge would be a Magistrate empowered to try a case under section 167 of the . The Special Judge will proceed to exercise the powers that are conferred upon a Magistrate having jurisdiction to try the case. The appeal is allowed and the order of <ORG> set aside.

N.V.K. Appeal allowed.


JUDGMENT Venkataramaiah, J.

1. These two appeals are filed against the common order passed in Writ Petitions Nos. 7496 and 7497 of 1978 by <NAME> dismissing the petitions. The appellant (hereinafter referred to as "the assessee") was the petitioner in the said petitions and the ITO, Company Circle III, Bangalore, was the respondent. In the writ petitions the assessee prayed for the issue of an appropriate writ, order or direction quashing the two notices dated March 25, 1978, issued by the respondent under s. 148 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), proposing to reassess the income of the assessee for the assessment years 1973-74 and 1974-75 on the ground that he had reason to believe that certain income of the assessee had escaped assessment in each of the above assessment years and for a writ in the nature of prohibition restraining the respondent from taking any steps pursuant to the said notices.

2. Briefly stated the facts are these : The assessee is a private limited company incorporated under the Companies Act and is carrying on business of manufacture of pressure cookers and allied products at Bangalore. The sale of these products is being effected by the assessee through its selling agents, <ORG>, which is a firm carrying on business at Madras, with whom the assessee has entered into an agreement. The assessee has been making payments to the said firm for the services rendered in connection with the sale of its products. The question whether the said payments could be treated as revenue expenditure and if so to what extent arose for consideration before the income-tax authorities in the earlier assessment years, i.e., 1968-69, 1969-70, 1970-71 and 1971-72, having regard to s. 40A(2)(a) of the Act and the relationship that existed between the directors of the assessee-company and the partners of the firm of <ORG>. Ultimately, by a common order dated October 30, 1976, the said question was settled by <ORG>, Madras Bench 'C', Madras, in I.T.A. Nos. 366 to 369 (Bang)/1975-76. After perusing the tripartite agreement dated December 20, 1956, entered into between the assessee, the selling agents and <ORG> and on the basis of the material available on record, the <ORG> concluded that the selling agents, <ORG>, had been rendering various services and providing various facilities to the assessee such as, (i) giving guidelines to the assessee in the matter of manufacture of various models and range of pressure cookers in the light of their own market research; (ii) giving advice to the assessee in the matter of selection and appointment of distributors for the sale of cookers and fixing the terms and conditions thereof and also advising termination of services of distributors as and when required; (iii) making reports to the assessee on the activities of the competitors; (iv) participation in the finalisation of advertisement and sales promotional campaigns; (v) supervising the activities of the distributors; (vi) attending to complaints of consumers; (vii) helping the assessee in the matter of collection from distributors; (viii) helping the assessee in liaison work with Government authorities; (ix) helping the assessee in procuring raw materials; and (x) helping the assessee in the matter of excise duty, etc. The <ORG> also perused the resolution dated October 17, 1960, passed by the assessee-company in its extraordinary general meeting appointing <ORG> as sole selling agents on a commission of 7 1/3% on cookers and 15% on spare parts and considered that with the passage of time, as and when the assessee came to undertake the after-sale service, the quantum of commission had to be reduced gradually to 5% and 2 1/2%, respectively. The departmental stand that there was no specific agreement entered into by the assessee with <ORG> was rejected by the <ORG> which held that the various resolutions passed by the assessee-company and the tripartite agreement earlier referred to constituted the agreement. Thus, the <ORG> in its elaborate order dated October 30, 1976, held that the payment in question was reasonable in the light of various factors and thus the same was not liable to be disallowed under s. 40A(2)(a) of the Act. The <ORG>, following the said order, dismissed the departmental appeal in respect of the assessment for the subsequent assessment year 1972-73 also. These orders of the <ORG> became final, the department having accepted the same.

3. When the assessment of the income of the assessee arose during the assessment year 1973-74, the <ORG> disallowed by his order dated August 6, 1976, the claim made by the assessee regarding payments made to the selling agents as the decision of the <ORG> had not yet been rendered on the appeals referred to above. The assessee filed an appeal against the said order of assessment before the <ORG>. The appeal was allowed on March 5, 1977, and the allowance claimed by the assessee was granted in the light of the appellate orders of the <ORG> regarding earlier assessment years passed on October 30, 1976. The order passed by the <ORG> was allowed to become final.

4. In the assessment order dated January 31, 1977, passed in respect of the assessment year 1974-75, the ITO himself granted the allowance claimed in respect of payments made to the selling agents as by then the appellate orders of the <ORG> in respect of the earlier years had been pronounced.

