BRIJ MOHAN AND ORS. …PETITIONER
Vs.
SMT. SUGRA BEGUM AND ORS. …RESPONDENT

DATE OF JUDGMENT: 19/07/1990

BENCH: KASLIWAL, N.M. (J) SHARMA, L.M. (J)

CITATION: 1990 SCR (3) 413 1990 SCC (4) 147 JT 1990 (3) 255 1990 SCALE (2)125

ACT:

Specific Relief Act –Specific performance of contract of sale of immovable property on basis of oral agreement alone–Heavy burden lies on plaintiff to prove consensus ad- idem.

Transfer of Property Act–Section 55–Provision not applicable where parties consciously negotiated but failed in respect of any term or condition resulting in agreement not being concluded.

HEADNOTE:

The appellants-plaintiffs are’ four brothers. They filed a suit against defendant No. 1, Smt. Mahboobunnisa. Begum, (Since deceased and represented by legal heirs) for specific performance of oral contract of sale of a building in Hyd- erabad- The property was later sold by defendant No.1 to defendants Nos. 3 and 4.

The plaintiffs’ case was that plaintiffs Nos. 1 and 2, on behalf of themselves and their younger brothers, plain- tiffs Nos. 3 and 4, had preliminary negotiations for the purchase of the suit property through Shri Arif Ali, advo- cate; that eventually on 3rd May, 1979 they met Arif Ali and offered to pay Rs. 10,00,000, which was the price demanded by the owner; that Arif Ali, after getting the confirmation of the said offer from the first defendant on phone, said that the plaintiffs should meet the first defendant on 6th May, 1979 and that she would in the meanwhile purchase the stamp papers for making the formal agreement of sale incor- porating the oral agreement arrived at on 3rd May, 1979;

that on 6th May, 1979 the plaintiffs met the first defendant in the presence of Arif Ali and other, wherein the amount of earnest money to be paid, time for registration of the sale deed etc. were decided; that at that meeting Shri Arif Ali, prepared first and the final drafts of the receipt in his own handwriting and handed over these drafts to the first plaintiff to get the final draft typed and duly stamped;

that Arif Ali also delivered the stamp papers to the first plaintiff for typing the formal agreement of sale; that at the meeting held on 6th May, 1979 the plaintiffs Nos. 1 and 2 were also permitted to proceed with the publication of the notices in the newspapers; that after the public notice was published, the first defendant got a reply notice published and got 414 issued a legal notice dated 8.5.79 through her advocate, alleging that there was no agreement for sale; that thereaf- ter, the first and second plaintiffs made sincere and re- peated attempts to convince the first defendant that there was in existence a concluded contract for sale of the suit property, and that the execution of the agreement of sale was a mere formality. On these allegations, the plaintiffs sought the relief of specific performance of the agreement.

The first defendant in her written statement stated that certain negotiations had taken place between her and plain- tiffs Nos. 1 and 2, but the negotiations had failed. It was further stated that there was no concluded or enforceable contract between the parties; that no price was settled or agreed upon and even the condition for advance payment and other terms and conditions were not agreed upon; that no final receipt or document had been prepared; and that the first defendant never asked for the purchase of stamp pa- pers.

The Trial Court found that on the facts and circum- stances of the case, it was established that the plaintiffs had entered into an oral contract of sale with the first defendant on 3.5.79. The Trial Court accordingly decreed the plaintiffs’ suit for specific performance.

Two separate appeals were filed in the High Court. A Division Bench of the High Court allowed the appeals and set aside the decree passed by the trial court. The High Court held that in order to determine the binding nature of a contract between the parties, the mere acceptance of sale price was not sufficient. The High Court further observed that in the absence of evidence that the other terms also were discussed over the phone and settled on 3.5.79, it could cot be said that there was a concluded contract on 3rd May, 1979, and that it was obviously for that reason that a further meeting was fixed at the house of the 1st defendant on 6th May, 1979.The High Court did not agree with the contention of the plaintiffs that all the terms of contract, including the stipulation with regard to the payment of advance amount and the vendor’s responsibility to obtain the permission from the Urban Land Ceiling Authority, had been settled by 3.5.79 and what was left to be done on 6.5.1979 was merely to incorporate the terms already arrived at into a formal document on stamp paper.

Before this Court lit was contended on behalf of the appellants that an agreement for sale of immovable property could be made orally; that in the facts and circumstances of the case all the fundamental and vital terms of the contract were settled and concluded on 3.5.1979 itself and 415 even if the other details like mode of payment of considera- tion, obtaining of no objection certificate from Land Ceil- ing Authorities etc. remained unsealed, the same could be settled subsequently or determined in accordance with sec. 55 of the Transfer of Property Act; that the only vital terms for a valid agreement of sale of an immovable property were the identity of the property and the price; that both these vital terms were settled and concluded on 3.5.79; and that the act of purchasing stamps on 3.5.79 by defendant No. 1 and the draft receipts, prepared by Shri Arif Ali, clearly lent support to the case of the plaintiffs.

Kollipara Sriramulu v. T. Aswathanarayana & Ors., [1968] INSC 55; [1968] 3 SCR 387 and Nathulal v. Phoolchand, [1970] 2 SCR 854, relied upon.

On the other hand, it was contended on behalf of the respondents that no vital or fundamental terms of the con- tract were discussed, agreed or settled on 3.5.79; that neither any earnest/advance money to be paid was settled, nor, any time for the payment of such money or time for execution of agreement of sale or final sale deed and its registration, was settled; that even if time may not be an essence of a term of contract for sale of immovable proper- ty, it was a vital term without which no concluded contract could be arrived at; that any agreement in the third week of April, 1979 to the effect that defendant No. 1 would bring the no objection certificate from the Urban Land Ceiling Authorities was found not proved by the High Court and as such there was no question of applying the principles con- tained in section 55 of the Transfer of Property Act; that a no objection certificate was necessary to be obtained from Urban Land Ceiling Authorities and the defendant No. 1 and her husband being old persons had clearly taken the stand that they would not bring such certificate; and that there- fore no final and concluded contract took place on any date.

Dismissing the appeals, this Court,

HELD: (1) There is no requirement of law that an agree- ment or contract of sale of immovable property should only be in writing. However, in a case where the plaintiffs come forward to seek a decree for specific performance of con- tract of sale of immovable property on the basis of an oral agreement along, heavy burden lies on the plaintiffs to prove that there was consensus ad-idem between the parties for a concluded oral agreement for sale of immovable proper- ty. Whether there was such a concluded oral contract or not would be a question of fact to be determined in the facts and circumstances of each individual case. It 416 has to be established by the plaintiffs that vital and fundamental terms for sale of immovable property were con- cluded between the parties orally and a written agreement if any to be executed subsequently would only be a formal agreement incorporating such terms which had already been settled and concluded in the oral agreement. [429B-D] (2)From a perusal of the evidence it would be abun- dantly clear that nothing was settled on 3.5.79 except the fact that the plaintiffs had conveyed their offer to pur- chase the suit property for Rs. 10,00,000 and Shri Arif Ali, after speaking to defendant No. 1 on phone conveyed that she was willing to sell the property for Rs. 10,00,000. [431B] (3) No averment was made in the plaint that defendant No. 1 had agreed to obtain the permission from the Urban Land Ceiling Authority in the meeting held in the third week of April, 1979. The High Court was right in concluding that it was unbelievable that in the third week of April, 1979 when still there was a wide gap of Rs.2,00,000 in the price payable for the suit building, the parties would have stipu- lated about the condition as to who should obtain the per- mission under the Urban Land Ceiling Act. [431C-F] (4) The High Court rightly believed the contention of defendant No. 1 that the agreement fell through because the plaintiffs insisted that defendant No. 1 should obtain the permission from the Urban Land Ceiling Authority while defendant No. 1 did not agree for the same. [432C] (5) The general principles contained in section 55 of the Transfer of Property Act regarding rights and liabili- ties of buyer and seller can only apply in the absence of a contract to the contrary and not in a case where the parties consciously negotiated but failed in respect of any term or condition, as a result of which the agreement itself could not be settled or concluded. [432E] (6) Once it is held/established in the present case that no agreement was finally concluded or settled on 6.5.79 and negotiations failed, as before this date it was never set- tled that defendant No. 1 would bring the no objection certificate from Urban Land Ceiling Authority, there was no question of applying general principles contained in section 55 of the Transfer of Property Act. [432F] Kollipara Sriramulu v. T. Aswathanarayana & Ors., [1968] INSC 55; [1968] 3 SCR 387, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1893 and 1894 of 1989.

From the Judgment and Order dated 24.9. 1987 of the Andhra Pradesh High Court in C.C.C.A. No. 152 of 1984 and C.C.C.A. No. 150 of 1984.

K. Parasaran, Shanti Bhushan, A.D.N. Rao and A. Subba Rao for the Appellants.

M.C. Bhandare, K. Madhava Reddy, Subodh Markandeya, Mrs. Chitra Markandeya, W.A. Nomani, G.S. Giri Rao, A.K. Raina and D. Prakash Reddy for the Respondents.

The Judgment of the Court was delivered by KASLIWAL, J. The Plaintiffs by Special Leave have filed these appeals against the Judgment of Andhra Pradesh High Court, Hyderabad, dated 24th September, 1987.

The four plaintiffs who are brothers filed the present suit on 17th July, 1979 for specific performance of oral contract for sale of a building known as “Roshan Manzil” located in an area of 4165 .sq. yards in Saifabad, Hydera- bad. M/s. Gopi Hotel was the tenant in the premises. Accord- ing to the case as set up in the plaint the first plaintiff Brij Mohan learnt some time in the first week of April, 1979 that the defendant No. 1 Smt. Mahboobunnisa Begum (since deceased) was contemplating the sale of the property in question and that Shri Arif Ali, her Advocate and income tax practitioner was assisting her in finding a purchaser. Shri Arif Ali had mentioned the above intention of the first defendant to Sh. Ibrahim Moosa of M/s. J. Moosa & Company who was known to the first plaintiff. On learning from Shri Ibrahim Moosa the first and second plaintiffs, namely, Brij Mohan and Jagmohan along with Sh. Ibrahim met Sh. Arif Ali.

Sh. Arif Ali gave the details of the property and also showed the plans of the property to them. Sh. Arif Ali stated that the defendant was expecting the price of Rs. 10,00,000. The plaintiffs Nos. 1 and 2 offered Rs.7,00,000.

Shri Arif stated that he will ascertain from the defendant her reaction to the said offer. A fortnight later i.e. in the third week of April, 1979 the plaintiffs Nos. 1 and 2 along with Sh. Ibrahim Moosa and Sh. Arif Ali went to the residence of the defendant, who was insisting on the payment of Rs. 10,00,000 as the sale price. At the said meeting the husband of the defendant was also present. The plaintiffs Nos. 1 and 2 418 increased their price from Rs.7,00,000 to Rs.8,00,000. The first defendant said that she would think over and inform the plaintiffs Nos. 1 and 2 through Sh. Arif Ali. On 3rd May, 1979 the plaintiffs Nos. 1 and 2 along with Shri Ibra- him Moosa met Sh. Arif Ali. Arif Ali stated that the defend- ant was agreeable to sell the property to plaintiffs only for Rs. 10,00,000 and not a pie less. Thereupon the plain- tiffs agreed to pay Rs. 10,00,000 as the sale price. Shri Arif Ali after getting the confirmation of acceptence of the said offer of the plaintiffs Nos. 1 and 2 from the first defendant said that the plaintiffs Nos. 1 and 2 should meet the defendants on 6th May, 1979 and that she would in the meanwhile purchase the stamp papers for making the formal agreement for sale incorporating the oral agreement arrived at.

It was further alleged in the plaint that on 6th May, 1979 the first and second plaintiffs along with Shri Ibrahim Moosa met the first defendant and her husband in the presence of the said Sh. Arif Ali. In the said meeting the amount of earnest money to be paid, time for registration of the sale deed etc., were decided. The said Shri Arif Ali prepared in his own handwriting a draft of the receipt incorporating the terms of the orally concluded agreement for sale. The draft was scrutinised by the husband of the first defendant who suggested some alterations. The said Shri Arif Ali thereupon prepared final draft of the receipt in his own hand. He handed over the first and the final draft to the first plaintiff to get the later typed and duly stamped. He also delivered the stamp papers to the first plaintiff for being used for typing of the formal agreement of sale.

It was further stated in the plaint that during the said meeting held on 6th May, 1979, the plaintiffs Nos. 1 and 2 were permitted to proceed with the publication of the no- tices in the newspapers. Accordingly, the contents of the publication were got prepared by them bonafidely anticipat- ing that the first defendant will execute the receipt after receiving the stipulated earnest money in the course of the day, ie. 6.5.79. However, for reasons known to herself the first defendant deliberately and wantonly evaded meeting the first and second plaintiffs to receive the advance and execute the receipt.

It was further stated in the plaint that after the public notice was published in the newspapers taking advan- tage of her wanton and deliberate act of evasion, the first defendant got a reply notice published in the newspaper and got issued a legal notice dated 8.5.79 through her Advocate, falsely alleging that there was no agreement for sale.

Thereafter the first and second plaintiff made sincere and repeated attempts 419 to convince the first defendant that the false and baseless pleas taken by her were detrimental to the interest of all concerned and there is inexistence a concluded contract for sale of the suit property and that the execution of the agreement of sale was a mere formality as well the receipt for the advance. Since the first defendant persisted in her illegal conduct. the plaintiffs got issued a final notice dated 27th June, 1979 calling upon the first defendant to execute the agreement, receive the earnest money and issue a valid receipt within three days of the receipt of the notice thus giving the first defendant one more opportunity. The plaintiffs neither received any reply nor the first defend- ant complied with the demands made in the notice. It was further alleged in the plaint that the plaintiffs Nos. 1 and 2 had negotiated for the purchase of the property on behalf of themselves and plaintiffs Nos. 3 and 4 who were their younger brothers. The concluded contract for sale entered into with the first defendant was for the benefit of all the four plaintiffs. Hence all the four plaintiffs had joined in the filing of the suit.

The second defendant was M/s Gopi Hotel who was the tenant of the first defendant in the suit premises. The plaintiffs further averred that they have been and are ready and willing to pay to the first defendant the sale consider- ation of Rs. 10,00,000. The plaintiffs undertake to deposit the same in the court at any time during the pendency of the suit or within a time fixed by the Hon’ble Court for the deposit of the same after passing the decree or at the time of execution and registration of the sale deed. The plain- tiffs on the above allegations sought the relief of specific performance of the agreement of sale in respect of the suit property after payment of sale consideration of Rs. 10,00,000 The first defendant Smt. Mahaboobunnisa Begum filed a written statement on 21st January, 1980 stating that certain negotiations took place between her and plaintiffs Nos. 1 and 2, but no contract was finalised with them and the negotiations failed. According to her, under an agreement of sale dated 22nd June, 1979 she agreed to sell the property in question to defendants Nos. 3 and 4, namely, Smt. Sugra Begum and Smt. Saira Banu. It was submitted in the reply that it was wholly incorrect to suggest of an oral contract of sale on 3rd May, 1979 in respect of sale of the suit property, in favour of the plaintiffs. There was a proposal of sale of the suit property and plaintiffs did approach for negotiations. However, the allegation of the plaintiffs approaching during first week of April, 1979 with Arif Ali, Income Tax practitioner, was wholly erroneous. In fact plaintiff No. 1 approached 420 No. 1 with Arif Ali and Ibrahim Moosa for negotiations, and plaintiffs Nos. 1 and 2 came along with them somewhere during the last week of April, 1979 and tried to negotiate, and thereafter, again they approached on 6th May, 1979, but negotiations could not be finalised and the answering de- fendant did not agree to sell the suit property to the plaintiffs Nos. 1 and 2. In fact, details have been men- tioned in the counter, filed in I.A. pertaining to injunc- tion bearing No. 679/79, which may be read as part of the written statement. There was no concluded or enforceable contract, arrived at on 3rd May, 1979, as alleged and con- tended. It was further alleged that there was no price settled or agreed and even the payment for advance was not settled and other terms and conditions were not agreed upon, even on 6th May, 1979 and the negotiations failed and noth- ing was settled. There was no concluded contract and the plaintiffs had no cause of action to file the present suit for specific performance. The parties never intended to have an oral agreement, and the negotiations if any, never re- sulted in a concluded contract, and even if the negotiations had been finalised, it had to be reduced into a written agreement, and the writing contemplated was not formal as alleged and contended by the plaintiffs, but was a condition and a term of contract. The plaintiffs with ulterior motive had taken the plea of oral contract It was further submitted in the written statement that it was true that plaintiffs Nos. 1 and 2 did approach the answering defendant on 6th May, 1979 along with Ibrahim and Arif, and even in the said meeting negotiations failed and the parties did not and could not arrive at a concluded contract; and even in the said negotiations on 6th May, 1979 matters remained unsettled and were not concluded. It was plaintiff No. 1 who attempted to prepare receipt, it was wholly erroneous to suggest of any draft receipt or a final receipt being prepared after scrutiny made by the husband of the answering defendant. There was no final document pre- pared and there was no final settlement of terms and condi- tions of contract. The answering defendant was not aware of the purchase of stamp paper and she never asked for the purchase of the stamp papers. The blank stamp papers and incomplete and unsigned draft receipts in no way spell out a concluded contract and the suit is untenable.

It was also alleged in the reply that even on 6th May, 1979 there was no completed or concluded contract and nego- tiations failed. Consequently, the plaintiffs took away the blank incomplete papers, and rushed with utmost haste to get it published in the newspaper, making false allegations of having paid Rs.50,000 as advance under the sale 421 agreement etc., and immediately, the answering defendant sent a suitable reply contradicting the said allegations.

There was no bonafides in their action. It was done with ulterior motive to cause loss and damage to the defendant.

When no earnest money had been paid or received, the plain- tiffs Nos. 1 and 2 had no right to make false allegations and mislead the public and consequently the answering de- fendant suffered heavy loss.

The second defendant M/s. Gopi Hotel only took the plea in the written statement that he was a tenant in the build- ing. Defendants Nos. 3 and 4 supported the case of the first defendant and claimed ownership in the suit property by virtue of a registered sale deed dated 19th November, 1979 executed in their favour. It may be made clear at this stage that according to defendant No. 1 an agreement to sell the property in question was made by the first defendant in favour of defendants Nos. 3 and 4 on 22.6.79. After the injunction being vacated by the High Court the first defend- ant sold the suit property for a sum of Rs. 10,00,000 in favour of defendants Nos. 3 and 4 by a registered sale deed dated 19th November, 1979. Defendant No. 1 died on 3rd November, 1982 during the pendency of the suit as such defendants Nos. 5 to 9 were impleaded as legal representa- tives of defendant No. 1.

The Learned Trial Court recorded the summary of the findings which are reproduced in its own words.

49. Summary of the findings:

“On the facts and circumstances of the case, it is estab- lished that the plaintiffs entered into an oral contract of sale with D. 1 on 3.5.79. The terms settled were that D. 1 should sell the suit property for a sum of Rs. 10,00,000 and D. 1 should obtain permissions from the authority under Land Ceiling Act and also income Tax Act. The sale deed should be executed within six months from 6.5.79. It is also settled that vacant possession was not to be given on the date of contract of sale, and the parties are aware that the defend- ant No. 2 was only a tenant in the premises. The only aspect left open on 3.5.79 is that mode of payment should be fixed on 6.5.79. On 6.5.79 it was agreed that D.1 should receive Rs.50,000 as advance and these terms were reduced into writing in Ems. A. 1 and A. 2, but, before the ink could dry, the defendant No. 1 on the evening of 422 6.5.79, refused to receive the amount. This resulted in the breach of contract on the part of D. 1. So the plaintiffs are entitled to specific performance of oral contract of sale concluded on 3.5.79. Subsequent sale to defendants 3 and 4 do not create any rights in favour of them and in order to prevent D. 3 and D. 4 from claiming any rights in future, they should also be made to join D. 5 to D. 9 in executing the registered sale deed. Defendant No. 2 is admittedly not entitled to any proprietary rights in the property and he is only a tenant. As to whether D. 2 is liable to be evicted or not it is held that the Plaintiffs are entitled to seek eviction at an appropriate time when they become full owners of the property. Defendants 3 and 4 shall not be liable to contribute any thing towards expenses for the executing of the registered sale deed and defendants 5 to 9 as legal representatives of D. 1 are bound to perform their part of contract by obtaining permission required under the Urban Land Ceiling Acts and Income Tax act and any other Act required execute the sale deed and register the sale upon receiving the entire consideration of Rs. 10,00,000. The expenses for registration of the sale deed shall be borne out in equal halls by defendants 5 to 9 on the one hand and the plaintiffs on the other hand”.

As a result of the above findings the trial court de- creed the plaintiffs suit for specific performance. Two separate appeals, one by defendants Nos. 5 to 9 and the other by defendants Nos. 3 and 4 were filed in the High Court challenging the decree passed by the trial court. A Division Bench of the High Court by Judgment dated 24th September, 1987 allowed both the appeals and set aside the decree passed by the trial court. As two separate appeals Nos. 150 and 152 of 1984 were disposed of by one single order the plaintiffs filed the above two civil appeals before this Court by Special Leave.

The High Court observed that the only question which arose for consideration in both the appeals was whether there was a concluded oral contract between the parties, namely, plaintiffs 1 and 2 on one side and the first defend- ant on the other, on 3rd May, 1979 as alleged by the plain- tiffs? According to the High Court to decide this question, the only available oral evidence was that of P.W. 1 Brij Mohan, P.W. 3 Jagmohan and D.W. 2 Arif Ali. As regard the negotiations which took place between the parties in the third week of April, 1979, the High court observed that the negotiations which took place between the 423 parties in the third week of April, 1979 were not in dispute and which were to the effect that when the first defendant was insisting on payment of Rs. 10,00,000, plaintiffs 1 and 2 increased their offer from Rs.7,00,000 to Rs.8,00,000 and the first defendant promised them to think over and inform the plaintiffs through Arif Ali. The High Court then consid- ered the bargain that took place between the parties on 3rd May, 1979. The plaintiffs apart from their own statements as P.W. 1 and P.W. 3 had also examined P.W. 2, the Income Tax Inspector B-Ward Circle No. 4, Hyderabad to show that de- fendant No. 1 was an income tax and wealth tax assessee and Sh. Arif Ali, Advocate and Income tax practitioner used to look after her tax matters. The plaintiffs had also examined P.W. 4, Mohd Yusuf a stamp vendor to prove Exhibit X-25 sales register of stamps and Exhibit X-26 an entry of sale of Ex. A. 3 non judicial stamps for Rs.5 to defendant No. 1 Smt. Mahboobnissa Begum. Similarly plaintiffs had examined P.W. 5 Sheikh Ismail another stamp vendor for having sold a stamp Exhibit A-4 to one Abdul Khalik on behalf of Smt.

Mehboobnissa Begum vide entry Ex. X-27 in the register of stamps. The plaintiffs by the aforesaid evidence wanted to establish that one stamp was purchased by Smt. Mehboobnissa Begum herself and another through Mohd. Khalik for executing the agreement for sale in favour of plaintiffs. The High Court in this regard observed that it was not necessary to discuss the evidence of P.W. 4 as to whether the first defendant personally went to him and purchased the stamp paper. The first defendant who is a lady from aristocratic family would not have gone all the way to Chotta Bazar to purchase a non-judicial stamp worth Rs.5. P.W. 4 deposed that he cannot identify whether the person who came for purchase of the stamp paper was Smt. Mehboobnissa Begum or not. It may be that some person by name Smt. Mehboobnissa purchased the stamp papers. P.W. 5 simply stated that he sold exhibit A-4 to one Adbul Khalik on behalf of Smt.

Mehboobnissa Begum. D.W. 2, Arif Ali however said that neither any transaction nor talks took place between the plaintiffs 1 and 2 and himself on 3rd May, 1979. The High Court did not agree with the submission of the Learned counsel for the plaintiffs made before them that the pur- chased of the stamps Exhibit A-3 and A-4 was a strong cri- cumstance in favour of a concluded contract. The High Court in this regard observed that first of all it was not firmly established that the purchase of the stamps was for the purpose of this transaction only. In view of the evidence of D.W. 2 much weight cannot be given to the evidence of P.Ws.

4 and 5. The High Court further observed that even assuming that these two stamps were purchased pursuant to the talks that took place between D.W. 2 and P.Ws. 1 and 3 it would not improve the case of the plaintiffs. The 424 stamps were blank and nothing was engrossed on them. This circumstances, at the most would show that meeting on 6th May, 1979 was fixed between the plaintiffs 1 and 2 and the first defendant for further negotiations. The High Court then observed that as regards the meeting which took place on 6th May, 1979 and the fact that the negotiations fell through was admitted by both the parties. Therefore, the crucial question for determination was whether all the terms of the oral contract were entered into between the parties on 3rd May, 1979 or any terms were left open to be dis- cussed and determined in the meeting to be held on 6th May, 1979.

The High Court then considered the argument of the plaintiffs according to whom Exhibit A-1 draft receipt was written by D.W. 2 Sh. Arif Ali on 6th May, 1979 stating that the suit premises was agreed to be sold for Rs. 10,00,000 and the permission for Urban Land Ceiling Authority will be obtained by the first defendant and the registration will be completed within six months from that date. The plaintiffs further case was that the first defendant’s husband who was present suggested some alterations basing on which Exhibit A-2 fair draft was prepared and that when the plaintiffs took the agreed advance amount of Rs.50,000 in the evening, the first defendant refused to accept the advance amount and resiled from the contract. As against the above contentions of the plaintiffs, D.W. 2 Sh. Arif Ali who is the represen- tative of the first defendant deposed that in the meeting between the parties which took place in April, 1979 the vendor did not take the responsibility of obtaining ,clear- ance under the Urban Land Ceiling Act. He denied the sugges- tion that in the third week of April, 1979 the first defend- ant offered to sell the suit property for Rs. 10,00,000 and that she would obtain the clearance under the Urban Land Ceiling Act. On the other hand he deposed that when the plaintiffs offered Rs.8,00,000 the first defendant told them that she would consider and communicate her view through D.W. 2 some time later. The High Court in this regard clear- ly observed that the contention of the plaintiffs that even in the third week of April, 1979 before the parties could agree upon the sale price for the suit building, there was discussion about the obtaining of clearance under the Urban Land Ceiling Act and that the first defendant undertook to obtain that clearance certificate cannot be believed. The High Court further observed as under:

“As seen from their own evidence, by the 3rd week of April, 1979 plaintiffs 1 and 2 increased theft offer from Rs.7,00.000 to Rs.8,00,000. At the time of the earlier 425 negotiations when the plaintiffs offered Rs.7,00,000 (seven lakhs) and the 1st defendant was not willing to accept that offer, there was no stipulation as to who should obtain the clearance under the Urban Land Ceiling Act. If so, it is unbelievable that in the 3rd week of April, 1979 when still there was a wide gap of Rs.2,00.000 in the price payable for the suit building, the parties would have stipulated about the condition as to who should obtain the permission under the Urban Land Ceiling Act. Therefore, the evidence of P.Ws.

1 and 3 can be believed to the extent that they approached Arif Ali on 3.5. 1979 and Arif Ali in his turn communicated their willingness to pay the price of Rs. 10,00,000 for the suit premises and the 1st defendant accepted that offer.” The High Court on the basis of the above finding then held that in order to determine the binding nature of the contract between the parties, the mere acceptance of sale price is not sufficient. It was not the case of the plain- tiffs that the other terms of the contract were also dis- cussed by D.W. 2 over the phone and their acceptance was communicated to them by the 1st defendant through D.W. 2. It was obviously for that reason that a further meeting was fixed at the house of the 1st defendant in the morning of 6th May, 1979 which had admittedly taken place.

The High Court further held that it must be remembered that this agreement is in respect of a valuable property and the main intention was to reduce the terms of agreement into writing and when the parties are very much relying on the alleged oral agreement dated 3rd May, 1979, there would definitely have been a reference in Exhibits A-1 and A-2 to the oral agreement said to have taken place on 3rd May, 1979. The absence of the same in Exhibits A-1 and A-2 against throws a serious doubt about the alleged agreement, dated 3rd May, 1979. In any event the mere fact that there was a meeting between the plaintiffs Nos. 1 and 2 and D.W. 2 on 3rd May, 1979 does not establish that there was a con- cluded contract between the parties on that day because admittedly the first defendant was not present at that time.

What all had happened according to P.Ws. 1 and 3 is that they offered to pay Rs. 10,00,000 for the suit building and D.W. 2 having contacted the 1st defendant over the phone conveyed to them her acceptance of the price fixed. In the absence of evidence that the other terms also were discussed over the phone and settled at that time and the 1st defend- ant agreed for the terms, it cannot be said that there is a con- 426 cluded contract on 3rd May, 1979. The fixation of price is only one of the terms of the contract and by mere acceptance of the price it cannot be said that there is a concluded contract between the parties in the absence of proof of fixation of other conditions mentioned in Exhibits A-1 and A-2, viz., undertaking by the 1st defendant to obtain per- mission from Urban Land Ceiling Authority and the amount of advance to be paid. It is not the case of the plaintiffs 1 and 2 that prior to 6.5.79 there was an agreement between the parties as to the amount of advance to be paid. The High Court thus held that in the absence of any consensus being arrived at between the two contracting parties about these important aspects of the agreement it cannot be said that there is a concluded oral contract between the parties on 3.5.79.

It is important to note that even exhibit B-4 an agree- ment of sale dated 22.6.79 executed between the 1st defend- ant and defendants Nos. 3 and 4 does not impose the condi- tion that the 1st defendant, the vendor, should obtain the clearance from the Urban Land Ceiling Authority within the stipulated period of six months. The High Court in this regard observed that this evidence showed that the conten- tion of the 1st defendant that the agreement fell through by reason of the plaintiffs insisting on her obtaining the permission from the Urban Land Ceiling Authority and the expression of her inability to comply with that demand appeared to be correct. The High Court clearly held that there was no clinching evidence to show that this stipula- tion was thought of by the parties on any day prior to 6.5.79. The High Court, therefore, did not agree with the contention of the Learned Counsel for the plaintiffs that all the terms of contract including the stipulation with regard to the payment of advance amount and that the vendor alone should obtain the permission from the Urban Land Ceiling Authority were settled by 3.5.79 and what was left to be done on 6.5.79 was merely to incorporate the terms already arrived at into a formal document on Exhibits. A-3 and A-4 stamp papers. It was further observed that had there been a meeting between plaintiffs Nos. 1 and 2 and the first defendant on 3.5.79 and there was a direct conversation between them, there may be a possibility for drawing such an inference. But, as observed already, what all had happened on 3.5.79 was that plaintiffs Nos. 1 and 2 expressed their willingness to pay a consideration of Rs. 10,00,000 for the suit building and the first defendant expressed her accept- ance of that offer through D .W. 2. The other terms could not have been settled between the parties in the third week of April, 1979 because by that time there was no agreement between the parties with respect to the sale consideration.

Without the price being settled, and especially when there was a gap of Rs.2,00,000 427 in the price accepted by the first defendant and the price offered by the first plaintiff, the parties would not have discussed the other terms of the agreement such as the advance money to be paid and the responsibility of the vendor to obtain the permission from the Urban Land Ceiling Authority.

It was submitted by the learned counsel for the appel- lants that the High Court itself has arrived to a finding that D .W. 2 Sh. Arif Ali on 3.5.79 after having a talk with defendant No. 1 on phone had conveyed her acceptance to sell the property for a sum of Rs. 10,00,000. It was submitted that an agreement for sale of immovable property could be made orally and so far as mode of payment of consideration is concerned, can be settled subsequently. It was submitted that in the facts and circumstances of the present case all the fundamental and vital terms of the contract were settled and concluded on 3.5.79 itself and even if the other details like mode of payment of consideration, obtaining of no objection certificate from Land Ceiling Authorities etc.

remained unsettled, the same could be determined in accord- ance with Sec. 55 of the Transfer of Property Act. Oral contract is permissible and so far as other terms which remain unsettled, the same can be determined by operation of law. It was contended that the only vital terms for a valid agreement of sale of an immovable property were the identity of the property and the price. Both these vital terms were settled and concluded on 3.5.79 and when the plaintiffs were always ready and willing to perform their part of the con- tract, a decree for specific performance should have been passed in their favour. It was further contended that the stand taken by the defendant No. 1 and tried to be supported by Sh. Arif Ali D.W. 2 that no meeting took place on 3.5.79 at all was held not believable by the High Court itself. It was further contended that the act of purchasing stamps on 3.5.79 by defendant No. 1 and the draft receipts Exhibits A-1 and A-2 prepared by Sh. Arif Ali D.W. 2 himself clearly lend support to the case of the plaintiffs. Reliance in support of the above contention was placed on Kollipara Sriramulu v. T. Aswathanarayana & Ors., [1968] INSC 55; [1968] 3 SCR 387 and Nathulal v. Phoolchand, [1970] 2 SCR 854.

On the other hand it was contended on behalf of the respondents that no vital or fundamental terms of the con- tract were discussed, agreed or settled on 3.5.79. It was contended that even if the case of the plaintiffs is be- lieved, all that happened on 3.5.79 was that plaintiffs had agreed to purchase the property for Rs. 10 lakhs to which the defendant N. 1 had conveyed her acceptance through D.W.

2. Neither 428 any earnest/advance money to be paid was settled, nor, any time for the payment of such money or time for execution of agreement of sale or final sale deed and its registration, was settled. It was argued that even if the time may not be an essence of a term of contract for sale of immovable property, it is a vital term without which no concluded contract can be arrived at. Admittedly no meeting was held on 3.5.79 in the presence of the defendant No. 1 and it was agreed to have a meeting of the plaintiffs and defendant No. 1 on 6.5.79. It was also an admitted position that neither any consideration passed nor any documents were signed by the parties on 3.5.79. So far as 6.5.79 is concerned admit- tedly the negotiations failed between the parties on that day. It was further contended that if the terms had already settled on 3.5.79 itself where was the necessity of execut- ing draft receipts on 6.5.79 and in any case if it was a mere formality then the plaintiffs should have brought a typed agreement on the stamps for formal signature of the parties. It was also argued that the plaintiffs failed to examine Ibrahim Moosa who was an independent and a very important witness in the whole transaction and an adverse inference should be drawn against the plaintiffs for not examining Ibrahim Moosa. The defendant No. 1 had produced a counter affidavit Exhibit C-1 dated 27.7.79 in reply to injunction application filed by the plaintiffs and she had taken a clear stand that no terms were settled or concluded on 3.5.79. It was further argued that admittedly the plain- tiffs had not paid any earnest/advance money to the defend- ant No. 1 towards the alleged transaction but still they malafidely stated in the notice of 7.5.79 published in the Newspaper that an amount of Rs.50,000 had been paid to defendant No. 1. The defendant No. 1 in these circumstances had immediately got published a contradiction on 8.5.79 and this clearly goes to show the malafide and ulterior motive of the plaintiffs. It was also argued that any agreement in the third week of April, 1979 to the effect that defendant No. 1 would bring the no objection certificate from the Urban Land Ceiling Authorities was found not proved by the High Court and as such there is no question of applying any principles contained in Sec. 55 of the Transfer of Property Act. It was also contended that the findings recorded by the High Court are supported by evidence and this Hon. Court should not interfere against such finding in the exercise of its jurisdiction under Article 136 of the Constitution of India. It was also argued that Sh. Arif Ali was not holding general power of attorney on behalf of defendant No. 1 and he had no authority to settle or conclude any terms in respect of a transaction of immovable property on behalf of defendantlll No. 1. No objection certificate was necessary to be obtained from Urban Land Ceiling Authorities and the defendant No. 1 and her husband being old person 429 had clearly taken the stand that they would not bring such certificate and no final and concluded contract took place on any date.

We have given our careful consideration to the arguments advanced by Learned Counsel for the parties and have thor- oughly perused the record. We agree with the contention of the Learned counsel for the appellants to the extent that there is no requirement of law that an agreement or contract of sale of immovable property should only be in writing.

However, in a case where the plaintiffs come forward to seek a decree for specific performance of contract of sale of immovable property on the basis of an oral agreement alone, heavy burden lies on the plaintiffs to prove that there was consensus ad-idem between the parties for a concluded oral agreement for sale of immovable property. Whether there was such a concluded oral contract or not would be a question of fact to be determined in the facts and circumstances of each individual case. It has to be established by the plaintiffs that vital and fundamental terms for sale of immovable property were concluded between the parties orally and a written agreement if any to be executed subsequently would only be a formal agreement incorporating such terms which had already been settled and concluded in the oral agreement.

Now we shall examine the facts and circumstances of the present case in order to find whether the plaintiffs have been able to prove that there was a concluded oral agreement between the parties on 3.5.79 in order to seek decree for specific performance of contract in their favour. Admitted facts of the case are that the transaction in question related to a sale of an immovable property for no less than a sum of Rs. 10,00,000 in May, 1979.3.5.79 is the crucial date on which the oral agreement is alleged to have been concluded. Admittedly on that date even earnest/advance money had not been settled. It was also not settled as to when the earnest/advance amount and the balance amount of sale consideration would be paid. It was also not settled as to when the final sale deed would be executed and regis- tered. No talk with regard to any terms of the oral agree- ment took place in the presence of the vendor defendant No. 1 on 3.5.79. It was also not decided whether actual posses- sion or only symbolical possession of the premises in ques- tion would be given by the vendor. No consideration actually passed even on 6.5.79 and negotiations failed. Apart from the above admitted facts of the case we would consider as to what happened on 3.5.79. The plaintiffs have alleged in the plaint that in the 3rd week of April, 1979 plaintiffs Nos. 1 and 2 along with Sh. Ibrahim Moosa and Sh. Arif Ali went to the residence of the defendant who 430 was insisting on the payment of Rs. 10,00,000 as the sale price. At the said meeting the husband of the defendant was also present. The plaintiffs Nos. 1 and 2 increased their price from Rs.7,00,000 to Rs.8,00,000. The first defendant said that she would think over and inform the plaintiffs Nos. 1 and 2 through Sh. Arif Ali. On 3.5.79 the plaintiffs 1 and 2 along with Shri Ibrahim Moosa met Shri Arif Ali. He stated that the defendant was agreeable to sell the plan schedule property to plaintiffs only for Rs, 10,00,000 and not a pie less. Thereupon the plaintiffs agreed to pay Rs. 10,00,000 as the sale price. Shri Arif Ali after getting the confirmation of acceptance of the said offer of the plain- tiffs No. 1 and 2 from the first defendant said that the plaintiffs Nos. 1 and 2 should meet the defendants on 6.5.79 and that she would in the meanwhile purchase the stamp papers for making the formal agreement for sale incorporat- ing the oral agreement arrived at. Then there is an averment with regard to the meeting of 6.5.79 between the first and second plaintiffs along with Shri Ibrahim Moosa and the first defendant and her husband in the presence of Sh. Arif Ali. It has been alleged that in the said meeting of 6.5.79 the amount of earnest money to be paid, time for registra- tion of the sale deed etc. were decided. Now it is an admit- ted case of the plaintiffs themselves that negotiations failed on 6.5.79 and the defendant No. 1 resiled to sign any of the receipts nor accepted any earnest/advance money nor any agreement was even typed on the stamp papers nor signed by defendant No. 1.

In the oral evidence P.W. 1 Shri Brij Mohan, plaintiff No. 1 stated that in the meeting arranged in the 3rd week of April, 1979 Shri Ibrahim and Shri Arif Ali came to the plaintiff’s shop and then they all went to the residence of defendant No. 1. The second plaintiff also accompanied them.

The husband of defendant No. 1 Shri Yunus was also present at the meeting. He was introduced to them as the retired Law Secretary. Defendant No. 1 insisted for Rs. 10,00,000 as consideration of the suit property and told the plaintiffs that she would obtain the permission from the ceiling au- thority. Shri Brij Mohan then stated that they raised their offer to Rs.8,00,000 defendant No. 1 told them that she would think over for two or three days and inform them through Shri Arif Ali, Thereafter Shri Brij Mohan states regarding the bargain held on 3.5.79. According to him he himself, second plaintiff and Mr. Ibrahim Moosa went to Shri Arif Ali on 3.5.79. Shri Arif Ali told them that defendant No. 1 was not willing to sell the suit property for less than Rs. 10,00,000. And if they were willing to purchase for Rs. 10,00,000 then they were welcome to do so at any time.

Shri Brij Mohan then said that they agreed to purchase the suit property for Rs. 10,00,000 and asked Shri Arif Ali to get the confirmation from 431 defendant No. 1. Shri Arif Ali spoke to defendant No. 1 on telephone and then informed that defendant No. 1 was willing to sell the property to them for Rs. 10,00,000. Shri Arif Ali then said that they would buy the stamps for agreement and fixed 6.5.79 morning for a meeting with defendant No. 1.

From a perusal of the above evidence it would be abundantly clear that nothing was settled on 3.5.79 except the fact that the plaintiffs had conveyed their approval to purchase the suit property for Rs. 10,00,000 and Shri Arif Ali after speaking to defendant No. 1 was willing to sell the property for Rs. 10,00,000. Admittedly at the same time a meeting was fixed with defendant No. 1 on the morning of 6.5.79. Accord- ing to the case set up by defendant No. 1 she had never agreed to obtain the permission from the ceiling Authority.

It would be important to note that no averment was made in the plaint that defendant No. 1 had agreed to obtain the permission from the ceiling Authority in the meeting held in the third week of April, 1979. However, Shri Brij Mohan plaintiff has sought to introduce this fact for the first time in his statement in the Court that defendant No. 1 had told them in the meeting held in the third week of April, 1979 that she would obtain the permission from the ceiling Authority. We are unable to accept the above statement of Shri Brij Mohan that in the meeting held in the third week of April, 1979 itself the defendant No. 1 had agreed that she would obtain the permission from the ceiling Authority.

It is an admitted position that till the meeting held in the 3rd week of April, 1979 the plaintiffs had offered Rs.8,00,000 and the first defendant had told them that she would consider and communicate her views through Shri Arif Ali some time later. We agree with the conclusion of the High Court in this regard that without first determining the sale price, it was quite unlikely that the parties would have bargained as to who should obtain the clearance under the Urban Land Ceiling Act. It was known. to the parties that until the clearance under the Urban Land Ceiling Act and the Income Tax clearance, the property will not be registered. The High Court was right in concluding that it is unbelievable that in the third week of April, 1979 when still there was a wide gap of Rs. 2,00,000 in the price payable for the suit building the parties would have stipu- lated about the condition as to who should obtain the per- mission under the Urban Land Ceiling Act. It is further pertinent to mention that even in Exhibits A-1 and A-2 which are drafts of agreement of sale there is no reference to the oral agreement said to have taken place on 3.5.79. In case all the terms had already been concluded in the oral con- tract between the parties on 3.5.79 and only a formal agree- ment was to be reduced in writing on 6.5.79, then in that case there ought to have been a mention in the draft agree- ment exhibits A-1 and A-2 regarding the oral agreement of 432 3.5.79. According to the statement of Shri Brij Mohan plain- tiff No. 1 ,himself, nothing was discussed with defendant ‘No. 1 herself and for that reason a further meeting was fixed at the house of the first defendant in the morning of 6.5.79. Shri Arif Ali may have been an Income Tax Advocate looking after the income tax and wealth tax matters of defendant No. 1 but he was not a General Power of Attorney holder to negotiate or settle any terms with regard to any transaction of immovable property belonging to defendant No.

1. It is further important to note that even in the agree- ment to sell exhibit B-4 dated 22.6.79 between defendent No. 1 and defendants Nos. 3 and 4, no responsibility had been taken by the defendant No. 1 for obtaining the clearance from the Urban Land Ceiling Authority. The High Court in these circumstances rightly believed the contention of the defendant No. 1 that the agreement fell through because the plaintiffs insisted that defendant No. 1 should obtain the permission from the Urban Land Ceiling Authority while defendant No. 1 did not agree for the same. There was no clinching evidence to show that this stipulation was thought of by the parties on any day prior to 6.5.79. Thus in the above circumstances when the parties were consciously nego- tiating about the bringing of no objection certificate from the Urban Land Ceiling Authority and the case put forward by defendant No. 1 in this regard has been believed there is no question of applying the principle contained in Section 55 of the Transfer of Property Act. The general principle contained in Sec. 55 of the Transfer of Property Act regard- ing rights and liabilities of buyer and seller can only apply in the absence of a contract to the contrary and not in a case where the parties consciously negotiated but failed in respect of any term or condition, as a result of which the agreement itself could not be settled or conclud- ed. Once it is held, established in the present case that no agreement was finally concluded or settled on 6.5.79 and negotiations failed and before this date it was never set- tled that defendant No. 1 would bring the no objection certificate from Urban Land Ceiling Authority, there is no question of applying general principles contained in Sec. 55 of the Transfer of Property Act.

In Kollipara Sriramula v. T. Aswathanarayana & Ors. (supra) was a case where in 1953 respondent No. 1 filed a suit alleging that all the partners of the firm except the appellant had entered into an oral agreement with him on July 6, 1952 to sell 137 shares in the site except the 23 shares belonging to appellant No. 1, that 98 shares had actually been sold to him, that 39 shares had not been sold to him and had been instead sold to appellant No. 1. Re- spondent No. 1 in these circumstances claimed specific performance of the agreement to sell the 433 aforesaid 39 shares by their owners and contended that the sale of those shares in favour of appellant No. 1 was not binding upon him. The Trial Court decided against respondent No. 1 but the High Court decided in his favour. On the basis of above facts this Court held that the High Court was right in holding that there was an agreement to sell 137 shares in the site to respondent No. 1. A mere reference to a future formal contract does not prevent the existence of a binding agreement between the parties unless the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. The evidence did not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement, nor did the absence of a specific agreement as to the mode of payment necessarily make the agreement ineffective, since the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. The facts of the above case clearly show that it related to sale of 137 shares and that in pursuance of the agreement partners who owned 98 shares had already executed sale deeds in favour of the plaintiffs/respondents and the other partners owning 39 shares did not do so. The High Court as well as this Court believed the evidence of the plaintiff/respondent for con- veying the entire 137 shares by an oral agreement dated July 6, 1952. This Court also found that the plaintiff respond- ents had built a valuable cinema theatre building on the disputed site and yet very strong reasons to make an out- right purchase of the site otherwise he would be placed in a precarious legal position- Negotiations for purchase were going on for several years passed and considering this background, the case of the respondent with regard to the oral agreement appeared highly probable.

In the above background this Court on Page 394 observed as under:

“It is, therefore, not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written docu- ment. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective.

The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed.” 434 Thus even in the above case the time for completion of the sale was considered as one of the vital terms’ of the contract. Further in the above case part of the agreement had been performed i.e. partners having 98 shares had al- ready executed sale deeds and this Court had believed the oral agreement for sale of 137 shares. Thus the above case is totally distinguishable and renders no assistance to the appellants in the case before us.

Thus we find no force in these appeals and the same are dismissed. In the facts and circumstances of the case we make no order as to costs.

R.S.S. Appeals dis- missed.

The post Brij Mohan and Ors. Vs. Smt. Sugra Begum and Ors. appeared first on B&B Associates LLP.

VIJAY KUMAR SHARMA & ORS. ETC. …PETITIONER
Vs.
STATE OF KARNATAKA & ORS. ETC. …RESPONDENT

DATE OF JUDGMENT: 27/02/1990

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH SAWANT, P.B. RAMASWAMY, K.

CITATION:
1990 AIR 2072 1990 SCR (1) 614
1990 SCC (2) 562 JT 1990 (2) 448
1990 SCALE (1)342

ACT:

Karnataka Contract Carriages (Acquisition) Act, 1976: ss. 14, & 20–Whether repugnant to ss. 74 & 80, Motor Vehicles Act, 1988–State Act whether impliedly repealed by Parliamentary Act–State Act whether hit by Article 254 of the Constitution.

HEADNOTE:

Constitution of India, Article 254.’ Repugnancy between the Parliamentary Act and the State Act in respect of mat- ters, in the Concurrent List, Seventh Schedule–When arises–Karnataka Contract Carriages (Acquisition) Act, 1976—Whether repugnant to the Motor Vehicles Act, 1988.

Statutory interpretation-Doctrine of pith and substance or dominant purpose–Scope of–Whether applicable to find repugnancy under Article 254 of the Constitution between Parliamentary and State laws in respect of matters in List 111. Seventh Schedule to the Constitution.

The Karnataka Contract Carriages (Acquisition) Act, 1976 enacted by the State Legislature by taking aid of Entry 42 List III of the Seventh Schedule and Articles 31 and 39 (b) and (c) of the Constitution was reserved for consideration and received the assent of the President of March 11, 1976.

Section 4 of that Act provided for vesting of contract carriages along with the respective permits and/or certifi- cates of registration issued under the Motor Vehicles Act, 1939 in the State absolutely free from encumbrances. Sub- section (1) of s. 14 prohibited applications for fresh permits or renewal of existing permits on or from the date of vesting. Section 14(2) provided for abatement of all applications, appeals or revisions pending before the appro- priate authority as on the notified date. Sub-section (1) of s. 20 provided for cancellation of, notwithstanding anything in the 1939 Act, all contract carriage permits granted or renewed in respect of any vehicle other than a vehicle acquired under the Act or belonging to the State Road Trans- port Corporation. Sub-section (2) entitled the Corporation to the grant or renewal of contract carriage permits to the exclusion of all other persons, while sub-section (3) re- strained the authority concerned from ?615 entertaining applications from persons other than the Corpo- ration.

Section 73 of the Motor Vehicles Act, 1988 (enacted to replace the 1939 Act) lays down the mode of application for a contract carriage permit. Section 74(1) empowers the Regional Transport Authority to grant such permits. Sub- section (2) enumerates conditions that could be attached to such permit. Sub-section (3) empowers the State Government when directed by the Central Government to limit the number of contract carriages on the city routes. Under s. 80(1) such application could be made at any time. Sub-section (2) posits that a Regional Transport Authority shall not ordi- narily refuse to grant such application. Section 217(1) repealed all the laws which were inconsistent with the provisions of the Act.

The petitioners, a group of contract carriage operators who were denied permits that they had applied for under ss.

73, 74 and 80 of the Motor Vehicles Act, 1988 in view of the provisions of ss. 14 and 20 of the Karnataka Contract Car- riages (Acquisition) Act, 1976, filed writ petitions under Article 32 of the Constitution questioning the action of the R.T.A. It was contended that the provisions of ss. 14 and 20 of the Karnataka Act were in direct conflict with the provi- sions of ss. 74 and 80(2) of the M.V. Act, 1988 in as much as while the Regional Transport Authority was enjoined by the said provisions of the 1988 Act ordinarily not to refuse to grant an application for permit of any kind, the said provisions of the Karnataka Act prohibited any person from applying for, and any officer or authority from entertaining or granting application for running any contract carriage in the State; that since the M.V. Act, 1988 was a later legis- lation operating in the same area, it should be deemed to have impliedly repealed the provisions of ss. 14 and 20 of the Karnataka Act even if the latter Act had received the assent of the President, in view of the proviso to sub- clause (2) of Article 254 of the Constitution; that when there is a repugnancy under Article 254 of the Constitution, the doctrine of pith and substance does not apply, and even if some of the provisions of the State Legislation are in conflict with some of the provisions of the Central legisla- tion, the conflicting provisions of the State legislation, will be invalid and that, therefore, their applications under ss. 74 and 80 were maintainable without reference to the provisions of the Karnataka Act.

For the respondents it was contended that the Acquisi- tion Act was made in exercise of the power under a different entry and was not on the same subject, therefore, the matter did not come within the ambit of Art. 254 of the Constitu- tion, and that the Acquisition Act having been 616 reserved for consideration under Art. 254(2) and having received the assent of the President, it prevails over the Parliamentary Act in the State of Karnataka.

On the question: Whether there is repugnancy between the provisions of ss. 14 and 20 of the Karnataka Contract Car- riages (Acquisition) Act, 1976 and ss. 74 and 80 of the Motor Vehicles Act, 1988 and whether the doctrine of domi- nant purpose and pith and substance is applicable while examining the repugnancy of the two statutes? Per Misra, J. (Concurring with Sawant, J.)

1. There is no direct inconsistency between the Karnata- ka Contract Carriages (Acquisition) Act, 1976 and the Motor Vehicles Act, 1988. [631G-H]

2.1 In cl. (1) of Art. 254 of the Constitution it has been clearly indicated that the competing legislations must be in respect of one of the matters enumerated in the Con- current List. In the instant case, the State Act was an Act for acquisition and came within Entry 42 of The Concurrent List. The Parliamentary Act on the other hand is a legisla- tion coming within Entry 35 of the Concurrent List. There- fore, the said two Acts as such do not relate to one common head of legislation enumerated in the Concurrent List.

Clause (2) also refers to the law with respect to the same matter. [628F; 629A]

2.2 Repugnancy between two statutes would arise if there is direct conflict between the two provisions and if the law made by Parliament and the law made by the State Legislature occupy the same field. In the instant case, the State Act intended to eliminate private operators from the State in regard to contract carriages acquired under the existing permits, vehicles and ancillary property and with a view to giving effect to a monopoly situation for the State Under- taking made provision in s. 20. The Parliamentary Act does not purport to make any provision in regard to acquisition of contract carriage permits which formed the dominant theme or the core of the State Act. Nor does it in s. 73 and s. 74 indicate as to who the applicant shall be while laying down how an application for a contract carriage permit shall be made and how such a permit shall be granted. Section 80 of the Parliamentary Act does contain a liberalised provision in the matter of grant of permits but even then there again the ancillary provision contained in s. 20 of the State Act to effectuate acquisition does not directly run counter to the 1988 provision. [630G; 631C] 617 There does not thus appear to be any repugnancy between the two Acts for invoking Art. 254 of the Constitution.

[631D-E] Bar Council of Uttar Pradesh v. State of U.P. & Anr., [1972] INSC 290; [1973] 2 SCR 1073; Kerala State Electricity Board v. Indian Aluminium Company, [1976] 1 SCR 552; Deep Chand v. State of Uttar Pradesh & Ors., [1959] INSC 3; [1959] 2 Suppl. SCR 8; T. Barai v.

Henry Ah Hoe & Anr., [1982] INSC 92; [1983] 1 SCR 905; Hoechst Pharmaceuti- cals Ltd. & Anr. v. State of Bihar & Ors., [1983] INSC 63; [1983] 3 SCR 130;

Zaverbhai Amaidas v. State of Bombay, [1955] 1 SCR 799; M.

Karunanidhi v. Union of India, [1979] INSC 45; [1979] 3 SCR 254 and State of Karnataka & Anr. v. Ranganatha Reddy & Anr. [1977] INSC 195; [1978] 1 SCR 641, referred to.

Per Sawant, J:

1. There is no repugnancy in the provisions of ss. 14 and 20 of the Karnataka Contract Carriages (Acquisition) Act, 1976 and ss. 74 and 80 of the Motor Vehicles Act, 1988.

Hence the provisions of Article 254 of the Constitution do not come into play. [652F; 636C]

2.1 Whenever repugnancy between the State and Central Legislation is alleged, what has to be first examined is whether the two legislations cover or relate to the same subject matter. The test for determining the same is to find out the dominant intention of the two legislations. If the dominant intention of the two legislations is different, they cover different subject matters. If the subject matters covered by -‘.he legislation are thus different, then merely because the two legislations refer to some allied or cognate subjects they do not cover the same field. The legislation to be on the same subject matter must further cover the entire field covered by the other. [652C-D] A provision in one legislation to give effect to its dominant purpose may incidentally be on the same subject as covered by the provision of the other legislation. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intended to be covered by Article 254(2). Both the legislations must be substantially on the same subject to attract the Article. [652E] Municipal Council Palai v.T.J. Joseph & Ors., [1963] INSC 37; [1964] 2 SCR 87; Tika Ramji & Ors. etc. v. State of U.P. & Ors., [1956] INSC 30; [1956] SCR 393 and State of Karnataka & Anr. etc. v. Ranga- natha Reddy & Anr. etc.[1977] INSC 195; , [1978] 1 SCR 641, referred to.

618 Ratan Lal Adukia v. Union of India, [1989] 3 SCR 537, distinguished.

2.2 In the instant case, the objects and the subject matters of the two enactments were materially different. The Karnataka Act was enacted by the State Legislature for acquisition of contract carriages under Entry 42 of the Concurrent List read with Article 31 of the Constitution to give effect to the provisions of Articles 39(b) and (c) thereof. The MV Act 1988 on the other hand was enacted by the Parliament under Entry 35 of the Concurrent List to regulate the operation of the motor vehicles. They thus occupy different areas. [636C, B-C]

2.3 Unlike the MV Act 1988 which was enacted to regulate the operation of the motor vehicles, the object of the Karnataka Act was, not only the regulation of the operation of the motor vehicles. Nor was its object merely to prevent the private owners from operating their vehicles with the exclusive privilege of such operation being reserved in favour of the State or the State Undertaking. For if that were the only object, the same could have been achieved by the Transport Undertakings of the State following the spe- cial provisions relating to State Transport Undertakings in Chapter IV-A of the Motor Vehicle Act, 1939 which was in operation when the Karnataka Act was brought into force. The very fact that instead the State undertook the exercise of enacting the Karnataka Act shows that the object of the State Legislature in enacting it was materially different i.e. to nationalise the contract carriage services in the State with a view to provide better transport facilities to the public and also to prevent concentration of wealth in the hands of the few and to utilise the resources of the country to subserve the interests of all. [634D-F; B-C]

3.1 A comparison of the provisions of the MV Act, 1939 and MV Act, 1988 shows that the latter has merely replaced the former. The special provisions relating to the State Transport Undertakings which are contained in Chapter VI of the MV Act, 1988 are pari-materia with those of Chapter IV-A of the MV Act, 1939 with only this difference that whereas under the old Act it was the State Transport Undertaking which had to prepare a scheme for running and operating the transport service by it in relation to any area or route or portion thereof exclusively, under the new Act such a scheme has to be prepared by the State Government itself. There is no difference in the legal consequences of the schemes under the two enactments. Both envisage the operation of the services by the State Transport Undertaking to the exclusion of the rest, and cancellation of the existing permits and compensation only for the deprivation of the balance of the period of the permit. No acquisi- 619 tion of the vehicles or the paraphernalia connected with such vehicles is envisaged as is the case under the Karnata- ka Act. [634G; 635E-G]

3.2 Section 98 of the MV Act 1988 in terms clearly states (as did Section 68B of the MV Act 1939) that Chapter VI relating to the special provisions about the State Trans- port Undertaking and the rules’ and orders made thereunder, shall have effect notwithstanding anything inconsistent therewith contained in Chapter V or in any other law for the time being in force or in any instrument having effect by virtue of any such law. Sections 74 and 80 relating to the grant of the contract carriage permit and the procedure in applying for the grant of such permits respectively, are in Chapter V. This means that when under Chapter VI, a scheme is prepared by the State Govt. entrusting the contract carriage services in relation to any area or route or por- tion thereof, to a State Transport Undertaking to the exclu- sion—complete or partial of other persons, the provisions of ss. 74 and 80 would have no application, and the private transport operators cannot apply for the grant of contract carriage permits under s. 80 nor can such permits be granted by the Transport Authority. The MV Act 1988 thus also makes a provision for nationalisation of routes, and envisages a denial of permits to private operators when routes are so nationalised. Hence it cannot be said that there was a conflict between the provisions of the Karnataka Act and the M.V. Act, 1988. [637H; 638D]

4. When the legislative encroachment is under considera- tion the doctrine of pith and substance comes to the aid to validate a legislation which would otherwise be invalid for the very want of legislative competence. When the repugnancy between the two legislations is under consideration, what is in issue is whether the provision of the State enactment though otherwise constitutionally valid, has lost its valid- ity because the Parliament has made a legislation with a conflicting provision on allegedly the same matter. If it is open to resolve the conflict between two entries in differ- ent Lists, viz., the Union and the State List by examining the dominant purpose and therefore the pith and substance of the two legislations, there is no reason why the repugnancy under Article 254 of the Constitution between the provisions of the two legislations under different entries in the same List, viz. the Concurrent List should not be resolved by scrutinizing the same by the same touchstone. What is to be ascertained in each case is whether the legislations are on the same matter or not. In both cases the cause of conflict is the apparent identity of the subject matters. The tests for resolving it therefore cannot be different. [639E-H] 620 Meghraj & Ors. v. Allahrakhiya & Ors., AIR 1942 FC 27 distinguished.

Per K. Ramaswamy, J. (Dissenting)

1. Section 14(1) of Karnataka Contract Carriages (Acqui- sition) Act, 1976 to the extent of prohibiting to make fresh application for grant of permits to run the contract car- riages other than those acquired under that Act and the embargo and prohibition created under s. 20(3) thereof on the respective Regional Transport Authority in the State of Karnataka to invite/receive the application to consider the grant of permits to such contract carriages according to law, are void. [686C-D]

2.1 The Parliament and the legislature of a State derive their exclusive power to legislate on a subject/subjects in List I and List II of Seventh Schedule to the Constitution from Art. 246(1) and (3) respectively. Both derive their power from Art. 246(2) to legislate upon a matter in the Concurrent List III subject to Art. 254 of the Constitution.

The entries in the three lists merely demarcate the legisla- tive field or legislative heads. Their function is not to confer powers on either the Parliament or the State Legisla- ture. [682E-D] Subrahmanyam Chettiar v. Muttuswami Goundan., AIR 1941 FC 47; Governor General in Council v. The Reliegh Investment Co. Ltd., [1944] FCR 229; Harakchand Ratanchand Banthia v.

Union of India[1969] INSC 136; , [1970] 1 SCR 479 AND Union of India v.H.S.

Dhillon[1971] INSC 292; , [1972] 2 SCR 33, referred to.

2.2 Clause (1) of Art. 254 posits as a rule that in case of repugnancy or inconsistency between the State Law and the Union Law relating to the same matter in the Concurrent List occupying the same field, the Union law shall prevail and the State law will fail to the extent of the repugnancy or inconsistency whether the Union law is prior or later in point of time to the State law. To this general rule, an exception has been engrafted in cl. (2) thereof, viz., provided the State law is reserved for consideration of the President and it has received his assent, and then it will prevail in that State notwithstanding its repugnancy or inconsistency with the Union law. This exception again is to be read subject to the proviso to cl. (2) thereof, which empowers the Parliament to make law afresh or repeal or amend, modify or vary the repugnant State law and it became void even though it received President’s assent. [659D-F] 621

2.3 The question of repugnancy under Article 254 of the Constitution arises when the provisions of both laws are fully inconsistent or are absolutely irreconcilable and it is impossible to obey without disobeying the other, or conflicting results are produced when both the statutes covering the same field are applied to a given set of facts.

It matters little whether the provisions fall under one or other entry in the Concurrent List. The substance of the same matter occupying the same field by both the pieces of the legislation is material and not the form. The repugnancy to be found is the repugnancy of the provisions of the two laws and not the predominant object of the subject matter of the two laws. The proper test is whether effect can be given to the provisions of both the laws or whether both the laws can stand together. If both the pieces of legislation deal with separate and distinct matters though of cognate and allied character repugnancy does not arise. [660A-B; 675B-C;

660C; 674H; 675A] Tika Ramji v. State of U.P., [1956] INSC 30; [1956] SCR 393; A.S. Krish- na v. Madras State[1956] INSC 76; , [1957] SCR 399; Prem Nath Kaul v. State of J &K, [1952] 2 Supp. SCR 273; Bar Council of U.P.v. State of U.P.[1972] INSC 290; , [1973] 2 SCR 1073; Deep Chand v. State ofU. P., [1959] Supp. 2 SCR 8; State of Orissa v.M.A. Tulloch & Co., [1963] INSC 170; [1964] 4 SCR 461; State of Assam v. Horizon Union, [1966] INSC 184; [1967] 1 SCR 484; State ofJ & K v.M.S. Farooqi[1972] INSC 85; , [1972] 3 SCR 881;

Kerala State Electricity Board v. Indian Aluminium Co., [1976] I SCR 552; Basu’s Commentary on the Constitution of India (Silver Jubilee Edition) Volume K 144; Clyde Engineer- ing Co. v. Cowburn, [1926] 37 CLR 466; Hume v. Palmer, [1926] HCA 50; [1926] 38 CLR 441; Brisbane Licensing Court[1920] HCA 24; , [1920] 28 CLR 23; Colvin v. Bradley Bros. Pvt. Ltd., [1943] HCA 41; [1943] 68 CLR 151; In Re Ex Parte Maclean, [1930] HCA 12; [1930] 43 CLR 472; Wenn v. Attorney General (Victoria), [1948] HCA 13; [1948] 77 CLR 84; O’ Sullivan v.

Noarlunga Meat Co. Ltd.[1954] HCA 29; , [1954] 92 CLR 565; O’Sullivan v.

Noarlunga Meat Co. Ltd., [1957] AC 1 and Blackley v. Devon- dale Cream (Vic.) Pvt. Ltd.[1968] HCA 2; , [1968] 117 CLR 253, referred to.

2.4 Section 14 read with s. 20 of the Acquisition Act freezed the right of a citizen to apply for and to obtain permit or special permit to run a contract carriage in terms of the permit and monopoly to run a contract carriage was conferred on the S.T.U., Karnataka. But the M.V. Act, 1988 evinces its intention to liberalise the grant of contract carriage permit by saying in s. 80(2) that the Regional Transport Authority “shall not ordinarily refuse to grant the permit”. It also confers the right on an applicant to apply for and authorises the Regional Transport Authority to grant liberally contract carriage permit except in the area covered by s. 80(3) and refusal appears to be an exception, that too, obviously for reasons to be recorded. It may be 622 rejected if the permit applied for relate to an approved or notified route. The M.V. Act accords the right, while the Acquisition Act, negates and freezes the self-same right to obtain a permit and to run a contract carriage and prohibits the authorities to invite or entertain an application and to grant a permit to run contract carriage. The Act and the relevant rules cover the entire field of making an applica- tion in the prescribed manner and directs the Regional Transport Authority to grant permit with condition attached thereto to run contract carriages vide ss. 66(1), 73, 74 and

80. Thus the existence of two sets of provisions in the Motor Vehicles Act 59 of 1988 and Acquisition Act 21 of 1976 is sufficient to produce conflicting results in their opera- tion in the same occupied filed. The two sets of provisions run on collision course, though an applicant may waive to make an application for a permit. Thereby there exists the operational incompatibility and irreconcilability of the two sets of provisions. Sections 14(1) and 20(3) of the Acquisi- tion Act are repugnant and inconsistent to ss. 73, 74 and 80 of the Act. By operation of proviso to Art. 254(2) of the Constitution, the embargo created by ss. 14(1) and 20(3) of the Acquisition Act to make or invite an application and injuction issued to Regional Transport Authority prohibiting to grant contract carriage permit to anyone except to S.T.U., Karnataka within the State of Karnataka became void.

[682H; 683E]

3.1 The Parliament with a view to lay down general prin- ciples makes law or amends the existing law. The State Legislature still may feel that its local conditions may demand amendment or modification of the Central Law. Their reserve power is Art. 254(2). After making the Act 59 of 1988 the power of the State Legislature under Art. 254(2) is not exhausted and is still available to be invoked from time to time. But unless it again enacts law and reserves it for consideration and obtains the assent of the President afresh, there is no prohibition for the petitioners to make applications for the grant of contract carriage permits under the Act and consideration and grant or refusal thereof according to law by the concerned Regional Transport Author- ity. [685E; 686B]

3.2 The Karnataka State Legislature is, therefore, at liberty to make afresh the law similar to ss. 14(1) and 20(3) of the Acquisition Act with appropriate phraseology and to obtain the assent of the President. [686B]

4. Parliament may repeal the State law either expressly or by necessary implication but Courts would not always favour repeal by implication. Repeal by implication may be found when the State law is repugnant or inconsistent with the Union law in its scheme or opera:ion. The principle would be equally applicable to a question under 623 Article 254(2) of the Constitution. In the instant case, s.

217(1) of the Union law does not expressly repeal ss. 14(1) and 20(3) of the State law. They are repugnant with the Union law. [676C-D; 670E-F; 669F] Zaveribhai v. State of Bombay, [1955] 1 SCR 799; M.

Karunanidhi v. Union of India, [1979] INSC 45; [1979] 3 SCR 254; T. Barai v.

Henry Ah Hoe[1982] INSC 92; , [1983] 1 SCR 905 and M/s Hoechst Pharmaceuti- cals Ltd. v. State of Bihar, [1983] INSC 63; [1983] 3 SCR 130, referred to.

