PETITIONER: <NAME> Vs. RESPONDENT: GOVERNMENT OF ANDHRA PRADESH AND OTHERS DATE OF JUDGMENT: 11/10/1965 BENCH: <NAME>, K. BENCH: <NAME>, K. MUDHOLKAR, <NAME>, R.S. CITATION: 1966 AIR 828 1966 SCR (2) 172 CITATOR INFO : RF 1973 SC2720 (9) F 1976 SC 578 (33) R 1982 SC 149 (962) RF 1991 SC2160 (31) ACT: Andhra Pradesh Panchayat <ORG>s and Zilla Parishads Act (35 of 1959), ss. 62 and 72-Scope of-Rules under-Validity of. Constitution of India, 1950, Art. 226-Who can file petition under. HEADNOTE: In order to promote rural welfare, the respondent had given administrative directions for dividing districts into Blocks and for the appointment of <ORG>. In pursuance of those directions, a primary health centre was inaugurated in a village in November 1958 in accordance with the resolution of <ORG>. One of the conditions which the village had to comply with was that it should give 2 acres of land free and a cash contribution of at least Rs. 10,000. Since the amount was not paid by the village, <ORG>, resolved to shift the primary health centre to another village with the consent of the representatives of the first village. The second village chosen, satisfied the condition regarding land and. cash contribution on 27th July 1959 and thereafter, on 31st July 1959 the first village also satisfied the condition. In August 1959 the Committee by a resolution decided to locate the contra at the second village, but the respondent directed that the matter should be decided by <ORG>, as by the time, the Andhra Pradesh Panchayat <ORG>s and Zilla Parishads Act, 1959 had come into force and <ORG> had been established for the concerned Block. Though in May 1960, <ORG> at first resolved to have the centre at the first village, and though the said resolution was approved by the respondent, <ORG> finally, by its resolution on 29th May 1961, cancelled its earlier resolution and resolved to locate the centre at the second village. On 7th March 1962, the respondent set aside the resolution of May 1961 of <ORG> on the ground that it did not get the requisite support of 2/3rd majority. On 18th April, 1963, the respondent reviewed its previous order on the ground that the saki order was made under a mistaken impression that the health centre was permanently located at the first village, and directed that the centre should be located in the second village. The appellant, who was the representative of the first village in all the proceedings, filed an application before <ORG> under Art. 226 of the Constitution for quashing the <ORG> order dated 18th April 1963. The petition was dismissed by <ORG>. In appeal to this Court, the appellant contended that : (i) Assuming the first <ORG> order dated 7th March 1962 was made under s. 72(1) the impugned order dated 18th April, 1963 reviewing the first, was invalid: in as much as the prerequisite for the exercise of the power of review, namely, the existence of a mistake of fact or law or the ignorance of any material fact, was not satisfied, (ii) the first <ORG> order was made under s. 62 of the Act, and therefore could not be reviewed by the impugned order under s. 72 and (iii) the impugned order was invalid, because it was made without giving an opportunity to the party prejudiced thereby. The respondent raised a preliminary objection that the appellant 173 had no personal right in the matter and therefore had no locus stand to file the application, and also urged, that the impugned order was neither made under s. 62 nor under s. 72. of the Act, but that it was really passed under the rules made by the respondent in exercise of the power conferred on it under s. 69 of the Act read with s. 18(2) and that therefore, no question -of review would arise at all as the respondent passed the final order in regard to the location of the health centre. HELD : (i) The appellant had the right to maintain the application. Ordinarily, the petitioner who seeks to file an application under Art. 226 should be one who has a personal or individual right in the subject matter of the petition. The personal right need not be in respect of a proprietary interest : it can also relate to an interest of a trustee. In exceptional cases, a person who has been pre-judicially affected by an act or omission of an authority can file a petition even though he has no proprietary or even fiduciary interest in the subject-matter. The appellant was the president of <ORG> of the first village. He was also the president of a committee for collecting contributions from the villagers for setting up the health Centre. His conduct, the acquiescence on the part of the members of the committee, and the treatment meted out to him by the authorities, support the inference that he was authorised to act on behalf of the committee which was in law, the trustee of the amounts collected. The appellant, therefore, had been prejudiced by the impugned order and his petition under Art. 226 was maintainable. [181 F] (ii)A reading of s. 18 of the Act with the Schedule shows that under the Act the statutory power to establish and maintain primary health centers is vested in <ORG>, and there is no provision vesting the said power in the <ORG>. Under s. 69 of the Act, the <ORG> can only make rules for carrying out the purposes of the Act; it cannot under the guise of rules, convert an authority with power to establish a primary health centre into only a recommendatory body. It cannot, by any rule, vest in itself a power which under the Act vests in another body. It is one thing to say that the exercise of the power by the <ORG> is regulated by the rules, but another thing, to deprive it of that power in the matter of location of the health centre and confer that power on the <ORG>. Therefore, the Rules, in so far as they make <ORG> a mere recommendatory body, are inconsistent with the Act, and so the impugned order could not be sustained under the authority of the Rules [183 F] (iii)Assuming that the first order was made under s. 72(1) the respondent was right when it said in the impugned order, that it made a mistake of fact in passing its earlier order on a misapprehension that there was a permanent location of the centre at the first village. The centre was never permanently located in the first village, it was only located' there subject to certain conditions which were not fulfilled [188 F] (iv)But, an analysis of the first order of the respondent demonstrates that it was nothing more than a cancellation of the resolution passed by the <ORG> on 29th May 1961. The fact that the word "cancel" is not used and s. 62 was not mentioned in the order could not make it anytheless an order cancelling the resolution. Therefore, the order was, one made under s. 62 and could not be reviewed by the impugned order under s. 72. [187 A-B] Section 62 confers a special power on the <ORG> to cancel a, resolution passed by the <ORG>, by an order in writing, if in its opinion; 174 such resolution is not legally passed or is in excess or abuse of the power conferred by the Act, after giving to the <ORG> an opportunity for explanation. Section 72(1) confers a wide power of revision on the <ORG>. On the principle of general a specialities non derogant the case provided for under s. 62 must be excluded from the operation of s. 72. It follows that the order reviewed fell under the scope of s. 62 and that in could not be reviewed under s. 72, for s. 72(3) enables the <ORG> only to review an Order made under s. 72(1). Further, the impugned order could not be sustained as being itself an order under s. 62 of the Act. The respondent, in exercise of that power, cancelled the resolution of the <ORG> by its earlier order, and therefore qua that order had become functus officio. It could not be review not could s. 13 of the Madras General Clauses Act, 1891 be invoked, because, that section, which enables the <ORG> to exercise its power from time to time as occasion requires. cannot apply to an order made in exercise of a quasi-judicial power under s. 62 . [184 H-158 B; 187 D-E] (v) Since the impugned order was made without giving an opportunity as required by s. 72 to the appellant or to the committee, who were the representatives of the first village, and who were prejudicially affected by it, the order was bad. [189 A-B] <ORG>, however, rightly refused to exercise its "extraordinary discretionary, power because, if it had quashed the impugned order. it would have restored the illegal order of 7th March 1962. That order was also illegal because it was made without giving notice to <ORG> is required by s. 62 . [189 E] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 755 of 1965. Appeal by special leave from the judgment and order dated September 7. 1964 of <ORG> in Writ Appeal No. 8 of 1964.

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

<NAME> and <NAME>, for respondent No. 1. <NAME>, Solicitor-General and <NAME>, for respondent No. 4.

The Judgment of the Court was delivered by <NAME>, J. This is an appeal by special leave against the judgment of a Division Bench of <ORG> in a Letters Patent appeal confirming that of a single Judge of that Court dismissing a petition filed by the appellant under Art. 226 of the Constitution for issuing a Writ of certiorari quashing the order of <ORG> dated April 18, 1963, under s. 72 of the Andhra Pradesh Panchayat Samithis and Zilla Parishads Act, 1959, (Act No. XXXV of 1959), hereinafter called the Act.

At the outset it will be convenient to survey the facts leading up to this appeal in their chronological order. For the promotion of rural welfare, <ORG> initiated Community Development Programme in the said State. Pursuant to that Programme, each district in the State was divided into Blocks, called Community Development Blocks. Chintalapudi Taluk in the West Godavari District was one of such Blocks. <ORG> was appointed for each Block and <ORG> for each district. All this was done by the Government by issuing administrative directions; indeed, the said Committees were only advisory bodies and the ultimate power vested in the Government. One of the activities of the said Committees was to constitute Primary Health centres in each district. On March 22, 1957, <ORG> issued a notification laying down broad principles for guidance in the selection of places for the location of Primary Health Centres. One of the said principles relevant to the present enquiry may be noticed at this stage and that is, the village selected for locating such Centre was expected to give 2 acres of site free and 50% cash contribution which would not be less than Rs. 10,000/-. On April 8, 1958, <ORG>, Chintalapudi, resolved unanimously, modifying its earlier resolution, to have <ORG> at Dharmajigudem village, as there were High Schools and education facilities there. On November 7, 1958, the Collector of the District formally inaugurated <ORG> at Dhanmajigudem. On July 11, 1959, the said Committee passed two resolutions, among others. Under resolution 3 it recorded with appreciation the donation of 50 cents of land by Achyutharamaiah, the <ORG> Member, towards site for <ORG> to be located at Dharmajigudem and appealed to the members of the <ORG> to see to the remittance of the cash contribution of Rs. 10,000/- immediately. Presumably because that something happened at the meeting immediately after the said resolution was passed indicating that there would be no response in that direction, another resolution was passed by the said Committee recording that, as the villagers of Dharmajigudem had failed to pay the said contribution for the last 8 months, <ORG> located in that place be shifted to and established permanently at any other suitable village where land and cash contributions were forthcoming. On July 13, 1959, i.e., 2 days after the aforesaid resolution, the Block Development Officer wrote a letter to the appellant, who was the President of the village panchayat, inform-