5. It would appear that the internal audit party raised an objection regarding allowance having been made in respect of payments made to the selling agents under s. 40A(2)(a) of the Act as according to them the case had to be dealt with under s. 40(c)(i) of the Act. In view of the observations made by the audit party the <ORG> decided to issue the impugned notices under s. 148 of the Act proposing to reopen the assessments for the assessment years 1973-74 and 1974-75 and to make a reassessment. Aggrieved by the said notices the assessee filed the two writ petitions. The petitions were dismissed at the stage of preliminary hearing by the learned single judge observing that since it was open to the assessee to appear before the <ORG> and to urge that there was no case for reopening the assessment proceedings already completed, they were not fit cases for interference at this stage. These appeals are filed against the orders of the learned single judge.

6. After the respondent was served with the notices in these appeals, he has filed a statement of objections to the relief claimed by the assessee. The relevant part of the statement of objections reads :

"4. The Internal Audit party of the department in the course of their inspection for the assessment year 1974-75 raised an objection that the allowance of payment of commission to <ORG> was not permissible under the Act. They also pointed out that the provisions of section 40(c)(i) of the Act were applicable to the assessee's case.

5. The Income-tax Officer accordingly took action under section 148 and initiated proceedings by issue of notice under section 148 for both the assessment years. The appellant has challenged these notices in the writ appeals on various grounds. The grounds on which the notices are challenged are :

(i) that it was not open to the department to reopen the assessments for the two years, having accepted the <ORG>'s order on the same point for the assessment year 1972-73;

(ii) the notices were issued only on a change of opinion;

(iii) that section 40(c) of the Act has no application to the assessee's case and the only section which has application is section 40A ;

(iv) neither section 147(a) nor (b) is applicable to the assessee's case.

6. It is submitted that none of the grounds referred to above is available to the assessee to urge in the writ appeals for the following reasons :

(i) that for the assessment year 1972-73 the order of the <ORG> is accepted by the department is not relevant for initiating action under section 148 for the subsequent assessment years;

(ii) the notices are not issued only on account of mere change of opinion on the part of the Income-tax Officer, but were issued as a consequence of audit objections raised by the internal audit party;

(iii) whether the provisions of section 40A or of section 40(c) are applicable to the facts of the case is a matter exclusively within the jurisdiction of the Income-tax Officer to adjudicate under the Act, and this is not a matter for interference by this hon'ble court under art. 226;

(iv) the notices are issued under section 147(b) and the records of assessment contain the information in support of the action and the notices are validly issued."

7. During the period under consideration, the relevant parts of s. 40 and s. 40A of the Act stood as follows :

"40. Amounts not deductible. - Notwithstanding anything to the contrary in sections 30 to 39 , the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession' - ...

(c) in the case of any company -

(i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be,

(ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub-clause (i) either wholly or partly for his own purposes or benefit, if in the opinion of the Income-tax Officer any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expenditure and allowance in respect of any one person referred to in sub-clause (i) shall, in no case, exceed -

(A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy-two thousand rupees;

(B) where such expenditure or allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period :

Provided that in a case where such person is also an employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub-section (5) of section 40A shall not be taken into account for the purposes of sub-clause (A) or sub-clause (B), as the case may be....."

"40A. Expenses or payments not deductible in certain circumstances. - (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head 'Profits and gains of business or profession'.

(2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Income-tax Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services of facilities for which the payment is made or the legitimate needs of business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction :

Provided that the provisions of this sub-section shall not apply in the case of an assessee being a company in respect of any expenditure to which sub-clause (i) of clause (c) of section 40 applies....."

8. There is no dispute in this case that if s. 40(c)(i) is applicable to the case then the challenge to the impugned notices has to fail. There is also no dispute about the nature of services and facilities that were provided by the selling agents for which payments have been made. Both parties have depended upon the appellate order of the <ORG>. The questions raised in these appeals have, therefore, to be decided on the above basis. They are :

"(i) Whether it is open to this court under article 226 of the Constitution to quash the impugned notices and to issue an order restraining the Income-tax Officer from taking further steps ?

(ii) Whether the observations made by the internal audit party amounts to 'information' within the meaning of that expression in section 147(b) of the Act ? and

(iii) Whether, on the facts and circumstances of the case, the Income-tax Officer had in consequence of such information reason to believe that income chargeable to tax had escaped assessment for the assessment years in question ?"

