Holding

The Company Court's jurisdiction is supervisory, and the scheme was just, fair, and reasonable; the objections were not sustainable.

Summary

The respondent transferee-company sought sanction of a scheme of amalgamation with the transferor-company. The appellant, a shareholder, objected on grounds of non-disclosure of director's interest, unfairness to minority, and unfair exchange ratio. The High Court sanctioned the scheme, and the Division Bench confirmed. The Supreme Court examined the scope of the Company Court's jurisdiction and held that the scheme was not unfair. The Court found that the personal disputes between directors were not relevant to the scheme, and the exchange ratio was approved by experts and overwhelming majority. The appeal was dismissed.

Issues considered

Whether non-disclosure of director's special interest vitiated the voting.
Whether the scheme was unfair to minority shareholders.
Whether separate meeting of minority shareholders was required.
Whether the exchange ratio was unfair.

Legislation cited

Companies Act, 1956s. 391, s. 392, s. 393

Subjects

Company LawAmalgamationScheme of ArrangementSection 391Section 393Jurisdiction of Company CourtMinority shareholdersExchange ratio

Judgment

MJHEER H. MAFATLAL A
v.
MAFATLAL INDUSTRIES LTD.,

SEPTEMBER 11, 1996

[N.P. SINGH AND S.B. MAJMUDAR, JJ.] B

Company Law :

Companies Act, 1956: Sections 391 to 393.

Amalgamation-Scheme of-Sanction-Granting of-Factors to be
c
considered-By Company Court-Jurisdiction of-Broad contours laid
down--Creditors or. members must anive at infonned decision based on
relevant material for approving schemc:-Scheme as a whole was to be just,
fair and reasonable to creditors or members without coercing mi1101ity.
D
Amalgamation-Scheme of-Approved by majority shareholde1"j~
Sanction of-By Company Cowt-Alleged bona fide action of maj01ity
shareholders or supression by the minority shareholders-Consideration
for-Held : Bona fides of majolity shareholde1"j' acting as group to be ex-
amined-Not bona fides of pe1w11 whose personal interest might be different E
from that of voters as a class-Fwthe1; glievance of bona fides of maj01ity
voiced before General Body meeting itself-In the circumstances of the case,
Scheme of Amalgamation could not be said to be unfair to min01ity
shareholders.

Amalgamation-Scheme of-Mi1101ity equity shareholders-Convening F
of separate meeting of-Held : No separate meeting of the sub-class of
min01ity shareholders to be convened unless different type of scheme of
compromise offered to them-If same scheme offered to entire class of equity
shareholders no separate meeting of 111in01ity shareholders required to be
convened.
G
The respondent transferee-company was a large multi- Division,
multi-locational company carrying on diversified activities including
manufacturing and sale of textiles. The appellant was a director in the
transferor-company which had been carrying on the business of manufac-
ture and sale of textile piece goods and chemicals. H
1
2 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A The transferee-company moved an application before the High Court
for sanctioning lofa scheme of Amalgamation of the transferor-company
with the transferee-company. H was at this sfage that ~he appellant who ·
was one of the shareholders of the transferee-company filed his objections
under Section 391 of the Companies Act, Earlier the High Court directed
convening of a meeting of equity shareholders of the respondent trans-
B
feree-company. In the meeting an overwhelming majority of equity
shareholders approved the scheme of Amalgamation. Thereafter the
respondent transferee-company filed Company Petition before the High
Court under Section 391(2) of the Act. The Single Judge sanctioned the

--
said scheme of Amalgamation which was confirmed in appeal by the
C Division Bench of the High Court. Being aggrieved the appellant preferred
the present appeal.

On behalf of the appellant it was contended that the respondent
transferee-company was guilty of hiding the special interest of its director
D from the shareholders thereby the voting by the equity shareholders got
vitiated; that the scheme of Amalgamation was unfair, unreasonable and
amounted to supression of minority shareholders represented by the ap·
pellant and hence liable to be rejected; that a separate meeting of minority
shareholders represented by the appellant was required to be convened on
the basis that the appeJiant's group represented a special class of equity
E shareholders; and that the exchange ratio of equity shares of the transferor
and transferee companies was ex f acie unfair and unreasonable to the
shareholders of the transferee-company.

On behalf of the respondent transferee-company it was contended
F that the personal disputes between the directors of the transferee and
transferor. eompanies were out of con·sideration of the equity shareholders
and in any case non~disclosure of such disputes had no adverse effect on the
decision ofthe majority shareholders who had approvedthe Scheme with a
thumping majqrity of a about 95% and the appellant who was objecting to
G the Scheme was in microscopic minority of 5% of the total voting strength;
that the appellant never cared even fo be present at the meeting of the equity
shareholders to put forward his objection and he only sent proxies who had
no right to speak at the meeting; that the exchange ratio was suggested by
experts and approved by an overwhelming majority of the equity
shareholders; and that the appellant himself who was the director of the
H transferor-company had approved the scheme of Amalgamation.
MIHEERH.MAFATIAL v. MAFATLALINDS.LTD. 3

Dismissing the appeal, this Court A
HELD: 1.1. The provisions of Sections 391and393 of the Companies
)., Act, 1956 show that compromise Qr arrangement can be proposed between
a company and its creditors or any class of them or between a company and
its members or any class of them. Such a compromise would also take in
its sweep any scheme of amalgamation/merger of one company with B
another. When such a scheme is put fonvard by a company for the sanction
of the Court in the first instance the Court has to direct holding of meeting
of creditors of class of creditors or members or class of members who are
concerned with such a scheme to accord their approval. The Company
Court which is called upon to sanction such a scheme has not merely to go
by the ipse dixit of the majority of the shareholders or creditors or their
c
respective classes who might have voted in favour of the scheme by requisite
majority but the Court has to consider the pros and cons of the scheme. A
Company Court before whom an application is moved for sanctioning such
a scheme which might have got the requisite majority support of the
creditors or members or any class of them for whom the scheme is mooted D
,.. . by the concerned company, cannot act merely as a rubber stamp and
automatically put its seal of approval on such a scheme. [24-A-G; 25-B]

1.2. The following broad contours of the jurisdiction of the Company
Court in granting sanction to the scheme have emerged :
E
1. The sanctioning court has to see to it that all the requisite
statutory procedure for supporting such a scheme has been complied with
and that the requisite meetings as contemplated by Section 391(1)(a) have
been held. [31-H; 32-A]
F
2. That the scheme put up for sanction of .the Court is backed up by
the requisite majority vote as required by Section 391 (2). [32-B]

3. That the concerned meetings of the creditors or members or any
class of them had the relevant material to enable the voters to arrive at an
informed decision for approving the scheme in question. That the majority G
decision of the concerned class of voters is just and fair to the class as a
whole so as to legitimately bind even the dissenting members of that class.
[32-C]
4. That all necessary material indicated by Section 393(l)(a) is
placed before the voters at the concerned meetings as contemplates by H
4 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Section 391(1). [32-C-D]

5. That all the requisite material contemplated by the proviso to
Section 391(2) of the Act is placed before the Court by the concerned
applicant seeking sanction•for such a scheme and the Court gets satisfied
about the same. [32-D]
B
6. That the proposed Scheme of compromise and arrangement is not
found to be violative of any provision of law and is not contrary to public
policy. For ascertaining the real purpose underlying the Scheme with a
view to be satisfied on this aspect, the Court, if necessary, can pierce the
c veil of apparent corporate purpose underlying the scheme and can judi-
ciously X-ray the same. [32-E]

7. That the Company Court has also to satisfy itself that members
or class of members or creditors or class of creditors, as the case may be,
were acting bona fide and in good faith and were not coercing the minority
D in order to promote any interest adverse to that of the latter comprising
of the same class whom they purported to represent. [32-F] - 1

8. That the scheme as a whole is also found to be just, fair and
reasonable from the point of vies of prudent men of business taking a
commercial decision beneficial to the class represented by them for whom
E
the scheme is meant. [32-G]

9. Once the aforesaid board parameters about. the requirements of
the scheme for getting sanction of the Court are found to have been met,
the Court will ha•e no further jurisdiction to sit in appeal over the
F commercial wisdom of the majority of the class of persons who with their
open eyes have given their approval to the scheme even if in the view of the
Court there would be a better scheme for the company and its members
or creditors for whom the scheme is framed. The Court cannot refuse to
sanction such a scheme on that ground as it would otherwise amount to
G the Court exercising appellant jurisdiction over the scheme rather than its
supervisory jurisdiction. [32-H; 33-A-B]

1.3. It is the commercial wisdom of the parties to the scheme who have
taken an informed decision about the usefulness and propriety of the
scheme by supporting it by the requisite majority vote that has to be kept
H in view by the Court. The Court certainly would not act as a court of appeal
MIHEER H. MAFATIAL v. MAFATLAL INDS. LID. 5

and sit in judgment over the informed view of the concerned parties to the A
compromise as the same would be in the realm of corporate and commer-
cial wisdom of the con~erned parties. The Court has neither the expertise
nor the jurisdiction to delve deep into the commercial wisdom exercised by
the creditors and members of the company who have ratified the Scheme
by the requisite majority. Consequently the Company Court's jurisdiction
to that extent is peripheral and supervisory and not appellate. The Court B
acts like an umpire in a game of cricket who has to see that both the teams
play their game according to the rules and do not overstep the limits. But
subject to that how best the game is to be played is left to the players and
not to the umprie. The supervisory jurisdiction of the Company Court can
also be culled out from the provisions, of Section 392 of the Act. Of course C
this Section deals with post- sanction supervision. But the said provisions
itself clearly earmarks the field in which the sanction of the Court operates.
The supervisor cannot ever treated as the author or a policy maker. Con-
sequently the propriety and the merits of the Compromise or arrangement
have to be judged by the parties who as sui juris their open eyes and fully
informed about the pros and cons of the Scheme arrive at their own D
reasoned judgment and agree to be bound by such compromise or arran-
.. gement. The aforesaid parameters of the scope and ambit of the jurisdic-
tion of the Company Court which is called upon to sanction a Scheme of
Compromise and Arrangement are not exhaustive but only broadly il-
lustrative of the contours of the Court's jurisdiction. E
[25-H; 26-A·C; 27-A-B]
Alabama New Orleans Texas and Pacific Junction Railway Company,
Re, (1891) 1 Chancery Division 213 andAnglo- Continental Supply Co. Ltd.,
Re, (1992) 2 Ch. 723, referred to.
F
Mankam Investments Ltd. and Others, Re., (1995) 4 Comp. W 330
(cal.), approved.

Hindustan Lever Employees' Union v. Hindustan Lever Ltd. and Other,
[1995] Supp. 1 SCC 499, relied on.
G
_.. Hoare & Co. Ltd., Re, (1933) All ER Rep. 105, Ch. D and Bugle Press
Ltd., Re, (1961) Ch. 270, cited.

Bucklay on the Companies Act, 14th Edition, referred to.
•
2.1. Section 393(1)(a) of the Act shows that the special interest of H
6 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

--· A director which is required -to be brought home to the voters m~st satisfy
the following requirements of the Section before it can be treated to be a
relevant special interest of the director which.is required to be.communi-
cated to the voters : [34-E-F] ·

1. The director's interest 1_!1.Ustbe a special interest different frQm the
B interest of other members who are the voters at the meeting. [34-E-F-GJ

2. The compromise or arrangement which is put to vote must have
an effect on such special interest of the director. [34-G]

___ c 3. Such effect must be different from the effect of compromise and
arrangement on similar interest of other persons who are called upon to
vote at the meeting. [~4-F-H]

2.2. When a scheme of Compromise and Arrangement which involves
two companies, namely, the transferor-company and the transferee-com-
D pany and their shareholders and creditors is on the anvil of scrutiny before
the sanctioning Court, the Court has to see that the interest of the class
of creditors or shareholders to whom the Scheme is offe17ed for approval
is any way likely to be affected by the suppression of special interest of t6'~
director in connection with such a scheme which is on the anvil. Two
independent bodies which are represented by their shareholders or
E creditors as a class, as the case may be, have to take commercial decisions
strictly with a view to seeing that the concerned Scheme of Compromise
or Arrangement is beneficial to the shareholders or creditors as a class
vis-a-vis the company which is a corporate entity in so far as company's
relations with these class of creditors and shareholders are concerned. If
F the special interest which the director has is in any way likely to be affected
by the Scheme and if non-disclosure of such an interest is likely to affect
the voting pattern of the class of creditors or shareholders who are. called
upon to vote on the scheme, then only such special interest of the director
is required to be communicated to the voters as per Section 393(1)(a) of
G the Act. [36-E-GJ

2.3. The personal family dispute between the appellant on the one
hand and his uncle, director or the transferee-company on the other
regarding the right to hold shares in the company cannot have any linkage
-
or nexus with the Scheme of Amalgamation of these two companies which
H was put to vote before the equity shareholders. The equity shareholders of
MIHEER H. MAFATLAL v. MAFA'ILALINDS. LTD. 7

the transferee-company had to decide in their commercial wisdom whether A
it is worthwhile to have a larger body of shareholders on account of the
merger so that apart from the share-holding of the transferee-company its
objects would also get diversified and its field of operation would be
enlarged with the prospect of hike in the dividend available to these
shareholders after the economic and Industrial activities of both the
B
companies so amalgamated would get elongated and whether the value of
their shares in such consolidated companies were likely to get a boost in
the stock market. While deciding whether transferor-company should be
merged with the transferee-company and the transferee company's
economic and industrial activity should be permitted to be enlarged as.a
result of such merger the equity shareholders least concerned whether the C
appellant would purchase in future the share of his uncle, t!le present
director or vice versa. That was entirely their personal dispute which was
still not adjudicated upon and its decision one way or the other had no
impact on the pattern of voting of the equity shareholders of the respon-
dent- company as a class of prudent businessmen and investors so far as D
the Scheme was concerned. Consequently, it must be held that mention
about the personal interest was outside the statutory requirements of
Section 393(1)(a) of the Act. [36-H; 37-A; C; H; 38-A-B; CJ

3.1. While considering the question of bona fides of the majority
voters and whether they were unfair to the appellant it has to be kept
E
in view that bona fides of the majority acting as a group has 'to be

... examined vis-a-vis the Scheme in question and not the bona fides of the
person whose personal interest might be different from the interests of
the voters as a class. Bona fide of person can only be relevant if it can
be established with reasonable certainty that he represents majority or F
is controller of majority. The director of the transferee-company cannot
be visited with such a charge. The question of bona fide of the majority
shareholders or .the alleged suppression by them of the minority
shareholders or their attempt to suffocate their interest has to be judged
from the pc,int of view of the class as a whole. Question is whether the G
majority equity shareholders while acting on behalf of the class as a
whole had exhibited any adverse interest against the appellant's minority
shareholders also having similar interest as members of the same clas's,
while approving the Scheme or had acted with any oblique motive to
whittle down such a class interest of the minority. [41-E-F] H
8 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

.A Hellenic and General Tmst Limited, Re, (1976) 1 WLR 123, referred
to.

3.2. In the instant case it cannot be said that the voting pattern was
dominated by the share-holding of the director of the transferee-company
_..(
and his group. Nor could it be said that the Scheme as put to vote was in
B any way unfair to appellant or that the majority shareholders acting as a
class had not behaved in a bona fide manner for protecting the interest of
the class as a whole and were in any way inimical to the appellant. It was
not the contention of the appellant that while voting by majority in favour
of the Scheme the majority had acted with any oblique motive to fructify
c any adverse commercial interest qua him and his group when it consisted
of outsiders like financial institutions or that there was any possibility of <::.
their surrendering their economic interest in the scheme at the dictates of
shareholder-director of the transferee-company and his group. The Board
of DirectfJrs of the respective companies, namely, the transferor-company
as well as the transferee-company had approved that Scheme of Amal-
D gamation before it was imt to vote. The appellant was himself one of the
directors of the transferee-company who had no objection to the Scheme of
Amalgamation from the point of view of the transferor-company. So far as
the transferee-company is concerned though appellant was not a director
he was 5% shareholder who did not think it fit to personally remain present
at the time of voting and simply relied upon proxy~ If the appellant was
E
feeling that the Scheme was unfair ~o him or was not going to protect his
interest as shareholder in the respondent-company nothing prevented him
from remaining present and voicing his grievance before the General Body
of the equity shareholders and to apprise them of the alleged pernicious
effect of the Scheme. It is, therefore, too late in the day for him to contend
F that the Scheme was unfair to him and that the family of the director of
transferee-company had tried to dominate and engineer any adverse pat·
tern of voting at the meeting of the equity shareholders. Apart from the
· pattern of voting at the meeting of the equity shareholders, even the share-
holding pattern of the respondent-company belies the submission put for·
G ward on behalf of the appellant that the group of the transferee-company's
director dominated the constitution of the company and could control the
decisions of the shareholders. The scheme of the Amalgamation cannot be
said to be unfair and, amounting to suppression of minority shareholders
represented by the appellant. [41-D; 42-C-F; 43-G]

H 4. Even though the Companies Act or the Article of Association do

'6
MIHEER H. MAFATLAL v. MAFATLAL INDS. LTD. 9

not provided for such a class within the class of equity shareholders, in a A
given contingency it may be contended by a group of shareholders that
because of their separate and conflicting interests vis-a-vis other equity
shareholders with whom they formed a wider class, a separate meeting of
such separately interested shareholders should have been convened. On
the express language of Section 391(1) it becomes clear that where a B
compromise or arrangement -is proposed between a company and its
members or any class of them a meeting of such members or class of them
has to be convened. This clearly presupposes that if the Scheme of Arran-
gement or Compromise is offered to the members as a class and no
separate Scheme is offered to any sub- clause of members which lms a
separate Scheme to consider, no question of holding a separate meeting of
c
such a sub-class would at all survive. In the instant case when one the same
Scheme is offered to the entire class of e(1uity shareholders for their
consideration :md when commercial interest of the appellant so far as the
Scheme is concerned is common with other equity shareholders he would
have a common cause \\1th them either to accept or to reject the Scheme D
from c;Jmmercial point of view. Consequently there was no occasion for
convening a separate class meeting of the minority equity shareholders
represented by the appellant and his group. [46-G-H; 47-E; G-H]

Palmer 011 Company Law 24th Edition, referred to. E
S. Valuation of shares is a technical and. complex problem which can

- be appropriately left to the consideration of experts in the filed of account-
ancy. Many imponderables enter the exercise of valuation of shares. Which
exchange ratio is better is in the realm of commercial decision of well
informed equity shareholders. It is not for the Court to sit in appeal over
F
this value judgment of equity shareholders who are supposed to be men of
the world and reasonable persons who know their own benefit and interest
underlying any proposed scheme and who with open eyes have okayed this
ratio and the entire Scheme. [49-D; SO-A; 51-B]
G
Kamala Sugar Mills Ltd. 55 Company Cases, 308 (Guj), approved.

CWT. v. Mahadeo Jalan, [1973] 3 SCC 157, relied on.

Penington : Plinciples of Company Law, referred to. H
10 SUPREMECqURTREPORTS [1996) SUPP. 6S.C.R.

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11879 of
1996.

. From the Judgment and Order dated 12.7.96 of the Gujarat High
Court in O.J.A. No. 16 of 1994.

B Shanti Bhusan, Miheer Thakur, Darshan Parekh, Jay Salve, and J.K.
Das for the Appellant.

Soli J. Sorabjee, S.B. Vakil, S. Ganesh, P.N. Kapadia, U.A. Rana and
Rajiv Tyagi for Gagrat & Co. for the Respondent.

c The Judgment of the Court was delivered by

S.B. MAJMUDAR, J. Leave granted.

By consent of learned advocate of parties this appeal was taken up
for final hearing. We have heard the learned advocates of parties. The
D appeal is being disposed of by this judgment.

This appeal by special leave arises out of the judgment and order of
a Division Bench of High Court of Gujarat in Original Jurisdiction Appeal
No. 16 of 1994 decided on 12 July 1996. The Division Bench by the said
E impugned judgment dismissed the appeal of the appellant and confirmed
the order of the learned Single Judge in Company Petition No. 22 of 1994
and s_anctioned a Scheme of Amalgamation of two Public Limited _com- .
panies, namely Mafatlal Industries Limited ('MIL' for short) being the
transferee-company with which Mafatlal Fine Spinning and Manufacturing
Company Limited ('MFL' for short) being the transferor-company was to
F be amalgamated. The iearned Single Judge granted requisite sanction to
the applicant transferee-company MIL to amalgamate in it the transferor-
compan y MFL under Section: 391(2) of the Companies Act, 1956
(hereinafter referred to as 'the Act'). In order to appreciate the grievance
of the appellant who objected to the Scheme moved by the respondent-
G company MIL, as ventilated before us by its learned senior counsel Shri
Shanti Bhusan, assisted by learned counsel Shri M.J. Thakore, it will be
necessary to glance through a few relevant background facts.

Background Facts

H The respondent-company MIL which was the petitioner before the
MIHEER H. M.Af<ATLAL v. MAI'A11.AL INDS. LTD. [S.B. MAJMUDAR, J.] 11

learned Single Judge has its registered office at Ahmedabad in Gujarat A
State. It was incorporated on 20th January 1913 under the name 'The New
Shorrock Spinning & Manufacturing Co. Limited' and its name was sub-
sequently changed to 'Mafatlal Industries Limited' as per the fresh Certifi-
cate of Incorporation dated 24 January 1974 consequent upon change of
name, as sanctioned by the Registrar of Companies, Gujarat, Ahmedabad.
The objects of the transferee-company MIL as per its Memorandum of
B
Association, inter a/ia, included activity of carrying on all or any of the
businesses such as cotton spinners and doublers, wool, silk, flax, jute and
hemp spinners and doublers, linen manufactures, to work spinning and
weaving mills, cotton mills, jute mills and mills of any other description.
The Authorised Share Capital of the respondent-company was Rs. c
100,00,00,000 (Rupees one hundred crores only) divided into 30,05,500
equity shares of Rs. 100 each and 69,94,500 unclassified shares of Rs. 100
each. The subscribed Share Capital of the respondent-company as on 31st
March 1993 was Rs. 26.30 crores (Rupees twenty six crores thirty lacs only)
divided into 26,90,000 equity shares of Rs. 100 each.
D

... The respondent-company commenced the business of textiles and
had been carrying on the same since incorporation. The respondent-com-
pany is a large multi-Division, Multi-locational company carryiny on diver-
sified activities including manufacturing and sale textiles, dyes
intermediates and chemicals, professional grade connectors, plastic E
processing machineries and promoting various companies through Project
Promotion Division.

The MFL being transferor-company was incorporated on 20th April
1931 under the Baroda State Companies Act and had been carrying on the F
busines.s of manufacture and sale of textile piece goods and chemicals. Its
registered office was situated at Mafatlal Centre, Nariman Point, Bombay.
It was engaged in the manufacture and sale of textiles and fluorines based
chemicals. There were three units of the Textiles Division situated at (1)
Vejalpur Road, Navsari, (2) Mazagon, Bombay and (3) Lower Parel,
Bombay and the unit of the Chemicals Division was situated at Bhestan, G
District Surat.

The Authorised Share Capital of the transferor-company as on 31st
March 1993 was Rs. 30 crores (Rupees thirty crores only) divided into
30,00,000 ordinary shares of Rs. 100 each. The Subscribed Share Capital H
12 SUPREME COURT REPORTS [1996} SUPP. 6 S.C.R.

A of the transferor-company as on 31st March 1993 was Rs. 26,25,77,100
(Rupees twenty six crores twenty five lacs seventy seven thousand and one
hundred only) divided into 26,25,771 ordinary shares of Rs. 100 each.
Subsequent to 31st March 1993 the the transferor-company had allotted
382 ordinary sh:ires of Rs. 100 each. The transferor-company had also
issued and allotted further 1,00,000 ordinary shares of Rs. 100 each at a
B premium of Rs. 200 per share on conversion of 1,00,000 Partly Convertible
Debentures of the face value of Rs. 2,000 each issued to Financial Institu-
tions with effect from 1st February 1994 by the transferor-company.

The transferor-company MFL is proposed to be amalgamated with
C the respondent-company MIL under the following circumstances and for
the following reasons :

(1) The proposed amalgamation will pave the way for batter,
more efficient and economical control in the running of
operation.
D
(2) Economies in administrative and management costs will im-
prove in combined profitability.

(3) The amalgamated company will have the benefit of the com-
bined reserves, manufacturing assets, manpower and
E
cashflows of the two companies. The combined technological,
managerial and financial resources are expected to enhance
the capability of the amalgamated company-to invest in larger
and sophisticated projects to ensure rapid growth.

F (4) The amalgamated company will have a strong and large re
source base. With a strong resource base, the risk bearing
capacity of the amalgamated Company will be substantial.
Hitherto, with limited resources and capacity, either company
had to forego business opportunities which would otherwise
have been profitable to the group.
G
(5) "Exports" have been identified a 'thrust' area for both the
companies and response in time to customers needs is con-
sidered to be critical in this area of 'operations. An amal-
gamated company will be strategically better placed to reduce
H the response time. Customers' confidence in dealing with such
MIHEERH.MAfi\TLAL v. MAf"ATLALINDS. LID. [S.B.MAfMUDAR,J.j 13

a mega company ensures timely delivery of large orders. A
(6) The amalgamated company will be able to source and absorb
new technology and spend on Research and Development,
Market Surveys etc. More comprehensively.

(7) More particularly in the Textiles Division, with .5 operating B
units at the company's disposal, the flexibility in operations
will be very much pronounced. The Managers will not be
inhibited by capacity constraints and will have the freedom
of choosing from various options.

(8) Both the companies have been subject to the pressures of raw
c
material price fluctuations and of adverse market conditions
in their respective product mix. Hence, the amalgamation will
neutralise the adverse effects of contrary business cycles. The
operations of one unit will be complementary to the other
and a stable profitability will be achieved. D

The director of the respondent-company MIL and transferor- com-
pany MFL approved the proposal for amalgamation of the MFL with MIL
and pursuant to the respective Resolutions passed by them the detailed
Scheme of Amalgamation was finalised. The directors of both the com-
panies of the opinion that such amalgamation was in the interest do both
E
the companies.
1~-
It is pertinent to note at this stage that the appellant who has
objected to the amalgamation before the High Court in the present
proceedings so far as the amalgamation of the transferee-company is F
concerned, is himself one of the directors of the transferor- company being
MFL. So far as the transferor-company MFL is concerned as its registered
office is located at Bombay the corresponding application on behalf of the
transferor-company for sanctioning this very Scheme of Amalgamation was.
moved in the Bombay High Court. The appellant at this stage did not
object to this very Scheme for amalgamation on behalf of the transferor- G
company of which he was one of the directors and party to the Resolution
approving the said am;:tlgamation. Learned Single Judge of the Bombay
High Court sanctioned the said Scheme on behalf of transferor-company. ,
It is not in dispute between the parties that Bombay High Court had
already sanctioned this very Scheme on behalf of the transferor-company. H
14 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A As the registered office of the transferee-company is located at
Ahmedabad the respondent transferee-company had approached the High
Court of Gujarat for sanctioning this very Scheme of Amalgamation on
behalf of the transferee-company and that application was moved on 8th ___..

February 1994. It is at this stage that the appellant who was one of the
shareholders. of the transferee-company filed his objection to the Scheme
B of Amalgamation moved under Section 391 of the Act. Earlier the learned
Single Judge directed convening of meeting of equity shareholders of the
respondent-company. In the meeting of equity shareholders convened pur-
suant to the order of the High Court, overwhelming majority of the equity
shareholders approved the Scheme in the meeting of 22nd January 1994
convened at Premabhai Hall, Bhadra, Ahmedabad. The said meeting was
c attended by 5522 members present in person or by proxy, holding 20, 48,
513 fully paid equity shares of Rs. 100 each aggregating to Rs. 20,48,51,300.
At the said meeting, resolution was passed without modification by the
requisite majority as 5298 members holding 19, 36, 964 fully paid equity
shares vokd in favour of the Scheme and 143 members holding 86, 061
D fully paid equity shares voted against the Scheme. In short, the said meeting
by requisite majority approved the proposed Scheme of Amalgamation and
report of the Chairman was submitted to the High Court. Thereafter the
respondent-company MIL filed Company Petition No. 22 of 1994 under
Section 391(2) of the Act. That application was ordered to be published in
local newspapers as well as in the Bombay edition ofthe said newspaper.
E Notice was also issued to Regional Director, Company Law Board,
Western Region, Bombay.

In response to the notice issued to the Central Government under
Section 394A of the Act the learned Additional Central Government
F Standing Counsel appeared before the High Court and submitted to the
orders of the Court making it clear that the Central Government is not to
make any representation in favour or against the proposed Scheme.

Pursuant to the public advertisement only the present appellant, the
G shareholder of transferee-company holding 40, 567 share in MIL filed
affidavit opposing the Scheme of Amalgamation and Arrangement between
the respondent transferee-company MIL and transferor-company MFL of
which, as noted earlier, he himself was one of the directors and the High
Court of Bombay which sanctioned this very Scheme on behalf of the
transferor-company had sanctioned· the Scheme without any objection
H being taken by the appellant at that stage.
MlHEERH.MAFATLAL v. MAFATLALINDS.LTD.(S.B.MAJMUDAR,J.] 15

Nine objections were raised by the appellant against the proposed A
Scheme of Amalgamation as shareholder of the transferee-company. At
this stage we may not mention all these nine objections as ultimately only
four objections have survived for our consideration in the present proceed-
ings and to which we will make a detailed reference hereinafter. Suffice it
to state at this stage that after a prolonged hearing the learned Single Judge B
S.D. Shah, J., over-ruled these objections and by a detailed as exhaustive
judgment running over 254 pages covering various aspects of the matters
; canvassed before him sanctioned the said Scheme moved on behalf of the
respondent transferee-company.
...a
The Division Bench of the High Court to which the appellant carried C
the matter in appeal confirmed the aforesaid decision of the learned Single
Judge by well considered Judgment which also ran into 136 pages and that
is how the appellant, original objector, is before us in this appeal.

Family Hist01y
D
In order to properly appreciate the grievance of the appellant against
the proposed Scheme and his roie as an objector it will be necessary to
note the family history of the appellant and two of the directors of the
respondent transferee-company who have a comm~n ancestor Mafatlal
Gagalbhai. The Family Tree of Mafatlal Gagalbhai projects the following E
picture:
<
Family Tree of Mafat/al Gagalblzai
<~

Seth Mafatlal Gagalbhai
(Died on 19.07.1944)
F
Bhagubhai Pransukhlal
Navinchandra
(Died (Deceased)
(Died 31.08.1955)
30.09.1944) (No issues)
Arvind Yogindra Rasesh
Hemant
Padmanabh (Died on G
(Died on Hrishikesh Atulya Pradeep 16.08.1971)
29.07.1990)
Miheer
(Born on
27.05.1958)
H
·~

16 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A As the aforesaid Family Tree shows, the appellant Miheer is the son of
cousin brother of Arvind Navinchandra who is said to be at the helm of
affairs of the transferee-company along with his son Hrishikesh. As seen
from the Family Tree the common ancestor Mafatlal Gagalbhai who was
himself a very astute businessman and entrepreneur had three sons Pran-
sukhlal. Navinchandra and Bhagubhai. The eldest son Pransukhlal got out
B of the family prior to the death of Mafatlal Gagalbhai and he died without
leaving any issue. Mafatlal Gagalbhai expired on 19th July 1944 and was
survived by his two sons Navinchandra and Bhagubhai. On 30th September
1944, the said Bhagubhai died leaving him surviving Hemant, then aged 9
as his only male issue. On 31st August 1955, Navinchandra Mafatlal died
c leaving him surviving the three sons. Arvind Mafatlal. Yogindra Mafatlal
and Rasesh mafatlal as his male issues. On 16th August 1971, said Hemant
expired leaving behind him only male issue, present objector Miheer, them
aged 13.

D The said Mafatlal Gagalbhai started different business undertakings
and with passage of time, the family of said Mafatlal consisting to
Navinchandra and Bhagubhai expanded their business undertakings. The
said family held controlli!lg interest in 'different business concerns run
throug~ public limited_ or private limited companies and the members of
the family were also partners in partnership firms. The pattern which was
E maintained throughout was thatthe two sons Navinchandra and Bhagubhai
and their families would respectively have an equal interest in companies
or in partnership firms. At the time of the death of the said Bhagubhai the
said Hemant was just 9 years of age. The business of Mafatlal Group was
therefore for all practical purposes managed by the said Navinchandra. At
F the time to the death of _Navinchandra the shareholding of.the branch of
Hemant Mafatlal in Mafatlal Group of Industries was equal to aggregate
shareholding of Arvind Mafatlal, Yogindra Mafatlal and Rasesh Mafatlal.
On the death of Navinchandra, the Mafatlal Group was managed by Arvind
Mafatlal, Yogindra Mafatlal, Rasesh Mafatlal and late Hemant Mafatlal.
Arvind Mafatlal was, however the eldest male member in the family who
G was always looked upon by Yogindra, Rasesh and late Hemant as an elder
in the family and respected.

On 16th August 1971, Hemant Mafatlal died at the young age of 36
years leaving behind him his widowed mother, his wife, his son Miheer
H (then aged 13) and his two daughters (then aged 11 and 6). At that time,
MIHEERH.MAFATLAL v. MAFATLALINDS.LTD.[S.B.MAIMUDAR,J.] 17

the Mafatlal family, i.e., the families of Navinchandra and Bhagubhai were A·
running 3 apex companies (1) Mafatlal Gagalbhai & Company Private
Limited, (2) Surat Cotton Spinning and Weaving Mills Private Limited and
(3) Pransukhlal & Company Private Limited.

It is the case of Miheer that when his father expired, the New
Shorrock Spinning and Manufacturing Co. Limited was being controlled B
and managed by Mafatlal Gagalbhai & Co. Limited in which his father and
his family had 46.47% shares vis-a-vis 43.66% shares held by the family of
Navinchandra Mafatlal. After the death of his father, when Miheer was
minor, it was decided to amalgamate Mafatlal Gagalbhai & Co. Pvt.
Limited with the New Shorrock Spinning & Manufacturing Co. Limited on C
24th January 1974 January 1974 :.i.nd the name of the company was changed
to present name i.e. MIL.

According to the appellant Miheer in or around 1979, there were
certain disputes and difference amongst Arvind Mafatlal, Yogindra Mafat- D
Ial and Rasesh Mafatlal and it was felt that some arrangement should be
worked put, whereby there would be a separation and division of the family
business concerns amongst the four branches viz. Miheer Branch known as
MHM Group, family of Arvind Mafatlal known as ANM Group, family of
Yogindra Mafatlal known as YNM Group and family of Rasesh Mafatlal
known as RNM Group. It is his further case that Shri C.C. Chokshi, a E
reputed chartered accountant was requested to prepare a Scheme for
division of family business concerns. According to the appellant. Shri C.C.
Chokshi prepared Note dated 23rd February 1979 making six suggestions
for the division of Mafatlal Group of Industries into four groups as there
were four family groups. The appellant contends that as per the aforesaid F
family arrangement the transferee-company, i.e., MIL was agreed to be put
to his share and the other groups which were holding shares in the said
transferee-company were to transfer their share-holdings in favour of the
appellant. The appellant contends that however because of some family
disputes the appellant fell from the grace of Shri Arvind Mafatlal who was
the eldest male member monitoring all these industries belonging to all the G
groups of the same family, and consequently the family arrangement was
not give effect to and that the transferee-company was not handed over in
management to the appellant.

On the other hand the case of the other group headed by Shri Arvind H
18 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Mafatlal was to the effect that the said family arrangement of 1979 was
given a go-by and the appellant himself agreed to sell his share-holding in
the transferee-company MIL in favour of Arvind Mafatlal''.: Group. Num-
ber of litigations took place between the parties in the second half of 1980s.
That on 6th April 1987 Arvind Mafatlal filed Suit No. 10 of 1987 in the
High Court of .Judicature at Bombay for a declaration that there was a
B valid, subsisting and binding contract to sell shares held by Rasesh Mafat-
lal, Yogindra Mafatlal and Miheer Mafatlal, the appellant herein, groups
to Shri Arvind Mafatlal's group and for a direction that they should sell
that shares at a price to be determined by the arbitrator. In the said suit
the appellant Miheer filed a counter-claim praying that the family arran-
c gement of 1979 should should be enforced and the share-holding of Shri
Arvind Mafatlal's group and other groups in the transferee- company MIL
should be sold by way of specific performance to the appellant. The
aforesaid suit by Arvind Mafatlal and the counter- claim by the appellant
are pending for adjudication in the High Court of Judicature at Bombay.
D It is in the background of the aforesaid history of family feud between these
warring groups descended from the common ancestor Shri Mafatlal
Gagalbhai that the grievance voiced by the appellant in these proceedings
has to be appreciated.

Rival Contentions
E
As noted earlier though a battle royal was fought between the
contesting parties before the learned Single Judge wherein nine objections
were raised for adjudication by the appellant, at this stage, the dispute
centered round a limited number of contentions which were canvassed for
F our consideration by learned senior counsel for the appellant. Four-fold.
submissions for opposing the Scheme were canvassed on behalf of the
appellant before us by Shri Shanti Bhushan, learned senior counsel. In the
first place he contended that the respondent-company while putting the
Scheme for approval of the equity shareholders in their meeting did not
G disclose the interest of the directors, namely, Shri Arvind Mafatlal and Shri
Hrishikesh Mafatlal belonging to the camp of Arvind Mafatlal in the
explanatory statement supporting the Scheme and consequently the +.'
shareholders were misled and could not come to an informed decision
regarding the approval of the said Scheme with the result that the approval
by the majority of equity shareholders to the said Scheme has got vitiated;
H (2) The Scheme as proposed was unfair to the minority shareholders
MIHEERH.MAFATLAL v. MAFATLALINDS.LID.[S.B.MATMUDAR,J.) 19

represented by the appellant and consequently it ought not to have been A
sanctioned by the Court; (3) The Scheme was otherwise unfair to ·the equity
shareholders as the exchange ratio of equity shares of the transferor and
transferee companies was ex facie unreasonable and unfair to the
shareholders of the transferee-company MIL in so far as it provides under
the Scheme that two equity shares of the transferee company will be • B
allotted against five equity shares of the transferor-company at their
respective face value of Rs. 100 per share; and (4) That the appellant
represented a distinct class of equity shareholders so far as the respondent
transferee-company is concerned and consequently separate meeting_ so far
as his group is concerned should have been convened by the Company
Court and as that has not been done the Scheme is liable to be rejected. C

As a corollary to the aforesaid contention Shri M.J. Thakore, learned
counsel appearing for the appellant in addition submitted that the voting
pattern as adopted in the meeting of equity shareholders which had ap-
proved the Scheme by majority, resulted in coercing the minority repre- D
sented by the appellant and that has rendered the Scheme unfair and
unreasonable and consequently it is required to be rejected.

On the other hand learned senior counsel Shri Sorabjee appearing
for th respondent transferee-company contended that there was to illegality
either procedural or substantive vitiating the Scheme and that there was E
no suppression of relevant material from the shareholders when the
Scheme was put to vote. That the personal disputes between the worring
groups of the family, namely, Arvind Mafatlal on the one hand and the
appellant on the other and which were subject-matter of the pending
litigation in Bombay High Court had nothing to do with the question of F
sanctioning the Scheme for its better economic viability with which the
shareholders were concerned and that as the transferor-company and the
transferee-company were juristic persons and corporate bodies, while con-
sidering the question of approving the said Scheme such personal disputes
between the directors of the transferee-company and the director of trans- G
feror-company were completely irrelevant and were out of consideration
of the equity shareholders who were not at all c9ncerned with this type of
internal feuds and in any case non-disclosure of such disputes had no
adverse effect on the decision of the majority share_holders who had
approved the Scheme with a thumping majority of about 95% and the
appellant who was objecting to the Scheme was in microscopic minority of H
20 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A 5% of the total voting strength. It was also contended by learned senior
counsel for the respondent that it is wrong to assume that the transferee-
company was family concerned and was managed by families. That Shri
Arvind Mafatlal and Hrishikesh Mafatlal were only two direcfors out of
thirteen directors of respondent-company. These eleven directors did not
belong to his family. That even shareholding of Arvind Mafatlal's group in
B
the respondent-company was not substantial and on the contrary about
40% shares were held by outside financial institutions. Even otherwise
there was no question of any unfairness underlying the proposed Scheme
or that in any way it was unfair to the appellant who never cared even to
remain present personally at time of the meeting of the equity shareholders
c to put forward his objections and he only sent proxies who had no right to
speak at the meeting. That therefore all these objections which he ultimate-
ly raised before the High Court were an afterthought. It was also contended
that there was nothing wrong with the exchange ration as C.C. Chokshi &
Co., a firm of reputed chartered accountants, had considered all the pros
and cons underlying the Scheme and had suggested the exchange ratio and
D
such an expert opinion was endorsed by another financial institution ICICI.
That the appellant had not chosen to controvert this expert opinion by
leading any evidence in rebuttal by any other expert in the field who could
have suggested the exchange ratio differently. That the appellant's conten-
tion that the exchange ratio should have been one share of transferee
E company against six shares of the transferor company was in the realm of
mere conjecture and ipse di.xit. It was not supported by any expert opinion.
Consequently the High Court was justified in taking the view both at the
stage of learned Single Judge as well as in appeal by the Division Bench
that the exchange ratio could not be said to be unfair or unreasonable
F especially when by as overwhelming majority the equity shareholders ap-
proved the said Scheme along with said exchange ratio and had no objec-
tion to the allotment of two equity shares of the transferee-company in
exchange for five equity shares of transferor-company. It was also con-
tended that the appellant himself who was the director of the transferor-
company had approved the same exchange ratio while he acted on behalf
G of the transferor-company. He was, therefore, playing hide and seek when
it came to the enforcement of the very same exchange ratio at the end of
the transferee-company wherein he was not a director but only shareholder
of merely 5% shares.

H It was next contended that the appellant was also an equity
MIHEERH.MAFA1LAL v. MAFA1LALINDS.LTD.(S.B.MAJMUDAR,J.] 21

shareholder and so far as the other equity shareholders were concerned A
they constituted the same class as the appellant. That there was no inter se
conflict between the rest of the equity shareholders representing 95% of
the voting strength which approved the Scheme and the appellant who
. ._ represented dissenting 5% votes and consequently there was no question
of holding as separate meeting so far as the appellant was concerned. Even · B
otherwise such a separate meeting would not have made any impact on the
voting pattern projected by the equity shareholders approving the said
Scheme by overwhelming majority. Repelling the additional contention
canvassed by learned counsel for the appellant it was submitted by Shri
Sorabjee learned senior counsel for the respondent that there was no
question of coercing any minority by the majority as in the meeting of the C
equity shareholders the appellant had not thought fit even to remain
present personally and had only got represented through proxy for submit-
ting his objection by voting against the Scheme without having any right to
address the meeting. Thus the contention regarding alleged suppression by
the majority was purely an afterthought especially when in the meeting the D
group of Arvind Mafatlal had not represented an absolute majority and
40% of the voting was by financial institutions who had no axe to grind
against the appellant and who had voted by keeping in view purely com-
mercial and economic interests of equity shareholders and had approved
the Scheme in that light. It was, therefore, submitted that the contention
raised on behalf of the appellant deserve to be rejected and the appeal E
consequently also deserve to be dismissed.

In view of the aforesaid rival contentions the following points arise
for our determination :
F
1. Whether the respondent-company was guilty of hiding the special
interest of its director Shri Arvind Mafatlal from the shareholders while
circulating the explanatory statement supporting the Scheme and whether
thereby the voting by the equity shareholders got vitiated.

2. Whether the Scheme is unfair and unreasonable to the minority G
shareholders represented by the appellant.

3. Whether the proposed Scheme of Amalgamation was unfair and
amounted to suppression of minority shareholders represented by the
appelJant and hence liable to be rejected. H
22 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 4. Whether separate meeting of minority shareholders represented
by the appellant was required to be convened on the basis that the
appellant's group represented a special class of equity shareholders.

5. Whether the exchange ratio of two equity shares of MIL for five
equity shares of MFL was ex f acie unfair and unreasonable to the equity
B shareholders of MIL and consequently the Scheme of Amalgamation on
that account was liable to be rejected.

However before we deal with the aforesaid. points for determination
seriatim, it will be necessary to keep in view the limited scope of the
C jurisdiction of the Company Court which is called upon to sanction the
Scheme of Amalgamation as per the provisions of Section 391 read with
Section ~93 of the Act.

Scope of inte1ference by the Company
Cowt in sanction proceedings
D
The relevant proyisions of the Companies Act, 1956 are found in
Chapter V of Part VI dealing with 'Arbitration, Compromises, Arrange-
ments and Reconstructions'. In the present proceedings we will be con-
cerned with Sections 391 and 393 of the Act. The relevant provisions
thereof read as under :
E
"391. (1) Where a compromise or arrangement is proposed -

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them;
F
the Court may, on the application of the company, or, ·of any.
creditor or member of the company, or, in the case of a company
which is being wound up, of the liquidator, order a meeting of the
creditors or class of creditors, or of the members or class of
members, as the case may be, to be called, held and conducted in
G
such manner as the Court directs.

(2) If a majority in number representing three-fourths in value of
. the creditors, or class of creditors, or members, or class of mem-
bers, as the case may be, present and voting either in person or,
H . where proxies are allowed under the rules made u.nder section 643,
MIHEER H. MAFATLAL v. MAFATLALINDS. LID. [S.B. MNMUDAR, J.] 23

by proxy, at the meeting, agree to any compromise or arrangement, A
the compromise or arrangement shall, if sanctioned by the Court,
be binding on all the creditors, all the creditors of the class, all the
members, or all the members of the class, as the case may be, and
also on the company, or, in the case of a company which is being
wound up, on the liquidator and contributories of the company :
B
Provided that no order sanctioning any compromise or arran-
gement shall be made by the Court unless the Court is satisfied
that the company or any other person by whom an application has
been made under sub-section (1) has disclosed to the Court, by
affidavit or otherwise, all material facts relating to the company, C
such as the latest financial position of the company, the latest
auditor's report on the accounts of the company, the pendency of
any investigation proceedings in relation to the company under
sections 235 to 251, and the like.

393. (1) Where a meeting of creditors or any class of creditors, or D
of members or any class of members, is called under section 391,-

(a) with every notice calling the meeting which is sent to a
creditor or member, there shall be sent also a statement E
setting forth the terms of the compromise or arrangement and
explaining its effect : and in particular, stating any material
interests of the directors, managing director, managing agent,
secretaries and treasurers or manager of the company,
whether in their capacity as such or as members or creditors
of the company or otherwise, and the effect on those interests, F
of the compromise or arrangement, if, and in so far as, it is
different from the effect on the like interests of other persons;
and

(b) in every notice calling the meeting which is given by adver- G
tisement, there shall be included either such a statement as
aforesaid on a notification of the place at which and the
manner in which creditors or members entitled to attend the
meeting may obtain copies of such a statement as aforesaid."

The aforesaid provisions of the Act show that compromise or arrangement H
24 SUPREME C,OURT REPORTS (1996) SUPP. 6 S.C.R.

. A can be proposed between a company and its creditors or any class of them
or between a company and its members or any class of them. Such a
compromise would also take in its sweep any scheme of amalgama-
tion/merger of one company with another. When such a scheme is put
forward by a company for the sanction of the Court in the first instance
B the Court has to direct holding of meetings of creditors or class of creditors
or members or class of members who are concerned with such a scheme
and once the majority in number representing three-fourths in value of
creditors or class of creditors or members or class of members, as the case
may be, present or voting either in person or by proxy at such a meeting
c. accord their approval to any compromise or arrangement thus put to vote,
and once such compromise is sanctioned by the Court, it would be binding
to all creditors. or class of creditors or members or class of membc:rs, as
the case may be, which would also necessarily mean that even to dissenting
creditors or class of creditors or dissenting members or class of members
D such sanctioned scheme would remain binding. Before sanctioning such a
scheme even though approved by a majority of the concerned creditors or
members the Court has· to be satisfied that the company or any other
person moving such an application for sanction under sub-section (2) of
Section 391 has disclosed all the relevant matters mentioned in the proviso
to sub-section (2) of that Section. So far as the meetings of the creditors
E or members, or their respective classes for whom the Scheme is proposed
are concerned, it is enjoined by Section 391(1)(a) that the requisite infor-
mation. as contemplated by the said provision is also required to be placed
for consideration of the concerned voters so that the parties concerned
before \Vhom the scheme is placed for voting can take an informed and
F objective decision whether to vote for the scheme or against it. On a
conjoint reading of the relevant provisions of Sections 391 and 393 it
becomes at once clear that the Company Court which is called upon to
sanction such a scheme has not merely to by go by the ipse di.xit of the
majority of the shareholders or creditors or their respective classes who
G might have voted in favour of the scheme by requisite majority but the
Court has to consider the pros and cons of the scheme with a view to
finding out whether the scheme is fair, just and reasonable and is not
contrary to any provisions of law and it does not violate any public policy.
This is implicit in the very concept of compromise or arrangement which
H is required to receive the imprimature of a court of law. No court of law
MIHEER H. MAFATLAL v. MAFATLAL INDS. LTD. (S.B. MAJMUDAR, J.] 25

would ever countenance any scheme of compromise or arrangement ar- A
rived at between the parties and which might be supported by the requisite
majority if the Court finds that it is an unconscionable or an illegal scheme
or is otherwise unfair or unjust to the class of shareholder or creditors for
whom it is meant. Consequently it cannot be said that a Company Court
before whom an application is moved for sanctioning such a scheme which B
might have got the requisite majority support of the creditors or members
or any class of them for whom the scheme is mooted by the concerned
company has to act merely as a rubber stamp and must almost automat-
ically put its seal of approval on such a scheme. It is trite to say that once
the scheme gets sanctioned by the Court it would bind even the dissenting
minority shareholders or creditors. Therefore, the fairness of the scheme
c
qua them also has to be kept in view by the Company Court while putting
its seal of approval on the concerned scheme placed for its sanction. It is,
of course, true that so far as the Company Court is concerned as per the
statutory provisions of Sections 391 and 393 of the Act the question of
voidability of the scheme will have to be judged subject to the rider that a D
scheme sanctioned by majority will remain binding to a dissenting minority
of creditors or members, as the case may be, even though they have not
consented to such a scheme and to that eXtent absence of their consent will
have no effect on the scheme. It can be postulated that even in case of such
a Scheme of Compromise and Arrangement put up for sanction of a E
Company Court it will have to be seen whether the proposed scheme is
lawful and just and fair to the whole class of creditors or members
including the dissenting minority to whom it is offered for approval and
which has been approved by such class of persons with required majority
vote. F

However further question remains whether the Court has jurisdiction
like an appellate authority to minutely scrutinies the scheme and to arrive
at an independent conclusion whether the scheme should be permitted to
go through or not when the majority of the creditors or members or their
respective classes have
.
approved
,
the schemeI
as required by Section 391 G
sub-Section (2). On this aspect. the nature of"compromise or arrangement
between the company and the ~creditors and members has to be kept in
. view. It is the commercial wisdom of the parties to the scheme who have
taken and informed decision about the usefulness and propriety of the
scheme by supporting it by the requisite majority vote that has to be kept H
26 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A in view by the Court. The Court certainly would not act as a court of appeal
nd sit in judgment over the informed view of the concerned parties to the
compromise as the same would be in the realm of corporate and commer-
cial wisdom of the concerned parties. The Court has neithe~ the expertise
nor the jurisdiction to delve deep into the commercial wisdom exercised
by the creditors and members of the company .who have ratified the
B Scheme by the requisite majority. Consequently the Company Court's
jurisdiction to that extent is peripheral and supervisory and not appellate.
The Court acts like an umprie in a game of cricket who has to see that
both the teams play their game according to the rules and do not overstep
the limits. But subject to that how best the game is to be played is left to
c the players and not to the umpire. The supervis~ry jurisdiction of the
Company Court can also be culled out from the provisions of Section 392
of the Act which reads as under :

"392. (1) Where a High Court makes an order under Section 391
sanctioning a compromise or an arrangement in respect of a
D company, it -

(a) shall have power to supervise the carrying out of the com-
promise or arrangement; and

(b) may, at the time of making such order or at any time there-
E
after, give such directions in regard to any matter or make
such modifications in the compromise or arrangement as it
may consider necessary for the proper working of the com-
promise or arrangement.

F (2) If the Court aforesaid is satisfied that a compromise or arran-
gement sanctioned under section 391 cannot be worked satisfac-
torily with or without modifications, it may, either on its own
motion or on the application of any person interested in the affairs
of the company, make an order winding up the company, and such
an order shall be deemed to be an order made under section 433
G
of this Act.

(3) The provisions of this section shall, so far as may be, also apply
to a company in respect of which an order has been made before
the commencement of this Act under section 153 of the Indian
H Companies Act, 1913 (7 of 1913), sanctioning a compromise or an
MIHEERH.MAFATLAL v._MAFATLALINDS.LID.[S.B.MAJMUDAR,J.]27
I

arrangement." A

Of course this Section deals with post-sanction supervision. But the said
provision itself clearly earmarks the filed in which the sanction of the Court
operates. It is obvious that the supervisor cannot ever be treated as the
author or a policy maker. Consequently the propriety and the merits of the
compromise or arrangement have to be judged by the parties who as sui
B
juris with their open eye and fully informed about the pros and cons of the
Scheme arrive at their own reasoned judgment and agree to be bound by
.. such compromise or arrangement. The Court cannot, therefore, undertake
the exercise of scrutinising the scheme place for its sanction which a view
to finding out whether a better scheme could have been adopted by the c
parties. This exercise remains only for the parties and is in the realm of
commercial democracy permeating the activities of the concerned creditors
and members of the company who in the their best commercial and
economic interest by majority agree to give green single to such a com-
promise or arrangement. The aforesaid statutory scheme which is clearly D
discernible from the relevant provisions of the Act, as seen above, has been
subjected to a series of decisions of different High Courts and this Court
as well as by the courts in England which had also occasion to consider
schemes under pari materia English Company Law. We will briefly refer to
the relevant decisions on the point. But before we do so we may also
usefully refer to the observations found in the oft-quoted passage in Bucklay E
on the Companies Act, 14th Edition. They are as under:

"In exercising its power of sanction the Court will see, first that the
provisions of the statute have been complied with, second, that the
class was fairly represented by those who attended the meeting F
and that statutory majority are acting bona fide and are not coerc-
ing the minority in order to promote interest adverse to those of
the class whom they purport to represent, and thirdly, that the
arrangement is such as an intelligent and honest man, a member
of the ciass concerned and acting in respect of his interest, might
reasonably approve. G

The court does not sit merely to see that the majority are acting
bona fide and thereupon to register the decision of the meeting,
but at the same time, the court Will be slow to differ from the
meeting, unless either the class has not been properly consulted, H
28 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A or the meeting has not considered the matter with a view to the
interest of the class which it is empowered to bind, or some blot \

is found in the Scheme."

In the case of Re. Alabama, New Orleans Texas and Pacific junction
Railway Company reported in 1891 (1) Chancery Division 213 the relevant
B observations regarding the power and jurisdiction of the Company Court
which is called upon to sanction a scheme of arrangement or compromise
between the company and its creditor or shareholders were made by
Lindley, L.J. as under :

"What the court has to do is to see, first of all, that the provisions
c of that statute have been complied with; and, secondly, that the
minority has been-acting bonafide. The court also has to see that
the minority is not being overriden by a majority having interests
of its own clashing with those of the minority whom they seek to
coerce. Further than that, the court has to look at the scheme and
D see whether it is one as to which persons acting honestly, and
viewing the scheme laid before them in the interests of those whom
they represent, take a view which can reasonable be taken by
businessmen. The court must look at the scheme, and see whether
the Act has been complied with, whether the majority are acting
bonafide, and whether they are coercing the minority in order to
E promote interests adverse to those of the class whom they purport
to represent; and then see whether the scheme is a reasonable one
or whether there is any reasonable objection to it, or such an
objection to it as that any reasonable man might say that he could
not approve it."
F To the similar ef\¢ct were the observations of Fry, L.J., which read as
under:

"The next enquiry is-Under what circumstances is the court to
sanction a resolution which has been passed approving of a com-
promise or arrangement? I shall not attempt to define what ele-
G
ments may enter into the consideration of the court beyond this,
that I do not doubt for a moment that the Court is bound to
ascertain that all the conditions required by the statute l~ve been
complied with; it is bound to be satisfied that the proposition was
made in good faith; and, further, it must be satisfied that the
H proposal was at least so far fair and reasonable, as that an intel-
MIHEER H. MAFATLAL v. MAFATLALINDS. LID. [S.B. MAJMUDAR, J.] 29

ligent and honest man, who is a member of that class, and acting A
alone in respect of his interest as such a member, might approve
of it. What other circumstances the court may take into considera-
tion I will not attempt to forecast."

In Anglo-Continental Supply Co. Ltd., Re. (1992) 2 Ch. 723 Ashtury, J., a
century later reiterated the very same propositions as under : B

"Before giving its sanction to a scheme of arrangement the court
will see firstly that the provisions of the statute have been complied
with; secondly that the· class was fairly represented by those who
attended tile meeting and that the statutory majority are acting
bona fide and are not coercing the minority in order to promote
c
interests adverse to those of the class whom they purport to
represent; and, thirdly, that the arrangement is such as a man of
business would reasonably approve."

Learned Single Judge of the Calcutta High Court in the case of Re. D
Mankam Investments Ltd. and Others (1995) 4 Comp U 330 (Cal.) relying
on a catena of decisions of the English Courts and Indian High Courts
observed as under on the power and jurisdiction of the Company Court
which is called upon to sanction a scheme of merger and amalgamation of
companies:
E
"It is a matter for the shareholders to consider commercially
whether amalgamation or merger is beneficial or not. The court is
really not concerned with the commercial decision of the
shareholders until and unless the court feels that the proposed
merger is manifestly unfair or is being proposed unfairly and/or to F
defraud the other shareholders. Whethe.r the merged companies
will be ultimately benefited or will be able to economise in the
matter of expenses is a matter for the shareholders to consider. If
three companies are amalgamated, certainly, there will be some
economies in the matter of maintaining accounts, filing of returns G
and various other matters. However, the court is really not con-
cerned with the exact details of the matter and if the shareholders
approved the scheme by the requisite majority, then the court only
looks into the scheme as to find out that it is not manifestly unfair
and/or is not intended to defraud or do injustice to the other
shareholders." H
30 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A We may also in this connection profitably refer to the judgment of this
Court in the case of Hindustan Lever Employee's Union v. Hindustan Lever
Ltd. and Others, [1995) Supp. 1 SCC 499 wherein a Bench of three learned
judges speaking through Sen, J. on behalf of himself and Venkatachaliah,
CJ., and with which decision Sahai, J., concurred. Sahai, J., in his concur-
ring judgment in the aforesaid case has made the folloWing pertinent
B
observations in this connection in paras 3. and 6 of the Report :

"But what was lost sight of was that the jurisdiction of the Court
in sanctioning a claim of merger is not to ascertain with mathe-
matical accuracy if the determination satisfied the arithmetical test.
c A company court does not exercise an appellate jurisdiction.

Section 394 casts an obligation on the court to be satisfied that
the scheme for amalgamation or merger was not contrary to public
D interest. The basic principle of such satisfaction is none other than
the broad and general principles inherent in any compromise or
settlement entered between parties that it should not be unfair or
contrary to public policy or unconscionable. In amalgamation of
companies, the courts have evolved, the principle. "prudent busi-
ness management test" or that the scheme should not be a device
E to evade law. But when the court is concerned with a scheme of
merger with a subsidiary of a foreign company then test is not only
whether the scheme shall result in maximizing profits of the
shareholders or whether the interest of employees was protected
but it has to ensure that merger shall not ·result in impeding
F promotion of industry or shall obstruct growth of national
economy. Liberalised economic policy is to achieve this goal. The
merger, therefore, should not be contrary to this objective.
Reliance on English decisions Hoare & Co. Ltd., Re 1933 All ER
Rep 105, Ch ·D and Bugle Press Ltd.. Re. 1961 Ch 270 that the
power of the court is to be satisfied only whether the provisions
G .P( .tl!t?. .~f::tJg1xe J?eeru:oi;nplied with· or, that therdassyor classes
1?bfrirl:WI~r.e MIY.:rf!pr.esent1,:;p a1'-P!the .wrangemeqbwas;suthras,a man of
1r, nu l;>µsjQ.~SliJW.OHl.dirJ(~l>OJ:!(/:b]y ~pprove bt;tween.two1private1e~_mpanies

nu ; tµ~YHQ~nCPfi.fieft !ian,4 Jn;J;ay normally; be1:a4her¢d (to ibJ.lt 11when the
, > :.Al.:le!;ge!. 1~~~~th :<!-'.:Sl\bsiflU.ry :.Pf <i 1fo.reign;90mpany th¢P, 1ei:;onomic
H interest of the country may have to be giYeniiJ)rete<;fence. The
MIHEER H. MAFATLAL v. MAFATLALINDS. LTD. [S.B. MAIMUDAR, J.) 31

jurisdiction of the court in this regard is comprehensive." A
Sen, J ., speaking for himself and Venkatachaliah, CJ., also towed the line
indicated by Sahai, J ., about the jurisdiction of the Company Court while
sanctioning the scheme and made the following pertinent observations in
paragraph 84 at page 528 of the Report :
B
"An argument was also made that as a result of the amalgama-
tion, a large share of the market will be captured by HLL. But
there is nothing unlawful or illegal about this. The Court will
decline to sanction a scheme of merger, if any tax fraud or any
other illegality is involved. But that is not the case here. A company
may, on its own, grow up to capture a large share of the market.
c
But unless it is shown that there is some illegality or fraud involved
in the scheme, the Court cannot decline to sanction a scheme of
amalgamation. It has to be borne in mind that this proposal of
amalgamation arose out of a sharp decline in the business of
TOMCO. Dr. Dhavan has argued that TOMCO is not yet a sick D
Company. That may be right, but TOMCO at this rate will become
a sick Company, unless something can be done to improve its
performance. In the last two years, it has sold its investments and
other properties. If this proposal of amalgamation is not sanc-
tioned, the consequence for TOMCO may be very serious. The E
shareholders, the employees, the creditors will all suffer. The
argument that the Company has large assets is really meaningless.
Very many cotton mills and jute mills in India have become sick
and are on· the verge of liquidation, even though they have large
assets. The Scheme has been sanctioned almost unanimously by
the shareholders, debenture-holders, secured creditors, unsecured F
creditors and preference shareholders of both the Companies.
There must exist very strong reasons for withholding sanction to
such a scheme. Withholding of sanction may turn out to be dis-
astrous for 60,000 shareholders of TOMCO and also a large
number of its employees." G
In view of the aforesaid settled legal position, therefore, the scope and
ambit of the jurisdiction of the Company Court has clearly got earmarked.
The following broad contours of such jurisdiction have emerged :

1. The sanctioning court has to see to it that all the requisite statutory H
32 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A procedure for supporting such a scheme has been complied with and that
the requisite meetings as contemplated by Section ·39l(l)(a) have been
held.

2. That the scheme put up for sanction of the Court is backed up by
the requisite majority vote as required by Section 391 sub- Section (2).
B
3. That the concerned meetings of the creditors or members or any
class of them had the relevant material to enable the voters to arrive at an
informed decision for approving the scheme in question. That the majority
decision of the concerned class of voters is just and fair to the class as a
whole so as to leg,itimately bind even the dissenting members of that class.
c
4. That all necessary material indicated by Section 393(1)(a) is placed
before the voters at the concerned meetings as contemplated by Section
391 sub-Section (1).

D 5. That all the requisite material contemplated by the proviso of
sub-Section (2) of Section 391 of the Act is placed before the Court by the
concerned appllicant seeking sanction for such a scheme and the Court
gets satisfied about the same.

6. That the proposed scheme of compromise and arrangement is not
E found to be violative of any provision of law and is not contrary to public
policy. For ascertaining the real purpose underlying the Scheme with a view
to be satisfied on this aspect, the Court, if necessary, can pierce the veil of
apparent corporate purpose underlying th~ scheme and can judiciously
· X-ray the same.

F 7. That the Company Court has also to satisfy itself that members or
class of members or creditors or class of creditors, as the case may be,
were acting bona fide and in good faith and were .not coercing the minority
in order to promote any interest adverse to that of the latter comprising of
the same class whom they purported to represent.
G
8. That the scheme as a whole is also found to be just, fair and
reasonable from the point of view of prudent men of business taking a
commercial decision beneficial to the class represented by them for whom·
the scheme is meant.

H 9. Once the aforesaid broad parameters about the requirements of a
34 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. )

A better, more efficient and economic control in the running opera-
tions and would lead to economy in the administrative and manage-
ment cost, resulting in improving profitability. The amalgamated
company will have a strong and large resource funds. The com- I

B
bined Technological Managerial and financial resources would
enhance the capability of the amalgamated company to invest in
• '
l.

larger and sophisticated projects to ensure rapid growth. The
amalgamated company's Textiles Division with five operative units
at its disposal will have· flexibility in its operation." ...._
So far as the aforesaid explanatory statement is concerned it gives sufficient
c indication regardingJhe pliability and usefulness of the proposed Scheme
of Amalgamation of transferor-company MFL with the transferee-company
MIL. However the special grievance of the appellant voiced by his learned
counsel is to the effect that the real interest underlying the scheme of
merger was that of the director Shri Arvind Mafatlal and his group who
were at the helm of affairs of the transferee,company. Learned senior
D counsel Shri Shanti Bhushan in this connection submitted that under
Section 393(1)(a) of the Act the company is enjoined to mention in the
statement material interest of the director Shri Arvind Mafatlal in the .~
Scheme which is of a special nature as compared to the interest of other
shareholders and it was also necessary to mention the effect of the com-
E promise and arrangement on such special interest of Shri Arvind Mafatlal
and ~s that was not mentioned in the explanatory statement along with
which the copy of the Scheme was circulat.ed to the members the majority
vote became vitiated. Now a mere look at Section 393(1)(a) shows that the
special interest of the director which is required to be brought home to the
voters must satisfy the following requirements of the Section before it can
F be treated to be a relevant special interest of the director which is required
to be communicated to the voters :

1. The director's interest must be a special interest different from the
interest of other members who are the voters at the meeting.
.)

G
2. The compromise or arrangement which is put to vote must have
t
an effect on such special interest of the director.

3. Such effect must be different from the effect of compromise and
arrangement on similar interest of other persons who are called upon to
H vote at the meeting.
~
MIHEERH.MAFA11..AL v. MAFA11..ALINDS.LTD. [S.B.MAJMUDAR,J.] 35

When we enquired of Shri Shanti Bhushan, learned senior counsel for the A
appellant as to which special interest, according to him, of director Arvind
Mafatlal was required to be communicated to the voters as per Section
393(1)(a), he stated that there was a pending litigation between the appel-
lant on the one hand Shri Arvind Mafatlal on the other in Bombay High
Court. That Shri Arvind Mafatlal had sought a declaration in a pending
B
suit against the appellant that the latter was required to sell off his
share-holding in the transferee-company MIL to the plaintiff Arvind
Mafatlal who was director of MIL. In this very suit the appellant had filed
a counter-claim to the effect that· Shri Arvind Mafatlal and his group was
required to transfer their share-holding in the transferee-company in
favour of the appellant as per the Family Arrangement of 1979. Shri Shanti C
Bhushan in this connection submitted that though the learned Single Judge
had taken the view that this type of special interest of director Arvind
mafatlal was not relevant and germane to the requirement of Section
393(1)(a), the Division Bench in appeal had taken a contrary view and held
that such a special interest was required to be communicated to the equity D
shareholders in their meeting as per the said provision. In this connection
our attention was invited by Shri Shanti Bhushan to the observation of the
Division Bench of the High Court at page 325 of the paper book wherein
the Division Bench observed as under :

"Mihir H. Mafatlal was to get exclusive control to MIL to t~e E
exclusion of Arvind N. Mafatlal and his two brothers. Under the
proposed family arrangement M. Fine was to be hived off from
MIL and the control and management of the M. Fine was to be
held by Arvind N. Mafatlal and that of MIL was tc:i be handed over
,
to objector Mihir H. Mafatlal. This family arrangement has suf- F
fered rough weather. Suit No. 1010of1987 was filed by Arvind N.
Mafatlal against Mihir H. Mafatlal and others before the Bombay
High Court alleging that another agreement subsequent to the said
family arrangement has come into existence under which Mihir H.
Mafatlal and other brothers of Arvind had agreed to transfer all
their holdings in MIL to A.N. Mafatlal, drawing a curtain on the G
family arrangement of 1979. Mihir H. Mafatlal has filed counter
claim in that suit claiming enforcement of family arrangement of
1979. The said dispute and the outcome thereof will have direct
effect on the respective interest of the shares held by AN. Mafatlal,
Mihir H. Mafatlal and other members of the Mafatlal family, and H
-
36 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A trusts. under them."

He also invited our attention to the observations of the Division Bench at
page 328 of the paper book to the effect that having cons;dered the rival
co.ntentions and closely examined the scheme of Section 393, they were
unable to sustain the conclusion that the facts about the interests under the
B alleged family arrangements and the effect of proposed arrangement for
amalgamation on such interests were not required to be disclosed under
section 393(1)(a).
.....
In our view the aforesaid observations of the Division Bench are not
C quite apposite in the light of the proposed Scheme of Compromise and
arrangement which was sought to be got sanctioned by the Court. On the
other hand the learned Single Judge was quite justified in taking the View
that this type of interest which was of personal nature so far as director
Arvind Mafatlal on the one hand and appellant on the other hand were
D concerned was not at all germane to the question relating to sanctioning
of the Scheme of Compromise and Arrangement with which the Court was
concerned. It is obvious that when a. Scheme of Compromise and Arran-
gement which involves two companies, namely the transferor- company and
the transferee-company and their shareholders and creditors is on the anvil
of scrutiny before the sanctioning Court, the court has to see that the
E interest of the class of creditors or shareholders to whom the Scheme is
offered for approval is any way likely to be affected by the suppression of
special interest of the director in connection with such a scheme which is
on the anvil. Two independent bodies which are represented by their
shareholders or creditors as a class, as the case may be, have to take
F commercial decisions strictly with a view to seeing that the concerned
Scheme of Compromise or Arrangement is beneficial to the shareholders '
or creditors as a class vis-a-vis the company which is a corporate entity in
so far as company's relations with these class of creditors and shareholders
are concerned. If the special interest which the director has is in any way
likely to be affected by the Scheme and if non-disclosure of such an interest
G is likely to affect the voting pattern of the class of creditors or shareholders
who are called upon to vote on the scheme, then only such special interest
of the .director is required to be communicated to the voters as per Section
393(1)(a). We fail to appreciate how the personal family dispute between
the appellant on the one hand and Arvind Mafatlal, director of the trans-
H feree-company MIL on the other regarding the right to hold shares in the
MIHEER H.MAFAlLAL v. MAFKILALINDS. LID. [S.B. MATMUDAR, J.) 37

company can have any linkage or nexus with the Scheme of Amalgamation A
of these two companies which was put to vote before the equity
shareholders. It is easy to visualize that if the suit filed by Arvind Mafatlal
against the appellant succeeds and the appellant's counter-claim fails then
all that would happen is that the appellant will have to sell his share-hold-
ing which is only 5% in the transferee-company to the plaintiff Arvind
B
Mafatlal. That. has nothing to do with the equity shareholders as a class
which was called upon to decide whether the scheme of merging the
transferor-company MFL with the transferee-company was for the benefit
of the shareholders as a class. The equity shareholders of the transferee-
com pany had to ,decide in their commercial wisdom whether it is
worthwhile to have a larger body of shareholders on account of the merger c
so that apart from the shareholding of the transferee-company its objects
would also get diversified and its filed of operation would be enlarged with
the prospect of hike in the dividend available to these shareholders after
the economic and industrial activities of both the companies so amal-
gamated would get elongated and whether the value of their shares in such D
consolidated companies were likely to get a boost in the stock market. This
was the commercial decision which the equity shareholders of the trans-
feree-company .had to take. For taking this informed decision they were
least concern~d whether 5% share-holding of appellant in the company
remained or did not remain with him in future. Consequently if Arvind
Mafatlal's suit ultimately succeeded before the Bombay High Court and E
the appellant lbst in his counter-claim that would have no effect whatsoever
on the informed decision which the equity shareholders were called upon
to take while approving the scheme in question.

Conversely if the appellant succeeded in his counter-claim and direc- F
tor Arvind Mafatlal lost in his suit then all that would happen is that Arvind
Mafatlal will have to transfer his share- holding and share-holding of his
group in favour of appellant so far as the transferee-company is concerned.
That future possibility would have no impact on the decision making
process which the equity shareholders of transferee-company had to un- G
dertake at this stage while approving the Scheme. Consequently such an
eventuality was totally irrelevant for being brought to the notice of the
equity shareholders before whom the scheme was put to vote. While
deciding whether transferor-company should be merged with the trans-
feree-company and the transferee-company's economic and industrial ac-
tivity should be permitted to be enlarged as a result of such merger the H
38 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A equity shareholders were least concerned whether the appellant would
purchase in future the share of the present director Arvind Mafatlal or vice
versa. That was entirely their personal dispute which was still not adjudi-
cated upon and its decision one way qr the other had no impact on the
pattern of voting of the equity shareholders of the respondent-company as
a class of prudent businessmen and investors so far as the Scheme was
B concerned. The Scheme of Compromise and Arrangement which was put
to vote was of such a nature that it had no impact or effect on the personal
interest of the director Arvind Mafatlal in connection with his present
share-holding in the transferee-c()mpany. Consequently it must be held that
mention about such an interest was outside the statutory requirements of
c Section 393(1)(a) as rightly held by the learned Single Judge whose view
was erroneously upset by the Division Bench. However in any case we are
in entire agreement with the subsequent reasoning of the Division Bench
for approving the decision of the learned Single Judge on this aspect,
namely, that such non-disclosure of interest had no impact on the voting
pattern adopted at the meeting by the equity shareholders who are called
D
upon to approve the scheme. It may also be noted in this connection that
the resolution of the equity shareholders approving the Scheme of Amal-
gamation was passed with overwhelming majority by members including
through proxies, present and voting. It projected the following picture :

E In favour Against Total
(i) No. of Members 5,298 143 5,441

(ii) No. of valid votes 19,36,964 86,061 20,23,025

F From the pattern ofvoting it became apparent that out of 100% of the
share capital 75.75 per cent in value participated of which 95.75 per cent
voted in favour of the proposed Scheme. Out of 95.75 per cent of the votes
in value, a paltry 8.43 per cent votes had been attributed to Arvind Mafatlal
group consisting of individuals and trust. 39.45 per cent were the votes
attributable to financial institutions which can be said to have no interest
G other than their own interests as men of business' in considering the
proposed Scheme. Over 23 per cent votes have been attributed to public
limited companies or private limited companies which held the shares of
MIL and in which Arvind Mafatlal was also alleged to have interests. Thus
non-mentioning of the private dispute between Arvind Mafatlal and objec-
H tor in connection with the holding of shares in the transferee-company had
·MIHEER H. MAFA'ILAL v. MAFATIAL INDS. LID. (S.B. MAJMUDAR, J.) 39

in fact no impact on the voting pattern of equity shareholders including the A
financial institutions which had nothing to do with this personal feud
between the warring groups. Consequently the non-mentioning of the
pending dispute between the appellant on the one and Arvind Mafatlal on
,_...,..._ the other which was pending adjudication in the Bombay High Court had
in fact no impact whatsoever on the result of the voting undertaken by the B
equity shareholders in their class meeting. Thus the requisite statutory
majority of votes approving the scheme could not have been adversely
affected by the non-mentioning of this pending litigation in the explanatory
note even assuming that the Division Bench was right in holding that it was
required to ·be informed to the voters as per the requirements of Section
393(1)(a). In either view of the matter, therefore, the non-mentioning of C
the pending litigation between. the director of the transferee-company
Arvind Mafatlal on the the one hand and the appellant on the other, had
no vitiating effect on the majority decision of the equity shareholders who
approved the Scheme with overwhelming majority of 95.75 per cent of votes
and when the dissenting vote on behalf of the appellant's group was in D
microscopic minority of less than 5%. It is also pertinent to note in this
connection that appellant who being a party to the civil litigation before
the Bombay High Court and who was very much keep to get more share-
holding in transferee-company and who had already filed his counter-claim
for enforcing the family arrangement of 1979, had not thought it- fit to
remain present in the meeting of equity shareholders and on the contrary E .
he got himself represented through proxy who had no night to speak. Thus
in substance the appellant himself never though that information about the
pendency of the litigation between Arvind Mafatlal, director or the respon-
dent-company and himself was so important that it was required to be
brought to the voters' notice even though he had opportunity to do so by F
0 remaining personally present in the meeting for that purpose. It, therefore,
clearly appears to be an afterthought when he put forward such an objec-
tion for the sake of it at the time of opposing the Scheme which was put
for sanction of the Court.

It may also be kept in view that the explanatory statement no way G
emphasised that it is the management of the transferee-company by Shri
Arvind Mafatlal which is going to be better monitored and managed by
him after the merger in question. In other words management of the
company is not at all a germane consideration for the Scheme. Consequent-
ly whether the management remains with Arvind Mafatlal or in future may H
40 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

.A met get changed and go in the hands of the appellant is not a consideration
which has any linkage or nexus with the Scheme. Consequently the interest
of Arvind Mafatlal in the share-holding or likely future impact thereon by
the litigation was de hors the Scheme in question and was not required to
be placed before the voters. The first point for determination is, therefore,
answered in the negative.
B
Point No. 2

..,. So far as this point is concerned Shri Shanti Bhushan, learned senior
counsel for the appellant, submitted that in modern days corporate bodies
c even.though public limited companies are mostly controlled by big, influen-
tial and economically powerful families, which have inherited
entrepreneurial skill and expertise from earlier generations which had
controlled such enterprises in past. That in the present case also the
director of the respondent-company Shri Arvirid Mafatlal, the eldest male
D member of the family, had descended from the common ancestor Mafatlal
Gagalbhai who had established this empire and which has further grown
with passage of years. That when such a powerful director who is the eldest
male member of the family of the family is at the helm of affairs the
minority interest of the appellant who, according to him, was entitled to
50% share in the family concerns as per the 1979 family settlement was
E likely to be voted out and cornered by the influence of such a towering
personality as Arvind Mafatlal in the meeting of equity shareholders.
Therefore, unfairness of the Scheme has to be judged also from the point
of view of its impact on the minority shareholder who has a common
ancestor Mafatlal Gagalbhai and who is sought to be cornered and
F deprived of his just share in the family concerns. by the machinations of
Shri Arvind Mafatlal. The Court has, therefore, to see whether the Scheme
of Amalgamation which is sought to be put through at the behest of the
director of the respondent-company is fair to the minority group of the
appellant who claims 50% share in the family concerns against the director
of the respondent-company Shri Arvind Mafatlal and his group. So far as
...
G this submission is concerned Shri Sorabjee, learned senior counsel for the
respondent joined issues and submitted that factually there is no basis for
such a contention as respondent-company is not controlled by Shri Arvind
Mafatlal who is one of the direct.ors along with his son Hrishikesh but there
are eleven outside directors and the share-holding of Arvind Mafatlal and
H his group is not even 50% even including the share-holding of other
MJHEERH.MAFATLALv.MAFATLALINDS.LTD.[S.B.MAfMUDAR,J.]41

subsidiary companies in which also Arvind Mafatlal and his group may be A ·
shareholders. We find considerable force in the aforesaid contention of
learned senior counsel for the respondent. The evidence produced in the
case shows that out of total majority vote of95.75 per cent which supported
- _, the Scheme at the meeting of equity shareholders even according to the
pattern disclosed by the appellant himself individual trust controlled by B
Arvind Mafatlal and private companies accounted to only 16% of the
shares voted in the meeting, about 44% of the share were represented by
financial institutions, employees and public taken together and two com-
panies stated to be from Mafatlal group had only 15% share. Consequently
it is too much to contend that the voting pattern was dominated by the
share-holding of Arvind of Mafatlal and his group when about 40% of the C
shares are held by financial institutions which had nothing to do with the
internal feuds of director Arvind Mafatlal on the one hand had the appel-
lant-objector on the other. It could not be said that the Scheme as put to
vote was in any way unfair to appellant or that the majority shareholders
acting as a class had not behave.cl in a bona fide manner for protecting the D
interest of the class as a while and were in any way inimical to the appellant.
While considering the question of bona fides of the majority voters and
whether they were unfair to the appellant it has to be kept in view that
bona fides. of the majority acting as a group has to be examined vis-a-vis
the Scheme in question and. not the bona fides of the person whose
persona!. interest might be different from the interest of the voters as a E
class. Bona fide of person can only be relevant if it can be established with
reasonable certainty that he represents majority or is controller of majority.
Arvind Mafatlal cannot be visited with such a charge. In this connection
we may usefully refer to a decision of English Court in the case of Hellenic
and General Trust Limited reported in (1976) 1 WLR 123. In that case the F
Court was concerned with a Scheme of Arrangement whereunder all the
ordinary shares of the company were to be cancelled and new shares were
to be issued to Hambros which would make the company as wholly owned
subsidiary of Hambros. Holders of such cancelled shares were to be paid
by Hambros at 48 pennies. In short it was an arrangement for taking over
of the company by Hambros. 53% shares of the Hellenic Company were G
held by another company MIT. MIT itself was a wholly owned subsidiary
company of Hambros. This situation led the Court to conclude that the
subsidiary company of Hambros which was holding such large number of
shares placed itself vis-a-vis Hambros in the position of vendor and the
H
42 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A lifted veil of transaction showed it to be one of acquisition than of amal-
gamation. The aforesaid decision is a pointer to the fact that what was
required to be considered while sanctioning the scheme was bona fides of
the majority acting as a class and not of single person. It is, therefore, not
possible to agree with the coatention of learned senior counsel for the
appellant that the majority had acted unfairly to the appellant and had not
B protected his interest when what was to be protected was the class interest
of minority shareholders falling in the same class along with the majority.
It is not the contention of the appellant that while voting by majority in
favour of the Scheme the majority had acted with any oblique motive to
fructify any adverse commercial interest qua him and his group when it
c consisted of outsiders like financial institutions or that there was any
possibility of their surrendering their economic interest in the Scheme at
the dictates of shareholder-director Arvind Mafatlal and his group. It is
also to be kept in view that the Board of Directors of the respective
companies, namely, the transferor-company as well as the transferee-com-
D pany had approved the Scheme of Amalgamation before it was put to vote .
. The appellant was himself one of the directors of the transferor- company
who had no objection to the Scheme of Amalgamation from the point of
view of the transferor-company. So far as the transferee-company is con-
cerned though appellant was not a director he was 5% shareholder who
did not think it fit to personally remain present at the time of voting and
E simply relied upon proxy. If he was feeling that the Scheme was unfair to
him or was not going to protect his interest as shareholder in the respon-
dent-company nothing prevented· him from remaining present and voicing
his grievance before the General Body of the equity shareholders and to
apprise them of the alleged pernicious effect of the Scheme. It is, therefore,
F too late in the day for him to contend that the Scheme was unfair to him
and that the family of Arvind Mafatlal had tried to dominate and engineer
any adverse pattern of voting at the meeting of the equity shareholders.

In 'this connection we tried to know from Shri Shanti Bhushan,
learned senior counsel for the appellant as to how the appellant felt that
G the Scheme was unfair to him. He submitted that under the Scheme the
transferor-company was losing its identity and was getting merged in the
transferee-company. That in the pending litigation between the parties in
the Bombay High Court if the appellant succeeded in his counter-claim he
was likely to get larger share-holding in the transferee- company and if that
H was not possible he could have got the complete control of the transferor-
MIHEER H. MAFA1LAL v. MAFA1LALINDS. LID. [S.B. MATMUDAR, J.] 43

company as per the family arrangement. Now once the transferor-company A
loses its identity then his counter-claim was likely to be infructuous as the
subject-matter of the counter-claim will stand withdrawn from the possible
operation of the decree if at all granted in his favour in the counter-claim.

r
This submission was countered by learned senior counsel for the respon-
dent by pointing out that it had no factual basis. That as earlier noted in
B
the suit pending in Bombay High Court if Arvind Mafatlal succeeded then
appellant will have to transfer his even remaining 5% share-holding in
transferee-company in favour of Arvind Mafatlal. If on the other hand the
appellant succeeded in his counter-claim and Arvind Mafatlal's suit was
dismissed then the appellant may get the shares which are at present held
by Arvind Mafatlal and his group in the transferee-company. But there is c
no question of appellant getting any exclusive control of the transferor-
company. Therefore, impact of that litigation one way or the other is going
to be totally negative so far as the existence of the transferor-company or
otherwise is concerned. We find considerable force in the contention of
iearned counsel for the respondent. It is also pertinent to note that if the D
appellant felt that the Scheme was unfair inasmuch as he was likely to lose
his future interest, if any, and control, if any, in the transferor-company by
its merger and loss of identity on account of the Scheme it passes one's
comprehension how he as sitting director of the transferor-company ap-
proved of the Scheme, did not object to the Scheme and on the contrary
was a party to the resolution of the Board of Directors of transferor-com- E
pany to propose the Scheme of its amalgamation with the transferee
company. Not only that but even when that Scheme was put for sanction
before the Bombay High Court on behalf of the transferor-company the
appellant did not object meaning thereby appellant had no objection to the
transferor-company losing its identity and getting merged in the transferee- F
company pursuant to the proposed Scheme. The appellant's own conduct,
therefore, belies his apprehension that the Scheme as proposed was in any
was unfair to him or that there were any ma/a fides behind the Scheme
attributable to Shri Arvind Mafatlal who is the director of the transferee-
company. The second point for determination, therefore, also is found to
be factually not sustainable. It is, therefore, held that the Scheme of G
Compromise and Arrangement is neither unfair nor unreasonable to the
minority shareholders represented by the appellant.

Before parting with the discussion on this point it is also worthwhile
to note that apart from the pattern of voting at the meeting of the equity H
44 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A shareholders, even the share-holding of the respondent-company belies the
submission put forward on behalf of the appellant that Arvind Mafatlal's
group dominated the constitution of the company and could control the
decisions of the shareholders. The evidence on record shows that the
share- holding of ANM Group can be worked out to 30.42% approximate-
ly. As against aforesaid share-holding the share-holding of financial institu-
B tions and MHM group in MIL would work out to 39.03% and that of
appellant's group works out at 29.05% while that of other shareholders
would work out to 34.34%. Hence it cannot be said that Arvind Mafatlal
is at the helm of affairs of the respondent- company or is in the driver's
seat or that his family is the virtual master of respondent-company. This is
c not a case where it can be urged with any emphasis that the respondent-
company is an alter ego of Arvind Mafatlal who is one of the directors of
the company and that he could create a show of the Scheme being
apparently beneficial to the shareholders but was in fact concealing any
covert and hidden device of augmenting his personal interest and interest
of his family which was adverse to the interest of innocent investors and
D
other equity shareholders including the appellant. It is also pertinent to
note that fina~cial institutions and statutory corporations held substantive
percentage of shares in respondent-company. This class of shareholders
who are naturally well informed about the business requirements and
economic meeds and the requirements of corporate finance in the light of
E their personal interest would not have wholly approved the Scheme if it
was contrary to the interest of shareholders as a class. Individual personal
interest of a minority shareholder like the appellant is absolutely out of
consideration when such class meeting acting for the benefit to the whole
class of equity shareholders take up the consideration of the Scheme for
its approval. Consequently it could not be said that the majority
F
shareholders had sacrificed the class interest of appellant minority
shareholders when they voted with overwhelming majority in favour of the
Scheme. Point No. 2 is accordingly answered in the negative. That takes us
to the consideration of Point No 3 for determination.

G Point No. 3

In a way the answer to point No. 2 necessarily results in negativing
this point also. Even that apart we fail to appreciate how the Scheme of
Amalgamation can be said to be unfair and amounting to suppression of
H minority shareholders represented by the appellant. It has to be kept in
MIHEERH.MAFAlLAL v. MAFAlLALINDS.LTD.[S.B.MAJMUDAR,J.] 45

view that by this proposed Scheme of Amalgamation the transferor-com- A
pany was getting merged in the transferee-company. Now even if it is held
that the appellant succeeds in his counter-claim in the suit pending in
Bombay High Court and if he is to get the share-holding of Arvind Mafatlal
and his group transferred to him so far as transferee- company is con-
cerned, the transferee-company because of the amalgamation will then be B
having more diversified activities and if at all according to the appellant
because of this future success, if any, in the counter-claim he is going to
replace A'l:vind Mafatlal and his group in the management of the respon-
dent-company he would have larger field to operate and larger company
to manage. We fair to appreciate as to how such a scheme from any point
of view can amount to suppression of appellant's minority interest in the c
share-holding of the company. This interest is not going to be in any way
adversely affected. If at all, his share-holding is going to increase in the
respondent-company if his counter-claim succeeds. If his counter-claim
fails he will have to get out lock, stock and barrel from the respondent-
company and he will have to wash his hands off the same. In either case D
the Scheme of Amalgamation will have no adverse impact on the
appellant's interest in the respondent-company. On the other hand the
Scheme of Amalgamation is likely to have a move beneficial effect on the
appellant's share-holding in the respondent-company if he succeeds in his
counter-claim in Bombay High Court. It has to be kept in view that the E
question of bona fide of the majority shareholders or the alleged suppres-
sion by them of the minority shareholders or their attempt to suffocate their
interest has to be judged from the point of view of the class as a whole.
Question is whether the majority equity shareholders while acting on behalf
of the class as a whole had eXhibited any adverse interest against the
F
appellant's minority shareholders also having similar interest as members
of the same class, while approving the Scheme or had acted with any
oblique motive to whittle down such a class interest of the minority. As we
have seen earlier no such situation ever existed both at the time when the
Scheme of Compromise and arrangement was cleared and proposed by the
Board of Directors of both the transferor and transferee companies and G
also at the stage when the Scheme was put to vote before the meeting of
equity shareholders forming a common class of which the app~llant was
also a member though a minority member. Consequently point No. 3 will
also have to be answered in the negative on the same lines and for the same
reasons on the basis of which point No. 2 is answered. H
46 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Point No. 4

So far as this point is concerned the relevant provis10ns of the
· Companies Act to which we have made a reference earlier indicate that
the Court has to order under Section 391(1) a meeting of creditors or class
of creditors or members or class of members to whom the Scheme of
B Compromise or Arrangement is offered by the company. The present
controversy centers round a meeting of members. Members of the company
are shareholders. Part IV of the Companies Act deals with 'Share Capital
and Debentures'. Section 82 provides that 'the shares or other interest of ,.
any member in a company shall be movable property, transferable in the
c manner provided by the articles of the company'. As per Section 86 the
share cap.ital of a company limited by shares formed after the commence-
ments of this Act, or issued after such commencement, shall be of two
kiQds only, namely, equity share capital and preference share capital. So
far as the Articles of Association of respondent-company are concerned
D they also contemplate two classes of shareholders, namely, equity and
preference shareholders. No separate class of equity shareholders is con-
templated either by the Act or by the Articles of Association of respon-
dent-company. Appellant is admittedly an equity sharehoWer. Therefore,
he would fall within the same class of equity shareholders whose meeting
was convened by the orders of the Company Court. However it ·is vehe-
E mently contended by learned counsel for the appellant that because of the
family arrangement of 1979 on which he relies he was a special class of
·minority equity shareholder who had separate rights against the director
of the company and whose special interest because of the pending litigation
between him and the director Shri Arvind Mafatlal was likely to be adver-
F sely affected by the Scheme, therefore, a separate meeting had to be
convened as he represented a class within the class of equity shareholders.
It is difficult to agree with this contention. Even though the Companies Act
or the Articles of Association do not provide for such a class within the
class of equity shareholders, in a given contingency it may be contended
G by a group of shareholders that because of their separate and conflicting
interest. vis-a-vis other equity shareholders with whom they formed a wider f '
class, a separate meeting of such separately interested shareholders should
have been con~ened. But such is not the case of the appellant. It is not his
case that his interest as an equity shareholder in respondent-company is in
any way conflicting with the general interest of the equity shareholders as
H
MIHEERH.MAFATLALv.MAFATLALINDS.LTD.[S.B.MATMUDAR,J.]47

a class. Consequently it could no be urged by him with any emphasis that A
the General Body of equity shareholders acting as a class while considering
the question of approval of the Scheme was likely to take a decision which
could adversely affect the commercial interest of the appellant as an equity
shareholder. His personal conflict of interests with the director was totally
foreign to the scope of class meeting which was convened to consider the B
Scheme in question as we have seen earlier while considering earlier points
for determination. It is also to be ~ept in view that the appellant would
have urged with some justification his contention for convening a separate
meeting representing for him and his group of dissenting equity
shareholders if it was his case that the Scheme of Compromise and Arran-
gement as offered to him and his group was in any way different from the c
Scheme of Compromise and Arrangement offered to other equity
shareholders who also belonged to the same class in the wider sense of the
term. On the express language of Section 391(1) it becomes clear that
where a compromise or arrangement is proposed between a company and
its members or any class of them a meeting of such members or class of D
them has to be convened. This clearly presupposes that if the Scheme of
Arrangement or Compromise is offered to the members as a class and no
separate Scheme is offered to any sub- class of members which has a
separate interest and a separate Scheme to consider, no question of
holding a separate meeting of such a sub-class would at all survive. Even E
otherwise it becomes obvious that as minority shareholder if the appellant
had to dissent from the Scheme his dissent representing 5% equity share-
holding would have been visible both in a separate meeting if any, of his
sub-class or in the composite meeting where also his 5% dissent would get
registered by appellant either remaining present in person or through
proxy. Consequently when one and the same Scheme is offered to the
F
entire class of equity shareholders for their consideration and when com-
mercial interest of the appellant so far as the Scheme is concerned is in
common with other equity shareholders he would have a common cause
with them either to accept or to reject the Scheme for commercial point
of view. Consequently there was no occasion for convening a separate class G
meeting of the minority equity shareholders represented by the appellant
and his group as tried to be suggested. It is also to be kept in view that it
is not the case of the appellant that any different terms of compromise were
offered to persons holding equity shares who were covering by the family
arrangement of 1979 or otherwise. In fact the entire proposal of the H
48 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Scheme of Arrangement was one affecting equally and in the like manner
all the existing equity shareholders of the respondent-company. In this
connection it is profitable to refer to what the learned author Palmer in
his Treatise Company Law 24th Edition, has to say :

"What constitutes a class :
B
The Court does not itself consider at this point what classes of
creditors or members should be made parties to the scheme. This
is for the Company to decide, in accordance with what the scheme
purports to achieve. The application for an order for meetings is
c a preliminary step, the applicant taking the risk that the classes
which are fixed by the judge, unusually on the applicant's request,
are sufficient for the ultimate purpose of the section, the risk being
that if in the result, and we emphasis the words 'in the result' they
reveal inadequacies, the scheme will not be approved. If e.q. rights
of ordinary shareholders are to be altered, but those of preference
D
shares are not touched, a meeting of ordinary shareholders will be
necessary but not of preference shareholders. If there are different
groups within a class the interests of which are different from the
rest of the class, or which are to be treated differently under the
Scheme, such groups must be treated as separate class for the
E purpose of the scheme. Moreover, when the Company has decided
what classes are necessary parties to the scheme, it may happen
that one class will consist of a small number of persons who will
all be willing to be bound by the scheme. In that case it is not the
practice to hold a meeting of that class, but to make the class a
F party to the scheme and to obtain the consent of all its members
to be bound. It is however, necessary for at least one class meeting
to be held in order to give the Court jurisdiction under the Section."

It is, therefore, obvious that unless a separate and different type of Scheme
of Compromise is offered to a sub-class of a class of creditors or
G shareholders otherwise equally circumscribed by the class no separate f
meeting of such sub-class of the main class of members or creditors is
required to be convened. On the facts of the present case the appellant
has not been able to make out a case for holding a separate meeting of
dissenting minority equity shareholders represented by his. The fourth
H point for determination, therefore, is answered in the negative. That takes
MIHEER H. MAFATLAL v. MAFATLAL INDS. LTD. [S.B. MAJMUDAR, J.] 49

us to the consideration of the last point for determination placed for our A
consideration by the learned senior counsel for appellant.

Point No. 5

It was submitted that the exchange ratio of equity shareholders so
far as the transferee-company is concerned works very unfairly and un- B
reasonably to them. As per the proposed Scheme 5 equity shares of
transferor-company are to be exchanged for 2 equity shares of transferee-
company. So far as this contention is concerned it has to be kept in view.
.... that before formulating the proposed Scheme of Compromise and Amal-
gamation an expert opinion was obtained by the respondent-company as
well as the transferor- company, namely, MFL on whose Board of Direc-
c
tor~ appellant himself was a members. M/S. C.C. Chokshi & Co., a reputed
firm of Chartered Accountants, having considered all the relevant aspects
suggested the aforesaid exchange ratio keeping in view the valuation of
shares of respective companies. It must at once be stated that valuation of
shares is a technical and complex problem which can he appropriately left D
to the consideration of experts in the filed of accountancy. Pennington in
his 'Principles for Company Law' mentions four factors which had to be
kept in mind in the valuation on shares :

"(1) Capital Cover,
E'
(2) Yield,

(3) Earning Capacity, and

(4) Marketability
F
For arriving at the fair value of share, three well known methods
are applied :

(1) The manageable profit basis method (the Earning Per Share
Method)
G
(2) The networth method or the break value method, anti

(3) The market value method."

So many imponderables enter the exercise of valuation of shares. M/s. C.C.
Chokshi & Co. considering all the relevant aspects and obviously keeping H
50 SUPREME COURT REP.ORTS (1996] SUPP. 6 S.C.R.

A in view the accounting principles underlying the valuation of shares sug""
gested the said ratio which was found acceptable both by the Board ot
Directors of the respondent-company as well as th.e Board of Directors of
the transferor-company. That the appellant himself as a director of that
transferor-company gave green single to the Scheme and to this very ratio
B of exchange of shares. But Shri M.J. Thakore, appearing for the appellant
submitted that form the point of view of the transferor-company it was very
profitable to have two shares of transferee-company against five shares of
transferor- company. But the difficulty arises only from the point of view
of transferee-company shareholders. According to Shri Thakore the proper
c exchange ratio would be one share of transferee-company to six shares of
transferor-company. It is difficult to appreciate this contention of the
appellant. It has to be kept in view that appellant never bothered to
personally remain present in the meeting of equity shareholders for point-
ing out the unfairness of this exchange ratio to his brother equity
D shareholders who were likely to be affected by the very same ratio as the
appellant. His interest at least to that extent was entirely common and
parallel to that of other equity shareholders. But he had no time to remain
personally present. He sent his proxy only to record his dissent vote which
was in microscopic minority of 5% as compared to 95% majority vote. Not
only that even before the Court he did not submitted and contrary expert
E opinion regarding the valuation of shares of transferor and transferee
companies for supporting his ipse dixit that the correct ratio would be 6 :
1 so far as transferor .and transferee. companies were concerned. Shri
Shanti Bhushan, learned senior counsel for. the appellant having realised
this difficulty submitted that at last these proceedings are continuation of
F proceedings before the High Court, therefore, this Court may now in order
to satisfy itself send for the opinion of an expert. It is difficult to agree.
The appellant who was propounding this theory of correct exchange ratio
had nothing to offer in support of his contention both b~fore the learned
Single Judge as well as before the High Court. It has to be kept in view
G that the matter was fiercely contested on all permissible points before
learned Single Judge. 1:he proceedings were pending before the High t ,
Court for more than two years from 8th February 1994 till lZth July 1996
when the Division Bench disposed of the appeal. For all these years neither
before the learned Single Judge nor before the High Court in appeal the
H appellant thought it fit to request the Court to either call for the report of
MIHEERH.MAFA1LAL v. MAFA1LALINDS.LID. [S.B.MATMUDAR,J.) 51

any other expert on valuation of shares not did he himself get such report A
for placing for consideration of the Court in support of his supposed better
ratio. It has also to be kept in view that which exchange ratio is better is
in the realm of coinmercial decision of well informed equity shareholders.
It is not for the Court to sit in appeal over this value judgment of equity
shareholders who are supposed to be men of the world and reasonable B
persons who know their own benefit and interest underlying any proposed
scheme. With open eyes they have okayed this ratio and the entire Scheme.
40% of the majority shareholders were financial institutions who were
supposed to be well versed on the aspect of valuation of shares. They had
no objection to the exchange of 2 shares of transferee-company for 5 shares C
of transferor company. As stated earlier it was a sort of a package duly
· cdnsidering all imponderables and implicit factors which the shareholders
had to keep in view for deciding whether to approve the Scheme of
Amalgamation or not. The exchange ratio was only one of the itt!ms. They
though if fit in their commercial wisdom to ac;cept the Scheme as a whole D
along with the exchange ration presumaply in expectation of better profits
in years to come when the amalgamated companies would operate and
when there would be, according to the shareholders, better. prospects of
earning greater dividends. They willingly agreed to give in exchange two
shares of transferee-company for five share of transferor-company and
made them available to the shareholders of the transferor- company. The E
appellant was representing only 5% dissenting shareholders and his object
was almost a voice in the wilderness, which did not appeal to the majority
of his brother shareholders. Shri Shanti Bhushan, learned senior counsel
for the appellant in this connection invited our attention to the obser-
vation of the Division Bench in its judgment at page 375 wherein it has F
been observed that "if one were to examine the exactitude of exchange
ratio that may be offf'.red fairly on the arithmetic scale by taking into
consideration various details, there is some force in what were suggested
. by Mr. B.R. Shah on behalf of~e appellant. However, keeping in view the
scope of enquiry which the court is required to undertake and with whose G
findings we are concerned, it will not be ~ermissible for us in law to
undertake this exercise in the facts and circumstances of present case in
absence of bona fides". We fail to appreciate how this observation can be
of any avail to learned senior conceal for the appellant as all that the Court
wanted to suggest was that even assuming that some another exchange ratio H
52 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A can be suggested to be better one, it was for the equity shareholders who
acted bona fide in the interest of their class as a whole to accept even a
less favourable ratio considering other benefits, that may offset such less
favourable ratio once an amalgamation goes through. We wholly concur
with this view. In this connection we may also refer to a decision of
B Maughm, J., in Re Hoare & Co. (No. 2) case (1933) All ER 105 wherein it
was laid down that where statutory majority had accepted the offer the
onus must rest on the applicants to satisfy the court that the price offered
is unfair. In this connection following pertinent observations were made by . 1

the learned Judge :

c "The other conclusion I draw is this X X X X X X the court ought
to regard the scheme as a fair one inasmuch as it seems me
impossible to suppose that the court, in the absence of any strong
grounds, is to be entitled to set up its own view of fairness of the
scheme in opposition to so very large a majority of shareholders
D who are concerned. Accordingly, without expressing a final opinion
on the matter because there may be special circumstances in
special cases, I am unable to see that 11 have any, right to order
otherwise in such a case as I have before me, unless it is affirm-
atively established that notwithstanding the views of a very large
E majority of shareholder, the scheme is unfair."

We may also refer to a decision of the Gujarat High Court in Kamala
Sugar Mills Limited 55 Company Cases p. 308 dealing with an identical
objection about the exchange ratio adopted in the Scheme of Compromise
F and Arrangement. The Court observed as under :

"Once the exchange ratio of the shares of the transferee-company
to be allotted to the shareholders of the transferor-company has
been worked out by a recognised firm of chartered accountants
who are experts in the field of valuation and if no mistake can be
G pointed out in the said valuation, it is not for the court to substitute
its exchange ratio, especially when the same has been accepted
without demur by the overwhelming majority of the shareholders
of the two companies or to say that the shareholders in their
collective wisdom should not have accepted the said exchange ratio
H on the ground that it will be detrimental to their interest."
MIHEERH. MAFATIAL v. MAFATIALINDS. LID. [S.B.MATMUDAR,J.] 53

These observations in our view represent the correct legal position on this A
aspect. We may also keep in view that in the present case not only expert
like M/s. C.C. Chokshi & Co. had suggested the ratio but another inde-
pendent body ICICI Security & Finance Company Limited reached the
"' same conclusion which was conveyed by its letter dated 10th November
1993 to the company approving of the entire Scheme along with suggested B
ratio. A mere look at the report of the Chartered Accountants M/s. C.C.
Chokshi & Co. shows that various factors underlying the Scheme of Com-
promise and Arrangement were taken into consideration while suggesting
the exchange ratio by the said reputed firm of chartered accountants. The
said opinion had taken into account the fact that on amalgamation shares C
have to be cancelled. Increase in share premium account in equity capital
of the MIL will also have to be taken into account as a result of final call
made in respect of Bond 1992 issue. It has also taken into account sig-
nificant increase in the paid-up equity of MIL as a result of issue of its
Bond in the international market. It has undertaken exercise in calculating D
net-worth of two companies. It has also referred to the method of valuation
of exchange ratio on the basis of earning per share of the two companies
by taking into account five years' working results of the two companies
making certain adjustments. Apart from taking into consideration the past
results of the two companies, the chartered accountants have taken into
account the potentiality of the two companies to earn profit in future, E
considering existing expansion and modernisation of projected and
planned expenditure by the MIL as well as subsidiary and sister concern
in hard. It has also taken into account the market price of equity shares
of past 24 months, declared dividend by the two companies the overall
effect of security scam in the market price, realisable investment and their F
market value. Taking into consideration multifarious considerations
detailed in the report, note was also taken of the fact that MIL held
substantial shares of MFL, which shall have to be cancelled on merger of
MFL with MIL. :rwo fully paid up equity shares of MIL of Rs. 100 each
for every five equity share of Rs. 100 each of MFL, was considered to he G
a fair exchange ratio to be offered as term of amalgamation. It was clarified
that, 'in absolute terms it would mean that the MIL is keeping considera-
tion of equity capital of par value of Rs. 7.77 crores which at the last issue
price of share amounts about to Rs. 38.84 crores and which at the correct
market price amounts to Rs. 57.4 crores. At the stage of dividend declared H
54 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A . for 1992-93, it will result in a cost in terms of distributable profits of Rs.
2.72 crores. For an undertaking in a diversified business activity of textile
and chemicals with the tota_l infrastructure, knowhow, technology tie up
and range of established products and capacities and potential the
aforesaid cost to MIL can be regarded as fair and reasonable'.
B The aforesaid report of the chartered accountants heavily w~ighed
with the transferor-company's Board of Directors which comprised,
amongst others, the appellant himself but also the Board of Directors of
transferee-company and also weighed with tCe General Body of equity
shareholders who approved the Scheme and the ratio with overwhelming
c majority. No grievance, therefore, can be make by the appellant at the stage
of Company Petition proceedings.for demonstrating the ratio to be exfacie
unfair and unacceptable .as the appellant would like to have it.

Undeterred by this position Shri Thakore, learned counsel for the
D appellant in support of his contention that the exchange ratio was ex f acie
unfair to the shareholders. ·of the transferee- company, invited our attention
• to the statement showing the working results of both the transferor and
transferee companies as found at Annexures M and N of Vol. II of the
Paper Book at page 534 and 535. He submitted that these statements
E showing the working results of the company for the last five years ended
31st March 1993 showed that the earning per equity share after deprecia-
tion and tax so far as the respondent-company was concerned was Rs. 30
while earning of transferor-company Mafatlal Fine Spg. & Mfg. Company
Limited was only Rs. 7 for the relevant five years. He also invited our
attention to the break-up value of the shares of company on the basis of
F the Balance Sheet as on 31st March 1993 so far as respondent-company
was concerned. Annexure 'Q' at page 538 showed value per equity share t
of Rs. 100 each at Rs. 1,515 while so far as the transferor-company was
concerned the break-up value per equity share was Rs.259. That may be
so. But as a package deal when the Scheme as a whole is examined and
G found to be advantageous to the economic and commercial interest of
shareholders as a class only one or two item simplicitor for deciding the
exchange ratio cannot tilt the balance as so 'may factors and aspect would
enter that exercise. It was undertaken by expert body of chartered account-
ants like M/s. C.C. Chokshi & Co. Before parting with the discussion on
H this point it would be apposite to refer to the decision of this Court in
MIHEER H. MAFATLAL v. MAFATLALINDS. LTD. [S.B. MAJMUDAR, J.) 55

Hindustan Lever Employees' Union (supra). In paragraph 41 of the Report A
Justice Sen speaking for himself and Venkatachaliah, CJ, and to which
Sahai, J concurred has observed that the problem of valuation in the case
of amalgamation of two companies has been dealt with by Weinberg and
Blank in the book 'Take-overs and Mergers' in which it is stated that some
or all of the 8 listed factors will have to be taken into account in determin- B
ing the final share exchange ratio. The Court has also approved the fixation
of exchange ratio of the shares of the companies on the basis of adoption
of combination of two or more well-known methods of valuation of shares
out of many such methods. In para 37 of the Report it has been observed
that the question is what method should be adopted for arriving at a proper
exchange ratio. The usual rule is that shares of the going concern must be
c
taken at quoted market value. This principle was also recognised by this
Court in the case of CWT v. Mahadeo lalan, (1973) 3 SCC 157. It is not
.the case of the appellant that M/s. C.C. Chokshi & Co. had not taken into
consideration the quoted market value of shares of both the companies
which were going concerns and which were subjected to the Scheme of D
Amalgamation in question. For all these reasons, therefore, there is no
substance in this contention canvassed on behalf of the appellant that the
exchange ratio was ex f acie unfair to the equity shareholders of the trans-
feree- company. The fifth point for determination is also, therefore,
answered in the negative. E

Before parting with this appeal we may mention that written submis-
sions comprising of 69 pages have beeµ. submitted by learned counsel for
the appellant. We have gone through the written submissions. We may
mention that learned counsel for the appellant was permitted to file written
F
submissions spread over 4 to 5 pages while his written submission have
gone upto 69 pages. It may also be mentioned that there was an order
passed by us 21st August 1996 permitting filing of written statements within
two days but the learned counsel for the Appellant has filed written
submissions only on 27th August 1996. Therefore, ex f acie his written
submissions are not required to be considered. However in order to see G
that the appellant may not suffer on account of non-consideration of these
written submission we have gone through them and have considered them
in the interest of justice. But having gone through the same we find that
they involve repetition of the main contentions canvassed before us during
oral arguments by their learned senior counsel Shri Shanti Bhushan and by H
56 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A their counsel Shri M.J. Thakore. Some additional points also appear to
have been raised in the written submissions pertaining to additional objec-
tions which were not pressed before us at the time of oral hearing and,
therefore, they obviously cannot be considered in support of the conten-
tions on which the appeal was pressed before us. The written submissions
in connection with the points which were already pressed before us are
B
already dealt with by us while considering the main points for determina-
tion in the earlier part of this judgment and, therefore, it is not necessary
to deal with the same once again.

These were the only contentions canvassed in support of the points
C for determination which have all been answered in the negative. The
inevitable result is that the appeal fails and is dismissed. Jn the facts and
circumstances of the case, however, there will be no order as to costs.

v.s.s. Appeal dismissed.
COOCH BEHAR CONTRACTORS' ASSOCIATION A
AND ORS. ETC.
v.
STATE OF WEST BENGAL AND ORS.

SEPTEMBER 11, 1996
B
[S.P. BHARUCHA AND K. VENKATASWAMI, JJ.]

Sales Tax Law:

Bengal Finance (Sales Tax) Act, 1941: Sections 2(c) and 6-D. C
Sales TOJ..~Declaration forms-Denial of-To dealers under S.6-
D-While advantage of using such forms was available to other
dealers-Held: not violative of A1ticle 14 of Constitution-Constitution of
India, 1950, A1ticles 14 and 366(29- A).
D
Section 6-D-Scope of-Held : was a complete code so far as dealers in
works contract were concemed--Hence, such dealers were not entitled to any
concession other than those enumerated in S.6-D.

"Contractual transfer p1ice''-Goods supplied to contractor by contrac-
tee and p1ice recovered from colllractor by way of adjustment-Held : value E
of such goods covered under "contractual transfer p1ice".

"Contractual transfer p1ice''-Royalty-Paid by contractor in the execu-
tion of w01*s contract while procuring boulders, e01th etc.-Includibility
of-Held : royalty amounted to payment of p1ice for goods obtained from the
Govemment Depaltments and used in the works contract-Hence, includible
F
in "contractual tramfer price".

"Contractual transfer price''-Cost of'freight and delive1y for canying
goods to work site-Includibility of-Question left open.
G
Words and Phrases : "Contractual tram.fer price''-!vleaning of-In the
context of Section 6-D of the Bengal Finance (Sales Tax) Act, 1941.

The appellants were contractors who executed civil construction
, works under different departments of the Central and State Governments
as well as Corporations. The Revenue sought to assess the appellants H
57

•
58 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A under Section 6-D of the Bengal Finance (Sales Tax) Act, 1941. The
appellants filed a petition before the Taxation Tribunal challenging such
assessment. The Tribunal dismissed the petition. Being aggrieved the
appellants preferred the present appeal.

On behalf of the appellants it was contended that denial to dealers
B under Section 6-D c)f the Act the use of declaration forms which had been
made available to other dealers was violative of the Constitution; that the
value of the stores.and materials supplied by the contractee to the contrac-
tor should not be included in the "contractual transfer price" under Section
6-D of the act; that the royalty paid by the contractor in the execution of
c works contract while procuring boulders, earth etc. should not be included
in the 'contractual transfer price'; and that cost of freight and delivery for
carrying goods to the work site should not be included in the 'contractual
transfer price'.

Dismissing the appeal, this Court
D
HELD : 1.1. Section 6-D of the Bengal Finance (Sales Tax) Act, 1941
is a self-contained code so far as dealers in works contract are concerned.
Whatever concessions the Legislature wanted to extend to such dealers were
enumerated in clauses (a) to (e) of Section 6-D(2) of the Act. Moreover,
E having regard to the non-obstante clause used in Section 6-D, it is clear that
no further concession was intended to be extended to the dealers in works
contract. As t~ey form a class by themselves, they cannot compare themsel-
ves with other dealers coming under sections 4 or 5 and allege discrimina-
tion to invoke Article 14 of the Constitution of India. [63-H; 64-A-B]

.F Gannon Dunkerley and Co. v. State of Rajasthan, [1993) 1 SCC 364,
relied on.

Builders Association of India and Others v. Union of India and Others,
[1989) 2 sec 645, referred to. .

G 1.2. The Tribunal bas found the contractor has to pay the price of
the goods supplied by the contractee by way of adjustment. It is, therefore,
clear that goods used in the execution of the works contract stand trans-
ferred from the contractor to the contractee at the time the goods are
incorporated in the construction and the value of such goods is covered,
H under the 'contractual transfer price'. [65-E; H]
COOCHBEH.ARCONTRACTORS'.ASSN. v.ST.ATE[VENKATASWAMI,J.}59

N.M. Goel & Co. v ..Sales Tax Officer & Anr., 72 STC 375, relied on. A
2.1. The payment of royalty in the execution of works contract while
procuring boulders, earth etc. amounts to payment of price for the goods
obtained from the Government Departments and used in the works con-
tract, and covered under 'contractual transfer price'. [66-D]
B
State of Madhya Pradesh v. Orient Paper Mills Ltd., (1977) 2 SCC 77,
relied on.

2.2. The Tribunal has not finally disposed of the issue of inclusion
of cost of freight and delivery for carrying goods to the work site under
'contractual transfer price' and hence this question if left open. [67-B] C
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5577-79
(NT) of 1990 Etc.

From the Judgment and Order dated 26.4.90 of the West Bengal
Taxation Tribunal, in R.N. 103 (T), 367 (T) and 34(T) of 1989. D

B. Sen and T. Ramachandran, Dilip Sinha, D. Krishan and J. R. Das E
for the Respondents.

The Judgment of the Court was delivered by

VENKATASWAMI, J. Common questions of law arise out of a
common judgment of the West Bengal Taxation Tribunal dated 26.4.1990
rendered in RN-30(T), RN-31(T) RN-34(T), RN-103(T), RN-367(T), RN-
F
138(T), RN-338, RN-339 of 1989.

The appellants are contractors and they execute civil construction
works including construction of roads and bridges under different depart-
ments of the Central and State Governments as well as respective corpora- G
tions. Such works include excavation of earth, drilling, construction of
water channel and river bank protection. Sue~ works of contract were not
brought under the net of sales tax till the Bengal Finance (Sales Tax) Act,
1941 (hereinafter referred to as "the Act") was amended by the West
Bengal Act 4 of 1984 inserting section 60 and amending section 2(c) of
the Act. These amendments were pursuant to the 46th Amendment of the H
60 SUPREMECOURTREPORTS [1996]SUPP.6S.C.R.

A Constitution of India in the year 1982 inserting clause 29A in Article 366.

The constitutional validity of the 46th Amendment inserting clause
29A in Article 366 was challenged and this Court in Builders Association
of India and Others v. Union of India and Others, [1989] 2 SCC 645 upheld
the constitutionality of the said amendment.
B
As a result of the insertion of section 6D to the Act, all transfer of
property in goods (whether as goods or in some other form) involved in
the execution of a works contract was deemed to be a sale of those goods
by the }Jerson making the transfer and the purchase of those goods by the
person to whom such transfer was made. The revenue sought to assess the
c appellants under section 6D of the Act and the appellants aggrieved by
such assessm~nts moved the High Court challenging initially the · con-
stitutionality of section 6D and finally confining their challenge to certain
limited aspects which we shall refer to hereinafter. The cases were original-
ly filed in the High Court and subsequently were transferred to West
D Bengal Taxation Tribunal (hereinafter referred to as "the Tribunal") and
the Ttibunal in its detailed judgment repelled every one of the arguments
raised on behalf of the. appellants and consequently dismissed the cases.

Before us Mr. Jayant Das, learned Senior Counsel for the appellants
broadly raised three poi11ts while attacking the assessments under section
E 6D of the Act. The first contention raised by the learned counsel was that
section 6D unjustly discriminates in the matter of grant of declaration
forms to the dealers under section 6D and thereby denies the advantage
gained by other dealers by using declaration forms and thus it is violative
of Article 14 of the Constitution of India.
F
The second contention put forward by the learned counsel was that
the value of the stores and materials supplied by the contractee to the
contractor for the specific purpose of use in the execution of works
contract should not be included in the 'contractual transfer price' under
section 6D as according to the learned counsel in such supplies there is no
G transfer of property and the property always remains with the contractee.
The third submission advanced by the learned counsel for the appellants
was that the royalty paid by the contractors in the execution of works
contract while procuring boulders, earth etc. should not be included in the
'contractual transfer price'. Another minor point raised by the learned
H counsel was that the cost of freight and delivery for carrying goods to the
COOCH BEHAR CONTRACTORS'ASSN. v. STATE [VENKATASWAMI, J.] 61

works site should not also be included in the 'contractual transfer price'. ·A

Mr. B. Sen, learned Senior Counsel in reply submitted that none of
the questions raised by the learned counsel for the appellants remain res
integra as they are totally covered either by the decision of this Court in
Builders' Association case (supra) or the recent decision of this Court in
M/s. Gannon Dunkerley and Co. and Others v. State of Rajasthan and B
Others, [1993] 1 SCC 364. In addition to that he also invited our attention
to a decision of this Court in the case of State of Madhya Pradesh v. Orient
Paper Mills Ltd., (1977] 2 SCC 77 wherein this Court has held that 'royalty'
is a feudalistic euphemism for price. So far as the cost of freight and
delivery for carrying the goods to the works site is concerned, the learned C
counsel invited our attention to the judgment of the Tribunal wherein the
Tribunal has not finally decided the issue, but has left open the same for
decision with reference to the facts of each case. In view of this overall
submission with which we agree we do not feel it necessary to deal
elaborately the contentions raised before us.
D
For appreciation of the rival contentions, it is necessary to set out
sections 2(c) and 60 of the Act as amended in the year 1984. They read
as follows:

"2(c) 'dealer' means any person who carries on the business of E
selling goods in West Bengal or of purchasing goods in West
Bengal in specified circumstances or any person making a sale
under section 60 ......"

"60. - Liability to payment of tax on the transfer of property in
goods involved in the execution of works contract and rate thereof. F
- (1) Notwithstanding anything contained elsewhere in this Act. -

(a) any transfer of property in goods (whether as goods or in
some other form) involved in the execution of a works contract
(hereinafter referred to as contractual transfer) shall be deemed G
to be a sale of these goods by the person making the transfer and
the purchase of those goods by the person to whom such transfer
is made;

(b) (i) every dealer whose contractual transfer price during. the
last year ending on or before the 31st day of March, 1984 exceeds H
62 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A rupees two lakhs shall, in addition to the tax payable by him under
section 5 and section 6B, if any, be liable to pay from the 1st day
of April, 1984 a tax at the rate specified in sub-section (3) of such
part of his contractual ·transfer price. as specified in sub-section
(2);
B (ii) every dealer, other than a dealer referred to in sub-clause
(i), whose contractual transfer price during any year ending on or
after the 1st day of April, 1984 exceed& rupees two lakhs shall, in
addition to the tax payable by him under section 5 and section 6B,
if any, be liable to pay from the first day of the year immediately
c following such year a tax at the rate specified in sub-section (3) of
such part of his contractual transfer price as specified in sub-sec-
tion (2);

(iii) every dealer who has become liable to pay tax under
sub-clause (i) or sub-clause (ii) shall continue to be so liable until
D the expiry of three consecutive. years during each ·of which the
contractual transfer price does not exceed rupees two lakhs and
on the expiry of such three years his liability to pay such tax shall
cease.

(iv) every dealer, whose liability to pay tax has ceased under
E
the provisions of sub-clause (iii), shall, if the contractual transfer
price during any year again exceeds rupees two lakhs, be liable to
pay from the first day of the year immediately following such year
the tax at the rate specified in sub~section (3) of such par~ of this
contractual transfer price as specified in sub-section (2);
F
(2) The tax payable under sub-section (1) shall be levied on
that part of contractual transfer price of a dealer during any period
which remains after deducting therefrom his contractual transfer
price during the period on -

G (a) contractual ti'.iansfer of goods referred to iii. section 14 of
the Central Sales Tax Act, 1956 (74 ·of 1956), on a prior sale
whereof in West Bengal due tax under this Act or under the West
Bengal Sales Tax Act, 1954 (West. Bengal Act IV of 1954), if such .
goods are notified for taxation under that Act, is shown to the
H satisfaction of the Commissioner to have been paid;
---(
COOCHBEHAR CONTRACTORS'ASSN. v. STATE [VENKATASWAMI, J.] 63

(b) contractual transfer of goods, sales of which are declared A
tax-free under section 6;

(c) contractual transfer of goods, sales of which are generally
· exempt from tax under sub-clause (vi) of clause (a) of sub-section
(2) of Section 5;
B
(d) contractual transfer of .goods, on the purchase of which tax
is payable by him under section 6C;

(e) such other contractual transfers, as may be prescribed.

(3) The tax under this section shall be levied at the rate of four C
per centum of such part of the contractual transfer price as
specified in sub-section (2).

Explanation 1. - In this section, the expression "contractual
transfer price", used in relation to any period, shall mean the
aggregate of the amounts received or receivable by a dealer during D
such period as valuable consideration for the transfer of property
in goods used in execution of a works contract, whether or not
the amount receivable as valuable consideration for such transfer
is separately shown in the works contract, and shall include the
value of such goods purchased, manufactured, processed or E
procured otherwise by the dealer and the cost of freight or delivery
as may be incurred by such dealer for carrying such gooc_ls to the
place where these are used in execution of such ·works contact, but
shall not include such portion of the aforesaid amounts as may be
prescribed.
F
· Explanation 2. - For the purpose. of this section, the expression
"goods" include commodities specified for taxation under section
25 of the West Bengal Sales Tax Act, 1954 (West Bengal Act IV
of 1954) and, notwithstanding any contained in this Act or in the
west Bengal Act IV of 1954), tax shall be levied on such com- G
modities under this section."

A perusal of section 60 clearly indicates that it is· a self-contained
code so far as dealers in works contract are concerned. Whatever conces-
sions the Legislature wanted to extend to such dealers were enumerated
in clauses (a) to (e) of sub-section (2) of section 60. Apart from that and H
64 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A having regard to the non obstante clause used in section 6D, it is made
clear no further concession was intended to be extended to the dealers in
works contract. As they form a class by themselves, they cannot compare
themselves with other dealers coming under sections 4 or 5 and allege
discrimination to invoke Article 14 of the Constitution of India. The
Tribunal has rightly taken a view by holding 'we are satisfied that the
B contractors, being dealers under section 6D read with section 2(c), have
_he<:n appropriately grouped together in one class, distinct and separate
from the other classes of dealers. The charge of arbitrariness and un-
reasonableness must fail. The classification cannot be faulted on account
of denial of the facility of use of declaration forms, because this class of
c dealers has been treated and dealt with on a different footing altogether
and they are governed by almost a self-contained code envisaged in section
6D.'

As rightly pointed out by learned senior counsel for the respondent
D Mr. B. Sen, the recent decision of this Court in Gannon Dunkerley and Co.
v. State of Rajastlzan, [1993] 1 SCC 364 also supports the view taken by the
Tribunal. This Court has observed as follows :

"A question has been raised whether it is permissible for the
E State Legislature to levy tax on deerried sales falling within the
ambit of Article 366 (29-A)(b) by prescribing a uniform rate of tax
for all goods involved in the execution of a works contract even
though different rates of tax are prescribed for sale of such goods.
The learned counsel for the contractors have urged that it would
not be permissible to impose two different rates of tax in respect
F of sale of the same article, one rate when the article is sold
separately and a different rate when there is deemed sale in
connection with the execution of works contract. On behalf of the
States it has been submitted that it is permissible for the State to
impose a particular rate of tax on all goods involved in the execu-
G tion of a works contract which may be different from the rates of
tax applicable to those goods when sold separately. In the field of
taxation the decisions of this Court have permitted the legislature
to exercise an extremely wide discretion in classifying items for tax
purposes, so long as it refrains from clear and hostile discrimina-
H tion against particular persons or classes. (See : East India Tobacco
COOCH BEHAR CONTRACTORS'ASSN. v. STATE [VENKATASWAMI, J.] 65

Co. v. State of A.P., P.M. Ashwathanarayana Shetty v. State of A
Karnataka, Federation of Hotel & Restaurant Association of India
v. Union of India and Kera/a Hotel and Restaurant Association v.
State of Kera/a. Imposition of sales tax at different rates depending
on the value of the annual turnover was upheld in S. Kodar v. State
of Kera/a. Similarly, imposition of purchase tax at different rates B
for sugar mills and Khandsari units was upheld in Ganga Sugar Co.
v. State of U.P. In our opinion, therefore, it would be permissible
for the State Legislature to tax all the goods involved in t~e
execution of a works contract at a uniform rate which may be
different from the rates applicable to individual goods because the
goods which are involved in the execution of the works contract
c
when incorporated in the works can be classified into a separate
category for the purpose of imposing the tax and a uniform rate
may be prescribed for sale of such goods."

In view of the above we hold that there is no discrimination violating D
Article 14 of the Constitution as alleged by the learned counsel for the
appellants.

So far as the second contention urged on behalf of ·the learned
counsel for the appellant is concerned, the Tribunal on facts has found the
contractor has to pay the price of the goods supplied by the contractee by E
way of adjustment. This Court in 1989 (2) SCC 645 (supra) has observed
as follows:

"Ordinarily unless there is a contract to the contrary, in the
case. of a works contract the property in the goods used in the p
construction of a building passes to the owner. of the land on which
the building is constructed, when the goods or materials used are
incorporated in the building. The contractor becomes liable to pay
the sales tax ordinarily when the goods or materials are so used in
the construction of the building and it is not necessary to· wait till G
the final bill is prepared.for the entire work."

It is, therefore, clear that goods used in the execution of. the works
contract stand transferred from the contractor to the contractee at the time
the goods are incorporated in the construction. It is also brought to our
notice by the learned counsel for the respondents that the principle laid H

"'
66 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A down by this Court in N.M. Goel & Co. v. Sales Tax Officer & Anr., 72 STC
375 squarely applies to the second point raised herein. While considering
a similar issue, namely, whether there was sale of goods in view of the
contract between the parties whereunder the custody and control of the
goods remained with the P.W.D. and goods were only used in the construc-
tion under the contract, this Court held that 'in the instant case, by use or
B consumption of materials in the work of construction, there was passing
of the property in the goods to the assessee from the P.W.D. By appropria-
tion and by the agreement, there was a sale as envisaged in terms of clause
{10) set out hereinbefore. Therefore, in our opinion, there was a sale which
was liable to tax'. Though this case was sought to be distinguished before
c the Tribunal by contending that that ratio must be treated as one given per
incuriam it was rightly rejected by the Tribunal. We are, therefore, in
agreement with the conclusion reached by the Tribunal that 'having con-
sidered all aspects of the matter, we hold that a sale within the meaning of
section 2{g) of the 1941 Act, namely, a transfer of property in goods
D supplied by the owner/contractee to the contractor for use in the execution
of a works contract takes place in the cases under our consideration, when
such goods are actually used in the construction work, provided prices of
such goods are deducted from or adjusted against bills or dues of the
contractor'.

E So far as the third question of payment of royalty is concerned, we
do not think there is any substance in that argument. As rightly pointed
out by the learned counsel for the respondents that in view of the decision
of this Court in Orient Paper Mills (supra) the payment of royalty amounts
to payment of price for the goods obtained from the Government depart-
ments and used in the works contract.
•.
F
Regarding the additional minor point, the Tribunal has not finally
disposed of the issue and it has left open the issue by observing as follows:

"Learned counsel for the applicants did not submit that such
G inclusion is in anyway bad or unconstitutional. Expenses incurred
on account of labour simpliciter surely cannot form a part of the
contractual transfer price simply because it is not a value of or
valuable consideration for any 'goods' unless such expense amounts
to cost of freight or delivery for carrying the goods to the worksite.
H It will depend on the circumstances in which or the purpose for ,,

·-
COOCH BEHAR CONIRACTORS'ASSN. v. STATE [VENKATASWAMI, J.] 67

which labour was employed. On this question we hold accordingly. A
Each case shall have to be judged on its own merits and on its
peculiar facts. ...... We, therefore, do not at this stage express any
opinion one way or the other on those charges and expenses as to
whether or not they will form part of the contractual transfer price."
~ ..
In view of the above it is not necessary to go into this issue further. B
For the foregoing reasons, we do not think there is any case for
interference under Article ·136 of the Constitution. Accordingly, the ap-
peals are dismissed. No costs.

v.s.s. Appeals dism1.ssed. C
A SHRI CHANDER CHINAR BADA AKHARA
UDASIN SOCIETY AND ORS.
v.
STATE OF JAMMU AND KASHMIR AND JRS.

SEPTEMBER 11, 1996
B
[A.M. AHMADI CJ., N.P. SINGH AND B.N. KIRPAL, JJ.]

Education-Higher education-Admission to professional colleges:

c Medical Colleg~Admission-Selection procedure-P1ivate recognised
medical college run by society-No rules/guidelines framed by State Govem-
ment for admission-Students seeking admission filed w1it petition before
High Court-Complaining that failure on pmt of State Govemment to frame
rules/guidelines deprived them of opp01tunity of seeking admission-Society
D impleaded as respondent to the said wlit petition-Single Judge of High Cowt
constituted Committee for selecting candidates on basis of oral interviews and
fixed time schedule for admission-Pursuant to which advertisement issued
on 4-10-1995 inviting applications and last date for receipt of applications was
11-12-1995-/nterviews held between 15 and 17-12-1995-Classes com-
menced from 26-12-1975-But Division Bench in L.PA. stayed operation of
E order of Single Judge and directed selection be made on basis of common
viva voce examination and that 75% marks for academic qualification and
25% marks for viva voce be allotted-Advertisement in'Jiting applications
stipulated that candidate must be pennanent resident of State-Held: orders
and directions of Single Judge as well as J?ivision Bench of High Court not
F consistent with orders and directions issued by Supreme Court-Time
Schedule fLXed by Single Judge was perse arbitrary-Percentage of marks
secured at stage of higher secondmy examination conducted by different
Boards vary and should not f01m basis of selection-Allotment of 25% marks
for viva voce examination was unjustified-Condition of eligibility that cmi-
didate must be a pennanent resident of State also unreasonable:-Common
G entrance examination must be held and admission made in accordance with
Supreme Court's directions in-Vnnikrishnan and subsequent cases.

Medical Co/leg~Admission-Plivate recognised medical college-No
ntles/guidelines framed by State Govemment-Admission made in accbrd-
H ance with High Cowt's directions-Though such directions not consistent with
68
C.C. BADA v. STATE 69

orders and directions issued by Supreme Court-Held : due to indifferent A
attitude of State Government and haste shown by college, the so-called
candidates, who were said to have been admitted, were viltually on the
roads-But only on equitable grounds, a procedure which was not sanctioned
by law would not be approved only to mitigate hardship of such candidates
who had sought admissions in the said medical college.
B
The Appellant-Society had the object of promoting medical educa-
tion by establishing medical colleges, hospitals and child welfare· centres.
A proposal was submitted to the State Government for setting up a
medical college and a private hospital in the State. The State Government
allotted land for the proposed medical college and charitable hospital. In C
due course temporary recognition to the said medical college was granted
by the Medical Council of India. However, no rules/guidelines were framed
by the State Government for admissions to the said medical College.

Some students seeking admission to the said medical college filed a D
writ petition before the High Court complaining that failure on the part
of the State Government to frame rules/guidelines to regulate admission
to the medical college of the Society had deprived them of the opportunity
of seeking admission. The Single Judge of the Big~ Court constituted a
Committee for selecting candidates on the basis of oral interviews and
fixed a time schedule for admission, pursuant to which an advertisement E
was issued on 4-12-1995 inviting applications. The last date for receipt of
applications was 11- 12-1995 and interviews were held between 15-12-1995
and 17-12· 1995 and classes commenced from 26-12-1995.

The respondents filed a Letters Patent Appeal against the aforesaid F
order before the Division Bench which stayed the operation of the order
of the Single Judge. The Division Bench directed that selection be made
on basis of common viva voce entrance examination and no common
entrance written examination be held. A direction was also given that out
of 100 marks awarded for selection of the candidates, 75% shall be for
academic qualification and 25% shall be for common entrance viva voce G
examination. Pursuant to the direction given by the Division Bench an
advertisement was issued by the State Government notifying conditions of
eligibility for admission to the said medical college. One of the conditions
was the candidate must be a permanent resident of the State. There was
no such condition laid down by the Division Bench. Being aggrieved the H
70 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A appellant-Society preferred the present appeal.

Dismissing the appeal, this Court

HELD : 1.1. Orders and directions of the Single Judge as well as
Division Bench of the High Court are not consistent with the orders and
B directions issued by this Court indicating the procedure for admission in
private medical colleges. The time schedule fixed by the Single Judge was
perse arbitrary. The percentage of marks secured by different applicants
at different types of examinations at the higher secondary stage cannot be
treated as uniform. Some of such examinations are conducted at the state
C level, others at the national level including (he Indian School Certificate
examination. The percentage secured at different examinations are bound
to vary according to the standard applied by such examining bodies, which
is well known. As such a common entrance examination has to be held.
The allotment of 25% marks for viva voce examination is unjustified. A
fresh advertisement shall be issued inviting applications and admission
D must be made in accordance with this Court's orders/directions issued in
Unnikrishnan and subsequent cases. [77-D]

J.P. Unnilaishnan v. State of A.P. & Ors., [1993] 1 SCC 645, followed.

Ajay Hasia v. Khalid Mujib Sehravadi & Ors., AIR (1981) SC 487;
E
T.MA. Pai Foundation & Ors. v. State of Kamataka, [1993] 4 SCC 276;
Manipal Academy of Higher Education v. State of Kamataka & Ors., [1994)
2 SCC 201 and T.MA. Pai Foundation and Ors. v. State of Kamataka and
Ors., [1995) 5 SCC 220, referred to.

F 1.2. Due to the indifferent attitude of the State Government and
haste shown by the appellant-Society, the so-called selected candidates,
who are said to have been admitted, are virtually on the roads. But only \

on equitable grounds, a procedure which is. not sanctioned by law cannot
be approved only to mitigate the hardship of such candidates who have
G sought admissions in the medical college aforesaid. [77-B-C]°

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11915-17
of 1996 Etc.

From the Judgment and Order dated 22.3.96 of the Jammu &
H Kashmir High Court in L.P.A. (W) Nos. 307, 312/95 and 8of1996.
C.C.BADA v. STAIB[N.P.SINGH,J.] 71

Dhruv Mehta and S.K. Mehta for the Appellants. A

H.N. Salve, E.M.S. Anam and Subhash Sharma and Rajeev Sharma
for the Respondents.

The following Judgment/Order of the Court was delivered :
B
N.P. SINGH, J. Leave granted.

Appellant No. 1 Shri Chander Chinar Bada Akhara Udasin Society
(hereinafter referred to as the Society) is a society registered under the J
& K Society Registration Act, the primary object being to promote medical
education by establishing medical colleges, hospitals and child welfare
c
centres. A proposal was submitted to the State Government for setting up
a medical college and a private hospital in Jammu, in the year 1988. The
State Government allotted 356 kanals of land for the proposed medical
college and charitable hospital. A further allotment of 250 kanals of land
is said to have been made by the State Government. The State Government D
recommended to the Jammu University for grant of affiliation to the
proposed medical college to be set up by the society. The State Govern-
ment also requested the Medical Council of India to grant approval/recog-
nition to the said medical college. Inspection was made by the
representatives of the Medical Council of India in respect of infrastructure
including the teaching facilities. In due course temporary recognition of the
E
institution was granted. It is said that the Society approached the State
Government to issue necessary guidelines and to frame· rules to regulate
the admissions to the medical college established by the Society. The
Society in its communication undertook to make admissions in accordance
with the directions of the Supreme Court of India in the case of J.P. F
Un11ik1islman v. State of A.P. & Ors., (1993] 1 SCC 645 and other directions
issued by this Court. The last such communication was addressed by the
Society to the State Government on 17.10.1995 saying that although it had
got recognition from the Government of India, but no rules/regulations
were being framed by the State Government for admissions to the said G
medical college.

The State Government had issued an advertisement on 6.7.1995
inviting applications from eligible candidates for appearing at the entrance
test for admission to the two government medical colleges. But while
iSsuing such advertisement the State Government did not invite applica- H
72 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A tions for the admission into the medical college of the Society. In the
brochure published by the State Government for information to the can-
didates, who may be willing to seek admission, nothing was said about the
medical college in question, which was necessary in view of the judgments
and orders of this Court for filling up the 'merit seats' and the 'payment _, • .
seats'.
B
It is further the case· of the Society that when people of the State of
J & K learnt about the medical college of the Society, they approached the
management for seeking admission and some applications were also sub-
mitted to the management. However, no action was taken on such applica-
c tions, as no instructions had been received from the State Government.

Some students seeking admission in the medical college in question,
filed a writ petition before the High Court of J ammu & Kashmir making
a grievance in respect of failure on the part of the State Government to
frame necessary rules/guidelines to regulate admission to the medical
D college of the society which had deprived them -of the opportunity of
seeking admission against the 'merit seats' or the 'payment seats'. The
appellant-society was impleaded as a respondent to the said writ petition.
Counte~ affidavit was filed on their behalf. All necessary records and
information were placed before ~he High Court. Inspite of the several
E opportunities being given to the State Government, no affidavit on their
. behalf was filed. By an order dated 27.11.1995, the learned single Judge
constituted a Cqmmittee consisting of :

"(a) Mr. Justice J.N. Bhat, (Rtd.) Judge of J & K High Court:
Chairman.
F
(b) Mr. A.M. Watali, former member J & K Public Service
Commission :
Member.

(c) Dr. Krishan Lal Gupta, Former Director, Health Services,
G J & K State:
Member.

(d) Prof. Vidya Nath Gupta, formerly Prof. and Head, Depart-
ment of Hindi, University of Jammu:
H Member."
C.C.BADA v. STATE[N.P.SINGH,J.) 73

A direction was giveµ to the said committee to immediately proceed A
with the selection process for admission of students in the 1st year MBBS
course of the said medical college. An option was given to invite or call for
applications by publication through recognised modes including issuance
of an advertisement in at least one leading newspaper having wide circula-
tion. In the order, the learned Judge observed that the selection Committee
B
may conduct oral interviews of the candidates for short-listing the ap-
plicants on basis of their inter se merit. The first meeting of the aforesaid
Committee is said to have been held on.29.11.1995. An advertisement was
issued on 4.12.1995 inviting applications from eligible candidates in
respect of the following four catregories :-
c
"(a) 50% merit seats from permanent resident of the State of
J&K;

(b) 20% payment seats from permanent resident of the State
of J&K;
D
(c) 15% payment seats from candidates outside the State of
J&K; and

( d) 15% from NRl's and foreigners."

The advertisement was published in the Indian Express in its issue dated
E
4.12.1995. In the said advertisement, 11.12.1995 was fixed as the last date
for receipt of the applications saying "that the interviews of the candidates
shall be held between 15.12.1995 and 17.12.1995. It is the case of the Society
that after the interviews were so held, a merit list was prepared on basis
of the percentage of marks secured by the applicants at the Higher Secon- F
dary School Examination or equivalent examinations and the marks
secured at the interview. The report of the Selection Committee was
forwarded on 19.12.1995, which was placed on the notice board on
20.12.1995. Candidates so selected were admitted between 20.12.1995 to
26.12.1995. The teaching commenced from 26.12.1995.
G
A Letters Patent Appeal against the order dated 27.11.1995,
aforesaid of the learned single Judge, had been filed on behalf of the State
Government, which was listed before the Division Bench on 27.12.1995. On
the basis of the caveat filed on behalf of the Society, the parties were heard
on the aforesaid date. After hearing the parties, the appeal filed on behalf H
74 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A of the State Government, was admitted and the operation of the order of
the learned single Judge was stayed. Ultimately, the Appeal filed on behalf
of the State and the appeals filed on behalf of others were allowed on
22.3.1996. The order of the learned single Judge was set aside. The pre~ent,
appeals have been filed against the said judgment of the Division Bench.
B From the judgment of the Division Bench, it shall appear that after
"
taking into consideration the different aspects of the controversy as well as
the predicament of the students who claimed to have been admitted in the
medical college aforesaid, the following directions were given :

"To conclude, considering these several aspects, we make the
c following orders :

(1) These appeals are allowed. The order of the learned Single
Judge passed on OWP No. 379/1995 dated November 27, 1995 is
set aside.
D (2) We issue a writ of Mandamus to the State Govt. to issue a
Notification calling for application from the eligible candidates in
the prescribed form for appearing in the common viva voce
entrance examination. There shall be no common entrance written
examination. Notification calling for applications shall be publish-
E ed in one local Daily Vernacular language and in one daily widely
circulated English newspaper providing enough time. The Writ
petitioners, the contesting respondents, the appellants of the LPAs
who have already applied need not apply once again except those
who have not applied.
F (3) The last date for receiving the applications in the prescribed
form shall be 5th April, 1996. Applications received after the date
fixed above either by post or by hand would not be entertained.

(4) The Roll Nos. to the eligible candidates shall be supplied
by the 8th April, 1996. The date for holding the common entrance
G ·r
viva voce examination is fixed as 10th April, 1996.

(5) The competent Authority shall make selection and an-
nounce the results on or before 17th April, 1996. The selection list
. so prepared shall be got published in atleast two leading local
H dailies of .Srinagar and Jammu and it shall also be displayed at the
C.C.BADA v.STATE[N.P.SINGH,J.] 75

office of Competent Authority, Entrance Examination in J ammu A
and Srinagar.

(6) Out of 100 marks awarded for selection of the candidates,

- 75% shall be for academic qualification and 25% shall be for
common Entrance viva voce Examination.

(7) The number of 100 seats shall be filled up by selecting
B

candidates from the order of merit.

(8) At least 50% of the seats out of the 100 seats shall be filled
up by the nominet!s of the Govt. or University as the case may be, C
hereinafter referred to as "free seats". These students shall be
selected on the basis of merit determined on the basis of merit list
by such criteria as may be determined by the Competent Authority
or appropriate Authority as the case may be. The remaining 50%
of the seats (payment seats) shall be filled up by those candidates
who are prepared to pay the fee prescribed therefor and who have D
complied with the instructions regarding deposit and furnishing of
cash security/Bank guarantee for the balance of the amount. The
allotment of students against payment seats shall also be done on
the basis of inter se merit determined on the same basis as in the
case of free seats. E
(9) In so far as the reservation of the seats. for persons claiming
constitutionally permissible reserved, the SRO issued by the State
of J&K in relation to the reservation of seats shall be followed.

(10) In so far as the fixation of the scale of fee payable by these F
students, the State Govt. shall constitute a committee within a
period of ten days and that committee shall fix the scale of fee
payable by the students in accordance with the guidelines con-
tained in the scheme of Unnikrislman J.P. AIR (1993) SC 2173."

It is apparent from the order aforesaid that a writ of mandamus was issued G
to the state Government to inyite applications from eligible candidates in
prescribed form for app~aring in the common viva voce entrance examina-
tion. However, there is a specific direction that no common entrance
written examination shall be held. 5th April, 1996 was as the last date for
receiving the applications in the prescribed form. Thereafter a time · H
76 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A schedule was prescribed in respect of common viva voce entrance examina-
tion, selection and announcement of the result. A direction was also given
that out of 100 marks awarded for selection of the candidates, 75% shall
be for academic qualification and 25% shall be for common entrance viva
voce examination.
B According to the appellant-society, there was no justification on the
part of the Division Bench to interfere with the directions given by the
learned single Judge, which were just and proper. It was pointed out that
under the predicament under which the appellant-society and the ap-
plicants had been placed because of the inaction on the part of the State
c Government, the learned single Judge had no option but to constitute a
Committee of persons mentioned above for selecting the applicants for
admission in order to save them from losing an academic session, for no
fault of theirs.

D It is true ·that when the Society requested the State Government to
frame necessary rules/guidelines to regulate the admissions in the medical
college of the society, the State Government should have taken appropriate
and immediate steps and there was no sense in shelving the said issue by
ignoring it outright. The learned counsel, who appeared on behalf of the
State, could not give any explanation as to why the necessary guidelines
E were not issued to the society in respect of the admissions in the medical
college aforesaid. But the fact remains that the learned Single Judge on
the writ petition filed on behalf of the students adopted a procedure and
fixed a time schedule in respect of admission of the applicants, which are
not consistent with the orders and directions issued by this Court in
F different cases, indicating the procedure for admission in private medical
colleges. There is no dispute that the advertisement inviting applications
from eligible candidates was issued on 4.12.1995 and 11.12.1995 was fixed
as the last date for receipt of the such applications i.e. within a week, which
according to us, was perse an arbitrary time limit fixed for receipt of the
G applications. It is said that the interviews were held between 15.12.1995 and
17.12.1995 and the selection list was forwarded on 19.12.1995. The selected
candidates are said to have been admitted between 20.12.1995 and
26.12.1995 and classes are said to have commenced since 26.12.1995 itself.
Admittedly, the Division Bench passed an interim order staying the opera-
tion of the judgment of the single Judge only the next day i.e. 27.12.1995.
H In this background, it is difficult to accept the claim made on behalf of the
C.C.BADA v. STATE(N.P.SINGH,J.] 77

Society as well as applicants who are said to have been admitted in the said A
medical college, that their studies coinmenced since 26.12.1995 and as such
on equitable grounds they should be allowed to pursue their studies.

It is unfortunate that due to the indifferent attitude of the State
Government and haste shown by the appellant-society, the so-called
selected candidates, who are said to have been admitted, are virtually on
B
the roads. But only on equitable grounds, a procedure which is not sanc-
tioned by law cannot be approved only to mitigate the hardship of .such
candidates who have sought admissions in the .medical college aforesaid.
But at the same time many of the directions given by the Division Bench
also cannot be approved. It has directed that selection be made on basis c
of common viva voce entrance examination and no common entrance
written examination be held. According to the direction of the Division
Bench, 75% marks have been allotted for academic qualification and 25%
• marks for the viva voce examination. It need not be pointed out that the
percentage of marks secured by different applicants at different types of D
examinations at the higher secondary stage cannot be treated as uniform.
Some of such examinations are conducted at the state level, others at the
national level including the Indian School Certificate examination. The
percentage secured at different examinations are bound to vary according
to the standard applied by such examining bodies, which is well known. As
such a common entrance examination has to be held. The counsel appear- E
ing for the parties could not justify the awarding of 25% marks for viva
voce examination in view of the several judgments of this Court in connec-
tion with admission in educational institutions; one such judgment being
from the State of J&K itself in the case of Ajay Hasia Etc. v. Khalid Mujib
Sehravadi and Others Etc.; AIR (1981) SC 487 = (1981) 1 SCC 722. F
The learned counsel appearing on behalf of the State informed the
Court that pursuant to the direction given by the Division Bench, an
advertisement was issued on 27.3.1996 by the State Government, notifying
the conditions of eligibility for admission in the said medical college. From G
the said advertisement it appears that one of the conditions is that the
candidate must be permanent resident of J & K. There was no such
direction given by the Division Bench. Apart from that any such condition
is not consistent with the different judgments and orders of this Court. Mr.
Verma, learned senior counsel, immediately offered to rectify the same
and to abide by any direction given by this Court. H
78 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A Taking all the facts and circumstances into consideration, we are of
the view that for one reason or the other, now it is not possible to complete
the admission in the said medical college for the session which has already
commenced. As such the only reasonable course shall be that a (resh
advertisement be issued for the next academic session in accordance with
law in the light of directions given by this· Court in the cases of J.P.
B Unnik1ishnan v. State of AP & Ors. (supra), T.MA. Pai Foundantion & Ors. -
' .

v. State of Kamataka, [1993] 4 SCC 276; Manipal Academy of Higher
Education v. State ofKamataka & Ors.; [1994] 2 SCC 201 and in the case
of T.MA. Pai Foundation and Ors. v. State of Kamataka and Ors., [1995] 5
SCC 220. The advertisement inviting applications should be given proper
c publicity and thereafter the seats should be ear-marked and allotted in
terms of the judgments aforesaid which prescribe the procedure for admis-
sion by the private medical colleges. Seats shall also be reserved for NRI
within the percentage fixed in those judgments. The State Government
shall extend all cooperation and help so that proper selections are made
D as per directions of this Court and the appellant-society which was estab-
lished the medical college is able to pursue its goal by making the medical
college functional, which shall be in the interest of the State of J & K itself.
The learned counsel appearing for the State of J & K assured this Court
that all necessary steps shall be taken promptly.

E In the result, the appeals are dismissed but at the same time in view
of the directions given above, it has to be held that we are not approving
the directions given by the Division Bench. Now, the steps have to be taken
by the appellant-society and the State Government in accordance with the
different directions given by this Court for admission in the private medical
p colleges. There shall be no orders as to cost.

v.s.s. Appeals dismissed.

N.P. SINGH, J. Leave granted.

G ,,,.
Civil Appeals are disposed of in terms of the judgment of this Court
in the case of Shri Chander Chinar Bada Akhara Udasin Society and Ors.
v. The_ State of J & Kand Ors., (Civil Appeal Nos. 11915-17of1996@ SLP
(C) Nos. 7924-7926 of 1996) delivered today.

H v.s.s. Appeals disposed of.
AHMEDABAD URBAN DEVELOPMENT AUTHORITY A
v.
MANILAL GORDHANDAS AND ORS.

•
•
SEPTEMBER 11, 1996

[AM. AHMADI, CJ. N.P. SINGH AND B
SUJATA V. MANOHAR, JJ.]

Gujarat Town Planning and Urban Development Act, 1976 : Sections
17(1)(c), 9 to 17, 20 and 124.
c
Town Pla1111i11g-Development Plan-Sanction of-State Govemment
accorded sa11ction to Draft Development Plan submitted by Mu11icipal Cor-
poration under Bombay Town Planning Act, 1954-Subsequently 1976 Act
came into force and repealed earlier Bombay A ct-{]rban Development
Authority submitted Development Plan to State Govemment for sanction
which covered area included in Draft Development Plan submitted by D
Municipal C01poratio11-Held : sanction of Plan submitted by Municipal
Corporation without co11sideli11g Pla11 submitted by Urban Development
Authority was without application of mind-Provisions of Bombay Act incon-
sistent with provisions of Gujarat Act-Therefore, deeming fiction in S.124(2)
would not apply and Plan submitted under repealed Act not deemed to be E
submitted u11der Gujarat Act-Final development pla11 i11 respect of area ....
withi11 C01poration came into force on date of sam;tio11 of draft developme11t
plan submitted under Gujarat Act-Hence, pe1iod of 10 years mentioned liz
S.20(2) must be computed from that date-Bombay Town Pla11ning Act,
1954.
F
Administrative Law :

Judicial review-Mala fide excercise of power--Held: It must be shown
that power was excercised with ulte1ior motive only to defeat statutory rights
of perso11s biterested. G
The Bombay Town Planning Act, 1954 regulated the town planning
activity within the area falling within the jurisdiction of the local authority
in the State including the Municipal Corporation. On 15.1.1976 the Cor-
poration submitted a revised development plan for tbe area falling within
the limits of the Corporation to the State Government for its sanction. On H
79
80 SUPREME COURTREPORTS (1996) SUPP. 6 S.C.R.

A 19.6.1976 the Gujarat Town Planning and Urban Development Act was
enacted which came into force on 30.1.1978. On that very date Ahmedabad
Urban Development Authority (AUDA) was constituted under Section 22
of the said Act. Section 124(1) of the said Act repealed the Bombay Town
Planning Act, 1954.

B By a notification dated 12.8.1983 the State Government sanctioned
the revised development plan submitted on 15.1.1976 by the Corporation
under the Bombay Town Planning Act, 1954. AUDA prepared a draft
development plan in accordance with the provisions of the Gujarat Town
Planning Act and submitted to the State Government for sanction on
C 23-7-1981. It also included the area covered by the Corporation. The State
Government sanctioned the draft development plan submitted on 23.7.1981
by the appellant AUDA on 2.11.1987 including for the areas within the
Corporation in respect of which the draft development had been sanc-
tioned by the State Government by aforesaid notification dated 12.8.1983.

D According to the writ petitioners respondents, as the draft develop-
ment plan which had been submitted. on 15.1.1976 and sanctioned on
12.8.1983 by a notification saying that the sanction plan would come into
force with effect from 16.9.1983, the period of 10 years as specified in
Section 20(2) of the Gujarat Town Planning Act would have to be counted
E with effect from 16.9.1983 so far as the area covered by notification dated
12.8.1983 was concerned. They claimed that within the aforesaid period of
10 years from coming into force of the final development plan neither t~e
lands in question covered by that notification were acquired by agreement
nor any proceedings under the Land Acquisition Act, 1894 were com-
menced. Thereafter, they issued notices and on expiry of the period of six
F months from the date of service of such notices it was claimed on their
behalf that the designation of the land had lapsed. This found favour with
the High Court. Being aggrieved the appellant-ADDA preferred the present
appeal.

Allowing the appeal, this Court
G
HELD : 1.1. The State Government could not have sanctioned the
draft development plan submitted by the Municipal Corporation on
12.8.1983 because the Gujarat Town Planning Urban Development Act, .
1976 had come into force on 30.1.1978, and Section 124(2) of the Gujarat
H Town Planning Act shall not save the plan submitted by the Corporation,
AHMEDABAD URBAN DEV. AlJTHORITY v. MANUAL GORDHANDAS 81

provisions of Sections 9 to 17 of Gujarat Town Planning Act being incon- A
sistent with Sections 7 to 10 of the Bombay Town Planning Act, 1954. The
· State Government after coming int(, force of the Gujarat Town Planning
Act should have ignored the draft development plan submitted by the
Corporation on 15.1.1976. This was also necessary because a special Act,
Gujarat Town Planning Act had been enacted on 19.6.1976 with the sole B
object to develop the urban area of the State in accordance with the
provisions of the said Act. [98-G-H; 99-A-B]

1.2. From a mere comparison of the relevant Sections under the
Bombay To"11 Planning Act, 1954 with the provisions of the Gujarat Town
Planning Act it shall appear that the relevant provisions of the Gujarat C
Town Planning Act are inconsistent with the provisions of Bombay Town
Planning Act. Provisions of Sections 7 to 10 of Bombay Town Planning Act
are inconsistent with Sections 9 to 17 of the Gujarat Town Planning Act.
As such after coming into force of Gujarat Town Planning Act on 30.1.1978
State Government was required to follow provisions of Sections 9 to 17 of D
the Gujarat Town Planning Act. Section 124(2) of Gujarat Town Planning
Act was of no help when the plan submitted by Corporation was sanctioned
on 12.8.1983. That could have been done if the provisions of the Gujarat
Town Planning Act had been consistent with the provisions of Bombay
Town Planning Act. [94-G; 95-E]
E
1.3. There was a complete lack of application of ~ind on the part of
the State Government when the draft development plan submitted on
15.1.1976 by the Corporation was sanctioned under the provisions of the
Gujarat Town Planning Act on 12.8.1983, overlooking the fact that in the
meantime a comprehensive draft development plan had been prepared by F
the appellant and had been submitted on 23.7.1981 for sanction of the State
Government. When Section 17(1) vests power in the State Government to
sanction the draft development plan, the said statutory power should not
be exercised in a casual manner without proper application of mind. The
facts of the present case clearly depict how the State Government has
exercised the power under Section 17(l)(c) of the Gujarat Town planning G
Act without proper application of mind. It appears the notification dated
12.8.1983 has· been issued being completely oblivious and ignorant of the
submission of a draft development plan by the appellant in the meantime
on 23.7.1981 covering those areas also. If the State Government was
conscious of the fact that later a more comprehensive draft development . H
82 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A plan had been submitted by the appellant, there was no reason to sanction
the draft development plan submitted by the Corporation which had lost .
jurisdiction over ·the area for which the draft development plan had been
prepared. (93-G-H; 94-A~E)

2.l. The State Government. should not have Qiken note of the plan -~
B •
submitted on 15.1.1976 by the Corporation after the repeal of the Bombay
Town Planning Act on 30.1.1978 and coming into .force of the new Gujarat
Town Planning Act. There was no occasion to ignore the comprehensive
plan submitted by AUDA vested With the power to submit such plan and
to sanction the draft plan submitted by the Corporation. After coming into
C force of the Gujarat Town, Planning Act on 30.1.1978 the State Government
could not have sanctioned a plan submitted by the Corporation when the
AUDA had already submitted a draft development plan even <:overing
those areas under the Gujarat Town Planning Act. (96-B-D]

2.2. When power has been vested in the appellant to prepare a draft
D
developnient plan and there being no bar to include in the said draft
development plan even area for which an earlier draft development plan
had already been sanctioned, then the draft development plan which was
sanctioned and notified on 2.11.1987 shall be deemed to be the final
development plan within the meaning of Section 20 of the Gujarat Town
E Planning Act. As such the period of 10 years has to be calculated and
counted With reference to 3.12.1987 the date when such final development
plan was to come into force. (97-D-E)

3. The possibility of misuse of such power does not arise because if
p such power is exercised With ulter~or motive and With an object to defeat
the statutory right of persons interested, courts Will be perfectly justified
in nullifying such actions of area development authorities. But in the
present case the draft development plan had been submitted by the appel-
lant as early as on 23.7.1981 much before the draft development plan
submitted by the Corporation was sanctioned on 12.8.1983. There is no
G scope for attributing any bad faith or malice on the part of the appellant
or the State Government in the facts and circumstances of the present
case. The writ petitioners - respondents did not take such a stand that the
State Government approved the draft development plan submitted by the
appellant ·on 2.11.1987 only to defeat the right which was to accrue to the
H · land owners or persons interested in the next few years. (98-A-C]
AHMEDABAD URBAN DEV. AUlHORITY v. MANILALGORDHANDAS (N.P. SINGH, J.) '83

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 11935- A
11943 of 1996.

From the Judgment and Order dated 1.8.95 of the Gujarat High
Court in L.P.A. No. ~96, 300, 301-02, 299, 294"95, 297 and 298 of 1995.

S.N. Shelat, Additipnal Advocate General, Gujarat, S.K. Dholakia, B
Soli J. Sorabjee, Anil B. Divan, Ashok H. Desai, S.H. Sanjanwala, Harish
N. Salve, P.S. Poti and R.P. Bhatt, Sr. Advs., V.K. Bhatt, D.S. Nanavati,
A.K. Agarwal, A. Chinnasamy, Y. Adhyaru, Ms. Alka Agarwal, V.D.
Khanna, Mrs. Nirmala Gupta, H.S. parihar, Kuldeep S. Parihar, P.H.
Parekh, E.R. Kumar, G.E. Desai, C.G. Sharma, Sandeep Parekh, A.J. c
Patel, C. Patel, S. Parekh, H. D. Raval, Anip Sachthey, C.D. Singh, N.N.
Munshi, A.P. Medh, A. Mehrotra, A. K. Pandey, C.C. Bhalja, A.K. Pandey,
A. Mehrotra, C.C. Bhalja, Ms. Tanuja Sheel and Ms .. Reema Bhandari for
the appearing parties.

The Judgment of the Court was delivered by D

N.P. SINGH, J. Leave granted.

These appeals have been filed on behalf of the Ahmedabad Urban
Development Authority for setting aside the order passed by the High E
Court of Gujarat dismissing the Letters Patent Appeals filed on behalf of
the appellants, against the judgment of the single Judge of the said High
Court in different writ petitions. The writ petitions had been allowed saying
that the sanction accorded by the Notification dated 12.8.1983, by the State
of Gujarat in exercise of powers conferred 011 it by clause (c) of sub-section
(1) of Section 17 of the Gujarat Town Planning and Urban Development F
Act, 1976 had lapsed after the expiry of period of 10 years and because of
service of notice by the concerned land owners in accordance with sub-sec-
tion (2) of Section 20 of the said Act, as during this period neither the
lands in question were acquired by agreement nor proceedings under the
Land Acquisition Act, 1894 were cbmmenced.
G
The Bombay Town Planning Act, 1954 regulated the town planning
activity within the area falling within the jurisdiction of the local authorities
in the State of Gujarat including the Ahmedabad Municipal Corporation
(hereinafter referred to as the "Corporation"). On 15.1.1976 the Corpora-
tion submitted a revised development plan to the State Government for the H
84 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A area falling within the limits of the Corporation for sanction of the State
Government. Section 7 of the Bombay Town Planning Act provides that
the details of the proposals for designating the use of the land for the
purposes such as (1) residential (2) industrial (3) commercial and (4)
agricultural as well as proposals regarding designation of and for public
purposes such as parks, play-grounds, recreation grounds, open spaces,
B schools, markets and for institutions should be indicated in the develop-
ment plan. Section 8 prescribes, the particulars which have to be submitted
to the State Government along with the development plan. In view of
Section 9 within 2 months from the date of publication of the aforesaid ·
development plan any member of the public has a right to communicate in
c writing to the local authority any suggestion relating to such plan which has
to be considered at any time before submitting the development plan to
the State Government. On receipt of the development plan under Section
8, the State Government under Section 10 can sanction such development
plan including with modifications if any. Such sanction shall be notified in
D official gazette and thereafter the development plan so sanctioned shall be
called "the final development plan" which shall come into force on such
date as the State Government may specify in the notification issued. The
Corporation submitted the development plan to the State Government for
sanction on 15.1.1976. On 19.6.1976 the Gujarat Town Planning and Urban
Development Act, 1976 (hereinafter referred to as the Gujarat Town
E Planning Act) was enacted, which came in force on 30.1.1978 and the
Bombay Town Planning Act was repealed since that date. On 30.1.1978
itself in exercise of the power under Section 22, the Ahmedabad Urban
development Authority (hereinafter referred to as the AUDA) was con-
stituted and the power to prepare development plan in respect of even the
F areas which were the part and parcel of the Corporation vested in AUDA
since that date.

The preamble of the Gujarat Town Planning Act says "an Act to
consolidate and amend the law relating to the making and execution of
development plans and town planning schemes in the State of Gujarat".
G Section 7 specifies the functions of the development authority which in-
cludes to undertake the preparation of development plans under the
provisions of the. said Act for the development area and to undertake the
preparation of town planning schemes under the provisions of the said Act;
to control the development activities. Section 9 provides that as soon as
H may be after the constitution of an area development authority as in the
AHMEDABADURBANDEV.AUIBORITY v.MANILALGORDHANDAS(N.P.SINGH,J.) 85

present case AUDA, for any development area such authority shall not A
later than three years after the declaration of such area as a development
area or within such time as the State Government may, from time to time
extend "prepare and submit to the State Government a draft development
plan for the whole or any part of the development area" in accordance with
the provisions of the said Act. In view of Section 10 of that Act a copy of
B
the draft development plan as prepared under Section 9 in respect of any
area has to be kept open for inspection by the public. Section 12 requires
such draft development plan to indicate the manner in which the use of
the lands in the area covered by it shall be regulated and shall also indicate
the manner in which the development therein shall be carried out. The
relevant portion of sub-section (2) of Section 12 is as follows : c

-
"12(2) In particular, it shall provide, so far as may be necessary,
for all or any of the following matters, namely :

(a) proposals for designating the use of the land for residential,
industrial, co~mercial, agricultural and recreational purpose; D

(b) proposals for the reservation of land for public purposes,
such as schools, colleges and other educational institutions, medi-
cal and public health institutions, markets, social welfare and
cultural institutions, theatres and places for public entertainment, E
public assembly, museums, art galleries, religious buildings, play-
grounds, stadia, open spaces, dairies and for such _other purposes
as may, from time to time, be specified by the State Government;

(c) ............................................................... ..
F
( d) transport and communications, such as roads, highways,
parkways, railways, waterways, canals and airport, including their
extension and development;

(e) ............................................................... ..
G
(t) ·································································
(g) ................................................................ .

(h) ................................................................. H
86 SUPREME COURT REPORTS [1996]SUPP. 6 S.C.R.

A (i) .......................................... ,..................... .

G) ·································································
(k) proposals for the reservation of land for the purpose of
Union, any State, local authority or any other authority or body
B established by or under· any law for the time being in force;

(1) ................................................................ .

(m) ................................................................. .

c (n) provision for preventing or removing pollution of water or
air caused by the discharge of waste or other means as a result of
the use of land;

(o) ................................................................. "

D Because of Section 13 such authority after "the draft development
plan is prepared and submitted to the State Government under Section 9",
shall publish it in the official gazette and in such other manner as may be
prescribed along with a notice in a prescribed manner inviting suggestions
or objections from any person with respect to the development plan within
a period of two months from the date of its publication. Sub-section (2) of
E Section 13 prescribes the particulars which have to be published alongwith
the draft development plan. Objections or suggestions communicated in
writing within the period specified has to be considered and· if necessary
the draft development plan may be modified. If the modifications made by
the authority in the draft development ptan are of extensive or substantial
F nature the said authority has to publish the said modifications in the official
gazette along with the notice in prescribed manner inviting suggestions or
objections from any person with respect to the proposed modifications
within a period of two months from the date of publication of the said
notice, which is required by Section 15. Section 16 provides that after the
development plan is published as aforesaid and the objections or sugges- .,
G tions thereto, if any, are received, the authority shall within a period of six
months from the date of the publication of the draft development plan
under Section 13 "submit to the State Government for its sanction the draft
development plan and the regulations with the modifications, if any, made
thereof under Sections 14 or 15". The particulars published under sub-sec-
H tion (2) of Section 13 and the suggestions or objections received under
AHMEDABAD URBAN DEV. AUIBORITY v. MANIJ.ALGORDHANDAS [N.P.SINGii,J:) 87

Sections 14 or 15 have also to be submitted to the State Government along A
with the draft development plan because of sub- section (2) of Section 16.
Section 17(1) which is relevant for the pr.esent case is as follows :

"17.(l)(a) On receipt of the draft development plan under
section 16, the State Government may, by notification, -
B
(i) sanction the draft development plan and the regulations so
received, within the prescribed period, for the whole of the area
covered by the plan or separately for any part thereof, either
without modifications, or subject to such modifications, as it may
consider proper; or c
(ii) return the draft development plan and the regulations to
the area development authority or, as the .case may be, to the
authorised officer, for modifying the plan and the regulations in
s~ch manner as it may direct.
D
· Provided that, where the State Government is of opinion that
substantial modifications in the draft development plan and regula-
tions are necesary, the State Government may, instead of returning
them to the area development authority or, as the case may be,
the authorised officer under this sub-clause, publish the modifica-
E
tions so considered necesary in the Official Gazette alongwith a
notice in the prescribed manner inviting suggestions or objections
from any person with respect to' the proposed modifications within
a period of two months from the date of publication of such notice;
or
F
(iii) refuse to accord sanction to the draft development plan·
and the regulations and direct the area development authority or
the authorised Officer to prepare a fresh development plan under
the provisions of this Act.

(b) Where a development plan and regulations are returned to G
an area development authority, or, as the· case may be, the
authorised. officer under sub-clause (ii) of clause (a), the .area
development authority, or, as the case may be, the authorised·
officer, shall carry out the modifications therein as directed by the
State 'Government and then submit them as so modified to the · H ·
88 SUPREME COURT REPORTS l 1996) SUPP. 6 S.C.R.

A State Government for sanction; and the State Government shall
thereupon sanction them after satisfying itself that the modifica-
tions suggested have been duly carried out therein.

(c) Where the State Government has published the modifica-
tions considered necessary in a draft development plan as required
B under the proviso to sub-clause (ii) of clause (a), the State Govern-
ment shall, before according sanction to the draft development
plan and the regulations, take into consideration the suggestions
or objections that may have been recieved thereto, and thereafter
accord sanction to the draft development plan and the regulations
c in such modified form as it may consider fit.

(d) The sanction accorded under clause (b) or clause (c) shall
be notified by the State Government in the Official Gazette and
the draft development plan together with the regulations so sanc-
tioned shall be called the final development plan.
D
(e) The final development plan shall come into force on such
date as the State Government may specify in the notification issued
under clause ( d) :

Provided that the date so specified shall not be earlier than one
E month from the date of publication of such notification .

.The State Government under the aforesaid sub-section (1) of .section 17,
may sanction the draft development plan forwarded by development
authority either without modifications or subject to such modifications.
Section 20 provides :
F
"20.(1) The area development authority or any other authority
for whose purpose land is designated in the final development plan
for any purpose specified in clause (b ), clause (d), clause (k) or
clause (n) of sub-section (2) of section 12, may acquire the land
either by agreement or under the provisions of the Land Acquisi-
G
tion Act, 1894.

(2) If the land referred to in sub-section (1) is not acquired by
agreement within a period of ten years from the date of the corning
into force of the final development plan or if proceedings under
H the Land Acquisition Act, 1894 are not commenced within such
AHMEDABAD URBAN DEV. AUIBORITY v. MANilALGORDHANDAS [N.P. SINGH, J.) 89

period, the owner or any person interested in the land may serve A
a notice on the authority concerned requiring it to acquire the land
and if within six months from the date of service of such notice
the land is not acquired or no steps are commenced for its
acquisition, the designation of the land as aforesaid shall be
deemed to have lapsed.
B
On a plain reading, sub-section (1) of Section 20 requires the area develop-
ment authority for whose purpose land is designated in the final develop-
ment plan for any purpose specified in clauses (b), (d), (k) or clause (n)
of sub-section (2) of Section 12 to acquire the land either by agreement or
under the provisions of the Land Acquisition Act. If such land is not C
acquired by agreement within the period of 10 years from the date of the
"coming into force of the final development plan" or if the proceedings
under the Land Acquisition Act are not commenced within such period,
the owner or any person interested in the land may serve a notice on the
authority concerned requiring it to acquire the land. If within period of six D
months from the date of the service of the notice the land is not acquired
or no steps are taken for its acquisition, the designation of the land as
aforesaid shall be deemed to have lapsed.

Sub-section (1) of Section 124 repeals the Bombay Town Planning
Act, 1954 but because of sub-section (2) of the said Section 124 not- E
withstanding such repeal anything done or any action taken, including any
declaration of intent.ion to make a development plan or town planning
scheme, any draft development plan or draft town planning scheme pub-
lished by a local authority, any application made to the State Government
for the sanction of any draft development plan or draft town planning
scheme, any, sanction given by the State Government to the draft develop- F
ment plan or draft town planning scheme shall in so far as it is not
inconsistent with the provisions of the Gujarat Town Planning Act shall have
effect in relation thereto.

(emphasis supplied) G

As already mentioned above on 15.1.1976 the Corporation under the
provisions of the Bombay Town Planning Act, 1954 had submitted a revised
development plan to the State Government for the area falling within the
limits of the Corporation for sanction of the State Government. But on
19.6.1976, the Gujarat Town planning Act was enacted which came into H
90 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A force with effect from 30.1.1978. On that very date AUDA was constituted
under Section 22 of the said Act. Because of sub-section (1) of SectiOn 124
it shall be deemed that the Bombay Town Planning Act was repealed with
effect from 30.1.1978, when the Gujarat Town Planning Act came into
force. Section 9 required AUDA to prepare and submit to the State
Government a draft development plan within three years from the decla-
B ration of the areas as development areas. A draft development plan was
prepared by AUDA for the entire area under its jurisdiction which in-
cluded the area covered by the Corporation and was submitted to the State
Government for its sanction on 23.7.1981.

c saying:On 12.8.1983 a notificatio~ ,.was issued by the State Government
"WHEREAS the Ahmedabad Municipal Corporation
(hereinafter referred to as "the said Municipal Corporation) has
prepared a "Draft Revised Development Plan (hereinafter referred
to as the said" Draft Revised Development Plan") in respect of the
D
lands within the jurisdiction of the said Municipal Corporation
under the provisions of the Bombay Town Planning Act, 1954 and
advertisement regarding publication of the said draft revised
Development Plan and calling; objections and suggestions in the
said draft revised development plan was published in the Part II
E of the Gujarat Government Gazette dated 15th January, 1976;
I

AND WHEREAS the government of Gujarat had considered
it necessary to make modifications (hereinafter referred to as "the
said modifications") in the said draft revised Development Plan
which was submitted by the said Municipal Corporation to the
F State Government for sanction under the provisions of the Gujarat
Town Planing and Urban Development Act, 1976;

NOW, THEREFORE, in exercise of the powers conferred by
G clause (c) of sub-section (1) of section 17 of the Gujarat Town
Planning and Urban Development· Act, 1976, the Government of
Gujarat hereby;

(a) finalises the said modifications;

H (b) sanctions the said draft revised development plan and the
AHMEDABAD URBAN DEV. AUTHORITY v. MANll.ALGORDHANDAS [N.P. SINGH,J.j 91

regulations thereto subject to the modifications so finalised and as A
set out in the schedule appended hereto; and

(c) specifies the 16th September, 1983 as the date on which the
final development plan shall come into force."

From the aforesaid notification itself it is apparent that the State Govern- B
. ment purported to sanction the draft revised development plan submitted
on 15.1.1976 by the Corporation under the provisions of the Bombay Town
Planning Act and State Government specified 16.9.1983 as the date on
which the said final development plan shall come into force.

There is no dispute that when AUDA prepared a draft development c
plan in accordance with the provisions of the Gujarat Town Planning Act
and submitted to the State Government for sanction on 23.7.1981 it also
included the area and the draft plan with modifications already submitted
by the Corporation on 15.1.1976. It is the case of the AUDA that it was
considered necessary to include even that area in the draft development D
plan prepared by the appellant, because by that time the draft development
plan which had been submitted by the Corporation had not been sanc-
tioned by the State Government. The State Government sanctioned the
draft development plan submitted on 23.7.1981 by the appellant AUDA on
2.11.1987 including for the areas within the Corporation in respect of which E
the draft development had been sanctioned by the State Government by
aforesaid notification dated 12.8.1983.

According to the writ petitioners-respondents, as the draft develop-
ment plan which had been submitted on 15.1.1976 and sanctioned on
12.8.1983 by a notification saying that the sanction plan shall come into F
force with effect from 16.9.1983, the period of 10 years as specified in
sub-section (2) of Section 20 of the Gujarat Town Planning Act shall have
to be counted with effect from 16.9.1983 so far the area covered by
notification dated 12.8.1983 is concerned. They claimed that within the
aforesaid period ,of 10 years from coming into force of the final develop- G
ment plan neither the lands in question covered by that notification were
acquired by agreement nor any proceedings under the Land Acquisition
Act were commenced. Thereafter, they issued notices and on expiry of the
period of six months from the date of seryice of such notices it was claimed
on their behalf that the designation of the land had lapsed. This has found
favour with the High Court which has been questioned before this Court. H
92 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A It may be pointed out that although the aforesaid notification dated
12.8.1983 was issued under the provisions of Clause (c) sub-section (1) of
Section 17 of the Gujarat Town Planning Act, admittedly the said draft
plan had neither been prepared in accordance with the provi;ions of
Gujarat Town Planning Act nor submitted by AUDA the appellant. In the
B notification itself it has been specifically mentioned that the Corporation
had prepared the said draft revised development plan under the provisions
of the Bombay Town Planning Act and submitted the same to the State
Government on 15.1.1976. It has been further said that the State Govern-
ment had considered it necessary to make modifications in the said draft
revised development plan which was submitted by the Corporation to the
c State Government and thereafter sanction was being accorded. We are not
able to appreciate as to why and how the draft revised development plan
which had been submitted by the Corporation on 15.1.1976 was sanctioned
and notified on 12.8.1983, when in the meantime the Gujarat Town Plan-
ning Act had come into force with effect from 30.1.1978 which had juris-
D diction even over the area in respect of which the Corporation had
submitted the draft development plan on 15.1.1976. Apart from that before
the aforesaid notification dated 12.8.1983 was issued, the appellant had
submitted its draft development plan prepared in accordance with the
provisions of the Gujarat Town Planning Act to the State Government for
E sanction, covering even the area which had been included in the draft
development plan submitted by the Corporation on 15.1.1976 along with
the much larger area for which th~ draft development plan was prepared
by the appellant. In normal course, the State Government should not have
taken note of the draft development plan submitted by the Corporation on
15.1.1976 which remained pending before the State Government and in the
F meantime the Gujarat Town Planning Act came into force and a more
comprehensive draft development plan prepared by the appellant had been
submitted to the State Government covering even the· area for which the
Corporation had submitted a draft developmenf plan. On behalf of the
respondents it was pointed out that when the appellant had submitted the
G draft development plan on 23.7.1981 including the area for which the draft
development plan had been submitted by the Corporation, it was open to
the State Government to sanction the draft development plan only in part,
covering the area for which the draft development plan had been submitted
earlier, while exercising power under Section 17(1)(a)(i) which says that
H the State Government may by notification sanction the draft development
AHMEDABAD URBAN DFV. AUlHORITY v. MANII.ALGORDHANDAS [N.P. SINGH, J.) 93

plan for the "whole area covered by the plan or separately for any part A
thereof'. This argument could have been accepted if in the notification
dated 12.8.1983 the State Government had referred to the draft develop-
ment plan submitted by the appellant on 23.7.1981 and had specifically said
that it was sanctioning only part of the said plan by that notification. In the
notification dated 12.8.1983, no notice has been taken of the draft develop- B
ment plan submitted by the appellant on 23.7.1981, covering even the areas
in respect whereof the draft development plan had been prepared by the
Corporation. As such it is a futile contention that by notification dated
...~
12.8.1983 part of the draft development plan submitted by the appellant on
23.7.1981 had been sanctioned by the State Government in exercise of the
powers under Section 17(1)(a)(i).
c
_,(
I
It was then submitted that as the draft development plan had been
submitted by the Corporation to the State Government before the Bombay
Town Planning Act stood repealed on coming into force of the Gujarat
Town Planning Act on 30.1.1978, because of sub- section (2) of Section 124 D
aforesaid it was open to the State Government to sanction that plan. On
proper reading of sub- section (2) it appears, that it shall be deemed that
the said draft ·development plan was pending before the State Government
because of sub~section (2) of Section 124. There is a deeming fiction in
sub-section (2) of Section 124 saying that any application made to the State E
Government for sanction of any draft development plan shall "be deemed
to have been done or taken under the corresponding provisions of this
Act". It shall only keep the draft development plan submitted by the
Corporation pending for consideration by the State Government because
it shall be deemed that it has been submitted to the State Government
under the provisions of the Gujarat Town Planning Act. But before
F

- sanctioning the said plan the State Government was required to examine
the said draft development plan along with the draft development plan
prepared and submitted by the appellant AUDA in the meantime. It can
be said that there was complete lack of application of mind on the part of
the State Government when the draft development plan submitted on G
15.1.1976 by the Corporation was sanctioned under the provisions of the
Gujarat Town Planning Act on 12.8.1983, overlooking the fact that in the
meantime a comprehensive draft development plan had been prepared by
,, the appellant and had been submitted on 23.7.1981 for sanction of the State
Government. When Secrion 17(1) vests power in the State Government to H
94 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A sanction the draft development Plan, the said statutory Power should not
be exercised in a casual manner without proper application of mind. The
fac~s of the present case clearly depict how the State Government has
exercised the power under Section 17(1)(c) of the Gujarat Town planning
Act without proper application of mind. It appears the notification dated
B 12.8.1983 has been issued being completely oblivi.:ius and ignorant of the
submission of a draft development plan. by the appellant in the meantime
on 23.7.1981 covering those areas also. lnspite of repeated queries from
the counsel who appeared for the writ petitioner-responc!ents, they could
not explain as to how while sanctioning the draft development plan sub-
C mitted on 15.1.76 by the Corporation, there is no mention in the notification
in question about the submission of a draft development plan by the
appellant covering those very areas. Why the State Government was
sanctioning the plan submitted on 15.1.1976 ignoring the more comprehen-
sive and detailed draft developmeat plan for a· much larger area including
the area for which the draft development plan had been submitted on
D 15.1.1976 by the Corporation? If the State Government was conscious of
the fact that later a more comprehensive draft development plan had been
submitted by the appellant, there was no reason to sanction the · draft
development plan submitted by the Corporation which had lost jurisdiction
over the area for which the draft development plan had been prepared.
E The draft development plan submitted by the Corporation had been sanc-
tioned on 12.8.1983 without proper application of mind is obvious from the
fact that admittedly later the State Government on 2.11.1987 sanctioned by
notification issued under Section 17(1)(i)(c) of the Gujarat Town planning
Act,. the draft development plan submitted by the appellant on 23.7.1981
F including the area for which the draft development plan had been sub-
mitted by the Corporation on 15.1.1976.

Apart from that from a mere compadson of the relevant Sections
under the Bombay Town Planning Act with the provisions of the Gujarat
G Town Planning Act it shall appear that the relevant provisions of the
Gujarat Town Planning Act are inconsistent with the provisions of Bom-
bay Town Planning Act. Section 12 of the Gujarat Town Planning Act
>-
covers a much wider field of the development and the object for develop-
ment is not as limited as Section 7 of the Bombay Town Planning Act.
·•
H Section 12 takes note of the factors and objects for which provisions have
t0 be made in the draft development plan. Keeping in view the modern
AHMEDABADURBANDEV.AUTIIORITY v.MANII.ALGORDHANDAS(N.P.SINGH,J.) 95

requirements for an urban development provisions have been made for A
zoological gardens, green belts, natural reserves sanctuaries, railways,
waterways canals, airport, water supply, drainage, sewage disposal, public
utility amenities including supply of electricity and gas. It also contemplates
preservation, conservation and development of natural scenery and
landscape, places of historical, architectural interest. It provides for con- B
trolling and regulating the use and development of land within the
developed area including imposition conditions and restrictions in regard
to the open space to be maintained for buildings, the percentage of
building area for a plot, the location, number, size, height, number of
storeys, parking spaces etc. It conceives provision for preventing or remov-
ing pollution of water or air caused by discharge of waste or other means
c
as a result of the use of land. All this was not in Section 7 of the Bombay
Town Planning Act prescribing the contents of the development plan.
Similarly, the procedure prescribed for sanction of a draft development
plan under Sections 13 to 17 of the Gujarat Town Planning Act are not
D
consistent with Sections 8 to 10 of Bombay Town Planning Act. It has to
be held that provisions of Sections 7 to 10 of Bombay Town Planning Act
are inconsistent with Sections 9 to 17 of .the Gujarat Town Planning Act.
As such after coming into force of Gujarat Town Planning Act on 30.1.1978
State Government was required .to follow provisions of Sections 9 to 17 of E
the Gujarat Town Planning Act. Sub-section (2) of Section 124 of Gujarat
Town Planning Act was of no help when the plan submitted by Corporation
was sanctioned on 12.8.1983. That could have been done if the provisions
of the Gujarat Town Planning Act had been consistent with the provisions
of Bombay Town Planning Act. Sub- section (2) of Section 124 says :
F
"Notwithstanding such repeal, anything done or any action taken
(including any declaration of intention to make a development plan
or town planning scheme, any draft development plan or draft town
planning scheme published by a local authority, any application
made to the State Government for the Sanction of any draft
development plan or draft town planning scheme, any, sanction G
It
given by the State Government to the draft development plan...... .

shall, in so far as it is not in consistent with the provisions of this
Act, be deemed to have been done or taken under the correspond-
ing provisions, of this Act, and the provisions of this Act shall have H
t-

96 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A effect in relation thereto."

(emphasis supplied)

Provisions and procedures under Sections 7 to 10 of the Bombay Town
Planning Act are different from the provisions and procedures in respect
B of preparation of a development plan under the Gujarat Town Planning
Act. In this background the State Government should not have taken note
of the Plan submitted on 15.1.1976 by the Corporation after the repeal of
the Bombay Town Planning Act on 30.1.1978 and coming in force of the
new Gujarat Town Planning Act. There was no occasion to ignore the
C comprehensive plan submitted by AUDA vested with the power to submit
such plan and to sanction the draft plan submitted by the Corporation.
According to us, after coming into force of the Gujarat Town Planning Act
on 31.1.1978 State Government could not have sanctioned a plan submitted
by the Corporation when the AUDA had already submitted a draft
D development plan even covering those areas under the Gujarat Town
Planning Act.

To prepare a scheme for the development of an urban agglomeration
in the present days is a very complex issue and any development authority
E as well as the State Go\-ernment which is· the sanctioning authority has to
apply its mind on the details of such development plans. During the last
few decades an urban development has assumed unprecedented impor-
tance because of the population migration from rural areas to urban areas
and cry for a roof and fresh air. In such urban areas the orderly growth of
the cities has to be enforced through proper development plans. For every
F city as was done in Ahmedabad in the present case, development
authorities have been constituted who can prepare comprehensive develop-
ment plans keeping not only the present requirement but even the require-
ments for the 21st century in view. If the development in such areas are
not carried on the well known principle, most of.the cities will be converted
G into slums sooner or later. There was a time when a ci~y meant only
residential area and commercial complex including industrial centres. But
the whole concept has changed. While planning an urban area not only the
residential, institutional, industrial and commercial, aspects have to be seen
but also provisions have to be made in respect of zoological gardens, green
H belts, natural reserves, sanctuaries, highways, parkways, Waterways, airport,
AHMEDABAD URBAN DEV. AUTIIORITY v. MANII.ALGORDfL\NDAS [N.P. SINGH,J.) 97

···drainage, sewage disposal. The development authority has also to reserve · A
land for community facilities and services and for prevention of pollution
of water or air caused by the discharge of waste or other means as a result
of the use of land. From a bare reference to sub-section (2) of Section 12
.. · it shall appear that framers of the Gujarat Town Planning Act have
conceived the new requirements for a proper development of an urban B
area.

As in the present case the only question which is to be answered is
as to with effect from which date 10 years period shall be counted, it has
to be decided as to which date shall be deemed to be the date of coming
into force of the final development plan, so far the area within the Cor- C
poration is concerned. The notification dated 2.11.1987 had been issued by
the State Government covering the area notified on 12.8.1983 several years
before the issuance of notices by the writ petitioners. The notification dated
2.11.1987 was neither questioned by the writ petitioners-respondents nor
could have been questioned, according to us. When p9wer has been vested D
in the appellant to prepare a draft development plan and there being no
bar to include in the said draft development plan even area for which an
earlier draft development plan had already been sanctioned, then the draft
development plan which was sanctioned and notified on 2.11.1987 shall be
deemed to be the final development plan within the meaning of Section 20 E
of the Gujarat Town Planning Act. As such the period of 10 years has to
be calcu.lated and counted with reference to 3.12.1987 the date when su.ch
final development plan was to come into force.

On behalf of the writ petitioners it was pointed out that if it is held
that period of 10 years is to be counted with reference to 3.12.1987 then
F
the right which has been provided to the land owners or the persons
interested by sub-section (2) of Section 20 to give notice after the expiry
of the period of 10 years from coming into force of the final development
plan, can be defeated by any area development authority by notifying a
fresh draft development plan just on expiry of the final plan including fresh G
areas. In other words any area development authority on verge of the eXpiry
of the period of 10 years of a final development plan, may include that area
into another draft development plan along with other area to defeat the
right which had accrued or was likely to accrue to the land owners or the
persons interested under sub-section (2) of Section 20. If such power is H
98 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A exercised with ulterior mo~ive and with an object to defeat the statutory
right of persons interested, courts will be perfectly justified in nullifying
such actions of area development authorities. But in the present case as
has been pointed out above the draft development plan had been submitted
by the appellant as early as on 23.7.1981 much before the draft develop-
B ment plan submitted by the Corporation was sanctioned on 12.8.1983.
There is no scope for attributing any bad faith or malice on the part of
the appellant or the State Government in the facts and circumstances of
the present case. In all fairness none of the counsel appearing for the
writ-petitioners-respondents took such a stand that the State Government
approved the draft development plan submitted by the appellant on
c 2.11.1987 only to defeat the right which was to accrue to the land owners
or persons interested in the next few years.

We are not inclined to accept the submission made on behalf of the
respondents that the effect of the sanctions given on 12.8.1983 and
D 2.11.1987 shall be that two final development plans had come into force.
The effect of sanction given on 2.11.1987 shall be that the State Govern-
ment had sanctioned the comprehensive draft plan prepared by the appel-
lant with the area in respect of which State Government had purported to
accord sanction on 12.8.1983. The respondents could not point ou~ as to
E how this sanction of the State Government given by notification dated
2.11.1987 shall be illegal, invalid and not sanctioned by law. In the present
case the draft development plai:i was submitted on 23.7.1981 by the appel-
lant which was sanctioned on 2.11.1987. Then it shall be deemed that the
area in respect of which separate draft development plan had been sanc-
tioned on 12.8.1983 merged and became part and parcel of the scheme and
F
plan which had been submitted by the appellant AUDA on 23.7.1981 and
which was sanctioned on 2.11.1987. It will be deemed that the final plan
came in force with effect from 3.12.1987, even in respect of area which was
covered by the notification dated 12.8.1983.

G We have already held that the State Government could not have
sanctioned the draft development plan submitted by Corporation on
12.8.1983 because the Gujarat Town Planning Act had come in force on
30.1.1978 and sub-section (2) of Section 124 of the Gujarat Town Planning
Act shall not save the plan submitted by the Corporation, provisions of
H Sections 9 to 17 of Gujarat Town Planning Act being inconsistent with
AHMEDABAD URBAN DEV. AUTIIORITY v. MANIIALGORDHANDAS [N.P. SINGH, J.] 99

Section 7 to 10 of the Bombay Town Planning Act. The State Government A
after coming into force of •the Gujarat Town Planning Act should have
ignored the draft development plan submitted by the Corporation on
15.1.1976. This was also necessary because a special Act, Gujarat Town
Planning Act had been enacted on 19.6.1976 with the sole object to develop
the urban areas of the State in accQrdance with the provisions of the .said
Act.
B

Accordingly, the appeals are allowed. The Judgments of the High
Court are set aside and the writ petitions are dismissed. There shall be no
orders for costs.

v.s.s. Appeals allowed.
c
A DEPUTY COLLECTOR, MINICOY AND ORS.
v.
NAVADIGOTHI MOHAMMED AND ORS.

SEPTEMBER 11, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Tenancy and Land Laws :

Laccadive, Minicoy and Amindivi Islands Revenue and Tenancy
C Regulation, 1965: Section 121.
South Pandaram Land-Allotment of-To inhabitants-Such in-
habitants had only collective right of collection of coconuts and enjoyment
thereof through their Mooppans as Trustees-Neither the Mooppans nor the
inhabitants had right over the land or coconut trees-Mooppans as trustees
D exercised this collective right arbitrarily-Hence notices issued for allotment
of separate plots of land to inhabitants-Mooppans challenged these notices
claiming 1ight of occupancy on ground of they being in occupation of said
land on behalf of inhabitants prior to commencement of Reguiation-High
Court allowed the claim-Held : High Court e"ed in granting right of oc-
E cupancy to Mooppans-ln the circumstances of the case, Regulations, Rules
and notices were valid-Lakshadweep Land Revenue and Tenancy (Allot-
ment of Pandaram Land) Rules, 1979-Constitution of India, 1950, Article
240.

The inhabitants of the South Pandaram Land collected coconuts
p from the trees for which purpose they were getting some remuneration in
kind but at no point of time they had any vested right to the trees or the
land on which the trees stood. After sometime this right was conferred as
a collective right in favour of the inhabitants for enjoyment thereof
through the respondents- Mooppans as trustees. When the Moppans as
trustees arbitrarily exercised this collective right, the appellants
G promuglated Laccadive, Minicoy and Amindive Islands Revenue and
Tenancy Regulation, 1965 under Article 240 of the Constitution of India.
The appellants issued notices for allotting separate plots of land to the
inhabitants in accordance with Lakshadweep Land Revenue and Tenancy
(Allotment of Pandaram Land) Rules, 1979 framed under Section 121 of
H the Regulations.
100
DY. COLLECTOR MINICOY v. NAVADIGOTIII MOHAMMED 101

The respondents-Mooppans filed writ applications before the High A
Court challenging the aforesaid notices for allotment of plots which were
dismissed by the Single Judge. On appeal the Division Bench held that the
respondents-Mooppans were in occupation of the Pandaram Lands at the
commencement of the Regulation on behalf of the inhabitants and, there-
fore, they were entitled to their claim of right of occupancy over the land B
in question. The Division Bench also held that the notices issued under
the Rules were only applicable in respect of fresh lands and would not
divest the persons who had already acquired right of occupancy. Accord-
ingly, the Division Bench allowed the writ appeals. Being aggrieved the
appellants preferred the present appeal.
c
Allowing the appeal, this Court

HELD : 1. There is no infirmity with the Laccadive, Minicoy and
Amindivi Islands Revenue and Tenancy Regulations, 1965 as well as the
Lakshadweep Land Revenue and Tenancy (Allotment of Pandaram Land)
Rules, 1979 framed thereunder and it has been so framed in exercise of D
power conferred under Article 240 of the Constitution for the peace,
progress and good government of the Lakshadweep group of Islands. The
Regulations and the Rules sub-serve the purpose for which power has been
conferred on the President under Article 240 of the Constitution and the
Regulation and the Rules would achieve the object of allotting specific part E
of the land in favour of each individual, so that, the Mooppans will not be
able to exploit the individuals. The Division Bench of the High Court was
wholly in error in granting right of occupancy in favour of the respondents
and in quashing the impugned notices issued by the Administrator in
exercise of his power under the Regulation and the Rules framed there-
under. [105-A-C; DJ F

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11907-
11910 of 1996.

From the Judgment and Order dated 8.2.84 of the Kerala High Court G
in W.A. Nos. 525~26, 547 and 550 of 1981.

P.A. Chowdhary, S.P. Singh and B. Krishna Prasad for the Appel-
lants.

A.S. Nambiar, Ms. Shanta Vasudevan and P.K. Manohar for the H
102 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Respondents.

The Judgment of the Court was delivered by

PATTANAIK, J~ Leave granted.

B These appeals by special leave are directed against the judgment of
the Division Bench of the Kerala High Court dated 8th February, 1984 in
Writ Appeal No.525/81 and batch. Notices were issued under the Lakshad-
weep Land Revenue and Tenancy (Allotment of Pandaram Land) Rules,
1979 (hereinafter referred to as 'Rules') and challenging those notices the
respondents herem filed writ applications. The learned Single Judge dis-
c missed the writ applications. In appeal the Division Bench of the High
Court by the impugned judgment quashed notices issued and allowed the
writ appeals filed and thus these appeals by special leave.

The case of the appellants is that South Pandaram Lands are the
D Government lands. Before the Minicoy Island came under the British Rule
the Raja of Cannanore was enjoying the usufruct of the coconut trees
standing on the South Pandaram Lands. The inh~bitants of the Islands
were getting some mamul for collecting and stacking the coconuts. After
the British Rule the inhabitants of the Islands continued to collect the
coconuts from the trees and for that purpose they are getting some
E remuneration in kind but at no point of time they had any right to the trees
or the land on which the trees stood. Sometimes prior to 1942 the Govern-
ment evolved a scheme conferring rights to the inhabitants of the Island to
collect and enjoy the fruits from the coconut trees. After India became
independent when Five Year Plan was implemented, on the representation
F of the people of Minicoy a new ·scheme was proposed and under that
scheme the inhabitants were permitted not only to collect the coconuts
falling from the trees but also to pluck the nuts from the trees itself. And
after this right was conferred as a collective right in favour of inhabitants
through their Moopppans, the Mooppan thus as a trustee for all the
villagers had the right to enjoy usufruct of the coconut trees for himself as
G well as for all the villagers together and the Mooppan was distributing the
coconuts amongst the villagers. While the Mooppans continued to enjoy
usufruct of the coconut trees for themselves as well as for the villager!',
gradually a demand for abolition of Mooppans system began. The ad-
ministration considering the grievances of the villagers finally thought of
H granting separate plots and land individually to the inhabitants and ul-
DY. COLLECTORMINICOY v. NAVADIGOTIIIMOHAMMED (PATIANAIK, J.) 103

timately Laccadive, Minicoy and Amindivi Islands Revenue and Tenancy A
Regulation, ·1965 (hereinafter referred to as the 'Regulation') was promul-
gated under Article 240 of the Constitution of India. The Administrator
thereafter framed Rules in exercise of power conferred under Section 121
of the Regulation. It is the further case of the appellants that the people
of Minicoy Island never had any vested right on the land on which the B
coconut trees stood though they were enjoying the right of collection of
yield of the coconut trees standing on the South Pandaram Land and there
fore they cannot be held to have acquired right of occupancy. In accord-
ance with the Rules framed under the Regulation notices having been
issued by the appropriate authority for allotting different parts of South
Pandaram Land to different persons, writ applications came to be filed by C
the respondents herein contending inter alia that they have acquired right
of occupancy being in occupation of South Pandaram Lands prior to the
Regulation coming into force and therefore the notices issued under the
Rules would deprive them of their right of occupancy. The learned Single
Judge on consideration of the relevant provisions of the Regulation and D
the rights enjoyed by the Mooppans in respect of the usufruct of the
coconut trees came to hold that no right of occupancy accrued in favour
of the Mooppans under Sections 83 and 84 of the Regulation. It was also
further found that the Mooppans as well as the inhabitants of the Island
merely enjoyed a right of plucking coconuts from the trees without having
any right over the land or the trees itself and therefore they cannot be held E
to be in occupation of the land in question and their claim of right of
occupancy is unsustainable. With these findings the writ applications having
been dismissed, the respondents preferred appeals to the Division Bench.
The Division Bench by the impugned judgment came to hold that the
Mooppans were in occupation of the Pandaram Lands at the commence- F
ment of the Regulation on behalf of the inhabitants of the village and
therefore they are entitled to their claim of right of occupancy over the
land in question. The notices issued by the appropriate authority under the
1979 Rules can only be applicable in respect of fresh lands and will not
divest the persons who have already acquired right of occupancy. Accord-
ingly, the Division Bench allowed the writ appeals and hence these appeals G
by special leave.

Mr. Chowdhary, the learned senior counsel appearing for the appel-
lants contended that in view of the limited right of collection of coconuts
from the trees conferred upon the Mooppans and the inhabitants of the H
104 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A village without any right over the Land on which the trees stood, the
Division Bench of the High Court was wholly in error to hold that they
were in occupation of the land prior to Regulation coming into force. He
further contended that the Mooppan of the village had been conferred
certain privileges as he was representing the interest of village community
at large. The Mooppans were acting as trustees but as complaints received
B
from several villagers the Government decided to confer individual rights
on the inhabitants under the Regulation and therefore there is no infirmity
with the notices issued. Mr. Nambiar, the learned senior counsel appearing
for the respondents on the other hand contended that the Lakshadweep
group of Islands have its own peculiar concept of rights and the Mooppans
C were merely representing the entire village community. There was total
unity of enjoyment and the Moopans and the villagers had absolute right
over the coconut trees and therefore the Division Bench rightly held that
they held the right of occupancy which right can't be taken away by the
Regulation or the Rules framed thereunder.
D In view of the rival submissions at the Bar the question that arises
for consideration is whether the Division Bench of the High Court was
right in its conclusion that the Mooppans and the villagers can be said to
have acquired the right of occupancy over the land on which the coconut
trees stood prior to Regulation coming into force? If it is held that right
of occupancy had accrued in their favour then that right cannot be taken
E away by the administration in exercise of its power under the Regulation
and Rules framed thereunder. But on examination of the materials on
record and the history of the bundle of rights which the inhabitants of these
Islands were enjoying, it is crystal clear that there was no demarcation of
any individual property. The villagers through their Mooppans were initial-
F ly getting some remuneration for collecting and stacking coconuts. In
course of time. they got the right to pluck coconuts from the trees but no
specific individual had any specific right over any specific tree and it was
a case of collective right of collection and enjoyment of the fruits through
their Mooppans. Mooppan was acting as the trustee and was equality
G distributing the usufruct of the coconut trees. At no point of time either
the Moopans or any individual villager had an iota of right over the land
or the coconut trees standing thereon. This being the position, it is difficult
to accept the conclusion of the Division Bench of the High Court that the
respondents had acquired a right of occupancy prior to the Regulation
coming into force. Further the so-calle9 collective rights which were being
H exercised by the Mooppans on behalf of the villagers as trustees were
DY. COLLECTOR MINICOY v. NA VADIGOIBI MOHAMMED (PATIANAIK,J.j 105

complained of when the Mooppans started arbitrarily exercising their A
power. After due enquiry the government decided to confer right of
occupancy over specific parts of land in favour of each individual in
accordance with the Regulation and the Rules framed thereunder. We see
no infirmity with the Regulation as well as the Rules framed thereunder
and it has been of framed in exercise of power conferred under Article 240
B
of the Constitution for the peace, progress and good government of the
Lakshadweep group of Islands. The Regulation and the Rules sub-serve
the purpose for which power has been conferred on the President under
Article 240 of the Constitution and the Regulation and the Rules would
achieve the object of allotting specific parts of the land in favour of each
individual, so that, the Mooppans will not be able to exploit the individuals. c
In view of our aforesaid conclusion we have no hesitation to hold that
the Division Bench of the High Court was wholly in error in granting right
of occupancy in favour of the respondents and in quashing the impugned
notices issued by the Administrator in exercise of his power under the
Regulation and the Rules framed thereunder. Appeals are accordingly D
allowed. The judgment of the Division Bench of the High Court in Writ
Appeal No. 525/81 and batch is set aside. Writ applications filed by the
respondents stand dismissed. There will be no order as to costs.

v.s.s. Appeal allowed. E
A M/S. GUJARAT MACHINERY MANUFACTURERS LTD.
v.
COLLECTOR, CENTRAL EXCISE, BARODA.

SEPTEMBER 11, 1996

B (S.P. BHARUCHA AND K. VENKATASWAMI, JJ.]

Central Excises & Salt Act, 1944:
•,
First Schedule-Tariff Item 23A(4), general item 68-Frit-Assistant
C Collector accepting the claim of assessee and classifying it under general item
68-Collector setting aside the order and classifying flit as other glass failing
under Item 23-A(4) and demanding difference in duty-Tribunal upholding
the reclassification but limited levy of duty for six months prior to the notice
by Tribwia1-0n appeal held, since no notice was issued to the assessee by
the Collector before the reclassification, the orders of the Collector and the
D Tribunal directing the assessees to pay the short-levied duty bad in
law--Hence set aside.

CIVIL APPELLATE JURISDICTION : CiVil Appeal No. 117 of
1984.
E From the Judgment and Order dated 10.6.83 of the Customs Excise
and Gold (Control) Appellate Tribunal in A. No. E.D. (SB) (T) A. No.
139 of 1982-D.

D.A. Dave, Sunil Dogra, A. Roy, S. Shroff for S.A. Shroff & Co. for
F the Appellants.

Joseph Vellappally and V.K. Verma for the Respondent.

The following Order of the Court was delivered :

G We are concerned in this appeal against an order of the Customs,
Excise and Gold (Control) Appellate Tribunal (the "Tribunal") with a
commodity called frit, which is manufactured by the appellants.

