Holding

The Court held that a company incorporated under the Companies Act does not fall within the definition of "University" under Section 2(f), but because the appellants acted in good faith during the two‑year grace period, their convictions under Section 24 were set aside.

Summary

The appellants, members of Commercial University Ltd (CUL), were prosecuted under Section 24 of the University Grants Commission Act, 1956 for continuing to use the word "University" and for conferring degrees after the Act came into force, despite CUL being incorporated under the Companies Act, 1913. The central issue was whether a company incorporated under a general Companies Act falls within the definition of "University" under Section 2(f) and thus is subject to the prohibitions of Sections 22 and 23. The Court examined the legislative intent, held that the definition requires establishment or incorporation by a specific Central, Provincial or State Act, not by a general Companies Act, and affirmed that the provisions are intra vires Parliament. However, the Court accepted that the appellants acted in good faith under the two‑year grace period and set aside their convictions and fines. It directed the appellants to seek recognition under Section 3 of the Act and remitted the matter to the Central Government for appropriate action.

Issues considered

The meaning of "University" under Section 2(f) of the University Grants Commission Act, 1956 and whether a company incorporated under the Companies Act qualifies.
Whether Sections 22, 23 and 24 of the Act are within Parliament's legislative competence (intra vires) given the constitutional distribution of powers on education.
The applicability of the two‑year grace period in the proviso to Section 23 and the appellants' bona‑fide belief.
The validity of the conviction under Section 24 for contravening Sections 22 and 23.

Legislation cited

Companies Act, 1913
Companies Act, 1956s. 3
University Grants Commission Act, 1956s. 22, s. 23, s. 24, s. 2(f), s. 3

Subjects

University Grants Commission Actdefinition of universitydegree conferralCompanies Actultra viresconstitutional laweducation legislationcriminal convictionspecial leave petition

Judgment

883

PREM CHAND JAIN & ANR.
A
v.

R. K. CHHABRA

February I 3, 1984
B
{S. MJJRTAZA FAZAL ALI, A. VARADARAJAN AND
RANGANATH MISRA, JJ.j

Unfrersity Grants Commission Act, 1956 (Act III of 1956) Sections 2 (f). 22
and.-23, Scope of-Right to confer degree and Right to have the word "University"
associated to the name of an institution--Whether the wOrds ,."established" or
"incorporated" in section 2 (h}. 22 and 23 also included a univ,rsity regiStered C
1D1der the Companios Act of 1913?

SectiOn 2 (f) of the University Commission Act; 1956 defines "a Univer-
sity" to ffiean : "a University established or incorporated by or under a
Central Aet, a Provincial A.ct,. or a State Act, and inc1udeS any such insti-
tution, as may in consultation with the University concerned, be recognised
by the Commission in accordance with the regulations made in this behalf D
under this .Act''. Section 22 which empower the right to confer degrees
and Section 23 which imposes the prohibition for use of the word "Uni-
versity" also ptovides that way. Penalties for contrave:riing the provi".'
sions of sections 22 and 23 are provided under section 24 o.f the Act but
the proviso to section 23 exempts any institution having a suffix "Univer-
sity"· before the commencement of the University Grants Commission Act,
E
_for a period of two years only to enable· it to take appropriate steps
' under the University Grants Con1mission Act. ·

Commercial University which was registered. under the companies
Act of 1913 and before the coming into force of the University Commis-
sion Grants Act, 1956 and was doing useful service to the students
community did not take any -steps· as required under the new Act even p
after the lapse of the two years, and therefore, the appellant came to be
prosecuted for the offences under sections 22 and 23. The appellants
having lost their case includin·g in the High Court have come up- ·in ·
appeal by way of. special leave.

Allowing the appeil iti. part and setting as~de the convictions and
s~ntence of fine? the Coqrt G·
884 SuPllmlE'coURT REPORTS (1985) 2 S.C.R.