9. The first question arises out of the contention urged on behalf of the department that the petitions are barred under art. 226(3) of the Constitution, which provides that no petition for the redress of any injury referred to in sub-clause (b) or sub-clause (c) of clause (1) of art. 226 shall be entertained if any other remedy for such redress is provided for by or under any other law for the time being in force. The prayers made in the writ petitions are that the notices issued under s. 148 of the Act in contravention of law, which are likely to result in injury of a substantial natural may be quashed and a writ in the nature of prohibition may be issued to the respondent restraining him from taking any further step pursuant to the impugned notices. The question is whether the law provides any alternative machinery through which the assessee can secure the reliefs prayed for in the petitions. It may be possible for a party to a proceeding before an inferior court or <ORG> to urge all his contentions against the jurisdiction assumed by it and challenge its decision on that question either before a higher court or tribunal to which an appeal or revision petition may lie against such decision or by applying for a writ in the nature of certiorari under art. 226 of the Constitution. But we are not on that point now. We are concerned with the question whether the petition for issue of a writ in the nature of prohibition referred to in clause (1) of art. 226 of the Constitution is barred only because after the decision of the inferior court or tribunal, an appeal or a revision or a petition for the issue of a writ of certiorari can be filed. The distinction between a writ in the nature of prohibition and a writ in the nature of certiorari and the stages at which they can be issued are well settled. Rejecting the contention based on Rex v. Electricity Commissioners  1 KB 171 (CA) that there was no difference in law between a writ of prohibition and a writ of certiorari, <ORG> observed in <CITATION> , as follows :

"What is stated there is that both writs of prohibition and 'certiorari' have for their object the restraining of inferior courts from exceeding their jurisdiction, and they could be issued not merely to courts but to all authorities exercising judicial or quasi-judicial functions. But there is one fundamental distinction between the two writs, and that is what is material for the present purpose. They are issued at different stages of the proceedings. When an inferior court takes up for hearing a matter over which it has no jurisdiction, the person against whom the proceedings are taken can move the superior court for a writ of prohibition, and on that, an order will issue forbidding the inferior court from continuing the proceedings. On the other hand, if the court hears that cause or matter and gives a decision, the party aggrieved would have to move the superior court for a writ of 'certiorari', and on that, an order will be made quashing the decision on the ground of want of jurisdiction.

It might happen that in a proceeding before the inferior court a decision might have been passed, which does not completely dispose of the matter, in which case it might be necessary to apply both for certiorari and prohibition - 'certiorari' for quashing what had been decided, and prohibition for arresting the further continuance of the proceeding. Authorities have gone to this extent that in such cases when an application is made for a writ of prohibition and there is no prayer for 'certiorari', it would be open to the court to stop further proceedings which are consequential on the decision. But if the proceedings have terminated then, it is too late to issue prohibition and 'certiorari' for quashing is the proper remedy to resort to. Broadly speaking and apart from the cases of the kind referred to above, a writ of prohibition will lie when the proceedings are to any extent pending and a writ of 'certiorari' for quashing after they have terminated in a final decision."

10. <CITATION> , , <ORG> further explained the nature of jurisdiction exercised by a superior court while issuing a writ in the nature of prohibition thus (P. 1277) :

"The jurisdiction for grant of a writ of prohibition is primarily supervisory and the object of that writ is to restrain courts of inferior tribunals from exercising a jurisdiction which they do not possess at all or else to prevent them from exceeding the limits of their jurisdiction. In other words, the object is to confine courts or tribunal of inferior or limited jurisdiction within their bounds. It is well settled that the writ of prohibition lies not only for excess of jurisdiction or for absence of jurisdiction but the writ also lies in case of departure from the rules of natural justice (See Halsbury's Laws of England, 3rd edn., Vol. 11, P. 114). It was held for instance by <ORG> in King v. <NAME> [1927] 1 KB 491, that as the order of the judge of <ORG> of July 24, 1925, was made without giving the vicar an opportunity of being heard in his defence, the order was made in violation of the principles of natural justice and was, therefore, an order made without jurisdiction and the writ of prohibition ought to issue. But the writ does not lie to correct the course, practice or procedure of an inferior tribunal, or a wrong decision on the merits of the proceedings. It is also well established that a writ of prohibition cannot be issued to a court or an inferior tribunal for an error of law unless the error makes it go outside its jurisdiction (See <NAME> v. Comptroller-General of Patents and Designs [1953] 2 WLR 760 at p. 765 (QB) and <ORG> v. <NAME>, 59 CLR 369. A clear distinction must, therefore, be maintained between want of jurisdiction and the manner in which it is exercised. If there is want of jurisdiction then the matter is coram non judice and a writ of prohibition will lie to the court or inferior tribunal forbidding it to continue proceedings therein in excess of its jurisdiction."

11. The reason for interfering at this stage in cases of this nature are to be found in <CITATION> . In that case, the petitioner was asked by a sales tax authority to apply for registration and to submit returns under the provisions of the Bihar Sales Tax Act, 1947. The petitioner who questioned the jurisdiction of the authority to issue such a notice applied under art. 226 of the Constitution. <ORG> of Patna took the view that the Bihar Sales Tax Act undoubtedly conferred jurisdiction on the STO to investigate the question of liability of a dealer to sales tax and accordingly he was well within his jurisdiction in issuing the impugned notice and dismissed the petition observing that if on assessment it was found that the order was erroneous the matter could be agitated in appeal under that Act. On appeal, <ORG> repelled the contention that the petition was not maintainable in view of the existence of an alternative remedy in the following terms (p. 457) :