With the introduction into Tariff Item 23-A(4) of the words "glass
and", it read "other glass and glassware including tableware". The Collector
H of Central Excise issued to the appellants a notice under Section 45-A of
106
GUJ. MACHINERY MANUFACTURERS LID. v. COLLECTOR, CENTRAL EXCISE 107

the Central Excise and Salt Act on 4th November, J..981, asking them to A
show cause why frit should not be classified under sub-item (4) of Item
23-A with effect from 1st March, 1979, and the order of the Assistant
Collector accepting that classification under the general Item 68 be revised
accordingly. The appellants showed cause. The collector by his order dated
3.12.1981 made the notice absolute. He set aside the Assistant Collector's
B
order. He ordered that frit 'is hereby classified as other glass falling within
the purview of Item 23-A(4) of the First Schedule'. He further ordered that
the appellants 'shall pay the duty of excise at the appropriate leviable rate
on frit glass manufactured and cleared by them as applicable to Item
23-A(4) of the said First Schedule or the difference in duty, as the case
may be'. c
The appellants preferred a revlSlon appl:cation to the Central
Government which came to be transferred to the Tribunal when it was
.. onstituted. The Tribunal considered the evidence that had been placed
on record by the appellants and upheld the classification of frit as "other D
glass" within the meaning of Item 23-A( 4). It was contended before the
Tribunal that no notice had been issued to the appellants in regard to the
recovery of any short-levied duty pursuant to such re-classification and
that, therefore, no demand in this behalf could have been made or sus-
tained. The Tribunal stated that the show-cause notice dated 4th Novem-
ber, 1981, no doubt did not, in terms, ask the appellants to show cause E
why recovery of the short-levied duty should not be made, but, once the
Collector came to the conclusion and ordered the re-classification of frit
under Item 23-A(4), he was right in demanding the payment of differential
duty. However, the recovery thereof could be made only in respect of the
period of six months preceding the date of the order, i.e., 30th April, 1982, F
as determined with regard to the provisions of Rule 11 or Section llA. The
Excise authorities were directed to re-calculate the amount of the short
levy in the light of the Tribunals' order and communicate the appropriate
figure to the appellants.

• It is unnecessary to go into the aspect of classification because the G
new Tarif expressly provides for the classification of frit and because we
are of the view that no notice for the recovery of short-levied duty as
required by Section 35A was given to the appellants.

The relevant provisions of Section 35A read thus :- H
108 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A "S.35A.-Revision by Board \lr Collector.-

1......................................................

2. The Collector of Central Excise may, of his own motion or
otherwise, call for and examine the record of any proceeding in
B which any decision or order has been passed under this Act or the
rules made thereunder by a Central Excise Officer subordinate to
him (not being a decision or order passed on appeal under Section
35) for the purpose of satisfying himself as to the correctness,
legality or propriety of such decision or order and may pass such
c order thereon as he thinks fit.

3(a) No decision or order under this section shall be varied so as
to prejudicially affect any person unless such person is given a
reasonable opportunity of making a representation and, if he so
desires, of being heard in his defence.
D .
(b) Where the Board or, as the case may be, the Collector of
Central Excise is of opinion that any duty of excise has not been
levied or has been short-levied or erroneously refunded, no order
levying or enhancing the duty, or no order requiring payment of
the duty so refunded, shall be made under this section unless the
E person affected by the proposed order is given notice to show
cause against it within the time-limit specified in Section llA."

Sub-section (2) of Section 35A empowers a Collector of Central
Excise, suo motu or otherwise, to revise any decision or order made by a
F Central Excise officer subordinate to him. If he is satisfied as to its
incorrectness, illegality or impropriety, he may pass such order thereon as
he thinks fit. By reason of clause (a) of sub-section (3), no decision or order
may be so varied as to prejudicially affect any person unless that person
has been given a reasonable opportunity of making a representation and,
if so desired, of being heard. Clause (b) of sub-section (3) applies when
G duty which has not been levied or has been short-levied or has been
erroneously refunded is sought to be recovered. In such event, no order in
this behalf can be made unless the person who would have to pay is a)
given notice to show cause against "it", that is, against being required to
pay; and b) the notice is given within the time limit specified in Section
H llA. ,
GUJ. MACHINERY MANUFACfURERS LTD. v. COLLF.CIOR, CEN1RAL EXCISE 109

The order of the Collector under Section 35A gave to the appellants A
no notice that he proposed to make an order that would require them to
pay the duty which might be found to have been short-levied if the frit was
found to be classifiable under Item 23-A(4). The orders of the Collector
and of the tribunal, insofar as they required the appellants to pay the
short-levied duty, even though limited to the period of six months prior to B
the date of the notice by the Tribunal, are bad in law.

In the result, the appeal is allowed. The order of the Tribunal is set
aside insofar as it directs the Central Excise authorities to recalculate the
amount of the short levy in the light of its observation that recovery of the
short levied duty could be made in respect of the period of six months C
preceding the date of the Collector's order and requires the appellants to
pay such sum. In the event that any part of such sum has been recovered,
the same shall be returned to the appellants.

There shall be no order as to costs.
D
G.N. Appeal allowed.
A J.S. PARIHAR
v.
GANPAT DUGGAR AND ORS.

SEPTEMBER 11, 1996 ..
B [K. RAMASWAMY, FAIZAN UDDll\J" AND G.B. PATTANAIK, JJ.]

Service Law :

Rajastha.n Civil Engineering Services (Public Health
C Branch}-Seniority list of Engineers--Prepared with retrospective ef-
f ect~uashed by the High Court with a direction to prepare the seniority list
afresh-Fresh seni01ity list prepared--Contempt proceedings initiated-Single
Judge giving directions-Appeal by State-Division Bench holding that appeal
not maintainable under S.19 of the contempt of Courts Act but as a Letters
Patent Appeal-Set aside the directions of Single Judge-On appeal, held the
D Single Judge was exercising his jurisdiction to consider the matter on merits
in contempt proceedings, which is not pennissible-Division Bench rightly
exercised its power under S.18 of the Rajasthan High Court Ordinance to
co1Tect the mistake committ~d by the Single Judge-Since Division Bench
already seized of the matter it was not necessary for the State to go in appeal.
E Contempt of Courts Act. 1971.

Ss.12, 19-Contempt proceedings-Single Judge going into merits of the
case and giving directions-Not pennissible-Division Bench of High Court
exercising power under, S.18 of Rajasthan High Court Ordinance to co17"ect
F the mistake committed by Single Judge-Held, the Division Bench justified in
doing so, since appeal under S.19 not maintainable-Rajasthan High Cowt
Ordinance-S.18.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12494-96
of 1996.
G
From the Judgment and Order dated 3.4.96 of the Rajasthan High
Court in D.B.C.S.A. No. 1-2 of 1995 and D.B.C.L~ .to A. No. 40 of 1995.

Sushil K. Jain for the Appellant.

H Aruneshwar Gupta for the Respondent.
110
··-
J.S. PARIHAR v. GANPATDUGGAR 111

The following Order of the Court was delivered : A
We have heard the counsel on both sides.

' . Leave granted.
l
These appeals by special leave arise from the order of the Division B
Bench dated April 3, 1996 made in Special Civil Appeal Nos. 1 & 2 of
1995. The facts are not in dispute. The controversy relates to the prepara-
tion of the seniority list of the engineers in Rajasthan Civil Engineering
Services (Public Health Branch). In W.P. No. 560n9 by order dated
October 6, 1988 the Division. Bench of the High Court declared the C
seniority list prepared with retrospective effect in terms of the amended
Rules as unconstitutional; it accordingly quashed the list and directed
preparation of the seniority list afresh to determine the inter se seniority
on that basis and to grant promotion to the appellants within the specified
time. The same order came to be reiterated by order of another Division
Bench dated September 9, 1989 made in W.P. No. 1074/80. It was further D
reiterated in the order dated March 22, 1990. When the seniority list came
to be prepared, the contempt proceedings were initiated under Section 12
of the Contempt of Courts Act, 1971 (for short the "Act"). The learned
single Judge on consideration of the merits in the seniority held that the
respondents had not wilfully disobeyed the orders of the Court and gave
E
directions as under :

"In Gyaneshwar's case, only retrospectivity of these amendments
was challenged and, therefore, it was felt by the learned Judges of
the Division Bench that retrospectivity of these amendments has
already been held to be ultra vires in Kai/ash Chand Goyal's case F
and so, it had not been declared as such afresh. In that case, the
notifications whereby amendments were introduced were not chal-
lenged but only their retrospectivity was challenged and, therefore,
the decision of this Court in Gyaneshwar's case does not hold the
field. The controversy raised in this case is squarely covered by the
decision of this Court in Kai/ash Chand Goyal's _case (supra) and G
in Kai/ash Ozand Goyal's case, the impugned notifications An-
nexures 5 to 6 have been quashed in their entirety and so,k the
seniority of the petitioner has to be determined on the basiS of the
directions given by this Court in Kai/ash Chand Goyal's case
(supra) and promotions have to be accorded accordingly. Of H
112 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A course, it appears quite just and reasonable that the non-
petitioners did not intend to disobey the directions given by this
Court on account of the legal advice that has been tendered to
them and on account of certain interpretations put to the judgment
rendered in Kailash Chand Goyal's case (supra) on the basis of
Gyaneshwar's case (supra) and as son1e confusion prevailed with
B the non petitioners on account of that, they could not comply this
order. However, the non- petitioners are directed to comply with
the order of this Court dated 22.3.1990 by giving effect to the ratio
of the decision that has been rendered by a Division Bench of this
Court in Kai/ash Chand Goyal's case (supra) and the seniority list
c should be prepared as directed in the judgment in Kai/ash Chand
Goyal's case (supra) and promotions should be accorded according-
ly. If this order is not complied with within a peliod of six months
from today, the petitioner will be free to move a contempt petition
afresh against the non-petitioners."
D
The State had filed appeal against these directions. A preliminary
objection was taken on the maintainability of the appeal and also argu-
ments were advanced. The Division Bench while holding the appeal as not
maintainable under Section 19 of the Act, held that the appeal would be
maintainable as a Letter Patent Appeal as the direction issued by the
E learned single Judge would be a Judgment within the meaning of Clause
(18) of the Rajasthan High Court Ordinance. Accordingly the Division
Bench set aside the directions issued by the learned single Judge. Thus
these appeals by special leave.

F The question is : whether an appeal against the directions issued by
the learned single Judge is maintainable under Section 19 of the Act?
Section 19 of the Act envisages that "an appeal shall lie as of right from
any order or decision of High Court in the exercise of its jurisdiction to
punish for contempt where the order or decision is that of a single Judge,
G to a bench of not less than two Judges of the Court". Therefore, an appeal
would lie under Section 19 then an order in exercise of the jurisdiction of
the High Court punishing the contemner has been passed. In this case, the
finding was that the respondents had not wilfully disobeyed the order. So,
. there is no order punishing the respondent for violation of the orders of
H the High Court. Accordingly, an appeal under Section 19 would not lie.
J.S. PARIHAR v. GANPATDUGGAR 113

The question then is : whether the Division Bench )Vas right in setting A
aside the direction issued by the learned single Judge to redraw the
seniority list. It is contended by Mr. S.K. Jain, learned counsel appearing
for the appellant, that unless the learned Judge goes into the correctness
. - of the decision taken by the Government in preparation of the seniority list
in the light of the law laid down by three Benches, the learned Judge cannot
come to a conclusion whether or not the respondent had wilfully or
B
deliberately disobeyed the orders of the Court as defined under Section
2(b) of the Act. Therefore, the learned single Judge of the High Court
necessarily has to go into the merits of that question. We do not find that
the contention is well founded. It is seen that, admittedly, the respondents
had prepared the seniority list on 2.7.1991 Subsequently promotions came c
to be made. The question is : whether seniority list is open to review in the
contempt proceedings to find out, whether it is in conformity with the
directions issued by the earlier Benches. It is seen that once there is an
order passed by the Government on the basis of the directions issued by
the Court, there arises a fresh cause of action to seek redressal in an D
appropriate forum. The preparation of the seniority list may be wrong or
may be right or may or may not be in conformity with the directions. But
that would be a fresh cause of action for the aggrieved party to avail of the
opportunity of judicial review. But that cannot be considered to be the
wilful violation of the order. After re-exercising the judicial review in
contempt proceedings, afresh direction by the learned single Judge cannot E
be given to redraw the seniority list. In other words, the learned Judge was
exercising the jurisdiction to consider the matter on merits in the contempt
proceedings. It would not be permissible under Section 12 of the Act.
Therefore, the Division Bench has exercised the power under Section 18
of the Rajasthan High Court Ordinance being a judgment or order of the F
single Judge, the Division Bench corrected the mistake committed by the
learned single Judge, Therefore, it may not be necessary for the State to
file an appeal in this Court against the judgment of the learned single Judge
when the matter was already seized of the Division Bench.

The appeals are accordingly dismissed. It may be open to the ag- G
grieved party to assail the correctness of the seniority list prepared by the
State Government, if it is not in incomformity with the directions issued by
the High Court, if they so advised, in an appropriate forum. No costs.

G.N. Appeals dismissed. H
A SH. S.K. VAISH
v.
UNION OF INDIA AND ORS.

SEPTEMBER 11, 1996

B (K. RAMASWAl~A:Y, FAIZAN UDDIN AND G.B. PAITANAIK, JJ.)

Service Law :

Efficiency Bar-Crossing of-Employee kept under suspension and
C disciplinary proceedings initiated against him-Punishment of compulsory
retirement imposed-On appeal, department directed that the punishment be
treated pwtly as suspension and pa1tly in service-Tribunal directing that the
·employee be treated as on duty for all pwposes including pay and allowan-.
ces--It also held that DPC had considered his case for efficiency bar and
found him not fit and therefore the employee not entitled to cross efficiency
D ba~n appeal held, after reinstatement the employee had hardly worked for
three months--Foi· three successive years there were adverse entlies against
him--OPC recommended that he was unfit to cross efficiency ba1-Tribuna/
accepted the position-Hence no inteiference called for.

CIVIL APPELLATE JURISDI,CTION: Special Leave Petition (C)
E No. 19774 of 1996.

From the Judgment and Order dated 15.2.96 of the Central Ad-
ministrative Tribunal, Delhi in: O.A. No. 978 of 1992.

Sant Lal, Pradeep Kumar and B.S. Gupta for the Petitioner.
-F
The following Order of the Court was delivered :

·-~ Delay condoned.

This Special Leave Petition has been filed against the order dated
G February 15, 19% made in OA. No. 978/92 of th'e CAT, Principal Bench,
New Delhi. The admitted position is that the petitioner after his promotion
as Assistant Engineer in Telecom Engineering Service Group 'B' on April
16, 1979 was kept under suspension and disciplinary proceedings were
initiated against him. On June 30, 1986, punishment was imposed· by way
H of compulsory retirement. The same came to be challenged by way of an
114
S. K. V AISH v. U.0.1: 115

appeal. On appeal, the Department directed that the punishment be A
treated partly as suspension and partly as in service by proceeding~ dated
February 16, 1979. When the petitioner challenged the same in O.A. No.
1690/90, by order dated February 14, 1992, the samf was allowed and
direction was given to treat him as on duty for all purposes including pay
and allowances. After reinstatement, the petitioner retired from service on
B
attaining superannuation on ·May 31, 1992. He had prior to that filed
representation for crossing his efficiency bar. In the impugned order, the
Tribunal has held that the D.P.C. had considered his case for efficiency
bar and found him not fit and, therefore, he is not entitled to the relief.
Thus, this special leave petition.
c
It is contended by the learned counsel for the petitioner that when
he was reinstated into service the efficiency bar was required to be
considered after taking into account his subsequent record. What was
stated was adverse entries for the year 1979-80, 1980-81-1981-82. There was
no reconsideration in the light of the direction issued by the Ministry in D
the letter dated September 18, 1991 in O.M. No. 7(28)/EIIl/91 that all
pending cases should be considered to bring the pending cases of the
employee so as to bring them on par with the scale of pay recommended
by the 4th Pay Commission. The petitioner had given a representation but
the same was not considered; even direction given to produce the record
was not followed. Therefore, the Tribunal ought to have drawn adverse E
inference against the Government and should have directed that he was
entitled to cross the efficiency bar. He also contended that the sealed cover
procedure as is invogue should have been adopted for crossing the efficien-
cy bar and kept pending when the departmental enquiry was pending
against him. F

We find no force in the contention. The petitioner has not brought
to our notice any circular issued by the Government and it is obviously
incongruous for the reason that in the event of the petitioner's disciplinary
proceedings becoming final the exercise to consider the question of cross- G
ing the efficiency bar would be fruitless. It would be unnecessary to
consider the case for efficiency bitr. It would be only in the event of his
being reinstated in the service that the question of consi~eration of his
crossing the efficiency bar would arise. Therefore, the sealed cover pro~e
dure in consideration of question of efficacy bar does not apply. It is seen
that after the representation was made by the petitioner on June 8, 1990, H
116 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the matter was referred for consideration by the D.P.C. D.P.C. had met on
.January 21, 1992 and considered the record of the petitioner. After
reinstatement, he had hardly worked for three months. It would appear
that for three successive years, there were adverse e..ntries against the
petitioner. Consequently. DPC as considering the record of the petitioner
which was available, recommended that he was unfit to cross efficiency bar.
B The same came to be informed to the petitioner vide letter dated February
7, 1992. The Tribunal also had accepted this position. Under these cir-
cumstances, we do not find any illegality in the order passed by the
Tribunal warranting issue of notice.

C The special leave petitiion is dismissed.

G.N. Petition dismissed.

·-
,_
PRAMOD LAHUDAS MESHRAM A
v.
STATE OF MAHARASHTRA AND ORS.

-
<
SEPTEMBER 11, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B

Service Law :

Selection-Post of Oversear/Junior Engineer (Civil Enginee1ing)-Ad-
ve1tisement-On the basis of recommendation letter from Member-Secret01y C
3 candidates appointed on probation for one yea~Services of the said
candidates tenninated on the basis that the earlier letters canied unauthorised
reconunendatiims-W!it Petition filed in High Cowt challenging the tennina-
tion orders dismissed-On appeal held the letter$ of recommendation were
not auth01ised and according to mies-Therefore the cancellation of the said
appointments could not be found fault with-State Govemment directed to D
refer the matter to appropriate State CID enquiry to make an independent
investigation into the matter and to find out as to who were responsible for
such malpractice and to launch approp1iate C1iminal prosecution against the
culprits.

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
E
No. 19775 of 1996.

From the Judgment and Order dated 6.3.96 of the Bombay High
Court in W.P. No. 885 of 1993.
F·
AK. Sanghi and S.V. Deshpande for the appearing parties.

The following Order of the Court was delivered :

Delay condoned.

The petitioner complains that he being a qualified candidate with G
Diploma in Engineering and Secondary Education had applied for the post
of Oversear/Junior Engineer (Civil Engineering) as per the advertisement
dated April 30, 1991 published in daily 'Tarun Bharat' on May 2, 1991.
The advertisement indicated that of the 3 posts, two were reserved for
backward classes and one was for general candidates. Petitioner being a H
117
118 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A reserved class, hailing from che Scheduled Caste, received letter of appoint-
ments from the Chief Executive Officer, Zilla Parishad, Gadchiroli; in
letter No. PWB/Estt-1/1108/1/93 dated March 31, 1993 it was stated that a
recommendation had been made by Member Secretary, Regional Subor-
dinate Service Seleccion Board, Nagpur in their letter No.
RSB,:Nag/1210/M-792/PS-l/92 dated June 15, 1992 that 3 candidates were
B
selected. The names had been repeated and as regards the petitioner, his
recommendation letter No. RSB/N~g/1160/M-792/1992/PS-I dated July 31,
1992/7.8.92 was said to be issued by the Member Secretary selecting the
petitioner as Junior Engineer (Civil). Pursuant thereto, he came to be
appointed as a Junior Engineer with probation for one year. After comple-
c tion of nine months service, he received the letter dated November 16, 1992
stating therein that the above letters carried unauthorised recommenda-
tions; therefore, the services of the petitioner were terminated. The order
of the Chief Executive Officer, Zilla Parishad, Gadchiroli was impugned
by the petitioner and others in the W.P. No. 885/93 in the High Court of
Bombay, Nagpur Bench claiming that they had been regularly appointed
D
to the posts which were advertised; therefore, their services could not be
terminated during t~e probation period without affording opportunity of
hearing in the enquiry. The High Court has dismissed the writ petition.
Thus, this special leave petition.

E Shri A.K. Sanghi, learned counsel for the petitioners has contended
that when the posts were advertised and the candidates were found eligible,
it does not mandate that there should be an interview and selection.
Obviously, the Service Selection Board having found the petitioner to be
eligible and qualified, recommended him and was accordingly appointed
p as Junior Engineer, when it was sought to be cancelled on a letter written
by Member Secretary of the Service Selection Board, they are entitled to
be heard. No such opportunity has ever been given before cancellation of
their appointments. It was, therefore, violative of principles of natural
justice. We find no force in the contention. It is seen that on their own
admission they have merely applied for the post pursuant to an advertise-
G ment made for the selection. It is the case of the Selection Board that a
regular selection has to be made and selecting the eligible candidates,
recommendation for appointment would be made. Therefore, the letter can
be said to have conveyed that the recommendations were not authorised
and according to the rules; such being the admitted position, we do not
H find any fault to cat).cel the appointments. Under those circumstances, we
P.LMESHRAM v.STATE 119

do not find any illegality in the action taken by the respondents. However,
such things will not be permitted to be kept under the carpet. The State
Government is directed to refer the matter to the appropriate State CBI
enquiry and the concerned Inspector would make an independent inves-
tigation into the matter to find out as to who were responsible for such
mal- practice committed and it will be open to take appropriate criminal
prosecution launched against the culprits.

The SLP is dismissed. This order to be communicated to the D.G.P.,
Maharasht~a.

G.N. Petition dismissed .

•
A BABU SINGH BAINS ETC.
v.
UNION OF INDIA AND ORS. ETC.

SEl'TEMBER 11, 1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

Capital of Punjab (Development & Regulations) Act, 1952 : Section
8-A-PresC1ibed in-built procedure of gi,ving an opportunity and right to ad-
duce evidence--Consideration thereof by the Estate Officer before resumption
C and to pass reasoned order which is subject to an appeal before the Chief
Administrato1~Also subject to judicial review under A1t, 226-Resumption is
not only in case of non-payment of dues under the sale but also for violations
of the conditions of the sale, the ntles, regulations and other relevant condi-
tions applicable in that behalf-Hence the provision is not violative of A1t.
14-Constitution of India, A1t, 14.
D
Ram Pwi v. Chief Commissi01te1; Chandigad1, AIR (1982) P&H 301
and Magan/al Chhagganlal (P) Ltd. v. Municipal C01poration of Greater
Bombay & Ors., AIR (1974) SC 2009, relied on.

Jagdish Chand v. State of Punjab, AIR (1972) SC 2587 and Nonhem
E India Caterers (Pvt.) Ltd. v. State of Punjab & Anr., AIR (1967) SC 1581,
referred to.

Chandigarh (Sale of Sites and Buildings) (Amendment) Rules, 1979:

Rule 11-D-Application under the proviso-Making of-Inordinate
F delay of 13 years--Condonation of-Explanation for the delay that the appel-
lant was carrying on litigation but was not properly advised at the appropriate
stages to avail the remedies-Appellant landed himself in trouble on account
of his own conducrffigh Coult rightly pointed out that there was no proper
explanation for the inordinate delay-Hence no inteiference called for.
G
Chandigarh Administration v. Johnson Paints, [1996] 3 SCALE 680
and R.C. Chawla v. State of Haryana & Ors., JT (1996) 1 SC 633, referred
to.

CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
H No. 12931 of 1996 Etc.
120
BABU SINGH BAINS v. U.O.l. 121

. From the Judgment and order dated 27.1.93 of the Punjab and A
Haryana High Court in C.W.P. No. 14183 of 1992.

M.S. Gujral, S.K. Bagga, Swaraj Kaushal, V.N. Ganpule, Sr. Adv.
Sarup Singh, Dr. Meera Agarwal, R.C. Mishra, Mahabir Singh, Altamesh
Rein, Subhash Sharma, M.R. Vij, N.P. Sharma, M.S. Tanuj Bagga, Seeraj
Bagga, Mrs. S. Bagga, Ms. Kamini Jaiswal, (Ms. Kusum Chaudhary and B
B.K. prasad) Advs. (NP), Ms. Shruti Pandey, Ms. Mukti Sinha, Ms. Indu
Malhotra, Satish K. Agnihotri, Ashok Singh, Ashok K. Mahajan and
Mahabir Singh for the appearing parties.

The following Orders of the Court was delivered :
c
C.A. No. 12931/96 @ SLP No. 4559/93 & WP. No. 520/94.

Application for impleadment is dismissed.

Leave granted in the special leave petition.
D
The City of beauty, Chandigarh, carefully architectured and
meticulously executed as a modal city in India by famous architect, Shri
Le. Corbursier; when it was getting desideration compounded by disfigura-
tion of beauty and elegance, statutory regulations 1:tepped in to stamp out
erosion and to restore its natural environment. These cases are instances E
of blatent misusage of the buildings or plots in the planned structures.

This appeal by special leave arises from the order of the Division
Bench of the Punjab & Haryana High Court made on January 27, 1993 in
C.W.P. No. 14183/92 upholding the order of the Estate Officer who refused
to condone the delay in making application under Rule 11-D of the F
Chandigarh (Sale of Sites and Buildings) (Amendment) Rules, 1979 (for
short, the "Rules").

The writ petition under Article 32 of the Constitution was filed by
the petitioner challenging the validity of Section SA of the Capital of G
Punjab (Development & Regulation) Act, 1952 (Punjab Act of 1952) (for
short, the "Act").

The facts are long and tendentious. Suffice it to state, in nutshell, that
the appellant/petitioner having had the allotment of free hold plot in
residential Sector 21-A, viz., bearing House No. 341 in Street 'D' had H
!<.
122 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A constructed a double-storeyed house. He had used it as Blue Star Guest
House, contrary to the regulations. Consequently, a notice of resumption
under Section 8 of the Act was given to the appellant/petitioner. After
following the procedure prescribed thereunder, the resumption order came
to be passed on October 17, 1977. The revision against that order came to
be dismissed on August 28, 1978. Thus the resumption order had become
B
final. Subsequently, notice under Section 5 of the Public Premises Act was
issued to the appellant/petitioner for taking possession of the land. Those
proceedings also ultimately culminated in the judgment of this Court made
in C.A. No. 3102/81 on March 13, 1992. Therein, this court had given an
opportunity to the appellant/petitioner to argue afresh on merits of
c resumption but he could not point out any invalidity in the resumption
order. Accordingly, the resumption was upheld. Even on the ground of
eviction also this Court had upheld the order on merits thus :

"Learned counsel for the appellant was unable to point out any
infirmity whatsoever of order passed by the Estate Officer under
D
the Eviction Act. In. view of the circumstances, we find no force
in this appeal and it is accordingly dismissed."

However, one year's time was given to the appellant/petitioner to
vacate the premises subject to his giving an undertaking. Since he had not
E filed the undertaking within the prescribed time, it is not in dispute,
possession was taken. Thus the resumption order as well as order of
eviction became final and conclusive against the appellant/petitioner. i-Iis
right, title and interest in the said property stood divested and the Chan-
digarh Administration became owner thereof. The appellant/petitioner
F then filed an application on April 6, 1992 and April 9, 1992 under Rule
11-D of the Rules. The Estate Officer dismissed the petition giving
elaborate reasons in support thereof. The High Court in the impugned
order thereunder has pointed out that the appellant/petitioner has not
given any satisfactory explanation for the delay of 13 years in filing the
G application and no fault could be found with the order passed by the Estate
Officer. Thus this appeal by special leave and the writ petition.

When the matter came up for hearing before a Bench of two learned
Judges, by order dated February 14, 1995 reference was made to a three-
H Judge Bench. to consider the validity of Section SA of the Act and the
BABU SINGH BAINS v. U.O.l. 123

que~tion of resumption since it has got a vital bearing on the right to A
property held by a defaulter. Thus these cases have come up before this
Bench.

i
It has been very strenuously argued by Shri Swaroop Singh, learned
counsel for the appellant with painstaking efforts, realising the tight spot B
in which the appellant was placed, that the appellant though had used the
house partly for residence and partly for non-residential purpose, (which
we need not enter upon for adjudication) Section 8A of the Act would be
invoked only when the instalments of purchase price of the site, or other
dues were not paid by the purchaser. On their due discharge, power under
Section 8A gets exhausted. For the violation of the rule for misuser of the C
property, there is no power under Section 8A of the Act to resume the
property. Such power would be available and be invoked only when avail-
able under any State law. The only remedy provided under Section 15 of
. the Act is to stop misusage without invoking the power of resumption,
laying prosecution under Section 15 and to collect the penalty. The power D
under Section 8A cannot be resorted to in case of misuse; such invocation
of power would be an arbitrary exercise of power violating Article 14 of
the Constitution. It is also contended that the appellant has been using all
legal recourse open to redress his legal injury and was diligently prosecut-
ing the remedies available under the law. There was no need for him to
challenge the resumption order in any court of law for the reason, that the E
resumption at one point of time was only divestiture of the title but not of
dispossession from the property. When his possession was sought to be
interdicted by having him ejected from the premises, he had challenged the
eviction order which was ultimately upheld by this Court. Thereafter, the
appellant had availed of the right and remedy provided in Rule 11-D of F
the Rules and that, therefore, this was the proper explanation in filing the
application at a belated point of time. The Estate Officer and the High
Court have committed error of law in not considering the delay from this
proper perspective. He further contended that the appellant/petitioner
having invested huge money in construction of double-storeyed building,
he cannot be visited with the penalty of divestiture of title to and ejectment G
of him from the said property. When penalty could be collected under
Section 15, the recourse for eviction was bad in law. So, he availed of the
right as provided in Rule 11-D of the Rules. The exercise of the power of
the Estates Officer in refusing to condone the delay and not re-transferring
the property is vitiated by manifest error of law warranting interference. H

.....
124 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Mrs. Kamini Jaiswal, learned counsel for the respondent, has argued
that the resumption and eviction order having become final, it is no longer
open to the appellant/petitioner to challenge the validity of Section 8A. In
fact, the validity of Section 8A was dealt with and upheld by majority of
the Full Bench of the High Court in Ram Pwi v. Chief Commissioner,
Chandigarh, AIR (1982) P&H 301. When this Court had given an oppor-
..
B tunity to the appellant/petitioner to point out illegality, if any, in the action
taken under Section 8A of the Act, he could not satisfy this Court as to
any invalidity thereof. Under these circumstances, he cannot be permitted
1 to raise these contentions in the writ petition. He is not entitled to chal-

lenge the validity of Section 8A in the writ petition since his remedy has
c already been closed by the orders of this Court. She also contended that
the action for resumption was taken to maintain the ecology sanitation and
beauty of the city constructed as per the design and planning, as a model
city. Contravention of the scheme renders the beauty of the city irre-
versible. The appropriate course open to the authorities is to resume the
D land and prevent such misuser. The appellant/petitioner having allowed all
the options closed to him, it is no longer open to him now to challenge the
validity of Section 8A of the Act at this belated stage. Even otherwise,
Section 8A is ultra vires the Act as it seeks to sustain the purpose and policy
of the Act which otherwise would be rendered ineffective and toothless.
She further contends that he having slept over for 13 years, the appellant
E cannot be permitted to file an application under Rule 11-D of the Rules.
He has no right as such. He has only benefit of making an application. It is
a discretionary relief available to him under the Rules to be considered by
the Estate Officer. In view of the background of the case, the Estate Officer
had considered the totality of the facts and given elaborate reasons for
F refusing to condone the delay and to re-transfer of the property. In support
thereof, she relies upon the judgment of this Court in Chandigarh Ad-
ministration v. Johnson Paints, (1996) 3 SCALE 680. The High Court also
has given cogent reasons for refusing to grant the relief sought for. Accord-
ingly, no case has been made out warranting interference.

G In view of the diverse contentions raised, the only question is;
whether the appellant/petitioner is entitled to avail of the remedy under
Article 32 of the Constitution? But for the reference made by the Bench
of two learned Judges, we would have straightaway held that the doors to
a litigant citizen under Article 32 of the Constitution are closed fast and
H writ petition is not maintainable _since it amounts to reviewing the order
BABU SINGH BAINS v. U.0.1 125

passed by this Court in C.A. No. 3102/81 March 13, 1992. It is settled law A
that once an order passed on merits by this Court exercising the power
under Article 136 has become final, no writ petition under Article 32 on
the self-same issue is maintainable. Though the resumption order was not
challenged, this Court had permitted the appellant to convince this Court
as to the invalidity of the resumption order passed under Section 8A but B
he could not point out any invalidity nor did he raise any contention as
regards the validity of Section 8A. Therefore, the principle of constructive
res judicata stands fast in his way to raise the same contention once over.
However, since the two-Judge Bench has made the reference in this behalf,
it is necessary to briefly deal with the contentions raised by Sri Swaroop
Singh, learned counsel for the appellant. C

After unsuccessful challenge to Section 9 of the Act under Article
226 before the Full Bench of the Punjab & Haryana High Court, on appeal,
this Court in Jagdish Chand v. State of Punjab, AIR (1972) SC 2587 had
declared that Section 9 was invalid since the purchaser had already paid D
the entire consideration amount and thereafter the power under Section 9
was not available for resuming the property. Consequently, the Parliament
amended the Act and introduced Section 8A deleting Section 9 and 11 of
the Act. The Statement of Objects in that behalf read as under :

"The Supreme Court in Jagdish Chand Radhey Shyam v. State of E
Punjab, Civil (Appeal No. 1099 of 1967) declared Section 9 of the
Capital of Punjab (Development and Regulation) Act, 1952 (Pun-
jab Act XXVII of 1952), as in force in the Union Territory of
Chandigarh, as being violative of Articles 14 and 19(1)(t) of the
Constitution and held that the Central Government is not entitled F
to resume the site or building transferred under Section 3 of that
Act, or to forfeit the money paid in respect of such transfer under
the said Section 9. The main ground on which the Supreme Cowt
had based its conclusions was that there is nothing in the Act to guide
the exercise of power by the Govemment as to when and how any
• of the methods for recovering the amount of consideration in a1rears G
specified in Sections 3, 8 and 9 of the Act, will be chosen. (Emphasis
supplied).

2. The decision of the Supreme Court has created several
practical difficulties in administering the provisions of the Act. H
126 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Further, the situation created by the decision of the Supreme Court ,
is already having an adverse effect on the regulation and develop-
ment of the entire city of Chandigarh, which has been planned and
developed with great care and at considerable expense over the ..
past several years. It is, therefore, essential to remove the objections
pointed out by the Supreme Court by amending the Act retrospectively
B from the 1st of Novembe1; 1966 being the date on which the Union
Territory of Chandigarh was formed, and to validate the actions
taken under the impugned provisions of the Act (Emphasis sup-
plied).

c 3. The Bill seeks to achieve the aforesaid objection."

(emphasis supplied)

A reading thereof would clearly indicate the animation of the Legis-
lature that the aforesaid decision of this Court was causing inconvenience
D for preventing misuser of the property defeating the scheme of the Act.
Therefore, it necessitated to amend the Act and bring on statute Section
BA for resumption of the property used in violation of the conditions of
the sale, provisions of the Act and the Rules made in that behalf. Majority
of the Full Bench in Ram Puri's case (supra) had considered the effect of
Section BA and held in paragraph 66 thus :
E
"66. Adverting specifically to Sec. BA the restrictions for the
exercise of the powers yested thereby exist not only in the express
provision thereof, but are equally discernible from t;l}I{ larger
purpose of the Act, its preamble as also the other sectiohithereof
when read with the statutory rules framed thereunder. The larger
F purpose of the planed development and regulation of the new
capital city, as spelled out in the preamble of the Act, is the fixed
Pole Star to which the ultimate exercise of the power of resumption
under Section BA is hitched. What deserves highlighting herein is
that this power of resumption under Section B-A is merely a
discretionary and an enabling power. The statute does not lay down
G any mandate that it must necessarily be exercised in a particular
situation. In sub- section (1) thereof it is first in the discretion of
the Estate Officer that he may issue a notice to show cause why
an order of resumption of site or building may not be made.
Equally under sub-section (2) after considering the cause shown
H against such a notice it is optional for the Estate Officer to order
BABU SINGH BAINS v. U.O.I. 127

such resumption or not. The word used in both the sub-sections A
is 'may' and not 'shall'. Mr. Anand Swaroop rightly pointed out
that this power of resumption is indeed the last arrow in the quiver
of a number of sanctions to enforce the planned development and
the regulation of the capital and to be only resorted to in a'£iituation
commensurate with its necessary exercise. To put it in plain lan-
guage it is not mandatory for the authority to order resumption, B
but only in extreme cases it enables it to do so when the other
powers and sanctions to enforce the purpose of the Act have
failed, or in the circumstances it is the only remedial power which
can be applied. Therefore, it is farcical and imaginary to assume
that the authority would necessarily use this power arbitrarily and
whimsically and that they will use this hammer to swat a fly. As
c
Section 8-A now stands (in sharp distinction to the deleted Section
9) it mandatorily required a notice to show cause to the person
concerned whenever the exercise of this power is contemplated.
Not only is such a person entitled to have a reasonable opportunity
of contesting such a notice, but the law in terms confers on him D
the power to lead evidence in support of his stand. The mandate
as laid on the Estate Officer is to record his reasons in case he
orders resumption. Apart from these inbuilt safeguards under
Section 8-A, it is the statutory rules which provide for an appeal
against the order of resumption by the Estate Officer, to the Chief
Administrator. It is thereafter that the rules zealously provide for E
a revision to the Chief Commissioner, who is the executive head
of the Union Territories. Obviously in a proper case, the right to
approach the Court under Article 226 of the Constitution of India
is equally open.
F
68. In conclude, in the larger conspectus of the purposes of the
Act itself, its preamble; the setting in which it is placed along with
the supplementary sections of the Act and the rules framed there-
under it has to be held that the enabling power of resumption
conferred thereby is only a reasonable restriction on the fundamen-
tal right to hold, acquire and dispose of property and is, therefore, G
in no way violative of Article 19(1)(f)."

Accordingly, the Full Bench had held that Section 8-A was brought
on statute which a view to bring it in conformity with the purpose the Act
seeks to subserve. Learned couns~l for the appellant relied upon the H
128 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A minority judgment of learned Judge. It would, however, appear that the
learned Judge, with due respect, sought to set the clock back to the
Amendment by constructing the meaning of the words 'forfeiture' and
'resumption' and the consequential effect on general principles of law
without giving needed effect to the object of the Amendment. Once the
statute occupied the field and gave power to resume the land or building
B subject to the conditions mentioned therein, the general principles of
resumption and other principles considered therein absolutely remained no
more relevant. The majority judgment has rightly focussed the question in
the correct perspective and had held that Section 8-A is valid in law and,
therefore, not violative of Article 14. In N01them India Caterers (Pvt.) Ltd.
v. State of Punjab & Anr., AIR (1967) SC 1581, this Court had held that
c when there are two modes of procedure, one being more drastic and
harsher than the other without any guidelines, invocation of the former was
violative of Article 14 which was reversed by a larger Bench in Magan/al
Chhagganlal (P) Ltd. v. Municipal C01poration of Greater Bombay & Ors.,
AIR (1974) SC 2009 knocking the bottom of the ·plea of constitutional
D invalidity of Section 8-A on the anvil of Article 14. Though softer course
under Section 15 was available, Section SA does not become invalid on that
score. Section 9 has been deleted and procedural safeguards have been
provided in Section 8-A. Therefore, Section 8-A, having provided fair
procedure, does not become arbitrary and violative of Article 14.

E For these reasons and also for the reasons given in the majority
judgment, we are of the view that Section 8-A is not violative. of Article 14
since it has prescribed an in-built procedure of giving an opportunity and
right to adduce evidence and consideration thereof by the Estate Officer
before resumption and to pass a reasoned order in support thereof. The
F order is also subject to an appeal before the Chief Administrator. It
permissible, within circumscribed paramaters, appellate order may be sub-
ject to judicial review under Article 226. Since this procedure was not
available under Section 9 ef the Act, this Court had declared it as ultra
vires of Article 14. The vice pointed out by this Court in Jagdish Chander's
case (supra) has been cured by introducing Section 8-A. It would, there-
G fore, be clear that the resumption under Section 8-A is not only in case of
non-payment of dues under the sale but for violation of the conditions of
the sale, the rules, regulations and other relevant conditions applicable in
that behalf. Therefore, we do not find any invalidity in Section 8-A.

H It is then to be seen : whether the appellant's application under Rule
BABU SINGH BAINS v. U.O.I. 129

11-D of the Rules has not been considered in proper perspective by the A

-
Estate Officer and whether any illegality has been committed by the High
Court by not interfering therewith. Having considered the reasoning given
by the Estate Officer in his order and the conclusion reached by the High
Court, we do not think that they have committed any illegality in refusing
to condone the delay. This Cohrt has pointed out inlolmson Paints's case
(supra) in paragraph 6 that ~nee the original allotment stands cancelled B
and resumption by the Estate Officer becomes final, the allottee has no
right to the allotment of the site or building. Rule 11-D deals with only
discretionary power given to the Estate Officer. It does not clothe the.
former allottee with any right to reallotment. The power under Rule 11-D
is only discretionary; he may give the benefit to the former transferee C
subject to fulfilment of the conditions mentioned therein which includes
power to refuse to order reallotment. In fact, this Court has doubted the
wisdom behind Rule 11-D of reopening the issue once over through back
door entry under Rule 11-D, after the entire process of resumption has
become final and received quiteous. It would be a constant sprout of
corruption and abuse of Rule 11-D for diverse reasons which in the interest D
of smooth administration need to remove the irritant. However, we need
not dwell upon it any further as it is not necessary for the purpose of
deciding the question in this case. Suffice it to state that Rule 11-D is only
an enabling provision to make an application. The Estate Officer has
discretion to re-grant the land or building which stood already resumed
and vested in the State. Of course, he cannot arbitrarily reject the petition; E
he has to give reasons in support thereof as contemplated in Rule 11-D
itself.

Thus considered, the High Court has rightly pointed out that the
appellant has not given any proper explanation for inordinate delay of 13
years in not making the application. It is true that the appellant was
F
carrying on the litigation but was not properly advised at the appropriate
stages to avail the remedies; he landed himself in trouble on account of his
own conduct. Considered from this perspective, having regard to the facts
in this case, we do not think that it is a case warranting interference.
G
The appeal and the writ petition accordingly stand dismissed. No
costs.

IW.P. (C) No. 412/96

The writ petition is dismissed as withdrawn. H
130 SUPREME COURT RE,PORTS [1996] SUPP. 6 S.C.R.

A CA. Nos. 12936-37/96 (@ SLP (C) Nos. 8118-19/90

Leave granted.

These appeals by special leave arise from the judgment and order of
the High. Court of Punjab and Haryana at Chandigarh made on January
B i.5, 1990 and March 16, 1990 in Review Petition No. 45 of 1990 and CWP
No. 8266. of 1988.

Admittedly the appellants, though doctors, are using the premises for
nursing home/clinic. Admittedly, the premises are located in residential
zone. Therefore, it would clearly be a contravention of the rule by misuser
c of the house for non-residential purpose. Accordingly we do not find any
illegality in the action taken by the respondents. However, six months' time
is granted to the appellants to stop the misuser. The appellants should give ·
an undertaking before the Estate Officer within four weeks from today that
they would .stop misuser on expiry of six months from to-day. In case they
D do not stop misuser on expiry of six months, the Estate Officer is entitled
to resume the property without any further order or action. For misuser,
in lieu of resumption, the Estate Officer may impose any reasonable
penalty which the appellants shall pay.

The appeals are accordingly disposed of. No costs.
E
CA. Nos. 12932-33/96 (@ SLP (C) Nos. 15376-77/90

Application for intervention is dismissed.

Leave granted.
F
These appeals by special leave arise form the judgment and order of
the High Court of Punjab & Haryana made on January 25, 1990 and March
16, 1990 in Review Petition No. 49/90 and CWP No. 8317/88.

The appellant is using part of the prope~ty for non-residential pur-
G pose, viz.; a shop and, therefore, it is clear case of conversion of user of \
the property from residential to non-residential. The action taken. by the
authorities is perfectly legal. However, we give six months' time to the
appellant to stop the misuser. He should give an undertaking to the Estate
Officer within one month from .today that he would stop misuser within
H six months from today. If he continues the misuser even after expiry of six
BABU SINGH BAINS v. U.O.L 131

months from today or any time thereafter, the Estate Officer is at liberty A
to resume the property without any further order or proceedings. Similarly
the Estate Officer is at liberty to impose any reasonable penalty for misuser
which the appellant shall pay over.

The appeals are accordingly ordered. No costs.
B
CA. No. /96 (@ SLP (C) No. 12491/90

Leave granted.

This appeal by special leave arises out of the judgment and order of ·
the High Court of Punjab & Haryana made on March 16, 1990 in Review C
Petition No. 47/90 and W.P. No. 5576/88. The appeal filed against the main
writ petition has already been disposed of by this Court in R.C. Chawla v.

- State of Haryana & Ors., JT (1996) 1 SC 633.

The appeal is disposed of in terms of decision in R.C. Chawla's case.
No. costs.
D

CA. Nos. 12947-48/1996 (@ SLP (C) Nos. 12389-90/1650 of 1990 and
CA. Nos. 12952-53/96@ S.L.P. (C) Nos. 14-15/91

Leave granted. E
These appeals by special leave arise out of the judgment and order
of the High Court of Punjab and Haryana made on March 16, 1990 and
January 25, 1990 in Review Petition No. 46/90 in W.P. 5258/88 and other
matters.
F·
Admittedly, the appellants were using the premises for non- residen-
tial purpose in a residential area. Therefore, the authorities were well
within their power to issue notice for resumption of the properties. How-
ever, pending disposal of these matters, the appellants have stated that they
had already stopped misuser an year ago. The appellants should file an
affidavit before the Estate Officer stating that they have already stopped G
J misuser of the premiseS. On such an affidavit being filed, it would be open
to the Estate Officer to have it verified whether they have already stopped
the misuser. If they have already stopped misuser, the order of resumption
may be revoked. If they have not, the order passed by this Court would not
be of any help to the appellants. The order of resumption would stand H
132 SUPREME COURT REPORTS [1996] SUPP. 6 s:c.R.

A upheld. The Estate Officer may six any reasonable penalty for misuse and .
the appellants shall pay over the same. If they were to repe.at .the misuser,
the Estate Officer would be free to resume the property witho1:1t taking any
recourse to fresh proceedings.

The appeals are accordingly disposed of. No costs.
B
CA. Nos. 12949, 12934-35, 12955, 12938-43, 12945-46/96@ S.L.P. (C) Nos.
885/91, 15393-94, 7960, 9174-79 & 11578-79/90

Leave granted.

C These appeals by special leave arises from the judgment and order
of the High Court of Punjab and Haryana made on January 25, 1990 in
CWP No. 1162/89 and other matters.

The appellants, admittedly, have been using the residential premises
D for non-residential purpose converting it into a shop contrary to the
conditions of the sale and also the Rules. Thereby, it is a clear case of
misuser of the premises. However, an opportunity is given to the appellants
to stop the misuser within six months from today and pay reasonable
penalty levied by Estate Officer on misuser. They should file an undertak-
ing before the Estate Officer within one month from today that.they would
E stop the misuser within six months from today. On expiry of six months, it
would be open to the Estate Officer to verify whether the appellants ·have
stopped the misuser. If they would have not, the resumption o:rder would
get revived and thereafter it would be open to the Estate Officer to deal
with the property in accordance with law without further reference to the
appellants or taking any further action in this behalf. If the misuser is
F repeated, he would free to resume the property without further proceed-
ings. Reasonable penalty may be fixed and the appellants shall pay over
the same.

The. appeals are accordingly disposed of. No costs.
G
W.P. 250/96

This writ petition filed by the petitioners challenging the resumption
orders passed by the Estate Officer for contravention of the conditions of
the sale. Therefore, it would be open to the petitioners, to avail of remedy,
H if any, available under the law.

•
BABU SINGH BAINS v. U.0.1. 133

The writ petition is accordingly dismissed. One month's time is given A
to the petitioner to approach the High Court. In the meanwhile, status quo
as on to-day shall be maintained.

Civil Appeal No. 12954 of 1996.

ORDER B

Leave granted.

This appeal by special leave arises against the judgment dated
August 31, 1990, made in W.P. No. 3278/81 by the High Court of Bombay.
The admitted facts are that the appellants had from the Government 4 C
acres of land on April 5, 1946 for construction of Ayurvedic Karkhana in
the industrial zone subject to the following conditions :

"(a) The land (and the building to be constructed thereon) should
be used for the purpose for which it is granted, viz. Manufacture D
and sale of Ayurvedic Medicines, and conducting an Ayurvedic
School or College, and an Ayurvedic Hospital.

(b) The management of the Shahu Aryopushadhi Karkhana should
agree to abide by all the building rules and regulations of the
Kolhapur Municipal Borough; and E
(c) The management should also agree to purify its discharges to
such extent as may be laid down by the Municipality from time to
time and let them out in the Municipal drains and sewage at such
intervals and at such times as may be fixed by the Municipality
from time to time." F

On inspection made by the Collector, he found that 1 Hectare 29
acres of land allotted to him was to be vacant; that he had the information
that the appellant was attempting to alienate the property; and that the
appellants had not used the assigned land in compliance of the three
conditions enumerated hereinbefore. Therefore, notice was given to the G
_J appellant as to why the land could not be resumed; If not reply was not
received within 10 days from the date of the receipt of the letter, it was to
be presumed that the appellants had no cause or grievance for resumption
of the land by the Government. After passage of two years, they gave reply
on February 5, 1980. An order came to be passed after consideration of H
134 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the submissions made by the appellants on September 5, 1981 rejecting the
contentions opposing presumption of the land. Calling that order in ques-
tion, they filed a writ petition in the High Court. The High Court in. the
above writ petition has dismissed the same.

Shri V.N. Ganpule, learned senior counsel appearing for the appel-
B lants, contended that under the provisions of the Maharashtra Land
Revenue Code, the Collector has no power to resume the land and that,
therefore, the action,.taken by the Collector is without authority of law. We
find no force in the contention. Admittedly, the Collector being the Chief
Executive, Revenue Head of the District and the property being situated
c within Kohlapur District, he had the competence to inspect the land; he
found that the land was not used for the purpose for which the grant was
made under the' Government Grant Act. Consequently, when he noticed
that there was a breach of the covenants in the grant, a notice was issued
to the appellants as to why the lands granted in their favour should not be
resumed. He had power and competence to initiate the action for cancel-
D lation of grant and for resumption thereof. Even belated show cause notice
was duly considered by the District Collector who refused to accede to the
request made to him. Consequently, the resumption became valid. The
High Court, therefore, has not committed any error of law in this behalf.

E It was also contended in the High Court that subsequent to the
resumption order passed by the Collector followed by actual resumption,
the Government have passed a resolution on November 21, 1987 for
re-grant subject to the conditions mentioned thereunder, we do not have
the advantage to see the grounds on which the re-grant was sought to be
made etc. However, the High Court refused to go into that question. It may
F be open to the appellants to make an application to the District Collector
and it is for the District Collector to consider and dispose it of according
to law. It is stated by the appellants that they had already made a repre-
sentation before the Commissioner and it was not considered. It is seen
that the direction was to make representation before the Collector and not
G the Commissioner. It was a misconceived action taken by the appellants.
He did not avail of the remedy as directed by the High Court. Therefore, l
we cannot go into that question. ~

The appeal is· accordingly dis\l}issed. No costs.

H G.N. Petition and Appeal dismissed.
Q

THECANTONMENTBOARD,MATHURA A
v.
KRISHNA BRICKS AND LIME FACTORY

SEPTEMBER 12, 1996

[N.P. SINGH AND S.B. MAJMUDAR, JJ.] B

Cantonments Act, 1924: Section 60.

Imposition of Tax-By cantonment Board-On trades and call-
ings-Rate of tax-Held : must be within the ceiling limit fixed by Art.
276(2)-S. 60 linked Board's power to impose tax with that of any
c
Municipality in the State where Cantonment was situated-Since power of
municipality was subject to ceiling fixed by Art. 276(2), Board's power was
also subject to such ceilin~Hence, Board did not have unlimited taxing
power-U.P. Municipalities Act, 1916, S. 128(1)(ii}-Constitution of India,
1950, Art. 276(2). D

The respondent was the owner of a brick kiln and was carrying on
the business of manufacturing and selling of bricks. A suit was filed by the
respondent for restraining the appellant~Board from realising tax at the
rate of 0.75p per thousand bricks by raising it from 0.19p per thousand E
bricks. It was contended by respondent that it neither derived any ad-
vantage from the Board nor any service was provided by the Board to it.
As such, the realisation of the tax at the aforesaid rate was in contraven-
tion and in violation of Section 60 of the Cantonments Act, 1924 read with
Section 128(1)(ii) of the U.P. Municipalities Act, 1916. The suit was dis-
missed and the judgment was affirmed in first appeal. However, in second F
appeal, the High Court came to the conclusion that the ceiling and restric-
tion imposed by Article 276(2) of the Constitution, as applicable to the
State, any municipal, district board, local board or other local authority
within such State in respect of imposition of taxes on professions, trades
and callings, was applicable even on the Board which had been established G
under the aforesaid Cantonments Act. On that finding the notification
raising the rate of tax was declared to be invalid being hit by Article 276(2)
of the Constitution. Being aggrieved the appellant-Board preferred the
present appeal.

Dismissing the appeal, this Court H
135
136 SUPREME COURT REPORTS [1996] SUPP.6S.C.R.

A HELD : 1.1. Article 276 of the Constitution within a prescribed limit,
enables the legislature of the State to make law for imposition of taxes on
income for the benefit of the State or municipality, district board, local
board to other local authority from professions, trades, callings saying that
such law shall not be invalid on the ground_ that it relates to a tax on income.
In view of Article 276, no law of legislature of a State relating to imposition
B of taxes for the benefit of the State or of a municipality, district board, local
board, or other local authority therein in respect of professions', trades,
callings shall be valid, if it provides the total amount payable in respect of
any one person to the State, exceeding the limit fixed by Article 276tl) of
the Constitution. [144-C]
c
1.2. In the instant case the impugned notification imposing enhanced
tax of 0.75p per thousand bricks on brick-kiln owners was issued by the
Cantonment Board under Section 60 of the Cantonments Act, 1924. As such
the said notification shall not be deemed to have been issued in exercise of
power under a law enacted by the legislature of the State for the objects
D mentioned in Article 276. Section 60 of the Cantonments Act, prescribes two
conditions for imposition of tax by the Board. Firstly, that there must be a
previous sanction of the Central Government and secondly that only such
tax can be imposed within any cantonment which under any enactment for
the time being in force may be imposed in any municipality in the State
E wherein such cantonment is situated. The framers of the Cantonment Act
did not desire to delegate and authorise the Board to impose any tax.
{144-E-G]
1.3. In exer~ise of power under Section 128(1) (ii) of the U.P.
Municipalities Act, 1916, the Municipal Board of any municipality within
F the State could impose a tax on trades and callings carried on within the
municipal limits. Therefore, any Board within the State can also impose
such tax within the cantonment area because of Section 60 of Cantonments
Act. When Section 60 links the power to impose tax with any enactment
for the time being in force in respect of any municipality in the State where
the cantonment is situated, then it shall be deemed that it has also
G prescribed the limit of the ceiling of such tax with reference to the said
enactment in force in respect of any municipality in that State. The Board
cannot have unlimited power without any ceiling to tax on professions,
trades or callings being carried on within the cantonment area. If it is held
otherwise, it will lead to an anomalous position, so far the nature of tax is
H concerned, because of Section 60 the power of the Board is circumscribed
CANI'ONMENTBOARD v.KRISHNABRICKSANDUMEFACTORY(N.P.SJNGH,J.J 137

with reference to any enactment for the time being in force in respect of A
municipality in that State whereas the rate of such tax which is more vital,
has been left to the discretion of the Board. But the Board cannot excercise
unlimited taxing power under Section 60 on the plea that any such tax
including the rate thereof had to be first sanctioned by the Central Govern-
ment. [145-F; H]
B
Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR
(1966) SC 249 and Mahapalika of the City of Agra v. The Agra Brick Kiln
Owners Association and Anr., [1976) 3 SCC 42, relied on.

Madan Lal v. Cantonment Board, Mathura, (1978) All W 1147; Narain C
and Anr. v. Cantonment Board, Nasirabad, AIR (1963) Raj 190 and Hiralal
& Anr. v. Union of India & Anr., (1977,) Tax L.R. 2051, approved.

Mis. Punjab Lime and Lime-Stone Co., Dehradzm v. Cantonment
Board, Delzaradun & Anr., AIR (1967) All 15, overruled.
D
Poona City Municipal C01poration Case, AIR (1965) SC 555, cited.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 799-802
of 1981.

From the J udginent and Order dated 20.10. 78 of the Allahabad High E
Court in S.A. Nos. 347-350 of 1978.

K.N. Shukla, Ms. Binu Tamta and C.V. Subba for the the Appellant.

M.P. Shorawala for the Respondent.
;
F
The Judgment of the Court was delivered by:

N.P. SINGH, J. These appeals have been filed on behalf of the
cantonment Board, Mathura (hereinafter referred to as the 'Board') for
setting aside the judgment of the Allahabad High Court, declaring notifica- G
tion dated 22.11.1958, by which tax at the rate of 0. 75 p. per thousand bricks
had been fixed by the Board within the cantonment area as invalid.

The respondent is the owner of a brick kiln and was carrying on the
business of manufacturing and selling of bricks. A suit was filed on behalf
of the said respondent for restraining the appellant-Board from realising H
138 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A tax form the said respondent at the rate of 0.75 per thousand of bricks. It
was alleged that previously the Board was realising the tax from the
manufacturers of bricks at the rate of 0.19 per thousand. But by impugned
notification, it raised the rate of the tax at 0.75 per thousand of bricks. It
was alleged and asserted that the respondent as the manufacturer of bricks
was neither &riving any advantage from the Board nor any service was
B being provided by the Board. As such, the realisation of the tax at the
aforesaid rate was in contravention and in violation of Section 60 of the
Cantonments Act, 1924 read with Section 128(1)(ii) of the U.P.
Municipalities Act, 1916. The suit filed on behalf of the respondent was
dismissed by the Trial Court. That judgment was affirmed by the Court of
c Appeal. However, on second appeal being filed on behalf of the said
respondent, the High Court came to the conclusion that the ceiling and
restriction imposed by Article 276(2) of the Constitution, as applicable to
the State, any municipal, district board, local board or other local authority
within such state in respect of imposition of taxes on professions, trades
and callings, was applicable even on the Board which had been established
D
under the aforesaid Cantonments Act. On that finding the notification was
declared to be invalid being hit by Article 276(2) of the Constitution.

Section 3 of the Cantonments Act provides that the Central Govern-
ment may, by notification in the Official Gazette, declare any place or
E places in which any part of the Forces is quartered or which, being in the
vicinity of any such place or places, is or are required for the service of
such forces to be a cantonment for the purposes of the said Act and may
by a like notification, declare that any cantonment shall cease to be a
cantonment. In view of sub-section (4) of Section 3 Central Government
F may, by notification in the Official Gazette, direct that any place declared
a cantonment under sub-section (1) the provisions of any enactment relat-
ing to local self-Government other than this Act shall have effect only to
such extent or subject to such modifications, or that any authority con-
stituted under any such enactment shall exercise authority only to such
extent, as may be specified in the notification. Section 6 provides that when
G by a notification under Section 3, any cantonment ceases to be a canton-
ment, the local area comprised therein shall immediately be placed under
the control of a local authority, the balance of the cantonment fund and
other property vesting in the Board shall also vest in such local authority,
and the liabilities of the Board shall be transferred to such local authority.
H Similarly, Section 7 and 8 make provisions in respect of cantonment fund
CANTONMENT BOARD v. KRISHNA BRICKS AND LlME FACTORY [N.P. SINGH, J.) 139

and its property which is placed under the control of some other local A
authority, in view of the notification under Section 4, because of which any
local area forming part of cantonment ceases to be under the control of a
particular Board. Section 60 of the Cantonments Act provides :

General Power of taxation -
B
(1) The Boardkay, with the previous sanction of the Central
Government, impose in any cantonment any tax which under any
enactment for the time being in force, may be impose in any
municipality in the State wherein such cantonment is situated :

(2) Any taximposed under this section shall take effect from the C
date of its notification in the Official Gazette or where any later
date is specified in this behalf in the notification, from such later
date.

Because of aforesaid Section 60 the Board may with previous sanction of D
the Central Government impose in any cantonment, any tax 'which under
any enactment for the time being in force, may be imposed in any
municipality in the State where such cantonment is situated'. For imposing
any tax in exercise of the power under Section 60, two conditions have to
be fulfilled and complied with (1) there must be a previous sanction of the
Central Government to impose such tax and (ii) the tax to be imposed must E
be such which under any enactment for the time being in force may be
imposed in any municipality in the State wherein such cantonment is
situated.
\ So far the municipality within any State is concerned, its power to
F
impose a tax in respect of professions, trades or callings is governed and
controlled by Article 276 of the Constitution, which says :

"Taxes on professions, trades, callings and employments -

(1) Notwithstanding anything in article 246, no law of the Legisla- G
ture of a State relating to taxes for the benefit of the State or of a
municipality, district board, local board or other local authority
therein in respect of professions, trades, callings or employments
shall be invalid on the ground that it relates to a tax on income.

(2) The total amount payable in respect of any one person to the H
140 SUPREME COURT REPORTS. [1996] SUPP. 6 S.C.R.

A State or to any one municipality, district board, local board or
other local authority in the State by way of taxes on professions,
trades, callings and employments shalt not exceed two thousand
and five hundred rupees per annum.

(3) The power of the Legislature of a State to make laws as
B aforesaid with respect to taxes on p;ofessiens, trades, callings and
employritents shall not be construed as limiting in any way the
power of Parliament to make laws with respect to taxes on income
accruing from or arising out of professions, trades, callings and
employments."
c
There is a non-obstante clause in Article 276(1) of the Constitution saying
that notwithstanding anything contained in Article 246 no Jaw made by the
legislature of a State relating to taxes for the benefit of the State or of a
municipality, district board, local board, or other local authority therein in
D respect of professions, tradings, callings or employments shall be invalid
on the ground that it relates to a tax on income. Having said so a ceiling
on the amount of tax has been imposed by Article 276(2), which was Rs.
250 earlier and has been raised to Rs. 2,500 by the Constitution (Sixtieth
Amendment) Act, 1988 with effect from 20.12.1988. In the case of Bharat
Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR 1966 SC I
E 249 = [1965) 3 SCR 499 a Constitution Bench in its majority judgment I

said:
a
"Before we deal with these cases it is necessary to point out the
rational upon which S. 142-A of the Govt. of India Act, 1935 was
F enacted and on which Art. 276 of the Constitution now rests. It is
that the legislative spheres of the Provinces and the Centre came
to be clearly demarcated in regard to items falling within Lists I
and II of Schedule VII of the Govt. of India Act and now to those
falling within the same lists of Schedule VII of the Constitution.
Taxes on professions, trades callings and employments are taxes on
G income and are thus outside the provincial and now State - lists and
belong exclusively to Parliament and before that to the Central
Legislature. Yet under a large number of laws enacted before the
Govt. of India Act, 1935 came into force, power was conferred on
local Governments and local authorities to impose taxes on such
H activities. This was obviously in conflict with S. 100 of the Govt. of
CANTONMENT BOARD v. KRISHNA BRICKS AND LlMEFACIORY [N.P.SINGH,J.) 141

India Act. When this was realised S. 142-A was enacted by the A.
British Parliament which saved the power conferred by pre- exist-
ing laws but limited the amount payable to Rs. 50 after 31st March,
1939. A saving was made, however, of pre-existing laws subject to
certain conditions with which we are not concerned. The provisions
of this section have been substantially reproduced in Article 276 B
of the Constitution with the modification that the upper limit of
- such tax payable per annum would be Rs. 250 instead of Rs. 50.
A tax can be recovered only if it is 'payable' and it would be payable
only after it is assessed. It is, therefore, futile to contend that the
ban placed by the aforesaid provisions extends only to recoveries
and not to an earlier stage. C

(emphasis supplied)

D
We may further observe that where there is an express prohibi-
tion in a statute against a local authority from imposing a tax, as
for instance, the recovery in the Statute construed by this Court in
the Poona City Municipal Corporation case, C.A. No. 582 of 1961,
date 5.5.1964: (AIR 1965 SC 555) (supra) or where a prohibition
can be implied - whether it be with regard to an item of taxation E
or with regard to the rate of tax or the quantum of tax payable by
an individual assessee - the action of a local authority or of any of
its instrumentalities in transgressing that prohibition must be
regarded as being in excess of its jurisdiction. Here there is a
prohibition in S. 142-A of the Government of India Act and now F
in Art. 276 of the Constitution, which precludes a State Legislature
from making a law enabling a local authority to impose a tax on
"professions, trades, callings and employments" in excess of Rs. 250
per annum. These provisions have to be read in the A~t or to be
deemed by implication to be there as the Constitution is the G
paramount law to which all other laws are subject as was the
Government of India Act, 1935 before January 26, 1950. If, there-
fore, after the date specified. in S. 142-A of the Government of
India Act or after the commencement of the Constitution a local
authority or any of its instrumentalities imposed or imposes a tax
which is in excess of the permissible amount, it would be exceeding H
142 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A its jurisdiction and a provision like S. 84(3) of the Act will not bar
the jurisdiction of a civil Court to entertain a suit instituted by a
person from whom it is collected for the repayment of the money
recovered from him in excess of the permissible amount.. ........ Here
since the Assessing Officer had no authority to levy a tax beyond
what S. 142-A of the Government of India Act, 1935 permitted or
B
what Art. 276 permits his proceedings are void in so fa~ as they
purport to levy a tax in excess of the permissible amount and
authorise its collection and the assessment order is no answer to
the suit for the recovery of the excess amount. To this .::xtent, even
the order of assessment cannot obtain the protection of S. 84(3)
c of the Act and, therefore, the appellant's suit is maintainable."

Again in the case of Malzapalika of the city of Agra v. The Agra Brick
Kiln Owners Association and Anotl!CI; (1976) 3 SCC 42, the scope of Article
276(2) was considered by this Court in connection with the aforesaid U.P.
Municipalities Act, 1916. The State Government issued a notification in the
D year 1947 imposing a tax under Section 128(1)(ii) of the said Act, at the
rate of 14 annas per thousand bricks. Brick kiln owners who were effected
by the said notification filed a suit for declaration that the tax was void as
such could not be realised in view of Section 142-A of the Government of
India Act, 1935 and Article 276 of the Constitution. This Court said :
E
"The Government of India Act, 1935, certainly set a maximum
on t~e tax on trades and callings and we agree that the High Court
was right in holding that the Municipal Board's light to levy tax
under the notification Ex. H could be valid up to Rs. 50 per year
and, to the extent it went beyond that limit, was void. So, we affirm
F the High Court' holding for the period upto January 26, 1960 that
no sum higher than Rs. 50 as set out in the Government of India
Act, 1935 can be exacted under Section 128 of Act II of 1916.

From the Raj to the Republic was a big break in constitutional
law, but there was some continuity maintained. A certain ceiling
G
on taxes on professions. trades, callings and employments had been
set by Article 276 of one Constitution of India, but this maximum
was not Rs. 50 as in the Government of India Act, 1935 but Rs.
250.

H
CANTONMENTBOARD v.KRISHNABRICKSANDLIMEFACIDRY[N.P.SINGH,J.) 143

Inevitably it follows that during the post- constitution period noth- A
ing by way of taxes on trades or callings above the limit so set is
recoverable and hence the maximum levy form each person under
the notification issued under Act II of 1916 rises to Rs. 250.

B
This does not mean that anything beyond Rs. 250 (the tax freeze
under Article 276(2) can be levied. No. The constitutional maxi-
mum prevails as it covers all taxes on trade or calling even today.
Therefore, until Parliament makes any other law, as contemplated
in the proviso to Section 172 of the Adhiniyam, the maximum of C
Rs. 250 binds. We have to read down the notification Exhibit H
for the post-Constitution period, i~ tune and conformity with the
Constitution and uphold its validity to the extent of constitutional
permissibility."

In the case of Mahapalika of Agra v. Agra blick Kiln Owners Association D
(supra) the validity of a notification issued under Section 128(1)(ii) of the
U.P. Municipalities Act, 1916 in respect of Agra Municipal Board imposing
a tax on brick manufacturers at the rate of 14 annas per thousand bricks
was considered by this Court and it was held that any such notification
must conform and fulfil the requirement of the ceiling fixed by Article E
276(2) of the Constitution.

In view of Article 276, it has to be held that no law of legislature of
a State relating to imposition of taxes for the benefit of the State _or of a
municipality, district board, local board, or other local authority therein in
respect of professions, trades, callings shall be valid, if it provides the total F
amount payable in respect of any one person to the State or to any one
municipality, district board, local board, or other local authority in the
State, exceeding the limit fixed by Article 276(2) of the Constitution.

Now the question which is to be answered is whether the ceiling
prescribed by Article 276(2) of the Constitution shall also be applicable to G
Board which has been established under the Cantonments Act. It need not
be pointed out ~hat the Board has been established under Cantonments
Act which is a Central Act. So far Article 276 is concerned, it relates to
the power of the legislature of a State to make law for the benefit of the
State or of a municipality, district board, local board or other local H
144 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A authority in respect of taxes on professions, trades, callings saying that it
shall not be invalid on the ground that it relates to tax. on income. But at
the same time, by Article 276(2) a ceiling has been fixed in respect of the
amount payable to the State, or anyone municipality, district board, local
board or other local authority in the State. This was necessary because the
power to tax on income has been provided under Entry No. 82 of List I in
B the Seventh Schedule and only Parliament can ena;;t a law in respect
thereof. The State legislature cannot make a law in respect of taxes on the
income of individuals within the State. It can be said that Article 276 of
the Constitution within a prescribed limit, enables the legislature of a State
to make law for imposition of taxes on income for the benefit of the State
c or municipality, district board, local board or other local authority from
professions, trades, callings saying that such law shall not be invalid on the
ground that it relates to a tax on income.

So far the Board is concerned which has been established under the
Cantonments Act, has issued the impugned notification in exercise of the
D power under Section 60 of the Cantonments Act. As such the said notifica-
tion shall not be deemed to have been issued exercise of power under a
law enacted by the legislature of the_ State for the objects mentioned in
Article 276. To that extent, we are not in agreement with the opinion
expressed by the learned Judge of the High Court. Whether the provisions
E of Article 276 shall be applicable has to be examined by construing the
scope of Section 60 of the Cantonments Act. Section 60 of the Canton-
ments Act, prescribes two conditions for imposition of tax. by the Board.
Firstly, that there must be a previous sanction of the Central Government
and secondly .that only such tax can be imposed within any cantonment
which under any enactment for the time being in force may be imposed in
F
any municipality in the State wherein such cantonment is situated. The
framers of the Cantonment Act did not desire to delegate and authorise
the Board to impose any tax. The power of the Board to impose a tax was
circumscribed by prescribing a limitation that the Board may impose in the
cantonment any tax which under any enactment for the time being in force,
G may be imposed in any municipality in the State wherein such cantonment
is situated. ·

Section 128(1)(ii) of the U.P. Municipalities Act, 1916 provides :

H "A tax on trades and callings carried on within the municipal limits

..
CA!fi;ONMENTBOARD v. KRISHNABRICKSANDUMEFACTORY(N.P.SINGH,J.] 145

and deriving special advantages from, or imposing special burdens A
o~, municipal services."
J• I '

., . of power
In exercise . .
under Section 128(1)(ii), the Municipal Board. . .
of
. any
municipality within the State of Uttar Pradesh could impose a tax on trades
and callings carried on with~n the municipal limits. Therefore, any .Board
.-~i4~~ .the ·state oJ U.P. can also impose such tax within t~r cantonment
B
area because of Section 60 of the Cantonments Act. In view . ( of- the clear
~ : ..

.and unambiguous provision of Section 60, the learned counsel appearing
. ·fQr the·<\P.pellant-Board did not contest this position. But according to him,
it does not mean, that Board is also bound by the rates of the taxes so
. imposed by the municipality or the local board within that State. It can c
prescribed its own rates of taxes on the trades and callings. According to
us, it is difficult to accept this contention. If the framers of the Constitution
did not give this liberty and latit)..lde to the legislature of a State in respect
of' taxes on professions, trades or callings for benefit of the State or
municipality, district board, local board· or other authority under Article
.D
276 of the Constitution, how an unlimited power so far the rate of tax is
concerned, can be conceded in favour of the Board which is a creature and
· · authority established under the Cantonments Act? When Section 60 links
the power to impose tax with any enactment for the time being in force in
respect of any municipality in the State where the cantonment is situated,
then it shall be deemed that it has also prescribed the limit of the ceiling E
' of suth tax with reference to the said enactment in force in fosp~ct of any
municipality in that State. If it is held otherwise, it will lead to an anomalous
position; so far the nature of tax is concerned, because of Section 60 the
powbr of the Board· is· circumscribed with reference to any enactment for
the 'tin\e being in force in respect of municipality in that State whereas so
F
faf ihe 'rate of such tax which is more vital, has been left t~ 'the discFetion
1

of the Board.
• j j ~ , I( • I ~

. ,, On .b~halLof: the appellant-Board .it was p,pinted out that the Board
,,. c(!.nnQl1 ~~ercise.,arbitrary power. under Section _60 because any such tax
-,_;including the rate th,ereof, has to be_first sanctioned by the._ Central Govern- G
,. ,rnent, According .~o us, because of Article 279 .if ~he State legislature cannot
~ hta?(, on, pr9fes.sipps trades or cal~ings for the benefit of the State,
.. municipality, district boan,l, local board or other local authority, beyond
1,Jhe limit,prei;;cribed by Article 276(2) as it amounts to tax on income, then
>lhow,it.can be,,held that the Board 1hii$,Unli!llited power without any ceiling 1 H
146 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A to tax on professions, trades or callings being carried on within the canton-
ment area? When Section 60 provides that Board may with Previous ·
sanction of the Central Government impose in any cantonment any tax
which under any enactment for the time being in force may be imposed in
any municipality in the State wherein such cantonment is situated, such
restriction shall not be only in respect of the nature of the tax, but also in
B respect of the ceiling on rates prescribed under the enactment, relating to
the municipality.

On behalf of the appellant, reference was made to the judgment of
Allahabad High Court in the case of Mis. Punjab Lime and Lime-stone Co.,
c Dehradun v. Cantonment Board, Dehradun and Anotlw; AIR (1967) Al-
lahabad 15. A learned Judge in connection with Section 60 of the Canton-
ments Act said :

"Section 60 of the Cantonments Act nowhere says that Canton-
ment Boards can levy taxes which can be levied by municipalities ·
D subject to the same limitatioris. It simply provides that the taxes
which are realisable by Municipal Boards are also realisable by
Cantonment Boards. This does not mean that the limitations on
the powers of Municipal Boards to levy thdr taxes must also be
applied to taxes levied by Cantonment Boards."
E A contrary view was expressed in the case of Madan Lal v. Canton-
ment Board, Mathura, (1978) All L.J. 1147 by a learned Judge of the same
High Court saying that Cantonment Board while imposing a tax on per
thousand of bricks must fix the maximum limit which does not contravene
the provisions of Article 276 of the Constitution. A Division Bench of
F Rajasthan High Court in the case of Narain and Another v. Cantonment
Board, Nasirabad, AIR (1963) Rajasthan 190 said :

"Considering section 60 of the Act, we may point out that the
legislature empowering the respondent to levy and collect taxes
used the word "impose only and evidently, therefore, the terms
G should be taken lo have been used in a wider sense. Besides the
object and purport underlying section 60 appears to be that the
taxes to be imposed by the respondent (Cantonment Board) should
be consistent with and should conform to the State laws relating
to imposition of taxes by the local authorities. Section 60 further
H does not refer to State laws in force at a particular point of time
CMTONMENTBOARD v.KRISHNABRICKSANDLIMEFACIDRY(N.P.SINGH,J.) 147

but the State laws gen~ally as might be from time to time have A
been referred to. It will be hardly in keeping with the object and
policy underlying section 60 that the respondent should be per-
mitted to continue taxes in contravention of State laws. The term
"impose" should, therefore, be taken to have been used in wider
sense in sectiQn 60 and that being so, the respondent cannot collect
taxes in contravention of State laws."
B
In the case of Hira Lal and Another v. Union of India and Another, (1972)
Tax L.R. 2051, the Himachal Pradesh High Court has also come to the
conclusion that under Section 60 of the Cantonments Act, while imposing
a profession tax, Article 276(2) of the Constitution cannot be violated.

Accordingly, the appeals fail and are dismissed. There shall be no C
order as to costs.

v.s.s. Appeals dismissed.

,
/'

A .' , K.C.P.
' ~.
LIMITED
'.
..., ·~..

. '• 'v. ' .-. '
'. THEJ~,RE§~DiNG OFFI.CER,f;\ND o~s.
··-·
,l ,;I.

. ' :· . . ·· -~ I . ·t ' ; . ,. . • .
B [AM. AHMAm;·a., S.B. MAJMUDAR AND B.N: KlRPAL, JJ.]
• 1 , • • , •n ·~ .~

Labour Law:

IndustlialDisputes Act, 1947: Sections 2(k) & (p), 2-A and 18(1).
c Settlement-Otlwwise than in conciliation proceedings-Dispute be-
tween employer compal.ly and workmen-Resulted in dismissal of certain
workmen-Sole recognised and representative trade u11ion pa,1Jic,ippf~4 ,in
conciliation proceedings on behalf of ail workmen including the dismissed
ones who co1ttini1ed to be members of trade union-Conciliation proceediitgs
D ultimately f ailed-Pursua11t to which industlial dispute raised under S.
2(k)-No industlial dispute raised under S. 2-A by dismissed workmen-
Dwing pe11de11cy of dispute before Labour Cowt, the said trade union and
employer anived at settlemeni:-.Option either to accept reinstatement with
co11tinuity in se1vice without back wages or accept a specified lwnpsum
amount with other mo1ietmy be11efits-Some dismissed workmen did not
E approve settlement-But trade union entered into settlement on behalf of all
dismissed workmen including the dissenting 011es-Howeve1; Labour Court
declined to pass award iii tenns of settlement-Held : settlement was not ex
facie, unjust or un.fai1~77ierefore, it was binding even on such dismissed
workmen who did not approve the settlement-Hence, Labour Cowt should
F. have passed an award in tenns of settlement and should not have continued
the industdal dispute in relation to dismissed workmen who did not approve
settlement.

Settlement-Othe1wise than in conciliation proceedings-Ce1tain dis-
pute between employer company and workmen led to go slow, stdke and lock
G out-Disciplina1y action against 29 workmen for va1ious acts of misconduct
resulted i.u-tll.ejr dismissal-Subsequently, settlement anived at between
employer anti-trade union-Option either to accept reinstatement with con-
tinuity in se1vice without back wages or accept a specified lwnpsum amount
with other nwnet01y benefits-All stdking workmen other than dismissed ones
H reinstated without back wages-Held : In the circumstances of the case, the
148
KC.P. LID. v. PRESIDING OFFICER 149

tenns oj seitlemen't relating to proposed reinstatement of dismissed workmen A
without. back wages neither unfair nor unjust.

The appellant-Company had an Engineering Unit where it manufac-
tured inachinery and employed about 500 workmen. Respondent No. 2 was
the only recognised and a representative trade union of all the workmen
in the said establishment. Certain disputes between the appellant and the B
workmen led to go slow, strike and lock out declared by the appellant-Com-
pany. Disciplinary action against 29 workmen for various acts of miscon-
du~t l'esulted in "their ·m~missal: The respondent No. 2~trade union
participated iri the concilation proceedings on behalf of all workmen
inclu~ng the ·dismissed ones, which ultimately failed. An industrial dis- c
pute under SectiOn 2(k) of the Industrial Disputes Act, 1947 was raised by
the r~sl.iondent No:'. 2~trade union on behalf of the said 29 workmen.
However, none of the said 29 workmen raised industrial dispute in their
• r,. • ·~ I f. ' . ~~ J • • ·-· •
individual "capacity under Section 2-A of the Act.

· ·During the pendency of the said industrial dispute before the Labour D
Court the said trade union entered into a settlement with the appellant-
Company under Section 18(1) of the Act otherwise than in the course of
conciliation proceedings on behalf of all the said 29 dismissed workmen
giving option to either accept reinstatement with continuity of service
without back wages or accept a specified lumpsum amount with other E
monetary benefits. However, 12 workmen out of the said 29 workmen did
not accept the aforesaid settlement. The Labour Court·declined to pass an
award in terms -of the settlement on the ground that the 12 workmen had
not approved the settlement and ·industrial dispute in respect of them
would continue and proceed furthe1·. However, out of the said 29 workmen,
17 workmen had agreed to abide by the terms or the settlement and were F
reinstated in exercise of'their·option. The 12 workmen were members of
the respandent No. 2-trade union who were acting on their behalf and still
continued to be members of the union.
;I

The appellant-Company filed a writ petition before the High Court G
challenging the decision of the Labour Court.to continue the dispute in
connection with the said 12 workmen. The High Court dismissed the writ
petition. Hence this appeal.
..jl I\ lt.l'·, •
. . , On behalf of the appellant-Company it was contended that when
respondent No. 2-Union had espoused the cause of all the 29 dismissed H
150 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A workmen, and the reference was made under Section 2(k) of the Act, the
union which represented all the workmen including the said 12 workmen
was entitled to act on behalf of all of them and enter into a settlement;. and
that under these circumstances individual workmen had no independent
right to contest their dismissal orders and were bound by the settlement
which was not in any way ex facie, unfair or unjust.
B
Allowing the appeal, this Court

HELD : 1.1. The settlement arrived at by the respondent No. 2-union
with the appellant-company was not in the course of conciliation proceed-
C ings. Therefore, it would be binding under Section 18(1) of the Industrial
Disputes Act, 1947 to the parties to the agreement, namely, the appellant-
company on the one hand and respondent No. 2-union representing all the
29 dismissed employees, who were its members and on whose behalf it had
raised the industrial dispute under Section 2(k) of the Act, on the other. The
D settlement was duly signed by both the parties. Under these circumstances,
respondent Nos. 3to14 (in all 12 workmen) also would be ordinarily bound
by this settlement entered into by thefr representative union \'tith the com-
pany unless it is shown tl)at the said settlement was ex-facie, unfair unjust
or malafide. No. such case could be even alleged much less made out by the
dissenting respondent Nos. 3 to 14 before the trial court. The entire in-
E dustrial dispute was raised by respondent No. 2-union on behalf of all the
29 dismissed workmen and as it was not an industrial dispute covered by
Section 2A of the Act whereunder individual dismissed workman could
come in the arena of contest, it could not be held, as wrongly assumed by the
Labour Court that this settlement was not entered into under Section 18(1)
F of the Act by these dissenting workmen when the respondent-union did
represent them from beginning to-end and is still representing them as they
are members of the union at present. Tue terms of the settlement cannot be
considered to be in any way ex-facie, unjust or unfair and that the said
settlement consequently must be held to be binding on these contesting
workmen also. Hence, the entire industri.al dispu~e should have been dis-
G posed of in the light of this settlement and an award in terms of the
settlement should have been passed by the first respondent-court in the case
of respondents 3 to 14 also. [157~C-D; 157-F-H]

Ram Prasad Vishwakanna v. The Chaimian, Industrial Tribunal,
H [1961] 3 SCR 196; lferbertsons Ltd. v. The Workmen of Herbertsons Ltd. &
KC.P. LID. v. PRESIDING Ofl!CER [S.B. MAJ MUDAR, J.] 151

Ors., AIR (1977) SC 322 and Banmi Refilwy Pragatisheel Shannik Parishad A
v. Indian Oil C01poration, [1991) 1 SCC 4, relied on.

1.2. The relief of reinstatement without back wages could not be said
to be unreasonable as all other workmen also lost their back wages only
because they they supported the cause of these 29 colleagues of theirs and
·/ I BI
hence there was no reason why the workmen who indulged in the acts or
misconduct and who were also to be taken in service should not also lose,
their wages. Relief of reinstatement was made available to respondents 3
to 14 on the same line as it was made available to their 17 remaining
colleagues who were covered by the very same settlement and who accepted
the same. Such a package deal entered into by respondent No. 2 in the best C
interest of these workmen could not be said to be unfair or unjust from
any angle. On the contrary, if the back wages were given to them, then the
remaining workmen against whom there was no disciplinary action or any
alleged misconduct and who had also lost wages only because they were in
sympathy with these 29 dismissed workmen would have stood dis-
criminated against. Consequently, it is not possible to agree with the D
contention of the respondent Nos. 3 to 14 that the said settlement was in
any way unfair or unjust. [162-F-H; 163-A; BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11944 of
1996.
E
From the Judgment and Order dated 4.4.95 of the Madras High
Court in W.A. No. 1186 of 1993.

N.B. Shetye, V. Balaji and A.T.M. Sampath for the Appellant.
F
V.G. Pragasam, M.A. Krishnamoorthy and M.A. Chinnasamy for the
Respondents.

The Judgment of the Court was delivered by

S.B. MAJMUDAR, J. Leave granted.
G
This appeal by special leave arises out of the judgment and order
dated 4th April, 1995 of the High Court of Judicature at Madras in Writ
Appeal No. 1186 of 1993. A Division Bench of the High Court dismissed
the appeal of the appellant company and confirmed the judgment and
order of the learned Single Judge in writ petition No. 611 of 1993 dismiss- H
152 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A ing ·the sanie'.
'I ·'
A few relevant facts leading to this appeal deserve to ,be noted at the
''. . ;. • . ; .• .1 - -1..,'. z : ' •, ; 'I' j • .. •.1. ~1 t'-, I -'~I :-; I • • ; •: 1 c. :

outset. The appellant ts havmg
,. . ~. .
an Engmeering
i ... ~ ... ~ ~ I
Umt at Tiruvottiyur,
,tlhl IJ•
Madras
;';" ":i»d·-~n .. •t"•,)f"l'" , •• ol
-·,-.: •
1
' - .. ' ,.- I

where it manufactures machinery for sugar, cement and alhed industries
~-~.1< .· , ... ; . ~ . · ,·'.;·'. ~11·i:. . .. tj; _1;;.a,_·, Jr~!~· J·q[ffl~~'. f'-1!' t".Hl ',f'!l.~b;~v

B' '. a~d ~~pl9~~ ~b~u,t ?op,:-;o.~¥~en. R,~sp,?~?f~~I~~·. ~ ,~~J·~~~;o~~¥/;f~pll~§:?~iii
and a representar1ve umon of all th~ workm,en ~orkmg .m the said, estab-
• • . ~. :1 .-: Sn 1 .( .. ·, . . . -.• ·.r.-... ·~ J•L .1:.l ;. 4~• ·p·:!.t... •r':l.'°'' d~l.J Dt•r !~}Ul)."j• 1 .. uh
hshment. In the past alJ mdustnal disputes were settled by the appellant
c6m~~~ 6~· i~~ '~asi~' 'qi '1~ng th~~ 'settl~~~~t~· ~~i i~~d iht~ '~th'i~e: ?~~ii
1 1 1

ret~n<leiit unio~~ 'ike lasl of\'.¥1li~h'~~~· d~t~d Q~ce~~et3(( 1991.!dl ... "
1 1

t;~Hf~ '..~·. nt::·t '.h.c ~n~nLi ~ "".' 'h.tit~(", · n ' j . . !fl .d l)-: t: ·IV<J ....Jll ;~if'! .-''JU:,;~··Jh1·)
c') 1"'' Ikseptembe~: l990 When' tHe ihue of Bb'b'uido~· tlil fina6cia'i'ye~¥j;
1 1 1

1989-9o''"was' 1 uiideV~onsiderktio'i{ th~ ;wo~kin'en ''af the''iri~hHlb~··or··ziili' 1 '
respoiia~ht uniort"resorte~ to go ~16w' insisting· tlie app'e1i~Ht i~ ipaHhoie'"
bonus 1eveii though''as ·coritende(l by' tii'e' app~llan(tirtdef'lii~ prdvisiciil~ ·Sf ·
th'e, faYfueiit1 of 'B.otius 1A1<:i: "only 'diinirilliili. bonus1 ohi'.33% '<Wriib"b.~riici'
..-sh i~·~~·:f .. ~ ... :-r ~t1.r-· • . ·: '1..~ •• t h'l .. "' ~. •tl !'' ·j • j·~t .:t.i,, 1.;~, +:.i:1t·
;j'

wages was payable for ~he financial year 1989-90. The go slow resorted to
D . b{the1\~ori<Ihen re~uit~d iri'totai' stoppag~'~fw6ritalid
•. • ... i ~.. • .t. , ....
). •
1
~H 1 ~1i'eg~d iiibg~I '
ill •·1
·• ,t ,,... ~,., · • ; • :~ ~ ·. ~ .• '- ~---; ~
1

0~11•u""'~~t1, >
strike on 'and'from OCtober 26,' 1990. It is. the case of .the appellant tliat iii
view of the deteriorating situa'tio'n 'a~d 'tith: ·~; ~J\J';to" pr~te~t pe~sb~h1''
11

securi}Y qf th.e §upervisory an~l M~n;;1.~e~i~l, s~~ff, ~t1_h<;tg·: ~~ ~,t;clar7 ,a 1lock
out on October 30, 1990. The appellant also chargesheeted 29 workmen ,
E including respondents 3 to 14 herein on November 5, 1990 for various acts
of misconduct allegedly committed by them between ~eptemher 25, .1990
and October 29, 1990 when the workmen had resorte~ to go slow and other '-
alleged violent acts of misconduct.
;. . i I ..
. •1 The explanation given by 29 workmen having not been found satis-
F factory, the appellant. decided- to hold 'inquiry~ into' .-the ;charges inv61ved
against the said 29 workmen. Inquiries were conducted by the two 'tetired'.>'
District Judges and during the inquiries all the 29 workmen participated
in the inquiry proceedings which contii1ued froni .i'itnuary8,1991 to August
21, 1992.
')
d , On :October 31, 1990 the GovernmentI of Tamil f'Nadu intervened and
!~;:·-·f_' •,::,•,':J!': <. .1 ! p .t ·~ 1 I .J~. '_'r., '. '.; JI ·~( 1 , .. '~ I

imti~~e~. co.ncihation pr9,ce~dings to. bring, about s..ettlem,ent ,in_ !e&P.ect.
!t.""•,·.· 1 .,.~l•a.1 . .,.-.,.~.~ .• ·, (·,lt.H,l .• 1 • j,,l~ .• 0Ji·L+..01"t1
of
the pending dispqtes including lock out.. As no settlement could take .place
durii{g' concili~tiOn ~~~ceedings, .the Co~citi~tio~
·, ,lt' 1
L~\ !
Office~
~ ..
l,•jfj: .'!
submltt~d report:
I · ,• . J;,;f. ; i;._·· If ,I ; ~c I .~ i .i ·a· ·. 1

. J to t~~i !,\pptopr~ate q?v.ern~er-t '.op,. Amil 9,, .19~L On ¥,~y 7, .~9?1 .~~~.,
H Government of Tamil Nadu issued three different orders referring certain
KC.P·. LTD. v. PRESIDING OFFICER [S.B. MAJMlIDAR,J.] 153
, -
indu_strial disputes for adjudication. G.O. No. 485 was in respect of revision A
of scale of pay, revision of dearness allowance, revision of house rent
allowance etc. By G.O. No. 486 the Government of Tamil Nadu declined
to refer cer~in disputes .such ~as leave facility, housing scheme, medical
facilities etc. for adjudication. by giving.reasons in: the said G.O. No. 486.
The third G.O. ,No. 487 was issued under Section 10-B of the Industrial
B
Disputes -Act, 1947 (hereinafter referred to s 'the Act') . directing the
appellant to lift lock out on or before 13.5.1991 and allow all except 29 ·,
workmen to resume work. In the. said G.O. No. 487 the ·appellant was
directed to maintain status quo obtaining prior to the date of.the lock out.·•
in regard to the terms and conditions of service and the appellant was '"\

further directed to· complete inquiry proceedings against 29 workmen on c
or before 10.6.1991 a:hd: to pay 'them full wages during the' period- of
disciplinary proceedings. In the saio G.O. No. 487 the workmen •were·
directed to niallitain norinal'production ·which they whe giving prior to -the · !
date of the High Court order an'd also to maintain di~cipline in the-f~cf6ry.
: - i '
D
By August 19, 1991 inquiries' in respect of all the 29 workmen were
completed and on the basis of the findings by the Inquiry Officer and other
extenuating circllmstances, the 29 workmen were dismissed from service
betweellK 23.8."t991 to 1~16.1991.
. I

In a meeting held before the Joint Comll).issioner of Labour on E
October 4, 1991 between the appellant and the 2nd respondent, an agree-
ment was reached on the qua~tum of increase in wages: recoverable
advance and issue· of bonus for the years 1989-90 and 1990-91. It was
1
fur,ther agreed that th~ issue of 'nc)n-employment of 29· dismissed workmen
wouta be' discussed sepa~ately ·and on that basis all workin~n except the F
saia 29 workmin ~~eed to resume work in a phased manne~ _not later than
October 12, 1991 although the lock out was lifted on May 13, l991. - '·
1; ,,
Subsequer1tly, a settlemell.t was _arrived at between the appellant a¥d
the 2i;id responc1ent ~nder Section 12(~) of the Act wherein it was agreed G ' '
th~t the is~ue of, non;~mployment of 29 d_ismis&ed workmen w_ould _be .
discussedip. the. pr~ceeciip.gs to be initiated by the Joint Labour C::ommis-
sioner as ~arly as possible. T~e- J9int Labour Commissioner held m~etings,
bety.;een !~uary 8, 199~ and March 6, 19_9~ ap.d as no settlement coµld ,be,
reached report with regard to failure of t}ie conciliation proceedings '¥as 'l

submitted to the Government of Tamil Nadu which by order dated H
154 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

.A 13.5.1992 referred the issue of non-employment of 29 workmen for ad-
judication to the 1st respondent. The said reference was registered as l.D.
No. 708 of 1992 on the file of the 1st respondent.
~-
The said industrial dispute was referred for adjudication pursuant to
the demand espoused by all the workmen and raised by the 2nd respondent
B union under Section 2(k) of the Act. All the said 29 workmen who were
members of the union had also authorised the 2nd respondent to represent
them before the Conciliation Officer whereafter reference was made to the
1st respondent. None of the said 29 workmen raised industrial dispute in
their individual capacity under Section 2A of the Act.
c It appears that thereafter the appellant company on the one hand
and second respondent - union on the other held discussions regarding
non-employment of 29 workmen: Ultimately on 7th November, 1992 an
understanding was reached between the appellant and the 2nd respondent
- union that option would be given to the said 29 workmen either to accept
D reinstatement without backwages or a lumpsum amount of Rs. 75,000 with
other monetary benefit may be accepted by the concerned workmen:

Respondent Nos. 3 to 14 (in all 12 workmen) out of these 29
workmen did not accept the proposed settlement and accordingly ad-
dressed a letter to the Commissioner of Labour on 2nd December, 1992.
E Thereafter, the 2nd respondent entered into a settlement with the appellant
company under Section 18(i) of the Act on behalf of all the 29 workmen
whose industrial dispute with regard to non-employment was espoused and
raised by it under Section 2(k) of the Act. On 14th December, 1992 a
comprehensive settlement was arrived at and signed by the appellant and
F the 2nd respondent - union. Copies of the said settlement were also
forw2.rded to various authorities as contemplated under the provisions of
the Act and Ru'le thereunder.

A joint memorandum signed by respondent No. 2 and the appellant
company was filed before the Presiding Officer. First Additional Labour
G Court, Madras, respondent No. 1 herein, before whom the industrial
dispute was pending for adjudica!ion. It was requested that an award in
terms of the settlement may be passed in the pending industrial dispute
reference No. 708of1992. However, respondent No. 1, by his order dated
28th December, 1992 declined to make an award in terms of the settlement
H dated 14th December, 1992 on the ground that the respondent Nos. 3 to
K.C.P. LTD. v. PRESIDING OFFICER [S.B. MAJMUDAR,J.] 155

14 had not approved the settlement and therefore industrial dispute in A
respect of these respondents will continue and proceed further. It may be
stated that out of the 29 dismissed workmen in connection with .whose
dismissal, respondent No. 2 - union had raised the industrial dispute under
Section 2(k} of the Act., 17 workmen had already agreed to abide by the
terms of the settlement and had got reinstated in exercise of their option.
B
Only the remaining 12 dismissed workmen, respondent Nos. 3 to 14 herein.
proceeded with the dispute and did not agree to the terms of the settlement
even though admittedly they were members of the respondent No. 2 - union
who wa.s acting on their behalf and even till date they have continued to
be the members of the said union.
c
As the 1st respondent decided to continue the reference in connec-
tion with respondent Nos. 3 to 14, the appellant company filed Writ
Petition No. 611 of 1993 before the Madras High Court. As seen earlier,
the learned Single Judge by his Judgment and order dated 29th September.
1993 dismissed the said Writ petition. The appellant thereafter moved the D
Division Bench of the High Court in appeal which also got dismissed on
4th April, 1995 an"d that is how the appellant company has moved this
appeal on special leave.

Learned counsel for the appellant company vehemently submitted
that when respondent No. 2 - union had espoused the cause of all the 29 E
dismissed workmen, and the reference was got made by it under Section
2(k) of the Act, the union which represented all the workmen including the
dismissed respondents 3 to 14 was entitled to act on behalf of all of them
by way of collective bargaining and could legitimately enter into the settle-
ment which was for the benefit of all concerned workmen. Under these F
circumstances, individual workmen had no independent right to contest
their dismissal orders and were bound by the settlement which was not
shown by them to be in any way ex-facie, unfair or unjust; that it was a
package deal entered into by respondent No. 2 - union with the appellant
company and in such a collective industrial bargaining there was always G
give and take; that there were no exceptional grounds for rejecting such a
settlement which was for the benefit of all concerned workmen and the
Labour Court ought to have acted upon the same. Consequently, the order
of the Labour Court refusing to act upon the said settlement so far as
respondent Nos. 3 to 14 are concerned, was patently erroneous in law and
hence, the order of the learned Single Judge of the High Court confirming H
156 SUPREME COURT REPORTS [i996j SUPP: 6 S.C.R.

A such order of respondent No. 1 and 'further order of the Divisio~ B~~~hl
also equally suffered from pat~nt errors of l~~. ln ~~pport of thes~, sub~ ,
1
missions, various decisions of this Court' 'were 'died to which we wili r~fe~
1
. . ~-' ~ . :• . ' ( .,/ -. ; ~. . . u
a little later.

H Learned counsel fO'r· respondent Nos'. j to 14 ori' tlie ·otl~dr 'hand .
B submitted 'that though these respondents w~}e admittedly ·fhemBers ~f ! t~e L
respondiri(~ ufliort, tlief
haH acrept~d iilhgrms' th:e'!~eit16~eiit'ano 1 '
Ii.or of
the said s~ttlem~h.t '\v'as'Mt biAciing on'ihenr;' that iH;fa tt:l~b&'irmh1{t6 'tlie'
1

ie.l:rnb<l ·cc1unseVa0 at by'Ve~pOn'lterir N'<r2·,. ·uiiion
s1etttetneirt\Jas arrivea'
1

not on behalf of these contesting workmen'lhit only fck the 'iefuaffiing 17
C · ·workmen 1 i:_
who had ac:cept~d the settlemep.t by givirg it in wr,iting to the
' l· ,..., ·11,~rf ,'.Li·'J1i;i"' .. t·~,,~,.,.,. .. !1

Preside11t of respondent No, 2 · uniori. He also tried to suomit that in any
j~ >\• ' ' ll""'·I -'"! · !1• (}! Cl~· 1;~ ·l '·
I }..: !:,O

case, the settlement was ncit fafr 'and just as the workmen were: required to
givb 'up" all the bac.:k wages ~~eri tliough tngy were gi~~n r6instateinent with
·i.'• • ~
,·· I, !i 11'
1,. ~ '-,J~. ·J· •·f, i~",I,
,. '~ 1'1'1 ,,. 'i

continuity
'I 1 ·,
of service
-
and t:J:iey
j-',
were't farther' required
"·t~ (~ _f.1 i'
to givej a letter in
• fll\r/'~)~r f ' ·_ .

D t fwrj,tin~· t? the Manage~ent,~fat~~g t~?t .trey,_wa,u~~ ~~qujt themselves in an
orderly manner and would assure that they would not give a room for any
m1sc~n~uct and dis~l.plina~y acti6~ i~· It wa~'s'ubWiitted that under future:
these circumstances the contesting respondents were e~'titled to insist that ;·
their dispute should be adjudicated on merits by the Labour Court.
.,j:J•, •.1, ' t ,j •'lj • • (! ' .1 l '• I •' I

-' H:aiing given our aniious consideration to these rival submissiOris, we
E
find thafthe 'terink of th~ settlement cann6t be·considered to be' in any way·
1

ex~fdi:ie; tlnjbst .or unfair and that the'said 'settleili.ent 'consequently must b~ ·
held to be biu'Ciing dn thes.e contesting workmen a:lso. - ·. · '1' · ' · • .!
i '~: ; : 1j ! f i ,, ~. • ~: ' • ... . ' 1

·:It has to
be; I<ept in. ·view that the :industriai dispute was ta:is'ed 'Dy .
F respo'rident Nd. 2 ~ri Jnioii ·on behalf of all 'th-e· 29 ·wo~km:en· ·\vho were· ,
disinlsse·<l fioni service ~by 'the app~ltaiit" company: It \Jas an iiiaristrial' 7
dispute' as defined::by Sectioh.2.(k)·ofthe Act'taised by the uniotl:\)ii behalf·
of its n1embers. Respondent Nos. r3 tiV1:'4"were .at 'the, 'tekvaht tihl'e,;,•1
; 1members of the union and even till date they cciritinue 'to be t~e :members '
1

G ofthe sponsoring union. This was not ~a reference r~is~d'by a dis~issed.
employee as per·secti6n'2A. of tKe :Act. Conseque'ntly, ·as pe'r'Se~tfoii
{ · • 1 .. , · ~ , · • • · . • , i • '. ·u. -; j-.. .• -- ,_ -· . • , 1 , , 1
36
of .the Act, it was respondent No. 2 union which was. 'in charge of tlie
"~ • n Jii!·. ;,~-
-" I•. ·' :·-
·· Ur ·,l{ _;I "\
· 1 •• ·••. t'

procee<l,~gs_ari.d could repres~nt an the29,dismissed.workmen on whose .
l .... liJ. ~,, • , !"' •.••.' ! ; -. ·f~. r. ~~ 1·; '.I , ,~f.i 1 _, 1 rt;.J
H be~~l~l~~ 1 di~p)lte ~~~ rais>ed by ~tJYh~~ 1 fh~ said, 11ni9n}1a,yi11g; c9nsi?e~ed .
H the pros and cons of the situation, entered into the settlement on behalf of
I,
l(.C,P.LID.
•
v. PRESIDINGOFFICER[S.B.MAJMUDAR,J.J
,
157

~· <
all the workmen for whom it had taken cudgels unless the said settlement A
,~l , ' ,,, I ( ,

was found.to ex- facie, unjust or unfair it could not be gone behind by these
·respo~?ents who, can' ~e said to be parties t~ the same through their
representative union - respondent No. 2. In this connection a reference is
,also ~~q~ired to be made t.o Se,ction 18(1) of the Act which lays down as
under: B

"A settle~ent arriv~d at by agreement between the employer and
workman. otherwise than in the course of conciliation proceeding
shall be binding on. the parties to the agreement."

It is not in dispute that the settlement arrived at by respondent No. C
2 - union with the appellant company was not in the course of conciliation
proceedings. Therefore, it would' be binding to the parties to the agree-
ment, namely, the appellant company on the one hand and respondent No.
· 2 ~ union representing all the 29 dismissed employees, who were its
members and on whose behalf it had raisea the industrial dispute under D
Section·2(k) of the Act, on the other.
f~ I } ; ' f 1 l~ ' : · .!~

Section 2(p) of the Act .defines a settlement to mean a settlement
arrived at in the course of_ conciliation proceedings and includes a written
agreement between the employer and workmen arrived at otherwise than E
in the course of conciliation proceedings where such agreement has been
signed by the parties thereto in such manner as may be prescribed and a
copy thereof ha~ been. sent to an officer authorised in this behalf by the
appropriate, Government and the Conciliati9n Officer.
' I

It, is .. also ~o~ in dispute that parties to the settlement were the· t F
1.appellant conipany on th~ one hand and respondent No. 2 - . union on
tl}e. other,_ which acted_ on .qehalf of all .the 29. dismissed workmen for
.• ~horn refenmce,.w._a~ pending in the, I.abour C,qurt I_t was duly .signe,d by
both these parties. Under these circumstances, respondent Nos, 3 to 14
also would be ordinarily bound by this settlement entered into by their: ' G
r_epreseptath:'e.u11i911: ~ti! t~e compa!J,y it.is shown that the said settlement
was..: ex-facie, unfair,· ,unjust ·or malafide. No such case could .. be even
alleged ,much less,made.·out by the.dissent~ng respondent Nos. 3 tgi 14
before the..trial, court.. It is interesting to note. that.before the Labour
.·. CoutHhe,only argument put forward.on behalf of respondent Nos. 3 to·' H
158 SUPREME CoURT REPORTS [1996) SUPP. 6 S.C.R.

A 14 was that they were not parties to the settlement and therefore, it was
not binding on them. Once it is kept in view thii.t the entire industrial
dispute was raised by respondent No. 2 union on behalf of all the 29
dismissed workmen and as it was not an industrial dispute covered by
Section 2A whereunder individual dismissed workman could come in the
B arena of contest, it could not be held, as wrongly assumed by the Labour
Court that this settlement was not entered into •mder Section 18(1) of
the Act by these dissenting workmen when the respondent - union did
represent them from beginning to end and is still representing them as
they are members of the union even at present. In the case of Ram Prasad
C Vishwakanna v. The Chainnan, lndustlial Tlibzmal, [1961) 3 SCR 196 a
Bench of three Hon'ble Judges of this Court had an occasion to consider
the effect of a settlement entered into by the union of workmen which
had espoused the cause of its members by raising an industrial dispute
under Section 2(k) of the Act and the further question whether under
D these circumstances an individual workman had any independent locus
standi in proceedings before the reference court. Rejecting the contention
on behalf of the individual workman, it was observed by ·oas Gupta., J.
speaking for the Court that the concerned workman was not entitled to
separate representation when already represented by the Secretary of the
union which espoused his cause. A dispute between an individual
E workman and an employer cannot be an industrial dispute as defined in
Section 2(k) of the Act unless it is taken up by a union of ~orkmen or
by a considerable number of workmen. When an individu.al workman
becomes a party to a dispute under the Act he is a party, not inde-
pendently of the union which has espoused his cause. It was further
F observed that although no general rule can be laid down in the matter,
the ordinary rule should be that representation by an officer of the trade
union should continue throughout the proceedings in the absence of
exceptional circumstances justifying other representation of the workman
concerned.
G
It is true that the said decision was rendered prior to the insertion
of Section 2-A in the Act by which individual workmen were also given a
fight to raise industrial dispute in case of discharge, dismissal or retrench-
ment or otherwise termination of service. It is also true that the present
H controversy has arisen after the coming into operation of Section 2-A but
KC.P. LTD. v. PRESIDING OFFICER [S.B. MAIMUDAR,J.] 159

as noted earlier the industrial dispute raised for 29 dismissed workmen was A
raised by the union - respondent No. 2 under Section 2(k) of the Act and
there was no reference under Section 2-A of the Act, so far as respondent
nos. 3 to 14 are concerned.

In the case of Herbe1tsons Ltd. v. 771e Workmen of Herbensons Ltd.
and Ors., AIR (1977) SC 322 another Bench of three learned Judges of this
B
Court considered the effect of a settlement arrived at by recognised union
of majority of workers pending appeal to Supreme Court. It was observed
by Goswami, J., speaking for the Court that when a recognised union
negotiates with an employer the workers as individuals do not come into
the picture. It is not necessary that each individual worker should know the c
implications of the settlement since a recognised union, which is expected
to protect the legitimate interests of labour enters into a settlement in the
best interests of labour. This would be the normal rule. There may be
exceptional cases where there may be allegations of ma/a fides, fraud or
even corruption or other inducements. But in tl1e absence of such allega- D
tions a settlement in the course of collective bargaining is entitled to due
weight and consideration.

In connection with the justness and fairness of the settlement it was
observed that this has to be considered in the light of the conditions that
were in force at the time of the reference. When, therefore, negotiations
E
lake place which have to be encouraged. particularly between labour and
employer in the interest of industrial peace and well-being, there is always
give and take. The settlement has to be taken as a package deal and when
labour has gained in the matter of wages and if there is some reduction in
the matter of dearness allowance so far as the award is concerned, it cannot F
be said that the settlement as a whole is unfair and unjust. It was further
observed that it is not possible to scan the settlement in bits and pieces
and hold some parts good and acceptable and others bad. Unless it can be
demonstrated that the objectionable portion is such that it completely
outweights all the other advantages gained the Court will be slow to hold G
a settlement as unfair and unjust. The settlement has to be accepted or
rejected as a whole.

It has to be kept in view that under the Scheme of labour legislations
like the Act in the present case, collective bargaining and the principle of
industrial democracy t>ermiate the relations between the management on H
160

,A the one hand and the union which resorts.to collective bargaining on behalf
'6('it~' 1 fuembers- workmen ~ith 'thelUci~kaiJdierif'6n 'the' other. 'siich a
. ' 'tblle~tiv~' bargaining whlc;h inay result 1 i~' jtist 'all1d f~ir ''sbttl~m~n't would
1

· • •'f . r · ''' ' ' JI,.•
f ./ 1 ,I ~1
· ~ I /' ;" ·' 11 ., "r
7
•

always be beneficial to the managemenca:s well as to the oody of workmen
and society at large as there would b~ indtistri~l 'p'eace 'an~ ttlntjullity
1

B pursuant to such settlement a.nd; w~if~i~W~I.~. ~~.oi? ~1!:?e~~~s~~'Y social
strife and tribulation .
on the -one
, .·' ,!l
hand and promote
·~· ...-'1 l:;n;.,f~.i· '.:--~
industrial
It'\.·,~, _:nl1
and commer- .~r ~ 1. ·

cial development on tpe -~ther ~~!1~·, Keepmg m, .~ew ,t\le aforesaid salient
-,;i n. /,1) _ I, · ' . 10 JI t .
l' )a L J [_1(,.).I ·fl
features of the Act the settlement. whidi is sought to,oe impugned has to
be scanned and scrutinised: 's~itlg~enr ~f '1a~o tfr '<li~~utes 'by '<liiect
1

negotiation and collective bargaini'1,1g is1~l~ayi t~ ·be pref6rred 1t'ls' the for
c best guarantee of industrial peace' \Vhidl'is 'tl-i'e
·f. I ,.
aim
of aihegislatio~~ ,for
.
settlement of labour disputes. In order to bring about such a settlement
more easily and to make it more wci}k'able ·ifod effectiv~ ifni~y"riO't'be
always possible or necessary thgt\hcli\i· settlement 'is hrfi~e1d %'the at
course of conciliation proce~airibL~\thiCh ·m~y tie 'fhe first' step'lto~a~ds
1

D · 'r~solvlng the industrial llisp~tc: \~hitli _niaY. 1b'ti ·'lingering 'between , the
l : · • employers and theit workmen 'tepresenteU' oy th~ih.iriions but' even if· at
that stage: such settlement dJes ..Vat. thke ·pfaee a:iid 'the industrial disj>Ute
gets referred for adjudication, even pending such'disputes; the·par.ties fan
arrive at amicable settlement which may be binding to the parties to the
settlement unlike settlement l ~irived a'( Cluririg! !contili'ation pr'ohe~dings
E which may be binding not 6'nl)it~ 'the1 part'iesJt~· the shtt!ein'efit but' everi, to
the entire labour force working in th'e coli'cerned''6rgahisatfon even tliough
they may not be members of the uni6n' which might have entered into
settlement during conciliation proceedings. The differe1we between the _
l'f I f' '' ' .,. I• ,..f , '

settlement arrived at under the Act during conciliation proce·edings · by
F " parti~s and the settlement arr~~e~}t_'·o~~er~s(t~~n. :.~u,ri~g c?~'t~li~t.ion
proceedings has been succinctly br.ought ciut by the decision of thi's Court
in Barauni Refi1\J,!y 'Pragatisheel' slt'/aiiiik Palishad Etc. Et~. V. b;didn Oil
~ ~
, ! , . ~ ·, · ' · . , r ;
1, . '"" . . •.. .1 J J ir , 't
l •• • • .., ·1 1 L" .. · <I. 1

C01poi·dtion Ltd. ~tc. 'Etc.; [199~) 1 SCC, 4 wnerein Alimadi, J... (as His
·~~'·'· i· .......'.)· '1."; _J,.d'·•l··t: 4 ·ttt ~.J)')!;4-i:
1 ~ ... ·/· •-';,ri.·c~·o·1·~i1tJr~
Lordship then ~as) spoke for the Court to the followmg effect :
,~liL"'h?.1 f1;1"..> l: ft,.r;J ,·l,.iJ' .. , n1i(t1·1rJ ·:;·f{IL~l1• L·· (<J1; 1 ·d h.o11! t·;JJ.~lfr1.,,ra-;b
--QL!tui IJ! ·,J<1f..- · ·i !tf.t:t n ·,·; ) : i:i b·..;IHt. -1 ~"'-';.h--lrh~l:;t ... ;';HJ1 · ·..d~! t!h 1.;1l:H.1¥/J11"
1

L· :r1 D'.lfj'J'.; ..11 .~~yHl~m-.e1?-.~S W~1?Jyi~i9 i~~? s~o!~~!e~~~i~J" ,.ip~~lyJi) ,~h?se
arrived at outside the conciliation proceedin~~ [~E<'.ti~p. i}§~i))_ ~rd
(ii) those arrived at in the course of conciliation proceedings
~r;, ,; , .:. · , 1 .~S~c.:~k~~ l8(~)r A. set!Jt:~P~.1Y4~!~~·J?e~ongs;t~ .the;first,c:at~gory has
i, ; ·, lr, -.... , .Nn};it~~ 1 ~ppli~~~!9µ,in Jh~t it1 IJl_er~ly _b~n<!s thf .pjir~i~~ ~~- tl,t~, agr_ee-
i 1H~,, 1,r ,,, _,,pl~pt1 ~,Utra s~gtcnwJJ:.t,_~r.riveci at;jp, ,tJi~ .sou~~;i9f S9n~i!i_atipn
KC.P. LID. v. PRESIDING OFFICER [S.B. MAJMUDAR, J.] 161

proceedings with a recognised majority union has extended ap- A
plication as it will be binding on all workmen of the establishment,
even those who belong to the minority union which had objected
to the same. To that extent it departs from the ordinary law of
contract. The object obviously is to uphold the sanctity of settle-
ments reached with the active assistance of the Conciliation Officer
B
and to discourage an indiVidual employee or a minority union from
scuttling the settlement. There is an underlying assumption that a
settlement reached with the help of the Concilition Officer must
be fair and reasonable and can, therefore, safely be made binding
not only on the workmen belonging to the union signing the
settlement but also on the others. That is why a settlement arrived C
at in the course of conciliation proceedings is put on par with an
award made by an adjudicatory authority.'

As in the present case the settlement arrived at between the parties
was not during conciliation proceedings, it would remain binding to parties D
to the settlement as per Section 18(1) of the Act. But as we have seen
above, respondent No. 2 union while entering into that settlement acted on
behalf of all the 29 dismissed workmen who were its members including
the present respondent nos. 3 to 14 who are also its members as noted
earlier. We have also seen earlier that the Labour Court had erred in taking E
the view that respondents 3 to 14 were not parties to the said settlement
as individually they had no locus standi and they were represented by their
union respondent no. 2 which had signed the settlement on behalf of its
members for whom the dispute was raised by the union. Nothing could be
alleged by respondents 3 to 14 to the effect that the said settlement was in
any way unjust or unfair or was a ma/a fide one. There were no exceptional
F
circumstances to reject this settlement qua even the contesting respon-
dents. However, as learned counsel for the respondent-workmen tried to
faintly suggest to that effect we have carefully gone through the circumstan-
ces which are brought on record which had led to the settlement. It may
be noted that about 500 workmen had gone on strike and that had resulted G
in the lock-out by the appellant company and ultimately disciplinary action
was initiated against 29 workmen who had indulged into various acts of
misconduct. It is for these 29 workmen who were ultimately dismissed from
service that the respondent-union had raised a dispute under Section 2(k)
of the Act on their behalf. Earlier the remaining workmen had gone on H
162 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A strike for nearly 5 months Ultimately. the strike was withdrawn; lock-out
was lifted and broad understanding was reached between the appellant
company and the workmen represented by their union whereby it was
agreed that 29 workmen, who were dismissed, would be either given Rs.
75,000 as compensation or reinstatement with continuity of service without
B back wages and the concerned workmen should express apology for mis-
conduct and also assure good conduct in future.

Out of 29 workmen for whom the industrial dispute was raised 17
workmen agreed and accepted this settlement and joined the service
C Remaining 12 workmen (respondent Nos, 3 to 14) have not agreed to the
said settlement. It is under these circumstances that the settlement arrived
at by the union on behalf of all of them has to be scrutinised. It has clearly
transpired on the record of this case that all the 500 workmen excluding
29 dismissed workmen had espoused the cause of these dismissed workmen
and had struck the work. Ultimately, when they were reinstated in service
D leaving aside the 29 workmen for whom industrial dispute lingered on, all
the remaining workmen lost their wages from_20.10.1990 to 12.5.1991 and
also from 13.5.1991 to 6.10.1991. They lost their wages because they were
expressing sympathy for their 29 colleagues who were facing disciplinary
action and even for these 29 workmen respondent no. 2 union entered into
E a settlement so that they could be reinstated in service with continuity of
service or could walk out from service with Rs. 75,000 and other monetary
benefits. All that was agreed to by the union as a condition for reinstate-
ment was that the workmen would give up back wages and had to sign a
written undertaking to behave properly in future. In our view there was
F nothing unreasonable or unfair in these terms of settlement. The relief of
reinstatement without back wages could not be said to be unreasonable as
for nearly 12 months all the other workmen lost their back wages only
because they supported the cause of these 29 colleagues of theirs and hence
there was no reason why the workmen who indulged in the acts of miscon-
duct and who were also to be taken in service should not lose their wages
G for 12 months. Relief of reinstatement was made available to respondents
3 to 14 on the same line as it was made available to their 17 remaining
colleagues who were covered by the very same settlement and who ac-
cepted the relief of settlement without back wages or a lumpsum compen-
sation of Rs. 75,000 and other monetary benefits in lieu of that. In our view
H such a package deal entered into by respondent no. 2 in the best interest
K.C.P.LTD. v. PRESIDINGOFFICER(S.B.MAJMUDAR,J.] 163

of these workmen could not be said to be unfair or unjust from any angle. A
On the contrary, it the back wages were given to them, then the remaining
workmen against whom there was no disciplinary action or any alleged
misconduct and who had also lost wages for 12 months only because they
were in sympathy with these 29 dismissed workmen would have stood
discriminated against. Consequently, it is not possible to agree with the B
learned counsel for respondent nos. 3 to 14 that the said settlement was in
any way unfair or unjust. Once this conclusion is reached it is obvious that
the entire industrial dispute should have been disposed of in the light of
this settlement and an award in terms of the settlement should have been
passed by the first respondent-court in the case of respondents 3 to 14 also.
Consequently, the judgment and order of the Division Bench of the High C
Court dated 4th April, 1995 and the order of learned Single Judge dated
29th September, 1993 are quashed and set aside. The writ petition filed by
the appellant company will stand allowed with a direction to the first
respondent-Labour Court to pass award in terms of the settlement dated
14th December, 1992 by treating it to be binding to respondent nos. 3 to D
14 also.

Learned counsel for these respondents ultimately submitted that the
time during which the concerned workmen had to exercise their option as
per the terms of the settlement is now over and the appellant company may
not make available the said option to them. His apprehension on behalf of E
the respondents was set at rest by learned counsel for the appellant
company who stated that the appellant company is·willing to make available
the option to these respondent nos. 3 to 14 to either accept reinstatement
with continuity of service without back wages on their executing the writing
as per the said settlement or to be paid Rs. 75,000 each in addition to F
gratuity as per the payment of Gratuity Act, wages for unavailed leave and
bonus, if any payable.

In view of this fair stand taken by the appellant company it is directed
that if the respondent nos. 3 to 14 exercise their option as per the proce- G
dure laid down in the settlement dated 14th December 1992 either to get
reinstatement without back wages for the period of non-employment and
· with continuity of service or to accept a lumpsum monetary compensation
as laid down in the settlement within a period of 8 weeks from today, the
appellant company will ad upon the said option exercised by th~ said
workmen and shall give appropriate benefit of the option as per the H
164 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A settlement to the concerned workmen. As the period of lumpsum payment
of Rs. 75,000 by instalments (as laid down by the settlement) is already
over, it is directed that if any of the concerned workmen-respondents 3 to
14 exercises the option of receiving the lumpsum arnoun: of Rs. 75,000 in
lieu of the reinstatement, a sum of Rs. 40,000 out of the said amount shall
be paid to the concerned workmen within 15 days of the exercises of su<;:h
B
option and the balance of the Rs. 35,000 with other monetary benefits as
indicated in the settlement shall be paid to the concerned workmen within
a further period of 2 months thereafter.

The appeal is allowed in the aforesaid terms. In the facts and
C circumstances of the case, there shall be no order as to costs.

v.s.s . Appeal allowed.

•
AKHIL BHARTIYA SOSHIT KARAMCHARI SANGH, A
THROUGH ITS SECRETARY AND ANR.
v.
UNION OF INDIA THROUGH ITS SECRETARY,
MINISTRY OF RAILWAYS AND ORS.
B
SEPTEMBER 12, 1996

(K. RAMASWAMY AND G.B. PAITANAIK, JJ.]

'
Se1Vice Law :
c
Seniority-By tlze time a se11ior perso11 belo11gi11g to the general categ01y
gets promoted to the higher grade if the junior perso11 belo11ging to a rese1ved
categ01y who had been promoted to still higher grade-Question of granti11g
seniority to the general category ca11didate i11 the promoted category could
11ot aris~Roster 111ea11t for rese1Ved category candidate followed-No barfor D
filling up vacancies in the ge11eral categ01y even i11 favour of candidate
belonging to rese1ved catego1y if such ca11didate is entitled to the same on the
basis of his ge11eral seniority.

R.K. Sabha1wal & Ors. v. State of Punjab & Ors., [1995) 2 SCC 745;
Union of India & Ors. v. Vi1pal Singh Clzauhan & Ors., [1995) 6 SCC 684; E
Ma11agi11g Director EC/ Hyderabad & Ors. v. B. Kanmakar & Ors., [1993) 4
SCC 727; U11ion of India v. Mohd: Ramzan Khan, [1991) 1 SCC 580; Indian
Administrative Se1Vice (S.C.S.) v. Union of India & Ors., [1993) Supp. l SCC
730; Mohd. Slmjat Ali & Ors. v. Union of India & Ors., [1975) 1 SCR 449;
Mohd. Bhakar v. Krishna Reddy, (1970) SLR 768; State of Mysore v. G.B.
Purohit, (1967) SLR 753); Ramchandra Shankar Deodhar v. State of F
Maharashtra, [1974) 1 SCC 317 and Syed Khalid Rizvi & Ors. v. Union of
India & Ors., [1993] Supp. 3 SCC 575, relied on.

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
No. 16812 of 1996 G
• From the Judgment and Order dated 30.4.96 of the Central Ad-
ministrative Tribunal, Allahabad Bench in O.A. No. 304 of of 1992.

Rajeev Dhawan, Manoj Goel and Ms. Abha R. Sharma for the
Petitioners. H
165
166 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A The following Order of the Court was delivered :

G.B. PATIANAIK, J. Special Leave Petition was listed before us on
6th September, 1996 and the same was dismissed but it was indicated that
the reasoned order will follow and accordingly this order is being passed.
B ''
The question for consideration is whether the Central Administrative
Tribunal, Allahabad Bench, committed any error in dismissing the O.As.
filed before it on interpretation of the different circulars issued by the
Railways and following the constitution Bench decision of this Court in
R.K Sabh01wal's & Ors. v. State of Punjab & Ors., (1995) 2 SCC 745, on the
c question of promotion of a reserved category candidate on the basis of his
normal seniority in the cadre from which he is being promoted.

Petitioner Nos. 1 and 2 filed O.A. No. 304 of 1992 challenging the
promotion of Shri A.S. Rana, respondent No. 6 to the post of D.S.K.-1
D made on 26.2.1991. The case of the petitioners was that petitioner No. 2
joined the Railways as a Jr. Clerk on 4.12.1956 and was promoted as Sr.
Clerk on 1.4.1966. He was promoted to D.S.K.-III on 16.10.1978 and
further promoted to D.S.K.-11 on 24.3.1989. The respondent No. 6 belong-
ing to the reserved category was appointed in the Railways as Jr. Clerk on
30.10.1983 and was promoted as Sr. Clerk on 16.8.1984. He was promoted
E as D.S.K.-III on 26.11.1986. The said respondent No. 6 was promoted
earlier to petitioner No. 2 to the cadre of D.S.K.-11 on 8.10.1987, in view
of the post available in the cadre of D.S.K.- II for the reserve category
people. When the question of promotion to cadre of D.S.K.-1 came up for
consideration against the vacancies meant for general category said respon-
F dent No. 6 Shri Rana was promoted on 26.2.1991 on the basis of his
accelerated seniority, he having taken advantage of accelerated promotion
being a member of the reserved category. The petitioner No. 2 filed a
representation before the authorities making the grievance·that respondent ·
No. 6 could not have been promoted to a post meant for general category
and the authorities illegally promoted him. but not being successful therein,
G challenged the promotion of respondent No. 6 before the Tribunal. The
railway administration filed their counter-affidavit before the Tribpnal ·
taking several technical objections regarding the maintainability of the
proceedings at the behest of the association. So far as the merits of the
case are concerned, it was contended that no doubt respondent No. 6 had
H been promoted to the cadre of D.S.K.- III and D.S.K.-11 against the
AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.O.I. 167

reserved vacancy following the roster but so far as promotion to the cadre A
of D.S.K.-1 is concerned he was considered against a vacant post in the
general category on the basis of his normal seniority and ultimately he has .
been promoted in accordance with the circulars issued by the railway
administration and in accordance with the law laid down by this Court in
SabhalWal's case (supra). The Tribunal following the decisions of this
B
Court in Sabha1Wal's case as well as Virpal Singh Chauhan's case rejected
the application on the conclusion that the alleged promotion of respondent
No. 6 was much prior to the decision of this Court in SabhalWal's case in
the year 1995 and promotion already made cannot be interfered.

Dr. Rajiv Dhawan appearing for the petitioners, however, vehement- C
ly contended that the accelerated promotion of a reserve category can-
didate cannot confer on him the seniority in the promotion cadre and
therefore the impugned promotion of respondent No. 6 made in February,
1991 to the cadre of D.S.K.-1 must be held to be invalid and inoperative
and Tribunal committed gross error in rejecting the O.A. We find no force D
in the aforesaid contention. In Sabha1Wal's case this Court was considering
the question of promotion and the filling up of the post in the promoted
cadre and the implementation of the rosters indicating the reserved point.
In explaining legal position this Court held that the "running account" is to
operate only till the quota provided under the impugned instructions is
reached and not thereafter. The vacancies arising in the cadre, after the E
initial posts are filled, will pose no difficulty. As and when there is a
vacancy whether permanent or temporary in a particular post the same has
to be filled from amongst the category to which the post belonged in the
roster but in the event or non-availability of a reserve candidate at the
roster point it would be open to the State Government to carry forward F
the point in a just and fair manner. Having indicated the law as above it
was categorically held that the principle should operate only prospectively.
In further elaborating the point of computation of the percentage of
reservation this Court further held :

"When a percentage of reservation is fixed in respect of a particular G
cadre and the roster indicates the reserve points, it has to be taken
that the posts shown at the reserve points are to be filled from
amongst the members of reserved categories and the candidates
belonging to the general category are not entitled to be considered
for the reserved posts. On the other hand the reserved category ' H
168 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A candidates can compete for the non-reserve posts and in the event
of their appointment to the said posts their number cannot be
added and taken into consideration for working out the percentage
of reservation. Article 16(4) of the Constitution of India permits
the State Government to make any provision for the reservation
of appointments or posts in favour of any Backward Class of
B citizens which, in the opinion of the State is not adequately repre-
sented in the Services under the State. It is, therefore, incumbent
on the State Government to reach a conclusion that the Backward
Class/Classes for which the reservation is made is not adequat~ly
represented in the State Services. While doing so the State Govern-
c ment may take the total population of a particular Backward Class
and its representation in the State Services. When the State
Government after doing the necessary exercise makes the reserva-
tion and provides the extent of percentage of posts to be reserved
for the said Backward Class then the percentage has to be followed
strictly. The prescribed percentage cannot be varied or changed
D
simply because some of the members of the Backward Class have
already been appointed/promoted against the general seats. As
mentioned above the roster point which is reserved for a Backward
Class has to be filled by way of appointment/promotion of the
member of the said class. No general category candidate can be 1..

E appointed against a slot in the roster which is reserved for the
Backward Class. The fact that considerable number of members
of a Backward Class have been appointed/promoted against
general seats in the State Services may be a relevant factor for the
State Government to review the question of continuing reservation
F for the said class but so long as the instructions/rules providing
certain percentage of reservations for the Backward Classes are
operative the same have to he followed. Despite any number of
appointees/promotees belonging to the Backward Classes against
the general category posts the given percentage has to be provided
in addition."
G
In the case of Union of India & Ors. v. Virpal Singh Chauhan & Ors.,
[1995] 6 SCC 684, this Court again considered the case of accelerated
promotion and inter se seniority between a general and reserve candidate
in the promoted category and after considering the several circulars issued
H by the railway administration, held :
AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.0.1. 169

"Hence, the seniority between the reserved category candidates A
and general candidates in the promoted category shall continue to
be governed by their panel position. We have discussed herein-
before the meaning of the expression 'panel' and held that in case
of non-selection posts, no 'panel' is prepared of or is necessary to
be prepared. If so, the question arises, what did the circular/letter
B
dated 31.8.1982 mean when it spoke of seniority being governed
by the panel position? In our opinion, it should mean the panel
prepared by the selecting authority at the time of selection for
Grade 'C'. It is the seniority in this panel which must be reflected
in each of the higher grades. This means that while the rule of
reservation gives accelerated promotion, it does not give the ac- c
celerated - or what may be called, the consequential - seniority.
There is, however, orie situation where this rule my not have any
practical relevance. In a given case, it may happen that by the time
the senior general candidate gets prompted to the higher grade,
the junior reserved category candidate (who was promoted to the D
said higher grade earlier) may have got promoted to yet higher
grade. In other words, by the time the senior general category
candidates enters, say, Grade 'B', his junior Scheduled
Caste/Scheduled Tribe candidate is promoted to Grade 'A'. It is
obvious that in such a case, the rule evolved in the aforesaid
circulars does not avail the senior general candidate for there can E
be no question of any seniority as between, say, a person in 'B'
grade and a person in 'A' grade."

This Court in Chauhan's case accepted the direction in Sabh01wal's
case that appointments according to roster already made prior to the F
judgment in Sabh01wal's case are legal and valid. In effect, they were
declared legal and valid and direction was given to determine seniority in
the light of the principles laid down therein. It was held that when the
panel/select list was prepared at the time of making selections for promo-
tion to the selection post it would be that panel and not the panel/select
list prepared at the time of appointment to the initial grade that would G
determine the seniority to the posts. It would obviously apply to future case
in accordance with the rule, the subject matter of the interpretation in the
judgment in Chauhan 's case. Therefore, the two judgment became effective
from the date of the decision in Sabh01wal's case. All appointments made
prior to that date being legal and valid including right to seniority in H
170 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A promoted post or cadre, they require to be given effect to.

In Managing Direct01; ECIL, Hyderabad & Ors. v. B. Kanmakar &
Ors., [1993] 4 SCC 727 the Constitution Bench considered the scope of
prospective operation of the judgment and held that as on the date of the
judgment the order of dismissal or action taken prior to the date of the
B judgment, as held in Union of India v. Mohd. Ramzan Khan, [1991] 1 SCC
580 could not be reopened. The Judgment will be prospective in nature,
i.e., it will be operative from the date when it is made; if the copy of the
enquiry was not supplied to the delinquent officer, from that date the order
or action would get vitiated under Article 311(2) of the Constitution.
c
In Indian Administrative Service (S.C.S.) v. Union of India & Ors.,
[1993] Supp. 1 SCC 730 at 745-46 in paragraph 14 and 15, a Bench of three
Judges had held that there is a distinction between right and interest. No
one has a vested right to promotion or seniority, but an officer has an
D interest to seniority acquired by working out the rules. It could be taken
away only by operation of.valid law.

In Mohd. Shujat Ali & Ors. v. Union of India & Ors., (1975] 1 SCR
449 a Constitution Bench had held a rule which confas a right of actual
promotion or a right to be considered for promotion, is a rule prescribing
E condition of the service. Another Constitution Bench in Mohd. Bhakar v.
Klishna Reddy, (1970) SLR 768 had held that any rule which affects the
promotion of a person relates to his condition "Of service and is not arbitrary
or unconstitutional. In State of Mysore v. G.B. Purohit, (1967) SLR 753,
another Bench of three Judges had held that the rule which merely affects
F chances of promotion cannot he regarded as varying a condition of service.
Chances of promotion are not condition of service, which principle was
reiter:ited in another Constitution Bench judgement in Ramchandra
Shankar Deodhar v. State of Maharashtra, (1974] 1 SCC 317. In Syed Khalid
Rizvi & Ors. v. Union of India & Ors., (1993] Supp. 3 SCC 575, another
Bench of three Judges referred with approval and relied on these cases
G and had held in para 31 at page 602 that no employee has a right to
promotion but he has only the right to be considered for promotion
according to rules. Chances of promotion are not conditions of service and
are defeasible. An illustration was given as regards the inter se claim
between general candidate and a reserved candidate and their right to
H seniority in the promotional post. When a reserved candidate was
AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.O.l. 171

promoted according to the roster and got promotion to a higher post, it A
was observed that such a reserved candidate having scaled a march over
the senior general candidate to higher service, the senior general candidate
in the lower cadre who was subsequently promoted to the higher cadre
cannot claim seniority over the reserved candidate.

In P.S. Ghalaut v. State of Haryana & Ors., (1995] 5 SCC 625, a Bench
B
of two Judges has held that in fixing inter se seniority as per the roster,
order of merit prepared by the Public Service Commission gets displaced
and the reserved candidate gets seniority over the general candidate in
accordance with the roster, though the general candidate has been recom-
mended by the Public Service Commission to be more meritorious. It was C
held that when the roster is maintained to give effect to the constitutional
policy of reservation in respect of places reserved for reserved candidates
and fitted the general candidates and reserved candidates according to
roster, the changed order of merit invariably gets affected which is not
arbitrary or unconstitutional.
D
Thus by the time a senior person belonging to the general category
gets promoted to the higher grade if the junior person belonging to a
reserved category who had been pr.omokd to the said higher grade earlier
has been promoted to still higher grade, question of granting seniority to
the general category candidate in the promoted category could not arise. E
This being the position, and the promotion of respondent No. 6 to D.S.K.-1
having been made as early as in February, 1991 much prior to the judgment
of this Court in Sabharwal's case as well as Vbpal Singh Chauhan's case,
the Tribunal was wholly justified in rejecting the O.A. filed before it. That
apart in a particular cadre after following the roster meant for reserved F
category candidate, there is absolutely no bar for filling up the vacancies
in the general category even in favour of candidate belonging to the
reserved category if the said reserved category candidate is entitled to the
same on the basis of his general seniority, No materials have been placed
before us to hold that the promotion of respondent No 6 was not on the
basis of his general seniority in D.S.K.-11. In the aforesaid premises, we find G
no substance in the contention of Dr. Rajiv Dhawan and the special leave
petition must fail.

G.N. Petition dismissed.
A GAJRAJ SINGH ETC.
v.
STATE TRANSPORT APPELLATE TRIBUNAL AND ORS. ETC.

SEPTEMBER 12, 1996

B [K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.]

Motor Vehicles Act, 1988: Sections 217(2)(a) & (b) and (4), and 70,
72 and 81.

C Stage caniage pennit-Granted under repealed Act of 1939-Pennit
valid till commencement of new Act-Pennit renewed under new Act which
came into force on 1.7.1989-Validity of-Saving under S.217(2)(a) or
(b )--<:onditions precedent for applicability of-Held : grant of pennit under
new Act not a vested or accrl(ed right but only a p1ivilege-Provisions of
repealed Act inconsistent with those of new Act as regards renewal-Hence,
D S.217(2)(a) or (b) not attracted-Pennit granted under repealed Act stood
expired on 1. 7.1989 unless application for renewal pending under S.58 of
repealed Act-If no application was pending fresh application must be made
under S.70 of new Act for grant of pennit-S.6 of General Clauses Act
applicable. ·
E
Stage Caniage Pemzit-Renewal-Grant of-Nature-Explained.

Stage Caniage Pennit-Sclzeme approved and published under Chapter
IV-A of repealed Act of 1939-Such pennits held by named private
operators-Scheme continued after commencement of new Act on
F 1.7.1989-Held: Scheme was self-contained and self-operative and law by
itself and saved by S.217(2)(a)-Rights of such named private operators alone
for grant or renewal of their pennits preserved-Such a right was not violative
of Art. 14 on ground of invidious discrimination-Procedure for grant or
renewal of pennit laid down-Motor Vehicles Act, 1939, Ss.68-F(l-D) &
G 68-F( 1-F).

General Clauses Act, 1897 : Section 6.

Repeal of Act-Effect of-Held : Obliterated the Act completely from
record of Parliament as if it never existed except for transactions past and
H closed.
172
GATRAJ SINGH v. STATE 173

Repeal of Act-Followed simultaneously by fresh legislation on same A
subject-Held : S.6 would be applicable unless new legislation manifested
contrmy or inconsistell( intention-Hence, Court had to ascerlain such incom-
patibility from relevant p01tions of new Act.

Inte1pretation of Statutes :
B
Interpretation-Subsidiary' rnles of-Legal fiction-Meaning and effect
of-Explained.

Administrative Law :

Repealed Act-Right acquired or accrued unde,-..Per-
c
mit/licence-Grant of renewal of-Held: amounted to fresh grant-Discretion
given by Statute-To be exercised on basis of rules of reason and justice and
not arbitr01ily-Subject to rejection of application for renewal for reasons to
be recorded-Hence, right to renewal of pennit was not a vested or accrued
right but only a privilege-General Clauses Act, 1897, S.6(c). D

The appellant was granted a stage carriage permit on the route
under Section 47(3) of the Motor Vehicles Act, 1939 (Repealed Act) for a
period of 3 years. The said permit was renewed under Section 81 of the
Motor Vehicles Act, 1988 (which came into force on 1.7.1989) for a further E
period of 5 years and a second renewal was also granted. The respondents
bad applied under Section 70 of the Act for· grant of stage carriage permits
under Section 72 of the Act on the' route which intersected a part of the
route on which the appellant was operating his stage carriage. Despite
objections raised by the appellant, the State transport Authority (STA)
granted permits to them which were challenged in the revision petition F
filed under Section 90 of the Act before the State Transport Appellate
Tribunal (STAT). The STAT dismissed the revision petition on the ground
that the renewal of the permit granted to the appellant was not valid in
law as the appellant did not get a new permit under the Act. The High
Court dismissed the writ petition filed by the appellant. Hence this appeal. G

On behalf of the appellant it was contended that the renewal of the
permit of the appellant granted under the Repealed Act was a permit
under the Act and its operation was saved by Section 217(2)(a) read with
sub-section (4) thereof and Section 6 of the General Clauses Act, 1897;
therefore, the second renewal of the permit granted under Section 81 of H

'
174 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the Act which was renewable under Section 68-F(l-D) of Chapter IV-A Qf ,
the Repealed Act was valid in law; that there was no need for the appellant
to obtain a fresh permit under the Act as the renewal was a continuation
of the original permit which was a vested right; that Section 217(2)(b) of
the Act would be applicable only if the permit was inconsistent with the
provisions of the Act in which case the life of the permit granted under the
B Repealed Act got extended for the balance period of the permit; and that
since the appellant was not paid compensation, he was entitled to renewal
of permits as a matter of right.

On behalf of the respondents it was contended that the scheme of
C the Act was inconsistent with the scheme of operation in the Repealed Act;
that the STA or the Regional Transport Authority as the case may be,
would be devoid of power and jurisdiction to grant permit under the act;
that under Section 217(2)(b) of the Act the permit was valid only for the
unexpired period granted under the Repealed Act; that between the dates .
of application for permit and its grant the Act provided for grant of
D temporary permits; that any grant of permit should only be consistent with
the provisions of the Act; and that the Repealed Act continued to remain
in operation in spite of its express repeal by Section 217(1) of the Act.

Disposing of the appeal, this Court
E HELD: 1.1. Ex abundenti cautela clauses (a) to (e) of Section 217(2)
of the Motor Vehicles Act, 1988 elaborate the enumeration of rights. They
would apply to specific rights given to an individual upon· the happening
of one or other of the events specified in the statute. Section 217(2)(a) of
the Act gives an elongated operation as regards all transactions, which
F being consistent with the provisions of the Act should be deemed to have
been issued, made, granted, done or taken under the corresponding
provisions of the Act. [198-C-D] ·

1.2. By operation of Section 217(4) of the Act read with Section
217(2), Section 6 of the General Clauses Act, 1897 (GC Act) steps in and
G the proceedings initiated before Motor Vehicles Act, 1939 (the Repealed
Act) was repealed, would be continued and concluded under the Act as if
the Act was not enacted. However, four things would emerge from its
operation. First there must exist a corresponding provision under the Act
pari materia with the Repealed Act; secondly, that the order or permit
H granted must exist and be in operation as on 1.7.1989-the day on which

·-
GAJRAJ SINGHv. STATE 175

the Act had come into force; thirdly, it must not be inconsistent with the A
provisions of the Act; and fourthly some positive acts should have been
done before 1.7.1989 to further secure any right. All the four conditions
should be satisfied as conditions precedent for application of Section 6 of
the GC Act by operation of Section 217(4) and then Section 217(2)(a) steps
in and starts operation thereof. (199-B-G]
B
1.3. This may be angulated from yet another legal perspective, name-
ly, consequences that would flow from the meaning of the word 'renewal'
of a permit under Section 81 of the Act. Grant of renewal is a fresh grant
though it breaths life into the operation of the previous lease or licence
granted as per existing appropriate provisions of the Act, rules of orders C
or acts intra vires or as per the law in operation as on the date of renewal.
Grant of renewal under Section 81 is a discretion given to the State
Transport Authority (STA) or Regional Transport Authority (RTA) sub·
ject to the conditions and the requirement of law. Discretion given by a
statute connotes making a choice between competing considerations ac·
cording to rules of reason and justice and not arbitrary or whim but legal D
and regular. Sections 70 and 71 read with Section 81 of the Act do indicate
that grant of permit or renewal thereof is not a matter of right or course.
It is subject of rejection for reasons to be recorded in support thereof.
Therefore, right to renewal of a permit under Section 81 is not a vested or
accrued right but a privilege to get renewal according to law in operation E
and after compliance with the pre-conditions and abiding the law. There
is a distinction between right acquired or accrued, and privilege, hope and
expectation to get a right. A right to apply for renewal and to get a
favourable order would not be deemed to be a right accrued unless some
positive acts are done, before repeal of the Repealed Act or corresponding
law to secure that right of renewal. (199-H; 200-E-H]
F

Provash Chandra Dalui & Anr. v. Bishwanath Banerjee & Anr., (1989]
Supp. 1. SCC 487; Ambika Quarry Works v. State of Gujarat, (1987] 1 SCC
213; Rural Litigation and Entitlement Kendra v. State of U.P., [1989] Supp.
1 SCC 504; State of M.P. & Ors. v. Krishnadas Tikaram, [1995] Supp. 1 SCC G
587 and Gujarat Electricity Board v. Shanti/al, AIR (1969) SC 239 relied on.

Black's Law Dictionary, p.1296 and P. Ramanatha Aiyar's "The Law
Lexicon" (Reprint Edition 1987), referred to.

2.1. If no action under the Repealed Act was set in motion before H
176 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 1.7.1989, by valid application for renewal of a permit, there was no right ·
acquired or accrued to pursue the remedy untler the Act. The privilege to
obtain renewal of a permit is not an accrued right. Section 58(2) of the
Repealed Act gives, as stated supra, preferential right to a holder of a
permit for renewal thereof. Section 71 of the Act gives preferential right in
B favour of State Transport Undertaking (STU) for grant of permit in
Chapter V which is not available under the Repealed Act. Therefore, even
for grant of a permit or a renewal under Section 72 or 81, the STU is
entitled to preferential right over the private citizens .. Thereby, the Act
manifests intention inconsistent with and incompatible to that in Chapter
IV of the Repealed Act. Similarly, even on the approved routes under a
c Scheme framed in Chapter IV-A, an execution has been carved out in the
scheme with a non-obstante clause in favour of STU, which is a self-opera-
tive law by itself. The rights of the existing operators for renewal thereof ,
under Section 68F(ID) under the Repealed Act were saved. But, under the
Act, Chapter VI does not speak of renewal of the permits to the private
D operators, though permits were saved in the scheme itself. Chapter VI
manifested inconsistency in its operation from the law in Chapter IVA of
the Repealed Act. Similarly, other provisions are inconsistent with those
in the Repealed Act. Therefore, Section 217(2)(a) would not get attracted,
even if it were to apply to grant of permit being a "thing done" as contended
E by the appellant. Let it be said that a permit is preceded by an order
granting permit by the concerned RTA or STA, as the case may be, under
the Repealed Act. The said order stands merged with the grant of permit
and gets exhausted. [202-C-H]

p 2.2. By operations of Section 217(2)(b) of the Act a permit granted
under the Repealed Act shall continue to have the same operation under
the Act under the same terms and conditions and for the same period, as
if the Repealed Act was in operation and as if the Act had not been passed.
This is the fiction of law by which, though the Repealed Act was wiped out,
its operation gets revived. The intention, thereby, appears to be that the
G Act breaths life into the dead permits etc •. and allows full play to the
permits granted under the Repealed Act, even if inconsistent, till their ·
period expired by eftlux of time. Any other view would tantamount to
allowing the Repealed Act to remain in operation in perpetuity simul-
taneously with the operation of the Act. Both cannot co-exist in the same
H shelter. [203-A]
GAJRAJ SINGH v. STATF 177

State of Punjab v. Mohar Singh, (1955] 1 SCR 893 and Universal A
Imp01ts Agency & Anr. v. The Chief Controller of Imports and Exports & Ors.,
[1961) 1 SCR 305, held inapplicable.

D. Nataraja Mudaliar v. The State Transport Auth01ity, Madras, [1978]
4 sec 290, referred to.
B
2.3. It must, therefore, be held that grant of renewal of the stage
carriage permit should necessarily be preceded by a grant of a permit to
stage carriage under Section 72, in accordance with the procedure laid
down in Sections 70 and 71. This should be made before the expiry of the
period prescribed in the permit granted under the Repealed act. Therefore, C
for stage carriage permits granted under Chapter IV of the Repealed Act,
if they stand to expire or expired after 1-7-1989 without any pending ap-
plication for renewal having been made under Section 58 as on 1-7-1989,
fresh applications under Section 70 should be filed and after consideration
under Section 71, permits be obtained as per law under Section 72. If there
is any delay to obtain permits pending consideration, by operation of D
providing stage carriage service, Section 87 gives power to grant temporary
permit without following the procedure laid down in Section 70. The argu-
ment of arbitrariness, discrimination or avoidable inconvenience to the
holders of permits etc. under the Repealed Act and to the travelling public
would be hypothetical and without force. [203-H; 204-A-D] E

Mithilesh Garg & Ors. v. Union of India & Ors., [1992] 1 SCC 168,
relied on.

3.1. Section 68F (lD) and Section 68F (lF) of the Repealed Act had
prescribed that renewal of the p,ermits granted to the private operators and F
STU should be renewed under the scheme; similar provision does not find
place in Chapter VI of the Act. Rules do prescribe procedure to apply for
renewal by the private operators as well as STU but the rules or procedure
do not confer substantive right to renewal of the permits granted under the
scheme; when Chapter VI is Sub silentio, rules cannot travel beyond the Act. G
[205-C-DJ

3.2. However, the approved scheme under the Repealed act or in the
Act is a self-contained and self-operated scheme. It is a law by itself. The
schemes published under the Repealed Act are saved by Section 217(2)(a)
of the Act. Therefore, until they are modified or cancelled under Section H
178 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 102, the scheme should continue to be in operation in the notified area,
route or part thereof. The right to apply for and obtain permit in the
notified scheme was totally frozen to the private operators giving exclusive
right to the STU to apply for and obtain permits to run the stage carriages
or additional service under Section 101 of the Act on the notified area,
route or a part thereof and none else. With a non-obstante clause in Section
B 101, the right to apply for and obtain temporary permits under Section 87
by private operators was taken away. There is no need for STU to obtain
such permits, as an intimation to concerned RTA of its providing such
additional service on special occasions like fair or religious gatherings for
conveyance of passangers, is sufficient. Yet the scheme itself saved and
c preserved the rights of the named existing operators in respect of overlap-
ping routes in the specified permits, subject to the corridor restrictions of
picking up and setting down the passengers en route the prescribed
prohibited route. They became entitled to run their stage carriages subject
to the law. Though,. their permits are saved, the named operators being
D private operators, the Parliament appear to have thought that there was
no necessity to expressly retain in Chapter VI itself their right of renewal
as the same was already provided in Section 81 of the Act corresponding
to Section 68F(1D) of Chapter IV-A of the Repealed Act. There is no
express indication of their rights being taken away under the Act; nor it is
so by necessary implication. [206-G-H; 207-A-F]
E
33. Thus the rights of the existing named operators saved in the
appropriate approved schemes in respect of specified permits were not
desti::oyed. By necessary implication of Section 104, they were saved. they
became entitled to avail of their right to apply for grant of permit in
F accordance with the procedure prescribed under Sections 70 and 71 and
to obtain permit under Section 72, before the expiry of the permit or
renewed permit saved under the approved scheme and should obtain
permit afresh to ply their stage carriages before expiry of the period
mentioned therein; periodical renewals from time to time should be
obtained under Section 81 of the Act in accordance with the operation of
G the law. The RTA or STA, as the case may be, should consider and may
grant permits or renewal of permits as per law or rejection thereof for
reasons to be recorded in that behalf. [209-H; 210-A-C]

Krishan Kumar v. State of Rajasthan & Ors., [1991) 4 SCC 258, relied
H on.
GAJl~I SINGH v. STATE 179

3.4. The contention that such a construction creates and brings A
about invidious discrimination offending Article 14 of the Constitution is
without force. Section 217(2)(a) read with Section 217(4) of the Act
manifest the distinction between acts done or actions taken consistent with
the provisions of the repealed Act but inconsistent with the Act. The Act
saves only acts done or actio(\S taken etc. which are consistent with the
B
provisions. By implication, all inconsistent acts done or actions taken,
except those c.ompleted and closed, would not be considered to be done or
taken under the Act and consequently could not be operative under the
Act. They are obliterated completely from statute as if they never existed
except to the extent of limited operation provided in the appropriate
clauses in Section 217(2) of the Act. (211-D-E-F] c
3.5. Acco~dingly, the na11:1ed transport operators whose permits were
saved in the relevant scheme shall apply for permits under Sections 70 and
71 and obtain permits afresh under Section 72 of the Act before the expiry
of the period mentioned in the permit issued either under Section 47 or D
Section 48 or renewal under Section 58 or Section 68F (lD) of the Repealed
Act. No third party/private operators are entitled to apply for permits on
the same notified route or part thereof, nor are they entitled to compete
with them for grant of permit, since the right of all other private operators
to apply for and operate in the approved notified area, route or a part E
thereof, has been frozen. The right is reserved only in relation to the named
operators and that too for specified permit, and none else. Along with the
application under Section 70 filed for grant of permit under Section 72 or
renewal under Section 81 made by the named holder of a specified permit
in an approved scheme, he should enclose an authenticated copy of the
approved scheme, the details of the route on which he was plying his stage F
carriage with corridor restrictions on over lapping routes. the RTA or STA,
as the case may be, should verify the original scheme under which the
named operator, whose specified permit was saved, whether he is entitled
to ply the stage carriage in the approved scheme with the condition of the
corridor restrictions on the notified scheme and if so to what extent. What G
is the dura~ion of his right~saved in the approved scheme? Whether he had
plied his stage carriage on complying with the law in force? His right to
permit under Section 72 or renewal under Section 81 cannot be higher than
the original right saved in the approved scheme. The STU also should be
heard in that behalf, in 1·elation to grant of stage carriage permit or renewal
thereof, the appropriate authority may grant or reject; in the latter event, H
180 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A for reasons to be recorded in support of the rejection. The authorities
should consider their applications in accordance with the law and the
prescribed procedure and may grant new permits under section 72 and
later on before the ex11iry thereof, to renew it in accordance with the proce-
dure prescribed in Sections 80 and 81, that too, on compliance with law,
until the scheme is duly modified or cancelled in accordance with law. This
B right is available exclusively to the named private operators and that too
in respect of the specified permits and with same restrictions continued in
the scheme and none else and no more. [211-H; 212-A-E]

3.6. Since the appellants had obtained permits by mistake of the law
C and misconception of law on the part of the competent authorities applied
under Section 81 and had been granted renewal of their respective permits
under Section 81 after· t.7.1989, such grant of renewal of the permits
should be treated to be temporary permits under Section 87 of the Act.
Therefore, the private operators, be they covered by Chapter V or VI,
should apply for and obtain afresh permits before the expiry of the period
D mentioned in their respective permits or renewed for consideration under
Section 71 and grant under Section 72 of the permits afresh consistently
with Section 2(31~ of the Act. Such permit alone would be a permit defined
in Section 2(31)ofthe Act. Therefore, before expiry thereof, they shall apply
for and the concerned STNRTA may grant or refuse renewals of permit
E for reasons to be recorded under Section 81 of the Act. [212-F-H; 213-A]

Secreta1y, Qui/on Distt. Motor Transp01t Workers' Cooperative Society
Ltd. v. Regi-onal Transp01t Auth01ity & Ors., [1994) Supp. 3 SCC 210, af-
firmed.

F M/s. Gurcharan Singh Baldev Singh v. Yashwant Singh & Ors., [1992)
sec 428, held inapplicable.
Mysore State Road Transp01t Co1poration v. Mysore State Transpo1t
Appellate T1ibunal, [1974) 2 SCC 750; Adarash Travels Bus Se1vice &Anr. v.
G State of U.P. & Ors., [1985) 4 SCC 557; T.V. Nataraj & 01:f. v. State of
Kamataka & Ors., [19941. 2 SCC 32; Ram Krishna Venna & Ors. v. State of
U.P. & Ors., [1992] 2 SCC 620 and Nisar Ahmad & Ors. v. State of U.P. &
Ors., [1994] Supp. 3 SCC 640, referred to ..

4.1. Whenever an Act is repealed it must be considered, except as to
H transactions past and closed, as if it had never Existed. The effect thereof
GAJRAJ SINGH v. STATE 181

is to obliterate the Act completely from the record of the Parliament as if A
it had never been passed, it never existed except for the purpose of those
actions which were commenced, prosecuted and concluded while it was
existing law. Repeal is not a matter of mere form but is of substance
de11ending on the intention of the Legislature. If the intention indicated
either expressly or by necessary implication in the subsequent statute was
B
to abrogate or wipe off the former enactment wholly or in part, then it
would be a case of total or pro tanto repeal. [193-B-C]

India Tobacco Co. Ltd. v. The Commercial Tax Office1; Bhavanipore
& Ors., [1975] 3 SCC 512, relied on.
c
4.2. When there is a repeal and simultaneous re-enactment, Section
6 of the GC Act would be applicable in such cases unless the new legislation
manifests intention inconsistent with or contrary to the application of the
section. Such incompatibility would have to be ascertained from all
relevant provisions of the new Act. Therefore, when the repeal is followed
by a fresh legislation on the same subject, the Court would undoubtedly D
have to look to the provisions of the new act only for the purpose of
determining whether the new Act indicates different intention. The object
of repeal and re-enactment is to obliterate the Repealed Act and to get rid
of certain obsolete matters. [193-D-E]
E
Bishambhar Nath Kohli & Ors. v. State of U.P. & Ors., AIR (1966) SC
573, relied on.

Crawford's Inte1pretation of Law (1989), pp. 626, 627, 657; G.P. Singh:
"P1inciples of Statuto1y Inte1pretation", (Sixth Edn.), 1996, pp. 413, 418;
Jagdish Swamp : "Legislation and Inte1pretation ", (1974) Edn.), p. 539; F
Maxwell On the Inte1pretation of Statutes, (12th. Edn.) p. 17; Sutherland
Statuto1y Construction", (3rd. Edn.) Vol. 1 paras 2043 to 2045; Francis
Benion's Statutory Inte1pretatio11, (Second Edn.) p. 210 and Randall: "Car-
dinal Rules of Legal Interpretation", (3rd. Edn.), A.E., 1924, pp. 531-32,
referred to.
G
Brown v. Mc. Lachian, (1872), LR. 4 PC 543; In re Busfield, (1886) 32
Ch. D 123; Hume v. Some1ton, (1890) 25 QBD 239 and In re R., (1906) 1
Ch. 730, cited.

5. Legal fiction is one which is not an actual reality and which the H
182 SUllREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A law recognises and the court accepts as a reality. Therefore, in case of legal
fiction the court believes something to exist which in reality does not exist.
It is nothing but a presumption of the existence of the State of affairs which
in actuality is non-existent. The effect of such a legal fiction is that a
position which otherwise would not obtain is deemed to obtain under the
circumstances. [192-C-D]
B
CIVIL APPELLATE/ORIQINAL JURISDICTION: Civil Appeal
No. 2003 of 1996 Etc.

From the Judgment and Order dated 13.10.95 of the Allahabad High
c Court in C.W.P. No. 26132 of 1995.

H.N. Salve, S.K. Dhaon, Rani Chhabra, V.P. Gupta, S.C. Garg,
Rachna Srivastava, Abha Jain, Gaurav Jain, Vijay K. Mehta, Ms. Nirmala
Gupta, Pramod Swarup, Anil Karnwal, Krishan Singh Chauhan, A.K. Goel
for the appearing parties.
D
The Judgment of the Court was delivered by

K. RAMASWAMY, J. Common questions of law have arisen in all
these cases. The facts in Gajaraj Singh's case are sufficient for disposal of
all these cases. Though notices were served on respondents, Shri Goel
E appeared for the State and Shri Pramod Swarup for the UPSRTU, none
is appearing in other cases.

In 1988, the appellant was granted a stage carriage permit on the
Meerut-Baraut route under Section 47(3) of the Motor Vehicles Act, 1939
p (4 of 1939) (for short, the 'Repealed Act') for a period of 3 years. The
Motor vehicles act, 1988 (59 of 1988) (for short, the 'Act') came into force
w.e.f. July 1, 1989. The said p·ermit was renewed under Section 81 of the
Act in 1991 for a further period of 5 years and the second renewal was
granted in 1995. Respondents 3 to 17 had applied under Section 70 for
grant of stage carriage permits under Section 72 on the Meerut-Gangoh
G route which intersects part of the route on which the appellant was operat-
ing his stage carriage. Despite objections raised by the appellant, the State
Transport Authority (for short, 'STA') granted permits to them on Novem-
ber 23, 1992 which came be challenged by the appellants in revision filed
under Section 90 before the State Transport Appellate Tribunal (for short,
H 'STAT'). The respondents questioned the appellant's locus standi under
GATRAJ SINGH v. STATE (K. RAMASWAMY, J.] 183

the preliminary objection that the renewal granted under Section 81 to the
appellant was void. By order dated August 9, 1995, the STAT upheld the
·. preliminary objection and held that the appellant has no locus standi to
object the grant of permits to the respondents, since the renewal of the
permit granted to the appellant was not valid in law as he had not got any
new permit under the Act. The High Court in the impugned judgment
B
dated October 13, 1995 made in Writ Petition No. 26132of1995 has upheld
the order of the STAT. Thus, this appeal by special leave.

Shri K.K. Venugopal, learned senior counsel for the appellant, con-
tended that the renewal of the permit of the appellant granted under the
Repealed Act is a permit under the Act and its operation was saved by C
Section 217(2)(a) read with sub-section (4) thereof. Therefore, the second
renewal granted under Section 81 was valid in law. There was no need for
the appellant to obtain a fresh permit under the Act as the renewal is a
continuation of the original permit which is a vested right. The effect of
saving provisions in Section 217(2)(a) is to allow all the permits granted D
under the Repealed Act to continue after renewal under the Act. Section
217(2)(a) and sub-section (4), thus, obviate the need to obtain fresh permit
under the Act and, therefore, it would be unnecessary. In support thereof,
he placed strong reliance on M/s. Gurcharan Singh Baldev Singh v. Yash-
want Singh & Ors., [1992] 1 SCC 428. He further contended that this Court
in Secret01y Quillon Distt. Motor Transp01t Workers' Cooperative Society Ltd E
v. Regional Transp01t Auth01ity & Ors., [1994] Supp. (3) SCC 210 did not
intend to lay down that after the Act came into force, all the holders of
stage carriage permits granted tinder the Repealed Act would be required
to obtain fresh permits under the Act. Section 6 of the General Clauses
Act (for short, the 'GC Act') read with Section 217(2)(a) and (4) saves F
operation of all those permits which were alive when the Act came into
force. Consequently, renewals granted under Section 81 were valid. For
contra construction, an argument of inconvenience was forcefully
projected. He argued that Section 217(2)(b) would be applicable only if
the permit is inconsistent with the provisions of the Act in which event the
life of the permit granted under the Repealed Act gets extended only for G
the balance period of permit.

Shri S.K. Dhaon, learned Counsel appearing in C.A.@ SLP (C) No.
27335/95, contended that the permits granted to the existing· operators
under the nationalised scheme in Chapter IV-A of the Repealed Act are H
184 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
' .
A not required to be renewed under Section 81 of the Act as they have
already been saved being existing permits. So the need to obtain fresh
permits under the Act would be inconsistent with the scheme of the
Repealed Act as well as the Act. Shri Venugopal buttressed the contention
emphasising that the renewal is only a continuation of the existing permit
granted under the Repealed Act. The need for fresh permit arises only if
B the renewal is inconsistent with the provisions of the Act. Therefore, the
view of the High Court is clearly not sust~inable in law. In support thereof,
Shri Venugopal placed strong reliance on D. Nataraja Mudaliar v. The State
Transport Auth01ity, Madras, (1978) 4 SCC 290; State of Punjab v. Mohar
Singh, (1955) 1 SCR 893 and M/s. Universal Imp01ts Agency & Anr. v. Tlze
c Chief Controller of Imp01ts and Exp01ts & Ors. (1961) 1 SCR 305. Shri
Harish N. Salve, appearing for some of the existing operators in the
nationalised schemes, contended that they were not paid compensation
since permits in their names were saved with corridor restrictions. They
are, therefore, entitled to renewal of permits as a matter of right.
D
Shri Adrash Kumar Goel, learned counsel for the state, resisted the
contentions. According to him, the scheme of the Act in many a provision
is inconsistent with the scheme of operation in the Repealed Act. When
the Legislature manifested its intention as to its inconsistency in the opera-
tion of the Act with the provisions of the Repealed Act, the STA or the
E Regional Transport Authority (for short, 'RTA'), as the case may be, would
be devoid of power and jurisdiction to grant renewal of permit under the
Act. Consequently, the erstwhile holders of permits are required to obtain
fresh permits under the Act. The Repealed Act has been saved only to the
extent of validating, under Section 217(2)(b), the continuation of the permit
F for the unexpired period granted under the Repealed act. The owner of
the vehicle, thereby, became entitled. to operate, for the balance period,
stage carriage on the respective route. On its expiry, the erstwhile holder
of the permit ceases to have the permit under the Act until he obtains
afresh stage carriage permit under the Act. To obviate the difficulty of
running the stage carriage between the date of application for permit and
G the date of grant, the Act provides for grant of temporary permits. There
is no hiatus in the operation in that behalf and any grant of permit or
renewal should only be consistent with the provisions of the Act. Other-
wise, the Repealed Act continues to remain in operation, in spite of its
express repeal by Section 217(1) of the Act. The ratio of this Court in
H Secretary, Quillan Dist1ict Motor Transp01t Worker's Cooperative Society
GATRAJ SINGH v. STATE [K RAMASWAMY, J.] 185

Ltd.'s case (for short, 'Quillon's case) would be applicable to the situation. A
The ratio in Gzirnchara11 Singh's case (supra) would be applicable only to
a pending application for renewal filed before the Act came into force
which would be disposed of by operation of Section 217(2)(a) as saved by
Section 217(4) of the Act. If so understood, there is no inconsistency in the
ratio of the aforesaid two decisions of this Court and the operation of the
B
provisions of the two Acts.

We issued notice to Shri Promod Swamp to appear on behalf of
STUs and argue on the question of renewal of permits covered by the
schemes. He contended that they are not entitled to renewal under Chapter
VI of the Act. Chapter V does not apply to them. Therefore, they have no C
right to apply or obtain permit under Section 72 or renewal under Section
81.

We may make it clear at this juncture that when the .cases had come
up for admission and Shri Venugopal had pointed out to plausible misap- D
prehension in the operation of the the ratio laid down by this Court in the
above two cases, we had referred the matter to three Judge Bench. Thus,
the matter has come before this Bench.

The question for consideration is : whether the holder of a stage
carriage permit under the Repealed Act is required to obtain fresh permit E
or a renewal of the permit as per the provision of the Act? To appreciate
the contentions in proper perspective, it would be profitable to refer to
the provisions of the Act, extent of their operation and their inconsistency
with the provision in the Repealed Act so as to focus the tiue intentment
and operation of the Act. Section 2(31) of the Act defines "pennit" to mean F
a pennit issued by the State or Regional Tra11sp01t Auth01ity or an a11tlz01ity
presC1ibed in this behalf under the Act (emphasis supplied) authorising the
use of motor vehicle as a !ransport vehicle. "Transport vehicle" has been
defined under Section 2(47) to mean a public service vehicle, a goods
carriage, an educational institution bus or a private service vehicle. "Stage G
carriage" has been defined under Section 2(40) .to mean motor vehicle
constructed or adapted to carry more than six passengers excluding the
driver for hire or reward at separate fares paid by or for individual
passengers, either for the whole journey or for stages of the journey.
"Route" has been defined under Section 2(38) to mean a line of travel
which specifies the highway which may be traversed by a motor vehicle H
186 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A between one terminus and another. "Public service vehicle" has been
defined by Section 2(35) to mean any motor vehicle used or adapted to be
used for the carriage of passengers for hire or reward, and includes a
maxicab, a motorcab, contract carriage, and stage carriage. These defini-
tions similarly had found place in the Repealed Act with slight variations.
B Chapter V of the Act under the heading "Control of transport
vehicle" regulates use of, or permission for use of, the vehicles and the
necessity to obtain permits in that behalf by an owner of motor vehicle.
Section 66 enjoins every owner of a motor vehicle to obtain permit and no
owner shall use the motor vehicle as stage carriage except in accordance
c with the conditions of the permit granted or countersigned by the
prescribed authority for its use in the public place. The manner in which
the vehicle should be used gets regulated by the conditions of the permit,
the rules and the law; the details thereof are not material. Section 67
empowers the State Government to control road transport. Section 68
enumerates the manner in which the RTA or the STA or other authorities
D
under the Act would exercise the powers and perform functioi1s specified
under the Act. Section 69 enjoins the owner of a vehicle to make applica-
tion for permit.

Section 70 specifies the procedure for making an application to
E obtain stage carriage permit and· the conditions subject to which the
application is required to be dealt with. Section 71 prescribes the proce-
dure for ·sTA or RTA to consider such applications for grant of stage
carriage permits. It envisages, under sub-section (3) thereof, that subject
to the number of vehicles, road conditions and the relevant matters, the
F State Government shall, by a notification, direct an STA or RTA to limit
the number of stage carriages generally or of any specified, type as may be
fixed and specified in the notification, operating on city routes in towns
with a population of not less than five lakhs. Its, operation is subject to
clause (b) and (c) thereof. The proviso to sub-section (3) of Section 71
envisages that other conditions being equal, preference shall be given to
G applications for permits from (1) State transport undertakings; (ii) co-
operative societies registered or deemed to have been registered under any
enactment for the time being in force; (iii) ex-servicemen; and (vi) any
other class or category of persons, as the State Government may, for
reasons to be recorded in writing, consider necessary. On other routes,
H except town service, no restrictions are imposed unlike in Section 47{3) of
GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 187

the Repealed Act to grant stage carriage permits. Section 72 empowers the A
RTA or STA to decide an application for grant of a permit to operate a
Stage carriage with any one or more of the conditions enumerated under
sub- section (2) thereof or the rules or conditions attached to the permit.

Section 80 prescribes procedure to apply for and grant of renewal of
permits. Sub-section (2) envisages that on an application made under B
sub-section (1) at any time, the STA or RTA or any prescribed authority
under Section 66, shall not ordinarily refuse to grant an application for pemiit
of any kind made under the Act. (emphasis supplied). The proviso lifts the
embargo of sub-section (2) and permits summary refusal of the application,
if such a grant would have the effect of "increasing the number of stage C
carriages as fixed and specified in a notification" under Section 71(3)(a) or
of the contract carriages as fixed and specified in a notification under
Section 74(3)(a). Under the proviso to Section 71(1), prior to its amend-
ment thereof by Section 23 of Amendment Act 54 of 1994, the RTA/STA
was prohibited to grant permit for a route of 50 kilometers or less to all
juristic persons and to grant permit "only to an individual or a State D
Transport undertaking". The Amendment became operative from Novem-
ber 14, 1994 and the above prohibition no longer operates.

Section 81 regulates renewal of permits and duration thereof. Sub-
section (1) visualises that a permit, other than a temporary permit issued
under Section 87 or special permit issued under Section 88(8), shall be E
effective from the date of issuance or renewal thereof for a period of 5
years. Under the proviso, the period of countersigned permit is coterminus
with the validity of the primary permit. Sub-section (2) prescribes the
limitation within which an application for renewal should be made before
expiry of original grant or renewal. Sub-section (3) gives discretion to F
condone the delay in making the application for the grounds mentioned
thereunder. Sub-section (4) enumerates grounds for refusal of renewal of
a permit for one or more of the grounds enumerated thereunder. The
terms and conditions subject to which stage carriage permit is required to
be renewed are different from those of Section 58 of the repealed Act
except the procedural part. Sub-section (2) of Section 58 of the Repealed G
Act gives preferential freatment for renewal of a permit in favour of the
holder of the permit, while Section 81 of the Act does not give such
preferential right to renewal. On the other hand, if the permits granted
under Section 72 exceed the limit prescribed by the State Government for
town service, there would be danger of refusal or renewal subject to giving H
188 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A reasons in support thereof. Equally, in relation to other routes, discretion
is given to reject renewal of a permit for reasons to be recorded in the
order.

Chapter VI deals with special provisions relating to State Transport
Undertakings (for short, 'STU') which is equivalent to Chapter IV-A of
B the Repealed Act. By operation of Section 98, Chapter VI and the rules
and orders made thereunder shall have overriding effect over the inconsis-
tent provisions contained in Chapter V or in any other law for the time
being in force or in any instrument having effect by virtue of any such law.
The STU shall provide an efficient, adequate, economical and properly co-
C ordinated road transport service on the notified area or route or portion
thereof to the exclusion of the private operators except as exempted in the
scheme itself which itself is a self-operative law. The details are not
material for the purpose of this case except that under the said Chapter,
there is no specific provision, like Section 68F(1D) for renewal in favour
of any person or any class in relation to an area or route or portion thereof
D covered by such scheme for renewal, or Section 68F(1E) in favour of STU.

Section 217 repeals the existing laws and provides savings from its
operation. Sub-section (1) specifically repeals Act 4 of 1939 and any law
corresponding to that Act in force in any State before July 1, 1989.
E Sub-section (2) with a non obstante clause provides certain savings as
provided thereunder :

Clause (a) of Section 217(2) provides that notwithstanding the repeal
of act 4 of 1939 or any other analogous enactments in operation, any
notification issued, rule, regulation made, order passed or notice issued or
F any appointment or declaration made, or exemption granted or any con-
fiscation made, or any penalty or fine imposed, any forfeiture, cancellation
or any other thing done (emphasis supplied) or any other action taken under
the Repealed Act and in force immediately before July 1, 1989 shall, so far
as it is not inconsistent with the provisions of the Act (emphasis supplied)
G be deemed to have been issued, made, granted, done or taken under the
corresponding provision of the Act. In other words, clause (a) saves such
of those enumerated events under the Repealed Act which are consistent
with the provisions in the Act.

Clause (b) of Section 217(2) provides that any certificate of fitness
H or registration or licence or pemiit (emphasis supplied) issued or granted
GAJRAT SINGH v. STATE (K. RAMASWAMY, J.] 189

under the repealed enactment shall continue to have effect after such A
commencement under "the same conditions and for the same period" as if
the Act had not been passed (emphasis supplied). In an emphatic manner,
the saving provision provides that, notwithstanding the repeal of Act 4 of
1939 or any corresponding law, the permit issued under the Repealed Act
should continue to operate proprio vigore till its life expires under the same B
conditions and for the same period as if the Act was not passed. Other
clauses are not relevant. Hence they are not dealt with.

Clause (e) deals with the scheme under Section 68-C or under the
corresponding law in operation, which shall be disposed of under Section
100 of the Act. Similarly, temporary permits issued under sub-section (1-A) C
of Section 68F of the Repealed Act or under the corresponding provisions
shall, because of use of clause (f), continue to remain in force until
approved scheme under Chapter VI of the Act is published. The omission
to provide similar right of renewal of permanent permit like one available
under Section 68F(1D) to a private operator or to STU under Section D
68(1F) is significant and deliberate. It should be presumed that the Parlia-
ment having made similar provision in Section 81 for renewal of permits
issued in Chapter V of the Act, the omission thereof in Chapter VI in
relation to the private operators manifests the intention of the Parliament
that the right to obtain stage carriage permit, contract carriage permit or E
temporary permit on the notified area or route or a portion thereof has
been frozen to all private operators except to the extent of the right to ply
stage carriage on the basis of the permits saved under Chapter IV-A of the
Repealed Act. Therefore, the result would be that even the private
operators whose permits were saved also would have limited operation
under Section 217(2)(b) to ply their stage carriages for the unexpired
F
period only. So, limited validity of permits to run stage carriages etc. on
the nationalised routes or notified area or portion thereof in the approved
scheme was saved so that the holder of the stage carriage permits will have
full course of unexpired life of the permits granted under the Repealed
Act. In other words, Section 217(2)(b) breathed limited life into all permits G
granted under the repealed Act except those granted to STU under
approved or draft schemes to run its full course. It was so manifested by
Section 217(4) and Section 6 of the GC Act. The operation of law in
Chapter IVA of the Repealed Act as declared by this Court would be of
much assistance for interpretation in this behalf. H
190 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. ·

A In Mysore State Road Transport Corporation v. Mysore State
Transp01t Appellate Tlibunal, (1974) 2 SCC 750, it was held that no licence
can be granted to any private operator whose route traversed or over-
lapped any part of a notified route or routes as prohibited in Chapter IV-A
of the Repealed Act. An applicant seeking grant of a permit on a route
which overlapped even on a portion of a notified route was held to be not
B entitled to the grant of the permit. In Adarsh Travels Bus Service and
Another v. State of U.P. & Ors, [1985) 4 SCC 557, a Constitution Bench of
this Court approved the above law and had held that under Sections 68FF,
68B, 68C, 68D read with Section 2 (28A), once a scheme was published
under Section 68D in relation to any area or a route or portion thereof,
C whether to the exclusion, complete or partial, of other persons or other-
wise, no person other than the .State Transport Undertaking may operate
on the notified area or notified route except as provided in the scheme
itself. No private operator can operate his vehicle on any portion of the
notified are or notified route unless authorised to do so by terms of the
D scheme itself. Therefore, corridor shelter was impermissible on a notified
area, route or a portion of the route. It was further held that unless the
scheme provides for exempting operators already having permit for com-
mon sector from the scheme by incorporating appropriate conditional
clauses in the scheme to enable them to ply their vehicles over common
sectors without picking up or setting down passengers on the common
E sectors, it was not open to the RTA or STA to grant permits on the notified
area or notified route providing corridor shelter.

In T.V. Nataraj & Ors. v. State of Kamataka & Ors., (1994) 2 SCC 32,
a Bench of two Judges of this Court considered the integrity of the route,
p the effect of the notification of the scheme under Section 68C of the
Repealed Act and held that on publication of the approved scheme under
Section 68A, the private operators were excluded, utiless saved· by the
scheme itself, to operate on an approved area or route by obtaining· permits
to run the stage carriage on the approved route under the Scheme. In the
absence of any express exemption in the Scheme, the exclusion of the
G private operators to operate the stage carriage on the approved scheme is
total and complete. It was only for the State Government to take steps to
put vehicles on approved schemes so as to avoid any inconvenience to the
travelling public.

H In Ram Krishna Venna & Ors. v. State of U.P. & Ors., [1992) 2 SCC
GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 191

620 another Bench of two Judges had considered the scheme of Chapter A
IV-A of the Repealed Act and Sections 80 and 98 of the Act. It was held
that the scheme published under Section 68D of the Repealed Act (Chap-
ter VI of the Act) is a law and it has over-riding effect over chapter IV of
the repealed Act (Chapter V of the Act). The scheme operates against
everyone unless it is modified. It excluded private operators from the
B
notified area or notified route or a portion thereof covered under the
scheme except to the extent saved under the scheme itself. The right of the
private operators to apply for and to obtain permits under Chapter IV of
the Repealed Act (Chapter V of the Act) had been totally frozen and
prohibited. The result was that on the approved nationalised route or area,
the private operators were totally prohibited to obtain permits under c
Section 72 or renewal under Section 81 of the Act to ply their stage
carriages. This ratio was reiterated by another Bench in Nisar Ahmad &
Ors. v. State of U.P. & Ors., [1994) Supp. 3 SCC 460 holding that the
approved scheme is a law by itself and everyone, whether or not party to
the earlier order of this Court K.K. Venna's case, was bound by the law D
laid down and directions given by this Court under Article 142(2) of the
Constitution.

It is seen that Chapter VI of the Act empowers STU to frame
schemes which have over-riding effect, by operation of Section 98, on
Chapter V and other laws. Section 101 with a non obstante clause gives E
power to the STU to operate additional services for the conveyance of the
passengers on special occasions such as to and from fairs and religious
gatherings. Section 102 empowers the State Government to modify or
cancel the approved scheme only in the public inter.;st. Section 103 gives
exclusive right to the STU to apply for and obtain stage carriage permits F
or goods carriage permits or contract carriage permits in respect of a
notified area or notified route or portion thereof. Section 104 prohibits
STA or RTA to grant any permit except in accordance with the scheme.
Thus, private operators whose named permits were saved from the scheme,
became entitled to operate their stage carriages subject to corridor restric-
tions of picking up on up and setting down the passangers enroute on the G
overlapped route.

It would, thus, be clear that there is no provis10n like Section
68F(1D) of the Repealed Act to obtain renewal of a permit saved under
the scheme to private operators. In contrast, sub-section (2) of Section 103 H
192 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A gives power to the STA or RTA, on application made by the STU under
Section (1) thereof, either to grant any other permit or reject a pending
application or to cancel an existing permit or to modify the terms of an
existing permit in the manner indicated in clause (c) of sub-section (2) of
Section 103. It would, thereby, indicate the inconsistency with the
provisions contained in Chapter IVA of the Repealed Act.
B
Whenever an Act is repealed it must b_e considered, except as to
transaction past and closed, as if it had never existed. The effect thereof is
to obliternte the Act completely from the record of the Parliament as if it
had never been passed, it never existed except for the purpose of those
C actions which were commenced, prosecuted and concluded while it was
existing law. Legal fiction is one which is not an actual reality and which
the law recognises and the court accepts as a reality. Therefore, in case of
legal fiction the court believes something to exist which in reality does not
exist. It is nothing but a presumption of the existence of the state of affairs
D which in actuality is non- existent. The effect of such a legal fiction is that
a position which otherwise would not obtain is deemed to obtain under the
circumstances. Therefore, when Section 217(1) of the Act repealed Act 4
of 1939 w.e.f. July 1, 1989, the law in Act 4 of 1939 in effect came to be
non-existent except as regards the transactions, past and closed or saved.

E In Crawford's Interpretation of Law (1989) at page 626, it is stated
that "(A)n express repeal will operate to abrogate an existing law, unless
there is some indication to the contrary, such as a saving clause. Even
existing rights and pending litigation, both civil and criminal, may be
affected although it is not an uncommon practice to use the saving clause
F in order to preserve existing rights and to exempt pending litigation". At
page 627, it is stated that "(M)oreover, where a repealing clause expressly
refers to a portion of a prior Act, the remainder of such Act will not usually
be repealed, as a presumption is raised that no further repeal is necessary,
unless there is irreconcilable inconsistency between them. In like manner,
if the repealing clause is by its terms confined to a particular Act, quoted
G by title, it will not be extended to an act upon a different subject". Section
6 of the GC Act enumerates, inter alia, that where the Act repeals any
enactment, unless a different intention appears, the repeal shall not (a)
revive anything not in force or existing at the time at which the repeal takes
effect; or (b). affect the previous operation of any enactment so repealed
H or anything duly done or suffered thereunder; or (c) affect any right,
GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 193

privilege, obligation or liability acquired, accrued or incurred under any A
enactment so repealed, and any such investigation, legal proceeding or
remedy may be instituted, continued or enforced. In India Tobacco Co.
Ltd. v. The Commercial Tax Officer, Bhavanipore & Ors., [1975) 3 SCC 512
at 517 in paras 6 and 11, a Bench of three Judges had held that repeal
connotes abrogation and obliteration of one statute by another from the
B
statute book as completely as if it had ~ever been passed. When an Act is
repealed, it must be considered, except as to transactions past and closed,
as if it had never existed. Repeal is not a matter of mere form but is of
substance, depending on the intention of the Legislature. If the intention
indicated either expressly or by necessary implication in the subsequent
statute was to abrogate or wipe off the former enactment wholly or in part, C
then it would be a case of total or pro tanto repeal.

When there is a repeal and simultaneous re-enactment, Section 6 of
the GC Act would apply to such a case unless contrary intention can be
gathered from the repealing Act. Section 6 would be applicable in such D
cases unless the new legislation manifests intention inconsistent with or
contrary to the application of the section. Such incompatibility would have
to be- ascertained from all relevant provisions of the new Act. Therefore,
when the repeal is followed by a fresh legislation on the same subject, the
Court would undoubtedly have to look to the provisions of the new Act
only for the purpose of determining whether the new Act indicates dif- E
ferent intention. The object of repeal and re- enactment is to obliterate the
Repealed Act and to get rid of certain obsolete matters.
(

On "Saving of rights acquired", in the Principles of Statutory Inter-
pretation by G.P. Singh [(Sixth Edition) - 1996) at page 413, the learned F
author has stated that the effect of clauses (c) to (e) of Section 6 of GC
Act is, speaking briefly, to prevent the obliteration of a statute in spite of
its repeal to keep intact rights acquired or accrued and liabilities incurred
during its operation and permit continuance or institution of any legal
proceedings or recourse to any remedy which may have been available
before the repeal for. enforcement of such rights and liabilities. At page G
418, the learned author has stated that the privilege to get an extension of
a licence under an enactment is not an accrued right and no application
can be filed after the repeal of the enactment for renewal of the licence.
In Legislation and Interpretation by Jagdish Swarup (1974 Ed.) at page
539, it is stated that the power to take advantage of an enactment may H
·-
194 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A without impropriety be termed as a "right", but the question is whether it
is a "right accrued". A mere right (assuming it to be properly so called)
existing in the members of the community or any of them to take advantage
of an amendment, without any act done by an individual towards availing
himself of that right, cannot properly be deemed a "right accrued".
B In Bishambhar Nath Kohli & Ors. v. State of Uttar Pradesh & Ors., (
AIR 1966 SC 573 a Constitution Bench of this Court was to consider
application of Section 6 of the GC Act to Section 27 of the Administration
of Evacuee Property Act, 1950. Regarding saving of rights accrued there-
under by operation of Section 6 of the GC Act ~his Court, after an
C elaborate consideration, had held that by Section 58 (3) of the Administra-
tion of Evacuee Property Act the Legislature had not expressed any
reservation in the application of that section and none can be implied. The
order of the Deputy Custodian was declared final by operation of Section
30(6) of Ordinance 1of1949, but the liability was subject to the provisions
D of sub-sections (1) to (5) of Section 30. If fictionally order is deemed to
have been passed under Act 31 of 1950 (Administration of Evacuee
Property Act) as if the Act were in operation on October 12, 1949, it is
difficult to escape the conclusion that the order would be subject to the
appellate or revisional jurisdiction of the authorities who have the appellate
or revisional power by virtue of provisions conferring those powers and
E which must also be deemed to have been in force on the date when the
impugned order was passed. It was held that Section 6 was inapplicable to
revive the Act that became final.

The question, therefore, is: what rights were preserved by saving
F provisions in Section 217(2) of the Act? In Crawford's Statutory Interpreta-
tion it is stated under Section 322 at page 657 thus :

"Often the legislature instead of simply amending a pre-existing
statute, will repeal the old statute in its entirety and by the same
enactment re-enact all or certain portions of the pre-existing law.
G Of course, the problem created by this sort of legislative action
involves mainly the effect of the repeal upon rights and liabilities
which accrued under the original statute. Are those rights and
liabilities destroyed or preserved? The authorities are divided as
to the effect of simultaneous repeals and re-enactments, some
H adhere to the view that the right and liabilities accruing under the
GAJRAJSINGHv. STAIB[K RAMASWAMY,J.) 195

repealed act ~e destroyed, since the statute from which they A
sprung has actually terminated, even though for only a very short
period of time. Others, and they seem to be in the majority, refuse
to accept this view of the situation, and consequently maintrun that
all rights and liabilities which have accrued under the original
statute are preserved and may be enforced, since the re-enactment
B
neutralizes the repeal, thereby continuing the law in force without
interruption. Logically, the former attitude is correct, for the old
statute does cease to exist as an independent enactment, but all
practical considerations favour the majority view. This is so even
where the statute involved is a penal act."
c
In Maxwell on the Interpretation of Statutes (12th Ed.) it is stated at
page 17 that the effect of repealing Acts passed after August 30, 1889, is
now dealt with by Section 38(2) of the Interpretation Act. Such repealing
Acts are, unless the contrary intention appears, not to ....." (b) affect the
previous operation of any enactment so repealed or anything duly done or D
suffered under any enactment so repealed; or (c) affect any right, privilege,
obligation, or liability acquired, accrued or incurred under any enactment
so repealed; or ( d) affect any penalty, forfeiture, or punishment incurred
in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding, or remedy in respect of any
such right, privilege, obligation, liability, penalty, forfeiture, or punishment E
as aforesaid".

In Sutherland Statutory Construction (3rd Edition) Vol. I by Horack,
in paras 2043 to 2045, it is stated that :
F
"Under common law principles of construction and interpreta-
tion all rights, liabilities, penalties, forfeitures and offences which
are of purely statutory derivation and unknown to the common law
are effaced by the repeal of the statute which granted then,
irrespective of their accrual. Likewise, where a common law prin-
ciple is abrogated, its effective existence is destroyed both as to G
past actions and to pending proceedings. However, a right of a
common law nature which is further embodied in statutory terms
exists as an enforceable right exclusive of the statute declaratory
of it, and therefore the right is not expunged by the repeal of the
statute. H
196 SUPREME COURT REPORTS .(1996] SUPP. 6 S.C.R.

Since the effect of a repeal is to obliterate the stattik and to .
destroy its effective operation in futuro, or to suspend the opera-
tion of the common law when it is a common law: principle which
is abrogated, any proceedings which have not culminated in a final
judgment prior to the repeal are abated at the consummation of
the repeal. When, however, the repeal does not contemplate either ·
B a substantive common law or statutory right, but merely the pro-
cedure prescribed to secure the enforcement of the .right, the right
itself is not annulled but remains in existence e~orced by applying
the new procedure.

Effect on vested rights
c
Under. common law principles of construction and interpreta-
tion the repeal of a statute or the abrogation of a common law
principle operates to divest all the rights accruing under .. the ·
repealed statute or the abrogated common law, and to halt all
D proceedings not concluded prior to the repeal.. However, .a right
which has become vested is not dependent upon the common law
or the statute under which it was acquired for its assertion, but has
an independent existence. Consequently, the repeal of the statute
.or the abrogation of the common law from which it originated does
not efface a vested right, but it remains enforceable without regard
E to the repeal.

In. order to become vested, the right must be a contract right,
a property right, or a right arising from a transaction in the nature
of a contract which· has become perfected to the degree that the
continued existence of the statute cannot further enhance its ac-
F quisition.

Effect up On inchoate rights

Rights of action which are dependent upon a statute, and which
are still inchoate and not reduced to possession or perfected by
G final judgment, are lost ·by the repeal of the statute from which
they stem. This rule of construction.is simply a.restatement of the
common law principle of construction that the repeal of a statute
operates to divest all· rights accruing under the repealed statute
and all proceedings not concluded prior to the repeal, since
H inchoate rights are by definition not vested rights such as to escape
GArRAJ SINGH v. STATE [K RAMASWAMY, J.j 197

the common law rule of effacement. The inchoate rights are but A
an incident to the statute and fall with its repeal."

In Francis Bennion's Statutory Interpretation (Second Edition) it is
stated at page 210 thus : ·

"Where an Act passed after 1978 repeals and re- enacts as If
enactment (with or without modification) then, unless the contrary
intention appears, anything done, or having effect as if done.under
the enactment repealed, in so far as it could have been done under
the provision re-enacted, has effect as if done under that
provision." C

In Cardinal Rules of Legal Interpretation (3rd Edition) by Randall,
A.E., 1924, it is stated at page 531-32 thus :

"Their lordships ........ conceived that, in dealing with a statute
which professes merely to repeal a former statute of limited opera- D
tion, and to re-enact its provisions in an amended form, they are
not necessarily to presume·an intention to extend the operation of
those provisions to classes of persons not previously subject to
them unless the contrary is shown, but that they are to determine
on a fair construction of the whole statute, considered with refer-
ence to the surrounding circumstances, whether such an intention E
existed.". Brown v. Mc. Lachlan, [1872) L.R. 4 P.C. 543, at p.550;
42 L.J.P.C. 18, at p.23, Sir W. Colville, delivering the judgment of
the Judicial Committee.

"Where you have a repeal, and you have also a saving clause, F
you have to consider whether the substituted enactment contains
anything incompatible with the previously existing enactment. The
question is, Aye or No, is there incompatibility between the two?
And in those cases the judges, in holding that there was a saying
clause large enough to annul the repeal, said .that you must see
. whether the true effect was to substitute something incompatible G
with the enactment in the Act repealed; and that if you ·found
something in the repealing Act incompatible with the general
enactments in the repealed Act, then you must treat the jurisdiction
under the repealed Act as pro tanto wiped out. That is settled by
the cases of In re Busfield (1886), 32 Ch. D. 123; 55 L.J. Ch. 467; H
198 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A and Hume v. Sonwton, [1890], 25 Q.B.D. 239; 59 L.J. Q.B. 420."
- In re R., (1906) 1 Ch. 730, at p. 736; 75 L.J. Ch. 421, at p. 423,
Collins,_ M.R."

It is already seen that the operation of sub-section (1) of Section 217
is to obliterate the Act 4 of 1939 and any corresponding law in force in any
State from operation with effect from 1st July, 1989, However, repeal shall
not affect any right or liability acquired, accrued or incurred. Sub-section
(2) enumerates and saves from the obliteration of Act 4 of 1939 and
corresponding law by fiction with its non obstante clause. Ex abwidenti
cautela clauses (a) to (3) elaborate the enumeration of rights. They would
c apply to specific rights given to an individual upon the happening of one
or other of the events specified in the statute. Clause (a) preserves con-
tinued operation of any notification, rules, regulations, order or notice
issued etc. and any appointment ·or declaration made etc. under the
Repealed Act in force immediately before July 1, 1989. Those enumerated
D acts or actions shall be deemed to have been issued, made, granted, done
or taken under the corresponding provisions of the Act which are not
inconsistellt with the provisions of the Act. In other words, Section 217(2)
(a) gives an elongated operation as regards all transactions, which being
consistent with the provisions of the Act should be deemed to have been
issued, made, granted, done or taken under the corresponding provisions
E of the Act. Existence of the corresponding provisions similar to the
repealed provisions is a condition precedent. If the operation of the
provisions in the Act is inconsistent and incompatible, it gets obliterated
and the earlier provisions no longer revive or survive. If anologous
provision in the Repealed Act does not find place in the Act, the rights
accrued or acquired thereunder would not continue under the Act unless
F
fresh rights are acquired under the Act.

By operation of clause (b), any certificate of fitness of a motor vehicle
or its registration or licence issued or permit granted under the repealed
enactments, shall continue to have effect after such commencement under
G the same conditions and for the same period as if this Act had not been
....
passed. In other words, a permit granted under the Repealed Act 4 of 1939
shall continue to have the same operation under the Act under the same
terms and conditions and for the same period, as if the Repealed Act was
in operation and as if the Act had not been passed. This is the fiction of
H law by which, though Act 4 of 1939 was wiped out, its operation gets
GATRAJ SINGH v. STATE [K. RAMASWAMY, J.] 199

revived. The intention, thereby, appears to be that the Act breaths life into A
the dead permits etc., and allows full play to the permits granted under the
Repealed Act, even if inconsistent, till their period expired by efflux of
time.

On expiry of the period of permit granted under Act 4 of 1939 or
corresponding law, what would be the consequence is the question? It is
B
true, as contended by Shri Venugopal, that by operation of sub-section (4)

- of Section 217, read with clause (a) of sub- section (2) of Section 217,
Section 6 of the GC Act steps in and the conjoint operation thereof leaves
no manner of doubt that the notification issued, rules or regulations made,
orders passed, notice issued, or any appointment or a declaration made, c
exemption granted or any confiscation made or any penalty or fine imposed
in or any other thing done or any other action taken under the repealed
enactment in force immediately before such commencement shall, as far as
it is not inconsistent with the provisions of the Act, be deemed to have
been corresponding issued, made, granted, done or taken under the Act
and their operation thereby gets saved by appropriate clause in Section 6 D
of the GC Act read with Section 217(2)(a) to (e) of Act. In other words,
proceedings initiated before Act 4 of 1939 was repealed, would be con-
tinued and concluded under the Act as if the Act was not enacted.
However, four things would emerge from its operation. First there must
exist a corresponding provision under the Act pari materia with the
Repealed Act; secondly, that the order or permit granted must exist and
E
be in operation as on July 1, 1989 - the day on which the Act had come
into force; thirdly, it must not be inconsistent with the provisions of the
Act; and fourthly some positive acts should have been done before July 1,
1989 to further secure any right. All the four conditions should be satisfied
as conditions precedent for application of Section 6 of the GC Act by F
operation of sub-section (4) of Section 217 and then clause (a) of sub-sec-
tion (2) of Section 217 steps in and starts operation thereof. We are
concerned with permits, let it be said that a permit is preceded by an order
granting permit by the concerned RTA or STA, as the case may be, under
the Repealed Act. The said order stands merged with the grant of permit
and gets exhausted. G

This may be angulated from yet another legal perspective, namely,
consequences that would flow from the meaning of the word 'renewal' of
a permit under Section 81 of the Act. Black's Law Dictionary defines the
word 'renewal' at page 1296 thus : H
200 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A "The act of renewing or reviving. A revival or rehabilitation of an
expiring subject; that which is made anew or re-established. The
substitution of a new right or obligation for another of the same
nature. A change of something old to something new. To grant or
obtain extension of;"

B
In P. Ramanatha Aiyar's "The Law Lexicon" (Reprint Edition 1987),
the word 'renewal' is defined at page 1107 to mean "a change of something
old for something new. The renewal of a 'license' means a new license
granted by way of renewal". the renewal of a negotiable bill or note is
regarded simply as a prolongation of the original contract. The office of a
-
c "renewal", as it is termed, of a life policy, is to prevent discontinuance or
forfeiture.

In Provaslz Chandra Dalui & Anr. v. Bisawanath B01wjee & Anr.,
[1989) Supp. 1 SCC 487 at 496 in para 14, this Court drew the distinction
D between the meaning of the words extension and renewal. It was held that
a distinction between extension and renewal is chiefly that in the case of
renewal, a new lease is required while in the case of extension the same
lease continues in force during additional period by the performance of
stipulated act. In other words, the word 'extension' when used in its proper
and usual sense in connection with a lease, means prolongation of the
E lease.

It is settled law that grant of renewal is a fresh grant though it breaths ·
life into the operation of the pervious lease or licence granted as per
existing appropriate provisions of the Act, rules, or orders or acts intra
F vires or as per the law in operation as on the date of renewal. The right to
get renewal of a permit under the Act is not a vested right but a privilege
subject to fulfilment of the conditions precedent enumerated under the
Act. Under Section 58 of the Repealed Aet, renewal of a permit is a
preferential right and refusal thereof is an exception. But the Act expresses
different intention. Sections 66, 70, 71 and 80 prescribe procedure for
G making application and compliance of the conditions mentioned therein.
Existence of the provisions of the Act consistent with the Repealed Act is
a pre-condition.· Grant of renewal under Section 81 is a discretion given to
the authority (STA or RTA) subject to the conditions and the requirement
of law. Discretion given by a statute connotes making a choice between
H competing considerations according to rules of reason and justice and not
GAIRAJ SINGH v. STATE [K. RAMASWAMY, J.J 201

arbitrary or whim but legal and regular. Sections 70 and 71 read with A
Section 81 do indicate that grant of permit or renewal thereof is not a
maller of right of course. It is subject of rejection for reasons to be
recorded in support thereof. Therefore, right to renewal of a permit under
Section 81 is not a vested or accrued right but a privilege to get renewal
according to law in operation and after compliance with the pre-conditions
B
and abiding the law.

In Ambika Quany workis V. State of Gujarat, [1987] 1 sec 213 this
Court was to deal with right to renewal of a mining lease under the Gujarat
Mines and minerals Concessions Rules. When the renewal of the lease was
not !,l'fanted, due to statutory embargo created by Section 2 of the Forest C
(Conservation) Act, 1980, this Court had held that though the right to
renewal was in accordance with the rules, with the interposition of the Act
for conservation of the forests, it puts an embargo on the right to renewal.
Therefore, the refusal to grant renewal of lease was upheld.

In Rural Litigation and Entitlement Kendra v. State of U.P., [1989) D
Supp. 1 SCC 504 at 523-24 after considering the above ratio, it was held
that though the lessees of the mines were entitled to apply for renewal as
per the law and clauses in the lease, this Court prohibited obtaining of
renewals applying Section 2 of the Forests (Conversation) Act, 1980.
E
In State of M.P. & Ors. v. .KJishnadas Tikaram, (1995) Supp. 1 SCC
587 this Court had held that it is settled law that renewal is a fresh· grant
and must be granted consistent with law in operation as onthat date. In
that case, it was held that renewal of mining lease in the forest area for
extraction of minerals under the Mining and Mineral Concessions Rules

- should be consistent with Forest (Conservation) Act, 1980. Section 2
mandates the State Government to obtain prior approval of the Central
Government, renewal granted without. prior approval was subsequently
cancelled. When its validity was questioned, the High Court set aside the
F

order. On appeal, this Court reversed the High Court's order and had held
that the. Government was not precluded to cancel the renewal of the lease G
granted without obtaining prior approval of the Central Government. The
order of cancellation was, therefore, upheld.

There is a distinction between right acquired or accrued, ·and
privilege, hope and expectation to get a right, as rightly pointed out by the
High Court in the impugned judgment. A right to apply for renewal and H
202 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A to get a favourable order would not be deemed to be a right accrued unless
some positive acts are done. before repeal of Act 4 of 1939 or correspond-
ing law to secure that right of renewal. In Gujarat Elect1icity Board v.
Shanti/al, AIR (1969) SC 239, this Court had pointed out that before
Section 71 of the Electricity Supply Act was amended, the appellant had
issued a notice under Section 7 thereof, exercising the option to purchase
B the undertaking. It was held that a right to purchase the electrical under-
taking which had accrued to the Electricity Board was saved by Section 6
of the GC Act.

So, if no action under the Repealed Act was set in motion before
c .July 1, 1989, by a valid application for renewal of a permit, there was no
right acquired or accrued to pursue the remedy under the Act. The
privilege to obtain renewal of a permit is not an accrued right. Section
58(2) of the Repealed Act gives, as stated supra, preferential right to a
holder of a permit for renewal thereof. Section 71 of the Act gives
D preferential right in favour of STU for grant of permit in Chapter V which
is not available under the Repealed Act. Therefore, even for grant of a
permit or a renewal under Section 72 or 81, the STU is entitled to
preferential right over the private citizens. Thereby, the Act manifests
intention inconsistent with and incompatible to that in Chapter IV of the
Repealed Act. Similarly, even on the approved routes under a scheme
E framed in Chapter IVA, an exception has been carved out in the scheme
with a non obstante clause in favour of STU, which is a self-operative law
by itself. The rights of the existing operators for renewal thereof under
Section 68F(1D) under the repealed Act were saved. But, under the Act,
Chapter VI does not speak of renewal of the permits to the private
F operators, though permits were saved in the scheme itself. In other words,
Chapter VI manifested inconsistency in its operation from the law in
Chapter IVA of the Repealed Act. Similarly, other provisions are incon-
sistent with those in Act 4 of 1939 which exist in the Act as are apparent
but they are not relevant for our present propose and hence need no
elaboration. Therefore, clause (a) of sub-section (2) would not get at-
G tracted, even if it were to apply to grant of permit being a "thing done" as
contended by Shri Venugopal. So, any permit issued to operate a stage
carriage under the Repealed Act would survive, by virtue of clause (b) of
sub-section (2) of Section 217 of the Act by fictional operation of law; and
this would be on the same conditions and for the same period mentioned
H under the Repealed Act, as if the Act was not enacted. Any other view
l
GAfRAJ SINGHv. STA'lE [K.RAMASWAMY,J.) 203

would tantamount to allowing the Repealed Act to remain in operation in A
perpetuity simultaneously with the operation of the Act. Both cannot
co-exist in the same shelter.

In State of Punjab v. Mohar Singh, (1955] SCR 893 the facts were that
the respondent filed a claim as an evacuee under EP (Registration of Land
Claims) Act, 1948. The claim was investigated into and it was found to be B
false; it _was held to be an offence under the Act. At the trial, on his
confession, the respondent was convicted and was sentenced to imprison-
ment. On suo motzt revision, the District Magistrate found the sentence to
be inadequate and referred the case to the High Court to be dealt with
under Section 437, Cr. P.C. The High Court found that since the Ordinance
was repealed, he could not be convicted under Section 7 of the Act. This
c
Court, on appeal reversed the decision and upheld the conviction applying
Section 6 of the GC Act. Interpreting that section, this Court had held that
the words "anything done" occurring in Section 11 of 1948 Ordinance did
not mean act done by a person but an official act done by the authority in
exercise of the powers conferred by or under the Ordinance. Far from D
helping the appellants, the ratio would apply to official acts done or orders
issued etc. covered by Section 217(2)(a) of the Act. As stated earlier, after
permit was in fact issued, the order passed by STA or RTA out lived its
purpose and grant of the permit and its operation was saved to the extent
provided in clause (b) of Section 217(2).
E
The ratio of M/s. Universal Imports Agency and Anr. v. The Chief
Controller of Imp01ts and Exp01ts & Ors., (1961) 1 SCR 305 also is not of
assistance to the appellants. Therein, before the Government of India
issued notification applying the French Establishments' (Application of
Laws) Order, 1954 to the territory of Pondicherry, tl).e appellant had F
entered into a contract with the foreign buyers for the import of the goods
which, after the said Order came into force, were imported into Pondicher-
ry. The question therein was whether Section 6 of the GC Act would apply,
Majority of three Judges, dissented by minority opinion of two Judges, had
held that the words "things done" in para 6 of the French Establishments' G
(Application of Laws) Order was comprehensive enough to take within its
ambit not only things done but also the effect of the legal consequences
flowing therefrom. The ratio is not at all applicable to the facts of this case.

We, therefore hold that grant of renewal of the stage carriage permit
should necessarily be preceded by a grant of a permit to stage carriage H
I '
204 SUPREME COURT REPORTS [ 1996) SUPP. 6 S.C.R.

A under Section 72, in accordance with the procedure laid down in Sectio~s
70 and 71. This should be made before the expiry of the period prescribed
in the permit granted under the Repealed Act. Therefore; for stage car-
riage permits granted under Chapter IV of the Repealed Act, if they stand
to expire or expired after 1st July, 1989, without any pending application
for renewal havirig been made under Section 58 as on 1st July, 1989, fresh
B applications under Section 70 should be filed and after consideration under
Section 71, permits be obtained as per law under Section 72. If there is any
delay to obtain permits pending consideration, by operation of Section 76,
to avoid hiatus in continued operation of providing stage carriage service,
Section 87 gives power to grant temporary permit withoQt following the
c procedure laid down in Section 70. In Mithilesh Garg & Ors. v.. Union of
India & Ors., [1992] 1 SCC 168, this Court had laid down different criteria
for grant of inter-region, intra-region and interstate permits under the Act
under Section 88 and 80 of the Act which did not find place in the
Repealed Act. It was held that such distinction was neither discriminatory
D nor violative of Article 14 of the Constitution. Thus considered, the
argument of arbitrariness, discrimination or avoidable inconvenience to the
holders of permits etc. under the Repealed Act and to the travelling public
would be hypothetical and without force.