A HELD I : I The University Grants Commission Act, 1956 did
nOt intend to admit a commpany incorporated under the Companies Act
into the definition of a ''University,' under section 2 (f), or for - the pur-
poses of Section 23. Several institutions stayaing themelves as cuniversi-
ties' had started awarding degrees and. diplomas which had no basis and
could not be accepted. Keeping in view the mischief which wa~ sought
to be eradicated and the _consideration which weighed with Parliament
B to introduce the prohibition in the Act, the Act recognises only those
institutions established or incorpoq1.ted under special statutes of sovereign
leg;slatures. (890D-E)

1:2 The definition of university and' the provisions in S.23 of the
Act refer to Acts of the Cenlral, Provincial or the State legislatures by
c which one or more universities are established or incorporated and not
to institutions incorporated under a general statute providing for incor-
poration. The words "established" or "incorporated'' referred to Act
under which universities are established or incorporated. Several univer-
sities in this country have been either established or incorporated under
special statutes, such as the Delhi University Act, the Banaras Hindu
,University Act, the Allahabad University Act etc. In these cases, there is
D ~ special Act e;ther of the Central or the _Provincial or· the State legis-
latures e_stablishing and incorporating the particular universitiCs. There is
a)so another pattern-where urider one compondious Act several universities·
efe either- established or incorporated-for instance, the Madhya Pradesh
Universities Act 1913. [889a-E; P]
.
1:3 Commercial University Ltd. when incorporated under the Com-
E panies Act, therefore, did not satisfy the definition as also the provisions of
section 23 of Act consequently the prosecution under section 23 was
valid. [889H]

Attorney General v. H.R.H. Augushtis [1957] I All E.R. 49 (HL);
Bhagwan Prasad v. Secretary of State; AIR 1940 P.C. 8_2, quoted with
F approval.
2:1 The-definition of University given in section 2 (f) or the prohi-
bition in section 23 of the Act are not ultra vires the Parliament on the ,
ground that such provisionS are beyond its legislative competence. [ 8 91 F]

2:2 'Education including universities' was a State subject until by
G the 42nd Amendment of the Constitution in 1976, that entry was omitted
from the State lis~ and, was taken into entry 25 of the Concurrent Ii st.
The University Grants Commissions Act essentially intended to make
provisions for the coordination and determination ·of standards in univer·
sitics and that, is squarely covered under entry 66 of list I. While
legislatin1 for a purpose germane to the subject covered by that entry and
establishing a University Grants Commission, Parliament consi~cred .it
H necessary, as a regulatory measure, to prohibit unauthorised conferment
of degrees and diplomas as also use of the word 'university' by institution
which had not been either established or incorporated by special Icgisla,-
PREM CHA)ID JAi)! V. ll.IC. CHIUJIRA

ation. In doing s.o the Parliament did uot entrench upon lc&islativc A
power reserved for the State legislature. [890E·G)

2:3. The legal position is well-settled that the en_tries incorporated
in the lists.covered by Schedule VII are not powers of legislation but
'fields' of legislation. Such entries are mere legislative heads and are of
an enabling character. The language of the entries s.hould be siven the
widest scope or amplitude. Bach general word has been asked to be B
extended to all ancillary or subsidiary matters which can fairly and reaso-
nably be comprehended. An entry confers powers Upon the legislature
to legislate for matters ancillary or incidental, including provision for
avoiding the law. As long as the legislation is within the permissible
field in pith and substance, objection would not· be.entertained merely on
the ground that while enacting legislation, provision has been made for a
matter which though germane for the purpose for which competent
c
legislation is made it covers an aspect beyond it. If an enactment subs.
tantially falls within the powers expressly conferred by the Constitution
upon the legislature enacting it, it·cannot be held to be invalid merely
because it incidentally encroaches on matters assigned to another legisla-
ture. [891A·B]
Harakchand v. Union of India, [1970] 1 S.C.R. 479 at p. 489; Stall of .D
Bihar v. Kameswar, [1952] S.C.R. 889; Navlnchandra v. C.I.T. [1955] 2 S.C.R.
829 at p. 836 ; State of Madras v. Cannon Dunkerley, [1959] S.C.R. 379 at
p. 391 ; The Check Post Officer & Others v. K.P. Abdulla Bros, [1971] 2 S.C.R.
817 ; State of Karnataka v. Ranganatha, [1978] 1 S.C.R. 641 at p. 661 ; KSE
Board v. Indian Aluminium, [1976] 1.S.C.R. 552 ; Subramanyam C~ttiar v.
Muthuswami, [1945] F.C.R. 179 ; Praful/a Kumar Mukherjee & Other• v. Bank
of Commerce, [1947] F.C.R. 28; Ganga Sagar Co. v. U.P .. State, [1960] S.C.R. E
769 at p. 782.
3. The observations in Azeez Pasha & Anr v. Union of India (1968)
I.S.C.R. 833 were with reference to the rights of the minority commu-
nity to establish a university in exercise of its right guaranteed under Art.
30 of the Constitution. Admittedly. CUL is not an institution belonging
to any minority community. It will not be appropriate either to allow
aruguments based on what has been observed with reference to an insti- F
tution belonging to the ·minority community or to examine the vires of
the Act with reference to what dOes not arise for consideration in the
appeals. [892A-B)
4. Though the proviso to s. 2 3·had specifid a period of two years
within which the word 'university' had to be omitted ·by the institution
not entitled to its use yet there is scope for the submission that being G
incorporated under a Central Act, the people connected with CUL worked
under the bona fide . impression that sue~ incorporation satisfied the
requirements of the Act. In such circumstances, the conviction of the
appellant must be set aside. (8920-E)
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.
2S3-254 of 1972. · H
from the Jud$ment and Order dated the 6th day of January,
886' SUPREME COURT REPORTS [1984) 2 S.C.R.