"It has been argued that the application was premature, for there has, so far, been no investigation or finding on facts and no assessment under section 13 of the Act. The appellant-company, contending, as it does, that the Act is ultra vires and void, should have ignored the notice served on it and should not have rushed into court at this stage. This line of argument appears to us to be utterly untenable. In the first place, it ignores the plain fact that this notice, calling upon the appellant-company to forthwith get itself registered as a dealer, and to submit a return and to deposit the tax in a treasury in Bihar, places upon it considerable hardship, harassment and liability which, if the Act is void under article 265 read with article 286 constitute, in praesenti, an encroachment on and an infringement of its right which entitles it to immediately appeal to the appropriate court for redress. In the next place, as was said by this court in <CITATION> , , when an order or notice emanates from <ORG> or any of its responsible officers directing a person to do something, then, although the order or notice may eventually transpire to be ultra vires and bad in law, it is obviously one which prima facie compels obedience as a matter of prudence and precaution. It is, therefore, not reasonable to expect the person served with such an order or notice to ignore it on the ground that it is illegal, for he can only do so at his own risk and peril. This court has said in the last mentioned case that a person placed in such a situation has the right to be told definitely by the proper legal authority exactly where he stands and what he may or may not do.

Another plea advanced by the respondent <ORG> is that the appellant-company is not entitled to take proceedings praying for the issue of prerogative writs under article 226 as it has adequate alternative remedy under the impugned Act by way of appeal or revision. The answer to this plea is short and simple. The remedy under the Act cannot be said to be adequate and is, indeed, nugatory or useless if the Act which provides for such remedy is itself ultra vires and void and the principle relied upon can, therefore, have no application where a party comes to court with an allegation that his right has been or is being threatened to be infringed by a law which is ultra vires the powers of the legislature which enacted it and as such void and prays for appropriate relief under article 226. As said by this court in <CITATION>  5 STC 115 (SC) this plea of the <ORG> stands negatived by the decision of this court in <CITATION> .  4 STC 113 (SC). We are, therefore, of the opinion, for reasons stated above, that <ORG> was not right in holding that the petition under article 226 was misconceived or was not maintainable. It will, therefore, have to be examined and decided on merits."

12. <CITATION> , where a notice issued under s. 34 of the Indian I.T. Act, 1922, corresponding to s. 148 of the Act was questioned, <ORG> observed (p. 207) :

"Mr. <NAME> mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the Income-tax Officer had reason to believe that under-assessment had resulted from non-disclosure of material facts, before the Income-tax Officer himself in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or <ORG> or in <ORG> under section 66(2) of the India Income-tax Act. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action."

13. It is no doubt true that the above decisions relate to the period prior to the amendment of art. 226 of the Constitution by the Constitution (42nd Amend.) Act, 1976. But we are of the view that art. 226(3) as it now stands also does not preclude <ORG> from exercising the power in appropriate cases to issue a writ, order or direction prohibiting an illegal or unauthorised act. We agree with the view expressed in <CITATION> 1977 Guj 113 [FB] that clause (3) of art. 226 of the Constitution which restricts the scope of power of <ORG> under art. 226 should be construed strictly and if <ORG> is of opinion that the alternative remedy does not provide adequate relief, jurisdiction under art. 226 has to be exercised in an appropriate case.

14. <CITATION> , <ORG> held that art. 226(3) was no bar to entertain petition in which the validity of a notice under s. 148 of the Act was challenged holding that there was no provision in the Act providing for any remedy for the redress of any injury that might be caused to the assessee if the assessment was allowed to be reopened and that a suit in which the validity of such notice could be questioned could not be considered as an alternative remedy barring the jurisdiction of <ORG> under art. 226. <ORG> also expressed the same view in <CITATION>  111 ITR 900 in which a notice issued under s. 148 of the Act was quashed under art. 226.

15. It is true that in <CITATION> , a Full Bench of <ORG> has held that art. 226(3) of the Constitution precluded an assessee from challenging a notice issued under s. 148 of the Act relying upon the observations made by <ORG> in the case of <ORG> and holding that <ORG> had recognised the existence of an alternative remedy. We are of the view that the case has to be examined in the light of the amended art. 226 which imposes a restriction on the power of <ORG> and the nature of the alternative remedy available. In that case, <ORG> qualified the words "alternative remedy" with the word "such" as referring to the remedy by way of an appeal and reference under s. 66 to <ORG> which were referred to by the counsel for the department. But it cannot be assumed that <ORG> held in that case that the appeal and reference referred to therein did really amount to remedies "alternative" to a writ or direction that could be issued under art. 226 restraining the continuance of a proceeding which had been commenced without jurisdiction. We respectfully disagree with the above decision of <ORG> of <ORG> of Punjab and Haryana.