5. For the applicability of the principle that special law prevails over the general law, the special law must be valid law in operation. Voidity of law obliterates it from the statute from its very inception. In the instant case, since ss. 14(1) and 20(3) are void the said principle is not applicable. [683F] Justiniano Augusto De Peidada Barreto v. Antonia Vicente De Fonseca & Ors., [ [1979] INSC 59; 1979] 3 SCR 494, distinguished.

6.1 The doctrine of pith and substance or the predomi- nant purpose or true nature and character of law is applied to determine whether the impugned legislation is within the legislative competence under Arts. 246(1) and 246(3) of the Constitution, and to resolve the conflict of jurisdiction.

If the Act in its pith and substance fails in one List it must be deemed not to fail in another List, despite inciden- tal encroachment and its validity should be determined accordingly. The pith and substance rule, thereby, resolves the problem of overlapping of “any two entries of two dif- ferent Lists vis-a-vis the Act” on the basis of an inquiry into the “true nature and character” of the legislation as a whole and tries to find whether the impugned law is substan- tially within the competence of the Legislature which enact- ed it, even if it incidentally trespasses into the legisla- tive field of another Legislature. [680C; 677F; 678A1

6.2 The doctrine has no application when the matter in question is covered by an entry or entries in the Concurrent List and has occupied the same field both in the Union and the State Law. It matters little as in which entry or en- tries in the Concurrent List the subject-matter falls or in exercise whereof the Act/provision or provisions therein was made. The Parliament and Legislature of the State have exclusive power to legislate upon any subject or subjects in the Concurrent List. The question of incidental or ancillary encroachment or to trench into forbidden field does not arise. The determination of its ‘true nature and character also is immaterial. [680C-D] 624 Prafulla Kumar v. Bank of Commerce, Khulna, AIR 1947 PC 60;

State of Bombay v.F.N. Balsara[1951] INSC 38; , [1951] SCR 682; Atiabari Tea Co.Ltd. v. State of Assam, [1960] INSC 123; [1961] 1 SCR 809 and Meghraj & Ors. v. Allaharakhiya & Ors., AIR 1942 FC 27, referred to.

ORIGINAL JURISDICTION: Writ Petition No. 723 of 1989 etc.

(Under Article 32 of the Constitution of India).

G. Ramaswamy, Additional Solicitor General (N.P.), F.S.

Nariman, G.L. Sanghi, G.Prabhakar, M. Rangaswamy, N.D.B.

Raju, Ms. C.K. Sucharita, S.K. Agnihotri, P.R. Ramashesh, K.R. Nagaraja and Ms. Anita Sanghi for the appearing par- ties.

The following Judgments of the Court were delivered:

RANGANATH MISRA, J. I have the benefit of reading the judgment prepared by my esteemed brethren Sawant and K.

Ramaswamy, JJ. Brother Sawant has taken the view that s. 20 of the Karnataka Act has not become void with the enforce- ment of the Motor Vehicles Act, 1988, while Brother K.

Ramaswamy has come to the contrary conclusion. Agreeing with the conclusion of Sawant, J., I have not found it possible to concur with Ramaswamy, J. Since an interesting question has arisen and in looking to the two judgments I have found additional reasons to support the conclusion of Sawant. J., I proceed to indicate the same in my separate judgment.

These applications under Article 32 of the Constitution by a group of disgruntled applicants for contract carriage permits call in question action of the concerned transport authorities in not entertaining their applications under the provisions of the Motor Vehicles Act, 1988.

Motor Vehicles Act (4 of 1939) made provision for grant of contract carriage permits. The Karnataka Contract Car- riages (Acquisition) Act (Karnataka Act 21 of 1976) received assent of the President on 11th of March. 1976. but was declared to have come into force from 30th of January, 1976, when the corresponding Karnataka Ordinance 7 of 1976 had come into force. The long title of the Act indicated that it was an Act to provide for the acquisition of contract car- riages and for matters incidental. ancillary or subservient thereto, and the preamble stated:

625 “Whereas contract carriages and certain other categories of public service vehicles are being operated in the State in a matter highly detrimental and prejudicial to public interest;

And whereas with a view to prevent such misuse and also to provide better facilities for the transport of passengers by road and to give effect to the policy of 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 and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment;

And whereas for the aforesaid purposes it is considered necessary to provide for the acquisition of contract carriages and certain other categories of public service vehicles in the State and for matters incidental, ancillary or subservient thereto …… ” Section 2 contains the declaration to the following effect:

“It is hereby declared that this Act is for giving effect to the policy of the State towards securing the principles specified in clauses (b) and (c) of Article 39 of the Con- stitution of India and the acquisition therefore of the contract carriages and other property referred to in section 4.” Under ss 4 contract carriages owned or operated by contract carriage operators along with the respective per- mits and/or certificates of registration, as the case may be, vested in the State absolutely free from encumbrances, and compensation for such acquisition was provided under the scheme of the Act. Section 14 prohibited application for any permit or fresh permit or renewal of existing permits for running of any contract carriage in the State by any private operator and all pending proceedings in relation to grant or renewal abated. Consequential provisions were made in ss. 15 and 16 of the Act. Section 20 gave the Corporation the exclusive privilege of running contract carriages within the State to the exclusion of any provision under the 1939 Act.

The vires of the Act was the subject-matter of the decision of this 626 Court in a group of appeals in the case of the State of Karnataka & Anr. v. Shri Ranganatha Reddy & Anr., [1977] INSC 195; [1978] 1 SCR 641. A Seven Judge Bench upheld the validity of the statute holding that the impugned statute was an ‘acquisi- tion Act’ within the ambit of Entry 42 of the Concurrent List under Schedule VII of the Constitution. The Court took note of the fact that even though it may have had some incidental impact on inter-State trade or commerce it did not suffer from any lacuna on that count. Since the Act had been reserved for Presidential assent, to the extent s. 20 made provisions contrary to those in the Motor Vehicles Act of 1939, was taken to be valid under Art. 254(2) of the Constitution.

The Motor Vehicles Act (59 of 1988) being a Parliamen- tary legislation was brought into force with effect from 1.7. 1989. Under s. 1(2), the Act extended to the whole of India and, therefore, the Act became applicable to the State of Karnataka by the notification appointing the date of commencement of the Act.

The 1988 Act has admittedly liberalised the provisions relating to grant of permits of every class including con- tract carriages. Sections 73, 74 and 80 contain the relevant provisions in this regard. While s. 73 provides for an application for such permit, s. 74 contains the procedure for the consideration of the grant and s. 80 contains a general provision that the transport authority shall not ordinarily refuse to grant an application for permit of any kind made at any time under the Act. It is the contention of the petitioners that with the enforcement of the Motor Vehicles Act of 1988 as a piece of central legislation, the provisions of s. 20 of the Karnataka Act became void to the extent the state law was inconsistent with the provisions of the 1988 Act and, therefore, by operation of the provisions contained in Art. 254 of the Constitution, s. 20 stood abrogated and the scheme of the 1988 Act became operative.

The applications of the petitioners for grant of contract carriage permits were maintainable and should have been entertained and disposed of in accordance with the provi- sions of the 1988 Act.

It is the stand of the respondents, in particular of the Karnataka State Transport Undertaking, that the State Act is a legislation under a different entry and was not on the same subject. Therefore, the matter did not come within the ambit of Art. 254 of the Constitution. The State Act contin- ues to hold the field and the transport authorities had rightly refused to entertain the petitioners’ applications.

627 The question for consideration is: Whether Art. 254( I) of the Constitution applies to the situation in hand and whether s. 20 of the Karnataka Act being inconsistent with the provisions of ss. 73, 74 and 80 of the 1988 Motor Vehi- cles Act became void. It would be convenient to extract the provisions of Art. 254 of the Constitution at this stage and recount the background in which such provision was warrant- ed. It is the common case of the parties that with the introduction of federalism and distribution of legislative powers and accepting a Concurrent List wherein in regard to specified subjects the Federal and the Federating State Legislatures had power to legislate, a provision of ration- alisation became necessary. Section 107 of the Government of India Act, 1935, contained the provision to deal with such a situation. The Constituent Assembly accepted a similar mechanism and added a proviso to clause (2) of Art. 254 to meet the difficulties experienced in the intervening years.

The Article reads thus:

“254(1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of any existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repug- nancy, be void.

(2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concur- rent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legis- lature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State:

Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.” 628 Though for some time there was difference of judicial opinion as to in what situation Art. 254 applies, decisions of this Court by overruling the contrary opinion have now concluded the position that the question of repugnancy can arise only with reference to a legislation falling under the Concurrent List: Bar Council of Uttar Pradesh v. State of U.P. & Anr., [1972] INSC 290; [1973] 2 SCR 1073 and Kerala State Electricity Board v. Indian Aluminium Company, [1976] 1 SCR 552.

This Court in Deep Chand v. State of Uttar Pradesh & Ors., [1959] INSC 3; [1959] 2 Suppl. SCR 8; T. Barai v. Henry Ah Hoe & Anr., [1982] INSC 92; [1983] 1 SCR 905 and Hoechst Pharmaceuticals Ltd. & Anr. v. State of Bihar & Ors., [1983] INSC 63; [1983] 3 SCR 130 has laid down that cl. (1) of Art. 254 lays down the general rule and cl. (2) is an exception thereto; the proviso qualifies the exception. Therefore, while interpreting Art. 254 this position has to be kept in view. The situation of the 1939 Motor Vehicles Act being existing law and the Karnataka Act containing provision repugnant to that Act with Presidential assent for the State Act squarely came within the ambit of cl. (2) of the Article. That is how the State Act had over- riding effect.

The consideration of the present question has to be within the ambit of cl. (1) as the State law is the earlier legislation and the Parliamentary Act of 1988 came later and it is contended that the State legislation has provisions repugnant to provisions made in the 1988 Act. There can be no controversy that if there is repugnancy, the Parliamen- tary legislation has to prevail and the law made by the State Legislature to the extent of repugnancy becomes void.

In cl. (1) of Art. 254 it has been clearly indicated that the competing legislations must be in respect of one of the matters enumerated in the Concurrent List. The seven- Judge Bench examining the vires of the Karnataka Act did hold that the State Act was an Act for acquisition and came within Entry 42 of the Concurrent List. That position is not disputed before us. There is unanimity at the Bar that the Motor Vehicles Act is a legislation coming within Entry 35 of the Concurrent List. Therefore, the Acquisition Act and the 1988 Act as such do not relate to one common head of legislation enumerated in the Concurrent List and the State Act and the Parliamentary statute deal with different mat- ters of legislation.

The language of cl. (2) is also similar though applica- ble in a different situation. Apparently in one sense both the clauses operate on a similar level though in dissimilar context. In cl. (2) what is rele- 629 vant is the words: ‘with respect to that matter’. A Consti- tution Bench of this court in Zaverbhai Amaidas v. State of Bombay, [1955] 1 SCR 799 emphasised that aspect. Venkatarama Ayyar, J. pointed out:

“The important thing to consider with reference to this provision is whether the legislation is ‘in respect of the same matter’. If the later legislation deals not with the matters which formed the subject of the earlier legisla- tion but with other and distinct matters though of a cognate and allied character, then Art. 254(2) will have no applica- tion.” A lot of light relevant to the aspect under considera- tion is available from another decision of a Constitution Bench of this Court: (M. Karunanidhi v. Union of India, [1979] INSC 45; [1979] 3 SCR 254) Atp. 263 of the Reports, it has been said:

“It would be seen that so far as clause (1) of Article 54 is concerned it clearly lays down that where there is a direct collision between a provision of a law made by the State and that made by Parliament with respect of one of the matters enumerated in the Concurrent List, then, subject to the provisions of clause (2), the State law would be void to the extent of the repugnancy. This naturally means that where both the State and Parliament occupy the field contemplated by the Concurrent List then the Act passed by Parliament being prior in point of time will prevail and consequently the State Act will have to yield to the Central Act. In fact, the scheme of the Constitution is a scientific and equitable distribution of legislative powers between Parlia- ment and the State Legislatures. First, regarding the mat- ters contained in List I, i.e., the Union List to the Sev- enth Schedule, Parliament alone is empowered to legislate and the State Legislatures have no authority to make any law in respect of the Entries contained in List I. Secondly, so far as the Concurrent List is concerned. both Parliament and the State Legislatures are entitled to legislate in regard to any of the Entries appearing therein, but that is subject to the condition laid down by Article 254(1) discussed above. Thirdly, so far as the matters in List II, i.e., the State List are concerned, the State Legislatures alone are competent to legislate on them and only under certain condi- tions Parliament can do so. It is, therefore, obvious that in such matters repugnancy may result from the following circumstances:

630

1. Where the provisions of a Central Act and a State Act in the Concurrent List are full.v inconsistent (Emphasis added) and are absolutely irreconcilable, the Central Act will prevail and the State Act will become void in view of the repugnancy.

2. Where, however, a law passed by the State comes into collision with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with clause (2) or Article 254.

3. Where a law passed by the State Legislature while being substantially within the scope of the entries in the State List entrenches upon any of the Entries in the Central List the constitutionality of the law may be upheld by invoking the doctrine of pith and substance if on an analysis of the provisions of the Act it appears that by and large the law fails within the four corners of the State List and en- trenchment, if any, is purely incidental or inconsequential.

4. Where, however, a law made by the State Legislature on a subject covered by the Concurrent List is inconsistent with and repugnant to a previous law made by Parliament, then such a law can be protected by obtaining the assent of the President under Article 254(2) of the Constitution. The result of obtaining the assent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in its applicability to the State only. Such a state of affairs will exist only until Parliament may at any time make a law adding to, or amending, varying or repealing the law made by the State Legislature under the provision to Article 254.” In Deep Chand v. State of Uttar Pradesh, supra, this court had pointed out that repugnancy between two statutes would arise if there was direct conflict between the two provisions and if the law made by Parliament and the law made by the State Legislature occupied the same field.

It has already been stated that the State Act intended to eli- 631 minate private operators from the State in regard to con- tract carriages acquired under the existing permits, vehi- cles and ancillary property and with a view to giving effect to a monopoly situation for the State undertaking made provision in s. 20 for excluding the private operators. The 1988 Act does not purport to make any provision in regard to acquisition of contract carriage permits which formed the dominant theme or the core of the State Act. Nor does it in s. 73 or s. 74 indicate as to who the applicant shall be while laying down how an application for a contract carriage permit shall be made and how such a permit shall be granted.

Section 80 of the 1988 Act does contain a liberalised provi- sion in the matter of grant of permits but here again it has to be pointed out that the ancillary provision contained in s. 20 of the Acquisition Act to effectuate acquisition does not directly run counter to the 1988 provision.

Section 20 of the State Act creates a monopoly situation in favour of the State undertaking qua contract carriages by keeping all private operators out of the filed. Since ss.

73, 74 and 80 of the 1988 Act do not contain any provision relating to who the applicants for contract carriages can or should be, and those sections can be applied without any difficulty to the applications of the State undertaking, and there does not appear to be any repugnancy between the two Acts for invoking Art. 254 of the Constitution. A provision in the State Act excluding a particular class of people for operating contract carriages or laying down qualifications for them would not run counter to the relevant provisions of the 1988 Act.

A number of precedents have been cited at the hearing and those have been examined and even some which were not referred to at the bar. There is no clear authority in support of the stand of the petitioners–where the State law is under one head of legislation in the Concurrent List; the subsequent Parliamentary legislation is under another head of legislation in the same List and in the working of the two it is said to give rise to a question of repugnancy.

The State Act had done away with the private operators qua contract carriages within the State. It is true that the 1988 Act is applicable to the whole of India and, therefore, is also applicable to the State of Karnataka in the absence of exclusion of the State of Karnataka from its operation.

But as has been pointed out already, there is no direct inconsistency between the two and on the facts placed in the case there is no necessary invitation to the application of cl. (1) of Art. 254 of the Constitution.

632 The writ petitions fail and are dismissed.

SAWANT, J. This group of petitions raises a common question of law viz. whether the Motor Vehicles Act, 1988 (hereinafter referred to as the MV Act 1988) has impliedly repealed the Karnataka Contract Carriages (Acquisition) Act, 1976 (hereinafter referred to as the Karnataka Act).

2. The petitioners claim a declaration that the provisions of Sec. 14 and 20 of the Karnataka Act are invalid because of their repugnancy with the provisions of the MV Act, 1988, and a direction to respondent nos. 2 and 3, namely the Karnataka State Transport Authority and the Karnataka Re- gional Transport Authority respectively, to consider their applications for the grant of contract carriage permits under Sec. 74 and 80 of the MV Act, 1988, without reference to the provisions of the Karnataka Act. The precise question that falls for consideration, therefore, is whether there is a repugnancy between the two legislations.

3. The Karnataka Act, as its title shows, was enacted to provide for the acquisition of contract carriages and for matters incidental, ancillary and subservient thereto. It was enacted under Entry 42 of the Concurrent List read with Article 31 of the Constitution, in furtherance of Article 39(b) and (c) thereof. This is evident from the preamble, and Section 2 of the Act. The preamble states that since the contract carriages and certain other categories of public service vehicles were being operated in the State in a manner highly detrimental and prejudicial to public inter- est, it was necessary to prevent the misuse, and to provide better facility for the transport of the passengers by road.

It was also necessary to give effect to the policy of the State towards securing that the ownership and control of the material resources of the community were so distributed as best to subserve the common good and that the operation of the economic system did not result in the concentration of wealth and means of production to the common detriment. To effectuate the said intention it was considered necessary to enact the legislation. Section 2 of the Act makes a declara- tion in the following words:

“It is hereby declared that this Act is for giving effect to the policy of the State towards securing the principles specified in Clauses (b) and (c) of Article 39 of the Con- stitution of India and the acquisition therefor of the contract carriages and other property referred to in Section 4.” 633 Under Section 4 of the Act every contract carriage owned or operated by contract carriage operator along with the permit or the certificate of registration or both as the case may be, vested in the State Government absolutely and free from all encumbrances. Further, a11 rights, title and interest of the contract carriage operators in the lands, buildings, workshops and other places and all stores, in- struments, machinery, tools, plants, apparatus and other equipments used for the maintenance, repair of, or otherwise in connection with the service of the contract carriage as the State Government may specify in that behalf and all books of accounts, registers, records and all other docu- ments of whatever nature relating to the contract carriages vested in the State Government absolutely and free from all encumbrances, and all the said property was deemed to have been acquired for public purpose. Section 6 provided for payment of compensation for the acquisition of all the said property.

Since the avowed object of the Act was two fold, namely (i) to prevent the misuse of the operation of the contract carriages and to provide better facilities for the transport of passengers, and (ii) to give effect to the policy under- lying Clauses (b) and (c) of Article 39 of the Constitution, it was also necessary to prevent the issue of fresh permits or renewal of the existing permits for running the contract carriages in the State to any private individual. Hence, Section 14 provided for a prohibition of the issue of fresh permit or renewal of the existing permit to any individual or the transfer of such permit to anyone except to the State Government or the Corporation which it may establish under the Karnataka State Road Transport Corporation Act, 1950. To make an alternative arrangement for running the contract carriages and to prevent both the misuse of the permits as well as concentration of wealth in the hands of a few indi- viduals, Section 20 of the Act provided that all contract carriage-permits granted or renewed till then would stand cancelled and the Corporation alone would be entitled to the grant or renewal of the said permits to the exclusion of all other persons, and that applications from persons other than the Corporation for the grant of such permit shall not be entertained.

In State of Karntaka & Anr. etc. v. Shri Ranganatha Reddy & Anr. etc.[1977] INSC 195; , [1978] 1 SCR 641 this Court upheld the validity of the said Act holding, among other things, that the Act was for acquisition of property and was in the public interest and for a public purpose. The Act, according to the Court, had nationalised the contract transport serv- ice in the State and that was also for a public purpose as declared in the Act. It was also observed that if Articles 38 and 39 are to be given 634 effect to, then the State has progressively to assume the predominant and direct responsibility for setting up new industrial undertakings which would also include development of transport facilities. The State has also to become agency for planned national development, and the socialistic pat- tern of society as the national objective required that public utility services should be in the public sector. The acquisition of road transport undertaking by the State, therefore, undoubtedly served the public purpose.

4. It is thus clear from the provisions of the Karnataka Act that the whole object of the Act is to nationalise the contract carriage service in the State with a view to put an end to the abuse of the contract carriage services by the private operators and to provide better transport facilities to the public, and also to prevent concentration of the wealth in the hands of the few and to utilise the resources of the country to subserve the interests of all. To secure the objective of the Act, it was also necessary to prohibit the grant of the contract carriage permits to private indi- viduals and to reserve them exclusively to the State Under- taking which was done by Sections 14 and 20 of the Act.

Unlike the MV Act 1988, which is admittedly enacted by the Parliament under Entry 35 of the Concurrent List, to regu- late the operation of the motor vehicles, the object of the Karnataka Act is not only the regulation of the operation of the motor vehicles. Nor is its object merely to prevent the private owners from operating their vehicles with the exclu- sive privilege of such operation being reserved in favour of the State or the State Undertaking. For if that were the only object, the same could have been achieved by the Trans- port Undertakings of the State following the special provi- sions relating to State Transport Undertakings in Chapter IV-A of the Motor Vehicles Act, 1939 which was in operation when the Karnataka Act was brought into force. The very fact that instead, the State undertook the exercise of enacting the Karnataka Act shows that the object of the State Legis- lature in enacting it was materially different. This is also obvious from the various provisions of the enactment pointed out above.

5. It is for this reason that the contention advanced by the petitioners that the object of the Karnataka Act and that of the MV Act, 1988 is the same and that both of them occupy the same field, cannot be accepted. A comparison of the provisions of the MV Act, 1939 (Old Act) and MV Act, 1988 (New Act) further shows that the latter has merely replaced the former. All that it has done is to update, simplify and rationalize the law on the subject. For this purpose it has made important provisions in the following matters, namely:

635 “(a) rationalisation of certain definitions with additions of certain new definitions of new types of vehicles;

(b) Stricter procedures relating to grant of driving li- cences and the period of validity thereof;

(c) laying down of standards for the components and parts of motor vehicles;

(d) standards for anti-pollution control devices;

(e) provision for issuing fitness certificates or vehicles also by the authorised testing stations;

(f) enabling provision for updating the system of registra- tion marks;

(g) liberalised schemes for grant of stage carriage permits on non-nationalised routes, all India Tourist permits and also national permits for goods carriages;

(h), (i), (j), (k), (l) ……….

6. The special provisions relating to the State Trans- port Undertakings which are contained in Chapter VI of the new Act are pari materia with those of Chapter IV-A of the old Act, with only this difference that whereas under the old Act it was the State Transport Undertaking which had to prepare a scheme for running and operating the transport service by it in relation to any area or route or portion thereof exclusively, under the new Act such a scheme has to be prepared by the State Government itself. There is no difference in the legal consequences of the schemes under the two enactments. Both envisage the operation of the services by the State Transport Undertaking to the exclusion of the rest, and cancellation of the existing permits and compensation only for the deprivation of the balance of the period of the permit. No acquisition of the vehicles or the paraphernalia connected with such vehicles is envisaged as is the case under the Karnataka Act.

It is also not correct to say that the new Act, i.e. MV Act 1988 incorporates a special policy of liberalisation for private sector operations in the transport field. We see no such provision in the Act nor was any pointed out to us. The provisions with regard to the grant of 636 permits under both the old and the new Act are the same. In any case there is no provision for liberalisation of the grant of contract carriage permits in favour of the private individuals or institutions so as to come in conflict with the Karnataka Act.

7. Thus the Karnataka Act and the MV Act, 1988 deal with two different subject matters. As stated earlier the Karna- taka Act is enacted by the State Legislature for acquisition of contract carriages under entry 42 of the Concurrent list read with Article 31 of the Constitution to give effect to the provisions of Articles 39(b) and (c) thereof. The MV Act 1988 on the other hand is enacted by the Parliament under entry 35 of the Concurrent list to regulate the operation of the motor vehicles. The objects and the subject matters of the two enactments are materially different. Hence the provisions of Article 254 do not come into play in the present case and hence there is no question of repugnancy between the two legislations.

8. Shri Nariman, the learned counsel for the petitioners however, contended that the provisions of Section 14 and 20 of the Karnataka Act were in direct conflict with the provi- sions of Sections 74 and 80(2) of the MV Act 1988. According to him while the Regional Transport Authority (RTA) is enjoined by the provisions of Section 74 read with Section 80(2) of the MV Act 1988, ordinarily not to refuse to grant an application for permit of any kind, the provisions of Section 14 and 20 of the Karnataka Act prohibit any person from applying for, and any officer or authority from enter- taining or granting, application for running any contract carriage in the State. Thus there is a direct conflict between the two legislations, and since the MV Act 1988 is a later legislation, operating in the same area, it should be deemed to have impliedly repealed the provisions of Section 14 and 20 of the Karnataka Act, even if the latter Act had received the assent of the President. This is so because of the proviso to sub-clause (2) of Article 254 of the Consti- tution.

This contention proceeds on the footing that the two legislations occupy the same field. As has been pointed out earlier, the objects of the two legislations are materially different. The provisions of Sections 51 and 57 of the old Act further correspond to provisions of Sections 74 and 80 of the new Act. The Karnataka Act had received the assent of the President inspite of the provisions of Sections 51 and 57 of the old Act. The assent of the President, further as stated by the respondents, was taken by way of abundant precaution, although the subject matters of the two Acts were different. The provisions of Sections 14 and 637 20 of the Karnataka Act were incidental and necessary to carry out the main object of the said Act. Without the said provisions, the object of the said Act would have been frustrated. In the case of State of Karnataka & Anr. Etc.

v..Ranganatha Reddy & Anr. Etc., (supra) while repelling the contention that there was a legislation encroachment by the Karnataka Act because it impinged on the subject of Inter- State Trade & Commerce in the Union List as it provided also for acquisition of transport carriages running on inter- state routes, this Court in para 32 of the Judgment has observed as follows:

” ….. It (the Karnataka Act) is not an Act which deals with any Inter-State Trade and Commerce. Even assuming for the sake of argument that carriage of passengers from one state to the other is in one sense a part of the InterState Trade and Commerce, the impugned Act is not one which seeks to legislate in regard to the said topic. Primarily and almost wholly it is an Act to provide for the acquisition of contract carriages, the Intra-State permits and the other properties situated in the State of Karnataka. In pith and substance it is an Act of that kind. The incidental en- croachment on the topic of inter-state trade and commerce, even assuming there is some, cannot invalidate the Act. The MV Act 1939 was enacted under Entry 20 of List III of Sched- ule Seven of the Government of India Act 1935 corresponding to Entry 35 of List III of the Seventh Schedule to the Constitution. The subject being in the Concurrent List and the Act having received the assent of the President, even the repugnancy, if any between the Act and the Motor Vehi- cles Act stands cured and cannot be a ground to invalidate the Act. Entry 42 of List 111 deals with acquisition of property. The State has enacted the Act mainly under this entry …… ” (emphasis supplied) According to me these observations should put an end to any controversy on the subject, namely, whether the two Legislations are enacted under two different entries in the Concurrent List, and whether they occupy different areas or not.

I am also unable to appreciate the contention that the provisions of Sections 14 and 20 of the Karnataka Act are in conflict with the provisions of Sections 74 and 80 of the New MV Act 1988. Section 98 of the MV Act 1988 in terms clearly states (as did Section 68B of the 638 MV Act 1939) that Chapter VI relating to the special provi- sions about the State Transport Undertaking and the rules and orders made thereunder, shall have effect notwithstand- ing anything inconsistent therewith contained in Chapter V or in any other law for the time being in force or in any instrument having effect by virtue of any such law. Sections 74 and 80 relating to the grant of the contract carriage permit and the procedure in applying for the grant of such permits respectively, are in Chapter V. This means that when under Chapter VI, a scheme is prepared by the State Govt.

entrusting the contract carriage services in relation to any area or route or portion thereof, to a State Transport Undertaking to the exclusion–complete or partial of other persons, the provisions of Sections 74 and 80 would have no application, and the private transport operators cannot apply for the grant of contract carriage permits under Section 80 nor can such permits be granted by the Transport Authority. In other words, the MV Act 1988 also makes a provision for nationalisation of routes, and envisages a denial of permits to private operators when routes are so nationalised. Hence it is not correct to say that there is a conflict between the provisions of the two Acts.

9. It was then contended that when there is a repugnancy between the legislations under Article 254 of the Constitu- tion, the doctrine of pith and substance does not apply, and even if some of the provisions of the impugned State legis- lation are in conflict with some of the provisions of the Central legislation, the conflicting provisions of the State legislation will be invalid. In support of this contention, reliance was placed on two decisions one of the Federal Court in the case of Meghraj & Ors. v. Allahrakhiya & Ors., 29 AIR 1942 FC 27 and the other of the Privy Council report- ed in AIR 34 1947 PC 722 confirming the former.

The Federal Court in the above decision has observed that when a provincial Act is objected to as contravening not Section 100 but Section 107(1) the Govt. of India Act 1935 (corresponding to Article 254(1) of the Constitution) the question of the pith and substance of the impugned Act does not arise. In that case, the validity of the Punjab Restitution of Mortgage Lands Act was challenged on the ground that some of its provisions were repugnant to certain provisions of the Contract Act and of the Civil Procedure Code. The Court held that there was no repugnancy between the legislations. But while holding so, the Court made a one sentence observation as follows: “In the judgment of the High Court there is some discussion of the question of the “pith and substance” of the Act; but that question does not 639 arise as objection is taken not under Section 100 of the Constitution act but Sec. 107.” There is no discussion on the point. The arguments, if any advanced on the question are neither reproduced nor dealt with. The observation further was not necessary for the decision in that case, since as is pointed out above, the Court had held that there was no repugnancy between the two statutes since they cov- ered two different subject matters. Hence the issue as to whether the impugned Punjab Restitution of Mortgage Lands Act was valid because the pith and substance of the Act covered an area different from the one covered by the Con- tract Act and the Civil Procedure Code, did not fall for consideration before the Court. What is more, when the matter went in appeal before the Privy Council, the said point was not even remotely referred to and I find no obser- vation in the judgment either confirming, or dissenting from the said observations. This being the case the said observa- tions cannot be regarded as more than general in nature.

They are not even an obiter-dicta much less are they the ratio decidendi of the case Hence the said observations do not have a binding effect.

Even otherwise, I am of the view that not to apply the theory of pith and substance when the repugnancy between the two statutes is to be considered under Article 254 of the Constitution, would be illogical when the same doctrine is applied while considering whether there is an encroachment by the Union or the State legislature or a subject exclu- sively reserved for the other. When the legislative en- croachment is under consideration the doctrine of pith and substance comes to the aid to validate a legislation which would otherwise be invalid for the very want of legislative competence. When the repugnancy between the two legislations is under consideration, what is in issue is whether the provision of the State enactment though otherwise constitu- tionally valid, has lost its validity because the Parliament has made a legislation with a conflicting provision on allegedly the same matter. If it is open to resolve the conflict between two entries in different Lists, viz. the Union and the State List by examining the dominant purpose and therefore the pith and substance of the two legisla- tions, there is no reason why the repugnancy between the provisions of the two legislations under different entries in the same List, viz. the Concurrent List should not be resolved by scrutinizing the same by the same touchstone.

What is to be ascertained in each case is whether the legis- lations are on the same subject matter or not. In both cases the cause of conflict is the apparent identity of the sub- ject matter. The tests for resolving it therefore cannot be different.

640

10. I may in this Connection refer to some of the au- thorities relied upon by the parties. In Municipal Council Palai v.T.J. Joseph & Ors., [1963] INSC 37; [1964] 2 SCR 87 this Court had to consider the repugnancy between the presolution passed by the appellant Municipal Council in exercise of the powers vested in it under Section 286 and 287 of the Travancore District Municipalities Act 1941, and the provisions of Section 42 of the Travancore-Cochin Motor Vehicles Act 1950 which came into force on January 5, 1950, providing for the use of a public bus stand constructed for Stage Carriage buses starting from and returning to the Municipal limits or passing through its limits.

The respondent operators challenged the resolution of the Council by contending that the provisions of Sections 286 and 287 of the Municipalities Act stood repealed by implication by virtue of the provisions of Section 42 of Travancore-Cochin Motor Vehicles Act, 1950. That Section read as follows:

“Government or any authority authorised in this behalf by Government may, in consultation with the local authority having jurisdiction in the area concerned, determine places at which motor vehicles may stand either indefinitely or for a specified period of time, and may determine the places at which public service vehicles may stop for a longer time than is necessary for the taking up and setting down of passengers. ‘ ‘ The High Court accepted the contention of the respondents and allowed the Writ Petition. In appeal against the said decision, this Court discussed the law relating to the repugnancy between two legislations by referring to various decided cases foreign as well as Indian. The Court pointed out that in Daw v. The Metropolitan Board of Works, [1862] EngR 606; [1862] 142 ER 1104 after stating the general principles of con- struction, the Court there had said that when the legisla- tion was found dealing with the same subject matter in two Acts, so far as the later statute derogates from and is inconsistent with the earlier one, the legislature must be held to have intended to deal in the later statute with the same subject matter which was within the ambit of the earli- er one. This Court further observed that in that case the English Court was concerned with the statutes which covered more or less the same subject matter and had the same object to serve. That decision further had kept open the question whether the powers conferred upon one authority by an earli- er Act, could continue to be exercised by that authority after the enactment of a provision in a subsequent law which 641 conferred wide powers on another authority which would include some of the powers conferred by the earlier statute till the new authority chose to exercise the powers con- ferred upon it. Referring to the case of The Great Central Gas Consumers Co. v. Clarke, [1863] EngR 90; [1863] 143 ER 331 the Court observed that the foundation of that decision was that the later statute was a general one whereas the previous one was a special one and, therefore, the special statute had to give way to the later general statute.

Referring to the case of Goodwin v. Phillips, [1908] 7 CLR 16 the Court observed that the doctrine of implied repeal was well recognised, and that repeal by implication was a convenient form of legislation and that by using this device, the legislature must be presumed to intend to achieve a consistent body of law. The Court then went on to say that it is undoubtedly true that the legislature can exercise the powers of repeal by implication, but it is an equally well-settled principle of law that there is a pre- sumption against an implied repeal. Upon the assumption that the legislature enacts laws with a complete knowledge of all existing laws pertaining to the same subject, the failure to acid a repealing clause indicates that the intent was not to repeal existing legislation. This presumption is rebutted if the provisions of the new Act are so inconsistent with the old ones that the two cannot stand together. Then the Court referred to the following observations from page 631, para 311 of Crawford on Statutory Construction:

“There must be what is often called ‘such a positive repug- nancy between the two provisions of the old and the new statutes that they cannot be reconciled and made to stand together’. In other words they must be absolutely repugnant or irreconcilable. Otherwise, there can be no implied repeal ….. for the intent of the legislature to repeal the old enactment is utterly lacking.” The Court then referred to the observations made in Crosby v. Patch, 18 Calif. 438 quoted by Crawford “Statutory Con- struction” p. 633 to point out the reasons of the rule that an implied repeal will take place in the event of clear inconsistency or repugnancy. The said observations are as follows:

“As laws are presumed to be passed with deliberation, and with full knowledge of all existing ones on the same sub- ject, it is but reasonable to conclude that the Legislature, in 642 passing a statute, did not intend to interfere with or abrogate any former law relating to the same matter, unless the repugnancy between the two is irreconcilable. Bowen v.

Lease, 5 Hill 226. It is a rule, says Sedgwick, that a general statute without negative words will not repeal the particular provisions of a former one, unless the two acts are irreconcilably inconsistent. ‘The reason and philosophy of the rule’, says the author, ‘is, that when the mind of the legislator has been turned to the details of a subject, and he has acted upon it, a subsequent statute in general terms, or teating the subject in a general manner, and not expressly contradicting the orginal act, shall not be con- sidered as intended to affect the more particular or posi- tive previous provisions, unless it is absolutely necessary to give the latter act such a construction, in order that its words shall have any meaning at all.” The Court then pointed out that for implying a repeal the next thing to be considered is whether the two statutes relate to the same subject matter and have the same purpose.

The Court in this connection quoted the following passage at page 634 from Crawford:

“And, as we have already suggested, it is essential that the new statute covers the entire subject matter of the old;

otherwise there is no indication of the intent of the legis- lature to abrogate the old law. Consequently, the later enactment will be construed as a continuation of the old one.” (emphasis supplied) These observations are very material for considering the question with which we are concerned in the present case, namely whether the doctrine of pith and substance is ap- plicable while examining the repugnancy of the two statutes.

The Court then stated that the third question to be considered was whether the new statute purports to replace the old one in its entirety or only partially, and the Court observed that where replacement of an earlier statute is partial, a question like the one, which the Court did not choose to answer in Daw’s case (supra) would arise for decision. The Court also stated that it has to be remembered that at the basis of the doctrine of implied repeal is the presumption that the legislature which must be deemed to know the existing law did not intend to create any confusion in the law by retaining conflicting provi- 643 sions on the statute book and, therefore, when the court applies this doctrine, it does no more than give effect to the intention of the legislature ascertained by it in the usual way, i.e., by examining the scope and the object of the two enactments, the earlier and the later.

The Court then referred to its earlier decision in Deep Chand v. State of U.P. & Ors., [1959] 2 SCR 8 and pointed out that in that case the following principles were laid down to ascertain whether there is repugnancy or not:

1. Whether there is direct conflict between the two provi- sions;

2. Whether the legislature intended to lay down an exhaus- tive code in respect of the subject matter replacing the earlier law;

3. Whether the two laws occupy the same field.

The Court then referred to Sutherland on Statutory Construc- tion (Vol. 13rd Edn. p. 486) on the question of “repeal of special and local statutes by general statutes”. The para- graph reads as follows:

“The enactment of a general law broad enough in its scope and application to cover the field of operation of a special or local statute will generally not repeal a statute which limits its operation to a particular phase of the subject covered by the general law, or to a particular locality within the jurisdictional scope of the general statute. An implied repeal of prior statutes will be restricted to statutes of the same general nature since the legislature is presumed to have known of the existence of prior special or particular legislation, and to have contemplated only a general treatment of the subject-matter by the general enactment. Therefore, where the later general statute does not propose an irreconcilable conflict, the prior special statute will be construed as remaining in effect as a quali- fication of or exception to the general law.” The Court, however, hastened to add that there is no rule of law to prevent repeal of special and local statute by a later general statute and therefore, where the provisions of the special statute are wholly repugnant to the general statute, it would be possible to infer that the special statute was repealed by the general enactment. However, the Court observed that where it is doubtful whether the special statute 644 was intended to be repealed by the general statute, the Court should try to give effect to both the enactments as far as possible, since the general statute applies to a11 persons and localities within its jurisdiction and scope as distinguished from the special one which in its operation is confined to a particular locality. Where the repealing effect of a statute is doubtful, the statute is to be strictly construed to effectuate its consistent operation with previous legislation as observed by Sutherland on Statutory Construction. The Court also approved of the observations of Suleman J., in Shyamakant Lal v. Rambhajan Singh, [1939] FCR 193 that repugnancy must exist in fact, and not depend merely on a possibility. After discussing the principles of repugnancy as above, the Court answered the question that fell for consideration before it in favour of the Municipal Council by observing as follows:

“It seems to us however, clear that bearing in mind the fact that the provisions of s. 72 of the Travancore Cochin Motor Vehicles Act were intended to apply to a much wider area than those of ss. 286 and 287 of the Travancore District Municipalities Act it cannot be said that s. 72 was intended to replace those provisions of the Travancore Distt. Municipalities Act. The proper way of construing the two sets of provisions would be to regard s. 72 of the Travancore-Cochin Motor Vehicles Act as a provision inconti- nuity with ss. 286 and 287 of the Travancore District Munic- ipalities Act so that it could be availed of by the appro- priate authority as and when it chose. In other words the intention of the legislature appears to be to allow the two sets of provisions to co-exist because both are enabling ones. Where such is the position, we cannot imply repeal.

The result of this undoubtedly would be that a provision which is added subsequently, that is, which represents the latest will of the legislature will have an overriding effect on the earlier provision in the sense that despite the’ fact that some action has been taken by the Municipal Council by resorting to the earlier provision the appropri- ate authority may nevertheless take action under s. 72 of the Travancore Cochin Motor Vehicles Act, the result of which would be to override the action taken by the Municipal Council under s. 287 of the District Municipalities Act. No action under section 72 has so far been taken by the Govern- ment and, therefore, the resolutions of the Municipal Coun- cil still hold good. Upon this view it is not necessary to consider certain other points raised by learned counsel.” 645 It would thus appear from this decision that the Court held there that the allegedly conflicting provisions of Travancore Cochin Motor Vehicles Act were intended to apply to much wider area than the relevant provisions of the Distt. Municipalities Act and, therefore, it could not be said that the provisions of the Motor Vehicles Act were intended to replace the provisions of Municipalities Act.

The Court also held that the proper way of construing the two sets of provisions would be to regard the conflicting provisions of the Motor Vehicles Act as provisions in conti- nuity with the relevant provisions of the Municipalities Act so that it could be availed of by the appropriate authority as and when it chose. The Court, therefore, read into the relevant provisions, the intention of the legislature to allow the two sets of provisions to co-exist because both were enabling ones, and in such circumstances no repeal could be implied. The Court also rested the said decision by relying on the fact that since no action was taken by the Government under the relevant provisions of the Motor Vehi- cles Act, till such time as the action was taken under the said provisions, the Municipal Council could act under the provisions of the Municipalities Act.

What is important from our point of view, is the view taken in that case that when repugnancy is alleged between the two statutes, it is necessary to examine whether the two laws occupy the same field, whether the new or the later statute covers the entire subject matter of the old, whether legislature intended to lay down an exhaustive code in respect of the subject matter covered by the earlier law so as to replace it in its entirety and whether the earlier special statute can be construed as remaining in effect as a qualification of or exception to the later general law, since the new statute is enacted knowing fully well the existence of the earlier law and yet it has not repealed it expressly. The decision further lays down that for examining whether the two statutes cover the same subject matter, what is necessary to examine is the scope and the object of the two enactments, and that has to be done by ascertaining the intention in the usual way and what is meant by the usual way is nothing more or less than the ascertainment of the dominant object of the two legislations.

In Ratan Lal Adukia v. Union of India, [1989] 3 SCR 537 the conflict was between the provisions of Section 80 of the Railways Act 1890 as amended by the Railways (Amendment) Act 1961 on the one hand and the provisions of Section 20 of the Code of Civil Procedure, 1908 and section 18 of the Presi- dency Small Causes Courts Act 1882, on the other. Section 80 of the Railways Act before its amendment had 646 provided that a suit for compensation for loss of life or injury to a passenger or for loss, destruction and deterio- ration of animals or goods, would lie where the passengers or the animals or goods were booked through over the Rail- ways of two or more Railway Administrations, against the Railway Administration from which the passengers and the goods were booked or against the Railway Administration on whose railway the loss injury, destruction or deterioration occurred. By the amendment of 1961, the aforesaid provisions of Section 80 were changed and such a suit was made main- tainable–(a) if the passenger or the animals or goods were booked from one station to another on the railway of the same Railway Administration, against that Railway Adminis- tration. (b) if they were booked through over the railway of two or more Railway Administrations, against the Railway Administration from which they were booked or against the Railway Administration on whose railway the destination station lay or the loss etc. occurred. It was further pro- vided that in either of these two cases the suit may be instituted in a court having jurisdiction over the place at which the passenger or the goods were booked or the place of destination or over the place in which the destination station lies or the loss etc. occurred. Thus the changes brought about by the amendment were significant. The old section did not deal with the liability of claims in respect of goods etc. carried by single railway. It only concerned itself with them when they were carried by more than one railway and provided that the suit for loss of such goods could he brought against either the Railway Administration with which the booking was made or against the Railway Administration of the delivery station. The old section further did not speak of the places where such suits could be laid. The choice of the forum was regulated by section 20 of the Code of Civil Procedure or section 18 of the Presi- dency Small Causes Courts, as the case may be. The amendment of the section however, made a departure in this respect, namely, it also named the place where such suits could be instituted and it is with this change the decision in ques- tion was concerned. Confirming the High Court’s view, the Court held that the new Section 80 prevailed over the provi- sions of Section 20 of the Code of Civil Procedure and of Section 18 of the Presidency Small Causes Courts Act. The Court took the view that in view of the fact that the provi- sions of the new Section 80 as well as the relevant provi- sions of the Code of Civil Procedure and the Presidency Small Causes Courts Act dealt with the same subject matter, namely, the forum for suits, and since the new Section 80 was a special provision relating to special suits against the Railway Administration the special provisions would prevail over the general provisions. The Court also stated that Section 80, looking into its earlier history 647 and the other changes which were brought in it, was a code in itself dealing with the relevant subject matter, and therefore, it repealed the provisions of Section 20 of the Code of Civil Procedure and of Section 18 of the Presidency Small Causes Courts Act by necessary implication. The Court also held that since the provisions of the latter two gener- al statutes related to territorial jurisdiction of courts and since the amendment to Section 80 also dealt with the same subject, but in case of only suits for compensation against the Railway, Section 80 being the special statute should be deemed to have supplanted the general statutes like the Code of Civil Procedure and general provisions of section 20 of the Code and Section 18 of the Presidency of Small Causes Courts Act.

It will thus be apparent that in that case the provi- sions which were in conflict related to the same subject matter unlike in our case. The provisions with regard to application and grant of permits in Sections 14 and 20 have nothing in common with the provisions of Sections 74 and 80 of the Motor Vehicles Act 1988. The former provisions are ancillary to giving effect to the acquisition and nationali- sation of the road transport within local territorial lim- its. The later provisions are general in nature and in furtherence of the object of the Act which is to regulate transport. The subject matters of both the statutes and the object of the two sets of provisions are, therefore, materi- ally different. In our case both the statutes can stand together. The legislative intent is clear. Since, further, the Parliament had enacted the later statute knowing fully well the existence of the earlier statute and yet it did not expressly repeal it, it will be presumed that the Parliament felt that there was no need to repeal the said statute.

In Ch. Tika Ramji & Ors. etc. v. State of U.P. & Ors., [1956] INSC 30; [1956] SCR 393 what fell for consideration was the alleged repugnancy between the U.P. Sugarcane (Regulation of Supply and Purchase) Act 1953 and two Notifications issued by the State Government under it on September 27, 1954 and November 9, 1955 on the one hand, and Industries (Development & Regulation) Act 1951 and the Essential Commodities Act 1955 and the Sugar Cane Control Order 1955 issued under it on the other. The Court has stated there that no question of repug- nancy under Article 254 of the Constitution can arise where Parliamentary legislation and State legislation occupy different fields and deal with separate and distinct matters even though of a cognate and allied nature, and whereas in that case there was no inconsistency in the actual terms of the Act enacted by Parliament and the State Legislature, the test of repugnancy would be whether Parliamentary 648 and the State Legislature in legislating under an Entry in the Concurrent List exercised their powers over the same subject matter or whether the laws enacted by Parliament were intended to be exhaustive so as to cover the entire field.

The Court then referred to three tests of inconsistency or repugnancy listed by Nicholas on p. 303 2nd Edn. of his Australian Constitution, namely, (1) there may be inconsist- ency in the actual terms of the competing statutes, (2) though there may be no direct conflict, a State law may be inoperative because the Common Wealth Law, or the Award of Common Wealth Court is intended to be a complete exhaustive code, (3) even in the absence of intention, the conflict may arise when both State and Common Wealth Law seek to exercise their powers over the same subject matter. The Court also quoted with approval, observations of the Calcutta High Court in G.P. Stewart v.B.K. Roy Choudhary, AIR 1939 Cal.

628 on the subject which are as follows:

“It is sometimes said that two laws cannot be said to be properly repugnant unless there is a direct conflict between them, as when one says “do” and the other “don’t”, there is no true repugnancy according to this view, if it is possible to obey both the laws. For reasons which we shall set forth presently, we think that this is too narrow a test: there may well be cases of repugnancy where both laws say “don’t” but in different ways. For example, one law may say, “No person shall sell liquor by retail, that is, in quantities of less than five gallons at a time” and another law may say, “No person shall sell liquor by retail, that is, in quantities of less than ten gallons at a time”. Here, it is obviously possible to obey both laws, by obeying the more stringent of the two namely the second one; yet it is equally obvious that the two laws are repugnant, for to the extent to which a citizen is compelled to obey one of them, the other, though not actually disobeyed, is nullified”.

“The principle deducible from the English cases, as from the Canadian cases, seems therefore to be the same as that enunciated by Issacs, J.in the Australian 44 hours case (37 CLR 466) if the dominant law has expressly or impliedly evinced its intention to cover the whole field, then a subordinate law in the same field is repugnant and therefore inoperative. Whether and to what extent in a 649 given case, the dominant law evinces such an intention must necessarily depend on the language of the particular law”.

The Court also approved the observations of Sulaiman, J. in Shyamakant Lal v. Rarnbhajan Singh, (supra) on the subject which are as follows:

“When the question is whether a Provincial legisla- tion is repugnant to an existing Indian law, the onus of showing its repugnancy and the extent to which it is repug- nant should be on the party attacking its validity. There ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; and care should be taken to see whether the two do not really operate in different fields without encroachment. Further, repugnancy must exist in fact, and not depend merely on a possibility. Their Lordships can discover no adequate grounds for holding that there exists repugnancy between the two laws in districts of the Province of Ontario where the prohibitions of the Canadian Act are not and may never be in force: (Attorney-General for Ontario v. Attorney-General for the Dominion, [1896] AC 348).

11. Referring to the case in hand; the Court then stated that there was no question of any inconsistency in the actual terms of the two Acts. The only questions that arose there were whether the Parliament and the State Legislature sought to exercise their powers over the same subject matter or whether the laws enacted by Parliament were intended to be a complete exhaustive code, or in other words, expressly or impliedly evinced an intention to cover the whole field.

The Court then compared the provisions of Industries (Devel- opment and Regulation) Act, 1951 as amended by Act XXVI of 1953, the Essential Commodities Act X of 1955 and the Sugar Control order 1955 issued thereunder with the U.P. Act and Order of 1954 issued by the State Government thereunder. By comparing the impugned State Act with the Central Act of 1951 as amended by the Act, 1953, the Court held that the Central Act related to sugar as a finished product while the State legislation covered the field of sugar cane. Thus the fields of operation of the two legislations were different and hence there was no repugnancy between the Central Act and the State Act. It was also further pointed out there that even assuming that sugar cane 650 was an article or class of articles relatable to the sugar industry within the meaning of Section 18(g) of the Central Act, no order was issued by the Central Government in exer- cise of the powers vested in it under that Section, and hence no question of repugnancy could ever arise because repugnancy must exist in fact and not depend merely on a possibility. The possibility of an Order under Section 18(g) being issued by the Central Government would not be enough.

The existence of such an Order would be the essential pre- requisite before any repugnancy could ever arise.

12. As far as the Essential Commodities Act, 1955 was concerned, the Court pointed out that the Parliament was well within its powers in legislating in regard to sugar cane, and the Central Government was also well within its powers in issuing the Sugar Cane Control Order, 1955 because all that was in exercise of the concurrent powers of legis- lation under Entry 33 of List 111. That, however, did not affect the legislative competence of the U.P. State Legisla- ture to enact the law in regard to sugar cane and the only question which had to be considered was whether there was any repugnancy between the provisions of the Essential Commodities Act and the State legislation in that behalf.

The Court then pointed out that the State Government did not at all provide for the fixation of minimum price for sugar cane. Neither had it provided for the regulation of movement of sugar cane as was done by the Central Government in Clauses (3) and (4) of the Sugar Cane Control Order 1955.

Likewise, the provision contained in Section 17 of the State Act in regard to the payment of sugar cane price (as fixed by the Central Govt.) and the recovery thereof as if it was an arrear of land revenue, did not find its place in the Central Government Sugar Cane Control Order 1955. The provi- sions in the two legislations were, therefore, mutually exclusive and did not impinge upon each other. By referring to the provisions of Central Government Sugar Cane Control Order 1955 and the U.P. Govt. Sugar Cane (Regulation and Purchase) Order 1954 issued under the respective statutes, the Court pointed out that none of those provisions also overlapped. The Centre was silent with regard to some of the provisions which had been enacted by the State and the State was silent with regard to some of the provisions which had been enacted by the Centre. There was no repugnancy whatever between those provisions, and neither the State Act nor the rules flamed thereunder as well as the State Government’s Order issued under it, trenched upon the field covered by the Essential Commodities Act. The Court therefore held that since there was no repugnancy between the two, the provi- sions of Article 254(2) of the Constitution did not come into play. The Court then considered 651 whether the repealing Section 16 of the Essential Commodi- ties Act and clause 7 of the Sugar Cane Control Order 1955 had repealed the State Act to the extent mentioned therein.

Section 16(1)(b) provides as follows:

“16(1) The following laws are hereby repealed– (a) x x x x (b) any other law in force in any State immediately before the commencement of this Act in so far as such law controls or authorises the control of the production, supply and distribution of, and trade and commerce in, any essential commodity”.

The contention was that the expression “any other law” covered the impugned State Act which was in force in the State immediately before the commencement of the Essential Commodities Act in so far as it controlled or authorised the control of production, supply and distribution of and trade and commerce in sugar cane (which was), an essential commod- ity under the Central Act and Clause (7) of the Sugar Cane Control Order. The contention advanced on behalf of the U.P.

State was that under the proviso to Article 254(2), the power to repeal a law passed by the State Legislature was incidental to enacting a law relating to the same matter as is dealt with in the State legislation and that a statute which merely repeals a law passed by the State Legislature without enacting substantive provisions on the subject would not be within the proviso, as it could not have been the intention of the Constitution that on a topic within the concurrent sphere of the legislation, there should be a vaccum. The Court observed that there was considerable force in the said contention and there was much to be said for the view that a repeal simpliciter was not within the scope of the proviso. The Court however, stated that it was not necessary to give its decision on the said point as the petitioner in that case would fail on another ground. The Court then observed that while the proviso to Article 254(2) does confer on Parliament a power to repeal a law passed by the State Legislature, that power is, under the terms of the proviso, subject to certain limitations. It is limited to enacting a law with respect to the same matter adding to, amending, varying or repealing a “law so made by the State Legislature”. The law referred to here is the law mentioned in the body of Article 254(2). It is a law made by the State Legislature with reference to a matter in the Concurrent List containing provisions repugnant to an earlier law made by 652 Parliament and with the consent of the President. It is only such a law that could be altered, amended or repealed under the proviso. The impugned Act was not a law relating to any matter, which is the subject of an earlier legislation by Parliament. It was a substantive law covering a field not occupied by Parliament, and no question of its containing any provisions inconsistent with a law enacted by Parliament could therefore arise. To such a law, the proviso had no application and Section 16(1)(b) of Act X of 1955 and clause 7(1) of the Sugar Cane Control Order 1955 must, in this view, be held to be invalid. (Sic).

13. The aforesaid review of the authorities makes it clear that whenever repugnancy between the State and Central Legislation is alleged, what has to be first examined is whether the two legislations cover or relate to the same subject matter. The test for determining the same is the usual one, namely, to find out the dominant intention of the two legislations. If the dominant intention, i.e. the pith and substance of the two legislations is different, they cover different subject matters. If the subject matters covered by the legislations are thus different, then merely because the two legislations refer to some allied or cognate subjects they do not cover the same field. The legislation, to be on the same subject matter must further cover the entire field covered by the other. A provision in one legis- lation to give effect to its dominant purpose may inciden- tally be on the same subject as covered by the provision of the other legislation. But such partial coverage of the same area in a different context and to achieve a different purpose does not bring about the repugnancy which is intend- ed to be covered by Article 254(2). Both the legislations must be substantially on the same subject to attract the Article.

14. In this view of the matter I am of the view that there is no repugnancy in the provisions of Sections 14 and 20 of the Karnataka Act and Sections 74 and 80 of the MV Act 1988. The petitions must therefore fail and are hereby dismissed with costs.

ORDER

15. In view of the decision of the majority the Writ Petitions stand dismissed and the rule in each is discharged with costs.

K. RAMASWAMY, J. 1. Despite my deep respect to my learned brother, I express my inability to persuade myself to agree with the result proposed in the draft judgments of my brothers.

653 The notoriety of open and uninhibited misuse of contract carriage as stage carriages in picking up and setting down the passengers en route the route for hire or reward sabo- taging the economic, efficient and co-ordinated transport service by the respective State Transport Undertakings (for short, “the S.T.U.”) had been taken cognizance of by the Karnataka State Legislature. It provided the remedy making the Karnataka Contract Carriages (Acquisition) Act (21 of 1976), for short, “the Acquisition Act” by taking aid of the Entry 42, List III (Concurrent List) of the Seventh Schedule to the Constitution and Articles 31, 39(b) and (c) of the Constitution. It was reserved for consideration and has received the assent of the President on March 11, 1976. It came into force with effect from March 12, 1976. Section 3(g) of the Acquisition Act defines “Contract Carriage” as one covered under s. 2(4) of the Motor Vehicles Act (4 of 1939), for short, “the Repealed Act” including public serv- ice vehicle defined under s. 63(6), etc. s. 3(a) defines “acquired property”–means the vehicles and other immovable and movable property vesting in the State Government under s. 4 thereof. The Acquisition Act excluded tourist vehicles, motor cabs, etc. Section 4 declares that on and from the notified date, every contract carriage along with permit or certificate of registration or both, lands, buildings, workshop, etc. shall stand vested in the State Government free from encumbrances. Section 6 provides machinery to determine the amount for the vesting of the acquired proper- ty under s. 4. Section 14 which is relevant for the purpose of this case read thus:

“Fresh permit or renewal of the existing permit barred- Except as otherwise provided in this Act– (1) No person shall on or after the commencement of this Act apply for any permit or fresh permit or for renewal of an existing permit for the running of any contract carriage in the State; and (2) every application for the grant of a permit or fresh permit or for the renewal of the existing permit and all appeals or revisions arising therefrom relating thereto made or preferred before the commencement of this Act and pending in any Court or with any Officer, Authority or Tribunal constituted under the Motor Vehicles Act shall abate.” A reading thereof manifests its unequivocal declaration that on and 654 from the date of vesting viz., March 12, 1976, the statute prohibits any person to apply for, any fresh permit or renewal of an existing permit to run any contract carriage in that State and all applications, appeals or revisions pending before the appropriate authority as on the notified date, statutorily declared to have been abated. Section 20 declares by employing non-obstenti clause in sub-s. (1) that notwithstanding anything in the repealed Act with effect from March 12, 1976 all contract carriage permits granted or renewed in respect of any vehicle other than a vehicle acquired under the Acquisition Act, or belonging to the S.T.U., Karnataka; or referred to in s. 24 thereof shall stand canceled. Sub-s. (2) accords with mandatory language that the S.T.U. “shall be entitled for or renewal of con- tract carriage permits to the exclusion of all other per- sons” and sub-s. (3) prohibits by employing a negative language that “no officer or authority shall invite any application or entertain any such application of persons other than the Corporation (S.T.U.) for grant of permit or the running of the contract carriage.” By conjoint operation of ss. 14 and 20, the right of any person other than S.T.U., Karnataka to apply for and to obtain any permit or renewal of an existing permit to run a motor vehicle as a contract carriage has been frozen and issued statutory injunction restraining the authority concerned from either inviting or entertaining any application from him for the grant or renewal of contract carriage permit. Monopoly to obtain permit or renewal to run contract carriage was conferred on S.T.U., Karnataka. The constitutional validity of the Acqui- sition Act was upheld by this Court in State of Karnataka v.

Ranganatha Reddy, [1978] 1 SCR 64 1. The contention that the Acquisition Act fails under Entry 42 of List I of Seventh Schedule to the Constitution, viz., inter-state trade and commerce and that therefore the State Legislature lacked competence to make the Acquisition Act was negatived. It was held that in pith and substance, it is an act of acquisition of the contract carriages falling in Entry 42 of List III.

It was further held that the effect of operation of ss. 14 and 20 is incidental or ancillary to the acquisition. Having received the assent of the President, it is saved by Art.

254(2) of the Constitution. When an attempt to obtain renew- al or fresh special permits to run contract carriages taking aid of s. 62(1) or s. 63(6) respectively of the repealed Act 4 of 1939 was made on the ground that the Acquisition Act had saved their operation, this Court in Secretary, R.T.A., Bangalore v. P.D. Sharma, [1988] INSC 366; AIR 1989 SC 509 held that by operation of ss. 14 and 20(3), a public service vehicle be it a contract carriage or stage carriage for which temporary permits under ss. 62(1) and 63(6) were issued and were in force on January 30, 1976 are not entitled to fresh permits and exclusive monopoly to run contract carriages was given to S.T.U., Karnataka.

655

2. The Motor Vehicles Act, 1988 (Act 59 of 1988), for short, “the Act”, came into force with effect from July 1, 1989. Section 2(7) defines ‘contract carriage’. Section 2(8) defines ‘motor vehicle’ or ‘vehicle’ to mean any mechanical- ly propelled vehicle adapted for use upon road whether the power of propulsion is transmitted thereto from an external or internal source and includes a chasis to which a body has not been attached and a trailer ….. Section 2(34) de- fines ‘public place’ to mean, a road, street, way or other place whether a thoroughfare or not, to which the public have a right of access and includes any place or stand at which passengers are picked up or set down by a stage car- riage. Section 2(35) defines ‘public service vehicle’ to mean, any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a ….. , contract carriage and stage carriage. Section 2(47) defines ‘transport vehicle’ to mean, a public service vehicle ….. , or a private service vehicle. Chapter V deals with Control of Transport Vehicles, s. 66 mandates an owner of a motor vehicle to obtain permit to run it in accordance with the conditions of a permit thus:

“(1) No owner of a motor vehicle shall use or permit the use of the vehicle as a transport vehicle in any public place whether or not such vehicle is actually carrying any passen- gers or goods save in accordance with the conditions of a permit granted or countersigned by a Regional Transport Authority or any prescribed authority authorising him the use of the vehicle in that place in the manner in which the vehicle is being used.” (Emphasis supplied) (The provisos are not necessary for the purpose of this case. Hence omitted) Section 73 requires him to make an application for permit of a contract carriage with particulars specified therein.

Section 74 deals with grant of contract carriage permit.

Sub-s. (1) thereof provides that “subject to provisions of sub-s. (3), a Regional Transport Authority may, on an appli- cation made to it under s. 73, grant a contract carriage permit in accordance with the application or with such modifications as it deems fit or refuse to grant such a permit, provided that no such permit shall be granted in respect of any area not specified in the application.” Sub- s. (2) empowers the Regional Transport Authority to impose any one or more conditions enumerated therein to be attached to the permit, the details thereof are redundant. Sub-s. (3) empowers a State 656 Government, when directed by the Central Government, to limit the number of contract carriages generally or a speci- fied type as may be fixed in the notification published in this behalf for their operation on the city routes. The details are also not necessary for the purpose of this case.

Under s. 80(1), an application for a permit of any kind may be made at any time. Sub-s. (2) posits that “a Regional Transport Authority shah not ordinarily refuse to grant an application for permit of any kind made at any time under this Act.” (Emphasis Supplied). The proviso are omitted as not being relevant. The petitioners have applied under ss.

73, 74 and 80 of the Act for grant of contract carriage permits. Placing reliance on ss. 14 and 20 of the Acquisi- tion Act, the concerned authorities have refused to enter- tain their applications. Calling them in question the above writ petitions have been filed under Art. 32 of the Consti- tution.

3. The contention of Sri Nariman, learned senior counsel for the petitioners, is that the object of the Act is to liberalise grant of contract carriages which do not ply on any particular routes. Contract carriage defined under s.

2(7) of the Act is a public service vehicle within the meaning of s. 2(35) of the Act. Section 66 obligates the owner to obtain permits to run contract carriages. Section 14(1) read with s. 80(1) accords the right to the petition- ers to apply for, and enjoins the authorities under s. 80(2) to consider and to grant permits to run public service vehicles as contract carriages. Section 217(1) repealed all the laws, save such of the laws which are not inconsistent with the provisions of the Act. The operation of ss. 14 and 20 of the Acquisition Act is inconsistent with ss. 74 and 80 of the Act. Grant of permit to run contract carriage is covered by Entry 35 of List III of the Seventh Schedule.

Though, the Acquisition Act was made under Entry 42 of List III and has received the assent of the President, by opera- tion of s. 74 read with s. 80 and s. 2 17, the operation of ss. 14 and 20 became void under proviso to Art. 254(2).

Sections 14 and 20 also stood repealed by implication. The authorities are, hereby, enjoined to consider the petition- ers’ applications for grant of contract carriage permits as per the provisions of the Act and the relevant rules. Mr.

Sanghi, learned senior counsel for the S.T.U., Karnataka, contended that the Acquisition Act was made in exercise of the power under Entry 42 of List III of Seventh Schedule to the Constitution. Its constitutional validity was upheld by this Court. It does not occupy the same field as under the Act. The Acquisition Act, having been reserved for consider- ation under Art. 254(2) and has received the assent of the President, it prevails over the Act in the State of Karnata- ka. The Acquisition Act is a “special law” in juxtaposition to the general law under the 657 Act. The argument of Mr. Sanghi, though apparently at first blush is alluring and attractive, but on a deeper probe, I find insurmountable difficulties in his way to give accept- ance to them. The main questions are whether ss. 14 and 20 of the Acquisition Act and ss. 73, 74 and 80 of the Act is “in respect of the same matter” and whether the Act evinces its intention to occupy the same field.

4. At the cost of repetition, it may be stated that ss.

49 to 51 and the relevant rules under the Repealed Act govern the grant of contract carriage permits and in partic- ular the rigour imposed in s. 50 thereof is absent in the Act. The Acquisition Act aimed to acquire the contract carriages. They stood vested in the State Government under s. 4. Incidental and ancillary thereto, the operation of the existing permits or seeking renewal thereof and the pendency of the proceedings in that regard either by way of an appli- cation or in appeal or in revision, having statutorily been declared under s. 14(2) to have been abated, the right to obtain permits or special permits afresh or renewal thereof to run contract carriages or stage carriages after expiry of the term, has been frozen to all citizens. Exclusive monopo- ly to obtain permits or of the renewal to run them has been given to the S.T.U., Karnataka. On and from March 12, 1976, s. 20(3) prohibits the authorities concerned to invite or entertain an application or to grant or renew the permits to a contract carriage or special permit, except to the S.T.U., Karnataka. The non-obstenti clause makes clear any cloud of doubts of the applicability of the repealed Act 4 of 1939.

After the receipt of the assent of the President, though it is inconsistent with the Repealed Act, its operation is saved by Art. 254(2) of the Constitution. Sections 73 and 74 read with s. 80 of the Act gives to an applicant the right to apply for and to obtain, and obligates the Regional Transport Authority to grant permit to run any public serv- ice vehicle as contract carriage throughout the country including the State of Karnataka. Though, s. 80(1) gives discretionary power to grant permit but sub-s. (2) of s. 80 manifests that refusal to grant contract carriage permits appears to be an exception for stated grounds and obviously for reasons to be recorded.

4A. Constitutionalism is the alter to test on its anvil the constitutionality of a statute and Art. 254 is the sole fountain source concerning a State law in the Concurrent List. Article 254(1) deals with inconsistency of law made by Parliament and the law made by the Legislature of a State.

Clause (1) adumbrates that the existing law, if it is repug- nant with the law made by the Parliament, subject to the provisions of cl. (2), the law made by the Parliament wheth- er passed before or after the law made by the Legislature of such state, or, as the case 658 may be, the existing law shall prevail and the law made by the Legislature of the State shall, to the extent of repug- nancy, be void. Clause (2) deals with the law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by the Parliament or an existing one “with respect to that matter”, then the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the Presi- dent and has received his assent, prevails in that State;

provided that nothing in this clause shall prevent Parlia- ment from enacting “at any time any law with respect to the same matter’ ‘, including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.