17 6 ing him that he had not taken any steps for the realization of the contribution so far and that if the required contribution was not realized before the end of the month steps would be taken -to shift <ORG> to some other place. It may be noticed at this stage that <ORG>, who had to implement the resolution of the <ORG>, had outstand his powers in writing a letter in derogation of the terms of the resolution of the <ORG> dated July 11, 1959. On July 16, 1959, the appellant and others of Dharmajigudem informed <ORG> that it was not possible for them to collect the amount and that there was no objection to the shifting of the <ORG> from their village to any other place. On July 17, 1959, <ORG> wrote to the people of Dharmajigudem that as they were unable to pay the said amount, the said <ORG> would be shifted to Lingapalem. On July, 27, 1959, the 4th respondent, <NAME>, representing Lingapalem village deposited Rs. 10,000/- with the Block Development <ORG> and also donated 2 acres of land for the purpose of locating the said <ORG> in the said village. On July 31, 1959, on behalf of Dharmajigudem, <NAME>, the appellant, deposited the sum of Rs. 10,000/- in the <ORG>-<ORG> and <NAME> donated 2 acres of land and delivered possession of the same to <ORG>. On August 14, 1959, the said <ORG>, after reviewing the previous history of the location of <ORG> and after noticing that both the villages deposited the amount-one on July 27, 1959 and the other on July 31, 1959-and after considering the competing claims, resolved unanimously to have <ORG> located permanently at Lingapalem and to request the authorities concerned to shift it from Dharmajigudem to Lingapalem at an early date. One important fact to be noticed in this resolution is that it was recorded therein that the representatives of Dharmajigudem assured the representatives of Lingapalem that they not only gave up their efforts to have <ORG> at Dharmajigudem but also unanimously agreed to have it located at Lingapalem. It was further recorded therein that the villagers of Lingapalem paid up the entire contribution enthusiastically and that too after obtaining the concurrence of the villagers of Dharmajigudem and also on an assurance that the latter gave up the idea of having <ORG> at Dharmajigudem. It would, therefore, be noticed that this resolution for locating <ORG> at Lingapalem was passed after the representatives of the two villages settled their disputes. On September 18, 1959, the Act came into force and under <CITATION> thereof <ORG> was constituted for Chintapudi. On January 7, 1960, the <ORG> informed the Collector of West Goda- vari District that the question of shifting <ORG> from Dharmajigudem to Lingapalem should be left to the decision of <ORG> constituted under the Act. The President of <ORG>, Chintalapudi Block, was requested to place the resolution dated August 14, 1959, of the Block Planning and Development <ORG> before <ORG> for reconsideration and submit a report to the <ORG> through the Chairman, <ORG>, West Godavari. It may be noticed that after the passing of the Act, what was being done administratively was sought to be placed on a statutory basis. On May 28, 1960, <ORG> held its meeting and resolved that <ORG> should be permanently located at Dharmajigudem; and the said resolution was communicated to the <ORG>. On July 6, 1960, the <ORG> approved the proposal of <ORG> to locate <ORG> permanently at Dharmajigudem. On January 23, 1961, the Rules framed by the <ORG> in exercise of the powers conferred on it under s. 69 of the Act came into force. On February 22, 1961, on a representation made to the <ORG> that the meeting of <ORG> held on May 28, 1960, was irregular on the -round of inadequate notice, the <ORG> decided not to interfere with those proceeding under s. 72 of the Act. On May 12, 1961, <ORG> at a special meeting, on the ground that the meeting held on May 28, 1960, was not held in accordance with r. 4(1) of the Rules for the conduct of business, in exercise of the power given to it under r. 15 thereof, cancelled all the resolutions passed by the meeting of the <ORG> on May 28, 1960. On May 29, 1961, the <ORG> passed another resolution adopting all the resolutions which it cancelled on May 12, 1961, except the resolution to locate <ORG> at Dharmajigudem. In regard to the location of the said <ORG> it resolved to locate it at Lingapalem. On March 71, 1962, the <ORG> made an order holding that there was no valid reason for shifting <ORG> from Dharmajigudem to Lingapalem and directing <ORG> to take action accordingly. The main reason given for that order was that <ORG> was already func- tioning at Dharmajigudem and a Health <ORG> once established should not be shifted to another place within the Block unless <ORG> resolved by two- thirds majority of the members present at the meeting as required under r. 7 of the Rules and that the resolution dated May 29, 1961, was not supported by the requisite majority. On April 18, 1963, i.e., about a year after the earlier order, the <ORG> passed another order wherein it held that it passed the previous order dated March 7, 1962, on a mistaken impression that it was a case of shifting <ORG> from one place where it was permanently located to another, while the correct position was that in the instant case <ORG> was not permanently located by the <ORG> and, therefore, the resolution passed by <ORG> on May 29, 1961, fell within r. 2 of the Rules and not under r. 7 thereof. In that view, it directed that the said <ORG> should be located permanently in Lingapalem village in accordance with the resolution of <ORG> dated May 29, 1961.

A resume of the said facts leads to the following factual position. Before the Act came into force, <ORG> was inaugurated at Dharmajigudem presumably subject to the condition that the said village would comply with the conditions laid down by the administrative directions, governing the location of a <ORG>. One of the important conditions was that the village seeking to have the <ORG> should give 2 acres of land free and 50% cash contribution which would not be less than Rs. 10,000/-. The said amount was not paid by Dharmajigudem village with the result the condition was not complied with. With the consent of the representatives of the village of Dharmaji- gudem, <ORG> resolved to shift <ORG> from Dharmajigudem to Lingapalem. The Lingapalem village satisfied the conditions on July 27, 1959. Thereafter, Dharmajigudem village also satisfied the said conditions on July 31, 1959. On August 14, 1959, the said Committee by a resolution decided to locate the <ORG> at Lingapalem, but the Government directed the matter to be decided by <ORG>, as by that time the Act had come into force and <ORG> for the Block had been established. Though on May 28, 1960, <ORG> at first resolved to have the <ORG> at Dharmajigudem and though the said resolution was approved by the Government, the said Panchayat Samithi finally by its resolution dated May 29, 1961, cancelled its earlier resolution and resolved to locate the <ORG> it Lingapalem. On March 7, 1962, under s. 62 of the Act the said resolution of <ORG> was set aside by the Government on the ground that it did not get the requisite support of two-thirds majority. But on April 18, 1963, the Government reviewed its previous order, under s. 72 of the Act, on the ground that the said order was made under a mistaken impression that <ORG> was permanently located at Dharmajigudem and directed the <ORG> to be located at Lingapalem. It will, therefore, be seen that though the Health <ORG> was formally inaugurated at Dharmajigudem before the Act came into force, there was not and could not have been a permanent location of the <ORG> at that place, as the condition precedent was not compiled with. After the Act came into force, though <ORG> at first approved of the location of the <ORG> at Dharmajigudem, it cancelled the resolution and decided to locate it at Lingapalem. The Government, on a misapprehension of fact, set aside that order, but when it came to know of the mistake it reviewed its earlier order and directed the location of the <ORG> at Lingapalem. The question is whether on these facts the Government had jurisdiction to make the order which it did in exercise of its powers under s. 72 of the Act.

The appellant, who was the representative of the village of Dhartnajigudem in all the said proceedings, filed an application before <ORG> under Art. 226 of the Constitution for quashing the said order of the <ORG>. The said application was, in the first instance, heard by a single Judge of <ORG> and he dismissed it. On appeal, <ORG> of <ORG> confirmed it. Hence the appeal.

Mr. <NAME>, learned counsel for the appellant, raised before us the following points : (1) The order of the <ORG> cancelling the resolution dated May 29, 1961, was made under s. 62 of the Act and, therefore, the said order could not be reviewed under s. 72 thereof. (2) Assuming that the said order dated March 7, 1962, was made under s. 72(1) of the Act, the order dated April 18, 1963, reviewing the said order was invalid inasmuch as the prerequisite for the exercise of the power of review thereunder, namely, the existence of a mistake of fact or law or the ignorance of any material fact, was not satisfied. (3) The order dated April 18, 1963, was also invalid, because it was made without giving an opportunity to the party prejudiced thereby of making a representation against the making of the said order.

Mr. <NAME>, learned counsel for the State of Andhra Pra- desh, raised a preliminary objection that the appellant had no personal right in the matter of the location of the Primary Health Center and, therefore, he had no locus stand to file an application under Art. 226 of the Constitution. lie argued that the order of the <ORG> dated March 7, 1962, was not simply a cancella-

lion of a resolution made by <ORG>, but a composite order giving directions to the Block Development Officer and, therefore, it fell directly within the scope of s. 72 of the Act; and, as the said order was made under a misapprehension that there was a permanent location of the Health Centre at Dharmajigudem, the <ORG> had jurisdiction to review the same under S. 72(3) of the Act. He would further contend that even if the order dated March 7, 1962, was passed under s. 62 of -the Act, the said order being an administrative one, the <ORG> had jurisdiction to review the same under s. 62 itself when the mistake was discovered or brought to its notice. In addition he raised before us a new point which was not argued either before the single Judge or, on appeal, before <ORG> of <ORG>. He would say that the impugned order was neither made under s. 62 or under S. 72 of the Act, but it was really passed under the relevant Rules made by the Gov- ernment in exercise of the power conferred on it under s. 69 of the Act, read with sub-s. (2) of s. 18 thereof, where under the ultimate authority under the Act to locate the Health Centre was the <ORG>, though on the recommendation of <ORG>. In this view, the argument proceeded, no question of review would arise at all, for the <ORG> passed the final order in regard to the location of the Primary Health Centre at Lingapalem. The learned Solicitor General, appearing for the 4th respon- dent, supported Mr. <NAME> on all the points and further elaborated that aspect of the argument which related to the construction of the order made by the <ORG> on March 7, 1962.