The appeals arising out of SLP Nos. 924/96, 1913/96, 27355/95 relate
E to renewal of state carriage permits of the appellants, whose permits were
saved under the nationalised schemes. It is an admitted position that before
the Act had come into force on July 1," 1989 they had their permits saved
by the schemes approved and published under Chapter IVA of the
Repealed Act and renewable under Section 68F (ID) of the Repealed Act
F and were renewed under Section 81 of the Act without obtaining fresh
permits under the Act. The extreme contention of Sri S.K. Dha~n was that
the definition of "permit" under Section 2(31) of the Act is so wide as to
include permits granted under the Repealed Act and the approval and
publication of the schemes under Section 68D of Chapter IYA of the
Repealed Act stands nullified since there is. no saving thereof under the
G Act. Therefore, every one is free to obtain permits under the nationalised
scheme after expiry of the period for which the permit was granted under
the Repealed Act. We firid it difficult to give acceptance to this extreme
contention. It is settled la~ that the scheme approved u,nder Chapter IVA, .
which is equivalent to Chapter VI of the Act, is a· self contained and.
H self-operative scheme and is a law by itself. The scheme operateSto the ·
GAJRAJ SINGH v. STATE [K RAMASWAMY, J.) 205

exclusion of private operators with non-obstante clause that the STU should A
obtain permits to run stage carriages in the notified area, routes or a
portion thereof to provide coordinated efficient, adequate and economical
road transport service. Thereby the right to apply for and obtain a stage
carriage permit has been frozen to all private operators, except as saved
under the· scheme itself. Until the scheme gets modified or cancelled by B
the State it would continues to be in operation. We find no inconsistency
under the Repealed Act and the Act in this behalf. Resultantly, all schemes
remain operative under Section 217.(2)(a) of the Act.

The question, therefore, is: Whether a private operator saved under
the scheme is not liable to get permits under Section 72 and renewal of the C
permits under Section 81 of the Act? It is true that Section 68F(1D) and
Section 68F (lF) of the Repealed Act had prescribed that renewal of the
permits granted to the private operators and STU should be .renewed
under the scheme; similar provision does not find place in Chapter VI of
the Act. Rules do prescribe procedure to apply for renewal by the private D
operators as well as STU but the rules or procedure do not confer
substantive right to renewal of the p_ermits granted under the scheme; when
ch&pter VI is sub Silentio, rules cannot travel beyond the Act.

The question, therefore, is: whether the named holder of a specified
stage carriage permit has the right of renewal under the Act after the expiry E
of the period mentioned in the permit granted under the Repealed Act?
·Did the Parliament intend to put an end to and denude the right of a
private named operator to operate the .stage carriage, or to that extent the
right to apply for and obtain permit under Sections 70 to 72 or renewal
under Section 81 was preserved? p

Two views are plausible under the Scheme of the Act. The first is
that after the expiry of the permit or renewed permit under the Repealed
Act, the named private operator saved under the scheme gets denuded of
his right of renewal of his permit under the Act, since "permit" defined G
under Section 2(31) would mean permit granted under tlte Act, which
occasion does not arise as the field, occupied by the exclusive right to
operate stage carriages was given to STU. Thereby, he ceases thereafter to
have any right to ply stage carriages, though saved under the self operative
scheme which continues to be in existence after the Act came into force.
The other view is that the rights of the private named operators whose H
206 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A specified permits were saved under the respective schemes, were not
expressly taken away under the Act. Being private operators, they would
be entitled to avail of the right and remedy given in Chapter V of the Act,
with exclusion of other private competitors. Thereby they should apply for
and obtain permit afresh under Section 72 and renewal thereafter under
Section 81. In this behalf, it is relevant to noLe the contention of S/Shri
B Venugopal and Salve. Their contention is that in the scheme, such named
operators whose specified permits were mentioned in the scheme alone
were given exclusive rights to ply their stage carriages on the named routes
subject to corridor restrictions mentioned in the scheme. Other persons
whose permits were nationalised were paid compensation under the
c Repealed Act or under Section 105 of the Act but the appellants were not
paid compensation as their permits were saved. By operation of Section
217 (2)(e) and Section 100 of the Act, even pending schemes should be
finalised under the Act within the limitation prescribed therein. Until its
finalisation, the existing operators are allowed to ply their vehicles and to
D obtain temporary permits. This would indicate the legislative intention that
the Act did not intend to destroy the rights, saved under the respective
schemes, of the named operators in respect of the specified permits. The
contention of Mr. Pramod Swarup for U.P.S.R.T.U. is that after the expiry
of the period mentioned in the permits granted to the named operators of
the specified permits, they lost their right to renewal of their permits since
E the right to renewal, similar to Section 68F(1D ), does not find place in
Chapter VI. The grant of renewal to them, unless modified by the scheme
under Section 102 of the Act, is inconsistent and, therefore, the private
operators are not entitled to the renewal of their permits. The exclusive
right, thereby, was given to the STU to ply their stage carriages, goods
carriages or contract carriages so as to avoid inconvenience and hardship
F
to the travelling public.

After giving careful and anxious consideration to the respective
contentions, we find that there is some force in the contention of the
respec:tive counsel for the appellants. It bears repetition to state that the
G approved scheme under the repealed Act or in the Act is a self-contained
and self-operative scheme. It is a law by itself. The schemes published
under the Repealed Act, as held earlier, are saved by Section 217(2)(a) of
the Act. Therefore, until they are modified or cancelled under Section 102,
the scheme should continue to be in operation in the notified area, route
H or part thereof. The right to apply for and obtain permit in the notified
GATRAJSINGHv. STA1E[K.RAMASWAMY,J.) W7

scheme was totally frozen to the private operators giving exclusive right to
the STU to apply for and obtain permits to run the stage carriages or
additional service under Section 101 of the Act on the notified area, route
or a ,part thereof and none else. With a non obstante clause in Section 101,
the right to apply for and obtain temporary permits under Section 87 by
private operators was taken away. There is no need for STU to obtain such B
permits, as an intimation to concerned RTA of its providing such addition-
al service oh special occasion like fair or religious gatherings for con-
veyance of passengers, is sufficient. Yet the scheme itself saved and
preserved the rights of the named existing operators in respect of over
lapping routes in the specified permits, subject to the corridor restrictions
of picking up and setting down the passengers en route the prescribed C
prohibited route. They became entitled to run their stage carriages subject
to the law. Though, their permits are saved, the named operators being
private operators, the Parliament appear to have thought that there was no
necessity to expressly retain in Chapter VI itself their right of renewal as
the same was already provided in Section 81 of the Act corresponding to D
Section 68F(1D) of Chapter IV-A of the Repealed Act. The reason ap-
pears to be obvious. Every private operators falls within the field covered
by Chapter V of the Act. It would seem that the Parliament is of the view
that the named operators,be.ing saved under the schemes, are entitled to
apply for and obtain necessary permit or renewal thereof to ply their stage E
carriages only on overlapped routes subject to the corridor restrictions
mentioned in the scheme itself. It may be stated that we do not find any
express indication of their rights being taken away under the Act; nor do
we find it by necessary implication in that behalf and to that effect. This
view does justice also to all concerned.
F
As far as the STU is concerned, they having had the monopoly to ply
stage carriages, goods carriages, contract carriages or special services in
the notified areas or route or part thereof under the scheme, it was thought
unnecessary to bother them to obtain renewal of permits for of stage
carriages etc. Section 101 itself provides for such an intention. Resultantly, G
the Legislature appears to have obviated the need to obtain periodical
renewals of permits for stage carriages etc. run by the STU. Parliament
was aware of the need to obtain the renewal of permits by the STU under
Section 68F (lF) of the Repealed Act and absence of such a provision in
the Act is further eloquent and self-explanatory. H
208 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A In Krishan Kumar v. State of Rajasthan & Ors., [1991) 4 SCC 258, a
contention was raised that since Section 100(4) of the Act prescribes
limitation within which the State Government should hear and consider the
objections on the draft scheme, finalise the scheme and publish the same
in the official Gazette, after the· Act had come into force, the limitation" of
one year stood lapsed. Though Section 217(2)(e) empowers the State
B Government to finalise the pending draft schemes, they stood lapsed from
the date on which draft scheme was published. The contention was rejected
by this Court for the obvious reason that the Repealed Act did not
prescribed any limitation to finalise the draft scheme as indicated in
sub-section (4) of Section 100 of the Act. As years rolled by from tlie date
C of publication of draft scheme for finalisation, the Parlialhent for the first
time prescribed limitation in Section 100(4) putting a fetter on the exercise
of the power of the Government in approving the draft scheme and
publication thereof after complying with the ~equirements of law. The right
of the private operators and the remedy of finalisation of the draft scheme
D .· were harmoniqusly interpreted by this Court and it held that the limitation
of one year starts running from the ,date the Act had come into force,
namely, July 1, 1989. We are of the view that same harmonious interpreta-
tion is required to be adopted in this case al~o. Applying the same har-
monious interpretation, we hold that the rights of nanied.private operators
to apply for and obtain permits. and renewal of me specified stage carriage
E permits are saved and they alone are eligible to avail of that right and
remedy under Chapter V of the Act, while preserving monopoly of the
STU in Chapter VI.

In Chapter V, permits are required to be obtained on non-
F nationalised routes. The STU ~so has the right to apply for and obtain
permits to run the stage carriages, goods carriages or contract carriages
on permits, as the case may be, and in some instances the preferential right
under the Act is given to the STU. In respect of permits had under the
Repealed Act or the Act, the need to apply for and obtain renewals of the
G stage carriage permits, goods carriages or contract carriage permits for
plying on non~nationalised routes was to comply with the procedure
prescribed in Chapter V, which should be adhered to. This is in relation
to non nationalised routes only. But as regards the approved schemes, in
Chapter VI or continued schemes saved by section 217(2)(a) read with
sub-section (4) read with Chapter IVA of the Repealed Act, there is no
H need for STU to obtain periodical renewals of permits of stage carriages,
GATRAJSINGHv. STATE[K RAMASWAMY,J.) 209

contract carriages, or goods carriages in respect of the notified area, route A
or portion thereof, notwithstanding anything contained in Chapter V. The
STU retains its exclusive right to ply the stage carriages or special service
or goods carriage or contract carriage on the notified area or route or part
thereof, until the scheme is duly modified or cancelled in accordance with
law prescribed in Section 102 "of Chapter VI. B
It is required to be stated that along with the application under
Section 70 filed for grant of permit under Section 72 or renewal under
Section 81 made by the named holder of a specified permit in an approved
scheme, he should enclose an authenticated copy of the approved scheme,
the details of the route on which he was plying his stage carriage with C
corridor restrictions. The RTA or STA, as the case may be, should verify
the regional scheme under which the named operator, whose specified
permit was saved, whether he is entitled to ply the stage carriage in the
approved scheme with the condition of the corridor restrictions imposed
in the notified scheme and if so to what extent. What is the duration of his
right saved in the approved scheme? Whether he had plied his stage D
carriage on complying with the law in force? His right to permit under
Section 72 or renewal under Section 81 cannot be higher than the original
right saved in the approved scheme. The STU also should be heard in that
behalf. On consideration of these and all other relevant facts in relation to
grant of stage carriage permit or renewal thereof, the appropriate authority E
may grant or reject. In the later event, for reasons to be recorded m
support of the rejection.

In Mithilesh Garg's case (supra) a Bench of three Judges considered
the right of the existing operators in conformity with Article 19(1)(g) of
the Constitution and the procedure prescribed under the liberal policy for F
grant of permits to the new entrants, while continuing the same right to
existing operators under the new provisions in the Act. It was harmoniously
interpreted and this Court had held that there was no cause for complaint
by the existing operators when the liberal policy had given right to apply
for and obtain permits under Chapter V on the non-nationalised routes to
augment facility to the travelling public. Section 104 does not stand in the G
way of the named private operaters whose specified permits were/are saved
in that behalf. On the contrary, it would say "except in accordance with the
provisions of the scheme."

Thus considered, we are of the view that the rights of the existing H

J
210 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A named operators saved in the appropriate approved schemes in respect of
specified permits were not destroyed. By necessary implication of Section
104, they were saved. They became entitled to avail of their right to apply
for grant of permit in accordance with the procedure prescribed under
Sections 70 and 71 and to obtain permit under Section 72, before the expiry
of the permit or renewed permit saved under the approved scheme and
B
should obtain permit afresh to ply their stage carriages before expiry of the
period mentioned therein; periodical renewals froni time to time should be
obtained under Section 81 of the Act in accordance with the operation of
the law. The RTA or STA, as the case may be, should consider and may
grant permits or renewal of permits as per law or rejection thereof for
c reasons to be recorded in that behalf.

It is true that some renewals of stage carriage permits to the hold~rs
of permits or renewed permits under the Repealed Act were granted under
Section 81. Some of them are still in operation. With a view to prevent
D hiatus in operational efficacy we would declare that though renewals of
state carriage permits were granted under Section 81, they must be deemed
to be temporary permits granted under Section 87, till regular permits are
granted or refused. The ratio of Gwucltaran's case (supra), does not help
the appellants. Therein the application for renewal of stage carriage permit
under Section 58(2) of the Repealed act was pending consideration as on
E 1st July, 1989. Consequently, Section 6 of the GC Act saved its operation.
This Court had, therefore, held that applications for renewal filed under
Section 58 of the Repealed Act must be disposed of under Section 80 read
with Section 81 of the Act. However, it is stated that disposal must be taken
to be, not of a permit granted under the Act, but one under deemed fiction.
There would be no further fiction of law created under the Act to be a
F
deemed renewal of permit under the Act.

In Quillan's case (supra) this Court did not have the occasion to
consider the effectof Section 6 of the GC Act and clause (a) of sub-section
G (2) of Section 217 since the case fell under clause (b). Therein, the proviso
to unamended Section 71(1) prohibited the Society to obtain a permit.
Consequently, it could not obtain renewal of stage carriage permit, being
inconsistent with the provisions of the Act It was held that the stage
carriage permit issued under the Repealed Act would remain operative for
the period for which it was granted as if the Act had not been passed. After
H its expiry, the appellant therein was required to obtain a permit under
GAJRAJ SINGH v. STATE [K. RAMASWAMY, J.] 211

Section 72 of the Act. Thereby, it was held that the Society was not entitled A
to the renewal under Section 81 of the Act. In view of the consideration of
the operation of the relevant provisions mentioned hereinbefore, there is
no conflict between Gurcharan Singh 's case and Quillon 's case. the inter-
pretation in Quilon's case is also consistent with the consideration herein-
before made.
B
The next contention of S~ri Venugopal is that the Act intends that
all permits issued under the Repealed Act would be continued under the
Act and be given effect in toto so long as such of those permits or
certificates or licences are not inconsistent with the provisions of the Act.
To that extent, their operations are saved giving. limited operation under C
clause (b) of sub-section (2) of Section 217. However, notifications etc.

-
......
issued under the Repealed Act and saved by clause (a) of sub-section (2)
of Section 217, as mentioned earlier, are distinct from the permits issued
in furtherance of the orders passed by the STA or RTA, as the case may
be. The further contention that such a construction creates and brings
about invidious discrimination offending Article 14 of the Constitution is
D

without force. Section 217(2)(a) read with Section 217(4) of the Act
manifest the distinction between the acts done or actions taken consistent
with the provisions of the Repealed Act but inconsistent with Act. The Act
saves only acts done or actions taken etc. which are consistent with the
provisions. By implication, all inconsistent acts done or actions taken, E
except those completed and closed, would not be considered to be done
or taken under the Act and consequently could not be operative under the
Act. They are obliterated completely from statute as if they never existed
except to the extent of limited operation provided in the appropriate
clauses in sub-section (2) of Section 217 of the Act. F

Accordingly, we hold that the named transport operators whose
permits were saved in the relevant scheme shall apply for permits under
Sections 70 and 71 and obtain permits afresh under Section 72 of the Act

- before the expiry of the period mentioned in the permit issued either under
Section 47 or Section 48 or renewal under Section 58 or Section 68F(1D)
of the Repealed Act. No third party/private operators are entitled to apply
G

for permits on the same notified route or part thereof, nor are they entitled
to compete with them for grant of permit, since the right of all other private
operators to apply for and operate in the approved notified area, route or
a part thereof, has been frozen. The right is reserved only in relation to the H
212 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A named operators and that too for specified permit, and none else. Along
with the application under Section 70 filed for grant of permit under
Section 72 or renewal under Section 81 made by the named holder of a
· specified permit in an approved scheme, he should enclose an authenti-
cated copy of the approved scheme, the details of the route on which he
was plying his stage carriage with corridor restrictions on over lapping
B routes. The RTA or STA, as the case may be, should verify the original
scheme under which the named operator, whose specified permit was
saved, whether he is entitled to ply the stage carriage in the approved
scheme with the condition of the corridor restriction on the notified
scheme and if so to what extent. What is the duration of his right saved in
C the approved scheme? Whether he had plied his stage carriage on comply-
ing with the law in force? His right to permit under Section 72 or renewal
under Section 81 cannot be higher than the original right saved in the
approved scheme. The STU also should be heard in that behalf. On
consideration of these and all other relevant facts in relation to grant of
.....
t--
D stage carriage permit or renewal thereof, the appropriate authority may
grant or reject; in the later event, for reasons to be recorded in support of
the rejection. The authorities should consider their applications in accord-
ance with the law and the prescribed procedure and may grant new permits
under Section 72 and later on before the expiry thereof, to renew it in
accerdance with the procedure prescribed in Sections 80 and 81, that too
E on compliance with law, until the scheme is duly modified or cancelled in
accordance with law. We reiterate that this right is available exclusively to
the named private operators and that too in respect of the specified permits
and with same restrictions continued in the scheme none else and no more.

F Since the appellants had obtained permits by mistake of the law and
misconception of law on the part of the competent authorities applied
under Section 81 and had been granted renewal of their respective permits
under Section 81 after July 1, 1989, such grant of renewal of the permit
should be treated to be temporary permits under Section 87 of the Act.
Therefore, the private operators, be they covered by Chapter V or VI,
G should apply for and obtain afresh permits before the expiry of the period
mentioned in their respective permits or renewed for consideration under
Section 71 and grant under Section 72 of the permits afresh consistently
with Section 2(31) of the Act. Such permit alone would be a permit defined
in Section 2 (31) of the Act. Thereafter, before expiry thereof, they shall
H apply for and the concerned STNRTA person authority may grant or
GAJRAJ SINGH v. STATE [K. RAMASWAMY, J.] 213

refuse renewals of permit for reasons to be recorded under Section 81 of A
the Act.

This interpretation of the law would relieve undue hardship to all the
operators and at the same time it would also be consistent with the scheme
of the Act to subserve the rights and protection provided under the Act so
as to avoid rigour in the operation of the law. B
Thus considered, for the reasons given above, the view taken by the
High Court is in conformity with law but subject to above modification in
1 the judgment.

The appeals and the writ petition are accordingly disposed of but, C
under the circumstances, without costs.

v.s.s. Appeal and petition disposed of.
A BIKRAM SINGH AND ORS.
v.
THE LAND ACQUISITION COLLECTOR AND ORS.

SEPTEMBER 12, 1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

Income Tax Act, 1961 :

Sections 4,5, 194-A-lnterest received as income on the delayed pay-
C ment of compensation detennined under S.28 or 31 of Land Acquisition
Act-Held : It is revenue receipt exigible to tax under S.4-S.194A not
applicable as it relates to deduction of tax at source.

Land Acquisition Act, 1894 :

D Sections 28,31-Jnterest received as income on the delayed payment of
compensation-ls a revenue receipt exigible to tax under S.4 of the Income
Tax Act, 1961.

Dr. Sham/al Nanlla v. Commissioner of Income tax, Jamnm, 53 ITR
151; TMK Gvoindaraju Chetty v. Commissioner of Income-tax, Madras, 66
E ITR 465; Rama Rai & Ors. v. CIT Andhra Pradesh, 181 ITR 400 and K.S.
Krishna Rao v. CIT, A.P., 181 ITR 408, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12497-
12500 of 1996.
F From the Judgment and Order dated 13.12.91 of the Punjab &
Haryana High Court in C.W.P. Nos. 10558, 10556, 11495 and 10557of1991.

K. G. Bhagat, S.S. Dahiya, Kamal Baid and G.G. Singh for the
Appellants.
G
R.R. Misra, Ms. Lakshmi Iyengar and Anil Srivastava for the
Respondents.

The following Order of the Court was delivered :

H Leave granted.
214
BIKRAM SINGH v. lAND ACQN. COLLECTOR 215

We have heard learned counsel on both sides. A

This appeal by special leave arises from the judgment of the High
court of Punjab & Haryana made in CWP Nos. 1558/91 and batch on
December 13, 1991. The admitted facts are that the appellants had received
notice on July 31, 1991 for payment of income-tax on the delayed interest B
amount recovered under the Land Acquisition Act, 1894 (for short, the
"LA Act"). calling that notice in question, they filed writ petitions. The
High Court relying upon decisions of this Court dismissed the petitions
with a finding as under :

"This now leads us to the consideration of the question whether c
interest paid on the amount of compensation for compulsory
acquisition of land is "income" and, therefore, taxable under. the
Act. Matters which have to be considered for awarding compen-
sation for compufaory acquisition of land are enumerated in section
23 of the Land Acquisition Act. While sub- section (2) of that D

-
section provides for payment of certain solatium for acquisition of
compulsory nature, interest is not included as an item of compen-
sation. Instead, interest is payable by force of section 34 of the Act,
if compensation is not paid or depositeq on or before taking
possession of the land. By force of section 28 also, the court, on a
reference if it enhances the co~pen~ation offered by the Collector E
is entitled to award interest on the amount of such enhanced
compensation. Section 28 a:lso provides that the court, on a refer-
ence, shall award interest on the amount of enhanced compensa-
tion. It will thus appear from the text of section 34 of the Land
Acquisition Act that interest is not payable as compensation but F
is paid if the compensation is not paid before taking possession of
the land. Interest is thus payable because of the deprivation of the
possession of that land before compensation for compulsory ac-
quisition of that land is paid. This position is now well- settled. In
Dr. Sham/al Nam/a v. CIT, (1964) 53 ITR 151 SC ; AIR (1964) SC
1878, the observation is that interest has to be paid on the amount G
awarded from the time the Collector takes possession until the
amount is paid or deposited. Interest is not an item of compensa-
tion nor is it consideration for acquisition of land. Payment of
interest has been provided for separately under section 34 of the
Land Acquisition Act. This is so because interest is paid after the H
216 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A compensation has been determined. It is something in addition to
the capital amount though it arises out of it. It has expressly been
held that interest under section 34 of Land Acquisition Act is not
compensation paid to the owner for depriving him of his right to
possession of the land acquired, but is given to him for the
deprivation of the use of the money representing the compensation
B
for the land acquired. This interest under section 34 of the Land
Acquisition Act is thus paid for the delayed payment of the
compensation amount and, therefore, a revenue receipt liable to
tax under the Income-tax Act. The Supreme Court expressly dis-
tinguished the decision of the Privy Council in Inglewood Pulp and
c Paper Co. Ltd. v. New Brnnswick Electric Power Commission, AIR
(1928) PC 287. This decision of the Privy Council as also the
decision in Abhay Singh Surana v. Secretary, Ministry of Com-
munication, AIR (1987) SC 2177 are authorities only for the
proposition that interest is payable on the amount of compensation
D determined either under the Land Acquisition Act or under the
Requisition and Acquisition of Immovable Property Act, 1952.
Neither of these authorities consid{'.red the question of exigibility
of such interest to income-tax. This principle in Narnla's case
(1964) 53 ITR 151 SC has subsequently been applied by the
E Supreme Court in a later decision in T.N.K. Govindaraju Chetty v.
CIT, (1967) 66 ITR ·465 also, where the property was acquired
under the Requisition and Acquisition of Immovable Property Act
which did not make any specific provision for the award of interest
on the amount of compensation, the application of sections 28 and
34 of the Land Acquisition Act, 1894, dealing with the pa~ent of
F interest on the amount awarded ·as compensation could not be
deemed to be excluded. When the owner of property was dispos-
sessed pursuant to an order for compulsory acquisition, an agree-
ment that the acquiring authority will pay interest on the amount
of compensation was implied. It has been expressly held that the
G view in Sham/al Narula's case (1964) 53 ITR 151 SC, that the
interest received is chargeable to tax as income, will apply if
interest is payable under the terms of an agreement, express or
implied, and the court or the arbitrator gives effect to the terms
of the agreement and awards interest which has been agreed to be
H paid. It has, therefore,to be held that the amount received as
BIKRAM SINGH v. LAND ACQN. COLLECTOR 217

interest on the amount of compensation assessed under the Land A
Acquisition Act or under the Requisition and Acquisition of Im-
movable Property Act is income taxable under the Income Tax
Act. Certainly, it is not agricultural income since it is neither rent
nor revenue derived from the land used for agricultural purposes
It is, therefore, not exempt from income-tax under section 10(1)
B
of the Income-tax Act as agricultural income. The Land Acqui~i.
tion Collector is, therefore, perfectly justified in retaining the
amount of interest payable to the holders of agricultural lands
compulsorily acquired in terms of section 194A of the Act. The
Land Acquisition Collector is also justified in demanding the sum
paid on account of interest under section 194A of the Act. The C
notices issued and challenged in these petitions are, therefore,
valid and perfectly justified."

The question for consideration is : whether the delayed interest on
the compensation paid under the Land Acquisition Act is chargeable to D
income tax under Sections 4 & 5 of the Income Tax Act, 1961 (for short
the "Act") It is contended for the appellants that "interest"-has been defined
under Section 2 (28A) as:

"Interest" means interest payable in any manner in respect of any
moneys borrowed or debt incurred (including a deposit, claim or E
other similar right or obligation) and includes any service fee or
other charge in respect of the moneys borrowed or debt incurred
or in respect of any credit facility which has not been utilised."

Under Section 194A dealing with "interest on securities" provides as
under: · F

"194A. (1) Any person, not being an individual or a Hindu un-
divided family, who is responsible for paying to a resident any
income by·way of interest on securities shall, at the time of credit
of such income to the account of the payee or at the time of G
payment thereof in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income- tax thereon at
the rates in force.

Explanation-For the purposes of this section, where any income
by way of interest as aforesaid is credited to any account, whether H
218 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A called "Interest payable account" or "SuspeJ!Se account" or by any
other name, in the books of account of the person liable to pay
such income, such crediting shall be deemed to be credit of such
income to the account of the payee and the provisions of this
section shall apply accordingly."
B In the circular issued by the Board of Direct Taxes, the concept of
"interest" defined under Section 2(28A) has been explained with the added
explanation as under :

"The terms "interest" has been defined in new clause (28A) inserted
in Section 2 of the Income-Tax Act with a view to removing doubts
C.
about the true character of fees or other charges paid in respect
of moneys borrowed or in respect of the credit facilities which
have not been utilised. The definition is very wide and covers
interest payable in any manner in respect of loans, debts, deposits,
claims and other similar rights or obligations. It also includes any
D service fees · or other charges in respect of such loans, debts,
depo~its, etc. as also fees in the nature of commitment charges on
unutilised portion of credit facilities. This definition will be ap-
plicable for all purposes of the Income-tax Act.:

Relying upon these three provision, it is contended that the definition
E of "interest" is confined only to money-lending business between debtor and
the creditor and if the creditor receives any amount by way of interest from
the debtor, it is in the nature of a receipt of income on a charge paid in
respect of money borrowed or in respect of the credit facility given which
have been utilised and, therefore, the definition would be applicable only
F when the money is lent by a creditor and received by the debtor. Then only
interest is chargeable to income-tax. When interest is paid either under
Section 34 or Section 28 of the LA Act, it is only a payment in considera-
tion of loss of enjoyment of the possession by the owner. It is not by way
of any charge on compensation determined under Section 23(1). Therefore,
it is not exigible to income tax. We find no force in the contention.
G
The controversy is no longer res integra. This question was considered
elaborately by this Court in Dr. Shamlal Narula v. Commissioner of Income-
tax, Jammu 53 ITR 151. Therein K. Subba Rao, J. as he then was, con-
sidered the earlier case law on the concept of "interest" laid down by the
H Privy Council and all other cases and had held at page 158 as under :
\
BIKRAM SINGH v. lAND ACQN. COLLECTOR 219

"In a case where title passes to the State, the Statutory interest A
provided thereafter can only be regarded either as representing
I
the profit which the owner of the land might have made he had
the use of the money or the loss he suffered because he had not
that use. In no sense of the term can it be described as damages
or compensation for the owner's right to retain possession, for he B
has no right to retain possession after possession was taken under
Section 16 or Section 17 of the Act. We, therefore, hold that the
statutory interest paid under Section 34 of the Act is interest paid
for the delayed payment of the compensation amount and, there-
fore, is a revenue receipt liable to tax under the Income-tax Act".
c
This position of law has been consistently reiterated by this Court in
the case of TMK Govindaraju Chetty v. Commissioner of Income Tax,
Madras, 66 ITR 465; Rama Rai & Ors. v. CIT, Andhra Pradesh, 181 ITR
400 and K.S. Krishna Rao v. CIT, A.P., (181) ITR 408. Thus by a catena
of judicial pronouncements, it is settled law that the interest received on D
delayed payment of the compensation is a revenue receipt exigible to
income tax. It is true that in amending the definition of "interest" in Section
2(28A), interest was defined to mean interest payable in any manner in
respect of any money borrowed or debt incurred including a deposit, claim
or other similar right or obligation and includes anv service, fee or other
charges in respect of the moneys borrowed or debt incurred or in respect E
of any credit facility which has not been utilised. It is seen that the word
"interest" for the purpose of the Act was interpreted by the inclusive
definition. A literal construction may lead to the conclusion that the
interest received or payable in any manner in respect of any moneys
borrowed or a debt incurred or enumerated analogous transaction would F

- be deemed interest. That was explained by the Board in the circular
referred to hereinbefore.

But the question is: whether the interest on delayed payinent on the
acquisition of the immovable property under the Acquisition Act would G
not be exigible to income-tax? It is seen that this Court has consistently
taken the view that it is a revenue receipt. The amended definition of
"interest" was not intended to exclude the revenue receipt of interest on
delayed payment of compensation from taxability. Once it is construed to
be a revenue receipt, necessarily, unless there is an exemption under the
appropriate provisions of the Act, the revenue receipt is exigible to tax. H
220 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A The amendment is only to bring within its tax net, income received from
the transaction covered under the definition of interest. It would me~n that
the interest received as income on the delayed payment of the compensa-
tion determined under Section 28 or 31 of the Acquisition Act is a taxable
event. Therefore, we hold that it is a revenue receipt exigible to tax under
Section 4 of the Income-Tax Act. Section 194A of the Act has no applica-
B tion for the purpose of this case as it encompasses deduction of the income
tax at the source. However the appellants are entitled to spread over the
income for the period for whieh payment came to be made so as to
compute the income for assessing tax for the relevant accounting ye<!.r.

c of lawUnder these circumstances, we do not think that there is any error
committed by the High Court in the Judgment under appeal war-
ranting interference

The appeals are accordingly dismissed. But in the circumstances
without costs.
D
G.N. Appeals dismissed.
STATE OF RAJASTHAN AND ORS. A
v
D.R. LAXMI AND ORS.

SEPTEMBER 12, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B

Land Acquisition Act, 1894:

Section 4( 1)-Does 11ot e11visage specification of the nature of the land
as to whether it is waste or arable la11d when the 11otification is published. C
Section 17(4)-11wugh lands situated ill Urban areas, Urban Land
Ceili11g Act recognises the existence of a151icultural lands within urban ag-
gelomeration-Wlien the lands were capable of raising crops, they remain to
be anzble lands-Hence exercise of power under S.17(4) by the Govemment
was not bad in law. D
Sections 4(1), 6, 16, 17(2) & 48-Absence of publication of the sub-
stance of the notification in the locality-Wliether re11ders the proceedings
void--Held, conduct of parties to be considered--After possession was taken,
the lands stood vested in the State free from all e11cumbra11ces-11ierefore the
title validly vested i11 the Govemme11t cannot be divested-Moreover deter- E
mination of compe11sation attained finality-Also it was not a case to shift
the date for the detennination of compensation--Court should be loathe to
quash the notification.

Co11Stitution of India, 1950 :
F
Art. 226-Extraordinmy jurisdictio11-Discretionary powers-Exercise
of-All relevant factors to be taken i11to pra151natic consideration-Land Ac-
quisition proceedings-Award passed and has become final--Land also
vested in Govemme11t-Fili11g of writ petition after inordinate delay-In such
circumstances Cowt should be loathe to quash the notifications. G

lshwarlal Girdharilal Joshi v. State of Gujarat, [1968) 2 SCR 267,
followed.

Sanjeevanagar Medical & Health Employees' Co-operative Society v.
Mohd. Abdul Wahab & Ors., [1996) 3 SCC 600; Satendra Prasad lain v. State H
221
222 SUPREME COURT REPORTS {1996) SUPP. 6 S.C.R.

A of U.P., (1993] 4 SCC 369 and Municipal Corporation of Greater Bombay v.
Industrial Development & Investment Co. (P) Ltd., C.A. No. 282 of 1989
decided on 6.9.96, relied on.

Nutakki Sesharatanam v. Sub-Collector, L.A. Vijayawada, (1992] 1
sec 114, dissented from.
B
Ujjain Vikas Pradhikaran v. Raj Kumar Jolui & Ors., (1992] 1 SCC
328, distinguished.

Raja Anand Brahma Shah v. 17ie State of Utt~r Pradesh & Ors., AIR
(1967) SC 1081 and M.P. Housing Board v. Mohd. Shafi & Ors., [1992] 2
c sec 168, referred to.
''Administrative Law" by H.W.R. Wade (7th Edition) pages 342-43
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2411 of
D 1993.

From the Judgment and Order dated 2.9.85 of the Rajasthan High
Court in D.B.C.W.P. No. 602 of 1978.

Aruneshwar Gupta for the Appellants.
E
Rajinder Sachhar, H.K.Puri, Ujjwal Banerjee and Rajesh Srivastava,
for the Respondent.

Ms. Niranjana Singh for Ms. Sushma Suri for the Respondent Nos.
5-6.
F
The following Order of the Court was delivered :

This appeal by special leave arises from the Division Bench judgment
of the High Court of Rajasthan made on September 2, 1985 in W.P. No.
G 602/78. The admitted facts are that the notification under Section 4(1) of
the Land Acquisition Act, 1894 (1 of 1894) (for short, the 'Act') was
published in the State Gazette on March 23, 1977 acquiring 31.28 acres of
land for defence purpose. Enquiry under Section 5-A was dispensed with
in exercise of the power under Section 17(4) of the Act and declaration
under Section 6 was published on April 28, 1976. Possession was taken on
H May 19, 1977. The award was passed under Section 11 on March 21, 1978.
STATE v. D.R. IAXMI 223

The reference under Section 18 was sought and made in March 1978 to A
Civil Court for enhancement of the compensation. In September 1978, the
respondent filed writ petition in the High Court seeking to quash the
notification under Section 4(1) and the declaration under Section 6. The
learned single Judge referred the matter to the Division Bench. The
Division Bench has held that the acquired land is not an arable or waste
land and, therefore, the exercise of the power under Section 17(4) of the
B
Act was bad in law. Substance of the notification under Section 4(1) was
not published in the locality. The notification under Section 4(1) did not
mention that it was a waste or arable land. On these grounds, the learned
judges have quashed the notification. Thus, this appeal by special leave.
c
Shri Aruneshwar Gupta, learned counsel for the appellants, has
contended that the view of the High Court is clearly erroneous. It is not
necessary that the notification under Section 4(1) should contain a decla-
ration that the needed land is a waste or arable land. The finding that it is
neither waste nor arable land is not correct so long a the land is capable D
of cultivation. If no cultivation was made it would still be arable land.
Therefore, the view that it is neither waste nor arable land is not correct.
It is difficult to accept that the entire six acres of land which is now claimed
by the respondents was within the compound wall as found by the High
Court. The view that substance of the notification was not published in the
locality was not correct in law without any further discussion on facts or E
legal principles. Even the finding cannot be well supported by any material
on record; in law the High Court was wrong in intereferring under Article
226 of the Constitution~ Shri Rajinder Sachar, learned senior counsel for
the respondents, contended that since the substance of the notification
under Section 4(1) was not published which is mandatory, the notification F
under Section 4(1), and declaration under Section 6 could be challenged
at any time even after the award was made or possession was taken. Since
publication of the notification under Section 4(1) is the foundation for
taking further steps for the acquisition, procedural steps required under
the Act should be followed. The substance of the notification under Section
4(1) was not published in the locality. So all the proceedings which had G
subsequently been taken place stand nullified. Therefore, the Court would
in an appropriate case grant the declaration including to quash the award
and future steps. He also contended that it would be difficult to accept that
the lands are arable lands, if not waste land. The finding that the land is
arable land is based on consideration of the material on record. Therefore, H
224 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A it is not arable land. Further, it is contended that the respondent had stated
in the High Court that he was prepared to accept the compensation
provided the date of notification under Section 4(1) was shifted to four or
five years later to the actual date of the notification under Section 4(1)
published on March 23, 1977. He would stand by the same offer and,
therefore, it is not a case warranting interference.
B
The questions, therefore, are: (1) whethe1· the notification under
Section 4(1) should contain the declaration that the lands are waste or
arable lands; (2) whether the exercise of the power under Section 17(4)
was vitiated by the finding that the lands were not capable of cultivation
C being situated in urban area; (3) whether the substance of the notification
published under Section 4(1) was not published in the locality;_ if it not
complied with, when the entire acquisition proceedings had become final,
whether the High Court was justified in exercising the power under Article
226? It is not necessary to recapitulate all the facts narrated above. Suffice
D it to state that after the reference was made to the Civil Court, it passed
an award under Section 26 which was challenged by the State by filing an
appeal under Section 54 against the enhanced compensation. Thereby, the
respondents had accepted the award. The State feeling aggrieved by the
enhanced compensation, filed an appeal in the High Court. The High
E Court, by judgments dated May 5, 1982 and September 23, 1982, dismissed
the appeals which became final. Thus, the acquisition proceedings became
final.

The question, therefore, as said above is : whether the High <;;ourt
is justified in interfering with these matters? Section 4(1) of the Act does
F not require to specify the nature of the land, i.e. whether it is arable or
waste land. The object of the publication of the notification under Section
4(1) was that (1) the land is needed for a public purpose or is likely to be
needed; (2) the officers of the State are authorised to enter upon the land
and carry on measurement etc.; and (3) the owner/interested person was
G put on notice that any encumbrance hereafter would not bind the State.
Therefore, Section 4(1) does not envisage specification of the nature of the
land, i.e. whether it is waste or arable land, when the same was published.
The view, therefore, of the High Court that the notification under Section
4(1) should contain a declaration of- the nature of the land is clearly
H erroneous.
STATE v. D.R. LAXMI 225

Second question whether the land is waste or arable, is a mixed A
question of facts and law. It depends upon the facts in each case. In this
case, it is seen that on their own showing, the land of an extent of 6 acres
belonging to the respondents was sought to be acquired along with other
vast extent of land. It consists of open land as well as building and the
servant quarters. The award of the Land Acquisition Officer has been
B
placed before us. The building was not acquired for the public purpose but
only servant quarters came to be acquired. From this background, the
question arises: whether the land is arable .land? This question was con-
sidered by a Bench of three Judges in Ishwarlal Girdharilal Joshi v. State
of Gujarat, (1968] 2 SCR 267. After elaborate consideration of the various
judgments of the High Courts and dictionary meaning of the words "arable" c
in that behalf, this Court has relied thus :

"There is no definition of the word 'arable' in the original Land
Acquisition Act. A local amendment includes garden lands in the
expression. Now lands are of different kinds: there is waste-land D
desert-land, pasture-land, meadow-land, grass-land, wood-land,
marshy-land, hilly-land, etc. and arable land. The Oxford biction-
ary gives the meaning or 'arable' as capable of being ploughed;
fit for tillage; opposed to pasture-land or wood land and gives the
root as arable is in Latin. The learned Judges have unfortunately
not given sufficient attention to the kinds of land and the contrast E
mentioned with the meaning. Waste- land comes from the Latin
vastitas or vastus (empty, desolate, without trees or grass or build-
ings). It was always usual to contrast vastus within incultus (uncul-
tivated) as in the phrase 'to lay waste' (agri vastate). A meadow
or pasture-land is pratum and arable is arvum and Cicero spoke F
of prata et a1va (meadow and arable lands). Grass-land is not
meadow or pasture- land and in Latin is known as campus as for
example the well- known Campus Martius at Rome, where the
comitia (assembly of the Roman people) used to meet. Woodlands
is silvae, nemora or saltus."
G
This was considered also by the Constitution Bench in Raja Anand
Brahma Shah v. The State of Uttar Pradesh & Ors., AIR 1967 SC 1081. In
that case, the acquired lands were mineral lands for mining purpose.
Therefore, the question arose: whether they were arable lands? On the
facts of this case, the Constitution bench came to the conclusion that since H
226 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A they were not arable lands, the exercise of the power under Section 17(4)
was not justified in law. In view of the fact that the Act itself has considered
as to when the land could be considered to be arable land, as explained by
this Court, the interpretation put up in lshwar Lal's case is in the correct
perspective. The Court has power to consider the question in that light. In
considering the question whether the land is arable or waste, dictionary
B meaning does not help the Court to solve the problem. Pragmatic ap-
proach is required to be adopted in considering the question on the facts
in each case. Though the lands in this case were situated in urban area, the
urban Land Ceiling Act itself recognises existence of the agricultural lands
within the urban agglomeration and they are dealt with accordingly. When
c the lands were capable of raising crops, they remained to be arable lands.
Therefore, the exercise of the power under Section 17(4) by the Govern-
ment was not bad in law. On facts, it is an arable land capable to cultiva-

D
tion. It is seen that it being a small area comprising servant quarter as part
of a large area, including six areas of respondent's lands, it cannot be said
that the rest of the ·1and is occupied by the buildings ·or is within the
-
compound though situated in urban area. The view of the High Court,
therefore, was clearly erroneous.

The question is: whether the absence of the publication of the
substance of the notification in the locality renders the entire proceedings
E void? We need not dilate upon the question whether local publication of
substance of Section 4(1) notification is mandatory or directory. Since this
Court has consistently taken the view that compliance of the requirement
of the publication of the notification under Section 4(1) in the Gazette as
well as publication of the substance of the notification in the locality now
F under the Amended Act in the newspaper, is mandatory requirement. As
the facts are not in controversy, as mentioned in the judgment of the High
Court, the substance of the notification was not published in the locality;
we proceed on the premise that second step, namely, publication of the
substance of the notification in the locality, was not taken. The question
G then is : whether Section 4(1) notification and Section 6 declaration are
required to be quashed? In this regard, we have to consider the conduct
of the parties and the effect thereof. Under the Scheme of the Act, After
. the possession of the land was taken either under Section 17(2) or Section
16, the land stands vested in the State free from all encumbrances. There-
after, there is no provision under the Act to divest the title which was
H validly vested in the State. Under Section 48(1) before possession is taken,
STATE v. D.R. LAXMI 227

the State Government is empowered to withdraw from the acquisition by A
its publication in the Gazette. In this regard, a three-Judge Bench of this
Court has considered the question in Sanjeevanagar Medical & Health
Employees' Co-operative Society v. Mohd. Abdul Wahab & Ors., [1996] 3
sec 600 and held in paragraph 12 thus :
B
"That apart, as facts disclose, the award wa,s made on 24.U.1980
and the writ petition was filed on 9.8.1982. It is not in dispute that
compensation was deposited in the Court of the Subordinat~
Judge. It is asserted by the appellant Society that possession of the
land was delivered to it and the land had been divided and allotted
to its members for construction of houses and that construction of C
some houses had been commenced by the date the writ petition
was filed. It would be obvious that the question of division of the
·properties among its m(!mbers and allotment of the respective plots
to them would arise only after the Land Acquisition Officer had
taken possession of the acquired land and handed it over to the D
appellant Society. By operation of Section 16, the land stood vested
in the State free from all encumbrances. In Satendra Prasad Jain
v. State of U.P., [1993] 4 SCC 369, the question arose: whether
notification under Section 4(1) and the declaration under Section
6 gets lapsed if the award is not made within two years as envisaged
under Section 11-A? A Bench of three Judges had held that once E
possession w;;i.s taken and the land vested in the government, title
tc the land so vested in the State is subject only to determination
of compensation and to pay the same to the owner. Divesting the
title to the land statutorily vested in the Government and reverting
the same to the owner is not contemplated under the Act. Only F
Section 48(1) gives power to withdraw from acquisition that too
before possession is taken. That question did not arise in this case.
The property under acquisition having been vested in the appel-
lants, in the absence of any power under the Act to have the title
of the appellants divested except by exercise of the power under
Section 48(1), valid title cannot be defeated. The exercise of the G
power to quash the notification under Section 4(1) and the decla-
ration under Section 6 would lead to incongruity. Therefore, the
High Court under those circumstances should not have interfered
with the acquisition and quashed the notification and declaration
under Sections 4 and 6 respectively. Considered from either H
228 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A perspective, we are of the view that the High Court was wrong in
allowing the writ petition."

In Satinder Prasad Jain's case another Bench of three Judges had
held that though award under Section 11-A was not made within two years
after the Amendment Act 68 of 1984 came into force, the title having been
B vested in the State, the notification under Section 4(1) and declaration
under Section 6 do not get lapsed and non-compliance of statutory
provisions does not have the effect of divesting the title of the land vested
in the Government free from all encumbrances.

c Recently, another Bench of this Court in Municipal Corporation of
Grater Bombay v. Industrial Deve/Opment & Investment Co. (P) Ltd., C.A.
No. 282 of 1989 decided on September 6, 1996 re-examined the entire case
law and had held that once the land was vested in the State; the Court was
not justified in interfering with the notification published under ap-
D propriate provisions of the Act. Delay in challenging the notification was
fatal and writ petition entails with dismissal on grounds of laches. It is thus,
well settled law that when there is inordinate delay in filing the writ petition
and when all steps taken in the acquisition proceedings have become final,
the Court should be loathe to quash the notifications. The High Cour.t has,
no doubt, discretionary powers under Article 226 of the constitution to
E quash the notification under Section 4(1) and declaration under Section
6. But it should be exercised taking all relevant factors into pragmatic
consideration. When the award was passed and possession was taken, the
Court shoul~ not have exercised its power to quash the award which is a
material factor to be taken into consideration before exercising the power
F under Article 226. The fact that no third party rights were crated in the
case, is hardly a ground for interference. The Division Bench of the High
Court was not right in interfering with the discretion exercised by the
learned single Judge dismissing the writ petition or the ground of laches.
Reliance was placed by Shri Sachhar on M.P. Housing Board v. Mohd. Shafi
& Ors., [1992] 2 SCC 168 in particular paragraph 8, wherein it was held
G that compliance of the requirements is mandatory and non-compliance
thereof renders all subsequent proceedings connected therewith unexcep-
tionably illegal; but the question is what will be its effect. That was not the
question in that case, since no award had come to be passed in Nutakki
Sesharatanam v. Sub-Collector, LA., Vijayawada, [1992] 1 SCC 114 a
H two-Judge Bench of this Court had held that if the requirements of Section
STATE v. D.R. LAXMI 229

4 are not complied with, all proceedings had become invalid and possession A
was directed to be re-delivered to the appellant. We are of the view that
the ratio therein is not correctly laid down. The question whether violation
1( of the mandatory provisions renders the result of the action as void or
voidable has been succingly considered in "Administrative Law" by H.W.R.
Wade (7th Edition) at page 342-43 thus :
B
"The truth of the matter is that the Court will invalidate an order
only if the right remedy is sought by the right person in the right
proceedings and circumstances. The order may be hypothetically
a nullity, but the court may refuse to quash it because of the
plantiffs's lack of standing, because he does not deserve a discre- C
tionary remedy, because he has waived his rights, or for some other
legal reason. In any such case the 'void' order remains effective
and is, in reality, valid. It follows that an order may be void for
one purpose and valid for another; and that it may be void against
one person· but valid against another. A common case where an D
order, however void, becomes valid is where a statutory time limit
expires after which its validity cannot be questioned. The statute
does not say that the void order shall be valid; but by cutting of
legal remedies it produces that result."

The order or action, if ultra vires the power, it becomes void and it E
does not confer any right. But the action need not necessarily set at naught
in all events. Though the order may be void, if the party does not approach
the Court within reasonable time, which is always a question of fact and
have the order invalidated or acquiesced or waived, the discretion of the
Court has to be exercised in a reasonable manner. When the discretion has F
been conferred on the Court, the Court may in appropriate case decline
to grant the relief, even if it holds that the order was void. The net result
is that extraordinary jurisdiction of the Court may not be exercised in such
circumstances. It is seen that the acquisition has become final and not only
possession had already been taken but reference was also sought for; the G
award of the Court under Section 26 enhancing the compensation was also
accepted. The order of the appellate court had also become final. Under
those circumstances, the acquisition proceedings having become final and
the compensation determined also having become final, the High Court
was highly unjustified in interfering with and in quashing the notification
under Section 4 (1) and declaration under Section 6. H
230 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A It is true that the respondent had offered to accept the compensation
by s.hifting the date of the notification by 4 to 5 years from the date of the
notification under Section 4(1). For this view, reliance was placed by Shri
Sacher on the judgment of this Court in Ujjain Vikas Pradhikaran v. Raj
Kumar Johri & Ors. (1992) 1 SCC 328 where this Court had allowed the
shifting of the date for the determination of the compensation. In that case
B since the award had not been passed, this Court had given the direction
but in this case award determining the compensation has attained finality.
it is not a case to shift the date for the determination of the compensation.
Thus considered, we are of the view that the High Court was not justified
in interfering with the notification and declaration under Section 4(1) and
c 6.

The appeal is accordingly allowed. The judgment of the High Court
stands set aside. The writ petition stands dismissed but, in the circumstan-
ces, without costs.

D G.N. Appeal allowed.
BASANT KUMAR ETC. A
v.
UNION OF INDIA ETC.

SEPTEMBER 12, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B

La11d Acquisition Act, 1894 :

Compensation-Award-All lands can11ot a11d should 11ot be classified
as possessed of same market value-Burde11 on claimant to prove market C
value-Cowts should adopt realistic standards a11d pragmatic approach in
evaluation of the evidence-Doctline of equality i11 detenni11ation a11d pay-
me11t of same compensation for all claimants involved in the same 11otifica-
tioit is not good plinciple-Deductio11 towards providing amenities like roads,
pad:s, electlicity, sewages water facilities etc.-High Cozat not justified in
adopting ad-hoc pli11ciple-Claima11ts e11titled to e11ha11ced compensation, D
interest on enhanced compensatio11 at the rate of 6% per annum and 15%
solatiwn on the enhanced compensation from the date of taking possession
till the date of deposit into Cowt.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4327 of E
1991 Etc. Etc.

From the Judgment and Order dated 8.7.91 of the Delhi High Court
in L.P.A. No. 97 of 1980.

P.C." Jain, N.K. Jain and Ms. Sheela Goal for the Appellants. F
The following Order of the Court was delivered :

These appeals by special leave arise from the judgment of the
Division Bertch of the High ~ourtof Delhi made on July 8, 1996.in Letters
Patent Appeal No. 97/80 and other cases. G

Notification under Section 4(1) of the Land Acquisition Act, 1894 (1
of 1894) (for short, the 'Act') was published on October 24, 1961 acquiring
a larg.: extent of 1669 bighas 18 biswas of land for the planried development
of Delhi. The said lands are situated in revenue estate of Posangipur. The H
231
232 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Land Acquisition Officer categorised the lands into two blocks - Block A
and Block B. He assessed the compensation at the rate of Rs. 1400 per
bigha for Block A and Rs. 1200 per bigha for Block B. On reference under ;.-
Section 18, the Additional District Judge by his award and decree dated
March 8, 1968 enhanced the compensation to Rs. 3050 per bigha. On
B Regular First Appeal, the learned Single Judge dismissed the appeal
confirming the award of the reference Court. When the LPA was filed, the
Division Bench held that the LPA did not lie.

In Balbir Singh v. Union of India, in RFA No. 214/68 by judgment
dated may 14, 1980, the sanie was taken on merits in the appeal. Similar
c is the case in SLP (C) No. 17055/92 relating to Chhajju in RFA No. 65/69
of the even number dated May 14, 1980. Thus, these appeal by special
leave.

The extent of the land involved in Basant KumaT's case, viz., CA No.
D 4327/91 is not clear as no one is appearing for the appellant. But as regards
the appeal of Chhajju, his lands are of an extent of 37 bighas 10 biswas in
which his share is 01ie-half. As regards Balbir Singh's lands, he has 66
bighas, 10 biswas in which he has l/3rd share. The question for considera-
tion is : what will be the reasonable compensation which the lands under
E acquisition were capable to secure as on the date of the notification?

Shri N.C. Jain, the learned senior counse:l appearing for the appel-
lants, contended that in RFA No. 55/70 Raghuvir Singh v. Union of India,
arising out of the same notification, another Division Bench of the High
Court had determined the compensation at the rate of Rs. 8700 per bigha
F and less Rs. 500 per bigha for the notified lands; and similar was the view
taken by another Bench of that Court in LPA No. 137/80 and batch decided
on April 19, 1991 titled Chet Ram & Ors. v. Union of India, all these lands
being situated in the same village, the appellants are also entitled to the
same rate of compensation. The Union of India has not filed any appeals
G against those cases. The lands are possessed of same potential value and,
therefore, the appellants are entitled to the same compensation. We had
adjourned the case on the last occasion, as no one appeared for the Union
of India; Since, even today, no one is appearing for the Union of India, we
have taken assistance of Shri Jain and have waded through the entire
H material evidence. The question is : whether the appellants are entitled to
BASANTKR. v. U.0.1. 233

the same compensation as was determined by the High Court in the A
appeals arising out of Raghuvir Singh's and Chet Ram's case? It has been
firmly settled law by beed role of decisions of this Court that the Judge
determining the compensation under Section 23(1) should sit in the arm
chair of a willing prudent purchaser in an open market and see whether
he would offer the same amount proposed to be fixed as market value as B
a willing and prudent buyer for the same or similar land, i.e., land possess-
ing all the advantageous features and to the same extent. This test should
always be kept in view and answered affirmatively, taking into considera-
tion all relevant facts and circumstances. If feats of imagination are allowed
to sway, he out steps his domain or judicial decision and lands in miscon- C
duct amenable to disciplinary law. We have gone through the record and
judgment in Chet Ram case and Raghuvir Singh case decided by the two
division Benches. The learned Judges have adopted the principle that the
entire lands in the village shall be treated as one unit and the compensation
shall uniformly be determined on that basis. The principle is wholly unsus- D
tainable in law and cannot be a valid ground for determination of compen-
sation. It is common knowledge that even in the same village, no two lands
command same market value. The lands abutting main road or national
highway command higher market value and as the location goes backward,
market value of interior land would be less even for same kind of lands. It
is a settled legal position that the lands possessed of only similar poten- E
tiality or the value with similar advantages offer comparable parity of the
value; It is common ·knowledge that the lands in the village spread over the
vast extent. In this case, it is seen that land is as vast as admeasuring 1669
bighas, 18 biswas of land in the village. So, all lands cannot and should not
be classified as possessed of same market value. Burden is always on the F
claimant to prove the market value and the Court should adopt realistic
standards and pragmatic approach in evaluation of the evidence. No doubt,
each individual had different parcels of the land out of the vast land. If that
principle is accepted, as propounded by the High Court, irrespective of the
quality of the land, all will be entitled to the same compensation. That G
principle is not the correct approach in law. The doctrine of equality
in determination and payment of same compensation for all claimants
involved in the same notification is not good principle acceptable for
the aforestated reasons. When both the lands are proved to be possessed
of same advantages, features etc., the only equal compensation is permis- H

'f
234 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A sible.

It is then to be seen that the learned Judges have further pointed out
that when the amount claimed in the High Court in appeal under Section
54 was more them what was determined by the reference Court; to what
extent of the said amount, as claimed in appeal, could be granted was the
B test laid down. It is also opyicmsly on illegal principal. What has to be
determined under Section 23(1) 'is the market value prevailing as on the
date of notification published under Section 4(1) but not what was claimed
by the parties even pursuant to notice under Section 10 or its reference
under Section 18 or grounds of appeal under Section 54. Prior to Amend-
C ment Act 68/84 under Section 22(1), the Court had no power to grant
higher than was claimed under notice in Section 9 and 10. But now it stood
deleted. Even the estimate of the market value given by the claimant is not
decisive. Therefore, the principle laid down by the Court in the said two
cases is obviously illegal and cannot form a legal basis. Though these
D judgments became final, we cannot repeat, on principle of parity, the same
illegality.

It is true, as pointed out by the High Court and also stressed v~ry
vehemently by Shri Jain, that compensation cannot be determined on the
E basis of the face of the claimants or the status of the claimants. Compen-
sation requires to be determined for the land acquired and not on the basis
of the status of the person from whom the land was acquired. In Raghbir
Singh's case as the lands acquired were developed ones, Rs. 9,000 and Rs.
8700 per bigha were determined. It is settled legal position that if the land
is already developed then what has to be seen is the nature of development
F and money expanded by the developer and as to what was the market value
prevailing on that basis as on the date of notification, and what was the
situation of the acquired land on that date; all these and other relevant
facts have to be taken into consideration and then market value should be
determined. Merely because a land is developed or developing land, it
G would not be that some compensation is to be adopted to determine the
market value for the entire land. as a ·developed land. If it is to be
developed, it is settled legal position that at least l/3rd of the compensation
has to be deducted towards providing amenities, like roads, parks,
electricity, sewage, water facilities etc. This Court had upheld deduction of
H even 60% towards development charges. The High Court, therefore, was
BASANTKR.v. U.0.1. 235

also not right in adopting ad hoc principle. A

The question then is : what would be the reasonable compensation
which the lands of appellants were capable to secure as on the date of
notification? It is seen that the appellants have produced two sale
transactions; in respect of land acquired in September 1961 the market B
price fetched was not more than Rs. 3250 per bigha; for land acquired
in the year 1958 the market value fetched was about Rs. 5000 per bigha.
We do not have any material indicating as to what were the reasons
behind the sale in respect of those sale deeds and the nature and situation
of that land. Under these circumstances, the reference Court rightly had C
not placed reliance on the 1958 sale transactions since the appellants have
not produced any evider.ce on record to show whether the lands of the
appellants were developed and fit for construction of the houses. There-
fore, what we have to consider is that the lands are agricultural lands
and possess potential for being used for building pl,lrposes only in future D
which is not relevant. Therefore, since the lands as on the date of
notification were agricultural lands, the value has rightly been determined
on the bigha basis instead of yards basis. Since the appellants have
produced sale deeds indicating the maximum which was secured, viz., Rs.
3,250 per bigha, necessarily, the appellants would be entitled to the E
maximum rate of Rs. 3, 250 per bigha.

The next question is : whether the LPA would lie against the judg-
ment of the learned single Judge? It is settled legal position that under
Section 54 of the Land Acquisition Act, the appeal would lie to the High
F
Court; when the appeal on the basis of the pecuniary value was decided by
a single Judge necessarily, it being the judgment of the single Judge, an
appeal would lie to the same Court in the form of LPA to Division Bench.
The Division Bench was not right in holding that the LPA would not lie to
the High Court against the judgment of the single Judge. To that extent, G
the view of the High Court is not correct. The judgment in cases of Chet
Ram and R,aghbir Singh proceeded on wrong principles of law and deter-
mined the compensation. We do not approve of the views as correct and,
therefore, we cannot base the same market value to be the market value
for the lands under consideration. H

•
236 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A The appellants are entitled to the enhanced compensation at the rate
of Rs. 3,250 per bigha and interest on enhanced compensation at the rate
of 6% per annum from the date of taking possession till the date of deposit
into court. They are ai.so entitled to 15% solatium on the enhanced com-
pensation from the date of taking possession till the date of deposit.
B The appeals are accordingly allowed, but in the circumstances,
without costs.

G.N. Appeals allowed.

•
JAHAR SINGH A
v.
UNION OF INDIA AND OTHERS

SEPTEMBER 13, 1996
B
[M.K. MUKHARJEE AND S.P. KURDUKAR, JJ.]

Se1Vice Law:

Appointme11t-Appella11t after obtaining the due pennission appeared
in the examination for the post of accou11ta11t and qualified-His ca11didature C
was cancelled on the grou11d of bei11g L.D. C. and for orga11isatio11al in-
eligibility-Held, C01icellation of the candidature illegal-Other siinilarly
:situated persons allowed to appear-Contrary and conflicting stands in op-
posing the appeal only to fore stall the claim of the appellant-Appellant
e11titled to all the consequential be11efits upon his having been declared D
successful.

The appellant, an employee of the Savings Bank Control Organisa·
tion (SBCO), Uttar Pradesh Circle, under the Ministry of Communica·
tions, appeared in the examination held for appointment of Accountants
in the Post Office and Railway Mail Service and qualified. lnspite of his E
being (fUalified, he did not get any appointment as an Accountant but on
the other hand he was intimated by Assistant Director General, New Delhi
vide letter dated July 23rd, 1993 addressed to ADDS (Rectt.) U.P. Circle
that as the appellant was working as Lower Division Clerk (LDC) in the
SBCO, he was not eligible to appear in the aforesaid examination and his F
candidature be immediately cancelled. The representation of the appellant
against the cancellation of his candidature having been rejected by the
Director General of Post, New Delhi, the appellant approached the Central
Administrative Tribunal. Before the Tribunal the respondent contested the
claim of the appellant on the ground mentioned in letter dated 23rd July, G
1993 and also on the ground that there was a separation of cadre of
Assistants of SBCO from that of the PO and RMS. The Tribunal held that
the respondents were not justified in cancelling his candidature and set
. aside the order dated 23rd July, 1993. But the Tribunal did not grant the
main relief of appointment for the reason that there was separation of
cadres of Assistants of SBCO from those PO and RMS. H
237
238 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A The appellant moved this Court in appeal. The respondents con-
tested on the ground that the appellant was not eligible as he was an L.D.C.
and that the permission was granted inadvertantly as there was organisa-
tional ineligibility of the appellant to appear in the examination due to
seperation of cadres.

B Allowing the appeal, this Court

HELD : 1. The respondents have taken different and contradictory
stands and filed affidavits making patently incorrect and untrue state-
ments only to forestall the claim of the appellant. [242-A]
c 2. The cancellation of the candidature of the appellant on the ground
that he was LDC (SBCO) is unfounded which is apparent from the letter
dated 23rd July, 1993 itself, wherein the respondent mentioned the desig-
nation of the appellant as P.A. and not LDC, as well as from the affidavit
filed in this Court by the respondent on March 29th, 1996 wherein it was
D stated that the appellant was Postal Assistant in Savings Bank Control
Organisation. [242-B-C]

3. The plea of organisational ineligibility of the appellant to appear in
the examination is also without any substance, as the respondent allowed
E two P.As. of the SBCO to appear in the examination held in the year 1993 for
appointment as Accountant. Therefore, the rule and the circular shown by
the respondent disentitling the 8ppellant to appear in the examination due
to seperation of cadres has no substance. [242-H; 243-G]

4. The impugned order dated 23rd July, 1993 is quashed and the
F respondents are directed to grant all the benefits to the appellant conse-
quent upon his having been declared successful in the examination held
on 22nd May 1992 for the post of Accountant in P.O. and RMS and this
direction has to be complied by 31st October, 1996. [244-A-B]

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11929 of
1996.

From the Judgment and Order dated 23.2.96 of the Central Ad-
ministrative Tribunal, Allahabad in O.A. No. 403 of 1994.

H S. Muralidhar and Ms. Neeru Vaid for the Appellant.
JAHARSINGHv. U.0.1.(M.K.MUKHERJEE,J.] 239

P.A. Chaudhary and C.V. Subba Rao for the Respondents. A
The Judgment of the Court was delivered by

M.K. MUKHERJEE, J. Special leave granted. Heard the learned
counsel for the parties.
B
At all material times the appellant was - and still is - an employee of
Savings Bank Control Organisation (SBCO), Uttar Pradesh Circle, under
the Ministry of Communications, Department of Posts, New Delhi. In May
1992 while working in the Agra Head Post Office he appeared in the
examination held for appointment of Accountants in the Post Office (PO) C
and Railway Mail Services (RMS); and the Senior Superintendent of Post
Offices, Agra Division, Agra vide his letter No. 82/Exam/po and RMS/Ac-
countant/92 dated November 30, 1992 informed him that he had qualified
for that post. The appellant, however, did not get any appointment to the
post of Accountant in spite of his such qualification and, on the contrary,
on August 26, 1993, he received a copy of a letter dated July 23, 1993 sent D
by Shri AK. Kaushal, an Assistant Director General in the office of the
Director General (Posts), New Delhi, to Shri jagdamba Singh, ADOS
(Rectt.) attached to the office of the Chief Post Master General, U.P.
Circle, intimating him that as he (the appellant) was working in SBCO as
an LDC (Lower Division Clerk) he was not eligible to appear for the PO E
and RMS Accountant examination and his candidature may be cancelled
immediately, Since this letter has an important hearing on this appeal we
quote the same in extenso :

"AK. KAUSHAL
ASSIT. DIR. GENL. (SPN) F
141-230/92-SPB-II 23.7.93
•
Dear Shri Singh,

Please refer to your d.o. letter No. Rectt. JM- 67/May-92/3 G
dated 4.5.93 regarding posting of Shri Jahar Singh, SBCO Agra
H.P.O. as Accountant.

2. The mater has been examined. Since Shri Jahar Singh was
working in SBCO as an LDC he was not eligible to appear for the
PO & RMS Accountant Exam as per rules. The candidature of H

..
240 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Shri Jahar Singh may be cancelled immediately and he cannot,
therefore, be considered for appointment as an Accountant.

With best wishes,

Yours sincerely,
B (AK. KAUSHAL)

Shri Jagdamba Singh, AD.O.S. (Rectt.)
0/o the Chief Postmaster General,
U.P. Circle,
LUCKNOW
c
Copy to:

1. The PMG Agra Region, Agra.

2, Shri Jahar Singh, PA (SBCO) Agra H.P.O. with reference to his
D letter dated 28.3.1993 addressed to Member (D), Department of
Posts, Oak Bhavan, New Delhi,

(AK. KAUSHAL) ,\
Asst. Director General (SPN)"
E
(emphasis supplied)

Against such cancellation of his candidature the appellant made a
representation to the Director General of Posts, New Delhi which was
rejected. He then filed an original application in the Central Administrative
F Tribunal. (CAT) Allahabad Bench wherein he asserted that though his
initial appointment in 1983 was as in LDC in SBCO since August 1, 1991
he was working there as a Postal Assistant (PA) and the permission that
" granted to him to appear in the examination for appointment as an
was
Accountant was unqualified - and not provisional. He, therefore, submitted
G that the respondents were not justified in rejecting his claim for appoint-
ment to that post after his success in the examination.

In contesting the application the respondents reiterated that the
appellant was working as an LDC at the time he appeared for the examina-
tion. The other contention that was raised on their behalf was that even
H the PAs of SBCO acquired an identity of its own after it (SBCO) was
JAHARSINGHv. U.O.l. [MK MUKHERTEE,J.] 241

reorganised with effect from August 1, 1991 with a different. and distinct A
channel of promotion which. did not entitle them to become Accountants
in PO and RMS under the extant Rules.

In disposing of the application the Tribunal observed that though
from the admitted facts of the case it was apparent that the appellant was
allowed to appear in the examination for appointment as an Accountant B
• I
by mistake as he belonged to a separate cadre, the respondents were not
justified in cancelling his candidature as he was a bona fide candidate and
there was no lapse on his part. It further observed that no rules or circulars
were brought to its notice which empowered the respondents to cancel his
candidature. Accordingly, the Tribunal set aside the order dated July 23, C
1993 cancelling the candidature of the appellant as an Accountant and all
orders made pursuant thereto. Inspite thereof, the Tribunal did not grant
the relief sought for by the appellant on the ground that he had become
ineligible for promotion to the post of Accountant by virtue of separation
of cadres of Assistants of SBCO from those PO and RMS. Dissatisfied with D
the above order the appellant filed a review application contending that
after having quashed the order of cancellation of his candidature the
Tribunal was not justified in refusing him the consequential relief of being
appointed as an Accountant in PO and RMS. The Tribunal, however,
rejected the application observing that even a defective reasoning of an E
order could not be made the basis for setting aside the same in review.
Hence this appeal at the instance of the appellant.

Besides, reiterating the contentions raised before the Tribunal Mr.
Murlidharan, the learned counsel appearing for the appellant submitted,
relying upon the averments made by the appellant in the supplementary
F
affidavit he filed in this Court, that the contention of the respondents that
PAs of SBCO were not eligible for appointment to the post of Accountants
in PO and RMS was patently untrue for in the following year (1993) also
PAs of SBCO were permitted to appear in the examination held for the
above post. In opposing the above contentions Mr. Chaudhary, the learned G
Senior counsel appearing for the respondents, assailed the finding of the
Tribunal that the cancellation of the appellant's candidature was improper
but supported the other finding of the Tribunal that the appellant was not
entitled to the post of Accountant in the PO and RMS, as SBCO has a
distinct identity and separate channel of promotion. H
242 SUPREME COURT REPORTS [1996) SUPP. 6.S.C.R.

A To appreciate the respective contentions· of the parties we have
carefully gone through the entire materials on reeord and the only con-
clusion we draw therefrom is that the respondents have taken different and
contradictory stands only to forestall the claim of the appellant and Shri
Kaushal, who has filed affidavits on their behalf, has made patently incor-
rect and untrue statements therein.
B
From a cursory glance of the letter dated July 23, 1993 written by Sri
Kaushal (reproduced earlier) it is apparent that the only ground that was
canvassed by the respondents to cancel the candidature of the appellant
was tha.t he was working in SBCO as LDC. In the affidavit that Shri
C Kaushal filed in this Court on December 9, 1995 while opposing the special
leave petition of the appellant, he reiterated :

"He (the appellant) wrongly mentioned in his. application (obvious-
ly referring to his application seeking permission to appear in the
examination) that he was Postal Assistant and inadvertently he was
D allowed to sit in the examination. When it was realised that the
permission given to him was contrary to the rules it was rightly
cancelled and naturally he was not entitled to any consequential
benefits."

That the above stand of the respondents, as put forward through the
E
affidavit of Shri Kaushal, is unfounded will be apparent, first from the letter
dated July 23, 1993 itself wherein, while indicating that a copy of the letter
was being forwarded. to the appellant his designation was shown as 'PA
(SBCO) Agra HPO' - and not LDC - and secondly, from the following
statement made by Shri Kaushal in paragraph 3 of his affidavit filed in this
F Court on March 29, 1996:

"It is submitted that the petitioner Sri Jahar Singh is a postal
assistant in Savings Bank Control Organisation........."

·Since the post the appellant was holding was made the sole basis for
G cancelling his candidature - as the letter dated July 23, 1993 clearly
demonstrates - the above discussion of ours would have been sufficient to
allow this appeal but as later on the respondents took the organisational
ineligibility of the appellant to appear in the examination as a further
ground for such cancellation we may advert to the same. In canvassing this
H ground it has been stated by Shri Kaushal in the affidavit filed ori Decem-
JAHAR SINGH v. U.O.I. [M.K MUKHERJEE,J.] 243

ber 9, 1995 as under: A

"It is further submitted that according to Rule 273 of the Postal
Manual Vol. IV Postal Assistants and Sorting Assistants, Railway
Mail Service are eligigle for appearing in the examination of Post
Office and Railway !Mail Service Accountants. The petitioner B
belongs to Savings Bank Control Organisation Unit of Post Office
and thus he was not entitled to appear in the said examination held
in May, 1992. The petitioner (the appellant) was inadvertently
pennitted because on his application f onn he had written his desig-
nation as Postal Assistant, SBCO."
c
(emphasis supplied)

Apart from the above Rule, reliance has also been placed on a
circular dated July 26, 1991 issued by the Assistant Director General,
Government of India, Ministry of Communications, Department of Posts, .D
which refers to the proposed reorganisation of the SBCO with effect from
August 1, 1991, and particular emphasis laid on Para (viii) thereof which
reads that "consequent upon reorganisation, the distinct identity of the
SBCO will be maintained and Postal Assistants (SBCO) will not be inter-
changeable with the Postal Assistants of the Post Office."
E
The above additional ground of the respondents so far it seeks to
justify the cancellation of the candidature of the appellant as an Account-
ant even after he was given permission to appear in the examination in
which he came successful is also without any substance. The averment in
the above quoted paragraph that the permission was 'inadvertently' granted F
because the appellant had wrote in his application form that his designation
was P.A., SBCO is patently incorrect for on the showing of the respondents
(as discussed earlier) the appellant was holding that post. Besides, in spite
of the above Rules and Circular, two PAs of SBCO, Auraiya Office, namely
Satya Prakash and H.C. Ram were permitted to appear in the PO and
RMS examination held in the year 1993 for appointment of Accountants G
as will be evident from the supplementary affidavit filed by the appellant
on February 23, 1996. It is pertinent to mention here that in the affidavit
that Shri Kaushal filed later on March 29, 1996, he did not dispute the
above assertion of the appellant, nor give any explanation as to why such
permission was granted to them in spite of the above Rules and Circular. H
244 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A For the foregoing discussion we quash the impugned order dated
July 23, 1993 and direct the respondents to grant all the benefits which the
appellant would be entitled to consequent upon his having been declared
successful in the examination held on May 22, 1992 for the post of Ac-
countant in PO and RMS. This direction should be complied with by
October 31, 1996. The appeal is thus allowed with costs, qnantified at Rs.
B 5,000.

H.K. Appeal allowed.

. tr:
SAHIB SINGH A
v.
STATE OF PUNJAB

SEPTEMBER 13, 1996

[M.K. MUKHERJEE AND S.P. KURDUKAR, JJ.] B

Criminal Law :

Tennrist and Disntptive Activities (Prevention) Act, 1987: Section 5.

Revolver and six live c01t1idges--Recovery of-No independent people c
of locality witnessed search-Anns and ammwiition allegedly recovered from
accused not packeted and sealed-No evidence to indicate with whom revolv-
er was after its seizure till it was sent to Anns Expe1t-Held : In the cir-
cwnstances of the case, accused was entitled to benefit of reasonable
doubt-Anned Act, S. 25. D
The appellant was convicted and sentenced under Section 25 of the
Arms, 1959 and Section 5 of the Terrorists and Disruptive Activities
(Prevention) Act, 1987. Hence this appeal

According to the prosecution, the appellant was apprehended on E
suspicion and on search by police officers a revolver with six live cartridges
were recovered from the bag the appellant was holding in his right hand.

On behalf of the appellant it was contended that no independent
people of the locality were called upon by prosecution to witness the search;
that the Designated Court was not justified in solely relying upon the F.
evidence of police officers in convicting the appellant; that the _arms and
ammunition recovered from the appellant were not packeted and sealed;
and that there was no evidence to indicate with whom the revolver was after
its seizure till it was sent to the Arms Expert.
G
Allowing the appeal, this Court

HELD : 1. Before conducting a search the concerned_ police officer
is required to call upon some independent and respectable people of the
locality to witness the search. In a given case it may so happen that no
such person is available or, even if available, is not willing to be a party H
245
246 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A to such search. It may also be that after joining the search, such persons
later on turn hostile. In any of these eventualities the evidence of the police
officers who conducted the search cannot be disbelieved solely on the
ground that no independent and respectable witness was examined to
-
prove the search but if it is found - as in the present case - that no attempt
was even made by the concerned police officer to join with him some
B persons of the locality who were admittedly available to witness the
recovery, it would affect the weight of evidence of the police officer, though
not its admissibility. The arms and ammunitions allegedly recovered from
the appellant and seized were not packeted and sealed. There was no
evidence to indicate with whom the revolver was after its seizure till it was
c sent to the Arms Expert for testing. This missing link also weakens the
prosecution case. For all these infirmities the appellant is entitled to the
benefit of reasonable doubt. [247-F-H; 248-A-B]

Ama1jit Singh v. State of Punjab, [1995) Supp. 3 SCC 217, relied on.

D CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
61of1992.

From the Judgment and Order dated 21.12.91. of the Designated
Court, Amritsar, in S.C. No. 61 of 1991.

E Ms. Naresh Bakshi for the Appellant.

Ms. Rupinder Wasu for R.S. Suri for the Respondent.

The Judgment of th~ Court was delivered by

F M.K. MUKHERJEE,_ J. This appeal is directed against the judgment
and order dated December 21, 1991 rendered by the Additional Judge,
Designated Court, Amritsar in Sessions Case No. 21 of 1991 convicting and
sentencing the appellant under Section 25 of the Arms Act, 1959 and
Section 5 of the Terrorists and Disruptive Activities (Prevention) Act, 1987.
G According to the prosecution case on May 12, 1990 at or about 12.30
P.M. when Inspector Gurmit Chand of Chheharata Police Station (P.W. 3)
along with Sub-Inspector Rattan Lal (P.W. 2) and other police officials
were on patrol duty near Bole-di-Bambi they apprehended the appellant
on suspicion and on search recovered a revolver with six live cartridges
H from the bag he was holding in his right hand. ;

I
1
SAHIB SINGH v. STATE [MK MUKHERJEE, J.] 247

• The appellant pleaded not guilty to the above accusation and his A
defence.was that he was falsely implicated at the instance of his neighbour
Sewa Singh.

To prove its case, prosecution examined four witnesses of whom
Manohar Lal (P.W. 1), a clerk in the office of the District Magistrate, B
Amritsar, proved the sanction accorded for prosecution of the appellant
under the Arms Act; P.Ws. 2 and 3 spoke about the arrest of the appellant
and the recovery of the revolver and the cartridges from him and Sital
Singh (P.W. 4), an Armourer, claimed to have mechanically tested the
revolver and found it in working order. Accepting their evidence the
learned Judge recorded the impugned order of conviction and sentence, C

It was first contended on behalf of the appellant that since no
independent witness was examined by the prosecution to prove the alleged
recovery of the arms and ammunitions from the appellant the designated
Court was not justified in convicting him relying solely upon the evidence D
of the two police officers. It was next contended that since no evidence was
led by the prosecution to prove that the offensive articles were packeted
and sealed after their seizure the possibility of tampering with them could
not be ruled out. It was lastly contended that from the test • !port of P.W.
4 (Ex. PF) it would appear that one Head Constable Baita Singh produced
the revolver before him (P.W. 4) but neither he was examined nor any other E
witness to explain how he (the constable) got the revolver from P.W. 3.

Having gone through the record we find much substance in each of
the above contentions. Before conducting a search the concerned police
officer is required to call upon some independent and respectable people F
of the lo.::ality to witness the search. In a given case it may so happen that
no such person is available or, even if available, is not willing to be a party
to such search. It may also be that after joining the search, such persons
later on turn hostile. In any of these eventualities the evidence of the police
officers who conducted the search cannot be disbelieved solely on the G
ground that no independent and respectable witn~ss was examined to
prove the search but if it is found - as in the present case - that no attempt
was even made by the concerned police officer to join with him some
persons of the locality who were admittedly available to witness the
recovery, it would affect the weight of evidence of the Police Officer,
though not its admissibility. We next find from the record that the arms H
248 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A and ammunitions allegedly recovered from the appellant and seized were
not packeted and sealed. InA111a1jit Singh v. State of Punjab, [1995] 3 SCC
217 this Court has observed that non-sealing of the revolver at the spot is
a serious infirmity because the possibility of tampering with the weapon

B
cannot be ruled out. From the record we further find that there is no
evidence to indicate with whom the revolver was after its seizure by P.W.
3 till it was sent to the Arms Expert for testing through constable Baita
Singh. This missing link also weakens the prosecution .case. For all these
-
I

infirmities we are of the view, that the appellant is entitled to the benefit
of reasonable doubt.

C We, therefore, allow this appeal and set aside the conviction and
sentence against the appellant. The appellant, who is on bail, is discharged
from his bail bonds. Fine, if paid, be refunded to him.

V.S.S. Appeal allowed.

,.

,
DEVINDER A
v.
STATE OF HARYANA

SEPTEMBER 13, 1996
B
[M.K. MUKHERJEE AND S.P. KURDUKAR, JJ.]

Indian Penal Code, 1860-Section 302:

Code of Criminal Procedure, 1973, Section 157-Circumstances for
benefit of doubt-Non-disclosure of the names of the accused at the earliest C
opportunity-Delay in sending the special report to the Magistrate-Benefit of
doubt can be given to the accused-:4nns Act, 1959-Ss. 25, 27-TADA Act,
s. 6.

At about 9.00 A.M. on 26th July, 1986 the appellant was alleged to D
have given two blows to the victim with knife-one on the left side of the
chest and the other on the abdomen, in presence of two eye witnesses, who
carried the injured to the Hospital, where he was examined by the doctor,
who certified that at the time of admission the victim was fully conscious.
The medico-legal report contained the name of his father, address, occup-
tation and an account as to how the injuries were caused to him. The A.S.I. E
recorded the statement of P.W. 10 in the Hospital at 2.40 P.M. and the
same was treated as FIR and a case under section 307 was registered. The
injured succumbed to his injuries the next day at about 11.30 A.M. and on
his death the case was converted to section 302 IPC and then only a special
report was sent to the Magistrate. Charges were framed against the F
accused under section 302 IPC and unde1 section 25 and 27 of the Arms
Act 1959 read with Section 6 of TADA for unlawful possesion and user of
a spring activated knife. The Designated Court, relying upon the testimony
of the eye witnesses held the accused guilty of the charges and convicted
him, against which the present appeal was moved before this Court.
G
Allowing the appeal, this Court

HELD : 1.1. Though apparently there is no reason to disbelieve the
two eye witnesses, yet there are certain underlying circumstances due to
which, benefit of reasonable doubt can be given to the appellant. [253·B; C] H
249
250 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.
•
A 1.2. According to the prosecution, after the infliction of the injuries,
the victim was immediately taken to the hospital where he was examined
and ·a medico-legal report was prepared which contained all material
particulars like parentage, occupation, 'and an account as to how the
injuries were received, except the name of the assailant. Obviously these
material particulars had been furnished either by the victim himself or by
B the eye witnesses present. In this view of the matter, it was expected that
if the appellant was really the assailant, then his name would have been
disclosed by all or any one of them. Legitimately it can be inferred that at
the earliest available opportunity the name of the appellant was not
disclosed. [253-C-E]
c
1.3. No special report in respect of the registration of the case was
sent· to the Magistrate on the day of occurrence and it was forwarded to
the Magistrate only after the case was converted to one under section 302
IPC consequent upon the death of the victim on July 27, 1986 and was
received in Magistrate's office at 10 P.M. This glaring circumstance indi-
D cates that the FIR did not see the light of the day till the death of the victim
and the version of the prosecution that the FIR was recorded on July 26,
1986 is not t111e. [253-G-H; 254-A]

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
446of1987.
E
From the Judgment and Order dated 26.7.86 of the Designated
Court, Rohtak, Haty~a in Sessions Case No. 550 of 1986.
'
Ms. Rajni Anand (AC.) for the Appellant.
F Prem Malhotra for the Respondent.

The Judgment of the Court was delivered by

M.K. MUKHERJEE, J. The subject matter of challenge in this
appeal is the judgment and order dated May 30, 1987 rendered by the
G Designated Court, Rohtak, while disposing of Sessions Case No. 550 of
1986 and Arms Act Case No. 551 of 1986. By the impugned judgment and
order the Court convicted and sentenced the appellant Devinder @ Pappy
under Section 302 IPC and Sections 25 and 27 of the Arms Act, 1959 read
with Section 6 of Terrorist and disruptive Activities (Prevention) Act, 1985
H ('TADA' for short).
DEVINDER v. STATE [M.K. MUKHERJEE, J.) 251
'
2. Shorn of details the prosecution case is as under : (a) Ramphal A
(the deceased) used to sell vegetables from his shop-cum- residence in the
Janta Colony, Rohtak city. On July 26, 1986 at or about 9 AM. the
appellant went to his shop and asked for some vegetables on credit.
Ramphal told the appellant that as he had not paid his earlier dues he
would not oblige him any more. Since such refusal of Ramphal was in the B
presence of two others, namely, Jagdish (P.W. 10) and Satbir Singh (P.W.
. 11), the appellant felt insulted and left in a huff.

(b) About twenty minutes thereafter the appellant came back with a
knife and remarked that he would teacfl him (Ramphal) a lesson for
insulting him in the presence of others. Ramphal, who was then cooking, C
stood up and attempted to escape. He however could not succeed in his
attempt as the appellant gave him two blt>ws with the knife - one of the left
side of the chest and the other on the abdomen. Jagdish and Satbir Singh,
who were there still then, and one U mesh, who reached there by chance,
witnessed the assault.
D
(<;:) Jagdish and Umesh then carried Ramphal in a rickshaw to the
Medical College Hospital, Rohtak where he was examined by Dr. Sushil
Kumar Jain (P.W. 5) first, After examination, Dr. Jain sent a medico legal
report (Ex. PS) and a mkka (Ex. PD) to the Police Post attached to the
hospital where an entry in terms thereof was made by Constable Mangal E
Singh (P.W. 1) in the daily diary book at 1.45 P.M. (Ex. PE).

(d) In the me.~time, however, - at 11.30 AM. to be precise - the
City Police Station, R,qhtak had received a telephonic message from the
above Police Post abo~t the admission of Ramphal in the hospital with
·' injuries on his person and, after recording that message in the daily dairy F
book (Ex; PF), ASI Tota Ram (P.W. 12) had left for the hospital. Reaching
there he found Jagdish present and recorded him statement (Ex. PZ) at
2.40 P.M. which was treated as the FIR. After forwarding the statement to
the Police Station for registering a case, Tota Ram took up investigation
and went to the spot. He prepared a rough site plan and seized some G
blood-stained earth therefrom in the presence of Jagdish and Satbir.

(e) Ramphal, who was admitted as an indoor patient in the hospital,
was operated upon by Dr. Pradeep Kumar (P.W. 7) for his injuries but he
succumbed to them on the following day i.e. July 27, 1986 at 11.30 AM.
On receipt of that information the case which was earlier registered against H
252 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the appellant under Section 307 l.P.C. was converted into one under
Section 302 1.P.C. and a special Report (Ex. PH) was sent to the local
Magistrate, ASI Tota Ram then went to the hospital and after holding
inquest upon the dead body of Ramphal, sent it for autopsy which was
performed by Dr. M.K. Bishnoi (P.W. 9).
B (f) In course of the investigation the appellant was arrested on July
29, 1986 and pursuant to a statement made by him to Tota Ram on July
31, 1986 (Ex. PEE) a spring activated knife concealed under the bricks in 1
a deserted kotha towards the southern boundary wall of Hanuman Park,
Rohtak was recovered in the presence of Jagdish (P.W. 10) and Daya
c Chand. After recovery of the knife a separate case was registered against
the appellant under the Arms Act, 1959 read with Section 6 of TADA.

(g) The blood-stained earth recovered from the spot, the shirt
removed from the dead body of Ramphal and the knife recovered pursuant
to the statement of the appellant were sent to the Forensic Science
D Laboratory (F.S.L.), Madhuban for chemical examination and human
blood was detected on all those articles on such examination. On comple-
tion of the inves.tigation ASI Tota Ram submitted two separate charge-
sheets against the appellant; one under Section 302 l.P.C. for the murder
of Ramphal on July 26, 1986 and the other under Section 25 and 27 of the
E Arms Act, 1959 read with Section 6 of TADA for un_lawful possession and
user of a spring actuated knife.

3. The two cases arising out of the above charge-sheets were clubbed
and tried together and were disposed of by the impugned judgment in the
manner indicated above.
F
4. The appellant pleaded not guilty to the charges levelled against
him and his defence was that at the instance of Jagdish and Ramphal he
was falsely implicated in the case as he had, three days prior to the alleged
murder of Ramphal, a quarrel with Jagdish and Umesh over their mis-
G behaviour in their locality under the influence of liquor.

5. In support of their respective cases prosecution examined twelve
witnesses and the defence one.

6. To sustain the charge of murder levelled against the appellant the
H prosecution rested its case principally upon the ocular version of J agdish
DEVINDER v. STAIB [M.K. MUKHERJEE,J.) 253

(P.W. 10) and Satbir (P.W. 11). The Designated Court found them to be A
the most probable and natural witnesses and as their evidence stood amply
corroborated by the evidence of the doctors, the recovery of the knife
pursuant to the statement of the appellant, and the report of the Forensic
Science Laboratory held the appellant guilty of both the charges levelled
against him. B
7. Having carefully gone through the entire materials on record, we
are unable to sustain the impugned judgment. Though apparently there is
not reason to disbelieve the two eye witnesses, there are certain underlying
circumstances which persuade us to give the benefit of reasonable doubt
to the appellant. According to the prosecution case - and as testified by C
Jagdish - immediately after the assault Ramphal was taken to the hospital
by him (Jagdish) and Umesh (not examined), who were present at the time
of the assault. Dr. Jain testified that at the time of admission Ramphal was
fully conscious and his blood pressure and pulse were normal. From the
medico legal report (Ex. PS) that the doctor sent to the police after D
examining Ramphal we find that apart from his name, the father's name of
Ramphal, his address, his occupation and an account as to how the injuries
were caused find place. Obviously all these particulars had been furnished
by Ramphal, and/or Jagdish and Umesh, who had accompanied him. In
that context it was expected, if really the appellant was the assailant, that
his name would be disclosed by all or any of them while furnishing the E
cause of the injuries. It can, therefore, be legitimately inferred that at the
earliest available opportunity the name of the appellant was not disclosed.

8. It was, however, contended by Mr. Malhotra appearing on behalf
of the respondent that since the F.I.R. was lodged by Jagdish with F
promptitude and therein the name of the appellant as the assailant had
been mentioned, non-disclosure of his name earlier before the doctor, whq
was under no statutory obligation to record the name of the assailant, was
of no moment. If the F.I.R. was recorded at 2.40 P.M. (on July 26, 1986)
as indicated therein we might have persuaded ourselves to accept the
contention of Mr. Malhotra but we find, suprisingly enough, that no special G
report in respect of the registration of the case was sent to the Magistrate
on that day; and, indeed, as the evidence on record unmistakably shows
that it was forwarded to the Magistrate only after the case was converted
to one under Section 302 IPC consequent upon the death of Raniphal on
July 27,_1986 and received in his office at 10 P.M. This glaring circumstance H
254 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A prompts us to hold that the F.I.R. did not see the light of the day till the
death of Ramphal and the version of the prosecut on that the F.I.R. was
recorded on July 26, 1986 is not true.

9. For the foregoing discussion the prosecution case as presented
before the Court cannot be accepted. We, therefore, allow this appeal, set
B aside the conviction and sentence recorded against the appellant and
acquit him. The appellant, who is in jail, be released forthwith unless
wanted in connection with some other case.

H.K. Appeal allowed.
ALL INDIA STATE BANK OFFICERS FEDERATION AND ORS. A
v.
UNION OF INDIA AND ORS.

SEPTEMBER 13, 1996
B
[.T.S. VERMA AND B.N. KIRPAL, JJ.]

Service Law :

State Bank of India Officers (Detenni11atio11 of Tenns and Conditions
of Service) Order, 1979: Paragraph 17. c
Promoti01r-Ca11didates--From post of Senior Managemeizt Grade
Scale V to Top Executive Grade Scale VI in State Bank of India-Zone of
consideration--Omission to limit number of candidate-Validity
of--Origiizally minimum two years' se1vice in the previous grade/scale required D
and zone of co11sideration limited to three to four times the number of
vacancies-However, promotional policy dated 7.3.1989 discontinued limita-
tio11 of zone of consideration a11d raised mi11imum se1vice from two to four
years-Held: promotio11al policy not illegaf-State Ba11k of I11dia (Supe1vising
Staff) Se1vice Rules, 197~State Bank of1ndia Act, 195~Ss. 17 and 43.
E
Promoti01r-Candidates-From Senior Management Grade Scale V to
Top Executive Grade Scale VI-Eligibility of-Promotional polity dated
7.3.1989-Modification in nonns of-Held: promotional policy not ar-
bitrary-Eligibility 1101111s made on realistic basis-To choose best talents to
man critical positions-Cozm could not sit in appeal to decide what was good F
for Bank.

Promotion-From Senior Management Grade Scale V to Top Execu-
tive Grade Scale VI-Inte1view-Candidates-Number of-Guidelines dated
23.6.1986 issued under Regn. 17-Limited 11umber of candidates to be inter-
viewed to three to four times of vacancies-Applicability of-Held : applicable G
011/y to Nationalised Banks and not to State Bank of l11dia--Furthe1111ore,
said guidelines could not be regarded as directions under Sectio11 18 of State
Bank of India Act-Govemment of India, Mi11istry of Fi11a11ce Guidelines
dated 23.6.1986-0fficers Se1vice Regulations Regn. 17-Banking Regulation
Act; 1949. H
255
256 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Pronwtion--4:andidate~From Senior Management Grade Scale V to
Top Executive Grade Scale VI-Eligibility of-Promotional policy dated
7.3.1989-Modification in 1wmzs of-Made by Central Board of State Bank
of India-Allegedly motivated to benefit certain candidate~onditions
precedent for such allegations to succee~Held : person making such allega-
tion must conclusively show that intended benefici01ies wielded influence over
B all members of Board-Neither this condition fulfilled nor Chairnian or
Directors impleade~Hence, petitioners could not be allowed to raise said
allegations of mala [ides.

Promotion--4:andidate~From Senior Management Grade Scale V to
C Top Executive Grade Scale VI--4:onsideration of past record~Absence of
unif01111 appraisal system-Annual Confidential Rep01ts-Replaced by assign-
ment appraisal system throughout the Bank not simultaneously but in a
phased manner from 1986 to 1990-Consequently, in case of some officers
annual confidential rep01ts considered while in case of others assignment
D appraisal reports considered-Held: absence of wzifornz appraisal system did
not vitiate selection--4:onsideration of two types of repolts did not result in
discrimination--4:onstitution of India, 1950, Alt. 14.

Promotion--4:andidate~From Senior Management Grade Scale V to
Top Executive Grade Scale VI-Past record for period which exceeded min-
E imum length of service in post immediately below--Co11sideration
of-Whether vali~Held : consideration of peifomzance of six years while
minimum service for eligibility was four years did not cause prejudice to any
officer.

Promotion--4:andidate~From Senior Management Grade Scale V to
F Top Executive Grade Scale VI--lnterview-Prescribed minimum 60% marks
as eligibility criterion-Validity of-Held : inte1view marks represented only
25% of aggregate mar~No exaggerated weightage given to marks prescribed
in interview.

Practice and Procedure :
G
Affidavit-False allegation in--4:hallenge of promotion to Top Execu-
tive Grade Scale VI in State Bank of India in writ petition by petitione,-
Federation-ln rejoinder affidavit, the then President of petitioner-Federa-
tion deposed that in fact only V, an officer of B01zk, had allotted marks on
H the individual promotion appraisal f onns on basis of which list of candidates
ALL INDIA STATE BANK OFFICERS FEDERATION v. U.O.l. 257

- prepared and signed by three members of Screening Committee-Supreme A
Court directed the then President to verify on affidavit the said allegation
specifying precise source of infonnation-Supreme Cowt also wamed that if
allegation was found false that also would have its own consequences-Presi-
dent filed additional affidavit deposing that he derived infonnation from V
himself and another officer of Bank-Cliief General Manager (Personnel) of
Bank as well as two' officen~ refe1Ted to in said additional affidavit, filed their B
own affidavits denying said allegation-Fwthennore, allegation not substan-
tiated by photo copies of appraisal fonns of promotees-Held : In such
circumstances, said allegation in rejoinder affidavit of the then President
absolutely false-Tiie then President already apologised to Supreme Cowt for
some mis-statements in an earlier affidavit-Supreme Court expressed its c
disapproval and anguish over that matter-But did not dismiss petition in
view of offer of Bank to contest the case on nwits-Since the then President
once again made false statements in his affidavit despite said observations of
Supreme Cowt, he dese1ved to be prosecuted-Howeve1; since he was no
longer President of Federation and since prosecution might take fwther time,
D
instead of direct~ng him to be prosecuted, the petition dismissed with costs,
quantified at Rs. 20,000 of which Rs. 10,000 to be paid by him personal-
• ly-Constitution of India, 1950, A1t. 32-'-Judicial strictures.

The petitioner-Federation filed a writ petition before this Court
challenging the new promotional policy framed by the respondent-Bank on E
7 3.1989 relating to the promotion from the post of Senior Management
Grade Scale V' to Top Executive Grade Scale VI. The said Policy was
framed by the Central Board under paragraph 17 of the State Bank of
India Officers (Determination of Terms and Conditions of Service) Order,
1979 which had been framed under Section 43 of the State Bank of India F
Act, 1955. The State Bank of India (Supervising Staff) Service Rules, 1975
framed under Section 43 of the Act, dealt with various grade and scales of
officers, conduct rules, salary, seniority, promotion, etc. From 1975 on-
wards the Central Board approved a promotion policy under which assign-
ment appraisals and interviews were made the two components of the
selection procedure. According to the petitioners zone of consideration G
from amongst the eligible officers had been varying from time to time.
From 8.6.1982 onwards two years' service in the previous grade/scale
became a condition of eligibility for promotion but the zone of considera-
., tion was limited to three to four times the number of vacancies. In the
policy framed on 7.3.1989 the Central Board made three modifications H

\
258 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A which were as follows :
(i) The minimum service in the previous grade/scale for being
eligible for promotion was raised to four years.

(ii) The maximum marks for interview and performance appraisal
B were refixed as 50 and 150 instead of 100 and 100 respectively.

(iii) The limitation of the zone of consideration was discontinued.

From 1986 onwards the system of writing of annual confidential
~
reports was substituted by a new appraisal system in which the appraisee
c got an opportunity of writing self appraisal. However, this new system was
not introduced throughout the Bank simultaneously but was completed
in a phased manner only in 1990.

The main contention of the petitioners was that it was unreasonable
D not to limit the zone of consideration to three to fqur times of the number ,_
of vacancies. It was further contended by the petitioners that the change
in the policy was completely arbitrary and without any reason; that the
guidelines dated 23.6.1986 issued by the Government of India, Ministry of
Finance under Regulation 17 of the Officers Service Regulations men-
tioned that the number of persons to be considered for promotion from
E one scale to another should normally be restricted to three or four times
the number of vacancies; that the promotion policy should not have been
in conflict with the said guidelines; that the change in policy in 1989 was
motivated with a view to benefiting respondents 4 and 5; that uniform
system of appraising the work was not followed in that in case of some
F employees annual confidential reports were considered and in case of
others assignment appraisal reports were considered which had caused '
prejudice to a section of the employees of the Bank; that with the change
in the eligibility norm to four years instead of the actual five/six service
there was a need for reducing the consideration of period of appraisal from
six years to four years; that as this had not been done the junior officers
G who were considered were at an advantageuus position because their
performance in Scale V as well as in the lower Scale IV was considered
whereas in the case of senior officers their performance in Scale V alone
was considered because they had rendered more than five to six years
service in that grade; that prescribing of 60 per cent marks for the
~
H interview as an eligibility craeria was arbitrary, unfair and unjust; and
ALL INDIA STATE BANK OFFICERS FEDERATION v. U.0.1. 259

that the percentage of marks in the viva voce examination should not have A
not more than 15 per cent.

Dismissing the petition, this Court

HELD : 1. Having a reasonable eligibility condition, as four years in
the present case, 8'ay become meaningless if all the eligible officers are not B
considered for promotion. By increasing the number of years from two to
four the field has been somewhat restricted and considering that selection
has to be made only on the basis of merit, it is not unreasonable to give
an opportunity to all the eligible officers to compete with each other and
for the best persons to be selected. Therefore, it cannot be held that the C
change of the policy brought by the Board in its meeting on 7.3.1989 in this
regard is in any way bad in law. [271-G-H]

Asliok Kumar Yadav v. State of Haryana, [1985) 4 SCC 417; VJ.
Thomas & Ors. v. Union of India & Ors., [1985] Supp. SCC 7 and S.B.
Mathur & Ors, v. Chief Justice of Delhi High Court, [1989] Supp. 1 SCC 34, D
held inapplicable.

2. There is nothing wrong if the bank devised a policy defining the
eligibility norms on a realistic basis and devised a system whereby the best
available talent would be chosen to man the critical positions. Keeping this
objective in view t~e changes in the promotion policy have been made. It
E
is always for the employer to see how to promote and utilise the best talent
available in the organisation. The promotion policy originally framed in
the year 1975 has been amended from time to time. The changes have now
been made in 1989 keeping in mind the requirement of the bank and based
on the experience of the bank in regard to making selection for promotion. F
The changes so made cannot be regarded as arbitrary and the Court
cannot sit in appeal and decide as to what is good for the institution. Under
the new policy the petitioners are also eligible for consideration and they
cannot have any grievance because certain persons who were eligible under
the old policy, but in practice were not considered for promotion, are now G
considered under the new policy. The object of the new policy seems to be
not only to redress the injustice to those officers resulting on account of
the difference between the rules and the practice but also with the object
of selecting the best talent for the top executive posts. [274-H; 275-A-C]

3. The guidelines in question have been issued by the Government H
260 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A under the Regulations framed under the Banking Regulations Act, 1949
which Act does not apply to the State Bank of India. The said guidelines
dated 23.6.1986 are addressed to the Chief Executi•:es of twenty
nationalised banks and only a copy of the same was marked to the
Chairman of the respondent bank. Furthermore as far as State Bank of
India is concerned paragraph 17 of the State Bank of India Officers
B (Determination of Terms and Conditions of Service) Order, 1979 em·
powers the Central Board or the Executive Committee to lay down a policy
regarding promotion to all grades of officers in the Bank. The aforesaid
guidelines which have been issued expressly relate to the nationalised
banks, and not to the State Bank of India, and cannot be regarded as
c directions which are issued under Section 18 of the State Bank of India
Act, 1955 as was sought to be suggested by the petitioners. [272-C-F]

4.1. The modification was approved by the Chairman and all the
Directors who were present in the meeting of the Board. For an a!Iegation
of ma/a fide to succeed it must be conclusively shown that respondents 4
D and 5 wielded influence over all the members of the Board who were present
in the said meeting. No such allegation has been made. The decision to
modify the promotion policy was taken by a competent authority, namely,
the Central Board in a duly constituted meeting held on 7.3.1989 and it is
not possible to accept that this change in the policy was brought about
E solely with a view to help respondents 4 and 5. [274-C-D]

4.2. Moreover, the person against whom mala fides are alleged must
be made a party to the proceeding. The allegation that p.olicy was amended
with a view to benefit respondents 4 and 5 would amount to the petitioners
contending that the Board of Directors of the Bank sought to favour
F respondents 4 and 5 and, therefore, agreed to the proposal put before it.
Neither the Chairman nor the Directors, who were present in the said
meeting, have been impleaded as respondents. This being so the petitioners
cannot be allowed to raise the allegations of Mala fide. [274-E-F]

5. It is no doubt that in the case of some employees annual confiden·
G tial reports were considered and in the case of other employees assignment
appraisal reports were considered. However, this cannot be a gdod ground
for holding that the selection is vitiated. No particulars have been given in
the writ petition in order to show that the officers in whose case that annual
confidential reports were considered had suffered a disadvantage. Each
H report of an officer, whether an annual confidential report or assignment
ALL INDIA STATE BANK OFFICERS FEDERATION v. U.O.I. 261

appraisal report, bad to be considered on its own and the performance A
assessed. There is nothing to suggest that such assessment on the basis of
the annual confidential report or the assignment appraisal report could
not have been given. It is, therefore not possible to hold that the considera·
tion of two types of reports had resulted in any discrimination.
(275-G; 276-C-D-E]
B
6. The procedure of considering the assignments in respect of the
positions held during the past six years was in vogue even when the
eligibility criteria was two years which has how been revised to four years.
Furthermore even in the case of some senior officers the assignments would
cover a portion of their tenure as Scale IV officers. In considering such C
reports what has to be seen is whether the assignment targets which are set
have been satisfactorily met or not. It would not be very material as to in
which scale the officer was while adjudging this aspect. Normally in order
to assess the merit of an officer a period covering three assignments was
considered to be necessary. This being so six years annual assignment
reports had to be considered and such consideration could not be said to D
have caused any prejudice to any officer. This contention, therefore, is
without any substance. (277-F; G; HJ

7.1. There can be no rigid or hard and fast rule that the interview
marks can only be 15 per cent and no more. The percentage of marks for E
viva voce or interview which can be regarded as unreasonable will depend
on the facts of each case. What the interview or viva voce marks should be,
may vary from service to service and the office or position or the purpose
for which the interview is to be held. But the interview marks should not
be so high as to give an authority unchecked scope to manipulate or act
in an arbitrary manner while making selection. Where merit can be best F
judged by holding an interview there such marks may be high but each
case will have to be judged on its own facts. Interview marks may be the
minimal in such cases as relating to admission to a college. (278-B-C-D]

Periakarnpan v. State of Tamil Nadu, [1971] 1SCC38 and Ajay Hasia G
v. Kalid Mujib Sehrawardi, (1981] 1 SCC 722, relied on.

7.2. In the present case, the interview marks represent only 25 per
cent of the aggregate, i.e. 200 marks. In order to be eligible a candidate is
required to obtain 60 per cent of these fifty marks. Considering the fact
that the selection has to be made for appointment to the top executive H
262 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A cadre and keeping in view the job requirements and the nature of respon-
sibility the bank has raised the minimum qualifying percentage from 50
per cent to 60 per cent. At the same time the total number of interview
marks have been reduced from 100 to 50. Under the circumstances it
cannot be contended that exaggerated weightage has been given to the
marks to be obtained in the interview. [279-G-H; 280-A]
B
Lila Dhar v. State of Rajasthan, [1981] 4 SCC 159; State of U.P. v.
Rafiquddin, [1987] Supp. SCC 401 and Mehmood Alam Tariq & Ors. v.
State of Rajasthan & Ors., (1988] 3 SCC 241, relied on.

C 8.1. In the rejoinder affidavit the then President of the petitioner-
Federation deposed that in fact only V, an officer of the Bank had allotted
the marks on the individual promotion appraisal forms on the basis of
which a list of candidates was pr~pared by three members of the Screening
Committee. This Court directed the then President to verify on affidavit
D specifying the precise source of information from which the said allega-
tion was derived. This Court also warned that if the allegation was found •
false that also would have its own consequences. The then President filed
an additional affidavit deposing that he had derived the information from
V himself and another officer of the Bank. The Chief General Manager
(Personnel) of the Bank as well as the two officers, referred to in the said
E additional affidavit, filed their own affidavits, denying the said allegation.
Furthermore, the allegation was not substantiated by photo copies of the
appraisal forms of the promotees. In such circumstances, the said allega-
tion in the rejoinder affidavit of the then President of the petitioner-
Federation is absolutely false. [280-A]
F
8.2. The then President had alre;ldy "tendered an unqualified appol-
ogy" to this Court for some mis-statements made in an earlier affidavit.
This Court expressed its disapproval and anguish over that matter but did
not dismiss the petition in view of the offer of the respondent-Bank to
contest the case on merits. Since the then President had once again made
G false statements in his affidavit despite the said observations of this Court
he deserved to be prosecuted for having committed perjury. However, since
he is no longer the President of the Federation and considering that
prosecution may take further time, instead of directing him to be
prosecuted, this writ petition is dismissed with costs which are quantified
H at Rs. 20,000 of which Rs. 10,000 will be paid by him personally. [284-E-F]
ALLINDIASfATEBANKOFFICERSFEDERATIONv. U.O.L [KIRPAL,J.) 263

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 507 of A
'1989.

(Under Article 32 of the Constitution of India.)

', WITH
B
Writ Petition (C) No. 1260 of 1989.

Under Article 32 of the Constitution of India.

Rajinder Sachher, R. Vasudevan, D.S. Chauhan, K.D. Saini for
Lawyers Inn for the Petitioners. C
Dr. AF. Julian and A Mariarputham for the Petitioner.

Shanti Bhushan, Shanti Swamp Sharma, Sanjay Kapur, Rajiv Kapur,
AV. Rangam and A Ranganathan for the Respondents.
D
The Judgment of the Court was delivered by

- KIRPAL, J. The All India State Bank Officers Federation, which is
registered as a trade union of the officers of the State Bank of India
working throughout the country, is seeking to challenge a new promotional
policy framed by the respondent bank on 7th March, 1989 relating to the E
promotion from the post of Senior Management Grade Scale V to Top
Executive Grade Scale VI.

The respondent bank was established by the State Bank of India Act,
1955 (for short 'the Act') and according to Section 17 of the said Act its
Management is entrusted to the Central Board constituted under the Act. F
Under Section 43 of the said Act the Bank is empowered to appoint such
number of officers, advisers and employees as it considers necessary or
desirable for the efficient performance of its functions. Sub-section (1) of
Section 43 gives the bank the power to determine the terms and conditions
of the appointment of such persons. G
The bank framed State Bank of India (Supervising Staff) Service
Rules, 1975, in exercise of its powers under Section 43 of the Act. These
rules deal with various grades and scales of officers, conduct rules, salary,
seniority, promotion etc. Again, under Section 43 of the Act, the Central
Board of the bank framed the State Bank of India Officers (Determination H
264 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A of Terms and Conditions of Service) Order 1979 (hereinafter referred to
as 'DTCS Order'). This Order deal~ with various grades and scales of
officers, salary perquisites, appointments, probation, confirmation, promo-
tio~, age of retirement rules, terminal benefits etc. The grades and scales
of officers are as follow :
B "From 1.10.79 From 1.2.84
(consequent upon revision (consequent upon
of service conditions) wage revision)
c
Junior Management Grade I Junior Management Gr. I
and all officer Gr. II
c
Middle Management Middle Management
Grade Scale II Grade Scale II

Middle Management Middle Management
Grade Scale II.I Grade Scale III
D
Senior Management Senior Management
Grade Scale IV Grade Scale IV

Senior Management Senior Management
E Grade Scale IV-A Grade Scale V

Senior Management Top Executive Grade Scale VI
Grade Scale V Dy. General Manager

Top Executive Grade Scale Top Executive Grade Scale VII
F VI General Managers - General Managers

Top Executive Grade Scale Top Executive Grade Special
VII Chief General Managers Scale I-Chief General Managers

Top Executive Grade Special Top Executive Grade Special
G Scale I Dy. Managing Directors Seale II- Dy. Managing
Directors"

Paragraph 17 of the DTCS Order specifically deals with promotion
of staff and is as under :

H "Promotions to all grades of officers in the Bank shall be made
ALLINDIASTA1EBANKOFFICERSFEDERA110Nv. U.0.1. (KIRPAL,J.) 265

in accordance with the policy laid down by the Central Board or A
the Executive Committee from time to time."

In exercise of the powers under this paragraph the Central Board of
the Bank has, from time to time, been determining the policy for promotion
to various grades of scales of officers. The policy for promotion from
Senior Management Grade Scale V to Top Executive Grade Scale VI, with B
which we are concerned in the present petition, and Top Executive Grade
Scale VI to Top Executive Grade Scale VII was framed by the Central
Board in its meeting held on 28th November, 1975. Prior to 1975 the
promotion policy which was in force for promotion to Top Executive
Grade Scale VI and to Scale VII did not provide for any selection proce- c
dure. From 1975 onwards the Central Board approved a promotion policy
under which assignment appraisals and interviews were made the two
components of the selection procedure. Ac,cording to the petitioners zone
of consideration from amongst the eligible officers had been varying from
time to time. Generally the Bank had been following a ratio of 1 : 3 or 1 : D
4 between the number of vacancies and the number of candidates. The
Central Board at its meeting held on 8th June, 1982 approved a modifica-
tion in the promotion policy in terms of which officers with two years
service in Senior Management Grade Scale V were to be eligible for
promotion to Top Executive Grade Scale VI and officers with two years
service in Top Executive Grade Scale VI were to be eligible for promotion E
to Top Executive Grade Scale VII. It is an admitted fact that as the zone
of consideration was restricted to three to four times the number of
vacancies, the candidates who were actually considered for promotion to
Top Executive Grade Scale had put in a minimum five to six years of
service in Scale IV, even though the minimum eligibility condition was of
only two years service. F

- In its meeting held on 7th March, 1989, the Central Board of the
Bank made two modifications in the then existing policy which were as ·
follow:
G
(i) The eligibility criterion for consideration for promotion to Top
Executive Grade Scale VI was refixed at four years service in the previous

-· grade/scale, instead of the existing two years service.

(ii) Previously evaluation of the eligible officers was done by allot-
ment of marks on the performance appraisal and interview. An aggregate H
266 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A of 200 marks were being allotted; 100 marks used to be allotted for
performance appraisal and another 100 marks for interview. The qualifying
marks both for performance appraisal and interview were 60 per cent. Now
as a result of the modification made on 7th March, 1989 out of the
aggregate of 200 marks, 150 marks were now allotted for performance
B appraisal (in lieu of the earlier 100 marks) and 50 marks (in lieu of the
earlier 100 marks) had been allotted for interview. The qualifying marks
for performance appraisal had been changed from 60 per cent to 80 per
cent, while the qualifying marks for interview remained unaltered at 60 per
cent.

C The manner in which the performance has been appraised has also
undergone a change from time to time. Since long there had been in force
a system of writing annual confidential reports. Since 1974 or 1975 a system
of assignment appraisal was also introduced by the bank. In the year 1986,
according to the petitioners, the bank brought about further change in the
D system of performance appraisal. The old system of writing of annual
confidential reports was substituted by a new and more open and par-
ticipatary appraisal system. According to the writ petition in this new
system the appraisee got an opportunity of writing self appraisal. However,
this new system was not introduced throughout the bank simultaneously.
The old system of recording of annual confidential reports remained in
E position till that was gradually replaced by the self appraisal system. We
were informed that now since 1990 the system invoked is ortly that of self
appraisal and the old system of writing annual confidential reports no
longer exists.

The writ petition has been filed challenging the aforesaid modifica-
F
tion in the promotion policy which was approved by the Central Board in
its meeting held on 7th March, 1989. There are various grounds of attack
to the resolution approving the new promotion policy. It is also the case of
the petitioners that the manner in which the process of promotion has been
undertaken was defective.
G
The main thrust of arguments of Mr. Rajindar Sachar, learned senior
counsel appearing on behalf of the petitioners, was that it was unreasonable
not to limit the zone of consideration to three to four times the number of
vacancies. As a result of the new policy, it was submitted, a much larger
H number of relatively junior officers have been considered and promoted.
ALLINDIASfA'IEBANKOFFICERSFEDERATIONv. U.O.I. (KIRPAL,J.] 267

In order to show that injustice had been done to senior eligible officers, as A
a result of the change in the policy, our attention was drawn to the
following statement with regard to the filling up of 58 vacancies in Scale
VII on selection made in 1989 :

No. of officers No. of officers No. of
who qualified who qualified officers B
with 70% marks with 60% marks promot
in the past in the interview ed
.performance
Total number of
officers considered c
under the impugned
policy and belonging to 270 104 58
the 1982, 1983 1984
and left over of earlier
batches. D
498
Number of officers
belonging to the 1982
and left over of earlier
102 62 16
batches out of the total E
of 498 officers
considered.
212

The contention on behalf of the petitioners was that eligible candidates p
after the 1982 batch should not have been considered and if the zone of
consideration had been limited to three to four times then the filed of
choice would have been restricted and only those officers who were in
Scale V in the year 1982 or earlier would have been considered and
promoted. In support of his contention that doing away with the zone of
consideration was not reasonable, reliance was placed on the decision of G
this Court in the case of Ashok Kumar Yadav v. State of Haryana, [1985) 4
sec 417.
Ashok Kumar Yadav's case was concerned with the recruitments
made by the Haryana Public Service Commission to 61 posts in Haryana H
268 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Civil Service (Executive) and other allied services. The relevant rules
provided that a competitive examination was to be held consisting of
written examination in different papers having an aggregate of 700 marks
ahd a vive voce examination carrying 200 marks. The rules, inter alia,
further provided that no candidate was eligible to appear in the vive voce
B test unless he obtained 45 per cent marks in aggregate in all the subjects.
In response to the said advertisement 6000 candidates applied and ap-
peared for the written examination and out of these over 1300 secured 45
per cent marks and had thus qualified for being called for the interview or
the vive voce examination. Though originally the recruitment was only for
C 61 posts but during the time when the selection process was under way a
total number of 119 posts became available. The Haryana Public Service
Commission invited all the 1300 and odd candidates who had qualified for
the viva voce test and the interview lasted for almost half a year. On the
basis of the total marks obtained in the written examination as well as viva
voce test 119 candidates were selected and recommended by the Commis-
D sion to the State Government. Some of the candidates who were not
selected filed a writ petition in the Punjab and Haryana High Court
challenging the said selection. Five of the selected candidates, including
Ashok Kumar, were impleaded as respondents.

E The Division Bench of the High Court allowed the writ petition and
held that the Haryana Public Service Commission should not have called
for interview all the candidates who had obtained more than 45 per cent
marks in the written examination and the number of candidates to be called
for interview should not have exceeded twice or thrice the number of
vacancies required to be filled. This was one of the grounds on which the
F
selection of Ashok Kumar and other candidates was quashed. Thereupon
appeals were filed by Ashok Kumar Yadav and the State of Haryana. Their
appeal was allowed by this Court and the selection made by the Haryana
Public Service Commission was upheld. While dealing with the submissions
relating to the Haryana Public Service Commission calling the 1300 and
G odd candidates for viva voce test, who had secured 45 per cent or more
marks in the written examination for only 61 seats, it was observed by this
Court that merely because minimum qualification for eligibility to appear
at the viva voce test for a candidate was to obtain at least 45 per cent marks
in the aggregate in the written examination the Haryana Public Service
H Comn1ission was under no obligation to call for viva voce test all the
ALLlNDIASTAIBBANKOFFICERSFEDERATIONv. U.0.1. [KIRPAL,J.) 269

. candidates who satisfied the minimum eligibility requirements. It was open A
to the Commission to call for viva voce test a limited number of candidates
who figured at the top of the list. After referring to Kothari Committee's
Report on "Recruitment Policy and Selection Methods for the Civil Service
Examination" at page 447 it was observed as follows :

"We are therefore of the view that where there is a composite test
B
consisting of a written examination followed by a viva voce test,
the number of candidates to be called for interview in order of the
marks obtained in the written examination, should not exceed twice
or at the highest, thrice the number of vacancies to be filled. The
Haryana Public Service Commission in the present case called for C
interview all candidates numbering over 1300 who satisfied the
minimum eligibility requirement by securing a minimum of 45%
marks in the written examination and this was certainly not right,
but we may point out that in doing so, the Haryana Public Service
Commission could not be said to be actuated by any mala fide or D
oblique motive, because it was common ground between the par-
ties that this was the practice which was being consistently followed
by the Haryana Public Service Commission over the years and what
was done in this case was nothing exceptional."
E
Relying upon the aforesaid passage it was strongly contended by Mr.
Sachar that the policy of 7th March, 1989 which did away with the concept
of zone of consideration was clearly contrary lo the aforesaid observations
of this Court in As/wk Kumar Yadav's case.

In our opinion Aslzok Kumar Yadav's case can be of no assistance to
F
the petitioners. It is no doubt true that this Court did make the aforesaid
observation that the number of candidates to be called for interview should
not exceed twice or at the highest thrice the number of vacancies to be
filled. Nevertheless after making this observation the Court posed a ques-
tion as to "whether this had any invalidating effect on the selections made G
by the Haryana Public Service Commission". The answer to this was
provided in the subsequent paragraph in the following words "We do not
think that the selection made by the Haryana Public Service Commission
could be said to be vitiated merely on the ground that as many as 1300 and
more candidates representing more than twenty times the number of H
270 SUPREME COURT REPORTS [1996} SUPP. 6 S.C.R.

A available vacancies were called for mterview, though on the view taken by
us that was not the right course to follow and not more than twice or at
the highest thrice the number of candidates shoulcl have been called for
the interview. Something more than merely calling an unduly large number
of candidates for interview must be shown in order to invalidate the
B selections made."

It is clear from the aforesaid that this Court 'Vas of the opinion that
while it was desirable that the number of candidates who were called for
viva voce examination should not be unduly large but it did not agree with
the conclusion of the High Court that calling large number of candidates
C invalidated the selection. In other words not having a restricted zone of
consideration was not regarded as illegal or bad in law. An unduly large
number of candidates to be intervie~ed may make it impossible to carry
out a satisfactory viva voce test and the interview may tend to be casual,
superficial or sloppy. The above quoted observations are only words of
D caution lest the viva voce test be reduced to farce. Notwithstanding the fact
that the Court did not approve of a large number of candidates being called
for interview, nevertheless the selections so made by the Haryana Public
Service Commission were not invalidated by this Court and the judgment
of the High Court was set aside and tl!e selection made was upheld.
E
Whereas in As/wk Kumar Yadav's case for 61 vacancies, which were
originally notified, 1300 and 9dd candidates were called for viva voce
examination and this Court held that this was not invalid, in the present
case for 58 vacancies only 498 eligible officers were considered for promo-
tion. Applying the ratio of decision of As/wk Kumar Yadav's case to the
F facts of the present case it cannot be said that the policy of considering all
the eligible officers for promotion, without having a restricted zone of
consideration is in any way bad in law. In fact in this manner no eligible
officer can have a grievance, which may be legitimate, that he was not
considered even though he was eligible.
G
Our attention was also drawn to the case of V.J. Thomas and Ors. v.
Union of India and Ors., [1985] Supp. SCC 7. The decision in this case has
no application here because there the Court was concerned with a case
where it was held that if the vacancies were few, and the candidates were "'
H disproportionately large in number, department could make a classification
AU...INDIASfA1EBANKOFFICERSFEDERATIONv. U.0.1. (K.IRPAL,J.] 271

amongst eligible candidates on the basis of their lenght of experience so as A
to restrict the examination only for those having longer service leaving
others to appear in the next examination. Similarly the decision in S.B.
Mathur and Ors. v. Chief Justice of Delhi High Court and Ors., [1989] Supp.
1 SCC 34 holding that the zone of consideration or field of choice can be
limited to a multiple of number of vacancies, on the basis of seniority, has B
no application to the point in issue here. In fact the Court referred to the
decision in Ashok Kumar Yadav's case (supra) and, in principle to the
observation on which reliance has been placed by Mr. Sachar, and in was
observed at page 51 para 19 as under :

"The Bench however, went on to hold that, in its view, merely C
because the Haryana Public Service Commission had called all the
1300 candidates who obtained 45 per cent or more marks in the
written examination to appear in the interview that did not in-
validate the selection made. This decision points out that the
minimmn eligibility qualification has to be kept distinct from the D
-zone of consideration and even if there are a large number of
candidates who satisfy the minimum eligibility requirement it is not
always required that they should be included in the zone of
consideration, it being open to the authority concerned to restrict
the zone of considera!ion amongst the eligible candidates in any E
reasonable manner."

Our attention has not been drawn to any decision or observation of
this Court which has taken a contrary view. Having a reasonable eligibility
condition, as four years in the present case, may become meaningless if all
the eligible officers are not considered for promotion. By increasing the F
numbers of years from two to four the field has been somewhat restricted
and considering that selection has to be made only on the basis of merit,
it is not unreasonable to give an opportunity to all the eligible officers to
compete with each other and for the best persons to be selected. Moreover,
this case relates to in-service promotion while Ashok Kumar Yadav was a G
case of direct recruitment. We are, therefore, unable to agree with the
petitioners that the charge of the policy brought by the Board in its meeting
on 7th March, 1989 in this regard is in any way bad in law.

It was then contended that on 23rd June, 1986 the Government of
India, Ministry of Finance, had issued guidelines under Regulation 17 of H
272 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A the Officers Service Regulation. In the said guidelines it was mentioned
that the number of persons to be considered for promotion from one scale
to another should normally be restricted to three to four times the numbers
of vacancies for which the promotions are being considered. The modifica-
tion on 7th March, 1989 in the promotion policy, it was submitted, should
not have been done in a way which was in conflid with the said guidelines
B and, therefore, doing away with the zone of consideration was not war-
ranted.

We do not find any merit in this contention, for more reasons than
one. Firstly, these guidelines have been issued by the Government under
C the Regulations framed under the Banking Regulations Act, which Act
does not apply to the State Bank of India. The said letter of 23rd June,
1986, enclosing the guidelines, is addressed to the Chief Executives of
twenty nationalised banks and only a Copy of the same was marked to the
Chairman of the respondent bank. As far as the State Bank of India is
D concerned the central Government can issue directions under Section 18
of the State Bank of India Act, 1955 and no directions in this behalf have
been issued. Furthermore as far as State Bank of India is concerned
paragraph 17 of the DTCS Order of 1979, which has been quoted earlier,
empowers the Central Board or the Executive Committee to lay down a
policy regarding promotions to all grades of officers in the Bank. The
E aforesaid guidelines which have be~n issued expressly relate to the
nationalised banks, and not to the State Bank of India, and cannot be
regarded as directions which are issued under Section 18 of the State Bank
of India Act, as was sought to be suggested by the counsel for the
petitioners.
F
It was then contended by Mr. Sachar that the change in the policy
in 1989 was motivated with a view to benefit respondents 4 and 5. .The
allegation in the writ petition in this regard was that respondent No. 4 was
working as Chief Officer (Industrial Relations) in the central office of the
bank and was of 1984 batch officer in scale IV. Respondent No. 5 was also
G a scale V officer of 1983 batch and was working as Private Secretary to the
Chairman of the Bank at Central Office, Bombay. It was alleged that on
account of the positions so held they wielded a lot of power in determining
the personal policies of the bank. These respondents, it was alleged,
succeeded in getting some imaginary hardships of junior scale IV officers
H highlighted in the conference of Chief General Managers held in January,
ALLINDlASfATEBANKOFFICERSl<".EDERATIONv. U.0.1. [KIRPAL,J.] 273

1988. In proof of the influence which respondents 4 and 5 had, it was A
submitted· that the memorandum dated 2nd March, 1989 containing the
proposal for the amendment in the promotion policy was not included as
an agenda item of the meeting of the Central Board which was to be held
on 7th March, 1989, and was not circulated in advance. This memorandum
was presented before the Boai;d as a table item and the Chairman, it was B
contended, ought not to have allowed the introduction of this memoran-
dum without its being included as a regular item on the agenda.

The allegations relating to mala ft.des so made in the writ petition
have been denied in the affidavit failed on behalf of the respondent bank.
It has been explained therein that the Chief General Managers and other C
top ex:!wtives are concerned with the development of human resources.
As such, all po!icy matters, before being formulated, are discussed with
Chief General Managers at an appropriate forum. It is after such a con-
ference was held that various suggestions and views had emerged. They
were examined by a group headed by a Senior Managing Director and D
other !'eni.or functionaries. A report submitted by the group was then
examin.?d by the Central Management Committee of the bank which
decided that the recommendations of the Cadre Management Group,
relating to promotions to Top Executive Grade Scale VI and VII, be
accepted and shuuld be implemented from the current year itself. This
decision was taken by the Central Management Committee in late E
February, 1939. As certain vacancies in these Scales VI and VII: d been
identified, the Central Management Committee felt that these positions
should be fitted up as early as possible so that important positions in the
bank do not remain vacant. On 2Jd March, 1989 the Deputy Managing
Director (Pc,rsonnel and Systems) prepared and signed a memorandum F
seeking the approval of the Central Board of the said policy. A meeting of
the Central Board had already been fixed for 7th March, 1989 and the next
meeting was expected to be held after one and a half on two months. With
a view to t;xpedite the consideration of the change in the policy the Deputy
Managing Director sent the memorandum to the Managing Director and
the Chairman. The Chairman and the Managing Director agreed that the G
memorandum be put to the Central Board at its meeting to be held on 7th
March, 1989. By that time the usual agenda items fixed earlier for the
Central Board meeting had already been circulated. It was in these cir-
cumstances that the item was placed as a table item at the Central Board
meeting held on 7th March, 1989 with the consent of the Chairman and H
274 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the Directors who were present at the meeting. It was also denied that the
policy had been modified wit~ a vi~w to help respondents 4 and 5. Allega-
tions of mala fides were denied.

In view of the aforesaid explanation of the respondent bank, which
we see no re~son to disbelieve, it is clear that the petitioners have made
B baseless and reckless allegations of mala fide. Respondents 4 and 5 ob-
viously had no direct or indirect wle to play either in the formulation of
the policy or in the memorandum being placed as a table item to be taken
up for consideration in the meeting held on 7th March, 1989. The modifica-
. tion was approved by the Chairman and all the Directors who were present
C in the meeting of the Board. For an allegation of mala fide to succeed it
must be conclusively shown that respondents 4 and 5 wielded influence
over all the members of the Board who were present in the said meeting.
No such allegation has been made. The decision to modify the promotion
policy was taken by a competent authority, namely, the Central Board in a
D duly constituted meeting held on 7th March, 1989 and we are unable to
accept that this charge in the policy was brought about solely with a view
to help respondents 4 and 5.

There is yet another reason why this contention of the petitioners
must fail. It is now settled law that the person against whom ma/a fides are
E alleged must be made a party to the proceeding. The allegation that the
policy was amended with a view to benefit respondents 4 and 5 would
amount to the petitioners contending that the Board of Directors of the
Bank sought to favour respondents 4 and 5 and, therefore, agreed to the
proposal put before it. Neither the Chairman nor the Directors, who
F present in the said meeting, have been impleaded as respondents. This
being so the petitioners cannot be allowed to raise the allegations of mala
fide, which allegations, in fact, are without merit.

It was also submitted that the change in the Policy was completely
arbitrary and without any reason. We are unable to accept this contention.
G The respondent bank is a business organisation and it must identify the
best available talent in the organisation for.holding challenging assignments
in the top executive grades. There is nothing wrong if the bank devised a
policy defining the eligibility norms on a realistic basis and devised a system
whereby the best available talent would be chosen to man the critical
H positions. Keeping this objective in view the changes in the promotion
ALLINDIASTATEBANKOFFICERSFEDERATIONv. U.0.1 [KIRPAL,J.) 275

policy have been made. It is always for the employer to see how to promote A
and utilise the best 'talent available in the organisation. The promotion
policy originally framed in the year 1975 has been amended from time to
time. The changes have now been made in 1989 keeping in mind the
requirement of the bank and based on the experience of the bank in regard
to making selection for promotion. The changes so made cannot be
B
regarded as arbitrary and the Court cannot sit in appeal and decide as to
what is good for the institution. Under, the new policy the petitioners are
also eligible for consideration and they cannot have any grievance because
certain persons who were eligible under the old policy, but in practice were
not considered for promotion, are now considered under the new policy.
The object of the new policy seems to be not only to redress the injustice c
to those officers resulting on account of the difference between the rules
and the practice but also with the object of selecting the best talent for the
top executive posts.

It was next contended that a uniform system of appraising the work D
was not followed which has caused prejudice to a section of the employees
of the bank. Prior to April 1986 appraisal used to be on the basis of the
annual confidential reports. With effect from April, 1986 a new system
known as annual appraisal system was introduced. Under the new system
the appraisal report states with the writing by 1.n employee himself, which
is called self appraisal. It is then forwarded to the superior authorities who E
record their own remarks on the performance of the employee concerned.
At already noticed this self appraisal system was not applicable in respect
of all the candidates. The comparative merit was assessed by taking into
consideration the annual confideRtial reports in the case of some
employees and the new performance appraisal reports in the case of others. F
Alleging that this has caused prejudice to those employees whose annual
confidential reports were considered the submission made was that the
procedure so adopted was discriminating.

It is no doubt true that in the case of some employees annual
confidential reports were considered and in the case of other employees G
assignment appraisal reports were considered. In our opinion, however,
this cannot be a good ground for holding that the selection is vitiated.
Firstly, no particulars have been given is the writ petition in order to show
that officers in whose case the annual confidential reports were con~idered
and suffered a disadvantage. If the petitioners were serious in raising this H
276 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A contention they would have given particulars as to how many of the 58
officers who were selected were those in whose case annual confidential
reports were considered and how many were those in whose case the
assignment appraisal reports were considered. In the absence of this basic
fact it cannot be presumed thatthe section of the employees whose annual .
confidential reports were considered had suffered a disadvantage. Further-
B more confronted with the situation whether the performance of the officer ·
was recorded in two different types of reports the managements had, as of
necessity, to consider the same and evaluate them. Even though the assign-
ment appraisal reporting system may be an improvement in the existing
system of writing annual confidential reports, the performance of the
c officer concerned could have been determined from the annual confiden-
tial reports. In fact this was being done before the gradual introduction of
appraisal reporting system. Each report of an officer, whether an annual
confidential report or assignment appraisal report, had to. be considered
on its own and the performance assessed. It is only if they received 70 per
D cent marks on the basis of this assessment that they were eligible for being
called for the interview. There is nothing to suggest that such assessment,
and assignment of marks, on the basis of the annual confidential report on
the assignment appraisal report could not have been given. it is, therefore,
not possible to hold that the consideration of two types of reports had
resulted in any discrimination.
E

F

ln reply the respondent bank in its affidavit has explained as follows: ~

"So far as assignment appraisal are eoncerned the assignment in
respect of positions held during the past 6 years are assessed
H irrespective of the posts held. This has been followed even under
AILINDIASfA1EBANKOFFICERSFEDERATIONv. U.0.1. (KIRPAL,J.] 277

the pre-revised promotion policy, i.e., when eligibility criterion was A
2 years of same continued even when officers were considered after
516 years. For the impugned promotion as well the same thing has
been followed. There was no need to reduce the period of assign-
ment. Appraisal to be considered from 6 years to 4 years. It is
reiterated that the Annual Confidential reports for 5 years and B
Assignment Appraisal for 6 years irrespective of the assignment
held have been uniformly assessed in respect of officers. Since 5
years Annual Confidential Reports were to be considered, reports
starting from as on 31.12.84 to 31.12.88 on thereafter were con-
sidered in respect of all officers. As such, even in respect of an
officer in Senior Management Grade Scale V of 1.8.84 batch C
reports as Scale V have only been assessed. So far as the Assign-
ment Appraisal Reports are concerned, it is submitted that, an
assignment covers generally a period of two to three years. Since
the last 6 years assignment appraisal is taken into consideration,
the oldest assignment will relate to the year 1983 assignment would D
normally cover a period commencing from 1980-81: Thus even in
respect of a 1.8.82 batch Scale V officer, assignment could and
would cover a portion of his assignment as Scale IV officer. Thus
the contention that respondent Nos. 4 and 5 (or other Scale V
offic~rs of 1.8.83 and 1.8.84 batches) have got any special ad-
vantages are not well founded." E

The aforesaid explanation clearly shows that the procedure of con-
sidering the assignments in respect of the positions held during ~e past six
years was in vogue even when the eligibility criteria was two years which
has now been revised to four years. Furthermore even in the ca~e of some F
senior officers the assignments would cover a portion of their tenure as
Scale IV officers. In considering such reports what has to be seen is
whether the assignment targets which are set have been satisfactqrily met
or not. It would not be very material as to in which scale the officer was
while adjudging this aspect. It was submitted by Mr. Shanti Bhushan,
learned senior counsel appearing for the respondents that each assignment G
covers two years. Normally in order to assess the merit of an officer a
period covering three assignments was considered to be necessary.. This
being so six years annual assignment reports had to be considered and we
do not find that such consideration could have caused any prejudice to any
officer. This contention, therefore, is without any substance. H
278 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A It was also contended that prescribing of 60 per· cent marks for the
interview as an eligibility criteria was arbitrary, unfair and unjust. It was
further submitted that the percentage of marks in viva voce examination
should not have been more than 15 per cent.

We do not find any merit in this contention. There can be no rigid
B
or hard and fast rule that the interview marks can only be 15 per cent and
no more. The percentage of marks for viva voce or interview which can be
regarded as unreasonable will depend on.the facts of each case. Decisions
of this Court show that no rigid rule, relating to percentage of marks for
interview of general universal application can .or has been laid down. What
c the interview on viva voce marks should be may vary from service to service
and the office or position or the purpose for which the interview is to be
held. But the interview marks should not be so high as to give an authority
unchecked scope to manipulate or act in an arbitrary manner while making
selection. Where merit can be best judged by holding an interview there
D such marks may be high but each case will have to be judged on its own
facts. Interview marks may be the minimal in such cases as relating to
admission to a college as held by this Court in Periakarnpan v. State of
Tamil Nadu, [1971] 1 SCC 38 and Ajay Rasia v. Khalid Mujib Sehrawardi,
[1981] 1 SCC 722. In Lila Dhar v. State of Rajasthan, [1981] 4 SCC 159 this
Court, on the other hand, held that in some cases relating to recruitment
E from amongst persons of matured personality holding of an interview may
be the only way subject to basic and essential requirements being satisfied.
The following observations in this regard made in Lila Dhar's case are very
apposite:

F "There are of course, many services to which recruitment is made
from younger candidates whose personalities are on the threshold
of development and who show signs of great promise, and the
discerning may in an interview test, catch a glimse of the future
personality. It the case of such services, where sound selection must
combine academic ability with personality promise, some weight
G has to be given, though not much too great a weight, to the
interview test. There cannot be any rule of thumb regarding the
precise weight to be given. It must vary from service to service
according to the requirements of the service, the minimum
qualifications prescribed, the age group from which the selection
H is to be made, the body to which the task of holding the interview
ALL INDIA SfAIB BANK OFFICERS FEDERATION v. U.0.1. (KIRPAL, J.) 279

testis proposed to be entrusted and a host of other factors. It is A
a matter for determination by experts. It is a matter for research.
It is not for courts to pronounce upon it unless exaggerated weight
has been given with proven or obvious oblique motives. The
Kothari Committee also suggested that in view of the obvious
importance of the subject, it may be examined in detail by the
B
Research Unit of the Union Public Service Commission. (emphasis
supplied)"

Again in the State of U.P. v. Rafiquddin Ors., [1987) Supp. SCC 401
dealing with a case relating to U.P. Civil Service (Judicial Branch) Rules,
1951 the prescription of 35 per cent qualifying minimum marks for viva C
voce test was upheld. In this connection it was observed that if any
minimum marks either in the written test or in viva voce test are fixed by
the Public Service Commission so as to determine the suitability of a
candidate the same has to be respected.

It is not necessary to multiply the number of cases in this regard D
except to notice the decision of this Court in Mehmood Alam Taliq and
Ors. v. State of Rajasthan and Ors., [1988] 3 SCC 241. This case related to
recruitment by the Public Service Commission to certain branches of
service under the State by a scheme of competitive examination. The
Division Bench of the Rajasthan High Court had declared the rules which E
required that a candidate must secure a minimum of 33 per cent of the
marks prescribed for the viva voce examination as being unconstitutional.
While allowing the appeal arising from the said judgment this Court held
that considering the nature of the services for which the recruitment was
to be made the provision in the rules requiring the candidate to obtain a
minimum of 33 per cent of marks in viva voce test could not be regarded F
as bad in law.

Applying the ratio of the aforesaid decisions in this case we find that
the interview marks represent only 25 per cent of the aggregate, i.e., 200
marks. In order to be eligible a candidate is required to obtain 60 per cent G
of these fifty marks. Considering the fact that the selection has to be made
for appointment to the top executive cadre and keeping in view the job
requirements and the nature of responsibility the bank has raised ti~~
minimum qualifying percentage from 50 per cent to 60 per cent. At the
same time the total number of interview marks have been reduced from
100 to 50. Under the circumstances it cannot be contended that exag- H
280 SUPREME COURT REPORTS 11996] SUPP. 6 S.C.R.

A gerated \\'~ight has been given to the marks to be obtained in the interview.

As already noticed the process of selection contemplates the assess-
ment of the annuai reports. In the rejoinded affidavit filed by one Sh. Urned
Singh, the then President of the petitioner Federation, it was conteded as
follows:
B
"In fact iri the impugned promotions only one person Shri V.K.
Mehrotra, General Manager has allotted marks on the individual
(
promotion appraisal forms. A list of candidates was prepared and
the marks allotted by Shri Mehrotra were copied and then the list
was got signed by the three Deputy Managing Directors. This can
c be ascertained form the records itself."

In view of the aforesaid averment this Court in its order dated 27th
July, 1990 noted that this was a very serious allegation and as the Court
did not firid from the affidavit the basis on which this allegation was made,
D it directed Sh. Urned Singh "to verify on affidavit this allegation and to state
specifically whether the allegations have been made on his personal
knowledge or on the basis of information believed to be true and the preuse
(sic) source of the information from whom the information was derived will
have to be specifically stated as otherwise credence whatever can be given
to allegation of this type. If the allegation is to be found false that also will
E have its own consequences." By this order the Court also required that the
file containing the photo copies of the appraisal records of all the persons
promoted should be tendered in the Registry and the same was required .
to be kept by the Registrar in a sealed cover.

F ·Pursuant to the aforesaid order a further affidavit dated 10th August,
1990 was filed in this Court by Sh. Urned Singh. In paragraph 2 of this
affidavit he stated that the averments made by him in his rejoinder affidavit
were based on the information derived by him from Sh. V.K. Mehrotra and
one Sh. R.P. Rastogi, the then Deputy General Manager, Central Office,
Bombay. Elaborating this it was stated that the deponent had met Sh. V.K.
G Mehrotra in the room of the P.A. to the General Manager (Planning), State.
Bank of India, New Delhi on or around 28th April, 1989. It is at that time
Sh. V.K. Mehrotra is alleged to have informed Sh. Urned Sing that he had
been called by the Central Office in connection with the awarding of marks
for promotion appraisals. It was further stated in this affidavit of Sh. Urned
H Singh that Sh. R.P. Rastogi had told him that marks on the individual
ALLINDIASTAIBBANKOFFICERSFEDERATIONv. U.0.1. [KIRPAL,J.J 281

promotion appraisal forms were awarded by Sh. V.K. Mehrotra and the A
statement of marks in respect of various candidates was signed by the
Screening Committee comprising of the three Deputy Managing Directors.

In response to the aforesaid additional affidavit of Sh. Urned Singh
a counter affidavit dated 12th October, 1990 of Sh. M.N. Sheorey, Chief
General Manager (Personnel) of the respondent bank was filed. In this B
affidavit Sh. Sheorey stated that Sh. Umed Singh was incorrect in stating
that Sh. V.K. Mehrotra had allotted marks on individual appraisal forms.
Explaining the procedure which was actually followed Sh. Sheorey, in
paragraphs 4 and 5 of this affidavit observed as follows :

''That in March 1989 an office order to the following effect had
c
been issued by the Chairman of the State Bank of India which is
being set out hereunder :

"As per the extant procedure, the recommendations received
from the Circles and Central Office departments, for promo- D
tion to Top Executive Grade Scale, VI and VII are processed
by Personnel Department, as per the laid down norms.
Thereafter, the officers who fulfil the norms are called for
interview. From the current year, it is proposed to have a
second stage screening of all these reports after they are E
processed by the Personnel Department. The list of the offi-
cials to be interviewed will be finalised thereafter. The com-
mittee comprising Shri B. Gupta, Deputy Managing Director
(OSD), Shri M.C. Sharma, Dy. Managing Director (Agricul-
ture & Rural Banking), and Shri B.K. Mazmudar, Deputy
Managing Director (Personnel & Systems) will be the mem- F
hers of the Screening Committee. The necessary secretarial
support will be provided by the Chief General Manager
(Personnel & HRD)."

Each and every promotion appraisal form was scrutinised by the
Screening Committee consisting of 3 Deputy Managing Directors G
and it was the Screening Committee which used to finally deter-
mine the marks to be given to different officers in respect of each
promotion appraisal form. What the deponent as Chief General
Manager (Personnel and HRD), since redesignated as Chief
General Manager (Personnel), did was to provide assistance to the H
282 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A deliberations of the Screening Committee. The final marksheet was
accordingly signed by all the 3 members of the Screening Commit-
tee.

It is submited that, I, as Chief General Manager, Personnel and
HRD, in view of about 500 candidates' appraisal forms being
B involved, had taken assistance in arranging/processing the papers
from Shri R.P. Rastogi who was the Dy. General Manager (Per-
sonnel Administration) as also Shri V.K. Mehrotra·who had earlier
been the Chief Officer (presently known as Dy. General Manager)
of Personnel Administration Dept. before putting them up to the
c Screening Committee."

Along with this an, affidavit of Sh. V.K. Mehrotra was also filed where,
while referring to the earlier statement of Sh. Urned Singh alleging that Sh.
V.K. Mehrotra had allotted marks on the individual promotion appraisal
forms, it was categorically stated that the said statement was absolutely
D false. Sh. R.P. Rastogi, another officer mentioned in the affidavit of Sh.
Urned Singh, has also filed an affidavit in this connection in which he has
stated as follows :

"Mr. Urned Singh never asked me at any time any question relating
E to the processing of the promotion papers nor told me anything
as to what Mehrotra told him. These allegations are pure figments
of deponent's imagination. With regard to furt~er allegation that
I told the deponent that while marks on the individual promotion
forms were awarded by Shri V.K. Mehrotra these were copied in
a separate paper and signed by three Deputy Managing Directors,
F firstly. I never told anything to Mr. Urned Singh and secondly the
second fact itself is not true."

The photo copies of the documents including the appraisal forms
which have been filed in Court have also been examined by us. No docu-
G ment in these two volumes which have been filed has been shown to us to
be in the handwriting of Sh. V.K. Mehrotra. In other words the documents
so filed do not show that Sh. V.K. Mehrotra had any role, as alleged, to
play in awarding marks on the individual appraisal forms. Furthermore the
affidavits filed by Mr: Sheorey, Sh. Mehrotra and Sh. Rastogi clearly belie
the allegations made by Sh. Urned Singh in his rejoind.er affidavit. There
H is no reason as to why the affidavits filed by these senior officers of the
ALLINDIASTAlEBANKOFFICERSFEDERATIUNv. U.0.I. [KIRPAL,J.J 283

bank should be di~believed. This is more so when we find that the allega- A
tion with regard to Sh. Mehrotra has been made at a late stage. The writ
petition was filed in this Court on 21st April, 1.989. The alleged conversa-
tion between Sh. Urned Singh and Sh. V.K. Mehrotra is stated to have
taken place on or about 28th April, 1989. It is not till the filing of the
rejoinder affidavit on 23rd October, 1989 that an allegation regarding B
alleged conversation with Sh. V.K. Mehrotra was made in this Court. If
such a conversation, as alleged, had taken place one would have expected
the petitioners to approach the Court at the earliest either with a view to
amend the writ petition or to file an additional affidavit making allegations
raised in the rejoinder affidavit and thereby giving an opportunity to the
respondents to file the reply. This conduct of Sh. Urned Singh shows that C
the bald allegation regarding Sh. V.K. Mehrotra assigning the marks, as
contained in the rejoinder affidavit, is an afterthought. We have, therefore,
no hesitation in coming to the conclusion that the averments made by Sh.
Urned Singh in his rejoinder affidavit of 23:td October, 1989 and the further
affidavit of 10th August 1990 with regard to Sh. V.K. Mehrotra are ab-
solutely false. While on this subject it will be pertinent to note that the D
respondents in their counter affidavit had taken an objection to the effect
that the writ petition should be dismissed because the petitioners had
suppressed certain material facts from this Court and had also tried to
abuse the process of the Court, attention of the Bench of this Court was
drawn to the affidavits of Sh. Urned Singh which had been filed in this case. E
In the order dated 16th April, 1990, the Bench went into the question as
to whether some of the statements made in the writ petition as well as in
the affidavit are correct or not. It also took note of an affidavit filed by Sh.
Urned Singh in which he had purported to "tender an unqualified appol-
ogy." for some mis-statements made in an earlier affidavit. Ultimately the
Bench came to the conclusion that "apart from mis-statements in the F
affidavit filed before this Court, the petitioner Federation has clearly
resorted to tactics which can only be described as abuse of the process of
the Court." The Bench also further expressed its anguish in the following
words:

"We have set out the facts in this case at some length and passed G
a detailed order because we are deeply grieved to come across
such conduct on the part of an association, which claims to repre-
sent high placed officers of a premier bank of this country. One
expects such officers to fight their battles fairly and squarely and
not to stoop low to gain, what can only be, temporary victories by H
284 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A keeping away material facts from the Court. It is common
knowledge that, of late, statements are being made in petitio~s and
affidavits recklessly and without proper verification not to speak
of dishonest and deliberate mis-statements. We, therefore, take
this opportunity to record our strong and emphatic disapproval of
the conduct of the petitioners in this case and hope that this will
B be a lesson to the present petitioner as well as to other litigants
and that atleast in future people will act more truthfully and with
a greater sense of responsibility."

The petition was not dismissed on account of mis-statements and suppres-
c sion of material facts because of the concession made by the counsel for
the bank that he was appearing for a public sector undertaking and was
prepared to contest the petition on merits and that the preliminary objec-
tion was primarily intended to bring to the notice of the court the conduct
of the petitioners in this regard.

D It is indeed unfortunate that despite the aforesaid observations made
by the Bench in its order dated 16th April, 1990, Sh. Urned Singh has not
batted an eye lid and has, once again made false statements in his affidavit
dated 10th August, 1990. Normally we would have ordered the prosecution
of Sh. Urned Singh for having committed perjury. We are, however, in-
E formed that he is no longer the President of the Federation and considering
that prosecution may take further time, it will not be practical to initiate
such proceedings in this connection ~t this stage.

For the aforesaid reasons this writ petition is dismissed with costs
which are quantified at Rs. 20,000 of which Rs. 10,000 will be paid by Sh.
F Urned Singh personally.

Writ Petition No. 1260 of 1989

For the reasons stated in the judgment in writ petition No. 507 of
G 1989, this writ petition is also dismissed.
v.s.s. Petitions dismissed.
-11

KESHUB MAHINDRA A
v.
STATE OF M.P.

SEPTEMBER 13, 1996

(AM. AHMADI, CJ. AND S.B. MAJMUDAR, J.] B

Criminal Law :

Criminal Procedure Code, 1973 : Sections 227, 228, 397 and 482.

Criminal Proceedings-Quashing of-Bhopal Gas Tragedy-Leakage c
of highly toxic MIC gas from storage tank of plant resulting in huge loss of
human lives-Permanent/temporary injuries or total/pa1tial disablement and
loss of cattle lives-Charges framed against personnel who handle plant
substantively under Sec. 304 Part II, 324 324 and 429 !PC r/w. S. 3~
/PC-According to Expert Committee Report escape of gas on account of D
defective plant and lack and supervision by accused led to accident-Held:
material available on record prima facie did not connect accused with
offences with which they were charged-Hence, these charges quashed and set
asid~However, prima f acie charge under S. 304-A !PC made out:-Since
originally case registered under S. 304-A, charges could be framed there-
w1der-T1ial Court, could also consider on material led by prosecution
E
whether charges could be franted under Ss. 336, 337 and 338 /PC.

Penal Code, 1860:

Sections 299 and 304 Part II-Ingredients of-Accused must have done
F
an act which caused death of a person with knowledge that by such act he
was likely to cause death.

Sections 324 and 326-Ingredients and applicability of-Accused must
commit act with knowledge that by such act he was likely to cause hurt or
grievous hurt to victim. G
Sections 425 and 429-Ingredients and applicability of S. 429-/f com-
mission of 'mischief as defined in S. 425 by accused was not made out S.
429 could not be invoked.

Constitution of India, 1950 : Anicle 142. H
285
\>

286 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A. Crimi11al Proceedings-Quashing of-Charges framed against accused
quashed by Supreme Court as offences alleged not prima facie made
out-However, Supreme Cowt in exercise of power under A1ticle 142 could
direct framing of charge for another offence under which case was initially
registered and as regards to which counsel for pmties addressed the Cowt with
view to avoiding multiplicity of proceedings.
B
A grim tragedy of unprecedented nature occu17"ed on the f atefu.l 11ight
when a ltigltly dangerous and to;xic gas called MIC escaped from a tank from
the factory belonging to accused No. 12-Union Carbide India Limited
resulting in huge loss of human lives, permanent/temporary injwies or
C total/pa1tial disablement and loss of cattle lives.

This ghastly tragedy had come to be known as 'Bhopal Gas Tragedy'.
According to the Expe1t Committee Repolt the lethal gas MIC escaped both
on account of defective plant which was operated under the control of the
D appellants-Accused and their lack of supe1vision which led to the accident.
Charges were framed against the appellants-Accused who were actually
handling the Pla1tt (accused Nos. 2 to 9), substantively under Section 304 Pa1t
II, 324, 326 and 429 read with Section 35 of the India11 Penal Code,1860.
Aggrieved by the aforesaid charges the appellant-accused moved Criminal
Revision Applications before the High Co wt under Sections 397 and 382 of
E the Oiminal Procedure Code, 1973, which was dismissed. Hence this appeal.

On behalf ofthe·appellants-accused it was contended that as per the
chargesheet and supporting material there was no prim a f acie case that
the accused were guilty of the offence under Sections 304-A, 324, 326 and
F 429 read with Section 35 of the IPC; that there was no proximate act of the
negligence on the part of the accused which had resulted in the accidental
tragedy; that none of !he accused could be held criminally liable for the
accident; and that the charges framed against the accused were required
to be quashed.

G On behalf of the respondent-State it was contended that there was
ample material produced by the prosecution in support of the chargesheet;
that the Expert Committee Report had clearly indicated the causes of the
accident and the defects found in the running of the plant at the relevant
time; and that there was sufficient material to prim a f acie indicate that
H the accused were liable to be prosecuted.
KESHUB MAHINDRA v. STATE 2B7

Allowing the appeal in part, this Court A

HELD : 1. It is clear from Sections 227 and 228 of the Criminal
Procedure Code, 1973 that while exercising jurisdiction under Section 482
Cr.P.C. when the High Court is called upon to quash the charge pursuant
to which proceedings at the stage of trial are pending, and even when the B
High Court is called upon to quash proceedings pursuant to complaint,
only a prima facie appraisal of the allegations made in the complaint and
the material in support thereof has to be done and the Court has no
jurisdiction to go into the merits of the allegations as that stage would
come when the trial proceeds. It is, therefore, necessary to keep in view the
limited jurisdiction available to the Court regarding the permissible C
scrutiny of the prosecution case as revealed from the chargesheet and
material supporting the same framing charges against the present ac-
cused. [302-A; B; C; G]

Niranjan Singh Karam Singh Punjabi v. Jitendra Bhimraj Bijja & Ors., D
AIR (1990) SC 1962 and State of U.P. v. O.P. Shanna, (1996) 2 SCALE 356,
relied on.

2. Before any charge under Section 304 Part II of the India Penal
Code, 1860 can be framed, the material on record must at least prim a f acie
show that the accused is guilty of culpable homicide and the act allegedly E
committed by him must amount to culpable homicide. In view of Section
229 of the IPC the material relied upon by the prosecution for framing a
charge under Section 304 Part II must at least plima f acie indicate that
the accused had done an act which had caused death with at least such a
knowledge that he was by such act likely to cause death. The entire material F
which the prosecution relied upon before the Trial Court for framing the
charge cannot support such a charge unless it indicates plima f acie that
on that fateful night the plant was run by the concerned accused with the
knowledge that such running of the plant was likely to cause deaths of
human beings. Mere act of running a plant as per the permission granted
by the authorities would not be a criminal act. Even assuming that it was G
a defective plant and it was dealing with a very toxic and hazardous
substance like MIC the mere act of storing such a material by the accused
in tank could not even prim a f acie suggest that the concerned accused
thereby had knowledge that they were likely to cause death of human
beings. In fairness to prosecution it was not suggested and could not be H
288 SUPREME COURT REPORTS l1996] SUPP.6S.C.R.

A suggested that the accused had an intention to kill any human being while
operating the plant. Taking the entire material on its face value and
assuming it to represent correct factual position in connection with the
operation of the plant on tha.t fateful night it could not be said that the
said material even prima f acie called for framing of a charge against the
B concerned accused under Section 304 Part II, IPC on the spacious plea
that the said act of the accused amounted b culpable homicide because
the operation of the plant on that night ultimately resulted in deaths of
number of human beings and cattle. When on the material produced by
the prosecution no charge could be framed against any of the accused
under Section 304 Part II there would remain no occasion to press in
C service the applicability of Section 35, IPC in support of such a charge for
those accused who were not actually concerned with the running of the
plant, namely accused Nos. 2, 3, 4, and 12. [323-E]

Adam Ali Taluqdar & Ors. v. King-Emperor, AIR (1927) Cal. 324, held
D inapplicable.

3.1. For applicability of Sections 324 and 326 of the IPC the material
relied upon by the prosecution in support of such charges must show that
the concerned accused had committed the act complained of at least with
the knowledge that by such act he was likely to cause hurt or grievous hurt
E to the victim. The material pressed in service by the prosecution for fram-
ing such charges against the accused falls short of indicating that the act
of ruQning the plant on that fateful night which in its turn involved stpring
and utilising highly dangerous and volatile substance like MIC in this
storage tank could not even prima f ticie be said to have been done with the
knowledge that by such act itself simple hurt or grievous hurt was likely to
F be caused to any one. Consequently on such material even charge under
Sections 324 and 326, IPC could not have been framed against the con-
cerned accused. Once this conclusion is reached there would also remain
no occasion to press in service against the accused Nos. 2, 3, 4 as well as
12, the charge under Section 35 IPC which the prosecution sought to press
G in service along with substantive Sections 324 and 326 IPC. In fact on the
material as placed by the prosecution in support of these charges if a
charge under Section 304 Part II cannot be framed then on the parity of
reasoning no charge under Sections 324 and 326 could also be framed.
[324-A-EJ

H 3.2. Before Section 429 IPC is pressed in service the material relied
KESHUBMAHINDRAv. STATE 289

upon by the prosecution must indicate even prima f acie that the concerned A
accused by running the plant on that fateful night had knowledge that by
running such plant they were likely to cause wrongful loss or damage to the
public or to any person. The material produced by the prosecution does not
even plima f acie indicate how by running such a plant wherein highly
dangerous and volatile subs~nce like MIC was stored in tank the accused
had the knowledge that· by 'that act alone they were likely to destroy B
anybody's property or cause wrongful loss or damage to any person. Once
the applicability of Section 425, IPC dealing with 'mischier is ruled out on
such material there would remain no occasion to invoke Section 429 which
for its applicability requires the prosecution to show in the first instance
any material against the concerned accused indicating the commission of C
mischief by the accused. Therefore, on the material pressed in service by
the prosecution for framing charges against the accused no charge could
have been framed against the concerned accused either under Section 304
Part II or under Section 324, 326 or 429, IPC with or without the aid of
Section 35, IPC. On these findings all the charges will have to be quashed.
(325-A·CJ D
(

4 3.3. On the finding that the material pressed in service by the
prosecution does not indicaie even prima f acie that the accused were guilty
of an offence of culpable homicide and, therefore, Section 304 Part II was
out of picture, Section 304-A on this very finding can straightaway get
attracted at least plima facie. Because of the operation of the defective E
plant on that fateful night a highly dangerous and volatile substance like
MIC got converted into poisonous gas which snuffed off the lives of
thousands of human beings and maimed other thousands and killed
number of animals and that all happened, as seen at least plima f acie the
material led by the prosecution on record, because of rash and negligent F
act on the part of the accused who were in-charge of the plant. The material
led by the prosecution shows that there were not only structural defects
but even operational defects in the working of the plant on that fateful
night which resulted into this grim tragedy. Even though, therefore, these
accused cannot be charged for offences under Section 304 Part II, the
material led against them by the prosecution at least p1ima f acie showed G
that the accused were guilty of rash or negligent acts not amounting to
culpable homicide and by that act caused death of large number of
pers~ns.

3.4. It is true that though originally the criminal case was registered H
290 SUPREME COURT REPORTS l1996] SUPP. 6 S.C.R.

A for an offence under Section 304-A of the IPC the Central Bureau of Inves-
tigation which· took up the investigation thought it proper to press in
service Section 304 Part II and Sections 324, 326 and 429 of the IPC.
Charges under these Sections have been found to be unsustainable on the
material produced by the prosecution on record in support of these char-
ges. However that does not mean that on the material as it stands on record
B the accused cannot even p1ima f acie be alleged to have committed any
criminal offence for which they can be called upon to face the trial and that
they should get a clean chit and clear walk-over. On the question whether
on this material Section 304-A could be invoked or not, counsel for the
appellants as well as Addi. Solicitor General for the respondent-State did
c address this Court, therefore, the Court can and should, with a view to
avoid multiplicity of proceedi.ngs, exercise its powers under Article 142 of
the Constitution and decide whether the material led by the prosecution
can prima facie support charges under Section 304-A against the concerned
accused. Question of proof of rashness and negligence will arise at the stage ·'
of trial after full evidence is led by the prosecution and even by the accused
D side if at all they choose to do so and in the light of that evidence the
question would arise whether the charge as framed is made out by the
prosecution against the concerned accused. The aforesaid conclusion,
therefore, would make out a plima f acie case against accused Nos. 5, 6, 7, 8
and 9 who were in actual charge of running of the plant and would require
E them to face the trial for charge under Section 304-A of the IPC. [329-E]

State of Gujarat v. Haidarali Kalubai, [1976] 1 SCC 889; Ambala/ D.
Bhatt v. State of Gujarat, [1972] 3 SCC 525; Sulemim Rehiman Mulani &
Anr. v. State of Maharashtra, [1968] 2 SCR 515 and Kurban Hussain
Mohammedali Rangwalla v. State of Maharashtra, [1965] 2 SCR 622, held
F inapplicable.

4.1. So far as the remaining accused Nos. 2, 3, 4 and 12 are concerned
the material produced on record clearly indicates at least plima facie that
they being at the helm of affairs have to face this charge for the alleged
G negligence and rashness of their subordinates who actually operated the
plant on that fateful night and for that purpose Section 35 of the IPC would
also prim a f acie get attracted against them. A mere look at that Section
shows that if the act alleged against these accused becomes criminal on
account of their sharing common knowledge about the defective running of
plant by the remaining accused who represented them on spot and who had
H to carry out their directions from them and who were otherwise required to
KESHUB MAHINDRA v. STATE 291

supervise their activity. Section 35 of the IPC could at least prima f acie be A
invoked against accused 2, 3, 4, and 12 to be read with Section 304-A, IPC.
Consequently on the material led by the prosecution against the accused at
this stage a p1ima f acie case was made out by the prosecution for framing
charges against accused Nos. 2, 3, 4 and 12 under Section 304-A read with
Section 35 IPC while su~stantive charges under Section 304-A could be B
framed against accused ~os. 5, 6, 7, 8 and 9. (329-F; G]

Esso Standard Inc. v. Udltaram Bhagwandas Japanwalla, (1973) 45
Comp. Cas. 16, held inapplicable.

4.2. However, from the material which is produced on record there C
is a possibility of considering a further question whether charges under
Sections 336, 337 and 338 of the IPC with or without the aid of Section 35
can be framed against the concerned accused. As none of the parties have
addressed this Court on these aspects this question is left open for
consideration of the Tria' Judge who may after hearing the parties decide
whether on the material' as led by prosecution on record at this stage, D
charges, if any, can also be framed under Sections 336, 337 and 338of the
IPC with or without the aid of Section 35 of the IPC. [331-C; 332-A]

4.3. On the material led by the prosecution appropriate charges
which are required to be framed against the concerned accused are under E
Section 304-A, IPC so far as the accused Nos. 5, 6, 7, 8 and 9 are concerned
wh!le so far. as accused Nos. 2, 3, 4 and 12 are concerned charges under
Section 304-A read with Section 35 IPC will have to be framed. As these
offences are triable by the court of Judicial Magistrate 1st Class, the
Sessions Case shall be transferred to the Court of the Chief Judicial
Magistrate, 1st Class who will proceed with thetrial in accordance with.law F
and frame appropriate charges under Section 304-A with or without the aid
of Section 35, as the case may be, against the concerned accused. [332-B-C]

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
1672 of 1996 Etc. Etc.
G
From the Judgment and Order dated 1.8.95 of the Madhya Pradesh
High Court in Crl. R. No. 237 of 1993.

Asok H. Desai and K.K. Desai, A.K. Desai, K.J. John and Palkar for
the Appellant in Crl.A. No.1672/96. H

'
1

292 SUPREME COURT REPORTS [1996) SUPP • 6 S.C.R.

A Prasad Dakephalkar, P.H. Parekh and Ms. Bina Madhavan for the
Appellant in Crl.A. Nos. 1673, 1675 and 1674/96.

Altaf Ahmad, Additional Solicitor General, P. Parmeswaran and
S.A. Matto for the Respondent.
B
The Judgment of the Court was delivered by

S.B. MAJMUDAR, J. Leave granted in all these Special Leave
Petitions. In these appeals the concerned appellant-accused have brought
in challenge the order dated 8th April 1993 passed by the Court of 9th
C Additional Sessions Judge, Bhopal in Sessions Trial No. 257 of 1992
whereby the learned Sessions Judge framed charges against the appellants
in appeals arising out of S.L.P. (Crl.) Nos. 3900 of 1995, 3901of1995 and
3953 of 1995 under Sections 304 Part II, 326, 324 and 429 read with Section
35 of the Indian Penal Code (for short 'IPC' ') and framed charges under
D Sections 304 Part II, 326, 324 and 309 against the appellants in appeal
arising out of S.L.P. (Crl.) No. 3932 of 1995. They had also challenged the
orders of the High Court of Madhya Pradesh at J abalpur in Criminal
Revision Application Nos. 237/93, 238/93, 312/93 and 311/93 whereby these
charges were sustained. Appeal arising out of S.L.P. (Crl.) No. 3900of1995
is moved by Shri Keshub Mahindra who is accused No. 2 before the
E Sessions Court. Appeal arising out of S.L.P. (Crl.) t'io. 3901 of 1995 is
moved by Shri V.P. Gokhale who is accused No. 3 in the same case. Appeal
arising out of S.L.P. (Crl.) No. 3953 of 1995 is moved by Kishore Kamdar
who is accused No. 4 in the said case while the last appeal arising out of
S.L.P. (Crl.) No. 3932of1995 is moved by six accused being Shri J. Mukund
F accused No. 5, Dr. R.B. Roy Choudhary accused No. 6, Shri S.P. Chaud-
hary accused No. 7, Shri K.V. Setty accused No. 8, Shri S.I. Qureshi
accused No. 9 and Union Carbide India Limited ('UCTL' for short)
accused No. 12 in the same case pending before the Sessions Court at
Bhopal. The concerned appellants had moved the High Court of Madhya
Pradesh at J abalpur under Sections 397 and 482 of the Code of Criminal
G .
Procedure (Cr.P.C.) for quashing the aforesaid charges.

With a view to highlighting the grievances of the appellants a few
relevant facts deserve to be noted at the outset.

H Introductory Facts
KESHUB MAHINDRA v. STATE (S.B. MAJMUDAR, J.] 293

A grim tragedy of unprecedented nature occurred at Bhopal on the A
night intervening 2nd December 1984 and 3rd December 1984 wherein
between 0030 hours and 0045 hours a highly dangerous and toxic gas called
MIC escaped from tank No. E610 from the Bhopal factory belonging to
accused No. 12 UCIL. As a result of this leakage 3828 human beings lost
their lives while permanent injuries were caused to 18922 human beings, B
tei:nporary disablement was suffered by 7172 human beings, temporary
disablement caused by permanent injury was suffered by 1313 persons
while permanent partial disablement was suffered by 2680 persons, While
40 human beings suffered from permanent total disablement and the death
toll of animals amounted to 2544. This ghastly tragedy has come to be
known as 'Bhopal Gas Tragedy'. After the gas leakage Criminal Case No.
c
1104 of 1984 was registered at the Police Station Hanumanganj, Bhopal on
3rd December 1984 by the Station House Officer sou motu. This case was
registered under Section 304-A, IPC. In the said case 12 accused were
indicted. Accused No. 1 was Shri Warren Anderson who was the Chairman
of Union Carbide Corporation. The said concern was also indicted as D
accused No. 10. Accused No. 2 Keshub Mahindra was the r:hairman of
UCIL which in its turn was shown as accused No. 12. Accused No. 3 V.P.
Gokhale was shown as an accused in his capacity as Managing Director of
UCIL. Kishore Kamdar who was the Vice President and Incharge of A.P.
Division of UCIL was shown as accused No. 4. Shri J. Mukund the Works E
Manager of the Bhopal Plant was joined as accused No. 5. Dr. R.B. Roy
Choudhary who was Assistant Works Manager, A.P. Division, UCIL at
Bhopal was joined as accused No. 6. Accused No. 7. was Shri S.P. Choud-
hary, Production Manager of the Bhopal Plant. Shri K.V. Shetty, Plant
Superintendent of the said Bhopal plant was accused No. 8. Shri S.I. F
Qureshi was shown as accused No. 9. He was Production Assistant at the
said Bhopal plant. Out of the above accused persons accused Nos. 5, 6, 7,
8 and 9 were stationed at Bhopal and were incharge of the Bhopal Plant
itself.

G
On the registration of the aforesaid Crime Case the Station House
. Officer, Bhopal, arrested five employees of the factory, namely, accused
Nos. 5 to 9 and they were kept in police custody. Accused Nos. 1, 2 and 3
were arrested on 7th December 1984. Out of them accused No. 1 Shri
Warren Anderson was released on bail the same day. On 6th of December H
294 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 1984 the case was handed over to the CBI. On completion of investigation
the chargesheet was presented by the CBI in the Court of CJM, Bhopal on
1st December 1987.

In the present proceedings we are not concerned with the question
of compensation payable to the gas-disaster victims at Bhopal and the
B
various steps taken by the Government of India in this connection. We,
therefore, do not dilate on these aspects. Suffice it is to state that by earlier
orders of this Court dated 14th February 1989 and 15th February 1989 all
criminal proceedings relating to and arising out of the Bhopal Gas Disaster
were quashed by this Court. As a result the proceedings in the present case
C which were then pending in the Committal Court stood terminated. How-
ever the said order was reviewed by this Court on 3rd October 1991 and
the above criminal proceedings were restored. After their restoration the
case was committed to the Court of Sessions. Commitment was made by
order dated 30th April 1992. On the case being committed to the Court of
D Sessions it was registered as Sessions Trial Case No. 237 of 1992 as
aforesaid. It appears that trial of the criminal case against accused No. 1
Warren Anderson, accused no. 10 UCC and accused No. 11 Union Car-
bide (Eastern) -Inc., Hongkong had to be segregated and split up as the
concerned accused were absconding. The trial proceeded against remain-
ing accused Nos. 2 to 9 and 12. In the light of the supporting material
E produced by the prosecution before the Sessions Court along with the
chargesheet and its contents the Sessions Court was requested by the
prosecution to frame appropriate charges against the concerned accused
against whom the trial had to proceed. After hearing the prosecution as
well as the learned counsel for the concerned accused the learned 9th
F Additional Sessions Judge, Bhopal passed order dated 8th April 1993
framing charges against the concerned accused. As these charges have
been seriously brought into challenge it would be apposite to reproduce
the charges as framed by the learned Trial Judge against the concerned
accused. So far as accused No. 2 Keshub Mahindra is concerned four
charges were framed against him as under :
G
"Firstly : That on or about the night intervening 2nd and 3rd
December, 1984 at Bhopal, the Capital of M.P. co-accused persons
S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.B.
Choudhary/KV. Setty and S.I. Qureshi committed culpable
H homicide not amounting to murder by causing death of 3828 or
KE.SHUB MAHINDRA v. STATE [S.B. MATMUDAR, J.) 295

more human beings by allowing the highly toxic gas known by the A
name of MIC to escape from tank No. 610 of AP. Division plant
of UCIL knowing that it was likely to cause deaths and you sharing
this common knowlege with them did not do anything to avoid the
said escape of gas thus you thereby committed on each courts an
offence punishable under Sec. 304 (II) R/W Sec. 35 of the IPC and
B
within the cognizance of the Court of Session.

Secondly: That on the above date and at the above place, above
co-accused persons by allowing to escape from the above tank the
corrosive substance known by the name of MIC gas, knowing that
it was likely to cause grevious hurts, thus voluntarily (as defined c
U/S 39 IPC) caused grevious hurts to 21694 or more human beings
and you sharing this common knowledge with them .did not do
anything to avoid the said escape of gas thus you thereby com-
mitted on each count an offence punishable under section 326 R/W
Sec. 35 IPC and within the cognizance of the Court of Sessions.
D
17tirdly : That on the above date and at the above place, co-accused
persons by allowing to escape from the above tank the corrosive
substance known by the name of MIC gas knowing that it was likely
to cause hurts, thus voluntarily (ai defined Under Sec. 39 IPC)
caused hurts to 8485 or more human beings and you sharing this E
common knowledge with them did not do anything to avoid the
said escape of gas, thus you the_reby committed on each count an
offence punishable U/S 324 R/W Sec. 35 IPC and within the
cognizance of the Court of Sessions.

Fourthly : That on the above date and at the above place the above F
accused persons by allowing MIC gas to escape from the above
tank knowing that it was likely to cause death of animals, com-
mitted mischief by killing thereby 2544 or more animals of various
descriptions each valuing more than Rs. 50 and you sharing this
common knowledge with them did not do anything to avoid the G
said escape of gas, thus you thereby committed on each count an
offence punishable U/S 429 R/W Sec. 35 IPC and within the
cognizance of the Court of Sessions."

Charges framed against accused No. 3 V.P. Gokhale were identical
with the charges framed against accused No. 2. H
296 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Charges framed against accused No. 4 Kishore Kamdar ran as under:

"Firstly : That on or about the. night intervening 2nd and 3rd
December, 1984 at Bhopal, the Capital of M.P. co-accused persons
S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.P.
Choudhary/KV. Shetty and S.I. Qureshi committed culpable
B homicide not amounting to murder by causing death of 3828 or
more human beings by allowing the highly toxic gas known by the
name of MIC to escape from tank No. 610 of A.P. Division Plan1
of UCIL knowing that this common knowledge with them did not
do any thing to avoid escape of gas thus you thereby committed
c on each count an offence punishable U/S 304(II) R/W Sec. 35 of
the I.P.C. arid within the cognizance of the court of Sessions.

Secondly : That on the above date and at the above place, above
co-accused persons by allowing to escape from the above tank the
corrosive substance known by the name of MIC gas, knowing that
D it was likely to cause grevious hurts, thus voluntarily (as defined
U/S 39 IPC) caused grevious hurts to 21694 or more human beings
and you sharing this common knowledge with them did not do
anything to avoid the said escape of gas, thus you thereby com-
mitted on each count an offence punishable U/S 326 R/W Sec. 35
E IPC and within the cognizance of the Court of Sessions.

17iirdly : That on the above date and at the above place, above
co-accused persons by allowing to escape from the above tank the
corrosive substance known by the name of MIC gas, knowing that
it was likely to cause hurts, thus voluntarily (as defined U/S. 39
F IPC) caused hurts to 8485 or more human beings and you sharing
this common knowledge with them did not do anything to avoid
the said escape of gas, thus you thereby committed on each count
an offence punishable U/S. 324 R/W Sec. 35 IPC and within the
cognizance of the Court of Sessions.
G Fowthly: That on the above date and at the above place, the above
co-accused persons by allowing MIC gas to escape from the above
tank knowing that it was likely to cause death of animals, com-
mitted mischief by killing thereby 2544 or more animals of various
descriptions each valuing more than Rs. 50 and you sharing this
H common knowledge with them did not do any thing to avoid the
KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 297

said escape of gas, thus you thereby committed on each count an A·
offence punishable U/S. 429 R/W Sec. 35 IPC and within the
cognizance of the Court of Sessions."

Charges framed against accused No 5 J. Mukund were as under:

"Firstly : That you on or about the night intervening 2nd and 3rd
B
December, 1984 at Bhopal, the capital of M.P. committed culpable
homicide not amounting to murder by causing death of 3828 or
more human beings by allowing the highly toxic gas known by the
name of MIC to escape from tank No. 610 of A.P. Division Plant
of UCIL, knowing that it was likely to cause deaths and you thereby C
committed on each count an offence punishable U/S 304(II) l.P.C.
and within the cognizance of the court of Sessions.

Secondly : That you on the above date and at the above place by
allowing to escape from tank No. 610 of the A.P. Division Plant D
of UCIL, a corrosive substance known by the name of MIC gas,
knowing that it was likely to cause grevious hurts, thus voluntarily
(as defined U/S. 39 IPC) caused grevious hurts to 21694 or more
human beings and, thereby committed on each count an offence
punishable U/S. 326 IPC and within the cognizance of the Court
of Sessions. E

Third(v : That on the above date and at the above place by allowing
to escape from tank No. 610 of A.P. Division Plant of UCIL, a
corrosive substance known by the name of MIC gas, knowing that
it was likely to cause hurts, thus voluntarily (as defined U/S. 39 F
IPC) caused hurts to 8485 or more human beings and thereby
committed on each count an offence punishable U/S. 324 l.P.C.
and within the cognizance of the Court of Sessions.

Fourthly : That on the above date and at the place by allowing to G
escape from tank No. 610 of the A.P. Division Plant of UCIL,
knowing that it was likely to cause death of animals, committed
mischief by killing thereby 2544 or more animals of various descrip-
tions each valuing more than Rs. 50 and thereby committed on
each count an offence punishable U/S. 429 IPC and within the
cognizance of the Court of Sessions." H
298 SUPREME COURT REPORTS 11996) SUPP. 6 S.C.R.

A Identical charges were framed against accused No. 6 R.B. Roy
Choudhary, accused No. 7 S.P. Choudhary, accused No. 8 K.V. Shetty and
accused No. 9 S.I. Qureshi while UCIL, Calcutta accused No. 12 had to
face the following charges :

"Firstly : That on or about the night intervening 2nd and 3rd
B December, 1984 at Bhopal, the Capital ofM.P. co-accused persons
S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.P.
Choudhary/K. V. Shetty and SJ. Qureshi committed culpable
homicide not amounting to murder by causing death of 3828 or
more human beings by allowing the highly toxic gas known by the
c name of MIC to escape from tank No. 610 of AP. Division Plant
of UCIL knowing that it was likely to cause deaths and you sharing
this common knowledge with them did not do any thing to avoid
the said escape of gas thus you thereby committed on each count
an offence punishable U/S 304(11) R/W Sec. 35 of the I.P.C. and
within the cognizance of the court of Sessions.
D
Secondly : That on the above date and at the above place, above
co-accused persons by allowing to escape from the above tank the
corrosive substance known by the name or MIC gas, knowing that
it was likely to cause grevious hurts, thus voluntarily (as defined
E UIS 39 IPC) caused grevious hurts to 21694 or more human beings
and you sharing this common knowledge with them did not do
anything to avoid the said escape of gas, thus you thereby com-
mitted on each count an offence punishable U/S. 326 R/W Sec. 35
IPC and within the cognizance of Court of Sessions.

F 17zirdly : That on the above date and at the above place, above
co-accused persons by allowing to escape from the above tank the
corrosive substance known by the name of MIC gas, knowing that
it was likely to cause hurts, thus voluntarily (as defined U/S. 39
IPC} caused hurts to 8485 or more human beings and you sharing
this common knowledge with them did not do anything to avoid
G
the said escape of gas, thus ym1 thereby committed on each count
an offence punishable U/S. 324 R/W Sec. 35 IPC and within the
cognizance of the Court of Sessions.

Fowthly: That on the above.date and at the above place, the above
H co-accused persons by allowing MIC gas to escape from the above

....
KESHUB MAHINDRA v. STATE [S.B. MAJMUDAR,J.] 299

tank knowing that it was likely to cause death of animals, com- A
mitted mischief by killing thereby 2544 or more animals of various
descriptions each valuing more than Rs. 50 and you sharing this
common knowledge with them did not do any thing to avoid the
said escape of gas, thus you thereby committed on each count an
offence punishable U/S. 429 R/W. Sec. 35 IPC and within the B
cognizance of the Court of Sessions."

All these accused being aggrieved by the aforesaid charges framed
by the learned Sessions Judge approached the High Court of Madhya
Pradesh at Jabalpur in Criminal Revision Applications moved under Sec-
tions 397 and 482 of the Cr.P.C. as noted earlier. The High Court of C
Madhya Pradesh by common judgment in three Criminal Revising Applica-
tions Nos. 237/93, 238/93 and 312/93 moved by accused Nos. 2, 3 and 4
respectively, was pleased to dismiss the same by upholding the charges
framed against these accused. Similarly Criminal Revision Application No.
311/93 moved by accused No. 5 J. Mukund, accused No. 6 R.B. Roy D
Choudhary, accused No. 7 S.P. Choudhary, accused No. 8 K.V. Shetty,
accused No. 9 S.I. Qureshi and accused No. 12 UCIL was also dismissed
by a separate order of even date. It is under these circumstances that the
concerned accused are in appeal before us on special leave.

Learned senior counsel Shri Ashok Desai appearing for accused No. E
2 Keshub Mahindra, learned senior counsel Shri Nariman, appearing for
accused No. 3 V.P. Gokhale and learned senior counsel Shri Rajendra
Singh, appearing for the remaining accused vehemently contended that
taking the case of the prosecution at the highest as reflected by the contents
of the chargesheet and the supporting material it could not be even prima F
;
f acie said that the concerned accused were guilty of offence of culpable
homicide not amounting to murder as envisaged by Section 304 Part II,
IPC with which they are charged. That there was no question of the
concerned accused having done any act on that fateful night at Bhopal
which was done with the knowledge that they were likely by such act to G
cause death and consequently they could not have been charged on the
material produced by the prosecution before the Trial Court at this stage
of the trial for the offence of culpable homicide not amounting to murder.
It was also submitted that on the same reasoning they could not have been
charged for offence under S~ctloii 326 IPC for voluntarily causing grievous
hurt or for that matter for ·the offence under Section 324 for voluntarily H
300 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A causing hurt by dangerous means. It was also contended that on the same
parity of reasoning no case is made out against the concerned accused
under Section 429 IPC for having committed mischief by killing, poisoning
or maiming any animals. It was also submitted that so far as accused Nos.
2, 3 and 4 were concerned they were stationed at Bombay and they were
B not concerned with the day to day working of the Plant at Bhopal. Conse-
quently there was no question of framing any charge against them for the
aforesaid offences read with Section 35 of IPC as there was no evidence
whatsoever for even alleging against these accused that they had any
criminal knowledge in connection with the misshap that occurred on that
fateful night at Bhopal. It was also contended by the aforesaid learned
C senior counsel that even lesser charge under Section 304-A, IPC also could
not have been framed on this material as nothing was alleged by the
prosecution at this stage about any proximate act of the negligence on the
part of the concerned accused which had resulted into this accidental
tragedy. That if at all it ·was an unfortunate accident which had taken heavy
D toll of human lives and cattle wealth, however, none of the accused could
be held criminally liable for the said accident. It was, therefore, contended
that the charges as framed against the concerned accused are required to
be quashed and the High Court had erred in not exercising its jurisdiction
in that behalf.

E On the other hand learned Additional Solicitor General Shri Altaf
Ahmed submitted that there was ample material produced by the prosecu-
tion in support of the chargesheet which clearly indicated that all the
concerned accused shared common criminal knowledge about the potential
danger of escape of the lethal gas MIC both on account of defective plant
F which was operated under their control and supervision at Bhopal and also
on account of the operational shortcomings detected by the Expert Com-
mittee which had gone into the causes of this unfortunate accident, namely,
Vardarajan Committee which was constituted by the Government of India
for that purpose. That the report of the Scientific and Industrial Research
team had clearly indicated the causes of this tragedy and the defects found
G in the running of the Plant at the relevant time. That this material indicated
that all the accused were properly charged for the offences alleged against
them and that the court at this stage was not concerned with the t'nrth or
falsity of the allegations with which the prosecution has charged them. That
at this stage only enquiry into the prima f acie nature of the allegations
H supporting these charges has to be made and if there is any material to·
KESHUBMAHINDRAv.STATE(S.B.MAJMUDAR,J.] 301

prim a f acie indicate that the concerned accused were liable to be A
prosecuted for the charges with which they are indicated the trial is
required to be permitted to proceed further and should not be nipped in
the bud as the appellants would like to have it. In support of the respective
contentions learned senior counsel for the appellants as well as learned
Additional Solicitor General relied upon various decisions of this Court to B
which we will make a reference at appropriate stage in latter part of this
judgment.

Before we deal with the nature of the material produced by the
prosecution before the Trial Court for framing the charges against the
concerned accused it will be necessary to keep in view the limited nature C
of the jurisdiction available to the court for deciding whether the charges
framed are legally sustainable on the basis of the material available at this
stage. Section 227 of the Cr.P.C. lays down that, 'if, upon consideration of
the record of the case and the documents submitted therewith, and after
hearing the submissions of the accused and prosecution in this behalf, the D
Judge considers that there is not sufficient ground for proceeding against
the accused, he shall discharge the accused and record his reasons for so
doing'. On the other hand as enjoined by Section 228, if after such con-
sideration and hearing as aforesaid the Judge is of opinion that there is
ground for presii'I:ning that the accused has committed an offence, then
subject to the procedure laid down by sub-sections (a) and (b) of the said E
Section the charge shall be framed in writing against the accused. In the
case of Niranjan Singh Karam Singh Punjabi v. Jitendra Bhimraj Bijja &
Ors., AIR (1990) SC 1962, one of. us A.M. Ahmadi, J. (as His Lordship
then was) speaking for the Division Bench of this Court in this connection
observed as under : F

"It seems wel\ ~ettled that at the Ss. 227-228 stage i.e., stage of
framing the charge, the Court is required to evaluate the material
and documents on record with a view to finding out if the facts
emerging therefrom taken at their face value disclose the existence G
of all the ingredients constituting the alleged offence. The Court
may for this limited purpose sift the evidence as it cannot be
expected even at that initial stage to accept all that prosecution
states as gospel truth even if it is opposed to common sense or the
broad probabilities of the case." H
302 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A It is also well settled that while exercising jurisdiction under Section 482 ...
Cr.P.C. when the High Court is called upon to quash the charge pursuant
to which proceedings at the stage of trial are pending, and even when the
High Court is called upon to quash proceedings pursuant to complaint,
only a plima f acie appraisal of the allegations mqde in the complaint and
B the material in support thereof has to be done and the Court has jurisdic-
tion to go into the merits of the allegations as that stage would come when
the trial proceeds. In this connection we may usefully refer to a judgment
rendered by a Bench of three learned Judges of this Court in the case of
State of U.P. v. O.P. Shanna, (1996) 2 SCALE 356. Relying on earlier
decisions of this Court the Bench in the aforesaid case made the following
C pertinent observations in paragraphs 11 and 12 of the Report :

"The question then is : whether the High Court is right in its
exercise of inherent power under Section 482 Cr.P.C.? This Court
in State of Himachal Pradesh v. Pirthi Chand &Anr., (Crl. A. 1752
of 1995) decided on November 30, 1995 held as under :
D
'It is thus settled law that the exercise of inherent power of
the High Court is an exceptional on~ Great care should be
taken by the High Court before embarking to scrutinise the
FIR/charge-sheet/complaint. In deciding whether the case is
E rarest of rare cases to scuttle the prosecution in its inception,
it first has to get into the grip of the matter whether the
allegations constitute the offence. It must be remembered
that FIR is only an initiation to move the machinery and to
investigate into cognisable offence. After the investigation is
F conducted and the charge-sheet is laid the prosecution
produces the statements of the witnesses recorded under
Section 161 of the Code in support of the charge-sheet. At
that stage it is not the function of the court to weigh the pros
and cons of the prosecution case or to consider necessity of
strict compliance of the provisions which are considered
G mandatory and its effect of non-compliance. It would be done
after the trial is concluded. The Court has to p1ima f acie
consider from the averments in the charge-sheet and the
statements of witnesses on the record in support thereof
whether court could take cognizance of the offence, on that
H evidence and proceed further with the trial. If it reaches a
KESHUB MAHINDRAv. STATE [S.B. MAJMUDAR,J.] 303

conclusion that no cognisable offence is made out no furthf?r A
act could be done except to quash the charge sheet. But only
in exceptional cases. i.e. in rarest of rare cases of mala fide
initiation of the proceedings to wreak private vengeance
process of criminal is availed of in laying a complaint or FIR
itself does not disclose at all any cognisable offence - the B
court may embark upon the consideration thereof and exer-
cise the power.

In State of Bihar v. Rajendra Agrawal/a, (Cd.A. No. 66 of 1996) C
decided on January 18, 1996, this Court observed as under :

'It has been held by this Court in several cases that the
inherent power of the court under Section 482 of the Code
of Criminal Procedure should be very sparingly and cautious-
ly used only when the court comes to the conclusion that D
there would be manifest injustice or there would be abuse of
the process of the court if such power is not exercised. So far
as the order of cognizance by a Magistrate is concerned, the
inherent power can be exercised when the allegations in the
First Information Report or the complaint together with the E
other materials collected during investigation taken at their
face value, do no~ constitute the offence alleged. At that stage
it is not open for the court either to shift the evidence or
appreciate the evidence and come tn the conclusion that no
prima facie case is made out."'
F
Keeping in view the aforesaid well settled limited jurisdiction regarding the
permissible scrutiny of the prosecution case as revealed from the char-
gesheet and the material supporting the same for framing charges against
the present accused we will now proceed to examine the available material
on record of the case which has resulted into the framing of the impugned G
charges against the appellant-accused.

Material in Support of the prosecution case

In the first place we may glance through the relevant recitals in the
chargesheet presented by the agency before the court which has resulted H
304 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A into the framing of the impugned charges. The said chargesheet is found
at page 1 of the compilation in appeal arising out of S.L.P. (Crl.) No.
3900/95. As noted earlier the chargesheet indicts 12 accused out of which
the present 9 appellants in these four appeals are accused Nos. 2 to 9 and
12 respectively. In column 5 of the chargesheet are found listed main
findings of the investigating agency in connection with this unfortunate
B tragedy. The relevant recitals therein read as under :

"Union Carbide India Ltd., the majority share holding in which is
held by U.C.C., USA, was running a factory at Bhopal for the
manufacture of pesticides. The main chemical from which the
c pesticide Sevin was manufactured was Methyl Isocynate
(CII3N = C-0) which was also being manufactured in the same
factory and was being stored in underground tanks. The factory is
presently not functioning.

2. Ori the night of 2nd/3rd December, 1984 from about 0034 to
D
0045 hrs. (on 3rd December, 1984) onwards, MIC started to escape
from tank No. 610 in the factory in large quantities causing the
death of thousands of human beings and animals .... and injuring
also the health of many thousands of human beings and animals.

E 3. Crime No. 1104/84 was registered at Police Station, Hanuman-
ganj, Bhopal, on 3rd December, 1984, by the S.H.O., Shri Surinder
Singh Thakur. Inspector who observed people dying around the
factory of Union Carbide India Ltd. Bhopal (UCIL) due to escape
of some gas from the factory. He registered the case suo moto
F under Section 304A IPC. There was no information available at
that stage from anyone in the factory. Based on enquiries made by
him during the course of the day, five employees of the factory
(AS to A9) were arrested and kept in police custody. Accused No.
1 Shri Warren Anderson was arrested alongwith accused No. 2 &
3 on 7th December, 1984. Shri Warren Anderson was released on
G bail the same day by the 1.0. After completing the required legal
formalities, C.B.I. (D.P.S.E.) registered a case on 6th December,
1984 as RC-3/84-CIU(I) U/S 304A IPC and received the records
of the case from the local police on 9th December, 1984 alongwith
A2, A3 and AS to A9 in police custody from the Madhya Pradesh
H Police.
KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.] 305

4. Investigation has revealed that the Union Carbide Corporation A
·is a company with headquarters in U.S.A. having affiliate and
subsidiary companies throughout the world. There subsidiaries
were supervised by four regional offices which were controlled by
UCC, USA UCIL is a subsidiary of UCC, USA Union Carbide
Eastern Inc. with· its office in Hongkong is the regional office of
B
UCC, USA which controlled UCIL, India besides others. UCC,
USA get incorporated in India on 20th June, 1934, a Company
known as the Eveready Company (India) Ltd. under the Indian
Companies Act (Act VII) of 1913 with the Registrar of Joint Stock
Companies, Bengal. The Name of the Company was further
changed w.e.f. 24th December. 1959 into Union Carbide India Ltd. c
under the Indian Companies, 1956. The UCC was a majority
shareholder (50.9%) in UCIL. UCC was nominating its own Direc-
tors to the Board of Directors of the UCIL and was ex~rcising
strict financial, administrative and technical control on the Union
Carbide India Limited. Thus, all major decisions were taken under D
the orders of the Union Carbide Corporation to America. The
evidence collected during the investigation proves that UCC was
in total control of all the activities of UCIL.

5. The ~nvestigation of this case was dependent on highly scientific
and technical evaluation of the events which led to the escape of E
MIC gas from the UCIL plant at Bhopal. The Government of India
therefore constituted, immediately after the incident, a team
headed by Dr. S. Varadarjan, then D.G./C.S.LR. to study all the
scientific\~nd technical aspects and submit their report. Dr. M.
Sriram, Chief Research and Development Manager, Hindustan F
Organic Chemicals, Rasayani, District Ralgad (Maharashtra), was
member as well as the co-ordinator of the Scientific Team. Dr.
Varadarajan submitted the report in December, 1985. A further
back up report was submitted by the C.S.I.R. in May, 1987. These
reports furnish, inter alia, the causes that led to the incident.
G
6. Investigation has revealed that UCIL started importing Sevin
from the UCC, USA in December, 1960. They were marketing this
Sevin after adding dilutants etc. Subsequently, they decided to
manufacture Sevin in their plant at Bhopal itself and accordingly
created necessary facilities for production of Sevin MIC as the H
306 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A basic raw material. To start with; they were importing MIC in 200
litres capacity stainless steel drums from the UCC Plant in West
Virginia, USA Subsequently UCC and UCIL decided to manufac-
ture MIC in their factory at Bhopal itself.

7. At that stage on 13th November, 1973, UCC and UCIL entered
B into an agreement entitled Foreign Collaboration Agreement ac-
cording to which the best manufacturing information then available
from or to Union Carbide had to be provided for the factory in
India. This necessitated UCC supplying the design, knowhow and
safety measures for the production, storage and use of MIC which
c ought to have been an improvement on the factory of UCC at West
Virginia based on the experience gained there. Investigation has
however disclosed that the factory at Bhopal was deficient in many
safety aspects. The design, know-how and safety measures were
provided by the Union Carbide Corporation, USA and the erec-
tion and commissioning of the plant was done under the strict
D control of the experts of UCC. The Indians in this plant were only
working under their di~ections.

8. After an initial period of profits, the UCIL factory was running
in loss. The loss for the first 10 months of 1984 amounted to Rs.
E 5,03,39,000. Due to this, U.C.E. Hongkong directed UCIL vide
their letter dated 26 October, 1984 that the factory at Bhopal
should be closed down and sold to any available buyer. As no buyer
became available in India, UCE, Hongkong directed UCIL to
prepare an estimate for dismantling the factory and shipping it to
F Indonesia or Brazil where they probably had some buyers. These
estimates were completed towards the end of November, 1984.

9. The investigation conducted by the C.B.I., the report of the
scientific team established by Government of India and in par-
ticular the literature and manuals etc. regarding MIC of Union
G Carbide Corporation itself prove that MIC is reactive, toxic,
volatile and flammable. It is a highly hazardous and lethal material
by all means of contact and is a poison. Skin contact with MIC can
cause severe burns. MIC can also seriously injure the eyes even in
its concentrations. Exposure to MIC is extremely irritating and
H would cause chest pain, coughing, choking and even pulmonary
KF.SHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 307
"
edema. On thermal composition, MIC would produce hydrogen A
cyanide, nitrogen oxide, carbon monoxide and/or carbon dioxide.

10. MIC has to be stored and handled in stainless steel of types
304 or 316, namely, good quality stainless steel. Using any other
material could be pangerous. In particular, iron o; steel,
aluminium, zinc or galvanized iron, copper or tin or their alloys
B
could not be used for purposes of storage, transfer/transmission of
MIC. This would mean that even the pipes and valves carrying
MIC had also got to be of the prescribed stainless steel. In other
words, at no stage should MIC be allowed to come into contact
with any of the metals mentioned above. c
11. The tanks storing MIC, have to be, for reasons of safety, twice
the volume of the MIC to be stored. It was also advised by UCC
itself that an empty tank should also be kept available at all times
for transferring MIC from its storage tank to the stand by tank on D
occasions of emergency. MIC has to be stored in the tanks under
pressure by using nitrogen wh~ch does not react with MIC. The
temperature of the tank with MIC has to be maintained below 15
degree celsius and preferably at about 0 degree celsius. The storage
system and the transfer lines have to be free of any contaminants
as even trace quantities of contaminants are sufficient to initiate E
reaction which could become runaway reaction. On reaction set-
ting in, there could be dangerous and rapid trimerization. The
induction period could vary from several hours to several days.
The heat generated could cause reaction of explosive violence. In
particular, water reacts exothermically to produce heat and carbon F
dioxide. Consequently, the pressure in the tank will rise rapidly if
MIC is contaminated with water. The reaction may begin slowly,
especially if there is no agitation, but it will become violent. UCC
itself states that with bulk systems contamination is more likely
than with tightly sealed drums. All these properties of MIC show
that despite all the safety precautions that could be taken, storage G
of large quantities of MIC in big tanks was fraught with consider-
able risk.

12. Investigation 'has disclosed that at the time when the incident
took place there were thee partially buried tanks in the factory at H
308 SUPREME COURT REPORTS l 1996) SUPP. 6 S.C.R.

A Bhopal. These were numbered E 610. E 611 and E 619. MIC was
being stored generally in the tanks E 610 and E 611. E 619 was
supposed to be the stand by tank. In the normal running of the
factory, MIC from E 610 and E 611 was being transferred to the
Sevin plant through stainless steel pipe lines. MIC is kept under
pressure by nitrogen which is supplied by a carbon steel header
B
common to all the storage tanks. There is a strainer in the nitrogen
line. Subsequent to the strainer the pipe is of carbon steel and
leads to make up control valve (DMV) which also has a body of
carbon steel. These carbon steel parts could get exposed to MIC
vapours and get corroded, providing a source of contaminant
c which could enter the MIC storage tank and cause dangerous
reactions in the MIC. During the normal working of the factory,
MIC fumes and other gases that escape pass first through a pipe
line called Process Vent Header (PVH) of 2" diameter. The
escaping gases were carried by the PVH line to a Vent Gas
Scrubber (VGS) containing alkali solution which would neutralize
D
the escaping gases and release them into the atmosphere. Another
escape line of such gases that was provided from the tanks was the
Relief Valve Vent Header (RVVH) of 4"diameter. Normal pres-
sure of the MIC tank is shown by a pressure indicator. When the
pressure in the tank exceeded 40 psig, a rupture disc (RJ?) leading
E to a safety relief valve (SR V) had to break and the said SRV in
the R VVH line open automatically to allow the escaping gas to
travel through the RVVH line to the VGS for neutralization.

13. Investigation has shown that the PVH and R VVH pipe lines
as well as the valves therein were of carbon steel. Besides, on
F
account of design defect these lines also allowed back flow of the
alkali solution from the VGS to travel upto the MIC tanks.

14. A very essential requirement was that the MIC tanks in the
factory had to be kept under pressure of the order of 1 Kg./cm2g
G by using nitrogen, a gas that does not react with MIC. However,
MIC in tank No. 610 was stored under nearly atmospheric pressure
from 22nd October, 1984 and attempts to pressurize it on 30th
November and 1st December, 1984 failed. The design of the plant
ought not have allowed such a contingency to happen at all. The
H tank being under nearly atmospheric pressure, free passage was
·'
KE.SHUB MAHINDRA v. STATE [S.B. MAIMUDAR, J. J 309

available for the entry of back flow of the solution from the VGS A
into the tank. According to the report of Dr. Varadarajan Com-
mittee, about 500 Kgs. water with contaminants could enter tank
610 through RVVH/PVH lines. The water that entered RVVH at
the time of water flushing along with backed up alkali solution
from the VGS already present could find its way into the tank 610
B
through the RVVH/PVH lines via the blow down DMV or through
the SRV and RD.

15. The first indication of any reaction in the tanks comes through
the pressure and temperature indicators. The thermowell and
temperature transmitting lines were out of order throughout and C
no temperature was being recorded for quite sometime. Pressure
was also being recorded at the end of each shift of 8 hours duration
instead every 2 hours as was being done earlier.

16 ............ .
D
17. On 2nd December, 1984 before 10.45 PM no deviation was
noticed in the pressure of tank No. 610. Soon thereafter, in the
night shift, some operators notice9 leakage of water and gases and
gases from the MIC structure and they informed the Control
Room. The Control Room operator saw that the pressure had
E
suddenlly gone up in tank No. 610 .. Some staff in the Illrd shift
including S/Shri R.K. Kamparia, C.N. Sen and Saumen Dey check-
ed the pressure indicator on ·the tank E 610 and found that the
pressure had gone out of range. The factory staff tried to control
the situation but they failed. Even tank E 619 which had to be kept
empty for emergency transfers was found to contain MIC and F
therefore when the reaction started, transfer thereto from tank 610
was not possible. The staff on duty immediately informed senior
officials of UCIL at Bhopal about the escape of MIC. During all
these developments and even thereafter the Union Carbide offi-
cials at Bhopal did not give any information to the residents or any G
local authority about the serious dangers to which the pf. Jple were
exposed and regarding which the said officials had full knowledge.
On the other hand, what was initially mentioned was ammonia gas
had escaped."

Thereafter are listed the findings of the Scientific Team made by Dr. H
310 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Vardarajan indicating the causes that had resulted in the toxic gas leakage
causing its heavy toll. In para 20 of the chargesheet the following findings
of the investigation conducted by the C.B.I. have been noted :

"20. The investigation conducted by the C.B.I. has proved the
following aspects :
B
(i) MIC is a highly dangerous and toxic poison.

(ii) Storing huge quantity of MIC in large tanks was undesirable
and dangerous as the capacity and actual production in the Sevin
C plant did not require such a huge quantity to be stored. Only
adequate quantity of MIC should have been stored, that too in
small separate stainless steel drums. ·

(iii) The VGS that had been provided in the design was capable
of neutralising only 13 tonnes of MIC per hour and proved to be
D totally inadequate to neutralise the large quantities of MIC that
escaped from tank No. E 610. When the two tanks (610 and 611)
themselves had been designed for storing a total of about 90 tonnes
of MIC, proportionately large capacity VGS should have been
furnished in the design and erected rather than VGS that was
E actually provided.

(iv) Due to the design defect, there was back flow of alkali solution
from the VGS to the tanks which had been drained in the past by
the staff of UCIL. Infact, even after the incident, such draining
was done from the PVH and RVVH lines.
F
(v) Whereas the MIC tanks had to be constantly kept under
pressure using nitrogen, the design permitted the MIC tanks not
being under pressure in certain contingencies.

(vi) The refrigeration system that had been provided was inade-
G quate and inefficient. No alternate stand by system was provided.

(vii) Neither the UCC nor the UCIL took any steps to apprise the
local administration authorities or the local public about the con-
sequences of exposure of MIC or the gases produced by its
H reaction and the medical steps to be taken immediately.
KESHUB MAHINDRAv. STATE [S.B. MNMUDAR,J.] 311

21. Apart from these design defects, the further lapses that were A
committed were :

(a) Invariable storing MIC in the tanks which was much more than
the 50% capacity of the tanks which had been prescribed.

(b) Not taking any adequate remedial action to prevent back flow B
of solution from VGS into the RVVH and PVH lines. This alkali
solution/water, therefore, used to be drained.

(c) Not maintaining the temperature of the MIC tanks at the
preferred temperature of 0 degree celsius but at ambient tempera-
tures which were much higher. c
( d) Putting a slip blind in the PVH line and connecting the PVH
line with a jumper line to the RVVH line.

(e) Not taking any immediate remedial action when tank No. E D
610 did not maintain pressure from 22nd October, 1984 onwards.

(t) When the gas escaped in such large quantities, not setting out
an immediate alarm to warn the public and publicise the medical
treatment that had to be given immediately."
E
It was also recited that if these lapses had not occurred, still the incident
would have taken place due to the basic defects in the design supplied by
the UCC whose experts supervised the erection and commissioning of the
plant itself. The lapses only helped to aggravate the consequences of the
incident. Thereafter referring to the indications obtainable from the
evidence collected during the investigation regarding the knowledge of the F
accused about the defective functioning of the plant the following pertinent
recitals are found in paragraph 23 and 24 of the chargesheet :

"23. The evidence collected during the investigation proves that the
accused persons had the knowledge that by the various acts of
commission and omission in the design and running of the MIC G
based plant, death and injury of various degrees could be caused
to a large number of human beings and animals. All the accused
persons joined in such acts of omission and commission with such
common knowledge. This resulted in the incident on the night of
2nd/3rd December, 1984 which caused the death immediately and H
312 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A till date of about 2850 human beings and about 3000 animals. The
number of affected persons is more than 5,00,000. The ailments
damaged respirator tract function, gastro intestinal functions, mas-
cular weakness, forgetfulness etc.

24. The investigation has established that S/Shri Warren Anderson,
B then Chairman, Union Carbide Corporation, USA: Keshub
Mahindra, then Chairman, UCIL Bombay; Vijay Gokhle, then
Managing Director and presently Chairman-cum-Managing Direc-
tor, UCIL, Bombay; Kishore Kamdar, then Vice President In-
charge, AP. Division, UCIL, Bombay; J. Mukund, then Works
c Manager, AP. Division, UCIL, Bhopal, Dr. R.B. Roy Choudhary,
then Asstt. Works Manager, AP. Division, UCIL, Bhopal, S.P.
Choudhary, then Production Manager, AP. Division, UCIL,
Bhopal; K.V. Setty, Plant Superintendent, AP. Division, Bhopal;
S.I. Qureshi, Production Assistant, AP. Division, UCIL, Bhopal;
D the Union Carbide Corporation. U.S.A.; Union Carbide Eastern
Inc. Hongkong and Union Carbide India Limited, Calcutta have
committed offences punishable Under Sections 304, 326, 324, 429
IPC r/w Section 35 IPC."