(Emphasis supplied)

5. In a federal system like ours, there are two streams of law, viz., Union and State. At times, the citizen sub- jected to both of laws Central and State will find incon- sistency between the obligations imposed on him by those laws or finds variance to avail both laws. In fact, both the Union and State Legislatures are competent to make laws on a subject enumerated in the Concurrent List. We are not con- cerned in this case with regard to Union List or State List.

it is quite possible that while legislating upon the sub- ject, they might end up in handing down inconsistent law and the observance of one law may result is non-observance of the other. The citizen will, in such a situation, be at a loss to decide which of the two laws he should follow. To resolve the inconsistency, in other words, to bring about operational uniformity Constitution presses into Service Art. 254. Its forerunner is s. 107 of the Government of India Act, 1935. Both the Parliament and a State Legislature derive their power only under Art. 254 and Art. 246(2) to legislate concurrently on the subjects enumerated in the Concurrent List. The enumeration of the subjects in the Concurrent List is only for demarcation of legislative heads or distribution of the subject/subjects over which the Parliament and the State Legislature have competence to make law. However, paramouncy has been accorded to the Union Law, making provision in Art. 254 firstly as to what would happen in case of repugnancy between the Central and the State law in the concurrent field and secondly resolving such a con- flict. The reason is that there are certain matters which cannot be allocated exclusively either to the Parliament or to a State Legislature and for which, though often it is desirable that the State Legislature should make a provision in that regard. Local conditions necessarily vary from State to State and the State Legislature ought to have the power to adopt general legislation to meet the particular circum- stances of a State. It is equally necessary that the 659 Parliament should also have plenary jurisdiction to enable it in some cases to secure uniformity in the main principles of law throughout the country or in other matters to guide and encourage the States’ efforts and to provide remedies for mischiefs arising in the State sphere extending or liable to extent beyond the boundaries of a single State.

The subjects like the Indian Penal Code, Civil Procedure Code, Criminal Procedure Code, Labour Laws, the Motor Vehi- cles Act, etc. occupy this area. The essential condition for the application of Art. 254(1) is that the existing law or a law made by the Parliament subsequent to State law, must be with respect to one of the matters enumerated in the Concur- rent List. In other words, unless it is shown that the repugnancy is between the provisions of a State law and an existing or subsequent law or amended law etc. of the Par- liament in respect of the same specified matter, Art. 254 would be inapplicable,

6. The Court has to examine in each case whether both the legislations or the relevant provisions therein occupy the same field with respect to one of the matters enumerated in the Concurrent List and whether there exists repugnance between the two laws. The emphasis laid by Art. 254 is “with respect to that matter”. Clause (1) of Art. 254 posits as a rule that in case of repugnancy or inconsistency between the State law and the Union law relating to the same matter in the Concurrent List occupying the same field, the Union law shall prevail and the State law will fail to the extent of the repugnancy or inconsistency whether the Union law is prior or later in point of time to the State law. To this general rule, an exception has been engrafted in cl. (2) thereof, viz., provided the State law is reserved for con- sideration of the President and it has received his assent, and then it will prevail in that State notwithstanding its repugnancy or inconsistency with the Union law. This excep- tion again is to be read subject to the proviso to cl. (2) thereof, which empowers the Parliament to make law afresh or repeal or amend, modify or vary the repugnant State law which will become void even though it received President’s assent. In short, cl. (1) lays down a general rule; cl. (2) is an exception to cl. (1) and proviso qualifies that excep- tion. The premise is that the law made by the Parliament is paramount and Union and State law must relate to the same subject matter in the Concurrent List. It is, thus, made clear that the Parliament can always, whether prior or subsequent to State law, make a law occupied by the State law. An absurd or an incongruous or irreconcilable result would emerge if two inconsistent laws or particular provi- sions in a statute, each of equal validity, could coexist and operate in the same territory.

660

7. Repugnancy between the two pieces of legislation, generally speaking, means that conflicting results are produced when both laws are applied to the same set of facts. Repugnancy arises when the provisions of both laws are fully inconsistent or are absolutely irreconcilable and that it is impossible to obey without disobeying the other.

Repugnancy would arise when conflicting results are produced when both the statutes covering the same field are applied to a given set of facts. The Court should, therefore, make every attempt to reconcile the provisions of the apparently conflicting enactments, and would give harmoneous construc- tion. There is no repugnancy unless the two Acts or provi- sions are wholly incompatible with each other or the two would lead to absurd result. The purpose of determining the inconsistency is to ascertain the intention of the Parlia- ment which would be gathered from a consideration of the entire field occupied by the State Legislature. The proper test is whether the effect can be given to the provisions of both the laws or whether both the laws can stand together.

There is no repugnaney if these two enactments relate to different fields or different aspects operating in the same subject. In my considered views, Art. 254 was engrafted in the Constitution by the rounding fathers to obviate such an absurd situation. The reason is obvious that there is no provision in the Constitution that the law made by the Parliament is to be void by reason of its inconsistency with the law made by the Legislature of a State. It may be dif- ferent if the State law is only to supplement the law made by the Parliament. If both the laws without trenching upon another’s field or colliding with each other harmoneously operate, the question of repugnancy does not arise. It is also axiomatic that if no law made by Parliament occupies the field, the State Legislature is always free to make law on any subject/subjects in the Concurrent List III of the Seventh Schedule of the Constitution.

8. It is seen that the Acquisition Act was made in exercise of the power under Entry 42 of the Concurrent List and ss. 14 and 20 thereof are integral part of the Acquisi- tion Act. Undoubtedly, they are consequential or ancillary to s. 4 thereof. It had received the assent of the Presi- dent. But after the Act was brought on statute, the question emerges whether there exists no repugnancy between ss. 14(1) and 20(3) of the Acquisition Act in juxtaposition to ss.

66(1), 73, 74 and 80 of the Act. Before embarking upon an enquiry into the results produced by these provisions in the light of above discussion, let us consider the relevant decisions and the ratio laid down therein in this context.

661 Occupied Field:

1n Tika Ramji v. State of U.P., [1956] INSC 30; [1956] SCR 393. Bhag- wati, J. speaking for the Constitution Bench, applied three tests propounded by Nicholas in his Australian Constitution, Second Edition, page 303, to find the inconsistency or repugnancy thus. (1) There may be inconsistency in the actual terms of competing statutes; (2) Though there may be no direct conflict, a State law may be inoperative because the Commonwealth law, or the award of the Commonwealth Court, is intended to be a complete and` exhaustive Code;

and (3) Even in the absence of intention, a conflict may arise when both State and Commonwealth seek to exercise their power over the same subject matter. (Emphasis sup- plied). The repugnancy between the two statutes should exist in fact and not depend merely on a possibility. In that case, the question was whether the U.P. Sugarcane (Regula- tion of Supply and Purchase) Act (Act 24 of 1953) is ultra vires of the U.P. Legislature in view of Art. 246 read with Entry 52 of List I and Item 33 of List III of Seventh Sched- ule to the Constitution. In that context, it was held that if both the Central Legislature and the Provincial Legisla- tures were entitled to legislature in regard to this subject of production, supply and distribution of sugarcane, there would arise no question of legislative competence of the Provincial Legislature in the matter of having enacted the impugned Act. Repugnancy falls to be considered when the law made by the Parliament and the law made by the Legislature occupy the same field, because if both these pieces of legislation deal with separate and distinct matters, though of a cognate and allied character, repugnancy does not arise. (Emphasis supplied) So far as our Constitution is concerned, repugnancy is dealt with in Art. 254. On a com- parison of various provisions of the State and Central laws, it was held that there was no question of any inconsistency in the actual terms of the Act enacted by the Parliament and the impugned Act and they did not occupy the same field.

In A.S. Krishna v. Madras State, [1956] INSC 76; [1957] SCR 399, the question was whether s. 4(2) of the Madras Prohibition Act which lays down a presumptive evidence is repugnant to the Central legislation, viz., Criminal Procedure Code. Dealing with s. 107 of the Government of India Act, 1935 which is in pari material to Art. 254 read with Schedule VII, List II, Items 2 and 31 and List III, Items 2 and 5 of Schedule VII to the Constitution, Venkatarama Ayyar, J. speaking for the Constitution Bench, held that for applying s. 107 of the Government of India Act 1935, two conditions must be ful- filled–the provisions of the provincial law and those of the Central legislation must both be in 662 respect of a matter which is enumerated in the Concurrent List; and they must be repugnant to each other. It is only when both these requirements are satisfied that the provi- sional law will to the extent of repugnancy becomes void.

Section 4(2) of the Prohibition Act was held to be void.

In Prem Nath Kaul v. State of J & K, [1959] 2 Supp. SCR 273, another Constitution Bench held that the essential condition for application of Art. 254(1) is that the exist- ing law must be with respect to one of the matters enumerat- ed in the Concurrent List; in other words, unless it is shown that the repugnancy is between the provisions of a subsequent law and those of an existing law in respect of the specified matters, the Article would be inapplicable. In Bar Council of U.P.v. State of U.P.[1972] INSC 290; , [1973] 2 SCR 1073 the question arose was whether the State Government is empowered to impose stamp duty on the certificate of enrollment under s. 22 of the Advocates Act. In considering schedule VII, List I, Entries 77, 78 and 96; List II, Entry 63 and List III, Entries 44 and 26 and the relevant provisions of the Stamp Act and its Schedules, this Court held that the ques- tion of repugnancy can only arise in respect of matters where both the parliament and the State Legislature have competence to pass laws. In other words, when the Legisla- tive power is located in the Concurrent List, the question of repugnancy arises. In Deep Chand v. State of U.P., [1959] Supp. 2 SCR 8 relied on by Sri Nariman, the Uttar Pradesh legislature made U.P. Transport Service (Development) Act, which had received the assent of the President, introduced a scheme of nationalisation of the transport service. Subse- quently, Parliament has amended Act IV of 1939 through Amendment Act 100 of 1956. By reason thereof, it was con- tended that the U.P. Amendment Act became void by reason of Art. 254 of the Constitution. The matter was examined by the Constitution Bench of this Court. Subba Rao, J. (as he then was) per majority, while considering the question, laid three propositions to determine the repugnancy thus: (1) Whether there is direct repugnancy between the two provi- sions; (2) Whether Parliament intended to lay down an ex- haustive code in respect of the subject matter replacing the Act of the State Legislature; and (3) Whether the law made by the Parliament and the law made by the State Legislature occupy the same field. After examining in detail the provi- sions of the respective Acts, it was held that after the Central Amendment Act 100 of 1956, it prevailed over the U.P. Act and prospectively became void as the Central Amend- ment Act occupied the same field in respect of the same schemes initiated under the U.P. Amendment Act and to that extent the State Act must yield its place to the Central Act.

663 In State of Orissa v.M.A. Tulloch & Co., [1963] INSC 170; [1964] 4 SCR 461 another Constitution Bench of this Court held that the inconsistency may be demonstrated not by a detailed compari- son of provisions of the two statutes but by the mere exist- ence of the two pieces of legislation. Meeting the argument as to on which Entry in the list the subject falls, it was held thus:

“If by reason of the declaration by Parliament the entire subject matter of ‘conversation and development of minerals’ has been taken over for being dealt with by Parliament, thus depriving the State of the power which it therefore pos- sessed, it would follow that the ‘matter’ in the State List is, to the extent of the declaration, (substracted from the scope of the declaration) and ambit of Entry 23 of the State List. There would, therefore after the Central Act 67 of 1957, be no matter in the List to which the fee could be related in order to render it valid.” It was accordingly held that the Orissa Mining Areas Devel- opment Fund Act (27 of’ 1952) to be void. Of course, this was in considering the question under Article 246, Entry 54 of List I, and Entry 23 of List 11.

In State of Assam v. Horizon Union, [1966] INSC 184; [1967] 1 SCR 484 the facts are that under the Industrial Disputes Act 1947, Section 7-A(3)(a) provided that the appropriate Government may by notification constitute an Industrial Tribunal con- sisting of one person to be appointed by the appropriate Government. The person shall not be qualified for appoint- ment as presiding officer of the Tribunal unless he is or has been a Judge of a High Court or he has held the office of Chairman or any other member of the Labour Appellate Tribunal constituted under the Industrial Disputes (Appel- late Tribunal) Act, 1950, or of any Tribunal, for a period of not less than two years. Assam Act 8 of 1962 made an amendment to the above procedure and had received the assent of the President, introducing clause (aa) to sub-section (3)(a) of Section 7-A thus:

“He has worked as a District Judge or as an Additional District Judge or as both for a total period of not less than three years or is qualified for appointment as a Judge of a High Court; provided that the appointment to a Tribunal of any person qualified under this clause shall not be made without consultation with the Assam High Court.” 664 In 1964, the Parliament made an amendment viz. Industri- al Disputes (Amendment) Act (36 of 1964) amending Section 7-A(3)(a) stating that “he has, for a period of not less than three years, been a District Judge or an Additional District Judge.” The contention raised was that the Assam Act became void by reason of the subsequent Amendment Act of 1964. Both the Parliament and the State Legislature have exercised their power under the Concurrent List of VII Schedule. Another Constitution Bench of this Court has held that the Central Amendment Act 36 of 1964 intended to be an exhaustive code in respect of the subject matter and occu- pies the same field. Therefore, the Assam Act 8 of 1962 was repugnant to the Central Amendment Act 36 of 1964 as it does not require the consultation with the High Court for the appointment of an Industrial Tribunal. Accordingly, it was held to be void.

In State ofJ & K v.M.S. Farooqi[1972] INSC 85; , [1972] 3 SCR 881 the facts were that the respondent was a member of the Indian Police Service governed by the All India Services Act, 1951 and the All India Services (Discipline and Appeal) Rules, 1955. They provided an exhaustive procedure to enquire into the misconduct by a member of the All India Services. The State Legislature, exercising the concurrent power, made Jammu and Kashmir Government Servants’ Prevention of Corrup- tion (Commission) Act, 1962. The validity thereof was ques- tioned on the anvil of Article 254 of the Constitution.

Dealing with the subject, another Constitution Bench, speak- ing through Sikri, C.J. held that the Commission Act empow- ers to conduct on enquiry into the charges of corruption and misconduct against all Government Servants including the members of All India Services. In addition to the recommen- dation for imposition of punishment engrafted in sub-section (2) of Section 17 of the Commission Act, it also disquali- fies for any public office to a specified period and also recommendation for prosecution for an offence in a Court of law. These details were not dealt with under the Central Act and the Rules. From this conspectus, this Court further held thus:

“It seems to us that in so far as the Commission Act deals with the infliction of disciplinary punishments it is repug- nant to Discipline and Appeal Rules. Parliament has occupied the field and given clear indication that this was the only manner in which any disciplinary action should be taken against the members of the All India Services 665 Accordingly it was held that the State Act must be read down so as to leave the members of the All India Services outside its purview. Thereby, by implication it was held that by operation of Article 254 of the Constitution the Commission Act is repugnant to the All India Services Act and Rules.

In Kerala State Electricity Board v. Indian Aluminium Co., [1976] 1 SCR 552 another Constitution Bench of this Court held that:

“Having discussed the question of the legislative field it might be necessary to discuss the question as to what hap- pens if it should be held that the matter under considera- tion in these cases falls within the concurrent list, that is, Entry 38 in List III as contended in the alternative by some of the respondents. As already mentioned the question will arise only if it should be held that the Kerala State Act falls under Entry 38 as contended by Mr. B. Sen. If the impugned legislation falls under List III then the question of repugnancy of that legislation with the existing law or the law made by Parliament as the case may be, will have to be considered.” In Basu’s Commentary on the Constitution of India (Silver Jubilee Edition), Volume K, at page 144, it is stated that “the repugnancy to be found is the repugnancy in the actual provisions of two laws and not the subject matter of the two laws. The proper test is whether effect can be given to the provisions of both the laws or whether both the laws can stand together.” (Emphasis added). It is trite law that the form of the provision does not conclude the matter.

It must be the “same matter” under consideration.

Operational Incompatibility:

9. Repugnancy could also be angulated from the perspec- tive of operational incompatibility as well. The celebrated decision in Clyde Engineering Co. v. Cowburn, [1926] 37 CLR 466 popularly known as 44-hour case, is a leading authority on this topic. The facts therein are that a Commonwealth Arbitration award fixed rates of pay and overtime on the basis of 48-hour working week while Forthfour Hours Week Act 1925 (NSW) S. 6 purported to deal with the same matter on the basis of 44-hours working week. The respondent employee claimed the State Act rate of pay but was denied on the basis of 48-hours working week. When questioned, it was argued that there was no 666 inconsistency between the award and the State Act because the employer, it was said, could obey both laws by observing the 44-hours working week but on the basis that the pay scale determined by the award applied to the 44-hours work- ing week. The High Court of Australia relying on s. 109 of Australian Constitution rejected the argument and found that an inconsistency existed, as the State law operated to vary the adjustment of industrial relations established by the Commonwealth award. Knox, C.J. held that two enactments may be inconsistent although obedience to each of them may be possible without disobeying the other. Statute may do more than impose duties; they may for instance confer rights; and one statute is inconsistent with another when it takes away a right conferred by the other even though the right may be one which might be waived or abandoned without disobeying the statute which conferred it. Issacc, J. in his separate but concurrent judgment held:

“The vital question would be: was the second Act in its true construction intended to cover the whole ground, and there- fore, to supersede the first? If it was intended, then the inconsistency would consist in giving operative effect at all to the first Act; because the second was intended en- tirely to exclude it. The suggested test however useful a working guide it may be in some cases prove a test; cannot be recognised as the standard measuring rod of inconsisten- cy. If, however, a competent legislature expressly or im- pliedly evinces its intention to cover the whole field, that is a conclusive test of inconsistency where another legisla- ture assumes to enter to any extent upon the same field ……

If such a position as I have postulated be in fact estab- lished the inconsistency is demonstrated not by comparison of detailed provisions but by the existence of the two sets of provisions; where that wholesale inconsistency does not occur but the field in partly open, then it is necessary to enquire further and possibly to examine and contrast partic- ular provisions. If one enactment makes or acts upon as lawful that which the other makes unlawful or if one enact- ment makes unlawful that which the other makes or acts upon as lawful, the two or to that extent inconsistent. It is plain that it may be quite possible to obey both simply by not doing what is declared by either to be unlawful and yet there is palpably inconsistency. The basic reason is that the 667 Constitution clearly intended that once the Commonwealth settled an interstate dispute, that settlement shall stand and that its terms should be framed by the one hand, the other being necessarily excluded. Forty-four hours shall constitute a week’s work. No day’s work to exceed either hours without payment for overtime, etc.” Higgins, J. has held that:

“When is a law inconsistent with another law? Etimologically I presume that things are inconsistent when they cannot stand together at the same time and law is inconsistent with another when the command or power or provision in one law conflicts directly with the command, power or other provi- sion of another. Where two legislations operate over the same territory and came into collision, it is necessary that one should prevail, but the necessity is confined to actual collision as one legislature says ‘do’ and the other says ‘do not’.

(Emphasis supplied) In that case it was held that there is operational incompat- ibility between the Commonwealth award and the State law.

The State law was held to be void.

In Hume v. Palmer, [1926] HCA 50; [1926] 38 CLR 441 both New South Wales Act and Commonwealth Act authorised making of the Regulations dealing with collisions at sea. In both cases regulations had been made. They were in identical terms except that in relation to the jurisdiction to convict for breaches. The New South Wales regulations prescribed summary prosecution and a maximum penalty of Pound 50 whereas the Commonwealth regulations prescribed summary prosecution on indictment and a maximum penalty Pound 100. It was held that the same facts produced different legal results under the two Acts, the penalty under State law was held displaced.

In R.v. Brisbane Licensing Court[1920] HCA 24; , [1920] 28 CLR 23 a section of the Commonwealth Electoral Act provided that on a polling day fixed for a federal election, a referandum or vote of the electors of a State or part thereof, should not be taken. A local option poll had been taken on such a day under Queensland legislation. It was held that a direct inconsistency existed, and that the local option poll was, therefore, declared to be invalid. In Colvin v. Bradley Bros. Pvt. Ltd., [1943] 68 668 CLR 151 an order made pursuant to a section of New South Wales Factories and Shops Act prohibiting the employment of women on a milling machine. An award had been made by the Commonwealth Arbitration Court under the Conciliation and Arbitration Act which permitted the employment of females on work, which included work on a milling machine, unless the work was declared to be unsuitable for women by a Board of Reference. No such declaration had been made by the Board.

it was held that the order was inconsistent with the award by virtue of s. 109 in that it directly prohibited something which the Commonwealth award permitted.

In In Re Ex Parte Maclean, [1930] HCA 12; [1930] 43 CLR 472 at 483. Dixon J. held:

“When the Parliament of the Commonwealth and the Parliament of a State each legislate upon the same subject and pre- scribe what the rule of conduct should be, they make laws which are inconsistent notwithstanding that the rule of conduct is identical, which each prescribes, and s. 109 applies.” It was further held that the Federal statute had evinced an intention to cover the subject matter and provide what the law upon it should be.

In Wenn v. Attorney General (Victoria), [1948] HCA 13; [1948] 77 CLR 84 the Re-establishment and Employment Act dealt with the obligations of employers’ to give preference to ex-service- men in employment (but included no provision as to the duty to give preference in promotion to ex-servicemen already employed). The State Act dealt not only with the same mat- ter, but also included a provision requiring employers to give preference in promotion. It was held that Commonwealth Legislation was an exhaustive code allowing no room for the operation of the State legislation relating to matter not covered by the Commonwealth Act. The Victorian Law giving preference in promotion was, therefore, held to have been displaced.

In O’Sullivan v. Noarlunga Meat Co. Ltd., [1954] HCA 29; [1954] 92 CLR 565 the facts are that the South Australian Act prohibited laughter of stock for export without a State licence while the Commonwealth Act prohibited export of meat from stock which had not been slaughtered on premises registered under the regulations thereof. In an evenly divided Court, the opinion of the Chief Justice had prevailed, it was held that the Commonwealth regulations were detailed enough to show that 669 they covered the whole field of ‘slaughter for export’ and, therefore, the State licensing requirement did not apply. On further appeal the Judicial Committee in O. Sullivan v.

Noarlunga Meat Co. Ltd., [1957] AC 1 at 28 added that “in applying this principle it is important to bear in mind that the relevant field or subject is that covered by the law said to be invalid.” In Australian Federal Constitutional Law by Collin Howard, Second Edition (1972). at page 27, it was stated that where both a Commonwealth Law and a State law are in terms applicable to a given set of facts, and they produce conflicting legal results on those facts, the Commonwealth law applies and not the State law. In Blackley v. Devondale Cream (Vie.) Pvt. Ltd., [1968] HCA 2; [1968] 117 CLR 253, a State wages determination prescribed a minimum rate of pay for certain work which was also covered by a Commonwealth award. The Commonwealth award prescribed a lower minimum rate. It was held that there was a direct inconsistence because on the same facts the two laws produced different entitlements. The award rate, therefore, prevailed over the State’s determina- tion.

10. REPEAL BY IMPLICATION:

Sub-s. (1) of s. 217 of the Act repeals thus:

“The Motor Vehicles Act, 1939, and any law corresponding to that Act in force in any State immediately before the com- mencement of this Act (hereafter in this section referred to as the repeal enactments) are hereby repealed.” (The other sub-sections are not relevant. Hence omitted. ) (Emphasis supplied) Thereby s.217(1) does not expressly repeal sections 14(1) and 20(3) of the Acquisition Act. In Zaveribhai v. State of Bombay, [1955] 1 SCR 799 relied on by Sri Nariman, the facts were that s. 7 of the Essential Supplies (Temporary Powers) Act, 1949 provides penalty for contravention of orders issued under s. 3 for a term of three years or with fine or with both. The Bombay Legislature amended the Act, by Act 52 of 1950. Section 2 of the Amendment Act provides that ‘- notwithstanding anything contained in Essential Supplies (Temporary Powers) Act, 1946, whoever contravenes an order made under Sec. 3 of the Essential Supplies (Temporary Powers) Act, shall be punishable with imprisonment for a term which may extend to seven years but shall not, 670 except for reasons to be recorded in writing, be less than six months and shall also be liable to fine”. Thus, the Bombay Act imposes minimum sentence while indicating maximum sentence and obtained the assent of the President. Later, the Central Act was amended in 1948, 1949 and 1950. In 1950 Act, Sec. 7 categorised three groups of offences covering the same field and imposd graded sentences depending on the character of the offence and the nature of the commodity contravened. The Bombay Act was challenged on the ground that it was repugnant and was repealed by implication.

Venkatarama Iyer, J. speaking for the Constitution Bench held that repugnancy might result when both the legislations cover the same field. It was further held:

“The important thing to consider with reference to this provision is whether the legislation in ‘in respect of the same matter.’ If the later legislation deals not with the matters which formed the subject of the earlier legislation but with other and distinct matters though of a cognate and allied character, then Art. 254(2) will have no application.

The principle embodied in s. 107(2) and Art. 254(2) is that when there is legislation covering the same ground both by the Centre and by the Province, both of them being competent to enact the same, the law of the Centre should prevail over that of the State.” It was further held that though there is no express repeal, even then the State law will be void under the proviso if it conflicts with later law with respect to the same matter that may be enacted by the Parliament. The principle on which the rule of implied repeal rests, namely, that if the subject matter of later legislation is identical with that of the earlier, so that they cannot both stand together then the earlier is repealed by the later enactment, will be equally applicable to a question under Art. 254(2) where the further legislation by Parliament is in respect of the same matter as that of the State law. Accordingly, it was held that Sec. 2 of the Bombay Act, No. 36 of 1947 cannot prevail as against Sec. 7 of the Essential Supplies (Temporary Powers) Act as amended by Act 52 of 1950.

The doctrine of repugnancy and implied repeal was again considered by this Court in M. Karunanidhi v. Union of India, [1979] INSC 45; [1979] 3 SCR 254 where the Tamil Nadu Public Men (Criminal Misconduct) Act (2 of 1974) was assailed to be repugnant to the Indian Penal Code and the Prevention of Corruption Act 1947. In considering that question, Fazal Ali, J. speaking for the Constitution Bench held:

671 “… So far as the Concurrent List is concerned, both Par- liament and the State Legislatures are entitled to legislate in regard to any of the Entries appearing therein, but that is subject to the condition laid down by Art. 254(1).

Where the provisions of the Central Act and a State Act in the Concurrent List are fully inconsistent and are absolute- ly irreconciliable, the Central Act will prevail and the State Act will become void in view of the repugnancy.

Where, however, a law passed by the State comes into colli- sion with a law passed by Parliament on an Entry in the Concurrent List, the State Act shall prevail to the extent of the repugnancy and the provisions of the Central Act would become void provided the State Act has been passed in accordance with CI. (2) of Art. 254.

Where a law passed by the State Legislature the entries in the State List entrenches upon any of the entries in the Central List the consitutionality of the law may be upheld by invoking the doctrine on a subject covered by the Concur- rent List is inconsistent with and repugnant to a previous law made by the Parliament, then such a law can be protected by obtaining the assent of the President under Art. 254(2) of the Construction. The result of obtaining the assent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in their applicability to the State only. Such a state of affairs will exist only until Parliament may at any time make a law adding to, or amend- ing, varying or repealing the law made by the State Legisla- ture under the proviso to Article 254.” Dealing with the question of repeal by implication, it was held that there is no repeal by implication unless the inconsistency appears on the face of the two statutes that where two statutes occupy a particular field but there is a room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results and that where there is no inconsistency, a statute occupying the same field seeks to create distinct and separate offence, no question of repugnancy arises and both the statutes continue to operate in the same field. On a comparison of the relevant provisions of the ,impugned Act and the Central Acts, it was not repealed by implication.

672 In T. Barai v. Henry Ah Hoe, [1982] INSC 92; [1983] 1 SCR 905 relied on by. Sri Nariman, the facts are that for an offence under Sec. 16(1)(a) read with Sec. 7 of the Prevention of Food Adulteration Act, 1954, prescribed maximum punishment of six years. But the West Bengal Legislature amended the Central Act with effect from April 29, 1974 by the Prevention of Adulteration of Food, Drugs and Cosmatics (West Bengal) (Amendment) Act, 1973, providing punishment with imprison- ment for life and triable by a Court of Sessions. It had received the assent of the President. Later on the Parlia- ment amended the Section (Section 16(a) and also introduced Section 16-A in 1976 to the Prevention of Food Adulteration Act, 1954, imposing punishment of three years. Both the enactments have been made in exercise of the concurrent power. In considering the question whether the State Act became void, A.P. Sen J. speaking for three Judges’ Bench has held thus:

“There is no doubt or difficulty as to the law applicable.

Art. 254 of the Constitution makes provision firstly, as to what would happen in the case of conflict between a Central and State Law with regard to the subjects enumerated in the Concurrent List. and secondly, for resolving such conflict, Art. 254(1) enunciates the normal rule that in the event of a conflict between a Union and a State Law in the concurrent field, the former prevails over the latter. Clause (1) lays down that if a State law relating to a concurrent subject is ‘repugnant’ to a Union law relating to that subject, then, whether the Union law is prior or later in time, the Union law will prevail and the State law shall. to the extent of such repugnancy, be void. To the general rule laid down in Clause (1), Clause (2) engrafts an exception, viz., that if the President assents to a State law which has been reserved for his consideration, it will prevail notwithstanding its repugnancy to an earlier law of the Union, both laws dealing with a concurrent subject. In such a case, the Central Act will give way to the State Act only to the extent of incon- sistency between the two, and no more. in short, the result of obtaining the assent of the President to a State Act which is inconsistent with a previous Union law relating to a concurrent subject would be that the State Act will pre- vail in that State and override the provisions of the Cen- tral Act in their applicability to that State only. The predominance of the State law may, however, be taken away if Parliament legislate under the proviso to Clause (2). The proviso to Art. 254(2) empowers the Union Parliament to 673 repeal or amend a repugnant State law even though it has become valid by virtue of the President’s assent. Parliament may repeal or amend the repugnant State law, either direct- ly, or by itself enacting a law repugnant to the State law with respect to the ‘same matter’. Even though the subse- quent law made by Parliament does not expressly repeal a State law, even then, the State law will become void as soon as the subsequent law of Parliament creating repugnancy is made. A State law would be repugnant to the Union law when there is direct conflict between the two laws. Such repug- nancy may also arise where both laws operate in the same field and the two cannot possibly stand together, e.g. where both prescribe punishment for the same offence but the punishment differs in degree or kind or in the procedure prescribed, In all such cases, the law made by Parliament shall prevail over the State law under Art. 254(1). That being so, when Parliament stepped in and enacted the Central Amendment Act, it being a latter law made by Parliament ‘with respect to the same matter’, the West Bengal Amendment Act stood impliedly repealed.” In M/s Hoeshst Pharmaceuticals Ltd. v. State of Bihar, [1983] INSC 63; [1983] 3 SCR 130 the Bihar Finance Act, 1981 was made in exercise of the power under Entry 54 of List II of Seventh Schedule to the Constitution amending and repealing the previous Act providing therein to levy tax on sale or pur- chase of goods. Section 5(1) imposes levy of surcharge on every dealer whose gross turnover during an year exceeds Rupees Five lakhs, in addition to the tax payable by him at such rate not exceeding 10 per cent of the total amount of tax. Sub-s. (3) of s. (5) prohibits such dealer from col- lecting the amount of surcharge from the purchasers. The Essential Commodities Act made under Entry 33 of the Concur- rent List III empowering the Government to fix prices of the essential commodities including drugs, medicines, etc. It was contended that by operation of sub-s. (1) of s. 5, the State Act is repugnant and is void. In considering that question, A.P. Sen, J. speaking for three Judges’ Bench held that both the Union and the State Legislature have concur- rent powers of legislation with respect to any of the mat- ters enumerated in List 111, subject only to the proviso contained in el. (2) of Art. 254, i.e. provided the State Act do not conflict with those of any Central Act on the subject …. The question of repugnancy arises only when both legislatures are competent to legislature in the same field, i.e. when both Union and the State laws relate 674 to a specified subject in List III and occupy the same field. Yet another place it was held that it is only when both these requirements are fulfilled that the State law will, to the extent of repugnancy became void. Art. 254(1) has no application to the cases of repugnancy due to over- lapping found between List II on the one hand and Lists I and II on the other. If such overlapping exists in any particular case, State law will be ultra vires because of the non obstenti clause in Art. 246(1) read with opening words–“Subject to” Art. 246(3). In such cases, the State law will fail not because of repugnance in the Union List but due to want of legislative competence. Repugnancy arises where there is a direct conflict or collision between the Central Act and the State Legislation and to the extent of repugnancy by necessary implication or by express reference the State legislation stands repealed.”

11. It is true, as tightly contended by Mr. Sanghi, that ss. 14 and 20 are consequential or ancillary to s. 4 of the Acquisition Act 21 of 1976 which had received the assent of the President. Its constitutionality was upheld by seven Judges’ Bench of this Court, when the legislative competence was assailed on the anvil of Entry 42 of List I of the Seventh Schedule, but not on the touchstone of proviso to cl. (2) of Art. 254 which gives overriding power to the Parliament to make any law or amend, vary, modify or repeal the law made by a State Legislature. Ranganatha Reddy’s ratio, thereby, does not stand an impediment to go into the validity of ss. 14 and 20 of the Acquisition Act.

12. The result of the above discussion leads to the following conclusions:

(a) The doctrine of repugnancy or inconsistency under Art.

254 of the Constitution would arise only when the Act or provision/ provisions in an Act made by the Parliament and by a State Legislature on the same matter must relate to the Concurrent List III of Seventh Schedule to the Constitution;

must occupy the same field and must be repugnant to each other;

(b) In considering repugnance under Art. 254 the question of legislative competence of a State Legislature does not arise since the Parliament and the Legislature of a State have undoubted power and jurisdiction to make law on a subject, i.e. in respect of that matter. In other words, same matter enumerated in the Concurrent List has occupied the field.

(c) If both the pieces of legislation deal with separate and dis- 675 tinct matters though of cognate and allied character repug- nancy does not arise.

(d) It matters little whether the Act/Provision or Provi- sions in an Act falls under one or other entry or entries in the Concurrent List. The substance of the “same matter occupying the same field by both the pieces of the legisla- tion is material” and not the form. The words “that matter” connotes identity of “the matter” and not their proximity.

The circumstances or motive to make the Act/Provision or Provisions in both the pieces of legislation are irrelevant.

(e) The repugnancy to be found is the repugnancy of Act/ provision/Provisions of the two laws and not the predoninant object of the subject matter of the two laws.

(f) Repugnancy or inconsistency may arise in diverse ways, which are only illustrative and not exhaustive:

(i) There may be direct repugnancy between the two provi- sions;

(ii) Parliament may evince its intention to cover the whole same field by laying down an exhaustive code in respect thereof displacing the State Act, provision or provisions in that Act. The Act of the Parliament may be either earlier or subsequent to the State law;

(iii) Inconsistency may be demonstrated, not necessarily by a detailed comparison of the provisions of the two pieces of law but by their very existence in the statutes;

(iv) Occupying the same field; operational incompatibility;

irreconcilability or actual collision in their operation in the same territory by the Act/provision or provisions of the Act made by the Parliament and their counter parts in a State law are some of the true tests;

(v) Intention of the Parliament to occupy the same field held by the State Legislature may not be expressly stated but may be implied which may be gethered by examination of the relevant provisions of the two pieces of the legislation occupying the same field;

676 (vi) If one Act/Provision/Provisions in an Act makes lawful that which the other declares unlawful the two to that extent are inconsistent or repugnant. The possibility of.

obeying both the laws by waiving the beneficial part in either set of the provisions is no sure test;

(vii) If the Parliament makes law conferring right/obliga- tion/ privilege on a citizen/person and enjoins the authori- ties to obey the law but if the State law denies the self same rights or privileges negates the obligation or freezes them and injuncts the authorities to invite or entertain an application and to grant the right/privilege conferred by the Union law subject to the condition imposed therein the two provisions run on a collision course and repugnancy between the two pieces of law arises thereby;

(viii) Parliament may also repeal the State law either expressly or by necessary implication but Courts would not always favour repeal by implication. Repeal by implication may be found when the State law is repugnant or inconsistent with the Union law in its scheme or operation etc. anti conflicting results would ensue when both the laws are applied to a given same set of facts or cannot stand togeth- er or one law says do and other law says do not do. In other words, the Central law declares an act or omission lawful while the State law says them unlawful or prescribes irrec- oncilable penalties/punishments of different kind, degree or variation in procedure etc. The inconsistency must appear on the face of the impugned statutes/provision/provisions therein;

(ix) If both the pieces of provisions occupying the same field do not deal with the same matter but distinct, though cognate or allied character, there is no repeal by implica- tion;

(x) The Court should endeavour to give effect to both the pieces of legislation as the Parliament and the legislature of a State are empowered by the Constitution to make laws on any subject or subjects enumerated in the Concurrent List III of Seventh Schedule to the Constitution. Only when it finds the incompatibility or irresconcilability of both Acts/provision or provisions, or the two laws cannot stand together, the Court is entitled to declare the State law to be void or repealed by implication; and (xi) The assent of the President of India under Art. 254(2) given to a State law/provision, provisions therein accord only opera- 677 tional validity though repugnant to the Central law but by subsequent law made by the Parliament or amendment/modifica- tion, variation or repeal by an act of Parliament renders the State law void. The previous assent given by the Presi- dent does not blow life into a void law.

Scope and operation of Rule of Pith and Substance and pre- doninant purpose vis-a-vis Concurrent List.

13. The further question is whether the doctrines of dominant purpose and pith and substance would be applied to the matter covered under the Concurrent List. in my consid- ered view, they do not apply. The doctrine of pith and substance primarily concerns in determining the legislative competence. The idea underlying the detailed distribution of legislative powers in three Lists was to ensure that Parlia- ment and State Legislatures should keep themselves within the spheres allocated to them in List I and vice versa in List II respectively. However, legislation is a very compli- cated matter as it reflects life, which itself is a compli- cated one. Hence, it is sometimes inevitable that a law passed by the Parliament may trench upon the domain of the State Legislature and vice versa. Would such incidental encroachment on the territory of the other invalidates the legislation? In examining this question and finding a solu- tion, the Courts try to save the legislation from unconsti- tutionality by applying the flexible rule of pith and sub- stance. It is not that the Courts encourage one legislature to encroach upon the legislative field of another legisla- ture but merely recognise the reality that despite the strict demarcation of legislative fields to respective legislatures, it is not always possible to effectuate a legislative purpose without incidental encroachment on another’s field. In such a situation the Courts try to find out the pith and substance of the legislation. If the legis- lation is found in its pith and substance, within the legis- lative competence of the particular legislature, it is held to be valid, despite incidental encroachment on the legisla- tive power of another legislature. Thus, the rule of pith and substance is applied to determine whether the impugned legislation is within that competence under Arts. 246(1) and 246(3) of the Constitution, and to resolve the conflict of jurisdiction. If the Act in its pith and substance falls in one List it must be deemed not to fall in another List, despite incidental encroachment and its validity should be determined accordingly. The pith and substance rule, there- by, solves the problem of overlapping of “any two entries of two different List vis-a-vis the Act” on the basis of an inquiry into the “true nature and character” of the legisla- tion. The Court examines the legislation as a whole and tries 678 to find whether the impugned law is substantially within the competence of the Legislature which enacted it, even if it incidentally trespasses into the legislative field of anoth- er Legislature. In a case where the question of validity of an act arises, it may be that the topic underlying the provisions of the Act may in one view of the matter falls within the power of the Centre, and on another view within the power of the States. When this happens, it is necessary to examine the pith and substance of the impugned legisla- tion; and to see whether in its pith and substance it fails within one, or the other of the Legislative Lists. As stated earlier the constitutionality of the Impugned Act is not determined by the degrees of invasion into the domain as- signed to the other legislature but its pith and substance and its true nature and character to find whether the matter fails within the domain of the enacting legislature. The incidental or ancillary encroachment into forbidden field does not effect the competence of the legislature to make the impugned law.

14. From this scenerio let us peep into few important decisions touching the subject. In Prafulla Kumar v. Bank of Commerce, Khulna, AIR 1947 PC 60 the question was whether the Bengal Moneylenders Act (10 of 1940) is ultra vires by reason of Schedule 7, List II, Items 28 and 38 of the Gov- ernment of India Act, 1935, and thereby is void. In consid- ering that question, the Judicial Committee held as culled out in Head note (b) thus:

“It is not possible to make a clean cut between the powers of the Federal and Provincial Legislatures. They are bound to overlap and where they do the question to be considered is what is the pith and substance of the impugned enactment and in what list is its true nature and character to be found. The extent of invasion by the Provinces into subjects in Federal List is an important matter not because the validity of a Provincial Act can be determined by discrimi- nating between degrees of invasion but for determining the pith and substance of the impugned Act. The question is not has it trespassed more or less but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act is not a Provincial matter but a Federal mat- ter. Once that is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true import.

No doubt where they come in conflict List I has priority 679 over Lists III and II and List III has priority over List II but in each case one has to consider what the substance of an Act is and whatever its ancillary effect, attribute it to the appropriate list according to its true character” This leading ratio formed foundation in countless cases decided by this Court. In State of Bombay v.F.N. Balsara, [ [1951] INSC 38; 1951] SCR 682 it was held that:

“It is well settled that the validity of an Act is not affected if it incidentally trenches on matters outside the authorised field and, therefore, it is necessary to enquire in each case what is the pith and substance of the Act impugned. If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it then it cannot be held to be invalid merely because it incidentally encroaches on matters which have been assigned to another Legislature.” In Atiabari Tea Co. Ltd. v. State of Assam, [1960] INSC 123; [1961] 1 SCR 809 Gajendragadkar, J. (as he then was) speaking per majority, has explained the purpose of the rule of pith and substance thus:

“The test of pith and substance is generally and more appro- priately applied when a dispute arises as to the legislative competence of the legislature, and it has to be resolved by reference to the entries to which the impugned legislation is relateable, when there is a conflict between the two entries in the legislative list, and legislation by refer- ence to one entry would be competent but not by reference to other, the doctrine of pith and substance is invoked for the purpose of determining the true nature and character of the legislation in question.” In Meghraj & Ors. v. Allaharakhiya & Ors., AIR 1942 FC 27 relied on by Sri Nariman, the contention raised was that when the matter in the Concurrent List had occupied the flied whether the question of pith and substance of the impugned Act would arise? The Federal Court held that when the Provincial Act is objected to as contravening not Sec.

100 but Sec. 107(1) of the Government of India Act 1935, which is in pari materia to Art. 254 of the Constitution, that the question of pith and substance of the impugned Act does not arise. In Tika Ramji’s case, the same question had arisen for resolution. It was held that– 680 “The pith.and substance argument also cannot be imported here for the simple reason that when both the Centre as well as the State Legislatures were operating in the Concurrent field. there was no question of any trespass upon the exclu- sive jurisdiction vested in the Centre under Entry 52 of List I, the only question which survived being whether, putting both the pieces of legislation enacted by the Centre and the State legislature together, there was any repugnancy a contention which will be dealt with hereafter.” I have no hesitation to hold that the doctrine of pith and substance on the predoninant purpose, or true nature and character of the law have no application when the matter in question is covered by an entry or entries in the Concurrent List and has occupied the same field both in the Union and the State Law. It matters little as to in which entry or entries in the Concurrent List the subject-matter falls or in exercise whereof the Act/provision or provisions therein was made. The Parliament and Legislature of the State have exclusive power to legislate upon any subject or subjects in a Concurrent List. The question of incidental or ancillary encroachment or to trench into forbidder field does not arise. The determination of its ‘true nature and character’ also is immaterial.

15. Power to legislate whether derived from the con- cerned Articles or legislative lists in Seventh Schedule

16. Parliament and the Legislature of any state derive their power from Art. 246(2) of the Constitution to make laws with respect to any of the matters enumerated in List III of the VIIth Schedule to the Constitution. With a non- obstanti clause engrafted therein namely notwithstanding anything in Clause ? the Parliament, and, subject to Clause 1, the Legislature of any State also have power to make laws with respect to any of the matters enumerated in List III.

List III of Seventh Schedule enumerates the legislative heads over which the appropriate Legislature can operate.

The function of the list is not to confer power on either the Parliament or a State Legislature. Article 254 of the Constitition removes the inconsistency between the law made by the Parliament and by the Legislatures of States. Thus the power to legislate on the Concurrent List is derived by the Parliament and the Legislature of any State from Article 246(2) read with Article 254 only. Paramouncy to the law made by the Parliament is given by Article 254(1) and provi- so to Article 254(2). The Parliament derives its exclusive power under Article 246(1) to legislate upon any of the 681 subjects enumerated in List I of the Seventh Schedule in the Constitution. Similarly the Legislature of a State derives its exclusive power from Article 246(3) to make laws on any matters in List II. When the Parliament or the Legislature of a State while making legislation within its exclusive domain, namely, List I or List II respectively if it inci- dentally trenches upon the forbidden flied, namely, the field demarcated or distributed to the State Legislature and vice versa by the Legislature into List I the doctrine of Pith and Substance was applied to find the “true purpose and character of the Legislation”. In considering the question of the doctrine of Pith and Substance in Subrahmanyam Chet- tiar v. Muttuswami Goundan, A.I.R. 1941 F.C. 47 at p. 51 held that it must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal inter- pretation would result in a large number of statutes being declared invalid because the Legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee where- by the impugned statute is examined to ascertain its “pith and substance”, or its “true nature and character”, for the purpose of determining whether it is legislation with re- spect to matters in this list or in that. In that case the question was whether the Madras Agriculturists Relief Act 4 of 1938, Section 8 thereto is invalid, since the matter is in Schedule VII, List I or List II of the Government of India Act, 1935. The contention was that the negotiable instrument; promissory notes are covered by List I of the Seventh Schedule, therefore, the Act is invalid. In consid- ering that question and negativing the contention the above ratio was enunciated.

(emphasis supplied) In Governor General in Council v. The Reliegh Investment Co.

Ltd., [1944] F.C.R. 229 at p. 261 in considering the ques- tion whether the Federal Legislature’s power is not limited to cases specified in clauses (a) to (e) of sub-section (2) of Section 99 from Entry No. 23 of the List I of the Seventh Schedule; it was held by Spens, C.J. that it would not be right that the Legislature would derive the power to legis- late on this topic merely from the reference to it in the List, because the purpose of the Lists was not to create or confer powers, but only to distribute between the Federal and the Provincial Legislatures, the powers which had been conferred by Section 99 and 100.

(emphasis added) 682 In Harakchand Ratanchand Banthia v. Union of India, [1969] INSC 136; [1970] 1 SCR 479 at p. 489 the Constitution Bench speaking through Ramaswami, J. dealing with the Gold (Control) Act (45 of 1968) observed thus:

“Before construing these entries it is useful to notice some of the well-settled rules of interpretation laid down by the Federal Court and by this Court in the matter of construing the entries. The power to legislate is given to the appro- priate legislature by Article 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation; they demarcate the area over which the appropriate legislatures can operate.” (emphasis added) In Union of India v.H.S. Dhillion[1971] INSC 292; , [1972] 2 SCR 33 at p.

52 Sikri, C.J. speaking per majority of Seven Judges’ Bench held that it must be remembered that the function of the lists is not to confer powers; they merely demarcate the legislative field. The Constitution Bench followed the ratio in Releigh Investment case, etc.

(emphasis supplied)

16. Thus I hold that the Parliament and the legislature of a State derive their power to legislate on a subject/subjects in Lists I and List II of Seventh Schedule to the Constitution from Art. 246(1) and (3) respectively.

Both derive their power from Art. 246(2) to legislate upon a matter in the Concurrent List III subject to Art. 254 of the Constitution. The respective lists merely demarcate the legislative field or legislative heads. The Parliament and the legislature of a State have concurrent power to legis- late upon any subject/subjects in the Concurrent list III of Seventh Schedule to the Constitution. Art. 254(1) and provi- so to Art. 254(2) give paramouncy to the law made by the Parliament, whether existing or made afresh or amended, modified, added or repealing the law subsequent in point of time to the state law made under Art. 254(2). The exercise of the power by a state legislature to make impugned law under one entry or other in the concurrent list is not decisive. The concerned entry or entries is not the source of power to make impugned law.

17. Keeping the principles laid hereinbefore at the back of our mind, let us consider the impugned provision. Section 14 read with s. 20 of the Acquisition Act (21 of 1976) freezed the right of a citizen to apply for an to obtain permit or special permit to run a contract car- 683 riage in terms of the permit and monopoly to run a contract carriage was conferred on the S.T.U., Karnataka. But the Act evinces its intention to liberalise the grant of contract carriage permit by saying in s. 80(2) that the Regional Transport Authority “shall not ordinarily refuse to grant the permit.” It also confers the right on an applicant to apply for and authorises and Regional Transport Authority to grant liberally contract carriage permit except in the area covered by s. 80(3) and refusal appears to be an exception, that too, obviously for reasons to be recorded. It may be rejected if the permit applied for relate to an approved or notified route. The Act accords the right, while the Acqui- sition Act negates and freezes the self-same right to obtain a permit and to run a contract carriage and prohibits the authorities to invite or entertain an application and to grant a permit to run contract carriage. the Act and the relevant rules cover the entire field of making an applica- tion in the prescribed manner and directs the Regional Transport Authority to grant permit with condition attached thereto to run contract carriages vide ss. 66(1), 73, 74 and 80 of the Act. Thus, the existence of two sets of provisions in the Act 59 of 1988 and Acquisition Act 21 of 1976 is sufficient to produce conflicting results in their operation in the same occupied field. The two sets of provisions run on collision course, though an applicant may waive to make an application for a permit. Thereby, there exists the operational incompatibility and irreconcilability of the two sets of provisions. Sections 14(1) and 20(3) of the Acquisi- tion Act are repugnant and inconsistent of ss. 73, 74 and 80 of the Act. By operation of proviso to Art. 254(2) of the Constitution, the embargo created by ss. 14(1) and 20(3) of the Acquisition Act (21 of 1976) to make or invite an appli- cation and injunction issued to Regional Transport Authority prohibiting to grant contract carriage permit to anyone except to S.T.U., Karnataka within the State of Karnataka became void.

18. For the applicability of the principle that special law prevails over the general law, the special law must be a valid law in operation. Voidity of law obliterates it from the statute from its very inception. In view of the finding that ss. 14(1) and 20(3) are void the contention that the special law prevails over the general law is without sub- stance. In Justiniano Augusto De Peidada Barreto v. Antonia Vicento De Fonseca & Ors., [1979] INSC 59; [1979] 3 SCR 494 s. 5(1) of the Goa, Daman and Diu (Administration) Act, 1962 declared that all laws in force immediately before December 20, 1961 in Goa, Daman and Diu or in part thereof shall continue to be in force therein until amended or repealed by a competent Legislature or other competent authority. Pursuant to the powers conferred by Art. 240 of the Constitution, the Presi- dent pro- 684 mulgated Goa, Daman and Diu (Laws) Regulations from time to time. These regulations were extended with specified modifi- cation to Goa, Daman and Diu like Civil Procedure Code, 1908 and the Arbitration Act, 1940, but the Limitation Act, 1908 was not extended by any regulation made by the President.

The Portuguese Civil Code inter alia provides limitation to lay suits which is different from the periods prescribed in Limitation Act 1963. It was contended that the Portuguese Civil Code is void by operation of Art. 254 of the Constitu- tion. While considering this question this Court at page 500 has stated thus:

“We are not here concerned with the provisions of cl.

(2). For the purpose of the present appeals, we will assume that the Portuguese Civil Code which was continued by Par- liament to be in force in Goa, Daman and Diu was a law made by the State, though there may be several objections to so doing …. Without doubt the provisions of the Portuguese Civil Code, unless they are saved by s. 29(2) of the Limita- tion Act, are repugnant to the provisions of the Portuguese Civil Code are saved by s. 29(2) then there can be no ques- tion of any repugnancy. So the question whether the provi- sions of Portuguese Civil Code are void on the ground that they are repugnant to the provisions of the Limitation Act depends on the question whether the Portuguese Civil Code is saved by s. 29(2) of the Limitation Act, 1963.” After exhaustive consideration of that question it was held by Chinnappa Reddy, J. speaking for a bench of two Judges that the provisions of the Portuguese Civil Code deal with the subject of limitation of suits etc. and in force in the Union Territory of Goa, Daman and Diu only is ‘local law’ within the meaning of s. 29(2) of the Limitation Act and they have to read into the Limitation Act 1963, as if the schedule to the Limitation Act is amended mutatis mutandis Thus, it is clear that the question of repugnancy in cl.

(2)of’Art. 245 did not arise in that case. On the other hand, operation of Portuguese Civil Code was saved by s.

29(2) of the Limitation Act as a local law.

20. The doctrine of predominant purpose of Acquisition Act (21 of 1976) as discussed by my learned brothers is to achieve the objective of preventing the flagrant and blatant misuse or abuse of the contract carriages as stage carriages by eliminating that class of private pliers from all Karna- taka roads I am in complete agreement with it. It is a laudable object to subserve public purpose. But the opera- tion of its incidental or ancillary provisions, i.e. Arts.

14(1) and 20(3) to the 685 primary or predominant purpose is nailed by the altered/situation, viz., making the law under the Act 59 of 1988. It is already held that Art. 254 applies only to repugnancy arising between an existing or subsequent Union law and State law on any one or more subjects in the Concur- rent List III of Seventh Schedule to the Constitution. The inconsistency arising between laws on the other two Lists, i.e. Lists I and II, of Seventh Schedule to the Constitu- tion, has been taken care of by the opening non obstenti clause of Art. 246(1) of the Constitution which gives Su- premacy of List I over List II/Laws made by Parliament in its residuary jurisdiction will be governed by the same provision because Art. 248 is to be read with Entry 97 of List I. Same is the position under Art. 252 of the Constitu- tion. Once Parliament has made a law under that Article on a matter in State List, the Legislatures of those States on whose resolution the law was passed by Parliament or which subsequently adopt it ceases to have a power to make a law relating to that matter, and, therefore, there is no ques- tion of retaining any legislative competence to make law on that matter. Same should De the position under Art. 253 of the Constitution. The position under temporary measures are, therefor dealt with by Art. 251 that in case of inconsisten- cy between the Union and State law, the former shall prevail and the latter will be only ‘inoperative’ but not ‘null and void’. Under Arts. 252 and 253, the loss of legislative power of the States is complete and, thereafter, the States can no longer make any law on a subject on which Parliament has made a law and, therefore, their existing laws and any laws that they may venture to make in future will be null and void and for that matter Art. 254(1) cannot be invoked.

But that is not the case with matter enumerated in the Concurrent List. The State Legislature did not surrenderated power or jurisdiction. The Parliament, with a view to lay down general principles makes law or amends the existing law. The State Legislature still may feel that its local conditions may demand amendment or modification of the Central law. Their reserve power is Art. 254(2). If the Parliament expressly repeals the repugnant law made under Art. 254(2) different considerations may arise for which no final pronouncement is needed here. It is already found that ss. 14(1) and 20(3) of the Acquisition Act (21 of 1976) became void. But after making the Act 59 of 1988, the power of the State Legislature under Art. 254(2) is not exhausted and is still available to be invoked from time to time Though, there is opposite school of juristic thought, in my considered view the interpretation I have but up will sub- serve the animation of the rounding fathers of the Constitu- tion; the Constitutional Scheme and purpose envisioned by Art. 254. Therefore, after the Act has come into force, the State legislature has its reserve power under Art. 254(2) 686 to make law. But unless it again enacts law and reserves it for consideration and obtains the assent of the President afresh, there is no prohibition for the petitioners to make applications for the grant of contract carriage permits under the Act and consideration and grant or refusal thereof according to law by the concerned Regional Transport Author- ity. It is, therefore, made clear that this order does not preclude the Karnataka State Legislature to make afresh the law similar to ss. 14(1) and 20(3) of the Acquisition Act with appropriate phraseology and to obtain the assent of the President. The authorities have misconstrued the effect of the Act.

21. Accordingly I hold that s. 14(1) to the extent of prohibiting to make fresh application for grant of permits to run the contract carriages other than those acquired under Act 21 of 1976 (Acquisition Act) and the embargo and prohibition created under s. 20(3) thereof on the respective Regional Transport Authority in the State of Karnataka to invite/receive the application to consider the grant of permits to such contract carriages according to law, are hereby, declared to be void.

22. The writ petitions are accordingly allowed, but, in the circumstances, without costs.

P.S.S. Petitions dismissed.

The post Vijay Kumar Sharma & Ors. Etc. Vs. State of Karnataka & Ors. Etc. appeared first on B&B Associates LLP.

Life Insurance Corporation of India
Vs.
Smt G. M. Channabasamma

Bench: L Sharma, M F Beevi

Judgment

SHARMA, J.

This appeal by special leave arises out of a suit filed by the plaintiff-respondent for a money decree for a sum of Rs. 77, 805.85 being the amount due for four insurance policies held by her deceased husband. The defendant-appellant Life Insurance Corporation denied the claim on the plea that the deceased, which filling up the proposal forms for the policies, was guilty of fraudulent misrepresentations and suppression of material facts with regard to his health. The trial court accepted the defence and dismissed the suit. On appeal by the plaintiff, the High Court reversed the decision and passed a decree

2. The deceased husband of the plaintiff was described in the policies as T.R. Gurpadaiah but in the plaint his name has been mentioned as Gurupadappa. However, since in our view the correct spelling of the name is not material for purposes of the present case, it is not necessary to give further details in regard to the difference in the two names. We agree with the Corporation that the correct name was Gurupadaiah and since the polices under which the claim in the suit has been made bear the said name, it is immaterial if he was also known by a slightly different name. After the receipt of the claim from the plaintiff, the Corporation, feeling suspicious, made an inquiry through its Administrative Officer Sri V.V. Narasimhan (DW 11) who according to the defence collected sufficient material to establish fraudulent misrepresentation and suppression of material facts by the insured at the time of taking out the policies. The insured died on October 14, 1961 in a hospital for tubercular patients. According to the case of the Corporation the deceased was suffering from acute diabetes and diseased of the lungs of which he was fully aware at the time of taking out the policies in question, and fraudulently denied the same in the proposal forms

3. The four policies were respectively taken out for Rs. 20, 000 on July 30, 1959, for Rs. 20, 000 on July 16, 1960, for Rs. 10, 000 on July 16, 1960 and for Rs. 25, 000 on August 23, 1961. It has been contended by the learned counsel for the appellant that since the last policy was of a date only about two months before the death of the insured it cannot be believed that he did not know about his illness. Even the earlier three policies had been taken out only a short time earlier, and having regard to the nature of the diseases it must be assumed that the insured was fraudulently suppressing the relevant fact. The questions on the proposal forms which the insured had to fill up have been placed before us and it has been argued that several answers submitted by the insured were definitely false to his own knowledge. It was claimed that the Administrative Officer of the Corporation was, on inquiry, informed by several doctors about the chronic illness of the insured and this information was corroborated by documentary evidence

4. The learned counsel of the respondent has contended that it is true that her husband died of tuberculosis but he nor any member of the family had any knowledge of his illness at the time of taking out the policies. He was keeping good health and actively taking part in his business and the discovery of the disease which accounted for his early demise was made very late. The allegations of fraudulent misrepresentation and suppression of material facts made in the written statement were emphatically denied on behalf of the plaintiff at the trial. The trial court, however, accepted the defence and dismissed the suit

5. On appeal the High Court, on a consideration of the evidence led by the parties and the arguments addressed on their behalf, held that the defendant had failed to prove that the insured was suffering from diabetes or tuberculosis at the time of filling of the proposals for the insurance policies or that he had given any false answer in his statements or suppressed any material fact which he was under a duty to disclose. The finding of the trial court that the assured had committed fraud on the defendant Corporation in taking out the policies was reversed. In the result, the appeal was allowed and the suit was decreed. This decision is under challenge in the present appeal by special leave

6. Mr. Vasudev, appearing in support of the appeal, has strenuously contended that in view of the evidence on the record and the circumstances, the findings of the High Court are erroneous and fit to be set aside. He has emphasised the fact that the policies in question were taken within a short span of time and that the insured died only about two months from the last policy. The argument is that the evidence of the witnesses examined on behalf of the defendant is fit to be accepted as reliable and is adequate to prove the defence case. We have gone through the entire evidence in this case with the learned counsel for the parties, and do not find ourselves in a position to take a view different from that of the High Court. Since we concur with the impugned judgment, it is not necessary to deal with the evidence at great length. We, however, proceed to briefly indicate our reasons

7. The principle as to when an insurer can validly repudiate a contract of insurance on the ground of misrepresentation or suppression of material facts is not in controversy in the present appeal. Mr. Vasudev, the learned counsel for the appellant has, however, placed a number of decisions both English and India dealing with this aspect, but we do not consider it necessary to discuss them here. It is well settled that a contract of insurance is contract uberrima fides and there must be complete good faith on the part of the assured. The assured is thus under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the duty of the insured to state them correctly cannot be diluted. Section 45 of the Act has made special provisions for a life insurance policy if it is called in question by the insurer after the expiry of two years from the date on which it was effected. Having regard to the facts of the present case, learned counsel for the parties have rightly stated that this distinction is not material in the present appeal. If the allegations of fact made on behalf of the appellant Company are found to be correct, all the three conditions mentioned in the Section and discussed in Mithoolal Nayak v. Life Insurance Corporation of India 1962 (S2) SCR 571 must be held to have been satisfied. We must, therefore, proceed to examine the evidence led by the parties in the case

8. The burden of providing that the insured had made false representations and suppressed material facts is undoubtedly on the Corporation. According to Mr. Vasudev the defence has discharged its duty by examining a number of doctors to establish that the insured was, at the time of taking out the polices, suffering from diabetes and other diseases. The appellant has heavily relied upon the evidence of DW 4 Dr. M.S. Kumar, who has deposed that he was giving Gurupadaiah injections of insulin, anacobia and vetabion and was also examining his urine daily which contained sugar. The witness has been disbelieved by the High Court on the ground of his enmity with Gurupadaiah’s father-in-law G.B. Mallikarjunaih. In his statement before the court in September 1966 he claimed to have treated Gurupadaiah from 1953 to 1957. He was charging fee for his services but on a concessional rate as he was a tenant in the house belonging to Mallikarjunaih. According to the plaintiff’s case, certain dispute had arisen between the two which ultimately led to Dr. Kumar’s vacating the house in 1959. The witness has denied the dispute but has admitted the tenancy and the fact that he left the house in 1959. In support of his claim to have treated the insured, he produced a chit Ex. D-33, containing an account of the payments from patients. The document is a single loose sheet of paper containing the accounts of 8 patients out of who only Gurupadaiah’s name finds place therein. No other patient’s name is mentioned in the slip. The witness has not offered any explanation for this exceptional treatment given to Gurupadaiah in mentioning his name in Ex. D-33. There is also an obvious discrepancy in the sheet with respect to the dates which the witness has explained by saying that it was a mistake. According to his further evidence Gurupadaiah again contacted him in 1960, but he has not produced any document similar to Ex. D-33. In answer to a question as to why he had struck off some other name at the top of Ex. D-33 and had written the name of Mallikarjunaih, Dr. Kumar stated that he did so as at that time he might not have any other paper with him. Having regard to all the circumstances pointed out by the High Court, we agree with its conclusion that the evidence of DW 4 cannot be relied upon for holding that Gurupadaiah was under his treatment in 1957, 1960 or at any point of time

9. Another medical practitioner Dr. H. N. Gangadhar was examined as DW 2. He was the family doctor of Mallikarjuniah and denied that Gurupadaiah was his patient. He, however, stated that he had given to Gurupadaiah two injections of anacobin in October 1958 and another in November 1958. According to his evidence anacobin injections are harmless and can be given even to healthy men as tonic; and generally they are given for general weakness, anaemia, sprain and a number of other diseases including diabetes. There is no reason to disbelieve Dr. Gangadhar. But his evidence does not take us beyond showing that the insured had taken in 1958 three injections of anacobin which, according to the doctor’s evidence, does not lead to any conclusion about the disease. The next witness Dr. Siddalingaih DW 3 was working in the T.B. Hospital, Tumkur, where Gurupadaiah was admitted as an indoor patient with severe cough trouble and chest pain. The doctor was in LMP, but did not hold any special diploma for treatment of tuberculosis. According to the witness, Gurupadaiah had lost weight and was weak and died there on October 14, 1961. Having regard to the condition of the patient, the doctor opined that he might have been ill for more than six months before his admission in the hospital. He, however, accepted in cross-examination that if a man is weak and not in a position to resist infection from outside, galloping tuberculosis may attack him, and in such a case the duration for the symptoms to come out may be from a month to three months. His evidence also does not necessarily lead to the conclusion that Gurupadaiah was inflicted by a serious disease for a long time

10. According to the evidence of three other doctors DW 5, DW 6 and DW 10, they had examined and treated a person bearing the name Gurupadayya or Gurupadaiah or Gurupadappa. But none of them is in a position to say that it was the same person as the deceased husband of the present plaintiff. They are not in a position to indicate anything whereby the identity of the patient can be proved or inferred. There is no mention of the father’s name or residence of the patient and their depositions can be of evidentiary value only if the statement of Dr. Kumar DW 4 is accepted. If the evidence of DW 4 is rejected, as we have already done, the evidence of the other three doctors by themselves is not of any help. As against this, the evidence of the Corporation’s doctors who had certified the good health of the insured at the time of taking out the insurance policies and who have been examined as defence witnesses, disproves the case of illness. It has not been suggested that these doctors were either won over by the insured or were negligent in performing their duty. They had submitted confidential reports about the health of the insured and were of the opinion that he was in good health. We, therefore, agree with the High Court that the defendant Corporation has failed to discharge the burden of proving the defence story about the serious illness of the insured at the time to taking out the insurance policies and knowingly suppressing the material information

11. Before concluding we would like to say a few words about the role of V.V. Narsimhan, DW 11, who was the Administrative Officer of the Corporation and was in charge of the investigation of the death claims. The learned counsel for the appellant has contended that certain observations in the judgment of the High Court amount to a criticism of the Administrative Officer. We do not think that the observations can be described as strictures, but, in any event, we would like to clarify the position that in our view no exception can be taken against the conduct of the officer in the matter of investigation of the present case. He was under a duty to have made a thorough inquiry in the circumstances, which certainly on the face appeared to be suspicious, and he was performing his duty with all seriousness as he ought to have done

12. For the reasons mentioned above, the appeal is dismissed, but, in the circumstances, without costs.

The post Life Insurance Corporation of India Vs Smt G. M. Channabasamma appeared first on B&B Associates LLP.

For the Petitioners: Mr. U.N.R. Rao, M/s. Daniel, Advocate. For the Respondent: Mr. David of Messrs. Kurian & Associates Advocate.

Judgment

1. The matter arises under the Trade and Merchandise Marks Act, 1958 (hereinafter referred to as the Act). The Petitioner filed this petition under Ss. 32(c), 46, 107 of the Act praying that the entry in the register in respect of registered Trade Mark No. 170403 in class-34 in Part-A in the name of the respondent K.B. Venkatachalam trading as Golden Match Works, Gudiyatham, dated 13-8-1955 may be removed from the Register.

2. The facts as stated in the petition in brief are as follows: The first petitioner K.R. Jadavappa Mudaliar is trading in Match Works under the name and style of M/s. Sarasu Match Works at Gudiyatham, North Arcot District. The second petitioner is the son of the first petitioner, who is also trading in the same trade under the name and style of M/s. Vanaja Match Works, at Thottidurai Mottur Village, Murasappalli (Post), Gudiyatham. The petitioners are represented by their counsel Mr. C. Daniel. The matte r was argued at length by the learned Senior Counsel Mr. U.N.R. Rao on behalf of the petitioners. The petitioners and the respondent are engaged in the business of manufacturing safety matches. They are competitors and rivals in the said business. The respondent has secured registration under the Act for a Trade Mark with the name National Park’ in class-34 in Part-A under No. 170403 since 13.3.1955. The mark was registered with the authorities and used in black and white. According to the petitioners, the respondent although had registered the mark has not used Trade Mark for the product of his manufacture except for short periods, and also has been licencing simultaneously in favour of 22 different manufacturers for the use of the Trade Mark. It is stated in the petition that with the written permission given by the respondent the Central Excise has been granting Central Excise licence to manufacture safety matches with ‘National Park’ as shown in document No. 1 as the trade mark under Rule 71(3) of Central Excise Rules, 1944. It is further stated that the second petitioner has also been using ‘National Park’ and was also using the same design with the alteration of the name as ‘Running Deer’. In March, 1986, the respondent filed C.S. No. 156 of 1986 in this Court under Ss. 105 and 106 of the Act, against the second petitioner for the alleged infringement of the respondent’s registered Trade mark of ‘National Park’ by the second Petitioner’s ‘Running Deer’ trade mark. The suit was for a permanent injunction against the use of ‘ Running Deer’ trade mark on account of the alleged infringement and passing off of the registered ‘National Park’ trade mark. The suit was however withdrawn on 13.1.1988 and the injunction order granted on 20.3.1986 in Application No. 1402 of 1986 came to an end with the withdrawal of the suit. According to the petitioner, the respondent had also filed O.S. No. 16 of 1987 a few days prior to withdrawal of C.S. No. 156 of 1986, before the District Court, North Arcot at Vellore against both the petitioners herein. However, in O.S. No. 16 of 1987 the respondent made both the petitioners as defendants. His complaint was that the first petitioner was committing infringement and passing off by the use of the ‘Standing Stag’ and the second petitioner is committing infringement and passing off with respect to ‘Running Deer’ vis-a-vis respondent’s registered Trade Mark of ‘National Park’. The second petitioner filed written statement in the said suit and urged that the registered Trade Mark ‘National Park’ having been used continuously since 1979 for about 10 years by several other manufacturers with the permission of the respondent, the mark has lost its distinctiveness and has become publici juris . Consequently, the plaintiff/respondent herein has lost his exclusive right with respect to the mark ‘National Park’. The petitioners, are aggrieved persons under the Act entitled to file this petition as they are in the same trade and filed the present petition alleging that the respondent is guilty of trafficking in trade mark which is not permissible under the Act.