16. We respectfully agree with the views expressed in the above decisions of the <ORG> of Gujarat, Calcutta and Orissa in so far as the question of issue of a writ in the nature of prohibition is concerned and hold that the writ petitions out of which these appeals arise are not barred by art. 226(3) of the Constitution. There will not be any difference even if it is held that while issuing a notice under s. 148 the <ORG> acts as an administrative authority to whom a writ of prohibition may not be issued as it is open to <ORG> to issue under art. 226 any appropriate order or direction restraining the continuance of an illegal proceeding if on merits the case requires <ORG> to do so. Hence, we reject the first contention.

17. On the second question it has to be held that the opinion expressed by the audit party amounts to information within the meaning of that expression in s. 147(b) of the Act and can form the basis of exercise of power thereunder (vide the decision of <ORG> in <CITATION> ).

18. The third question relates to the jurisdiction of the <ORG> to issue the impugned notices on the facts and in the circumstances of the case. It is argued by Sri <NAME>, learned counsel for the revenue, that the question whether the information he had was sufficient to issue the impugned notices was a matter for the decision of the <ORG> and cannot be canvassed before this court in a petition under art. 226. This question is no longer res integra. In the case of <ORG> , <ORG> rejected a similar contention while considering the validity of a notice issued under s. 34 of the Indian I.T. Act, 1922, which correspond to ss. 147 and 148 of the Act in the following terms (p. 206) :

"Mr. <NAME> argued that the question whether the Income-tax Officer had reason to believe that under-assessment had occurred 'by reason of non-disclosure of material facts' should not be investigated by the courts in an application under article 226. Learned counsel seems to suggest that as soon as the Income-tax Officer has reason to believe that there has been under-assessment in any year he has jurisdiction to start proceedings under section 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question, but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in the assessment proceedings. It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Income-tax Officer has reason to believe that an under-assessment has resulted from non-disclosure he shall have jurisdiction to start proceedings for reassessment within a period of 8 years : and where he has reason to believe that an under-assessment has resulted from other causes he shall have jurisdiction to start proceedings for reassessment within 4 years. Both the conditions, (i) the Income-tax Officer having reason to believe that there has been under-assessment, and (ii) his having reason to believe that such under-assessment has resulted from non-disclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under-assessment has resulted from non-disclosure of material facts, cannot therefore be accepted."

19. The above view is reiterated by <ORG> in <CITATION> . in which s. 147(b) of the Act arose for consideration in the following terms :

"<ORG> may, therefore, issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with reassessment when it appears that the Income-tax Officer had no jurisdiction to commence the proceeding.

The condition which invests the Income-tax Officer with jurisdiction has two branches : (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession that he has reason so to believe. Since the learned judges of <ORG> have concentrated their attention upon the second branch of the condition and have reached their conclusion in favour of the assessees on that branch, it would be appropriate to deal with the correctness of that approach. The expression 'information' in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If, as a result of information in his possession, the Income-tax Officer has reason to believe that income chargeable to tax had escaped assessment, the Income-tax Officer has jurisdiction to assess or reassess income under section 147(b) of the Income-tax Act, 1961. Information in his possession that income chargeable to tax has escaped assessment furnishes a starting point for assessing or reassessing income. If he has that information, the Income-tax Officer may commence proceedings for assessment or reassessment. To commence the proceeding for reassessment it is not necessary that on the materials which came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law.

<ORG> exercising jurisdiction under article 226 of the Constitution has power to set aside a notice issued under section 147 of the Income-tax Act, 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The court may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information; the court may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the court extends no further."

20. It is thus clear that it is open to this court to examine whether the information was such that prima facie it may be said that the <ORG> had reason to believe that income chargeable to tax had escaped assessment. This leads us on to the facts of these cases.

21. As mentioned earlier the <ORG> had after an elaborate investigation came to the conclusion that the payments made by the assessee to its selling agents were not either excessive or unreasonable having regard to the services and facilities provided by the selling agents by applying s. 40A(2) of the Act. Even though the non-obstante clause in s. 40A(1) gives the provisions of that section an overriding effect over the other provisions of the Act, the proviso to that section excludes the application of that section to any expenditure to which sub-clause (i) of clause (c) of s. 40 of the Act applies. Since the facts are not in dispute, we shall examine whether sub-clause (i) of clause (c) of s. 40 applies at all to the present case. That sub-clause refers to any expenditure incurred by a company which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be. Section 40(c) provides that it is open to the ITO to determine whether the remuneration, benefit or amenity is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom and also places a maximum limit on the deduction that may be claimed in respect of the aggregate of such expenditure and allowance in respect of any one person by declaring that in no case it shall exceed Rs. 72,000 and where such expenditure or allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of Rs. 6,000 for each month or part thereof comprised in that period. It further provides that where such person is also an employee at the company during the relevant period expenditure of the nature referred to in cls. (i) to (iv) of the second proviso to s. 40A(5)(a) shall not be taken into account for the purpose of determining the above-said maximum limit of Rs. 72,000 or Rs. 6,000 per month, as the case may be. A close reading of the above provision shows that s. 40(c) refers to an expenditure incurred by making periodical payments to a person mentioned in that clause apparently for any personal service that may be rendered by him. It cannot have any reference to payments made by the assessee for all kinds of "services or facilities" referred to in s. 40A(2)(a) . It is argued that the proviso thereto suggests that any expenditure incurred for any kind of service which is referred to in the main part of s. 40A(2)(a) and the expenditure referred to in s. 40(c) belong to the same category. This contention is not correct. The expression "services" in s. 40A(2)(a) is an expression of wider import. We should not forget that as observed by <ORG> in <CITATION> .  32 Comp Cas 604 (SC) provisos are sometimes introduced to "allay fears" or to remove misapprehensions. A proviso or an exception cannot be interpreted as to destroy the main provision. The proper rule of construction of a proviso is explained by <ORG> in <CITATION> ., as follows :