E Along with this chargesheet a detailed abstract was filed supported by
documentary evidence to show how the conclusions reached by the inves-
tigating agency were supported by this documentary evidence. In this
abstract it was recited that in that plant there were no facilities for
collecting MIC produced separately in each shift and the material is
F directly laid into the storage tanks without batchwise analysis. It was also
found that there are no on-line analysers. Similarly, nitrogen from a neigh-
bouring factory is fed directly into the storage tanks, without full inter-
mediate storage and quality determination. Carbon ~teel sections are used
in the connectors to the storage tanks. Copper tubes are used in connectors
to the level instruments of the tank. The system of instruments for alarm
G to indicate sudden increase in temperature are not suited to the conditions
of operation. Only a single refrigeration system for cooling of MIC in two
tanks was installed and it had not been operated for some considerable
time. MIC has the combination of properties of very high reactivity with
minimum contaminants, ready volatility to become gas and very high in-
H halation toxicity. The installed facilities provided for disposal of unstable
K.ESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.j 313

liquid MIC in alkali or for the neutralisation of gaseous emissions from A
violent reaction, on examination are found to be not capable of meeting
the objectives of such disposal in a very short time of two hours. The
abstract also recited that the ingress of about 500 kg. of water alone, was
not the sole cause of the escape of a huge quantity of toxic gas. In this
connection the following averments found in the abstract were relied upon
B
by the prosecution. :

"The ingress of about 500 kg. of water alone, without metallic
contaminants, would have led to a reaction with three to four
tonnes of MIC and gradual rise in temperature to 70 degree celsius,
below the boiling point of MIC at the safety valve pressure. The C
very rapid explosive rise in temperature and pressure in the tank
610, implies conditions for a run-away trimerisation reaction al-
ready existed. Ingress of water and reaction with MIC would
generate carbondioxide evolution and cause mixing. The storage
tank conditions would then equal those in a well mixed reactor, D
supplied with heat. Once initiated, the trimerisation reaction had
features of auto-catalytic and auto- thermal reactions and tempera-
tures increased rapidly to 250 degree celsius. The relief valve
design could not permit free flow of large quantities of gases at
the level at which they were generated and therefore further
reactions continued. E

The presence of sodium at levels of 50 to 90 ppm in the samples
from residues of tank 610 indicates ingress of some alkali, possibly
derived from the Vent Gas Scrubb~r Accumulator. It is known that
the tank 610 could not be pressured with nitrogen at any time after F
22 October, 1984. The contents of tank 610 were virtually at
atmospheric pressure from that date providing opportunities for
entry of metal contaminants. From a perusal of the reports of the
events of the night cf 2/3 December, 1984, it appears during the
cleaning of choked filters with water in the Relief Valve Vent G
Header, such water perhaps mixed with alkali from Vent Gas
Scrubber Accumulator, could have entered the non pressurised
tank and may have carried some metallic contaminants from the
carbon steel portions of header pipelines. The rapid rise in
temperature necessitates onset of metal catalysed polymerisation
and could not result from water alone. The presence of H
314 SUPREME COURT REPORTS (1996] SUPP.6S.C.R.

A choloroform has no influence whatsoever in initiating or accelerat-
ing the run-away reactions. The quantum of leakage is related not ·
to the quantum of water but to the amount of MIC stored in a
single container. If 42 tonnes of MIC had been stored in 210
stainless steel drums instead of_ a single tank, leakage by reactions
or spillage would be no more than one fifth of tonne."
B
Reliance was also placed on the brochure for showing that for
manufacture of Sevin, a very volatile and dangerous raw material, MIC had
to be stored in large quantities and that raw material was not properly kept
under cooling conditions and if coming in contact with water or any other
C pollutant had a tendency to create extremely toxic gas which once it
escapes would necessarily create disaster to the human beings and even
cattle which come in its contact. It has to be stated in fairness to learned
senior counsel for the appellants that they also did not challenge the fact
that MIC was a very highly volatile and dangerous material which had to
D be properly kept so that it may not spell disaster once it gets converted
into poisonous gas and if such gas escapes from the factory. However their
only contention was whether there was any prim a f acie evidence to show
that the appellants or any one of them was in any way responsible for this
unfortunate accident, which in their view was an act of God for which no
human being was responsible.
E
The learned Addl. Solicitor General Shri Altaf Ahmed has also
invited our attention to document D-159 a brochure of UCC, USA which
stated that if MIC is contaminated with water it may become violent. He
also invited our attention to D-195 which is a circular giving company
p information about definitions of 'subsidiary and associate companies'. This
was relied upon to show that UCIL was a subsidiary company of UCC,
USA. Additional D-9 was relied upon which was a copy of the application
for grant of industrial licence for manufacture of MIC based pesticides with
foreign collaboration of UCC, USA, to show that UCL authorities were
well aware regarding the ·Iiazardous nature of MIC which they were
G handling in collaboration with UCC, USA and the safety measures which
were required to be undertaken. Letter D-191 dated 26.10.1984 written by
R. Nagarajan of UCEI to Shri K.S. Kamdar was relied upon to show that
Shri Kamdar was requested to give feasibility report for dismantling of the ,
MIC Plant, Bhopal and the shipment thereof abroad and the cost estimate
H involved in such an undertaking. Reply of Shri Kanidar at D-19 dated
K.ESHUBMAHINDRAv.STATE(S.B.MAJMUDAR,J.] 315

29.11.1984 was also relied upon to show the cost estimate prepared for A
dismantling and shipping of the Sevin/MIC Unit from Bhopal. These
documents were relied upon to indicate that by the closing months of 1984
this plant had become useless and had to be scrapped and shifted and that
showed lack of interest of the management and those operating the plant
in the safe working of the plant which was no longer profit making and was B
almost a dead burden to them and this had resulted, according to the
prosecution, in illegal omission on their part in taking necessary safety
measures for containing the hazardous MIC within the confines of factory
premises. D-216 was a statement showing loss to MIC Unit from 1981 to
1984 which showed huge financial loss suffered by the company in running
the said plant. Thereafter the learned Additional Solicitor General placed C
strong reliance on document D-205 which was Operational Safety Survey
Report conducted by team of experts of UCC. This document showed that
a number of deficiencies in the maintenance of MIC Unit were pointed out
by experts as early as in 1982. Ti1e said report is styled as Operational
Safety Survey Co, MIC and SEVIN Units Union Carbide India Limited, D
Bhopal Plant. It is dated 28th July 1982. The covering letter addressed to
Shri J. Mukund accused No. 5, the then Works Manager of the Bhopal
Plant recites that the team was very impressed with the quality of operating
and work procedures developed over the past few years. However it sought
to bring to the attention of the addressee in connection with the equipment
and mechanical deficiencies described in the report and suggested that E
continued efforts in the area of procedures, training and enforcement were
necessary for contributing substantially to the on-going safety efforts at the
Bhopal Plant. It was indicated that there were potentials for release of toxic
materials in the phosgene/MIC unit and storage areas, either due to
equipment failure, operating problems or maintenance problems. There F
were potentials for contaminations, overpressure, or overfilling of the
SEVIN MIC feed tank. At M.2.1. were noted several conditions for opera-
tion of the unit that presented serious potential for sizeable releases of
toxic materials. They were listed us under :

"(a) Leakage of phosgene and choloroform from the PSS feed and G
quench feed filter head assemblies.

(b) Breakage of small lines or connections, either because of
inadequate line strength, installation of long unsupported
nipples, or corrosion. Examples cited included quench pump H
316 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A drain and vent connections, HCI Scrubber pump drains, and
MRS and pyrolyzer tails pump drains and vents. (It should
be noted that several of these lines were originally schedule
10 nickel piping, and have been replaced, for the most part.)

(c) Possible failure of the pyrolyzer calandria vapor line due to
B erosion/corrosion.

(d) Mechanical pump seal failures, caused by improper seal
design (on the Glit pumps,· for instance) or inadequate control
of replacement materials.
c (e) Release of material at unexpected places due to improper
evacuation jet operation or open evacuation drops."

Regarding the operation of MIC Feed Tank at Sevin which was the basic
source of the Bhopal Gas tragedy the Expert Committee Report indicated
D the dismal situation then existing even _in 1982 in paragraph M.4.2. of the
Report as under :

"(a) It appears that it would be possible to contaminate the tank
with material from the vent gas scrubber. Although the ar-
rangement of lines connecting the tank and vent scrubber
E appears to be adequate to prevent back flow of liquid, it
appears possible to back reactive quantities of water vapors
and other gases from the scrubber to the feed tank wheµ it
is depressurized.

(b) Location of the tank inside a room and lack of water spray
F protection facilities create a situation where a toxic and
flammable vapor cloud could be formed and confined without
provision for knockdown or dispersal. There is mechanical
ventilation in the room, b'..lt the same circumstances that could
result in a leak or overfill (power failure, for instance) could
result in the ventilation being inoperative. Also, it appears
G
that a sizeable spill would not be readily dispersed by the
system.

( c) There is some question about the adequacy of the tank relief
valve to relieve a runaway reaction or fire exposure, par-
H ticularly since the tank has been enlarged.
KE.SHUB MAHINDRA v. STATE [S.B. MAJMUDAR, J.) 317

(d) Manual control of filling of the tank, with no instrumentation A
backup, creates a possibility of accidental overfilling."

Even that apart after the Bhopal Gas tragedy as stated earlier a scientific
team of experts headed by Dr. Vardarajan inspected the plant on spot and
tried to find out the reasons for this tragedy. At page 81 of the Report after
listing various defects in the working of the plant especially with reference B
to storage tank and the instrumentation and control system the committee
in paragraph 4.3 of the Report which is D-164 on the record of the Trial
Court observed as under :

"MIC is kept under a pressure of nitrogen which is supplied by a C
carbon steel header common to all the storage tanks. There is a
strainer in the nitrogen line. Subsequent to the strainer the pipe is
of carbon steel and leads to make-up DMV which also has as body
of carbon steel. Similarly, the blowdown DMV is also of carbon
steel body. These carbon steel parts may be exposed to MIC
- vapours and get corroded, providing a source of contaminant D
which can enter the MIC storage tank."

At paragraph 4.4 dealing with 'Instrumentation°and Control System' it was
observed in the Report of the Vardarajan Committee as under:

"4.4. Instrumentation and Control System : E
The pressure in the MIC tank increases rapidly if MIC is con-
taminated with water. There is no high pressure alarm to alert the
operator about the build-up of pressure.

There is a graphite rupture disc between the tank and the safety F
valve. This graphite rupture disc may break because of pressure surges
even under normal conditions. !here is no provision for an alarm to
bring such a breakage of rupture disc to the attention of the operator.

For the storage of a lethal chemical such as MIC, two instru-
ments in parallel (one for controVindication and another for alarm) G
are normally provided. No such provision is made. For example,
quite often the level readings have not been recorded, reportedly
because the level system used to be out of order very often due to
choking problems. In fact, after the event, since the only level
monitoring system provided for tank 611 was not functioning, it
was not possible to ascertain the exact quantity of MIC in that H
318 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A tank. An additional level measuring system would have helped in
such a situation.

Ingress of contaminants or water can start a reaction with MIC
which begin slowly and produce a rise in temperature of the tank
contents. However, the range of the temperature transmitter
B provided was only -25 degree celsius to + 25 degree celsius, with
a high alarm setting at + 11 degree celsius. The contents of the
tank were being stored at ambient temperature, which varies
approximately from + 15 degree celsius to + 40 degree celsius at
Bhopal. The temperature of MIC in the storage tanks for most part
of the year was higher than the high temperature alaram setting. i.e.
c + 11 degree celsius. Indeed the temperature of material in the tank
was higher than the maximum of the range of the temperature
transmitter, i.e. + 25 decree celsius. In such circumstances the actual
temperature was not known and the transmitter was of no value.
Further, provision of "rate of rise in temperature" alarm would have
D invited the operator's attention to the start of such a re.action. No
such provision was made."

In connection with refrigeration the Committee observed in paragraph 4.5
of the Report as under :

E 4.5 Reftigeration :

There is only one common compressor and chiller system for
all the three MIC storage tanks. For such a hazardous material as
MIC, where maintaining it at a low temperature is considered very
important, a spare compressor and chiller system would have
F ensured proper chilling even when the main compressor and chiller
system is under repairs or maintenance. This provision of spare
compressor and chiller has not been made."

At paragraph 5 of the Report is found an analysis of the events which led to
G the disaster out of the gas escape on that fateful night and the summary of the
conclusion is found in the last sub-paragraph of para 5. It reads as under :

"In retrospect, it appears the factors that led to the toxic gas
leakage and its heavy toll existed in the unique properties of very
high reactivity, volatility and inhalation toxicity of MI<;. The need-
H less storage of large quantities of, the material in very large size
KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.) 319

containers for inordinately long periods as well as insufficient A
caution in design, in choice of materials of construction and in
provision of measuring and alarm instruments, together with the
inadequate controls on systems of storage and on quality of stored
materials as well as lack of necessary facilities for quick effective
disposal of material exhibiting instability, led to the accident. These
factors contributed to guidelines and practices in operations and B
maintenance. Thus the combination of conditions for the accident
were inherent and extant. A small input of integrated scientific
analysis of the chemistry, design and controls relevant to the
manufacture would have had an enormously beneficial influence
in altering this combination of conditions, and in avoiding or C
lessening considerably the extent of damage of December, 1984 at
Bhopal."

In addition to the aforesaid documentary evidence the learned Additional
Solicitor General also relied upon D-157 being Memorandum of Associa-
tion and Articles of Association of Mis Ever Ready Company (India) D
Private Limited subsequently changed to M/s Union Carbide India Limited
showing accused No. 2 Keshub Mahindra as the Chairman. Various annual
reports were pressed in service to show how accused No. 2 Keshub
Mahindra presided over the meetings and how accused No. 3, V.P. Gok-
hale worked as whole-time Director. This was relied upon to show that E
these accused even though stationed at Bombay shared the criminal
knowledge of the other personnel of the company who were actually
handling the Bhopal plant being accused Nos. 5 to 9. It was submitted
relying on aforesaid material and also the statements of Arjun Singh,
Mohan Singh and Ram Lal and other statements of persons working in the
plant which were recorded during investigation that all the accused had F
criminal knowledge regarding the defective working of the plant at Bhopal
and as the Plant was to be dismantled and shifted out of India the powers
that monitored the plant were no longer interested in its safe keeping and
by their illegal omissions to take appropriate steps for safe working of the
plant and for the safe keeping of such dangerous material like MIC which G
they were handling at Bhopal, they were rightly charged for the concerned
offences by the learned Trial Judge and that the High Court was right in
refusing to interfere with the framing of these charges. In this connection
it was pointed that as the material showed no transfer of MIC from the
strorage tanks to the production line could take place since November 22,
1984 due to the defective system. Still no remedial measures were taken. H
320 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A That the report of Vardarajan Committee showed that a relief valve vent
header and process valve header were joined together by putting a 'U' type
flexible hose jumber line. Therefore, according to him, this resulted in back
flow of alkalin solution from the VGS to the storage tanks leading to a
chain of reactions.

B It was next submitted that despite the recommendations in the report
of the operational Safety Survey conducted at Bhopal Plant by experts
from United States during May 1982 and despite various deficiencies of
serious and minor nature being pointed out no remedial steps were taken.
Even during the Safety Survey leakages from MIC plant area h~d been
C noticed. Deficiency in safety valve and absence of fixec water sprayers in
the MIC Plant area had been particularly pointed out. Thus the gas had
leaked from the storage tank due to a chain chemical r~action. That the
material led before the Trial Court at the stage of framing of charge clearly
indicated that. there was possibility of ingress of water and other con-
taminants from the RVVH or during cleaning of the valve due to rupturing
D the disc valve which had resulted into this grim tragedy. It was next
contended that the material led by the prosecution at this stage at least
prima f acie showed that all the accused were fully responsible for t1:te
conduct of the plant and they shared the criminal knowledge about the acts
of commission and omission on the part of those of the accused who were
E actually handling the plant and supeivising its working on that fateful night
at Bhopal. That accused R. Choudhary, J. Mukund, S.P. Choudhary, K.V.
Shetty and S.I. Qureshi who were actively associated with the working of
the plant at Bhopal were directly concerned with the incident as they were
in full knowledge of the deficiencies in the plant. Similarly accused Keshub,
Mahindra, V.P. Gokhale and Kishore Kamdar too had full knowledge of
F the defects in the plant at Bhopal and therefore, they also shared the
criminal liability based on criminal knowledge about the acts of commission
and omission in connection with the operation of the said plant at Bhopal.
That all the accused had full knowledge of the hazardous nature of the
MIC manufactured as an intermediate product in Bhopal plant, defects in
the design of the plant lack of safety measures, but still they had taken to
G precautionary steps to avoid this unfortunate accident.

Learned senior counsel for the appellant-accused on the other hand
submitted that even if taking the material available on record at this stage
on its face value the short question is whether any charge could have been
H framed against the accused under Section 304 Part 11, IPC with or without
KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.] 321

the aid of Section 35, IPC and even for that matter any charges could have A
been framed under Sections 326, 324 or 429 with or without the aid of
Section 35 of IPC. We may at once state that both the learned Sessions
Judge as well as the High Court have taken the view on the aforesaid
material that a plima f acie case has been made out by the prosecution
requiring a~cused to face the aforesaid charges and the trial of the accused B
on these charges cannot be cut short or nipped in the bud in the light of
the aforesaid material which has to be accepted as plima f acie true and
reliable at this preliminary stage of framing of charges.

It, therefore, become necessary for us now to address ourselves on
this moot question. As noted earlier the main charge framed against all C
these accused is under Section 304 Part II, IPC. So far as accused Nos. 2,
3, 4 and 12 are concerned they are also charged with offences under
Sections 326, 324, IPC and 429 IPC read with Section 35 IPC while accused
5 to 9 are, charged substantially with these offences also. We shall first deal
with the charges framed against the concerned accused under the main D
provisions of Section 304 Part II, IPC. A look at Section 304 Part II shows
that the concerned accused can be charged under that provision for an
· offence of culpabl6. homicide not amounting to murder and when being so
charged ifit is alleged that the act to the concerned accused is done with
the knowledge that it is likely to cause death but without any intention to
cause death or to cause such bodily injury as is likely to cause death the E
charge offences would fall under Section 304 Part II. However before any
charge under Section 304 Part II can be framed, the material on record
must at least prima f acie show that the accused is guilty of culpable
homicide and the act allegedly committed by him must amount to culpable
homicide. However, if the material relied upon for framing such a charge F
against the concerned accused falls short of even prim a f acie indicating that
the accused appeared to be guilty of an offence of culpable homicide
Section 304 Part I or Part II would get out of the picture. In this connection
we have to keep in view Section 299 of the Indian Penal Code which defines
culpable homicide. It lays down that, 'whoever causes death by doing an
act with the intention of causing death, or with the intention of causing G
such bodily injury as is likely to cause death, or _with the knowledge that
he is likely by such act to cause death, commits the offence of culpable
homicide'. Consequently the material relied upon by the prosecution for
framing a charge under Section 304 Part II must at least prima f acie
indicate that the accused had done an act which had caused death with at H
322 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A least such a knowledge that he was by such act likely to cause death. The
entire material which the prosecution relied upon before the Trial Court
for framing the charge and to which we have made a detailed reference
earlier, in our view, cannot support such a charge unless it indicates plima
facie that on that fateful night when the plant-was run at Bhopal it was run
B by the concerned accused with the knowledge that such running of the
plant was likely to cause deaths of human beings. It cannot be disputed
that mere act of running a plant as per the permission granted by the
authorities would not be a criminal act. Even assuming that it was a
defective plant and it was dealing with a very toxic and hazardous substance
like MIC the mere act of storing such a material by the accused in tank
C No. 610 could not even plima facie suggest that the concerned accused
thereby had knowledge that they were likely to cause death of human
beings. In fairness to prosecution it was not suggested and could not be
suggested that the accused had an intention to kill any human being while
operating the plant. Similarly on the aforesaid material placed on record
D it could not be even plima f acie suggested by the prosecution that any of
the accused had a knowledge that by operating the plant on that fateful
night whereat such dangerous and highly volatile substance like MIC was
stored they had the knowledge that by this very act itself they were likely
to cause death of any human being. Consequently in our view taking the
E entire material as aforesaid on its face value and assuming it to represent
correct factual position in connection with the operation of the plant at
Bhopal on that fateful night it could not be said that the said material even
plima facie called for framing of a charge against the concerned accused
under Section 304 Part II, IPC on the spacious plea the said act of the
F accused amounted to culpable homicide only because the operation of the
plant on that night ultimately resulted in deaths of number of human beings
and cattle. It is also pertinent to note that when the complaint was original-
ly filed suo motu by the police authorities at Bhopal and the criminal case
was registered at the police station Hanumanganj, Bhopal as case No.
1104/84 it was registered uncle~ Section 304-A of the IPC. We will come to
G that provision a little later. Suffice it to say at this stage that on the entire
material produced by the prosecution in support of the charge it could not
be said even plima f acie that it made the accused liable to face the charge
under Section 304 Part II. In this connection we may refer to a decision of
t~e Calcutta High Court to which our attention was drawn by learned
H senior counsel Shri Rajendra Singh for the appellants. In the case of Adam
KESHUB MAHINDRA v. STATE [S.B. MATMUDAR, J. J 323

Ali Taluqdar and Ors. v. King-Empem1; AIR (1927) Calcutta 324 a Division A
Bench of the Calcutta High Court made the following pertinent observa-
tions while interpreting Section 304 Part II read with Section 34 IPC :

"Although to constitute an offence under S. 304, Part 2, there must
be no intention of _:causing death or such injury as the offender
knew was likely to cause death, there must still be a common B
intention to do an act with the knowledge that it is likely to cause
death though without the intention of causing death. Each of the
assailants may know that the act, they are jointly doing, is one that
is likely to cause death but have no intention of causing death, yet
they may certainly have the common intention to do that act and
therefore S. 34 can apply to a case under S. 304, Part 2."
c
Once we reach the conclusion that the material produced by the prosecu-
tion before the Trial Court at the stage of framing of charges did not even
prim a f acie connect the accused with any act done with the knowledge that
by that act it~elf deaths of human beings would be caused the accused D
could not be even charged for culpable homicide and consequently there
would be no question of attracting Section 304 Part II against the con-
cerned accused on such material. When on the material produced by the
prosecution no charge could be framed against any of the accused under
Section 304 Part II there would remain no occasion to press in service the
applicability of Section 35, IPC in support of such a charge for those E
accused who were not actually concerned with the running of the plant at
Bhopal, namely, accused Nos. 2, 3, 4 and 12.

We may now turn to the charges framed against the concerned
accused- appellanty under Sections 324 and 326 of the IPC. Section 324 F
deals with 'voluntarily causing hurt by dangerous weapons or means' while
Section 326 deals with 'voluntarily causing grievous hurt by dangerous
weapons or means". Both these sections for their application require
material against the accused on the basis of which it could be said that the
accused had voluntarily caused such hurt or grievous hurt, as the case may
be. Section 321 defines 'voluntarily causing hurt' and provides that, G
'whoever does any act with the intention of thereby causing hurt to any
person, or with the knowledge that he is likely thereby to cause hurt to any
person, and does thereby cause hurt to any person, is said "voluntarily to
cause hurt". Similarly Section 322 deals with 'voluntarily causing grievous
hurt' and lays down that, 'whoever voluntarily causes hurt, if the hurt which H
324 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A he intends to cause or knows himself to be likely to cause is grievous hurt,
and if the hurt which he causes is grievous hurt, is said "voluntarily to cause
grievous hurt". For applicability of these Sections the material relied upon
by the prosecution in support of such charges must show that the con-
cerned accused had committed the act complained of at least with the
B knowledge that by such act he was likely to cause hurt or grievous hurt to
the victim. We have already indicated hereinabove that the material
pressed in service by the prosecution for framing such charges against the
accused falls short of indicating that the act of running the plant on that
fateful night at Bhopal which in its turn involved storing and utilising highly
dangerous and volatile substance like MIC in their storage tank No. 610
C could not even prima facie be said to have been done with the knowledge
that by such act itself simple hurt or giievous hurt was likely to be caused
to any one. Consequently on such material even charge under Sections 324
and 326, IPC could not have been framed against the concerned accused.
Once this conclusion is reached there would also reinain Iio occasion to
2:
D . press in service against the absentee accused Nos. 3, 4 as well as, i2
Section 35 IPC which the prosecution sought to press in service along with
substantive Sections 324 and 326 IPC. In fact on the material as placed by
the prosecution in support of these charges if a charge under Section 304
.Part II cannot be framed then on the parity of reasoning no, charge under
E Sections 324 and 326 could also be framed. That takes us to Section 429,
IPC which deals with 'mischief by killing or maiming cattle, etc., of any
value or any animal of the value of fifty rupees'. For application of this
Section the material must indicate that the concerned accused had com-
mitted mischief in the first place. The term 'mischief is defined by Section
425 IPC. It lays down that, 'whoever, with intent to cause, or knowing that
F he is likely to cause, wrongful loss or damage to the public or to any person,
or in the situation thereof as destroys or diminishes its value or utility, or
affects it injuriously, commits "mischief'". Before the said Section is pressed
in service the material relied upon by the prosecution must indicate even
prim a f acie that the concerned accused by running the plant at Bhopal on
G that fateful night had knowledge that by running such plant they were likely
to cause wrongful loss or damage to the public or to any person. It is
difficult to appreciate how said provision can be pressed in service on the
basis of the material referred to hereinabove which does not whisper or
even prima facie indicate how by running such a plant wherein highly
H dangerous and volatile substance like MIC was stored in tank No. 610 the
KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.) 325

accused had the knowledge that by that act alone they were likely to A
destroy anybody's property or cause wrongful loss or damage to any
person. Once the applicability of Section 425, IPC dealing with 'mischief'
is ruled out on such material there would remain no occasion to invoke
Section 429 which for its applicability requires the prosecution to show in
the first instance any material against the concerned accused indicating the B
commission of mischief by the accused. In our view, therefore, on the
material pressed in service by the prosecution for framing charges against
the accused no charge could have been framed against the concerned
accused either under Section 304 Part II or under Section 324, 326 or 429,
IPC with or without the aid of Section 35, IPC. On these findings of ours
the appeals will be required to be allowed and all these charges will have C
to be quashed.

However this is not the end of the matter. There still remains the
question as to whether any other charge can be framed against the con-
cerned accused for any of the offences under the Indian Penal Code on D
the basis of the very same material relied upon by the prosecution for
framing appropriate charges against the accused. It is true that though
originally the criminal case was registered for an offence under Section
304-A of the IPC the Central Bureau of Investigation which took up the
investigation thought it proper to press in service Section 304 Part II and
Sections 324, 326 and 429 of the IPC. Charges under these Sections have E
been found by us to be unsustainable on the material produced by the
prosecution on record in support of these charges. However that does not
mean that on the material as it stands on record the accused cannot even
plima f acie be alleged to have committed any criminal offence for which
they can be called upon to face the trial and that they should get a clean F
chit and clear walk-over. In our view the prosecution on the material as
aforesaid had made out a plima facie case against the accused for being
tried under Section 304-A of the IPC which reads as under:

"304-A. Causing death by negligence. - Whoever causes the death
of any person by doing any rash or negligent act not amounting to G
culpable homicide shall be punished with imprisonment of either
description for the term which may extend to two years, or fine,
or with both".

On our finding that the material pressed in service by the prosecution does H
326 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A not indicate even prima f acie that the accused were guilty of an offence of
culpable homicide and, therefore, Section 304 Part II was out of picture,
Section 304-A on this very finding can straightaway get attracted at least
p1ima facie. It cannot be disputed that because of the operation of the
defective plant at Bhopal on that fateful night a highly dangerous and
volatile substance like MIC got converted into poisonous gas which snuffed
B
off the lives of thousands of human beings and maimed other thousands
and killed number of ~nimals and that all happened, as seen at least prima
f acie the material led by the prosecution on record, because of rash and
negligent act on the part of the accused who were in-charge of the plant
at Bhopal. Even though, therefore, these acq1sed cannot be charged for
C offences under Section 304 Part II the material led against them by the
prosecution at least prim a f acie showed that lhe accused were guilty of rash
or negligent acts not amounting to culpable homicide and by that act
caused death of large number of persons. We may mention that on the
question whether on this material Section 304-A could be invoked or not,
D learned senior counsel for the appellants as well as learned Addl. Solicitor
General for the respondent-State did address us and, therefore, we can
and should, with a view to avoid multiplicity of proceedings, exercise our
powers under Article 142 of the Constitution and decide whether the
material led by the prosecution can prima f acie support charges under
Section 304-A against concemed accused. In the case of State of Gujarat v.
E Haidarali Kalublzai, [1976] 1 SCC 889 it was laid down by this Court as
under:

"Section 304-A by its own definition totally excludes the ingredients
of Section 299 or Section 300 I.P.C. Doing an act with the intent
- to kill a person or knowledge that doing of an act was likely to
F
cause a person's death are ingredients of the offence of culpable
homicide. When intent or knowledge as described above is the
direct motivating force of the act complained of, Section 304-A
has to make room for the graver and more serious charge of
culpable homicide."
G
< On the facts found in that case it was held that the prosecution evidence
did not make out a case of any wilful or deliberate act on the part of the
accused in order to cause the death of the deceased by driving the truck
in the way he did. Whether the prosecution brings home the charge under
H Section 304- A or not will, of course, have to be decided in the light of the
K.ESHUB MAHINDRAv. STATE [S.B. MAJMUDAR,J.J 327

evidence that may be led in the trial against the accused who is required A
to face the charge under Section 304-A. But for framing such a charge the
material on record must at this stage be assumed to be representing a true
version of the event. For repelling the applicability of Section 304-A,
learned senior counsel for the appellants pressed in service decision in the
case of Ambalal D. Bhatt v. The State of Gujarat, [1972] 3 SCC 525. The
B
following observations in the aforesaid judgment were pressed in service :

"(i) In a prosecution for an offence under Section 304- A of I.P.C.,
the court has to examine whether the alleged act of the accused is
the direct result of a rash and negligent act and that act was the
proximate and efficient cause of the death without intervention of C
other's negligence. The mere fact that an accused contravenes
certain rules or regulations in doing of an act does not establish
an offence under Section 304-A, l.P.C.

The act causing deaths must be the causa causans; it is not D
enough that it may have been the causa sine qua. non. The court
has to determine whether the act of the accused is the causa
causans or has there been a cause intervening which has broken
the chain of causation so as to make the act of the accused, though
a negligent one, not the immediate cause or whether it amounts
to an act or gross negligence or recklessly negligent conduct. The E
fact that twelve lives have been lost, however shocking and regret-
table it may be, ought not to allow the mind boggle while appreciat-
ing the evidence."

It was submitted that the material must prima f acie show that the alleged F
act of the accused was the direct result of rash and negligent act. In this
connection we .must observe that the material led by the prosecution to
which we have made a detailed reference earlier prima f acie shows that
there were not only structural defects but even operational defects in the
working of the plant on that fateful night which resulted into this grim G
tragedy. Consequently a prima facie case is made out for framing charges
under Section 304-A against the concerned accused. If ultimately on the
evidence led by the prosecution and even by the defence if at all they
choose to led evidence in rebuttal, it is found that that act complained of
was not the proximate and efficient cause of death and intervention of
other's negligence had taken place the accused may get acquittal after H
328 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A facing the full fledged trial. But that stage has yet not come. It would,
therefore, be premature at this stage to say as to. what would be the ultimate
result of the trial once the accused are made to face such a trial. But it
cannot be said that on the material led by the prosecution at this stage even
the case of culpable negligence of rashness is also not made out at least
B plima f acie against the concerned accused and the trial should be nipped
in the bud even for such a charge. Our attention was also invited by learned
senior counsel for the appellants in support of their contention that the
material on· record does not plima f acie make out a case for framing a
charge under Section 304-A, IPC. The following observations of Hegde, J.
speaking for a Bench of three learned Judges in the case of Suleman
C Rehiman Mulani & Ors. v. State of Maharashtra, [1968] 2 SCR 515, were
pressed in service:

"The requirements of s. 304-A I.P.C. are that the death of any
person must have been caused by the accused by doing any rash
or negligent act. In other words, there must be proof that the rash
D or negligent act of the accused was the proximate cause of the
death. There must be direct nexus between the death of a person
and the rash or negligent act of the accused. There is no presump-
tion in law that a person who possesses only a learner's licence or
possesses no licence at all does not know driving. For various
E reasons, not excluding sheer indifference, he might not have taken
a regular licence. The prosecution evidence that first appellant had
driven the jeep to various places on the day previous to the
occurrence was a· proof of the fact that he knew driving."

Even that decision cannot be of any avail to the appellants for the simple
F reason that question of proof of rashness and negligence will arise at the
stage of trial after full evidence is led by the prosecution and even by the
accused side if at all they choose to do so and in the light of that evidence
the question would arise whether the charge as framed is made out by the
prosecution against the concerned accused. At present we are concerned
G with the short question as to whether on the material led by the prosecution
at this stage a case is made out for framing under Section 304-A, IPC or
not? It cannot be gainsaid that the voluminous evidence led by th,e prosecu-
tion in this connection at least prima facie shows that the concerned
accused who operated the plant on that fateful night at Bhopal could be
alleged to be at least guilty of rash and negligent act in the way this highly
H volatile substance MIC was handled by them and which ultimately escaped
KESHUBMAHINDRAv.STATE[S.B.MNMUDAR,J.] 329

in vapourous form and extinguished the lives of thousands of human beings A
and animals apart from causing serious bodily injuries to thousands of
others. Our attention in this connection was also invited by learned senior
counsel for the appellants to the case of Kurban Hussein Mohammeda/i
Rangwa/la v. State of Maharashtra, (1965] 2 SCR 622. It was submitted
relying on the said deCision that for punishing an accused under Sections
304-A and 285 of the IPC it was required to be shown that because of the
B
alleged rash and negligent act death must result and death must be the
direct and proximate result. It that case on evidence led at the full fledged
trial the question arose whether the charge was made out. All these
judgments on which learned senior counsel for the appellants placed
reliance, therefore, could have applicability for judging the culpability of C
the concerned accused after they face the trial and entire evidence is led
in the case against them. However for framing charge under Section 304-A
on the aforesaid material it cannot be said that the said material even prima
f acie did not point out the culpability of the concerned accused in running
a defective plant having number of operational defects and in being prima
f acie guilty of illegal omissions to take safety measures in running such a D
limping plant on that fateful night which resulted into this colossal tragedy.
The aforesaid conclusion of ours, therefore, would make out a prim a f acie
case against accused nos. ~' 6, 7, 8 and 9 who were in actual charge of
running of the Bhopal plant and would require them to face the trial fr :
charge under Section 304-A of the IPC. E
So far as the remaining accused nos. 2, 3, 4 and 12 are concerned
the material produced on record clearly indicates at least prima f acie that
they being at the helm of affairs have to face this charge for the alleged
negligence and rashness of their subordinates who actually operated the
plant on that fateful night at Bhopal and for that purpose Section 35 of the F
IPC would also prima f acie get attracted against them. A mere look at that
Section shows that if the act alleged against these accused becomes
criminal on account of their sharing c'Jmmon knowledge about the defec-
tive running of plant at Bhopal by the remaining accused who represented
them on spot and who had to carry out their directions from them and who G
were otherwise required to supervise their activity, Section 35 of the IPC
could at least prim a f acie be invoked against accused 2, 3, 4 and 12 to be
read with Section 304-A, IPC. Consequently we find that on the material
led by the prosecution against the accused at this stage a prima f acie case
was made out by the prosecution for framing charges against accused Nos.
H
330 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 2, 3, 4 and 12 under Section 304-A read with Section 35 IPC while
substantive charges under Section 304-A could be framed against accused
Nos. 5, 6, 7, 8 and 9. In this connection Shri Desai, learned senior counsel
for the appellants vehemently submitted that the High Court was in error
in invoking Section 35 against the concerned accused. Placing reliance on
B Esso Standard Inc. v. Udltaram Bhagwandas Japanwalla, [1975] 45 Comp.
Cas. 16 he submitted that, that was a case in which for the individual acts
of the directors of the company the company was sought to be made liable
by invoking the principle of corporate liability based on the doctrine of
directing mind and will. Shri Desai submitted that this was a converse case
where for the act of the company which is a corporate body being accused
C No. 12 the individual directors are sought to be roped in. The aforesaid
contention of Shri Desai cannot be of any avail at this stage for the simple
reason that whether on facts such converse case is made out or not in the
light of aforesaid decision will depend upon the evidence that may be led
at the stage of trial. But this would not rule out framing of appropriate
D charge against the appellants if there is prim a f acie material against them
which in our view has been made available by the prosecution before the
Trial Court for framing such a charge against the concerned accused.

Shri Ashok Desai, learned senior counsel then submitted that the
material led by the prosecution does not even remotely indicate that
E accused no. 2 who was at Bombay could have shared any knowledge with
persons at Bhopal who were actually operating the plant. When from the
documentary evidence produced by the prosecution it isprima facie indi-
cated that the accused at the helm of affairs was in the apex position
enabling him to know the shortcomings of the working of the plant at
· F Bhopal. Whether he actually shared knowledge or not will be a question
of evidence and proof to be resolved at the stage of trial. However from
the material available on record it cannot be said that the prosecution had
not prim a f acie made out a case for attracting Section 35, IPC so far as the
present accused are concerned. However we must add a caution. We must
note that wh~tever we have observed at this stage in connection with the
G material produced by the prosecution for framing charges against the
accused is strictly confined to this limited question. Whether the accused
are found actually guilty of the charges framed against them or not will
strictly depend upon the evidence that may be led at the stage of trial and
the court will have to decide the culpability of the concerned accused, if
H any, strictly confined to the evidence that may be led at the stage of trial.
KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 331

Our present observations, therefore, should not be treated to have even A
remotely suggested that in fact the accused are guilty of the offences with
which they are liable to be charged pursuant to our present order. Conse-
quently on the material as produced by the prosecution on record charges
under Section 304-A read with Section 35 IPC can be framed against
accused nos. 2, 3, 4 and 12. We direct the appropriate Trial Court to frame
B
charges as aforesaid against the concerned accused.

However in our view from the material which is produced on record
there is a possibility of considering a further question whether charges
under Sections 336, 337 and 338 of the IPC with or without the aid of
Section 35 can be framed against the concerned accused. They read as C
under:

"336. Act endangering life or personal safety of others. - Whoever
does any act so rashly or negligently as to endanger human life or
the personal safety of others, shall be punished with imprisonment
of either description for a term which may extend to three months, D
or with fine which may extend to two hundred and fifty rupees, or
with both.

337. Causing hurt by act endangering life or personal safety of
others. - Whoever causes hurt to any person by doing any act so E
rashly or negligently as to endanger human life, or the personal
safety of others, shall be punished with imprisonment of either
description for a term which may extend to six months, or with
fine which may extend to five hundred rupees, or with both.

338. Causing grievous hurt by act endangering life or personal F
safety of others. - Whoever causes grievous hurt to any person by
doing any act so rashly or negligently as to endanger human life,
or the personal safety of others, shall be punished with imprison-
ment of either description for a term which may extend to two
years, or with fine which may extend to one thousand rupees, or G
with both."

As none of the parties have addressed us on these aspects we leave
this question for consideration of the learned Trial Judge who may after
hearing the parties decide wht<ther on the material as led by the prosecu-
tion on record at this stage charges, if any, can also be framed under H
332 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Sections 336, 337 and 338 of the IPC with or without the aid of Section 35
of the IPC. We express no opinion on this aspect and leave it open to the
Trial Court to address itself on this question.

As· a result of the aforesaid discussion it is held that on the material
led by the prosecution appropriate charges which are required to be
B framed against the concerned accused are under Section 304-A, IPC so far
as the accused Nos. 5, 6, 7, 8 and 9 concerned while so far as accused nos.
2, 3, 4 and 12 are concerned charges under Section 304-A read with Section
35 IPC will have to be framed. As these offences are triable by the court
of Judicial Magistrate 1st Class, Bhopal the Sessions Case shall be trans-
C ferred to the Court of the Chief Judicial Magistrate, 1st Class, Bhopal who
will proceed with the trial in accordance with law and frame appropriate
charges under Section 304-A with or without the aid of Section 35, as the
case may be, against the concerned accused as indicated hereinabove.

In the result the appeals filed by the concerned accused partially
D succeed to the aforesaid extent. Charges framed against them under Sec-
tions 304 Part 11, 324, 326 and 429, IPC with or without the aid of Section
35, as the case may be, are quashed and set aside. Instead it is directed
that the appropriate Trial Court shall frame charges against these accused
as indicated in the judgment. The appropriate Trial Court to which the
E case will stand transferred is also directed to consider the further question
whether charges should be framed under Sections 336, 337 and 338 of the
IPC with or without taking the aid of Section 35, IPC after hearing the
concerned parties. On that aspect we expri~ss no opinion. Orders accord-
ingly.

v.s.s. Appeal allowed.

I.
SANKALCHAN JAYCHANDBHAI PA'FEL AND ORS. A
v.
VITHALBHAI JAYCHANDBHAI PATEL AND ORS.

SEPTEMBER 13, 1996

[K. RAMASWAMY AND G.B. PATTAN~ JJ.] B

Bombay Revenue Jurisdiction Act :

Section I I-Whether a bar to entertaining a civil suit-Held, there is a
prohibition on the Civil Court to entertain any suit against the Government C
on account of any act or omission of any Revenue Officer-But there is no
prohibition on private pa1ties inter se to avail of the remedy of the suit
provided under CPC-Hence Civil Suit is maintainable-Code of Civil Pro-.
cedure-:-Section 9.

·CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 12808-09 D
of 1996.

From the Judgment and order dated 30.6.95 of the Gujarat High
·Court in M.C.A. No. 656 of 1995.

Yashank Adharya, Braj K. Misra and Ejaz Maqbool for the Appel- E
lants.

The following Order of the Court was delivered :

Leave granted.
F
These appeals by special leave arise from the order of the learned
single Judge of the High Court of Gujarat, originally made on March 23,
1995 in Order No. 40/95 and in MCA No. 656/95 on June 30, 1995.

The facts are fairly not in dispute. The admitted position is that the G
appellant and the respondent had jointly purchased the suit schedule
property. It would appear that there was a partition between them as
co-owners on March 20, 1982. Subsequently, it would appear that mutation
was effected in the revenue record on July 21, 1982 to the extent of the
property that had fallen to the share of the appellant who claims to have
a further effected partition between the appellant and his children on July H
333
334 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A 24, 1986. It is the case of the appellant th.at the respondent filed an appeal
under Section 11 of the Bombay Revenue Jurisdiction Act which was
dismissed by the appellate Court on March 9, 1994. Without availing of the
further right of revision as provided thereunder, he filed the civil suit in
the Court seeking declaration of his title to the property anq perpetual
injunction. Initially, the trial Court refused to grant injunction. But, on
B appeal, the District Judge had granted injunction pendi11g the suit restrain-
ing the appellant from alienating the property. The revision was dismissed
by the High Court. Review petition was also dismissed. Thus, these appeals
by special leave.

C The primary question raised by Mr. Yashank Adharyu, learned
counsel for the appellant, is that Section 11 is a bar on entertaining the
suit. The High Court, therefore, was not right in restraining the appellant
from alienating the property without deciding jurisdiction issue, i.e.,
whether the suit itselfis maintainable. In support thereof, he placed strong
. reliance on a judgment of a single Judge of the Gujarat High Court in
D Rukmanibai v. The State of Gujarat, (1960) 1 GLR 1791. The question,
therefore, is : whether Section 11 is a bar for maintainability of the suit? It
is seen that the bar of Section 37 of the Bombay Land Revenue Code would
be only as against the lands vesting in or befonging to the State. Therefore,
it has not relevance to the inter se claims of the private parties. The High
E Court, therefore, was not right in relying on Section 37.
Section 11 of the Bombay Revenue Jurisdiction Act reads as under:

"11. Suits not to be entertained unless plaintiff has exhausted right
of appeal. - No Civil Court shall entertain any suit (against the
F Government) on account of any act or omission of any Revenue
Officer Unless the plaintiff first proves that previously to bring his
suits he has presented all such appeals allowed by the law for the
time being in force, a within the period of limitation allowed for
bringing such suits it was possible to present."
G A reading of the section would clearly indicate that there is a
prohibition on the civil Court to entertain any suit against the Government,
no account of any act or omission of any Revenue Officer, unless the
plaintiff first proves that he previously brought it by way of an appeal
before the competent authority and within the time prescribed. Without
H availing of that remedy, he cannot present the suit against the State. The
SJ.PATELv. VJ.PATEL 335

question is : whether Section 11 applies to the inter se claim of the private A
parties? It would be seen that learned single Judge has construed Section
11 of the Bombay Revenue Jurisdiction Act, and concluded that Section
11 prohibits entertainment of the suit between private parties unless the
plaintiff has exhausted right of appeal or revision prescribed therein and
available to him before he resorts to the suit challenging the order passed B
by the Revenue Officer. A reading of Section 11 does not indicate any
prohibition on private parties inter se to avail of the remedy of a suit
provided under the Code of Civil Procedure, 1908 (CPC). Section 9 or
CPC does not expressly or by necessary implication, prohibits the jurisdic-
tion of the civil Court to entertain the suit based on title.
c
It is settled law that mutation entries are only to enable the State to
collect revenues from the persons in possession and enjoyment of property
and that the right, title and interest as to the property should be established
de horse the entries. Entries are only one of the modes of proof of the
enjoyment of the property. Mutation entries do not create any title or
interest therein. Therefore, the view taken by the learned Single Judge, with D
due respect, is not correct in law. The civil suit is clearly maintainable. The
High Court rightly granted injunction restraining the appellants from
alienating the land. Even otherwise, Section 52 of the Transfer of Property
Act /is pendense always stands in the way of purchaser of the land subject
to the result in revision. E
Under these circumstances, we do not find any illegality in the order
of the high Court warranting interference. ·

The appeals accordingly dismissed. No costs.

G.N. Appeals dismissed.
F
A JUDHISTIR MOHANTY
v.
STATE OF ORISSA AND ORS.

SEPTEMBER 13, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Service Law:

Scale ofpa)~Entitlement of higher scale of pay-Employee working as
C jail Supe1intendent in leave rese1ve-Making representation for transfer to a
patticular place-Grant of the request-Though he was holding a Class II post
he was adjusted against a Class-/ post-Claim for higher scale of pay-Held
not justified since it was· a request trans[er and he was accommodated in a
higher post, he is not entitled to higher scale of pay than the scale of pay
attached to his post.
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12858 of
1996.

From. the Judgment and Order dated 26.4.88 of the Orissa Ad-
E ministrative Tribunal in M.P. No. 281/1988 in T.A. No. 29/87 (OJC No.
2540 of 1984.

Mr. Y.P. Rao for the Appellant.

Mr. P.N. Misra for the Respondents.
F
The following Order of the Court was delivered :

Delay condoned.

Leave granted.
G
We have heard learned counsel on both sides.

This appeal by special leave arises from the two orders dated April
26, 1988 of the Administrative Tribunal at Bhubaneswar made in T.A. No.
29/87 (OJC No .. 2540/84) transferred from the High Court and M.P. No.
H 281/88.
336
J. MOHANTY v. STATE 337

The admitted position is that the appellant, while working as Super- A
intendent of Jail in leave reserve in the Head Officer of LG. (prisons) made
a representation on February 5, 1978 to the Chief Minister stating that he
had no house of his own and had recently secured a site at Behrampur. He
wanted to settle down at Behrampur. He had served the Department for
more than 37 years. His children were prosecuting studies hear Behrampur. B
if he is transferred to Behrampur Of near about Behrampur, he would be
able to construct the house and settle him down after retirement at
Behrampur. Taking that representation into consideration, the Govern-
ment granted sanction on January 27, 1978 directing that he was trans-
ferred and posted as Superintendent of Jail at Circle Jail at Behrampur.
By proceedings dated January 27, 1978, the Government have sanctioned c
two posts of Superintendent of Jail for Circle Jail at Behrampur in the pay
scale of Rs; 850-1450 with D.A. In one of the above sanctioned posted, the
appellant came to be adjusted by proceedings dated March 28, 1978 and
it is not in dispute that he worked during the period from April 1, 1978 to
October 31, 1978 the date on which he attained superannuation and retired D
from service. The writ petition filed in the High Court was subsequently
transferred to the Tribunal. Though there is no mention as regards his
entitlement to the payment of the salary in the post of Superintendent
referred to hereinbefore, the same was not paid to him for the reason that
he was transferred and posted to the said post at his request. It is the E
contention of Shri Y. Prabhakara.Rao, learned counsel for the appellant,
that since he was asked to discharge that duty for the said period, he is
entitled to the payment of the salary. Plima facie, we are impressed with
the arguments addressed by Shri Y.P. Rao, but it is pointed by Shri Misra,
learned counsel appearing for the State, that the Superintendent leave
F
reserve is only Class II post whereas the Superintendent of the Circle is
Class I post. Since the appellant made a request for adjustment of him at
Behrampur and since there was no other post equivalent to Class II
available, he came to be adjusted in that post at request. Therefore, he was
not eligible to the scale of pay attached to the post. We are in agreement
with Shri Misra, learned counsel for the State. It is a settled position that G
if the Government, for want of candidate, directs an officer in the lower
cadre to perform the duties of the post in the higher cadre, during that
period, necessary incumbent would be entitled to the payment of salary
attached to the post if the incumbent performed the duties in that post.
Similarly where concerned officer is on promotion from lower cadre to the H
338 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A higher cadre, though on ad hoc or even temporary basis, the incumbent
would be entitled to the payment of the salary attached to the post for the
period of his discharging the duty in that post. In this case, neither would
be is applicable. At request, he was transferred and thought orc~er dos not
speak of, but the fact remains and is not disputed that the order came to
B be passed pursuant to a representation made by the appellant to the Chief
Minister. It was obviously on that basis that direction was issued by the
Chief Minister's Office and the transfer order came to be made to accom-
modate him, before his retirement, at Behrampur where he had proposed
to construct the house. Since there was no equivalent post of Grade II
category, necessarily he was accommodated in that post. Consequently he
C is not entitled to the higher scale of pay than to which he was entitled as
Superintendent Leave Reserve on which post he would otherwise have
retired.

The appeal 1s accordingly dismissed, but m the circumstances,
without costs.
D
G.N. Appeal dismissed.
KULDIP SINGH A
v.
STATE OF PUNJAB AND OTHERS

SEPTEMBER 16, 1996

[B.P. JEEVAN REDDY AND K.S. PARIPOORANAN, JJ.) B

• Service Law-Punjab Police Act 1861 :

Punjab Police Rules, 1934-Section 7-Rules 16.1and16.24-Powerof
dismissal and enquiry. C

Constitution of India, 1950-Article 311(2)(b)(3)-Condition precedent
to dispensing with the enquiry-Satisfaction of the disciplina1y authority
recorded on proper assessment of facts and circumstances-The decision of
the disciplinary authority is final but subject to judicial review-The decision D
of the disciplinary authority, confinned by the appellate auth01ity not to hold
enquiry against the appellant, helping the te"orists-High Court satisfied with
the view-Supreme Court would not interfere and take a different view.

Evidence Act, 187~Sections 25 and 26-Confessions made to the
police officer-Relevancy in departmental enquiry-If accepted as voluntary E
and tJUe by disciplinary authority and the appellate authority-Supreme Court
would not go into the question-Strict rules of evidence not applicable to
departmental enquiry-Principles of natural justice and rules governing the
enquiry must be followed.
F
The Senior Superintendent of Police, invoking proviso(b) of Article
311(2) of the Constitution and the Punjab Police Rule 16.1 read with
Section 7 of the Punjab Police Act, 1861, dismissed the appellant, a Head
Constable, who was helping the terrorists. The satisfaction of the Senior
Superintendent of Police for not holding the enquiry was that the cir·
cumstances were such that it was not reasonably practicable to hold an G
enquiry against the appellant, as no witness was likely to depose against
him due to fear of life. The appeal preferred by the appellant was rejected
by the Inspector General of Police. The High Court also rejected his appeal
holding that there were sufficient materials before the disciplinary
authority for not holding the enquiry. The appellant moved this court H
339
340 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A challenging that except the confession made to the police during interroga-
tion, there was no other material against him warranting his dismissal and
that he was acquitted by the Designated Court.

Dismissing the appeal, this Court

B HELD : 1. Though according to sections 25 and 26 of the Evidence
Act, the confession made before or while in custody of a police officer is
not admissible, it is well-settled that these rules do not apply to
departmental enquiry. Even the evidence recovered or discovered as a
result of illegal search is relevant in India departing from the law of United
C States. The fact that the confession was made to the police, may not be of
much consequence for the reason that strict rules of evidence do not apply
to the departmental enquiry and as such the appellant's confession is
relevant. In departmental enquiry, it would perhaps be permissible for the
authorities to prove that the appellant did make such a confession during
the course of interrogation and it would be for the disciplinary authority
D to decide whether it was voluntary or not. The disciplinary authority is
entitled to act upon such statement if it is voluntary and true. Once the
disciplinary authority as well as the appellate authority conclude that the
confession made by the appellant is voluntary, this court would not go into
the question of its being voluntary or not. [345-H]
E
2. Undoubtedly, there is no other material except the confesion of the
appellant. There is also the fact that the appellant was acquitted by the
designated court, however, the High Court has opined that there were
en~ugh materials before the appropriate authority upon which it could
come to a reasonable conclusion that it was not reasonable practicable to
F hold an enquiry as contemplated by clause (2) of Article 311 of the
constitution. Nothing has been shown to justify the taking of a contrary
view at this stage. Once proviso(b) of Article 311(2) is held to have been
validly invoked, the only ground left with the concerned Govt. servant is
to impugn the punishment actually awarded as being unwarranted. In the
G instant case, the punishment awarded to the appellant cannot be said to
be excessive. [346-B-E]

KuTUma v. The Queen, (1955) A.C. 197, referred to.

Union of India v. Tulsi Ram Patel, [1985) Suppl. 2 SCR 131; Pooran
H Mal v. Director of Insvection, [1974) 1 SCC 345; State of Mysore v. S.S.
KULDIP SINGH v. STAIB (B.P.JEEVAN REDDY, J.] 341

Makapur, AIR (1963) SC 375 and The State of Assam v. S.K Dass, AIR A ,
(1970) SC 255, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12313 of
1996.

From the Judgment and Order dated 10.12.93 of the Punjab & B
Haryana High Court in C.W.P. No. 14895 of 1993.

R.S. Sodhi for the Appellant.

Manoj Swarup for the Respondents.
c
The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted.

This appeal arises from the judgment of the Punjab and Haryana
High Court dismissing the writ petition filed by the appellant. The appel- D
lant was a Head Constable of Police in the service of the Punjab Govern-
ment. He has been dismissed from service without holding an enquiry as
contemplated by clause (2) of Article 311 of the Constitution of India. The
Senior Superintendent of Police (S.S.P.), Tarn Taran has invoked proviso
(b) appended to the said clause (2), dispensing with the enquiry on the E
ground that it is not reasonably practicable to hold such an enquiry in the
case of the appellant. The order of dismissal is dated February 21, 1992.
The appeal preferred by the appellant was dismissed by the Inspector
General of Police, Border Range, Amritsar on June 22, 1993. The order
or dismissal and the appellate order affirming it were questioned by .the
appellant by way of a writ petition in the punjab and Haryana High Court F
which too has failed, as stated above. The order of dismissal passed by the
S.S.P., Tarn Taran, reads:

"Whereas Head Constable Kuldip Singh No. 2874!fT of this dis-
trict has been found indulging in activities prejudicial to the effi- G
cient functioning of the Police force. He has very close. links with
extremists and helping them by providing information of the Police
Department.

And whereas it is established that Head Constable Kuldip
Singh No. 2874!fT is mixed up with the extremists and had been H
342 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A found responsible for supplying information relating to the Police
Department.

And whereas in the interest of maintenance of law and general
administration and retention of Head Constable Kuldip Singh No.
2874ffT of Police District Tarn Taran is considered undesirable.
B
And whereas I am satisfied that the circumstances of the case
such that if is not reasonably practicable to hold an enquiry in the
manner provided in Punjab Police Rules 16.24 because no witness
is likely to depose against him due to fear of injury of his Iife.
c Now, therefore, I Ajit Singh, Senior Superintendent of Police,
Tarn in exercise of the powers vested in me by virtue of the
provisions of the Punjab Police Rules 16.1 read with Section 7 of
the Police Act, 1861 and Article 311(2) of the Constitution of India,
do hereby dismiss from service the Head Constable Kuldip Singh
D No. 2874ffT with effect from 21.2.1992."

On Appeal, the appellate authority found that the appellant did have
links with the terrorists and was mixed up with them and he was supplying
secret information of the police department to terrorists which was creating
E hindrance in the smooth functioning of the police department. The appel-
late authority also found that it was impossible to conduct an enquiry
against the appellant because nobody would come forward to depose
against such "militant police official". The appellate authority also referred
to the fact that the appellant was interrogated in a case, FIR No. 210/90,
and that during interrogation he admitted that he was having links with
F Major Singh Shahid and Sital Singh Jakhar and was working for them. It
further stated in its order that the appellant was preparing to murder some
senior police officers while taking advantage of his position.

The High Court found that the reasons given by the S.S.P. for
G dispensing with the enquiry were acceptable and that the satisfaction
recorded by him cannot be said to be unjustified or unwarranted. The High
Court was also of the opinion that there was sufficient material before the
disciplinary authority to conclude that it was not expedient to hold a
regular enquiry against the appellant.

H In this appeal, it is contended by Sri R.S. Sodhi, learned counsel for the
KULDIPSINGHv. STATE[B.P.JEEVANREDDY,J.] 343

appellant, that except the alleged admission/confession of the appellant made A
before the police officers during interrogation in FIR No. 219/90, there is no
other material upon which the disciplinary authority could have concluded
that the dismissal of the appellant was warranted. He submitte4 that such an
admission/confession is inadmissible in law and, therefore, cannot constitute
the basis of an order of dismissal. The learned counsel also submitted that no
B
material has been placed by the disciplinary authority before the court upon
which it was satisfied that it was not expedient to hold a disciplinary enquiry
against the appellant as contemplated by clause (2) of Article 311. The
learned counsel also brought to our notice that though the appellant was
prosecuted and tried before the designated court, Amritsar under Terrorists
and Disruptive Activities Act in connection with the crime in FIR No. 219/90, c
he has been acquitted by the said court.

On the other hand, the learned counsel for respondents supported
the reasoning and conclusion of the High Court as also the action of the
authorities. D

At our direction made on April 22, 1996 in this matter, the learned
counsel for the State has produced the original record relating to the
appellant's dismissal along with translated copies of the relevant document.
The first document placed before us by the learned counsel for the State E
J is the copy of the FIR No. 219/90 dated November 24, 1990. It is based
upon the statement of. Head constable Hardev Singh, who was posted as
gunman with Sri Harjit Singh, Superintendent of Police (S.P.) (Opera-
tions). The F.I.R. speaks of the jeep (in which the said S.P. was travelling
along with certain police personnel) being blown up killing the said S.P.
and few other police officials. The next document placed before us is the F
case diary pertaining to the said crime containing the statement of the
appellant, Kuldip Singh. In his statement, Kuldip Singh, did clearly state
about his association with certain named militants, the plot laid by them to
kill Sri Harjit Singh, Superintendent of Police, Tarn Taran by placing a
bomb and the manner in which they carried out the said plot. He also G
stated that he and his militant companions planned to plant a bomb in the
office of S.S.P, Tarn Taran but that the police officers came to know of the
said plan, thus foiling their plan. The learned counsel for the State of
Punjab did concede that except the aforesaid statement of admission/con-
fession of the appellant, there was no other material on which the appellant
could be held guilty of conduct warranting dismissal from service. H
344 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Proviso (b) to Article 311(2) says that the enquiry contemplated by
clause (2) need not be held "where the authority empowered to dismiss or
remove a person or to reduce him in rank is satisfied that for some reason, to
be recorded by that authority in writing, it is not reasonably practicable to hold
such enquiry". Clause (3) of Article 311 expressly provides that "if, in respect
B of any such person as aforesaid, the question arises whether it is reasonably
practicable to hold such enquiry as is referred to in clause (2), the decision
thereon of the authority empowered to dismiss or remove such person or to
reduce him in rank shall be final". These provisions have been the subject-
matter of consideration by a Constitution Bench of this Court in Union of
India v. Tulsi Ram Patel, [1985) Suppl. 2 S.C.R 131. It would be appropriate
C to no tic'? _a few relevant holdings in the said judgment:

"Before denying a government servant his constitutional right to
an enquiry, the first consideration would be whether the conduct
of the concerned government servant is such as justifies the penalty
D of dismissal, removal or reduction in rank. Once that conclusion
is reached and the condition specified in the relevant clause of the
second proviso is satisfied, that proviso becomes applicable and
the government servant is not entitled to an enquiry (p.205) ..... It
would also not be reasonably practicable to hold the enquiry where
an atmosphere of violence or of general indiscipline and insubor-
E dination prevails, and it is immaterial whether the concerned
government servant is or is not a party to bringing about such an
atmosphere ..... The reasonable practicability of holding an inquiry '
· is a matter of assessment to be made by the disciplinary authority.
Such authority is generally on the spot and knows what is happen-
F ing. It is because the disciplinary authority is the best Judge of this
That clause (3) of Article 311 makes the decision of the disciplinary
authority on this question final... ... The finality given to the decision
of the disciplinary authority by Article 311(3) is not binding upon
the court so far as its power of judicial review is concerned
(p.270) ....... Where a government servant is dismissed, removed or
G reduced in rank by applying clause (b) or an analogous provision
of the service rules and he approaches either the High Court under
Article 226 or this Court under Article 32, the court will interfere
on grounds well established in law for the exercise of power of
judicial review in matters where administrative discretion is exer-
H cised. It will consider whether clause (b) or an analogous provision
in the service rules was properly applied or not... .. In examining
KULDIP SINGH v. STATE [B.P. JEEVAN REDDY, J.] 345

the relevancy of the reasons, the court will consider the situation A
which according to the disciplinary authority made it come to the
conclusion that it was not reasonably practicable to hold the
inquiry..... In considering the relevancy of the reasons given by the
disciplinary authority, the court will not, however, sit in judgment
a
over them like court of first appeal; (p.273-274)."
B
The judgment also stresses that very often a person dealt with under
any of the three clauses in the second proviso to Article 311(2) has a right
of appeal where the correctness of the decision taken by the aj>prop~iate
authority will be subject to reView - apart, of course, from the remedy of
judicial review provided in the Constitution. C

Now coming to the main contention of the learned counsel for the
appellant, it is true that a confession or admission of guilt made by a person
accused of an offence before, or while in the custody of, a police officer is
not admissible in a court of law according to Sections 25 and 26 of
Evidence Act but it is equally well settled that these rules of evidence do D
not apply to departmental enquiries - See State of Mysore v. S.S. Makapur,
A.LR. (1963) S.C. 375 and State of Assam v. S.K. Das, A.LR. (1970) S.C.
1255 - wherein the only test is compliance with the principles of natural
justice - and, of course, compliance with the rules governing the enquiries,
if any. In this context, it is well to remember that in India, evidence
recovered or discovered as a result of an illegal search is held relevant E
departing from the law in the United States. We may refer to the following
observations of the Judicial Committee of the Privy Council in Kuntma v.
11ie Queen, (1955) A.C. 197, quoted approvingly by the Constitution Bench
of this Court in Pooran Mal v. Director of Inspection, [1974] 1 S.C.C. 345
at 256:
F
"The test to be applied, both in civil and in criminal cases, in
considering whether evidence is admissible is whether it is relevant
to the matters in issue. If it is, it admissible, and the Court is not
concemed with how it was obtained.''
G
In this sense, if the appellant's confession is relevant, the fact that it
was made to the police or while in the custody of the police may not be of
much consequence for the reason that strict rules of Evidence Act do not
apply to departmentaVdisciplinary enquiries. In a departmental enquiry, it
would perhaps be permissible for the authorities to prove that the appellant
did make such a confession admission during the course of interrogation H
346 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A and it would be for the disciplinary authority to decide whether it is a
voluntary confession/admission or not. If the disciplinary authority comes
to the conclusion that the statement was indeed voluntary and true, he may
well be entitled to act upon the said statement. Here, the authorities say
that they were satisfied about the truth of the appellant's confession. There
is undoubtedly no other material. There is also the fact that the appellant
B has been acquitted by the designated court. We must say that the facts of
this case did present us with a difficult choice. The fact, however, remains
that the High Court has opined that there was enough material before the
appropriate authority upon which it could come to a reasonable conclusion
that it was not reasonably practicable to hold an enquiry as contemplated
C by clause (2) of Article 311. Nothing has been brought to our notice to
persuade us not to accept the said finding nf the High Court. Even a copy
of the r:ounter filed by the respondents in the High Court is not placed
before us. Once proviso (b) is held to have been validly invoked, the
government servant concerned is left with no legitimate ground to impugn
the action except perhaps to say that the facts said to have been found
D against him do not warrant the punishment actually awarded. So far as the
present case is concerned, if one believes that the confession made by the
appellant was voluntary and true, the punishment awarded cannot be said
to be excessive. The appellant along with some others caused the death of
the Superintendent of Police and a few other police officials. It must be
remembered that we are dealing with a situation obtaining in Punjab during
E the years 1990-91. Moreover, the appellate authority has also agreed with
the disciplinary authority that there were good grounds for coming to the
conclusion that it was not reasonably practicable to hold a disciplinary
enquiry against the appellant and that the appellant was guilty of the crime
confessed by him. There is no allegation of malafides levelled against the
F appellate authority. The disciplinary and the appellate authorities are the
men on the spot and we have no reason to believe that their decision has
not been arrived at fairly. The High Court is also satisfied with the reasons
for which the disiciplinary enquiry was dispensed with. In the face of all
these circumstances, it is not possible for us to take a different view at this
stage. It is not permissible for us to go into the question whether the
G confession made by the appellant is voluntary or not, once it has been
accepted as voluntary by the disciplinary authority and the appellate
authority.

The appeal accordingly fails and is dismissed. No costs.

H H.K. Appeal dismissed.
THE PATIALA CENTRAL COOPERATIVE BANK LTD. A
v.
THE PATIALA CENTRAL COOPERATIVE
BANK EMPLOYEES UNION AND ANR. ETC.

SEPTEMBER 16, 1996 B
[B.P. JEEVAN REDDY, S.C. SEN AND S.B. MAJMUDAR, JJ.}

Labour Law-Industrial Disputes Act, 1947-Section 19--Agree-
ment-Termination of-Agreement Validly terminated Under Section C
19(2)-Effect and Scope-Terms of the agreement can not be enforced after
the agreement is validly terminated under Section 19(2).

Punjab Co-operative Societies Act 1961-Section 84-B-Bar on pay-
ment of Deamess Allowance at a higher rate than the rate admissible to the
Government employees drawing the same p~alidity-Not ultravires the D
State Legislature-It is a valid legislation.

On the basis of a charter of demands of the respondents, a Union of
the petitioner Bank, a comprehensive agreement dated May 28, 1973 ~as
executed inter alia providiqg the fixation of pay scales after classifying the
various categories of staff, Fixation Formula providing for pay rise, E
provision for dearness allowances, travel allowance, house rent 'allowance,
city compensation allowance and various other allowances. As a matter of
fact, the agreement embraced all aspects of the service condition. The
agreement dated May 28, 1973 was valid for a period of four years and
came to end on 31st March, 1977. On the expiry of the agreement, a dispute F
arose between the parties interalia about the payment of Dearness Al-
lowance in terms of the agreement dated 28th May, 1973. The Union
asserted that the aforesaid agreement is binding even after the period
mentioned in the agreement and the agreement can not be unilaterally
repudiated as per the provisions of S.19(2) of the Industrial Disputes Act, G
1947. The respondent Union also claimed that as no notice terminating the,
agreement had been given by the petitioner bank, the agreement continued.
to be in force and was binding upon the petitioner and the payment of
Dearness Allowance specified in the agreement can not be avoided by the
petitioner'. The respondent Union also contended that the introduction of
Section 84-B by amending Act, 1981, in the Punjab Co-Operative Societies H
347
348 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Act, 1961, inter alia providing that the Dearness Allowance at a higher rate
than admissible to the Government Employee with the same pay rate shall
not be admissible to an employee of the co-operative society, can not in
any way abrogate an agreement protected by the provisions of the In-
dustrial Disputes Act.
B The respondent Union filed a Writ Petition in the High Court·and
besides reiterating their earlier stands, challenged the virus of Section
84-B of the Punjab Co-operative Societies Act, 1961 as being violative of
Section 19 of the Industrial Disputes Act, for the reason that the Punjab
Cooperative Societies Act is a general Act and it can not curtail or control
C the specific provisions of the Industrial Disputes Act, in any manner
whatsoever. The High Court held that Section 84-B of the Punjab Coopera-
tive Societies Act was violative of the Industrial Disputes Act and also
ultravires the State Legislature of Punjab. The amended Section 84-B
could not take away the effect of settlement dated 28th May, 1973 and the
agreement/settlement could continue to be subsisting, and binding between
D the parties and class III and IV employees of the petitioner bank were held
entitled to claim Dearness Pay in terms of the 1973 agreement. The High
Court further held that service condition of an employee can not be
changed in any of the matter mentioned in Fourth Schedule without giving
notice under Section 19(2) of the Industrial Dispute Act and this being so,
E the unilateral withdrawal of city compensatory allowance and dearness
allowance by the Bank affected the service condition of the respondent and
attracted the mandatory condition of Section 9-A of the Industrial Dispute
Act.

In appeal to this Court, the respondent in their counter affidavit did
F not dispute the factual aspect of the case including the issuance of notice
dated 25.2.1978 terminating the ~greement dated 28th May, 1973 issued by
the petitioner.

Allowing the appeal, this Court
G HELD : (Per Sen, J.) 1. It is not in dispute that notice was given on
25th Feb. 1978, terminating the agreement dt. 28th May, 1973 and the
agreement was validly terminated by the Management and the same ceased
to operate from that date. [362-C]

H 2. In view of the admitted fact that the pay scales and other benefits
PATIALACENTRALOO-OP. BANK LTD. v. PA11ALACEN1RALCO-OP. BANK EMPLOYEES UNION 349

of the employees had been drastically revised upwards at all levels than A
what was given by the agreement dated 28.5.1973, the employees can not
claim that Dearness Allowance formula of the agreement must remain
intact, but at the same time the drastic changes in every other part of the
agreement dated 28.5.1973 will continue in force for the benefit of the
employees. [358-D]
B
3. Section 84-B of the Punjab Co-Operative Societies Act, 1961
(inserted by Amendment Act 26 of 1981) places a bar on payment of
Dearness Allowance at a rate higher .than the rate admissible to the
employees of the Government drawing the same pay. This provision is
made applicable to all the employees of the Co-operative societies in C
Punjab. It specifically states that inspite of any s.tatutory provisions to the
contrary, or any agreement Dearness Allowance can be paid upto the rate
fixed by the Government for corresponding pay of the Government Ser-
vant. (362-D]
D
4. Section 19(2) of the Industrial Dispute Act, merely provides even
if the period of agreement has expired the terms of agreement will continue
to be in force unless determined in the manner laid down in Section 19(2)
of the Act. The provisions of Section 19(2) make an agreement between the
employer and the employees binding. It also lays down the period during E
which it shall be binding. It also provides the manner in. which the
agreement can be terminatt:d inter parties. It does not follow from this
provision that a competent legislature can not legislate on any matter
which forms part of the agreement. Nor does Section 19 have the effect of
validating any infirmity in the agreement. If the agreement is contrary to
any law or if the agreement can not be implemented without violating any
F
provision of law, than the agreement can not be enforced at all. There is
nothing in sub-section (2) of Section 19 to suggest that even such agree-
ment will continue to be binding upon the employers and the employees
and enforceable against express provision of law. If after the agreement
has been entered into, any law is passed and the agreement can not be G
enforced without violating that law, then clearly the agreement can not be
enforced. The law will prevail. Sub Section (2) of Section 19 merely extends
the period during which the agreement will be enforced, but it does not
provide that the agreement will be valid and binding notwithstanding any
law to the contrary. [360-F-H; 361-A-B] H
350 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Per JEEVAN REDDY, J. (Concurring) :

So far as the validity of Section 84-B of the Punjab Co-operative
Societies Act, 1961 is concerned, it is enough to say that once the settlement
between the parties was held to have been validly terminated by the
management, there was no occasion for the High Court to have con-
B sidered the validity of the said section and/or to have declared it void. The
judgment of the High Court declaring section 84-B as void and illegal is
accordingly set aside. [361-E]

Per_MAJMUDAR, J. (partly concurring):
c 1.1. In view of the finding that the agreement dated 28th May, 1973
was validly terminated by the Management on 25.2.1978 and the same had
ceased to operate from that day, no further question survives for con-
sideration, namely whether section 84-B of the Punjab Co-operative
Societies Act, 1961 is repugnant to the provisions of Sections 9A and 19(2)
D of the Industrial Disputes Act, which is a central legislation. The High
Court has taken the view ignoring the factual position that the agreement
in question had stood terminated with effect from 25th Feb. 1978. It was
not open to the High Court to consider the validity of Section 84-B on the
admitted facts of the case. The finding of the High Court declaring Section
E 84-B as ultravires of the State Legislature on account of its repugnancy to
Sections 9A and 19(2) of the Industrial Disputes Act is set aside. No
occasion arises for this Court, nor did it arise for_ the High Court to go
into the Legislative competence of the State Legislature in enacting Section
84-B and to examine and pronounce upon the said question. Tll.e.question
of virus of Section 84-B is kept open for consideration in an appropriate
F case. [363-A-B]
..
1.2. The view that Section 84-B will operate even de- hors the binding
agreement under section 19(2) of the Industrial Disputes Act, is not
concurred with. No opinion is expressed on this question, as it does not
G arise for consideration in the present case. [363-C] .

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4390 of
1988 Etc.

From the Judgment and Order dated 28.4.88 of the Punjab &
H Haryana High Court in C.W.P. No. 2193of1983.
PATIALACEN1RALCO-OP.BANKL1D.v.PATIALACEN'IRALCO-OP.BANKFMPLOYEESUNION 351

G.K. Chatrath, Advocate General, S.S. Kang, Dy. Adv. General, A
(Punjab) H.S. Munjral, G.K. Bansal, Arvind Kumar, Ms. LaxmiArvind and
· T.S. Arora for the Appellant.

AK. Sen and Rajinder Sachar and P.P. Singh for the Respondents.

The following Judgment/Orders of the Court were delivered by B
SEN, J. The Patiala Central Cooperative Bank Ltd., the appellant
herein, is a Cooperative Bank registered under the provisions of Punjab
Cooperative Societies Act, 1961. The Patiala Central Cooperative Bank
Employees Union, the respondent No. 1 herein, is a Union of the
employees of the appellapt-Bank working at various places in different C
branches of the Bank. On 13.11.1972, the Union submitted a charter of
demands culminating in an agreement between the Bank and the Union on
28.5.1973. This agreement was ~o be in force upto 31st March 1977.

The agreement reached on 28.5.1973 provided for a number of things D
like fixation of pay-scales after classifying the various categories of staff. It
also provided for Fixation Formula providing for pay rise in the revised
pay scales. There was also a provision for payment of dearness allowance,
travel allowance, house rent allowance, city compensatory allowance and
various other allowances. Provisions have been made for cycle and car
allowance, children allowance and special. allowances, if any. Provisions E
were also made for uniforms, provident fund, gratuity, over time allowance
and also fixation of strength and rules providing quota for promotion to
various po~t.§)11 the future. The agreement also provided for loans to be
given for purchase of scooter/motor cycle/cycle upto a ceiling of Rs. 15,000
for Central Cooperative Banks and Rs. 30,000 for Apex Cooperative Banks F
per annum. The agreement concluded with General Conditions which were
as under:

"GENERAL CONDITIONS
(i) The existing facilities given to employees on the Punjab State
Cooperative Bank may continue. G
(ii) This settlement will remain in force for a period of four years,
i.e., upto 31.3.1977.

(iii) A copy of this settlement may be sent to the Labour Commis-
sioner, Punjab for necessary confirmation. H
352 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A (iv) Anomalies,. if any, shall be discussed in the joint meeting of
the signatories."

In order to appreciate the argument advanced in this case, lt is
necessary to set out the pay scales and the provisions relating to dearness
B allowance as agreed upon in the settlement:-

Category of Staff Present grades Revised Revised
after merger Grades grades after
of grades DP merger of D .P.
w.e.f. 1.2.1968
c a. Subordinate Staff
Peons and Chowkidar in 75-140 75-165 122-5-162-6
all the C.Bs. 216-7-258
Daftri 95-160 100-170 147-6-195-7
230-8-270
D Drivers 120-170 120-170 190-7-267-8
b. Clerical Jr. Staff Clerks
A Class Banks 140-315 150-350 240-10-300-
425-15-470
B Class Banks 130-270 140-315 210-10-300-
E
400-15-430
C Class Banks 115-265 140-315
Senior Clerks
A Class Banks 170-360 190-385 280-12112-380-
F 16-485-20-505
B Class Banks 155-335} 170-360 260-10-280-12112
C Class Baks 149-315} 380-15-485
c. Supe1Visory staff
Junior Accountant 245-480 245-510 365-15-490-20-
G 590-25-640
Junior Accountant 220-420}
B Class Banks 190-380} 245-480 365-12112-380-
15-500-20-620

H Regarding the staff in the Common Cadre· also, new grades will be
PATIAI.ACENTRALCO-OP. BANK LTD." PATIAI.ACENTRALCO-OP. BANK EMPLOYEES UNION 353

framed after merging D.P., in their present pays. The new grades will be A
as under:

Senior Accountants 275-530 385-15-480-20-590-25-665
Assistant Managers 375-690 485-20-525-25-725-30-815
Managers 475-930 595-30-745-35-955-40-1075 B
Fixation Fonnula

All employees may be given a pay rise of 5% of their -pay in the
revised scales mentioned above and may be fixed at the next higher stages
after adding 5% to their present basic pay including Dearness Pay. In the C
case of subordinate staff, however, one additional increment may also be
given over and above the above mentioned benefits.

Dearness Allowance.

As mentioned above, the D.P. is to be merged in the revised grades. D
The D.A. and interim relief which the employees are getting at present will
together form the D.A. This D.A. may be linked with the All India
Consumers Price Index number (Base Year 1960: 100) in such a way that
any further rise in the Index number niay be reflected to D.A. to the extent
of 100% in the case of subordinate staff and 75% in case of the other staff. E
No additional D.A. will be made unless the Index number increases by at
least four points (quarterly average).

The rate of D.A. being paid at present will be converted into per-
centage rates mentioned below for various categories of staff. This percent-
age has been worked out on the basis of the current D.A. plus relief, rates, F
rounded off in such a way that the rate can be divided by four in the case
of subordinate staff and by three in the case of others :

Category of Staff Percentage rate of DA.

Peons and Chowkidars 56 G
Drivers 40
Daftry 44
Clerk 33
t"
Senior Clerk-I 27
-t Senior Clerk-II 30 H
354 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Junior Accountants and Senior
Accountants 24.
Assistant Managers and
Managers 18

It is certified that any increase/decrease in the Index number after
B 31.3.1973 shall be added/reduced in the percentage rate mentioned above
at the rate of 100% in the case of subordinate staff and 75% in the case
of others.

TA. and DA.
c T.A. and D.A. rules as applicable at present to common cadre
employees be applied to all the employees.

This was a comprehensive agreement reached between the
Employees' Union and the management. It is not an agreement relating to
D payment of Dearness Allowance only.· The agreement was valid for a
period of four years and came to be end on 31st March, 1977. After the
agreement came to an end, disputes and differences cropped up between
the employees and the management inter alia about the payment of Dear-
ness Allowance in terms of the aforesaid agreement. The case of the
employees is that the agreement cannot be repudiated unilaterally even
E though the period of four years mentioned irt the agreement expired on
31st March, 1977. It has been contended that the agreement will continue
to be binding even after the expiry of the period mentioned in the agree-
ment expired on 31st March, 1977, by virtue of the provisions of sub-section
(2) of Section 19 of the Industrial Disputes Act, 1947. Section 19 lays down
that a settlement shall come into operation on such date as is agreed upon
F by the parties to the dispute, and if no date is agreed upon, on the cl;,at:e on
which the memorandum of the settlement is signed by the parties ,, to the
dispute. Sub-section (2) of Section 19 provides that if any settlement has
been reached between the workers and the management, that shall be
binding not only for the agreed period, but also shall continue to be binding
G on the parties after the expiry of the period mentioned in the agreement
"until the expiry of two months from the date on which a notice in writing
of an intention to terminate the settlement is given by one of the parties to
the other party or parties to the settlement."

The case of the employees is that no such notice was given, and,
H therefore, the agreement continues to be force and binding upon the
PA11Al.A CEN1RAL <X>-OP. BANK LTD. v. PA11Al.A CENTRAL <X>-OP. BANK EMPLOYEES UNION 355

management. The duty to pay Dearness Allowance at the rate specified in ~
the agreement cannot be avoided by the management by any device.

It has been further contended that Section 84-B, which was intro-
duced in the Punjab Cooperative Societies Act, 1961 by which it was laid
down that "no employee of a cooperative society shall be paid dearness
allowance at a rate higher tha~ that admissible to the employees of the
B
Government drawing pay at the same rate", cannot in any way abrogate an
agreement protected by the provisions of the Industrial Disputes Act.

On behalf of the employees; a writ petition was filed in the High
Court under Article 226 challenging the validity of Section 84-B. The case C
of the employees is that by virtue of Section 19 of the Industrial Disputes
Act, the agreement between the management and the employees cannot be
altered except in the manner laid down in the Act. Such agreements have
been given statutory force and they cannot be altered by the management
on its own without following the procedure of law. Similarly, the State D
Government cannot give any directions as to the manner of working out of
the a~eement or abridge or modify the contents of the agreement in any
manner whatever. Industrial Disputes Act being a special Act relating to
industrial disputes and, in particular, about the relationship between the
management and the employees, the agreement reached under that Act
cannot be varied or abrogated by the management unilaterally. It was E
further contended that the Punjab Cooperative Societies Act, 1961 is a
general Act relating to Cooperative Societies and it cannot curtail or
control the specific provisions of Industrial Disputes Act which is a special
Act, in any manner whatever.
F
It was held by the Division Bench of the Punjab High Court that
Section 84-B of the Punjab Cooperative Societies Act, 1961, which was
introduced by the Amending Act of 1981, could not take away the effect
of the settlement dated 28th May, 1973 which was subsisting and binding
on the date of Amendment Act came into force. Section 84-B of the J>unjab
Cooperative Societies Act was violative of the provisions of Section 19 of G
the Industrial Disputes Act, 1947. It was further held by the High Court
that change in condition of service of the employees could not be made in
respect of any of the matters mentioned in the Fourth Schedule, without
giving a prior notice in the manner prescribed by Section 19(2) of the Act.
It was held that unilateral withdrawal of the City compensatory allowance H
356 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A by the employer of the workmen affected their conditions of service and
attracted mandatory provisions of Section 9-A. On the same analogy
unilateral withdrawal of dearness pay from the workmen affected the
condition of service of Class III and Class IV employees of the Co-opera-
tive Banks. Since the'provisions of Section 9-A of the Industrial Disputes
B Act, 1947 had not been complied with, the changes brought about in the
service conditions of the employees were of no consequence. It was,
therefore, held that the respondents would continue to be benefited by the
terms of the settlement dated 28th May, 1973 as before. Section 84-B of
the Punjab Cooperative Societies Act, 1961 was held to be ultra vires of the
State Legislature of Punjab and quashed. It was further held that the
C settlement dated 28th May, 1973 would continue to be valid and binding
between the parties and Class III and Class IV employees of the Coopera-
tive Banks were held entitled to claim dearness pay in terms of the
aforesaid settlement.

D On behalf of the appellant, it has been contended that an important
factual aspect has been totally ignored by the High Court in this case. It
was contended on behalf of the appellant before the High Court that a
notice under Section Section 19(2) of the Industrial Disputes Act (p.4 of
the Writ Petition) was duly issued by the (appellant and served upon the
employees. The High Court has failed to deal with this aspect of the case
E altogether. It has been stated in paragraph 2 of the Special Leave Petitidn
that it was specifically stipulated in the agreement that the agreement was
valid for a period of four years and would cease to be effective after the
expiry of 31st March, 1977. As there was no Board of Directors and the
administration was being run by the Administrator, as per provisions of
F Section 27 of the Punjab Cooperative Societies Act, the Administrator
issued a notice under Section 19(2) of the Industrial Disputes Act for
terminating the agreement dated 28.5.1973 which had expired on 31.3.1977.
The notice was issued on 25.2.1978. It has been alleged after this, the Board
of Directors of the Bank had ratified the notice by Resolution No. 7 at its
meeting held on 9.4.1978.
G
In the counter affidavit filed on behalf of the Employees' Union,
affirmed by Malinderjit Singh, General Secretary of the Employees' Union;
it has been stated that since the facts of the case as pleaded in the Special
Leave Petition are not disputed and the whole matter relates to pure
H questions of law for decision, it is not necessary for the deponent to answer
PATIAI..A CEN1RALCO-OP. BANK LTD. v. PATIAl..A CENffiAL CO-OP. BANK EMPLOYEES UNION 357

parawise the petition. In view of the submissions made above and the two A
decisions of this Hon'ble Court referred to in the affidavit, the appeals may
be dismissed with costs.

In other words, the (act that notice was given on 25.2.1978 terminat-
ing the agreement dated 28.5.1973 is not in dispute.
B
However, the case need not be decided on the technicality of the
pleadings only. After expiration of the term of the agreement dated
28.5.1973 on 31.3.1977, the agreement has not been continued unaltered. If
the legal contention on behalf of the petitioner is upheld and if it be held
that the agreement dated 28.5.1973 is still continuing by virtue of the C
provisions of sub-section (2) of Section 19, then the entire agreement
including the clause relating to the Dearness Allowance will have to be
tr7ated as still in force. The pay scales and other terms and conditions

.. relating to employment have been drastically revised upwards after the
expiration of the agreement dated 28.5.1973. From the chart of salaries,
furnished by the appellants, it appears that the pay scales have been revised D
upward in the following manner :

Category of Position as on Position as on Position as on
Post 4.6.81 1.10.81 1.1.86
Rs. Rs. Rs. E
PEON 525.32 605.84 1144.60
JR. CLERK 820.95 917.30 1838.34
SR. CLERK 943.68 1109.32 2117.69

NOTE : No minimum benefit and Interim Relief has been included while F
fixing pay as on 1.10.1981 and 1.1.1986.

There is some dispute as to the exact quantum of the enhancement
but there is no dispute that the salaries payable under the agreement dated
28.5.1973 have been drastically revised upwards at all levels thereafter.
G
Another point that has been made on behalf of the appellants which
is of substance is that in fixing pay of the Bank employees consequent upon
the revision of pay scales, the same formula which was applied for fixation
of pay scales of Punjab Government employees has been adopted. The
Bank employees have been given the benefits of proficiency step-up, master H
358 SUPREME COUR)' REPORTS [1996) SUPP. 6 S.C.R.

A scales and stepping up of pay of senior equivalent to the junior as allowed
by the Punjab Government to its employees. All these changes have
brought about substantial benefits to the employees of the Bank. In the
background of these facts, the employees cannot claim dearness allowance
in terms of the agreement dated 28.5.1973. That agreement has been given
B up for much better terms and conditions and also subsequent revision of
pay. The employees cannot be heard to say that they will enjoy all the
subsequent benefits given by the revision of pay scales, but dearness
allowance must be given in accordance with the formula contained in the
agreement dated 28.5.1973. It is not the case of the employees that the
agreement dated 28.5.1973 will have to be enforced in full.
c
There is some dispute as to the exact amount of the benefit conferred
by the various revisions in pay scales but there is no dispute that the pay
scales and other benefits now given are much better and higher than what

D
was given by the agreement dated 28.5.1973. No one wants to go back to
that agreement so far as the pay scales are concerned. I fail to see how in
the context of these facts, the employees can urge that Dearness Allowance
formula of that agreement must remain in tact but at the same time the
-
drastic changes in every other part of the agreement date9 28.5.1973 will
continue in force for the benefit of the employees.

E In view of the aforesaid, it is unnecessary to go into other questions
raised in this case. But since the question of validity and scope of Section
84-B of the Punjab Cooperative Societies Act, 1961 has be~n raised that
question will have to be examined. Sectiol). 84-B was inserted by Amend-
ment Act 26 of 1981. The section is as under :

F "84-B. Dearness Allowance - Notwithstanding anything in this Act
or any other law for the time being in force, or any agreement,
settlement or award, no employee of a Co-operative Society shall
be paid dearness allowance at a rate higher than that admissible
to the employees of the Government drawing pay at the same rate."
G This section places a bar. on payment of Dearness Allowance at a
rate higher than the rate admissible to the employees of the Government
drawing the same pay. This provision will apply to all the employees of all
the Cooperative Societies in the State of Punjab. This provision has been
specifically made applicable notwithstanding, inter alia any other law for
H the time being in force or any agreement, settlement or award.
f
PATIALACEN'IRALCO.OP.BANKL1D.v.PATIALACENIRALCO.OP.BANKEMPLOYEESUNION 359

Prima facie, there is no reason to hold that this provision will not A
apply to the agreement dated 28.5.1973 assuming that that agreement was
still in force on the date Section 84-B was introduced in the statute. It has
been contended that Industrial Disputes Act is a complete Code relating
to industrial disputes and, therefore, by the general provisions of the
Punjab Cooperative Societies Act, 1961, the applicability and scope of the
B
provisions of Industrial Disputes Act cannot be whittled down.

I am unable to uphold this contention because sub-section (2) of
Section 19 of the Industrial Disputes Act merely provides that even if the
period of the agreement has expired, the terms of the agreement will
continue to be in force unless determined in the manner laid down in C
sub-section (2) of Section 19. It does not have the effect of invalidating any
legislation altering the terms of the agreement after the period of agree-
ment comes to an end. The agreement provided for payment of Dearness
Allowance higher than what was provided by the Government to its
employees. Section 84-B specifically stated that in spite of any statutory D
provision to the contrary, or any agreement, Dearness Allowance can only
be paid upto the rate fixed by the Government for corresponding pay of
the Government Servants.

There is nothing in the wording of Section 19 of the Industrial
Disputes Act which supports this contention of the employees. Section 19 E
reads as under :

"19. Period of operation of settlements and awards. -

(1) A settlement shall come into operation on such date and is
agreed upon by the parties to the dispute, and if no date is F
agreed upon, on the date on which the memorandum of the
settlement is signed by the parties to the dispute.

(2) Such settlement shall be binding for such period as is agreed
upon by the parties, and if no such period is agreed upon, G
for a period of six months from the date on which the
memorandum of settlement is signed by the parties to the
dispute, and shall continue to be binding on the parties after
the expiry of the period aforesaid, until the expiry of two
months from the date on which a notice is writing of an
intention to terminate the settlement is given by one of the H
360 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A parties to the other party or parties to the settlement."

'Settlement' has been defined in Section 2(p) as under :

"2(p) 'settlement' means a settlement arrived at in the course of
conciliation proceeding and includes a written agreement between
B the employer and workmen arrived at otherwise than in the course
of conciliation proceeding where such agreement has been signed
by the parties thereto in such manner as may be prescribed and a
copy thereof has been sent to an officer authorised In this behalf
by the appropriate Government and the conciliation officer." (

c A written agreement between the employer and workmen may con-
stitute a settlement in the circumstances mentioned in Section 2(p). But
Section 19 lays down that such agreement shall come into operation on the
agreed date between the parties to the settlement or if the date is not agree
upon, on the date on which the settlement is signed by the parties. That is
D the starting point. Sub-section (2) provides {or the period during which the
s'ettlement will be in force. It shall be binding during the period agreed
upon by the parties. If no such period is agreed upon, then the settlement
will be valid for a period of six months from the date on which . the
settlement was signed by the parties and shall continue to be binding after.
E the expiry of the aforesaid period. The settlement can be brought to an
end by serving a notice in writing by one of the parties to the other party
of its intention to terminate the settlement. If such a ·notice is given, the
settlement will remain in force for two nionths from the date on which the
notice of termination is given.

F The provisions of Section 19(2) make an agreement between the
employers and the employees binding. It also lays down the period during
which it shall be binding. It also provides the manner in which the agree-
ment can be terminated inter parties. It does not follow from this provision
that a competent legislature cannot legislate on any matter which forms
,. . . part of the agreement. Nor does Section 19 have the effect of validating
J any infirmity in the agreement. If the agreement is CO!J.trary to any. law or
if the agreement cannot be implemented without violating any proVision of
law, then the agreement cannot be enforced at all. There is nothing in
sub-section (2) of Section 19 to suggest that even such an agreement will
continue to be binding upon the employers and the employees and enfor-
H ceable against express provision of law. If after the agreement has been
PATIALACEN1RALOO-OP.BANKL1D.v.PA11ALACENIRALOO-OP.BANKFMPLOYEESUNJON 361

entered into, any law is passed and the agreement cannot be enforced A
without violating that law, then clearly the agreement cannot be enforced.
The law will prevail.

Sub-section (2) of Section 19 merely extends that period during
which the agreement will be .enforced, but it does not provide that the
agreement will be valid and binding·notwithstanding any law to the con- B
trary.

For all these reasons, this appeal is allowed. The order under appeal
is set aside. There will be no order at to costs.

Civil Appeal No. 4074 of 1988 and Civil Appeal Nos. 4075-76 of 1988. c
In view of the judgment in Civil AppeaJ No. 4390 of 1988, the above
appeals .are also allowed. There will be no order as to costs.

I respectfully agree with the conclusions arrived at by my leamed
brother Sen, J.
D
So far as the· validity of Section 84-B of the Punjab Cooperative
Societies Act, 1961 is concerned, it is enough to say that once the settle-
ment between the parties was held to have been validly terminated by the
management, there was no occasion for the High Court to have considered E
the validity of the said section and/or to have declared it void. The
judgment of the High Court declaring Section 84-B as void and illegal is
accordingly set aside herewith.

Accordingly, I agree with the final orders proposed by learned
brothers Sen and Majmudar, JJ. F
S.B. MAJMUDAR, J. I have gone through the judgment prepared
by my esteemed learned brother Sen, J. I am in entire agreement with the
finding reached by learned brother Sen, J., that the Agreement governed
by the provisions of Industrial Disputes Act, 1947 (hereinafter referred to G
as 'the Act') dated 28th May 1973 which had a life of four years, expired
on 31st March 1977 and thereafter even though its effects continued as per
Section 19 sub-Section (2) of the Act and were binding on the parties, the
entire agreement including the clause relating to dearness allowance was
terminated by one of the parties to the Agreement, namely, the Central
Cooperative Bank when the administrator appointed under Section 28 of H
362 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the Punjab Cooperative Societies Act, 1961 issued a notice dated 25th
February 1978 under Section 19(2) of the Act for terminating the said
Agreement and when the said termination was ratified by the Directors of
the Bank by Resolution No. 7 at the meeting of the Board of Directors
. . ~-
held on 9th. April 197~uently that agreement ceased to. operate
B thereafter. I also res~lly agree with the finding of my learned brother
that this aspect of the case was nof disputed on behalf of the Employees'
union in the counter affidavit affirmed by f>4aninderjit Singh, Joint
Secretary of the Employees Union and consequently the fact that notice
was given on 25th February 1978 terminating the Agreement dated 28th
May 1973 is not in dispute.
c
However on the aforesaid finding reached by my learned brother on
the facts of this case and to which I respectfully agree, in my view, no
further question survives for consideration in the present litigation between
the parties, namely, whether Section 84-B of the Punjab Cooperative
D Societies Act, 1961 inserted by Punjab Legislature by Amending Act 26 of
1981 was repugnant to the provisions of Sections 9A and 19(2) of the
Industrial Disputes Act which was a Central Legislation. The High Court
has taken the view, ignoring the factual position that the Agreement in .
question had stood terminated with effect from 25th February 1978, that ·
Section 84-B was repugnant to the aforesaid provisions of the Act and as
E the enactment of the said Section was covered by Entry 22 of the Concur-
rer.~ List ill of Schedule VII of the Constitution of India dealing with
'Trade Unions, Industrial and Labour Disputes', the said provision to the
extent of repugnancy became void as per Article 251 read with Article 254
of the Constitution of India as admittedly the said provision inserted by
F Amending 26 of 1981 was not reserved by the State Legislature for con-
sideration of the President and had not received his assent as required by
Article 254 sub-Article (2) of the Constitution. In my opinion the said
exercise was not open to the High Court on the admitted facts of the
present case. That even under Section 19(2) of the Act the said Agreement
had ceased to operate from 25th February 1978 and consequently there
G remained no question of any repugnancy of Section 84-B on the one hand
and Sections 9A and 19(2) of the Industrial Disputes Act on the other. In
short that question did not arise for consideration of the High Court on
the aforesaid well established facts on record. In my view once this factual
conclusion is arrived at as rightly arrived at by my learned brother Sen, J.,
H no occasion arises for this Court nor did it arise for the High Court to go
PATIALACEN1RALCO-OP.BANKLTD.v.PATIALACEN'IRALCO-OP.BANKEMPLOYEESUNION 363

into the legislative competence of the State Legislature in enacting Section A
84-B and to examine and pronounce upon the said question. On this short
ground, therefore, I would set aside the decision of the High Court
declaring Section 84-B as ultra vires the State Legislature on account of
repugnancy of Section 84-B with the provisions of Sections 9A and 19(2)
of the Industrial Disputes Act. The appeal of the bank is required to be
B
allowed on this short ground keeping the question of vires of Section 84-B
open for consideration in an appropriate case. However, with great respect
I do not concur with the view of my learned brother Sen, J ., that the said
Section will operate even de hors the binding agreement under Section
19(2) of the Act. On this aspect I would express no opinion as that
question, in my view, does not arise for consideration on the facts of the c
present case. I, however, agree with the final conclusion to which my
learned brother Sen, J .,-h:rs-- reached that appeals are required to be
allowed, but on the aforesaid different reasoning.

In view of the opinions delivered today, the appeals are allowed and
the judgment of the High Court is set aside subject to the observations D
made in our opinions. No orders as to costs.

H.K. Appeals allowed.
A DELHI DEVELOPMENT AUTHORITY
v.
KANWAR KUMAR MEHTA AND ORS. ETC.

SEPTEMBER 16, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.)

Urban Development :

Land allotted by Delhi Development Authority-Delay in developing
C the lands due to High Court's stay order on the land acquisition-On equit}
DDA charging escalation at 16.62% per annum-High Court ordering escala-
tion to be charged at the same 7% p.a. the rate of interest which DDA pays
to unsuccessjitl applican~n appea~ held, escalation charged at 16.62%
per annum justified, DDA to adjust the 7% p.a. interest on the deposits from
D the date ·of original draw till the communication of letters of allotment.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 13053 of
1996 Etc.

From the Judgment and order dated 265.95 of the Delhi High Court
E in C.W.P. No. 5329 of 1993.

Arun Jately and V.B. Saharya for the Appellant.

M. Shekhar, Bimal Roy Jad, Devendra Singh, S.M. Garg, N. Shekhar,
F Ms. Arnita Gupta and Ms. Chandra Kumari for the Respondents.
The following Order of the Court was delivered :

Delay condoned..

Leave granted.
G
We have heard learned counsel of both sides.

The question of law that arises for consideration in these appeals is:
whether the High Court was right in directing calculation of interest @ 7%
H of the escalation charges on the principle of equity?
364
D.DA v. K.K. MEHTA 365

The facts of the case are not in dispute. On March 27, 1991 draw of A
plots was made for allotment of 5000 plots in Sectors 23 and 24 of Rohini
Scheme in Delhi. Between 6th April, 1991 and March 27, 1991, around
3000 orders of allotment came to be issued. Only Woo persons are yet to
be issued of the allotment letters. It is settled law that the rate of plot is
as is prevailing on the date of communication of the allotment letter. B
Before the letters of allotment was communicated to the rest of the
suceessful applicant, the owners of the lands acquired under the notifica-
tion issued under Section 4(1) had approached the High Court and had
stay of further proceedings. Consequently, the issuance of the letters of
allotment was stopped. Subsequently, the stay was vacated on August 4, C
1992 and it is stated in the counter-affidavit that the owners had ap-
proached this Court by way of appeal and in September 1992 this Court
had dismissed the special leave petitions. In the meanwhile, the Govern-
ment of India have pre-determined the cost of the land for allotment of
the acquired land for the year 1993-94 effective from April 1, 1993 to
March 31, 1994 at Rs. 2675.29 per square mtr. The ODA evolved the D
principle of calculating the cost of developmental charges at par with cost
of living index rate which admittedly worked out to 16.62% per annum. On
that basis, it had worked out the cost of plot at the rate of Rs. 1579.71 per
square mtr. On the basis thereof, they recalculated the cost of allotment
and issued letter of allotment to the reEpondents. The respondents came E
to challenge that order in the High Court. The impugned judgment made
on August 11, 1995 in C.W.P. No. 196/94 was declared invalid. The Division
Bench of the High Court has ultimately held that when the DDA seeks
equity, it must also do equity. When the claimants have been directed to
bear interest only at the rate of 7% per annum oa the amount deposited F
by them towards advance payment deposited adjustable of the successful
bidders and refund is made to the unsuccessful applicants with the same
rate of interest, the DDA should equally charge the escalation charges at
the rate of 7% per annum. Therefore, directions to deposit the costs of
plot at 16.62% per annum as escalation cost is unjust in law.
/
G

Mr. Arun Jaitley, learned senior counsel appearing for ODA, has
contended that the DOA, with a view to do justice to the claimants, have
not demanded the rate of charges prevailing as on the date of allotment as
determined by the Government of India namely, Rs. 2675.79 per square H
366 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A metre and instead worked oQt special equity by enhancing the cost of
escalation charges at 16.62% per annum as per the cost of living index. The
High Court was not justified in giving the direction to charge the escalation
only at the rate of 7% per annum. We find force in the contention. Though
Shri M. Shekhar and Shri Bimal Roy Jad, learned counsel appearing for
B the respondents, have contended that the ODA has not produced any
material to show that the escalation cost would be at the rate of 16.62 and
that there is no evidence to show that between the date of the stay by the
High Court and th~ date of the demand, this amount has been expended
for developmental charges bythe DDA. That point was not raised before
C the High Court, the appellant is not entitled tO raise the contention. We
find no force in the contention. It is the very basis on which the appellant
has justified their demand in the High Court which was also accepted by
the High Court, on the basis of which, it proceeded that due to grant of
stay by the High Court the escalation charges have increased for improve-
ments effected. Consequently they worked out the escalation charges ap-
D plying the special equity namely, the basis of living costs of index which
admittedly was 16.62% per annum.

Under those circumstances, we are of the view that the basis on
which all parties have proceeded and the High Court has accepted was
E that the escalation charges for improvements have been worked out at
16.2% per annum. On that basis re-calculation came to be made and the
pre-determined rate value was determined at the ra~e of Rs. 1579.71 per
square yard. The direction of the High Court, that they have to pay, while
working out equity at 7%, is not based on any rational principle. The High
F Court lost sight of the fact that the appellant had spent money for develop-
ment of the plots and to meet the cost demand in allotment letters was
made at reduced rate. It is also stated that the two allottees who were in
the low priority· list in 1991 had same benefit of pre 1991 rates and the
same be extended to the respondents. Though this contention was not
raised in the High Court, nor the High Court had advantage of it, we are
G of the view that it has no legal foundation is a mistaken allotment to them
in 1991 is no ground to allot to respondent at the same rate. .

The appellants are, however, directed to charge the rate of interest
at 7% on the deposits made by the respondents till the date of the letter
H of allotment. Time for payment of the amount at the rate of Rs. 1579.71
D.DA v. K.K. MEHTA 367

A per square metre is extended for six months and the appellant is directed A
to deduct the difference of the rate of interest on the deposit amount at
7% from the date of the original draw till the date of communication of
the letters of allotment.

The appeals are accordingly allowed. The order of the High Court B
B is set aside, but iri the circumstanees, without costs.

G.N. Appeals allowed.

c
A RAJASTHAN CO-OPERATIVE DIARY FEDERATION LTD.
v.
SH. MAHA LAXMI MINGRATE MARKETING
SERVICE PVT. LTD. AND ORS.

SEPTEMBER 17, 1996
B
(M.M. PUNCHHI AND SUJATA V. MANOHAR, JJ.]

Constitution of India, 1950: A1ticles 226, 136-Writ Petition-Disputed
questions of fact-Maintainability of-Govemment Co11tract---Letter of Intent
C issued infavour of contractor-Contractor did not fulfil conditions stipulated
in Letter of I11tent-Subsequently, Letter of Intent cancel/ed---Colltractor i11-
cu1Ted heavy expenses in anticipation of contract-Held: whether contractor
incu1Ted heavy expenses in allticipation of contract and was entitled to recover
the same were disputed questions offact-Such disputed questions offact
D could neither be examined by High Court in writ petition nor by Supreme
Court in appeal.

Administrative Law :

Natural justice-Pre-decisional hearing--Govemment Contract---Letter
E' of Intent issued in favour of contractor-Letter of Intent specified submission
of i1Tevocable bank guarantee of Rs. 15 lakhs within a stipulated date,
execution of agreement within that date and submission of profit and loss
account and balance sheet for the past year before execution of agree-
ment-Contractor did ll'Jt fulfil conditions but issued advertisement inco1Tect-
ly describing itself as sole selling agent Letter of Intent ca11ce/led without giving
F opportunity of healing to contractor--Held : cancellation of letter of Intent
not arbitrary-Reasons being gennane to the decision to cancel Letter of
Intent, extraneous circumstances could not be relied upon to hold decision
ma/a fide--l11 the circumsta11ces of the case;.pre-decisional hearing was not
required to be given.
G A Letter of Intent was issued by the appellant in favour of respon-
dent No. 1 for appointment as selling agent of appellant's products. The
conditions stipulated in the Letter of Intent were submission of an ir-
revocable bank guarantee of Rs. 15 lakhs within a specified date, execution
of an agreement within that date, submission of profit and loss account
H and balance sheet for the past year before execution of the agreement.
368
RAJ. CO-OP. DIARY FEDERATION LID. v. M.I...M MICTG. SERV!CEPVf. LID. 369

However, respondent No. 1 did not fulfil the conditions of the Letter of A
Intent but issued an advertisement in which respondent No. 1 incorrectly
described itself as the sole selling agent of the appellant. For these reasons
the appellant cancelled the Letter of Intent.

Respondent No. 1 filed a ~it petition before the High Court chal-
lenging the revocation of the Letter of Intent. The High Court allowed the · B
petition on the ground that the appellant had acted arbitrarily with mala
fide intention and had violated the principles of natural justice in not
giving a hearing to respondent No. 1 before cancelling the Letter of Iiltent.
Being aggrieved the appellant preferred the present appeal.
c
On behalf of respondent No. 1 it was contended that in anticipation
of entering into a contact with the appellant,"(espondent No. 1 incurred
heavy expenses and that respon~ent No. 1 wa~ entitled to recover them
from the appellant.

Allowing the appeal, this Court D

HELD 1.1. The appellant, as a prudent businessman is entitled to
satisfy itself about the financial position of the party whom the appellant
is appointing as its selling agent. If respondent No. 1 has not submitted
the requisite documents in this connection and has held itself out as the E
sole selling agent when to its knowledge, there was no intention of appoint-
ing respondent No. 1 as the sole selling agent, these are valid circumstan-
ces which the appellant can take into account in deciding whether to enter
into a contract and bind itself legally with respondent No. 1 or not. In these
circumstances, if the letter of intent has been cancelled it cannot be
considered as arbitrary action on the part of the appellant violative of any F
Fundamental Rights of respondent No. 1. [373-A-C]

1.2. When the reasons for cancellation are clearly set out in the
cancellation letter and are germane to the decision not to enter into a
contract with respondent No.1, the extraneous circumstances relied on by G
respondent No. 1 cannot make the decision mala fide. [373-D]

1.3. The doctrine of audi alteram partem cannot also be imported in
these circumstances. If the conduct of respondent No. 1 was such that it
did not inspire any confidence in the appellant, the appellant was entitled
to decline entering into any legal relationship with respondent No. 1 as its H
370 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A selling agent. The Letter of Intent merely expressed an intention to enter
into a contract. If the conditions stipulated in the Letter of Intent were not
fulfilled by respondent No.I, and if the conduct of respondent No.I ~s
otherwise not such as would generate confidence, the appellant was entitled
to withdraw the Letter of Intent. There was no biding legal relationship
B . between th~ appellant and respondent No. I at this stage and the appellant
was entitled to look at the totality of circumstances in deciding whether to
enter into a binding contract with respondent No. I or not. (373-E-F-G]

2. The statement of respondent No. I that it incurred heavy expenses
in anticipation of entering into a contract with the appellant has to be
C established on evidence. A writ petition is not an appropriate proceeding
if any claim for damages based on disputed facts is required to be estab-
lished. This Court would also not pronounce on the question whether, in
anticipation of entering into a contract, a party which incurs expenses, can
recover them from the other party if that. other party ultimately, rightly
declines to enter into a contract. [373-H; 374-A]
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2679·of
199i

From the Judgment and Order dated 7.8.91 of the Rajasthan High
E Court in D.V.C.S.A. No. 169 of 1991.

Sudhir Gupta, Shahil Rezvi and Aruneshwar Gupta for the Appel-
lant.

H.N. Salve and S.V. Deshpande for Respondents.
F
The Judgment of the Court was delivered by

MRS. SUJATA V. MANOHAR, J. The appellant, Rajasthan Co-
operative Dairy Federation Ltd.; issued an advertisement inviting applica-
tions for selling agents for its various products for the territories of
G Rajasthan, Punjab, Haryana, Himachal Pradesh arid Delhi, on or about
19th of November, 1988. Seventy applications were received. by the appel-
lant. Ultimately, on 1st June, 1990, a letter of Intent was issued by the
appellant in favour of respondent No. 1 for appointing respondent No. 1
as the selling agent of the appellant for marketing of Saras Brand Dairy
H Products, inter alia, on the following terms~
RAJ.CO.OP.DIARY FEDERATION LID.>< M.I...M. MICTO.SERVIC.Bi'Vr. LID. (MRS.MANOHAR,J.J 371

"(1) that you will sign an agreement on non-judicial stamp paper A
of Rs. 5 with RCDF ~nd this arrangement will be enforceable from
the date legally executed contract has come into being.

. (2) ........................................... .

(3) .................... L..
The goods will be issued to you against ir- B
revocable bank guarantee on furnishing from schedule bank on 15
days credit basis ....... (sic).

You are requested to submit irrevocable bank guarantee for an
amount of Rs. 15 lacs in favour of RCDF, Jaipur. .
c
This letter duly signed by you must reach GM(M&P) by 5th of
June, 1990 and call on us for execution of the agreement .on
12.6.1990 (sic).

You are also requested to take preparatory action for starting D
work within effect from 21st June, 1990 and also submit us imme-
diately the market plan for taking further action at your end."

Respondent No. 1, by its letter of 1st of June, 1990, acknowledged
receipt of the Letter of Intent. The letter also noted that the agreement
was to be signed on 12th of June, 1990 and that respondent No. 1 was going E
ahead, inter alia, with arranging an irrevocable bank guarantee from a
scheduled bank. The letter contained a request to the appellant to release
an advertisement announcing the appointment of respondent No.1 as the
selling agent. The appellant, however, did not release any such an adver-
tisement. Respondent No. 1, however, issued an advertisement in which F
respondent No.1 incorrectly described itself as the sole selling agent and
further wrongly indicated that it was also the sole selling agent for Polypack
Mille. The appellant protested against wrong statement in the advertisement.

Tb¥ contract was not signed on 12th of June, 1990. The respondent
did not attend on that date and asked for some time. The irrevocable bank G
guarantee for Rs. 15 lacs was also not submitted by respondent No. 1. The
appellant, by its letter of 16th July, 1990, cancelled the Letter of Intent. In
the letter, the appellant pointed out that the Letter of Intent issued to
respondent No. 1 was conditional on his fulfilling certain obligation as a
condition precedent to entering into a contract. The conditions, inter alia, H
372 SUPREME COURT REPORTS (1996) SUPP. 6 S.CR.

A were, (1) submission of an irrevocable bank guarantee of Rs. 15 lacs by
12th of June, 1990; and (2) execution of an agreement with the appellant
by 12th of june, 1990. Beside these two conditions, respondent No. 1 had
also promised to submit to the appellant its profit & loss account and
balance-sheet for the past year before the execution of the agreement.
B Respondent No. 1 had not done so. The letter also referred to the un-
authorised advertisement issued by respondent No. 1 wro_ngly describing
itself as the sole selling agent of the appellant and stated that in these
circumstances, since respondent No. 1 had failed to fulfil its obligations
within the stipulated period, the Letter of Intent was revoked. A telegram
C of the same date to the same effect was also sent to respondent No. 1.

Respondent No.1 filed a writ petition challenging the revocation cf
the Letter of Intent. The writ petition was allowed. The High Court upheid
the contention of respondent No. 1 that the reasons given by the appellant
for cancellation of the Letter of Intent were not valid. The cancellation of
D the Letter of Intent was mala fide inasmuch as there were questions asked
in the Legislative Assembly
. .
about the appointment of respondent No. 1 as
a selling agent of the appellant because respondent No. 1 was the brother-
in-law of the then Chief Minister. The High Court further said that the
appellant had acted arbitrarily in cancelling the Letter of Intent and had
E violated the principles of natural justice in not giving a hearing to respon-
dent No. 1 before cancelling the Letter of Intent. An' Appeal filed by the
~ppellant before the Division Bench of the High Court aISo fail~d. Hence
the appellant has come before this court by way of present appeal.

F In its letter of 16th of July, 1990 cancelling the Letter of Intent issued
in favour of respondent No. 1, the appellant had given several reasons for
cancelling the Letter of Intent. Respondent No. 1 had not submitted to the
appellant its profit and loss account and balance-sheet for the previous year
as requested by the appellant. Respondent No. 1 had wrongly held itself
out as the sole selling agent of the appellant. These are clearly circumstan-
G ces which are relevant to the cancellation of the Letter of Intent. Also the -·
Letter of Intent clearly set out the conditions which respondent No. 1 had •
to fulfil. One such condition was submitting an irrevocable bank guarantee
for Rs. 15 lacs. This was also not done. Respondent No. 1 contends that it
had informed the appellant that· it would submit the bank guarantee within
H three days of the signing of the contract. The appellant, however, is within
RAJ. CO.OP. DIARY FEDERATION LID. v. MLM MIITG.SERVICE PVI'. LID. [MRS. MANOHAR,J.) 373

its rights in insisting that the bank guarantee should be suhmitted before A
the contract is signed. The appellant, as a prudent businessman is entitled
to satisfy itself about the financial position of the party whom the appellant
is appointing as its selling agent. If respondent No. 1 has not submitted the
requisite documents in this connection and has held itself out as the sole
selling agent when to its knowledge, there was no intention of appointing B
respondent No. 1 as the sole selling agent, these are valid circumstances
which the appellant can take into account in deciding whether to enter into
a contract and bind itself legally with respondent No.l or not. In these
circumstances, if the contact has been cancelled it cannot be considered as
arbitrary action on the part of the appellant violative of any Fundamental
Rights of respondent No. 1.
c
Respondent No. 1 has tried to rely upon certain extraneous cir-
cumstances to allege mala fides on the part of the appellant in cancelling
the Letter of Intent. When the reasons for cancellation are clearly set out
in the cancellation letter and are germane to the decision not to enter into D
a contract with respondent No. 1 we fail to see how thee extraneous
. circumstances can make the decision mala fide.

The High Court was also not right in importing the doctrine· of audi
a/teram partem in these circumstances. If the conduct of respondent No. 1 E
was such that it did not inspire any confidence in the appellant, the
appellant was entitled t<;> decline entering into any legal relationship with
respondent No. 1 as its selling agent. The Letter of Intent merely expressed
an intention to enter into a contact. If the conditions stipulated in the
Latter of Intent were not fulfilled by respondent No. 1 and if the conduct
F
of respondent Nc>.l was otherwise not such as would generate confidence,
the appellant was entitled to withdraw the Letter of Intent. There was no
binding legal relationship between the appellant and respondent No. 1 at
this stage and the appellant was entitled to look at the totality of cir-
cumstance in deciding whether to enter into a binding contact with respon-
dent No. 1 or not. G

Respondent No. 1 contends that in anticipation ·of entering into· a
contract with the appellant, respondent No.1 incurred heavy expenses. This
statement of respondent No.l has to be established on evidence. A writ
petition is not an appropriate proceeding if any claim for damages based H
374 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A on disputed facts is required to be established. We do not wish to
pronounce on the question whether, in anticipation of entering into a
contract, a party which incurs expenses, can recover them from the other
party if that other party ultimately, rightly declines to enter into a contract.

The appeal is, therefore, allowed. The judgment and order of the
B High Court is set aside and the writ petition is dismissed. In the cir-
cumstances, there will be no order as to costs.

V.S.S. Appeal allowed.
STATE OF PUNJAB A
v.
M/S. YOGINDER SHARMA ONKAR RAI & CO. AND ORS.

SEPTEMBER 17, 1996

[S.P. BHARUCHA AND K. VENKATASWAMI, JJ.) B

Constitution of India, 1950: Article 226-Administrative Law-Auction
of liquor vends-High Court reversing order of Financial Commissioner reject-
ing the allegedly unsuccessful bidder's representation-Held, Financial
Commissioner's conclusion were reasonable and he was not biased; the High C
Court was in e1ror and its judgment was based on conjectures impennissib/e
where the fact-finding auth01ity's conclusion is neither perverse nor w1-
reaso11ab/~Administrative Law-Constitution of India, Article 14.

Practice and Procedur~Writ petition challenging public auction of
liquor vends-Held, petitioner must prove bonafides by depositing a substan- D
tial portion of what he says he will bid; only if such deposit is made should
the auction be set side and re-auction ordered-Constitution of India, A1ticle
226.

"" On March 11, 1996 a public auction of liquor vends of Group Nos. E
108 to 111 in Khanna Circle, District Ludhiana, Punjab for the year
1996-?7 took place. The respondent challenged the auction in a_ writ
petition which was disposed of by the High Court with a direction to the
Financial Commissioner to treat the writ petition as a representation and
give the respondent an opportunity of being heard before passing ap-
propriate orders. F

The Financial Commissioner while rejecting the representation of the
respondent concluded that the respondent had not given a bid of Rs. 4.21
crores for Group No. 108 or a bid of Rs. 3.50 crores for Group No. 111 as
alleged by him; that it was next to impossible that 34 bank drafts could have G
been prepared on the day of the auction in banks at Khanna and Mandi
Gobind Garb situated 40-50 kms. away from the site of the auction; that bid
of the respondent for Group No. 108 being Rs. 50 lakhs more than the
' successful bid and that for Group No. 111 being Rs. 45 lakhs more than the
successful bid, it was hard to believe that the Collector who was present at
the site did not intervene; that the independent observers had in their H
375
376 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A reports made no mention of the alleged higher bids and had stated that the
auctions were fair and without favouritism; that there. was no evidence that
the auction had been stage-managed.

While the writ petition by another petitioner challenging the Finan-
cial Commissioner's order was dismissed by one Division bench stating
B that there was no infirmity the~n, the respondent's writ petition challeng-
ing the same order was allowed by another Division Bench of the High
Court. The Division Bench here held that the respondent being the highest
bidder was wrongly shown to have not participated in the bid. It held that
the Financial Commissioner's conclusions were based on conjectures and
C it passed strictures on his conduct. All the four groups were directed to be
re-auctioned. In case the writ petitioner did not participate in the re-auc-
tion and there was no other bidder making the same offer as that of the
successful bidders, the writ petitions would be deemed to be dismissed.

The State of Punjab and the successful bidders appeal to this Court.
D
Allowing the appeals, this Court

HELD : 1.1 .. The Division Bench of the High Court was in error in
reaching the conclusion that the auction was not properly and fairly held.
The Financial Commissioner's conciusion in his report were reasonable.
E The remarks made by the Division Bench about him are not justified. There
was nothing in his order to indicate that he was in any way biased.
[389-H; 390-A]
1.2. The judgment of the Division Bench was based upon conjectures
and surmises and inferences more tenuous than those it found the Finan-
F cial. Commissioner guilty of. Such conjectures and surmises were imper-
missible in a judgment upon a writ petition under· Article 226 where the
fact-finding authority had arrived at a conclusion which was not perverse
or so unreasonable that, upon the record, it could not have been reached.
[388-H; 389-A]
G 2.t. The respondent's story did not ring true. or the twelve to thirteen
hundred persons present in the pandal, not one independent observer had
stated on affidavit that the respondent had made bids far larger than the
successful bids but they had been ignored. [389-F]

2.2. The order of the High Court was not a workable or well thought
H out one. The finality of auctions must also be recognised to be in the interest
STA1Ev. YOGINDERSHARMAONKARRAI(BHARUCHA,J.) 377

of the exchequer. If auctions are set aside and re-auctions ordered on Jess A
than satisfactory material, the loss of the exchequer would be far greater.
[390-B]

Mis. Rajshila v.State of U.P., [1993) Supp 1 SCC 477, referred to.

2.3. In cases where there was real need to set aside an auction, he B
who challenged it must be required to prove his bonafides before the
auction is set aside by depositing a substantial portion of what he said he
would bid. It was only if the deposit was made that the auction should be
set aside and a re-auction ordered. [390-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7992 of C
1996 Etc.

From the Judgment and Order dated 8.5.96 of the Punjab &
Haryana High Court in C.W.P. No. 5007of1996.

M.L. Sarin, Advocate General, Punjab, Soli J. Sorabjee, Dushyant D
D. Dave, D.P .. Gupta, S. BhoUmik, Atul Sharma, Manoj Swarup, P.H ..
Parekh, Amit Dhingra, E.R. Kumar, G.K. Benerji, Mohan Jain, Ms. Nan-
dini Gore, Pradeep Mishra, V.C. Rishi, Ms. Mukta Sharma and Goodwill
Indeevar for the appearing parties.
E
The Judgment of the Court was delivered by

BHARUCHA, J. These are appeals against the judgment and order
dated 8th May, 1996, of a Division Bench of the High Court of Punjab &
Haryana, passed upon a writ petition filed by the first respondent, M/s.
Yoginder Sharma Onkar Rai & Co. The subject matter of the writ petition F
was the auction of liquor vends of Group Nos. 108 to 111 in Khanna Circle,
District Ludhiana, State of Punjab for the year 1996-97. The First appeal
is by the State of Punjab. The other appeals are by the successful bidders.

The auction took place on 11th March, 1996. On 18th March, 1996,
the first respondent filed an earlier writ petition (Writ Petition no. G
4047/1996) before the High Court challenging the auction. Thereon the
Division bench ordered :

"After hearing the learned counsel for the parties and perusing the
record we are of the opinion that the points raised by the
petitioners do require a consideration by the competent authority H
378 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A authorised a reject the higher bid offered and the auction held.
The disputed questions of facts raised in this litigation can also
better be appreciated by such authority.

xxx xxx xxx

B In view of the facts and circumstances of the case, this petition
is disposed of with the following directions:

{i) That Shri Y.S. Ratra, Financial Commissioner, Taxation shall
treat this writ petition as representation/revision in terms of Rule
36(18) of the Rules filed before him to determine the legality of
c the bids in auction held in favour of the private respondents.

(ii) The parties shall be given an opportunity of being heard before
passing the appropriate orders."

Consequential directions were also given.
D
The Financial Commissioner heard the parties as directed by the
High Court and rejected the representation/revision filed by the first
respondent. He noted various circumstances on the basis of which he came
to the conclusion that the first respondent had not given a bid of Rs. 4.21
E crores for Group no. 108 or a bid of Rs. 3.50 crores for Group no.111. The
Financial Commissioner found that the possession of a receipt for entry
into the auction pandal did not mean that the first respondent had made
a bid unless it was shown from the bid sheet that its name was recorded
thereo~. Being a sitting licensee for the last 4 or 5 years did not give the
F licensee any right to get the vend again unless he bid for it in open auction.
Not much reliance could be placed on newspaper report, as the Supreme
Court had held that newspaper reports had no evidentiary value but were
only hearsay evidence. That a bank counter had been opened in the pandal
did not bar the successful bidders from depositing the requisite amount of
15% of the bid money in the Government Treasury at Khanna in the stated
G time. In the pandal there was 1200-1300 persons. They were not all bidders.
Being the first auction of liquor vends in the State for the given year,
licensees from other districts had come to see the trends and make a
market survey. That only 2 or 3 bidders had given bids for a particular vend
was, therefore, not noteworthy. Though the partners of S.P. Kalia and Co.
H and Puneet Kalia and Co. were relations there was no reason why they
STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.] 379

should not bid against each other. It was next to impossible that 34 drafts A
could have been prepared on the day of the auction in banks at Khanna
and Mandi Gobind Garh which would reach the pandal by 11 a.m. con-
sidering the fact that the banks opened at 10 a.m. at Khanna and Mandi
Gobid Garh, which was approximately 40-50 kms. from the site of the
auction at Ludhiana. It was more likely that all this would take 2 hours. B
This indicated that the first respondent did not have adequate funds to
deposit 15% of the bid money at the fall of the hammer and, therefore,
did not bid at all. Note was taken of the pattern of bidding. For Group no.
108 the initial bid was for Rs. 3.55 crores, the next was Rs. 3.65 crores, then
3.68 crores, then Rs. 3.70 and the successful bid was of Rs. 3.71 crores.
Thus the tend of the rise was Rs. 10 lacs in the first instance, then Rs. 3 c
lacs, then Rs. 2 lacs and, lastly, Rs. 1 lac. The case of the first respondent
was that it bid Rs. 4.21 crores, that is to say, there was a rise of Rs. 50 lacs
over the last bid. Substantially similar was the position in regard to Group
No. 111 where there was allegedly a rise of Rs. 45 lacs. It was hard to
believe that the Collector, who was present at the auction, would not have D
intervened in these circumstances. No evidence was forthcoming that any- ,
thing spectacular had happened in the pandal. The first respondent had
not approached any of the senior officers who were in the city in connec-
tion with the auction. The mere mention during the argument that it had
approached the Excise and Taxation Commissioner and told him its case E
and that he said he would look into the matter was an after -thought. If
the difference between the successful bids and the allegedly higher bids
was really of Rs. 50 lacs and Rs. ·45 lacs respectively, the first respondent
should have put it in writing and the Excise and Taxation Commissioner
would have taken cognizance. The telegram sent by the first respondent
was 4 days after the auction. There were telegrams under different names
F
but they were all similarly worded and no mention was made therein of the
amounts of the allegedly higher bids, but merely that a lower bid had been
accepted despite a higher bid. Due credence had to be given to the reports
of the two independent observers nominated by the Excise and Taxation
Commissioner and the Deputy Commissioner of the District who were . G
present at the pandal. No mention had been made of the alleged higher
bids in the observers' reports, which stated that the auctions were fair and
there was no favouritism. The decision of the State Government not to
allow S.K. Ralhan, Deputy Excise and Taxation Commissioner, Patiala
Division, to conduct auctions in other districts of Patiala Division was H
380 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A based on administrative grounds and the matter was under consideration.
There was· no evidence that the auction had been stage-managed. The
claim of the first respondent was, therefore, without any basis, an after-
thought and not based on any concrete evidence.

The order of the Financial Commissioner was passed consequent
B upon three writ petitions. The petitioner in one of three writ petitions did
not carry the matter to the H~gh Court. The writ petitioner in another writ
petition filed a second writ petition challenging the order; it came up
before another Division Bench which, on 9th April, 1996, passed the
following order :
c "We find no infirmity in the detailed order, Annexure P-9, passed
by the Financial Commissioner, (Taxation), Punjab. All the points
raised before us have been dealt with in detail by the Financial
Commissioner and we concur with the findings recorded by him.

D Dismissed."

The writ. petitioner in the third writ petition was the first respondent and
it filed the present writ petition (No. 5007/96) impugning the Financial
ComQJ.issioner's order on 6th April, 1996. This writ petition was disposed
E of by the judgment and order under appeal.

The Division Bench noted therein the case of the first respondent
that it had offered Rs. 4.21 crores for Group no. · 108 as against the
successful bid of Rs. 3.71 crores which had been wrongly accepted, thereby
putting the public exchequer to loss of Rs. 50 lacs. Similarly, for Group
F no. 111, the first respondent had Qffered Rs. 3.5 crores but the bid of Rs.
3.!}5 crores was accepted, thus putting the exchequer to a loss of Rs. 45
lacs. Though the representatives of the first respondent were present at the
time of the auction, their presence and the bids offered by them were not
recorded. It was the said S.K. Ralhan who had not accepted the higher
l:>ids offered by the firs respondent without any basis or assigning any valid
G reason. The first respondent had raised a hue and cry, which met with deaf
ears. The first respondent, through its partner, Yoginder Sharma, had
approached the Excise and Taxation Commissioner. and brought to his
notice the arbitrary, capricious, illegal and unconstitutional auction on the
·part of the said S.K Ralhan, but no action was taken. The denials of the
H respondents before the High Court were noted, including those of the said
STATEv. YOGINDERSHARMAONKARRAI(BHARUCHA,J.) 381

SK Ralhan. The order on the earlier writ petition (No. 4872/96) was set A
out in extenso. The Division Bench then enumerated the circumstances
which had led the Financial Commissioner to reject the representation or
revision of the first respondent (as set out above). The validity of the
auction was challenged by the first respondent on three grounds. The first
and. second grounds related to the provisions of the Punjab Excise Act and
the Punjab Liquor Licence Rules and the term and conditions of the
B
Auction notice. (These grounds were rejected and need not detain us.) The
third ground, which was accepted; was set out thus :

"(iii) The petitioner, despite being the highest bidder, was wrongly
shown to have not participated in the bid. The learned counsel has c
referred to various circumstances, which, according to him, show
the bonafides of the petitioner in bidding in the auction and having
been present on the spot".

The Division Bench stated that, in support of his submission that the first D
respondent had offered a higher bid, its counsel had referred to various
circumstances and submitted .that the cumulative effect thereof proved the
presence and participation of the first respondent in th~ auction, which had
not been taken note of. The ci.rcumstances enumerated by the first respon-
dent and "probabilised to have been proved" were set out by the Division
Bench. The first circumstance was the receipt for entry into the auction E
panda!; this, according to the Division Bench, established that the first
respondent had decided to participate in the auction. The second cir-
cumstances was that the representatives of the first respondent were in
possession of bank drafts worth Rs. 1.90 crores besides cash in the sum of
Rs'. 10 lacs on the date of the auction "for the purpose of bidding in the p
auction". The factum of bank drafts was not disputed. The Financial
Commissioner' observations in regard to the bank drafts were then set out
and the Division Bench observe :

"The .conclusions arrived at by the Financial Commissioner, Taxa- G
tion, are based upon conjecturers nd apparently observed with pale
eyes. It is not improbable to obtain 34 drafts prepared from a banlc
at Khanna and Mandi Govindgarh on the same day and before the
time of auction. It is not uncommon that the banks have been
providing special services to their customers particularly having
huge monetary dealings. The Financial Commissioner, Taxation, H
382 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A has not referred to any special knowledge of banking system and ·
has arrived at the aforesaid conclusion without ascertaining the
true position from the concerned bank."

According to the Division Bench, if drafts for such a huge amount had
B been issued, the same demonstrated the bona fide intention of the first
respondent to participate in the auction. Again, it was "fully established"
that the first respondents' representatives were in possession of the bank
drafts on the relevant date, which showed their intention to participate in
the auction. The provisions of Rule 36 (17), though they could not be made
the basis for quashing the auction proceedings, were relevant to show the
C biased treatment given to the first respondent. Whether the first respon-
dent had raised the ple'1. or not, it was for the authorities to explain the
omission in not ·mentioning the pre-determined license fee, which might
have become the basis for accepting or rejecting the bid offered by a
particular bidder. It was intrigliing and not explained as to why such an
D omission was allowed in the case of Group No. 108 and 11 only and not
in the case of any other group auctioned on 'the same day or thereafter.
The first respondent had taken steps for participation in the auction by
obtaining an entry slip and by procuring bank drafts, which led to the
irresistible conclusion that it was not only a spectator. The affidavits of the
partners of the first respondent showed that they were present at the time
E of the auction and had participated in it, but their presence was not taken
note of. Press report also suggested that the auction was not free from
suspicion. Some extracts of these press reports were set out. It was then
said by the Division Bench that it was true that press reports could not be
made the basis for holding the auction illegal or contrary to the law;
F however, "in drawing inferences, the circumstances of the press reports
cannot be completely ignored, .........".The telegrams aforementioned also
could not be completely ignored. The mere omission of details therein
could not be made the basis for rejecting them. It was not a coincidence
that immediately after the auction was concluded on 11th March, 1996, the
said S.K. Ralhan had been transferred. His transfer suggested, prima facie,
G the satisfaction of the authorities that he had not been fair in holding the
auction. It was worth mentioning that the successful bidders had not denied
the allegations made against them and it was, therefore, proved that the
persons participating in the auction were hand in glove with each other
with the object of putting the State exchequer to loss. "The cumulative
H effect", the High Court held, "of the aforesaid discussion clearly and
STAIB v. YOGINDER SHARMA ONKAR RAI (BHARUCHA, J.) 383

unequivocally leads to the conclusion that the auction with respect to A
groups No. 108 and 11 held on 11th March, 1996, was neither fair, nor
proper. The petitioners were wrongly deprived of their right of participa-
tion in the bid and the State exchequer was subjected to huge loss, which
in no case is lesser then Rs. 95 lacs."

As far as the Financial Commissioner was concerned, the High Court E
said:

"Least we say about Shri Ratra, better it would be. We were
interested in the job of adjudication of the rival claims of the
parties, presuming him to be an independent and impartial person, C
keeping in view the status of the post he is holding. During
arguments, a· reference has been made to Annexure PS2, a press
report dated 12th March, 1996, which shows that Shri Ratra had
gone to· the press with the claim that outcome of the auction had
allegedly been better than the expected rise of 12 to 13 per cent. D.
At that time, it was not brought to our notice that Shri Ratra had
already taken a stand with respect to the matter in dispute and,
presumably, could not have given any other finding than the one,
which is incorporated in Annexure P 66. Omission on the part of
the parties to bring to our notice the commitments made by Shri
Ratra has resulted in the reference being made to him." E

Ultimately, in the High Court's view, the substance of the circumstan-
ces in the context of the allegations made, clearly suggested that the auction
was not fairly and properly held, with the result that the State exchequer
had been subjected to a huge loss. The High Court thereupon passed the p
following order, which must be quoted in extenso :

"Under the circumstances, the writ petition is allowed and the
auction held on March 11, 1996, with respect to group Nos. 108
and 111 vide annexures _P 44 and P 47 is quashed. Consequently,
the auction of group Nos. 109, 110 and protection vend of Kotla G
Azner {Fatehgarh Sahib) in favour of the successful bidders of
group Nos. 108 and 111 shall also stand quashed. This judgment
would become effective from May 16, 1996, and the private respon-
dents are allowed to continue their business until the mid-night of
May 15, 1996. H
384 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A In view of the detailed discussion made above, the order of the
Financial· Commissioner, Taxation, Punjab (Annexure P.66) is
quashed for the remaining period of 10 and a· half month com-
mencing with effect from 16.5.1996 to 31.3.1977. All the four
groups, i.e., Nos. 108 to Ul and protection vend of Kotla Azner
(Fatehgarh Sahib), are directed to ·be re-auctioned positively
B before May 15, 1996, at the cost of the petitioners, after due
publicity and advertisement. The petitioners, private respondents .·
and all other shall be permitted to participate in the bid, which
shall be strictly held in accordance with the provisions of Rules 36
of the Punjab Liquor Licence Rules. All snch persons, who enter
c the venue for the purpose of bid, shall be directed to sign a
separate paper sheet, recording the.if attendance and the bid shall
be supervised by an officer, not below the rank of Financial
Commissioner.

After pre-determining the licence-fee, first bid for group No.
D 108 shall be deemed to be Rs. 4.21 crores offered by the petitioners
and for group No. 111, the first bid shall be deemed. to be of Rs.
3.50 crores, offered by the petitioners.

After deducting the proportionate fee for the period commenc-
E ing from l.4;1996 to 15.5.1996, the balance amount of fee, if
deposited by the respondent/successful bidders, shall be refunded
to them after May 15, 1996.

The petitioners shall deposit a sum of Rs. one lac within two
days, out of which the expenditure for re-holding of the auction
F shall be adjusted aud the balance amount paid back to them after
completion of the process of auction.

In the new auction, Shri S.K. Ralhan Deputy Excise and Taxa-
tion Commissioner and Shri Y.S. Ratra, Financial Commissioner,
Taxation shall not be associated in any manner.
G
In case, the petitioners, opt not to participate in the new auction
bid and no other bidder offers ·the bid for the amount already
offered by the private resp<!mdents-successful bidders, this petition
shall be deemed to have been dismissed with costs of rupees one
H lac to be paid to the privat,e respondents. However, on the com-
STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.) 385

pletion of the fresh process of auction, the private respondents A
shall be liable to pay a sum of Rs. 10,000 as costs which shall be
deposited in the State Treasury."

Learned counsel for the appellants submitted that questions of fact
were involved. At the hearing of the earlier writ petition this had been B
recognised by the Division Bench and the first respondent had been
reference to the Financial Commissioner treating the writ petition as a
representation or revision under the statutory provision. The order of the
•'
Financial Commissioner was reasonable in its appreciation of the facts.
The Division Bench had not found it to be perverse. The Division Bench,
therefore, was not entitled to reverse it. In any event, the judgment of the C
Division Bench was based upon conjectures and the order that was passed
by it was erroneous and unworkable.

Learned counsel for the first respondents drew our attention to its
case that in the auction pandal itself its partners had met the Excise and D
Taxation Commissioner and told him their grievance and the Excise and
Taxation Commissioner had assured them that the matter would be looked
into. Learned counsel referred to the press reports which stated that the
Excise and Taxation Minister of Punjab had said that while there was no
report with the State Government on the alleged irregularities during the
auction of liquor vends, it had come to the notice of the State Government E
that the auction of some liquor vends in Ludhiana were conducted in a
manner contrary to the interests of the revenue and that, on the basis of a
representation, the State Government had relieved the Deputy Excise and
Taxation Commissioner in charge of the Patiala Division of the respon-
sibility of conducting auctions for the remaining districts of the Division. F
A copy of the order relieving the said S.K. Ralhan was pointed out.
Learned counsel submitted that, even so, the Financial Commis$ioner in
his report had stated that the decision of the State Government not to allow
the said S.K. Ralhan to conduct auctions in the remaining districts of
Patiala Division was based on administrative grounds. Learned counsel G
submitted that there was, thus evidence to show that the auction had not
been conducted fairly and in the prescribed manner. The Financial Com-
missioner in his report had stated that it was hard to believe that the
Collector would not have intervened when bids of R. 50 and 45 lacs
respectively over the next highest bids had been made. Learned counsel
submitted that the Financial Commissioner himself should have accepted H
386 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the higher bids of the first respondent. The first respondent was even now
prepared to deposit 15% of the required deposit for the remaining hall of
the term and secure the balance. Learned counsel relied upon the judg- .
ment of this Court in M/s. Rajshila v. State of U.P. and Ors., [1993] Supp.
1 S.C.C. 477. This was a case where the appellant oould not participa:te in
the auction of the exclusive right to collect tolls on a bridge owing to a
B
strike in Government offices. The appellant had to run from pillar to post
to fulfil the precondition of a security deposit which, in view of the involved
procedure, was rendered impossible of fulfilment. The appellant had ~,

tendered cash security of Rs. 7 lacs on the date of the auction and sought
permission to participate, but the request had been turned down. Upon
C this, the appellant had given an application signifying its willingness to offer
Rs. 86 lakhs per year as against the accepted bid of Rs. 75 lacs per year.
After hearing counsel, this Court was persuaded to take the view that the
ends of justice would be met by an order directing a re-auction subject to
certain conditions, the first being that the appellant should, with a view to
D establishing its readiness and willingness to stand by the offer of Rs. 86 lacs
per year, deposit a sum of Rs. 25 lacs on or before the stated date. If the
sum of Rs. 25 lacs was deposited, the contract in favour of the successful
bidder would stand set aside. Learned counsel submitted that the present
was a case where the ends of justice required that the judgment and order
under appeal be maintained subject to such conditions as this Court might
E deem fit to impose.
The question that goes to the root of these appeals is : did the first
respondent make bids at the auction of Rs. 50 and Rs. 45 lacs respectively
over the successful bids for Group nos. 108 and 111?
F
This is a question of fact: It was rightly referred to the Financial
Commissioner under the statutory provision by the Division Bench in its
order on the earlier writ petition. On the order passed by the Financial
Commissioner the High Court could interfere in a writ petition under
Article 226 only if it found it to be perverse, that is to say, if it found its
G conclusions such as could not reasonably have been arrived at upon tlie
record. The Division Bench in the order under appeal has not so held,
specifically or impliedly.

The order of the Financial Commissioner is not perverse or un-
H reasonable. He was right in concluding that the fact that the first respon-

'
IV-

)•
STATEv. YOGINDERSHARMAONKARRAI[BHARUCH.A,J.] 387

dent had entered the auction pandal did not established that it had made A
a bid. His views about the drafts procured by the first respondent from the
banks at Khanna and Mandi Gobindgarh ar not unreasonable, for, or-
dinarily, a prospective bidder would not cut it so fine. He would ordinarily
obtain the required bank drafts before the auction date and not wait to do
so with only an hour or so to spare. No extraordinary circumstances have B
been adverted to by the first resf ondent which required it to obtain the
drafts only on the morning of the auction from banks which were a sizeable
distance from its site. The pattern of bidding referred to by the Financial
Commissioner is very telling. It is unlikely that when the bid is rising by Rs.
10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it should suddenly rise by Rs.
50 lacs and Rs. 45 lacs respectively. The Financial Commissioner was c
justified in rejecting the case of the first respondent that it had approached
the Excise and Taxation Commissioner and spoken to him about what had
happened for this was mentioned only in the course of the argument before
him. It also germane for the Financial Commissioner to observe that no
higher revenue officials had been approached by the first respondent, as D
also to point out that the observers' reports did not speak of any ir-
regularity. They would certainly have done so had a bid which was Rs. 50
lacs more than the successful bid been ignored; there would have been a
conmotion in the auction_ pandal and this would have been mentioned in
the reports. The Financial Commissioner pointed out, and rightly, that the
telegram sent by the first respondent was four days after the auction. There E
were other telegrams, similarly worded but under different names. In all
the telegrams no mention had been made of the quantum of the higher bid
but merely that a lower bid had been accepted against a higher bid. The
Financial Commissioner noted that two partnerships had bid against each
other but commented, with some justification, that the mere fact that their F
partners were relations did not make for a rigged auction.

The Division Bench castigated the Financial Commissioner for his
report and stated that his conclusions were "based upon conjectures and
apparently observed with pale eyes". It said that "it is not improbable" to G
obtain 34 drafts prepared from a bank at Khanna and Mandi Gobindgarh
on the same day and before the time of auction. It is "not uncommon" that
banks provide special services to their customers, particularly if they have
huge monetary dealings. The Financial Commissioner had not referred to
any special knowledge of the banking system and had arrived at his
conclusions without ascertaining the true position from the concerned H
388 SUPREME QOURT REPORTS (1996) SUPP. 6 S.C.R.

A bank The Division Bench did not state its authority for its statements about
banking practice.

The Division Bench found that "it was fully established" that first
respondent's representatives were in possession of the bank drafts, "which
showed petitioners' intention of participation in the auction". The Division
B Bench took the view that the revenue authorities were obliged to explain
-why the pre-determined license fee had not been mentioned and that it was
intriguing "why such an omission was allowed in case of Group No. 108
and 111 only and not with respect to any other group auction on the same
day or thereafter". In fact, it appears that this omission took place not only
C with regard to Group nos. 108 and 111 but with regard to all auctions in
Ludhiana-I. The fact that first respondent had taken steps for participation
the auction by obtaining an entry slip and by procuring bank drafts led
the Division Bench "to the irresistible conclusion that they were not only
spectators". The affidavits of the partners of the first respondent also
D showed that they were present at the time of the ·auction and had par-
tic~pated in it but their presence had not been taken note of. Extracts of
press reports were set out in the judgment and the Division Bench noted
that while they could not be made a basis for holding an auction illegal or
contrary to the law, "in drawing inferences" the press reports could not be
ignored. The mere omission of giving details in the telegrams was not a
E reason to reject them. It was not a coincidence that the said S.K Ralhan
had been transferred, after the auction on 11th March, 1996, was concluded
and it suggested, prima facie, that the authorities had been satisfied that he
had not been fair in holding auction. The Division Bench found that the
successful bidders had not specifically denied the allegations of relation-
F ship between their partners and their inter-action in the auction; it was,
therefore, proved that they "were hands in glove with each other with the
object of putting the State exchequer to loss". As a matter of fact, the
allegations are denied by the successful bidders in their affidavits. The
cumulative effect clearly and unequivocally led the Division Bench to the
conclusion that the auction with respect to Group nos. 108 and 111 was
.G neither fair nor proper, the first respondent had been wrongly deprived or
its right of participation therein and the State exchequer had been sub-
jected to a loss of not less than Rs. 95 lacs.

We are constrained to observe that the judgment of the Division
H Bench is based upon conjectures and inferences more tenuous than those
STATEv. YOGINDERSHARMAONKARRAl[BHARUCHA,J.) 389

it found the Financial Commissioner guilty of. Such conjectures and in- A
ferences are impermissible in a judgment upon a writ petition under Article
226 where the fact-finding authority has arrived at a conclusion which is
not perverse or so unreasonable that, upon the record, it could not have
been reached.

The basic question which cannot be lost sight of is : did the first
B
respondent make bids.at the auction of Rs. 50 and Rs. 45 lacs respectively
over the successful bids for Group nos. 108 and 111? Securing Group no.
108 and 111 was so important for the first respondent, it would have us
be\ieve, that it raised the bids by the staggering sums of Rs. 50 and -Rs. 45
lakhs respectively. If it did, the previous rises having been of the order of C
Rs. 10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it would have attracted
the attent~on of some, if not most, of the twelve to thirteen hundred persons
in the auction pandal. It would be a brave auctioneer indeed who would,
in J.b.e circumstances, ignore such bids. The partners of the first respondent
would not in the ordinary course of human conduct have let it pass without D
stout, long and loud protests. They would have attracted notice, and
support. But, according to the oral submissions of the first respondent's
counsel before the Financial Commissioner, the first respondent's partners
were satisfied with an oral complaint to the Excise and Taxation Commis-
sioner and his assurance that he would look into the matter. In the ordinary
course of events, one would have expected a bidder making such large bids E
which are ignored to shoot off notices in all directions. All we have are
telegrams sent four days after the auction which do not mention the
enormous difference between the bids. Of the twelve to thirteen hundred
persons present in the pandal, not one independent observer has stated on
affidavit that the first respondent had made bids far larger than the F
successful bids but they had been ignored. To our ears the first
respondent's story does not ring true.

As we have already held, the Financial Commissioner's conclusions
in his report were reasonable. The remarks made by the Division Bench
about him were not justified. As Financial Commissioner, he spoke to the G
Press about the outcome of the auctions generally. This was in the perfor-
mance of his duties. In any event, we do not see in his orders anything.that
indicates that he was in any way biased.

The Division Bench was, in the circumstances, in error in reaching H
390 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the conclusion that the auction was not fairly and properly held with the
result that the State exchequer had been subjected to a huge loss. In any
event, loss to the exchequer is a factor which may be taken into account in
genuine cases, as it was in the case of M/s. Rajshila cited by learned counsel
for the first respondent. At the same time, the finality of auctions must also
B be recognised to be in the interests of the exchequer. If auctions are set
aside and re-auctions ordered on less than satisfactory material, the loss of
the exchequer would be far greater.

This brings us to the form of the order that the Division Bench
passed. We have quoted it above in extenso. It quashes the auction. It
C directs re-auction for the balance of the term. It directs that for Group no.
108 the first bid "shall be deemed to be Rs. 4.21 crores" as offered by the
first respondent, and for Group no. 111 the first bid "shall be deemed to
be of Rs. 3.50 crores" as offered by it. Th.e order then directs that in case
the first respondent opts not to participate in the fresh auction and no
other bidder offers a bid of the amount equivalent to the earlier successful
D bid, "this petition shall be deemed to have been dismissed".

It is a very difficult order to appreciate. If at the fresh auc~ion the
first respondent does not bid and no other bidder offers a bid equivalent
to the earlier successful bid and the writ petition is to stand dismissed, what
E is the State Government's authority for holding the fresh auction? Whether
or not the first respondent bids or somebody else bids an amount
equivalent to the earlier succe~sful bid can be known only after the fresh
auction is held. If at that stage the petition is to stand dismissed, there is
no authority for holding the fresh auction. Secondly, if at the fresh auction
the first respondent does not bid and no other bidder offers 3; bid
F equivalent to the earlier successful bid, it must mean that the earlier
successful bidder is no longer interested; but, by reason of the dismissal of
the writ petition, he remains bound by his earlier bid. This is not a workable
or well thought out order.

G In cases were there is real need to set aside an auction, he who
challenges it must be required to prove his bona Ji.des before the auction
is set aside by depositing a substantial portion of what he says he will bid.
It is only if the deposit is made that the auction should be set aside and a
re-auction ordered.

H The Division Bench would have done well to follow the order
STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.] 391

(quoted above) already passed by another Division Bench upon a writ A
petition impugning the same order of the Financial Commissioner.

The appeals are allowed. The judgment and order under appeal is
set aside. The writ petition filed by the first respondent is dismissed. The
first respondent shall pay to the appellant in each of the three appeals the
costs of the appeal, quantified in .the sum of Rs. 25,000. B
.S.M. Appeals allowed.
A UNIVERSITY GRANTS COMMISSION ETC.
v.
SADHANA CHAUDHARY AND ORS.

SEPTEMBER 17, 1996

B [S.C. AGRAWAL AND G.T. NANAVATI, JJ.]

University Grants Commission Act, 1956.

University Grants Commission (Qualifications Required of a Person to
C be Appointed to the Teaching Staff of a University and Institutions Affiliated
to it) Regulations 1991.

Appointment of Lecturers-Exemptio11 granted to various categories of
candidates from appea1ing in the Nation vide eligi.bility test by circulars dated
Feb. 10, 1993, June 15, 1993 and notification dated June 21, 95 issued by
D UGC-Validity of.

Constitlltion of lndi~Artic/e 14-Right to equality-Cut off dates as
prescribed by circular:. dated Feb 10, 93 June 15, 1993 and notification dated
June 21, 1995 issued by UGC granting exemptio11 to various categories of
E candidates from appearing in the eligi.bility test for appointment to the post of
lecturer:,~Held, not violative of liglit to equality as such.

UGC framed University Grants Commission (Qualification re-
quired of a person to be appointed to the teaching staff of a university
and institutions affiliated to it) Regulations 1982 in exercise of powers
F conferred by S. 26(1)(e) of the Act laying down the minimum qualifica-
tions for the purpose of appointment as university lecturer and college
lecturer.

On recommendations of Mehrotra committee and the Vice Chan-
G cellors Conference, UGC framed (Qualification required of a person to
be appointed to the teaching staff of a university and Institutions
affiliated to it) Regulations. The 1991 regulations laid down that for the
purpose of appointment to the post of lecturers in University & colleges
a candidate should have good academic record with at least 55% marks
H or an equivalent grade at master's level in the relevant subject from an
392
U.G.C. v. S. CHAUDHARY 393

IDdian University or an equivalent degree from a foreign University. A
Candidates besides fulfilling the above qualifications should have cleared
the eligibility test for lecturers conducted by UGC, CSIR or similar test
accredited by the UGC. The rational of the eligibility test prescribed by
1991 Regulations was upheld by this Court in University of Delhi v. Raj
Singh and Ors., [1994] Supp. 3 SCC 516. B

UGC issued circulars on 15.2.93 and June 15, 1993 by which
exemption was granted to 4 categories of candidates from appearing in
the eligibility· test viz. • candidates who have passed UGC/CSIR J.R.F.
examination, candidates who have already been awarded Ph. D. Degree, C
candidates who have already been awarded M.Phil degree upto 31st,
December 1992, and those who will submit their Ph.D. thesis upto 31st
December 1993. The 1991 Regulations were further amended on 21.6.95
stipulating that candidates who have submitted thesis or passed M.Phil.
examination by 31st December 1993 are exempted from the eligibility test
for lecturer conducted by UGC, CSIR or similar test accredited by the D
UGC.

Haryana Public Service Commission issued advertisement on Jan.
23, 1995 inviting applications for 200 tP.mporary posts of lecturers
(College Cadre) in Haryana Educational Services (Group B) prescribing E
that along with the essential qualifications the candidates should have
cleared the eligibility test for leCtureship conducted by UGC, CSIR or
similar test accredited by the UGC. However the said condition was not
applicable to the candidates who had been awarded M.Phil degree upto
31st December 1992 and who have .submitted Ph.D. thesis upto December F
31, 1993.

The candidates who were awarded M.Phil degree in December 1993
approached High Court by way of a writ petition assailing the cut off
dates fixed by the advertisement dated January 23, 1995. Allowing the G
writ petition High Court held that the cut off dates fixed by the
advertisement were unjust and not based on any rationale in as much
as it amounts to creation of an artificial class amongst the eligible
candidates though similarly situated, as the cut off dates fixed are far
earlier to the date of the advertisement dated January 23, 1995. The High H
394 SU~REME COURT REPORTS (1996] SUPP. 6 s.c.~.

A Court directed the Haryana Public Service Commission to issue a
corrigendum extending the dates as prescribed in advertisement dated
January 23, 1995 upto December 31, 1994. It further directed HPSC to
ensure in future that as and when any such advertisement is issued that
should bear in mind that the eligibility dates be not far off from the
B date of advertisement.

Bihar State University Service Commission on Nov. 22, 1993 issued
advertisement inviting applications for appointment to the post of
lecturers in various Universities of Bihar. However the .said advertise-
ment did not prescribe that the candidates should have cleared the
C national eligibility test conducted by UGC.

Candidates from State of Bihar who had cleared the eligibility test
as prescribed by UGC filed Writ Petition challenging the Advertisement
issued by Bihar State University Commission on the ground that the
D qualifications prescribed in the advertisement were not in consonance
with the qualifications prescribed by UGC.

High Court allowed the writ Petition and held that only the
candidates who had passed national eligibility test in terms of the UGC
E regulations could be considered by the Bi~ar State University Commis-
sion.

Bihar State University (Second amendment) Ordinance 1994 and
Patna University (Third amendment) Ordinance, 1994 were promulgated
F which laid down that a candidate who has submitted Ph.D. thesis by
December 31, 1993 or has got a degree of M.Phil before December 31,
1992 will be exempted from appearing in the eligibility test of lec-
turers/Junior Research fellow conducted by UGC/CSIR.

Consequently the Bihar State University Commission issued a
G corrigendum dated December 25, 1994 to the advertisement dated Nov.
22, 1993 to this effect. The said ordinances as well as the circulars dated
Feb. 10, 1993 and June l:i, 1993 issued by the UGC were challenged by
way of Writ petition. The High Court held that UGC was within its
jurisdiCtion in issuing guidelines for the appointment of lecturers in
H Universities & colleges & Chancellor was also within his Jurisdiction in
U.G.C.v.S.CHAUDHARY 395

promulgating the ordinance. Hence this appeal by Special Leave. A

The questions before this Court were;-

(i) whether the cut off dates fixed under the circular & notification
wer valid.
B
(ii) whether the exemption from clearing eligibility test or equivalent
examination under the said circular and notification is valid.

It was contended by UGC that the circulars were in the nature of
transitional provisions.
c
Disposing of the appeals, this court

HELD : 1.1. Exemption granted by the amendment introduced in the
1991 Regulations by circulars dated February 10, 1993, June 15, 1993 and
by notification dated June 21, 1995 is not violative of the right to equality D
guaranteed under article 14 of the Constitution as such candidates con-
stitute a distinct class who could be treated separately in so far as the
requirements of clearing the eligibility test is concerned. Such a classifica-
tion of candidates for the purpose of applicability of the requirement of
clearing the eligibility test has a rational basis which has a reasonable E
nexus with the·object sought to be achieved by the 1991 Regulations, i.e.
clearing of National Eligibility test for appointment to post of lecturers in
various universities so as to remove disparties in the standards of ex-
amination at the Masters level between different universities. [408-F-G]

1.2. It is settled law that the choice of date as a basis for classification F
cannot always be dubbed as arbitrary even if no particular reason is
forthcoming for the choice unless it is shown to be capricious or whimsical
in the circumstances. When it is seen that a line or a point there must be
and there is no mathematical or logical way of fixing it precisely, the
decision of the legislature or its delegate must be accepted unless it can G
be said that it is very wide of the reasonable mark. [406-C-D]

1.3. In the instant cases the cut off dates fixed cannot be held to be
carpicious or whimsical or wide of the reasonable mark. [406-C-D]

Union of India & Anr. v. Mis. Paramesltwaran Match Works Ltd., H
396 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A [1975) 2 SCR 573 and Dr. (Mrs. Sushma Shanna Etc. Etc. v. State of
Rajasthan & Ors., [1985) 3 SCR 243, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12284 of
1996 etc.

B From the Judgment and Order dated the 21st March, 1995 of the.
High Court of Punjab and Haryana in Civil Writ Petition No. 2252 of 1995.

M.K. Banerjee, S.B. Sanyal, Gaurav Banerjee, Navin Prakash, A.K.
Pandey, B.B. Singh, A.O. Sikri, Ashok K. Mahajan and R.S. Suri for the
C appearing parties.

The Judgment of the Court was delivered by

S.C. AGARWAL, J. Special leave granted in both the special leave
petitions.
D
These appeals raise questions relating to grant of exemption from
the provisions contained in the University Grants Commission (Qualifica-
tions Required of a Person to be Appointed to the Teaching Staff of a
University and Institutions Affiliated to it) Regulations, 1991 (hereinafter
E referred to as 'the 1991 Regulations') which require that for appointment
on the post of lecturer in universities and colleges the candidate should
have cleared the eligibility test for lecturers conducted by the University
Grants Commission ( hereinafter referred to as 'the UGC'), Council of
Scientific and Industrial Research (for short 'CSIR') or similar test ac-
credited by the UGC.
F
The UGC has been established under the University Grants Com-
mission Act, 1956 (hereinafter referred to as 'the Act) which was enacted
by Padiament to make provisions for the co- ordination and determination
of standards in Universities. One of the functions entrusted to the UGC
under the Act is to recommend to any University the measures necessary
G for the improvement of University education and advise the University
upon the action to be taken for the purpose of implementing such recom-
mendation (Section 12(d)). The UGC has been empowered to make
regulations consistent with the Act and the rules made thereunder defining
the qualifications that should ordinarily be required of any person to be
H appointed to the teaching staff of the University, having regard to the
U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.] 397

branch of education in which he is expected to give instruction. [Section A
26(1)(e)]. In exercise of the powers conferred by Section 26(1)(e), the
UGC made the University Grants Commission (Qualifications Required of
a Person to be Appointed to the Teaching Staff of a University and
Institutions Affiliated to it Regulations, 1982 (hereinafter referred to as 'the
1982 Regulations') whereby qualifications were prescribed for appointment B
to a teaching post in the University or in any of the institutions including
constituent or affiliated colleges recognised under clause (f) of Section 2
of the Act or in an institution deemed to be a University under Section 3
of the Act. Under the 1982 Regulations the minimum qualifications
prescribed for appointment to the post of University lecturers were (i) a
Doctorate's Degree or Research work of equally high standard; and (ii) a C
good academic record with at least second class (C in the seven point
scale) Master's degree in a relevant subject from an Indian University or
an equivalent degree from a foreign University. For college lecturers the
minimum qualifications prescribed were (i) an M.Phil degree or a recog-
nised degree beyond the Master's level or published work indicating the D
capacity of a candidate for independent research work; and (ii) good
academic record with at least second class (C in the seven point scale)
Master's degree in a relevant subject from an Indian University or an
equivalent degree from a foreign university.

In its report dated March 23, 1985, the National Commission on E
Teachers II, after observing that standards of performance varied from
university to university, expressed the view that it must be ensured that
every citizen aspiring to be a teacher at the tertiary level, i.e., a lecturer,
qualified in terms of a national yardstick. The Commission recommended
that the UGC should incorporate the passing of one of the national tests F
at least in grade B + on a seven point scale in its regulations laying down
the minimum qualifications of teachers and that this should come into force
within two years. Thereafter, in 1986, the UGC appointed a Committee
under the Chairmanship of Prof. R.C. Mehrotra (for short 'the Mehrotra
Committee') to examine the structure of emoluments and conditions of
service of University and college teachers and to make recommendations G
in this behalf having regard to the necessity of attracting and retaining
talented persons in the teaching profession and providing advancement and
opportunities to teachers of Universities and colleges. The Mehrotra Com-
mittee was of the view that, in order to ensure quality of new entrants to
the teaching profession, all aspirants for the post of lecturer in a University H
398 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A or college should have passed a national qualifying examination since such
a test would have the merit of removing disparities in standards of examina-
tion at the Master's level between different Universities and, as a result, ·
local influence would be minimised and the eligibility zone for recruitment
would become wider. The Mehrotra Committee recommended the follow-
B ing minimum qualifications for appointment to the post of Lecturer :
,
"(i) Qualifying at the National Test conducted for the purpose by
the UGC or any other agency approved by the (JGC.

(ii) Master's degree with at least fifty-five percent marks or its
equivalent grade and good academic record.
c
The minimum qualifications mentioned above should not be
relaxed even for :::andidates possession M.Phil, Ph.D qualification
at the time of recruitment."

D After examining the various recommendations contained in the
report of the Mehrotra Committee and the recommendations made by the
U GC, the Government of India prepared a scheme for revision of pay
scales of Teachers in the Universities and Colleges and other measures for
maintenance of standards in higher education and, by letter dated June 17,
1987, the Government of India forwarded the said scheme to the Education
E Secretaries of all the State and Union Territories with a request to formu-
late detailed proposals for the implementation of the scheme on the lines
indicated in the said letter. The said scheme was revised by the Central
Government in 1988. The original scheme as well as the revised scheme
required that only those candidates who, besides fulfilling the minimum
F academic qualifications prescribed for the post of Lecturer, have qualified
in a comprehensive test, to be specially conducted for the purpose, will be
eligible for appointment as Lecturers.

In 1989 a conference of Vice-Chancellors was held under the
auspices of the UGC and one of the major recommendations made in the
G said conference was :
"The National level test to determine the eligibility for lecturers be
conducted. When the State Government conducts such tests, while
accrediting them caution be exercised."

H Keeping in view the said recommendations the UGC made the 1991
U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.J 399

Regulations which were notified vide notification dated September 19, A
1991. The 1991 Regulations superseded the 1982 Regulations and
prescribed the following minimum qualifications for the post of lecturers
in universities and colleges :

"Good academic record with at least 55% marks or an equivalent
grade at Master's level in the relevant subject from an India B
University or an equivalent degree from a foreign University.

Candidates besides fulfilling the above qualifications should have
cleared the eligibility test for lecturers conducted by UGC, CSIR
or similar test accredited by the UGC." C

By Circular dated February 10, 1993 the UGC granted exemption
from appearing in the eligibility test to following categories :

1. All candidates who have passed UGC/CSIR J.R.F. Examina-
tion. D
2. All candidates who have already been awarded Ph.D degree.

3. All candidates who have already been awarded M.Phil degree
upto 31st March, 1991.
E
4. All candidates who will submit their Ph.D thesis upto 31st
December, 1993.

By circular dated June 15, 1993 in respect of candidates falling in
category (3) exemption from appearing in the eligibility test was extended
to candidates who had been awarded M.Phil degree upto December 31, F
1992. By a notification dated June 21, 1995 the 1991 Regulations have been
amended and the following proviso has been added below the requirement
regarding clearing the eligibility test for appointment on the post of Lec-
turer:
G
"Provided that candidates who have submitted Ph.D thesis or
passed,the M.Phil examination by 31st December, 1993 are ex-
empted from the eligibility test for lecturers conduct by UGC,
CSIR or similar test accredited by the UGC."

The requirement regarding clearing the eligibility test for appoint- H
400 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A ment on the post of Lecturer as prescribed by the UGC under the 1991
Regulations came up for consideration before this Court in University of
Delhi v. Raj Singh and Ors., (1994) Supp. 3 SCC 516. After taking note of
the report of the National Commission on Teachers II, the Mehrotra
Committee report and the recommendations of the Vice-Chancellors' con-
B ference held in 1989, the Court has observed:

"It is very important to note that a duty is cast upon the Commission
{the UGC) to take 'all such steps as it may think fit for the
determination and maintenance of standards of teaching'. These
are very wide-ranging powers. Such powers, in our view, would
c comprehend the power to require those who possess the educa-
tional qualifications required for holding the post of lecturer in
Universities and colleges to appear for a written test, the passing
of which would establish that they possess the minimal proficiency
for holding such post. The need for such test is demonstrated by
the reports of the commissions and committees of educationists
D referred to above which take note of the disparities in the standards
of education in the various Universities in the country. It is patent
that the holder of a postgraduate degree from one University is
not necessarily of the same standard as the holder of the same
postgraduate degree from another University. That is the rational
E of the test prescribed by the said Regulations."

(pp. 5321 533)

We may now briefly refer to the facts of these two cases.

F Civil Appeal No. of 1996 (@ S.L.P. (C) No. 16220/1995)

On January 23, 1995, the Haryana Public Service Commission issued
an advertisement inviting applications for 200 t~mporary posts of Lecturers
{College cadre) in various subjects in Haryana Educational Service {Group
'B). In the said advertisement it was prescribed that candidates besides
G fulfilling the essential qualifications mentioned therein in the respective
subjects should have cleared the eligibility test for lectureship conducted
by the UGC, CSIR or similar test accredited by the UGC. The said
condition was, however, not applicable to candidates mentioned in clauses
(a) to {d) 'Jf paragraph 5. Clause (b) covered those who had been awarded
H M.Phil degree upto December 31, 1992 and clause (c) covered candidates
U.G.C. v. S.CHAUDHARY(S.C.AGRAWAL,J.] 401

who had submitted their Ph.D thesis upto December 31, 1993. A

Sadhana Chaudhary and Aarti Ahluwalia, respondents Nos. 1 and 2,
had joined M. Phil course of Punjab University for the session 1991-92.
Sadhana Chaudhary submitted her thesis on January 25, 1993, the viva voice
'. test was held some time in November, 1993 and the M. Phil degree was
awarded to her on December 14, 1993. Aarti Ahluwalia submitted her B
thesis on October 7, 1992, the viva voice test was held in December, 1993
and she was awarded M.Phil degree on December 14, 1993. Since they had
been awarded the M.Phil degree after December 31, 1992, they were not
given exemption from clearing the eligibility test as per the requirement of
the advertisement. They approached the High Court of Punjab and C
Haryana by filing a writ petition (Civil Writ Petition No. 2252 of 1995)
wherein they assailed the cut off dated, i.e., December 31, 1992, as fixed
in paragraph 5(b) of the advertisement regarding exemption given to .
candidates who have been awarded M.Phil degrees from the eligibility .test.

D
The grievance of both the writ petitioners was 11iat for the purpose
of giving exemption from eligibility test for candidates who had obtained
M.Phil degrees the cut off date, i.e., December 31, 1992, has been fixed
arbitrarily and that there is no rational basis in confining the exemption to
candidates who had been awarded M.Phil degrees upto December 31, 1992
in an advertisement issued in January 1995 because as between Decembe.r E
31, 1992 to Decerber 1994 many candidates might have obtained M.Phil
degrees. ·

The exemption for clearing the eligibility test under clauses (a) to (d)
of paragraph 5 of the advertisement was based on the Circulars of the UGC F
dated February 10, 1993 and June 15, 1993 referred to earlier. It appears
that the UGC did not appear in response to the notice issued by the High
Court on the writ petition filed by respondents Nos. 1 and 2 and the State
of Haryana and the Haryana Public Service Commission, who contested
the said writ petition, could not offer any explanation for the said provision
in the advertisement. In the absence of any explanation having been G
offered for fixing December 31, 1992 as the cut off date for grant of
exemption to candidates having M.Phil degree, the High Court, by its
judgment dated March 21, 1995, allowed the writ petition of respondents
Nos. 1 and 2 on the view that cut off dates prescribed in paragraph 5(b)
and (c) of the advertisement in respect of candidates who had acquired H
402 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A M.Phil degree or submitted the Ph.D thesis are totally unjust and based on
no rationale inasmuch as it amounts to creation of an artificial class
amongst the eligible candidates though similarly sit~ated, i.e., having ob-
tained M.Phil degree after December 31, 1992., or having submitted Ph.D
thesis after December 31, 1993 respectively and that cut off dates, i.e.,
B December 31, 1992 for M.Phil degree and December 31, 1993 in case of
submission of Ph.D thesis, are far earlier to the date of the advertisement
dated January 23, 1995. According to the High Court, it would not be
necessary to appear in the eligibility test for the candidates who have
applied or/are applying for the Lecturers' post pursuant to the advertise-
ment dated January 23, 1995 if they have obtained M.Phil degrees or
C submitted Ph.D thesis before December 31, 1994, i.e., prior to the date of
the publication of advertisement dated January 23, 1995. On that view the
High Court directed the Haryana Public Service Commission and State of
Haryana to issue a corrigendum extending the dates in paragraph 5(b) and
(c) of the advertisement dated January 23, 1995 upto December 31, 1994
D and further directed that in future also they should ensure that as and when
any such advertisement is issued, they will bear in mind that the eligibility
dates be not far off from the date of advertisement. .....
Civil Appeal No. of 1996 (@ S.L.P. (C) No. 27375/1995)
E
On November 22, 1993, the Bihar State University Service Commis-
sion issued an advertisement inviting application is for appointment on the
post of Lecturers in various universities in Bihar. The said advertisement
did not prescribe that the candidates should have cleared the national
F- eligibility test conducted by the UGC. Some of the ·candidates who had
qualified in the national eligibility test filed a writ petition (C.WJ.C. No.
321 of 1994) in the Patna High Court wherein it was alleged that the
qualifications that were prescribed in the advertisement were not in con-
sonance with the qualifications prescribed by the UGC whereunder it is
necessary that the candidates should have passed the eligibility test. The
G said writ petition was allowed by the High Court by judgment dated March
9, 1994 whereby it was held that the applications of only those candidates
who had passed national eligibility examination in terms of the regulations
framed by the UGC could be considered by the Bihar State University
Service Commission. A Review Petition was filed against the said judgment
H by the Bihar State University Service Commission and by order dated April
U.G.C. v. S.CHAUDHARY[S.C.AGRAWAL,J.] 403

27, 1994 the High Court clarified that the Bihar State University Service A
Commission should consider the candidature of such persons who were
eligible to be considered in terms of regulations framed by the UGC.
Thereafter the Governor of Bihar promulgated Bihar State University
(Second Amendment) Ordinance, 1994 and Patna university (Third
Amendment) Ordinance, 1994 on December 8, 1994 where by provisions
B
was made regarding relaxation of the minimum qualification for appoint-
ment on the post of Lecturer in university/constituent colleges and a
candidate who has got a degree of Ph.D in the concerned subject and/or
has submitted his thesis for Ph.D by December 31, 1993 and/or has got a
degree of M.Phil before December 31, 1992 has been made eligib!e for
appointment as Lecturer without having passed the Bihar Eligibility Test c
or the Eligibility Test of Lecturer/Junior Research Fellow (JRF) conducted
by the UGC/CSIR. Thereafter the Bihar State University Service Commis-
sion issued a Corrigendum dated December 25, 1994 in the advertisement
dated November 22, 1993 whereby it was indicated that all candidates who
have already done M.Phil upto December 31, 1992 or who have done or D
submitted the Ph.D thesis upto December 31, 1993 or have qualified the
National Eligibility Test (NET)/JRF Test of UGC/CSIR would be ex-
empted from appearing at the Bihar Eligibility Test to be conducted by
Bihar State University Service Commission.
•
E
Thereupon the writ petition (C.W.J.C. No. 744 of 1995) which has
given rise. to this appeal was filed in the Patna High Court by the appellan~s
herein. In the said writ petition the validity of the provisions contained in
the aforementioned Ordinances dated December 8, 1994 promulgated by
the Governor of Bihar regarding relaxation of the minimum qualification
F
for appointment on the post of lecturer as well as the Corrigendum dated
December 25, 1994 issued by the Bihar State University Service Commis-
sion and the Circulars dated February 10, 1993 and June 15, 1993 issued
by the UGC were challenged. The appellants sought_ a direction that the
post of Lecturers be filled by only those persons who have cleared the
National Eligibility Test or its equivalent examination. During the Penden- G
cy of the said'writ petition in the High Court, the Bihar State University
Service Commission conducted the Bihar Eligibility Test on June 18, 1995.
On June 21, 1995, the UGC issued a notification amending· the 1991
Regulations to which reference has already been made earlier. By the
impugned judgment dated June 27, 1995 the High Court has held that H
404 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A UGC was within its jurisdiction in issuing guidelines for the appointment
of Lecturers in the Universities and colleges in the State of Bihar and the
Chancellor was also within his jurisdiction in promulgating the Ordinances
in consonance thereto. Feeling aggrieved by the said judgment of the High
Court the appellants have filed this appeal.
B During the course of arguments it was pointed out that both the
Ordinances referred to above which were promulgated by the Governor of
Bihar on December 8, 1994 have since been replaced by enactments of the
State Legislature, viz., Bihar Acts Nos. 12 and 13 of 1995. lt has also been
pointed out that the Bihar Eligibility Test for Lecturership that was con-
C ducted by the Bihar State University Service Commission on June 18, 1995
has been granted accreditation by the UGC on February 12, 1996 and
future tests to be held in .the period 1995-97 have also been accredited by
the UGC with certain recommendations.

D Both these appeals raise questions regarding validity of the circulars
of the UGC dated February 10, 1993 and June 15, 1993 as well as the
notification dated June 21, 1995 amending the 1991 Regulations. In Civil
Appeal arising out of Special Leave Petition (C) No. 16220 of 1995 the
question is whether the cut off dates fixed under the said Circulars and
• notification in respect of candidates who have obtained M.Phil degree or
E have submitted their Ph.D thesis were valid. In Civil Appeal arising out of
Special Leave Petition (C) No. 27375 of 1995 the question is whether the
exemption from clearing the eligibility test or equivalent examination
under the said Circulars and notification is valid. This appeal also involves
the question regarding validity of the two Ordinances tha~ were promul-
F gated by the Governor of Bihar on December 8, 1994 and the legislative
enactment replacing the Ordinances.

Shri Milon K. Banerjee, the learned senior counsel appearing for the
UGC, has submitted that the Circulars dated February 10, 1993 and June
15, 1993 were in the nature of transitional provisions which became neces-
G sary as a result of imposing the requirement regarding clearing the
eligibility test by a candidate for appointment on the post of Lecturer under
the 1991 Regulations. The learned counsel has pointed out that under the
1982 Regulations, which were superseded by the 1991 Regulations, a
person possessing Ph.D degree was eligible for appointment on the post of
H Lecturer in the University and a person possessing M.Phil degree was
U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.) 405

eligible for appointment on the post of Lecturer in the college. This A
position was altered by the 1991 Regulations and candidates having good
academic record with it least 55% marks or an equivalent grade at Master's
degree level in the relevant subject became eligible for appointment on the
post of Lecturers in universities or colleges provided they had cleared the
eligibility test for Lecturers conducted by the UGC, CSIR or similar test B
accredited by the l)GC. A Ph.Dor M.Phil degree is no longer an essential
qualification for such appointments. There were a number of persons who
had obtained Ph.D and M.Phil degrees or had joined the Ph.D or M.Phil
degree courses prior to the issuance of the 1991 Regulations in the light of
the minimum qualifications that were prescribed in the 1982 Regulations.
The Circulars dated February 10; 1993 and June 21, 1993 were issued to C
mitigate the resultant hardship to such persons on account of the introduc-
tion of the requirement of clearing the eligibility test in the 1991 Regula-
tions. By Circular dated February 10, 1993 exemption from this
requirement was granted to candidates who had already been awarded the
Ph.D degree as well as to candidates who would submit their Ph.D thesis D
upto December 31, 1993. As regards candidates having obtained M.Phil
degree, by Circular dated February 10, 1993, the exemption was initially
confined to those who had already been awarded M.Phil degree upto
March 31, 1991. Subsequently it was felt that there were candidates who
had joined the M.Phil course prior to issuance of the 1991 Regulations but
E
had not obtained the M.Phil degree till then and, therefore, by Circular
dated June 15, 1993, the date of obtaining the M.Phil degree was extended
from march 31, 1991 to December 31, 1992 under the eXpectation that by
that date those persons would be able to complete the M.Phil course and
obtain M.Phil degree. Shri Banerjee has contended that both these Cir-
culars dated February 10, 1993 and June 21, 1993 have now ceased to have F
any significance in view of the notification dated June 21, 1995 wereby the
1991 Regulations have been amended and it has been prescribed that
candidates who have submitted Ph.D. thesis or passed the M.Phil examina-
tion by December 31, 1993 are exempted-from eligibility test for Lecturers
conducted by UGC/CSIR or similar test accredited by the UGC. The G
submission is that after the aforesaid amendment in the 1991 Regulations
the only question that is left for' consideration is whether the cut off date
(December 31, 1993) prescribed in the 1991 Regulations, as amended, can
be held to be arbitrary. Shri Banerjee has urged that having regard to the
time that is normally taken by a candidate who had registered for the Ph.D H
406 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A degree or had joined M.Phil course prior to the making of the 1991
Regulations, the fixation of December 31, 1993 as the cut off date cannot
be held to be arbitrary or unreasonable. Shri Banerjee, in this context, has
placed reliance on the decision of this Court in Union of India & Anr. v.
M/s. Parameshwaran Match Works Ltd., (1975] 2 SCR 573; and Dr. (Mrs.)
B Sushma Shanna Etc. Etc. v. State of Rajasthan & Ors., (1985] 3 SCR 243.

We find considerable force in the aforesaid submissions of Shri
Banerjee. It is settled law that the choice of a date as a basis for classifica-
tion cannot always be dubbed as arbitrary even if no particular reason is
forth coming for the choice unless it is shown to be capricious or whimsical
C in the circumstances. When it is seen that a line or a point there must be
and there is no mathematical or logical way of fixing it precisely, the
decision of t!ie legislature or its delegate must be accepted unless it can be
said that it is very wide of the reasonable mark. (See : Union of India &
Anr. v. M/s. Parameshwaran Match Works Ltd., (1975] 2 SCR 573, at p. 579;
D and Dr. (Mrs.) Susluna Shanna Etc. Etc. v. State of Rajasthan & Ors., (1985]
3 SCR 243, at p. 269. In the present case, the date, December 31, 1993, as
fixed by notification dated June 21, 1995, in the matter of grant of exemp-
tion from the eligibility test for appointment on the post of lecturer has a
·reasonable basis keeping in view the time taken in submitting the Ph.D
E thesis or obtaining M.Phil degree by candidates who had undertaken the
study for Ph.D or M.Phil degree prior to the issuance of the 1991 Regula-
tions and the date, December 31, 1993 cannot be held to be capricious or
whimsical or wide of the reasonable mark. The High Court of Punjab and
Haryana has proceeded on the basis that the cut off date for the purpose
of granting exemption from eligibility test should have nexus with the date
F of the advertisement inviting applications for appointment on the post of
Lecturers. The High Court was in error in taking this view. The exemption
from eligibility test that has been granted under paragraph 5 of the adver-
tisement dated January 23, 1995 is relatable to the introduction of the
requirement of eligibility test in the 1991 Regulations. The object underly-
G ing the grant of exemption is to mitigate the resultant hardship to can-
didates who had registered for Ph.D degree or had joined the course for
M.Phil degree on the basis of the minimum qualifications prescribed under
the 1982 Regulations. The validity of the fixation of cut off date for the
purpose of grant of exemption from the eligibility test has to be considered
H with reference to the date of issuance of the 1991 regulations and not with
U.G.C. v. S.CHAUDHARY[S.C.AGRAWAL,J.] 407

reference to the date of advertisement inviting applications for appoint- A
ment on the post of Lecturers. We are, therefore, unable to uphold the
direction of the High Court that it would not be necessary to appear in the
eligibility test for candidates who have applied or/are applying for the
Lecturers posts pursuant to the advertisement dated January 23, 1995 if
they have obtained M.Phil degrees or submitted Ph.D thesis before Decem- B
her 31, 1994, i.e., prior to the date of the publication or advertisement
dated January 23, l995 and the further directi.on to the Haryana Public
Service Commission and State of Haryana to ensure that as and when any
such advertisement is issued, they would bear in mind that the eligibility
dates be not far off from the date of advertisement. The exemption from C
the requirement regarding clearing the eligibility test has to be confined
within the limits indicated in the amendment introduced in the 1991
Regulations by notification dated June 21, 1995. Respondents Nos. 1 and
2 who had moved the High Court by filing the writ petition obtained their
M.Phil degrees prior to December 31, 1993. They would be entitled to
exemption from clearing the eligibility test under the terms of the notifica- D
tion dated June 15, 1995. The decision of the High Court, in so far as it
relates to the said respondents, is not required to be disturbed and is,
therefore, maintained.

We may now come to the validity of the exemption from the require- E
ment regarding clearing the eligibility test that has been granted under the
Circulars dated February 10, 1993 and June 15, 1995 and the notification
dated June 21, 1995. Shri S.B. Sanyal; the learned senior counsel appearing
for the appellants in Civil Appeal arising out of S.L.P. (C) No. 27375 of
1995, has submitted that having regard to the report of the National
Commission on Teachers II and the report of the Mehrotra Committee,
F
which form the basis for introducing this requirement by the UGC in the
1991 Regulations, there is no rational basis for granting exemption from
the eligibility test to candidate who had submitted Ph.D thesis or passed
the M.Phil examination by December 31, 1993. We find no merit in this
contention. Prior to the making of the 1991 Regulations there was no G
statutory requirement regarding clearing the eligibility test for the purpose
of appointment on the post of Lecturer. Such a requirement was intro-
• duced for the first time by the 1991 Regulations. At the time when the 1991
Regulations were made the provisions contained in the 1982 Regulations
had given rise to a legitimate expectation that a person having a Ph.D or H
408 SUPREME COURT REPORTS [1996) SUPP. 6 S.C : ..

A M.Phil degree and having good academic record as prescribed under the
1982 Regulations would be eligible for appointment on the post of Lecturer
without anything more. While intrqducing the. requirement of clearing the
eligibility test in the 1991 Regulations, the UGC did not intend to deprive
the persons who had obtained M.Phil degree or Ph.D degree prior to the
B making of the 1991 Regulations of their legitimate expectation in the matter
of appointment on the post of Lecturer in universities or colleges. It was
also felt that the said. requirement in the 1991 Regulations should not
operate to the prejudice of persons who, having regard to the qualifications
prescribed in the 1982 Regulations, had registered for the Ph.D degree or
had joined study for M.Phil degree course prior to making of the 1991
C Regulations and, therefore, provision was made for granting exemption to
such candidates with the condition that they should have passed M.Phil
examination or should have submitted Ph.D thesis by a garticular date. In
so far as the date of submission of Ph.D thesis is concerned, the said date,
i.e., December 31, 1993, has remained unchanged in the Circulars dated
D February 10, 1993 and June 15, 1993 and the notification dated June 21,
1995. For M.Phil degree the date was, however, changed from March 31,
1991 to December 31, 1992 by Circular dated June 15, 1993 and from
December 31, 1992 to December 31, 1993 by notification dated June 21,
1995. The amendment in the 1991 Regulations that has been made by the
E notification dated June 21, 1995, in substances, postpones the date of
applicability of the requirement regarding clearing the eligibility test in the
1991 Regulations till December 31, 1993 in respect of candidates who had
joined the M.Phil course or registered for Ph.D degree. Such candidates
constitute a distinct class who could be treated separately in so far as the
requirement of clearing the eligibility test was concerned. Such a classifica-
F tion of the candidates for the purpose of applicability of the requirement
of clearing the eligibility test has a rational basis which has a reasonable
nexus with the object sought to be achieved by the 1991 Regulations. We
are, therefore, unable to hold that the exemption that has been granted by
the amendment introduced in the 1991 regulations by notification dated
G June 21, 1995 is violative of the right to equality guaranteed under Article
14 of the Constitution.

.. Shri Sanyal has also raised the question regarding the validity of the
two Ordinances promulgated by the Governor of Bihar on December 8,
1994 and the legislative enactments which have now replaced the Ordinan-
H
U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.] 409

ces and has urged that since the 1991 Regulations that have been made by A
the U GC in exercise of the power conferred under Section 26 of the Act
which has been enacted by Parliament under Entry 66 of List I (Union
List) of the Seventh Schedule to the Constitution, the Bihar State Legisla-
ture was not competent to legislate in this field and the legislation enacted
by the Bihar State Legislature is ultra vires the legislative powers conferred B
on the Bihar State Legislature under the Constitution and that the Patna
High Court was in error in upholding the validity of the Ordinances. We
do not consider it necessary to go into this question. The grievance of the
appellants in their writ petition before the High Court was against the
corrigendum dated December 25, 1994 issued by Bihar State University C
Service Commission whereby it was prescribed as under :

"The candidates who have already done M.Phil upto 31st decem-
ber, 1992 or who have done or submitted Ph.D thesis upto 31st
December, 1993 or have qualified i_ll the NET/JRF Tests of
UGC/CSIR are exempted from appearing at the BET to be con- D
ducted by Bihar State University Service Commission."

This grant of exemption was in accord with the Circulars dated
February 10, 1993 and June 15, 1993 that had been issued by the UGC. As
noticed earlier Bihar Eligibility Test that was conducted by Bihar State E
University Service Commission on June 18, 1995 has been accredited by
the UGC on February 12, 1996 and further tests to be held in the period
1995-1997 have also been accredited with certain recommendations. The
grant of exemption from the eligibility test in the Corrigendum, therefore,
does not run contrary to the requirement prescribed by the U GC in the
1991 Regulations read with Circulars dated February 10, 1993 and June 15,
F
1993 which were applicable at that time. The question regarding validity of
the two Ordinances and the legislative enactments replacing them is,
therefore, left open.

In the result, Civil Appeal arising out of S.L.P.(C) No. 27375of1995 G
is dismissed. Civil Appeal arising out of S.L.P. (C) No. 16220 of 1995 is
partly allowed to the extent that the direction given by. the High Court of
Punjab and Haryana that it would not be necessary to appear in the
eligibility test for candidates who have applied or/are applying for the
lecturers' posts pursuant to the advertisement dated January 23, 1995, if H
410 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A they have obtained M.Phil degrees or submitted Ph.D thesis before Decem-
ber 31, 1994, i.e., prior to the date of the publication of advertisement, and
further directing the Haryana Public Service Commission and State of
Haryana to ensure that as and when any such advertisement is issued, they
would bear in mind that the eligibility dates be not far off from the date
B of advertisement, are set aside and it is declared that the exemption from
eligibility test for the purpose of appointment on the post Lecturer will
have to be confined to candidates fulfilling the requirements in the 1991
Regulations as amended by notification dated June 21, 1995. The direction
given by the High Court of Punjab and Haryana in so far as respondents
Nos. 1 and 2 are concerned is not disturbed.
c
No orders as to costs.

S.S. C.A. No. 12308/96 dismissed.
C.A. No. 12284/96 partly allowed.
IN RE : HARUAI SINGH AND ANR. A
IN RE : VUAY KUMAR

SEPTEMBER 17, 1996

(KULDEEP SINGH AND FAIZAN UDDIN, JJ.]
B
Constitution of India: Article 19(J)(a).

Freedom of press part of freedom of speech and eJ.pression-Mother of
all liberties in a democratic society-Freedom of press is not absolutely
unlimited and unfettered-Element of responsibility must be present in the C
conscience of the Joumalists--Rights of press to be recognised with its duties
and responsibilities towards the society-Newspaper publishing improper and
false news must be punished by cowt of law.

Common cause a regd. society filed a writ petition against alleged
misuse and arbitrary exercise of discretionary power by the Petroleum and D
Natural Gas Ministry in relation to allotment of retail outlets for
petroleum products and LPG Dealership from discretionary quota.

During the pendency of writ petition a Box news under caption
"pumps for all" was published in the Sunday Tribune on March 10, 1996
stating that Petroleum Minister has made 17 allotments of petrol pumps E
and gas agencies to relatives of the then Prime Minister Narasimha Rao
out of his discretionary quota though. the allotment under this caD only be
made to the weaker section of the society and war-widows. It also stated
that two children of Lok Sabha Speaker Shiv Raj Patil and two sons of a
Senior Judge of Supreme Court have also been favoured.
F
Similar News item was also published in Hindi Newspaper Punjab
Kesari dated March 10, 1996 which stated that 17 relatives of the Prime
Minister Narasimha Rao have been allotted petrol pumps or gas agencies
out of the discretionary quota. Then it went on to add that the list includes
names of two sons of Mr. Ahmadi, Chief Justice of India. G
Notice was issued by the Supreme Court to the Secretary, Ministry
of Petroleum and Natural Gas. In his affidavit dated March 20, 1996 he
stated that since the allegations regarding allotment under the discretion-
ary quota in favour of two sons of senior Judge of Supreme Court are vague
and in the absence of specific names it is difficult to deal with the same. On H
411
412 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the request of Additional Solicitor General time was granted to file further
affidavit of a respvnsible officer and it was further directed that relevant
files be produced in Court.

Joint Secretary in the Ministry of Petroleum and Natural Gas, Govt.
of India in his affidavit dated March 28, 1996 categorically stated that there
B was no allotment in favour of son/sons of any Supreme Court Judge.

Since the allegations were completely false, contempt proceedings
were initiated again~t the Editors and Publishers of the Sunday Tribune,
Chandigarh and the Punjab Kesari, Jalandhar and show cause notices were
issued to them.
c
Editor of ''The Sunday Tribune" Hari Jai Singh filed affidavit admit-
ting that the news item published in Sunday Tribune dated March 10, 1996
·' with regard to the allotment of petrol outlets to the sons of Senior Judge of
the Supreme Court was not correct and therefore tendered unqualified
D apology and prayed for mercy and pardon.

He further stated that it was an inadvertent publication as the news
item was supplied by an experienced journalist Dina Nath Misra who is a
journalist of 30 years standing. He submitted that he has the highest
respect for the Judiciary in general and to this Court in particular and
E tendered his unqualified apology with a feeling of remorse. It was further
submitted that an apology was already published in the Tribune dated May
10, 1996. Similarly affidavit was also filed by Publisher of the Tribune Lt.
Col. S.L. Dheer, tendering his apology and prayed for mercy and pardon
due .to Bonafide Mistake.

F Vijay Kumar Chopra, Editor and Publisher of Punjab Kesari,
Jalandhar also filed his affidavit and statedthat news item was published
on the basis of report sent by a senior Journalist which due to inadvertence
escaped the attention of the Editor. And an apology was carried out
prominently in the Newspaper on April 7, 1996. He also tendered his un-
G conditional and unqualified apology.
Thereafter a contempt notice was issued to Dina Nath Misra and he ·.~.
filed an affidavit on August 1, 1996 and admitted that a capsule item about
the allotment of Petrol Pumps to the sons of senior Judge of the Supreme
Court was not factually correct and he tendered his unqualified apology for
H the lapse that he had committed.
INRE:HARIJAISINGH INRE: VDAYKR. 413

He filed additional affidavit on Aug. 29, 1996 and admitted that he A'
has committed a grievous error in writing news items which have no basis
and again offered his unconditional apology. Disposing of the contempt
petitions, this Court

HELD : 1. Freedom of press is an essential pre-requisite of a
democratic form of Govt. The freedom of press is a part of the freedom of B
the speech and expression as envisaged in Article 19 (1) (a) of the Constitu-
tion of India. The freedom of press is regarded as the mother of all liberties
in a democratic society. [419-G, 420-A]

Indian Express Newspaper v•.Union of India, [1985] 1 SCR 641 and C
Indian Express Newspaper v. Union of India, AIR (1986) SC 872, relied
upon.

2. In a democratic set up there has to be an active and intelligent
participation of the people in all spheres and affairs of their community
as well as the State. The primary function of the press is to provide D
comprehensive and objective information of all aspects of country's politi-
cal, social, economic and cultural life. It has an educative and mobilising
role to play. It plays an important role in moulding public opinion and
can be an instrument of social change. [420-D, 420-F]
E
3. But it has to be remembered that freedom of press is not absolute,
unlimited and unfettered at all times and in all circumstances as giving
an unrestricted freedom of speech and expression would amount to an
uncontrolled licence. If it were wholly free even from reasonable restraints
it would lead to disorder and anarchy. The freedom is not to be
misunderstood as to be a press free to disregard its duty to be responsible. F
In fact the element of responsibility must be present in the conscience of
the journalists. IIi an organised society, the rights of the press have to be
recognised with its duties and responsibilities towards the society. Public
order, decency, morality and such other things must be safeguarded. The
protective cover of press freedom must not be thrown open for wrong G
doings. If a newspaper publishes what is improper, mischievously false or
illegal and absues its liberty it must be punished by Court of law.
[420-H, 421-A-B]
4. Editors of a Newspaper or a Journal have a greater responsibility
to guard against untruthful news and publications. Certain restrictions H
414 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R

A are essential for preservation of the freedom-of the press itself. (421-B-D]
5. It is the duty of true and responsible Journalist to inform people
with accurate and impartial news after dispassionate evaluation of facts
and information received by them. (421-D-E]

B 6. In the instant case neither the printer, nor the editor and reporter
took necessary care in publishing the news item of an allegation of a
serious nature having great repercussion causing embarrassment to this
Court. Such an irresponsible conduct of Editor, Publisher and Reporter
is distinctly opposed to the high professional standards. Even the ordinary
C care was not resorted to by the contemners in publishing such a false news
item. This cannot be regarded as a public service but a disservice to the
public by misguiding them with a false news. [421-G-H, 422-A]

7. This Court is not hypersensitive in matters relating to contempt
of courts and has always shown magnanimity in accepting apology. Fair
D criticism within the parameters of law is always welcome in democratic
system. But the news item in the present case is neither fair nor made in
good faith but wholly false and explanation given is far from satisfactory.
However the written unconditional apology tendered by Bari Jai Singh,
Editor of Sunday Tribune, Ft. Col. H.L. Dheer, Publisher and Editor of
E the· Sunday Tribune and Vijay Kumar Chopra, Editor and Publisher of
Punjab Kesari is accepted with the warning that they should be careful in
future. (422-B-D, 422-G]

8. As for Dina Nath Mishra, he being a very experienced fournalist,
F should have taken extra care to verify the correctness and if he had done
so there would not have been any difficulty in coming to know that
information supplied to him had absolutely no legs to stand and was
patently false and the publication would have been avoided which not only
caused embarrassment to this Court but conveyed a wrong message to the
public at large jeopardizing the faith of the illiterate masses in our
G judiciary. He committed a serious mistake but, his sincere repentence and
unconditional apology are accepted. [422-G, H, 423-A]

9. The contemners will publish in the front page of their respective
newspaper in a box; their respective apologies, specifically mentioning that
H the said news item were absolutely incorrecfand false. (423-CJ
. INRE:HARIJAISINGH INRE: VJJAYKR.(FAIZANUDDIN,J.] 415

CIVIL ORIGINAL JURISDICTION : Contempt Petition Nos. 206- A
207of1996.

IN

Writ Petition (C) No. 26 of 1995.
B
(Under Article 32 of the Constitution of India.)

In-Person for Petitioner.

K.T.S. Tulsi, Additional Solicitor General, Ram Jethmalani and Ash-
wini Kumar, Prashant Bhushan, P.H. Parekh, Arvind Sharma, Sameer C
Parekh, Ms. Bina Madhavan and K.S. Chauhan for the appearing parties.

The Judgment of the Court was delivered by

FAIZAN UDDIN, J. When this Court was seized of, Writ Petition
filed by the "Common Cause, A Registered Society'' with regard to the D
alleged misuse and arbitrary exercise of discretionary power by the
Petroleum and Natural Gas Ministry in relation to the allotment of retail
outlets for Petroleum products and L.P.G. Dealership, from discretionary
quota, a news item in box with a caption ''Pumps for all" was published in
the daily newspaper "The Sunday Tribune" dated March 10, 1996 which is E
reproduced hereunder :

"Pumps for all!

Believe it or not, Petroleum Minister Satish Sharma has made 17
1 allotments of petrol pumps and gas agencies to relatives of Prime F
Minister Narasimha Rao out of his discretionary quota. Allotments
in this category can only be made to members of the weaker
sections of society and war widows, yet five of the Prime Minister's
grandchildren have been favoured as have been five of his nephews
from the family of V. Rajeshwar Rao, MP. Besides, three wards G
of his brother Manohar Rao, two relatives of P. Venkata Rao and
the son of A VR Krishnamurthy whose family lives with the Prime
Minister have been allocated petrol 'pumps and gas agencies.
Similarly, Rao's daughter, Vani Devi, who is the official hostess
has a petrol pump allotted in the name of her daughter Jyotiriyai.
She was also favoured by the Airport Authority of India which H
416 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A released a prime piece of land located in Begum.pet area to her
for just Rs. 3 lakh. The market value is stated ,to be over Rs. 1
crore. It has been registered in the name of Shri Jai Balaji Agency,
However, the Prime Minister's kin are not the only ones who have
benefited from these allotments. Two children of Lok Sabha
Speaker Shivraj Patil have also been favoured as have the two sons
B of a senior judge of the Supreme Court. Interestingly; the Supreme
Court had recently asked the government to supply a list of all
discretionary allotments made by the ministry. However, the Min-
ister has so far managed to withhold this crucial document. But it
has hardly helped as the list has been leaked by Sharma's own
c men."

A similar news item was also published in the Hindi newspaper
"Punjab Kesari" dated March 10, 1996; the English translation of which is
as follows:
D
"17 Poor Members of the family of the Prime Minister

Out of the short out ways of becoming rich, one way is to obtain
Petrol Pump or Gas Agency. But the power to allot the same lies
with the Petroleum Minister. He has the discretionary powers to
E allot petrol pump or gas agencies in charity. This power of doing
such charities. has been entrusted in some special cases which
include the people belonging to the poor, backward classes and
the wives of those who were killed in the war. But all those persons
to whom these agencies have been allotted by the Petroleum
F Minister Capt. Satish Sharma turned out to be a scam in itself. The t-
matter was referred to the Supreme Court in which the Govern-
ment was directed to submit a list. The Petroleum Minister sup-
pressed the list. The list was demanded in the Parliament. But the
list was not presented. Now the list has been leaked out from the
Petroleum Ministry. Believe it, there are 17 relatives of the Prime
G Minister Narsimaha Rao in that list. Five persons are his grand-
sons and grand-daughters. Five others are the members of the
family of V. Rajeshwar Rao. He is a Member of Parli~-ient and_
the relative of the Prime Minister, Manohar Rao is the brother of
Narasimha Rao. These agencies were also allotted to his three'
H children. There is one more relative - P. Venkatrao. Two allottees
INRE:HARUAISINGH INRE: VIJAYKR.[FAIZANUDDIN,J.] 417

have been found in his family. One is A.V.R. Krishna Murty who A
resides in the residence of the Prime Minister. He has also been
allotted the Agency at the Bolaram Road at Sikandrabad. But the
most interested story is of Jyotiramal. Narasimha Rao is his real
grand maternal father.

The authorised hostess of the Prime Minister's residence is
B
Vani Devi who is the daughter of the Prime Minister and mother
of Jyotirmal. Their agency is situated at Begumpet under the name
and style "Shri Sai Balalji Agency". The land of 2000 Sq. M. of the
Indian Aviation Authority was given to Sri Sai Balaji Agency
merely for rupees three lakhs. Presently, the cost of this land is c
more than one crore. The Petroleum Minister also allotted the
agencies to the two children of Shivraj Patil, Speaker of the Lok
Sabha. You should not be astonished if you find the names of two
sons of Mr. Ahmadi, Chief Justice of India in the list of the
discretionary quota. Otherwise the names of such poor and back- D
ward person are also available in this list.

Since, the aforesaid news items contained an allegation that two sons
of a senior Judge of the Supreme Court and two sons of the Chief Justice
of India were also favoured with the allotment of petrol outlets from the
discretionary quota of Ministry and therefore, by our Order dated March E
13, 1996, we issued a notice to the Secretary, Ministry of Petroleum and
Natural Gas to file an affidavit offering his comments and response to the
facts stated in the aforesaid two news items. Pursuant to the said notice,
Shri Vijay L. Kelkar, Secretary in the Ministry of Petroleum and Natural
Gas, Government of India, filed his affidavit dated March 20, 1996 stating F
that since the allegation regarding allotment under the discretionary quota
in favour of two sons of a senior judge of the Supreme Court are vague
and in the absence of specific names, it is difficult to deal with the same.
Thereafter when the matter again came up before this Court on March 21,
1996, Shri Altaf Ahmad, learned Additional Solicitor General stated that G
he would look into the records and file further affidavit of a responsible
officer giving response to the other allegations regarding ~elationship of
VIPs. We, therefore, granted time for the purpose and at the same time
directed the relevant files to be produced in Court. It was thereafter that
Shri Devi Dayal, Joint secretary in the Ministry of Petroleum and Natural
Gas, Government of India filed his affidavit dated March 26, 1996. In H
418 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A paragraph 5 of his affidavit, he made a categorical statement that there is
no allotment in favour of son/sons of any Supreme Court Judge. After
· verification at records and affidavits referred to above, we found that the
news items referred to above were patently false and, therefore, by our
Order dated March 27, 1996, we initiated contempt proceedings against
B the Editors and Publishers of the daily "The Sunday Tribune" Chandigarh r
and "The Punjab Kesari", Jalandhar and issued notices to them to show
cause why they may not be punished for the contempt of this Court.

In response to the contempt notice, Shri Hari Jaisingh, the Editor of
"The Sunday Tribune" filed an affidavit dated June 24, 1996 admitting that
C the news item published in "The Sunday tribune" dated March 10, 1996
with regard to the allotment of petrol outlets to the sons of a senior Judge.
of the Supreme Court was not correct and, therefore, tendered unqualified
apology and has prayed for mercy and pardon. He has stated that it wa~
an inadvertent publication made bona fide on the faith that the iten:
D supplied by an experienced journalist, Shri Dina Nath Misra, who i~
generally reliable would not be factually incorrect. It has been stated t~at
Dina Nath Misra is a journalist of standing for over 30 years and there have
been no complaints about the correctness of the material contributed by
him and believing the said item of news to be correct it was published
without any further scrutiny in a good faith. He has submitted that he has
E the highest respect for the judiciary in general and to this Court in
particular and rendered his unqualified apology with a feeling of remorse.
He has submitted that since it was noticed that the news item was not
correct, an apology was already published by him in the Tribune dated May
10, 1996 and necessary instructions to all members of the editorial staff
F were issued to be careful and assuring the factual accuracy of all legal
reports.

Lt. Col. S.L. Dheer (Retd.), the Publisher of "The Tribune", in
response to the contempt notice has also filed his affidavit dated June 27,
1996 more or less in the same terms as. the one filed by Shri Hari J aisingh
;
G and has tendered his apology and prayed for mercy and pardon due to the
bonafide mistake.

In response to the contempt notice, Shri Vijay Kumar Chopra, Editor
and Publisher of daily "Punjab Kesari" Jalandhar has also filed affidavit
H dated June 29, 1996 stating that the news item in the daily "Punjab Kesari"
INRE:HARIJAISINGH INRE: VIJAYKR.[FAIZANUDDlN,J.] 419

referred to above was published on the basis of the news report sent by a A
senior journalist which due to inadvertence escaped the attention of the
Editor. He has stated that immediately after the incorrectness of the news
item was noticed a contradiction and apology was carried out prominently
in the issue of the Paper dated April 7, 1996. He has stated that the said
news item was not actuated by any malice tow&rds the judiciary and that
the mistake was bonafide. He has also tendered his unconditional and
B
unqualified apology.

On being apprised that the news items referred to above found to be

- false which were published on the basis of the information and material
supplied by the journalist/reporter Dina Nath Misra to "The Sunday C
Tribune" and "Punjab Kesari", we issued a similar contempt notice to Dina
Nath Misra by our Order dated July 9; 1996. The journalist Dina Nath
Misra in his affidavit dated August 1, 1996 admitted to have written a
capsule item about the allotment of petrol pumps to the sons of a senior
Judge of the Supreme Court which was not factually correct and he has, D
therefore, tendered his unqualified apology for the lapse that he had
committed. He has stated that he has been a journalist for about 4 decades
and is known for his integrity and commitment towards the professionalism.
He has further stated that a highly reliable source who had earlier given
many reliable informations to the deponent gave this information also
which was believed by him to be true, but it turned out to be incorrect. He E
has stated various other facts to show :that the mistake was bonafide, but
we find the said excuses and explanations to be not acceptable at all. He
has, however, expressed his deep repentance and tendered unqualified
apology and seeks forgiveness for this honest and inadvertent blunder. In
yet another additional affidavit dated August 29, 1996, he has reiterated F
the said facts and admitted that he has committed a grievous error in
writing news items which have absqlutely no basis, and has again offered
unconditional apolo&ry to Hon'sble the Chief Justice as well as to this Court.

