ACT:
Hindu Law-Whether the holder of an impartible estate to which the rule of primogeniture applies as an essential characteristic of such an estate, can alienate the properties comprised in the estate, by a deed of gift or a will.

JUDGMENT

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2477 of 1972.

From the Judgment and Decree dated 2.12.1969 of the Gujarat High Court in F.A. No. 89 of 1961.

S.K. Dholakia, R.C. Bhatia and P.C. Kapur for the Appellants.

B.K. Mehta, H.S. Parihar and N.D. Bhatti for the Respondents.

The Judgment of the Court was delivered by DUTT, J. This appeal by special leave is at the instance of the plaintiff-appellant, since deceased, and is directed against the judgment and decree of the Gujarat High Court reversing those of the Civil Judge, Senior Division, Himatnagar, whereby the learned Civil Judge decreed the suit instituted by the appellant.

The late Thakore Sartansinhji, the father of the appellant, was the Ruler of the former Mohanpur State situated in the district of Sabarkantha, Gujarat. After independence, the said Mohanpur State merged in the then State of Bombay.(now the State of Maharashtra). The former Ruler, the father of the appellant, by a deed of gift dated May 14, 1951 gifted certain properties to his youngest son, the respondent No. 1 herein. By his will dated May 22, 1951 the former Ruler also bequeathed certain properties to the respondent No. 1 and his mother. The father of the appellant died on December 9, 1955 and on his death the appellant became the Ruler. On May 10, 1956, the suit out of which this appeal arises, was instituted by the appellant challenging the validity of the said deed of gift and the will. In the suit, the case of the appellant was that as the rule of primogeniture applied to the Raj Estate, he being the eldest son succeeded to the ‘Gadi’. It was contended that the former Ruler, that is, the father of the appellant, had no power of alienation either by gift or by will and, accordingly, the disposition made by him by the said deed of gift and the will in favour of his younger brother, the respondent No. 1, was illegal and invalid.

The respondents including the younger brother of the appellant, contested t-he suit, inter alia, denying that the former Ruler had no power of alienation as contended by the appellant. It was averred that the deed of gift and the will were perfectly legal and valid. The learned Civil Judge decreed the suit in part declaring that the deed of gift and the will were illegal and directed the respondent No. 1 to hand-over to the appellant the possession of the properties which were all agricultural lands, as mentioned in the deed of gift. The learned Civil Judge passed a decree for mesne profit, but refused the prayer of the appellant for an injunction on the ground that the appellant had failed to prove his possession of the properties mentioned in the plaint.

Being aggrieved by the judgment and decree of the learned Civil Judge, the respondents preferred an appeal to the High Court. The High Court, after considering the facts and circumstances of the case and the evidence adduced by the parties, held that the former Ruler had the power of alienation and, accordingly, the deed of gift and the will impugned in the suit, were legal and valid. The appeal was allowed and the judgment and decree of the learned Civil Judge were set aside. Hence this appeal by special leave.

During the pendency of the appeal in this Court, the appellant Thakore Harnathsinhji Vinayasinhji died on June 27, 1985 leaving behind him the present appellants, who were already on record, as his heirs and legal representatives.

It is not disputed that the Raj Estate, of which the deceased appellant was the Ruler, is impartible and that the rule of primogeniture, which is one of the essential characteristics of an impartible estate, is also applicable. The question that is involved in this appeal for our consideration is whether the holder of an impartible estate, to which the rule of primogeniture applies as an essential characteristic of such an estate, can alienate the properties comprised in the estate by a deed of gift or will. The legal position that prevailed up to 1888 was that a holder of an impartible estate could not transfer or mortgage such estate beyond his own life-time so as to bind the coparceners, except for purposes beneficial to the family and not to himself alone. In 1888, for the first time, in Rani Sartaj Kuari v. Deoraj Kuari, 15 IA 51 the Privy Council recognised the power of alientation by the holder of an impartible estate and held that such power of alienation could be excluded by custom or by the nature of the tenure. In that case, the Privy Council also took the view that in an impartible Raj Estate, the son is not a co- sharer with his father. This view, however, was not accepted by the later Privy Council decisions and it is now well settled that co-ownership of the joint family exists in impartible estate.

At this stage, it will be profitable for us to refer to the illuminating judgment of Sir Dinshah Mulla in the case of Shiba Prasad Singh v. Rani Prayag Kurnari Debi, AIR 1932 PC 2 16. Sir Dinshah Mulla while delivering the judgment of the Judicial Committee of the Privy Council observed as follows:-

“Impartibility is essentially a creature of custom. In the case of ordinary joint family property, the members of the family have; (1) the right of partition; (2) the right to restrain alienations by the head of the family except for necessity; t3) the right of maintenance; and (4) the right of survivorship.. The first of these rights cannot exist in the case of an impartible estate, though ancestral, from the very nature of the estate. The second is incompatible with the custom of impartibility as laid down in Satraj Kuari’s case 15 IA 5 1 and Rama Krishna v. Venkata Kumara, 26 IA 83 (PC), and so also the third as held in Gangadhara v. Rajah of Pittapur, 45 IA 148. To this extent the general law of the Mitakshara has been superseded by custom, and the impartible estate, though ancestral, is clothed with the incidents of self-acquired and separate property. But the right of survivorship is not inconsistent with the custom of impartibility. This right therefore still remains, and this is what was held in Baijnath’s case, 48 IA 195. To this extent the estate still retains its character of joint family property, and its devolution is governed by the general Mitakshara law applicable to such property. Though the other rights which a co-parcener acquires by birth in joint family property no longer exist, the birthright of the senior member to take by survivorship still remains. Nor is this right a mere spes successlonis similar to that of a reversioner suceeding on the death of a Hindu widow to her husband’s estate. It is a right which is capable of being renounced and surrendered. Such being their Lordships’ view, it follows that in order to establish that a family governed by the Mitakshara in which there is an ancestral impartible estate has ceased to be joint, it is necessary to prove an intention, express or implied, on the part of the junior members of the family to renounce their right of succession to the estate. It is not sufficient to show a separation merely in food and worship.”
The law has been clearly and succinctly stated in the passage extracted above. There is, therefore, no restraint on the power of alienation of the holder of the impartible estate, as any restraint on the power would be incompatible with the custom of impartibility. The impartible estate, though ancestral, is clothed with the incidents of self- acquired and separate property, except as regards the right of survivorship which is not inconsistent with the custom of impartibility.

The right of survivorship has been held to be a birthright and is not a mere spes successionis similar to that of a reversioner succeeding on the death of a Hindu widow to her husband’s estate.

Mr. Dholakia, learned Counsel appearing on behalf of the appellants, does not dispute that the holder of an impartible estate has the power of alienation by transfer inter vivos. It is, however, submitted by him that he has no such power to make a disposition by a will which would affect the right of survivorship by birth of the junior members of the family, which is the only right that remains and, as recognised by the Privy Council in Shiba Prasad’s case (supra), is not opposed to the custom of impartibility. It is submitted by the learned Counsel that disposition by will is incompatible with the right of survivorship by birth. The right of the junior branch to succeed by survivorship to the Raj on the extinction of their senior branch, has also been definitely and emphatically reaffirmed by the Privy Council in Collector of Gorakhpur v. Ram Sundar Mal, AIR 1934 PC 157. Counsel submits that the right of alienation by will and the right of survivorship by birth cannot co-exist and, as it is now a settled law that in an impartible Raj Estate, the right of survivorship of birth of the junior members to succeed to the estate still remains, it will be beyond the power of the holder of the estate to defeat such right by a will.

Attractive though the contention is, we regret we are unable to accept the same. It has been already noticed that in Sartaj Kuari’s case (supra) the right of alienation of the holder has been recognised and in Shiba Prasad’s case (supra) such right of the holder is reiterated. Impartibility is essentially a creature of custom which supersedes the general law. It is true that the impartible estate retains the character of joint family property only to the extent that there is a right of survivorship by birth to the junior members of the family but, as the Privy Council has observed in Shiba Prasad’s case (supra) that in all other respects it is clothed with the incidents of self- acquired and separate property, so it follows that the holder of the impartible estate has the unlimited right of alienation not only by transfer inter vivos, but also by will. When the holder has the power to dispose of the estate during his life-time, it would be quite illogical to hold that he would not have the power of disposition by a will.

It is, however, submitted that no assumption should be made of the power of disposition by will from the existence of the power of the holder to alienate during his life-time. In support of this contention, the learned Counsel for the appellants has placed reliance upon a decision of this Court in Chinnathayi v. Kulasekara Pandiya Naicker, [19521 SCR 241 where it has been observed by Mahajan, J. in delivering the judgment of the Court, that in the case of an impartible estate the power to divide it amongst the members does not exist, though the power in the holder to alienate it is there, and from the existence of one power the other cannot be deduced as it is destructive of the very nature and character of the estate and makes it partible property capable of partition. We do not think that the said observation bears any analogy to the contention made on behalf of the appellants. In that case, this Court was concerned with the question whether the holder of an impartible estate could divide the estate amongst the members. In laying down that there is no such power of division, this Court has pointed out that such a power would be contrary to the nature and character of the estate, that is to say, the impartibility of the estate. In the instant case, the question is whether the holder has power of disposition by will. The power of alienation, as already noticed, has been recognised without any reservation inasmuch as such power is not incompatible with the impartibility of the estate. The rights which are available to the members of the Hindu joint family under the Mitakshara law have been curtailed to a great extent, as most of the said rights would be inconsistent with the nature and character of the estate. Chinnathayi’s case (supra) lends no support to the contention of the appellants.

We may now consider a later decision of the Privy Council in Sri Raja Rao v. Venkata Kumari, 26 IA 83. In that case, the Privy Council considered the question of extension of the decision in Sartaj Kuari’s case (supra) to a will and it was held “If the Rajah had power to alienate, he might do it by will and the title by the will would have priority to the title by succession.” As the case before the Privy Council related to an impartible Raj Estate, succession to the estate would be by survivorship. The Privy Council, however, took the view that title by will would have priority to the title by succession. In other words, it follows that the holder of the Raj Estate can defeat the right of survivorship by disposing of the estate by a will. The learned Counsel for the appellants, however, submits that in laying down that an impartible Raj Estate is alienable by a will, the Privy Council proceeded on the basis that there was no right of survivorship by birth. We are afraid, we are unable to accept this contention. It is true that the Privy Council in that decision has not referred to the right of survivorship of the junior members of the family, but it should not be assumed that the Privy Council was not aware of the legal position that in an impartible Raj Estate the junior members would succeed to it by survivorship. Raja Rao’s case (supra) is, therefore, an authority for the proposition that a holder of an impartible estate cannot only dispose of the estate by transfers inter vivos, but also by a will and that when such a disposition is made by a will, it defeats the right of survivorship.

It is submitted by the learned Counsel for the appellants that in extending the decision in Sartaj Kuari’s case (supra), the Privy Council Raja Rao’s case (supra) did not give any reason for extending the power of alienation of the holder of an impartible estate to alienation by a will, thereby defeating the right of survivorship by birth, which is the only right that is available to the junior members of the family. It may be that no reason has been given by the Privy Council but, at the same time, there is also no reason why when the holder is entitled to dispose of the estate during his life-time, he is not so entitled to dispose of the same by a will.

Our attention has been drawn by the learned Counsel for the appellants to a decision of the Privy Council in Seth Lakhmi Chand v. Mt. Anandi and others, AIR 1926 PC 54. In that case, the question that arose was whether a member of a joint Hindu family could make a disposition by a will or not. The Privy Council relied upon the following observation made in its earlier decision in Lakshman Dada Naik v. Ramchandra Dada Naik, 7IA 181:-

“Its, the High Court’s, reasons for making distinction between a gift and a devise are that the co-parcener’s power of alienation is founded on his right to a partition; that that right dies with him; and that, the title of his co-sharers by survivorship vesting in them at the moment of his death, there remains nothing upon which the Will can operate.”

It is submitted on behalf of the appellants that the same principle against alienability by will by a coparcener should also be applied to an impartible estate, otherwise it will defeat the right of survivorship by birth which is the only right that is conceded to in favour of the junior members of the joint Hindu family. The decision in Lakhmi Chand’s case (supra) or in Lakshman Dada’s case (supra) does not relate to an impartible estate, but to a coparcenary property and, accordingly, the principle of law that is applicable to a coparcenary property or to the coparceners is inapplicable to an impartible estate or to the holder thereof except, as has been noticed earlier, that an impartible estate is considered to be a joint family property to the extent of the junior members succeeding to the estate by right of survivorship. Similarly the decision of this Court in M.N. Aryamurthi v. M.L. Subbaraya Setty, AIR 1972 SC 1279 relating to coparcenary property has no application to the instant case.

It is urged on behalf of the appellants that to hold that the holder of an impartible estate has the power of dispossession by a will defeating the right of survivorship, would be quite illogical. It may be that the holder of an impartible estate can defeat the right of survivorship by leaving a will and such right cannot be said to have been founded on any logical basis. But, it has to be borne in mind that the whole concept of impartibility is a creature of custom including the right of alienation of the holder of such estate. In matters of custom, it is hardly possible to justify every incident on some logical basis.

Much reliance has been placed by the learned Counsel for the appellants on the decision of the Privy Council in Baijnath Prasad Singh v. Tej Bali Singh, AIR 192 1 PC 62 where it has been ruled that the fact that a Raj Estate is impartible does not make it a separate or self-acquired property. It is submitted that if the impartible estate is not a separate or self-acquired property, as held by the Privy Council, how then a holder of such an estate will have the power of disposition by a will. There can be no doubt that an impartible estate is not a separate or self-acquired property of the holder thereof, but it has been observed by Sir Dinshah Mulla in Shiba Prasad’s case (supra) that it is clothed with the incidents of self-acquired and separate property. One of such incidents is that the owner is entitled to dispose of the same in whatever manner he likes- either by a transfer during his life-time or by a will. The contention of the appellants proceeds on the assumption that the right of survivorship is an immutable right and cannot be defeated by the disposition by a will.

Mr. Mehta, learned Counsel appearing on behalf of the respondents, has invited our attention to a statement of law in Mulla’s Hindu Law, Fifteenth Edition, Paragraph 229(2) to show that a right of survivorship of a coparcener can be defeated in certain cases. Paragraph 229(2) is as follows:-

“Para 229(2). The right of a coparcener to take by survivorship is defeated in the following cases:-
(i) Where the deceased coparcener has sold or mortgaged his interest, in States where such sale or mortgage is allowed by law;
(ii) Where the interest of the deceased coparcener has been attached in his lifetime in execution of a decree against him. A mere decree obtained by a creditor, not followed up by an attachment in the lifetime of the debtor, will not defeat the right of survivorship, unless the judgment debtor stood in the relation of father, paternal grandfather or great-grandfather to the surviving coparceners. This rule must be read subject to the provisions of sections 6 and 30 of the Hindu Succession Act, 1956, in cases where those sections are applicable.

(iii)Where the interest of the deceased coparcener has vested in the official Assignee or Receiver on his insolvency. On the annulment of insolvency the interest which vested in the Official Receiver revests under sec. 37 of the Provincial Insolvency Act in the insolvent and if on that date he is not alive, it goes to his heirs under the law.

Thus, the right of a coparcener to take by survivorship can be defeated under certain circumstances, as enumerated in Mulla’s Hindu Law in the passage extracted above. In paragraph 587 of Mulla’s, Hindu Law, it is stated that an impartible estate is not held in coparcenary, though it may be joint family property. Indeed, this proposition has not been disputed by either party in this appeal. When under certain circumstances the right of a coparcener to take by survivorship can be defeated, no exception can be taken, if the right of survivorship of junior members of an impartible estate to succeed to it is defeated by the holder thereof by disposition by a will.

The same principle as laid down in Raja Rao’s case (supra) has been reiterated by the Privy Council in a later decision in Protap Chandra Deo v. Jagadish Chandra Deo, 54 IA 289. In this case it has been ruled by the Privy Council that the holder of an impartible Zamindari can alienate it by will, although the family is undivided, unless a family custom precluding him from doing so, is proved.

In Mirza Raja Shri Pushavathi Viziaram Gajapathi Raj Manne Sultan Bahadur v. Shri Pushavathi Visweswar Gajapathi Raj, [1964] 2 SCR 403 it has been held by this Court that it must be taken to be settled that a holder of an impartible estate can alienate the estate by gift inter vivos, or even by a will, though the family is undivided; the only limitation on this power would flow from a family custom to the contrary or from the condition of the tenure which has the same effect. The same principle of law has been reiterated by this Court in Bhaiya Ramanuj Pratap Deo v. Lalu Maheshanuj Pratap Deo, [1982] 1 SCR 417. In view of the above Privy Council decisions and of the decisions of this Court, it must be held that the holder of an impartible estate has the power of alienation not only by transfer inter vivos, but also by a will, even though the disposition by will may altogether defeat the right of survivorship of the junior members of the family.

The only question that remains to be considered by us relates to the alternative plea of the appellants that by virtue of a family custom the holder of the impartible estate, with which we are concerned, had no power of alienation either by a transfer inter vivos or by a will. In support of this contention, our attention has been drawn on behalf of the appellants to a few correspondence between the original appellant, since deceased, and the political agent of the Mohanpur State. Before considering these correspondence, a few facts are necessary to be stated. In 1938, the former Ruler, that is, the father of the deceased appellant, during his life-time gifted certain villages and properties by way of jiwai (maintenance) to his younger son. In that connection, some correspondence ensued between the appellant and the political agent of the State. Before such a gift was made by way of jiwai to the younger son, the original appellant by his letter dated August 1, 1937 drew the attention of the political agent of the State to the proposed jiwai worth, according to him, Rs.10,000. It was stated in the said letter that despite his pointing out to his father that the proposal of jiwai was too big in proportion to the annual revenue of the State which was about Rs.60,000, his father turned a deaf ear to his earnest entreaties not to make such a jiwai. In that letter, it was stated by him that “big jiwai was proposed contrary to the prevailing practice in all the states and Talukas of this Agency and the past precedent of the State”. In reply to the said letter the political agent, by his letter dated August 13, 1937, informed the appellant that he would not sanction any grant which the former Ruler wished to make to his younger son without any previous discussion with the appellant. The appellant also had written to his father on June 26, 1938, inter alia, stating that “whatever he wished to give him in excessive in proportion to the income of the State and it is unreasonable and against the practice and rules prevailing in the State”. The political agent, it appears, refused to sanction the proposed jiwai. Further, it appears that the appellant had given consent to the execution by his father of a deed of gift dated February 9, 1940 in favour of his younger brother for his jiwai. The political agent granted sanction to the said deed of gift, as it was with the consent of the appellant.

The appellants have placed much reliance upon the above documentary evidence in proof of their contention that there was a family custom prohibiting alienation by the Ruler of the State. The correspondence related only to the question of granting jiwai to the younger son of the former Ruler. It would appear from the correspondence that the entire attempt of the appellant was against the quantum of maintenance that was proposed to be granted by the Ruler to his younger son. It was not the contention of the appellant that in view of a family custom, the Ruler had no right of alienation, but his case was that in view of the annual revenue of the State the quantum of the jiwai would be out of proportion. It was only on this ground that he protested against the proposed jiwai. We do not think that the correspondence referred to above prove any custom of inalienability of the impartible estate.

It is submitted on behalf of the appellants that as there was no instance of alienation till before the impugned deed of gift and the will, it should be presumed that there was a family custom of inalienability of the estate. More or less, a similar contention was made before the Privy Council in Protap Chandra Deo’s case (supra) that the absence of any instance of a will purporting to dispose of the estate, was itself sufficient evidence of the custom of inalienability of the estate. The said contention was overruled by the Privy Council. There must be some positive evidence of such a custom. Mere absence of any instance of alienation will not be any evidence of custom. Moreover, as noticed already, the correspondence which are being relied upon as the evidence of the alleged family custom of inalienability are far from being such evidence, for the only question that formed the subject matter of all this correspondence related to the propriety of the quantum of jiwai. Accordingly, we hold that the appellants have failed to prove that there was any family custom of inalienability of the estate. No other point has been urged in this appeal by either party.

For the reasons aforesaid, the judgment and decree of the High Court are affirmed and this appeal is dismissed. There will, however, be no order as to costs in this Court.

S.L. Appeal dismissed.

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ACT:
Sections 4, 27(1) and 29–Wealth tax–Gift–Assessee directing firm by a letter to debit his account of certain amounts and credit respective accounts of his sons and grandsons–Gifts made out of love and affection–Entries in account books–Whether constitute valid gift-Whether inclu- dible in net wealth of assessee–Absence of cash balance with the firm or overdraft facilities with the bank–Effect of.

Allowing the appeal by the Revenue, this Court,

^HELD: 1. In order to constitute a valid gift there must be an existing property. In case of entries in the books of account by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited. In the case of banking companies or other firms and companies who have overdraft facilities, even if the sums are not in credit of the donor and are not with such companies or firms, gifts might be possible by adjustment of book entries. But in the cases of non-banking companies or firms, if these companies or firms do not have overdraft facilities, it is not possible to make valid gift if sums or funds are not available. [126E-G]

2. It is possible in certain circumstances for a donor to make a valid gift by instructing a firm or a company or H.U.F., in which the donor has an account to give effect to the gift by debiting his account and crediting the account in the name of the donee. But in such cases merely book entries would not suffice. The circumstances must be such as to make it clear that there were sufficient funds at the disposal of the donor by reason of which he could make the gift by such book entries. The firm in which the donor may have account may or may not have sufficient cash balance but it must have sufficient provision for overdraft with the bank on the basis of which it could honour instructions given by the assessee. [126H;127A-B]

3. Each case must be decided on the facts of that case. Where the assessee has a credit account with a firm or with a family or with a banking company and that sum is available to that firm or the company or H.U.F. on the date of the gift, then a valid gift by book entries might be possible. But where a sum was not available with the firm or the H.U.F. or a company which was not a banking company or which had no overdraft facility, by mere book entries, even though there was acceptance of that gift by the donee a valid gift would not be effectuated. [131D-E]

4. In the instant case, the entries in the books of account could not effectuate valid gifts. The only sum which could be taken by the donee was Rs.4,000 in the case of the first company, which had no 123 overdraft facility with the bank. Thus, there was no exist- ing goods to be parted. The High Court was, therefore, in error in answering the questions against the Revenue. [132E-F]

[Appeal allowed. Order and Judgment of the High Court set aside.]

Gopal Raj Swarup v, Commissioner of Wealth-tax, Lucknow, 77 I.T.R. 9 12; Indian Glass Agency v. Commissioner of Income-Tax, New Delhi, 137 I.T.R. 245; New India Colour Co. v. Commissioner of Income Tax, New Delhi, 80 I.T.R. 206; Commissioner of Income Tax, West Bengal 111 v. Ashok Glass Works, 103 I.T.R. 379; Commissioner of Gift Tax, West Bengal 111 v. Tarachand Meghraj, 109 I.T.R. 775; Chimanbhai Lalbhai v. Commissioner of Income Tax (Central), Bombay, 34 I.T.R. 259; Commissioner of Income Tax, Ahmedabad v. Digvijay- singhji Tin Factory, 36 I.T.R. 72; Commissioner of Income- Tax, Bombay City-I1 v. Popatlal Mulji, 108 I.T.R. 4; Addl. Commissioner of Income-Tax, Poona v. Dharsev Keshavji, 143 I.T.R. 509; Commissioner of Income-Tax, Poona v. Devinchand Uttamchand, 148 I.T.R 530; Baliram Mathuradas (By his Legal Heir, Madanlal Paliram) v. Commissioner of Income-Tax, Bombay City-H, 59 I.T.R. 278; Virji Devshi v. Commissioner of Income-Tax, Bombay, 65 I.T.R. 291; E.M.V. Muthappa Chet- tiar v. Commisioner of Income-Tax, Madras, 13 I.T.R 311; Mrs. Ida L. Chambers and Three Others v. Kelland Huxford Chambers, 1941 I.L.R. 232; Balimal Nawal Kishore v. Commis- sioner of Income-Tax, Punjab, 62 I.T.R. 669; Sukhlal Sheo Narain v. Commissioner of Wealth-Tax, Haryana, 89 I.T.R. 157; Abba Dada and Company v. Commissioner of Income-Tax, Burma, 6 I.T.R. 470; K.P. Brothers v. Commissioner of In- come-tax, New Delhi, 42 I.T.R 650; Commissioner of Income Tax, U.P.v. Smt. ‘Shyamo Bibi, 59 I.T.R. 1; Commissioner of Wealth-Tax v. Gulab Rai Govind Prasad, 85 I.T.R. 308; Bhau Ram Jawaharmal v. Commissioner of Income Tax, ‘ U.P., 82 I.T.R. 772; Gopal Jalan v. Commissioner of Income-Tax, U.P., 86 I.T.R. 317; Phool Chand Gajanand v. Commissioner of Income-Tax, U.P., 89 I.T.R. 148; Controller of Estate Duty, Punjab, Haryana, J. & K., H.P. and Chandigarh v. Kamlavati, 120 I.T.R. 456, referred to.

JUDGMENT

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1713(NT) of 1973.

From the. Judgment and Order dated 6.1.1971 of the Allahabad High Court in Wealth Tax Reference No. 285 of 1965 S.C. Manchanda and Ms. A. Subhashini for the Appellant. Respondent-in-person. (Not present ) The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. The appeal under section 29(1) of the Wealth-Tax Act, 1957 (hereinafter called the Act) is directed against the judgment and order of the High Court of Allahabad dated 6th of January 1971. The questions involved before the Allahabad High Court in the reference under section 27(1) of the Act were as follows:

(1) Whether, on the facts and in the circumstances of the case, the Tribunal right- ly held that the assessee did not make valid gifts aggregating Rs. 1,50,000 on 1.1. 1957? (2) Whether, on the facts and in the circumstances of the case, the Tribunal right- ly held that the assessee did not validly assign Rs. 1,50,000 in favour of his sons and grand sons by his letter dated 1.1. 1957? (3) Whether, on the facts and in the circumstances of the case, the Tribunal tight- ly held that the sum of Rs. 1,50,000 was properly included in the assessee’s net wealth?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal right- ly held that the assessee did not make valid gifts aggregating Rs.67,560/- (5) Whether, on the facts and in the circumstances of the case, the Tribunal right- ly held that the sum of Rs.67,560/12/- was rightly included in the net wealth of the assessee?
The case relates to the assessment year 1957-58 and the relevant date of valuation was 31st March, 1957. The asses- see, Dr. R.S. Gupta had maintained an account in the books of Messrs. Tika Ram and Sons Pvt. Ltd. On 1st January, 1957, the account showed a credit of Rs. 1,50,740. On that day, the assessee had addressed a letter to the Company stating that he had decided to gift away for love and affection various sums to the following persons:

Ved Prakash Gupta … Rs.25,000
Om Prakash Gupta … Rs.25,000
Hari Prakash Gupta … Rs.50,000
Pravin Kumar Gupta … Rs. 50,000

By that letter the assessee had directed the Company to debit his account to the extent of Rs. 1,50,000 and credit the respective amounts in the names of the aforesaid per- sons. It appears further that copies of this letter were sent to one Om Prakash Gupta and Ved Prakash Gupta. There was no dispute that instructions of the assessee were car- ried out by the Company and relevant debit and credit en- tries were made in the respective accounts. On the same day i.e. on ist January, 1957, Om Parkash Gupta wrote to the assessee, his father, thanking him for the gift of Rs.25,000 made in his favour and the gift of Rs.50,000 in favour of his son Pravin. A similar letter was written by Ved Prakesh thanking the assessee, his father, for the gift of Rs.25,000 made to him and Rs.50,000 gifted to his son. It must be mentioned, however, that the company i.e. Messrs Tika Ram and Sons. Pvt. Ltd. was stated to be running an oil mill and carrying on business as grain tillers. contractors and brick-kiln owners. It was also stated to be carrying on business of advancing money and taking money on loan when necessary. But it appears that it was admitted position that Tika Ram & Sons had a cash balance of Rs.4000 only on 1.1.1957 and it did not have any overdraft facilities with any bank. The respective donees were stated to have later on withdrawn amounts from the amounts so transferred to their accounts. The assessee contended that a total sum of Rs. 1,50,000 was validly gifted by him to his sons and grand sons and hence the amounts had been wrongly included in his net wealth by the Income-Tax Officer and the Appellate Assistant Commissioner. It was his contention that Tika Ram & Sons carried on the business of banking and hence the gifts were valid. But there was no evidence that Tika Ram and Sons were carrying on any banking business. The Tribunal held that they were not carrying on banking business. The main question therefore that falls for consid- eration is whether gifts in question made by transfer en- tries in the books of debtor company were valid gifts even though the debtor company was not carrying on business of banking and had no cash in hand for the amount in question on that date. Gift is defined in section 122 of the Transfer of Property Act, 1882 as transfer of certain existing mova- ble or immovable property made voluntarily and without consideration by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Section 123 of the said Act deals with how transfers are effected and stipulates, inter alia, that for the purpose of making a gift of movable property as in this case, the transfer must be effected either by a registered instrument signed by the donor and attested or by delivery. Such delivery may be made in the same way as goods sold may be delivered. The next contention was regarding the inclusion of net wealth a sum of Rs.67,560/12/- standing to the credit of the assessee in the books of M/s Pearls & Beads. The assessee claimed to have gifted the said amounts by transfer entries in the books of M/s Pearls & Beads on 30th March, 1957. No letter as in the previous case was addressed by the assessee but only oral instructions were said to have been given. The Tribunal held that there was no valid gifts. There was no evidence, it appears, that the said sum was available with the said firm of M/s Pearls & Beads.

The High Court in view of the decision of the Division Bench of the Allahabad High Court in the case of Gopal Raj Swarup v. Commissioner of Wealth-tax, Lucknow, 77 I.T.R. 912 answered the first question in the negative and so far as the second question is concerned, it declined to answer as it did not arise in view of the answer given to the first question and the questions Nos. 3,4 and 5 were answered in the negative. Aggrieved by the said decision, the revenue has come up in appeal.

In order to constitute a valid gift there must be an existing property. In case of entries in the books of ac- count by credit and debit, the sums should be available on the date of gift in the account of the firm whose accounts are said to be credited or debited. In the case of banking companies or other firms and companies who have overdraft facilities, even if the sums are not in credit of the donor and are not with such companies or firms, gifts might be possible by adjustment of the book entries. But in the cases of non-banking companies or firms, if these companies or firms do not have overdraft facilities, it is not possible to make valid gift if sums or funds are not available. This question has been examined by the various High Courts. It is possible in certain circumstances for a donor to make a valid gift by instructing a firm or a company or a H.U.F. in which the donor has an account to give effect to the gift by debiting his account and crediting the account in the name of the donee. But in such cases merely books entries would not suffice. The circumstances must be such as to make it clear that there were sufficient funds at the disposal of the donor by reason of which he could make the gift by such book entries. The firm in which the donor may have account may or may not have sufficient cash balance but it must have sufficient provision for overdraft with the bank on the basis it could honour in- structions given by the assessee. This position of law has been referred to and reiterated by the Bench decision of the Delhi High Court in the case of India Glass Agency v. Com- missioner of Income-Tax, New Delhi, 137 I.T.R. 245. Justice Ranganathan of the Delhi High Court after referring to several authorities has observed that book entries may be sufficient only when circumstances make it clear that the gift was genuine and the firms where accounts transfer are effected must have sufficient cash in hand or sufficient provision for overdraft facility upon the basis of which it would honour the instructions given by the assessee. The assessee must also have sufficient credit balance to enable him to make the gift. Reference may also be made for this proposition to the decision of the Delhi High Court in New India Colour Co. v. Commissioner of Income:Tax, New Delhi, 80 I.T.R. 206 The effect of the two aforesaid decisions of the learned fudges of the Delhi High Court indicates that in case there was not sufficient cash balance from out of which the amount gifted could be physically given to the donee, more entries in the books of account in the form would not constitute delivery of possession over the gifted property to the donee and gift in such case will not be valid. The position, however, might be different if such firms or companies or H.U.F. in whose accounts gifts are effected have overdraft facilities.

The Calcutta High Court had occasion to discuss this aspect in the case of Commissioner of Income-Tax, West Bengal 111 v. Ashok Glass Works, 103 I.T.R 379. There it was held on facts that the entries had been made contemporane- ously showed that the transaction was genuine and there was no suggestion that the interests which were credited in the accounts of the minor donees by the firm which carried on money-lending business also were fictitious. The Tribunal therefore, it was found, tightly held that the gifts were valid and the interest paid in respect of the accounts standing in the name of the donees was allowable as a deduc- tion in the hands of the assessee firm.

The Calcutta High Court had to consider this in the case of Commissioner of Gift-Tax, West Bengal 111 v. Tara- chand Maghraj, 109 I.T.R. 775. There the High Court after discussing various decisions including certain decisions of the Allahabad High Court which we shall presently note and the provisions of section 122 of the Transfer of Property Act, 1882, and the Sale of Goods Act. held that under section 123 of the Transfer of Property Act, in case of gift of movable property, the transfer may be effected by delivery. Such delivery may be in the same way as goods sold may be delivered. Section 33 of the Sale of goods Act permitted the parties to deliver by any manner or method which the parties agreed would be treated as delivery or which had the effect of putting the goods in the possession of the buyer. In that case, it was found that the effect of the transaction in that case was to put the amounts in the possession of the assessee who was authorised to hold the amounts on behalf of the donees which resulted in a delivery of the amounts within the meaning of the Sale of Goods Act. The Court, however, pointed out that it was held that there was no valid gift on the date of the entries, then it could not be held that, subsequently, when the money was transferred by further entries in the same books, it resulted in a valid gift.

In the instant case before us and we have noted and we reiterate only a sum which could be taken by the donees was Rs.4000 in Messrs Tika Ram & Sons Pvt. Ltd. and there was no overdraft facility of Tika Ram & Sons with any bank. In that view of the matter, there was no existing goods to be part- ed.

Before the Bombay High Court, in the case of Chimanbhai Lalbhai v. Commissioner of Income-Tax (Contral), Bombay, 34 I.T.R. 259 there were entries in the books of a Banking Company and gifts were held to be valid. In the case of Commissioner of IncomeTax, Ahmedabad v. Digvijaysinghji Tin Factory, 36 I.T.R. 72, on the contrary it was held that the gifts were valid though not sufficient cash with firm avail- able but proper book entries were made. See also the cases of Commissioner of Income-Tax, Bombay City-H v. Popatlal Mulji, 108 I.T.R. 4 and also in the case of Addl. Commis- sioner of Income-Tax, Poona v. Dharsey Keshavji, 143 I.T.R. 509 and Commissioner of Income-Tax, Poona v. Devichand Uttamchand, 148 I.T.R. 530. In the background of facts of those cases the Bombay High Court held that the gifts were valid. In the case of Baliram Mathuradas (By his legal Heir, Madanlal Paliram) v. Commissioner of Income-Tax, Bombay City-II, 59 I.T.R. 278 the Bombay High Court had occasion to consider this question and held that there was no evidence of acceptance. It was held by the Bombay High Court that there was no valid gift. Similarly, in the case of Virji Devshi v. Commissioner of Income-Tax, Bombay, 65 I.T.R. 291 the Bombay High Court held “Just as the entries in his own account book by a person would not constitute a valid transfer even the entries in the accounts of the firm would not be sufficient.”