1972 or the Delhi High Court in Criminal Appeal Nos. 103 & 104
of 71.

Shanti Bhushan, R.K. Garg, Shiv Dayal and S. K. Bagga for
the Appellants.
B
Hharbans Lal, R. N. Poddar, Ms. Halda Khatun and C. V. ·
S,ubba Rao for the Respondent.
The Judgment of the Court was delivered by
RANGANATH MISRA, J. Both these appeals are by Special leave
and challenge is to the conviction and sentence of fine imposed
c under Section 24 of the University Grants Gommission Act, 1956
(III of 1956) ('Act' for short) by the learned Additional Sessions
Judge and upheld by the Delhi High Court in appeal.

Commercial University Limited (CUL for short) was incor-
•ID <porated under the Companies Act, 1913 (VII of 1913) with objects,
inter alia, to promote commercial education, encourage and impart
commercial education by opening institutes, colleges· and schools
.and provide, prescribe. and maintain various standards of studies
and examinations in the study of. commercial subjects and 'to ascer:
lain by means of examinations and/or otherwise the persons who
E acquire the prescribetl standards and to confer on such persons any
academic diplomas, degrees, etc. It has a Board of Governors and
the Registrar of the University is one of the Ex-Officio Governors.
This institution claims to have expanded its activities and regular
convocations have been held for awarding degrees and diplomas.
The Act came into force in 1 956 and for the· first time provided
F restrictions under ss. 22 and 23 of the Act to the following effect :
,
"S.22. the right io confer degrees-

(!) The right of conferring or granting degrees shall
be exercised only by· a University established or incorpo-
G rated by or under a Central Act, a Provincial Act or a State
Act or an institution deemed to be a University under sec-
tion 3 or an institution specially empowered by an Act of
Parliament to confer or grant degrees.

(2) Save as provided in sub-section (I) no person or
H
authority shall confer, or grant, or hold himself or itself out
as entitled to confer or grant, any degree.
PREM CHAND JAIN v. R. K. CHHABRA (Ranganath Misr11, J.) gg7

(3) For the purpose of this section, "degree means any
A
.. r such degree as may, with the previous approval of the
Central Government, be specified in this behalf by the Com-
mission by notification in the official gazeUe."

"S.53. No institution, whether a corporate body or not, B
other than a University established or incorporated by or
under a Central Act, a Provincial Act or a State Act shall be
entitled to have the word 'University' associated with its
name in any manner whatsoever :

Provided.that nothing in this section shall, for a period C
of two years from the commencement of this Act, apply to
an institution which, immediately before such commence-
ment, had the word 'University' associated with its name."
Penalties for contravening the proyisions of ss.22 and 23 were
provided in s. 24 and whoever contravened those provisions became
D
punishable with fine which would extend to rupees one thousand
and if the person contravening was an association or other body of
individuals, every member of such association or other body, who
knowingly or willingly authorised or permitted the contravention
was punishable with fine which would also extend to one thousand
rupees. .,, E
The appellants came to be prosecuted for the offence
under s. 24 of the Act as CUL continued to bear the description of
University even after the period indicated in the proviso to s. 23 of
the Act was over.