3. The respondent filed a detailed counter statement by raising the following defence: The trade mark ‘National Park’ owned by the respondent was registered in 1955 and it is distinctive to the manufacture and trading style of the respondent and the respondent alone. Hence Section. 32 (c) of the Act cannot be invoked which is subject to Sections 35 and 46. The distinctiveness of the respondent’s trade mark has not been lost because no other manufacturer of safety matches other than the petitioners have in fringed the trade mark or used it on their own. The respondent entered into agreement with various parties to manufacture matches, but the terms and conditions stipulated therein would go to reveal that at no point of time did the respondent give up his right in the Registered Trade Mark that he possesses. All the persons with whom agreements were entered into have undertaken to manufacture and give the respondent the labels supplied by the respondent and on no account the agreement holders could exploit the said brand in the open market without the consent of the respondent. Hence it could not be contended that the respondent has lost the distinctiveness in the trade mark owned by him nor the same has become Publici juris nor can it be said that the respondent is trafficking in his trade mark. The respondent is manufacturing and selling matches under its Trade Mark ‘National Park’ with device of a deer ever since 1955 and the respondent has been manufacturing and selling by himself, apart from affixing his labels on the goods manufctured by other match producers but strictly in accordance with the terms of the agreement entered into. It is stated that the parties listed in the petition are parties to the agreement with the respondent to manufacture and supply safety matches. It is seen from the agreements entered into with various parties listed in the petition that they have expressly mentioned that the agreement holder acknowledges the absolute proprietorship of the respondent over his trade mark ‘National Park’ and ‘Running Deer’ together with the colour scheme thereof. Each of the parties has also undertaken not to use the said label in respect of safety matches except exclusively for supply to be made only to the respondent.

Hence the other manufacturers were manufacturing matches only on behalf of the repondent and they had no right to use the said label bearing the trade mark of the respondent for their independent use; and for manufacture and sale in the open market. Therefore at no point of time did the respondent abandon its trade mark; neither did the respondent indulge in trafficking in its trade mark nor could it be said that the distinctiveness has been lost especially at the time of commencement of these proceedings. The respondent has also not violated Section 46 of the Act. There is ample evidence to prove that the respondent did make use of its trade mark in its manufacturing process ever since its mark was conceived and was very much in proper and effective use at the commencement of these proceedings.

It is not in dispute that the respondent is the owner of the trade mark ‘National Park’ with a device of the ‘Running Deer’ having an exclusive colour combination. It may be true that the device of a deer was endorsed to be common to the trade, but the get up and the colour combination together with the trade mark ‘National Park’ can never be said to be common to the trade. The respondent was forced to file a suit before this Court for an infringment of his trade mark, because the petitioners were openly manufacturing and trading with the respondent’s trade mark which directly affected the respondent in many ways, not to speak of the monetary loss that the respondent was suffering because of the infringement committed by the petitioners. The respondent on advice withdrew the said suit and were advised to be filed another suit before District Court, Vellore without prejudice to the rights of the respondent. It is the privilege of the respondent to choose the forum. The allegation of the respondent’s trade mark becoming public ijuris is not correct since the infringers of the trade mark are only the petitioners and there are no other infringers to say that it has become publici juris . The occurence of a few fraudulent infringements of the respondent’s trade mark by the petitioners without the knowledge of the respondent who is the proprietor of the trade mark ‘National Park’ with a device of a standing or Running Deer with the exclusive colour scheme and combination will not make the mark common to the trade. The use of the respondent’s trade mark by the petitioners is nothing but an illegal act, calculated to deceive the public. The parties with whom the agreements have been signe d by the respondent would go to prove that the tenor of the agreements does not give any permitted use to the manufacturers to use the trade mark of the respondent to bring it under the scope of S. 2(m) of the Act. It is denied that the respondent never permitted any trade/manufacturer in safety matches to use his registered mark. So far as the respondent is concerned the business dealings with the other safety matches manufacturers were pure and simple governed by the agreement and the question of permitted user and the registration under the Act does not arise. There is no force in any of the contentions raised by the petitioners to make out a prima facie case, much less under Sections 32 (c), 46 and 107 of the Act. This petition has been filed by the petitioners only as counterblast to see that the maximum nuisance is caused to the respondent because the respondent took action for the crime of infringing upon the mark of the respondent.

4. No oral evidence was let in by both the parties. By consent of parties Document Nos. 1 to 9 have been marked on behalf of the petitioners, and Documents Nos. 1 to 44 and additional documents 1 to 13 have also been marked by on behalf of the respondent.

5. On the above pleadings the following issues have been framed for consideration.

1. Has the respondent’s Trade Mark lost its distinctiveness on the date of this O.P. Proceedings?

2. Has the respondent’s Trade Mark become publici juris?

3. Is the respondent guilty of trafficking in its trade mark?

4. Was the respondent’s Trade Mark registeredwithout any bona fide, intention to use in relation tothe goods for which the registration is granted?

5. Has the petitioner discharged his onus of proof by invoking Sections 32 (c) and 46 of the Act?

6. Should the Trade Mark usage be taken (into account) while deciding matters of this nature under the Act?

6. Issue No. 1 : Has the respondent’s Trade Mark lost its distinctiveness on the date of these proceedings in O.P. No. 182 of 1988?

According to the petitioner, the respondent had authorised 19 different traders and permitted them to affix the Trade mark of National Park and that one single mark is sought to be utilised to locate the origin of the products of 19 different manufacturers. The concept of distinctiveness means a trade mark is to be utilised to distinguish the goods of the proprietor of trade mark from the goods manufactured by the others. By the conduct of the respondent, same mark is now accepted to indicate 19 differe nt sources of matches in Gudiyatham. It is submitted by the learned counsel for the petitioner that the conduct of the respondent in permitting a large number of manufacturers to affix the same mark on their respective goods has resulted in destroying the original distinctiveness of the trade mark ‘National Park’. It is further submitted that under the definition of Trade Mark in Section 2 (v) (ii), it is only the proprietor Of the Trade Mark who can use the mark on goods. In the present case the respon dent has permitted 19 different persons using the same mark, each claiming to the public that he is the proprietor of the mark.

7. Per contra Mr. David, learned counsel for the respondent invited my attention to look into the definition of a Trade Mark as under :

‘A Trade Mark is a symbol which is applied or attached to goods Offered for sale in the Market , so as tc distinguish them from similar goods and to identify them with a particular Trader or with his successors as the owners of a particular business, as being made, worked upon, imported, selected, certified or sold by him or them, or which has been properly registered under the Act as the Trade mark of a particular Trader’.

According to the learned counsel for the respondent, the goods must be offered for sale in the market and the agreement holders as such do not offer the matches manufactured for the respondent with the Trade Mark label of the respondent direct to the market without the consent of the respondent. Hence, according to him the entire control of the Trade Mark of the respondent is with the respondent and the same is in tact. Moreover the distinctive nature of the trade mark is well established by the respond ent for the following reasons as submitted by him :-

a) The Trade Mark was registered in the year 1955 and through the years it has become distinctive with that of the goods of the respondent.

b) The respondent is very much in the market and to establish the same the learned counsel for the respondent drew my attention to documentary evidence filed by the respondent as per Ex. R. 32, to R. 35 and R. 43 to prove the same.

c) Through the decades that have passed the Trade mark of the respondent has become so associated with that of the respondent’s goods.

8. In this connection the learned counsel for the respondent has also invited my attention to paragraph 796 of Narayanan’s Trade Mark and Passing-off III Edition, where Radiation Case 1 has been referred to. In the said case, an application for registration of a trade mark was opposed on the ground inter alia that the applicants themselves had not used the mark as a trade mark within the meaning of the definition of a trade mark in the Trade Marks Act of 1905. It was observed in the said case that a merchant can select goods by ordering them to be made by a manufacturer according to a given specification, and that he could in such a case arrange for his mark to be applied to the goods when they were made and for the goods to be sent direct from the factory to his customer or to his agent to be sold on his behalf.

9. Applying the said principle it was argued that in the instant case also the similar practice is being adopted. Hence the learned counsel for the respondent has contended that the mere permission by the agreement holder to affix the trade mark label on the goods manufactured and given to the respondent is nothing but a mere licence given to the agreement holder to do a particular act without in any way divesting one’s right, title and interest in the Mark and it does not dilute the ownership of the Title to the property in the Trade Mark as such. In London Rubber Co. v. Durex Products 2 (Paragraph 19) Justice Mukerjee observes as follows :

‘Trade mark is a kind of property and is entitled to protection under the law, irrespective of its value in money, so long as it has some business of commercial values, not merely the interest of the public, but also the interests of the owner are the subject of concern of Trade Mark legislation.’

Hence the learned counsel placing reliance on the said decision submitted that his Trade Mark which has-been his property from 1955 has to be safeguarded and the petitioner cannot impute any motive on untenable grounds and get the mark removed on the ground of distinctiveness being lost just because by agreement other manufacturers were permitted to affix the respondent’s Trade Mark label on the goods manufactured and supplied only to the respondent and none other.

10 . The learned counsel for the respondent also drew my attention to the evidence available with regard to distinctiveness. They are as under;

a) The respondent has been manufacturing matches from 1955 onwards till date without break;

b) The Sales details are proof which is seen from Ex. R. 32;

c) Duplicate Bills from 4.4.1983 to 29.7.1988 under Ex. R. 33

d) Gate pass duplicates from 4.4.1983 to 29.7.1988 under Ex. R. 34.

The other distinctive features are the lay out as well as the marking on the labels on the matches manufactured and sold directly or through and by the agreement holder. It is further contended by the respondent that the Trade Mark of the respondent was at the commencement of these proceedings distinctive in nature and not otherwise for the petitioner to invoke Section 32(c) of the Act, on which the Issue No. 1 has been framed. The extracts obtained from the Central Excise authorities and furnished in the petition would only reveal that the agreements and the approval to affix the labels of the respodent related to the year 1979 and thereafter. By that time the respondent’s label had already acquired distinctiveness. Hence, even according to the petitioner, since more than seven years had elapsed when such agreements were entered into it does not entail removal of the respondent’s mark because of the adequate safeguard given to the respondent under Section 32 of the Act, which says that after seven years from the date of registration the original registration shall be taken to be valid in all respects. Hence I find force in the contention of the respondent that his Trade Mark is deemed to be valid in all respects.

11 . It is relevant at this juncture to refer to the definition of the word distinctiveness. The word distinctiveness is defined under Section 9(3) of the Act. The said Section starts with words, Tor the purpose of this Act, the expression distinctive in relation to the goods in respect of which a trade mark is proposed to be registered, means adapted to distinguish goods with which the proprietor of the Trade Mark is or may be connected in the course of trade from goods in the case of which no such connec tion subsists either generally or where the trade mark is proposed to be registered subject to the limitation in relation to use within the extent of the registration.’ The expression ‘distinctiveness’ appears also in Sections 10, 31 (2) and 32 (c) of the Act. It must be considered in relation to the particular goods in respect of which registration is proposed. But in the case of the respondent, the mark is not proposed to be registered, but it is already registered and remaining on the register withou t any blemish whatsoever from the year 1955 continuously thereafter. Hence there can be no doubt by all standards the respondent’s mark is distinctive in nature. Secondly as submitted by the learned counsel for the respondent that mark must be adapted to distinguish the goods of the applicant from similar goods of other traders. The vital test would be that even if the traders’ name is not used along with the mark. It is also seen that the respondent to prove the evidence of user of a trade mark or of its distinctiveness, has fulfilled all the requirements as per section 99 and Rule 116. It is also seen that the trade mark of the respondent is definitely distinctive because of the exclusive colour combination and use. The trade Mark label of the respondent is exclusive in so far as the colour combination is concerned and this is a vital aspect which has to be taken into consideration to decide whether the respondent’s registered Trade Mark is distinctive to its goods or not.

12 . The next aspect would be whether the respondent’s Trade Mark has acquired distinctiveness by virtue of use. The mark, as already stated above, has acquired distinctiveness’ through the years because of the lengthy use of the Trade Mark by the respondent from the year 1955 till date. It would be worthwhile referring in this context to the decision reported in The Imperial Tobacco Company of India v. Registrar of Trade Marks 1 . The Calcutta High Court held :

‘Even so, the acquisition of distinctiveness should be on the date when the application is filed for registration and the law does not require or provide for acceptance of evidence of subsequent events.’

Paragraph 326 of Narayanan’s Third Edition of Trade Marks and Passing-off, also deals with the Test of acquired distinctiveness as under :

‘The test cf acquired distinctiveness is that the mark when applied to the goods should indicate to the purchaser that they are the goods of a particular person and of nobody else. Distinctiveness must carry with it the feature that the goods distinguished are the goods manufactured by a particular person and by no other. A word or words to be really distinctive of a person’s goods must generally speaking be incapable of application to the goods of any one else.’ Cheviers v. Cheviers 2 ‘

The above tests squarely apply to the Trade Mark of the respondent herein.

13 . The next point that would emerge is the point of disclaimer which was highlighted by Mr. U.N. Rao, learned counsel for the petitioner, by referring to Exhibit P. 6 to say that the device of the Deer on the Trade Mark label has been disclaimed by the respondent. The answer is that the respondent’s mark was considered registerable subject to the proprietor disclaiming right over the device of a Deer, but this would not affect the question of distinctiveness. In this context, it is useful to refer to paragraph 332 of Narayanan’s Trade Marks and Passing-off, Third Edition, wherein it has been observed that for deciding whether a mark is distinctive, attention must be focussed upon the content of the Mark and not upon the content of the protection sought for the mark. With reference to Section 17, the totality of the mark may be considered distinctive if the combination produces a net impression of distinctiveness as is existing in the respondent’s mark. It is further stated that when a device is common to the trade a word describing the device is not considered distinctive. This follows from the principle that Trade Mark appeals to the ear as much as to the eye and distinctiveness must be judged from the visual as well as the phonetic aspects. Just because the device of a deer was disclaimed, it would not mean that it is common to the trade as alleged by the learned counsel for the petitioner. In my view, the petitioner has to prove the same which he has failed to do before this court. The device of the deer is not used by anybody except the agreement holders who have only manufactured and affixed the respondent’s Trade Mark label and sold such goods only to the respondent and none else in the course of trade. The fact that a matter is or is not common to the trade is a question of fact and it has not been adequately proved by the petitioner that the device of deer is common to the match manufacturing industry. No evidence whatsoever has been let on the part of the petitioner. Thus, the respondent’s mark taken as a whole is distinctive of the goods manufactured and marked by the respondent.

14 . In a decision reported in Registrar of Trade Marks v. Ashok Chandra 1 , Das, J. held that the object of the disclaimer is to prevent any likelihood of misapprehension as to the rights conferred by the registration, and the discretion under Section 17 is wide enough to enable the appropriate disclaimer to be framed to meet the requirement in any particular case. The learned Judge, further held that a long user acquired by the proprietor of a trade mark cannot be affected in any way by the concept of disclaimer. In my opinion this is precisely the case with the respondent’s Trade Mark. The most important aspect is that in spite of the admission that the device of a Deer is common to the trade the respondent was granted registration of his Trade Mark because the Registrar was satisfied that the respondent’s mark was distinctive in nature. Hence for the aforesaid reasons I am unable to hold that the respondent’s Trade Mark has lost its distinctiveness on the date of this proceedings. Thus, I hold issue No. 1 against the petitioner.

15 . Issue No. 2 :- Has the registered Trade Mark become public ijuris? On this point the learned counsel for the petitioner submits that by permitting several other manufacturers to use the registered Trade Mark ‘National Park’ it has lost its distinctiveness and has become public ijuris . Consequently the learned counsel submits that the respondent has lost his exclusive right with respect to the mark ‘National Park’. The learned counsel for the respondent, in answer to the said submission, submits that there is no exhaustive definition for the terms ‘ public ijuris ‘ in the Act, and that each case mustdepend upon the facts and circumstances of that case. The proper test to decide whether a mark which was originally a Trade Mark has become public ijuris is to see whether the use of it by other persons is still calculatedto deceive the public. It is also to be seen whether the Mark has become so public and in such universal use that nobody can be deceived of it or can be induced from the use of it to believe that he is buying the goods of the original trader.

16 . To say that a mark has become common to the trade is another way of saying that it has ceased to be distinctive of a particular trader’s goods. In this connection it will be useful to refer to the dicta laid down by the Supreme Court in National Bell Co. v. Metal Goods Manufacturing Co. (P) Ltd. 1, wherein the Supreme Court held that to establish common use, use by other persons should be substantial. Now coming to the present case and facts that exist, the agreements marked as Exhibits R. 2 to R. 7 have to be referred to. On a perusal of the agreement entered into between K.B. Venkatachalam of Golden Match Industries, Gudiyatham with other traders under Exhibits R. 2 to R. 7, it is seen that the respondent has only allowed the other manufacturers, the affixture of the Trade Mark label of the respondent on the goods manufactured and sold to the respondent. Much was highlighted by Mr. U.N. Rao, learned counsel fot the petitioner stating that even though the labels belong to the respondent, the name of the respondent is not found on the label. I am unable to appreciate the said contention. If the label affixed by the agreement holder is carefully scrutinised, the name of the agreement holder is displayed in very small print just to satisfy the Central Excise Act and Rules which is apparently invisible to the naked eye. Whereas the Trade Mark, get up and colour scheme and combination alone catch and attract the eye of the consumer, the consumer only goes by the pictorial representation of the Trade Mark label on the match box and not from the source of manufacture to decide to buy the said product or not. Hence at no point of time could it be said that the act of the respondent is calculated to deceive the public. The more important aspect is whether such a situation has ever arisen in this trade for the petitioner to allege the same. No evidence whatsoever has been produced before me in the form of affidavits as required by Section 99 and Rule 116 to show that complaints have been received from the public regarding the alleged act by the respondent. The mere allegation that the respondent’s registered trade mark has become publici juris or lost its distinctiveness is not enough. The onus is heavily on the petitioner to prove the same with concrete evidence which is totally lacking in this case.

17. The next question will be whether the use by other persons exists on the facts of the present case. In so far as the agreement holders do not exploit the matches manufactured by them with the Trade Mark labels of the respondent, there cannot exist the concept of substantial use by other persons. The name of the agreement-holder on the labels does not constitute a disappearance of the right of the respondent over its trade mark. The mark still remains to be distinctive with that of the respondent and as per the facts enumerated above, the Trade Mark of the respondent, by any stretch of imagination, has not become common to the trade as alleged by the petitioner. Then the mode and method adopted as per the agreement between the parties cannot be said to show that the mark came to be public that nobody can be deceived nor can it be said that by such usage of the labels as per the agreements anybody could be induced that they are buying the goods of the original Trade mark holder. In the instant case the agreement holders do not sell the matches manufactured for the respondent to the outside public. Hence the question of anybody being deceived or otherwise does not arise. This being so, the concept of registered user or permitted use does not arise. A mere reading of the agreement entered into between the parties will go to show that the agreements are plain and in unambiguous terms. In my opinion, there is perfect indication for entering into such agreement. The argument of the learned counsel for the petitioner that only registered users should be permitted to use the Trade Mark and not the agreement holders, is far-fetched and hard to believe and digest. The Act does not expressly prohibit licencing of Trade Marks whether registered or unregistered. An attempt was made by the learned counsel for the petitioner by contending that the Radiation Case 1 was one which was decided before the 1938 Act came into force in United Kingdom, and hence the same could not be relied upon. But the learned counsel has not noted that even if the said Act was in force, which provisions are very much similar to 1958 Act, there is an identical decision that has been decided in 1969 reported in G.E. Trade Mark 2 , In the said case, Graham, J. expressed his views on the effect of licensing of a Common law trade mark as follows :-

‘An examination in particular of the Bowden case , Thome & Sons Ltd. v. Pimms Ltd. and other relevant cases show that if the principles in relation to confusion and deception to be derived from those cases are applied to the changed circumstances of trade today, the same connection in the course of trade today, which it is now recognised is proper by the registered user provisions of the Act in the case of the registered mark is also proper in the case of an unregistered mark. It is a matter of common knowledge and experience that the conditions of trade and the practices of the trading community have very greatly changed since the middle of the last century when our trade mark law began to assume the present form. The development of the sciences and the application of technology in industry, the growth of great manufacturing and holding companies with large numbers of subsidiaries, the exchange of technical know-how not only between companies in this country but on an international scale and, not the least important, very great changes which have been and are still being made in the presentation, packaging and methods of marketing goods, have all had their effects on the use and significance of trade marks. These changes have been reflected in our statutory trade mark law in, for example, the broadening of the definition of a trade mark, in the recent provisions of assignment without goodwill and in the recognition in the registered user provisions that a trade mark can be licensed without causing deception or confusion provided the owner of the trade mark retains control over t he character and quality of the goods sold under the mark.’

Again in ‘paragraph 803 of Narayanan’s Trade Mark and Passing-off, Third Edition, the learned author in dealing with the said issue has remarked as follows:-

‘In so far as unregistered common law trade marks are concerned, the principle to be derived from the cases are quite consistent with and can be applied in present day conditions and, in my judgment, result in the position at common law being parallel with the provisions under the statute.’

In the same case it was observed that there is no reason for holding that the Bostitch Case is an authority for saying that the same principle cannot or should not be applied in the case of a common law mark used on goods outside the registration. There is no good reason why it should not be so applied and I hold, for the reasons given above, that in the changed circumstances of today the same principle does so apply.’

‘Cross L.J. after examining the cases concluded that the authority given by the United States parent company in respect of the GE Trade Mark to its United Kingdom subsidiary to use the registered mark was not open to objection because the use by the subsidiary might fairly be considered as user by the parent itself and because the licencing of the mark, whether registered or not, did not deprive it of the character of a trade mark provided that the owner of the mark retained a sufficient connection in the course of trade with the mark and the goods bearing it.’

17 . In this connection the learned counsel for the respondent has relied on an extract of Paragraph 9.2., Common Law Licence Page 68 of Registration under Trade Marks Law by Directorate of Research, The Institute of Company Secretaries of India, New Delhi. The extract referred to above by the learned counsel for the respondent is extracted hereunder :-

‘Faced with the almost impossible prospects of recordal of registered user under the Act, many foreign trade mark owners and their licensees have resorted to use the marks under Common Law Licences, i.e. licences recognised by the English Common Law, the principles of which continue to be generally accepted in India. Even Common Law Licence must provide for quality control by the proprietor so that the distinctiveness of the mark is not diluted. The disadvantage is that use of the trade mark by a Common Law Licensee does not ensure to the benefit of the proprietor. By the same token, the licensee can neither initiate nor join in any legal proceedings for infringement of the mark.’

‘A word of caution, there is no decisive judicial precedent in India which determines the rights of the proprietor and licensee inter se or the rights of third parties who seek cancellation of the mark on the ground of non-use by the proprietors or deceptive use by an unregistered licensee. On the basis of the decisions of English Courts in a series of cases, it is believed that the Indian Courts may uphold the validity of the common law licences and further that it does not necessarily dilute the distinctiveness of ownership of the mark.’

18 . Section 2(1) (s) of the Act defines the term ‘registered user’ to mean a person who is for the time being registered as such under Section 49. Section 48 to 55 of the Act and Rules 82 to 93 deal with there gistered users. Hence in my opinion, thereis no need for a person to be a registereduser as contemplated under the Act to usethe Registered Trade Mark of another personso as to suggest that without it, it would beinvalid. Hence the agreements entered intoby the respondent and the third parties arevalid, binding and enforceable and not hitby any act as alleged by the counsel for thepetitioner, much less Sections 23 and 27 ofthe Indian Contract Act. Hence, consideringthe rival submissions made by both thelearned counsel, I am of the view that thesubmission made by the respondent that therespondent’s Trade Mark is very much in tactand totally controlled and monitored by himis wholly acceptable. I am unable to holdthat the mark has become publici juris asalleged by the counsel for the petitioner.

19 . Issue No. 3 : Is the respondent guiltyof trafficking in its trade Mark? Mr. U.N.R. Rao, on this question, submits that the respondent had made a declaration on 12.3.1982 that he was no longer manufacturing safety matches with the Trade Mark ‘National Park’, as found from the records of the office of the Central Excise. But, on the other hand, the respondent has permitted 22 others to use the Trade Mark extensively with his knowledge. According to the learned counsel this conduct of the respondent will go to show that the respondent had no longer any bonafide intention to use the trade mark to establish a commercial link between himself and the product in the minds of the public, and that the respondent is guilty of trafficking in trade mark which is totally prohibited under the Act. Learned counsel further submits that trafficking in Trade Mark means utilising the Trade Mark not for the purpose for which the registration is granted but for other collateral purposes like commercial exploitation throu gh others of the foodwill one has acquired on a trade mark, he learned counsel for this point invited my attention to pages 2, 6, 10, 14, 19, 23, 28 and 32 of the selected papers filed by the respondent evidencing a number of agreements by which the respondent has permitted the agreement holders to affix the ‘National Park’ on the respective matches with condition that their entire production should be sold exclusively to the respondent. Learned counsel also drew my attention to the various clauses in t he agreement and particularly paragraph No. 2 which states that

‘the second party are finding it difficult to market their safety matches on a profitable basis, involving in reduction in their output which in turn entails laying off of labour.’

In all the cases the consideration for the agreement holder to affix the respondent’s mark is that the entire stock of the agreement holder will be bought by the respondent. Elaborating the said contention extracted above, learned counsel contends that Clause 6 of the agreement which insists that the entire stock should be sold only to the respondent and none else is a restrictive clause under Section 33 (a) of MRTP Act, 1969. Further he submits that as the agreement is not registered, the agreement is void in law, and that the agreement is a text book example of utilisation of a trade mark for a purpose other than the purpose for which the registration was granted by the Registrar under Sections 18 and 28 of the Act for use by the respondent only. All the above agreements by which the respondent permits different persons to use these marks on their goods is impermissible under the Trade and Merchandise Marks Act. It is prohibited under the Act. Chapter-VI containing sections 45 to 55 deals with the subject of use of trade marks and registered users. Trade Marks Act contemplates the use of the registered trade mark either by the proprietor or by the registered user, if there is a registered user agreement. Outside the scope of this registered user agreement, it is not permissible for A to use the trade mark of B and still seek the protection under the Act. It is said that no man is compelled by the Trade Marks Act to register a user agreement. But if he does not register it under the Act he cannot claim protection under the Act, which means despite user of the trade mark by third parties, their use is for and on behalf of a registered proprietor. Hence the learned counsel submits that in a petition for rectification the proprietor of a registered trade mark can claim in defence that the user by registered users is as good as his own use. To sum up the said contention, the learned counsel submits that in the present case the use of the mark by a large number of non-registered users cannot in any way be for the benefit of the respondent. I have heard Mr. David, learned counsel for the responde nt, for M/s. Kurian & Associates, On this aspect. Learned counsel contends that the word ‘trafficking’ has not been defined in the Trade Marks Act, but the expression has been used in S. 48 of the Act. According to him, the word ‘trafficking’ would mean an unrestricted licence of a mark to a number of persons with the sole object of licencing to others without any bonaride intention to use the mark by the registered proprietor himself. Let me now see whether by applying the facts of the present case, th e ho objection letter given to the Central Excise authorities in Ex. R. 17, Exs. R. 18 and R. 19 for the affixing of the respondent’s labels, payment of the tax, and handing over such produce to the respondent would constitute trafficking thereof. The mere permission to affix the Trade Mark labels of the respondent does not constitute trafficking. Rule 71 (3) of the Central Excise Rules, 1944 stipulates that every packet, box or booklet, or the manufacturer s label affixed thereto shall bear in clealy discernible characters, the name of the factory or a distinguishing mark, which may take the form of a special design whereby the origin of the matches can be traced, and that specimens of all such label shall be submitted to the Collector for the approval and record before they are brought into use. To comply with this Rule, permission has been granted by the respondent to the agreement holders and nothing more and this would not constitute trafficking in the respondent’s Trade Mark as alleged by the petitioner. In this connection Exs. R. 9 to R. 14 were referred to by the learned counsel. The moment the permission is withdrawn by the respondent, the Central Excise Authorities would not allow the agreement holders to affix the labels on the goods manufactured by them as per the agreements thereof. Such letters of withdrawal have been filed by the respondent as per Ex. R. 15 and Ex. R. 16. Hence, in my view it cannot be construed as trafficking on the facts and circumstances of the case from any angle. The respondent through the agreements have been trading in goods and not their Mark to constitute trafficking as alleged by the petitioner.

20 . In this context, paragraph 806 of Narayan’s Trade Marks ana Passing-off, Third Edition, could be usefully referred to. It says that the lincensing of trade marks may be permitted provided;

a) The licensing does not result in causing confusion or deception among the public;

b) It does not destroy the distinctiveness of the Trade Mark before the public eye; continued to exist.

In my view all the requirements are fully satisfied and are existing as on date and time of filing of this Original Petition in this Court for rectification. It cannot be said that the respondent is guilty of trafficking in its trade mark as alleged by the petitioner.

21 . In American Home Products Corpn. v. MAC Laboratories Pvt, Ltd. 1 the Supreme Court has held as follows :-

‘To my mind, trafficking in a trade mark context conveys the notion of dealing in a trade mark primarily as a commodity in its own right and not primarily for the purpose of identifying or promoting merchandise in which the proprietor of the mark is interested. If there is no real trade connection between the proprietor of the mark and the licensee or his goods, there is room for the conclusion that the grant of the licence is a trafficking in the mark. It is a question of fact and degree in every case whether a sufficient trade connection exists.’

For all the reasons stated above, I am of the view that the respondent is not guilty of trafficking in his Trade Mark.

22 . Issue No. 4 : Was the respondent’s Trade Mark registered without any bonafideintention to use in relation to the goods forwhich the registration is granted?

On this question both the learned counsel have advanced elaborate arguments. It is seen from the records that the respondent has been manufacturing and selling its matches with its Trade Mark from the year 1955 onwards. The advertisement bills Exs. Rs. 35 to R. 44 would prove the same. In addition, Exs. Rs. 32, Rs. 33 and Rs. 34 which are sales details, from the year 1956 to 1988, will also go to prove the case of the respondent that the respondent has been manufacturing and selling the matches with its Trade Mark for all these years. I see only bonafide intention on the part of the respondent to use the same, or else the respondent would not have manufactured the product at all. Learned counsel for the petitioner has argued that the respondent has not made use of its Trade Mark as per Section 46 of the Act which, in my view, is not an acceptable proposition.

23 . Whether or not a party had a bonafideintention never to use the Trade Mark as registered must be established as a fact on the material placed on record as done by the respondent in the instant case. This has been decided in a judgment reported in Lachhmandas Biharilal v. Bhagwan Dass 2, wherein the Delhi High Court held as follows :

‘Whether or not a party had a bonafide intention never to use the trade mark as registered must be established as a fact on the material placed on the record. It is not possible to infer it as a matter of law merely from the use of the registered trade mark by the party with an alteration in breach of the conditions of the registration is broken, it may be open to the Assistant Registrar to remove the mark for this or any other reason, but not on the ground that the party never had the intention to use the registered trade mark.’

In this connection I would like to refer to the arguments advanced by the learned counsel for the petitioner that conduct and intention of the parties are irrelevant in these proceedings. In my opinion the said argument cannot be accepted because the words, ‘intention of the parties’ finds a place in Section 46 itself. Hence the intention of parties should have been looked into to find out what they have contracted among themselves and if the contract is looked into (Exs. R. 2 to R. 7) clause 4 reads as follows :

‘The second party hereby expressly covenant and acknowledges the absolute proprietorship of the First Party over their National Park label trade mark which are the subject matter of these presents, and undertake not to use the said label in respect of safety or any other kind of matches except exclusively for supply of safety matches to the first party. The second party also covenants, agrees and undertakes not to use at any time any colourable imitation of the said labels on a safety match or any other kind of matches manufactured by them. The second party also covenants that it will on all the labels as aforesaid acknowledge clearly that it has manufactured the matches on behalf of the first party.’

Clause 4 of the agreement extracted above clearly shows that the intention of the petitioners/third parties is to go back on the said terms to remove the respondent’s mark could only mean the ulterior motive on the part of the petitioners and nothing else. Thus, I hold that the respondent had only a bonafide intention to use the registered trade mark in relation to the goods for which the registration is granted. Hence I answer this issue in favour of the respondent.

24 . Issue No. 5 : Has the petitioner discharged his onus of proof by invoking Sections 32 (c) and 46 of the Act in respectof the respondent’s trade mark?

Submissions made by the learned counsel for the petitioners and the respondent on this point are considered as under. On the point that the respondent has not used National Park for over five years and one month on the date of application for rectification, learned counsel for the petitioners submits that the petition was filed on 25.11.1988 by the petitioners and also placed reliance on page 29 of the plaintiffs typed set to show; that on the request of the respondent Central Excise cancelled the authorisation given under Rule 73 of the Central Excise to affix National Park on 1.3.1983.

25 . According to the learned counsel forthe petitioners the respondent has notproduced any document to show that he hasapplied afresh for the approval of Nationalpark, which would lead to an irresistibleconclusion that from 1.3.1983 the respondenthad no legal authority to manufacture thematches with label, ‘National Park’. Learnedcounsel further submits that vouchers whichwere shown by the counsel for the respondentto indicate clearance of National Park matchboxes from the factory of the respondentcannot be accepted as evidence of user of National Park in the absence of authorityunder Excise Rules to use the mark. I amunable to countenance the above arguments. The concept of burden of proof has beeneffectively laid down by the Supreme Court in a judgment reported in Narayan v. Gopal 1 wherein the Supreme Court has held as follows :

‘The expression ‘burden of proof’ means one of two things (1) that a party has to prove an allegation before it is entitled to a judgment in its favour, or (3) that the one or the other of the two contending parties has to introduce evidence on a contested issue. The question of onus is material only where the party on which it is placed would eventually lose if it failed tp discharge the same. Where issues are, however, joined, evidence is led and such evidence can be weighed in order to determine the issues, the question of burden becomes academic’

In this context paragraph 498 of Narayanan’s Trade Marks and Passing-off, Third Edition can also be looked into :

‘Onus of Proof : The question whether a mark is common to the trade being a question of fact, the onus of proof is on the party alleging this fact. The mere presence of a number of trade marks containing a common feature on the register in the name of different persons is not proof that the feature is common to the trade. The presence of a mark on the register does not prove its user.’

In Corn. Products v. Shangrila Food Products 2 the Supreme Court held as follows :

‘Where there are a ‘series’ of marks, registered or unregistered, having a common feature or a common syllable, if the marks in the series are owned by different persons, this tends to assist the applicant for a mark containing the common feature. But before the applicant can seek to derive assistance for the success of his application for registration from the presence of a number of marks having one or more common features which occur in his mark also, he has to prove that these marks had acquired a r eputation by user in the market.

The presence of a mark in the register does not prove its user at all. It is possible that the mark may have been registered but not used. It is not permissible to draw any inference as to their user from the presence of the marks on the register.’

Thus it is to be seen whether the petitioners have discharged their onus of proof and proved the non-user on the part of the respondent in respect of its registered Trade Mark without a bonafide intention to use the same, and actually has not at all used the said trade mark after its registration. It is also to be further proved that the respondent has been guilty of trafficking in its trade mark and hence should be removed from the register. In my view the: petitioners have failed to establish through proper evidence his allegations made in his petition for removal of the respondent’s registered trade mark. The petitioners have not proved anything to justify their action for invoking the said concept of ‘burden of proof through the Trade Marks Act to rectify the Register thereof by removing the respondent’s registered mark. Learned counsel for the respondent further submits that unless and until a prima facie case of non-use is established, the onus would not shift to the respondent who is the registered proprietor to prove actual use, if any. The petitioner in my view, has not proved beyond doubt that the respondent never used his Trade Mark in his business for five years and one month prior to the date of the application. But, on the contrary, the respondent has proved through Exs. R. 33 and R. 34 that during the five years and one month period prior to the date of the application for rectification, there had been continuous use of Trade Mark in the course of his business.

26 . Mr. U.N.R. Rao, learned counsel for the petitioners has raised another point that as per the respondent’s request to the Central Excise authorities the Trade mark of the respondent’s label was cancelled and after that, not approved. To meet the said contention of the learned counsel for the petitioner, the learned counsel for the respondent placed reliance on Exhibits R. 33 and R. 34 series and a look at the said Exhibits would go to prove that the respondent was manufacturing and selling the matches with its Trade Mark ‘National Park’. My attention was drawn to Exhibit R. 34 which would prove that the Central Excise gate passes duly signed by the authorities were issued indicating collection of Central Excise duty during the years 1986, 1987 and 1988 for the matches that were manufactured by the respondent with his Trade Mark as National Park. Hence, on this ground also, the petitioners’ case has to be rejected, since the petitioners have failed to establish their case by acceptable evidence.

27 . It is seen from the records that therespondent does have the label with its Trade Mark duly approved in March, 1982 itselfafter it had requested for a cancellation ofits mark to change the colour scheme tosatisfy the demand of one of its customers. In this connection the respondent’s counselhas also submitted that the Trade Mark ofthe respondent was not restricted to anycolours, and hence he was free to change itscolours on the Mark and sell. It is alsosubmitted that whenever change is effected, a fresh approval as per the Rules has to beobtained from the authorities, which isimperative. At any rate, I have to acceptthe contentions of the counsel for therespondent that the gate passes would onlyreveal manufacture on the part of therespondent and that the manufacturing operation was being carried on by the respondentwith his trade mark. In my view, that wouldsuffice to show that there was manufacturingoperation on the part of the respondent. ThusI hold that the petitioners have not dischargedtheir burden or proof.

28 . Issue No. 6 : Should the Trade Markusage be taken into account while decidingmatters of this nature under the Act?

The normal usage in a particular ‘trade has very much relevance when deciding whether there has been a misuse of one’s registered trade mark in the course of ‘trades. Exhibit R.1 filed by the respondent is an agreement signed by Golden Matches in favour of WIMCO and further Exhibit R. 36 are labels of various other traders who have given them to other manufacturers to affix their labels as done in the instant case. By doing so the right in the Trade Mark of the respondent is not lost and there cannot be any motive as attributed by the petitioners.

29 . It is now to be seen whether thepetitioner is an aggrieved person entitled tofile the rectification proceedings in this court. Learned counsel for the petitioners submitsthat anyone who is adversely affected by theexistence and retention of the registration ofthe trade mark is an aggrieved person.

Learned Counsel further submits as follows :

a) Petitioner is in the same trade.

b) Petitioner is prevented from using National Park because of registration.

c) Respondent has filed an infringement Proceedings against the petitioner.

30 . Per contra, the counsel for the respondent submits that the petitioner is not anaggrieved person to file this rectificationproceedings and drew my attention to paragraph 860 of Narayanan’s Trade Marks and Passing-off, Third Edition, wherein it is statedthat persons whose trading interests areaffected are aggrieved persons.

According to the learned counsel, an application for rectification can only be made by a person aggrieved. The expression ‘persons aggrieved’ has been construed liberally by English Courts while dealing with the corresponding provisions under the English Acts. Thus persons who are aggrieved are persons who are in some way or other substantially interested in having the mark removed from the register, or persons who would be substantially damaged if the mark remained. Though the petitioner has not clearl y spelt out his grievance on this issue in detail in the petition for rectification, the counsel for the petitioner at the time of the arguments submits that the petitioner is also in the same trade as the person who has registered the Trade Mark and wherever the Trade Mark, if remaining on the register, would limit legal rights of the petitioner so that by reason of the existence of the entry on the register the petitioners could not lawfully do that, and if but for the existence of the mark upon the register he could lawfully do, the petitioner has a locus standi to be heard as a person aggrieved. In the instant case, the petitioner, has been manufacturing the same product for some time and subsequently has been prevented from using the mark National Park because of registration. The mere fact that the petitioner is engaged in the same trade is not sufficient to make him a person aggrieved. In order to show that he is a person aggrieved the petitioner must establish in a practical sense that he may be damaged or injured if the Trade Mark is allowed to stand. He is not an aggrieved person or a person substantially interested in having the mark removed from the register. The petitioner has not proved what is nis substantial interest in having the mark removed nor has he made out a case that he is substantially damaged by the respondent’s registered mark remaining on the register. The petitioner has his own mark as stated by him in Ex. R. 45 and he could in no way be prejudiced by the respondent’s mark remaining on the register. Hence I hold that the petitioner is not an aggrieved person as per the yard sticks adopted by the various rulings and passages referred to above and hence could not sustain this petition for rectification and could not be granted the prayers asked for. Mr. U.N.R. Rao has also referred to Section 29 of the Act and submits that as per the said Section lawful use of a Trade Mark can be done either by the registered proprietor or by registered user, if any. According to the learned counsel, the use of the Trade Mark by third parties on behalf of the respondent amounts to infringement. He further submits that consent given by the respondent through unregistered agreement cannot alter the legal act of infringement, and does not belong to the category of permitted user. By concluding his argument the learned counsel further submits that when a mark suffers simultaneously by infringement by various persons to the knowledge of the proprietor, the original petition filed by the petitioner for rectification has to be ordered as the mark has become publici juris . I am unable to agree with the said contention for the reasons already stated in the paragraphs supra. I hold that the respondent has not violated Section 29 of the Act and the agreement entered into by him with various parties is lawful and valid. Hence I am unable to order the prayer for rectification as prayed for by the petitioners.

31 . I cannot also ignore one important factor which forced the petitioners to come forward with this present Original Petition for rectification. According to the respondent, the petitioner contacted the respondent and offered to manufacture and supply safety matches with the label of the respondent. The respondent agreed for the same but cautioned the petitioner that if the goods manufactured and given are not upto the specification and quality of the respondent, the agreement would be cancelled. The pet itioner did manufacture on three or four occasions and affixed the respondent’s label and sold the same to the respondent. This could also be seen in the evidence given by the petitioner in the proceedings before the District Munsif’s Court at Gudiyatham, marked as Ex. R. 45 in this proceedings, (O.P. No. 627 of 1987) wherein the petitioner has categorically admitted that the ‘Running Deer’ trade mark belongs to the respondent herein (defendant) in O.P. No. 627 of 1987 and that it belongs only to the respondent herein. As the matches supplied by the petitioner were of a sub-standard quality, the respondent requested the petitioner to confirm to the given specification to maintain quality. The respondent to make sure that the quality is maintained took a sample to the department of Industries and Commerce. The same was tested and a report was sent under Ex. R. 29 (Chemical Testing and Analytical Laboratory Test Certificate continuation sheet). As per Ex. R. 29 the quality of the petitioners’ matches wa s far from satisfactory and hence the respondent was compelled to withdraw the consent given to the Central Excise Authority to permit affixture on the respondent’s label forthwith. But in spite of such withdrawal the petitioners without the knowledge of the respondent and that of the Central Excise authority were manufacturing their matches by affixing the trade mark label of the respondent, which was objected to by the respondent. Since the petitioners continued to manufacture and sell its matches with the Trade mark label of the respondent, the respondent filed a suit for infringement of its Trade Mark on the file of the District Court at Vellore and the same is said to be pending before the said Court. In the meanwhile this petition has been filed by the petitioner under Sections 32 (c), 46 and 107 of the Act. As the O.P. No. 182 of 1988 was taken on file by this court, the proceedings pending before the District Court, Vellore were stayed automatically under Section 111 of the Act. Thus the ultimate motive of the petitioner will be seen from his conduct of initiating various proceedings in different courts.

32 . To another point urged by Mr. U.N.R. Rao that the agreements sought to be relied upon by the respondent with various parties filed as Exs. R. 2 to R. 7 are viod for the reason that they contravene Sections 33 (a) and 48 of the MRTP Act, Mr. David, learned counsel for the respondent, would submit that the said argument is outside the ambit and scope of the relief sought for in the petition by the petitioner. A reading of the definition of ‘restrictive trade’ practice in Section 2 (o) of the MRTP Act wo uld mean trade practice which has or may have the effect of preventing, distorting or restricting competition in any manner in particular :

(i) which tends to obstruct the flow of capital of resources into the stream of production, or

(ii) which tends so bring about manipulation of prices of conditions of delivery or to effect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions.’

33 . We may now refer to Section 2(a) which defines Trade Practice, which means ‘any practice relating to the carrying on of any trade’ and includes anything done by any person which controls or affects the price charged by, or the method of trading or any Trader, or any class of traders. On a careful scrutiny of Exs. R. 2 to R. 7 it could be seen that the respondent has no control as such over the other agreement holders in their activity of manufacturing and selling any brand of matches. The agreement only stipulates that oh the safety matches manufactured for the respondent by affixing the Trade Mark of the respondent the same should not be exploited and sold in the market without the knowledge of the respondent. The respondent at no point of time has in any way prevented, distorted or restricted competition in the manufacture and sale of matches by the other manufacturers who have agreed to manufacture and supply safety matches by affixing the respondent’s Trade mark label. A mere reading of the agreements will only go to establish that the other manufacturers have the unfettered liberty to manufacture their brand and compete with therespondent notwithstanding the agreement with the respondent to manufacture and affix the respondent’s label and sell such goods to the respondent themselves or to anybody whom the respondent may direct. There is no Restrictive Trade Practice whatsoever as alleged by the petitioner.

34 . To determine whether a Trade Practice is restrictive in nature or not, three matters are to be considered. First, what facts are peculiar to the business to which the restraint is applied; second, what was the condition before and after the restraint is imposed; and ‘third, what is the nature of the restraint and what is its actual probable effect. This has been enunciated by the Supreme Court in its judgement reported in Telco v. Rt Agreement, New Delhi 1 and it has been held as follows :

‘The definition of restrictive trade practice is an exhaustive and not an inclusive one. The decision whether trade practice is restrictive or not has to be arrived at by applying the rule of reason and not on the doctrine that any restriction as to area or price will per se, be a restrictive trade practice. Every trade agreement restrains or binds persons or places or prices. The question is whether the restraint is such as regulates and thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine this question three matters are to be considered. First, what facts are peculiar to the business to which the restraint is applied. Second, what was the condition before and after the restraint is imposed. Third, what is the nature of the restraint and what is its actual and probable effect.’

If the aforesaid tests are applied to the present case it could be seen that the agreement entered into by the respondent with the various other third parties as per Exs. R. 2 to R. 7 does not constitute any restrictive Trade Practice as alleged by the petitioner. Merely because it falls within one or the other clause of Section 33 (1), a trade practice does not become a restrictive trade practice. It should also satisfy the definition of restrictive trade practice contained in Section 2(o) and it is only then that agreement relating to it would require to be registered under Section 33. This being so I will have to reject the argument of Mr. U.N.R. Rao on Section 48 of the Act. This being so, Section 48 of the Act has no relevance whatsoever. On a careful consideration of the facts and circumstances, the pleadings filed by both parties and the arguments advanced by the respective counsel, I hold that the petitioner has not made out any case for removal of the entry in the register in respect of registered Trade Mark No. 170403 in class-34 in Part-A in the name of the respondent K.B. Venkatachalam trading as Golden Match Works, Guid Iyatham, dated 13.8.1985. Thus, I dismiss the Original Petition. However, in the circumstances of the case, there will be no order as to costs.

35 . Before parting with this case, I have to place on record that I have had the benefit of very able arguments from U.N.R. Rao, learned counsel for the petitioners and Mr. David of M/s. Kurian & Associates, learned counsel for the respondent, which enabled me to grasp the questions at issue between the parties in the proper perspective. I place on record my deep apreciation of the manner in which both the counsel have argued the matter in this case.

The post K. R. Jadayappa Mudaliar Trading as M S Sarasu Match Works Vs. K. B. Venkatachalam Trading as M/s Golden Match Industries appeared first on B&B Associates LLP.

IN THE SUPREME COURT OF INDIA
JACOB M. PUTHUPARAMBIL AND ORS. ETC. ETC. … PETITIONER
Vs.
KERALA WATER AUTHORITY AND ORS. ETC. ETC. …RESPONDENT
DATE OF JUDGMENT: 19/09/1990
BENCH: AHMADI, A.M. (J) REDDY, K. JAYACHANDRA (J)
CITATION:
1990 AIR 2228 1990 SCR Supl. (1) 562
1991 SCC (1) 28 JT 1990 (4) 27
1990 SCALE (2)588
CITATOR INFO :
D 1992 SC2070 (15,20,22)
RF 1992 SC2130 (10,11)

J U D G M E N T

ACT:

Kerala Water Supply and Sewerage Act, 1986/Kerala State Subordinate Service Rules, 1958–Section 19(1)/Rule 9(a)(i)–Kerala Water Authority– Transfer of employees and regularisation of service.

HELD: Interpreting Rule 9(a)(i) consistently with the spirit and philosophy of the Constitution, which it is permissible to do without doing violence to the said rule, it follows that employees who are serving on the establish- ment for long spells and have the requisite qualifications for the job, should not be thrown out but their services should be regularised as far as possible. Since workers belonging to this batch have worked on their posts for reasonably long spells they are entitled to regularisation in service. [388A-B] P.K. Narayani & Ors. v. State of Kerala and Ors., [1984] Suppl. SCC 212; Dr. A.K. Jain & Ors. v. Union of India and Ors., [1987] INSC 266; [1987] Suppl. SCC 497; Daily-rated Casual Labour employed under P & T Department through Bhartiya Dak Tar Mazdoor Manch v. Union of India and Ors., [1987] INSC 297; [1988] 1 SCC 122, referred to.

ORIGINAL JURISDICTION: Writ Petition (Civil) No. 112 of 1990 etc. etc.

(Under Article 32 of the Constitution of India.) P.S. Poti. E.M.S. Anam, V.J. Francis and M.N. PopIi for the Petitioners.

T.S. Krishnamurthy Iyer, G. Viswanatha Iyer, A.S. Nambi- ar. K.R. Kurup. S. Balakrishanan, Vijay Kumar, T.T. Kunhi Kannan. Smt. S. Vasudevan and P.K. Manohar for the Respond- ents.

564 The Judgment of the Court was delivered by AHMADI, J. In special leave petitions, leave granted.

An autonomous body called the Kerala Water and Waste Water Authority was constituted with effect from 1st April, 1984 under Section 3(1) of the Kerala Water and Waste Water Ordinance, 1984 (No, 14 of 1984) which Ordinance was brought into force w.e.f. 1st March, 1984. This ordinance was re- placed by similar Ordinances issued from time to time, the last being Ordinance No. 27 of 1986 which was in turn re- placed by the Kerala Water Supply and Sewerage Act, 1986 (Act No. 14 of 1986), (hereinafter called ‘the Act’); Sec- tion 1(3) whereof provides that it shall be deemed to have come into force on 1st March, 1984. This Act, besides pro- viding for the establishment of an autonomous authority to be called the Kerala Water Authority, makes provision for the development and regulation of water supply and waste water collection and disposal and for matters connected therewith. There is no dispute that the functions which were carried on by the Public Health Engineering Department (PHED) were transferred to the autonomous body on the enact- ment of the Ordinance No. 14 of 1984. After the enactment of the Act, every person working in the PHED became the employ- ee of the Kerala Water Authority (for short ‘the Authority’) by virtue of Section 19(1) of the Act, which reads as under:

“Transfer of employees to the Authority–Save as otherwise provided in this section, every person who was employed in the Public Health Engineering Department of the Government shall, on and from the appointed day become an employee of the Authority and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions, and with the same rights and privileges as to pension, gratuity and other matters as he would have held the same on the appointed day if this Act had not come into force and shall continue to do so until his employment in the Authority is terminated or until his remuneration or other terms and conditions of service are revised or altered by the Authority under or in pursuance of any law or in accordance with any provision which for the time being governs his service:

Provided that nothing contained in this sub-section shall apply to an employee in the cadres of the Administrative ? 565 Officers, Financial Assistants Divisional Accounts, Typists and Stenographers, who, by notice in writing given to the Government and the Authority within such time as the Govern- ment may, by general or special order, specify, intimates his intention of not becoming an employee of the Authority:

Provided further than an employee referred to in the preced- ing proviso shall continue to be an employee under the Government and shall be provided elsewhere in any post or other service under the Government.” Sub-sections (3) and (6) of Section 19 make it clear that such transfer of service shall not entitle the employee to claim any compensation under the Industrial Disputes Act, 1947 nor shall it amount to retrenchment or abolition of post under any extant rule, regulation or order applicable to Government servants. Thus, the erstwhile staff of the PHED was by the thrust of Section 19(1) transferred on the establishment of the Authority. This would naturally concern those persons only who were in the employment of the PHED before the establishment of the Authority w.e.f. 1st April, 1984.

The staff members employed by the Authority after its constitution were naturally appointed under the provisions of the concerned statute. Since the Act has retrospective effect, reference may be made to Section 8(1) of the Act which reads thus:

“Appointment of officers and staff–Subject to the provi- sions of sub-section (2), the Authority may appoint for the purpose of enabling it to carry out its powers, duties and functions under this Act, a Secretary and such other offi- cers and staff as may be required against posts duly sanc- tioned by it:

Provided that the-Authority shall obtain the previous ap- proval of the Government for the creation of post above the rank of the Executive Engineer.” By virtue of Section 8(3), except as provided by sub-sec- tions (1) & (2), the appointment and conditions of service of the officers and employees of the Authority are to be governed by rules made by the Government from time to time.

Although the Act is deemed to have come into force w.e.f.

1st March. 1984, Section 69 became effective 566 from the date of publication of the Act in the Gazette i.e.

4th August, 1986. That section reads as follows:

“Amendment of Act 19 of 1970–With effect from the date of publication of this Act in the Gazette, the Kerala Public Service Commission (Additional functions as respects certain Corporations and Companies) Act, 1970 (19 of 1970) shall have effect subject to the following amendment, namely:– in clause (a) of Section 2, the words and figures “or the Kerala Water Authority” established under section 3 of the Kerala Water Supply and Sewerage Act 1986;”, shall be added at the end.” Even though Act 19 of 1970 stood so amended by the force of Section 69, actual effect could be given after issuance of Notification No. G.O. (MS) No. 38/88/P & ARD dated 30th July, 1988 on which date item (LIII) was added to the rele- vant rules as “Amendment of the Rules–In the Kerala Public Service Com- mission (consultation by Corporation and Companies) Rules, 1971, in Clause (d) of rule 2, after item (LII), the follow- ing item shall be added, namely:– (LIII)–The Kerala Water Authority.” This amendment was considered necessary with a view to bringing the Authority within the purview of PSC so that it may seek the advice of that body on matters relating to the methods of recruitment of its employees, etc.

From the above discussion it becomes clear that the employees of the Authority can be divided into four distinct groups, viz., (i) those who were in the employment of PHED before the constitution of the Authority and were trans- ferred to the Authority (ii) those whom the Authority em- ployed between 1st April. 1984 and 4th August, 1986 (iii) those who were appointed between 4th August, 1986 and 30th July, 1988 and (iv) those who were appointed after 30th July, 1988.

The petitioners in this batch of matters are serving in different capacities, such as, cleaners, pump operators, draftsmen, drivers, etc. They claim that they were appointed through the Employment Ex- 567 change between 1981 and 1988. They contend that they have been compelled to approach this Court as their services are likely to be terminated as has been done in the case of a few of their colleagues. They contend that till the issuance of the notification dated 30th July. 1988 amending the concerned PSC rule (amendment extracted earlier) there was no question of the Authority consulting the PSC and there- fore, appointments made prior to that date cannot be termed as irregular or unauthorised and cannot be determined on that ground. They contend that as in a few cases the High Court of Kerala failed to appreciate this true legal posi- tion and refused to grant relief to employees whose services were threatened, the Managing Director of the Authority issued instructions to his subordinates to terminate the services of similarly placed employees, thereby compelling the present petitioners to approach this Court so that all such employees are uniformly governed by this Court’s order.

They point out that in Civil Appeals Nos. 472 to 478 of 1988 arising from the High Court decision. and Writ Petitions (Civil) Nos. 857 and 1135 of 1987, this Court passed the following order on 1st February, 1988:

“Special leave granted. Heard counsel for the parties.

We are of the view that in the facts and circumstances of these cases the services of such of the appellants as pos- sess the requisite qualifications should be regulated in accordance with the Kerala Public Service Commission (Addi- tional functions as respects certain Corporations and Compa- nies) Act, 1970 and until such regularisation is made, no appointment on similar posts from outside be made. If there be any excess employees now in service employment, it will be open to the Authority to terminate their services on condition that as and when vacancies arise, they shall first be considered for appointment keeping the direction indicat- ed above in view.

Recruitments in future will, however, be in accordance with the Kerala Public Service Commission (Additional functions as respects certain Corporations and Companies) Act, 1970 and the Kerala Water Supply and Sewerage Act, 1986.” Thereafter in another batch of special leave petitions Nos.

4385 to 4387 of 1988 this Court passed the following order on 24th March, 1988:

568 “Heard learned counsel for parties. The only direction which we can give in the facts and circumstances of the case will be in case after all those who have been regularly selected by the Public Service Commission are appointed and thereaf- ter any vacancies are left, the same should be given to those who, like the petitioners, have already been in serv- ice taking into consideration their seniority. Every step should be taken by the Water Authorities to regularise the services of such people who can be appointed under our direction as indicated above. There will be no further direction in this case. The other person who may be thrown out of employment on account of the direction of the Water Authority which is impugned before us, may appear before the Public Service Commission in the next examination, The State of Kerala has informed us that age bar would be waived. The petitions are disposed of accordingly.” The Authority treated these orders as confined to the work- men who had filed the proceedings and did not extend the ratio to others similarly placed. Not only that, the Author- ity, contend the petitioners, placed different interpreta- tions on the aforesaid orders and continued to terminate the services of the employees. Another group of writ petitions Nos. 525,527,528, and 503 of 1988 came up before this Court on 28th November, 1988 when this Court passed the following Order:

“Mr. Krishna Murthy Iyer appearing for the Kerala Water Authority states that the claims of the petitioners can be divided into three categories, namely (1) those who had been employed by Public Health Engineering Department before the Kerala Water Authority was constituted, (2) those who get employed between 1.4.1984 and 1986 and (3) the persons appointed after 1986. The Kerala Water Authority is given three months’ time to examine the individual cases of these groups and take its decision accordingly. We direct the Authority to place its conclusions before the Court before giving effect to them. Status quo as on today will continue until further orders.” The grievance of the petitioners is that no action was taken by the Authority within the time allowed nor has it taken any action till today to implement the said order. The petitioners also contend that the employees are compelled to knock at the doors of different courts as the Authority continues to terminate the services of the employees 569 not with standing the aforequoted orders passed by this Court. Mr. P.S. Poti, the learned counsel for the petition- ers, therefore, made a fervent appeal that this Court should pass an order laying down guidelines for the regularisation of the services of not only the petitioners but also all others similarly placed so that these low income group employees are not required to knock at the doors of differ- ent courts to protect themselves from the threatened arbi- trary action of the Authority terminating their services. In other words he wants this Court to formulate a scheme for the regularisation of the services of all similarly placed employees which would put an end to all pending cases and future cases which are bound to arise if the Authority continues its present policy.

The claims made by the employees in this group of cases is contested mainly on the plea that their tenure and serv- ice conditions were regulated by Rule 9(a)(i) of the Kerala State and Subordinate Service Rules, 1958 (hereinafter called `the Rules’) which were statutory in character and were, therefore, binding on the Authority as well as the employees. It is contended that the employees belonging to different categories were appointed on different dates by the PHED prior to 1st April, 1984 under this rule and, therefore, their services could only be regulated thereun- der. After the autonomous Authority was constituted w.e.f.

1st April, 1984 on the enactment of Ordinance 14 of 1984, the Authority passed a Resolution No. 8 on 25th April, 1984 adopting the aforesaid Rules and hence all appointments made after 1st April, 1984 also came to governed by Rule 9(a)(i) of the Rules till Section 69 of the Act came into force w.e.f. 4th August, 1986 and not 30th July, 1988 when the relevant rule was amended by the introduction of item (LIII) referred to earlier. Appointments made after 4th August, 1986 are clearly subject to the requirement of Section 69 of the Act and the Authority cannot act in contravention there- of. Had it not been for Court orders restraining the Author- ity from terminating their services, the services of all those who were governed by Rule 9(a)(i) would have been terminated on the expiry of 180 days. The text of that rule may be noticed at this stage:

“Where it is necessary in the public interest, owing to an emergency which has arisen to fill immediately a vacancy in a post borne on the cadre of a service, class or category and there would be undue delay in making such appointment in accordance with these rules and the Special Rules, the appointing authority may appoint a person, otherwise than in accordance with the said rules, temporarily.” 570 The first proviso is not relevant for our purpose but reli- ance was placed on the second proviso which reads as under:

“Provided further that a person appointed under this clause by direct recruitment to a post other than teaching post and a post covered by the proviso to clause (iii) of rule 10(b)] shall not be allowed to continue in such post for a period exceeding three months.” (i.e. one hundred eighty days) The rule further requires that a person appointed under clause (i) should be replaced as soon as possible by a member of the service or an approved candidate qualified to hold the post under the said rules. Such replacement must take place in the order of seniority based on length of temporary service in the unit. It is, therefore, the case of the Authority that appointments made under this rule were purely temporary, not to exceed three months, and had to be terminated on the expiry of the said period and it was not open to the Authority to continue their services even by reappointment unless fresh candidates were not available for reappointment through employment exchange. Therefore, had it not been for the restraint orders issued by different Courts, the Authority contends it was under an obligation to act in conformity with the above rules. However, as regards those who had joined service prior to 1st April. 1984 in different categories, the Authority passed a resolution on 30th January, 1987 to the following effect:

“Resolved to recommend the Government the regularisation of the service of the employees recruited in the erstwhile PHED and still working in the Kerala Water Authority.” The Government, it seems, has not taken any decision in this behalf as yet. Since the counter filed on behalf of the State Government is silent on this point we inquired of the learned counsel for the State to clarify the position. We were told that since the Authority was an autonomous body it was free to regularise the services of such employees, if it so desired, without the concurrence of the State Government.

While admitting the fact that appointments were made from the lists submitted by various District Employment Officers, the Authority contends that as the appointments were gov- erned by Rule 9(a)(i) they could not ensure beyond three months and the termination of their employment did not fall within the ambit of `retrenchment’ as understood under the 571 Industrial Disputes Act, 1947. In any case even otherwise the application of that law is specifically excluded by Section 19(3) of the Act and hence the benefit of that law cannot be extended to the employees of the Authority. The contention that the action of the Authority to terminate the services is violative of Article 14 is repelled on the plea that acting in conformity with a statutory Rule 9(a)(i) can never be branded as arbitrary. Lastly it is contended that the Authority was not directed to apply this Court’s orders passed in some of the proceedings referred to earlier to all similarly situated employees as the Court’s orders were based on `the fact and circumstances of these cases’ and were not intended to be of general application. With refer- ence to the order of 24th March, 1988 it is said that the Authority has moved a review application which is pending.

The Authority contends that as there is no infringement of any fundamental right, the writ petitions brought under Article 32 of the Constitution cannot be sustained. The above is the stand taken by the Authority. The State Govern- ment has by and large supported this stand and, therefore, we need not restate the contentions raised in their counter.

The respondents, therefore, contend that the employees are not entitled to any relief whatsoever and the appeals/peti- tions deserve to be dismissed with costs.

The question of regularisation in service must be exam- ined keeping in mind the historical as well as the constitu- tional perspectives. During the colonial rule industrial growth in the country was tardy and most of the large-sized industries were controlled by British interests.

These establishments employed Indian labour on wages far below the sustenance levels. Men, women and even children were required to work for long hours in thoroughly unhygien- ic conditions. Because of large-scale unemployment there was a surplus labour market which the employers could and did exploit. This virtually forced the labour to accept employ- ment on terms unilaterally dictated by the employers. The relationship between the employer and the employee being purely contractual, the hire and fire rule governed. Those were the days of laissez faire when contractual rights were placed above human rights. The concepts of dignity of labour and fair remuneration for work done were wholly alien. The workers had to work in appalling conditions and at low wages with no job security.

After we attained independence the pace of industrial growth accelerated. Our Constitution makers were aware of the hardships and insecurity faced by the working classes.

The Preamble of our Constitution obligates the State to secure to all its citizens social and economic justice, besides political justice. By the 42nd Amendment, the Pream- 572 ble of the Constitution was amended to say that ours will be a socialistic democracy. In furtherance of these promises certain fundamental rights were engrafted in Part 111 of the Constitution. The Constitution guarantees `equality’, abhors discrimination, prohibits and penalises forced labour in any form whatsoever and extends protection against exploitation of labour including child labour. After extending these guarantees, amongst others, the Constitution makers proceed- ed to chart out the course for the governance of the country in Part IV of the Constitution entitled `Directive Princi- ples of State Policy’. These principles reflect the hopes and aspirations of the people. Although the provisions of this part are not enforceable by any court, the principles laid down therein are nevertheless fundamental in the gover- nance Of the country and the State is under an obligation to apply them in making laws. The principles laid down therein.

therefore, define the Objectives and goals which the State must endeavour to achieve over a period of time. Therefore, whenever the State is required to make laws It must do so consistently with these principles with a view to secur- ing social and economic freedom so essential for the estab- lishment of an egalitarian society. This part, therefore, mandates that the State shall strive to promote the welfare of the people by minimising the inequalities in income and eliminating inequalities in status, facilities and opportu- nities; by directing its policy towards securing, amongst others, the distribution of the material resources of the community to subserve the common good; by so operating the economic system as not to result in concentration of wealth;

and by making effective provision for securing the right to work as also to public assistance in cases of unemployment, albeit within the limits of its economic capacities. There are certain other provisions which enjoin on the State certain duties, e.g. securing to all workers work, a living wage, just and humane conditions of work, a decent standard of life. participation in management, etc., which are aimed at improving the lot of the working classes. Thus the Pream- ble promises socio-economic justice, the fundamental rights confer certain justiciable socio-economic rights and the Directive Principles fix the socio-economic goals which the State must strive to attain. These three together constitute the core and conscience of the Constitution.

India is a developing country. It has a vast surplus labour market. Large-scale unemployment offers a matching opportunity to the employer to exploit the needy. Under such market conditions the employer can dictate… I his terms of employment taking advantage of the absence of the bargaining power in the other. The unorganised job seeker is left with no option but to accept employment on take-it-or- 573 leave-it terms offered by the employer. Such terms of em- ployment offer no job security and the employee is left to the mercy of the employer. Employers have betrayed an in- creasing tendency to employ temporary hands even on regular and permanent jobs with a view to circumventing the protec- tion offered to the working classes under the benevolent legislations enacted from time to time, One such device adopted is to get the work done through contract labour, It is in this backdrop that we must Consider the request for regularisation in service.

Before we deal with the case on hand it would be advan- tageous to refer to some of the decision bearing on the question of regularisation. In Smt. P.K. Narayani & Ors. v.

