DATE: 07 January 2003

Taparia Overseas (P) Ltd. & Another
vs
Union of India & Others

By, THE HONOURABLE MR. JUSTICE V.C. DAGA & THE HONOURABLE MR. JUSTICE J.P. DEVADHAR

Shri M. Jaykar with S.R. Garud i/b Gagrat & Co. for the petitioners in W.P. Nos. 3343/87, 3501/87 and 3603/87. Shri Shiraj Rustomji with T.N. Tripathi for the petitioners in W.P. N. 3695/87. Shri M.I. Sethna, Senior Counsel with Shri R. Asokan and K.R. Chaudhari i/b T.C. Kaushik for the respondents in all matters.

Judgment

V.C. DAGA, J.

The legal debate raised in these conjoint petitions centers around common saying from law books, that fraud vitiates everything. This debate is raised in the petitions filed under Article 226 of the Constitution of India, challenging the action of the Revenue, the Custom Authorities in withholding the clearance of the goods described as “Polyester Filament Yarn” imported by the petitioners under the licences acquired and held by them as transferees for value without notice of the alleged fraud.

2.The petitioners are different but the issues involved are identical so a single judgment will dispose of all these writ petitions. We propose to discuss the facts drawn from Writ Petition No. 3343 of 1987 (M/s Taparia Overseas (P). Ltd. Vs. Union of India) as the facts involved in all other petitions are more or less similar except with some minor variations which have no bearing on ultimate decision of these petitions.

3.Brief background facts sketched from the above petition are as under:

BACKGROUND FACTS:

The petitioners had acquired 2 licences both dated 2nd March 1987 issued under the provisions of Import (Control) Order, 1955 (the ‘order’ for short) in favour of one M/s Suraj Textiles Traders, New Delhi, in terms of Appendix 21 of Import/Export Policy, Vo.I, 1985-88 by the Deputy Chief Controller of Import/Export, New Delhi, for import of ‘Polyster Filament Yarn’ . It had been acquired by the petitioners in terms of paras 225 and 226 of the Import Export Policy 1985-88 (‘the import export police’ for short).

4.The petitioners before acquiring these two licences had written a letter dated 9th April 1987 furnishing full particulars to the Joint Chief Controller of Import and Export, Delhi and informing him that they have negotiated for the purchase of the same and sought confirmation as to whether the licences were issued as per ITC regulations. It was also made clear that in the event of no reply within 7 days they would finalise transactions and proceed to open letter of credit. The correspondence made in this behalf is not in dispute.

5.The petitioners did not hear anything contrary from the Joint Controller of I. & E., New Delhi, for quite a long time. Consequently, the petitioners went ahead and purchased the said licences from M/s Suraj Textile Traders, New Delhi, and got the same transferred in their name.

6.The office of the Jt. Chief Controller of Imports and Exports, New Delhi vide its letter dated 31 July 1987 confirmed the issuance of the licences as per Appendix 21 of the Import Export Policy 1985-88. By other letters dated 29th June 1987 and 10th August 1987 the office of the Joint Chief Controller & E., New Delhi, expressly confirmed that two licences were issued to M/s. Suraj Textile Traders, New Delhi, for import of Polyster Forament Yarn. These letters and contents thereof are not in dispute.

7.The petitioners had placed orders with foreign suppliers and opened letter of credit in their favour through their bankers Central Bank of India. The said suppliers caused 3 consignments of 8000 Kgs., 2400 Kgs. and 445 Kgs. of Polyster Fimalemt Yarn and shipped the same on the board of two vessels under the different Bills of Leading issued by the Shipping Companies. The said vessels arrived at Bombay some time in the month of July 1987. The petitioners filed prior IAM along with three prior bills of entry dated 12th and 13th July, 1987 in respect of the three consignments.

8.The goods remained to be unloaded for some time but ultimately goods were unloaded somewhere in the month of August 1987. The Customs Authorities inspected these goods on 26th August 1987 and 7th September 1987, but did not clear the same, though they found that the goods imported were as per specification.

9.On 18th September 1987 the petitioners came to be served with the copy of the order dated 11th September 1987 addressed to the original licence holders; whereby the Deputy Chief Controller of I. & E., New Delhi had informed suspension of the operation of the Licences issued to the original licence holder in exercise of powers conferred under clause 9(3) of the Order (as amended).

10.In view of the aforesaid development, the Customs Authorities did not process the Bill of Entry for home consumption. They did not pass any order under section 47 of the Customs Act. In other words, the Customs Authorities had decided to withhold the clearance of the said ‘Polyester Filament Yarn’ imported by the petitioners holding a view that the import was without valid licence. The aforesaid action on the part of the Custom Authorities withholding clearance of goods imported by the petitioners resulted in invoking writ jurisdiction of this Court under Article 226 of the Constitution of India, contending that the goods having been validity imported under validity issued licences could not affect the imports made by them much before the suspension of the licences in question; since suspension would only operate prospectively.

11.This Court whilst granting rule, relying upon para (35) of the judgment of the Apex Court in the case East India Commercial Co. Vs. Collector of Customs, AIR 1962 SC 1893 and Chemicolour Agency Vs. Chief Controller of I.E. 1986 (6) ECR 495 (Calcutta), prima facie, finding that the licences were good till the date of suspension and imports being prior to the date of suspension permitted by interim order dated 29.10.1987 clearance of the goods imported by the petitioners subject to petitioners furnishing bank guarantee for CIF value of the goods. The goods were accordingly allowed to be cleared on the petitioners furnishing bank guarantee.

12.On being noticed, though respondent had promptly appeared but filed their affidavit-in-reply on 13th February 2002 i.e. after about 15 years. The main thrust of the contention raised on behalf of the Revenue is that the licences having been obtained by making misrepresentation and misleading statements by original licence holder which led to the suspension there by order communicated vide letter dated 11.9.1987, passed by the Joint Chief Controller of I. & E., New Delhi. It, ultimately, resulted in issu of show cause notice dated 11.9.1987 and cancellation of licences obtained by M/s Suraj Textile Traders, New Delhi, vide order dated 30.11.1987.

13.The Revenue in support of their action relied upon judgment of the Apex Court in the case of M/s. Fedco (P) Ltd. Vs. S. N. Biligrami, AIR 1960 SC 415. In defence it was pleaded that the entire scheme of control and regulation of imports by licences is on the basis that the licences were granted on the correct statement of the relevant facts. That basis disappears, if the grant of licence is found to be induced by fraud or misrepresentation, whether by the licensee himself or some other party, in such a case, the basis of grant of licence disappears. Consequently, such licence cannot be allowed to continue. That the licence obtained by fraud cannot create any legal right in favour of anybody much less in favour of the transferees for value without notice. That the petitioners cannot be allowed to take advantage of the tainted import licences purchased by them. That they could not get better title or right than what the original licence holder had. Consequently, it was prayed that all the petitioners be directed to pay full import duty at the rate prevailing at the time of import.

SUBMISSIONS:

14.Mr. M. Jayakar learned Counsel opened arguments on behalf of the Petitioners and submitted that the petitioners had acquired licences in question for valuable consideration by paying heavy premium without notice of any fraud alleged to have been played by original licence holder. The Revenue is not disputing that the Petitioners, were the bonafide transferees for value. The licences, though were suspended on 11.9.1987, but prior to that petitioners had filed Bill of Entry for home consumption on 12th and 13th July 1987 as such their imports cannot be said to be without licence. In his submission, suspension cannot be retroactive. Reliance was placed on Clauses (9) and (10) of the Order in support of his contention.

15.Clause (9) thereof provides that the Central Government and Chief Controller of I & E may cancel licence if the same is found to have been obtained by fraud or misrepresentation. Clause 10 of the said Order provides that no such action of cancellation can be taken against importer or any other person unless he has been given a reasonable opportunity of being heard. In his submission, the Joint Chief Controller ought to have given an opportunity of being heard since he was well aware that the Petitioners were transferees of the licences, in view of the two letters addressed by the Petitioner to the office of the Joint Chief Controller on 9th July 1987 and their reply vide their letters dated 29th June, 1987 and 31st July 1987 confirming the genuineness of the licences in question. The copy of the order of suspension issued by the Deputy Chief Controller of I & E, New Delhi was marked to the petitioners who were transferees. In the wake of these facts, learned Counsel for the petitioners emphasised that the authorities passing the suspension order was well aware of the licences of the fact that the petitioners were transferees of the licences. In spite of this, no notice was given to the petitioners, so as to comply with the provision of Clause (10) of the order.

16.For the Petitioners, it was contended that the Bill of Entry for home consumption was filed with the Customs Authorities much before the suspension order was served on them. That, as a matter of fact, the order dated 30th November 1987 purported to be under clause (9) cancelling the licences was never served on the petitioners. According to them, it was made known to them for the first time through their counter affidavit filed on 13.2.2002. Thus, the Respondent cannot be allowed to rely upon the order of cancellation which is clearly in breach of principles of natural justice as such ab initio void. It has got to be ignored for all purposes.

17.Per contra the learned Counsel appearing for the Revenue relied upon judgment of the Apex Court in the case of Fedco (P) Ltd. urged that ‘if grant is induced by fraud or misrepresentation’, whether by licence holder himself or some other party, then the fact remains that in such a case very basis of grant disappears and consequently, the licence cannot be allowed to continue. In other words, his submission is that once licence is held to be obtained by licence holder by fraud, such licence will have to be treated non-est right from the date of its grant. It would be ab initio void. Such licence obtained by fraud cannot create any legal right in favour of anybody much less in favour of the transferees, may have the same for value without notice of fraud. For the Revenue, it was contended that the petitioners cannot be allowed to claim protection or any right if the licences have been obtained by fraud or misrepresentation. He relied upon common saying that the fraud vitiates everything. He, thus prayed for dismissal of the petition with costs.

18.In rejoinder, the learned Counsel for the petitioners contends that the judgment in case of Fedco (P) Ltd. (supra), is not applicable to the facts of the present case. In his submission in that case, petitioners M/s Fedco (P) Ltd. (supra) itself was involved in practising fraud on the concerned authorities while obtaining licences. In that view of the matter, the Apex Court observed that whether licencee himself or some other party is responsible for fraud or misrepresentation, the fact remains that basis of grant of licence disappears. In that light the observations was made that it would be unreasonable to allow such licences to continue. In other words, continuation thereof was snapped by the Supreme Court but till the date, it was snapped, it was allowed to operate. The submission is that the judgment of Fedco (P) Ltd. cannot be read out of context.

19.On behalf of the Petitioners, it was pointed out that in judgment of Fedco (P) Ltd. (supra), the Apex Court has categorically ruled that if reasonable opportunity against proposed cancellation of licence has not been given, the order would be an unjustified interference with the petitioner’s right. He further pointed out that Fedco’ s judgment (para 9) specifies how an action has to be reasonable and how the fair chance is to be given to the concerned affected party. In the instant case, none of these principles were followed. Admittedly, no notice was given to the petitioners despite knowledge of the respondents that petitioners were the transferees of the licences in question. In his submission, Clause (9) does not deal with rendering of any licence void ab-initio but merely permits the licence to be cancelled or rendered ineffective. It has no retroactive operation. Both the cancellation of licence and/or rendering it ineffective can only operate prospectively. It cannot operate retrospectively.

20.The learned Counsel for the petitioners fairly submitted that the petitioners are not really concerned with cancellation of licence as their imports have been completed much prior to the suspension of the licences or for that matter cancellation thereof. The learned Counsel for the petitioners submitted that no doubt Clause (9) of the Order, empowers the Joint Controller of Imports and Export to cancel any licence or to render the same ineffective; if the same was found to be obtained by fraud or misrepresentation but until passing of such order of cancellation or rendering it ineffective, the licences have to be treated as good and any bonafide action done prior to the order of suspension or cancellation could not be held to be bad and illegal. A licence was good till it was avoided. The petitioners while relying upon judgment of the Apex Court in the case of East India Commercial Co. Vs. the Union of India (supra) in support of their proposition pointed out that this judgment has been consistently followed by the Apex Court in all subsequent judgments including that of Union of India Vs. Sampat Raj Durgar JT 1992 (1) SC 554 and the Collector of Customs vs. Sneh Sales Corporation (2000) 121 ELT 577. The Apex Court in all the cases have categorically ruled that even a licence obtained by fraud is at the best voidable and is good until avoided. The contention, therefore, canvassed is that the order in question dated 30th November 1987, purports to cancel licence ab initio is not permissible under clause 9(1)(a) of the Order. In the submission of the Petitioners, the contention canvassed by the respondents, that since the licences were held to be avoid ab initio, there was no necessity of giving a show cause notice, is contrary to the principles of natural justice as there is no such concept of any licence being declared void ab initio under the scheme of the order in general or under clause (9) thereof in particular.

21.The learned Counsel for the petitioners further brought to our notice that Paragraph 225 of the Handbook of Import & Export Procedure which provides that a transfer of a licence does not require any endorsement or permission from the licensing authority i.e. such transfer is to govern by the ordinary law. He further pointed out that imports against replenishment were governed by Handbook on Import Export Procedure 1985-88, which were in the nature of administrative instructions issued by the Central Government. As such transfer of the licence was not to be governed by any statutory provisions but, it was to be governed by Common Law. It was thus pointed out that as a fact the principles of Law of Contract were applied by the Apex Court in the case of East India Commercial Co. (supra). In that view of the matter, the submission is that the licences were good till they were avoided. He, therefore, submitted that a contract or other transaction induced or tainted by fraud is ipso facto not void, but only voidable at the election of the party defrauded. Until it is avoided, the transaction is valid, so that third party without notice of the fraud may in the meantime acquire rights and interest in the matter which would be enforceable in accordance with law.

22.The learned Counsel for the petitioners further submitted that imports against replenishment licences were permitted duty free if the importers produced an Import Replenishment licence when the goods or the materials were imported into India. In the instant case, when the goods were imported into India, and/or even when the Bills of Entry was filed, neither the licence was suspended nor was the same cancelled.

23.The Petitioners further urged that section 46 of the Customs Act enjoins upon an importer a duty to file a bill of entry for home consumption upon the import of goods. The importer is required to produce all documents along with the entry made for home consumption. Section 47 of the Customs Act, the Custom Authorities are required to ascertain that the goods in question are not prohibited and then to make the order for clearance of the goods. On 12th and 13th July 1987 the petitioners had filed the Bill of Entry and furnished all the documents relating to the imports in question including the 2 licences. Right up to 11th September 1987, there was neither a whisper nor any allegation that the licences were in any way tainted. In fact, after filing of the Bill of Entry the Joint Chief Controller of Imports & Exports on 31st July 1987 had informed the Customs Authorities about the genuineness of the issuance of the 2 licences issued to M/s. Suraj Textile Trader. It was further pointed out that on 29th June 1987 and 10th August 1987 the Joint Chief Controller of Imports & Exports Office had also confirmed to the Petitioners about the issuance of such licences. As such under section 47 the proper officer after being satisfied that the goods entered for home consumption were not prohibited goods (were covered by a licence) and had paid the required duty. ought to have made an order directing clearance of goods.

24.The learned Counsel for the petitioners further submitted that satisfaction of the proper under section 47 is in fact administrative in nature and that the officer has only to see that the goods in question are not prohibited and that duty is paid thereon. Such an order permitting the goods to go out of the customs charge does not in any way render the Customs Authorities helpless, if any action is to be taken in future. In his submission not only the provisions of section 28 is available for demanding duty but a notice under section 124 could be issued not only for confiscating goods but also for levying penalty under section 112. He therefore, submitted that although there is no time limit stipulated, but, it is expected that order is to be passed within a reasonable time. In this case, since at the time when the goods were imported and the import was complete, that too of the goods of which the import was not of prohibited, as such a subsequent cancellation of the licence could not make the import bad.

25.The learned Counsel for the petitioners at the cost of repetition submitted that for want of show cause notice or an opportunity of hearing to the transferees the petitioners, order cancelling licence will have to be treated as ab initio void being in breach of principles of natural justice. Though, he fairly conceded that said issue could be of no relevance in the present case as the order of cancellation was made much after the import, but in his submission, at any rate, order ab initio cancelling of licences which is clearly in breach of principles of natural justice cannot be allowed to be put in defence. He placed reliance on the judgment of the Apex Court in Sinha Govindji vs. Deputy Collector of Imports and Exports 1962 (1) SCR 540 and S.L. Kapoor vs. Jagmohan and ors. AIR 1981 SC 136, in support of his contention.

26.Shri Rustomji, learned Counsel appearing for the petitioners in Writ Petition No. 3695 of 1987 adopted all the contentions advanced Shri Jayakar, and further submitted that the petitioners in his case are also purchasers of import licences for valuable consideration without notice of the alleged fraud. He submits that import made by the petitioners in all these petitions have got to be held as legal and valid for the reasons put forth by Mr. Jayakar, as such all the petitions are liable to be allowed declaring and holding that the action of the Customs Authorities withholding clearance of the goods was bad and illegal.

CONSIDERATION

27.Having heard the parties at length and having examined the facts involved in these petitions, it is not in dispute that all the petitioners are transferees for value without notice of the alleged fraud. The main issue which requires consideration is: to what extent the fraud committed by the original licence holders have affected the validity of the licences which were in the hands of the transferees for consideration, without notice. At the relevant time, licences were issued under the provisions of the Order, however, transfers thereof were to be governed by the terms of Import Export Policy of 1985-88, which had no statutory force. Thus, though the grant of licence was to be governed by Statute, but transfer thereof was to be governed by ordinary law. At the relevant time, under Import Export Policy of 1985-88, the transfers of all the licences were subject to the compliance of clauses 225 and 226 thereof, the contents of which are reproduced hereinbelow:

“Utilisation of REP licences.

225. The REP licence will be issued in the name of the Registered Exporter only and will not be subject to ‘Actual User’ conditions, Except for cases covered by para 195(2), 204, 263(2) and 265(1), a licence holder may transfer the licence in full or part in favour of any other person. The licence holder or such transferee may import the goods permitted therein but the facility of paragraph 195(2), 196 and 202 shall not be available to any transferee, unless the transferee is himself a registered exporter and can satisfy the customs authorities at the time of clearance of the goods, of his bona fides.

226. The transfer of the licence will not require any endorsement or permission from the licensing authority i.e., it will be governed by the ordinary law. Accordingly, clearance of the goods covered by a REP licence issued under this policy, will be allowed by the customs authorities on production by the transferee of only the document of transfer of the licence concerned in his name. Whenever an REP licence is transferred, the transferor should give a formal letter to the transferee, giving full particulars regarding number, date and value of the licence transferred and the name and address of the transferee, and complete description of the import items for which the licence is transferred. A copy of the transfer letter should be endorsed to the licensing authority who issued the REP licence, for record. This procedure will also apply to subsequent transfers of the same licence.”

The bare conjoint reading of the above clauses makes it clear that the licences were allowed to be transferred freely without any endorsement or permission from the licensing authority. Such transfers were to be governed by common law subject to the compliance of the conditions laid down under clause 226 referred to above.

28.It is not in dispute that the above procedure was followed by all the petitioners while getting the licences transferred in their respective names. It is, therefore, clear that transfer of licence was to be governed by ordinary law. The Apex Court, had an occasion to deal with one of such similar issues sought to be raised in these petitions. In the leading case of East India Co. (supra), the Apex Court inter alia, observed as follows:

“Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable: it is good till avoided in the manner prescribed by law.” (emphasis supplied)

The aforesaid observations of the Apex Court would show that while dealing with the cancellation of licence principles of law of contract were invoked.

29.In the seventh edition of “Keer on Law of Fraud and Mistake” in Chapter – I dealing with contract induced by fraud said that such contract is voidable but not void and observed as under:

“It further goes on to say that when the subject matter of transaction is to be governed by the contract, no man is bound by a bargain into which has been induced by fraud to enter, because assent is necessary to a valid contract, and there is no real assent when fraud and deception have been used as instruments to control the will and influence the assent. But a contract or other transaction induced or tainted by fraud is not valid, but only voidable at the election of the party defrauded. Until it is avoided, the transaction is valid, so that third parties without notice of the fraud may in the meantime acquire rights and interests in the matters which they may enforce against the party defrauded.

The fact that the contract has been induced by fraud does not make the contract void, or prevent the property passing, but merely gives the party defrauded the right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that “the party defrauded” has at any time after knowledge of the fraud either by express words or by unequivocal acts affirmed the contract, “his election is determined for ever. The party defrauded may keep the question open so long as he does nothing to affirm the contract.” The question always is, has the person on whom the fraud has been practised, having notice of the fraud, elected not to avoid the contract? or, has he elected to avoid it? or, has he made no election? As long as he has made no election he retains the right to determine it either way, subject to this that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrongdoer is affected, he will lose his right to rescind.”

30. The aforesaid well settled principle of law of Contract was applied to the licence obtained by fraud or misrepresentation by the Apex Court in the case of East India commercial case (supra) in the following words:

“A licence obtained by misrepresentation does not make the licence non-est. with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under S.3 of the Act so as to bring the case within cl.(8) of S. 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable: it is good till avoided in the manner prescribed by law.” (emphasis supplied)

The decision in East India Co. (supra) has been followed in several cases by this Court and also by other High Courts readily available cases are Chemi Colour Agency vs. C.C.I.E., 1987 (30) ELT 175, Bansilal Jesasingh vs. U.C.I., 1988 (36) ELT 52, K. Uttamlal (Exports) vs. U.O.I., 1990 (46) ELT 527.

31. The view taken in the East India Commercial case has also been followed by the Apex Court in the case of Union of India Vs. Sampat Raj Durgar JT 1992 (1) SC 554. In that case, the import licence under which goods had been imported was cancelled before the clearance of the goods and the goods were sought to be confiscated, inter alia on the basis that there was no valid licence for clearance of the same. The Apex Court rejected this contention inter alia observing as follows:

“The next question is whether the import of the said goods was contrary to law in any manner and whether the said goods is liable to be confiscated under the Customs Act. The only provisions relied upon by the Appellants are clauses (d) and (o) in Section 111 of the Customs Act. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. (East India Commercial Co. Vs. Collector of Customs 1963 (3) SCR 338 at 372).”

The ratio in the East India Commercial (Supra) case was also followed by the Supreme Court in the another recent case of Collector of Customs vs. Sneha Sales Corporation 2000 (121) ELT 577 (SC), the facts of which are similar to the facts involved in the present petition. It also involved import of Polyester Filament Yarn by the transferee of an REP licence. The contention that the cancellation of the licence by the Controller of Imports and Exports rendered it ab initio void was categorically rejected by the Apex Court in the following words:

“Shri Aroop Choudhary, the learned Senior Counsel appearing in support of the appeal, has urged that the Tribunal was in error in interfering with the order passed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under section 111(d) of the Act the submission of the learned Counsel is that since the licences have been cancelled by Deputy Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read with Imports and Exports (Control) Act, 1947. We are unable to accept this contention of the learned Counsel in view of the law laid down by this Court in East India Commercial Company Ltd. Vs. Collector of Customs, Calcutta (supra).”

On the above canvas of settled law; recognised by the Apex Court and catena of decisions of the various High Courts including of this Court, it is clear that a licence obtained by fraud is not void ab initio and is merely voidable. It is good till avoided in the manner prescribed by law.

32. With the aforesaid backdrop, let us now turn to another judgment of the Apex Court in Fedco (P) Ltd. Vs. S.N. Bilgrami (supra) upon which heavy reliance was placed by Mr. M.I. Sethna learned Senior counsel for the Revenue. In that case, one of the questions involved was with respect to the cancellation of licence on the ground that it was obtained by fraud. Before any of the goods could be cleared by the company, the licence holder, there were served with a notice stating that whereas there was a reason to believe that five licences had been obtained fraudulently, as such the Government proposed to cancel said licences unless sufficient cause was furnished within stipulated period. In that case, the petitioner company itself was a licence holder. The petitioner company, the licence holder itself was proved to be a party to the fraud. It was proved that the licences were obtained fraudulently. Thus, the licences in question were cancelled after giving reasonable opportunity of hearing to the licensee. In that context the Apex Court as under:

“The entire scheme of control and regulation of imports by licences is on the basis that the licence is granted on a correct statement of relevant facts. That basis disappears if grant of the licence is induced by fraud or misrepresentation. Whether the licensee himself or some other party is responsible for the fraud or misrepresentation, the fact remains that in such cases the basis of the grant of licence has disappeared. It will be absolutely unreasonable that such a licence should be allowed to continue.”

The comparative dissection of two cases of the Apex Court i.e. East India Commercial and Fedco (P) Ltd. (cited supra) would reveal that in the East India Commercial the Court was dealing with the rights of the transferee, who had obtained licence from transferor for value without notice and was not a party to the fraud or misrepresentation, whereas in Fedco (P) Ltd. the Apex Court was dealing with the rights of the licence holder, who was a party to the fraud proved against it. The Court ruled that the person who himself is guilty of fraud shall never be permitted to avail himself any benefit of it. The same is a principle of law of contract. If the contract founded in fraud be questioned between the parties to the contract, in that event, as against a person who has committed fraud and who endeavors to avail himself any benefit of it, the contract is to be considered as null and void but it does not lay down that fraud intended by one man shall overturn a fair and bona fide contract or transaction with others. As a matter of fact, this question did not gerame in the case of Fedco (P) Ltd. (supra). That was a case between the Licensing Authority and the licence holder and the grant of licence was governed by the provisions of the statute. No transfer of licence in favour of third person who involved. The person holding the licence itself had fraudulently obtained licences. In other words the person holding licence itself was a party to the fraud and such person could not have been allowed to rely upon principles of Law of Contract, because no contract was involved. The grant was to be governed by Statute since the fraud practised was a legal fraud, consequently, the Apex Court rightly held that once the fraud is established, whether the licensee himself or some other party is responsible for the fraud or misrepresentation is immaterial but the fact remains that in such cases the basis of grant of licence disappears.

33. The question involved in the present petitions did not arise for consideration in Fedco’s case. The issue whether or not the licence was ab initio void or was voidable was neither raised nor considered by the Apex Court. It is well settled law that a judgment cannot be read as laying down a proposition which was never raised before it or considered in rendering its decision.

34. Having regard to the facts of the Fedco’s case, we are of the opinion that the decision cited by the learned Counsel for the Revenue has no application in the instant cases.

“A decision, as is well-known, is an authority for which it is decided and not what can logically be deduced therefrom. It is also well-settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision (See Smt. Ram Rakhi vs. Union of India & Ors. (AIR 2002 Delhi 458), Delhi Administration (NCT of Delhi) vs. Manoharlal (AIR 2002 SC 3088). Haryana Financial Corporation and Anr. Vs. M/s. Jagdamba Oil Mills & Anr. (JT 2002 (1) SC 482) and Dr.Nalini Mahajan etc. Vs. Director of Income Tax (Investigation) & Ors. ((2002) 257 ITR 123).”

35. For the aforesaid reasons, the reliance sought to be placed by the Revenue on the Fedco’s case is misplaced, considering the facts involved in the cases at hand. In our opinion, Fedco’s case will not be relevant for decision of these petitions.

36. It is true that legal fraud vitiates everything even judgments and orders of the Court, but the question is: as to what extent this concept can be imported in commercial transactions, where question of transfer of properties is life and soul of trade. In a mercantile transaction, as well as in those connected with real properties, the general rule undoubtedly is, that a person cannot transfer to another a right which he does not himself possesses. The rule of cavet emptor spells out two exceptions to the rule, one in cases for encouragement of commerce such as sales in market overt, and other to the transfer of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the Bill of Lading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub buyer, then the sub buyer, provided he has taken the document in good faith, as well as for valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt.

Without attempting to enumerate the various rights which are assignable, either by the express act of the parties, or by the operation of law, we may observe, generally, the maxim assignatus utitur jure auctoris, i.e. an assignee is clothed with the rights of his assignor is subject to many restrictions, shortly enumerated hereinbelow. (See Broom’s Legal Maxims, tenth Edition p. 302)

Assignatus utitur jure auctoris (Hal. Max., p. 14) – An Assignee is clothed with the rights of his assignor.

“This maxim applies generally to all property, real and personal, and refers to assigns by act of parties, as where the assignment is by deed; and to assigns by operation of law, as in the case of an executor. All rights of the assignor in the thing assigned must pass from him to the assignee by virtue of the assignment, for duo non possunt in solid unam rem possidere. It should be observed, also that the thing assigned takes with it all the liabilities attached to it in the hands of the assignor at the time of the assignment, except in cases for the encouragement of commerce, such as sales in market overt, negotiation of promissory notes, bills of exchange, etc., and, in the case of equities, where the assignee is a bona fide purchaser for value without notice.” (Emphasis supplied)

It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transaction, governed by common law and not by provisions of any statute.

In this behalf, we are reminded of the observation of Kings Bench in the case of Master vs. Miller, 4 T.R. 320. (See English Report Vol. 100 pq. 1042) made by Justice Buller, J. while dealing with the case arising out of contract

“I hold that in this case there is no fraud either express or implied: and that, as the plaintiffs have proved that they gave a valuable consideration for the bill, and that it was endorsed to them by those through whose hands it passed, their case is open to no objection whatever.

But I will suppose for a moment, though the case does not warrant it, that Wilkinson and Cooke did mean a fraud; still I am of the opinion that would not effect the case between the plaintiffs and the defendants.

It is a common saying in our law books, that fraud vitiates everything. I do not quarrel with the phrase, or mean in the smallest degree to impeach the various cases which have been founded on the proof of fraud. But still we must recollect that the principle which I have mentioned is always applied ad hominem.

He who is guilty of fraud shall never be permitted to avail himself of it; and if a contract founded in fraud be questioned between the parties to that contract. I agree that, as against the person who has committed the fraud, and who endeavors to avail himself of it, the contract shall be considered as null and void. But there is no case in which a fraud intended by one man shall overturn a fair and bonafide contract between two others. Even as between the parties themselves we must not forget figurative language of Lord Chief Justice Wilmot, who said that “that statute law is like a tyrant; where he comes he makes all void; but a common law is like a nursing father, and makes void only that part where the fault is, and preserves the rest.”

On the above canvas, having examined the well settled established and well recognised concept of law that the effect of fraud is not to render the transaction void ab initio but renders it voidable at the instance of the party defrauded and transaction continues valid until the party defrauded has decided to avoid it.

37. Alternatively, let us consider it from another angle assuming that licence comes to an end upon its suspension and/or cancellation, in catena of cases, it is laid down that the date of import of goods would be the date on which the Bill of Entry was presented under section 46. This legal position is clear from the decision of the Apex Court as laid down in Union of India vs. Apar Ltd. 1999 (112) ELT 3 (SC) and Garden Silk Mills vs. Union of India 1999 (113) ELT 358 (SC). The same is the view taken by of the Apex Court in Sampat Raj Dayar’s case (cited supra). Imports against replenishment Licences were permitted duty free if the importers produced an import Replenishment Licence the goods of the materials were imported into India. In the instant cases when the goods were imported into India, and even when the Bills of Entry were filed, neither were the licences suspended nor the same cancelled. In all these cases, Bills or Entry were filed by the petitioners well before the suspension and/or cancellation of the licences in question, thus the imports were made under valid licences, the goods could not be subjected to levy of customs duty in the peculiar facts and circumstances of the cases in hand.

In the circumstances, we hold that in all cases at hand, the goods were imported, under valid licences. The goods imported were neither prohibited nor restricted by or under the Customs Act, as such, it was not open for the Customs Authorities to withhold clearance thereof.

38. Before closing we may briefly notice few more contentions raised by the petitioners. It is canvassed that principles of natural justice and reasonable opportunity of being heard within the meaning of Clause (10) of the Order have not been extended to the petitioners while suspending the operation of the licences or rendering them ineffective, especially when the same were held by them as transferees in good faith for value without notice as such the impugned action of suspension and/or cancellation of licences is not only bad, illegal but ab initio void. We do not think on the canvas of the view taken by us, this issue canvassed by rival parties needs any consideration in the facts and circumstances of the cases in hand. We do not propose to dwell on this issue, but we need not be understood to have rejected the contention of the petitioners in this behalf. In our opinion, it is not necessary to consider this issue as the imports in all these cases are much prior to making the licences ineffective. We, therefore, do not express any opinion on this question canvassed before us.

So far as the exercise of powers under section 47 are concerned, we only express that the same required to be exercised in a reasonable period depending upon the facts and circumstances of each. No hard and fast rule in this behalf can be laid down. Other questions raised need no consideration in the light of the view taken by us in these petitions.

In the result, all the petitions are allowed. Action of respondents, the Revenue in all these petitions withholding clearance of goods imported by the Petitioners is declared as bad and illegal, consequently, all imports are held to be legal and valid. There will be an order of prohibition against the Customs Authorities from proceeding against the petitioners. Rule in all the petitions is made absolute in terms of this Judgment with no order as to costs.

The post Taparia Overseas (P) Ltd. & Another Vs. Union of India & Others appeared first on B&B Associates LLP.

INTERNATIONAL COACH BUILDERS LTD. …PETITIONER
VS
KARNATAKA STATE FINANCIAL CORPN. …RESPONDENT

DATE OF JUDGMENT: 05/03/2003

BENCH: RUMA PAL & B.N.SRIKRISHNA

JUDGMENT

2003 (2) SCR 631

The Judgment of the Court was delivered by

SRIKRISHNA, J. These appeals arising under different factual background raise the same question of law and can, therefore, conveniently be disposed of by a common judgment.

Facts

Civil Appeal Nos. 4702 and 4703 of 1994

On 23rd May, 1988 a winding up petition was filed under Section 433 of the Companies Act, 1956 seeking to wind up the company known as International Coach Builders Ltd. Another petition by another creditor was also filed on 2.11.88. On 10.11.89, during the pendency of the above petitions before the High Court of Karnataka, the respondent, a Corporation established under the State Financial Corporation Act. 1951 (SFC Act), which was the second charge holder on the assets of the said company, took possession of the mortgaged assets of the said company in purported exercise of its power under Section 29 of the SFC Act. On 30.11.1990 the High Court of Karnataka in Company Petition No. 131 of 1988 made an order of winding up of International Coach Builders Ltd. and appointed the Official Liquidator as the Liquidator to take charge of the assets of the said company. On 30.11.90 the respondent-Corporation accepted a bid of Rs. 85 lakhs made by Raheja Development Corporation for sale of the mortgaged assets of the said company, although, to its knowledge, the assets charged were totally valued at an estimated value of Rs.97 lakhs. Neither the Official Liquidator, nor the Company Court, was in any way involved with the negotiations held by the respondent-Corporation with the prospective purchaser. On 4.3.1991 the respondent filed an application under Section 446 (2) (b) read with Section 537 of the Companies Act, 1956 before the High Court of Karnataka praying for leave to stand outside the winding up proceedings and realize its securities by selling the assets mortgaged to it. As per the resolution passed in its Board meeting held on 30.11.1990, it was resolved to accept the bid of M/s Raheja Development Corporation. On 8.10.1991 the Company Court allowed the application of the respondent-Corporation for standing outside the liquidation proceeding to work out its remedies under Section 29 of the SFC Act subject to an undertaking to discharge the workmen’s dues. The Official Liquidator appealed against the order of the Company Judge praying that the sale of the assets of the company under liquidation should only be done by the Official Liquidator under the supervision of the Company Court. The appeal of the Official liquidator (OSA No. 26/91) was dismissed by a Division Bench of the High Court of Karnataka. An application for review, Review, Application No. 118/93, was also dismissed by the High Court of Karnataka. The Official Liquidator filed two Special Leave Petitions before this Court challenging the order of the Division Bench dated 23rd January, 1992 dismissing the appeal OSA No.26/91, and the order dated 17th June, 1993 dismissing the Review Application No. 118/93. These are respectively Civil Appeal Nos. 4702 & 4703 of 1994.

When the Special Leave Petitions came up for admission this Court made the following order.

“Special Leave Petition granted.

Meanwhile, it appears appropriate that the Respondent KSFC should sell the properties acting jointly with the Official Liquidator under the supervision and in accordance with the direction of the Learned Company Judge of the High Court and sale proceeds be deposited in the Court and then distributed in accordance with the direction of the Learned Company Judge.”

Civil Appeal No. 12928 of 1996

As a seque to the above order, M/s Raheja Development Corporation moved an application before the Company Judge, High Court of Karnataka, for a direction to the Official Liquidator to concur in the sale effected by Karnataka State Finance Corporation (KSFC) in its favour. The Company Judge disposed of the application holding that, in view of the order passed by this Court, the application did not survive. M/s Raheja Development Corporation made an unsuccessful attempt to intervene in Civil Appeal No.4702/94 by seeking relief therein, but its applications I.A. Nos. 4,5,6 & 7 were dismissed. M/s Raheja Development Corporation appealed against the order of the Company Judge raising similar contentions as urged by the KSFC. The Division Bench dismissed the appeal by taking the same view as the Company Judge. The appellant is before this Court.

Civil Appeal No. 6491 of 1995

A company known as M/s. Prasad Bakers Pvt. Ltd. borrowed money from the appellant-a State Financial Corporation established in Uttar Pradesh. The repayment of the borrowed money was secured by mortgage of the factory premises and hypothecation of plant and machineries of the said M/s. Prasad Bakers Pvt. Ltd. (the second respondent in the appeal). The second respondent defaulted in repayment of the loan and the appellant called in the money by a notice dated 30th June 1997. On 18.9.1987 the appellant, in purporting to exercise its power under Section 29 of SFC Act, took possession of the mortgaged assets. In the meanwhile, the first respondent, a creditor of the second respondent, had filed a petition under Section 433(e) of the Companies Act on which the High Court of Allahabad made an order dated 1.2.1994 for winding up of the second respondent company. The appellant-Corporation appeared before the Company Judge and contended that it was a secured creditor having first charge over the mortgaged property and, despite commencement of the winding up proceeding, entitled to exercise its powers under Section 29 of the SFC Act to put to sale the mortgaged assets without leave of the Company Court. The learned Company Judge rejected the submission made on behalf of the appellant-Corporation and directed winding up of the company. An appeal carried to the Division Bench was summarily dismissed. Hence, the appeal by the Corporation.

Civil Appeal No. 2007 of 1997

The respondent company obtained large amounts of loans/advances from the appellant Karnataka State Finance Corporation (KSFC). The loans were secured by mortgages and charges on the assets of the respondent company. The company having defaulted in repayment of the loans according to the schedule, the KSFC issued a notice and took over the mortgaged and charged assets under Section 29 of the SFC Act. In the meanwhile, at the instance of a creditor of the respondent company the company was ordered to be wound up. The KSFC made an application to the Company Judge under Section 537 of the Companies Act, 1956 for permission to stand outside the winding up proceedings and realize its security. The learned Company Judge dismissed the petition of the respondent. An appeal to the Division Bench also failed. The KSFC is in appeal and raises the same contentions with regard to its rights under Section 29 of the SFC Act.

Civil Appeal No. 6303 of 1995

A company known as Himalaya Tools (India) Pvt. Ltd. had borrowed money from the Gujarat State Financial Corporation. The said company was ordered to be wound up on 25.1.1988 by the Company Court. On 9.5.1988, in purported exercise of rights under Section 29 of the SFC Act, the Gujarat State Financial Corporation (GSFC) took possession of the charged assets of the said company. The Official Liquidator of the said company took out a judge’s summons seeking a direction to GSFC forthwith to hand over’ possession of the asset of the company in liquidation. In the meanwhile the GSFC took steps to transfer of the properties of the company liquidation, again purportedly under Section 29 of the SFC Act. On 20.12.1989 the GSFC handed over possession of the premises of the company in liquidation to M/s Mahuvawala Trading Company for a consideration of Rs. 8,99,726.52. At no point of time was permission of the Company Court taken, nor was the sale approved by the Company Court. The Company Court on being moved did not find the sale to be wanting in bona fides and declined to set aside the sale, but directed GSFC to deposit the consideration received in court taking the view that the powers under Section 29 could not be unilaterally exercised without concurrence of the Company Court. GSFC carried the matter in appeal to the Division Bench which allowed the appeal holding that GSFC as a secured creditor could opt to realise the securities by standing outside the winding up proceeding and neither the liquidator, nor the Company Court, could interfere with the rights of GSFC as a secured creditor once it opted to remain outside the winding up proceedings. The Official Liquidator is in appeal.

The common question agitated in all these appeals is: whether the rights of the State Financial Corporation under Section 29 of SFC Act to sell and realise the security could be exercised without reference to the Company Court when a winding up order is made against the company.

Conflicting views have been taken by different High Courts on this issue. Hence, the need for this Court to settle the law.

Relevant Statutory Provisions

Before we address ourselves to the question of law argued, it is necessary to refer to some of the relevant statutory provisions. The State Financial Corporation Act, 1951 was brought on the statute book to grant special privileges to State Financial Corporations established thereunder in the matter of enforcement of their claims against borrowers and to enable speedier recovery of public monies. The relevant povisions of the SFC Act are Sections 29 and 31 which read as under:

“Section 29 – (1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concerns] as well as the [right to transfer by way of lease or sale] and realize the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.

(2) Any transfer of property made by the Financial Corporation, in exercise of its powers [ ***] under sub-section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property.

(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.

(4) [Where any action has been taken against an industrial concern] under the provisions of subsection (1), all costs, [ charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it [ ***] shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation and the residue of the money so received shall be paid to the person entitled thereto.]

(5) [Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purpose of suits by or against the concern, and shall sue and be sued in the name of [the concern].

“Section 31 – (1) Where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 30 the industrial concern fails to make such repayment, [then, without prejudice to the provisions of section 29 of this Act and of section 69 of the Transfer of Property Act, 1882 (4 of 1882)] any officer of the Financial Corporation, generally or specially authorized by the Board in this behalf, may apply to the district judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs namely:-

(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the [Financial Corporation ] as security for the loan or advance; or

(aa) or enforcing the liability of any surety; or]

(b) for transferring the management of the industrial concern to the Financial Corporation; or

(c) for an interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.

(2) An application under sub-section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.

Section 32 empowers the Corporation to move the District Judge for appropriate ad interim and interim orders in aid of action under Section 31. Section 46B gives an overriding effect to the provisions of the Act and reads as under:

“Section 46B – The provision of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of associations of an industrial concern or in any other instrument having effect by virtue of any law other than this Act,

but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.]

Section 46B was inserted by Act 56 of 1956 with effect from 1.10.1956.

The relevant provisions of the Companies Act, 1956 which need to be noticed are: Section 529 and 529A which read as under:

“Section 529 – (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-

(a) debts provable;

(b) the valuation of annuities and future and contingent liabilities; and

(c) the respective rights of secured and unsecured creditors;

as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent;

[Provided that the security if every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen’s portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security:-

(a) the liquidator shall be entitled to represent the workmen and enforce such charge;

(b) any amount realized by the liquidator by way of enforcement of such charges shall be applied ratably for the discharge of workmen’ dues; and

(c) so much of the debt due to such secured creditor as could not be realized by him by virtue of the foregoing provisions of this proviso or the amount of the workmen’s portion in his security, whichever is less, shall rank pari passu with the workmen’s dues for the purpose of section 529.]”

“Section 529A- (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company-

(a) workmen’s dues; and

(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of Section 529 pari passu with such dues shall be paid in priority to all other debts.”

The Contentions

It is contended on behalf of the SFCs that they are secured creditors and as such entitled to exercise their rights under the mortgage as also the statutory rights conferred on them by Section 29 of SFC Act without interference of courts. Hence, it is urged that the SFCs can sell the mortgaged and charged properties without reference to any court, much less the Company Court. Reliance is placed on the judgment of this Court in M.K. Ranganathan and Anr. v. Government of Madras and Ors., AIR (1955) SC 604.

That was a case arising under Section 232 of the Companies Act, 1913. This Court was required to consider the meaning of the provision “any sale held without leave of the Court of any of the properties” used in Section 232 (1) of the Companies Act, 1913 which rendered such sales void. It was held that these words refer only to sales held through the intervention of the Court and not to sales ’effected by the secured creditor outside the winding up without intervention of the Court. This Court pointed out that the law in England, and under the provisions of the Companies Act in India, was the same, namely, that the secured creditor had the right of realizing his security by standing outside the winding up, in which case he was not required to seek intervention of the Court.

The decision in Ranganathan (supra) held the field for considerable period, both under the Companies Act, 1913 and the Companies Act, 1956. However, by amending Act 35 of 1985, amendments were carried out in section 529 and a new Section 529A was enacted. These developments in our view, brought about a qualitative change in the legal situation. It is important to notice that M.K.. Ranganathan (supra) was decided under the Companies Act, 1913 which did not have any provision corresponding to the proviso to Section 529 or Section 529A of the Companies Act 1956. Obviously therefore, Ranganathan could not have considered the impact of these amendments on the provisions of section 232 of the Companies Act, 1913 (corresponding to Section 537 of the Companies Act. 1956).

The Division Bench of the Bombay High Court has considered in detail the change in the legal situation brought about by these new legal provision in Maharashtra State Financial Corporation v. Ballarpur Industries Limited, AIR (1993) Bombay 392.