Before coming into force of the Act, there was no legislation F
in India which prohibited any individual or body from establishing
a university and such university was free to confer degrees and
diplomas. Section 22 prohibited privately established universities
from conferring degrees and restricted such conferment to univer-
sities established by Acts passed by State legislatures or Parliament
or institutions which were deemed to .be universities in the manner G
provided by the Act. Similarly, before the Act came into force
there was no law which restricted the use of the wo~d 'University'
and all institutions were free to associate this word with their
names if they liked. Section 23, however, imposed the . restriction
in absolute term and the proviso allowed a period of two years
within which adjustments to the new situation brought about by
H
law had to be made,
888 SUPREME COURT REPORTS [1984) 2 S.C.R.

A Originally there were five accused persons. One of them died
and in respect of another the prosecution was withdrawn as he
resigned from CUL. .The prosecution continued against the remain •.
ing three-Shri P.C. Jain and Smt. Sushi[a Sohni who are appel·
!ants in Criminal Appeal No. 253 of 1972 and Shri L.N. Mehra
B
who is appellant in the connected criminal appeal.
Mr. Shanti Bhushan appearing for the appellants anvanced
four contentions :-(I) CUL had been incorporated under the
Companies Act of 1913 and is deemed to be a company under s. 3 ,~~~-
c . of the Companies Act, 1956, the prosecution was misconceived as
the prohibition in s. 23 was not attracted. (II) The restriction
imposed under s. 23 of the Actwas ultra vires because entry 11
which read ·as "Education including universities" was in list.II of
Schedule VII of the Constitution and was a State subject but the
Act in question was passed by Parliament. The long title of the Act
D reads as "an Act to make provision for the coordination and deter-
'j
mination of standards in universities and for that purpose, to
establish a University Grants Commission" and is covered by entry
66 oflist I of the Seventh Schedule. The restriction provided py
s. 23 as such does not appear to be a matter squarely within the
'ambit of the entry and therefore such a provision is ultra vires the
Constitution. (III) This Court observed in S. Azeez Basha & Anr.
E v. .Union of India(') as per Wanchoo, C. J. :
" ...... we should like to say that the words 'educational
institutions' are of very wide import and would include a
university also, This was not disputed on behalf of the
·union of India and therefore it may be accepted that a
religious minority had the right to establish a university
F under Art. 30 (I). The position with respect to the establish-
ment of Universities before the Constitution came into
force in 1950 was this. There was no law in India which
prohibited any private individual or body to establish a
university ......... Thus, in law in India there was no prohibi-
G tion against establishment ·of universities by private indivi·
duals or bodies and if any university was so established it
· . must of necessity be granting degrees before it could be called
a university. But though such a univetsity might be grant-
ing degrees it did not follow that the Government of the
country was bound to recognise those degrees ............. "
H
(!) (1968) I S. C. R. 833.
PREM CHAND JAIN v. R .IC. CHHABRA (Ranganath Misra, J.) 889

It was urged by Mr. Shanti Bhushan that since Art. 30 guaran- A
teed the right to establish a university to the minotity communities,
the restrictions imposed by the Act would not be operative and to
that extent the provision would be ultra vires the Constitution;
(IV) All the three accused appellauts had severed their connection
with CUL-Smt. Sohni resigned in Angus!, 1962; Shri Mehra in
December, 1965; and Shri Jain in 1970. On the same analogy B
which led to withdrawal of the prosecution against Shri Anand
Singh, the present prosecution should not have been pursued against
the appellants.