State of Kerala & Ors,, [1984] Suppl. SCC 212 the petition- ers who had been serving as employees of the State of Kerala or its public sector undertakings for the past few years challenged the action of the employer in terminating their services to make room for the candidates selected by the Kerala Public Service Commission. This Court directed that the petitioners and all others similarly placed should be allowed to appear at the next examination that the Public Service Commission may hold without raising the age bar;

till then the petitioners and others may be continued in service provided there are vacancies. This, clarified the Court, will not confer any right on the employees to contin- ue in service or of being selected by the Commission other- wise than in accordance with the extant rules and regula- tions. These directions were given to resolve what this Court described as `a human problem which has more than one facet’, Again in Dr. A.K. Jain & Ors. v, Union of India & Ors., [1987] INSC 266; [1987] Suppl. SCC 497 the services of ad hoc Assistant Medical Officers who were initially appointed for six months but were continued for periods ranging upto four years, were sought to be terminated to accommodate the candidates se- lected by the Union Public Service Commission. The petition- ers claimed that their services should be regularised and their seniority should be fixed from the date of their initial entry in service as ad hoc appointees. In the coun- ter, the Union of India contended that `ad hoc’ appointments were made by the General Managers of the Zonal Railways to tide over temporary shortages of doctors and their tenures were extended till regular selection was made by the UPSC and appointments were made by the President of India. Since the appointing authority was the President of India such ad hoc appointments by the General Managers of the Zonal Rail- ways could not be regularised. It was further contended that the ad hoc appointees were granted age relaxation and were asked to appear at two special selections based on interview alone held by the 574 UPSC in 1982 and 1985. The petitioners were those ad hoc appointees who had either failed to avail of the special benefit of selection or had appeared and failed to qualify.

In the circumstances it was contended that they could not be regularised in service. Notwithstanding the same this Court directed regularisation of services of all doctors appointed upto October 1, 1984 in consultation with UPSC on the evalu- ation of their work and conduct based on the confidential reports in respect of the period subsequent to October 1, 1982. Such regularisation was to be from the dates from which they were continuously working. The services of those not regularised were allowed to be terminated. The petitions of those appointed after October 1, 1984 were however dis- missed.

In the case of Daily-rated Casual Labour employed under P & T Department through Bhartiya Dak Tar Mazdoor Manch v.

Union of India & Ors., [1987] INSC 297; [1988] 1 SCC 122 this Court, while dealing with the question of their absorption, referred to the State’s obligations (referred to as an individual’s rights) under Part IV of the Constitution and observed as under:

“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 produc- tion. It is again for this reason that managements and the governmental agencies in particular should not allow workers to remain as casual labourers or temporary employees for an unreasonable long period of time.” This Court emphasised that unless a sense of belonging arises, the worker will not give his best and consequently production will suffer which in turn will result in economic loss to the nation. This Court, therefore, directed the department to prepare a scheme on a rational basis for absorbing those who have worked for a continuous period of one year.

575 Tested on the above and keeping in mind the constitu- tional philosophy adverted to earlier, we may now proceed to consider the main plank of the contention raised by the Authority. But before we do so we may dispose of the non- controversial part of the case.

From the pleadings in this case one thing that clearly emerges is that the Authority had taken a decision on 30th January, 1987 to regularise the services of those who were employed by the erstwhile PHED and whose services stood transferred to the Authority by the thrust of the statute.

According to the resolution extracted earlier, the Authority recommended to the State Government that the services of the employees recruited in the erstwhile PHED and who continued to work on the establishment of the Authority should be regularised. The learned counsel for the State Government contended that since these employees were now borne on the establishment of the Authority on the statutory transfer of their services, it was for the Authority to regularise their services, and it was quite unnecessary to make a recommenda- tion to the State Government in that behalf. To put it differently, the stand of the State Government through its counsel is that the question of regularisation of the serv- ices of ex-PHED employees now borne on the establishment of the Authority is exclusively within the purview of the Authority and the State Government has no role to play. That means it was wholly unnecessary on the part of the Authority to make the recommendation it made by the resolution of 30th January, 1987 to the State Government for the regularisation of the ex-PHED employees serving on its establishment on that date. To us the position, therefore, appears crystal clear that it is for the Authority and the Authority alone to regularise the services of such employees without waiting for a nod from the State Government. The sphinx-like silence on the part of the State Government for now over three years from the date of the resolution is indeed disturbing and betrays total lack of concern for this pressing human prob- lem.

The second batch of workers comprise those who were appointed between 1st April. 1984 and 4th August, 1986 by the Authority itself. Under section 8(1) of the Act the power to appoint the Secretary and other officers and staff members vests in the Authority. Only when a post above the rank of an Executive Engineer is to be created that the sanction of the State Government becomes necessary under the proviso. Sub-section (2) to which sub-section (1) is subject expects the Authority to seek the previous sanction of the Government if it desires to employ a servant of the Central or State Government on deputation and not otherwise. It is, therefore, clear beyond any manner of doubt 576 that the power to appoint the staff-members with whom we are concerned, solely vests in the Authority. Since the Act is brought into force w.e.f. 1st March, 1984 the question of regularisation of the services of staff-members appointed after that date must be examined with reference to the power found in section 8(1) of the Act. However, the contention of the Authority is based on Rule 9(a)(i) of the Rules, which it claims to have adopted under Resolution No. 8 dated 25th April. 1984. The Authority contends that by the thrust of this rule the appointments were limited to 180 days only and since the said rules had statutory flavour the Authority was bound to act in accordance therewith. We have extracted the relevant part of this rule earlier. since these rules were framed in exercise of power conferred by the proviso to Article 309 of the Constitution they are undoubtedly statu- tory in character but Mr. Poti was right in his contention that they do not retain that character in their application to the staff-members of the Authority since they have been adopted by the Authority under a resolution. These rules would undoubtedly be statutory in character in their appli- cation to the members of the Kerala Subordinate services for whom they were enacted but when any other authority adopts them by a resolution for regulating the services of its staff, the rules do not continue to remain statutory in their application to the staff of that Authority. They are like any other administrative rules which do not have statu- tory force. It was not contended, as indeed it could not That these rules derive statutory force from section 64 or 65 of the Act. Section 64 confers the rule making power on the State while section 65 empowers the Authority to make regulations with the previous approval of the Government. It is nobody’s case that these rules were adopted after obtain- ing the previous approval of the Government. If that be so.

we must accept Mr. Poti’s submission that these rule their application to the staff members of the Authority appointed after 1 st. April, 1984 have no statutory flavour or force.

Now to the text of Rule 9(a)(i) of the Rules. It empowers the appointing authority to appoint a person temporarily otherwise than in accordance with the rule if (i) it is necessary in public interest and (ii) where an emergency has arisen to fill any particular post which has fallen vacant, immediately. In the present case it is diffi- cult to say that all appointments made after 1st April, 1984 were required to be filled immediately because of an emergency of the type contemplated by the said rule. On the contrary it seems appointments were routinely made in purported exercise of power conferred by this rule. The proviso on which reliance is placed , which we have extract- ed earlier. merely states that ordinarily such appointments will be of those persons who 577 possess the requisite qualifications for the post. If any person who does not possess the requisite qualifications is appointed under the said clause, he will be liable to be replaced by a qualified person. Clause (iii) of Rule 9 states that a person appointed under clause (i) shall, as soon as possible, be replaced by a member of the service or an approved candidate qualified to hold the post. Clause (e) of Rule 9, however, provided for regularisation of service of any person appointed under clause (i) of sub-rule (a) if he had completed continuous service of two years on December 22, 1973, notwithstanding anything contained in the rules.

This is a clear indication that in the past the Government also considered it just and fair to regularise the services of those who had been in continuous service for two years prior to the cut-off date. The spirit underlying this treat- ment clearly shows that the Government did not consider it just, fair or reasonable to terminate the services of those who were in employment for a period of two or more years prior to the cut-off date. This approach is quite consistent with the spirit of the rule which was intended to be invoked to serve emergent situations which could not brook delay.

Such appointments were intended to be stop-gap temporary appointments to serve the stated purpose and not long term ones. The rule was not intended to fill a large number of posts in the service but only those which could not be kept vacant till regular appointments were made in accordance with the rules. But once the appointments continued for long, the services had to be regularised if the incumbent possessed the requisite qualifications as was done by sub- rule (e). Such an approach alone would be consistent with the constitutional philosophy adverted to earlier. Even otherwise, the rule must be so interpreted, if the language of the rule permits, as will advance this philosophy of the Constitution. If the rule is so interpreted it seems clear to us that employees who have been working on the establish- ment since long, and who possess the requisite qualifica- tions for the job as obtaining on the date of their employ- ment, must be allowed to continue on their jobs and their services should be regularised. It is unfair and unreasona- ble to remove people who have been rendering service since sometime as such removal has serious consequences. The family of the employee which has settled down and accommo- dated its needs to the emoluments received by the bread winner, will face economic ruination if the job is suddenly taken away. Besides, the precious period of early life devoted in the service of the establishment will be wholly wasted and the incumbent may be rendered `age barred’ for securing a job elsewhere. It is indeed unfair to use him, generate hope and a feeling of security in him attune his family to live within his earnings and then suddenly- to throw him out of job. Such behaviour would be an 578 affront to the concept of job security and would run counter to the constitutional philosophy, particularly the concept of right to work in Article 41 of the Constitution. There- fore, if we interpret Rule 9(a)(i) consistently with the spirit and philosophy of the Constitution, which it is permissible to do without doing violence to the said rule, it follows that employees who are serving on the establish- ment for long spells and have the requisite qualifications for the job, should not be thrown out but their services should be regularised as far as possible. Since workers belonging to this batch have worked on their posts for reasonably long spells they are entitled to regularisation in service.

The third and fourth batches concern workers who were appointed between 4th August, 1986 and 30th July, 1988 and after 30th July, 1988, respectively. Their appointments would be governed by Section 69 which became effective from 4th August, 1986. By virtue of this section the Kerala Public Service (Additional Functions as respect certain Corporations and Companies) Act, 1970 (19 of 1970) came to be amended with effect from 4th August, 1968 on which date it came to be published in the Gazette. Thereby in clause (a) of section 2 the “Kerala Water Authority” came to be added. In law, therefore, the need to consult the PSC had arisen. True it is that the consequential notification amending the 1971 Rules was issued on 30th July, 1988. But on that account we do not think it would be proper to treat them differently. We think it advisable to treat them as forming a single batch since the need to consult the PSC had arisen on Section 69 coming into effect from 4th August, 1986.

In the result we allow these appeals and writ petitions and make the rule absolute as under:

“(1) The Authority will with immediate effect regularise the services of all ex-PHED employees as per its Resolution of 30th January, 1987 without waiting for State Government approval.

(2) The services of workers employed by the Authority be- tween 1st April, 1984 and 4th August, 1986 will be regula- rised with immediate effect if they possess the requisite qualifications for the post prescribed on the date of ap- pointment of the concerned worker.

(3) The services of workers appointed after 4th August, 1984 and possessing the requisite qualifications should be regu- lated in accordance with Act 19 of 1970 provided they have put in continuous service of not less than one year, artifi- cial breaks, if any, 579 to be ignored. The Kerala Service Public Service Commission will take immediate steps to regularise their services as a separate block. In so doing the Kerala Public Service Com- mission will take the age bar as waived.

(4) The Kerala Public Service Commission will consid- er the question of regularisation of the services of workers who possess the requisite qualifications but have put in less than one year’s service, separately. In doing so the Kerala Public Service Commission will take the age bar as waived. If they are found fit they will be placed on the list along with the newly recruited candidates in the order of their respective merits. The Kerala Public Service Com- mission will be free to rearrange the list accordingly.

Thereafter fresh appointments will issue depending on the total number of posts available. If the posts are inade- quate, those presently in employment will make room for the selected candidates but their names will remain on the list and they will be entitled to appointment as and when their turn arrives in regular course. The list will enure for such period as is permissible under the extant rules.

(5) The Authority will be at liberty to deal with the serv- ices of the workers who do not possess the requisite quali- fications as may be it considered appropriate in accordance with law.

(6) Those workers whose services have been terminated in violation of this Court’s order in respect of which Contempt Petition No. 156 of 1990 is taken out shall be entitled to the benefit of this order as if they continue in service and the case of each worker will be governed by the clause applicable to him depending on the category to which he belongs and if he is found eligible for regularisation he will be restored to service and assigned his proper place.

This order will regulate the services not only of the par- ties to the present petitions but also all others similarly situated including those who may be parties to other pro- ceedings pending in different Courts.

If further directions are required in the matter of working out of the above order the High Court of Kerala may be approached for the same. All the aforestated proceedings are disposed of accordingly with no order as to costs.

Y. Lal Appeals and petitions allowed.

The post J. M. Puthuparambil Vs. Kerala Water Authority appeared first on B&B Associates LLP.

IN THE SUPREME COURT OF INDIA
BRITISH INDIA STEAM NAVIGATION CO., LTD. …PETITIONER
Vs.
SHANMUGHAVILAS CASHEW INDUSTRIES AND ORS. …RESPONDENT
DATE OF JUDGMENT: 13/03/1990
BENCH: SAIKIA, K.N. (J) SAWANT, P.B.
CITATION:
1990 SCR (1) 884 1990 SCC (3) 481
JT 1990 (1) 528 1990 SCALE (1)462

ACT:

Indian Bill of Lading Act, 1856: Bill of Lading–Negoti- ation of Contract of affreightment need not be expressed in writing; agreed jurisdiction of a court and choice of law binding on the parties; no submission to the jurisdiction of another court if appearance only to protest.

The Indian Carriage of Goods by Sea Act, 1925 Contract of affreightment–‘ Voyage charterparty’ ‘time charterpar- ty’; responsibility of the charterer vis-a-vis the owner to be ascertained from the charterparty and the bill of lading.

HELD: (1) A bill of lading is the symbol of the goods, and the right to possess these passes to the transferee of the bill of lading, and the right to sue passes with it.

]893C] Sewell v. Burdick, [1884] 10 App. Cases 74 (85, 104), re- ferred to.

(2) A bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment. If a consignee claims the goods under a bill of lading, he is bound by its terms. [904C] (3) The property in the cargo passes to the consignee or the endorsee of the bill of lading but the contract whereun- der the consignment or endorsement is made has always to be taken into consideration. Thus the consignee or endorsee gets only such rights as its consignor or endorser had in respect of the goods mentioned in the bill of lading.

[904C-D] (4) The jurisdiction of the Court may be decided upon the parties themselves on the basis of various connecting factors, and the parties should be bound by the jurisdiction clause to which they have agreed unless there is some strong reason to the contrary. [897B; 899F] (5) The first respondent is the consignee and holder of the bills of 886 lading and ex facie should be bound by clause 3 thereof in regard to jurisdiction. 1892A] (6) If clause 3 of the bills of lading is held to be binding on the first respondent the choice of law by the parties would also be binding. [892C] (7) In the event of the English Court alone having the jurisdic- ion, the application of Indian statutes and the jurisdiction of the Indian court would be, to that extent, inapplicable.

[892D] (8) There may, however, be submission to the jurisdic- tion of an Indian Court by litigating in India. [896E] Sirdar Gurdyal Singh v. Rajah of Faridkote, [1894] AC 670 (684), referred to.

(9) The question of jurisdiction in this case ought not to have been determined by the High Court on the basis of the provisions of section 28 of the Indian Contract Act in the absence of a specific provision making it applicable to transactions in international trade. [895F] (10) Where the negotiation of a bill of lading is by the person who had a right to sue on it, mere possession of it does not enable the holder to sue any person who was not liable under it and not to sue another who was liable under it, to make good the claim. He cannot also sue at a place not intended by the parties when intention has been ex- pressed. [893E-F] (11) Although a defendant who appears and contests the case on its merits will be held to have submitted to the juris- diction, an appearance merely to protest that the court does not have jurisdiction will not constitute submission, even if the defendant also seeks stay of proceedings pending the outcome of proceedings abroad. [896F-G] Williams & Glyn’s Bank PLC v. Astro Dinamico Compania Navi- era S.A. & Anr. The Weekly Law Reports Vol. (1) 1984-438 and Rein v. Stain, [1892] 66 LT 469, referred to.

(12) In the instant case, in the Memo. of appeal before the lower appellate court no specific ground as to jurisdic- tion was taken though there were grounds on non-maintain- ability of the suit. Even in the Special Leave Petition before this Court no ground of lack of jurisdiction of the courts below has been taken. The appellant has, therefore, to be 887 held to have either waived the objection as to jurisdiction or to have submitted to the jurisdiction, in the facts and circumstances of the case. The defence that the suit was not maintainable in the absence of the owner of the ship could in a sense be said to have been on the merits of the case.

[899B-C] 13) Clause 3 of the bills of lading also contains the selection of law made by the parties. The contract is gov- erned by English law and disputes are to be determined according to English Law. [8991] (14) As the law has been chosen, the proper law will be the domestic law of England and the proper law must be the law at the time when the contract is made, throughout the life of the contract, and there cannot be a “floating” proper law. [900D] Gienar v. Meyer, [1796] 2 Hy BI 603; Rex v. Internation- al Trustee for the Protection of Bondholders AG, [1937] AG 500 (529); Vita Food Products Inc. v. Unus Shipping Co.

Ltd., [1939] AC 277 (289-90); James Miller & Partners Ltd.

v. Whirworth Street Estates (Manchester) Ltd., [1970] AC 583 (603); Mackendar v. Feldia AG, [1966] 3 All E.R. 847; Com- pagnie d’Armement Maritime SA v. Compagnie Tunisienne de Navigation SA, [1971] AC 572: [1970] 3 All E.R. 71 and Acrow (Automation) Ltd. v. Rex Chainbelt Inc., [1971] 3 All E.R.

1175, referred to.

(15) The bill of lading is not the contract of af- freightment, for that has been made before the bill of lading was signed and delivered, but it evidences the terms of that contract. [901B] (16) If certain clauses of the charterparty are referred to in the bill of lading those should be referred to in specific terms so as to bind the shipper and the consignee.

A general reference may not be sufficient under all circum- stances. [902E] T.W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd., [1912] AC 1; Vita Food Products, Incorporated v. Unus Ship- ping Co. Ltd., [1939] AC 277 and Rex. v. International Trustee for the Protection of Bondholders, [1937] AC 500, referred to.

(17) For the purpose of ascertaining the responsibility of a charterer in respect of the cargo shipped and landed, it would be necessary to know not only the stipulations between the shipper i.e. the owner of the cargo and the charterer evidenced by the bill of lading, but 888 also those between the charterer and the owner of the ship.

If the charter is by way of demise the problem would be simple inasmuch as the bill of lading will be purely between the shipper and the charterer. In cases of a ‘voyage char- ter’ or a ‘time charter’ one has to find out the actual terms of the charter to ascertain whether they operated as charter by demise or made the charterer only as an agent of the ship owner, and if so to what extent so as to ascertain the extent of privity established between the shipper and the ship owner as stipulated in the bill of lading. [905G-H;

906A] (18) Whether a charterparty operates as a demise or not depends on the stipulations of the charterparty. The princi- pal test is whether the master is the employee of the owner or of the charterer. [906G] (19) It cannot be said that the bill of lading is not conclusive evidence of its terms and the person executing it is not necessarily bound by all its stipulations, unless he repudiates them on the ground that, as he did not know, and could not reasonably be expected to know, of their exist- ence, his assent to them is not to be inferred from his acceptance of the bill of lading without objection. [907D] (20) Where there is a charterparty, the bill of lading is prima facie, as between the ship owner and an indorsee, the contract on which the goods are carried. This is so when the indorsee is ignorant of the terms of the charterparty, and may be so even if he knows of them. As between the ship owner and the charterer the bill of lading may in some cases have the effect of modifying the contract as contained in the charterparty, although, in general, the charterparty will prevail and the bill of lading will operate solely as an acknowledgement of receipt. [907E-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 764 (N) of 1975.

From the Judgment and Decree dated 30.11.1973 of the Kerala High Court in A.S. No. 365 of 1969.

R.F. Nariman, Mrs. A.K. Verma and D.N. Mishra for the Appellant.

Ramamurthi (Not Present) for the Respondents.

The Judgment of the Court was delivered by 889 K.N. SAIKIA, J. The first respondent M/s. Shanmughavilas Cashew Industries, QuiIon purchased from East Africa 350 tons of raw cashewnuts which were shipped in the vessel SS Steliosm chartered by the appellant M/s. British India Steam Navigation Co. Ltd., incorporated in England, pursuant to a contract of affreightment evidenced by 3 bills of lading issued to the shipper for the 3 loads of cashewnuts. Out of 4445 bags containing the nuts carried in the said vessel only 37 12 bags were delivered at Cochin, there being thus short landing of 733 bags.

The first respondent sued the appellant in suit No. O.S.

18/1965 in the Court of the Subordinate Judge, Cochin seek- ing damages for the shortage of 733 bags of raw cashewnuts amounting to Rs.44,438.03. The suit having been decreed with interest @ 6% per annum from 17.7. 1964, for the sum total of Rs.46,659.93, the appellant preferred therefrom appeal A.S. No. 365 of 1969 in the High Court of Kerala which was pleased by its Judgments and decree dated 16.8. 1973 and 30.11. 1973, to dismiss the appeal and affirm that of the Subordinate Judge. Aggrieved, the appellant has preferred this appeal by special leave.

In the courts below the main contentions of the appel- lant, inter alia, were that it was a mere chatterer of the vessel which was owned by S. Matas & Compnay c/o Lucas Matas & Sons, Piraeus, Greece; that there was a charterparty executed between the first respondent and M/s. Victorial Steamship Company as agents of the said owner of the vessel in London on 27.1. 1964; that as per clause 3 of the bill of lading the court at Cochin had no jurisdiction and only English courts had jurisdiction; and that as per the char- terparty and clause 4 of the bill of lading the reined.? of the first respondent, if any, was against the owner who alone was liable and not against the appellant charterer of the vessel. Exhibit D 1 is the photostate copy of the char- terparty concluded in London on 27.1. 1964 and Exhibit P 1 to P3 are the 3 bills of lading in the transaction. The first respondent denied that the appellant was only a char- terer and not liable for the shortage. It also denied that only English Courts had jurisdiction in the matter.

Mr. R.F. Nariman the learned counsel for the appellant first submits that the appellant is an English company registered in England carrying on business in England, and it does not carry on any business in India. It is submitted, as the carrier under clause 3 of the bill of lading, only the appellant has an option either to sue or be sued in England, or in Cochin, which is a port of destination but the shipper 890 had no option to sue at Cochin. In its written statement it was clearly stated that it had appeared under protest and without prejudice to the contention regarding jurisdiction which contention it had also pressed at the time of the argument, and, therefore, it could not be said to have submitted to the jurisdiction of Cochin court; and it never made any submission or raised any objection as to the fact of short landing. According to counsel the High Court has held clause 3 of the bill of lading to be bad on two errone- ous grounds, namely, that it offends section 28 of the Contract Act and that it gives an unfair advantage to the carrier which advantage is not given to the consignee.

Section 28, according to counsel, is not applicable and clause 3 was not bad on the ground of having given an unfair advantage to the carrier in giving him the option to sue or be sued either in England or at the port of destination and that even if it was bad, only the offending portion could be struck off, the rest of the clause would still be applicable and only the English court would have jurisdiction.

Records show that in the written statement the appellant as defendant in para B stated that the contract evidenced by the bills of lading was governed by English law and the parties had agreed that the disputes were to be determined in England according to English law to the exclusion of the jurisdiction of the courts of any other country and that the institution of the suit at Cochin was in violation of that agreement, and hence the Court had no jurisdiction to try the suit and the plaint should be returned for presentation to proper court.

In the Replication filed by the plaintiff it was said:

“The objection regarding jurisdiction raised in clause B of written statement is not tenable. The cause of action for the suit has arisen within the local limits of the jurisdic- tion of this Court. The defendant is also residing and carrying on business within this court’s jurisdiction. It is now well settled that the parties cannot be consent confer or oust the jurisdiction of a Court. The plaintiffs deny the agreement mentioned in clause B and no agreement can oust the jurisdiction of the Court when the Court possesses the jurisdiction.” Issue No. 1 was: “Whether the suit is properly filed in this Court?” The trial court in its judgment dated 29.3.

1968 held:

“This issue has been considered by this Court on 28.2. 1966 891 and it has been found that this Court has jurisdiction to try the suit. The said finding has been confirmed by the Hon’ble High Court on 6.4.1967 in C.R.P. 977/66.” That judgment is not before us. In the memo of appeal to the High Court apart from the general grounds that the judgment and decree of the Court below were wrong in law and fact;

that the Court below should have held that the suit was not maintainable in law and should have finally dismissed the suit as the owners of the vessel ‘Steliosm’ a necessary party, as he alone was liable, was not impleaded and pro- ceeded against, no specific ground about jurisdiction was taken and consequently we do not find any direct discussion on the point in the High Court judgments.

Even so, this being a question of jurisdiction going to the root of the matter we allowed the appellant to make his submissions. The appellant’s submission that the courts at Cochin had no jurisdiction is based on clause 3 of the Bills of Lading which reads as follows:

“3. JURISDICTION: The contract evidence by this bill of lading shall be governed by English law and disputes deter- mined in England or, at the option of the Carrier, at the port of destination according to English law to the exclu- sion of the jurisdiction of the Courts of any other country.” If the above clause was binding on the first respondent, without anything more, there could be no doubt that the suit claim arising out of the contract of affreightment evidenced by the bills of lading will have to be determined in England or, at the option of the carrier, that is the appellant, at the port of destination, that is, Cochin, to the exclusion of the jurisdiction of the courts of any other country. Is the first respondent bound by this clause of the Bill of Lading? Clause 29 of both the bills of lading Exhibit P 1 and P2 runs as follows:

“Finally in Accepting This Bill of lading. The shipper, Consignee, and Owner of the goods, and the Holders of this Bill of Lading, expressly accept and agree to all its stipu- lations, exceptions, and conditions whether written, print- ed, stamped or incorporated, as fully as if they were all signed by such Shipper, Consignee, Owner or Holder.” 892 The first respondent is the consignee and holder of the bills of lading and ex facie should be bound by this clause.

No doubt the bills of lading were issued to the shipper from whom it was received by the first respondent. There is no evidence to show that the shipper has repudiated the stipu- lations in the bills of lading in any manner. Under these circumstances would it be open to the first respondent to repudiate clause 3 of the bills of lading? It is a settled principle of Private International Law governing bills of lading that the consignee or an endorsee thereof derives the same rights and title in respect of the goods covered by the bill of lading as the shipper thereof had. For the purpose of jurisdiction the action of the first respondent is an action in personam in Private International Law. An action in personam is an action brought against a person to compel him to do a particular thing. If clause 3 of the bills of lading is held to be binding on the first respondent the choice of law by the parties would also be binding. English courts would perhaps use their own Private International Law to decide the dispute. In the event of the English Court alone having the jurisdiction, the application of Indian statutes and the jurisdiction of the Indian courts would be, to that extent, inapplicable.

Until the Bills of Lading Act, 1855 was passed in Eng- land the endorsement of a Bill of Lading would not affect the contract evidenced in it, and the endorsee could not sue or be sued on such contract, though he was the person really interested in goods, the subject of the contract. By section 1 of the Bills of Lading Act, 1855, in England “every con- signee of goods named in a Bill of Lading, and every endor- see of a Bill of Lading to whom the property of goods shall pass, upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the Bills of Lading had been made with himself.” In Sewell v. Burdick, [1884] 10 App. Cas. 74 (85, 104) it is held that section 1 is to be given effect in any proceeding in the English Court regardless of the proper law governing the transfer of the bill of lading. The property passes by reason of consignment or endorsement and the right to sue passes with it. The consignee or endorsee may lose his right or liability under the Act by such further endorsement of the bill of lading as divests him of the property. Such a vesting of rights and liabilities on endorsement of a bill of lading does not in any way affect the shipowners’ rights against the original shippers or owners of the goods for the freight or the shipper’s rights under the bill of fading or the liability 893 Of the consignee or indorsee by reason of his being such consignee or indorsee or of his receiving the goods in consequence of such consignment or endorsement, or any right of stoppage in transit.

The Indian Bill of Lading Act, 1856 was based on the English Bills of Lading Act, 1855 (18 and 19 Vict. C. 111) (Act IX of 1856). Under section 1 of the Indian Bills of Lading Act, 1856 also every consignee of goods named in a bill of lading and every endorsee of a bill of lading to whom the property in goods therein mentioned shall pass, upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.

The bill of lading is the symbol of the goods, and the right to possess those passes to the transferee of the bill of lading. In other words, its transfer is symbolic of the transfer of the goods themselves and until the goods have been delivered, the delivery of the duly endorsed bill of lading operates as between the transferor or transferee, and all who claim through them, as a physical delivery of the goods would do. The bill of lading is a negotiable instru- ment in the sense of carrying with it the right to demand and have possession of the goods described in it. It also carries with it the rights and liabilities under the con- tract, where the property in the goods also is transferred.

However, a bill of lading is not a negotiable instrument in the strict sense of the transferee deriving better title than the transferor. The transferee of a bill of lading gets no better title than the transferor himself had. Mere pos- session of the bill of lading does not enable the holder to sue a person at a place where the tranferor himself could not have done. Where the negotiation of a bill of lading is by the person who had a right to sue on it, mere possession of it does not enable the holder to sue any person who was not liable under it and not to sue another who was liable under it to make good the claim. He cannot also sue at a place not intended by the parties when intention has been expressed.

It would also be relevant to consider whether English courts would be likely to entertain the instant suit if instituted in England in terms of the bills of lading so that the first respondent is not likely to be without a remedy.

Dicey & Morris in the Conflict of Laws 1 1th Ed. have given the following general principles as to jurisdiction in actions in personam:

894 “Rule 28, Sub-rule 4: The court may assume jurisdiction if, in the action begun by the writ, the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which (i) was made in England, or (ii) was made by or through an agent trading or residing in England on behalf of a principal trading or residing out of England, or (iii) is by its terms or by implication governed by English law, or (iv) contains a term to the effect that the court shall have jurisdiction to hear and determine any action in respect of the contract.” Rule 34 deals with jurisdiction clauses and it says:

“(1) Where a contract provides that all disputes between the parties are to be referred to the jurisdiction of the Eng- lish courts, the court normally has jurisdiction to hear and determine any action in respect thereof.

(2) Subject to clause (3) of this Rule, where a contract provides that all disputes between the parties are to be referred to the exclusive jurisdiction of a foreign tribu- nal, the English court will stay proceedings (or, as the case may be, refuse to give leave to serve the writ out of the jurisdiction) instituted in England in breach of such agreement, unless the plaintiff proves that it is just and proper to allow them to continue.

(3) Where the case falls within the scope of the 1968 Con- vention, unless the defendant submits to the jurisdiction, the court has no jurisdiction to determine a dispute.

(a) if one or more of the parties is domiciled in a Con- tracting State and the parties have agreed in accordance with Article 17 of the 1968 Convention 895 that the courts of a Contracting State other than the United Kingdom are to have jurisdiction to settle any such dispute;

or (b) if none of the parties is domiciled in a Contracting State and the parties have agreed in accordance with Article 17 of the 1968 Convention that the courts of a Contracting State other than the United Kingdom are to have jurisdiction to settle any such dispute and the courts chosen have not declined jurisdiction.” According to the authors the parties to a contract in international trade or commerce may agree in advance on the forum which is to have jurisdiction to determine disputes which may arise between them. The chosen court may be a court in the country of one or both the parties, or it may be a neutral forum. The jurisdiction clause may provide for a submission to the courts of a particular country, or to a court identified by a formula in a printed standard form, such as a bill of lading referring disputes to the courts of the carrier’s principal place of business. It is a question of interpretation, governed by the proper law of the con- tract, whether a jurisdiction clause is exclusive or non- exclusive, or whether the claim which is the subject matter of the action fails within its terms. If there is no express choice of the proper law of the con.tract, the law of the country of the chosen court will usually, but not invaria- bly, be the proper law.

It is accordingly unlikely that the first respondent would be without any remedy if the terms of clause 3 of the bills of lading are faithfully observed.

The question of jurisdiction in this case ought not ,to be determined by the High Court on the basis of the provi- sions of s. 28 of the Indian Contract Act in the absence of a specific provision making it applicable to transactions in international trade. The effective operation of statutes of a country in relation to foreigners and foreign property, including ships, is subject to limitations..In general, a statute extends territorially, unless the contrary is stat- ed, throughout the country and will extend to the territori- al waters, and such places as intention to that effect is shown. A statute extends to all persons within the country if that intention is shown. The Indian Parliament therefore has no authority to legislate for foreign vessels or for- eigners in them on the high seas. Thus a foreign ship on the high seas, or her foreign owners or their agents in a for- eign country, are not deprived of 896 rights by our statutory enactment expressed in general terms unless it provides that a foreign ship entering an Indian port or territorial waters and thus coming within the terri- torial jurisdiction is to be covered. If the Parliament legislates in terms which extend to foreign ships or for- eigners beyond the territorial limits of its jurisdiction, the Indian court is of course bound to give effect to such enactment. However, no such provision has been referred to in the impugned judgments. Without anything more Indian statutes are ineffective against foreign property and for- eigners outside the jurisdiction.

The Privy Council in Sirdar Gurdyal Singh v. Rajah of Faridkote, [1894] AC 670 (684) decided that no territorial legislation can give jurisdiction in personal action which any foreign court should recognize against absent foreigners owing no allegiance or obedience .to the power which so legislates. Lore Selborne said: “In a personal action to which none of these causes of jurisdiction apply, a decree pronounced in absentem by a foreign court, to the jurisdic- tion of which the defendant has not in any way submitted himself, is by international law an absolute nullity. He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the courts of every nation except (when authorised by special local legislation) in the country of the forum by which it was pronounced.” There may however be submission to the .jurisdiction of an Indian court by litigating in India. The question then is what would amount to submission to jurisdiction.

Cheshire & North’s Private International Law 11th Ed., on submission to jurisdiction says: “Despite the fundamental principle that the court cannot entertain an action against a defendant who is absent from England, it has long been recognised that an absent defendant may confer jurisdiction on the court by submitting to it. This may be done in a variety of ways, such as by the defendant acknowledging service before actual service of the writ, or instructing a solicitor to accept service on his behalf; Commencing an action as a plaintiff will give the court jurisdiction over a counter claim. Although a defendant who appears and con- tests the case on its merits will be held to have submitted to the jurisdiction, an appearance merely to protest that the court does not have jurisdiction will not constitute submission, even if I the defendant also seeks a stay of proceedings pending the outcome of proceedings abroad.” The authors go on to say that any person may contract, either expressly or impliedly, to submit to the jurisdiction of a court to which he would not otherwise be subject. In case of an international contract it is common practice for the par- ties, to agree that 897 any dispute arising between them shall be settled by the courts of another country even though both the parties are not resident of that country. In such a case having consent- ed to the jurisdiction one cannot afterwards contest the binding effect of the judgment. The defendant out of the jurisdiction of the country may be deemed to have been served by service on his agent within the jurisdiction.

However, parties cannot by submission confer jurisdiction on the court to entertain proceedings beyond its authority.

The jurisdiction of the court may be decided upon by the parties themselves on basis of various connecting factors.

Wastlake says in his Treatise on Private International Law, at page 5: “The principal grounds for selecting a particular national jurisdiction in which to bring an action are that the subject of the action, if a thing, is situate, if a contract, was made, or was to be performed, if a de- lict, was committed, within the territory: hence the forum situs, or rei sitae, contractus, delicti, the two latter of which are classed together as the forum special obligatio- nis. Or that the jurisdiction is that in which all the claims relating to a certain thing or group of things ought to be adjudicated on together, the forum concursus, or that to which the defendant is personally subject, the forum rei.” In the instant case the appellant submits that as de- fendant it appeared before the Indian court to protest its jurisdiction and put forth its defences subject to that protest. The appellant, it has been stated in para 2 of the judgment under appeal, dated 30.4.1973, had not filed any objection to the findings as to damages. Did it then amount to submitting to the jurisdiction of the Indian court in which the shipper or the first respondent had no right to sue? In Williams & Glyn’s Bank PLC v. Astro Dinamico Compania Naviera S.A. & Anr., The Weekly Law Reports Vol. (1) 1984- 438, where the plaintiff-bank sought to enforce its securi- ties against the defendants by instituting proceedings in England in reliance of clause 7 of the guarantees, whereby each of the defendants were expressed to submit irrevocably to the jurisdiction of the English courts. The respondents (defendants) made an application disputing the jurisdiction of the English courts and had also simultaneously applied for stay of the action. It was contended on behalf of the appellants (plaintiffs) that the respondents (defendants) either had waived any objection to the jurisdiction because they had taken a step in the action by applying for a stay or that they would waive any objection if they persisted with 898 their application in priority to disputing the jurisdiction.

Lord Fraser observed that it would surely be quite unrealis- tic to say that the respondents had waived their objection to the jurisdiction by applying for a stay as an alternative in the very summons in which they applied for an order giving effect to their objection to the jurisdiction. That the summons made it abundantly clear that they were object- ing and the fact that they asked for a decision upon their objection to be postponed until the outcome of the Greek proceedings was known, was not in any way inconsistent with maintaining their objection. There was no reason in princi- ple or in common sense why the respondents should not be entitled to say: “We object to the jurisdiction of the English courts, but we ask for the proceedings necessary to decide that and the other issues to be stayed pending the decision of the proceedings in Greece.” Reference was made to Rein v. Stein, [1892] 66 LT 469, where it was said at page 471: “It seems to me that, in order to establish a waiver, you must show that the party alleged to have waived his objection has taken some step which is only necessary or only useful if the objection has been actually waived, or if the objection has never been entertained at all.” In Dulles’ Settlement (No.2) ( 1951) Ch. 842; the question was whether a father, who was an American resident outside England, had submitted to the jurisdiction of the English courts in a dispute about payment of maintenance to his child in Eng- land. He had been represented by counsel in the English court, who argued that he was not subject to their jurisdic- tion. Denning LJ (as he then was) said at page 850:

“I cannot see how anyone can fairly say that a man has voluntarily submitted to the jurisdiction of a court, when he has all the time been vigorously protesting that it has no jurisdiction. If he does nothing and lets judgment go against him in default of appearance, he clearly does not submit to the jurisdiction. What difference in principle does it make, if he does not merely do nothing, but actually goes to the court and protests that it has no jurisdiction? I can see no distinction at all.” The judgment of the court of appeal which held that the application for a stay involved assumption that the court had jurisdiction to entertain the action and therefore the question of jurisdiction must be decided first, was set aside in appeal, and the appeal therefrom was dismissed by the House of Lords.

In the instant case the question is of initial jurisdiction on the 899 basis of claues 3 of the bills of lading. We have to ask the question whether the shipper could or could not have the right to sue at Cochin under the bills of lading. If he could not have done so, the appellant’s appearance to pro- test about jurisdiction would not cure that defect of juris- diction. However, we find that in the Memo. of appeal before the lower appellate court no specific ground as to jurisdic- tion was taken through there were grounds on non-maintain- ability of the suit. Even in the Special Leave Petition before this Court no ground of lack of jurisdiction of the courts below has been taken. We are, therefore, of the view that the appellant has to be held to have either waived the objection as to jurisdiction or to have submitted to the jurisdiction in the facts and circumstances of the case. The defence that the suit was not maintainable in the absence of the owner of the ship could in a sense be said to have been on the merits of the case. The submission as to lack of jurisdiction is, therefore, rejected.

Clause 3 of the bills of lading also contains the selec- tion of law made by the parties. The contract is governed by English law and disputes are to be determined according to English Law. Is the selection of law binding? In Cheshire & North’s Private International Law 1 th Ed., page 495,, while discussing about the interpretation of contracts the authors say: “When the stage has been reached where an obligation, formally and essentially valid and binding on parties of full capacity, has been created, then in the further matters that may require the intervention of the Court, there is, speaking generally, no reason in principle why the parties should not be free to select the governing law.” The express choice of law made by parties obviates need for interpretation.

In the absence of an express choice the question of the proper law of contract would arise. The parties to a con- tract should be bound by the jurisdiction clause to which they have agreed unless there is some strong reason to the contrary.

Dicey & Morris in the Conflict of Laws formulate the following rule on proper law of contract as Rule 180:

“The term “Proper law of a contract” means the system of law by which the parties intended the contract to be governed, or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connec- tion.” 900 Sub-rule 1:

“When the intention of the parties to a contract, as to the law governing the contract, is expressed in words, this expressed intention, in general, determines the proper law of the contract.” Sub-rule 2:

“When the intention of the parties to a contract with regard to the law governing the contract is not expressed in words, their intention is to be inferred from the terms and nature of the contract, and from the general circumstances of the case, and such inferred intention determines the proper law of the contract .” There can, therefore, be no doubt that the instant contract of affreightment evidenced by the bills of lading will be governed by English law. As the law has been chosen, the proper law will be the domestic law of England and the proper law must be the law at the time when the contract is made throughout the life of the contract and there cannot be a “floating” proper law. It has been recognised since Gienar v. Meyer, [1796] 2 Hy B 1608, that the the time of making the contract the parties may expressly select the law by which it is to be governed and they may declare their common intention by a simple statement that the contract shall be governed by the .law of a particular country. This has been settled by a long line of decisions, as ‘Rex v. Internation- al Trustee for the Protection of Bondholders AG, [1937] AC 500 (529); Vita Food Products Inc. v. Unus Shipping Co.

Ltd., [1939] AC 277 (289-90); James Miller and Partners Ltd.

v. Whitworth Street Estates (Manchester) Ltd., [1970] AC 583 (603); Mackender v. Feldia AG, [1966] 3 All E.R. 847; Com- pagnie d’ Armement Maritime SA v. Compagnie Tunisienne de Navigation SA, [1971] AC 572: [1970] 3 All E.R. 71 and Acrow (Automation) Ltd. v. Rex Chainbelt Inc., [1971] 3 All E.R.

1175.

It is true that in English law there are certain limita- tions on freedom to choose the governing law. The choice must be bona fide and legal, and not against public policy.

It may not be permissible to choose a wholly unconnected law which is not otherwise a proper law of contract. English courts, it has been said, should, and do, have a residual power to strike down for good reasons, choice of law clauses, totally unconnected with the contract. Where there is no express 901 choice of the proper law, it is open to Court to determine whether there is an implied or inferred choice of law in the parties contract.

The next question to be decided is whether the appellant would be liable for the suit claim. This would naturally depend on the contract of affreightment. It is an accepted principle that the bill of lading is not the contract of affreightment, for that has been made before the bill of lading was signed and delivered, but it evidences the terms of that contract. The bill of lading serves as a receipt and also as a document of tittle and may be transferred by endorsement and delivery. Article III(3) of the Hague Rules says that a bill of lading is prima facie evidence of the receipt by the carrier of the goods described therein. The Hamburg Rules define a bill of lading under Article 1(7) as follows:

“Bill of lading” means a document which evidences a contract of carriage by sea and the taking over or loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document. A provision in the document that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.” The Hague Rules say that after the goods are taken into his charge, the carrier or his agent shall issue to the shipper, if he so demands, a bill of lading, showing among other things the particulars of the goods.

The contract of affreightment need not necessarily be expressed in writing. The bill of lading is evidence of the terms of the contract which can also be ascertained from the charterparty where one exists. Dr. Justice T. Kochu Thommen in his book of Bills of Lading in International Law and Practice at page 25 writes:

“As between the shipowner and the shipper, the bill of lading is not conclusive evidence of the terms of the con- tract and parties to the contract are entitled to prove that the stipulations in the bill of lading are at variance with the agreed terms of the contract, as expressed or evidenced in other documents. In practice, however, the terms of the bill of lading govern the contractual relations between the shipowner and the shipper, and the booking note generally states that the carrier’s regular forms of bill of lading shall 902 be used and all the terms thereof shall form part of the contract. The bill of lading assumes the character of con- clusive evidence once it has passed into the hands of a consignee or indorsee and evidence may not be given which varies or contradicts it. The position is, however, differ- ent when the ship is under charter and stipulations in the charterparty are expressly and clearly incorporated in the bill of lading. In such a case the bill of lading, even after it has passed in to the hands of a consignee or indor- see, has to be read subject to the charterparty stipula- tions. In the hands of a charterer, the bill of lading is only a receipt and the charterparty is the governing docu- ment as far as the shipowner’ and the charterer are con- cerned.” Apart from the question of the charterparty having been proved or not according to law the question in the instant case is whether clause 4 of the charterparty as to responsi- bility of the shipowner in respect of the goods carried would form part of or be incorporated in the bills of lad- ing. How far the charterparty clauses laying down the re- sponsibility and liabilities between the charterer and the shipowner can be attributed to the consignee under the bill of lading? It is an accepted principle that if certain clauses of the charterparty are referred to in the bill of lading those should be referred to in specific terms so as to bind the shipper and the consignee. A general reference may not be sufficient under all circumstances. Thus in T.W.

Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd., [1912] AC 1 in the bill of lading there was also a marginal clause in writing as follows:

“Deck load at shipper’s risk, and all other terms and condi- tions and exceptions of charter to be as per charterparty, including negligence clause.” The question was whether the arbitration clause in the charter~ party was incorporated by the reference in the bill of lading. Lord Loreburn L.C. answering this question wheth- er an arbitration clause found in the charterparty was applicable to the contract evidenced by the bill of lading, and to disputes arising between the shipowners and the holders of the bill of lading under that document, replied in the negative. Lord Atkinson observed that when it was sought to introduce into a document like a bill of lading–a negotiable instrument–a clause such as the arbitration clause, not germane to the receipt, carriage, or delivery of the cargo or the payment of freight, the proper subject matters with which the bill of lading is conversant, that should 903 be done by distinct and specific words, and not by such general words as those written in the margin of the bill of lading in that case.

In Vita Food Products, Incorporated v. Unus Shipping Co.

Ltd., [1939] A.C. 277, the bill of lading set out in detail the terms and conditions of the contract “which are hereby mutually agreed upon as follows”. Clause 7 contained a general exemption in respect of the goods carried from liability for all damage capable of being covered by insur- ance and from liability above a certain value per package unless a special declaration was made. The same clause also provided that “these contracts have been governed by English Law.” While determining what was the proper law of the contract the Privy Council held that the expressed words of the bill of lading must receive effect with the result that the contract was governed by English Law. It was said: “It is now well settled that by English Law (and the law of Nova Scotia is the same) the proper law of the contract is the law which the parties intended to apply. That intention is objectively ascertained, and, if not expressed, will be presumed from the terms of the contract and the relevant surrounding circumstances.” In that case the goods were shipped in Newfoundland under bills of lading which did not contain the statement required by section 3 of the Carriage of Goods by Sea Act, 1932 which incorporated the Hague rules subject to certain modifications but the bill of lading contained a general clause that the contracts “shall be governed by English Law” and applying that law the Shipowner was held to be within the exceptions which exempted him from liability. In Rex v.International Trustee for the protection of Bondholders, [1937] AC 500, it was held that the inten- tion of the parties would be ascertained from what is ex- pressed in the contract, which will be conclusive. Repelling the contention that the transaction which was one relating to the carriage on a Nova Scotian ship of goods from New- foundland to New York between residents in those countries, contained nothing to connect it in any way with English law, and that choice could not be seriously taken, their Lord- ships held that connection with English law was not as a matter of principle essential.

The Indian Bills of Lading Act, 1856, which is based on the Bills of Lading Act of 1855 of England in its preamble says:

“Whereas by the custom of merchants a bill of lading of goods being transferable by endorsement, the property in the goods may thereby pass to the indorsee, but nevertheless all rights in respect of the contract contained in the bill of lading continue in the original shipper or owner, and it is 904 expedient that such rights should pass with the property.” Section 1 of the Act provides that fights under bills of lading are to vest in consignee or endorsee. It says: “Every consignee of goods named in a bill of lading and every endorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.” Thus a bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment. If the consignee claims the goods under a bill of lading he is bound by its terms. The property in the cargo passes to the consignee or the endorsee of the bill of lading but the contract whereunder the consignment or en- dorsement is made has always to be taken into consideration.

Thus the consignee or an endorsee gets only such rights as its consignor or endorser had in respect of the goods men- tioned in the bill of lading. This is in conformity with Private International law applicable to the case.

The Indian Carriage of Goods by Sea Act, 1925 (Act XXVI of 1925) is an Act to amend the law with respect to carriage of goods by sea. It was passed after accepting the recommen- dations of the International Conference on maritime Law held at Brussels in October, 1922 and accepting the rules con- tained in the Draft Convention held at Brussels meeting in October, 1923 amending the rules to give the rules the force of law with a view to establish the responsibilities, li- abilities, rights and amenities attaching to carriers on the bills of lading. But the Rules of the act are not applicable to this case.

The High Court rejected the contention of the appellant that it could not be made personally liable for claim on the grounds that the bills of lading were issued in the printed forms of the appellant company bearing its name at the top and that beyond what appeared at the bottom over the signa- ture and seal, there was nothing at all to indicate that the appellant company was issuing the bills of lading for and on behalf of any owners of the vessel. However, the conditions printed on the reverse of the bills of lading itself could not have been avoided. Clause 4 Agency Clause said:

“If the vessel is not owned by or chartered by demise to the company or Line by whom this bill of lading is issued (as may be the case notwithstanding anything that appears to 905 the contrary) this bill of lading shall take effect only as a contract with the owner or demise chatterers as the case may be as principal made through the agency of the said company or Line who act solely as agents and shall be under no personal liability whatsoever in respect thereon.” This clause ex facie establishes a privity of contract between the owner or demise charterer of the vessel on the one hand and the shipper to whom the bill of lading has been issued by the appellant company as the charterer otherwise than by demise. The High Court construed this clause to be one relieving or lessening the carrier’s liability without considering whether it was otherwise than as provided in the Rules under the Carriage of Goods Act, 1924 of England.

In Halsbury’s Laws of England 4th edn. Vol. 43, para 401, it is said.

“A contract for the carnage of goods in a ship is called in law a contract of affreightment. In practice these con- tracts are usually written and most frequently are expressed in one or other of two types of document called respectively a charterparty and a bill of lading.” In para 402 we read that a contract by charterparty is a contract by which an entire ship or some principal part of her is let to a mer- chant, called ‘the charterer’, for the conveyance of goods on a determined voyage to one or more places, or until the expiration of a specified period. In the first case it is called a “voyage charterparty”, and in the second a “time charterparty”. Such a contract may operate as a demise of the ship herself, to which the services of the master and the crew may or may not be added, or it may confer on the charterer nothing more than the right to have his goods conveyed by a particular ship, and, as subsidiary to it, to have the use of the ship and the services of the master and crew.

Thus for the purposes of ascertaining the responsibili- ty of a charterer in respect of the cargo shipped and land- ed, it would be necessary to know not only the stipulations between the shipper i.e. the owner of the cargo and the charterer, evidenced by the bill of lading and also those between the charterer and the owner of the ship. If the charter is by way of demise the problem would be simple inasmuch as the bill of lading will be purely between the shipper and the charterer. In cases of a ‘voyage charter’ or a ‘time charter’ one has to find out the actual terms of the charter to ascertain whether they operated as charter by demise or made the charterer only as an agent 906 of the shipowner and if so to what extent so as to ascertain the extent of privity established between the shipper, and the shipowner as stipulated in the bill of lading.

Charterparties by way of demise, says Halsbury, at para 403, are of two kinds: “(1) charter without master or crew, or “bareboat charter”, where the hull is the subject matter of the charterparty and (2) charter with master and crew, under which the ship passes to the charterer in a state fit for the purposes of mercantile adventure. In both cases the charterer becomes for the time being the owner of the ship;

the master and crew are, or become to all intents and pur- poses, his employees, and through them the possession of the ship is in him. The owner, on the other hand, has divested himself of all control either over the ship or over the master and crew, his sole fight being to receive the stipu- lated hire and to take back the ship when the charterparty comes to an end. During the currency of the charterparty, therefore, the owner is under no liability to third persons whose goods may have been conveyed upon the demised ship or who may have done work or supplied stores for her, and those persons must look only to the charterer who has taken his place.” In para 404 Halsbury said:

“Although a charterparty which does not operate as a demise confers on the charterer the temporary right to have his goods loaded and conveyed in the ship, the ownership remains in the original owner, and through the master and crew, who continue to be his employees, the possession of the ship also remains in him. Therefore, the existence of the char- terparty does not necessarily divest the owner of liability to third persons whose goods may have been conveyed on the ship, nor does it deprive him of his rights as Owners.” Whether a charterparty operates as a demise or not depends on the stipulations of the charterparty. The princi- pal test is whether the master is the employee of the owner or of the charterer. In other words where the master becomes the employee of the charterer or continues to be the owner’s employee. Where the charterparty is by way of demise, the charterer may employ the ship in carrying either his own goods or those of others. Where the charterparty does not operate as a demise, the charterer’s right vis-a-vis the owner depends upon the terms of the contract. “The contract of carnage is personal to the 907 charterer, and he cannot call upon the shipowner to under- take liabilities to third persons or transfer to third persons his own liabilities to the shipowner unless the contract so provides.” A charterparty has to be construed so as to give effect, as far as possible, to the intention of the parties as expressed in the written contract. The stipu- lations of charterparty may be incorporated in a bill of lading so that they are thereby binding on the parties. It is an accepted principle that when stipulations of the charterparty are expressly incorporated, they become terms of the contract contained in the bill of lading, and they can be enforced by or against the shipper, consignee or endorsee. The effect of a bill of lading depends upon the circumstances of the particular case, of which the most important is the position of the shipper and of the holder.

Where there is a bill of lading relating to the goods, the terms of the contract on which the goods are carried are prima facie to be ascertained from the bill of lading.

However, if a shipper chose to receive a bill of lading in a certain from without protest he should ordinarily be bound by it. Thus, it cannot be said that the bill of lading is not conclusive evidence of its terms and the person execut- ing it is not necessarily bound by all its stipulations, unless he repudiates them on the ground that, as he did not know, and could not reasonably be expected to know, of their existence, his assent to them is not to be inferred from his acceptance of the bill of lading without objection. Where there is a charterparty, the bill of lading is prima facie, as between the shipowner and an indorsee, the contract on which the goods are carried. This is so when the indorsee is ignorant of the terms of the charterparty, and may be so even if he knows of them. As between the shipowner and the charterer the bill of lading may in some cases have the effect of modifying the contract as contained in the char- terparty, although, in general, the charterparty will pre- vail and the bill of lading will operate solely as an ac- knowledgement of receipt.

In the instant case we find from Exts. P 1 to P3 that the following has been prominently printed just below the signature ‘For the Master and Owners’ in the bills of lad- ing. SEE CONDITIONS OF CARRIAGE AND OTHER CONDITIONS OF REVERSE. It can not therefore be said that the shipper, whose knowledge will be attributed to the first respondent did not know of the conditions of carriage printed on the reverse , there being no other conditions printed elsewhere in the bills of lading.

None of the parties having repudiated the bills of lading in this case, the High Court ought not to have ac- cepted the submission of .the first respondent that clause 4 of the bills of lading offended the provisions of the Car- riage of Goods by Sea Act, 1924 and therefore bad.

908 The Carriage of Goods by Sea Act, of 1924 of England was on the Hague Rules which were amended by Brussels protocol 1968 which is now embodied in the Carriage of Goods by Sea Act 1971 which came into force in 1977. The Indian Carriage of Goods by Sea Act 1925 (Act XXVI of 1925) which is an Act to amend the law with respect to the carriage of goods by sea was passed after the International Conference on Maritime Law held at Brussels in October 1922 and Brussels meeting in October 1923. Under Section 2 of that Act which deals with application of rules it is provided: “Subject to the provi- sions of this Act, the rules set out in the Schedule (here- inafter referred to as “the Rules”) shall have the effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in India to any other port whether in or outside India.” To apply the Rules to a case, the port of origin has to be an Indian Port.

Unless the starting point or the port of loading is a port in India the Rules are inapplicable. These Rules have no application when goods are not carried from any Indian port.

As in the instant case goods were shipped in Africa and carried to Cochin, this Act obviously was not applicable.

There is nothing to show that the charterparty was by way of demise. Pacta dant legem contractui–the stipulations of parties constitute the law of the contract. Agreements give the law to the contract. Clause 4 having been a stipu- lation in the contract evidenced by the bills of lading the parties could not resile therefrom. It is not clear whether the English Carriage of goods by Sea Act, 1924 or the Indian Carriage of Goods Act 1925 was applied by the High Court.

The Articles and the Rules referred to are to be found in the Schedule to the Indian Act the Rules whereunder were not applicable to the facts of the case. The dispute could not have been decided partly according to municipal law and partly according to English law. The English law was not proved before the court according to law.

The result is that this appeal must succeed. We accordingly allow this appeal, set aside the impugned judgments and remand the case to the trial court for disposal according to law after giving opportunity to the parties to amend their pleadings and adduce additional evidence, if they are so advised, in light of the observations made hereinabove. In the facts and circumstances of the case we make no order as to costs.

R.S.S. Appeal allowed.

The post British India Steam Navigation Co. vs. Shanmughavilas Cashew Industries appeared first on B&B Associates LLP.

IN THE SUPREME COURT OF INDIA

STATE OF MAHARASHTRA ….PETITIONER
Vs.
CHANDRAPRAKASH KEWAL CHAND JAIN …RESPONDENT

DATE OF JUDGMENT: 18/01/1990
BENCH: AHMADI, A.M. (J) FATHIMA BEEVI, M. (J)

CITATION:
1990 AIR 658 1990 SCR (1) 115
1990 SCC (1) 550 JT 1990 (1) 61
1990 SCALE (1)33

CITATOR INFO :
R 1992 SC2004 (5)

ACT:

Indian Evidence Act–Sections 39, 114, 118 and 133–Victim of sex offence–Victim of crime–Court to evalu- ate evidence so as to protect rights of women extent of corroboration needed–Notion that except in rarest of rare cases, the evidence of the prosecutrix cannot be accepted unless corroborated in material particulars erroneous.

Indian Penal Code–Sections 376 and 342–Crime committed by persons in authority–Police officer–Court to give deterrent punishment.

HELD: A prosecutrix of a sex-offence cannot be put on par with an accomplice. She is in fact a victim of the crime. The Evidence Act nowhere says that her evidence cannot be accepted unless it is corroborated in material particulars. She is undoubtedly a competent witness under section 118 and her evidence must receive the same weight as is attached to an injured in cases of physical violence. The same degree of care and caution must attache in the evalua- tion of her evidence as in the case of any injured complain- ant or witness and no more. [123B-C] What is more necessary is that the Court must be alive to and conscious of the fact that it is dealing with the evidence of a person who is interested in the outcome of charge levelled by her. Having regard to the increase in the number of sex-violation cases in the recent past, particu- larly cases of molestation and rape in custody, it is proper to remove the notion, if it persists, that the testimony of a woman who is a 116 victim of sexual violence must ordinarily be corroborated in material particulars except in the rarest of rare cases.

[123C-D; 124B-C] Ours is a conservative society where it concerns sexual behaviour. Ours is not a permissive society as in some of the Western and European countries. Our standard of decency and morality in public life is not the same as in those countries. It is, however, unfortunate that respect for womanhood in our country is on the decline and cases of molestation and rape are steadily growing. An Indian Woman is now required to suffer indignities in different forms, from lewd remark to eve-teasing, from molestation to rape.

Decency and morality in public life can be promoted and protected only if we deal strictly with those who violate the social norms. The standard of proof to be expected by the Court in such cases must take into account the tact that such crimes are generally committed on the sly and very rarely direct evidence of a person other than the prosecu- trix is available. [124D-F] Courts must also realise that ordinarily a woman, more so a young girl, will not stake her reputation by leveling a false charge concerning her chastity. By our criminal laws vide powers are conferred on police officers investigating cognizable offences. The infrastructure of our criminal ‘investigation system recognises and indeed protects the right of a woman to decent and dignified treatment at the hands of the investigating agency. [124F-H] The purpose and setting, the person and his position, the misuse or abuse of office and the despair of the victim which led to her surrender are all relevant factors which must be present in the mind of the Court while evaluating the conduct-evidence of the prosecutrix. A person in author- ity, such as a police officer carries with him the awe of office which is bound to condition the behaviour of his victim [125C-D] The Court must not be oblivious of the emotional turmoil and the psychological injury that a prosecutrix suffers on being molested or raped. She suffers a tremendous sense of shame and the fear of being shunned by society and her near relatives including her husband. Instead of treating her with compassion and understanding as one who is an injured victim of a crime, she is, more often than not, treated as a sinner and shunned. It must, therefore be realised that a woman who is subjected to sex-violence would always be slow and hesitant about disclosing her plight. The Court must, therefore, evaluate her evidence in the above background.

117 Bharwada Bhognibhai Hirjibhai v. State of Gujarat, [1983] INSC 72; [1983] 3 SCR 280–relied upon.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 221 of 1986 etc.

From the Judgment and Order dated 28.6.1985 of the Bombay High Court in Crl. Appeal No. 215 of 1982.

S.B. Bhasme, Mrs. H. Wahi, A.S. Bhasme and A.M. Khanwil- kar for the Appellants.

V.D. Misra, J. Wad and Mrs. Aruna Matbur for the Re- spondents.

The Judgment of.the Court was delivered by AHMADI, J. This appeal by special leave is brought by the State of Maharashtra against the judgment of acquittal recorded by the Nagpur Bench of the High Court of Bombay (Maharashtra) reversing the conviction of the respondent Chandraprakash Kewalchand Jain, a Sub-Inspector of Police, under Section 376, I.P.C. for having committed rape on Shamimbanu, a girl aged about 19 or 20 years on 22nd August, 1981. The learned Additional Sessions Judge, Nagpur, came to the conclusion that the prosecution had brought home the charge under Section 376, I.P.C. and sentenced the respond- ent to suffer rigorous imprisonment for 5 years and to pay a fine of Rs.1,000, in default to suffer rigorous imprisonment for 6 months. He was, however, acquitted of the charge under Section 342, I.P.C. The respondent challenged his conviction in appeal to the High Court. The High Court set aside the order of conviction and sentence imposed by the trial court and acquitted the respondent. The State feeling aggrieved sought special leave to appeal. On the same being granted this appeal is before us.

Briefly the facts are that the parents of Shamimbanu were residing as tenants in a part of the building belonging to the father of Mohmad Shafi while the remaining portion was occupied by the owner’s family. PW 1 Mohmad Shafi aged about 25 years fell in love with PW 2 Shamimbanu aged about 19 years. The prosecution case is that although the parents of both knew about their love affair, for some reason or the other, they were not married. Both of them left Nagpur and went to Bombay where they contracted a marriage 118 through a Kazi and returned to Nagpur by train on 20th August, 198 1. They got down at Anjani Railway Station (a suburb of Nagpur) and went to a nearby Gurudeo Lodge and occupied Room No. 204. That night i.e. on the night of 20th/12st August, 1981, PW 8 Police Sub Inspector Qureishi checked the hotel and learnt that the couple was living in the said room in the assumed names of Mohmad Shabbir and Sultana. On being questioned PW 1 Mohmad Shafi gave out the true facts and showed the Nikahnama. Ex. 10. On being satis- fied about the correctness of the version, Police Sub-In- spector qureishi got their correct names substituted in the register of the Lodge as is evident from the entry Ex. 31, proved by PW 5 Manohar Dhote, the Manager of the Lodge.

Police Sub-Inspector Qureishi did not deem it necessary to take any steps against the couple.

On the next night between 21st and 22nd August, 1981 the respondent-accused went to the hotel room No. 204 occupied by the couple at the odd time of about 2.30 a.m. and knocked on the door. He was accompanied by PW 7 Constable Chandrab- han. When Mohmad Shafi opened the door the respondent ques- tioned him on seeing Shamimbanu with him. Mohmad Shafi told him that she was his wife and gave their correct names.

Notwithstanding their replies the respondent insisted that they accompany him to the police station. PW 5 requested the respondent to sign his visit book since he had inspected a few rooms of his Lodge including Room No. 204 but the re- spondent told him that he would do it later. So saying he left the Lodge with the couple.

On reaching the police station the respondent separated the couple. He took Shamimbanu to the first floor of the police station while her husband Mohmad Shafi was taken to another room by PW 7. Shamimbanu alleges that after she was taken to the first floor, the respondent flirted with her, slapped her when she refused to respond to his flirtation and demanded that she spend the night with him. The respond- ent also demanded that she should give her age as 15 years so that Mohmad Shafi could be booked. On her refusing and protesting against his behaviour he threatened her with dire consequences.

In the other room Mohmad Shafi was subjected to beating by PW 7. After sometime both the boy and the girl were brought down to the main hall of the police station. By then it was around 5.00 or 5.30 a.m. Thereafter he sent Mohmad Shafi with a constable to fetch the girl’s father. The girl’s parents arrived at the police station shortly. The respondent asked the girl’s parents if they were prepared to take 119 back the girl who claimed to have married Mohmad Shafi. The girl’s parents showed annoyance and left the police station refusing to take her with them. Mohmad Shafi’s parents also adopted the same attitude.

The respondent then recorded an offence under Section 110 read with 117 of the Bombay Police Act against Mohmad Shafi on the allegation that he was found misbehaving on a public street uttering filthy abuses in front of Gujarat Lodge near Gurudeo Lodge. After putting Mohmad Shaft in the lock-up he sent the girl Shamimbanu to Anand Mahal Hotel with PW 7. Initially PW 4, the Hotel Manager refused to give a room to an unescorted girl but PW 7 told him that he had brought her on the directive of the respondent. Thereupon PW 4 allotted Room No. 36 to her. He made an entry in the hotel register to the effect ‘Shamimbanu wife of Mohmad Shaft ….. as per instructions of Police Sub-Inspector Shri Jain …… ‘ vide Ex. 25. Afterleaving the girl in Room No. 36, PW 7 left the hotel. It is the prosecution case that after the girl was allotted the room, as per the usual practice, the hotel boy changed the bed-sheets, pillow covers and quilt cover. The rent was charged from the girl.

Having thus separated the couple and finding the girl thoroughly helpless, the respondent visited the girl’s room and knocked on the door. The unsuspecting Shamimbanu opened the door. The respondent entered the room and shut the door behind him. Thereafter he asked the girl to undress but on the girl refusing he forcibly removed her ‘kurta’ and threw it away. He gagged the girl’s mouth and threatened her with dire consequences if she did not submit. He then threw the girl on the cot, forcibly removed her ‘salwar’ and denuded her. He then had sexual intercourse with her, notwithstand- ing her protestations. After satisfying his lust, the re- spondent left threatening that he would bury both of them alive if she complained to anyone. He told her that he would now arrange to send back her husband.

Not fully satisfied the respondent returned to the hotel room after about half an hour and knocked on the door.

Shamimbanu opened the door thinking that her husband had returned. When she saw the respondent she tried to shut the door but the respondent forced his way into the room and shut the door from within. He once again had sexual inter- course with her against her will. He repeated his threat before leaving.

On the other hand Mohmad Shaft was sent to Court on his arrest 120 under Sections 110/117 of the Bombay Police Act. He was released on bail. He returned to the police station by about 5.00 p.m. and enquired about the whereabouts of his wife. PW 7 told him she was in Room No. 36 of Anand Mahal Hotel. He immediately went to his wife. On seeing him she was in tears. She narrated to him what she had gone through at the hands of the respondent. Enraged Mohmad Shaft went back to the police station and informed PW 14 Inspector Pathak about the commission of assault and rape on his wife by the re- spondent. PW 14 recorded the same in the station diary at 6.35 p.m. and informed his superiors about the same presuma- bly because a police officer was involved. Thereupon Deputy Commissioner of Police Parassis and Assistant Commissioner of Police Gupta arrived at the police station. The Assistant Commissioner of Police asked Inspector Pathak to accompany Mohmad Shafi and fetch Shamimbanu. On their return with Shamimbanu Mohmad Shaft was asked to give a written account of the incident which he did. On the basis thereof an of- fence under section 376, I.P.C. was registered and the investigation was entrusted to Inspector Korpe of Crime Branch.

In the course of investigation a spot panchnama of Room No. 36 was drawn up and certain articles such as bed-sheet, quilt cover, mattress, etc. which had semen-like stains were attached. The hotel register containing the relevant entry (Ex. 25) was also seized and statements of witnesses were recorded. Both the respondent and Shamimbanu were sent for medical examination and their blood samples were taken along with that of Mohmad Shafi to determine their blood groups.

Similarly the garments of the respondent and Shamimbanu were attached and sent for chemical examination along with the articles seized from the hotel room. On the conclusion of the investigation the respondent was charge sheeted and put up for trial before the Additional Sessions Judge, Nagpur.