As a result of the proviso added in Section 529, the security of every secured creditor is deemed to be subject to a ’pari passu’ charge in favour of the workmen to the extent of the workmen’s dues (called ’workmen’s portion, as defined in sub-section (3)(c) therein. It is further provided that, where the secured creditor, instead of relinquishing its mortgage and proving his debt, opts to stand outside the winding up proceedings and realise his security, the Official. Liquidator shall be entitled to represent the workman and enforce such charge and that any amount realised by enforcement of such charge shall be applied ratably by the Official Liquidator for the discharge of workmen’s dues. It is true that even the amended proviso does not give the Liquidator an independent right of enforcing the charge by selling the security against which such charge is created. Nonetheless, it creates a ’pari passu’ charge in favour of the workmen to the extent of their dues and makes the Liquidator the representative of the workmen to enforce such a charge. By reason of Clause
(c) of the newly added proviso , so much of the debt due to the secured creditor opting to realise security as could not be realize because of the specially created rights in favour of the workmen or the amount of the workmen’s portion in the security, whichever is less , shall rank ’pari passu’ with the workmen’s dues under Section 529A. Section 529A provides for overriding preferential payments of workmen’s dues and unrealised portion of the secured creditors dues, as provided in clause (c) of the proviso to Section 529.

Counsel for the SFCs contended that there is a conflict between the provisions of Section 529 read with Section 529A of the Companies Act on the one hand and Section 29 of the SFC Act on the other. It is urged that the provisions of the Companies Act being general law must yield to the provisions of the SFC Act which is special law. In the first place, we see no such conflict between the provisions of the Companies Act as amended in 1985 and the provisions of the SFC Act, 1951. In our view, the provisions of the SFC Act were merely intended to give an expeditious remedy to the SFCs without having to go through the procedure of enforcing the mortgage under the Transfer of Properties Act, 1882. In fact, even under Section 69 of the Transfer of Property Act, under certain circumstances a mortgagee has the power to sell the mortgaged property in default of payment of mortgaged money without intervention of the court. Under the general law, the SFCS would have to file a suit for realising their security unless they qualified under section 69 of the Transfer of Property Act. This meant considerable delay and holding up of the public monies due to the SFCs. In public interest, therefore, special provisions were made by Section 29, 30,
31 and 32 enabling the SFCs to take possession of the mortgaged assets and sell them without having to move a court of law. The provisions of Section 29 to 32 and the rights flowing thereon are exercisable under ordinary circumstances. However, when the debtor is a Company in winding up, the rights of the SFCs are affected by the provisions of the Companies Act, 1956. Looked at from this point of view, therefore, there is no conflict between the provisions of the SFC Act and the Companies Act. Assuming that there is conflict, then the judgment of this Court in A.P. State Financial Corporation v. Official Liquidator, [2000] 7 SCC 291 clearly holds that the amendments made in Section 529 and 529A would override and control the rights under Section 29 of the SFC Act. Though the Companies Act may be general law, the provisions introduced therein in 1985, were intended to confer special rights on the workers and pro tanto must be treated as special law made by Parliament. Since the amendments to the Companies Act were made by a later Act of 1985, they would override the provisions of section 29 of SFC Act, 1951. We are unable to accept the contention that the view taken in A. P. State Financial Corporation (supra) needs reconsideration. Far from it, we are in agreement with the view expressed therein.

The decision of the Bombay High Court in Maharashtra State Financial Corporation case (supra) gives weighty reasons as to why when the company is under winding up the SFC to which the assets of the company are charged cannot proceed to realise the security without intervention of the Company Court. We have already noticed that as a result of the amendment to Section 529 a pari passu charge to the extent of the workmen’s portion is created on the security of every secured creditor when he opts to realize a security by standing outside winding up. ’Pari Passu’ means “with equal steps, equally, without preference” (Jowitt’s Dictionary, Vol. II, 1959 Edition 1294). Black’s Law Dictionary, 6th Edition, 115 defines it as ’By an equal progress… used especially of creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other.” It is also defined as “With equal steps, that is to say, proceeding side by side at the same place” (Prem’s Judicial Dictionary, Volume III, 1964 Edition, page 1217)

The rights of the pari passu charge holders would run equally, temporally and potently, with the rights of the secured creditors. The Official Liquidator, as the representative of the workmen, to enforce such pari passu charge would have the right of representing the workmen equally with the rights of the secured creditors. Charge is defined under Section 100 of the Transfer of Properties Act thus:

“Section 100-Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained [which apply to a simple mortgage shall, so far as may be, apply to such charge.]

Though the charge by itself may not amount to mortgage, all the provisions which apply to a simple mortgage, so far as may be, apply to a charge.
Thus, the Official Liquidator, as the representative of the workmen’s pari passu charge, would be in the position of a co-mortgagee. Though Section 29 hitherto enabled the SFC as a mortgagee to exercise its right thereunder by taking possession of the property and selling it in satisfaction of its debt, the situation has now changed. Because of the aforesaid statutory intervention, the SFC must necessarily contend with a pari passu charge holder who has equal rights. It is well established law that where there are co-mortgagees, one co-mortgagee cannot sell without consent of the comortgagee or institute any proceedings for sale of mortgaged property without joining the other co-mortgagees either as plaintiffs or as defendants. The SFC’s right under Section 29 of freely realising its security gets trammeled if it has to take on a pari passu charge holder.

The realisation of the security can thereafter only be done either by satisfaction of the pari passu charge or by a suit in which the pari passu charge holder would be a party defendant. Though when the SFC Act was enacted in 1951 it was intended that SAF could act unilaterally, the amendments made to the Companies Act in 1985 have introduced a pari passu charge holder as a co-helmsman of the ship of the SFC, who can neither be ignored nor overridden. In other words, the existence of the pari passu charge holder being represented by the Official Liquidator would necessarily bring in supervision of the Company Court as the Official Liquidator cannot act without directions from and supervision of the Company Court. This is precisely the reason why the judgment of this Court in A.P. State Financial Corporation (supra) holds that the statutory right of the SFCs to sell the property under Section 29 of the SFC Act is now subject to the provisions of Section 529 and Section 529 A of the Companies Act. The statutory right to sell the property under Section 29 of the Act has now to be exercised in tandem with the rights of pari passu charge in favour of the workmen created by the proviso to Section 529 of the Companies Act. This Court observed in A.P. State Financial Corporation (Supra):

“The Act of 1951 is a special Act for grant of financial assistance to industrial concerns with a view to boost up industrialization and also recovery of such financial assistance if it becomes bad and similarly the Companies Act deals with companies including winding up of such companies. The proviso to sub-section (1) of Section 529 and Section 529-A being a subsequent enactment, the non obstante clause in Section 529-A prevails over Section 29 of the Act of 1951 in view of the settled position of law. We are, therefore, of the opinion that the above proviso to sub-section (1) of Section 529 and Section 529-A will control Section 29 of the Act of 1951. In other words the statutory right to sell the property under Section 29 of the Act of 1951 has to be exercised with the rights of pari passu charge to the workmen created by the proviso to Section 529 of the Companies Act. Under the proviso to sub-section (1) of Section 529, the liquidator shall be entitled to represent the workmen and force (sic enforce) the above pari passu charge. Therefore, the Company Court was fully justified in imposing the above conditions to enable the Official Liquidator to discharge his function properly under the supervision of the Company Court as the new Section 529-A of the Companies Act confers upon a Company Court the duty to ensure that the workmen’s dues are paid in priority to all other debts in accordance with the provisions of the above section. The legislature has amended the Companies Act in 1985 with a social purpose viz. to protect dues of the workmen. If conditions are not imposed to protect the right of the workmen there is every possibility that the secured creditor may frustrate the above pari passu right of the workmen.”

Since the Official Liquidator is in the position of a comortgagee, the SFCs cannot act independently or by ignoring him for enforcing their security.
It is established law that, in case of co-mortgagees, all of them should join in the suit for enforcing the security, but if some of them refuse to join, they have to be included as defendants, not merely as performa parties, but as necessary parties inasmuch as the mortgage right vests in them along with the plaintiffs mortgages. (See in this connection the judgment of the Privy Council in Sunitibala Debi v. Dharae Sundri Debi, AIR (1919) PC 24). The same principle would be substantially true and applicable in the case of a mortgagee and a pari passu charge-holder over the same security for realising the security. The realization of the security can only be done by both the charge-holders joining and realising the security simultaneously. If a sale takes place, it can only be simultaneously for recovery of the claim of all pari passu charge holders and sale proceeds are required to be divided proportionately in the same proportion as their dues.

In support of their respective contentions, parties have referred to and relied upon judgments of different High Courts. The view taken by the Bombay High Court commands itself to us. The Division Bench of the said High Court pointed out that, like a secured creditor, the official liquidator as a pari passu charge holder cannot independently bring the security to sale ignoring the secured creditor. He must, therefore, either obtain concurrence of the secured creditor for sale and take the Court’s sanction, or he can apply for sanction of the Court after notice to the secured creditor. In either event, the Court while granting sanction may impose appropriate conditions and give directions regarding the conduct of the sale, the fixing of the reserve bid, acceptance of the bid, confirmation of sale and distribution of sale proceeds.

We cannot be unmindful of the fact that every creditor is interested in realizing the security only for his benefit and to the extent necessary for recovery of his outstandings. Prior to 1985 it might have been possible for a secured creditor under section 529 of the Companies Act, 1956, or its predecessor, section 232 of the Companies Act, 1913 as interpreted by this Court in M.K. Ranganathan case (supra), to opt to stand outside the winding up and realise the security by bringing it to sale. This was possible because the secured creditor had unrestricted right of standing outside the winding up and proceeding against the property mortgaged to him. Or, to put it in the words Lord Wrenbury in Food Controller v. Cork, (1923) AC 647 A, [as quoted in para 15 of M.K. Ranganathan case (supra)]:

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

Of course, even in such a situation, if the same property was mortgaged to more than one secured creditor, they had to either come to an agreement, or in the event of disagreement, there had to be a suit in which dissenting mortgagee had to be sued as a necessary party defendant. No doubt section 29 of the SFC Act was intended to place the SFCs on a better footing . But, in our view, this better footing is available only so long as the debtor is not a company or is a going company. The moment a winding up order is made in respect of a debtor company, the provisions of section 529 and 529A come into play and whatever superior rights had been ensured to SFCs under the provisions of the SFC Act are now subjected to and operate only in conjunction with the special rights given to the workmen, who as pari passu charge-holders are represented by the official liquidator. We are, therefore, of the view that the unhindered right hitherto available to the SFCs to realise their security, without recourse to the Court, no longer holds true as the right vested in the official liquidator is a statutory impediment to such exercise and has to be reckoned with. And since the official liquidator can do nothing without the leave or concurrence of the Court, all necessary applications must, therefore, come to the Company Court.

We do not really see a conflict between Section 29 of the ’SFC Act and the Companies Act at all, since the rights under Section 29 were not intended to operate in the situation of winding up of a company. Even assuming to the contrary, if a conflict arises, then we respectfully reiterate the view taken by the Division bench of this court in A.P. State Financial Corporation case (supra). This Court pointed out therein that section 29 of the SFC ACT cannot override the provisions of section 29(1) and 529A of the Companies Act, 1956, inasmuch as the SFCs cannot exercise the right under section 29 ignoring a pari passu charge of the workmen. It was observed in the judgment:

“The proviso to sub-section (1) of Section 529 and Section 529-A being a subsequent enactment, the non obstante clause in section 529-A prevails over Section 29 of the Act of 1951 in view of the settled position of law. We are therefore, of the opinion that the above proviso to sub-section (1) of the Section 529 and Section 529-A will control Section 29 of the Act of 1951. In other words the statutory rights to sell the property under Section 29 of the Act of 1951 has to be exercised with the rights of pari passu charge to the workmen created by. the proviso to Section 529 of the Companies Act. Under the proviso to sub-section (1) of Section 529, the liquidator shall be entitled to represent the workmen and force (sic enforce) the above pari passu charge.”

This very contention based on the non-obstante clause in Section 46B of the SFC Act was rejected by pointing out that if the non-obstante clause in section 529A and section 46B of the SFC Act which was inserted in the year 1956. Far from taking a different view of the matter, we too are of the same view as has been taken in the judgment of this Court in A.P. State Financial Corporation case (supra).

Similar view was taken by a Division Bench of the A.P. High Court in Andhra Pradesh State Financial Corporation v. Electrothermic (P) Ltd. and Anr., (1986) Co. Cases 402 and a learned single Judge of the Punjab High Court in Official Liquidator, Ravindra Pharmaceutical (P) Ltd. v. Haryana Financial Corporation, (Company cases Vol. 98 p. 683).

The Division Bench of the Gujarat High Court in C.A. No. 6303 of 1995 has, however, struck a discordant note. The Division Bench was impressed by the fact that in M.K. Ranganathan this Court had emphasised the right of a secured creditor to realize his security by standing outside the winding up of a company. It also emphasised that the proviso to section 529 of the Companies Act operates only where a secured creditor, instead of relinquishing his security and proving his debt, proceeds to realise his security. In the words of the Gujarat High Court “But the fact remains, it has yet been left at the option of the secured creditor to realise the security without proving his debt in the winding up proceedings.” This seems to be the linchpin of the reasoning. In our view, the reasoning of the Gujarat High Court that in case secured creditor does not opt to realise the security, the liquidator, by dint of the proviso to section 529, does not become a charge holder in the estate of the company so as to exercise the right of a simple mortgagee as envisaged under section 100 of the Transfer of Property Act, appears to be non-sequitur, secured creditor does not opt to stand outside the winding up but relinquishes his security and proves his debt in the winding up, then there is no doubt that the official liquidator will come into custody of all the assets of the company in liquidation and the distribution of the assets would have to proceed in accordance with the provisions of section 529A of the Companies Act, in which case the secured creditor stands in line as an unsecured creditor. It is only when the SFC as a secured creditor opts stand outside the winding up and seeks to realise its security that the conflict, if any, can arise. We have already indicated as to who must yield in such a clash of the titans. The fact that the liquidator or the workmen do not have a right independently to enforce the charge, unless the creditor decides to stand outside the winding up, does not make any difference to the situation, in our view. It is not the contention of the SFCs that they do not desire to exercise the option available to them of standing outside the winding up.

In fact, it is their contention that as mortgages they have a right to stand outside the winding up and are not subject to the supervisory jurisdiction of the Company Court. They also contend that, unlike other mortgagees, they have a special right by reason of sections 29 of the SFC Act of taking possession of the assets and realising them by sale, transfer and so on. We are, therefore, unable to accept the reasoning of the Gujarat High Court as correct.

Finally, counsel for the SFCs urge that the view we are to take would obliterate the difference between a creditor opting to stay outside up and one who opts to prove his debts in winding up. We are unable to accept it. As a result of the amendments made by the Act of 1985 in the Companies Act, 1956, the SFCs as secured creditors, must seek leave of the Company Court for the limited purpose of ensuring that the pari passu charge in favour of the workmen is safeguarded by imposition of suitable conditions under the supervision of the Company Court. If this amount to impeding their hitherto unimpeded rights, so be it. Such is the Parliamentary intendment, according to us. This impediment is of a limited nature for the specific purpose of protecting the pari passu charge of the workmen’s dues and subject thereto, SFCs can continue to exercise their statutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. Neither is the apprehension expressed justified, nor the contention sound. We, therefore, hold as under :

1. The right unilaterally exercisable under section 29 of the SFC Act is available against a debtor, if a company, only so long as there is no order of winding up ;

2. The SFCs cannot unilaterally act to realise the mortgaged properties without the consent of the official liquidator representing workmen for the pari passu charge in their favour under the proviso to section 529 of the Companies Act, 1956.

3. If the official liquidator does not consent, the SFCs have to move the Company Court for appropriate directions to the official liquidator who is the pari passu charge holder on behalf of the workmen. In any event, the official liquidator cannot act without seeking directions from the Company Court and under its supervision.

In the result, Civil Appeal No. 4702/1994 and Civil appeal No. 4703/ 1994 are allowed and the Karnataka State Finance Corporation is directed to move the Company Court to seek appropriate directions in the matter. The judgment of the Division Bench as well as the single Judge permitting the SFC to sell the assets of M/s Raheja Development Corporation without the leave of the Company Court are set aside, with liberty to the KSFC to move the Company Court and seek appropriate directions in the matter of realization of its securities.

Civil Appeal No. 12928/1996 is dismissed.

Civil Appeal Nos. 6491/95 and 2007/97 are dismissed with the same liberty to the SFC to move the Company Court for further directions.

Civil Appeal No. 6303/1995 is allowed. The judgment of the Division Bench of the Gujarat High Court is set aside and the judgment of the Company Judge is upheld. The Gujarat State Finance Corporation has the same liberty for moving the learned Company Judge for appropriate directions for realisation of the sale proceeds of the assets.

All the aforesaid appeals are accordingly disposed of with no order as to costs.

The post International Coach Builders Ltd. Vs Karnataka State Financial Corpn. appeared first on B&B Associates LLP.

Civil Miscellaneous Appeal No.1550 of 1995 is filed against the judgment dated 14.11.1994 in M.O.P.No.94 of 1991 and Civil Miscellaneous Appeal No.1758 of 1996 is filed against the judgment dated 7-8-1996 in M.O.P.No.110 of 1995, on the file of the Family Court, Pondicherry.

For Appellant : Mr. V.K.Muthusamy, S.C., for Mr.N.Jothi

For Respondent : Mr.Lakshmi Narayanan.

Dated: 10/01/2003

JUDGMENT

A.K.RAJAN, J.

The appellant and the respondent are husband and wife; the marriage between them took place on 4.7.1984 at Pondicherry, according to Hindu rites and custom; It was also registered before the Registrar, Pondicherry.The husband was working in the Ministry of Civil Aviation, New Delhi.Soon after the marriage, the husband and wife were residing at Delhi till 1988; they are living separately from 1988. There were some earlier judicial proceedings between the parties.Presently, the husband filed M.O.P.94 of 1991 on the file of the Family Court, Pondicherry against the wife seeking dissolution of marriage. The Family Court dismissed his petition. C.M.A.No.1550 of 1995 is againstchallenging the judgment dismissing his petition for divorce. Subsequent to the dismissal of M.O.P.94 of 1991, the wife filed M.O.P.110 of 1995 seeking restoration of conjugal rights. The Court granted a decree of restitution of conjugal rights;Challengingthat, the husband has preferred C.M.A.No.1758 of 1996.Thus in both the C.M.As., the husband is the appellant. In view of the nature of dispute, both the C.M.As. are heard together.

C.M.A.No.1550 of 1995:

2. The husband in his petition, M.O.P.94 of 1991 has stated that the wife had an overwhelming attachment towards her father and had an irresistible temptation to meet her father and hence very often she visited Pondicherry and stayed there for months together.The father of his wife is a wealthy person in the locality; He wanted his daughter by his side in Pondicherry; hence he requested the husband to get a job in Pondicherry;It was not to the liking of the husband.In the year 1988, the wife left the matrimonial home at Delhi and did not return thereafter, in spite of repeated requests made by the husband.This compelled the husband for making an application to the University of Pondicherry for a job;But he did not get the job.The father of the wife did not send her back on the ground of giving medical treatment;When he asked for a proof of her daughter’s treatment, he abused him. A child was born to them on 5.7.1987.The petitioner was always prepared to condone the failings of his wife and take her and lead a peaceful life;Therefore, he filed a petition for restitution of conjugal rights in H.M.A.409 of 1988 before the District Judge, Delhi.But, the wife filed a petition before the Principal Sub-Judge, Pondicherry in M.O.P.No.96 of 1988 (re-numbered as M.O.P.25 of 1990) seeking judicial separation. The wife obtained stay of the proceedings of the Delhi Court. In view of the stay order granted by the Supreme Court, he withdrew that petition and presented another petition with the same prayer before the Family Court, Pondicherry in M.O.P.182 of 1990.The respondent/wife invented a string of stories of cruelties in her petition for judicial separation.They are only imaginary and invented only for the purpose of counter-blasting his petition for restitution of conjugal rights.Further, the wife sent petitions to his higher officersin the year 1990 making false allegations; and in the year 1990 also requested to take disciplinary action against the petitioner; in that, she has stated the purpose of the petitioner seeking a relief of restitution of conjugal rights was only to take her to Delhi and to kill her.The respondent/wife also filed a complaint before the Pondicherry Police Station on 25.9.1988.The false allegations made by the respondent against the petitioner are only to cover up the abnormal relations of the respondent with her father. Theabove conduct of the wifeamounts to cruelty.

3. It is further stated that the Family Court at Pondicherry heard M.O.P.25 of 1990 and 182 of 1990 and by a common order dated 5.9.1990 granted judicial separation for none months in M.O.P.25 of 1990, it also directed the petitioner to pay Rs.600/- per month as maintenance to the child and adjourned the matter to 10.6.1991 in order to see whether the parties could come together.But the respondent/wife filed appeals against the order of the Family Court, dated 5.9.1990 before the High Court in C.M.As.1016and 1017 of 1990.This makes it clear that the respondent/wife was not prepared for re-union; she was bent upon separation.Even the suggestion made by the Judges of the High Court during the hearing of the C.M.As. was not heeded by the wife.The behaviour of the respondent/wife shows that she is having the doubtful integrity and character. The petitioner was ready and willing to take her back though she left the house without just and reasonable cause.But the respondent did not join the petitioner.The conduct of the wife in withdrawing from the company of the petitioner without any just cause amounts to desertion.Further, the respondent has unjustifiably withdrawn from the society of the petitioner for more than three years. By the conduct of the wife, it is not possible for the husband to live with the wife any longer. Her continued stay with her father is wilful and intentional and amounts to desertion. Hence, he is entitled for a decree of divorce.

4. In the counter filed by the wife in M.O.P.94 of 1991, she has stated that, the husband shifted the residence in Delhi for more than four times between May and October 1988 with a view to extract money from the respondent’s father; that the petitionerwas always keen in getting money from her father by ill-treating her with cruelty; It is only the petitioner who approached her father seeking a job at Pondicherry;The petitioner received huge money from the respondent’s father on several occasions. The statement that the respondent was having abnormal relationship with her father is mischievous and defamatory; The petitioner has filed several proceedings against the respondent, but could not substantiate his case.The petitioner initiated proceedings for restitution of conjugal rights but subsequently has withdrawn it.Hence, the present petition for dissolution of marriage is unsustainable in law.Further, it is stated that thepetitioner used to beat the respondent mercilessly at Delhi; As the obedient wife, shetolerated hisbrutal treatment while she was in Delhi.The petitioner even threatened the respondent that he would endanger the life of the respondent at Delhi.The petitioner refused to take the respondent in spite of the order of the Court.It is not correct to say that the respondent unjustifiably withdrew from the society of the petitioner.The only motive of the respondent is to get money by threatening.

5. The wife filed M.O.P.110 of 1995 for restitution of conjugal rights; she has stated in that petition that the differences arose between the spousesdue to the attitude of the husband, leading to misunderstandingresulting in series of litigations.The parties resorted to legal proceedings on burst of emotions; In 1988, both parties approached the Court of Law against each other.M.O.P.No.96 of 1988, renumbered as M.O.P.No.25 of 1990 was filed by the wife for judicial separation; M.O.P.182 of 1990 was filed by the husband for restitution of conjugal rights.The Family Court, Pondicherry passed a common judgment in M.O.P.25/1990 and M.O.P.182 of 1990, to the effect that the parties must live separately, “for a period of nine months and if the parties forget their differences and come to an understanding, they can unite together.”that the husband shouldpay Rs. 600/- per month for the maintenance of the child.The husband did not file any appeal against that order.Instead, husband filed a petition for divorce on the groundof desertion and cruelty in M.O.P.94/1991.The Family Court in its order, dated 17.8.1992 granted a decree of divorce.Aggrieved by the decree of divorce,the wife preferred an appeal before the High Court in C.M.A.1021 of 1992.A Division Bench of this Court attempted to reconcile the dispute and tried to re-unite the parties; but to the recalcitrant attitude of the husband,it could not succeed. Therefore, C.M.A.1021 of 1992 was decided on merits; and ultimately, the case was remandedpointing out four infirmities in the order of grant of divorce.The husband went on appeal to the Supreme Court, but the S.L.P. was dismissed.Thereafter, the Family Court heard the matter and ultimately dismissed M.O.P.No.94 of 1991 on 14.11.1994.Pursuant to that order, the petitioner made various attempts to join the respondent; she has written several lettersto take her back to the matrimonialhome.She even contacted over phone; Her repeated appeals for re-union went unheeded.The petitioner was always willing to join the respondent.The High Court during the hearing suggested that both the parties to go to New Delhi.The respondent booked tickets and reported to the Court; butwhen the petitioner was ready to go back to her matrimonial home, the respondent refused to take her back; no reason was assigned for the refusal.TheDivision Bench of the High Court also suggested both parties to go and meet the parents of the husband at Akkur village along with the respective parties to effect a conciliation;A date was fixed by both the sides and the petitioner along with her son, mother and father, her counsel went to meet the parents; but, neither the respondent nor his counsel turned up and hence, thatattempt failed. All these incidents revealed that the petitioner was always willing to join her husband and it is the respondentwho without any reasonable cause had withdrawn from the conjugal home.The respondent remained silent even after dismissal of the divorce petition.Therefore, the petitionfor restitution of conjugal rights has been filed.The respondent’s failure to protect the conjugal rights of the petitioner has compelled the petitioner to move the present application for restitution of conjugal rights. Further, it is stated that the respondent is bound to take care of the minor son Sankaranarayanan;but no steps were taken by him;He did not even visit once to see the child.In law, he is bound to maintain the child.The child is studying in a convent; for his education, clothing , food and other expenditure, a sum of Rs.1,000/- is spent by her every month.Further the basic requirement of the petitioner’s maintenance works out to Rs.2,000/-.Thus, in all, the petitionerhas to be paid Rs.3,000/- per month for maintenance.The respondent is working asUnder Secretary in CentralGovernment and earns Rs.10,000/- per month.

6. The husband in the counter filed by him in M.O.P.110 of 1995 raisedsomepreliminary objections; that the dismissal of O.P.94/91 is pending in appealbeforethisCourt;The petitioner/wife cannot take advantage of her own wrong;When the husband/respondent filed a petition for restitution of conjugal rights in Delhi during 1988, the wife filed a suit for judicial separation before PondicherryCourt; subsequent to the order passed by the Supreme Courttransferring the petition pending in Delhi to Pondicherry that petition was withdrawn by the husband.But in the petition for judicial separation, the wife had stated that she apprehended danger for her life ifshe was to livewith the husband in Delhi.She has also alleged that the husband attempted to pour kerosene on her to burn her alive.If really the intention of the wife was to return to the matrimonial home, she would not have filed a petition for judicial separation.Even after the grant of decree of judicial separation for nine months, the wife never showed any intention of rejoining.The petition for divorce filed under Section 13(1)(i-a) and (b) was after one year from the completion of judicial separation.

7. Further, the husband stated in his counter in M.O.P.110 of 1995 that this petition is not maintainable.She wrote letters to the Ministers, Secretaries and Joint Secretaries of Department of Civil Aviation in which he was working wherein it was stated that the main purpose of the husband filing a petition for restitution of conjugal rights was to take the wife to Delhi and to kill her;In view of such numerous letters written to his superior authorities, his career had been spoiled which amounts to cruelty.Shealso lodged false complaints to police against him;nearly three years after the marriage, differences arose between the spouses due to the insistence and persistence of the petitioner/wife to go to her father’s house very often and due to the constant pressure exerted by the father of the wife to get a job and settle at Pondicherry;The father of the petitioner/wife is a pensioner getting Rs.40,000/- per month;Apart from that, they are having vast agricultural lands and they are also doing business in auto spare parts business in Karaikal.The petitioner has also completed her post-graduation in Sociology and she is drawing a salary of Rs.10,000/-;She is working as a teacher.It is only the petitioner/wife who deserted the matrimonial home.Even though the husband filed a petition for restitution of conjugal rights, the wife filed a petition for judicial separation and the Court also granted judicial separation; the present petition for restitution of conjugal rights is not bonafide and is designedly filed for consideration other than re-union;This petition has been filed after eight years of separation which was brought about by the petitioner herself;Therefore, this petition is liable to be dismissed on the ground of laches also. The suggestion made by the Hon’ble Judges of the High Court are conciliatory in nature.The respondent is the natural guardian for his son.The respondent has means to educate the child.In the circumstances, the custody of the child should be given to the respondent.The sole intention of the petitioner is only to harass the respondent.The petitioner is trying to take advantage of her own wrong.

8. The Family Court, Pondicherry framed seven points for consideration in M.O.P.94 of 1991. The husband was examined as P.W.1 and Exs.P.1 to P.31 were marked; On the side of the respondent, the wife was examined as R.W.1;R.W.2 has also has been examined;Exs.R.1 to R.8 were marked. Considering the evidence on record, the Family Court dismissed the petition for divorce.

9. On the Point No.1 as to whether the wife deserted the husband without any reasonable cause, the Family Court relying upon the letters written by both parties prior to the date of separate living has held that, ” Ex.P.24 demolishes the plea of the petitioner.”The Family Court also refers to Ex.P.9, dated 26.5.1990 sent by the respondent to Joint Secretary, Ministry of Civil Aviation, New Delhi and Ex.P.10, the copy of the police complaint given by the wife against the respondent and found that, “It is the rudimentary principle of social behaviour that between husband and wife, whenever there is any trouble, all in a sudden, they would not go to the extreme, but after harbouring their individual grievances in a part of the heart, they move normally. “Relying on these letters, the Family Court comes to the conclusion that the departure in May, 1988 by the wife was not due to the attachment to her father, but because she could not tolerate the behaviour of the petitioner.Therefore, the Family Courtheld that in these circumstances, it cannot be stated that the respondent/wife had animus deserendi and hence, there was no desertion on the part of the wife.

10. The Family Court also held that without any reason, simply for the love and affection towards the father, no married daughter would stay with her father abandoning her husband. The theory of abnormal relationship has not been established by the petitioner and it is totally false.Further, it held, “the ego problem on both sides preventedthem from amicably settling the differences between them, but it took a litigation course and it got snowballed to the present stage.”; Therefore, there is no desertion by the wife.

11. The Family Court further observed that the wife could have refrained from resorting to legal course even when the husband has filed a petition for restitution of conjugal rights;the act of the wife in filing a petition for judicial separation was nothing but, “a hasty counter-blast which triggered the anger of the husband further. ” Relying upon the failure on the part of the husband to take back his wife to Delhi on the advice given by the Division Bench of this Court, the Court came to the conclusion that the wife was not at fault.

12. With respect to Point No.2 as to whether desertion, if any, by the wife got terminated on the expressing ofwillingness to join the husband, the Family Court has come to the conclusion that assuming that previously the wife deserted the husband, it got terminated by the unconditional acceptance of the wife to accompany the husband to resume conjugal life.

13. With respect to Point No.3 whether the desertion if any by the respondent/wife was condoned by the petitioner/husband, the Family Court held that, “mere filing of the petition for restitution of conjugal rights would not amount to condoning of cruelty.”Though it is not happily worded, it appears that this issue has been decided in favour of the husband.

14. With respect to Point No.4 as to whether there was desertion, if any,for a continuous period of two years preceding the date of filing of the petition for divorce, the Court held that since the finding of the Court is that there is no desertion on the part of the wife, this point is held against the petitioner.The Family Court has also stated,

” For complying with the High Court’s direction only the Point No.4 has been framed and considered.As such, Point No.4 is decided in favour of the respondent and as against the petitioner to the effect that there was no desertion for a continuous period for two years anterior to the filing of petition for divorce. ”

15. With respect Point No.5, the Court also found that the respondent/wife is not relying on it to live away from her husband, but she likes to live with her husband.Therefore, this point has been answered against the husband; Thus the Family Court has held that due to the act of cruelty committed bythe husband, he was not entitled for the decree of dissolution of marriage.

16. (i) In M.O.P.No.110 of 1995, the Family Court has framed four points for consideration.With respect to Point No.1, the Court has found that there was no insincerity in filing the present application.With reference to the earlier petition for judicial separation, the Family Court has found that she was misguided by her counsel for filing the petition for judicial separation.Even if the fact is not proved, the respondent herein expressed her desire to join her husband.From this, this Court concludes that there was no insincerity on the part of the wife.

(ii) In respect of Point No.2, whether the petitioner was entitled for the decree of restitution of conjugal rights with the respondent, the Family Court held that the respondent/husband was not able to prove any reasonable excuse for his withdrawal from the society of the petitioner.Therefore, this issue has been decided in affirmative holding that the petitioner/wife was entitled for the decree of restitution of conjugal rights as against the respondent.

(iii) With respect to Point No.3 whether the petitioner was entitled for award of maintenance of Rs.3,000/-, the Family Court has held that the evidence of the wife that the husband is earning Rs.10,000/- is acceptable and grant of 30 per cent of his salary towards the maintenance of his wife and child is reasonable.

(iv) Point No.4 is only for consequential relief.

17. The learned counsel for the appellant submitted thatEx.P.24, a letter written on 5.9.1984almost three years prior to the date of separate living,cannot be the basis to decide the issue.This argument is acceptable. There is no dispute that parties were living cordially till the birth of the child in July, 1987.Inasmuch as this letter is three years prior to that date, this letter cannot be the basis to decide the issue.

18. The Family Court refers to various letters written prior to May, 1988.Only the letters, Ex.P.17 and P.19 are the letters subsequent to May, 1988;Ex.P.19 refers to the departure by the wife on 30.5.1988; the husband apologized for his conduct on that date and Ex.P.17 reveals that he intended to her back on 22.7.1988;Thereafter, there was an attempt made by the wife to get a job for the husband in Pondicherry University; From these letters, the Court concluded that there was no intention of the wife leaving the matrimonial home. This conclusion of the Court does not appear to be correct.If the wife had no intention of leaving the matrimonial home, the wife would have joined the husband on the earliest opportunity; but even when the husband filed a petition for restitution of conjugal rights in the years 1988, the wife resisted that by filing a petition for judicial separation on the ground of cruelty.Hence, the finding of the Court is not sustainable.

19. Further, the counsel for appellant contended that it cannot be said that the cruelty or desertion committed by the wife has been condoned by the husband.Learned counsel relied upon a decision in Dastane v. Dastane ((1975) 2 S.C.C. 326, wherein the Supreme Court held,

” Condonation means forgiveness of the matrimonial offence and the restoration of offending spouse to the same position as he or she occupied before the offence was committed.To constitute condonation there must be, therefore, two things: forgiveness and restoration.

But condonation is always subject to the implied condition that the offending spouse will not commit a fresh matrimonial offence, either of the same variety as the one condoned or of any other variety.` No matrimonial offence is erased by condonation.It is obscured but not obliterated.’ Since the condition of forgiveness is that no further matrimonial offence shall occur, it is not necessary that the fresh offence should be ejusdem generis with the original offence.Condoned cruelty can therefore be revived, say by desertion or adultery.`Condonation’ under Section 23(1)(b) therefore means conditional forgiveness, the implied condition being that no further matrimonial offence shall be committed. ”

The Learned counsel next relied upon thedecision in Emmanualv. Mandakini (A.I.R. (33) 1946 Nagpur 69) wherein it was held that,

” Condonation means forgiveness of a conjugal offence with full knowledge of all the circumstances.It is not a question of law but of fact.Cohabitation which means connubial intercourse is prima facie evidence of condonation.There is a distinction between forgiveness and condonation and the distinction lies in the fact that condonation implies a complete reconciliation in the sense of reinstating the offender to conjugal cohabitation or intercourse. ”

The counsel also referred to the judgment in W. v. W. (No.2) 1954 (2) All England Reporter 829 for the proposition that whether the offer for re-union is genuine has to be decided bearing in mind the background of the case. He also referred to the following paragraph in Halbury’s Law of England with reference to “offer” of return.

” The offer must be genuine, that is it must be made in good faith in the sense that it is an offer to return permanently which, if accepted, will be implemented, and is an offer containing an assurance to terminate the conduct, if any, that caused the separation.An offer must likewise be made in good faith where the parties separated consensually. ”

Relying upon the above judgments and observations, the learned senior counsel submitted that the alleged offer by the wife to come and live with the husband is not genuine and hence, it has to be held that it is not bonafide.

20. Therefore, learned senior counsel for the appellant submitted that the Court erred in its conclusion that even assuming that the wife deserted, it got terminated when the wife unconditionally agreed to accompany the husband to Delhi. The counsel submitted that the mere offer does not prove animus revertendi.This argument of the counsel for appellant is acceptable.The desertion does not get terminated on the mere offer to go back to the matrimonial home. When the wife did not in fact join the husband, the desertion cannot be said to have been terminated.Therefore, the conclusion of the Court is not legally sustainable.

21. Learned senior counsel also referred to the judgment in Adhyatma Bhatta Alwar v. Adhyatma Bhattar Sri Devi ((2002) 1 Supreme Court Cases 308) wherein the Supreme Court has held that,

” “Desertion” in the context of matrimonial law represents a legal conception.It is difficult to give a comprehensive definition of the term.The essential ingredients of this offence in order that it may furnish a ground for relief are:

” 1. the factum of separation;

2. the intention to bring cohabitation permanently to an end-animus deserendi;

3. the element of permanence which is a prima condition requires that both these essential ingredients should continue during the entire statutory period. ”

Relying upon this judgment, learned senior counsel submitted that during the entire period after the wife left the matrimonial home till the date of filing of the petition, the first two ingredients are proved to have existed.Therefore, the trial Court should have granted decree of divorce.This argument of the counsel for appellant is acceptable.From the date on which the wife left the house at Delhi on 30.5.1988, she never returned to Delhi; nor the husband and wife lived together even for a single day.Therefore, the factum of separation is proved.As already stated, the fact that the wife resisted the petition filed by the husband for restitution of conjugal rights by filing a petition for judicial separation proves animus non-revertendi; it proves the intention of the wife not to return to the matrimonial home.Thus, the first two ingredients mentioned above are proved to have existed.

22. That apart, the learned senior counsel submitted that for the past 14 years, the parties are living separately and therefore, it is not possible for them to re-unite and therefore, on that ground also the husband is entitled to for decree of divorce.In support of that, learned senior relied upon the decisionin Sudhakar v. Smt. Kalavati (II (2001) DMC 155), wherein it was held that,

” No Marital relationship existing between parties for last 16 years; reconciliation not possible. ”

and on that ground,divorce was granted.

He also referred to another judgment of the Orissa High Court in Mrs. Gayatri Mishra v. Pramod Kumar Nanda (I (2000) DMC 102 (DB)), (Divorce and Matrimonial cases), wherein it was held,

” that the wife is voluntarily depriving her husband of her society and cohabitation for years.The husband, therefore, can definitely be said to be under the strain of wilful separation for years and complete denial of conjugal relationship.This would amount to causing mental cruelty.The husband is in his thirties-the prime of his life-and once he entered into the wedlock, he could naturally like to have conjugal relationship with the wife and in case the latter refuses to cohabit with him for years together, it is bound to cause him both mental and physical torture which, would be covered by the expression “cruelty” as used in connection with matrimonial matters covered by Section 13(1)(i-a) of the Act. ”

Learned counsel also referred to the judgment of the Supreme Court in Romesh Chander v. Savitri ((1995) 2 S.C.C. 7), wherein the Supreme Court held that,

” marriage being dead, both emotionally and practically, continuance of marital alliance for namesake would to prolonging the agony and affliction and would be cruelty; hence in exercise of power under Article 142, the marriage between appellant and respondent directed to stand dissolved subject to the appellant transferring his house in the name of his wife. ”

23. Placing reliance on these decisions, the learned senior counsel submitted that even in this case, the spouses are living separately for nearly 14 years now and hence following the decision of the Supreme Court, the husband has to be granted divorce, as prayed for.

24. Learned counsel for the respondent submitted that the decision of the Supreme Court exercising the power under Article 142 of the Constitution of India is not a ratio decidendi and therefore, a similar relief granted therein cannot be granted by this Court, since the High Court has no power similar to Article 142 of the Constitution.Therefore, the fact that Supreme Court has dissolved a marriage on the ground that there was no marital relationship for a period of 14 years cannot be said to be aratio decedendi and hence is not a binding precedent; hence on that ground, divorce cannot be granted.This argument of the counsel for the respondent is acceptable.The Supreme Court has power under Article 142 to decide an issue even outside the scope of a statute; the Supreme Court can supplement the legal provisions in order to render complete justice in a given case, as held by the Supreme Court in the casein Delhi Development Authority v. Skipper Construction Co.(P) Limited ( A.I.R. 1996, S.C.2005).Therefore, merely because the parties were living separately for more than 14 years, this Court cannot grant a decree of divorce presuming that the marriage is dead between the parties, unless the relief can be granted otherwise, in accordance with law.

25. Learned senior counsel further submitted that the Supreme Court inKameswara Rao v. G.Jabilli ((2002) 2 S.C.C. 296 has held that false police complaint and consequent loss of reputation and standing in society at the instance of one’s spouse would amount to cruelty. On the same ground, since the wife has given a false complaint to police and that amounts to mental cruelty and on that ground also, the husband is entitled for divorce.

26. Learned senior counsel further relied upon a decision in Devram Bilve v. Indumati ((2000) 10 S.C.C. 540), wherein the Supreme Court has held that letters written to superiors containing false and baseless allegations amount to cruelty.Admittedly, the counsel submitted, the respondent/wifehas written letters to the superiors of the husband alleging falsity; therefore, that act amounts to cruelty and therefore, in any even, the Family Court should have granted divorce, as prayed for.

27. Learned counsel for the respondent relies upon a decision of the Supreme Court reported in Bipinchandra Shah v. Prabhavati (A.I.R.1957 S.C. 176), where the concept of desertion has been elaborately dealt with; he mainly relied upon the following passage,

” Hence, if a deserting spouse takes advantage of the locus poenitentiae thus provided by law and decides to come back to the deserted spouse by a bona fide offer of resuming the matrimonial home with all the implications of marital life, before the statutory period is out or even after the lapse of that period, unless proceedings for divorce have been commenced, desertion comes to an end and if the deserted spouse unreasonably refuses to offer, the latter may be in desertion and not the former.Hence, it is necessary that during all the period that there has been a desertion, the deserted spouse must affirm the marriage and be ready and willing to resume married life on such conditions as may be reasonable.It is also well settled that in proceedings for divorce the plaintiff must prove the offence of desertion, like and other matrimonial offence, beyond all reasonable doubt.Hence, though corroboration is not required as an absolute rule of law the Courts insist upon corroborative evidence, unless its absence is accounted for to the satisfaction of the Court. ”

Therefore, the counsel for the respondent submitted that since the wife had expressed her desire to go back to the marital house, the desertion comes to an end and applying that principle to the present case, since the wife has filed a petition for restitution of conjugal rights, it has to be concluded that desertion has come to an end.

28.This argument of the counsel for the respondent is not acceptable. For the reasons stated above, the “offer” of the wife was not genuine.Therefore, the desertion of the wife has not come to an on the date when the petition for divorce was filed by the husband.Therefore, this decision will not help the respondent, in any manner.

29. According to the Family Court, when the wifeexpressed her desire to join him and to go along with him to Delhi on the advice of the Division Bench, the desertion got terminated. The Court has held that” As opined by the Family Court in its judgment, dated 5.9.1988, the wife aptly agreed to resume cohabitation forgetting the past and the husband alone negatived it. “According to the Family Court, the animus revertendi on the part of the wife was clearly established; therefore, that point was also decided in favour of the wife and against the husband.There is no judgment dated 5.9.1988 by any of the Courts. Presumably,the Family Court refers to the order dated 5.9.1990 whereby the Family Court ordered “the wife shall live away from her husband for a period of nine months.”

30.The Family Court refers to the ingredients to the act of desertion in an earlier paragraph, that “animus” and “factum deserendi” must be proved. The Court has come to the conclusion that it cannot be stated that the wife had “animus deserendi” and therefore, the Court has held that it proves the animus revertendi and therefore, it came to the conclusion that desertion has not been proved against the wife. Admittedly, after 30.5.1988, the parties never resided together; that is, the wife had not returned to the matrimonial home after that date.Assuming for the sake of argument that the wife had the intention of resuming cohabitation, that alone is not sufficient. Admittedly, the wife left the house with her father and thereafter never returned.The case of the husband is that the wife had left the house with the intention to leave the matrimonial home; therefore,the mere statement/expression of intention to return is not sufficient; that is, mere animus revertendi is not sufficient to terminate the act of desertion; that intention must be coupled with factum revertendi, that is the wife should have in fact returned to the matrimonial home. In the above circumstances, it cannot be held that the desertion had come to an end.The conclusion of the Family Court that the expression of willingness to come back to the home is sufficient and it terminates the desertion is erroneous. Therefore, the finding of the Family Court regarding points-1 and 2 is not legally sustainable and hence are liable to be set aside and hence set aside.