The word 'university' has been defined in s. 2 (f) of the Act c
to mean: "a University established or incorporated by or under
a Central Act, a Provincial Act or a State Act, and includes any
such institution as may, in consultation with the University con-
cerned, be recognised by the commission in accordance with the
regulations made in this behalf under this Act". Section 23 of the
Act imposing the prohibtion for use of the word 'University' also D
provides that way. Undoubtedly under the Companies Act when
a company is duly registered, it gets incorporated and such incor-
poration brings into existence an independent legal entity different
from the share-holders constituting it. Yet we are not prepared to
agree with Mr. Shanti Bhushan that the Act intended to admit a E
company incorporated under the Companies Act into the definition
or for the purpose of s. 23. The word "established" or "incorpo-
rated" referred to· Acts under which universities are ·es.tablished
or incorporated Several universities in this country have been
either established or incorporated under special statutes, such as
the Delhi University Act, the Banaras Hindu University Act, the F
Allahabad University Act etc. In these cases, there is a special Act
either of the Ce11tral or the Provincial or the State legislatures esta-
blishing and incorporating the particular universities. There is also
another pattern-where under one compendious Act several univer-
sities are either established or incorporateds-for instance, the
Madhya Pradesh Universities Act, 1973. The definition of univer- G
sity and provisions in s. 23 of the Act refer to Acts of the Central,
Provincial or the State legislatures by which one or more univer-
sities are established or incorporated and not to institutions incor-
porated under a general statue providing for incorporation. We
do not accept 'the contention of Mr. Shanti Bhushant that CUL
H
when incorporated under the Companies Act satisfied the definition
as also the provisions of s. 23 of Act and, therefore, there could
890 SUPREME COURT REPORTS (1984] 2 S.C.R.

A be no prosecution. We agree with the observation of Lord Somer-
vell to the effect :

"The mischief against which the statute is directed and,
perhaps though to an undefined extent, the surrounding
circumstances can be considered",
B
"In ascertaining the true legislative intention. (A. G. v.
H. R. H. Augustus('). Lord Porter also spoke to the same effcet
while speaking for the Board in the following words :
·"A right construction of the Act can only be attained
c if its whole scope and object together with an analysis of its
working and the circumstances in which it is enacted are
taken into consideration."

Bhagawan Prasad v. Secretary of State('). SeYeral institutions
styling themselves as 'universities' had started awarding degrees
and diplomas which had no basis and could not be accepted. Keep-
ing in view the mischief which was sought to be eradicated and the
consideration which weighed with Parliament to introduce the
prohibition in the Act, it must be held that the Act recognises
only those institutions established or incorporated under special
statutes of sovereign legislatures.
E
'Education including universities' was a State subject until
by the 42nd Amendment of the Constitution in 1976, that entry
was omitted from the State list and, was taken into entry 25 of
the_ concurrent "list. But as already pointed out the Act essen-
tially intended to make provisions for the coordination and deter-
mination of standards in universities and that, as already indi-
F cated, is squarely covered under entry 66 of list I. While legis-
lating for a purpose germane to the subject covered by that entry
and establishing a University Grants Commis.sion, Parliament
considered it necessary, as a regulatory measure, to prohibit un-·
authorised conferment of degrees and diplomas as also use of the
. word 'university' by institution which had not been either. establi-
G
shed or incorporated by special legislation. We are not inclined
to agree with the submission advanced on behalf of the appellants
that in doing so Parliament entrenched upon legislative power
reserved for . the State legislature. fhe legal position is well-
ff
(1) (1057) 1 A. E. R. 49 (H.L.)
(2) A. I. R. 1949 P. C. 82.
PREM CHAND JAIN v. R. K. CHHABRA (Ranganath Misra, J.) 891

A
settled that the entries incorporated in the lists covered by Sche·
dule VII are not powers of legislation but· 'fields' of legislation.
Harakchand v. Union of India(1). In State of Bihar :v.
Kameswar(') this Court has indicated that such entries are mere
legislative heads and are of an enabling character. This Court,
has clearly ruled that the language of the entries should be given h
the widest scope or 'amplitude.. Navinchandra v. C.T.T. (3)
Each general word has been asked to be extended to all ancillary
or subsidiary matters which can fairly and reasonably be compre-
hended. See State of Madras v. Gannon Dunkerley('). It
has also been held ·by this Court in The Check Post Officer and
• Others. v. K.P. · Abdulla Bros (5) that an entry confers power c
upon the legislature to legislate for matters ancillary or incidental,
including provision for avoiding .the law. As long as the legisla·
tion is within the permissible field in pith and substance, objection
would not be entertained merely on the ground that while enacting
legislation, provision has been made for a matter which though
germane for the purpose for. which competent legisl.ation is made D
it covers an aspect beyond it. In a seiies ·of decisions this Court
has opined that if an enactment substantially falls wiihin the
powers expressly conferred by the Constituiion upon the legis-
lature enacting it, it cannot be heid to be invalid merely because
it incidentally encroaches on matters· assigned to another legis·
lature. See State of Karnataka v. Ranganatha (6);' KSE Board E
v. India Aluminium (7); Subramanyam Chettiar v. Mutuswami (');
Prafulla ·Kumar Mukherjee & Othere v. Bank of Commerce(');
Ganga Sugar Co. v. UP. State (10). We, therefore, do not accept
the submission that the definition of university "given in.s. 2 (f)
or the prohibition in s. 23 of the Act are ultra vires the Parlia- F
ment on the ground that such provisions are beyond its legislative
competence.