"The cardinal rule of construction of the provisions of a section with a proviso is succinctly stated in Maxwell's Interpretation of Statutes, 10th edn., at p. 162 thus :

"The proper course is to apply the broad general rule of construction, which is that a section or enactment must be construed as a whole, each portion throwing light if need be on the rest.

The true principle undoubtedly is, that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause, and proviso, taken and construed together is to prevail.

Unless the words are clear, the court should not so construe the proviso as to attribute an intention to the legislature to give with one hand and take away with another. To put it in other words, a sincere attempt should be made to reconcile the enacting clause and the proviso and to avoid repugnancy between the two."

22. The crucial words in s. 40A(2)(a) are 'fair market value of the goods, services or facilities'. If the remuneration, benefit or amenity referred to in s. 40(c) is treated as the same as what is paid in return for "the goods, services or facilities" then irrespective of the fair market value of the goods, services and facilities provided by a person who may be a director or who has a substantial interest in the company or a relative of the director or of such person, as the case may be, only a maximum of Rs. 72,000 can be allowed to be deducted in computing the income of the company in any one year. We do not think that <ORG> even intended that such a result should follow. The goods, services and facilities referred to in s. 40A(2)(a) are those which have a market value and which are commercial in character. Many of the services and facilities referred to above are those which are nowadays provided by independent organisations. They take diverse forms, such as packing and forwarding, transport service, advertisement service, warehousing facilities, processing, collection of price, insurance of goods, etc., which involve investment of large finance and employment of number of persons. The cost of post-manufacture operations in some cases will be in the order of 30% of the price paid by the customer. Marketing and distribution of goods have become important branches of modern industrial and commercial operations, which have not become highly standardised. Their importance in the scheme of the free market system is dealt with by <NAME> in the Chapter entitled "Services and the Market System" in his book Economics and Public Purpose  as follows :

"Services are rightly assumed to be the domain of the small firm and thus of the market system. In recent times there has been much talk in the United States and other industrial countries of the rise of the so-called service economy. This, in turn, has been taken by determined defenders of the market to prove that the market controlled economy is not only surviving but resurgent. Economics, as it is taught, is being saved from the depredations of the great corporation by the growing demand for services.

On examination this development turns out to be a good deal more complex. Numerous service enterprises are the by-product of the rise of the large firm. They are, in effect, a subsidiary and supporting development of the planning system. This is especially the case with that part of the service sector which, from outward evidence, is expanding most rapidly.

Services, nonetheless, are the favoured domain of the small firm. As mentioned in the last chapter, the growth of the firm is arrested where the task is geographically dispersed and where, accordingly, the activity at any one point is limited and where the task involved is unstandardized. This means that one or a few people work in isolation, i.e., without supervision. Under such circumstances they adopt their preferred pace, which is normally slow. They enhance their input of mental and physical energy only if, in their earning, they reap the rewards and suffer the penalties of the individual entrepreneur.

Geographical dispersion, it may be observed, is not an absolute barrier to organization. If the task is relatively standardized, performance norms can be established for dispersed workers to which they can then be required to conform. Or payment can be according to product or revenue produced. On such dispersed functions can be associated with the capital and technical support of a larger organization as in the case of a local unit of a retail or restaurant chain. In recent times there has also been a great exfoliation of hybrid arrangements, commonly denoted franchises, by which an individual is made responsible for a local enterprise and is thus subject to the comprehensive incentive system, that is, associated with individual entrepreneurship. Ordinarily he is required to put some of his own capital at risk. As the proprietor he is then rewarded for any and all energy and intelligence he expends and punished for failure in this regard, as well as for such errors of optimism and gullibility as he may have made and such other misfortune as he may endure..."