The Madras High Court had also taken divergent views. It may be noted that in E.M.V. Muthappa Chettiar v. Commission- er of Income-Tax, Madras, 13 I.T.R. 311 the Madras High Court held that mere entries were not enough to constitute valid gifts particularly when gift of fund continued to be used in the donors’ business.

The Madras High Court in the case of Mrs. Ida L. Cham- bers and Three Others v. Kelland Huxford Chambers, [1941] I.L.R. 232 was dealing with a case where C, proprietor of a business who had invested a large amount of capital in it, caused entries to be made in his account books crediting his wife and certain other members of his family with sums which were debited to his capital account. Separate accounts in their names were opened in the books and in their accounts the credits were entered. The entries were followed up by letters to the effect, inter alia, that the sums were en- tirely in the nature of personal gifts from C and would bear interest payable half-yearly. C was not in a position to make gifts in cash of the amounts credited in favour of his wife and relatives. He had large assets but these were represented by land, buildings, plant, machinery and stock- in-trade. Interest on the amounts was also credited in the accounts regularly for some time, until a bank from which C had obtained an overdraft objected to such crediting of interest. C’s wife withdrew various sums of money from time to time from the interest account and whenever C desired to retransfer amounts to his capital account he obtained let- ters of consent from her. The principal amounts credited were shown as ‘deposits” in the balance sheets of the busi- ness for some years and were thereafter referred to as “unsecured loans”. On a question arising whether there was a valid gift or trust in respect of the said amounts, it was held by the Division Bench of the Madras High Court that there was no completed gift of the principal amounts as there was no registered deed and as there was no delivery of the property. Though C had the intention of making gifts, the entries in the books did not complete the gift. It was further held that there was no trust either and that there was nothing in the acts or conduct of C to show that he intended to create a trust or to constitute himself a trus- tee. Where moneys were actually paid by way of interest on the alleged gifts, those became completed gifts. This deci- sion went up to the Privy Council but on the aspect of gift, no opinion was expressed by the Judicial Committee. The decision of the Privy Council is reported in ILR 1944 at page 617.

The Punjab and Haryana High Court in Balireal Nawal Kishore v. Commissioner of Income-Tax, Punjab, 62 I.T.R. 669 held that the credit cash balance of the donor was Rs.81,000 and cash balance with firm was only Rs.4,299 but the unuti- lised overdraft of the firm was Rs. 1,27,088. The gift was held to be valid.

In Sukhlal Sheo Narain v. Commissioner of Wealth-Tax, Haryana, 89 I.T.R. 157 the Punjab & Haryana High Court had dealt with a case where the father had gifted Rs.84,000 i.e. Rs.28,000 to each of his sons. Father had complete control and dominion over that amount. There was no evidence that gifts were accepted on behalf of minors. It was held by the High Court that gifts were invalid.

Rangoon High Court in Abba Dada and Company v. Commis- sioner of Income-Tax, Burma, 6 I.T.R. 470 held that the mere book entries were not sufficient in that case to constitute valid gift.

The Rajasthan High Court in K.P. Brothers v. Commission- er of Income-Tax, New Delhi, 42 I.T.R. 650 held that there was a valid gift but in that case it was a banking company. The Allahabad High Court in the case of Commissioner of Income-Tax, U.P.v. Smt. Shyamo Bibi, 59 I.T.R 1. had to deal with a case where the credit balance of 2-1/2 lakhs was with the firm. Balance of the firm was only Rs. 15. Memo of gift recorded on stamp paper. It was held that the gift was not valid.

In Commissioner of Wealth-Tax v. Gulab Rai Govind Pra- sad, 85 I.T.R. 308 there was an alleged gift of Rs.2 lakhs to minor son by book entries. Cash Balance was only Rs.7626. No interest was credited to donee’s account. No acceptance was produced. Property purchased out of gift and income was used by the family. It was’ held that there was no valid gift. But the Allahabad High Court in the case of Gopal Raj Swarup v. Commissioner of Wealth-Tax, Lucknow (supra) had to deal with the wealth-tax. There the assessee was the karta of a Hindu undivided family. On 20th November, 1956, the assessee purported to transfer Rs.50,000 from his account to the account of his son. The transfer was effected by debit- ing the assessee’s personal account in the books of the Hindu undivided family with Rs.50,000 and crediting the same in the personal account of his son. On 20th November, 1956, the assessee had a substantial credit balance exceeding the sum of Rs.50,000 which he purported to give to his son. The adjustment of entries made in the books of account was in pursuance of a letter written by the assessee to the said Hindu undivided family on the same date. The Wealth-Tax Officer and the Income-Tax Officer rejected the contention that he made a gift of Rs.50,000 to his son and this amount should be excluded from his taxable net wealth. The Tribunal never doubted that the transaction in question was bona fide but dismissed the appeal of the assessee on the sole ground that the transfer evidenced by the entries in the books of account and by the declaration, did not operate to bring into existence a valid gift. It was held on the facts of that case that the asses- see had made a valid gift of the value of Rs.50,000. In the impugned judgment, the Allahabad High Court had followed the said decision. The said decision was also followed in Bhau Ram Jawaharmal v. Commissioner of Income Tax, U.P., 82 I.T.R. 772 in Gopal Jalan v. Commissioner of Income-Tax, U.P., 86 I.T.R. 317 and in Phool Chand Gajanand v. Commis- sioner of Income-Tax, U.P., 89 I.T.R. 148 We are of the opinion that each case must be decided on the facts of that case. Where the assessee has a credit amount with firm or with family or with a banking company and that sum is available to that firm or the company or H.U.F. on the date of the gift, then a valid gift by book entries might be possible but where a sum was not available with the firm or the family or a company which was not a banking company or which had no overdraft facility, by mere book entries even though there was acceptance of that gift by the donee would not effectuate a valid gift. The Court in Controller of Estate Duty, Punjab, Haryana, J. & K., H.P., and Chandigarh v. Kamlavati, 120 I.T.R. 456 had to deal with gift by way of transfer in the account books. There this Court held that when the property was gifted by a donor the possession and enjoyment of which was allowed to a partnership firm in which the donor was a partner, then the mere fact of the donor sharing the enjoy- ment or the benefit in the property was not sufficient for the application of section 10 of the Estate Duty Act, 1953, until and unless such enjoyment or benefit was clearly referable to the gift, i.e. to the parting with such enjoy- ment or benefit by the donee or permitting the doner to share them out of the bundle or rights gifted in the proper- ty. If the possession, enjoyment or benefit of the donor in the property was consistent with the facts and circumstances of the case other than those of the factum of gift, it could not be said that the donee had not retained the possession 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. There, M, the deceased, was a partner in a firm having a half-share in the partnership. On 27th March, 1957, M made a gift of Rs. 1 lakh to his son, L, and of Rs.50,000 to his wife, K, by making debit entries in his account in the firm and corresponding credits to the accounts of L and K. With effect from 28th March, 1957, L was taken as a partner in the firm by giving L one-forth share out of the half-share of M. M died on 9th January, 1962. The Tribunal held that section 10 of the Estate Duty Act was not attracted and the sum of Rs. 1,50,000 could not be included in the property passing on the death of M; and the High Court, on a reference, affirmed the viewes of the Tribunal. This Court held affirming the decision of the High Court that section 10 did not apply to the gifts of Rs. 1 lakh and Rs.50,000 made by the deceased to his son and to his wife respectively. But in that case, the question in the present form in which it arises before us in the instant case did not arise.

This Court in the case of Badri Prasad Jagan Prasad v. Commissioner of Income-Tax, U.P., 156 I.T.R. 430 (judgment by one of us) had occasion to refer to the effect of book entries but this question which is present before us in the present appeal was not before this Court in that case. No useful purpose, therefore, will be served by reference to that case.

In that view of the matter, except to the extent indi- cated above, the entries in the books of account could not effectuate gifts. As we have discussed the facts on the principles, we are of the opinion that the High Court was in error in answering the question in the manner it did. The order and judgment of the High Court are therefore set aside. All the questions are answered in favour of the revenue. As the respondent is not appearing, there will be no order as to costs.

N.P.V. Appeal
allowed.

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IN THE SUPREME COURT OF INDIA
SHOBHA RANI …PETITIONER
Vs.
MADHUKAR REDDI …RESPONDENT
DATE OF JUDGMENT: 12/11/1987
BENCH: SHETTY, K.J. (J) RAY, B.C. (J)
CITATION:
1988 AIR 121 1988 SCR (1)1010
1988 SCC (1) 105 JT 1987 (4) 433
1987 SCALE (2)1008

J U D G M E N T

ACT:

Hindu Marriage Act, 1955: Section 13(1)(i-a)-`Cruelty’- Demand for dowry-Whether cruelty-Whether wife entitled to decree for dissolution of marriage-`Intention’-Whether necessary to constitute and prove cruelty in matrimonial cases.

Dowry Prohibition Act, 1961: `Dowry’-Demand of-Whether amounts to cruelty entitling wife to decree for dissolution of marriage.

Indian Penal Code, 1860: Section 498A-`Cruelty’-What is-Demand for dowry-Whether amounts to cruelty-Whether wife entitled to decree for dissolution of marriage.

HELD: 1.1 In order to curb the evil practice of dowry, the Parliament enacted the Dowry Prohibition Act, 1961 prohibiting the giving or taking of dowry. But, as the pernicious practice continued in some communities, the Dowry Prohibition (Amendment) Act, 1984 was enac- 1011 ted with considerable changes in the parent Act. Likewise, the Indian Penal Code, 1860 was amended by introducing an entirely new offence with regard to criminal jurisdiction.

Section 498A was introduced providing for punishment to the husband or the relative of the husband of a woman, subjecting her to cruelty. [1015F-H] new dimension has been given to the concept of cruelty.

Explanation to s. 498A of the Indian Penal Code provides that any wilful conduct which is of such a nature as is likely to drive a woman to commit suicide or likely to cause grave injury or danger to life, limb or health (whether mental or physical of the woman), and harassment of the woman with a view to coercing her or any person related to her to meet any unlawful demand for any property or valuable security would constitute cruelty. [1016E-F]

1.2 Cruelty simpliciter is a ground for divorce under section 13 of the Hindu Marriage Act. However, the word `cruelty’ has not been defined. Indeed, it could not have been defined. It has been used in relation to or in respect of matrimonial duties and obligations. It is a course of conduct of one which is adversely affecting the other. The cruelty may be mental or physical, intentional or unintentional. If it is physical, the Court will have no problem to determine it. It is a question of fact and degree. If it is mental, the enquiry must begin as to the nature of cruel treatment and the impact of such treatment in the mind of the spouse, whether it caused reasonable apprehension that it would be harmful or injurious to live with the other. Ultimately, it is a matter of inference to be drawn by taking into account the nature of the conduct and its effect on the complaining spouse. There may, however, be cases where the conduct complained of itself is bad enough and per se unlawful or illegal. Then the impact or injurious effect on the other spouse need not be enquired into or considered. In such cases, the cruelty will be established if the conduct itself is proved or admitted.

[1013E-H; 1014A]

1.3 The matrimonial conduct which constitutes cruelty as a ground for dissolution of marriage, if not admitted, requires to be proved on the preponderance of probabilities as in civil cases and not beyond a reasonable doubt as in criminal cases. [1016G]

1.4 Evidence as to harassment to the wife to meet any unlawful demand for money is necessary to constitute cruelty in criminal law. This is the requirement of the offence of cruelty defined under s. 498A of the Indian Penal Code. It is not so under s. 13(1)(i-a) of the Hindu 1012 Marriage Act, 1955. The cruelty need not be only intentional, wilful or deliberate. It is not necessary to prove the intention in matrimonial offence. From the context and the set up in which the words `cruelty’ has been used in s. 13(1)(i-a), intention is not a necessary element in cruelty. That word has to be understood in the ordinary sense of the term in matrimonial affairs. If the intention to harm, harass or hurt could be inferred by the nature of the conduct or brutal act complained or, cruelty could be easily established. But the absence of intention should not make any difference in the case, if by ordinary sense in human affairs, the act complained of could otherwise be regarded as cruelty. The relief to the party cannot be denied on the ground that there has been deliberate or wilful ill-treatment. [1020F-H; 1021A-C]

1.5 The matrimonial duties and responsibilities are of varying degrees from house to house or person to person.

Therefore, when a spouse makes complaint about the treatment of cruelty by the partner in life or relations, the Court should not search for standard in life. In matrimonial cases, the Court is not concerned with the ideals in family life. It has only to understand the spouses concerned as nature made them, and consider their particular grievance.

[1014B,F] Sheldon v. Sheldon, [1966] 2 ALL E.R. 257, 259, Gollins v. Gollins, [1963] UKHL 5; [1963] 2 All E.R. 966 1972 and Narayan Ganesh Dastane v. Sucheta Narayan Dastane, [1975] INSC 79; [1975] 3 SCR 967 1978, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3013 of 1987.

From the Judgment and Order dated 30.7.1986 of the Andhra Pradesh High Court in A.A.O. No. 1491 of 1985.

S. Madhusudan Rao, K.K. Gupta and Rakesh Kumar Gupta for the Appellant.

K.V. Sreekumar and B. Parthasarthi for the Respondent.

The Judgment of the Court was delivered by JAGANNATHA SHETTY, J. We grant special leave and proceed to dispose of the appeal.

Shobha Rani is the appellant. Her husband is Madhukar Reddi who is respondent before us. The wife is post-graduate in biological 1013 sciences. The husband is a medical doctor. They were happily married on December 19, 1982. But their happiness did not last longer. They started exchanging letters with bitter feelings. Then they began to accuse each other. At one stage, they thought of winding up by mutual consent. It was perhaps out of disgust. it would have been better, if it had happened. But unfortunately, it did not materialise.

Ultimately they landed themselves in the Court. The wife moved the Court for divorce on the ground of cruelty.

Before referring to further facts, let us consider the law. The cruelty simpliciter is now a ground for divorce under Sec. 13 of the Hindu Marriage Act (Act 25 of 1955).

Section 13 provides, so far as it is material:

“13 Divorce (1) Any marriage solemnized whether before or after the commencement of this Act, may, on a petition presented by either the husband or the wife, be dissolved by a decree of divorce on the ground that the other party …..

(i) …….

(i-a) has, after the solemnization of the marriage, treated the petitioner with cruelty, or xxxx xxxxx xxxxx xxxxx Section 13(1)(i-a) uses the words “treated the petitioner with cruelty”. The word “cruelty” has not been defined. Indeed it could not have been defined. It has been used in relation to human conduct or human behaviour. It is the conduct in relation to or in respect of matrimonial duties and obligations. It is a course of conduct of one which is adversely affecting the other. The cruelty may be mental or physical, intentional or unintentional. If it is physical the court will have no problem to determine it. It is a question of fact and degree. If it is mental the problem presents difficulty. First, the enquiry must begin as to the nature of the cruel treatment. Second, the impact of such treatment in the mind of the spouse. Whether it caused reasonable apprehension that it would be harmful or injurious to live with the other. Ultimately, it is a matter of inference to be drawn by taking into account the nature of the conduct and its effect on the complaining spouse.

There may, however, be cases where the conduct complained of itself is bad enough and per se unlawful or illegal. Then the impact or the injurious effect on the other spouse need not be enquired into or 1014 considered. In such cases, the cruelty will be established if the conduct itself is proved or admitted.

It will be necessary to bear in mind that there has been marked change in the life around us. In matrimonial duties and responsibilities in particular, we find a sea change. They are of varying degrees from house to house or person to person. Therefore, when a spouse makes complaint about the treatment of cruelty by the partner in life or relations, the Court should not search for standard in life.

A set of facts stigmatised as cruelty in one case may not be so in another case. The cruelty alleged may largely depend upon the type of life the parties are accustomed to or their economic and social conditions. It may also depend upon their culture and human values to which they attach importance. We, the judges and lawyers, therefore, should not import our own notions of life. We may not go in parallel with them. There may be a generation gap between us and the parties. It would be better if we keep aside our customs and manners. It would be also better if we less depend upon precedents. Because as Lord Denning said in Sheldon v. Sheldon, [1966] 2 All E.R. 257 (259) “the categories of cruelty are not closed.” Each case may be different. We deal with the conduct of human beings who are not generally similar. Among the human beings there is no limit to the kind of conduct which may constitute cruelty.

New type of cruelty may crop up in any case depending upon the human behaviour, capacity or incapability to tolerate the conduct complained of. Such is the wonderful/realm of cruelty.

These preliminary observations are intended to emphasize that the Court in matrimonial cases is not concerned with ideals in family life. The Court has only to understand the spouses concerned as nature made them, and consider their particular grievance. As Lord Reid observed in Gollins v. Gollins, [1963] UKHL 5; [1963] 2 All. E.R. 966 (1972):

“In matrimonial affairs we are not dealing with objective standards, it is not a matrimonial offence to fall below the standard of the reasonable man (or the reasonable woman). We are dealing with this man or this woman.” Chandrachud, J. (as he then was) in Narayan Ganesh Dastane v. Sucheta Narayan Dastane, [1975] INSC 79; [1975] 3 SCR 967 (978) said:

“The Court has to deal, not with an ideal husband and an ideal wife (assuming any such exist) but with parti- 1015 cular man and woman before it. The ideal couple or a near-ideal one will probably have no occasion to go to a matrimonial court, for, even if they may not be able to drown their differences, their ideal attitudes may help them overlook or gloss over mutual faults and failures.” With these principles in mind, we may now unfold the story with which the wife came to the Court seeking dissolution of her marriage. She made several grievances. We may ignore all but one. The one and the only one with which we are concerned is her complaint about the dowry demand by the husband or his parents. The dowry is a deep rooted evil in the society. It started as customary presents with love and affection. In olden days, it was customary to give some presents to the bride and bridegroom and his family at the time of marriage. The parents of the bride or their relations out of affection and good intention used to provide the couple something to fall back upon in case of need. The system started at a time when girls were generally not very much educated and even if they were educated they were unwilling to take up gainful employment. There was also less opportunity for them either to supplement the family income or to become financially independent. There was yet another reason for such customary gifts. The daughter then was not entitled to a share in the joint family properties when she had a brother. Hence the father out of affection or other consideration used to give some cash or kind to the daughter at the time of marriage. The right of the father to give a small portion of even the family property as a gift to the daughter at the time of her marriage was recognised.

But unfortunately over the years new practice developed. The boy or his family members started demanding cash or kind from the brides parents. They started demanding dowry as a matter of right. The demand more often extended even after the marriage. There were instance of harassment of the wife, if the demand was not complied with. In order to curb this evil practice, the Parliament enacted the Dowry Prohibition Act, 1961 (Act No. 28 of 1961). The Act prohibited the giving or taking of dowry. But in spite of this enactment, the pernicious practice continued in some communities. The Joint Committee of Parliament appointed to examine the working of the Dowry Prohibition Act remarked “the evil sought to be done away with by the Act, on the other hand, increased by leaps and bounds and has now assumed grotesque and alarming proportions.” Again the Parliament intervened.

The Dowry Prohibition (Amendment) Act, 1984 was enacted with considerable changes in the parent Act. Likewise the Indian Penal Code was amended by introducing of an entirely new offence hitherto unknown to criminal jurisprudence. Sec- 1016 tion 498 A has been introduced in the following terms:

“498 A. Husband or relative of husband of a woman subjecting her to cruelty; whoever, being the husband or the relative of the husband of a woman, subjects such woman to cruelty shall be punished with imprisonment for a term which may extend to three years and shall also be liable to fine.

Explanation-For the purposes of this section “cruelty” means:

(a) Any wilful conduct which is of such a nature as is likely to drive the woman to commit suicide or to cause grave injury or danger to life, limb or health (whether mental or physical) of the woman or (b) harassment of the woman where such harassment is with a view to coercing her or any person related to her to meet any unlawful demand for any property or valuable security or is on account of failure by her or any person related to her to meet such demand.” A new dimension has been given to the concept of cruelty. Explanation to Sec. 498 A provides that any wilful conduct which is of such a nature as is likely to drive a woman to commit suicide would constitute cruelty. Such wilful conduct which is likely to cause grave injury or danger to life, limb or health (whether mental or physical of the woman) would also amount to cruelty. Harassment of the woman where such harassment is with a view to coercing her or any person related to her to meet any unlawful demand for any property or valuable security would also constitute cruelty.

We are, however, not concerned with criminal offence either under the Dowry Prohibition Act or under the Indian Penal Code. We are concerned with a matrimonial conduct which constitutes cruelty as a ground for dissolution of marriage. Such cruelty if not admitted requires to be proved on the preponderance of probabilities as in civil cases and not beyond a reasonable doubt as in criminal cases. This Court has not accepted the test of proof beyond a reasonable doubt. As said by Chandrachud, J. in Dastane case (Ibid at p. 976):

“Neither section 10 of the Act which enumerates the 1017 grounds on which a petition for judicial separation may be presented nor section 23 which governs the jurisdiction of the Court to pass a decree in any proceedings under the Act requires that the petitioner must prove his case beyond a reasonable doubt. Section 23 confers on the court the power to pass a decree if it is “satisfied” on matters mentioned in clauses (a) to (e) of the section. Considering that proceedings under the Act are essentially of a civil nature, the word “satisfied” must mean “satisfied” on a preponderance of “probabilities” and not “satisfied beyond a reasonable doubt”. Section 23 does not alter the standard of proof in civil cases.” Let us now turn to the evidence in this case. It consists of that of wife as P.W. 1 as against the evidence of husband as R.W. 1. The parties have also produced the letters exchanged between them. There appears to be no doubt that the husband or his parents were demanding dowry from the appellant. The husband in his letter Ex. Al dated August 28, 1983 wrote to the wife:

“Now regarding Dowry point, I still feel that there is nothing wrong in my parents asking for few thousand rupees. It is quite a common thing for which my parents are being blamed, as harassment.” The wife in her evidence before the Court has stated:

“My Mother-in-law always used to make demand for money from my parents. I used to tell my parents about what was happening to me in that house. I used to keep silent when my mother-in-law made demands for money. The respondent also sometimes used to make demands for money.

I used to tell him as to why should I ask money from my parents, and I also used to tell him that I would not ask my parents. But he used to reply that such things were only there in olden times and not now and that therefore, I should ask money from my parents. There were fixed deposits receipts in my name in the Bank upto one and a half to two lakhs. Besides this there was house plot in my name at Jubilee Hills. I was afraid of telling my husband and my parents in law that I would not ask my parents for money.

1018 This I was afraid because I had an apprehension that something would be done to me either physically or mentally if I told them so. I entertained this apprehension because this went on regularly every day, that is their demands for money.

xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx I was afraid to go back again to the respondent’s house because I felt that the pestering for money will go on like this. I, therefore, developed aversion for going back to the respondent. For that reason, I joined as a school teacher.” The trial court or the High Court did not state that there was no demand for money. The case of the wife was, however, rejected on the ground that there was no satisfactoy evidence that the demands were such as to border on harassment. The trial court said:

“Though one would not justify demands for money, it has to be viewed in this perspective.

The respondent is a young up coming doctor. There is nothing strange in his asking his wife to give him money when he is in need of it. There is no satisfactory evidence that the demands were such as to border on harassment.” In regard to the admission by the husband in his letter dated August 28, 1983 as to the dowry demanded by his parents, the trial court observed:

“The letter should be read as a whole. The respondent has an explanation to make and has made one in the cross-examination. He is trying to confess. It is clear from the attitude of the petitioner that she is prone to exaggerate things.

That is evident from her complaint of food and the habit of drinking.” xxxxxx xxxxxx xxxxxx “Either because of her over sensitivity or because of her habit of exaggeration, she has made a mountain of mole-hill. Further, for the reasons best known to her, the petitioner 1019 has not examined her father. There is no explanation why he has not been examined in support of her contention that the respondent and his parents were harassing her for money.” The High Court also went on the same lines. The High Court said that the wife appears to be hypersensitive and she imagines too much and too unnatural things. The High Court then observed:

“Though one would not justify demands for money it has to be viewed in the circumstances from a proper angle. The respondent is a doctor, if he asks his rich wife to spare some money, there is nothing wrong or unusual.” This is not a case where the husband requested his wife to give some money for his personal expenses. The High Court appears to have misunderstood the case. It has evidently proceeded on a wrong basis. It proceeded on the ground that the husband wanted some money from his wife for his personal expenses. If the demand was only of such nature we would have thrown this appeal away. The wife must extend all help to husband and so too the husband to wife. They are partners in life. They must equally share happiness and sorrow. They must help each other. One cannot take pleasure at the cost of the other. But the case on hand is not of a failure on that front. It has been admitted by the husband himself in his letter dated August 28, 1983 addressed to the wife that his parents demanded dowry. But he wrote to the wife that there was nothing wrong in that demand of his parents. This is indeed curious. He would not have stated so unless he was party to the demand. The wife has stated in her evidence that there were repeated demands for money from her monther- in-law. Her evidence cannot be brushed aside on the ground that she has not examined her father. It was not the case of the wife that the dowry was demanded directly from her father. The evidence of the father was therefore not material. It is also not proper to discredit the wife as hypersensitive or prone to exaggeration. That would be judging the wife by our style of manners and our standard of life. That we cannot apply. We must try to understand her feelings and then search for the nugget of truth in the entire evidence.

The contents of Ex. Al should not be read in isolation.

It must be viewed against the background of accusations in the letter dated December 26, 1983 written by advocate for the wife to his counter-part. The relevant portion of the letter reads:

1020 “In the background of these, the worst form of ill trestment that is meted out to our client was constant harassment for monies. It may be brought to your notice that prior to marriage on demand by your client’s father a sum of Rs. 17,000 was given and also a Scooter thereafter. It may be brought to your notice that one other main reason for your client to dowry deaths which are very frequently seen now-a-days in papers. It may be pointed out that your clients philosophy is that since our client’s are financially sound, there is no wrong for your client’s parent to ask for few more thousands. It may be pointed out and brought to your notice that it appears your client’s sole object of marriage was to get the monies standing in the name of our client transferred to his name.

It would be better to understand that money that stand in our client’s name are somwhere about two lakhs. It is not out of place to mention that your client’s behaviour and treatment with our client could only be said to be a pointer for seeking these monies alone and marriage was a device………..” The cumulative effect of all the circumstances and the evidence of parties lead to the conclusion that the demand of dowry went on with the support of the husband. The High Court while dealing with this part of the case has observed that there is no evidence to show that the demands were such as to cause harassment to the wife. The High Court appears to have misconstrued the scope of cruelty in matrimonial affairs. The evidence as to harassment to the wife to meet any unlawful demand for money is necessary to constitute cruelty in criminal law. It is the requirement of the offence of `cruelty’ defined under sec. 498A of the Indian Penal Code. Sec. 13(1)(i-a) of the Hindu Marriage Act provides that the party has after solemanization of the marriage treated the petitioner with cruelty. What do these words mean? What should be the nature of cruelty? Should it be only intentional, wilful or deliberate? Is it necessary to prove the intention in matrimonial offence? we think not.

We have earlier said that cruelty may be of any kind and any variety. It may be different in different cases. It is in relation to the conduct of parties to a marriage. That conduct which is complained of as cruelty by one spouse may not be so for the other spouse. There may be instance of cruelty by the unintentional but inexcusable conduct of any party. The cruel treatment may also result by the cultural conflict of the spouses. In such cases, even if the act of cruelty is established, the intention to commit cannot be 1021 established. The aggrieved party may not get relief. We do not think that that was the intention with which the Parliament enacted sec. 13(1)(i-a) of the Hindu Marriage Act. The context and the set up in which the word ‘cruelty’ has been used in the section, seems to us, that intention is not a necessary element in cruelty. That word has to be understood in the ordinary sense of the term in matrimonial affairs. If the intention to harm, harass or hurt could be inferred by the nature of the conduct or brutal act complained of, cruelty could be easily established. But the absence of intention should not make any difference in the case, if by ordinary sense in human affairs, the act complained of could otherwise be regarded as cruelty. The relief to the party cannot be denied on the ground that there has been no deliberate or wilful ill-treatment. The same is also the line of reasoning adopted by the House of Lords in Gollins v. Gollins, [1963] UKHL 5; [1963] 2 All E.R. 966 at 976 where Lord Evershed said:

“I am unable to accept the premise that “cruelty” in matrimonial proceedings requires or involves of necessity the element of malignity- though I do not of course doubt that if malignity be in fact established it would be highly relevant to a charge of cruelty. In my opinion, however, the question whether one party to a marriage has been guilty of cruelty to the other or has treated the other with cruelty does not, according to the ordinary sense of the language used by Parliament, involve the presence of malignity (or its equivalent); and if this view be right it follows, as I venture to think, that the presence of intention to injure on the part of the spouse charged or (which is, as I think, the same thing) proof that the conduct of the party charged was “aimed at” the other spouse is not an essential requisite for cruelty. The question in all such cases is, to my mind, whether the acts or conduct of the party charged were “cruel” according to the ordinary sense of that word, rather than whether the party charged was himself or herself a cruel man or woman………….

Bearing in mind the proper approach to matrimonial offence, we are satisfied that the facts and circumstances brought out by the appellant in this case do justify an inference that there was demand for dowry. The demand for dowry is prohibited under law. That by itself is bad enough.

That, in our opinion, amounts to cruely entitling the wife to get a decree for dissolution of marriage.

1022 In the result, we allow the appeal and in reversal of the judgments of the courts below, we grant a decree for dissolution of the marriage. In the circumstances of the case, however, we make no order as to costs.

N.P.V. Appeal allowed.

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IN THE SUPREME COURT OF INDIA
DAILY RATED CASUAL LABOUR EMPLOYEDUNDER P & T DEPARTMENT THR …PETITIONER
Vs.
UNION OF INDIA & OTHERS …RESPONDENT
DATE OF JUDGMENT: 27/10/1987
BENCH: VENKATARAMIAH, E.S. (J) RANGNATHAN, S.
CITATION:
1987 AIR 2342 1988 SCR (1) 598
1988 SCC (1) 122 JT 1987 (4) 164
1987 SCALE (2)844
CITATOR INFO :
R 1988 SC 517 (3)
R 1988 SC 519 (4)
D 1989 SC1117 (3)
F 1990 SC 883 (2,8)
F 1991 SC 101 (223,241)
RF 1991 SC1173 (6)

ACT:

Constitution of India, 1950: Articles 14, 16, 37 and 38(2)-Posts and Telegraphs Department-Daily rated casual labour-Classification on basis of number of days of service for payment of wages-Whether Constitutional, justifiable and tenable whether opposed to International Covenant on Economic, Social and Cultural Rights-Non-regularisation of temporary employees or casual labour-Whether a wise policy Directions issued for preparation of scheme for absorption of casual labourers.

HELD: 1.1 The classification of employees in the present case into casual employees and regularly recruited employees for the purpose of paying less than the minimum pay payable to employees in the corresponding regular cadres particularly in the lowest rungs of the department, where the pay scales are the lowest is not tenable. The further classification of casual labourers into three categories, namely, (i) those who have not completed 720 days of service; (ii) those who have completed 720 days of service and not completed 1200 days of service, and (iii) those who have completed more than 1200 days of service for the purpose of payment of different rates of wages is equally untenable. There is clearly no justification for doing so.

Such a classification is violative of Articles 14 and 16 of the Constitution. It is also opposed to the spirit of Article 7 of the International Covenant on Economic, Social and Cultural Rights, 1966 which exhorts all States, parties to the Covenant to ensure fair wages and equal wages for equal work. [608E-H]

1.2 The State cannot deny at least the minimum pay in the pay scales of regularly employed workmen even though the Government may not be compelled to extend all benefits enjoyed by regularly recruited employees. Such denial amounts to exploitation of labour. [608Dl

1.3 The Government should be a model employer. It cannot take advantage of its dominant position, and compel any worker to work 600 even as a casual labourer on starving wages. It may be that the casual labourer has agreed to work on such low wages.

That he has done, because he has no other choice. It is poverty that has driven him to that state. [608E-Fl

1.4 It may be that the petitioners have not been regularly recruited, but many of them have been working continuously for more than a year in the Department, and some of them have been engaged as casual labourers for nearly ten years. They are rendering the same kind of service which is being rendered by the regular employees doing the same type of work. [608A-B]

1.5 Even though the Directive Principle contained in Article 38(2) may not be enforceable as such by virtue of Article 37 of the Constitution of India, it may be relied upon to show that they have been subjected to hostile discrimination. [608C ] Dhirendra Chamoli and Another v. State of U.P., [1986] 1 SCC V 637, relied on.

2.1 Non-regularisation of temporary employees or casual labour for a long period is not a wise policy. 610E-F]

2.2 India is a socialist republic. It implies the existence of cer- tain important obligations which the State has to discharge. Many rights like right to work, equal pay for equal work, security of work, etc. have to be ensured by appropriate legislation and executive measured. [609D-E]

2.3 If a person does not have the feeling that he belongs to an organisation engaged in production, he will not put forward his best effort to produce more. That sense of belonging arises only when he feels that he will not be turned out of employment the next day at the whim of management. Security of work should as far as possible be assured to the employees so that they may contribute to the maximisation of production. Managements and the Governmental agencies in particular should not allow workers to remain as casual labourers or temporary employees for an unreasonably long period of time. [609G-H; 610A]

2.4 The employees belonging to skilled, semi-skilled and unskilled classes can be shifted from one department to another even if there is no work to be done in a given place. Administrators should realise even as a casual labourer on starving wages. It may be that the casual labourer has agreed to work on such low wages. That he has done, because he has no other choice. It is poverty that has driven him to that state. [608E-F] 601 that if any worker remains idle on any day, the country loses the wealth that he would have produced during that day. Our wage structure is such that a worker is always paid less than what he produces. [610B-C]

3. The Union of India and the other respondents are directed to pay wages to the workmen who are employed as casual labourers at the rate equivalent to the minimum pay in the pay scales of the regularly employed workers in the corresponding cadres but without any increments with effect from 5th of February, 1986 and corresponding Dearness Allowance and Addl. Dearness Allowances, if any, payable thereon. Other benefits which are now being enjoyed by the casual labourers shall continue to be extended to them. The arrears of wages payable shall be paid within four months.