(1) ·(1970] 1 S. C.R. 479 at p. 489.
(2) (195.2] S. C. R. 889.
(3) (1955] 2 S. C. R. 129 at p. 836. G
(4) (1959] S. C, R. 379 at p. 391.
(5) (1971] 2 S. C.R. 817.
(6) (1978] IS. C.R. 641 at p. 661. . ~,.

(7) (1976] ! S. C. R. 552.
(8) (1945) F. C.R. 179.
(9) · [1947] F. C.R. 28. H
(10) (1960] S. C.R. 569 at p. V82.
SUPREME COURT REPORTS (1984} 2 s.C.R.

A In the decision of this Court in the case of. Azee• Basha,
the observations relied upon were with reference to the rights of
the minority community to establish a university in exercise of
its right giiaranteed under Art. · 30 of the Constitution. Admitte-
dly, CUL is not an institution belonging to any minority commu-
nity. We do not think it is appropriate to allow arguments to
B be canvassed in this case on the basis of what had been observed
with reference to an institution belonging to the minority commu- '
uity. Nor is it appropriate that the vires of the Act should be
examined with reference io what does not arise for consideration
in the appeals before us. ;

There is no dispute that prosecution against Shri Anand Singh
c was withdrawn as he had ·resigned from CUL after the case was
launched. The claim of Mr. Shanti Bhushan that the three
accused persons have resigned between 1962 to 1970 as already
indicated has not been disputed. Though the proviso to s. 23
had specified a period of two years within which the word 'univer-
D sity' had to be omitted by the institution not entitled to its use,
yet there is scope for the submission of Mr. Shanti Bhushan
that being incorporated under a Central Act, the people connec-
ted with CUL worked under the bona fide impression that such
incorporation satisfied the requirements of the Act. In such
circumstances, we think it appropriate to accept the submission
E advanced on behalf of the appellants to a limited extent and allow
the appeals and set aside the conviction of the appellants under
s. 24 of the Act. · They are acquitted of the offence and fines if
already realised be refunded.

Before we part with the matter, we think it appropriate to
F deal with another aspect. Under s. 3 of the Act provision has
been made that the Central Government may on .the advice of the
Commission declare by notification in the official gazette any
institution for higher education other than a university to be
deemed to be a uuiversity for the purposes of the Act and when
such declaration is made, all the provisions of the Act would
G
apply to such an institution as if it were a university within the
definition of the term in s. 2 (f). CUL may make an application
to the Central Government for such recognition and on the advice
of the University Grants Commission, the Central Government
should dispose of the same in accordance with law. We have
H
been told that the institution has been working very satisfactorily
and has, to its credit, a long history of service in the field of
PREM CHAND iAIN v. i!.. K. CHHABRA (Ranganath Missra, i.) 893
education. We are hopeful that taking all aspects into consid~ra A
tion botJj the Commission as also the Central Government would
r consider the request of the institution to be recognised under s. 3
of the Act. If it is so recognised the institution would be able to
confer degrees as provided in s. 22 of the Act.

It is for the Central Government next to consider whether B
an institution covered by s. 3 of the Act would not satisfy the
provision of s. 23 of the Act and if in the opinion of the Central
Government such an institution is not covered, whether an appro-
priate amendment to s .. 23 should not be made so as to exclude
recognised institutions under s. 3 of the Act from the · field of
prohibition covered by s. 23 of the Act. CUL should make the c
application within one month from now and the Central Govern-
ment should examine the matter appwpriately and pass proper
orders or directions within six months thereafter. At any rate
the institution should have reasonable time-until end of 1984-to
take such.appropriate steps as it may be advised, to avoid fnrther
Prosecution under the Act. D

S.R. Appeal partly allowed.