The respondent pleaded not guilty to the charge and denied the accusation made against him. His defence was that he arrested Mohmad Shaft on the charge under Sections 110/117, Bombay Police Act, and took him to Gurudeo Lodge and from there he took him and Shamimbanu to the police station. Since the parents of both the boy and the girl disowned them he had no alternative but to place Mohmad Shaft in the lock-up and allow Shamimbanu to leave the police station as a free citizen since she was not accused of any crime. It was his say that after Shamimbanu left the police station she went to Anand Mahal Hotel and stayed in Room No. 36 awaiting Mohmad Shafi. According to him as Mohmad Shaft was annoyed because of his detention in the 121 lock-up, he had, with the assistance of Shamimbanu, falsely involved him on the charge of rape.

The trial court found that the respondent had visited Room No. 204 at an odd hour and had taken the couple to the police station where he had misbehaved with the girl. It also found that he had booked the boy on a false charge and had lodged the girl in Room No. 36 after their parents disowned them. It lastly held that the evidence of the prosecutrix clearly established that the respondent had raped her twice in that room. The trial court convicted the respondent under Section 376, I.P.C.

The respondent preferred an appeal to the High Court. A learned Single Judge of the High Court allowed the appeal and acquitted the respondent. The High Court took the view that the oral information Ex. 50 furnished by Mohmad Shafi to Inspector Pathak at 6.35 p.m. constituted the First Information Report and the subsequent written information Ex. 7 given at 8.30 p.m., was inadmissible in evidence as hit by Section 162 of the Code. The High Court then took the view that except in the ‘rarest of the rare cases’ where the testimony of the prosecutrix is found to be so trustworthy, truthful and reliable that no corroboration is necessary, the Court should ordinarily look for corroboration. Accord- ing to it as Ex. 50 did not unfold two successive acts of rape, this was not a case where it would be safe to base a conviction on the sole testimony of the prosecutrix, more so because both the girl and the boy had reason to entertain a grudge against the respondent who had booked the latter.

Lastly the High Court pointed out that the version of the prosecutrix is full of contradictions and is not corroborat- ed by medical evidence, in that, the medical evidence re- garding the examination of the prosecutrix is negative and does not show marks of violence. These contradictions and inconsistencies have been dealt with in paragraphs 24 to 31 of the judgment. The High Court also noticed certain infirm- ities in the evidence of PW 1 Mohmad Shafi in paragraphs 32 to 34 of its judgment. The High Court, therefore, concluded that the prosecution had miserably failed to prove the guilt of the accused and accordingly acquitted him. It is against this order of the High Court that the State has preferred this appeal by special leave.

The learned counsel for the appellant-State submitted that the entire approach of the High Court in the matter of appreciation of evidence of the prosecution witnesses, particularly PW 2, betrays total ignorance of the psychology of an Indian woman belonging to the 122 traditional orthodox society. He submitted that the prosecu- tix of this case came from an orthodox muslim family, was semi-literate having studied upto the VII Standard and whose parents considered it a shame to take her back to their fold because she had eloped and married a boy of her own choice.

He submitted that the statement of law in the High Court judgment that implicit reliance cannot be placed on a prose- cutrix except in the rarest of rare cases runs counter to the law laid down by this Court in Bharwada Bhoginbhai Hirjibhai v. State of Gujarat, [1983] INSC 72; [1983] 3 SCR 280. He also submitted that the evidence of the prosecutrix has been rejected on unsustainable grounds which do not touch the substratum of the prosecution case and which can be at- tributed to nervousness and passage of time. According to him this approach of the High Court has resulted in gross miscarriage of justice which this Court must correct in exercise of its jurisdiction under Article 136 of the Con- stitution. The learned counsel for the respondent, however, supported the High Court judgment.

It is necessary at tile outset to state what the ap- proach of the Court should be while evaluating the prosecu- tion evidence, particularly the evidence of the prosecutrix, in sex-offences. Is it essential that the evidence of the prosecutrix should be corroborated in material particulars before the Court basis a conviction on her testimony? Does the rule of prudence demand that in all cases save the rarest of rare the Court should look for corroboration before acting on the evidence of the prosecutrix? Let us see if the Evidence Act provides the clue. Under the said stat- ute ‘Evidence’ means and includes all statements which the Court permits or requires to be made before it by witnesses, in relation to the matters of fact under inquiry. Under Section 59 all facts, except the contents of documents, may be proved by oral evidence. Section 118 then tells us who may give oral evidence. According to that section all per- sons are competent to testify unless the Court considers that they are prevented from understanding the questions put to them, or from giving rational answers to those questions, by tender years, extreme old age, disease, whether of body or mind, or any other cause of the same kind. Even in the case of an accomplice Section 133 provides that he shall be a competent witness against an accused person; and a convic- tion is not illegal merely because it proceeds upon the uncorroborated testimony of an accomplice. However, illus- tration (b) to Section. 114, which lays down a rule of practice, says that the Court ‘may’ presume that an accom- plice is unworthy of credit, unless he is corroborated in material particulars. Thus under Section 133, which lays down a rule of law, an accomplice is a competent witness and a conviction based solely on his uncorroborated evidence 123 is not illegal although in view of Section 114, illustration (b), courts do not as a matter of practice do so and look for corroboration in material particulars. This is the conjoint effect of Sections 133 and 114, illustration (b).

A prosecutrix of a sex-offence cannot be put on par with an accomplice. She is in fact a victim of the crime. The Evidence Act nowhere says that her evidence cannot be ac- cepted unless it is corroborated in material particulars.

She is undoubtedly a competent witness under Section 118 and her evidence must receive the same weight as is attached to an injured in cases of physical violence. The same degree of care and caution must attach in the evaluation of her evi- dence as in the case of an injured complainant or witness and no more. What is necessary is that the Court must be alive to and conscious of the fact that it is dealing with the evidence of a person who is interested in the outcome of the charge levelled by her. If the Court keeps this in mind and feels satisfied that it can act on the evidence of the prosecutrix, there is no rule of law or practice incorporat- ed in the Evidence Act similar to illustration (b) to Sec- tion 114 which requires it to look for corroboration. If for some reason the Court is hesitant to place implicit reliance on the testimony of the prosecutrix it may look for evidence which may lend assurance to her testimony short of corrobo- ration required in the case of an accomplice. The nature of evidence required to lend assurance to the testimony of the prosecutrix must necessarily depend on the facts and circum- stances of each case. But if a prosecutrix is an adult and of full understanding the Court is entitled to base a con- viction on her evidence unless the same is shown to be infirm and not trustworthy. If the totality of the circum- stances appearing on the record of the case disclose that the prosecutrix does not have a strong motive to falsely involve the person charged, the Court should ordinarily have no hesitation in accepting her evidence. We have, therefore, no doubt in our minds that ordinarily the evidence of a prosecutrix who does not lack understanding must be accept- ed. The degree of proof required must not be higher than is expected of an injured witness. For the above reasons we think that exception has rightly been taken to the approach of the High Court as is reflected in the following passage:

“It is only in the rarest of rare cases if the Court finds that the testimony of the prosecutrix is so trustworthy, truthful and reliable that other corroboration may not be necessary.” 124 With respect, the law is not correctly stated. If we may say so, it is just the reverse. Ordinarily the evidence of a prosecutrix must carry the same weight as is attached to an injured person who is a victim of violence, unless there are special circumstances which call for greater caution, in which case it would be safe to act on her testimony if there is independent evidence lending assurance to her accusation.

We think it proper, having regard to the increase in the number of sex-violation cases in the recent past, particu- larly cases of molestation and rape in custody, to remove the notion, if it persists, that the testimony of a woman who is a victim of sexual violence must ordinarily be cor- roborated in material particulars except in the rarest of rare cases. To insist on corroboration except in the rarest of rare cases is to equate a woman who is a victim of the lust of another with an accomplice to a crime and thereby insult womanhood. It would be adding insult to injury to tell a woman that her story of woe will not be believed unless it is corroborated in material particulars as in the case of an accomplice to a crime. Ours is a conservative society where it concerns sexual behaviour. Ours is not a permissive society as in some of the Western and European countries. Our standard of decency and morality in public life is not the same as in those countries. It is, however, unfortunate that respect for womanhood in our country is on the decline and cases of molestation and rape are steadily growing. An Indian woman is now required to suffer indigni- ties in different forms, from lewd remarks to eve-teasing, from molestation to rape. Decency and morality in public life can be promoted and protected only if we deal strictly with those who violate the societal norms. The standard of proof to be expected by the Court in such cases must take into account the fact that such crimes are generally commit- ted on the sly and very rarely direct evidence of a person other than the prosecutrix is available. Courts must also realise that ordinarily a woman, more so a young girl, will not stake her reputation by levelling a false charge con- cerning her chastity.

But when such a crime is committed by a person in au- thority, e.g. a police officer, should the Court’s approach be the same as in any other case involving a private citi- zen? By our criminal laws wide powers are conferred on police officers investigating cognizable offences. The infrastructure of our criminal investigation system recog- nises and indeed protects the right of a woman to decent and dignified treatment at the hands of the investigating agen- cy. This is evident from the proviso to sub-section (2) of Section 47 of the Code which obliges the police officer desiring to effect entry to give an opportunity to the 125 woman in occupation to withdraw from the building. So also subsection (2) of Section 53 requires that whenever a female accused is to be medically examined such examination must be under the supervision of a female medical practitioner. The proviso to Section 160 stipulates that whenever the presence of a woman is required as a witness the investigating offi- cer will record her statement at her own residence. These are just a few provisions which reflect the concern of the legislature to prevent harassment and exploitation of women and preserve their dignity. Notwithstanding this concern, if a police officer misuses his authority and power while dealing with a young helpless girl aged about 19 or 20 years, her conduct and behaviour must be judged in the backdrop of the situation in which she was placed. The purpose and setting, the person and his position, the misuse or abuse of Office and the despair of the victim which led to her surrender are all relevant factors which must be present in the mind of the Court while evaluating the con- duct-evidence of the prosecutrix. A person in authority, such as a police officer, carries with him the awe of office which is bound to condition the behaviour of his victim. The Court must not be oblivious of the emotional turmoil and the psychological injury that a prosecutrix suffers on being molested or raped. She suffers a tremendous sense of shame and the fear of being shunned by society and her near rela- tives, including her husband. Instead of treating her with compassion and understanding as one who is an injured victim of a crime, she is, more often than not, treated as a sinner and shunned. It must, therefore, be realised that a woman who is subjected to sex-violence would always be slow and hesitant about disclosing her plight. The Court must, there- fore, evaluate her evidence in the above background.

It is time to recall the observations of this Court made not so far back in Bharwada Bhognibhai Hirjibhai, (supra):

“In the Indian setting, refusal to act on the testimony of a victim of sexual assaults in the absence of corroboration as a rule, is adding insult to injury. Why should the evidence of the girl or the woman who complains of rape or sexual molestation be viewed with the aid of spectacles fitted with lenses tinged with doubt, disbelief or suspicion? To do so is to justify the charge of male chauvinism in a male domi- nated society. We must analyse the argument in support of the need for corroboration and subject it to relentless and remoreseless cross-examination. And we must do so with a logical, and not an opinionated, eye in the light of 126 probabilities with our feet firmly planted on the soil of India and with our eyes focussed on the Indian horizon. We must not be swept off the feet by the approach made in the Western World which has its own social milieu, is own social mores, its own permissive values, and its own code of life.

Corroboration may be considered essential to establish a sexual offence in the backdrop of the social ecology of the Western World. It is wholly unnecessary to import the said concept on a turn-key basis and to transplate it on the Indian soil regardless of the altogether different atmos- phere, attitudes, mores, responses of the Indian Society, and its profile. The identities of the two worlds are dif- ferent. The solution of problems cannot therefore be identi- cal.” Proceeding further this Court said:

“Without the fear of making too wide a statement, or of overstating the case, it can be said that rarely will a girl or a woman in India make false allegations of sexual assault ………. The statement is generally true in the context of the urban as also rural society. It is also by and large true in the context of the sophisticated, not so sophisticated, and unsophisticated society. Only very rarely can one conceivably come across an exception or two and that too possibly from amongst the urban elites. Because: (1) A girl or a woman in the tradition bound non-permissive Socie- ty of India would be extremely reluctant even to admit that any incident which is likely to reflect on her chastity had ever occurred. (2) She would be conscious of the danger of being ostracised by the Society or being looked down by the Society including by her own family members, relatives, friends and neighbours. (3) She would have to brave the whole world. (4) She would face the risk of losing the love and respect of her own husband and near relatives, and of her matrimonial home and happiness being shattered. (5) If she is unmarried, she would apprehend that it would be difficult to secure an alliance with a suitable match from a respectable of an acceptable family. (6) It would almost inevitably and almost invariably result in mental torture and suffering to herself. (7) The fear of being taunted by others will always haunt her. (8) She would feel extremely embrassed in relating the incident to others being over powered by a feeling of shame on account of the upbringing 127 in a tradition bound society where by and large sex is taboo. (9) The natural inclination would be to avoid giving publicity to the incident lest the family name and family honour is brought into controversy. (10) The parents of an unmarried girl as also the husband and members of the hus- band’s family of a married woman would also more often than not, want to avoid publicity on account of the fear of social stigma on the family name and family honour. (11) The fear of the victim herself being considered to be promiscu- ous or in some way responsible for the incident regardless of her innocence. (12) The reluctance to face interrogation by the investigating agency, to face the court, to face the cross examination by Counsel for the culprit, and the risk of being disbelieved, acts as a deterrent.” We are in complete agreement with these observations.

We now proceed to examine if the High Court was justi- fied in upturning the order of conviction passed by the Trial Court. The High Court refused to confirm the convic- tion of the respondent as it found the evidence of the prosecutrix full of contradictions and not consistent with medical evidence as well as the findings recorded by the Chemical Analyst. We may first indicate the contradictions which prompted the High Court to look for corroboration.

They are:

(i) the version that the respondent had misbehaved with her in the police station and had molested her could not be believed because she did not complain about the same to the other police officers who were present in the police station main hall on the ground floor or to her relatives who were called to the police station;

(ii) the conduct of the respondent in calling her par- ents and in giving them an opportunity to take her with them does not smack of an evil mind;

(iii) the evidence of the prosecutrix that the respondent was instrumental in lodging her in Anand Mahal Hotel room is not supported by any evidence;

(iv) the conduct of the prosecutrix in not informing and seeking assistance from the hotel management after the first incident and even after the second incident of rape in the hotel 128 room is unnatural and surprising;

(v) the find of semen-stains on the ‘salwar’ and ‘kurta’ of the prosecutrix runs counter to her evidence that on both the occasions she was completely denuded before she was ravished;

(vi) the absence of marks of physical violence also runs counter to her version that when she tried to raise an alarm she was slapped by the respondent;

(vii) the evidence of PW 3 Dr. Vijaya and the medical report Ex. 17 do not lend corroboration to the evidence of the prosecutrix that the respondent had sexual intercourse with her notwithstanding the resistence offered by her;

(viii) the report of the Assistant Chemical Analyst Ex.

71 shows that neither semen nor spermatozoa were detected from the vaginal smear and slides that were forwarded for analysis; and (ix) the evidence of PW 12 Dr. More and his report Ex. 41 shows that no physical injuries were found on the person of the respondent to indicate that he had forcible sexual intercourse shortly before his examination.

Before we proceed to deal with these discrepancies we think it is necessary to clear the ground on the question whether the prosecutrix had a sufficiently strong motive to falsely involve the respondent and that too a police offi- cer. It is possible that she may have felt annoyed at being dragged out of the hotel room at dead of night after they had satisfied Police Sub-Inspector Qureishi that they were legally wedded only a few hours back. PW 1 may also have felt offended at being wrongly hooked under Sections 110/117, Bombay Police Act. The question is whether on account of this annoyance both PW 1 Mohmad Shaft and PW 2 Shamimbanu would be prepared to stake the reputation of the latter? As pointed out earlier ordinarily an Indian woman would be most reluctant to level false accusation of rape involving her own reputation unless she has a very strong bias or reason to do so. In the present case although the couple had reason to be annoyed with the conduct of the respondent, the reason was not strong enough for Mohmad Shafi to involve his wife and soil her reputation nor for Shamimbanu to do so. An Indian woman attaches maximum impor- 129 tance to her chastity and would not easily be a party to any move which would jeopardise her reputation and lower her in the esteem of others. There are, therefore, no such strong circumstances which would make the court view her evidence with suspicion.

The next question is whether the High Court was justi- fied in refusing to place reliance on her evidence in view of the discrepancies and inconsistencies indicated above. It is not in dispute that the respondent had taken both PW 1 and PW 2 to the police station at dead of night. At the police station both of them were separated. She was all alone with the respondent till about 5.00 a.m. This was her first encounter with the police. She must have been nervous and considerably shaken. She must have felt helpless as she was all alone. She must be terribly worried not only about her own fate but also that of her husband. It is during the time she was alone with the respondent that the latter is alleged to have misbehaved with her. How could she complain to the other police officers in the police station about the behaviour of their colleague unless she be sure of their response? Having seen the behaviour of one of them, how could she place confidence in others belonging to the same clan? She may rather prefer to ignore such behaviour than speak of it to unknown persons. Ordinarily an Indian woman is ashamed to speak about such violations of her person, more so to total strangers about whose response she is not sure. There was no point in speaking to her parents who had disowned her. She, however, claims to have informed her husband about the same on his return. The omission on the part of her husband to make a mention about the same cannot discredit her. Even if we assume that she omitted to mention it, the said omission cannot weaken her evidence as obvious- ly she would attach more importance to what happened there- after in the hotel room. The respondent’s behaviour in the police station had paled into insignificance in view of his subsequent misdeeds. No wonder she would attach greater importance to the subsequent events rather than dwell on advances made earlier. We, therefore, cannot agree with the High Court’s observation that “the prosecutrix is not only prone to make improvements and exaggerations, but is also a liar disclosing a new story altogether to serve her inter- est”. This is a harsh comment which, we think, is totally unwarranted.

The High Court has argued that the conduct of the respondent in sending for her parents and in permitting her to go with them shows that the respondent’s intentions were not evil. In the first place it must be mentioned that the suggestion to call the parents came from PW 1.

130 Secondly the evil thought may have taken concrete shape after the parents refused to take her with them. It was then that the respondents realised the helplessness of the girl and chalked out a plan to satisfy his lust. As a part of that design he falsely booked Mohmad Shaft and made arrange- ments to lodge the girl in a hotel of his choice. The evi- dence of PW 4 Suresh Trivedi read with the entry in the hotel register and the contradiction brought on record from his police statement leave no room for doubt that the girl was lodged in his hotel at the instance of the respondent.

PW 6 and PW 7 have also resiled from their earlier versions to help the respondent. But notwithstanding their denial we see no reason to disbelieve Shamimbanu on the point of PW 7 having lodged her in Room No. 36 of Anand Mahal Hotel as the same is corroborated not only by the remark in the entry Exh. 25 of the hotel register but also by the fact that it was PW 7 who informed Mohmad Shaft that she was in Room No.

36. We are, therefore, of the view that her evidence in this behalf is supported by not only oral but also documentary evidence. How then could she seek help or assistance from the hotel staff which was under the thumb of the respondent? The hotel was situate within the jurisdiction of the re- spondent’s police station. It was at the behest of the respondent that she was kept in that room. She must have realised the futility of complaining to them. Failure to complain to the hotel staff in the above circumstances cannot be described as unnatural conduct.

It is true that the prosecutrix had deposed that on both the occasions she was completely denuded before the respond- ent raped her. On the first occasion he had removed her ‘kurta’ before she was laid on the cot. Her ‘salwar’ was removed while she was lying on the cot. Therefore, the ‘salwar’ may be lying on the cot itself when the act was committed. It is, therefore, not at all surprising to find semen stains on the ‘salwar’. She was wearing the same clothes when she was ravished the second time. On the second occasion he first threw her on the cot and then undressed her. Therefore, both the ‘kurta’ and the ‘salwar’ may be lying on the cot at the time of sexual intercourse. Besides she had worn the same clothes without washing herself imme- diately after the act on each occasion. It is, therefore, quite possible that her clothes were stained with semen. It must also be remembered that this is not a case where the prosecuting agency can be charged of having concocted evi- dence since the respondent is a member of their own force.

If at all the investigating agency would try to help the respondent. There is, therefore, nothing surprising that both these garments bore semen stains. Besides, there was no time or occasion to manipulate semen stains on her clothes and that too of the respondent’s 131 group. Her clothes were sent along with the other articles attached from Room No. 36 for chemical analysis under the requisition Ex. 67. The report of the Assistant Chemical Analyser, Ex. 69 shows that her clothes were stained with human blood and semen. The semen found on one of her gar- ments and on the bed sheet attached from the room was of group A which is the group of the respondent, vide Ex. 70.

Of course the other articles, viz., the mattress and the underwear of the respondent bore no stains. On the contrary the find of semen tends corroboration, if corroboration is at all needed to the version of the prosecutrix. The possi- bility of the semen stains being of Mohmad Shaft is ruled out as his group was found to be ‘B’ and not ‘A’. In the circumstances the absence of semen or spermatozoa in the vaginal smear and slides, vide report Ex. 71, cannot cast doubts on the creditworthiness of the prosecutrix. The evidence of PW 3 Dr. Vijaya Lele shows that she had taken the vaginal smear and the slides on 23rd August, 1981 at about 1.30 p.m. i.e., almost after 24 hours. The witness says that spermatozoa can be found if the woman is examined within 12 hours after intercourse, thereafter they may be found between 48 and 72 hours but in dead form. Shamimbanu may have washed herself by then. Therefore absence of sper- matozoa cannot discredit her evidence.

The absence of marks of physical violence on the prose- cutrix is not surprising. According to her the respondent had slapped her and threatened her with dire consequences when she tried to resist him on both occasions. Since she was examined almost 24 hours after the event it would be too much to expect slap marks on her person. It is, however, true that according to PW 12 Dr. More there were no marks of injury on the body of the respondent when he was examined on the 22nd itself at about 8.45 p.m. While it is true that the version of the prosecutrix is that she had tried to resist him, it must be realised that the respondent being a strong man was able to overpower her and take her by force. Be- sides, he was a man in authority in police uniform. The prosecutrix was alone and helpless. In the circumstances as pointed out earlier the resistance would be considerably dampened. But the evidence of PW 12 Dr. More who examined the respondent on the 22nd at 8.45 p.m. reveals that he had noticed (i) absence of smegma around the glans penis and (ii) the frenum tortuous and edematous. indicative of the respondent having had sexual intercourse within the preced- ing 24 hours. However, absence of marks of violence and absence of matting of pubic hair led the witness to state that no definite opinion could be given whether or not the respondent had sexual intercourse in the last 24 hours. In cross-examination an attempt was 132 made to show that smegma may be absent in a man with clean habits; that the frenum may be edematous if there is fric- tion with rough cloth and tortuousness of the frenum could be due to anything that causes swelling of the skin. The witness, however, said that he had not seen marks of itching thereby negativing the suggestion. Be that as it may, the evidence of this witness does show that there was evidence suggesting the possibility of the respondent having had sexual intercourse within the preceding 24 hours although the witness could not hazard a definite opinion. Therefore, the non-committal opinion of this witness cannot be said to run counter to the evidence of the prosecutrix. It may be that the evidence as to resistence may have been overstated, a tendency which is generally noticed in such cases arising out a fear of being misunderstood by the society. That is not to say that she was in any way a consenting party. She was the victim of brute force and the lust of the respond- ent.

PW 1 Mohmad Shafi’s evidence is also brushed aside on account of so-called contradictions set out in paragraphs 32 to 34 of the High Court Judgment. The first reason is the non-disclosure of details in the first oral statement which was reduced to writing at Ex. 50. That was skeleton informa- tion. That is why the need to record a detailed version Ex.

7 was felt. Therefore, merely because the details are not set out in Ex. 50 it cannot be said that the prosecutrix had not narrated the details. We have treated Ex. 50 as FIR for deciding this case. The previous involvement of PW 1 in a couple of cases is not at all relevant because the decision of the case mainly rests on his wife’s evidence. But even Ex. 50 shows that his wife had told him that the respondent had raped her. We, therefore, do not see how the evidence of PW 1 can be said to be unacceptable.

The fact that the respondent had gone to Gurudeo Lodge at an odd hour and had taken the prosecutrix and her husband to the police station at dead of night is not disputed. The fact that the respondent refused to sign the police visit book of the Lodge, though requested by the Manager PW 5 Manohar Dhote, on the pretext that he was in a hurry and would sign it later, which he never did, speaks for itself.

Then the respondent booked Md. Shafi under a false charge and put him behind the bars thereby isolating the prosecu- trix. We say that the charge was false not merely because it is so found on evidence but also because of the report Ex.

46 dated 21st September, 1981 seeking withdrawal of prosecu- tion for want of material to sustain the charge. Having successfully isolated the prosecutrix he sent her to Anand Mahal Hotel with PW 7 who lodged her in Room No. 36. The respondent, 133 therefore, had planned the whole thing to satisfy his lust.

The subsequent attempt on the part of the respondent to commit suicide on being prosecuted as evidenced by the FIR Ex. 56 betrays a guilty conscience. We are, therefore, of the opinion that if the prosecution evidence is appreciated in the correct perspective, which we are afraid the High Court failed to do, there can be no hesitation in concluding that the prosecution has succeeded in proving the respond- ent’s guilt. Unfortunately the High Court stigmatised the prosecutrix on a thoroughly erroneous appreciation of her evidence hereby adding to her woes. If the two views were reasonably possible we would have refrained from interfering with the High Court’s order of acquittal. In our opinion the trial court had adopted a correct approach and had properly evaluated the evidence and the High Court was not justified in interfering with the trial court’s order of conviction.

On the question of sentence we can only say that when a person in uniform commits such a serious crime of rape on a young girl in her late teens, there is no room for sympathy or pity. The punishment must in such cases be exemplary. We, therefore, do not think we would be justified in reducing the sentence awarded by the trial court which is not harsh.

In the result we allow this appeal, set aside the order of the High Court acquitting the respondent and restore the order of conviction and sentence passed on the respondent by the trial court. The respondent will surrender forthwith and serve out his sentences in accordance with law. His bail bond will thereupon stand cancelled.

Criminal Appeal No. 220 of 1986.

In view of the order passed in the State’s appeal, we need not pass separate orders in this appeal. The appeal will, therefore, stand disposed of in view of the order passed in the above appeal.

R.N.J. Appeal al- lowed.

The post State of Maharashtra Vs. Chandraprakash Kewal Chand Jain appeared first on B&B Associates LLP.

R.M. NARAYANA CHETTIAR AND ANOTHER …PETITIONER
Vs.
N. LAKSHMANAN CHETFIAR AND OTHERS …RESPONDENT

DATE OF JUDGMENT : 11/10/1990

BENCH: KANIA, M.H. SHARMA, L.M. (J)

CITATION:
1991 AIR 221 1990 SCR Supl. (2) 266
1991 SCC (1) 48 JT 1991 (5) 408
1990 SCALE (2)803

ACT:

Code of Civil Procedure, 1908: Section 92–Leave to institute, suit–Grant of–Whether opportunity to show cause to be given to respondents.

HELD: (1) A plain reading of section 92 of the Civil Procedure Code indicates that leaves of the court is a pre- condition or a condition precedent for the institution of a suit against a public trust for the reliefs set out in the said section, unless all the beneficiaries join in institut- ing the suit; if such a suit is instituted without leave it would not be maintainable at all. [275B-C] (2) Having in mind the objectives underlying section 92 and the language thereof, it appears that, as a rule of caution, the court should normally, unless it is impractica- ble or inconvenient to do so, give a notice to the proposed defendants before granting leave under section 92 to insti- tute a suit. The desirability of such notice being given to the defendants, however, cannot be regarded as a statutory requirement to be complied with before leave under section 92 can be granted as that would lead to unnecessary delay, and in a given case, could cause considerable loss to the public trust. [275C-E] (3) If a suit is instituted on the basis of such leave granted without notice to the defendants, the suit would not thereby be rendered bad in law or non-maintainable. The grant of leave cannot be regarded as defeating or even seriously prejudicing any right of the proposed defendants because it is always open to them to file an application for revocation of the leave which can be considered on merits and according to law. [275G] T.N. Shanmugam and Others v. The Periyar Self Respect Propaganda Institution and Others, [1984] II MLJ 440; AIR 1985 Mad. 93; Swami Parmatmanand Saraswati & Anr. v. Ramji Tripathi & Anr., [1974] INSC 151; [1975] 1 SCR 790, 795; Charan Singh & Anr. v. Darshan Singh and Ors., [1974] INSC 272; [1975] 3 SCR 48; Mahant Pragdasji Guru Bhagwandasji v. Patel Ishwarlal Bhai Narsibhai and Others, [1952] INSC 14; [1952] SCR 513; Prithipal Singh v. Magh Singh and Others, AIR 1982 Punjab & Haryana 137; Lachhman Dass Udasi (deceased by L. RS.) and Others v. Ranjit Singh and Others. AIR 1987 Punjab and Haryana 108; I. V. Mathew v. K.V. 268 Thomas. AIR 1983 Kerala 5; Mayer Simon Perur v. Advocate- General of Kerala, AIR 1975 Kerala 57; Ambrish Kumar Singh v. Raja Abhushan Bran Bramhshan and Others, AIR 1989 All 194 and Gurdwara Prabandhak Committee, Delhi Cantonment and Others v. Amarjit Singh Sabharwal and Others, AIR 1984 Delhi 39, referred to. (4) Although clause (ffa) of section 104(1) of the Code of Civil Procedure provides that an appeal shall lie against the refusal of grant of leave, that cannot lead to the conclusion that it is obligatory on the part of the court to give notice to the proposed defendants before granting leave because an appeal lies only against the refusal and not the grant of leave. [275H; 276A]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4890-91 of 1990.

From the Judgment and Order dated 17.10.1989 of the Madras High Court in C.R.P. Nos. 517 & 5 18 of 1989.

S. Padmanabhan, P.N. Ramalingam and A.T.M. Sampath for the Appellants.

K. Parasaran, S. Balakrishnan and Ms. Revati for the Respondents.

The Judgment of the Court was delivered by KANIA, J. Special Leave granted. Counsel heard.

These two appeals are filed by Special leave against the judgment of the High Court of Madras in Revision Petitions Nos. 5 17 and 5 18 of 1989. These appeals raise an interest- ing question as to whether it is obligatory on the Court, before granting leave to institute a suit as required under section 92 of the Code of Civil Procedure, 1908, to give an opportunity to the respondents to show cause against the grant of such leave, and whether leave granted without such opportunity having been given is void.

The appellants instituted suit No. O.S. 55 of 1987 in the court of the learned subordinate Judge of Sivaganga in Tamil Nadu against the respondents as a representive suit inter alia praying for framing a scheme for a public char- itable trust. It is common ground that the reliefs prayed for in the suit were such that leave under section 92 of 269 the Civil Procedure Code was required for instituting the suit. On the same day on which the suit was filed by lodging the plaint in court an application was made praying for leave to institute the suit under section 92 of the Code.

Without issuing any notice to the respondents, the said court granted leave by passing an order reading “permitted” and issued summons to the respondents. In March, 1988 the respondents filed an interim application before the learned Subordinate Judge for revoking the leave granted inter alia on the ground that the respondents had not been given any opportunity to be heard before leave was granted. The learned Subordinate Judge dismissed the said application on the ground that the grant of leave was an administrative act of the court and no notice to the respondents was required before such leave was granted. The respondents then pre- ferred a Civil Revision Petition in the Madras High Court which has been allowed by a judgment delivered by learned Single Judge. He took the view that an analysis of the provisions of section 92 of the Code shows that in order to institute a representative suit as contemplated in the said section two or more persons must have an interest in the trust and they should have obtained the leave of the court before they institute the suit. The learned Single Judge held that while the said section enables persons interested in a public trust to file a suit to secure the proper admin- istration and management of the trust and its properties by its trustees, it also imposes a check on the institution of such suits by the imposition of certain conditions,-one of which is the obtaining of leave from the court. It was held that it is the grant of leave which confers on the person concerned a right to institute a suit under section 92 of the Code. If there were any facts which might disentitle the applicants for leave from obtaining the leave of the court, these could be best brought to the notice of the court by the party arrayed on the opposite side. The learned Judge also referred to the provisions of section 104(1) (ffa) of the Code whereby an order under section 91 or section 92 refusing leave to institute a suit of the nature referred to in section 91 is made appealable. The learned Judge followed the decision of the High Court of Madras in T.M. Shanmugam and Others v. The Periyar Self Respect Propaganda Institu- tion and Others, [1984] II MLJ 440; AIR 1985 Madras 93 and held that as the leave had been granted without any notice to the respondents, it was void and liable to be set aside.

The learned Judge allowed the-revision petitions, set aside the leave and held that the suit could not be entertained and was liable to be dismissed. It is against this decision that these appeals have been peferred to.

Learned counsel for the appellants submitted that if the court 270 were required to give opportunity to the defendants to be heard before granting leave to under section 92, the grant of leave would entail a great deal of delay and might defeat the ends of justice where some urgent relief was required.

He pointed out that, if a defendant had a grievance against the grant of leave he could always made an application to revoke the leave and no serious prejudice would be caused to the defendant by the grant of leave.

Learned counsel for the respondents contended that leave under section 92 of the Code to institute a suit was a material requirement for maintenance of a suit. Before granting leave the court was called upon to consider various aspects of the matter, namely, whether the suit was such as contemplated under section 92, whether the persons applying for such leave were fit persons to institute a representa- tive suit and so on. It was submitted by him that the court could not decide whether leave should be granted without giving an opportunity to the defendants to show cause against the grant of leave. It was submitted by him that the grant of leave was a pre-condition for instituting a ‘suit under section 92. Leave granted without giving any opportu- nity to the defendant to show cause was void and a suit instituted on the basis of such void leave was not maintain- able at all. It was submitted by him that at the stage of grant of leave what the court is called upon to consider is the plaint and whether, prima facie, the suit proposed to be instituted was of the kind contemplated under section 92 of the Code, that is, whether the reliefs prayed for were such as were set out in section 92 and whether the suit was against a public trust. It was also necessary for the court to consider whether, the proposed plaintiffs had an interest in the public trust and were fit persons for leave being granted to them. The Court could also consider whether, prima facie, the allegations in the plaint were baseless or frivolous. At that stage, it was necessary to give any notice to the defendant because he could point out the reasons why leave should not be granted.

Before considering the merits of the aforesaid conten- tions, it would not be out of place to refer to the relevant provisions of the Code of Civil Procedure. The relevant part of sub section (1) of section runs as follows:

“92. Public Charities (1) In the case of any alleged breach of any express or constructive trust created for public purposes of a charita- ble or religious nature, or where the direction of the Court 271 is deemed necessary for the administration of any such trust, the Advocate-General, or two or more persons having an interest in the trust and having obtained the leave of the Court, may institute a suit, whether contentious or not, in the principal Civil Court of original jurisdiction or in any other court empowered in that behalf by the State Gov- ernment within the local limits of whose jurisdiction the whole or any part of the subject matter of the trust is situate to obtain a decree– (a) removing any trustee;

(b) appointing a new trustee;

(c) vesting any property in a trustee;

(cc) directing a trustee who has been removed or a person who has ceased to be a trustee, to deliver possession of any trust property in his possession to the person entitled to the possession of such property;

(d) directing accounts and enquiries;

(e) declaring what proportion of the trust property or of the interest therein shall be allocated to any particular object of the trust;

(f) authorising the whole or any part of the trust property to be let, sold, mortgaged or exchanged;

(g) settling a scheme; or (h) granting such further or other relief as the nature of the case may require.

Section 104 provides for appeals against certain orders unless otherwise provided in the body of the Code or by any other law in force. Clause (ffa) of that section runs as follows:

“(ffa) an order under section 91 or section 92 refusing leave to institute a suit of the nature referred to in section 91 or section 92, as the case may be.” 272 We may mention that prior to its amendment in 1976, section 92 of the Code provided that leave of the Advocate- General had to be obtained for the institution of a suit of the kind described in that section and not the leave of the court.

We may now discuss the main cases relied on by the learned Counsel for the respective parties. Coming first to the cases relied upon by learned Counsel for the appellants, we find that the first decision cited by him was the deci- sion of this Court in Swami Parmatmanand Saraswati & Anr. v.

Ramji Tripathi & Anr., [1974] INSC 151; [1975] 1 SCR 790 at p. 796. In that case it was held that to see whether the suit falls within the ambit of section 92, only the allegations in the plaint should be looked into in the first instance. But, if, after the evidence is taken, it is found that the breach of trust alleged has not been made out and that the prayer for direc- tion of ‘the court is vague and is not based on any solid foundation of fact or reason but is made only with a view to bring the suit under the section then such a suit must be dismissed. Learned Counsel next drew our attention to the decision of this Court in Charan Singh & Anr. v. Darshan Singh & Ors., [1974] INSC 272; [1975] 3 SCR 48. Section 92 of the Code before its amendment in 1976 was applicable to the case. The court cited with approval the observations of Mukherjea, J., (as he then was), in Mahant Pragdasji Guru Bhagwandasji v. Patel Ishwarlalbhai Narsibhai and Others, reported in [1952] SCR 5 13 which runs as follows:

“A suit under section 92, Civil Procedure Code, is a suit of a special nature which presupposes the existence of a public trust of a religious or charitable character. Such suit can proceed only on the allegation that there is a breach of such trust or that directions of the court are necessary. It is only when these conditions are fulfilled that the suit has got to be brought in conformity with the provisions of section 92, Civil Procedure Code …… ” Neither of the aforesaid decisions of this Court deal with the question as to whether, before granting leave to insti- tute a suit under section 92, Advocate-General, or later the Court, was required to give an opportunity to the proposed defendants to show cause why leave should not be granted.

What learned counsel for the appellants urged, however, was that these decisions show that at the time when the Advo- cate-General or the Court is required to consider whether to grant leave to institute a suit as contemplated under sec- tion 92, it is only the averments in the plaint which have to be examined and hence, 273 the presence of the defendant is not necessary. We may now consider the High Court decisions relied on by the learned counsel for the appellants.

In Prithipal Singh v. Magh Singh and Others, AIR 1982 Punjab and Haryana 137 a learned Single Judge of the Punjab and Haryana High Court held that the grant of leave to file a suit is not a mere irregularity which can be cured but is a condition precedent. The provisions of section 92 are mandatory in nature in that respect. He further held that in granting leave under section 92 of the Code, the court does not have to write a reasoned order. It does not even have to give a notice to the defendant of an application for leave to file a suit as the order granting leave is of an adminis- trative nature. The same view was taken by a Division Bench of the Punjab and Haryana High Court in Lachhman Dass Udasi (deceased by L.R. ‘s) and Others v. Ranjit Singh and Others, AIR 1987 Punjab and Haryana 108 wherein it was held that no notice is necessary to be issued to the defendants prior to the granting or refusing of leave under section 92 of the Code as at that stage it is only the subjective satisfaction of the court that is required and, thus, the order is an order of administrative nature.

A Division Bench of the Kerala High Court also took the same view in P.V. Mathew and Others v. K.V. Thomas and Oth- ers, AIR 1983 Kerala 5. In that case it was held that along with the petition for leave the plaintiffs-petitioners should produce in court the plaint for the court’s perusal to enable it to pass a proper order under section 92(1).

This does not preclude the court from requiring the produc- tion of any other record necessary for a proper decision.

The court, if it is so satisfied, may grant the leave with- out issuing notice to the respondents-defendants or hearing them. In coming to this conclusion, the Division Bench relied upon the earlier decision of the Full Bench of the Kerala High Court in Mayer Simon, Perur v. Advocate-General of Kerala and Others, AIR 1975 Kerala 57 which was rendered before the amendment of Section 92 of the Code in 1976.

Learned Counsel referred to the judgment of a learned Single Judge of Allahabad High Court in Ambrish Kumar Singh v. Raja Abhushan Bran Bramhshan and Others, AIR 1989 Allaha- bad 194. In that case the learned Judge held that while granting leave the court does not decide the rights of the parties. No right is adjudicated at this stage. The court has merely to see whether there is a prima facie case for granting leave to file a suit. This order does not in any way affect the final decision which will be given on merits after the parties have 274 led evidence in the suit. Section 92 of the Code does not contemplate giving of any notice to the proposed defendants before granting leave.

Learned counsel for the respondent.,;. on the other hand drew our attention to the afore-mentioned decision of the Madras High Court in T.M. Shanmugham and Others v. The Periyar Self Respect Propaganda Institution and Others, AIR 1985 Madras 93 which has been relied upon in the impugned judgment. In that case a learned Judge of the said High Court held that leave granted to the plaintiffs to institute a suit under section 92 of the Code without notice to the defendants is void in law and the logical consequence will be that the institution and the numbering of the suit cannot be validly sustained in law and, therefore, the suit was liable to be dismissed on that technical ground. However, this will not stand in the way of the plaintiffs, if so desired, to institute fresh proceedings in accordance with law under section 92 of the Code.

In the case of Gurdwara Prabandhak Committee. Delhi Cantonment and Others v. Amarjit Singh Sabharwal and Others.

AIR 1984 Delhi 39 a learned Single Judge of the Delhi High Court has taken the view that an order of District Judge granting or refusing leave must be a reasoned order. The public trust concerned has right to be heard before the grant or refusal of leave. It was held by him that if the trust is not given an opportunity of being heard, it would be a material irregularity. To pass a non-speaking order in a judicial proceeding is also a material irregularity and revision would lie against such an irregularity. The grant- ing or refusing leave is a judicial order subject to revi- sion or appeal and it must be supported by reasons. Before such an order is passed both sides must have had an opportu- nity of being heard.

As far as the decisions of this Court which have been pointed out to us are concerned, the question as to whether before granting leave to institute a suit under section 92 of the Code, the Court is required to give an opportunity of being heard to the proposed defendants did not arise for determination at all in those cases. As far as the High Courts are concerned, they have taken different views on this question. The legislative history of section 92 of the Code indicates that one of the objects which led to the enactment of the said section was to enable two or more persons interested in any trust created for a public purpose of a charitable or religious nature should be enabled to file a suit for the reliefs set out in the said section without having to join all the beneficiaries since it would be highly inconvenient and impractic- 275 able for all the beneficiaries to join in the suit; hence any two or more of them were given the right to institute a suit for the reliefs mentioned in the said section 92 of the Code. However, it was considered desirable to prevent a public trust from being harassed or put to legal expenses by reckless or frivolous suits being brought against the trus- tees and hence, a provision was made for leave of the court having to be obtained before the suit is instituted.

A plain reading of section 92 of the Code indicates that leave of the court is a pre-condition or a condition prece- dent for the institution of a suit against a public trust for the reliefs set out in the said section: unless all the beneficiaries join in instituting the suit. if such a suit is instituted without leave, it would not be maintainable at all. Having in mind, the objectives underlying section 92 and the language thereof. it appears to us that, as a rule caution, the court should normally. unless it is impractica- ble or inconvenient to do so, give a notice to the proposed defendants before granting leave under section 92 to insti- tute a suit. The defendants could bring to the notice of the court for instance that the allegations made in the plaint are frivolous or reckless. Apart from this. they could, in a given case, point out that the persons who are applying for leave under section 92 are doing so merely with a view to harass the trust or have such antecedents that it would be undesirable to grant leave to such persons. The desirability of such notice being given to the defendants, however, cannot be regarded as a statutory requirement to be complied with before leave under section 92 can be granted as that would lead to unnecessary delay and, in a given case. cause considerable loss to the public trust. Such a construction of the provisions of section 92 of the Code would render it difficult for the beneficiaries of a public trust to obtain urgent interim orders from the court even though the circum- stances might warrant such relief being granted. Keeping in mind these considerations, in our opinion. although, as a rule of caution, court should normally give notice to the defendants before granting leave under the said section to institute a suit. the court’ is not bound to do so. If a suit is instituted on the basis of such leave, granted without notice to the defendants, the suit would not thereby be rendered bad in law or non-maintainable. The grant of leave cannot be regarded as defeating or even seriously prejudicing any right of the proposed defendants because it is always open to them to file an application for revocation of the leave which can be considered on merits and according to law.

We may mention that although clause (ffa) of a section 104(1) of the Code provides that an appeal shall lie against the refusal of grant of 276 leave, that cannot lead to the conclusion that it is obliga- tory on the part of the court to give notice to the proposed defendants before granting leave because an appeal lies only against the refusal of leave and not against the grant of leave. Before refusing leave the proposed plaintiffs are bound to be heard and it is the plaintiffs and not the defendants who could be prejudiced by refusal to grant such leave.

In the result, the appeals are allowed as aforestated.

The impugned judgment of the High Court is set aside. The Trial Court is directed to dispose of the application for revocation of leave on merits and in accordance with law.

On the facts and circumstances of the case, there will be no order as to cost incurred so far.

R.S. S. Appeals allowed.

The post R.m. Narayana Chettiar & Anr Vs. N. Lakshmanan Chetfiar & Ors appeared first on B&B Associates LLP.

SHRI SITARAM SUGAR COMPANY LIMITED & ANR. ETC. …PETITIONER
Vs.
UNION OF INDIA & ORS. …RESPONDENT

DATE OF JUDGMENT 13/03/1990

BENCH: THOMMEN, T.K. (J) MUKHARJI, SABYASACHI (CJ) SHETTY, K.J. (J) AHMADI, A.M. (J) SAIKIA, K.N. (J)

CITATION: 1990 AIR 1277 1990 SCR (1) 909 1990 SCC (3) 223 JT 1990 (1) 462 1990 SCALE (1)475

CITATOR INFO : RF 1991 SC 363 (12) R 1991 SC 724 (13) RF 1991 SC1902 (16) RF 1992 SC1033 (38)

ACT:

Essential Commodities Act, 1955: S. 3(3-C)–Government of India Notifications dated November 28, 1974 and July 11, 1975–Fixing prices of levy sugar on zonal basis–Validity of–Whether legislative in character–Whether amenable to judicial review–Determination of price–Requirement of ‘having regard to’ Clauses (a) to (d)–Whether mandatory–Power delegated to fix different prices for different areas, different factories or different kinds of sugar–Nature and scope of-Whether matter of economic poli- cy–Whether falls within purview of court.

Judicial review of State action–Legislative, executive or quasijudicial–Nature and scope of.

Administrative law–Delegation of legislative power Judicial review–Scope of–Courts not to interfere with matters of economic policy.

Administrative Law–Administrative action–Principles of natural justice–Observance of–Even if rule of audi alteram partem not attracted reasonableness and fair play in action must be observed.

Constitution of India, Article 14: Principle of equality must govern every State action.

HELD: 1. The notifications dated 28th November, 1974 and 11th July, 1975 issued under sub-s. (3-C) of s. 3 of the Essential Commodities Act, 1955 are intra rites the Act.

There is no merit in the challenge. [950F, 918F-G]

2.1 Sub-section (3-C) is attracted whenever any producer is required to sell sugar by an order made with reference to sub-s. (2)(f) and no notification has been issued under sub-s. (3-A) or any such notification, having been issued, has ceased to be in force. It operates notwithstanding anything contained in sub-s. (3). This means the compensa- tion payable to the seller in the circumstances attracting sub-s. (3-C) is not the price postulated in sub-s. (3). Nor is it the price mentioned under sub-s. (3-A), for that sub- section cannot be in operation when sub-s. (3-C) is attract- ed. What is payable under sub-s. (3-C) is an amount calcu- lated with reference to the price of sugar. [930F-H] 912 The Panipat Cooperative Sugar Mills v. The Union of India, [1973] 2 SCR 860, referred to.

2.2 The price of sugar is determined by the Central Government having regard to the factors mentioned in cls.

(a) to (d) of sub-s. (3-C). This is done with reference to the industry as a whole by a process of costing in respect of a representative cross-section of manufacturing units and not with reference to any individual seller. The order notifying the price is required by sub-ss. (5) and (6), to be notified in official gazette and laid before both Houses of Parliament. [931H, 932A, 936G, 931G]

3. The words ‘having regard to’ in sub-s. (3-C) are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory. They do not mean that the Government cannot, after taking into account the matters mentioned in cls. (a) to (d), consider any other matter which may be relevant. The expression is not “having regard only to” but “having regard to”. These words are not a fetter, they are not words of limitation. [936D, 934E] Union of India v. Kamlabhai Harjiwandas Parekh & Ors., [1967] INSC 202; [1968] 1 SCR 463; Commissioner of Income Tax v. Williamson Diamonds Ltd., L.R. 1958 A.C. 41; Commissioner of Income Tax, West Bengal, Calcutta v. Gungadhar Banerjee & Co. (P) Ltd., [1965] INSC 78; [1965] 3 SCR 439; Saraswati Industrial Syndicate Ltd.

etc’. v. Union of India[1974] INSC 163; , [1975] 1 SCR 956; State of Karnata- ka & Anr. etc. v. Shri Ranganatha Reddy & Anr. etc.[1977] INSC 195; , [1978] 1 SCR 641; State of U. P. & Ors. v. Renusagar Power Co., [1988] INSC 194; [1988] 4 SCC 59 and O’May & Ors. v. City of London Real Property Co. Ltd., [1982] 1 All E.R. 660, referred to.

4.1 In considering the reasonableness of the order made by the Government’ in exercise of its power under sub-s.

(3-C) the Court will not strictly scrutinise the extent to which matters mentioned in cls. (a) to (d), or any other matters have been taken into account by the Government in making its estimate of the price. There is sufficient com- pliance with the sub-section if the Government has addressed its mind to the factors which it may reasonably consider to be relevant, and has come to a conclusion, which any reason- able person placed in the position of the Government, would have come to. [936E-F]

4.2 In the instant case, the material brought to the notice of the Court does not support the arguments at the bar that the Central Government had not applied its mind to the relevant questions to which 913 they were expected to have regard in terms of the statute.

Nor any data has been furnished to show that the prices determined by the Government would have been different had the ingredients of cls. (a) to (d) of the sub-section been examined with reference to each individual producer instead of a representative cross section of manufacturing units.

[947A, 934D]

5.1 Judicial decisions are made according to law while administrative decisions emanate from administrative policy.

Quasi-judicial decisions are also administrative decisions emanating from adjudication but they are subject to some measure of judicial procedure, such as rules of natural justice. Legislative orders can be distinguished from rest of orders by reference to the principle that the former are of general application. They are made formally by publica- tion and for general guidance with reference to which indi- vidual decisions are taken in particular situations, [937C, 939E, 938A-B] H.W.R. Wade.’ Administrative Law, 6th ed., 47, referred to.

5.2 An instruction may be treated as legislative even when it is not issued formally but by circular or a letter or the like. What matters is the substance and not the form, or the name. Where an authority to whom power is delegated is entitled to sub-delegate his power, be it legislative, executive or judicial, then such authority may also give instructions to his delegates and these instructions may be regarded as legislative. However, a judicial tribunal cannot delegate its functions except when it is authorised to do so expressly or by necessary implication. [938B-C, D-E] Griffith and Street.’ Principles of Administrative Law, 5th ed., p. 65 and Bernard & Ors. v. National Dock Labour Board & Ors., [1953] EWCA Civ 5; [1953] 2 Q.B. 18 at 40, referred to.

5.3 What distinguishes legislation from adjudication is that the former 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 touched by it; while adjudication operates con- cretely upon individuals in their individual capacity.

[938F] Davis.’ Administrative Law Text, 3rd ed., p. 123, referred to.

5.4 A statutory instrument such as a rule, order or regulation emanates from the exercise of delegated legisla- tive power which is a 914 part of the administrative process resembling enactment of law by the legislature. It affects the rights of individuals in the abstract. [939D-E, C] Bernard Schwartz.’ Administrative Law [1976] p. 144 and Davis: Administrative Law Text, p. 123, referred to.

5.5 When the function is treated as legislative, a party affected by the order has no right to notice and bearing unless, of course, the statute so requires. It is neverthe- less imperative that the action of the authority should be inspired by reason. It being of general application engulf- ing a wide sweep of powers, applicable to all persons and situations of a broadly identifiable class, the legislative order may not be vulnerable to challenge merely by reasons of its omission to take into account individual peculiari- ties and differences amongst those failing within the class.

[939F, 943C, 939F-G] Union of India & Anr. v. Cynamide India Ltd. & Ant., [1987] 2 SCC 720 and Saraswati Industrial Syndicate Ltd., v.

Union of India[1974] INSC 163; , [1975] 1 SCR 956, referred to.

5.6 The orders in the instant case, duly published in the official gazettes notifying the prices determined for sugar of various grades and produced in various zones, and applicable without exception to all producers failing within well defined groups can be legitimately characterised as legislative. No rule of natural justice is applicable to any such order. [941H, 942A, 943B-C] Union of India & Anr. v. Cynamide India Ltd. & Anr., [1987] 2 SCC 720; State of U.P. & Ors. v. Renusagar Power Co., [1988] INSC 194; [1988] 4 SCC 59; Saraswati Industrial Syndicate Ltd.

etc. v. Union of India[1974] INSC 163; , [1975] 1 SCR 956; Prag Ice & Oil Mills & Anr. etc. v. Union of India[1978] INSC 43; , [1978] 3 SCR 293 and Bates v. Lord Hailsham of St. Marylebone & Ors., [1972] 3 All ER 1019, referred to.

6. It is with reference to predetermined prices of sugar that subsection (3-C) postulates the calculation of the amount payable to each producer who has sold sugar in compliance with an order made with reference to cl. (f) of sub-s. (2). The calculation of such amount is in contradis- tinction to the determination of price of sugar, a non- legislative act. The individual orders to that effect being administrative orders rounded on the mechanics of price fixation, they must be left to the better instructed judg- ment of the executive, and in regard to them the principle of audi alteram partem is not applicable- All that is 915 required is reasonableness and fair play which are in es- sence emanations from the doctrine of natural justice.

[942B, 936F-G, 943A-B] The Panipat Cooperative Sugar Mills v. The Union of India, [1973] 2 SCR 860; A.K. Kraipak & Ors. etc. v. Union of India & Ors., [1970] 1 SCR 457 and State of U.P. & Ors.

v. Renusagar Power Co.[1988] INSC 194; , [1988] 4 SCC 59, referred to.

Union of India & Anr. v. Cynamide India Ltd. & Anr., [1987] 2 SCC 720, distinguished.

7.1 Any Act of the repository of power, whether legisla- tive or administrative or quasi-judicial, is open to chal- lenge if it is in conflict with the Constitution or the governing Act or the general principles of the law of the land or it is so arbitrary or unreasonable that no fair minded authority could ever have made it. [946C] E.P. Royappa v. State of TamilNadu & Anr., [1973] INSC 214; [1974] 2 SCR 348; State of U.P. & Ors. v. Renusagar Power Co., [1988] INSC 194; [1988] 4 SCC 59; Saraswati Industrial Syndicate Ltd. v. Union of India, [1974] INSC 163; [1975] 1 SCR 956; Mrs. Maneka Gandhi v. Union of India & Anr., [1978] 1 SCC 248; Ramana Dayaram Shetry v. The International Airport Authority of India & Ors., [1979] INSC 111; [1979] 3 SCR 1014; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors., [1980] INSC 219; [1981] 1 SCC 722; D.S. Nakara & Ors. v. Union of India, [1982] INSC 103; [1983] 1 SCC 305; The Barium Chemicals Ltd. & Ant. v.

The Company Law Board & Ors., [1966] Supp. SCR 311; Leila Mourning v. Family Publications Service, [1973] USSC 85; 411 US 356, 36 L.

Ed. 2d 318; Kruse v. Johnson, [1988] 2 Q.B. 91; Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1947] EWCA Civ 1; [1948] 1 K.B. 223; Westminster Corporation v. London and North Western Railway, [1905] AC 426; Mixnam Properties Ltd.

v. Chertsey U.D.C., [1965] AC 735; Commissioners of Customs

ney v. Forde, [1971] AC 632 (H.L.); Carltona Ltd. v. Commis- sioners of Works, [1943] 2 All ER 560; Point of Ayr. Col- lieries Ltd. v. Lloyd George, [1943] 2 All E.R. 546; Scott v. Glasgow Corporation, [1899] AC 470; Robert Baird L.D.v.

City of Glasgow, [1936] AC 32; Manhattan General Equipment Co. v. Commissioner, [1936] USSC 22; [1935] 297 US 129; Yates (Arthur) & Co.

Pty Ltd. v. Vegetable Seeds Committee, [1945] HCA 55; [1945-46] 72 CLR 37;

Bailey v. Conole, [1931] WALawRp 3; [1931] 34 WALR 18; Boyd Builders Ltd. v.

City of Ottawa, [1964] 45 DLR 2d 211; Re Burns & Township of Haldimand, [1966] 52 DLR 2d 1014 and Lynch v. Tilden Produce Co., [1924] USSC 125; 265 US 315, referred to.

916

7.2 Where a question of law is at issue, the Court may determine the rightness of the decision of the authority on its own independent judgment. If the decision does not agree with that which the Court considers to be the right one, the finding of law by the authority is liable to be upset. Where it is a finding of fact, the Court examines only the reason- ableness of the findings. When the finding is found to be rational and reasonably based on evidence then judicial review is exhausted even though the finding may not neces- sarily be what the Court would have come to as a trier of fact. [944C-E]

7.3 Whether an order is characterised as legislative or administrative or quasi-judicial, or, whether it is a deter- mination of law or fact, the judgment of the expert body, entrusted with power, is generally treated as final and the judicial function is exhausted when it is found to have warrant in the record and a rational basis in law. [944E-F] Rochester Tel. Corp. v. United States, [1939] 307 U.S.

125, 83 L. Ed. 147; Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1947] EWCA Civ 1; [1948] 1 K.B. 223 and Chief Constable of the North Wales Police v. Evans, [1982] UKHL 10; [1982] 1 WLR 1155 at 1160, referred to.

7.4 The orders, in the instant case, are undoubtedly based on an exhaustive study by experts. They are fully supported by the recommendations of the Tariff Commission in 1969 and 1973 and are not shown to be either discriminatory or unreasonable or arbitrary or ultra vires. [946D-E]

8.1 Judicial review is not concerned with matters of economic policy. Nor is price fixation within the province of the Courts. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the “feel of the experts” by its own views. When the legis- lature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness and are consistent with the laws of the land. [948F, 949B, 948F-G] M/s. Gupta Sugar Works v. State of U.P. & Ors., [1987] Supp. SCC 476; Railroad Commission of Texas v. Rowan & Nichols Oil Company, 311 US 570-577, 85 L. ed. 358 and Mississippi Valley Barge Line Company v. United States of America, 2.92 US 282-290[1934] USSC 101; , 78 L.ed 1260, referred to.

917

8.2 In the instant case, sufficient power has been delegated to the Central Government by sub-s. (3-C) to formulate and implement its policy decisions by means of statutory instruments and executive orders. Classification of sugar factories with due regard to geographical-cum-agro economic considerations for the purpose of determining the price of sugar in terms of the said sub-section is a policy decision based on exhaustive expert conclusions. Such clas- sification, cannot, in the absence of evidence to the con- trary, be characterised as arbitrary or unreasonable or not rounded on an intelligible differentia having a rational nexus with the object sought to be achieved by sub-section (3-C). [949E, 947B-D] The Panipat Cooperative Sugar Mills v. The Union of India, [1973] 2 SCR 860 and T. Govindaraja Mudaliar etc. v.

The State of TamilNadu & Ors., [1973] INSC 1; [1973] 3 SCR 222, applied.

Federal Power Commission v. Hope Gas Co., [1944] USSC 2; 320 US 591;

Union of India & Anr. v. Cynamide India Ltd. &Anr., [1987] 2 SCC 720 and M/s. Gupta Sugar Works v. State of U.P. & Ors., [1987] Supp. SCC 476, referred to.

8.3 If the petitioners nevertheless incur losses, such losses need not necessarily have arisen by reason of geo- graphical zoning, but for reasons totally unconnected with it, such as the condition of the plant and machinery, quali- ty of management, investment policy, labour relations, etc.

These are matters on which they have not furnished data. The decisions in Anakapalle[1972] INSC 271; , [1973] 2 SCR 882 and Panipat, [1973] 2 SCR 860 do not require reconsideration. [947D-E, 950E-F]

8.4 Whether the policy should be altered to divide the sugar industry into groups of units with similar cost char- acteristics with particular reference to recovery from sugarcane, duration of the crushing season, size and age of units and capital cost per tonne of output, without regard to their location, is a matter for the Central Government to decide. What is best for the sugar industry and in what manner the policy should be formulated and implemented, bearing in mind the fundamental object of the statute, is again a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review. [949E-G] Secretary of Agriculture, etc. v. Central Roig Refining Company etc., 338 US 615-617, 94 L. ed. 391-392, referred to.

918 & ORIGINAL JURISDICTION: Writ Petition Nos. 464 & 617 of 1977.

(Under Article 32 of the Constitution of India. ) K. Parasaran, Attorney General, Shanti Bhushan, Ashwani Kumar, K.G. Bhagat, L.N. Sinha, Raja Ram Aggarwal, S.P.

Gupta, H.K. Puri, V. Parthasarthy, T.C. Sharma, P.P. Singh, Ms. A. Subhashini, Mrs. Sushma Suri, G. Gopalakrishnan, O.P.

Rana, A.V. Rangam and Shartha Raju for the appearing par- ties.

F.S. Nariman, K.K. Venugopal, A.K. Verma, D.N. Mishra and S. Kachawa for the intervener in W.P. No. 464/77.

The Judgment of the Court was delivered by THOMMEN, J. The petitioners are owners of sugar mills operating in the State of Uttar Pradesh in areas classified for the purpose of determining the price of levy sugar as West and East Zones. They challenge the validity of notifi- cations dated 28th November, 1974 and 11th July, 1975 (Annexures 8 & 9) issued by the Central Government in exer- cise of its power under sub-section (3-C) of section 3 of the Essential Commodities Act, 1955 (Act No. 10 of 1955), as amended to date (hereinafter referred to as the ‘Act’). The petitioners do not, and cannot, challenge the validity of the subsection by reason of Article 3 lB of the Constitution of India. By the impugned orders, the Central Government fixed the prices of levy sugar for 1974-75 production. For the purpose of determining the prices, the country is divid- ed into 16 zones, and the prices fixed for various grades of sugar in terms of section 3 (3-C) of the Act vary from ‘ zone to zone. Prices are determined with reference to the geographical-cum-agro-economic considerations and the aver- age cost profiles of factories located in their respective zones. Each State for this purpose constitutes a separate zone, while U.P. is divided into 3 zones and Bihar into 2 zones. The petitioners contend that these orders are ultra vires the Act and violative of their fundamental fights as the prices of levy sugar have been determined arbitrarily with reference to the average cost profiles of factories grouped together in zones without regard to their individual capacity and cost characteristics. Such prices do not re- flect the actual manufacturing cost of sugar incurred by producers like the petitioners or secure to them reasonable returns on the capital employed by them. Geographical zon- ing, for the purpose of price fixation, they point out, is an irrational’ and discriminatory system of (1) Published in the Gazette of India Extraordinary dated 28.11.1974 and 11.7.1975.

919 averaging wide cost disparities amongst producers of widely varying capacity. Cost of manufacture of sugar depends on a number of factors, such as recoveries from the sugarcanes, duration of the crushing season, crushing capacity of the plant, the sugarcane price paid and the capital employed in the manufacture of sugar. These factors vary from factory to factory. Fixation of the levy sugar prices on zonal basis without regard to these divergent factors and the compara- tive cost profiles gives the owners of bigger factories an undue advantage over producers like the petitioners whose factories are comparatively of lower crushing capacity and whose manufacturing cost is consequently higher. Clubbing of the petitioners’ factories with dissimilar factories in the same zones for the purpose of price fixation is discrimina- tory, arbitrary and unreasonable. The petitioners point out that the system of geographical zoning for the purpose of price determination has been severely criticised by the Bureau of Industrial Costs & Prices (The “BICP”) who have strongly recommended the division of the sugar industry into groups of units having similar cost characteristics with particular reference to recovery, duration, size and age of the unit and capital cost per tonne of output, and irrespec- tive of their location.

The respondents, on the other hand, contend that the classification of sugar industry into 15 zones (now 16) was upheld by a Constitution Bench of this Court in Anakapalle Co-operative Agricultural & Industrial Society Ltd. etc.

etc. v. Union of India & Ors., [1972] INSC 271; [1973] 2 SCR 882. The conten- tion that the zonal system was discriminatory and violative of constitutional principles was pointedly urged, but cate- gorically rejected by this ‘Court. The method adopted by the Government in fixing the price of levy sugar is fully sup- ported by the recommendations of various expert bodies. The Tariff Commission in its 1973 Report recommended division of the country into 16 zones for this purpose. The price of sugar is fixed with reference to the Cost Schedule recom- mended by that body. These recommendations are based on various factors such as cost and output of individual la- bour, cane price (accounting for about 70 per cent of the cost of sugar production), quality of sugarcane, taxes on sugarcane, cost of other material, transport charges, cost of storing the sugar produced, cane development charges and other overhead expenses, selling expenses etc. These factors are almost identical for the entire zone.

The cost of manufacturing sugar, the respondents con- tend, depends not only on recovery from the sugarcane, duration of crushing season, crushing capacity of the plant, the sugarcane price paid and the capital employed, as stated by the petitioners, but also to a consider- 920 able extent on the condition of the plant and machinery, quality of management, investment policy, relations with cane growers and labour, financial reputation etc. They say:

“It is evident from the Tariff Commission Report of 1959, as also the Official Directory of the Bombay Stock Exchange, that the petitioner Company has been consistently diverting huge amounts for investments running into several lakhs elsewhere instead of ploughing back the same into the peti- tioner’s sugar industry in question. Thus, the petitioner Company has been neglecting the sugar factory and for such neglect of their own they cannot blame the Zonal System.” Mr. Shanti Bhushan, appearing for the petitioners, does not object to the factories being grouped together on the basis of factors common to them with a view to fixing the prices applicable to them as a class of producers. He does not advocate fixation of price separately for each unit. He says that the sugar factories must be grouped together, not on the basis of their geographical location, but similarity in cost characteristics. He relies upon the 1976 Report of the BICP. The present system of fixing prices according to the regions, where the factories are located, he says, is based on “averaging wide cost disparities” as a result of which manufacturers like the petitioners incurring a high cost of production and others incurring a low cost of pro- duction are treated alike. Such a system works to the disad- vantage of the former and to the advantage of the latter.

This, Mr. Shanti Bhushan contends, is an unreasonable and invalid classification and violative of constitutional principles. While this line of argument is supported by Mr.

Raja Ram Agarwal, Mr. S.P. Gupta appearing for the interven- er in Civil Writ Petition No. 464 of 1977 advocates aboli- tion of zonal classification or grouping of any kind and supports fixation of price for each individual factory with reference to its cost and regardless of any other considera- tion. Such unit-wise determination alone, according to him, satisfies the requirements of Section 3(3-C). Any system of zoning or grouping for determination of price, he contends, will fail to meet the norms of that sub-section. Mr. M .M.

Abdul Khader, on the other hand, submits that while averag- ing and costing with reference to a representative cross- section may ordinarily be an appropriate method for deter- mining the fair price, such a method is inappropriate for a small zone like Kerala where there are only three manufac- turing units. In respect of such a zone, he says, unit-wise fixation of price is the only just and proper method.

921 Mr. K.K. Venugopal, counsel for Indian Sugar Mills’ Association (ISMA), on the other hand, supports the zoning system. He says that, except for a few producers like the petitioners, all the rest of them in the country have ac- cepted the principle of zoning. In his written submissions, Mr. Venugopal states as follows:

“As was seen during the course of hearing only 2 or 3 per- sons have come forward challenging zoning. There are 389 sugar factories in the country and the present intervener has 166 members. Besides there are 220 members with the cooperative sector. Their Association being National Federa- tion of Cooperative Sugar Factories Ltd., has also inter- vened in these petitions and have adopted the arguments of ISMA. Hence almost the entire industry has supported zoning and only a handful of people who also factually are not high-cost units have opposed zoning.” Mr. Venugopal submits that the present case is squarely covered by the decisions of this Court in Anakapalle Cooper- ative Agricultural & Industrial Society Ltd. etc. etc. v.

Union of India & Ors., [1972] INSC 271; [1973] 2 SCR 882 and The Panipat Cooperative Sugar Mills v. The Union of India, [1973] 2 SCR 860. He says that the petitioners have not made out a case for reconsideration of these two decisions. He refers to T.

Govindaraja Mudaliar etc. etc. v. The State of Tamil Nadu & Ors., [1973] INSC 1; [1973] 3 SCR 222 at 228 to 230 and submits that this Court would not reexamine an earlier decision merely because certain aspects of the question had not been noticed in that decision. Mr. Venugopal, however, advocates neutralisation of the high cost incurred by the old units having lower crushing capacity by giving them an incremental levy price as recommended by the High Level Committee in 1980.