[609B-C; 610G] The respondents are directed to prepare a scheme for absorbing as far as possible the casual labourers who have been continuously working for more than one year in the Posts and Telegraphs Departments 610-Fl

ORIGINAL JURISDICTION: Writ Petition No. 373 of 1986.

(Under Article 32 of the Constitution of India).

A.K. Goel, E.X. Joseph and N.S. Das Bahl for the petitioners.

V.C. Mahajan, Girish Chandra, Mrs. Sushma Suri and Miss A. Subhashini for the Respondents.

The Judgment of the Court was delivered by VENKATARAMIAH, J. These petitions are filed on behalf of persons who are working as ‘Daily Rated Casual Labour’ in the Posts and Telegraphs Department. The ‘Daily Rated Casual Labour’ includes three broad categories of workers, namely, unskilled, semiskilled and skilled. The unskilled labour consists of safai workers, helpers, peons etc. and are mostly engaged in digging, carrying loads and other similar types of work. The semi-skilled labour consists of carpenters, wiremen, draftsmen, A.C. mechanics etc. who have technical experience but do not hold any degree or diploma.

The skilled labour consists of labour doing technical work, who hold requisite degrees/diplomas.

The principal complaint of the petitioners is that even though 602 many of them have been working for the last ten years as casual A labourers, the wages paid to them are very low and far less than the salary and allowances paid to the regular employees of the Posts and Telegraphs Department belonging to each of the categories referred to above and secondly no scheme has been prepared by the Union of India to absorb them regularly in its service and consequently they have been denied the benefits, such as increments, pension, leave facilities etc. etc. which are enjoyed by those who have been recruited regularly. They allege that they are being exploited by the Union of India.

They have produced the order of the Director General, Posts and Telegraphs Department bearing No. 28-II/77-SR/STN dated 15.5.1980 which prescribes the rate or rates of wages payable to the casual labour in the Telecommunication Wing of the Department. The relevant part of the order reads thus:

“No. 28-II/77-SR/STN Office of the Director General Posts and Telegraphs, New Delhi-1, 15.5.1980 To …………………………

Subject: Increase in rate of daily wages for the casual labour employed in the Telecom. Wing of P & T.

The employment of casual labour in the Telecom. Wing, who are working for a reasonably long period, on continuous basis was one of the items under discussion in the P & T Department council (JCM). The potential of absorption of the large force of casual mazdoor in regular grade was limited on the Telecommunication side. As an alternative to regular absorption it was proposed that a wage related to the minimum of the pay scale of Time-Scale Group-D cadre with the benefit of neutralisation for the rise in cost-Index as applicable to regular employees may be effected.

603

2. The President is now pleased to decide that the A rates of daily wages for the casual labour employed in the Telecom. Wing of P & T will be as follows:- (i) Casual labour who has not completed 720 days of service in a period of three years at the rate of 240 days per annum with the Department as on 1.4.80.

_________________________________________________ No change. They will continue to be paid at the approved local rates.

(ii) Casual labour who having been working with the Department from 1.4.77 or earlier and have completed 720 days of service as on 1.4.80.

__________________________________________________ Daily wages equal to 75% of 1/30th of the minimum of Group time Scale plus admissible D.A.

_________________________________________________ (iii) Casual labour who has been working in the Department from 1.4.1975 or earlier and has completed 1200 days of service as on 1.4.1980.

_________________________________________________ Daily wages equal to 1/30th of the minimum of the Group Time Scale plus 1/30th of the admissible D.A.

(iv) All the casual labourers will, however, continue to be employed on daily wages only.

(v) These orders for enhanced rates for category (ii) & (iii) above will take effect from 1.5.80.

(vi) A review will be carried out every year as on the Ist of April for making officials eligible for wages indicated in paras (ii) and (iii) above.

(vii) The above arrangement of enhanced rates of daily wages will be without prejudice to absorption of causal mazdoors against regular vacancies as and they occur ………………………………………….

604 sd/- (M.S. Yegneshwaran) Asst. Director General (Stn.)” The above order is followed by the another order bearing No. 10-4/83-R dated 26.7.1984 which reads as under:- To All General Managers Telecom.

Subject: Increase in rates of daily wages for the casual/ semi-skilled/skilled labour.

Sir, The employment of the casual semi skilled/skilled labour in the Telecom. Wing who are working for a reasonably long period, on continuous basis has been engaging the attention of this Directorate for quite sometime past. The potential of absorption of labour of the type in regular grade was limited on the Telecommunication side. As an alternative to regular absorption the need was being felt that wage related to the minimum of the pay scale of semi skilled skilled casual labour with the benefit of neutralisation for the rise in cost index as applicable to regular employees may be effected as is at present available to casual un-skilled labour working under the P & T Department.

2. The President is now pleased to decide that the rates of daily wages for the semi-skilled/skilled casual labour employed in the Telecom. Wing of the P & T Department will be as under:- (i) Casual semi-skilled/skilled labour who has not completed 720 days of service over a period of three years or more with the department.

_________________________________________________ No change. They will continue to be paid at the approved local rates.

(ii) Casual semi-skilled/skilled labour who has completed 605 720 days of service over a period of three years or more.

_________________________________________________ Daily wage equal to 75% of 1/30th of the minimum of the scale of semi-skilled (Rs. 210-270) or skilled (Rs.260-350) as the case may be, plus admissible DA/ADA thereon.

(iii) Casual Labour who has completed 1200 days of service over a period of 5 years or more.

__________________________________________________ Daily wage equal to 1/30th of the minimum of the pay scale of semi-skilled (Rs.210-270) skilled (Rs.260-350) as the case may be, plus DA/ADA admissible thereon.

(iv) All the casual semi-skilled/skilled labour will, however continue to be employed on daily wages only.

(v) These orders for enhanced rates for category (ii) and (iii) above will take effect from 1.4.1984. (vi) A review for making further officials eligible for wages vide (ii) and (iii) above will take effect as on Ist of April every year.

(vii) If the rates calculated vide (ii) and (iii) above happen to be less than the approved local rates, payment shall be made as per approved local rates for above categories of labour.

(viii) The above arrangements of enhanced rates of daily wages will be without prejudice to absorption of casual semi-skilled/skilled labour against regular vacancies as and when they occur.

(ix) The benefit of increased rates of daily wages will not be admissible to the casual semi- skilled/skilled labour in whose case the continuous spells of duty are intervened by a period of more than six months. The absence of more than six months may, however, be condoned by the Divisional Engineer on one of the two grounds namely, prolonged illness on production of medical certificates or nonemployment due to non- availability of work. In the case of 606 absence beyond six months at a time on account of illness for the past years, the production of medical certificate may not be insisted upon and the period of break may be condoned if the Divisional Engineer is satisfied about the genuineness of the absence

4. These enhanced rates of daily wages are applicable to the semi-skilled/skilled casual labour who strictly conform to the job content of corresponding regular posts in scales of Rs.210- 270 and Rs.260-350 as the case may be and that there should not be any variation in the respective job con tent. In case of slight variation/doubt cases may be referred to the . .

P. & T for review .

Yours faithfully, (V. Ramaswamy) Assistant Director General (Stn. )” Aggrieved by the discrimination made against them by these orders which very heavily weighed against them, the petitioners submitted a statement of demands through the Secretary General, BPTEF, New Delhi, of which they were members, claiming regularisation of casual labourers, payment of interim relief, payment of bonus, supply of dresses, leave and medical facilities etc. They received a reply from the Department on January 10, 1986 which read as under :- “Sub: Demands of casual labour-daily rated workers.

Ref: Your letter No. PF/Casual Labour/86 dated 13.

12. 1985.

Please refer to your above cited letter. The position regarding the various demands in your above cited letter is as below:- (i) Regularisation of Casual Labour.

This is being done as per existing instructions of department of Personnel & Training as against the vacancies as and when they arise.

607 (ii) Payment of interim relief.

Revision of wages is done once in a year for casual labourers of category 1 (those who have not completed 720/120O days in 3/5 years) in the month of April taking into account the prevailing local rates in consultation with the local authorities.

However, in respect of categories (ii) and (iii) i.e. for those who have completed 720/1200 days in 3/5 years, the revision is done as and when DA/ADA. Interim Reliefs are being granted to regular staff at the rate of 3/4th full of the minimum of the scale of regular class-IV employees …………….

(vii) Regularisation of skilled/semi/skilled/ unskilled labour in similar grade:- Provision has been made in the recruitment rules whereever possible to give preference in recruitment for corresponding semi-skilled/skilled workers. Regarding unskilled labour, they will be taken as Group staff as and when vacancies arise, on their becoming eligible for absorption as per instruction of DGP & T.

(S. KRISHAN) DIRECTOR (ST) 10.1.1986.” The petitioners were not satisfied with the above reply received by them. They, therefore, filed the above petitions and the first of them bearing Writ Petition No. 302 of 1986 was filed on 5.2.1986 for the issue of a writ in the nature of mandamus to the Union of India to direct it to pay to the petitioners same salary and allowances and other benefits as are being paid to the regular and permanent employees of the Union of India in the corresponding cadres and to direct the Union of India to regularise the service of the casual labour who had been in continuous service for more than six months.

The allegation made in the petitions to the effect that the petitioners are being paid wages far less than the minimum pay payable under the pay scales applicable to the regular employees belonging to corresponding cadres is more or less admitted by the respondents. The respondents, however, contend that since the petitioners belong to the category of casual labour and are not being regularly employed, they 608 are not entitled to the same privileges which the regular employees are enjoying. It may be true that the petitioners have not been regularly recruited but many of them have been working continuously for more than a year in the Department and some of them have been engaged as casual labourers for nearly ten years. They are rendering the same kind of service which is being rendered by the regular employees doing the same type of work. Clause (2) of Article 38 of the Constitution of India which contains one of the Directive Principles of State Policy provides that “the State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vacations.” Even though the above Directive Principle may not be enforceable as such by virtue of Article 37 of the Constitution of India, it may be relied upon by the petitioners to show that in the instant case they have been subjected to hostile discrimination. It is urged that the State cannot deny at least the minimum pay in the pay scales of regularly employed workmen even though the Government may not be compelled to extend all the benefits enjoyed by regularly recruited employees. We are of the view that such denial amounts to exploitation of labour.

The Government cannot take advantage of its dominant position, and compel any worker to work even as a casual labourer on starving wages. It may be that the casual labourer has agreed to work on such low wages. That he has done because he has no other choice. It is poverty that has driven him to that State. The Government should be a model employer. We are of the view that on the facts and in the circumstances of this case the classification of employees into regularly recruited employees and casual employees for the purpose of paying less than the minimum pay payable to employees in the corresponding regular cadres particularly in the lowest rungs of the department where the pay scales are the lowest is not tenable. The further classification of casual labourers into three categories namely (i) those who have not completed 720 days of service; (ii) those who have completed 720 days of service and not completed 1200 days of service and (iii) those who have completed more than 1200 days of service for purpose of payment of different rates of wages is equally untenable. There is clearly no justification for doing so. Such a classification is violative of Articles 14 and 16 of the Constitution. It is also opposed to the spirit of Article 7 of the International Covenant on Economic, Social and Cultural Rights, 1966 which exhorts all States parties to ensure fair wages and equal wages for equal work. We feel that there is substance in the contention of the petitioners 609 In Dhirendra Chamoli and Another v. State of U.P., [1986] 1 SCC 637 this Court has taken almost a similar view with regard to the employees working in the Nehru Yuvak Kendras who were considered to be performing the same duties as Class IV employees. We accordingly direct the Union of India and the other respondents to pay wages to the workmen who are employed as casual labourers belonging to the several categories of employees referred to above in the Postal and Telegraphs Department at the rates equivalent to the minimum pay in the pay scales of the regularly employed workers in the corresponding cadres but without any increments with effect from 5th of February, 1986 on which date the first of the above two petitions, namely, Writ Petition No. 302 of 1986 was filed. The petitioners are entitled to corresponding Dearness Allowance and Addl.

Dearness Allowance, if any, payable thereon. Whatever other benefits which are now being enjoyed by the casual labourers shall continue to be extended to them.

India is a socialist republic. It implies the existence of certain important obligations which the State has to discharge. The right to work, the right to free choice of employment, the right to just and favourable conditions of work, the right to protection against unemployment, the right of every one who works to just and favourable remuneration ensuring a decent living for himself and for family, the right of every one without discrimination of any kind to equal pay for equal work, the right to rest, leisure, reasonable limitation on working hours and periodic holidays with pay, the right to form trade unions. and the right to join trade unions of one’s choice and the right to security of work are some of the rights which have to be ensured by appropriate legislative and executive measures.

It is true that all these rights cannot be extended simultaneously. But they do indicate the socialist goal. The degree of achievement in this direction depends upon the economic resources, willingness of the people to produce and more than all the existence of industrial peace throughout the country. Of those rights the question of security of work is of utmost importance. If a person does not have the feeling that he belongs to an organization engaged in production he will not put forward his best effort to produce more. That sense of belonging arises only when he feels that he will not be turned out of employment the next day at the whim of the management. It is for this reason it is being repeatedly observed by those who are in charge of economic affairs of the countries in different parts of the world that as far as possible security of work should be assured to the employees so that they may contribute to the maximisation of production. It is again for this reason that managements and the Government agencies in particular should not allow 610 workers to remain as casual labourers or temporary employees for an unreasonably long period of time, where is any justification to keep persons as casual labourers for years as is being done in the Postal and Telegraphs Department? Is it for paying them lower wages? Then it amounts to exploitation of labour. Is it because you do not know that there is enough work for the workers? It cannot be so because there is so much of development to be carried out in the communications department that you need more workers.

The employees belonging to skilled, semi-skilled and unskilled classes can be shifted from one department to another even if there is no work to be done in a given place. Administrators should realise that if any worker remains idle on any day, the country loses the wealth that he would have produced during that day. Our wage structure is such that a worker is always paid less than what he produces. So why allow people to remain idle? Anyway they have got to be fed and clothed. Therefore, why don’t we provide them with work? There are several types of work such as road making, railway construction, house building, irrigation projects, communications etc. which have to be undertaken on a large scale. Development in these types of activities (even though they do not involve much foreign exchange) is not keeping pace with the needs of society. We are saying all this only to make the people understand the need for better management of man power (which is a decaying asset) the non-utilisation of which leads to the inevitable loss of valuable human resources. Let us remember the slogan: “Produce or Perish”. It is not an empty slogan. We fail to produce more at our own peril. It is against this background that we say that non-regularisation of temporary employees or casual labour for a long period is not a wise policy. We, therefore, direct the respondents to prepare a scheme on a rational basis for absorbing as far as possible the casual labourers who have been continuously working for more than one year in the Posts and Telegraphs Department.

The arrears of wages payable to the casual labourers in accordance with this order shall be paid within four months from today. The respondents shall prepare a scheme for absorbing the casual labourers, as directed above, within eight months from today.

These petitioners are accordingly disposed of.

N.P.V. Petitions disposed of.

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IN THE SUPREME COURT OF INDIA
SHEELA BARSE …PETITIONER
Vs.
STATE OF MAHARASHTRA …RESPONDENT
DATE OF JUDGMENT: 18/09/1987
BENCH: MISRA RANGNATH DUTT, M.M. (J)
CITATION: JT 1988 (3) 15

ACT:

Permission to journalists to interview prisoners and tape-record the interviews, guarantees under Articles 19(1)(a) and 21-Benefits thereof for all the citizens.

HELD: The term ‘life’ in Article 21 covers the living conditions of the prisoners, prevailing in the jails. The prisoners are also entitled to the benefit of the guarantees provided in the Article subject to reason able restrictions.

It is necessary that public gaze should be permitted on the prisoners, and the pressmen as friends of the society and public spirited citizens should have access to information about, and interviews with, the prisoners. But such access has to be controlled and regulated. The petitioner is not entitled to uncontrolled interviews. The factual information collected as a result of the interviews should usually be 211 cross-checked with the authorities, so that a wrong picture of a situation may not be published. Disclosure of correct information is necessary, but there is to be no dissemination of wrong information. Persons, who get permission to interview have to abide by reasonable restrictions. As for tape-recording the interviews, there may be cases where such tape-recording is necessary, but tape-recording is to be subject to special permission of the appropriate authority. There may be some individuals or class of persons in the prisons with whom interviews may not be permitted for reasons indicated by this Court in Prabha Dutt v. Union of India & ors.[1981] INSC 191; , [1982] 1 S.C.R. 1184. The interviews cannot be forced upon anyone and willingness of the prisoners to be interviewed is always to be insisted upon. There may also be certain other cases, where, for good reasons, permission to interview the prisoners may be withheld, which situations can be considered as and when they arise. [215C; 217F; 218B, E-H; 219A-B] The petitioner can make a fresh application for permission to interview the prisoners, which is to be dealt with in accordance with the guidelines laid down hereinabove. [219B] Prabha Dutt v. Union of India & ors., [1982] 1 S.C.R.

1184; Sunil Batra v. Delhi Administrator, [1979] 1 S.C.R.

392 and Francis Coralie Mulin v. Administrator, Union Territory of Delhi and ors., [19811 1 S.C.C. 608, referred to.

ORIGINAL JURISDICTlON: Writ Petition No. 1053 of 1982.

(Under Article 32 of the Constitution of India).

Suleman Khurshid and K.K. Luthra for the Petitioner.

S.B. Bhasme, A.M. Khanwilkar and A.S. Bhasme for the Respondent.

L.R. Singh for the Intervener.

The Judgment of the Court was delivered by RANGANATH MISRA, J. Petitioner is a Bombay-based free lance journalist who had sought permission to interview women prisoners in the Maharashtra jails and on 6.5.1982, the Inspector-General of Prisons of the State permitted her to do so in respect of female prisoners lodged in the Bombay Central Jail, the Yerawada Central Jail at Pune and the Kolhapur District Jail. When the petitioner started 212 tape-recording her interviews with the prisoners at the Bombay Central Jail, she was advised instead to keep notes only of interviews. When the petitioner raised objection on this score, the Inspector-General of Prisons orally indicated that he had changed his mind. Later, the petitioner was informed that grant of permission to have interview was a matter of discretion of the Inspector- General and such interviews are ordinarily allowed to research scholars only. Petitioner has made grievance over the withdrawal of the permission and has pleaded that it is the citizen’s right to know if Government is administering the jails in accordance with law. Petitioner’s letter was treated as a writ petition under Article 32 of the Constitution.

Return has been made to the rule nisi and the Inspector-General of Prisons in his affidavit has pleaded that the petitioner is a free lance journalist and is not employed by any responsible newspaper. The permission issued in favour of the petitioner was under administrative misunderstanding and mistaken belief and was in contravention of the Maharashtra Prison Manual. When this fact was discovered the permission was withdrawn. It has been pleaded that interview with prisoners is governed by the rules made in the Maharashtra Prison Manual and the petitioner does not satisfy the prescription therein so as to justify grant of permission for having interviews with prisoners. The Inspector-General wrote a letter to the petitioner on 31st May, 1982, explaining therein that normally the prison authorities do not allow interviews with the prisoners unless the person seeking interview is a research scholar studying for Ph. D. Or intends to visit the prison as a part of his field work of curriculum prescribed for post graduate course etc. The letter further indicated that there was no rules for permitting interviews except to the relatives and legal advisers for facilitating defence of prisoners. The Inspector-General further indicated in his letter that there was no inherent right of journalists to elicit information from prisoners.

The counter affidavit further indicated that the State Government has prescribed a set of rules known as the Maharashtra Visitors of Prisons Rules, 1962. A Board of Visitors is constituted for every jail and the Board consists of both ex-officio visitors and non-official visitors appointed by the State Government. The members of the Board are expected to inspect the barracks, cell wards, work sheds and other buildings; ascertain or make enquiries about the health, cleanliness, security of prisoners and examine registers of convicted and under trial prisoners, punishment books, other records relating to prisoners, attend to representations, objections etc. made by prisoners, make 213 entries in the visitors’ book abou their visits. It was finally indicated in A the counter affidavit that the petitioner was an amateur journalist and had published ‘certain articles in the newspapers and magazines without realising the impact thereof; many of such allegations and the so-called hearsay stories said to have been collected from the under trials were one-sided and nothing but exaggeration of facts. Such articles written by her were defamatory, irresponsible and no mature journalist would have published such reckless articles.

We have heard Mr. Salman Khurshid Ahmed for the petitioner and Mr. Bhasme for the State of Maharashtra and have considered the written submissions filed on behalf of both in furtherance of their submissions.

According to the petitioner and her counsel Articles 19(1)(a) and 21 guarantee to every citizen reasonable access to information about the institutions that formulate, enact, implement and enforce the laws of the land. Every citizen has a right to receive such information through public institutions including the media as it is physically impossible for every citizen to be informed about all issues of public importance individually and personally. As a journalist, the petitioner has a right to collect and disseminate information to citizens. The press has a special responsibility in educating citizens at large on every public issue. The conditions prevailing in the Indian prisons where both under trial persons and convicted prisoners are housed is directly connected with Article 21 of the Constitution. It is the obligation of Society to ensure that appropriate standards are maintained in the jails and humane conditions prevail therein. In a participatory democracy as ours unless access is provided to the citizens and the media in particular it would not be feasible to improve the conditions of the jails and maintain the quality of the environment in which a section of the population is housed segregated from the rest of community.

On behalf of the State it has been contended that neither of the Articles is attracted to a matter of this type. The rules made by the Government are intended to safeguard the interests of the prisoners. The Board contemplated under the Rules consists of several public officers both executive and judicial. Apart from that there is a body of non-official visitors as provided in Rule 5 of the Maharashtra Rules. Detailed provisions have been made in the Rules as to the duties of the visitors and the manner in which the visitors have to perform the same. It has been further contended that the idea of segregating the prisoners from the community is to keep the prisoners under strict control and H 214 cut off from the community. If unguided and uncontrolled right of visit is provided to citizens it would be difficult to maintain discipline and the very purpose of keeping the delinquents in prison would be frustrated.

In the case of Prabha Dutt v. Union of India & ors., 119821 1 SCR 1184 this Court was considering the claim of a jounalist to interview two condemned prisoners awarding execution. The learned Chief Justice said:

“Before considering the merits of the application, we would like to observe that the constitutional right to freedom of speech and expression conferred by Article 19(1)(a) of the Constitution, which includes the freedom of the press, is not an absolute right, nor indeed does it confer any right on the press to have an unrestricted access to means of information. The press is entitled to exercise its freedom of speech and expression by publishing a matter which does not invade the rights of other citizens and which does not violate the sovereignty and integrity of India, the security of the State, public order, decency and morality. But in the instant case, the right claimed by the petitioner is not the right to express any particular view or opinion but the right to means of information through the medium of an interview of the two prisoners who are sentenced to death. No such right can be claimed by the press unless in the first instance, the person sought to be interviewed is willing to be interviewed. The existence of a free press does not imply or spell out any legal obligation on the citizens to supply there is under section 161 (2) of the Criminal Procedure Code. No data has been made available to us on the basis of which it would be possible for us to say that the two prisoners are ready and willing to be interviewed Dealing with the matter further learned Chief Justice stated:

“Rule 549 (4) of the Manual for the Superintendence and Management of Jails, which is applicable to Delhi, provides that every prisoner under a sentence of death shall be allowed such interviews and other communications with his relatives, friends and legal advisers as the Superintendent thinks reasonable.

Journalists or newspapermen are not 215 expressly referred to in clause (4) but that does not mean that they can always and without good reasons be denied the opportunity to interview a condemned prisoner. If in any given case, there are weighty reasons for doing so, which we expect will always be recorded in writing, the interview may appropriately be refused. But no such consideration has been pressed upon us and therefore we do not see any reason why newspapermen who can broadly, and we suppose without great fear of contradiction, be termed as friends of the society be denied the right of an interview under clause (4) of the Rule 549.” That Article 19(1)(a) of the Constitution guarantees to all citizens to freedom of speech and expression is not the point in issue; but the enlarged me. ng given to the provisions of Article 21 by this Court would, however, is relevant. The meaning given to the term ‘life’ will cover the living condition prevailing in jails.

In Sunil Batra v. Delhi Administration, [1978] INSC 148; [1979] 1 SCR 392 a Constitution Bench of this Court was examining the effect of Article 21 in regard to a condemned prisoner. The Court observed thus:

“Judges, even within a prison setting, are the real, though restricted, ombudsmen empowered to prescribe and prescribe, humanize and citizens and life-style within the carcers. The operation of Articles 14, 19 and 21 may be pared down for a prisoner but not puffed out altogether. For example, public addresses by prisoners may be put down but talking to fellow prisoners cannot. Vows of silence or taboos on writing poetry or drawing cartoons are violative of Article 19. So also, locomation may be limited by the needs of imprisonment but binding hand and foot, with hoops of steel, every man or woman sentenced for a term is doing violence to Part III .. ” The Constitution Bench quoted with approval from Munn v. Ilino’s, [1876] USSC 149; [1877] 94, U.S. 113, to emphasise the quality of life covered by Article 21. The same Constitution Bench judgment further states: – “….. so, when human rights are hashed behind bars, constitutional justice impeaches such law.

In this sense, courts which sign citizens into prisons have an onerous duty to ensure that, during detention and subject to the 216 Constitution, freedom from torture belongs to the detenu.” In Francis Coralie Mulin v. Administrator, Union Territory of Delhi & ors.[1981] INSC 12; , [1981] 1 Scc 608 this Court pointed out that:

” … A prisoner or detenu is not stripped of his fundamental or other legal rights, save those which are inconsistent with his incarceration and if the constitutional validity of any such law is challenged, the court would have to decide whether the procedure laid down by such law for depriving a person of his personal liberty is reasonable, fair and just .. ..

It was also pointed out in this case that ‘life’ included the right to live with human dignity In A.K. Roy etc. v.

Union of India & Anr., [ 1982]2 SCR the word was found:

“………. to include the necessity of right such as nutrition, clothing shelter over the head, facilities for reading, writing, interviews with members of the family and friends, subject, of course, to present regulation, if any . . . . . .

. . . . .

Counsel for the petitioner relied upon the observations of this Court in the case of S.P. Gupta & OrS. v. Union of India & orS., [1982] 2 SCR 365 at page 598, where it was said:

“Now it is obvious from the Constitution that we have adopted a democratic form of Government.

Where a society has chosen to accept democracy as its creda faith it is elementary that the citizens ought to know what their government is doing The citizens have a right to decide by whom and by what rules they shall be governed and they are entitled to call on those who govern on their behalf to account for their conduct No democratic government can survive without accountability and the basic postulate of accountability is that the people should have information about the functioning of the government. It is only if people know how government is functioning that they can fulfil the role which democracy assigns to them and make democracy a really effective participatory democracy. “Knowledge said James Madison, ‘will for ever govern ignorance and a people who mean to be their own gover- 217 nors must arm themselves with the power knowledge gives.A popular government without popular information on the means of obtaining it, is but a prologue to a force or tragedy or perhaps both’.

The citizens’ right to know the facts, the true facts, about the administration of the country is thus one of the pillars of a democratic State. And that is why the demand for openness in the government is increasingly growing in different parts of the world.” “The demand for openness in the government is based principally on two reasons. It is now widely accepted that democracy does not consist merely in people exercising their franchise once in five years to choose their rulers, and once the vote is cast, then retiring in passivity and not taking any interest in the government. Today it is common ground that democracy has a more positive content and its orchestration has to be continuous and pervasive. This means inter alia that people should not only cast intelligent and rational votes but should also exercise sound judgment on the conduct of the government and the merits of public policies, so that democracy does not remain merely a sporadic exercise in coting but becomes a continuous process of government-an attitude and habit of mind. But this important role people can fulfil in a democracy only if it is an open government where there is a full access to information in regard to the functioning of the government ” We endorse these observations as a correct statement of the position. We also reiterate the views expressed in several decisions of this Court that “life” in Article 21 has the extended meaning given to the word and those citizens who are detained in prisons either as under-trials or as convicts are also entitled to the benefit of the guarantees subject to reasonable restrictions.

Judicial notice should be taken of the position that on account of intervention of courts there has been a substantial improvement in the conditions prevailing in jails. The provisions of jail manuals have undergone change;

the authorities connected with the jail administration have changed their approach to administration and method of control there has been a new awakening both in citizens in general and the people detained in jail. Indisputably intervention of the courts has been possible on account of petitions and protests lodged from jails;

218 news items published in the Press. We may not be taken to mean that the rules prescribed for administration of prisons are of no value at all. Yet, until the appropriate attitude grows in the administrative establishment the provisions in the several manuals applicable to the jails in the country would not provide adequate safeguard for implementation of the standards indicated in judicial decisions. It is, therefore, necessary that public gaze should be directed to the matter and the pressmen as friends of the society and public spirited citizens should have access not only to information but also interviews. Prison administrators have the human tendency of attempting to cover up their lapses and so shun disclosure thereof. As an instance, we would like to refer to incidents in the Tihar Jail located at the country’s capital under the very nose of the responsible administrators.

In such a situation we are of the view that public access should be permitted. We have already pointed out that the citizen does not have any right either under Article 19(1)(a) or 21 to enter into the jails for collection of information but in order that the guarantee of the fundamental right under Article 21 may be available to the citizens detained in the jails, it becomes necessary to permit citizen’s access to information as also interviews with prisoners. Interviews become necessary as otherwise the correct information may not be collected but such access has got to be controlled and regulated.

We are, therefore, not prepared to accept the petitioner’s claim that she was entitled to uncontrolled interview. We agree with the submission of Mr. Bhasme for the respondent that as and when factual information is collected as a result of interview the same should usually be cross-checked with the authorities so that a wrong picture of the situation may not be publised. While disclosure of correct information is necessary, it is equally important that there should be no dissemination of wrong information. We assume that those who receive permission to have interviews will agree to abide by reasonable restrictions. Most of the manuals provide restrictions which are reasonable. As and when reasonableness of restrictions is disputed it would be a matter for examination and we hope and trust that such occasions would be indeed rare. We see reason in the stand adopted by Mr. Bhasme relating to the objections of his client about tape-recording by interviewers. There may be cases where such tape-recording is necessary but we would like to make it clear that tape-recording should be subject to special permission of the appropriate authority. There may be some individuals or class of persons in prison with whom interviews may not be permitted for the reasons indicated by this Court in the case of 219 Prabha Dutt (supra). We may reiterate that interviews cannot be A forced and willingness of the prisoners to be interviewed would always be insisted upon. There may be certain other cases where for good reason permission may also be withheld. These are situations which can be considered as and when they arise.

The petitioner is free to make an application to the prescribed authority for the requisite permission and as and when such application is made, keeping the guidelines indicated above, such request may be dealt with. There will be no order for costs.

S . L. Petition disposed of.

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IN THE SUPREME COURT OF INDIA
STATE OF GUJARAT …PETITIONER
Vs.
MOHANLAL JITAMALJIPORWAL & ANR. …RESPONDENT
DATE OF JUDGMENT: 26/03/1987

BENCH: THAKKAR, M.P. (J) NATRAJAN, S. (J)

CITATION:
1987 AIR 1321 1987 SCR (2) 677
1987 SCC (2) 364 JT 1987 (1) 783
1987 SCALE (1)598

CITATOR INFO :
RF 1992 SC 604 (49)

ACT:

Customs Act, 1962: s. 123 and s. 135(1) read with s.

III-Presumption that goods seized were smuggled goods When to be raised–‘Reasonable belief’–Connotation of.

Code of Criminal Procedure, 1973:s.391–Additional evi- dence to prove a document–Admissibility of–Lapse of six years–Whether material.

Practice & Procedure Criminal Trial–Economic offences–Cause of the communi- ty-Courts to give equal treatment.

HELD: 1.1 The view taken by the High Court that the presumption under s. 123 of the Customs Act that the seized article was smuggled gold could not be raised was altogether unreasonable and cannot be sustained. [681E-F]

1.2 Whether or not the official concerned had seized the article in the “reasonable belief’ that the goods were smuggled goods was not a question on which the Court could sit in appeal. If prima facie there were grounds to justify the belief the Courts have to accept the officer’s belief regardless of the fact whether the Court of its own might or might not have entertained the same belief. Section 123 of the Customs Act does not admit of any other construction.

[682A-C] Pukhran v. D.R. Kholi, [1962] 3 Supp. S.C.R. 866, applied.

1.3. In the instant case, the conduct of respondent No.1 in coating the article of pure gold with mercury to make it appear as if it was of silver was itself a conduct which could have provided the basis for entertaining a reasonable belief that the article was a smuggled article. This was an extremely unusual circumstance which would have aroused the suspicion of anyone. When the goldsmith was summoned at the railway station to test the article on the spot, and he expressed the opinion that it was made of pure gold, there was no scope for taking any other view. The acceptance of this evidence would, in view of the provisions of s. 123 of the Customs Act, result in the burden of proof being shifted on the person from whom the article was seized to establish that it was not smuggled gold, which would justify raising the presumption that the article in question was made of smuggled gold. [683C; 681E] lsardas Daulat Ram & Ors. v. The Union of India & Ors., [1962] Suppl. 1 S.C.R. 358, referred to.

2. The High Court was altogether unjustified in reject- ing the application of the prosecution invoking the powers of the Court under s. 391 of the Code of Criminal Procedure for reception of additional evidence. The prayer was reject- ed by the High Court on the ground that it did not consider it ‘expedient in the interests of justice to open a new vista of evidence’ in view of the fact that the offence had taken place six years back. The mere fact that six years had elapsed, for which time lag the prosecution was in no way responsible was no good ground for refusing to act in order to promote the ends of justice in an age when 679 delays in the Court have become very common. The opinion of the Mint Master, which had admittedly been placed on record, though had not been formally proved, completely supported the case of the prosecution that the gold was of the speci- fied purity. To deny the opportunity to remove the formal defect was to abort a case against an alleged economic offender. The matter remitted to the High Court. An appro- priate direction shall be issued for recording of the evi- dence to prove the report of the Mint Master. [683F-H; 684A;

E-F] Ends of justice are not satisfied only when the accused in a criminal case is acquitted. The Community acting through the State and the Public Prosecutor is also entitled to justice. The cause of the Community deserves equal treat- ment at the hands of the court in the discharge of its judicial functions. The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. [684A-B]

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 74 of 1978.

From the Judgment and Order dated 3.11.1976 of the Gujarat High Court in Criminal Appeal No. 95 of 1975.

Girish Chandra and M .N. Shroff for the Appellant.

Dalveer Bhandari and S.K. Jain for the Respondents.