31. By order dated 5.9.1990 as seen from Ex.P.11,the Family Court, Pondicherry has passed a very strange order of judicial separation for a period of nine months.As per Section-10 of the Hindu Marriage Act, either party to a marriage, whether solemnized before or after the commencement of this Act, may present a petition praying for a decree for judicial separation on any of the grounds specified in sub-section(1) of Section 13 of the Act and the Court can come to a conclusion that whether the petitioner was entitled to a decree of judicial separation or not.If the Court comes to the conclusion that there are sufficient grounds to grant judicial separation, it shall grant judicial separation.If it finds that the grounds are not sufficient to grant judicial separation, it has to dismiss the petition for judicial separation.It is not legal for any Court to grant a decree for judicial separation only for a period of nine months or for any specified period.

32. Aggrieved by the common order passed by the Family Court on 5.9.1990 in M.O.P.25 of 1990 and 182 of 1990, the wife filed two appeals in A.A.O.1016 of 1990 and 1017 of 1990; one appeal was to enhance the award of Rs.600/- per month as maintenance for the child and another appeal was against the grant of judicial separation only for a limited period of nine months.A Division Bench of this Court has dismissed those appeals on 8.10.1991 holding that it was only an interim order since the case was posted for further hearing; it did not go into the merits of the order.Thereafter, on 28.2.1992, the Family Court, Pondicherry dismissed M.O.P.25 of 1990 for the reason that the husband filed a petition for divorce; on the same day, M.O.P.182 of 1990 was dismissed as not pressed.No appeal was filed against the dismissal of M.O.P.25 of 1990 by the wife.

33. Therefore, the present C.M.A.No.1550 of 1995 (filed against the dismissal of M.O.P.94 of 1991) M.O.P.94 of 1991 has to be decided on the basis of evidence on record. Admittedly the wife left the matrimonial home at Delhi on 30th May, 1988.The reason stated by her, viz., that was due to cruelty of the husband for the reasonsalready stated is not acceptable; Therefore, the act of leaving the matrimonial home by the wife is not justifiable under Section 13(1) of the Hindu Marriage Act.Even thereafter, the husband filed a petition for restitution of conjugal rights, as early as 5.9.1988 before the Delhi Court; but the wife resisted it and filed a petition for judicial separation before the Family Court, Pondicherry. Thereafter, the husband withdrew the petition filed before the Delhi High Court and filed a similar petition for restitution of conjugal rights before the Family Court, Pondicherry.But even then, the wife did not withdraw her petition for judicial separation, but contested her petition for judicial separation. This proves beyond any doubt that the wife had no intention of returning to the matrimonial home.Therefore, there was no animus revertendi for the wife on any date.This one factor is sufficient to hold that the Family Court has come to an erroneous conclusion that the wife was always willing to join the matrimonial home.

34. On the other hand, the stand of the wife was that she was afraid to go to Delhi and join the matrimonial home because according to her, the intention of the husband was to take her to Delhi only to kill her.She also alleges that during the stay at Delhi before her return to Pondicherry in 1988, there was an attempt by the husband to set her on fire pouring kerosene, but in her evidence, the wife admits that in Ex.P.9,she has not stated that the husband filed the petition for restitution of conjugal rights with intention to kill her in Delhi.If it was true that the husband attempted to kill by pouring kerosene on her when they were living in Delhi, she would not have omitted to say that in her petition in M.O.P.No.25 of 1990 or in the counter in M.O.P.182 of 1990. Therefore, the reason given by the wife does not appear to be true. This conclusion is fortified by subsequent letters as referred already that the father of the wife wanted him to take a job at Pondicherry and he also applied for a post in Pondicherry University on such advice.Thus, the reason given by the wife for not willing to join the husband when he filed a petition for restitution of conjugal rights does not appear to be true.

35. The other reason alleged by the wife for separate living was that the husband was demanding money on various occasions and that he alleged that the wife had abnormal relationship with her father.In so far as the demand of money is concerned, that cannot be the reason for living separately when it is not coupled with any other act of cruelty.With respect to the “abnormal relationship”, the husband has deposed in the cross-examination as follows:

” By abnormal relationship as stated in the petition, I meant that my father-in-law could not leave his daughter and my wife could not live without her father. But after marriage, one does not accept so much attachment towards her father.Except this, I do not mean anything. ”

Therefore, such a statement does not amount to cruelty within the meaning of Section 13(1)(i-a) of the Hindu Marriage Act.Therefore, the reasons stated by the wife for living separately is not a justifiable reasons under the Act. Therefore, the act of the wife, withdrawal from the matrimonial home amounts to desertion within the meaning of Section 13(1) of the Hindu marriage Act, as held by the Supreme Court in the case G.V.N. Kameswara Rao v. G.Jabilla (2002(2)S.C.C. 296).

36.The High Court in C.M.A.1021 of 1992 set aside the earlier order of the Court and remanded the case for fresh disposal.In that, the High Court has held that,

“Judicial separation for a period of nine months ordered by the Family Court has to be excluded while calculating the period of two years immediately preceeding the date of filing of the petition for divorce on the ground of desertion.So calculated, the present petition for divorce in M.O.P.94 of 1991 does not satisfy the two years’ period.Therefore, the petition is liable to be dismissed on that ground alone.”

Even excluding the nine months, the period of two years was complete on the date when the petition was filed. This Court has been misled to believe that the two years period was not complete on that date.Admittedly, the wife left the matrimonial home on 30th May, 1988.M.O.P.94 of 1991 has been filed on 12.6.1991.Therefore, it is 3 years and 12 days from 30.5.1988.Even excluding nine months’ period of judicial separation, it comes to 2 years, 3 months and 12 days.Therefore, viewed from any angle, this petition has been filed only after completion of two years immediately before the presentation of the petition. Since the petition has been presented after two years, it should have been allowed by the Family Court. C.M.A.No.1758 of 1996:

37. Admittedly, the wife has given police complaint against the husband containing false allegations.The wife has also written letters to the higher officers of the department in which the husband was working; the allegations stated therein was not proved by the wife and hence such act of the wife amounts to cruelty within the meaning of Section 13(1)(i-a) of the Hindu Marriage Act as per the judgment of the Supreme Court in Devram Bilve v. Indumati ((2000) 10 S.C.C. 540).

38. Therefore, the dismissal of the petition for divorce is not legally sustainable.Hence the judgment of the Family Court is set aside the petition, M.O.P.94 of 1991 is allowed as prayed for.

39. As seen already, initially it was the husband who filed the petition for restitution of conjugal rights in M.O.P.182 of 1990, but that was opposed by the wife by filing a petition in M.O.P.25 of 1990 for judicial separation and both the petitions were dismissed.Therefore, the present M.O.P.110 of 1995 has been filed by the wife for restitution of conjugal rights long after, the husband filed the petition in M.O.P.94 of 1991 for dissolution of marriage on the ground of desertion.Even assuming that the wife’s intention to join the matrimonial home terminates the act of desertion, that should have been expressed before the expiry of two years from the date of leaving the home or atleast before a petition for divorce was filed by the husband as per the decision of the Supreme Court relied on by the counsel for the respondent, Bipinchandra Shah v. Prabavathi (A.I.R.1957 S.C. 176).Inasmuch as the husband had filed the petition for divorce already in the year 1991, the offer of the wife to join the matrimonial home by filing the present petition for restitution of conjugal rights in the year, 1995 does not help the wife.It is also to be seen that the wife filed the petition in M.O.P.110 of 1995 for restitution of conjugal rights only after the Family Court had dismissed the petition in M.O.P.No.94 of 1991 filed by the husband for divorce was dismissed on 14.11.1994. The finding of the Court that when the wife expressed her willingness to go to Delhi before the Division Bench of this Court terminates the desertion, if any, is not legally sustainable for the reasons stated above.Therefore the grant of decree of restitution of conjugal rights is liable to be set aside and hence set aside.Consequently, this appeal is allowed.

40. Admittedly, the minor son is liable to be maintained by the husband.Considering the fact that the child is studying and the fact that the husband/father of the minor is a highly placed Central Government employee and the award of Rs.1,000/- per month is reasonable.Hence, we confirm the order of maintenance towards the son.

41. In so far as the maintenance of the wife, the Family Court awarded maintenance of Rs.2,000/- per month, taking into account the salary of the husband.Section 25 1) of the Hindu Marriage Act reads as follows:

“S.25. Permanent alimony and maintenance:

(1) Any court exercising jurisdiction under this Act, may, at the time of passing any decree or at any time subsequent thereto, on application made to it for the purpose by either the wife or the husband, as the case may be, order that the respondent shall pay to the applicant for her or his maintenance and support such gross sum or such monthly or periodical sum for a term not exceeding the life of the applicant as, having regard to the respondent’s own income and other property, if any, the income and other property of the applicant (the conduct of the parties and other circumstances of the case), it may seem to the Court to be just, and any such payment may be secured, if necessary, by a charge on the immovable property of the respondent. ”

42. This Court in the case Rajagopalan v. Kamalammal (A.I.R. 1982, Madras, 187) has held that under Section 25 of the Hindu Marriage Act, permanent alimony can be granted even to an erring spouse.Therefore, even though the decree of divorce is granted on the ground of desertion by the wife and hence the wife is the erring spouse, yet it does not preclude the Court from passing the order of maintenance.After considering this provision and the above decision as well as the the fact that the husband is the highly placed civil servant in the Central Government, the award of maintenance granted by the Family Court is confirmed. With this modification, this appeal is allowed.

43. In the result, C.M.A.No.1550 of 1995 is allowed and C.M.A.No.1758 of 1996 is partly allowed.

The post P.Kalyanasundaram Vs. K.Paquialatchamy appeared first on B&B Associates LLP.

J U D G M E N T

BHAN, J.

Civil Appeal Nos. 8232 of 1996, 8231 of 1996, 9237 and 10208 of 1996 arising from a common judgment of the High Court involving the same question of law are taken up for disposal together. Illustrative facts are taken from Civil Appeal No. 8232 of 1996.

Tata Oil Mills Co. Ltd. (Transferor Company) was incorporated on 10.12.1917 under the Companies Act, 1913. Hindustan Lever Ltd. (Transferee Company) was incorporated under the same Act on 17.10.1933. The scheme of amalgamation of transferor company with the transferee company was formulated and approved by the Board of Directors of respective companies on 19.3.1993. On 3.3.1994 the scheme of amalgamation of the transferor company with the transferee company was sanctioned with certain modifications by a Single Judge of the High Court. Appeal filed against the judgment and order of the Single Judge was rejected by the Division Bench on 18.5.1994. Special leave petition against the above judgment of the Division Bench was dismissed by this Court on 24.10.1994. This judgment is reported in Hindustan Lever Employees’ Union Vs. Hindustan Lever Ltd. & Ors., 1995 Suppl. (1) SCC 499.

The drawn up order of amalgamation of transferor company with transferee company was approved by the High Court on 24.11.1994. On presentation of the certified copy of the Court’s order the Registrar of Companies, Maharashtra issued a certificate amalgamating the two companies.

In view of the stamp duty sought to be levied on the order of amalgamation passed under Section 394 of the Companies Act, 1956 (hereinafter referred to as “the Act”) the appellant filed writ petition in the Bombay High Court challenging the constitutional validity of the provisions of Section 2(g)(iv) of the Bombay Stamp Act, 1958 (hereinafter referred to as “the Stamp Act”). By the impugned order the Division Bench of the High Court has dismissed the writ petition. The validity of Section 2(g)(iv) of the Stamp Act has been upheld. Section 2(g) of the Stamp Act which defines “Conveyance” reads:

“2. In this Act, unless there is anything repugnant in the subject or context.-

xxx xxx

(g) “Conveyance” includes,.-

(i) a conveyance on sale,

(ii) every instrument,

(iii) every decree or final order of any Civil Court,

(iv) every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of amalgamation or reconstruction of companies; and every order made by the Reserve Bank of India under Section 44A of the Banking Regulation Act, 1949 in respect of amalgamation or reconstruction of Banking companies by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any other person, inter vivos, and which is not otherwise specifically provided for by Schedule I;

Explanation.- An instrument whereby a co-owner of any property transfers his interest to another co- owner of the property and which is not an instrument of partition, shall, for the purposes of this clause, be deemed to be an instrument by which property is transferred inter vivos; ”

It would be seen that conveyance includes a conveyance on sale as well as every instrument. Clause (g)(iii) was added by the Maharashtra Act No. 27 of 1985 which came into operation w.e.f. 10.12.1985. It provides that conveyance includes every decree or final order of any civil court. Clause (g) (iv) was added by the Maharashtra Act No. 17 of 1993 which came into operation w.e.f. 1.4.1993.

Section 2(g)(iii) came up for interpretation before this Court in the case of Ruby Sales and Services (P) Ltd. & Anr. Vs. State of Maharashtra & Ors., 1994 (1) SCC 531. It was held that the definition of “conveyance” and “instrument” starts with the expression “includes” which shows that the definition is very wide which would include a consent decree as well. That the sub-clause (iii) of Section 2(g) was introduced out of abundant caution and it does not mean that the consent decree was not otherwise covered by the definition in Section 2 (g) or 2(l) of the Stamp Act. That there was no particular pleasure in merely going by the label but what is decisive is the terms of the document. It was clear from the terms of the consent decree that it is also an instrument under which the property has been transferred by one person to another. It was observed:

“There is no particular pleasure in merely going by the label but what is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an “instrument” under which title has been passed over to the appellants/plaintiffs. It is a live document transferring the property in dispute from the defendants to the plaintiffs.

Thus the position becomes clear that the consent decree falls under the definitions of “conveyance” as well as “instrument”.”

By Act No. 17 of 1993, the Legislature has added Section 2(g)(iv) to include every order passed by the High Court under Section 394 of the Companies Act in respect of amalgamation of the companies. Section 394 of the Companies Act reads:

“394. Provisions for facilitating reconstruction and amalgamation of companies. \026 (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court \026

(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and

(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a “transferor company”) is to be transferred to another company (in this section referred to as “the transferee company”);

the court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:-

(i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company;

(ii) the allotment or appropriation by the transferee company of any shares, debentures, policies or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(iv) the dissolution, without windingup, of any transferor company;

(v) the provision to be made for any persons, who within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and

(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:

(Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being woundup, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report from the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:

Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the Court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.)

(2) Where an order under this Section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within {thirty} days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.

If default is made in complying with this sub- section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to {five hundred rupees}.

(4) In this section\026

(a) “property” includes property, rights and powers of every description; and “liabilities” includes duties of every description; and

(b) “transferee company” does not include any company, other than a company within the meaning of this Act; but “transferor company” includes any body corporate, whether a company within the meaning of this Act or not.”
[Emphasis supplied]

The issue which is debated before us is: (1) whether the State Legislature had the legislative competence to impose stamp duty on the order of amalgamation passed by a court? and (2) whether an order sanctioning a scheme of amalgamation under Section 394 read with Section 391 of the Companies Act, 1956, is liable to be stamped in accordance with the provisions of the Bombay Stamp Act in its application in the State of Maharashtra?

Section 394 provides that application and order of amalgamation under Section 394 is based on compromise or arrangement which has been proposed for the purpose of amalgamation of two or more companies. The amalgamation scheme, which is an agreement between the companies is presented before the Court and the Court passes an appropriate order sanctioning the compromise or arrangement. The foundation or the basis for passing an order of amalgamation is agreement between two or more companies. Under the Scheme of amalgamation, the whole or any part of the undertaking, properties or liability of any company concerned in the scheme is to be transferred to the other company. The company whose property is transferred would be the transferor company and the company to whom property is transferred would be considered as the transferee company. The scheme of amalgamation has its genesis in an agreement between the prescribed majority of shareholders and creditors of the transferor company with the prescribed majority of shareholders and creditors of the transferee company. The intended transfer is a voluntary act of the contracting parties.

The transfer has all the trappings of a sale. The transfer is effected by an order of the Court. The proposed compromise or arrangement is subject to verification by the Court as provided therein. First is that the scheme of compromise or arrangement proposed for the purposes of amalgamation or in connection therewith, shall not be sanctioned unless the Court has received a report from the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interest of its Members or to public interest and; secondly that the order of resolution of transfer of company shall not be made unless official liquidator on scrutiny of the books and papers of the Company makes a report to the Court that the affairs of the company had not been conducted in a manner prejudicial to the interest of its members or to public interest.

By virtue of provisions of section 391 of the Companies Act a scheme sanctioned by the Court is statutorily binding on all its shareholders and creditors including those who dissented from or were opposed to the scheme being sanctioned. Since by law a procedure has been prescribed by which every shareholder and creditor in the absence of individual agreement, gets bound by the scheme, which would otherwise be necessary to give its validity, the two provisos have been introduced casting a duty on the Court to satisfy itself that the affairs of the company were/are not being conducted in a manner prejudicial to the interest of its members or to the public interest. The basic principle underlying these provisos is none other than the broad and general principle inherent in any compromise or settlement entered into between the parties, the same being that it should not be unfair, contrary to the public policy, unconscionable or against the law. There is no adjudication as such. Any modification proposed by the Court in the scheme is also subject to its being accepted by the transferor and the transferee company. If any one of them objects to the modifications suggested by the Court then the scheme would not be sanctioned. The scheme would be sanctioned only if there is an acceptance to the modification proposed by the Court to the scheme by the transferor as well as transferee company. On acceptance of the same it gets incorporated in the compromise or arrangement arrived at between the two companies. Modification in the scheme becomes a part of the compromise or arrangement arrived at between the parties.

While exercising its power in sanctioning a scheme of agreement, the Court has to examine as to whether the provisions of the statute have been complied with. Once the Court finds that the parameters set out in Section 394 of the Companies Act have been met then the Court would have no further jurisdiction to sit in appeal over the commercial wisdom of the class of persons who with their eyes open give their approval, even if, in the view of the Court better scheme could have been framed. This aspect was examined in detail by this Court in Miheer H. Mafatlal Vs. Mafatlal Industries Ltd., 1997 (1) SCC 579. The Court laid down the following broad contours of the jurisdiction of the company court in granting sanction to the scheme as follows:-

1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held.

2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2).

3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.

4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1).

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

6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not unconscionable, nor contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same.

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

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

9. Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. Consequently the Company Court’s jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the Company Court can also be culled out from the provisions of Section 392. Of course this section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. The supervisor cannot ever be treated as the author or a policy-maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eyes and fully informed about the pros and cons of the scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement.

Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are:

1. That the order passed by the Court amalgamating the company is based on a compromise or arrangement arrived at between the
parties; and

2. That the jurisdiction of the company court while sanctioning the scheme is supervisory only, i.e., to observe that the procedure set
out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy.

The Court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement
arrived at between the parties. The role of the court is that of an umpire in a game to see that the teams play their role as per rules and do not overstep the limits. Subject to that how best the game is to be played is left to the players and not to the umpire.

Both these principles indicate that there is no adjudication by the court on the merits as such.

In Hindustan Lever Employees Union case (supra) it has been held by this Court that Section 394 casts an obligation on the Court to be satisfied that the scheme of amalgamation or merger was not contrary to the public interest; the basic principle of such satisfaction is none other than the broad and general principle inherent in any compromise or settlement entered between the parties that it should not be unfair or contrary to public policy or unconscionable or that the scheme should not be a device to evade the law.

The term “instrument” has been defined in Section 2(l) of the Bombay Stamp Act 1958 which is as under:-

” “instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt;”

This definition of instrument is not amended by the Maharashtra Act of 17 of 1993. The word “Instrument” is defined to mean, every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debenture proxy and receipt. The recital in the scheme of amalgamation as well as the order of the High Court under Section 394 of the Companies Act, declares, that, upon such order of High Court the undertaking of the transferor company shall stand transferred to the transferee company with all its movable, immovable and tangible assets to the transferee company without any further act or deed. Sub-section 3 of Section 394 provides that the certified copy of the Order of the Court has to be presented before the Registrar of companies within 30 days for registration. And in default any officer of the company, who is in default, becomes liable to be punished and fined, which may extend up to Rs.500/-. Section 391 (3) provides that an order made by the court under sub-section (2) of Section 391 shall not have effect till a certified copy of the order has been filed with the Registrar. On presentation of the certified copy of order, the Registrar of the Company certifies that the transferor company stands amalgamated with the transferee company along with all its assets and liabilities. Thus the amalgamation scheme sanctioned by the Court would be an “instrument” within the meaning of Section 2(i). By the said “instrument” the properties are transferred from the transferor company to the transferee company, the basis of which is the compromise or arrangement arrived at between the two companies.

Mr. Anil B. Diwan and. Mr. Andhyarajuna, learned senior counsels have appeared for the appellants in these appeals. The submissions made by them are on the similar lines. It was contended by the learned counsels appearing for the appellants that an order of amalgamation under Section 394 is not an order simplicitor of transfer of property by an act of parties with imprimatur of the Court. It is an order made by the Court after judicial scrutiny and transfer of the property under such an order would not be an act of parties to which the Court puts its seal of approval. Stamp duty can be levied on “documents” or “instruments”. The Order of the Court in exercise of its judicial functions is not “a document” or an “instrument”. Once the Court passes an order or a decree, it is required to be implemented or executed as such. The same cannot be subjected to stamp duty otherwise the orders passed by the Courts would become subject to interference by the revenue authorities and would not be admissible in evidence unless the stamp duty is paid.

It is difficult to subscribe the view propounded by the learned counsels for the appellants. As stated earlier, the order of amalgamation is based on a compromise or an arrangement arrived at between the two companies. No individual living being owns the company. Each shareholder is the owner of the company to the extent of his share holding. By enacting Sections 391 to 394 a method has been devised to give effect to the will of the prescribed majority of shareholders/ creditors. Even in the absence of individual agreement by all the shareholders and creditors the decision of the majority prescribed in Section 391 (2) binds all the creditors and the shareholders. The Scheme after being sanctioned by the Court binds all its creditors, members and shareholders including even those who were opposed to the scheme being sanctioned. It binds the company as well. While exercising its power in sanctioning the scheme of amalgamation, the Court is to satisfy itself that the provisions of statute have been complied with. That the class was fairly represented by those who attended the meeting and that the statutory majority was acting bona-fide and not in an oppressive manner. That the arrangement is such as which a prudent, intelligent or honest man or a member of class concerned and acting in respect of the interest might reasonably would take. While examining as to whether the majority was acting bona-fide the Court would satisfy itself to the effect that the affairs of the company were not being conducted in the manner prejudicial to the interest of its members or to public interest. The basic principle underlying such a situation is none other than the broad and general principle inherent in any compromise or settlement entered into between the parties the same being that it should not be unfair, contrary to public policy and unconscionable or against the law.

Orders passed by the Court resulting in transferring the rights in property have been subjected to levy of stamp duty in several situations. It is there from the date of the inception of the Indian Stamp Act 1899. Section 2 (m) of the Indian Stamp Act 1899 defines “instrument of partition” to mean any instrument whereby co-owners of any property divide or agree to divide such property in severalty, and includes also a final order for effecting a partition passed by any revenue authority or any Civil Court and an award by an arbitrator directing a partition. This provision specifically provide that any final order effecting partition by any Court, Revenue Authority or award made by the Arbitrator directing partition would be an instrument of partition.

This Court in Purshottam H. Jadve and Ors. Vs. V.B. Potdar, 1966 (2) SCR 353, considered as to whether an award made by the Industrial Tribunal could be considered as an instrument. After considering the relevant provisions of the law it was held that the word “instrument” would include awards made by the Industrial Tribunal.

In the case of The Commissioner of Inland Revenue Vs. G. Anous & Co. & Anr. (1891) \026 Vol. XXIII Queen’s Bench Division 579, considered as to what interpretation has to be placed upon the expression “conveyance on sale” with regard to Section 70 of the stamp Act, 1899 and held:-

“The term conveyance on sale includes every instrument and every decree or order of any Court or of any commissioners, whereby any property upon
the sale thereof is legally or equitably transferred to or vested in the purchaser or any other person on his behalf or by his direction.”

The Court held that the thing, which is made liable to stamp duty is the “instrument”. It is not a transaction of purchase and sale, which is struck at, it is the “instrument” whereby the purchase and sale are affected which is struck at. It is the “instrument” whereby any property upon the sale thereof is legally or equitably transferred and the taxation is confined only to the instrument whereby the property is transferred. If a contract of purchase or sale or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case would not fall within the Section and no tax can be imposed. Taxation is confined to the instrument by which the property is transferred legally and equitably transferred.

Point as to whether the stamp duty was leviable on the Court order sanctioning the scheme of amalgamation was considered at length in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners 1971 (1) All England Law Reports 135. The point which arose for determination as to whether the stamp duty was payable on the order of the Judge sanctioning the scheme of arrangement under Section 206 of the Companies Act, it was held:-

” It follows that it is the court order that effects the transfer; and this is nonetheless so because the scheme is not operative until an office copy has been
delivered to the Registrar of Companies for registration, for the court order itself ordered that to be done and the Act so provides; nor because London
has still to cause the name of Sun Alliance to be entered on to the register as the holder of the shares. The registration of the transferee occurs in every case where a transfer is executed, and merely perfects the title of the transferee. The same thing occurs in the case of registered land, where one finds a transfer and subsequent registration. I have therefore come to the conclusion that by the court order the shares were transferred to Sun Alliance, or, to use the words of s. 54, by that order property was transferred to a purchaser.”

Expression “conveyance on sale” as provided in Section 54 of the Stamp Act, 1891 is similar to Section 2 (g) of the Bombay Stamp Act. The expression “conveyance on sale” as defined in the said Section includes every instrument, and every decree or order of any Court or any Commissioner, whereby any property, or a estate or interest in any property, upon the sale thereof was transferred or vested in the purchaser, or any other persons on his behalf and on his direction.

The Court further considered as to whether the order of the judge is an ’instrument’ executed in any part of the United Kingdom for the purposes of Section 14(4) of the Stamp Act, 1891; it was held that it was an instrument executed in the United Kingdom within the meaning of Section 14(4) of the
Stamp Act 1891. It was further held that order of the Court was liable to stamp duty as it resulted in transferring the property and that the order passed by any Court which results in transfer of property would be an instrument as it
includes every document.

Section 391 (2) of the Companies Act, 1956 provides as follows: “391(2). If a majority in number representing three- fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed, under the rules made under Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company:

Provided that no order sanctioning any compromise or arrangement shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor’s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.”

Section 394 (2) of the Companies Act, 1956 provides that the properties and liabilities of the transferor company stand transferred to the transferee company by virtue of an order of court. The statutory form of an order under Section 394 (2) of the Companies Act provides for three different Schedules in order to incorporate therein the properties transferred. It would be useful to take notice of the statutory form of an order under Section 394 (2) of the Companies Act.

“THE COMPANAIES (COURT) RULES, 1959 FORM NO. 42
(See rule 84)

Upon the above petition and application coming on for further hearing on\005 upon reading etc, and upon hearing, etc.

THIS COURT DOTH ORDER

(1) That all the property, rights and powers of the Transferor company specified in the first, second and third parts of the Schedule hereto and all other property, rights and powers of the transferor company be transferred without further act or deed to the transferee company and accordingly the same shall pursuant to section 394(2) of the Companies Act, 1956, be transferred to and vest in the transferee company for all the estate and interest of the transferor company therein but subject nevertheless to all charges now affecting the same other than (here set out any charges which by virtue of the compromise or arrangement are cease to have effect); and

(2) That all the liabilities and duties of the transferor company be transferred without further act or deed to the transferee company and accordingly the same shall, pursuant to section 394(2) of the Companies Act, 1956, be transferred to and become the liabilities and duties of the transferee company ;and

(3) That all proceeding now pending by or against the transferor company be continued by or against the transferee company; and

(4) That the transferee company do without further application allot to such members of the transferor company as have not given such notice of dissent as is required by clause\005.of the compromise or arrangement herein the shares in the transferee company to which they are entitled under the said compromise or arrangement; and

(5) That the transferor company do within 14 days after the date of this order cause a certified copy of this order to be delivered to the Registrar of Companies for registration and on such certified copy being so delivered the transferor company shall be dissolved and the Registrar of Companies shall place all documents relating to the transferor company , and registered with him on the file kept by him in relation to the transferee company and the files relating to the said two companies shall be consolidated accordingly; and

(6) That any person interested shall be at liberty to apply to the court in the above matter for any directions that may be necessary.

SCHEDULE

Part I

(Insert a short description of the freehold property of the transferor company )

Part II

(Insert a short description of the leasehold property of the transferor company)

Part III

(Insert a short description of all stocks, shares, debentures and other charges in action of the transferor company )”

(Emphasis supplied)

The transfer of assets and liabilities takes effect by an order of the Court. The order also provides for passing of consideration from the transferee company to the shareholders of the transferor company. The consideration for sale in a transaction like this is the shares. The share exchange ratio is decided on the basis of number of factors including the value of net assets of the transferor and transferee company. To arrive at this figure of net assets the liabilities have to be set off against the gross value of the assets. The share value is fixed. The properties belong to the company and the company belongs to the shareholders. Once the shareholders of the transferee company receive the consideration it would be deemed as if the owner has received the consideration.

Strong reliance was placed by the counsel for the appellants on the judgment of this Court in M/s. General Radio and Appliances Co. Ltd. and Ors Vs. M.A. Khader (Dead) By Lrs., 1986 (2) SCC 656. Transferor- company had taken a premises on rent with the stipulation that the tenant would not sublet the premises without the written consent of the landlord. After sanctioning of the scheme for amalgamation by the Court, the tenanted premises came to be transferred to the transferee company. Landlord filed the eviction suit. The question before the Court was whether the amalgamation amounted to transfer of tenant company’s right under the lease by way of subletting and as such violative of the provisions of Section 10(ii)(a) of the A.P. Buildings (Lease, Rent and Eviction) control Act as also the terms of the rent agreement. It was observed that the A.P. Act prohibited in specific terms both subletting as well as transfer or assignment of the interest of the tenant. By the order of amalgamation, the interest, rights of the transferor company in all its properties including leasehold interest tenancy rights and possession were transferred and vested in the transferee company voluntarily and the transferor company was dissolved and ceased to be exist for all practical purposes in the eye of law. This amounted to contravention of Section 10 (ii)(a) of the A.P. Rent Act as well as of the terms of the said rent agreement thereby making the transferee company liable to be evicted from the tenanted premises. Though, the court held that the transfer was voluntary but still to test the argument and treating it to be involuntary it was observed that there was no express provision in the A.P. Rent Act that in case of involuntary transfer or transfer of rights by virtue of a scheme of amalgamation sanctioned by the court under Section 394 of the Companies Act will not come within the purview of Section 10(ii) (a) of the A.P. Rent Act, and, therefore, the transferee company is required to be evicted. Even in the case of involuntary transfer or transfer of tenancy rights by virtue of scheme of amalgamation sanctioned by the court by its order under Sections 391 and 394 of the Companies Act the transfer will come within the purview of Section 10(ii) (a) of the A.P. Rent Act. It was observed that since the order of amalgamation had been made on the basis of a petition filed by the transferor company it could not be said that it was an involuntary transfer effected by the order of the Court. Instead of supporting the contention of the appellant this decision indicates to the contrary as the Court held that order of transfer of property by a scheme of amalgamation was not “involuntary” meaning thereby it was a voluntary act by agreement between the parties. In any case, the Court decided the dispute between the parties in the context of specific provisions of the A.P. Rent Act and would have no applicability to the point which is being examined by the present case.

A document creating or transferring a right is an instrument. Can it be said that an order effectuating the transfer is a document? The answer has been given in the affirmative by this in Court in Haji Sk. Subhan Vs. Madhorao, AIR 1962 SC 1230, wherein it was held that the question is whether the word “document” includes a decree of the Court. It was held that there was no good reason why a decree of the court, when it affects the proprietary rights and is in relation to them should not be included in this expression. This question more pointedly arose before this Court in Ruby Sales and services (P) Ltd., (supra). In that case in a suit for specific performance the property was conveyed to the vendee by a consent decree.

The question arose whether the consent decree is an instrument and liable to be stamped. The consent decree contained a recital to the effect that “this decree does operate as the conveyance from the defendants in favour of the plaintiffs in respect of the said property more particularly described in exhibit A to the
plaint.” The Court held that “there is no particular pleasure in merely going by the label but which is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an “instrument” under which title has been passed over to the appellant/plaintiffs. It is a live document transferring the property in dispute from the defendants to the plaintiffs.” The aforesaid decree was based on an agreement between the parties. So is the
case with an order under Section 394 of the Companies Act which is also based on an agreement between the transferor company and the transferee company.

Learned counsel for the appellants argued that the Ruby Sales and services (P) Ltd., (supra) was a case of consent decree where the term of the settlement was admittedly a conveyance, transferring property alone. That the order passed by the High Court under Section 394 of the Companies Act cannot be equated with a consent order. This submission cannot be accepted. The Court held that consent decree was an instrument. It was not held to be an instrument because it was a consent decree. It was held to be an instrument because it conveyed the title in the property in dispute from the defendant to the plaintiff. It was held to be an instrument because it had the effect of conveying the title and not because it was a consent decree. Once this definition is kept in view it would be clear that consent or no consent when the decree or order of the Court purports to transfer title in the property, it becomes an instrument. Court negatived the submission made, that, prior to introduction of Section 2 (g)(iii) the consent decree was not included in the definition of “conveyance” and “instrument” was negatived by observing “it appears to us that the amendment was made out of abundant caution and it does not mean that the consent decree was not otherwise covered.” It clearly shows that the Court was of the opinion that consent decree which purports to convey the title in the property was in an instrument liable for stamp duty at all times and it was only by way of abundant caution that the Legislature had included the consent decree in the definition of the word “conveyance”.

In view of the aforesaid discussion, we hold that the order passed by the Court under Section 394 of the Companies Act is based upon the compromise
between two or more companies. Function of the Court while sanctioning the compromise or arrangement is limited to oversee that the compromise or arrangement arrived at is lawful and that the affairs of the company were not conducted in a manner prejudicial to the interest of its members or to public interest that is to say it should not be unfair or contrary to public policy or unconscionable. Once these things are satisfied the scheme has to be sanctioned as per the compromise arrived at between the parties. It is an instrument which transfers the properties and would fall within the definition of Section 2 (1) of the Bombay Stamp Act which includes every document by which any right or liability is transferred. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44, List III of the seventh Schedule of the Constitution of India and prescribe rates of stamp duty under Entry 63, List II.

It was next contended that the impugned duty is not a duty upon instrument but it is in reality a duty on transfer of property which the State Legislature is not competent to impose.

In Welfare Association, A.R.P., Maharahstra & Anr. Vs. Ranjit P. Gohil & Ors., 2003 (2) Scale 288, it was held that there is a presumption that the Legislature does not exceed its jurisdiction. A statute should be construed so as to make it effective and operative on the principle expressed in the maxim “ut res megis valeat quam pereat”. (It is better to validate a thing than to invalidate it). The burden of establishing that the Act is within the competence of the Legislature, or that it has transgressed other constitutional mandates is always on the person who challenges its vires. That the fountain source of legislative power exercised by the Parliament or the State Legislature is not Schedule Seven; the fountain source is Article 246 and other provisions of the Constitution. The function of the three Lists in Seventh Schedule is merely to demarcate legislative fields between Parliament and State Legislatures and not to confer any legislative power. The several entries mentioned in the three Lists are fields of legislation. While exercising the legislative competence of a Legislature in regard to a particular enactment with reference to the entries in the various lists it is necessary to examine the pith and substance of the Act and to find out if the matter comes substantially within the item in the list. The express words employed in an entry would necessarily include incidental and ancillary matters so as to make the legislation effective. The scheme of the Act under scrutiny, its object and purpose, its true nature and character and the pith and substance of the legislation are to be focused at.

If the matter is within the exclusive competence of State Legislature, i.e., List II then the Union Legislature is prohibited to make any law with regard to the same. Similarly, if any matter is within the exclusive competence of the Union, it becomes a prohibited field for the State Legislatures. The concept of occupied filed is relevant in the case of laws made with reference to entries in List III. The doctrine of covered field has to be applied only to the Entries in List III. This proposition of law is well settled in a number of decisions of this Court including State of A.P. & Ors. Vs. Mcdowell & Co. & Ors., 1996 (3) SCC 709; State of Rajasthan & Ors. Vs. Vatan Medical & General Store & Ors., 2001 (4) SCC 642 and Shri Krishsna Gyanoday Sugar Ltd. & Anr. Vs. State of Bihar, 2003 (2) Scale 226.

The relevant entries of the Constitution Schedule VII are as follows: List II Entry 63:
” Rates of Stamp duty in respect of documents other than those specified in provisions of List I with regard to the rates of stamp duty.”

List III Entry 44:

“Stamp duties other than duties or fees collected by means of judicial stamps but not including rates of stamp duty”

List I Entry 91:
“Rates of stamp duty in respect of Bill of Exchange, cheques, promissory notes, Bill of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.”

List I Entry 43:

“Incorporation, regulation winding up of trading corporation including banks insurances and finance corporations but not including corporative societies.”

List I Entry 44:

” Incorporation, Regulation and winding up of corporations, whether trading or not with object not confined to one state but not including universities.”

List I Entry 97:

“Any other matter not enumerated in List II and List III, including any tax not mentioned in either of any those lists.”

Union under Entry 91 of List I can prescribe rates of stamp duty in respect of Bill of Exchange, cheques, promissory notes, Bill of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. In exercise of power conferred by Entry 63 List II it is open for the State Legislature to make amendment in the Act in regard to the rates of Stamp duty in respect of documents other than those specified in provisions of List I.

As discussed above, the order passed under Section 394 is founded on consent and this order is an instrument as defined under Section 2 (1) of the Bombay Stamp Act. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44 List III of the Seventh Schedule of the Constitution and prescribes rate of stamp duty under Entry 63 List II. It does not in any way impinge upon any entry in List I. Entry 44 of List III empowers the State Legislature to provide for stamp duties other than duties or fees collected by means of judicial stamps. Along with this, Entry 63 of List II empowers the State Legislature to prescribe rates of stamp duty in respect of documents other than those specified in the provisions of List I, that is to say, rates of stamp duty in respect of Bill of Exchange, cheques, promissory notes, Bill of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. By sanctioning of amalgamation scheme, the property including the liabilities are transferred as provided in Section 394 of the Companies Act and on that transfer instrument, stamp duty is levied. It, therefore, cannot be said that the State Legislature has no jurisdiction to levy such duty.

Charging Section, i.e., Section 3 of the Bombay stamp Act reads:

“3. Instrument chargeable with duty. Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in Schedule I as the property duty therefor respectively, that is to say \026

(a) every instrument mentioned in Schedule I, which not having been previously executed by any person, is executed in the State on or after the date of commencement of this Act;

(b) every instrument mentioned in Schedule I, which not having been previously executed by any person, is execute out of the State on or after the said date, relates to any property situate, or to any matter or thing done or to be done in this State and is received in this State:

xxx xxx xxx”

The duty charged by the State Legislature is on the instrument and is on the execution of the instrument. The measure of charging stamp duty may be
fixed or ad-valoram which is to be determined by the Legislature. The basis for computation of stamp duty can be determined by the State Legislature and it
may be on the basis of the market value of the property transferred or at a fixed amount.

In Himalaya House Co. Ltd. Vs. The Chief Controlling Revenue Authority, & Anr. AIR 1972 SC 899, it was observed:

“On a conspectus of these authorities it is, therefore, apparent that in the exercise of powers conferred on
it by Entry 63 of List II and Entry 44 of List III, it was open to the State Legislature not only to make an amendment in the Act in regard to the rates of stamp duty but also in regard to the mode of computation of stamp duty. In other words, it was open to the State Legislature to lay down that the basis for computing stamp duty shall not be the amount or value of the consideration of the conveyance as set forth therein but it shall be the market value of the property which is the subject matter of conveyance.”
{Emphasis supplied}

Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 1997 was enacted whereby in Article 25 of the Schedule I of the Bombay Stamp Act, 1958 Clause (da) and Explanation III were added with retrospective effect prescribing the rates at which the duty was to be calculated and levied. Vires of this provision of this Act were not challenged in the writ petition.

It was next contended that provisions of Section 2(g)(iv) read with Section 34 of the Bombay Stamp Act which provides that the instrument not duly stamped would be inadmissible in evidence are repugnant to Section 394 of the Companies Act and that the State Legislation cannot be prevail over the provisions of the Companies Act. It was also contended that in the guise of the stamp duty the State Legislature is in reality imposing a tax on the amalgamation of the companies and has therefore encroached on the field of the Parliament under Entry 43, List I of the Constitution. We do not find any substance in this submission as well. Stamp duty is levied on the instrument and the measure is the valuation of the property transferred. There is no question of encroachment on the field of Parliament under Entry 43, List I of the Constitution which empowers the Union to make laws re: incorporation, regulation winding up of trading corporation including banks insurances and finance corporations but not including corporative societies. The follow up legislation under Entry 43 List I is totally different from the levy of stamp duty and of prescribing rate of stamp duty on such documents. The Bombay Stamp Act does not provide for any Legislation with regard to incorporation, regulation and winding up of corporations. It only levies the stamp duty and prescribes the rate of stamp duty in respect of documents by compromise or arrangement.

Section 2 (g)(iv) of the Act does not in any way describe any alternate procedure as compared to the one appearing in Section 394 of the Companies Act, 1956. The question of repugnancy of Section 2(g)(iv) of the Act visa-a- vis Section 394 of the Companies Act, 1956 is therefore irrelevant. Section 2(g)(iv) does not impinge or negate the judicial power because it merely defines the word “conveyance” in regard to the order passed by the High Court under Section 394 of the Companies Act, the basis of which is consent and voluntary act which ultimately result in transfer of property for consideration.

Under the Bombay Stamp Act conveyance includes any instrument by which property, whether movable or immovable, or any estate or interest in
any property is transferred to, or vested in, any other person, inter vivos. The word “inter vivos” has not been defined in the Act or in the General Clauses Act. The meaning assigned to the word “inter vivos” in the Black’s Law Dictionary, 6th Edn., is:

“Between the living; from one living person to another. Where property passes by conveyance, the
transaction is said to be inter vivos, to distinguish it from a case of succession or devise. So an ordinary gift from one person to another is called a “gift inter vivos”

It was contended that since the transaction was not between the ’living beings’ the same was not “inter vivos” as the transfer of property had not taken place between the living beings. We do not agree. “Transfer of Property” has been defined in Section 5 of the Transfer of Property Act, 1882 to mean an act by which a living person conveys property, in present or in future to one more other living persons. Company or association or body of individual, whether incorporated or not, have been included amongst the “living person” in this Section. It clearly brings out that a company can effect transfer of property. The word “inter vivos” in the context of Section 394 of the Companies Act would include within its meaning also a transfer between two “juristic persons” or a transfer to which a ’juristic person’ is one of the parties. The transaction between a minor or a person of unsound mind with the other person would not be recognised in law, though the same is between two living beings, as they are not juristic persons in the eyes of law who can by mutual consent enter in a contract or transfer the property. The company would be juristic person created artificially in the eyes of law capable of owning and transferring the property. Method of transfer is provided in law. One of the methods prescribed is dissolution of the transferor company by merger in the transferee company along with all its assets and liabilities. Where any property passes by conveyance, the transaction would be said to be inter vivos as distinguished from a case of succession or devise.

No other point was urged.

For the reasons stated above, we do not find any merit in these appeals and dismiss the same with no order as to costs.

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J U D G M E N T

S.B. SINHA, J :

THE BACKGROUND FACT:

The appellant (Club) herein is an association incorporated under the laws of the United Kingdom. It is a mutual association of ship owners. It offers insurance cover in respect of the vessels entered with it for diverse third party risks associated with the operation and trading of vessels. According to the appellant, no vessel operates without a Protection & Indemnity (P&I) cover and the same has been made compulsory to allow a ship to enter major ports in India.

’Sea Ranger’ and ’Sea Glory’ are the sister vessels of the 1st respondent vessel and they are allegedly owned by the 2nd respondent. The first two vessels entered into a contract with the appellant’s association for the years 1998-1999 and 1999-2000 but they have not paid the unpaid insurance premium due and payable by the 2nd respondent for various P&I risks for which they had been insured. These unpaid insurance calls being “necessaries” was enforceable within the
“admiralty jurisdiction” of the Bombay High Court.

For the arrest of the 1st respondent vessel which came to Mumbai Port within the territorial waters of India, a suit was filed by the club inter alia for the prayers : “(a) for a decree against the respondents in the sum of US$1,18,194.89 together with interest at the rate of 12% per annum, which was the unpaid insurance premium amount due to the club and payable by the 2nd respondent; and (b) for arrest of the 1st respondent vessel to secure the claim.”