Before we examine the provisions of section 3(3-C) in the context of the general scheme of the Act, we shall briefly refer to the observations of this Court in Anaka- palle[1972] INSC 271; , [1973] 2 SCR 882 and Panipat, [1973] 2 SCR 860.

Grover, J. speaking for the Bench in Anakapalle (supra) states’:

“The system of fixing the prices, according to certain regions or zones, is not a new one. The Tariff Commission in 1959 favoured the formation of four zones. In the report of the Sugar Enquiry Commission 1965 it was pointed out that the Government had actually fixed the prices for 22 922 zones which meant that from four zones the number had been increased to twenty two or more. The Commission was of the view that there should be five zones only in addition to Assam. The Tariff Commission, 1969 however recommended the constitution of fifteen zones largely on State-wise basis with an exception only in case of Uttar Pradesh and Bihar.

Uttar Pradesh was divided into three zones and Bihar into two. The Tariff Commission had been specifically requested to inquire into the working of the zonal system, the main point for inquiry being the zones into which the sugar producers should be grouped having regard to the basis of classification to be recommended by the Commission. The view of the Commission was that on the whole the number of price zones should be fifteen which would reduce, though not eliminate, the inter-se anomalies in the cost structure without resorting to the extreme of the fixation of price for each unit or a single or at the most two, one for the sub-tropical and other for the tropical one. The Tariff Commission hoped that in the course of time conditions would be created making the operation of the second alternative feasible.” Rejecting the contention that it was the zonal system that caused the losses allegedly incurred by some of the sugar producers, Grover, J. says that ordinarily these units ought to have made profits. The reasons for incurring losses can be many, such as inefficiency, failure to pursue the right policy, poor management and planning etc., but these reasons have no relation to the zonal system. That system by and large has led to efficiency and provides an incentive to cut down the cost. Healthy competition among the units in the same zone should in the normal. course result in reduc- tion of cost and greater efficiency in the operation of the units. It is proper management and planning that would lead to the success of any commercial venture. The contention of the producers that they have been incurring losses on ac- count of the zonal system is opposed to the evidence pro- duced by them. The Court has rejected the extreme contention that prices should be fixed unitwise, i.e., on the basis of actual cost incurred by each unit. Referring to this conten- tion, this Court observes:

“Apart from the impracticability of fixing the prices for each unit in the whole country, the entire object and pur- pose of controlling prices would be defeated by the adoption of such a system.” 923 Grover, J. states that, during the earlier period of price control, it was on an all India basis that the price was fixed. That is still the objective. If such an objective is achieved, it would undoubtedly be conducive to conferring proper benefit on the consumers. The objective of the Tariff Commission is to have only two regions for the whole coun- try, viz., sub-tropical and tropical.

The Court has rejected as baseless the criticism against the principle of weighted average adopted in the fixation of price in each zone. Such a principle is well recognised and acted upon by various Sugar Enquiry Commissions. A proper cost study is intended to do justice to the weak and strong alike. There is abundant justification for continuing and sustaining the zonal system. The varying climatic conditions of each State have been taken into account. For the same reason, Bihar is divided into 2 zones and U.P. into 3 zones, while, in the case of many other States, each State is treated as a single zone. This system of zoning is thus adopted with special reference to climatic and agro-economic conditions. Rejecting the contention that the zonal system has resulted in discriminatory treatment, this Court states:

“We are unable to hold that while classifying zones on geographical-cum-agro-economic consideration, any discrimi- nation was made or that the price fixation according to each zone taking into account all the relevant factors would give rise to such discrimination as would attract Article 14 of the Constitution.” Even if there is no price control, the uneconomic units would be at a great disadvantage. The Court states:

“Even if there is no price control each unit will have to compete in the market and those units which are uneconomic and whose cost is unduly high will have to compete with others which are more efficient and the cost of which is much lower. It may be that uneconomic units may suffer losses but what they cannot achieve in the open market they cannot insist on where price has to be fixed by the govern- ment. The Sugar Enquiry Commission in its 1965 report ex- pressed the view that “cost-plus” basis of price fixation perpetuates inefficiency in the industry and is, therefore, against the long-term interest of the country.” Considering the general principle involved in price fixa- tion, the Court states:

924 “It is not therefore possible to say that the principles which the Tariff Commission followed in fixing the prices for different zones are either not recognised as valid principles for fixing prices or that simply because in case of some factories the actual cost was higher than the one fixed for the zone in which that factory was situate the fixation of price became illegal and was not in accordance with the provisions of sub-section (3-C). It has not been denied that the majority of sugar producers have made prof- its on the whole and have not suffered losses. It is only some of them which assert that their actual cost is far in excess of the price fixed. That can hardly be a ground for striking down the price fixed for the entire zone provided it has been done in accordance with the accepted principles ….. “.

The Court concludes:

“When prices have to be fixed not for each unit but for a particular region or zone the method employed by the Commis- sion was the only practical one and even if some units because of circumstances peculiar to them suffered a loss the price could not be so fixed as to cover their loss. That cannot possibly be the intention of the Parliament while enacting sub-section (3-C) of section 3 of the Act. If that were so the price fixation on zonal or regional basis would have to be completely eliminated. In other words, the entire system of price control which is contemplated wilt break down because fixation of price for each unit apart from being impractical would have no meaning whatsoever and would not be conducive to the interest of the consumer. ‘ ‘ This Court has thus in Anakapalle (supra) rejected the argument that the alleged loss incurred by certain sugar producers is attributable to fixation of price on a zonal basis; or the zonal system has led to inefficiency or lack of incentive, or it has resulted in unequal or unfair treat- ment. On the other hand, the zonal system has encouraged a healthy competition amongst the units in the same zone.

Unit-wise fixation is impracticable. The Tariff Commission is the best judge in selecting units for cost study to determine the average cost. The fair price has to be deter- mined with reference to the conditions of a representative cross section of the industry. For all these reasons, there is ample justification in continuing and sustaining the zonal system for 925 the purpose of price fixation. Price has to be fixed for each zone and necessarily it varies from zone to zone. There is no discrimination in the classification of zones on a geographical-cum-agro-economic consideration and any such classification is perfectly consistent with the principle of equality.

In Panipat, [1973] 2 SCR 860, Shelat, J. speaking for the same Constitution Bench that has decided Anakapalle[1972] INSC 271; , [1973] 2 SCR 882, referes to the norms adopted in sub-sec- tion (3-C), viz., (a) determination by the Government of the “price of sugar”, and (b) payment of “an amount” to the manufacturer, and states that the concept of fair price which is what is referred to in sub-section (3-C) as “price of sugar” does not by any account mean the actual cost of production of every individual manufacturer. Such price has to be arrived at by a process of costing with reference to a representative cross section of the manufacturing units. He states:

“The basis of a fair price would have to be built on a reasonably efficient and economic representative crosssec- tion on whose workings cost-schedules would have been worked out and the price to be determined by Government under sub- section (3-C) would have to be built.” So stating, Shelat, J. rejects the contention that such price has to be determined unit-wise. Any such fixation of price, he points out, would be contrary to the concept of partial control postulated by the subsection and would perpetuate inefficiency and mismanagement. But, of course, any such price, he hastens to add, has to be fixed reasona- bly and on relevant considerations. Referring to the policy of partial control, Shelat, J. states:

” ….. the Central Government was confronted with two main problems (a) deterioration in the sugar industry, and (b) the conflicting interests of the manufacturer, the consumer and the cane grower. The floor price of cane fixed by Government was intended to protect the farmer from ex- ploitation, but that was found not to be an incentive enough to induce him to increase his acreage. A device had to be found under which a price higher than the minimum could be paid by the manufacturer of sugar. The consumer, on the other hand, had also to be protected against the spiralling of sugar price and his needs, growing as they were, had to be satisfied at some reasonable price.” 926 Shelat, J. emphasises the need to modernise the factories which alone would yield a reasonable return. This is what he states:

‘Both these and a larger production of sugar would not be possible unless there was a reasonable return which would ensure expansion, which again would not be possible unless new machinery for such expansion was brought in and facto- ries, particularly in U.P. and Bihar, were modernised and renovated. A fair price for sugar, therefore, had to be such as would harmonise and satisfy at least to a reasonable extent these conflicting interests.” Significantly, the BICP’s recommendation to group indi- vidual units having homogenity in cost, irrespective of their location, was not accepted by the Central Government, particularly because the Tariff Commission itself had con- sidered the question and reached the conclusion that geo- graphical-cum-agro-economic considerations demanded the grouping of factories with reference to State zones, or subzones as in the case of U.P. and Bihar. To group them on the basis of their location in various regions of the coun- try for the purpose of price fixation is a rational method reflecting economic realities. This is particularly so as conditions generally vary from State to State as regards the availability and quality of sugarcane, labour conditions and other factors, whereas within the same region like facili- ties are generally available to all factories. If the cost structure varies from factory to factory, such variation is not necessarily caused by the non-availability, or the poor quality of raw material, or the labour conditions, but probably for reasons unconnected with them, such as the age of the plant, availability of finance, management ability, etc. There is great force in the submission of the respond- ents that to group together factories having a high cost profile and to determine a price specially applicable to them is, as recognised by this Court in Panipat (supra) and Anakapalle (supra), to put a premium on incompetence, if not mismanagement.

The history of control over sugar has been set out at length in Panipat (supra) and we do not wish to burden this judgment with a narration of the circumstances which have led to the introduction of partial control under which 60% of the output of sugar is acquired and the balance left for free sale. It is in implementation of this policy that sub- section (3-C) of section 3 was inserted2 Before we examine the

2. For an illuminating discussion of this aspect, See A.M. Khusro, Price Policy, Lancer International (1987), p.

62-63:

927 provisions of that sub-section under which the impugned notification have been issued, we shall refer to the statu- tory scheme.

The Act was, as stated in the preamble, enacted by Parliament “to provide, in the interest of the general public, for the control of the production, supply and dis- tribution of, and trade and commerce in, certain commodi- ties”. The entire Act is devoted to the cause of the general public with a view to achieving equitable distribution of essential commodities at fair prices.

Section 3 of the Act confers wide power upon the Central Government to control production, supply, distribution, etc., of essential commodities. It reads:

“3. Powers to control production, supply, distribution, etc., of essential commodities–(1) If the Central Govern- ment 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 prices or for securing any essential commodity for the defence of India or the efficient conduct of military operations, it may, by order, provide for regu- lating or prohibiting the production, supply and distribu- tion thereof and trade and commerce therein.” Sub-section (2) of section 3 says that, without preju- dice to the generality of the powers conferred by sub-sec- tion (1), an order made “After many years of adverse experience a new strategy of dual pricing was introduced in sugar. The mills were asked to deliver to the public distribution system about 60 per cent of their output say at Rs.2 per Kg. and were allowed to sell the balance of 40 per cent in the free market at say Rs.6 per kg. The mills were delighted to do so as they got very much enhanced receipts from their flee- market sales. With larger receipts they offered in the following season a higher price to the farmer (the sugarcane grower) who, in turn, grew and offered more cane. In other words, the law of supply which had been held captive, as it were, was freed from bondage. With a higher price offer from the mills, the cane growers brought more land under sugar- cane, diverted land from other crops to cane, used more inputs, produced and delivered to the mills more cane and in fact diverted cane deliveries from the open-pan system to the mill system. Having thus obtained much more cane, the mills produced much more sugar and sold 30-40 per cent of it in the free market. Within a year or two, the free-market price of sugar fell from Rs.6 to Rs.3 or even Rs.2.50. At this rate consumers began to buy more in the free market, millions of ration cards remained unused and the demands on the public distribution declined substantially. Prolonged shortages of sugar got converted into a relative abundance.” 928 under that sub-section may provide for the matters specified in subsection (2). One of them is what is contained in clause (f) of sub-. section (2) which empowers the Central Government to require any person dealing in any essential commodity to sell the whole or a specified part of such commodity to the Central Government or the State Government or to a nominee of such Government. It reads:

“(2) Without prejudice to the generality of the powers conferred by sub-section (1), an order made thereunder may provide- (a)………………………………………….

…………………………………………….

(f) for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling of any essential commodity ,– (a) to sell the whole or a specified part of the quantity held in stock or produced or received by him, or (b) in the case of any such commodity which is likely to be produced or received by him, to sell the whole or a speci- fied part of such commodity when produced or received by him, to the Central Government or a State Government or to an officer or agent of such Government or to a Corporation owned or controlled by such Government or to such other person or class of persons and in such circumstances as may be specified in the order.” The power contained in sub-section (1) or sub-section (2) is exercisable by an order. An ‘order’ is defined under section 2 to include a direction issued thereunder. Any order made under section 3 by the Central Government or by an officer or authority of the Central Government is re- quired by sub-section (6) of section 3 to be laid before both Houses of Parliament, as soon as may be, after it is made. Any order made under section 3 which is of a general nature or affecting a class of persons has to be notified in the official gazette. [Subsection (5) of section 3].

929 Sub-section (3) of section 3 provides that where any person has sold any essential commodity (sugar being such a commodity) in compliance with an order made with reference to clause (f) of sub-section (2), he shall be paid the price of the goods purchased from him as provided under clauses (a), (b) and (c) of sub-section (3). This subsection oper- ates only where an order has been made under sub-section (1) with reference to clause (f) of sub-section (2). While clause (a) of the sub-section postulates an agreed price, consistently with the controlled price, if any, clause (b) speaks of a price calculated with reference to the con- trolled price, if any, when no agreement is reached. Where neither clause (a) nor clause (b) applies, either because there is no agreement or because there is no controlled price, the seller has to be paid, as per clause (c), a price calculated at the market rate prevailing in the locality at the date of the sale.

Sub-section (3-A) empowers the Central Government to regulate in accordance with the provisions of the sub-sec- tion the price of any foodstuff sold in a locality in com- pliance with an order made with reference to clause (f) of sub-section (2). This power is exercisable by a direction which has to be duly notified in the official Gazette. The power to issue the direction is notwithstanding anything contained in sub-section (3). Before issuing the notifica- tion, the Central Government has to form an opinion that the price of any foodstuff (including sugar) has to be regulated for the purpose of cotrolling the rise in its prices or preventing its hoarding in any locality. Any such notifica- tion will remain in force for any specified period not exceeding 3 months. The price payable in such cases is either the agreed price consistently with the controlled price, if any, or where no such agreement is possible, the price calculated with reference to the controlled price, if any, or where neither of these two methods is applicable, the price calculated with reference to the average market rate prevailing in the locality during the period of 3 months immediately prior to the date of the notification.

The average market rate will be determined by an officer authorised by the Central Government and the rate so deter- mined by him is not liable to be questioned in any court.

Sub-section (3-C) which is the crucial provision, was inserted in 1967. It reads:

“(3-C). Where any producer is required by an order made with reference to clause (f) of sub-section (2) to sell any kind of sugar (whether to the Central Government or a State Government or to an officer or agent of such Govern- 930 ment or to any other person or class of persons) and either no notification in respect of such sugar has been issued under sub-section (3-A) or any such notification, having been issued, has ceased to remain in force by efflux ot time, then, notwithstanding, anything contained in sub- section (3), there shall be paid to that producer an amount therefore which shall be calculated with reference to such price of sugar as the Central Government may, by order, determine, having regard to– (a) the minimum price, if any, fixed for sugarcane by the Central Government under this section;

(b) the manufacturing 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, and different prices may be determined from time to time for different areas or for different factories or for different kinds of sugar.

Explanation–For the purposes of this sub-section, “produc- er” means a person carrying on the business of manufacturing sugar.” (emphasis supplied) Sub-Section (3-C) is attracted whenever any producer is required to sell sugar by an order made with reference to sub-section (2)(f) and no notification has been issued under sub-section (3-A) or any such notification, having been issued, has ceased to be in force. Whenever sub-section (3- C) is attracted, it operates notwithstanding anything con- tained in sub-section (3). This means the compensation payable to the seller in the circumstances attracting sub- section (3-C) is not the price postulated in sub-section (3). Nor is it the price mentioned under sub-section (3A), for that sub-section cannot be in operation when sub-section (3-C) is attracted. What is payable under sub-sectin (3-C) is an “amount” calculated with reference to the “price of sugar” determined in the manner indicated in that sub-sec- tion.

931 Construing sub-section (3-C), this Court in Panipat [1973] 2 SCR 860,870 says:

“Sub-section 3C, with which we are presently concerned was inserted in sec. 3 by sec. 3 of Act 36 of 1967. The sub- section lays down two conditions which must exist before it applies. The first is that there must be an order made with reference to sub-section 2 cl. (f), and the second is that there is no notification under sub-section 3A or if any such notification has been issued it is no longer in force owing to efflux of time. Next, the words “notwithstanding anything contained in sub-section” suggest that the amount payable to the person required to sell his stock of sugar would be with reference to the price fixed under the subsection and not the agreed price or the market price in the absence of any controlled price under sub-sec. 3A. The sub-section then lays down two things; firstly, that where a producer is required by an order with reference to sub-sec. 2(f) to sell any kind of sugar, there shall be paid to that producer’ an amount therefore, that is for such stock of sugar as is required to be sold, and secondly, that such amount shall be calculated with reference to such price of sugar as the Central Government may, by order, determine, having regard to the four factors set out in cls. (a), (b), (c) and (d).

Unlike the preceding three sub-sections under which the amount payable is either the agreed price, or the controlled price, or where neither of these prices is applicable at the market or average market price, the amount in respect of sugar required to be sold is to be calculated at the price determined by th Central Government …… ” What is specially significant is that sub-section (3-C) postulates payment of an amount to the producer who has been required to sell sugar in the circumstances mentioned there- in. What is required to be paid to him is not the price of sugar, but only an amount. That amount has to be calculated with reference to the price of sugar. The “price” is deter- mined by the Central Government by means of an order which, as required by sub-sections (5) and (6), has to be notified in the official gazette and laid before both Houses of Parliament. The order notifying the “price of sugar” is of general application and it is the rate at which the actual “amount” payable to each seller is calculated.

The price of sugar must be determined by the Central Govern- 932 ment having regard to the factors mentioned in clauses (a) to (d) of sub-section (3~C). This is done with reference to the industry as a whole and not with reference to any indi- vidual seller. In contradistinction to the “price of sugar”, the “amount” is calculated with reference to the particular seller. The Central Government is authorised to determine different prices for different areas or for different facto- ries or for different kinds of sugar. Whether factories are required to be grouped together for a rational determination of the prices according to their location or their size, age and capacity or by any other standard is a matter for deci- sion by the Central Government on the basis of relevant material. What is contemplated by the legislature in dele- gating such wide discretion to the Central Government is that it must apply its mind to the manifold questions rele- vant to the determination of prices and with due regard to the norms laid down in the sub-section. What is required by sub-section (3-C) is the adoption of a valid classification of factories having a rational nexus to the object sought to be achieved, viz., determination of a fair price of sugar with reference to which the actual amounts payable to the producers, in the circumstances attracting the sub-section, are calculated.

Referring to the legislative background of sub-section (3-C), this Court in Panipat (supra) observes:

“In order to appreciate the meaning of cls. (a), (b), (c) and (d), it must be remembered that ever since control on sugar was imposed, Government had set up expert committees to work out cost-schedules and fairprices. Starting in the beginning with an All-India cost-schedule worked out on the basis of the total production of sugar, the factories were later grouped together into zones or regions and different cost-schedules for different zones or regions were con- structed on the basis of which fair prices were worked out at which sugar was distributed and sold. The Tariff Commis- sion in 1958 and the Sugar Enquiry Commission in 1965 had worked out the zonal cost-schedules on the basis of averaged recovery and duration, the minimum and not the actual price of cane, the averaged conversion costs and recommended a reasonable return on the capital employed by the industry in the business of manufacturing sugar. This experience was before the legislature at the time when subsec. 3C was inserted in the Act. The legislature therefore incorporated the same formula in the new sub-section as the basis for working out the price. The purpose behind 933 enacting the new sub-section was three-fold, to provide an incentive to increase production of sugar, encourage expan- sion of the industry, to devise a means by which the cane producer could get a share in the profits of the industry through prices for his cane higher than the minimum price fixed and secure to the consumer distribution of at least a reasonable quantity of sugar at a fair price. ‘ ‘ Clauses (a) to (d) of sub-section (3-C) postulate that the price of sugar must be determined having regard to the minimum price, if any, fixed for sugarcane by the Central Government, the manufacturing cost of sugar, the duty or tax applicable in the zone, and the securing of a reasonable return on the capital employed in the business of manufac- turing sugar. Referring to clause (d) of sub-section (3-C), this Court observes in Panipat (supra):

“It is clear from the reports of the Tariff Commission that a reasonable return recommended by that body at a fixed amount of Rs. 10.50 per quintal which worked out in 196667 at 12.5% per annum was not in respect of levy sugar only but on the whole, so that even if such a return was not obtain- able on levy sugar but was obtainable on the whole, it would meet the requirement of cl. (d). In this conclusion we derive a two-fold support, firstly, from the language used in cl. (d) itself, viz., a reasonable return on the capital employed in the business of manufacturing sugar, which must mean the business as a whole and not the business of manu- facturing levy sugar only, and secondly, from the fact of the Commission having all along used the same phraseology while recommending Rs. 10.50 per quintal as an addition by way of a reasonable return on the capital employed in the industry. The cost-schedules prepared by these bodies were for determining a fair price in relation to the entire sugar produced by the industry and the return which should be granted to it on the capital employed in the industry and not with respect to that stock only required to be sold under sub-sec. 2(f). This is clear from the heading of Ch. 9 of the Tariff Commission’s report, 1969, “Cost Structure and Price Fixation”.” The petitioners contend that although the Government has the discretion to fix different prices for different areas or for different 934 factories, or for different kinds of sugar, such wide dis- cretion has to be reasonably exercised. It is, of course, a well accepted principle that any discretion conferred on the executive has to be reasonably exercised. Nevertheless, it is a discretion which the Court will not curtail unless the exercise of it is impeachable on well accepted grounds such as ‘ultra vires’ or ‘unreasonableness’.

The petitioners further contend that the Act requires the Government to have regard to clauses (a) to (d) and, therefore, it is mandatory on the part of the Government to act strictly in compliance with the provisions of those clauses in determining the prices. According to them, “having regard to” is a mandatory requirement demanding strict compliance with the provisions to which reference is made by the legislature. They say that the ingredients of clauses (a) to (d) must be examined with reference to each producer as a condition precedent to the determination of the price of sugar.

We may in this connection point out that the petitioners have not furnished any data to show that the prices deter- mined by the Government would have been different had the ingredients of clauses (a) to (d) of the sub-section been examined with reference to each individual producer instead of a representative cross section of manufacturing units. Be that as it may, the expression “having regard to” must be understood in the context in which it is used in the stat- ute. See Union of India v. Kamlabhai Harjiwandas Parekh & Ors., [1967] INSC 202; [1968] 1 SCR 463 at 471. These words do not mean that the Government cannot, after taking into account the matters mentioned in clauses (a) to (d), consider any other matter which may be relevant. The expression is not “having regard only to” but “having regard to”. These words are not a fetter; they are not words of limitation, but of general guidance to make an estimate. The Government must, of course, address itself to the questions to which it must have regard, and, having done so, it is for the Government to determine what it is empowered to determine with refer- ence to what it reasonably consider to be relevant for the purpose. The Judicial Committee in Commissioner of Income Tax v. Williamson Diamonds Ltd., L.R. 1958 A.C. 41, 49 observed with reference to the expression “having regard to”:

“The form of words used no doubt lends itself to the sugges- tion that regard should be paid only to the two matters mentioned, but it appears to their Lordships that it is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other 935 relevant factors. Moreover, the statute does not say “having regard only” to losses previously incurred by the company and to the smallness of the profits made. No answer, which can be said to be in any measure adequate, can be given to the question of “unreasonableness” by considering these two matters alone …… ” See Commissioner of Income-tax, West Bengal, Calcutta v.

Gungadhar Banerjee and Co. (P) Ltd., [1965] INSC 78; [1965] 3 SCR 439 at 444-45. See also Saraswati Industrial Syndicate Ltd. etc. v.

Union of India[1974] INSC 163; , [1975] 1 SCR 956 at 959. In State of Karna- taka and Anr. etc. v. Shri Ranganatha Reddy & Anr. etc.[1977] INSC 195; , [1978] 1 SCR 641 at 657-58 this Court stated:

“The content and purport of the expressions “having regard to” and “shall have regard to” have been the subject matter of consideration in various decisions of the Courts in England as also in this country. We may refer only to a few.

In Illingworth v. Welmsley, [1900] 2 Q.B. 142 it was held by the Court of Appeal, to quote a few words from the judgment of Romer C.J. at page 144: “All that clause 2 means is that the tribunal assessing the compensation is to bear in mind and have regard to the average weekly wages earned before and after the accident respectively. Beating that in mind, a limit is placed on the amount of compensation that may be awarded ….. “In another decision of the Court of Appeal in Perry v. Wright (etc. etc.), [1908] 1 K.B. 441 Cozens- Hardy M.R. observed at page 451: “No mandatory words are there used; the phrase is simply “regard may be had”. The sentence is not grammatical, but I think the meaning is this: Where you cannot compute you must estimate, as best as you can, the rate per week at which the workman was being remunerated, and to assist you in making an estimate you may have regard to analogous cases.” It is worthwhile to quote a few words from the judgment of Fletcher Moulton L.J. at page 458. Under the phrase “Regard may be had to” the facts which the Court may thus take cognizance of are to be “a guide, and not a fetter”. This Court speaking through one of us (Beg, J., as he then was), has expressed the same opinion in the case of Saraswati Industrial Syndicate Ltd. etc. v.

Union of India[1974] INSC 163; , [1975] 1 SCR 956. Says the learned Judge at page 959: “The expression “having regard to” only obliges the Government to consider as relevant data material to which it must have regard”.” 936 In State of U.P. & Ors. v. Renusagar Power Co., [1988] INSC 194; [1988] 4 SCC 59, one of us (Mukharji, J., as he then was) observed:

“The expression “having regard to” only obliges the govern- ment to consider as relevant data material to which it must have regard ….. “.

In O’May and Ors. v. City of London Real Property Co. Ltd., [1982] 1 All E.R. 660 at 665 (H.L.), Lord Hailsham stated:

“A certain amount of discussion took place in argument as to the meaning of ‘having regard to’ in s. 35. Despite the fact that the phrase has only just been used by the draftsman of s. 34 in an almost mandatory sense, I do not in any way suggest that the court is intended or should in any way attempt to bind the parties to the terms of the current tenancy in any permanent form ….. “.

The words “having regard to” in the sub-section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory. The reasona- bleness of the order made by the Government in exercise of its power under sub-section (3-C) will, of course, be tested by asking the question whether or not the matters mentioned in clauses (a) to (d) have been generally considered by the Government in making its estimate of the price, but the Court will not strictly scrutinise the extent to which those matters or any other matters have been taken into account.

There is sufficient compliance with the sub-section, if the Government has addressed its mind to the factors mentioned in clauses (a) to (d), amongst other factors which the Government may reasonably consider to be relevant and has come to a conclusion, which any reasonable person, placed in the position of the Government, would have come to. On such determination of the price of sugar, which, as stated in Panipat (supra) is the fair price, the sub-section postu- lates the calculation of an amount, with reference to such price, for payment to each producer who has complied with an order made with reference to sub-section (2)(f). The “price of sugar”, unlike the “amount” is arrived at by a process of costing in respect of a representative cross section of manufacturing units, beating, of course, in mind the legis- lative instruction contained in clauses (a) to (d).

The Attorney General submits that orders determining the 937 prices of sugar in terms of the sub-section are of general application and, therefore, legislative in character. Omis- sion, if any, to consider the peculiar problems of individu- al producers is not a ground for judicial review. The peti- tioners’ counsel as well as Mr. Venugopal appearing for the intervener (ISMA), do not agree. They submit that the sub- section contemplates only administrative or quasi-judicial orders of particular application and the impugned orders are not legislative. They rely upon a certain observation of this Court in Union of India & Anr. v. Cynamide India Ltd. & Anr., [1987] 2 SCC 720. Mr. Venugopal, however, hastens to add that his client does not seek personal heating before prices are determined. Mr. B.R.L. Iyengar, supporting the contentions of the petitioners, points out that the expres- sion ‘determine’ used in sub-section (3-C) indicates that the order to which that expression refers is quasi-judicial.

Judicial decisions are made according to law while administrative decisions emanate from administrative policy.

Quasi-judicial decisions are also administrative decisions, but they are subject to some measure of judicial procedure, such as rules of natural justice. To distinguish clearly legislative and administrative functions is “difficult in theory and impossible in practice”.3 Referring to these two functions, Wade says:

‘They are easy enough to distinguish at the extremities of the .spectrum: an Act of Parliament is legislative and a deportation order is administrative. But in between is a wide area where either label could be used according to taste, for example where ministers make orders or regula- tions affecting large numbers of people ….. ,, .4 Wade points out that legislative power is the power to prescribe the law for people in general, while administra- tive power is the power to prescribe the law for them, or apply the law to them, in particular situations. A scheme for centralising the electricity supply undertakings may be called administrative, but it might be just as well legisla- tive. Same is the case with ministerial orders establishing new towns or airports etc. He asks: “And what of ‘directions of a general character’ given by a minister to a nationa- lised industry? Are these various orders legislative or administrative?” Wade says that the correct (3) Comd. 4060 (1932), p. 73; see H.W.R. Wade-Adminis- trative Law, 6th ed., p. 47 (4) Ibid p. 848.

938 answer would be that they are both. He says:” ….. there is an infinite series of gradations, with a large area of overlap, between what is plainly legislation and what is plainly administration”.5 Courts, nevertheless, for practi- cal reasons, have distinguished legislative orders from the rest of the orders by reference to the principle that the former is of general application. They are made formally by publication and for general guidance with reference to which individual decisions are taken in particular situations.

According to Griffith and Street, an instruction may be treated as legislative even when they are not issued formal- ly),, but by a circular or a letter or the like. What mat- ters is the substance and not the form, or the name. The learned authors say: “. …. where a Minister (or other authority) is given power in a statute or an instrument to exercise executive, as opposed to legislative, powers–as, for example, to requisition property or to issue a licence–and delegates those powers generally, then any instructions which he gives to his delegates may be legisla- tive”.6 Where an authority to whom power is delegated is entitled to sub-delegate his power, be it legislative, executive or judicial, then such authority may also give instructions to his delegates and these instructions may be regarded as legislative. However, as pointed out by Denning, L.J., (as he then was) a judicial tribunal cannot delegate its functions except when it is authorised to do so express- ly or by necessary implication’ see Bernard and Ors. v.

National Dock Labour Board and Ors., [1953] EWCA Civ 5; [1953] 2 Q.B. 18 at 40.

Kenneth Culp Davis says: “What distinguishes legislation from adjudication is that the former 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 touched by it; while adjudica- tion operates concretely upon individuals in their individu- al capacity”.7 Justice Holmes’ definition, which is what is called the “time test” and which Davis describes as one which has produced many unsatisfactory practical results, reads:

“A judicial inquiry investigates, declares, and enforces liabilities 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 and (5) Ibid.

(6) Principles of Administrative Law, 5th ed., p. 65 (7) Administrative Law Text, 3rd ed., p. 123-24.

939 changes existing conditions by making a new rule, to be applied thereafter to all or some part of those subject to its power. The establishment of a rate is the making of a rule for the future, and therefore is an act legislative, not judicial ……

Prentis v. Atlantic Cost Line Co., 211 US 210,226.

The element of general application is often cited as a distinct feature of legislative activity. In the words of Chief Justice Burger, “rule-making is normally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class”? Bernard Schwarts says: “an adjudication, on the other hand, applies to specific individuals or situations. Rule-making affects the fights 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 concretely upon individuals in their individual capacity”9 According to Schwartz, the “time test” and the “applicability test” are workable in most cases although in certain situations distinctions are indeed difficult to draw.

A statutory instrument (such as a rule, order or regula- tion) emanates from the exercise of delegated legislative power which is the part of the administrative process resem- bling enactment of law by the legislature. A quasi judicial order emanates from adjudication which is the part of the administrative process resembling a judicial decision by a court of law. This analogy is imperfect and perhaps unhelp- ful in classifying borderline or mixed cases which are better left unclassified .10 If a particular function is termed legislative rather than judicial, practical results may follow as far as the parties are concerned. When the function is treated as legislative, a party affected by the order has no fight to notice and heating, unless, of course, the statute so re- quires. It being of general application engulfing a wide sweep of powers, applicable to all persons and situations of a broadly identifiable class, the legislative order may not be vulnerable to challenge merely by reason of its omission to take into account individual peculiarities and differ- ences amongst those falling within the class.

(8) Quoted by Bernard Schwartz in ‘Administrative Law’ (1976), p. 144.

(9) Ibid (10) See Davis, Administrative Law Text, p. 123 940 In Union of India & Anr. v. Cynamide India Ltd. & Anr., [1987] 2 SCC 720 at 734-35, Chinnappa Reddy, J. referring to the earlier decisions of this Court states:

” ….. 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 ………. 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 ………. It is true that, with the proliferation of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative, quasi-judicial decisions tend to merge in legislative activity and, con- versely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activi- ty”.

Stating that rule-making is of general application to all members of a broadly identifiable class while adjudication is applicable to specific individuals or situations, the learned Judge observes:

“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 transactions. It is a direction of a general character, not directed 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 obligations of the producer to charge no more than the price fixed. Viewed from whatever angle, the angle of general application, the prospectiveness 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 legisla- tive activity”.

The learned Judge emphasises:

941 “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 such situations the determination of price may acquire a quasiju- dicial character”.

These observations have been cited with approval by one of uS (Sabyasachi Mukharji, J., as he then was) in Renusagar (supra).

In Saraswati Industrial Syndicate Ltd. etc. v. Union of India[1974] INSC 163; , [1975] 1 SCR 956 at 961, this Court states:

“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 jus- tice has not been followed in fixing the price”.

In Prag Ice & Oil Mills & Anr. etc. v. Union of India[1978] INSC 43; , [1978] 3 SCR 293 at 317, Chandrachud, J., as he then was, speaks for the majority:

“We think that unless, by the terms of a particular statute, or order. price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation. A legisla- tive measure 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”.

See also the observation of Megarry, J., as he then was, in Bates v. Lord Hailsham of St. Marylebone & Ors., [1972] 3 All ER 1019 at 1024.

The impugned orders, duly published in the official gazettes notifying the prices determined for sugar of var- ious grades and pro- 942 duced in various zones, and applicable to all producers of such sugar, can, in our view, be legitimately characterised as legislative. These orders are required by Sub-section (6) to be laid before both Houses of Parliament. The notified prices are applicable without exception to all persons falling within well defined groups. The prices are deter- mined in accordance with the norms postulated in the sub- section. It is with reference to such predetermined prices of sugar that the “amount” payable to each producer, who has sold sugar in compliance with an order made with reference to clause (f) of sub-section (2), is calculated. The calcu- lation of such amount is, in contradistinction to the deter- mination of “price of sugar”, a non-legislative act.

Thus, while individual consideration is relevant to the calculation of the “amount”, it is not so for the determina- tion of the “price of sugar” which is the rate at which the amount is calculated. That price, as stated in Panipat (supra) is to be arrived at by a process of costing with reference to a reasonably efficient and economic representa- tive cross section of manufacturing units.

In this connection, we must point out that at first blush a certain observation of Chinnappa Reddy, J. in Cyna- mide, [1987] 2 SCC 720 at 741, on which much reliance is placed by the petitioners’ counsel, appears to be inconsist- ent with what we have now stated. The learned Judge says:

“The Order made under Section 3(2)(c), which is not in respect of a single transaction, nor directed to a particu- lar individual is clearly a legislative act, while an Order made under Section 3(3-C) which is in respect of a particu- lar transaction of compulsory sale from a specific individu- al is a non-legislative act”.

It would appear that what the learned Judge had in mind was an order by which the “amount” was calculated in terms of sub-section (3-C) in respect of each individual producer and not an order determining the “price of sugar”. While the former is non-legislative, the latter, by the very test adopted by the learned Judge, is legislative in character.

We, therefore, understand the observation of the learned Judge on this point as applicable only to the individual order fixing the “amount” in terms of the sub-section and not to orders determining the “price of sugar” which are what the impugned orders are. Any other construction of the sub-section would conflict with what was adopted by the Constitution Bench in Panipat (supra) and would, therefore, be unsustainable.

943 The individual orders, calculating the “amounts” payable to the individual producers, being administrative, orders rounded on the machanics of price fixation, they must be left to the better instructed judgment of the executive, and in regard to them the principle of audi alteram partem is not applicable. All that is required is reasonableness and fair play which are in essence emanations from the doctrine of natural justice as explained by this Court in A.K. Krai- pak & Ors. etc. v. Union of India & Ors., [1970] 1 SCR 457.

See also the observation of Mukharji, J., as he then was, in Renusagar, [1988] 4 SCC 103, 105.

Price fixation is in the nature of a legislative action even when it is based on objective criteria rounded on relevant material. No rule at natural justice is applicable to any such order. It is nevertheless imperative that the action of the authority should be inspired by reason. Saras- wati Industrial Syndicate Ltd.[1974] INSC 163; , [1975] 1 SCR 956, 961, 962.

The Government cannot fix any arbitrary price. It cannot fix prices on extraneous considerations: Renusagar, (supra).

Any arbitrary action, whether in the nature of a legis- lative or administrative or quasi-judicial exercise of power, is liable to attract the prohibition of Article 14 of the Constitution. As stated in E.P. Royappa v. State of Tamil Nadu & Anr., [1973] INSC 214; [1974] 2 SCR 348, “equality and arbi- trariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch.” Unguided and unrestricted power is af- fected by the vice of discrimination: Mrs. Maneka Gandhi v.

Union of India & Anr., [1978] 1 SCC 248 at 293-294. The principle of equality enshrined in Article 14 must guide every state action, whether it be legislative, executive, or quasi-judicial: Ramana Dayaram ‘Shetty v. The International Airport Authority of India & Ors., [1979] INSC 111; [1979] 3 SCR 1014 at 1042; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors..

[1980] INSC 219; [1981] 1 SCC 722 and D.S. Nakara & Ors. v. Union of India, [1982] INSC 103; [1983] 1 SCC 305.

Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably, intra vires the power granted, and on relevant consideration of material facts. All his decisions, whether characterised as legislative or administrative or quasi-judicial, must be in harmony with the Constitution and other laws of the land. They must be “reasonably related to the purposes of the enabling legislation”. See Leila Mourn- ing v. Family Publications Service[1973] USSC 85; , 411 US 356, 36 L Ed. 2d 318. If they are manifestly unjust or oppressive or outra- geous or directed to an unauthorised end or do not tend in some degree to the accomplishment of 944 the objects of delegation, courts might well say, “Parlia- ment never intended to give authority to make such rules;

they are unreasonable and ultra vires”. per Lord Russel of Killowen, C.J. in Kruse v. Johnson, [1988] 2 Q.B. 91, 99.

The doctrine of judicial review implies that the reposi- tory of power acts within the bounds of the power delegated and he does not abuse his power. He must act reasonably and in good faith. It is not only sufficient that an instrument is intra vires the parent Act, but it must also be consist- ent with the constitutional principles: Maneka Gandhi v.

Union of India, [1978] 1 SCC 248, 314-315.

Where a question of law is at issue, the Court may determine the rightness of the impugned decision on its own independent judgment. If the decision of the authority does not agree with that which the Court considers to be the right one, the finding of law by the authority is liable to be upset. Where it is a finding of fact, the Court examines only the reasonableness of the finding. When that finding is found to be rational and reasonably based on evidence, in the sense that all relevant material has been taken into account and no irrelevant material has influenced the deci- sion, and the decision is one which any reasonably minded person acting on such evidence, would have come to, then judicial review is exhausted even though the finding may not necessarily be what the Court would have come to as a trier of fact. Whether an order is characterised as legislative or administrative or quasi-judicial, or, whether it is a deter- mination or law or fact, the judgment of the expert body, entrusted with power, is generally treated as final and the judicial function is exhausted when it is found to have “wanant in the record” and a rational basis in law: See Rochester Tel. Corp. v. United States, [1939] USSC 85; [1939] 307 U.S. 125, 83 L. Ed. 1147. See also Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1947] EWCA Civ 1; [1948] 1 K.B. 223.

As stated by Lord Hailsham of St. Marylebone L.C., (H.L.) in Chief Constable of the North Wales Police v.

Evans[1982] UKHL 10; , [1982] 1 WLR 1155 at 1160-61:

“The function of the court is to see that lawful authority is not abused by unfair treatment and not tO attempt itself the task entrusted to that authority by the law ……….

The purpose of judicial review is to ensure that the indi- vidual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter 945 which it is authorised by law to decide for itself a conclu- sion which is correct in the eyes of the court”.

In the same case Lord Brightman says:

“Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made”.

A repository of power acts ultra vires either when he acts in excess of his power in the narrow sense or when he abuses his power by acting in bad faith or for an inadmissi- ble purpose or on irrelevant grounds or without regard to relevant considerations or with gross unreasonableness. See Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1947] EWCA Civ 1; [1948] 1 K.B. 223. In the words of Lord Mac- naghten in Westminster Corporation v. London and North Western ‘ Railway, [1905] AC 426, 430:

” ….. It is well settled that a public body invested with statutory powers such as those conferred upon the Corporation must take care not to exceed or abuse its pow- ers. It must keep within the limits of the authority commit- ted to it. It must act in good faith. And it must act rea- sonably. The last proposition is involved in the second, if not in the first…..”.

In The Barium Chemicals Ltd. & Anr. v. The Company Law Board & Ors., [1966] Supp. SCR 311, this Court states:

” ….. Even if (the statutory order) is passed in good faith and with the best of intention to further the purpose of the legislation which confers the powers, since the Authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extra- neous to the legislation or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation. In any one of these situations it can well be said that the authority did not honestly form its opinion or that in forming it, it did not apply its mind to the relevant facts”..

In Renusagar[1988] INSC 194; , [1988] 4 SCC 59, 104, Mukharji, J., as he then was, states:

946 “The exercise of power whether legislative or administrative will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary. Similarly, if the power has been exercised on a non-consideration or non-application of mind to relevant factors the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administra- tive) is exercised on the oasis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated”.

The true position, therefore, is that any act of the repository of power, whether legislative or administrative or quasi-judicial, is open to challenge if it is in conflict with the Constitution or the governing Act or the general principles of the law of the land or it is so arbitrary or unreasonable that no fair minded authority could ever have made it The impugned orders are undoubtedly based on an exhaus- tive study by experts. They are fully supported by the recommendations of the Tariff Commission in 1969 and 1973.

It is true that these recommendations in some respects were the subject matter of criticism by a subsequently appointed expert body, viz., the BICP. Apart from the fact that the BICP’s criticism has not been accepted by the Government, that criticism is not relevant in so far as the impugned orders are concerned because the latter are in regard to an earlier period. These orders are fully supported by the relevant material on record. The conclusions reached by the Central Government in exercise of its statutory power are expert conclusions which are not shown to be either discrim- inatory or unreasonable or arbitrary or ultra vires. The (11) See the observation of Lord Russel in Kruse v.

Johnson, [1898] 2 Q.B. 91 and that of Lord Greene, M.R. in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1947] EWCA Civ 1; [1948] 1 K.B. 223; See also Mixnam Properties Ltd. v. Chertsey U.D.C., [1965] AC 735; Commissioners of Customs and Excise v. Cure and DeeIcy Ltd. [1962] 1 Q.B.

340; McEldowney v. Forde, [1971] AC 632 (H.L.); Carltona Ltd. v. Commissioners of Works, [1943] 2 All ER 560, 564;

Point of Ayr. Collieries Ltd. v. Lloyd George, [1943] 2 All ER 546; Scott v. Glasgow Corporation, [1899] AC 470, 492;

Robert Baird L.D.v. City of Glasgow, [1936] AC 32, 42;

Manhattan General Equipment Co. v. Commissioner, [1936] USSC 22; [1935] 297 US 129, 134; Yates (Arthur) & Co. Pty. Ltd. v. Vegetable Seeds Committee, [1945] HCA 55; [1945-46] 72 CLR 37; Bailey v. Conole, [1931] WALawRp 3; [1931] 34 WALR 18; Boyd Builders Ltd. v. City of Ottawa, [1964] 45 DLR (2d) 211; Re Burns and Township of Haldimand, [1966] 52 DLR (2d) 10 14 and Lynch v. Tilden Produce Co. 265 US 3 15,320-322.

947 material brought to our notice by the petitioners does not support the arguments at the bar that the Central Government has not applied its mind to the relevant questions to which they are expected to have regard in terms of the statute.

That the sugar factories for the purpose of determining the price of sugar in terms of sub-section (3-C) should be grouped on the basis of their geographical location is a policy decision based on exhaustive expert conclusions.

Factories are classified with due regard to geographi- cal-cumagro-economic considerations. Fair prices for differ- ent grades of sugar are determined for each zone with refer- ence to a reasonably efficient and economic representative cross-section of the manufacturing units. Such classifica- tion, as held in Panipat (supra) and Anakapalle (supra) cannot, in the absence of evidence to the contrary, be characterised as arbitrary or unreasonable or not rounded on an intelligible differentia having a rational nexus with the object sought to be achieved by subsection (3-C). The person assailing such classification “carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences” Federal Power Commission v. Hope Gas Co., [1944] USSC 2; 320 US 591, 602 (1944). If the petitioners nevertheless incur losses, such losses need not necessarily have arisen by reason of geographical zoning, but for reasons totally unconnected with it, such as the condition of the plant and machinery, quality of management, investment policy, labour relations, etc. These are matters on which the petitioners have not furnished data, and, in any event judicial review is hardly appropriate for their consideration.

In this connection we would recall the observations of Chinnappa Reddy, J. in Union of India and Anr. v. Cynamide India Ltd. andAnr., [1987] 2 SCC 720 at p. 736:

“We do not agree with the basic premises 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.” In M/s. Gupta Sugar Works v. State of U.P. and Ors., [1987] Supp. SCC 476 at p. 48 1 one of us (Jagannatha Shetty, J .) stated:

“In this view of the matter, the primary consideration in the fixation of price would be the interest of consumers 948 rather than that of the producers.” The Court has neither the means nor the knowledge to reevaluate the factual basis of the impugned orders. The Court, in exercise of judicial review, is not concerned with the correctness of the findings of fact on the basis of which the orders are made so long as those findings are reasonably supported by evidence. In the words of Justice Frankfurter of the U.S. Supreme Court in Railroad Commission of Texas v. Rowan & Nichols Oil Company, 311 US 570-577, 85 L. ed. 358,362:

“Nothing in the Constitution warrants a rejection of these expert conclusions. Nor, on the basis of intrinsic skills and equipment, are the federal courts qualified to set their independent judgment on such matters against that of the chosen state authorities ….. When we consider the limit- ing conditions of litigation–the adaptability of the judi- cial process only to issues definitely circumscribed and susceptible of being judged by the techniques and criteria within the special competence of lawyers–it is clear that the Due Process Clause does not require the feel of the expert to be supplanted by an independent view of judges on the conflicting testimony and prophecies and impressions of expert witnesses”.

This observation is of even greater significance in the absence of a Due Process Clause.

Judicial review is not concerned with matters of econom- ic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the “feel of the expert” by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonable~ ness. In all such cases, judicial in- quiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As rated by Jagannatha Shetty, J. in M/s. Gupta Sugar Works, (supra):

“the court does not act like a chartered accountant nor acts like an income tax officer. The court is not concerned with any individual case or any particular problem. The court 949 only examines whether the price determined was with due regard to considerations provided by the statute. And wheth- er extraneous matters have been excluded from determination.” Price fixation is not within the province of the courts.

Judicial function in respect of such matters is exhausted when there is found to be a rational basis for the conclu- sions reached by the concerned authority. As stated by Justice Cardozo in Mississippi Valley Barge Line Company v.

United States of America[1934] USSC 101; , 292 US 282-290, 78 Led 1260, 1265:

“The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the Commis- sion by training and experience is qualified to form …..

It is not the province of a court to absorb this function to itself ….. The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body”.

It is a matter of policy and planning for the Central Government to decide whether it would be on adoption of a system of partial control, in the best economic interest of the sugar industry and the general public that the sugar factories are grouped together with reference to geographi- cal-cum-agro-economic factors for the purpose of determining the price of levy sugar. Sufficient power has been delegated to the Central Government to formulate and implement its policy decision by means of statutory instruments and execu- tive orders. Whether the policy should be altered to divide the sugar industry into groups of units with similar cost characteristics with particular reference to recovery, duration, size and age of the units and capital cost per tonne of output, without regard to their location, as recom- mended by the BICP, is again a matter for the Central Gov- ernment to decide. What is best for the sugar industry and in what manner the policy should be formulated and imple- mented, bearing in mind the fundamental object of the stat- ute, viz., supply and equitable distribution of essential commodity at fair prices in the best interest of the general public, is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review.

We would, in this connection, recall the words of Jus- tice Frankfurter in Secretary of Agriculture, etc. v. Cen- tral Roig Refining Com- 950 pany, etc., 338 US 615-617, 94 Led 391-392:

“Congress was ….. confronted with the formula- tion of policy peculiarly with its wide swath of discretion.

It would be a singular intrusion of the judiciary into the legislative process to extrapolate restrictions upon the formulation of such an economic policy from those deeply rooted notions of justice which the Due Process Clause expresses ….. “.

“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, perchance, substitute its notion of expediency and fairness for that of Congress. This is so even though the quotas 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 legislation”.

It is important to remember that the division of the industry on a zonal basis for the purpose of price determi- nation has been accepted without question by almost all the producers with the exception of a few like the petitioners.

Even if it is true that the petitioners as individuals are at a disadvantage and have suffered losses on account of the present system–an assertion which has not been established and which by its very nature is incapable of determination by judicial review–that is not sufficient ground for inter- ference with the impugned orders. We are not satisfied that the decisions of this Court in Anakapalle[1972] INSC 271; , [1973] 2 SCR 882 and Panipat, [1973] 2 SCR 860 require reconsideration in any respect. We see no merit in the challenge against the im- pugned orders. The civil writ petitions are, in the circum- stances, dismissed. However, we do not make any order as to costs.

P.S.S. Petitions dismissed.

The post Shri Sitaram Sugar Company Limited & Anr Vs. Union of India & Ors appeared first on B&B Associates LLP.

PUNJAB LAND DEVELOPMENT ANDRECLAMATION CORPORATION LTD.,CHAN …PETITIONER
Vs.
PRESIDING OFFICER, LABOUR COURT,CHANDIGARH ETC. …RESPONDENT

DATE OF JUDGMENT : 04/05/1990

BENCH : SAIKIA, K.N. (J) MUKHARJI, SABYASACHI (CJ) RAY, B.C. (J) KANIA, M.H. AGRAWAL, S.C. (J)

CITATION : 1990 SCR (3) 111 1990 SCC (3) 682 JT 1990 (2) 489 1990 SCALE (1)878

ACT:

Industrial Disputes Act 1947:

Section 2(oo)–“Retrenchment”–Interpretation of–Wheth- er termination by the employer of the services of a workman by employer for any reason whatsoever or termination by the employer of the services of a workman for any reason whatso- ever otherwise than as a punishment inflicted by way of disciplinary action–Whether to be understood in its narrow, natural and contextual meaning or in its wider literal meaning.

Precedent–Ratio decidendi of the earlier decision–How to ascertain–Major premise, minor premise and decision in a case-Whether may be narrowed or widened by the subsequent decision.

Constitution of India, 1950–Article 141–Supreme Court is not bound by its earlier decision–Stare decisis–doc- trine of.

Decision per incuriam–meaning and effect of non refer- ence to an earlier larger bench decision of Supreme Court–Subsequent decision of Supreme Court will be per incuriam only if the ratio of the earlier decision is in conflict with it.

Interpretation of Statutes–Wider literal construction–When preferable to narrower, natural and contextual construction–Definition clause using the word means ‘instead’ of ‘includes’–Shows that no other meaning can be assigned.

HELD:

(1) Definition of ‘retrenchment’ in Section 2(oo) means termination by the employer of the service of a work- man for any reason whatsoever, otherwise than as a punish- ment inflicted by way of disciplinary action and those expressly excluded by the definition. This is the wider literal interpretation as distinguished from the narrow, natural and contextual interpretation of the word to mean termination by the employer of the service of a workman as surplus labour for any reason whatsoever. [156C; 131B] B.N. Mutto v. T.K. Nandi, [1978] INSC 243; [1979] 2 SCR 409; Jugal Ki- shore Saraf v. Raw Cotton Co. Ltd., [1955] INSC 13; [1955] 1 SCR 1369;

Sussex Peerage Case, [1844] II CI & Fin 85:8 ER 1034 (HL);

Thompson v. Goold & Co., 26 TLR 526; Ealsing L.B.C. v. Race Relations Board, [1972] 1 All ER 105; Whiteley v. Chappell, [1868] LR 4; Prince Ernest of Hanover v. Attorney General, [1956] Ch D 188 and Muir v. Keay, 44 MJMC 143, referred to.

(2) Difficulty was created by defining ‘retrenchment’ to mean something wider than what it naturally and ordinarily meant. Such a definition created complexity as the draftsman himself in drafting the other sections using the definition may slip into the ordinary meaning instead of the defined meaning. However, a judge facing such a problem of interpre- tation cannot simply fold his hands and blame the draftsman.

[149A-B; F] 113 (3) The definition has used the word ‘means’. When a statute says that a word or phrase shall ‘mean’–not merely that it shall ‘include’ certain things or acts, “the defini- tion is a hard-and-fast definition, and no other meaning can be assigned to the expression than is put down in defini- tion.” [150F-G] Queen v. Commissioners under the Boiler Explosions Act, 1882, [1891] I QBD 703 and Gough v. Gough, [1891] 2 QB 665:65 LT II; relied on.

(4) There are apparent incongruities when the definition Clause Section 2(oo) is considered in the context of the main provisions viz. Sections 25F, 25G and 25H but there is room for harmonious construction. The definitions contained in Section 2 are subject to there being anything repugnant in the subject or context. [152C-D] Vishwamitra Press v. Workers, [1952] INSC 62; AIR 1953 SC 41; Presidency Jute Mills Co. Ltd. v. Presidency Juite Mills Co. Employees Union, [1952] I LLJ 796 (LAT) (Cal); Iron & Steel Mazdoor Union, Kanpur v. J.K. Iron and Steel Co. Ltd., [1952] LAC 467; Halar Salt and Chemical Works, Jamnagar v. Workmen, [1953] 2 LLJ 39; Prakriti Bhushan Gupta v. Chief Mining Engineer, Railway Board, [1953] LAC 373; Sudarshan Banerjee v. Mcleod and C. Ltd., [1953] LAC 702; Srinivasa Enterprises v. Union of India, [1980] INSC 188; [1980] 4 SCC 507; Reserve Bank of India v. Peerless Central Finance and Investment Co. Ltd., [1987] 2 SCR I, referred to.

(5) The express exclusion of volitional element in cl.

(a) and (b) of Section 2(oo) namely, voluntary retirement, and retirement on superannuation age implies that those would otherwise have been included. If such cases were to be included, termination on abandonment of service, on efflux of time and on failure to qualify, though only consequential or resultant would be included as those have not been ex- cluded. Then there appears to be a gap between the first part and the exclusion part. When such a gap is disclosed, the remedy lies in an amending Act. The Court has to inter- pret a statute and apply it to the facts. [150C-E] Duport Steels v. Sirs, [1980] 1 All ER 529, referred to.

(6) Construing retrenchment in its wider sense, the rights of the employer under the standing orders and under contracts of employment may have been affected by Sections 2(00) and 25F and other relevant sections. Secondly, it may be said that the rights as such are not affected or taken away but only additional social obligation has been 114 placed on the employer so as to give retrenchment benefit to affected. workmen perhaps for tiding over immediate finan- cial distress. Seen from this angle, there is implicit a social policy. So goes the maxim-Stat Pro ratione voluntes populi–the will of the people stands in place of a reason.

[153E-G] (7) In Sundara Money and subsequent cases the Supreme Court has adopted wider liberal meaning rejecting the narrow natural and contextual meaning. The question of subsequent decisions of the Supreme Court being per incuriam on grounds of failure to apply the earlier law laid down by the Consti- tution Bench in Hariprasad Shukla case could arise only if ratio in Sunclara Money and subsequent decisions was in conflict with the ratio in Hariprasad and Anakapalli. Hari- prasad case is not an authority for the proposition that Section 2(oo) only covers cases of discharge of surplus labour and staff. Sundara Money and subsequent decisions in the line could not be held to be per incuriam in as much as in Hindustan Steel and Santosh Gupta cases the Division Benches of the Supreme Court had referred to Hariprasad case, and rightly held that its ratio did not extend beyond the case of termination on the ground of closure and as such it would not be correct to say that subsequent decision overlooked a binding precedent. In a fast developing branch of Industrial and Labour Law it may not be always of partic- ular importance to rigidly stick to a precedent and a prece- dent may need to be departed from if the basis of legisla- tion changes. [143B-C; 145E] L. Robert D’Souza v. Executive Engineer, Southern Rail- way and Anr., [1979] 1 LLJ 211; Rajasthan State Electricity Board v. Labour Court, [1966] 1 LLJ 381 (Raj.); Goodlas Nerolac Paints v. Chief Commissioner, Delhi, [1967] 1 LLJ 545 (Punj.) and The Managing Director, National Garages v.

J. Gonsalves, [1962] 1 LLJ 56 (Bom.), overruled.

Delhi Cloth and General Mills Ltd. v. Shambhu Nath Mukherjee and Ors., [1977] INSC 185; [1978] 1 SCR 591; Hindustan Steel Ltd.

v. The Presiding Officer, Labour Court[1976] INSC 221; , [1977] 1 SCR 586;

Santosh Gupta v. State Bank of Patiala, [1980] INSC 97; [1980] 3 SCR 884;

Gammon India Ltd. v. Niranjan Das, [1983] INSC 193; [1984] 1 SCC 509 and Reg v. Home Secretary, Ex P. Khawaja, [1984] AC 74 (HL), relied on.

Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Maz- door Union, [1956] SCR 872; Sub Nomine Barsi Light Railway Co. v. K.N. Joglekar, [1957] 1 LLJ 243 (SC); Hariprasad Shivshankar Shukla v. A.D. Divikar, [1957] SCR 121; Anaka- palla Co-operative Agricultural 115 and Industrial Society Ltd. v. Workmen. [1963] Supp. 1 SCR 730 and Workmen of Subong Tea Estate v. The Outgoing Manage- ment of Subong Tea Estate and Anr., [1963] INSC 235; [1964] 5 SCR 602, dis- tinguished.

Employees v. India Reconstitution Corporation Ltd., [1953] LAC 563; Indian Hume Pipe Co. Ltd. v. Workmen, [1960] 2 SCR 32; Benett Coleman and Company Ltd. v. Employees, [1954] 1 LLJ 341 (LAT); Mahan Lal v. Bharat Electronic Ltd., [1981] INSC 95; [1981] 3 SCR 518 and Surendra Kumar Verma v. Central Govern- ment Industrial Tribunal-cum-Labour Court, New Delhi[1980] INSC 186; , [1981] 1 SCR 789, referred to.

(8) Article 141 embodies, a rule of law, the doctrine of precedents on which our judicial system is based. [136H] (9) Per Incuriam means through inadvertance. A decision can be said generally to be given per incuriam when the Supreme Court has acted in ignorance of its own previous decision or when a High Court has acted in ignorance of a decision of the Supreme Court. The problem of judgment per incuriam when actually arises, should present no difficulty as the Supreme Court can lay down the law afresh if two or more of its earlier judgments cannot stand together. Article 141, which embodies as a rule of law, the doctrine of prece- dents, was enacted to make the law declared by the Supreme Court itself. [136G; 138G; 137F] Re Dawson’s Settlement Lloyds Bank Ltd. v. Dawson, [1966] 3 All ER 68 and Bengal Immunity Company Ltd. v. State of Bihar, [1955] 2 SCR 603, relied upon- (10) The doctrine of ratio decidendi has also to be interpreted in the same line. To consider the ratio deciden- di Court has to ascertain the principle on which the case was decided. The ratio decidendi of a decision may be nar- rowed or widened by the judges before whom it is cited as a precedent. [139G-H] State of Orissa v. Sudhansu Shikhar Misra, [1967] INSC 251; [1968] 2 SCR 154; F.A. & AB Ltd. v. Lupton (Inspector of taxes), [1972] A.C. 634; Osborne v. Rowlett. 13 Ch D 774 and Quinn v.

Leathem. [1901] UKHL 2; [1901] AC 495, relied on- Griffiths v. J.P. Harrison (Watford) Ltd., [1963] AC 1;

Finsbury Securities Ltd. v. Inland Revenue Commissioners, [1966] 1 WLR 1402, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3241-48 of 1981 Etc.

From the Judgment and Order dated 20.7.1983 of the Punjab & Haryana High Court in C.W.P. Nos.

469,748,750,751,752 and 753 of 1981 B.N. Shinghvi, V.A. Bobde, M.K. Ramamurthy, N.B. Shetty K.K. Venugopal, Dr. Anand Prakash, S.S. JavaIi, H.S. Gill, Brij Bhushan, M.G. Ramachandran, M.C. Dhingra, A.K. Sanghi, U.A. Rana, B.R. Agarwala, R.C. Pathak, Naresh Mathur, S.K.

Sajwan. Baby Lal, Praveen Kumar, B.B. Singh, Vineet Kumar, B.D. Ahmed. R.S. Hegde, Parijat Singh, Mrs. Jayshree Wad, S.

Balakrishnan, Ms. Janani, Mrs. Urmila Kapoor, T.T. Kunhikan- nan, H.K. Puri, S. Srinivasan, Mrs. M. Karanjawala, Vijay Kumar Verma. Ashok Grover, V.N. Ganpule, M.A. Gagrat, Mrs.

P.S. Shroff, Anil Gupta, R.A. Gupta, A.K. Ghosh, S. Mandal, Ranjit Kumar, M. Veerappa, Girish Chandra, Dr. Meera Aggar- wal, A.K. Srivastava, K.R. Nambiar, A.G. Ratnaparkhi, R.

Satish, P.H. Parekh, S.A. Shroff and K.V. Sree Kumar for the appearing parties.

The Judgment of the Court was delivered by K.N. SAIKIA. J. This analogous cluster of seventeen appeals by special leave, and a special leave petition involves a common question of law though they arise out of the following respective facts:

c.A. Nos. 324 z-3248 of 1981 These eight appeals by the Land Development and Reclama- tion Corporation, Chandigarh are from the Judgment and Order of the Punjab and Haryana High Court dismissing its writ petitions challenging the Award dated 2.8.1980 of the Labour Court, Chandigarh holding that the respondents were entitled to reinstatement with back wages except Yaspal (C.A. No.

3242 of 1981) who was to get wages up to 10.10.1979, with benefits of continuity of service. The respondents were workmen under the management of the Corporation and their services were terminated on the ground that the Chairman had no power to appoint them. The Labour Court in its Award held that their services were terminated illegally without pay- ment of retrenchment compensation under the Industrial Disputes Act, 1947, hereinafter referred to as the Act’, and that they were entitled to reinstatement.

117 C.A. No. 686 (NL) of 1982 This appeal is from the Judgment dated 9.11.1981 of the High Court of Bombay (Nagpur Bench). The first respondent was an employee of the appellant’s corporation since 1972.

He was taken on probation in 1975 for one year which was extended from time to time, lastly from 1.9.1977 to 31.10.

1977, whereafter his services being not found satisfactory were terminated with effect from 1.11.1977 under Regulation 44(b) of the State Transport Employees Service Regulations of the Corporation. The Labour Court took the view that it amounted to retrenchment and the provisions of s. 25F of the Act having not been complied with the termination was ille- gal. The appellant’s writ petition therefrom was dismissed.

C.A. No. 1817 of 1982 The respondent workman was employed by the appellant Bank on 3.10.1962 as a clerk and he was put on probation for six months. As allegedly there was total lack of confidence of the bank in the employee it terminated his service on 27.7.1974 on payment of three month’s salary. The industrial tribunal by its award dated 3.12.1981 directed reinstatement of the workman with full back wages on the ground of non- compliance with the provisions of s. 25F of the Industrial Disputes Act. The employer Bank now appeals from that Award.

C.A. No. 1898 of 1982 Respondent Nos. 2-6 were employed on probation by the appellant a partnership firm on 12.6.1975. Respondent Nos.

2-5 assaulted a supervisor and being afraid of police re- mained absent from 29.3.1976 and abandoned their jobs and their services were terminated. Respondent No. 6 stopped attending duties from 9.8.1975 and he left the service of his own accord. The Labour Court by its Award dated 16.9.

1980 held that their termination amounted to retrenchment and was illegal for non-compliance with the provisions of s.

25F of the Act and they were entitled to reinstatement with full back wages. The Management’s writ petition challenging the Award having been unsuccessful, it has appealed.

C.A. No. 3261 of 1982 Respondent Namdeo was a clerk under the appellant Maha- rashtra State Road Transport Corporation. Pursuant to a disciplinary 118 proceeding his service was terminated with effect from 23.4.1963 by giving him one month’s salary in lieu of no- tice. Moved by the respondent, the Assistant Commissioner under s. 16 of the C.P. & Berar Industrial Disputes Settle- ment Act, 1947 held the Inquiry Proceeding to be an empty paper formality and the termination amounted to dismissal and accordingly he set aside the order and directed the corporation to reinstate and pay him his back wages amount- ing to Rs. 15,97 1.66 within one month. The Corporation having moved the State Industrial Court at Nagpur under s.

16(5) of the Settlement Act, that Court by its order dated 29.9.1973 allowed the application and set aside the Assist- ant Labour Commissioner’s judgment and dismissed the work- man’s application holding that the acts of misconduct fairly stood proved and he deserved to be dismissed from service.

The High Court on being moved by the workman set aside the Labour Court’s order and restored that of the Assistant Labour Commissioner. Hence this appeal.

CIVIL APPEAL NO. 3025 ………. OF 1990 The services of the workman Sri Pratap Singh, driver respondent No. 3 were terminated with effect from 18.10.1974 under clause 9(a)(i) of the DRTA (Conditions of Appointment and Service) Regulations 1952. As the conciliation efforts failed, the order was placed before the Labour Court, Delhi, who set aside the order on the ground of noncompliance with the provisions of s. 25F of the Act and ordered reinstate- ment with full back wages and continuity of service. The High Court having dismissed the writ petition therefrom, the appellant seeks special leave. We grant special leave and hear the appeal.

C.A. No. 885 of 1980 The workmen appellants Nos. 2 and 3 were discharged on I 1.11.1972 for their trade union activities. The Labour Court, Bombay by its Award dated 25.8.1977 refused to inter- fere. Challenge to the Award in the High Court having failed, the workmen appealed to this Court.

C.A. No. 1866 of 1982 The workman respondent No. 2 reported for artisan train- ing on 25.9.1963 and was absorbed as artisan trainee on 16.3.1964. He was made a skilled machine operator, under the appellant company and was discharged with effect from 23.7.1970. The Labour Court by its 119 Award dated 1.8.1980 held the termination to be illegal on ground of non-compliance of s. 25F of the Act, though the order of discharge was issued under Standing Order 18(1).

The Company has appealed against the said order.

C.A. No. 1868 of 1984 The respondent was an employee in the appellant’s facto- ry as welder and his services were terminated with effect from 21.11.1972 under Standing Order No. 28. The Labour Court by its Award dated 30.12.1980 held the order of termi- nation amounted to retrenchment and bad for non-compliance with s. 25F and hence set it aside and ordered reinstatement with full back wages. Hence this appeal.

C.A. No. 8456 of 1983 The respondent was dismissed by the appellant–Corpora- tion after disciplinary inquiry by order dated 28.5.1971 paying one month’s wages in advance. The workman having raised an industrial dispute, the Labour Court, Aurangabad by its Award dated 9.11.1979 held the order of termination to be legal and proper. The respondent’s writ petition therefrom was allowed and the Award was quashed and the workman was declared entitled t0 reinstatement. Hence this appeal.

C.A. No. 10828 of 1983.

The respondent was a store keeper of Rungta Colliery.