The Judgment of the Court was delivered by THAKKAR, J. A passenger travelling by a train, (respond- ent no. 1 herein) who had adorned his waistline with a waistchain (kandora) weighing 820 grammes, which according to the prosecution, was made of pure gold and was coated with mercury so as to give an appearance of being made of silver was acquitted by the trial court relying on the evidence of a licensed gold dealer as a defence witness, who, as per the narration in para. 17 of the judgment of the trial court, stated that:- ” ……. such chains are put on as ‘kando- ra’ on the waist of ladies and gents in Rajas- than. He had sold such kandoras and seen people putting on such kandoras in Rajasthan State on their waist. Such chains or kandoras can be prepared out of pure gold as well as mixed gold. In old times 680 such kandoras used to be prepared out of pure gold. In these days such type of kandoras are sold out to us by people. The witness further states that the design of muddamal chain was much in vogue in Rajasthan as because of unsoldered hooks it would fetch full value on sale. By pure gold he meant gold of more than 99.60 purity or 24 carats purity. According to him about 25 years back sharaps of Rajasthan were not allowed to sell gold of less purity than 99.60 under Mewari State Law ……. “.

The Learned Trial magistrate persuaded himself that the aforesaid evidence established that it was an ornament and not primary gold. The learned Magistrate acted with an impropriety in making himself a witness for the defence by observing:- ” ….. I have seen the seized gold chain myself in court. It cannot be called in unfinished state or form. It is an ornament ….. ” The trial court in these premises held that what was seized was an ‘ornament’ and not ‘primary gold’. The trial court accordingly acquitted the respondent-accused of the charge for an offence under Section 85 of the Gold (Control) Act of 1968. It is a matter of great concern that the High Court confirmed this finding by overlooking a significant circum- stance which stood out a mile. If the chain was bona fide worn as an ornament, it would not have been plated with silver. The desire to show off being the basic purpose of wearing an ornament, one may subject an ornament of silver to gold plating. But one would not subject an ornament of pure gold to silver plating. It was obvious that it was a deceitful device to evade the law. Be that as it may, this aspect need not be probed further in view of the fact that the appeal preferred by the State against the order of acquittal in so far as it concerns the offence under Section 85 of the Gold (Control) Act, 1968 was not pressed. Suffice it to say that the approach made by the trial court evinces a permissive and over-indulgent attitude towards the viola- tors of laws enacted to prevent and punish economic of- fences.

The occasion for approaching this Court has been provid- ed by the view taken by the High Court in regard to the charge for an offence under Section 135(1) read with Section III of the Customs Act. The charge against respondent no. 1 was that he was concerned with acquisition, carriage, keep- ing or concealing with the goods which were liable to be confiscated under Section III having regard to the fact that there was a prohibition against the import into India of goods which 681 were found in his possession namely pure gold of the speci- fied fineness i.e. 99.60 or 24 carat. It needs to be re- called that Respondent No. 1 had adorned himself with a gold chain which was coated with mercury in order to give it an appearance that it was made of silver. The trial court disregarded the evidence of P.W.3, the gold-smith who certi- fied that the chain was made of pure gold and that the presumption under Section 123(1) of the Customs Act could not be raised as in the opinion of the learned Magistrate, P.W. 1 Mahida, Superintendent of Customs who had made the seizure could not have “entertained a reasonable belief” that the article in question was made of smuggled gold. The trial court also found fault in regard to the proof of report of the Mint Master that the article in question was made of pure gold of the specified fineness.

The High Court confirmed the acquittal on all the three grounds. The request made by the learned Assistant Public Prosecutor for adducing additional evidence under Section 391 of the Code of Criminal Procedure in order to remove the alleged formal defect in the proof of the Mint Master was rejected. That is why the matter has been brought before this Court by way of the present appeal.

P.W. 1, Superintendent of Customs Shri Mahida testified that he had seized the article in question in the reasonable belief that the same was an article made of smuggled gold.

The acceptance of this evidence would result in the burden of proof being shifted on the person from whom the article was seized to establish that it was not smuggled gold in view of the statutory provision Section 123 of Customs relating to burden of proof which would justify raising the presumption that the article in question was made of smug- gled gold. Whether or not the

1. “123. Burden of proof in certain cases–(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they arc smuggled goods, the burden of proving that they are not smuggled goods shall (a) in a case where such seizure is made from the possession of any person.– (i) on the person from whose possession the goods were seized; and (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also, on such other person;

(b) in any’ other case, on the person, if any who claims 10 be the owner of the goods seized,

2. This section shall apply to gold, diamonds, manufacturers of gold or diamonds. watches and any other class of goods which the Central Government may by notification in the Official Gazette specify.” 682 official concerned had seized the article in the “reasonable belief” that the goods were smuggled goods is.not a question on which the Court can sit in appeal. The law to this effect has been declared in no ambiguous terms in Pukhran v.D.R.

Kholi[1962] INSC 97; , AIR 1962 S.C. 1559 = 1962 (3) Supp. S.C.R. 866. This Court has administered caution to the Courts not to sit in appeal in regard to this question and has observed that if prima facie there are grounds to justify the belief the Courts have to accept the officer’s belief regardless of the fact whether the court of its own might or might not have entertained the same belief. The law declared by this Court is binding to the High Court and it was not open to the High Court to do exactly what it was cautioned against by this Court. Section 123 of the Act does not admit of any other construction. Whether or not the officer concerned had entertained reasonable belief under the circumstances is not a matter which can be placed under legal microscope, with an over-indulgent eye which sees no evil anywhere within the range of its eyesight. The circumstances have to be viewed from the experienced eye of the officer who is well equipped to interpret the suspicious circumstances and to form a reasonable belief in the light of the said circumstances. In the present case the concerned official had mentioned three circumstances which made him entertain the reasonable belief that the article was a smuggled one viz:

(1) On the basis of the prior information he was alert and was on the look out, watching the movements of respond- ent no. 1.

(2) The chain which had adorned the waistline of respond- ent no. 1 was coated with mercury so as to give an appear- ance of being made of silver.

(3) As per the opinion of the goldsmith it was made of pure gold.

If these circumstances did not make the Superintendent of Customs entertain a reasonable belief that it was a smuggled article, he was not fit to be an Officer of the Customs Department. The circumstance that the chain was coated with mercury and given an appearance of having been made of silver though it was made of pure gold of 99.60 purity or 24 carat, was sufficient even for a layman, not to speak of a Customs official, to entertain the belief that it was smug- gled gold. Would any one who was wearing an article as an ornament, evidently for ostentious purposes, given the article of pure gold the appearance of being made of silver? To repeat the observation made earlier one might coat an article of silver to give an appearance of having been made of gold but no one would ordinarily take the trouble and incur the expenditure to 683 coat an article of gold in order to give it an appearance of having been made of silver. This was an extremely unusual circumstance which would have aroused the suspicion of anyone. When the goldsmith was summoned at the Railway Station to test the article on the spot, and he expressed the opinion that it was made of pure gold, there was no scope for taking any other view. Even if a layman, let alone a judge, were to ask himself the question as to whether in these circumstances he would have entertained a reasonable belief that the article was a smuggled article inasmuch as gold of this purity is manufactured only in foreign coun- tries which have sophisticated equipment and the further fact that an attempt to camouflage the article was made by the person concerned his commonsense would not have given himself any other answer. The conduct of respondent no. 1 in coating the article of pure gold to make it appear as if it was of silver was itself a conduct which could have provided the basis for entertaining a reasonable belief it being a relevant piece of evidence as per the law declared by this Court in Isardas Daulat Ram & others v. The Union of India & others, [1962] Suppl. 1 S.C.R. 358 = A.I.R. 1966 SC, 1867.

The view taken by the High Court is altogether unreasonable and accordingly it cannot be sustained.

The next question which arises is as regards the request made by the learned Assistant Public Prosecutor for adducing additional evidence in order to prove letter Ex. 26 received from the Mint Master certifying that the article in question was made of gold of the purity of 99.60. The request was made in order to invoke the powers of the Court under Sec- tion 391 of the Code of Criminal Procedure, 1973, which inter alia provides that in dealing with any appeal under Chapter XXIX the appeal court, if it thinks additional evidence to be necessary, shall record its reasons and may either take such evidence itself or ask it to be taken by a Magistrate. The High Court rejected the prayer on the ground that it did not consider it “expedient in the interests of justice to open a new vista of evidence” in view of the fact that the offence had taken place six years back. The mere fact that six years had elapsed, for which time-lag the prosecution was in no way responsible, was no good ground for refusing to act in order to promote the interests of justice in an age when delays in the Court have become a part of life and the order of the day. Apart from the fact that the alleged lacuna was a technical lacuna in the sense that while the opinion of the Mint Master had admittedly been placed on record it had not been formally proved the report completely supported the case of the prosecution that the gold was of the specified purity. To deny the opportuni- ty to remove the formal defect was to abort a case 684 against an alleged economic offender. Ends of justice are not satisfied only when the accused in a criminal case is acquitted. The Community acting through the State and the Public Prosecutor is also entitled to justice. The cause of the Community deserves equal treatment at the hands of the court in the discharge of its judicial functions. The Commu- nity or the State is not a person-non-grata whose cause may be treated with disdain. The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner with- out fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest. The High Court was therefore altogether unjustified in rejecting the application made by the learned Assistant Public Prosecutor invoking the powers of the Court under Section 391 of the Code of Criminal Procedure. We are of the opinion that the application should have been granted in the facts and cir- cumstances of the case with the end in view to do full and true justice. The application made by the learned Assistant Public Prosecutor is therefore granted. The High Court will issue appropriate directions for the recording of the evi- dence to prove the report of the Mint Master under Section 391 Cr. P.C. when the matter goes back to High Court and is listed for directions. The appeal is therefore allowed. The order of acquittal is set aside. The matter is remitted to the High Court for proceeding further in accordance with law in the light of the abovesaid directions.

P.S.S. Appeal al- lowed.

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IN THE SUPREME COURT OF INDIA

INDER MOHAN LAL …PETITIONER
Vs.
RAMESH KHANNA …RESPONDENT

DATE OF JUDGMENT: 04/08/1987

BENCH: MUKHARJI, SABYASACHI (J) NATRAJAN, S. (J)

CITATION:
1987 AIR 1986 1987 SCR (3) 765
1987 SCC (4) 1 JT 1987 (3) 246
1987 SCALE (2)196

CITATOR INFO :
F 1987 SC1996 (9,13)
RF 1989 SC 162 (6)
APL 1989 SC 458 (9,11)
R 1990 SC 325 (18)
E 1990 SC1725 (19)
RF 1991 SC1233 (5)
R 1992 SC1555 (2,7,18)

ACT:

Delhi Rent Control Act, 1958: s. 21–Requirements of–Permission to let out premises for limited period–Validity of–Reason for landlord’s non-requirement of premises–Whether to be stated-Agreement in writing–Whether to be registered.

Practice & Procedure: View taken by the High Court over a number of years—-Should normally be adhered to.

HELD: 1.1 The permission granted by the Rent Controller under s. 21 of the Delhi Rent Control Act was valid. The order permitting limited tenancy was not a mindless order but one passed by him after taking the relevant facts into consideration. [780D]

1.2 In order to attract s. 21 of the Act, it is necessary firstly that the landlord must not require the premises either in whole or part for a particular period; secondly, the landlord must obtain the permission of the Controller in the prescribed manner; thirdly, letting of the whole or part of the premises must be for residence, and fourthly such letting out must be for such period as may be agreed in writing. These and these alone are the conditions which are required to be fulfilled. [772G-773B]

1.3 Section 21 only gives sanction if the landlord makes a statement to the satisfaction of the Court and the tenant accepts that the landlord does not require the premises for a limited period. This statement of the landlord must be bona fide. The purpose must be residence. There must not be any fraud or collusion. There is a presumption of regulari- ty. But it is open in particular facts and circumstances of the case to prove to the satisfaction of the executing court that there was collusion or conspiracy between the landlord and the tenant and the landlord did not mean what he said or that it was a fraud or that the tenant agreed because he was wholly unequal to the landlord. [776F-H]

1.4 In the instant case there was no permission previ- ously. This was the first letting. There was no evidence that when the landlord stated that he did not require the premises in question for a particular period, he did not mean what he said or that he made a false statement. There was no evidence at any stage that the tenant did not under- stand what the landlord was stating or that he did not accept what the landlord stated. There was no evidence that either the tenant was in collusion or perpetrating any fraud with the landlord or the tenant was unequal to the landlord in bargaining powers. There was thus no evidence to show that the Controller did not apply his mind. [779F, 776H- 777B] S.B. Noronah v. Prem Kumari Khanna, [1979] INSC 150; [1980] 1 S.C.R. 281;

Nagindas Ramdass v. Dalpatram Ichharam, [1973] INSC 227; [1974] 2 SCR 544;

V.S. Rahi and another v. Smt. Ram Chambeli, [1984] 2 SCR 290; J.R. Vohra v. India Export House Pvt. Ltd. and another[1985] INSC 25; , [1985] 2 SCR 899 and Smt. Dhanwanti v. D.D. Gupta, [1986] INSC 120; [1986] 3 SCC 1, referred to

2. It is not necessary to state under s. 21 the reasons why the 767 landlord did not require the premises in question for. any particular period. The landlord or the tenant may be able to show that cogent reasons did exist or were within the knowl- edge of the parties as to why the landlord did not require the whole or a part of his premises for a specified period.

[777BC, 782B]

3. There is no presumption that in all cases the tenants are the weaker sections. The presumption is, on the con- trary, in favour of sanction. It is he who challenges the statement and the admission of the landlord or the tenant who has to establish facts. In the instant case the onus was on the tenant to show that the sanction under s. 21 was a nullity. He did not make any attempt to dislodge the pre- sumption in favour of the permission. [777C, 779F]

4.1 An agreement in writing submitted along with the application under s. 21 of the Act is really a proposed agreement. It comes into effect only after the grant of permission. It does not require registration. [782CD] S.B. Noronah v. Prem Kumari Khanna, [1981] 1 SCR 281, referred to.

Vijay Kumar Bajaj v. Inder Sain Minocha, [1982] 2 Rent Control Reporter 392, approved.

4.2 It has been consistently held by the Delhi High Court that s. 21 is a code by itself, that the order of permission is itself an authority and that no lease was necessary. This view has been acted upon for long and trans- actions have been completed in the Union Territory on the basis of permission and it was never doubted that there was any requirement of any lease or any agreement subsequent to the order and the same required registration. The view taken by the High Court over a number of years should normally be adhered to and not to be disturbed. A different view would not only introduce an element of uncertainty and confusion but it would also have the effect of unsettling transactions which might have been entered into on the faith of those decisions. [780A-C] Raj Narain Pandey and others v. Sant Prasad Tewari & others[1972] INSC 268; , [1973] 2 SCR 835 and Kasturi Lal v. Shiv Charan Das Mathur, [1976] 8 Rent Control Reporter 703, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 468 of 1987.

768 From the Judgment and Order dated 19.7. 1985 of the Delhi High Court in Second Appeal No. 374 of 1980.

Madan Bhatia, N.D.B. Raju and Vineet Kumar for the Appellant.

Dr. L.M. Singhvi, K.B. Rohtagi, Praveen Jain and Baldev Atreya for the Respondent.

The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This appeal by special leave is from the judgment and order of the High Court of Delhi dated 19th of July, 1985. The appellant had. made an application on or about 15th of July, 1976 before the Rent Controller to let out the premises for a period of two years under section 21 of the Delhi Rent Control Act, 1958 (hereinafter called ‘the Rent Act’). The Rent Controller after recording the statements of the appellant and the respondent made an order permitting creation of limited tenancy only for a period of two years for residential purposes to which the respondent had agreed upon. It may be material to refer to the fact that the appellant in his application under section 21 of the Rent Act had stated as follows:

“1 do not require the premises for a period of two years from 15.7.76. The purpose of letting shall be residential only and the premises are shown in the site plan Ex. A-1.

The proposed agreement is Ex. A-2. Limited tenancy under section 21 of the Act may be allowed to be created for the said period.” The respondent agreed to the aforesaid statement and stated as follows:

“I have heard the statement of the petitioner and I accept it as correct. I have no objec- tion. I shall vacate the premises after the expiry of two years from 15.7.76. The purpose of letting shall be residential only”.

Upon this the Rent Controller passed the following order:

“This is an application filed under section 21 of the Act for permission to create limited tenancy for a period of two years from 15.7.76. The-purpose of letting shall be 769 residential only and the premises is shown in the site plan Ex. A-1. The proposed agreement is Ex. A-2. From the perusal of the statements of the parties I am satisfied that as at present the petitioner does not require the premises. Therefore, limited tenancy is al- lowed to be created for a period of two years from 15.7.76.” The appellant filed an application on 6th November, 1978 for eviction of the respondent as the respondent had refused to vacate the premises in spite of his statement made before the Rent Controller. The appellant filed an application on the said date under section 21 of the Rent Act on behalf of himself and his family members claiming possession of the premises for their bona fide need and use. The appellant contended that he (the appellant) was a retired official and was living in a rented house while the respondent was a rich man doing business in jewellery and was also owning a house in Delhi. In the application made under section 21 of the Rent Act the appellant had stated that the appellant owned a newly built house in the New Friends Colony comprising of dining, drawing, three bed rooms with attached bath rooms, a study room, family lounge and a garage. The appellant had further stated that he did not require the premises for the personal residence for a period of two years. The appellant had also stated in that application, that the appellant had agreed to let it out to the respondent for the first time on the terms and conditions set out in the proposed lease deed for a period of two years. It was stated that the respondent had heard the statement and recorded that he had no objec- tion and would vacate the premises after expiry of two years. Subsequently, when the second appeal was pending in the Delhi High Court, the appellant had filed an application for early hearing in which he had stated that when the construction of the house in question was completed the appellant’s father R.B. Nanak Chand, advocate, was old and alone (the appellant’s mother had died earlier and other brother and sister being away from Delhi) and in view of his father’s ailing health the appellant was living with him in the rented premises at 4-Flag Staff Road, Delhi to look after his old and ailing father. It was in those circum- stances that the appellant had decided to let out the suit premises for a limited period of two years only. It may be mentioned that the appellant’s father died two months after the Rent Controller had granted permission.

The Rent Controller after hearing both the parties on the 4th of January, 1980 held, rejecting the contention of the respondent, that section 21 of the Rent Act was not ultra vires. Furthermore, he was 770 satisfied that a limited tenancy had been created and as such he granted permission for eviction. Aggrieved by the aforesaid order the respondent preferred an appeal to the Rent Control Appellate Tribunal. The Rent Control Appellate Tribunal upheld the eviction order.

On or about the 19th of July, 1985, being further ag- grieved, the respondent preferred a second appeal before the High Court of Delhi. The High Court of Delhi by the impugned judgment allowed the appeal on the ground that there was no ground stated in the application under section 21 of the Rent Act as to why a limited tenancy was intended to be made. The High Court held that the order under section 21 of the Rent Act was a mindless order inasmuch as the respondent before it had not disclosed as to how the demised premises were being dealt with before creating the said alleged tenancy and why the respondent before it did not require the demised premises for the alleged period of two years and as to why the same would be required by him after the period of two years.

The High Court relying on the decision in the case of S.B. Noronah v. Prem Kumari Khanna, [1979] INSC 150; [1980] 1 S.C.R. 281, held that the order in question in this case was a mindless order and in that view of the matter the order passed under section 21 of the Rent Act was not valid. The High Court was of the view that there was no inquiry for the Controller to come to the conclusion on the basis of the material that the premises for which the permission was sought for creating a limited tenancy was in fact available for being let for a limited period only and in the absence of that, this was a mindless order.

The appellant has come up in appeal before this Court from the said decision.

The question, therefore, that arises for consideration of this Court is whether in view of the requirements of section 21 of the Rent Act, was the permission invalid? The main points upon which the High Court has relied are: first- ly, on the materials put forward before the Rent Controller for sanction under section 21 of the Rent Act, no reason had been stated as to why the premises in question was not required for a limited period; secondly, it was not stated as to how the premises in question was dealt with; thirdly, the High Court was of the view that there was no writing and no lease registered after the permission was granted. So far as the second ground, namely, as to how the premises in question was dealt with prior to the letting out in the 771 instant case the High Court was obviously and factually incorrect. It was stated in the application for permission that it was agreed to be let out ‘for the first time’ and secondly, it was stated that the appellant owned ‘newly built house’. Therefore two facts were clearly stated name- ly, this was a ‘newly built’ premises and further that there was no prior letting. In the aforesaid facts and circum- stances of the case therefore, it cannot be denied that how the premises in question was dealt with before the letting out had been clearly stated.

It is true however, that why the premises in question was stated by the appellant not to be required for a limited period had not been ‘specifically’ stated at the time of seeking permission under section 21 by the appellant. The appellant had stated that he did not require the premises in question for a period of two years. He had not stated as to why he did not require the said premises for the said limit- ed period of two years. The question therefore is was it necessary to seek a valid order under section 21 to state that reason and if permission was granted on satisfaction of the Rent Controller on other conditions without being satis- fied as to why the landlord did not require the premises in dispute for a limited period, the order would suffer from the vice of being a mindless order. Such an order if other- wise the conditions are satisfied would not be an invalid order. In order to determine that question it is necessary to bear in mind the parameters and the purposes of section 21 of the Rent Act. The Delhi Rent Control Act like other Rent Control Legislations had been passed to provide for the control of rent and eviction. The Rent Acts all over the country came in the Wake of partition and explosion of population in metropolitan and new urban cities. There are acute shortages of accommodation. Very often these shortages and the demand for accommodation led to rack-renting as well as unreasonable eviction of the tenants. To meet that situa- tion and to facilitate proper letting the Rent Acts were passed all over the country ensuring fair return to the landlords and giving the landlords the right of eviction for limited purposes and at the same time protecting the tenant from unreasonable eviction by the landlords. This led to a series of litigations leading to long delays resulting specially in metropolitan cities like Delhi, Calcutta and Bombay in reluctance of many landowners who had vacant premises for letting out only for limited period either because of the family conditions or official commitments as they did not require the premises immediately and at the same time who were reluctant to part with the said premises on rent because of the long delay and the procedure that had to be followed to recover possession of those premises.

772 Section 21 of the Rent Act was an attempt to meet that reluctance. Section 14 of the Rent Act controls the eviction of tenants and gives protection to the tenants against eviction. It stipulates that notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any court or Controller in favour of the landlord against a tenant unless certain specified conditions were fulfilled. Those conditions were laid down in different sections and provisos thereof. It is not necessary to set these out in detail. As mentioned hereinbefore that led to a good deal of reluctance on the part of the landlords to part with the possession of the premises in their occupation because of the time and expenses consuming process involved for recovery of possession. In order, therefore, to induce reluctant/potential landlords to create tenancies, section 21 was enacted for the benefit of the capital city of Delhi.

This is a new provision-the unique provision made for the metropolitan city of Delhi. Section 21 of the Rent Act reads as follows:

“21. Where a landlord does not require the whole or any part of any premises for a par- ticular period, and the landlord, after ob- taining the permission of the Controller in the prescribed manner, lets the whole of the premises or part thereof as a residence for such period as may be agreed to in writing between the landlord and the tenant and the tenant does not, on the expiry of the said period, vacate such premises, then notwith- standing anything contained in section 14 or in any other law, the Controller may, on an application made to him in this behalf by the landlord within such time as may be pre- scribed, place the landlord in vacant posses- sion of the premises or part thereof by evict- ing the tenant and every other person who may be in occupation of such premises.” An analysis of this section makes it clear that in order to attract section 21, the first condition is that the landlord does not require the whole or part of any premises for a particular period. If that condition is fulfilled then the said landlord after obtaining the permission of the Controller in the prescribed manner lets the whole of the premises or part thereof as a residence for such period as may be agreed to in writing between the landlord and the tenant and the tenant does not on the expiry of the said period, vacate such premises, then notwithstanding anything contained in section 14 or in any other law, the Controller may, on an application made to him in this behalf by the landlord 773 within such time as may be prescribed, order the eviction of the tenant. Therefore the first condition must be that the landlord must not require the premises either in whole or part of any premises for a particular period. Secondly, the landlord must obtain the permission of the Controller in the prescribed manner. Thirdly, letting of the whole or part of the premises must be for residence. Fourthly, such letting out must be for such period as may be agreed in writing.

Therefore, there must be an agreement in writing, there must be a permission of the Controller for letting out for a limited period, the landlord must not require the premises for a particular period and letting of the premises must be as a residence. These and these alone are the conditions which are required to be fulfilled.

In Nagindas Ramdass v. Dalpatram Ichharam, [1973] INSC 227; [1974] 2 SCR 544,the question was whether a compromise decree for evic- tion could be passed because the Rent Act enjoined the eviction only on the satisfaction of the court. The respond- ent-landlord in that case instituted a suit under the Bombay Rent Act, 1947 for possession against the tenant on two grounds, namely, arrears in payment of rent and bona fide requirement of the premises for personal use and occupation.

A compromise decree was passed.1 When the appellant applied for execution of the decree the tenant contended that the compromise decree had been passed by the Rent Court without satisfying itself as to the existence of grounds of eviction under the Act and hence being a nullity was not executable.

It was held by this Court that the public policy permeating this Act was the protection of tenants against unreasonable eviction. Construing the provisions of sections 12, 13 and 28 of the Act in the light of the said policy, it should be held that the Rent Court under the Act was not competent to pass a decree for possession either in invitum or with the consent of the parties on a ground which was de hors the Act or ultra vires the Act. The existence of one of the statut- ory grounds mentioned in sections 12 and 13 was a sine qua non to the exercise of jurisdiction by the Rent Court. Par- ties by their consent could not confer jurisdiction on the Rent Court to do something which, according to the legisla- tive mandate, it could not do. But if at the time of the passing of the decree there was some material before the Court on the basis of which the Court could prima facie be satisfied about the existence of a statutory ground for eviction, it would be presumed that the court was so satis- fied and the decree for eviction,though passed on the basis of the compromise would be valid. Such material may be in the form of evidence recorded or produced or it may partly or wholly be in the shape of express or implied admissions made in the compromise agreement. Sarkaria, J. speaking for the 774 Court held that admissions if true and clear were by far the best proof of the facts admitted especially when these were judicial admissions admissible under section 58 of the Evidence Act. In that case the Court found because of the admission to pay the arrears of rent and mesne profits at the ‘contractual rate and the withdrawing of his application for fixation of standard rent, that there was no dispute with regard to the amount of standard rent and there was an admission that the rent was in arrears. The Court observed at pages 552 to 553 of the report as follows:

“From a conspectus of the cases cited at the bar, the principle that emerges is, that if at the time of the passing of the decree, there was some material before the Court, on the basis of which, the Court could be prima facie satisfied, about the existence of a statutory ground for eviction, it will be presumed that the Court was so satisfied and the decree for eviction, though apparently passed on the basis of a compromise, would be valid. Such material may take the shape either of evidence recorded or produced in the case, or, it may partly or wholly be in the shape of an express or implied admissiOn made in the compromise agreement, itself. Admissions if true and clear are by far the best proof of the facts admitted. Admissions in pleadings or judicial admissions, admissible under s. 58 of the Evidence Act, made by the parties or their agents at or before the hearing of the case, stand on a higher footing than evidentiary admissions. The former class of admissions are fully binding on the party that makes them and constitute a waiver of proof. They by them- selves can be made the foundation of the rights of the parties. On the other hand, evidentiary admissions which are receivable at the trial as evidence, are by themselves, not conclusive. They can be shown to be wrong.” The aforesaid principle must be borne in mind in order to judge the invalidity of the order passed under section 21 of the Act which was based on the statements made by the appellant and the respondent. The facts of the case upon which great deal of reliance was placed by the High Court in the judgment under appeal and upon which the appellant relied very heavily are mentioned in the case of S.B. Noro- nah v. Prem Kumari Khanna (supra). There this Court reiter- ated that section 21 of the Rent Act carved out a category for special treatment. While no landlord could evict without compliance with sections 775 14, 19 and 20 of the Act, a liberal eviction policy could not be said to under-lie in section 21. The Court observed that the Parliament was ‘presumably keen on maximising accommodation available for letting, realising the scarcity crisis. One source of such spare accommodation which is usually shy is potentially vacant building or part thereof which the landlord is able to let out for a strictly limited period provided he had some credible assurance that when he needed it he would get it back. The law sought to persuade the owner of the premises available for letting for a par- ticular period by giving him a special assurance that at the expiry of that period the appointed agency would place the landlord in vacant possession. Section 21 confined the special remedy to letting for residential uses only. Parlia- ment had the wholesome fear that if the section were not controlled by many conditions it might open the floodgates for wholesale circumvention of the rent control legislations by ingenious landlords exploiting the agonising need of houseless denizens.

Section 21 of the Act over-rides section 14 precisely because it was otherwise hedged in with drastic limitations and safe guarded itself against landlords’ abuses. The first condition was that the landlord did not require the demised premises ‘for a particular period’ only. That meant that he must indicate to the authority before which sanction was sought for letting what was the particular period for which he could spare the accommodation. The Controller exercised an important regulatory function on behalf of the community.

The fact that a landlord and a potential tenant together apply, setting out the formal ingredients of section 21, did not relieve the Controller from being vigilant to inquire and satisfy himself about the requisites of the landlord’s non-requirement ‘for a particular period’ and the letting itself being ‘as a resident’. A fraud on the statute could not be permitted especially because of the grave mischief that might be perpetrated in such event.

The Court highlighted that it would be a terrible blow to the rent control law if section 21 were freely permitted to subvert the scheme of section 14. Every landlord would insist on a tenant going through the formal exercise of section 21, making ideal averments in terms of that section.

The consequence would be that both the Civil Procedure Code which prescribed suits for recovery of possession and the Delhi Rent Control Act which prescribed grounds for eviction would be eclipsed by the pervasive operation of section 21.

Neither grounds for eviction nor suits for eviction would thereafter be needed, and if the landlord moved the Court for a mere warrant to place the landlord, through the Court process, in vacant possession of the premises, he 776 would get it. No court-fee, no decree, no execution peti- tion, no termination of tenancy-wish for possession and the Court was at your command. The Court observed that such a horrendous situation would be the negation of the rule of law in this area.

When the application under Section 21 is filed by the landlord and/or tenant the Controller must satisfy himself by such inquiry as he may make, about the compulsive re- quirements of that provision. If he makes a mindless order, the Court. when challenged at the time of execution will go into the question as to whether the twin conditions for sanction have really been fulfilled. Of course, there will be a presumption in favour of the sanction being regular, but it will still be open to a party to make out his case that in fact and in truth the conditions which make for a valid sanction were not present.

The sanction granted under section 21, if it has been procured by fraud and collusion cannot withstand invalidity because, otherwise, high public policy will be given as hostage to successful collusion. The doctrine of estoppel cannot be invoked to render valid a proceeding which the legislature, has on grounds, of public policy subjected to mandatory conditions which are shown to be absent. As be- tween unequals the law steps in and as against statutes there is no estoppel, especially where collusion and fraud are made out and high purpose is involved.

Law that non-performs stultifies the rule of law and hence the need for strict compliance. Or else, the sanction is non-est. Collusion between the strong and the weak cannot confer validity where the mandatory prescriptions of the law are breached or betrayed.

An analysis of this judgment which has been applied in the various cases would indicate that section 21 only gives sanction if the landlord makes a statement to the satisfac- tion of the court and the tenant accepts that the landlord does not require the premises for a limited period; this statement of the landlord must be bona fide. The purpose must be residence. There must not be any fraud or collusion.

There is a presumption of regularity. But it is open in particular facts and circumstances of the case to prove to the satisfaction of the executing court that there was collusion or conspiracy between the landlord and the tenant and the landlord did not mean what he said or that it was a fraud or that the tenant agreed because the tenant was wholly unequal to the landlord. In the instant case none of these conditions were fulfilled. There is no evidence in this case that when the landlord 777 stated that he did not require the premises in question for a particular period, he did not mean what he stated or that he made a false statement. There was no evidence in this case at any stage that the tenant did not understand what the landlord was stating or that he did not accept what the landlord stated. There was no evidence that either the tenant was in collusion or perpetrating any fraud with the landlord or the tenant was unequal to the landlord in bar- gaining powers. It is manifest that there is no evidence to show that the Controller did not apply his mind. If that is so then on the principle enunciated by this Court in Noro- nah’s case, this sanction cannot be challenged. It is not necessary to state under section 21 the reasons why the landlord did not require the premises in question for any particular period. Nor is there any presumption that in all cases the tenants are the weaker sections. The presumption is, on the contrary, in favour of sanction, it is he who challenges-the statement and the admission of. the landlord or the tenant who has to establish facts as indicated in Nagindas’s case.

In V.S. Rahi and another v. Smt. Ram Chambeli, [1984] 2 SCR 290, this Court on the facts found that the permission under section 21 of the Act had been obtained by her on the basis of wrong statement, but for which the permission would not have been accorded. These statements which were in the nature of half truths were apparently made in order to make good the plea that there was only a temporary necessity to lease out the building for a short period and that there was a bona fide anticipation that there would be a pressing necessity to reoccupy the premises at the end of the period.

which were the two crucial factors governing an order under section 21 of the Act. It was stated that the appellants, in that case, who were the weaker of the two parties did not question the truth of the statements made by the respondent ,when the permission was granted. But such collusion, if any, between the two unequal parties did not confer any sanctity on the transaction in question. The observations of this Court in that case must be understood in the light of the facts mentioned by this Court. It was found in Rahi’s case that there were wrong statements made by the appellant when he approached the Rent Controller. It was admitted before this Court that it was a wrong statement. These were mentioned in pages 295-296 of the Report. What was urged was that the appellants being the tenants had colluded with the respondent. It was reiterated by this Court, it is always open to the weaker of the two parties to establish that the transaction was only a camouflage used to cover its true nature. When one party could dominate over the will of the other, it would not be a case of collusion but one of com- pulsion. The Court relied on the observations of Lord Ellen borough in Smith v. Cuff, 778 [1817] EngR 391; [1817] 6 M & S 160 at 165 that it can never be predicted as pari delicto where one holds the rod and the other bows to it. See the observations of this Court at pages 297 and 298 of the Report. There is no evidence in this case that there was any wrong or incorrect statement made by the landlord nor is there any evidence that the tenant-respondent herein was the weaker side of the bargain. In that view of the matter the respondent cannot get much assistance from this decision of this Court.

This question was again considered by this Court in J.B. Vohra v. India Export House Pvt. Ltd. and another[1985] INSC 25; , [1985] 2 S.C.R. 899 where Tulzapurkar, J. referring to Noronah’s case observed that section 21 carved out tenancies of particular category for special treatment and provided a special proce- dure that would ensure to the landlord vacant possession of the leased premises forthwith at the expiry of the fixed period of tenancy, evicting whoever be in actual possession.