It may be relevant here to recall that the freedom of Press has always
been regarded as an essential pre-requisite of a Democratic form of G
Government. It has been regarded as a necessity for the mental health and
the well being of the society. It is also considered necessary for the full
development of the personality of the individual. It is said that without the
freedom of press truth cannot be attained. The freedom of press is a part
of the freedom of the speech and expression as envisaged in Article H
420 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A 19(1)(a) of the Constitution of India. Thus, the freedom of the press is
included in the fundamental right of freedom of expression. The freedom
of Press is regarded as "the mother of all other liberties" in a democratic
society. Further, the importance and the necessity of having a free press in
a democratic Constitution like ours was immensely stressed in several
landmark judgments of this Court. The case of Indian &press Newspaper
B v. Union of India, [1985] 1 SCR 641, is one of such judgments rendered by
Venkataramiah, J. (as he then was). Again in another case of Indian
Express Newspaper v. Union of India, AIR (1986) SC 872. A.P. Sen, J. (as
he then was) described the right to freedom of the press as a pillar of
individual liberty which has been unfailingly guarded by the Courts.
c
It is thus needless to emphasise that a free and healthy press is
indispensable to the functioning of a true demo(:racy. In a democratic
set-up, there has to be an active and intelligent participation of the people
in all spheres and affairs of their community as well as the State. It is their
right to be kept informed about current political, social, economic and
D cultural life as well as the burning topics and important issues of the day
in order to enable them to consider and form broad opinion about the same
and the way in which they are being managed, tackled and administered
by the Government and i,ts functionaries. To achieve this objective the
people need a clear and truthful account of events, so that they may form
E their own opinion and offer their own comments and view points on such
matters and issues and select their further course of action. The primary
function, therefore, of the press is to provide comprehensive and objective
information of all a·spects of the country's political, social, economic and
cultural life. It has an educative and mobilising role to play. It plays an
important role in •moulding public opinion and can be an instrument of
F social change. It may be pointed out here that Mahatama Gandhi in his
autobiography has stated that one of the objectives of the newspaper is to
understand the proper feelings of the people and give expression to it;
another is to arouse among the people certain desirable sentiments; and
the third is to fearlessly express popular defects. It, therefore, turns out
that the press should have the right to present anything which it thinks fit
G for publication.

But it has to be remembered that freedom of press is not absolute,
unlimited and unfettered at all times and in all circumstances as giving an
u11rest1icted freedom of the speech and expression would amount to an
H uncontrolled licence. If it were wholly free even from reasonable restraints it
INRE_:HARIJAISINUH lNRE: VIJAYKR.[FAIZANUDDIN,J.] 421

would lead to disorder and anarchy. The freedom is, not to be misunderstood A
as to be a press free to disregard its duty to be reasonable. Infact, the element
of responsibility must be present in the conscience of the joumalists. In an
organised society, the rights of the press have to be recognised with its duties
and responsibilities towards the society. Public orde1; decency, morality and
such other things must be safeguarded. The protective cover of press freedom
B
must not be thrown open for wrong doings. If a new~paper publishes what is
improper, mischievously false or illegal and abuses its liberty it must be
punished by Cowt of Law. The Editor of a Newspaper or a journal has a
greater responsibility to guard against untruthful news and publications for
the simple reason that his utterances have a far greater circulation and
impact than the utterances or an individual and by reason of their appear- c
ing in print, they are likely to be believed by the ignorant. That being so,
certain restrictions are essential even for preservation of the freedom of
the press itself. To quote from the rep01t of Mons Lopez to the Economic
and Social Council of the United Nations "if it is tme that human progress
is impossible without freedom, then it is no less tme that ordin01y human D
progress is impossible without a measure of regulation and discipline". It is
the duty of a true and responsible journalist to strive to inform the people
with accurate and impartial presentation of news and their views after
dispassionate evaluation of the facts and information received by them and
to be published as a news item. The presentation of the news should be
truthful, objective and comprehensive without any false and distorted E
expression.

In the present case, as w~ have noticed above, neither printer,
published nor the editor and reporter took the necessary care in evaluating
the correctness and credibility of the information published by them as the F
news items in the newspapers referred to above in respect of an allegation
of a very serious nature having great repercussion causing an embarras-
ment to this Courts. An Editor is a person who controls the selection of
the matter which is to be published in a particular issue of the newspaper.
The Editor and Publisher are liable for illegal and false matter which is
published in their newspaper. Such an irresponsible conduct and attitude G
on the part of the editor, publisher and the reporter cannot be said to be
done in good faith, but distinctly opposed to the high professional stand-
ards as even a slightest enquiry or a simple verification of the alleged
statement about grant of Petrol outlets to the two sons of a senior Judge
of the Supreme Court, out of discretionary quota, which is found to be H
422 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A patently false would have revealed the truth. But it appears that even the
. ordinary care was not resorted to by the contemners in publishing such a
false news items. This caMot be regarded as a public service, but a
dis-service to the public by misguiding them with a false news. Obviously,
this cannot be regarded as something done in good faith. 1.

B
But it may be pointed out that various judgments and pronounce-
ments of this Court, bear testimony to the fact that this Court is not
hypersensitive in matters relating to contempt of Courts and has always
shown magnanimity in accepting the apology on being satisfied that the
error made in the publication was without any malice or without any
C intention of dis-respect towards the Courts or towards any member of the
judiciary. This Court has always entertained fair criticism of the judgments
and orders or about the person of a Judge. Fair criticism within the
parameters of law is always welcome in a democratic system. But the news
items with which we are concerned can neither be said to be fair or made
D in good faith but wholly false and the explanation given is far from
satisfactory. Shri Hari Jaisingh, Editor of the Sunday Tribune and Lt. Col.
H.L. Dheer, Publisher as well as Vijay Kumar Chopra. Editor and Publish-
er of daily Punjab Kesari have taken the stand that they had taken the news
items to be correct on the basis of the information supplied by a very senior
senior journalist of long standing Dina Nath Misra. But this cannot be
E accepted as a valid excuse. It may be stated that at common Law, absence
of intention or knowledge about the correctness of the contents of the
matter published (for example as in the present case, on the basis of
information received from the journalist I reporter) will be of no avail for
the editors and publishers for contempt of Court but for determining the
F quantum of punishment which may be awarded. Thus they cannot escape
the responsibility for being careless in publishing it without caring to verify
the correctness. However, since they have not only expressed repentance
on the incident but have expressed their sincere written unconditional
apology, we accept the same with the warning that they should be very
careful in future. As regards the case of Dina Nath Misra, we find he acted
G in gross carelessness. Being a very experienced journalist of long standing
it was his duty while publishing the news item relating to the members of
the apex Court, to have taken extra care to verify the correctness and if he
had done so, we are sure there would not have been any difficulty in coming
to know that the information supplied to him had absolutely no legs to
H stand and was catently false and the publication would have been avoided
INRE:HARIJAISINGH.INRE: VUAYKR[FAIZANUDDIN,lr- 423.

which not only caused great embarrassment to this Court but conveyed a A
wrong message to the public at large jeopardizing the faith of the illeterate
masses in our judiciary. Shri Dina Nath Misra has no doubt committed a
serious mistake but he has realised bis mistake and expressed sincere
repentance and has tendered unconditional apology for th~ same. He was
present in the Court and virtually looked to be gloomy and felt\epentant B
of what he had done. We think this sufferance itself is sufficient punishment
for him. He being a senior journalist and an aged person and,· the~efore,
. taking ·a .lenient view of the matter, we accept bis apology also. We,
· however, direct that the contemners will publish in the front page of their
respective newspapers within a box their respective apologies specifically
· mentioning that the said news items were absolutely incorrect and false. C
. This may be done within two weeks. The Contempt Petition Nos. 206-207
of 1996 are disposed of accordingly.

S.S. Petitions disposed of.
A MIS. SHAPERS CONSTRUCTION (P) LTD. AND ANR.
v.
AIRPORT AUTHORITY OF INDIA AND ANR.

SEPTEMBER 17, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.)

Tender Form-Condition enVisaging completion of particular type of
work on the date of application-Party had done major part of such work but
not completed on the date of application-Hence tender form refused-Party
C filing a writ petition and High Court ordering issue of tender form-On appeal
held since on the date of application admittedly such work was not completed,
the pre-condition is not satisfied-Hence the High Court was right in finally
dismissing the writ petition.

New Horiwns Ltd. & Ors. v. Union of India & Ors., (1995] 1 SCC 478,
D distinguished.
CIVIL APPELLATE JURISDICTION : Special Leave Petition (C)
No. 181~1-22 of 1996.

From the Judgment and Order dated 8.8.96 of the Madhya Pradesh
E High Court in W.P. No. 2164/96 and L.PA. No. 138of1996.

G.C. Gupta and Shiv Sagar Tiwari for the Petitioners.

The following Order of the Court was delivered :

F The petitioners have filed these special leave petitions against the
order of the Division Bench of the High Court of M.P. at Jabalpur made
on August 14, 1996 in LPA No. 138/96. The learned single Judge as well
as the Division Bench dismissed the writ petitions in which the petitioners
had sought direction to the respondents to give the tender form on the
G ground that they had satisfied Condition No. 2 of the Tender Conditions.
Pursuant to the interim order passed by the High Court, the petitioner
submitted their tender forms. But, at the final hearing, the writ petitions
came to be dismissed. Thus, these special leave petitions.

It is contended for the petitioners that they have past experience in
H execution of the national highway. They have two contracts of more than
424
SHAPERS CON1N. (P) LTD. v. AIRPORT AUUIORITY OF INDIA 425

required amount specified in the tender conditions, 42% of Rs. 4 crores A
and Rs. 6 crores respectively. The certificates issued by the competent
engineers, namely Executive Engineer and the Superintending Engineer
would show that the petitioners have been satisfactorily performing their
duties in execution of the work. The petitioners, after securing the con-
tracts, have executed major part of the work within the scheduled time
granted under. the contracts. Therefore, the failure to give tender form at
B
the inception and consideration thereof after the interim direction is
violative of their fundamental right to compete in the tender for the further
contract. The question is : whether the view taken by the High Court is
wrong in law? Tender Condition No. 2 envisages as under:
c
"The tenderer who wish to apply shall have satisfactorily completed
at least two runway/ National highway, preferably rigid pavement
works involving considerable earth filling each of value Rs. 400
lakhs or one work of Rs. 600 Ic.khs during the last five years and
have annual turn over of Rs. 500 lakhs in each (1992-93, 1993-94 D
& 1994-95) and should possess computerised hot mix plant and
concrete batching plant for executing asphaltic and rigid pavement
works."

A reading of this condition would clearly indicate that the tenderers
who wish to apply shall have satisfactorily completed at least two run- E
way/National highway, preferably rigid pavement works involving consider-
able earth filling, each valuing Rs. 400 lakhs and one work of Rs. 600 lakhs
during the last five years and have annual turn over of Rs. 500 lakhs in each
of the last three years {1992-93, 1993-94 and 1994-95). He should possess
computerised hot mix plant and concrete batching plant for executing F
asphaltic and rigid pavement works.

It is true, as contended by the petitioners, that the Tender Condition
would indicate that they had completed at least two runway/National
highway, preferably rigid pavement works. He contends that the comple-
tion of the work is different from tendering the contracts for execution of G
the work. They had two contracts as envisaged thereunder; though they
had not totally completed the same, major part of the work had been
completed. Therefore, they have fulfilled the conditions prescribed there-
under. The petitioners, thereby, could not be denied of their right to
compete in, apply for and be considered for assignment of the work under H
426 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the tenders now in dispute. We find no force in the contention.

The condition envisages that he shall have satisfactorily completed.
The word 'completed' would indicate that as on the date of application for
the tenders, he should have completed at least two runway/National high-
way works, preferably rigid pavement works involving considerable earth
B filling. In other words, the completion of the work of at least two run-
way/National' highway is a pre-condition. On their own admission, they had
not completed, though the major part of the work as professed by them is
completed. Under these circumstances, the view taken by the High Court
cannot be said to be unwarranted.
c The learned counsel placed strong reliance on the judgment of this
Court in New H01izons Ltd. & 01:f. v. Union of India & Ors., [1995] 1 SCC
478, in particular, paragraphs, 21 and 22 in support thereof. This case
relates to previous experience and the question therein was : whether the
previous experience would be considered after submitting the tenders or
D before submitting the tenders? This Court had held that the question would
arise only after the submission of the tender. In support of consideration
of the tender thereof, the previous experience would play an important role
for awarding the -contract. In that case, this Court considered and held that
at the inception, the tender forms cannot be refused on the ground that he
had not proved the previous experience. That question has no relevance to
E the facts in these petitions. Und<:;r these circumstances, as stated earlier,
the completion of the work of at least two runway/National highway works
is a pre-condition for submitting the application. On their own admission,
since the petitioners had not completed the works in hand, we cannot find
any illegality in respondents not giving the tender forms nor in non-con-
F sideration of their cases pursuant to the interim direction given by the High
Court.

·The petitions are accordingly dismissed.

G.N. Petitions dismissed.
MIS. KALYANJI VITHALDAS AND SONS· A.
v.
THE STATE OF M.P. AND ORS.

SEPTEMBER 17, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Agreement with Govemment for purchase of Tendu leaves in certain
area for 3 years-One of the tenns was that the lease was renewable every
yea~Appellant to opt for renewal within 15 days prior to the end of the
year-Leases to be renewed within 15 days of the issue and to be accepted by C
the Department-Appellant's offer for renewal accepted by the Govemment
and communication sent-Appellant refused to accept the communication
and sent telegram withdrawing from the offer-Loss to the Government on
account of non-execution of the renewal deed and due to non-collection of
Tendu leaves for the pe1iod since it was not sold to any other agency-Govern- D
ment calling upon the appellant to make good the loss-High Court dismissing
the writ petition and holding that the appellant was liable to pay the
damages-On appeal held, acceptance of the offer communicated to the ap-
pellant by the Govemment within time-Appellant appears to have taken
undue advantage of some typographical e"or in the name of the appel/a:it-
company and sought to resile from the offer accepted by the Govem- E
ment-Having allowed the contract to lapse resulting in loss caused to the
State due to non-execution of the contract, the resultant loss has to be
recovered from the appellant-<Jovemment is empowered to recover the ar-
rears of the dues as land revenue from the appellant-contractor towards loss
caused to the Govemment in not collecting the Tendu leaves under the con- F
tract-Land Revenue Code, S.155-Revenue Recove1y Act, 1890, Ss.3 and
4(2).

Shiv Saran Lal v. State of M.P. & Ors., AIR (1980) M.P. 93, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 675 of G
1980.

From the Judgment and Order dated 24.1.79 of the Madhya Pradesh
High Court in M.P. No. 370 of 1971.

S.V. Deshpande for the Appellant. H
427
428 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A S.K. Agnihotri. and Ashok Kr. Singh for the Respondents.

The following Order of the Court was delivered :

This appeal by special leave arises from the judgment of the Division
Bench of the M.P. High Court at Jabalpur made on January 24, 1979 in
B Miscellaneous Petition No. 370/71.

The admitted facts are that the appellant-firm had entered into an
agreement with the Government for purchase of Tendu leaves in Unit No.
14, Chowki in South Division for three years ending on December 31, 1970
C on the terms and conditions mentioned in the agreement dated November
30, 1968. One of the terms was that the lease is renewable every year. The
lease commences from February l of the year and- end on January 31 of
the next year. In this case, the agreement of the appellant commenced from
Mai'ch 2, 1968 and it was to end on January 31, 1968. As per the terms of
the agreement, the appellant had to opt for renewal within 15 days prior
D to December 31 and the leases were to be renewed within 15 days from
the date of the issue and was to be accepted by the Department. The
admitted position is that the appellant had offered for renewal on Decem-
ber 7, 1968. It is seen from the record that the Government had accepted
the offer on January 31, 1969 and communication was sent to the appellant
E on February 7, 1969; but he refused to receive the same. On February 9,
1969, the appellant had sent a telegram withdrawing from the offer of the
renewal. Since the appellant had refused to accept the communication, it
was sent by the Divisional Officer on February 12, 1969 and was received
by the appellant on February 17, 1969. Consequently, a letter was sent on
May 20, 1979· calling upon the appellant for payment of Rs. 93,821.23
F towards the loss caused by the appellant due to non-execution. of the
renewal deed and also for non-collection of the Tendu leaves for the period
since it was not sold to any other agency. The appellant challenged it by
filing a writ petition in the High Court. The High Court in the impugned
order dismissed the same holding that before the appellant had withdrawn
G the offer, the Government had already accepted the offer of the appellant
and, therefore, he was liable to pay the damages.

Shri S.V. Deshpande, learned counsel for the appellant raised two-
fold contentions. Firstly, since the communication was not sent to the
appellant before 31st January, the deadline, the appellant was entitled to
H Withdraw from the offer. He had duly withdrawn it on February 9, 1969 by
KALYANJI VITHAL DAS v. STATE 429

issuing a telegram to all concerned. Therefore, the appellant cannot be A
saddled with the liability for the resultant loss. We find no force in the
contention.

Clause (2) of the contract provides as under :

"This agreement shall commence from 2.3.1968 and shall remain B
in force upto 31.12.1968 unless earlier determined under the terms
hereinafter appearing;

Provided that :

(1) Unless earlier determined under the terms of the Agreement c
there will be yearly renewal of Agreement by 31st January
each year by issue of an order by Government in writing
provided. Government are satisfied that purchaser has ful-
filled the following conditions each year :

(a) the quality of leaves collected during the year has exceeded D
by 10 per cent or more over the quantity notified and also 10
per cent or more over the quantity collected in the unit during
the preceding year.

(b) There was no serious breach of the Act and Rules made
E
thereunder and the Agreement.

(c) The purchaser had paid all dues including penalty, fine, etc.
promptly and in accordance with the provisions of the Agree-
ment.
r
F
(2) Purchase rate per standard bag applicable for every renewed
year shall be the rate calculated by increasing the purchase
rate applicable to the preceding year by 5 per cent and adding
to it the total increase in rates of all the following terms during
the renewed year as compared to rates fixed for the same
items in the preceding year : G
(i) Purchase rate payable to grower,

(ii) remuneration payable to Agent,

(iii) handing charges payable to agent. H
430 SUPREME COURT REPORTS [1996) SUPP. 6 s:c.R.

A (3) The purchaser shall, execute the fresh Agreement within 15
days from the date of the issue of the order granting renewal,
after completing all formalities required under conditions of
Tender Notice for executing Agreement failing which the
Agreement shall be liable to be terminated by Government
and all consequences of termination given in the Agreement
B shall be binding and applicable. Loss to Government if any
in subsequent sal~ of leaves in the unit shall be recoverable
from the previous purchaser." .

It is seen that the appellant had a contract for three years ending on
C December 31, 1970. He worked out the contract in the year 1968 ending
on January 31, 1969. Under Clause (1) of the proviso, unless earlier
determined under the terms of the agreement, there will be yearly renewal
of agreement by 31st January each year by issue of an order by Government
in writing provided Government is satisfied that purchaser had fulfilled the
D conditions enumerated subsequently. It is true, as contended by Shri S.V.
Deshpande; that the word 'issue' implies service of notice. Unless the
contractor receives acceptance by the Government he will not be in a
position to know whether or not his offer has been accepted by the
Government. Therefore, the date of the receipt would be the date of issue.
For this proposition, there would not be any controversy. The question is
E : whether on expiry of 31st January of the year, the previous contractor is
absolved of his liability for non-execution of the renewal date? It is seen
that originally, the contract was for three years. Therefore, he is entitled
for renewal unless it was either determined earlier and offer of renewal
was rejected by the Government. Admittedly, the appellant had given his
F offer for renewal before the expiry of the period and the Government also
had accepted the offer before 31st January, 1969. Obviously, it would take ·
time for communication thereof. It being a continuing contract which the
appellant otherwise would have for three years, there is no hiatus in the.
continuity unless any step was taken by the Government in the interregnum .
to have his lease terminated in terms of the contract. In this case, the
G contract has not been terminated. Resultantly, the acceptance of the offer
communicated to the appellant by the Government having been made
within time, namely, on January 31, 1969, what remained to be done was
only execution of the renewal lease deed for a further period of one year
in terms of the contract. The appellant had withdrawn his offer only after
H · the acceptance was communicated to him on February 7, 1969. No doubt,
KALYANJI VITHAL DAS v. STAIB 431

there was a defect in communication of the order to the appellant but as A
regards the address furnished by the appellant and sent to the Government,
there was no defect. There may be some typographical error in the name
of the appellant-company. The appellant appears to have taken undue
advantage of it and sought to resile from the offer accepted by the Govern-
ment. Having allowed the contract to lapse resulting in loss caused to the
State due to the non execution of the contract, the resultant loss has to be
B
recovered from the appellant.

Shri S.V. Deshpande, learned counsel, has placed reliance on the
judgment of the same Bench in another case in Shiv Saran Lal v. State of
M.P. & Ors., AIR (1980) M.P. 93. Therein, learned Judges have held that C
since the communication of acceptance was not made before the expiry of
January 31 of the succeeding year, the contractor was not liaple for the
payment thereof. On the principle of the communication, as stated earlier,
there is no quarrel but the learned Judges have not considered the further
aspect, viz., whether in a case of continuing contract, is he absolved of the
liability? In the view as we have stated earlier, the same Bench appears to
D-
have taken inconsistent view without reference to the judgment under
appeal. Therefore, the later view expressed by the High Court on the
liability is not correct in law.

The question then is : whether the arrears due from the lessee- E
contractor would.be recovered as arrears of land revenue? Section 155 of
the Land Revenue Code and Sections 3 and 4(2) of the Revenue Recovery
Act of 1890 reads as under :

"155. The following monies, may be recovered, as far as may be
under the provisions of this chapter in the same manner as arrears F
of land revenue :

(a) xxxx xxxx xxxx

(b) all monies falling due to the State Government under any grant,
lease or contract which provides that they shall be recoverable in G
the same manner as an arrears of land revenue."

Section 3 of the Revenue Recovery Act.

"3. Recovery of public demands by enforcement of process in other
districts than those in which they become payable (1) where an H
432 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A arrear of land revenue, or a sum recoverable as an arrear of
land-revenue is payable to a Collector by a defaulter being or
having property in a district other than that in which the arrear
accrued or the sum is payable, the Collector may send to the
Collector of the other district a certificate ~n the form as nearly as
may be of the Schedule, stating -
B
(a) the name of the defaulter and such other particulars as may
be necessary for his identification, and

(b) the amount payable by him and the account on which it is due.

c (2) The certificate shall be signed by the Collector making it (or
by any officer to whom such Collector may, by order in writing,
delegate this duty) and, save as otherwise provided by this act, shall
be conclusive proof of the matters therein stated.

(3) The Collector of the other district shall, on receiving the
D certificate, proceed to recover the. amount stated therein as •if it
were an arrear of land revenue which had accrued in his own
district."

Section 4( 1)
E "4. Remedy available to person denying liability to pay amount
recovered under last foregoing section (1) when proceedings are
taken against a person under the last foregoing section for the
recovery of an amount stated in a certificate that person may if he
denies his liability to pay the amount or any part thereof and pays
F the sa;ne under protest made in writing at the time of paying and
signed by him or his agent, institute a suit for the repayment of
the amount or the part thereof so paid."

A reading of these provisions would clearly indicate that the recovery
G of public demands by enforcement of process is recoverable as arrears of
land revenue, since all moneys fall due to the State Government, under any
grant, lease or contract shall be recoverable in the same manner as arrears
of land ;:evenue. Therefore, the Government is clearly empowered to
recover the arrears of the dues as land revenue from the appellant-con-
tractor towards loss caused to the Government in not collecting the Tendu
H leaves under the contract.
KALYANJJ VITI.IAL DAS v. STAIB 433

We are informed that the appellant has already furnished the bank A
guarantee. The Government is at liberty to enforce the bank guarantee and
recover the same. In case of any shortfall of the amount already given under
the bank guarantee, the Government is at liberty to recover the same.

The appeal is accordingly dismissed with the above directions but, in
the circumstances, without costs. B

... G.N. Appeal dismissed.

•
A JAYKUMAR GANPATI WAIKAR
v.
NIVRITTI SAKHARAM TITWE AND ORS.

SEPTEMBER 17, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Bombay Tenancy and Agricultural Lands Act, 1948: Sections 31(3),
32 & 32F-Proceedings for ejectment of tenant:-lnitiated by appellant's
mother on the ground that she was entitled to resume the land-Pending
C proceedings she died, and her son the appellant who was a min01; was brought
on record-Proceedings ending in dismissal of the suit-Appellant attained
majority and the tenant issued notice opting to purchase the land-Tenant
filing Wlit petition in High Court-High court held that the tenant entitled to
purchase the land since as on April 1, 1957, the tillers' day, lte was in pos-
session but could not opt to purchase the property due to the disability of the
•·-
D widow which stood in his way-On appeal, held : It was the mandatory duty
of the minor landlord, after attaining maj01ity, to issue notice to the tenant
calling upon him, whether he would exercise his option to purchase, as en-
visaged under Section 32F of the Act-Admittedly, he did not issue any such
notice-On the other hand, the tenant himself, on becoming aware of the
E appellant's becoming major, issued the notice exercising the option to purchase
the property under Section 32F of the Act-There is no illegality in the ultimate
conclusion reached by the High Cowt though this consideration was not ad-
verted to by the High Court.

Harshavardhan Shrinivas Potnis v. Mahadu Pundalik Gangurde, AIR
F (1980) Born. 198, distinguished.

--.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 688 of .
1980.

From the Judgment and Order dated 23.11.78 of the Bombay High
G Court in Spl. C.A. No. 2589 of 1974.

Krishna Mahajan, P.H. Parekh for the Appellant.

V.N. Ganpule and V.B. Joshi for the Respondents.

H The following Order of the Court was delivered :
434
J.G. WAIKAR v. N.S. TITWE 435

.. This appeal by special leave arises from the judgment dated Novem-
ber 23, 1978 of the High Court of Bombay in Special Civil Application No.
A

2589/74 filed under Article 227 of the Constitution.

The admitted facts are that the appellant was a minor when his
adoptive mother Guru Santabai Ganpati Waykar had initiated that
B
proceedings under Section 31(3) of the Bombay Tenancy and Agricultural
Lands Act, 1948 (for short the "Act") for ejectment of the respondent-
tenant on the ground that she was entitled to resume the land. Pending
proceedings, she died and thereafter the appellant had come on record.
Admittedly, as on the date of the death of his mother the appellant was a
minor. The proceedings under Section 31(3) ultimately ended in dismissal C
of the suit on March 13, 1972. In the meanwhile, the appellant had attained
majority on March 19, 1968. Resultantly, the tenant got issued notice on
April 21, 1968 under Section 32F of the Act opting to purchase the land
under Section 32. The application, appeal and the revision arising under
the Act came to be dismissed. Thus the tenant-respondent filed writ D
petition in the High Court. The writ petition was allowed and it was held
that the respondent was entitled to purchase the lands since as on April,
1, 1957, the tillers' day, he was in possession but he could not opt to
purchase the property due to the disability of the widow, which stood in
his way under Section 32F of the Act. Thus this appeal by special leave.
E
The question is : whether the respondent had exercised that right
under Section 32F of the Act within one year? Section 32F of the Act
envisages as under :

"32F. (1) Notwithstanding anything contained in the preceding F
sections -

(a) where the landlord is a minor, or a widow, or a person subject
to any mental or physical disability the tenant shall have the right
to purchase such land under Section 32 within one year from the
expiry of the period during which such landlord is entitled to G
terminate the tenancy under Section 31 and for enabling the tenant
to exercise the right of purchase, the landlord shall send an
intimation to the tenant of the fact that he has attained majority,
before the expiry of the period during which such landlord is
entitled to terminate the tenancy under Section 31." H
436 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A It is seen that the widow had already exercised the option to ter-
minate the tenancy of the tenant and the proceedings were pending in the
appropriate forum during the course of which the widow died. On her
demise, the appellant, admittedly being a minor yet another disabled
landlord, came o~ record as legal representative of the adoptive mother.
It is also further seen that the proceedings under Section 31(3) came to be
B terminated on March 13, 1972. A literal interpretation of Section 32F
would indicate that widow, the minor or the disabled landlord, on minor's
attaining majority i.e., is cessation of disability, shall be required to intimate
to the tenant of his attaining majority before his exercising the option to
terminate the tenancy under Section 31(3) of the Act. Admittedly, the
C mother having already opted for termination of the tenancy for personal
resumption and the appellant having been a minor, stepped into the shoes
of his mother and continued the proceedings for resumption of the land;
those proceedings, as stated earlier, came to be terminated on March 13,
1972. Resultantly, even before the proceedings came to be terminated, the
D tenant had opted to purchase the property by issuing the notice on April
21, 1968. Admittedly, the appellant had attained majority on march 19, 1968
and the notice of option to purchase the property was exercised by the
tenant within one month thereafter. Under these circumstances, the limita-
tion of one year h~d not expired. Since the mother, disabled landlady, was
continuing the proceedings and on her demise the appellant having got
E substituted himself as landlord, but he being a further disabled landlord,
the need to issue notice to the mother of the appellant did not arise
because she had ·already exercised the option under Section 31(3) to
resume the land by terminating the tenancy for personal cultivation and the
proceedings therefor were initiated. Since she died pending proceedings
F and in the meanwhile, the appellant had attained majority, the need to issue
notice by the tenant opting to purchase the property arose only after the
disability ceased. The disability ceased on March 19, 1968 and the notice
of option was given by the tenant within one month thereafter, namely, on
April 21, 1968.

G Shri Krishna Mahajan, learned counsel for the appellant, placed
reliance on the judgment of the Division Bench of the Bombay High Court
in Harshavardhan Shrinivas Potnis v. Mahadu Pundalik Gangurde, AIR
(1980) Born. 198 and contended that irrespective of his attaining majority
or disability withir_ one year from the date of the demise of his mother, the
H respondent was to exercise the option and had not done so. Therefore, the

j
J.G. WAIKAR v. N.S. TITWE 437

respondent is not entitled to the benefit. We find no force in the conten- A
tion. In that case, the facts were that the mother who was widow had not
exercised the option under Section 31(3) of the Act. On her demise, the
minor who succeeded by virtue of bequeath made by the widow had
exercised the option within one year from the date of the demise of the
mother-donor. Therefore, it was interpreted that Sections 32F and 31(3)
B
are to be read together and harmonious interpretation is required to be
given. In this case that question does not arise for consideration.

It is also seen that the widow mother of the appellant had already
exercised the option under Section 31(3) and continued the proceedings
pending which she died. Subsequently, the appellant came on record as a C
legal representative and continued the proceedings. As held earlier, It was
the mandatory duty of the minor landlord, after attaining majority, to issue
notice to the tenant calling upon him, whether he would exercise his option
to purchase, as envisaged under Section 32F of the Act Admittedly, he did
not issue any such notice. On the other hand, the tenant himself, on
becoming aware of the appellant's becoming major, issued the notice D
exercising the option to purchase the property under Section 32F of the
Act. There is no illegality in the ultimate conclusion reached by the High
Court though this consideration was not adverted to by the High Court.

The appeal is accordingly dismissed, but in the circumstances,
without costs.
E

G.N. Appeal dismissed.
A D.K. CHHANGANI AND ORS.
v.
NITYA RANJAN MUKHERJEE AND ORS.

SEPTEMBER 17, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Ce11tral Civil Services (Recog11itio11 of Se1vice Associatio11s) Rules,
1993:

c is ope11Rules 4 to J(}-Rival U11io11s of Se1vice employees-Recognition of-It
to the U11io11 co11cemed to approach the Govemme11t under the
provisio11s of the Rules and to seek recognition in accordance with /aw-This
would avoid future litigation i11 this behalf.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 490 of
D 1980.
From the Judgment and Order dated 14.9.79 of the Calcutta High
Court in Civil Rule No. 13393 (W) of 1979.

AK. Pandey, R.K. Khanna and R.P. Singh for the Appellants.
E
B. Sen and P.P. Malhotra, Dilip Sinha, D. Krishnan, K.R. Nambiar
.and C.V.S. Rao for the Respondents.

The following Order of the Court was delivered :

F This appeal by special leave arises from the order of the Calcutta
High Court made on September 14, 1979 and December 17, 1979 in Civil
Rule No. 13393 (W).

The claims relate to the recognition to the rival union of Geological
Survey of India Employees' Association. The controversy is : as to whether
·G the Calcutta High Court has jurisdiction over the adjudication made by the
,Industrial Tribunal in Maharashtra on the rival questions of the member-
ship and recognition of an association based thereon? It is not necessary
to go into the question, though it is open to grave and grim jurisdictional
fault for two reasons. Firstly, since elections were held on September 12,
H 1975 and more than two decades have passed by since then, it is· no longer
438
D.KCHHANGANiv. N.R.MUKHERJEE 439

- a live issue. Moreover, the President exercising the power under Proviso
to Article 309 of the Constitution and clause (5) of Article 148, after
consultation with the comptroller and Auditor General, had issued rules
A

called the Central Civil Services (Recognition of Service Associations)
Rules, 1993, which came into force w.e.f. November 5, 1993. Rule 4 deals
with Service Associations registered or yet to be registered. They are
B
required to make an application under Section 3. Clause (5) prescribes
conditions for recognition of a Service Association and provides as under:

"5. Conditions for recognition of Service Associations : A Service
Association which fulfills the following conditions may be recog-
nised by the Government, namely; C

(a) An application for recognition of Service Association has
been made to the Government containing Memorandum of
Association, Constitution, Bye-laws of the Association,
Names of Office-Bearers, total membership and any other
information as may be required by the Government; D

(b) the Service Association has been formed primarily with the
object of promoting the common service interest of its mem-
bers;
E
(c) membership of the Service Association has been restricted to
a distinct category of Government Servants having common
interest all such Government servants' being eligible for mem-
bership of the Service Association;

(d) (i) The Association represents minimum 35 per cent of total F
number of a category of employees provided that where there
is only one Association \vith second highest membership,
although less than 35 per cent may be recognised if it com-
mands at least 15 per cent membership;
G
(ii) The membership of the Government servant shall be
automatically discontinued on his ceasing to belong to such
category;

(e) Government employees who are in service shall be members
of office bearers of the Service Association; H
440 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A (t) the Service Assotiation shall not be formed to represent the
interests, or on the basis of any caste, tribe or religious
denomination or of any group within or Section of such caste,
tribe or reli~ious denomination;

(g) tfle Executive of the Service Association has been appointed
B from amongst the members only; and
I

(h) the lands of the Service Association consist exclusively of
subscriptions from members and grants, if any, made by the (

Government, and are applied Ot!.ly for the furtherance of the
objects of the Service Association."
c
Rule 6 deals with conditions subject to which recognition is con-
tinued to the Associations and Rule 7 gives power for verification of the
membership. Rule 8 deals with withdrawal of recognition. Rule 9 gives
power to the Government for relaxation. Rule 10 relates to interpretation
D of the Rules.

It would, thus, be seen that if there are more than one rival unions
of the Service employees, the Government of India have evolved a policy
as to how the Service Associations required to be recognised by the
appropriate authority should represent the interest of the members of the
E respective unions. In this view, it would be open to the appropriate union
to approach the Government in the light of the above rules and seek
recognition in accordance with law to avoid any future litigation in this
behalf.

The appeal is accordingly disposed of. No costs.
F
'G.N. Appeal disposed.

\
GHEEVARGHESE MATHEW ETC. A
v.
STATE OF KERALA AND ANR. ETC.

SEPTEMBER 17, 1996

(K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Land Acquisition Act, 1894:

Compensation-Award of-Appeal by claimants for enha11ce-
n1ent-High Court granting compensation at Rs. 1000 per cent-On appeal by C
ciaimants for fwther enhancement held : Ten months prior to the date of
Notification, claimants assessed the compensation at Rs. 350 per cent and .
offered to sell at that rate-High Court awarded compensation at Rs. 1000
per cent which is three times more than what was offered by the claimants
themselves-No inteiference called for to increase fwther compensation.
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4123 of
1991.

From the Judgment and order dated 17.9.90 of the Kerala High
Court in L.A.A. No. 270 of 1985.
E
With Civil Appeal Nos. 4124/91 and 11812/95.

T.L. V. Iyer, Ramesh Babu, M.R. B.V. Deepak, M.T. George and
Ms. Malini Poduval (NP) for the Appellants.

G. Viswanath Iyer, T.G.N. Nair and Shakil Ahmed Syed for the F
Respondents.

The following Order of the Court was delivered :

Notification under Section 3(1) of the Kerala Land Acquisition Act,
1950 which is equivalent to Section 4(1) of the Land Acquisition Act, 1894 G
(1 of 1894) was published on July 8, 1980 acquiring an extent of 3.37
hectares of land for public purpose, namely, Greater Cochin Development
Authority, for the purpose of the Site and Service Scheme at Alwaye. The
land Acquisition Officer in his award dated March 19, 1982 determined
compensation at Rs. 280 per cent as against Rs. 2000 per cent claimed by H
441
442 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A the appellants. On reference, the civil court enhanced the compensation to
Rs. 1800 per cent by its award and decree dated August 7, 1984. On further
appeal by the State, the High Court reduced the compensation to Rs. 1000
per cent. Thus, these appeals by special leave.

Shri T.L.V. Iyer, learned senior counsel for the appellants, has
B contended that the lands under Exs. A-6 to A-B, of an extent ranging
between 60 cents and 40 cents had been sold on March 31, 1976, April 13,
1976 and April 21, 1976 respectively at the rate of Rs. 800 per cent. Ex.
A-3 to A-5 would indicate steep rise in the value till the date of the
notification. That was spoken of even by RW 2, the executive Officer of
c the Panchayat. The acquired lands are abutting the two roads on either
side. The developed area is situated near the acquired lands. These facts
had been duly taken note of by the reference Court in determining refer-
ence under Section 18. The High Court had not adverted to these relevant
facts but considered Exs. A-6 to A-8 and held that the compensation at
D Rs. 1000 would be the just compensation. Unless the findings of the
reference Court were found to be perverse, the High Court would not have
interfered with the award of the reference Court. Shri G. Viswanatha Iyer,
learned senior counsel for the respondent, placed reliance on a document,
a letter addressed by the claimants themselves wherein they have agreed
as on October 15, 1979 to sell the property to GCDA @ Rs. 350 per cent.
E In view of this circumstance, it does not warrant more compensation than
has been awarded by the High Court.

Having regard to the respective contentions, the question that arises
for consideration is: what would be the responsible compensation with the
F acquired lands are capable to secure? It is seen that Exs. A-3 to A-5 offer
no comparable value. As stated by Shri Viswanatha Iyer, that they offer
only an evidence of rise in the price. It is seen that lands under Ex A-6 to
A-8 also were purchased by common institution from the persons, brothers
and sisters, which happened to be contiguous to their institution for better
utilisation. Under those circumstances, they cannot be automatically of-
G fered as comparable sales for the lands in question. Admittedly, the lands
are situated outside Alwaye Municipal limits as on the date of notification.
The High Court having considered the totality of the facts and circumstan-
ces reduced the compensation to Rs. 1000 per cent as against Rs. 2000 per
cent as claimed by the appellants. It is more than 4-1/2 times than what
H was granted by the Land Acquisition Officer. The State did not file any
G.MATilEWv. STATE 443

appeal. A
It is seen from the letter addressed by the appellants themselves on
October 15, 1979, i.e. 10 months prior to the date of the notification, that
they had assessed the compensation at Rs. 350 per cent and offered to sell
it at that rate. But for the fact that no agreement as contemplated under
sub-section (2) of Section 11 has been executed, this admission stares at B
their face to claim any further enhancement in the compensation. It was
not necessary for the High Court, before reversing the judgment of the
reference Court, to reach at a conclusion that the award and judgment of
the reference Court was perverse or wholly unsustainable. It is the man-
datory duty of the Court to consider the entire evidence by applying the C
tests and principle of law as settled by this Court in assessing the compen-
sation and to find out as to what would be the reasonable market value
which the lands are capable to command in open market. It the estimate
of the High Court, the reasonable compensation is Rs. 1000 per cent which
is three times more than that was offered by the claimants themselves.
Under these circumstances, we do not think that these cases warrant D
interference to increase further compensation.

The appeals are dismissed, but without costs.

G.N. Appeals dismissed.
A M/S. ESTER INDUSTRIES LTD.
v.
U.P. STATE ELECTRICITY BOARD AND ORS.

SEPTEMBER 17, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.)

Indian Electlicity (Supply) Act, 1948 :

S. 78-A-Grant of 10% develop~nent rebate in supply of electlicity to
C newly set-up industlies-:Policy of State Govemment-High Cowt holding that
the Electlicity Board not automatically bound by the directions of State
Govemment-On appeal held : So long as the policy direction issued by the
Govemment is consistent with the provisions of the Act and the taliff policy
laid down by the board, it may be open to the Board to either accept it or not
to accept the directions as such-It is for the State Govemment to consider
D whether the Board has laid down the policy or whether the direction issued
by the State Govemment has not been properly implemented-Court cannot
give a direction to implement the directions issued by the State Govemment
exercising the power under Article 226 of the Constitution to direct the Board •
to exercise its power under Section 78A(l) of the Act-Sub-section (2) has
E no application for the reason that if the Board feels any doubt as to whether
the direction issued by the Govemment is in the realm of a policy or othe1wise,
then it shall be refeJTed to the authority constituted under the Act whose
decisions shall be final, i.e., de hors the question in this case-Doctrine of
promiss01y estoppef-Held not applicable in the //Jets and circumstances of
the case.
F
Real Food products Ltd. & Ors. v. A.P. State Electricity Board & Ors.,
AIR (1995) SC 2234, referred to.
I

CIVIL APPELLATE JURISDICTION: Special Leaves Petition (C)
G No. 18156 of 1996.
From the Judgment and Order dated 8.5.96 of the Allahabad High
Court in W.P. 10195 of 1989.

R. Santhanam, Ashok Kumar Singh and Rajinder Singhvi for the
H Appellants.
444
ES1ER INDS. LID. v. U.P. STAIB ELECTRICITYBD. 445

The following Order of the Court was delivered : A
This special leave petition arises from the judgment and order of the
Division Bench of the Allahabad High Court at Lucknow made on May 8,
"1996 in Writ Petition No. 10195/89.

The admitted position is that the Government of Uttar Pradesh had B
laid down in sanction for grant of 10% developmental rebate in supply of
electricity to the newly set up industries on July 16, 1986 and that was to
be in vogue till 1990. It is the claim of the petitioner that pursuant to that
policy, the petitioner had set up his industry in Nainital District. Conse-
quently, he is entitled to the rebate. When the bill was issued, the Board C
imposed its tariff rates contrary to the rebate. Resultantly, they filed the
writ petition. The High Court in the impugned judgment had held that
Section 78A of the Indian Electricity (Supply) Act, 1948 (Act 54 of 1948)
(for short, the 'Act') being a legislative policy, the Board was not automat-
ically bound by the directions issued by the State Government. The Board
is entitled to revise tariff in accordance with its procedure. Therefore, writ D
could not be issued compelling the Board to follow the directions issued
by the State Government. Thus, this special leave petition.

It is contended for the petitioner that in view of the law laid down
by this Court in Real Food Products Ltd. & Ors. v. A.P. State Electricity E
Board & Ors., AIR (1995) SC 2234 in particular paragraph 8, the Board is
bound by the directions issued by the State Government. The view taken
by the High Court is, therefore, not correct in law. We find no force in the
contention. It is well settled legal position that the fixation of the tariff is
a legislative policy and the Board is entitled to revise unilaterally the tariff
from time to time. The consumer is bound by the revision of the tariff duly F
notified in accordance with the procedure prescribed under the Act. The
question is : whether contrary to the conditions of the tariff entered into
by the parties, the policy direction issued by the State would be interposed
and be revised by the Electricity Board in consonance with the directions
issued by the State Government? In this regard, the observations of this G
Court in paragraph 8 are worth recapitulation :

"The only surviving question is with regard to the nature and effect
of the direction given by the State Government under Section 78A
of the Act. The question has to be examined in the context of the
facts of the present case which is confined to the charging of a flat H
446 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A rate per H.P. for agricultural puinp sets. The nature of the function
of the Board in the fixing the tariffs and the manner of its exercise
has been considered at length in tll;e earlier decisions of this Court
and it does not require any further elaboration in the present case.
Section 78 A uses the expression "the Board shall be guided by
such directions on question of policy as may be given to it by the
B State Government". It does appear that the view expressed by the
State Government on a question of policy is in the nature of a
direction to be followed by the Board in the area of the Policy to
which it relates. In the context of the function of the Board of
fixing the tariffs in accordance with Section 49 read with Section
c 59 and other provisions of the Act, the Board is to be guided by
any such direction of the State Government, as in the present case,
was to fix· a concessional tariff for agricultural pump sets at a flat
rate per H.P., it does relate to a question of policy which the Board
must follow. However, in indicating the specific rate in a given
case, the action of the State Government may be in excess of the
D
power of giving a direction on the question of policy, which the
Board, if its conclusion be different, may not be obliged to be
bound by. But where the Board considers even the rate suggested
by the State Government and finds it to be acceptable in the
discharge of its function of fixing the tariffs, the ultimate decision
E of the Board would not be vitiated merely because it has accepted
the opinion of the State Government even about the specific rate,
In such a case the Board accepts the suggested rates because that
appears to be appropriate on its own view. If the view expressed
by the State Government in its direction exceeds the State of policy,
the Board may not be bound by it unless it takes the same view
F
on merits itself."

. Section 78A(l) of the Act postulates that in the discharge of its
functions, the Board shall be guide<.l by such directions on questions of
policy as may be given to it by the State Government. In other words, the
G Electricity Board has a statutory'function to discharge in determination of
the rates of tariff and terms and conditions subject to which the electrical
energy be supplied to the consumers and enforcement thereof. This being
a legislative policy, while exercising the power under Section 78A policy
directions issued by the Government may also be taken into consideration
H by the Electricity Board which has a statutory duty to perform. So long as
ESTER INDS. LTD. v. U.P. STATE ELb.... fRICITY BD. 447

the policy direction issued by the Government is consistent with the A
provisions of the Act and the tariff policy laid down by the Board, it may
be open to the Board to either accept it or not to accept the directions as
such. It is for the State Government to consider whether the Board had
laid down the policy or whether the direction issued by the State Govern-
ment has not been properly implemented Court cannot give a direction to
implement the directions issued by the State Government exercising the
B
power under Article 226 of the Constitution to direct the Board to exercise
its power under Section 78A (1) of the Act. sub-section (2) has no applica-
tion for the reason that if the Board feels any doubt as to whether the
direction issued by the Government is in the realm of a policy or otherwise,
then it shall be referred to the authority constituted under the Act whose c
decision shall be final i.e., de hors the question in this case.

The learned counsel for the petitioner has brought to our notice that
this Court has granted leave against the judgment of another Division
Bench on the question of applicability of the promissory estoppel. In this
case, that question does not arise for the reason that the promissory D
estoppel would apply only in a case where there was no contract executed
between the parties. In this case, since there exists a contract duly executed
under law between the petitioner and the Board which binds them, unless
it is revised, the question of promissory estoppel does not arise. Considered
fmm this perspective, we are of the view that the High Court has not E
committed any manifest error of law warranting interference.

The special leave petition 'is dismissed.

G.N. Petition dismissed.
A GHANTESHER GHOSH
v.
MADAN MOHAN GHOSH AND ORS.

SEPTEMBER 18, 1996

B [N.P. SINGH AND S.B. MAJMUDAR, .TJ.)

P01tition Act, J893 : Section 4.

Dwelling house-Belonging to undivided family-Transfer of share to
C stranger-Pursuant to final decree for p01tition--Such strange1~Transferee
filed petition for execution of decree·-Dwing pendency of execution proceed-
ings co-owner family member filed application before executing cowt for
purchase or share of such stranger--transferee by enforcing his claim for
pre-emption under S.4 of the Act-Executing cowt dismissed application on
ground that said application not maintainable after passing of final decree in
D p01tition suit-Howeve1; High Court allowed said application-Applicability
of S.4-Held : Words "such transferee sues for partition" and "Sues for
partition" wider in scope than words "filling suit for p01tition''-Suit for
partition included initiation of proceedings for execution of partition
decree-S.4 operated at all stages of litigation in a partition suit--R.ight from
E its inception till its tennination not only by final decree for partition but also
by its complete satisfaction and discharge in execution proceedings-S.4 could
be invoked by any co-owner family member for purchase of strr;1iger-
transferee's share-But once final decree for p01tition was completely satisfied
and discharge in execution proceedings S.4 could not be invoked-Code of
Civil Procedure, J908, S.11. Expin. VII, 0.22 Rr. JO and J2--Transfer of
F Property Act, J882, Ss. 44 and 52.

Interpretation of Statutes :
)

Benevolent legislation-Interpretation which ftuctified beneficial pur-
G pose of provision should be adopted.

Words and Phrases:

"Sue'~ "~uit" and "Sue for p01titio11''-Meaning of-In the context of
Code of Civil Procedure, J908, S. J J Expln. VII, 0.22 Rr;. JO, J2 and PaTtition
H Act, 1893 S.4.
448
•
G. GHOSH v. M.M. GHOSH [MAJMUDAR J.j 449

A residential house was owned by three brothers, each having 1/3rd A
share. After the death r,f one of the brothers his widow inherited 1/3rd
undivided share of her husband in the said dwelling house and on coming
into ·operation of the Hindu Succession Act, 1956 she became full owner of
the l/3rd share of her deceased husband in the said house. Thereafter, she
filed suit for partition against the other two co-owners claiming separa-
B
tion of her 1/3rd share in the said house. She obtained a final decree in
the suit. Thereafter, she executed and got registered a deed of gift in favour
of her brother, the appellant, in respect of her 1/3rd undivided interest in
the said dwelling house. Armed with that gift-deed, the appellant-donee,
who was a stranger to the joint family, filed an execution petition for
executing the final decree. Pending the execution proceedings one of the C
co-owner judgment-debtors died and the respondent No. 1 was brought on
record as his legal heir in the execution proceedings. The respondent No.
'· 1 filed an application before the executing court under Section 4 of the
Partition Act, 1893 for enforcing his claim of pre-emption against the
appellant stranger transferee of the 1/3rd undivided interest of the original D
title holder. The executing court dismissed the said application of respon-
dent No. 1 on the ground that the said application was not maintainable
after the final decree was passed in the partition suit. But the High Court
took the view that the said partition suit under the Act was maintainable
as still the final decree had not got fully executed and satisfied by actual
division of the property by metes and bounds and delivery of actual E
possession to the stranger transferee who had taken out the execution
proceedings. Being aggrieved the appellant-stranger transferee preferred
the present appeal.

Disposing of the appeal, this Court
F
HELD : 1.1. Section 4 of the Partition Act, 1893 can validly be
pressed in service by any of the co-owners of the dwelling house belonging
to undivided family pending the suit for partition till final decree is passed
and thereafter even at \i1e stage of execution of the final decree for
partition so long as the execution proceedings have not effectively ended G
and the decree for partition has not been fully executed and satisfied by
putting the shareholders in actual possession of their respective shares.
Beyond that stage, however, Section 4 of the Act will go out of commission.
[469-E-G]

1.2. Amongst other cor1ditions, Section 4 requires for its applicability H
450 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A that the stranger transferee must sue for partition and only in that
eventually the right of pre-emption envisaged by Section 4 can be made
available to the other contesting co-owners. This Section does not provide
as a condition for its applicability that such stranger tra;isferee must file
a suit for partition. The words "transferee for partition" are wider than the
B words "transferee filing a suit for partition". The terminology "suing for
partition" would not necessarily mean filing of a suit in the first instance
by the transferee. If a transteree seeks to execute any final decree for
partition in favour of his transferor co-owner, he can be said to have
initiated· a legal action for redressal of his decretal right as a stranger
C transferee. Any legal action ~ken by anyone for get.ting redressal from a
law court and for vindicating his legal right on which such action is based
can be said to have sued in a court of law. It cannot, therefore, be said that
a purchaser of decretal rights flowing from a final decree for partition
•
.I-
while initiating proceedings for execution of that decree against the judg-
D ment- debtors who are co-sharers in the property sought to be partitioned
by metes and bounds, is' not suing for partition by getting the said decree
executed through a court of law. Once the partition decree becomes final,
it is the duty of the court which passes the decree to get it executed when
called upon to do so with a view to seeing that the rights and obligations
flowing from such decree get finally complied with and translated into
E reality. Till that stage is reached the court which passes the decree does
not become totally ftmctus officio and the litigation between parties cannot
be said to have ended finally. Under these circumstances, it cannot be said
that a decree-holder in a partition suit or his transferee who is armed with
the plaintiff's rights pending such suit or even after the passing of the final
F decree as transferee of decretal rights when he seeks execution is not suing
for partition or is not entreating the court for its assistance to get his right
fully vindicated as per the claim in the suit and decree therein. The
legislative intent underlying various provisions of the Code of Civil Proce-
dure, 1908 viz., Explanation VII to Section 11, Order 22, Rules 10 and 12
G also show that in given circumstances the proceedings in the suit can be
treated to include even execution proceedings. Section 52 of the Transfer
of Property Act, 1882 is another illustration on the point dealing with the
principle of Lis pendens. The legislature for different contingencies has
thought it fit to exte.nd the scope and ambit of the terminology "suit" even
H for covering the execution proceedings in connection with decrees passed
G. GHOSH v. M.M. GHOSH [MAJMUDAR, J.] 451

in such suits. Section 4 of the act has also advisedly used the terminology A
"sues for partition" and has not confined it only to suits filed by stranger
transferee for applicability of Section 4 of the Act. [461-E-H, 462-D-E]

- 1.3. The court should lean in favour of that interpretation which
fructifies the beneficial purpose for which the provision is enacted by the B
legislature and should not adopt an interpretation which frustrates or
unnecessarily truncates it. On the express language of Section 4 of the
Partition Act which is a benevolent provision enacted by the legislature for
the welfare and tranquility of the members of a joint family occupying the
dwelling house, the Court must so construe the provision as to make it
available at all the relevant stages of the litigation between the contestingc
co-owners till the litigation reaches its terminus by way of full and final
discharge and satisfaction of the final decree for partition. If a stranger
transferee enters the arena of contest at any stage and seeks to get his
share separated as far as the subject-matter of the litigation, namely, the
dwelling house, is concerned, he can be said to be suing for partition and D
separate possession of his undivided share to which he had become en-
titled because of transfer by one of the co-owners. Such a transferee might
come on the scene prior to the final decree via Order 22 Rule 10 or he may
come on the arena of contest seeking redressal of his right of partition and
separation of his undivided share even in execution proceedings as a
transferee of the decretal right of erstwhile plaintiff under the final decree E
either by himself filing the execution proceedings as per order 21 Rule 16
or may subsequently step in the shoes of the decree-holder who has already
filed the execution proceedings via Order 22 Rule 10 read with Order 22
Rule 12. In either eventuality, such a stranger transferee who emerges on
the scene of litigation between the contesting co-owners which has not still F
reached its terminus and who seeks vindication of his transferee-rights in
the dwelling house can certainly be said to be suing for partition even at
the stage of execution of such final decree for partition. [464-A-D]

\
> Satya Narayan Chakravarty v. Bishwanath Paul & Ors., [1974] Cal. G
WN 871; Boto Krishna Ghose v. Aklwy Kumar Ghose & Ors. AIR 37 Cal
111 and Harendra Nath Mukliarjee v. Shyam Sunder Kuer & Ors. AIR (1973)
Pat 142, approved.

Abdul Sathar v. A. Nawab, AIR (1980) Mad. 235, overruled. H
452 SUPREME COURT REPORTS. [1996) SUPP. 6 S.C.R.

A Sheodhar Pra:jad Singh & Ors. v. Kishun Prasad Singh & Ors., AIR
(1941) Pat 4 and Brindera Nath Ba1te1jee v. Smt. Sneha,{ata Devi and Anr.
AIR (1958) Cal 380, held inapplicable. . ·.

Waman Vishnu Gokhale v. Vasudeo Morbhat Kale, lLR 23 Born. 73, ....
cited.
B
Maxwell : "The Inte1pretation of Statutes'~ 12th Edn. Chapter 4, p96;
Black's law Dictionary, 6th Edn, p 1432; Collins English Dictionary, (1979)
Edn. p. 1452; Aiyar's Judicial Dictionary, 10th Edn. (1988), p. 980; Concise
Oxford, Dictionary, 7th Edn. p. 1066 and Stroud's Judicial Dictionary, 5th
C Edn. p. 2540, referred to.

2. Section 4 in its applicability will cover all stages of litigation in a
partition suit from its inception till its termination not only by the final .J
decree for partition but also by its complete satisfaction and discharge
through the assistance of the executing court; once that happens the court
D itself becomes ftmctus officio and the Litigation will come to an end and
the concerned parties thereafter will occupy the respective portions of the •.
erstwhile dwelling house as full owners of their portions. The separated
part of the dwelling house in possession of such stranger transferee cannot
then be treated as a part and parcel of the dwelling house belonging to an
E undivided family and at that stage the dwelling house qua such a stranger
would cease to belong to any joint family and it would belong to different
owners occupying their respective portions in a composite building. The
moment the integrity of common dwelling house belonging to undivided
family is broken by the execution of the final partition decree through the
F intervention of the court and the proceedings are ended, there would
remain no scope for play of Section 4 of the Act as there would be no
subject-matter of a common dwelling house belonging to an undivided
family on which it could operate. [469-A-E]

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3732 of
1991.

From the Judgment and Order dated 17.12.90 of the Calcutta High
Court in Civil Rule No. 2250 of 1987.

H Dr. Shankar Ghosh and Somnath Mukherjee for the Appellant.
G.GHOSHv. M.M.GHOSH[MATMUDAR,J.] 453

Haradhan . Banarjee, Bijab Ghosh and R.P. Gupta for the Respon- A
dents.

The Judgment of the Court was delivered by

MAJMUDAR, J. A short question falls for determination of this Court B
.. in this appeal by special leave against the decision of the Division Bench of the
High Court of Calcutta in Civil Revision Appiication No. 2250of1987. The
question is whether Section 4 of the Partition Act, 1893 (hereinafter referred
to as 'the Act') can be pressed in service in execution proceedings arising out
of a final decree for _Partition, by one of the co-owners of a dwelling house
belonging to an undivided family against a stranger transferee of a share C
therein belonging to another erstwhile co-owner of the said dwelling house.
The learned Secon.d Assistant District Judge, Howrah, before whom the said
application y.7as nio~ed took the view that Section 4 of the Partition Act could
not be .pressed in service against the stranger purchaser of such share. The
said view was not accepted by the Division Bench of the High Court of Cal- D
cut.ta by the
.
impugned
.
judgment.

In order to appreciate the correct contours of the controversy in
respect of the aforesaid question, it is necessary to glance through a few
background facts leading to the proceedings. The premises in question are
a residep.tial house situated at No. 6/1 Ghoshal Bagan Lane, Howrah. It E
was originally owned by one Kalipada Ghosh and on his death his three
surviving sotis, namely; Pran Krishna, Gour Mohan and Kamal Krishna·
became owners of 1/3rd share each. On 7.9.1948, Kamal Krishna died
leaving behind him his widow Smt. Radha Rani. Thus, she inherited 1/3rd
m
undiVi.ded share of h~r husband the said dwelling house. On the c~ining F
·. into _operatio~ ". of the :1-Iindu Succession Act, 1956, Smt. . Radha Rani
became full owner of 1/3rd share of her deceased h11sbarid in the said
house. She filed a suit for partition on 5.9.1960 -claimip.g sep.aration of her
1/3rd share in the said house aniongst other. proper~ies. In the present
proceedings, we are concerned o~ly with the aforesaid family dwelling
house. The suit was filed against the other two co-owners, namely, Pran G
Krishn and Gaur Mohan. Ultimately, after the preliminary decree a final
decree came to be passed in favour of Smt. Ra~ R,ani on 31.8.1971 ..
Accordingly, she became entitled to partition and separation of her 1/3rd
share in the said dwelling house. She made an abortive attempt to get the
final decree executed but therein she did not get any relief of actu.al H
454 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A possession for number of years. In the meanwhile, on 8.10.1979 she ex-
ecuted and got registered a deed of gift in favour of her brother, the
present appellant, gifting her 1/3rd undivided interest in the said dwelling
house as decreed to her pursuant to the final decree for partition. Armed
with that gift deed, the appellant donee who obviously was a stranger to
the joint family, filed execution petition on 14.12.1981 for executing the
B
final decree obtained by his predecessor in interest, namely, the donor Smt.
Radha Rani. Pending the execution proceedings taken out by the appellant
do nee, one of the judgment-debtors Pran Krishna, original first defendant,
died in July 1983. In his place, his son present Respondent No. 1, Madan
Mohan Ghosh was brought on record as his legal heir in the execution
C proceedings. The executing court by its order dated 17.1.1985 issued a writ
of possession by appointing a Pleader Commissioner to undertake the task
of suggesting partition of the suit house by metes and bounds. Then in
September 1985, pending the execution proceedings · original judgment
debtor Defendant No. 2 Gaur Mohan also died. It appears that thereafter
D the real contest remained between the appellant on the one hand and
Respondent No. 1 on the other. Respondent No. 1 filed an application on
12.12.1986 before the executing court under Section 4 of the Act for
enforcing his claim of pre-emption against the appellant stranger transferee
of l/3rd undivided interest of the original title-holder Smt. Radh Rani. The
executing court by its order dated 13.8.1987 dismissed the said application
E of respondent No. 1 on the ground that the said application was not
maintainable after the final decree was passed in the partition suit. As
stated earlier; the said view of the executing court was· not approved by the
Division Bench of the Calcutta High court in the revision application. It
took the view the view that said petition under the Act was maintainable
F and still the final decree had not got fully exe,cuted and satisfied by actual
division of the property by metes and bounds and delivery of actual
possession to the stranger transferee who had taken out the execution
proceedings. By its order dated 17.12.1990, the High Court directed the
executing court to dispose of the application of Respondent No. 1 under
Section 4 of the Act on merits with a further direction to complete the said
G proceedings within six months. It is the aforesaid order of the High Court
which is challenged in the present appeal by special leave, as noted earlier.

RIVAL CONTENTIONS:

H Dr. Ghosh, learned senior counsel for the appellant, vehemently
G. GHOSHv. M.M. GHOSH [MAJMUDAR,J.] 455

- contended that on the express language of section 4 of the Act, the
application moved by Respondent No.1 was not maintainable. Dr. Ghosh
relied upon a number of decisions which had taken the view canvassed by
him. His submission in short was that Section 4 of the Act can be availed
A

of any of the parties to the litigation in the partition suit till its culmination
into a final decree for partition. That even during the appeal against the
B
final decree section 4 can be pressed in service. That once the final decree
comes to be passed and gets finally confirmed by the ultimate court of
appeal the suit comes to an end. Thereafter,. when execution proceedings
are taken out for execution such final decree, Section 4 of the Act would
be out of picture and cannot be pressed in service against the stranger
transferee of the decretal rights of one of the co-owners in the family C
dwelling house. Dr. Ghosh also vehemently tried to submit that the finding
reached by both the courts below that the suit property consisted of a
family dwelling house and was not an open land, was also not sustainable.
On the other hand, learned counsel for the respondents submitted that
Section 4 is a beneficial provision which seeks to avoid the interference by D
the stranger transferee of co-owners' right in a joint family dwelling house
and it such strangers are permitted to come into possession of any part of
such dwelling house, the peace and tranquility of the rest of the occupant
members of the joint family would be affected and in order to avoid such
a contingency and possible social strife the legislature in its wisdom and
enacted this provision which has stood the test of time spread over more E
than a century and there was no reason to restrict the application of such
a benevolent section only upto the stage of final decree and not during
further proceedings in execution of such final decree. It was submitted that
beneficial provision of Section 4 can rightly be made applicable during
execution proceedings tili the final decree gets fully satisfied by division of F
property by metes and bounds and by actual delivery of possession of
respective portions of the joint family dwelling house to the concerned
shares. It is only at that stage that the executing court would become
ftmctus officio. That till that stage is reached Section 4 of the Act can be
legitimately pressed in service by any of the remaining co-owners claiming
pre-emptive right to purchase the share of the stranger transferee from one G
of the co-owners. Learned counsel also in his turn relied upon a decision
of the Division Bench of the Patna High Court in Harendra Nath Mukh01jee
v. Shyam Sunder Kuer & Ors., A.LR. (1973) Patna 142. He also submitted
that in a partition suit till the decree gets fully satisfied and executed each
H
456 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A contesting party remains as god as a plaintiff and consequently the benefi-
cial provision of Section 4 can be pressed in service by any of the contesting
co-owners till the final decree in such a suit for partition ge_ts fully executed
and implemented and consequently curtain drops on the partition proceed-
-
ings between the parties for ever.

8 It is in the background of these rival contentions that we address
ourselves to the consideration of this question. Before we refer to the
cleavage of judicial opinion amongst different High Courts on the scope
and ambit of Section 4 of the act, it would be profitable to have a look at <
the provision itself. The Statement of Objects and Reasons for enacting the
c Partition Act, 1893 amongst others, provided as under :

"It is also proposed in the Bill to give the Court the power of
compelling a stranger, who has acquired by purchase a share in a
family dwelling-house when he seeks for a partition, to sell his ....
share to the members of the family who are the owners of the rest
D
of the house at a valuation to be determined by the Court. This
provision is only an extension of the privilege gi:ven to such share
holders by section 44, paragraph 2 of the Transfer of Property Act,
and is an application of a well-known rule which obtains among
Muhammadans everywhere and by custom also among Hindus in
E some parts of the country."

It is obvious that the Act intended to extend the privilege already available
to a co-sharer in a family dwelling house as per Section 44 of the Transfer
of Property Act, 1882 (hereinafter referred to as the T.P. Act'). Section 44
F of the T.P. Act dealing with cases of transfer by one of the co-owners of
immoveable property, reads as under :

"44. Transfer by one co-owner - where one of two or more co-
owners of the immovable property legally competent in that behalf
transfers his share of such property or any interest therein, the
G transferee acquires, as to such share or interest, and so far as is
necessary to give effect to the transfer, the transferor's right to
joint possession or other common or part enjoyment of the proper-
ty, and to enforce a partition of the same, but subject to the
conditions and liabilities affecting, at the date of the transfer, the
H share or interest so transferred.
G. GHOSH v. M.M. GHOSH [MAJMUDAH., J.] 457

Where the transferee of a share of a dwelling house belonging A
to an undivided family is not a member of the family, nothing in
this section shall be deemed to entitle him to joint possession or
other common or part enjoyment of the house".

It is obvious that by the time the Act came to be enacted, the legislature
had in view the aforesaid parent provision engrafted in section 44 of the B
T.P. Act to the effect that a stranger to the family who becomes the
transferee of an undivided. share of one of the co-owners in a dwelling
house belonging to undivided family could not claim a right of joint
possession or common or part enjoyment of the house . with other co-
owners of the dwelling house. Implicit in the provision was the legislative c
intent that such stranger should be kept away from the common dwelling
house occupied by other co-sharers. It was enacted with the avowed object
· of ensuring peaceful enjoyment of the common dwelling house by the
remaining co-owners being members of the same family sharing a common
hearth and or home. It is in the light of the aforesaid pre-existing statutory D
background encompassing the subject that we have to see what Section 4
of the Act purports to do. Section 4 of the Act pr.ovides as under :

"4. Partition suit by transferee of sh<\re in dwelling-house. - (1)
where a share of a dwelling-house belonging to an undivided family
has been transferred to a person who is not a member of such E
family and such transferee sues for partition, the Court shall, if any
member. of the family being a shareholder shall undertake to buy
the share of such transferee, 'make a valuation of such share in
such manner as it thinks fit and direct the. sale of such share to
such shareholder, and may give all necessary and proper directions
in that behalf. F

(2) If in any case described in sub-section (1) two or more
members of the family being such shareholders severally under-
take to buy such share, th·e Court shall follow the. procedure
prescribed by sub-section (2) of the last foregoing section." G
A mere look at the aforesaid provision shows that for its applicability at
any stage of the proceedings between the contesting parties, the following
conditions must be satisfied :

(1) A co-owner having undivided share in the family dwelling house H
458 SUPREME COURT REPORTS l 1996) SUPP. 6 S.C.R.

A should effect transfer of his undivided interest therein :

(2) The transferee of such undivided interest of the co-owner
should be an outsider or stranger to the family;

(3) Such transferee must sue for partition and separate possession
B of the undivided share transferred to him by the concerned co-
owners;

(4) As against such a claim of the stranger transferee, any member
of the family having undivided share in the dwelling house should
put forward his claim of pre-emption by undertaking to buy out
c the share of such transferee; and

(5) While accepting such a claim for pre-emption by the existing
co-owner of the dwelling house belonging to the undivided family,
the court should make a valuation of the transferred share belong-
D ing to the stranger transferee and make the claimant co-owner pay
the value of the share of the transferee so as to enable the claimant
co-owner to purchase by way of pre-emption the said transferred
share of the stranger transferee in the dwelling house belonging to
the undivided family so that the stranger transferee can have no
more claim left for partition and separate possession of his share
E in the dwelling house and accordingly '~an be effectively denied
entry in any part of such family dwelling: house.

The aforesaid analysis of Section 4 of the act m::.kes it clear that there
is no express provision indicating the stage at which such application can
F be moved against the stranger transferee of the share of an erstwhile
co-owner of dwelling house of undivided family. Consequently, on the
language of Section 4, it cannot be urged that it cannot be pressed in
service after the final decree for partition is pas1;ed and before such final
decree is fully executed whereby the co!lrt becomes ftmctus officio. It is
trite to observe that in the present case out of the aforesaid conditions for
G applicability of Section 4, save and except the condition regarding the
stranger transferee suing for partition which is the subject-matter of fierce
controversy between the parties, all the remaining conditions are satisfied.
In other words, there is well established on the record of the case that the
suit house was a dwelling house belonging to undivided family of three
H erstwhile brothers and which later on came to belong to two undivided
G. GHOSH v. M.M. GHOSH (MAJMUDAR,J.] 459

brothers along with the widow of their deceased brother and thus the suit A
house was a dwelling house belonging to undivided family. Dr. Ghosh,
learned senior counsel for the appellant, faintly tried to submit that both
the courts below were in error in holding that the suit property consisted
of a dwelling house and not open land. As both the courts concurrently
found it to be a dwelling house belonging to undivided family, this conten-
B
tion is no longer open for adjudication at this stage. We, therefore, proceed
on the basis that the suit house is a dwelling house belonging to undivided
family. It is also not in dispute between the parties that 1/3rd interest of
one of the co- owners, namely, Smt. Radha Rani, who had got final decree
for partition in her favour, was transferred by gift in favour of the appellant
after the final decree and that such donee-transferee was a stranger to the c
family as he was not a member of the said family. It is also not in dispute
that Respondent No. 1 by way of application under Section 4 of the Act
undertook to buy out the share of the appellant stranger transferee being
l/3rd undivided share which belonged to his predecessor in title decree-
holder Smt. Radha Rani. However, the real controversy between the D
parties is whether the appellant who is a stranger transferee of 1/3rd
undivided interest of Smt. Radha Rani in the suit property can be said to
have sued for partition so as to satisfy the remaining condition of the said
provision.

In order to answer this moot question, it has to be kept in view what E
the legislature intended while enacting the Act and specially Section 4
thereof. The legislative intent as reflected by the Statement of Objects and
Reasons, as noted earlier, makes it clear that the restriction imposed on a
stranger transferee of a share of one or more of the co-owners in a dwelling
house by Section 44 of the T.P. Act is tried to be further extended by F
Section 4 of the Partition Act with a view to seeing that such transferee
washes his hands off such a family dwelling house and gets satisfied with
the proper valuation of his share which will be paid to him by the pre-empt-
ing co-sharer or co-sharers, as the case may be. This right of pre-emption
available to other co- owners under Section 4 is obviously in further.
fructification of the restriction of such a transferee as imposed by Section G
44 of the T.P. Act. It is true that amongst other conditions, Section 4
requires for its applicability that such stranger transferee must sue for
partition and only in that eventuality the right of pre- emption envisaged
by Section 4 can be made available to .the other contesting co-owners. In
this connection, great emphasis was placed by Dr. Ghosh 011 the words H
. 460 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A "such transferee sues for partition" as employed by Section 4. However, it
has to be noted that this seCtion 'does not provide as a condition for its
applicability that such' stranger t;ansferee must file a suit for partition. The
words "transferee sues foi: partiti()ni' ar.e wider than the words "transferee
filing a suit for partition". The latter phraseology is conspicuously absent
in the section. the ·Partition Act does not define the words "suing for
B partition". The connotation of the term "sue" can be better appreciated by
looking at certain standard W?rks defining such a phrase. In Black's Law
Dictionary, Sixth Edition, at page 14;32 tlie meaning of the word "sue"
mentioned as under·:

"To conj~ence or t6 continue legal proceedings for recovery of a
0

c
right; to proceed with as ;m action, and follow it up to its proper
termina_tion; to gain by legal process".

Jn Collins English Dictionary, 1979 Edition, at page 1452, one of the
meaning of the word "sue" has been shown as under :
D
"to institute legal proceedings against".

In Aiyar's Judicial Dictionary, lO~h Edition (1988), at page 980, the word
"sue" is said to have the .following ineaning : -

E T~.t~R:e anyl~gal·proceedings against one".
It is further observed that the· word is used most exclusively to prosecute
a civil action against one.

In Concise Oxford Dictionary, Seventh Edition, at page 1066, the
F following meanings are ascribed to the word "s~e" :
.. "1. institute legal proceedings against (person); make application
to or to law court for redress; make petition in law court for and
obtain (writ,· pardon etc.); 2. entreat (person); make entreaty to
(person) for a favour".
G
In Stroud's JudiCial Dictionary, Fifth Edition, at page 2450, the words "to
sue" is said to have the meaning generally speaking, of bringing action.

It is, therefore well-established that the terminology "suing for parti-
tion" would not necessarily mean filing of a suit in the first instance by the
H transferee. If a transferee·seeks to execute any final decree for partition in
G.GHOSHv.M.M.GHOSH[MAIMUDAR,J.J. 461

favour of his transferor co-owner, h.e can b~ said to have initiated a legal A
action for redressal of his decretal right as a stranger transferee. Any legal
action taken by anyone for getting redressal from a law court · and for
indicating his legal right on which such action is based can be said to have
sued in a court of law. It ca~not, therefore, be said that a purchaser of
decretal rights flowing from a final decree for partition while initiating B
proceedings for execution of that decree against the judgment-debtors who
are co-sharers in the property sought to be partitioned by metes and
bounds, is not suing for partition by getting the said decree executed
through a court df law. If the words "transferee suing for partition" are
given a restrictive meaning, namely, that he can be said to· be suing for
partition only upto the stage of final decree in ·such a suit for partition then C
the wide phraseology advisedly employed by the legislature in .the section
would be deprived of its real laudable object and content. It is trite to
observe. that till the final decree for partition of a co-ownership property
culminates into its full discharge and satisfaction, the lis between the
contesting parties cannot be said to have come to a final end. It is also
exiomatic that once the partition decree becomes final, the court which D
passed the decree does not become ftmctus officio for all purpose. On the
contrary, its role remains effective till the decree passed by it gets fully
executed and implemented. It is for this very purpose that the legislature
has provided as per Section 38 of the Civil procedure Code that a decree
may be executed by the court which passed it, or by the court to which it E
is sent for execution. Therefore, it is the duty of the court which passes the
decree to get it executed when called upon to do so with a view to seeing
that the rights and obligations flowing from such decree get finally com-
plied with and translated into reality. Till that stage is reached the court
which passed the decree does not become totally functus officio and the
litigation between parties cannot be said to have ended finally. Under F
these circumstances, it cannot be said that a decree-holder in a partition
suit or his transferee who is armed with the plaintiffs rights pending such
suit or even after the passing of the final decree as transferee of decretal
rights when he seeks execution is not suing for partition or is not entreating
the court for its assistance to get his right fully vindicated as per the claim G
in the suit and decree therein. In this connection, it is also profitable tc
keep in view the legislative intent underlying various provisions of the Code
of Civil Procedure which shows that in given circumstances the proceedings
in the suit can be treated to include even execution proceedings. Explana-
tion VII to Section 11 of the civil Procedure Code dealing with res judicata
lays down as under : H
462 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A "Explanation VII. - The provisions of this section shall apply to a
proceeding for the execution of a decree and references in this
section to any suit, issue or former suit shall he construed as
references, respectively, to proceeding for the execution of the
decree, question arising in such proceedings and a former proceed-
ing for the execution of that decree."
B
As per Order 22 Rule 10, in cases of an assigr.ment, creation or devolution
of any interest during the pendency of a suit, the suit may, by leave of the
court, be continued by or against the person to or upon whom such interest
has come or devolved. As per Order 22 Rule 12, notlting in rules 3, 4 and
C 8 shall apply to proceedings in execution of a decree or order meaning
thereby that Order 22 Rule 10 will apply to execution proceedings whereby
the same scheme regarding devolution of interest of either party in the suit
is made applicable even to execution proceedings.

D Section 52 of the Transfer of Property Act is another illustration on
the point dealing with the principle of /is pendens. The explanation to the
said section indicates that the pendency of a suit would encompass the
stage after the final decree till complete satisfaction and discharge of such
decree or order. It is, therefore, obvious that legislature for different
contingencies has thought it fit to extend the scope and ambit of the
E terminology "suit" even for covering the execution proceedings in connec-
tion with decrees passed in such suits. As we have seen earlier, Section 4
of the Act has also advisedly used the terminology "sues for partition" and
has not confined it only to suits filed by stranger transferee for applicability
of Section 4 of the Act.
F
We have also to keep in view the avowed beneficial object underlying
the said provision. Section 4 of the Partition Act read with Section 44 of
the T.P. Act represents a well knit legislative scheme for insulating the
domestic peace of members .·of undivided family occupying a common
dwelling house from the encroa<;hment of a stranger transferee of the share
G of one undivided co-owner as :the rerµ.aining co-owners are presumed to
follow similar tradition a,nd mode of life and to be accustomed to identical
likes and dislikes and identical family traditions. This legislative scheme
seeks to protect them from the onslaught on their peaceful joint family life
by stranger-outsider to the family who may obviously be having different
H outbok and mode of life including food habits and other social and
G. GHOSH v. M.M. GHOSH (MAJMUDAR,.J.] 463

religious customs. Entry of such outsider in the joint family dwelling house A
is likely to create unnecessary disturbances not germane to the peace and
tranquility not only of the occupants of the dwelling house but also of
neighbours residing in the locality and in the near vicinity. With a view to
seeing that such homogenious life of co-owners belonging to the same joint
family and residing in the joint family dwelling house is not adversely
B
affected by the entry of a stranger to the family, this statutory right of
pre-emption is made available to the co-owners who undertake to buy out
such undivided share of the stranger co-owner. If such a right flowing from
Section 4 of the Act is restricted in its operation only upto the final decree
for partition, the very benevolent object of the section would get frustrated
as upto final decree stage, the court would only crystalise the shares of the c
contesting co-owners but the separation and partition of the shares of
respective parties get really affected on spot only by actual division by
metes and bounds and delivery of possession of respective shares to
respective share-holders. This can be achieved only at the stage when the
execution of the final decree takes place and the litigation reached its D
terminus for the contesting parties and the curtain drops on the litigation.
Only then the court which passed the decree becomes finally ftmctus officio.
It is also well-settled rule of interpretation of statute that the court should
lean in favour of that interpretation which fructifies the beneficial purpose
for which the provision is enacted by the legislature and should not adopt
an interpretation which frustrates or unnecessarily truncates it. Maxwell on E
the Interpretation of statutes, Twelfth Edition, has observed in Chapter 4
pertaining to beneficial construction as under :

"The fact that a section is clearly designed to afford relief may
incline the court to construe it more benevolently than it might a
less obviously remedial enactment... .... "
F

Similarly, it has been observed at page 96 as under :

"It is said to be the duty of the judge to make such construction
of a statute as shall suppress the mischief and advance the remedy. G
To this end, a certain extension of the letter is not unknown, even
in criminal statutes".

Consequently, on the express language of Section 4 of the Partition Act
which is a benevolent provision enacted by the legislature for the welfare
and tranquility of the members of a joint family occupying the dwelling H
464 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A house, we must so construe the provision as to make it available to all the
relevant stages of the litigation between the contesting co-owners till the
litigation reaches its terminus by way of full and final discharge and
satisfaction of the final decree for partition. If a stranger transferee enters
the arena of contest at any stage and seeks to get his share sepanted as
far as the subject-matter of the litigation, namely, the dwelling house, is
B concerned, he can be said to be suing for partition and separate possession
of his undivided share to which he has become entitled becaµse of transfer
by one. of the co-owners. Such a transferee might come on the scene prior
to the final decree via order 22 rule 10 or he may come on .the arena of
contest seeking redressal of his right of partition ar.d separation of his
C undivided share even in execution procee.<lings <,iS a transferee· of the
decretal right of erstwhile plaintiff under the final decree either by himself
filing the execution proceedings as per Order 21 Rule 16 or may sub-
sequently step in the shoes of the decree-holder who has already filed the
execution proceedings via Order 22 Rule 10 read with Order 22 Rule 12.
D In either eventuality, such a stranger transferee who emerges on the ·scene
of litigation between the contesting co-owners which has not still reached
its terminus and who seeks vindication of his transferee-rights in the
dwelling house can certainly be said to be suing for partition even at the
stage of execution of such final decree for partition. .

E In our view, therefore, on the express language of Section· 4 of the
Partition Act, the Division Bench of the High Court reached a correct
conclusion in the impugned judgment.

. Now is time for us to have a quick look at the different decisions of
F the High Courts on this question. Dr. Ghosh, learned· senior ;counsel for
the appellant, heavily relied upon some of the decisions of the· Patna and
the Calcutt<: High Courts as well as the decision of the Madras High Court
in support of his contention that Section 4 cannot be applied at the stage
of execution of a final decree for partition. On the otht_!r hand, learned
counsel for the respondents, relied upon the latter decisions of the Patna
G High Court as well as the Calcutta High Court in support of his rival
contention seeking application of Section 4 of the Act even during execu-
tion proceedings and which contention, as we have seen above, meets our
approval. We shall first deal with the decisions relied upon by Dr. Ghosh
in support of his contention. In Sheodhar Prasad Singh & Ors. v. Kishzm
H Pra.<:;id Singh &. Ors., A.LR. (1941) Patna 4, Dhavle, J. took the view that
G. GHOSH v. M.M. GHOSH (MAJMUDAR,J.) 465

an application under section 4 could be made in appeal against final A
decree. Now it must be kept in view that the learned Judge was not directly
concerned with a situation which arises in the present case. In the case
before the learned judge of the Patna High Court, the question of ap-
plicability of Section 4 of the Act fell for consideration at the stage when
the final decree reached the second appellate stage before the High Court.
B
According to the learned Single Judge, Section 4 could apply even at that
stage. The learned Single Judge, therefore, had no occasion to consider the
further question with which we are concerned. The view propounded by
him cannot be said to have ruled out the applicability of Section 4 beyond
the stage of final decree in a suit for partition. Dr. Ghosh invited our
attention to a decision in Birendra Nath Banerjee v. Smt. Snehalata Devi & c
Am:, A.LR. (1968) Calcutta 380. Even in that case the Division Bench of
the High Court was concerned with the applicability of Section 4 pending
appeal against the final decree for partition. The Division Bench observed
· therein as under :
D
"The right of pre-emption under Section 4 of the Partition Act
is a right given by the statute and on its wording, it subsists so long
as the suit remains pending, or, in other word, so long as the suit
has not been concluded or terminated for an effective final decree
for partition. Therefore, an application claiming pre-emption at a
time when the appeal against final partition decree is pending E
cannot be held barred by limitation on the ground that it has been
filed beyond three years of the passing of the preliminary partition
decree."
I
The aforesaid observation makes it clear that the court was con- F
cerned with the question of limitation in connection with application under
Section 4 of the Act pending the appeal against the final decree and
whether it should be treated as time barred considering the starting point
of preliminary decree. It is true that the Division Bench, in this connection,
observed that the right of pre-emption under Section 4 subsists so long as G
the suit is pending or has not been concluded or terminated by the final
decree for partition. But the said observation cannot be construed to have
excluded the possibility of applicability of Section 4 to a post final decree
stage as such a situation had not arisen for consideration of the court.
However, the decision of the Madras High Court is on the point. Strong
reliance was placed by Dr. Ghosh on the judgment of the Madras High H
466 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Court inAbdu/ Satharv.A. Nawab, A.l.R. (1980) Madras 235, In that case
a learned Single Judge, Ratnam, J ., took the view dissenting from the
decisions of the Patna and the Calcutta High Cuurts to which we shall' ·
make a reference presently that Section 4 of the Act cannot be pressed in
service after the final decree for partition is passed. In other words, in
execution proceedings ·Section 4 of the Act cannot apply. As already
B discussed by us earlier Section 4 on its express language cannot be read in
such a truncated fashion. Therefore, the decision of the learned Single
Judge cannot be considered to be lying down good law. On the other hand,
the decisions of the Patna and the Calcutta High Courts to which we shall
now make a reference.
c
In Satya Narayan Chakravwty v. Biswanath Paul & Ors., (1974)
Calcutta Weekly Notes 871, a Division Bench of the Calcutta High Court
observed that so long as the stranger purchaser of decretal rights of one
of the co-owners has not taken possession of his allotted share by execution
D of the said decree, application under Section 4 of the Partition Act is
maintainable. In this connection, it was observed by the Division Bench,
speaking through Laik, J., as under :

"Having considered the scheme of the Partition Act including
its object which is to prevent the introduction of any foreign
E element into the group of family members and its aim which is to
maintain homogeneity in respect of the entire family and par-
ticularly the provisions of section 4 thereof, which does not indicate
a contrary intention and after giving anxious consideration to the
principles laid down but following the principle that the residence
F in a dwelling house of an undivided family should not, if possible
(but not contrary to law), be thrown open to a stranger to the
family and remembering that the terms of section 4 of the Act are
quite general and distinct from a decree passed in a partition suit
and holding further the rule that the executing court should not
go behind the decree, is inapplicable in an application under
G Section 4 of the Partition Act and not ignoring the provisions of
section 44 of the Transfer of property Act and the rules of pre- ·
emption governing the Muhammandans, Buddists, Jews, Romans
and others and agreeing with respect to the dictum of the judicial
committee in 42 IA 10-ILR 37 AM 129 (141) R.C. that .the right
H of pre-emption is a "valuable right" - the object of such· a right
G.GHOSHv. M.M.GHOSH[MAJMUDAR,J.] 467

being the avoidance of a disagreeable stranger (though some may A
think it an archanism and a clog on freedom of contract) the court
held that an application under Section 4 of the Partition Act is
maintainable even after the final decree is passed ..... "

In Boto Krishna Ghose v. Akhoy Kumar Ghose & Ors., A.LR. 37 B
(1950) Calcutta 111, it was held by another Division Bench of the Calcutta
High Court that a dwelling house of an undivided family has a linkage with
the dwelling house which belongs to the family and which is not divided
and that such dwelling house may be owned by members of such family
who need not be joint in mess and that house itself should be undivided
amongst the members of the family who are its owners. The emphasis is C
really on the undivided character of the house, and it is this attributed of
the house which imparts to the family its character of an undivided family.
For the members of the family may have partitioned all their other joint
properties and may have separated in mess and worship, but they would
still be an undivided family in relation to the dwelling house so long as they D
have not divided it amongst themselves. In this connection, it has been
further observed as follows : -

"If in this state of things a member of the family transfers his
share in the dwelling house to a stranger, the position that arises
is that para 2 of section 44, T.P. Act comes into operation and the E
transferee does not become entitled to joint possession or other
common or part enjoyment of the house, although he would have
the right to enforce a partition of his share. The object of this
provisions is to prevent the instruction of strangers into the family
residence which is allowed to be possessed and enjoyed by the F
members of the family alone in spite of the transfer of a share to
a stranger. The factual position then is that it is still an undivided
dwelling house, the possession and enjoyment of which are con-
fined to the members of the family, the stranger transferee being
debarred by law from exercising his right to joint possession which G
is one of the main incidents of co-ownership of property. Such a
dwelling house can in our opinion still be looked upon as a dwelling
house belonging to an undivided family, because the members of
the family have not divided it amongst themselves and are in sole
enjoyment and possession of it to the exclusion of the stranger
transferee who has only a right to partition. And so long as the H
468 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A dwelling house has not been completely alienated to strangers as
was the case in Vaman Vishnu v. Vasudeo Norbhat, 23 Born. 73,
successive transfer by other co-sharer members of the family do
not alter the factual position in this respect, because the remaining
member or members of the family have the right to hold exclusive
possession to the exclusion of the stranger alienees. So long as that
B
situation lasts, the dwelling house, in our opinion, continues to be
a dwelling house belonging to an undivided family."

The aforesaid decision also shows that so long as decree for partition of a ·
family dwelling house does not get fully executed and the shares of co-
C owners do not get separated by metes and bounds and the co-owners are
not put in actual possession of their respective shares, the dwelling house
remains to be common dwelling house of joint family and so long as that
attribute remain~, Section 4 would continue to be attracted. We may now
deal with the decision of the Division Bench of the Patna High Court which
D has also directly spoken on the point. In Harendera Nath Mukherjee v.
Shyam Sunder Kuer & Ors. (Supra) Mukharji, J., speaking for the court had
to consider this very question in the light of the scheme of Section 4 of the
Partition Act. It was held that application under Section 4 could be made
at any stage of the suit. Simply because an application had been filed after
the passing of the final decree, it could not be said that it was not
E maintainable on the ground that the executing court could not go behind
the decree. It was not a case of going behind the decree. It was further
observed that. family continued to be undivided qua dwelling house till
possession was delivered to the members of the family in execution of the
final decree for partition and as such, the application under Section 4 was
F maintainable after passing of the final decree and before the possession of
the dwelling house in question was delivered to the stranger transferee.
The aforesaid decisions of the Calcutta High Court in the cases of Satya
Narayan Chakrav01ty (supra) and Boto Krishna Ghose (supra) as well as
the decision of the Division Bench of the Patna High Court in the case of
Harendra Nath Mukherjee (supra) lay down the correct legal position.
G
At this stage, we may note one apprehension voiced by Dr. Ghosh.
It was submitted that if this view regarding applicability of Section 4 is
...
upheld, then it may very well happen that even after the decree for partition
is executed by one of the erstwhile co- owners and his transferee and the
H stranger transferee is actually put in possession of his share by division on
G. GHOSHv. M.M.GHOSH [MATMUDAR,J.] 469

spot by metes and bounds, and thereafter if such a transferee transfers his A
separate share in the dwelling house which has been actually handed over
to him, the co-owner may still file an application under Section 4 of the
Act. This apprehension is totally misconceived. Section 4 in its ap-
plicability, as discussed above, will cover all stages of litigation in a partition
suit from its inception till its termination not only by the final decree for B
partition but also by its complete satisfaction and discharge through the
assistance of the executing court; once that happens the court itself be-
comes functus officio and the litigation will come to an end and the
concerned parties thereafter will occupy the respective portions of the
erstwhile dwelling house as full owners of their portions. The separated
part of the dwelling house in possession of such stranger transferee cannot C
then be treated as a part and parcel of the dwelling house belonging to an
undivided family and at that stage the dwelling house qua such a stranger
would cease to belong to any joint family and it would belong to different
owners occupying their respective portions in a composite building. Mo-
ment the integrity of common dwelling house belonging to undivided family D
is broken by the execution of the final partition decree through the inter-
vention of the court and the proceedings are ended, there would remain
no scope for play of Section 4 of the Act as there would be no subject-mat-
ter of a common dwelling house belonging to an undivided family on which
it could operate.
E
As a result of the aforesaid discussion, it must be held that Section
4 of the Act can validly be pressed· in service by any of the co-owner of the
dwelling house belonging to undivided family pending the suit for partition
till final decree is passed and thereafter even at the stage of execution of
the final decree for partition so long as the execution proceedings have not F
effectively ended and the decree for partition has not been fully executed
and satisfied by putting the share-holders in actual possession of their
respective shares. Beyond that stage, however, Section 4 will go out of
commission.

That leaves out the question as to what final order should be passed G
in these proceedings. As we have upheld the applicability of Section 4 to
the present proceedings the application fded by Respondent No. 1 is held
maintainable and is required to b e processed further. At this stage, on the
aforesaid conclusion to which we have reached, it would be necessary, as
directed by the High Court, to remand the proceedings under Section 4 of H
470 SUPREME COURT REPORTS [1996) SUPP~ 6 S.C.R.

A the Act for being processed further. However, as the proceedings are very
old and are lingering on since so many years in the court, learned counsel
for thy respondents fairly suggested with a view to putting an end to this
litigation that Respondent No. 1 who had moved the application under
Section 4 of the Act in 1986, is prepared to pay Rs. four lakhs to the
appellant in full and final satisfaction of his claim as a donee of the share
B belonging to Smt. Radha Rani. This amount was offered in the light of the
valuation of the share of the appellant in the dwelling house as on
12.12.1986 when that application was, moved. This offer was made by
learned counsel for the respondents in consultation with Respondent No.
1 who was present in the Court. Dr. Ghosh, learned senior counsel for the
C appellant, was also agreeable to the said course being adopted. In our view
this is a fair stand taken by both the parties to put an end to this litigation
which was triggered off as early as on 5.9.1960. It is high time that it reaches
its final terminus at least after 36 years we, therefore, grant application of
Respondent No. 1 under Section 4 of the Partition Act and direct him to
D pay Rs. four lakhs to the appellant in full and final satisfaction of his clait;i
and on payment of Rs. four lakhs by Respondent No. 1 to the appellant,
the appellant shall convey his right, title and interest in the suit house to
Respondent No. 1 as per Section 4 of the Partition Act. Rupees four lakhs
shall be paid by Respondent No. 1 to the appellant by instalments as under:

E 1. Rupees two lakhs will be paid by Respondent No. 1 to the
appellant on or before 31.12,1996.

2. The balance of Rupee two lakhs shall be paid by Respondent No.
1 to the appellant on or before 31.3.1997.
F
It is further directed that in case of default of any of these instal-
ments, the amount remaining due on such default shall become payable by
Respondent No. 1 to the appellant with 18% interest thereon from the date
of this judgment till the payment of such defaulted amount. On payment
of the aforesaid amount of Rs. four lakhs and also subject to payment of
G interest on the requisite amount, in case of default, if any, as aforesaid, the
right, title and interest of the appellant in the suit dwelling house shall
stand transferred in full ownership of Respondent No. 1, the applicant of
Section 4 of the Act and such share shall be treated to have been sold by
the appellant to respondent No. 1. On receipt of the aforesaid sale con-
H sideration, the appellant shall also execute necessary sale document in
G. GHOSH v. M.M. GHOSH [MAIMUDAR,J.) 471

favour of Respondent No. 1 The cost of registration of such sale document A
shall be borne by Respondent No. 1 Thereupon, the application for execu-
tion moved by the appellant shall be treated as closed and the decretal
claim of the appellant qua the judgment-debtors will be treated as fully
satisfied. It is further directed that the concerned parties shall not alienate
or encumber in any manner their respective shares in the joint family
dwelling house till the present order is fully complied with. The concerned
B
parties are directed to carry out the aforesaid directions punctually. The
appeal is accordingly disposed of with no order as to costs in the facts and
circumstances of the case.

v.s.s. Appeal disposed of. C
A SAROJINI AMMAL
v.
THE CONTROLLER OF ESTATE DUTY, MADRAS

SEPTEMBER 18, 1996

B (S.P. BHARUCHA AND K. VENKATASWAMI, JJ.)

Estate Duty Act, 1953: Section JO.

Estate-Plincipal value of-Gifted amounts-Includibility in-Business
C man made unconditional gifts to his daughters who accepted the same-Sub-
sequently, as per request of daughters a pa1tnership Jinn comp1ising donor-
f ather and donee-daughters was f om zed-Amounts gifted retained in business
and utilised as share capital of donee-daughters in pa1tnership Jinn-Later
donor-father died-Held: In the circumstances of the case, amounts of gift
retained in business was not includible in the p1inciple value of the estate of
D the deceased.

The proprietor of a business concern made unconditional cash gifts
to his daughters and they accepted the same. Subsequently, as per the
request made by the said daughters a partnership firm comprising the
E donor-father and the donee-daughters was formed and the amounts gifted
to the donee- daughters were retained in the business and utilised as share
capital of the donee-daughters in the partnership firm. Later the donor-
father died. The Assistant Controller of Estate Duty held that the gifted
amounts were liable to be included in the principal value of the estate of
the deceased donor under Section 10 of the Estate Duty Act, 1953. The High
F Court confirmed this assessment. Being aggrieved the appellant preferred
the present appeal.

Allowing the appeal, this Court

HELD: 1. When the gift was made and accepted, it was unconditional.
G the donees requested that a partnership be formed and the amounts gifted
be retained and utilised as share capital of the donees in the partnership
firm to be formed. There is nothing, in this case, to suggest that parting with
the enjoyment or benefit by the donee, or permitting the donor to share
them out of the bundle of right gifted in the property is referable to the gift.
H Hence, the amounts of gift retained in business was not includible in the
472
SAROJINI AMMAL v. CONIROLLER OF ESfA1E DUfY [VENKATASWAMI, J.)473 -

principal value of the estate of the deceased. [476-H, 477-A] A
Controller of Estate Duty, Kera/av. R. V. Vishwanathan & Ors., [1977]
1 sec 90 ' relied on.

Controller of Estate Duty, Punjab & Haryana, Jammu & Kashmir,
Himacltal Pradesh and Chandigarh v. Kamalavati, [1979) 4 SCC 265, held B
inapplicable.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2513 of
1981.

From the Judgment and Order dated 23.1.79 of the Madras High C
Court in T.C. No. 98 of 1975.

A.T.M. Sampath for the Appellant.

Dr. R.R. Misra, R.C. Ramesh and S.N. Terdol for the Respondent. D
The Judgment of the Court was delivered by

VENKATASWAMI, J. In this appeal by a certificate granted by the
High Court of Madras under section 65 of the Estate Duty Act, 1953
(hereinafter referred to as "the Act"), the vexed question of applicability E
or otherwise of section 10 of the Act arises for decision of this Court.

One Murugesa Mudaliar, the deceased, passed away on 15.10.1964.
He was carrying on a business under the name and style of 'Newton &
Company' a proprietory concern. On 20. 7.1962, the deceased made two
cash gifts of Rs. 40,000 each to his two daughters, namely, Smt. Rajeswari F
and Gnanambigai by debiting his capital account and crediting their ac-
counts in his personal business book. On 20.7.62, both the donees wrote
letters to the deceased accepting the gifts and thanking their father. Again
on 27.7.62 each donee by separate letters thanking once again for the gifts
requested the deceased to retain the same in the business and admit them G
as partners. Accordingly, a partnership was formed with effect from
1.8.1962 in which the donees and also the donor were the partners. As
noticed, the deceased passed away on 15.10.1964. A question arose, inter
alia, whether on the facts and in the circumstances of the case, the gifts of
Rs. 80,000 in all made by the deceased to his two daughters by debiting his
capital account and crediting the accounts of the donees in his personal H
474 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A business book could not be included in the principal value of the estate of
the deceased under section 10 of the Estate Duty Act.

The Assistant Controller of Estate Duty overruling the objection of
the accountable persons concluded that since the gifted amounts were not
taken possession of and enjoyed by the donees to the entire exclusion of
B the donor, the gifted amounts were liable to be included in the principal
value of the estate of the deceased under Section 10 of the Act. On appeal,
the Appellate Controller confirmed the assessment. The accountable per-
sons appealed to the Income Tax Appellate Tribunal ("Tribunal" for short)
and the Tribunal found that the gifts in question did not fall within the
C ambit of section 10 of the Act and consequently they were not liable to
estate duty. The Tribunal found as follows :

"These sequence of events clearly go to establish : -

(1) The two sums transferred by book entries were still available
D for purpose of the business carried on by the deceased.

(2) Under Section 122 of the Transfer of Property Act, the gift
must be accepted by the donee and an offer without acceptance
of the donee cannot complete the gift. While accepting the gift,
the donees have stipulated for retention of th~ gifted amounts in
E the business of the deceased and admit them as partners. It,
therefore, follows that the transfer of gifts were complete with the
condition or understanding that the gifted amounts for the capital
account of the donees and continue to be available for purposes
of the business carried on by the deceased.
F (3) On making the gifts, the donees? assumed such possession
and enjoyment of the subject matter of the gift as it was capable
of at that time and that was also retained to the exclusion of the
donor.

(4) If the donor had some sort of control over the gifted
G
amounts, it was not because of any reservation made by him while
making the gifts, but the gift itself was made subject to the condi-
tion or understanding that the gifted amounts would be available
for the continued use of the business carried by the deceased" ..

H The revenue aggrieved by the decision of the Tribunal moved the
SAROJINIAMMALv. CONfROLLEROFESTAIBDUfY[VENKATASWAMl,J.j475

High Court by way of reference. Before the High Court, on behalf of the A
accountable persons, a decision of the Court in Controller of Estate Duty,
Kera/a v. R. V. Viswanathan & Others, [1977] 1 SCC 90 was relied upon.
However, the High Court distinguished that decision and ruled that on the
facts of the case, Section 10 of the Act is attracted and consequently
answered the question referred to it in favour of the Revenue and against
B
the assessee.

Later at the instance of the accountable persons, the High Court
granted a certificate of fitness for appeal to this Court in view of the later
decision of this Court in Controller Estate Duty, Punjab & H01yana, Jammu
& Kashmir, Himachal Pradesh and Chandigarh v. Kamlavati, [1979] 4 SCC C
265.

Before us also learned counsel appearing for the appellant placing
reliance on the decisions of this Court in Vishwanathan's case (supra) and
Kamlavati's case (supra) contended that the facts of this case as well as the D
facts in Vishwanathan's case are identical and the High Court was not
correct in stating that the facts were not identical and therefore, the
appellant is entitled to succeed in this Appeal. The learned counsel ap-
pearing for the Revenue, however, submitted that in almost all the cases,
the donor was already a partner in partnership firm and the donee/donees
was/were taken as partner/partners subsequent to the gift and the principle E
or the ratio laid down in such cases cannot be pressed into service to the
facts of this case where the donor was sole proprietor of the concern and
subsequent to the gift, the donees were taken as partner's and the partner-
ship came into existence. We do not think that the learned counsel for the
Revenue is right in making this submission. In Vishwanathan's case, the F
donor was the sole pro.prietor when he gifted the total sum of Rs. 2,70,000
to his four major and two minor sons.

After going through various decisions of this Court, which have taken
into account a number of English decisions, we find that the rigour with G
which Section 102 of the English Act corresponding to Section 10 of our
Act was applied, has been mellowed down, if we may use that expression,
and certain amount of leniency has definitely been shown in favour of the
accountable persons. It is true that when the High Court rendered this
decision, there were conflicting views of High Court and to a certain extent,
· miSunderstanding of the decisions of this Court was prevailing. That was H
476 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R ..

A the reason for this Court in Kamlavati's case to observe as follows :

"To avoid the conflict in the application of the ratio of the various
Supreme Court cases as seems to have been done by so.µie of the
High Courts, we would like to clarify and elucidate some of the
aspects and facts of the matter a bit further. When a property is
B gifted by a donor the possession and enjoyment of which is allowed •
to a partnership firm in which the donor is a partner, then the
mere fact of the donor sharing the enjoyment or the benefit in the
property is not sufficient for the application of Section 10 of the
Act until and unless such enjoyment or benefit is clearly referable
c to the gift, i.e. to the parting with such enjoyment of benefit by the .
donee or permitting the donor to share them out of the bundle of
rights gifted in the property. If the possession, enjoyment or benefit
of the donor in the property is consistent with the other facts and
circumstances of the case, other than those of the factum of gift,
then it cannot be said that the donee had not retained the posses-
D sion and enjoyment of the property to the entire exclusion of the
donor, or, to the entire exclusion of the donor in any benefit to
him by contract or otherwise. It makes no difference whether the
donee is a partner in the firm from before or is taken as such at
the time of the gift or he becomes a creditor of the partnership
E furn by allowing it to make use of the gifted property for the
purposes of the partnership."

After observing as above, this Court in the said case further observed
as follows:

F "But we want to emphasise that the principles of law laid down by
this Court in several decisions which we have reviewed in this
judgment with some further clarification and elucidation should be
carefully and broadly applied to the facts of each case without
doing too much of dichotomy and hair splitting of facts so as not
to easily apply or not to apply the provision of law contained in
G
Section 10 of the Act."

We have already set out the facts as found by the Tribunal and from
those, it is clear that when the gift was made and accepted, it was uncoil-·
ditional. A week later the donees requested that a partnership be formed
H and the amounts gifted be retained and utilised as share capital of the
SAROJINIAMMALv.CONfROLLEROFESfA1EDUI'Y[VENKATASWAMI,J.)477

donees in the partnership firm to be formed. In the light of the letters A
written by the donees, as noticed above, we are of the view that there is
nothing to suggest that parting with the enjoyment or benefit by the donee,
or permitting the donor to share them out of the bundle of rights gifted in
the property is referable to the gift, we agree with the contention of the
learned counsel for the appellant that the facts are more or less identical
with the facts in Vishwanathan's case (supra) and the ratio laid down
B
therein which has been consistently applied by this Court subsequently will
apply to the facts of this case.

Accordingly, we allow the Appeal and answer the question referred
to the High Court in the affirmative in favour of the accountable persons C
and against the revenue. However, there will be no order as to cost.

v.s.s. Appeal allowed.
A UNITED BANK OF INDIA
v.
SH. NARESH KUMAR AND ORS.

SEPTEMBER 18, 1996

B [J.S. VERMA AND B.N. KIRPAL, JJ.]

Code of Civil Procedure, 1908 : Order 6 Rule 14. Order 29 Rule 1 and
Order 41 Rule 27(1)(b).

C Pleadings-Suit by companr-f'laint signed and velified by person duly
auth01ised by company-However, suit was dismissed on ground that it was
not duly signed and velified by a competent person-Held : Company could
expressly auth01ise one of its officers to sign plaint or it could ratify, expressly
or impliedly, act of signing-Court could render finding about ratification on
basis of evidence on record and circumstances specially with regard to
D conduct of trial-Even if [lial cowt found plaint was not duly signed and
velified by competent person, appellate cowt under 0.41 R. 27(l)(b) could
direct power of attomey to be produced or order competent person of com-
pany to be examined as witness to prove ratificatiort-ln the circumstances of
the case, plaint was duly signed and velified by a competent person.
E
Practice and Procedure :

PleadingJ.~Substantive lights should not be allowed to be defeated on
account ofprocedural in-egul01ity or mere technicality which is curable-Code
of Civil Procedure, 1908, 06 R. 14.
F
The appellant-Bank instituted a suit for recovery of the loan ad-
vanced to respondent No. 1 together with interest thereon. One R had
signed and filed the plaint on behalf of the appellant. The suit had been
filed in the name of the appellant'Company; full amount of court fee had
been paid by the appellant bank; documentary as well as oral evidence had
G been led on behalf of the appellant and the trial of the suit had continued
for about two years. The co_urts below came to a conclusion that money
had been taken by respondent No. 1 and that respondent No. 2 and
husband of respondent No. 3 had stood as gurantors and that claim of the
appellant was justified. However, the suit was dismissed by the courts
H below on the ground that the plaint was not duly signed and verified by a
478
UNIIBD BANK OF INDIA v. NARF.SH KR. 479

competent person. The question for consideration before this Court was A
whether the plaint was duly signed and verified by a competent person.

Allowing the appeal, this Court

HELD : 1.1. A company like the appellant can sue and be sued in its
own name. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the B
Code of Civil Procedure, 1908 it would appear that even in the absence of
any formal letter of authority or power of attorney having been executed a
person referred to in Rule 1 of Order 29 can, by virtue of the office which
he holds, sign and verify the pleadings on behalf of the Corporation. In
addition thereto an de hors Order 29 Rule 1 of the Code of Civil Procedure, C
as a company is Juristic entity, it can duly authories any person to sign
the plaint or the written statement on its behalf and this would be regarded
as sufficient compliance with the provisions of Order 6 Rule 14 of the Code
of Civil Procedure. A person may be expressly authorised to sign the
pleadings on behalf of the company. In absence thereof and in cases where
pleadings have been signed by one of its officers a Corporation can, ratify D
the said action of its officer in signing the Pleadings. Such ratificatlq~ can
be express or implied. [483-D-F]

2.1. The courts below could have held that R must have been em-
powered to sign the plaint on behalf of the appellant. In the alternative it E
would have been legitimate to hold that the manner in which the suit was
conducted showed that the appellant- bank must have ratified the action
of R in singing the plaint. If, for any reason whatsoever, the courts below
were still unable to come to this conclusion, then either of the appellant
courts ought to have exercised their jurisdiction under Order 41 Rule
27 (1) (b) of the Code of Civil Procedure and should have directed a proper F
power of attorney to be produced or they could have ordered R or any other
competent person to be examined as a witness in order to prove ratification
or the authority of R to sign the plaint. Such a power should be exercised
by a court in order to ensure that injustice is not done by rejection of a
genuine claim. [483-H, 484-A-B] G
2.2. In cases like the present where suits are instituted or defended
on behalf of a public corporation, public interest should not be permitted
to be defeated on a mere technicality. Procedural defect which do not go
to the root of the matter should not be permitted to defeat a just cause.
There is sufficient power in the Courts, under the Code of Civil Procedure, H
480 SUPREME COURT REPORTS (1996) SUPP: 6 S.C.R.

A to ensure that injustice is not done to any party who has _a just case. As·.
far as possible a substantive right should not be allowed to be defeated on
account of a procedural irregularity which is curable. [482-H, 483-A]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11884 of
1986.
B
From the Judgment and Order dated 30.8.93 of the Punjab &
Haryana High Co\ll't in R.S.A. No. 869 of 1993.

Sunil Goyal for Ms .. Mridula Ray Bhardwaj for the Appellant.

C G.K. Bansal for the Respondent No. 1-2.

The Judgment of the Court was delivered by

KIRPAL, J. The main question which arises in this appeal by special
leave is whether the suit for recovery of money filed by the appellant bank
D was properly instituted.

The appellant's branch at Ambala Cantt. had instituted a suit in the
Court of Sub-ordinate Judge, Ambala Cantt. for recovery of Rs. 1,40,553.91
from the respondent. The case of the appellant was that on 12th April,
E 1984 a sum of Rs. 50,000 was advanced as loan to respondent No. 1 for the
purposes of his business and on that date he had executed a demand
promissory note, hypothecation of goods agreement and other documents.
Respondent No. 2 and one Sh. Suresh Kumar, husband of respondent No.,
3 had stood as guarantors for the repayment of the loan. The respondents
were stated to have agreed to pay interest at the rate of 18 per cent per
F annum with quarterly rests. When default in payment of the money was
committed the aforesaid suit was filed for the recovery of the principal
amount and the interest thereon. The sum total came to Rs. 1,40,553.91.

In the written statement filed-by respondent No. 1 the plea which
G was taken was that he had never taken loan as alleged by the appellant
bank and respondent No. 2 and Sh. Suresh Kumar had not executed any
guarantee deed. It was, however, admitted that certain blank documents
had been got signed but it was denied that the respondents had agreed to
pay interest at th~ rate of 18 per cent per annum. He also took an
additional plea challenging the authority of Sh. L.K. Rohatgi to sign and
H file the plaint on behalf of the appellant. Respondent No. 2 filed a separate
UNITED BANK OF INDIA v. NARESH KR. [KIRPAL, J.] 481

·written statement taking the pleas similar to the one which had been raised A
by respondent No. 1 in his written statement. A further plea which was
taken by her was that her guarantee was limited to the extent of Rs. 50,000
and she was not liable to pay any more amount merely because additional
credit facilities may have been allowed to respondent No. 1. As the other
guarantor - Sh. Suresh Kumar had died his widow, namely respondent No. B
3 was impleaded as one of the defendants but as she did not appear the
case against her proceeded et parte. The appellant bank filed its replication
wherein it denied the allegations contained in the written statement filed
by respondents 1 and 2.

On the pleadings of the parties the following issues were framed : C
"1. Whether the plaint i!rfduly signed and verified by a competent
person? OPP

2. Whether the defendant No. 1 raised a loan of Rs. 50,000 from
the plaintiff bank on 12.4.84 and executed a demand promissory D
note, hypothecation of goods agreement, letter of loan and other
documents in favours of the plaintiff bank? OPP

3. Whether the defendants No. 2 and 3 stood as guarantors for the
repayment of the loan and if so, what is the extent of their liability?
OPP E
4. What is the balance amount? OPP

5. Whether the plaintiff varied the terms of loan and if so, its effect
qua the liabilities of defendants No. 2 and 3, Onus on Parties.
F
6. Whether the statement of account produced by the plaintiff is
admissible in evidence? OPP

7. Whether the defendants agreed to pay interest if so, at what rate
and to what amount? OPP
G
8. Whether the plaintiff has no cause of action? OPP

9. Relief."

The trial judge by his judgment dated 14th November, 1987 decided
issue No. 1, 2 and 7 against the appellant. Issues 3, 4, 5 and 6 were held in H
482 SUPREMECOURTREPORTS (1996] SUPP. 6 S.C.R.

A the appellant's favour. The trial court, however, held, under issues 2 and
3, that respondent No. 3 was not liable to pay any amount and respondent
No. 2 was liable to pay only a sum of Rs. 55,699.W as the principal amount
plus interest at the rate of 18 per cent per annum for the period 12th April,
1984 to 11th February, 1985. In view, however, of the decision against the
B appellant of issue No. 1 the suit filed by the appellant was dismissed with
costs.

The appellant then filed an appeal which was decided on 2nd
November, 1992 by the Additional District Judge, Ambala. The Additional
District Judge reversed the findings of the trial court in so far as issues 2
C and 7 were concerned and came to the conclusion that the appellant had
been able to prove that respondent No. 1 had taken a loan of Rs. 50,000
and had also proved the execution of relevant documents by the respon-
dents. The principal debtor and the guarantors were also held to have
agreed to pay interest at the rate of 18 per cent per annum. It affirmed the
decision of the trial court limiting respondent No. 2's liability to Rs. 50,000
D and interest thereon. With regard to the liability of respondent No. 3 the
lower appellate court held that in the absence of any evidence to prove
that she had inherited any estate from her deceased husband no liability
could be fastened on her and the decision of the trial court, to that effect,
was affirmed. The appeal was, however dismissed because the Additional
E District Judge upheld the decision of the trial court with regard to issue
No. 1. It was held that it has not been proved that Sh. L.K. Rohatgi had
held any valid authority to file the suit on behalf of the appellant bank.

Against the aforesaid decision of the Additional District Judge the
appellant filed a regular second appeal. By order dated 30th August, 1993
F a single judge of the Punjab and Haryana High Court dismissed the said
appeal in limine by observing that there was no ground for interference
with the concurrent findings of facts recorded by two courts below. Hence
this appeal by special leave.

G In this appeal, therefore, the only question which arises for con-
sideration is whether the plaint was duly signed and verified by a competent
person.

In cases like the present where suits are instituted or defended on
behalf of a public corporation, public interest should not be permitted to
H be defeated on a mere technicality. Procedural defects which do not go to
UNffED BANK OF INDIA v., NARESH KR. [KIRP AL, J.] 483

the root of the matter should not be permitted to defeat a just cause. There A
is sufficient power in the Courts, under the Code of Civil Procedure, to
ensure that injustice is not done to any party who has a just case as for as
possibl~e a substantive right should not be allowed to be defeated on
account of a procedural irregularity which is curable.
I
,,
In cannot be disputed that a company like the appellant can sue and
B
be sued in its in its own name. Under drder 6 Rule 14 of the Code of Civil
Procedure a pleading is required to be signed by the party and its pleader,
if any. As a company is a juristic entity it is obvious that some person has
to sign the pleadings on behalf of the company. Order 29 Rule 1 of the
Code of Civil Procedure, therefore, provides that in a suit by or against a C
corporation the secretary or any Director or other Principal Officer of the
corporation who is able to depose to the facts of the case might sign and
verify on behalf of the company. Reading Order 6 Rule 14 together with
Order 29 Rule 1 of the Code of Civil Procedure it would appear that even
in the absence of any formal letter of authority or power of attorney having D
been executed a person referred to in Rule 1 of Order 29 can, by virtue of
the office which he holds, sign and verify the pleadings on behalf of the
corporation. In addition thereto an de hors Order 29 Rule 1 of the Code
of Civil Procedure, as a company is a juristic entity, it can duly authorise
any person to sign the plaint or the written statement on its behalf and this
would be regarded as sufficient compliance with the provisions of Order 6 E
Rule 14 of the Code of Civil Procedure. A person may be expressly
authorised to sign the pleadings on behalf of the company, for example by
the Board of Directors passing a resolution to that effect or by a power of
attorney being executed in favour of any individual. In absence thereof and
in cases where pleadings have been signed by one of its officers a Corpora- p
tion can ratify the said action of its officer in signing the pleadings. Such
ratification can be express or implied. The Court can. on the basis of the
evidence on record, and after taking all the circumstances of the case,
specially with regard to the conduct of the trial come to the conclusion that
the corporation had ratified the act of signing of the pleading by its officer.
G
The courts below could have held that Sh. L.K. Rohatgi must have
been empowered to sign the plaint on behalf of the appellant. In the
alternative it would have been legitimate to hold that the manner in which
the suit was conducted showed that the appellant bank must have ratified
the action of Sh. L.K. Rohatgi in signing t'1e plaint. If, for any reason H
484 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A whatsoever, the courts below were still unable to come to this conclusion,
then either of the appellate ~ourts ought to have exercised their jurisdiction
under Order 41 Rule 27(1)(b) of the Code of Civil Procedure and should
have directed a proper power of attorney to be produced or they could
have ordered Sh. L.K.. Rohaigi or any other competent ·person to be
examined as a witness in order to prove ratification or the authority of Sh.
B L.K. Rohatgi to sign the plaint. Such a power should be exercised by a
court in order to ensure that injustice in not done by rejection-of a genuine
claim.

The Courts below having come to a conclusion that money had been
C taken by respondent No. 1 and that respondent No. 2 and husband of
respondent No. 3 had stood as guarantors and that the claim of the
appellant was justified it will be a travesty of justice if the appellant is to
be non suited for a technical reason which does not go to the root of the
matter. The suit did not suffer from any jurisdietional infirmity and the -only
defect which was alleged on behalf of the respondents was one which was
D curable.

The court had to be satisfied that Sh. L.K. Rohatgi could sign the
plaint on behalf of the appellant. The suit had been filed in the name of
the appellant company; full amount of. court fee had been paid by the
E appellant bank; documentary as well as oral evidence had been led on
behalf of the appellant and the trial of the suit before the Sub Judge,
Ambala, had continued for about two ye_ars. it is difficult, in these cir-
cumstances, even to presume that the suit had been filed and tried without
the appellant having authorised the institution of the same. The only
reasonable conclusion which we can come to is that Sh. L.K. Rohatgi must
F have been authorised to sign the plaint and, in any case, it must be ~eld
that the appellant had ratified the action of Sh. L.K. Rohatgi in signing the
plaint and thereafter it continued with the suit

CONCLUSIONS :
G The suit of the appellant had been dismissed because issue No. 1
had been decided against it. Counsel for the parties have not challenged
the decision of the lower appellate court on the other issues, which decision
was affirmed by the High Court when it dismissed the second appeal in
limine. For the reasons stated hereinabove we hold that issue No. 1 was
H wrongly decided and this being so the appellant was entitled to a decree
.
UNITED BANK OF INDIA v. NARESH KR. [KIRP AL, J.) 485

in view of the decision of the lower appellate court on the other issues. A
The appeal of the appellant is, accordingly, allowed in the aforesaid
terms. The effect of this would .be that the suit of the appellant would be
decreed in accordance with the decision of the lower appellate court on
the other issues which that cour~ had decided in favour of the appellant.
The appellant will also be entitled to costs. B
v.s.s. Appeal allowed.
A UNION OF INDIA
v.
MHATHUNG KITHAN AND ORS.

SEPTEMBER 18, 1996

B [AM. AHMADI, CJ. AND SUJATA V. MANOHAR, J.)

Se1Vice Law:

Indian Administrative Se1Vice (Cadre) Rules-Rule 5.

c Cadre allocation-Insider vacancy-Non-availability of Insider-Cany-
f01ward--Pennissibility of-Policy dated 30. 7. I984 required at least 662/3%
of directly recmited Officers from outside State concemed--Held : did not
impose ceiling of 66.2/3o/u-Hence, in absence of any mle, filling up of insider
vacancy by outside due to non-availability of insider not a ground to accom-
D modate insider in outsider vacancy in subsequent year.
Respondent No. 1 was appointed to the Indian Administrative Ser-
vice and was allocated to a state different from his home State. There were
two seats which were available for the home State of respondent No. 1.
However, both these seats were earmarked for outsiders as per the 30 point
E roster under a policy dated 30.7.1984 of the appellant-Union in which the
"outsider" element in the direct recruitment quota was raised to 66.2/3%.
Respondent No. 1 challenged his allocation before the Central Administra-
tive Tribunal which directed the appellant to consider transfer of respon·
dent No. 1 from his present State to his home State. Being aggrieved the
F appellant-Union preferred the present appeal.

On behalf of respondent No. 1 it was contended that in the previous
batch when the vacancy was for an insider since no insider was available,
the vacancy was occupied by an outsider; and that respondent No. 1 should
be considered for one of the roster points available for his batch in the
G subsequent year.
Allowing the appeal, this Court

HELD : 1.1. In the light of the Policy dated 30.7.1984 a continuous
30 point roster was provided. The roster follows the cycle, "outsider,
H insider, outsider, outsider, insider, outsider •••••...". In any given year the
486
U.O.I. v. MHAIBUNG KITH.AN [MRS. SUJATA V. MANOHAR,J.) 487

roster starts with the point where the roster ended in the previous year. A
In the case of the State cadre for the home State of respondent No. 1 there
were two vacancies for allocation to his batch. As per the 30 point roster,
both these vacancies were for outsiders. Hence the first respondent, being
an "insider", was not eligible for either of the two vacancies. He was,
therefore, allotted to a different State. (489-B-D] B
1.2. There is no rule which provides for a carry-over of "insider"
vacancies if they are not filled due to non- availability of insider candidates.
In the absence of any such rule for carry-forward of insider vacancies, is not
possible to accommodate respondent No. 1 in the vacancies which are
earmarked for outsiders as the relevant roster points. [489-E-F] C

Union of India & Ors. v. Rajiv Yadav, IAS & Ors., (1994) 6 SCC 38,
relied on.

2. The roster is framed bearing in mind the requirement of increas-
ing outsiders in the quota of Direct Recruits. The policy requires that at D
least 66.2/3% of the officers who are directly recruited are from outside the
State concerned. It does not impose a ceiling of 66.2/3%. [489-H, 490-A]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12310 of
1996 Etc.
E
From the Judgment and Order dated 23.12.94 of the Central Ad-
ministrative Tribunal, Chandigarh in O.A. No. 1064-CH of 1992.

V.R. Reddy, Additional Solicitor General, K.N. Shukla, (Ms. Shashi
Kiran) for Ms. Anil Katiyar and C.V.S. Rao for the Appellant. F
Pankaj Katra and B.K. Sharma for the Respondent in C.A. No.
12310/96.

Rajeev K. Singh for the Respondent in C.A. No. 12325/96.
G
The Judgment of the Court was delivered by

MRS. SUJATA V. MANOHAR, J. Leave granted in both the special
leave petitions.

Civil Appeal No 12310/96 (@ SLP(C) No. 13705/95. H
488 SUPREME COURT REPORTS {1996) SUPP. 6 S.C.R.

A Respondent No. 1 appeared in the Civil Service Examination con-
ducted by the Union Public Service Commission in the year 1985. He was
selected for appointment to the Indian Administrative Service in the 1986
batch. The home State of respondent No. 1 is Nagaland and he gave his
preference for allocation to his home State cadre. There were two seats
which were available for allocation to Nagaland. Both these seats were
B
earmarked for outsiders as per the 30 point roster. 1-Ience the first respon-
dent was allocated to the State of Haryana. He challenge this allocation by
filing an application before the Chandigarh Bench of the Central Ad-
ministrative Tribunal. The Tribunal has allowed the application and
directed the appellant-Union of India to consider the transfer of respon-
C dent No. 1 from the Haryana cadre to the Nagaland cadre in the manner
set out in the order. The present appeal is from the order of the Tribunal.

Under Rule 5 of the Cadre Rules it is provided as follows :

D "5. Allocation of members to various cadres 5(1). The allocation
of cadre officers to the various cadres shall be made by the Central
Government in consultation with the State Government or the
State Government concerned.

5(2) - The Central Government may, with the concurrence of the
E
State Government concerned transfer a cadre officer from one
· cadre to another cadre".

Rule 5 was construed by this Court in the case of Union of India and
Ors. v. Rajiv Yadav, /AS and Ors., {1994] 6 SCC 38. It has held that a
F selected candidate has a right to be considered for appointment to the IAS
but he has no such right to be allocated to a cadre of his choice or to his
home State. Allotment of cadre is an incidence of service; and a member
of an All-India service bears liability to serve i11 any part of India. Respon-
dent No. 1, therefore, had no right to be allocated to a cadre of his choice.
G Under a policy decision conveyed by the Govt. of India, Department
of Personnel & Training to the Chief Secretaries of all States by a letter
dated 30th July,1984, it was decided that for various reasons set out therein,
in order to have a proper balance in the State cadre, the "outsider" element
in the direct recruitment quota was raised to 66.2/3% or in the ratio 2 : 1
H as between outsiders and insiders in place of 1 : 1. The letter states :
U.O.I. v. MHA1HUNG KITHAN [MRS. SUJATA V. MANOHAR,J.) 489

"It is proposed to give effect to this decision by ensuring henceforth A
at the time of allocating candidates appointed to I.AS. and I.P.S
on the basis of Civil Service Examination, that at least 66.2/3% of
the officers are from outside the State concerned."

(underlining ours)
B
In the light of this policy a continuous 30 point roster was provided
starting from the examination~held in 1983. The roster follows the cycle,
"outsider, insider, outsider, outsider, insider, outsider ···~··"· In any given
year the roster starts with the point where the roster ended in the previous
year. In the case of the State cadre for the State of Nagaland there were C
two vacancies for allocation to the batch which had passed the examination
in the year 1985. As per the 30 point roster, both these vacancies were for
outsiders. Hence the first respondent, who belonged to the State of
Nagaland, being an "insider", was not eligible for either of the two vacan-
cies. he was, therefore, allotted to the State of Haryana.
D
The first respondent has contended that in the batch passing the
examination in 1984, when the vacancy was for an insider, no insider was
available and the vacancy had been occupied by an outsider. Hence he
should be considered for one of the roster points available for the batch
of 1985. We have, however, not been shown any rule which provides for a E
carry-over of "insider" vacancies if they are not filled due to non-availability
of insider candidates. In the absence of any such rule for carry- forward of
insider vacancies, we do not see· how the first respondent can be accom-
modated in the vacancies which are earmarked for outsiders as per the
relevant roster points.
F
In the policy statement of 30th July, 1984, a reference was made to
the fact that State serviee officers who get promoted to l.A.S/l.P.S. are in
the age group of 40 to 50 and at that late stage, their transfer to another
State cadre may give rise to personnel and administrative problems of
adjustment. Therefore, in order to restore the outsider-insider balance in
a State cadre, it was proposed that the outsider element in the direct G
recruitment quota required to be increased. In this context it is difficult to
accept the contention of the first respondent regarding carry-forward of
"insider" vacancies. The roster is framed bearing in mind this requirement
of increasing outsiders in the quota of Direct Recruits. The policy requires
that at least 66.2/3% of the officer who are directly rec1Uited are from outside H
490 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the State concemed. It does not impose a ceiling of 66.213%. The TlibunfJ-l
was, therefore, not light in disturbing the implementation of this policy as per
the roster.

The · appeal is, therefore, allowed with costs. The order of the
Tribunal· is set aside and the application of the first respondent is dis-
B missed.

In view of the above decision, Civil Appeal No. 12325/96 (@ SLP(C)
No. 21429/93) is also allowed with costs since the facts are similar to the
facts in the above Civil Appeal.

c v.s.s. Appeal allowed.
JAIPUR DEVELOPMENT AUTHORITY A
v.
MAHA VIR HOUSING CO-OP., SOCIETY, JAIPUR ETC.

SEPTEMBER 18, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND B
G.B. PATTANAIK, JJ.)

Land Acquisition Act, 1894:

Compensation-Award of-In the given circumstances of the case two C
times more than what was granted by the Land Acquisition Officer would be
the just compensation-Central Amendment Act applicable from August 1,
1987 to the acquisition in State of Rajasthan-Hence only 6% p.a. interest
payable prior to 1.8.1987 and thereafter at 15% p.a. on the enhanced com-
pensation till date of deposit in Cowt-Also entitled to solatium on the D
enhanced cpmpensation at 30o/u-Not entitled to additional amount.

Umed Industries & Land Development Co. & Ors. v. State of Rajasthan
& Ors., (1995] 2 SCC 563; Prem Nath Kapur and Anr. v. National Fe1tilizers
Corpn. of India Ltd. and Ors., (1996] 2 SCC 71; Union of India v. Raghubir
Singh, (1989] 3 SCR 316 and Bai Shaloiben v. Sp/. LA.O., (1996) 4 SCALE E
636, relied on.

State of Punjab & Ors. v. Mohinder Singh Randhawa & Anr., [1993]
Supp. 1 SCC 49, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12662 of F
1996 Etc.

From the Judgment and Order dated 20.12.9~ of the Rajasthan High
Court in R.P. No. 1059 of 1993.
G
Dr. Shankar Ghose and A.K. Goel for the Appellant.

Tapas Ray, S.M. Jain, Sushil Kr. Jain, A.P. Dham.ija, Mrs. Pratibha
Jain and Prakash Shrivasatava for the Respondents.

The following Order of the Court was delivered : H
491
492 SUPREMECOURTREPORTS (1996)SUPP.6S.C.R.

A Leave granted.

Notification under Section 4(1) of the Rajasthan Land Acquisition
Act, 1953 was published on August 21, 1969 acquiring a large extent of 484
bighas 11 biswas of land for Jaipur Urban Development Scheme by dif-
ferent notifications. An extent of 4 acres 5 biswas (9845 sq. yds.) relates to
B
the acquisition in appeal arising out of SLP (C) No. 14811/94.. ln respect
of the appeal rising out of SLP (C) No. 6519/94, an extent of 10 bighas 7
biswas was acquired. The Land Acquisition Officer. determined the com-
pensation by his award dated July 16, 1981 and 9ctober 12, 1981 respec-
tively determining the compensation at the rate of Rs. 5,000 per bigha to
C the respondent - Jai Ambe Co-op. Housin~ Society and Rs 7,500 per bigha
to the respondent - Mahavir Housing Co-op. Society. On reference, the
civil Judge enhanced the compensation at the rate of Rs: 40,000 per bigha.
As regards the award of the Civil Judge, an appeal was filed against the
respondent - Jai Ambe Co-op. Society Ltd. The learne.d single Judge in
D appeal No. 142/92 has confirmed the same by judgment dated May 2, 1994. ·
As regards the award in favour of Mahavir Housing Co-operative Society,
no appeal was filed. But in execution an objection has been raised· regard-
ing additional amount award under Section 23(1-A) which was negatived.
On revision, the High Court in Revision No. 1059/93 dated December 20,
E 1993 confirmed the sanie. Thus, these appeals by special leave.

When the matter relating to M~avir Housing Co-operative Society
initially came up, notice was confined in respect of Section 23(1-A), but
later when it was brought to our notice of the fraud and collusi?n between
the officers entrusted with the prosecution on behalf of the appellant.and
F the claimants, we have indicated to the counsel that we would go into the
·question of determination of the compensation. Thus, these cases are heard
together. It is seen that from the evidence adduced before the reference
Court in respect of Jai Ambe Co-operative Housing Society except one
claimant Mr. Garg, not documentary evidence has been adduced in sup-
G port of the claimant for enhancement. Two awards under Section 26 came
to be filed in which one award relating to the Mahavir Housing Co-opera-
,.. tive Society and another award relating to the same notification but an
amount of Rs. 24,000 per bigha was awarded. As regards the claim in
Mahavir Housing Co-operative Society is concerned, they relied upon a
H judgment of the High Court in which the High Court has granted to some
JAIPURDEV.AUTIIORITYv.MAHAVlRHSG.CO-OP.SOCY. 493

lands at the rate of Rs. 12 per sq. yd. which relates to the acquisition of A
1964 and also a certificate issued by Tehsildar relating to some other
village, which worked out at· the rate. of Rs. 44,000 per acre and the sale
deeds in support thereof. One curious fact in both the cases that cannot
be lost sight of is that the claimants have purchased these properties after
the notification under Section 4(1) was published and a reference came to B
be made at their instance to the civil Court. Though an opportunity was
~ven to the appellant, for well over 11 years, no counter affidavit has been
filed. As a result, they were set ex-parte. Yet another curious aspect that
we cannot lose sight of is that the reference Judge has merely with
parrot-like but traditional consideration swallowed what with witnesses has C
stated that the market value is Rs. 50 per sq. yd. without ~ubjecting to any
scrutiny as per the tests laid do~ by this Court. It is also to be noted that
the same aspect was repeated by the learned Judge of the High Court in
Jai Ambe Co-operative Housing Society's case.

The question, therefore, is : what would be the reasonable compen- D
· sation to which the claimants are capable to get? In view of the settled legal
position that the claimants f>eing the subsequent purchasers cannot have a
higher right than that the original owner himself had. They cannot set up
any title to the property on the basis of sale deeds and consideration but
may be entitled to the compensation obviously getting into the shoes of the E
claimant. We need not go into the ques.tion of correctness whether or not
. the reference is valid in this case, though open to doubt since t~at question
was not raised at any stage much less in this Court. We proceed on the
premise that the reference under Section 18 was valid.

As stated earlier, the entire process has gone on in collusion. When
F
we have issued notice to the appellants as to what steps they have taken
against the officers who are responsible even for not filing the .appeals or
not contesting the matter, an affidavit has been filed in which it was stated
that disciplinary action against the Land Acquisition Officer was taken and
even the counsel who appeared for the Jaipur Development Authority was G
in collusion and steps were taken by laying a complaint before the Bar
Council for professional misconduct. We need not further dwell up on that
fact but suffice it to state that the acquisition proceedings have proceeded
in collusion and, therefore, they did not reflect the correct market value as
is available in this case. As seen in Jai Ambe Co-operative Housing Society's H
494 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A _ case, even their own sale deeds under which they have purchased from one
Bhagwan Singh, who was said to be the original owner, were not even filed.
Under these circumstances, we thought over the matter as to what would
be the appropriate course to be adopted in this case. We are of the view
that instead of relegating the matter again, we can ourselves decide the
B matter on the basis of the evidence on record. Accordingly, we have
considered the case on merits.

It is seen that the Land Acquisition Officer has awarded compensa-
. tion at the rate of Rs. 7,500 per bigha to the lands purchased by Mahavir
Co-operative Housing Society and Rs. 5,000 per bigha to the lands pur-
C chased by J ai Ambe Co-operative Housing Society Ltd. Having regard to
the facts and circumstances, we are of the considered view that two times
more than what was granted by the Land Acquisition Officer would be the
Just compensation in the given circumstances of the case. Accordingly, we
determine the compensation to Jai Ambe Co-operative Housing Society
D Ltd. at the rate of Rs. 15,000 per bigha and to the lands of Mahavir housing
Co-operative Society Rs. 22,000 per bigha.

As regards the State of Rajasthan the Land Acquisition (Amend-
ment) Act, 68 of 1984 was extended w.e.f. April 30, 1987. But the State
E legislature had amended the Rajasthan Urban Improvement Act, 1959 by
Amendment Act 29 of 1987 w.e.f. August 1, 1987. In Umed Industries &
Land Development Co_. & Ors. v. State of Rajasthan & Ors., [1995] 2 SCC
563, a Bench of two Judges had held that the Central Amendment Act 68
of 1984 would apply for August 1, 1987 to the acquisition in State of
Rajasthan. It is seen that in Mahavir Housing Co-operative Society's case,
F possession was delivered on May 24, 1984 after the stay was vacated by the
civil Court since that civil Court granted stay of dispo_ssession on October
23, 1983. Therefore, the respondent-Society is not entitled to the interest
prior to May 25, 1984. Therefore, the decree as regards payment of interest
from the date of the notification till May 24, 1984 is clearly illegal. It is seen
G that since that award of the reference Court is dated June 15, 1990, the
claimants will be entitled to interest from May 25, 1984 at the rate of 6%
per annum till August 1, 1987 and thereafter 15% per annum on the
enhai:ced compensation till 'date of deposit in the Court. As regard the
solatium is concerned, they are entitled to 30% solatium on the enhanced
H compensation. As regards the additional amount under Section 23(1-A) is
JAIPUR DEV. AUIBORITY v. MAHAVIR HSG. CO-OP. SOCY. 495

concerned, the claimants are not entitled to the additional amount since A
the awards came to be passed by the Land Acquisition Officer on October
12, 1981 and July 16, 1981 in Mahavir Housing Co-operative Society and
Jai Ambe Co-operative Housing Society Ltd. respectively.

In Prem Nath Kilpur and Anr. v. National Fertilizers Corpn. of India B
Ltd. and Ors., [1996] 2 SCC 71, considered the entire case law by a bench
of three Judges in paragraph 17 had held that the power to grant additional
amount under section 23(1-A) and enhanced interest under the proviso to
Section 28 and solatium at 30 per cent was due to amendments brought
under Act 68 of 1984. Prior thereto the court has no power or jurisdiction
to grant them. Therefore, the additional amount, the excess rate of interest c
or solatium at 30 per cent granted were without jurisdiction and a nullity.
The courts cannot correct the award of the decree in exercise of the power
under Sections 151 and 152 C.P.C. This Court has relied upon the Con-
stitution Bench decision in Union o[ india v. Raghubir Singh, (1989) 3 SCR
316. This Court has reiterated the same principle in another recent judg- D
ment in Bai Shakriben v. Spl. LA.O., (1996) 4 SCALE 636. Therefore,
objection would be raised in execution under section 47. The award of the
additional amount was one of without jurisdiction and so a nullity.

It is contended for the respondent in Maliavir Housing Co- operative E
Society's case, that since the award was allowed to become final including
grant of additional amount under Section 23(1-A), it is not open to the
review at a later date since it is not one of initial lack of jurisdiction but
an illegality has been committed in awarding the additional amount. In
support thereof, learned counsel relied upon a judgment of this Court in
State of Punjab & Ors. v. Mohinder Singh Randhawa & Anr., [1993) Supp.
F
1sec49, paragraph 3. It is true that in a case where the proceedings were
properly conducted and the order w'as allowed to become final, the mat,ter
may be construed to be an order of illegalify. -when it is one of jurisdiction,
.this Court has repeatedly, in plethora Qf precedents, had held that the
courts have no jurisdiction to award additional amount under Section G
23(1-A) since the Collector had~ already passed the award ,under Section
11 and the benefit of additional amount would be confined to the period
between the date of the notification under Section 4(1) and the award
under Section 11 when the proceedings were pending-before him. In this
case, since we have already recorded the finding that the award became H
496 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A final due to collusion by the officers and the claimants, the principle of
illegality in the award does not apply since fraud unravels the· entire
procedure and makes the award a nullity.

The appeals are accordingly allowed as indicated above, but in the
circumstances, without costs. As regards strictures awarded by the refer-
B · ence Court, they stands upheld.
G.N. Appeal allowed.
MOLLY JOSEPH @ NISH A
v.
GEORGE SEBASTIAN @ JOY

SEPTEMBER 18, 1996

[N.P. SINGH AND S.B. MAJMUDAR, JJ.] B

Indian Divorce Act, 1869 :

Sections 17, 19(4), 20-Maniage annuled by order or Ecclesiastical
Tribunal-Validity of-Held: When a Legislature enacts a law even in respect C
of the personal law of a group of persons following a pa1ticular religion, the
statutory provisions shall prevail and ovenide any personal law usage or
custom prevailing before coming into force of such Act-District Cowt or
High Cowt vested with the power-No other auth01ity including Ecclesiastical
Tribunal could exercise power in connection with matlimonial matters
covered by the Aci-Distlict Judge disposed of the application for divorce D
without any enquiry into the allegations relating to the subsistence of the
fonner maniage-H.ence High Court justified in remitting the matter to the
Distlict Judge for decision in accordance with law.

Lakshmi Sanyal v. Sachit Kumar Dhar, AIR (1972) SC 2667 =[1973) E
2 SCR 122, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8782 of
1994.

From the Judgment and Order dated 20.7.94 of the Kerala High
F
Court in C.M.R. No. 5 of 1994.

Vernhese Kalliath, Shaju Francis, C.N. Sreekumar, K.M.K. Nair, S.
Balakrishnan and M.T. George for the appearing parties.

The following Order of the Court was delivered :
G
This appeal has been filed on behalf of the wife for setting aside the
judgment of the Special Bench of the Kerala High Court, directing the
District Judge to conduct enquiry into the allegations relating to the
subsistence of a former marriage of the appellant and then to pass a decree
in accordance with law. A petition was filed by the respondent-husband H
497
498 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A before the District Judge for a declaration that his marriage with the
appellant is a nullity on the ground (i) the marriage between the appellant
and one Prince Joseph was subsisting on the date the appellant married
the respondent; (ii) the appellant was insane and continued to be so till
the date of marriage. That application was contested by the appellant
saying that although she had married earlier with aforesaid Prince Joseph,
B the said marriage was annulled by the order of the Ecclesiastica1 Tribunal
(Church Court as it is referred to at times). It also asserted on her behalf
that previous marriage was known to the respondent and inspite of that he
agreed to marry the appellant.

C The learned District Judge did not conduct any enquiry and he
declared the marriage between the appellant and the respondent a nullity
merely on basis of the pleadings of the parties. According to him, as the
appellant had admitted the earlier marriage and as there was no decree of
any Civil Court in accordance with the provisions of the Indian Divorce
D Act, 1869 (hereinafter referred to as the 'Divorce Act') the former mar-
riage continued inspite of annulment order passed by the Ecclesiastical
Tribunal, and the marriage had to be declared a nullity because of Section
19(4) of the Divorce Act. As required by Section 20 read with Section 17
of the aforesaid Act the order of the District Judge was placed before a
bench of three Judges presided over by Justice K.T. Thomas (as he then
E was) for confirmation. The High Court held:

"Canon Law (or personal law of Christians) can have theologi-
cal or acclesiastical implications to the parties. But after the
Divorce Act came into force a dii:solution or annulment granted
under such personal law cannot have any legal impact as statute
F
has provided a different procedure and a different code for divorce
or annulment."

This appeal is against the aforesaid judgment of the High Court.

G The preamble of the Divorce Act says :

"Whereas it is expedient to amend the law relating to the divorce
of persons professing to Christian religion, and to confer upon
certain Courts jurisdiction in matters matrimonial; it is hereby
H enacted as follows ........."
MOLLY JOSEPH v. GEORGE SEBASTIAN 499

Section 3(4) defines 'Court' to mean the High Court or the District Court, A
as the case may be. Section 4 provides
I
:

"Matrimonial jurisdiction of High Courts to be exercised sub-
ject to Act.

Exception - the jurisdiction now exercised by the High Courts in B
respect of divorce a mensa et toro, and in all other causes, suits
and matters matrimonial, shall be exercised by such Courts .and by
the District Courts subject to the provisions in this Act contained,
and not otherwise; except so far as relates to the granting of
marriage-licenses, which may be granted as if this Act had not been C
passed."

Section 10 enables any husband to present a petition to the District Court
or to the High Court, praying that his marriage may be dissolved on the
ground that his wife has, since the solemnization thereof, been guilty of
adultery. A wife may also present a petition to District Court or to the D
High Court for dissolution of the marriage on the grounds mentioned
therein. In view of Section 17 every decree for dissolution of marriage made
by the District Judge shall be subject to confirmation by the High Court.
The said Section requires that cases for confirmation of decree for dissolu-
tion of marriage shall be heard by a Bench comprising of three Judges. It
also vests power in the High Court, if it thinks necessary, to direct further E
enquiry or additional evidence to be taken. Chapter IV deals with nullity
of marriages. In view of Section 18 any husband or a wife may present a
petition to the District Court or to the High Court praying that his or her
marriage may be declared null and void. Section 19 prescribes the grounds
on which a marriage can be declared to be nullity. Section 19 provides : F
"Grounds of decree - Such decree may be made on any of the
following grounds : -

(1) that the respondent was impotent at the time of the marriage
and at the time of the institution ofthe suit; G
(2) that the parties are within the prohibited degrees of consan-
guinity (whether natural or legal) or affinity;

(3) that either party was as lunatic or idiot at the time of the
marriage; H
500 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A (4) that the former husband of wife or either party was living al .
the time of the marriage, and the marriage with such former
husband or wife was then in force.

Nothing in this section shall affect the jurisdiction of the High
Court to make decrees of nullity of marriage on the ground that
B the consent of either party was obtained by force or fraud."

Every decree of nullity of marriage Ql.ade by the District Judge shall be
subject to confirmation by the High Court because of Section 20 and
provisions of Section 17, clauses one, two, three and four, shall, mutatis
C mutandis be applicable.

From a bare reference to the different provisions of the Act including
preamble thereof it is apparent that Divorce Act purports to amend the
law relating to divorce of persons pr.ofessing the Christian religion and to
D confer upon courts which shall include District Court and the High Court
jurisdiction in matrimonial matters. In this background, unless the Divorce
Act recognises the jurisdiction, authority or power of Ecclesiastical
Tribunal (sometimes known as Church Court) any order or decree passed
by such Ecclesiastical Tribunal cannot be binding on the courts which have
been recognised under the provisions of the Divorce Act to exercise power
E in respect of granting divorce and adjudicating in respect of matrimonial
matters. It is well settl.ed that when legislature enacts a law even in respect
of the personal law of a group of persons following a particular religion,
then such statutory provisions shall prevail and override any personal law,
usage or custom prevailing before coming into force of such Act. From the
p provisions of the Divorce Act it is clear and apparent that they purport to
prescribe not only the grounds on which a marriage can be dissolved or
declared to be nullity, but also provided the forum which can dissolve or
declare the marriage to be nullity. As already mentioned above, such power
has been vested either in the District Court or the High Court. In this
background, there is no scope for any other authority including Ecclesias-
G tical Tribunal (Church Court) to exercise power in connection with
matrimonial matters which are covered by the provision of the Divorce Act.
The High Court has rightly pointed out that even in cases were Ecclesias-
tical Court purports to grant annulment or divorce the Church authorities
)\'ould still continue to be under disability to perform or solemnize a second
H marriage for any of the parties until the marriage is dissolved or annulled
MOLLY JOSEPH v. GEORGE SEBASTIAN 501

in accordance with the statutory law in force. A

The learned counsel appearing for the appellant placed reliance on
the judgment of this Court in the case of Lakshmi Sanyal v. Sachit Kumar
Dhar, AIR (1972) SC 2667 = [1973] 2 SCR 122, in support of his stand
that inspite of the provisions of the Divorce Act and procedures prescribed B
therein for dissolution of marriage or declaration of a marriage to be
nullity, Ecclesiastical Tribunal can also dissolve a marriage. In that case,
this Court was considering whether a marriage could be declared a nullity
on the ground that the parties were within the prohibited degrees consan-
guinity which is a ground for declaring a marriage to be nullity under
Section 19(2) of the Divorce Act. In that connection, It was said : C

''The Second point relates to the effect of the marriage between
the parties within the prohibited degree of consanguinity. The
Indian Divorce Act or the Indian Christian Marriage Act do not
give any definition of what the prohibited degrees are. It has been D
urged on behalf of the appellant that assuming the Canon Law had
to be looked at for finding the prohibited degrees it has been found
that the appellant and the respondent being children of real sisters
fell within those degress. Section 19 of the Divorce Act lays down
in categorical terms that a marriage may be declared null and void,
inter a/ia, where the parties are within the prohibited degree of E
consanguinity. There is no exception contained in ground No. 2 in
the said section It is not open it has been contended, to the courts
to the travel beyond S. 19 or the provisions of the Divorce Act to
discover whether such an impediment which renders the marriage
null and void ab initio can be removed by a dispensation granted F
by the competent authority of the Roman Catholic Church

The question of capacity to marry and[ impediments in the way of
marriage would have to be resolved by referring to their personal
law. That, for the purpose of deciding the validity of the marriage,
would be the law of the ~oman Catholic Church, namely the Canon G
law of that Church."

From the judgment aforesaid it is apparent that this Court having
said that Section 19(2) makes a marriage between the parties within the
prohibited degrees of consanguinity a ground for declaring the marriage to H
502 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R

A be nullity, pointed out that the Divorce Act does not give definition was to
what are the prohibited degrees. Thereafter it was said that for that limited
purpose personal law has to be looked into. Accor-<ling to us, on basis of
the aforesaid judgment of this Court it cannot be held that. any declaration
of marriage to be void by Ecclesiastical Tribunal shall be binding on the
District Court or the High Court. Such Ecclesiastical Tribunal cannot
B exercise a power parallel to the power of the District Court or the High
Court which have been vested in the District Court and the High Court by
the provisions of the Divorce Act. Section 18 provides that any husband or
wife may present a petition to the District Court or to the High Court
praying that his or her marriage may be declared null and void. In that
C event, it excludes the jurisdiction and authority of any other Tribunal or
Court including Ecclesiastical Tribunal (Church Court).

As the District Judge had disposed of the application for divorce
without any enquiry into the allegation relating to the subsistence of the
former marriage, the High Court was justified in remitting the matter to
D the District Judge for fresh decision in accordance with law. We find no
reason to interfere with the said order. The appeal is accordingly dis-
missed. No costs.

Criminal Appeal No. 447 of 1994.

E ORDER

In view. of the order passed in C.A. No. 8782/94 the appeal is
dismissed.

G.N. · Appeals dismissed.
UNION OF INDIA AND ANR. A
v.
MADHAV S/0. GAJANAN CHAUBAL AND ANR.

SEPTEMBER 18, 1996

[K. RAMASWAMY, FAIZAIN UDDIN AND G.B. PATTANAIK, JJ.] B

Service Law :

Promotion-Reservation i1t-Single post-Rule of rotation and roster
point-Tribunal holding that no reservation could be granted to the reserved •C
candidates as it would amount to 100% reservation and therefore the promo-
tion made was unconstitutional-On appeal held, even though there is a
single post, if the Government have applied the rule of rotation and the roster
point to the vacancies that had arisen in the single point post and were sought
to be filled up by candidates belonging to reserved categories at the point on
which they are eligible to be considered such a rule is not violative of Art. D
16(1)-Constitution of India, Articles 14, 16(1) and 16(4).

Arati Ray Choudhary v. Union of India & Ors., [1974] 1 SCC 87
followed. '
Chetan Dilip Motghare v. B.L. Education Society Nagpur & Ors., [1995] E
Supp.1SCC157, overruled.

General Manager, Southern Railway v. Rangachari, [1962] 2 SCR 596;
State of Kera/a v. Thomas, [1976] 1 SCR 906; State of Punjab v. Hira Lal,
[1970] 3 SCC 567; A.B.S.K Sangh v. Union of India, [1985] 2 SCR 185;
Comptroller & Auditor General v. S.K Jagannath, [1986] 2 SCR 17; Indra F
Sawhney & Ors. v. Union of India & Ors., [1992] Supp. 3 SCC 217; S.R.
Bommai v. Union of India, [1994] 3 SCC 1; LIC of India v. Consumer
Education and Research Center, [1995] 5 SCC 482; Smt. H.B. Usha v. D.S.
Ramachandra, [1995) Supp. 2 SCC 49; R.K Sabharwal & Ors. v. The State
of Punjab & Ors., [1995) 2 SCC 745 and State of Bihar v. Bageshwardi Prasad, G
[1995) Suppl. 1 SCC 432, relied on.

Dr. Chakradhar Pasvan v. State of Bihar, [1988) 2 SCC 214; Commis-
sioner of Commercial Taxes v. D. Sat/tu Madhva Rao, [1996) 7 SCC 512 and
M. Venkteswarlu v. Government of Andhra Pradesh, [1996) 5 SCC 167,
referred to. H
503
504 SUPREMECOURTREPORTS [1996]SUPP.6S.C.:.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12871 of
1996.

From the Judgment and Order dated 11.3.92 of the Central Ad-
ministrative Tribunal, Bombay in O.A. No. 613 of 1990.

B N.N. Goswami, Ms. Shashi Kiran, D.S. Mehra, S.W.A. Qadri and Das
for the Appellants.

The following Order of the Court was delivered :

Delay condoned.
c
Leave granted.

On the last occasion when the matter had come up after notice, since
the respondents were not represented either in person or through counsel
and when the counsel had pointed out the decision followed by the
D Tribunal, namely, Dr. Chakradhar Pasvan v. State of Bihar, [1988] 2 SCC
214, this Court had referred the matter to three-Judge Bench. Thus, the
matter has come up to-day. Even now, none is appearing for the respon-
dents; nor are they appearing in person. We have taken the assistance of
Sri Goswami, learned senior counsel. We requested him to place on record
E the decisions for or against him. He has fairly argued case.
The admitted facts are that in the National Savings Scheme Service,
the Governn;ient had created various posts upto the post of Superintendent;
there are number of posts but there is only one post of Secretary. This post
is a feeder post for promotion as Regional Deputy Director in which
F category there are several posts. The Government applied the rule of
reservation by rotation to the vacancies in the post of Secretary. 40 point
roster is also being applied to these vacancies. In the post of Secretary,
point No. 4 vacancy was reserved for Scheduled Tribes. When that vacancy
was sought to be filled up by promotion from the Superintendents in Group
A category from Scheduled Tribe candidates, the respondent filed OA in
G the Central Administrative Tribunal at Bombay. The Tribunal following the
decision of this Court in Pasvan's case (supra), by order dated March 11,
1992 in OA No. 613/90, set aside the promotion holding that since the post
of Secretary is a single point post, no reservation could be granted to the
reserved candidates as it would amount to 100% reservation; therefore, it
H is unconstitutional. Thus, this appeal by special leave.
U.01.v.MADHAV 505

The question is : whether the application of 40 point roster to the A
successive vacancies in thy post of Secretary violates Article 16(1) of the
Constitution? Shri Goswami has contended that in Pasvan's case, that
question was left open since the controversy did not arise therein on those
facts. Since the Government have decided that when in a single post
vacancy arises as per roster point and when candidates belonging to B
Scheduled Castes or Scheduled Tribes are available, then the vacancy
reserved for respective Scheduled Caste or Scheduled Tribe could be
considered as per rules for appointment by promotion to the post of
Secretary. In the absence of their availability, the vacancies would be and
is being carried forward. Therefore, the principle of rotation applied to a
single post is not violative of Article 16(1) of the Constitution. He has taken C
us through various judgments of this Court concerning the question.

In General Manager, Southern Railway v. Rangachari, [1962) 2 SCR
586, the Constitution Bench, per majority, had held that appointment by
reservation to the selection post was not violative of Article 16(1) of the D
Constitution. The· same principle was followed in the case of promotion in
State of Kera/a v. Thomas, [1976] 1 SCR 906. In The State of Punjab v. Hira
Lal, [1970] 3 SCC 567 and A.B.S.K Sangh v. Union of India, [1985] 2 SCR
185 and Comptroller & Auditor General v. S.K Jagannath, (1986] 2 SCR 17,
the matters were referred to a larger Bench. In Indra Sawhney & Ors. v.
Union of India & Ors., [1992] Supp. 3 SCC 217, per majority, the Bench of E
nine Judges of this Court had held that Article 16(1) and 16(4) do not
apply to appointment by promotion. They would be applicable only to
initial appointments. By Section 2 of the Constitution (77th Amendment)
Act, 1995, Article 16(4A) was introduced which envisages that nothing in
this Article shall prevent the State from making any provision in reservation F
in matter of promotion to any class or classes of posts in the service under
the State. It is well settled legal position that Preamble of the Constitution
is part of the Constitution. In S.R. Bommai v. Union of India, [1994] 3 SCC
1, this Court has held that preamble to the Constitution is a part of its basic
structure. Socio-economic justice, equality of opportunity and of status, G
dignity of persons are the arch of the Constitution. Social Justice is a
fundamental right as held in LIC of India v. Consumer Education and
Research Centre, [1995] 5 SCC 482. Economic empowerment to the poor
• was held to be a fundamental right in Smt. H.B. Usha v. D.S. Ramachandra,
(1995] Supp. 2 SCC 49. Article 335 mandates the State to take into
consideration the claims of the Dalits and Scheduled Tribes for appoint- H
506 SUPREME COURT REPORTS (1996] SUPP.6S.C.R.

A ment to a post or office under the State, consistent with efficiency o(
administration. Article 46 enjoins upon the State to provide socio-
economic and educational facilities and opportunities. Government
evolved reservation in posts or offices under the State as one of modes to
socio-economic justice to Dalits and Scheduled Tribes. Appointment to an
office or post into a service under the State is one of the means to render
B socio-economic justice. Constitution.17th Amendment Act, 1995 has resus-
cituted the above objective to enable the Dalits and Scheduled Tribe-
employees to improve excellence in higher echolons of service and a source
of equality of opportunity in the matter of social and economic status
guaranteed by the Preamble to the Constitution. As a consequence, the
C Parliament has removed the lacuna pointed out by this Court in Indra
Sawhney's case. Thus, it would be seen that the legal position held by this
Court in Rangachari's case and followed in other cases has been restored
and reservation of appointment by promotion would be available to the
members of the Schedule Castes and Scheduled Tribes as per 50% quota
D as is maintained by this Court in Indra Sawhney's case. The carry forward
principle has also been upheld in Indra Sawhney's case. In Commissioner
of Commercial Taxes v. D. Sethu Madhva Rao, (1996] 7 SCC 512 a Bench
of three Judges and in M. Venkteswarlu v. Government of Andhra Pradesh,
[1996] 5 sec 167 a bench of two Judges have held that right to reservation
in promotion stands restored by Constitution 77th amendment) Act which
E introduced clause (4-A) to Article 16.

The question, therefore, arises : whether the Government would be
justified in law to provide reservation in promotion in a single post by
rotating the vacancy as per the roster point prepared by the Government?
f It is tree that in Pasvan's case the Government, with a view to provide
reservation to the Scheduled Castes to the post of Director which is a single
post, was fused with two posts of Deputy Directors which do not carry the
same scale of pay. Therefore, this Court had pointed out that the'
cadre would mean the cadre carrying the same scale of pay. Since the
Deputy Directors are not carrying the same scale of pay they cannot be
G fused together for applying the principle of reservation. By implication, this
Court had accepted that two or more single posts carrying the same scale
of pay would be fused to elongate the Constitutional objective of providing
reservation to a post in the service or office of the State. It was then held
that single post cannot be reserved which amounts to 100% reservation
H and, therefore, it is violative of Article 16(1) of the Constitution. The
U.0.1. v. MAD HAV 507

further question whether in the same single point post, reservation by A
rotation could be granted and whether it will 6e violative of Article 16(1)
was left open in that case. This constitution Bench of this Court in Arati
Ray Choudhary v. Union of India & Ors., (1974] 1 SCC 87 considered the
question of the single post and applied the rule c:if reservation by rotation ·
to the carried forward post and filled the post when reserved candidates B
were available on the carried forward posts. In this regard, this Court had
laid down thus :

"That is precisely what happened here. The S.E. Railway runs orily
two Secondary Schools for girls, one at Adra and the other at
Kharagpur. Senior-most Assistant Mistress, Smt. Gita Biswas. In C
pursuance of the Memorandum dated December 4, 1963 of the
, Ministry of Home Affairs, the Railway Board revised the Model
Roster by their letter of January 16, 1964. The first point in this
roster is a reserved point and therefore the Adra vacancy was
strictly a reserved vacancy. But there being orily one vacancy in D
the particular year of recruitment, it had to be treated as un-
reserved and therefore the appointment when to Smt. Biswas, an
open, not a reserved candidate. This, however, had to be compen-
sated for by carrying forward the reservation though not over more
than 2 subsequent recruitment years. For the purposes of Services
under the Railway administration 'recruitment year' means the E
'financial year' and the Adra appointment having been inade in
the financial year 1966-67, it was permissible to carry forward the
reservation till the close of the financial year 1968-69. There was
no vacancy in 1967-68. The vacancy in the post of the Headmistress
of the Kharagpur school occurred in the financial year 1968-69 by F
the retirement of Smt. Bina Devi with effect from December 31,
1968. This vacancy, indubitably, had to be treated as a reserved
vacancy and since from amongst the 4 Assistant Mistresses, respon-
dent No. 8 was the orily candidate belonging to the Scheduled
Caste, she was entitled to be considered for selection to the post G
of the Headmistress, to the exclusion of the other 3. The claims,
if any, of the petitioner who is not a reserved candidate have to
be postponed, though in the normal course it may be quite some
years before she gets her turn. The Adra Headmistress and respon-
dent No. 8 would seem to have a long tenure in their respective
office." H
508 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Accordingly, it was ,held that in carried forward post in a single post,
reservation would be applied and the vacancies, after carrying forward,
would be filled up by promotion from the members of the Scheduled
Castes. This principle would apply in a single post carried forward by
applying rotation and it would be consistent with the principle of equality
B envisaged under Articles 14 and 16(1) of the Constitution. Article 14 and
16(1) equally applies to Scheduled Castes and Scheduled Tribes and they
too are entitle to seek equal opportunity to hold the single post by promo-
tion, Otherwise, it would amount to total prohibition of opportunity to hold
the single point post which also violates Articles 14 and 16(1). A three
C Judges Bench was to consider the same question in Sou. Vidyulata Arvind
Kakade v. Digambar Gyanba Surwase & Ors., C.A. No. 242 of 1992 decided
on January 17, 1992 in a short judgment. This Court stated thus :

"We have also perused the judgment of the Constitution Bench
and the Division Bench of this Court in Arati Ray Choudhary v.
D Union of india & Ors., [1972] 2 SCR 1 and Dr. Chakradhar Paswan
v. State of Bihar & Ors., (1988] 2 SCC 214 respectively. No copy of
the writ petition has been filed in this Court. There is no material
on record to show that the Resolution providing for reservation
provides that the reservation has not to be applied in isolated posts
E which is the basis of the Challenge in this petition."

It would thus be seen that this Court has accepted that reservation
could be provided even to the isolated posts on the basis of the rule of
rotation. Extension of reservation in such cases is not unconstitutional. On
F the other hand, such scheme provides opportunity and facilities to
Scheduled Castes and Schedule Tribes to be considered for promotion to
hold single posts consistent with equality of opportunity on par with others.
In R.K Sabharwal & Ors. v. The State of Punjab & Ors., (1995] 2 SCC 745
a Constitution Bench of this Court considered whether the reservation as
G per the roster by promotion could be valid and consistent with Article 16(1)
of the Constitution. This Court harl pointed out that the reservation to the
post as per the roster for the purpose of promotion is valid in law. The
same C<!n be filled up applying the roster points prescribed by the Govern-
ment. When a candidate belonging to the backward classes is appointed by
promotion on merit, he cannot be considered to be reserved candidate; the
H candidate appointed on rule of reservation would be fitted into the post on
U.01. v. MADHAV 509

the basis of roster point available to reserved candid~tes. In Chetan Dilip A
Motghare v. B.L. Education Society Nagpur & Ors., (1995] Supp. 1 SCC 157
a Bench of two Judges of this Court considered whether reservation to
single post could be valid in law. Though the decision in Vidyulata Arvind
Kakade's case was brought to the notice of the learned Judges, the learned
Judges found that it did not lay down any contra principle to the one laid B
down by this Court in -Paswan 's case and, therefore, it was held that single
point post could not be reserved for promotion. With due respect, we hold
that the learned Judge have not correctly appreciated the ratio laid down
by this Court in Vidyulata's case and Arati Couudhary's case. In State of
Bihar v. Bageshwardi Prasad, (1995] Suppl. 1 SCC 432, the Bihar Govern-
ment had provided by way of a circular, the rule of rotation to a single post C
and applied the roster point for providing promotion to the vacancies that
had arisen in accordance with roster point. This Court had upheld the rule
of reservation and held that reservation to the single post by applying the
rule of rotation is not violative of Articles 14 and 16(1) of the Constitution.
The judgment in Pasvan's case was distinguished. D
Thus, we hold that even though there is a single post, if the Govern-
ment have applied the rule of rotation and the roster point to the vacancies
that had arisen in the single point post and were sought to be filled up by
the candidates belonging to the reserved categories at the point on which
they are eligible to be considered, such a rule is not violative of Article E
16(1) of the Constitution.

In this case, it is seen that the post of Secretary is carrying the scale
of pay of Rs. 2200-4000. The Government have decided to apply the 40
point roster maintained for the post of Secretary. The vacancy available at
the time of point No. 4 of the roster was reserved for the Scheduled Tribes. F
When the Department had sought for the clarification from the Depart-
ment of Personnel and Training, the Government of India, had stated thus:

"There is no change in the position however, it may be stated that
unless this Department changes the earlier instructions, the old G
order will remain in force. Thus the Supreme Court Judgment
cannot be made applicable to other cases automatically".

Thus, the Government have adhered to the rule of rotation to a single
post and the 40 point roster to the single post was applied and the vacancy
reserved for the Scheduled Castes and Scheduled Tribes as and when had H
510 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A arisen, was sought to be filled up, when the candidates were available.
Thus, we hold that the roster point No. 4 in the vacancy of the Secretary
reserved for the Scheduled Tribes was valid and constitutional. When the
officer available was eligible to be consider~d, he was entitled -to be
considered in accordance with the rules and be promoted as Secretary. The
B Tribunal, therefore, was not right in directing that the rule of rotation to
the single post could not be applied. It is brought to our notice that the
original promotee died pending the proceedings and, therefore as and
when vacancy arises as per rule of rotation as per roster the same would
be filled up in accordance with law.

C The appeal is accordingly allowed but in the c;ircumstances, without
costs.

G.N. Appeal allowed.
DELHI CLOTH AND GENERAL MILLS CO. LTD. AND ANR. A
v.
UNION OF INDIA AND ANR.

SEPTEMBER 19, 1996

[S.P. BHARUCHA AND K. VENKATASWAMI, JJ.] B

Customs Tariff Act:

S. 3-Assessee imp01ting tyre cord grade wood plup from USA-Called
upon to pay additional duty thereort--Cliallenged before the Assistant Collec-
tor and thereafter before the High Court, but without success-On appeal,
c
held, where a like lllticle is not produced or manufactured in India additional
duty is required to be levied on the imp01ted article on the basis of the excise
duty leviable on the class or description of lllticles to which the imported
article belongs-Articles not elsewhere described under the residuary entry 68
fomz a class by themselves-Hence if a like article is not described in the D
Tllliff, additional duty is leviable 011 the imported article upon the basis of
the levy of excise duty under the provisions of Entry 68.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3400 of
1984.
E
From the Judgment and Order dated 27.5.82 of the Rajasthan High
Court in D.B.C.W.P. No. 1381 of 1990.

H.K. Puri for the Appellants.

Joseph Vallappally and C.V. Subba Rao for the Respondents. F
The following Order of the Court was delivered :

A limited argument is addressed in this appeal that impugns the
judgment and order of a Division Bench of the High Court of Rajasthan.
G
The appellants manufacture tyre yarn cord and fabric for which
purpose they import tyre cord grade woodpulp from the United States of
America. The appellants were called upon to pay additional duty thereon
under the provisions of Sections 3 of the Customs Tariff Act.

Among other contentions raised by the appellants was this : The said H
511
512 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. ~

A woodpulp was not produced or manufactured in India. Under the terms of
Section 3 additional duty had, therefore, to be calculated on the basis of
the excise duty that would be leviable on the class or description of a~ticle ~
to which the said woodpulp belonged. There was no entry in the Tariff that
related to an article of the like of the said woodpulp. Entry -68, being a
B residuary entry relating to no class or description of goods, did not apply.
No additional duty was, therefore, leviable on the said woodpulp.

The said contention was rejected by the Assistant Collt:ctor and by
the High Court in the writ petition filed by the appellants.

It is the only contention raised before us.
c
Section 3 of the Customs Tariff Act, so far as it is relevant, reads
thus:

"S. 3.- Levy of Additional Duty equal to Excise Duty :
D (1) Any article which is imported into India shall, in addition, be
liable to a duty (hereinafter in this section referred to as the
\
additional duty) equal to the excise duty for the time being leviable
on a like article if produced or manufactured in India and if such
excise duty on a like article is leviable at any percentage of its
E value, the additional duty to which the imported article shall so
liable shall be calculated at that percentage of the value of the
imported article.

Explanation : In this Section, the expression 'the excise duty for
the time being leviable on a like article if produced or manufac-
F tured in india' means the excise duty for the time being in force
which would be leviable on a like article if produced or manufac-
tured in India, or if a like article is not so produced or manufac-
tured, which would be leviable on the class or description of
articles to which the imported article belongs, and where such duty
is leviable at different rates, the highest duty," ·
G
It is the Explanation which is important. The expression "the excise
duty for the time being leviable on the like article if produced or manufac-
tured in India used in the body of sub-section (1) is explained to mean the
excise duty for the time being in force (a) which would be leviable on a
H like article if produced or manufactured in Indian, or (b) if a like article
DELHI CLOTII AND GEN. MILLS v. U.0.1. 513

is not produced or manufactured in India, the excise duty that would be A
leviable on the class or description or articles to which the imported article
belongs.

Where a like article is not produced or manufactured in India
additional duty is required to be levied on the imported article upon the
basis of the excise duty that is leviable on the class or description of articles B
to which the imported article belongs. Articles which are not elsewhere
described, falling under the residuary Entry 68, form a class by themselves.
Hence, if a like article is not described in the Tariff, additional duty is
leviable on imported article upon the basis of the levy of excise duty under
the provisions of Entry 68. ·
c
The only contention raised before us is rejected.

The appeal is dismissed, with no order as to costs.

G.N. Appeal dismissed.
A RAMJI SHARMA @ RAMJI BABU (DEAD) BY LRS.
v.
THE STATE OF BIHAR AND ORS.

SEPTEMBER 19, 1996

B [N.P. SINGH AND S.B. MAJMUDAR, JJ.J·

Bilzar Land Refonns (Fixation of Ceiling Area and Acquisition of
Surplus Land) Act, 1961:

C Sections 2(b), 2(g), 16(3)-Transfer of la11ds to any person other than
the co-sharer or a raiyat of adjoining land-Right of any co-sharer of the
transferor or any raiyat holdi11g land adjoi11i11g the land trans/eJTed, to make
an application for transfer of the land to him-Held : In view of the fact that
the lands in question were in the urban area, the High Court lightly rejected
the application-Appellant pennitted to withdraw the amount deposited by
D him alo11g with the application-Refund ordered to be made within three
months.

Fakir Mohammad v. Salahuddin & Ors., AIR (1975) Patna 119, ap-
proved.

E CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1505 of
1981.

From the Judgment and ::lrder dated 15.9.80 of the Patna High Court
in LP.A. No. 103 of 1980.
F L.R. Singh for the Appellants.

S.B. Sanyal, S.K. Sinha, R.P. Singh, AK. Pandey for the Respon-
dents.

The following Order of the Court was delivered :
G
This appeal has been filed for setting aside the judgment of the High
Court, dismissing the application under Section 16(3) of the Bihar Land
Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act,
1961 (hereinafter referred to as the Act) filed on behalf of the appellants,
H claiming retransfer of the lands which had been transferred by respondent
514
RAMJISHARMAv. STATE 515

No. 5 in favour of respondent No. 7 through the registered sale deed dated A
· 30.12.1969. The respondent No. 7 by the aforesaid sale deed purchased 5
· kathas of land of survey plot No. 610 and 6 kathas 10 dlutrs of land of survey
plot No. 614 from respondent No.5 for a consideration amount of Rs. 4,600.
The purchase had been made for construction of house in Mahalia Sah-
jadpur Aderkila within the town of Hajipur.
B
An application under sub-section (3) of Section 16 of the Act was
filed on behalf of the appellants before the Deputy Collector, Land
Reforms, for a direction that respondent No. 7, the transferee be directed
to convey the lands purchased by him by executing and registering a deed
of transfer in favour of the appellants in terms of the said sub-section (3) C
of Section 16. That application was dismissed by the Deputy Collector,
Land Reforms, on the ground that the lands which had been transferred
shall not be deemed to be the lands within the meaning of the Act, as such
.the provisions thereof shall not be applicable. However, an appeal being
filed on behalf of the appellants, was allowed by the Collector. The
Member, Board of Revenue, dismissed the Revision Application, filed on D
behalf of Respondent No. 7 Thereafter, a writ petition was filed on behalf
of Respondent No. 7, for quashing the orders passed by the Collector and
the Member, Board of Revenue before the High Court. The High Court
by the impugned judgment quashed the orders passed by the Collector and
the Member, Board of Revenue, on a finding that as the lands which had
been transferred were within the town of Hajipur and were urban in nature, E
the provisions of the Act shall not be applicable including sub-section (3)
of Section 16 thereof. This finding of the High Court is being questioned
in this appeal.

The Preamble of the Act says that it is an Act to provide for fixation
of ceiling, restriction on sub-letting and resumption bY\certain raiyats, for
F
personal cultivation of land, acquisition of status of raiyc\t by certain under
raiyats and acquisition of surplus land by the State in the State of Bihar
and matters connected therewith. Section 2(t) defines land :

"(t) "land" means land which is used or capable of beirtg used G
for agriculture or horticulture and includes land which is an or-
chard Kharhur or pasturage (or forest land or even land. peren-
nially submerged under water) or the homestead of the
land-holder;

Explanation I. - "Homestead" means a dwelling house for the H

'
516 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A purpose of living or for the purpose of letting out on rent together
with any courtyard, compound, attach~d garden, orchard and
out-building and includes any outbuilding of the purpo.;e con-
nected with agriculture or horticulture and any tank, liberary and
place of worship appertaining to such dwelling house.
B Explanation II. - Land perennially submerged under water shall
not include land submerged in the bed of a river."

c
Section 2(g) defines 'land holder' :

"(g) 'land holder' means a family as defined in clause (ee) holding
land as raiyat or as under-raiyat or a mortgagee or land in posses-
-
sion or holding land permanently settled by Government or lessee
of land not resumable by Government."

On a plain reading of the definition of land it means which is used or
D capable of being used for agriculture or horticulture or for the homestead
of a land-holder. Explanation I, specifies what is meant by homestead
which shall include dwelling house for the purpose of living or for the
purpose of letting out on rent together with courtyard, compound, attached
garden, orchard and includes any outbuilding for the purpose connected
E with agriculture or horticulture. Section 4 prescribes the ceiling area of the
land which a land-holder can hold under the provisions of the Act. The
other provisions relate to fixation of such ceiling and declaration of the
surplus land which shall vest in the State. Sub-section (1) of Section 16
provides that no person shall, after, the commencement of the Act, either
by himself or through any other person, acquire or possess by transfer,
F exchange, lease, mortgage, agreement or settlement any laild which
together with the land, if any, already held by him exceeds in the aggregate
the ceiling area. Sub-section (3) of Section 16 provides :

"3(i) When any transfer of land is made after the commence-

-
ment of this Act to any person other than a co-sharer or a raiyat
G of adjoining land, any co-sharer of the transferor or any raiyat
holding land adjoining the land transferred, shall be entitled, within
three months of the date of registration of the document of
transfer, to make an application before the Collector in the
prescribed manner for the transfer of the land to him on the terms
H and conditions contained in the said deed :
RAMJI SHARMA v. STATE 517

Provided that no such application shall be entertained by the A
Collector unless the purchase-money together with a sum equal to
ten per cent thereof is deposited in the prescribed manner within
the said period.

(ii) on such deposit being made the co-sharer or the raiyat shall B
be entitled to be put in possession of the land irrespective of the
fact that the application under clause (i) is pending for decision :
)

Provided that where the application is rejected, the co-sharer
or the raiyat, as the case may be, shall be evicted from the land
and possession thereof shall be restored to the transferer and the C
transferee shall be entitled to be paid a sum equal to ten per cent
of the purchase-money out of the deposit made under clause (i).

(iii) If the application is allowed, the Collector shall by an
order, direct the transferee to convey the land in favour of the D
applicant by executing and registering a document of transfer
within a period to be specified in the order and, if he neglects or
refuse to comply with the direction, the procedure proscribed in
Order XXI, Rule 34 of the Code of Civil Procedure, 1908, (IV of
1908), shall be, so far as may be, followed."
E
In view of sub-section (3) of Section 16, whenever any transfer of land is
made to any person other than the co-sharer or a raiyat of adjoining land,
any co-sharer of the transferor or any raiyat holding land adjoining the land
transferred, shall be entitled within the period prescribed therein to make
an application before the Collector for the transfer of the land to him on F
the terms and conditions contained in the said deed. He has to comply with
the other requirements of the said Section by way of deposit of purchase
money along with a sum equal to 10% thereof.

The question which is to be answered is as to whether the expression
land as defined in the Act will include not 'only the lands which are being G
used or capable of being used for agriculature or horticulture purposes but
also lands within the urban areas meant for building purposes. It is well
known that in and around the towns and urban areas at one point of time
most of the lands were being used for agriculture or horticulture purposes.
With growth of population and development activities slowly-slowly such H
518 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A agricultural lands are converted to uses which are non-agricultural. Many
colonies have been developed by the side of the old cities which at one
point of time were agriculture fields and crops used to be grown. But with
passage of time and cry for more plots of land for construction of buildings
they lost their original character and purpose. It appears that the farmers
B of the Act were quite conscious of this aspect of the matter, that is why
while defining 'land' they laid much emphasis in respect of the nature of
use such land was being put by saying that it meant land which is used or
(
capable of being used for agriculture or horticulture or the homestead of
the land-holder. It need not be pointed out that the sole object of the Act
C is to put ceiling on the lands held by land-holders for agriculture or
horticulture purposes and to declare the areas beyond the ceiling as surplus
which shall vest in the State Goverilment. In this background neither it can
be assumed nor it can be held that the framers of the Act had in mind even
the lands which are in the heart of the cities meant for construction of
buildings. It is a matter of common knowledge that even in areas which are
D completely urban in nature or even in a colony some plots are lying vacant
as no constructions have been made over the same for one reason or the
other including financial constraint. Till constructions are made they are
being used for growing some crops or fruits. But can it be said that such
plots which are meant for building purposes shall be deemed to be land
E within the meaning of Section 2(f) of the Act? According to us, the answer
is in negative. Whenever an application under sub-section (3) of Section
16 is filed, which is in respect of a land within the urban area, the
authorities or the High Court concerned should first examine what is the
primary-object for which such land was being used or is capable of being
used. If it is found that the land was being retained by the transferor or
F
was being transferred to another person for a purpose and object which is
not connected with agriculture then an application under sub-section (3) _j>
of Section 16 should not be entertained. On other hand, if the authorities
or the High Court are satisfied that the land which has been transferred is
fully covered by the definition of land as given under Section 2(f) then
G provision of the Act have to be applied for examining the question as to
whether the applicant was entitled for retransfer in his favour from the
transferee on the same terms and conditions. A Full Bench of the Patna
High Court in the case of Fakir Mohammad v. Salahuddin & Ors., AIR
(1975) PATNA 119, presided over by N.L. Untwalia, CJ. (as he then was)
H examined the scope of expression 'land' as defined in Section 2(±) of the
RAMJI SHARMA v. STATE 519

Act, It was observed : A
"The consensus of opinion - and, as I shall presently show, there
is no conflict in any of the decisions - is that a parti piece of land
belonging-to a raiyat, an agriculturist, which is his homestead on
which there is no dwelling house or any of the things as mentioned
B
in the Explanation, is not a land covered by Act. It has been fwther
pointed out that a land fit for building proposes not connected with
agriculture situated ordina1ily and general(v in town or bazaar areas,
to which are applicable the provisions of the Transfer of Property
Act, is not the homestead of a land-holder to made it a land within
the meaning of Section 2(f)." c
(Emphasis supplied)

We are in agreement with the view expressed in the aforesaid judgment of
the Full Bench. D
So far the facts of the present case are concerned, the High Court
has rejected the contention that the land in question can be held to be land
within the meaning of Section 2(t) merely because in the Kathian Entry it
had been recorded as Bhit Land. The High Court in the impugned order
has observed : E

"It goes without saying that all the urban lands at some point
to time or the other were rural in nature where agricultural
operations were carried on. Therefore, mere description of the
land as a Bhit Land by the Survey authorities would not be a F
conclusive proof that land was agricultural in nature. The fast
development and urbanisation of the town of Hazipur which has
very recently been made a district, cannot be lost sight of. There-
fore, I would accept the second contention of Mr. Krishna Prakash
Sinha and hold that the pre-emptor has not succeeded in estab-
lishing his case that the disputed land was a land within the G
meaning of the provisions of the Act to which the provisions of
section 16(3) would apply."

In view of the findings recorded by the High Court that the land which
have been transferred were in the town of Hajipur and in the urban area, H
520 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the application filed under sub-section (3) of Section 16 has been rightly
dismissed. Accordingly, appeal fails and it is dismissed. There shall be no
orders as to cost.

The appellant shall be permitted to withdraw the amount which has
been deposited on behalf of the appellant in connection with the applica-
B tion under sub-section (3) of Section 16 of the Act. The refund shall be
made within three months from the date of the filing of the application on
behalf of the appellant.

G.N. Appeal dismissed.
KUMUD LATA DAS A
v.
INDU PRASAD

SEPTEMBER 19, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND,G.B. PATTANAIK, JJ.) B

Code of Civil Procedure, 1908 :

Order IX Rule 13-Application for setting aside. exparte decree-Proper-
ty in possessio11 of daughter-i11-law-She could not live amicably with her C
husband-Mother-in-law filing suit for possession on the basis of her alleged
title-Appellant was set ex-parte-Applicatio11 for restoration of decree dis-
posed of by the High Court by imposing condition of depositing mes11e profits
for the execution of the exparte decree-Not justified-Matter remitted to High
Cowt for fresh consideration of the application for setting aside the decree on
merits and i11 accorda11ce with law. D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12729 of
1996.

From the Judgment and Order dated 16.4.96 of the Delhi High Court
in I.A. No. 8629/95 in Suit No. 3781 of 1990. E
M.N: Krishnamani and S.B. Upadhyay for the Appellant.

AK. Ganguli, Manish Mishra for N.S. Bisht for the Respondent.

The following Order of the Court was delivered : F

Leave granted.

This appeal by special leave arises from the order made on April 16,
1996 by the Delhi High Court in I.A. No. 8629/95 in Suit No. 3781/90. The
suit was for possession of the property from the appellant. The plaintiff is G
the mother-in-law of the appellant. The appellant and her husband are not
able to live amicably in matrimonial tie. The proceedings for divorce are
pending._The appellant is in possession of the property and, therefore, the
respondent-mother-in-law filed a suit for possession on the basis of her
· alleged title. The appellant was set ex parte and the applicatio1i under H
521
522 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Order 9, Rule 13 CPC is now pending before the High Court. The
application for restoration of the decree has been disposed of with direc-
tions to deposit and to continue to deposit mesne profits at the rate of Rs.
2,000 per month from the date of ex-pa1te decree, Hence, this appeal by
special leave.

B In view of the fact that the parties are closely related and the matter
has been disposed of ex-parte, we are of the view that it is not a fit case to
impose costs of depositing mesne profits from the date of ex-parte decree
and to continue to deposit it as a condition to contest the application to
set aside ex-parte decree. Moreover, such onerous condition is not valid,
C though discretio~ary.

Under these circumstances, we think that the learned Single Judge
was not right in imposing the condition of depositing the mesne profits as
a condition precedent for execution of the ex-parte decree. The impugned
order of the High court is accordingly set aside. There .shall be stay of
D execution of the ex-parte decree. The matter is remitted to the High Court
for fresh consideration of the application for setting aside the decree on
merits and in accordance with law.

The appeal is allowed. No costs.

E G.N. Appeal allowed.
P.A. THOMAS AND ANR. A
v.
M. MOHAMMED TAJUDDIN AND ANR.

SEPTEMBER 19, 1996

[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B

Rent Control and Eviction :

Tamil Nadu City Protection Act, 1922:

Section 2(4)(ii)(a)-Tenant-Open land let out to defendant in tlze C
suit-He converted his individual business into a partnership business-Not
having control over the property-Held : He had sublet the prope1ty to the
partnership Jinn and thereby contravened the conditions of leas~Hence
liable for ejectment-Decree of ejectment granted by trial Court and affinned
by High Court-Not vitiated by any en-<?r of law wa1Ta11ti11g i11te1ference. D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1569 of
1987.

From the Judgment and Order dated 9.1.87 of the Madras High
Court in S.A. No 1706 and C.R.P. No. 3135 of 1985. E
Ms. Seira Vidyalingem for the Appellants.

K.R. Chowdhary for the Respondents.

The following Order of the Court was delivered :
F
A Bench of three Judges of this Court by judgment dated May 26,
1989 while negativing all the contentions raised by the appellant-tenant
found merit in the contention raised by the counsel that if the first appel-
lant was in effective control over the management of the business of the
partnership to which he had taken two other partners, it would amount that G
he had not sublet the premises and that he would be "a tenant" within the
meaning of sub-clause (a) of Clause (ii) of sub-section (4) of Section 2 of
the Tamil Nadu City Protection Act, 1922.

Sub-section (4) of Section 2 defines the terms "tenant" in relation to
any land. Clause (i) thereof runs as follows : H
523
524 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A "(i) means a person liable to pay rent in ·respect of such land, under
a tenancy agreement express or implied".

Sub-clause (a) of clause (ii) of sub-section (4) of Section 2 of the said
Act runs as follows :

B "(a) any such person as is referred to in sub-clause (i) who
continues in possession of the land after the determination of the
tenancy agreement."

The relevant part of sub-clause (b) of the said clause runs as follows:
c "(b) any person who was a tenant in respect of such land under a
tenancy agreement to which this Act is applicable under sub-sec-
tion (3) of Section 1 and who or any of his predecessors in interest
had erected any building on such land and who continues in actual
physical possession of such land and building, notwithstanding that
D
Since there is no evidence on this issue this Court thought that a
finding was required to be given by the High Court and if required, the
matter may be sent to the trial court for recording the evidence for
submission thereof to the High Court. In furtherance thereof, the High
E Court remitted the matter to the trial court for recording further evidence
afresh which was adduced.

After consideration of the evidence, the High Court noted that in
paragraph 8 of the plaint it is stated that the business of the first defendant
p was converted into a partnership in name and style of "P.A. Thomas and
Co." taking the second defendant who was looking after the business and
another as partners. The averment that the second defendant was looking
after the business was not specifically denied in the written statement.
Therefore, no issue was raised in that behalf. The first defendant was not
continuing to have effective control over the business even after its conver-
G sion into a partnership firm. The High Court pointed out that though the
partnership deed was filed in this .Court in the appeal, the same was not
produced either in the trial Court; nor was it produced in the High Court.
The first defendant did not choose to examine himself as a witness after
remand. Only the second defendant who was examined as DW-1, has
H reiterated his evidence given on earlier occasion. The first defendant was
PA THOMAS v. M.MOHD. TAJUDDIN 525

doing business only upto 1970 in the suit property and thereafter he never A
turned up. On the other hand, the business was being run in the suit
property exclusively by the second defendant. It was also noted by the High
Court that the first defendant was doing business in Mundakkayam as
pointed out in paragraph 5 of the judgment. The High Court has recorded
the finding that after remand, DW-1 admitted that his father, the first
B
defendant, was living in Mundakkayam, Kerala State and he as his son was
doing the business in the suit property at Cwnbum. The evidence of DW-2
is also to the same effect and he claimed that it was he who remitted the
rent by money orders to the plaintiffs and -later deposited the rent in the
Court. After considering the entire evidence on record and drawing an
adverse inference against the first defendant for his failure to get himself C
examined as a witn~ss, though opportunity was given to him, a finding was
recorded by the High Court that the first defendant was not in exclusive
control of the business. On the other hand, the second defendant was doing
the business in the premises after converting it into partnership firm. This
being the finding of fact, we do not think that there is any question of law D
is involved.

In view of the definition of "tenant" and in view of the fact that the
first defendant to whom the open land was let out, had converted individual
business into a partnership business and was not having any control over
the property or the business, it can be said that he had sub-let the property E
leased out to the first defendant, to the partnership firm and thereby,
contravened the conditions of the le<J.se. Accordingly, he became liable for
ejectment. The decree of ejectment granted by the trial Court and affirmed
by the High Court was thereby not vitiated by any error of law warranting

... interference.
F
The appeal is accordingly dismissed. No costs.

G.N. Appeal dismissed .

.-
A DR. CHIITARANJAN SHARMA AND ORS.
v.
THE STATE OF HIMACHAL PRADESH AND ANR.

SEPTEMBER 19,1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PAITANAIK, JJ.]

Service Law :

Abs01ption of employees of Aywvedic Degree College taken over by the
C State Govemmenf:-Regular absorptio!l made on the basis of recommenda-
tions made by screening committee constituted for this purpose-Appellants
not possessing the requisite qualifications-Hence absorbed in suitable ad-
ministrative posts to which they were eligible-Challenged before the Tribunal
and it directed to maintain their scale of pay and to absorb them in the post
of Ayurvedic Chikitsa Adhikaris-<Jn appeal held, directions of Tribunal
D based on equity and hence no inteiference called for.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1248-49
of 1987.

From the Judgment and Order dated 15.12.86 of the State Ad-
E ministrative Tribunal, Shimla in T. No. 74 and 77 of 1986.
S.V. Deshpande for the Appellants.

T. Sridharan, T.A. Khan, Shiva Pujan Singh and Rajiv Nanda for the
Respondents.
F
The following Order of the Court was delivered :

These appeals by special leave arise from the order of the Ad-
ministrative Tribunal made on December 15, 1986. Admittedly the H.I.M.
G Ayurvedic Degree College, Paprola, District Kangra was taken over by the
Government and handed over to the H.P. Health and Family Welfare
Department. Clause (3) of the agreement envisages as under :

"The service of the existing staff, principal, Teaching Administra-
tive and other employed on regular basis in the college who fulfil
H the requisite qualifications and age conditions may be taken over
526
·,-
CHITTARANJAN SHARMA v. STATE 527

with effect from 3.3.1978 after due screening if done by a screening A
committee constituted for this purpose by the Government in
which 2 members i.e. principal and Manager from the Managing
Committee shall also be included. Service of the present employees
will be protected according to Government rules."

In accordance therewith, the existing staff, principal, teaching, ad-
B
ministrative and other employees employed on regular basis in the college
were eligible to be absorbed on regular basis provided they fulfilled the
following conditions : (1) they were appointed on regular basis in the
college before taking over; (2) they possessed the requisite qualifications
prescribed for the posts; and (3) they fulfilled the age condition at the time c
of taking over w.e.f. March 3, 1978. On fulfilment of all these conditions,
they would be sent to a screening committee constituted for the purpose
by the Government including to members, i.e., the Principal and Manager
to the Managing Committee to represent the employees in the screening
committee. On recommendation made by the Committee, the regular D
absorption could be made.

Unfortunately, the appellants were not regularly appointed; nor did
they possess the requisite qualifications for absorption on regular basis in
the posts as on the date of the take over. Resultantly, mstead of throwing
them out of service by retrenchment, the Government issued the order E
exercising the power under proviso to Article 309 of the Constitution on
May 24,1980 in consultation with the Himachal Pradesh Public Service
Commission and Rules for Recruitment and Promotion of the Ayurvedic
College employees, Paprola, District Kangra. Admittedly, the appellant
even than did not satisfy those qualifications prescribed under the Rules. F
Resultantly, they were absorbed in suitable administrative posts to which
they are eligible. When they challenged their absorption, the Tribunal in
the impugned order directed to maintain the scale of pay which they were
drawing on the date of the take over and directed their absorption in the
posts of Ayurvedic Chikitsa Adhikaris etc. Thus, these appeals by special
leave. G

It is seen that since the appellant had not fulfilled the requisite
qualifications either when they were initially appointed by the committee
before take over nor when statutory rules were made by the Governor so
as to enable for absorption. Instead of retrenching them from service due H
528 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A to nor-fulfilment of the requisite qu.llif'ications, the Government came to
absorb them in the Ayurvedic Chikitsa Adhikaris posts etc. to which they
are eligible. The Tribunal has given the direction to maintain the pay-scales
and to make adjustment and absorption. In our view directions are correct
and based on equity and do not call for any interfere!lce. They may also
B be considered for further promotion from the absorbed posts in accord-
anc~, with the rules.

The appeals are accordingly dismissed. No. costs.

G.N. Appeals dismissed.
MEERUT DEVELOPMENT AUTHORITY ETC. A
v.
SATBIR SINGH AND ORS. ETC.

SEPTEMBER 19, 1996
B
[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

Land Acquisition Act, 1894:

Sections 4(1), 6, 17(4'r-Simultaneous publication of the declaration
under S. 6 along with publication of notification under .s. 4(1'r-Validity C
of-Judicial decision holding it invalid-Amending Act-Cannot simply seek
to take away the effect of the judgment-In that case it would amount to
legislative repeal of the judicial decision-Held, S. 2 of the U.P. Amendment
Act 5 of 1991 would operate prospectively and retrospectively from April 24,
1984 applying to the previous notifications and declarations but also to D
notifications and declarations to be published subsequently-Retrospective
effect given from date of issuance of ordinance to the Act and operation
retrospectively from the date of judgment-No inconsistency in operation of
the Act or invalidity in giving two dates for the retrospective operation of the
provisions of the Act-Acquisition for housing development is an urgent
purpose and exercise of the power under S. 17(4) dispensing with the enquiry E
under S. SA is not invalid-Exercise of power under S. 4(1) and declaration
under S. 6 are not vitiated by any manifest e"or of law wa"anting to quash
the declaration under S. 6 as was done by the High Court~onstructions
made despite status quo order passed by Supreme Court-Such constructions
will not bind the authority-No compensation for these illegal construe- F
tions---Land Acquisition Officer to take note of these at the time of passing
the Award-Award to be passed within six months.

Smt. Somawanti & Ors. v. State of Punjab & Ors., (19631 2 SCR 775;
Ghaziabad Development Authority v.Jai Kalyan Samiti, Sheopuri, Ghaziabad G
& Anr., [1996) 2 SCC 365; Indian Aluminium Co. & Ors. v. State of Kera/ &
Ors., JT (1996) 2 SC 85; State of Orissa v. Gopal Chandranath, [1995) 6
SCC 243; Bhubaneswar Singh & Anr. v. Union of India & Ors., [1994) 6 SCC
77; Comorin Match Industries P. Ltd. v. State of Tamil Nadu, [1996) 4 SCC
281; Gouri Shankar Gauri & Ors. v. State of U.P. & Ors., [1994) 1 SCC 92;
Government ofAndhra Pradesh v. HM. T., [1975) Supp. SCR 384;Aflatoon H
529
530 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A v. Lt. Governor of Delhi & Ors., [1975) 4 SCC 285; Smt. Pista Devi v. M.DA.,
[1986) 4 SCC 251 and State of Tamil Nadu v. L. Krishnan, [1996) 7 SCC
450, relied on.

State of U.P. & Ors. v. Radhey Shyam Nigam & Ors., [1989) 1 SCR
92; Madan Mohan Pathak v. Union of India, [1978) 2 SCC 50; State of U.P.
B & Anr. v. Keshwav Prasad Singh, [1995) 5 SCC 587 and State of Haryana v.
The Kamal Co-operative Fanners' Society Ltd., JT (1993) 2 SC 235, referred
to.

CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal
C No. 1828 of 1988 Etc. Etc.

From the Judgment and Order dated 14.1.88 of the Allahabad High
Court in C.M.W.P. No. 10551 of 1985.

Dr. Rajeev Dhawan, M.N. Krishnamani, Anis Suhrawardy, Mrs. S.
D Janani, V.J. Francis, R.D. Upadhyay, R. Bana, Ms. LaXIni Arvind, Subodh
Markandeya, Ms. Chitra Markandeya M.M. Chopra, Ms. Meenakshi Agar-
wal, (Anip Sachthey, P.D. Sharma, R.B. Misra, A.S. Pundir), (NP),
Pradeep Misra, T. Mahipal, (RC. Verma) for, Ashok K. Srivastava for the
appearing parties.

E The following Orders of the Court was delivered :

Substitution allowed.

Leave granted in all the special leave petitions.

F Notification under Section 4(1) of the Land Acquisition Act, 1894
(for short, the "Act") was published on June 11, 1985. The Government also
exercised the power under Section 17(4) of the Act and dispensed with the
enquiry under Section 5-A and had the declaration under Section 6 pub-
lished on June 13, 1985. The publication of substance of the notification in
the local newspapers came to be made on July 25, 1985. In August 1985,
G the respondents filed a batch of writ petitions in the High Court impugning
the validity of the notification under Section 4(1) and of the declaration
under Section 6 on six grounds. Five of the grounds raised by the respon-
dents were negatived by the High Court as not sustainable but declaration
under Section 6 was quashed on the ground that after the Amendment Act
H 68 of 1984 had come into force w.e.f. September 24, 1984, the simultaneous
MEERUT AUTHORITYv. SATBIRSINGH 531

publication of the declaration under Section 6 along with publication of A
notification under Section 4(1) was invalid in law. They relied upon judg-
ment of this Court in State of U.P. & Ors. v. Radhey Shyam Nigam & Ors.
etc., (1989) 1 SCR 92. The respondents filed cross appeals against the
findings that were negatived by the High Court in respect of all the other
five points. Thus these appeals by special leave.
B
Pending appeals, the Governor exercising the power under Article
213 of the Constitution issued the Ordinance No. 32 of 1990 and State
Legislature enacted the Land Acquisition (U.P. Amendment and Valida-
tion) Act, 1991 (UP Act 5 1991) which came into force from December
28, 1990, introducing proviso to Section 17(4) of the Act and also by C
Section 3 thereof validated all the notifications and declarations issued
under the Act prior to the date of the judgment of this Court in Radhey
Shyam Nigam case (supra). The Ordinance came to be challenged by way
of Writ Petition No. 153/96. Thus all the matters tagged are disposed of
together. With a view to satisfactorily resolve the controversy, it is, at the D
first instance, necessary to dispose of the writ petition.

It is seen that this Court in Radhey Shyam Nigam's case had con-
sidered the provisions of U.P. Urban Planning and Development Act and
the Act. In exercise of power under Section 17(4) of the Act, the ap-
propriate State Government was empowered to issue and get published the E
notification under Section 4(1) and the declaration under Section 6 of the
Act simulatensouly. That was upheld by this Court in Smt. Somawanti &
Ors. v. State of Punjab & Ors., [1963) 2 SCR 775. After the Amendment
Act 68 of 1984 was brought on statute, sub-section (4) of Section 17
envisages that the authority is empowered to have the declaration under F
Section 6 published after the publication of the notification under Section
4(1). In other words, the simultaneous exercise of power to get tqe notifica-
tion under Section 4(1) and declaration under Section 6 was not valid in
law. This Court had held thus :

"It is true that the expression "after the date of the publication G
of the notification" introduced in Section 17(4) can be explained.....
changes in Sections 4 and 6 of the Act".

It is to be seen that the State Legislature thereafter, has enacted
proviso to sub-section (4) as under : H
532 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A "Provided that where in the case of any land, notification under
Section 4, sub-section (1) has been published in the official Gazette·
on or after September 24, 1984 but before January 11, 1989, and
the appropriate Government has under this sub-section directed
that the provisions of Section 5-A shall not apply, a declaration
under Section 6 in respect of the land may be made either simul-
B taneously with, or af any time after, the publication in the official
Gazette of the notification under Section 4, sub-section (1)."

This proviso was inserte~ by Section 2 of the State Amendment Act
5 of 1991. Sub-section (3) validated the acquisitions pending as on the date
C of the judgment of this Court which reads as under :

"3. Validation of certain acquisitions. - Notwithstandine any
judgment, decree or order of any Court, Tribunal or other
authority, no acquisition of land made, or purporting to have been
made, under the Principal Act before the commencement of this
D Act and no action taken or thing done (including any order or
-declaration made, agreement entered into or notification publish-
ed) in connection with such acquisition, which is in conformity with
the provisions of the Principal Act as amended by this Act shall
be deemed to be invalid or ever to have been invalid merely on
E the ground that declaration under Section 6 of the Principal Act·
was published in the Official Gazette on the same· date on which
. notification under Section 4, sub-section (1) of the Principal ;\ct,
was published in Official Gazette or on any other date prior to the
•
date of publication of such notification as defined in Section 4,
sub-section (1) of the Principal Act."
F
The controversy is not longer res integra. This Court in Ghaziabad
Development Authority v. Jai Kalyan Samiti, Sheopuri, Ghaziabad & Anr.,
[1996) 2 sec 365 has considered the effect of the proviso introduced by
the State Legislature by way of amendment to Section 17(4). Th.e validity
G has been upheld by the two-Judge Bench of this Court.
Shri Pradeep Misra, learned counsel for the respondents, contended
that if the law is declared by this Court that simultaneous publication under
Section 4(1) and declaration under Section 6 of the Act is invalid, the
Legislature has no power to over-rule and nullify the judgment of this
H Court by way of amendment. It has only to remove the defect, as p~inted
MEERUT AUIBORITY v. SATBIR SINGH 533

out by this Court, by suitably amending the statute. In this case, a reading A
of the proviso would indicate that the State Legislature, without removing
the defect, as pointed out by this Court, reiterated the defect and sought
to validate all the invalid notifications or declarations as declared by this
Court in Radhey Slzyam Nigam's case (supra) as valid. Therefore, the U.P.
Amendment Act 5 of 1991 is invalid in law.
B
It is well-settled by catena of decisions of this Court that when this
Court in exercise of power of judicial review, has declared a particulate
statute to be invalid, the Legislature has no power to over-rule the judg-
ment; however, it has the power to suitably amend the law by use of
appropriate phraseology removing the defects pointed out by the court and C
by amending the law inconsistent with the law declared by the court so that
the defects which were pointed out were never on statute for effective
enforcement of the law. This Court has considered in extenso the case law
in a recent judgment in Indian Aluminium Co. & Ors. v. State of Kerala &
Ors., JT (1996) 2 SC 85 had held that such an exercise of .power to amend
a statute is not an incursion on the judicial power of the court but is a D
statutory exercise of the constituent power to suitably amend the law to
validate the actions which have been declared to be invalid. It laid down
the following principles :

"(1) The adjudication of the rights of the parties is the esential E
judicial function. Legislature has to lay down the norms of conduct
or rules which will govern the parties and the transactions and
require the court to give effect to them;

(2) The Constitution delineated delicate balance in the exercise of
the sovereign power by the Legislature, Executive and Judiciary; F

(3) In a democracy governed by rule of law, the legislature exer-
cises the power under Articles 245 and 246 and other companion
Articles read with the entries in the respective lists in the Seventh
Schedule to make the law which includes power to amend the law; G

(4) Courts in their concern and endeavour to preserve judicial
power equality must be guarded to maintain the delicate balance
devised by the Constitution between the three sovereign
functionaries. In order that rule of law permeates ta. fulfil an
egalitarian social order, the respective sovereign functionaries H
534 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A need free-play in their joints so that the march of social progress
and order remain unimpeded. The smooth balance built with
delicacy must always be maintained;

(5) In its anxiety to safeguard judicial power, it is unnecessary to
be overjealous and conjure up incusion into the judicial preserve
B invalidating the valid law competently made; !
\

(6) The Court, there fore, need to carefully scan the law to find
out; (a) whether the vice pointed out by the Court and invalidity
suffered by previous law is cured complying with the legal and
c constitutional requirements; (b) whether the Legislature has com-
petence to validate the law; (c) whether such validation is consis-
tent with the rights guaranteed in Part III of the Constitution;

(7) The Court does not have the power to validate an invalid law
D or to legalise or to remove the norm of invalidation or provide a
remedy. These are not judicial functions but the exclusive province
of the Legislature. Therefore, they are not the encroachment on
judicial power.

(8) In exercising legislative power, the Legislature by mere decla-
E ration, without anything more, cannot directly overrule, revise or
override a judicial decision. It can render judicial decision ineffec-
tive by enacting valid law on the topic within its legislative field
fundamentally altering or changing its character retrospectively.
The changed or altered conditions are such that the previous
F decision would not have been rendered by the Court if those
conditions had existed at the time of declaring the law as invalid.
It is also empowered to give effect to retrospective legislation with
a deeming date or with effect from a particular date. The Legis-
lature can change the character of the tax or duty from inpermis-
sible to permissible tax but the tax or levy should answer such
G character and the Legislature is competent to recover the invalid ·
tax validating such a tax or removing the invalid base for recovery
from the subject or render the recovery from the State ineffectual.
It is competent for the legislature to enact the law with retrospec-
tive effect and authorise its agencies to levy and collect the tax on
H that basis, make the imposition of levy collected and recovery of
MEERUT AU1HORI1Yv. SATBIRSINGH 535

the tax made valid, notwithstanding the declaration by the Court A
or the direction given for recovery thereof.