The first question is whether the appellant had locus standi to file a petition in <ORG> under Art. 226 of the Constitution. This Court in <CITATION> (1), dealing with the question of locus standi of the appellant in that case to file a petition under Art. 226 of the Constitution in <ORG>, observed " Article 226 confers a very wide power on <ORG> to issue directions and writs of the nature mentioned therein for the enforcement of any of the rights conferred by Part III or for any other purpose. It is, therefore, clear that persons other than those claiming fundamental right can also approach the court seeking (1)  Supp. 3 S.C.R. 1, 6.

a relief thereunder. The Article in terms does not describe the classes of persons entitled to apply thereunder; but it is implicit in the exercise of the extraordinary jurisdiction that the relief asked for must be one to enforce a legal right........................ The right that can be enforced under Art. 226. also shall ordinarily be the personal or individual right of the petitioner himself, though in the case of some of the writs like habeas corpus or quo warranto this rule may have to be relaxed or modified."

Has the appellant a right to file the petition out of which the present appeal has arisen ? The appellant is the President of <ORG> of Dharmajigudem. The villagers of Dharmajigudem formed a committee with the appellant as President for the purpose of collecting contributions from the villagers for setting up <ORG>. The said committee collected Rs. 10,000/- and deposited he same with the Block Development Officer. The appellant represented the village in all its dealings with <ORG> and <ORG> in the matter of the location of <ORG> at Dharmajigudem. His conduct, the acquiescence on the part of the other members of the committee, and the treatment meted out to him by the authorities concerned support the inference that he was authorized to act on behalf of the committee. The appellant was, therefore, a representative of the committee which was in law the trustees of the amounts collected by it from the villagers for a public purpose. We have, therefore, no hesitation to hold that the appellant had the right to maintain the application under Art. 226 of the Constituiton. This Court held in the decision cited supra that "ordinarily" the petitioner who seeks to file an application under Art. 226 of the Constitution should be one who has a personal or individual right in the subject-matter of the petition. A personal right need not be in respect of a proprietary interest : it can also relate to an interest of a trustee. That apart, in exceptional cases, as the expression "ordinarily" indicates, a person who has been prejudicially affected by an act or omission of an authority can file a writ even though he has no proprietary or even fiduciary interest in the subject-matter thereof. The appellant has certainly been prejudiced by the said order. The petition under Art. 226 of the Constitution at his instance is, therefore, maintainable.

Now, we shall first take the new argument advanced by Mr. <NAME> for the first time before us, for, if that was accepted, the appeal would fail. Briefly stated, his contention was that the order of the <ORG> dated April 18, 1963, was not made either under s. 62 or under s. 72 of the Act, but was made only under the Rules made by the <ORG> in exercise of its power under s. 69 of the Act. To appreciate this contention it will be useful to notice the relevant rules.

Under r. 2, <ORG> only recommends to the <ORG> the place for locating the said Centre. Under r. 3 (11), in the case of conflict between the relevant authorities in regard to the location of a Health Centre, the <NAME>'s order shall be final. Under's. 6, a Primary Health Centre once established shall not ordinarily be shifted to another place except by the <ORG> on the recommendation of <ORG> on the basis of a resolution passed by it by two-thirds of the member,, of <ORG> present at the meeting. Even in such a case the <ORG> has no power to direct the shifting of a Primary Health Centre established in one place to another, if the contribution from the people had been accepted and is in deposit. It is clear from the said rules that the ultimate authority to locate <ORG> or to direct its shifting from one place to another is the <ORG>. On the basis of the said rules, learned counsel contended that <ORG> missed the real point, presumably on the arguments advanced before it, and pro- ceeded to consider the validity of the impugned order in terms of s. 72 of the Act. The circumstance, the argument proceeded, that the <ORG> in its orders referred neither to s. 62 nor to s. 72 of the Act or did not give any notice to parties as prescribed theretinder clearly indicates that the <ORG> acted only under the said relevant rules. This argument so stated appears at the first blush to be unanswerable. But a scrutiny of the relevant provisions of the Act shows that the said rules are inconsistent with the provisions of the Act and they cannot possibly override the statutory power conferred on <ORG>.. Under s. 18 (1) of the Act, subject to the provisions of the Act, the administration of the Block shall vest in <ORG>; and under sub-s. (2) thereof <ORG> shall exercise the powers and- perform the functions specified in the Schedule. When we refer to the Schedule it will be seen &,at the following entry is found under the heading "Health and Rural Sanitation", "Establishing and maintaining Primary Health Centre and Maternity Centres". It is manifest that under the Act the statutory power to establish and maintain Primary Health Centres is vested in <ORG>. There is no provision vesting the said power in the Gov-

ernment. Under s. 69 of the Act, the <ORG> can only make rules for carrying out the purposes of the Act; it cannot, under the guise of the said rules, convert an authority with power to establish <ORG> into only a recommendatory body. It cannot, by any rule, vest in itself a power which under the Act vests in another body. The rules, therefore, in so far as they transfer the power of <ORG> to the <ORG>, being inconsistent with the provisions of the Act, must yield to s. 18 of the Act.

Realizing this difficulty, the learned Solicitor General, who appeared for the 4th respondent, made an attempt to reconcile the relevant rules with the provisions of s. 18 of the Act. He argued -that s. 18 of the Act conferred a power on <ORG> to establish and maintain Primary Health <ORG>s, whereas the Rules provided for the location or shifting of the <ORG>s. This argument does not appeal to us. A Primary Health <ORG> cannot be established in vacuum; it must be established in some place. The Rules deprive <ORG> of the power to select a place for establishing a Primary Health <ORG> and make it a re- commendatory body with final powers in the <ORG>. The Rules also confer a power on the District Medical Officer and the District Health Officer in the matter of location of the <ORG> and give the <ORG> the final voice, if there is any conflict between -those officers and <ORG>. Even in regard to shifting of the Primary Health <ORG>, the <ORG>'s voice is final under the Rules. It is one thing to say that the exercise of the power by <ORG> is regulated by the Rules, but another thing to deprive it of that power in the matter of location of the Primary Health <ORG> and confer the said power on the <ORG>. We, therefore, hold that the Rules, in so far as they make <ORG> a mere recommendatory body, are inconsistent with the Act. This may be the reason why in <ORG> the <ORG> did not think fit to sustain the order under the authority of the Rules. The next question is whether the order dated April 18, 1963, can be sustained under s. 72 of the Act. Section 72 of the Act reads :

Power of revision and review by Government:

(1) The Government may either suo motu or on an application from any person interested, call for and examine the record of <ORG> or <ORG> or of their <ORG> in respect of any proceeding to satisfy themselves as to the regularity of such proceeding or the correctness, legality or propriety of any decision or order passed therein; and, if, in any case, it appears to the Government that any such decision or order should be modified, annulled or reversed or remitted for reconsideration, they may pass orders accordingly Provided that the Government shall not pass any order prejudicial to any party unless such party has had an opportunity of making a representation.

(3) The Government may suo motu at any time or on an application received from any person interested within ninety days of the passing of an order under subsection (1), review any such order if it was passed by them under any mistake, whether of fact or of law, or in ignorance of any material fact. The provisions contained in the proviso to sub- section (1) and in sub-section (2) shall apply in respect of any proceeding under this sub- section as they apply to a proceeding under subsection (1)."

Sub-section (1) of S. 72 of the Act confers a wide power on the <ORG> to revise any decision or order passed in any proceeding under the Act. Sub-section (3) thereof confers a power on the <ORG> to review the order made under sub- s. (1) thereof if it was passed by the <ORG> under any mistake, whether of fact or of law, or in ignorance of any material fact. To attract sub-s. (3), the order sought to be reviewed should have been made under sub-s. (1). To appreciate the scope of S. 72(1) of the Act, it is necessary to compare the said sub-:section with S. 62 of the Act. Under S. 62(1) , the <ORG> may, by order in writing, cancel any resolution passed by a Panchayat Samithi, if in its opinion such resolution is not legally passed or is in excess or abuse of the powers conferred by or under the Act or for any other reasons mentioned therein. Under sub-s. (2) of S. 62 , the <ORG> shall, before taking action under sub-s. (1) thereof shall give <ORG> or <ORG>, as the case may be, an opportunity for explanation. Section 72 confers a general power on the <ORG>; and on its terms, if there was no other section, it can cancel a resolution of a Panchayat Samithi. But, S. 62 of the Act confers a special power on the <ORG> to cancel a resolution passed by a Panchayat Samithi in the cir-

cumstances mentioned therein. The principle generalities specialities non derogant compels us to exclude from the operation of S. 72 the case provided for under s. 62 . If so construed, it follows that if the order reviewed fell under the scope of s. 62 , it could not be reviewed under s. 72 , for s. 72(3) enables the <ORG> only to review an order made under sub-s. (1) -of S. 72 . So, the learned counsel for the <ORG> as well as for the 4th respondent made a serious effort to bring the order of the <ORG> dated March 7, 1962, within the terms of s. 72(1) of the Act. As the argument turns upon the terms of the said order, it may conveniently be read at this stage :

<ORG> Planning and Local Administration Department. MEMORANDUM NO. 1354/Prog.11/61-2 dated 7-3-1962. Sub Community Development Programme-Chintalapudi Block

-Shifting of <ORG> from Dharmajigudeni to Lingapalem--Orders issued.

Ref. 1. Representation of <NAME> and others dated 31-6-1961.