On an application for arrest of the 1st respondent vessel having been made, the 2nd respondent appeared and undertook to furnish security in respect of the appellant’s claim and further gave an undertaking that until the security is furnished the said vessel will not leave the Port of Mumbai. However, thereafter S.S. Shipping Corporation Inc., Liberia claiming to be the registered owner of the 1st respondent furnished a bank-guarantee in relation to the appellant’s claim in discharge of the undertaking of security given by the second respondent. The 1st respondent thereafter took out a Notice of Motion for rejection of the plaint purported to be under Order 7 Rule 11(a) of the Code of Civil Procedure inter alia on the ground that the averments contained therein do not disclose a cause of action as the claim of unpaid insurance premium was not a “necessary” within the meaning of Section 5 of the

Admiralty Courts Act, 1861. A learned Single Judge of the High Court after hearing the Notice of Motion by an order dated 1-2/2/2001 referred the said question to a Division Bench as it could not agree with a decision rendered by another learned Single Judge. However, on the other two grounds it discharged the Notice of Motion holding that the averments made in paragraphs 1 and 14 of the plaint inter alia to the effect that all the three ships are beneficially owned by the 2nd respondent disclose a cause of action.

An appeal thereagainst was preferred by the respondent herein.

The Division Bench took up the appeal preferred by the respondent herein as also the reference made by the learned Single Judge and passed a common judgment.

ISSUES :

The questions which arose for consideration before the High Court were:

(i) whether arrears of insurance premium due and payable to the appellant by the 2nd respondent would fall within the scope and ambit of Section 5 of the Admiralty Courts Act, 1861;

(ii) whether refusing to reject the plaint under Order 7 Rule 11(a) upon holding that the plaint discloses a cause of action is a ’judgment’ within the meaning of Clause 15 of the Letters Patent of the Bombay High Court and was, thus, appealable; and

(iii) Whether the averments made in paragraphs 1 and 14 of the plaint disclose sufficient cause of action for maintaining a suit.

The Division Bench while answering the question No. 1 in favour of appellant, answered question Nos. 2 and 3 against it. Appeal No. 226 of 2001 has been filed by the ’club’ whereas Civil Appeal No. 5666 of 2002 has been filed by the ’vessel’.

Submissions :

Mr. Bharucha, the learned counsel appearing on behalf of the “Vessel” would inter alia submit:

(i) The amount of arrears of insurance premium alleged to be due to the 1st respondent towards release calls is not a maritime claim entitling the Club to invoke the admiralty jurisdiction of the High Court as such unpaid insurance money does not constitute ’necessaries’ within the meaning of Section 5 of the Admiralty Courts Act, 1861.

(ii) Sufficiently direct and proximate connection between insurance and the vessel is a prerequisite for bringing an action in rem. Insurance is meant primarily as a means of indemnifying and protecting the vessel owner against the loss of his vessel and/or claims that that may arise as a result of damage or loss caused by the vessel. Although it may be a commercial necessity but the same would not come within the purview of the term ’necessaries’ within the meaning of the provisions of the said Act. The provisions contained in the Admiralty Courts Act of 1840 and 1861, Section 22 of the Supreme Court of Judicature Act, 1925, the 1952 Brussels Arrest Convention as also the Administration of Justice Act, 1956 disclose one uniform feature that in order that a monetary claim qualifies for and is recognized as a maritime claim the same must be necessary for operation of the ship.

(iii) In United Kingdom, it has consistently been held for more than a century that unpaid insurance premium is not a “necessary”within the conventional meaning of the said term as understood in maritime law. The said view has been reiterated by the Courts of Australia, South Africa and Singapore. In support of the said contention, strong reliance has been placed on Queen Vs. Judge of the City of London Court [1891 1 QB 273], The Beldis [1936 P. 51], Webster Vs. Seekamp [1821 4B & Ald 352], Heinrich Bjorn [1883 8 P.D. 151], The Andre Theodore [10 Aspinall 94], Stokes Vs. The Conference [1887 (8) NSWR 10], The River Rima [1988 2 L Rep 193], a South African Court decision in The Emerald Transporter [1985 2 SALR 152] as also a decision of Singapore High Court in The Golden Petroleum [1994 1 SLR 92].

(iv) The expression “necessaries supplied to any ship” although has not statutorily been defined; over a long period of time, the same had attained a definite connotation, i.e., goods or services supplied to a specifically identified ship in order to successfully prosecute the voyage in question, and, thus, applying the said test unpaid insurance premium does not answer the said definition. The matter has furthermore to be looked at from the point of view of physical necessity and practicality and not from the viewpoint of prudence or sound economics.

(v) There are a large number of categories of insurance from hull and machinery insurance, to protection and indemnity (P&I) cover, through war risks, to freight demurrage and defence cover (FD&D), oil spill cover (TOVALOP), and strike cover etc and in that view of the matter if P&I should be held to be a necessary, others are not, the same would lead to an incongruous situation.

(vi) In view of the decision in The Aifanourious [1980 2 L Reps. 403] as also the decision rendered by the House of Lords in Gatoil International Inc. Vs. Arwkright Boston Manufacturers Mutual Insurance Co. & Other The Sandrina [1985 (1) All ER 129], holding that claim for unpaid insurance has never been recognized as maritime claim under any other head and the Courts of England expressly held the same to have been excluded as such under Article 1 of the Brussels Arrest Convention, 1952. Such a claim, thus, due to unpaid insurance premium would not be a maritime claim also under the head “disbursements made on account of a ship”.

(vii) In the decision of this Court in M.V. Elisabeth [(1993) Supp. 2 SCC 433], it was merely held that the High Courts in India will have an extended jurisdiction under the Admiralty Courts Act, 1861 and the said principle cannot be further extended.

(viii) As the maritime jurisdiction of the High Courts in India was derived from the pre-independence statutes and as the High Courts of India exercise the same jurisdiction as that of the courts in England, it must necessarily be held that the interpretation of the word “necessaries” rendered by the English Courts and which has been followed by other courts except by the American Court should prevail.

Mr. Prashant S. Pratap, the learned counsel appearing on behalf of the Club, on the other hand, would submit that:
(i) “necessaries” are the things which a prudent owner would provide to enable a ship to perform the functions wherefor she has been engaged and, thus, the provision of services would come within the definition of necessaries.

(ii) The term “necessaries” must be construed in a broad and liberal manner keeping in mind the ever changing requirements of a ship to be able to trade in commerce.

(iii) Contemporary maritime statutes in England do not use the term “necessaries” but the American Federal Maritime Liens Act does and, thus, decision rendered by the American Courts that insurance is a “necessary” should be held to be correct. (Equilease Corp. Vs. M.V. Sampson 793 F.2d 598- U.S. Court of Appeals).

(iv) A valid P&I insurance cover is necessary for a ship to call at major ports in India and consequently so far as India is concerned, it is a necessity having regard to the fact that Mumbai Port, JNPT and Kolkata Port have issued a statutory direction in this behalf.

(v) The domestic legislation in India also provide for a compulsory insurance. Reference in this connection has been placed on the Inland Vessels Act, 1917 (as amended in the year 1977), the Merchant Shipping Act, 1956 (as amended in 1983) and Multimodal Transportation of Goods Act, 1993 (as amended in 2000) and in that view of the matter the pedantic and regressive view should be discouraged specially in the light of the judgment of this Court in M.V. Elisabeth (supra).

(vi) By reason of the 1999 Arrest Convention inter alia unpaid insurance calls had been added and in absence of any codification and maritime claim by a statute in India the same should be taken into consideration for determination of the jurisdiction of the High Court. Several countries such as Canada, South Africa, Australia, China and Korea have given the claim for unpaid insurance premium in respect of a ship, the status of a maritime claim.

(vii) Flexibilities being the virtue of law court, the High Court has rightly held that the marine premium would come within the purview of the term “necessaries” having regard to the global change and outlook in trade and commerce. Reliance in this connection has been placed on M.V. Al Quamar Vs. Tsavliris Salvage (International) Ltd. & Ors. [(2000) 8 SCC 278].

STATUTORY PROVISIONS :

The relevant provisions of Admiralty Court Act, 1840 are as follows:

“3. WHENEVER A VESSEL SHALL BE ARRESTED, ETC., COURT TO HAVE JURISDICTION OVER CLAIMS OF MORTGAGEES: Whenever any ship or vessel shall be under arrest by process issuing from the said High Court of Admiralty, or the proceeds of any ship or vessel having been so arrested shall have been brought into and be in the registry of the said court, in either such case the said court shall have full jurisdiction to take cognizance of all claims and causes of action of any person in respect of any mortgage of such ship or vessel, and to decide any suit instituted by any such person in respect of any such claims or causes of action respectively.

4. COURT TO DECIDE QUESTIONS OF TITLE, ETC.: The said Court of Admiralty shall have jurisdiction to decide all questions as to the title to or ownership of any ship or vessel, or the proceeds thereof remaining in the registry, arising in any cause of possession, salvage, damage, wages or bottomry, which shall be instituted in the said court after the passing of this Act.

6. THE COURT IN CERTAIN CASES MAY ADJUDICATE, ETC.: The High Court of Admiralty shall have jurisdiction to decide all claims and demands whatsoever in the nature of salvage for services rendered to or damage received by any ship or sea-going vessel or in the nature of towage, or for necessaries supplied to any foreign ship or sea-going vessel, and to enforce the payment thereof, whether such ship or vessel may have been within the body of a country, or upon the high seas, at the time when the services were rendered or damage received, or necessaries furnished, in respect of which such claim is made.

The relevant provisions of Admiralty Court Act, 1861 are as under: “4. AS TO CLAIMS FOR BUILDING, EQUIPPING, OR
REPAIRING OF SHIPS: The High Court of Admiralty shall have jurisdiction over any claim for the building, equipping, or repairing of any ship, if at the time of the institution of the cause the ship or the proceeds thereof are under arrest of the court.

5. AS TO CLAIMS FOR NECESSARIES: The High Court of Admiralty shall have jurisdiction over any claim for necessaries supplied to any ship elsewhere than in the port to which the ship belongs, unless it is shown to the satisfaction of the court that at the time of the institution of the cause any owner or part owner of the ship is domiciled in England or Wales: Provided always, that if in any such cause the plaintiff do not recover twenty pounds, he shall not be entitled to.

6. AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED:
The High Court of Admiralty shall have jurisdiction over any claim by the owner or consignee or assignee of any bill of lading of any goods carried into any port in England or Wales in any ship, for damage done to the goods or any part thereof by the negligence or misconduct of or for any breach of duty or breach of contract on the part of the owner, master, or crew of the ship, unless it is shown to the satisfaction of the court that at the time of the institution of the cause any owner or part owner of the ship is domiciled in England or Wales: Provided always, that if any such cause the plaintiff do not recover twenty pounds, he shall not be entitled to any costs, charges, or expenses incurred by him therein, unless the judge shall certify that the cause was a fit one to be tried in the said court.

8. HIGH COURT OF ADMRILATY TO DECIDE QUESTIONS AS TO OWNERSHIP, ETC. OF SHIPS: The High Court of Admiralty shall have jurisdiction to decide all questions arising between the co-owners, or any of them, touching the ownership, possession, employment, and earnings of any ship registered at any port in England or Wales, or any share thereof, and may settle all accounts outstanding and unsettled between the parties in relation thereto, and may direct the said ship or any share thereof to be sold, and may make such order in the premises as to it shall seem fit.

Section 2 of Colonial Courts of Admiralty Act, 1890 reads thus: “2. Colonial Courts of Admiralty. – (1) Every court of law in a British possession, which is for the time being declared in pursuance of this Act to be a Court of Admiralty, or which, if no such declaration is in force in the possession, has therein original unlimited civil jurisdiction, shall be a Court of Admiralty, with the jurisdiction in this Act mentioned, and may for the purpose of that jurisdiction, exercise all the powers which it possesses for the purpose of its other civil jurisdiction, and such Court in reference to the jurisdiction conferred by this Act is in this Act referred to as a Colonial Court of Admiralty….
(2) The jurisdiction of a Colonial Court of Admiralty shall, subject to the provisions of this Act, be over the like places, persons, matters, and things, as the Admiralty jurisdiction of the High Court in England, whether existing by virtue of any statute or otherwise, and the Colonial Court of Admiralty may exercise such jurisdiction in like manner and to as full an extent as the High Court in England, and shall have the same regard as that Court to international law and the comity of nations.

Section 2 of The Colonial Courts of Admiralty (India) Act, 1891 reads as under:

2. APPOINTMENT OF COLONIAL COURTS OF ADMIRALTY:
The following Courts of unlimited civil jurisdiction are hereby declared to be Colonial Courts of Admiralty, namely:-

(1) the High Court of Judicature at Fort William in Bengal;
(2) the High Court of Judicature at Madras, and
(3) the High Court of Judicature at Bombay.”

Section 22(1) of Supreme Court of Judicature (Consolidation) Act, 1925 reads thus:

“22. ADMIRALTY JURISDICTION OF HIGH COURT: (1)
The High Court shall, in relation to admiralty matters, have the following jurisdiction (in this Act referred to as “admiralty jurisdiction”) that is to say –

(a) Jurisdiction to hear and determine any of the following questions or claims:

*** *** ***

(viii) Any claim by a seaman of a ship for wages earned by him on board the ship, whether due under a special contract or otherwise, and any claim by the master
of a ship for wages earned by him on board the ship and for disbursements made by him on account of the ship;

(ix) Any claim in respect of a mortgage of any ship, being a mortgage duly registered in accordance with the provisions of the Merchant Shipping Acts, 1894 to 1923, or in respect of any mortgage of a ship which is, or the proceeds whereof are, under the arrest of the court;”

(x) Any claim for building, equipping or repairing a ship, if at the time of the institution of the proceedings the ship is, or the proceeds thereof are, under the arrest of the court.”

Articles 1(k) and 2 of the 1952 Brussels Convention are as under: “(1) “Maritime Claim” means a claim arising out of one or more of the following:

*** *** ***

(k) goods or materials wherever supplied to a ship for her operation or maintenance;

2. A ship flying the flag of one of the Contracting States may be arrested in the jurisdiction of any of the Contracting States in respect of any maritime claim, but in respect of no other claim; but nothing in this Convention shall be deemed to extend or restrict any right or powers vested in any Governments or their Departments, Public Authorities, or Dock or Harbour Authorities under their existing domestic laws or regulations to arrest, detain or otherwise prevent the sailing of vessels within their jurisdiction.”

HISTORY OF JURISDICTION OF THE HIGH COURT :

The jurisdiction of the High Court of Admiralty in England used to be exercised in rem in such matters as from their very nature would give rise to a maritime lien – e.g. collision, salvage, bottomry. The jurisdiction of the High Court of Admiralty in England was, however, extended to cover matters in respect of which there was no maritime lien, i.e., necessaries supplied to a foreign ship. In terms of Section 6 of the Admiralty Act, 1861, the High Court of Admiralty was empowered to assume jurisdiction over foreign ships in respect of claims to cargo carried into any port in England or Wales. By reason of Judicature Act of 1873, the jurisdiction of the High Court of Justice resulted in a fusion: of admiralty law, common law and equity. The limit of the jurisdiction of the Admiralty court in terms of Section 6 of the 1861 Act was discarded by the Administration of Justice Act, 1920 and the jurisdiction of the High Court thereby was extended to (a) any claim arising out of an agreement relating to the use or hire of a ship; (b) any claim relating to the carriage of goods in any ship; and (c) any claim in tort in respect of goods carried in any ship.

The admiralty jurisdiction of the High Court was further consolidated by the Supreme Court of Judicature (Consolidation) Act, 1925 so as to include various matters such as any claim “for damage done by a ship”, and claim ’arising out of an agreement relating to the use or hire of a ship’; or ’relating to the carriage of goods in a ship’; or “in tort in respect of goods carried in a ship”.

The admiralty jurisdiction of the High Court was further widened by the Administration of Justice Act, 1956 so as to include not only the claims specified under Section 1(i) of Part I but also any other jurisdiction which either was vested in the High Court of Admiralty immediately before the date of commencement of the Supreme Court of Judicature Act, 1873 (i.e. November 1, 1875) or is conferred by or under an Act which came into operation on or after that date on the High Court as being a court with admiralty jurisdiction and any other jurisdiction connected with ships vested in the High Court apart from this section which is for the time being assigned by rules of court to the Probate, Divorce and Admiralty Division.

Sub-Section (4) of Section 1 removed the restriction based on the ownership of the ship. By reason of Clauses (d) (g) and (h) of the said Section the jurisdiction in regard to question or claims specified under Section 1(i) included any claim for loss of or damage to goods carried in a ship, any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship.

In the course of time the jurisdiction of the High Courts vested in all the divisions alike. The Indian High Courts after independence exercise the same jurisdiction.

NECESSARIES – AS A MARITIME CLAIM:

The concept “as to claims for necessaries” is specified under Section 5 of the Admiralty Court Act, 1861, which provides for the jurisdiction of High Court as regard “Necessaries supplied to any ship elsewhere than in the port to which the ship belongs, unless it is shown to the satisfaction of the court that at the time of institution of the cause an owner or part owner of the ship is domiciled in England or Wales”.

The term “necessaries” had not been defined in the Act of 1861.

It was given a meaning by judicial pronouncements.

It stands accepted that having regard to the legislative and executive policy, England and Wales never considered the arrears of insurance premium as a ’necessary’. The Courts of England further maintained a distinction between a maritime claim and maritime lien. The decisions cited by Mr. Bharucha go to show that the English Courts proceeded on the premise that for the purpose of considering as to whether any necessary has been supplied to a ship or not must have a sufficient and direct connection with the operation of the ship. It held that unpaid insurance premium is not a maritime claim as it is not needed to keep it going. [See Queen Vs. Judge of the City of London Court (supra), Heinrich Bjorn (supra), The Andre Theodore (supra), The Aifanourious (supra). The English Courts, thus, refused to put a wide construction on that term.

A similar view was also adopted by an Australian High Court in Gould Vs. Cornhill Insurance Co. Ltd. [1 DLR 4th Ed. 183].

In The Riga [(1869-72) L.R. 3 A&E 516], it is stated: “The definition of the term “necessaries” given by Lord Tenterden in Webster v. Seekamp (4 B. & Ald. 352) adopted and applied in proceedings in Admiralty. Semble, there is no distinction between necessaries for the ship and necessaries for the voyage.”

In The Edinburgh Castle [(1999) Vol. 2 Lloyd’s Law Reports 362], it has been held:

“To address these concerns, Mr. Charkham helpfully invited my attention to a number of the authorities and to such discussion as there is on s.20(2)(m) and its predecessors. Taking the matter very shortly, for present purposes, the following propositions emerge:

1. The words “in respect of” are wide words which should not be unduly restricted: The Kommunar, [1997] 1 Lloyd’s Rep. 1, at p.5.
2. Section 20(2)(m), which is derived from the equivalent provision in the Administration of Justice Act, 1956, contains a jurisdiction which is no narrower than the predecessor jurisdiction in respect of claims for “necessaries”: The Fairport (No. 5), [1967] 2 Lloyd’s Rep. 162; The Kommunar, sup.
3. No distinction is to be drawn:
…between necessaries for the ship and necessaries for the voyage, and all things reasonably requisite for the particular adventure on which the ship is bound are comprised in this category. [Roscoe, The Admiralty Jurisdiction and Practice, 5th ed., at p. 203: The Riga (1872) L.R. 3 Ad. & Ecc. 516].
4. The jurisdiction extends to the provision of services: The Equator, (1921) 9 L1.L.Re. 1: The Fairport (No. 5), sup.

In the light of these propositions, I am satisfied that the plaintiffs bring their claims within s. 20(2)(m). Provisions for the passengers were “necessaries” for the particular adventure on which this passenger vessel was engaged. The provision of services is capable of coming within the sub-section and does so here, given the nature of the services provided. I should mention that I was referred in addition to The River Rima, [1988] 2 Lloyd’s Rep. 193 (H.L.) and [1987] 2 Lloyd’s Rep. 106 (C.A.) but, as I understand it, nothing said there precludes my decision in favour of the plaintiffs on the facts of this case.”

In Nore Challenger and Nore Commander [(2001) Vol. 2 Lloyd’s Law Reports 103] the claim relating to supply of crew was held to be “necessary” stating:

“Before considering whether the concept of necessaries encompasses the provision or supply of crew, it is important to bear in mind that it has long been established that no distinction need be drawn between the supply of necessaries and the payment for such supply.”

Identical view has been taken by a Court of Durban in M.V. Emerald Transporter [1985 2 SALR 448] with reference to the provisions contained in Admiralty Jurisdiction Regulation Act 105 of 1983 wherein it was held that services which are insured solely to the benefit of the ship owner would not be classed as necessaries. The said decision was, however, rendered in the context of ranking of claims against a fund comprising of sale proceeds of the vessel M.V. Emerald Transporter.

The House of Lords in The River Rima (supra) considered the provisions of Article 1(1)(k) of the 1952 Brussels Arrest Convention incorporating “goods or materials wherever supplied to a ship for her operation or maintenance” as a maritime claim. Having regard to the provisions contained in Section 6 of Admiralty Court Act, 1840 and Section 5 of Admiralty Court Act, 1861 it was held:

“In other words, what is now called a claim in respect of goods or materials supplied to a ship for her operation or maintenance is the equivalent of what used to be called a claim for necessaries, but without the restrictions which formerly applied to such a claim.”
(Emphasis Supplied)

The Singapore High Court also in Golden Petroleum (1994 1 SLR 92) considered the expression “goods supplied to a ship for her operation and maintenance” in the following terms:

“In my opinion, bunker oil supplied to the ship for sale to other ships could not be conceived as goods supplied for her operation. The phrase ’operation of the ship’ should not be equated with the business activities of the shipowner and the section as enacted could not cover goods which are loaded onto two ship only to be unloaded or disposed of soon thereafter by sale.”

It appears that the matter is pending in appeal.
Yet again in Gatoil International (supra), it was held: “An agreement for the cancellation of a contract for the carriage of goods in a ship or for the use or hire of a ship would, I think, show a sufficiently direct connection. It is unnecessary to speculate what other cases might be covered. Each case would require to be decided on its own facts. As regards the contract of insurance founded on in the instant appeal, I am of opinion that it is not connected with the carriage of goods in a ship in a sufficiently direct sense to be capable of coming within para (e).”

The question, however, is as to whether having regard to the changed situation unpaid insurance premium should be held to be a commercial necessity. With a view to answer the question it is necessary to consider as to whether a failure to insure the security is a matter which would have a bearing upon the security of the ship.

Whether the provisions of insurance is to be considered to be a service? A further question which may arise is as to whether such service is to the ship or not ?

INSURANCE COVERS – EXTENT OF:

The law of marine insurance rested almost entirely on common law.
Only a few isolated points were dealt with by statute. Although, there may be a plethora of authority on some points, the decisions may be meagre on others. The interpretative changes made from time to time turned upon new commercial conditions, the old ones having become obsolete. Some countries enacted and codified marine laws while many did not. With the passage of time, the scope and ambit of the contracts of insurance increased not only having regard to the experience gathered by the contracting parties but also by the legislators and the Court. A lot of amendments in the statutes as also interpretive changes took place. The decisions rendered by different courts on marine insurance law even frequently apply to non-marine insurance. With the increase in marine traffic, the insurance law also developed and new varieties of insurance covers came into being. There has been a considerable expansion of the practice of insurance against various forums of legal liabilities which the assured may incur to the third parties.

P&I mutual insurances cover the liabilities of assured shipowner incurred to third parties. In Modern Admiralty Law by Aleka Mandaraka- Sheppard at page 642, it is stated:

“P&I mutual insurance (P&I associations) cover the liabilities of their assured shipowner incurred to third parties, which include cargo claims, pollution liabilities, damage to harbours, piers, etc., and personal injury or loss of life claims, which are all excluded from the RDC clause. In addition the P&I association insures the remaining one-fourth of the assured’ liability under the RDC clause. Legal costs in defending such claims are covered as well.”

The title of a claimant to sue the defendant as regard cargo claim enquiry has been stated in Shipping Law by Simon Baughen, Second Edition at page 16-17 in the following terms:

“Does the claimant have title to sue the defendant?

’Title to sue’ means the claimant’s right to sue the defendant, be it in contract, tort or bailment, in respect of the transit losses it will have borne as a buyer taking delivery at the end of a chain of sale contracts. If the claimant has insured the goods and has been indemnified, then the action may be brought in its name by its insurers under the process of subrogation.

The defendant will usually be the shipowner, but may also be a charterer or a freight forwarder who has contracted as carrier. If an inaccurate bill of lading is signed, the defendant could also be the party who actually signed the bill of lading. The shipowner’s liability in respect of cargo claims will generally be covered by liability insurance, known as ’P&I’ (protection and indemnity) insurance. Shipowners will not be covered in respect of claims arising out of deviation, misdelivery and the issuing of a ’clean’ bill of lading for goods that were damaged prior to loading.”

Apart from P&I club, there exists the Inter club Agreement (ICA). In Shipping Law by Simon Baughen, at page 183, it is stated :

“Another very common clause in time charters is the ’Inter-Club Agreement’ (ICA). The agreement began as an agreement between the P&I Clubs as to how they would recommend settlement of cargo claims as between shipowners and charterers where the NYPE form time charter is used. It is now common for the agreement to be specifically incorporated into the time charter. Indeed the NYPE 1993 form contains a printed cl 27 to this effect.”

The Special Compensation P&I Club Clause (the SCOPIC clause) enumerated from Article 14 remuneration after The Nagasaki Spirit, in 1999 as a result of discontent by salvors. Although this provision affected only the salvor and the shipowner, the international groups of P&I Clubs have agreed a code of conduct giving their backing to the clause whenever a ship enters with the International Group is salved by a member of the International Salve Union. The salient features of the claim which received clarificatory amendment in 2000 are as under:

“For the clause to operate it needs to be specifically incorporated into an LOF contract, of whatever form. LOF 2000 contains a box to be ticked if the parties agree to the incorporation of the SCOPIC clause. If the clause is incorporated it then needs to be invoked by salvor. This can be done even if there is no threat to the environment. Invoking the clause completely replaces the right of the salvor to claim under Art. 14, even in respect of services performed before the invocation of the clause.

The provisions of Art. 14(5) and (6), however, continue to remain effective. Within two days of the clause being invoked, cl 3 obliges the shipowner to put up security for the salvor’s claim under the clause in the amount of US$3,000,000. If the shipowner fails to do so, cl 4 entitles the salvor to withdraw from the SCOPIC clause, provided the security is still outstanding at the date of withdrawal.

Clause 5 provides that SCOPIC remuneration is to be calculated by reference to an agreed tariff of rates that are profitable to salvors, calculated by reference to the horsepower of the salvage tug/s employed. It also covers the salvor’s out of pocket expenses. An uplift of 25% is applied to both these heads of claim.

Clause 6 provides that SCOPIC remuneration is payable only in the event that it exceeds the amount of the award under Art 13. To deter salvors from invoking SCOPIC too readily, cl 7 provides that in the event of SCOPIC remuneration falling below the amount of the Art 13 award, that award shall be discounted by 25% of the difference between the award and the SCOPIC remuneration. Thus, where the Art 13 award is for $1,000,000 and the SCOPIC remuneration is only $600,000, the Art 13 award will be reduced by $100,000 being 25% of the difference between the two sums, giving the salvor a net award of $900,000.

The SCOPIC clause also provides for the termination of both the SCOPIC provisions and the LOF in two situations. First, the salvor can terminate if the cost of its services less any SCOPIC remunerations exceeds the value of the salved property. Secondly, the shipowner can terminate by giving five days’ notice.

These termination provisions do not apply if the contractor is restrained from demobilizing its equipment by a public body with jurisdiction over the area where the services are being performed. Once the clause has been invoked, the shipowner is entitled to appoint a Special Casualty Representative (SCR) to monitor the salvage services. The SCR does not impinge on the authority of the salvage master but does have the right to be kept fully informed about the progress of the salvage operations. This provision improves the flow of information back to the P&I Club whose interests will ultimately be affected by the salvage services.”

[See Shipping Law by Simon Baughen – page 293]

NECESSITY OF INSURANCE COVER:
The necessity of a P&I cover is in commercial expediency. All P&I clubs are non-profit making companies. The owner upon entering the ship becomes the member of the P&I club and he not only pays membership fee but undertakes to pay contribution towards the losses incurred by other members of the club which are payable by the company. A new concept has come into being in terms whereof a reciprocal system has been evolved to the effect that each member is cast under a duty to refund the damage suffered by any one of them and pay, on mutual basis, each other’s claim. Thus, the members play a dual role of both beneficiary and benefactor. We have noticed the concept of such clubs. The Indian statutes operating in the field are pointer to the fact that such insurance has become more and more commercially expedient. No ship having regard to the ramification in international law can sail without such insurance. Apart from the 1952 Brussels Arrest Convention, the Merchant Shipping (Oil) Pollution Act, 1961 makes insurance compulsory.

As would be noticed hereinafter, P&I insurance cover to call at major ports in India is now a statutory requirement.

CHANGING SCENARIO :

The advancement in law would be evident from the 1999 Arrest Convention whereby significant changes to the law relating to in rem claims and arrest has been made. Pursuant to Article 14 of the 1999 Arrest Convention, such changes would come into force six months after ratification by the 10th State. The countries which have ratified the Convention are as follows: “Algeria, Antigua and Barbuda, Bahamas, Belgium, Belize, Benin, Burkina Faso, Cameroon, Central African Republic, Comoros, Congo, Costa Rica, Ctte d’Ivoire, Croatia, Cuba, Denmark, Djibouti, Dominica, Republic of, Egypt, Fiji, Finland, France, Overseas Territories, Gabon, Germany, Greece, Grenada, Guyana, Guinea, Haiti, Haute- Volta, Holy, Seat, Ireland, Italy, Khmere Republic, Kiribati, Latvia, Luxembourg, Madagascar, Marocco, Mauritania, Mauritius, Netherlands, Niger, Nigeria, North Borneo, Norway, Paraguay, Poland, Portugal, Romania, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sarawak, Senegal, Seychelles, Slovenia, Solomon Islands, Spain, Sudan, Sweden, Switzerland, Syrian Arabic Republic, Tchad, Togo, Tonga, Turks Isles and Caicos, Tuvalu, United Kingdom of Great Britain, and Northern Ireland, United Kingdom (Overseas Territories), Gibraltar, Hong-Kong (1), British Virgin Islands, Bermuda, Anguilla, Caiman Islands, Montserrat, St. Helena, Guernsey, Falkland Islands and dependencies, Zaire.”

Article 1 of the Convention contemplates an expansion of existing categories of arrestable claims under the following headings, some of which, namely, heading (c) and (d) are already reflected in Section 20(2) of the Supreme Court Act, 1981:
(a) this refers to ’loss or damage caused by the operation of the ship’ rather than ’damage done by a ship’ and would encompass
claims for pure economic loss…
(c) this extends the category of salvage to include claims arising from salvage agreements or special compensation under Art. 14
of the 1989 Salvage Convention;
(d) this covers damage to environment, including threatened damage…
(l) this extends the scope of claims in respect of supply of goods and materials to a ship to cover ’provisions, bunkers,
equipment (including containers) supplied or services rendered to the ship for its operation, management, preservation or maintenance’;
(m) this extends the scope of claims against ships by shipyards to cover ’construction, reconstruction, repair, converting or
equipping of the ship’…
(o) this extends the scope of claims in respect of port dues, and also in respect of wages which will now cover repatriation
costs and social insurance contributions…
(u) this extends the scope of claims in respect of mortgages by removing the reference to a registered or registrable mortgage, thereby encompassing unregistered mortgages…

The purpose of the 1952 Convention was to restrict the possibilities of arrest with regard to seagoing vessels flying the flag of a contracting State. Such an arrest was allowed for maritime claims against the vessel or against the sister ship belonging to the same owners. What would be the maritime claim is specified in Article 1 of the Convention. Other claims can only be secured if the vessel’s home port is situated in a non-contracting State.

Apart from those restrictions resulting from the Convention, all kinds of claims can be secured by an arrest and there is no need to prove a connection with the operation of the vessel. As for example, a guarantee given by the owners for a subsidiary company or other principal debtor is as suitable as a claim resulting from the purchase of the ship or any other goods by the owners. However, in terms of Article 1(k) of the Convention claims for “goods or materials” supplied to a ship for her operation or maintenance are acknowledged as maritime claims.

What was expressly excluded in 1952 convention has been included in 1999 convention. The restrictions imposed under 1952 convention as regard ’Maritime claim’ to operation of ship and maintenance thereof have been removed.

In Kapila Hingorani Vs. State of Bihar [JT 2003 (5) SC 1] this Court observed:

“Justice Holmes expressed the following view in Missouri vs. Holland [252 US 416 (433)] :

“When we are dealing with words that also are a constituent act, like the Constitution of the United States, we must realise that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realise or to hope that they had created an organism, it has taken a century and has cost their successors must sweat and blood to prove that they created a nation. The case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago.”

Justice Frankfurter elucidated the interpretive role in “Some Reflections on the Reading of Statutes” :

“There are varying shades of compulsion for judges behind different words, differences that are due to the words themselves, their setting in a text, their setting in history. In short, judges are not unfettered glossators. They are under a special duty not to overemphasize the episodic aspects of life and not to undervalue its organic processes – its continuities and relationships”

In Jagdish Saran and Others Vs. Union of India [(1980) 2 SCC 768], it is stated:

“Law, constitutional law, is not an omnipotent abstraction or distant idealization but a principled, yet pragmatic, value-laden and result-oriented, set of propositions applicable to and conditioned by a concrete stage of social development of the nation and aspirational imperatives of the people. India Today – that is the inarticulate major premise of our constitutional law and life.”

It is also well-settled that interpretation of the Constitution of India or statutes would change from time to time. Being a living organ, it is ongoing and with the passage of time, law must change. New rights may have to be found out within the constitutional scheme. Horizons of constitutional law are expanding.”

In the aforementioned judgment, this Court referred to a large number of decisions for the purpose of interpreting the constitutional provisions in the light of the international treaties and conventions.

Further more in John Vallamattom and Anr. Vs. Union of India [JT 2003 (6) SC 37] while referring to an amendment made in U.K. in relation to a provision which was in pari materia with Section 118 of the Indian Succession Act, 1925, this Court observed:

“…The constitutionality of a provision, it is trite, will have to be judged keeping in view the interpretive changes of the statute effected by passage of time.”

Referring to the changing scenario of the law having regard to the declaration on the right to development adopted by the World Conference
on Human Rights and Article 18 of the United Nations Covenant on Civil and Political Rights, 1966, it was held:

“It is trite that having regard to Article 13(1) of the Constitution, the constitutionality of the impugned legislation is required to be considered on the basis of laws existing on 26.11.1950, but while doing so the court is not precluded from taking into consideration the subsequent events which have taken place thereafter. It is further trite that that the law although may be constitutional when enacted but with passage of time the same may be held to be unconstitutional in view of the changing situation.

Justice Cardoze said :

“The law has its epochs of ebb and flow, the flood tides are on us. The old order may change yielding place to new; but the transition is never an easy process”.

Albert Campus stated :

“The wheel turns, history changes”. Stability and change are the two sides of the same law-coin. In their pure form they are antagonistic poles; without stability the law becomes not a chart of conduct, but a gare of chance: with only stability the law is as the still waters in which there is only stagnation and death.”

In any view of the matter even if a provision was not unconstitutional on the day on which it was enacted or the Constitution came into force, by reason of facts emerging out thereafter, the same may be rendered unconstitutional.”

Yet again in Indian Handicrafts Emporium & Ors. Vs. Union of India [2003 (6) SCALE 831] this Court considered the Convention on International Trade in Endangered Species (CITES) and applied the principles of purposive constructions as also not only the Directive Principles as contained in Part IV of the Constitution but also Fundamental Duties as contained in Part IVA thereof.

Referring to Motor General Traders and Another vs. State of Andhra Pradesh and Others [(1984) 1 SCC 222], Rattan Arya and Others vs. State of Tamil Nadu and Another [(1986) 3 SCC 385] and Synthetics and Chemicals Ltd. and Others vs. State of U.P. and Others [(1990) 1 SCC 109], this Court held:

“There cannot be any doubt whatsoever that a law which was at one point of time was constitutional may be rendered unconstitutional because of passage of time. We may note that apart from the decisions cited by Mr. Sanghi, recently a similar view has been taken in Kapila Hingorani Vs. State of Bihar [JT 2003 (5) SC 1] and John Vallamattom and Anr. Vs. Union of India [JT 2003 (6) SC 37].”

It was, however, held that India being a sovereign country is not obligated to make law only in terms of CITES. It may impose stricter restrictions having regard to the local needs.

Legal history is a good guide for the purpose of appreciating the legal development across the world particularly in the field of international law, maritime law being a part of it. While interpreting such a situation, one must take into consideration the flexibility in law as has been highlighted by this Court in m.v. Al Quamar (supra) wherein it was opined:

“43. The two decisions noted above in our view deal with the situation amply after having considered more or less the entire gamut of judicial precedents. Barker, J’s judgment in the New Zealand case ((1980) 1 NZLR 104 (NZSC)) very lucidly sets out that the court has to approach the modem problem with some amount of flexibility as is now being faced in the modern business trend. Flexibility is the virtue of the law courts as Roscoe Pound puts it. The pedantic approach of the law courts are no longer existing by reason of the global change of outlook in trade and commerce. The observations of Barker, J. and the findings thereon in the New Zealand case ((1980) 1 NZLR 104 (NZSC)) with the longish narrations as above, depicts our inclination to concur with the same, but since issue is slightly different in the matter under consideration, we, however, leave the issue open, though the two decisions as above cannot be doubted in any way whatsoever and we feel it expedient to record that there exists sufficient reasons and justification in the submission of Mr. Desai as regards the invocation of jurisdiction under Section 44-A of the Code upon reliance on the two decisions of the New Zealand and Australian Courts.”

No statutory law in India operates in the field. Interpretative changes, if any, must, thus be made having regard to the ever changing global scenario.

This Court in M.V. Elisabeth (supra) observed that Indian statutes lag behind any development of international law and further it had not adopted the various conventions but opined that the provisions thereof having been made as a result of international unification and development of the maritime laws of the world should be regarded as the international common law or transnational law rooted in and evolved out of the general principles of national laws, which, in the absence of any specific statutory provisions can be adopted and adapted by courts to supplement and complement national statutes on this subject.

This Court in M.V. Elisabeth (supra) observed: “30. The Exchequer Court of Canada was established by the Admiralty Act R. S. Canada, 1906, c. 141, as a Colonial Court of Admiralty. It is not clear whether that Court was in its jurisdiction comparable to the Indian High Courts. Assuming that it was comparable at the relevant time, and whatever be the relevance of Yuri Maru (1927 AC 906 : 43 TLR 698) to courts like the Exchequer Court of Canada, we see no reason why the jurisdiction of Indian High Courts, governed as they now are by the Constitution of India, should in any way be subjected to the jurisdictional fetters imposed by the Privy Council in that decision. Legal history is good guidance for the future, but to surrender to the former is to lose the latter.”
(Emphasis supplied)
(See paras 78 and 99 also)

It was further observed:

“89. All persons and things within the waters of a State fall within its jurisdiction unless specifically curtailed or regulated by rules of international law. The power to arrest a foreign vessel, while in the waters of a coastal State, in respect of a maritime claims, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions (See the Conventions referred to above. See also Nagendra Singh, International Maritime Conventions, British Shipping Laws, Vol. 4). These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law. The want of ratification of these conventions is apparently not because of any policy disagreement, as is clear from active and fruitful Indian participation in the formulation of rules adopted by the conventions, but perhaps because of other circumstances, such as lack of an adequate and specialised machinery for implementation of the various international conventions by co-ordinating for the purpose the Departments concerned of the Government. Such a specialised body of legal and technical experts can facilitate adoption of internationally unified rules by national legislation. It is appropriate that sufficient attention is paid to this aspect of the matter by the authorities concerned. Perhaps the Law Commission of India, endowed as it ought to be with sufficient authority, status and independence, as is the position in England, can render valuable help in this regard. Delay in the adoption of international conventions which are intended to facilitate trade hinders the economic growth of the nation.”
(Emphasis supplied)

M.V. Elisabeth (supra) is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied.

Application of the 1999 convention in the process of interpretive changes, however, would be subject to : (1) domestic law which may be enacted by the Parliament; and (2) it should be applied only for enforcement of a contract involving public law character. It is not correct to contend as has been submitted by Mr. Bharucha that this Court having regard to the decision in M.V. Elisabeth (supra) must follow the law which is currently prevalent in UK and confine itself only to the 1952 Arrest Convention into Indian Admiralty Jurisprudence. The question is as to if the 1952 Arrest Convention had been applied keeping in view the changing scenario why not the 1999 Arrest Convention also? A distinction must be borne in mind between a jurisdiction exercised by the High Courts in India in terms of the existing laws and the manner in which such jurisdiction can be exercised. Once the Court opines that insurance is needed to keep the ship going – it has to be construed as ’Necessaries’. The jurisdiction of the Courts in India, in view of the decision of this Court in M.V. Elisabeth (supra)is akin to the jurisdiction of the English Courts but the same would not mean that the Indian High Courts are not free to take a different view from those of the English Courts. As regard application of a statute law the Indian High Courts would follow the pre-independence statute but Indian Courts need not follow the judge- made law.

M.V. Eligabeth defines the jurisdiction of the Court but does not limit or restrict it.

Supply of necessaries is a maritime lien in U.S.A. in terms of the relevant statute and has been classified in the category of subordinate to the Preferred Ship Mortgage.

In Benedict on Admiralty, 6th Edn., Vol.1, p. 22, it has been stated :

“Whenever a debt of a maritime nature is by law, no matter what law, or by contract, a lien upon the vessel, the vessel may be proceeded against in rem. The maritime lien, whether created by actual hypothecation or by implication or operation of law, may be enforced in the admiralty.”

It is true that this Court is not bound by the American decisions. The American decisions have merely a persuasive value but this Court would not hesitate in borrowing the principles if the same is in consonance with the scheme of Indian law keeping in view the changing global scenario. Global changes and outlook in trade and commerce could be a relevant factor. With the change of time; from narrow and pedantic approach, the Court may resort to broad and liberal interpretation.

What was not considered to be a necessity a century back, may be held to be so now.

INDIAN STATUTES OPERATING IN THE FIELD:

Section 352 N of the Indian Merchant Shipping Act, 1958 makes such an insurance compulsory which reads as under:

“352-N. Compulsory insurance or other financial guarantee. – (1) The owner of every Indian ship which carries 2000 tons or more oil in bulk as cargo, shall, in respect of such ship, maintain an insurance or other financial security for an amount equivalent to –

(a) one hundred and thirty-three Special Drawing Rights for each ton of the ship’s tonnage; or
(b) fourteen million Special Drawing Rights, whichever is lower.

The Inland Vessels Act requires a compulsory third party risk insurance cover and the standard format charter parties mostly have printed clauses making it mandatory for a vessel to have a valid protection and indemnity cover for want of which such vessels are not accepted for charter.

Chapter IV of the Inland Vessels Act provides for a compulsory insurance in terms whereof Chapter VIII of the Motor Vehicles Act, 1939 has been incorporated by reference.

This Court while considering the question of third party insurance in Motor Vehicles has noticed the development of law from the Road
Traffic Act, 1930 and Motor Vehicles Act, 1939 to Motor Vehicles Act, 1988 and the amendments carried out therein from time to time. [See National Insurance Co. Ltd., Chandigarh vs. Nicolletta Rohtagi and Others – (2002) 7 SCC 456].

The Multimodal Transportation of Goods (Amendment) Act 2000 inter alia provides for responsibilities and liabilities of the multimodal transport operator. By reason of Act 44 of 2000 a proviso has been added. Section 5 of the said Act amends Section 7 of the Principal Act of 1993 and reads as under:

“5. In Section 7 of the principal Act, in sub- section (1), the following proviso shall be inserted, namely:-

“Provided that the multimodal transport operator shall issue the multimodal transport document only after obtaining and during the subsistence of a valid insurance cover.”

CIRCULARS:

The insurance association has issued a circular dated 20th February, 2001 which is to the following effect:

“TO THE MEMBERS

Dear Sirs

NEW COMPULSORY INSURANCE REQUIREMENTS IN AUSTRALIAN WATERS

Members should be aware that new Compulsory

Insurance requirements for non tank vessels have come into force in Australia. Details are available at the website of the AMSA – http:/www.amsa.gov.au.

From 6th April 2001 ships of 400gt or more (excluding tankers covered by CLC Certificates) will be required to carry a “relevant insurance certificate” containing the following information:

a) the name of the ship
b) the name of the ship’s owner
c) the name and address of the insurer
d) the commencement date of the insurance
e) the amount of cover which must in any event not be less than the limit of
liability under the 1976 Limitation Convention.

The “relevant insurance certificate” will need to be produced during Port State Control inspections and by the Australian Customs Service on entering or leaving Australian ports.

A six months period of grace will be allowed before full enforcement action is undertaken; ships without sufficient documentation on board will be given a warning until 5th September, 2001. Thereafter ships will be detained until the requirement documentation is produced.

AMSA officials have indicated that although the Notice requires that the amount of cover be set out in the Certificate of Entry it will be assumed if a dollar amount is not set out that Club cover in any event extends at least to the cover provided under the 1976 Convention as amended.