(9) The consistent thread that runs through all the decisions of this
Court is that the legislature cannot directly overrule the decision
or make a direction as not binding on it but has power to make
the decision ineffective by removing the base on which the decision B
was rendered, consistent with the law of the Constitution and the
legislature must have competence to do the same."

The same view as reiterated in State of Orissa v. Gopal Chandrarath,
f1995] 6 SCC 243; Bhubaneswar Singh & Anr. v. Union of India & Ors., C
[1994] 6 SCC 77 and• Comorin Match Industries P. Ltd. v. State of Tamil
Nadu, [1996) 4 SCC 281. It is equally settled law that validating Act cannot
simply seek to take way the effect of the Judgment of the Court. In such
an event, it will be legislative repeal of judicial decision as had been held
by this Court in Madan Mohan Pathak v. Union Of India, [1978} 2 SCC 50; D
State of U.P. & Anr. v. Keshwav Prasad Singh, [1995} 5 SCC 587 and State
of Haryana v. The Kamal Co-operative Fanners' Society Ltd., JT_(1993) 2
SC 235.

The question in this case is : whether the Legislature has merely
reiterated the defect pointed out by this Court and thereby caused legisla- E
tive repeal of the judicial decision or it has cured the defect pointed out
by this Court so as to be in conformity with the law? In this behalf, it must"
be remembered on the facts in this case that acquisition is a concurrent
subject vide Entry 42 in the List III of the Seventh Schedule to the
Constitution on which both the Parliament as well as the State legislature F
have competence to enact the law suitable to the situtation prevailing in
the appropriate State. Article ,254 of the Constitution deals with such an
area. Clause (2) of Article 254 envisages that "Where a law made by the
Legislature of a State with respect to one of the matters enumerated in the
Concurrent List contains any provision repugnant to the provisions of an G
earlier law made by parliament, or an existing law with respect to that
matter, then, the law so made by the Legislature of such State shall, if it
has been reserved for the consideration of the President and has received
his assent, prevail in that State". The scope thereof was elaborately con-
sidered by this Court in Gouri Shakar Gauri & Ors. v. State of U.P. & Ors.,
[1994] 1 sec 92 at 117-118 and it was held thus: H
536 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A "... (1) where the provisions of a Central Act and a State Act in
the Concurrent Lir.t are fully inconsistent and are absolutely brecon-
ciliable, the Centnl Act will prevail and the State Act will become
void in view of the repugnancy; (2) where, however, a law passed
by the State comes into collision with a law passed by Parliament
on an Entry in the Concurrent List, the State Act shall prevail to
B
the extent of the repugnancy and the provisions of the Central Act
would become void provided the State Act has been passed in
accordance with clause (2) Article 254; (3) where, however, a law
made by the State Legislature on a subject covered by the Con-
current List is inconsistent with or repugnant to a previous law
c made by parliament, then such a law can be protected by obtaining
the assent of the President under Article 254(2) of the Constitu-
tion. The result of obtaining the assent of the President would be
that so far as the State Act is concerned, it will prevail in the State
and overrule the provisions of the Central Act in their applicability
to the State only. Such a state of affairs will exist only until
D
Parliament may at any time make a law adding to, or amending,
varying or repealing the law made by the State Legislature under
the proviso to Article 254. In that case it was held that part of the
provisions were not repugnant in their application to the public
men in Tamil Nadu but are void to the extent of public servants,
E T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177 is a case where Section
16(1)(a) of the Prevention of Food Adulteration Act, 1954, in the
Concurrent List prescribes a punishment of six years and fine. The
West Bengal State Legislature emended it by West Bengal Amend-
ment Act, 1973 and prescribed a punishment of imprisonment for
life for the selfsame offence under Section 16(1) of. the Act.
F
Prevention of Food Adulteration Act was amended by Parliament
in 1976. The question arose whether by operation of proviso to
Article 254(2) the State law is void. Since the Central Amendment
Act, 1976 occupies the same filed imposing lesser punishment, the
previous State law imposing punishment of imprisonment for life,
.G though received the assent of the President, was held to·be void."

It is not in dispute that the State Amendment Act 5 of 1991 was
enacted and reserved for consideration of the President and received the
assent of the President on 26.2.1991 and the Act was published in the
H Gazette on 27.2.1991. It is to be seen that as regards simultaneous publi-
MEERUTAUlHORITYv. SAIBIRSINGH 537

cation of the notification and the declaration in respect of acquisition of A
the land for public purpose exercising the power of eminent domain in
certain situation where possession was needed urgently, depending upon
the local needs and the urgency, Government requires such power. Con-
sequently, the State Legislature thought it appropriate that despite the
enactment of the Amendment Act 68of1984 Amending Section 17(4), the
B
State needed further amendment. Resultantly, the U.P. Amendment Act 5
of 1991 came to be made and it was given retrospective effect from the
date of the Amendment Act 68 of 1984 has come into force, i.e., September
24, 1984.

It is true that the proviso was not happily worded. But a reading of · C
it would clearly give us an indication that the proviso to sub-section (4)
introduced by Section 2 of the Amendment Act 5 of 1991 would deal with
both the situations, namely, the notifications published on or after Septem-
ber 24, 1984 but before January 11, 1989 but also the declaration to be
simultaneously published subsequent thereto. The literal interpretation D
sought to be put up by Shri Pradeep Misra would defeat the legislative
object. Therefore, ironing out the creases we are of the view that the
proviso applies not only to the notifications and declarations simultaneous-
ly published after the date of coming into force of the Amendment Act 68
of 1984 but also to the future declarations as well. Thus, it could be seen
that the proviso would operate prospectively and retrospectively from April E
24, 1984 applying to the previous notifications and declarations but also to
the notification and declaration to be published subsequently.

It is true that normally the Legislature has to give effect to the
judgment of the court only to cure the defects pointed out in the previous F
judgment so that the operation of the law would be consistent with the law
declared by this Court. But in view of the peculiarity, namely, the special
needs of the State, Article 254(2) itself gives such a power to the State
legislature to amend the law to m'lke applicable in relation to that State
though Central Law may be inconsistent with the law operating in other
States. In other words, when the topic is occupied in the Concurrent List, G
uniformity of the operation of the law is not the rule but simultaneous
existence of the inconsistency would also operate in the same filed. But
when the State Amendment was reserved and received the assent of the
President to the extent of inconsistency it is saved in relation to that State.
• Therefore, the amendment by proviso to Section 17(4) is not invalid. Any H
538 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A other construction would dry out the power of the State Legislature to
enact the law on the subject of acquisition.

It is seen that Section 3 of the Amendment Act 5 of 1991 seeks to
validate the illegal declarations made simultaneously with the publication
of the Section 4 notification and in some cases even prior to the publication
B of Section 4 notification; it also seeks to validate certain acquisitions
envisaged thereunder. This validation is not illegal. Shri Misra contended
that since the appeals were pending before this Court, the Legislature
would not be competent to amend the law so as to take away the effect of
the decisions of this Court. In support thereof he contended that leave was
C granted by this Court and it was directed to post these cases along with
the main matter, i.e., Radhey Shyam Nigam's case. Since the matters were
not disposed of, the amendment was brought about to defuse the effect of
the judgment. Therefore, the amendment is not valid in law. We find no
force in the contention.
D
Government of Andhra Pradesh v. H.M. T, [1975) Supp. SCR 384 was
a case where pending appeals in this Court the Legislature has amended
the Gram Panchayat Act and suitably defined 'house' which was found to
be defeetive as declared by a judgment of A.P. High Court under appeal.
Amendment was made to the Gram Panchayat Act. When the Validation
E Act was challenged, a bench of three judges of this Court had· upheld. the
validity of the Amendment Act and held that the State Legislature has not
overruled or set aside the judgment of the High Court. It has amended the
definition of 'house' by substitution of a new Section 217 for the old section
and it has provided that the new definition shall have retrospective effect
F notwithstanding anything contained in any judgment, decree or order of
any court or other authority. In other words, it has removed the basis of
the decisions rendered by the High Court so that the decisions would not
have been given in the altered circumstances. The same ratio applies to the
facts in this case.

G It is then contended by Shri Krishnamani, learned Senior counsel
appearing for some of the appellants in cross appeals that in the Amend-
ment Act two inconsistent dates for coming into force of the Act and giving
effect to the provisions of the Act have been introduced. That is also
impermissible. We find no force in the contention. It is seen that the
H Amendment Act 5 of 1991 was given effect from the date when the
MEERUTAUTifORITYv. SATBIRSINGH 539

Amendment Ordinance was published in the Gazette but the effect of the A
amendment was to remove the defects pointed out and to validate the
notifications and declarations which otherwise would be invalid. Conse-
quently, the retrospective effect was given from the date of the issuance of
the Ordinance to the Act and it came into operation retrospectively from
the date of judgment. Under those circumstances, we do not find any
B
inconsistency in the operation of the Act or invalidity in giVing two dates
for the respective operation of the provisions of the Act.

Then it is contended by Smt. S. Janani, learned co.unsel for the
appellants in cross appeals that the High Court was not justified in reject- C
ing 5 of the contentions raised by the appellants. The exercise of the power
is arbitrary. She has highlighted her point by placing before us a map in
which some of the portions were omitted from acquisition while lands in
question came to be acquired. Therefon:;, it is arbitrary exercise of the
power. We find no force in the contention. When we have enquired from
the counsel appearing for the M.D.A., it was pointed out that the lands left D
out were agricultural lands which could be acquired under the Land
Reforms Act and that, therefore, they had not resorted to the acquisition
under the Land Acquisition Act. It is also pointed, out that some of the
lands were abadi is situated, were not acquired. Shri Rajeev Dhawan,
learned senior counsel for the MDA further contended that certain lands
were left out where greenery is in existence and that was not sought to be E
disturbed so as to maintain ecology. Mrs. Janani has pointed pointed out
that the Kanugo had intimated that th~ respondents are free to construct
houses without obtaining permission. The High Court has pointed 'out that
such construction was invalid in law and therefore the notification under
section 17(4) was not to be sustained on that ground. The view of the High
Court is not correct in law. We find no force in the contention. It is seen F
that where large extent of land was acquired, mere existence of some
houses even if they were constructed, may be according to rules or may
not be according to rules, the exercise of the power under section 17(4) by
the Government dispensing with the enquiry does not become invalid,
when there was urgency to take possession of the acquired land. It is now G
settled legal position that acquisition for planned development of housing
scheme is also urgent purpose as laid down by this Court inAflatoon v. Lt.
Governor of Delhi & Ors., [1975] 4 SCC 285 and Smt. Pista Devi v. M.DA..,
(19861 4 SCC 251 and in recent judgment of this Court in State of Tamil
Nadu v. Krishnan, [1996) 7 SCC 450. In the light of the settled legal position
the acquisition for housing development is an urgent purpose and exercise H
540 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A of the power under section 17(4) dispensing with the enquiry under Section
SA is not invalid.

Mrs. Janani has further contended that since no developments have
been undertaken and no plants have been prepan::d, the acquisition is bad
in law. We find no force in the contention. Under the U.P. Urban Develop-
B ment Act it is not mandatory that the entire scheme should be prepared
prior to the notification under section 4(1) was published. Similar situation
was considered by this Court in L. Kiish~zan's case (supra) and it was held
that the acquisition on that account is not bad in law. Accordingly we hold
that the exercise of the power under section 4(1) and declaration under
C section 6 are not vitiated by any manifest error of law warranting to quash
the declaration under section 6 as was done by the High Court.

The appeals of the Meerut Development Authority are accordingly
aJlowed. The appeals of the claimants-respondents stand dismissed. The
writ petition also stands dismissed. But in the circumstances, without costs.
D
Shri Markandeya, learned counsel has pointe'd out that in some of
the cases despite the status quo order passed by this Court, some of the
respondents/appellants in contempt case have carried out the constructions
and that, therefore, he has taken out contempt proceedings for violation of
the orders of the court. We need not take any further steps in this case.
E Suffice to state that any constructions will not bind the authority nor are
they entitled to compensation for these illegal constructions. The same
would be taken note of by the Land Acquisition Officer at ·the time of
passing the award and would be dealt with appropriately. The contempt
petitions are accordingly dismissed. The Land Acquisition Officer should
pass the award within six months from the date of the receipt of this order.
F
Civil Appeal Nos. 2313-14 of 1997.

ORDER

G These appeals by special leave arise from the order of the Division
Bench of the Allahabad High Court made on May 20, 1976 in W.P. Nos.
792/75 and 5032/75 and batch. The appellant challenged, along with yet
other batch, the validity of the notification published under Section 4(1) on
October 12, 1974 and declaration under Section 6 dated September 28,
1974 contending that the declaration under Section 6 could not be made
H until the notification under Section 4{1) was published in accordance with
MEER UT AUTHORI1Y v. SATBIR SINGH 541

law. Therefore, the notification is bad in law. The High Court noted, as a .A,
fact, that the notification under Section 4(1) and the declaration under
Section 6 were simultaneously published on October 12, 1974. T71ere is 1w
bar on the Govemment making the order that before publication of Section
4( I) declaratio11 u11der Section 6 should also be published. It is not in dispute
that the State had in exercise of its power of eminent domain under Section
17(4) of the Act, dispensed with the enquiry under Section SA. It is settled B
law that simultaneous publication of the notification under Section 4(1) and
the declaration under Section 6 was valid in law prior to the coming into
force of the Amendment Act 68 of 1984. It is also seen that in relation to
th¢ State of Uttar Pradesh, Land Acquisition (Amendment) Act 5 of 1991
has been brought into force w.e.f. February 17, 1991 and, therefore, in c
'relation to the State of U.P. it is now settled law that when the State
exercises the power of eminent domain and in exercise of the power under
Section 17(4) dispensing with the enquiry under Section 5-A to acquire the
land under Section 4(1) the State is entitled to have the notification under
Section 4(1) and the declaration under Section 6 simultaneously published
so as to take further steps as required under Section 9 of the Act, i.e. D
issuance of the notice and taking possession thereof under Section 17(2)
of the Act. Thereafter, the land stands vested in the State free from all
encumbrances. In view of the urgency, the Government exercised power of
eminent domain and dispensed with the enquiry under Section 5-A; we do
not find any illegality in the action taken by the respondents in having the
notification under Section 4(1) and the declaration under Section 6 simul- E
taneously published. It is then sought to be contended that the appellant
has a small extent of ·the land and other lands have been excluded from
acquisition and, therefore, it is arbitrary exercise of power. He also seeks
to contend the procedural infirmities, but unfortunately none of the con-
tentions have been pressed before the High Court, though might have been F
raised in writ petition. Under those circumstances, we cannot permit the
appellants to argue these points afresh which are purely questions of fact
to be verified on the basis of the material as the State had no opportunity
to deal with them.

The appeals are accordingly dismissed but, in the circumstances, G
without costs. The Land Acquisition Officer is directed to pass the awards
within a period of six months from the date of the receipt of the order of
this Court.

G.N. Appeals dismissed.
A S.K. SINGH
v.
CENTRAL BANK OF INDIA AND ORS.

OCTOBER 19, 1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.)

Service Law :

Removal from service-Branch Manager of a Bank-Disciplinary
C proceedings as cash found sh01t-Enquiry conducted-Order of removal from
service-Clzallenged on the ground that copy of enquily report was not sup-
plie~egatived by High Cowt-On appeal held, though copy of the enquby
report not supplied, the employee could not satisfy the Court as to the
prejudice caused to him on account of its non-supply-Hence there is no
illegality in the decision taken by the High Court.
D
Managing Director, ECJL Hyderabad and Ors. v. B. Kanmakar and
Ors., [1993] 4 SCC 727, referred to.

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
No. 18181 of 1996.
E
F~om the Judgment and Order dated 13.3.96 of the Madhya Pradesh
High Court in L.P.A. No. 80 of 1996.

S.S. Khanduja, Yash Pal Dhingra and Baldev L. Satija for the
Petitioner
F
The following Order of the Court was delivered :

This petition is filed against the judgment of the Division Bench of
the Madhya Pradesh High Court Gwalior Bench made on March 13, 1996
G in L.P.A. No. 80/96.

The admitted position is that the petitioner was working as a Branch
Manager in the respondent-Bank. A sum of Rs. 20,000 was found to be
short in cash of the Branch. Therefore, disciplinary proceedings were
initiated against him and an enquiry was conducted and he was removed
H from service. He challenged the order of his removal in an appeal which
542
S.K SINGH v. CENTRAL BANK OF INDIA 543

was dismis~ed; the writ petition filed by him was also dismissed by the A
learned single Judge of the High Court and on appeal, it was confirmed.

The only controversy raised in the High Court was that as he was not
supplied with the copy of the"-i.9.t.l,u_iiy report, the order of dismissal was
bad in law. The learned Single Jud,ge as well as the Division Bench of the
High Court have considered the e.ff~ct of the judgment of the Constitution B
Bench of this Court in Managing Director, ECIL, Hyderabad and Ors. v. B.
Kamnakar and Ors., [1993] 4 SCC 727. The learned single Judge as well as
the Division Bench of the High Court had asked the petitioner as to what
prejudice the petitioner had suffered for non-supply thereof. Since there
was no adequate explanation offered by the petitioner, the High Court c
came to the conclusion, that though the copy of the report was not
supplied, on the facts, as no prejudice was proved, it was not a case
warranting interference.

It is contended by Sri Khanduja, learned counsel for the petitioner
that since this Court has laid down the law that supply of copy of the D
enquiry report is a pre-condition for a competent officer to take discipli-
nary action, the appropriate course would have been to send back the case
to the disciplinary authority. For this course, normally there is no quarrel,
as this Court had settled the law that a copy of the report needs to be
supplied to the delinquent employee to enable him to make representation E
against the proposed action or punishment and, thereafter, the authority is
required to consider that explanation offered by the petitioner and _then to
take decision on the quantum of punishment. In this case, though copy of
the report was not supplied, he was asked by the learned Single Judge as
well as by the Division bench as to what prejudice he suffered on account
of non-supply of the report; but he was not able to satisfy the learned F
Judges as to the prejudice caused to him on account of non-supply of the
enquiry report. On the facts, we find that there is no illegality in the
decision taken by the High Court.

The special leave petition is accordingly dismissed.
G
G.N. Petition dismissed.
•

A THE SCHEDULE CASTES AND SCHEDULED TRIBES
OFFICERS' WELFARE COUNCIL
v.
STATE OF UTTAR PRADESH AND ANR.

SEPTEMBER 19, 1996
B
[K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

Se1vice Law :

C U.P. Regulation of Ad hoc Appointment (On Posts Within 171e PwvieWi
Of The Public SelVice Commission) Rules 1979:

Provincial Medical Health services-Reservation in pri.01110-
tion-Promotion· to posts of Deputy Chief Medical Officer, Chief Medical
Officer Additional Director, Director-Fixing minimum length of ser-
D viCl--Memorandum dated July 28, 1986 increasing the minimum length of
se1Vice-ln view of the new C1ite1ia three officers be/ongiilg to S CfST were
denied their entitlement to promotion as Chief Medical Officers and Joint
Directors-ReselVation Policy should be strictly adhered to and not left to the
whims of officers to introduce their own criteria contrary to the general
E po/icy-Department not preparing separate list of general candidates,
Schedule Castes and Scheduled Tribes in integrating the111 as per the roster
prepared ~y the Govemment-Obviozisly it is an illegal procedure fallowed t<?
deprive the officers belonging to SC, ST and Backward Classes in integrating
their seniority according to rostef--Hence the Memo dated July 28, 1986 and
all other i11cide11tal instructions issued i11 furtherance thereof are
F quashed-Govemment to consider the cases of the three officers and all other
eligible officers according to 1Ules in vogue from 1973 till the date of intro-
ducing the offending ntles--If necessary to create supemumer01y posts i11 the
respective vacancies to which the three officers are eligible to be co11sidered
and promoted in accordance with the rules with all consequential
G benefits-Directions issued.

Constitution of India-A1ticle l6-Rese1vation in Promotion.

Consumer Educatio11 & Research Centre & Ors. v. Union of India &
Ors., (1995) 3 SCC 432; Dalmia Cement (Bharat) Ltd. & Anr. v. Union of
H India & Ors. Etc., JT (1996) 4 SC 555; Mur/idhar Dayandeo Kesekar v.
544
SC/ST OFFICERS WELFARE COUNCIL v. STATE 545

Vishwanath Pandu Barde & Anr., [1995] Supp. 2 SCC 549; Bihar State A
Electricity Board & Ors. v. Panneshwar Kumar Agarwala Etc. Etc., JT (1996)
5 SC 555; State of U.P. v. Dr. R.K. Tandon, [1995] 3 SCC 616 and State of
U.P. & Ors. v. Dr. R.K. Tandon & Ors., JT (1996) 7 SC 174, relied on.

Indra Sawlzney v. Union of India, [1992] Supp. 3 SCC 217, referred
to. B

"Constitutional Law of India" edited by M. H-idayatullah, former Chief
Justice (Vol. II) at pages 294; Swami Vivekanand : Lecture entitled "The
Before Us" ( 1897) published in "The Complete Works of Swami Viveka11a11d"
(Vol. 3, p. 269 (1979 edn.) Swami Ranganathananda: "Enlightened Speeches" C
(First Edition), 1985; "Law, Justice and the Philosophy of Man", by Swami
Ranganathananda; Swami Ranganathananda "Social Responsibilities of
Public Administration" an article in "The Responsible Society-17ie Ethos of
which India Lacks Today" a commemorative volume to Justice V.S. Desh-
pande, former Chief Justice of Delhi High Court; "Eternal Values for a
Changing Society" by Swami Ranganathananda (1971-3rd Edn.) page 693, D
SA. de Smith "17ie abuse of statutory powers; "Ultra vires breach of statutory
duty" by Peter Cane, Fellow of Corpus Christi College, OJ..ford, published in
Public Law Seties, 1981 p. 11; "Public Administration" by Pfiffner-presthus
(4th Edn.) p. 550; "Responsibility in Government : Theory and Practice" by
Herbert J. Spiro; "British Government and the Constitution-Test, Cases and E
Materials" by Colin Twpin (Third Edition-1995) p. 315 & "The Nature and
Destiny and Man" Vol. II (New York: Charles Scribner's Sons, 1948) pp.
266 561, referred to.

CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 621 of
1987. F
(Under Article 32 of the Constitution of India.)

D.N. Goburdan, Ms. Pinky Anand and Ms. Geeta Luthra for the the
Petitioner.
G
R.C. Verma for Ashok K. Srivastava, A.K. Goel, Mrs. M. Qamarud-
din and M. Qamaruddin for the Respondents.

The following Order of the Court was delivered :

This writ petition under Article 32 was referred to a Bench of three H
546 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Judges to decide an important question of constitutional dimension raised
in this case.

Admittedly, in the Health Department of Government of U.P. called
Provincial Medical Health Services (for short, the 'Services') recruitment
to the post of Doctors and promotion up to the post of Director were
B regulated by executive instructions of the Government and fr:om the year
1973 Government had appointed the doctors to the service. Until the U.P.
Regulation of Ad hoc Appointment (On Posts Within The Purview Of The ,.
Public Service Commission) Rules, 1979 were made by the Governor, in
exercise of power under proviso to Article 309 of the Constitution, all the
c appointments and also promotions came to be made on ad hoc basis. The
petitioner-Association is seeking for a writ to quash the memo dated July
28, 1986 and for declaration that promotions made within the cadre shall
be on the basis of seniority subject to rejection on ground of unfitness and
to regularise the services of all the officers in the cadre as per instructions
D as were in vogue prior to the date of that memo and other reliefs;

The admitted position from the record, is that the Personnel Depart-
ment of the Government has issued model rules to all the departments to
exercise the power under the proviso to Article 309 of the Constitution and
to frame the statutory rules for appointment made in accordance with the
E rules. Pending making of the Rules, ad hoc appointments could be made
but it would be for one year and as soon as regular appointments were
made, the ad hoc. appointments were to be regularised in accordance with
the rules. In this case, admittedly, no statutory rules were made nor the
procedure even as per instructions in force, was followed. Adhocism was
F the rule at the whim of the Department of Medical Health. In the Services, ·
as per !nstructions in vogue, appointment to the post of Doctor could be
made from amongst qualified doctors and diploma-holders. For promotion .
.,
from the post of Medical Officer to the post of Deputy Medical Officers
etc., qualifications and experience have been prescribed. Prior to July 28,
1986, for promotion to the post to Deputy Chief Medical Officer ex-
G perience of eight years of service was prescribed and for promotion to the
post of Chief Medical Officer, two years'experience as Deputy Chief
Medical Officer was prescribed. Similarly, for promotion to the post of
Joint Director, -two years' experience as Chief Medical Officer was
prescribed; for promotion to the post of Additional Director, two years'
H experience as Joint Director was prescribed; and for promotion to the post
SC/ST OFFICERS WELFARE COUNCIL v. STATE 547

of Director, one years experience as Additional Director but on the basis A
of merit and ability, was prescribed. For all other posts, seniority, subject
to rejection on the ground of. unfitness, was the rule. No minimum length
of service was prescribed.

In the offending Memo dated July 28, 1986, they have increased the
minimum length of service from 8 years to 12 years for promotion from the
B
post of Medical Officer to the post of Deputy Chief Medical Officer and
to 15 years for promotion from Deputy Chief Medical Officer to the post
of Chief Medical Officer with a minimum experience of two years and
selection would be subject to merit and ability. Similarly, for promotion
from the post of Chief Medical Officer to the post of Joint Director, total c
service of 15 years and minimum experience of one year was prescribed.
Merit and ability was prescribed for promotion from the post of Joint
Director to the post of Additional Director; total length of service
prescribed was 25 years with a minimum of four years' service as Joint
Director subject to merit and ability. For promotion from the post of D
Additional Director to the post of Director, total service of 28 years with
minimum qualifying service of one year subject to merit and ability, was
the criteria. In normal circumstances, such prescription laying down mini-
mum service as qualification would be unexceptionable to augment the
efficiency in the Services and would evoke no ire. But whether it was laid
only as pretext and subterfuge to deny the constitutional right and to E
frustrate the constitutional objective is the question. In the first instance,
we reacted against the contentions of Sri Goburdhan, learned counsel for
the petitioner. But when he ripped apart the veil and succeeded in con-
necting the links as camouflage, the game plan became transperently visible
and naked to indicate that colourable exercise of power was used and
F
abused to denude the legitimate rights of the officers belonging to reserved
categories and to deny them of their rights. Sri Verma, very fairly, was
unable to support the actions of the Department.

Sri Goburdhan contend that this procedure was devised only to avoid
promotion to three eligible officers belonging to the Scheduled Castes and G
Scheduled Tribes as Joint Directors etc. and this was demonstrated with
reference to the instructions issued by the Personnel Department and the
successive orders issued by the respondents. It is not in dispute that the
Personnel Department had issued instructions on December 27, 1956 that
the principle of seniority-cum-rejection on the ground of being unfit for H
548 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A selection as eligibility criteria should strictly be observed. Where eligible
and able persons are available in Government service, opportunity should
be given to all. If no suitable and experienced officer is available, there is
a possibility of worsenining in future of the persons facing the seniority
criteria. The Government, therefore, directed that seniority-cum-rejection
on the ground of being unfit be followed in promotion. The eligible persons
B
should be offered opportunity. This principle eversince is being followed
uniformly in all the Departments. In Memo No. E-210/80-SR-25-77 Per-
sonnel 1 dated April 9, 1980, the Government had issued instruction to
frame the statutory rules and the manner and procedure to select the
personnel was indicated and deviation as laid in para 5, which is relevant,
c reads as under:

"5. This has also been decided by the State Government that if in
adopting the provision as laid down in the enclosed model draft
there comes any difficulty then instead thereof, as an exception
and in special circumstances, if there is necessary to make any
D other arrangement in public interest then it may be done only after
the consultation with the Karmik (personnel) and Judicial depart-
ment with the higher orders (Council of Ministers of equivalent)
or it' can be continued."

E The Personnel Department further issued directions on December
31, 1973 that there was a provision for reservation as per the orders of the
Government dated March 8, 1973 for. the Scheduled Caste and Scheduled
Tribe persons in promotions. It read as under :

"The Government has taken decision that the SC/ST will avail the
F benefits of reservation in service and posts on which the promotion
is made on seniority basis and the promotions is done in the
prescribed manner."

The Government have, therefore, reiterated the decision that SC/STs
G officers will avail of the benefit of reservation in services and posts and also
in promotion. The principle of promotion is made on seniority basis subject
to rejection on the ground of unfitness and the promotion is done in the
prescribed manner.

But, in this case, instead of implementing the Government directions
H in promoting those three officers as per rules, the offending criteria was
SC/ST OFFICERS WELFARE COUNCIL v. STATE 549

introduced. It is not in dispute that the Government have issued that in A
case any special circumstances are made out in derogation to the general
principles, the approval of the Personnel Department, Law Department
and the Cabinet Sub-Committee was required to be obtained before issuing
the special rules governing the Services. But, in this case, admittedly, the
Medical Health Department in deviation of the general principle of B
seniority, subject to rejection on the ground of unfitness, introduced merit
and ability to fill up that post of Chief Medical Officer and upwards,
without obtaining prior approval of those three functionaries. The counsel
for the petitioner contends members of the petitioner association also do
not feel shy to compete on merit and ability provided their cases were
considered honestly, sincerely and objectively without pre-disposed C
prejudice.

In the counter-affidavit, it has not been stated that the Department
had obtained approval of the three authorities. Therefore, the offending
resolution was obviously contrary to the general principles laid down by D
Government. It is also brought out from the orders passed by the Depart-
ment itself the from 1973 till January 12, 1986 the rule of seniority-cum-
rejection on the ground of unfitness was in vogue and they did not insist
upon a minimum qualifying service in each of the promotional post except
the minimum experience in the particular post which was prescribed for
promotion. It is also to be noted that the Department had relaxed the E
above prescribed qualifying and minimum length of service immediately
after six months when claim of general candidates had come up for
consideration and after the promotion was given to the general candidates
the rule was restored. The petitioner have specifically pleaded that the rule
of minimum qualifying service was prescribed only to deny the promotion F
to three eligible officers belonging to SCs/STs because they did not have,
while the general candidats had the prescribed total length of service. In
paragraphs 9 and 10 of the writ petition, they have specifically averred and
in para 25 of additional affidavit it is reiterated giving insistence in that
behalf. In paragraph 25 of the counter-affidavit filed by the respondents,
they vaguely denied that relaxation to general candidates in the interest of G
administration was given. When the petitioners pointed out that other
Departments were not insisting upon the administrative experience, merit
and ability upon the minimum qualifying service, it has been stated in the
counter-affidavit that since the promotee officers up to the level of Chief
Medical Officer, Joint Director, Additional Director are required to have H
550 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.Q..

A administrative experience, minimum qualifying service etc. were insisted
upon. But when it was pointed out that in other Departments administra-
tive officers were not required to put up minimum qualifying service, they
have stated in the counter- affidavit that in other Department, it was not
insisted upon since the posts are administrative posts. The stand taken in
the counter-affidavit is mutually inconsistent and blows hot and cold at the
B same time. It is a volte face justification given by the Department only1o-
justify their arbitrary and mala fide action. As soon as the Scheduled Caste
and the Scheduled Tribe officers were eliminated from consideration and
general candidates were promoted, they looked around and found it safe
to retrace their steps and to fall in general line by restoring the rule of
C minimum length of service, merit and ability and qualifying service. This
gets demonstrated by the above undisputed facts.

It is also seen that when the post of Additional Director became
vacant for general candidates only and when they were not available for
D promotion since they did not have required length of minimum qualifying
service, the Department relaxed the requirement of minimum qualifying
service on the specious plea that services of the officers were required.
They have stated that they were the only special circumstances for the
officers concerned. Again, after the officers from general category were
promoted, the general prescription of qualifying service was insisted upon.
E These circumstances clearly would indicate that the persons manning the
Department are using a policy of pick and choose to suit their convenience
in abuse of colourable exercise of power creating disharmony in policy and
resorting to victimisation of the eligible officers since they belong to
reserved category. There circumstances would clearly and in unmistakable
F terms demonstrate that the aforesaid instructions came to be issued by
mala fide exercise of the power by the concerned officers with a view to
deprive the eligible SC/ST officers for promotion to the posts to which they
are entitled as Chief Medical Officers and Joint Directors.

G Under JHe scheme of the Constitution the political executive headed
by the Governor of the State is assisted by the Chief Minister appointed
by the Governor and the Council of Ministers appoin~d on the advice of
the Chief Minister who would be collectively responsible for the ad-
ministrat.ion of the State. The administration is carried on by and in the
name of the Governor but the Chief Minister, Council of Minister and the
H individual Ministers in charge of the assigned subjects individually and
SC;ST OFFICERS WELFARE COUNCIL v. STATE 551

collectively are responsible for the functioning of the concerned Ministry. A
The Constitution further envisages permanent bureaucracy with all India
services and State services envisaged in Part XIV; their recruitment and
conditions of service are regulated by provisions contained in Chapter XIV
or any Acts of Legislature or the rules made under proviso to Article 309
of the Constitution or even executive instructions co-extensive with the
legislative power of the State Legislature. The political executive lays
B
broadly the policies and programmes consistent with their political
manifesto but should be in conformity with the Directive Principles of the
) State Policy which binds the Government in power and also the Fundamen-
tal Rights. The bureaucracy works out the details of the policy and applies
the law to the given circumstances in assisting the political executive. The c
preamble, the fundamental rights and the directive principles envisage
establishment of an egalitarian social order to accord socio-economic
justice, liberty. equality or status and of opportunity, dignity of person and
fraternity in an integrated Bharat. The Indian social order is based on
hierarchical social structure. Since the Scheduled Tribes habitate in
reserved forests and forest areas, the funding fathers of the Constitution D
recognised and protected their special interests in Schedules V and VI to
·the Constitution so as to integrate them in the mainstream of the national
life. Equally, the Schedule Castes who were denied social integration and
kept away from the mainstream of the national life due to practice of
untouchability abolished by Article 17 are protected from discrimination. E
In Part III of the Constitution, in particular Articles 17 and 15(2) enable
them to have access to public places and denial of equality due to un-
touchability was declared to be constitutional offence punishable under
Civil Rights Protection Act; Articles 14, 16 and 15 grant equality. Article
46 protects them from exploitation and directs the State to accord socio-
economic justice, facilities and opportunities to have opportunities for F
appointment to an office/service/post so as to accord soio-economic justice
for their integration in the mainstream of national life. The social imbalan-
ces should be removed only through rule of law. Law is a social engineer.
The social justice was held to be a fundamental right by a Bench of three
Judges in Consumer Education & Research Centre & Ors. v. Union of India G
& Ors., 1995] 3 SCC 432 and Dalmia Cement (Bharat) Ltd. & Anr. v. Union
of India & Ors. Etc., JT (1996) 4 SC 555. Economic empowerment was also
held by a Bench of three Judges in Mur/idhar Dayandeo Kesekar v. Vish-
wanath Pandu Barde & Anr., {1995] Supp. 2 SCC 549 and Bihar State
Electricity Board & Ors. v. Panneshwar Kumar Ag01wala Etc. Etc., JT (1996)
5 SC 555 to be fundamental right available to them. By operation of Article H
552 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A 38 and 46, in particular, facilities and opportunities are required to be
provided to them to improve their excellence in all spheres of life. The
State, therefore, has evolved, as held by this Court in Indra Sawhney v.
Union of India, [1992) Supp. 3 SCC 217 appointment or employment to an
office particularly in the service under the State as means to provide -
facilities and opportunities for employment. The opportunity for education
B given under Article 15( 4) and employment accord to them right to equality
;
of opportunity and of status and the dignity of person, economic empower-
ment and opportunity to improve excellence. The Constitution (77th
Amendment) Act, 1995 introducing clause (4A) of Article 16 made (
provision for reservation iQ matters of promotion of any class or classes of
c posts in service under the State in favour of Scheduled Castes and
Scheduled Tribes which in the opinion of the State are not adequately
represented in the services under the State. Article 335 of the Constitution
enjoins upon the State to take into consideration the claims of the
Scheduled Castes and the Scheduled Tribes in making appointments to
services and posts in connection with the affairs of the Union or of a State,
D consistently with the maintenance of· efficiency of administration. It is
settled law that conditions of services include everything from cradle to
grave, viz., recruitment to service or posts under the State, promotion,
salary, pension etc. The conditions of services are regulated either by
statautory rules or in their absence executive instructions. There is no need
E for pre-existing statutory rules to regulate the conditions of services.
Proviso to Article 309 of the Constitution gives power to the President or
the Governor, as the case may be, subject to law made by the Parlia-
ment/the State Legislature to constitute services and to regulate the service
conditions by making statutory rules go~erning the conditions of si::rvice.
Under Article 162, the executive has the power to issue executive ir\struc-
F tions consistent with the fundamental rights in Chapter III, to regulate
conditions of service but they are subject to the law made by the State
Legislature or the Rules made by the Governor under proviso to Article
309 of the Constitution. Executive instructions can also be made to supple-
ment the law to fill in the yawning gaps. The permanent bureaucracy,
G therefore, in evolving the principles or giving shape to the policy of the
political executive on in applying the law, rules or instructions, is guided
by constitutional philosophy and public policy envisaged thereunder. Ar-
ticle 261 of the Constitution, therefore, accords full faith and credit to the
executive acts and records of the Union and the States, the law made by
the Parliament or the Legislature or such of the rules or regulations etc.
H made in furtherance thereof as well as judicial proceedings of the Union
SC/ST OFFICERS WELFARE COUNCIL v. STATE 553

and of every State. A

In the "Constitutional Law of India" edited by M. Hidaytullah, former
Chief Justice (Vol. II) at pages 294, on the doctrine of "full faith and credit"
it is stated that relationship between the Union and the States leaves
Article 261 to play greater role than its counter-part does in the U.S.
Constitution. Our experience since the formation of the Constitution fully B
supports this" conclusion. The public acts, records and judicial proceedings,
.... in recognition of law, accorded by Article 261 are in accord with Entry 12
of the Concurrent List subject to the law made by the Parliament in clause
(2) of Article 261". The founding fathers of the Constitution posed full faith
and credit under Article 261 to all the enumerated acts, proceedings etc.
with absolute faith that they are done to further the goals set down in the
c
Preamble, the basic structure of the Constitution. But the crux of the
matter is not the grammer of the language but the spirit behind the doctrine
of full faith and credit. The reason is that the political executive assisted
by the permanent bureaucracy faithfully impiements the constitutional
philosophy and applies the law to further the goals set down in the D
Constitution to establish the egalitarian social order under the rule of law
and applies the law objectively, dispassionately and truthfully to elongate
the constitutional perspectives and the objectives of the law made there-
under. Therefore, full faith and credit is accorded to the public acts and
records. That apart, the same may be relied on by other States.
E
Swami Vivekanand in his lecture entitled "The Work Before Us"
(1897) published in "The Complete Works of Swami Vivekananda" (vol. 3,
p. 269 (1979 adn.) has stated the scope of enlightened citizenship thus :

"The problem of life is becoming deeper and broader every day as F
the world moves on. The watchword and the essence have been
preached in the days of yore when the Vedantic truth was first
discovered, the solidarity of all life. One atom in the universe
cannot move without dragging the whole world along with it. There
cannot be any progress with the whole world following in the wake, G
and it is becoming every day clearer that the solution of any
problem can, never be attained on racial, or national, or narrow
grounds. Every idea has to become broad till it covers the whole
of this world, every aspiration must go on increasing till it has
engulfed the whole of humanity, nay the whole of life, within its
scope. This will explain why our country for the last two centuries H
554 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A has not been what she was in the past. We find that one of the
causes which led to this degeneration was the narrowing of our
view, narrowing the scope of our actions".

Swami Ranganathananda in his Inaugural Address at Swami
Vivekananda Auditorium, speaking on the concept of enlightened citizen-
B ship as envisaged in Gita and its relevance in a democracy has stated in
"Enlightened Speeches" (First Edition, 1985) a publication of Ramakrishna
Mission, New Delhi, thus :

"That is the primary status of man in India since 1950 -
c sovereign and free citizens in a sovering democratic republic. Since
then, we have been re-living in India the ancient and modern
V{estern political experience, in a big way, and learning our lessens
in this new experience of, and adpating it into, a nation-wide
political democracy, in the context of immense human diversities
and complex social structures, of a continental size and millennia-
D old cultural traditions, which would have staggered the leaders of
the simple Greek city states. The several national and state elec-
tions since independence have given a democratic political educa-
tion to our people, which we never had in our millennia-old history.
The Constitution treats the entire people of India as sovereign and
E free; none is treated as slaves or as outside that citizenship all the
people of India are transformed into citizens of a free democratic
state. What a beautiful concept and ex.Perience.

It is a big change from subjection to freedom, from being praja
or subject to citizenship. But it is unfortunate that we did not
F understand its implications or appreciate its significance; and we
failed to take sustained energetic steps to assimilate the beauty and
strength of this citizenship concept and value. After experiencing
the ectasy of it during the first flag hoisting ceremony on the 26th
January 1950, we day by- day forgot all about it. We did not give
serious thought to the question, what does it mean to be citizens
G
of a free democracy? What changes should this statuts produce in
myself, in my attitude and in my behaviour, to be able to deserve
this status and to strengthen my new democratic state? After a
little effervescence of a day or two, that ectasy of freedom slowly
evaported away. The consciousness of being a free citizen, and
H what it involved during the modern period of our history, had
SC/ST OFFICERS WELFARE COUNCIL v. STATE 555

dawned only in few people of our country. That has been our A
nation's misfortune. If during these thirty years, our intelligentsia,
constituted of our school-and-college-educated section, had real-
ized and assimilated the meaning of citizenship, what political and
economic strength, what human energy resources, what shall-round
national progress we would have achieved by now. In our Indian
context at least, therefore, we have to introduce this new term, B
namely enlightned citizenship, making a distinction between mere
political adult citizenship and enlightened citizenship. It is like the
milk in our Indian market where we have to ask for pure milk,
unlike in the West where our people, when they go there find an
adjective sounds puzzling and absured to the people there, since C
all milk there is pure".

At page 259, under the heading "Citizenship on the Focus of Human
Equality", he has stated elaborately that we are primarily citizens of India
and secondarily only these and other !;imilar functionaries. All these are
only the functions that we severally perform as citizens of the country. He D
emphasised the unity of awareness of citizenship to elongate wider
spectrum of functional affinity by getting rid of all forms of mental abera-
tions from the humble to the high and the mighty and to widen broad
mental horizens. He quoted from Bhartrhari in his Niti-sataka (verse 64)
the four qualities of man thus :
E
"There is one type of people called the sat-purusas, good people,
who sacrifice their own self-interest and work for the welfare of
other people; the next group consists of the samanyas, the
generality, or the majority, who also work for the welfare of other
people, but without sacrificing their own self-interest; there are F
other .the third group are the manava-raksasas, demons among
men, who destroy other people's welfare in order to gain their own
selfish interests; but they the fourth group on the contrary - alas,
I do not know what to call them - destory other people's welfare,
even without gaining anything for themselves."
G
x x x x x x x

"The second group will constitute the majority of the population
in every society. And enlightened citizenship belongs to that
category. The Philosophy by which they live can also be described,
in the language of the nineteenth-century British political H
556 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A philosophy, as enlightened self-interest. They are frankly not as-
cetics; they have their own presonal and family interests to achieve;
but they include these in a wider concern for society as a whole;
and that constitutes the vital element of enlightenment attached to
their self-interest. But there is need for this group to be alert;
otherwise, there is every chance of this enlightenment getting
B eroded and self-interest ruling supreme. And once this erosion
takes place, they slide slowly down and join the third group, among
whom are found all those who indulge in all sorts of social malprac-
tices, like bribery, corruption, tax-evasion, smuggling, food and
drug adulteration. Out of these, some fall further down into the
fourth category and become sheer vandals. The only remedy
c against the second type sliding into the third and fourth categories
is alterness, and constant looking up to the people of the first
category - the sat-purusas and drawing inspiration from that small
minority of men and women who are, in the language of Jes us in
New Testament, the 'salt of the earth'."
D
x x x x x x x x x

"Human equality at the spiritual level has been preached and
practised in our country since ages. This is the meaning of, and is
E derived from, the Vedantic teaching of the same divine Atman in
all beings - integral, inalienable, and full, and the samatvam and
the sama-darsitvam, '~quality and sameness of vision', flowing from
it. A few sanints and devotees had realized this truth and lived by
it. Bhakter jat nai, 'There is no caste and class distinction among
devotees of God (as he dwells in all)', is a famous saying of Sri
F Ramakrishna. This great truth had never been translated into the
wide social and economic fields, or transformed into a social fact
of human awareness affecting millions. But that opportunity has
come to us in the modern age, through the massage of modern
democracy - political, economic, and social. That sama-darsityam
at the spiritual level becomes, today, buttressed and strengthened
G
by ~ sama-darsitvam at the political and social level, by the modern
concept and practice of citizenship of a democratic state.
Democratic citizenship is a focus of not only human freedom. and
dignity but also of human equality. Swami Vivekananda considered
the significance of the emerging modern period of our history to
H consist essentially in this practical implementation of the Vedantic
SC/ST OFFICERS WELFARE COUNCIL v. STATE 557

vision of human freedom, dignity and equality. In our new India, A
therefore, political efforts and spiritual efforts coalesce and rein-
force each other, in the struggle to evolve an egalitarian society;
the spiritual effort stresses human unity in the one Atman in all,
and political effort stresses human unity in the unity of citizenship
in our democracy."
B
On "Law, Justice and the Philosophy of Man", Swami Ran-
ganathananda has stated thus :

"Our country is now discussing, and tardily going about affording,
legal aid to the poor; it is good that we are slowly realizing that
administering and dispensing law may not always be the same as c
dispensing justice, and that our democracy cannot be well estab-
lished without bringing law closest to justice. Theoritically, our law
is equal to all, and all are· equal before our law. But in actual
operation, it benefits the rich and the strong, not the poor and the
weak. The Sanskrit word dharma stands for the integrating prin- D
ciple in human society and can be translated roughly as justice or
righteousness or ethical sense. Next to the truth of the Atman, it
i& the most significant and pervasive truth and value in Indian
culture. Dharma is that very truth of the Atman reflected in the
social context of human interactions. The Brhadarnyaka
Upanishad gives the following exposition of dharma as righteous- E
ness, as the soul of justice :

Yet He (the Cosmic Person) did not flourish (even after
projecting all power into the universe - intellectual, politico-
military, commercial and labour). He specially projected that ex-
cellent form, dharma, or righteousness. This dharma is the F
controller of the Ksatriya (the holder of power and authority).
Therefore there is nothing higher than that, even a weak man hopes
(to defeat) a stronger man through dharma, as (one contending)
with the king. That dharma is verily truth.
G
Until law becomes not only in formulation but also in operation,
law has no meaning."

In "The Responsible Society - The Ethos of which India lacks Today",
a commemorative volume to Justice V.S. Deshpande, former Chief Justice
of Delhi High Court, in his article "Sdcial Responsibilities of Public Ad- H
558 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A ministrators" Swami Ranganathananda has stated at page 1 thus :

"I consider the administator primarily as a citizen of India and
I want him to always remember this truth. It will do him good to
know what that means. Nobody is bor1 an administrator, and
nobody is always an administrator. We are all born citizens of a
B free India, and acquire the status of full citizenship at the age of
maturity as laid down under the Constitution. Some of those
mature citizens choose to be, and are called upon to become, our
administrators for some years of their life. This means that their
primary individuality is not as administrators, but as citizens. We
c are all essentially citizens of free India called upon to perform
particular functions in the service of our nation, so that citizenship
constiutes our primary being, and what we do as administrators,
or as members of some other profession becomes merely the
function we discharge deriving inspiration from that being.:"

D On "The Problem of Motivation", he has stated that bureaucracy is
necessary for every State which is part of the whole process of Government.
But a functionary need not be a bureaucrat, static and wooden, though
functioning as a bureaucrat. On "Bureaucracy : Static versus Dynamic" at
page 4, he has stated thus :
E
"A static bureaucracy and a dynamic bureaucracy are both
bu,reaucracies; the difference lies only in attitudes; the first repre-.
sents a low notion of man as a mere functionary, man as a mere
bureaucrat. That is a very poor state of man, in which he or she
draws from his or her function to enrich his or her inner being
F which is otherwise empty; and this is the state of mind that is prone
to, and often succumbs to, corruption. The second represents man
as inwardly rich in his being, in the strength of citizenship awar-
ness .and patriotic impulse, and pouring out the richness into his
or her function. And this attitude fosters a spirit of service and
contains much innate strength to resist and overcome corrupting
G
influences. In these context, attitude plays a great part. A change
of attitude can produce termendous results. And attitude is some-
thing that one can control, that one can manipulate, that one can
make to grow. This attitude control is an integral part of a
philosophy of man, which can enrich one's being as well as func-
H tion."
..
SC/ST OFF1CERS WELFARE COUNCIL v. STATE 559

In his article "Role of the People and Institutions in a Responsible A
Society", published in "The Responsible Society" (ibid), Justice H.R. Khan-
na, former Judge of this Court has expressed his views at page 55 bout the
role of the civil servants and has stated that "Apart from ensuring that there
is no trespass by one wing of the State upon the domain of the other wings,
we have also to ensure that within each wing proper norms which have
been evolved for the healthy functioning of democracy are adhered to and B
complied with. lt is in this context that one may first turn to the executive.
This is the· strongest wing of the State and consists of two parts - the
.. ministers and the civil servants. So far as the ministers are concerned it is
they who normally take the policy decisions and lay down the general
pattern of administration. The execution of those decisions and the applica- C
tion of policy matters to individual cases is, however, tci be left to the civil
servants. The civil servants, therefore, of necessity, have to act in fulfilment
of the promises in the policy and the Constitution. It is the duty of the civil
servants to carry out the policies to fulfil the constitutional objectives and
the responsibility of the government".
D
In "Eternal Values for a Changing Society" by Swami Ran-
ganathananda (1971 - 3rd Edn.) at page 693, the pragmatic philosopher
had in his speech advised the young Indian Administrative Officers, stating
under the heading"The Administrator in a Welare State" that the State in
a democratic society deives its strength from the co-ordinated wills of all E
its free and equal citizens. In the absence of this strength, the State
becomes an imposition on the people. States have always been looked upon
as irksome burdens by the people at large in our country, who have
tolerated their existence for the little benefits of order and security derived
from them. Quoting Bertrand Russel in his "Impact of Science on Society",
Swami Ranganathananda has stated "Unless men increase in wisdom as F
much as in knowledge, increase of knowledge will be increase of sorrow".
Buddhi connotes this ripening of knowledge into wisdom. Intelligence at
the buddhi level creates a pattern of what Sorokin calls altruism in human
character. It cannot function except in a creative and constructive way.
Detachment and stability, resourcefulness ar.d sympathy, are the hallmarks G
of such a character, at once efficient and human. He has stated that the
Indian Administrative Service Training School has kept this two-fold ef-
ficiency as its objective, and has adopted for its motto the pregnant
message of Sri Krisna in the second chapter of the Gita, verse 50; Yogah
karmasu kausalam - Yogi is efficiency for action. A world of ethical and
spiritual thought has been compressed in· that brief message. Therefore, he H
560 SUPREME COURT REPORTS [1996JSUPP. 6 S.C.R.

A has 'exhorted the IAS Officers thus : "Our politics and administration will
have to breathe the spirit of this yoga if we are to realize the objectives of
a welare State, If we are to establish a polity based on social justice and
social peace, a polity free from all forms of exploitation, not merely
economic, but also political and mental. This yoga however, is not a
teaching to compose the distractions of a mere nation and people, but is
B universal in its scope".

S.A. de Smith in his article "The abusd of statutory powers" Published
in Public Law Series 1956 (page 233) has stated at page 237 under the
heading "Misuse of Powers in Bad Faith and in Good Faith" that a
C discretiojlry power may be exercised invalidly if its repository exercises it
for aii improper purpose or on the basis of irrelevant considerations or in
disregard of relevant considerations or with gross unreasonableness .... The ,_
concept of bad faith eludes precise definition, but in relation to the exercise
of statutory powers it may be said to comprise dishonesty and malice. A
power is exercised dishonesty if its repository in_tends to achive an object
D other than that for which he believes the power to have been conferred.
His intention may be to promote another public interest or his own private
interests. A power is exercised maliciously if its repository is motivated by
personal animosity towards those who are directly affected by its exercise. )-

On the "Ultra vires breach of Statutory duty" by Peter Cane, Fellow
E of Corpus Christi College, Oxford, published in public Law Series, 1981 at
page 11, the author has stated at page 13 on the "The Content and Scope
of the Duty" that duties are not always couched in terms of such crystal
clarity that they are practically self-applying. One of the important differen-
ces between a duty and a power is that the holder of a power has a greater
or less freedom to give concrete content to the power in particular cir-
F cumstances, whereas the bearer of a duty has no control over the content
of the duty. At page 19, he cori£ludes by saying that the legal consequences
of the use of the word 'duty' are varied and complex and depend to a large
extent on how open-textured is the language in which the content of the
duty is cast as well as on the political sensitivity of the area in which the
G duty operates, Secondly, by developing the notion of ultra vires, breach of
duty, the courts have given themselves a degree of flexibility and power in
the enforcement (or non enforcement of the duties of public authorities
which has hitherto existed only in relation to the control of powers and
discretions.

H In "Public Administration" by Pfiffner-Presthus (4th Edn.) at page
SC/ST OFFICERS WELFARE COUNCIL v. STATE 561

550 it is stated that public administration is responsible to the rule of law A
doctrine which proves a fairly effective standard for judging administrative
decisions. Political responsibility is similarly involved with the idea of
government's control by public opinion, political parties, and the com-
munity, Responsibility is also commonly used to denote the obligation of
an individual to behave according to certain standards of conduct. In public B
administration, responsibility often has a negative connotation; we are
usually satisifed if the official is kept from wrong doing. On "Responsibility
and Accountability", he· states that accountability refers to the formal or
legal locus of responsibility, Responsibility, on the other hand, has a highly
personal, moral quality and is not necessarily related to formal status or
power, although it is probably true that greater power brings greater C
responsibility. Thus a department head is accountable for the actions of all
his subordinates, although iii actual fact he is not "responsible for their use
of the power which he must of necessity delegate to them. Similarly, in
exercising discretion the official is morally responsible for his decisions,
although he is often not legally accountable. In practice, responsibility must
be shared; it percolates down the stream throughout the entire administra- D
tiv:e branch. On the other hand, accountability, which concerns the formal
relationships between administration and the legislative and judicial
branches, can never be shareq,. In general, the bureaucracy is regarded as
accountable to elected representatives and to the courts who give meaning
to the rule of law doctrine. Within the Executive branch, accountability is E
sought through a hierarchy of offices and duties and makes possible a "line
of command" from top to bottom. The chiefs of the various departments
must. answer to the President as repository of power. Each section and

-.
division heads are legally accountable in turn to departmental heads. Upon
the Executive head falls the impossible task of coordinating and directing
' the entire executive branch. Under the Constitutional mandate that gives F
the President "executive power" and directs him to ensure that "the laws
are faithfully executed." The Council of Ministers is accountable for the
entire administrative branch. The bureaucracy has a representative func-
tion. In the case of regulatory activity, for example, administrators give
meaning to board legislative declarations of social policy by their decisions G
in specific cases. In advancing the social objectives of the community, they
sometimes develop the rule of public interest which is applied when
decisions are made. The bureaucracy shares with the legislature the task
of ensuring that the community receives a reasonable amount of justice in
the distribution of public resources. Moreover, by virtue of a recruitment
policy that gathers individuals with socio-economic backgrounds far more H
562 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A varied than those of elected representatives. The bureaucracy may be
viewed as a truer cross-section of the nation, providing necessary supple- ·
ment to the incomplete representation which the Parliament offers. Al-
though this thesis violates traditional democratic theory, the hard facts of
administrative policy determination and the official's role in compromising
group demands suggest that orthodox interpretations require some
B modification, formulation and principles and policies; application of them
requires pragmatism with broad vision to elOngate the Constitution
physolophy. Obviously, therefore, full faith was given to their acts and
actions. In selecting among alternative policies, in extending or narrowing
the efficacy of rule or policy, the official necessarily must work in a value
C context. Various factors impinging upon a particular decision are isolated
and require assignment of relative weights nor in accordance with what the
official thinks is "right" but. in tune with and to effectuate mandates of the
Constitution.; The "public interest" will be the ultimate element in this
process. In "Responsibility in Government : Theory and Practice" by Her-
bert J. Spiro had stated at pages 86-87 and 95 thus :
D
".... Modern law modern hureacycracy were created to fill the same
needs. On the Continent, especially, the birth and growth of each
cannot be conceived of without the other. Administrative law was ·
designed to make responsible conduct possible for the ruler's new
in~truments, the bureaucrats, by giving them reasonable expecta-
E tions of the probable consequences of their acts. As it became
more than just administrative law facilitated mo~e responsible
conduct for all to whom it applied. Belief in the political respon-
sibility of individuals is, therefore, intimately linked with advocacy
of the rule of law. This rule of law, together with the resources

F
already mentioned, gives us two components of the deliberately
created, explicit casual responsibility of the early bureaucrats. As
T
the third component, they were endowed with not only the
capacity, but the obligation, to make decisions. In other words,
they had to exercise their discretion when they applied to speemc
cases the general rules and instructions laid down for them by the
G sovereign himself, or on his behalf. Finally, the carefully cultivated
esprit de corps of the new public services and, indeed, the spirit
of the whole epoch, endowed both public servants and the subjects
on whom they acted with the purpose and determination needed
to make the novel system work."

H x x x x x x x x x

J:i._
SC/ST OFFICERS WELFARE COUNCIL v. STATE 563

"It lead us also to characterise a healthy bureaucratic situation A
as a situation of responsibility par excellence."

x x x x x x x x x

"They consider the bureaucrat, or the citizen, responsible so
long as he is honest, broadly speaking. They want to prevent, or B
at least to punish, dishonesty. The honesty of public servants and
citizens is certainly an important matter."

x x x x x x x x x

"In terms of the constitutional, democratic postulate, each C
citizen delegates parts of his original, general casual responsibility
to other groups and individuals - to political parties, to legislative
and other representatives, to judges, and to administrators.
Moreover, in the course of the constant division and sub division
for labour, new special responsibilities are created". D
In "British Government and the Constitution - Taxt, Cases and
Materials" by Colin Turpin (Third Edition - 1995) it is stated at page 315
thus:

"Legitimacy is primarily a feature of constitutional systems.
E
- They possess this quality by virtue of a general public support for
their authority, and may have it in greater or lesser decree. Suc-
cessive governments, even unpopular ones, benefit from the
legitimacy attaching to the constitutional order, so that their own
actions are. perceived as 'legitimate'. It will be evident that this is
not the same thing as 'lawful' although legality is normally a F
condition of legitimacy, in that a government which disregards the
law is seen to .be acting disordantly with the constitutional system
from which its legitimacy is derived".
' Reinhold Niebuhr's has stated in "(T)he Nature and Destiny of Man" G
Vol. II (New York: Charles Scribner's Sons, 1948) p 266 at page 561 that
bureaucracy, therefore, shares this responsibility when it talks in its forward
thrust to effectuate the Constitutional philosophy and public justice. Ad-
mihistrative responsibility lies in giving shape and content not only to the
policies laid down in the Constitution and by the executive, but also applies
them to given set of facts. In this case, on the facts the executive H
564 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A bureaucracy has forfeited the faith and credit according to them by the
Constitution and betrayed public faith in honest and dispassionate decision
making process and in applying the given set of standards of executive
orders in giving promotions to different classes of offieers in diametrically
opposite way frustrating the constitutional .objectives to promo~e socio-
B economic justice and equality of opportunity in promotion to the officers
of the appellant-Association.

It is settled law that the Constitution having given the benefit of
reservation and having adopted the policy by the Government, the policy
should strictly be adhered to and it should not be made a farce and
C introducing at the whim of the officers, their own criteria contrary to the
general policy. Therefore, it was directed by this Court in State of U.!'. v..
Dr. R.K. Tandon, [1995] 3 SCC 616 in paragraph 6 that the rule of
reservation if applied and the candidates were selected, accordingly, therr
seniority vis-a-vis general candidates should be in accordance with the
D roster maintained by the State Government. The same was reiterated in
State of U.P. & Ors. v. Dr. R.K Tandon & Ors., JT (1996) 7 SC 174 in
paragraph 8 thus :
,
"Yet another problem that was brought to our notice is that while
preparing their inter se seniority and fitment, the Government was
E not strictlyfollowing the rule of roster and reserved for Scheduled
Caste Scheduled Tribe and Backward Class candidates and their
placement on the respective vacancies earmarked for them in the
roster. It would be obvious that when the Government makes
appointments through administrative instructions or statutory
F rules, the appointment of candidates should be according to order
of merit and roster. The Government should follow the rule of
reservation and make appointments as per roster points. That
procedure is also prescribed even in the Ad hoc Rules. Therefore,
even appointments from the lists of 1971, 1977, 1978, 1979 and
among those retired from service or had the benefit of court orders
G or non-selectees, the inter se seniority should accordingly be deter-
mined as per the rule of reservation and roster. Even among the
non-selectees when they are appointed under Ad hoc Rules and
seniority under Rule 7 thereof is determined, the same principie
should be followed. There roster points should also be worked out
H and appointments made accordingly. There shall be direction to
SC/ST OFFICERS WELFARE'COUNCIL v. STATE 565

follow this procedure so that there will not be any deviation from A
the rules of appointment, reservation so that and the order of
appointment. would become according to rules and remain legal."

-
It is not in dispute that the department was not preparing separate
list of the general candidates, Scheduled Castes and Scheduled Tribes in
integrating them as per the roster prepared by the Government. It is B
obviously illegal procedure followed to deprive the officers belonging to
Scheduled Castes, Scheduled Tribes and Backward Classes in integrating
their seniority according to roster. Therefore, we have no hesitation to
quash the offending memo issued by the Department of Provincial Medical
Health Service, Government of U.P. dated July 28, 1986 and all other c
incidental instructions issued in furtherance thereof.· The Government is
directed to consider the cases of the three officers and all other eligible
officers according to rules in vogue from 1973 till the date of introducing
these offending rules. If necessary, the Government is directed to create
supernumerary posts in the respective vacancies to which the three officers
are eligible to be considered and promoted in accordance with the rules D
with all consequential benefits.

The writ petition is accordingly allowed. The respondents are
directed to consider the cases of the three officers and if found fit, to
promote them or any of other eligible officers within a period of six months E
from the date of the receipt of this order with all consequential benefits in
accordance with the rules. The cases of all other officers should also be
considered according to rules and if found eligible, they may be promoted
against respective vacancies as per roster. No costs.

G.N. Petition allowed.

-
A DHARAMBIR SINGH
v.
UNION OF INDIA AND ORS.

SEPTEMBER 19, 1996

B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.]

Mines & Minerals (Regulation & Development) Act, 1957/Mineral Con-
cession Rules, 1960.

Section 11/Rule 59-Mining licence and prospecting licenc~Applica-
c tion from a person who had claimed that he had discovered the min~State
Govemment notifying that area-Challenged before the Central Govem-
ment-Mines Tribunal setting aside the notification-Declined to grant mining
lease to petitioner on the ground that the State Goveniment had done so in
its discretion and that the Central Govenunent would not curtail the discre-
D tion-Cliallenge negatived by High Cowt-On appeal held, the State Govem-
ment has a discretion to grant or refuse to grant any prospective licence or
licence to any applicant-No applicant has a right, much less vested right, to
the grant of mining lease for mining operations in any place within the State.

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
E No. 18150 of 1996.
. From the Judgment and Order dated 9.7,96 of Punjab & Haryana
High Court in C.W.P. No. 9624of1996.

K.B. Rohtagi, Ms. Apar.na Rohtagi for the Appellant.
F
The following Order of the Court was delivered :

The petitioner has file'd this special· leave petition against the judg-
ment of the High Court of Punjab & Haryana made on Juiy 9, 1996 in CWP
No. 9624 of 1996. The petitioner had applied for mining lease and the
G prospecting licence claiming that he had discovered limestone minerals in
Bhemdemti Dostpur, Mohindergarh District in the State of Haryana. The
Government has notified that area under Rule 59 of the Mineral Conces-
sion Rules, 1960. The petitioner challenged the reservation of the area in
revision before the Central Government and prayed for grant of the lease
H in his favour. The Mines Tribunal of the· Central Government while setting
566
DHARAMBIRSINGHv. U.0.1. 567

aside the notification issued by the State Government, declined to grant A
mining lease to the petitioner stating that the State Government had done
so in its discretion and that the Central Government would not curtail the
said discretion as it is its property. The High Court dismissed the writ
petition in limine. Hence this special leave petition. .

Shri Rohtagi, learned counsel for the petitioner, placing reliance on B
sub-section (2) of Section 11 of the Mines and Minerals (Regulation &

.. Development) Act, 1957, contended that the petitioner having filed an
application for mining lease has got preferential right and the Mines
Tribunal and the High Court were not right in rejecting his prayer. We find
no force in the contention. Section 11 of the Act reads as under : c
"(1) Where a prospecting licence has been granted in respect of
any land, the licensee shall have a preferential right for obtaining
a mining lease in respect of that land over any other person;

Provided that the State Government is satisfied that the licen- D
see -

(a) has undertaken prospecting operations to establish minerals
resources in such land;
E
(b) has not committed any breach of the terms and conditions
of the prospecting licence; and

(c) is otherwise a fit person for being granted the mining lease.

(2) Subject to the provisions of sub-section (1), where two or more F
persons have applied for a prospecting licence or a mining lease
in respect of the same land, the applicant whose application was .-
received earlier shall have a preferential right for the grant of the
licence or lease, as the case may be, over an applicant whose
application was received later :
G
Provided that where any such applications are received on the
same day, the State Government, after taking into consideration
the matters specified in sub-section (3), may grant the prospecting
licence or mining lease, as the case may be, to such one of the
applicants as it may deem fit. H
568 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A (3) The matters referred to in sub-section (2) are the following :

(a) any special knowledge, of, or experience in, prospecting
operations or mining operations, as the case may be, possessed by
the applicant;

B (b) the financial resources of the applicant;

(c) the nature and quality of the technical staff employed or to
be employed by the applicant; ·

(d) such other matters as may be prescribed.
.
..
c (4) Notwithstanding anything contained in sub-section (2) but
subject to the provisions of sub-section (1), the State Government
may for any special reasons to be recorded and with the previous
approval of the Central Government, grant a prospecting licence
or a mining lease to an applicant whose application was received
D latter in preference to an applicant whose application was received
earlier."

Sub-section (1) of Section 11 envisages grant of a prospecting licence
in respect of a land and a prospecting licensee has a preferential right for
E obtaining a mining lease in respect of the land over any other person;
provided, however, that the conditions enumerated in clauses (a) to (c) in
proviso thereto are satisfied. Further, sub-section (2) states that subject to
the provisions of sub-section (1), where two or more persons have applied
for a prospecting li:cence or a mining lease in respect of the same land, the
applicant whose application was received earlier, shall have a preferential
F right for the grant of the licence or lease, as the case may be, over an
applicant whose application was received later. It is also, again, subject to
.the conditions enumerated in the proviso. Sub-section (3) is not material
for the purposes of this case. Sub-section (4) further provides that not-
withstanding anything contained in sub-section (2) but subject to the
G provisions of sub-section (1), the State Government, may for any special
reasons to be recorded and with the previous approval of the Central
Government grant a prospecting licence or a mining lease to an applicant
whose application was received later in preference to an applicant whose
•
application was received earlier.

H Thus it would be seen that while granting a prospecting licence or
DHARAMBffi. SINGH v. U.O.L 569

mining lease, the area of discretion has been circumscribed by several A
factors enumerated in Section 11. In grant of mining lease of a property of
the State, the State Government has a discretion to grant or refuse to grant
any prospective licence or licence to any applicant. No applicant has a
right, much less vested right, . to the grant of mining lease for mining
operations in any place within the State. But the State Government is
required to exercise its discretion, subject to the requirements of the law.
B
Therefore, the Tribunal of the Central Government has rightly held that it
being in the area of discretion of the State Government, merely because
the applicant had applied for, the State Government was not enjoined to
grant the mining lease. The petitioner had taken the plea that since he
alone had discovered the mines, he has got a preferential right over any C
other peri.-on. The Tribunal of the Central Government and the High Court
rightly rejected that contention of the petitioner; that contention has not
been pressed before us. We find no illegality in the order of the Tribunal
refusing to grant mining lease to the petitioner nor is their any illegality in
the order of the High Court.
D
The special leave petition is dismissed.

G.N. Petition dismissed.
A THE CHIEF GENERAL MANAGER, JAGANNATH
AREA AND ORS.
v.
STATE OF ORISSAAND ORS.

SEPTEMBER 20, 1996
B
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Orissa Motor Vehicles Taxation Act, 1975 :

C Motor Vehicle--Lery of tax on-Dumper fitted with heary duty tyres
and used within mining areas-Such dumpers exceeded pennissible dimen-
sions prescribed by Motor Vehicle Rules-Consequently, there was an embar-
go for the dumpers to be used on public roads-Held : dumpers in question
were motor vehicles-Hence, were taxable within the ambit of the
Act-Central Motor Vehicles Rule, 1989-Rr. 92 and 93.
D
Motor Vehicle--Lery of tax on-Dumpers fitted with heary duty tyres
and capable of being used on public roads-But actually used within mining
areas and not on public roads-Held: lery of tax on such dumpers was not
inconsistent with compensatory nature of tax.

E Motor Vehicle--Lery of tax on-Held : compensatory in nature.

Motor Vehicle--Lery of tax on-Validity of-Held : not violative of
Article 301-Constitution of India, 1950, Article 301.

The Dumpers belonging to the petitioners which were used within the
F mining areas were taxed as Motor Vehicles under The Orissa Motor
Vehicles Taxation Act, 1975. The writ petition filed by the petitioners was
dismissed by the High Court. Being aggrieved the Petitioners preferred the ·
present Special Leave Petition.

G On behalf of the petitioners it was contended that the said dumpers
ran on tyres of higher load-carrying capacity and were not capable of being
used in public roads; that the"manufacturers of the dumpers had given a
certUicate that the dumpers were not meant for plying on highways because
(i) Culverts and bridges on highways were generally not designed to take
care of such axis loads continuously; (ii) The vehicles cannot run at
H reasonable speed on highway and hence obstruct the flow of normal traffic;
570
CHIEF GENERAL MANAGER v. STAIB 571

(iii) Width and height of the equipment would adversely affect the traffic A
and minimum preferable width of the road required for plying these
vehicles was 50 ft; (iv) The vehicles were fitted with specially designed heavy
duty tyres and the heat generation was much more and generally could not
be run for more than about 5 kms. at one stretch; that since the dimensions
of the dumpers exceeded the permissible dimensions under the Act there
was an embargo for the dumpers to be used on public roads and as such B
the dumpers could not be held as Motor vehicles and could not be taxed
under the act; and that the tax on dumpers being compensatory in nature
the same could not be levied on vehicles which did not use the roads.

Dismissing.the petition, this Court
c
HELD : 1. On the facts of this case it cannot be held that the vehicles
in question were not adapted or suitable or capable of being used on public
roads, even though for most of the time it might actually be used within the
mining areas on the roads prepared by the mine owners. Therefore, it has
to be held that the dumpers in question are motor vehicles and are taxable D
within the ambit of Orissa Motor Vehicles Taxation Act, 1975. (581-F-G]

Central Coal Fields Ltd. v.,State of Orissa, (1992) Supp. 3 SCC 133
and Union of India v. Cltowgule & Co. Pvt. Ltd. & Ors., (1992) Supp. 3 SCC
14, relied on.
E
Boiani Ores Ltd. v. State of Orissa, [1974) 2 SCC 777, referred to

2.1. The tax imposed on the motor vehicles is basically a tax for the
·use of the roads within the State. It is no doubt a compensatory tax which
facilitates trade, commerce and intercouse within the State by providing
roads and maintaining roads in a good state of repair. (582-C] F

Automobile Transport Ltd. v. State of Rajasthan & Ors., (1963) 1 SCR
49, relied on.

2.2. If a statute fixes a charge for a convenience or service provided G
by the State or an agency of the State, and imposes it upon those who
choose to avail themselves of the service or convenience, or who can use
the services provided for, the imposition assumes the character of
remuneration or consideration charged in respect of an advantage sought
or received or advantage which can be received•.The mere fact that any
particular individual though can take advantage of the convenience of the H
572 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A services provided by the State but for some reason or the otlier chooses
not to enjoy the services provided cannot escape the taxing liability on that
score nor can the provision imposing the tax become invalid on that score.
Such levy of tax for keeping a motor vehicle for use on the public roads or
which is capable of being used on the public roads are are no doubt
B . compensatory taxes but does not violate provisions of Article 301 of ~he
Constitution of India. [582-D-F]

· Steel Auth01ity of India Ltd. v. State of Olissa, Original Jurisdiction
case No. 847of1991 (Ori) decided on 18.6.92, referred to.

Regional Transport Officer-cum-Taxing Autholity, Rourke/a & Ors.
c [1995) 4 set 165, referred to.

CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) ·
No. 16476 of 1996.

D From the Judgment and Order dated 10.4.96 of the Orissa High
Court in O.J.C. No. 811 of 1996.

Shanti Bhushan, Gopal Subramaniam, Sanjit Mohanty, H. Munshi,
Anip Sachthey and C.D. Singh for the Petitioners

E P.N. Misra for the Respondent.

The Judgment of the Court was delivered by

PATIANAIK, J. This Special Leave Petition is directed against the
judgment of the Division Bench of the Orissa High Court dated 10.4.1996
F passed in Original Jurisdiction case No. 811 of 1996. The question for
consideration before the Orissa High Court was whether the Dumpers
belonging to the petitioner which are used within the mining areas are
taxable as Motor Vehicle under the provisions of Orissa Motor Vehicles
Taxation Act (referred to as "The Taxation Act"). The Orissa High Court
G relying upon the decision of this Court in the case of Central Coal Fields
Ltd. v. State of Orissa & Batch, [1992] Supl. 3 SCC 133 dismissed the Writ
Petition. When the present application was listed for admission, the same
was dismissed by us. But since Mr. Shanti Bhushan, learned senior counsel
appearing for the petitioners had re-~rgued the matter at length for a
considerable period and contended that the decision of this Court in
H Central Coal Fields case (supra) has no application we had indicated that
CHIEFGENERALMANAGERv. STATE[PATTANAIK,J.] 573

a reasoned order will follow and hence the reasons are being given for A
dismissing the Special Leave_ Petition. -

Under Section 3 of the Taxation Act, tax shall be levied on every
motor vehicle used or kept for use within the State at the rate specified in
the Schedule.
B
The expression "Motor Vehicle" means any wheeled conveyance
which is propelled mechanically is a motor vehicle if it is adapted for use
upon the road irrespective of whether the power of propulsion is trans-
mitted thereto from an internal or external source and includes a chassis
to which a body has not been attached and a trailer; but does not include c
a vehicle running upon fixed rails or a vehicle of a special type adapted for
use only in a facto~y or in any other enclosed premises. Because of the
latter part of the definition of Motor Vehicles, the petitioner had made out
the case before the Orissa High Court that the dumpers in question are so
heavy that they cannot move on the public road and, therefore, are not D
taxable under the Taxation Act but the High Court had negatived the said
contention.

Mr. Shanti Bhushan, learned senior counsel reiterated the same
arguments in this Court and essentially raised two contentions :
E
(1) the Dumpers which have been taxed under the Taxation Act are
used only within the mining areas and-are not capable of being used in the
public roads and, therefore, cannot be held to be Motor Vehicles and
consequently are not taxable under the Taxation Act.
F
(2) secondly, the learned senior counsel argued that the tax on
vehicles being compensatory in nature, levy of such tax can be sustained
only on the grou.o.d that the vehicles used the roads for which tax is levied.
If the vehicle in question did not use the roads and yet tax is levied on the
same, the said levy is liable to be struck down.
G
In elaborating the first argumer..t Mr. Shanti Bhushan took us through
some of the provisions of the Motor Vehicle Rules which prescribe the
dimension of such vehicle in the matter of width, length or height and
which prohibits the vehicles beyond such dimensions to be used on public
roads. In this connection the learned senior counsel brought to our notice H
574 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Rules 92 and 93 of the Motor Vehicles Rules (hereinafter referred to as
"the Rules" which are quoted hereinbelow in extenso :

RULE 92

GENERAL : (1) No person shall use or allow be to used in any
B public place any motor vehicle which does not comply with the
provisions of this Chapter.

(Provided that nothing contained in this rule shall apply to
vehicles manufactured prior to the coming into force of the Central
Motor Vehicles (Amendment) Rules, 1993)
c
Nothing in this Rule shall apply to a motor vehicle -

(a) which has been damaged in an accident or to a vehicle
stopped or impeded owing to shortage of fuel or other temporary
defects while at the place at which the accident or defect occurred;
D
(b) which is defective or damaged and is being removed to the
nearest place or repair or disposal' or

(c) which is more than fifty years old from the date of its
registration and is being driven for taking part in a vintage car
E
rally;

Provided that where a motor vehicle can no longer remain
under the effective control of the person driving, the same shall
not be used in a public place except by towing.
F
Overall dimension

93. OVERALL DIMENSION OF MOTOR VEHICLES;

(1) the overall width of a motor vehicle, measured at right
G angles to the axis of the motor vehicle between perpendicular
planes enclosing the extreme points, shall not exceed;

(i) in the case of a motor vehicle, other than a transport vehicle,
2.5 metres;

H (ii) in the case of a transport vehicle, 2.7 metres.

p
CHIEF GENERAL MANAGER v. STATE[PATIANAIK,J.) 575

EXPLANATION: A
For purposes of this Rule, a rear view mirror, or guard rail or
a direction indicator when in operation shall not be taken into
. considerationin measuring the overall width of a motor vehicle.

(2) The overall length of a motor vehicle other than a trailer, shall B
not exceed, -

(i) in the case of motor vehicle other than a trdnsport vehicle
having not more than two axles, 9 .5 metres;

(ii) in the case of a transport vehicle with rigid frame having two C
or more axles, 11.25 metres;

(iii) in the case of an articulated vehicle having more than two
axles, 16 metres;

(iv) in the case of truck trailer or tractor trailer combinations, 18 D
metres.

(3) In the case of an articulated vehicle or a tractor trailer com-
bination specially constructed and used for the conveyance of
individual load of exceptional length, - E
(i) if all the wheels of the vehicle are fitted with pneumatic tyres,
or

(ii) if all the wheels of the vehicle are not fitted with pneumatic
tyres, so long as the vehicle is not driven at a speed exceeding p
twenty five kilometres per hour, the overall length shall not exceed
18 metres.

EXPLANATION

For the purpos~s of this Rule "overall length" means the length G
of the vehicle measures between parllel planes passing through the
extreme projection points of the vehicle exclusive of -

(i) a starting handle;

(ii) any hood when down; H
576 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A (iii) any fire-escape fixed to a vehicle;

(iv) any post office letter-box, the length of which mea5ures
parallel to the axis of the vehicle, does not exceed 30 centimetres;

(v) any ladder used for loading or unloading from the roof of
B the vehicle or any tail or indicator lamp or number plate fixed to
a vehicles;

(vi) any spare wheel or spare wheel bracket or bumper fitted
to a vehicle;

c (vii) any towing hook or other fitment which does not project
beyond any fitment covered by clauses (iii) to (vi).

(4) the overall height of a motor vehicle measured from the
surface on which the vehicle rests, -

D (i) in the case of a vehicle other than a double- decked motor
vehicle, shall not exceed 3.8 metres;

(ii) in the case of a double-decked motor vehicle, shall not
exceed 4.75 metres;

E (iii) in the case of a laden trailer carrying ISO series 1 Freight
Container, shall IJ.Ot exceed 4.2 metres;

Provided that the provisions of clauses (i) to (iii) shall not apply
to fire-escape tower wagons and other special purpose vehicles
exempted by general or special order of registering authority.
F
(5) The overhang of a tractor shall not exceed 1.85 metres.

(6) The overhang of the motor vehicle other than a tractor shall
not exceed 60% of the wheel base.

G Explanation 1.-For the purpose of this rule "wheel base" means,-

(a) in the case of vehicles with only two axles, the distance
measured horizontally and parallel to the longitudinal axis of the
vehicle, between the centre points of the front axle and rear axle;

H (b) in case of vehicle having only three axles, and the front axle
-.

• CHIEFGENERALMANAGERv. STATE[PATTANAIK,J.) 577

is only the steered axle, the distance measured horizontally and A
parallel to longitudinal axis of the vehicle between the centre of
the front axle and centre point between the two rear-axles;

Explanation II. - For the propose of this Rule, "overhang"
means the distance measured horizontally and parallel to the
longitudinal axis of the vehicles between two vertical planes at right B
angles to such axis passing through the two points specified
hereunder:

(A) The rearmost point of the vehicle exclude of -

(i) any hood when 1 do~ ; c
-i (ii) any post office letter-box, the length of which measured
parallel to the longitudinal axis of the vehicle, does not exceed
thirty centimetres;

(iii) any ladder forming part of a turnable fire- escape fixed to
D
a vehicle;

(iv) any ladder used when the vehicle is at rest for loading or
unloading from the roof of the vehicle, or any tail lamp or number
plate fixed to a vehicle; E
(v) any spare wheel or spare wheel bracket fitted to a vehicle;

(vi) any language carrier fitted to a motor vehicle constructed
solely for carriage of passengers and their effects and adapted to
l carry not more than seven passengers exclusive of the driver; F
..L
(vii) any towing hook or other fitment which does not project
, beyond any fitment mentioned in clauses (ii) to (vi);

(viii) any mounted implement on a 3 point linkage of a tractor;
'
G
Provided that in the case of a stage carriage :

(a) the projection of any bumper or advertisement panel fitted
at the rear of the vehicle shall not exceed fifteen centimetres;

(b) the projection in respect of an advertisement panel shall H

'•
;
578 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
'
A not be such as to obstruct either the vision from the rear view
mirror or project through the emergency exist at the rear or both;
ii
(B)(i) in. the case of a ve~icle only two axles, one of which is
not a steering axle, the centre point of that axle; or
·~
B (ii) in the case of a vehicie having only three axles and front
axle is the only steering axle; The centre point of the rear most
axle;

(iii) in the case of any vehicle registered in India before the
commencement of these rules it shall suffice if the overhang does
c not exceed 7/24ths of the overall length of the vehicle;

(iv) in the case of a motor vehicle having only three axles where
t-
two front axles are steering axles, the centre point of the rearmost
axle;
D (v) in the case of the motor vehicle having four axles, where
two front axles are steering axles, a point 102 millimetres in rear
of the centre of a straight line joining the ·centre points of the
rearmost two axles;

E (vi) in any other case a point situated on the longitudinal axis
of the vehicle such that a line drawn from it at right angle to that
axis will pass through the centre of the minimum: turning circle of
the vehicle.

(7) No part of the vehicle other than a direction indicator, when
F in operation, or a driving mirror, shall project laterally more than i,>
355 millimetres beyond the centre line of the rear whee~ in the
case of single rear wheels, or more than 152 millimetres beyond
the extreme outer edge of the outer tyres, in the case of dual rear
wheels;
G
Provided that in case of agricultural tractors lateral projection
upto 700 millimetres beyond the central line of the rear wheel shall
be permitted.

Provided that the State Government or any authority authorised
H in this behalf by the State Government, if it is satisfied that it is

1'·
CHIEF GENERAL MANAGER v. STA1E(PATIANAIK,J.J 579

necessary because of the nature of any road or bridge or in the A
interest of public safety, may prohibit or restrict the operation of
a motor vehicle in a specified route or area unless such vehicle
complies with the requirements specified by the State Government
for such route or area.

(8) No motor vehicle shall be loaded in such a manner that the B
load or any part thereof extends, -

(i) laterally beyond the side of the body;

(ii) to the front beyond the foremost part of load body of the
vehicle;· c
(iii) to the rear beyond the rearmost part of the vehicle;

(iv) to a height beyond the limits specified in sub-rule (4) :

Provided that clause (iii) shall not apply to a goods carriage D
when loaded with any pole or rob or indivisible load so long as the
projecting part or parts do not exceed the distance of one metre
beyond the rearmost point of the motor vehicle."

According to Mr. Shanti Bhushan, learned senior counsel, since the dimen-
sion of the dumpers in question exceed the permissible dimensions under E
the aforesaid Rules, there is an embargo for the dumpers to be used on
public roads and as such, the vehicle cannot be taxed under the· Taxation
Act. We are unable to persuade ourselves to agree with the submission of
the learned senior counsel for the petitioner. The crux of the question is
whether the dumper is a motor vehicle and whether the vehicle attracts the F
liability of tax under Section 3 of the Taxation Act? The very question came
up for consideration before this Court in the case of Central Coal Fields
Ltd. v. State of Olissa & Batch (supra) wherein the various provisions of
the Orissa Motor Vehicles Taxation Act was under consideration and the
vehicles which had been taxed under the Taxation Act in the said case were
dumpers and rockers. This Court after tracing the legislative history and G
the decisions of this Court commencing from Boiani Ores Ltd. State of
Orissa, [1974] 2 SCC 777, repelled argument of the mine owners who used
dumpers within their mining premises to the effect that the dumpers are
vehicles not adapted for use upon roads and, therefore, are outside the
scope of the Taxation Act and held that these dumpers run on tyres, in H
..
580 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A marked contrast to chain plates like caterpillars or military tanks. It was
also held that by the use of rubber tyres it is evident that they have been
adapted for use on roads, which means they are suitable for being used on
public roads and on the mere fact they are required at places to run at a
particular speed is not to detract from the position otherwise clear that
they are adapted for use on roads. The very nature of these vehicles make
B
it clear that they are not manufactured or adapted for use only in factories
or enclosed premises. The mere fact that the Dumpers or Rockers as
suggested are heavy and cannot move on the roads without damaging them ~
is not to say that they are not suitable for use on roads: The word "adapted"
in the provision was read as "suitable" in Boiani Ores' case by interpretation
c on the strength of the language in Entry 57, List II of the Constitution. On
the fact situation, therefore, it must be held that Dumpers and Rockers are
vehicles adapted or suitable for use on roads and being motor vehicles per
se, were liable to taxation on the footing of their use or kept for use on
public roads.
D
The various.restrictions contained in Rules 92 and 93 referred to by )'

Mr. Shanti Bhushan, learned senior counsel are intended to lay down the
outer limits for the vehicles to be plied on the public road. But that does
not mean that the vehicles which are otherwise motor vehicles within the
definition clause go out of the definition the moment they exceed the limit
E as provided in Rules 92 or 93 of the Rules. The taxability of dumpers again
came up before this Court in the case of Union of India & Ors. v. Chowgule
& Co. Pvt. Ltd. & Ors.,. (1992) Sup. 3 Supreme Court Cases 141. In this
case an argument had been advanced that the dumpers are used only in
miming operation within the mining area and are not actually used on roads
F not are suitable for use on roads arl.d, therefore, are not taxable. The
Judicial Commissioner of Goa, Daman and Diu accepted the contention
and allowed the appeal. Union of India had come up in appeal to this
Court. This Court reversed the decision of the Judicial Commissioner of
Goa, Daman and Diu and relying upon the earlier decision of this Court
G in Central Coal Fields Ltd. v. State of Orissa, [1992] Suppl. 3 SCC 133 held
the mere fact that dumpers were used solely on the premises of the owner, ~

or that they were in closed premises, or permission of the authorities was
needed to move them from one place to another, or that they are not
intended to be used or are incapable of being used for general purposes,
H or that they have an unladen and laden capacity depending on their weight
CHIEFGENERALMANAGERv. STATE{PATIANAIK,J.) 581

and size, is of no consequence for, dumpers are vehicles used for transport A
of goods and thus liable to pay a compensatory tax for the availability of
roads for them to run upon commission.

The dumpers in question which have been levied under the Taxation
Act run on tyres as is apparent from the letter to the Automative Research
Association of India dated 25th January, 1993, which has been annexed as
B
Annexure 'C' to this Special Leave Petition but the tyres are of higher load
carrying capacity from the certificate given by Hindustan Motors which has
been annexed as Annexure 'D' to this Special Leave Petition. It appears
that the reasons which impelled the manufacturer to give the certificate
that the vehicles are not meant for plying on highway are - c
(i) Culverts and bridges on highways are generally not designed
to take care of such axle loads continuously;

(ii) The vehicles cannot run at reasonable speed on highway
and hence obstruct the flow of normal traffic; D
(iii) Width and height of the equipment will adversely affect
the traffic and minimum preferable width of the road required for
plying these vehicles is 50 ft.

(iv) The vehicles are fitted with specially designed heavy duty E
tyres and the heat generation is much more and generally cannot
be run for more than about 5 kms. at one stretch which is not so
in case of normal conventional hauling units which ply on highways.

On these facts it is difficult for us to hold that the vehicles are not p
adapted or suitable or capable of being used on public roads, even though
for most of the time it might actually be used within the mining areas on
the roads prepared by the mine owners. Following the two earlier judgment
of this Court in Central Coal Fields Ltd. (Supra and Union of India v.
Clwwgule & Co. (supra) we hold that the dumpers in question are motor G
vehicles and are taxable within the ambit of the Taxation Act.

Coming now to the second argument of Mr. Shanti Bhushan, learned
senior counsel which is on the question of compensatory nature of the Act
it is to be seen that in the very decision in Central Coal Fields Limited v.
State of Orissa (supra) it was held : H
'582 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A "Thus on the fact situation, we have no hesitation in holding
that the High Court was right in concluding that Dumpers and
Rockers are vehicles adapted or suitable for use on roads and
being motor vehicles per se, as held in Boiani Ores case (supra)
were liable to taxation on the footing of their use or kept for use
on public roads; the network of which, the State spreads, maintains
B it and keeps available for use of motor vehicles and hence is
entitled to a regulatory and compensatory tax."

The tax imposed on the motor vehicles is basically a tax for the use
of the roads within the State. It is no doubt a compensatory tax which
C facilitates trade, commerce and intercourse within the State by providing
roads and maintaining roads in a good state of repair. As has been held
by this Court in Automobile Transp01t Ltd. v. State of Rajasthan & Ors.,
[1963] 1 SCR 491, it would not be right to say that the tax is not compen-
satory because the precise or specific amount collected is not actually used
D in providing any facilities. If a statute fixes a charge for a convenience or
service provided by the State.or an agency of the State, and imposes it upon
those who choose to avail themselves of the service or convenience, or who
can use the services provided for, the imposition assumes the character of
remuneration or consideration charged in respect of an advantage sought
E or received or advantage which can be received. The mere fact that any
particular individual though can take advantage of the convenience of the
servi_ces provided by the State but for some reason or the other c~ooses
not to enjoy the services provided cannot escape the taxing liability on that
score nor can the provision imposing the tax become invalid on that score.
Such levy of tax for keeping a motor vehicle for use on the public roads or
F which is capable of being used on the public roads are no doubt compen-
satory truces but does not violate provisions of Article 301 of the Constitu-
tion of India.

Mr. Shanti Bhushan, learned senior counsel appearing for the
G petitioners strongly relied upon the decision of the Division Bench of the
Orissa High Court in the case of Steel Authority of India Ltd. v. the State·
of Orissa., in Original Jwisdiction Case No. 847 of 1991 disposed of by a
judgment dated 18.6.92, wherein Orissa High Court had held that vehicles
kept by the Steel Authority of India for being used within its premises are
H not liable to pay tax under the Orissa Motor VehicleTaxationAct. But the
CHIEF GENERAL MANAGER v. STATE [PATIANAIK, J.] 583

very decision has been reversed by this Court in Regional Transp01t Officer- A
cum-Taxing Authority, Rourke/a & Ors., (1995) 4 SCC 165 wherein it was
held that the vehicle in question kept by the Steel Authority of India are
taxable under the Motor Vehicle Taxation Act but the matter was remitted
on an enquiry on which item of the Schedule the levy in question will
remam.
B
In the premises, as aforesaid, the dumpers belonging to the
petitioners are taxable as held by the Orissa High Court and we see no
infirmity in the said judgment.

v.s.s. Petition dismissed.
c
A THE SECRETARY, JAIPUR DEVELOPMENT
AUTHORITY, JAIPUR
v.
DAULAT MAL JAIN

SEPTEMBER 20, 1996
B
'
[K. RAMASWAMY AND B.L. HANSARIA, JJ.]

Land Laws:

Rajasthan Land Acquisition Act, 1953: Sections 4, 6, 16 and 31(3).
c
Land Acquisition-Pwt of acquired land allotted to erstwhile owner-
Subsequently owner sold such land to 'sub-awardees' or 'nominees'-Validity
of-Held : Once notification of acquisition of land issued u11der S. 4, decla-
ration made u11der S. 6 and possession of land taken under S.16, pre-existing
D right, title and interest of la11downer stood ceased a11d same vested in State
free from all encumbrances-Hence, allotment of pa1t of la11d to erstwhile
owner was void-It was not saved by S. 31(3) of Act or R1: 31 and 36 of
Rules-Subsequent sale of pan of la11d to 'sub- awardees' or 'nominees' was
opposed to public policy a11d he11ce void under S. 23 of Contract Act-Con-
sequently, purchasers acquired no 1ight, title or interest therein-Rajasthan
E Land Acquisition Rules, 1956, Rr. 31 and 36--Rajasthan Improvement Tntst
(Disposal of Urban Land) Rules, 1956-Land Acquisition Act, 1894, Ss. 4,
6, 31(3) & (4)-contract Act, 1872, S. 23.

Constitution of India, 1950: A1ticles 14 and 166(3).
F Public Accountability-Misuse of power-By public servant viz., Mini-
ste1~Held : Minister answerable and accountable to people for acts or
conduct in pe1fonnance of duties not only by him personally but also by
bureaucrats working under him.

A1ticle 14-Discrimination-If some persons derived benefit by il-
G
legality, others similarly situated could not claim same benefit on ground of
equality-Judicial pro.cess could not be abused to perpetuate illegalities.

A notification under· Section 4 of the Rajasthan Land Acquisition
Act, 1953 was published in the Oflicial Gazette for acquiring land for a
H housing scheme. After following the procedure, an award was passed and
584
SECY. JAIPUR DEV. AUTHORITY v. D.M. JAIN 585

possession of the land was taken. Therein, apart from awarding compen- A
sation to the owners the land Acquisition Otlicer (LAO) granted plots to
owners, sub-awardees or nominee in the scheme itself. It was the case of
the respondents that pursuant to a public policy, the Government had
decided to allot the lands to the sub-awardees/nominees. Further, the
Minister, accepting the same, had directed delivery of possession of land. B
The respondents purchased the lands from the erstwhile owner, pursuant
to the sale deeds executed by him. These allotments were questioned by
way of writ petitions in the High Court. The High Court held that the LAO
and the Minister had committed illegality for such allotments being ob-
noxious, deflected the scheme and defeated the public purpose by abusing
public office. However, the High Court directed allotment of the lands to C
the respondents since allotment made to others had become final and
denial thereof to the respondents would amount to violation of equality
clause enshrined in Article 14 of the Constitution. Being aggrieved the
appellant preferred the present appeal.
D
On behalf of the respondents it was contended that the LAO was
empowered under the Rajasthan Land Acquisition Rules, 1956 to allot the
lands in lieu of compensation; that Section 31 of the Land Acquisition Act,
1894 which is in pali materia with Section 31 of the Act empowered the LAO
to allot land in lieu of compensation; that the public policy further
reiterated it; that the Government decided to allot land to the awardees, E
sub-awardees or nominees of the erstwhile owners of the land; that in
furtherance thereof, all<!_tment came to be made, directions were given for
deposit of the value of the sites pursuant to which the amount came to be
deposited; that the Government had evolved the policy to mete out the
problem of the rehabilitation of the awardees, sub-awardees and nominees; F
that the Government, therefore, in implementation of the scheme had
allotted the plots, amounts were deposited in furtherance of the policy,
irrespective of the fact whether or not the LAO had power to allot the land
to the awardees or sub-awardees or nominees; that the policy of the
Government to allot plots legitimated the allotment made to the respon-
dents and, therefore, the allotment was valid in law; that since some people G
were given possession and some among them had built houses thereon, the
respondents could not be denied of their right to possession; that having
. deposited the amount 20 years ago due to the impugned allotment they
were denied the right to apply for allotment elsewhere; that conse9uential·
ly, the respondents now would be rendered without any remedy for allot- H
586 SUPREMECOURTREPORTS [1996] SUP.P. 6 S.C.R.

A ment; and that interference, at this distance of time, would cause undue
hardship to the respondents.

Disposing of the app~I, this Court

HELD : 1.1. The Government runs the Executive Government of a
B State with the aid and advice of the Chief Minister and the Council of
Ministers which' exercise the powers and performs its duties by the in·
dividual Ministers as public officers with the assistance of the bureaucracy
working in various Departments and Corporate sectors etc. Though they
are expressed in the name of the Governor, each Minister is personally and
C collectively responsible for the actions, acts and policies. They are account-
able and answerable to the people. Their powers and duties are regulated
by the Law and the rules. The legal and moral responsibility or liability for
the acts done or omissions, duties performed and policy laid down rest
solely on the Minister of the Department. Therefore, they are indictable for
their conduct or omission, or misconduct or misappropriation. The Coun-
D cil of Ministers are jointly and severally responsible to the Legislature.
He/they is/are also publicly accountable for the acts or conduct in the
performance of duties. [596~F, G, H & 597-A]

1.2. The Minister holds public office though he gets constitutional
E status and performs functions under constitution, law or executive policy.
The acts done and duties performed are public acts or duties as holder of
the public office. Therefore, he owes certain accountability for the acts done
or duties performed. In a democratic society government by rule of law,
power is conferred on the holder of the public office or the concerned
authority by the Constitution by virtue of appointment. The holder of the
F office, t~erefore, gets opportunity to abuse or misuse the office. (597 -B-C]

2.1. The Government acts through its bureaucrats, who shapes its
· social, economic and administrative policies to further the social stability
and progress socially, economically and politically. Actions of the Govern-
G ment, should be accounted for social morality. Therefore, the actions of the
individuals would reflect on the actions of the Government. The actions are
intended to further the goal.s set down ·in the Constitution, the laws or
administrative policy. The action would, therefore, bear necessary integral
connection between the 'purpose' and the end object of public welfare and
not personal gain. The action cannot be divorced from that of the individual
H actor. The end is something aimed at and only individuals can have and
SECY.JAIPURDEV.AU1HORrfYv. D.M.JAIN 587

shape the aims to further the social, economic and political goals. The A
ministerial responsibility threat comes into consideration. The Minister is
responsible not only for bis actions but also for the job of the bureaucrats
who work or have worked under him. He owes the responsibility to the
electors for all bis actions taken in the name of the Governor in relation to
the Department of which he is the head. He bears not only moral respon- B
sibility but also in relation to all the actions of the bureaucrats who work
under him bearing actual responsibility in the working of the Department
under his ministerial responsibility. [597-E-H, 598-A-C]

2.2. All purposes or actions for which moral responsibility can be
attached are actions performed by individual persons composing the c
Department. All Government actions, therefore, means actions performed
by individual persons to further the objectives set down in the Constitution,
the laws and the administrative policies to develop democratic traditions.
Social and economic democracy are set down in the Preamble, Part III and
Part IV of the Constitution. The intention behind the Government actions D
and purposes is to further the public welfare and the national interest.
Public good is synonymous to protection of the interests of the citizens as
a territorial unit or nation as a whole. It also aims to further the public
. policies. The limitation of the policies are kept along with the public inter-
est to prevent the exploitation or misuse or abuse of the office or the
executive actions for personal gain or for illegal gratification. [598-D-E-F] E

3,1. The so-called public policy cannot be a camouflage for abuse of
the power and trust entrusted with a public authority or public servant for
the performance of public duties. Misuse implies doing or something im-
proper. The essence of impropriety is replacement of a public motive for a F
private one. When satisfaction sought in the performance of duties is for
mutual personal gain, the misuse is usually termed as corruption. The
holder of a public office is said to have misused his position when in pursuit
of a private satisfaction, as distinguished from public interest, he has done
something which he ought not to have done. The most elementary qualifica- G
ti on demanded of a Minister is honesty and incorruptibility. He should not
only possess these qualifications but should also appear to possess the
same. The rules of Code of Conduct for political executives, public servants
and private entrepreneurs, emphasising merit and regulated system of
appointment in state bureaucracy and stimulating pride in public service,
would generate remedies for political corruption. [598-G, H, 599-A, 599-H] H
588 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A Director of Public Prosecutions v. Holly, (1977) 1 All ER 316; R. v.
Andrews Weatheifoil Ltd. & Ors., (1972) 1 All ER 65; Rother Valley Railway
Co. Ltd. v. Minist1y of Transport, (1972) 2 W.L.R. 1041; Ch. D, Regi.na v.
Smith, (1960) 2 W.L.R.164 (Court of Criminal Appeal) andR v.Braithwaite,
(1983) 2 All ER 87 (Cr.D), referred to.

B Seymour Mertin Lipset: "Encyclopedia of Democracy", Vol. I, p-310,
referred to.

3.2. The court, therefore, would be required to consider whether the
policy sought ,to be relied on and directed by the Minister was to further
C public good or was a means to fritter away the public property for personal
gain or to misuse public power. The public policy under the Act is that the
acquired land should be used only for public purpose declared under
Section 6(1) of the Rajasthan Land Acquisition Act, 1953 or any other
public purpose and under no circumstances, for any private purpose. The
limited relaxation of public power entrusted with the LAO is to allot any
D other land, if available to the owner with limited interest or remission of
land revenue when limited interest is acquired for public purpose.
(600-H, 601·A~B]
4.1. The respondents purchased the lands from the erstwhile owner,
pursuant to the sale deeds executed by him or an agreement of sale etc.
E Their source of title, therefore, is the erstwhile owner. The sales obviously
are void since the erstwhile owner had no right, title and interest in the land
acquired pursuant to notification under Section 4(1) of the Act issued and
possession taken under Section 16 of the Land Acquisition Act, 1894 and
equivalent Sect!on 16 of the State Act. The pre-existing right, title and
interest held by the erstwhile owner stood ceased and the same were vested
F in the appellant free from all encumbrances. All encumbrances stand ex-
tinguished by operation of Section 16 of the Act. Therefore, the purchaser
gets no title to the acquired land. The sale (being opposed to the public
policy) was void under Section 23 of Contract Act, 1872. Consequentially,
the respondents acquired no right, title or interest either under the sale
G deeds or agreement entered into by them with the erstwhile owner. The
nomenclature of sub-awardees or nominees does not get elevated ~hove the
source and they had no right, title or interest under void sale except, if at
all, only to claim compensation under Section 23(1) of the Act.
(595-E-H, 596-A-C]
H Gian Chand v. Gopala & Ors., (1995] 2 SCC 528 and Yadu Nandan
SECY. JAIPUR DEV. AUTIIORITY v. D.M. JAIN 589

Garg v. State of Rajasthan & Ors., JT (1995) 8 SC 179, relied on. A
4.2. Rule 31 of the Rajasthan Land Acquisition Rules, 1956 was made
to guide the exercise of power of the collector (Land Acquisition Oflicer)
. under Section 31(3) of the Act. The Government has empowered the Col-
lector to allot "any other land" in lieu of money compensation only when the
land acquired belongs to a person having "limited interest in the land", like B
widow's estate of minor's estate, Mutawali etc. In that behalf, Rule 31
amplifies the exercise of the power by the authorised LAO. Rule 31 is only
to elongate the discretion which the LAO is expected to exercise in awarding
land in lieu of cash consideration and the circumstances in which it would
be done. Equally, Rule 36 deals with disposal of the excess land acquired c
by the Collector for a company and imposition of the conditions for sanc-
tion of transfer of excess land. Therefore, the absence of reference of them
does not make any dent into the principle of law laid in Radhey Shyam 's
case. That apart, these two rules merely emphasise the limited power given
to the Government and to the LAO to impose the conditions and restric-
tions to attain the public purpose for which the land is acquir~d and is not D
intended to fritter away public property for private purposes or gain or
illegal gratification. The allotment to the respondents was not under the
Rajasthan Improvement (Disposal of Urban Land) Rules, 1974. [601-C-H]

Jaipur Development Authority v. Radhey Shyam & Ors., [1994) 4 SCC
370, relied on.
E

4.3. There was no policy laid down by the Government and it cannot
be laid contrary to the aforestated rules and no such power was given to
individual Minister by executive action, as the land was already notified
conclusively under Section 6(1) for public purpose, namely, earmarked F
scheme. Since the persons whose land was acquired were not owners having
limited interest therein, qua the owners having lost right, title and interest
therein, the sub-awardees or nominees, after the acquisition under Section
4(1), would acquire no title to the land nor such ultra vires acts of the
Minister would bind the Government. The actions, therefore, taken by the G
Minister-cum-Chairman of the appellate authority and bureaucrats for
obvious reasons would not clothe the respondents with any vestige of right
to allotment. The policy does not bear any insignia of a public purpose, but
appears to be a devise to get illegal gratification or distribution of public
property defeating the public purpose by misuse of public office.
[602-E-F, 603-A] H
590 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 5.1. There was no evidence that under the so-called policy, anyone
from general public could equally apply for allotment of the plots or was
eligible to apply for sq.ch allotment nor any such general policy was
brought to the notice of this Court. The allotment was benefitted only a
specified class, namely, th~ awardees, sub-awardees or nominees and none
else. The decision by the Minister or the actions of the bureaucrats was
B limited to the abov~ class which included the respondent. Legitimacy was
given to the void acts of the erstwhile owr.er as well as the LAO. Directions
were given by the Minister and the bureaucrats acted to allot the land
under the very void acts. They are ultra vires the power. These acts are in
utter disregard of the statute and the rules. Therefore, it cannot be said
C to have the stamp of public policy; rath~r it is a policy to feed corruption
and to deflect the public purpose and to confer benefits on a specified
category, as described above. [603-B-D]

5.2. The illegal allotment founded upon ultra vires and illegal policy
D' of allotment made to some other persons wrongly, would not form a legal
premise to ensure it to the respondent or to repeat or perpetuate such
illegal order, nor could it be legalised. Judicial process cannot be abused
to perpetuate the illegalities. Article 14 proceeds on the premise that a
citizen has legal and valid right enforceable at law and person having
similar right and persons similarly circumstanced, cannot be denied of the
E benefit thereof. Such person cannot be discriminated to deny the same
benefit. The rational relationship and legal back up are the foundations to
invoke the doctrine of equality in case of persons similarly situated. If
'some persons derived benefit by illegality and had escaped from the
ctiltches of law, similar persons cannot plead, nor court can countenance
that benefit had from infraction of law and must be allowed to be retained.
F One illegality cannot be compounded by permitting similar illegal or
illegitimate or ultra vires acts. The High Court was clearly in error in
directing the appellants to allot the land to the respondents.
[604-A-C, 605-E-F]

G Yadu Nandan Garg v. State of Rajasthan & Ors., JT (1995) 8 SC 179;
Coromandel Fertilizers Ltd. v. Union of In(i,ia & Ors., [1994] Supp. SCC 457
and Chandigarh Administration & Anr. v. Jagjit Singh & Anr., [1995) 1 SCC
745, relied on.

6.1. There is, however, force in the contention that if allotments
H would be cancelled by this Court, it would be virtually impossible for the
SECY. JAIPUR DEV. AUTHORITYv. D.M. JAIN [K. RAMASWAMY, J.) 591

respondents to acquire residential plots any where now in the city in view A
of the great increase in prices of land in.the-meantime. It is not possible
to overlook or ignore this facet of the case; more so, because it may be that
the respondents had not obtained the allotments by taking recourse to any
illegal means. Therefore, this Court would not invoke its power under
Article 136 to undo the impugned order of the High Court even ifthe same B
be illegal. [606-B, CJ

6.2. It is, however, necessary to modify the direction of the High
Court, as a very special case, in two respects. First, the respondents would
be given allotment in some other scheme. Secondly, the area of the land to
be allotted would be uniform. In similar cases, this Court has favoured C
uniformity as regards the area. As the plot would be needed for residential
purpose, an area of 250 sq. yds. would be enough and proper. Therefore,
it is ordered that an allotment of plot measuring about 250 sq. yds. be
made to each of the two respondents in some other scheme of JDA. This
would, however, be at the rate which was prevailing when the allotments D
were first made to them. [606-C-E]

CIVIL APPELLATE JURISDICTiON: Civil Appeal No. 12370 of
1996 Etc. Etc.

From the Judgment and Order dated 24.9.93 of the Rajasthan High E
Court in D.B.C.S.A.W. No. 680 of 1992.

Dr. Sh~nkar Ghosh and S.K. Bhttacharya for the Appellant.

G.L. Sanghi, S.M. Jain, S.K. Jain, A.P. Dhamija, S. Ganesh, Mrs.
Pratibha Jain for the Respondents. F

The Judgment of the Court was delivered by

K. RAMASWAMY, J. The facts of these cases expose the blatant
misuse of public office by Minister of Urban Development, Government of G
Rajasthan as Chairman of the appellant authority; they, in particular
demonstrate the danger involved in entrusting unbridled dual powers in a
single individual leading to abuse of office on account of lack of counter
ch6ck. It would be appropriate to extract from the enquiry report dated
November U, 1992 of the Lokayukta of Rajasthan under Section 10 of the
Rajasthan Lokayukta and Uplokayukta Act, 1973 as under : H
592 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A "lri view of what has been stated above, it is p1ima f acie established
that Smt. Kamala, the then Hon'ble Minister, Urban Development
and Housing Department, Government of Rajasthan-cum-Chair-
man J.D.A. Jaipur, Shri N.D. Kaurani, IAS the then Commissioner,
Jaipur Development Authority and Shri Subhebhan Mitra, the then
Zonal Officer, Lal Kathi Scheme, J.D.A. Jaipur have blatantly
B misused their official position to favuur a few influential and highly
placed individuals and have also thereby caused wrongful gain to
them and wrongful loss to the Jaipur Development Authority and
the public at large. But Smt. Kamala, the then Hon'ble Minister,
Urban Development and Housing Department-cum-Chairman,
c J.D.A. is not now a public servant as defined in Section 2(1) of
the Rajasthan Lokayukta and Up-Lokayukta Act, 1973 (for short,
the 'Act') because she has ceased to be a Minister, so investigation
is not being commenced against her but the investigation deserves
to be commenced against S/Shri M.D. Kaurani, IAS and Subheb-
han Mitra under Section I of the Act and I order accordingly."
D
Edmund Burke as early as in 1780 had lamented the corroding
influence of corruption thus : "Corrupt influence, which is itself the peren-
nial spring of all prodigality, and of all disorder, which loads us, more than
millions of debt; which takes away from our arms wisdom from our
E councils, and every shadow of authority and credit from the most venerable
parts of our constitution."

The facts in nutshell in these cases are as under :

F Notification under Section 4 of the Rajasthan Land Acquisition Act,
1953 (for short, the 'Act') was published in the State Gazette on June 29,
1960 acquiring land in Bhojpura and Chuck Sudershanpura, Tehsil Jaipur'
popularly known as Lal Kathi Scheme, which is adjacent to the Jaipur City
for urban development, viz., for multipurpose project Qf constructing Legis-
G lative Assembly M.L.A. quarters etc. After following the procedure, an
award was passed on January 9, 1964 and possession taken later on.
Therein, .apart from awarding compensation to the owners, the Land
Acquisition Officer granted plots ranging between 2000 sq. yds. to 1000 sq.
yds. to owners, sub-awardees or nominees in the scheme itself. This Court
in Jaipur Development Authority v. Radliey Shyam & Ors., (1994] 4 SCC 370,
H known as Radliey Shyam's case, had held that the Land Acquisition Officer
SECY. JAIPUR DEV. AUTHORITY v. D.M. JAIN [K RAMASWAMY, J.] 593

(LAO) was devoid of the power and jurisdiction under Section 11 to allot A
part df the acquired land or any land to the land owners etc. in determining
compensation under Section 23(1). It was, therefore, held that the award
alloting land was void ab initio and it confered no right on ·an erstwhile
khatedar/owner to cla!m·possession of the land in execution of the award.
The award, confirmed in the decree under Section 26, though had bec:ome
. final, being a nullity, it could be questioned at any stage, when it is sought
B
to be executed/enforced. ~t was, therefore, held that the ~xecution of such
a decree and delivery of the possession iq furtherance of the award was
invalid, void and inexecutable. These cases spring from the same foul
source and being part of the same scheme and same award, are governed
by the above judgment. The Khatedar (owner) in these cases is one c
Chhote Lal whose 14 bighas of land had come to be acquired. The LAO
awarded 2000 sq. yards to him. He entered into agreements with respon-
dents Daulat Mal and Raj Kumafi to Sell 1000, 500, 250 sq. yds. etc. The
sale deeds came to be registered on December·14, 1970. The purchasers
were described as sub-awardees or nqminees, which terms are unknown ~o D
the law of property acquired for public purpose.
0. ... . •

•
Then came into picture the Minister-cum-Chairman . and the so-
called Committees. It is now. the case of the respondents that pursuant to
a public policy, the Government had decided in 1978 to a~lot th~. lands to
the sub-awardees/nominees @ Rs. 8 per sq. yd. Further, the Minister, E
accepting the same, had directed delivery of the possession and. sub-
sequently the amount was received @ Rs. 8 per sq'. ·yd. or at revised rates ·
of Rs. 50. per sq. y~.; details thereof being not material for the purpose of
this case, are omitted. It.would appear-that, subsequently, the lands were
. ~further sub-djvided to escalate the net by reducing the area of allotment in F
the proceedings dated September 16, 1980. Lots were drawn for allotment
of the plots on December 23, 1980. They came to be;questioned by way of
writ petitions in the High Court. The High Court came heavily against the
illegality committed by the LAO and the Minister for such allotments being
obnoxious, deflecting the scheme and defeating the public purpose by
abusing public office. When it was inquired into by the Lokayukta, in the G
aforestated report, he castigated the persons for the blatant abuse of the
power and action was accordingly initiated. It shocks the judicial i;on-
science in that it did not touch even the fringe of "actors". The counsel for
respondents, rightly and in the light of the settled legal position, admitted
that the respondents did not acquire any title to the lands sold to them H
594 SUPREME COURT REPORTS. (1996) SUPP. 6 S.C.R.

A und~r defective and void title. However, they strongly pressed into service
the orders of allotment issued by the Minister, the accyptance of payment
and the so-called public policy to support their claim for poss~ssion.

. In this background, the question arises; whet~er the High Court was
B right in directing allotment of the lands to the respondents ·Since allotment
made to others had bec;ome final and denial thereof.to th~ respondents
would amouqt to violation of equality clause enshrined iI?. Article 14 of the
Constitution, which is now the subject matter of these appeals? In fairness,
the l{'.arned Judges have held that the allot~ent of the plots was in violation
of the scheme and the award of the LAO and did not confer any right to
C the purchasers, sub-awardees or n~minees. Yet the rel_ief has been founded
on the preQJ.ise of violation of equality on par with others who got posses-
sion under the void·awaql. etc. It directed the appellants to deliver posses-
sion of the plots allotted to them on the basis of the sales and letters of
allotment thereof. Thus, these appeals arise from the .judgment and order
of the Division Bench of the Rajasthan High Court made on September 2,
.D 1993 in Writ Petition No. 680 of 92 etc.

Dr. Shankl'!r Ghosh,· tea,rned senior counsel appearing in one case
and Shri. S.K. Bhattacharya appearing in another, contended that in view .
of the law laid down in Radhey Shyam 's case, the direction issued by the
E High Court is illegal. There is no discrimin<1;tion for perpetration of wrong-
ful acts in furtherance of void orders. Extension of the equality in Ai:ticle
14 for breach of ·law would aid impetus to perpetrate further illegalities.
Article 14 is unavailable in this baclcdrop.

F Mis. G.L.·Sanghi, learned senior counsel and M.S. Ganesh, learned
counsel for the respondents and S.M. Jain for the petitioner in the third
case, contended that the judgment in Radhey Shyam's case is per incuriam
since the relevant provisions 'under the Act and the Rajasthan Land
Acquisition Rules had not been brought to the notice of this Court. The
LAO was empowered under the Rules to allot the lands in lieu of com-
G pensation; Section 31 of the Central Act which in pari materia :vith Section
31 of the Act empowers the LAO to allot land in lieu of compensation.
The policy of 1978 further reiterated it. The Government decided to allot
land to the awardees, sub-awardees or nominees of the erstwhile owners
/ of the land. In furtherance thereof, allotment came to be made, directions
H were given for deposit of the value of the sitr;s pursuant to which the
. ~ECY.JAIPURDEV.AUTHORITYv. D.M.JAIN [KRAMASWAMY,J.) 595

amount came to be deposited. The extent of the land purchased by the A
respondents in 500 sq. yds. and it was further reduced to 400 sq. yd. and
250 sq. yd. etc. The Government had evolved the policy to mete out the
problem of the rehabilitation of the awardees, sub-awardees and nominees.
The Government, therefore, in implementation of the Scheme had allotted
' the plots, amounts were deposited in furtherance of the policy, irrespective
of the fact whether or not the LAO had power to allot the land to the
B
awardees or sub-awardees or nominees. The policy of the Government to
allot plots legitimatises the allotmen! made to the respondents. Therefore,
the allotment is valid in law. Since some people were 'given possession and
some among them had built houses thereon, the respondents cannot be
denied of their right to possess'ion. It is further contended that the respon- c
dents having deposited the amount 20 years ago due to the impugned
allotment they were denied the right to apply for allotment elsewhere.
Consequentially, the respondents now would be rendered without any
remedy for allotment. Interference, at this distance of time, would cause
undue hardship to the respondents. Though for different reasons, the High D
Court, therefore, was. right in holding that the r·~spondents were dis-
criminated against due to non-delivery of possession of plots to them for
construction of their houses:

Th9 diverse contentions give rise to the first question : whether the E
respondents have a right to allotment of the lands? It is an admitted
position that they purchased the lands from Chhote Lal, the erstwhile
owner, pursuant to the sale deeds executed by him in 1970 or an agreement
of sale etc. Their source of title, therefore, is Chhote Lal, the erstwhile
owner. The sales obviously are void since Chhote Lal had no right, title
and interest in the land acquired pursuant to notification under Section F
4(1) issued on dated June 29, 1960 and possession taken under Section 16
of the Centrai Act and equivalent to Section 16 of the State Act. The
pre-existing right, title and interest had by Chhote Lal stood ceased and
the same were vested in· the appellant free from all encumbrances. The
nomenclature of sub- awardees or nominees does not get elevated above
the source and they had no right, title or interest under void sale except, G
if at ail, only to claim compensation under Section 23(1) of the Act. In
Gain Chand v. Gopala & Ors., (1995] 2 SCC 528 this Court had held that
after the notification under Section 4(1) is published, any encumbrances
created by the owner of the land does not bind the Government. The
agreement of sale, if any, was frustrated by the publication of the notifica- H
596 SUPREME COURT REPORTS. [1996] SUPP. 6 S.C.R.

A tion under Sectio~ 4(1) and the declaration under Section 6. In Yadu
Nandan Garg v. State of Rajasthan & Ors., JT (199,5) 8 SC 179 and eaten~
of other decisions, this Court has held that the purchase after notification
under Section 4(1) published in the Gazette was not lawful which did not
clothe the sale with any colour of title as against the State. All encumbran-
B ces stand extinguis,hed by operation of Section 16 of the Act. Therefore,
the purchaser gets no title to the acquired land. The sale (being opposed
to the pubJic policy) ~as void under Section 23 of Contract Act. Conse-
quentially, the respondents acquired no right, title or int~rest either under
the sale deeds or agreement entered.into by !hem with Chhote Lal, the
erstwhile owner.
c
The next question is : whether there is any public policy allotment of
th!:'. land to the respondents independent of the colour ~of their title? It is
, seen from the record. that the premise on which the Minister and the
Committee headed. by the Minister had proceeded to allot the lands to the
respondents and other, was the void awatct made by the LAO giving land
D to the erstwhile owners, sub-awardees or nominees, apart from compema-
tion given un'der Section 23(1): That preniise was knocked of i~ bottom in
the Radhey Shyam's case. It would be a mockery to call it a policy of the
Government, much less a.public policy.

E The Governor calls upon the leader of a political party/groups that
command majority in the Assembly to form the Government and appoints
him as Chief Minister. On tater's advice he appoints other Ministers.
Business of the Government gets allocated and is run as per business rules
framed under Article 166(3). The executive power of the State Government
p . extends over which the legislature has power to make law. The Government
runs the Executive Government of a State with the aid and advice of the
Chief Minister and the Council of Ministers which exercise the powers and
performs ·its duties by the hi.dividual Ministers as publiC officers with the
assistance of the bureaucracy working in various Departments and Cor-
porate sectors etc. Though they are expressed in the name of the Governor,
G each Minister is personally and collectively responsible for the actions, acts
and policies. They are accountable and answerable to the people. Their
powers and duties are regulated by the law and the rules. The legal and
moral responsibility or liability for the acts done or omissions, duties
performed and policy laid down rest solely on the Minister of the Depart-
H ment. Therefore, they are indictable for their conduct or omission, or
SECY.JAIPURDEV.AU1HORITYv.D.M.JAIN[KRAMASWAMY,J.] 597

misconduct or misappropriation. The Council of Ministers are jointly and A
severally responsibly to the Legislature. He/they is/are also publicly ac-
countable for the acts or conducts in the performance of duties.

The Minister- holds public office though he gets constitutional status
and performs functions under constitution, law or executive policy. The B
acts done and duties performed are public acts or duties as holder of the
public office. Therefore, he owes certain accountability for the acts done
or duties performed. In a democratic society governed by rule of law,
power is conferred on the holder of the public office or the concerned
·authority by the Constitution by virtue of appointment. The holder of the
office, therefore, gets opportunity to abuse or misuse the office. The C
politician who hblds public office must perform public duties with the sense
of purpose, and a sense of direction, under rules or sense-of priorities. The
purpose must be genuine in a free democratic society governed by the rule
of law to further socio-economic democracy. The executive Government
should frame i~s policies to maintain the social order, stability; progress D
and morality. All actions of the Government are perfor~ed through/by
indiVidual persons in collective or joint or individuii.l capacity. Therefore,
they should morally be respoflsible for their actions.

When a Government in office misuses its powers figuratively, we E
refer to lhe individual Minister/Council of Ministers who are constituents
of the Government. The Government acts through its bureaucrats,· who
shapes its social economic and 'administrative policies to further the social·
stability ~nd progress socially, economically and politically. A~tions of the
Government, should be accounted for social morality. Therefore, the ac-· F
tions of the individuals would reflect on the actions of the Government.
The actions are inten~ed to further the goals set down in the Constitution,
the laws or administrative policy. The action would, therefore, bear neces-
sary integral connection between the 'purpose' and the end obji;ct of public
welfare and not personal gain. The action cannot be divorced from that of
the individual actor. The end is something aimed at and only individuals · G
~an have and shape the aims to further the socia~ economic and political
goals. The ministerial responsibility threat comes into consider~tion. The
Minister is responsible not only for his actions but also fqr the job of the
bureaucrats who work or have work'ed under him. He owes the respon-
sibility to the electors for all his actions taken in the name of the Governor H
598 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A in relation to the Department of which he is the head. If the Minister, in
fact, is responsible for all the detailed workings of his Department, then
clearly ministerial responsibility must cover a wider spectrum than mere
moral responsibility : for no minister can possibly get acquainted with all
the detailed decisions involved in the working of his Department. The
B Ministerial respon~ibility, therefore, would be that the Minister must be
prepared to answer questions in the House about the actions of his
department and the resultant enforcement of the policies. H.e owes them
moral responsibility. But for actions performed without his concurrence
also, he will be required to provide explanations and also bear respon-
C sibility for the actions of the bureaucrats who work under him. Therefore,
he bears not only moral responsibility but also in relation to all the actions
of the bureaucrats who work under him bearing actual responsibility in the
working of the Department under his ministerial responsibility.

All purposes or actions for which moral responsibility can be at-
D tached are actions performed by individual persons composing the Depart-
ment. All Government actions, ·therefore, means actions performed by
individual person to further the objectives set down in the Constitution, the
,-
·~-

laws and the administrative policies to develop democratic traditions.
Social and economic democracy are set down in the Preamble, Part III and
E Part IV of the Constitution. The intention behind the Government actions
and purposes is to further the public welfare and the national interest.
Public good is synonymous to protection of the interests of the citizens as
a territorial unit or nation as a whole. It also aims to further the public
policies. The limitations of the policies are kept along with the public
interest to prevent the exploitation or misuse or abuse of the office or the
F
executive actions for personal gain or for illegal gratification.

The so-called public policy cannot be a camouflage for abuse of the
power and trust entrusted with a public authority or public servant for the
performance of public duties. Misuse implies doing of something improper.
G The essence of impropriety is replacement of a public motive for a private
one. When satisfaction sought in the performance of duties is for mutual
personal gain, the misuse is usually termed as corruption. The' holder of a
public office is said to have misused his position when in pursuit of a
private satisfaction, as distinguished from public interest, he has done
H something which he ought not to have done. The most elementary
SECY. JAIPUR DEV. AUTHORITYv. D.M. JAIN [K RAMASWAMY, l} 599

qualification demanded of a Minister is honesty and incorruptiqility. He A·
should not only possess these qualifications but should also appear to
possess the same.

In the Encyclopedia of Democracy by Seymour Martin Lipset,' Vol.
1, page. 310, in the Chapter "Corruption", it is stated that corruption is an B
abuse of public resources for private gain. The occasions for political
corruption increases when control on the activity of public administrators
are fragile·and the division of power between political actors and the public
bureaucrats, as well as between the Government and the middle· man, is
unclear. It is difficult to. discover and punish cases of corruption. Research . C
has shown that political corruption tends to be·. more widespread in
authoritarian or totalitarian regimes and when p.ublic opinion and the press
are unable to denounce corruption. Corruption developes because of con-
fusion about the bor~ers between State and society and between traditional
· and modern values. It can be expected to grow during phases.of transition.
Corr.uption should disappear in modern st~ble democratic societies·. In- 'D
stead, it _is growing. Since State intervention in economic and social life has
increased the occasions for political corruption, new technologies have
increased the cost of electoral campaigns and the professionalisation of
political careers has increased the number of those who have to make a
living from politics rather than living for. politics. Corrup!ion has not
disappeared. Corruption has dangerous consequences for politics. Al- E
though political corruption is more widespread in non-democratic regimes,
it is particularly dangerous for democracy because it undennines two of
the major principles on which democracies are based; the equality of
citizens' rights and the transparency of the' political sfecision-making
process. Bribes open the way for access to the State for those whq are F
willing to pay and can afford the price. The situation may leave rion-corrupt •
citizens with the belief that one "counts" only if one has the right personal
contacts with those who ·hold power. Because of its ·illegal nature, corrup-
tion increases the range of public aecision that are made in secrecy: It was
suggested that internal controls on public bureaucracies through ad-
ministrative controls and accounting procedure~ as well as. ombudsman G
systems for public complaints, are remedies to control political corruption. ·
. The rules of Code of Cqnduct for political exec;utives, public servants and
private enterpreneurs, emphasising merit and regulated system of appoint-
ment in state bureaucracy and stimulating pride in public service, would
generate remedies for political corruption. H
600 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A In Director of Public Prosecutions v. Holly Director of Public Prosecu-
tions v. Manners, (1977) 1 All ER 316 (House of Lords), the expression
'public body' came up for consideration. The applicability of Prevention of
Corruption Act was not restricted to. local authorities but referred to any
public body having public or statutory duties to perform and which carried
on acti.vities of public interest. In that behalf,· House of Lords, had held
B
that the Prevention of Corruption Act was not restricted to local
authorities; it was applicable to any body which has public and statutory
.duties to perform and bodies which perform those duties and carry out
their transactions for the benefit of the public and not for privat<? profit.
Accordingly, it was held that the persons who perform public functions are
C liable to prosecution for corruption. Similar views were expressed in R v.
Andrews Weatllelfoil Ltd. & Ors., (1972) 1 All ER ·65; Rother Valley Railway
Co. Ltd. v. Minist1y of Transport, ( 1972) 2 W:L.R. 1041 (Chancery Division);
Regina v. Smith, (1960) 2 W.L.R. 164 (Court of Criminal Appeal); and R
v. Br~ithwaite R v. Girdham, (1983) 2 A.II ER 87 (Criminal Division).
D
The court, therefore, would be required to consider whether the
policy sought to be relied on and directed by the Minister was to further
public good or was a means to fritter away the public property for personal
gain or to misuse public powet. The object of publication of the notification
under under Section 4(1) in the Official Gazette is to give notice to the
E owner that the land is needed for public purpose and he is prevented to ·
create any sort of encumbrance on the land with effect from that date· etc.
The land, if ultimately acquired, vests in the State under Section 16 or 17(2)
of the Act free from all encumbrances. The public policy of the Govern-
ment should only be to further the public purpose and issue of declaration
F is the conclusive proof of public purpose under Section 6(1) or any other
similar public purpose. Limited public purpose given under Section 31(3),
by operation of which, the LAO/Collector is empowered, after the sanction
is accorded by the appropriate Government, with the liberation of non
obstante clause, is to allot any oth~r land, in lieu of money compensation
only, to such persons having a limited interest in such land, either by the
G grant of some other lands in exchange or remission of land revenue on
other lands held under the same title, or in such other way as may be
equitable "having regard to the interest" of the persons having limited
interest in the land.

H In other words, the public policy under the Act is that the acquired
SECY. JAIPUR DEV. AUTIIORITYv. D.M. JAIN (K RAMASWAMY, J.] 601

land should be used only for public purpose declared under Section 6(1) A
of the Act or any other public purpose and, under no circirumstances, for
any private purpose. The limited relaxation of public power entrusted with
the LAO is to allot any other land if available to the owner with limited
interest or remission of land revenue when limited interest is acquired for
purpose. B
We may at this juncture dispose of the contention that the ratio in
Radhey Shyam's case is per incuriam. The basic postulate of the contention
is the omission to refer to Rules 31and36 of the Rajasthan Land Acquisi-
tion Rules, 1956. Rule 31 was made to guide the exercise of power of the
Collector (LAO) under Section 31(3) of the Act. As seen the Government C
has empowered the Collector to allot "any other land" in lieu of money
compensation only when the land acquired belongs to a person having
"limited interest in the land", like widow's estate or minor's estate, Mutawali
etc. In that behalf, Rule 31 amplifies the exercise of the power by the
authorised LAO. It says that "the Collector cannot force a party to take D
land in lieu of cash. Where, however, the interest of the party is so limited
as in the case of a trustee of a wakf property or a Hindu widow, as to make
it extremely difficult, if not impossible, to arrive at an adequate cash
estimate of its value or where, from the circumstances of a case, it is
impossible to place the parties concerned by cash compensation in the E
same or nearly the same position as before acquisition, sub-section (3)
enables the Collector to arrange to a~ard land (subject to the same
limitation of interest) in lieu of cash. In Radhey Shyam's case the scope of
sub-section (3) of Section 31 has been considered and explained in extenso.
Rule 31 is only to elongate the discretion which the LAO is expected to
exercise in awarding land in lieu of cash consideration and the circumstan- F
ces in which it would be done. Equally, Rule 36 deals with disposal of the
excess land acquired by the Collector for a company and imposition of the
conditions for sanction of transfer of excess land. Therefore, the absence
of reference of them does not make any dent into the principle of law laid
in Radhey Shyam's case. G

That apart, these two rules merely emphasise the limited power given
to the Government and to the LAO to impose the conditions and restric-
tions to attain the public purpose for which the land is acquired and is not
intended to fritter away public property for private purposes or gain or H
602 SUPREM!! COURT REPORTS (1996) SUPP. 6 S.C.R.

A illegal gratification.

The Rajasthan Improvement Trust (Disposal of Urban Land) Rules,
1974, were mad.e in exercise of power under Rajasthan Urban Improve-
ment Act, 1959. Therein elaborate procedure has been provided to grant
lease, restrictions thereunder, assessment of the ground rent, preparation
B of the scheme, sale or disposal of the land, reservation of the land for
residential plot or allotment of non-residential plots at concessional rates
to the specified categories, reserv~tion of non-residential lands, fixation of
the premium, reserved prices or fixed prices, assigning allotment and sale
of non-residential land, allotment of residential plots at concessional rates,
c priorities, categories, procedure, size, the procedure for recovery of cost
of the land, resale of the plot to recover for non~compliance of conditions,
allotment of land to public or charitable institutions, to institutions other
than charitable and public institutions, grant of sale deeds, etc. Allotment
to the respondents obviously was not under these Rules nor is it their case.
D
Therefore, there was no policy laid by the Government and it cannot
be laid contrary to the aforestated rules and to such power was given to
individual minister by executive action, as the land was .already notified
conclusively under Section 6(1) for public purpose, namely, earmarked
scheme. Since the persons whose land was acquired were not owners
E having limited interest therein, qua the owners having lost right title and
interest therein, the sub-awardees or nominees, after the acquisition under
Section 4(1), would acquire no title to the land nor such ultra vires acts of
the Minister would bind the Government. The actions, therefore, tilken by
the Minister-cum-Chairman bf the appellate authority and bureaucrats for
F obvious reasons would not clothe tf:i.e respondents with any vestige of right
to allotments. Acceptance of the contentions of the respondents would be ·
fraught with dangerous consequences. It would also bear poisonous seeds
to sabotage the schemes defeating the declared public purpose. The
record discloses that such ailo.tment in many a cases was in violation of the
Urban Land Ceiling Act which prohibits holding the land in excess of the
G prescribed ceiling limit of the urban lancL In some instances, person a
whose . land of 500 square yards was acquired, was compensated with
allotment of 2000 square yards and above, which is against the public policy
defeating even the Urban Land Ceiling Act. Would any responsible Mini-
ster or a bureaucrat, with a sense of public duty and responsibility, transfer
H such land to sabotage the planned development of the scheme? Answer
SECY.JAIPURDEV.AUTIIORITYv. D.M.JAIN [KRAMASWAMY,J.] 603

has obviously to be in the negative. The necessary inference is that the A
policy does not bear any insignia of a public purpose, but appears to be a
devise to get illegal gratification or distribution of public property defeating
the public purpose by misuse of public office.

There is no iota of evidence placed on record that under the so-
called policy, anyone from general public could equally apply for allotment B
of the plots or was eligible to apply for such allotment nor any such general
policy was brought to our notice. The allotment has benefitted only a
specified class, namely, the awardees, sub-awardees or nominees and none
else. The decision by the Minister or the actions of the beaurocrats was
limited to the above class which included the respondents. Legitimacy was C
given to the void acts of Chottey Lal, the erstwhile owner as well as the
LAO. Directions were given by the Minister and the bureaucrats acted to
allot the land under the very void acts. They are ultra vires the power.
These acts are in utter disregard of the statute and the rules. Therefore,
by no stretch of imagination it can be said to have the stamp of public
policy; rather it is a policy to feed corruption and to deflect the public D
purpose and to confer benefits on a specified category, as described above.

The question then is : whether the action of not delivering possession
of the land to the respondents is on par with other persons who had
possession is ultra vires act and violates Article 14 of the Constitution? We
had directed the appellants to file an affidavit explaining the actions taken E
regarding the allotment which came to be made to others. An affidavit has
been filed in that behalf by Shri Pawan Arora, Deputy Commissioner, that
allotments in respect of 47 persons were cancelled and possession was not
given. He listed various cases pending in this Court and the High Court
and executing court in respect of other cases. It is clear from the record p
that as and when any person had gone to the court to get the orders of the
LAO enforced, the appellant-authority resisted such actions taking consis-
tent stand and usually adverse orders have been subjected to decision in
various proceedings. Therefore, no blame of inaction or favouratism to
others can be laid at the door of the present set up of the appellant-
authority. When the Minister was the Chairman and had made illegal G
allotments following which possession wad delivered, no action to unsettle
any such illegal allotment could have been taken then. That apart, they
were awaiting the outcome of pending cases. It would thus be clear that
the present set up of the bureaucrats has set new standards to suspend the
claims and is trying to legalise the ultra vires actions of Minister and H
604 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A predecessor bureaucrats through the process of law sd such so that illegal
and ultra vires acts are not allowed to be legitimised nor are to be per-
petuated by aid of Article 14. The apart, Article 14 has no application or
justification to legitimise an illegal and illegitimate ·action. Article 14
proceeds on the. premise that a citizen has legal and valid right enforceable ·
at law and persons having similar right and persons similarly cir-
B cumstanced, cannot be denied of the benefit thereof. Such person cannot
be discriminated to. deny the same benefit. The rational relationship and
legal back up are the foundations to invoke the doctrine of equality in case
of persons similarly situated. If some person derived benefit by illegality.
and had escaped from the clutches of law, similar persons cannot plead
C nor court can countenance ,that benefit had from infraction of law and must .
be allowed to be retained. Can one· illegality be compounded by permitting .
similar illegal or illegitimate or ultra vires acts? Answer is obviously no.

In Yadu Nandan Garg's case (supra), it was contended that one of
D the person whose land was acquired, had the benefit of exemption from
the acquisition; writ petition was filed seeking similar benefit.. When it was
contended that it was violative of Article 14, this court in paragraph 5 had
held that "a wrong exemption under wrong action taken by the authorities
will not clothe others to get the same benefit nor can Article 14 be pressed
~nto service on the ground of invidious discrimination."
E
In Coromandel Fertilizers Ltd. v. Union ofbulia and Ors., [1984] Supp
sec 457, it was held in paragraph 13, that wrong decision in favour of any
party does not entitle any other party to claim the benefit on the basis of
the wrong decision. In that case, one of the items was excluded· from the
F schedule, by wrong decision, from its purview. It was contended that
authorities could not deny benefit to the appellant, since he stood on the
same footing with excluded company. Article 14, therefore, wa:s pressed
into service. This Court had held that ·even if the grievance of the appellant
was well founded, it did not entitle the appellant to claim the benefit of
the notification. A wrong decision in favour of any particular party does
G not entitle another party to claim the benefit on the basis of the wrong
decision. Therefore, the claim for exemption on the anvil of Article 14 was
rejected.

In Chandigarh Administration & Another v. Jagjit Singh & Another,
H l1995l 1 sec 745, allotment of the sites was subject matter under several
. SECY.JAIPURDEV.AUTIIORffYv. D.M.JAIN[KRAMASWAMY,J.) 605

·proceedings in the High Court; ultimately some persons had the benefit of A
allotment while others were denied of the same. When Article 14 was
pressed into service, this Court in paragraph 8 at page 750 had held, that
the basis of the principle, if it can be called one, on which the writ petition
had been allowed to be taken, was unsustainable in law and indefensible
in principle. The mere fact that the respondent-authority had passed a B
particular order: in the case of another person similarly situated, can never
be the ground for issuing a writ in favour ·of petitioner on the plea of
discrimination. The order in favour of the other person might be legal and
valid or it might not be. That has to be investigated first before it can be
directed to be followed in the case of petitioner. If the order in favour of
the other person is found to be contrary to law or· not warranted in the C
facts and circumstances of his case, it is obvious that such illegal or
unwarranted order could not be made the basis of issuing a writ compelling
the respondent-authority to repeat the illegality to cause another unwar-
ranted order. The extraordinary and 4
discretionary power of the High Court
under Article 226 cannot be exercised for such a purpose. D

A host of other decisions in that context have laid the same principle.
It is not necessary to burden the judgment any further. Suffice to hold that
. the illegal allotment founded upon ultra 11ires and Wegal policy of a_llotment
made to· some other persons wrongly, would not form a legal premise to
ensure it to the respondent or to repeat or. perpetuate such illegal order, E
nor could it be legalised. In other words, judicial process cannot be abused
to perpetuate the illegalities. Thus considered, we hold that the High Court
was clearly in error in directing the appellants to allot the land to the
respondents.
F
It is then c<;mtended that the respondents have been deprived of right
to apply for allotment of a plot of land in this or any other scheme right
from 1970, in view of the long lapse of time and the escalation of the prices,
it would be impossible for the respondents to purchase any site. To permit \
the authorities to cancel the allotment made in favour .of the respondents
would cause great injustice. Therefore, it is not a fit case for this Court to G
interfere under Article 136.

We have given our considered thought to the fervent and persuasive
plea of Shri Sanghi. There are two aspects of the matter. The first is that
this Court has the duty to correct all obvious ultra vires or illegal exercise H
606 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A of power or misuse of the same. Failure to do so send wrong signals that
the court legitimise wrong actions. There is, however, force in the conten-
tion of Shri Sanghi that if allotments would be cancelled by this Court, it
would be virtually impossible for the respondents to acquire residential
plots any where now in a city like Jaipur in view of the great increase in
prices of land in the meantime. We have r.ot been able to overlook or
B ignore this facet of the case; more so, because it may be that the respon-
dents herein had not obtained the allotments by taking recourse to any
illegal means. So, we have felt persuaded to agree with Shri Sanghi that we
may not invoke our power under Article 136 to undo the impugned order
of the High Court, even if the same be illegal, according to us.
c So, we have decided not to disturb the direction of the High Court,
as a very special case. We would, however, modify the same in two respects.
First, the respondents would be given allotment in some other scheme.
Secondly, the area of the land to be allotted would be uniform. In similar
cases, this Court has favoured uniformity as regards the area. As the plot
D would be needed for residential purpose we think an area of 250 sq. yds.
would be enough and proper. We therefore order for an allotment of plot
measuring about 250 sq. yds. to each of the two respondents in some other
scheme of the JDA. This would, however, be at the rate which was
prevailing when the allotments were first made to them. Since we laid down
E the law for the first time, we have not· interfered with the direct.ion of the
High Court but have suitably modified it. This direction, therefore, will not
be used as a precedent. .

Appeals arising out of SLP(C) Nos. 20857/93, 20936/93 an CC No.
25107/94 are disposed of accordingly. Appeals arising out of SLP(C) No.
F 2492/90, which is by Shanti Swaroop against the judgment of the High
Court in A.K. Garg and connected cases js, however, dismissed. There
would be no order at to costs.

/ v.s.s. Appeal disposed of.
THE STATE OF KARNATAKA AND ANR. A
v.
T. VENKATARAMANAPPA

SEPTEMBER 20, 1996

[M.M. PUNCHHI AND K. S. PARIPOORNAN, JJ.) B

Se1Vice Law:

Kamataka Civil .Se1vice Rules :

Rule 28-Govemment Se1vant contracti11g a second maniage while the c
first 011e wa~ subsisti11g-Suspe11ded from Se1vice-Climinal proceedings for
bigamy-Discharged--Departmental proceedings-Quashed by the Tribu11al
a11d suspe11sio11 lifted--011 appeal held, dep01tme11tal e11quiry be held since it
is 11ot necess01y that a conviction for bigamy under S.494 is a pre-requisite
for the same-But since the order of discharge is i11 favour of the employee, D
his continued suspeiision during the enquiry not wanwzted-lndian Penal
Code, S.494.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12312 of
1996.
E
From the Judgment and Order dated 26.10.90 of the Karnataka
Administrative Tribunal, Bangalore, in A. No .. 4928 of 1990.

M. Veerappa for the Appellant.

Mahabir Singh for the Respondents. F

The following Order of the Court was delivered :

Leave granted.

This is an appeal against the order of the Karnataka Administrative G
Tribunal (the Tribunal) at Bangalore whereunder the respondent seeming-
ly was absolved from facing a departmental enquiry on the charge of having
contracted a second marriage in the presence of the one subsisting with
his acknowledged wife and, as a result of which, the orders of suspension
passed against the respondent were lifted conferring consequential H
607
608 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A benefits. It appears from the record that the respondent, a Police Con-
stable, faced prosecution at the instance of his wife, before the criminal
court and was discharged for want of evidence of the_ 2nd marriage. On
the other hand, a departmental enquiry was instituted against the respon- t-
dent for which, priorly, he was suspended. He, in turn, approached the
B Tribunal for the twin relief of (i) lifting the suspension order and (ii) to
stop the enquiry on the ground that the criminal court had on 14.1.1988
discharged him of the offence of bigamy. These pleas found favour with
the Tribunal and, resultantly, the departmental proceedings were quashed
and the suspension lifted.

c When this matter was brought to this Court, it was pleaded that the
said order of the criminal court, dated 14.1.1988 had been subjected to
revision and there was a likelihood of the view of ·the Magistrate being
reversed. Now, it transpires that the Court of the Additional Sessions Judge
concerned vide order dated 11.9.1990, has affirmed the view of the Trial
D Magistrate with the result that the respondent remains discharged. This
apparently is on the basis that strict proof of solemnisation of thf~ second
marriage must be proved before conviction can be recorded for such
offence. There is a st!ing of judgments of this Court whereunder' strict
proof of solemnisation of the second marriage, with due observance of
E rituals and ceremonies, has been insisted upon. The prosecution evidence
in the criminal complaint may have fallen short. of those standards but that .
does not meari th~.t the State was in any way debarred from invoking Rule
28 of the Karnataka Civil Service Rules, which 'forbids a Government
servant tci marry a second time without the permission of the Government.
F But, h~re, the respondent being a B:indu," could never have been granted
permission by the Government to marry a second time because of his
personal law· forbidding such marriage_. It was thus beyond the ken of the
Tribunal to have scuttled the dep~rtmental proc~edings against the respon-
dent on the footing that such question of bigamy should normally not be
taken up for decision in departmental enq~iries, as tlie decisions of com-
G petent courts tending to be decisions in rem would stand at the highest
pedestal. There was a clear fallacy in such view because for purposes of
Rule 28, such strict standards, as would warrant a conviction for bigamy
under Section 494 IPC, may not, to begin with, be necessary. We therefore
explain away the orders of the Tribunal to the afore extent that Rule 28
H can be invoked, but would certainly maintain the orders of revocation of
STATEv. T. VENKATARAMANAPPA 609

suspension since in the presence of the orders of discharge in favour of the A
respondent, his continued suspension during the enquiry was totally unwar-
ranted. Let the enquiry be held.

There is thus partial success for both the parties. The appeal stands
ordered with these observations and directions.
B
G.N. Appeal disposed of.
A P. SIDDALINGAPPA
v.
THE STATE OF KARNATAKA AND ORS.

SEPTEMBER 20, 1996

B (K. RAMASWAMY AND G.B. PATIANAIK, JJ.)

Service Law :

Kamataka Municipal Corporation Act, 1976/Kamataka Municipal Cor-
C poration Rules, 1977:
Sections 82, 84/Rule 26-Bangalore City Corporation-Promo-
tion-Revenue Officers to Deputy Commissioners-Appointment orde,-ffeld
: Promoted Deputy Commissioners-Power to appoint vests with the Com-
missioner and not with the Govemment.
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No.12872 of
1996.

From the Judgment and Order dated 23.1.96 of the Karnataka High
Court in W.A. No. 1265 of 1993.
E
Rama Joise and S.N. Bhat for the Appellant.

Vijaya Shankar, K.R. Nagraja and Kishan Tyagi for the Resp~dents.

The following Order of the Court was.delivered:
F Leave granted.

We have heard learned counsel on both sides. The admitted position
is that the Karnataka Municipal Corporation Rules were framed under the
Karnataka Municipal Corporation Act, 1976. The appointing authority in
G respect. of various posts governed under the provisions of the Act is
regulated by Sections 82 and 84 of the Act. Section 82 reads as under :

"82. Appointment of Engineer, H ea/th Officer etc. - (1) The Govern-
ment shall appoint for every corporation such officers of the State
Civil Services as it considers suitable to be the engineer, health
H officer, revenue officer, chief accounts officers and council
610
P.SIDDALINGAPPAv. STATE 611

secretary for the efficient functioning of the corporation and such A
officers shall be subordinate to the Commissioner. The Govern-
ment may also appoint one or more Deputy Commissioners and
Assistant Commissioners who shall exercise such powers and dis-
charge such functions as may be specified in the rules. They shall
be subordinate to the Commissioner.
B
(2) The Government shall, in consultation with the Mayor, appoint
an officer not below the rank of an Assistant Commissioner to be
• the council secretary. The officer appointed shall be on deputation
ordinarily for a period of three years and if the corporation by two
thirds majority of its members so desire he shall be withdrawn C
earlier and another person appointed. It shall be the duty of the
council secretary to attend every meeting of the corporation and
the standing committees and he shall perform such other duties as
are imposed on him by or under this Act.

(3) The officers appointed under sub-section (1) shall be whole- D
time officers of the corporation and shall not undertake any work
unconnected with their offices.

(4) Every officer of the Government appointed under sub-sections
(1) and (2) shall be paid by the corporation such salary as may be E
determined by the Government from time to time which shall be
met out of the corpdration fund and shall be entitled to leave and
other privileges in accordance with the rules and regulations· ap-
plicable to the Government service to which he belongs and in
force· for the time being, and the corRoration shall make such
contribution towards his leave allowance, pension and provident F
fund as may be payable under such rules and regulations by him
or on his behalf."

Section 84 reads as under :

"84. Appointment to the other posts on the cotporation estab- G
lisltment. - (1) Subject to the provision of Section 85 and 86
appointment to posts on the corporation establishment other than
those borne on the cadres of the Karnataka Municipal Administra-
tive Service and the posts, referred to in Section 82 shall be made
by the Commissioner in accordance with this act, the rules and the H
612 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A regulations framed thereunder."

Rule 26 of the Karnataka Municipal Corporation Rule, l977 (for
short, the 'Rule') envisages mode of appointment and the source of ap-
pointment as under :
B "SI.
No.
1.
Posts

..............
Deputy
Method of appointment of Officer
No. of
Posts
.
By deputation of an Officer from the
2. 1
Commissioner I.AS. Cadre
c
By deputation of an Officer (Senior
scale) from the K.A.S. Cadre in the
Cadre of K.A.S. (Senior scale)
By promotion from the Cadre of
D revenue Officers of Bangalore City
Corporation. ............ II

A reading of Section 82(1) and (4) conjointly would indicate that the
Government is empowered to appoint to the every Corporation such
officers of the State Civil Services as it considers suitable to be the
E Engineer, Health Officer, Revenue Officer, Chief Accounts Officer and
Council Secretary. The Government may also appoint one or more Deputy
Commissioners and Assistant Commissioners who shall exercise such
powers and discharge such functions as may be specified in the Rules.
Sub-section (4) postulates that every officer of the Government appointed
p under sub-section (1) and (2) shall be paid by the Corporation such salary
as may be determined by the Government from time to time which shall
be met out of the Corporation fund and shall be entitled to all the service
benefits enumerated therein. Section 84, as stated earlier, is subject to
Sections 85 and 86 and it also says that appointment to posts other than
those borne on the cadres of the Karnataka Municipal Administrative
G Servic;:e and the posts referred to in Section 82 shall be made by the
Commissioner in accordance with the Act, the rules and the regulations
framed thereunder. It would thus be seen that such of the officers of the
State Government which are appointed by the State would function under
the control of the Commissioner. In addition, the Commissioner also has
H power under Section 82 to appoint Deputy Commissioner or assistant
p :smIJALINGAPPAv. STATE 613

. Commissioners by promotion in accordance with the procedure of the Act, A
the rules and regulations framed thereunder. Clause (2) in the Schedule of
Rule 26 envisaged that Deputy Commissioners are appointed by the
Government by deputation of an officer from the IAS cadre and also by

- deputation of an officer (senior scale) from K.AS. cadre in the cadre of
KA.S. (senior scale); Deputy Commissioners by promotion from the cadre
of Revenue Officers of Bangalore City Corporation. In other words, under
sub-section (1) of Section 82, the Government may also appoint one or
B

more Deputy Commissioners who are the IAS officers or senior scale
officers, Karnataka Administrative Service cadre officers. But, as regards
the Deputy Commissioners promoted from the cadre of the Revenue
officers of the Bangalore City Corporation, by operation of sub-section (1) c
of Section 84, it is the Commissioner who is empowered to make appoint-
ment to such posts according to the Act, rules and regulations framed
thereunder. Resultantly, promoted Deputy Commissioners from the
Revenue Officers of the Bangalore City Corporation are required to be
appointed by the Commissioner and Government have no power to make D
appointments of them.

The appeal is accordingly allowed. The judgment and order of the
Division Bench made in Writ Appeal No. 1265 of 1993 dated January 23,
1996 stands set aside and that of learned single Judge stands confirmed but
in the circumstances without costs. E

G.N. Appeal allowed.

'
'
A RAMESH KUMAR CHOUDHA AND ORS.
v.
STATE OF M.P. AND ORS.
-
SEPTEMBER 20, 1996

B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.)

Service Law :
y

M.P. Irrigation Engineering Services (Gazetted) Recrnitment Rules,
c 1968:
Rules 7, 15, 16--Promotion-Assistant Enginee,-.Eligibility as on 1st
January of the year-Graduate Engineers to have a minimum 8 years ex-
perience-Diploma Engineers to have a minimum of 12 years experience-If
the Diploma Engineers acquire graduation they become eligible for promo-
D tion after 8 years-But cut-off date being 1st January, even if they had acquired
degree, prior to that date, their eligibility would be taken into account after
the cut-off date-Those promoted prior to their eligibility 011 the basis of
T1ibunal's orders-To be treated ad hoc and de hors the 1Ules-Not entitled
to senimity from that date-DPC to sit every year in Febmwy or Marclt--DPC
to sit and consider the candidates for filling up the vacancies from 1992 to
E 1996.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12859-69
of 1996.

From the Judgment and Order dated 12.8.94 of the Madhya Pradesh
F Administrative Tribunal at Bhopal Bench in OA. No. 180. of 1993.
S. B. Sanyal and R.D. Upadhyay for the Appellants.

B.S. Banthia for the Respondents.

G S.K. Agnihotri and Sakesh Kumar for the State.

The following Order of the Court was delivered :

Delay condoned.

}I Leave granted.
614
R.K. CHOUDHA v. STATE 615

- We have heard learned counsel on both sides. A
These appeals by special leave arise from the orders of the Madhya
Pradesh State Tribunal made on October 1, 1994 in O.A. No. 616/93 and
batch.

The admitted position is that the appellants as well as the respon- B
dents are governed by the provisions of M.P. Irrigation Engineering ser-
vices (Gazetted) Recruitment Rules, 1968 issued by the Governor in
exercise of the power under proviso to article 309 of the Constitution. Rule
7 of the Rules prescribes the mode of recruitment either by direct recruit-
ment or by promotion of substantive or officiating feeder cadre, i.e., c
sub-Engineers, or by transfer of person who held in a substantive capacity
such post as may be specified by the State Government in that behalf.

- Eligibility criteria has been prescribed under Rule 15 and procedure for
· conside~~tion under Rule 16 which read as under :

"15. Condition of eligibility for promotion: D

(1) Subject to the provisions of sub-rule (2), the committee con-
. sider the cases of all persons who on the 1st day of January of that
year had completed the prescribed years of service (whether of-
ficiating or substantive) on the post/service mentioned in column E
2 of Schedule IV or any other post or posts declared equivalent
thereto by the Government as under and are within the zone of
consideration as per sub-rule (2): -

(i) Sub-Engineers Head Draftsman/Draftsman to the post of
Assistant Engineers minimum "Service of 12 years as Sub- F
Engineers, Head Draftsman/Draftsman.

Provided that a sub-Engineer head Draftsman/Draftsman who
completed a minimum of 8 years service and possessed degree in
Civil/Electrical/Mechanical Engineering from recognised Univer- G
sity or qualifications declared eq~ivalent thereto by the State
Government wiir also be eligible for promotion to the post of
Assistant Engineer and will be considered each time, just after the
zone of consideration and the final selection list shall be made
from both the groups on the basis of merits, for example, if ten
posts are vacant in the cadre of Assistant Engineer to be filled by H
616 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A promotion of sub-Engineers then 10 x 5-50 diploma holders sub-
Engineers from working list be considered first and thereafter the If

eligible graduate sub-Engineers be considered in the order of their
seniority for promotion.

(ii) Junior Engineers to the post of Assistant Engineers
B minimum Service of 2 years as Junior Engineers. (iii)
Research Assistants to the post of Assistant Research
Officers-Minimum Service of 8 years as Research As-
sistant.

(iii) Embankment Inspector/Silt Analysts to the post of As-
c sistant Research Officers-minimum service of 8 years
as Embankment Inspector/Silt Analyst.

(iv) Assistant Engineers promoted from sub-Engineers
Head Draftsman/Draftsman cadres to the post of E.E.
D minimum 18 years of total service out of which at least
6 years should be as Assistant Engineers.

(v) Assistant Engineers to the post of Executive- Engineers
minimum 6 years as Assistant Engineer.

E (vi) Superintending Engineers to the post of Chief En-
gineers-Minimum Service 6 years as Superintendent
Engineers.

(2) The field of selection shall ordinarily be limited to five times
the number of officers to be included in the select list, provided
F that if the required number of suitable officers are not available
in the field so determined the field may be enlarged to the extent
considered necessary by the Committee by mentioning the reasons
in writing.

16. Preparation of list of suitable officers :
G
(1) The committee shall prepare a list of ~uch persons as satisfy
the condition prescribed in the Rule 15 above and are held by the
committee to .be suitable for promotion to the service. This list
shall be sufficient to cover the anticipated vacancies on account of
H retirement and promotions during the course of one year from the
R.K.CHOUDHAv. STATE 617

date of preparation of the select list. A reserve list consisting of A
25% of the number of persons included in the said select list shall
be prepared to meet the unforeseen vacancies occurring during
the course of the aforesaid period.

(2) The selection for inclusion in such list shall be based on merit
and suitability in all respects with due regard to seniority. B

(3) The names of the officers included in the list shall be arranged
in order of seniority in the (as in column II Schedule IV service
at the time of preparation of each select list; provided that any
Junior Officer, who is in the opinion of the committee, is of an C
exceptional merit and suitability, may be assigned iri the list a
higher place then that of officers senior to him.

Explanation : A person whose name is excluded in the select list
but who is not promoted during the validity of the list shall have
no claim to seniority over those considered in a subsequent selec- D
tion merely by the fact of his earlier selection.

(4) The list" so prepared shall be reviewed and revised every year.

(5) If in the process of the selection, review or revision, it is
proposed to supersede any member of the service or members of E
Madhya Pradesh Irrigation Department (non-gazetted) Service,
the committee shall record its reasons for the proposed superses-
sion." •

A resume of these Rules would clearly indicate that the eligibility is
considered as on 1st of January of the year. the incumbent must have F
completed the prescribed years of service, namely, 8 years of service for
the Graduation Engineers and 12 years of service for the sub-Engineers. It
is not in dispute that the appellants as on January 1992 had not acquired
the Graduation qualification but some of them had completed 8 years of
service. Similarly, the respondents who were promoted as per the direc- G
tions of the Tribunal had admittedly acquired the qualifications of Gradua-
tion in October 1992. When the DPC met in December 1992 for filling up
of the vacancies for the year 1992 their claims did not come up for
consideration. So, the respondents filed OAs and the Tribunal has held
that since they had completed 8 years of service and also acquired the
graduation, they should be considered if found fit to be promoted. Thus H
618 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A they came to be promoted.

The case of the appellants is that though the respondents had com-
pleted the eligibility criteria as on January 1 of the year 1992, a fact that
the graduation qualifications acquired subsequent to that date but before
B the DPC had considered their cases are not entitled to be promoted. The
approach adopted by the Tribunal is illegal and contrary to Rules 15 and
16 of the Rules referred to hereinbefore. We find force in the contention.
As seen Rule 15 is a clear mandate as to the eligibility criteria. Firstly, the
diploma-holders should have minimum of 12 years qualifying service for
eligibility to be considered for promotion as Assistant Engineers. If a
C diploma holder acquires graduation, he should complete minimum of eight
years of service then only he becomes eligible for consideration for promo-
tion as Assistant Engineer. He should hold the post as sub-Engineer in a
substation or continuous officiating capacity as prescribed. But the cut off
date for eligibility is 1st January of the year in which the eligibility was to
D be considered. Since the respondents acquired the qualifications in Oc-
tober 1992, They did not become eligible for consideration for promotion
for the year 1992 though the DPC had met in December 1992. Consequent-
ly, the direction issued by the Tribunal and the appointments of the
respondents made pursuant to the contempt orders are clearly illegal. We
are informed that they have been already promoted. Therefore, their
E promotions should be treated to be ad hoc and de horse the rules. Though
as per the orders of the Tribunal, they came to be promoted, such promo-
tions do not confer any right to seniority over any other eligible candidates
who acquired the qualifications as on January 1, 1992. Therefore, the DPC
is directed to sit every year either in the month of February or March for
F consideration of respective claims of the candidates provided if any vacan-
cy exists or is anticipated. As regards this year is concerned, they should
sit in this year to consider the vacancies that had arisen between 1st
January 1992 to 1st January 1996. The DPC should get identified the
vacancies having arisen in each year and consider the cases of respective
G eligible candidates diploma-holders as well as Engineers, who have com-
pleted U years of service by the diploma holders or the diploma holders
who acquire graduation before first day of January each year for promotion ·
in accordance with rules. Such of the candidates found fit and recom-
mended fit be given regular promotion provided they are substantive or
substantively in officiating capacity in the lower ranking. It would appear
H that some of the candidates who approached the Government taking
R.K. CHOUDHA v. STATE 619

advantage of the orders of the Tribunal and got promoted, also came to A
be considered and were promoted. All appointments are also to be treated
as ad hoc.

The appeals are accordingly disposed of. The orders of the Tribunal
are set aside. No costs.
B
G.N. Appeals disposed of.
A U.P. STATE ROAD TRANSPORT CORPN.
THROUGH ITS MANAGING DIRECTOR AND ANR.
v.
GOBARDHAN AND ANR.

SEPTEMBER 20, 1996
B
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.)

Service Law :

C U.P State Road Transport Corporation-Waiting list of candidates to
be-recruited during peak season or during suspension of conductors or against
leave vacancy for 15 days or one month-Appointed after notification in
newspapers-In respect of absentees seniority not adhered to and juniors
appointed-Respondent not appointed though some of his juniors were ap-
pointed and regularised-Filed writ petition-High Court directing the Cor-
D poration to appoint him-On appeal h;eld, after cancellation of the wait-list
procedure, though no one has a right, those on the wait list need to be
considered in accordance with the rules in view of the fact that their juniors
got appointment and were even regularise~Appellant-Corporation directed
to consider the case of respondent as a special case and make appointment
E according to the procedure-Others who had not approached or would ap-
proach the Court belatedly would not be entitled to any relief

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12286 of
1996.

From the Judgment and Order dated 31..8.95 of the Allahabad High
F Court in W.P. No. 6727of1993. ·

Pradeep Misra for the Appellants.

S.K. Bhattacharya and P.K. Jain for the Respondents.

G The following Order of the Court was delivered :

Leave granted.

We have heard learned counsel on both sides.

H This appeal by special leave arises from the judgment of the Al-
620

'
U.P. STAIB RD. TPT. CORPN. v. GOBARDHAN 621

lahabad High Court made on August 31, 1995 in Writ Petition 6727/93. For A
the recruitment in the year 1980, the Regional Manager of the appellant-
Corporation had prepared a waiting list of 414 candidates to be recruited
during peak season or during suspension of any conductors or against leave
. vacancy for L'i days or one month. It would appear that the list continued
for 1980- 81, 1981-82 and 1982-83. The appointments were to be made
B
during the peak season by notification in the newspapers and whoever
would come within 7 days would be given appointment. Thereafter, in
respect of absentees, seniority was not being adhered to and juniors were
given appointments. It would appear that the respondent is one of the
candidates placed in the seniority list. Since he had not received the
intimation, he did not join during the peak seasons. He filed a writ petition C
in 1993 challenging his non-appoint, he took the plea that those juniors to
him were already appointed and some of them were even regularised. The
High Court has accepted the contention and given the direction to appoint
him to the post of conductor since some of his juniors had come to be
appointed, Thus, this appeal by special leave.
D
Shri Pradeep Misra, learned counsel for the Corporation, has con-
tended that the Corporation has evolved the principle of wait list to meet
the contingencies during peak season etc. The wait- list, for the year 1980
in fact was cancelled in July 19, 1980; the writ petition which came to be
filed against the cancellation.were dismissed; the respondent filed the writ E
petition for the first time in 1983; from, 1988 onwards, the wait-list proce-
dure has been dispensed with and, therefore, the High Court was not
justified in giving the direction. Shri Bhattacharya, learned counsel for the
respondent, contended that since the newspaper had no circulation in the
region in which he was living he could not see the newspaper publication; F
as a result, he could not appear and join the post; but since his juniors
came to be appointed and some of them were even regularised, he is also
entitled to the same benefit. Though we find force in the contention of Shri
Pradeep Misra that the candidates have no right to the post since they are
in the wait-list, since the Corporation has already appointed some of the
juniors who are in the waiting list, necessarily, before following that proce- G
dure, they should have given intimation to those candidates who were
placed in the waiting list; if even then they do not turn up, then it could be
taken that they have waived the right of appointment. But in this case, it
might be that a candidate who was in the waiting list was under the
expectation that he would get an order of appointment from the Corpora- H
622 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

. A tion as and when the vacancy arises and may be he could not read the
newspaper, though published. Under these circumstances, we think that
after the cancellation of the wait-list procedure, though no one has a right;
those who were on the wait list need to be considered in accordance with
the rules in view of the fact that their juniors had got appointment and
B were even regularised. Therefore, the appellant are directed to consider
the case of the respondent as a specia! case and make appointment
according to the procedure.

Any other persons who had not approached or would approach the
Court belatedly, would not be entitled to any relief.
c The Appeal is accordingly disposed of. No costs.

G.N. Appeals disposed.
STATE OF U.P. AND ANR. A
v
T.P. LAL SRIVASTAVA

SEPTEMBER 20, 1996

[K. RAMASWAMY AND.G.B. PATTANAIK, JJ.] B

SeTVice Law :

Dismissal from service on charges of Misappropriati01t-Charge-sheet
for committing gross i"egularities--Employee not submitting his reply despite C
several letters-Employer holding the employee guilty of misappropriation and
dismissing him from seTVice-Employee challenging it and the High Coult
holding that documents not supplied to the employee and the action vitiated
by e"or of law-On appeal held, Employer not conducted enquiry though the
employee. avoided giving reply-Employee had foregone his right to submit his
reply-However employer not absolved of the duty to hold an ex-parte en- D
quiry-Disciplinary authority to communicate copy of enquiry report and seek
an explanation from the employee-Appropriate orders. to be passed thereafter
in accordance with law-Till then the. employee deemed to be under suspen-·
sion.
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12885 of
1996.

From the Judgment and Order dated 15.3.93 of the Allahabad High
Court in C.M.W.P. No. 12480of1987.
F
Irshad Ahmad for A.K. Srivastava for the Appellants.

The following Order of the Court was delivered :

Though notice was sent to the respondent on January 25, 199.), till
date neither acknowledgment nor unserved cover has been received back. G
Under these circumstances, notice must be deemed to have been served
on the respondent. He is set ex-pane.

Leave granted.

We have heard learned counsel for the apj>ellant. H
623
624 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

This appeal by special leave arises from the judgment of the Al-
lahabad High Court made on March 15, 1993 in Writ Petition No. 12480/87.
The admitted position is that while the respondent was working as a Senior
Marketing Inspector, a charge-sheet was served on him on November 23,
1984 calling upon him to explain the charges for committing gross ir-
regularities in the movement of wheat outside the State of U.P. Instead of
B submitting reply to the charge-sheet, he,; went on dilly-dallying in submitting
the reply. Several letters addressed to the respondent proved ineffective.
Resultantly, the appellants took a decision on June 26, 1987 holding that
the respondent was found guilty of misappropriation. Consequently, he
came to be dismissed from service. The respondent challenged the same
C in the writ petition. The High Court has set aside the order in the impugned
order holding that the documents have not been supplied to the respondent
and, therefore, the action was vitiated by error of law. We do not find any
justification in the view taken by the High Court; the substratum of the
result is that the appellants have not conducted any enquiry though the
D respondent had been avoiding to give the reply. Since the respondent had
avoided to submit the reply, he has forgone his right to submit his reply.
Nonetheless, the appellants are not absolved of the duty to hold an ex-parte
enquiry to find out whether or not the charge has been proved. In the event
of the Enquiry Officer find that the charge is proved, he would submit that
report to the disciplinary authority. The disciplinary authority should com-
E municate the copy of the enquiry report to the respondent and seek an
explanation for the proposed action thereon. If the respondent submits any
explanation, the same may be taken into consideration and appropriate
order may be passed according to law. Until then, the respondent must be
deemed to be under suspension. ·
F The appeal is accordingly allowed, but in the circumstances, without
costs.

G.N. Appeal allowed.
ALL ORISSA ELECTRICAL WORKERS UNION A
v.
STATE OF ORISSA AND ORS.

SEPTEMBER 20, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

SelVice Law:

Superannuation-Employees under the State of 01isscr-<;lass III and
upwards though skilled or highly skilled not entitled to the benefit of 60 year.1' C
for superannuatiott--Class W employees though skilled, semi skilled or highly
skilled alone entitled to the benefit of superannuation at the age of 60 years.

State of 01issa v.Adwant Charan Mohanty & Ors., [1995] Supp.1 SCC
470 and State of Olissa v.Amab Kumar Dutta, JT (1996) 2 SC 516, referred
to. D
CIVIL APPELLATE JURISDICTION: Special Leave Petition (C)
No. 12717 of 1996.

From the Judgment and Order dated 21.3.96 of the Central Ad-
ministrative Tribunal at Cuttak in O.A. No. 1087 of 1996. E
. Mrs. Indira Jaising, Bharat Sangal and Ms. Anita Chinoy for the
Petitioner.

The following Order of the Court was delivered :
F
Smt. Indira J aising, learned senior counsel for the petitioner in this
petitio~J has argued on 2.8.1996 before the Bench comprising Hon'ble Mr.
Justices M.M. Punchhi and K. Venkataswami, JJ. and the learned Judges
have referred the ~atter for reconsideration of the earlier decision by the
Bench of which Hon'ble Sri Hansaria, J. was a member. Consequently, it G
was posted on August 5, 1996 before the Bench consisting of Hon'ble
Justice G.N. Ray and Hon'ble Justice Hansaria who have referred the
matter again to us for reconsideration of the judgment rendered in State
of Orissa v. Adwant Charan Mohanty & Ors., [1995] Supp. 1 SCC 470. We
thought that there was a conflict between the judgment in State of Orissa
v. Amab Kumar Dutta, JT (1996) 2 SC 516 and the judgment in Mohanty's H
625
626 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A case. After going through the two judgments, we find that there is no
conflict of the views. On the other hand, in A.K Dutta's case, the Bench
has followed the decision in Mohanty's case.

Smt. Indira Jaising has contended that the Government have treated
different classes of the persons, namely, electrician, plumber, mastry, fitters
B Grade II, roller mechanic, mechanic, wireman, etc...... as skilled workmen
entitled to the benefit of 60 years and that the judgment in Mohanty's case
requires consideration. We do not think that the learned counsel is right
in her submission. We have considered the entire service rules operating
in the State of Orissa and also various instructions issued by the Govern-
C ment from time to time together with the note to Rule 71(a) of the Rules.
We have categorised various persons who are eligible to superannuation at
the age of 60 years and such of those employees who have been fitted into
class III and upwards, though they are skilled or highly skilled, they are not
entitled to the benefit of 60 years for superannuation. They are required
to retire on attaining the age of 58 years while the Class IV employees,
D though skilled, semi-skilled or highly skilled alone are entitled to the
benefit of superannuation at the age of 60 years. In that view, we are of
the considered opinion that the judgment in Mohanty's case does not
require reconsideration. ·

The special leave petition is accordingly dismissed.
E
C.K. LOKESH A
v.
P.E. PANDURANGA NAIDU

SEPTEMBER 20, 1996

(K. RAMASWAMY AND G.B. PAITANAIK, .JJ.) B

Code of Civil procedure, 1908:

Order 5 Rule 20A, Order 9 Rule 13--Suit for declaration of title and
for injunction restraining the appellant from inte1jedng with suit proper- C
ty-Personal se1vice not effected on the appellant-Substituted se1vice by
publication in the new::.7Japer directed by the Court also not reaching the
appellant set ex-pmte-On becoming aware appellant filing application for
setting aside the ex-pmte decree and orde1~Allowed by Distdct Judge-Single
Judge setting aside the same-On appeal held : the Disuict Judge was right
in holding that the appellant had filed the application to set aside the ex-parte D
order within 30 days from the date of knowledge-High Court was in en·or in
i11te1fering with the same-Appellant to appear before the District Judge and
file a written statement-17ze District Judge to dispose of the suit as ex-
peditiously as possible.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13086 of E
1996.

From the Judgment and Order dated 7.12.95 of the Madras High
Court i.n C.R.P. No. 2566 of 1995.

R. Mohan and T. Raja for the Appellant. F

A.T.M. Sampath and V. Balaji for the Respondent.

The following Order of the Court was delivered :

Leave granted. G
We have heard learned counsel on both sides.

The appellant is defendant in O.S. No. 288/84 on the file of the
District Munsif Court, Cheyyar. The appellant was set ex-parte on March
30, 1985. The respondent filed a suit for declaration of his title and for H
627
628 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A injunction restraining the appellant from interfering with the suit property,
i.e., the land to the extent of 2 acres and 30 cents. It is admitted that
personal service was not effected on the appellant. It would appear that
the Court has directed to effect the substitute service by publication in the
newspaper but that also did not reach the appellant. On becoming aware
of the ex-parte decree and order in 1990, the appellant filed an application
B under Order 9, Rule 13, C.P.C. within 30 days from the date of his
knowledge to set aside the decree and order. He filed an application under
Section 5 of the Limitation Act to condone the delay. The district Judge
condoned the delay holding that :

"I uphold the submissions of the petitioner that the petitioner had
c no knowledge of the case nor he was aware of the pending case
and, therefore, he is entitled to prefer this petition within 30 days
from the date of knowledge. hence the petition is allo~ed."

Against the aforesaid order, the respondent carried the matter in
D revision. The learned single Judge allowed the petition setting aside the
order passed by the District Judge. Thus, this appeal by special leave.

It is contended by Sri Sampath, learned counsel for the respondent,
that the respondent had taken all the steps available under Order 5 CPC
including of effecting service through substitute service under Rule 20A,
E Order 5 CPC. Therefore, the Court was right in setting the appellant ex
parte and passing the ex-pa1te decree. The learned District Judge after
going through the entire material on record came to the above conclusion
that the appellant had not been served with a notice and, therefore, he was
entitled to file the application under Article 123 of the Schedule of Limita-
tion act, which is 30 days from the date of knowledge. Accordingly, the
p application came to be filed, though belated by 2015 days. Under these
circumstances, the learned District Judge was right in holding that the
appellant had filed the application to set aside the ex- parte appeal within
30 days from the date of knowledge. The High Court was clearly in error
in interfering with the order passed by the District Judge.

G The appeal is accordingly allowed. The order of the High Court is·
set aside and that of the District Judge stands confirmed. The appellant is
directed to appear before the District Judge on 28th October, 1996 and he
should also file a written statement. The learned District Judge is directed
to dispose of the suit as expeditiously as possible. No costs.

H G.N. Appeal allowed.
KRISHI UTPADAN MANDI SAMITI ORAi DISTRICT, A
JALAUN THROUGH ITS SECRETARY
v.
AMAR SINGH AND ANR.

SEPTEMBER 20, 1996
B
[K. RAMASWAMY AND G.B. PA'ITANAIK, JJ.]

Land Acquisition Act, 1894 :

Sections 23(1-A), 23(2), 26 and 28-Compensation Award passed by C
the Reference Cowt-On appeal High Court awarding additional amount,
enhancing solatium and also awarding interest-Held : High Court was in
en-or in granting the additional amounts to which the claimants not en-
titled-17iey are entitled to interest @ 6% on the enhanced compensation
from date of taking of possession of the land till date of deposit and solatiwn
at 15% on the enhanced compensation. D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 13090 of
1996.

From the Judgment and Order dated 19.5.94 of the Allahabad High
Court in C.M.A. No. 3684/90 in P.A. No. 4 of 1981. E
O.P. Rana, T. Mahipal ~nd Pradeep Misra for the Appellant.

V.K.. Choudhary and A.S. Pundir for the Respondents.

The following Order of the Court was delivered : F
Leave granted.

Though the notice was issued, neither the acknowledgment nor the
unserved cover has been received from the second respondent. The first
respondent is appearing through the counsel. G
We have heard the learned counsel for the appellant and the first
respondent. A notification under Section 4(1) of the Land Acquisition Act,
1894 was published on March 1, 1973. The award of the Collector was
made on 15th October, 1975. On reference under Section 18, the Civil
Court enhanced the compensation on January 30, 1975. On July 9, 1981, H
- 629
630 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the appeal filed by the State was dismissed confirming the compensation
@ Rs. 10,000 per acre. Subsequently, the claimant's appeal was disposed
1

of on August 24, 1987 with enhancement of the solatium and interest and
also the additional amount under Section 23(2), proviso to Section 28 and
Section 23(1-A) respectively. In March 1990, application under Section
151, CPC filed by the appellant for correction of the award granted by 'the
B High Court was dismissed on May, 1994. Th~s, this appeal by special leave.

It is now well settled legal position that when the award itself under
Section 26 was passed by the reference Court on January 10, 1979, the High
Court was obviously in error in awarding the additional amount under the
C Amendment Act 68 of 1984 as per Section 23(2), proviso to Section 28 and
Section 23(1-A) enhancing solatium to 30%, interest @ 9% for one year
and @ 15% thereafter from the date of taking possession on enhanced
compensation and additional amount @ 12% per annum from the date of
the notification till the date of taking possession or award, whichever is
earlier. In these circumstances, the High Court was obviously in error in
D granting those additional amounts. When an application under Section
151, CPC was filed, the High Court ought to have corrected its misrake,
but instead it dismissed it. Under these circumstances, we hold that the
claimants are not entitled to the aforesaid benefits; instead, they are
entitled to the interest @ 6% on the enhanced compensation from the date
E of taking possession of the land till the date of deposit and solatium at 15%
on the enhanced compensation.

The appeal is accordingly allowed, but without' costs.

G.N. Appeal allowed.
F
•

..
GIRIDHARI PARAMANAND VADHAVA ETC. A
V,
STATE OF MAHARASHTRA

SEPTEMBER 23, 1996

B
[G.N. RAY AND G.B. PATTANAIK, JJ.]

Indian Penal Code 186(}-Sections 302/ 120-B and 120-B-Brutal mur-
der of an innocent young school boy-kidnapped and held for ransom by the
accused-Demand for Rs. 2 lacs-Consented and assured by the victim's
famiZJVictim subjected to physical and mental torture with utmost C
brutality-Killing by strangulation of neck of the victim with a belt by the
accused-Conviction by trial court-Held, evidence clearly established that the
accused tortured the victim both physically and rnentally apart from taking
active role in holding the victim for ransom and murdering him-Conviction
and sentence upheld. D

Te"orist and Disruptive Activities (Prevention) Act 1987-Section 3(1)
and 3(2) (i}-Kidnap of an innocent school boy-Held for ransom-Despite
promises by the family members-Boy was killed brutally-Held, intention to
strike te"or in the minds of people can be reasonably inferred-An innocent
boy was killed only because demand for ransom amount was iiot met by the
E
f amity members-Such killing can not but send a shock wave and bring about
te"or in the minds of the people of the locality-Hence rightly convicted and
sentenced.

According to the Prosecution, 'V', the deceased was studying in a F
school. Appellant (A-3) was the friend of 'V' and also of P.W. 3. A casio
piano of 'V' was bought by P.W. 3 on the negotiations of Appellant. On
September 15, 1992 at 7.00 P.M., Appellant took 'V' along with him on a
scooter from his house, on the false pretext that the price of the Piano
could be realised by 'V' from P.W. 3 by coming to the farm house of P.W. G
3. The Farm house belonged to P.W. 10, an aunt of P.W. 3 A2, A4 and A5
had taken a room on rent on the first floor of the farm house. PW 5 was
··a friend of PW3 and was visiting P.W.3 in the farm house quite frequently.
At the relevant time P.W. 5 was present at the place of occurrence along
with P.W. 3, and their hands were tied by the accused persons to ensure
that both of them would not go out alid shout for help. H
631
632 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A At about 8.15 P.M. on September 15, 1992, 'V's family started sear-
ching for their soµ and when all the efforts failed they informed the Police
Station. At about 11.15 P.M., a person talked to the complainant, the
grandfather of 'V', on telephone in Hindi and informed him that 'v' was in
their custody and he would be released if the amount of Rs. 2 lacs would
B b e paid. 'V' also talked to the complaint on phone and stated that the
said persons were severely beating him and would kill him. 'V' requested
the complainant to save him by paying the demanded amount. 'V' also
informed that he was being tied with a rope and a revolver was pointed on
his head. The complainant requested the person who talked to him earlier
not to beat 'V' and he would comply with their demand.
c
The police was informed. They went to the house of A.3, but were
informed that since morning, he had gone to Bombay. At about 4,30 a.m.;
a complaint was lodged.

On September 16, 1992 at about 6.00 a.m. the police informed the
D complainant that 'V' had been brought to the hospital. On reaching the
hospital, 'V' was found dead, wearing only an under pant, and several
injuries including swelling on the neck of the dead body, were noticed. The
complainant was informed that the accused had kidnapped 'V' and had
taken him to the premises of a Farm house :md they had killed 'V' as the
E ransom of Rs. two lacs had not been paid to them.

After apprehending A3, the police were led by him to the Farm house,
wherein all the other accused persons were present except one 'B', and they
were apprehended.

F Considering the evidences adduced in the case the Designated Court
came to the finding that the accused were guilty of the offences punishable
under Section 120 B IPC and Section 302 read with Section 120 B IPC and
also for the offence under Section 3(2)(1) of TADA and convicted al the
said accused for the aforesaid offences. The designated court sentenced
G each of the accused to suffer imprisonment for life on each count by
indicating that the sentences would run concurrently. Hence this appeal.

Dismissing the appeal, this Court

HELD : 1.1. It has been clearly proved by PW3 and PW5 that all the
H accused including A3 had taken part in killing V after b.olding him for
G.P. VADHAVAv. STATE 633

ransom and attempting to realise money from his family. From his A
evidence, it has transpired that 'B'; was a dreaded criminal. He had
extorted money from other persons on previous occasions. He also master-
minded the crimes committed by the accused including A3 and had also
taken the leading role and finally killed 'V' by strangulating him with his
own belt. But from the evidences adduced in the case, it has also been
B
clearly established that all the other accused including A3 conspired to
hold for ransom when he would be brought to the Farm House. All the
said accused also actively associated with 'B' in murdering 'V'. [654-D, E]

1.2. When A3 had realised the price of the piano, there was no
necessity of bringing 'V' for realisation of the price of the said piano from C
PW3 residing in the said Farm house, situated in a lonely place. It is in
the evidence that 'B' was not residing in the first floor but at that time he
was also present at the Farm house when 'V' was taken there. The satis-
faction expressed by 'B' by thanking A3 for doing an excellent job for
bringing 'V', a son of Katyare family indicates that 'B' and other accused D
had been waiting for A3 who was expected to bring the only son of his
parents in Katyare family. It will be significant to note in this connection
that 'B' did not cause any enquiry as to who was the boy but he definitely
caused the enquiry as to whether or not the boy brought by A3 was a
member of the Katyare family. This fact coupled with subsequent events
and the role played by A3 in threatening 'V' with serious consequences if E
he would not listen to the dictates of 'B' and his associates and his overt
act in slapping PW 3 and asking him to remain quiet and also tying his .
hands so that he could not go out of the Farm house and thereafter
connecting the residential telephone of 'V' from the telephone at the Farm
house so that the demand for ransom could be made. This clearly indicates F
that A3 had conspired that 'V' after being taken to the farm house would
be held for ransom to extort money from 'V's family. It is true that A3
himself did not assault 'V' and also did not torture him like some of the
co-accused, but he had taken an active role in holding 'V' tightly when 'B'
had decided that 'V' would be killed and started pulling with force the belt
which was fastened around the neck of 'V'. Both PW 3 and PW 5 have G
specifically stated that A3 along with other accused held 'V' tightly when
he Was trying to free himself from the clutches of 'B', so that killing by
stran'gulation was facilitated. [649-A-D]

State of Maharashtra v. Som Nath Thapa and Others; (1963) 3 SCALE H
634 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A 449, referred to.
1.3. It is true that A3 himself did not assault 'V' and also did not
torture him like some of the co-accused, but he had taken an active role
in holding 'V' tightly when 'B' had decided that 'V' would be killed and
started pulling with force the belt which was fastened around his neck.
B Both PW3 and PW5 have specifically stated that A3 alongwith other
accused held 'V' tightly when he was trying to free himself from the clutches
of 'B', so that killing by strangulation was facilitated. When searches were
made by the members of the family to trace out 'V', the family members
had also gone to house of A3 because 'V' had left his home in his company.
C The family members of A3 disclosed that he had left for Bombay in the
morning. The fact remains that A3 had not left for Bombay but he was very
much in the town itself. It is quite likely that in view of the conspiracy to
hold 'V' for ransom, A3 knew that he would not come back to his home at
night and presumably to explain his absence from his home, he had made
a false representation to the members of his family that he would go to
D Bombay. [653-D-H, 654-A-C]

2.1. The intention to strike terror in the minds of the people can be
reasonably inferred because 'B' declared such intention in no uncertain
term by indicating that 'V' should be killed in order to send message to
E the people in the locality that if the demand of 'B' and his associates was
not met, extreme consequences of killing of innocent persons would be
resorted to. In ~rder to send such message to the society, it was decided
that 'V' would be killed and he was killed for giving effect to the intended
threat to the people. If an innocent boy is killed only because the deinand
for ransom amount was not met by the family members, such killing
F cannot b_ut send a shock wave and bring about terror in the minds of the
people of the locality. [654-H, 655-A-B]

Niranjan Singh Karam Singh Punjabi Advocate v. Jitendra Bijaya and
Ors., [1990) 4 SCC 76, referred to.

G 2.2. In the facts of the case, the Designated Judge has rightly con-
victed the accused for offences under Section 120 B and Section 302 read
with Section 120B of the IPC. In any event, for the offences of murder the
accused have been convicted and sentenced to life imprisonment. It will be
of little consequence so far as sentence part is concerned, if the conviction
H under Section 3(2) (1) of TADA is not made. [655-D-E]
G.P. VADHAVAv. STATE 635

2.3. So far as the other co-accused are concerned, some of them had A
even tortured 'V' both physically and mentally apart from taking active
role in holding 'V' for ransom and murdering him. Hence, convictions of
all the accused for the aforesaid offences are fully justified and no inter-
ference is called for against such convictions. [655-F]

2.4. So far as the question of quantum of punishment is concerned, B
it appears that it was 'B' who had masterminded that crime and had taken
the leading role in committing the crime. Although, other accused who
• faced the trial in the absence of 'B', since absconding, are also guilty of the
offences under Sections 120B and 302 read with 120B of the IPC and
Section 3(2) (1) of TADA. In the facts of the case, it does not appear that c
their offence murderin~ 'V' can be held to be an offence for murder in the
rarest of the rare cases. The Designated Court has, therefore, rightly
passed the sentence of life imprisonment against the accused. Therefore,
appeals preferred by the convicted accused are dismissed and also appeal
preferred by the State for enhancing the sentence. [655-G, H, 656-A-B]
D
2.5. A crime even if perpetrated with extreme brutality may not
constitute 'terrorist activity' within the meaning of Section 3(1) of TADA.
For constituting 'terrorist activity' under Section 3(1) of TADA, the activity
must be intended to strike terror in people or a section of the people or
bring about other consequences referred to in said Section 3(1). Terrorist E
activity is not confined to unlawful activity or crime committed against
individual or individuals but it aims a.t bringing about terror in the minds
of people or section of people disturbing public order, public peace and
tranquility, social and communal harmony disturbing 01· destabilising
public administration and threatening security and integrity of the
country. [654-F-H]
F

Hitendra Vishnu Thakur v. State of Maharashtra, [1994) 4 SCC 602,
referred to.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. G
319 of 1995 Etc.

From the Judgment and Order dated 22.9.94 of the Designated Court
at Nasik in Special Case No. 1of1993.

Ms. Rani Jethmalani, S.M. Sarkar, Parvez Siddiqui, Qamarruddin, H
636 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Rajiv Mehta for Kailash Vasdev for the Appellants.

K.T.S. Tulsi, Additional Solicitor General and S.M .Jadhav for the
Respondent.

The Judgment of the Court was delivered by
B
G.N. RAY, J. These appeals have been filed under Section 19 of the
Terrorists and Disruptive Activities (Prevention) Act (hereinafter referred
to as TADA) against convictions and sentences passed by the learned
Judge. Designated Court, Nasik in Special Case No. 1of1993 by Judgment
C dated September 21, 1994. Five accused including the three appellants
were tried for offences under Sections 143, 364, 368, 385, 302 read with
Section 120B and Section 140 IPC and Section 3 (2) (1) of TADA.

The prosecution case in short is that on september 15, 1992, the
D complainant Kantilal Katyare returned to his house at about 8.15 P.M. He
was then informed by his wife that his grandson Vaibhav had gone with the
accused No. 3 Girdhari who is the appellant in Crl. Appeal No.319 of 1995
on a scooter to bring the price of casio piano since sold by vaibhav but
Vaibhav had not returned. Suspecting something foul, Vaibhav's father had
gone in search of Vaibhav. At about 9.30 P.M., Vaibhav's father Vijay
E informed the complainant on phone that Vaibhav could not be traced. He
had, therefore, gone to the Deolali Camp police station. The complainant
had also informed the police on phone to search Vaibhav. At about 11.15
P.M. a person talked to the complainant on phone in Hindi informing the
complainant that Vaibhav was in their custody and if the amount of Rs.
p two lacs would be paid, Vaibhav would be released. Vaibhav also talked /

to the complainant on phone stating that the said persons were severely
beating him and would kill him. So he should pay the amount as demanded
by them. On enquiry by the complainant, Vaibhav told that he was talking
from Deolali Camp. Vaibhav also informed that he was tied with a rope
and a revolver was pointed on his head and the said persons were not
G . allowing him to give their phone number or addresses. Vaibhav requested
the complainant to save him. The complainant thereafter requested the
person who talked to him earlier, not to beat Vaibhav and he also informed
that he was prepared to comply with their demand and they would take
away the amount or the complainant would himself come with the amount
H at the place to be named by them.
G.P. VADHAVAv. STAIB(G.N.RAY,J.) 637

It is the prosecution case that immediately thereafter, the com- A
plainant went to the Nasik Road police station and informed the matter to
the police. Along with police he had also come to D<?olali Camp and they
had also gone to the house of Girdhari accused No. 3 But they were
informed by the family members of Girdhari that since morning, Girdhari
had gone to Bombay. They also searched the house of the fri~nds of B
Vaibhav but Vaibhav could not be found.

Vijay also searched for Vaibhav but without any success. At about
4.30 A.M. on September 16, 1992, a complaint was lodged expressing
apprehensions that at about 7.00 P.M. on September 15, 1992. Vaibhav had
been kidnapped by Girdhari under the pretext of realising the price of C
casio but later on the accused had demanded ransom of R. two lacs. At
about 6.00 A.M. on September 16, 1992, the police had come to the
complaint's house and informed him that Vaibhav had been brought to
Bytoo hospital. Thereafter, the complainant had gone to the hospital where
they found the dead body of Vaibhav. He was wearing only an unlier pant D
and several injuries including swelling on the neck on the dead body of
Vaibhav, were noticed. The complainant was informed that Girdhari, Birju
and their colleagues had kidnapped Vaibhav and had taken him to the
premises known as Mithun Farm near, Deolali camp and they had killed
Vaibhav as the ransom of Rs. two lacs had not been paid to them.
Accordingly, a supplementary complaint was recorded as part of the E
complaint Ex. 21 and Crime No. 323 of 1992 was registered by the police.

The investigation had been carried out by Mr. Pote Police Inspector
(Crime) Ex.76, Police Inspector Mr. Sarnaik Ex. 93, Mr. Marathe, Police
Inspector (Crime) Ex. 95 and Mr. Chaudhari Police Inspector (Crime) F
Nasik Ex. 98. The investigations made by the police disclosed that Girdhari
was apprehended by Police Inspector Dilip Daswani Ex. 25 and Shankar
Albard Ex. 74 at about 4.30 P.M. On September 16, 1992 outside Mithun
Farm house. Accused No. 1 Ranjit @ Ravindra and accused No. 2 Ravi @
Raviraj were also arrested on September 16, 1992 by 2.30 P.M. Accused G
No. 4 Major alias Ravindar Mogal was arrested on November 29, 1992.
Witness Prabhakar Bawiskar had held identification parade on December
25, 1992 (Ex. 53} in which PW 4 Dilip Daswani identified accused No. 5
as per panchnama Ex. 50. Prabhakar Bawiskar, the Special Judicial
Magistrate again held identification parade on January 14, 1993 (Ex. 53)
in which witness Shankar Albard identified accused No. 5 as per H
638 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A panchnama Ex. 52. Accused Nos. 1, 2, 3 and 4 were produced before Shri
Bansode, Dy. Commissioner of Police on November 4, 1992 for recording
their confessional statements. The said accused were given 48 hours time
for reflection. Thereafter, they were again produced before the Dy. Com-
missioner of Police on November 16, 1992. These four accused Nos 1, 2, 3
and 4 had given their confessional statements Ex. 83, 87 85 and 81 respec-
B tively before the Dy. Commissioner of Police.

The said accused however at the trial had stated that Birju who had
killed Vaibhav by strangulating him with the help of his belt had absconded ..
All the accused denied the charges made against them and claimed to be
C tried and they asserted that they had been falsely involved in the case. The
accused Nos 1 to 4 also contended that their confessional statements before
the Dy. Commissioner of Police were recorded after they were severely
beaten and under threat of their being killed and they had not voluntarily
given confessional statements recorded in Ex. 81, 83, 85 and 87. Accused
D No. 1 in his statement under Section 313 of the Criminal Procedure Code
also stated that absconding accused Birju Indori, PW 3, PW 5 and Car-
roline themselves formed a gang and Birju was the agent of Katyare Family.
.The accused No. 2 stated in the statement that though he had no concern
with the alleged offences, he was brought by the police from his house at
Deolali Camp under the assurance that he would be released on the same
E evening but he was falsely involved in the said case. The accused No. 3
Girdhari stated that he was a college student and also worked as a
salesman in a cloth stores. The accused No. 4 stated that on September 17,
1992 when he was playing football on Cantonment school ground, the
police jeep came there and he was brought to Deolali Camp police station.
F He had given his name as Ravindra Mohan Pande but the police were
insisting that his name was Virendra Major Pande and were alleging that
he was a colleague or companion of the absconding accused Birju Indori.
He also stated that he was given a severe beating at the police station and
along with him 3 to 4 persons were apprehended by the police. Two ladies,
a boy of fair complexion and the said 3 to 4 persons were brought to Mukti
G Dham where some talks took place between Shri Pote, Police Inspector
and the said 3 to 4 persons. He was only detained but the others were
allowed to go. He also alleged that he was given electric shock on his
private part. He thereafter became unconscious and later on brought to
the civil hospital Nasik where his injury was sutured. Accused No .5 alleged
H that in the newspaper he had read about the incident wherein his name
G.P. VADHAVAv. STA1E[G.N.RAY,J.) 639

was also mentioned as a person involved in murdering Vaibhav Therefore, A
along with the said newspaper, he himself had gone to the police station
and gave his name as Sanjay Mohan Jadhav. The police insisted him to
disclose who was Bandya and he pleaded his i1:,rnorance .He also alleged
that he had been falsely implicated in the said case.

P.W. 10 Carroline has deposed that Mithun Farm House belonged B
to her and PW 3 Pravin was her sister's sons. Such fact has also been stated
by PW 3 Pravin. Both the said witnesses have deposed that Pravin was
staying in Mithun Farm house since September 1992. PW 3 and PW 5 have
deposed that there was a phone in Mithun Farm House and the number
of the telephone is 42177. The police has also noted the presence of a C
telephone in Mithun Farm House, number of which is 42177. Ex. 38 is a
bill of the said telephone for the period from ·June 6, 1992 to August 5,
1992 and such phone stands in the name of Carroline the witness No. 10.
The complainant and his daughter-in-law PW 2 deposed that they have also
got a phone, the number of which is 61841. The learned Designated Court D
has, therefore, held that it has been clearly established that there are two
phones respectively at the said two premises namely at Mithun Farm and
at the house of the deceased Vaibhav.

About the location of Mithun farm house, the depositions of PWs. 3, E
5, 22-25 get corroboration from the Map Ex.. 29 and the panchanama of
pl~ce of offence Ex. 30 .. It transpires that the place where the inciqent had
taken place is isolated. From the evidence of PW.3 and also from the
evidence of PW. 10, it is revealed that/PW3 had been staying in the Mithun
Farm House belonging to his aunt, PW. 10. Accused Nos. 2, 4 and 5 had
taken a room on rent on first floor of the house. The owner of the said
F
Mithun Farm House has also deposed that she had let out the first floor
of the house to accused Nos. 2, 4 and 5 at a monthly rental of Rs. 500.
Such deposition stands unchallenged. It has been established by cogent
evidence that PW. 5 was a friend of PW 3 and the said PW5 used to come
to the said Farm House to meet his friend PW 3. It is also established that G
a boy aged about 10 years was engaged as a part time domestic helper for
washing the utensils of PW 3. It also transpires from the deposition of PW
5 that PW 3 and 5 were reading in the same class and since two years prior
to the said incident, PW 5 was visiting PW 3 in the said Mithun Farm
House quite frequently. H
640 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A It may be stated here that no identification parade was held in
respect of accused No. 3 Girdhari. The said accused was apprehended by
the police and such fact is established from the deposition of PW 4, 18, 22,
23 and 24. It also transpires that after apprehending accused No. 3, he was
taken in a' police jeep and the accused No. 3 had led the police to the
Mithun Farm House.
B
The learned designated court has observed that in view of such facts
there was no necessity of holding any identification parade for the accused
No. 3. From the evidences of PWs. 23 and 24 it also transpires that when
the police reached the Mithun Farm House along with accused No. 3, the
C lights inside and outside the house were switched on. PW, 23 has deposed
that four persons were seen standing in the varandah. One of them was the
absconding accused Birju. The said two witnesses have also deposed that
on noticing the presence of the police party, Birju had shouted that police
had come and they should run away. Such depositions of PWs 23 and 24
D also stand corroborated from the evidences of PWs. 3 a.nd 5 who had also
heard the said statement made by Birju. PW 23 has deposed that P.S.I.
Gite chased Birju and he asked the other police personnel to chase the
other culprits. PW 23 thereafter chased 0th.er persons who were running
towards the south. The said PW 23 could apprehend one of them at a
distance of 100 feet and produced him before PSI Gite and the person who
E was apprehended by PW 23 is accused No. 1. Similarly, PW 24 has deposed
that on being asked by PSI Gite, he also chased one of the accused who
was running towards the east and he apprehended the said accused at a
distance of 100 ft. and the person so apprehended is accused No. 2.

F The learned designated court has observed that such depositions of
the police personnel are fully reliable and there is nothing on record which
may impel the court to discard such evidence. PW 2 Meena the mother of
the deceased, has deposed that accused No. 3 Girdhari was working in
Deepak Hosiery. She ha! further deposed that Deepak Hosiery was very
close to her house. The complainant and PW 2 Meena have also deposed
G that there was friendship between the deceased Vaibhav and Accused No.
3 Girdhari and accused No. 3 was on visiting terms with Vaibhav at his
residence.

The actual incident in holding the deceased for ransom and the
H incident of murdering him after torturing him brutally and mercilessly
G.P. VADHAVAv. STATE [G.N.RAY,J.] 641

assaulting him had taken place inside the Mithun Farm House. PW3 the A
resident of Mithun Farm House and PW 5, the friend of P.W. 3 who was
then present in the said Farm House, have given a detailed account as to
bow Vaibhav was brought in Mithun Farm House by the accused No. 3 on
the pretext of realising the price of a casio piano which was sold by Vaibhav
to PW 3 and how thereafter the accused Birju and other accused came B
down from the fist floor and thereafter they started assaulting and torturing
Vaibhav. PW 3 and PW 5 have deposed that on two occasions Birju
telephoned to the members in the house of the cleccased Vaibhav demand-
ing ransom and he also compelled Vaibhav to speak to the members of his
family over the telephone that his life was in danger and the persons who
had held him for ransom were mercilessly beating him and if the money C
was not paid as demanded, he would be killed. From the depositions of
PWs. 3 and 5, it clearly transpires that although Birju took leading part in
holding the deceased Vaibhav for ransom had also demanding such ransom
on two occasions after connecting the telephone number at the house of

-
!
Vaibhav from the telephone kept in the said Mithun Farm, the other D
accused also played their respective role in assaulting and torturing the
deceased after tying PW 3 and PW 5 and threatening them not to utter a
word, otherwise to be killed. Both the said PWs. 3 and 5 have deposed that
when second time the house of Vaibhav was contacted from the telephone
kept in Mithun Farm and Birju talked on the telephone, Birju disconnected E
the telephone and declared that the amount of Rs. two lacs as demanded
by him was not gong to be paid and Vaibhav should, therefon 'Je killed
to set an example that if the demand of Birju was not met, it would entail
a very severe consequence.

F
Both the said witnesses have also deposed that Vaibhav was un-
dressed and seriously assaulted and with the help of the belt of Birju, Birju
tried to strangulate him. At one stage, the accused No. 3 Girdhari cau-
tioned Birj11 that if the !Jelt would be pulled on so tightly, the boy would
die immediately and that should not be done. Birju then replied that the
. boy should be killed and he started pulling the belt tightly around 'the ne~k G
of Vaibhav with force. At that time all the accused including Girdhari held
Vaibhav tightly, who was then desperately trying to free himself, so that
Birju could execute the strangulation. Both PW 3 and PW 5 have deposed
that after some time froth started coming from the mouth of Vaibhav and
when the belt being pulled with great force gave away, the other accused H
642 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A holding Vaibhav released their hold. Vaibhav fell on the ground dead. Both
of them have deposed that when second time, Vaibhav's house was con-
tacted over the telephone from Mithun Farm, Vaibhav was forced to speak
on the phone and Vaibhav had told his mother by saying that Mummy
should pay the amount as demanded otherwise he would be killed. PW 2
B has also deposed to the same effect that when the accused contacted the
telephone of the house of Vaibhav for the second time, PW 2 had picked
up the telephone and she heard Vaibhav speaking to her over the
telephone to meet the demands of the accused otherwise he would be
tortured and killed. The demand for ransom as made by Birju over the
C telephone on the first occasion stands corroborated by the deposition of
the complainant who received the said telephone call.

Considering the evidences adduced in the case, the learned desig-
nated court has come to the finding that the prosecution case was fully
established that although the price for the piano had been paid by PW 3
D to the accused No. 3 a day before when such piano was delivered to him,
Girdhari accused No. 3 acting on a false pretext to realise the price of the
said piano from Mithun Farm took Vaibhav to the said Mithun Farm
House. Immediately after Vaibhav was brought by Girdhari in the said
Mithun Farm, the other accused including the absconding accused Birju
E came down from the first floor and when Birju enquired as to whether the
said boy was from Katyare family and Girdhari answered in the affirmative,
Birju said that Girdhari had done excellent job. Thereafter, attempt to
realise two lacs of rupees by way ransom was made by the said accused
including the absconding accused Birju and having failed to get any as-
p surance from the mother of Vaibhav, who is PW 2 Meena, that rupees two
lacs would be paid as demand, Birju took the decision that Vaibhav should
be murdered, to set an example as to what would happen if their demand
was not met. Thereafter, the said boy was murdered after being very cruelly
tortured and mercilessly assaulted by the accused. The learned designated
court has come to the finding that the accused were guilty for the offences
G punishable under Section 1208 IPC and Section 302 read with Section
1208 IPC and also for the offence under Section 3(2)(1} of TADA and he
convicted all the said accused for the aforesaid offences. The learned
designated court has sentenced each of the accused to suffer imprisonment
for life on each count by indicating that the sentences would run concur-
H rently.
G.P. VADHAVAv. STA1E[G.N.RAY,J.] 643

Against the said order of· conviction and sentence passed by the A
learned Designated Court accused No. 3 Girdhari has preferred Crl.
Appeal No. 319 of 1995 before this court and accused No. 4 Major @
Revindra Mogal Pande has preferred Crl. Appeal No. 1305 of 1995. The
State of Maharashtra has also preferred Crl. Appeal No. 702 of 1993
praying for enhancement of sentence of the convicted accused in view of
the grave nature of offences committed by them. All the said appeals have B
been heard analogously and are being disposed of by this common judg-
ment.