2. Letter from Collector, West Godavari, No. 01.5642/61 dated 22-9-1961.

<ORG>, Chintalapudi, at its meeting held on 25-8-1960 unanimously resolved to locate <ORG> at Dharmajigudem. Later, <ORG> at its meeting held on 29-5-61 resolved to shift <ORG> permanently to Lingapalem village. The President, <NAME>, and others have represented to <ORG> against acceptance of the resolution passed by the <ORG> at its meeting held on 29-5-1961. This representation has been carefully examined by the <ORG> in consultation with the Collector, West Godavari.

Under Rule 6 of the Rules for the establishment and maintenance of Primary Health Centres by Panchayat Samithis made under the provisions of <ORG>s and Zilla Parishads Act, 1959, <ORG> once established shall not ordinarily be shifted to another place within the Block unless the Samithi resolves by 2/3rd majority of the members present at the meeting as required under rule 7 of the said rules. In the present case <ORG> was already functioning at Dharmajigudem and the resolution of <ORG> dated 29-5-1961 did not get the requisite support of the Samithi Members as required under rule 7. In the above circumstances, the Government consider that there are no valid reasons for shifting <ORG> from Dharmajigudem to Lingapalem. The Block Development Officer, <NAME>, is directed to take action accordingly.

Sd/- <NAME>.

Deputy Secretary to Government.

It was said that the said order did not mention the section whereunder it was passed, that it did not cancel any resolution, that it did not in terms approve or disapprove any resolution, that it considered other orders issued and finally gave a direction to the Block Development Officer to take action in accordance with the terms of the order. In short, the argument of the learned counsel was that the order was not for the cancellation of the resolution of <ORG> but one made in terms of s. 72 of the Act. We are not impressed by this argument. The preamble to the order clearly mentions that <ORG> Chintala- pudi, it its meeting held on May 29, 1961, resolved to shift <ORG> permanently to Lingapalem village. Then it states that the President of <ORG> and others had represented to the <ORG> against the acceptance of the said resolution. The order then records that the <ORG> had carefully considered the said representation. Then it gives the reason that the said resolution was bad inasmuch as that under r. 6 of the Rules <ORG> once established should not ordinarily be shifted to another place within the Block, unless <ORG> resolves by two-thirds majority of the members of the <ORG> present at the meeting as required by r. 7 of the Rules. Then it point-. out that <ORG> was functioning at Dharmajigudem and, therefore, the resolution, not having the support of the requisite majority, did not comply with r. 7 of the Rules. For the said reasons the order concludes that there were no valid reasons for shifting <ORG> from Dharmajigudem to Lingapalem. The Gov-

ernment then gives the consequential directions to the Block Development Officer to take action accordingly. An analysis of the order demonstrates beyond any reasonable doubt that it is nothing more than a cancellation of the resolution passed by <ORG> on May 29, 1961. The mere fact that the order does not use the expression "cancel" will not make it any the less an order cancelling the resolution. We, therefore, hold that the order of the <ORG> dated March 7, 1962, was one made under s. 62 of the Act and, therefore, it could not be reviewed under s. 72 thereof.

The learned counsel for the <ORG> then contended that the order dated April 18, 1963, could itself be sustained under S. 62 of the Act. Reliance is placed upon s. 13 of the Madras General Clauses Act, 1891, whereunder if any power is conferred on the Government, that power may be exercised from time to time as occasion requires. But that section cannot apply to an order made in exercise of a quasi- judicial power. Section 62 of the Act confers a power on the Government to cancel or suspend the resolution of a Panchayat Samithi, in the circumstances mentioned therein, after giving an opportunity for explanation to <ORG>. If the Government in exercise of that power cancels or confirms a resolution of <ORG>, qua that order it becomes functus officio. Section 62 , unlike s. 72, of the Act does not confer a power on the Government to review its orders. Therefore, there are no merits in this contention.

Before we leave s. 62 of the Act, it may be noticed that the order dated March 7, 1962, was passed by the <ORG> without giving notice to <ORG>. It was in violation of the mandatory provision of sub-s. (2) of s. 62 which says that the <ORG> shall, before taking action under sub-s. (1), give <ORG> an opportunity for explanation. This opportunity was not given and, therefore, that order was not legal.

Now let us assume that the said order was made under sub-s. (1) of s. 72 of the Act. Two objections were raised against the validity of the order reviewing the previous order, namely, (i) there was no mistake of fact or law, and (ii) the said order, which was prejudicial to Dharmajigudem village, was made without giving an opportunity to the representatives of the said village of making a representation. The order gives in extension the history of the dispute between Dharmajigudem and Lingapalem in the matter of location of <ORG>. It points out that all the earlier resolutions of <ORG> were cancelled and Sup .C/66-13 the only outstanding resolution was that of May 29, 1961, whereunder the said <ORG> was directed to be located permanently at Lingapalem. Then it proceeds to say that the order dated March 7, 1962, was passed on a mistaken impression that it was a case of shifting <ORG> from one place where it was permanently located to another, while the correct position was that the place where <ORG> was to be located permanently had not till then been decided by the <ORG>. In that view, in supersession of the order issued by it on March 7, 1962, it directed that the said <ORG> should be located permanently at Lingapalem as per the resolution of <ORG> dated May 29, 1961. No doubt the statement in that order, namely, that the place where <ORG> was to be located permanently had not so far been decided by the <ORG>, if taken out of context, may appear to be an incorrect statement, for the <ORG> by it-, order dated July 6, 1960, approved the proposal of <ORG>, Chintalapudi, to locate <ORG> permanently at Dharmajigudem. But an analysis of the various orders passed by <ORG> and the <ORG> discloses, as we have already indicated, that <ORG> was never permanently located at Dharmajigudem, that before the Act it was located therein subject to certain conditions which were not fulfilled, that after the Act <ORG>, though it passed a resolution on May 28, 1960, approving the location of the said <ORG> permanently at Dharmajigudem and though it was approved by the <ORG> by its order dated July 6, 1960, cancelled its earlier resolution in accordance with law on May 29, 1961 and voted for locating the <ORG> at Lingapalem. Therefore, the <ORG> was right when it said in its order that it made a mistake of fact in passing its earlier order on March 7, 1962, on a misapprehension that there was a permanent location of the <ORG> at Dhar- majigudem.

But there is another flaw in the order of the <ORG> dated April 18, 1963, i.e., it made the order without giving an opportunity to the representatives of Dhartnajigudem who were prejudicially affected by the said order. Learned counsel for the <ORG> said that the appellant could not be considered to be a party prejudicially affected by that order. But, as we have stated earlier, the appellant was the President of the <ORG> which collected the amount, he was representing the village all through and he also deposited the prescribed amount with the <ORG> officer. The <ORG> should have, therefore, given notice either to him or to the <ORG>, which was representing the village all through for the purpose of securing the location of <ORG> in their village. The order made in derogation of the proviso to sub-s. (1) of s. 72 of the Act is also bad.

The result of the discussion may be stated thus : The Primary Health Centre was not permanently located at Dharmajigudem. The representatives of the said village did not comply with the necessary conditions for such location. <ORG> finally cancelled its earlier resolutions which they were entitled to do and passed a resolution for locating the Primary Health Centre permanently at Lingapalem. Both the orders of the Government, namely, the order dated March 7, 1962, and that dated April 18, 1963, were not legally passed : the former, because it was made without giving notice to <ORG>, and the latter, because the Government had no power under s. 72 of the Act to review an order made under s. 62 of the Act and also because it did not give notice to the representatives of Dharmajigudem village. In those circumstances, was it a case for <ORG> to interfere in its discretion and quash the order of the Government dated April 18, 1963 ? If <ORG> had quashed the said order, it would have restored an illegal order-it would have given <ORG> to a village contrary to the valid resolutions passed by <ORG>. <ORG>, therefore, in our view, rightly refused to exercise its extraordinary discretionary power in the circumstances of the case.

In the result, the appeal is dismissed, but, in the circumstances of the case, without costs.

Appeal dismissed.


PETITIONER: <NAME> Vs. RESPONDENT: THE COMMISSIONER OF <ORG>,BOMBAY CITY. DATE OF JUDGMENT: 01/11/1954 BENCH: <NAME>, <NAME> BENCH: <NAME>, <NAME> MAHAJAN, <NAME> (CJ) HASAN, <NAME>, <NAME>, <NAME> CITATION: 1955 AIR 58 1955 SCR (1) 829 CITATOR INFO : F 1958 SC 560 (10) R 1959 SC 459 (13) R 1959 SC 582 (7) RF 1960 SC 424 (11) R 1960 SC 751 (4) R 1960 SC1073 (10) RF 1961 SC 652 (10) R 1962 SC1563 (10) R 1963 SC1241 (68) RF 1964 SC 572 (8) R 1965 SC1375 (9,22,24,25,27,35,36) RF 1965 <NAME> (12) MV 1966 <NAME> (55) R 1967 <NAME> (40) E 1968 SC1286 (6) R 1971 SC 792 (4) R 1972 SC 425 (30) D 1978 SC 449 (26,41,42) F 1978 SC 771 (58) R 1981 SC 907 (10,13) R 1984 SC 981 (8) RF 1986 SC1272 (79) RF 1990 SC 781 (13) E 1990 SC1637 (16-A,38) E 1990 SC1664 (6) ACT: Indian Income-tax Act (XI of 1922) s. 12-B -Government of India Act, 1935 (26 Geo. 5 CH. 2) Seventh Schedule, List I, Item 54-Tax on capital gains, if ultra vires--Capital gains, if income -Legislative practice-Interpretation of words- Words used in Constitution Act . HEADNOTE: Section 12-B of the Indian Income-tax Act, 1922 (inserted by Act XXII of 1947) which imposed tax on 'Capital gains' is not ultra vires the Government of India Act, 1935. The term 'Capital 106 830 gains' comes well within the meaning of the word 'income' used in item No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935. It is incorrect to say that income cannot signify 'Capital gains' and it is equally an incorrect approach to hold that there is a legislative practice which recognises a clear line of demarcation between income and capital. What is relied on here as a legislative practice is nothing but the judicial interpretation given to the word 'income' as used in the income-tax and fiscal statutes. Such interpretation does not necessarily cut down the ordinary natural meaning of the word 'income' as used in item No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935. Cardinal rule of interpretation is that the words should be read in their ordinary natural and grammatical meaning. But the words in a constitutional enactment conferring legislative powers should however be construed most liberally and in their widest amplitude, <CITATION> . 59 I.A. 206); <NAME> v. <NAME> and <NAME> v. <NAME> (1923) 8 T.C. 521; <ORG> Reduced) v. <NAME> (1904) 5 T.C. 159; <CITATION> . 75 I.A. 86: (1948) F.C.R. 1 : 16 I.T.R 2401 ; Croft v. <NAME> L.R. 1933 A.C. 156; <CITATION> . 70 I.A. 180: (1943) 11 I.T.R. 513] ; In re The Central Provinces and Berar Act No. -XIV of 1938 (1939) F.C.R. 18; United Provinces v. Atiqa Begum (1940) F.C.R. 110; <CITATION> (1951) S.C.R. 682 ; Eisner v. <NAME> (252 U.S. 189 : 64 L. Ed. 521) <ORG> v. <NAME> (255 U.S. 509: 65 L. Ed. 751) ; United States v. <NAME> (311 U.S. 60: 85 L. Ed. 40) and <NAME> v. Federal Commissioner of Taxation (66 C.L.R. 198), referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 194 of 1952. Appeal from the Judgment and Order, dated the 7th day of September, 1951, of <ORG> at Bombay in Income-tax Reference No. 46 of 1950.