Such being the avowed object of prescribing the special procedure, service of a prior notice on the tenant upon receipt of the landlord’s application for recovery of pos- session and inviting his objections followed by an elaborate inquiry in which evidence might have to be recorded would really frustrate that object. It will be vitiated because it is procured by fraud practised by landlord for creating a limited tenancy. If it is found that the initial order granting permission to create limited tenancy was vitiated by fraud practised by the appellant inasmuch as he had suppressed the fact that an earlier application for such permission had been declined on the ground that premises had been let out for commercial-cum-residential purposes and then there would be no executable order pursuant to which any warrant for possession could be issued under section 21 of the Act. In the instant case, there is no such collusion and therefore, the principle of Noronah’s case would not be applicable. The ratio of that decision must be understood in its proper light.

Section 21 of the Rent Act was examined by this Court in Smt. Dhanwanti v. D.D. Gupta, [1986] INSC 120; [1986] 3 S.C.C. 1. There was observed by Pathak, J. as the learned Chief Justice then was, that it was possible for the owner of a premises, on looking to the immediate future, to find that for certain reasons he was unable to occupy the premises forthwith himself but that he may do so later in the not very distant future. The mere fact that the owner has let out the prem- ises after obtaining permission under section 21 of the Act for a limited period, and thereafter on the expiry of that period has found it necessary to obtain permission to let out the premises again for another limited 779 period cannot necessarily lead to the inference that from the very beginning the premises were available for letting out indefinitely. The Rent Controller and the Rent Control Tribunal should have examined the circumstances prevailing on each occasion when an application was made under section

21. It was observed that assumption would not be justified where there is no positive material to indicate’ that from the very beginning there was never any intention on the part of the landlord to occupy the premises himself. There was no such material in that case. On the contrary there was mate- rial showing that the landlady had expectation that her son and his family would be in Delhi after two years’ period of tenancy. This is significant for the present issue. There is nothing to show that the permission of the Rent Controller Was obtained by practising fraud or that it could be regard- ed as a nullity or that material facts were concealed. The principle of that decision will apply much more in this case. It is observed in that decision that it seems to have been ignored altogether that it is perfectly possible for the owner of a premises, on looking to the immediate future, to find that for certain reasons, he is unable to occupy the premises forthwith himself but that he may do so later in the not very distant future. It is not always that a man can plan his life ahead with any degree of definiteness. Pre- vailing uncertainty in the circumstances surrounding him may not permit clear-sighted vision into the future. The circum- stances might justify his envisioning his need for the premises two or three years later, and therefore applying for permission under section 21 of the Act to let out the premises accordingly.

The facts are more stronger and clearer in support of the instant case. Here there was no permission previously.

This was first letting out. There was nothing which indicat- ed that any statement was made which was incorrect. We are of the opinion that sanction under section 21 in the instant case was not a nullity. The onus was on the tenant to show that it was so. He did not make any attempt to dislodge the presumption in favour of the permission.

Learned counsel for the appellant also stressed before us that section 21 of the Rent Act was a complete code by itself. The order was under section 21 of the Rent Act. No further question of lease or registered lease arose thereaf- ter.

This question has been settled by series of decisions of the Delhi High Court upon which people have. acted for long.

See the decision in Kasturi Lal v. Shiv Charan Das Mathur, [1976] Rent Control Reporter Vol. 8703 where at pages 708- 709, Misra, J. of the Delhi High Court 780 had clearly indicated numerous cases where it was held that section 21 was a code by itself. The order of the permission is itself an authority; no lease was necessary and if that is the state of law in Delhi, it is too late in the day to hold otherwise. See the observations of this Court in Raj Narain Pandey and others v. Sant Prasad Tewari & others[1972] INSC 268; , [1973] 2 S.C.R. 835, where this Court observed that in the matter of the interpretation of a local statute, the view taken by the High Court over a number of years should nor- mally be adhered to and not to be disturbed. A different view would not only introduce an element of uncertainly and confusion but it would also have the effect of unsettling transactions which might have been entered into on the faith of those decisions. In Delhi transactions have been complet- ed on the basis of permission and it was never doubted that there was any requirement of any lease or any agreement subsequent to the order and the same required registration.

It must be observed that in Noronah’s case there was no admission on oath nor was there any question of registered lease.

Numerous other decisions were cited before us but in the view we have taken on the two basic points that the permis- sion was valid and the order permitting limited tenancy was not a mindless order but one passed after application of the mind taking the two relevant facts under section 21 of the Act into consideration, it is not necessary to discuss these decisions any further. In view of the fact that section 21 is a code by itself, there was no question of any further agreement in writing which has to be registered arises.

There is no merit in the contention of the respondent.

There is another aspect of the matter which has to be borne in mind. The tenant not only failed to establish any fact impeaching the order, he waited for the full term to take this point and did not contest when the permission was obtained on a misrepresentation.

It was submitted by Shri Bhatia that in Delhi most of the transactions have been done under section 21 on the assumption that after order of the court no further or separate document or lease was required to be executed or that such document or lease had to be registered. It was submitted that numerous transactions have taken place on that basis. It was urged that if it is now found that is not the correct position and the correct position in law is that there should be a lease containing the terms of the lease being for 11 months, such enunciation of law should only be made applicable prospectively. Counsel for the appellant contended that otherwise it would have disastrous conse- 781 quences of unsettling numerous decisions and unsettling many settled transactions between the parties. He drew our atten- tion to the decision of this Court in 1. C. Golak Nath & others v. State of Punjab and another[1967] INSC 45; , [1967] 2 S.C.R. 762.

If we had any doubt on the scope and ambit of section 21, we might have considered this submission urged on behalf of the appellant provided we were sure, factually that large number of transactions had been completed on the assumption that no further lease was required after the permission under sec- tion 21. Our attention was also drawn to the decision of the Privy Council and the observation of Lord Blanesburgh in the case of Dhanna Mal and others v. Rai Bahadur Lala Moti Sagar, A.I.R. 1927 Privy Council 102. If we were inclined to the view that section 21 was not a code by itself but re- quired separate lease to follow it up then perhaps we might have considered the effect of the aforesaid decision and observations.

In aid of the submission that in order to be entitled to eviction under section 14 of the Rent Act, the court had to be satisfied itself that the statutory ground for eviction existed and that application of satisfaction of the court could not be by-passed and circumvented by a compromise decree, reliance was placed on certain observations on a decision in Ferozi Lal Jain v. Man Mal and another, [1970] 3 S.C.C. 181. In view of the facts of the particular case, we are of the opinion that it is not necessary to discuss the said decision in detail. Numerous decisions of the Delhi High Court were placed before us in support of or in respect of contentions of the parties specially in support of con- tention that the Delhi Rent Act required a separate lease.

The scope and ambit of the Delhi Rent Act after the decision of Noronah’s case came up for consideration before a divi- sion bench of the Delhi High Court in Vijay Kumar Bajaj v.

Inder Sain Minocha, [1982] 2 Rent Control Reporter 392. In that decision, in the light of section 21, the following questions were posed:

(1) Whether the permission under section 21 of the Act is invalid in view of Supreme Court judgment in S.B. Noro- nah’s case (supra), if reasons for not requiring the prem- ises by the landlord for a particular period are not dis- closed in his application or his statement before the Con- troller? (2) Whether before or after permission execution of any agreement in writing to let the premises for the fixed period is necessary, if so, whether such a document requires registration? (3) Whether the proposed agreement of tenancy in writing sub- 782 mitted along with the application under Section 21 of the Act, in this appeal required registration? The questions were answered by the High Court as follows:

(1) Not necessarily. The landlord or the tenant may be able to show that cogent reasons did exist or were within the knowledge of the parties as to why the landlord did not require the whole or a part of his premises for a specified period.

(2) No registration is necessary. The agreement in writing may be entered into either before or after grant of permission.

(3) An agreement in writing submitted along with the application under section 21 of the Act is really a proposed agreement. It comes into effect only after the grant of permission under section 21 of the Act. It does not require registration.

We are in agreement with the views of the Delhi High Court.

Large number of decisions of this Court were cited in support of the contention that eviction decree passed in contravention of the statutory conditions or passed without consideration whether the statutory conditions are fulfilled or not are not binding and cannot be enforced. See Bahadur Singh and another v. Muni Subrat Dass and another, [1969] 2 S.C.R. 432 and Kaushalya Devi and others v. Shri K.L. Ban- sal[1968] INSC 307; , [1969] 2 S.C.R. 1048.

We are, however, of the opinion that in view of the facts found in the instant appeal before us, these decisions are not of any relevance.

Similarly, our attention was drawn to the observations of this Court in Mansaram v. S.P. Pathak and others[1983] INSC 138; , [1984] 1 S.C.R. 139 and State of Maharashtra v. Narsingrao Gangaram Pimple, [1984] 1 S.C.R. 62 1, In the view we have taken and the real controversy in this case, this contention is no longer open.

On the unregistered lease question, our attention was drawn to a decision of the Delhi High Court in Jagat Taran Berry v. Sardar Sant Singh, A.I.R. 1980 Delhi 7. As we have held that section 21 was a code by itself and no further document was required, it is not necessary to pursue the matter any further.

783 Similarly, our attention was drawn to a division bench judgment of the Calcutta High Court in the case of Ram Abatar Mahato v. Smt. Shanta Bala Dasi and others, A.I.R. 1954 Calcutta 207 on the question of the terms and extent of section 107 of the Transfer of Property Act and whether a document in performance of an agreement had to be registered or not. As mentioned hereinbefore in the view we have taken, it is not necessary for us to pursue this aspect any further as to the question whether oral evidence should be intro- duced to explain the terms of a document embodied in writ- ing.

Our attention was drawn to certain observations of this Court in State of Uttar Pradesh v. Singhara Singh and oth- ers, [19641 4 S.C.R. 485 but the same are not relevant for our consideration in the present controversy in the light in which we have understood it. Equally same is the decision in respect of the observations of Fazal Ali, J. of the Jammu and Kashmir High Court in Ishwar Dutt and another v. Sunder Singh and others, A.I.R. [1961] J & K 45 and the observa- tions of this Court in Sri 5 Sita Maharani and others v. Chhedi Mahto and others, A.I.R. [1955] S.C. 328.

In the aforesaid light we are of the opinion that the High Court was in error in the view it took in setting aside the decision in the second appeal. The appeal is, therefore, allowed and the order and judgment of the High Court of Delhi dated 19th of July, 1985 are set aside and the order and judgment of Rent Control Tribunal dated 28th of August, 1980 are restored. The appellant is entitled to the costs of this appeal.

P.S.S. Appeal allowed.

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IN THE SUPREME COURT OF INDIA

DUKHTAR JAHAN …PETITIONER
Vs.
MOHAMMED FAROOQ …RESPONDENT

DATE OF JUDGMENT: 20/01/1987

BENCH: NATRAJAN, S. (J) SEN, A.P. (J)

CITATION:
1987 AIR 1049 1987 SCR (1)1086
1987 SCC (1) 624 JT 1987 (1) 221
1987 SCALE (1)92

ACT:

A Code of Criminal Procedure, 1973, section 125, nature of proceedings under.

B. High Court’s jurisdiction under section 482 of the Code of Criminal Procedure–Whether could interfere with the concurrent findings of the courts below granting maintenance to the child/wife.

C. Evidence Act, section 112–Rule of law under section 112 as to the legitimacy or otherwise of the child–Whether the factors that the child was born within seven months’ time from the date of the marriage and that the illiterate mother had deposed the child was not born prematurely lead to the inference of suppression of the factum of the mother being enceinte at the time of marriage.

HELD 1.1 Proceedings under section 125 of the Code of Criminal Procedure are of a summary nature and are intended to enable destitute wives and children, the latter whether they are legitimate or illegitimate, to get maintenance in a speedy manner. In the instant case, the order of the High Court of Calcutta quashing the order of maintenance in favour of the child by setting aside the concurrent findings rendered by the Courts below is not in order. [1094E-F]

1.2 The proper course for the High Court, even if enti- tled to interfere with the concurrent findings of the courts below in exercise of its powers under Section 482 Cr. P.C., should have been to sustain the order of maintenance and direct the respondent to seek an appropriate declaration in the Civil Court, after a full-fledged trial, that the child was not born to him and as such he is not legally liable to maintainit. [1094D-E] 1 .3 The facts of the case and the conduct of the par- ties and the attendant circumstances reveal a preponderance of materials to support the case of the appellant rather than that of the respondent. [1093E] 1088 If the appellant was pregnant even at the time of the marriage she could not have concealed that fact for long and in any event the respondent would have come to know of it within two or three months of the marriage and thereupon he would have immediately protested and either discarded the appellant or reported the matter to the village elders and relatives and sought for a divorce. On the contrary the respondent had Continued tO lead life with the appellant in a normal manner till the birth of the child. Even the con- finement appears to have taken place in his house as other- wise the child’s birth would not have been registered in his village. The respondent had not disowned the child immedi- ately after its birth or sent away the appellant to her parents’ house. Such would not have been his conduct if he had any doubt about the paternity of the child. Moreover, there is an entry in the birth register (Exhibit Kha-I) setting out the respondent as the father of the child.

Though the respondent has attempted to neutralise the entry in Exhibit Kha–I by examining D.W.2 and making it appear that the entry had been made on the basis of the information given by a third party, the lower courts have refused to give credence to the vague and uncorrobarated testimony of D.W.2. Further, the respondent had allowed eleven months to pass before effecting a divorce. By his inaction for such a long period the respondent has given room for inference that the divorce may have been effected for other reasons and not on account of the appellant giving birth to a child con- ceived through someone else. Lastly, even if the child had been born alter a full-term pregnancy it has to be borne in mind that the possibility of the respondent having had access to the appellant before marriage cannot be ruled out because they were closely related and would therefore have been moving on close terms. AH these factors negate the plea of the respondent that the minor child was not lathered by him. Giving birth to a viable child after 28 weeks’ duration of pregnancy, according to medical science is not biologi- cally an improbable or impossible event. [1093F-H; 1094A-D]

2. Section 112 of the Indian Evidence Act lays down that if a person was born during the continuance of a valid marriage between his mother and any man or within two hun- dred and eighty days after its dissolution and the mother remains unmarried, it shall be taken as conclusive proof that he is the legitimate son of that man, unless it can be shown that the parties to the marriage had no access to each other at any time when he could have been begotten. This rule of law based on the dictates of justice has always made the courts incline towards upholding the legitimacy of a child unless the facts are so compulsive and clinching as to necessarily warrant a finding that the child could not at all have been begotten to the father and as such a legitima- tion of the 1089 child would result in rank injustice to the father. Courts have always desisted from lightly or hastily rendering a verdict and that too, on the basis of slender materials, which will have the effect of branding a child as a bastard and its mother an unchaste woman. [1092D-F] Mahbub Ali v. Taj Khan, AIR 1915 Lahore 77(2); Kahan Singh v. Natha Singh, AIR 1925 Lahore 414; Sibt Mohamed v.

Md. Maneed, AIR 1926 Allahabad 589 and Ponnamal v. Addi Aivan, AIR 1953 TRACO 434 (Vol. 40, C.N. 169), approved.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 13 of 1981 From the Judgment and Order dated 26.3.1979 of the Allahabad High Court in Crl. Misc. Petition No. 1816 of 1976 Altar Ahmad for the Appellant (not present). V.A. Bobde (Amicus Curiae) for the Respondent.

The Judgment of the Court was delivered by NATARAJAN, J. This is an unfortunate case where the High Court has quashed an order of maintenance passed in favour of a minor child Tarana Farooq by the Special Judicial Magistrate No. 1, Rampur under Section 125 Cr.P.C., in exercise of its powers under Section 482 Cr. P.C. The High Court has, however, deemed it fit to grant a certificate to the appellant Dukhtar Jahan, the mother of the minor child, under Article 134(1)(c) read with Article 134A of the Con- stitution to prefer an appeal to this Court for considera- tion of a question of law formulated as under:– “Whether, in an application under Section 482 Cr.P.C. the High Court can interfere with concurrent findings rendered by the courts below.” As we find the appeal is capable of being disposed of on the basis of other materials, we do not feel called upon to answer the question of law formulated for consideration by the High Court.

We may now have a look at the facts of the case. The appellant Dukhtar Jahan and the respondent Mohammed Farooq who were already related as first cousins, being the issues of two sisters, were married on 11.5.1973. The marriage lasted only for about 17 months 1090 since the respondent divorced the appellant on 16.10.1974.

However, when the parties were in wedlock the appellant delivered a female child named Tarana Farooq on 5.12.1973.

After the respondent effected the divorce in October 1974, the appellant filed a petition under Section 125 Cr.P.C. in the court of the Special Judicial Magistrate No. 1, Rampur for grant of maintenance to her and the child at Rs. 150 p.m. and Rs.50 p.m. respectively. The appellant however gave up the claim of maintenance for herself as the stand of the respondent was that he had paid her the Maher and the amount payable for the Iddat period and that he had also returned all the articles given by way of dowry. The enquiry in the petition was therefore, confined to the claim of maintenance for the child Tarana.

The respondent refuted his liability to provide mainte- nance to the child on the ground that he was not the father of the child and that the child had been conceived even before marriage and the appellant had suppressed the fact of her being enceinte at the time of the marriage.

While the appellant examined herself and another witness to substantiate the claim for maintenance for the child, the respondent examined three witnesses besides himself to refute the claim. Of those three witnesses, two have spoken about the payment of Maher etc. to the appellant and hence we need mention only about the testimony of D.W.2 Abdul Asad. This witness was a Panchayat Sevak and he has deposed that he made entries in the birth register (Exhibit Kha-I) about the birth of the girl child Tarana Farooq to the respondent and the appellant on the basis of information given to him by the Village chowkidar by name Kalicharan.

Obviously this witness has been examined to show that the respondent was not the informant of the birth of the child in order to neutralise the effect of the entry in the birth register.

The Trial Magistrate, after taking into consideration the evidence adduced in the case and the conduct of the parties held that since the child had been born when the parents were in wedlock and since the respondent had not discarded the wife or disowned the child forthwith but had waited for about 10 months to divorce the appellant, it would be reasonable to hold that the child should have been conceived to the respondent and as such he is by law obli- gated to provide maintenance to the child. After taking into consideration the respondent’s income the learned Magistrate awarded maintenance to the child at Rs.30 per month as against the claim of Rs.50 p.m.

1091 A Revision preferred against the order of the Magistrate to the Sessions Judge, Rampur proved of no avail and hence the respondent filed Criminal Misc. Petition No. 1816 of 1978 to the High Court of Calcutta under Section 482 Cr.P.C.

for quashing the order of maintenance. A Single Judge of the High Court has allowed the petition and quashed the order of maintenance in favour of the child. The learned Judge has taken the view that since the child had been born in about 7 months’ time from the date of marriage and since the child was not claimed to be prematurely born it has to be neces- sarily held that the appellant should have conceived even before she married the respondent and consequently the respondent cannot be held to be the father of the child and called upon to pay maintenance to it.

As the order of the High court appeared to be prima facie unsustainable and as the respondent failed to enter appearance in spite of notice being served on him, we re- quested Mr. Bobde to appear as amicus curiae for the re- spondent, and we are thankful to him for his assistance.

The admitted facts are that the appellant and the re- spondent were close relations and not strangers before marriage. They were married on 11.5.1973 and the girl child was born on 5.12.1973. The respondent did not divorce the appellant immediately after the child birth or even two or three months later but he divorced her only on 16.10. 1974.

The child birth took place in the house of the respondent himself and hence there is no question of the birth of the child not being known to the respondent immediately.

In spite of all these factors the High Court has allowed itself to be influenced by only two factors viz. the child birth taking place in about 7 months’ time from the date of marriage and the child being claimed to be a full-grown one at the time of birth.

Examining the matter, we feel the learned Judge has failed to view the case in its entire conspectus and this has led to miscarriage of justice. On the sole ground that the child had been born in about 7 months’ time after the marriage it cannot be concluded that the child should have been conceived even before the respondent had consummated the marriage. Giving birth to a viable child after 28 weeks’ duration of pregnancy is not biologically an improbable-or impossible event. In “Combined Textbook of Obstetrics and Gynaecology” by Sir Gugald Baird 7th Edition at page 162 it is reported as under:- 1092 “In the case of Clark v. Clark (1939) an extremely small baby, born alive 174 days after last possible date when intercourse with the husband could have taken place, and which survived, was held to be legitimate. While it is most unusual for babies of this weight for gestation period to survive it does occasion- ally happen.” The learned Judge ought not, therefore, to have rushed to the conclusion that a child born in about 7 months’ time after the marriage of the parents should have necessarily been conceived even before the marriage took place. In so far as the second aspect is concerned viz. about the appel- lant’s statement that the child was not born prematurely, the High Court has failed to bear in mind that the appellant is a rustic and illiterate woman and as such her opinion could suffer from error of judgment.

Another serious infirmity noticed in the judgment is that the learned Judge has completely lost sight of Section 112 of the Indian Evidence Act. Section 112 lays down that if a person was born during the continuance of a valid marriage between his mother and any man or within two hun- dred and eighty days after its dissolution and the mother remains unmarried, it shall be taken as conclusive proof that he is the legitimate son of that man, unless it can be shown that the parties to the marriage had no access to each other at any time when he could have been begotton. This rule of law based on the dictates of justice has always made the courts incline towards upholding the legitimacy of a child unless the facts are so compulsive and clinching as to necessarily warrant a finding that the child could not at all have been begotten to the father and as such a legitima- tion of the child would result in rank injustice to the father. Courts have always desisted from lightly or hastily rendering a verdict and that too, on the basis of slender materials, which will have the effect of branding a child as a bastard and its mother an unchaste woman.

To drive home the point, we may refer to some of the reported cases where the courts have applied the rule of evidence contained in Section 112 of the Indian Evidence Act and declared the legitimacy of a child born during wedlock, even though the child had been born prematurely. In Mahbub Ali v. Taj Khan,, A.I.R. 1915 Lahore 77 (2) it was held that a boy born about 7 months’ after his father and mother were lawfully married and who had opportunity or access to each other at the time he could have been begotten, must be held to be the legitimate son of his parents. In Kahan Singh v. Natha Singh, A.I.R.

1093 1925 Lahore 414 the defendant’s father was married to the defendant’s mother on 2nd August 1889 and the defendant was born on 23rd January 1890. Even so it was held “that the defendant being born during the continuance of the marriage between his parents, he is his father’s legitimate son unless it is shown that his parents had no access to each other at any time when he could have been begotten and that it is immaterial how soon after the marriage the defendant was born.” In Sibt Mohammad v. Md. Hameed, A.I.R. 1926 Allahabad 589 it was held that a Muhammedan child born during the continuance of a valid marriage between its parents but within 6 months of the date of its parents’ marriage must be held to be a legitimate child by reason of Section 112 of the Evidence Act. In Ponnammal v. Addi Aiyan, A.I.R. 1953 TRA-CO 434 [Vol. 40, C.N. 169] the paternity of a child born to a married woman after 8 months’ from the date of marriage was disputed as the husband alleged that he was incapacitated from having sexual intercourse for one month from date of marriage due to some operation he had to undergo and hence the child was not his. The court held that even assuming that the husband was so incapacitated, the time available, viz, over seven months, was sufficient to raise the presumption that he was the father of the child.

Even without reference to Section 112 of the Indian Evidence Act if we take into consideration the facts of the case and the conduct of the parties and the attendant cir- cumstances we find a preponderance of materials to support the case of the appellant rather than that of the respond- ent.

The relevant features which have escaped the attention of the High Court can be catalogued as under:- If the appellant was pregnant even at the time of the marriage she could not have concealed that fact for long and in any event the respondent would have come to know of it within two or three months of the marriage and thereupon he would have immediately protested and either discarded the appellant or reported the matter to the village elders and relatives and sought for a divorce. On the contrary the respondent had continued to lead life with the appellant in a normal manner till the birth of the child. Even the con- finement appears to have taken place in his house as other- wise the child’s birth would not have been registered in his village. The respondent had not disowned the child immedi- ately after its birth or sent away the appellant to her parents’ house. Such would not have been his conduct if he had any doubt about the paternity of the child. Moreover, there is an entry in 1094 the birth register (Exhibit Kha-1) setting out the respond- ent as the father of the child. Though the respondent has attempted to neutralise the entry in Exhibit Kha-1 by exam- ining D.W.2 and making it appear that the entry had been made on the basis of information given by a third party, the lower courts have refused to give credence to the vague and uncorroborated testimony of D.W.2. It is also significant to note that the respondent had allowed eleven months to pass before effecting a divorce. By his inaction for such a long period the respondent has given room for inference that the divorce may have been effected for other reasons and not on account of the appellant giving birth to a child conceived through some one else. Lastly, even if the child had been born after a full-term pregnancy it has to be born in mind that the possibility of the respondent having had access to the appellant before marriage cannot be ruled out because they were closely related and would therefore have been moving in close terms. All these factors negate the plea of the respondent that the minor child was not lathered by him.

The proper course for the High Court, even if entitled to interfere with the concurrent findings of the courts below in exercise of its powers under Section 482 Cr.P.C., should have been to sustain the order of maintenance and direct the respondent to seek an appropriate declaration in the Civil Court, after a full-fledged trial, that the child was not born to him and as such he is not legally liable to maintain it. Proceedings under Section 125 Cr.P.C., it must be remembered, are of a summary nature and are intended to enable destitute wives and children, the latter whether they are legitimate or illegitimate, to get maintenance in a speedy manner. The High Court was, therefore, clearly in error in quashing the order of maintenance, in favour of the child.

The appeal has, therefore, to succeed and we accordingly allow the appeal and set aside the order of the High Court and restore the order of maintenance passed by the trial court.

S.R. Appeal allowed.

The post Dukhtar Jahan Vs. Mohammed Farooq appeared first on B&B Associates LLP.

DATE: 20 January, 1987

Equivalent citations: AIR 1987 AP 171

Bench: P Choudary

ORDER

1. The broad question that falls for consideration is whether the Life Insurance Corporation of India and the Income-tax Department, Hyderabad, can legally use the land owned by them in a recreational zone within the city limits of Hyderabad for residential purposes contrary to the developmental plan published in G.O.Ms. No. 414 M.A. dt. 27-9-1975.

2. Although the City of Hyderabad was founded about 400 years ago in 1951 (sic) around the present area of the historic Charminar, its growth till recently was never regulated by settled laws. During these four centuries, the city had grown in all directions without any plan or design. Particularly after the formation of the State of Andhra Pradesh and in the aftermath of the second world war, this city had started growing wildly and almost as an uncultivated jungle. For the first time, its civic problems have, therefore, become unmanageable. Although by size and population, Hyderabad is today one of the country’s biggest cities, it is a city without any effective and satisfactory provision for elementary civic amenities to its inhabitants. Passers by praise it while its permanent residents curse it. Absence of a development plan coupled with the presence of an unimaginative and indifferent administration has been the cause of this malady. For too long a time rule of law is not fully enforced here. The city has been for long in the grip of several well known city landgrabbers. Being most of the time insensitive to the civil needs of the community and acting largely to the dictates of the power brokers, the Government has been often aiding and abetting this maladministration. Multi-storied buildings are allowed to be built up contrary to municipal bye-laws. Transgressings of municipal laws in general and the building bye-laws in particular are generally condoned. New areas are allowed to be developed even without any provision being made for the minimum civic needs. Today, on a rough estimate, the city has more than 100 slums spreading dirt, disease and squalor everywhere. Roaming herds of king size buffaloes and pale pathetic and hungry looking cows passing through the city thoroughfares and posing serious traffic hazards both to motorist and pedestrian are a regular sight of some of the city main roads. Probably nowhere else in India, the citizen’s fundamental right to move freely is so heavily trampled upon by the beast as it is done on the roads of this city. Regulation of city traffic is a neglected item of the traffic police. Much of traffic on the impossibly narrow roads of the city wends through when it moves at all on its own motion while the traffic police merrily watches and whistles aimlessly. The so-called local lorries occupy many a congested parts of the city roads without being charged for violation of laws and with the traffic police taking no preventive or prohibitive action. In most parts of the city drainage and sewerage systems even where they exist do not function well. Consequently, most of the city inhabitants are condemned to live in their houses without access to pure air or water and under unhygienic conditions. Spread over 120 square miles and having one hundred and above slum dwelling areas and not having enough of open spaces developed for the recuperation of the health of the city inhabitants, and going without bare minimum of civil amenities the city of Hyderabad is painfully dying a civic death. Large chunks of public land that could have been freely used and developed by the city corporation for the common purposes of the community are generally occupied and appropriated by the land grabbers, of late even Gods have joined this unwholesome game by establishing their abodes on the busy roads openly obstructing the free flow of traffic. Land grabbing makes the availability of public land for public purposes such as creation of recreational parks almost impossible. Notwithstanding the frequent claims made by the city corporation about Hyderabad city being a beautiful city, surely it is one of the ugliest cities of India.

3. It is in the above circumstances that a need for drawing a developmental plan was felt. Accordingly, a draft developmental plan, sometimes also called Master Plan, has been first conceived and published in the State Government gazette in G.O.Ms. No. 470 Municipal Administration, dated 6th Nov. 1973. The draft plan was published under the legal authority of the Hyderabad Municipal Corporation Act and the Developmental Rules made under that Act. That Draft Plan proposed and fixed the various uses to which each bit of the land situated in the Hyderabad city owned either privately or publicly could be put by the owners. For that purpose, the various parts of the city were divided into a residential, commercial, recreational or other areas. The approval of such a draft plan makes the plan final and legally binding. It would not then matter whether the land belongs to a private individual or to the State. The draft plan once approved would have the undoubted effect of restricting and curtailing even denying the rights of enjoyment of the land which otherwise belongs to the land owners. An approved draft plan can also affect the rights of the inhabitants of those areas to live in peacefully. The law, therefore, requires the draft plan to be published inviting objections or suggestions to those proposals. The draft plan published in the above G.O.Ms. No. 470 went through all these stages. After expiry of the time stipulated for receipt of objections and suggestions, if any, the Government, acting under S. 464(1) of the Hyderabad Municipal Corporation Act, 1955, gave its final approval to the above draft developmental plan. In G.O.Ms. No. 414 Municipal Administration dated 27th Sept., 1975, the Government gave its sanction to the developmental plan. The Map No. 2 and the explanatory reports that accompanied the plan had identified the areas and the specific uses to which the land in those areas could be put. Thus a final developmental plan restricting the user of the lands in city of Hyderabad by force of law has come into existence. We are here concerned with the user of a small bit of a land adjoining the tank bund area. According to the above developmental plan, land admeasuring Acs. 151.55 cents and situated below the Tank Bund and adjacent to Ram Gopal Mills on either side of Hussainsagar surplus nalla is reserved for laying a recreational park. Thereby the use of the above mentioned land of Acs. 151.55 cents were fixed. That land of Acs. 151.55 cents could be used under the above G.O.Ms. No. 414 only as a part of a recreational park. That land could not be used either as a residential area or commercial area or industrial area. In law an approved developmental plan operates both as a prohibition against the owners putting their land for any impermissible use. It also operates as a permission to use the lands for the purpose indicated in the developmental plan. As the above extent of Acs. 151.55 cents of land situated below the Tank Bund and adjacent to Ram Gopal Mills on either side of Hussainsagar nalla is shown as a part of the recreational park, the owners of those lands situated within that area, whether they be private owners or public owners cannot legally use that land except as a recreational park.

4. So much cannot seriously be disputed. Yet the Life Insurance Corporation and the Income-tax Department are claiming rights to use a part of this very area for residential purposes contrary to the above plan on the basis of their ownership. What seems to have led these parties to this untenable position is the somewhat confusing history of acquisition of some of this land. Long prior to the issuance of the above G.O.Ms. No. 414 making a developmental plan providing for the creation of a recreational park in an area of Acs. 151.55 cents, Government planned for the creation of a much larger park extending over an extent of Acs. 200.00. For that purpose it had proposed to acquire the necessary extent of the land. In fact a Notification under S. 4(1) proposing to acquire the necessary extent of land for that purpose was even published. But in G.O.Rt. No. 725 dated 9-1-1969 published under S. 6 of the Land Acquisition Act, the Government declared its intention to acquire only a smaller extent of Acs. 99.10 guntas. Accordingly, only that extent of land was acquired. But on physical verification it was found that the land was measuring actually Acs. 101.19 guntas. What is, however, important to note is the fact that the above extent of Acs. 101.19 guntas is a part of the above mentioned Acs. 151.55 cents demarcated by the above developmental plan to be used as a recreational park. Subsequently, an extent of Acs. 37.00 and odd out of the above extent of Acs. 151.55 cents was acquired under the Land Acquisition Act for the purpose of enabling the Life Insurance Corporation of India to build houses. A small part of the above Acs. 37.00 was later sold by the Life Insurance Corporation of India to the Income-tax Department. The above are the facts which probably led the Life Insurance Corporation and the Income-tax Department to assert their right to build houses. But clearly the acquisition of the land by the Life Insurance Corporation of India or the Income-tax Department is of no relevance or significance for deciding the question that falls for consideration in this case. For the purpose of this writ petition all that is necessary and relevant to be noticed is that the entire extent of Acs. 37.00 above mentioned is a part of the area demarcated for recreational park by the developmental plan. It must be stressed that the purpose of compulsory acquisition proceedings which is to transfer compulsorily the title to private property from one owner to another owner does not in any way alter the binding nature of the developmental plan and its decision to create a recreational park. Whether a particular piece of land is compulsorily acquired or is sold voluntarily or is allowed to be in the hands of the previous owners, the direction of the developmental plan dictating the uses to which that particular piece of land could be put will prevail and will have to be honoured. Accordingly, the question of acquisition of the land can be omitted as irrelevant from our consideration.

5. Subsequent to the acquisition of Acs. 101.19 guntas the Hyderabad Municipality has developed an area of about Acs. 50.00 as a park called ‘Indira Park’. There can be no objection to this because that action of the Hyderabad Municipal Corporation is in conformity with the requirements of the developmental plan published in G.O.Ms. No. 414. It is also in conformity with the requirements of S. 112 of the Hyderabad Municipal Corporation Act. The developmental plan has thus been put into force in part. But thereafter the Hyderabad Municipality had not only failed and faltered in carrying out its statutory duties of developing the rest of the area into a recreational park but it has also started acting contrary to the dictates of the above mentioned S. 112 of the Hyderabad Municipal Corporation Act and also to the developmental plan. It has already allowed the Life Insurance Corporation of India to build a few residential houses in the above extent of Acs. 37.00 of land acquired by the Life Insurance Corporation of India. Now the Income-tax Department also wants to build houses in an extent of 10 acres and odd which it has recently acquired from the Life Insurance Corporation of India. Judicial notice may also be taken of the fact that there are several other structures built in this area. These clearly constitute contravention of the law laid down by developmental plan regarding the land uses in the area. Those contraventions gave rise to the filing of this writ petition.