Ms. Rani J athmalani, learned counsel appearing for the appellant
Girdhari, the accused No. 3 has submitted that Girdhari was admittedly a C
friend of the deceased Vaibhav and was on visiting terms with Vaibhav. He
had only negotiated a deal of selling a casio piano belonging to Vaibhav
which PW 3 intended to purchase as he happened to know both of them.
In order to secure the price of the said piano sold by Vaibhav to PW 3 he
had taken Vaibhav to Mithun Farm. There is no evidence to hole! that D
Girdhari belonged to the group of absconding accused Birju and other
accused who used to stay in the first floor of Mithun Farm. It is not unlikely
that Birju or other residents of first floor had noticed Vaibhav coming to
Mithun Farm and they got down from the first floor with an intention to
hold Vaibhav for ransom and Girdhari had no idea of such intention of the
other accused including the absconding accused Birju. E

Ms. Rani Jethmalani has contended that when Birju enquired as to
whether Vaibhav belonged to Katyare family Girdhari answered in the
affirmative and according to depositions of PWs 3 and 5, Birju expressed
his happiness for bringing Vaibhav to Mithun Farm. The learned counsel F
for the appellant Girdhari has submitted that it was not unlikely that Birju
who was a hardened criminal for which evidences have been led, and was
contemplating to hold Vaibhav for ransom became happy when for a
different purpose, Vaibhav was taken by Girdhari to the Mithun Farm and
expressed his happiness on seeling Vaibhav brought to the said farm by
Girdhari. Form such evidence, it cannot be held that Girdhari was a party G
to conspiracy to hold Vaibhav for ransom. Ms. Jethamalani has submitted
that only because PW 3 has deposed that he had paid the price of the
piano, on the previous day to Girdhari, it cannot be held in the absence of
any corroboration, that PW 3 had actually paid the price. If the price was
really paid, it was quite unlikely that Girdhari would take Vaibhav for H
644 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A realisation of the price of the piano only at the risk of being exposed that
he was dishonest. Ms. Jethmalani has further submitted that Girdhari was
not supposed to anticipate that there would not be other persons present
at Mithun Farm when Vaibhav was taken there because admittedly the said
farm house was a residential unit. She has submitted that the finding by
the learned designated court that Girdhari was a party to the conspiracy
B in holding Vaibhav for ransom and in execution of such conspiracy, he had
brought Vaibhav on a false plea of realising the price of casio, is based
more on surmise and conjecture than on any convincing and clinching
evidence. Hence, conviction of Girdhari on account of conspiracy must be
held illegal.
c
Ms. Jethmalani has also submitted that even if depositions of PW 3
and PW 5 are taken to be correct on their face value, it clearly transpires
from the deposition of PW 3 and 5 that it was Birju who was commanding
every one to act according to his dictate. Girdhari was asked to connect
the telephone at the house of Vaibhav because he knew the number but
D Girdhari did not make any demand for ransom either on the first or on the
second occasion when residential telephone of Vaibhav was connected. On
both the occasions Birju spoke over the phone and demanded ransom. Ms.
J ethamalani has submitted that it has been deposed by both PW 3 and PW
5 that Girdhari asked Vaibhav to act as per direction of Birju because Birju
E and his associates were dangerous persons. Such advice of Girdhari, ac-
cording to learned counsel, only indicates that being a friend of Vaibhav,
he was alarmed and greatly concerned for the well being of Vaibhav_ when
Birju and his associates came down and held Vaibhav for ransom.

Ms. Jethmalani has submitted that the overt act alleged against
F Girdhari is that he had tied Praveen's hands and slapped him when he had
enquired as to why Birju and his associates were holding Vaibhav. Such
act on the part of Girdhari, according to learned counsel, may be reasonab-
ly explained by indicating that Girdhari did not dare flouting any command
of Birju, a notorious and hardened criminal. It is not unlikely that he was
G afraid that Praveen and his friend might be in grave danger if having
witnessed Birju and his associates in holding Vaibhav for ransom, they
would try to escape from the place or shout for help.

Ms. J ethmalani has submitted that Girdhari did not take any part in
torturing or assaulting Vaibhav or even treating him with cruelty by pouring
H Beer in his mouth or forcing him to take meat. Both PW 3 and 5 have
G.P. VADHAVAv. STATE [G.N.RAY,J.) 645

specifically deposed that when Birju tied his belt around to neck of Vaibhav A
and was attempting to pull the belt with force, it was Girdhari who had
cautioned Birju not to pull the belt with force, otherwise Vaibhav would
die. Such act of Girdhari clearly reveals that he did not intend that Vaibhav
should be killed.

Ms. J ethmalani has submitted that PW 3 and PW 5 made an omnibus B
statement that when Birju had declared that Vaibhav should be killed to
give a lesson that a dire consequence would follow if Birju's demand was
not met, all the accused held Vaibhav tightly ad Birju pulled the belt
fastened at the neck of Vaibhav \Vi.th force till he had died. The learned
counsel has submitted only for such omnibus statement, without specifying C
individual role of each of the accused as to how and what part of the body
of the victim was held by such accused, no conviction for murdering
Vaibhav can be based against Girdhari. Ms. Jethmalani has submitted that
essential ingredients of common object or common intention to murder
Vaibhav so far as Girdhari is concerned are totally absent. Unfortunately, D
the learned Judge of the designated court being obsessed with the view tha.t
Girdhari hatched a conspiracy for holding Vaibhav for ransom, proceeded
on the assumption that he had also taken part in killing Vaibhav.

Ms. Jethmalani has submitted that in any event, conviction of
Girdhari under Section 3(2)(1) of TADA is wholly illegal. The learned E
counsel has contended that from the evidences adduced in the case, it only
transpires that Birju was a hardened criminal and he had extorted money
on some occasions. Even if it is accepted that Birju and his associates
hatched a conspiracy to hold Vaibhav for ransom and formed an unlawful
assembly at Mithun Farm and actually held Vaibhav for ransom and made
demand for the · ransom money and not getting such money tortured F
Vaibhav with cruelty and ultimately killed him,such criminal activities
cannot be held to have been committed to overawe Government or to strike
terror in the people or any section of the people or to do such other acts
as mentioned in Section 3(1) of TADA so that the accused may be held to
have committed terrorist act'. The criminal activities, alleged by the G
prosecution, only indicate that the accused including the absconding ac-
cused made an attempt to realise ransom from the family of Vaibhav but ·
not being successful to realise the amount demanded, had killed the victim
after torturing him. Such act, according to learned counsel, is at best a
crime under the penal law of the land. Only because Birju exclaimed that
Vaibhav would be killed to teach a lesson to others that if demand of Birju H
646 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A was not met, the same would entail a serious consequence, it cannot be
reasonably held that the said acts would hold the society at large, terror
striken.

In this connection, Ms. Jethmalani, has referred to a decision of this
Court in Niranjan Singh Kamm Singh Punjabi, Advocate v. Jitendra Bijaya
B and Ors., [1990) 4 SCC 767. In the said case, accused exclaimed "Presently,
Raju and Kesav are having dominance in the town. We would become
dadas of the town upon taking lives out of them. Then there would not be
any rival to us in the town. Upon commission of murder of Raju and Kesav
on account of terror, the people would be scared". The designated court
C held that the materials placed before the Court did not disclose offence
under Section 3(1) of TADA. According to the designated court, the
intention of the accused was not to strike terror in the people or a section
of the people but only to eliminate Raju and Kesav their rivals in the
underworld with a view to gain supremacy of the underworld. Upholding
D the finding of the learned designated court, it has been indicated by this
Court that "a mere statement to the effect that the show of such violence
would create terror or fear in the minds of the people and none would
dare to oppose them, cannot contribute offence under- Section 3(1) of the
Act. That may indeed be fall out of violent act but that can not be said to
be the intention of the perpetrators of the crime".
E
Ms. J ethmalani has submitted that Birju might 'have intended to
. project himself to be a dreaded and hard core criminal whose dictate could
not be lightly taken but that by itself was not sufficient to make an
individual criminal act, even if perpetrated with utmost cruelty, to be an
F act which was likely to strike terror in the mind of the people at large or
a section of people as contemplated under Section 3(1) of TADA.

Ms. J ethmalani has also contended that even if it can be assumed
that Birju committed a gruesome murder by intending that such act would
strike terror in the minds of the people or a section of the people so far
G as he was concerned, there is no material which would warrant a finding
that other accused and particularly Girdhari had also intended. to strike
terror in the minds of the people by associating with Birju in co~itting
the murder of Vaibhav. Girdhari had no tack record of criminal activity.
There was no occasion for him to project himself as a notorious criminal
H to strike terror in the minds of the people. Ms. Jethmalani has submitted
G.P. VADHAVAv. STATE (G.N.RAY,J.) 647

that TADA is a monstrous Act and provisions of this Draconian statute A
must be construed very strictly so that a crime is not unjustly branded as
an offence of 'terrorist activity' under Section 3(1) of TADA.

Ms. Jethmalani has submitted that conviction of Girdhari under
Section 120b. 302 read with 120B IPC and under Section 3(2)(1) of TADA
is wholly unjustified and he should therefore be acquitted by allowing his
B
appeal.

The learned counsel appearing for the other appellants and for
accused respondents Nos. 2 and 5 in the appeal preferred by State for
enhancing the sentence, have supported the contentions of Ms. J ethmalani. C
It has been contended by the learned counsel that the absconding accused ·
Birju masterminded the crime. He made demands for ransom and when
his demands were not met, he decided to kill Vaibhav to set an example
to others as to consequences of not meeting his demand. It is Birju who
took out his own belt and fastened the same on the neck of Vaibhav and D
pulled the belt with force and thus strangulated Vaibhav and killed him.
From the evidence adduced in the trial, it has clearly come out that it was
Birju who dictated others to do certain things and they had to follow such
command. Birju was a notorious criminal and it was not possible for the
other accused to disobey his command. It is quite evident from the deposi-
tions that excepting Birju no one had decided or intended to kill Vaibhav E
but Birju decided to kill him to project his dreaded image. Even if the
accused had helped Birju in holding Vaibhav for ransom, the other accused
cannot be convicted for the offence of murder or offence under Section
3(1) of TADA. They may at best, be convicted for only abetting Birju to
hold Vaibhav for ransom The learned counsel have therefore submitted F
that convictions of the other accused for murder with conspiracy and
terrorist activities should be set side.

Mr. Tulsi, the learned Additional Solicitor General appearing for the
State, has, however, refuted the contentions of Ms. Jethmalani and other
learned counsel appearing for the convicted accused. Mr. Tulsi has sub- G
mitted that complicity of Girdhari for the offences for which he has been
convicted with other co- accused is clearly established if the following facts,
which have been convincingly proved, are taken into consideration : (a)
Girdhari had already received the price of the piano from PW 3 on the
previous day but on a false pretext of realising the price, he brought H
648 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Vaibhav to Mithun Farm House situated at a lonely place in the evening.
(b) when Birju and other accused came down to the ground floor and
enquired whether the boy from katyare family was brought, he answered
in the affirmative by addressing Birju as 'BOSS' and Birju expressed his
happiness for the good job done by Girdhari (c) when Vaibhav was
assaulted by the accused. Girdhari did no raise a voice of protest or even
B requested Birju and others not to resort to such activity of assaulting and
torturing but told to Vaibhav that he would act as dictated by the accused
by threatening that the accused were dangerous people (d) In order to
ensure that PW 3 and PW 5 would not go out and shout for help he tied
the hands of Praveen and slapped him when he protested against rough
C dealing with Vaibhav. The friend of Praveen was similarly tied by a co-ac-
cused (e) Girdhari connected the telephone at Vaibhav's house so that
demand for ransom could be made. (f) When liquor and mutton were
brought by the co- accused, Girdhari, on his own, bolted the door from
inside so as to ensure that no one could enter. (g) When finally Birju
D declared that Vaibhav should be killed, the neck of Vaib]iav was fastened
with the belt and Birju started pulling the same with force to strangulate
Vaibhav, and Vaibhav had attempted to extricate himself; Girdhari along
with other co-acctlsed tightly held Vaibhav in order to facilitate the killing
of Vaibhav by strangulation. Girdhari held Vaibhav till he breathed his last.

E Mr. Tulsi has submitted that when PW 3 told Vaibhav and Girdhari
that he had paid the price of piano on the previous day, Girdhari did not
protest against such assertion. It is, therefore, quite evident that Girdhari
brought Vaibhav to the said secluded place, namely, Mithun Farm House
in the evening on a false pretext of realising the price of piano from PW
F 3. Birju and other accused were waiting for arrival of the boy from Katyare
family and when Girdhari brought Vaibhav, they all came down from the
first floor and after ascertaining the identity of the boy thanked Girdhari
for doing an excellent job. If the fact of bringing Vaibhav to the said
secluded place on a false pretext is considered along with subsequent event
that followed in the context of specific role played by Girdhari, there is no
G manner of doubt that he was a party to the conspiracy to hold the boy for
ransom and played his role in executing the conspiracy.

Mr. Tulsi has submitted that Girdhari knowingly became a member
of an unlawful assembly and played positive role in executing the game plan
H to realise ransom from the family members of Vaibhav. Mr. Tulsi has also
G.P. VADHAVAv. STA1E(G.N.RAY,J.] 649

submitted that when Vaibhav was mercilessly tortured and assaulted and A
the belt of Birju was fastened around the neck of Vaibhav and Birju
declared that Vaibhav would be murdered and started pulling the belt with
force. Girdhari did not remain as a silent spectator but along with other
co-accused he tightly held Vaibhav so that he could not extricate himself
for which he was then making efforts, and he held Vaibhav tightly till he B
was brutally murdered. Mr. Tulsi has submitted that at the first phase of
attempt to strangulate Vaibhav, Girdhari requested Birju not to pull the
belt with much force otherwise Vaibhav would die immediately. Such
conduct of Girdhari, according to Mr. Tulsi, may be explained by indicating
that in all probability Girdhari had desired that attempt to realise ransom
money should be continued by keeping Vaibhav alive. Even if it is assumed C
that Girdhari did not, upto that moment, intend to kill Vaibhav but when
the decision was taken by Birju that Vaibhav would be killed, he shared
the common intention of killing Vaibhav by playing an active role in holding
Vaibhav tightly to facilitate the act of Killing.
D
Mr. Tulsi has submitted that whether an act is committed with an
intention to strike terror in the people or a section of people or not is to
be gathered from the commission of the act and surrounding circumstan-
ces. In the instant case, it has come out in evidence that Birju was a
dreaded and hard core criminal. He had already extorted money from
others by threatening them. Birju made a demand for large sum of money, E
namely, rupees two lakhs from the family members of Vaibhav who was
held for ransom by Birju and other co-accused. Birju decided that Vaibhav
should be killed in order to strike terror in the society by sending a clear
message that the demand made by the gang of Birju was not to be stifled
in any manner and if the demand was not met, the innocent person held F
for ransom would be killed:

Mr. Tulsi had submitted that the fact inNiranjan Singh's case (supra)
as considered by this Court was entirely different. In Niranjan Singh 's case,
the accused really intended to gain supremacy in the underworld by killing G
his rivals who were also underworld dons thereby intending to cow down
any other rival of the accused. In the facts of that case, both the learned
designated court and this court held that the evidence adduced in the case
did not warrant any finding that the accused had, in fact, intended to strike
terror in the minds of people or a section of people. Mr. Tulsi has
submitted that even in Niranjan Singh's case this court has clearly indicated H
650 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A that "It would have been a different matter, if to strike terror some innocent
persons were killed. In that case. the intention would be to strike terror
and the killings would be to achieve that objective" Mr. Tulsi has submitted
that in the instant case an innocent boy, held for ransom was brutally killed
with a clear intention to strike terror in the minds of people in that locality
so that a command of the gang led by Birju was to be acceded to without
B protest otherwise innocent person would be mercilessly killed. Such activity
by indicating clear intention constitutes offence of terrorist activity under
Section 3(1) of TADA.

In this connection, Mr. Tulsi has referred to the decision of this
C Court in Hitendra Vishnu Thalatr v. State of Maharashtra, (1994) 4 SCC 602.
In that case, this Court has considered the import of terrorist activity' as
contemplated under Section 3(1) of TADA by indicating that terrorism has
not been defined under TADA nor is it possible to give a precise definition
of terrorism or lay down what constitutes terrorism. It may be possible to
D describe it as use of violence when its most important result is not merely
physical and mental damage of the victim but the prolonged psychological
effect it produces or has the potential of producing on the society as a
whole. There may be death, injury, or destruction of property or even
deprivation of individual liberty in the process but the extent and reach of
the intended terrorist activity travels beyond the effect of an ordinary crime
E capable of being punished under the ordinary penal law of the land and its
main objective is to overawe the Government or disturb harmony of the
society or to terrorise people and the society and not only those directly
assaulted. Mr. Tulsi has submitted that the murder of the innocent boy on
failure to meet the .exorbitant demand of money immediately, was com-
p mitted with an avowed intention to strike terror in the society and such
wanton act of killing can not but bring about shock and fear psychosis in
the minds of people, thereby bringing the offence within the parameter of
'terrorist activity' .under Section 3(1) of TADA.

Mr. Tutsi has also submitted that to establish a charge of conspiracy,
G knowledge about indulgence in either an illegal act or a legal act by illegal
means is necessary. When the ultimate offence consists of a chain of
actions, it would not be necessary for the prosecution to establish to bring
home the charge of conspiracy, that each of the conspirators had "'the
knowledge of what the collaborator would do so long as it is known that
H the collaborator would put the goods unlawfully obtained to unlawful use.
G.P. VADHAVAv. STAIB[G.N.RAY,J.] 651

For such contention. Mr. Tulsi has referred to the decision of this Court A
in State of Maharashtra v. Som Nath Thapa and Others, [1963] 3 SCALE
449. Mr. Tulsi has submitted that in the instant case it was clearly declared
by Birju that Vaibhav would be held for ransom and as a matter of fact he
was held for such ransom. Thereafter demand for ransom money was made
from the family members of Vaibhav who was also tortured and compelled B
to speak over the phone to the members of the family to pay the money
demanded by the accused. When the family members failed to meet the
full amount as demanded immediately, decision to kill Vaibhav was taken
and he was killed and in such act of killing each of accused had played a
role. Mr. Tulsi has, therefore, submitted that the convictions of each of the
accused as made by the learned designated judge are fully justified and no C
interference with such convictions is warranted.

Mr. Tulsi has submitted that the innocent boy was cruelly tortured
and murdered by assaulting him mercilessly, kicking on his private part,
forcing him to consume liquor and meat and thereafter killing him by D
strangulation after undressing him and giving burn injuries on some parts
of his body with cigarette butt. Such extreme cruelty in committing the
murder of an innocent school boy make the offence of murder as one of
the rarest cases for which extreme penal~y for death is wholly justified.
Mr. Tulsi, however,has fairly submitted that quantum of punishment is
primarily the concern of the court and is to be decided by delicately E
balancing the aggravating and mitigating circumstances in committing the
crime by evaluating the evidence adduced in a case. He has submitted that
the Birju, the absconding accused, no doubt masterminded the crime and
took the leading role and also tortured the boy with extreme brutality and
ultimately killed him by strangulating, the other accused also helped him p
in perpetrating the crime and some of them also tortured the victim by
assaulting him and compelling him to consume liquor and meat. Hence, all
of them also deserve exemplary punishment for the murder of an innocent
boy.

After giving our careful consideration to the facts and circumstances G
of the case and the evidences through which we have been taken by the
learned counsel appearing for the parties, it appears that a young sch9ol
boy was brutally murdered after subjecting him to various physical and
mental torture with utmost cruelty. The deceased Vaibhav was taken from
his home by the accused No. 3 Girdhari to Mithun Farm House which was H

/ '
652 SUPREME COURT REPORTS (1996) SUPP.6 S.C.R.

A situated at a lonely place. It has been clearly established by the deposition
of the mother of the deceased PW 2 Meena that Girdhari was a friend of
the deceased and was on visiting terms with Vaibhav. It has also come out
in the evidence that Girdhari negotiated for the sale of a Casio piano which
belonged to Vaibhav and purchased by PW 3 who was also known to
Girdhari. According to PW 3, he had paid the price of the said piano on
B the previous day when such piano was delivered by Girdhari. Even then,
on a false pretext that the price of the piano would be realised by Vaibhav
from PW 3 by coming to his house at Mithun Farm, Vaibhav was taken to
the said Mithun Farm by Girdhari. When Girdhari told PW 3 that the
owner of the said casio piano had come with him to realise the piice of
C the said piano, PW 3 immediately replied that why the owner would come
when he had already paid the price for the said piano to Girdh'.:l.ri on the
previous day. Girdhari did not make any protest for such assertion about
the payment of price of piano by PW 3. Such assertion by PW 3, without
any protest by Girdhari, stands corroborated by the deposition of PW 5. It
D is, therefore, quite evident that Girdhari had received the price from PW
3 but on a false plea of realising the sale price of the piano, he induced
the deceased Vaibhav to come with him at the Mithun Farm House.

It has also come out in the evidence that Birju and other accused
were present in the first floor of the said Farm House where Vaibhav was
E taken by Girdhari. It has also been proved that immediately after the arrival
of Vaibhav Birju and other accused came down from the first floor and
ascertained from Girdhari as to whether the boy from Katyare family had
come with him. When Girdhari answered in the affirmative by addressing
Birju as 'BOSS, Birju expressed his happiness by saying that Girdhari had
F done a good job. Although it has been contended by Ms. Jethmalani that
simply because Birju expressed his satisfaction for bringing Vaibhav by
Girdhari to the said Mithun Farm House, it cannot be presumed that
Girdhari was a member to the conspiracy to hold Vaibhav for ransom, we
are not inclined to accept such submission of Ms. Jethmalani. It has already
G been indicated that when Girdhari had realised the price of the piano,
there was no necessity of bringing Vaibhav for realisation of the price of
the said piano from PW 3 residing in the said Mithun Farm, situated in a
lonely place. It has also come out in the evidence that Birju was not residing
in the first floor but at that time he was also present at Mithun Farm when
Vaibhav was taken there. The satisfaction expressed by Birju by thanking
H Girdhari for doing an excellent job for bringing Vaibhav a son of Katyare
G.P. VADHAVAv. STATE[G.N.RAY,J.) 653

family indicates that Birju and other accused had been waiting for Girdhari A
who was expected to bring the only son of his parents in katyare family. It
will be significant to note in this connection that Birju did not cause any
enquiry as to who was the boy but he definitely caused the enquiry as to
whether or not the boy brought by Girdhari was a member of the katyare
family. This fact coupled with subsequent .events and the role played by B
Girdhari in threatening Vaibhav with serious consequences if he would not
listen to the dictates of Birju and his associates and his overt act in slapping
Praveen and asking him to remain quiet and also tying his hands so that
he could not go out of the Mithun Farm and thereafter connecting the
residential telephone of Vaibhav from the telephone at Mithun Farm so
that the demand for ransom could be made. In our view, clearly indicate C
that Girdhari had conspired that Vaibhav after being taken to Mithun farm
house would be held for ransom to extort money from katyare family. It is
true that Girdhari himself did not assault Vaibhav and also did not torture
him like some of the co-accused, but he had taken an active role in holding
Vaibhav tightly when Birju had decided that Vaibhav would be killed and D
started pulling with force the belt which was fastened around the neck of
Vaibhav. Both PW 3 and PW 5 have specifically stated that Girdhari along
with other accused held Vaibhav tightly when he was trying to free himself
from the clutches of Birju, so that killing by strangulation was facilitated.
Ms. Jethmalani has submitted that when initially Birju tightened his belt
around the neck of Vaibhav and was pulling it, Girdhari requested Birju E
not to pull with force otherwise Vaibhavwould die immediately, According
to- Ms. J ethmalani, such act on the part of Girdhari only reflects that
Girdhari did not intend to kill Vaibhav. Such submission cannot, however,
be accepted because of the subsequent role of Girdhari If after making
such statement Girdhari had not taken any active role in helping Birju to p
commit the murder of Vaibhav, the said statement of Girdhari perhaps
would have indicated about his intention not to kill Vaibhav. In our view,
in all probability, as submitted by Mr. Tulsi, Girdhari wanted that Vaibhav
should be kept alive for some more time so that the ransom amount would
be realised by keeping him detained. But when Birju after talking to the
mother of Vaibhav declared that the amount as demanded by Birju was G
not going to be paid by the family of Vaibhav and Vaibhav should be killed
so as to set an example that if the demand of Bii:ju and his associates was
not met it would invite the death and then proceeded to kill Vaibhav after
undressing him and torturing him brutally, Girdhari along with other
H
654 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A accused actively assisted Birju in murdering Vaibhav by holding Vaibhav
tightly till he breathed his last. It may also be indicated here that when
searches were made by the members of the family to trace out Vaibhav,
the family members had also gone to Girdhari's house because Vaibhav
had left his home in the company of Girdhari. On enquiry at the house of
Girdhari, the family members disclosed that Girdhari had left for Bombay
B
in the morning. The fact remains that Girdhari had not left for Bombay
but he was very much in the town itself. It is quite likely that in view of the
conspiracy to hold Vaibhav for ransom, Girdhari knew that he would not
come back to his home at night and presumably to explain his absence from
his heme, he had made a false representation to the members of his family
C that he would go to Bombay.

It has been clearly proved by PW 3 and PW 5 that all the accused
including Girdhari had taken part in killing Vaibhav after holding him for
ransom and attempting to realise money from the family of Vaibhav. From
D the evidence, it has transpired that Birju was a dreaded criminal. He had
extorted money from other persons on previous occasions. He also master-
minded the crimes committed by the accused including Girdhari and had
also taken the leadin~ role and finally killed V aibhav by strangulating him
witjh his own belt. But from the evidences adduced in the case, it has also
been clearly established that all the other accused including Girdhari
E conspired to hold Vaibhav for ransom when he would be brought to
Mithun Farm. All the said accused also actively associated with Birju in
murdering Vaibhav.

A crime even if perpetrated with extreme brutality may not constitute
F 'terrorist activity' within the meaning of Section 3(1) of TADA For con-
stituting 'terrorist activity' under Section 3(1) of TADA, the activity must
be intended to strike terror in people or a section of the people or bring
about other consequences referred to in said Section 3(1). Terrorist Ac-
tivity is not confined to unlawful activity or crime committed against
G individual or individuals but it aims at bringing about terror in the minds
of people or section of people disturbing public order, public peace and
tranquility , social and communal harmony, disturbing or distabilising
public administration and threatening security and integrity of the country.
In the instance case, the intention to strike terror in the minds of the people
can be reasonably inferred because Birju declared such intention in no
H uncertain term by indicating that Vaibhav should be killed in order to send
G.P. VADHAVAv. STATI~[G.N.RAY,J.) 655

the message to the people in the locality that if the demand of Birju and A
his associates was not met, extreme consequence of killing of innocent
person would be resorted td. In order to send such message to the society,
it was decided that Vaibhav would be killed and Vaibhav was killed for
giving effect to the intended threat to the people. If an innocent boy is
killed only because the demand for ransom amount was not met by the B
family members, such killing cannot but send a shock wave and bring about
terror in the minds of the people of the locality. In Niranjan Singh's case
(supra), this Court has also indicated that killing of underworld dons who
were held to be rivals of the accused for gaining supremacy in the under-
world cannot be held to have been intended to strike terror in the minds
of the people or a section of the people but it will assume altogether a C
different dimension if in order to strike terror in people or a section of
people some innocent persons are killed because in that case, the intention
to strike terror will achieve that objective. It is the impact of the crime and
its fall cut on the society and the potentiality of such crime in producing
fear in the minds of the people or a section of the people which makes a D
crime, a terrorist activity under Section 3(1) of TADA. In our view, in the
facts of the case, the learned designated Judge has rightly convicted the
accused for offences under Section 3(1) of TADA besides convicting each
of them under Section 120B and, Section 302 read with Section 120B of the
IPC. We may, however, indicate here that in any event, for the offence of
murder the accused have been convicted and sentenced to life imprison- E
ment, it will be of little consequences so far as sentence part is concerned,
if the conviction under Section 3(2) (i) of TADA is not made.

So far as the other co-accused are concerned, some of them had even
tortured Vaibhav both physica~ly and mentally apart from taking active role p
in holding Vaibhav for ransom and murdering him. Hence, convictions of
all the accused for the aforesaid offences are fully justified and no inter-
ference is called for against such convictions.

So far as the question of quantum of punishment is concerned, it
appears to us that it was Birju who had masterminded the crime and had G
taken the leading role in committing the crime. Although other accused
who faced the trial in the absence of Birju, since absconding, are also guilty
of the offences under Sections 120 B and 302 read with 120 B of the IPC
and Section 3(2)(1) of TADA, in the facts of the case, it does not appear
to us that their offence in murdering Vaibhav can be held to be offence H
656 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A for murder in che rarest of rare cases. The learned designated court has,
therefore, rightly passed the sentence of life imprisonment against the
accused. We, therefore, dismiss the appeals preferred by the convicted
accused and also the appeal preferred by the State for enhancing the
sentences.

B M.K. Appeals dismissed.
JASWANT SINGH AND ANR. A
v.
THE STATE OF PUNJAB

SEPTEMBER 23, 1996

(K. RAMASWAMY.AND G.B. PATTANAIK, JJ.] B

SeTVice Law:

Appointment-Altemative appointment to Drivers who had become
blind while in service-Removal from service not justified-Altemative C
employment-Directions issued.

Anand Bihmi v. Rajasthan S.R. T.C., [1991) 1 SCC 731, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 12832-33
of 1996.
D
From the Judgment and Order dated 18.7.95 of the Punjab and
Haryana High Court in C.W.P. Nos. 3020 and 3027 of 1994.

P.N. Puri for the Appellants.

H.S. Munjral for Manoj Swarup for the Respondent. E

The following Order of. the Court was delivered :

Leave granted.

We have heard learned counsel for the parties. F
These appeals l!iy special leave arise from the judgment of the Punjab
and Haryana High Court made on July 18, 1995 in CWP Nos. 3020 and
3027 of 1994.

The appellants were appointed as drivers. While in service, they G
became blind and, therefore, they sought for alternative appointment.
Instead, they were removed from service. The controversy is no longer res
integra. This Court in Anand Bihari v. Rajasthan S.R.T.C., [1991] 1SCC731
had considered the controversy in similar circumstances and issued direc-
tions for alternative appointment as indicated in paragraph 15 of the
judgment. H
657
658 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A "In view of the helplessness shown by the Corporation, we are
constrained to evolve a scheme which, according to us, would give
relief as best as it can to the workmen such as the ones involved
in the present case. While evolving the scheme and giving these
directions we have kept in mind that the workmen concerned are
/

incapacitated to work only as drivers and are not rendered in
B capable of taking any other job either in the Corporation or
outside. Secondly, the workmen are at an advanced age of their .
life and it would be difficult for them to get a suitable alternative
employment outside. Thirdly, we are also mindful of the fact that
the reli~f made available under the scheme should not be such as
c would induce the workmen to feign disability which, in the case of
disability such as the present one, viz., the development of .a
defective eyesight, it may be easy to do. Bearing in mind all the
aforesaid factors, we· direct the Corporation as follows :

(i) The Corporation shall in addition to giving each of the retired
D workmen his retirement benefits, offer him any other alter-
native job which may be available and which he is eligible to
perform.

(ii) In case no such alternative job is available, each of the .
E workmen shall be paid along with his retirement benefits, an
additional compensatory amounts as follows :

(a) where the employee has put in 5 years' or less than 5 yeas'
service, the amount of compensation shall be equivalent to 7
days' salary per year of the balance of his service;
F
(b) where the employee has put in more than 5 years' but less
than 10 yeas' service, the amount of compensation shall be
equivalent to 15 days' salary per year of the balance of his
service;
G ( c) where the employee has put in more than 10 years' but
less than 15 years services, the amount of compensation shall
. be equivalent to 21 days' salary per year of the balance of his
service;

H ( d) where the employee has put in more than 15 years' service
JASWAN)'SINGHv. STATE 659

but less than 20 years' service, the amount of compensation A
shall be equivalent to one month's salary per year of the
balance of his service;

(e) where the employee has put in more than 20 yeas' service,
the amount of compensation shall be equivalent in two
months' salary per year of the balance of his service. B
The salary will mean the total monthly emoluments that the ..
workman was drawing on the date of his retirement.

(iii) If the alternative job is not available immediately but becomes
available at a later date, the Corporation may offer it to the C
workman provided he refunds the proportionate compen-
satory amount.

(iv) The option to accept either of the two reliefs, if an alternative
job is offered by the Corporation, shall be that of the
workman. D
Under these circumstances, the appeals are allowed. The respondent
is directed to consider the cases of the appellants for alternative appoint-
ment as and when vacancies arise. No costs~

G.N. Appeals allowed. E
A· HARJINDER SINGH SODHI
v.
STATE OF PUNJAB AND ORS,.

SEPTEMBER 23, 1996

B (K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Se1vice Law:

: Punjab Civil SelVices Executive Branch-Selection to-Public SelVice
C Commission and Govemment applying the plinciple of 50% marks for the
record and 50% for the inte1View-Held: Since no wlitten examination was
conducted for consideration of the claims of candidates, the principle adopted
is not arbitrmy-Govemment rightly did not consider the case for selection for
subsequent vacancies which would .affect the candidates who qualified later.

D CIVIL APPELLATE JURISDICTION : Special Leave Petition (C)
No.14737 of 1996.

From the Judgment and Order dated 29.1.96 of the Punjab &
Haryana High Court in C.W.P. No. 4882 of 1995.

E Arvind Kr. Shukla and Irshad Ahmad for the Petitioner.

The following Order of the Court was delivered :

This special leave petition is filed against the order of the Division
Bench of the Punjab and Haryana High Court made on January 29, 1996
f in W.P. No. 4882/95. No doubt, pursuant to the direction issued by this
Court on the earlier occasion on November 25, 1994, the case of the
petitioner was considered but he was not selected by the Punjab Public
Service Commission to Punjab Civil Services Executive Branch. Three
contentions have been raised by the learned counsel· for the petitioner .,
firstly, that when this Court had directed to consider the case of the
G Petitioner vis-a-vis others, the Public Servic~ Commission should have
evaluated the respective merit and found' whether the petitioner is more
meritorious over those persons but that was not done. We find no force in
the contention. A counter-affidavit has been filed by the Public Service
Commission in the High Court in which it was pointed out that the relevant
H merit of the 12th respondent vis-a- vis the petitioner was considered and
660
H.S. SODHI v. STATE 661

she was found to be more meritorious. The second contention was that the A
Public Service Commission having found him eligibile, called on the
government to find whether there is an additional vacant post which would
show that petitioner was more meritorious. There was an additional post
vacant but the Government had given false statement that the post was not
available. We find no force in the contention. Admittedly, having been
B
sought for nomination to the posts available in 1991, merit has to be
considered only among the candidates for appointment to nine posts arose
in 1991. Therefore, Government have rightly did not consider the case for
selection for subsequent vacancies which would effect the candidates who
became qualified later. It is then contended that 50% of the marks were
allotted to the interview and 50% marks were allotted for the record. c
Allotment of 50% for interview is arbitrary in view of the law laid down by
this Court. We find no force in the contention. It is not the case that any
written examination was conducted for consideration of the claims of the
parties. Accordingly, the Public Service Commission and the Government
have applied the principle of keeping 50% marks for the record and 50% D
for the interview. Under those circumstances, we do not find any illegality
in the order passed by the High Court.

The SLP is accordingly dismissed.

G.N. Petition dismissed.
E
A . THE AGRICULTURAL PRODUCE MARKET COMMITTEE
BY ITS SECRETARY ETC.
v.
THE LAND ACQUISITION OFFICER AND ASSISTANT
COMMISSIONER AND ANR. ETC.
B
SEPTEMBER 23, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Land Acquisition Act, 1894 :
c
Compensation-Awarded by Land Acquisition Office1~Enhanced by
Reference Cowt-Reduced by High Cowt-On appeal held, no prudent pur-
chaser in open market would offer to purchase the land on Sq. ft. basis that
too on the basis of few small sale transactions-Small extents of land would
D always fetch higher market value-Large eJ.1ent of land would never command
such high p1ice-Such instances of sale of small extent not comparable
sa/e3~Awards and decrees of the Reference Cowt and High Cowt set
aside-Matter remitted to civil cowt for decision afresh after giving oppor-
tunity to the pa1ties and then to decide the market value-Additional amount
under S.23 ( 1-A) awarded by High Cowt also set aside since land Acquisition
E Officer made the award before the Amendment Act came into f 01:ce.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12883 of
1996 Etc,

From the Judgment and Order dated 7.10.92 of the Karnataka High
F Court in M.FA. No. 837 of 1987.

KM. Reddy, N.D.B. Raju, G. Prakbhakar and M. Veerappa for the
appellants.

G Ranjit Kumar, P. Mahale and K.K. Gupta for the Respondents.

The following Order of the IS:ourt was delivered :

Leave granted.

H We have heard learned counsel on both sides.
662
AGRICULTURALPRODUCEMKf. COMMITIEE v. lAND AQSN. OFFlCER 663

Notification under Section 4(1) of the Land Acquisition Act, 1894 A
(for short, the 'Act') was published on April 14, 1977 acquiring an extent
of 3 acres 34 gunthas, 1 acre 2 gunthas for extension of Agricultural
Produce Marketing Committee, Gadag in Dharwad District ,of Karnataka
State. The Land Acquisition Officer (LAO) by his award dated January
23, 1982 determine the compensation of the rate of Rs. 0.76 per sq. ft. On
B
reference, the Civil Judge, Gadag in his award dated November 29, 1982
enhanced the compensation to Rs. 8.50 per sq. ft. On appeal under Section
54, in the impugned judgment dated October 7, 1992 and November 4, 1992
in MFA No. 837/87 and MFA No. 1962/87 respectively, the High Court of
Karnataka reduced the compensation to Rs. 7 per sq. ft. Thus, these
appeals by special leave. c
The reference Court and the High Court relied on three sale instan-
ces of an extent of 38. 4 sq. ft. and 87.35 sq. ft. which worked out at the
rate of Rs. 8 and Rs. 19.98 per sq. ft.; another sale deed of 78 sq. ft. was
worked out at the rate of Rs. 31.25 per sq. ft. The question is whether the D
principle adopted by the courts below is correct in law? It is now settled
legal position by catena of decisions of this Court that the Civil Court has
to sit in the arm chair of a willing prudent purchaser and put a question
to itself and answer whether such a willing prudent purchase would offer
to purchase in the open market at the rate Court proposed to determine
as compensation. When a total extent of 7 acres and odd is sought to be E
acquired no prudent purchaser in open market would offer to purchase
the open land on sq. ft. basis that to·o on the basis of few small sale
transactions and small extents would always fetch higher market value and
the same will never command such price in respect of large extent. This
Court had always rejected such instances as being not comparable sales. F
Therefore, the Civil Judge adopted feats of imagination and determined
the compensation on the basis thereof. Unfortunately, the High Court ·a1so
fell into the same grave error in determining the compensation on the same
basis but deducted l/3rd towards developmental charges. The principle
adopted by the courts below is obviously erroneous and, therefore, it G
cannot be sustained on that basis. However, when we asked t)le learned
counsel for the parties to produce the evidence, the appellant has produced
certain .documents indicating therein that for the same purpose they ap-
peared to have negotiated and purchased the properties for others at the
rate of Rs. 9,000 per acre and registered sale deed came to be executed.
They are produced for the first time. Shri Ranjit Kumar, learned counsel H
664 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A for the respondents, contended that the documents were not placed either '
in the reference Court or in the High Court. He also says that location of
the lands are different. Under these circumstances, we cannot decide for
the first time the value of the land on the basis thereof without giving an
opportunity to either of the parties for adducing evidence and without
B consideration thereof by the reference Court. Accordingly, the awards and
decrees of the reference Court and that of the High Court stand set aside.
The cases are remitted to the civil Court for decision afresh after giving an
opportunity to the parties to adduce evidence afresh and then decide the
market value according to law. Pend~ng these appeals since the respon-
.dents have withdrawn the amount as per the interim direction passed by
C this Court, the same may not be disturbed and the amount withdrawn will
be adjusted when the award was passed by the reference Court.

The appeals are accordingly disposed of. The judgment of the High
Court to the extent of awarding additional amount under Section 23(1-A)
of the Act stands set aside since the LAO had made his award before the
D Amendment Act came into force. No costs.
G.N. Appeals disposed of.
MADHAVKRISHNA AND ANR. A
v.
CHANDRA BHAGA AND ORS.

SEPTEMBER 23, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Code of Civil Procedure :

S. 11-Res judicata-Suit filed-Trial Cowt held that properties in
question not family prope1ties-Decree became final-Properties bequeathed C
by way of a will-Suit filed for title and possession-Decreed-High Court
setting aside the decree on the ground that the other p01ty had pe1fected the
title by adverse possession-On appeal held, since there was no claim of
hostile title against the owner of the prope1ty, the earlier decree operates as
res judicata-Subsequent suit filed within 12 years from date of death of the
owner-Obviously 110 adverse possessio11 had bee11 peifected against the D
appellant-Moreover, as against the predecessor i11 title of the appellant, the
earlier decree operates as constructive res judicata 011 the plinciple of might
a11d ought-Judgme11t a11d decree of High Court set aside.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12994 of E
1996.

From the Judgn1ent and Order dated 3.7.95 of the Madhya Pradesh
High Court in S.A. No. 102 of 1989. ~

AK. Chitale and Niraj Sharma for the Appellants. F
Sushil K. Jain for the Respondents.

The following Order of the Court was delivered :

Leave granted. G
This appeal by special leave arises from the judgment and order
dated July 3, 1995 passed by the High Court of Madhya Pradesh Bench at
Gwalior in S.A. No. 182/89.

The admitted facts are that Mansaram had two sons by name, H
665
•
666 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A Babula! and Parasram. The appellants are the descendants through
Babula) and the respondents are descendants through Parasram. In an
earlier suit No. 384-N64, the respondents pleaded in their plaint that
Mansaram, Babula) and Prasaram were members of the joint family and,
therefore, each of them was entitled to l/3rd share in the suit property.
B They sought for partition and a decree for partition by meets and bounds
to the extent of their 1/3rd share in the said house. It was held that
Mansaram was the exclusive owner of the property and that it was not a
joint family property and that the respondents have no right to partition
of the said property. The decree has become final. Mansaram, during his
C lifetime, had executed a registered Will on March 28, 1964 bequeathing
the properties to the appellants and Mansaram died on December 12,
1968. The appellants filed the suit on November 14, 1977 for declaration
of title and for possession thereof. The Civil Court in Suit No. 942-A of
1984, Vllth Civil Judge, Civil II, Gwalior by order dated May 10, 1985
D decreed the suit. On appeal, the 4th Additional Judge, Gwalio! upheld
the same by decree and judgment dated August 21, 1989. The High Court
in the second appeal while upholding that the Mansaram was the owner
and had validly bequeathed it under the Will in favour of the appellants
set aside the decree on the ground that the respondents had perfected
that title by adverse possession. Thus, this appeal by special leave.
E
It is seen that the respondents have pleaded in their written state-
ment in para 9 as under :
0

"The plaintiffs are not the exclusive owners of the suit house. The
F northern portion of House Municipal No. 217 situated at Nimbaji
Ka Bag, Jiwaji Lashkar, was constructed by Parasarm and Man-
saram. Parasaram had died 25 years ago. The defendants are the
heirs of Parasram. The southern portion was constructed by the
defendants and Mansaram together. In this way, the defendants
G are residing in the suit house in the capacity of owner which fact
is within the knowledge of the plaintiffs and their ancestors from
the very beginning. House Municipal No. 2/7 is of the joint Hindu
Family of the plaintiffs and the defendants. For this reason, the
plaintiffs have no right to file the suit and recover possession and
H the defendants being in actual possession of the suit land for over
MADHAVKRISHNAv. CHANDRABHAGA 667

12 years, the suit is barred by limitation and deserves to be A
dismissed."

No doubt there is an issue raised on the plea of adverse possession
and findings recorded by the course below was that the respondents had
not perfected their title by adverse possession. The High Court has B
reversed that finding on the ground that the respondents remained in
. possession for more than 12 years and thereby they perfected their title ·
by adverse possession. The question is : whether the view of the High
Court is correct in law? A reading of the pleadings would clearly indicate
that they set up their own title to the property and they have remained C
in possession for more than 12 years and, therefore, they sought for the
suit to be dismissed on that ground. In view of the fact that Mansaram
.was found to be the owner in the earlier suit and he died on December
12, 1968 until then the question of adverse possession did not arise. The
plea of adverse possession as against Mansaram was not pleaded. In this D
case, except repeating the title already set up but which was negative in
the earlier suit, namely, that they had constructed the house jointly with
Mansaram, there is no specific plea of disclaiming the title of the
appellants from a particular date, the hostile assertion thereof and then
of setting up adverse possession from a particular date to the knowledge E
of the appellants and of their acquiescence. Under these circumstances,
unless the title is disclaimed and adverse possession with hostile title to
that of the Mansaram and subsequently as against the appellant is pleaded
and proved, the plea of adverse possession cannot be held proved. In this
case, such a plea was not averred nor evidence has been adduced. The p
doctrine of adverse possession would arise only when the party has set
up his own adverse title disclaiming the title of the plaintiff and
established that he remained exclusively in possession to the knowledge
of the appellant's title hostile to their title and that the appellant had
acquiesced to the same. Since there is no plea that he had claimed any G
hostile title against Mansaram, the owner of the property, the earlier
decree operates as res judi,cata. The present suit was filed within 12 years
from the date of the demise of Mansarain; hence, it was obvious that no
adverse possession has been perfected against the appellant. Moreover,
as against Mansaram, the predecessor in title of the appellant, the earlier H
668 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A decree operate as constructive res judicata on the principle of might and
ought. The High Court, obviously, was incorrect in its finding that the
respondents ·had perfected their title by adverse possession.

The appeal is accordingly allowed. The judgment and decree of the
B High Court stands set aside and that of the trial Court and the appellate
Court stand restored. No costs.

G.N. Appeal allowed.
GUPTA STEEL INDUSTRIES A
v.
M/S. JOLLY STEEL INDUSTRIES PVT. LTD. AND ANR.

SEPTEMBER 23, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Code of Civil Procedure, 1908 :

Compromise decree-Modification of-Pending the first appeal in the
High Court, a compromise decree was passed whereunder respondents were
required to deposit in t1ial cowt ce1tain amounts and the appellants to hand
c
over possession of the la11d and machine1y to the receiver-Respondents did
not deposit the amou11t within time-High Cowt accepted delayed payment
by the respondents and directed the appellant to pay damages for use and
occupation as may be detennined by civil cowt-Held, as a principle of law,
High Court was b1c01Tect in inteifering with and modifying the consent decree D
unless p01ties agree for the same-However, it would not be justified to
inteifere with the order at this distance of tim~irections given to trial court
to .conduct an inquiry whether the appellant was prevented by the respondents
to remain in possession from working out the factory and decide the question
of damages accordingly-If the amount deposited to the credit of the suit had
not been invested in interest eaming secwity, respondents would pay interest E
at the commercial rate from the date of deposit till date of judgment of the
High Court.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 12995-
13000 of 1996 Etc.
F
From the Judgment and Order dated 18.7.96 of the Bombay High
Court in C.A. Nos. 3588/91, 1686, 3580/92 1415 and 1414 of 1993.

Bhimrao Naik and A.M. Khanwilkar for the Appellant.

Soli J. Sorabjee, J.K. Das and J. Savla for the Respondents. G
The following Order of the Court was delivered :

Leave granted.

We have heard learned counsel on both sides. H
669
670 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A These appeals by special leave arise from the order of the Division
Bench of the High Court of Bombay made on July 18, 1996 in Civil
Application Nos. 3588-89/91 in FA No. 1 & 2/90.

The admitted position is that pursuant to a compromise entered into
betwe.en the parties, pending the first appeal in the High Court, a com-
B promise decree came ·to be made by the Division Bench on 12.4.1991.
Clause (2) of the Compromise Decree reads as under :

"2. (a) The parties agree that Jolly Steel Industries Pvt. Ltd. and
· Jolly Torsteel Pvt. Ltd., the respondents herein and the Original
C plaintiffs in Suit No. 446 of 1987 and Suit No. 447 of 1987,
respectively, shall between them deposit in the.Trial Court, a sum
of Rs. 15,00,000 (Rupees Fifteen Lakhs only) in the aggregate on
or before 31st May, 1991 and a further sum of Rs. 10,40,000
(Rupees Ten Lakhs and forty thousand only) on or before 29th
June, 1991;
D
(b) These amounts are to be deposited in Suit No. 446 of 1987 in
the Court of Additional Civil Judge, Senior Division, Pune, on
account of over payment by the Appellants (Original defendants)
as the defendants were not liable to pay and the Respondents
(Original plaintiffs) were not entitled to receive the same.
E
(c) The Appellants (Original Defendants) are at liberty to
withdraw the aforesaid amounts."

Admittedly, Rs.12 lakhs was deposited after expiry of the last date,
p namely, June 29, 1991, after one month. In the meanwhile, the respondents
filed an application for extension of time in the trial Court. That was
dismissed on the ground that it had no jurisdiction. Consequently, the
application came to be filed in the High Court. Similarly under Clause 5(a)
the appellants also agreed to hand over possession of the disputed land
and the machinery to the receiver on or before 31st March, 1992. In view
G of the default committed by the respondent, the appellants came to file an
application, on the basis of which the High Court passed an order to
maintain the status quo on March 27, 1992. The appellants have taken out
contempt proceedings against the respondents in which another Division
Bench of the High Court passed an order on July 18, 1996 stating that the
H respondents have prevented the appellants from taking possession due to
GUPTA STEEL INDS. v. JOLLY STEEL INDS. (P) LTD. 671

the factory having been locked by the respondent. Nonetheless, no action A
was taken on the contempt petition. In the impugned order, the Division '
Bench passed an order accepting the delayed payment by the respondents
and directed the appellants to pay damages for use and occupation as may
be determined. by the civil Court. Thus, these appeals by special leave.

As principle of law, the High Court was obviously incorrect in
B
interfering with and modifying the consent decree unless parties agree for
the same. Though it is contended by Shri Bhimrao Naik, learned .senior
counsel for the appellants, that the High Court has no power after the
expiry of the period to extend the time for the compliance on the facts and
circumstances, we do not think that we would be justified to interfere with c
this order at this distance of time. However, as regards the direction to
make payment of compensation, we do not think. that it would he ap-
propriate at this stage to give any finding; however, the trial Court is
directed to conduct an enquiry whether the appellant was prevented by the
acts of the respondents to remain in possession and work out the factory. D
In the event of the finding being recorded that the appellant was prevented
by the acts of the respondent for working out the factory, the appellant will
not be liable to pay damages whatsoever. On the other hand, if it is found
that the appellant had worked out the factory in view of the fact that the
High Court had granted the order of Status quo, we think they are liable
to pay @ Rs. 2,500 p.m. E

It is stated by Mr. Soli J. Sorabjee, learned senior counsel for the
respondents, that Rs. 12,00,000 (Rupees Twelve lakhs only) deposited by
the respondents before the expiry of the period six months by way of a
demand draft, has been encashed by the appellant. The app((llants are F
denying the same. The trial Court is directed to verify whether the amount
was subsisting till the date of the order passed by the High Court and
whether the amount stands deposited in any interest earning security,
within a period of six months from the date of receipt of this order. In case
the amount was deposited to the credit of the suit and it had not been
invested in interest earning security then the respondents are directed to G
. pay interest at the commercial rate from the date of the deposit till date
of the Judgment of the High Court. In case the appellant was found to have
withdrawn it, the need to pay interest does not arise.

Mr. Bhimrao Naik further requests that the amount of Rs. 20,00,000 H
672 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A (Rupees twenty lakhs only) standing to the credit of the suit, may be
directed to be withdrawn by the appellant. We are not inclined to give any
direction. After the enquiry into mesne profits is conducted by the trial
Court and if there is any amount due to either party, the same may be
worked out accordingly by w_ay of adjustment. ·

B The appeals are accordingly disposed of. No costs.

R.P. Appeals disposed of.
BIHAR STATE ELECTRICITY BOARD A
v.
HOTEL SATKAR PVT. LTD. AND OTHERS

SEPTEMBER 24, 1996
B
[K. RAMASWAMY AND G.B. PAITANAIK, JJ.)

Indian Electricity Act, 19lo-Discontinuance of supply of
electricity-Wl1ether Electlicity Board justified in making demands on the
basis of contract demand in the absence of agreement between pa1ties-Pa1ties
agree to inter-dete1111ination of dispute for the period upto Febma1y 1984 by
c
an officer not below rank of Chief Engineer to be nominated by Govem-
ment-Clzief Engineer detennining the amount payable on the basis of actual
consumption-Held : Decision of Chief Eligineer is binding 011 the pwties.

The respondent filed a Writ Petition challenging the legality of notice D
u/s. 24(1) of the Yndian Electricity Act 1910 for disconnection of electricity
supplied to the Respondent by the appellant Board on the ground of
non-payment of bills amounting to Rs. 3,01,449.30 upto March 1979 sub-
mitted by the Board to the respondent. The respondent's contention was
that in the absence of any contract entered into with the appellant Board,
charge could be levied only on the basis of actual consumption and not on E
basis of contract demand. It was further contended that the bills submitted
by the appellant'being disputed, no notice could have been issued u/s. 24(1)
and the matter could only have been referred to be Electrical Inspector for
a decision u/s. 24(2) of the Act. The High Court accepted the contentions
of the respondent and quashed the notice of demand and issued a man- F
damns to the appellant Board not to disconnect the supply line so long as
the dispute was not resolved in accordance with law.

On appeal preferred by the Board, this Court, issued certain interim
directions regarding payment of bills on the basis of actual consumption. G
On 9th May, 1984, the appellant Board disconnected the supply of
electricity as the respondent failed to pay the bills issued by the Board. On
an application filed by the respondent, this Court by its order dated
28.5.1984, on the agreement and joint submissions of both parties, directed
that the correct amount payable be determined by an officer, not below the
rank of Chief Engineer to be nominated by Government. Subject to the H
673
674 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A respondent undertaking that the amount so determined shall be eaid
within a week and compliance therewith, this Court directed the Board to
restore the supply of electricity. Such payment however was to be without
prejudice to the rights and contentions raised in the appeal. The Chief
Engineer nominated by the Government, after hearing the parties came to
the conclusion that for the period from 1st April 1977 to February 1984,
B
the respondent was liable to pay a sum of Rs. 9,68,335.67 on the basis of
actual consumption of energy and giving credits for amounts actually paid,
the outstanding dues till February 1984 worked out to Rs. 3,84,559.33.
Objections were filed by the respondent to the report of the Chief Engineer.

C Disposing of the appeal, this Court

HELD : 1. The Respondent could not seek to wriggle out of the Chief
Engineer's report submitted pursuant to this Court's order dated 28.5.1984
which has been passed on the agreement of both parties,.on the ground that
it was without prejudice to the contentions in the appeal.,[678-E-Gr
D
2. Though initially the dispute related to bills sub-milted upto 1979 on
the date the Court pas_sed the order i.e. on 28.5.1984, the controversy was in
respect of the amount charged till February 1984 and not the original
amount which was the subject matter ofthe Writ Petition. ~679-B-C]
E
3. The Chief Engineer had determined the liability not on the basis
of contract demand but on the basis of actual consumption. [679-D·E]

4. The fact that the dispute regarding the bills raised upto 1979 had
been referred to the Chief Inspector under section 24(2) of the Electricity
F Act must be considered in the light of subsequent developments and any
order that may be passed by the Electrical Inspector cannot over-ride the
ultimate decision taken by the Chief Engineer in determining the liability
of the respondent. [679-G-H, 680-A·B]

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 921. of
1980.

. From the Judgment and Order dated 7.9.79 of the Patna High Court
iii C.WJ.C. No. 1710of1979.

H Pramod Swarup and Praveen Swarup for die ~llant.
BIHARSfATEELECIRICITYBDv. HOTELSATKAR(P)LID.(PAITANAIK,J.)675
I
S.B. Sanyal and P.P. Singh for the Respondents. A

The Judgment of the Court was delivered by

PATTANAIK, J. This appeal is directed against the judgment of
Division Bench of the Patna High Court dated 7th September, 1979 in Civil B
Writ Jurisdiction Case No. 1710 of 1978.

The respondent filed the writ petition challenging the legality of the
notice served by the appellant issued in exercise of power under Section
24(1) of the Indian Electricity Act, 1910 (hereinafter referred to as 'the
Act') inter alia on the ground that a bona fide dispute exists between the c
licensee and the consumer of electric energy and as such the provisions of
Section 24(1) of the Act will not apply. The case of the respondent -
consumer is that the appellant has been supplying energy to the respondent
hotel but the said respondent has not entered into any agreement and
therefore the appellant is entitled to be charged on the basis of the actual D
consumption and not on the basis of any contract demand. The appellant,
however, submitted bills in respect of the energy consumed on the basis of
the contract demand which the respondent did not pay and for such default
in payment of the amount charged under the bills the appellant issued
notice of discontinuance under Section 24 of the Act. According to the
respondent's case the bills submitted by the appellant being disputed, no E
notice could have been issued by the appellant under sub-section (1) of
·section 24 and the matter can only be referred to the Electrica:l Inspector
for a decision as provided under sub-section (2) of Section 24. The appel-
lant disputed the aforesaid stand of the respondent and submitted that the
respondent having failed to pay the bills raised by the appellant in respect F
of the energy consumed, the appellant was fully justified in issuing notice
under Section 24(1) of the Act and there is no illegality in the same. The
High Court by the impugned judgment came to the conclusion that no
agreement had been entered into between the licensee, namely, the Bihar
State Electricity Board and the consumer, the respondent. It further came G
to the concluSion that in the absence of any agreement between the parties
the Board w~ not entitled to raise the bills on the basis of the contract
demand and can only charge on the basis of the actual consumption of
energy. Finally, the High Court came to the conclusion that there existed
a bona fide dispute between the licensee and the consumer, and therefore,
until that dispute is resolved by a determination made by the Electrical H
676 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Inspector under sub-section (2) of Section 24, the licensee was not entitled
to issue notice of disconnection in exercise of power under sub-section (1)
of Section 24 of the Act. The High Court, therefore, q!lashed the notice of
demand and the threat of disconnection and issued a mandamus to the
licensee not to disconnect the supply line so long as the dispute is not
B resolved in accordance with law. The High Court also further held that
until the dispute is finally resolved, the consumer would be liable to be
charged on the basis of actual consumption of energy. The amount of
accumulated arrear which was indicated in the notice of disconnection to
the licensee was Rs. 3,01,449,30 upto March, 1979 which demand was
quashed by the High Court by the impugned judgment. This Court on 1st
C May, 1981 directed that the respondents shall pay the amount due on the
bills submitted to them by the appellant for the consumption and future
bills will be paid by the respondents from time to time on the basis of
actuals and such submission of bills and payment will be without prejudice
to the rights and contentions of the parties. By another Order dated 5th
D May, 1982 this Court further indicated that for the time being the Board
will not collect any energy charges by the application of the multiplier of
the two. Thereafter, as the respondent failed to pay the bills issued by the
Board, the supply of electricity to the respondent was disconnected on 9th
of May, 1984. The respondent, therefore, approached this Court by filing
an application for necessary direction to th.e Boa.rd to restore the connec-
E tion of electricity supply and to injunct the Board from disconnecting the
· supply without permission of this Court during the pendency of the appea~
which was registered as C.M.P. No. 23405 of 1984. In the said application
it was alleged that the appellant Board went on giving inflated bills based
on erroneous conclusion on the basis of 315 KVA of maximum contract
F demand which has already been quashed by the Patna High Court and
which is contrary to the interim orders issued by this Court as stated
earlier. This application was disposed of by this Court with the following
direction:

"Counsel for both the parties have jointly submitted before me that
G the parties are agreeable that the correct amount payable by the
respondent in the appeal by way of charges for actual consumption
of electric energy as per tariff rates applicable may be determined
by any officer not below the rank of Chief Engineer nominated by
the Secretary, Department of Energy, Govt. of India. This sugges-
tion appears to me just and fair which is accordingly accepted and
H
BIHARSfATEELECfRICITYBDv. HOTELSATKAR(P)LTD.[PATIANAIK,J.)677

the Secretary, Department of Energy will forth with nominate any A
one officer underhim of the rank indicated above to go into the
question as to what amount, if any, remains payable upto date by
the Hotel Satkar (P) Ltd. to the Bihar State Electricity Board,
Patna by way of consumption charges taking into account actual
consumption. Such determination will be made after hearing both
the parties of their representatives at Delhi or atPatna as will be B
convenient to the officer nominated by the Secretary, Department
of Energy. The entire process or determination of the amount
should be completed within four weeks from today. The Respon-
dent shall file an undertaking during the course of the day today
to pay to the Bihar Electricity Board within one week from the C
date of such determination of the exact amount by the Officer
nominated by the Secretary, Department of Energy. Subject to the
fulfilment of this condition the Bihar State Electricity Board is
hereby directed to restore forthwith the electric connection to the
respondent Hotel Stakar (P) Ltd. If the respondent Hotel Stakar
fails or defaults in the payment within one week of determination D
of the amount due, it will be open to the Bihar State Electricity
Board to disconnect electric connection. The payment to be made
by the Respondent in pursuance of this order will be without
prejudice to the rights and contentions raised in the appeal pend-
ing before this Court."
E
Pursuant to the aforesaid order of this Court the Chief Engineer,
Central Electricity Authority was nominated by the Secretary, Department
of Power Ministry of Energy to go into the question as to what amount, if
any, remains payable upto date by the respondent. The said Chief Engineer
heard the parties and gave opportunity to present their respective case and F
after analysing all the relevant papers and docm:pents produced before him,
came to the conclusion that for the period from April 1977 to February
1984 the respondent is liable to pay the appellant a sum of Rs. 9,68,335.67
for the energy consumed on the basis of actual consumption and out of the
said amount the consumer has paid a total of Rs. 5,83,776.34 and, therefore,
the outstanding dues till February 1984 work out to Rs. 3,84,559.33. On G
behalf of the respondent an objection to the aforesaid report of the Chief
Engineer has also been filed in this Court.

Mr. Pramod Swarup, learned counsel appearing for the appellant
contended that in view of the agreement between the parties this Court H
678 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A having passed the order on 28th May, 1984 requiring an officer not below
the rank of Chief Engineer be nominated by the Secretary, Department of
Energy, Govt. of India to go into the entire controversy and the said Chief
Engineer having gone into the controversy and having determined the
liability of the respondent, the parties are bound by the same and it is no
B longer necessary to examine the legality of the conclusion arrived at by the
Patna High Court. Mr. Sanyal, learned senior counsel appearing for the
respondent on the other hand contended that the report submitted by the
said Chief Engineer is patently erroneous, and therefore could not bind
the respondent for liability as found and further the judgment of the Patna
High Court is unassailable. The learned counsel further contended that the
C very order of this Court dated 28th May, 1984 indicates that payment to
be made by the respondent will be without prejudice to the rights and
contentions raised in appeal pending before this Court. Mr. Sanyal, further
contended that the aforesaid order passed by this Court was in relation to
a fresh demand having been raised by the Board during the pendency of
D the appeal and disconnection of the electric supply for non-payment of the
same and it would not cover the demand for the period which was the
subject matter in the writ petition before the Patna High Court and which
is the subject matter of appeal in this Court.

Having considered the rival submissions and having applied our mind
E to the relevant documents and several orders passed by this Court we are
of the considered opinion that this Court was persuaded to pass the order
of 28th May, 1984 on the agreement of the parties to get the controversy
examined by an officer not below the rank of Chief Engineer to be
nominated by the Secretary, Department of Energy, Govt. of India. The
F said Chief Engineer having examined the documents produced before him
by the parties concerned and having determined the entire liability upto
February, 1984 the respondent cannot wriggle out of the said order on the
ground that the said order was without prejudice to the contentions to be
raised in the appeal. As it appears, the controversy between the parties
was, whether the Board was justified in raising demands on the basis of the
G contract demand in the absence of any agreement between the parties and
the High Court had ordered that demand can be raised only as per the
actual consumption of energy. It further appears from the materials on
record that the meters which had been installed to record the consumption
of energy were only suitable for 5 Amp. and had their dials calibrated to
H register consumption corresponding to loads of 100 Amp., 200 Amp., 300
BIHARSfATEELECfRICfIYBDv. HOTELSATKAR(P)LTD.[PATIANAIK,J.]679

Amp. or 400 Amp. It further transpires that though initially the dispute A
related to the bills which had been submitted upto the year 1979 but during
the pendency of the appeal in this Court when fresh bills were also
submitted by the Board and the respondent did not pay the same, the
appellant took action of disconnection and respondent, therefore, ap-
proached this Court for necessary direction for reconnection. It is on B
consideration of all these materials and on the agreement between the
parties this Court passed the order on 28th May, 1984 requiring the entire
controversy to be re-examined by any officer not below the rank of Chief
Engineer to be nominated by the Secretary, Department of Energy, Govt.
of India. Thus on the date this Court passed the order on 28th May, 1984
the controversy between the parties was in respect of amount charged till C
February, 1984 and not the original amount which was the subject matter
of the writ petition. This being the position and the matter having been
duly scrutinised by an officer of the Government of India and amount
having been arrived at and the parties having agreed the controversy to be
re-examined by such officer it is not permissible for the respondent to D
contend that they are not bound by the decision thus arrived at. So far as
the merits of the objections to the report of the Chief Engineer is con-
cerned we find that the said Chief Engineer has not determined the liability
on the basis of contract demand but on the basis of the actual consumption
of energy. Mr. Sanyal's argument, however, was that in terms of sub-section E
(2) of Section 24 of the Act when the matter has been referred to the
Electrical Inspector and the said Electrical Inspector has determined the
dispute in favour of the respondent, such statutory determination cannot
be given a go-bye unless and until it is annulled by any superior authority.
He further contended that multiplying factor as applied by the Chief
F
Engineer is not at all applicable to the facts an~ circumstances of the
present case when there was no defect with the meter at any point of time.
We find ourselves unable to accept these objections raised by Mr. Sanyal
appearing for the respondent. In respect of the dispute with regard to the
liability of the respondent to make the payment as per the bills raised upto
1979 no doubt had been referred to the Electrical Inspector under sub-sec- G
tion (2) of Section 24 of the Act. But during the pendency of the appeal
in this Court when further bills were raised by the appellant and for
non-payment of the same the electrical connection was disconnected and
respondent challenged the same and ultimately agreed before this Court
to get the entire controversy examined by an independent officer of the H
680 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Government of India and this Court ultimately passed the order on 28th
May, 1984, the entire eontroversy with regard to the liability of the respon-
dent to pay for the energy consumed was before the Chef Engineer and
consequently any order passed by the Electrical Inspector under sub-sec-
tion (2) of Section 24 cannot override the ultimate decision taken by the
Chief Engineer in determining the liability of the respondent. The objec-
B
tions of Mr. Sanyal, therefore cannot be sustained.

In the aforesaid premises the impugned judgment of the Patna High
Court stands reversed and the liability of the respondent as determined by
the Chief Engineer for the energy consumed upto February 1984 becomes
C enforceable. The respondent would be liable to pay in accordance with the
said determination after adjusting the amount already paid. The appeal is
disposed of with the aforesaid direction. There will be no order as to costs.

R.D. Appeal disposed of.
HAFIZ WASHI AHMED A
v.
KUTUBUDDIN AND ORS.

SEPTEMBER 24, 1996

[K. RAMASWAMY, K. VENKATASWAMI AND B
G.B. PATTANAIK, JJ.]

Admillistratioll of the Evacuee Prope1ty Act, 1950:

Ss. 28 alld 46-Vestillg of the propelty ill the custodian of the evacuee C
property-Appellant claiming exclusive light ill a p01tion of the land vested ill
the custodiall of the evacuee propelty alld the stntcture standing thereoll Oll
the basis of a gift-Suit for illjunctioll by the appellant-Trial Court holdillg
that the questioll whether the propelty was in exclusive possession of the
appellant or was it not vested in the custodiall of the evacuee prope1ty has to
be adjudicated at the tlial of the suit-Ill revisioll petition, High Court holding D
that by operatioll of ss. 28 and 46 of the Act the prope1ty in dispute stood
vested in the custodian of the evacuee prope1ty alld the suit is not main-
tainable-Held, trial court was right in its direction-Order of the High Court
stands set aside and that of the t1ial court stands confinned-Matter is
remitted to the trial co wt for decision after adjudication of the question of E
fact whether the propelty exclusively belongs to the plaintiff-appellant as
claimed by !zim.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1007 of
1980.
F
From the Judgment and Order dated 7.11.74 of the Patna High Court
in C.R. No. 300 of 1974.

Syed Ali Ahmed, Tanweer Ahmed and Mohan Pandey for the Ap-
pellant.
G
D. Goburdhan for the State.

The following Order of the Cpurt was delivered :

This appeal by special leave arises from the judgment of the High
Court of Patna made on November 7, 1974 in C.R. No. 300/74. The H
681
682 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A appellant filed the suit for injunction restraining the respondent from
interdicting with his possession and enjoyment of a portion of the property
bearing plot No. 1323 and the structure standing thereon. The appellant
claimed that though the plot No. 1499 bounded with Khata No. 246 ·in
Touzi No. 3274 was declared as an evacuee property, the house in respect
of which the appellant claimed is situated in a part of Khata No. 263 in
B Plot No. 1499 and the same Touzi number, belongs to him. The learned
Munsif had taken the view that it is required to have an adjudication at the
trial of the suit whether the property bearing Khata No. 263, though
situated in Plot No. 1499 of the same Touzi No. 3274 was his exclusive
property or was not vested in the custodian of the evacuee property. The
C objection raised by the respondent was rejected. In the revision, the High
Court has taken the view that by operation of Sections 28 and 46 of the
Administration of the Evacuee Property Act, 1950, the lands and the
buildings stood vested in the custodian of the evacuee property and,
therefore, the suit is not maintainable. When the matter had come up this
D Court before grant of leave, the counsel were heard and it was stated that
the house or structure on Plot No. 1499 was only a portion and there was
no claim that it was evacuee property in respect portion of plot No. 1323
or any structure thereon. Therefore, this Court granted leave concerning
the question of dispossession in respect of Plot No. 1499.

E In view of fact that the appellant has claimed exclusive title in respect
of the property in dispute, the Court is required to go into the question
whether or not it is the part of the land which was declared as evacuee
property and stood vested in the custodian of the evacuee property or is
appellant's exclusive property on the basis of the alleged gift said to have
F been given to the appellant. This is a question of fact to be adjudicated at
the trial of the suit before considering whether the land vested in the
custodian of the evacuee property. If the learned District Munsif would
find that the suit property is the evacuee property necessarily it stands
vested in the custodian of the evacuee property and thereby the civil suit
is not maintainable. On the other hand, if the finding would be that it is
G not part of the evacuee property, necessarily the injunction as claimed to
be considered whether or not to be granted. All facts required to be
investigated at the trial.

We think that the trial Court was right in its direction. The appeal
H is accordingly allowed. The order of the High Court stands set aside an
HAF1ZWASHIAHMADv. KUTIJBUDDIN 683
.
that of the trial Court stands confirmed. It is made clear that we have not A
expressed any opinion on merits. The issue is at large. The matter is
remitted to trial Court. As the suit is pending for over two decades, the
trial Court is directed to dispose of the suit within a period of six months
from the date of the receipt of this order. No costs.

R.P. Appeal allowed. B
A STATE OF MADHYA PRADESH
v.
SWAROPCHANDRA

SEPTEMBER 24, 1996

B [K. RAMASWAMY, K. VENKATASWAMI AND
G.B. PATTA,NAIK, JJ.]

M.P. Ven Upaj Vyapar Viniyaman (Adhiniyam), 1969/ForestAc~ 1927:

C Ss. 19(1)(b), 22/s.52 and 53 (as amended by State Amendment Act 9
of 1965).

Seizure of truck with fore st produce-Confiscation of trnck-Wlit peti-
tion-High Cowt holding that State Act did not provide for confiscation of
truck-Appeal-Held, ss. 52 and 52-A as amended by Amendment Act 9 of
D 1965, ·having occupied the field in respect of confiscation of vehicles etc. and
the procedure thereunder, the Legislature had not expressly provided such
procedure again for confiscation under the State Act-High Court erred in
holding that by operation of s. 22, the vehicle used for transp01tation of
specified forest produces in contravention of the State Act has excluded
E applicability of the provisions of the Central Act as amended by State
Amendment Act 9 of 1965 in respect of vehicles etc.

Constitution of India, 1950:

Article 254 'occupied field' Forest Act, 1927, ss. 52 and 53 as amended
F by M.P. Amendment Act 9 of 1965 and M.P. Ven Upaj Vyapar Viniyam
Adhiniyam, 1969-Provision for confiscation of vehicle transporting the forest
produce in contravention of State Act-Held, in view of the fact that the Forest
Act as amended under the State Amendment Act 9 of 1965 has already
occupied the field for confiscation of the vehicles etc. it is not necessary again
G to provide the same procedure under the State Act.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1380 of
1988.

From the Judgment and Order dated 31.3.83 of the Madhya Pradesh
H High Court Court in W.P. No. 203of1983.
684
STATEv. SWAROPCHAlIDRA 685

Sakesh Kumar for S.K. Agnihotri for the Appellant. A
Sunil Gupta, S.K. Gambhir and Vivek Gambhir for the Respondent.

The following Order of the Court was delivered :

This appeal by special leave arises from the judgment of the Division B
Bench of the Madhya Pradesh High Court made on 31st March, 1983 in
Misc. Petition No. 203 of 1983.

The admitted facts are that since the truck bearing No. 9493 was
found carrying 22 logs of timber on October 4, 1983 without permit, it was C
seized on the said date by Divisional Forest Officer under the M.P. Ven
Upaj (Vyapar Viniyaman) Adhiniyam, 1969, No. 9 of 1969 (for short, the
'Act'). On October 5, 1983, a notice was issued to the driver of the truck
whether. he was willing to have the offence compounded. The truck was
valued at Rs. 70,000. The driver consented to the compounding of the
offenc:e and paid a sum of Rs. 1,000.. After following the prescribed D
procedure, by impugned order, the truck was confiscated as the value
thereof was not paid. The respondent challenged the power of seizure in
the writ proceedings in the High Court. The High Court held that the Act
did not provide the power of confiscation of the truck under Section
19(1)(b) of the Act. By operation of Section 22 of the Act, the Central E
Forest Act, 1927 as amended by the State Amendment Act 9 of 1965 (for
short, the 'Forest Act') is not applicable to the confiscation of the truck.
The Divisional Forest Officer had not produced the truck before the
criminal court nor did he lay any charge-sheet for prosecution of the
offender. Therefore, the order of confiscation was without authority oflaw.
Accordingly a direction was given to release the vehicle. Pending appeal F
in this Court, interim direction was given to release the vehicle to the
respondent on furnishing security for a sum of Rs. 25,000.

The question, therefore, is : whether the view taken by the High
Court is correct in law? It is contended by Mr. Sakesh Kumar, learned
counsel for the State, that Section 15 provides for the seizure. Section 19 G
gives power to compound the offence including payment of the compensa-
tion for release of the vehicle ·seized and confiscation of specified forest
produce. Section 22 excludes only the specified forest produce. Section 52
of the Forest Act read with the State Amendment Act 9 of 1965 gives
power for confiscation of the vehicle or receptacle used for transportation H
686 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A of the forest produce which includes the specified forest produce. There-
fore, there is no necessity to expressly provide in the Act, the power for
confiscation in Section 19 of the Act of the vehicle, tools or receptacle etc.
used for transportation of the specified forest produce. Therefore, the view
taken by the High Court is not correct in law.

B Mr. Sunil Gupta, learned counsel for the respondent, on the other
hand, contended that the Act has occupied the field in respect of specified
forest produce with power of seizure, power to levy penalty or collect
compensation in lieu of prosecution, power to prosecute either for the
forest offence or confiscate the forest produce. Having specified the
C detailed procedure and identified the specified forest produce alone to be
confiscated, by necessary implication, the Legislature intended not to take
by action for confiscation of the vehicle, cart, receptacle or tools etc. used
for offence of transport of forest produce. Unless it is an offence of forest
produce under the Forest Act, Sections 52 to 55 of the Forest Act have no
application to the facts. Thereby, there is no express power given by the
D Legislature to the officer to confiscate the vehicle used for the transporta-
tion of the specified forest produce. Thus considered, the High Court was
clearly right in directing the release of vehicle.

With a view to appreciate the respective contentions, it is necessary
E to look into the relevant provisions under the Act. Section 2(d) defines
"Forest Produce". Section 2(k) defines "specified area". Section 2(1) defines
"Specified forest produce". Section 5 imposes restrictions on purchase or
transport of specified forest produce except in accordance with the permit
issued under the Act and the rules made thereunder. Section 15 deals with
F power of entry, search, seizure of the forest produce given to the Forest
Officer or vehicles used for the transport to satisfy the compliance of the
Act or rules or used in contravention of the provisions of the Act or the
rules made thereunder so as to ensure compliance of the provisions of the
Act. The details thereof are not necessary for the purpose of the case. But
G Section 15(1)(iii) gives power to seize the specified forest produce in
respect of which the officer suspects that any of the provisions of the Act
or rules made thereunder have been, are being or are about to be con-
travened, along with the receptacle or vehicle containing such produce, or
the vehicle or boats, carts etc. used in carrying such produce. The
provisions of Section 102 and 103 of the Code of Criminal Procedure, 1898
H (for short, the 'Repealed Code') are pari materia with the provisions of the
STATEv. SWAROPCHANDRA 687

Code of Criminal Procedure, 1973 would apply for such seizure as well. A
Section 19(1)(b) provides that when the property, other than a specified
forest produce, has been seized is liable to confiscation, to release the same
on payment of the value thereof as estimated by such officer. The State
Government may, by notification empower a Forest Officer. Under sub-
section (2) of Section 19, on payment of such sum or money, or such value
B
or both, as the case may be, to such officer, the suspected persons shall be
discharged, and the property other than the specified forest produce, if
any, seized, shall be released and not further proceedings shall be taken
against such person or property. Resultantly, if a suspected person pays
compensation of the value of the property seized other than specified forest
produce the same should be released and no further prosecution would lie C
and the proceedings would be closed. The receptacle or vehicle, boats or
carts etc. used for the carriage of the specified forest produce when seized,
the n~cessary consequence would be, the same procedure would be fol-
lowed for non-payment. What provision of law would be applied is the
question? Section 22 of the Act, prior to the Amendment Acts 15/1987 and D
16/1990, reads as under :

"Nothing contained in the Indian Forest Act, 1927 (No. 16 of 1927)
shall apply to specified forest produce in respect of matters for
which provisions are contained in this."
E
In other words, if there is a specified procedure provided in the Act
in respect of the specified forest produce, by operation of the provisions
of Section 22 of the Act, the provisions of Forest Act stand excluded. The
question is : whether the content, i.e., specified forest produce, is liable to
confiscation and whether on payment of value of vehicle etc. it is liable to F
release and proceedings closed, whether on non-payment in respect of the
. container i.e. vehicle used in contravention of the provisions of the Act or
rules and seized by the officer, is liable to confiscation under the provisions
of the Forest Act or to be released? There is no provision for release of
the vehicle by the officer except on payment of the value thereof. It is seen
that when the Act was made with a view to prevent illicit transportation of G
the forest produce or the specified forest produce and seizure and confis-
cation have been provided for, could it be said that the Legislature in-
tended to exclude the confiscation of the container, i.e., vehicle or
receptacles or boats, carts or tools used for carriage of the specified forest
produce, i.e., content, in contravention of the provisions of the Act? The H
688 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A answer is obviously no.
In our view, the High Court was clearly in error in reaching the
conclusion that there is no such provision under the Act. It is seen that the
Act occupies the field in respect of the specified matters enumerated
thereunder. In view of the fact that the Forest Act, as amended under the
B State Amendment Act 9 of 1965 has already occupied the field for confis-
cation of the vehicles etc., it is not necessary, again to provide the same
procedure under the Act. In this behalf, it is relevant to look into the
procedure provided in the Forest Act as amended by M'..P. Act 9 of 1965.
Section 52 deals with the seizure of the property liable to confiscation and
C procedure thereunder. Section 52-A deals with the appeal against orders
of confiscation. Section 52-B deals with revision before Court of Sessions
against order of appellate authority. Section 53 gives power to the Forest
Officer to release the seized property under certain ·circumstances
enumerated thereunder. Thus, it could be seen that Section 52 as amended
by the State Amendment Act 9 of 1965 and having and Section 52-A,
D having occupied the field in respect of the confiscation of vehicles etc. and
the procedlire thereunder, the Legislature had not expressly provided such
procedure again for confiscation under the Act:-The High Court, therefore,
was clearly in error in coming to the conclusion that by operation of Section
22 of the Act, the vehicle used for transportation of the specified forest
E produce in contravention of the Act has excluded the applicability of the
provisions of the Forest Act, as amended by Act 9 of 1965 in respect of
vehicles ·etc. It was confined only to specified forest produce.

The order of the High Court stands set aside. The release order will
be subject to the respondent's paying the balance amount, after deducting
F the sum already secured. The sum of Rs. 25,800 be realised from. the
security. The balance sum will be paid within a period of six months from
today. If he does not pay the amount, it would be open to the appellant to
seize the vehicle, if available, or proceed against any other property or
person of the respondent.
G Accordingly, the appeal is allowed and writ petition stands dismissed.
No. costs. -

R.P. Appeal and Petition dismissed.
JAGANNATH KASHINATH PATIL A
v.
NARA YAN BALUGAIKAR

SEPTEMBER, 24, 1996

[K. RAMASWAMY, K. VENKATASWAMI AND B
G.B. PATTANAIK, JJ.)

Suit-Title to property-Proof-Plaintiff respo11de11t filed suit against
defe11da11t-appellant for removi11g constrnctions and i11teferi11g with his pos-
sessio11 over the plot in dispute-Plailltiff claiming title as successor of his C
matemal gra11d~mother, ow11er of the property-Mortgagee had delivered pos-
session of the property to the plai11tiff-Appella11t failing to file any proof of
title except his oral testimo11y-Held the trial court a11d the Higlr Court were
right in decreei11g tire suit-Tire plai11tiff/respondent lravi11g been found as a
successor to the property from his matemal gr011d-mother a11d was in posses- D
sion of the property delivered by the mortgagee, succession t~ the estate of
grand-motlier fumislted him the title to the property and delivery of possession
to him by tlie mortgagee rein/orees his lawful title to and legal possession of
tire property-Respondent is entitled to have tire possession retained without
any inter-/erence as sought for and the i11jrmctio11 granted by tire trial Court
is comet in law. E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. l205 of
1980.

From the Judgment and Order dated 30.1.79 of the Bombay High
Court in SA. No. 553 of 1971. F
V.B. Joshi for the Appellant.

V.N. Ganpule, Makarand D. Adkar, S.D. Singh, Kumar Parimal and
Ejaiz Maqbool for the Respondent. G
The following Order of the Court was delivered :

This appeal by special leave arises from the judgment of the single
Judge of the Bombay High Court made on January 30, 1979 in Second
Appeal No. 553 of 1971. · H
689
690 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A The admitted facts are that the respondent filed suit against the
appellant for removal of construction and to restrain him from interfer··
~
ing with his possession and enjoyment of land admeasuring 50' x 30'
marked by letter "A B C & D" in the sketch {Exh. 44) claiming title to
the said plot. The trial Court decreed the suit, on appeal it was -reversed.
B In the second appeal, the High Cpurt set aside the decree of the ·
appellate Court and confirmed the decree of the trial Court. Thus, this
appeal by special leave.

It was not disputed during the cross-examination of the witnesses that
c the property originally belongs to Rukmanibai, the maternal grand-mother
of the respondent who had executed possessory mortgage in favour of one
Pukharaj and the said Pukharaj had given back the mortgage deed and also
delivered possession of the house to the respondent. The High Court,
therefore, has taken into consideration all these factual matrix and con-
eluded that the respondent-plaintiff has succeeded to the estate of his
D
grand mother and given possession to him by the mortgagee and remained
in possession of the property. The appellant had constructed one room and
w.c. therein for convenient enjoyment of his property. Though the appellant
had set up his own title, he has not filed any proof of title except his oral
testimony. The appellate Court has concluded that the mortgage does not
E create any title and proper evidence should have been produced to estab-
lish title of the respondents and on that premise set aside the judgment
and decree of the trial Court.

Sri Joshi, learned counsel for the appellant, contended that the view
F of the appellate Court on the above facts is correct in law and the High
·Court was not justified to interfere with the finding of fact recorded by
final Court of facts. We find no force in the contention.· The plain-
tiff/respondent having been found as a successor to the property from his
maternal grand- mother and was in possession of the pr(1{erty deliver~d
· to "tI{e , "estate
G by Pukhara.J,· the mortgagee, succession gra -me:>~li.b3r
o JoorJRl;M
.rl I 10

furnished him the :t\~1E1 .~~.,t~7 J?.~9I?flf~ 1a!f1~, ~7liv9rx Pt.tR9Afff~¥~"·f-O him
by the mortgagee reinforces his lawful title to and legal possession of the
1Jf.9IJ.~r!N;1 'Oi~!'~~'iU\d<;µt
~ .· . is entitled ta:. have)1qe . '(fi00s~joruiii6tained
wj~b.oJLt APY!·~~e~fm-~~¥ 1as sougb~ufor and the .inju~tgrarltel:l1 brJlhl.
#

H trial Court is correct in law. The High Court rigtiH~ allowea .tlid ~4
J.KPATILv. NARAYANBALUGAIKAR 691

appeaL The appellant is directed to remove the offending structure put A
up on the said property within a period of three months from today. On
default, the respondent will be at liberty to have it removed in execution
of the decree and recover the costs incurred therefor from the. appellant.

The appeal is accordingly dismissed. No costs.
B
R.P. Appeal dismissed.

\' ( f. I ' • •,, .., ( t • 'i .0111 J. I If

: b:mvibb t.tiW huo') ::irlt lo l::ilnO gniwollo1 :irfT

.Jndbqqi; '.jrfJ lot hmuo::i b::ims::il b1s:id ::iv£rl ::iW ti
~{Jc)
A STATE OF KARNATAKA AND ANR.
v.
UPPEGOUDA AND ORS. ETC.

SEPTEMBER 24, 1996

B [K. RAMASWAMY, K. VENKATA SWAMI
AND G.B. PATTANAIK, JJ.)

Kamataka Land Refonns Act, 1961/Mysore Tenancy Act 1952:

C Ss. 44 and 4515(2}-'Land holder' giving the land to te11ant in 1950 for
a period of 5 yeQl'S--Tenallt remained in possession till after 2.6.1965-Land
holder claiming that the tenant had su1Tendered the land and entries in
revenue records were made accordingly-Held, entries in revenue record are
of no relevance-Mysore Tena11cy Act protected possession of the tenant-On
contractual tenancy coming to an end, statutory tenancy sets in operation and
D tenant would be liable for ejectment only on proved grounds of statutory
comravention-17iere is no order of competent authority for eviction of tenant .
on SUC/i gTQUnds-17te tenant Who Was lawfully eiatitled to CUitivate t/ti /and
personally immediately prior to coming into fol-ce of the amendment Act, but
was wrong/Ully prevented from doing so, is entitled to registration of ocatpan-
E cyu/s45.
P.G.. Esltwarappa v. M. Rudrappa & Ors., .JT (1996) 8 SC 171, i"elied.
on.

Bales/ta Ram Kltot & Ors. v. Land Tribunal, Cltikodi & Ors., (1978) K
F KW 116, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1284-85
of 1980.

From the Judgment and Order dated '21J.6.77 of the Karnatalca High
G Court lo W.A. No. 196(A) and 197 of 1977.
M. Veerappa for the Appellants.

The following Order of the Court was delivered :

H We have heard learned counsel for the appellant.
692
STATE v. UPPEGOUDA 693

Though the respondents were served with notice, they do not appear A
either in person or through counsel.

These appeals by special leave arise from the judgment of the
Division Bench of the Karnataka High Court made on June 20, 1977 in
Writ Appeal Nos. 196A and 197 of 1977.
B
The admitted facts are that Sy. No. 16 admeasuring 2 acres and 30
gunthas of land of Mattighatta village belonged to respondent No. 2
(hereinafter called, the 'Land holder'). Respondent No. 1, Puppegouda was
put in possession of the land from the year 1950 as tenant under a lease
for 5 years which was extended from time to time upto 1960. Renewal of C
lease deed was executed in 1960 for a further period of 5 years. The
Karnataka Tenancy Act, 1961 came into force protecting the tenancy rights.
Land Reforms (Amendment) Act introducing Section 44 and other
provisions came into force w.e.f. March 1, 1974 abolishing intermediary
right of land-holders and conferment of permanent rights to the tiller of. D
the soil, i.e., tenant. The land-holder became entitled to compensation ·
payable under the Act.

The question· is : whether the tenant was continuing in possession as
on the date the land stood vested in the State Government so as to confer
title on the tenant? A Full Bench of the High Court in Balesha Ram Khot E
& .Ors. v. Land Tribuna~ Chikodi & Ors., {1978) (k) KU 116 had held that
· "even if the land was not in a:c~ possession of the tenant, immediately
prior to 1st March, 1974 if it was tenanted land, it vested in the State
Governinent. That the land could not be registered in favour of the tenant
who was not in actual possession immediately prior to 1st March, 1974 was F
not relevant for the purpose of deciding the question as to whether the
land stood vested in the State Government under Section 44 of the Act".

The tenant who was lawfully entitled to cultivate the land personally
immediately prior to the commencement of the Amendment act, but was G
wrongfully prevented from doing so is entitled to registration of occupancy
under Section 45 of the Act.

The Act provides procedure to recover possession from an un-
authorised occupant by a person entitled to such possession (Sections 41,
121 and 129). A tenant who has been wrongfully or illegally prevented from H
694 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A cultivating the land may request the land Tribunal to defer consideration
of his application till possession is restored to him and if he recovers
possession, he may ask the Tribunal to proceed with his application.

In this case, in view of the fact that the tenant continued in possession
of the land from January 30, 1950 upto 2nd June 1965 when the Mysore
B Tenancy Act was in force, it protected his possession. Sub-section (2} of
Section 5 of the Tenancy Act reads as under :

"Notwithstanding any agreement usage or law to the contrary, no
tenancy shall be terminated before the expiry of a period of five
c years except on the grounds mentioned is Section 15.

Provided that with the consent of the landlord any ten~ncy may be
terminated by a tenant before the expiry of a period of five years
·by surrendering his interest as a tenant in1 favour of the landlord."

D This Court in a recent judgment in P.G. Eshwarappa v. M. Rudrappa
& Ors., JT (1996) 8 SC 171 had held that ejection of a tenant under a
decree obtained prior to the coming into force of the Karnataka Land
Reforms Act, 1961 had come into force was illegal and that he was entitled
to restitution of the possession illegally taken away from him. It was held
E 'that on the date when the Act had come into force and the tena~t was
found to be ii;i possession of the land by operation' of sub- section (1) of
Section 22, with a 11011-obstante clause, the tenant shall not be evicted from
the land held by him except on the grounds enumerated in clauses (a) to
(e) of Section 22.
F In this case, land holder has merely asserted that the tenant had
surrendered the land and entries in revenue records were received in
support thereof. It is easy to have the entries made with the assistance of
patwari who had exclusive custody of records. The object of the Tenancy
Act is to protect the tenanLs to remain in possession and enjoy it subject
G to c0mpliance of the provisions of the Tenancy Act. Contracted tenancy
come to an an end and statutory tenancy sets in operation an'd so he would
be liable for cjectment only on proved grounds of statutory contravention,
the entries of revenue recordc; arc self-~erving. There was no order of a
competent authority of eviction of tenant for contravention of the above
H mentioned grounds. The proviso, though enables a landlord to .obtain
STATE v. UPPEGOUDA 695

possession on surrender, it must be proved strictly, as several devices would A
be used to circumvent the beneficial provision and illiteracy and ignorance
of the tenant would be taken advantage of. There is no proof of eviction
of the tenant. The stand taken by the land-holder is not supported by legal
setting. The High Court committed grave error of law. Accordingly, the B
judgment of the High Court is not correct in law and stands set aside.

-
The appeals are allowed with no order as to costs.

R.P. App~als allowed.

I
A CHATTAR SINGH AND ORS.
v.
STATE OF RAJASTHAN AND ORS.

SEPTEMBER 24, 1996

B [K. RAMASWAMY, K. VENKATASWAMI AND
G.B. PATTANAIK, JJ.)

SeIVice Law:

C Rajasthan State and Subordinate SeIVices (Direct RecIUitment by com-
bined competitive Examinations) Rules, 1962:

Rule 13 Proviso, read with Rule 7-Services of the Statt-21% reserva-
tion for O.B.Cs.-RecIUitment for the year 1991-RecIUitment by competitive
examination-Preliminary examination and main examination-Number of
D candidates to be examined in· main examination to be 15 times of total
vacancies-Discretion of Commission to keep cut off marks upto 5% less
than general candidates in case of Scheduled Caste and Scheduled Tribes if
they are not in sufficient number to come up to 15 times of total num-
ber-Candidates belonging to O.B.C. category claiming the benefit of 5% cut
E off in marks like Scheduled Caste and Scheduled Tribes-Held, 5% cut off
marks in the preliminary examinations from the lower range fixed for general
candidates is confined only to Schedule Caste and Scheduled Tribe can-
didates who could not secure total aggregate marks on par with the general
candidates-The Rule expressly confines the benefit of the proviso to
Scheduled Castes and Scheduled Tribes-By process of interpretation O.B.Cs.
F cannot be declared alike the Scheduled Castes and Scheduled Tribes-Can-
didates belonging to OBCs are not entitled to 5% cut off marks as provided
under the proviso to Rule 13--However, in view of the latest amendment the
Commission would prepare and publish separate lists of candidates in each
category i.e. Genera~ OBCs, SCs, STs and physically handicapped so as to
G make up number of candidates 15 times the vacancies and enable them to
appear in the main examination.

Constitution of India, 1950 :

A11icles 14, 15(4), 16(4)-l'roviso to Rule 13. of Rajasthan State and
H Subordinate SeIVices (Direct Recruitment by Combined Competitive Ex-
696
CHATTARSINGHv. STAIB 697

aminatio11s) Rules, 1962 providing for Scheduled Caste and Scheduled Tribe A
candidates 5% cut off marks less than the general candidates in preliminary
examination so as to make them eligible for main examination-Candidates
belonging to OBCs also claiming the benefit of the proviso-Held, Scheduled
Castes and Scheduled Tribes stand as two separate classes while OBCs stand
apart-1710ugh OBCs are socially and educationally not f01ward they do not B
suffer the same social handicaps inflicted upon Scheduled Castes and
Scheduled Tribes-They are always treated dis-similar and they do not fonn
an integral class with Dalits and Tribes for purpose of Articles 16(4) and
15(4). .

Madhu Kishwar & Ors. v. State of Bihar & Ors., (1996) 5 SCC 125, C
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13118 of
19%.

From the Judgment and Order dated 30.8.96 of the Rajasthan High D
Court in C.W.P. No. 1579of19%.

Sushil Kumar Jain for the Appellants.

B.D. Sharma for the Respondt>uts.
0
E
The following Order of the Court was delivered :

Mr. B.D. Sharma, learned counsel for Public Service Commission,
takes notice.

We have heard learned counsel for the parties. F

Leave granted.

This appeal by special leave arises from the judgment and order of
the High Court of Rajasthan, made on August 30, 19% in Civil Writ
Petition No. 1579/96. The Government of Rajasthan issued a notification G
on September 28, 1993 declaring reservation to the extent of 21% of the
posts in various services of State of Rajasthan reserved for the OBCs which
was given statutory force by Rule 8-A of the Rajasthan State and Subor-
dinate Services (Direct Recruitment by Combined Competitive Examina-
tions) Rules, 1962 (for short, 'the Rules') w.e.f. September 28, 1993. H
698 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Notification dated November 21, 1994 was issued calling applications for
recruitment to 275 posts in administrative and subordinate services; of
them, 137 we:re for general candidates; 52 for OBCs.; 50 for Schedules
castes; and 36 for Schedules Tribes. On April 9, 1996, preliminary examina-
tions were conducted and results of the candidates for final examination
were declared. Candidates belonging to OBCs came to challenge the vires
B of the proviso to Rule 13.

Rule 13 of the Rules prescribes the mode of conducting preliminary
as well as main examination. It reads as under :

"13. Scheme of Examination" personality and viva-voce test :- The
c Competitive Examination shall be conducted by the Commission
in two stages i.e., preliminary Examination and Main Examination
as per the scheme specified in Schedule-III .. The marks obtained
in the preliminary Examination by the candidates, who are
declared qualified for admission to the Main Examination will not
D be counted for determining their final order of merit. The number
of candidates to be admitted to the Main Examination will be 15
times the total approximate number of vacancies to be filled in the
year in the various services and posts; provided they are otherwise
eligible, but in the said range all those candidates, who secure the
E same percentage of marks as may be fixed by the Commission for
any lowest range will be admitted to the Main Examination.

Provided further that if adequate number of candi~ates belonging
to the Scheduled Castes/Scheduled Tribes are not available
amongst the candidates to be declared qualified for admission to
F the Main Examination, the Commission may at their discretion
keep the cut off marks upto 5 (five) per cent less the General
candidates.

Candidates who obtain such minimum qualifying marks in the
Main Examination as may be fixed by the Commission in their
G discretion shall be summoned by them for an interview. The
Commission shall award marks. to each candidate interviewed by
them, having regard to their character, personality, address, physi-
que and knowledge of Rajasthani Culture. However for selection
to the Rajasthan Police Service Candidates having 'C' certificate
H of N.C.C. will be given preference. The marks so awarded shall be
CHATIARSINGHv. STATE 699

added to the marks obtained in the Main Examination by each A
such candidate."

Rule 7 prescribes the syllabus for examinations and the subjects in
which the candidates are required to write the examination as set out in
Scheduled III which deals in that behalf.
B
A reading of Rule 7 read with Schedule III would indicate that the
Scheme of Examination consists of :

(i) Preliminary Examination;

(ii) Main Examination.
c
The Preliminary Examination will consist of two papers i.e. one
Compulsory Paper and one Optional Paper, which will be objective type
and would carry a maximum of 400 marks in the subjects mentioned in'
Sections 'A' and 'B'. The Examination is meant to serve as a screening test D
only. The marks obtained in the Preliminary Examination by the can-
didates, who are declared qualified for admission to the Main Examination
will not be counted for determining their final order of merit. The number
of canaidates to be admitted to the Main Examination will be 15 times the
total or approximate number of vacancies to be filled in the year in various E
services and posts, provided they are otherwise eligible, but in the said
range all those candidates, who secure the same percentage of marks as
may be fiXed by the Commission for any lowest range, will be admitted to
the main Examination. The proviso left that embargo and empowers the
Commission to keep in its discretion the cut off marks up to 5 per cent less
than the general candidates, if adequate number of candidates belonging F
to the Scheduled Castes/Scheduled Tribes are not available amongst the
candidates to be declared qualified for admission to the Main Examination.

When the matter had gone before the Division Bench consisting of
Hon'ble B.R. Arora and J.C. Verma, JJ., the learned Judges differed on
the interpretation of the proviso to Rule 13. The learned Judge Mr. Justice G
B.R. Arora had held that the OBCs' are not entitled to the benefit of the
proviso to Rule 13 for reducing 5% of the qualifying marks secured in the
preliminary Examinations so as to enable the OBCs to be 15 times the
required number of posts reserved for OBCs. The learned Judge Mi;.
Justice J.C. Verma held that having included OBCs, SC and STs as H
700 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A backward classes in Article 16(4), the omission of them in proviso to Rule
13 would violate Article 16(4) of the Constitution. When the matter was
referred to the third Judge limited to the point of difference of opinion,
the learned Judge Mr. Justice V.J. Kokje, agreed with Shri Justice Arora
and held that proviso does not apply to the OBCs. Therefore, OBCs are
B not eligible to claim reduction of 5% of the marks secured by them in the
Preliminary Examination for enabling them to appear in the Main Ex-
amination. Thus, this appeal by special leave.

Shri Sushil Kumar Jain, learned counsel for the appellant raises
three-fold contention. According to the learned counsel, the main part of.
C Rule 13 does not speak of any minimum marks so as to enable the
candidate to appear in the Main Examination. The rule requires considera-
tion of all those candidates who have applied for the post, if they have
fulfilled basic qualifications prescribed for the posts. The qualified can-
didates are eligible to write Preliminary Examination conducted by Public .
D Service Commission. While calling the qualified candidates to the main
examination, the PSC should announce results in such a way that can-
didates numbering 15 times the total posts earmarked for each category,
are called to write the main examination. Under Rule 13 on working out
the number, the Public Service Commission has to put the minimum of the
marks in such a way that there would be available opportunity to the 15
E times the candidates belonging to various categories to appear for the main
examination. Therefore, the prescription of the minimum of the marks and
elimination of the candidates irrespective of the fact whether· or not they
reached 15 times.the posts is an arbitrary procedure adopted by the Public
Service Commission.
F
Secondly, it is contended that Article 16(4) of the Constitution does
not specify whether they should belong to Scheduled Castes, Scheduled
Tribes or OBCs. All are compendiously called Backward Classes. OBCs
have now been declared eligible for selection under the reserved quota,
G having been fused for the purpose. of Article 16(4); their elimination under
proviso to Rule 13 is arbitrary, violating their fundamental right to equality
enshrined in Articles 14 and 16(1) and 16(4). He further contends that
once the reservation has been prescribed to various categories, namely,
Scheduled Castes, Scheduled Tribes & OBCs under Article 16(4) the
J>ublic Service Commission is required to prepare a separate list of the
H candidates while declaring the result of the Preliminary Examination and
CHATIARSINGHv. STAIB 701

to call candidates numbering 15 times the total posts earmarked for them. A
The candidates who secure the minimum of the marks so as to be eligible
to appear in the main exams should be called. The latest amendment to
Rule 13 and Illrd Schedule to Rule 7 and also to Rule 10(1) of the Rules
by notification dated April 2, 1996 which indicates that the result should
be declared categoryWise, was relied on. So categoryWise declaration is B
implicit in it. The High Court, therefore, was not right in its consideration
of the effect of Rule 13.

Shri Badri Das Sharma, learned counsel for the Public Service Com-
mission, contended that main part of Rule 13 is that the Public Service
Commission would prescribe minimum cut off marks out of the aggregate C
marks secured by the general candidates in the preliminary examination
conducted as per Rule 7 read with IIIrd Schedule. From among the
candidates who obtain such minimum qualifying marks as may be fixed by
the Commission in their discretion and candidates numbering 15 times the
posts shall be summoned by. them for main examinations. If more can- D
didates should secure same cut off marks, all wUl be called for main
examination. If the candidates are more than the 15 times pos~, only that
number, and all candidates who secure the minimum cut off marks, ir-
respective of whether it exceeded 15 times or not are to be permitted to
write main examination. This interpretation is consiStent with the main part
of Rule 13. The operation of the proviso should be extended only in cases E
where the SCs and STs do not come upto the minimum of 15 times even
afte~ getting 5% of the minimum cut off marks in the lowest range. Those
candidates who secured further lowest of 5% marks less than the lowest
range of general candidates will be called to appear for the main examina-
tion. The Rule thus worked out by the Public Service Commission is F
consistent with the spirit and .letter of Rule 13. He also contends that
though OBCs declared eligible for the selection to the said services and
had 21 % of the vacancies reserved for them, the OBCs and Scheduled
Castes and Scheduled Tribes are distinct classes. The Sch~duled Castes
.and Scheduled Tribes have been dealt with separately by the Constitution. G
All OBCs, are not identified under the Constitution to get the benefit
· under Article 16(4) or 15(4); those, among them, identified by a Commis-
sion appointed by the President under Article 340 of the Constitution and
accepted by the State Government or Central Government and notification
in the Gazette as OBCs alone are treated as a Class but they cannot be
confused with the Scheduled Castes or Scheduled Tribes who would stand H
702 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A a separate class. The learned minority Judge was not right in holding that
Article 14 was violated.

As regards the third contention of Mr. Sushil Kumar Jain, Shri
·. Sharma contends that there is no need to prepare a separate result of
B various categories for whic~ the recrui~ment was called for. That became
necessary only as per the amended Rule under the notification dated April
2, 1996 which is only prospective. Therefore, it does not apply to the
· recruitment for the year 1991.

In view of the respective contentions, the first question that arises for
C consideration is whether Ruk 13, as interpreted by Shri Sushil Kumar Jain,
is valid in law? To be fair to the learned Judges of the High Court, the first
question was not addressed before the learned Judges in the manner in
which it was argued before us. The thrust of the arguments before them
was on proviso to Rule 13. A reading of Rule 13 would indicate that
D competitive examination shall be conducted by the Public Service Commis-
sion in two stages, namely, Preliminary Examination and Main Examina-
tion. As per the Scheme specified in.Rule 7 and Schedule III, preliminary
examinations are conducted on the subjects as per the syllabus and ag-
gregate marks are taken into considerati6~ to call the candidates for main
examination. Marks obtained in the preliminary examination by a candidate
E would not be counted for the purpose of main examination to determine
final order of merit. The number of candidates to be admitted to the main
examination will be 15 times the total approximate number of vacancies to
be filled in the year of recruitment in the various services and posts/vacan-
cies notified or expected. However, the candidates would be otherwise
p eligible in a particular range. All those candidates, who secure the same
percentage of marks as may be fixed as the lowest range will be admitted
for the main examination. It would thus be seen tha.t Rule 13 read with
Rule 7 and Schedule III does not prescribe any minimum of the lowest
range of marks for calling the candidates for appearing iti the main
examination. What requir.es1t.P. be done,is thafthe Public Service Commis-
G sion has to co~sid.e1;itli~1tiurnb:er oJLvacaacies notified or likely to bC"filled
in11tb#oyear'(:Ofutei¢r11itm,nbrfot1oohicl\ :notifiA:a(foh 1w~ ·)published. 11'hen
canclidatm1r.wh'o :hkdloaiY.Jfear~1JforJJ1ihe lRte!imiliaijJ ~niltipp; an.ii
quidifilia cfolbmain:.examinatldn 1arie~lk:mbensunrened ibyjthte teit.'{ai'Jie,:bj:>jid
is:ft~limirr~tdmndbly!ilOn.~list bfi.l:landidates1sd1thai!~'portuttitydo sitilfmi
H hnW'>?. mminatiomsliliillrulic!fgim to eatm1taates1hurit0'ei;iil'grllij1timmlthe
CHATIARSINGHv. STATE 703

notified posts/vacancies in various services; in other words for every one A
post/vacancy there should be 15 candidates. There would be wider scope
to get best of the talent by way of competition in the examination. The
ultimate object is to get at least three candidates or as is prescribed, who
may be called for vivo-vote. Therefore, the lowest range of aggregate marks
as cut off for general candidates should be so worked out as to get the B
required number of candidates including OBCs, Schedule Castes and
Scheduled Tribes. The lowest range would, therefore, be worked out in
such a way that candidates numbering 15 times the notified posts/vacancies
would be secured so as to afford an opportunity to the candidates to
compete in the main examination.
c
Under the proviso, if that range has not been reached by the can-
didates belonging to the SCs or the STs, there may be 5% further cut off
from the last range worked out for the general candidates so as to declare
them as qualified for appearing in the main examination. In other words,
where candidates belonging to the SCs and STs numbering 15 times the D
total vacancies reserved for them are not available then the Service Com-
mission has to go down further and cut off 5% of the marks from the lowest
of the range prescribed for general candidates and then declare as eligible
the SC and ST candidates who secured 5% less than the lowest range fixed
by P.S.C. for general candidates so as to enable them to appear for the
main examination. The candidates who thus obtain qualifying marks are E
eligible to appear and write the main examination. The respective propor-
tion of 1 : 3 or as may be prescribed and candidates who qualified in the
main examination will be called by the Commission, in their discretion, for
interview. The Commission shall award marks to each candidate inter-
viewed by them, having regard to their character, personality, address,
F
physique and knowledge of Rajasthani culture as is in vogue as per rules.
However, for selection to the Rajasthan Police Service; candidates having
'C' Certificate of N.C.C. will be given preference. The marks so awarded
shall be added to be marks obtained in the main examination by each such
candidamnmuJ:.n 101 ,_ ... .:,.;b L' .. ,,,·J
' ... :".~/(ID ;;J.i,;1l '.JrlJ 1IJ nm'JU :..di ·:I fl'u!·J A'" .l . I
€J>
'.;,i,1 ·n.¥E~tkiiig')0t1tt<tifilHJSte~dill-ef'if1 ~i_ntlnittt\im·'Of,1S 1 tiime~P6Ptl:ie'
ooiididlttS&Ja¥eqaenlifte'd fifia~e-suttiJdkf~ it rwoutd;iibf be.1iec~s~
1

t~ ~ick l~ei~ffiit!ri.JJ~ser-vettleclri11iaaru&! 1tr\V6ufdiwal)bei~d!Sstriy1ll'
d~eiaw merresli1t:ib¥ <n1(;f@'tBaiilii~liftfeYtlie'!te1illPhO'filleti ~iit\ae~/pds~
sliI=@-f6'leniiblet~n\H{b tfuri\~levuHherlfuaih ~a'6oir11TlllP~et''l:ff #
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
704
.
A screening test'is to eliminate·unduly long number of persons to appear for
main examination, If more candidates are called by declaring their result
in preliminary examination, the object of Rule 15 would be frustrated.

The next question is : whether the OBCs are to be treated alike
. · B Scheduled Castes and Scheduled Tribes and given the 5% cut off marks in
the Preliminary Examination under proviso to Rule 13 and whether omis-
sion thereof prohibits the right to equality envisaged in Article 14? Article
14 provides right to equality of opportunity c.and equal protection of law.
Articles 15 and 16 are species of Article 14. Article 16(1) prohibits dis-
crimination and gives equality of opportunity to every citizen in matters
C relating to employment or appointment to any office under the State,
Article 16(4) elongates the equality of opportunity to unequals by affirm-
ative action by enjoining upon the State to make provision for reservation
of appointments for posts in favour of "any backward class of citizens"
which in the opinion of the State is noi: adequately represented in the
D service under the State. It is now well settled legal position that Article
16(4) is not exception but a facet of Article 14 and 16(1). It gives power
to the State to effectuate the opportunity of equality to any backward class
of citizens. Article· 366(24) ·defmes 'Scheduled Castes' and Article 366(25)
defines 'Scheduled Tribes'. Article 341 empowers the President in consult-
ation with the Governor of the State specify by public notification that the
E tribes or tribal communities. or parts of or groups within tribes or tribal
communities which shall for the purposes of this Constitution be deemed
to be Scheduled Tribes in relation to that State or Union territory, as the
case may be. Similarly, Article 342(1) gives power to the President to
specify the tribes or tribal communities which shall, for the purpose of
p Constitution, be deemed to be Scheduled Castes in relation to the State or
Union Territories, as the case may be. That will be subject to the law made
by the Parliament under clause (2) of Article 341 and 342(2) thereof. The
expression "Backward Classes" has ~ot been defined under the Constjtution
but the Pr.esident has been empowered to appoint as Commission to
G investigate into the conditions of backward classes for recommendation
with regard to steps to be taken by the Union or the State Governments
to remove difficulties and to improve their eonditions. Commissions like
Kelcker .Commission and Mandal Commission were appointed by the
President who identified the backward classes. On identification of social
and educational backwardness and acceptance thereof by the appropriate
H Government, the President or the Governor of the State Government
CHAlTARSINGHv. STATE 705

would issue public notification extending the benefits to improve their A
conditions. Until such a notification is published, Backward Classes are not
entitled to the benefit of reservation under Article 15(4) or 16(4) of the
Constitution. Articles 14 and 16 read with the Preamble gives equality of
opportunity in matters relating to employment or appointment to any office
under the State. By hierarchical unequal social status and denial of oppor-
B
tunities and facilities due to untouchability, a practice against Scheduled
Castes and Scheduled Tribes living in the forest area require protective
measures to remove handicaps and disavantages suffered by the members
belonging to the Scheduled Castes and Scheduled Tribes so as to enable
them to compete for selection. The appearance of injustice is denial of
justice. In Madhu Kishwar & Ors. v. State of Bihar & Ors., [1996] 5 SCC c
125, para 38, it was laid down that law is the manifestation of principles of
justice. Rule of law should establish a uniform pattern for harmonious
existence in a society where every individual should exercise his rights to
his best advantage to achieve excellence, subject to the protective dis-
crimination. The best advantage of one person could be the worst disad- D
vantage to another. Law steps in to iron out such creases and ensures
equality of protection to individuals as well as group liberties. Man's status
is a creature of substantive as well as procedural law to which legal
incidents would attach. Justice, equality and fraternity are trinity for. social
and economic equality. Therefore, law is the foundation on which the
potential of the society stands. If the law is to adept itself to the needs of E
the changing society, ;t must be flexible and adaptable. The constitutional
objective of socio-economic democracy cannot be realised unless all sec-
tions of the society partkipate in the State power equally irrespective of
their caste, community, race, religion and sex. All discriminations in sharing
the State power made on these grounds and those discriminations are to F
be removed by positive measures. The concept of equality, therefore,
requires that law should be adaptable to meet equality. Article 38 mandates
to minimise inequality in income and to eliminate the inequality in status,
facilities and opportunities not only among the individual but also among
the groups of people to secure to them adequate means to improve
excellence in all walks of life. Article 46 directs the State to promote with G
special care the educational and economic interests of the weaker sections
of the people, and in particular, of the Scheduled Castes and the Scheduled
Tribes, and to protect them from social injustice and all forms of exploita-
tion. Equal protection class, therefore, requires affirmative action for those
placed unequally. Equality for unequals is secured by treating them une- H
706 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A qually. Affirmative action or positive discrimination, th_f!refore, is inbuilt in
equality of opportunity in status enshrined in Articles 14 and 16(1) of the
Constitution. Therefore, Scheduled Castes and Scheduled Tribes stand as
two separate classes while OBCs stand apart.

B The State had evolved the principle of reservation to an office of the
State or post as an affirmative action to accord socio-economic justice
guaranteed in the Preamble· of the Constitution; the fundamental rights and.
the. directive principles which are the trinity of the Constitution to remove
social education and economic backwardness as a constitutional policy to
accord equality of opportunity, social status or dignity of person as is
C enjoined in Articles 14, 15, 16, 21, 38, 39, 39A, 46 etc. Article 335 enjoins
the State to take the claims of Dalits and Tribes into consideration for
appointment to an office/post in the services of the State consistently with
efficiency of administrati,;m. Though OBCs are socially and educationally
not forwards, they do not suffer the same social handicaps inflicted upon
D Scheduled Castes and Scheduled Tribes. Articles 15(2) and 17 furnish
historical and social dissatisfaction inflicted on them. The object of reser-
vation for the Scheduled Castes and Scheduled Tribes is to bring them into
the mainstream of national life, while the objective in respect of the
backward classes is to remove their social and educational handicaps.
Therefore, they are always treated dis-similar and they do not form an
E integrated class with Dalits and Tribes for the purpose of Article 16(4) or
15(4). Obviously, therefore, proviso to Rule 13 confines the 5% further cut
off ma:rks in the preliminary examination from the lowest range fixed for
general candidates. So, it is confined only to the Scheduled Castes and
Scheduled Tribes who could not secure total aggregate marks on par with
F the general candidates. The Rule expressly confines .the benefit of the
proviso to Scheduled Castes and Scheduled Tribes. By process of inter-
pretation, OBCs. cannot be declared alike the Scheduled Castes and
Scheduled Tribes. Therefore, the contention that the doctrine of fusing
"any backward class of citizen" in Article 16(4), further classification of
Scheduled Castes and Scheduled Tribes and OBCs. as distinct classes for
G the purpose of reservation and omission to extend the same benefits to
OBCs violates Article 14 is devoid of substance. If the logic of equality, as
propounded by minority Judge is given acceptance, logically they are also
entitled to reservation of seats in the House of the People or in tht:
Legislative Assemblies of States, though confined to Scheduled Tribes and
H Scheduled Castes, by operation of Article 334(a) of the Constitution with

Ir
CHATfARSINGHv. STATE 707

a non obstante clause engrafted therein. The founding fathers of the A
Constitution, having been alive to the dissimilarities of the socio-economic
and educational conditions of the Scheduled Castes and Scheduled Tribes
and other segments of the society have given them separate treatment in
the Constitution. The Constitution has not expressly provided such benefits
to the OBCs except by way of sp,f:cific orders and public notifications by
B
the appropriate Government. It would, therefore, be illogical and unrealis-
tic to think that omission to provide same benefits to OBCs, as was
provided to Scheduled Castes and Scheduled Tribes, was void under
Article 16(1) and 14 of the Constitution.

Accordingly we are of the view that the OBCs. are not entitled to c
5% cut off marks in the priliminary examination as provided under proviso
to Rule 13.

As regards the preparation of separate list of General, OBCs, SCs
STs and physically handicapped, in view of the fact that the latest amend-
ment has been made explicit what was implicit in Rule 13, we are of the D
view that separate lists are required to be published by the Service Com-
mission in respect of the candidates in the respective categories so as to
make up number of candidates 15 times the notified or anticipated
posts/vacancies so as to enable them to appear in the main examination. It
is true that the amendment is prospective in operation. However, it does
not detract from the efficiency of Rule 13 originally made. In view of the
E
above, the Public Serviee Commission is directed to call all those can-
didates that constitute 15 times the posts/vacancies notified or anticipated
in terms of the above declaration of law so as to enable them to appear in
the main examination.
F
The appeal is accordingly disposed of. No costs.

R.P. Appeal disposed of.
A GULZARI LAL AGARWAL
v.
ACCOUNTS OFFICER

SEPTEMBER 25, 1996

B (KULDIP SINGH AND S.P. KURDUKAR, JJ.]

Consumer Protection Act, 1986: Ss. 2(jj), 9(b), 13, 14(2), & (2A), 16,
18 and 29A.

C State Commission-President not appointed or President not discharg-
ing his function-Order passed by State Commission in the absence of
President-Validity of-Held Senionnost member shall discharge function of
President until a person is appointed to fill such vacancy or tlze President
becomes Ju,nctional in tenns of sub-mies (9) and ( 10) of R. 6-17tzts State
Commission will not be rendered non-functional for want of the Presi-
D dent-Hence order passed by tlze State Commission in the absence of the
President is neither illegal nor void-West Bengal Consumer Protection Rules,
1987, Rule 6(9) and (10).

Section 14--Scope of-Held: Consumer Fonun has no jurisdiction or
power to pass any interim order pending disposal of original complaint filed
E before it:

Interpretation of Statutes :

Hamwnious constmction-Held: Every provision in the Act should be
constmed lzannoniously with a view to promoting the object and spirit of the
F Act as long as 1w violence is caused to the plain language of the provision.

The appellant filed a complaint before the District Forum as regards
inflated telephone· bills. The District Forum passed an interim order
directing the respondent not to disconnect the telephone connection on the
G condition that the appellant deposited a sum of Rs. 4,000. The appellant
complied with the said order.

Being aggrieved the respondent filed an appeal before the State
Commission, which was dismissed. Thereafter the respondent preferred a
Revision Petition under Section 21 of the Consumer Protection Act, 1986
H before the National Commission, and it allowed the appeal on the ground
708
G.L AGARWAL v. ACCOUNTS OFFICER [S.P. KURDUKAR, J. 709

that the order passed by the State Commission was illegal and void being A
contrary to Section 14(2A) read with Section 18 of the Act since the State
Commission was not having the President at the relevant time when the
order was passed. The National Commission further held that the District
Forum had no jurisdiction or power to pass any interim order pending
disposal of an original complaint before it.
B
On behalf of the appellant it was contended that the National Com-
mission erroneously concluded that in the absence of the President of the
State Commission the other two members had no jurisdiction to deal with
the disputes/appeal filed before the State Commission; and that Section
2(jj), 14(2- A), 18-A and 29-A of the Act and Rule 6(9) and (10) of the West C
Bengal Consumer Protection Rules, 1987 should be construed har-
moniously with a view to promoting the object and spirit of the Act.

Allowing the appeal in part, this Court
D
HELD : 1.1. Every provision in an Act needs to be construed har-
moniously with a view to promoting the object and spirit of the Act but
while doing so, no violence would be done to the plain language used in
the Section. It is this principle that needs to be made applicable while
construing the provision of 14(2) and (2-A) of the Consumer Protection
Act, 1986 read with Rule 6(9) and (10) of the West Bengal Consumer E
Protection Rules, 1987. If sub-sections (2) and (2-A) of Section 14 are read
with Section 29-A of the Act and sub-rules (9) and (10) of Rule 6, it would'
be quite clear that it could never be the intention of the Legislature to stall
or render the State Commission non-functional in the absence of the
President either having not been appointed in time due to some valid F
reasons or if the President is on leave due to certain reasons beyond his
control. Sub-section (2) of Section 14 is a presumptuous provision where
the President of the State Commission is functional but it would not be
correct to say that if the President of the State Commission is non-
functional because of one or the other reason, the State Commission would
stop its functioning and wait till the President is appointed. The only G
harmonious construction that could be given to sub-sections (2) and (2-A)
of Section 14 read with sub-rules (9) and (10) of Rule 6 is that as and when
the President of the State Commission is functional, he alongwith at least
one member sitting together shall conduct the proceeding but where the
President being non-functional, sub-rules (9) and (10) of Rule 6 will govern H
710 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the proceedings. Sub-rule (9) provides that where any Sl!Ch vacancy occurs
in the office of the President of the State Commission, the senior most (in
order of appointment) member holding office for the time being, shall
discharge the function of the President until a person is appointed to fill
such vacancy. This sub-rule is made with a view to make the State Com-
mission functional in the absence of the President and not to allow the
B State Commission to be rendered non-functional for want of the President.
[716-E-H, 717-A-C]
1.2. Since the validity of sub-rules (9) and (10) of Rule 6 was never
challenged, the above view is taken on the premise that there is no
C challenge to the validity of the Rules and they hold the filed. [717-D-E]

1.3; Having regard to the Composition of the District Forum and the
, State Commission, it is more appropriate and desirable to make the
appointment of the President of the District Forum and the State Com-
mission without any delay since the complaints under the Act involved
D fairly large stakes which require a judicial approach. [717-F]
2. The consumer forum has no jurisdiction or power to pass any
interim order pending disposal of original complaint filed before it.
[718-A]
Morgan Stanely Mutual Fund v. Kartik Das, (1994) II CPJ 7 SC, relied
E
on.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 33 of
1996.

F From the Judgment and Order dated 17.5.95 of the Delhi High Court
in R.P. No. 393 of 1994.

S.K. Bhattacharya for the Appellant.

S.S. Sabarwal and S.K. Sinha for the Respondent.
G
The Judgment of the Court was delivered by

S.P. KURDUJCAR, J. This appeal is directed against the order dated
May 17, 1995, in Revision Petition No. 393/94 passed by the National
Consumer Disputes Redressal Commission, New Delhi (hereinafter
H referred to as 'National Commission'). It is not disputed that at the relevant
G.LAGARWALv.ACCOUNfSOFFICER[S.P.KURDUKAR,J.] 711

time when the order dated 21.1.1994 was passed by the State Commission A
constituted under the Consumer Protection Act, 1986 (for short 'the Act')
was not having the President since he had retired. No new President was
appointed on the said State Commission. A complaint was filed by the
appellant herein before the District Forum, Bankura as regards inflated
telephone bills. A prayer was made in the said complaint that the respon-
B
dent herein be directed not to disconnect the telephone connection. An
order was made by the District Forum in favour of the appellant directing
the respondent not to disconnect the telephone connection and maintain
the telephone line on condition that the appellant deposits a sum of Rs.
4,000. The appellant accordingly complied with the said order. It appears
that despite this order, the telephone connection of the appellant was c
disconnected on 30.11.1993. The appellant thereafter moved an application
for restoration and it is common premise that on 25.5.1994, the telephone
connection was restored. The complaint as regards the excessive bill of Rs.
13,896 is still pending.
D
2. The respondent not being satisfied with the order passed by the
District Forum preferred an appeal to the State Commission and the State
Commission vide its order dated 21.1.1994 dismissed the said appeal,
holding that the order passed by the District Forum was in consonance
with the circular dated 15.10.1992 issued by the Telephone Department.
Being aggrieved by the order passed by the State Commission, the respon- E
dent preferred Revision petition under Section 21 of the Act before the
. National Commission. The National Commission after hearing the parties
vide its impugned order dated May 17, 1995 allowed the Revision Petition
primarily on the ground of jurisdiction. The National Commission has held
as under: F
"The impugned order passed by the State Commission, West
Bengal has to be held illegal and void on the ground that the said
order has been passed only by two Members of the State Commis-
sion without the junction of the President, which is manifestly G
contrary to mandatory provisions contained in Section 14(2A) read
with Section 18 of the Consumer Protection Act, 1986. The said
order of the State Commission is hereby set aside. We also set
aside the interlocutory orders dated October 14, 1993 (Annexure
'B') and October 19, 1993 (Annexure 'C') passed by the District
Forum, Bankura as being totally devoid of jurisdiction in the light H
712 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A of the recent pronouncement of the Hon'ble Supreme Court in
Morgan Stanely Mutual Fund v. Kartik Das, (1994) II C.P.J. (S.C.
7) where it has been categorically laid down that a Consumer
Forum has no jurisdiction or power to pass any interim order
pending disposal of an original complaint filed before it".

B 3. It is this order passed by the National ComQlission which is the
subject matter of challenge in this appeal.

4. Before we deal with the rival contentions raised before us, it would
be appropriate to set out relevant provisions of the Act and Rules. Clause
C (ii) of Section 2 defines : member : -
"member" includes the President and a member of the National
Commission or a State Commission or a District Forum, as the
case may be."

D 5. Section 9 in Chapter III refers to the Consumer Disputes Redres-
sal Agencies and the relevant provisions are as under :

9. "Establishment of Consumer Disputes Redressal Agencies :

There shall be established for the purposes of this Act, the
E following agencies, namely, : -

(a) xxxx xxxx

(b) a Consumer Disputes Redressal Commission to be known as
the "State Commission" established by the State Government in the
F State by notification; and

(c) xxxx xxxx xxxx"

6. Section 13 prescribes the procedure to be followed on receipt of
a complaint.
G
7. Section 14 enumerates the items on which the District Forum shall
issue an order to the opposite party directing him to do one or more of
the following things set out in sub-sections 14(1)(a) to 14(1)(i).

8. The controversy relates to Section 14(2) and 14(2A) which are
H reproduced herein below :
G.LAGARWALv. ACCOUNTS OFFICER [S.P.KURDUKAR,J.] . 713

14(2)-Every proceeding referred to in sub-section (1) shall be A
conducted by the President of the District Forum and at least one
member thereof sitting together :

Provided that where the member, for any reason, is unable to
conduct the proceeding till it is completed, the President and the
other members shall conduct such proceeding de novo. B

14(2A)-Every order made by the District Forum under sub-section
(1) shall be signed by its President and the members or members
who conducted the proceeding :

Provided that where the proceeding is conducted by the Presi- c
dent and one member and they differ on any point or points, they
shall state the point or points on which they differ and refer the
same to the other member for hearing on such point or points and
the opinion of the majority shall be the order of the District Forum.
D
9. Section 16 deals with the Comp0<Lion of the State Commission
and it reads as under :

"16, Composition of the State Commission : (1) Each State Com-
mission shall consist of -
E
(a) a person who is or has been a Judge of the High Court,
appointed by the Statt Goverqment, who shall be its President :

(Provided that no appointment under this clause shall be made
except after consultation with Chief JustiCe of the High Court;)
F
(b) xxxx xxxx xxxx

(2) xxxx xxxx xxxx

(3) xxxx xxxx xxxx
G
(4) xxxx xxxx xxxx''

10. Section 18 deals with the Procedure applicable to Stat~ Commis-
sions and it reads thus :

"18. Procedure applicable to State Commission - The provisions of H
714 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A Sections 12, 13 and 14 and the rules made thereunder for the
disposal of complaints by the District Forum shall, with such
modifications as may be necessary, be applicable to the disposal
of disputes by the State Commission". .

11. Chapter IV of the Act deals with Miscellaneous Provisions.
B Section 29 refers to the power to remove difficulties. Section 29A is the
relevant provision which reads as under :

"29A - Vacancies or defects in appointment not to invalidate
orders - No act or proceeding of the District Forum, the State
Commission or the National Commission shall be invalid by reason
c only of the existence of any vacancy amongst its members or any
defect in the constitution thereof'.

12. Sub-section (2) of Section 30 deals with the Powers of State
Government to make rules. Sub-section (2) of Section 30 reads as under :
D
"The State Government may, by notification, make rules for carry-
ing out the provisions contained in (clause (b) of sub-section (2)
and sub-section (4) of Section 7), sub~section (3) of Section 10,
Clause (c) of sub-section (1) of Section 13, sub-section (3) of
section 14, section 15 and sub-section (2) of section 16."
E
Note:- Bracketed portion was incorporated by Act No. 34of1991;
with effect from 15.6.1991.

13. The State Government in exercise of powers conferred by sub-
section (2) of Section 30 of the Act framed the Rules which are called the
F West Bengal Consumer Protection Rules, 1987. These rules were brought
into force immediately. Sub-rules (9) and (10) of Rule 6 are relevant and
they read as under :

6(9)-Where any such vacancy occurs in the office of the President
of the State Commission the seniormost (in order of appointment)
G
member holding office for time being, shall discharge the functions
of the President until a person appointed to fill such vacancy
assumes the office of the President of the State Commission.

6(10)-When the President of the State Commission is unable to
H discharge his functions owing to absence, illness or any other cause,
G.LAGARWALv.ACCOUNTSOFFICER(S.P.KURDUKAR,J.) 715

the senior most (in order of appointment) member of the State A
Commission shall discharge the function of the President until the
day on which the President resumes the charge of the functions.

14. In the light of the aforesaid provisions, it is necessary to consider
as to whether the impugned order passed by the National Commission is
legal. The National Commission held that the order passed by the State
B
Commission is manifestly contrary to a mandatory provision contained in
Section 14(2A) read with Section 18 of the Act as it was made by two other
members of the said Commission without the 'junction' of the the Presi-
dent.
c
15. Mr. Bhattacharya, the learned counsel appearing for the appel-
lant urged that the impugned order is unsustainable. He urged that the
National Commission has totally overlooked certain provisions contained
in the Act and the Rules erroneously came to the conclusion that in the
absence of the President of the State Commission being functional, the D
other two members have no jurisdiction to deal with the disputes/appeal
filed before the State Commission. In support of the submission, Learned
Counsel drew our attention to the definition of a Member contained in
Clause GD of Section 2 and Sections 14{2A), 18A and 29A. Reliance was
also placed on sub-rules (9) and VO) of Rule 6. Mr. Bhattacharya urged
that all these provisions will have to be construed harmoniously with a view E
to promote the object and spirit of the Act. The impugned order passed
by the National Commission is unsustainable and the same be quashed and .
set aside.

16. Mr. S.K. Sabharwal, the learned Advocate appearing for the F
respondent supported the impugned order and urged that sub- sections (2)
and (2A) of Section 14 in unmistakable terms indicate that every proceed-
ing referred to in sub-section ( 1) shall be conducted by the President of the
District Forum and at least one member thereof sitting together. Sub-section
(2A) read with section 18 require that every order made by the District G
Forum/State Commission under sub-section (1) shall be signed by its
President and the Member or Members who conducted the proceedings.
In view of this mandatory provision, counsel urged that any proceeding
conducted before the State Commission in the absence of the President
would be non-est. He further Urged that admittedly when the State Com-
mission passed the orders on October 14, 1993 and October 19, 1993, the H
716 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A President of the State Commission was not appointed by the State Govern-
ment and, therefore, these orders were rightly held to be illegal.

17. After giving careful thought to the rival contentions raised before
us, we are of the considered opinion that the relevant provisions which we
B have quoted hereinabove will have to be construed harmoniously to
promote the cause of the consumers under the Act. As indicated earlier,
the definition of member includes the President and a member of the
District Forum/State Commission. It is true that sub-section (2) of Section
14 read with section 18 require that every proceeding referred to under
sub-section (1) shall be conducted by the President of the district
C Forum/State Commission and atleast one member thereof sitting together.
Section 2A is consequential in the sense that every order made by the State
Commission under sub-section (1) shall be signed by its President and the
Member of Members who conducted the proceeding. The procedure ap-
plicable to the District Forum is made applicable to the State Commission
D vide Section 18 with such modifications as may be necessary. Plain reading
of sub-sections (2) and (2A) of Section 14 may support the view taken by
the National Commission but if these provisions are read with Section 29A
of the Act and sub rules (9) and (10) of Rule 6, it would be quite clear
that it could never be the intention of the legislature to stall or render the
State Commission non-functional in the absence of the President either
E having not been appointed in time due to some valid reasons or if the
President is on leave due to certain reasons beyond his control. Sub-section
(2) and (2A) of Section 14 and Section 18A of the Act were brought into
force with effect from 18.6.1993 whereas Section 12A was made applicable
from 15.6.1991. The Rules of 1987 were brought into force immediately.
F The complaint before the District Forum by the appellant was filed on
14.10.1993. Therefore, all these amended provisions were very much
brought into force when the complaint was filed. Sub- section (2) of section
14 is a presumptuous provision where the President of the State Commis-
sion is functional but it would not be correct to say that if the President of
the State Commission is non-function:il because of one or the other reason,
G the State Commission would stop its functioning and wait till the President
is appointed. In order to avoid such a situation, the State Government has
framed the Rules and sub-rules (9) ·and (10) quoted hereinabove unmis-
takably provide answer to such a situation as in the present case. The only
harmonious constructfon that could be given to sub-section (2) and (2A)
H of section 14 read with sub-rules (9) and (10) is that as and when the
G.L.AGARWALv. ACCOUNTS OFFICER (S.P.KURDUKAR,J.] 717

President of the State Commission is functional, he alongwith atleast one A
Member sitting together shall conduct the proceeding but where the Presi-
dent being non- functional, sub-rules (9) and (10) of Rule 6 will govern the
proceedings. Sub rule (9) provides that where any such vacancy occurs in
the office of the President of the State Commission, the senior most (in
order of appointment) member holding office for the time being, shall
B
discharge the function of the President until a person is appointed to fill
such vacancy. This sub-rule is made with a view to make the State Com-
mission functional in the absence of the President and not to allow the
State Commission to be rendered non-functional for want of the President.
It is well settled that every provision in the Act needs to be construed
harmoniously with a view to promote the object and spirit of the Act but C
while doing so, no violence would be done to the plain language used in
the section. It is this principle that needs to be made applicable while
construing the provision of sub- sections (2) and (2A) of Section 14 read
with sub-rules, (9) and (10).

18. The West Bengal Government has framed the Rules in the year D
1987 and the object of sub-rules (9) and (10) of Rule 6 appears to us to
keep the State Commission functional in the absence of the President.
From the impugned order it appears that the attention of the National
Commission was not drawn to sub-rules (9) and (10) of Rule 6. It also
appears from the record that the validity of sub-rules (9) and (10) of Rule E
6 was never challenged. It is made clear that the view which we have taken
in this appeal is on the premise that there is no challenge to the validity of
the Rules and they hold the field.

19. Having regard to the composition of the District Forum and the
State Commission, it is more appropriate and desirable to make the F
appointment of the President of the District Forum and the State Commis-
sion without any delay since the complaints under the Act involved fairly
large stakes which require a judicial approach.

20. In view of above discussion, we are of the opinion that the G
National Commission committed an error in holding that order passed by
the two members of the State Commission without the junction of the
President is "illegal and void". Impugned order to '11.at extent is set aside.

21. Coming to the second part of the order as regards the grant of
interim order, in our opinion, the National Commission was right in apply- H
718 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A ing the law laid down by this Court in Morgan Stanely Mutual Fund v.
Kartick Das, (1994) II CPJ 7 (SC). The consumer fo:-um has no jurisdiction
or power to pass any interim order pending disposal of original complaint
filed before it. The impugned order in this behalf is confirmed.

22. In the result, the appeal is partly allowed. The impugned order
B holding that the order passed by the State Commission, West Bengal is
illegal and void is quashed and set aside. But, however, the rest of the
impugned order is confirmed. In the circumstances, parties are directed to
bear their own costs.

c v.s.s. Appeal partly allowed.
COMMON CAUSE, A REGISTERED SOCIETY A
v.
UNION OF INDIA AND OTHERS

SEPTEMBER 25, 1996

[KULDIP SINGH AND FAIZAN UDDIN, JJ.] B

Constitution of India-A1ticles 14, 32 and 298-Ministei~A/lotment of
retail outlets for petroleum products (Petrol Pumps) under discretionary
quota-All the allotments made in favour of persons related to
politicians/members of Oil Selection Boards/Officials in the Minisll)~Allot c
ments made in a cloistered and stereotyped manner without any guidelines or
critelia-Held, arbitra1y, disC1iminat01y, malafide and illegal-Exercise of dis-
cretion must be transparent, just, fair and non-arbitrwy in accordance with
set no11113~ clitelia or guideline3~Minister holds position of a tntstee of public
prope1ty in his charge and discretion-Arbitra1y allotments of such property D
amount to breach of llust-Hence, liable to be set aside-Directions issued.

Constitution of lndia-A1ticle 14-Allotments of petrol pumps by a
Minister under his discretiona1y quota in an arbitrary mannel'--No guidelines
fol/owed-Held, A1ticle 14 pennits a reasonable classification having a ration-
al nexus to the object sought to be achieved-It does not pennit to pick and E
choose arbitralily out of several persons failing in the categ01y.

Public Servant-Discharge of ftmctions-Malafide acts-Personal
liability of-Held, is in a position of a tmstce in respect of public prope1ty
under his charge and discretion-Must distlibute ill a bonafide manner and
in con[ormity with law-Should be held personally responsible for his F
malafide acts in the discharge of his ftmctions as Public Se1vant for he betrays
the tntst reposed in him by the people under the Constitution.

The then Minister of State for Petroleum and Natural Gas, while
exercising the powers of the Central Government made the allotments of G
retail outlets for petroleum products (petrol pumps) to fifteen persons
under the discretionary quota.

Two of the allottees were the sons of politicians and seven of the
allottees were related to the members of Oil Selection Boards (OSBs) or
the members themselves and remaining six allottees were the relatives of H
719
720 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the officials in the Petroleum Ministry. All the fifteen allottees mentioned
in their applications for the allotment th.e reasons for compassionate
grounds for allotment, such as unemployment, poverty etc. among other
grounds. There was no advertisement issued to invite the applications. The
applications were not received officially by the Ministry. There was no
receipt entry on any of the applications. Nobody had the knowledge of
B number of petrol pumps available for allotment. l'!o criteria was fixed, no
guidelines were kept in view. The applicants seemed to have approached
the Minister directly.

The petitioner had originally challenged the corruption in various
C fields of public life in a public interest petition. During its pendency, when
the petitioner brought to the notice of the court a news item appeared in
a national daily regarding the allotments of retail outlets for petroleum
products (petrol pumps) by the Minister of State for Petroleum and
Natural Gas, exercising the powers of Central Government, the Court took
D cognisance of it and a notice was issued on the petition.

Disposing of the writ petition, this Court

HELD : 1.1. The orders allotting the petrol pumps to fifteen persons
are quashed. Allocation and allotment of petrol pumps/retail outlets
E dealerships by the Government of India, Indian Oil Corporation Ltd. or
any other Corporation in their names shall stand cancelled with immediate
effect .. · Those who have commissioned the petrol pumps and are running ·
the same shall stop operating the petrol pumps and running the said
business. The Government of India/Oil Corporation (concerned) shall take
F over the petrol pump premises from these persons. The Oil Corporation
shall have the market value of the site and the construction thereon,
determined in a fair and just manner. Each of the commissioned petrol
pumps so taken over shall be disposed of by way of public auction. The
original allottee may also participate in the auction. The petrol pump shall
G be allotted to the highest bidder. Out of the auction money the value of the
site and the construction as determined by the Oil Corporation shall be
paid to the original allottee ·and the remaining money shall go to the
Government coffer. Prosecution proceedings shall be initiated against the
Minister for criminal breach of trust or any other offence under law and
also he shall be made liable to pay damages for his malafide action in
H allotting petrol pumps to the fifteen persons. (754-C-H, 755-A-C]
COMMON CAUSE v.. U.0.1. 721

1.2 The allotments have been made by the Minister either on the A
ground of poverty or unemployment. Assuming that the allottees belong to
either of these two categories then how the Minister has selected them out
of millions of poor and unemployed in this country. All the 15 allotments
have been made by the Minister in a stereotyped manner. The applications
have not been officially received by the Petroleum Ministry. There is no B
receipt-entry on any of the applications. The applicants. seem to have
approached the Minister directly. None of the applications have been dealt
with in any of the branches of the Ministry. There is nothing on the record
to indicate that the Minister kept any criteria in view while making the
allotments. How the applicants came to know about the availability of the
petrol pumps is not known. No advertisement was made to invite the C
applications. There is nothing:on the record to show that any other method
of inviting applications was adopted. There is no indication in the allot-
ment orders or anywhere in the record to show that the Minister kept any
guidelines in view while making these allotments. None knew how many
petrol pumps were available for allotment. The allotments have been made D
in a cloistered manner. The petrol pumps public property have been doled
out in a wholly arbitrary and discriminatory manner. [750-D]

1.3. It is obvious that the Minister was personally interested in
making allotments of petrol pumps in favour of all these 15 persons. He
made allotments in favour of relations of his personal staff under the E
influence of the staff on wholly extraneous considerations. The allotments
to the sons of Ministers were only to oblige the Ministers. The allotments
to the members of the Oil Selection Boards and their/Chairman's relations
have been done to influence them and to have favours from them. All these
allotments are wholly arbitrary, nepotistic and are motivated by ex- p
traneous considerations. [751-B-C]

2.1. Capt. Satish Sharma acted in a wholly biased manner in as much
as he unfairly regarded with favour the cases of 15 allottees before him.
There is no justification whatsoever to pick up these persons except that
they happen to have won the favour of the Minister on malafide considera- G
tions. The exercise of discretion was wholly arbitrary. Such a discretionary
power which is capable of being exercised arbitrarily is not permitted by
Article 14 of the Constitution of India. While Article 14 permits a
reasonable classification having a rational nexus to the objective sought
to be achieved, it does not permit the power to pick and choose arbitrarily H
722 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A out of several persons falling in the same category. A transparent and
objective criteria/procedure has to be evolved so that the choice among the
members _belonging to the same class or category is based on reason, fair
play and non-arbitrariness. It is essential to lay down as a matter of policy
as to how preferences would be assigned between two persons falling in the
same category. Lack of transparency in the system promotes nepotism and
B
arbitrariness. It is absolutely essential that the entire system should be
transparent right from the stage of calling for the applications upto the
stage of passing the orders of allotment. The names of the allottees, the
orders and the reasons for allotment should be available for public
knowledge and scrutiny. [751-G, 752-D-G]
c
2.2. The Minister has acted in utter violation of the law laid down b)
this court and has also infracted Article 14 of the Constitution of India. A
Minister in the Central Government is in a position of a trustee in respect
of the public property under his charge and discretion. The Petrol
pumps/gas are a kind of wealth which the Government must distribute in
D a bonafide manner and in conformity with law. The Minister has betrayed
the trust reposed-in him by the people under the Constitution. It is high
time that the public servants should be held personally responsible for
their malafide acts in the discharge of their functions as public servants.
The Minister shall show-cause within two weeks why he should not be made
E liable to pay damages for his malafide action in allotting petrol pumps to
the fifteen persons. [753-D-E]

3.1. The allocation/allotment of the petrol pumps/retail outlet dealer-
ships by the Government of India, Indian Oil Corporation Ltd., in the
names of fifteen persons shall stand cancelled with immediate effect. The
F Government of India/Oil Corporation shall take over within ten days the
petrol pump premises from those persons who have not commissioned
them. As far those commissioned the petrol pumps, they shall stop operat-
ing them. Each of the commissioned petrol pumps, taken over by the
Governurnt/Oil Corporation shall be disposed of byway of public auction.
[754-G]
G
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 26 of
1995.

(Under Article 32 of the Constitution of India.)

H H.D. Shourie, In-person for the Petitioner.
COMMON CAUSE v. U.O.I. [KULDIP SINGH, J.] 723

Kapil Sibal for the petitioner in W.P. No. 26/95. A

Prashant Bhushan for Jayant Bhushan for the Petitioner in T.P. (C)
No. 127/96.

Altaf Ahmed, Additional Solicitor General, P.P. Malhotra, H.L.
Agrawal, K.N. Bhatt, A.B. Rohtagi, S.C. Maheshwari, B.K. Prasad, Navin B
Prakash, Krishan Mahajan, T.V. Ratnam, D.S. Mehra, Anil Katiyar, K.K.
Gupta, Sanjeev Bansal, Pramod Dayal, A.K. Mahajan, Ms. Sandhya Gos-
wami, Ms. H.Wahi, Ms. N. Mukherjee, T. Sridharan, Tufail A. Khan, Rajiv
Nanda, A.K. Goel, Mrs. Sheela Goel, K. Swamy, (Piyush), Ved Prakash,
Goodwill Indeevar and Rajesh K. Sharma, for (Pradeep Kumar and Gulam C
Ahmed Mia), D.M. Nargolkar, D.K. Sinha, K.R. Nagaraja, S.K. Agnihotri,
S.A. Syed, G.K. Bansal, Ms. Kirti Misra, N.K. Sharma, S. Kulshreshthra,
Pramod Dayal, S.K. Bisaria, J.M. Khanna and S.M. Ashri for the Respon-
dents.

The Judgment of the Court was delivered by D

KULDIP SINGH, J. The allotments of retail outlets for petroleum
products (the petrol pumps), by Capt. Satish Sharma, Minister of State for
Petroleum & Natural Gas, exercising the powers of the Central Govern-
ment, have been challenged in this public interest petition under Article 32 E
of the Constitution of India. The petition as originally filed was directed
against corruption in various fields of public life. Mr. H.D. Shourie -
Director "Coinmon Cause" - appearing in person, invited this Court's
attention to a news item dated August 11, 1995, on the front page of "Indian
Express" under the caption ''In Satish Sharma's Reign, Petrol and
Patronage Flow Together". The solicitor general who was present in Court, F
took notice of the news item and stated that he would have the matter
examined in the Ministry concerned and file an affidavit giving Ministry's
response to the news item. The news item, inter alia, stated as under :

"Not only the relatives of most of the officials working for Captain G
Satish Sharma but even his own driver and the driver of his
additional Private Secretary have been allotted a petrol pump and
a gas agency respectively.

The wives of two clerks and a stenographer in the Ministry have
similarly been allotted petrol pumps. Some of these allotments H
724 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A . have been made from the discretionary quota with the Petroleum
Minister while others have been made through a1l ostensibly ob-
jective selection process undertal,(en by the Oil Selection Boards
(OSBs) .......... A Mr. Poda Rajshekar, a relative of Mr. G.
Gurusharan, :Private Secretary to Captain Sharma has been allotted
a petrol pump at Banjara Hills, Hyderabad out of the Minister's
.B
discretionary quota taking pity on the "financictl circumstances that
the family finds itself in."

Ms. Madhuri Safaya, a relation of the Additional Private
Secretary to the Minister, Mr. V.N. Safaya has been allotted a
c petrol pump "on compassionate grounds" from the discretionary
quota.

Another relation of Mr. Safaya, Mrs. Monica Malla, has als\l
been a beneficiary of a petrol pump, courtesy Captain Sharina.

D Mrs. Daya Rani, wife of Mr. Hari Ram Verma, personal
assistant to the Additional PS to the Minister, Mr. V.N. Safaya,
· was allotted a petrol pump out of the discretionary quota..........
Mrs. Vijaya Nair, wife of Mr. D.V. Pillai, another additional Private
secretary to Captain Sharma has been allotted a petrol pump on
the grounds that the "applicant is a young unemployed (woman)
E
.with the responsibility of looking after a large family" - hardly a
unique classification m this country of 900 million. ......... The
Chairman of the OSB for Uttar Pradesh is Justice S.H. Abidi
(retd.) who lives at 50, Dariyabad, Allahabad. It so happens that
Syed Shaukat Hasan Abid~ his son, living at 50/1, Daryabad,
F Allahabad put ma request and was allotted a petrol pump on
"compassionate grounds" at Fatehpur (80 km Mile Stone) mUttar
Pradesh.

A former MLA, Mr. Shiv Balak Passi, from Rae Bareli is a
member of the OSB for Madhya Pradesh and his job is to allot
G petrol pumps to others. He too had put in a request for the
discretionary allotment of a petrol pump. Lo and behold, on
·"compassionate grounds" he was immediately allotted a petrol
pump o~ the Rae Bareli-Lucknow Road in UP.

H Mr. Krishna Swaroop, a Congress party worker and resident ·
COMMON CAUSE v. U.O.I. [KULDIP SINGH, J.] 725

of 1817, Punjabi Bagh Extension, New Delhi-26 is a member of A
the OSB for Delhi and Chandigarh. His son, Mr. Pradeep Kuinar,
was favoured with a petrol pump by the Minister on the grounds
that "the applicant is a young man from· Scheduled Caste Com-
munity with no source of regular income. The case deserves sym-
pathetic consideration. Therefore, a retail Outlet for MS-HSD in
B
the Union Territory of Delhi is allotted to Shri Pradeep Kumar,
r/o 18/7, Punjabi Bagh Extension, New Delhi-110026."

Mr. Ghulam Ahmed Mir is also a member of the OSB for Delhi
and Chandigarh. An application was made by him for the allotment
of a petrol pump. And the Minister passed the order on "compas- C
sionate grounds" from his discretionary quota.

Similarly the following OSB members, either themselves or
their next of kin:, have been allotted petrol pumps : Mr. K.L.
Sharma (Member OSB, West Bengal), Mr. R.S. Nautiyal (Member
OSB, Punjab), and Mr. Harbanslal Gupta (member OSB, D
Haryana). Two relations of Mrs. Satya Bahen (Member OSB,
Haryana) were allotted a gas agency in Etah and a petrol pump
at Itmadpur near Tundla, respectively.

The son of a former Home Minister who is currently a Cabinet E
Minister; the son of a present Minister of State from the North
East; the brother-in-law of a former Janata Dal office-bearer and
now a Congressman from Eastern UP; the son of a Dalit leader
who was with the late H.N. Bahuguna at one time and is now in
the Congress; the son of a former Congress Councillor of the
Municipal Corporation of Delhi; the wife of an ex-Congress MP F
·from the UP. hills; the wife of a prominent Dalit leader in the
Opposition and several political hacks from Ainethi are among the
hundreds who have been gifted petrol pumps or gas agencies
during the tenure of Captain Satish Sharma as the Petroleum
Minister." G
Mr. Vijay L. Kelkar, Secretary in the Ministry of Petroleum and Natural
Gas, Government of India, filed affidavit dated October 9, 1995. The
relevant part of the affidavit is as under : -

"It may be relevant to point out here that under the approved H
726 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A Guidelines, the Hon'ble Minister personally decides each case and
the order is a speaking order. An unsuccessful applicant in the
same category is entitled to have a copy of the order if a request
is made for it.

The specific instances referred to in the Indian Express
B newspaper dated 11th August, 1995, appear to relate to allotments
made prior to the order of this Hon'ble Court dated 31st March,
1995. However, those allotments also were made on merits of each
case as appearing from the applications which contained the cir-
cumstances under which the request was made. For the cases
c mentioned in the newspaper report, it is denied that the allotments
were made on account of alleged- relationship and/or any improper
motive. The relationship of an applicant with any official of the
Ministry has not been a relevant- factor in considering discretionary
allotment on compassionate grounds. Should this Hon'ble Court
direct, the relevant files shall be produced for persual for this
D Hon'ble Court."

This Court examined the affidavit of Mr. Kelkar on October 13, 1995 and
_passed the following order :

E "Mr. Vijay L. Kelkar, Secretary in the Ministry of Petroleum and
Natural Gas, Government of India has filed an affidavit pursuant
to this Court's order dated August 11, 1995. Without commenting
on the affidavit, we direct the Ministry of Petroleum and Natural
Gas to file a further and better affidavit within two weeks with
F reference to the specific instance~."

Pursuant to the above quoted order Mr. Kelkar filed affidavit dated
October 28, 1995. The relevant part of the affidavit is as under :

"That the Deponent, in compliance with the said order dated 13th
G October, 1995, has ascertained the position regarding the allega-
tions that allottees under the discretionary quota are related to
various political leaders, officials and members of Oil Selection
Boards {OSBs) or the members themselves. Such allottees can be
grouped under three different categories and allegation regarding
H each one of them is answered and/or dealt with as follows :
COMMON CAUSE v. U .O.I. [KULDIP SINGH, J.] 727

A ALLOTIEES SAID TO BE RELATED TO POLITICIANS. A
(i) With reference to the allegation that the son of a former Home
Minister, who is currently a Cabinet Minister, has been allotted a
Petrol Pump, .............. It is correct that the allottee, Shri Sarbjot
Singh is the son of the said Shri Buta Singh.
B
(ii) with reference to the allegation that the son of a present
Minister of State from North-East, has been allotted a petrol
pump. ......... It is correct that the said allottee is the son of a
Minister namely, Shri K. Hollahan, in the State Government of
Nagaland.
c
B. ALLOTIEES SAID TO BE RELATED TO THE MEMBERS
OF OSBs OR THE MEMBERS THEMSELVES.

(i) With reference to the allegation that Shri Syed Shaukat Hasan
Abidi is the son of Justice S.H. Abidi (retd.), who is the Chairman . D
of the OSB for U ttar Pradesh....................... Discretionary allotment
was made in favour of the applicant in January, 1995. It is correct
that the said allottee is the son of the said Chairman of OSB for
U.P.

(ii) With reference to the allegation that Shri Shiv Balak Passi is E
a member of the OSB for Madhya Pradesh and he is himself an
allottee from discretionary quota, .......... A discretionary allotment
was sanc:tioned in his favour in December, 1994. It is correct that
Shri Passi is a Member of the OSB for Madhya Pradesh.

(iii) With reference to the allegation that the allottee, Shri Pradeep F
Kumar, is the son of Shri Krishna Swaroop who is a Member of
OSB for Delhi and Chandigarh, ............... It is correct that the
allottee is the son of the said Shri Krishna Swaroop.

(iv) With reference to the allegation that the allottee, Shri Ghulam G
Ahmad Mir is a Member of OSB for Delhi and Chandigarh, .......... .
It is correct that Shri Mir is a Member of the OSB, Delhi.

(v) With reference to the allegation that Shri R.S. Nautiyal, who
is a Member of OSB, Punjab, has been allotted a Petrol Pump
either in his own name or in the name of his next of kin, it is stated H
7'2J!, SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A that Smt. Neena Nautiyal, made an application in August, 1994.
....... It is correct that Smt. Neena Nautiyal is the wife of Shri R.S.
Nautiyal, a Member of OSB, Punjab.

(vi) With reference to the allegation that a Petrol Pump was
allotted to Shri Justice Harbanslal Gupta, a Member of OSB,
B
Haryana, in his own name or in the name of his next of kin, it is
stated that one Shri Arun K. Gupta made an application in Sep-
tember, 1993, ....... It is correct that Shri Arnn Kumar Gupta is the
son of Shri Justice Harbanslal Gupta (Retd.) who is the Chairman
of the OSB, Haryana.
c
(vii) With reference to the allegation that two relations of Smt.
Satya Bahin, a Member of the OSB for Haryana, were allotted a
Gas Agency and a Petrol Pump, it is stated that one Shri Dharmesh
Kumar made an application in September, 1994, ..... Along with
D his application there was a recommendation for discretionary
allotment from Smt. Satya Bahin, Ex Member of Parliament... .... It
is stated that the relationship of Shri Dharmesh Kumar with Smt.
Satya Bahin is not known.

E C. ALLOTTEES WHO ARE SAID TO BE RELATED TO
VARIOUS OFFICIALS IN THE MINISTRY.

(i) The allegation is that relatives of the Drivers of the Minister
and of the Additional Private Secretary to the Minister have been
allotted Petrol Pump and Gas Agency. It has been found that one
F Smt. Leela Devi,· \vife of late Shri Kishan Swaroop made an
application that her husband was brutally murdered on 25.1.1994,
she had no means of income to support her family and that she
belonged to a Scheduled Caste. A retail outlet was allotted to Smt.
Leela Devi on compassionate grounds from the discretionary quota
G in May, 1995. It has now been ascertained that Smt. Leela Devi
happens to be a relative of a ·Driver of the Minister.

(ii) With reference to the allegation that Shri Poda Rajasekhar is
a relative of Shri G. Gurucharan, Private Secretary to the Minister
H of State, it is stated that an app~cation was made by Shri Rajasek-
COMMON CAUSE v. U.O.I. [KULDIP SINGH, J.] 729

har in July, 1993, ..... A retail Outlet Dealership for MS-HSD at A
Secunderabad was sanctioned to Shri Rajasekhar on compas-
sionate grounds. It has been ascert:fined that the said allottee is a
relative of the said Shri Gurucharan.

(iii) With reference to the allegation that Ms. Madhuri Safaya is a
relative of Shri B.N. Safaya, Additional Private Secretary to the B
Minister, to whom a Retail Outlet has been allotted, ......... It has
been ascertained that she is related to the said Shri B.N. Safaya.

(iv) With reference to the allegation that Ms. Monica Malla is also
related to Shri B.N. Safaya, ....... A Retail Outlet was allotted to C
her in November, 1994 out of discretionary quota. It has been
ascertained that the said Ms. Malla is related to the wife of Shri
B.N. Safaya.

(v) With reference to the allegation that the allottee, Mrs. Daya
Rani, is the wife of Shri H.R. Verma, Personal Assistant to the D
Additional Private Secretary to the Minister, Shri B.N. Safaya, .....
It is correct that the allottee is the wife of Shri H.R. Verma.

(vi) With reference to the allegation that Mrs. Vijaya Nair, who
has been sanctioned a Retail Outlet, is that the wife of Shri D.V.
· Pillai, Additional Private ~ ecretary to the Minister of State,........ It E
has been ascertained that Mrs. Vijaya Nair is not the wife of Shri
D.V. Pillai, but she is related to him".

This Court issued notice to all the 15 persons mentioned in the affidavit of
Mr. Kelkar. Thirteen, out of them filed affidavits justifying the allotments
of petrol pumps made to them by Capt. Satish Sharma.
F

This Court by the order dated December 6, 1995 directed that "the minister
may, if he so desires, file an affidavit in this regard". Capt. Satish Sharma
has, however, not chosen to file any affidavit.
G
The relevant records have been produced before us.

Mr. Sarbjot Singh in his application mentioned that he was a com-
merce graduate belonging to the scheduled caste community. He com-
pleted graduation in the year 1991. He was iiiterested in sports (shooting)
and won awards at the national level. Because of his pre-occupation with H
730 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the sports, he had average academic record and as a, consequence could
not get admission to any professicnal courses. He further stated that in
spite of his best efforts he could not get any suitable employment for
supporting himself and as such a petrol pump in Delhi be allotted to him.
The file does not indicate how the application was entertained. There is
B no receipt/entry on the application. No official/officer has examined the
application before the Minister's order. There is nothing to show that any
guide-lines were kept in view. The application, obviously, was given by hand
to the Minister, who readily passed the allotment order. There is a separate
sheet containing the order of the Minister which is as under :

c "Office of the Minister of State
(P&NG)

**********

Placed below is an application of Shri Sarbjot Singh for allot-
D . ment of a retail Outlet dealership for MS-HSD. The applicant has
stated that he is a graduate without any suitable employment.

Submitted for kind orders.

Sd/-
E (G. Gurucharan)
PS to MOS (P&NG)
31/1

Minister
F I have examined the application carefully. The applicant is an
unemployed graduate and a sportsman who participated in nation-
al level competitions. The applicant has not been able to get any
gainful employment and is unable to support himself. The case
deserves sympathetic consideration. Therefore, a Retail Outlet for
G MS-HSD in the National Capital Territory of Delhi is allotted to
Shri Sarbjot Singh r/o 16, Ashok Road, New Delhi.

Orders may be issued accordingly.

Sd/-
H (Capt. Satish Sharma)
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.] 731

Minister of State" A

Thereafter, the matter was processed in the office and in one of the notes
by an officer of the Ministry it was mentioned that the allottee " is son of
Shri Buta Singh, Minister of Civil Supplies". No one took notice of this fact
and the allotment order was issued.
B
In all the cases discussed hereinafter the pattern of allotment and the
method and procedure followed was the same as in Sarbjot Singh's case.

Benjamin K. Hollohon stated in his application that he was an
educated unemployed youth and also active party worker in the area. He
belonged to scheduled tribe from Nagaland State. He requested in the
c
application for allotment of petrol pump in Purana Bazar area of Dimapur
town, Nagaland. The application was sent to Captain Satish Sharma by Mr.
K. Hollohon, Minister, Industry and Commerce, Nagaland (Father of the
applicant) along with a d.o. letter which reads as under :
D
"My dear Capt. Satish Sharma,

Kindly recall our discussions of date regarding allotment of one
retail outlet petrol pump (petrol & Diesel) in the Purana Bazar
area of Dimapur town in Nagaland in favour of my son Benjamin E
K. Hollohon.

As you may be aware. that Benjamin's application and my
earlier note in this regard are available in your Ministry. However,
I am again enclosing copy of Benjamin's application for your
~mtl F
It was indeed pleasure to note that you have very kindly agreed to
allot one petrol pump in favour of my son Shri Benjamin after
careful and due consideration as a very very special case. I shall
personally grateful if you cou1d kindly me your good offices in
issuing suitable instructions to the officials concerned in your G
Ministry so that the possible bureaucratic delays are averted and
the permit is issued without much loss of time. Therefore, I request
your personal intervention in the matter. I hope, you can very well
appreciate may predicament in the matter and am sure, you will
&~~~ H
732 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A The allotment order by the Minister is reproduced hereunder :
"Office of the Minister of State
(P&NG)
***************

B Placed below is an application of Shri Benjamin K. Hollohon
for allotment of a retail outlet for MS-HSD. The applicant has
stated that· he is an unemployed youth belonging to Scheduled
Tribe community. The applicant has also stated he no regular
source of income.
c Submitted for kind orders.

Sd/-
(G. Gurucharan)
PS to MOS (P&NG) -
D 10/10/94

Minister

I have examined the application carefully. The applicant is an
educated unemployed Scheduled Tribe youth without regular
E source of livelihood. The case deserves sympathetic consideration.
Therefore, a Retail Outlet for MS-HSD at Purana Bazar, Dimapur,
Nagaland is allotted to Shri Benjamin K. Hollohon r/o Dur-
gapathar, 2 1/2 Mile, Dimapur, Nagaland, Pin Code -797 112.

Necessary orders may be issued accordingly.
F
Sci/
(Capt. Satish Sharma)
Minister of State"

G Syed Hasan Shaukat abidi stated in his application as under :

"Respectfully I beg to state that I was born at Allahabad, Uttar
Pradesh on 20th December, 1965. I have passed B.Sc. and com-
pleted my Master's in Business Administration (specialisation in
Marketing). In spite of my best efforts. I have not been able to get
H a suitable employment. I have no other source of income and am
COMMON CAUSE v. U.0.1. [KULDIP SINGH,J.J 733

entirely dependent on my aged parents for survival. My inability A
to find employment and settle down is causing anxiety to my
parents. Hence, I would most humbly request you Sir, to grant me
a petrol pump at Fatehpur (80 Km. Mile Stone) in Uttar Pradesh."

The Minister passed the following order :
B
"Office of the Minister of State
(P&NG)
************

Placed below is an application of Shri Syed Hasan Shaukat C
Abidi for allotment of a Retail Outlet for MS-HSD. The applicant
has stated that he has completed his post Graduation in Business
Administration and has not been able to find any suitable employ-
ment. The applicant has also stated that he has no other source of
income and is· dependent on his parents for sustenance.
. . ·n
Submitted for kind orders .

Sd/-
(G. Gurucharan)
PS to MOS (P&NG)
16;12 E
Minister

I have examined the application carefully. The applicant is a
professional qualified man without any regular employment. The
applicant has no other source of income and is entirely dependent F
on his parents for support and sustenance. The case deserves
sympathetic consideration. Therefore, a Retail Outlet for MS-HSD
at Fatehpur (80 Km. Mile Stone) in Uttar Pradesh is allotted to
Shri Syed Hasan Shaukat Abidi r/o 50/1, Dariyabad, Allahabad,
Uttar Pradesh. G
Orders may be issued accordingly.

Sci/-
(Capt. Satish Sharma)
Minister of State" H
734 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A It is obvious from Mr. Kelkar's affidavit that Syed Hasan Shaukat Abidi is
the son of justice S.H. Abidi (retd.) who was at that time Chairman of the
Oil Selection Board for Uttar Pradesh.

Shiv Balak Passi applied for allotment of petrol pump in the follow-
ing words:
B
"I wish to state the following about myself. I am a social worker
who has devoted his entire life for the upliftment of downtrodden,
underprivileged. I have been in the forefront in all activities involv-
ing eradication of social evils. But Sir, I am growing old and am
not in a position to support myself. Therefore, Sir, with due respect
c I request you to grant me a petrol pump al Lucknow-Rae Bareilley
Road, Uttar Pradesh."

The Minister passed the following order :

D "Office of the Minister of State
(P&NG)
***********

Placed below is an application of Shri Shiv Balak Passi for
allotment of a Retail Outlet for MS-HSD. The applicant has stated
E that he is a social worker without any regular source of income.

Submitted for kind orders.

Sd-
(G. Gurucharan)
F PS to MOS (P&NG)
21/U

Minister

I have examined the application carefully.' The applicant is an
G educated unemployed who has no regular source of income due
to his serious pre occupation for the upliftment of downtr~dden.
The case deserves sympathetic consideration. Therefore, a Retail
Outlet for MS-HSDA at Rae Bareilley Lucknow Road, UP, is
allotted to Shri Shiv Balak Passi, Ex-MLA, District Rae Bareilley,
H Uttar Pradesh.
COMMON CAUSE v. U.O.l. [KULDIP SINGH, J.) 735

Orders may be issued accordingly. A

Sd/-
(Capt. Satish Sharma)
Minister of State"

Mr. Kelkar's affidavit shows that Shiv Balak Passi himself is a member of B
the Oil Selection Board for Madhya Pradesh.

Pradeep Kumar, in his application stated that he was an unemployed
young man from Scheduled Caste category with enterprise, initiative and
determination and was very keen to make petrol pump dealership as his
business. He indicated that he was appearing in B.A. (final). He further
c
stated that his father has been an active congress worker since 1952 and
has held many important positions in the organisation as well as on the
executive side. The following order was made by the Minister :

"Office of the Minister of State D
(P&NG)
**********

Placed below is an application of Shri Pradeep Kumar for
allotment of Retail Outlet for MS-HSD. The applicant has stated
that he belongs to a Scheduled Caste Community and also an E
unemployed Under Graduate.

For kind orders.

Sd/-
(G. Gurucharan) F
PS to MOS (P&NG)
2.0/6/94

Minister

I have examined the application carefully. The applicant is a G

-
~

young man from Scheduled Caste Community with no source of
regular income. The case deserves sympathetic consideration.
Therefore, a Retail Outlet for MS-HSD in the Union Territory of
Delhi is allotted to Shri Pradeep Kumar, r/o 18/7, Punjabi Bagh
Extension, New Delhi - 110 026. H
736 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Orders may be issued accordingly.

Sd/-
(Capt. Satish Sharma)
Minister of State"

B While processing the order, noting on the file is as under :

"Reference notes on pre-page. MOS i1as sanctioned a retail outlet
dealership at Delhi on compassionate grounds to Shri Pradeep
Kumar who is belonging to SC Category. He has stated in his
aplication vide p-1/c that he is appearing in BA final year. He is
c son of Shri Krishna Swaroop member of OSB, Delhi. The allowan-
ces and perks of the Member of OSB exceed Rs. 5000 per month.

2. However, in view of the sanction by MOS, file is put up with a
fair sanction letter for signature, if approved.
D
Sd/-
27/6

Allotment of a dealership to the son of a sitting Member of the
OSB will invite adverse criticism. It will also create an avoidable
E impression that govt. is influe1tcing the OSB in this manner.

Sd/-
27.6.94"

Mr. Kelkar's affidavit shows that Shri Pradeep Kumar is the son of Shri
F Krishan Swaroop, who was at that time member of Oil Selection Board for
Delhi and Chandigarh. Pradeep Kumar in his application did not mention
this fact. The file indicates that despite the .noting to the effect that the
allotment would invite adverse criticism, the allotment orders were issued.

G Mr. Ghulam Ahmad Mir in his application, addressed to the Mini-
ster, stated that due to the escalation of extremist violence in Kashmir
Valley in the recent years, it has become difficult to iead a normal life in
the Valley and as such earning a livelihood has become very difficult. He
further stated that the family was forced to sell some of the ancestral
property. He added that despite being a Graduate he could not get regular
H employment. He also stated in the application that he was aq...:active social
COMMON CAUSE v. U.0.1. (KULDIP SINGH,J.) 737

worker and had been promoting the nationalist cause in the Valley due to A
which he and his family have been facing constant threats from the militants
and extremists in the Valley. The Minister passed the following order on
the application:

"Office of the Minister of State for (P&NG)
B
**************

Placed below is an application of Shri Ghulam Ahmad Mir for
allotment of a Retail Outlet for MS-HSD. The applicant has stated
that he is a graduate from Jammu and Kashmir, who has been
forced to migrate from Kashmir as result of militant threats to his C
life. The applicant has also stated that he has no regular source of
income for maintaining his family.

Submitted for kind orders.

Sd/- D
(G. Gurucharan)
PS to MOS (P&NG)
23/9

Minister
E
I have examined the application carefully. The applicant is an
unemployed graduate from Jammu & Kashmir trying to settle in
Delhi. The applicant is an active social worker espousing the
nationalist cause for which reason he and his family have become
a target of militants in the Valley. The applicant has not been able F
to obtain any suitable employment in Delhi and is finding it difficult
to support his immediate family in Delhi and his parents in J ammu.
The case deserves sympathetic consideration. Therefore an 'A' site
Retail Outlet for MS-HSD in the Union Territory of Delhi is
allotted to Shri Ghulam Ahmad Mir S/o Haji Gh. Hassan Mir r/o
71-D, Pocket 'K', Sheikh Sarai-II, New Delhi. G
Orders may be issued accordingly.

Sd/-
(Capt. Satish Sharma)
Minister of State" H
738 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A While processing the Minister's order the office put up the following note
on the file:

"Ref. note above. Sh. G.A. Mir, has furnished his bio-data vide
pp 3-4/C. In his bio-data he has stated that he working as· Member
of Oil Selection Board and is getting Rs. 250 per sitting of the
B Board as honorarium.

2. In view of the above, file is put up for orders whether we may
issue sanction to Oil Company for award of RO dealership, to Sh.
G.A. Mir as per sanction letter placed below if approved."
c Despite the above quoted note, the allotment order was issued. Mr. Kelkar
in his affidavit has stated that Shri Mir is a member of the Oil Selection
Board for Delhi and Chandigarh.

Mrs. Neena Nautiyal addressed a three lined application to the
D Minister. It is stated in the application that she is an educated lady and
belong to Scheduled Tribe Community. Being an unemployed, she wished
to instal a retail outlet in the Union Territory. Delhi. The following order
was passed by the Minister :

"Office of the Minister of State (P&NG)
E *******
Placed below is an application of Smt. Neena Nautiyal for
allotment of a Retail Outlet for MS-HSD. The applicant has stated
that is an educated unemployed lady from Scheduled Tribe com-
munity.
F
Submitted for kind orders.

Sd/-
(G. Gurucharan)
G PS to MOS (P&NG)
19/8

Minister

I have examined the application carefully. The applicant is an
H educated lady and belongs to Scheduled Tribe community. The
COMMONCAUSEv. U.0.1.[KULDIPSINGH,J.) 739

applicant is unemployed and has no regular source of income. The A
case deserves sympathetic consideration. Therefore, a Retail Out-
let for MS-HSD in the Union Territory of Delhi is allotted to Smt.
Neena Nautiyal r/o B-399, Gali No. 19, Bhajanpura, Delhi.

Orders may be issued accordingly.
B
Sd/~
(Capt. Satish Sharma)
Minister of State"

While processing the Minister's order the office put up the following C
note:

"Ref. above Smt. Neena Nautiyal has furnished her bio-data
vide pp 8-7/C wherein she has stated that her occupation is
agriculture and her and her husband's income is 25,000 & 18,000
per annum respectively. In this connection it is stated that it D
happens from her bio-data that she is the wife of Sh. Ravi Sharan
Nautiyal who is a member of OSB-Punjab.

2. In view of the above, file is put up for orders whether we may
issue sanction to Oil Company for setting up a RO dealership in
favour of Smt. Neena Nautiyal." E
The allotment letter dated 7th October, 1994 was iss1:1ed to Neena Nautiyal.
It is admitted in the affidavit of Mr. Kelkar that Neena Nautiyal is the wife
of R.S. Nautiyal, Member, Oil Selection Board, Punjab.

Arun Kumar Gupta in his application stated that he passed BSc. in F
Production Engineering in the year 1970 and worked as Project Engineer
in the Haryana State Cooperative Supply and Marketing Federation Ltd.
at Chandigarh from 1976 to 1989 when he was forced to tender resignation
on political considerations when the Haryana Government was headed by
Shri Devi Lal. It is further stated that since then he was unemployed and G
as such the application for grant of petrol pump. The application was
directly dealt with by the Minister and his Private Secretary in the following
manner:

"Office of the Minister of State
(P&NG) H
740 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A ***********

Placed below is an application of Shri Arun K. Gupta for
allotment of Retail Outlet. The applicant has stated that he is a
professional who has not been able to find a regular employment
and is finding it difficult to make ends meet.
B
Submitted for kind orders.

Sd/-
(G. Gurucharan)
PS to MOS (P&NG)
c 22/X/93

Minister

I have examined the application carefully. The applicant is a
D graduate in Production Engineering and is without any regular
employment. The case deserves sympathetic consideration. There-
fore, a Retail Outlet for MS-HSD is allotted to Shri Arun K.
Gupta, s/o Shri Harbans Lal r/o H.No. 68, Sector 8-A, Chandigarh
at Sector-20 C, Chandigarh.

E Orders may be issued accordingly.

Sd/- .
(Capt. Satish Sharma)
Minister of State"

F While processing the above order, Mr. S.K. Singh, Under Secretary in the
Ministry wrote on the file as under :

"A retail outlet dealership has been allotted to Shri Arun
Kumar Gupta s/o Sh. Harbans Lal, At Chandigarh under discre-
tionary powers of Govt. vide MOS's order at p-1/n and Govern-
G
ment sanction at p-2/c.

2. Since the allottee has not mentioned anything about his father
and since a similar named person is working as Chairman of one
of the Oil Selection Boards, IOC was asked to check the detail
H from the allottee. A report now received from IOC is placed at pp
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.) 741

5-3/c for perusal. It may be see11 therefrom that the father of the A
a/lottee Sl11i Harba11s Lal is a Retd. judge of the Pu11jab and Haryana
High Cowt and practisi11g Senior Advocate i11 the Supreme Court at
New Delhi, and also fu11ctioning as the Chainna11 of the Oil Selectio11
Board for Haryana.

3. It is humbly submitted that such allotments will i11vite adverse B
public oiticism.

Sd/-
(S.K. SINGH)
US(M.II)/6.12.93"
c
Letter of intent was issued to Mr. Arun Kumar Gupta on December 9,
1993. Mr. Kelkar in his affidavit has stated that Arun Kumar Gupta is the
son of Justice Harbans Lal Gupta (retd), who at that time was Chairman
of the Oil Selection Board, Haryana.
D
Satya Bahin, Ex. Member of Parliament and member of the Oil
Selection Board for Haryana recommended the application of Dharmesh
Kumar for allotment of petrol pump. It was stated in the recommendation
that Dharmesh Kumar's father died few years back, they are poor and his
mother is suffering from Cancer. The Minister allotted the petrol pump by
the following order: E
"Office of the Minister
of State (P&NG)
**********

"Placed below is an application of Shri Dharmesh Kumar for F
allotment of a Retail Outlet for MS-HSD. The applicant has stated
that he is an educated youth from Scheduled Tribe whose father
had passed away while in Government service. The applicant has
also stated his mother who had been trying to support her family
is also afflicted by Cancer which has put the family in difficult G
circumstances.

Submitted for kind orders.

Sd/-
(G. Gurucharan) H
742 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R:

A PS. to MOS (P&NG)
9.11.

Minister

I have examined the application carefully. The applicant is an
B unemployed youth whose father's as sudden demise had prevented
from completing his education. The applicant's mother who had
been the sole bread-winnet ·for t,he ·fawilY. is al~o afflicted with
Cancer which has put the family in str~tened circumstances. The
applicant has also not been able to obtain suitable employment.
The case deserves sympathetic consideration. Therefore, a Retail
c Outlet for MS-HSD at Ferozabad-Shikohabad Road, near Mak-
hanpur, Uttar Pradesh is allotted to Shri Dharmesh Kumar s/o
Late Shri Johari Lal (Amin) r/o H.No. 20, Katra Mohammad Mah,
Gandhi Marg, Shikohabad, Firozabad, Uttar·Pradesh.

D Orders may be issued accordingly.

Sd/- 9/11
(Capt. Satish Sharma)
Minister of State"

E In his affidavit filed before this Court Dharmesh Kumar stated that he is
"neither a family member nor dependent on Satya Babin. The deponent is
not closely related to Satya Babin."

Leela Devi in her application stated that her husband expired on 25th
January, 1994. Two clerks of lawyers killed her husband in the premises of
F a
Patiala House. It is further stated that she is housewife with no means of
income to feed herself and her family since the death of her husband. The
Minister allotted the petrol pump by the following order:

"Office of the Minister of State
(P&NG) ·
G ****************

Placed below is an application of Smt Leela Devi for allotment
of a Retail Outlet for MS-HSD. The applicant has stated that her
husband was murdered and ever since his death her family is left
H without any regular source of livelihood.
COMMON CAUSE v. U.O.l. [KULDIP SINGH, J.) 743

Submitted for kind orders. A
Sd/
(G. Gurucharan)
PS to MOS (P&NG)
19/5/95
B
Minister

I have examined the application carefully. The applicant is a
widow whose husband was murdered. The applicant has no regular
income to support herself and her family. The case deserves
sympathetic consideration. Therefore, a Retail Outlet for MS-HSD C·
at NOIDA, UP is allotted to Smt. Leela Devi W/o. Late Shri
Krishan Swaroop r/o. H. No. B-412/A, Sector No. 19, NOIDA, UP.

Orders may be issued accordingly.

Sd/ D
(Capt. Satish Sharma)
Minister of State"

The material on the file shows that the late husband of Leela Devi was a
dismissed employee of Post and Telegraph Department. He had six sons E
and a house on Kalibari Marg. Late Husband of Leela Devi was living away
from the family for 7-8 years prior to his death. Mr. Kelkar in his affidavit
has stated that Leela Devi is the relative of the driver of the Minister. The
affidavit filed by Leela Devi and the documents attached with the affidavit
read with Kelkar's affidavit clearly show that Leela Devi is the mother of
Nand Kishor who was working as driver of Capt. Satish Sharma. Mr. Kelkar F
in his affidavit has stated that "Smt. Leela Devi happens to be a relative of
the driver of the Minister". Least we can say is that Mr. Kelkar should have
known that Leela Devi was Minister's driver's mother.

Poda Rajasekhar has, in his application, stated that he completed his
B.Com in 1980 and in spite of his best efforts he could not settle in regular G
employment. His father was serving as an Inspector of Customs and
Central Excise. He expired in January 1981. His mother, who was a
teacher, retired on 19.4.1993. He finds it difficult to cope with the present
circumstances. The Minister allotted the pertol pump by the following
order: H
744 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A "OFFICE OF THE MINISTER OF STATE
(P&NG)
**************

Placed below is the application of Shri Poda Rajasekhar r/o.
8-3-897/6 Nagarjuna Nagar, Hyderabad (AP.). The applicant has
B stated that he is an educated unemployed person who has the
responsibility of looking after his mother as well as a cousin, who
is mentally retarded. He has stated that besides his best efforts, he
has not been able to settle in any regular employment. He has
prayed that a retail outlet dealership for MS-HSD may be allotted
c to him at Banjara Hills, Secunderabad (AP.).

For kind orders.

Sd/-
(G. GURUCHARAN)
D PS TO MOS (P&NG)
23.7.93

Minister

I have examined the application carefully. The applicant's case
E is genuine in view of_ the adverse financial circumstances that the
family finds itself in. It is a fit case for sympathetic consideration.
Accordingly a retail outlet dealership for MS-HSD is allotted to
Shri Poda Rajasekhar at Banjara Hills, Secunderabad (AP.).

Orders may be issued immediately.
F
Sd/-
(CAPT. SATISH SHARMA)
MOS (P&NG)"

G Mr. Kelkar in his affidavit has stated that "Poda Rajasekhar is a relative of
Shri Gurucharan, Private Secretary to the Minister".

Madhuri Safaya has stated in her application that she is a native of
Kashmir. She is a young lady and has been rendered homeless due to the
increasing militancy in the Valley. Due to sudden migration to Delhi she
H has not been able to complete her education. On these grounds she
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.) 745

requested the Minister to allot her a pertol pump. The Minister readily A
obliged her by the following order : ·

"Office of the Minister
of State (P&NG)
***********
B
Placed below is an application of Ms. Madhuri Safaya for
allotment of Retail Outlet for MS-HSD. The applicant has stated
that she belongs to Kashmir and her family has migrated to
Kashmir. The applicant has also stated that she has not been able
to get a suitable job and is without a regular source of livelihood.
c
Submitted for kind orders.

Sd/-
(G. Gurucharan)
PS to MOS (P&NG) D
12.10

Minister

I have examined the application carefully. The applicant is a
·young lady whose family has migrated from Kashmir and are E
dependent on their relatives for sustenance. The applicant has not
been able to obtain a Stai.table job for herself and is without any
regular source of income. The case deserves sympathetic con-
sideration. Therefore, a Retail Outlet for MS-HSD in the National
Capital Territory of Delhi is allotted to Ms. Madhuri Safaya r/o.
B-6/1, Vasant Vihar, New Delhi. F
Orders may be issued accordingly.

Sd/-
(Capt. Satish Sharma)
Minister of State" G
Mr. Kelkar has confirmed in his affidavit that Madhuri Safaya is related to
B.N. Safaya, Addl. Private Secretary to the Minister.

Monika Malla in her application stated that her family was forced to
leave Kashmir due to the militant activities. Her family had to dispose of H
746 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the property at a loss and all the savings has already been spent. She has
to support her parents who are not keeping good health. On these grounds
she requested the Minister for the allotment of pertol pump. The Minister
passed the following order :

"Office of the Minister of State
B (P&NG)
***********

Placed below is an application of Ms. Monica Malla for allot-
ment of a Retail Outlet for MS-HSD. The applicant has stated that
she is young lady from Kashmir whose family has been forced to
c . migrate to Delhi due to growing militancy. The applicant has also
stated that she has exhausted their family's savings and are finding
it difficult to sustain themselves in Delhi.

Submitted for kind orders.
D Sd/-
(G. Gurucharan)
PS to MOS (P&NG)
12.10

E Minister

I have examined the application carefully. The applicant is a
young lady whose family had migrated to Delhi owing to militant
activities of the extremists. The applicant's family has no source of
livelihood and she has not been able to obtain any suitable employ-
F ment. The cas~ deserves sympathetic consideration. Therefore, a
Retail Outlet for MS-HSD in the National Capital Territory of
Delhi is allottedto Ms. Monica Malla c/o Smt. Labroo r/o. D-1/54,
Vasant Vihar, New Delhi.

Orders may be issued accordingly.
G
Sd/-
(Capt. Satish Sharma)
Minister of State"

Mr. Kelkar has stated in his affidavit that Monica Malla is related to the
H wife of B.N. Safaya, Addi. Private Secretary to the Minister.
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.) 747

Daya Rani stated in her application that she is a housewife of a low A
paid employee having four school going children. It was difficult to live
with the meagre salary of her husband. She wanted to share the respon-
sibility of her husband and as such requested the Minister to allot her a
petrol pump. The Minister obliged her by passing the following order :

"Office of the Minister of State
B
(P&NG)
**************

Placed below is an application of Smt. Daya Rani w/o. Shri
H.R. Verma for allotment of a Retail Outlet for MS-HSD. The C
applicant has stated that she has a family of four school going
children and is finding it difficult to make ends meet with the
income being earned by her husband.

Submitted for kind orders.
D
Sd/-
(G. Gurucharan)
PS to MOS (P&NG)
10.10.94
E
Minister

I have examined the application carefully. The applicant is
a housewife whose family is facing difficult financial circumstan-
ces. The case deserves sympathetic consideration. Therefore, a
Retail Outlet in the Union Territory of Delhi is allotted to Smt. F
Daya Rani w/o. Shri H.R. Verma r/o. C-183, Albert Square,
Ramakrishna Ashram Marg, Gole Market, New Delhi.

Orders may be issued accordingly.

Sd/- G
(Capt. Satish Sharma)
Minister of State"

Shri S.K. Singh, Under Secretary, while processing the Minister's order
noted on the file as under : H
'

748 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A "Smt. Daya Rani, the allottee is the wife of Shri Hali Ram Venna
who is working in this Minist1y as an Assistant and presently posted
to Minister's Offic,e. His annual income from pay and allowances
during 1993-94 is reported Rs. 52,925. However, the allottee has
shown the annual income as Rs. 36,000 which is factually not
correct. It seems that she has shown only the take-home pay after
B deductions. It is for consideration whether the sanction letter
placed blow as per Orders of MOS recorded at p-1/n may be
issued.

-S/d-
c (S.K. SINGH)
US (M. 11)/25.10.94"

Allotment order was issued to Daya Rani on 31st October 1994. Mr. Kelkar
has stated in his affidavit that Daya Rani is wife of H.R. Verma, Personal
Assistant to the Addi. Private Secretary (B.N. Safaya) to the Minister.
D
Vijaya Nair has stated in her application that she is a young
housewife with a large family to support. She has studied up to B.A. level.
The meagre income of her husband could not sustain their liabilities. She
requested the Minister to allot her a pertol pump which was done by the
E following order :

"Office of the Minister of State
(P&NG)
*****************

F Placed below is the application of Smt. Vijaya Nair. The ap-
plicant is a young educated unemployed person with the respon-
sibility of looking after a family which has a meagre income. The
applicant has stated that despite best efforts she has been unable
to obtain suitable job. She has, therefore requested that as a special
case she may be allotted a Retail Outlet MS-HSD in the Union
G
Territory of Delhi.

For kind orders.

Sd/-
H (G. Gurucharan)
COMMON CAUSE v. U .0.I. [KULDIP SINGH, J.) 749

PS to MOS (P&NG) A
23.7.93

Minister

I have examined the application carefully. The applicant is an
educated unemployed housewife whose family circumstances is B
one of considerable financial difficulty. The applicant has also
prayed that she has the necessary drive and initiative to run a Retail
Outlet. This is a fit case to be considered sympathetically. Accord-
ingly, a Retail Outlet for MS- HSD is allotted to Smt. Vijaya Nair,
2213, Lodi Road Complex, New Delhi-110003, in the Union Ter-
ritory of Delhi as a special case.
c
Orders may be issued accordingly.

Sd/-
(Capt. Satish Sharma) D
Minister of State"

Mr. Kelkar has stated in his affidavit that Vijaya Nair is related to D.V.
Pillai, Addi. Private Secretary to Minister.

All the 15 allotments - discussed above - have been made by Minister E
in a stereotyped manner. The applications have not been officially received
by the Petroleum Ministry. There is no receipt - entry on any of the
applications. The applicants seem to have appi;_oached the Minister direct-
ly. None of the applications have been dealt with in any of the branches of
the Ministry. There is nothing on the record to indicate that the Minister
kept any criteria in view while making the allotments. How the applicants F
came to know about the availability of the petrol pumps is not known. No
advertisement was made to invite the applications. There is nothing on the
record to show that any other method inviting applications was adopted.
There is no indication in the allotment-orders or anywhere in the record
to show that the Minister kept any guidelines in view while making these G
allotments. The allotments have been made in a cloistered manner. The
Petrol pumps - public property - have been doled out in a wholly arbitrary
manner. This Court in Ramana Dayaram Shetty v. International Airport
Authority of India and Others., [1979) 3 SCC 489, held as under :

"It must, therefore, be taken to be the law .that where the H
750 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A Government. is dealing with the public, whether by way of giving
jobs or entering into contracts or issuing quotas or licences or
granting other forms of largesse, the Government cannot act ar-
bitrarily at its sweet will and, like a private individual, deal with
any person it pleases, but its action must be in conformity with
standard or norms which is not arbitrary, irrational or irrelevant.
B
The power or discretion of the Government in the matter of grant
of largesse including award of jobs, contracts, quotas, licences, etc.
must be confined and structured by rational relevant and non-dis-
criminatory standard or norm and if the Government departs from
such standard or norms in any particular case or cases, the action
c of the Government would be liable to be struck down."

The allotments_ have been made by the Minister either on the ground
of poverty or unemployment. Assuming that the allottees belong to either
of these two categories then how the Minister has selected them out of
D millions of poor and unemployed in this country. As mentioned above no
criteria was fixed, no guidelines were kept in view, none knew how many
petrol pumps were available for allotment, applications were not invited
and the allotments of petrol pumps were made in an arbitrary and dis-
criminatory manner.

E We may examine these allotments from another angle which has very
serious repercussions. Six. of the allottees are related to various officials
working with the Minister. Leela Devi is the mother· of Minister's driver.
Poda Rajasekhar is a relation of G. Gurucharan, Private Secretary to the
Minister. Madhuri Safaya and Monika Malla are related to B.N. Safaya,
F Addl. Private Secretary to the Minister. Daya Rani is the wife of H.R.
Verma, Personal Assistant to B.N. Safaya and Vijaya Nair is the wife of
D.V. Pallai, Addi. Private Secretary. Two of the allottees are related to the
politicians. Sarbjot Singh is the son of Buta Singh who was Home Minister
and at the relevant time was Cabinet Minister heading the Civil Supplies
G portfolio. Benjamin K. Hollohan is the son of Shri K. Hallahan, Minister

-
in the State of Nagaland. Remaining seven allottees are either members of
the Oil Selection Boards or their relations. Shaukat Hasan Abidi is the son
of Justice S.H. Abidi (Retd.), who was the Chairman of the Oil Selection
Board, Uttar Pradesh. Similarly, Arun Kumar Gupta is the son of the
Justice Harbans Lal Gupta (Retd.) who was the Chairman of Oil Selection
H Board,· Haryana. Pradeep Kumar is the son of Krishna Swaroop, who was
COMMON CAUSE v. U.O.l. [KULDIP SINGH, J.) 751

Member of Oil Selection Board for Delhi and Chandigarh. Neena Nautiyal A
is the wife of_ R.S. Nautiyal, who was member of Oil Selection Board,
Punjab. Dharmesh Kumar was the recommendee of Satya Bahin, Ex.
Member of Parliament and Member of the Oil Selection Board for
Haryana. Shiv Balak Passi and Ghulam Ahmad Mir were themselves
members of the Oil Selection Board. It is obvious that Capt. Satish Sharma
B
was personally interested in making allotments of petrol pumps in favour
of all these 15 persons. He made allotments in favour of relations of his
personal staff under the influences of the staff on wholly extraneous
considerations. The allotments to the sons of Ministers were only to oblige
the Ministers. The allotments to the members of the Oil Selection Boards
and their/chairmen's relation have been done to influence them and to have c
favours from them. All these allotments are wholly arbitrary, nepotistic and
are motivated by extraneous considerations.

The Government today - in a welfare State - provides large number
of benefits to the citizens. It distributes wealth in the form of allotment of D
plots, houses, petrol pumps, gas agencies, mineral leases, contracts, quotas
and licences etc. Government distributes largesses in various forms. A
Minister who is the executive head of the department concerned distributes
these benefits and largesses. He is elected by the people and is elevated to
a position where he holds a trust on behalf of the people. He has to deal
with the peoples' propercy in a fair and just manner. He cannot commit E
breach of the trust reposed in him by the people. We have no hesitation
in holding · that Capt. Salish Sharma i.n his capacity as a Minister for .
Petroleum and Natural Gas deliberately acted in a wholly arbitrary and
unjust manner. We have no doubt in our mind that Capt. Satish Sharma
knew that the allottees were relations of his personal staff, sons of Mini-
F
sters, sons/relations of Chairmen and members of the Oil Selection Boards
and the members of the Oil Selection Boards themselves. The allotments
made by him were wholly mala fide and as such cannot be sustained.

We are further of the view that Capt. Satish Sharma acted in a wholly
biased manner inasmuch as he unfairly regarded with favour the cases of G
15 allottees before him. The relevant circumstances available from record
and discussed by us leave no manner of doubt in our mind that Capt. Satish
Sharma d,eliberately acted in a biased manner to favour these allottees and
as such the allotment orders are wholly vitiated and are liable to be set
aside. H
752 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A The orders of the Minister reproduced above read : ''the applicant
has no regular income to support herself and her family", "the applicant is
an educated lady and belongs to scheduled tribe community", "the ap-
plicant is unemployed and has no regular source of income", "the applicant
is an uneducated, unemployed scheduled tribe youth without regular
B source of livelihood", "the applicant is a housewife whose family is facing
difficult financial circumstances" etc. etc. There would be literally millions
of people in the country having these circumstance or worse. There is no
justification whatsoever to pick up these persons except that they happen
to have won the favour of the Minister on ma/a fide considerations. None
of these cases· fall within the categories placed before this Court in writ
C petition (Civil) No. 886/93 title Centre for public interest Ligation v. Union
of India & Am:s., decided on March 31, 1995 but even if we assume for
argument sake that these cases fall in some of those or similar guidelines
the exercise of discretion was wholly arbitrary. Such a discretionary power
which is capable of being exercised arbitrarily is not permitted by Article
D 14 of the Constitution of India. While Article 14 permits a reasonable
classification having a rational nexus to the objective sought to be achieved,
it does not permit the power to pick and choose arbitrarily out of several
persons falling in the same category. A transparent and objective
criteria/procedure has to be evolved so that the choice among the members
belonging to the same class or category is based on reason, fair play and
E.
non arbitrariness. It is essential to lay down as a matter of policy as to how
preferences would be assigned between two persons falling in the same
category. If there are two eminent sportsmen in distress and only one portal
pump is available, there. should be clear, transparent and objective
criteria/procedure to indicate who out of the two is to be preferred. Lack
F of transparency in the system promotes neptosism and arbitrariness. It is
absolutely essential that the entire system should be transparent right from
the stage of calling for the applications upto the stage of passing the orders
of allotment. The names of the allottees, the orders and the reasons for
allotment should be available for public knowledge and scrutiny. Mr. Shanti
G Bhushan has suggested that the petrol pumps, agencies etc. may be allotted
by public auction - category-wise amongst the eligible and objectively
selected applicants. We do not wish to impose any procedure on the
Government. It is a matter of policy for the Government to lay down. We,
however, direct that an,Y'procedure laid down by the Government must be
H transparent, just, fair and non-arbitrary.
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.] 753

This Court in a The Centre for Public Interest Litigation case (supra) A
has endorsed the guidelines submitted by the Attorney General for allot-
ment of petrol pumps, gas agencies etc. The Court in that case did not have
before it the actual manner of exercise of discretion by the Minister in the
allotment of pumps/agencies. The allotment orders which are now before
the Court clearly indicate that leaving the authorities to enjoy absolute
discretion even within the guidelines would inevitably lead to gross viola- B
tion of the constitutional'norms when the persons for allotment are picked
up arbitrarily and discriminatory.

This Court as back as in 1979 in Ramana Shetty's case (supra) held
"it must, therefore, be taken to be the law......" that even in the matter of C
grant of largesses including award of jobs, contracts, quotas and licences,
the Government must act in fair and just manner and any arbitrary dis-
tribution of wealth would violate the law of the land. Mr. Satish Sharma
has acted in utter violation of the law laid-down by this Court and has also
infracted Article 14 of the Constitution of India. As already stated a D
minister in the Central Government is in a position of a trustee in respect
of the public property under his charge and discretion. The petrol
pumps/gas agencies are a kind of wealth which the Government must
distribute in a bona fide manner and in conformity with law. Capt. Satish
Sharma has betrayed the trust reposed in him by the people under the
Constitution. It is high time that the public servants should be held per- E
sonally responsible for their mala fide acts in the discharge of their func-
tions as public servants. This Court in Lucknow Development Authority v.
M.K Gupta, (1994) 1 Supreme Court Cases 243, approved "Misfeasance in
public offices" as a part of the Law of Tort. Public servants may be liable
in damages for malicious, deliberate or injurious wrong- doing. According
to Wade "There is, thus, a tort which has been called misfeasance in public F
office and which includes malicious abuse of power, deliberate malad-
ministration, and perhaps also other unlawful acts causing injury". With
the change in socio-economic outiuok, the public servants are being
entrusted with more discretionary power even in the field of distribution
of Government wealth in various forms. We take it to be perfectly clear, G
that if a public servant abuses his office either by an act of omission or
commission, and the consequence of that is injury to an individual or loss
of public property, an action may be maintained against such public
servant. No public servant can say "you may set-aside an order on the
ground of mala fide but you cannot hold me personally liable". No public
servant can arrogate to himself the power to act in a manner which is H
754 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A arbitrary.

For the reasons indicated above, we conclude that the orders passed
by Capt. Satish Sharma, the then Minister of State for Petroleum and
Natural Gas, Government of India, allotting petrol pumps to Sarbjot Singh,
Benjamin K. Hollohon, Syed Hasan Shaukat Abidi, Shiv Balak Passi,
B Pradeep Kumar, Ghulam Ahmad Mir, Neena Nautiyal, Arun Kumar
Gupta, Dharmesh Kumar, Leela Devi, Poda Rajasekhar, Madhuri Safaya,
Monika Malla, Daya Rani and Vijaya Nair are arbitrary, discriminatory,
mala fide, wholly illegal and as such are liable to be quashed.

We, therefore, hold and direct as under :
c
1. The orders - reproduced in earlier part of this judgment -
allotting petrol pumps to the above mentioned fifteen persons are
hereby quashed.

2. The allocation, allotment of the petrol pumps/retail outlet
D Cfealerships by the Government of India, Indian Oil Corporation
Ltd. or any other corporation in the names of the above said fifteen
persons shall stand cancelled with immediate effect.

3. Most of these 15 persons have not as yet commissioned the
petrol pumps. Those who have commissioned the petrol pumps
E
and are running the same shall stop operating the petrol pumps
and running the said business with effect from October 31, 1996.
The Government of India/Oil Corporation (concerned) shall take
over the petrol pump premises from these persons within ten days
thereafter. The Oil Corporation shall have the market-value of the
F site and the construction thereon, determined in a fair and just
manner before October 31, 1996.

4. Each of the commissioned petrol pumps, taken over by the
Government/Oil Corporation (concerned) and the built-up area
along with the site' (whether lease-hold or owned by the original
G allottee) shall be disposed of by way of public auction. The original
allottees may also participate in the auction. The petrol pump shall
be allotted to the highest bidder. The said allottee shall run the
petrol pump on the original terms and conditions. He shall have
all the rights in respect of the site and the construction thereon as
H the original allottee had on the date of auction. Out of the auction

.
:-----
COMMON CAUSE v. U.0.1. [KULDIP SINGH, J.) 755

money the value of the site and the construction as determined by A
the Oil Corporation shall be paid to original allottee and the
remaining money shall go to the Government coffer. On receipt
of the said amount the original allottee shall cease to have any
right or interest in the site and the construction thereon. If the
successful bidder is the original allottee, he shall pay the dif-
B
ference between the auction money and the value of the site and
construction as determined by the Oil Corporation.

5. Capt. Satish Sharma shall show-cause within two weeks why a
direction be not issued to .the appropriate police authority to
register a case and initiate prosecution against him for criminal C
breach of trust or any other offence under law. He shall further
show-cause within the said period why he should not, in addition,
be made liable to pay damages for his ma/a fide action in allotting
petrol pumps to the above mentioned fifteen persons.

We place on record our appreciation for Mr. H.D. Shourie, who, very D
ably, assisted us in this matter. He shall be entitled to costs which we
quantify as rupees fifty thousand. The cost shall be paid by Capt. Salish
Sharma personally.

Before parting with this judgment, we may mention about Civil Writ E
Petitions Numbers 4003/95 and 4430/95 which are pending before the Delhi
High Court. In the said petitions, allotment of petrol pumps/gas agencies
to various other persons during the period 1992-93, 1993-94 1994-95 and
1995-96 have been challenged. Transfer petition No. 127/96 has been filed
in this Court seeking transfer of those writ petitions from Delhi High Court
to this Court. We have issued notice in the transfer petition and have stayed F
further proceedings before the High Court in the writ petitions. Various
affidavits have been filed on behalf of the Ministry of Petroleum & Natural
Gas. Mr. Devi Dayal, Joint Secretary of the Ministry, in his affidavit dated
March 26, 1995, has stated that in 1995-96 petroleum products agencies
were allotted to 99 persons under the discretionary powers of the Govern- G
ment. It is further stated that orders on file have been made allotting petrol
pumps/agencies to 61 more persons. An affidavit filed by Mr. Srinivasan,
Advocate supporting the transfer petition gives a long list of persons who
are related to the then Prime Minister/Ministers and other VIPs and who
have been allotted petrol pumps and gas agencies. Mr. Devi Dayal, Joint
Secretary in the Ministry of Petroleum has filed another affidavit dated H
756 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A April 18, 1996 in reply to the affidavit of Mr. Srinivasan. Para 6 of the
affidavit is as under :

"As regards the list of allottees mentioned in paras 3 to 6 and the
alleged relationship with the Prime Minister, other Ministers,
V.I.Ps., M.P.s/M.L. As., etc., it is to submit that enquiries have
B been made through the Oil Companies from the allottees, who
have replied through affidavits. The comments of the Ministry, on
the basis of above enquiry and records, are contained in Annexure
- I to this affidavit."

C Annexure 1 with the affidavit shows that gas agencies were allotted to six
relations of the then Prime Minister, an age~cy to a son' of the OSD in
Prime Minister's office, LPG dealership to daughter-in-law of the OSD to
the then Minister of Petroleum, a petrol pump to the real brother of
Chandraswamy (Nemi Chand Jain), LPG distributorship to brother of Shri
Bhagwan Shri Satya Sai Baba, LPG dealership to Manju Devi, wife of
D private secretary to additional private secretary of Capt. Satish Sharma, a
petrol pump to wife of V.K. Aggarwal, additional private secretary, Mini-
ster of Law, RO dealership to Rakesh Saluja, son of R.L. Saluja, who was
employed in the Ministry of Petroleum till June, 1993, RO dealership to
Prathiba Singh related to Shri Kalapnath Rai, RO· dealership in January,
E 1995 to Kanti Lal Bhuriya, who at that time was Minister for Tribal Welfare
in the Madhya Pradesh Government, a gas agency to the son-in-law of Mr .
.G. Ganga Reddy, Member of Parliament and various others.

Since the two writ petitions, mentioned above, are pending before
the High Court wherein the allotments made to all the persons mentioned
F above and others, have been challenged, it is not necessary for us to
transfer the writ petitions to this Court. We vacate the stay order granted
by this Court and dispose of the transfer petition. We direct the Registry
of this Court to send all the affidavits filed by the parties in the transfer
petition along with annexures to the High Court. We have no doubt that
G the High Court shall examine the issues involved in the writ petitions and
shall also go into the validity of the allotment lo petrol pumps/gas agencies
to various persons, after hearingthem, in accordance with law. We request
the High Court to expedite the hearing of the petitions.

M.K. Petition disposed of.
H
. PERIASAMI AND ANR.
v.
A

STATE OF TAMIL NADU

SEPTEMBER 25, 1996

[DR. A.S. ANAND AND K. T. THOMAS, JJ.] B

Oiminal Law :

Evidence Act, 1872: Sections 101 and 105.

Burden of Proof-Benefit of general exception-Right to private c
defence-Availing of-Held : Initial burden on prosecution to prove that
accused committed the offence charged against-Presumption regarding ab-
sence of circumstances bringing the case within the exception does not dis-
place the traditional burden of the prosecution--Accused can discharge the
burden by ''preponderance of probabilities" unlike the prosecution--But there D
is no presumption that an accused is the aggressor in every case of homicide.

Penal Code, 1860: Sections 96 to 106, 302 and 304.

Homicide-Accused being aggressor-Presumption-Held : No
presumption that the accused is the aggressor in every case of E
homicide-Benefit of reasonable doubt that the deceased party was the
aggressor would be extended to the accused no matter that he did not adduce
any evidence in that direction.

Section 96-Private defence-Specific plea-Absence of-When ex-
amined under S.313 Cr. P.C. Held: Not enough to denude the accused of the F
right if the same can be made out othenvise-Criminal Procedure Code, 1973,
S.313 and Section 154.

FIR Delay in lodging of-Witness gave infomiation of incident to local
village administrative officer who went to the spot to ascertain the truth and, G
after verification of the correctness of the infonnation, recorded his state-
ment-Held: Possibility of deliberations and confabulations cannot be ruled
out-But this is not enough to vitiate the entire testimony of the witness-As-
surance can be obtained from other evidence regarding the truth of his version.

Section 162:-Inquest report-Statement of witness-Recorded H
757
758 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A in-Held: Prohibited by S.162-Such a statement could not be used for any
purpose except to contradict its author.
..
The appellants-accused were acquitted by the Sessions Court of the
offence under Section 302/34 of the Indian Penal Code, 1860. However, the
High Court set aside the acquittal and convicted the accused under Section
B 302/34 IPC. Hence this appeal.