23. Now, in the case of a selling agent who carries on marketing operations it is seen that he has to perform several functions such as, (i) providing godown facilities for the goods of the principal; (ii) providing watch and ward; (iii) arranging collection of price; (iv) providing workshop facilities in the locality in the case of automobiles and machinery; (v) processing of goods; (vi) packing and forwarding; (vii) advertising; (viii) collection of market information; (ix) depositing money with the principal without any interest; (x) insurance of goods, and several other functions. Without the services of a competent selling agent it may not be possible to a big manufacturer to push his goods in the market. We do not think that, in these circumstances, payment made to such a selling agent can be treated as an expenditure referred to in s. 40(c) of the Act. It is also relevant to bear in mind s. 40(c) is a successor to s. 10(4A) of the 1922 Act. But s. 40A was introduced in the year 1968 in the Act apparently for the purpose of preventing the abuse of excessive or unreasonable payments being made by assessee to persons referred to therein in lieu of goods, services and facilities. If the payments represent a fair market value then there is no limitation on the total amount payable during any period. We are of the view that expenditure incurred by way of commission paid to a selling agent who acts as an independent entrepreneur with an independent organization which is not subject to the control and supervision of the assessee, for the services and facilities provided by him, cannot, therefore, be considered as equivalent to remuneration or benefit or amenity referred to in s. 40(c) of the Act.

24. In the instant case it is not disputed that <ORG> & Company, the selling agents, have been providing the services and facilities under the agreement as independent entrepreneurs and it has been held that the commission paid to them was not excessive. At this stage, it is appropriate to set out a part of the order of the <ORG> dated October 30, 1976, in respect of the assessment years 1968-69 to 1971-72, It reads :

"On a careful consideration of the facts of the case on record, we are of the opinion that the commission paid to the selling agents in this case is neither excessive nor unreasonable having regard to the tests set forth in section 40A(2)(a) . The assessee-company did not have any establishment in the form of premises, staff, telephone and other facilities in any of the major cities of India, Bombay, Calcutta, Delhi and Madras, which are the principal distribution centers. If the assessee-company had these facilities, it would have incurred costs, which the assessee had estimated at about Rs. 7.39 lakhs per year. As regards the legitimate business reeds, we have already set out the background in which the tripartite agreement was entered into between the assessee-company, the foreign company and <ORG> and Company. We have also referred to in great detail the various services rendered by <ORG> and Company in the matter of promoting sales of '<ORG>' pressure Cookers, appointment of distributors, collection distributors, infringement of trade marks, attending to consumer complaints, etc. The assessee-company had also derived benefit by the services rendered by the sole selling agents, <ORG> and Company, in proof of which the assessee has furnished the following chart of performance :

Year Sales Profit before Commission Profit ending charging before commission tax ---------------------------------------------------------------------- Rs. Rs. Rs. Rs. 31-10-1967 1,06,37,997 18,64,590 6,44,555 12,20,035 31-10-1968 1,37,60,859 34,32,080 7,82,597 26,49,483 31-10-1969 1,13,66,749 23,36,303 5,56,155 18,30,148 31-10-1970 1,57,02 532 42,24,041 4,34,585 37,89,456 ------------------------------------------------------------------------ Having carefully considered all the aspects of the caes, we have no hesitation in upholding the findings of the <ORG> arrived at on the facts of the case. The orders of the <ORG> setting aside the disallowance of commission payment is accordingly upheld."

25. The total payment made to the selling agents may be in excess of Rs. 72,000 per year. But as long as the case does fall under s. 40(c) , there is no justification for the <ORG> to issue the impugned notices even though the audit party may have said so. We hold that the present case does not at all fall under s. 40(c) of the Act. We are of the opinion that on the face of it the case did not attract s. 147(b) of the Act. We, therefore, held that the <ORG> had no jurisdiction to issue the impugned notices under s. 148 of the Act as he could not reasonably entertain any doubt that any part of the assessee's income had escaped assessment by reason of not applying s. 40(c) to the case.

26. In the result, we allow these appeals, reverse the common order passed by the learned single judge and quash the notices issued under s. 148 of the Act which are impugned in these cases. We also direct the respondent in each of these cases not to take any further proceedings pursuant to the impugned notices.

27. Parties shall bear their own costs.


JUDGMENT <NAME>, J.

1. This appeal under Section 110-D of the Motor Vehicles Act. 1939, (hereinafter referred to as the Act), is from a judgment of <ORG>, Shimoga, (hereinafter referred to as the <ORG>), awarding compensation to respondent 1 herein for the death of his son in an automobile accident.

2. The appeal is by the insurer of the motor lorry which caused the death of respondent 1's son. Neither the owner nor the driver of that lorry, has presented any appeal from that judgment of the <ORG>. In the Memorandum of appeal, the appellant has urged grounds which relate to negligence of the driver of the lorry and the quantum of compensation awarded by the <ORG>

3. Before going into the merits of those grounds, the appellant who was the insurer, should satisfy that it is open to him to urge those grounds. <CITATION> . (1971 (1) Mys LJ 300) = (AIR 1971 Mys 207) this Court held that an insurer cannot urge in an appeal any ground which he could not urge before the Tribunal. Sub-section (2) of Section 96 of the Act provides, inter alia, that an insurer to whom notice of bringing of any action for compensation in respect of third partv risks is given shall be entitled to be made a party to that action and to defend it on any of the grounds specified in Clauses (a) to (c) of that subsection. Those grounds do not include negligence of the driver of the vehicle insured or the quantum of compensation for death or injury caused by. or arising out of, the use of that vehicle. In <ORG> case, this Court referred to Sub-section (2) of Section 96 and held that it is not open to the Insurer to urge before the Tribunal that there was no negligence on the part of the person driving the vehicle that caused death or injury or that the amount of compensation claimed is excessive.