6. The present writ petition has been filed by some of the residents and rate-payers of the Hyderabad Municipal Corporation who live around the abovementioned area demarcated by the developmental plan as a recreational park. Their complaint is that the balance of about Acs. 50.00 of land out of the aforementioned Acs. 151.55 cents which is shown by the developmental plan as a part of the recreational park ought not to be allowed to be used by the Life Insurance Corporation or Income-tax Department as a residential area. This writ petition is, therefore, filed to direct the Municipal Corporation of Hyderabad and the Bhagyanagar Urban Development Authority, Hyderabad, to develop the entire area comprising of the land bounded in the West by Tank Bund, in the East by Ashoknagar Colony, in the North by D. B. R. Mills and in the South Domalguda locality as a public park in accordance with the approved developmental plan.

7. The petitioners say that many residents of the twin cities are economically backward and poor people and are having insufficient accommodation to live in. According to the affidavit allegations, the majority of inhabitants of Hyderabad have no open spaces left in front of their houses to relax and recreate themselves and maintain their health. The petitioners additionally argue, though it is strictly not necessary for obtaining the relief in the writ petition, that as the above extent of Acs. 101.19 guntas of land has been acquired with the express object of developing that area into a park and for the purpose of promoting the well-being and welfare of the residents of the twin cities in general and of those belonging to the weaker sections of the society in particular, the Hyderabad Municipal Corporation is bound in law not to allow any part of that land to be used for any purpose other than the one the developmental plan had allocated to it. The petitioners referred to S. 112 of the Hyderabad Municipal Corporation Act, 1955, whereunder a mandatory duty is imposed on the Hyderabad Municipal Corporation to make adequate provision for public parks, gardens, playgrounds and recreational grounds. The petitioners say that the reservation of the above area under the developmental plan for recreational park renders the omission on the part of the Municipal Corporation to develop that area fully as a failure to carry out its duty both under S. 112 of the Hyderabad Municipal Corporation Act and under the developmental plan. Accordingly, they argue that it is the statutory obligation of the Hyderabad Municipal Corporation to develop the abovementioned area into a recreational zone.

8. To this writ petition as originally filed only the Hyderabad Municipal Corporation and the Bhagyanagar Urban Developmental Authority and the Life Insurance Corporation of India were added as party-respondents. By 14th of Oct. 1985, the Hyderabad Municipal Corporation had been asserting that the State Government had granted exemption from the above developmental plan to a portion of the above mentioned land of 101 and odd acres which was acquired from private owners for the specific purpose of developing it as a park. It was in these circumstances the State Government was impleaded as a party-respondent so as to find out the correctness of the assertion of the Municipal Corporation. The State Government, after taking several adjournments, had filed its counter into this Court on 22nd of April, 1986. Earlier the Hyderabad Municipal Corporation filed its counter on 21st of Feb., 1986. In the month of March, 1986, the Life Insurance Corporation of India had filed its counter. The Income-tax Commissioner had impleaded himself as a party-respondent on 8th July, 1986. While this writ petition is pending in this Court, he has purchased a small extent of land which is part of the area shown by the Developmental plan as a recreational park. He has filed his counter on 21st of July, 1986. The Bhagyanagar Urban Development Authority was the last to file its counter-affidavit on 17-9-1986.

9. There is no serious dispute that in the above developmental plan published under G.O.Ms. No. 414 an extent of Acs. 151.55 cents and situated within the abovementioned boundaries is shown as a recreational park. In para 2 of the counter-affidavit of the Hyderabad Urban Development Authority it was admitted that “The development plan was approved by the Municipal Corporation in its resolution No. 307 dt. 1-8-1970 and it was notified by the Government in G.O.Ms. No. 470 dated 6-11-1973 for public objection and suggestion, and after examining all suggestions and objections, the Government approved the plan under G.O.Ms. No. 414 dated 27-9-1975. It was notified and came into force from 1-10-1975.”

In the same para, the Hyderabad Urban Development Authority said.

“In the Master Plan of 1975 under planning division No. 3 the vacant land below Tank Bund adjacent to Ramgopal Mills on either side of Hussain Sagar surplus nalla to an extent of Acs. 151.55 is reserved for recreation purposes as park and open spaces. A major part of the land was acquired and Indira Park was developed therein.”

10. The State Government in its counter-affidavit also admits the above material facts. In para 2 of the counter-affidavit of the State Government, it is said that, “In G.O.Rt. No. 877 M.A., dated 17-10-1986, the Government approved the draft notification under S. 4(1) of the Land acquisition Act, 1894 submitted by the Joint Collector, Hyderabad, for acquisition of Acs. 231.00 of land in Daira, Ganganmahal, Bakaram and Lingampally villages of Hyderabad District, below tank bund for National Park. The draft notification was published at pages 19-24 in the Andhra Pradesh Gazatte No. 44-A, dated 10-11-1966.”

11. The State Government in para 3 of the same counter-affidavit said, “The Standing Committee of the Corporation recommended to the General Body of the Corporation to acquire only Acs. 100.00 out of those Acs. 231.00 by deleting certain areas in respect of which lay out plans were submitted. Thereupon the General Body in its Resolution No. 3 dated 6-11-1968 resolved to delete land covered by 16 survey numbers and sent proposals with plans for confining the acquisition to an extent of Acs. 100.00 only out of the already notified area…… The Government considered those objections and overruled them and issued G.O. Rt. No. 25, M.A. dated 9-1-1969 approving the draft declaration under S. 6 of the Land Acquisition Act which was sent by the Board of Revenue which was in existence at that time for an extent of Acs. 99.19 guntas and the same was published in the extraordinary issue of the Andhra Pradesh Gazette dated 10-1-1969. But on actual verification of the above land, it was found to be Acs. 101.19 guntas instead of Acs. 99.19 guntas.”

12. The Hyderabad Municipal Corporation in its counter-affidavit had admitted the above facts. In para 6 of the counter-affidavit of the Hyderabad Municipal Corporation there is a significant admission. There it is said, “I admit the averments in paras 5 to 10 of the affidavit to the extent that originally the Government in Master Plan has shown 231 acres of land as recreational zone.”

13. From the above extracted statements it is clear that the above extent of Acs. 101.19 guntas which was acquired by the Government is a part of Acs. 151.55 cents which the developmental plan allocated to be developed as a recreational park. The specifications and details of the developmental plan published in G.O.Ms. No. 414 Municipal Administration dated 27th September, 1975 clearly attest to this fact. It is, however, true that the Life Insurance Corporation of India had acquired an extent of nearly Acs. 37.00 in the villages of Gaganmahal, Daira and Bagh Lingampally for promoting housing schemes and took possession of it on 12th of March, 1974 and subsequently and extent of Acs. 10.95 out of the above extent of Acs. 37.00 acquired by the Life Insurance Corporation of India has been sold and conveyed to the Income-tax Department while this writ petition was pending. Possession of that land was also taken by the Income-tax Commissioner from the Life Insurance Corporation on 16-9-1986 and the Life Insurance Corporation had also constructed a few residential houses. But in my opinion these facts are of no legal significance for our purpose.

14. From the facts stated above, it is clear that Acs. 151.55 cents has been reserved, according to the developmental plan for purposes of recreational park and that a part of that land has been later acquired by the Life Insurance Corporation of India and the Income-tax Commissioner for building residential houses. Neither in the counter-affidavit of the Life Insurance Corporation norin the counter-affidavit of the Income-tax Commissioner the fact of publication of a draft and final developmental plan with respect to Acs. 151.55 is specifically denied. In fact, the various public documents including the maps make the taking of such a plea by any party almost impossible. What is, therefore, ascertained by these two respondents is their title to this land. The Life Insurance Corporation of India in its counter-affidavit has boldly asserted, “This Hon’ble Court has no jurisdiction or authority in law to issue any direction to the 1st respondent to encroach upon the land purchased by this respondent”. There is no doubt that the Life Insurance Corporation is greatly mistaken in making the above assertion. The question in this writ petition is not, who owns the land that is shown as a part of the recreational zone by the developmental plan but whether that land owned either by the Life Insurance Corporation of India or by the Income-tax Department or by any other person or body is covered by a developmental plan and is allocated to be used as a recreational park. As I have noticed above, the setting up of such a case is almost impossible in this case. As a fact neither of these respondents have set up such a case specifically in their counter-affidavits although there is a vague and unspecified assertion in the counter-affidavit of the Life Insurance Corporation of India. On the other hand, there is positive affidavit evidence in the respondents’ counter-affidavits admitting the preparation and publication of the developmental plan covering this very area of Acs. 151.55. In this connection a letter dated 3rd of July, 1981 written by the Special Officer, Municipal Corporation of Hyderabad and filed into the Court as a material exhibit by the Income-tax Commissioner himself should be noticed. Material part of that letter reads as follows :

“Moreover in the year 1975, the developmental plan for twin cities of Hyderabad and Secunderabad has come into force. In the developmental plan, the entire stretch of Land from lower Tank Bund Road to Hussain Sagar surplus nall has been earmarked for recreational zone wherein residential houses are not permitted in normal course.”

The above letter written in 1981 shows that the land of Acs. 37.00 acquired by the Life Insurance Corporation of India is a part of the Acs. 151.55 cents covered by the developmental plan published in G.O.Ms. No. 414.

15. From the above the conclusion that the land of Acs. 151.55 cents situated below the Tank Bund and adjacent to Ram Gopal Mills on either side of Hussain Sagar surplus nall is declared by the developmental plan published in G.O.Ms. No. 414 as a recreational park and that 3, 7 and odd acres which was acquired by the Life Insurance Corporation of India is a part of the above extent of Acs. 151.55 cents covered by the development plan becomes unavoidable and inevitable. There is overwhelming uncontradicted documentary evidence in support of that conclusion. Many parties admit the fact in their counter-affidavits.

16. On the basis of the above conclusion it cannot be seriously contended that the Life Insurance Corporation or the Income-tax Department can use the land which they have acquired and which is presently under their occupation for the purpose of constructing residential quarters or for any other purpose except for the purpose of a recreational park.

17. It is undoubted that under the common law ownership which is a bundle or rights carries with it the right to put the property to any use the owner chooses. Under the common law, therefore, the Life Insurance Corporation as well as the Income-tax Department could not have been restrained from constructing residential quarters on the above 37 acres plot. Those bodies, would have been well within their legal powers as owners of their properties to build residential houses. But that ownership right is now curtailed by a statutory provision contained in the developmental plan. Putting the above 37 acres to residential use would be clearly contrary to the restrictions which the developmental plan had imposed on the above land. Developmental plan had forbidden any user of that land except as recreational zone, the common law rights of the owners must give in to the statutory restrictions. The common law use and enjoyment of these ownership rights should, therefore, be subject to the requirements of the statutory law of the developmental plan. Municipal laws are the earliest examples of statutory laws restricting the use of property rights. Chapter XIII of the Hyderabad Municipal Corporation Act, 1955 and more particularly S. 464 of that Act which is now repealed and replaced by the provisions of the Andhra Pradesh Urban Areas (Development) Act, 1975 are of that nature. They provide in the interests of the general welfare of the community for the preparation and enforcement of development plans. Those laws require conducting of elaborate survey of the civil needs of the inhabitants and feasibility and practicability of the various land uses and the prospective growth of the city before demarcating the land for different purpose. According to that law the developmental plans should define the various zones into which the area sought to be developed may be divided and should also indicate the manner in which the land in each zone is proposed to be used. The dominant intention of these statutory provisions is to plan for the present and future development of the whole area by restricting and regulating the ownership rights of the landlords under the common law. Those owners can no longer enjoy their unrestricted right available to them under common law to use their lands as they desire. Once a developmental plan has been prepared and published in accordance with law, the owners of the area concerned can only use their property in accordance with and in conformity with the provisions of the developmental plan. Once the developmental plan has been legally and finally published, no one in the area can use the land contrary to the provisions of the developmental plan. In this case, it has already been shown that the developmental plan has been published in accordance with law in the abovementioned G.O.Ms. No. 414. We have also seen that the entire extent of Acs. 151.55 cents of land abutting the Tank Bund and situated adjacent to Ram Gopal Mills on either side of Hussain Sagar surplus nalla was reserved in the above G.O.Ms. No. 414 by the developmental plan for the purpose of recreational park. In view of the above, the assertion of the Life Insurance Corporation of India or that of the Income-tax Department that they have a legal right to build residential houses on the land they own because they own that land should be rejected as being contrary to all accepted principles of law. In using or attempting to use the land which they have acquired within the recreational zone as residential area, these bodies or authorities are clearly violating the provisions of the developmental plan and are acting contrary to law. Because the developmental plan is law, it should also be held that the State Government and the Municipal Corporation of Hyderabad and the Hyderabad Urban Development Authority are equally bound to implement and enforce the developmental plan. Rule of law requires these authorities to implement the developmental plan. These legal authorities cannot, therefore, permit either the Life Insurance Corporation of India or the Income-tax Department to use any part of the abovementioned Acs. 151.55 cents of land for any purpose other than the one indicated in the developmental plan. It may be noted that the Special Officer of the Hyderabad Municipal Corporation in his letter of 1981 written to the State Government had shown long time back complete awareness of this plain legal position. His objection to use of the above land by the Income-tax Department for residential purposes is based solely on the ground that the use of this land in the developmental plan is shown as recreational park and that would not be permissible to use such a land as a residential area. It is as well that I make it clear that the declarations regarding demarcations of Land user contained in a developmental plan published under statutory authority are neither pious aspirations nor empty promises. Such declarations are legally enforceable. Those declarations impose legal obligations on the land owners and the public authorities. The public authorities should enforce those obligations. If they do not, it becomes the solemn duty of this Court to compel those authorities to perform their mandatory obligations. Law should not be allowed to be mocked by the haughty and the mighty. I, therefore, declare that the use of the above area for the construction of residential houses by the Life Insurance Corporation of India or the Income-tax Department, is quite clearly illegal and contrary to law.

18. The argument that the above land of 37 acres and odd had been acquired for a public purpose of building houses by the Life Insurance Corporation of India and that, therefore, the Life Insurance Corporation or its transferee can build houses on that land even acting contrary to the developmental plan has no merit or meaning. An element of public purpose is a necessary condition for the exercise of that inherently unjust powers of eminent domain, but is otherwise irrelevant for deciding the question whether the Life Insurance Corporation can disregard or ignore a developmental plan. It is relevant only for validating a compulsory transfer of title. It has the least relevance in the context of the restrictions to be imposed on the land user in accordance with the terms of the developmental plan. That a transferee cannot have greater rights than the original owner is too plain a proposition to require elaboration.

19. Acting in utter contempt of rule of law, the State Government under G.O.Rt. No. 449, Municipal Administration, dated 18-3-1986 relaxed the provisions of R. 10(1) of the layout Rules with respect to the maintenance of the width of the roads. Acting similarly the State Government also relaxed the provisions of bye-laws 34(2) and 70 of the Building bye-laws, 1972 with respect to the maintenance of the height of the kitchen and bed-rooms etc. But those relaxations would be wholly ineffective and inoperative in an area reserved to be used by the developmental plan solely for recreational purposes. Such relaxations made by the State Government would have been fruitful if made with respect to lands outside the recreational zone where it is permissible to build residential buildings. The above relaxation orders could not be construed as an amendment to the developmental plan either. Once approved, the developmental plan can only be altered by the well settled statutory method mentioned in S. 12 of the A.P. Urban Areas (Development) Act, 1975. Under that section, the A.P. Urban Areas Development Authority can make modification without affecting important alterations in the character of the developmental plan. Similarly, the Government’s power to make modifications to the developmental plan in hedged by several limitations. In either case, a prior notice should be published inviting objections and suggestions from all with respect to any amendments proposed to be made to a developmental plan. The objections so received should be considered by the proposer of the draft amendments. This statutory obligation to hear and dispose of the objections shows that the law treats the alteration of a developmental plan as affecting the rights and valuable interests of the city inhabitants. There is thus a lis present which can be dispose of only by applying judicial norms. Modifications to the approved developmental plan cannot, therefore, be made except for substantial reasons. In such a scheme of things policy considerations and personal predilections and intention to favour powerful bodies like Life Insurance Corporation or Income-tax Department can have no place. Further every modification to the developmental plan validly approved should be published in a reasonable manner. It is nobody’s case here that the Government has ever published any draft modification or invited any objections or otherwise followed the procedure dictated by S. 11 of the A.P. Urban Areas (Development) Act, 1975 or it published a finally modified developmental plan. Thus it must be held that the developmental plan published in G.O.Ms. No. 414 still holds the field even to this day. Inasmuch as the abovementioned G.O.Rt. No. 449 dated 18th March, 1976 was not even remotely connected with the scheme of S. 11 of the A.P. Urban Areas (Development) Act, that G.O. cannot be considered to be valid or efficacious to alter the land uses fixed by the developmental plan. Relaxing the Layout rules and the Building bye-laws has no relevance to the enforcement of developmental plans. Such a relaxation as the one made by the Government in G.O.Rt. No. 449 can only apply to the lands which are permitted to be used by the developmental plan as residential areas. Where there is a legal prohibition regarding the use of certain areas except as a recreational park, the relaxations granted under the Layout Rules and the Building bye-laws cannot lift those prohibitions. They do not apply at all because the layout rules and the building bye-laws would not apply to areas where there is no (sic) legal prohibition to build residential houses.

Law of Ecology and Environment :

20. The matter may be examined from the view point of our legal and constitutional obligation to preserve and protect our ecology and environment.

21. Under the common law, ownership denotes the right of the owner to possess the thing which he owns and his right to use and enjoy the thing he owns. That right extends even to consuming, destroying or alienating the thing. Under the doctrine of right to choose the uses to which a owner can put his land belongs exclusively to his choice. The right of use thus becomes inseparable from the right of ownership. The thrust of this concept of individual ownership is to deny communal enjoyment of individual property. This private law doctrine of ownership is comparable in its width and extent to the public law doctrine of sovereignty.

22. Into the domain of this doctrine of ownership, it is the collectivist jurisprudence of municipal administration that has made its first in roads. But in the recent past the law of ecology and environment has even more seriously shaken its roots. Under the powerful impact of the nascent but the vigorously growing law of environment, the unbridled right of the owner to enjoy his piece of land granted under the common law doctrine of ownership is substantially curtailed.

23. The objective of the environmental law is to preserve and protect the nature’s gifts to man and woman such as air, earth and atmosphere from pollution. Environmental law is based on the realisation of mankind of the dire ophysical necessity to preserve these invaluable and none too easily replenishable gifts of mother nature to man and his progeny from the reckless wastage and rapacious appropriation that common law permits. It is accepted that pollution “is a show agent of death and if it is continued the next 30 years as it has been for the last 30, it could become lethal”. (See Krishna Iyer’s Pollution and Law). Stockholm declaration of United Nations on Human Environment evidences this human anxiety :-

“The natural resources of the earth, including the air, water, land, flora and fauna and especially representative samples of natural ecosystem, must be safeguarded for the benefit of present and future generations through careful planning or management, as appropriate. . . . . . . Nature conservation including wildlife must therefore receive importance in planning for economic development.”

Similarly, the African Charter on Human and People’s rights declares that “all peoples shall have the right to a general satisfactory environment favourable to their development”. Judicially responding to this situation, Justice Douglas has suggested that environmental issues might be litigated in the name of “the inanimate object about to be… deposited” with those who have an “intimate relation” with it recognised as its legitimate spokemen. Common law being basically blind to the future and working primarily for the alienated good of the individual and operating on the cynical theory that because posterity has proved its utter inadequacy to achieve the urgent task of preservation and protection of our ecology and environment. Roscoc Pound blamed the common law for its serious social shortfalls. He wrote :-

“Men have changed their views as to the relative importance of the individual and of society; but the common law has not. Indeed, the common law knows individuals only….. It tries questions of the highest social import as mere private controversies between John Deo and Richard Deo. And this compels a narrow and one sided view.”

Rejecting these individualistic legal theories of common law that are found to be incompatible with the basic needs and requirements of the modern collective life environmental laws all over the world lay down rules for the preservation of environment and prevention of pollution of our atmosphere, air, earth and water. Our Parliament has recently enacted the Environment (Protection) Act (Act No. 29 of 1986) for the purpose of protecting and improving our environment. It widely distributed powers on all those who are traditionally classified as not aggrieved persons to take environmental disputes to Courts. This is clearly in harmony with our Constitutional goals which not only mandate the State to protect and improve the environment and to safeguard the forests and wildlife of the Country (Art. 48A); but which also hold it to be the duty of every one of our citizens to protect and improve the natural environement including forests, lakes, rivers and wildlife and to have compassion for living creatures (Art. 51-A(g)).

24. From the above it is clear that protection of the environment is not only the duty of the citizen but it is also the obligation of the State and all other State organs including Courts. In that extent, environmental law has succeeded in unshackling man’s right to life and personal liberty from the clutches of common law theory of individual ownership. Examining the matter from the above constitutional point of view, it would be reasonable to hold that the enjoyment of life and its attainment and fulfilment guaranteed by Art. 21 of the Constitution embraces the protection and preservation of nature’s gifts without life cannot be enjoyed. There can be no reason why practice of violent extinguishment of life alone should be regarded as violative of Art. 21 of the Constitution. The slow poisoning by the polluted atmosphere caused by environmental pollution and spoilation should also be regarded as amounting to violation of Art. 21 of the Constitution. In R. L. & E. Kendra, Dehradun v. State of U. P., , the Supreme Court has entertained environmental complaints alleging that the operations of lime-stone quarries in the Himalayan range of Mussoorie resulted in depredation of the environment affecting ecological balance. In R. L. & E. Kendra, Dehradun v. State of U. P., the Supreme Court in an application under Art. 32 has ordered the closure of some of these quarries on the ground that their operations were upsetting ecological balance. Although Art. 21 is not referred to in these judgments of the Supreme Court, those judgments can only be understood on the basis that the Supreme Court entertained those environmental complaints under Art. 32 of the Constitution as involving violation of Art. 21’s right to life.

25. It, therefore, becomes the legitimate duty of the Courts as the enforcing organs of Constitutional objectives to forbid all action of the State and the citizen from upsetting the environmental balance. In this case the very purpose of preparing and publishing the developmental plan is to maintain such an environmental balance. The object of reserving certain area as a recreational zone would be utterly defeated if private owners of the land in that area are permitted to build residential houses. It must, therefore, be held that the attempt of the Life Insurance Corporation of India and the Income-tax Department to build houses in this area is contrary to law and also contrary to Art. 21 of the Constitution.

26. Accordingly, I allow this writ petition and direct a mandamus to issue forbidding the Life Insurance Corporation of India and the Income-tax Department, Hyderabad, from raising any structures or making any constructions or otherwise using the land referred to above for residential purposes. I also direct the State Government of Andhra Pradesh, the Hyderabad Municipal Corporation and the Bhagyanagar Urban Development Authority, Hyderabad, to enforce the law as contained in the developmental plan in G. O. Ms. No. 414 and to prevent and forbid the Life Insurance Corporation of India and the Income-tax Department, Hyderabad, from using the above land for residential purposes. I also direct the State Government of A. P., the Hyderabad Municipal Corporation and the Bhagyanagar Urban Development Authority, Hyderabad, to remove within sixty days any structures that might have been raised by the Life Insurance Corporation of India or the Income-tax Department, Hyderabad, during the pendency of this writ petition in this Court. I, however, make it clear that any residential houses or structures which have been built prior to the filing of this writ petition will not be covered by the judgment.

27. The writ Petition is accordingly allowed with costs. Advocate’s fee Rs. 500/-.

28. Petition allowed.

The post T. Damodhar Rao and Ors. vs The Special Officer, Municipal appeared first on B&B Associates LLP.

UNION OF INDIA & ANR. …PETITIONER
Vs.
CYNAMIDE INDIA LTD. & ANR. …RESPONDENT

DATE OF JUDGMENT : 10/04/1987

BENCH : REDDY, O. CHINNAPPA (J) SINGH, K.N. (J)

CITATION : 1987 AIR 1802 1987 SCR (2) 841 1987 SCC (2) 720 JT 1987 (2) 107 1987 SCALE (1)728

CITATOR INFO : F 1987 SC2351 (3) APL 1988 SC 686 (9) D 1988 SC1301 (8) R 1988 SC1737 (75) R 1990 SC 334 (102) E 1990 SC1277 (31,38,43) R 1990 SC1851 (30)

ACT:

Drugs (Prices Control) Order, 1979: Paragraphs 3, 12, 13 & 27: Bulk Drugs–Price fixation of–Whether legislative activity–Principles of natural justice whether applicable to-Cost of production—–Whether can be determined by a subordinate legislating Body–Price fixation-Review–Nature of–Formulations–Fixation of retail prices–Whether to await the result of review application.

Constitution of India, Articles 32 & 226–Essential Commodities-Price fixation of—Whether matter for investi- gation and interference by Court.

Practice and Procedure: Essential Commodities–Price fixation of–Interim order staying implementation of notifi- cation fixing prices–Courts not to pass orders which would be against public interest.

Constitution of India, Article 39(b)–Material resources of the community–Distribution of to sub-serve common good–Obligations of State.

HELD:

Paragraph 3 of the Drugs (Prices Control) Order, 1979 made by the Central Government in exercise of powers under s. 3(2)(c) of the Essential Commodities. Act, 1955 empowers the Government, after making such enquiry as it deems fit, to fix the maximum price at which the indigenously manufac- tured bulk drug shall be sold. Clause (2) of Paragraph 3 provides that while so fixing the price of a bulk drug, the Government may take into account the average cost of produc- tion of such bulk drug manufactured by a efficient manufac- turer and allow a reasonable return on net worth. Paragraph 12 empowers the Government to fix leader prices of formula- tions of categories I and II, while paragraph 13 empowers the Government to fix retail prices of formulations of category III. Paragraph 27 enables any person aggrieved by any notification or order under the various paragraphs aforesaid to appeal to the Government for a review.

The Central Government issued notifications under paragraph 3 842 of the 1979 Order fixing the maximum prices at which various indigenously manufactured bulk drugs could be sold. The manufacturers first filed review applications under para- graph 27 of the Order and thereafter writ petitions under Art. 226 of the Constitution challenging the notifications.

The High Court quashed those notifications on the ground of failure to observe the principles of natural justice. Since prices of formulations are primarily dependent on prices of bulk drugs, the notifications fixing the retail prices of formulations issued during the pendency of review petitions were also quashed.

In the appeal by the Union of India, it was contended that the fixation of maximum price under paragraph 3 of the Order was a legislative activity and, therefore, not subject to any principle of natural justice, that paragraph 27 of the Order gave a remedy to the manufacturers to seek a review of the order fixing the maximum price under paragraph 3, that such review did not partake the character of a judicial or quasi,judicial proceedings, and that at the time of the hearing of the review application the matter under- went thorough and detailed discussion between the parties and the Government as well as the Bureau of Industrial Costs and Prices, and that the prices had not been fixed in an arbitrary manner.

For the respondents, it was contended that unlike other price control legislations, the Drugs (Prices Control) Order was designed to induce better production by providing for a fair return to the manufacturers; that the provision for an enquiry proceeding the determination of the price of a bulk drug, the prescription in paragraph 3, clause 2 that the average cast of production of the bulk drug manufactured by an efficient manufacturer should be taken into account and that a reasonable return on net worth should be allowed, and the provision for a review of the order determining the price, established that price fixation under the Order was a quasi-judicial activity obliging the observance of the rules of natural justice; that the review, for which provision is made by paragraph 27, was certainly of quasi-judicial char- acter and, therefore, it was necessary that the manufactur- ers should be informed of the basis for the fixation of the price, that the price had been fixed in an arbitrary manner and the Government was not willing to disclose the basis on which the prices were fixed on the pretext that it may involve disclosure of matters of confidential nature; that since the price of formulations were dependent on the prices of bulk drugs, these should not have been prescribed until the review application was disposed of, that the undertaking given by the parties before the High Court while obtaining ex-parte interim order to main- 843 tain the stanus-quo on the prices of bulk drugs and formula- tions prevailing before the issue of notifications, and in case of dismissal of their petitions to deposit the differ- ence in the prices of the formulations in the Court, lapsed with the disposal of the writ petition and it could no longer be enforced; and that the delay in filing special leave petitions against other manufacturers should not be condoned as the Government was well versed litigant as compared to private litigants.

Allowing the appeal, the Court,

HELD: 1. Price fixation is neither the function nor the forte of the Court. The Court is concerned neither with the policy nor with the rates. But it has jurisdiction to en- quire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant consid- erations kept out of the determination of the price. For example, if the legislature has decreed the pricing policy and prescribed the factors which should guide the determina- tion of the price, the Court will, if necessary, enquire into the question whether the policy and factors were present to the mind of the authorities specifying the price.

Its examination would stop there. The mechanics of price fixation are not concern of the executive. The Court will not revaluate the considerations even if the prices were demonstrably injurious to some manufacturers or producers.

It will, of course, examine if there was any hostile dis- crimination. [852E-H] Secretary of Agriculture v. Central Reig Refining Compa- ny, 338 604; Prag Ice & Oils Mills v. Union of India, [1978] INSC 43; [1978] 3 SCC 459 and Welcom Hotel v. State of Andhra Pradesh, [1983] 4 SCC 575, referred to.

2. Profiteering, by itself, is evil. Profiteering in the scarce resources of the community, much needed life-sustain- ing food stuffs and fife saving drugs is diabolic. It is a menace which has to be lettered and curbed. The Essential Commodities Act, 1955 is a legislation towards that end, in keeping with the duty of the State enshrined in Art. 39(b) of the Constitution towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. [851E-F] The right of the citizen to obtain essential articles at fair prices and duty of the State to provide them are thus transformed into the power of the State to fix prices and obligation of the producer to charge no more than the price fixed. [854F] 844 Shree Meenakshi Mills Ltd. v. Union of India, [1973] INSC 215; [1974] 1 SCC 468; Hari Shankar Bagla v. State of Madhya Pradesh, [1955] 1 SCR 380; Union of India v. Bhanamal Gulzarimal, [1959] INSC 156; [1960] 2 SCR 627; Sri Krishna Rice Mills v. Joint Director (Food), (unreported), State of Rajasthan v. Nathmal and Mithamal, [1954] INSC 23; [1954] SCR 982; Narendra Kumar v. Union of India, [1959] INSC 147; [1960] 2 SCR 375, Panipat Co-operative Sugar Mills v. Union of India, [1972] INSC 272; [1973] 1 SCC 129; Anakapalle Co-operative Agricul- tural and Industrial Society Ltd. v. Union of India, [1972] INSC 271; [1973] 3 SCC 435 and Premier Automobiles Ltd. v. Union of India, [1971] INSC 323; [1972] 2 SCR 526, referred to.

3.1 A price fixation measure does not concern itself with the interests of an individual manufacturer or produc- er. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character not directed against a particular situa- tion. It is intended to operate in future. It is conceived in the interest of the general consumer public. [854E-F]

3.2 Price fixation is more in the nature of a legisla- tive activity than administrative. A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in ac- cordance with the requirements of policy. Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future; administration is the process of performing particu- lar acts, of issuing particular orders or of making deci- sions which apply general rules to particular cases. [853F- H; 854A] Secretary of Agriculture v. Central Reig Refining Compa- ny[1950] USSC 16; , 338 US 604, and Saraswati Industrial Syndicate Ltd. v.

Union of India[1974] INSC 163; , [1974] 2 SCC 630, referred to.

3.3.1 Price fixation may occasionally assume an adminis- trative or quasi-judicial character when it relates to acquisition or requisition of goods or property from indi- viduals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be deter- mined according to the statutory guidelines laid down by it.

In such situations the determination of price may acquire a quasi-judicial character. [854G-H; 855A] 3.3.2 Section 3(2)(f) of the Essential Commodities Act enables the 845 Central Government to make an order requiring any person engaged in the production of any essential commodity to sell the whole or a specific part of the quantity produced by him to the Government or its nominee. Section 3(3)(C) provides for the determination of the price to be paid to such a person. If the provisions of s. 3(2)(c), under which the price of an essential commodity may be controlled, are contrasted with s. 3(3)(C) under which payment is to be made for a commodity required to be sold by an individual to the Government, the distinction between a legislative act and a non-legislative act will at once become clear. The order made under s. 3(3)(c), which is not in respect of a single transaction, nor directed to a particular individual, is clearly a legislative act, while an order made under s.

3(3)(C), which is in respect of a particular transaction of compulsory sale from a specific individual, is a nonlegisla- tive act. [860B-H; 861A-B]

3.3 The order made under s. 3(2)(c) controlling the price of an essential commodity may itself prescribe the manner in which price is to be fixed but that will not make the fixation of price a non-legislative activity, when the activity is not directed towards a single individual or transaction but is of a general nature, covering all indi- viduals and all transactions. The legislative character of the activity is not shed and an administrative. or quasi- judicial character acquired merely because guidelines pre- scribed by the statutory order have to be taken into ac- count. [861B-C]

3.4 Legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case of Parlia- mentary legislation, the proposition is self evident. In the case of subordinate legislation, it may happen that Parlia- ment may itself provide for a notice and for a hearing, in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. But where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity. [852H; 853A-C] New India Sugar Works v. State of Uttar Pradesh, [1981] INSC 50; [1981] 2 SCC 293; Laxmi Khandsari v. State of Uttar Pradesh, [1981] INSC 57; [1981] 2 SCC 600; Ramesh Chandra Kachardas Porwal v. State of Maharashtra, [1981] INSC 35; [1981] 2 SCC 722; Bates v. Lord Hailsha, of St.

Marylebone, [1972] 1 WLR 1973; Edinburgh and Dalkeith Rv. v.

Wauchope Per Lord Brougham, [1842] 8 CI & F 700, 720; Brit- ish Railways Board v. Pickin, [1974] UKHL 1; [1974] 1 All ER 609, Sarkar Sasta Anaj Vikreta Sangh v. State of Madhya Pradesh, 846 [1981] 4 SCC 471 and Tharoo Mal v. Puranchand, [1977] INSC 222; [1978] 1 SCC 102, referred to.