<NAME> (<NAME> and <NAME>, with him) for the appellant.

<NAME>, Attorney-General for India (<NAME>, with him) for the respondent.

1954. November 1. The Judgment of the Court was delivered by DAS J.

DAS J.-This appeal is directed against the judgment pronounced on the 7th September, 1951, by <ORG> at Bombay on a reference made at the instance of the appellant under section 66(1) of the Indian Income-tax Act, 1922. By an, assessment order dated the 31st March, 1948, the appellant was assessed by <ORG>, Bombay, for the assessment year 1947-1948 on a total income of Rs. 19,66,782 including a sum of Rs. 9,38,011 representing capital gains assessed in the hands of the appellant under section 12-B of the Act. The said amount of capital gains was earned by the appellant in the following circumstances. The assessee had a half share in certain immovable properties situate in Bombay which were sold by the assessee and his coowners during the relevant accounting year which was the calendar year ending on the 31st December, 1946, to a private limited company known as <ORG> The profits on the sale of the said properties amounted to Rs. 18,76,023 and the appellants half share therein came to the sum of Rs. 9,38,011 which was included in the assessment under section 12-B .

In April, 1948, the appellant appealed from the said order to the Appellate Assistant Commissioner contending that section 12-B of the Act authorising the levy of tax on capital gains was ultra vires <ORG>. The Appellate Assistant Commissioner by his order dated the 5th April, 1949, dismissed the appeal. A further appeal to <ORG> was dismissed by its order dated the 30th June 1950.

Being aggrieved by the order of <ORG> the appellant applied to it under section 66(1) of the Act for raising certain questions of law. <ORG> agreeing that certain questions of law did arise out of its order drew up a statement of the case which was agreed to by the parties and referred to <ORG> the following questions:-

(1) Whether the imposition of a tax under the head " capital gains " by <ORG> was ultra vires (2) Whether the imposition was in any way invalid on the ground that it was done by amending the Indian Income-tax Act ?

After hearing the reference <ORG> following ,its judgment in Income-tax Reference No. 18 of 1950, <CITATION> , answered the first question in the negative and expressed the opinion that it was not necessary to answer the second question. In that reference the two learned Judges gave the same answer to the first question but on different grounds as elaborated in their respective judgments.

The principal question that was discussed before <ORG>, as before us, was whether section 12-B which authorised the imposition of a tax on capital gains was invalid being ultra vires <ORG>. Section 12-B was inserted in the Act by the Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 (XXII of 1947) which was a Central Act . Under section 100 of the Government of India Act, 1935, <ORG> was, empowered to make laws with respect to matters enumerated in List I in the Seventh Schedule to that Act. The only entries in List I on which reliance could be placed to uphold the impugned Act were entries 54 and 55 which were as follows:

" 54. Taxes on income other than agricultural income.

55. Taxes on the capital value of the assets,exclusive of agricultural land, of individuals and companies, and taxes on the capital of companies."

<NAME> held that the enactment of Act XXII of 1947 which inserted section 12-B was well within the scope of the legislative powers of <ORG> as it fell within entry 55 and was valid either as a whole or, in any case, to the extent that it applied to individuals and companies. Although it was unnecessary for the learned Chief Justice to decide whether the Act could be supported as a valid piece of legislation falling within the scope of entry 54 yet in deference to the arguments advanced before the <ORG> the learned Chief Justice expressed the view that it could not be so supported. <NAME>, on the other hand, held that Act XXII of 1947 was wholly intra vires <ORG> as it fell within entry 54 and in this view of the matter he did not consider it necessary to discuss whether the legislation was covered by entry 55 in List I of the Seventh Schedule. In our opinion the view taken by <NAME> with respect to entry 54 is correct and well- founded.

In the course of a lucid argument advanced with his usual ability and skill Mr. <NAME> submitted that entry 54 which deals with "taxes on income" does not embrace within its scope tax on capital gains. "Income", according to him, does not signify capital gains either according to its natural import or common usage or according to judicial interpretation of relevant legislation both in England and in India. He submitted that the learned Chief Justice was entirely right in the view that there was a clear line of demarcation that had always been observed by English lawyers and English jurists between income and capital, that the English legislative practice had always recognised this difference and that as the word had come to acquire a certain meaning and a certain -connotation by reason of such legislative practice in England, the British <ORG> which enacted the Government of India Act, 1935, must be regarded as having understood and used that word " income " in entry 54 in that sense. Our attention has not, however, been drawn to any enactment other than fiscal statutes like the Finance Act and the Income-tax Act where the word "income" has been used and, therefore, it is not possible to say that the critical word had acquired any particular meaning by reason of any legislative practice. Reference has been made to several cases where the word "income" has been construed by the <ORG>. What is, therefore, described as legislative practice is nothing but judicial interpretations of the word " income " as appearing in the fiscal statutes mentioned above. A perusal of the those cases, however, will reveal at once that those decisions were concerned with ascertaining the meaning of that word in the context of the Income-tax legislation. Thus the observation of their Lordships of <ORG> in <CITATION> .(1), laid down the connotation of the word "income" as used "in this Act." The passage in the judgment of <ORG> in <NAME> v. <NAME> and <NAME> v. Honeywill(2), quoted by the learned Chief Justice in his judgment and strongly relied on by Mr. <NAME>, refers to profits or gains "as used in these Acts." In <ORG>Limited and Reduced) v. Harris(3), Lord Justice Clerk refers to the enhanced price realised on sale of certain things over the cost price thereof as not being profits "in the sense of Schedule D of the Income Tax Act of 1842." These guarded observations quite clearly indicate that they relate to the term "income" or "Profit" as used in the Income-tax Act . There is no warrant for saying that these observations out down the natural meaning of the ordinary English word "income" in any way. The truth of the matter is that while Income-tax legislation adopts an inclusive definition of the word "income" the scheme of such legislation is to bring to charge only such income as falls under certain specified heads (e.g., the 5 Schedules of the English Act of 1918 and our section 6 read with the following sections) and as arises or accrues or is received or is deemed to arise or accrue or to be received as mentioned in the statute. The <ORG>s have striven to ascertain the meaning of the word "income" in the context of this scheme. There is no reason to suppose that the interpretation placed by the <ORG>s on the word in question was intended to be exhaustive of the connotation of the word "income" outside the particular statute. If we hold, as we are asked to do, that the meaning of the word "income" has become rigidly crystallized by reason of the judicial interpretation of that word appearing in the Income-tax Act then logically no enlargement of the scope of the Income-tax Act , by amendment or otherwise, will be permissible in future. A conclusion so extravagant and astounding can scarcely be contemplated or (1) (1932) L.R. 59 I.A. 206 at page 212.

(2) (1923) 8 T.C. 521 at page 525.

(3) (1904) 5 T.C. 159 at page 165.

<NAME>

countenanced. We are satisfied that the cases relied on by Mr. <NAME> and referred to in the judgment of the learned Chief Justice do not, as we read-them, establish the broad proposition that the ordinary English word "income" has acquired a particularly restricted. meaning. The case of <CITATION> (1) was not concerned with ascertaining the meaning of the word "income" at all. The problem there was whether the foreign income of an English company which was a partner in a firm carrying on business in Bombay and whose Indian income was greater than its foreign income could be treated as a resident within the meaning of section 4-A . It was in that context said in that case that in determining the scope and meaning of the legislative power regard was to be had to what was ordinarily treated as embraced within that topic in the legislative practice of the United Kingdom. The problem there was not to ascertain the meaning of the word "income" so much as to ascertain the extent of the application of the Act to the foreign income. That case, clearly, does not establish that the word "income" had acquired any special or narrow meaning. The same remarks apply to the case of <NAME> v. Dunphy(1), referred to by Lord <NAME> in delivering the judgment of <ORG> in <ORG> case (supra). In <NAME> v. Commissioner of Income-tax(,), Lord <NAME> observed :-

" Income, it is true, is a word difficult and perhaps impossible to define in any precise general formula. It is a word of the broadest connotation. "

After making the above observation his Lordship referred to the observations of Sir <NAME> in <CITATION> . (supra), where an attempt was made to indicate the connotation of the word "income" as used "in this Act." It is, therefore, clear that none of the authorities relied on by Mr. <NAME> establish what may be called a legislative practice indicating the connotation of the (1) (1948) L.R. 75 I.A. 86;  F.C.R. 1 ; 16 I.T.R.