4. However, Mr. <NAME>. learned counsel for the appellant referred to the following observations of <ORG> in <CITATION> , :

"..... the insurer has the right, provided he has reserved it by the policy, to defend the action in the name of the assured and if he does so. all defences open to the assured can then be urged by him".

5. Following the above observations of <ORG>, this Court observed in <CITATION> . (AIR 1966 Mys 346) that Section 96 of the Act preserves for the insurer the right to defend the action in the name of the assured and to raise all defences open to the assured if that right has been preserved to him under the Insurance Policy.

6. Reiving on the above observations, Mr. <NAME>. contended that it was open to the appellant to urge in this appeal all the contentions which the insured had unsuccessfully urged before the <ORG>,

7. From the above decisions it is clear that the insurer can urge all the defences open to the insured, only when the insurer defends the action in the name of the insured. But, in the present case it has not been shown that before the <ORG> the appellant defended the action in the name of the insured. On the other hand, the insured (the owner of the lorry) and the driver of the lorry who were respondents 1 and 2 before the <ORG> had filed their objections and the appellant had filed a separate statement of objections. Unless the appellant had defended before the <ORG>, the action in the name of the insured, the only defences which it (the appellant) could urge before the <ORG> and which it can urge in this appeal, are those specified in Clauses (a) to (c) of Sub-section (2) of Section 96 of the Act.

8. However. Mr. <NAME> contended that Sub-section (2-A) inserted in Section 110-C of the Act by the Motor Vehicles (Amendment) Act . 1969, enables the insurer to defend an action for compensation on all or any of the grounds available to the person against whom the claim has been made end that in on appeal under Section 110-D the insurer can urge all the grounds that could be urged by the person against whom the claim has been made, had he preferred an appeal. Sub-section (2-A) of Section 110-C reads :--

"(2-A) Where in the course of any inquiry, <ORG> is satisfied that--

(i) there is collusion between the person making the claim and the person against whom the claim is made, or

(ii) the person against whom the claim is made has failed to contest the claim, it may, for reasons to be recorded by it in writing, direct that the insurer who may be liable to in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have the right to contest the claim on all, or any of the grounds that are available to the person against whom the claim has been made." The above sub-section empowers an insurer to contest the claim for compensation on all or any of the grounds that are available to the person against whom the claim has been made, if the following two conditions are satisfied :

"(i) Collusion between the person making the claim and the person against whom the claim is made; or the person against whom the claim is made, has failed to contest the claim; and

(ii) The <ORG> has, for reasons recorded in writing, directed that the insurer shall be impleaded as a party to the proceeding".

9. Unless the above conditions are satisfied, the insurer cannot contest the claim on any ground other than those specified in Clauses (a) to (cl of Sub-section (2) of Section 96 of the Act.

10. Mr. <NAME> contended that the above conditions were satisfied in the present case. According to him, there was collusion between respondent 1 (who claimed compensation) on the one hand and respondents 2 and 3 (the owner and the driver of the lorry) on the other.

11. There is absolutely no material to infer such collusion. The owner and the driver of the lorry who were respondents 1 and 2 before the <ORG>, had filed their objections to the petition and resisted the claim. The driver of the lorry gave evidence to the effect that the accident was not due to his negligence .

12. In the present case it cannot also be said that the person against whom the claim was made, failed to contest the claim. As seen earlier, the owner and the driver of the lorry did contest the claim end also adduced evidence in support of their defence. The appellant (the insurer) had been impleaded as a party along with the owner and the driver of the lorry when the petition was presented, and this is not a case in which the <ORG> directed that the insurer should be impleaded as a party. There was no occasion for the <ORG> recording its reasons in writing for directing the insurer to be impleaded as a party.

13. Thus, none of the conditions specified in Sub-section (2-A) of Section 110-C has been fulfilled in this case. Hence, the appellant cannot be permitted to urge in this appeal that there was no negligence on the part of the driver of the lorry or that the amount of compensation awarded by the <ORG>, was excessive. In the memorandum of appeal, the appellant has not urged any of the grounds specified in Clauses (a) to (c) of Sub-section (2) of Section 96 of the Act.

14. As the appellant cannot be permitted to urge any of the grounds stated in the memorandum of Appeal, this appeal fails and is dismissed in limine and with costs. Advocate's fee Rs. 100/-.