AMSA officials have also indicated that if a vessel does not carry any original certificate of Entry they will be satisfied with the provision of a photocopy on the vessel’s first visit. However on the second and subsequent visits vessels will be expected to carry an original Certificate of Entry.

Please contact the Club if you need further information.

Yours faithfully,

THOMAS MILLER (BERMUDA) LTD.”

A circular has also been issued by the Insurance Association on 26.07.2000 regarding new legislation in U.S.A. (Alaska) which is to the following effect:

“26 July 2000 TO ALL MEMBERS
Dear Sirs

OIL POLLUTION: UNITED STATES
NEW LEGISLATION IN ALASKA FOR NON-TANK VESSELS FINANCIAL RESPONSIBILITY REQUIREMENTS: DRAFT REGULATIONS

In May 2000 the State of Alaska followed the recent example of California in passing legislation requiring non-tank self-propelled vessels operating in Alaskan waters and exceeding 400 gt to demonstrate proof of financial responsibility for oil spills occurring in Alaskan waters. The effective date of the Financial Responsibility Act is 1 September 2000.

Proof of financial responsibility must be established for non-tank vessels operating in Alaskan waters in the following amounts:

(a) For vessels carrying predominately persistent product, $300 per incident
for each barrel of oil storage capacity, or $5,000,000, whichever is greater.
(b) For vessels carrying predominately non- persistent product, $100 per incident
for each barrel of oil storage capacity, or $1,000,000, whichever is greater.

The Act applies to non-tank vessels over 400 gt which by definition covers self-propelled vessels including commercial fishing vessels, passenger and cargo vessels. Barges are excluded, as are public vessels unless “engaged in commerce”.

The Alaska Department of Environmental Conservation (ADEC) have proposed draft regulations to implement the financial responsibility requirements. ADEC predicts that their regulations will not become final until September or early October 2000 but the effective date for the new law remains 1 September 2000. A summary of the draft regulations is set out below:

Interim applications and Documentation for Proof of Financial Responsibility

An interim application procedure is set out in ADEC’s letter of 17 July 2000, which is attached. Owners or operators of non-tank vessels covered by the new law must submit a completed application and documentation of financial responsibility in the appropriate dollar amount not later than 31 August 2000.

Acceptable financial responsibility may include the following:

a. Affidavit of self-insurance and most recent audited financial statement;

b. Insurance certificate and insurance policy;
c. Surety bond;
d. Financial guarantee, accompanied by guarantor’s evidence of self insurance;
e. Letter of credit;
f. Certificate of entry evidencing coverage by a Protection and Indemnity Club; or
g. Certificate of deposit with assignment of negotiable interest.

Interim Approval

A completed application form and appropriate documentation evidencing proof of financial responsibility which is submitted by 31 August 2000 will be deemed approved by ADEC for purposes of meeting the 1 September 2000 deadline. Following adoption of final regulations, ADEC will review each application to ensure that it meets the requirements of the statute and regulations. A formal approval will be given to those vessels which qualify, and
non-qualifying applicants will be given 30 days to submit additional information as requested by the Department.

Application Form

A copy of ADEC’s application form is attached. In Section (c), paragraph 1(b), proof of financial responsibility by entry in a P&I Club must include a Certificate of Entry and must include “all addenda pertaining to the amount and applicability of oil pollution cover and amount of deductibles.”

Deductibles

With respect of deductibles, paragraph 1(c) of the application asks for proof of financial responsibility for any deductible, such as a certificate of deposit, or other “financial information.” It thus appears that ADEC will require some evidence of financial responsibility for any deductible as is presently required by ADEC’s draft regulations.

ADEC is presently considering whether to allow an interim application which does not have separate proof of financial responsibility for a deductible. However, at this juncture Owners and operators with insurance deductibles should probably plan to submit separate proof of financial responsibility for any deductible.
There are likely to be further developments on this issue and Members will be kept advised.

The Managers intend to issue a further circular when these regulations become final.

In the meantime, Members may contact Mr. Douglas R Davis of the Association’s correspondents at Anchorage, Alaska:

Kessal Young & Logan, Tel: +1(0)907 279 9696, Fax: +1(0)907 279 4239 for further assistance. Mr. Davis has filed submissions to ADEC on behalf of the International Group in relation to the draft regulations, and can assist Members with applications.

Yours faithfully
A BILBOUGH & CO. LTD (MANAGERS)”

The major ports in India, namely, Mumbai and Kolkata had issued circulars which are as under:

“MUMBAI PORT TRUST
Deputy Conservator’s Office Port House, 1st Floor Shoorji Vallabhadas Marg Mumbai – 400 001

No. DC/C.SH/2/4455 8th August, 1996 CIRCULAR
To
Ship Owners/Stevedores/Vessel Agents The Secretary
Bombay & Nhave/Sheve Ship-Intermodel Agents Association
3, Rex Chambers, Ground Floor Valchand Hirachand Marg
Ballard Estate, Mumbai – 400 001

The Secretary
The Bombay Stevedores Association Ltd., Janmabhoomi Chambers, 2nd Floor, Valchand Hirachand Marg,
Ballard Estate, Mumbai – 400 001

Subsequent to the Circular Nos. DC/C- SH/7200 dated 4th October, 1995 and DC/C- SH/2/3661 dated 9th July, 1996 and in view of recent experience gathered from the storm which hit the harbour on 18th and 19th June, 1996. It has been decided that vessels which do not possess valid P&I club cover or suitable Insurance Cover will not be decked. The intention of the Port is to eliminate all sub- standard vessels or ships without insurance cover, making Mumbai a port of call, because a mishap to such a vessel will render the port liable for expenses of wreck removal or other damages caused.

2. Therefore, notice is hereby given that from 1st November, 1996, ships, which do not possess valued insurance cover will not be given an anchorage berth in the Mumbai Port for cargo work or for any other purpose, this notice period is given so that the owners, agents and shippers proposing to load cargo have sufficient time to ensure that such cargoes will be loaded on duly protected ships.

Sd/-
Deputy Conservators

CALCUTTA PORT TRUST
HARBOUR MASTER (PORT)’S OFFICE CIRCULAR NO. 10 DATED 26.6.2001

To

All Shipping Agents

To safeguard Port interest for damage cost of repairs due marine accident or otherwise, it
is mandatory for the Agents to declare along with Berthing Application the details of P&I Club Coverage including period of validity and a declaration that insurance provides comprehensive coverage, inter alia, the following risks:

1) 3rd party liability claims
2) Claims arising out of injury/ death etc.
3) Claims arising out of damage to port properties
4) Claims against environmental damage owing to pollution caused by the ship or its personnel
5) Removal of the wreck comprehensively

The above details required to be submitted along with Berthing application to Harbour
Master (River) & Harbour Master (*Port).

Sd/-
(D.K. Rao)
Harbour Master (Port) Copy to:
DMD/TMN/FA&CAO/Secretary/H.M.(R)”

Cochin Port Trust had also been contemplating to issue such circular.

It may be true that some ports have not issued such circulars but from a bare perusal of the circulars as referred to hereinbefore, it would appear that such insurance cover has been considered to be a service having regard to the cover extended to oil spill, damage to
port, salvage operation, etc.

The circulars issued by the Port Trusts may not be determinative but there cannot be any doubt whatsoever the same would also be a relevant factor.

The ’Vessel’ is also not correct in its submission that the ports cannot take any direct action against the insurers. The circulars
issued are pointers to the fact that development of law in other countries is being taken note of for the purpose of taking insurance cover in different fields as a compulsive measure.

A DRIFT IN THE CONCEPT?

Whether arrears of insurance premium would come within the term “necessaries” is the core question involved in these appeals. The term has not been statutorily defined.

The term ’necessaries’ as defined in Black’s Law Dictionary reads as under:

“What constitutes “necessaries” for which an admiralty lien will attach depends upon what is reasonably needed in the ship’s business, regard being had to the character of the voyage and the employment in which the vessel is being used.”

In Bouvier’s Law Dictionary, the term ’necessaries’ has inter alia been defined as follows:

“The term necessaries is not confined merely to what is requisite barely to support life, but includes many of the conveniences of refined society.

A racing bicycle was held a necessary for an apprentice earning 21s. a week and living with his parents; 78 L.T. 296”

In The Canadian Law Dictionary, the term ’necessaries’ has been defined as follows:

“In the case of ships, the term denotes whatever is fit and proper for the service on which the ship is engaged, whatever the owner of that vessel, as a prudent man would have ordered if present at the time. Victoria Machinery Depot Co. Ltd. v. The ’Canada’ and the ’Triumph’, (1913) 15 Ex.C.R. 136, 14 D.L.R. 318.”

In Ballentine’s Law Dictionary, the term ’necessaries’ has been defined as follows:

“Under the maritime law permitting the master of a ship to pledge the owner’s credit for necessaries, the word does not import absolute necessity, but the circumstances must be such that a reasonable prudent owner, present, would have authorized the expenditures, and it is usually sufficient if they are reasonably fit and proper, having regard to the exigencies and requirements of the ship, for the port where she is lying and the voyage on which she is bound.
48 Am J1st Ship ’ 133.”

In 70 American Jurisprudence 2d, at page 478, it is stated: “The term “necessary” in this connection does not mean indispensable to the safety of the vessel and crew; necessaries which will create a lien upon the ship are such as are reasonably fit and proper for her under the circumstances, and not merely such as are absolutely indispensable for her safety or the accomplishment of the voyage. Whatever a prudent owner, if present, would be supposed to have authorized, the master may order, and for such expenditures the vessel will be held responsible.”

We may further notice that in Modern Admiralty Law by Aleka Mandaraka-Sheppard at page 52, it is stated:

“However, the decision of the Scottish Court of Session in The Aifanourios, mentioned above, shattered the hopes of P&I clubs. It took 19 years for the wheel to turn round and so to include such claims in the list of claims provided by the new Arrest Convention 1999. The new Arrest Convention 1999 has incorporated in the list of maritime claims for insurance premiums and brokerage, including claims by a P&I club for unpaid calls. Such claims will qualify for an arrest of a ship to be made once the Convention comes into force, or is enacted by the UK.”

In Principles of Maritime Law by Susan Hodges and Christopher Hill at page 364 it is stated:

“Failure to insure the ship: The authorities of Laming v. Seater, The Heather Bell, and Law Guarantee and Trust Society v. Russian Bank for Foreign Trade and others have all confirmed that a failure to insure the security is a matter which would have a bearing upon the security of the ship. In such an event, the mortgagee may enter into possession in order to make the ship available as security for the debt. It is to be noted that, in the last two cases, the court had also pointed out that a failure to insure the vessel (though it may constitute the basis of a right for the mortgagee to take possession) is not itself a legitimate ground for interfering with the performance of the charterparty.”

It is interesting to note that in P&I clubs – Law and Practice by Steven J. Hazelwood, it is stated:

“The defendant shipowners challenged the competence of the court to deal with the action as an action in rem. The catalogue of claims which entitle a claimant to proceed with an action in rem in the courts of Scotland are stated in section 47(2) of the Administration of Justice Act 1956 which provides, inter alia:
“This section applies to any claim arising out of one or more of the following, that is to say
…(d) any agreement relating to the use or hire of any ship whether by charter or otherwise;”.”

The learned author, however, noticed the shortcomings in the statutes operating in United Kingdom and made a prophecy to the effect that contract of maritime insurance may be included in the list of claim giving the right of arrest in the following terms:

“The current position is, therefore, that claims arising out of contracts of marine insurance are not claims which entitle a claimant to proceed by way of action in rem and claimants in respect of P.&I. Club membership are in no better position than those claiming in respect of traditional hull and cargo insurance.

In this context there is one respect in which the insurance cover offered by P.&I. Clubs differs from hull and cargo insurance and which has yet to receive the attention of the courts. Certain heads of P.&I. Cover have ceased to be matters which are, as Sir James Hannen P. once described, merely prudence but have become compulsory by law. Compulsory liability insurance was introduced in the area of oil pollution liability by the International Convention on Civil Liability for Oil Pollution 1969. Under the regime thereby introduced a shipowner is legally unable to trade or put to sea without having effected oil pollution indemnity insurance and having adequate liability insurance is as ’necessary’ to a shipowner as having fuel, stores, navigational equipment or other well-recognised “necessaries”. It is also arguable that as oil cannot be lawfully transported without the carrier having the required insurance cover, a contract for the entry of the vessel in a P&I Club could fairly be regarded as an agreement closely “relating to the carriage of goods in a ship or to the use of a ship”.

It may be that in any future review of the 1952 Arrest Convention, claims relating to contracts of marine insurance will be included
in the list of claims giving the right of arrest and provided the wording is framed appropriately to include club entry it may be that members who do not pay calls may one day find their vessels liable to arrest in this country.”

The said prophecy has come true. The learned author has also noted the decision in Marazura Navegacion S.A. and Others v. Oceanus Mutual Underwriting Association (Bermuda) Ltd. and John Laing (Management) Ltd. [1977] 1 Lloyd’s Rep. 283 wherein it has been noticed:

“Clubs can and do arrest vessels for non-payment of calls in jurisdictions which allow such actions; for example, the United States;”

In an interesting article “the International Convention on Arrest of Ships 1999” by Richard Shaw, it was opined:

“The 1999 Arrest Convention has produced a set of principles which are generally regarded as reasonably balanced, between the interests of legitimate claimants and those of shipping organizations seeking to ensure freedom of world trade without undue interference. The 1952 Arrest Convention has achieved a widespread degree of acceptance, and indeed there were those who argued that it was preferable to retain its well-tried principles rather than risk upsetting them while correcting its few deficiencies.

The extension of the right of arrest to claims for environmental damage, wreck removal, insurance premiums, commissions, brokerage and agency fees, and ship sale contracts are all significant steps to correct those recognized deficiencies, while still retaining the exhaustive list of maritime claims which is the heritage of the common law Admiralty jurisdiction. The remainder of the 1999 Convention contains nothing revolutionary, the radical UK proposal on associated ship arrest having been rejected by the conference, but there are a number of provisions which provide useful clarification of the law. The active articipation in the conference of delegations from China, Russia and the USA leads one to hope that these major states may, despite their relatively low rate of atification of other maritime conventions, find this one sufficiently non-controversial to commend it to their legislatures.”

The learned author further stated: “The principles of international law relating to jurisdiction have evolved significantly since 1952, in Europe in particular under the European Convention on Jurisdiction and Judgments 1968, but also with the development in English Law of the doctrine of forum non conveniens in cases such as the “ABDIN DAVER” [1984] A.C. 398.

The terms of Article 7 have therefore been drafted to reflect the modern law, while retaining the original principle in paragraph 1 that, in the absence of another rule of the lex fori arresti, the courts of the state where the ship has been arrested shall have jurisdiction to decide the merits of the claim.”

In Project Gabcikovo-Nagymaros (Op. Ind. Weeramantry) the International Court in its judgment dated 25.9.1997 at page 114 albeit in a different context observed:

“As this Court observed in the Namibia case, “an international instrument has to be interpreted and applied within the framework of the entire legal system prevailing at the time of the interpretation” (Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p. 31, para 53), and these principles are “not limited to the rules of international law applicable at the time the treaty was concluded.”

In Equilease Corporation Vs. M.V. Sampson [793 F.2d 598] the Court was considering interpretation of Ship Mortgage Act, 46 providing for right to a federal maritime lien to “any person furnishing repairs, supplies, or other necessaries, to any vessel. It was held:

“Equilease next argues that no maritime lien arises in favor of James because insurance is not a “necessary” and therefore neither general admiralty law nor the Act provides a maritime lien for unpaid insurance premiums.

Equilease relies on Learned and on Grow v. Steel Gas Screw Lorrains K, 310 F.2d 547 (6th Cir.1962), for this proposition. The Grow court stated in one sentence without elaboration that there is no federal maritime lien for insurance premiums, 310 F.2d at 549, and went on to grant the plaintiff insurance broker a lien under Michigan state law. Grow is thus not of much aid to us here. We focus instead on Learned.”

“Equilease urges us to apply Learned and to find that marine insurance in 1986 insures solely to the benefit of a ship’s owner, in no way aiding the ship, and therefore, that no federal lien can be had for unpaid insurance premiums. This we cannot do.

In the nineteenth century, an insurance policy on a ship was viewed as a contract for the personal indemnity of the insured ship’s owner. Under this reasoning, no lien against the ship itself could possibly arise as the result of an insurance policy; “unless the ship is benefited the ship should not pay.” In Re Petition of Insurance Co. of Pennsylvanis, 22 F.109, 116 (N.D.N.Y.1884), aff’d sub non. Insurance Co. of Pennsylvania v. The Proceeds of the Sale of the Barge Waubauschene, 24 F. 559 (C.C.N.D.N.Y.1885). It is no longer appropriate, however, to view maritime insurance this way. Even a vessel that simply sits at a dock without making any attempt to ply the waters must today have hull protection and indemnity insurance. As the district court noted, insurance is something that every vessel today needs just to carry on its normal business.”

It was further held

“We therefore hold that because insurance is essential to keep a vessel in commerce, insurance is a “necessary” under 46 U.S.C. Sec. 971 and unpaid insurance premiums to give rise to a maritime lien under the FMLA.”

Equilease Corp.(supra) has a greater persuasive value having regard to the fact that contemporary maritime statutes in England and other countries do not use the term “necessaries” but the American Federal Maritime Liens Act does.

The Indian courts need not follow the English judicial ideologies blindly. We must remind ourselves that in many fields, particularly, in the matter of preservation of ’Human Rights’ and ’Ecology’, Indian courts have gone far ahead than their English counterparts.

The decisions of the English Courts have been held to be a departure by the American Courts with regard to the jurisdiction of the admiralty but such departure is a well-known one.

Equilease Corporation has been noticed in Trident Marine Managers Inc. Vs. Serial No. CEBRF 0661586 [1988 American Maritime Cases 763].

The question, however, is whether a prudent shipowner would provide for an insurance. A compulsory insurance regime has come into being and keeping in view the changed situation the definition of the expression “necessaries” should also undergo a change.

The term “necessary” is a term of art but the same cannot, in our opinion, be used in a limited context of mandatory claims made for goods or services supplied to a particular ship for her physical necessity as opposed to commercial operation and maintenance. Physical necessity and practicality would be a relevant factor for determination of the said question. Taking insurance cover would not only be a commercial prudence but almost a must in the present day context. The third party insurance may not be compulsory in certain jurisdiction but having regard to the present day scenario such an insurance cover must be held to be intrinsically connected with the operation of a ship.

One of the relevant factors for arriving at a conclusion as to whether anything would come within the expression “necessary” or not will inter alia depend upon answer to the question as to whether the prudent owner would provide to enable a ship to perform well the functions for which she has been engaged. If getting the vehicle insured with P&I club would be one of the things which would enable a prudent owner to sail his ship for the purposes for which she has been engaged, the same would come within the purview of the said term. The matter must be considered having regard to the changing scenario inasmuch as the field of insurance has undergone a sea change from merely hull and machinery, the insurance companies cover various risks including oil spill damage to the Port, damage to the cargo etc. In that sense the term must be construed in a broad and liberal manner.

The changing requirement of a ship so as to enable it to trade in commerce must be kept in mind which would lead to the conclusion that P & I Insurance cover would be necessary for operation of a ship.

It may be true that there are a large number of insurance covers; from hull and machinery insurance to protection and indemnity cover.
But the question is not what insurance would be ’necessary’ and what would not be; as the issue has to be considered not only on a mere hypothesis but having regard to the statutes framed by other countries as also the 1999 Arrest Convention.

LEX FORI:

In Benedict on Admiralty, 6th Edn., Vol.1, p. 19, it has been stated :

“A ship is, of necessity, a wanderer. She visits shores where her owners are not known or are inaccessible. The master is the fully authorized agent of the distant owners but is not usually of sufficient pecuniary ability to respond to unforeseen demands of the voyage.

These and other kindred characteristics of maritime commerce underlie the practice of finding in the ship itself security, in many cases, for demands against the master or owners in their conduct of the ship as an instrumentality, whether commercial or not, or in their contracts made on account of the ship.”

In British Shipping Laws, Volume 14, while contrasting maritime liens and statutory rights of action it is stated:

“Although maritime liens and statutory rights of action in rem are similar in that they involve the Admiralty process in rem, there nonetheless exist fundamental differences between the two categories. These differences may be categories as follows:

(1) Nature of the claim Although the point is not free of uncertainty it is probably the case that a maritime lien is a substantive right whereas a statutory right of action in rem is in essence a procedural remedy. The object behind the availability of a statutory right of action in rem is to enable a claimant to found a jurisdiction and to provide the res as security for the claim.”

In Cheshire and North’s Private International Law, 12th Edition, it is stated

“At first sight the principle seems almost self-evident. A person who resorts to an English court for the purpose of enforcing a foreign claim cannot expect to occupy a different procedural position from that of a domestic litigant. The field of procedure constitutes perhaps the most technical party of any legal system, and it comprises many rules that would be unintelligible to a foreign judge and certainly unworkable by a machinery designed on different lines. A party to litigation in England must take the law of procedure as he finds it. He cannot by virtue of some rule in his own country enjoy greater advantages than other parties here; neither must he be deprived of any advantages that English law may confer upon a litigant in the particular form of action. To take an old example, an English creditor who sued his debtor in Scotland could not insist on trial by jury, nor, in the converse case, could a Scottish creditor suing in England refuse the intervention of a jury, on the ground that in Scotland, where the debt arose, the case would have been tried by a judge alone.”

An insurance transaction more often than not have links with more than one country. In a given case for resolution of a complex question the principles of private inter-national law or the conflict of laws may have to be turned to but with a view to determine the same, disputes have to be resolved by reference to the system of law which governs the contract of insurance. The jurisdiction to deal with an action by or against insurers in England and EC Member States except Denmark are now governed by EC Council Regulation No. 44/2001. In other countries, however, the law which is prevailing therein would govern the field. It may be true that some conventions like Brussels and Lugano are no longer relevant in most cases involving EC Member States but they form an important part of the background to the current jurisdictional regime.

For defending the limits of the jurisdiction of the case of a particular company the same must, therefore, be governed by the law prevailing therein. The claim may be a maritime claim in a non-contracting country but not in others. The ’Club’ in law, therefore, would be entitled to enforce its claims against the ’Vessel’ keeping in view the law prevailing in India within whose territorial jurisdiction the ship is found. Only because, the claim can be enforced in our country and not in some other countries, by itself would not lead to the conclusion that it cannot be enforced at all irrespective of the domestic law.

Some countries like Canada, Australia and South Africa as well as communist regimes like China and Korea have made statutes as a result whereof the maritime claims stand codified. The expression ’necessaries’ is not used in the said statutes except the statutes of United States. The domestic legislation indisputably will prevail over any international convention irrespective of the fact as to whether the country concerned is a party thereto or not.

The rules for ship arrest in international fora are not uniform.
Despite International Convention on the Arrest of Sea-going Ships 1952 as amended in the year 1999 either having been adopted by some countries or adopted by others, the law is enforced by the concerned countries having regard to their own domestic legal system. Where, how and when can a maritime claimant most advisedly arrest a ship in pursuit of its claim either in rem or in personem had all along been a complicated question keeping in view the principles of ’lex fori’.

As a matter of policy legislation or otherwise England did not want that arrears of insurance premium should be included as a maritime claim, but the same would not imply that in other countries despite the unpaid insurance premium being maritime claim, the same would not be enforced.

SUMMARY OF THE DISCUSSIONS:

The discussions made hereinbefore lead to the conclusion that having regard to the changing scenario and keeping in tune with the changes in both domestic and international law as also the statutes adopted by several countries, a stand, however, bold, may have to be taken that unpaid insurance premium of P&I Club would come within the purview of the expression “Necessaries supplied to any ship”. Other types of insurance, keeping in view the existing statutes may not amount to a “necessary”. In any event, such a question, we are not called upon to answer at present. The discussions made hereinbefore under different sub-titles of this judgment separately and distinctly may not lead us to the said conclusion but the cumulative effect of the findings thereunder makes the conclusion inevitable. The question has not only been considered from the angle of history of the judicial decisions rendered by different Courts having great persuasive value but also from the angle that with the change in time interpretative changes are required to be made. We, therefore, in agreement with the judgment of the Bombay High Court, hold that unpaid insurance premium being a maritime claim would be enforceable in India.

MAINTAINABILIY OF THE LETTERS PATENT APPEAL:

Submission of Mr. Pratap is that by refusing to exercise discretion to reject a plaint by account, no right or liability of the party is decided and by reason thereof the procedure for determining the rights and obligations of the parties are only set in motion. Such an order would akin to an order admitting the plaint, Mr. Pratap would submit. Reliance in this connection has been placed on The Justices of the Peace for Calcutta Vs. Oriental Gas Company [1872 Vol. VIII Bengal Law Reports 433 at 452].

It was urged that by not rejecting the plaint the defences set out by the defendant are not obliterated as they will be entitled to raise

all such contentions at the trial. Reliance in this connection has been placed on Prahladrai Agarwalla Vs. Shri Renuka Pal [AIR 1982 Cal 259 at page 266].

Mr. Pratap would further contend that the High Court has misread and misinterpreted the decision of this Court in Shah Babulal Khimji Vs. Jayaben Kania [(1981) 4 SCC 8]

By way of an analogy, the learned counsel would argue that leave to defend a suit granted in favour of the defendant under Order 37 of the Code of Civil Procedure would not be a ’judgment’ within the meaning of Clause 15 of the Letter Patent being an interlocutory order as
damage or prejudice in such a matter to the defendant must be a direct and immediate one.

Clause 15 permits an appeal against the order passed by a Single Judge of the High Court in the second forum.

The relevant portion of Clause 15 of the Letters Patent reads thus:

“And we do further ordain that an appeal shall lie to the said High Court of Judicature at Madras, Bombay, Fort William in Bengal from the judgment … of one Judge of the said High Court or one Judge of any Division Court, pursuant to Section 108 of the Government of India Act, and that notwithstanding anything hereinbefore provided, an appeal shall lie to the said High Court from a judgment of one Judge of the said High Court or one Judge of any Division Court, pursuant to Section 108 of the Government of India Act, made (on or after the first day of February 1929) in the exercise of appellate jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a court subject to the superintendence of the said High Court where the Judge who passed the judgment declares that the case is a fit one for appeal.”

The right of appeal which is provided under Clause 15 of the Letters Patent cannot be said to be restricted.

In Subal Paul v. Malina Paul and Anr. [JT 2003 (5) SC 193] this Court held:

“While determining the question as regards Clause 15 of the Letters Patent the court is required to see as to whether the order sought to be appealed against is a judgment within the meaning thereof or not. Once it is held that irrespective of the nature of the order, meaning thereby whether interlocutory or final, a judgment has been rendered, Clause 15 of the Letters Patent would be attracted.

The Supreme Court in Shah Babulal Khimji’s case (supra) deprecated a very narrow interpretation on the word ’judgment’ within the meaning of Clause 15.
This Court said:

“a court is not justified in interpreting a legal term which amounts to a complete distortion of the word ’judgment’ so as to deny appeals even against unjust orders to litigants having genuine grievances so as to make them scapegoats in the garb of protecting vexatious appeals. In such cases, a just balance must be struck so as to advance the objection of the statute and give the desired relief to the litigants, if possible.”

In Shah Babulal Khimji’s case (supra), this Court in no uncertain terms referred to the judgment under the Special Act which confers additional jurisdiction to the High Court even in internal appeal from an order passed by the Trial Judge to a larger Bench. Letters Patent has the force of law. It is no longer res integra. Clause 15 of the Letters Patent confers a right of appeal on a litigant against any judgment passed under any Act unless the same is expressly excluded. Clause 15 may be subject to an Act but when it is not so subject to the special provision the power and jurisdiction of the High Court under Clause 15 to entertain any appeal from a judgment would be effective.

The decision of this Court in Shah Babulal Khimji’s case (supra) has been considered in some details by a Special Bench of the Calcutta High Court in Tanusree Art Printers and Anr. v. Rabindra Nath Pal [2000 (2) CHN 213 and 2000 (2) CHN 843]. It was pointed out:

“If the right of appeal is a creature of a statute, the same would be governed by the said statute. Whether an appeal under Clause 15 of the Letters patent will be maintainable or not when the matter is governed by a Special Statute will also have to be judged from the scheme thereof. (e.g. despite absence of bar, a Letters Patent appeal will not be maintainable from a judgment of the learned Single Judge rendered under the Representation of People Act.)”

It was pointed out that in Shah Babulal Khimji’s case (supra) this Court posed three questions namely:

“1) Whether in view of Clause 15 of the Letters Patent an appeal under Section 104 of the Code of Civil Procedure would lie?

2) Whether Clause 15 of the Letters Patent supersedes Order 43, Rule 1 of the Code of Civil Procedure? 3) Even Section 104 of the CPC has no application, whether an order refusing to grant injunction or appoint a receiver would be a judgment within the meaning of Clause 15 of the Letters Patent?”
The Apex Court answered each of them from a different angle:

a) Section 104 of the Code of Civil Procedure read with Order 43, Rule 1 expressly authorizes a forum of appeal against orders falling under various clauses of Order 43 Rule 1 to a Larger Bench of a High Court without at all disturbing interference with or overriding the Letters Patent jurisdiction.

b) Having regard to the provisions of Section 117 and Order 49 Rule 3 of the Code of Civil Procedure which excludes various other provisions from the jurisdiction of the High Court, it does not exclude Order 43 Rule 1 of the CPC.

c) There is no inconsistency between Section 104 read with Order 43 Rule 1 and the appeals under Letters Patent, as Letters Patent in any way does not exclude or override the application under Section 104 read with Order 43 Rule 1 which shows that these provisions would not apply in internal appeals within the High Court.”

In Prataprai N. Kothari v. John Braganza [(1999) 4 SCC 403], even in a suit for possession only not based on title, a letters patent appeal was held to be maintainable.

The decision of this Court in Sharda Devi v. State of Bihar [(2002) 3 SCC 705] is also to the same effect, wherein in para 9 it was held:
“A Letters patent is the charter under which the High Court is established. The powers given to a High Court under the Letters Patent are akin to the constitutional powers of a High Court. Thus when a Letters Patent grants to the High Court a power of appeal, against a judgment of a Single Judge, the right to entertain the appeal would not get excluded unless the statutory enactment concerned excludes an appeal under the Letters Patent.”

Section 54 of the Land Acquisition Act, 1894 provides for an appeal before the High Court and thereafter to the Supreme Court and despite the same it was held that a letters patent appeal under Clause 15 would be maintainable.”

The view taken by the Calcutta and Bombay High Court that an order passed in terms of Order 37 of the Code of Civil Procedure granting leave to defend would not be a judgment within the meaning of Clause 15 of the Letters Patent may not be of much relevance.

In M/s. Tanusree Art Printers & Anr. Vs. Rabindra Nath Pal [2000 (2) CHN 213] it has been noticed:

“In M/s. Merchants of Traders (P) Ltd. Vs. M/s. Sarmon Pvt. Ltd., reported in 1997(1) CHN 287, learned Division Bench although did not consider this aspect of the matter but held that an order passed in terms of Order 37 Rule 5 of the Code of Civil Procedure will not be appealable.”

Reliance by Mr. Pratap upon a decision of the Calcutta High Court in Prahladrai Agarwalla and others Vs. Smt. Renuka Pal and Others [AIR 1982 Cal. 259] wherein it has been held that an order under Order 7 Rule 11 of the Code of Civil Procedure refusing to reject a plaint is not a judgment, is not apposite.

In the said judgment, however, the judgment of this Court in Shah Babulal Khimji (supra) was not taken into consideration. The ratio of the decision of this Court in Shah Babulal Khimji, as regard scope and ambit of the word “judgment” had not been noticed by the Calcutta High Court.

The submission, however, to the effect that in the suit all defences would be open to the defendant, in our opinion, is misconceived inasmuch as, no evidence can be adduced in absence of any pleading.

There may not, furthermore be any requirement to go into the trial if the plaint does not disclose a cause of action.

The contention that an order refusing to reject a plaint is one akin to order amending the plaint would not be a correct proposition of law.

The question as to whether the defendant despite such an order refusing to reject a plaint will have a right to show that the case is false would again be of no consequence. The said submission, in our opinion, is based on a wrong premise.

An order refusing to grant leave to a defendant to defend the suit would be passed when it is found that the defence is a moonshine.

Clause 15 of the Letters Patent is not a special statute. Only in a case where there exists an express prohibition in the matter of maintainability of an intra court appeal, the same may not be held to be maintainable. But in the event there does not exist any such prohibition and if the Order will otherwise be a ’judgment’ within the meaning of Clause 15 of the Letters Patent, an appeal shall be maintainable.

What would be a judgment is stated in Shah Babulal Khimji (supra) as under:

“We think that “judgment” in Clause 15 means a decision which affects the merits of the question between the parties by determining some right or liability. It may be either final, or preliminary, or interlocutory, the difference between them being that a final judgment determines the whole cause or suit, and a preliminary or interlocutory judgment determines only a part of it, leaving other matters to be determined.
81. An analysis of the observations of the Chief Justice would reveal that the following tests were laid down by him in order to decide whether or not an order passed by the Trial Judge would be a judgment :
(1) a decision which affects the merits of the question between the parties;
(2) by determining some right or liability;
(3) the order determining the right or liability may be final, preliminary or interlocutory, but the determination must be final or one which decides even a part of the controversy finally leaving other matters to be decided later.

In Lea Badin Vs. Upendra Mohan Roy [AIR 1935 Cal. 35], the Calcutta High Court held that an order refusing to appoint a receiver is determinative of a right of the plaintiff and would accordingly be a judgment.

Yet again in Chittaranjan Mondal Vs. Sankar Prosad Sahani [AIR 1972 Cal. 469] the Calcutta High Court held that an order refusing to grant an injunction restraining execution of the judgment-debtor was a judgment within the meaning of Clause 15.

As by reason of an order passed under Order 7, Rule 11 of the Code of Civil Procedure, the rights conferred upon the parties are determined one way or the other, stricto sensu it would not be an interlocutory order but having regard to its traits and trappings would be a preliminary judgment.

It is true that in Shah Babulal Khimji (supra) it is stated that an order rejecting the plaint would be appealable but does not expressly state that an order refusing to reject would not be appealable. Therein this Court gave 15 instances where an order would be appealable which are only illustrative in nature.

Such observations have to be understood having regard to the concept of finality which are of three types:

(1) a final judgment
(2) a preliminary judgment and
(3) intermediary or interlocutory judgment.

In our opinion the order refusing to reject the plaint falls in the category of a preliminary judgment and is covered by the second category carved out by this Court.

It is trite that a party should not be unnecessarily harassed in a suit. An order refusing to reject a plaint will finally determine his right in terms of Order 7 Rule 11 of the Code of Civil Procedure.

The idea underlying Order 7 Rule 11A is that when no cause of action is disclosed, the courts will not unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the Courts would interpret the provisions in such a manner so as to save expenses, achieve expedition, avoid the court’s resources being used up on cases which will serve no useful purpose. A litigation which in the opinion of the court is doomed to fail would not further be allowed to be used as a device to harass a litigant. (See Azhar Hussain Vs. Rajiv Gandhi 1986 Supp SCC 315 at 324-35).

In Dhartipakar Aggarwal Vs. Rajiv Gandhi [1987 Supp SCC 93], this court held:
“9. In K. Kamaraja Nadar v. Kunju Thevar (1959 SCR 583 : AIR 1958 SC 687 : 14 ELR 270), the Election Tribunal and the High Court both refused to consider preliminary objections raised by the returned candidate at the initial stage on the ground that the same would be considered at the trial of the election petition. This Court set aside the order and directed that the preliminary objection should be entertained and a decision reached thereupon before further proceedings were taken in the election petition. Bhagwati, J. speaking for the Court observed thus : We are of opinion that both the Election Tribunal and the High Court were wrong in the view they took. If the preliminary objection was not entertained and a decision reached thereupon, further proceedings taken in the election petition would mean a full-fledged trial involving examination of a large number of witnesses on behalf of the second respondent in support of the numerous allegations of corrupt practices attributed by him to the appellant, his agents or others working on his behalf; examination of a large number of witness by or on behalf of the appellant controverting the allegations made against him; examination of witness in support of the recrimination submitted by the appellant against the second respondent; and a large number of visits by the appellant from distant places like Delhi and Bombay to Ranchi resulting in not only heavy expenses and loss of time and diversion of the appellant from his public duty in the various fields of activity including those in the House of the People. It would mean unnecessary harassment and expenses for the appellant which could certainly be avoided if the preliminary objection urged by him was decided at the initial stage by the Election Tribunal. It was opined that in a given case a full dressed trial need not be undertaken.

Yet again in Samar Singh Vs. Kedar Nath (1987 Suppl. SCC 224) it has been held :

“In substance, the argument is that the court must proceed with the trial, record the evidence, and only after the trial of the election petition is concluded
that the powers under the Code of Civil Procedure for dealing appropriately with the defective petition which does not disclose cause of action should be exercised. With respect to the learned counsel, it is an argument which it is difficult to comprehend. The whole purpose of conferment of such powers is to ensure that a litigation which is meaningless and bound to prove abortive should not be permitted to occupy the time of the court and exercise the mind of the respondent.”

We may notice a converse case. In Dipak Chandra Ruhidas Vs. Chandan Kumar Sarkar [(2003) 7 SCC 66], in view of Section 98 (a) and Section 116-A of the Representation of People Act, a question arose as to whether dismissing an election petition at the threshold shall be appealable. This Court observed:

“13. Furthermore, Section 86 deals with trial of election petitions, Sub-section (1) whereof is a part of it. Trial has not been defined. In Black’s Law Dictionary at page 1348 it is stated:
“A judicial examination and determination of issues between parties to action, Gulf, C. & S.F. Ry. Co. v. Smit, Okl., 270 P.2d 629, 633; whether they be issues of law or of fact, Pulaski v. State, 23 Wis. 2d 138, 126 N.W. 2d 625, 628. A judicial examination, in accordance with law of the land, of a cause, either civil or criminal, of the issues between the parties whether of law or fact, before a court that has proper jurisdiction”.

14. It is, therefore, not necessary that the trial must be a full dressed or a jury trial or a trial which concludes only after taking evidence of a parties in support of their respective cases.

15. Section 116A provides for an appeal. The said provision must be given a liberal and purposive construction. The scope of an appeal

should be held to be wider than an application for judicial review or a petition under Article 136 of the Constitution of India.

16. Furthermore, the Representation of the People Act provides for a complete machinery. The right of appeal conferred upon a suitor must be considered from that angle. When an order is passed under Section 98 of the Act, the same may be in terms of either Sub-section (1) of Section 86 or otherwise. An appeal lies against a final order. An order passed under Sub-section (1) of Section 86 is also final. It may be that in the event an appeal therefrom is allowed, the matter may be required to be sent back but that would not render an order passed thereunder as an interlocutory one. It does not take away the concept of the finality attached therewith.”

In Central Mine Planning and Design Institute Ltd. Vs. Union of India and Another [(2001) 2 SCC 588] this Court upon referring Shah Babulal Khimji (supra) held:

“Adverting to the facts of this case, Section 17-B of the ID Act confers valuable rights on the workmen and correspondingly imposes onerous obligations on the employer. The order in question passed by the learned Single Judge determines the entitlement of the workmen to receive benefits and imposes an obligation on the appellant to pay such benefits provided in the said section. That order cannot but be “judgment” within the meaning of clause 10 of Letters Patent, Patna. The High Court is obviously in error in holding that the said order is not judgment within the meaning of clause 10 of the Letters Patent of Patna.”

We, therefore, are of the opinion that Letters Patent Appeal was maintainable.

REJECTION OF PLAINT:

Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in its entirety, a decree would be passed.

CAUSE OF ACTION:
A cause of action is a bundle of facts which are required to be pleaded and proved for the purpose of obtaining relief claimed in the suit. For the aforementioned purpose, the material facts are required to be stated but not the evidence except in certain cases where the pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence.

Order 7 Rule 14 of the Code of Civil Procedure provides as follows:

“14 PRODUCTION OF DOCUMENT ON WHICH PLAINTIFF SUES OR RELIES.
(1) Where a plaintiff sues upon a document or relies upon document in his possession or power in support of his claim, he shall enter such documents in a list, and shall produce it in Court when the plaint is presented by him and shall, at the same time deliver the document and a copy thereof, to be filed with the plaint.
(2) Where any such document is not in the possession or power of the plaintiff, he shall, where possible, state in whose possession or power it is.
(3) Where a document or a copy thereof is not filed with the plaint under this rule, it shall not be allowed to be received in evidence on behalf of the plaintiff at the hearing of the suit.
(4) Nothing in this rule shall apply to document produced for the cross-examination of the plaintiff’s witnesses, or, handed over to a witness merely to refresh his memory.”

In the instant case the ’Club’ not only annexed certain documents with the plaint but also filed a large number of documents therewith.

Those documents having regard to Order 7 Rule 14 of the Code of Civil Procedure are required to be taken into consideration for the purpose of disposal of application under Order 7 Rule 11(a) of the Code of Civil Procedure. The ’Club’ in its plaint pleaded:

“The Plaintiff is a Protection & Indemnity Association incorporated under the laws of the United Kingdom and carries on business through its Managers, Liverpool & London P&I Management Ltd. at Liverpool, UK. The Plaintiff is a mutual association of ship-owners and offers insurance cover in respect of vessels entered with it for diverse third party risks associated with the operation and trading of vessels. This insurance is commonly known as Protection & Indemnity (P&I) cover in respect of various risks associated with the vessels in their maritime adventure. The 1st Defendant vessel m.v. “Sea Success I” is a sistership of the vessels “Sea Ranger” and “Sea Glory” which were entered for P&I risks with the Plaintiff Association. The said two vessels were entered into the Plaintiff’s Association for the policy year 1999-2000 by Defendant No. 2, Singapore Soviet Shipping Co. Pte. Ltd. who, as per the terms of the insurance and Rules of the Plaintiff Association, were recognized and considered to be the owners of the said two vessels and the assured under the policy of insurance. The 1st Defendant vessel is owned and/ or controlled by Defendant No. 2 through its wholly owned 100% subsidiary, Singapore Soviet Shipping Corporation Inc., Monrovia. The 1st Defendant vessel is presently at the port and harbour of Mumbai within the territorial waters of India and within the Admiralty jurisdiction of this Hon’ble Court. The 2nd Defendant is the owner of the 1st Defendant and is also inter alia the party liable in personam in respect of the Plaintiff’s claim.

The Plaintiff submits as more particularly stated in paragraph 1 above, that the 1st Defendant vessel is a sistership of the two

vessels “Sea Glory” and “Sea Ranger” in view of the beneficial ownership, management of all three vessels having vested in Defendant No. 2. The Plaintiff further submits that Defendant No. 2 is liable in personam in respect of the unpaid insurance premium in respect of the two vessels “Sea Glory” and “Sea Ranger”. Consequently, the Plaintiff is entitled to arrest any other vessel in the ownership of Defendant No. 2. The 1st Defendant vessel is owned by Defendant No. 2 through it’s 100% subsidiary S.S. Shipping Co. Inc. In the circumstances, the Plaintiff submits that they are entitled to proceed against the Defendant vessel in rem and are entitled to an order of arrest, detention and sale of the vessel for recovery of their outstanding dues in respect of insurance premium as more particularly stated above. The Plaintiff is, therefore, entitled to have the Defendant vessel along with her hull, gear, engines, tackle, machinery, bunkers, plant, apparel, furniture, equipments and all appurtenances thereto condemned and arrested under a warrant of arrest of this Hon’ble Court for realization of the Plaintiff’s dues. The Plaintiff is further entitled to have the Defendant vessel sold under the orders and directions of this Hon’ble Court and to have the sale proceeds thereof applied towards the satisfaction of the Plaintiff’s claim in the suit. The Plaintiff is entitled to an order of arrest of the Defendant vessel as arrest is the only method of proceeding against the said vessel in rem. The Plaintiff submits that if such an order of arrest is not granted, irreparable harm and injury will be caused to the Plaintiff inasmuch as the Plaintiff’s suit will be rendered infructuous. There is no other alternative efficacious remedy available to the Plaintiff.

The Club has pleaded that the vessel is a sister ship of ’Sea Ranger’ and ’Sea Glory’ owned and possessed by the second defendant. The Club has also pleaded that the defendant No. 2 is beneficial owner of the first defendant ship. Determination on such assertions would amount to determination of question of fact. If the ’Vessel’ denies or disputes the same; an issue in that behalf will have to be framed and decided.

Beneficial ownership of a ship is not a question of fact alone. It is a mixed question of fact and law. In William Vs. Wilcox [(1838) 8 Ad. & EL 331] it is held:

“It is an elementary rule in pleading that when a state of facts is relied, it is enough to allege it simply, without setting out the subordinate facts which are the means of proving it or the evidence sustaining the allegations.”

The aforementioned dicta has been quoted with approval in Mohan Rawale Vs. Damodar Tatyaba & Ors. [(1994) 2 SCC 392].