240. (2) L.R. [1933] A.C. 156.

(3) (1943) L.R. 70 I.A. 180; [1943] 11 I.T.R. 513.

term "income", apart from the Income-tax statute. In our view, it will be wrong to interpret the word "income" in entry 54 in the light of any supposed English legislative practice as contended for by Mr. <NAME>. It ,is interesting to note that in the English Income Tax Act of 1945 (8 and 9 Geo. VI, C. 32, sections 37 and 38 ) capital gains have been included as taxable income.

In should be remembered that the question before us relates to the correct interpretation of a word appearing in a Constitution Act which, as has been said, must not be construed in any narrow and pedantic sense. <NAME> in In re The Central Provinces and Berar Act No. XIV of 1938(1), observed at pages 36-37 that the rules which apply to the interpretation of other statutes apply equally to the interpretation of a constitutional enactment subject to this reservation that their application is of necessity conditioned by the subject-matter of the enactment itself It should be remembered that the problem before us is to construe a word appearing in entry 54 which is a head of legislative power. As pointed out by <NAME> in The United Provinces v. Atiqa Begum(2) at page 134 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. Itis,therefore,clear-anditisacknowledged by Chief Justice <NAME>-that in construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. Reference to legislative practice may be admissible for cutting down the meaning of a word in order to reconcile two conflicting provisions in two legislative Lists as was done in The C. P. and Berar Act case (supra), or to enlarge their ordinary meaning as in <CITATION> (3). The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in (I)  F.C.R. 18.

(2) [1940] F.C. R. 110.

(3) [1951] S.C. R. 682.

construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude.

What, then, is the ordinary. natural and grammati-: cal meaning of the word "income" ? According to the dictionary it means "a thing that comes in". (See Oxford Dictionary, Vol. 11, page 162; <NAME>, Vol. 11, pages 14-16). In the United States of America and in Australia both of which also are English speaking countries the word "income" is understood in a wide sense so as to include a capital gain. Reference may be made to Eisner v. <NAME>), <ORG> v. <NAME>), and United States v. Stewart(3), and <NAME> v. Federal Commissioner of Taxation(

4). In each of these cases very wide meaning was ascribed to the word "income" as its natural meaning. The relevant observations of learned Judges deciding those cases which have been quoted in the judgment of <NAME> quite clearly indicate that such wide meaning was put upon the word "income" not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word "income." Its natural meaning embraces any profit or gain which is actually received. This is in consonance with the observations of Lord <NAME> to which reference has already been made. Mr. <NAME> concedes that the word "income" is understood in the United States and Australia in the wide sense contended for by the learned Attorney-General but he maintains that the law in England is different and, therefore, entry 54 which occurs in a Parliamentary statute should be construed according to the law of England. We are again brought back to the same argument as to the word having acquired a restricted meaning by reason of what has been called the legislative practice (1) (1920) 252 U.S. 189; 64 L. Ed. 521.

(2) (1925) 255 U.S. 509 ; 65 L. Ed. 75 1 (3) (1940) 311 U.S. 60 ; 85 L. Ed. 40.

(4) (1942) 66 C.L.R. 198.

in England an argument which we have already discarded. The argument founded on an assumed legislative practice being thus out of the way, there can be no difficulty in applying its natural and grammatical meaning to the ordinary English word "income." As already observed, the word should be given it widest connotation in view of the fact that it occurs in a legislative head conferring legislative power. For reasons stated above we are of opinion that Act XXII of 1947 which amended the Indian Income-tax Act by enlarging the definition of the term income in section 2 (6-C) and introducing a new head of income in section 6 and inserting the new section 12-B is intra vires the powers of <ORG> acting under entry 54 in List I of the Seventh Schedule of the Government of India Act, 1935. In this view of the matter it is unnecessary for us to consider or express any opinion as to the meaning, scope and ambit of entry 55 in that List. The appeal is accordingly dismissed with costs.

Appeal dismissed.


PETITIONER: <NAME> AND ANOTHER Vs. RESPONDENT: GOVERNMENT OF <NAME> AND OTHERS. DATE OF JUDGMENT: 20/04/1955 BENCH: <NAME>, NATWARLAL H. BENCH: <NAME>, NATWARLAL H. DAS, SUDHI RANJAN SINHA, BHUVNESHWAR P. CITATION: 1955 AIR 604 1955 SCR (2) 374 ACT: Indian Companies Act , (Act VII of 1913), s. 232(1) as amended by Act XXII of 1936-The words "or any sale held without leave of the <ORG> of any of the properties of the Company" added in the section-Whether legislature intended to make alteration in the low as respects sales effected by secured creditor-Secured creditor-Whether outside the winding up-Construction-Presumption against implied alteration of law. HEADNOTE: The secured creditor is outside the winding up and can realism his security without the leave of the winding up <ORG>, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under s. 171 of the Indian Companies Act to obtain the leave of the winding up <ORG> before he can do so although such leave would almost automatically be granted. 375 It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them. It is also a well- recognized rule of construction that the legislature does not intend to make a substantial alteration in the law beyond what it explicitly declares either in express words or by clear implication and that the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched. Held therefore that having regard to the context in which the words "any sale held without leave of the <ORG> of any of the properties" added in s. 232(1) by the amending Act XXII of 1936 have been used in juxtaposition with "any attachment, distress or execution put into force without leave of the <ORG> against the estate or effects" it would be a legitimate construction to be put upon them that they refer only to sales held through the intervention of the <ORG> and not to sales effected by the secured creditor outside the winding up and without the intervention of the <ORG>, and that the amendment was not intended to bring within the sweep of the general words sales effected by the secured creditor outside the winding up. Held accordingly that in the present case the sale effected by respondent No. 2 as the receiver of the trustees of the debenture holders in July 1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the Official Receiver. Food Controller v. Cork(1923 A.C. 647), <ORG> v. <NAME> ( I.L.R. 43 All. 433), <NAME> v. <ORG> ( 38 I.C. 91), <CITATION> (1954 S.C.R. 587), <NAME> and others v. <NAME> (L.R.  5 A. C. 63), <NAME>, P. v. <NAME>, C. L. ( 3 W.L.R. 682), <ORG> v. <NAME> ( 2 Q.B. 648), <CITATION> ( I.L.R. 30 Mad. 426) and <NAME> in <CITATION> ) (1946 F.C.R. 40), referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 20 of 1955. Appeal from the Judgment and Order dated the' 29th day of September 1954 of <ORG> at Madras in Original Side Appeal No. 113 of 1954 arising out of the order dated the 9th day of August 1954 of the said <ORG> in its Ordinary Original Civil Jurisdiction in Application No. 3542 of 1954.

<NAME>, Solicitor-General for India (<NAME>, <NAME> and <NAME>, with him) for the appellants.

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

2. <NAME>, ( <CITATION> , with him) for respondent No. 3.

1955. April 20. The Judgment of the Court was delivered by BHAGWATI J.-This appeal with a certificate under article 133 (1) (c) of the Constitution is directed against the judgment of <ORG> at Madras dismissing the appeal of the Appellants and refusing to set aside a sale effected by Respondent 2 of certain properties belonging to <ORG> hereinafter called the <ORG>, above the ground at Vepery, Madras and Mylapore, including the machinery cars, etc. and buildings as scrap to Respondent 3 in his capacity as the Receiver of the trustees of the debenture holders of the <ORG>. The Appellants are the Secretary and President respectively of <ORG> (Registered No. 1253) a Trade Union registered under the Trade Unions Act . The workmen employed by the <ORG> are entitled under the award of <ORG>, Madras in I. D. No. 9 of 1953 published in <ORG>, dated the 8th July, 1953 being G. 0. Ms. No. 3024/53 to a payment of nearly Rs. 7,00,000 out of which the workers belonging to <ORG> alone would be entitled nearly to a sum of Rs. 4,35,000 and are thus the major creditors of the <ORG>. The <ORG> was incorporated in England with its principal office situated at No. 1, Rundalls Road, Vepery, Madras-7 and was running <ORG> in Madras with licence issued to it by the <ORG> under the Tramways Act . It had issued 1300 First Debentures of CIOO each and the debenture-holders had appointed <ORG>, England as trustees. By an Indenture made in England on the 13th October 1924 the <ORG> charged by way of first charge in favour of the trustees all its undertaking properties and assets for the time being both present and future including its uncalled capital with the payment of all moneys for the time being owing on the security of the debentures and such charge was to rank as a floating charge. By two subsequent deeds made at Madras dated the 26th March, 1925 and 6th July, 1950 certain immovable properties belonging to the company were mortgaged in favour of the said trustees. The said Trustees appointed Respondent 2, the Managing Director of the <ORG> and day to day management of <ORG> and of the business of the <ORG>, as their Receiver. He took possession as such Receiver,, from the midnight of 11th April, 1953 of all the assets of the <ORG> including moneys in the bank to the credit of the <ORG> and after that date <ORG> was suspended and still remains suspended.

One <NAME>, one of the Directors of the Company filed O. P. No. 419 of 1953 as the duly constituted Attorney of the Company for winding up the Company on the ground that it was unable to pay its debts and that it bad ceased to carry on its business. An order for the winding up of the Company was made by the Court on the 20th January, 1954 and the Official Receiver, <ORG>, Madras, was appointed the Official Liquidator. Since all the assets including the moneys of the Company were in possession of Respondent 2, the Official Receiver was unable to take charge of anything except the records of the Company.

Soon after the order for winding up the Respondent 2 advertised in the newspapers on the 23rd January, 1954 for the sale of the properties and assets of the <ORG>. At the end of the conditions of sale he stated in paragraph 7 that "the sales are for the time being subject to the approval of <ORG> at Madras and it will be for the undersigned to obtain such approval for accepted offers free of all costs to the purchaser".