According to the prosecution, on the morning of the occurrence day
deceased in association with four other persons (including PW-1 and
PW-2) was working in a field. By about 9.30 a.m. deceased alone went to a
C nearby plantain grove to ease himself. After a little while PW-1 and PW-2
heard the squeal of a pig followed by the yells of the deceased PW-1 and
PW-2 rushed to the place and then they saw the first appellant inflicting
a bluw on the neck of the deceased with a billhook and the second appellant
stabbing him with a spear on the chest. Deceased fell down but first
appellant cut him on the neck with the billhook two or three times more.
D Assailants thereafter took to their heels. Deceased succumbed to his
injuries within an hour. In the quest report the time of death of the
deceased was recorded as 10.30 p.m. where as the death actually took place
at 9.30 a.m.

E PW-1 went to the local village administrative officer (PW-8) and
informed him of the incident. PW-8 went to the spot of occurrence and
verified the correctness of the information furnished by PW-1 After return-
ing to his office PW-8 recorded the statement of PW-1 which was forwarded
to the Police Station. FIR was prepared on its basis and during investiga-
tion appellants were arrested.
F
On behalf of the accused persons it was contended that there was
delay in lodging of the FIR, and that the deceased was the aggressor and
the accused had the right of private defence although no such specific plea
was taken by them.
G Disposing of the appeal, this Court

HELD : 1. Section 105 of the Evidence Act, 1872 prescribes a rule of
burden of proof. The burden is on the accused to prove the existence of
circumstances bringing his case within any ofthe exceptions and the Court
H shall presume the absence of such circumstances." The said rule does not
PERIASAMI v. STAIB 759

whittle down the axiomatic rule of burden (indicated in Section 101) that A
the prosecution must prove that the accused has committed the offence
charged against. The traditional rule that it is for prosecution to prove the
offence beyond reasonable doubt applies in all criminal cases except wh~re
any particular statute prescribes otherwise. The legal presumption created
in Section 105 with the words "the Court shall presume the absence of such B
circumstances" is not intended to displace the aforesaid traditional burden
of the prosecution. It is only where the prosecution has proved its case with
reasonable certainty that the court can rest on the presumption regarding
absence of circumstances bringing the case within any of the exceptions.
This presumption helps the court to determine on whom is the burden to
prove facts necessary to attract the exception and an accused can discharge C
the burden by 'preponderance of probabilities' unlike the prosecution. But
there is no presumption that an accused is the aggressor in every case of
homicide. If there is any reasonable doubt, even from prosecution evidence,
that the aggressor in the occurrence was not the accused but would have
been the deceased partly, then benefit of that reasonable doubt has to be
extended to the accused, no matter he did not adduce any evidence in that D
direction. [764-H; 765-A-D]
.r
Partap v. State of U.P., [1976] 2 SCC 798 and Yogendra Morarji v.
State of Gujarat, followed.

Dahyabhai Chhaganbhai Thakkar v. State of Gujarat, AIR (1964) SC
E
1563, relied on.

2. Although the appellants have not stated, when examined under
Section 313 of the Criminal Procedure Code, 1973, that they had acted in
exercise of their right of private defence yet absence of such a specific plea F
in the statement is not enough to denude them of the right if the same can
be made out otherwise. [764-G]

3. The local village administrative officer (PW-8) did not take down
the statement of PW-1 when it was made to him, but he went to the spot G
to ascertain the truth of account given by PW-1. There was the possibility
for deliberations and confabulations. However, this is not enough to vitiate
the entire testimony of PW-1. Assurance can be obtained from other
evidence regarding the truth of his version. [763-C-D]

Meghraj Singh v. State of U.P., [1994] 5 SCC 188, relied on. H
760 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 4. The recital in the inquest report regarding the time of death of the
deceased as 10.30 P.M. has no utility whatsoever because the said recital
in the inquest report is only a reproduction of what the witnesses would
have told the investigating officer. It falls within the sweep of the interdict
contained in Section 162 and hence could not be used for any purpose
(except to contradict its author). The mere fact that such a recital found
B
a place in the inquest report is not enough to save it from the prohibition
provided in the Section. [736-F-G]

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
346of1993.
c
From the Judgment and Order dated 7.12.92 of the Madras High
Court in Crl. A No. 489 of 1991.

S. Siva Subramaniam, V.G. Pragasam, R. Nedumaran, (R. Ayyam
Perumal) for the Appellants.
D
V. Krishnamurthy for the Respondent.

The Judgment of the Court was delivered by

E THOMAS, J. We have pronounced the verdict in this appeal on
29.8.1996 by altering the conviction of the two appellants to the offence
under section 304 part I read with section 34 of the IPC and sentencing
them each to rigorous imprisonment for seven years. However, we reserved
our reasons thereof and hence we now state the reasons as under :

'F First appellant (Periasamy) and second appellant (Ramaswamy)
were prosecuted along with one Murugesam for offences under section
302/34 IPC on the allegation that they with common intention to murder
deceased Ranganathan attacked him with billhook, spear and lathi at about
9.30 a.m. on 12.6.1989. Sessions Court acquitted all the three accused, but
G the High Court of Madras, on appeal by the State, set aside the acquittal
and convicted the two appellants under section 302/34 IPC. The other
accused Murugesan was, however, convicted only under section 324 IPC.
Appellants have filed this appeal under section 2 of the Supreme Court
(Enlargemeµt of Criminal Appellate) Jurisdiction Act 1970.

H Prosecution story, in brief, is the following : -
PERIASAMI v. STATE (TIIOMAS,J.j 761

Periasamy (first appellant) is the son and Murugesan is the nephew A
of Ramaswamy (second appellant). About five years prior to the murder,
second appellant's daughter Mallika was indecently assaulted by deceased
Ranganathan for which there was a criminal case and Ranganathan was
convicted in that case. A couple of years thereafter the plantain crops of
deceased Ranganathan were destroyed by the goats of second appellant
B
over which ther~o was some altercation between them. Thus, bad blood
existed between the deceased and second appellant's family.

On the morning of the occurrence day deceased Ranganathan in
association with four other persons (including PWl and PW2) engaged
themselves in the work of shifting an oil engine to a field for irrigation C
purposes. By about 9.30 a.m. deceased Ranganathan alone went to a nearby
plantain grove to ease himself. After a little while PWl and PW2 heard
the squeal of a pig followed by the yells of Ranganathan. PWl and PW2
rushed to the place and then they saw the first appellant inflicting a blow
on the neck of Ranganathan with a billhook and the second appellant D
stabbing him with a spear on the chest. When deceased tried to escape he
was assaulted by Murugesan with lathi. Second appellant again stabbed him
with the spear. Deceased fell down but first appellant cut him on the neck
with the billhook two or three times more. Assailants thereafter took to
their heels. Deceased Ranganathan succumbed to his injuries within an
hoo~ E
PWl went to the local village administrative officer (PW-8) and
informed him of the incident. PW-8 went to the spot of occurrence and
verified the correctness of the information furnished by PWl. After return-
ing to his office PW8 recorded the statement of PW-1 (Ext.P-1) which was p
forwarded to Velur Police Station. FIR was prepared on its basis and
during investigation appellants were arrested. On completion of the inves-
tigation the police charge- sheeted the appellants and Murugesam arraying
them as Al, A2 and A3, respectively.

PWl and PW2 are the only eye witnesses examined by the prosecu- G
tion. PW5 (Gunasekharan) deposed that PW2 rushed to his house soon
after the occurrence and told him of what the three accused did to the
deceased and that he went to the spot with PW 2 and found his brother
badly mauled. He made efforts to remove the injured to the hospital but
his brother died before reaching the hospital. PW6 said that she saw the H
762 SUPREME COURT REPORTS (1996J SUPP. 6 S.C.R.

A three accused running away from the scene with the weapons. PW7 said
that he over-heard some pedestrians mumbling between each other that
these three accused had given cut blows to the deceased and a little later
he saw the accused washing themselves and cleaning the weapons beneath
a bridge. PW7 further said that he over-heard a conversation as between
the accused that the weapons should be concealed and that they should
B consult a legal practitioner at Selam.

Learned Sessions Judge declined to place reliance on the testimony
of any of the above witnesses. The delay in registering the FIR, and a recital
found in the inquest report showing the time of death of the deceased as
C 10.30 in the night on 12.6.1989 were highlighted by the learned Sessions
Judge.

High Court of Madras, in reversal of the order, found the evidence
of PWl and PW2 trustworthy. Learned Judge also placed reliance on the
testimony of PW5, PW6 and PW7. However, Court did not accept the
D prosecution version that the third accused Murugesan had common inten-
tion to murder the deceased. Hence, the appellants were convicted and
sentenced as aforesaid.

Shri Siva Subramaniam, learned senior counsel who argued for the
appellants has taken us through the material evidence and advanced
E
several contentions, main among them is that the High Court ought not
have lightly interferred with the acquittal passed by the trial court. Alter-
natively, he argued that the conviction should not, in any view of the matter;
have gone beyond the offence of culpable homicide not amounting to
murder.
F
After going through the evidence of PW6 and PW7 we too are not
impressed by their testimony. We are in agreement with the learned
Sessions Judge that no credit can be given to their evidence. But the
evidence of PWl and PW2 stands on a different footing.
G The first hurdle which stands in the way of accepting PW-l's
evidence is the delay involved in preparing the FIR. PWS did not take down
the statement of PWl when it was made to him, but he went to the spot
to ascertain the truth of account given by PWl. There was the possibility
for deliberations and confabulations. In this context, we may refer to the
H observations made by one of us (Dr. Anand J.) in Meghraj Singh v. State
PERlASAMiv. STATE[THOMAS,J.] 763

of U.P., [1994] 5 SCC 188. A

"The object of insisting upon prompt lodging of the FIR is to obtain
the earliest information regarding the circumstance in which the
crime was committed, including the names of the actual culprits
and the parts played by them, the weapons if any, used, as also the B
names of the eye witnesses if any. Delay in lodging the FIR often
results in embellishment, which is a creature of an after thought.
On account of delay, the FIR not only gets bereft of the advantage
of spontaneity, danger also creeps in of the introduction of a
coloured version or exaggerated story."
c
However, the above weakness attached to Ext. P-1 is not enough to vitiate
the entire testimony of PW-1. We have to see whether assurance can be
obtained from other evidence regarding the truth of this version.

D
PW-2 also said that he saw the appellants striking the deceased with
the weapons when he went to the scene along with PWl. His evidence is
consistent with the testimony of PW-1. It is appropriate, in this context, to
refer to PW-5 (Gunasekharan) who is the brother of the deceased. He said
that by about 9.30 AM. PW2 ran to his house and told him that the three
accused had dealt blows on Ranganathan with billhook, spear and stick. E
PW-5 then rushed to the scene and ...aw the deceased lying badly mauled.
The witness, then narrated the efforts made to take his injured brother to
the hospital and how the efforts failed. The testimony of PW-5 inspires
confidence. It renders the version .of PW-2 also believable.
F
The recital in the inquest report regarding the time of death of the
deceased as 10.30 P .M. on 12.6.1989 has no utility whatsoever now. Firstly,
because the said recital in the inquest report is only a reproduction of what
witnesses would have told the investigating officer. It falls within the sweep
of the interdict contained in section 162 of the Code of Criminal Procedure
(for short 'the Code') and hence could not be used for any purpose (except G
to contradict its author). The mere fact that such a recital found a place
in the inquest report is not enough to save it from the prohibition provided
in the section. Secondly, even otherwise we are satisfied that the time 10.30
P .M. shown in the inquest report is only a mistake for 10.30 A.M. and
hence no implication would flow out of such an error. H
764 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A Learned counsel contended that evidence cif the eye witnesses is in
conflict with the medical evidence and hence the sessions Judge has rightly
discarded it. Both eye-witnesses (PWl and PW-2) said that first appellant
inflicted three cuts with the billhook on the neck, but only one incised
injury was noted by the doctors on the neck of the decea~ed. The descrip-
tion of that injury in the post-mortem certificate is this :
B
"An incised wound 20cm x lOcm x 19cm over the left side of the
neck extending from the left side of the clavicle to the nape of the
neck. Muscles and blood vessels were cut. Cervical vertebra cut at
CS."
c When Dr. Ilango (PW-3) was asked in cross-examination whether
such injury can be caused in one cut he answered in the affirmative. But
no question was put to the doctor whether the said injury could as well
have been the result of multiplicity of cuts on the same situs. Looking at
the width of the injury as 1.0 cm. extending from left clavicle upto the nape
D of the neck having a depth of 19 cm. involving blood-vessels and also the
5th cervical vertibra, we have no difficulty in countenancing the possibility
of multiple blows with a billhook resulting in that injury.

We, therefore, concur with the conclusion of the High Court that
appellants have inflicted the fatal injuries on the deceased with lethal
E
weapons and find no conflict between the occular testimony and the
medical evidence.

We shall now deal with the alternative contention advanced by Sri
Siva Subramaniam, learned senior counsel, that the offence would not go
F above section 304 part 1 of the IPC. This contention is made on the premise
that deceased was the aggressor in the incident and hence appellant had
initial right of private defence though they would have exceeded ~hat right.
We may point out that appellants have not stated, when examined under
section 313 of the Code, that they have acted in exercise of such right. Of
G course, absence of such a specific plea in the statement is not enough to
denude them of the right if the same can be made out otherwise.

While dealing with the said alternative contention we have to bear in
mind section 105 of the Evidence Act. A rule of burden of proof is
. prescribed therein that the burden is on the accused to prove the existence
H of circumstances bringing the case within any of the exceptions "and the
PERIASAMI v. STATE [IHOMAS,J.] 765

Court shall presume the absence of such circumstances." The said rule does A
not whittle down the axiomatic rule of burden (indicated in section 101)
that the prosecution must prove that the accused has committed the
offence charged against. The traditional rule that it is for prosecution to
prove the offence beyond reasonable doubt applies in all criminal cases
.It except where any particular statute prescribes otherwise. The legal
B
presumption created in section 105 with the words, " the Court shall
presume the absence of such circumstances" is not intended to displace the
aforesaid traditional burden of the prosecution. It is only where the
prosecution has proved its case with reasonable certainty that the court can
rest on the presumption regarding absence of circumstances bringing the
case within any of the exceptions. This presumption helps the Court to c
determine on whom is the burden to prove facts necessary to attract the
exception and an accused can discharge the burden by 'preponderance of
probabilities' unlike the prosecution. But there is no presumption that an
accused is the aggressor in every case of homicide. If there is any
reasonable doubt, even from prosecution evidence, that the aggressor in D
the occurrence was not the accused but would have been the deceased
party, then benefit of that reasonable doubt has to be extended to the
accused, no matter he did not adduce any evidence in that direction.

The above legal position has been succintly stated by Subbarao J. (as
he then was) in a case where an accused caused pleaded the exception E
under section 84 IPC Dahyabhai Chhaganbhai Thakkar v. State of Gujarat,
AIR 1964 SC 1563:

"The prosecution, therefore, in a case of homicide shall prove
beyond reasonable doubt that the accused death with the requisite F
intention described in S.299 of the Penal Code. This general
burden never shifts and it always rests on the prosecution

If the material placed before the court, such as, oral documentary
evidence, presumptions, admissions or even the prosecution G
evidence, satisfies the test of "prudent man", the accused will have
discharged his burden. The evidence so placed may not be sufficient
to discharge the burden under section 105 of the Evidence Act, but
. it may raise a reasonable doubt in the mind of a judge as regards
one or other of the necessary ingredients of the offence itself." H
766 SUP~EME COURT REPORTS (1996) SUPP. 6 S.C.R.

A In Partap v. The State of Uttar Pradesh, (1976) ~ SCC 798 a three
judges bench was considering a case where the accused failed to adduce
evidence to establish the exception under section 95 IPC. It was held that
even if the accused failed to establish his plea, in a case where prosecution
has not established its case beyond reasonable doubt against the appellant
on an essential ingredient of the offence of murder, the plea of right of
B private defence cannot reasonably be ruled out from prosecution evidence
the benefit of it must go to the accused. In Yogendra Morarji v. The State
of Gujarat, AIR (1980) SC 660 another bench of three judges of this Court
dealt with section 105 of the Evidence Act and observed thus :

c "Notwithstanding the failure of the accused to establish positively
the existence of circumstances which would bring his case within
an Exception, the circumstances proved by him may raise a
reasonable doubt with regard to one or more of the necessary
ingredients of the offence itself with which the accused stands
charged. Thus there may be cases where, despite the failure of the
D
accused to discharge his burden under section 105 the material
brought on the record may, in the totality of the record may, in
the totality of the facts and circumstances of the case, be enough
to induce in the mind of the Court a reasonable doubt with regard
to the mens rea requisite for an offence under section 299 of the
E Code."

Keeping the above legal position in mind, we scrutinised the evidence
to ascertain whether the deceased could have been the aggressor. Neither
PWl nor PW2 could say how the occurrence .stated. The possibility that
p before they reached the place, some events would have already taken place
cannot be ruled out. PWl and PW2 over-heard the squeal of a pig. They
also over-heard the sound of a quarrel. When they reached the scene they
saw the carcass of a slain pig iying nearby. The motive suggested by the
prosecution was sufficient for the deceased as well to entertain animus
towards second appellant. Further, both sides would have confronted with
G each other on that morning abruptly without any prior knowledge or inkling
that deceased might go to the plantain grove at the crucial time for
answering the call of nature.

The above circumstances are broad enough to instil reasonable doubt
H in our mind that accused would have picked up a quarrel with the second·
PERIASAMI v. STATE [THOMAS,J.) 767

appellant and then the other events had followed. Law entitles the appel- A
lants to have benefit of that reasonable doubt concerning the begining part
of the occurrence and renders them liable for culpable homicide not
amounting to murder.

The above are our reasons to alter the conviction to section 304 part
1 of IPC and for imposing sentence of rigorous imprisonment for seven B
years on each of them.

v.s.s. Appeal disposed of.
A ASHOK KAPJL
v.
SANA ULLAH (DEAD) AND ORS.

SEPTEMBER 25, 1996

B [KULDIP SINGH AND K.T. THOMAS, JJ.J

Rent control and Evir~tion-U.P. Urban B1tildings (Regulation of Let-
ting, rent and Eviction) Act 1972-Sections 3 and 16-Building-Allot-
ment~bjected by the landlor~Since roofless structure not to be considered
C as a building-Held, concwTent finding of the fact that stntcture was a roofed
building when it fell vacmzt and the roof of the building was p1tlled down by
the landlord subsequently, thereby rendeling it a roofless stntcture- A building,
even after losing the roof can cQntinue to be a building in its general mean-
ing-Taking recourse to such general meaning in the present context would
D help to prevent a mischief-Liberal inte1pretation of law fr necesswy to prevent
a wrong doer from taking advantage of his own wrong.

MAXIMS

"Nullus Commodum Capere Potest de Injuria Sua Prop1ia" (No man
E can take advantage of his own wrong~ne of salient tenets of equity-Held,
Respondent cannot secure the assistance of a cowt of law for enjoying the
fmit of his own wrong:

Sana Ullah, the father of contesting respondents was the landlord of
the suit premises. D was the tenant and on the expiry of his tenancy, the
F appellant applied to the District Magistrate for allotment of suit premises
in his name. The landlord raised objections that the structure was not a
"building" as it had no roof then. But his objections were rejected and the
District Magistrate found that the structure was still a building and
passed an order of allotment in the name of the appellant.
G On a revision· petition to the District Judge, the case was remanded
back to the District Magistrate for arriving at certain findings on facts.
Finally it was found that the building was a roofed structure when D
vacated it, but subsequently its tin roofs were dismantled by the owner of
the building and the structure remained roofless even on the date of
H allotment order. The District Magistrate passed an allotment order and
768
ASHOK KAPIL v. SANA ULLAH 769

the appellant occupied the building. A
In the revision, the District Judge confirmed the allotment order
holding that the District Magistrate had jurisdiction to allot such a
structure.

A writ petition filed in the High court by the landlord was allowed B
and the allotment order was quashed. The High Court was of the opinion
that the legislature did not confer power of allotment in respect of a
construction which ceased to be a building at the time of allotment and
hence the order of allotment made in favour of appellant was set aside.
The High Court took the view that an order of allotment under section 16 C
of U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act
1972 can be made only in respect of a building and not with respect to a
construction which was a building at the time when it was vacated but
subsequently ceased to the so. Hence this appeal.

Allowing the appeal, this Court D

HELD : 1.1. It is clear from the definition of 'Building' under section
3(1) of U.P. Urban Buildings (Regulation of Letting, Rent and Eviction)
Act 1972, that any structure without roof cannot fall within the ambit of
the definition. The factual position is that the structure remained a roofed E
building when it became vacant but the roof was later dismantled by the
owner. So as on the date of allotment order it remained roofless. If the
crucial date is the date of allotment order, the structure was not a building
as defined in the Act. But, the respondent cannot be assisted by a court of
law to take advantage of the mischief committed by him. The maxim,
"Nullus Commodum Capere Potest de injuriea sua propria" (No man can take F
advantage of his own wrong) is one of the salient tenets of equity. Hence,
in the normal course, respondent cannot secure the assistance of a court
of law for enjoying the fruit of his own wrong. [772-F-HJ

1.2. Jurisdiction of the District Magistrate is in respect of a building G
which is either vacant or which "has fallen vacant" or is about to fall vacant
as per Section 16(1), If a structure was a building as per the definition at
the time when it fell vacant, the D~strict Magistrate, no doubt, gets juris-
diction to initiated proceedings for passing allotment order. [773-F]

2.1. If the District Magistrate has commenced exercising jurisdiction H
770 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A ulider Section 16 of the Act, in respect of a building which answered the
description given in the definition of Section 3 (i), he would well be within •
his jurisdiction to proceed further notwithstanding the intervening
development that the building became roofless. A liberal interpretation to
prevent a wrong doer from taking advantage of his own wrong is necessary.
B A building even after losing the roof, can continue to be a building in its
general meaning. Taking recourse to such general meaning in the present
context would help to prevent a mischief. [774-D-E]

Victoria City v. Bishop of Vancourer Island, (1921) AC 384, referred
to.
c Stroud's ''Judicial Dictionary" (Vol. I 5th edn); Black's Law Dictionary
(5th edn), referred to.

2.2. The structure without roQfwill cease to be building as per Section
3(i) of the Act. But a roofless structure can still continu~ to be building
D .outside the fixed borders of the definition. Section 3 of the Act prefaces with
the words "unless the context otherwise requires". Thus the legislature,
which fixed contours for different expressions through the definition
clauses b,as also provided sufficient play at thejoints for contextual adap-
tations. Contextual variations are not impermissible under the act if such
variations are necessary to achieve the object of the enactment. Outside the
E defi1dtion in Section 3 of the .Act the word "building" need not necessarily
· be a roofed structure for even roofless structures are sometimes, used a
buildings in c.ertain circumstances. [773-G-H; 774-A]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 527 of
F 1979.

From the judgment and order dated 4.12.78 of the Allahabad High
Court in C.M.W.P. No. 524 of 1976.

M.C. Dhingra and P.K. Jain for the Appellant.
G
Satish Chandra and J.P. Goyal R.P. Goyal and ;s.K. Jain for the
Respondents. '

The Judgment of the Court was delivered by

H moMAS, J. The controversy between the parties in this appeal has
AS HOK KAPIL v. SANA ULLAH [THOMAS, J.] 771

narrowed down to a very short question. A building becal)le roofless before A
"allotment order" was passed under Section 16(1) of U.P. Urban Buildings
[Regulation of Letting, Rent and Eviction] Act, 1972 (for short' the Act).
The question now remains in this appeal is : should the structure have
-• necessarily bean a roofed one on the date of allotment order?

A summary of facts, out of which the said question has emerged, is
B
given below :

A building situated at Meerut City owned by the contesting
respondents' father (Sana Ullah) was let out to one Deep Chand Gupta
for a period of 5 years. On the expiry of lease period i.e. 3.8.1974. Deep C
Chand Gupta surrendered vacant possession of the building to the
landlord. On 20.8.1974, the present appellant moved an application before
the District Magistrate (who is the competent authority for passing allot-
ment order under the Act) for allotment of the said premises to him. Sana
Ullah filed his objections on 3.9.1974, in which he contended, inter alia, D
that the structure was not a "building" inasmuch as it had no roof then. The
District Magistrate found that the structure was still a building and hence
appellant was entitled to its allotment. The case had thereafter passed
through a chequered career. District Judge (the revisional authority under
the Act) remanded the case on two occasions to the District Magistrate
for arriving at certain findings on facts. Finally it was found that the E
building was a roofed structure when Deep Chand Gupta Vacated it, but
subsequently its tin roofs were dismantled by the owner of the building and
that the structure remained roofless even on the date of allotment order.
Nevertheless, allotment order was passed by the District Magistrate. Pur-
suant thereto the appellant occupied the building. In the revision learned F
District Judge held that District Magistrate had jurisdiction to allot such a
structure to the tenant and confirmed the allotment order.

Landlord filed a writ petition before the Allahabad High Court
challenging the aforesaid order. The High Court declined to interfere with G
---.. the finding on facts that the roOf of the building was removed by the
appellant after Deep Chand Gupta vacated the premises but took the view
that "an order of allotment under Section 16 can be made only in respect
of a building and not with respect to a construction which was a building
at the time when it was vacated but subsequently ceased to be so." Accord-
ing to the learned Single Judge "as the legislature did not c;onfer power of H
772 - SUPREMECOURTREPORTS (1996]SUPP.6S.C.R.

A allotment in respect of a construction which ceased to be a building at the
time of allotment the order of allotment made in favour of respondent 4
was liable to be set aside." Writ petition was hence allowed and the
allotment order was quashed. The said judgment of the Allahabad High
Court is now being challenged in this appeal by special leave.
B Before we proceed to consider the question set out earlier we may
observe that learned counsel for the respondents assailed the concurrent
finding of fact that roof of the building was pulled down by the landlord.
But we made it clear that in view of the clear finding made by the District
Magistrate and the learned District Judge on that issue and in view of the
C fact that High Court declined to disturb that finding, we would not go into
that aspect in this appeal

"Building" is defined in Section 3(i) of the Act thus ;

"building, means a residential or non-residential roofed structure
D and includes -

(i) any land (including any garden), garages and out-houses, ap-
purtenant to such building;

(ii) any furniture supplied by the landlord for use in such building;
E
(iii) any fittings and fixtures affixed to such building for the more
beneficial enjoyment thereof'.

It is clear from the definition that any structure without roof cannot
F fall within the ambit of the definition of building. Here the factual position
is this : The structure remained a roofed building when it became vacant :
but the roof was later dismantled by the owner. So on the date of allotment
order it remained roofless.

If the crucial date is the date of allotment order, the structure was
G not a building as defined in the Act. But can the respondent be assisted by
a court of law to take advantage of the mischief committed by him? The
maxim "Nullus commodum copere potest de injuria sua propria" (No man
can take advantage of .his own wrong) is one of the salient tenets of equity.
Hence, in the normal course, respondent cannot secure the assistance of a
H · court of law for enjoying the fruit of his own wrong.
ASHOKKAPILv. SANAULLAH(THOMAS,J.] 773

While considering the question whether District Magistrate would A
cease to have jurisdiction to pass allotment order in respect of a roofless
structure we may refer to the relevant provisions of the Act.

Chapter III of the Act contains a fasciculus of provisions (Sections

-- 11 to 19) dealing with allotment etc. under the heading "Regulation of
Letting". Section 11 prohibits the letting of any vacant building except in
pursuance of an allotment order issued under Section 16. Section 12
enumerates cases in which there would be deemed vacancy of buildings.
B

Section 13 declares that if any person occupies a building which fell vacant
otherwise than under an order of allotment he. would be deemed to be an
unauthorised occupant of the building. Section 15 casts an obligation on C
the landlord as well as the tenant to give notice of vacancy of the building
to the District Magistrate. (Landlord has to give such notice within 7 days
of the occurrence of such vacancy, whereas the tenant has to give the notice
within 15 days prior to the date of vacancy.) Section 16(1) reads thus :

"16(1). Allotment and release of vacant building. - (1) Subject to D
the provisions of the Act, the District Magistrate may by order -

(a) require the landlord to let any building which is or has fallen
vacant or is about to fall vacant, or a part of such building but not
appurtenant land alone, to any person specified in the order (to E
be called an allotment order);"

Jurisdiction of the District Magistrate, therefore, is in respect of a
building which is either vacant or which "has fallen vacant" or is about to
fall vacant. If a structure was a building as per the definition at the time
when it fall vacant, the Dist,rict Magistrate, no doubt, gets jurisdiction to F
initiate proceedings for passing allotment order, but would he lose juris-
diction merely because the structure became roofless subsequently? No
doubt, if we go by the definition in section 3(1) stricto sensu, the structure
without roof will cease to be building. But a roofless structure can still
continue to be building outside the fixed borders of the definition. It is now G
necessary to notice that section 3 of the Act, which contains all the
definition clauses, prefaces with the words "unless the context otherwise
requires". Thus the legislature, which fixed contours for different expres-
sions through the definition clauses has also provided sufficient play at the
jojnts for contextual adaptations. In order words, contextual variations are
not impermissible under the Act if such variations are necessary to achieve H
774 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

· A the object of the enactment. Outside the definition in section 3 of the act
the word "building" need not necessarily be a roofed structure for even
roofless structures are, sometimes, used as buildings in certain circumstan-
ces.

Stroud's ''Judicial Dictiona1y" (Vol. I of the 5th edn.) states that "what
B is a building must always be a question of degree and circumstances".
Quoting from Victoria City v. Bishopo of Vancouver Island, (1921) AC 384,
at P .390, the celebrated lexicographer commented that "the ordinary and
natural meaning of the word building includes the fabric and the ground
on which it stands". In Black's Law Dictionary (5th edn.) the meaning of
c the building is given as "a structure or edifice in closing a space within its
walls, and usually, but not necessarily, covered with a roof' (emphasis
supplied). The said description is recognition of the fact that roof is not a
necessary and indispensable adjunct for a building because there can be
roofless buildings. So a building, even after losing the roof, can continue
D to be a building in its general meaning. Taking recourse to such general
meaning in the present context would help to prevent a mischief.

The upshot is, if the District Magistrate has commenced exercising
jurisdiction under Section 16 of the Act, in respect of a building which
answered the description given in the definition in Section 3(i), he would
E well be within his jurisdiction to proceed further notwithstanding the
intervening development that the building became roofless. We are inclined
to afford such a liberal interpretation to prevent a wrong doer from taking
advantage to his own wrong.

F We, therefore, allow this appeal and set.aside the judgment of the
Allahabad High Court. There will be no order as to costs.

However, considering the importance of the locality in which the
building is situate and the palpably low rent which appellant is now paying,
we have no doubt, in the interest of justice, the appellant should pay higher
· G . rent. After hearing the counsel on both sides regarding this aspect, we fix
the monthly rent of the building at Rs. 500. Appellant shall pay rent at the
enhanced rate from 1.8.1996 onwards.

M.K.. Appeal allowed.
H
ADAIR DUTTA AND CO. INDIA PVT. LTD. A
v.
THE APPROPRIATE AUTHORITY, INCOME TAX
DEPARTMENT

SEPTEMBER 25, 1996
B
[KULDIP SINGH AND KT. THOMAS, JJ.]

!11come Tax Act, 1961:

Chapter XX-C, ss. 269 UD and 269 UE (!)-Purchase by Central C
Govemment of immovable property agreed to be sold-Vesting of prope1ty in
Central Govemment free from encumbrances-Held, in case agreement stipu-
lates the prope1ty to be sold free from all encumbrances or ce1tai11 encwnbran-
ces, then the vesting in Central Govemment would be free from such
encumbrances.
D
Tamil Nadu B11ildings (Lease and Rent Control) Act, 1960: B11ilding
belongi11g to Central Govemment-Whether exc/11ded from the pwview of the
Act-Matter remitted back to High Cowt for decisio11.

The appellant-company was tenant in a building situate in the city E
of Madras. The owner of the building entered into an agreement to sell the
building. The appropriate authority under Chapter XX-C of the Income
Tax, 1961, on coming to know of the agreement, ordered the Central
Government to purchase the said building for the same consideration as
shown in the agreement, in accordance with S.269 UD (1) of the Act. The
appellant was informed that the building stood vested in the Central F
Government by virtue of s.269 UE (1) of the Act free from all encumbran-
ces, and it was required to surrender possession of the building.

The appellant filed a writ petition before the High Court on the
grounds that in view of the decision in the case of C.B. Gautam* whereby G
the expression "free from all encumbrances" in sub-section (1) of s. 269-UE
had been struck down, only the right of the erstwhile owner of the building
vested with the Central Government without affecting the leasehold right
of the appellant; and that the appellant's right in the building was
protected .by the Tamil Na du Buildings (Lease and Rent Control) Act,
1960. The High Court dismissed the writ petition holding that the agree· H
775
776 SUPREME COURT REPORTS l1996) SUPP. 6 S.C.R.

A ment provided for a sale free from all encumbrances; and that the
provisions of the T.N. Act did not afford any protection to the appellant.
Aggrieved, the Company filed the present appeal.

It was contended for the appellant that though the T.N.Act excluded
government building from its purview, such exclusion was confined to
B buildings owned by the State Government and not to those owned by .....
Central Government.

Disposing of the appeal, this Court

HELD : 1. In C.B. Gautam* though the Constitution Bench has
c struck down the words "free from all encumbrances" in sub· section (1) of
s.269-UE of the Income Tax Act, 1961, it approved the distinction that in
case the agreement for sale contains the stipulation to the effect that the
property would be sold free from all encumbrances or certain encumbran·
ces then the vesting in the Central Government would be free from such
D encumbrances. In the instant ease, the agreement for sale executed by the
erstwhile owner, regarding the property in question,contained a stipula·
tion that the property would be sold free of all encumbrances. (780-A]

*C.B. Gautam v. Union of India & Ors., (1983) 1 SCC 78, explained
and followed.
E
2.1. The Constitution Bench in C.B. Gautam considered whether the
vesting in central Government would affect monthly tenancies, and held
that such tenancies would continue even on an order for purchase by
Central Government being made under s.269 UD (1), but such tenants
would lose the protection given to tena.nts under the rent protection laws
F
because such laws are not made applicable to properties owned by the
Central Government and their tenancies could be terminated by the
Central Government. (781-C-D]

C.B. Gautam v. Union of India & Ors., (1983) 1SCC78, referred to.
G
Tata Consulting Engineers &Anr. v. Union of India & Ors., (1994) 206
ITR 237, disapproved. ,
2.2. However, in C.B. Gautam the situation where monthly tenancy
is protected by a rent control legislation was not before the Court. The
H question regarding application of T.N. Act to buildings owned by the
ADAIR DUIT AND CO. v. APPROPRIATEAUTIIORITY (THOMAS,J.] 777

Central Government must be considered afresh by the High Court and, A
therefore, the matter is remitted to the High Court for disposal of the writ
petition accordingly. (781-H; 782-A-B]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1109 of
1995.
B
From the Judgment and Order dated 20.1.94 of the Madras High
Court in W.P. No. 9946 of 1989.

J aydeep Gupta, Ujjwal Banerjee, Rajesh Srivastava and H.K. Puri
for the Appellant.
c
B.B. Ahuja and S. Rajappa and S.N. Terdol for the Respondent.

The Judgment of the Court was delivered by

THOMAS, J. Whether a bona fide statutory tenant has the right to
continue in possession even after an order of purchase was made under D
Section 269 UD(l) in Chapter XX-C of the Income Tax Act, (for short
'the Act'), is the question sought to be raised in this appeal. According to
the appellant the answer to the said question must be in the affirmative.

A brief sketch of the facts :
E
The appellant - a Private Limited Company - is tenant on the· ground
floor of a building situate on the Mount Road (now called Anna Salai),
Madras. On 30.3.1989, owner of the building entered into an agreement
with another person for sale of the building, for a sum of Rs.26 lacs. The
Appropriate Authority, constituted under Chapter XX-C of the Act, on F
coming to know of the aforesaid agreement initiated proceedings, in exer-
cise of its powers under the said Chapter for purchase of the building. He
ordered the building to be purchased by the Central Government for the
same consideration as shown in the agreement in accordance with Section
26.9 UD(l) of the Act. Appropriate Authority then issued a communication G
to the appellant informing it that the building stood vested in the Central
Government by virtue of Section 269-UE(l) of the Act free from all
encumbrances with effect from 22.6.1989. The appellant was requested to
surrender possession of the building. A writ petition was filed before the
High Court of Madras Challenging the said communication had the sub-
sequent request. A Division Bench of the Madras High Court dismissed H
778 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the writ petition. This appeal by special leave has been filed against the
judgment of the Division Bench.
.
The two sub-sections of Section 269-UE of Chapter XX-C of the Act
which are relevant for this appeal are quoted below :

B "269-UE. Vesting of property in Central Government. -(1) Where

. •'
an order under sub-section (1) of Section 269-UD is made by the
appropriate authority in respect of an immovable property referred
--
to in sub-clause (i) of clause (d) of Section 269-UA, such property
shall, on the date such order, vest in the central Government free
c from all encumbrances.

(2) The transfer or any other person who may be in possession of
the immovable property in respect of which an order under sub-
section (1) of Section 269-UD in made, shall surrender or deliver
possession thereof to the appropriate authority or any other person
D duly authorised by the appropriate authority in this behalf within
fifteen days of the service of such order on him."

The contention of the appellant before the Madras High Court was two-
fold. First is that as the constitution Bench of this Court in C.B Gautam v.
Union of India & Ors., (1983) 1 SCC 78, has struck down the expression
E "free from all encumbrances" in sub-section (1) of Section 269-UE, what
was vested with the Central Government is only the right of the erstwhile
·owner of the building without affecting,the leasehold right of the appellant.
Second is that appellant's right in the building has been protected by the
Tamil Nadu (Lease and Rent Control) Act, 1960 (for short 'the T.N. Act') .
F and as such his statutory right' cannot be by-passed through the vesting
process.

Division Bench of Madras High Court repelled both contentions.
Learned JiJdges pointed out that the transferor has stipulated in the
agreement for sale dated 30.3.1989 (which led to the action taken by the
G Appropriate Authority) that the transfer of the premises shall be free from
all encumbrances and then held : "when the agreement in this case provides
for a sale free of all encumbrances, the property agreed to be sold would
also vest in the Central Government free of such encumbrances. Only in a
case where the agreement does not provide that he sale would be free from ··
H all encumbrances, the encumbrance holder of leases in possession may not
ADAIR DU1T AND CO. v. APPROPRIATE AUTHORITY [1HOMAS,J.] 779

be obliged to deliver possession of the property". Regarding the second A
contention the High Court pointed out that even otherwise·the provisions
of the T.N. Act do not afford any protection to the tenants of the buildings
owned by Central Government.

The Constitution Bench of this Court has struck do'Yfl the words
"free from all encumbrances" in sub-section (1) of Sectiort.269-UE of the
B
Act. The material portion of the judgment is extracted below :

"In view of the express provision in section 269-UE that the
property purchased would vest in the Central Government 'free
from all encumbrances' it is not possible to read down the section C
as submitted by learned Attorney General. In the result, the
expression 'free from all encumbrances' in sub-section (1) of Sec-
tion 269-UE is struck down and subsection (1) of Section 269- UE
must be read without the expression 'free from all encumbrances'
with the result the property in question would vest in the Central D
Government subject to such encumbrances and leasehold interests
as are subsisting thereon except for such of them as are agreed to
be discharged by the vendor before ~he sale is completed."

However, the Bench approved the distinction that in case the agree-
ment for sale contains the stipulation to the effect that the property would E
be sold free from all encumbrances or certain· encumbrances then the
vesting in the Central Government would be free from such encumbrances.
The following passage in the judgment makes the position clear :

"As we have stated earlier where an agreement for sale provides F
that the property is intended to be sold free of all encumbrances
or leasehold rights, the order for purchase of such property under
Section 269-UD(l) in the said Chapter would result in the said
property vesting in the Central Government free of such en-
cumbrances or leasehold interests. In such a case the holders of
the encumbrances and leasehold interests would have to obtain G
their compensation from the amount awarded as the purchase
price to the owner of the property. This appears to be a fair
construction because in such a case the apparent consideration
can be expected to include the value of such leasehold interests or
encumbrances ........" H
780 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A It was not disputed before us. that the agreement for sale executed
by the erstwhile owner, regarding the property in question, contained a
stipulation that the property would be sold free · cif all encumbrances.
However, learned counsel tried to get support for this contention from a
decision of the Karnataka High Court in Tata Consulting Engineers and
B Another v. Union of India and Others, (1994) 206 ITR 237, wherein it has
been observed that "the Supreme Court did not specifically consider a case
where ignoring or suppressing the fact that the premises were in the
occupation of a monthly tenant who had not agreed to vacate, the agree-
ment of sale, without referring to such tenancy, provided for dt<livery of
vacant possession at the time of sale. Chapter XX-C also does not provide
C for a case where the agreement of sale contained an incorrect information
regarding possession, that is agreeing to deliver vacant possession even
though vacant possession could not be delivered having regard to the fact
that the premises were in the occupation of a bona fide tenant". The
Karnataka High Court concluded that "on the facts and circums.tances set
D out above, in so far as the tenant is concerned, the term of the sale
agreement.providing for delivery of vacant possession should be read down
as only providing for delivery of vacant possession of the remaining por-
tions of the premises."

The said view of the learned single judge of the Karnataka High
E Court is not in consonance with the reasoning of this Court in C.B. Gautam
(supra). The position has been clearly stated by this Court in the judgment
as follows:

"The holders of the encumbrances and leasehold interests which
F would be destroyed in this manner can be said to be persons
interested as contemplated in clause (e) of sub- section (2) of
Section 269-UA. In this connection, we may refer to sub-section
(5) of Section 269-UE which declares that nothing in the said
section which deals with the vesting of property in the Central
Government shall operate to discharge the transferor or any other
G person (not being the Central Government) from liability in
respect of any encumbrances on the property and notwithstanding
anything contained in any other law for the time being in force,
such liability may be enforced against the transferor or such other
person. This provision makes it amply clear that in the case we
H have just referred to the encumbrance holder or the holder of the
ADAIR DUTf AND CO. v. APPROPRIATEAUIBORITY [THOMAS, J.J 781

leasehold rights could claim the fair value of his encumbrance or A
the leasehold interest out of the amount paid on account of the
purchase price to the owner of the immovable property acquired
by the Central Government under Section 269-UD."

In this context we may point out that the Constitution Bench in C.B.
Gautam (supra) considered whether such vesting in the Central Govern- B
ment would affect monthly tenancies. The following observation has been
made regarding that aspect :

"As far as monthly tenancies are concerned, they do not pose any
difficulty because monthly tenants are also lessees in law although C
their right is a very limited one. If the agreement to sell does
provide for vacant possession or the determination of monthly
tenancies such tenancies would continue even on an order for
purchase by the Central Government being made by the ap-
propriate authority concerned under Section 269-UD(l); but such
tenants would lose the protection given to tenants under the rent D
protection laws because such laws are not made applicable to
properties owned by the Central Govemment with the result that their
ten,ancies could be terminated by the Central Govemment."

(emphasis supplied)
E
Learned counsel for the appellant, however, contended that the T.N.
Act" applies even to buildings owned by the Central Government and hence
the aforesaid observation cannot apply to the tenancy rights protected by
.the said Act. We agreed that the Constitution Bench has not considered
the situation were the monthly tenancy is protected by a rent control F
legislation. No doubt, learned judges have stated in the impugned judgment
that "in relation to such statutory tenancy rights there is no protection as
such available, as the rent control laws are inapplicable to properties
owned by the Central Governm~nt and such tenancies could be terminated
by the Government".
G
The aforesaid finding in the impunged judgment is also challenged
in this appeal. Learned counsel contended that though the T.N. Act
excludes government buildings from its purview such exclusion is confined
to buildings owned by the State Government because of the definition
contained in the T.N. Act for the word "government" as meaning "State H
782 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Government".

We think that the question regarding application of T.N. Act to
buildings owned by the Central Government must be considered afresh by
the High Court in view of the aforesaid contention. We, therefore, set aside.
the. judgment under challenge and remit tliis case to the High Court for
B disposal of thse writ petition afresh in. the light of the observations made ·
above.

G.N. Appeal disposed of.

~.
SURJA RAM A
v.
STATE OF RAJASTHAN

SEPTEMBER 25, 1996

[G.N. RAY AND G.T. NANAVATI, JJ.] B

Indian Penal Code, 1960:

Ss. 302 and 307-Accused committed murder of his brother, brother's
two minor sons and his aunt-Attempted to commit murder of his brother's C
wife and daughter-Attack by accused, in cool and calculated manner, in
dead hours of night when his victims were asleep-Absence of provocation
immediately before or even proximately before the murders-ConvictiOn by
trial court-Death sentence passed by trial court confirmed by High
Court-Held-Crime committed by accused falls in categ01y of rarest of rare
cases for which extreme penalty of death is fully justified. D
Sentenc~Accused committed four murders of his relations in cool and
calculated manne~eld, for deciding to award just and appropriate sen-
tence, aggravating and mitigating factors and circumstances in which the
crime has been committed are to be balanced-Fact that accused was not E
convicted on any previous occasion is not a mitigating factor in favour of
accused that would out weight all aggravatingfactors and circumstances in
which murders had been committed-Death penalty awarded by trial court
and confirmed by High Court. upheld.

The appellant-accused was prosecuted for committing murders of his F
brother, two minor sons of the said brother, and his aunt (bua) and for
attempting to murder his brother's wife and daughter. The prosecution
case was that the accused and his two brothers had been residing in one
compound in their separate portions. A partition ofjoint property amongst
the brothers was effected. There arose some land dispute amongst the G
brothers about 6-7 months prior to the occurrence, but the said dispute was
said to have been sorted out. About 5-6 days prior to the occurrence, the
accused wanted to erect barbed fencing in the compound, but the proposal
was protested by his brother 'R'. On the fateful night at about 12.30 a.m.
when all were in their sound sleep, 'D' another brother of the accused, woke
up on hearing the cries or 'S', the daughter of'R'. He came out and saw the H
783
784 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A accused, armed with a kassi, assaulting 'S' who suffered serious injuries on
her neck, 'D' and the wife of the accused challenged the accused, who ran
away. The wife of 'R' was found lying seriously injured and his aunt was
found dead in the courtyard. Inside the room, 'R' and his one son were
found lying dead, and his other son 'N' critically injured. 'N' succumbed to
injuries shortly thereafter. The two injured, namely, the wife and the
B daughter of 'R', were taken to the hospital where on being treated both of
them survived.

The trial court found the accused guilty of the charges and sentenced
him to death under 302 IPC, life imprisonment and a fine of Rs. 2,000 under
C s. 307 IPC, and rigorous imprisonment for 10 years and a fine of Rs. 1,000
under s. 450 IPC. The High Court dismissed the appeal filed by the accused,
and confirmed the death sentence awarded by the trial court. Aggrieved, the
accused filed a special leave petition through his counsel and ajail petition.
The special leave petition was dismissed as regards the order of conviction,
but notice was issued to the State on the question of sentence passed
D against the accused.

It was contended for the appellant-accused that it was not fit case
calJing for awarding extreme penalty of death sentence; the appellant due
to the land dispute and the quarrel with the deceased over erecting the
barbed fence in the compound, suddenly became very much enraged and
E lost normal frame of mind, and the offences committed by the appellant in
such uncontrolled framed of mind could not be categorised as rarest of rare
case.

Dismissing the appeal and the jail petition, this Court

F Held : 1.1. It has been indicated by the trial court that the accused
was in full senses and had committed the murders of four close relations
one after the other and also attempted to commit murder of his brother's
wife and daughter in a cool and calculated manner. He did not even feel
remorsed and being quite alive to the enormity of the crime committed by
G him he escaped from the place of occurrence. [796-E-F]
1.2. From the evidence adduced, it is clearly revealed that the ac-
cused, in a cool and calculated manner, intended to wipe out the entire
family of his brother. In that end in view, he selected the most opportune
moment, namely dead of night when his brother and other members of his
H family would remain asleep so that they would be absolutely helpless and
SURJARAM. v. STAIB 785

not capable to give any defence to save themselves. He did not even spare A
his old aunt and brutally murdered her. In order to ensure death, the
accused chose to cut vital part of the body, namely, the neck, by a sharp
cutting weapon (kassi) when his victims were asleep. [796-A-B]
I .

_, 1.3. In the instant case, there is absence of any provocation. There B
is nothing on record to indicate that the accused had any occasion to
reasonably feel aggrieved for any unjust and improper conduct on the part
of the deceased brother. The joint lands had been partitioned long back;
and the dispute between the accused and the deceased in respect of only
one killa of land had been sorted out 8-10 months prior to the incident.
Thereafter no fresh incident took place to give any occasion to the accused C
to feel aggrieved. The quarrel, which took place 5-6 days prior to the
incident when the deceased brother objected to the proposal to put a
barbed fencing, cannot be reasonably held to be a cause for being
temperamentally upset and for enter- taining so much wrath and spirit of
vengeance as may impel a men of normal composure and frame of mind
D
to run amock and perpetrate ghastly murders of such magnitude. There
is no evidence to indicate that in view of such quarrel there had been any
aftermath and further dispute and resentment between the deceased and
the accused either . immediately before or even proximately before the
occurrence. [795-H; 796-A]
E
2.1. For deciding just and appropriate sentence to be awarded for an
offence, the aggravating and mitigating factors and circumstances in which
a crime has been committed are to be delicately balanced in a dispas-
sionate manner. The fact that the appellant was not convicted for any other
offence on any previous occasion, can hardly be considered as a mitigating F
factor in favour of the appellant that will outweigh all the aggravating
factors and circumstances in which the crime of murders had been com-
mitted. The murders had been committed very brutally and mercilessly, of
absolutely innocent person, namely, the aunt and two minor sons of his
brother, with whom there was no occasion to come in conflict and to
entertain any grudge or ill-feeling. [796-F-G] G

2.2. Punishment must also respond to the society's cry for justice
~oainst the criminal. While considering the punishment to be given to the
accused, the Court should be alive not only to the right of the criminal to
be awarded just and fair punishment by administering justice tempered H
786 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A with such mercy as the criminal may justly deserve, but also to the rights
of the victims of the crime to have the a~sailant appropriately punished
and the society's reasonable expectation from the court for the appropriate
deterrent punishment conforming to the gravity of the offence and consis-
tent with the public abhorrence for the heinous crime committed by the '

accused. [797-C-D]
B ......
2.3. In the facts and circumstances of the case, the crime committed
by the accused falls in the category of rarest of rare cases for which extreme
penalty of death is fully justified. There is no reason to interfere with the
sentence of death awarded against the appellant since confirmed by the
c High Court. [797-E]

Shankar v. State of Tamil Nadu, [1994) 4 SCC 479; Jasnuona Bharat
Singh & Others v. State of Gujarat, [1994) 4 SCC 353; Dhanarijoy Chatterjee
v. State of West Bengal, [1994) 2 SCC 220 and Ravji@ Ram Chandra v.
State of Rajasthan, JT (1995) 8. SC 520, referred to.
D
Dennis Lounde Mcoautha v. State of California, (402) U.S.183 L. Ed.
II 711, referred to.

Jagmohan Singh v. State of UP, AIR (1973) SC 947; Shiv Mohan Singh
v. State, AIR (1977) SC 949; Bachan Singh v. State, [1980) 2 SCC 684; Shashi
E Nayar v. Union of India & Ors., [1992) SCC Crl. 24 andAnshad & Ors. v.
State of Kamataka, [1994) 4 SCC 381, cited.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1727 of 1996 Etc.

F From the Judgment and Order dated 18.1.96 of the Rajasthan High
Court In D.B.Crl.A.No. 265 of 1995.

Rajiv Dutta for the Appellant.
~

K.S. Bhati, M.K. Singh and Ms. Kusum Sharma for the Respondent.
G
The Judgment of the Court wa5 delivered:

G.N. RAY, J. Leave granted. '
The appellant Surja Ram was convicted by the learned Additional .
H Sessions Judge, Hanumangarh in Sessions Trial No. 28 of 1991 for the
SURJARAM. v. STATE[G.N.RAY,J.] 787

offence under Section 302 JPC for murdering his real brother Raji Ram's A
two sons Naresh and Ramesh and Niko Bai their Bua, and for an offence
under Section 307 IPC for attempting to murder Sudesh, the daughter of
Raji Ram nd Phoola Devi the wife of Raji Ram also for offence under
Section 450 IPC for committing house trespass in order to commit offence
punishable with imprisonment for life. The learned Additional Sessions B
Judge awarded death sentence against the said accused Surja Ram for the
offence of murder. He was sentenced to suffer imprisonment from life and
a fine of Rs. 2,000, in default of payment of fine, further rigorous imprison-
ment for three months for the offence under Section 307 IPC and he was
also sentenced to suffer rigorous imprisonment for ten years and fine of
Rs._ 1,000, in default of payment of fine, to suffer further rigorous imprison- C
ment for one month for the offence under Section 450 IPC.

Against such convictions and sentences, the accused Surja Ram
preferred D.B Criminal Appeal No. 265 .and 266 of 1995 before the
Rajasthan High Court (Jodhour Bench). The said appeals were heard D
along with D.B. Criminal Murder Reference No. 1 of 1995 by the Rajasthan
High Court and by the impugned common judgment dated January 18,
1996, the High Court dismissed both the appeals preferred by the accused
Surja Ram and confirmed the death sentence passed against him.

Surja Ram filed S.L.P. (Crl.) No. 744 of 1996 through a learned E
counsel against his convictions and sentences before this Court. He also
sent another special leave petition from Jail to the Registry of .this Court
which has been numbered as D. No. 1007of1996. His special leave petition
was dismissed by this Court after hearing the learned counsel so far as the
order of convictions passed against the said accused is concerned but F
notice was issued to the State of Rajasthan limited only on the question of
sentences to be passed against the accused for his convictions for the
offences aforesaid.

Mi;:. Rajiv Dutta, the learned counsel appearing for the accused
appellant Surja Ram has submitted that it is not a fit case calling for G
awarding extreme penalty of death sentence because sufficient grounds
warranting such extreme penalty by holding it as one of the rarest of rare
cases are not present. Mr. Dutt has submitted that certain facts, relevant
for the consideration of appropriate punishment to be awarded against the
accused appellant, s11ould be noted. H
788 SUPREME COURT REPORTS {1996) SUPP. 6 S.C.R.
...., -
A The accused appellant and his two brothers Dalip Ram and the
. deceased Raji Ram has been living in one compound (Ahata) in their
respective residential unit. The accused appellant used to reside in the
middle portion of the said compound and the .deceased Raji Ram and
Dalip Ram used to reside respectively on the northern and southern side
of the side compound. The parents of the accused and his brothers were
B residing in punjab. There had been partition of joint _property amongst the ~-"
brothers. On such partition the accused and Dalip Ram each got 13 killa
of land and the deceased Raji Ram got 14 killa.

There was some land dispute amongst the brothers about 6 to 7
C months prior to the said incident of murder but such dispute is stated to
have been sorted out at the intervention of Sarpanch Chandra Pal.

About 5 or 6 days prior to the incident, the accused expressed the
desire to erect wire fericing in the compound but the deceased Raji Ram ·
D protested against such proposal of the accused.

The prosecution case as proved by the evidences adduced in the trial,
is that on August, 7, 1990 at about 9.00 P.M., the members of the family
of the deceased Raji Ram retired after taking their dinner. The informant.
Dalip Ram, who is the other brother of the deceased and the wife of Dalip
E Ram were sleeping in their courtyard. Raji Ram and his two sons Naresh
and Ramesh were sleeping in the outer room of his residential unit. Raji
Ram's wife Phoola Devi, her daughter Sudesh and Raji Ram's father's
sister Niko Bai were sleeping in their courtyard. It the courtyard of Surja
Ram the wife of the accused Imarti was ·also sleeping. After taking meal,
p the appellant went out of the house. At about 12.30 AM., Dalip Ram beard
the cries or sudesh, when he came out, he saw in the light that the accused
Surja Ram was standing with a kassi in his hand and was assaulting Sudesh .
. Dalip Ram and the wife of the accused Imarti challenged the accused and
the accused had ran away. It has been proved that Sudesh has suffered
severe injuries on her neck and she fell down in the courtyard and Niko
G and Phoola were also found lying seriously injured. Niko was, however,
found dead and Phoola was gasping for life. When Dalip Ram went inside
the room, he found that Raji Ram and his son Naresh were lying dead and.·
the other son Ramesh though alive, was critically injured. The said Ramesh,
however, died shortly thereafter and Sudesh and Phoola were taken in a
H jeep and admitted in the hospital at Sangaria. On being treated in the
SURJARAM. v. STAIB (G.N. RAY,J.] 789

hospital both of them survived. A·
In awarding the sentence of death against the accused-appellant, the
learned Additional Sessions Judge noted that :

(a) The aci;used had committed extremely barbaric and heinous
crime of causing murder of ·four persons and also attempted to murder the B
other two who, though seriously injured, providentially survived.

(b) The accused committed murder of his own real brother, two
minor sons of his brother and also his Bua. Although the accused also
attempted· to kill the daughter and the wife of his brother, they, being C
seriously injured, luckily survived.

(c) The accused committed the murder of the said persons and also
attempted to murder the other two close relations while all the said victims
ware defenceless as they were asleep then and therefore, had no oppor-
tunity to save themselves or resist the attack. D
( d) The accused attempted to kill Phoola his brother's wife by cutting
her neck and being critically injured, she remained unconscious for about
15 days and hovered between life are death but luckily survived. Attempt
was also made to kill the daughter of his brother by cutting her neck~th
kassi but she also luckily survived. E
(e) The intention of the accused was only to murder all the said
persons because the inflicted injuries or the neck of all the said persons·
with a sharp cutting weapon (kassi).

(f) The accused ensured that male member in the family of his F
brother Raji Ram was alive. As a matter of fact, he attempted to wipe out
the whole family of Raji Ram but the widow and the daughter of Raji Ram
survived even though they suffered serious injuries on their.necks by the
kassi blows inflicted by the accused.
G
(g) There was no instigation or provocation for causing the said
murders of four very close relations and· attempting to cause murders of
the other two persons.

(h) For some land dispute which was settled six months before and
the dispute an_d altercation over a small incident of putting the barbed wire H

.l
790 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A in the compound of the residential complex which had also taken place 2
to 3 days before the incident, the' accused in cool and calculated manner
attacked all the said persons wheri they were sleeping in their house and
were utterly helpless in resisting attacks m<1de on them.

(i) The previous and the subsequent conduct of the accused clearly
B revealed that he ·was mentally alert for which he selected the opportune
moment to commit the said murders when the victims were asleep and after
committing the crime escaped from the scene of crime.

G) There was comple_te absence of any feeling of remorse of the
C accused.

The learned Additional Sessions Judge after indicating the aforesaid
aggravating factors in the commission of the crime to the finding that there
was absence of any mitigating factor in favour of the accused and the
heinous act of murder of four persons including on old aunt and two minor
D sons of his real brother and attempting also to kill his brother's wife and
her daughter in a most cool and calculated manner by ensuring that none
of the victim could offer <iny resistance because they were asleep at the
time of being attacked, constituted the offence committed by the accused
as one of the rarest of rare cases for which the extreme penalty of death
E was warranted.

The learned Judge held that the death sentence per se was not
unconstitutional as has been held by this Court in Jagmohan Singh v. State
of U.P., AIR (1970) SC 947; Shiv Mohan Singh v. State, AIR (1977) SC
949; Bachan Singh v. State, (1980] 2 SCC 684; Shashi Nayar v. Union of
F India and Others, (1992] SCC Crl. 24.

Mr. Dutta, the learned counsel for the accused-appellant has sub-
mitted that though the appellant has committed a very serious crime by
killing his own brother, his two minor sons and his Bua when they were
asleep and he also attempted to kill his brother's wife and brother's
G daughter, the appellant did not act with cruelty or in a barbaric manner
and also did not torture anyone of them before committing the murder of
attempting to cause murder. The learned counsel has submitted that
though it is extremely unfortunate that the appellant committed the said
ghastly murders of his brother and its two minor sons and the old aunt and
H also attempted to kill brother's wife and daughter, it should be kept in mind
SURJARAM. v. STATE (G.N. RAY,J.] 791

that the appellant felt deeply aggrieved against the conduct of his brother A
Raji Ram on account of dispute with him in land matter and the recent
quarrel which he had with th.e deceased for not allowing the appellant to
put fending as desired by him, in the ·compound of their residential com-
plex. The appellant unfortunately fell victim to his deep seeded ill feeling
towards his brother and members of the family of the said brother and lost
B
his normal frame of mind for which he could not restrain himself and being
made with rage and being actuated by an urge for vengeance, murdered
the said persons and attempted to murder the other two.

The learned counsel for the appellant has further submitted that life
once put to end can never be brought back. It is, therefore, essentially C
necessary to give a very careful and serious consideration as to whether
such extreme penalty of death which will put an end of the life of the
accused, should be awarded in a case or not. The learned counsel has also
submitted that the number of persons murdered though a relevant con-
sideration in weighing the gravity or a crime is not the only consideration · D
in selecting the extreme penalty for murder and unless the crime per-
petrated by an accused can safely be placed in the category of rarest of
rare cases, the extreme penalty to death should not be awarded. In support
of such contention, the learned counsel for the appellant has referred to a
decision of this Court in Anshad and Others v. State of Karnataka, [1994)
4 sec 381. E

The learned counsel for the appellant has further submitted that the
facts and circumstances of the case do not reveal that the accused was a
maniac or otherwise blood-thirsty with a high degree of propensity to
commit murder of innocent persons. On the contrary, the accused is a poor F
agriculturist who was not booked for any crime. Unfortunately, for the said
land dispute and the quarrel with the deceased in connection with putting
of a barbed fence in the domestic house, the appellant suddenly became
very much enraged and lost the normal frame of mind and control over his
passions. In such uncontrolled frame of mind, he decided to murder his G
brother and his family members so as to but an end of any dispute with
them for ever. Such act though very heinous and extremely lamentable,
cannot be categorised as rarest of rare cases. The learned counsel has
submitted that the accused attacked each of the victim with a sharp·cutting
instrument 'kassi' and inflicted injuries on the neck of each of the victim
so that the death could be hastened. There was no tendency on his part to H
792 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A subject any of the victim to any cruel treatment or tortura before killing
them. In the aforesaid circumstances, the learned Additional Sessions
Judge and the High Court should not have awarded the extreme penalty
of death against the appellant The appellant should be given a chance to
reform himself in jail and regent for his crime during long span of imprison.:
ment for life and thereafter to be a useful member in the society. He has,
B
therefore, submitted that the d~ath penalty should be set aside by commut-
in.g the sentence to the sentence of imprisonment for life.

The learned counsel for the State, however, opposed the submissions
of the learned counsel for the appellant that the crime committed by the
C accused did not constitute a rarest or rare cases for which the extreme
penalty of death is warranted. It has been submitted by the learned counsel
for State that all the brothers had specific share of the land on partition of
joint property and they had been enjoying their respective share of land.
There is nothing on record to indicate that peaceful enjoyment of the land
D allotted to the share of the accused was sought to be interfered with by the
deceased who was none else but his real brother. On the contrary, it has
been proved that there was a dispute between the brothers in respect of
· only one killa of partitioned land. Such dispute was also sorted out at the
intervention of the Sarpanch of the village several months back. Hence,
E there was no just cause for nursing any aggrieved feeling and sense of
injustice meted out to him in the hands of the said brother. There was
tµinor dispute between the deceased and the accused 5 to 6 d~ys before
the date of the incident when the accused wanted to put a barbed fencing
on a portion of their residential complex and the deceased protested
F against such intention of the accused. In a domestic life, such petty discord
and dissension ofte.n happen. For such a petty discord, there cannot be any
of occasion of any map of normal composure to lose control of his senses
and to become so enraged as to commit murder of brother and his two
·minor sons and an old aunt and to attempt to murder the brother's wife
and daughter unless he is a person of cruel nature and absolutely men
G minded. Even if it is assumed that because of such dispute, the appellant
had felt aggrieved and became enraged, the murders had not been com-
.mitted immediately after the occurrence when the accused might have lost
normal fo. ie of mind. The incident of dispute in connection with putting
•of fencing had taken place several days before the date of commission of
H murders. It is quite evident that the accused did not commit said crime
SURJARAM. v. STATE[G.N.RAY,J.] 793

under a grave and sudden provocation and in a fit of emotional set back A
out being determined to wipe out the entire family of his brother, he
selected the most opportune moment to commit the said ghastly murders
at dead of night when the brother and the members of his family were fast
asleep and were completely helpless to put up any defence.
B
The learned counsel for the State has also submitted that even if the
accused had occasion to feel aggrieved against ·his brother either on
account of the land dispute, though in fact no such dispute was then
existing, or account of resistance given by the brother in not allowing the
accused to put a fencing in their residential complex, there was no occasion
for the accused to kill two innocent minor sons of his brother who were C
asleep at the time of murder. Similarly, there was not occasion to kill the
old aunt and also to attempt to kill the brother's wife and the brother's
daughter when they where also asleep and completely defenceless. The
brother's wife and daughter were given serious injuries by the sharp cutting
instrument on their necks and it was due to extreme good luck that they D
ultimately survived after prolonged medical treatment in the hospital. The
learned counsel for the State has submitted that such act of murders and
attempt to murder had not been committed on account of any grave or
sudden provocation but the same had been committed in a cool and
calculated manner with clear and definite intention to wipe out each
member of the family of his real brother. Such act on the part of the E
accused has been rightly categorised by the learned Additional Sessions
Judge and also by the High Court as one of the rarest of rare cases of
murder. The learned counsel has submitted that the said act of extreme
brutality in committing the murder of helpless innocent persons it bound
to shock the conscience of the society and the cry of the society for justice p
and just punishment to the criminal cannot be met by showing any sym-
pathy to the accused, when there is no real mitigating factor in favour of
the accused. He has, therefore, submitted that on interference is called for
against the capital sentence awarded against the accused. '

After giving our anxious consideration to the facts and circumstances G
of the case, it appears to us that for deciding just and appropriate sentence
to be awarded for an offence, the aggravating and mitigating factors and
circumstances in which a crime has been committed are to be delicately
balanced in a dispassionate manner. Such act of balancing is indeed a
difficult task, it has been very aptly indicated in Dennis Lounde Mcoautha H
794 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A v. State of California, 402 U.S. 183 L. Bo II 711 that no formula of a full
proof nature is possible that would provide a reasonable criterion in
determining a just and appropriate punishment in the infuiite. variety of
circumstances that may affect the gravity of the crime of murder. In the
absence of any full proof formula which may provide any basis for
B reasonable criteria to correctly assess various circumstances germane to
the consideration of gravity of crime of murder, the discretionary judgment
in the facts of each case, is the only way in which such judgment may be
equitable distinguished.

In Shanker v. State of Tamil Nadu, [1994] 4 SCC 479, this Court has
C indicated that the choice as to which one of the two punishments provided
for murder is a proper one in a given case depend upon the particular
circumstances of that case and the Court has to exercise its discretion
judicially and on well-recognised principles after balancing all the mitigat-
ing or aggravat~g circumstances 6f the case.

D In Jasnuona Bharat Singh and Others. v. State of Gujarat, [1994] 4
SCC 353, it has been held by this Court that in the matter of death
sentence, the Courts are required to answer new challenges and mould the
sentencing system to meet these challenges. The object should be to protect
the society and to deter the criminal in achieving the avowed object of law
E by imposing appropriate sentence. It is expected that the courts would
operate the sentencing system as to impose such sentence with reflects the
conscience of the Society and the sentencing process has to be stern where
it should be.

In Dhananjoy Chatterjee v. State of West Bengal, [1994] 2 SCC 220,
F this Court has observed that shockingly large number of criminals go
unpunished thereby increasing encouraging the criminals and in the ul-
timate making, justice suffer by weakening the system's credibility. The
imposition of appropriate punishment is the manner in which the Court
response to the society's cry for justice against the criminal. Justice
G demands that courts should impose punishment befitting the crime so that
that courts reflect public abhorrence of the crime. The Court must not only
keep in view the right of the criminal but also the rights of the victim of
the crime and the society at last while considering the imposition of
appropriate punishment.

H Similar view has also been expressed in Ravji @ Ram Chandra v.
SURJARAM. v. STA1E[G.N.RAY,J.] 795

State of Rajastlzan, JT (1995) 8 SC 520. It has been held in the said case A
that it is the nature and gravity or the crime but not the criminal, which
are germane for consideration of appropriate punishment in a criminal
trial. The Court will be failing in its duty if appropriate punishment is not
awarded for· a crime which has been committed not only against the
individual victim but also against the society to which the criminal and B
victim belong·. The punishment to be awarded for a crime must not be
irrelevant but it should conform to and be consistent with the atrocity and
brutality with which the crime has been perpetrated, the enormity of the
crime warranting public abhorrence and it should respond to the society's
cry for justice against the criminal. If for extremely heinous crime of
murder perpetrated in a very brutal manner without any provocation, most C
deterrent punishment is not given, the case of deterrent punishment will
lose its relevance.

. In the instant case, there is absence of any provocation. There is no
material on record from which it can be reasonably held that the accused D
had any occasion to reasonably feel aggrieved for any unjust and improper
conduct on the part of the deceased brother. It has transpired from
evidence adduced that joint lands had been partitioned long back amongst
the brothers and each of the brothers including the deceased and the
accused had been possessing his respective allotted lands. There was an
occasion for difference and dispute between the accused and the deceased E
in respect of only one kills of land but such dispute had been sorted out
at the intervention of the Sarpanch of the village about eight to ten months
before the incident. After that no fresh incident had taken place in recent
past for which there was any occasion for the accused to feel aggrieved
concerning his landed property. From the evidence it transpires that all the F
three brothers had been residing in separate portion within their residential
compound or Ahata. A few days before the incident, there was a quarrel
between the accused and the deceased when the accused intended to put
a barbed fencing on a portion of their residential complex out the deceased
objected to such course of action. Such incident cannot be reasonably held G

-· to be a cause for being temperamentally upset and for entertaining so much
wrath and spirit of vengeance as may impel a man of normal composure
and frame of mind to run amock and perpetrate ghastly murders of such
mignitude. There is no evidence to indicate that in view of such quarrel
happening a few days prior to the incident there had been any aftermath
and further dispute and resentment between the deceased and the accused H
796 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A either immediately before or even proximately before the incident of
murders and attempts to commit murders. From the evidence adduced, it
is clearly revealed that the accused, in a cool and calculated manner
intended to wipe out the entire family of his brother. In that and in 'View,
he selected the most opportune momef!t, namely, dead of night when his
B brother and other members of this family would remain asleep s6 that they
would be absolutely helpless and not capable to give any defence to save
themselves, in order to ensure death, the accused chose to out vital part of
the body, namely, the neck by a sharp cutting weapon (kassi) when his
victims were asleep. He, .therefore, succeeded in murdering his brother
Raji Ram and his two minor sons by cutting their necks without any
C resistance from them. He did not even spare the poor old aunt and brutally
murdered her by cutting her neck when she was asleep. In order to wipe
out the whole family of his brother, the accused also attempted to murder
. the brother's wife and the brother's daughter when they were also asleep.
Both the brother's wife and the daugh~er were critically injured by accused
D by cutting their necks. The wife of the brother, as a matter of fact, hovered
between life and death and re~ained unconscious for a number of days
but out of sheer luck she could survive. The daughter of the brother also
luckily survived after being seriously injured when her neck was also cut by
giving a number of injuries in and around the neck. It has been indicated
by the learned Additional Sessions Judge that the accused was in full senses
E and committed the murders of four close relations one after the other and
also attempted to commit murder of his brother's wife and \(laughte{ in a
cool and calculated manner. He did not even feel remorsed and being quite
alive to the enormity of the crime committed by him he escaped from the
place of occurrence.
F
It is true that the appellant was not convicted for any other offence
on any previous occasion. Such fact can hardly be considered as a mitigat-
ing factor in favour of the appellant that will outweigh all the aggravating
factors and circumstances in which the crime of the murders had been
committed. The murders had been committed very brutally and mercilessly
G of absolutely innocent persons, namely, the Bua and two minor sons <1f his
brother with whom there was no occasion to come in conflict and to
entertain any grudge or ill feeling. Even if it is assumed that there was still
some property dispute between the brothers despite sorting out of such
dispute at the intervention of the Sarpanch, for such common place proper-
H ty .dispute between brothers particularly when the accused was not dispos-
SURJARAM. v. STATE [G.N.RAY,J.] 797

sessed from the possession and enjoyment of his demarcated landed A
property by the deceased brother, it cannot be reasonably held that the
accused had a genuine cause to feel aggrieved for injustice meted out to
him in the hands of his deceased brother which may impel him to cause
the murder of his brother. In any event, there colild not be any cause to
take a decision to wipe out the entire family of the brother in a very cruel B
manner when being asleep they were absolutely helpless. The members of
the family of his brother were absolutely innocent and two of them were
even minors. Such murders and attempt to commit murders in a cool and
·calculated manner without provocation cannot but shock the conscience of
the society which must abhor such heinous crime committed on helpless
innocent person. Punishment must also respond to the society's cry for C
justice against the criminal. While considering the punishment to be given
to the accused, the Court should be alive not only to the right of the
criminal to be awarded just and fair punishment by administering justice
tempered with such mercy as the criminal may justly deserve, put also to
the rights of the victims of the crime to have the assailant appropriately D
punished and the society's reasonable expectation from the court for the
appropriate deterrent punishment conforming to the gravity of the offence
and consistent with the public abhorrence for the heinous crime committed
by the accused. In the facts and circumstances of the same, we are of the
view, that th~ crime committed by the accused falls in the category of rarest
of rare cases for which extreme penalty of -death is fully justified, we, E
therefore, find no reason to interfere with the sentence of death awarded
against the appellant since confirmed by the High Court. This appeal and
the jail petition being numbered as D. No. 1007/96 stand dismissed.

R.P. Appeal dismissed.
F
A J.K. INDUSTRIES LTD. ETC. ETC.
v.
THE CHIEF INSPECTOR OF FACTORIES AND BOILERS AND
ORS. ETC. ETC.

SEPTEMBER 25, 1996 ........._
B .

[DR. AS. ANAND AND K.T. THOMAS, JJ.]

Labour Laws-Factories Act 1948-Sections 2(n) proviso (ii) (as
amended in1987); 6(1)(e); 7; 7-A and 100(2) (omitted in 1987)-Factory
c owned and run by a company-Occupier-Person in ultimate control of the
affairs of the factory or only a director-Application for renewal or grant of
factory licence-Direction by the Chief Inspector of factories-Only a director
of the company is responsible and not any employee even otherwise
nominated by the Boa1:d of Directors-Held, is a valid direction-In the case
of a. company, which owns a factory, it is only one of the directors of the
D
company who can be notified as the occupier of the factory for the purposes
of the Factories Act and the company cannot nominate any other employee
to be the occupier of the factory-When the company fails to do so notify the
Inspector offactories shall be at liberty to proceed against any one of the
Directors of the company, treating him as the deemed occupier of the factory
E for prosecution and punishment in case of any breach or contravention of the
provisions of the factories Act or fo; offences committed under it-Proviso
(ii) to Section 2(n) of the Factories Act is intravires the substanti~e provision
of Section 2(n) of the factories Act.

Words & Phrases :
F
'Occupier'-Meaning of-In the context of Factories Act 1948-l'erson
who is in the ultimate control of the affairs of the factory--Held, person could
be a company or a partnership or an association of persons or an individual.

b1te1pretation of Statute :
G
Statute Law-f'roviw-Proper mode of interpretation of-Held, a Sec- ~.;

tion and the proviso thereto must b.e construed as a whole each throwing light
on the rest-Proviso (ii) is no ultra-vires the main provision of Section (2) of
the Fact01ies Act-171ere is not conflict at all between the main provision of
H Section 2(n) and proviso (ii) thereto.
798
J.K.INDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 799

Strict liability-The perJons punishable under the provision of Section A
92 of the Factories Act are occupiers and managers-Held, Section 92 con-
templated a joint liability of the occupier and the manager for any offence
committed irrespective· of the fact as to who is directly responsible for the
offence-The offence under the factories Act are strict statutory offences for
which establishment of mens rea is not an essential ingredient-The omission
B
or commission of the statutory breach is itself an offence.

Constitution of India-Articles 14, 19(1)(g); 21 and 141-Con-
stitutionality of Proviso (ii) to Section 2(n) of the Factories Act-Held, valid
and not ultravires of Articles 14, 19(l)(g) and 21-lt is not fair and proper to
read a sentence from Supreme Cowt's judgment divorced from its context and C
to build up a case treating that sentence to be completed law on the subject.

The petitioners/appellants desirous of renewal of the registration of
licence of their factories filed applications with the Chief Inspector of
Factories, (the respondent). The respondent rejecting the applications of
the appellants directed them to make an application duly signed by the D
director of the company in his capacity as the occupier of the factory and
that a nominee of the Board of Director, other than a Director, of the
Company could not make such an application us an occupier. According
to the respondent, section 2(n) with its proviso (ii) of the factories Act,
1948 as amended by Amending Act of 1987, provides that in case of a E
company, which owns the factory, the company cannot nominate any one
of its employees or officers, except a director of the company, as the
occupier of the factory.

The appellants challenged the correctness of that direction in the
High Court by way of a Writ Petition. The High Court d.ismissed the Writ F
.Petition and held that the nomination of an occupier to be made by the
company under proviso (ii) to Section 2(n) of the Factories Act, 1948 as
amended by Amending Act of 1987 can only be that of director and of no
other officers or employee of the factory or the company which owns the
factory. Hence these appeals. G
Dismissing the appeals, this court

HELD : 1.1. There is nothing unreasonable in fixing the liability of
a director of the company and making him responsible for compliance with
.the provisions of the Act and the rules made thereunder and laying down H
~
r-

800 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A that it there is contravention of the provisions of the Act or an offence is
committed under the Act, the notified director, and in the absence of the
notification, any one of the directors of the company, shall be liable to ·be
prosecuted and shall be liable to be punished as the deemed occupier. "A
law has to be judged (Br its constitutionality by the generality of cases it
covers and not by the freaks and exception'i it martyres." [836-G-H]
B ·-'-...

R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279, relied upon.

MIS. Bhatia Metal Containers Pvt. Ltd. and Anr. v. The State of Uttar
' .
Pradesh, (1990) II LLJ 534; Standard Industries Ltd. and Anr. Etc. Etc. v.
The State of Madhya Pradesh & Others, (decided on 15.11.1995); Ashok
c Leyland Ltd. v. The State of Rajasthan, (decided on 1.11.1991 by Rajasthan
High Court); Jaipur Syntex Ltd. and Others. v. State of Rajasthan and Others,
(1991) LLR 380; Champaran Sugar Co. Ltd. v. Union of India & Ors.,
(decided on 3.5.1988 by Patna High Court), approved.

D W.S. Industries (India) Ltd. and Another v. The Inspector of Factories,
Bangalore & Ors., (1991) II LLJ 480; Kirloskar Pneumatic Company Ltd. v.
VA. More and Others, (1993) I, LLJ 805; Indo Flaglabes Ltd. and Anr. and
Straw Products Ltd. and Anr. v. Chief Inspector of factories and Boilers and
Others, (1993) 66FLR171; WimocLtd. and Others v. The Union of India &
Others, (1995) FLJ 552; Ion Exchange India Ltd. Hosur v. Deputy Chief
E Inspector of Factories, Salem, (1995) LLR 756; Greaves Ltd. andAnr. v. State
of West Bengal & Anr., (1996) LLR 638, disapproved and overruled.

1.2. Where it is the company which owns or runs such a factory, it is
the company which has the ultimate control over the affairs of the factory,
F and therefore, it would be the company which would be the occupier of that
factory. However, since a company is a legal abstraction, it can act only
through jts agents who in fact control a~d determine the management and
are the centre of its personality. Such agents are generally called the
directions being ~e "directing mind and will" of the company. The deeming
fiction under proviso (ii), therefore, only clarifies the position where com-
G pany is the occupier of the factory. The legislature by providing the
deeming fiction under proviso (ii) did not detract from the generality .of the
main provision under Section 2(n), but only clarified it. The directors are
._
not the employees or servants of the company. They manage, control and
direct the business of the company as "owners". Th~ Directors are often
H referred to as the "alter ego" of the company. An el!Iployee or officer ofthe
J.K. INDS. LTD. v. CHIEF INSPECTOR OFFACIORIES AND BOILERS 801

factory or of the company, even it authorised by the board 11f directors by A
a resolution to be a person "in the ultimate control of the affairs of the

.. factory" cannot be so. Such an employee only carries out orders from above
and it makes no difference that he has given some measures of discretion
also and has supervisory control. He can at best be treated to be in the
immediate (control) of the affairs of the factory or having day to day control
over the affairs of the factory, the ultimate control being retained by the
company itself. The legislature did not designedly use the expression
B

immediate or day to day or supervisory control instead of ultimate control
in the main provision of section 2(n). [817,·A-E]

John Donald Mackenzie and Another v. The Chief Inspector of Fae- c
tories, Bihar, AIR (1962) SC 1351, held applicable.

Oxford advanced Leamer's Dictionary of current English En-
cyclopedic Edition (1992); Collins Dictionary of the English Language;
Black's Law Dictionary (Sixth Edition), relied upon.
D
1.3. The provisions of Sections 7 and 7A when considered in the light
of proviso (ii) to Section 2(n), leave no manner of doubt that it is a
statutory obligation under section 7 of the Act after 1987 to nominate the
occupier before the occupier occupies or beings to use the premises to run
the factory and in the case of an existing factory seek the renewal of the E
licence to continue to operate the factory. It is only when this statutory
requiremen~ is fulfilled that the factory would be given the licence or its
licence shall be renewed in the case of existing factories.

The option to 'Select' the director who would be the "occupier" vests
in the Board of Directors and once they notify the name and particulars of F
a director the Inspector of Factories is left with no discretion to 'pick and
choose" any other director for prosecution etc. for the breaches committed
in the factory or for contravention of any of the provisions of the Act. It is
only when the company fails to perform its statutory obligation to notify
the name of the director under section 7 of the Factories Act, that the
G
. Inspector of Factories may "Choose" any one of the directors as the deemed
occupier and proceed against him. The area for mischief can, thus, be
totally blocked by the company by notifying one of its directors as the
occupier in discharge of its statutory obligations enumerated in Section 7
of the Factories Act. The reasonableness of the restriction depends upon
the urgency of the evil sought to be controlled. The possibility of the power H
802 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A being abused is no ground for declaring the provision unconstitutional.
Proviso (ii) to Section 2(n) of the Factories Act, there fore, does not offend
Article 14 of the Constitution of India. [827-A]

1.4. A proviso to provision in a statute has several functions and while
interpreting a provision of the Statute, the Court is required to carefully
B scrutinise and find out the real object of the proviso appended to that
provision. It is not a proper rule of interpretation of a proviso that the
enacting part or the main part of the Section be construed first without
reference to the proviso and if the same is found to be ambigous only then
recourse may be had to examine the proviso. [824-B-C]
c An accepted rule of interpretation is that a section and proviso there-
to must be construed as a whole each portion throwirtg light, if need be, on
the rest. A proviso is normally used to remove special cases from the
general enactment and provide for them specially. Proviso (ii) to section
2(n) of the Act is intra- vires the substantive provision of section 2(n) of the
D Act. The restriction imposed by proviso (ii) if at all, it may be called a
restriction, has, a direct nexus with the object sought to be achieved and is,
therefore, a reasonable restriction within the meaning of clause (6) of
Article 19. Proviso (ii) to Section 2(n) is thus, not ultra-vires Article 19(1)(g)
of the Constitution. Proviso (ii) was introduced by the Amending Act,
E couched in a mandatory form - 'any one of the directors shall be deemed to
the occupier' - keeping in view the experience gained over the years as to
how the directors of a company managed to es~pe their liability, for
various breaches and defaults coinmitted in the factory by putting up
another employee as a shield and nominating him as an 'occupier' who
would willingly suffer penalty and punishment. Proviso (ii) now makes it
F possible to reach out to a director of the company itself, who shall be
prosecuted and punished for breach of the provisions of the Act, apart from
prosecution and punishment of the Manager and of the actual offender.
There is no conflict at all between the main provision of Section 2(n) and
proviso (ii) thereto. Both can be read harmoniously and when so ready in
the case a company, the occupier of a factory owned by a company would
G mean 'any one of the directors of the company who has been notified/identified
by the company to have ultimate control over the affairs of the factory and
where no such director has been so identified, for the purposes ofprosecution
and punishment under the Act, the Impector offactories may initiate proceed-
ings against any one of the Directors as the deemed occupier. .
H {824-C-D; 825-E-H; 826-A-D]
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 803

Reserve Bank of India Etc. Etc. v. Peerless General Finance and A
Investment Co. Ltd. and Others Etc. Etc., [1987) 1 SCC 424; S. Gopal Reddy
v. State of Andhra Pradesh, JT (1996) 6 SC 268; The Commissioner of
Income Tax, Mysore and Ors. v. The Indo Mercantile Bank Ltd. & Ors., AIR
(1959) SC 713, referred to.
B
2.1. The offences under the Factories Act are not a part of general
penal ·1aw but arise from the breach of a duty provided in a special
beneficial social defence legislation, which creates absolute or strict
liability without proof of any mens rea. The offence are strict statutory
offences for which establishment ofinens rea is not an essential ingredient.
The omission or commission of the statutory breach is itself the offence. c
'Absolute offences' are not criminal offences in any real sense but acts
which are prohibited in the interest of welfare of the public and the
prohibition is backed by sanction of penalty. Such offences are generally
known as public welfare offences. The rule of strict liability is attracted to
the offences committed under the Act and the occupier is held vicariously D
liable alongwith the Manager and the actual offender, as the case my be.
Penalty follows Actus reus, mens-rea being irrelevant. The legislature has
itself taken care to ,dilute the rigour of Section 92 of Factories Act, by
providing an exception to the strict liability rule by lying down a third party
procedure in section 101 of the Act Section 101 of the Act lays down "third
part procedure" as a defence and is in a way an exception to the general E
I
rule and enables the occupier or the manager or the factory, to extricate
himself from punishment by establishing that the actual offender is some-
one else and giving satisfactory proof of facts as are contemplated by
Section 101 (a) and (b). The 'passing on' defence provided in Section 101
of the Act is an accepted form of an exception to the principle of strict F
liability but its benefit would be available only when the requirements of
that section are fully complied with and the court is satisfied about the
proof of facts as are contemplated by clauses (a) and (b) of Section 101.
The Scheme on Section 101 being that the occupier or manager should be
relieved from liability only if the actual offender could be brought to court, G
the presence of the actual offender on whom the burden has been shifted
... by the occupier or the manager would be necessary at the time to trial and
a period of three months has been prescribed by the Legislature within
which the actual offender should or<Jinarily be brought before the court by
the process of law. If that cannot be done, the trial against the occupier or
the manager as the case may be, cannot be allowed to be protracted H
804 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A indefinitely and no fault can be found with this provision. Thus, proviso
(ii) to Section 2(n) when considered in relation to section 92 of the Act
does not offend Article 21 of the Constitution of India. [835-C-E]

R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279; Tesco Supemiarkets Ltd.
v. Nattrass, (1972) AC, 153; Lennards's Canying Company Ltd. v. Asiatic
B Petroleum Company Ltd., (1915) Ac 705; M.C. Mehta & Anr. v. Union of
India and Ors., [1986] 2 SCC 325.

2.2; Maneklal Jinabhai Kot v. State of Gujarat & Ors., [1967] 2 SCR,
507; Ward v. Smith, (1913) 3 KB 154; State of Gujarat v. Kansara Manila/,
C AIR (1964) SC 1893, "Text Book on Criminal Law" (1978) Edn.) - by Prof.
Glanville Williams, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4014-
4015 of 1993 Etc. Etc.

D From the Judgment and Order dated 6.4.93 of the Rajasthan High
Court in D.B.C.W.P. No. 1895 of 1989.

Ashok H. Desai, Attorney General, R.K. Jain, R.F. Nariman, V.A.
Mohta, Raj Birbal, P.P. Malhotra, S.S. Javali, K.N. Shukla, H.L. Agrawal,
Raju Ramachandran, K.K. Lahiri, Ejaz Maqbool, Braj K. Mishra, Ravindra
E Kumar, Jaideep Gupta, A.T. Patra, Gautam Khaitan for O.P. Khaitan &
Co., P.P. Tripathi, Rajesh Kumar Singh, S. Sukumaran, O.C. Mathur, P.N.
Misra, S. Misra, P. Pattnaik, A. Mahapatra, Rajeev Sharma, Anand
Chandra Swain, Rajiv Tyagi, U.A. Rana, M.K. Mohan, MJ.S. Rupal,
Mukul Mudgal, W.A. Qadr~ C.V. Subba Rao, R.C. Verma, R.B. Misra,
·F Aruneshwar Gupta, Jaideep Gupta, Ms. Radha Rangaswamy, Mrs. Kirti
Mishra, S.K. Agnihotri and B.B. Singh for the appearing parties.

The Judgment of the Court was delivered by

G DR. ANAND, J. Leave granted in C.A. :No.12552/96 SLP (C) No.
12498/96.

In this batch of cases, both in the writ petitions and in appeals by
special leave, short facts, which are not in dispute and are relevant for the
discussion hereinafter, are that the chief Inspector of Factories called upon
H the petitioners/appellants to fil applications seeking renewal of the registra-
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS[DRANAND,J.) 805

tion of licence of their respective factories, signed by a director of the A
company in his capacity as the occupier of the factory and stated that a
nominee of the Board of Directors, other than a Director, could not make
such an application as an occupier. The correctness of that direc-

. ~
tion/opinion has been put in issue in all these cases. The petitioners/appel-
lants have also called in question the constitutional validity of proviso (ii) B
to Section 2(n) of the Factories Act, 1948 (hereinafter referred to as 'the
Act') as amended by Act 20 of 1987, as violative of Articles 14, 19(1)(g)
and 21 of the Constitution of India.

The basic question which requires our consideration is whether in
the case of a company which owns or runs the factory, is it only a director c
of the company who can be notified as the occupier of the factory within
the meaning of proviso (ii) to Section 2(n) of the Act, or whether the
company can nominate any other employee to be the occupier by passing
a resolution to the effect that the said employee shall have 'ultimate control
over the affairs of the factory'. If the answer to the question is that in the D
case of a company, only a director can be notified as an occupier under the
Act, the next question which would require our consideration is about the
constitutional validity of proviso (ii) to Section 2(n) of the Act as intro-
duced by the Amending Act of 1987. The answer to these questions would
depend upon the interpretation of amended Section 2(n) of the Act. It
would, therefore, be appropriate to first notice the provisions of Section E
2(n) as it stood prior to the amendment and as it stands today.

Section 2(n) as it stood prior to Amendment of 1987.

"2(n) "occupier" of a factory means the person who has ultimate
control over the affairs of the factory, and where the said affairs
F
are entrusted to a managing agent, such agent shall be deemed to
be the occupier of the factory;

Section 2(n) as it is after Amendment of 1987.
G
"2(n) "Occupier" of a factory means the person, who has ultimate
-' ...-
control over the affairs of the factory,
J

Provided that

(i) in the case of a firm or other association of individuals any H
806 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A one of the individual partners or members thereof shall be deemeq
to be the occupier;

(ii) in the case of a company, any one of the directors shall be
deemed to be occupier;

B (iii) in the case of factory owned or controlled by the Central
Government or any State Govt. or any local authority, the person
or persons appointed to manage the affairs of the affairs of the
factory by the Central Government, the State Government or the
local authority, as the case may be, shall be deemed be the occupier
c
xxx xxx xxx xxx xxx xxx

Section 2(n) of the Act prior to its Amendment was required to be
read along with Section 100 of the Act with a view to determine an occupier
D under different situations.

Section 100 as it stood prior to the Amendment of 1987.

"100. Determination of occupier in certain cases - (1) Where
the occupier of a factory is a firm or other association of in-
E dividuals, any one of the individual partners or members thereof
may be prosecuted and punished under this Chapter for any
offence for which the occupier of the factory is punishable :

Provided that the furn or association may give notice to the
F Inspector that it has nominated one of its members residing within
India to be the occupier of the factory for the purposes of this
Chapter and such individual shall so long as he is so resident be
deemed to be the occupier of the factory for the purposes of this
Chapter until further notice cancelling his nomination is received
by the Inspector or until he ceases to be a partner or member of
G the firm or association.

(2) where the occupier of a factory is a company, any one of the
directors thereof may be prosecuted and punished under this
Chapter for any offence for which the occupier of the factory is
H punishable :
_J

J.K INDS. LTD. v. CHIEF INSPEGfOR OF FACTORIES AND BOILERS [DR. ANAND,J.] 807

Provided that the company may give notice to the Inspector that A
it has nominated a director, who is resident within in India, to be
the occupier of the factory for the purposes of this Chapter and
such director shall so long as he is so resident be deemed to be
the occupier of the factory, for the purposes of this Chapter until
... further notice cancelling his nomination is received by the Inspec-
tor or until he ceases to be a director. B
Provided further that in the case of a factory belonging to the
Central Government or any State Government or any local
authority the person or persons appointed to manage the affairs
of the factory shall be deemed to be the occupier of that factory C
for the purposes of this Chapter.

(3) Where the owner of any premises or building referred to in
Section 93 is not an individual, the provisions of this Section shall
apply to such owner as they apply to occupiers of factories who
are not individuals."

Section 100 has since been omitted by Amendment Act 20of1987.

There is divergence of opinion between various High Court in the
country with regard to the interpretation and scope of proviso (ii) to
Section 2(n) of the Act. That conflict also needs to be resolved.
E
The High Court of Karnataka in W.S. Industries (India) Ltd. and
Another v. The Inspector of Factories, Bangalore & Others., (1991) II LLJ,
480 opined that it is not necessary that the occupier must be necessarily
the owner or the director of the company and if by a resolution some other
person is nominated to be the occupier who is declared to be in the
ultimate control of the affairs of the factory then that person or officer
F
would be treated as the occupier for the purposes of the Act. The Court
said:

"But the main clause provides that occupier shall be one who has
ultimate control of the affairs of the company. This clause read with G
the operative provisions of the Act makes it clear that the oc-
cupier of a factory could be a person nominated by the board
or by the firm notwithstanding the fact .that such a partner or
director could also be liable and the liability in respect of the
operative provisions in respect of such director or partner will
have to be established." (Emphasis ours) H
808 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A However, the constitutional validity of Section 2(n) was, not dealt
with in the above case and it was observed that "it is unnecessary to go into
the constitutional validity of the provisions of the Act".

The Bombay High Court in the case of Kirloskar Pneumatic Company
Ltd. v. VA. More & Others, (1993) I LLJ 805 was also not called upon to
B decide the constitutional validity of Section 2(n) of the Act. The question
debated before the High Court was whether one of the Directors only
should be treated to be an occupier within the meaning of Section 2(n) or
not. The High Court noticed the deletion of Section 100 by the Amending
Act of 1987 and observed that the legislature had carved out an exception
C to the main provision by adding second proviso to Section 2(n) of the Act.
The learned Judges noticed the judgment of this Court in John Donald
Mackenzie and Another v. The Chief Inspector of Factories, Bihar, AIR
(1992) SC, 1351 and opined that the said decision lays down that an
occupier of a factory need not necessarily be a Director and that he can be
any other person or employee nominated, as an occupier, by the Board of
D Directors.

The Orissa High Court in Indo Floglabes Limited & Anr. and Strew
Products Ltd. and Anr. v. Chief Inspector of Fact01ies and Boilers and
Others, (1993) 66 FLR, 171 dealt extensively with the provisions of the
Factories Act before and after the 1987 amendment. It relied upon the
E judgments of the Kamataka and Bombay High Courts and went on to hold
that an occupier need not necessarily be a director of the company and that
the only requirement is that the person to be nominated as an occupier
must have the "ultimate control" over the affairs of the factory.

The High Court of Guwahati in Wimco Ltd. & Others v. The Union
F of India & Others, (1995) FLl, 552 has followed the judgments of Kar-
nataka, Bombay and Olissa High Courts. The Court observed :

"This being the position of law as enunciated by the Karnataka and
Bombay High Courts, now let us see whether this is good law as
laid down by these two High Courts a bare reading of Section 2(n)
as amended will show that the material part of the section defining
an occupier remains unaltered and so a person who has the
ultimate control of the factory can be nominated as the occupier,
and it also must be borne in mind that always a director may not
be in the ultimate control of the factory. It is ultimate control of
H the factory which is the touch-stone and not the ultimate control
J.K INDS. LTD. v. CHIEFINSPECIDROF FACTORIES AND BOILERS(DRANAND,J.) 809

of the company. A director may live at distance. But the ultimate A
control of the factory may be left to his Manager as in such case
it is the manager who will be deemed to be occupier of factory
and advisedly such a person can be nominated as the occupier.
Because of certain difficulties, an occupier only would be depend-
-.., able as such, an occupier of a factory assumes control and respon-
sibility and the legislature enunciated that the occupier should be B
the person who would be the person responsible to ensure that the
provisions of the Act are complied with. The proviso to S. 2{(n)
is only added to carve out an exception to the Rules that a person
who has ultimate control over the affairs of the factory as an
occupier. The legislature wanted to have "a say that in case of a
company, being the owner of the factory, the director would be
c
deemed to be an occupier ....."

The Madras High Court in ION Exchange India Ltd. (represented by
as Manager) Hosur v. Deputy Chief Inspector .of Factolies, Salem (1995)
LLR, 756 and the Calcutta High Cowt in Greaves Ltd. and Another v. State D
of West Bengal and Another, {1996) LLR, 638, have also, following, the
judgments of Bombay and Kamataka High Court opined that a company
which owns or runs a factory can nominate a person other than a director
of the company to be an occupier of the factory within the meaning of
Section 2(n) read with proviso (ii) thereto. None of these High Courts has,
however, dealt with the constitutional validity of the provision under con- E
sideration.

On the other hand, the High Court of Allahabad in Mis. Bhatia Metal
Containers Pvt. Ltd. and Another v. The State of U.P., (1990) II LU, 534,
the High Court of Madhya Pradesh in Standard Industries Ltd. and Another F
Etc. Etc. v. The State of Madhya Pradesh and Others, (Misc. Petition No.
3130/91 and Writ petition No. 4419/94 etc. decided on 15.11.95), High
Court of Rajasthan in Asliok Leyland Ltd. v. The State of Rajasthan and
Others, (Civil Writ Petition No. 4195/89 decided on 1.11.91) and in Jaipur
Syntex Ltd. and Others v. State of Rajasthan and Others, (1991) LLR, 380 G
... and the High Court of Patna in Oiamparan Sugar C. Ltd. v. The Union of
India and Ors., (C.WJ.C. No. 2254/88 decided on 3.5.88) have held that
the nomination of an occupier to be ma<le by the company under proviso
(ii) to Section 2(n) of the Act can only be that of a director and of no other
officer or employee of the factory or the .company which owns the factory. H
810 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Prior to the enactment of the Factories Act, 1948, regulation of
labour in factories was governed by the Factories Act, 1934 but as the
statement of objects and reasons of the Act of 1948 shows there were
various defects and weaknesses in the 1934 Act which came in the way of
its effective administration. The provisions of the 1934 Act regarding safety,
B health and welfare of workers were found to be inadequate and unsatisfac-
tory. In view of large and growing industrial activity in the country, an
overhauling of the factories law became necessary. The Factories Act of
1948 which came into force with effect from 1st of April, 1949 was, enacted
to remove some of the shortcomings noticed in the 1934 Act. The 1948 Act
is an act to consolidate the law regulating factories. It is a piece of social
C welfare legislation enacted primarily with the object of protecting workmen
employed in factories against industrial and occupational hazards. It seeks
not only to ensure that workers would not be subjected to long hours of
strain but also that employees should work in safe, healthy and sanitary
conditions and that adequate precautions are taken for their welfare and
D safety. The stringent provisions relating to the obligations of the occupiers
or managers with a view to protect workers and to secure to them employ-
ment in conditions conducive to their health and safety indicate the broad
purpose of the Act. The Act and the Rules made thereunder impose
numerous restrictions upon the occupier or manager or the factory to
E ensure to workers adequate safeguards for their health and physical well
being and to secure to them safe and health conditions at the place of work.
The 1948 Act was amended by Act 94 of 1976, with a view to remove some
lacunae relating to the definition of 'workers' and for improvement of the
provisions in regard to safety of workers and appointment of safety officers
and to provide for an enquiry in every case of a fatal accident. Some
F difficulties experienced in the administration of the 1948 Act even after the
1976 amendment specially those relating to hours of employment, safety
conditions and development of appropriate work culture conducive to
safety and health of workers particularly in case of factories which deal
with hazardous materials and the escape routes which the employers had
G found to shift their responsibilities on some employee or the other and
escape punishment and penalty, which were also noticed on certain judg-
ments of this Court, led the Parliament to amend the Act in 1987 which
inter alia amended Section 2(n), deleted Section 100 and incorporated
Section 7, 7A, Chapter IV-A, Section 104 A and Section 106 A, besides
H certain other provisions.
J.K INDS.LTD. v. CHIEF INSPECIDROFFACTORIESANDBOILERS[DRANAND,J.) 811

Prior to 1987, Section 2(n) of the Act which defined "occupier of a A
factory" had necessarily to be read alongwith Section 100 of the Act to find
out an occupier under different situations. Sub-section (2) of Section 100
provided that where the occupier of a fact01y was a company, any one of
the Directors thereof may be .prosecuted and punished for any offence
under Chapter X for which the occupier of the factory was punishable. B
Under the proviso to section 100(2), the Company had an option to
nominate one of its Directors, resident in India, who on such nomination
would be deemed to be an occupier for purposes of prosecution and
punishment under the Act. There was, thus, no compulsion under Section
100(2) that only a director should be nominated as an occupier, even C
though in the definition of an occupier under Section 2(n). it was provided
that an occupier means the person who has the ultimate control over the
affairs of the factory and where such affairs are entrusted to a managing
agent, such agent shall be deemed to be an occupier. Some of the com-
panies, taking advantage of the option as contained in the proviso to D
Section 100(2) of the Act and noticing the stringent provisions for punish-
ment for breach of some of the provisions of the Act, instead of nominating
a Director, as the occupier, used to nominate some other employee or
officer as an occupier of the factory and, thus, whenever any violation of
the Act was committed, it was that employee or officer, who was subjected
to penalty and punishment and not the Directors or any one of them. Thus, E
by nominating an employee or an officer as the occupier, the directors of
the company who are primarily responsible for ensuring safety measures in
the factory and taken care of health, hygiene and welfare of the workers ·
being in ultimate control of the management of the company which owns
the factory, were able to escape prosecution and punishment even if they F
were found to be negligent or indifferent to the welfare of the workmen or
had failed to provide adequate and proper safety measures in the factory
as well as in cases where the breach was found to have been committed
with their consent or connivance, or due to lack of diligence on their part.
After a tragedy occurred in Delhi by the leakage of chlorine gas, this. Court G
noticed the "escape route" which had been carved out by the Directors of
the Company, which own or runs the factory, and voiced its concern and
opined that if their was negligence in looking after the safety requirements,
in a hazardous industry, in particular, even the Chairman and the Managing
Director besides the Board of Directors must be held responsible and H
812 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A liable (even when they are not the actual offenders) as that alone could
ensure, reduction of, if not altogether eliminations of, risk and hazard to
workmen. In M.C. Mehta & Anr. v.. Union of India & Ors., [1986) 2 SCC,
325 it was obse!"Ved :

B "So far as the undertaking to be obtained from the Chairman and
Managing Director of Shriram is concerned it was pointed out by Shriram
that Delhi Cloth Mills Ltd. which is the owner of Shriram has several units
manufacturing different products and each of these units is headed and
managed by competent and professionally qualified persons who are
responsible for the day to day management of its affairs and the Chairman.
C and Managing Director is not concerned with day to day functioning off
the units and it would not therefore be fair and just to require the
Chairman and Managing Director to give an undertaking that in case of
death or injury resulting on account of escape of chlorine gas, the Chair-
man and Managing Director would be personally liable to pay compensa-
D tion. We find it difficult to accept this contention urged on behalf of
Shriram. We do not see any reason why the Chairman and/or Managing
Director should not be required to give an undertaking to be personally
liable for payment ·of compensation in case of death or injury resulting on
account of escape of chlorine gas, particularly when we find that according
E to the reports of various expert committees which examined the working
of caustic chlorine plant, there was considerable negligence in looking after
its safety r~quirements and in fact, considerable repair and renovation with.
and installation of safety devices had to be carried out at a fairly heavy cost
in order to reduce the element of risk or hazard to the community. We
may however make it clear that the undertaking to be given by the Chair-
F man and/or Managing Director may provide that no liability shall attach to
the Chairman and/or Managing Director if he can show that the escape of
chlorine gas was due to an Act of God or vis major or sabotage. But in all
pther cases the Chaimian or Managing Director must hold himself liable to
pay compensation. 17tat alone in our opinion would ensure proper and
,G adequate maintenance of safety devices and inst1Uments and operation of the
caustic chlorine plant in a manner which would considerably reduce, if not
eliminate, risk or hazard to the workmen and to the people living in the
vicinity"~
-
H (Emphasis ours)
J.K. INDS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS {DR ANAND, J.J 813

It was, thereafter, that the Parliament stepped in and passed the A
Amendment Act 20 of 1987 which as already noticed, besides amending
the definition of an occupier under Section 2(n) of the Act by addition of
various provisos thereto also made some more significant changes in the
Act. The statement of objects and reasons of Amendment Act 20 of 1987,
reads:
B
"Statement of Objects and Reasons"

(1) The Factories Act, 1948, provides for the health, safety, welfare
and other aspects of workers in factories. The Act is enforced by
the State Governments through their Factory Inspectorates. The C
Act also empowers the State Governments to frame rules, so that
the local conditions prevailing in the State are appropriately
reflected in the enforcement. The Act was last amended in 1976
for strengthening the provisions relating to safety and health at
work, extending the scope of the definition of "workers", providing
for statutory health surveys, and requiring appointment of safety D
officers in large factories.

(2) After the last amendment to the Act, there has been substantial
modernization and innovation in the industrial field. Several
Chemical Industries have been come up which deal with hazardous E
and toxic substances. This has brought in its strain problems of
industrial safety and occupational health hazards. It is, therefore,
considered necessary that the Act may be appropriately amended,
among other things to provide specifically for the safeguards to be
adopted against use and handling of hazardous substances by the
occupiers of factories and the laying down of emergency standards F
and measures. The amendments would also include procedures for
siting of hazardous polluting industries to ensure that hazardous
and polluting industries are not set up in areas where they can
cause adverse affects on the general public. Provision has also been
made for the workers' participation in safety management. G

(3) Opportunity has been availed of to make the punishments
provided in the Act stricter and certain other amendments found
necessary in the implementation of the Act."

It is in this background that we shall consider the scope and validity H
814 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A of Section 2(n) of the Act as amended in 1987. According to the definition
of the 'occupier' under Section 2(n), an occupier means a person who is in
'ultimate control of the affairs of the factory'. Though the word 'person'
has not been defined under the Act, but under Section 3(42) of the general
Clauses Act, a person has been defined to include a company or association
or body of individuals, whether incorporated or not. Such a person, under
B Clause 2(n) of the Act, therefore, could be a company or a partnership or
an association of persons or an individual. Where the factory is owned or
run by a company, it would be that company which would be the occupier
of the factory. Under Section 100, as it stood originally, where the occupier
of the factory was a company, any one of the directors may be prosecuted
C and punished and the company could give a notice identifying such a
director. It was, therefore, as already noticed, optional for the company to
notify a director as the occupier. The company could nominate any other
officer or employee also as occupier. The Amending Act of 1987
eliminated altogether section 100 and instead introduced into Section 2(n)
D various provisos and in proviso (ii) provided a deeming fiction, as to what
would happen if the occupier was a company. Criminal liability in case of
a default would primarily attach to the company, as the occupier of the
factory and, therefore, it has been provided that in the case of a company,
any one of the directors of the company shall be deemed to be the occupier.
To remove the ambiguity and ensure that a mere 'authorisation' by the
E Board of Directors of any of its employees or officers, by a resolution, to
be the occupier was not allowed to defeat the object of the Act, particularly
in matters of punishment and penalty, the Parliament also enacted Sections
7 and 7A of the Act by the Amending Act of 1987.

Section 7(1) of the Act reads as under :
F
7(1) The occupier shall, at least fifteen days before he beings to
occupy or use any premises as a factory, send to the Chief Inspec-
tor a written notice containing -

G (a) the name and situation of the factory;

(b) the name and address of the occupier; -
(bb) the name and addres~ of the owner of the premises or
building (including the precincts thereof) referred to in sec-
H tion 93:
J.K INDS. LTD. v. CIIlEF INSPE.CIDROF FACTORIES AND BOILERS (DR ANA.i.~D. J.) 815

(c) the address to which communication relating to the factory A
may be sent:

(d) the nature of the manufacturing process -

(i) carried on in the factory during the last twelve months in
the case of factories in existence on the date of commence- B
ment of this Act, and

(ii) to be carried on in the factory during the next twelve
months in the case of all factories;

(e) the total rated horse power installed or to be installed in the
c
factory, which shall not include the rated horse power of any
separate stand-by plant;)

(t) the name of the manager of the factory for the purposes of
this Act: D
(g) the number or workers likely to be employed in the factory :

(h) the average number of workers per employed during the last
twelve months in the case of a factory in existence on the date
of the commencement of this Act : E
(i) such other particulars as may be prescribed.

7A. General duties of the occupier. - (1) Every occupier shall
ensure, so far as is reasonably practicable, the health, safety and
welfare of all workers while they are at work in the factory. F

(2) Without prejudice to the generality of the provisions of
sub-section (1), the matters to which such duty extends, shall
include -
G
,...,,. (a) the provision and maintenance of plant and systems of
' work in the factory that are safe and without risk of health;

(b) the arrangements in the factory for ensuring safety and
absence of risks to health in connection with the use, ban·
dling, storage and transport of articles and substances; H
816 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A ( c) the provision of such information, instruction, training
and supervision as are necessary to ensure the health and
.safety of all workers at work;

(d) the maintenance of all places of work in the factory in a
condition that is safe and without risks to health and the
B provision and maintenance of such means of access to and
egress from, such places as are safe and without such riskS;

( e) the provision, maintenance or monitoring of such working
environment in the factory for the workers that is safe,
c without risks to health and adequate as regards facilities and
arrangements for their welfare at work.

(3) Except in such cases as may be prescribed, every occupier shall
prepare, and, as often as may be appropriate, revise, a written
statement of his general policy with respect to the health and safety
D of the workers at work and the organisation and arrangements for
the time being in force for carrying out that policy; and to bring
the statement and any revision thereof to the notice of all the
workers in such manner as may be prescribed."

E Under Section 7, a notice is required to be given to the Chief
Inspector, disclosmg the name of the occupier at least fifteen days before he
occupies or begins to use any premises as a factory. It also requires the
disclosure of the name of the owner of the premises or building and the name
and particulars of the Manager. Section 7A prescribes the duties of the
occupier. The provisions of Section 7 and 7A when considered in the light
F of proviso (ii) to Section 2(n), leave no manner of doubt that it is a statutory
obligation under section 7 of the Act after 1987 to nominate the occupier
before the occupier occupies or begins to use the premises to run the
factory and to the case of an existing factory seek the renewal of the licence
to continue to operate the factory. It is only when this statutory require-
G ment is fulfilled that the factory would be given the licence or its licence
shall be renewed in the case of existing factories. The argument of the
learned counsel for the appellants/petitioners that the expression "person" f'

in Section 2(n) implies only individual does not bear scrutiny, when con-
strued in the case of a company, a firm of partners or an association of
H persons. Where it is the company which owns or runs such a factory, it is
J.K INDS. LTD. v. CHIEF INSPECTOR OF FACT'ORIF.sAND BOILERS [DR At'iAND, J.J 817

the company which has the ultimate control over the affairs of the factory, A
and, therefore it would be the company which would be the occupier of that
factory. However, since a company is a legal abstraction, it can act only
through its agents who in fact control and determine the management and
are the centre of its personality. Such agents are generally called the
directors being the "directing mind and will" of the company. The deeming B
fiction under proviso(ii), therefore, only clarifies the position where com-

.. pany is the occupier of the factory. The legislature by providing the deeming
fiction under proviso (ii) did not detract from the generality of the ·main
provision under Section 2(n), but only clarified it. The directors are not the
employees or servants of the company. They manage, control and direct
the business of the company as "owners" (Section 291 of the Companies
c
Act). The Directors are often referred to as the "alter ego" of the company.
Where the company owns or runs a factory, it is the company which is in
the ultimate control of the affairs of the factory through its Directors. An
employee or officer of the factory or of the company, even if authorised by
the board of directors by a resolution to be a person "in the ultimate control D
of the affairs of the factory" cannot be so. Such an employee only carries
out orders from above and it makes no difference that he has been given
some measure of discretion also and has supervisory control. He can at
best be treated to be in the immediate control of the affairs of the factory
or having day to control over the affairs of the factory, the ultimate control E
being retained by th~. company itself. The legislature did not designedly use
the expression immediate or day to day or supervi.sory control instead of
ultimate control in the main provision of Section 2(n) .

. The word 'ultimate' in cominon parlance means last or final. The
oxford Advanced Learner'.s DiC:tionary of Current English Encyclopedic F
Edition (1992), defines the word 'ultimate' to mean :

"beyond which no other exists or is possible; last or final; from
which every thing is derived; basic or fundamental; that cannot be
surpassed or improved upon; greatest etc." G
; According to Collins Dictionary of the English Language the word
'ultimate' has been defmed as :

"last; final; elemental; fundamental; basic or essential; highest;
furthest or greatest thing." H
818 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A According to Black's Law Dictionary (Sixth Edition), the word 'ultimate'
means:

"at l~st, finally or at the end ....."

There is a vast difference between a person having the ultimate
B
control of the affairs of a factory and the one who has immediate or day
to day control over the affairs of the factory. In the case of a company, the
ultimate control of the factory, where the company is the owner of the I
.,:..
factory, always vasts in the company, through its Board of Directors. The
Manager or any other employee, of whatever status, can be nominated by
C the Board of Directors of the owner company to have immediate or day to
day or even supervisory control over the affairs of the factory. Even where
the resolution of the Board of Directors says that an officer or employee,
other than one of the directors, shall have the 'ultimate' control over the
affairs of the factory, it would only be a camaflouge or an artful circum-
D vention because the ultimate control cannot be transferred from that of
the company, to one of its employees or officers, except where there is a
complete transfer of the control of the affairs of the factory. Mechanical
recitation of the words of Section 2(n), as a Mantra, in a resolution
nominating an employee or an officer as the occupier by stating that he
shall have "ultimate control over the affairs of the factory", cannot be
E permitted to defeat the object of the amendment. The provisions of the
Act have to be construed in a manner which would promote its object,
prevent its subtle e-vasion and foil its artful circumvention to suppress the
mischief. Though, the expression ultimate control was used in Section 2(n)
even prior to the 1987 amendment also but read with the proviso to Section
F 100(2), it gave an opportunity to the companies owning the.factory to dilute
the. rigour of the provision by not notifying one of its directors to be the
occupier and instead nominating some employee or the other to be the
"occupier" for purposes of punishment and penalty. The ultimate control
which vests in an owner and in the case of a company in the Board of
G Directors cannot be vested in anyone else without completely transferring
the control over the factory to that person. The law does not countenance
duality of ultimate control. If the transfer of the control to another person
is not complete, meaning thereby that the transferor retains its control over
the affairs of the factory, the transferee, whosoever he may be, (except a
director of the company, or a partner in a partnership firm) cannot be
H considered to be the person having ultimate control over the affairs of the
J.K INDS. LTD. v. CHIEf INSPECIDR OF FACTORIES AND BOILERS (DR ANAND, J.j 819

factory notwithstanding what the resolution of the Board states. The litmus A
test, therefore, is who has the 'ultimate' control over the affairs of the
factory.

The observations of this Court in Mackenzie's case (supra) that the
"ultimate control over the factory must necessarily be with an owner unless
the owner has completely transfe1red that control to another person" are B
significant. Where, a company has "completely transferred" that control to

. another person, it would be that other person, who would have the ultimate
control over the affairs of the factory to the exclusion of the transferor -
company and would be its occupier. The High Courts taking the view that
in the case of a company, any person nominated by the Board of Directors C
to be in the ultimate control of the affairs of the factory would be an
occupier, whether or not he is a Director of the company, have relied upon
the following observation of this Court in John Donald Mackenzie and
Another v. 17te Chief Inspector of Factories, Bihar (supra) :

"Undoubtedly the expression 'occupier' is not to be equated with D
owner. But it must be borne in mind that the ultin:iate control over
the factory must necessarily be with an owner unless the owner has
completely transfe1red that control to another person. Whether that
was done in the present case would be a question of fact. It was
for the petitioners to contend that petitioner No. 1 was the manager E
of the factory and had the ultimate control thereof to lay before
the Chief ldspector of Factories t~e company had in some manner
transferred the entire control of the factory to petitioner No. 1".

(Emphasis supplied)
F
and from these observations those High Courts have concluded that the
law laid down by this Court in John Donald Mackenzie's case (supra) is
that the occupier of the factory need not necessarily be a Director and that
any person to whom control has been transferred and who has been given
the entire control over the affairs of the factory by the company through a
resolution can be the occupier, even if he is not a director. In our opinion, G
this is not a correct reading of that judgment, which even otherwise was
concerned with the pre-amendment provisions. A brief reference to- the
facts of that case is, therefore, necessary at this stage. Mackenzie, who was
petitioner No. 1 in the writ petition, had described himself as the Manager
and occupier of Bata Shoe Company's factory at Dhiga in Bihar while H
820 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A seeking renewal of the licence of the. factory. The Chief Inspector of
Factories enquired from the factory whether mackenzie was one of the
Directors of the company and pointed out that if he was not a Director,
then a fresh application seeking renewal .of the factory's licence signed by
the occupier should be submitted. The Chief Secretary of Bata Shoe
B Company sent a reply to the Chief Inspector of Factories stating therein
that Mackenzie was the person who had been nominated to have the ultimate
control of the affairs of the factory and therefore he was an occupier within
the m_eaning of Section 2(n) of the Act and, thus, competent to make an
application for seeking renewal of the licence. The Chief Inspector, how-
ever, returned the application stating that if Mackenzie was not a Director,
.
C then a fresh application signed by the Director is required to be submitted.
The Company, thereupon, moved the High Court at Patna for quashing the
direction of the Chief Inspector of Factories requiring a director only to •.
make the application for renewal of the licence. That petition was, dis-
missed by the High Court. The company then filed an appeal by special
D leave to this Court. This Court after setting out the definition of an occupier
under Section 2(n) of the Factories Act _went on to consider the correspon-
dence that had been exchanged between the company and the Chief
Inspector of Factories, which revealed that Mackenzie had been declared
to be an occupier without his being a director of the company and held :

E "In the circumstances, therefore, the Chief Inspector of Factories
was perfectly right in refusing to act on the application signed by
Mackenzie and in requiring the factory to file a proper application
for renewal of the licence.

F (Emphasis ours)

The appeal was consequently dismissed and the direction of the
Chief Inspector of factories was maintained. This Court, thus, did not hold
that a company can nominate any of its employee as an occupier of the
factory, even if he is not a Director of .the company. The judgment in
G Mackenzie's case, therefore, has to be understood in the context in which .
it was given as otherwise the decision of the Chief Inspector of Factories ...._
calling upon Mackenzie (who had· been nominated as the occupier having
'ultimate control over the affairs of the factory') but was not himself a
director, to have fresh application signed by the director submitted for
H renewal of the license, would not have been sustained by this Court. It is
J.K. INDS. LTD. v. CHIEF INSPECIDROF FACTORIES AND BOILERS (DR ANAND,J.( 821

not fair or proper to read a sentence from the judgment of this Court, A
divorced from the complete context in which it was given and to build up
a case treating as if that sentence is the complete law on the subject.
Judgments of this Court are not to be read in that manner .
.. Mr. Jain, learned senior advocate drew our attentio::i to an order of
a three Judges Bench of this Court in special leave petition No. 4141 of B
1979 dated 14.3.1990 to support his submission that the occupier of the
factory owned by a company need not necessarily be one of the directors
of the company. Their Lordships while dismissing special leave petition No.
4141of1979 filed by the State of Orissa against the judgment of that High
Court observed : c
"We are of the view that that judgment of the High Court of Orissa
in the instant case and that of the Gujarat High Court in Jyoti
Switchgears v. Chief Inspector of Factories (34), Indian Faci:ories
and Labour Reports 354, "that the occupier of a factory need not
necessarily be either a Director or an owner of the factory is D
correct". In other words it is open to a Company to nominate a
person other than a Director of the Company as an "occupier" of
the Company for the purpose of the Factories Act".

The above order, was concerned with the provisions of Section 2(n) E
· as they stood prior to the 1987 amendment, whereunder there was an
option available to the company, to nominate a person other than a director
of the company as an· 'occupier' of the company. This order, therefore,
cannot advance the case of the appellants\petitioners herein, who are
governed by the provisions of Section 2(n) as amended by the Amending
· Act of 1987. F

Thus, we find that after the 1987 amendment, the true import of
proviso (ii) to Section 2(n) would be that in the case of a company, which
owns the factory, the company cannot nominate any one of its employees
or officers, except a director of the company, as the occupier of the factory. G
In other words, an occupier of the factory in the case of a company must
necessarily be any one of its directors who shall be so notified for the
purposes of the Factories Act. Such an ·occupier cannot be any other
employee of the company or the factory. This interpretation of an "oc-
cupier" would apply to all provisions of the Act, wherever the expression
occupier is used not merely for the purposes of Section 7 or 7A of the Act. H
822 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Learned counsel for the appellants/petitioners, then, vehemently ar-
gued that proviso (ii) to Se<>tion 2{n) of the Act is beyond the scope of the
main Section. Learned counsel urged that since the principal provision
contained in Section 2(n) of the Act is clear, recourse cannot be had to
proviso (ii) with a view to expand the ,ambit of the principal provision. . .
B Learned counsel further. argued that proviso (ii) confers absolute, unfet-
tered and unguided powers upon the Inspector of factories to pick and
choose any one of the dir.ectors of company for prosecution and punish-
ment in connection with the breach of any of the provisions of the Act by
,.
a deeming fiction when that director is himself not responsible for the
contravention and proviso (ii) is, therefore, violative of Article 14 of the
C Constitution also. It is submitted that there is potential for abuse of power
by the Inspector of Factories, both in selecting and in not selecting a
director, as an occupier for prosecution, punishment and penalty under the
Act.

D The learned Attorney general and learned counsel appearing for
different States, on the other hand submitted that proviso (ii) to Section
2{n) of the Act does not run counter to the substantive provision and that
it is an exception to the main Section and has been enacted with a view to
advance the object of the Act and the intention of the legislature and it
does not travel beyond the scope of the main section. It is submitted that
E the proviso neither offends Article 14 nor the main provision of Section
2(n) of the Act. Mr. Ashok Desai, the learned Attorney General, further
submitted that the second proviso to Section ·2(n), by making any one of
the Directors to be a deemed occupier of the factory owned or run by a
company, dues not in any manner make the substantive part of the defmi-
F tion clause otiose and that the proviso and the main provision can be
harmoniously construed. He submitted that in the ~se of a company, the
main provision of Section 2(n) may be incapable of proper working without
the aid of proviso (ii) to the said Section because the company itself may
not be possible to be prosecuted and sentenced to any term of imprison-
ment, and hence the necessity of the deeming fiction. The learned Attorney
G General submitted that the apprehension expressed by the learned counsel
for the petitioners that the Inspector of Factories can pick and choose any
director at his whims is not well founded because Section 7 as introduced
by the 1987 Amendment Act casts a duty on the company to notify, the
name of a director who would be the occupier and once that statutory
H obligation is discharged, the Inspector of Factories has no choice but to
J.K. INDS. LTD. v. CHIEF INSPEC'IDR OF FACfORIESAND BOIIERS [DR ANANn,J.) 823

prosecute that notified director only. A
Does proviso {ii) to Section 2(n) travel beyond the scope of the main
provision or is otherwise violative of Article 14 of the Constitution of India?

In Reserve Bank of India Etc. Etc. v. Peerless General Finance And
Investment Co. Ltd. & Others Etc. Etc., [1987] 1 SCC 424 dealing with the B
principle for interprettion of statutes this Court observed :

"Interpretation must depend on the text and the context. They are
the basis of interpretation. One may well say if the text is the
texture, context is what gives the colour. Neither can be ignored.
Both are important. That interpretation is best which makes the c
textual interpretation match the contextual. A statute is best inter-
preted when we know why it was enacted. With this knowledge, the
statute must be read, first as a whole and tJ-.en section by section,
clause by clause, phrase by phrase and word by word. If a statute
is looked at, in the context of its enactment, with the glasses of the D
statute-maker, provided bysuch context, its scheme, the sections,
clauses, phrases and words may take colour ~nd appear different
than the statute is looked at without the glasses provided by the
context. With these glasses we must look at the Act as a whole and
discover what each section, each clause, each phrase and each word E
is meant and designed to say as to fit into the scheme of the entire
Act. No part of a statute and no word of a statute can be construed
in isolation. Statutes have to be construed so that every word has
a place and everything is in its place".

(Emphasis supplied) F
In S. Gopal Reddy v. State of Andhra Pradesh, JT (1996) 6 SC 268,
to which one of us (Anand, J.) was a party it was observed:

"It is well known rule of interpretation of statutes that the text and
the context of the entire Act must be looked into while interpreting G
any of the expressions used in a statute. The courts must look to
the object which the statute seeks to achieve while interpreting any ..
of the provisions of the Act. A purposive approach of interpreting
the Act is necessary."

(Emphasis supplied) H
824 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.~~.

A It is in the light of the above settled principles that we shall consider
the true scope and intent of Section 2(n) with reference to proviso (ii)
thereto within the scheme of the Act. Can Section 4(n) stand without
proviso (ii) in the case of a company? What is the true function of proviso
(ii) to Section 2(n)?
B A proviso to a provi5ion in a statute has several functions and while
interpreting a' provision of the statute, the Court is required to carefully
scrutinise and find out the real object of the proviso appended to that
provision. It is not a proper rule of interpretation of a proviso that the
enacting part or the main part of the Section be construed first without
C reference to the proviso and if the same is found to· be ambiguous only
then recourse may be had to examine the proviso as has been convassed
before us. On the other hand an accepted rule of interpretation is that a
Section and the proviso thereto must be construed as a whole each portion
throwing light, if need be, on the rest. A proviso is normally used to remove
D special cases from the general enactment and provide for them specially.
A proviso qualifies the generality of the main enactment by providing
an exception and taking out from the main P:rovision, a portion, which, but
for the proviso would be a part of ?ate ma~ provision. A proviso must,
therefore, be considered in relation to the principal matter to which it
E stands as a proviso. A proviso should not be read as if providing something
by way of addition to the main provision which is foreign to the main
provision itself.

Indeed, in some cases, a proviso, may be an exception to the main
provision though it cannot be inconsistent with what is expressed in the
F main provision and if it is so, it would be ultra- vires of the main provision
and struck down. As a general rule in construing an enactment containing
a proviso, it is proper to construe the provisions together without making
either of them redundant or otiose. Even where the enacting part is clear,
it is desirable to make an effort to give meaning to the proviso with a view
G to justify its necessity.
While dealing with proper function of a proviso, this Court in The
Commissioner of Income-Tax, Mysore & Ors. v. The Indo Mercantile Bank
Ltd. & Ors., AIR (1959) SC, 713 opined:

H "The proper function of a proviso is that it qualifies the generality
J.K INDS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS (DR. ANAND, J.J 825

of the main enactment by providing an exception and taking out A
as it were, from the main enactment, a portion which, but for the
proviso would fall within the main enactment. Ordinarily it is
foreign lo the proper function of a proviso to read it as providing
something by way of an addendum or dealing with a subject which
is foreign to the main enactment."
B
This view has held the field till date .

Let us now examine Proviso (ii) to Section 2(n) to determine whether
it is inconsistent with or beyond the main provision of Section 2(n).
c
Sy the Amending Act of 1987 it appears that the legislature wanted
to bring in a sense of responsibility in the minds of those who have the
ultimate control over the· affairs of the factory, so that they take proper care
for maintenance of the factories and the safety measures therein. The fear
of penalty and punishment is bound to make the Board of Directors of the D
company, more vigilant anJ responsive to the need to carry out various
obligations and duties under the Act, particularly in regard to the safety
and welfare of the workers. Proviso (ii) was introduced by the Admending
Act, couched in a mandatory form - 'any one of the directors shall be
deemed to be the occupier' - keeping in view the experience gained over
the years as to how the directors of a company managed to escape their E
liability, for various breaches and defaults committed in the Factory by
putting up another employee as a shield and· nominating him as the
'occupier' who would willingly suffer penalty and punishment. The state of
unemployment in the country being what it is, it is not difficult to "hire" the
services of someone only for this "job". Proviso (ii) now makes it possible F
to reach out to a director of the company itself, who shall be prosecuted
and punished for breach of the provisions of the Act, apart from prosecu-
tion and punishment of the Manager and of the actual offender. The
proViso, by making one of the directors of the company responsible for
proper implementation of the provisions of the Act, to a great extent
ensures that more care is taken for the maintenance of the factory and G
various safety measures prescribed under the Act for the health, welfare
and safety of the workers are not neglected. In the case of a company, the
main part of Section 2(n) would not be workable unless that provision is
read alongwith proviso (ii). The definition of an occupier under Section
2(n) is of general application and different situations have been covered by H
826 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the legislature only in different provisos appended to Section 2(n). These
situations were, to a large extent earlier covered by Section 100 of the Act
and with the deletion of Section 100, it became imperative to take care of
different situations dealt therein, by enacting varioris provisos to Section
2(n). Of course, the expression "shall be deemed to be an occupier" in
B second proviso to Section 2(n) indicates the creation of a legal fiction but
it is wrong to presume that such legal fiction can come into play only were
the substantive provision of Section 2(n) is not attracted. As already
observed, the substantive provision of Section 2(n) can become workable
only in the case of a company, when the same is read alongwith proviso
(ii). The deeming provision does not override the substantive provision of
C Section 2(n) but clarifies it. In our opinion, proViso (ii) is not ultra-vires the
main provision of Section 2(n) and as a matter of fact there is no conflict
at all between the main provision of Section 2(n) and proviso (ii) thereto.
Both can be read harmoniously and when so read in the case of a company,
the occupier of a factory owned by a company would mean 'any one of the
D directors of the company who has been 11otified/identified by the company to
have ultimate control over the affairs of the factory' and where no such
director has been identified, the11 for the purposes of prosecution and punish-
me11t under the Act, the Inspector of Factories may i11itiate proceedings
against any one of the directors as the deemed occupier.

E The apprehension that on account of Proviso (ii), the Inspector of
Factories has acquired 'unguided, unfettered or absolute powers' to pick
and choose any director of the company for prosecution and punishment is
not well funded. Section 7 lays down a mandatory obligation on the factory
to notify the name of the 'occupier' for obtaining the licence or seeking
F renewal of the licence of the factory and, therefore, the option to 'select'
the director who would be the "occupier" vests in the Board of Directors
and once they notify the name and particulars of that director, the Inspec-
tor of Factories is left with no discretion to 'pick and choose' any other
director for prosecution etc. for the breaches committed in the factory or
for contravention of the provisions of the Act. It is only when the company
G fails to perform its statutory obligation to notify the name of the director
under Section 7 of the Act, that the Inspector of Factories may "choose"
any one of the directors as the deemed occupier and proceed against him.
The area for mischief can, thus, be totally blocked by the company by
notifying one of its directors as the occupier in discharge of its statutory
H obligations ennumerated in Section 7 of the Act. That apart, the
J.K INDS. LTD. v. CHIEF INSPECIDROF FACTORIES AND BOILERS [DR ANAND, J.) 827

reasonableness of the restriction depends upon the circumstances obtain- A
ing at a particular time and the urgency of the evil sought to be controlled.
The possibility of the power being abused is no ground for declaring the
provision unconstitutional. Proviso (ii) to Section 2(n), therefore, does not
offend Article 14 of the Constitution.

In keeping with the aim and object of the Act which is essentially to B
safeguard the interests of workers, stop their exploitation, a11d take care of
their safety, hygiene and welfare at their place of work, numerous restric-
tions have been enacted in public interest in the Act. Providing restrictions
in a Statute would be a meaningless formality unless the statute also
contains a provision for penalty for the breach of the same. No restriction C
can be effective unless there is some sanction compelling its observance
and the provision for imposition of penalty for breach of the obligations
under the Act or the rules made thereunder is a concomitent and necessary
incidence of the restrictions. Such a provision is contained in Section 92 of
the Act, which contains a general provision for penalties for offences under D
the Act for which no express provision has been made elsewhere and seeks
to lay down uniform penalty for all or any of the offences committed under
the Act. The offences under the Act consist of contravention of ( 1) any
provision of the Act; (2) any rules framed thereunder; and (3) any order
in writing made thereunder. It comprises both acts of omission and com- E
mission. The persons punishable under the Section are occupiers and
managers, irrespective of the question as to who the actual offender is. The
provision, is in consonance with the scheme of the act to reach out to those
who have the ultimate control over the affairs of the factory to see that the
requirements for safety and welfare of the employees are fully and properly
carried out besides carrying out various duties and obligations under the F
Act. Section 92 contemplates a joint liability of the occupiei and the
manager for _the offence committed irrespective, of the fact as to who is
directly responsible for the offence. The fact that the notified/identified
director is ignorant about the 'management' of the factory which has been
entrusted to a manager or some other employee and is himself not respon- G

- sible for the contravention cannot absolve him of his liability. The iden-
tified/notified director is held vicariously liable for the contravention of the
provisions of the Act, the rules made thereunder or of any order made in
writing under it for the offender cQmpany, which is the occupier of the
factory. H
828 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Mr. Jain~ Mr. Nariman and Mr. Tripathi, appearing for the appel-
lants, however, argued that the since Section 92 imposes a liability for
imprisonment and/or fine, both on the occupier (the notified director) and
the manager of the factory, jointly and severally, for the contravention of
any of the provisions of the Act or any rule made thereunder or of any
order in writing given thereunder, irrespective of the fact whether the
B occupier (the notified director) or manager, hod any mens-rea in respect of
that contravention or that the contravention was not committed by him or
was committed by any other person in the factory without his knowledge,
consent or connivance, it is an unreasonable restriction. Learned counsel
argued that in criminal law, the doctrine of vicarious liability is un:known
C and if a director is to be punished for some thing of which he is not actually .
guilty, it would violate his fundamental right as enshrined in Article 21 of
the Constitution. It was urged that on account of advancement in science
and technology, most of the companies, appoint professionally qualified
men to run the factories and nominate such a person to be the 'occupier'
of the factory and make him responsible for µroper implementation of the
D provisions of the Act and it would, therefore, be harsh and unreasonable
to hold any director of the company, who may be wholly innocent, liable
for the contraventions committed under the Act etc. when he may totally
ignorant of what was going on in the factory, having vested the control of
the affairs of the factory to such an officer or employee, by ignoring the
liability of that officer or employee. The argument is emotional and attrac- 1
E tive but not sound.

The offences under the Act are not a part of gen~ral penal law but
arise from the breach of a duty provided in a special beneficial social
defence legislation, which creates absolute or strict liability without proof
F on any mens rea. The offences are strict statutory offences for which
establishment of mens rea is not an essential ingredient. The omission or
commission of the statutory breach is itself the offence. Similar type of
offences based on the principle of strict liabil!ty, which means liability
without fault or mensrea, exist in many statutes relating to economic
crimes as well as in laws concerning the industry, food adulteration, preven-
G tion of pollution etc. in India and abroad. 'Absolute offences' are not
criminal offences in any real sense but acts which are prohibited in the
interest of welfare of the public and the prohibition is backed by sanction
of penalty. Such offences are generally known as public welfare offences.
A seven Judge Bench of this Court in R.S. Joshi v. Ajit Mills, AIR (1977) ·
H SC,· 2279 at page 21J!,7 observed :
J.K. INDS. LTD. v. CHIEF INSPECIDR OF FACIURIES AND BOILERS (DR. ANAND, J.) 829

"Even here we may reject the notion that a penalty or a punishment A
cannot be cast in the form of an absolute or no-fault liability but
must be proceeded by mens rea. The classical view that 'no mens
rea no crime' has long ago been eroded and several laws in India
and abroad, especially regarding economic crimes and departmen-
tal penalties, have created severe punishments· even where the B
offences have been defined to exclude mens rea. Therefore, the
.contention that Section 37(1) fastens a heavy liability regardless of
fault has no force ......."

What is made punishable under the Act is the 'blameworthy' conduct
of the occupier which resulted in the commission of the statutory offence C
and not his criminal intent to commit that offence. The rule of strict liability
is attracted to the offences committed under the Act and the occupier is
held vicariously liable alongwith the Manager and the actual offender, as
the case may be, penalty follows actus reus, mens- rea being irrelevant.

As already noticed, there the company owns as factory is the com- D
pany which is the occupier, but, since company is a legal abstraction
Without a real mind of its own, it is those who in fact control and determine
the management of the company, who are held vicariously liable for
commission of statutory offences. The directors of the company are, there-
fore, rightly called upon to answer the charge, being the directing mind of E
the company. Dealing with the question of vicarious liability of the directors
for offences co~mitted by a company, the following observations of Lord
Diplock in Tesco Supemarkets Ltd. v. Nattrass, {1972) Ac, 153, are useful :

"In my view, therefore, the question : what natural persons are to
be treated in law as being the company for the purpose of acts done F
in the course of its business, including the taking of precautions and
the exercise of due diligence to avoid the commission of a criminal
offence, is to be found by identifying those natural person who by
the memorandum and articles of association or as a result of action
taken by the directors, or by the company in general meeting G
pursuant to the articles, are entnlsted with the exercise of the powers
of the company. This test is in conformity with the classic statement
of Viscount Haldane, Lord Chancellor, in Lennard's Carrying Com-
pany Ltd. v. Asiatic Petroleum Company Ltd."

(Emphasis supplied) H
830 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A The passage of Viscount Haldane, Lord ChancelJor, in Lennard's Canying
Company v. Asiatic Petroleum Company Ltd., (1915), referred to by Lord
Diplock, is as follows :

My Lords, a corporation is an abstraction. It has no mind of its
own; any more than it has a body of its own; its active and directing
B will must consequently be sought in the person of somebody who
for some purposes may be called an agent, but who is really the
directing mind and will of the corporation, the very ego and centre
of the personality of the corporation. That person may be under
the direction of the shareholders in general meeting; that person
may be the board of directors itself, or it may be, and in some
c companies it is so, that person has an authority co-ordinate with
the board of directors given to him under the articles of associa-
tion........"

We are in complete agreement with the above view propounded by
D Lord Diplock and Viscount Haldane Lord Chancellor and hold that under
the Act only one of the directors, the directing mind and will of the
company, its alter e'go; Call be nominated as an occupier for the purposes
of the Act. ·

The object of the Act would stand defeated if for the commission of
E strict offences, the identified director, as the deemed occupier of the
factory, is not held vicariously liable. An argument similar to the one raised
before us regarding the harshness of the provision insofar as an "innocent" ·
director is concerned, was also canvassed in M.C. Mehta' case (supra). We
may excerpt that portion which formulates the question and furnishes the
answer:
F
"So far as the undertaking to be obtained from the Chairman and
Managing Director of Shriram is concerned it was pointed out by
Shriram that Delhi.Cloth Mills Ltd. Which is the owner is Shriram
has several units manufacturing different products and each of
these units is headed and managed by competent and professional-
G
ly qualified persons who are responsible for the day to day manage-
ment of its affairs and the Chairman and Managing Director is not
concerned with day to day functioning of the units and it would ---
not therefore be fair and just to require the Chairman and Manag-
ing Director to give an undertaking that in case of death or injury
H resulting on account of escape of chlorine gas, the Chairman and
. J.KINDS.LTD.v.CHIEFINSPECIDROFFACTORIESANDBOILERS[DRANAND,J.) 831

Managing Director would be personally liable to pay compensa- A
tion. We find it difficult to accept this contention urged on behalf
of Shriram. We do not see any reason why the Chairman and/or
Managing Director should not be required to give an undertaking
to be personally liable for payment of compensation in case of
death or injury resulting on account of escape of chlorine gas."
B
We, therefore, find no hesitation in rejecting the argument of learned
counsel for the appellants.

It deserves a notice that under the Act, the legislature has itself taken
care to dilute the rigour of Section 92 by providing an exception to the
strict liability rule by laying down a third party procedure in Section 101 of C
the Act which read :

101. Exemption of occupier of manager from liability in certain
cases. - Where the occupier or manager of a factory is changed
with an offence punishable under this Act, he shall be entitled, D
upon complaint duly made by him and on giving to the prosecutor
not less than three clear days notice in writing of his intention so
to do, to have any other person whom he charges as the actual
offender brought before the Court at the time appointed for
hearing the charge; and if, after. the commission of the offence has
been provided, the occupier or manager of the factory, as the case E
may be, proves to the satisfaction of the court -

(a) that he has used due diligence to enforce the execution
of this Act, and

(b) that the said other person committed the offence in F
question without his knowledge. consent or connivance, -

.that other person shall be convicted of the offence and shall be
liable to the like punishment as if he were the occupier or manager
of the factory, and the occupier or manager, as the case may be, G

- shall be discharged from any liability under this Act in respect of
such offence :

Provided that in seeking to prove as aforesaid, the occupier or
manager of the factory, as the case may be, may be examined on
oath, and his evidence and that of any witness whom he calls in H
832 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A his support shall be subject to cross- examination on behaH of the
person he charges as the actual offender and by the prosecutor :

Provided further that, if the person charged as the actual
offender by the occupier or manager cannot be brought before the
Court at the time appointed for hearing the charge, the Court shall
B adjourn the hearing from time to time for a period not exceeding
three months and if by the end of the said period the person
charged as the actual offender cannot still be brought before the
Court, the Court shall proceeded to hear the charge against the
occupier or manager and shall if the offence be proved, convict
c the occupier or manager."

This section which lays down "third party procedure" as a defence, .. .<!:-
is in a way an exception to the general rule and enables .the occupier or the
manager of the factory, to extricate himself from punishment by establishing
that the actual offender is someone else and giving satisfactory proof of
D facts as are contemplated by Section lOl(a) & (b). The principle under-
taking Section 101 may well be gathered from the following observations
of phillimore J. in Ward v. Smith, [1913] 3 K.B. 154, while dealing with a
somewhat similar provision in England, the learned Judge said :

A prima f acie liability is imposed upon the occupier or manager
E
from which however he can extricate himself; otherwise he remains
liable. The scheme of the Act is first to find the a de facto employer.·
An information may be laid against the occupier. His way or escape
is provided for by this section. He may set up a defence not unlike
the defence of warranty which the .seller of food may set up under
F the English Sale of Food and Drugs Act. He may show that that
the offence was not committed by his fault. To do this he must
bring the real offender .before the. court."

prof. Glanville Williams in his "Text Book on Criminal Law" (1978)
G End.), while dealing with exception to the strict liability rule opined that
the principle of strict liability may be modified by the statute itself and
further that the statutes, generally speaking, contain two main types of
excuses (i) the third party. procedure and (ii) the no-negligence defence.
Prof. Williams observes at page 954;

H "As to the first, some penal statutes provide that when a charge is
J.K INDS. LTD. v. CIDEF INSPECTDR OF FACTORIES AND BOILERS [DR. ANAND, J.J 833

brought under them the defendant may bring in any other person A
(e.g.) a supplier) to whose act or default he alleges that the
contravention was due, and shift the blame to him. The defence is
sometimes called a "passing on" defence. The most important
example are in the Shops Act 1950 (s. 71), the Food and Drugs
Act, 1955 (s. 113), the Medicines Act 1968) (s. 121) (this Act
B
replacing the provisions of the 1955 Act with regard to drugs), the
weights and Measures Act 1963 ( s. 27), and the Factories Act
1961 (s. 161).

The 'passing on' defence provided in Section 101 of the Act is an
C

...
accepted form of an exception to the principle of strict liability but its
benefit would be available only when the requirements of that Section are
fully complied with and the Court is satisfied about the proof of facts as
are contemplated by clauses (a) and (b) of Section 101.

The provisions of Section 101 are almost identical to the provisions D
of Section 71 of the Factories Act prior to its amendment, with the
difference that under Section 101, a provision for 3 days advance notice to
the prosecutor has been added. Under Section 101, after a complaint is .
made by the Inspector of Factories against the manager or occupier under
Section 92 of the Act for contravention of any of the provisions of the Act, E
the manager or occupier is entitled to complain against the actual offender .
before the Court and if he does so, the actu?-1 offender is given a notice
and brought before the court and the trial then proceeds against both the
persons complained against, because the Section contemplates both sets of
complaints (one filed by the Inspector of Factories and the other by the
manager or the occupier) and both the accused (one as named by the
F
Inspector of Factories and the other as named by the Manager or occupier)
being brought before the Court at the same time. The carriage of proceed-
ings is with the original complamant (Inspector of Factories) and the onus
also lies on him of proving that an offence has been committed. Both the
parties complained against (one by the In~pector and the other by the G
Manager occupier) are entitled to cross-examine the prosecution witnesses
at this stage and also lead evidence to disprove the charge. If the prosecu~
tion fails to prove the offence, both of them would be acquitted. However, .
if the offence is proved then the trial court shall recotd an order to that .
effect and the occupier or manager shall be afforded an opportunity to H
834 SUPREME COURT REPORTS (1996} SUPP. 6 S.C.R.

A extricate himself from the liability provided he can give satisfactory proof
of the facts requires by Section lOl(a) and (b). The onus of proof, at that
stage, is shifted to the manager or the occupier. He is entitled to call
evidence as well as to give evidence himself. The alleged actual offender
would have a right to cross-examine the manager or the occupier as the
B case may be. He would also be entitled to call evidence. Even where the
occupier establishes that the actual offender is the person named by him,
he must still prove to the satisfaction of the Court, that he had used due
diligence to enforce the execution of the act and that the said other person
committed the offence in question without his knowledge, consent or
connivance.
c
In State of Gujarat v. Kansara Manila~ AI~ (1964) SC, 1893 at 1897
while dealing with the provisions of Section 101 of the Act, this Court . ._
opined:

D "Where an occupier or a manager is charged with an offence he .
is entitled to make a complaint in his own tum against any person
who was the actual offender and on proof of the commission of
the offence by such person the occupier or the manager is absolved
from liability. This shows that compliance with the preemptory
E provisions of the Act is essential and unless the occupier or
.manager brings the real offender to book he must bear the respon-
sibility. Such a provision largely excludes the operation of S.. 117
in respect of persons guilty of a breach of the provisions of the
Act. It is not necessary that mens rea must always be established
as has been said in some of the cases above referred to. The
F responsibility exists without a guilty mind. An adequate safeguard,
however, exists in Section 101 analysed above and the occupier
and manager can save themselves if they prove that they are not )
the real offenders but who, in fact is."

G This judgment has been noticed with approval by a three Judge
1
Bench of this· Court in Maneklal Jinabhai Kot v. State of Gujarat & Ors.,
[1967} 2 SCR, 507. We are in respec.tful agreerucnt with the view that an
adequate safeguard has been provided under Section 101, under which, for
circumstances mentioned therein, the occupier or manager can absolve
H himself from the liability if he can establish to the satisfaction of the Court
J.K INOS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS [DR. ANAND, J.) 835

that he is not the real offender but it is the other person charged by him A
who deserves to be punished and that he had been diligent and further that
the offence was not committed with his knowledge, consent or connivance.

Mr. Jain, learned senior counsel, however, argued that since 101
requires that the actmtl offender must be brought before the Court at the B
time appointed for hearing the charge or at the latest within a period of
three months thereafth and if by the end of that period the actual offender
cannot be brought before the Court, the Court would proceed to hear the
charge agaim,t the occupier or the manager and convict _him if the offence
is proved, renders the benefit of Section 101 as illusory. We find ourselves
unable to agree. The scheme of Section 101 being that the occupier or C
manager should be relieved from liability only if the actual offender could
.... be brought to Court, the presence of the actual offender on whom the
burden has been shifted by the occupier or the manager would be necessary,
at the time of trial and a period of three months has been prescribed by
the Legislature within which the actual offender should ordinarily be D
brought before the Court by the process of law. If that cannot be done, the
trial against the occupier or the manager as the case may be, cannot be
allowed to be protracted indefinitely and we find it difficult to see how any
fault can be found with this provision.
E
Thus, we are of the opinion that proviso (ii) to Section 2(n) when
considered in relation to Sec;tion 92 of the Act does not offend Article 21
of the Constitution of India either.

That Section 92 is a prefectly valid piece of legislation insofar as it
F
makes the occupier or manager or a factory guilty of an offence for
contravention of any of the provisions of the Act or the rules made
thereunder, even if the actual contravention may not have been committed
by the occupier or the manager, is not disputed or doubted before us and,
therefore, we are unable to appreciate how the provision contained in
proviso (ii) to Section 2(n) can render the said proviso readwith Section G
92 invalid or unreasonable or how it offends Article 19(1)(g) of the
Constitution by defining an occupier to be only the director of the company.

Article 19(1)(g) of the Constitution guarantees to a citizen the right
to practice any profession or to carry on any occupation, trade or business. H
836 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A This right, however, is subject to Clause (6) of Article 19 which lays down
that nothing in sub-clause (g) of Article 19(1) shall affect the operation of
any existing law insofar as it imposes or prevents the State from making
'.
any law imposing in the interest of the general public reasonable restric-
tions on the exercise of the right. Clause (6) of Article 19 is intended to
B strike a balance between individual freedom and social control. Keeping in A.
view the object of the Act, we must look to the reasonableness of the
provision requiring the nomination of a director as the occupier of the
factory under Section 7 of the Act, with a view to determine whether
proviso (ii) to Section 2(n) has a rational nexus with the object which the
legislature seeks to achieve. It was, as already observed, with a view to
c secure proper and effective enforcement of the provisions of the Act and
the Rules made thereunder, that the legislature considered it appropriate
to fasten the liability for proper implementation of the Act on one of the ••
directors by insisting that in the case of a company, which owns the factory,
one of the directors shall be, <leeme~ to be the occupier for all purposes,
D including prosecution.and penalty in respect of offences committed under
the Act. The Legislature has attempted to plug the loopholes, which existed
earlier and enabled the directors to escape their liability by passing on the
buck, as they say, to an employee. It is much too obvious that when top
persons of the company are made conscious of their responsibilities and
E duties for the implementation of the safety ancl. welfare measures in a
factory and to carry out the duties prescribed under the Act, at the pain
of punishment in case they choose to overlook, there are much _greater
chances that proper care would be taken for maintenance of the factory,
particularly in regard to the safety measures and welfare of workers.
F There is, therefore, nothing unreasonable in fixing the liability on a
director of a company and making him responsible for compliance with the
provisions of the Act and the rules made thereunder and laying down that
if there is contravention of a~y of th~ provisions of the Act or an offence
is committed under the Act, the notified director, and in the absence of
G the notification, any one of the directors of the company, shall be
prosecuted and shall be liable to be punished as the deemed occupier. "A
~
law has to be judged for its constitutionality by the generality of cases it
covers, not by the freaks and exceptions it martyrs." See AIR 1977 S.C.,
2279 (supra).
H
J.K INDS. LTD. v. CHIEF INSPECIDROF FACI'ORIES AND BOILERS [DR ANAND, J.I 837

The restriction imposed by proviso (ii) if at all, it may be called a A
restriction, has, a direct nexus with the object sought to be achieved and
is, therefore, a reasonable restriction within the meaning of clause (6) of
Article 19. Proviso (ii) to Section 2(n) is thus, not ultra vires Article
.A 19(1)(g) of the Constitution.
B
Thus, from the above discussion, it follows that the directions given
by the Chief Inspector of Factories to the writ petitioners and the appel-
lants herein to the effect that only a director of the company could file an
application for renewal of the factory licence (or grant of factory licence),
as occupier of the factory and that no other employee could make such and
application even if nominated by the company as an occupier of the factory, C
• suffers from no infirmity whatsoever. ·

To sum up our conclusions are :

(1) In the case a company, which owns a factory, it is only one
of the director of the company who can be notified as the D
occupier or the factory for the purposes of the Act and the
company cannot nominate any other employee to be the
occupier of the factory;

(2) Where the company fails to nominate one of its directors as E
the occupier of the factory, the Inspector of Factories shall be
at liberty to proceed against any one of the directors of th~
company, treating him as the deemed occupier of the factory,
for prosecution and punishment in case of any breach or
,_ contravention of the provisions of the Act or for offences
committed under the Act. F

(3) Proviso (ii) to Section 2(n) of the Act is inter-vires the sub-
stantive provision of Section 2(n) of the Act;

(4) Proviso (ii) to Section 2(n) is constitutionally valid and is not
G
ultra-vires Articles 14, 19(1)(g) and 21 of the Constitution of
India;

(5) The law laid down by the High Courts of Bombay, Orissa,
Karnataka, Calcutta, Guwahati and Madras is not the correct
law and the contrary view expressed by the High Courts of H
838 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Allahabad, Madhya Pradesh, Rajasthan and Patna is the
correct enunciation of law in regard to the ambit and scope
of proviso (ii) to Section 2(n) of the Act.

All the writ petitions and the appeals by special leave consequently
fail and are, hereby, dismissed. We, however, leave the parties to bear their·
B own cost.

M.K. Petitions and appeals dismissed.
K. SANKARAN NAIJ;l (DEAD) THROUGH LRS. A
v.
DEVAKI AMME MALATHY AMMA AND ORS.

SEPTEMBER 25, 1996

(N.P. SINGH AND S.B. MAJMUDAR, JJ.) B

Kera/a Land Refonns Act, 1963: Section 6-C (As inserted by Kera/a
Land Refonns (Amendment) Act, 1979) and Section 74.

Tenancy law-Deemed tenancy-Claim fo~Rejection in tenancy C
proceedings by Cowts and Supreme Cowt-Judgments consequently becom~
ing final-Amendment of Land Refonns Act by Kera/a Legislature-/11se1tion
of Section 6-C-Confennent of status of deemed tenant under-Fresh claim .
for deemed tenancy-Held b01red by ~es judicata.

Code of Civil Procedure, 1908: Section 11. D

Res judicat~Tenancy proceedings--Oecision rendered by competent
Courts regarding tenancy statu~Judgments acquiring final-Amendment of
Act-Confennent of status of deemed tenant-Fresh claim for deemed tenan-
cy based on amended Act held baJTed by res judicata.
E
Legislature-Power to ovemle judicial decision-Essential condition
for-Unless legislature renwves the substratum offoundation of the judgment,
it would remain operative and binding.

The respondents (plaintiffs) filed a suit claiming their 5/6th share F
in- the plaint schedule properties as well as for past and future mesne .
profits. The appellant (defendant No. 2) contested the suit contending that
he was a tenant. His case was that by a registered deed dated 10th January,
1969 the suit property was leased out to him by his mother-in-law. The
tenancy. Tribunal held that he was not a tenant and the lease deed in his G
• favour was hit by section 74 of the Kerala Land Reforms Act, 1963 which
totally barred creation of leases after 1.4.1964. The Tribunal's decision was
confirmed by the High Court on 31st March 1978. As the Special Leave
Petition filed by appellant was ·also dismissed by this Court on 28th
August, 1978 the question of alleged tenancy of the appellant got concluded
against the appellant. H
839
840 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A C_onsequently the respondents obtained possession from the appel-
lant and filed execution petition for mesne profits on 5th July, 1979. During
the pendency of these execution proceedings Kerala Land Rreforms
(Amendment) Act, 1979 came into force on 7th July, 1979. By the said
amendment Act Section· 6-C was inserted in the 1963 Act under which 4 •
certain lessees were conferred the status of deemed tenants. The appellant's
B application to get a fresh reference to the Land Tribunal for deciding his
deemed tenancy status under section 6C was rejected by the Executing
Court vide its order dated 29th January 1980 on the ground that it was
barred by principle of res judicata. On revision the High Court by its order
dated 7th April, 1980 held that (i) principle of res judicata was not ap-
C plicable because of the comming i~to force of a new provision viz. section
· 6C of the Act; (ii) the lease deed in favour of the appellant was inoperative
as the executant was a life estate holder and had no authority to create such
a lease under the provisions of the Act.

In appeal to this Court on the question whether the appellant was
D entitled to again claim the benefit of deemed tenancy as per section 6C of
the Act.

Dismissing the appeal, this Court

HELD : 1. Section 6C of Kerala Land Reforms Act could not be
E pressed into service by the original appellant for displacing the binding
judgments rendered by the Tribunal, the High Court and this Court in the
earlier tenancy proceedings wherein appellants claim for tenancy of the suit
land came to be repelled and those judgments have become final and
binding and were not in any way legally displaced by any competent piece of
legislation by the Kerala Legislature. Those judgments remained fully
F
operative against the appellant and consequently on the principle of res
judicata he could not once again re-agitate the question about his tenancy.
(850-F-G]
2. There is no question of lack of jurisdiction with the competent
G court which earlier decided the plea of tenancy under the very Act as raised
by the appellant. Not only the decision was ren4ered on merits byy com- Alllii
petent court but it was confirmed by this Court. The cause of action
remained the same, namely status of tenancy of the appellant qua the land
and against the plaintifs: In support of the same cause of action the appel-
lant wanted to take advantage of section 6C which fortunately for him was
H having no retrospective effect so as to knock off the substratum of the
. ./~;
K.S. NAIR (DEAD) v. D.A MALA1HY AMMA 841

decisions rendered by the competent courts earlier. [852-B] A

3. It is well settled that Legislature cannot overrule any judicial
decision without removing the substratum or the foundation of that judg-
ment by a retrospective amendment of the concerned legal provision.
Unless the Legislature by enactiJ,g a competent legislative provision B
retrospectively removes the substratum or foundation of any judgment of
a competent court the said judgment would remain binding and operative
and in the absence of such a legislative exercise by a competent legislature
the attempt to upset the binding effect of such judgments rendered against
the parties would remain an incompetent and forbidden e;xercise which
could be dudded as an abortive attempt to legislatively overrule binding C
decisions of courts. [848-E-F]

4. Section 6C, starts with a non obstante clause and seeks to remove
the prohibitive effect of Section 74. If that legislative exercise is to succeed
effectively, then section 74 should have been either deleted from the Statute D
Book with retrospective effect from 1st April 1964 when the Kerala Land
Reforms Act, the parent Act, came into force or at least from 1.1.1970 when
the Amendment Act, 1969 came on the Statute Book and on which date the
concerned person who claimed deemed tenancy under section 6C was
required to be in possession of the land. However, the Legislature in its
wisdom did not think it fit, while bringing on the Statute Book Section 6C E
from 7th July 1979, to either give it retrospective effect from 1.1.1970, or
to delete Section 74 retrospectively at least from 1.1.1970 if not from an
earlier date of 1st April 1964 when the parent Act itself was brought on
the Statute Book. Consequently the non obstante clause introduced in
Section 6C for bypassing the final judgments, decrees or orders of any F
court against any person remained in the realm of an abortive or an
incompetent exercise on the part of the legislature. [847-E-G]

5. Section 74 has operated untouched from the very inception when it
saw the light of the day along with other provisions of the Act on 1st April G
1964. Therefore, it effectively supplied a valid legal foundation for the
earlier Judgments rendered before 1.1.1970 to operate. That foundation has
remained untouched and Section 6C has not tinkered with it. Therefore,
earlier judgments as confirmed by this Court against the appellant negativ-
ing his plea under the Tenancy Act have remained fully operative and wiH
constitute a valid bar of res judicata against the present plea of the appel- H
'·

842 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A. lant centring round Section 6C. Therefore, the High Court was in error in
taking the view that because of section 6C the earlier judgments would not
operate as res judicata. Consequently on an entirely a different line of
reasoning, the judgment of the High Court is confirmed.
[853-E-GJ
B Slui Prithvi Cotton Mills ltd. & Anr. v. Broach Borough Municipality &
Ors., [1970) 1 SCR 388; Madan Mohan Pathak & Anr. Etc. Etc. v. Union of
India & Ors., [1978) 2 SCC 50; A. V. Nachane & Anr. Etc. Etc. v. Union of
India & Anr., [1982) 1 SCC 205; Bhubaneshwar Singh & Anr. v. Union of
India & Ors., [1994] 6 SCC 77; Comorin Match Industries (P) Ltd. v. State of
Tamil Nadu, [1996] 4 SCC ~81 and S.R. Bhagwat & Ors. v. State of Mysore,
c [1995) 6 sec 16, referred to.

Matlmra Prasad Bajoo Jaiswal & Ors. v. Dossibai N.B. Jeejabhoy, ,
[1970) 1 SCC 613 and Nand Kishore v. State of Punjab, [1995) 6 SCC 614,
held inapplicable.
D CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1118 of
1981.

From the Judgment and Order dated 7.4.80 of the Kerala High Court
in C.R.P. No. 682of1180-c;

K. Sukumaran and K.M.K. Nair for the Appellant.

T.L. Viswanatha Iyer, Shaju Francis arid C.N. Sree Kumar, for-the.
Respondents. ·

The Judgment of the Court was delivered by
F 0

S.B. MAJMUDAR, J. The appellants, who are the heirs of deceased
defendant No. 2, have challenged the judgment and order passed by
learned Single Judge of the Kerala High Court in Civil Revision Petition
No. 602 of 1980. The High Court rejected the contention of the original
G appellant-defendant no. 2, in Original Suit No. 241 of 1974 by which he
claimed status of a deemed tenant as per the provisions of .Section 6C of
the Kerala Land Reforms Act, 1963 as brought on the Statute Book by the
Kerala Land reforms (Amendment) Act, 1979 (hereinafter referred to as 'the
Act'). Having obtained special leave to .appeal under Article 136 of the
Constitution of India the present appeal has been filed by the original defen-
H dant no. 2. The respondents herein are the original plaintiffs in the suit.
K.S.NAIR(DEAD)v. D.AMALATHY AMMA[S.B.MATMUDAR,J.) 843

A few relevant facts leading to these proceedings may be noted at A
the outset. The respondents-plaintiffs filed Original Suit No. 21 of 1974 in
the Court of Subordinate Judge at Trivandrum for partition of respondents'
5/6the share in the plaint schedule properties and for recovering the same
from original appellant-defendant no. 2 and the his wife original defendant
no. 1 with past and future mesne profits.
B
The respondent-plaintiffs' case in short was that the suit properties
originally belonged to one Krishna Pillai Madhavan Pillai. Said Madhavan
Pillai by a settlement Deed of 1945 (1120 M.P.) decided that plaint proper-
ties A, B, C Schedule were to remain in possession and enjoyment of Shri
Madhavan Pillai, his wife Parvatbi Amma and for the benefit of their C
children and said Parvathi Amma had to remain in possession as life estate
holder. That said Madhavan Pillai died in 1955 and his widow Parvathi
Amma and his son Krishnan Nair succeeded to his properties. That Kerala
Land Reforms Act, Act I of 1964 was brought on the Statute Book on 1st
April 1964. Said Krishnan Nair died on 4th January 1968. Said Parvathi D
Aroma by a registered Dead is said to have leased. out her properties on
10th January 1969 to her son- in-law, deceased appellant original defen-
dant no. 2. Widow of Shri Krishnan Nair and her children filed the
aforesaid suit Was plaintiffs nos. 1 and 2 to 5 respectively in the Trial Court
for partition and separate possession of their 5/6th share in the plaint
schedule properties which were then in possession of original defendant E
no.2. In the said suit original defendant no. 2 took up the contention that
be was a tenant under the Kerala Agrarian Reforms Act. That question
was referred to the Tenancy Tribunal under Section 125(3) of the Kerala
Land Reforms Act for decision. The Tribunal held that original appellant-
defendant no. 2 \YaS not a tenant under the Act and the Lease Dead in his F
favour was hit by Section 74 of the Kerala Land Reforms Act which totally
barred creation of leases after 1.4.1964. The case of oral lease in his favour
prior to 1.4.1964 was also found to be not established. The Tribunal's
decision was confirmed by the High Court on 31st March ·1978. Appellant
carried the matter to this Court. Special Leave Petition against the High G
Court's judgment was also dismissed by this Court on 28th August 1978.
Thus the question of alleged tenancy of the appellant under the Lease
Deed of 10th January 1969 finally got concluded against the appellant. In ·
the meantime the Trial Court passed preliminary decree on 30th March
1976 and a receiver was appointed who took possession of the suit land
from the appellant. Final decree was passed on 27th September 1978. H
844 SUPREME COURT REPORTS [1996) SOPP. 6 S.C.R.

A Pursuant thereto the respondents obtained possession from the appellant
through the receiver. Consequently final decree remained to be executed
only for mesne profits and for that purpose the respondent filed Execution
Petition against the appellant on 5th July, 1979. Pending these execution
proceedings for m~sne profits Kerala Land Reforms (Amendment) Act,
1979 was brought on the Statute Book. As per Section 1 sub-section (2)
B thereof the said Amendment Act was deemed to have come into force· on
7th July 1979. By the said Amendment Act Section 6C was inserted in the
Kerala Land Reforms Act, 1963. The said provision reads as under :

"6C. Certain lessees who have made substantial improvements, etc.,
c to be deemed tenants: - Notwithstanding anything contained in
section 74, or in any contract, or in any judgment, decree or order
of any court or other authority, any person in occupation at the
commencement of the Kerala Land Reforms (Amendment) Act,
1969, of the land of another person on the basis of a lease deed
executed after the 1st day of April, 1964, shall be deemed to be a
D tenant if -

(a) he (including any member of his family) did not own or hold
land in excess of four acres in extent on the date of execution of
the lease deed; and
E
(b) he or any member of his family has made substantial improve-
ments on the land.

Explanation. - For the purposes of this section, improvements shall
be deemed to be substantial improvements if the value of such
F improvements is more than fifty per cent of the value of the land
on the date of execution of the lease deed."

The original judgment-debtor defendant no. 2, that is, the original appel-
lant herein, applied on 8th January 1980 in execution proceedings to get a ·
fresh reference to the Land Tribunal for deciding his 'deemed tenancy
G status under Section 6C of the aforesaid Amending Act. The respondents-
decree holders objected to the said application. By an order dated 29th
January 1980 the Executing Court rejected the claim of the appellant for
a fresh reference to the Tribunal about his status of deemed tenancy under
Section 6C of the Act on the ground that this contention was barred by
H principles of res judicata. The appellant carried the matter in revision
K.S.NAIR(DEAD)v. D.AMALATHY AMMA(S.B.MAJMUDAR,J.) 845

before the High Court. As noted earlier a learned Single Judge of the High A .
Court by her decision dated 7th April 1980 rejected the said revision
application taking the view that though the contention of the appellant was
not barred by res judicata because of the coming into force of a new
provision by way of Section 6C of the Act, the Lease Deed in favour of the
appellant dated 7th July 1969 was inoperative in law as Parvathi Amma B
who was a life estate holder had no authority to create such a lea~e and
Chapter II of the Kerala Land Reforms Act, 1963 did not apply to the facts
of the present case in view of Section 3(1)(vi) which stated that tenancies
in respect of land or of buildings or of both created by persons having only
life interest or other limited interest in the land or in the buildings or in
both, were not covered by Chapter II of the Act which included Section C
6C. It is the aforesaid order of the learned Single Judge of the Kerala High
Court that is brought in challenge by the original appellant by way of
present proceedings. Pending this appeal original appellant died and his
heirs have pursued this appeal.
D
A short question with which we are concerned in these proceedings
is as to whether original appellant-defendant no. 2 was entitled to again
claim the benefit of deemed tenancy as per Section 6C of the Act. Even
though the learned Single Judge of the Kerala High Court in the impugned
judgment . has taken the view that this contention is not barred by res
judicata learned senior counsel for the respondents vehemently contended E
that the decision of the learned Single Judge deserves to be confirmed on
the plea of-res judicata though even on merits, according to him, the said
decision is well sustained. In view of the aforesaid contention of learned
senior counsel for the respondents, learned senior counsel for appellant
Shri Sukumarn was called upon by us to point out as to how the contention F
of the appellant for getting benefit of Section 6C cannot be said to be
barred by res judicata in view of the earlier claim of his tenancy rights qua
the very same land had stood finally rejected by this Court on 28th August
1978. Learned senior counsel for the appellant in this connection submitted
that when earlier proceedings got terminated before this Court Section 6C G
was not on the Statute Book. That it was brought on the statute book
subsequently with effect from 7th July 1979. Consequently the principles of
res judicata would not apply to far as this new provision is concerned which
gave a fresh right to the appellant to contend that he was entitled to get
the benefit under the said new provision. In the light of the aforesaid rival
contentions we proceed to resolve this controversy. H
846 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A It must at once be stated that if the contention of the appellant for
getting benefit of Section 6C of the Act is found to be barred by principles
of res judicata nothing further would survive in these proceedings and the .
Judgment of the High Court will have to be confirmed on this ground
alone. In order to resolve this controversy between the parties it is neces-
sary to note the background facts leading to the enactment and introduc-
B tion of Section 6C in the parent Act. Relevant recitals in the Statement of ,4
Objects and Reasons for bringing on the Statute Book the aforesaid
provision read as under :

"Difficulty was experienced by the Government in implement-
c ing certain important provisions of the Kerala Land Reforms Act,
1963, in accordance with their true spirit and the intention of the
Legislature, because of certain decisions of the Kerala High Court.
Government have also received representations from a large num-
ber of tenants and other persons pointing out the hardship caused
to them by the impact of the above judgments. In order to over-
D
come such difficulties and hardship it was considered necessary to
amend the Kerala Land Reforms Act suitably. It was also proposed
to avail of this opportunity to make certain other amendments
which were found necessary for the smooth and speedy implemen-
tation of the provisions of the Act. The succeeding paragraphs
E briefly explain the scope of the more important amendments.

2. It was brought to the notice of the Government that inspite
of the provisions contained in section 74 of the Act, prohibiting
the creation of tenancies after the 1st April, 1964 some persons
F have obtained leases of lands after that date and have effected
substantial improvements on such lands. It was considered that it
would very hard if such lessees are evicted from their holdings. It
was therefore necessary to incorporate a provision to give protec-
tion to such persons."

G The aforesaid Statement clearly shows that as per the provisions of
Section 74 of the Act no tenancies could be created after 1st April 1964
and thus there was total bar to creation of such tenancies. Consequently
the appellant's claim to be a tenant of the land as per the registered Lease
Deed dated 10th January 1969 had stood repelled upto this Court. There
H cannot be any dispute about the same. In order to infuse life in such void
K.S.NAIR(DEAD)v. D.AMALATHY AMMA(S.B.MAJMUDAR,J.) 847

leases Section 6C was brought on the Statute Book by the Legislature. It A
is of course true that Section 6C starts with a non obstante clause and
recites that notwithstanding anything contained in section 74, or in any
contract, or in any judgment, decree or order of any court or other
authority, any person in occupation at the commencement of the Kerala
Land Reforms (Amendment} Act, 1969, of the land of another person on B
the basis of a lease deed executed after the 1st day of April 1964 shall be
deemed to be a tenant if he satisfies conditions (a) and (b} mentioned in
the said Section. It is also true that for .applicability of this Section the
concerned person who claims deemed tenancy status must be in occupa-
tion at the commencement of the Kerala Land Reforms (Amendment) Act,
1969, that is, on 1.1.1970 when that Act came into force and such a person C
must have been inducted as a lessee under a Lease Deed executed by the
lessor after 1st April 1964. But the said non obstante clause in Section 6C
can at all have an effect of displacing any final judgments or decrees against
such persons if the substratum of such judgments was removed by
retrospective amendment of the Act by insertion of Section 6C. It is now D
well settled that Legislature cannot overrule any judicial decision without
removing the substratum or the foundation of that judgment by a
retrospective amendment of the concerned legal provision. Section 6C, as
we have noted above, starts with a non obstante clause and seeks to remove
the prohibitive effect of Section 74. If that legislative exercise is to succeed
effectively, then section 74 should have been either deleted from the E
Statute Book with retrospective effect from 1st April 1964 when the Kerala
Land Reforms Act, the parent Act, came into force· or at least from
1.1.1970 when the Amendment Act, 1969 came on the statute Book and on
which date the concerned person who claimed deemed tenancy under
Section 6C was required to be in possession of the land. However the F
Legislature in its wisdom did not think it fit, while bringing on the Statute
Book Section 6C from 7th July 1979, to either give it retrospective effect
from 1.1.1970, or to delete Section 74 retrospectively at least from 1.1.1970
if not from an earlier date of 1st April 1964 when the parent Act itself was
brought on the Statute Book. Consequently the non obstante clause intro-
duced in Section 6C for bypassing the final judgments, decrees or orders G
of any court against any person remained in the realm of an abortive or an
incompetent exercise on the part of the Legislature. To recapitulate the
earlier decision rendered against the appellant could have been effectively
displaced by the Legislature by enacting Section 6C if the very foundation
or substratum of those earlier judgments was knocked off by the Legis)a. H
848 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A ture by enacting a competent piece of legislation undertaking any of the
following exercise :

1. By retrospectively deleting Section 74 of the Act from 1.4.1964 or
at least from 1.1.1970.

B 2. Or alternatively by making Section 6C retrospect:ve from 1.4.1964
,.,
or at least from 1.1.1970.

If any of the aforesaid legislative exercises which would have remained
within the competence of Kerala State Legislature was actually undertaken
c then only the non obstante clause under Section 6C would have effectively
and legally operated for bypassing the final judgments against such a
person who was to be given benefit of Section 6C. In the absence of any
of these eventualities it must be held that by ·enacting Section 6C the
Legislature tried to legislatively overrule binding judgments, against par-
D ties, which might have become final prior to 7th July 1979. As Section 6C
was expressly made operative only from that date, with the result the legal
foundation of adverse judgment against the appellant rendered prior to 7th
July 1979 could not be effectively whittled down by the sweep of Section
6C. It is now well settled by a catena of decisions of this Court that unless
the Legislature by enacting a competent legislative provision retrospective-
E ly removes the substratum or foundation of any judgment of a competent
court the said judgment would remain binding and operative and in the
absence of such a legislative exercise by a competent legislature the attempt
to upset the binding effect of such judgments rendered against the parties
would remain an incompetent and forbidden exercise which could be
dubbed as an abortive attempt to legislatively overrule binding decisions of
F
courts. A Constitution Bench of this Court in the case of Shri Prithvi Cotton
Mills Ltd. & Anr. v. Broach borough Municipality & Ors., [1970] 1 SCR 388
-
speaking through Hidayatullah, CJ., made the following pertinent observa-
tions in this connection :

G "........ \Vhen a legislature sets out to validate a tax declared by a
court to be illegally collected under an ineffective or an invalid
~
law, the cause for ineffectiveness or invalidity must be removed
before validation can be said to take place effectively. The most
important condition, of course, is that the legislature must possess t"
t
H the power to impose the tax, for, if it does not, the action must J
KS.NAIR(DEAD)v. D.AMAl.ATHY AMMA(S.B.MATMUDAR,J.] 849

ever remain ineffective and illegal. Granted legislative competence, A
it is not sufficient to declare merely that the decision of the Court
shall not bind for that is tantamount to reversing the decision in
exercise of judicial power which the legislature does not possess
or exercise. A court's decision must always bind unless the condi-
tions on which it is based are so fundamentally altered that the
B
decision could not have been given in the altered circumstances."

Another Constitution Bench of this Court in Madan Mohan Pathak
and Another Etc. Etc. v. Union of India and Others, [1978] 2 SCC 50
speaking through Bhagwati, J. for himself and Krishna Iyer and Desa~ JJ.,
in para 8 of the Report considered the incompetent attempt made by the C
Parliament in enacting Life Insurance Corporation (Modification of Settle-
ment) Act, 1976 by which a binding decision of the Calcutta High Court
issuing writ of mandamus commanding the Life Insurance Corporation to
pay the amount of bonus for the year April 1, 1975 to March 31, 1976 was
sought to be nullified. It was held that such an exercise was incompetent.
D
In the case of A. V. Nacltane & Anr. Etc. Etc. v. Union of India and
Anr. [1982] 1 SCC 205 a three Judge Bench of this Court referred the
aforesaid decision of the Constitution Bench speaking through Bhagwati,
J ., in para 12 of the Report.

This very question was once again examined by a three member
E
- A

bench of this Court to which one of us N.P. Singh, J., was a party and who
spoke for the Bench in the case of Bhubaneshwar Singh & Anr. v. Union of
India & Ors., [1994) 6 SCC 77. In para 11 of the Report the following
pertinent observations were made :
F
"From time to time controversy has arisen as to whether the effect
of judicial pronouncements of the High Court or the Supreme
Court can be wiped out by amending the legislation with retrospec-
tive effect. Many such Amending Acts are called Validating Acts,
validating the action taken under the particular enactments by G
removing the defect in the statute retrospectively because of which
the statute or the part of it had been declared ultra vires. Such
exercise has been held by this Court as not to amount to encroach-
ment on the judicial power of the courts. The exercise of rendering
ineffective the judgments or orders of competent courts by chang-
ing the very basis by legislation is a well-known device of validating H
850 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A legislation. This Court has repeatedly pointed out that such validat-
ing legislation which removes the cause of the invalidity cannot be
considered to be an encroachment on judicial power. At the same
time, any action in exercise of the power under any enactment
which has been declared to be invalid by a court cannot be made
valid by a Validating Act by merely saying so unless the defect
B which has been pointed out by the court is removed with retrospec-
tive effect. The validating legislation must remove the cause of
invalidity. Till such defect or the lack of authority pointed out by
the court under a statute is removed by the subsequent enactment
with retrospective effect, the binding nature of the judgment of the
c court cannot be ignored."

The same view was once again reiterated by this Court in the case of
Comorin Match Industries (P) Ltd. v. State of Tamil Nadu, (1996) 4 SCC
281. In S.R. Bhagwat & Ors. v. State of Mysore, [1995) 6 SCC 16, a three
Judge Bench speaking through one of us, S.B. Majmudar, J., made the
D following observations in para 12 of the Report :
''It is now well settled by a catena of. decisions of this Court that a
binding judicial pronouncement between the parties cannot be

E
made ineffective with the aid of any legislative power by enacting
a provision which in substance overrules such judgment and is not
in the realm of a legislative enactment which displaces the basis
or foundation of the judgment and uniformly appli~s to a class of
....
persons concerned with the entire subject sought to be covered by
such an enactment having retrospective effect."

F In view of this settled legal position, therefore, it must be held that Section
6C could not be pressed in service by the original appellant for displacing
the binding judgments rendered by the Tribunal, the High Court and this
Court in the earlier tenancy proceedings wherein his claim for tenancy of
the suit land came to be repelled and those judgments have become final
G and binding and were not in any way legally displaced by any competent
piece of legislation by the Kerala LegiSlature. Those judgments remained
fully operative against the appellant and consequently on the principle of
res judicata the appellant could not once again re-agitate the question
about his tenancy.
.~

H However, learned senior counsel, Shri Sukumaran, for the appellant
KS.NAIR(DEAD)v. D.AMALA.THY AMMA[S.B.MAJMUDAR,J.] 851

tried to get over this difficulty in the way of the appellant by placing A
reliance on two decisions of this Court. ~n Mathura Prasad Bajoo Jaiswal
& Ors. v. Dosibai N. B. Jeejeebhoy, [1970) l SCC 613 a three Judge Bench
of this Court speaking through J.C. Shah, J., took the view that the doctrine
of res judicata belongs to the domain of procedure and that a decision on
an issue of law will be res judicata in a subsequent proceeding between the B
same parties, if the cause of action of the subsequent proceeding be the
same as in the previous proceeding, but not when cause of action is
different. He invited our attention specially to para 7 of the Report wherein
it is observed that where the law is altered since the earlier decision, the
earlier decision will not operate as res judicata between the same parties C
and it was obvious that the matter in issue in a subsequent proceeding was
. not the same as in the previous proceeding, because the law interpreted is
different. These observations will have to be appreciated in the light of the
controversy which came up for consideration of this Court. In the aforesaid
case the tenant of an open land had tried to get standard rent fixed under D
the Bombay Rent Act. At that time the land ·in question was within the
territorial jurisdiction of Civil Court. Borivli, Greater Bombay. The learned
Civil Judge took the view that Rent Act was not applicable to open lands
which were let for construction of residential and business premises. There-
" .J
fore, the court had no jurisdiction under Section 8 of the Bombay Rent E
Act to entertain standard rent application. Subsequently the Bombay High
Court took a contrary view and held on the proper construction of Section
6 of the Bombay Rent Act that open lands let for construction of buildings
for residential and business purposes also were covered by the sweep of

-- Section 6 and the Bombay Rent Act applied to such lands. Taking a clue
from the said decision the tenant once again applied for fixation of stand-
ard rent before the Court of Small Causes, Bombay as the land by that time
F

had come within the territorial jurisdiction of the Small Causes Court
exercising jurisdiction over the Greater Bombay area. Question was
whether such an application for fixation of standard rent was barred by res G
judicata. This Court, disagreeing with the view taken by the High Court
that there was such a bar, held that when question of jurisdiction inde-
pendent of the rights of parties was on the anvil the earlier decision would
not be res judicata. It becomes obvious that the plea for fixation of standard
rent would furnish a recurrinf; cause of action and though earlier the Court H
852 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A might not have jurisdiction under Bombay Rent Act to fix standard rent,
if by a subsequent decision of a competent court the Rent Act was foun_d
applicable the subsequent applicat~on for fixation of standard rent could
· not be said to be barred by res judicata as the cause of action itself would
be different in that case being a subsequent and recurring cause of action.
B The tenant could effectively contend that even though earlier the standard
rent could not have been fixed by the Court which held that it had no
inherent jurisdiction if subsequently the Court was found to be having such
jurisdiction it could fix the standard rent at least prospectively from the
date of such fresh application. We fail to appreciate how that decision can
C be of any avail to the learned senior counsel for the appellant in the facts
of the present case. There is no question of lack of jurisdiction with the
competent court which earlier decided the plea of tenancy under the very
Act as raised by the appellant. Not only the decision was rendered on
merits by competent court but it was confirmed by this Court. The cause
of action remained the same, namely, status of tenancy of the appellant qua
D the land and against the p~aintiffs. In support of the same cause of action
the appellant now wanted to take advantage of Section 6C which unfor-
tunately for him was having no retrospective effect so as to knock off the
substratum of the decisions rendered by the competent courts earlier.
Consequently the ratio of the decision of this Court in Matlmra Prasad's
E case (supra) cannot be of any avail to the appellant on the facts of the
present case. Reliance was then placed by learned senior counsel for the
appellant on the decision of this Court in the case of Nand Kishore v. State
of Punjab, [1995) 6 SCC 614. In that case ·the provision under which earlier
the appellant was compulsorily retired from service was subsequently found
F to be unconstitutional. Question was whether thereafter the challenge to
compulsory retirement could be effectively levelled by the appellant or not
and whether such a challenge was barred by the principles of res judicata.
Punchhi, J. Speaking for a two member Bench of this Court held that once
----
the constitutionality of the provision was gone into by the Supreme Court
and once the provision was struck down the hurdle in the way of the
G appellant vanished and consequently the suit filed by the appellant chal-
lenging the compulsory retirement could not be said to be barred by the
prin<;:iples of res judicata. It becomes at once clear that once this Court
struck down the concerned rule permitting compulsory retirement of a
Government servant the very basis of'the earlier judgment upholding such
H an exercise got knocked off and was totally obliterated from the Statute
KS.NAIR(DEAD)v. D.AMAI.ATHY AMMA[S.B.MAJMUDAR,J.J 853

Book. Consequently the very foundation of the judgment vanished. Such a A
judgment would obviously become baseless lacking the very foundation on
which it could operate. The very foundation of an earlier judgment can be
displaced by either a competent legislature enacting a retrospective
provision for that purpose or by a competent court deciding the concerned
legal provision on which such judgment is based as ultra vires and void. In
B
either case the very fou!Jdation and legal substitution of such judgment will
vanish retrospectively. In such an eventuality the law could be said to have
been totally displaced from the very inception of enactment of such a law
and consequently any judgment based on such a non-existing law as found
in retrospective could obviously lack efficacy and consequential force of res
judicata. Learned senior counsel for the appellant could have got effective c
help from the aforesaid ratio of this judgment if any competent court had
.. struck down Section 74 of the Keral.a Land Reforms Act as unconstitu-
tional and had not resorted to the process of prospective overruling if such
. competent court otherwise do so. But such are not the facts of the present
case. Section 74 has operated untouched from the very inception when it D
saw the light of the day along with other provisions of the Act on 1st April
1964. Therefore, it effectively supplied a valid legal foundation for the
earlier judgments rendered before 1.1.1970 . That foundation has remained
untouched and Section 6C has not tinkered with it. It must, therefore, be
held that earlier judgments as confirmed by this Court against the appellant
negativing his plea under the Tenancy Act have remained fully operative E
and will constitute a valid bar of res judicata against the present plea of the
· appellant centering round Section 6C. The High Court with respect was in
error in taking the view that because of Section 6C the earlier judgments
would not operate as res judicata. Once that conclusion is reached the
decision of the High Court will have to be confirmed on this ground alone. F
Consequently on entirely a different line of reasoning we confirm the
judgment of the learned Single Judge of the High Court. In that view of
the matter we do not deem it fit to consider the further question whether
even if Section 6C operated in favour of the appellant, on merits he would
have no case as the lease was created in his favour by a life interest holder.
Learned senior counsel for the appellant had a serious grievance about the G
reasoning adopted by the High Court on this aspect. It is not necessary for
us to rest our judgment on consideration of this aspect as no further
enquiry in the matter survives for consideration in favour of the original
appellant once the earlier judgments are found to operate as res judicata
H
854 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A debarring him from raising such a contention during execution proceedings
taken out by the respondents for fixation of i:nesne profits.

In the result this appeal fails and will stand dismissed in view of our
aforesaid findings. In the facts and circumstances of the c::ase there· win be
B no order as to costs.

S.S. Appeal dismissed.
$MT. HIMI AND ANR. A
v.
SMT. HIRA DEVI AND ORS.

SEPTEMBER 25, 1996

[N.P. SINGH AND S.B. MAJMUDAR, JJ.] B

Hindu Succession Act, 1956:

S.14(1) and (2)-Hindu Female having a rest1icted Tight to occupy
properties flowing from consent tenns not created in acknowledgment of any C
pre-existing Tight of maintaince-Held, covered by Section 14 (2) and not S. 14
.. ( 1)-She does not become absolute owner by virtue of provisions of S. I 4( I) .

One "A" owned agricultural lands and made will of his properties
dividing equally the properties between his second wife "B" and daughter
from the first wife "C". D
A died on 25th July 1946. "C" filed a civil suit on 5th May, 1947
challenging mutation of property in her step mother's (B's) name and for
possession of her half share in the properties as a legatee under her
father's will.
E
A compromise was arrived at between the parties. Under the said
compromise "C" acknowledged the ownershjp of half share of "B" pursuant
to the will of "A".

.. It was further agreed that properties comprising of C's half share
under her father's will would remain in possession of "B" during her life F
time but after her death heirs of "C" would be entitled to enter upon the
possession of suit properties.

It was also agreed that during B's life time both the parties will have
equal rights over the suit properties.
G
"B" assumed that she had become full owner of the property by virtue
of provisions of S.14 (1) of the Act and donated the suit properties by two
gift deeds dated 17th April 1970 and 26th August 1970 in favour of "E" and
"F" Under these gift deeds apart from her half share in the properties for
which there was no dispute she gifted away the other half of properties H
855
856 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

· · A which belonged to "C" and which half was possessed by her during her life
time as per the consent decree.

Donees entered into possession of the property, 'B' died on 4th
September, 1971.

B Heirs of 'C' filed suit against donees stating that properties were
illegally donated by "B" to the concerned donees.

Trial Court passed a decree for possession in favour of appellants
holding that they are heirs of "'C' and that defendants are estopped from
C challenging the will as they were bound by admission made by "B", relating
to the validity of the will and the half share of "C" in the suit properties.

The Trial Judge further held that 'B' possessed these properties as
limited owner. as her right flowed from consent decree passed in 1947, and
therefore she had a restricted estate not capable of being enlarged into
D absolute ownership on account of provisions of S.14 (2) of the Act.

First Appellate Court dismissed the appeal against Judgment of the
trial Court.

A Single Judge of the High Court allowed the second appeal holding
E that donee was a third party and he was claiming dehors _the will and as
the said wi!l was not proved between the parties and the admission of "B"
regarding validity of the will was not binding on "E" Donee. The appellants
have preferred the present appeal by spedal leave.

F The appellants contended that compromise decree dated 6th Nov., ~-
1947 between the step ~other and step daughter for the first time con-
ferred a right on "B" to remain in possession of the. suit lands which
belonged to 'C'. Therefore, the consent decree created a new right in favour
of 'B' to remain in possession of'C's land and consequently Section 14(2)
G of the Act, applied and not section 14(1).
.... Respondents ~contended that they were not party to consent decree
and as the will was .not legally. proved on record no right· in the suit
property enured in favour of "C".

H It wa~ further contended that the suit properties were possessed by
HIMI v. HIRADEVI[S.B. MAJMUDAR,J.) 857

'B' when S.14(1) of the Act come into operation and her possession as A
limited owner matured into full ownership.

Allowing the appeal, this Court

HELD ; 1.1. Suit Filed by 'C' was compromised and "B" accepted
right, title and interest of "C" in the suit properties as flowing from the B
will o( her father to the extent of one half share and she agreed to remain
in possession of one half share of properties during her life time and on
her death "C" or her heir would be entitled to take possession of these
properties as full owner thereof. This restricted right was created not in
lieu of any pre-existing or antecedent right and the right was conferred on
"B" for the first time by 'C'. (863-G-HJ
c
1.2. On the facts of present case only section 14(2) would apply and
not Section 14(1). [864-A]

Vadda Boyina Tulasamma & Others v. Vadde Boyina Sesha Reddi D
(Dead) By L.R. 's., AIR (1977) SC 1944, held applicable.

2. 'B' was not full owner' of Property and she had no right to gift away
properties in favour of donees. Donees can not claim any better right than ·
what the donor had in the properties and 'B' could not have conveyed any
title of the properties to the donees. [864-D] E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4845 of
1989. .

From the Judgment and Order dated 5.8.88 of the Himachal Pradesh
High Court in R.S.A. No. 18 of 1978. F
John J. Zaveri and Harish J. Jhaveri for the Appellants.

Ambrish Kumar for the Respondents.

The Judgment of the Court was delivered by
G
S.B. MAJMUDAR, J. The appellants who are the heirs of one Bai
Lachhmu, are the original plaintiffs whose suit for possession against the
respondent-donees of suit agricultural lands claiming through the donor
Bai Utti came to be decreed by the Trial Court and which decree was
I confirmed by the District Court but who lost before the High Court in H
t
858 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Second Appeal and consequently their suit for possession came to be
dismissed by the High Court.

A few relevant facts leading to the present proceedings by special
leave to appeal under Article 136 of the Constitution of India may be noted
at the outset. The suit lands originally belonged to one Bali Ram. Said Bali
B Ram made a Will of his properties dividing equally the suit properties
between his second wife Bai Utti and his daughter from the first wife by
Lachhmu through whom the appellants claim. The legatees under the said
Will of Bali Ram were his second wife and his daughter from the first wife
who inter se were step-mother and step- daughter respectively.
c
Said Bali Ram died on 25th July 1946. Thereafter Lachhmu claiming
her half share in the properties on the basis of the Will of her father Bali
Ram filed a Civil Suit on 5th May 1947 against her step-mother Utti
challenging the mutation of properties in her name and for enforcing her
D rights under the Will and for possession of her half share in the properties
as a legatee under her father's Will. In the said suit between step-daughter
plaintiff Bai Lachhmu and step-mother Bai Utti a compromise was arrived
on 6th November 1947. Under the said compromise the defendant step-
mother acknowledged the ownership of the half share of plaintiff Bai
Lachhmu in the suit properties pursuant to the Will of Bali Ram. The
E plaintiff Bai Lachhmu on the other hand agreed that her properties com-
prising of the half share under her father's Will may remain in possession
of Bai Utti during her lifetime but after the dea:th of Bai Utti, plaintiff Bai
Lachhmu or her heirs would be entitled to enter upon the possession of
the suit properties. It was also agreed between the parties that both the
F parties will have equal rights in the suit properties during the lifetime of
Bai Utti, the step mother of the plaintiff. Accordingly Consent Decree was
passed. We will refer to the relevant terms of the Consent Decree a little
later to resume the narration of events Bai Utti who was permitted during
her lifetime to remain in possession of the properties which were accepted
G to be belonging to Bai Lachhmu as per the aforesaid Compromise decree,
assuming that she had become full owner of these properties which were
allowed to remain in her possession during her lifetime presumably by
virtue of Section 14 sub-section {1) of the Hindu Succession Act. 1956
{hereinafter referred to as 'the Act') donated the suit properties by two
Gift Deeds dated 17th April 1970 and 26th August 1970 in favour of one
H Bellu Ram and one Budhu respectively. Under these Gift Deeds thus apart
HIMI v. HIRADEVI [S.B. MAJMUDAR,J.] 859

from her half share in the properties for which there was no dispute she A
also gifted away the other half share of the properties which belonged to
Bai Lachhmu and which half share was possessed by her during her lifetime
pursuant to the consent decree. Accordingly the respective donees entered
upon possession of these properties. Thereafter Bai Utti died dn 4th
September 1971. The appellants as heirs of Bai Lachhinu filed a Civil Suit B
against both the donees Bellu Ram And Budhu on 20th January 1972
claiming possession of the properties which according to the appellants
belonged to Lachhmu and which were illegally donated by Utti to the
concerned donees; The learned Trial Judge after hearing the parties passed
a decree for possession on 6th September 1976 in favour of the appellants,
holding that they are the heirs of Bai Lachhmu and that the defendants are C
estopped from challenging the Will as they had claimed their rights under
Bai Utti and they were bound by the admission made by Bai Utti relating
to the validity of the Will and the right, title and interest regarding the half
share of Bai Lachhmu in the suit properties. The learned Trial Judge also
held that Bai Utti who was possessed of these properties when the Act D
came into force possessed them as limited owner but not on account of any
pre-existing right in these properties and that her right flowed from the
Compromise Decree passed in 1947 and consequently she had a restricted
estate not capable of being enlarged into absolute ownership on account
of the provisions of Section 14 sub-section (2) of the Act. Appeal preferred
against the said decree by the aggrieved defendant came to be dismissed E
by the First Appellate Court in 19th November 1979. The aggrieved defen-
dant thereafter carried the matter in second appeal before the High Court.
A learned Single Judge of the High Court took the view that as defendant
Budhu was a third party and a stranger and as was claiming de hors the
will of Bali Ram and as the said Will was not proved in the litigation F
between the parties and as the admission of Bai Utti regarding the validity
of the Will in the consent decree was not binding on Budhu the suit of the
appellants was liable to be dismissed and accordingly the learned Single
Judge of the High Court allowed the second appeal and dismissed the suit
of the appellants, as noted above. The said judgment and decree of the
High Court is brought in challenge by the dissatisfied plaintiffs in this G
appeal.

Learned counsel for the appellants vehemently contended that the
Compromise Decree date 6th November 1947 between the step-daughter
Bai Lachhmu, predecessor-in-interest of the appellants on the one hand H
860 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A and her step-mother Bai Utti, predecessor-in-interest of the contesting
respondents conferred for the first time a right on Bai Utti to remain in
possession ·of the suit lands which belonging to Bai Lachhmu. That the said
consent decree which gave life interest to Bai Utti did not acknowledge
any pre-existing right of Bai Utti in the properties for maintenance as the
step-daughter was not bound to maintain the step-mother. Therefore, the
B arrangement between the parties recognised by the consent Decree created
a new right in favour of Bai Utti to remain in possession of plaintiffs lands
during her lifetime only pum1ant to the decree and consequently Section
14 sub-section (2) of the Act applied and not Section 14 sub-section (1).
It was next contended that the High Court had totally gone wrong in
C holding that the admissions contained in the Consent Decree on the part
of Bai Utti were not binding on the respondents who were strangers to the
said decree. It was, therefore, contended that the High Court had patently
erred in law in interfering with the decree of the Trial Court as rightly
confirmed by the first Appellate Court.
D
Learned counsel for the respondents on the other hand submitted
that admittedly the contesting respondent-donees were not parties to the
Compromise Decree. That even though the Compromise Decree acknow-
ledged the rights of Bai Lachhmu under the Will of her father as the Will
was not legally proved on record no right in the suit properties enured in
E favour of Bai Lachhmu and consequently the appellants as her heirs also
cannot claim any interest in the suit properties. That the suit properties
were possessed by Bai Utti when Section 14(1) of the Act came into
operation and, therefore, her possession as limited owner matured into full
ownership pursuant to Section 14(1) and consequently the suit was rightly
dismissed by the High Court.
F
I:Iaving given our anxious consideration to these rival contentions we
find that the High Court was not justified in upsetting the decree for
possession as passed by the Trial Court and as confirmed by the First
Appellate Court. The reason for reaching this conclusion is obvious. It may
G be that in the suit filed by Bai Lachhmu the step-daughter against Bai Utti
her step-mother the Will of Bali Ram bequeathing one half share in the
properties of the testator in favour of his daughter Bai Lachhmu was
seriously disputed. But that dispute was settled and Bai Utti accepted by
way of compromise the right, title and interest of Bai Lachhmu in the suit
H pr0perties as flowing from the Will of her father. When we turn to the
HIMiv. HIRADEVI[S.B.MAJMUDAR,J.] 861

consent terms dated 6th November 1947 we find the following clear recitals A
·on the part of Bai Utti acknowledging the right, title and interest of Bai
Lachhmu in the suit properties :

"Defendant no. 1 Bai Utti has accepted with regard to the half
share in right, title and interest in favour of the plaintiff in the
remaining lands, the will dated 20th March 1946 made by Bali, the
B
father of the plaintiff. As regards in the remaining half lands, right,
..' title and interest thereto vests in the defendant no. 1. Both the
plaintiff and defendant no. 1 have equal right, title and interest in
these lands. However, the possession would remain with the defen-
dant no. 1 and that after her death the plaintiff shall be entitled c
to take the possession thereof, provided she is alive and if she is
,, not alive, her heirs would be entitled to take the possession.
.. ........ .. .. decree may be passed in terms of the conditions of this
compromise arrived at between the plaintiff and the defendant no.
1, and the case file be consigned to the Record room.
D
N.B.: During the lifetime of the defendant no. 1, the plaintiff
shall not be entitled to take possession."

In view of these clear recitals in the compromise Decree it becomes clear
that Bai Utti who was defendant no.1 in that suit acknowledged the right, E
title and interest of plaintiff Bai Lachhmu, her step-daughter to the extent
of one half share in the suit properties and she agreed to remain in
possession of the properties during her lifetime only and it was clearly
provided that on her death plaintiff B~i Lachhmu or her heirs would be
entitled to take possession of these properties obviously as full owners F
thereof. Thus only a restricted right to occupy the suit properties was
created in the properties belonging to the plaintiff Bai Lachhmu in favour
of her step-mother Bai Utti during the latter's lifetime. It is obvious that
this life interest was created not in lieu of any pre-existing or antecedent
right of Bai Utti for being maintained by the plaintiff Bai Lachhmu, her G
step-daughter. The step-daughter was not bound to maintain her step-
mother under any provisions of law. Nor was there any pre-existing legal
right of the step-mother Bai Utti qua these properties. Despite that Bai
Utti was permitted to remain in possession of plaintiff Bai Lachhmu's
property which was purely by way of a concession to resolve the dispute
between the parties. Thus the right to remain in possession of the suit H
862 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A properties during her lifetime was conferred for the first time on Bai Utti,
the step-mother by her step-daughter Bai Lachhmu, the plaintiff in that
suit. By these consent terms Bai Utti also acknowledged the right of the
plaintiff Bai Lachhmu flowing from her father's Will. This life interest
flowing from the consent terms in favour of Bai Utti, therefore, cannot be
B said to have been created in acknowledgment of any pre-existing right of <'
maintenance. Consequently Section 14 sub-section (1) could not be at-
tracted on the facts of the present case and it is only Section 14 sub-section
(2) which applied. Section 14 with its sub-sections reads as under :

"14. Property of a female Hindu to be her absolute property. - (1)
c Any property possessed by a female Hindu, whether acquired
before or after the commencement of this Act, shall be held by
her as full owner thereof and not as a _limited owner.

Explanation. - In i:his sub-section, "property" includes both movable
and immovable property acquired by a female Hindu by in-
D heritance or devise, or at a partition, or in lieu of maintenance or
arrears of maintenance or by gift from any person, whether a
relative or not, before, at or after her marriage, or by her own skill
or exertion, or by purchase or by prescription, or in any other
manner whatsoever, and also any such property held by her as
E stridhana immediately before the commencement of this Act.

(2) Nothing contained in sub-section (1) shall apply to any
property acquired by way of gift or under a will or any other
instrument or under a decree or order of a civil court or under
an award where the terms of the gift, will or other instrument or
F the decree, order or award prescribe a restricted estate in such
property."

It is no doubt true as decided by this Court in the case of Vaddeboyina
Tulasamma and Others·v. Vaddeboyina Sesha Reddy (dead) by L. Rs., AIR
(1977) SC 1944 that sub-section (2) of Section 14 of the Hindu Succession
G Act is a proviso to sub-section (1) of Section 14. But Section 14 sub-section
(1) would apply only if property is acquired by female Hindu in lieu of ~
maintenance or by virtue of any pre-existing right. Bhagwati, J., (as he then
was) speaking for himself and AC. Gupta, J., in the aforesaid decision has
made the following pertinent observations in this connection in paras 3 and
H 4 of the Report :
HIMI v. HIRA DEVI [S.B. MAJMUDAR, J.] 863

"Sub-section (1) of Section 14 is large in its amplitude and covers A
every kind of acquisition of property by a female Hindu includ-
ing acquisition in lieu of maintenance and where such property
was possessed by her at the date of commencement of the Act
or was subsequently acquired and possessed, she would become
the full owner of the property. Sub-section (2) is more in the
B
nature of a proviso or exception to sub-section (1). It excepts
certain kinds of acquisition of property by a Hindu female from
the operation of sub-section (1) and being in the nature of an
exception to a provision which is calculated to achieve a social
purpose by bringing about change in the social and economic
position of woman in Hindu society, it must be construed strictly C
so as to impinge, as little as possible on the broad sweep of the
ameliorative provision contained in sub-section (1), It cannot be
interpreted in a manner which would rob sub-section (1) of its
efficacy and deprive a Hindu female of the protection sought to
be giyen to her by sub-section (1).
D
Sub-section (2) must, therefore, be read in the context of
sub-section (1) so as to leave as large a scope for operation as
possible to sub-section (1) and so read, it must be confined to cases
where property is acquired by a female Hindu for the first time as
a grant without any pre-existing right, under a gift, will, instrument, E
decree, order or award, the terms of which prescribe a restricted
estate in the property. Where, however, property is acquired by a
Hindu female at a partition or in lieu of right of maintenance, it
is in virtue of a pre- existing right and such an acquisition would
not be within the scope and ambit of sub-section (2),even if the F
... instrument, decree, order or award allotting the property
prescribes a restricted estate in the property."

Applying the aforesaid settled legal position to the facts of the present case
it must be held that the compromise decree for the first time created a
right in favour of Bai Utti to remain in possession of the property belonging G
to Bai Lachhmu only during her lifetime and as that right was conferred
for the first time under the consent decree and was not in lieu of any
pre-existing right of Bai Utti in Bai Lachhmu's property Section 14 sub-
section (2) applied to the facts of the case and not Section 14 sub-section
(1). It is difficult to appreciate how.the High Court persuaded itself to hold H
864 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A that as the Will was not proved on record and as the donees by claiming
the suit properties from the donor Bai Utti were strangers to the consent
decree they were not bound by the admission of Bai Utti in the consent
decree. It is obvious that the contesting respondents herein who were
donees of the properties could not claim a better title to the suit properties
that what was available to the donor Bai Utti. If Bai Utti was not the full
B owner of the properties she had no right to gift away these properties in ,<_

favour of the respondent-donees. They could not be said to be strangers
to the consent decree, on the contrary, they were claiming through one of
the parties to the consent decree, namely, Bai Utti. The obligations flowing
from the consent decree and which were binding to the donor Bai Utti
c would necessarily bind the donees; namely, the respondents who stepped
in the shoes of Bai Utti. They cannot claim any better right than what the
donor had in the properties. Once it is held that Bai Utti was not the owner
of these properties and she had only a personal right to occupy the
properties during her lifetime, she could not have conveyed any title of the
D properties to the donee1:. It is equally difficult to appreciate how the
learned Single Judge of the High Court could hold that admissions of the
predecessor-in-title of the respondent-donees were not binding on the
respondents. For all these reasons, therefore, it must be held that the High
)
Court was in error in interfering with the decree for possession as passed
by the Trial Court and as confirmed by the First Appellate Court by
E holding that Section 14 sub-section (2) of the Act was not applicable to the
facts of the present case and Bai Utti had become the full owner of the
suit properties pursuant to the said provision.

In the result this appeal succeeds and is allowed. The judgment and
decree of the High Court in R.S.A. No. 18 of 1978 dated 5th August 1988
F is set aside, instead the decree passed in favour of the plaintiffs by the
learned Senior Sub-Judge, Kulu on 6th September 1976 and as confirmed
by the learned Additional District Judge, Mandi, Himachal Pradesh, on
19th November 1977 in Civil Appeal No. 50 of 1976 is restored. In the facts
and circumstances of the case there will be, no order as to costs.
G ~
S.S. Appeal allowed.

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