It may be true that Order 7 Rule 11(a) although authorises the court to reject a plaint on failure on the part of the plaintiff to disclose a cause of action but the same would not mean that the averments made therein or a document upon which reliance has been placed although discloses a cause of action, the plaint would be rejected on the ground that such averments are not sufficient to prove the facts stated therein for the purpose of obtaining reliefs claimed in the suit. The approach adopted by the High Court, in this behalf, in our opinion, is not correct.

In D. Ramachandran Vs. R.V. Janakiraman & Ors. [(1999) 3 SCC 267], this Court held:

“It is well settled that in all cases of preliminary objection, the test is to see whether any of the reliefs prayed for could be granted to the appellant if the averments made in the petition are proved to be true. For the purpose of considering a preliminary objection, the averments in the petition should be assumed to be true and the court has to find out whether those averments disclose a cause of action or a triable issue as such. The court cannot probe into the facts on the basis of the controversy raised in the counter.”

Furthermore a fact which is within the special knowledge of the defendant need not be pleaded in the plaint. In Punit Rai vs. Dinesh Chaudhary [JT 2003 (Supp.1) SC 557], it is stated:

“…These are the material facts relating to the plea raised by the appellant that the respondent is not a Scheduled caste. We don’t think if the respondent means to say that the petitoner should have stated in the petition that the respondent is not born of Deo Kumari Devi said to be married to Bhagwan Singh in village Adai. If at all these facts would be in the special knowledge of respondent, Bhagwan Singh and Deo Kumari Devi hence not required to be pleaded in the election petition. It is not possible as well. In this connection, a reference may be made to a decision of this Court in Balwan Singh vs. Lakshmi Nrain and Ors {AIR 1960 SC 770).
This case also relates to election matter and it was held that facts which are in the special knowledge of the other party could not be pleaded by the election petitioner. It was found that particulars of the arrangement of hiring or procuring a vehicle would never be in the knowledge of the petitioner, such facts need not and cannot be pleaded in the petition.”

In D. Ramachandran Vs. R.V. Janakiraman & Ors. [1999] 3 SCC 267, it has been held that the Court cannot dissect the pleading into several parts and consider whether each one of them discloses a cause of action.

In the aforementioned backdrop, the question as to whether the Club had been able to show that the Respondent No. 1 is a sister ship of “Sea Glory” and “Sea Ranger” admittedly belonging to the first respondent is a matter which is required to be gone into in the suit.

In ascertaining whether the plaint shows a cause of action, the court is not required to make an elaborate enquiry into doubtful or complicated questions of law or fact. By the statute the jurisdiction of the court is restricted to ascertaining whether on the allegations a cause of action is shown. In Vijay Pratap Singh Vs. Dukh Haran Nath Singh [AIR 1962 SC 941] this Court held:

“By the express terms of r. 5 clause (d), the court is concerned the ascertain whether the allegations made in the petition show a cause of action. The court has not to see whether the claim made by the petitioner is likely to succeed: it has merely to satisfy itself that the allegations made in the petition, if accepted as true, would entitle the petitioner to the relief he claims. If accepting those allegations as true no case is made out for granting relief no cause of action would be shown and the petition must be rejected. But in ascertaining whether the petition shows a cause of action the court does not enter upon a trial of the issues affecting the merits of the claim made by the petitioner. It cannot take into consideration the defences which the defendant may raise upon the merits; nor is the court competent to make an elaborate enquiry into doubtful or complicated questions of law or fact. If the allegations in the petition, prima facie, show a cause of action, the court cannot embark upon an enquiry whether the allegations are true in fact, or whether the petitioner will succeed in the claims made by him.”

So long as the claim discloses some cause of action or raises some questions fit to be decided by a Judge, the mere fact that the case is weak and not likely to succeed is no ground for striking it out. The purported failure of the pleadings to disclose a cause of action is distinct from the absence of full particulars. [See Mohan Rawale (supra)]

Beneficial ownership is not a pure question of fact. It is a mixed question of law and fact. In that view of the matter it was not necessary for the Club to set out the subordinate facts which arte means of proving it or the evidence sustaining the allegations. The High Court, however, in its order rejecting the plaint held:

“We have not gone into the merits of the Defendant No. 1 ship, we clarify, on the basis of any averments made by Defendant No. 1, to the contrary, but we have proceeded to examine the same on the basis of the averments made in the plaint to find out whether, as they stand, prove the Defendant No. 1 vessel Sea Success -I to be sister ship of vessels – “Sea Glory” and “Sea Ranger” being beneficially owned by Defendant No. 2. We have already indicated above that the allegations made in the plaint by themselves do not prove factum of Defendant No. 1 Sea Success- I being sister ship of vessels “Sea Glory” and “Sea Ranger” in respect of whom the claim has been raised in the suit, we find it difficult to approve the view of the learned Single Judge in this regard. It cannot be overlooked that ship is a valuable commercial chattel and her arrest undeservingly severely prejudices third parties innocently as well as affect the interest of owner, crew member, cargo owner, shipper etc. adversely and, therefore, it is all the more necessary to analyse the plaint meaningfully at the threshold to find out whether it discloses cause of action or not and not on technical and formal reading that if discloses cause of action and wait for trial.”

The approach of the High Court, in our considered opinion, is not correct. For the purpose of rejecting a plaint it is not necessary to consider whether the averments made in the plaint prove the factum that the defendant No. 1 “Sea Success-I” is a sister ship of “Sea Glory” and “Sea Ranger” or the said two ships are beneficially owned by the defendant No. 2. The reasons which have been assigned in support of the said aforementioned finding that that the ship is a valuable commercial chattel and her arrest undeservingly prejudices third parties as well as affect the interest of owner and others is a question which must be gone into when passing a final order as regard interim arrest of ship or otherwise. For the aforementioned purpose the Vessel herein could file an application for vacation of stay. While considering such an application, the Court was entitled to consider not only a prima facie case but also the elements of balance of convenience and irreparable injury involved in the matter. In such a situation and particularly when both the parties disclose their documents which are in their possession, the Court would be in a position to ascertain even prima facie as to whether the Club has been able to make out that “Sea Glory” and “Sea Ranger” are sister vessels of the “Vessel”.

The reason for the aforementioned conclusion is that if a legal question is raised by the defendant in the written statement, it does not mean that the same has to be decided only by way of an application under Order 7 Rule 11 of the Code of Civil Procedure which may amount to pre-judging the matter.

Furthermore, the question as to whether the asset of a 100% subsidy can be treated as an asset of the parent company would again depend upon the fact situation of each case.

In The Aventicum [1978] 1 Lloyd’s L.R. it has been held:

“I have no doubt that on a motion of this kind it is right to investigate the true beneficial ownership. I reject any suggestion that it is impossible “to pierce the corporate veil”. I of course remember, as Mr. Howard urges, the case of Saloman v. Saloman & Co., [1897] A.C. 22, but of course it is plain that s.3(4) of the Act intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial ownership. Certainly in a case where there is a suggestion of a trusteeship or a nominee holding, there is no doubt that the Court can investigate it. I think that it may well be, without having to resolve the difference of opinion expressed by Mr. Justice Brandon and Mr. Justice Goff in the two cases to which I have referred that the Court has the power and should in some cases look even further.”

Yet again in The Andrea Ursula [1971] 1 Lloyd’s L.R. 145, the Court opined:

“There is no definition in the Act of the expression “beneficially owned” as used in sect. 3(4). It could mean owned by someone who, whether he is the legal owner or not, is in any case the equitable owner. That would cover both the case of a ship the legal and equitable title to which are in one person, A, and also the case of a ship the legal title to which is in one person, A, but the equitable title to which is in another person, B. In the first case the ship would be beneficially owned by A, and in the second case by B. Trusts of ships, express or implied, are however, rare and the words seem to me to be capable also of a different and more practical meaning related not to title, legal or equitable, but to lawful possession and control with the use and benefit which are derived from them. If that meaning were right, a ship would be beneficially owned by a person who, whether he was the legal or equitable owner or not, lawfully had full possession and control of her, and, by virtue of such possession and control, had all the benefit and use of her which a legal or equitable owner would ordinarily have.”

Furthermore, the question as to whether the concept of ownership of a ship which has been introduced in 18th Century when there had been no joint stock companies and the concept of shares in a ship so as to encourage the individuals to pool their resources by a sister ship so that they may become co-owners is a matter which is required to be considered at an appropriate stage. We do not think that such a question can justifiably be gone into at this stage.

We do not intend to delve deep into the questions as to whether the two ships named hereinabove are the sister ships of the respondent No. 1 Vessel or whether the requirement of law as regard ownership of a ship in the Respondent No. 1 as beneficial owner has been fulfilled or not. Such issues must be considered at an appropriate stage.

CONCLUSION :
We, therefore, direct that in the event, a proper application is filed either for dissolution of the interim order of injunction passed by the learned Single Judge or if the High Court in its wisdom thinks fit to decide any issue as a preliminary issue such questions may be gone into in greater details. Any observations made by us must be considered to have been made only for the purpose of disposal of these appeals and not for the purpose of determining the merit of the matter. However, having regard to the facts and circumstances of this case, we will request the High Court to consider the desirability of disposing of the matter as expeditiously as possible and preferably within a period of three months from the date of receipt of a copy of this order.

For the reasons aforementioned, the judgment under challenge is set aside and the matter is sent back to the High Court. Civil Appeal No. 5665 of 2002 is accordingly allowed and Civil Appeal No. 5666 of 2002 is dismissed. No costs.

The post Liverpool & London S.P. & I Asson. Ltd Vs. M.V. Sea Success I & Anr appeared first on B&B Associates LLP.

J U D G M E N T

ARIJIT PASAYAT, J

Fifteen persons faced trial for alleged commission of offences punishable under Section 302 read with Sections 149, 148 of the Indian Penal Code, 1860 (for short the ’IPC’). Accused No.9 (appellant No.5 in the present appeals) additionally faced trial for offence punishable under Section 27 of the Arms Act, 1959(in short the ’Arms Act’). Accused No.2 Mahendra Rai (Appellant No.8 in the present appeals) who was separately charged for offence punishable under Section 302 IPC was acquitted of the said charge but instead was convicted as afore-noted in terms of Section 302 read with Section 149 IPC. Out of the 15 accused persons, two were acquitted and three died during pendency of the appeals before the High Court.

Prosecution version as unfolded during trial and which formed the foundation of the prosecution case is essentially as follows:

On 17.8.1983, one Sarjug Rai (hereinafter referred to as the ’deceased’) lost his life allegedly at the hands of the accused. About 5-6 years preceding the incident when Sarjug Rai was killed there was a partition of the family properties. Kamal Rai was his nephew who nourished serious grudge against his uncle, as according to him there was unequal partition of ancestral properties. Said Kamal Rai, strongly believed that construction of new house and purchase of tractor, subsequent to partition by the deceased was made from cash which had not been divided during partition. Though motive appears to be trivial and also stale but where direct evidence is available, motive pales into insignificance. The accusations appearing from the first information report of Ram Babu Rai (PW-14), son of the deceased and also narrations made by the witnesses at trial are that on 17.8.1983 while deceased at about 8.00 a.m. had gone to a temple after taking holy dip in a pond, adjacent to the temple, the appellants holding weapons came down from the house of Kamal Rai and came to the temple, pursuant to which Kamal Rai while exhorting others to liquidate the deceased dealt blows with a hard and blunt substance on his head as he had been unfair to him in partitioning the ancestral properties. Dukha Sah (PW-6), the priest of the temple locked the northern gate of the temple to save the deceased. However, he could not be saved as accused-appellant Deosharan Rai broke open the lock and dragged the deceased outside, pursuant to which on exhortation made by Kamal Rai all dealt indiscriminate blows on him with lethal weapons which they were carrying. When Shatrughan Pandey (PW-1), Ram Chandra Rout (PW-2), Nandlal Pandey (PW-4) and Sita Saran Rai (PW-5) came to rescue on hearing alarms raised by the son of the deceased (PW14), they could not proceed to rescue the deceased on being scared by the firing resorted to by accused-appellant Satya Narain Rai. Ram Babu Rai (PW-14) informed the police who visited village Bishanpur and recorded his statement, pursuant to which investigation commenced. The police during investigation apart from recording statement of witnesses under Section 161 of the Code of Criminal Procedure, 1973 (for short the ’Code’) visited the place of occurrence, and also made seizure of some offending articles from the place of occurrence. On conclusion of investigation, he laid charge sheet before the Court against all the 15 accused persons who were eventually put on trial. In the trial, the prosecution examined 17 witnesses. The accused persons pleaded innocence and false implication and examined 16 witnesses to counter the allegations attributed to them. Those examined by the prosecution were the villagers of Bishanpur, some outsiders, who were either relations of the deceased or claimed to have visited the village for holding panchayati for resolution of the dispute pending between the two parties, the doctor and also the police officer.

As noted supra, accused persons pleaded innocence and false implication due to animosity persisting between the parties. Three of the accused persons pleaded alibi to improbabilise their physical presence at the site of occurrence. Out of the prosecution witnesses, seven i.e. PWs 2 to 5, 6, 10, 14 were stated to be eyewitnesses. On consideration of the evidence on record, learned 3rd Additional Sessions Judge, Sitamarhi as afore-noted convicted 13 accused persons, acquitted two. In respect of three who died during the pendency of the appeal before the High Court the appeals abated. The convicted accused preferred three separate appeals before the High Court which by the impugned judgment disposed of them.

In support of the appeals, learned senior counsel submitted that the appellants have been convicted by application of Section 149 IPC. The ingredients necessary to bring in application of the said provision have not been established. The plea of alibi has been accepted in respect of two accused persons. Though, appellant Mahendra Rai stood at a better footing, his plea of alibi has been rejected on erroneous premises. Evidence was produced and a witness was examined to substantiate his plea of alibi which has been discarded without any basis. Though there were large number of injuries, no particular one has been attributed to any particular accused, except accused Deo Sharan Rai (A-1), Kamal Rai (A-7) and Satya Narain Rai (A-9). Accused Kamal Rai has died and the rest two are appellants 3 and 5 respectively in these appeals. The motive which was sought to be indicated as the foundation of the crime is too scarce and in fact Deo Narain Rai(PW-11) who is not an eyewitness and spoke about the motive of Kamal Rai has been disbelieved by both the trial Court and the High Court. The witnesses are closely related and in fact PW-11 has been discarded as unreliable. The investigation was more than perfunctory and the Courts below should have taken note of that. Identification in a mob is highly improbable. When plea of alibi has been accepted it clearly indicates the extent of false implication and the design therefor. One of the accused Rabindra Pandey was a child at the time of occurrence. Though he should have been separately dealt with under the Children’s Act and that having not been done his conviction is vitiated. The genesis as described by the prosecution is highly improbable. It is not believable that the deceased was going to offer puja in a temple which prima facie appears to be without a deity. The place of occurrence has been chosen in a manner as would give some credence to the evidence of some persons like Pujari Dukha Sah (PW-6). The evidence of prosecution is to the effect that all the accused persons came from the house of accused Kamal Rai. The visibility from the place where PW-6 claims to have seen them is well nigh impossible. There is no evidence to show that Kamal Rai has disclosed to others what he proposed to do, or there was sharing of common object. On the other hand, even if it was a case of similar or common intention, at the most, the prosecution could press into service Section 34 IPC for which there was no charge and for bringing in application of Section 34 IPC participation is a must. The allegations of a very general and repetitive nature have been made against all the accused persons. There is no evidence that Satya Narain Rai was carrying a country made gun and therefore the conviction under Section 27 of the Arms Act is not maintainable.

In response, Mr. B.B. Singh, learned counsel for the State submitted that the common object which sine qua non have application under Section 149 IPC has been clearly brought out. The unimpeachable evidence is that all the accused persons armed with deadly weapons came from outside the village in a group. The deceased was dragged first and given lathi blow by accused Kamal Rai which was a fatal one and when his son (PW-14) wanted to protect gun was fired to dissuade others from coming to his rescue. The evidence was more than sufficient to attract Section 149. So far as the alleged interestedness of the witnesses is concerned, it is trite law that if after careful analysis and scrutiny, the evidence is found credible, the conviction can be maintained. Additionally, there were witnesses who were not in any manner related. So far as the question of alibi is concerned, when presence of the concerned accused is satisfactorily established, the Court would be slow to believe the counter evidence unless it is of such quality as would create a reasonable doubt on the minds of the Court that the prosecution version was not cogent. The trial Court and the High Court have analysed in detail the plea of alibi and have discarded it in view of the evidence on record. So far as the claim of accused Rabindra Pandey to be a minor is concerned, the order dated 27.7.1984 passed by the trial Court clearly shows that it had discarded the plea. In fact the school records clearly indicated that he was more than 18 years of age on the date of occurrence. The father filed an affidavit with oblique motive to say that there was a wrong recording in the school register. Apparently, such a plea is not acceptable and the order dated 27.7.1984 was passed much before the completion of trial and the same having not been assailed has become final. Therefore, neither the trial Court nor the High Court has dealt with this plea which even does not appear to have been raised before the said Courts.

The jurisdictional issue based on purported age of the accused needs consideration first. The question relating to age of the accused was never raised before the courts below during trial, and in appeal, necessitating a decision in this regard. In fact, the Juvenile Act on which the appellants have placed reliance was not in existence at the time of occurrence. Further at no point of time during trial or before the High Court this question was raised. The necessity of determining the age of accused arises when the accused raises a plea and the Court entertains a doubt. Here, when the claim was made by the accused that he was a child the plea was considered and a decision was rendered that he was not a child. That order has attained finality without any challenge thereto. The clearly untenable plea that the school register was wrong, cannot be accepted by accepting the self-serving affidavit of the father. In any event, there was no argument advanced either before the trial Court or the High Court on this issue and the disputed factual question which has also attained finality in view of an earlier order cannot be permitted to be raised.

The first information report was lodged almost immediately. The police station is situated at a distance of 4 K.M. from the place of occurrence. The occurrence took place at around 8.00 a.m. The FIR was recorded at 10.00 a.m. almost immediately. The investigating officer reached the place of occurrence at 11.00 a.m. and the post mortem was conducted at 4.00 p.m. The evidence on record goes to show that the eyewitnesses were examined from 2.00 p.m. onwards.

Acquittal of some of the accused persons will not come to the rescue of the other appellants in respect of whom the High Court has considered the evidence on record and found them guilty. As noted above, PW-1 has no relationship with the deceased and his assertion in the examination-in-chief has gone unchallenged. It is to be noted that nothing has been elicited in the cross-examination of various witnesses as regards the place of occurrence and the manner of occurrence. That being the position, the convictions as done cannot be faulted.

We shall deal with the question regarding applicability of Section 149 IPC, which was urged emphatically.

A plea which was emphasized by the respondents relates to the question whether Section 149, IPC has any application for fastening the constructive liability which is the sine qua non for its operation. The emphasis is on the common object and not on common intention. Mere presence in an unlawful assembly cannot render a person liable unless there was a common object and he was actuated by that common object and that object is one of those set out in Section 141. Where common object of an unlawful assembly is not proved, the accused persons cannot be convicted with the help of Section 149. The crucial question to determine is whether the assembly consisted of five or more persons and whether the said persons entertained one or more of the common objects, as specified in Section 141. It cannot be laid down as a general proposition of law that unless an overt act is proved against a person, who is alleged to be a member of unlawful assembly, it cannot be said that he is a member of an assembly. The only thing required is that he should have understood that the assembly was unlawful and was likely to commit any of the acts which fall within the purview of Section 141. The word ’object’ means the purpose or design and, in order to make it ’common’, it must be shared by all. In other words, the object should be common to the persons, who compose the assembly, that is to say, they should all be aware of it and concur in it. A common object may be formed by express agreement after mutual consultation, but that is by no means necessary. It may be formed at any stage by all or a few members of the assembly and the other members may just join and adopt it. Once formed, it need not continue to be the same. It may be modified or altered or abandoned at any stage. The expression ’in prosecution of common object’ as appearing in Section 149 have to be strictly construed as equivalent to ’in order to attain the common object’. It must be immediately connected with the common object by virtue of the nature of the object. There must be community of object and the object may exist only up to a particular stage, and not thereafter. Members of an unlawful assembly may have community of object up to certain point beyond which they may differ in their objects and the knowledge, possessed by each member of what is likely to be committed in prosecution of their common object may vary not only according to the information at his command, but also according to the extent to which he shares the community of object, and as a consequence of this the effect of Section 149, IPC may be different on different members of the same assembly.

’Common object’ is different from a ’common intention’ as it does not require a prior concert and a common meeting of minds before the attack. It is enough if each has the same object in view and their number is five or more and that they act as an assembly to achieve that object. The ’common object’ of an assembly is to be ascertained from the acts and language of the members composing it, and from a consideration of all the surrounding circumstances. It may be gathered from the course of conduct adopted by the members of the assembly. For determination of the common object of the unlawful assembly, the conduct of each of the members of the unlawful assembly, before and at the time of attack and thereafter, the motive for the crime, are some of the relevant considerations. What the common object of the unlawful assembly is at a particular stage of the incident is essentially a question of fact to be determined, keeping in view the nature of the assembly, the arms carried by the members, and the behaviour of the members at or near the scene of the incident. It is not necessary under law that in all cases of unlawful assembly, with an unlawful common object, the same must be translated into action or be successful. Under the Explanation to Section 141, an assembly which was not unlawful when it was assembled, may subsequently become unlawful. It is not necessary that the intention or the purpose, which is necessary to render an assembly an unlawful one comes into existence at the outset. The time of forming an unlawful intent is not material. An assembly which, at its commencement or even for some time thereafter, is lawful, may subsequently become unlawful. In other words it can develop during the course of incident at the spot co instanti.

Section 149, IPC consists of two parts. The first part of the section means that the offence to be committed in prosecution of the common object must be one which is committed with a view to accomplish the common object. In order that the offence may fall within the first part, the offence must be connected immediately with the common object of the unlawful assembly of which the accused was member. Even if the offence committed is not in direct prosecution of the common object of the assembly, it may yet fall under Section 141, if it can be held that the offence was such as the members knew was likely to be committed and this is what is required in the second part of the section. The purpose for which the members of the assembly set out or desired to achieve is the object. If the object desired by all the members is the same, the knowledge that is the object which is being pursued is shared by all the members and they are in general agreement as to how it is to be achieved and that is now the common object of the assembly. An object is entertained in the human mind, and it being merely a mental attitude, no direct evidence can be available and, like intention, has generally to be gathered from the act which the person commits and the result therefrom. Though no hard and fast rule can be laid down under the circumstances from which the common object can be culled out, it may reasonably be collected from the nature of the assembly, arms it carries and behaviour at or before or after the scene of incident. The word ’knew’ used in the second branch of the section implies something more than a possibility and it cannot be made to bear the sense of ’might have been known’. Positive knowledge is necessary. When an offence is committed in prosecution of the common object, it would generally be an offence which the members of the unlawful assembly knew was likely to be committed in prosecution of the common object. That, however, does not make the converse proposition true; there may be cases which would come within the second part but not within the first part. The distinction between the two parts of Section 149 cannot be ignored or obliterated. In every case it would be an issue to be determined, whether the offence committed falls within the first part or it was an offence such as the members of the assembly knew to be likely to be committed in prosecution of the common object and falls within the second part. However, there may be cases which would be within first offences committed in prosecution of the common object would be generally, if not always, with the second, namely, offences which the parties knew to be likely committed in the prosecution of the common object. [See Chikkarange Gowda and others v. State of Mysore (AIR 1956 SC 731)]

Therefore, Section 149 has been rightly applied when the factual position as highlighted by the eyewitnesses is considered. Even if the absence of motive as alleged is accepted that is of no consequence and pales into insignificance when direct evidence establishes the crime. The first information report was lodged almost immediately and whatever elaboration has been done is really very minor in nature. Mere seemingly inconsistencies which are not contradictions or omissions or are of trivial nature do not affect substratum of the prosecution version. That is the situation in the case at hand. The number of injuries even if not co-related to the number of assailants is not material. [See Leela Ram (dead) through Duli Chand v. State of Haryana and Anr. (AIR 1999 SC 3717)] Similarly, even if there are irregularities or illegalities in the conduct of investigation that is of no consequence. [See State of Rajasthan v. Kishore (AIR 1996 SC 3035) and State of Karnataka v. K Yarappa Reddy (AIR 2000 SC 185)]

For discarding the plea of alibi the trial Court and the High Court have given cogent reasons. Merely because the plea was accepted in respect of two accused, that cannot be a ground for acceptance of the plea of alibi so far as accused Mahendra Rai is concerned. It is interesting to note that the date of occurrence is 17.8.1983 and the accused Mahendra Rai is supposed to have served from 10.8.1983 onwards till the date of occurrence. The trial Court noticed that there was no material to show that on the date of occurrence he was present in the school throughout and even no appointment letter showing appointment was produced. This is also evident from the certificate exhibited. The certificate was to the effect that he was on duty as a guard for a period from 10.8.1983 to 17.8.1983 on a regular basis. It is inconceivable that a person was appointed for one week on a regular basis. That is an additional ground to reject the plea of alibi. The signatures of the appellant on the attendance register were also found to be not acceptable.

Merely because two persons have been acquitted that benefit cannot be extended to others in view of the direct evidence establishing their presence and participation in the crime. Though it was pleaded that there was no evidence regarding the breaking of lock as deposed by eyewitnesses, it is to be noted that investigating officer’s objective findings clearly lead to acceptability of such plea. The broken lock was seized and exhibited as Exb-1. The marks of violence on the door were clearly noticed and noted by the investigating officer.

It is a settled position in law that there cannot be a reappraisal of evidence unless it is shown that the findings are perverse.

We are not inclined to re-examine the whole of the prosecution case for finding out as to whether occurrence had taken place in the manner alleged by the prosecution. We find no reason to disbelieve any of the eyewitnesses. The trial Court as well as the High Court have after critical examination of their statements, rightly concluded that they were the truthful witnesses and that all the appellants in these appeals were present at the time of occurrence. Merely because the witnesses happened to be the relations of the deceased is not a ground to reject their testimony. Under the circumstances of the case, the aforesaid witnesses appear to be natural witnesses who were supposed to be at the place of occurrence. Time and again, it has been held by this Court that no interference would be made with the concurrent findings of fact based on pure appreciation of evidence, even if this Court was to take a different view on the evidence. The Court will normally not enter into reappraisal or the review of evidence unless the trial Court or the High Court is shown to have committed an error of law or procedure and the conclusions arrived at are perverse. This Court cannot enter into the credibility of the evidence with a view to substitute its opinion for that of the trial Court or the High Court. This Court may interfere where on proved facts, wrong inferences of law are shown to have been drawn. It needs to be emphasized that this Court is not a regular court of appeal to which every judgment of the High Court in criminal case may be brought up for scrutinising its correctness. It is only in rare or exceptional case where there is some manifest illegality or grave or serious irregularity resulting in miscarriage of justice that the Court would interfere with such findings of fact. In this regard, reference may be made to the judgments of this Court reported in Duli Chand v. Delhi Administration (1975 (4) SCC 469), Ramnik Lal Gokaldas and Ors. v. The State of Gujarat (1976 (1) SCC 6), Mst. Dalbir Kaur and Ors. v. State of Punjab (1976 (4) SCC 158), Ramanbhai Naranbhai Patel and Ors. v. State of Gujarat (2000 (1) SCC 358) and Chandra Bihari Gautam and Ors. v. State of Bihar (JT 2002 (4) SC 62). This does not appear to be a case where interference is called for. Looked at from any angle, the appeals are without merit and deserve dismissal which we direct.

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IN THE SUPREME COURT OF INDIA
CASE NO.: Appeal (civil) 16727-16728 of 1996
Thirumala Tirupati Devasthanams & anr …PETITIONER
Vs
Thallappaka Ananthacharyulu & Ors. …RESPONDENT
DATE OF JUDGMENT: 10/09/2003
BENCH: S.N. Variava & H.K. Sema.

J U D G M E N T

S. N. Variava J
These Appeals are against the Judgment dated 25th September, 1996 by which two Writ Petitions seeking writs of prohibition and a contempt petition have been disposed of.

The dispute in this proceedings relates to 28.58 acres in Survey Numbers 686, 645 and 679 of Tirumala Village. This land is situated on Tirumala Hills where the temple of Sri Venkateshwara Swamy is situated. The Appellants are the statutory Devasthanam in control and management of the temple. The facts leading to the present litigation are set out in the impugned Judgment. In the impugned Judgment the Appellants are referred to as “T.T.D.” whereas the Respondents are referred to as “the Tallapaka people”. The facts, as set out in the impugned Judgment, are as follows:
“4. Sri Krishna Devaraya one of the greatest Emperors who ruled southern India in the 15th century granted an extent of Ac. 27-04 cents of land on Tirumala Hills (now covered by Survey Nos. 586 and 645) to Sri Tallapaka Annamacharya, the celebrated saint, composer and reformer, the progenitor of the petitioners herein (for short “the Tallapaka people”). Annamacharya was a great devotee of Lord Venkateswara, in whose praise he wrote and composed music for 32,000 devotional songs. He attained immortality as the greatest devotee of Lord Venkateswara and also the founder of the Bhakti cult, propagating the philosophy of Sri Ramanuja. Kings and emperors showered upon him honours and granted large number of inams in recognition of the spiritual service he rendered. He and his descendants, for over centuries, endowed vast properties for religious and charitable purposes. Tallapaka Venkata Seshacharyulu, the father of the petitioner in W. P. No. 8347 of 1996 and C.C. No. 373 of 1996 was the 12th descendant of Annamacharya.

5. The T.T.D. filed an application before the Revenue Divisional Officer, Chandragiri in 1962 under the Madras Hindu Religious and Charitable Endowments Act, 1951 against Tallapaka Venkata Seshacharyulu seeking resumption of the inam alleging that it was a grant in favour of the “Manager for the time being of Nandanavanam at Tirumala or Tirupati to be held for the support of Sri Venkataswara Swamy Pagoda at Tirumala and to be held so long as the conditions of the grant are duly fulfilled”. The T.T.D. contended that the grant was for the maintenance of flower and Tulasi garden and fruit bearing trees for the daily worship of and offering to Lord Venkateswara but neither offerings were made nor plants and trees maintained much less flowers and Tulasi plants were supplied from the Nandanavanam to the deity by the inamdars. The T.T.D. therefore, prayed for: (i) resumption of the inam and determining it as a grant of both melwaram and kudiwaram (land revenue as well as proprietary right); and (ii) regranting the inam to the T.T.D. as an endowment. That application was disposed of by the Revenue Divisional Officer holding that the Inams Deputy Tahsildar, Chandragiri had already issued a ryotwari patta under the Inams Abolition Act in favour of the T.T.D. and, therefore, no further relief was called for. The inamdars carried the matter in revision to the Commissioner, Survey, Settlements and Land Records (for short “the Commissioner”) under Section 14-A of the Andhra Pradesh (Andhra Area) Inams (Abolition and Conversion into Ryotwari) Act, 1956 (for short “the Inams Abolition Act”) and the Commissioner, while allowing the revision, remitted the matter to the Tahsildar for fresh enquiry on the ground that while granting patta in favour of the T.T.D. the Deputy Tahsildar had not issued notices to the parties.

6. After the remand, the Deputy Tahsildar conducted an enquiry under Section 3 of the Inams Abolition Act after notices to both the Institution (T.T.D.) and the inamdars and recorded a finding that the land in question is an inam land in Ryotwari village and that it was not held by an institution. On appeal, preferred by the T.T.D., the Revenue Divisional Officer affirmed the order of the Deputy Tahsildar. The T.T.D. carried the matter in revision to the Commissioner who, while recording the concession made by the Counsel for the T.T.D., that the lands in question were in possession of the inamdars on the crucial dates (as envisaged by Section 4 of the Inams Abolition Act) and that the inamdars had been in possession of the lands since 7-6-1933, dismissed the revision petition.

xxx xxx xxx

7. The T.T.D. filed W.P. No. 11895 of 1986 challenging the order of the Commissioner affirming the orders of the subordinate statutory tribunals and the inamdar filed W. P. No. 11437 of 1986 contending that an extent of Ac. 3-05 cents of land in question was illegally occupied by the T.T.D. without paying compensation and, therefore, he was entitled to be compensated for the wrongful deprivation. A learned single judge heard both the matters together and by a common judgment, allowed the writ petition filed by the T.T.D. holding that the grant in question was to the institution and that the possession of the land “on the relevant dates” by the inamdars was only on behalf of the institution but not in recognition of their rights as inamdars and that the view of the Commissioner that the inam was burdened with service was contrary to the recitals in the two title deeds. The learned Judge by his common judgment dated 17-4-1987 quashed the revisional order of the Commissioner and consequently dismissed W.P. No. 11437 of 1986 filed by the inamdar. Two Writ Appeals W.A. Nos. 1752 of 1987 and 4 of 1993 arising out of the above two writ petitions were allowed by a common judgment dated 23-12-1992.

â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â \200¦â\200¦â\200¦ 8â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦..The judgmen t of the Division Bench was carried in appeal to the Supreme Court in Civil Appeal Nos. 3468-69 of 1993â\200¦â\200¦â\200¦â\200¦.â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦ the Supreme Court dismissed both the appeals on 11-1-1995â\200¦ â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦..Review Petition Nos. 683-684 of 1995 seeking review of the aforesaid order of the Supreme Court 9th May, 1995 were dismissed.

9. After the dismissal of the review petitions by the Supreme Court the Tallapaka people (inamdars) filed an application before the Inams Deputy Tahsildar for grant of patta under Section 7(1) of the Inams Abolition Act and the same was granted by the Deputy Tahsildar by an order dated 9-8-1995.

10. The T.T.D. filed a suit O.S. No. 69 of 1995 in the Court of the Principal Subordinate Judge, Tirupati seeking a declaration that it is the absolute owner of the Ac. 25-08 cents of land covered by Survey Nos. 686 and 679/92 and for a consequential direction to the Tallapaka people to surrender possession of the same. The T.T.D. also filed an appeal under Section 7(2) of the Inams Abolition Act before the Revenue Divisional Officer challenging the grant of patta by the Deputy Tahsildar in favour of the Tallapaka people. In the plaint filed in O.S. No. 69 of 1995, it was averred by the T.T.D. inter alia, that the entire property lying within the limits of Tirumala belongs to the deity. Lord Venkateswara. The question of title to the suit land was not the subject matter of the earlier litigation between the T.T.D. and the Tallapaka people and in spite of the failure of the T.T.D. in the revenue proceedings and the judgment in the writ appeals (the first Tallapaka case), the question of title can still be agitated in a Civil Court. After adverting to certain G.O’s. and the earlier proceedings before the revenue authorities it was averred by the T.T.D. in the plaint that the inam was to the temple and not a personal grant to the Tallapaka people. As already stated at the very outset, the inamdars (the Tallapaka people) filed the present two writ petitions, each for a writ of Prohibition: one in regard to the suit and the other in regard to the appeal before the Revenue Divisional Officer, Tirupati restraining them from proceeding further in the matters. In the contempt case it was alleged by the inamdars that the T.T.D. in deliberate disobedience of the judgment of this Court in the first Tallapaka case had instituted the suit and, therefore, it is liable to be punished for contempt.”

By the impugned Judgment the contempt petition has been dismissed. However writs of prohibition have been issued in the following terms: “34. In the result, both the W.Ps. are allowed. A writ of prohibition will issue in W.P. No. 5997 of 1996 prohibiting the principal Subordinate Judge Tirupati from proceeding with the suit O.S. No. 69 of 1995. Likewise, a writ of prohibition will issue in W.P. No. 8347 of 1996 prohibiting the Revenue Divisional Officer, Tirupati from proceeding with the appeal preferred by the T.T.D. against the order of the Inams Deputy Tahsildar, Chittoor in S.R. No. 1/95 dated 9.8.1995.”

The reasoning adopted in the impugned judgment, in granting the writ of prohibition, is that having urged all contentions in the earlier round of litigation Appellants were now estopped from claiming any rights. The High Court held that the principles of res judicata applied. The High Court justified issuance of writs of prohibition on the following reasoning:
“If the Civil Court and the Court of the Revenue Divisional Officer were permitted to proceed with the trial and the appeal, they would be acting outside their powers. A writ of prohibition can be issued to prevent a person from acting or continuing to act in such a way as to abuse jurisdiction of a judicial or quasi-judicial body. It is not necessary for the petitioners to wait until the decisions are rendered by the Civil Court and the Revenue Divisional Officer and then move this Court for a writ of certiorari.”
At this stage it is necessary to set out Section 14 of the Andhra Pradesh (Andhara Area) Inams (Abolition and Conversion into Ryotwari) Act, 1956 (hereinafter called the said Act) which reads as follows:
“Bar of jurisdiction of Civil Courts:-No suit or other proceedings shall be instituted in any Civil Court to set aside or modify any decision of the Tehsildar, the revenue Court, or the Collector under this Act, except where such decision is obtained by misrepresentation, fraud or collusion of parties.”

Mr. Venugopal submitted that proceedings under the said Act are summary in nature. He submitted that such summary proceedings can never bar a suit on title. He submitted that on the question, whether a civil Court’s jurisdiction is barred, because a patta has been granted under the said Act, there are a number of authorities of this Court. He fairly pointed out the Judgments in the cases of Vatticherukuru Village Panchayat vs. Nori V. Deekshithulu reported in 1991 Supp (3) SCC 228, Peddinti Venkata Murali Ranganatha Desika Iyengar vs. Government of A. P. reported in 1996 (3) SCC 75, Pushpagiri Math vs. Kopparaju Veerabhadra Rao reported in 1996 (9) SCC 202, S. Vanathan Muthuraja vs. Ramalingam reported in 1997 (6) SCC 143. In all these cases it has been held that the suit on title was barred. He submitted that there are identical provisions in the Tamil Nadu Estates (Abolition and Conversion into Ryotwari) Act, 1948 and the Madras Minor Inams (Abolition and Conversion into Ryotwari) Act, 1963. He submitted that there are a number of decisions of this Court where it has been held that merely because a patta has been granted the jurisdiction of the civil courts to decide title is not barred. He pointed out the judgments in the cases of State of Tamil Nadu vs. Ramalinga Samigal Madam reported in 1985 (4) SCC 10, R. Manicka Naicker vs. E. Elumalai Naicker reported in 1995 (4) SCC 156, Sayyed Ali vs. A.P. Wakf Board, Hyderabad reported in 1998 (2) SCC 642 and Sri-La-Sri Sivaprakasa Pandara Sannadhi Avargal vs. T. Parvathi Ammal reported in 1998 (9) SCC 603. He submitted that there is a conflict of opinion between the above-mentioned two sets of decisions. He submitted that in view of the conflict of decisions the question whether a civil court has jurisdiction to try a suit on title should be referred to a larger bench. We are unable to except this submission. One set of Judgments are under the said Act whereas the other set of judgments are under legislations in Tamil Nadu. In Sri-La-Sivaprakasa Pandara Sannadhi Avargal’s case (supra) reliance had been placed on Vatticherukuru’s case (supra) in support of the proposition that a suit on title was barred. The three Judge bench distinguished that case on the ground that the provisions of the Andhra Pradesh Act and the Tamil Nadu Acts are different. Once a three Judge bench has taken a view that the provisions of the Andhra Pradesh Act are different from those of the Tamil Nadu Acts it cannot be said that there is any conflict of decisions. The decision of the three Judge bench is binding on this Court. It will thus have to be held that in respect of the said Act the first set of Judgments would apply whereas in respect of the legislations in Tamil Nadu the second set of Judgments would apply. It must be mentioned that in support of the submission that the title suit is not barred Mr. Venugopal had also relied upon a full bench judgment of the Madras High Court reported in (1998) The Madras Law Journal Reports 722.

Thus as per the law laid down by this Court in Andhra Pradesh the civil Court would have jurisdiction only in cases of misrepresentation, fraud or collusion of parties. The question still remains whether the High Court could or should have, in exercise of its writ jurisdiction, issued writs of prohibition against the civil Court from proceeding with the suit before it and against the Revenue Divisional Officer, Tirupati from proceeding with the appeal preferred by the Appellants against the order of the Inams Deputy Tahsildar, Chittoor. It must be remembered that in the Civil Procedure Code there are sufficient provisions, particularly Order 7 Rule 11 and Order 14 Rule 2, which give to the civil Court powers to decide its own jurisdiction and questions regarding maintainability of the suit. The civil Court is also competent to decide whether a suit before it is barred on principles of estoppal or res judicata.

Mr. Venugopal submitted that apart from Certiorari, this is the first time where a High Court has issued a writ, against a Civil Court, prohibiting it from proceeding with a civil suit instituted before it. He submitted that there are elaborate provisions in the Civil Procedure Code for rejecting a plaint and/or deciding questions of maintainability and for trying issues of its own jurisdiction as preliminary issues. Mr. Venugopal submitted that the precedent set has enormous potential of being mis-utilised and for multiplying litigation. He submitted that if this is permitted, a defendant who does not want an interim order to be passed against him would seek writs of prohibition against the Court from proceeding with the hearing and disposal of the suit. Mr. Venugopal submitted that the consequences would be far reaching. He submitted that if this is permitted, a writ of prohibition can be issued by a High Court in one State against the trial of a suit in another State provided summons are served or interim orders are received in that State, so that part of the cause of action arises in the former State. In support of this submission he relied upon the case of Navinchandra N. Majithia vs State of Maharashtra and others reported in 2000 (7) SCC 640.

Mr. Venugopal showed to this Court the case of Mirajkar vs State of Maharashtra reported in 1966 (3) SCR 779. In this case the High Court had stopped publication of the proceedings of a trial before it. A writ under Article 32 of the Constitution of India was filed challenging the validity of that order on the ground that it infringed fundamental rights under Article 19 (1) (a) of the Constitution of India. It was held, by the majority, that if a judicial Tribunal makes an order, which it has jurisdiction to make, the order cannot offend a fundamental right. It was held that an order is within the jurisdiction of the Tribunal if the Tribunal had jurisdiction to decide the matters that were litigated before it. It was held that the Tribunal having jurisdiction does not act without jurisdiction if it makes an error in the application of law. It was held that if a judicial order is erroneous any person aggrieved by the order, even a stranger, can file an appeal. It was held that the question about existence of jurisdiction as well as validity and propriety of the order cannot be raised in writ proceedings.

Mr. Venugopal also relied upon a well reasoned judgment of the Madras High Court in the case of I. S. Lulla vs Smt. Hari and others reported in AIR (1962) Madras 458 wherein it has been held that Article 226 does not clothe the High Court with jurisdiction to quash the orders of a subordinate Court. It has been held that orders susceptible to appeal or revision cannot be quashed by a Writ of certiorari or a writ of prohibition restraining or prohibiting the subordinate Court from proceeding to exercise jurisdiction in any matter before it. It has been held that the jurisdiction to issue writ is not a cloak of an appeal in disguise. It has been held that jurisdiction under Article 226 is an original jurisdiction which is quite distinct and separate from the appellate jurisdiction. Mr Venugopal also relied upon the case of U. P. Sales Tax Service Association vs Taxation Bar Association reported in 1995 (5) SCC 716. In this case it has been held that the writ of Prohibition can only be issued when the inferior Court or Tribunal (a) proceeds to act without or in excess of jurisdiction, (b) proceeds to act in violation of rules of natural justice, (c) proceeds to act under law which is itself ultra vires or unconstitutional, or (d) proceeds to act in contravention of fundamental rights.

Mr Venugopal very fairly brought to the notice of this Court the case of The Failika Dabvali Transport Co. Pvt. Ltd. Vs Madan Lal reported in 1977 (2) SCC 435 where a Writ of certiorari was issued against a judgment on the footing that the Court had acted illegally and there was an error apparent on the face of the record. It is however to be noted that there is no discussion, in this case, as to the circumstances under which a Writ of certiorari or prohibition can be issued. He also fairly pointed out the case of Chhedi Lal Gupta & Ors. vs Mohammad Sattar reported in AIR (1963) Allahabad 448 wherein it had been mentioned that the Writ of Prohibition had been issued earlier by the High Court from proceeding with the trial on the ground that the suit was one for infringement of trademark and could thus, by virtue of Section 73 of the Trademark Act, be filed only in the Court of the District Judge at Allahabad. However it must be noted that in this case it had been held that the Writ of Prohibition did not prevent the trial Court from returning the plaint for presentation to the proper Court under Order 7 Rule 10 of the Civil Procedure Code.

On the other hand Mr. Mishra submitted that Article 226 of the Constitution of India makes no distinction with respect to the power which a Writ Court can exercise for any of the prerogative writs which can be issued for enforcement of any of the rights conferred by Part III of the Constitution of India or for any other purpose. He submitted that mandamus, prohibition and certiorari are exercised in the same manner depending upon the nature of the controversy and the stage at which they can be effective. He submitted that a certiorari was a writ addressed to a proceeding in the Court and order passed therein whereas a prohibition was directed to the subordinate Court or to any other judicial or quasi-judicial authorities.