At the time of the order of winding up, two suits were pending in <ORG>, C.S. No. 191 of 1952 filed by the <ORG> against the State of Madras for Rs. 1,33,204-9-0 and interest thereon being electric charges alleged to have been collected by the State of Madras in excess of those payable by the <ORG> and paid by the company under protest and C.S. No. 368 of 1953 filed by the State of Madras against the <ORG> for the recovery of Rs. 9,26,123-2-3 with interest thereon, being the difference alleged to be due in respect of the electric charges under the old rates and the revised rates applicable to the <ORG>. During the pendency of the said suits Respondent 2 gave an undertaking in Application No. 4533 of 1953 in Civil Suit No. 368 of 1953 that he would not without the orders of <ORG> dispose of any of the assets of the <ORG> which were in his possession till the disposal of the suit C.S. No. 368 of 1953. The two suits aforesaid were tried together and were disposed of by a common judgment on the 16th March 1954. On the 16th July 1954 Respondent 2 agreed to sell and Respondent 3 agreed to buy the movable properties of the <ORG> the particulars of which were set out in the agreement entered into on that date, for a price of Rs. 4,01,658 of which half was paid on the signing of the agreement and the other half was agreed to be paid out of the proceeds of sale to be made by the purchasers of the assets as scrap.

On the 23rd July 1954 the Official Receiver, <ORG>, Madras (Respondent 5 herein) filed an application No. 3542 of 1954 for setting aside the said sale of the assets of the Company on the grounds, inter alia, that it was prejudicial to the interests of the General body of unsecured creditors, that the same had been concluded with undue haste and without adequate publicity and in violation of Respondent 2's said undertaking to the Court. It also asked for an injunction restraining the Respondent 2 from handing over and the Respondent 3 from either taking over or breaking up the assets purchased by him pending, the disposal of the said application.

This application was based on a report of the Official Receiver in which after setting out the relevant facts he submitted that even though under section 229 of the Indian Companies Act the Company which was admittedly insolvent was governed by rules prevailing with regard to the respective rights of the secured and unsecured creditors and to debts provable and valuation of annuities governing the administration in insolvency and secured creditors generally stood outside the liquidation and were entitled to have the remedy of realising the security and proving before him for the deficiency, if the properties of the Company could be sold for a price higher than the amount due to the Trustees of the debenture holders there was a possibility of a surplus coming into his bands for the benefit of the unsecured creditors. If the Respondent 2 proved before him for any deficiency due to the secured creditors, it would certainly affect the rights of unsecured creditors, and moreover though the secured creditors might realise the security, it will be in the interests of the unsecured creditors to see that a fair and proper price was obtained. He therefore submitted that in the interests of the unsecured creditors it was just and necessary to have a fair valuation ascertained and an enquiry held to ascertain whether the sale by the Respondent 2 in favour of Respondent 3 was bona fide and for a proper price. Respondent 2 filed an affidavit in reply in August 1954 contending inter alia, (1) that the offer by the Respondent 3 was the highest, that he had received and that this had been accepted bona fide, (2) that in the advertisement the condition as to the previous sanction of the <ORG> was inserted because of the undertaking that be had given to the <ORG> in C.S. No. 368 of 1953 and that this undertaking lapsed with the dismissal of the said suit on the 16th March 1954, (3) that he had been advised by the Solicitors in England for the debenture trustees that it was unnecessary for him to obtain the sanction of the <ORG> and that he had been instructed not to apply for such sanction and (4) that the sale was bona fide and he had secured as good a price as could be obtained.

By its judgment and order dated the 9th August 1954 Mr. Justice <NAME> (in Chambers) dismissed the said application with costs. The learned Judge held that the question whether Respondent 2 had violated the undertaking given by him was not germane to the application before him, that undoubtedly the Respondent 2 did give wide publicity of his intention to sell the assets of the Company, that it could not be said that the sale was sub rosa on the ground of want of wide publicity to the intended sale of the Company's assets and that the Respondent 3's offer was the best offer received by the Respondent 2 looking both to the abstract of offers appended to the affidavit of the Respondent 2 in the said application, and looking to the other offers pointed out to him by Respondent 5. The learned Judge further referred to the offer of <ORG> and said that the said <ORG> had not made any firm offer at all and that the offer of one A. Chettiar of Rs. 4,25,000 made on 5th August 1954 during the hearing of the application was an offer made by a person who did not appear to him to be of a man of sound financial status. The learned Judge in his judgment also recorded the fact that during the hearing of the application the Respondent 3 offered to sell to <ORG> the entire assets he had purchased at the same price which he paid for it but the <ORG> were not prepared to accept the offer.

The Respondent 5 accepted the said judgment and decision and did not prefer any appeal against the same. But the Appellants who were not parties to the proceedings applied for and obtained from <ORG> leave to appeal from the said decision. This appeal also was dismissed by <ORG> with costs on the 24th September 1954. <ORG> differed from the finding of <ORG> and held that due publicity had not been given to the intended sale and observed that if the matter rested merely on a decision of that point they would have allowed the appeal and set aside the sale. They how-' ever held that in the absence of fraud or want of bona fides on the part of the seller along with that of the buyer the sale in favour of the Respondent 3 could not be set aside. <ORG> further considered the question whether the said sale was void as being without the leave of the <ORG> in view of section 232 of the Indian Companies Act and answered that question in the negative. <ORG> further held that a secured creditor had a right to realise his security without seeking the assistance of the court and remaining outside the winding up.

Being aggrieved by the said judgment and decree of <ORG> the Appellants applied for leave to appeal to this Court and such leave was granted by <ORG> on the 24th September 1954.

The bona fides of the Respondent 2 in the matter of the sale were not challenged either in the <ORG>s below or before us and there were concurrent findings of fact that the price obtained by Respondent 2 was the best price available under the circumstances. It was however urged by the learned Solicitor-General for the Appellants:-(I) that <ORG>, having found that due publicity had not been given to the intended sale, ought not to have allowed the Respondent 3 at that stage to raise the question as to whether the <ORG> had any power or jurisdiction to set aside the sale except on the ground that it was vitiated by fraud or for want of bona fides and (2) that the sale- by Respondent 2 being a sale held without leave of the winding up <ORG> was void under section 232(1) of the Indian Companies Act. The High <ORG> bad allowed the Respondent 3 to raise the question even at that late stage inasmuch as it was a pure question of law and the learned Solicitor-General therefore rightly did not press the first contention before us. The main argument centered round the second contention, viz., whether the sale effected by the Respondent 2 without leave of - the winding up <ORG> was void and hence liable to be set aside.

The decision of this question turns upon the true construction of section 232 of the Indian Companies 'Act, which runs as under:-

"(I) Where any company is being wound up by or subject to the supervision of the <ORG>, any attachment, distress or execution put in force without leave of the <ORG> against the estate or effects or any sale held without leave of the <ORG> of any of the properties of the company after the commencement of the winding up shall be void. (2) Nothing in this section applies to proceedings by the Government".

It may be noted that the words "or any sale held without leave of the <ORG> of any of the properties" underlined above were inserted by Act XXII of 1936. Before this amendment section 232(1) was almost in identical terms with section 228(1) of the English Companies Act of 1948. Two other sections of the Indian Companies Act may be noted in this context, viz. section 171 :"When a winding up order has been made or a provisional liquidator has been appointed no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the <ORG>, and subject to such terms as the <ORG> may impose." and Section 229 :-

"In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section;" which correspond respectively to sections 231 and 317 of the English Companies Act of 1948.

The position of a secured creditor in the winding up of a company has been thus stated by Lord <NAME> in <ORG> Cork(1):

"The phrase 'outside the winding up' is an intelligible phrase if used, as it often is, with reference to a secured creditor, say a mortgagee. The mortgagee of a company in liquidation is in a position to say "the mortgaged property is to the extent of the mortgage my property. It is immaterial to me whether my mortgage is in winding up or not. I remain outside the winding up' and shall enforce my rights as mortgagee". This is to be contrasted with the case in which such a creditor prefers to assert his right, not as a mortgagee, but as a creditor. He may say 'I will prove in respect of my debt'. If so, he comes into the winding up".

It is also summarised in Palmer's Company Precedents Vol. II, page 415:

"Sometimes the mortgagee sells, with or without the concurrence of the liquidator, in exercise of a power of sale vested in him by the mortgage. It is not necessary to obtain liberty to exercise the power of sale, although orders giving such liberty have sometimes been made". The secured creditor is thus outside the winding up and can realise his security without the leave of the winding up <ORG>, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under section 231 (corresponding with section 171 of the Indian Companies Act) to obtain the leave of, the winding up <ORG> before he can do so although such leave would almost automatically be granted. Section 231 has been read together with section 228(1) and the attachment, sequestration, distress or execution referred to in the latter have reference to proceedings taken through the <ORG> and if the creditor has resort to those proceedings he cannot put them in force against the estate or effects of the <ORG> after the commencement of the winding up without the leave of the winding up <ORG>. The (1) 1923 Appeal Cases 647.

provisions in section 317 are also supplementary to the provisions of section 231 and emphasise the position of the secured creditor as one outside the winding up, the secured creditor being, in regard to the exercise of those rights and privileges, in the same position as he would be under the Bankruptcy Act.