His name was struck off the rolls of the Colliery with effect from 8.7.1975. He having raised an industrial dis- pute, the Industrial Tribunal, Jabalpur by its Award dated 22.8.1977 held the striking off t0 be unjustified and that the termination amounted to retrenchment and bad for non payment of retrenchment compensation. In the workman’s Letters Patent Appeal the Division Bench of the High Court also held that the termination amounted to retrenchment.

Hence this Management’s appeal.

The respective cases were argued with some dexterity by the learned counsel Mr. B.N. Singhvi, Mr. N.B. Shetye, Mr.

S.S. Javali, Mr. K.K. Venugopal, Mr. V.A. Bobde, Mr. M.K.

Ramamurthy, Mr. M.G. Ramachandran & Mr. R.S. Hegde.

On the above diverse facts two rival contentions are raised by the parties. The learned counsel for the employers contend that the word ‘retrenchment’ as defined in s. 2(00) of the Act means termination of 120 service of a workman only by way of surplus labour for any reason whatsoever. The learned counsel representing the workmen counted that ‘retrenchment’ means termination of the service of a workman for any reason whatsoever, other than those expressly excluded by the definition in s. 2(00) of the Act.

The precise question to be decided, therefore, is whether on a proper construction of the definition of “retrenchment” in s. 2(00) of the Act, it means termination by the employer of the service of a workman as surplus labour for any reason whatsoever, or it means termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, and those expressly excluded by the definition. In other words, the question to be decided is whether the word “retrenchment” in the definition has to be understood in its narrow, natural and contextual meaning or in its wider literal meaning.

Mr. N.B. Shetye, Mr. K.K. Venugopal, and the learned counsel adopting their arguments refer to the introduction of the provision of “retrenchment” in the Act. Retrenchment was not defined either in the repealed Trade Disputes Act, 1929, or in the Industrial Disputes Act, 1947, as originally enacted. Owing to a crisis in the textile industry in Bom- bay, apprehending large scale termination of services of workmen, the Government of India issued an Ordinance which later became the Industrial Disputes (Amendment) Act, 1953 (Act 43 of 1953) which was deemed to have come into force on the 24th day of October, 1953. Besides introducing the definitions of “lay-off” [Clause 2 (kkk)] and “Retrenchment” [Clause 2(oo)] this Amendment Act of 1953 also inserted Chapter VII in the Act which dealt with “lay-off” and “Retrenchment”. That Chapter contained sections 25A to 25J.

Section 25A provided that sections 25C to 25E inclusive shall not apply to certain categories of industrial estab- lishments. Section 25C dealt with right of workmen laid-off compensation. Section 25D provided for maintenance of muster rolls of workmen by employers and section 25E stated the cases in which the workmen were not entitled to lay-off compensation. Section 25F dealt with conditions precedent to retrenchment of workmen. Section 25G dealt with procedure for retrenchment and section 25H dealt with re-employment of retrenched workmen; and section 25J dealing with the effect of laws inconsistent with this Chapter said that the provi- sions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law (including standing orders made under the Industrial Employ- ment (Standing Orders) Act, 1946 (XX of 1946);

121 provided that nothing contained in this Act shall have effect to derogate from any fight which a workman has under any award for the time being in operation or any contract with the employer.

The Statement of Objects and Reasons of the Amendment Act, 1953 was as under:

“The Industrial Disputes (Amendment) Bill, 1953 seeks to provide for payment of compensation to workmen in the event of their lay-off or retrenchment. The provisions included in the Bill are not new and were discussed at various tripar- tite meetings. Those relating to lay-off are based on an agreement entered into between the representatives of em- ployers and workers who attended the 13th session of the Standing Labour Committee. In regard to retrenchment, the Bill provides that a workman who has been in continuous employment for not less than one year under an employer shall not be retrenched until he has been given one month’s notice in writing or one month’s wages in lieu of such notice and also a gratuity calculated at 15 days’ average pay for every completed year of service or any part thereof in excess of six months. A similar provision was included in the Labour Relations Bill, 1950, which has since lapsed.

Though compensation on the lines provided for in the Bill is given by all progressive employers, it is felt that a common standard should be set for all employers” Clause 2(00) as inserted read as under:

“‘Retrenchment’ means the termination by the employer of the service of a workman for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary ac- tion, but does not include– (a) voluntary retirement of the workman; or (b) retirement of the workman on reaching the age of super- annuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or (c) termination of the service of a workman on the ground of continued ill health.” 122 We are referred to contemporaneous interpretation of the word “retrenchment. In Employees of Messrs India Reconstruc- tion Corporation Ltd., Calcutta v. Messers. India Recon- struction Corporation Ltd., reported in 1953 LAC 563 it was observed by the Calcutta High Court:

“Ordinarily retrenchment means discharge from service of only the surplus part of the labour force but in the case of closure the whole labour force is dispensed with. In sub- stance the difference between closure and normal retrench- ment is one of degree only. As in the case of retrenchment so in the case of closure the workmen are not responsible for closing their jobs. In both the cases, what is called compensation by way of retrenchment relief should be admis- sible.” In Messrs Benett Coleman and Company Ltd. v. Their Employees, reported in 1954 LAC 24 it was observed by Cal- cutta High Court:

“Thus whether the closure was justified or not, the workmen who have lost their jobs would in any event get compensa- tion. If it was not bona fide or not justified, it may be that the measure of compensation would be larger than if it was otherwise.” The above almost contemporaneous exposition is worth consideration, Contemporanea expositio est optima et fortio- sima in lege, (2 Inst. 11). Contemporaneous exposition is the best and strongest in the law. A statute is best ex- plained by following the construction put upon it by judges who lived at the time it was made.

In Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union, [1956] SCR 872, the appellant company could not work its mills to full capacity owing to short supply of sugar-cane and got the permission of the Government to sell its machinery but continued crushing cane under a lease from the purchaser. The workmen’s union in order to frustrate the transaction resolved to go on strike and serving a strike notice did not cooperate with the management with the result that it lost heavily. On the expiry of the lease and closure of the industry, the services of the workmen were duly terminated by the company. The workmen claimed the share of profits on the basis of the offer earlier made by the compa- ny and accepted by the workers. The company having declined to pay and the dispute having been referred, 123 the Industrial Tribunal held that the company was bound to pay and accordingly awarded a sum of Rs.45,000 representing their share of the profits and the award was affirmed by the Labour Appellate Tribunal. Question before this Court in appeal was whether the termination of the workmen on the closure of the industry amounted to retrenchment. It was held that the award was not one for compensation for termi- nation of the services of the workmen on closure of the industry, as such discharge was different from the discharge on retrenchment, which implied the continuance of the indus- try and discharge only of the surplusage, and the workmen were not entitled either under the law as it stood on the day of their discharge or even on merits to any compensa- tion.

The contention of the workmen was that even before the enactment of Industrial Disputes (Amendment) Act, 1953, the tribunal had acted on the view that the retrenchment includ- ed discharge on closure of business and had awarded compen- sation on that footing and that the award of the tribunal in Pipraich’s case could be supported in that view and should not be disturbed. This was based on the decision in Employ- ees of Messrs India Reconstruction Corporation Ltd. Calcutta v. Messrs India Reconstruction Corporation Ltd., (supra);

and Messrs Benett Coleman and Company Ltd. v. Their Employ- ees, (supra). But their Lordship did not agree. Venkatarama Ayyar, J. speaking for the four Judge Bench said:

“Though there is discharge of workmen both when there is retrenchment and closure of business, the compensation is to be awarded under the law, not for discharge as such but for discharge on retrenchment, and if, as is conceded, retrench- ment means in ordinary parlance, discharge of the surplus, it cannot include discharge on closure of business.” As a result it was held that the Award in Pipraich was against the agreement and could not be supported as one of compensation to the workmen.

Thus this Court in Pipraich (supra) was dealing with the question whether the discharge of the workmen on closure of the undertaking would constitute retrenchment and whether the workmen were entitled on that account to retrenchment compensation; and it was observed that retrenchment connoted in its ordinary acceptation that the business itself was being continued but that a portion of the staff or 124 the labour force was discharged as surplusage and the termi- nation of services of all the workmen as a result of the closure of the business could not, therefore, be properly described as retrenchment, which in the ordinary parlance meant discharge from the service and did not include dis- charge on closure of business.

The same view was expressed in Hariprasad Shivshankar Shukla v. A.D. Divikar, [1957] SCR 121; also reported sub nomine Barsi Light Railway Co. v. K.N. Joglekar, [1957] 1 L.L.J. 243 (SC), wherein the Constitution Bench heard two appeals; namely, Civil Appeal Nos. 103 and 105 of 1956. In Civil Appeal No. 105 of 1956 the main appellant was the Barsi Light Railway Company Ltd., and the principal respond- ent was the President of the Barsi Light Railwaymen’s Union.

Under an agreement dated August 1, 1895 between the Secre- tary of State for India in Council and the Railway Company, the Secretary of State could purchase and take over the undertaking after giving Railway Company a notice. On Decem- ber 19, 1952 a notice was given to the Railway Company for and on behalf of the President of India that the undertaking of the Railway Company would be purchased and taken over as from January 1, 1954. On November 11, 1953, the Railway Company served a notice on its workmen intimating that as a result of the talking over, the services of all the workmen of the Railway Company would be terminated with effect from December 31, 1953. The notice further stated that the Gov- ernment of India intended to employ such of the staff of the company as would be willing to serve on the railway on terms and conditions which were to be notified later. About 77 per cent of the staff of the Railway Company were reemployed on the same scales of pay, about 23 per cent were reemployed on somewhat lower scales of pay and only about 24 per cent of the former employees of the Railway Company declined service under the Government. Applications for compensation having been filed on behalf of the erstwhile workmen of the Railway Company under s. 15 of the Payment of Wages Act, 1936, for payment of retrenchment compensation to the said workmen under clause (b) of s. 25F of the Act, the question was whether the erstwhile workmen were entitled to claim compen- sation under clause (b) of s. 25F of the Act; and whether they had been retrenched by their former employer within the meaning of the expression ‘retrenchment’ in the Act. In Civil Appeal No. 103 of 1956, the main appellant was Sri Dinesh Mills Ltd. Baroda and the principal respondent was District Labour Officer and Inspector under the Payment of Wages Act. The appellant company was running a woollen mill at Baroda and had abut 450 workmen and 20 clerks who worked in shifts day and night. On or about October 31, 125 1953, the appellant put up a notice declaring its intention to close down the entire mill. As a result of the closure, the services of all 450 workmen and 20 clerks were terminat- ed and the appellant company claimed that the closure was bona fide being due to heavy losses sustained by the compa- ny. The principal respondent claimed retrenchment compensa- tion for the workmen of the appellant under clause (b) of s.

25F of the Act.

Section 25F at the relevant time stood as follows:

“25F. Conditions precedent to retrenchment of workmen.–No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until– (a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

Provided that no such notice shall be necessary if the retrenchment is under an agreement which specifies a date for the termination of service;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of service or any part thereof in excess of six months; and (c) notice in the prescribed manner is served on the appro- priate Government.” In both the appeals the question before the Constitu- tion Bench was whether the claim of the erstwhile workmen both of the Railway Company and of Shri Dinesh Mills Ltd., to the compensation under clause(b) of s. 25F of the Act was a valid claim in law. Observing that the Act had a ‘plexus of amendments’, and some of the recent amendments had been quite extensive in nature and that s. 25F occurred in Ch. VA of the Act which dealt with ‘lay off and retrenchment’ in the Amending Act, and analysing s. 25F as it then stood, S.K. Das, J. speaking for the Constitution Bench observed that in the first part of the section both the words ‘re- trenched’ and ‘retrenchment’ were used and obviously they had the same meaning except that one was verb 126 and the other was a noun and that to appreciate the true scope and effect of s. 25F one must first understand what was meant by the expression ‘retrenched’ or ‘retrenchment’- Analysing the definition of ‘retrenchment’ in s. 2(00) the Court found in it the following four essential require- ments: (a) termination of the service of a workman;, (b) by the employer; (c) for any reason whatsoever; and (d) other- wise than as a punishment inflicted by way of disciplinary action. The Court then said:

“It must be conceded that the definition is in very wide terms. The question, however, before us is does this defini- tion merely give effect to the ordinary, accepted notion of retrenchment in an existing or running industry by embodying the notion in apt and readily intelligible words or does it go so far beyond the accepted notion of retrenchment as to include the termination of services of all workmen in an industry when the industry itself ceases to exist on a bona fide closure or discontinuance of his business by the em- ployer?” The Court further said:

“There is no doubt that when the act itself provides a dictionary for the words used, we must look into that dic- tionary first for an interpretation of the words used in the statute. We are not concerned with any presumed intention of the legislature; our task is to get the intention as ex- pressed in the statute. Therefore, we propose first to examine the language of the definition and see if the ordi- nary, accepted notion of retrenchment fits in, squarely and fairly, with the language used.” The Court reiterated the following observations in Pipraich (supra):

“But retrenchment connotes in its ordinary acceptation that the business itself is being continued but that a portion of the staff of the labour force is discharged as surplusage and the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as retrenchment.” 127 This was the ordinary accepted notion of ‘retrenchment’ in an industry before addition of s. 2(oo) to the Act, as retrenchment in that case took place in 1951. Replying to the argument that by excluding the bona fide closure of business as one of the reasons for termination of the serv- ice of workmen by the employer, one would be cutting down the amplitude of the expression ‘for any reason whatsoever’ and reading into the definition the words which did not occur there, the Court agreed that the adoption of the ordinary meaning would give to the expression ‘for any reason whatsoever’ a somewhat narrower scope; one might say that it would get a colour in the context in which expres- sion occurred; but the Court did not agree that it amounted to importing new words in the definition and said that the legislature in using that expression said in effect: “It does not matter why you are discharging the surplus; if the other requirements of the definition are fulfilled, then it is retrenchment”. In the absence of any compelling words to indicate that the intention was to include bona fide closure of the whole business, it would be divorcing the expression altogether from its context to give it such a wide meaning as was contended. About the nature of the definition it was said:

“It is true that an artificial definition may include a meaning different from or in excess of the ordinary accepta- tion of the word which is the subject of definition; but there must then be compelling words to show that such a meaning different from or in excess of the ordinary meaning is intended. Where, within the framework of the ordinary acceptation of the word, every single requirement of the definition clause is fulfilled, it would be wrong to take the definition as destroying the essential meaning of the word defined.” The Court in Hariprasad dealt with two other conten- tions; one was that before the amending Act of 1953 the retrenchment had acquired a special meaning which included the payment of compensation on a closure of business and the legislature gave effect to that meaning in the definition clause and by inserting section 25F. The second was that section 25FF inserted in 1956 by Act 41 of 1956 was ‘Parlia- mentary exposition’ of the meaning of the definition clause and of section 25F. Rejecting the contentions the Court held that retrenchment meant the discharge of surplus workmen in an existing or continuing business; it had acquired no special meaning so as to include discharge of workmen on bona fide closure of business, though a number of Labour Appellate Tribunals awarded compensation to 128 workmen on closure of business as an equitable relief for variety of reasons. The Court accordingly held:

“… that retrenchment as defined in s. 2(00) and as used in s. 25 has no wider meaning than the ordinary, accepted connotation of the word; it means the discharge of surplus labour or staff by the employer for any reason whatsoever, otherwise than as a punishment inflicted by way of discipli- nary action, and it has no application where the services of all workmen have been terminated by the employer on real and bona fide closure of business as in the’ case of Shri Dinesh Mills Ld. or where the services of all workmen have been terminated by the employer on the business or undertaking being taken over by another employer in circumstances like those of the Railway Company.” It is interesting to note that the Amending Act No. 41 of 1956 inserted original section 25FF on September 4, 1956.

The objects and reasons were stated thus:

“Doubt has been raised whether retrenchment compensation under the Industrial Disputes Act 1947 becomes payable by reason merely of the fact that there has been a change of employers, even if the service of the workman is continued without interruption and the terms and conditions of his service remain unaltered. This has created difficulty in the transfer, re-constitution and amalgamation of companies and it is proposed to make the intention clear by amending section 25F of the Act.” Hariprasad’s case (supra) was decided on November 27, 1956. The Industrial Disputes (Amendment) Ordinance, 1957 (4 of 1957) was promulgated immediately thereafter with effect from December 1, 1956 and that Ordinance was replaced by the Industrial Disputes (Amendment) Act 1957 (XVIII of 1957).

The following was the Statement of Objects and Reasons:

“In a judgment delivered on the 27th November, 1956, the Supreme Court held that no retrenchment compensation was payable under section 25F of the Industrial Disputes Act, 1947, to workmen whose services were terminated by an em- ployer on a real and bona fide closure of business, or when termination occurred as a result of transfer of owner- 129 ship from one employer to another (see AIR 1957 SC 12 1).

This has led and is likely to lead to a large number of workmen being rendered unemployed without any compensa- tion. In order to meet this situation which was causing hardship to workmen, it was considered necessary to take immediate action and the Industrial Disputes (Amendment) Ordinance, 1957 (4 of 1957), was promulgated with retrospec- tive effect from 1st December, 1956.” “This Ordinance was replaced by an Act of Parliament enact- ing the provisions contained in sections 25FF and 25FFF.

These sections provide that ‘compensation would be payable to workmen whose services are terminated on account of the transfer or closure of undertakings.’ In the case of trans- fer of undertakings, however, if the workman is re-employed on terms and conditions which are not less favourable to him, he will not be entitled to any compensation. This was the position which existed prior to the decision of the Supreme Court. In the case of closure of business on account of the circumstances beyond the control of the employer, the maximum compensation payable to workmen has been limited to his average pay for three months. If the undertaking is engaged in any construction work and it is closed down within two years on account of the completion of its work, no compensation would be payable to workmen employed there- in.” Hariprasad (supra) having accepted the ordinary contex- tual meaning of retrenchment, namely, termination of surplus labour as the major premise it was surely open to the Par- liament to have amended the definition of retrenchment in s.

2(00) of the Act. Instead of doing that the Parliament added s. 25FF and 25FFF which said:

“25FF. Compensation to workmen in case of transfer of under- takings–Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer, in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compen- sation in accordance with the provisions of section 25F, as if the workman had been retrenched:

130 Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if– (a) the service of the workman has not been interrupted by such transfer;

(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favour- able to the workman than those applicable to him immediately before the transfer; and (c) the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer.” “25FFF. Compensation to workmen in case of closing down of undertakings–(1) Where an undertaking is closed down for any reason whatsoever, every workman who has been in contin- uous service for not less than one year in that undertaking immediately before such closure shall, subject to the provi- sions of sub-section (2), be entitled to notice and compen- sation in accordance with the provisions of section 25-F, as if the workman had been retrenched;

Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workmen under clause (b) of section 25-F shall not exceed his aver- age pay for three months.” Thus, by this Amendment Act the Parliament clearly provided that though such termination may not have been retrenchment technically so-called, as decided by this Court, neverthe- less the employees in question whose services were terminat- ed by the transfer or closure of the undertaking would be entitled to compensation, as if the said termination was retrenchment. As it has been observed, the words “as if” brought out the legal distinction between retrenchment defined by s. 2(00) as it was interpreted by this Court and termination of services consequent upon transfer of the undertaking. In other words, the provision was that though termination of services on transfer or closure of 131 the undertaking may not be retrenchment, the workmen con- cerned were entitled to compensation as if the said termina- tion was retrenchment.

Thus we find that till then the accepted meaning of retrenchment was ordinary, contextual and narrower meaning of termination of surplus labour for any reason whatsoever.

In Anakapalla Co-operative Agricultural and Industrial Society Ltd. v. Workmen, [1963] Suppl. 1 SCR 730, a company running a sugar mill was suffering losses every year due to insufficient supply of sugarcane and wanted to shift the mill. The cane-growers formed a co-operative society and purchased the mill. As agreed between the company and the society, the company terminated the services of the employ- ees and paid retrenchment compensation to them under section 25FF of the Act. This society employed some of the old employees and refused to absorb some of them who raised an industrial dispute. The Industrial Tribunal having directed the purchaser-society by its award to re-employ them, the society contended that it was not a successor in-interest of the company and hence the claim of re-employment was not sustainable and the services of the employees having been terminated upon payment of compensation by the company under s. 25FF no claim could be made against the transferee socie- ty. This Court held that the society was the successor-in- interest of the company as it carried on the same or similar business as was carried by the vendor company at the same place and without substantial break in continuity. It was further held that the employees were not entitled to both compensation for termination of service and immediate re- employment at the hands of the transferee and section 25H was not applicable to the case as the termination of service upon transfer or closure was not retrenchment properly so called and that termination of service dealt with in s. 25FF could not be equated with retrenchment covered by s. 25F. It was observed that the words ‘as if’ in s. 25FF clearly distinguished retrenchment under s. 2(00) and termination under s. 25FF. Gajendragadkar, J., as he then was, speaking for the five Judges Bench said that in Hariprasad this Court was called upon to consider the true scope and effect of the concept of retrenchment as defined in s. 2(00) and it held that the said definition had to be read in the light of the accepted connotation of the words, and as such, it could have no wider meaning than the ordinary connotation of the word and according to this connotation retrenchment meant the discharge of surplus labour or staff by the employer for any reason whatsoever, otherwise’ then as a punishment inflicted by way of disciplinary action, and did 132 not include termination of services of all workmen on the bona fide closure of industry or on change of ownership or management thereof. It was observed:

” ….. the effect of this decision was that though the definition of the word ‘retrenchment’ may perhaps have included the termination of services caused by the closure of the concern or by its transfer, these two latter cases could not be held to fall under the definition because of the ordinary accepted connotation of the said word. This decision necessarily meant that the word ‘retrenchment’ in s. 25FF had to bear a corresponding interpretation.” In Workmen of Subong Tea Estate v. The outgoing Manage- ment of Subong Tea Estate and Anr., reported in [1963] INSC 235; [1964] 5 SCR 602, it was similarly observed at page 613 of the report:

“In dealing with the question of retrenchment in the light of the relevant provisions to which we have just referred, it is, however, necessary to bear in mind that the manage- ment can retrench its employees only for proper reasons. It is undoubtedly true that it is for the ‘management to decide the strength of its labour force, for the number of workmen required to carry out efficiently the work involved in the industrial undertaking of any employer must always be left to be determined by the management in its discretion, and so, occasions may arise when the number of employees may exceed the reasonable and legitimate needs of the undertak- ing. In such a case, if any workman become surplus, it would be open to the management to retrench them. Workmen may become surplus on the ground of rationalisation or on the ground of economy reasonably and bona fide adopted by the management, or of other industrial or trade reasons. In all these cases, the management would be justified in effecting retrenchment in its labour force. Thus, though the right of the management to effect retrenchment can not normally be questioned, when a dispute arises before an Industrial Court in regard to the validity of any retrenchment, it would be necessary for industrial adjudication to consider whether the impugned retrenchment was justified for proper reasons.

It would not be open to the management either capriciously or without any reason at all to say that it proposes to reduce its labour 133 force for no rhyme or reason. This position can not be seriously disputed” In Delhi Cloth and General Mills Ltd. v. Shambhu Nath Mukherjee and Ors., reported in [1977] INSC 185; [1978] 1 SCR 591 where the post of motion setter was abolished and the respondent was given a job of a trainee on probation for the post of As- sistant Line Fixer and the management found him unsuitable for the job even after extending his probation period upto nine months and offered him the post of fitter on the same pay and the respondent instead of accepting the offer wanted to be given another chance to show his efficiency in his job and the management struck off his name from the rolls with- out complying with the provisions of s. 25F(a) and (b) of the Act and the Labour Court having given award in the respondent’s favour and the appellant’s writ petition was rejected by the High Court, Goswami, J. speaking for three Judges Bench said: “Striking off the name of the workman from the rolls by the management is termination of his service. Such termination of service is retrenchment within the meaning of s. 2(00) of the Act. There is nothing to show that the provisions of section 25F (a) and (b) were complied with by the management in this case. The provisions of s.

25F(a), the proviso apart, and (b) are mandatory and any order of retrenchment in violation of these two peremptory conditions precedent is invalid.” The appeal was accordingly dismissed. The earlier decisions were not referred to.

Next comes the decision in State Bank of India v. Shri N. Sundara Money, reported [1976] INSC 3; [1976] 3 SCR 160, (Y.V. Chandra- chud, V.R. Krishna lyer and A.C. Gupta, JJ.). In an applica- tion under Article 226, the respondent on automatic extin- guishment of his service consequent to the pre-emptive provision as to the temporariness of the period of his employment in his appointment letter claiming to have been deemed to have had continuous service for one year within the meaning of s. 25(B)(2) of the Act, the Single Bench of the High Court having allowed his writ petition and the writ appeal of the appellant having also failed, this Court in appeal found as fact that the appointment was purely tempo- rary one for a period of 9 days but might be terminated earlier, without assigning any reason therefor at the peti- tioner’s discretion; and the employment unless terminated earlier, would automatically cease at the expiry of the period i.e. 18.11.1972. This 9 days’ employment added on to what had gone before ripened to a continuous service for a year “on the antecedent arithmetic of 240 days of broken bits of service” and considering the meaning of ‘retrench- ment’ it was held that the expression for any reason whatso- ever 134 was very wide and almost admitting of no exception. The contention of the employer was that when the order of ap- pointment carried an automatic cessatioin of service, the period of employment worked itself out by efflux of time, not by act of employer and such cases were outside the concept of retrenchment. This Court observed that to re- trench is to cut down and one could not retrench without trenching or cutting, but “dictionaries are not dictators of statutory construction where the benignant moo&of a law and, more emphatically, the definition clause furnish a different denotation.” Accepting the literal meaning, Krishna Iyer, J. observed:

“A break down of s. 2(00) unmistakably expands the semantics of retrenchment. ‘Termination ….. for any reason whatso- ever’ are the key words. Whatever the reason, every termina- tion spells retrenchment. So the sole question is, has the employee’s service been terminated? Verbal apparel apart, the substance is decisive. A termination takes place where a term expires either by the active step of the master or the running out of the stipulated term. To protect the weak against the strong this policy of comprehensive definition has been effectuated. Termination embraces not merely the act of termination by the employer, but the fact of termina- tion howsoever produced. May be, the present may be a hard case, but we can visualise abuses by employers, by suitable verbal devices, circumventing the amount of s. 25F and s.

2(00). Without speculating on possibilities, we may agree that ‘retrenchment’ is no longer terra incognita but area covered by an expansive definition. It means ‘to end, con- clude, cease.’ In the present case the employment ceased, concluded, ended on the expiration of 9 days automatically may be, but cessation all the same. That to write into the order of appointment the date of termination confers no mokshas from s. 25F (b) is inferable from the proviso to s.

25F(1). True, the section speaks of retrenchment by the employer and it is urged that some act of volition by the employer to bring about the termination is essential to attract s. 25F and a omatic extinguishment of service by effluxion of time cannot be sufficient.” It was further observed:

“Words of multiple import have to be winnowed judicially 135 to suit the social philosophy of the statute. So screened we hold that the transitive and intransitive senses are covered in the current context. Moreover, an employer terminates employment not merely by passing an order as the service runs. He can do so by writing a composite order, one giving employment and the other ending or limiting it.. A separate, subsequent determination is not the sole magnetic pull of the provision. A pre-emptive provision to terminate is struck by the same vice as the post-appointment termination.

Dexterity of diction cannot defeat the articulated con- science of the provision.” The precedents including Hariprasad do not appear to have been brought to the notice of their Lordship in this case. It may be noted that since Delhi Cloth and General Mills (supra) a change in interpretation of retrenchment in s. 2(00) of the Act is clearly discernible.

Mr. Venugopal would submit that the Judgment in Sundara Money’s case and for that matter the subsequent decisions in the line are per incuriam for two reasons: (i) that they failed t0 apply the law laid down by the Constitution Bench of this Hon’ble Court in Hariprasad Shukla’s case (supra) and (ii) for the reason that they have ignored the impact of two of the provisions introduced by the Amendment Act of 1953 along with the definition of “retrenchment” in s. 2(00) and s. 25F namely, ss. 25G and 25H. We agree with the learned counsel that the question of the subsequent deci- sions being per incuriam could arise only if the ratio of Sundara Money’s case and the subsequent Judgments in the line was in conflict with the ratio in the Hariprasad Shuk- la’s case (supra) and Anakapalla’s case (supra). The issue, it is urged, was, whether it was necessary for the Court to interpret s. 2(00) as being restricted to termination of services of workmen rendered surplus for arriving at a decision in the case and if it was unnecessary to so inter- pret s. 2(00) for the purpose of arriving at a decision in that case, the interpretation of s. 2(00) would necessarily by rendered obiter. According to counsel, the long discus- sion on interpretation of s. 2(00) could not be brushed aside as either obiter or mere casual observations of the Constitution Bench.

It is urged that for the.purpose of ratio decidendi, the question is not whether a subsequent Bench of the Su- preme Court thinks that it was necessary or unnecessary for the Constitution Bench, of the earlier Bench to have dealt with the issue, but whether the Constitution Bench itself thought it necessary to interpret Section 2(00) for 136 arriving at its final decision. If the smaller Bench of the Supreme Court could ignore the earlier decision of a larger Bench of the Supreme Court by holding that in its opinion, it was not necessary for the earlier Bench to have gone into the issue, equally it would be open to a High Court to adopt the same approach and ignore binding Judgments of the Su- preme Court; giving rise to judicial indiscipline. According to counsel the Constitution Bench, in its unanimous verdict, undoubtedly found it necessary to go into the interpretation of s. 2(00) and did so with elaborate reasoning supporting its findings, because if the contention of the Management in that case was accepted, namely, that “retrenchment” would cover only termination of surplus labour for any reason whatsoever, the logical result of this finding, would be twofold: (i) that the termination of the entirety of workmen by reason of closure, would not be a termination of workmen rendered surplus and, therefore, a case of closure would be outside s. 2(00), and (ii) secondly, such termination of workmen rendered surplus, could arise only if the industry continued to be a running industry.

The question whether the positive content of s. 2(00) restricting the definition of workmen rendered surplus, for any reason, whatsoever, is part of the ratio or not, submits Mr. Venugopal, is wholly an academic question in view of the fact that as many as 9 High Courts have restricted the applicability of s. 25F, 25G and 25H to only cases of termi- nation of services of surplus labour for any reason whatso- ever and not to other types of termination, whatever may be the reason for such termination. Even if a Judgment was to be based on two alternative reasons or conclusions, each one of these alternative reasons or basis, would form the ratio of the Judgment. It is also urged that the argument would equally apply to the ratio of Anakapalla’s case rendering the Judgments in Sundra Money’s case and the later decisions per incuriam, for not having noticed or followed a binding precedent of the Supreme Court itself, as the Judgment of the Constitution Bench binds smaller Divisions of the Court.

We now deal with the question of per incuriam by reason of allegedly not following the Constitution Bench decisions.

The Latin expression per incuriam means through inadvert- ence. A decision can be said generally t0 be given per incuriam when this Court has acted in ignorance of a previ- ous decision of its own or when a High Court has acted in ignorance of a decision of this Court. It can not be doubted that Art. 141 embodies, as a rule of law, the doctrine of precedents on which our judicial system is based. In Bengal Immunity Company Ltd. v. State of Bihar, [1955] 2 SCR 603, it was held that the words of Art.

137 14 1, “binding on all courts within the territory of India”, though wide enough to include the Supreme Court, do not include the Supreme Court itself, and it is not bound by its own judgments but is free to reconsider them in appropriate cases. This is necessary for proper development of law and justice. May be for the same reasons before judgments were given in the House of Lords in Re-Dawson’s Settlement Lloyds Bank Ltd. v. Dawson and Ors., [1966] 1 WLR 1234, on July 26, 1966 Lord Gardiner, L.C. made the following statement on behalf of himself and the Lords of Appeal in Ordinary:

“Their Lordships regard the use of precedent as an indis- pensable foundation upon which to decide what is the law and its application to individual cases. It provides at least some degree of certainty upon which individuals can rely in the conduct of their affairs, as well as a basis for orderly development of legal rules. Their Lordships nevertheless recognise that too rigid adherence to precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law. They propose, therefore, to modify their present practice and, while treating former decisions of this House as normally binding, to depart from a previous decision when it appears right to do so.

In this connection they will bear in mind the danger of disturbing retrospectively the basis on which contracts, settlements of property and fiscal arrangements have been entered into and also the especial need for cer- tainty as to the criminal law.” Though the above announcement was not made in the course of judicial proceeding it shows that it is open to House of Lords to depart from the doctrine of precedent when consid- ered justified. Section 2 12 of the Government of India Act, 1935 and Art. 141 of the Constitution of India were enacted to make the law declared by the Supreme Court binding on all courts in the country excluding, as is now being interpret- ed, the Supreme Court itself. The doctrine of ratio deciden- di has also to be interpreted in the same line. In England a decision is said to be given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covered the case before it, or when it has acted in ignorance of a decision of the House of Lords. In the former case it must decide which decision to follow, and in the latter it is bound by the decision of the House of Lords. It has been said that the decision of the House of 138 Lords mentioned above, refers to a decision subsequent to that of the Court of Appeal. However, “a prior decision of the House of Lords inconsistent with the decision of the Court of Appeal, but which was not cited to the Court of Appeal will make the later decision of the Court of Appeal of no value as given per incuriam.” But if the prior deci- sion had been cited to the Court of Appeal and that court had misinterpreted a previous decision of the House of Lords, the Court of Appeal must follow its previous decision and leave the House to rectify the mistake. In Halsbury’s Laws of England 4th Ed. Vol. 10 para 745 it has been said:

“While former decisions of the House are normally binding upon it, the House will depart from one of its own previous decisions when it appears right in the interests of justice and of the proper development of the law to do so. Cases where the House may reconsider its own previous decisions are those involving broad issues of justice or public policy and questions of legal principle. Only in rare cases will the House reconsider questions of construction of statutes or other documents. The House is not bound to follow a previous case merely because it is indistinguishable on the facts. ‘ ‘ The position and experience in this Court could not be much different, keeping in view the need for proper develop- ment of law and justice.

As regards the judgments of the Supreme Court allegedly rendered in ignorance of a relevant constitutional provision or other statutory provisions on the subjects covered by them, it is true that the Supreme Court may not be said to “declare the law” on those subjects if the relevant provi- sions were not really present to its mind. But in this case ss. 25G and 25H were not directly attracted and even if they could be said to have been attracted in laying down the major premise, they were to be interpreted consistently with the subject or context. The problem of judgment per incuriam when actually arises, should present no difficulty as this Court can lay down the law afresh, if two or more of its earlier judgments cannot stand together. The question howev- er is whether in this case there is in fact a Judgment per incuriarn. This raises the question of ratio decidendi in Hariprasad and Anakapalla’s cases on the one hand and the subsequent decisions taking the contrary view on the other.

139 An analysis of judicial precedent, ratio decidendi and the ambit of earlier and later decisions is to be found in the House of Lords’ decision in F.A. & A.B. Ltd. v. Lupton (Inspector of Taxes), [19722] AC 634, Lord Simon concerned with the decisions in Griffiths v. J.P. Harrison (Watford) Ltd., [1963] A.C. 1, and Finsbury Securities Ltd. v. Inland Revenue Commissioners, [1966] 1 WLR 1402, with their inter- relationship and with the question whether Lupton’s case fell within the precedent established by the one or the other case, said:

“What constitutes binding precedent is the ratio decidendi of a case and this is almost always to be ascertained by an analysis of the material facts of the case that is, general- ly, those facts which the tribunal whose decision is in question itself holds, expressly or implicitly, to be mate- rial.” It has also been analysed:

“A judicial decision will often be reached by a process of reasoning which can be reduced into a sort of complex syllo- gism, with the major premise consisting of a pre-existing rule of law (either statutory or judge-made) and with the minor premise consisting of the material facts of the case under immediate consideration. The conclusion is the deci- sion of the case, which may or may not establish new law–in the vast majority of cases it will be merely the application of existing law to the facts judicially ascertained. Where the decision does consititute new law, this may or may not be expressly stated as a proposition of law: frequently the new law will appear only from subsequent comparison of, on the one hand, the material facts inherent in the major premise with, on the other, the material facts which consti- tute the minor premise. As a result of this comparison it will often be apparent that a rule has been extended by an analogy expressed or implied.” To consider the ratio decidendi of a case we have, therefore, to ascertain the principle on which the case was decided. Sir George Jessel in Osborne v. Rowlett, [1880] 13 Ch. D. 774, remarked that ‘the only thing in a judge’s decision binding as an authority upon a subsequent judge is the principle upon which the case was decided’.

The ratio decidendi of a decision may be narrowed or widened by the judges before whom it is cited as a prece- dent. In the process the 140 ratio decidendi which the judges who decided the case would themselves have chosen may be even different from the one which has been approved by subsequent judges. This is be- cause Judges, while deciding a case will give their own reasons but may not distinguish their remarks in a rigid way between what they thought to be the ratio decidendi and what were their obiter dicta, that is, things said in passing having no binding force, though of some persuasive power. It is said that “a judicial decision is the abstraction of the principle from the facts and arguments of the case.” “A subsequent judge may extend it to a broader principle of wider application or narrow it down for a narrower applica- tion.” The submissions of Mr. Venugopal that for the purpose of ratio decidendi, the question is not whether a subsequent Bench of this Court thinks that it was necessary or unneces- sary for the Constitution Bench, or the earlier Bench to have dealt with the issue, but whether the Constitution Bench itself thought it necessary to interpret s. 2 (00) for arriving at the final decision has to be held to be untena- ble in this wide and rigid form.

Analysing the compled syllogism of Hariprasad’s case we find that its major premise was that retrenchment meant termination of surplus labour of an existing industry and the minor premise was, that the termination in that case was of all the workmen on closure of business on change of ownership. The decision was that there was no retrenchment.

In this context it is important to note what subsequent benches of this Court thought to be the ratio decidendi of Hariprasad, and for that matter of Anakapalla.

In Santosh Gupta v. State Bank Of Patiala, reported in [1980] INSC 97; [1980] 3 SCR 884, O. Chinnappa Reddy, J. sitting with Krish- na Iyer, J. deduced the ratio decidendi of Hariprasad thus:

“In Hariprasad Shivshankar Shukla v. A.D. Divikar, the Su- preme Court took the view that the word ‘retrenchment’ as defined in s. 2(00) did not include termination of services of all workmen on a bona fide closure of an industry or on change of ownership or management of the industry. In order to provide for the situations which the Supreme Court held were not covered by the definition of the expression ‘re- trenchment’, the Parliament added s. 25FF and s. 25FFF providing for the payment of compensation to the workmen in case of transfer of undertakings and in case of closure of undertakings respectively.” 141 In Hariprasad (supra) the learned Judges themselves formulated the question before them as follows:

“The question, however, before us is–does this definition merely give effect to the ordinary, accepted notion of retrenchment in an existing or running industry by embodying the notion in apt and readily intelligible words or does it go so far beyond the accepted notion of retrenchment as to include the termination of services of all workmen in an industry when the industry itself ceases t0 exist on a bona fide closure or discontinuance of his business by the em- ployer.” The question was answered by the learned Judges in the following words:

“In the absence of any compelling words to indicate that the intention was even to include a bona fide closure of the whole business, it would, we think, be divorcing the expres- sion altogether from the context to give it such a wide meaning as is contended for by learned counsel for the respondents ….. it would be against the entire scheme of the Act to give the definition clause relating to retrench- ment such a meaning as would include within the definition termination of service of all workmen by the employer when the business itself ceases to exist.” Rejecting the submission of Dr. Anand Prakash that “termina- tion of service for any reason whatsoever” meant no more and no less than discharge of a labour force which was a sur- plusage, it was observed in Santosh Gupta (supra) that the misunderstanding of the observations and the resulting confusion stem from not appreciating the lead question which was posed and answered by the learned Judges and’ that the reference to ‘discharge on account of surplusage’ was illus- trative and not exhaustive on account of transfer or closure of business.

Mr. V.A. Bobde submits, and we think rightly, that the sole reason for the decision in Hariprasad was that the Act postulated the existence and continuance of an industry and where the industry i.e. the undertaking, itself was closed down or transferred, the very substratum disappeared and the Act could not regulate industrial employment in the absence of an industry. The true position in that case was that s.

2(00) and 25F could not be invoked since the undertaking itself 142 ceased to exist. The ratio of Hariprasad, according to the learned counsel, is discernible from the discussion at pp.

13 1-132 of the report about the ordinary accepted notion of retrenchment ‘in an industry’ and Pipraich’s case was re- ferred to for the proposition that continuance of the busi- ness was essential; the emphasis was not on the discharge of surplus labour but on the fact that “retrenchment connotes in its ordinary acceptation that the business itself is being continued ….. the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as retrenchment.” At page 134 in the last four lines also it was said: “But the fundamental question at issue is, does the definition clause cover cases of closure of business when the closure is real and bona fide?” The reasons for arriving at the conclusion are given as “it would be against the entire scheme of the Act to give the definition clause relating to retrenchment such a meaning as would include within the definition termi- nation of service of all workmen by the employer when the business itself ceases to exist and that the industrial dispute to which the provisions of the Act applies is only one which arises out of an existing industry”. Thus, the Court was neither called upon to decide nor did it decide whether in a continuing business, retrenchment was confined only to discharge of surplus staff and the reference to discharge of surplusage was for the purpose of contrasting the situation in that case, i.e. workmen were being re- trenched because of cessation of business and those observa- tions did not constitute reasons for the decision. What was decided was that if there was no continuing industry the provision could not apply. In fact the question whether retrenchment did or did not include other terminations was never required to be decided in Hariprasad and could not, therefore have been, or be taken to have been decided by this Court.

Lord Halsbury’s dicta in Quinn v. Leathem, [1901] UKHL 2; [1901] AC 495 at page 506 is:

” ….. every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but gov- erned and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only on authority for what it actually decides.” This Court held in State of Orissa v. Sudhansu Misra, [1967] INSC 251; [1968] 2 SCR 154, that a decision is only an authority for what it actually decides.

143 What is of the essence in a decision is its ratio and not other observation found therein nor what logically follows from the various observations made in it. We agree with Mr.

Bobde when he submits that Hariprasad’s case is not an authority for the proposition that s. 2(00) only covers cases of discharge of surplus labour and staff. The Judg- ments in Sundara Money (supra) and the subsequent decisions in the line could not be held to be per incuriam inasmuch as in Hindustan Steel and Santhosh Gupta’s cases, the Division Benches of this Court had referred to Hariprasad’s case and rightly held that its ratio did not extend beyond a case of termination on the ground of closure and as such it would not be correct to say that the subsequent decisions ignored a binding precedent.

In Hindustan Steel Ltd. v. The Presiding Officer, Labour Court, [1976] INSC 221; [1977] 1 SCR 586 the question was whether termination of service by efflux of time was termination of service within the definition of retrenchment in section 2(oo) of the Act. Both the earlier decisions of the Court in Haripra- sad (supra) and Sundara Money (supra) were considered and it was held that there was nothing in Hariprasad which was inconsistent with the decision in Sundara Money’s case. It was observed that the decision in Hariprasad was only that the words “for any reason whatsoever” used in the definition of retrenchment would not include a bona fide closure of the whole business because it would affect the entire scheme of the Act. The decisions in L. Robert D’Souza v. Executive Engineer, Southern Railway and Anr., [1979] 1 L.L.J. 211;

The Managing Director, National Garages v.J. Gonsalves, [1962] 1 L.L.J. 56; Goodlas Nerolac Paints v. Chief Commis- sioner, Delhi, [1967] 1 L.L.J. 545 and Rajasthan State Electricity Board v. Labour Court, [1966] 1 L.L.J. 381, in which contrary view was taken, were overruled in Santosh Gupta holding that the discharge of the workman on the ground that she did not pass the test which would have enabled her to be confirmed was ‘retrenchment’ within the meaning of section 2(oo) and therefore, the requirement of section 25F had to be complied with. The workman was em- ployed in the State Bank of Patiala from July 13, 1973 till August, 1974 when her services were terminated. According to the workman she. had worked for 240 days in the year preced- ing August 21, 1974 and the termination of her services was retrenchment as it did not fall within any of the three accepted cases. The management’s contention was that termi- nation was not due to discharge of surplus labour but due to failure of the workman to pass the test which could have enabled her to be confirmed in the service and as such it was not retrenchment. This contention was repelled.

144 Both Mr. Shetye and Mr. Venugopal submit that judicial discipline required the smaller benches to follow the deci- sions in the larger benches. This reminds us of the words of Lord Mailsham of Marylebone, the Lord Chancellor, “in the hierarchical system of courts which exists in this country, it is necessary for each lower tier ….. to accept loyal- ly the decisions of the higher tiers”. However, in view of the ratio decidendi of Hariprasad, as we have seen, there is no room for such a criticism.

In Management of Karnataka State Road Transport Corpora- tion, Bangalore v. M. Boraiah, reported in [1983] INSC 172; [1984] 1 SCC 244, a Division Bench of A.N. Sen and Ranganath Misra, JJ. fol- lowing the decisions in State Bank of India v. N. Sundara Money, (supra); Hindustan Steel Ltd. v. Presiding Officer, Labour Court, Orissa, (supra); Santosh Gupta v. State Bank of Patiala, (supra); Indian Hume Pipe Co. Ltd. v. Workmen, [ 1960] 2 SCR 32; Mohan Lal v. Management of M/s. Bharat Electronics Ltd., [1981] INSC 95; [1981] 3 SCR 518 and Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, New Delhi, [1980] INSC 186; [1981] 1 SCR 789, held that in the above series of cases that have come later, the Constitution Bench deci- sion in Hariprasad (supra) has been examined and the ratio indicated therein has been confined to its own facts and the view indicated by the Court in that case did not meet with the approval of Parliament and, therefore, the law had been subsequently amended.

Speaking for the Court, R.N. Misra, J. significantly said:

“We are now inclined to hold that the stage has come when the view indicated in Money case (supra) has been ‘absorbed into the consensus’ and there is no scope for putting the clock back or for an anti-clockwise operation.” More than a month thereafter in Gammon India Ltd. v.

Niranjan Dass[1983] INSC 193; , [1984] 1 SCC 509, a three Judges Bench (D.A.

Desai, R.B. Misra and Ranganath Misra, JJ.) construing the one month’s notice of termination in that case due to reduc- tion of volume of business of the company said:

“On a true construction of the notice, it would appeal that the respondent had become surplus on account of reduction in volume of work and that constitutes retrenchment even in the traditional sense of the term as interpreted in Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor 145 Union, though that view does not hold the field in view of the recent decisions of this Court in State Bank of India v.

N. Sundara Money; Hindustan Steel Ltd. v. Presiding Officer, Labour Court, Orissa; Santosh Gupta v. State Bank of Patia- la; Delhi Cloth and General Mills Ltd. v. Shambhu Nath Mukherjee; Mohan Lal v. Management of M/s. Bharat Electron- ics Ltd. and L. Robert D’Souza v. Executive Engineer, South- ern Railway. The recitals and averments in the notice leave no room for doubt that the service of the respondent was terminated for the reason that on account of recession and reduction in the volume of work of the company, respondent has become surplus. Even apart from this, the termination of service for the reasons mentioned in the notice is not covered by any of the clauses (a), (b) and (c) of s. 2(00) which defines retrenchment and it is by now well settled that where the termination of service does not fall within any of the excluded categories, the termination would be ipso facto retrenchment. It was not even attempted to be urged that the case of the respondent would fall in any of the excluded categories. It is therefore indisputably a case of retrenchment.” (Emphasis supplied) In a fast developing branch of Industrial and Labour law it may not always be of particular importance to rigidly adhere to a precedent, and a precedent may need be departed from if the basis of legislation changes. It was in realisa- tion of the idea of a living law that in Reg v. Home Secre- tary, Ex. P. Khawaja, reported in [1984] AC 74 (H.L.) it was said at p. 84:

The House will depart from a previous decision where it is right to do so and where adherence to a previous decision may lead to injustice in a particular case. Constitutional and administrative law are not fields where it is of partic- ular importance to adhere to precedent. A recent precedent may be more readily departed from than one which is of long standing. A precedent may be departed from where the issue is one of statutory construction-” We now take up the question of interpretation of s.

2(00) of the Act dealing with the rival contentions, namely, ordinary or contextual as against literal meaning.

146 When we analyse the mental process in drafting the definition of “retrenchment” in s. 2(00) of the Act we find that firstly it is to mean the termination by the employer of the service of a workman for any reason whatsoever.

Having said so the Parliament proceeded to limit it by excluding certain types of termination, namely, termination as a punishment inflicted by way of disciplinary action. The other types of termination excluded were (a) voluntary retrenchment; or (b) retrenchment of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation on that behalf; or (c) termination of service of a workman on the ground of continued ill health. Had the Parliament envisaged only the question of termination of surplus labour alone in mind, there would arise no question of excluding (a), (b) and (c) above. The same mental process was evident when s. 2(00) was amended inserting another exclusion clause (bb) by the Amending Act 49 of 1984, with effect from 18.8.1984, “termination of the service of work- man as a result of the non-renewal of the contract of em- ployment between the employer and the workman concerned on its expiry of such contract being terminated under a stipu- lation in that behalf contained therein.” This is literal interpretation as distinguished from contex- tual interpretation.

“The only rule of construction of Acts of Parliament”, says Tindal, C.J. in Sussex Peerage case, [1844] 11 C1 & Fin 85 (143), “is that they should be construed according to the intent of the Parliament which passed the Act. If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves alone do, in such case, best declare the intention of the lawgiv- er.” In Mutto v. T.K. Nandi, reported in [1978] INSC 243; [1979] 2 SCR 409 (418) it was similarly said: “The Court has to determine the intention as expressed by the words used. If the words of a statute are themselves precise and unambiguous then no more can be necessary then to expound those words in their ordi- nary and natural sense. The words themselves alone do in such a case best declare the intention of the lawgiver.” As was stated in Thompson v. Gould, reported in [1910] A.C. 409 (420) “it is a wrong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do 147 so.” “The cardinal rule of construction of statute is to read statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning.” [Jugalki- shore v. Ram Cotton Co. Ltd.[1955] INSC 13; , [1955] 1 SCR 1369] To interpret an Act of Parliament is to give effect to its intention. Lord Simon in Ealing L.B.C. v. Race Relations Board, [1971] UKHL 3; [1972] AC 342 (360) said:

“The Court sometimes asks itself what the draftsman must have intended. This is reasonable enough: the draftsman knows what is the intention of the legislative initiator (nowadays almost always an organ of the executive); he know what canons of construction the courts will apply; and he will express himself in such a way as accordingly to give effect to the legislative intention. Parliament, of course, in enacting legislation assumes responsibility for the language of the draftsman. But the reality is that only a minority of legislators will attend the debates on the legislation. Failing special interest in the subject-matter of the legislation, what will demand their attention will be something on the face of proposed legislation which alerts them to a questionable matter. Accordingly, such canons of construction as that words in a non-technical statute will primarily be interpreted according to their ordinary meaning ….. ” According to Lord Simon looking into the legislative history or’ the preparatory works may sometimes be useful but may often lead to abuse and waste, as “an individual legislator may indicate his assent on an assumption that the legislation means so-and-so and the courts may have no way of knowing how far his assumption is shared by his col- leagues, even those present.” “In the absence of such mate- rial it is said, the courts have five principal avenues of approach to the ascertainment of the legislative intention:

(1) examination of the social background, as specifically proved if not within common knowledge, in order to identify the social or juristic defect which is likely subject of remedy; (2) a conspectus of the entire relevant body of the law for the same purpose; (3) particular regard to the long title of the statute to be interpreted (and where available, the preamble), in which the general legislative objectives will be stated; (4) scrutiny of the actual words to be interpreted, in the light of the established canons of interpretation; and (5) examination of the other provisions of the statute in question (or of other statutes in pari materia) for the illumination which they 148 throw on the particular words which are the subject of interpretation.

The Heydon’s Rule requires that the court will look at the Act to see what was its purpose and what mischief in the earlier law it was designed to prevent. Four things are to be considered: (i) What was the law before the making of the Act? (ii) What was the mischief and defect for which the earlier law did not provide? (iii) What remedy the Parlia- ment had resolved to cure? (iv) What is the true reason for the remedy? The Court shall make such construction as shall suppress the mischief and advance the remedy.

Where the statute has been passed to remedy a weakness in the law, it is to be interpreted in such a way as well to bring about that remedy.

The literal rules of construction require the wording of the Act to be construed according to its literal and gram- matical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed through- out the Act in the same sense, and in the case of old stat- utes regard must be had to its contemporary meaning if there has been no change with the passage of time. However, the Law Commission 21 of England has struck a note of caution that “to place undue emphasis on the literal meaning of the words of a provision is to assume an unattainable perfection in draftsmanship”. In Whiteley v. Chappelf, [1968-69] 4 L.R.Q.B. Div. 147, a statute concerned with electoral mal- practices made it an offence to personate ‘any person enti- tle to vote’ at an election. The defendant was accused of personating a deceased voter and the court, using the liter- al rule, found that there was no offence as the personation was not of person entitled to vote. A dead person was not entitled to vote. A deceased person did not exist and had no right to vote and as a result the decision arrived at was contrary to the intention of Parliament. As it was pointed out in Prince of Hanover v. Attorney General [1956] Ch. Div.

188, the Golden Rule in the form of modified literal Rule, according to which the words of statute will as far as possible be construed according to their ordinary and plain and natural meaning, unless this leads to an absurd result.

Where the conclusion reached by applying the literal rule is contrary to the intention of Parliament, the Golden rule is helpful. A tested rule is that of Noscitur a sociis. The meaning of a word can be gathered from its context. Under this rule words of doubtful meaning may be better understood from the nature of the words and phrases with which they are associated [Muir v. Keay, [1875] L.R 10 Q.B. 594]. But this will not apply when the word itself has been defined.

149 In the case before us the difficulty was created by defining ‘retrenchment’ to mean something wider than what it naturally and ordinarily meant. While naturally and ordi- narily it meant discharge of surplus labour, the defined meaning was termination of service of a workman for any reason whatsoever except those excluded in the definition itself. Such a definition creates complexity as the drafts- man himself in drafting the other sections using the defined word may slip into the ordinary meaning instead of the defined meaning.

Way back in the Queen v. The Commissioners under the Boiler Explosions Act, 1882, [1891] 1 Q.B. Division 703, a boiler for generating steam was situate above ground at a colliery, and a pipe conducted the steam down the shaft and along the working to a pumping engine in the mine. A valve in this pipe, in the mine and near the pumping engine blew off. The question was whether the pipe in which the explo- sion occurred was a ‘boiler’ within the interpretation clause of the Boiler Explosions Act, 1882. Lord M.R. Esher said; “If the Act had dealt with the explosion of a boiler and in some other’ section with an explosion in pipes or in any other specified thing, the matter would be easy; but the draftsman has gone upon that which to my mind is a dangerous method of drawing Acts of Parliament. He has put in a sec- tion which says that a boiler shall mean something which is in reality not a boiler. This third section of the Act of 1882 that is the Boiler Explosions Act 1882 is a ‘peculiarly bad specimen’ of the method of drafting, which enacts that a word shall mean something which in fact it does not mean.” However, a judge facing such a problem of interpretation can not simply fold his hands and blame the draftsman. Lord Denning in his Discipline of Law says at p. 12:

“Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instru- ment of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsman of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be lettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would cer- 150 tainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parlia- ment, and he must do this not only from the language of the statute, but also from a consideration of the social condi- tions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the writ- ten word so as to give ‘force and life’ to the intention of the legislature.” Analysing the definition of retrenchment in s. 2(00) we find that termination by the employer of the service of a workman would not otherwise have covered the cases excluded in (a) and (b), namely, voluntary retirement and retirement on reaching the stipulated age of retirement. There would be no volitional element of the employer. Their express exclu- sion implies that those would otherwise have been included.

Again if those cases were to be included, termination on abandonment of service, or on efflux of time, and on failure to qualify, although only consequential or resultant, would be included as those have not been excluded. Thus, there appears to be a gap between the first part and the exclusion part. Mr. Venugopal, on this basis, points out that cases of voluntary retirement, superannuation and tenure appointment are not cases of termination ‘by the employer’ and would, therefore, in any event, be outside the scope of the main provisions and are not really provisos.

The definition has used the word ‘means’. When a statute says that a word or phrase shall “mean”–not merely that it shall “include”–certain things or acts, “the definition is a hard-and-fast definition, and no other meaning can be assigned to the expression than is put down in definition” (per Esher, M.R., Gough v. Gough, [1891] 2 QB 665). A defi- nition is an explicit statement of the full connotation of a term.

Mr. Venugopal submits that the definition clause cannot be interpreted in isolation and the scope of the exception to the main provision would also have to be looked into and when so interpreted, it is obvious that a restrictive mean- ing has to be given to s. 2(00).

It is also pointed out that s. 25G deals with the prin- ciple of ‘last come, first go’, a principle which existed prior to the Amendment Act 151 of 1953 only in relation to termination of workmen rendered surplus for any reasons whatsoever and that was followed in Vishwamitra Press, Kanpur v. Workers of Vishwamitra Press, [1952] L.A.C. 20 at p.33/41; Presidency Jute Mills Co. Ltd.

v. Presidency Jute Mills Co.Employees Union, [1952] L.A.C.

62; Iron and Steel Mazdoor Union,Kanpur v. J.K. Iron and Steel Co. Ltd., [1952] L.A.C. 467; Halar Sali and Chemical Works, Jamnagar v. Workmen, [1953] L.A.C. 134;Prakriti Bhushan Gupta v. Chief Mining Engineer Railway Board, [1953] L.A.C. 373; Sudarshan Banerjee v. Mcleod and Co. Ltd., [1953] L.A.C. 702 (7 11). Besides, it is submitted, by its very nature the wide definition of retrenchment would be wholly inapplicable to termination simpliciter. The question of picking out a junior in the same category for being sent out in place of a person whose services are being terminated simpliciter or otherwise on the ground that the management does not want to continue his contract of employment would not arise. Similarly it is pointed out that starting from Sundara Money where termination simpliciter of a workman for not having passed a test, or for not having satisfactorily completed his probation would not attract s. 25G, as the very question of picking out a junior in the same category for being sent out instead of the person who failed to pass a test or failed to satisfactorily complete his probation could never arise. If, however, s. 25G were to be followed in such cases, the section would itself be rendered uncon- stitutional and violative of fundamental rights of the workmen under Articles 14, 19(1)(g) and 21 of the Constitu- tion. It would be no defence to this argument to say that the management could record reasons as to why it is not sending out the juniormost in such cases. Since in no single case of termination simpliciter would s. 25G be applicable and in every such case of termination simpliciter, without exception, reasons would have to be recorded- Similarly, it is submitted, s. 25H which deals with re-employment of re- trenched workmen, can also have no application whatsoever, to a case of termination simipliciter because of the fact that the employee whose services have been terminated, would have been holding a post which ‘eo instanti’ would become vacant as a result of the termination of his services and under s. 25H he would have a right to be reinstated against the very post from which his services have been terminated, rendering the provision itself an absurdity. It is urged that s. 25F is only procedural in character along with ss.

25G and 25H and do not prohibit the substantive right of termination but on the other hand requires that in effecting termination of employment,notice would be given and payment of money would be made and theater procedure under ss. 25G and 25H would follow.

152 Mr. Bobde refutes the above argument saying that ss.

25F, 25G and 25H relate to retrenchment but their contents are different. Whereas S. 25F provides for the conditions precedent for effecting a valid retrenchment, S. 25G only provides the procedure for doing so. Section 25H operates after a valid retrenchment and provides for re-employment in the circumstances stated therein. According to counsel, the argument is misconceived firstly for the reasons that s. 2 itself says that retrenchment will be understood as defined in s. 2(00) unless there is anything repugnant in the sub- ject or context; secondly s. 25F clearly applies to re- trenchment as plainly defined by s. 2(00); thirdly s. 25G does not incorporate in absolute terms–the principle of ‘last come, first go’ and provides that ordinarily last employee is to be retrenched, and fourthly ss. 25H upon its true construction should be held to be applicable when the retrenchment has occurred on the ground of the workman becoming surplus to the establishment and he has been re- trenched under ss. 25F and 25G on the principle ‘last come, first go’. Only then should he be given an opportunity to offer himself for re-employment- In substance it is submit- ted that there is no conflict between the definition of s.

2(00) and the provisions of ss. 25F, 25G and 25H. We find that though there are apparent incongruities in the provi- sions, there is room for harmonious construction in this regard.

For the purpose of harmonious construction, it can be seen that the definitions contained in section 2 are subject to their being anything repugnant in the subject or context.

In view of this, it is clear that the extended meaning given to the term ‘retrenchment’ under clause (00) of section 2 is also subject to the context and the subject matter. Section 25-F prescribed the conditions precedent to a valid re- trenchment of workers as discussed earlier. Very briefly, the conditions prescribed are the giving of one month’s notice indicating the reasons for retrenchment and payment of wages for the period of the notice. Section 25-FF pro- vides for compensation to workmen in case of transfer of undertakings. Very briefly, it provides that every workman who has been in continuous service for not less than one year in an undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F “as if the workman had been retrenched”. (Emphasis supplied). Section 25-FFA pro- vides that sixty days’ notice must be given of intention to close down any undertaking and section 25-FFF provides for compensation to workmen in case of closing down of undertak- ings. Very briefly stated section 25-FFF which has been already discussed lays down that “where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for 153 not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of section 25-F, as if the workman had been retrenched”. (Emphasised supplied). Section 25-H provides for re-employment of retrenched workmen. In brief, it provides that where any workmen are retrenched, and the employer proposes to take toto his employment any person, he shall, give an opportunity to the retrenched workmen to offer themselves for re-employment as provided in the section subject to the conditions as set out in the section. In our view, the principle of harmonious construc- tion implies that in a case where there is a genuine trans- fer of an undertaking or genuine closure of an undertaking as contemplated in the aforesaid sections, it would be inconsistent to read into the provisions a right given to workman “deemed. to be retrenched” a right to claim re- employment as provided in section 25-H. In such cases, as specifically provided in the relevant sections the workmen concerned would only be entitled to notice and compensation in accordance with section 25-F. It is significant that in a case of transfer of an undertaking or closure of an under- taking in accordance with the aforesaid provisions, the benefit specifically given to the workmen is “as if the workmen had been retrenched” and this benefit is restricted to notice and compensation in accordance with the provisions of section 25-F.

The last submission is that if retrenchment is under- stood in its wider sense what would happen to the rights of the employer under the Standing Orders and under the con- tracts of employment in respect of the workmen whose service has been terminated. There may be two answers to this ques- tion. Firstly, those rights may have been affected by intro- duction of ss. 2(00), 25F and the other relevant sections.

Secondly, it may be said, the rights as such are not affect- ed or taken away, but only an additional social obligation has been imposed on the employer so as to give the retrench- ment benefit to the affected workmen, perhaps for immediate tiding over of the financial difficulty. Looked at from this angle, there is implicit a social policy. As the maxim goes–Stat pro ratione voluntas populi; the will of the people stands in place of a reason.

Regarding the seeming gaps in the definition one would aptly remember what Lord Simonds said against the view that the court having discovered the intention of Parliament must proceed to fill in the gaps and what the legislature had not written the court must write.

“It appears to me to be a naked usurpation of the legisla- 154 tive function under the thin disguise of interpretation. And it is the less justifiable when it is guess work with what material the legislature would, if it had discovered the gap, have filled it in. If a gap is disclosed, the remedy lies in an amending Act.” The Court has to interpret a statute and apply it to the facts. Hans Kelsen in his Pure Theory of Law (P. 355) makes a distinction between interpretation by the science of law or jurisprudence on the one hand and interpretation by a law-applying organ (especially the court) on the other.

According to him “jurisprudential interpretation i., purely cognitive ascertainment of the meaning of legal norms. In contradistinction to the interpretation by legal organs, jurisprudential interpretation does not create law”. “The purely cognitive interpretation by jurisprudence is there- fore unable to fill alleged gaps in the law. The filling of a so-called gap in the law is a law-creating function that can only be performed by a law-applying organ; and the function of creating law is not performed by jurisprudence interpreting law. Jurisprudential interpretation can do no more than exhibit all possible meanings of a legal norm.

Jurisprudence as cognition of law cannot decide between the possibilities exhibited by it, but must leave the decision to the legal organ who, according to the legal order, is authorised to apply the law.” According to the author if law is to be applied by a legal organ, he must determine the meaning of the norms to be applied; he must ‘interpret’ those norms (P. 348). Interpretation therefore is an intel- lectual activity which accompanies the process of law appli- cation in its advance from a higher level to a lower level.

According to him, the law to be applied is a frame. “There are cases of intended or unintended indefiniteness at the lower level and several possibilities are open to the appli- cation of law.” The traditional theory believes that the statute, applied to a concrete case, can always supply only one correct decision and that the positive–legal ‘correct- ness’ of this decision is based on the statute itself. This theory describes the interpretive procedure as if it con- sisted merely in an intellectual act of clarifying or under- standing; as if the law-applying organ had to use only his reason but not his will, and as if by a purely intellectual activity, among the various existing possibilities only one correct choice could be made in accordance with positive law. According to the author: “The legal act applying a legal norm may be performed in such a way that it conforms (a) with the one or the other of the different meanings of the legal norm, (b) with the will of the norm creating authority that is to be determined somehow’, (c) with the expression which the norm-creating authority has chosen, (d) with the one or the other of the contradictory norms; or (e) the concrete case to 155 which the two contradictory norms refer may be decided under the assumption that the two contradictory norms annul each other. In all these cases, the law to be applied constitutes only a frame within which several applications are possible, whereby every act is legal that stays within the frame.” The definitions is s. 2 of the Act are to be taken ‘unless there is anything repugnant in the subject or con- text’. The contextual interpretation has not been ruled out.

In R.B.I. v. Peerless General Finance, reported in [1987] INSC 21; [1987] 2 SCR 1, O. Chinnappa Reddy, J. said:

“Interpretation must depend on the text and the context.

They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour.

Neither can be ignored. Both are important. That interpreta- tion is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statutemaker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court con- strued the expression ‘Prize Chit’ in Srinivasa and we find no reason to depart from the Court’s construction.” As we have mentioned, industrial and labour legislation involves social and labour policy. Often they are passed in conformity with the resolutions of the International Labour Organisation. In Duport Steels v. Sirs, [1980] 1 W.L.R. 142.

the House of Lords observed that there was a difference between applying the law and making it, and that judges ought to avoid becoming involved in controversial social issues, since this might affect their reputation in imparti- ality. Lord Diplock said:

156 “A statute passed to remedy what is perceived by Parliament to be a defect in the existing law may in actual operation turn out t0 have injurious consequences that Parliament did not anticipate at the time the statute was passed; if it had, it would have made some provision in the Act in order to prevent them ….. But if this be the case it is for Parliament. not for the judiciary, to decide whether any changes should be made to the law as stated in the Acts Applying the above reasonings; principles and prece- dents, t0 the definition in s. 2(00) of the Act, we hold that “retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever except those expressly excluded in the section.

The result is that C.A. Nos. 3241-48 of 1981, 686(NL) of 1982, 18 17 of 1982, 1898 of 1982, 3261 of 1982, 1866 of 1982, 1868 of 1982, 8456 of 1983, 10828 of 1983 and the appeal arising out of S.L.P. (C) No. 3149 of 1983 are dis- missed with costs quantified at Rs.3,000 in each appeal. It is stated that in C.A. No. 686 of 1982 the respondent has already been reinstated pursuant to the order dated 24.10.1983 passed by this Court, having regard to the fact that he has served since 1983, he shall be considered for confirmation with effect from his due date according to Rules, if he is not already confirmed by the Corporation.

In view of the facts and circumstances of the case, we dispose of C.A. No. 885 of 1980 with the direction that the two workmen involved in this appeal be paid compensation of Rs. 1,25,000 (Rupees one lakh twenty five thousand) each in full and final settlement of all claims including that of reinstatement. The payment shall be spread over a period from 11.11.1972 till date for the purpose of Income-tax.

C.A. No. 4116 (NL) of 1984 was on the board, but the paper book is not available. Hence it is delinked from the series.

C.A. Nos. 512-513 of 1984 and C.A No. 783 of 1984 were wrongly placed on the board. Their subject matters are different and hence are delinked from this cluster to be heard separately by an appropriate bench.

R.N.J. Appeals disposed of.

The post Punjab Land Development and Reclamation Corporation Ltd., Cha Vs. Presiding Officer, Labour Court, Chandigarh appeared first on B&B Associates LLP.