Mr. Mishra submitted that the instant case was one where a suit was being entertained in the teeth of a specific bar under the said Act and even though the suit was hit by res-judicata. He submitted that all the issues were adjudicated by the competent quasi-judicial authorities and affirmed by the Division Bench of the High Court and this Hon’ble Court in the earlier round of litigation. He submitted that the Civil Court has acted without jurisdiction in entertaining and proceedings with the suit. He submitted that the inferior court cannot traverse the findings in the judgment of the High Court and this Hon’ble Court. Mr. Mishra submitted that the primary rule is that a writ of prohibition is issued to a Court which also is an authority and since it is issued to a Court it is also issued to such persons or authorities who exercise judicial or quasi-judicial powers.

In support of the submission that the High Court has power to issue directions or orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari. Mr Mishra relied upon the case of Hari Vishnu Kamath vs Syed Ahmed Ishaque reported in (1955) SCR 1104. In this case the question was whether a writ of certiorari could be issued against an Election Tribunal after it had become functous officio. It was held that the intention of the Constitution was to vest in the High Court a power to supervise decisions of Tribunals by issue of appropriate writs and directions and that the exercise of that power cannot be defeated by technical consideration of form and procedure. It was held that the High Courts must however observe the principles which regulate the exercise of such jurisdiction. It was held that before a writ of certiorari can be issued there must be an error apparent on the face of the record.

Observations in following cases were cited with approval:
“The decision in Rex v. Northumberland Compensation Appeal Tribunal; Ex parte Shaw ([1951] 1 K.B. 711) was taken in appeal, and was affirmed by the Court of Appeal in Rex v. Northumberland Compensation Appeal Tribunal; Ex parte Shaw ([1952] 1 K.B. 338). In laying down that an error of law was a ground for granting certiorari, the learned Judges emphasised that it must be apparent on the face of the record. Denning, L.J. who stated the power in broad and general terms observed : “It will have been seen that throughout all the cases there is one governing rule : certiorari is only available to quash a decision for error of law if the error appears on the face of the record”.

The position was thus summed up by Morris, L.J. :
“It is plain that certiorari will not issue as the cloak of an appeal in disguise. It does not lie in order to bring an order or decision for rehearing of the issue raised in the proceedings. It exists to correct error of law where revealed on the face of an order or decision, or irregularity, or absence of, or excess of, jurisdiction where shown”.
In Veerappa Pillai v. Raman & Raman Ltd. and Others ([1952] S.C.R. 583), it was observed by this court that under article 226 the writ should be issued “in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record”. In T. C. Basappa v. T. Nagappa ([1955] S.C.R. 250) the law was thus stated :

“An error in the decision or determination itself may also be amenable to a writ of ’certiorari’ but it must be a manifest error apparent on the face of the proceedings, e.g., when it is based on clear ignorance or disregard of the provisions of law. In other words, it is a patent error which can be corrected by ’certiorari’ but not a mere wrong decision”.

Mr Mishra also relied upon the case of Union of India and others vs Upendra Singh reported in 1994 (3) SCC 357. In this case the Central Administrative Tribunal had examined the correctness of charges framed in a disciplinary proceedings. It was held that the jurisdiction of the Tribunal was akin to the jurisdiction of the High Court under Article 226. It has then been held that: “4. â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦ A writ of prohibition is issued only when patent lack of jurisdiction is made out. It is true that a High Court acting under Article 226 is not bound by the technical rules applying to the issuance of prerogative writs like certiorari, prohibition and mandamus in United Kingdom, yet the basic principles and norms applying to the said writs must be kept in view, as observed by this Court in T. C. Basappa v. T. Nagappa ((1955) 1 SCR 250 : AIR 1954 SC 440). It was observed by Mukherjea, J. speaking for the Constitution Bench :

“The language used in Articles 32 and 226 of our Constitution is very wide and the powers of the Supreme Court as well as of all the High Courts in India extend to issuing of orders, writs and directions including writs in the nature of ’habeas corpus, mandamus, quo warranto, prohibition and certiorari’ as may be considered necessary for enforcement of the fundamental rights and in the case of the High Courts, for other purposes as well. In view of the express provisions in our Constitution we need not now look back to the early history or the procedural technicalities of these writs in English law, nor feel oppressed by any difference or change of opinion expressed in particular cases by English Judges. We can make an order or issue a writ in the nature of ’certiorari’ in all appropriate cases and in appropriate manner, so long as we keep to the broad and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in English law.”

5. The said statement of law was expressly affirmed by a seven-Judge Bench in Ujjam Bai v. State of U.P. (AIR 1962 SC 1621, 1625) The reason for this dictum is self-evident. If we do not keep to the broad and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in English law, the exercise of jurisdiction becomes rudderless and unguided; it tends to become arbitrary and capricious. There will be no uniformity of approach and there will be the danger of the jurisdiction becoming personalised. The parameters of jurisdiction would vary from Judge to Judge and from Court to Court. (emphasis supplied)

Mr Mishra also relied upon the case of Smt. Ujjam Bai vs State of Uttar Pradesh reported in 1963 (1) SCR 778. In this case the question was whether a writ petition under Article 32 of the Constitution of India was maintainable against an assessment made by a sales tax officer under a valid act. The majority held that the writ petition was not maintainable. In this case it has been held by Aiyar J as follows: “Now, I come to the controversial area. What is the position with regard to an order made by a quasi-judicial authority in the undoubted exercise of its jurisdiction in pursuance of a provision of law which is admittedly intra vires ? It is necessary first to clarify the concept of jurisdiction. Jurisdiction means authority to decide. Whenever a judicial or quasi-judicial tribunal is empowered or required to enquire into a question of law or fact for the purpose of giving a decision on it, its findings thereon cannot be impeached collaterally or on an application for certiorari but are binding until reversed on appeal. Where a quasi-judicial authority has jurisdiction to decide a matter, it does not lose its jurisdiction by coming to a wrong conclusion whether it is wrong in law or in fact. The question, whether a tribunal has jurisdiction depends not on the truth or falsehood of the facts into which it has to enquire, or upon the correctness of its findings on these facts, but upon their nature, and it is determinable “at the commencement, not at the conclusion, of the inquiry’. (Rex v. Bolten ([1841] I Q.B. 66, 74.)). Thus, a tribunal empowered to determine claims for compensation for loss of office has jurisdiction to determine all questions of law and fact relating to the measure of compensation and the tenure of the office, and it does not exceed its jurisdiction by determine any of those questions incorrectly but it has no jurisdiction to entertain a claim for reinstatement or damages for wrongful dismissal, and it will exceed its jurisdiction if it makes an order in such terms, for it has no legal power to give any decision whatsoever on those matters. A tribunal may lack jurisdiction if it is improperly constituted, or if it fails to observe certain essential preliminaries to the inquiry. But it does not exceed its jurisdiction by basing its decision upon an incorrect determination of any question that it is empowered or required (i.e.,) had jurisdiction to determine. â\200¦â\200¦â\200¦â\200¦â\200¦â\200¦..

The characteristic attribute of judicial act or decision is that it binds, whether it be right or wrong. An error of law or fact committed by a judicial or quasi-judicial body cannot, in general, be impeached otherwise than on appeal unless the erroneous determination relates to a matter on which the jurisdiction of that body depends. These principles govern not only the findings of inferior courts stricto sensu but also the findings of administrative bodies which are held to be acting in a judicial capacity. Such bodies are deemed to have been invested with power to err within the limits of their jurisdiction; and provided that they keep within those limits, their decisions must be accepted as valid unless set aside on appeal. Even the doctrine of res judicata has been applied to such decisions.”

On the basis of the authorities it is clear that the Supreme Court and the High Courts have power to issue writs, including a writ of prohibition. A writ of prohibition is normally issued only when the inferior Court or Tribunal (a) proceeds to act without or in excess of jurisdiction, (b) proceeds to act in violation of rules of natural justice, (c) proceeds to act under law which is itself ultra vires or unconstitutional, or (d) proceeds to act in contravention of fundamental rights. The principles, which govern exercise of such power, must be strictly observed. A writ of prohibition must be issued only in rarest of rare cases. Judicial disciplines of the highest order has to be exercised whilst issuing such writs. It must be remembered that the writ jurisdiction is original jurisdiction distinct from appellate jurisdiction. An appeal cannot be allowed to be disguised in the form of a writ. In other words, this power cannot be allowed to be used “as a cloak of an appeal in disguise”. Lax use of such a power would impair the dignity and integrity of the subordinate Court and could also lead to chaotic consequences. It would undermine the confidence of the subordinate Court. It was not even argued that there was total lack of jurisdiction in the civil Court. It could not be denied that the civil Court, before which the suit was pending, had powers to decide on the maintainability of the suit and to decide on questions of its jurisdiction. The civil Court had jurisdiction to decide whether the suit was barred by Section 14 of the said Act or on principles of res judicata/estoppel. Thus unless there was some very cogent or strong reason the High Court should not have prevented the Court of competent jurisdiction from deciding these questions. In other words the High Court should not usurp the jurisdiction of the civil Court to decide these questions. In the impugned Judgment no reason, much less a cogent or strong reason, has been given as to why the civil Court could not be allowed to decide these questions. The impugned Judgment does not state that the civil Court had either proceeded to act without or in excess of jurisdiction or that it had acted in violation of rules of natural justice or that it had proceeded to act under law which was ultra vires or unconstitutional or proceeded to act in contravention of fundamental rights. The impugned Judgment does not indicate as to why the High Court did not consider it expedient to allow the civil Court to decide on questions of maintainability of the suit or its own jurisdiction. The impugned judgment does not indicate why the civil Court be not allowed to decide whether the suit was barred by virtue of Section 14 of the said Act or on principles of res judicata/estoppel. To be remembered that no fundamental right is being violated when a Court of competent jurisdiction is deciding, rightly or wrongly, matters before it.

Faced with this situation Mr. Mishra submitted that in the written statement filed by the Respondents it had been contended that the suit was not maintainable and was barred on principles of res judicata/estoppel. He submitted that in spite of these points having been urged before the civil Court an interim injunction restraining the Respondents from alienating the suit lands had been issued. He submitted that the civil Court had thus exercised jurisdiction when it clearly had no jurisdiction. He submitted that it was under these circumstances that the Respondents filed writ petitions before the High Court. On this submission Mr. Venugopal pointed out to us that whilst granting an interim injunction the civil Court had considered, prima facie, the question of maintainability of the suit. Mr. Venugopal also pointed out that the Respondents had filed an appeal against the order granting interim injunction. It was pointed out that the appeal is also dismissed holding prima facie that the suit was maintainable. Mr. Mishra could not deny these facts. These facts indicate how chaotic a result has prevailed by grant of the writ of prohibition. The impugned Judgment prohibits the civil Court from proceeding with the suit. Thus the suit will lie on the dormant file of the civil Court indefinitely. However the interim injunction granted by the civil Court, as affirmed by the appellate Court, will continue to operate. To be remembered that in the impugned Judgment there is no reference to these orders and no writ of certiorari has been issued quashing those orders. The end result would be that the suit cannot proceed yet the Respondent will continue, indefinitely, to be restrained by the interim order. Faced with this situation Mr. Mishra submitted that this Court in exercise of its powers should quash the interim order. Mr. Mishra submitted that this was the equitable and correct course to be followed by this Court. He submitted that this Court should not interfere with the impugned order as it would be futile to force the Respondents to undergo a full round of litigation for a second time when all questions, between the parties, including questions of title were already decided in the earlier round of litigation.

We have considered the rival submissions. It is not possible to accept Mr. Mishra submission that this Court should quash the interim orders. Those orders are not before this Court and this Court cannot blindly quash orders passed by Courts of competent jurisdiction without even looking into the orders. Even presuming, without so holding, that the suit is not maintainable by virtue of Section 14 of the said Act or on principles of res judicata/estoppel in our view the High Court should have permitted the civil Court, which was competent to decide these questions to do so. At the most the High Court could have directed the civil Court to decide these issues as preliminary issues. In our view the correct course is to set aside the impugned Judgment and direct the civil Court to decide the question of maintainability of the suit in view of Section 14 of the said Act and/or its jurisdiction to entertain the suit as also the question whether the suit is barred by principles of res judicata as preliminary issues. We see no substance in the apprehension that in deciding the preliminary issues the civil Court will not keep in mind Judgments of this Court (set out therein above) pertaining to maintainability of the suit once patta is granted under the said Act. Undoubtedly the civil Court would see whether in effect the suit is for purposes of setting aside or modifying the decisions taken in the earlier round of litigation.

It must also be mentioned that during arguments Mr. Venugopal had submitted that the Appellants were considering applying for amendment of the plaint in order to plead fraud. We are sure that if any such application is made the same will be considered on its merits after hearing the other side. It must be mentioned that Mr. Mishra had submitted that by the proposed amendments admissions are sought to be retracted. We see no reason to conclude that the civil Court would permit retraction of admissions.

Finally it must be mentioned that both sides had argued on the merits of the case. Mr. Venugopal relied upon, what he called, Title Deeds bearing Numbers 2920 in respect of 1.53 acres and 2921 in respect of 27.4 acres. The two grants are identically worded. Thus it is sufficient to reproduce Grant number 2920 which reads as follows:
“NO.2920
Title deed granted to the Manager for the time being of Nandanavanam at Tirupati and Tirumala.
1. By order of the Governor in council of Madras acting on behalf of the Secretary of State for India in Council, I acknowledge your title to a Devadayam of Nandanavanam Inam consisting of the right to the Government Revenue on land claimed to be (one) 1.53 acres of dry and situated in the village of Tirumala, Taluk of Chandragiri, District of North Arcot and held for the support of Venkateswara Swamy Pagoda in the village.
2. This Inam is confirmed to you and your successors tax-free to the held without interference as long as the conditions of the grant duly fulfilled.

Sd/- Inam Commissioner”

He submitted that these grants are in favour of the manager and are a gift to the temple. He submitted that these were granted as far back as 9th August, 1882. He submitted that on 21st April 1960 a patta was granted to the Devasthanam under the said Act. He submitted that the grant of patta was confirmed in appeal by the RDO, Tirupati. He submitted that on 4th November 1965 the Government of Andhra Pradesh confirmed the grant of patta. He submitted that the 9th April 1990 rules were framed under Section 97 read with Section 153 of the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 and Rule 196 declared these properties as the exclusive properties of the Devasthanam. He submitted that clearly the title to the property was with the Devasthanam. He submitted that in the earlier proceedings the only question was to whom a Ryotwari patta had to be granted. He submitted that in those proceedings the question of title was not looked into. He submitted that this Court in its order dated 11th January 1995, affirmed the findings of the Commissioner to the effect that the title to the Inam lands was not a condition precedent for grant of patta. He submitted that thus this Court had made it clear that it was not going into the question of title in those proceedings. He submitted that the Appellants were thus not estopped from filing a suit and the principles of res judicata had no application.

Mr. Venugopal submitted that a Ryotwari patta is only a bill for direct payment of revenue to the State and if at all only prima facie evidence of title. In support of this proposition he relied upon the book on Land Tenures in the Madras Presidency by S. Sunderraja Iyengar and the case of Ramamoorthy vs State of Madras reported in (1970) The Indian Law Reports 788. Mr. Venugopal submitted that a mere decision on grant of patta cannot exclude a subsequent suit based on title. Mr. Venugopal submitted that no provision of the said Act provides expressly for a determination of title. He submitted that Rule 15(1) of the Rules made under the Act, provides for summary proceedings. Mr. Venugopal submitted that if a decree is passed in their suit on title then the grant of a Ryotwari patta will get nullified incidentally. He submitted that the purpose of the said Act cannot be that notwithstanding title (unlike agrarian reforms) the inamdar institution will stand deprived of its property by a sidewind.

On the other hand Mr. Mishra submitted that the Suit is barred in view of the specific findings by the revenue authorities and as affirmed by the Division Bench of the High Court in W.A. No. 4/1993 and 1752 of 1987 in the first Thallappaka case reported in 1993 (1) Andhra Law Times 293. He relied on this Judgment and pointed out that on consideration of Section 3, 4(1), 7 & 14(A) of the said Act, it is held that as per the Inam’s Fair Register the legal title was that of Respondents and not Appellants. He submitted that the said decision has finally settled the question of title and rights as a rayat. Mr. Mishra pointed out the plaint in the suit now filed by the Appellants that there was no plea of misrepresentation, fraud or collusion in this suit. He pointed out that even in answer to the writ petitions filed by the Respondents, the Appellants had not taken up a contention that the earlier findings were obtained by misrepresentation, fraud or collusion. He pointed out that even in this Civil Appeal there is no ground that there had been any misrepresentation, fraud or collusion in obtaining the earlier decision. He submitted that thus the express bar to the suit, as provided under Section 14 of the said Act, willfully apply. He submitted that the High Court, in the impugned Judgment, has rightly held so. Mr. Mishra submitted that the Suit is also barred on the principle of constructive res-judicata. In support of the submission that principles of res-judicata to apply even to decisions in Writ proceedings Mr. Mishra relied upon the case of Gulabchand Parekh vs State of Bombay reported in 1965 (2) SCR 547. In support of the submission that the Inam Fair Register is evidence of utmost importance Mr Mishra relied upon the cases of N. Y. Lakshminarasimachari vs Sri Agasthewaraswami Varu of Kolakalur reported in 1960 (2) SCR 768; Shri Vallabharaya Swami Varu (Deity) of Swarna vs Deevi Hanumancharyulu & Ors. reported in 1979 (3) SCC 778 and Subramania Gurukkal vs Shri Patteswaraswami Devasthanam reported in 1993 Supp. (4) SCC 519.

Mr. Mishra submitted that in the earlier round of proceedings Appellants had admitted that the possession, on the relevant date, was with the Respondents. Mr. Mishra pointed out that in the first Thallappaka’s case the Commissioner while dismissing Appellants revision application noted in the order dated 7.2.1986 that the then counsel for the Appellants conceded as follows:
“The counsel for the T.T.D. concedes that the lands were in possession of the respondents on the crucial dates and that in the notice issued by the executive officer, T.T.D. in his ROC No. G1/10291/59 dated 8.8.1959 it has been clearly stated that Tallapakam Venkata Seshacharyulu and others were in possession of the lands since 7.6.1933.”

Mr. Mishra submitted that it was an admitted position, even in the plaint of the suit now filed by the Appellants, that the Respondents were in possession of the land. He submitted that as the Respondents alone enjoyed the land, their possession was sufficient for acceptance of their entitlement for Ryotwari patta. He submitted that the Appellants had produced no documentary evidence to show that land in question belonged to the temple. He submitted that on the contrary there was evidence to show that Appellants had filed a suit against one Mahant Prayag Das for recovery of possession of vast extents of lands. He submitted that significantly in that suit theses lands were not shown as lands of the Appellants. He submitted that in that suit the Appellants claimed 16 plots of land describing them as Nandanavanam i.e. garden of the temple, however, no relief was claimed in respect of these lands and these lands were not described in the said suit as Nandanavanam or the garden belonging to the temple. Mr. Mishra submitted that in view of the above noted facts the High Court’s Judgment is correct in law. Mr. Mishra submitted that Section 2 A of the said Act has to be read with Section 4(1) and 7 of the Act. While communal lands would vest in the Government other village lands in possession of the inamdar shall remain with him and he would be entitled to Ryotwari Patta.

We see no reason to express any opinion on the rival submissions. Were we to express any opinion we would be committing the same mistake that the High Court has committed viz usurping the jurisdiction of the civil Court to decide these questions. We therefore express no opinion on merits.

In view of what is set out herein above we set aside the impugned Judgment to the extent that it prohibits the civil Court from proceeding with Suit 69 of 1995. We direct the civil Court to frame and decide, as expeditiously as possible and in any case within six months from today, preliminary issues as to maintainability of the suit in view of Section 14 of the said Act and whether the suit is barred on principles of res judicata/estoppel.

We are in agreement with the observations of the High Court that grant of Patta to the Respondents was a formality in pursuance of the decisions in the earlier round of litigation. It is only if it is held that the Appellants suit is maintainable and not barred on principles of res judicata/estoppal that the Appellants can be allowed to pursue the appeal. Thus the writ of prohibition preventing the Revenue Divisional Officer, Tirupati from proceeding with the appeal preferred by the Appellants against the order of the Inams Deputy Tahsildar, Chittoor in S.R. No. 1/95 dated 9.8.1995 must continue for the present. Those proceedings shall therefore continue to remain stayed till after the final decision on the preliminary issues. If the preliminary issues are finally answered in favour of the Appellants then the writ of prohibition in respect of the appeal shall automatically stand vacated. If however the preliminary issues are finally answered against the Appellants the writ of prohibition shall stand confirmed.

These Appeals stand disposed of accordingly. There will be no order as to costs.

The post Thirumala Tirupati Devasthanams & anr Vs Thallappaka Ananthacharyulu & Ors. appeared first on B&B Associates LLP.

J U D G M E N T
[Arising Out of SLP (Crl.) No.3416 of 2002]

Y.K. Sabharwal, J.

Leave granted.

The question that falls for determination in the instant case is about the ambit of the inherent powers of the High Courts under Section 482, Code of Criminal Procedure (Code) read with Articles 226 and 227 of the Constitution of India to quash criminal proceedings. The scope and ambit of power under Section 482 has been examined by this Court in catena of earlier decisions but in the present case that is required to be considered in relation to matrimonial disputes. The matrimonial disputes of the kind in the present case have been on considerable increase in recent times resulting in filing of complaints by the wife under Sections 498A and 406, IPC not only against the husband but his other family members also. When such matters are resolved either by wife agreeing to rejoin the matrimonial home or mutual separation of husband and wife and also mutual settlement of other pending disputes as a result whereof both sides approach the High Court and jointly pray for quashing of the criminal proceedings or the First Information Report or complaint filed by the wife under Sections 498A and 406, IPC, can the prayer be declined on the ground that since the offences are non-compoundable under Section 320 of the Code and, therefore, it is not permissible for the Court to quash the criminal proceedings or FIR or complaint.

The facts here are not in dispute. Appellant No.4 is the husband. Respondent No.2 is his wife. Their marriage had taken place on 21st July, 1999. They are living separately since 15th July, 2000. Appellant Nos. 1 to 3 are father, mother and younger brother of appellant No.4. FIR No.8 of 2002 was registered under Section 498A/323 and 406 IPC at Police Station, Central Faridabad at the instance of the wife on 2nd January, 2002. She has filed an affidavit that the FIR was registered at her instance due to temperamental differences and implied imputations. According to that affidavit, her disputes with the appellants have been finally settled and she and Appellant No.4 have agreed for mutual divorce. The affidavit further states that on filing of the petition for mutual divorce, statements on first motion were recorded on 18th July, 2002 and 2nd September, 2002. Also that in second motion filed by the parties to the marriage, their statements were recorded by the Court of Additional District Judge, Delhi on 13th September, 2002. Counsel for respondent No.2 supporting the appeal also prays for quashing of the FIR. There is, however, serious opposition on behalf of the State.

The High Court has, by the impugned judgment, dismissed the petition filed by the appellants seeking quashing of the FIR for in view of the High Court the offences under Sections 498A and 406 IPC are non-compoundable and the inherent powers under Section 482 of the Code cannot be invoked to bypass the mandatory provision of Section 320 of the Code. For its view, the High Court has referred to and relied upon the decisions of this Court in State of Haryana & Ors. v. Bhajan Lal & Ors. [1992 Supp.(1) SCC 335]; Madhu Limaye v. The State of Maharashtra [(1977) 4 SCC 551; and Surendra Nath Mohanty & Anr. v. State of Orissa [AIR 1999 SC 2181].

After reproducing the seven categories of cases as given in para 102 of Bhajan Lal’s case, the High Court has held that the parameters, principles and guidelines for quashing of complaints, first information report and criminal proceedings have been settled in terms thereof and has concluded therefrom that the instant case does not fall in any of the said categories. It is quite clear that the High Court has lost sight of the earlier part of para 102 which made it abundantly clear that the said categories of cases were being given by way of illustration. Neither the categories of cases given were exhaustive nor it could be so. Before giving those categories, it was said in Bhajan Lal’s case that :

“In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulate and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.” In Pepsi Food Ltd. & Anr. v. Special Judicial Magistrate & Ors. [(1998) 5 SCC 749], this Court with reference to Bhajan Lal’s case observed that the guidelines laid therein as to where the court will exercise jurisdiction under Section 482 of the Code could not be inflexible or laying rigid formulae to be followed by the courts. Exercise of such power would depend upon the facts and circumstances of each case but with the sole purpose to prevent abuse of the process of any court or otherwise to secure the ends of justice. It is well settled that these powers have no limits. Of course, where there is more power, it becomes necessary to exercise utmost care and caution while invoking such powers.

The High Court has relied upon Madhu Limaye’s case for coming to the conclusion that since the offences under Sections 498A and 406 IPC are non-compoundable, i t would be impermissible in law to quash the FIR on the ground that there has be en a settlement between the parties. The decision in Madhu Limaye’s case has be en misread and misapplied by the High Court. The question considered in that ca se was when there was a bar on the power of revision in relation to any interloc utory order passed in an appeal, enquiry, trial or other proceedings, what would be its effect on exercise of power under Section 482 of the Code. Sub-section (2) of Section 397 of Cr.P.C providing that the power of revision conferred by s ub-section (1) shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceedings was noticed and it was held that on a plain reading of Section 482, it would follow that nothing in the Code, which would include sub-section (2) of Section 397 also, “shall be deemed to limit or affect the inherent powers of the High Court”. The Court said that if we were to say that the said bar is not to operate in the exercise of the inherent power at all, it will be setting at naught one of the limitations imposed upon the exercise of the revisional powers but adopting a harmonious approach held that the bar provided in sub-section (2) of Section 397 operates only in exercise of the revisional power of the High Court meaning thereby that the High Court will have no power of revision in relation to any interlocutory order. It was further held that, then, in accordance with one of the other principles enunciated above, the inherent power will come into play, there being no other provision in the Code for the redressal of the grievance of the aggrieved party. In Madhu Limaye’s case, it was, inter alia, said that if for the purpose of securing the ends of justice interference by the High Court is absolutely necessary, then nothing contained in Section 397(2) can limit or affect the exercise of the inherent power by the High Court. By way of illustration, an example was given where without jurisdiction the Court takes cognizance or issues process and assumes it to be an interlocutory order, would it stand to reason to say that inherent power of the High Court cannot be exercised for stopping the criminal proceedings as early as possible, since being an interlocutory order, it was not revisable and resultantly the accused had to be harassed up to the end, though the order taking cognizance or issuing process was without jurisdiction. It was held that the bar will not operate to prevent the abuse of the process of the Court and/or to secure the ends of justice.

It is, thus, clear that Madhu Limaye’s case does not lay down any general proposition limiting power of quashing the criminal proceedings or FIR or complaint as vested in Section 482 of the Code or extra ordinary power under Article 226 of the Constitution of India. We are, therefore, of the view that if for the purpose of securing the ends of justice, quashing of FIR becomes necessary, Section 320 would not be a bar to the exercise of power of quashing. It is, however, a different matter depending upon the facts and circumstances of each case whether to exercise or not such a power.

The High Court has also relied upon the decision in case of Surendra Nath Mohanty’s case (supra) for the proposition that offence declared to be non-compoundable cannot be compounded at all even with the permission of the Court. That is of course so. The offences which can be compounded are mentioned in Section 320. Those offences which are not mentioned therein cannot be permitted to be compounded. In Mohanty’s case, the appellants were convicted by the trial court for offence under Section 307. The High Court altered the conviction of the appellants and convicted them for offence under Section 326 and imposed sentence of six months. The trial court had sentenced the appellants for a period of five years RI. The application for compounding was, however, dismissed by the High Court. This Court holding that the offence for which the appellants had been convicted was non-compoundable and, therefore, it could not be permitted to be compounded but considering that the parties had settled their dispute outside the court, the sentence was reduced to the period already undergone. It is, however, to be borne in mind that in the present case the appellants had not sought compounding of the offences. They had approached the Court seeking quashing of FIR under the circumstanced abovestated.

In State of Karnataka v. L. Muniswamy & Ors. [(1977) 2 SCC 699], considering th e scope of inherent power of quashing under Section 482, this Court held that in the exercise of this wholesome power, the High Court is entitled to quash proce edings if it comes to the conclusion that ends of justice so require. It was ob served that in a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice and that the ends of justice are higher than the ends of mere law though justice had got to be administered according to laws made by the legislature. This Court said that the compelling necessity for making these observations is that without a proper realization of the object and purpose of the provision which seeks to save the inherent powers of the High Court to do justice between the State and its subjects, it would be impossible to appreciate the width and contours of that salient jurisdiction. On facts, it was also noticed that there was no reasonable likelihood of the accused being convicted of the offence. What would happen to the trial of the case where the wife does not support the imputations made in the FIR of the type in question. As earlier noticed, now she has filed an affidavit that the FIR was registered at her instance due to temperamental differences and implied imputations. There may be many reasons for not supporting the imputations. It may be either for the reason that she has resolved disputes with her husband and his other family members and as a result thereof she has again started living with her husband with whom she earlier had differences or she has willingly parted company and is living happily on her own or has married someone else on earlier marriage having been dissolved by divorce on consent of parties or fails to support the prosecution on some other similar grounds. In such eventuality, there would almost be no chance of conviction. Would it then be proper to decline to exercise power of quashing on the ground that it would be permitting the parties to compound non-compoundable offences. Answer clearly has to be in ‘negative’. It would, however, be a different matter if the High Court on facts declines the prayer for quashing for any valid reasons including lack of bona fides.

In Madhavrao Jiwajirao Scindia & Ors. v. Sambhajirao Chandrojirao Angre & Ors. [(1988) 1 SCC 692], it was held that while exercising inherent power of quashing under Section 482, it is for the High Court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. Where, in the opinion of the Court, chances of an ultimate conviction is bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the court may, while taking into consideration the special facts of a case, also quash the proceedings.

The special features in such matrimonial matters are evident. It becomes the duty of the Court to encourage genuine settlements of matrimonial disputes.

The observations made by this Court, though in a slightly different context, in G.V. Rao v. L.H.V. Prasad & Ors. [(2000) 3 SCC 693] are very apt for determining the approach required to be kept in view in matrimonial dispute by the courts, it was said that there has been an outburst of matrimonial disputes in recent times. Marriage is a sacred ceremony, the main purpose of which is to enable the young couple to settle down in life and live peacefully. But little matrimonial skirmishes suddenly erupt which often assume serious proportions resulting in commission of heinous crimes in which elders of the family are also involved with the result that those who could have counselled and brought about rapprochement are rendered helpless on their being arrayed as accused in the criminal case. There are many other reasons which need not be mentioned here for not encouraging matrimonial litigation so that the parties may ponder over their defaults and terminate their disputes amicably by mutual agreement instead of fighting it out in a court of law where it takes years and years to conclude and in that process the parties lose their “young” days in chasing their “cases” in different courts.

There is no doubt that the object of introducing Chapter XX-A containing Section 498A in the Indian Penal Code was to prevent the torture to a woman by her husband or by relatives of her husband. Section 498A was added with a view to punishing a husband and his relatives who harass or torture the wife to coerce her or her relatives to satisfy unlawful demands of dowry. The hyper-technical view would be counter productive and would act against interests of women and against the object for which this provision was added. There is every likelihood that non-exercise of inherent power to quash the proceedings to meet the ends of justice would prevent women from settling earlier. That is not the object of Chapter XXA of Indian Penal Code.

In view of the above discussion, we hold that the High Court in exercise of its inherent powers can quash criminal proceedings or FIR or complaint and Section 320 of the Code does not limit or affect the powers under Section 482 of the Code.

For the foregoing reasons, we set aside the impugned judgment and allow the appeal and quash the FIR above mentioned.

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2003 (3) SCR 607

The Judgment of the Court was delivered by D. RAJU, J. The above appeals have been filed by the husband, who lost before both the courts below, challenging the orders granting dissolution of the marriage solemnized between parties on 10th June, 1973 at the instance of the respondent wife and dismissing the petition filed by the appellant seeking for the relief of restitution of conjugal rights and custody of the two daughters. The wife filed M. J. Petition No. 382 of 1983 under Section 13(l)(i-a) of the Hindu Marriage Act, 1955, seeking for dissolution of the marriage and grant of divorce on the ground of cruelty said to have been meted out to the wife. In support of her claim, the wife narrated several instances of harassment and nagging attitude, which caused her mental agony and serious set back in health. These were ultimately considered and viewed by the learned Family Court Judge to be mere normal wear and tear of marital life. But at the same time, the allegations made by the husband, extensively with enumeration of instances and incidents against wife branding her as an unchaste woman, keeping illicit relations – sexually and otherwise with one Ramesh Sawant, the son of a neighbour, though subsequently withdrawn by seeking an amendment of the written statement, weighed with the court to uphold the claim of the wife for divorce. The manner of narration and claims of such allegations in the written statement was also considered to be per se indicative of the fact that he made such allegations against her not only when they were living together but also to her relatives, friends and persons whom he had contacted for reconciliation. The learned trial judge was also of the view that notwithstanding the withdrawal, in a reply filed on 17.1.90 also, those allegations were considered to have been substantially reiterated by the husband. Consequently, the Family Court allowed M.J. Petition No. 382 of 1983 on 7.4.1994. As a sequel to the same, the application in M. J. Petition No. 66 of 1988 filed by the husband for restitution of conjugal rights and custody of the daughters tried simultaneously with the other petition came to be rejected by a separate order on that very date of judgment granting dissolution of marriage between parties.

The appellant filed Family Court Appeal No. 56 of 1994 against the dismissal of M. J. Petition No. 66 of 1988 and Family Court Appeal No. 57 of 1994 against the order granting divorce in M. J. Petition No. 382 of 1983 filed by the wife. The Division Bench of the High Court of Bombay passed a detailed judgment in FCA No. 57 of 1994 affirming the order of the family court granting divorce and rejected the appeal on 4.10.2000. At the same time, by a separate order the other appeal in FCA No. 56 of 1994 was also dismissed, on the same date. Consequently, these appeals came to be filed by the husband.

Though notice was served in the appeals on the respondent, she did not choose to enter appearance in person or through counsel. But she had sent a reply contesting the claims of the appellant in the appeals filed before this court.

Shri V.N. Ganpule, learned senior counsel for the appellant, strenuously contended that the judgments of the courts below could not be sustained as they have mainly been based upon certain averments made in the written statement filed in M. J. Petition No. 382 of 1983, which were got deleted and withdrawn by seeking for and obtaining orders by way of amendment to the written statement on 16. 9. 1988 itself. All the more so, according to the learned counsel, when the other grievances made in the petition filed to substantiate the claim of cruelty, came to be rejected as matters of normal wear and tear in matrimonial life, not amounting to cruelty so as to justify the grant of divorce on them alone. It is further urged on behalf of the appellant that there is still scope left with parties for reconciliation and if only the decree for divorce is set aside, there is room for restitution of the marital relationship between parties and resumption of the marital home. Our attention has been drawn to certain decisions, in addition to those already noticed by the courts below and the stand taken for the appellant before the courts below, once more reiterated at the hearing of the appeals.

In Dr. N.G. Dastane v. Mrs. S. Dastane, AIR (1975) SC 1534, this Court observed that normally the burden lies on the petitioner to establish his or her plea that the respondent had meted out cruelty to the petitioner and that the standard of proof required in matrimonial cases under the Act is not to establish the charge of cruelty beyond reasonable doubt but merely one of weighing the various probabilities to find out whether the preponderance is in favour of the existence of the said fact alleged. As to what is the nature of cruelty that is necessary to be substantiated also, it has been pointed out that unlike the requirement under English law which must be of such a character as to cause danger to life, limb or health so as to give rise to a reasonable apprehension of such a danger, the courts under the Act in question has to only see whether the petitioner proved that the respondent has treated the petitioner with such cruelty as to cause a reasonable apprehension in mind that it will be harmful or injurious to live together, keeping into consideration the resultant possibilities of harm or injury to health, reputation,, the working-career or the like .

In V. Bhagat v. D. Bhagat (Mrs.), [1994] 1 SCC 337, it was observed that mental cruelty in Section 13(1) (i-a) can broadly be defined as that conduct which inflicts upon the other party such mental pain and suffering as would make it not possible for that party to live with the other and the parties cannot reasonably also be expected to live together or that the wronged party cannot reasonably be asked to put up with such conduct and continue to live with the other party. It was also considered to be not necessary to prove that the mental cruelty is such as to cause injury to the health of the wronged party. That was a case wherein the husband filed a petition against the wife for divorce on the ground of adultery. In the written statement filed by the wife in the said proceedings, she alleged that the husband was “suffering from mental hallucination’, that his was a “morbid mind …. for which he needs expert psychiatric treatment”, and that he was “suffering from paranoid disorder” etc., and that during crossexamination several questions were put to him that the petitioner and several members of his family including his grandfather were lunatics and that the streak of insanity was running in the entire family. It is in the said context this Court though held the allegations leveled against the wife were not proved the counter allegations made by the wife against the husband certainly constituted mental cruelty of such a nature that the husband cannot reasonably be asked to live with the wife thereafter. The husband, it was also held, would be justified to say that it is not possible for him to live with the wife. In rejecting the stand of the wife that she wants to live with her husband, this Court observed that she was deliberately feigning a posture, wholly unnatural and beyond comprehension of a reasonable person and held that in such circumstances the obvious conclusion has to be that she has resolved to live in agony only to make life a miserable hell for the husband, as well.

The question that requires to be answered first is as to whether the averments, accusations and character assassination of the wife by the appellant husband in the written statement constitutes mental cruelty for sustaining the claim for divorce under Section 13(1) (i-a) of the Act. The position of law in this regard has come to be well settled and declared that leveling disgusting accusations of unchastity and indecent familiarity with a person outside wedlock and allegations of extra marital relationship is a grave assault on the character, honour, reputation, status as well as the health of the wife. Such aspersions of perfidiousness attributed to the wife, viewed in the context of an educated Indian wife and judged by Indian conditions and standards would amount to worst form of insult and cruelty, sufficient by itself to substantiate cruelty in law, warranting the claim of the wife being allowed. That such allegations made in the written statement or suggested in the course of examination and by way of crossexamination satisfy the requirement of law has also come to be firmly laid down by this Court. On going through the relevant portions of such allegations, we find that no exception could be taken to the findings recorded by the Family Court as well as the High Court. We find that they are of such quality, magnitude and consequence as to cause mental pain, agony and suffering amounting to the reformulated concept of cruelty in matrimonial law causing profound and lasting disruption and driving the wife to feel deeply hurt and reasonably apprehend that it would be dangerous for her to live with a husband who was taunting her like that and rendered the maintenance of matrimonial home impossible.

The allegations made in this case do not appear to have been the result of any sudden outburst. On the other hand, such injurious reproaches, accusations and taunts as were found to have been made in this case lend credence to the fact that the husband was persisting in them for sufficiently a long time humiliating and wounding the feelings of the wife to such an extent as to make it insufferable for the wife and to live in matrimonial home any longer with the husband. The Division Bench of the High Court, in the course of its judgment in FCA No. 57 of 1994, particularly in paras 31 to 38 adverted to the nature and details of the allegations as culled out from the written statement extensively and meticulously and considered them in the light of the settled principles of law governing the same before affirming the judgment of the trial court which also recorded findings against the respondent after a detailed discussion of the relevant materials on record in paras 26 to 30 of the judgment in M.J. Petition No. 382 of 1983. On going through them we are convinced that the findings of the courts below are well merited and fully justified on the materials available on record and that they are neither shown to suffer any infirmity in law nor substantiated to be based on no evidence or vitiated on account of any perversity of approach to call for a different conclusion in our hands and interfere with the concurrent verdicts recorded by them.

The learned senior counsel for the appellant husband, as indicated supra, also was mainly trying to contend that once those allegations were unconditionally withdrawn by filing an application for amendment on 17.8.1988 which came to be also allowed by the trial court on 16.9.1988 and the amendments actually carried out on 5.10.1988, they could not have provided any basis for consideration in the case any longer to record any findings against the appellant. The plea on behalf of the appellant now made, as had been before the courts below, is that those allegations must be considered to have never been on record and not available for being referred or relied upon for any purpose. This aspect also, in our view, is found to have been considered at length and in its proper perspective by both the courts below before rejecting the claim projected on behalf of the appellant husband. Apart from observing, from the nature of the allegations and details disclosed that those statements were made by the appellant himself and only at his instance and on instructions, the courts below were of the view that the reply filed on 17.1.90 in court to an application filed by the wife seeking permission to engage her lawyer (mistakenly referred to as appellant’s application) and their contents substantially reaffirming what has been stated earlier in the written statement but got withdrawn by subsequent amendment rendered even the so called withdrawal to be of no significance or consequence and that it does not appear to have been genuine, too. Cogent and convincing reasons have been assigned by the courts below, in this regard and we are unable to come to a different conclusion on the indisputable factual developments noticed and relied upon by the High Court in paras 40 to 48 of its judgment for rejecting the claim of the appellant in this regard. The slender claim of alleged condonation was also rejected by the High Court, rightly by placing reliance on the repetition of many such allegations in the reply dated 17.1.90. In this connection, it would be of interest also to notice the observations of the learned trial judge in the order passed on 16.9.88 on the application for amendment filed by the appellant for withdrawal of certain allegations from the written statement. The respondent-wife who sent her response to the appeal filed by the appellant, in the form of an affidavit also enclosed to the same, the affidavit in reply dated 17.1.90 filed by the appellant in the trial court and a copy of the order dated 16.9.88 noticed above passed on the applications for amendment of the written statement. At paragraph 17 of the order dated 16.9.88, it is found observed as follows:

“17. It must be made clear that the amendment of the written statement cannot have any reference to anything that had happened prior to the filing of the petition on which the petitioner can place reliance although such matters may have been covered by the statements now deleted. It may be remembered that the petitioner is not withdrawing her allegations. It has also to be remembered that the petitioner has not acted upon unilateral withdrawal of the allegations by the respondent by his letter dated 14.8.86. ”

In the light of all these, it is futile to claim on behalf of the appellant that the withdrawal of allegations unilaterally by the appellant, by filing an application for amendment of the written statement wiped out completely all those allegations for all purposes.

That apart, in our view, even the fact that the application for amendment seeking for deletion of the accusations made in the written statement was ordered and amendments carried out subsequently does not absolve the husband in this case, from being held liable for having treated the wife with cruelty by making earlier such injurious reproaches and statements, due to their impact when made and continued to remain on record. To satisfy the requirement of clause (i-a) of Sub-section (1) of Section 13 of the Act, it is not as though the cruel treatment for any particular duration or period has been statutorily stipulated to be necessary. As to what constitute the required mental cruelty for purposes of the said provision, in our view, will not depend upon the numerical count of such incidents or only on the continuous course of such conduct, but really go by the intensity, gravity and stigmatic impact of it when meted out even once and the deleterious effect of it on the mental attitude, necessary for maintaining a conducive matrimonial home. If the taunts, complaints and reproaches are of ordinary nature only, the Courts perhaps need consider the further question as to whether their continuance or persistence over a period time render, what normally would, otherwise, not be a so serious an act to be so injurious and painful as to make the spouse charged with them genuinely and reasonable conclude that the maintenance of matrimonial home is not possible any longer. A conscious and deliberate statement leveled with pungency and that too placed on record, through the written statement, cannot so lightly be ignored or brushed aside, to be of no consequence merely because it came to be removed from the record only. The allegations leveled and the incidents enumerated in the case on hand, apart from they being per se cruel in nature, on their own also constitute an admission of the fact that for quite some time past the husband had been persistently indulging in them, unrelented and unmindful of its impact. That the husband in this case has treated the wife with intense cruelty is a fact, which became a fait accomplished the day they were made in the written statement. They continued on record at any rate till 5.10.1988 and the indelible impact and scar it initially should have created, cannot be said to have got ipso facto dissolved, with the amendments ordered. Therefore, no exception could be taken to the courts below placing reliance on the said conduct of the appellant, in this regard, to record a finding against him.

The submission on behalf of the appellant that once the decree for divorce is set aside, there may be fresh avenues and scope for reconciliation between parties to revert back to matrimonial home, does not appeal to us in any manner, viewed in the context of the attitude of the wife, seriously contesting the claims of the appellant, by filing her reply in this Court, with enclosures thereto, though not appearing either in-person or through counsel. The allegations and counter allegations exchanged are indicative of the strong hatred and rancour between them. Judged in the background of all surrounding circumstances noticed by the courts below and what has been observed by us supra, the claim appears to us to be too desolate, merely born out of despair rather than based upon any real, concrete or genuine purpose or aim. Once the decree for divorce is confirmed, the relief sought for by the husband for restitution has to inevitably fail.

For all the reasons stated above, we see no merit whatsoever in the appeals and consequently they fail and shall stand dismissed. No costs.