3.5 Nothing in the scheme of the Drugs (Prices Control) Order, 1979 leads to the inference that price fixation under that Order is not a legislative activity but a quasi-judi- cial activity which would attract the observance of the principles of natural justice. Nor is there anything in the scheme or the provisions of that Order which otherwise contemplates the observance of any principle of natural justice or kindred rule, the non-observance of which would give rise to a cause of action to a suitor. [871G-H; 872A-B]

4.1 Occasionally the legislature directs the subordinate legislating body to make ‘such enquiry as it think fit’ before making the subordinate legislation. In such a situa- tion, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the subordinate legislation, the nature and the extent of the enquiry is in the discretion of the subordinate legislating body and the subordinate legislation is not open to question on the ground that the enquiry was not as fur as it might have been. The provision for such an enquiry is generally an enabling provision, intended to facilitate the subordinate legislating body to obtain relevant information’ from all and whatever source considered necessary. It is the sort of enquiry which the legislature itself my cause to he made before legislating, an enquiry which will not confer any right an anyone other than the enquiring body. It is differ- ent from an enquiry in which an opportunity is required to he given to persons likely to he affected. The former is an enquiry leading to a legislative activity while the latter is an enquiry which ends in an administrative or quasi- judicial decision. [853D-F]

4.2 In the present case, paragraph 3 of the Drugs (Prices Control) Order, 1979 is an enabling provision. “Such an enquiry as it thinks fit” contemplated by it is an en- quiry of the former character to he made for the purposes of fixing the maximum price at which a bulk drug may he sold, with a view to regulating its equitable distribution and making it available at a fair price for the benefit of the ultimate consumer in consonance with Art. 39(b) of the Constitution. It is primarily from the consumer public’s point of view that the Government is expected to make its enquiry. The need of the consumer public is to he ascer- tained and making the drug available to them at a fair price is its ultimate aim. The enquiry is to he made from that angle and directed towards that end. Information may he gathered from whatever source considered desirable by the Government. [872B-E] 847

4.3 In fixing the price of a bulk drug, the Government is expressly required by the Order to take into account the average cost of production of such bulk drug manufactured by ‘an efficient manufacturer’ and allow a reasonable return on ‘net worth’. For this purpose too, the Government may gather information from any source including the manufacturers.

Here again the enquiry by the Government need not be re- stricted to ‘an efficient manufacturer’ or some manufactur- ers; nor need it be extended to all manufacturers. What is necessary is that the average cost of production, by ‘an efficient manufacturer’ must be ascertained and a reasonable return allowed on ‘net worth’. Being a subordinate or dele- gated legislative activity, the enquiry must necessarily comply with the statutory conditions, if any, no more and no less, and no implications of natural justice can be read into it unless it is a statutory condition. [866B-D]

5.1 The review provided by paragraph 27 of the Order, of the order made under paragraph 3 fixing maximum price of indigenously manufactured drugs, and under paragraphs 12 and 13 fixing leader and retail prices of formulations, is akin to a post-decisional hearing which is sometimes afforded after the making of some administrative orders, but not truly so. It is a curious amalgam of a hearing which occa- sianally precedes a subordinate legislative activity such as the fixing of municipal rates etc. and a post decisional hearing after the making of an administrative or quasi- judicial order. it is a hearing which follows a subordinate ‘legislative activity intended to provide an opportunity to affected persons such as the manufacturers, the industry and the consumer public to bring to the notice of the subordi- nate legislating body the difficulties or problems experi- enced or likely to he experienced by them consequent on the price fixation, whereupon the Government may make appropri- ate orders. More precisely it is a review of subordinate legislation by a legislating body at the instance of an aggrieved person. [873B; 874C-D]

5.2 The reviewing authority has the fullest freedom and discretion under paragraph 27 of the Order to prescribe its own procedure and consider the matter brought before it so long as it does not travel beyond the parameters prescribed by paragraph 3 in the case of a review against an order made under that paragraph and the respective other paragraphs in the case of other orders. But whatever procedure is adopted, it must be a procedure tuned to the situation. [873H; 874A- B] Vrajlal Manilal & Co. v. Union of India & Anr., [1964] INSC 67; [1964] 7 SCR 97; Shivaji Nathubhai v. Union of India & Ors., [1960] INSC 7; [1960] 2 SCR 775; Maneka Gandhi v. Union of India,[1978] 2 SCR 621;

Swadeshi Cotton Mills v.

848 Union of India[1981] INSC 11; , [1981] 2 SCR 533 and Liberty Oil Mills v.

Union of India[1984] INSC 96; , [1984] 3 SCR 676, distinguished.

6.1 So long as the method prescribed and adopted by the subordinate legislating body in arriving at the cost of production of bulk drugs was not arbitrary and opposed to the principal statutory provisions, it could not legitimate- ly be questioned. [878F]

6.2 It is open to the subordinate legislating body to prescribe and adopt its own mode of ascertaining the cost of production and the items to be included and excluded in so doing. Such a body is under no obligation to follow the method adopted by the Income-tax authorities in allowing expenses for the purpose of ascertaining income and assess- ing it. There may be many items of business expenditure which may be allowed by Income-tax authorities as legitimate expenses but which can never enter the cost of production.

It is open to such an authority to adopt a rough and read but otherwise not unreasonable formula rather than a need- lessly intricate so-called scientific formula. [878D-H] It could not therefore, be said in the instant case, that the subordinate legislating authority acted unreasona- bly in prescribing the norms in the manner it has done.

7.1 From the legislative nature of the activity of the Government, it is clear that it is under no obligation to make any disclosure of any information received and consid- ered by it in making the order but in order to render effec- tive the right to seek a review given to an aggrieved per- son, the Government, if so requested by the aggrieved manu- facturer, is under an obligation to disclose any relevant information which may reasonably be disclosed pertaining to ‘the average cost of production of the bulk drug manufac- tured by an efficient manufacturer’ and ‘the reasonable return on net worth’. [874C-E]

7.2 In the instant case, the procedure followed by the Government in furnishing the requisite particulars at the time of the hearing of the review applications and discuss- ing across the table the various items that hod been taken into account was sufficient compliance with the demands of fair play in the case of the class of persons claiming to by affected by the fixation of maximum price under the Drugs (Prices Control) Order. It cannot, therefore, be said that there was anything unfair in the procedure adopted by the Government. [876D-E]

8. This Court cannot constitute itself into a court of appeal over 859 the Government in the matter of price fixation. The ques- tions that obsolete quantitative usages had been taken into consideration, proximate cost data had been ignored, and the data relating to the year ending November 1976 had been adopted as the basis; that there were errors in totalling, errors in the calculation of prices of utilities, errors in the calculation of ‘net worth’ and many other similar er- rors, were questions to be raised before the Government in the review application under paragraph 27. [877A-C]

9.1 It is the necessary duty of the Government to pro- ceed to fix the retail price of a formulation as soon as the price of the parent bulk drug is fixed. Though the price fixation of formulations is dependent on the price of the bulk drug, it is not to await the result of a review appli- cation which in the end may turn out to be entirely without substance. In view of the public interest, therefore, it is necessary that the price of formulation should be fixed close on the heels of the fixation of bulk drug price.

[879D-E; G]

9.2 The ups and downs of commerce are inevitable it is not possible to devise a fool proof system to take care of every possible defect and objection. It is certainly not a matter at which the court could take a hand. All that court may do is to direct the Government to dispose of the review application expeditiously according to a time bound pro- gramme. [879F-G]

10. Though the price of a bulk drug is dependent on innumerable variables, it does not follow that the notifica- tion fixing the maximum price must necessarily be struck down as obsolete by the mere passage of time. The applica- tions for review must be dealt with expeditiously and when- ever they are not so dealt with, the aggrieved person may seek a mandamus from the court to direct the Government to deal with the review application within a time frame-work.

[880B-C]

11. Where prices of essential commodities are fixed in order to maintain or increase their supply or for securing their equitable distribution and availability at fair prices, the court should not make any interim order staying the implementation of the notification fixing the prices.

Such orders are against the public interest and ought not to be made by a court unless it is satisfied that no public interest is going to suffer. In matters of fixation of price, it is the interest of the consumer public that must come first and any interim order must take care of that interest. [880D-F] 850 In the instant case, the order made by the High Court has the manufacturers on terms, but the consumer public has been left high and dry. [881D]

12. Apart from the fact that an appeal is ordinarily considered to be a continuation of the original proceeding, in the present case, further orders of the Supreme Court were also in contemplation and such further orders could only be made if appeals were preferred to the Supreme Court.

There was no doubt in anyone’s mind that the matter would be taken up in appeal to the Supreme Court whichever way the writ petitions were decided. The undertakings given by the parties in the present cases, were thus intended to and do continue to subsist. [881E-F] [The Government is directed to dispose of the review applications after giving notice of hearing to the manufac- turer. The hearing to be given within two months and the review applications disposed of within two weeks after the conclusion of the hearing.]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1603 of 1985 etc.

From the Judgment and Order dated 17.12.1984 of the Delhi High Court in C.W.P. No. 820 of 1981.

G. Ramaswamy, Additional Solicitor General G. Subramani- um, C.V. Subba Rao and A. Subba Rao for the Appellants.

A.B. Diwan, S.I. Thakar, D.D. Udeshi, H.S. Merchant, Ravinder Narain, Mrs. A.K. Verma and D.N. Mishra for the Respondents.

The Judgment of the Court was delivered by CHINNAPPA REDDY, J. It was just the other day that our brothers Ranganath Misra and M.M. Dutt, JJ. had to give directions in a case (Vincent Panikurbangara v. Union of India) where a public spirited litigant had complained about the unscrupulous exploitation of the Indian Drug and Pharma- ceutical Market by multinational Corporations by putting in circulation low-quality and even deleterious drugs. In this group of cases we are faced with a different problem of alleged exploitation by big manufacturers of bulk drugs. The problem is that of high prices, bearing, it is said, little relation to the cost of production to the manufacturers. By way of illustration, we may straightaway mention a glaring instance of such high-pricing which was 851 brought to our notice at the very commencement of the hear- ing. ‘Barlagan Ketone’, a bulk drug, was not treated as an essential bulk drug under the Drugs (Prices Control) Order, 1970 and was not included in the schedule to that order. A manufacturer was, under the provisions of that Order, free to continue to sell the drug at the price reported by him to the Central Government at the time of the commencement of the order, but was under an obligation not to increase the price without the prior approval of the Central Government.

The price which the manufacturer of Barlagan Kotone, report- ed to the Central Government in 1971 was Rs.24,735.68 per Kg. After the 1979 Drugs (Prices Control) Order came into force, the distinction between essential and non-essential bulk drugs was abolished and a maximum price had to be fixed for Barlagan Ketone also like other bulk drugs. The manufac- turer applied for fixation of price at Rs.8,500 per Kg. The Government, however, fixed the price at Rs.1,810 per Kg. For the moment, ignoring the price fixed by the Government, we see that the price of Rs.24,735 per Kg. at which the manu- facturer was previously selling the drug and at which he continues to market the drug to this day because of the quashing of the order fixing the price by the High Court, is so unconsciously high even compared with the price claimed by himself that it appears to justify the charge that some manufacturers do indulge in ‘profiteering’.

Profiteering, by itself, is evil. Profiteering in the scarce resources of the community, much needed life-sustain- ing food-stuffs and lifesaving drugs is diabolic. It is a menance which had to be lettered and curbed. One of the principal objectives of the Essential Commodities Act, 1955 is precisely that. It must be remembered that Art. 39(b) enjoins a duty on the State towards securing ‘that the ownership and control of the material resources of the community are so distributed as best to subserve the common good’. The Essential Commodities Act is a legislation to- wards that end. Section 3(1) of the Essential Commodities Act enables the Central Government, if it is of opinion ‘that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair price’, to ‘provide for regulating or prohibiting by order, the production, supply and distribution thereof and trade and commerce therein’. In particular, s. 3(2)(c) enables the Central Government, to make an order providing for controlling the price at which any essential commodity may be bought or sold. It is in pursuance of the powers granted to the Central Government by the Essential Commodi- ties Act that first the Drugs (Prices Control) Order, 1970 and later the Drugs (Prices Control) Order, 1979 were made.

852 Armed with authority under the Drugs (Prices Control) Order, 1979 the Central Government issued notifications fixing the maximum prices at which various indigenously manufactured bulk drugs may be sold by the manufacturers. These notifica- tions were questioned on several grounds by the manufactur- ers and they have been quashed by the Delhi High Court on the ground of failure to observe the principles of natural justice. Since prices of ‘formulations’ are primarily de- pendent on prices of ‘buli drugs’, the notifications fixing the retail prices of formulations were also quashed. The manufacturers had also filed review petitions before the Government under paragraph 27 of the 1979 Order. The review petitions could not survive after the notifications sought to be reviewed had themselves been quashed. Nevertheless the High Court gave detailed directions regarding the manner of disposal of the review petitions by the High Court. The Union of India has preferred these appeals by Special leave of this Court against the judgment of the High Court. The case for the Union of India was presented to us ably by Shri G. Ramaswami, the learned Additional Solicitor General and the manufacturers were represented equally ably by Shri Anil Diwan.

Before we turn to the terms of the Drugs (Prices Con- trol) Order, 1979 we would like to make certain general observations and explain the legal position in regard to them.

We start with the observation, ‘Price-fixation is nei- ther the function nor the forte of the Court’. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant consid- erations kept out of the determination of the price. For example, if the Legislature has decreed the pricing policy and prescribed the factors which should guide the determina- tion of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price. But our examination will stop there. We will go no further. We will not deluge ourselves with more facts and figures. The assem- bling of the raw materials and the mechanics of price fixa- tion are the concern of the executive and we leave it to them. And, we will not revaluate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination. That is a different ‘cup of tea’ altogether.

The second observation we wish to make is, legislative action, 853 plenary or subordinate, is not subject to rules of natural justice. In the case of Parliamentary legislation, the proposition is self-evident. In the case of subordinate ‘legislation, it may happen that Parliament may itself provide for a notice and for a hearing-there are several instances of the legislature requiring the subordinate legislating authority to give public notice and a public hearing before say, for example, levying a municipal rate–,in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation.

The right here given to rate payers or others is in the nature of a concession which is not to detract from the character of the activity as legislative and not quasijudi- cial. But, where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity.

Occasionally, the legislature directs the subordinate legislating body to make ‘such enquiry as it thinks fit’ before making the subordinate legislation. In such a situa- tion, while such enquiry by the subordinate legislating body as it deems fit is a condition precedent to the subordinate legislation, the nature and the extent of the enquiry is in the discretion of the subordinate legislating body and the subordinate legislation is not open to question on the ground that the enquiry was not as full as it might have been. The provision for ‘such enquiry as it thinks fit’ is generally an enabling provision, intended to facilitate the subordinate legislating body to obtain relevant information from all and whatever source and not intended to vest any right in any one other than the subordinate-legislating body. It is the sort of enquiry which the legislature itself may cause to be made before legislating, an enquiry which will not confer any right on anyone.

The third observation we wish to make is, price fixation is more in the nature of a legislative activity than any other. It is true that, with the proliferation of delegated legislation, there is a tendency for the line between legis- lation and administration to vanish into an illusion. Admin- istrative, quasi-judicial decisions tend to merge in legis- lative activity and, conversely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activity. Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is ‘difficult in theory and impossible in practice’. Though difficult, it is necessary that the line must sometimes be drawn as different legal fights and conse- quences may ensue. The distinction between the two has usually been expressed as ‘one between the general and the particular’. ‘A legislative act is the creation 845 and promulgation of a general rule of conduct without refer- ence to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in accordance with the requirements of policy’. ‘Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future; adminis- tration is the process of performing particular acts, of issuing particular orders or of making decisions which apply general rules to particular cases.’ It has also been said “Rule making is normally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class” while, “an adjudication, on the other hand, applies to specific individuals or situa- tions”. But, this is only a bread distinction, not neces- sarily always true. Administration and administrative adju- dication may also be of general application and there may be legislation of particular application only. That is not ruled out. Again, adjudication determines past and present facts and declares rights and liabilities while legislation indicates the future course of action. Adjudication is determinative of the past and the present while legislation is indicative of the future. The object of the rule, the reach of its application, the rights and obligations arising out of it, its intended effect on past, present and future events, its form, the manner of its promulgation are some factors which may help in drawing the line between legisla- tive and non-legislative acts. A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transac- tions. It is a direction of a general character, not direct- ed against a particular situation. It is intended to operate in the future. It is conceived in the interests of the general consumer public. The right of the citizen to obtain essential articles at fair prices and the duty of the State to so provide them are transformed into the power of the State to fix prices and the obligation of the producer to charge n6 more than the price fixed. Viewed from whatever angle, the angle of general application the prospectivity of its effect, the public interest served, and the rights and obligations flowing therefrom, there can be no question that price fixation is ordinarily a legislative activity. Price- fixation may occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be determined accord- ing to the statutory guidelines laid down by it. In 855 such situations the determination of price may acquire aquasi-judicial character. Otherwise, price fixation is generally a legislative activity. We also wish to clear a misapprehension which appears to prevail in certain circles that price-fixation affects the manufacturer or producer primarily and therefore fairness requires that he be given an opportunity and that fair opportunity to the manufacturer or producer must be read into the procedure for price-fixa- tion. We do not agree with the basic premise that price fixation primarily affects manufacturers and producers.

Those who are most vitally affected are the consumer public.

It is for their protection that price-fixation is resorted to and any increase in price affects them as seriously as any decrease does a manufacturer, if not more.

The three observations made by us are well-settled and wellfounded on authority. The cases to which we shall now refer, will perhaps elucidate what we have tried, unfelici- tously, to express.

In Shree Meenakshi Mills Ltd. v. Union of India, [1973] INSC 215; [1974] 1 SCC 468 a notification fixing the ex-factory price of certain counts of cotton yarn was questioned on the ground that the price had been arbitrarily fixed. After referring to Hari Shanker Bagla v. State of Madhya Pradesh, [1955] 1 SCR 380; Union of India v. Bhanamal Gulzarimal, [1959] INSC 156; [1960] 2 SCR 627; Sri Krishna Rice Mills v. Joint Director (Food), (unreported); State of Rajasthan v. Nathmal and Mithamal, [1954] INSC 23; [1954] SCR 982; Narendra Kumar v. Union of India, [1959] INSC 147; [1960] 2 SCR 375; Panipat Co-operative Sugar Mills v. Union of India, [1972] INSC 272; [1973] 1 SCC 129; Anakapalle Co-operative Agricultural & Industrial Society Ltd. v. Union of India, [1972] INSC 271; [1973] 3 SCC 435 and Premier Automobiles Ltd. v. Union of India, [1971] INSC 323; [1972] 2 SCR 526 a constitution bench of the court observed that the dominant object and the purpose of the legislation was the equitable distribution and availability of commodities at fair price and if profit and the producer’s return were to be kept in the forefront, it would result in losing sight of the object and the purpose of the-legislation. If the prices of yarn or cloth were fixed in such a way to enable the manufacturer or producer recover his cost of production and secure a reasonable margin of profit, no aspect of infringe- ment of any fundamental right could be said to arise. It was to be remembered that the mere fact that some of those were engaged in the industry, trade or commerce alleged’that they were incurring loss would not render the law stipulating the price unreasonable. It was observed, “The control of prices may have effect either on maintaining or ,increasing supply of com- modity or securing equit- 856 able distribution and availability at fair prices. The controlled price has to retain this equilibrium in the supply and demand of the commodity. The cost of production, a reasonable return to the producer of the commodity are to be taken into account. The producer must have an incentive to produce.

The fair price must be fair not only from the point of view of the consumer but also from the point of view of the producer. In fixing the prices, a price line has to be held in order to give preference or pre-dominant consideration to the interest of the consumer or the general public over that of the produc- ers in respect of essential commodities. The aspect of ensuring availability of the essen- tial commodities to the consumer equitably and at fair price is the most important considera- tion.

The producer should not be driven out of his producing business. He may have to bear loss in the same way as he does when he suf- fers losses on account of economic forces operating in the business. If an essential commodity is in short supply or there is hoarding, concerning or there is unusual demand, there is abnormal increase in price.

If price increases, it becomes injurious to the consumer. There is no justification that the producer should be given the benefit of price increase attributable to hoarding or cornering or artificial short supply. In such a case, if an “escalation” in price is contem- plated at intervals, the object of controlled price may be stultified. The controlled price will enable both the consumer and the producer to tide over difficulties. therefore, any restriction in excess of what would be neces- sary in the interest of general public or to remedy the evil has to be very carefully considered so that the producer does not perish and the consumer is not crippled.” The cases of Panipat Sugar Mills and Anakapalle Co-operative Agricultural Society were distinguished on the ground that they were governed by sub-section (3C) of sec. 3 of the Essential Commodities Act and therefore, had no relevance to the case before the Constitution Bench. The case of Premier Automobiles was distinguished on the ground that the deci- sion was rendered by invitation and on the agreement of the parties irrespective of technical and legal questions. The Court quoted with approval a passage from Secretary of Agriculture v. Central Reig Refining Company, 330 US 604, stating, 857 “Suffice it to say that since Congress fixed the quotas on a historical basis it is not for this Court to reweigh the relevant factors and, per chance, substitute its notion of expediency and fairness for that of Congress.

This is so even though the quota thus fixed may demonstrably be disadvantageous to certain areas or persons. This Court is not a tribunal for relief from the crudities and inequities of complicated experimental economic legisla- tion “.

In Saraswati Industrial Syndicate Ltd. v.

Union of India[1974] INSC 163; , [1974] 2 SCC 630; the Court observed, “Price-fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. It could not, there- fore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price. Nevertheless, the criterion adopted must be reasonable. Reasonableness, for purposes of judging whether there was an “excess of power” or an “arbitrary” exercise of it, is really the demonstration of a rea- sonable nexus between the matters which are taken into account in exercising a power and the purposes of exercise of that power.” It was also reiterated that the decision in Shree Meenakshi Mills’ case was based on a special agreement between the parties and therefore, had no relevance to the question before them.

In Prag Ice & Oil Mills v. Union of India, [1978] INSC 43; [1978] 3 SCC 459 a Constitution Bench of seven judges of this court had to consider the validity of the Mustard Oil (Price Control) Order, 1977, an Order made in exercise of the powers con- ferred upon Central Government by the Essential Commodities Act. Chandrachud, J. speaking for the court approved the observation of Beg, CJ. in Saraswati Industrial Syndicate that it was enough compliance with the Constitutional man- date if the basis adopted for price fixation was not shown to be so patently unreasonable as to be in excess of the power to fix the price. He observed “In the ultimate analysis the mechanics of price fixation has necessarily to be left to the judgment of the Executive and unless it is patent that there is hostiled discrimination against a class of operators, the processual basis of price 858 fixation has to be accepted in the generality of cases as valid.” Referring to Shri Meenakshi Mills, the learned CJ. reaf- firmed the approval accorded to the statement in Secretary of Agriculture v. Central Reig Refining Company (supra) that Courts of Law could not be converted into tribunals for relief from the crudities and inequities of complicated experimental economic legislation. Panipat Sugar and Anakap- palle Society were again referred to and it was pointed out that those cases turned on the language of s. 3(3C) of the Essential Commodities Act. Premier Automobiles was consid- ered and it was affirmed that the judgment in that case could not be treated as precedent and could not afford any appreciable assistance in the decision of price fixation cases as it proceeded partly on agreement between the par- ties and partly on concessions made at the bar. Beg, CJ. who delivered a separate opinion for himself and for Desai, J.

agreed that the judgment in Premier Automobiles was not to provide a precedent in price fixation case. He also reaf- firmed the proposition that price fixation was in the nature of a legislative measure and could not give rise to a com- plaint that natural justice was not observed. He indicated the indicia which led him to the conclusion that price fixation was a legislative measure. He observed:

“We think that unless, by the terms of a ‘particular statute, or order, price fixation is made a quasi-judicial function for speci- fied purposes or cases, it is really legisla- tive in character in the type of control order which is now before us because it satisfies the tests of legislation. A legislative meas- ure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class. In the case before us, the Control Order applies to sales of mustard oil anywhere in India by any dealer. Its validity does not depend on the observance of any procedure to be complied with or particular types of evi- dence to be taken on any specified matters as conditions precedent to its validity. The test of validity is constituted by the nexus shown between the order passed and the purposes for which it can be passed, or in other words by reasonableness judged by possible or probable consequences.” In New India Sugar Works v. State of Uttar Pradesh, [1981] INSC 50; [1981] 2 SCC 293 859 there was an indication though it was not expressly so stated that the question of observing natural justice did not arise in cases of price fixation. In Laxmi Khandsari v.

State of Uttar Pradesh[1981] INSC 57; , [1981] 2 SCC 600 it was held that the Sugar Cane Control Order, 1966 was a legislative measure and therefore, rules of natural justice were not attracted.

In Rameshchandra Kachardas Porwal v. State of Maharashtra, [1981] INSC 35; [1981] 2 SCC 722 it was observed that legislative activity did not invite natural justice and that making of a declara- tion that a certain place shall be a principal market yard for a market area under the relevant Agricultural Produce Markets Acts was an act legislative in character. The obser- vation of Magarry, J. in Bates v. Lord Hailsha, of St.

Marylebone [1972] 1 WLR 1973 that the rules of natural justice do not run in the sphere of legislation, primary or delegated, was cited with approval and two well known text books writers Paul Kackson and Wades H.W.R. were also quot- ed. The former had said, “There is no doubt that a minister, or any other body, in making legislation, for example, by statutory instrument or by law, is not subject to the rules of natural justice–Bates v. Lord Hailsham of St. Marylebone (supra)–any more than is Parliament itself; Edinburgh and Dalkeith Rv. v. Wauchope per Lord Brougham, [1842] 8 CL & F 700, 720; British Railways Board v. Pickin, [1974] UKHL 1; [1974] 1 All ER 609. The latter had said, “There is no right to be heard before the making of legislation, whether primary or dele- gated, unless it is provided by statutes.” In Sarkari Sasta Anaj Vikreta Sangh v. State of Madhya Pradesh, [1981] 4 SCC 471; it was pointed out that the amendment of the Madhya Pradesh Food Stuffs Distribution Control Order was a legis- lative function and there was, therefore, no question of affording an opportunity to those who were to be affected by it.

In Welcom Hotel v. State of Andhra Pradesh, [1983] 4 SCC 575 the observations of Chandrachud, CJ. in Prag Ice and Oil Mills were quoted with approval in connection with the fixation of prices of food stuffs served in restaurants.

In Tharoe Mal v. Puranchand, [1977] INSC 222; [1978] 1 SCC 102 one of the questions was regarding the nature of the hearing to be given before imposing municipal taxes under the Uttar Pra- desh Municipalities Act, 1916. It was held, ” ……. the procedure for the imposition of the tax is legislative and not quasi- judicial …… The right to object, howev- er, seems to be given at the stage of propos- als of the tax only as a concession to re- quirements of 860 fairness even though the procedure is legisla- tive and not quasi-judicial.” We mentioned that the Panipat and the Anakapalle eases were distinguished in Shree Meenakshi, and Prag Ice. Pani- pat and Anakapalle were both cases where the question was regarding the price payable to a person who was required to sell to the Government a certain percentage of the quantity of sugar produced in his mill. The Order requiring him to sell the sugar to the Government was made under s. 3(2)(f) of the Essential Commodities Act under which the Central Government was enabled to make an order requiring any person engaged in the production of any essential commodity to sell the whole or specified part of the quantity produced by him to the Government or its nominee. It will straight-away be seen that an order under s. 3(2)(f) if a specific order directed to a particular individual for the purpose of enabling the Central Government to purchase a certain quan- tity of the commodity from the person holding it. It is an order for a compulsory sale. When such a compulsory sale is required to be made under s. 3(2)(f), the question naturally arises what is the price to be paid for the commodity pur- chased? Section 3(3C) provides for the ascertainment of the price. It provides that in calculating the amount to be paid for the commodity required to be sold regard is to be had to–(a) the minimum price, if any, fixed for sugarcane by the Central Government under this section; (b) the manufac- turing cost of sugar; (c) the duty or tax, if any, paid or payable thereon; and (d) the securing of a reasonable return on the capital employed in the business of manufacturing sugar. It is further prescribed that different prices may be determined, from time to time, for different areas or for different factories or for different kinds of sugar. It is to be noticed here that the payment to be made under s.

3(3C) is not necessarily the same as the controlled price which may be fixed under s. 3(2)(c) of the Act. Section 3(2)(c) of the Act, we have already seen, enables the Cen- tral Government to make an order controlling the price at which any essential commodity may be bought or sold, if the Central Government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or in securing their equitable distribution and availability at fair prices. Section 3(3C) provides for the determination of the price to be paid to a person who has been directed by the Central Government by an Order made under s. 3(2)(c) to sell a certain quantity of an essential commodity to the Government or its nominee. While s. 3(2)(c) contemplates an Order of a general nature, s.

3(3C) contemplates a specific transaction. If the provisions of s. 3(2)(c) under which the price of an essential commo- 861 dity may be controlled are contrasted with s. 3(3C) under which payment is to be made for a commodity require to be sold by an individual to the Government, the distinction between a legislative act and a non-legislative act will at once become clear. The Order made under s. 3(2c), which is not in respect of a single transaction, nor directed to particular individual is clearly a legislative act, while an Order made under s. 3(3C) which is in respect of a particu- lar transaction of compulsory sale from a specific individu- al is a non-legislative act. The Order made under s. 3(2)(c) controlling the price of an essential commodity may itself prescribe the manner in which price is to be fixed but that will not make the fixation of price a non-legislative activ- ity, when the activity is not directed towards a single individual or transaction but is of a general nature, cover- ing all individuals and all transactions. The legislative character of the activity is not shed and an administrative or quasi-judicial character acquired merely because guide- lines prescribed by the statutory order have to be taken into account.

We may refer at this juncture to some illuminating passages from Schwrtz’s book on ‘Administrative Law’. He said:

“If a particular function is termed “legisla- tive” or “rulemaking” rather than “judicial” or “adjudication,” it may have substantial effects upon the parties concerned. If the function is treated as legislative in nature, there is no right to notice and hearing, unless a statute expressly requires them. If a hearing is held in accordance with a statutory requirement, it normally need not be a formal one, governed by the requirements discussed in Chapters 6 and 7. The characterization of an administrative act as legislative instead of judicial is thus of great significance.” XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X “As a federal court has recently pointed out, there is no “bright line” between rule-making and adjudication. The most famous pre-APA attempt to explain the difference between legislative and judicial functions was made by Justice Holmes in Prentis v. Atlantic Coast Line Co. “A judicial inquiry,” said he, “investigates, declares and enforces liabili- ties as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end. Legislation on the other hand looks to the future 862 and changes existing conditions by making a new rule to be applied thereafter to all or some part of those subject to its power.” The key factor in the Holmes analysis is time: a rule prescribes future patterns of conduct; a decision determines liabilities upon the basis of present or past facts.” “The element of applicability has been empha- sized by others as the key in differentiating legislative from judicial functions. According to Chief Justice Burger, “Rulemaking is nor- mally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class.” An adjudication, on the other hand, applies to specific individuals or situations. Rulemaking affects the rights of individuals in the abstract and must be applied in a further proceeding before the legal position of any particular individual will be definitely affected; adjudication operates conceretly upon individuals in their individual X X capacity.” We may now turn our attention to the two Drugs (Prices Control) Order of 1970 and 1979, both of which were made by the Central Govern- ment in exercise of its powers under s. 3 of the Essential Commodities Act.

The Drugs (Prices Control) Order, 1970 defined ‘Bulk Drugs’ as follows:

“Bulk drugs” means “any unprecessed phamaceu- tical, chemical, biological and plant product or medicinal gas conforming to pharmacopocial or other standards accepted which is used as such or after being processed into formula- tions and includes an essential bulk drug.” Bulk drugs were divided into essential bulk drugs which were included in the schedule and bulk drugs which were not so included. In the case of essential bulk drugs, paragraph 4 of the order enabled the Central Government to fix the maximum price at which such essential bulk drugs should be sold. In the case of bulk drugs, which were not included in the schedule, a manufacturer was entitled to continue to market the product at the same price at which he was market- ing the products at the time of the commencement of the order. He was required to report this price to the Central Government within two 863 weeks of the commencement of the order and was further prohibited from increasing the price without obtaining the approval of the Central Government.

A Committee on Drugs and Pharmaceutical Industry, popu- larly known as the Hathi Committee was appointed by the Government of India to enquire into the various facets, of the Drug Industry in India. One of the terms of reference was ‘to examine the measures taken so far to reduce prices of drugs for the consumer, and to recommend such further measures as may be necessary to rationalise the prices of basic drugs and formulations.’ The Hathi Committee noticed that ‘in a country like India where general poverty and the wide disparities in levels of income between different sections existed’ it was particularly important to emphasise ‘the social utility of the industry and the urgent need for extending as rapidly as possible certain minimum facilities in terms of preventive and curative medicines to the large mass of people both urban and rural’. It was said, “The concern about drug prices, therefore, really arises from the fact that many of them are essential to the health and welfare of the community; and that there is no justification for the drug industry charging prices and having a production pattern which is based not upon the needs of the community but on aggres- sive marketing tactices and created demand.” The Government of India accepted the report of the Hathi Committee and announced in Parlia- ment the ‘Statement on Drug Policy’ pursuant to which the Drugs (Prices Control) Order, 1970 was repealed and the Drugs (Prices Con- trol) Order, 1979 was made. Paragraph 44 of the Statement on Drug Policy in 1978 dealt with ‘pricing policy’ and it may be usefully extracted here. It was as follows:- “The Hathi Committee had recommended that a return post tax between 12 to 14% on equity that is paid up capital plus reserves, may be adopted as the basis for price fixation, depending on the importance and complexity of the bulk drug. In the case of formulations, the Hathi Committee felt that the principle of selectivity could be introduced in terms of (a) the size of the units, (b) selection of items; and (c) controlling the prices only of market leaders, in particular, of products for which price control is contemplated. The Hathi Committee considered that units (other 864 than MRTP units) having only turnover of less than Rs.1 crore may be exempted from price control. Alternatively, all formulations (other than those marketed under generic names) which have an annual sale in the coun- try in excess of Rs.15 lakhs (inclusive of excise duty) may be subjected to price con- trol, irrespective of whether or not the total annual turnover of the unit is in excess of Rs.1 crore. The ceiling price will be deter- mined taking into account the production costs and a reasonable return for the units which are the market leaders. Yet another variant of a selectivity, according to the Hathi Commit- tee, would be to identify product groups which individually are important and which collec- tively constitute the bulk of the output of the industry. In respect of each item of this list, it would be possible to identify the leading producers who account for about 60% of the sales between them. On the basis of cost analysis in respect of those units, maximum prices may be prescribed and all other units may be free to fix their prices within this ceiling. On balance, the Hathi Committee was of the view that this particular variant selectivity may be administratively simpler.” The Drugs (Prices Control) Order, 1979 was made pursuant to this Statement of Policy.

Paragraph 2(a) of the Drugs (Prices Control) Order, 1979 defines ‘bulk drug’ to mean “any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacological or other stand- ards accepted under the Drugs and Cosmetics Act, 1940, which is used as such or as in ingredient in any formulations.” “Formulation” is defined as follows:- “Formulation means a medicine processed out of, or containing one or more bulk drugs or drugs, with or without the use of any pharma- ceutical aids for internal or external use for, or in the diagnosis, treatment, mitiga- tion or prevention of disease in human beings or animals, but shall not include– (i) any bona fide Ayurvedic (including Sidha) or Unani (Tibb) Systems of medicine;

(ii) any medicine included in the Hom- oeopathic system of medicine;

865 (iii) any substance to which the provi- sions of the Drugs and Cosmetics Act, 1940 (XXIII of 1940), do not apply” The expressions “free reserve”, “leader price”, “net-worth”, “now bulk drug”, “pooled price,” “pre-tax return”, “retention price” are defined in the following manner:

“”Free reserve” means a reserve created by appropriation of profits, but does not include reserves provided for contingent liability, disputed claims, goodwill, revaluation, and other similar reserves”.