The corresponding provisions of the Indian Companies Act have been almost bodily incorporated from those of the English Companies Act and if there was nothing more, the position of the secured creditor here also would be the same as that obtaining in England and he would also be outside the winding up and a sale by him without the intervention of the <ORG> would be valid and could not be challenged as void under section 232(1) of the Indian Companies Act. It was however urged that the addition of the words "or any sale held without leave of the <ORG> of any of the properties" had changed the position of the secured creditor and even though the secured creditor realised the security without the intervention of the <ORG> such sale, if effected by him without the leave of the winding up <ORG>, was void. It was pointed out that these words did not find their place in the corresponding section 228(1) of the English Companies Act and therefore even though any attachment, distress or execution put in force without leave of the <ORG> against the estate or effects of the company after the commencement of the winding up was void under the terms of the section 232(1) as it originally stood, the words "or any sale held without leave of the <ORG> of any of the properties" of the company were wide enough to include not only a sale held through the intervention of the <ORG> but also a sale effected by the secured creditor without the intervention of the <ORG> whether the sale was by private treaty or by public auction. It was contended on the other hand on behalf of the contesting Respondent, Respondent 3, that the amendment was made in order to get over the decision of the Allahabad High <ORG> in <ORG> v.

<NAME>) and that in any event on a true construction of section 232(1) as amended the words "any sale held" had reference in the context only to sales held by or effected through the intervention of the <ORG> and not sales effected by the secured creditor without the intervention of the <ORG>.

The decision of <ORG> above referred to had held on a construction of section 232(1) as it then stood, that an execution was not put in force merely when the property of the judgment debtor was sold in pursuance thereof, but it was put in force when the property was attached and hence where the property of an insolvent company was attached prior to the date of the commencement of the winding up but was actually sold subsequent to such date, the sale was not void and could be upheld. There was an earlier decision of <ORG> in <NAME> v. <ORG>) in which a contrary decision had been reached exactly under similar circumstances. It is well-known that this conflict was resolved and the decision of <ORG> was got over by inserting this amendment by Act XXII of 1936. The statement of objects and reasons is certainly not admissible as an aid to the construction of a statute. But it can be referred to for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil which he sought to remedy. <CITATION> (3). The amendment of section 232(1) inserted by Act XXII of 1936 was designed to prevent such sales as were upheld by the decision of <ORG> in <ORG> v. <NAME>) and it would be permissible to refer to that portion of the statement of objects and reasons for the purpose of ascertaining the extent and urgency of the evil which was sought to be remedied by introducing the amendment. It follows therefore that the (1)  I.L.R. 43 Allahabad 433 (2)  38 Indian Cases 91.

(3) [1954] S.C.R. 587, 628.

<NAME>

amendment could not have been intended to bring within the sweep of the general words "or any sale held without the leave of the <ORG> of any of the properties" sales effected by the secured creditor outside the winding up. Even apart from this intendment there are certain canons of construction which also tend to support the same conclusion. Prior to the amendment the law was well-settled both in England and in India that the secured creditor was outside the winding up and he could realise his security without the intervention of the <ORG> by effecting a sale of the mortgaged premises by private treaty or by public auction. It was only when the intervention of the <ORG> was sought either by putting in force any attachment, distress or execution within the meaning of section 232(1) as it stood before the amendment or proceeding with or commencing a suit or other legal proceedings against the company within the meaning of section 171 that leave of the <ORG> was necessary and if no such leave was obtained the remedy could not be availed of by the secured creditor. The sale of the mortgaged premises was also brought by the amendment on a par with the attachment, distress or execution put in force at the instance of the secured creditor and having regard to the context such sale could only be construed to be a sale held through the intervention of the <ORG> and not one effected by the secured creditor outside the winding up and without the intervention of the <ORG>.

It is a well-recognised rule of construction that "when two or more words which are susceptible of analogous meaning are coupled together noscunter a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other., that is., the more general is restricted to a sense analogous to the less general. (Maxwell on Interpretation of Statutes, Tenth Edition, p.

332). <ORG> also expressed itself in similar terms in <NAME> & Others v. <NAME>

(1) [1879] L.R. 5 A.C. 63, 69.

"It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them".

Having regard therefore to the context in which these words "any sale held without leave of the <ORG> of any of the properties" have been used in juxtaposition with "any attachment, distress or execution put into force without leave of the <ORG> against the estate or effects" it would be a legitimate construction to be put upon them that they refer only to sales held through the intervention of the <ORG> and not to sales effected by the secured creditor outside the winding up and without the intervention of the <ORG>.

There is also a presumption against implicit alteration of law and that is enunciated by <NAME> on Interpretation of Statutes, 10th Edition, at page 81 in the following terms:- "One of these presumptions is that the legislature does not intend to make any substantial alteration in the law beyond what it explicitly declares, either in express terms or by clear implication, or, in other words, beyond the immediate scope and object of the statute. In all general matters outside those limits the law remains undisturbed. It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness.......................... This passage from <NAME> was approved of by Their Lordships of <ORG> in Murugian, P. v. <NAME>, C. L.(1) and Their Lordships agreed that the law was correctly stated in the passage just cited. To the same effect are also the observations of <ORG> in <ORG> v. Wilkinson(1) where it was held that the Statute is not to be taken as affecting a fundamental alteration in the general law unless it uses words pointing unmistakably to that conclusion. In that case at page 658 Lord <NAME>, C.J. observed:-

(1) [1954] 3 Weekly Law Reports 682, 687, (2) [1952] 2 Q.B. 648 "But it may be presumed that the legislature does not intend to make a substantial alteration in the law beyond what it expressly declares. In <NAME> v. Leman(1), Sir <NAME>, M. R. stated as a principle of construction which could not be disputed that 'the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched' ".

If the construction sought to be put upon the words "or any sale held without leave of the <ORG> of any of the properties" by the Appellants were accepted it would effect a fundamental alteration in the law as it stood before the amendment was inserted in section 232(1) by Act XXII of 1936. Whereas before the amendment the secured creditor stood outside the winding up and could if the mortgage deed so provided, realise his security without the intervention of the <ORG> by effecting a sale either by private treaty or by public auction, no such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness. Having regard to the circumstances under which the amendment was inserted in section 232(1) by Act XXII of 1936 and also having regard to the context we are not prepared to hold that the <ORG> in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness. Such a great and sudden change of policy could not be attributed to the <ORG> and it would be legitimate therefore to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the contrary effect. (Vide the observations of <ORG> in <CITATION> (1). (1)  20 Beav. 269.

(2) (19O7) I.L.R. 30 Madras 426, 433, It may be observed in this connection that section 171 enacts a general provision with regard to suits or other legal proceedings to be proceeded with or commenced against the company after a winding up order has been made and lays down that no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the <ORG> and subject to such terms as the <ORG> may impose. This general provision is supplemented by the supplemental provisions to be found respectively in sections 229 and 232(1) of the Act. Section 229 speaks of the application of insolvency rules in winding up of insolvent companies and section 232(1) speaks of the avoidance of certain attachments, executions, etc., put into force without the leave of the <ORG> against the estate and effects of the company and also of any sale held without the leave of the <ORG> of any of the properties of the company after the commencement of the winding up. Section 229 recognises the position of the secured creditor generally as outside the winding up but enables him in the event of his desiring to take the benefit of the winding up proceedings to prove his debt, to value the same and share in the distribution pro rata of the assets of the company just in the same way as he would be able to do in the case of insolvency under the Presidency Towns Insolvency Act or the Provincial Insolvency Act . Section 232(1) also has reference to legal proceedings in much the same way as legal proceedings envisaged by section 171 of the Act and the attachment, distress or execution put in force or the sale held are all of them legal proceedings which can only be resorted to through the intervention of the <ORG>. The word "held" in connection with the sales contemplated within the terms of the amended section also lends support to this conclusion and this conclusion is further fortified by the terms of section 232(2) which says that nothing in this section applies to proceedings by the <ORG>, thus in effect indicating that what are referred to in section 232(1) are proceedings within the meaning of that term as used in section 171 of the Act.

<ORG> also put a similar construction on the provisions of section 171 read with section 232(1) of the Act in The Governor-General in <CITATION> )(1) " Section 171 must, in our judgment, be construed with reference to other sections of the Act and the general scheme of administration of the assets of a company in liquidation laid down by the Act. In particular, we would refer to section 232 . Section 232 appears to us to be supplementary to section 171 by providing that any creditor (other than <ORG>) who goes ahead, notwithstanding a winding-up order or in ignorance of it, with any attachment, distress, execution or sale, without the previous leave of the <ORG>, will find that such steps are void. The ref- erence to "distress" indicates that leave of the <ORG> is required for more than the initiation of original proceedings in the nature of a suit in an ordinary <ORG> of law. Moreover, the scheme of the application of the company's property in the pari passu satisfaction of its liabilities, envisaged in section 211 and other sections of the Act, cannot be made to work in co-ordination, unless all creditors (except such secured creditors as are "outside the winding-up" in the sense indicated by Lord <NAME> in his speech in Food Controller V. Cork(1) at page 671) are subjected as to their actions against the property of the company to the control of the <ORG>. Accordingly, in our judgment, no narrow construction should be placed upon the words "or other legal proceeding" in section 171 . 'In our judgment, the words can and should be held to cover distress and execution proceedings in the ordinary <ORG>s. In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company". We are therefore of the opinion that the sale effected by Respondent 2 as the Receiver of the Trustees of the debenture-holders on the 16th July 1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the (1)  F.C.R. 40, 55.

(2) 1923 A.C. 647.

Official Receiver. The position was rightly summed up by <ORG> as under:-

"We thus reach the position that no leave of Court was needed before the Receiver appointed by the mortgagee debenture-holders exercised the power of sale and that as there is no allegation of want of bona fides or recklessness or fraud against the Receiver in exercising such a power, it would follow that the sale held by the Receiver is valid and effectual to convey title to the purchaser and that such a sale cannot be avoided on the ground either of want of due notice given by the Receiver before effecting the sale or on the ground of undervalue".

The result therefore is that the appeal fails and must be dismissed with costs of the contesting Respondent

3. The other Respondents who have appeared before us will bear and pay their own costs of the appeal.