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IN THE SUPREME COURT OF INDIA
CASE NO.: Writ Petition (civil) 302 of 2001
Javed & Ors. …PETITIONER
Vs.
State of Haryana & Ors. …RESPONDENT
DATE: 30-July-2003
BENCH: R.C. LAHOTI, ASHOK BHAN & ARUN KUMAR.
JUDGMENT

(With C.A. Nos._5355-5372, 5380-5381, 5382, 5385, 5386, 5397-5450/2003 @ SLP(C) Nos. 7527-7528/2001, WP(C) No. 269/2001, SLP(C) Nos. 10551/2001, 10583/2001, 10725/2001, 11002/2001, 10729/2001, 13046/2001, 12313-12314/2001, 10996/2001, WP(C) Nos. 316/2001, 315/2001, SLP(C) Nos. 12259/2001, 13595/2001, 13398/2001, 13430/2001, WP(C) Nos. 329/2001, 362/2001, 363/2001, 258/2001, SLP(C) Nos. 14547/2001, 14686/2001, 10189/2001, WP(C) Nos. 403/2001, 395/2001, SLP(C) Nos. 16477/2001, 16483/2001, 18020/2001, WP(C) No. 420/2001, SLP(C) Nos. 17247/2001, 17497/2001, 16892/2001, 18557/2001, 18554/2001, WP(C) Nos. 438/2001, 475/2001, 507/2001, 508/2001, SLP(C) Nos. 19211/2001, 19139/2001, WP(C) No. 495/2001, SLP(C) No. 19244/2001, WP(C) Nos. 567/2001, 560/2001, 559/2001, 561/2001, 538/2001, 539/2001, 579/2001, SLP(C) Nos. 22309/2001, 22278/2001, 447/2002, 12779/2001, WP(C) No. 19/2002, SLP(C) Nos.

22574/2001, 22672/2001, WP(C) Nos. 30/2002, 32/2002, SLP(C) Nos. 497/2002, 13185/2001, 2188/2002, 1020/2002, 17156/2001, WP(C) Nos. 1/2002, 49/2002, 50/2002, 79/2002, SLP(C) Nos. 1768/2002, 856/2002, 1483/2002, 1820/2002, 3028/2002, 2022/2002, 2237/2002, 22524/2001, 18636/2001, 3214/2002, 4409-4411/2002, WP(C) Nos. 94/2002, 130/2002, 93/2002, 127/2002, 144/2002, SLP(C) Nos. 5374/2002, 5517/2002, 6186/2002, WP(C) Nos. 169/2002, 168/2002, 128/2002, 177/2002, 112/2002, 71/2002, 91/2002, 178/2002, SLP(C) Nos. 6427/2002, 5207/2002, WP(C) Nos. 184/2002, SLP(C) Nos. 6397/2002, 6466/2002, WP(C) Nos. 183/2002, 185/2002, SLP(C) Nos. 13156/2001, 18263/2001, 6537/2002, WP(C) No. 68/2002, SLP(C) No. 6769/2002, WP(C) Nos. 430/2001, 213/2002, 214/2002, 162/2002, 230/2002, 225/2002, 228/2002, SLP(C) Nos. 7542/2002, 7392/2002, 7223/2002, WP(C) No. 254/2002, SLP(C) No. 8631/2002, WP(C) Nos. 296/2002, 280/2002, 281/2002, 305/2002, SLP(C) Nos. 8632/2002, 9113/2002, 8963/2002, 8547/2002, 9246/2002, WP(C) Nos. 317/2002, 309/2002, C.A. No. 3629/2002, SLP(C) Nos. 10294/2002, 11755/2002, WP(C) No. 306/2002, C.A. No. 4053/2002, WP(C) Nos. 341/2002, 342/2002, 395/2002, C.A. No. 4066/2002, WP(C) Nos. 396/2002, 406/2002, C.A. Nos. 4501/2002, 4487/2002, WP(C) Nos. 402/2002, 336/2002, 424/2002, 355/2002, 381/2002, 380/2002, 430/2002, 431/2002, 421/2002, 404/2002, C.A. Nos. 5080/2002, 5081/2002, WP(C) Nos. 443/2002, 457/2002, 451/2002, C.A. No. 5270/2002, SLP(C) No. 11810/2002, WP(C) Nos. 462/2002, 491/2002, 495/2002, C.A. Nos. 5902/2002, 5903/2002, WP(C) No. 278/2002, C.A. No. 7034/2002, WP(C) Nos. 612/2002, 574/2002, 607/2002, 240/2002, 655/2002, 676/2002, 677/2002, 547/2002, 645/2002, 620/2002, 682/2002, 8/2003, 669/2002, C.A. Nos. 1187-1188/2003, WP(C) Nos. 18/2003, 28/2003, 40/2003, C.A. No. 2033/2003, WP(C) No. 63/2003, SLP(C) No. 3140/2003, WP(C) No.121/2003, 123/2003, C.A. No. 2395/2003, WP(C) Nos.149/2003, 193/2003, 195/2003, 204/2003, 155/2003, 161/2003, 188/2003, 245/2003, 247/2003, 248/2003, 250/2003, 257/2003, 268/2003, 270/2003, 277/2003, 281/2003 & SLP(C) No.10673/2003)

R.C. LAHOTI, J.

Leave granted in all the Special Leave Petitions.

In this batch of writ petitions and appeals, the core issue is the vires of the provisions of Section 175(1)(q) and 177(1) of the Haryana Panchayati Raj Act, 1994 (Act No.11 of 1994) (hereinafter referred to as the Act, for short). The relevant provisions are extracted and reproduced hereunder:- 175. (1) No person shall be a Sarpanch or a Panch of a Gram Panchayat or a member of a Panchayat Samiti or Zila Parishad or continue as such who – xxx xxx xxx xxx xxx xxx (q) has more than two living children :

Provided that a person having more than two children on or up to the expiry of one year of the commencement of this Act, shall not be deemed to be disqualified;

“177(1) If any member of a Gram Panchayat, Panchayat Samiti or Zila Parishad – (a) who is elected, as such, was subject to any of the disqualifications mentioned in section 175 at time of his election;

(b) during the term for which he has been elected, incurs any of the disqualifications mentioned in section 175, shall be disqualified from continuing to be a member and his office shall become vacant.

(2) In every case, the question whether a vacancy has arisen shall be decided by the Director. The Director may give its decision either on an application made to it by any person or on its own motion. Until the Director decides that the vacancy, has arisen, the members shall not be disqualified under sub-section (1) from continuing to be a member. Any person aggrieved by the decision of the Director may, within a period of fifteen days from the date of such decision, appeal to the Government and the orders passed by Government in such appeal shall be final :

Provided that no order shall be passed under this subsection by the Director against any member without giving him a reasonable opportunity of being heard.” Act No.11 of 1994 was enacted with various objectives based on past experience and in view of the shortcomings noticed in the implementation of preceding laws and also to bring the legislation in conformity with Part IX of the Constitution of India relating to ‘The Panchayats’ added by the Seventy-third Amendment. One of the objectives set out in the Statement of Objects and Reasons is to disqualify persons for election of Panchayats at each level, having more than 2 children after one year of the date of commencement of this Act, to popularize Family Welfare/Family Planning Programme (Vide Clause (m) of Para 4 of SOR).

Placed in plain words the provision disqualifies a person having more than two living children from holding the specified offices in Panchayats. The enforcement of disqualification is postponed for a period of one year from the date of the commencement of the Act. A person having more than two children upto the expiry of one year of the commencement of the Act is not disqualified. This postponement for one year takes care of any conception on or around the commencement of the Act, the normal period of gestation being nine months. If a woman has conceived at the commencement of the Act then any one of such couples would not be disqualified. Though not disqualified on the date of election if any person holding any of the said offices incurs a disqualification by giving birth to a child one year after the commencement of the Act he becomes subject to disqualification and is disabled from continuing to hold the office. The disability is incurred by the birth of a child which results in increasing the number of living children, including the additional child born one year after the commencement of the Act, to a figure more than two. If the factum is disputed the Director is entrusted with the duty of holding an enquiry and declaring the office vacant. The decision of the Director is subject to appeal to the Government. The Director has to afford a reasonable opportunity of being heard to the holder of office sought to be disqualified. These safeguards satisfy the requirements of natural justice.

Several persons (who are the writ petitioners or appellants in this batch of matters) have been disqualified or proceeded against for disqualifying either from contesting the elections for, or from continuing in, the office of Panchas/Sarpanchas in view of their having incurred the disqualification as provided by Section 175(1)(q) or Section 177(1) read with Section 175(1)(q) of the Act. The grounds for challenging the constitutional validity of the abovesaid provision are very many, couched differently in different writ petitions.

We have heard all the learned counsel representing the different petitioners/appellants. As agreed to at the Bar, the grounds of challenge can be categorized into five :- (i) that the provision is arbitrary and hence violative of Article 14 of the Constitution;

(ii) that the disqualification does not serve the purpose sought to be achieved by the legislation; (iii) that the provision is discriminatory; (iv) that the provision adversely affects the liberty of leading personal life in all its freedom and having as many children as one chooses to have and hence is violative of Article 21 of the Constitution; and (v) that the provision interferes with freedom of religion and hence violates Article 25 of the Constitution.

The State of Haryana has defended its legislation on all counts. We have also heard the learned Standing Counsel for the State. On notice, Sh. Soli J. Sorabji, the learned Attorney General for India, has appeared to assist the Court and he too has addressed the Court. We would deal with each of the submissions made.

Submissions (i),(ii) & (iii) The first three submissions are based on Article 14 of the Constitution and, therefore, are taken up together for consideration.

Is the classification arbitrary? It is well-settled that Article 14 forbids class legislation; it does not forbid reasonable classification for the purpose of legislation. To satisfy the constitutional test of permissibility, two conditions must be satisfied, namely (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that such differentia has a rational relation to the object sought to be achieved by the Statute in question. The basis for classification may rest on conditions which may be geographical or according to objects or occupation or the like. [See : Constitution Bench decision in SCR 1045]. The classification is well-defined and well- perceptible. Persons having more than two living children are clearly distinguishable from persons having not more than two living children. The two constitute two different classes and the classification is founded on an intelligible differentia clearly distinguishing one from the other. One of the objects sought to be achieved by the legislation is popularizing the family welfare/family planning programme. The disqualification enacted by the provision seeks to achieve the objective by creating a disincentive. The classification does not suffer from any arbitrariness. The number of children, viz., two is based on legislative wisdom. It could have been more or less. The number is a matter of policy decision which is not open to judicial scrutiny.

The legislation does not serve its object? It was submitted that the number of children which one has, whether two or three or more, does not affect the capacity, competence and quality of a person to serve on any office of a Panchayat and, therefore, the impugned disqualification has no nexus with the purpose sought to be achieved by the Act. There is no merit in the submission. We have already stated that one of the objects of the enactment is to popularize Family Welfare/Family Planning Programme. This is consistent with the National Population Policy.

Under Article 243G of the Constitution the Legislature of a State has been vested with the authority to make law endowing the Panchayats with such powers and authority which may be necessary to enable the Gram Panchayat to function as institutions of self-Government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats, at the appropriate level, subject to such conditions as may be specified therein. Clause (b) of Article 243G provides that Gram Panchayats may be entrusted the powers to implement the schemes for economic development and social justice including those in relation to matters listed in the Eleventh Schedule. Entries 24 and 25 of the Eleventh Schedule read:

24. Family Welfare.

25. Women and child development.

In pursuance to the powers given to the State Legislature to enact laws the Haryana Legislature enacted the Haryana Panchayati Raj Act, 1994 (Haryana Act No.11 of 1994). Section 21 enumerates the functions and duties of Gram Panchayat.

Clause XIX (1) of Section 21 reads:

“XIX. Public Health and Family Welfare – (1) Implementation of family welfare programme.” The family welfare would include family planning as well. To carry out the purpose of the Act as well as the mandate of the Constitution the Legislature has made a provision for making a person ineligible to either contest for the post of Panch or Sarpanch having more than two living children. Such a provision wouldì¥Á 7 ð ¿ Œì bjbjU U * 7| 7| qè ÿÿ ÿÿ ÿÿ l Œ Œ Œ Œ Œ Œ Œ Z Z Z 8 ‘ (r) d K, . – – ” @ @ @ @ @ @ î+ ð+ ð+ ð+ ð+ ð+ ð+ y- ™/ : ð+ Œ @ @ @ @ @ ð+ H( Œ Œ @ @ , H( H( H( @ j Œ @ Œ @ î+ H( @ î+ H( ¦ H( î+ Œ Œ î+ @ @ôë íQà º Z ª” ž î+ î+ , 0 K, î+ Ó/ H( Ó/ î+ H( Œ Œ Œ Œ Ù IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT PETITION NO. 302 OF 2001 Javed & Ors. … Petitioners Versus State of Haryana & Ors. ….Respondents (With C.A. Nos._____________________________________ ________________________________________________ ________________________________________________ ________________________________________________ @ SLP(C) Nos. 7527-7528/2001, WP(C) No. 269/2001, SLP(C) Nos. 10551/2001, 10583/2001, 10725/2001, 11002/2001, 10729/2001, 13046/2001, 12313-12314/2001, 10996/2001, WP(C) Nos. 316/2001, 315/2001, SLP(C) Nos. 12259/2001, 13595/2001, 13398/2001, 13430/2001, WP(C) Nos. 329/2001, 362/2001, 363/2001, 258/2001, SLP(C) Nos. 14547/2001, 14686/2001, 10189/2001, WP(C) Nos. 403/2001, 395/2001, SLP(C) Nos. 16477/2001, 16483/2001, 18020/2001, WP(C) No.

420/2001, SLP(C) Nos. 17247/2001, 17497/2001, 16892/2001, 18557/2001, 18554/2001, WP(C) Nos. 438/2001, 475/2001, 507/2001, 508/2001, SLP(C) Nos. 19211/2001, 19139/2001, WP(C) No. cessarily be identical. So is the case with the laws governing legislators and parliamentarians.

It is not permissible to compare a piece of legislation enacted by a State in exercise of its own legislative power with the provisions of another law, though pari materia it may be, but enacted by Parliament or by another State legislature within its own power to legislate. The sources of power are different and so do differ those who exercise the power. The Constitution (1955) 2 SCR 225, held that the power of the Court to declare a law void under Article 13 has to be exercised with reference to the specific legislation which is impugned. Two laws enacted by two different Governments and by two different legislatures can be read neither in conjunction nor by comparison for the purpose of finding out if they are discriminatory. Article 14 does not authorize the striking down of a law of one State on the ground that in contrast with a law of another State on the same subject, its provisions are discriminatory. When the sources of authority for the two statutes are different, Article 14 can have no application. So is the view taken in The Bar Council of State of Tamil Nadu and Ors. [1987] INSC 240; (1987) 4 SCC 238.

Incidentally it may be noted that so far as the State of Haryana is concerned, in the Haryana Municipal Act, 1973 (Act No. 24 of 1973) Section 13A has been inserted to make a provision for similar disqualification for a person from being chosen or holding the office of a member of municipality.

A uniform policy may be devised by the Centre or by a State. However, there is no constitutional requirement that any such policy must be implemented in one-go. Policies are capable of being implemented in a phased manner. More so, when the policies have far-reaching implications and are dynamic in nature, their implementation in a phased manner is welcome for it receives gradual willing acceptance and invites lesser resistance.

The implementation of policy decision in a phased manner is suggestive neither of arbitrariness nor of discrimination. In Lalit Narayan Mishra Institute of Economic Development [1988] INSC 83; (1988) 2 SCC 433, the policy of nationalizing educational institutes was sought to be implemented in a phased manner.

This Court held that all the institutions cannot be taken over at a time and merely because the beginning was made with one institute, it could not complain that it was singled out and, therefore, Article 14 was violated. Observations of this Court in (1996) 2 SCC 498, are apposite. In a pluralist society like India, people having faiths in different religions, different beliefs and tenets, have peculiar problems of their own. “A uniform law, though is highly desirable, enactment thereof in one go perhaps may be counter-productive to unity and integrity of the nation.

In a democracy governed by rule of law, gradual progressive change and order should be brought about. Making law or amendment to a law is a slow process and the legislature attempts to remedy where the need is felt most acute. It would, therefore, be inexpedient and incorrect to think that all laws have to be made uniformly applicable to all people in one go. The mischief or defect which is most acute can be remedied by process of law at stages.” To make a beginning, the reforms may be introduced at the grass-root level so as to spiral up or may be introduced at the top so as to percolate down. Panchayats are grass-root level institutions of local self-governance. They have a wider base. There is nothing wrong in the State of Haryana having chosen to subscribe to the national movement of population control by enacting a legislation which would go a long way in ameliorating health, social and economic conditions of rural population, and thereby contribute to the development of the nation which in its turn would benefit the entire citizenry. We may quote from the National Population Policy 2000 (Government of India Publication, page 35):- “Demonstration of support by elected leaders, opinion makers, and religious leaders with close involvement in the reproductive and child health programme greatly influences the behaviour and response patterns of individuals and communities. This serves to enthuse communities to be attentive towards the quality and coverage of maternal and child health services, including referral care.”……….”The involvement and enthusiastic participation of elected leaders will ensure dedicated involvement of administrators at district and sub-district levels. Demonstration of strong support to the small family norm, as well as personal example, by political, community, business, professional, and religious leaders, media and film stars, sports personalities and opinion makers, will enhance its acceptance throughout society.” No fault can be found with the State of Haryana having enacted the legislation. It is for others to emulate.

We are clearly of the opinion that the impugned provision is neither arbitrary nor unreasonable nor discriminatory. The disqualification contained in Section 175(1)(q) of Haryana Act No.11 of 1994 seeks to achieve a laudable purpose – socio- economic welfare and health care of the masses and is consistent with the national population policy. It is not violative of Article 14 of the Constitution.

Submission (iv) & (v) : the provision if it violates Article 21 or 25? Before testing the validity of the impugned legislation from the viewpoint of Articles 21 and 25, in the light of the submissions made, we take up first the more basic issue – Whether it is at all permissible to test the validity of a law which enacts a disqualification operating in the field of elections on the touchstone of violation of fundamental rights? Right to contest an election is neither a fundamental right nor a common law right. It is a right conferred by a Statute. At the most, in view of Part IX having been added in the Constitution, a right to contest election for an office in Panchayat may be said to be a constitutional right __ a right originating in Constitution and given shape by statute. But even so it cannot be equated with a fundamental right. There is nothing wrong in the same Statute which confers the right to contest an election also to provide for the necessary qualifications without which a person cannot offer his candidature for an elective office and also to provide for disqualifications which would disable a person from contesting for, or holding, an elective statutory office.

Returning Officer, Namakkal Constituency [1952] INSC 2; (1952) SCR 218, Ors.[1982] INSC 26; , (1982) (1) SCC 691, – “A right to elect, fundamental though it is to democracy, is, anomalously enough, neither a fundamental right nor a common law right. It is pure and simple, a statutory right. So is the right to be elected. So is the right to dispute an election. Outside of statute, there is no right to elect, no right to be elected and no right to dispute an election. Statutory creations they are, and therefore, subject to statutory limitation.” Ram and Ors., [1954] INSC 81; (1955) 1 SCR 608, a candidate at the election made a systematic appeal to voters of a particular caste to vote for him on the basis of his caste through publishing and circulating leaflets. Sections 123(5) and 124(5) of the Representation of the People Act, 1951, were challenged as ultra vires of Article 19(1)(a) of the Constitution, submitting that the provisions of Representation of the People Act interfered with a citizen’s fundamental right to freedom of speech.

Repelling the contention, the Constitution Bench held that these laws do not stop a man from speaking. They merely provide conditions which must be observed if he wants to enter Parliament. The right to stand as a candidate and contest an election is not a common law right; it is a special right created by statute and can only be exercised on the conditions laid down by the statute. The Fundamental Rights Chapter has no bearing on a right like this created by statute. The appellants have no fundamental right to be elected and if they want to be elected they must observe the rules. If they prefer to exercise their right of free speech outside these rules, the impugned sections (1955) 1 SCR 1004, the appellant’s nomination paper for election as a councillor of the Municipality was rejected on the ground that he was employed as a legal practitioner against the Municipality which was a disqualification under the relevant Municipality Act. It was contended that the disqualification prescribed violated the appellant’s fundamental rights guaranteed under Article 14 and 19(1)(g) of the Constitution.

The Constitution Bench held that the impugned provision has a public purpose behind it, i.e., the purity of public life which would be thwarted where there was a conflict between interest and duty. The Constitution Bench further held that the right of the appellant to practise the profession of law guaranteed by Article 19(1)(g) cannot be said to have been violated because in laying down the disqualification the Municipal Act does not prevent him from practising his profession of law; it only lays down that if he wants to stand as a candidate for election he shall not either be employed as a paid legal practitioner on behalf of the Municipality or act as a legal practitioner against the Municipality. There is no fundamental right in any person to stand as a candidate for election to the Municipality. The only fundamental right which is guaranteed is that of practising any profession or carrying on any occupation, trade or business.

The impugned disqualification does not violate the latter right.

Primarily no fundamental right is violated and even assuming that it be taken as a restriction on his right to practise his profession of law, such restriction would be liable to be upheld being reasonable and imposed in the interests of general public for the preservation of purity in public life.

In our view, disqualification on the right to contest an election by having more than two living children does not contravene any fundamental right nor does it cross the limits of reasonability. Rather it is a disqualification conceptually devised in national interest.

With this general statement of law which has application to Articles 21 and 25 both, we now proceed to test the sustainability of attack on constitutional validity of impugned legislation separately by reference to Articles 21 and 25.

The disqualification if violates Article 21 ? Union of India & Anr. – (1978) 1 SCC 248, and M/s. Kasturu Kashmir and Anr. – [1980] INSC 118; (1980) 4 SCC 1, it was forcefully urged that the fundamental right to life and personal liberty emanating from Article 21 of the Constitution should be allowed to stretch its span to its optimum so as to include in the compendious term of the Article all the varieties of rights which go to make up the personal liberty of man including the right to enjoy all the materialistic pleasures and to procreate as many children as one pleases.

At the very outset we are constrained to observe that the law laid down by this Court in the decisions relied on is either being misread or read divorced of the context. The test of reasonableness is not a wholly subjective test and its contours are fairly indicated by the Constitution. The requirement of reasonableness runs like a golden thread through the entire fabric of fundamental rights. The lofty ideals of social and economic justice, the advancement of the nation as a whole and the philosophy of distributive justice – economic, social and political – cannot be given a go-by in the name of undue stress on fundamental rights and individual liberty. Reasonableness and rationality, legally as well as philosophically, provide colour to the meaning of fundamental rights and these principles are deducible from those very decisions which have been relied on by the learned counsel for the petitioners.

It is necessary to have a look at the population scenario, of the world and of our own country.

India has the (dis)credit of being second only to China at the top in the list of the 10 most-populous countries of the world. As on 1.2.2000 the population of China was 1,277.6 million while the population of India as on 1.3.2001 was 1,027.0 million (Census of India, 2001, Series I, India – Paper I of 2001, page 29).

The torrential increase in the population of the country is one of the major hindrances in the pace of India’s socio- economic progress. Everyday, about 50,000 persons are added to the already large base of its population. The Karunakaran Population Committee (1992-93) had proposed certain disincentives for those who do not follow the norms of the Development Model adopted by National Public Policy so as to bring down the fertility rate. It is a matter of regret that though the Constitution of India is committed to social and economic justice for all, yet India has entered the new millennium with the largest number of illiterates in the world and the largest number of people below the poverty line. The laudable goals spelt out in the Directive Principles of State Policy in the Constitution of India can best be achieved if the population explosion is checked effectively. Therefore, the population control assumes a central importance for providing social and economic justice to the people of India (Usha Tandon, Reader, Faculty of Law, Delhi University, – Research Paper on Population Stabilization, Delhi Law Review, Vol. XXIII 2001, pp.125-131).

In the words of Bertand Russell, “Population explosion is more dangerous than Hydrogen Bomb.” This explosive population over-growth is not confined to a particular country but it is a global phenomenon. India being the largest secular democracy has the population problem going side by side and directly impacting on its per capita income, and resulting in shortfall of food grains in spite of the green revolution, and has hampered improvement on the educational front and has caused swelling of unemployment numbers, creating a new class of pavement and slum-dwellers and leading to congestion in urban areas due to the migration of rural poor. (Paper by B.K. Raina in Population Policy and the Law, 1992, edited by B.P. Singh Sehgal, page 52).

In the beginning of this century, the world population crossed six billions, of which India alone accounts for one billion (17 per cent) in a land area of 2.5 per cent of the world area.

The global annual increase of population is 80 millions. Out of this, India’s growth share is over 18 millions (23 per cent), equivalent to the total population of Australia, which has two and a half times the land space of India. In other words, India is growing at the alarming rate of one Australia every year and will be the most densely populous country in the world, outbeating China, which ranks first, with a land area thrice this country’s. China can withstand the growth for a few years more, but not India, with a constricted land space. Here, the per capita crop land is the lowest in the world, which is also shrinking fast. If this falls below the minimum sustainable level, people can no longer feed themselves and shall become dependent on imported food, provided there are nations with exportable surpluses. Perhaps, this may lead to famine and abnormal conditions in some parts of the country. (Source – Population Challenge, Arcot Easwaran, The Hindu, dated 8.7.2003). It is emphasized that as the population grows rapidly there is a corresponding decrease in per capita water and food. Women in many places trek long distances in search of water which distances would increase every next year on account of excessive ground water withdrawals catering to the need of the increasing population, resulting in lowering the levels of water tables.

Arcot Easwaran has quoted the China example. China, the most populous country in the world, has been able to control its growth rate by adopting the ‘carrot and stick’ rule. Attractive incentives in the field of education and employment were provided to the couples following the ‘one-child norm’. At the same time drastic disincentives were cast on the couples breaching ‘one-child norm’ which even included penal action.

India being a democratic country has so far not chosen to go beyond casting minimal disincentives and has not embarked upon penalizing procreation of children beyond a particular limit.

However, it has to be remembered that complacence in controlling population in the name of democracy is too heavy a price to pay, allowing the nation to drift towards disaster.

The growing population of India had alarmed the Indian leadership even before India achieved independence. In 1940 the sub-Committee on Population, appointed by the National Planning Committee set up by the President of the Indian National Congress (Pandit Jawaharlal Nehru), considered ‘family planning and a limitation of children’ essential for the interests of social economy, family happiness and national planning. The committee recommended the establishment of birth control clinics and other necessary measures such as raising the age at marriage and a eugenic sterilization programme. A committee on population set up by the National Development Council in 1991, in the wake of the census result, also proposed the formulation of a national policy. (Source – Seminar, March 2002, page 25) Every successive Five Year Plan has given prominence to a population policy. In the first draft of the First Five Year Plan (1951-56) the Planning Commission recognized that population policy was essential to planning and that family planning was a step forward for improvement in health, particularly that of mothers and children. The Second Five Year Plan (1956-61) emphasized the method of sterilization. A central Family Planning Board was also constituted in 1956 for the purpose.

The Fourth Five Year Plan (1969-74) placed the family planning programme, “as one amongst items of the highest national priority”. The Seventh Five Year Plan (1985-86 to 1990-91) has underlined “the importance of population control for the success of the plan programme….” But, despite all such exhortations, “the fact remains that the rate of population growth has not moved one bit from the level of 33 per thousand reached in 1979. And in many cases, even the reduced targets set since then have not been realised. (Population Policy and the Law, ibid, pages 44-46).

The above facts and excerpts highlight the problem of population explosion as a national and global issue and provide justification for priority in policy-oriented legislations wherever needed.

None of the petitioners has disputed the legislative competence of the State of Haryana to enact the legislation.

Incidentally, it may be stated that Seventh Schedule, List II – State List, Entry 5 speaks of ‘Local government, that is to say, the constitution and powers of municipal corporations, improvement trusts, district boards, mining settlement authorities and other local authorities for the purpose of local self-government or village administration’. Entry 6 speaks of ‘Public health and sanitation’ inter alia. In List III – Concurrent List, Entry 20A was added which reads ‘Population control and family planning’. The legislation is within the permitted field of State subjects. Article 243C makes provision for the Legislature of a State enacting laws with respect to Constitution of Panchayats. Article 243F in Part IX of the Constitution itself provides that a person shall be disqualified for being chosen as, and for being, a member of Panchayat if he is so disqualified by or under any law made by the Legislature of the State. Article 243G casts one of the responsibilities of Panchayats as preparation of plans and implementation of schemes for economic development and social justice. Some of the schemes that can be entrusted to Panchayats, as spelt out by Article 243G read with Eleventh Schedule is – Scheme for economic development and social justice in relation to health and sanitation, family welfare and women and child development and social welfare. Family planning is essentially a scheme referable to health, family welfare, women and child development and social welfare. Nothing more needs to be said to demonstrate that the Constitution contemplates Panchayat as a potent instrument of family welfare and social welfare schemes coming true for the betterment of people’s health especially women’s health and family welfare coupled with social welfare. Under Section 21 of the Act, the functions and duties entrusted to Gram Panchayats include ‘Public Health and Family Welfare’, ‘Women and Child Development’ and ‘Social Welfare’.

Family planning falls therein. Who can better enable the discharge of functions and duties and such constitutional goals being achieved than the leaders of Panchayats themselves taking a lead and setting an example.

Fundamental rights are not to be read in isolation. They have to be read along with the Chapter on Directive Principles of State Policy and the Fundamental Duties enshrined in Article 51A. Under Article 38 the State shall strive to promote the welfare of the people and developing a social order empowered at distributive justice – social, economic and political. Under Article 47 the State shall promote with special care the educational and economic interests of the weaker sections of the people and in particular the constitutionally down-trodden.

Under Article 47 the State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties.

None of these lofty ideals can be achieved without controlling the population inasmuch as our materialistic resources are limited and the claimants are many. The concept of sustainable development which emerges as a fundamental duty from the several clauses of Article 51A too dictates the expansion of population being kept within reasonable bounds.

The menace of growing population was judicially noticed and constitutional validity of legislative means to check the Ors. [1981] INSC 152; (1981) 4 SCC 335. The Court found no fault with the rule which would terminate the services of Air Hostesses on the third pregnancy with two existing children, and held the rule both salutary and reasonable for two reasons – “In the first place, the provision preventing a third pregnancy with two existing children would be in the larger interest of the health of the Air Hostess concerned as also for the good upbringing of the children. Secondly, ……… when the entire world is faced with the problem of population explosion it will not only be desirable but absolutely essential for every country to see that the family planning programme is not only whipped up but maintained at sufficient levels so as to meet the danger of over-population which, if not controlled, may lead to serious social and economic problems throughout the world.” To say the least it is futile to assume or urge that the impugned legislation violates right to life and liberty guaranteed under Article 21 in any of the meanings howsoever expanded the meanings may be.

The provision if it violates Article 25 ? It was then submitted that the personal law of muslims permits performance of marriages with 4 women, obviously for the purpose of procreating children and any restriction thereon would be violative of right to freedom of religion enshrined in Article 25 of the Constitution. The relevant part of Article 25 reads as under:-

25. Freedom of conscience and free profession, practice and propagation of religion. – (1) Subject to public order, morality and health and to the other provisions of this Part, all persons are equally entitled to freedom of conscience and the right freely to profess, practise and propagate religion.

(2) Nothing in this article shall affect the operation of any existing law or prevent the State from making any law – (a) regulating or restricting any economic, financial, political or other secular activity which may be associated with religious practice;

(b) providing for social welfare and reform or the throwing open of Hindu religious institutions of a public character to all classes and sections of Hindus.

A bare reading of this Article deprives the submission of all its force, vigour and charm. The freedom is subject to public order, morality and health. So the Article itself permits a legislation in the interest of social welfare and reform which are obviously part and parcel of public order, national morality and the collective health of the nation’s people.

The Muslim Law permits marrying four women. The personal law nowhere mandates or dictates it as a duty to perform four marriages. No religious scripture or authority has been brought to our notice which provides that marrying less than four women or abstaining from procreating a child from each and every wife in case of permitted bigamy or polygamy would be irreligious or offensive to the dictates of the religion.

In our view, the question of the impugned provision of Haryana Act being violative of Article 25 does not arise. We may have a reference to a few decided cases.

The meaning of religion – the term as employed in Article 25 and the nature of protection conferred by Article 25 stands settled by the pronouncement of the Constitution Bench decision [1994] INSC 547; (1994) 6 SCC 360. The protection under Articles 25 and 26 of the Constitution is with respect to religious practice which forms an essential and integral part of the religion. A practice may be a religious practice but not an essential and integral part of practice of that religion. The latter is not protected by Article 25.

In Sarla Mudgal (Smt.), President, Kalyani and Ors.

judicially noticed it being acclaimed in the United States of America that the practice of polygamy is injurious to ‘public morals’, even though some religions may make it obligatory or desirable for its followers. The Court held that polygamy can be superseded by the State just as it can prohibit human sacrifice or the practice of Sati in the interest of public order. The Personal Law operates under the authority of the legislation and not under the religion and, therefore, the Personal Law can always be superseded or supplemented by legislation.

Ors., (1985) 2 SCC 556, the Constitution Bench was confronted with a canvassed conflict between the provisions of Section 125 of Cr.P.C. and Muslim Personal Law. The question was: when the Personal Law makes a provision for maintenance to a divorced wife, the provision for maintenance under Section 125 of Cr.P.C. would run in conflict with the Personal Law. The Constitution Bench laid down two principles; firstly, the two provisions operate in different fields and, therefore, there is no conflict and; secondly, even if there is a conflict it should be set at rest by holding that the statutory law will prevail over the Personal Law of the parties, in cases where they are in conflict.

Bihar[1958] INSC 46; , (1959) SCR 629, the State Legislation placing a total ban on cow slaughter was under challenge. One of the submissions made was that such a ban offended Article 25 of the Constitution because such ban came in the way of the sacrifice of a cow on a particular day where it was considered to be religious by Muslims. Having made a review of various religious books, the Court concluded that it did not appear to be obligatory that a person must sacrifice a cow. It was optional for a Muslim to do so. The fact of an option seems to run counter to the notion of an obligatory duty. Many Muslims do not sacrifice a cow on the Id day. As it was not proved that the sacrifice of a cow on a particular day was an obligatory overt act for a Mussalman for the performance of his religious beliefs and ideas, it could not be held that a total ban on the slaughter of cows ran counter to Article 25 of the Constitution.

1952 Bombay 84, the constitutional validity of the Bombay Prevention of Hindu Bigamous Marriages Act (XXV (25) of 1946) was challenged on the ground of violation of Article 14, 15 and 25 of the Constitution. A Division Bench, consisting of Chief Justice Chagla and Justice Gajendragadkar (as His Lordship then was), held – “A sharp distinction must be drawn between religious faith and belief and religious practices. What the State protects is religious faith and belief. If religious practices run counter to public order, morality or health or a policy of social welfare upon which the State has embarked, then the religious practices must give way before the good of the people of the State as a whole.” Their Lordships quoted from American decisions that the laws are made for the government of actions, and while they cannot interfere with mere religious belief and opinions, they may with practices. Their Lordships found it difficult to accept the proposition that polygamy is an integral part of Hindu religion though Hindu religions recognizes the necessity of a son for religious efficacy and spiritual salvation. However, proceeding on an assumption that polygamy is recognized institution according to Hindu religious practice, their Lordships stated in no uncertain terms – “The right of the State to legislate on questions relating to marriage cannot be disputed. Marriage is undoubtedly a social institution an institution in which the State is vitally interested. Although there may not be universal recognition of the fact, still a very large volume of opinion in the world today admits that monogamy is a very desirable and praiseworthy institution. If, therefore, the State of Bombay compels Hindus to become monogamists, it is a measure of social reform, and if it is a measure of social reform then the State is empowered to legislate with regard to social reform under Article 25(2)(b) notwithstanding the fact that it may interfere with the right of a citizen freely to profess, practise and propagate religion.” What constitutes social reform? Is it for the legislature to decide the same? Their Lordships held in Narasu Appa Mali’s case (supra) that the will expressed by the legislature, constituted by the chosen representatives of the people in a democracy who are supposed to be responsible for the welfare of the State, is the will of the people and if they lay down the policy which a State should pursue such as when the legislature in its wisdom has come to the conclusion that monogamy tends to the welfare of the State, then it is not for the Courts of Law to sit in judgment upon that decision. Such legislation does not contravene Article 25(1) of the Constitution.

We find ourselves in entire agreement, with the view so taken by the learned Judges whose eminence as jurists concerned with social welfare and social justice is recognized without any demur. Divorce unknown to ancient Hindu Law, rather considered abominable to Hindu religious belief, has been statutorily provided for Hindus and the Hindu marriage which was considered indissoluble is now capable of being dissolved or annulled by a decree of divorce or annulment. The reasoning adopted by the High Court of Bombay, in our opinion, applies fully to repel the contention of the petitioners even when we are examining the case from the point of view of Muslim Personal Law.

The Division Bench of the Bombay High Court in Narasu Appa Mali (supra) also had an occasion to examine the validity of the legislation when it was sought to be implemented not in one go but gradually. Their Lordships held – “Article 14 does not lay down that any legislation that the State may embark upon must necessarily be of an all-embracing character. The State may rightly decide to bring about social reform by stages and the stages may be territorial or they may be community- wise.” Rule 21 of the Central Civil Services (Conduct) Rules, 1964 restrains any government servant having a living spouse from entering into or contracting a marriage with any person. A similar provision is to be found in several service rules framed by the States governing the conduct of their civil servants. No decided case of this court has been brought to our notice wherein the constitutional validity of such provisions may have been put in issue on the ground of violating the freedom of religion under Article 25 or the freedom of personal life and liberty under Article 21. Such a challenge was never laid before this Court apparently because of its futility. However, a few decisions by the High Courts may be noticed.

Allahabad High Court ruled that though the personal law of muslims permitted having as many as four wives but it could not be said that having more than one wife is a part of religion.

Neither is it made obligatory by religion nor is it a matter of freedom of conscience. Any law in favour of monogamy does not interfere with the right to profess, practise and propagate religion and does not involve any violation of Article 25 of the Constitution.

Education & Ors. – [1920] NZGazLawRp 51; 1981 (22) GLR 289, having analysed in depth the tenets of Muslim personal law and its base in religion, a Division Bench of Gujarat High Court held that a religious practice ordinarily connotes a mandate which a faithful must carry out. What is permissive under the scripture cannot be equated with a mandate which may amount to a religious practice. Therefore, there is nothing in the extract of the Quaranic text (cited before the Court) that contracting plural marriages is a matter of religious practice amongst Muslims. A bigamous marriage amongst Muslims is neither a religious practice nor a religious belief and certainly not a religious injunction or mandate. The question of attracting Articles 15(1), 25(1) or 26(b) to protect a bigamous marriage and in the name of religion does not arise.

Ors. (1957 L.L.J. (Vol.II) 172 = AIR 1961 Allahabad 334) a learned single Judge held that the act of performing a second marriage during the lifetime of one’s wife cannot be regarded as an integral part of Hindu religion nor could it be regarded as practising or professing or propagating Hindu religion. Even if bigamy be regarded as an integral part of Hindu religion, the Rule 27 of the Government Servants’ Conduct Rules requiring permission of the Government before contracting such marriage must be held to come under the protection of Article 25(2)(b) of the Constitution.

The law has been correctly stated by the High Court of Allahabad, Bombay and Gujarat, in the cases cited hereinabove and we record our respectful approval thereof. The principles stated therein are applicable to all religions practised by whichever religious groups and sects in India.

In our view, a statutory provision casting disqualification on contesting for, or holding, an elective office is not violative of Article 25 of the Constitution.

Looked at from any angle, the challenge to the constitutional validity of Section 175 (1)(q) and Section 177(1) must fail. The right to contest an election for any office in Panchayat is neither fundamental nor a common law right. It is the creature of a statute and is obviously subject to qualifications and disqualifications enacted by legislation. It may be permissible for Muslims to enter into four marriages with four women and for anyone whether a Muslim or belonging to any other community or religion to procreate as many children as he likes but no religion in India dictates or mandates as an obligation to enter into bigamy or polygamy or to have children more than one. What is permitted or not prohibited by a religion does not become a religious practise or a positive tenet of a religion. A practice does not acquire the sanction of religion simply because it is permitted. Assuming the practice of having more wives than one or procreating more children than one is a practice followed by any community or group of people the same can be regulated or prohibited by legislation in the interest of public order, morality and health or by any law providing for social welfare and reform which the impugned legislation clearly does.

If anyone chooses to have more living children than two, he is free to do so under the law as it stands now but then he should pay a little price and that is of depriving himself from holding an office in Panchayat in the State of Haryana. There is nothing illegal about it and certainly no unconstitutionality attaches to it.

Some incidental questions It was submitted that the enactment has created serious problems in the rural population as couples desirous of contesting an election but having living children more than two, are feeling compelled to give them in adoption. Subject to what has already been stated hereinabove, we may add that disqualification is attracted no sooner a third child is born and is living after two living children. Merely because the couple has parted with one child by giving the child away in adoption, the disqualification does not come to an end. While interpreting the scope of disqualification we shall have to keep in view the evil sought to be cured and purpose sought to be achieved by the enactment. If the person sought to be disqualified is responsible for or has given birth to children more than two who are living then merely because one or more of them are given in adoption the disqualification is not wiped out.

It was also submitted that the impugned disqualification would hit the women worst, inasmuch as in the Indian society they have no independence and they almost helplessly bear a third child if their husbands want them to do so. This contention need not detain us any longer. A male who compels his wife to bear a third child would disqualify not only his wife but himself as well. We do not think that with the awareness which is arising in Indian women folk, they are so helpless as to be compelled to bear a third child even though they do not wish to do so. At the end, suffice it to say that if the legislature chooses to carve out an exception in favour of females it is free to do so but merely because women are not excepted from the operation of the disqualification it does not render it unconstitutional.

Hypothetical examples were tried to be floated across the bar by submitting that there may be cases where triplets are born or twins are born on the second pregnancy and consequently both of the parents would incur disqualification for reasons beyond their control or just by freak of divinity. Such are not normal cases and the validity of the law cannot be tested by applying it to abnormal situations. Exceptions do not make the rule nor render the rule irrelevant. One swallow does not make a summer; a single instance or indicator of something is not necessarily significant.

Conclusion The challenge to the constitutional validity of Section 175(1)(q) and 177(1) fails on all the counts. Both the provisions are held, intra vires the Constitution. The provisions are salutary and in public interest. All the petitions which challenge the constitutional validity of the abovesaid provisions are held liable to be dismissed.

Certain consequential orders would be needed. The matters in this batch of hundreds of petitions can broadly be divided into a few categories. There are writ petitions under Article 32 of the Constitution directly filed in this Court wherein the only question arising for decision is the constitutional validity of the impugned provisions of the Haryana Act. There were many a writ petitions filed in the High Court of Punjab & Haryana under Articles 226/227 of the Constitution which have been dismissed and appeals by special leave have been filed in this Court against the decisions of the High Court. The writ petitions, whether in this Court or in the High Court, were filed at different stages of the proceedings. In some of the matters the High Court had refused to stay by interim order the disqualification or the proceedings relating to disqualification pending before the Director under Section 177(2) of the Act.

With the decision in these writ petitions and the appeals arising out of SLPs the proceedings shall stand revived at the stage at which they were, excepting in those matters where they stand already concluded. The proceedings under Section 177(2) of the Act before the Director or the hearing in the appeals as the case may be shall now be concluded. In such of the cases where the persons proceeded against have not filed their replies or have not appealed against the decision of the Director in view of the interim order of this Court or the High Court having been secured by them they would be entitled to file reply or appeal, as the case may be, within 15 days from the date of this judgment if the time had not already expired before their initiating proceedings in the High Court or this Court. Such of the cases where defence in the proceedings under Section 177(2) of the Act was raised on the ground that the disqualification was not attracted on account of a child or more having been given in adoption, need not be re-opened as we have held that such a defence is not available.

Subject to the abovesaid directions all the writ petitions and civil appeals arising out of SLPs are dismissed.

SLP (C) No.22312 of 2001 Though this petition was heard with a batch of petitions on 17.07.2003, raising constitutional validity of certain provisions of Haryana Panchayati Raj Act, 1994, no such question is raised in this petition. List for hearing on 04.08.2003.

There are three sets of petitions. In petitions under Article 32 of the Constitution, directly filed in this Court, the only question arising for decision is the constitutional validity of the impugned provisions of the Haryana Act. There were some writ petitions filed in the High Court of Punjab and Haryana under Article 226/227 of the Constitution which have been dismissed, appeals by special leave have been filed there against. All the writ petitions and appeals shall also stand dismissed. In some of the matters the High Court had by interim order stayed the disqualification and in some cases proceedings before the Director under Section 177 (2) of the Act. With the decision in these writ petitions, the proceedings shall stand revived at the stage where they were. Within 15 days from the date of this judgment the person proceeded against, may file appeal against the decision of the Director, as the case may be. In such of the cases where defence to the proceedings under Section 177(2) of the Act was raised on the ground of disqualification, being not attracted on account of the child having been given in adoption, the defence shall not be available. The proceedings shall stand concluded and the disqualification shall apply.

All the appeals and writ petitions be treated as disposed of in terms of the above said directions.

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