“‘leader price’ means a price fixed by the Government for formulations specified in Category I, Category II or Category III of the Third Schedule in accordance with the provi- sions of paras. 10 and 11, keeping in view the cost of or efficiency, or both, of major manufacturers of such formulations.” “‘net-worth’ means the share capital of a company plus free reserve, if any.” “‘new bulk drug’ means a bulk drug manufac- tured within the country, for the first time after the commencement of this Order.” “‘Pooled price’ in relation to a bulk drug, means the price fixed under para 7.” “‘pre-tax return’ means profits before payment of incometax and sur-tax and includes such other expenses as do not form part of the cost of formulations.” “‘retention price’ in relation to a bulk drug means the price fixed under paras 4 and 7 for individual manufacturers, or importers, or distributors, or such bulk drugs.” The distinction between an essential bulk drug included in the schedule and a bulk drug not so included in the sched- ule, which was made in 1970 Drugs (Prices Control) Order was abandoned in the 1979 Order. Bulk drugs were, however, broadly divided into indigenously 866 manufactured bulk drugs, imported bulk drugs and hulk drugs which were both manufactured indigenously as also imported.

Paragraph 3 of the 1979 Order enables the Government, with a view to regulating the equitable distribution of any indigenously manufactured bulk drug specified in the first or the second schedule and making it available at a fair price and after making such enquiry as it deems fit, to fix from time to time by notification in the official gazette, the maximum price at which the bulk drug shall be sold.

Clause (2) of Paragraph 3 provides that while so fixing the price of a bulk drug, the Government may take into account the average cost of production of such bulk drug manufac- tured by an efficient manufacturer and allow a reasonable return on net worth. By way of an explanation efficient manufacturer is defined to mean “a manufacturer-(i) Whose production of such bulk drug in relation to the total pro- duction of such bulk drug in the country is large, or (ii) who employs efficient technology in the production of such bulk drug.” We have already noticed that ‘net worth’ is defined to mean ‘the share capital of a company plus free reserve, if any’. “Free reserve” itself is separately de- fined. It is then prescribed by clause (3)– “No person shall sell a bulk drug at a price exceeding the price notified under sub-para- graph 1, plus local taxes, if any payable:

provided that until the price of bulk drug is so notified, the price of such bulk drug shall be the price which prevailed immediately before the commencement of this order and the manufacture of such bulk drug at a price exceeding the price which prevailed as afore- said.” This means that until the maximum sale price of an indige- nously manufactured bulk drug is fixed under paragraph 3 of the 1979 Order, the price fixed under paragraph 4 of the 1970 order or the price permitted under paragraph 5 of the 1970 order was to be maximum sale price. Paragraph 3(4)(a) requires a manufacturer commencing production of the bulk drug specified in the First or Second Schedule, the price of which has already been notified by the Government, not to sell the bulk drug at a price exceeding the notified price.

Paragraph 3(4)(b) provides that where the price of a bulk drug has not been notified by the Government, the manufac- turer shall, within 14 days of the commencement of the the production of such bulk drug, make an application to the Government in Form I and intimate the Government the price at which he intends to sell the bulk drug and the Government may, 867 after making such an enquiry as it thinks fit, by order, fix a provisional price at which such bulk drug shall be sold.

Paragraph 4 of the 1979 order provides that notwith- standing anything contained in paragraph 3, the Government may, if it considers necessary or expedient so to do for increasing the production of an indigenously manufactured bulk drug specified in the first or second schedule, by order, fix– “(a) a retention price of such bulk drug, (b) a common sale price for such bulk drug taking into account the weighted average of the retention price fixed under clause (a).” Paragraph 4 is thus in the nature of an exception to para- graph 3. It is meant to provide a fillip to individual manufacturers of bulk drugs whose production it is necessary to increase. Retention price, by its very definition per- tains to individual manufacturers. Common sale price, we take it, is the price at which manufacturers whose reten- tions are fixed may sell the bulk drug despite the maximum sale price fixed under paragraph 3.

Paragraph 5 deals with the power of the Government to fix maximum sale price of new bulk drugs. Paragraph 6 ena- bles the Government to fix the maximum sale price of import- ed bulk.drugs specified in First and Second Schedules.

Paragraph 7 deals with the power of the Government to fix retention price and pooled price for the sale of bulk drugs specified in the First and Second Schedules which are both indigenously manufactured and imported. Paragraph 9 empowers the Government to direct manufacturers of bulk drugs to sell bulk drugs to manufacturers of formulations. Paragraph 10 prescribes a formula for calculating the retail price of formulations. The formula is:

“R.P. = (M.C.+C.C.+P.M.+P.C.) x (1+MU)+ E.D.

100 “R.P.” means retail price.

“M.C.” means material cost and includes the cost of drugs and other pharmaceutical aids used including overages, if any, and process loss thereon in accordance with such 868 norms as may be specified by the Government from time to time by notification in the official Gazette in this behalf.

“C.C.’? means conversion cost worked out in accordance with such norms as may be specified by the Government from time to time by notifi- cation in the official Gazettee in this be- half.

“P.M.” means the cost of packing material including process loss thereon worked out in accordance with such norms as may be specified by the Government from time to time by notifi- cation in the official Gazette in this behalf.

“P.C.” means packing charges worked out in accordance with such norms as may be specified by the Government from time to time by notifi- cation in the official Gazette in this behalf.

“M.U.” means make-up referred to in para. 11.

“E.D.” means excise duty.” Paragraph 11 explains what ‘Mark-up’ means. Paragraph 12 empowers the Government to fix leader prices of formulations of categories I and II specified in the third schedule.

Paragraph 13 empowers the Government to fix retail price of formulations specified in category III of third schedule.

Paragraph 14 contains some general provisions regarding- prices of formulations. Paragraph 15 empowers the Government to revise prices of formulations.

Paragraph 16 provides that where any manufacturer, importer or distributor of any bulk drug or formulation fails to furnish information as required under the order within the time specified therein, the Government may, on the basis of such information as may be available with it, by order, fix a price in respect of such bulk drug or formu- lation as the case may be. Paragraph 17 requires the Govern- ment to maintain the Drugs Prices Equalization Account to which shall be credited, by the manufacturer, among other items, “the excess of the common selling price or, as the case may be, pooled price over his reten- tion price.” It is provided that the amount credited to the Drugs Prices Equaliza- 869 tion Account shall be spent for paying to the manufacturer, “the shortfall between his retention price and the common selling price or as the case may be, the pooled price.” Paragraph 27 enables any person aggrieved by any notifi- cation or order under paragraphs 3, 4, 5, 6, 7, 9, 12, 13, 14, 15 or 16 to apply to the Government for a review of the notification or order within fifteen days of the date of the publication of the notification in the official Gazette, or, as the case may be, the receipt of the order by him.

Bulk drugs constituting categories I and II are enumer- ated in the First Schedule. Bulk drugs constituting category III are enumerated in the Second Schedule. Formulations constituting categories I, II and III are enumerated in the Third Schedule. The Fourth Schedule prescribes the various forms referred to in the different paragraphs of the Drugs (Prices Control) Order. Form No. 1 which is referred to in paragraphs 3(4), 5 and 8(1) is titled “Form of application for fixation or revision of prices of bulk drug”. The sever- al columns of the Form provide for various particulars to be furnished and item 18 requires the applicant to furnish ,”the cost of production of the bulk drug as per proforma (attached) duly certified by a practising Cost/Chartered Accountant”. The ‘proforma’ requires particulars of cost- data, such as, raw materials, utilities, conversion cost, total cost of production, interest on borrowings, minimum bonus, packing, selling expenses, transport charges, transit insurance charges, total cost of sales, selling price, existing price or notional or declared prices, etc. to be furnished. A note at the end of the proforma requires the exclusion from cost certain items of expenses, such as, bonus in excess of statutory minimum, bad debts and provi- sions, donations and charities, loss/gain on sale of assets, brokerage and commission, expenses not recognised by income tax authorities and adjustments relating to previous years.

Shri G. Ramaswamy, learned Additional Solicitor General on behalf of the Union of India, submitted that the fixation of maximum price under paragraph 3 of the Drugs (Prices Control) Order was a legislative activity and, therefore, not subject to any principle of natural justice. He urged that relevant information was required to be furnished and was indeed furnished by all the manufacturers in the pre- scribed form as required by paragraph 3(4) of the Drugs (Prices Control) Order. This information obtained from the various manufacturers was taken into account and a report was then obtained from the Bureau of Industrial Costs and Prices, a high-powered expert body specially constituted to undertake the study of industrial cost struc- 870 tures and pricing problems and to advise the Government. It was only thereafter that notifications fixing the prices were issued. He further submitted that paragraph 27 of the Central Order gave a remedy to the manufacturers to seek a review of the order fixing the maximum price under paragraph

3. The review contemplated by paragraph 27 in so far as it related to the notification under paragraph 3, it was sub- mitted by the learned Additional Solicitor General, did not partake the character of a judicial or quasi-judicial pro- ceeding. He urged that the manufacturers had invoked the remedy by way of review, but before the applications for review could be dealt with, they rushed to the court with the writ petitions out of which the appeal and the special leave petitions arise. He urged that the Government had always been ready and wilting to give a proper hearing to the parties and in fact gave them a heating in connection with their review applications. The grievance of the manu- facturers in the writ petitions that they were not furnished the details of the basis of the price fixation was not correct since full information was furnished at the time of the hearing of the review applications when the matter underwent thorough and detailed discussion between the parties and the Government as well as the Bureau of Indus- trial Costs and Prices.

The submission of Shri Anil Diwan, learned counsel for the respondents was that unlike other price control legisla- tions, the Drugs (Prices Control) Order ,was designed to induce better production by providing for a fair return to the manufacturer. Reference was made to the Hathi Committee report which had recommended a return of 12 to 14% post tax return on equity, that is, paid up capital plus reserves and the ‘Statement on Drug Policy’ which mentioned that ceiling prices may be determined by taking into account production costs and a reasonable return. Great emphasis was laid on the second clause of paragraph 3 of the 1979 Order which provides that in fixing the price of a bulk drug, the Gov- ernment may take into account the average cost of production of such bulk drug manufactured by an efficient manufacturer and allow a reasonable return on networth. It was submitted that the provision for an enquiry preceding the determina- tion of the price of a bulk drug, the prescription in para- graph 3 clause 2 that the average cost of production of the drug manufactured by an efficient manufacturer should be taken into account and that a reasonable return on networth should be allowed and the provision for a review of the order determining the price, established that price-fixation under the Drugs (Prices Control) Order 2979 was a quasi- judicial activity obliging the observance of the rules of natural justice. The suggestion of the learned counsel was that the nature of the review under 871 paragraph 27 was so apparently quasi-judicial and that the need to know the reasons for the order sought to be reviewed was so real if the manufacturer was effectively to exercise his right to seek the quasijudicial remedy of review, that by necessary implication it became obvious that the Order fixing the maximum price must be considered to be quasi- judicial and not legislative in character. The provision for enquiry in the first clause of paragraph 3 and the prescrip- tion of the matters to be taken into account in the second clause of paragraph 3 further strengthened the implication, according to the learned counsel. It was contended that in any case, whatever be the nature of the enquiry and the order contemplated by paragraph 3, the review for which provision made by paragraph 27 was certainly of a quasi- judicial character and, therefore, it was necessary that the manufacturers should be informed of the basis for the fixa- tion of the price and furnished with details of the same in order that they may truly and effectively avail themselves of the remedy of review. If that was not done, the remedy would become illusory. It was argued with reference to various facts and figures that the price had been fixed in an arbitrary manner and the Government was not willing to disclose the basis on which the prices were fixed on the pretext that it may involve disclosure of matters of confi- dential nature. It was stated that the applications of the manufacturers for review of the notifications fixing the prices had not been disposed of for years though time was really of the very essence of the matter. The prices of formulations were dependent on the prices of drugs and it was not right that prices of formulations should have been fixed even before the applications for review against the notifications fixing the price of bulk drugs were disposed of. It was suggested that the delay in disposing of the review applications had the effect of rendering the original notifications fixing the prices unreal and out of date and liable to be struck down on that ground alone.

We are unable to agree with the submissions of the learned counsel for the respondents either with regard to the applicability of the principles of natural justice or with regard to the nature and the scope of the enquiry and review contemplated by paragraphs 3 and 27 while making our preliminary observations, we pointed out that price fixation is essentially a legislative activity though in rare circum- stances, as in the case of a compulsory sale to the Govern- ment or its nominee, it may assume the character ‘of an administrative or quasijudicial activity. Nothing in the scheme of the Drugs (Prices Control) Order induces us to hold that price fixation under the Drugs (Prices Control) Order is not a legislative activity, but a quasi-judicial activity which would attract the observance of the princi- ples of natural justice.

872 Nor is there anything in the scheme or the provisions of the Drugs (Prices Control) Order which otherwise contemplates the observance of any principle of natural justice or kin- dred rule, the non-observance of which would give rise to a cause of action to a suitor. What the order does contemplate however is ‘such enquiry’ by the Government ‘as it thinks fit’. A provision for ‘such enquiry’ as it thinks fit’ by a subordinate legislating body, we have explained earlier, is generally an enabling provision to facilitate the subordi- nate legislating body to obtain relevant information from any source and it is not intended to vest any right in any body other than the subordinate legislating body. In the present case, the enquiry contemplated by paragraph 3 of Drugs (Prices Control) Order is to be made for the purposes of fixing the maximum price at which a bulk drug may be sold, with a view to regulating its equitable distribution and making it available at a fair price. The primary object of the enquiry is to secure the bulk drug at a fair price for the benefit of the ultimate consumer an object designed to fulfil the mandate of Art. 39(b) of the Constitution. It is primarily from the consumer public’s point of view that the Government is expected to make its enquiry. The need of the consumer public is to be ascertained and making the drug available to them at a fair price is what it is all about.

The enquiry is to be made from that angle and directed towards that end. So, information may be gathered from whatever source considered desirable by the Government. The enquiry, obviously is not to be confined to obtaining infor- mation from the manufacturers only and indeed must go be- yond. However, the interests of the manufacturers are not to be ignored. In fixing the price of a bulk drug, the Govern- ment is expressly required by the Order to take into account the average cost of production of such bulk drug manufac- tured by ‘an efficient manufacturer’ and allow a reasonable return on ‘net worth’. For this purpose too, the Government may gather information from any source including the manu- facturers. Here again the enquiry by the Government need not be restricted to ‘an efficient manufacturer’ or some manu- facturers; nor need it be extended to all manufacturers.

What is necessary is that the average cost of production by ‘an efficient manufacturer’ must be ascertained and a rea- sonable return allowed on ‘net worth’. Such enquiry as it thinks fit is an enquiry in which information is sought from whatever source considered necessary by the enquiring body and is different from an enquiry in which an opportunity is required to be given to persons likely to be affected. The former is an enquiry leading to a legislative activity while the latter is an enquiry which ends in an administrative or quasi-judicial decision. The enquiry contemplated by para- graph 3 of the Drug (Prices Control) Order is an enquiry of the former charac- 873 ter. The legislative activity being a subordinate or dele- gated legislative activity, it must necessarily comply with the statutory conditions if any, no more and no less, and no implications of natural justice can be read into it unless it is a statutory condition. Notwithstanding that the price fixation is a legislative activity, the subordinate legisla- tion had taken care here to provide for a review. The review provided by paragraph 27 of the order is akin to a post decisional hearing which is sometimes afforded after the making of some administrative orders, but not truly so.

It is a curious amalgam of a hearing which occasionally precedes a subordinate legislative activity such as the fixing of municipal rates etc. that we mentioned earlier and a post-decision hearing after the making of an administra- tive or quasi-judicial order. It is a hearing which follows a subordinate legislative activity intended to provide an opportunity to affected persons such as the manufacturers, the industry and the consumer public to bring to the notice of the subordinate legislating body the difficulties or problems experienced or likely to be experienced by them consequent on the price fixation, whereupon the Government may make appropriate orders. Any decision taken by the Government cannot be confined to the individual manufacturer seeking review but must necessarily affect all manufacturers of the bulk drug as well as the consumer public. Since the maximum price of a bulk drug is required by paragraph 3 to be notified any fresh decision taken in the proceeding for review by way of modification of the maximum price has to be made by a fresh notification fixing the new maximum price of the bulk drug. In other words, the review if it is fruitful must result in fresh subordinate legislative activity. The true nature of the review provided by paragraph 27 in so far as it relates to the fixation of maximum price of bulk drugs under paragraph 3 leader price and prices of formulations under paragraphs 12 and 13 is hard to define. It is diffi- cult to give it a label and to fit it into a pigeon-hole, legislative, administrative or quasi-judicial. Nor is it desirable to seek analogies and look to distant cousins for guidance. From the scheme of the Control Order and the context and content of paragraph 27, the Review in so far as it concerns the orders under paragraph 3, 12 and 13 appears to be in the nature of a legislative review of legislation, or more precisely a review of subordinate legislation by a subordinate legislating body at the instance of an aggrieved person. Once we have ascertained the nature and character of the review, the further question regarding the scope and extent of the review is not very difficult to answer. The reviewing authority has the fullest freedom and discretion to prescribe its own procedure and con- 874 sider the matter brought before it so long as it does not travel beyond the parameters prescribed by paragraph 3 in the case of a review against an order under paragraph 3 and the respective other paragraphs in the case of other orders.

But whatever procedure is adopted, it must be a procedure tuned to the situation. Manufacturers of any bulk drug are either one or a few in number and generally they may be presumed to be well informed persons, well able to take care of themselves, who have the assistance of Accountants, Advocates and experts to advise and espouse their cause. In the context of the Drug industry with which we are concerned and in regard to which the Control Order is made we must proceed on the basis that the manufacturers of bulk drugs are generally persons who know all that is to be known about the price fixed by the Government. From the legislative nature of the activity of the Government, it is clear that the Government is under no obligation to make any disclosure of any information received and considered by it in making the order but in order to render effective the right to seek a review given to an aggrieved person we think that the Government, if so requested by the aggrieved manufacturer is under an obligation to disclose any relevant information which may reasonably be disclosed pertaining to ‘the average cost of production of the bulk drug manufactured by an efficient manufacturer’ and ‘the reasonable return on net worth’. For example, the manufacturer may require the Gov- ernment to give information regarding the particulars de- tailed in Form No. 1 of the Fourth Schedule which have been taken into account and those which have been excluded. The manufacturer may also require to be informed the elements which were taken into account and those which were excluded in assessing the ‘free reserves’ entering into the calcula- tion of ‘net worth’. These particulars which he may seek from the Government are mentioned by us only by way of illustration. He may seek any other relevant information which the Government shall not unreasonably deny. That we think is the nature and scope of the review contemplated by Paragraph 27 in relation to orders made under Paragraphs 3, 12 and 13.

On the question of the scope of a Review, the learned counsel for the respondents invited our attention to Vrajlal Manilal & Co. v. Union of India & Anr., [1964] INSC 67; [1964] 7 SCR 97;

Shivaji Nathubhai v. Union of India & Ors., [1960] INSC 7; [1960] 2 SCR 775; Maneka Gandhi, [1978] 2 SCR 621; Swadeshi Cotton Mills[1981] INSC 11; , [1981] 2 SCR 533; and Liberty Oil Mills.[1984] INSC 96; , [1984] 3 SCR 676.

We are afraid none of these cases is of any assistance to the correspondence since the court was not concerned in any of 875 those cases with a review of subordinate legislation by the subordinate legislating body.

In Vrajlal Manilal & Co. v. Union of India & Anr.

(supra) the court held that the Union of India when dispos- ing of an application for review under Rule 59 of the Mines Concession Rules functioned as a quasi-judicial authority and was bound to observe the principles of natural justice.

The decision rendered without disclosing the report of the State Government and without affording reasonable opportuni- ty to the appellants to present their case was contrary to natural justice was therefore, void. In ShivaIi Nathubhai v.

Union of India & Ors., (supra) it was decided by the court that the power of review granted to the Central Government under Rule 54 of the Mineral Concession Rules required the authority to act judicially and its decision would be a quasi-judicial act and the fact that Rule 54 gave power to the Central Government to pass such order as it may deem ‘just and proper’ did not negative the duty to act judicial- ly. In Maneka Gandhi’s case where Bhagwati, J. while ex- pounding on natural justice pointed out that in appropriate cases where a pre-decisional hearing was impossible, there must atleast be a post-decisional hearing so as to meet the requirement of the rule audi alteram partem. In Swadeshi Cotton Mills, it was observed that in cases where owing to the compulsion of the fact situation or the necessity of taking speedy action, no pre-decisional hearing is given but the action is followed soon by a full post-decisional hear- ing to the person affected, there is in reality no exclusion of the audi alteram partem rule. It is no adaptation of the rule to meet the situational urgency. In Liberty Oil Mills v. Union of India, (supra) the question arose whether clause 8B of the Import Control Order which empowered the Central Government or the Chief Controller to keep in abeyance applications for licences or allotment of imported goods where any investigation is pending into an imported goods where any investigation is pending into an allegation men- tioned in clause 8 excluded the application of the princi- ples of natural justice. The court pointed out that it would be impermissible to interpret a statutory instrument to exclude natural justice unless the language of the instru- ment left no option to the court. As we said, these cases have no application to a review of subordinate legislation by the subordinate legislating body at the instance of a party.

We mentioned that the price fixed by the Government may be questioned on the ground that the considerations stipu- lated by the order as relevant were not taken into account.

It may also be questioned on any ground on which a subordi- nate legislation may be 876 questioned, such as, being contrary to constitutional or other statutory provisions. It may be questioned on the ground of a denial of the right guaranteed by Art. 14 if it is arbitrary, that is, if either the guidelines prescribed for the determination are arbitrary or if, even though the guidelines are not arbitrary, the guidelines are worked in an arbitrary fashion. There is no question before us that paragraph 3 prescribes any arbitrary guideline. It was, however, submitted that the guidelines were not adhered to and that facts and figures were arbitrarily assumed. We do not propose to delve into the question whether there has been any such arbitrary assumption of facts and figures. We think that if there is any grievance on that score, the proper thing for the manufacturers to do is bring it to the notice of the Government in their applications for review.

The learned counsel argued that they were unable to bring these facts to the notice of the Government as they were not furnished the basis on which the prices were fixed. On the other hand, it has been pointed out in the counter-affida- vits filed on behalf of the Government that all necessary and required information was furnished in the course of the hearing of the review applications and. there was no justi- fication for the grievance that particulars were not fur- nished. We are satisfied that the procedure followed by the Government in furnishing the requisite particulars at the time of the hearing of the review applications is sufficient compliance with the demands of fair play in the case of the class of persons claiming to be affected by the fixation of maximum price under the Drugs (Prices Control) Order. As already stated by us, manufacturers of bulk drugs who claim to be affected by the Drugs (prices Control) Order, belong to a class of persons who are well and fully informed of every intricate detail and particular which is required to be taken into account in determining the price. In most cases, they are the sale manufacturers of the bulk drug and even if they are not the sole manufacturers, they belong to the very select few who manufacture the bulk drug. It is impossible to conceive that they cannot sit across the table and discuss item by item with the reviewing authority unless they are furnished in advance full details and particulars.

The affidavits filed on behalf of the Union of India show that the procedure which is adopted in hearing the review applications is to discuss across the table the various items that have been taken into account. We do not consider that there is anything unfair in the procedure adopted by the Government. If necessary it is always open to the manu- facturers to seek a short adjournment of the hearing of the review application to enable them to muster more facts and figures on their side. Indeed we find that the hearing given to the manufacturers is often protected. As we said we do not propose to examine this ques- 877 tion as we do not want to constitute ourselves into a court of appeal over the Government in the matter of price fixa- tion.

The learned counsel argued that there were several patent errors which came to light during the course of the hearing in the High Court. He said that obsolete quantita- tive usages had been taken into consideration, proximate cost data had been ignored and the data relating to the year ending November, 1976 had been adopted as the basis. It was submitted that there were errors in totalling, errors in the calculation of prices of utilities, errors in the calcula- tion of net-worth and many other similar errors. As we pointed out earlier, these are all matters which should legitimately be raised in the review application, if there is any substance in them. These are not matters for investi- gation in a petition under Art. 226 of the Constitution or under Art. 32 of the Constitution. Despite the pressing invitation of Shri Diwan to go into facts and figures and his elaborate submissions based on facts and figures, we have carefully and studiously refrained from making any reference to such facts and figures as we consider it out- side our province to do so and we do not want to set any precedent as was supposed to have been done in Premier Automobiles though it was not so done and, therefore, needed explanation in later cases.

One of the submissions of Shri Diwan was that in calcu- lating “net-worth” the cost of new works in progress and the amount invested outside the business were excluded from ‘free reserves’ and that such exclusion could not be justi- fied on any known principle of accountancy. We think that the question has to be decided with reference to the defini- tion of ‘free reserve’ in paragraph 2(g) of the Control Order and not on any assumed principle of accountancy. This is also a question which may be raised before the Government in the review application. Referring to the ‘proforma’ attached to Form No. 1 of the Fourth Schedule in which are set out several items which have to be taken into account in assessing the cost of production, the learned counsel at- tacks the notes at the end of Item No. 14 which mentions the various items of expenses to be excluded in ascertaining the cost. The notes is as follows:- “Notes:-(i) Items of expenses to be excluded from costs– a) Bonus in excess of statutory minimum.

(b) Bad debts and provisions.

878 (c) Donations and charities.

(d) Loss/Gain on sale of assets.

(e) Brokerage and commission.

(f) Expenses not recognized by Income-tax authorities (salary/prequisities, advertisements, etc.).

(g) Adjustments relating to previous years.” In particular, he argued that Item (a) ‘bonus in excess of statutory minimum’ should not have been excluded so also items of expenditure coming under the other heads (b) to (g) which had been allowed by Income-tax authorities as legiti- mate expenses. His submission was that where bonus in excess of statutory minimum was payable under the provisions of the Bonus Act there was no option left to the manufacturer not to pay the excess bonus. Similarly where expenses have been legitimately incurred and allowed by Income-tax authorities, there was no justification for excluding those items of expenditure from the cost. We do not agree with the submis- sion. It was open to the subordinate legislating body to prescribe and adopt its own mode of ascertaining the cost of production and the items to be included and excluded in so doing. The subordinate legislating body was under no obliga- tion to adopt the method adopted by the Income-tax authori- ties in allowing expenses for the purpose of ascertaining income and assessing it. There may be many items of business expenditure which may be allowed by Income-tax authorities as legitimate expenses but which can never enter the cost of production. So long as the method prescribed and adopted by the subordinate legislating body is not arbitrary and op- posed to the principal statutory provisions, it cannot be legitimately questioned. Another submission of the learned counsel relating to the norms for conversion costs, packing charges and process loss of raw materials and packing mate- rials required to the notified for the purpose of calculat- ing retail prices of formulations. The argument, for exam- ple, was that there should be a more scientific formula in regard to conversion cost and not, as was done, so many rupees and paise per thousand capsules or one litre of liquid. We do not agree with the submission. It is open to the subordinate legislating authority to adopt a rough and ready but otherwise not unreasonable formula rather than a needlessly intricate so-called scientific formula. We are unable to say that the subordinate legislating authority acted unreasonably in prescribing the norms in the manner it has done.

879 While on the question on formulations, we would like to refer to the “Oration” of Dr. N.H. Antia at the 24th Annual Convocation of the National Academy of Medical Sciences where he posed the question:

“Why do we produce 60,000 formulations of drugs worth Rs.2,500 crores which reach only 20% of the population when WHO recommends only 258 drugs and Rs.750 crores worth would suf- fice for all our people if used in an ethical manner?” A general submission of the learned counsel was that the price of formulations should not have been prescribed until the review application filed by the manufacturer in regard to the patent bulk drugs was disposed of. He submitted that the price of a formulation was dependant on the price of the bulk drug and it was, therefore, not right to fix the price of formulation when the price of bulk drug was in question in the review application and there was a prospect of the price of the bulk drug being increased. We do not see any force in the submission. We think that it is the necessary duty of the Government to proceed to fix the retail price of a formulation as soon as the price of the parent bulk drug is fixed. Price fixation of a formulation is no doubt de- pendant on the price of the bulk drug, but it is not to await the result of a review application which in the end may turn out to be entirely without substance. If a review application is allowed and the price of the bulk drug is raised and if in the meanwhile, the formulation had been ordered to be sold at a low price, it may result in consid- erable loss to the manufacturer. But on the other hand, if the review application turns out to be entirely without substance and has to be rejected and if in the meanwhile the formulation is allowed to be sold at a higher price, the consumer public suffers. Thus, the ups and downs of commerce are inevitable and it is not possible to devise a fool proof system to take care of every possible defect and objection.

It is certainly not a matter at which the court could take a hand. All that the court may do is to direct the Government to dispose of the review application expeditiously according to a time-bound programme. All that the Government may do is to dispose of the review application with the utmost expedi- tion. But as we perceive the public interest, it is neces- sary that the price of formulation should be fixed close on the heels of the fixation of bulk drug price.

Another submission of Shri Diwan was that there was considerable delay in the disposal of the review applica- tions by the Govern- 880 ment and that even now no orders had been passed in several cases. Accordingly to the learned counsel, the very delay in the disposal of review applications was sufficient to viti- ate the entire proceeding and scheme of price fixation.

According to the learned counsel, the price of a bulk drug is dependant on many variable factors which keep changing very fast. If time is allowed to lapse whatever price is fixed, it soon becomes out of date. If review applications are not disposed of expeditiously the notifications fixing the prices must be struck down as having become obsolete. It is difficult to agree with these propositions. It is true that the price of a bulk drug is dependent on innumerable variables. But it does not follow that the notification fixing the maximum price must necessarily be struck down as obsolete by the mere passage of time. We agree that applica- tions for review must be dealt with expeditiously and when- ever they are not so dealt with, the aggrieved person may seek a mandamus from the court to direct the Government to deal with the review application within a time framework.

We notice that in all these matters, the High Court granted stay of implementation of the notifications fixing the maximum prices of bulk drugs and the retail prices of formulations. We think that in matter of this nature, where prices of essential commodities are fixed in order to main- tain or increase supply of the commodities or for securing the equitable distribution and availability at fair prices of the commodity, it is not right that the court should make any interim order staying the implementation of the notifi- cation fixing the prices. We consider that such orders are against the public interest and ought not to be made by a court unless the court is satisfied that no public interest is going to be served. In the present case, on ex-parte interim order was made on April 20, 1981 in the following terms:

“In the meanwhile on the petitioners’ giving an undertakings to maintain prices both for bulk and formulation, as were prevailing prior to the impugned notification we stay implemen- tation of the impugned bulk drug prices as well as formulation prices.” Thereafter on November 25, 1981, a further order was made to the following effect:

“After hearing learned counsel and with their consent, and arrangement has been worked out as on interim measure. We, there- fore, confirm till further orders the 881 interim order made by us on April 20, 1981.

The terms of the said order, that is on the undertaking given on behalf of the petitioners to maintain status quo on the prices prevail- ing prior to the issue of the impugned notifi- cation, the petitioners, through their counsel further given an undertaking to this court that, in case the petition is dismissed and the rule is discharged, the petitioners shall within eight weeks of the dismissal of the petition by this court, deposit in this court the difference in the prices of the formula- tions in question for being …… equaliza- tion account. The petitioners, through their counsel further given an undertaking that in this court the petitioners would not contend or challenge the said amount if deposited, is not liable to be deposited under any law whatsoever. It is made clear that the under- taking is without prejudice to the petition- ers’ right to take appropriate directions from the Supreme Court if so advised in this re- gard.” No doubt the order as made on November 25, 1981 has the manufacturers On terms, but the consumer public has been left high and dry. Their interests have in no way been taken care of. In matters of fixation of price, it is the interest of the consumer public that must come first and any interim order must take care of that interest. It was argued by the learned counsel that the undertaking given by the parties lapsed with the disposal of the writ petition by the High Court and that it could no longer be enforced. We do not agree with this submission. Apart from the fact that an appeal is ordinarily considered to be a continuation of the original proceeding, in the present case, we notice that further orders of the Supreme Court were also in contempla- tion and such further orders could only be if appeals were preferred to the Supreme Court. We do not think that there was any doubt in anyone’s mind that the matter would be taken up in appeal to the Supreme Court whichever way the writ petitions were decided. We are of the view that the undertakings given by the parties in the present cases were intended to and do continue to subsist.

On the conclusions arrived at by us we have no doubt that the appeal must be allowed and the writ petition in the High Court dismissed. However, we think that it is necessary to give a direction to the Government to dispose of the review applications after giving a notice of hearing to the manufacturer. The hearing may be given within two months from today and the review application disposed of within two weeks after the conclusion of the hearing. Any information sought by 882 the manufacturer may be given to him at the hearing in terms of what we have said in the judgment. The Union of India is entitled to the costs of the appeal and the writ petition in the High Court.

It appears that although several writ petitions filed by different manufacturers were disposed of by the High Court by a common judgment, the Union of India filed an appeal within the prescribed period of limitation against one of the manufacturers, Cynamide India Limited only. This was apparently done under some misapprehension that it would be enough if a single appeal was filed. Later when it was realized that separate appeals were necessary, the Union of India filed petitions for special leave to appeal against the other manufacturers also. As these petitions were filed beyond the prescribed period of limitation, petitions for condoning the delay in filing the petitions for special leave to appeal had to be and were filed. These applications are strenuously opposed by the manufacturers who contend the ordinary rule which is enforced in cases of delay namely that everyday’s delay must be properly explained should also be rigorously enforced against the Government. It is con- tended that the Government is a well verse litigant as compared with private litigants and even if there is justi- fication of adopting a liberal approach in condoning delay in the case of private litigants there was no need to adopt such approach in the case of the Government. In cases like the present where parties have acted on the assumption that no appeals had been filed against them and have proceeded to arrange their affairs accordingly it would be unjust to condone the delay in filing the appeals at the instance of the Government. Though we see considerable force in the submission of Shri Diwan, we think that the circumstances of the instant cases do justify the exercise of our discretion to condone the delay. Two important features have weighed with us in condoning the delay. One is that all the writ petitions were disposed of by a common judgment and an appeal had been filed in the principal case. The other is that it is a ‘matter of serious concern to the public inter- est. We, therefore, condone the delay, grant special leave in all the petitions for special leave and direct the ap- peals to be listed for hearing on May 1, 1987.

P.S.S. Appeal allowed.

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