State Bank of India & Ors …PETITIONER
Vs.
S.N. Goyal …RESPONDENT

DATE OF JUDGMENT: 02/05/2008

BENCH: H. K. Sema & R. V. Raveendran

J U D G M E N T

CIVIL APPEAL NOS. 4243-4244 OF 2004

R.V. RAVEENDRAN, J.

Theses appeals by special leave are filed by a defendant-employer (State Bank of India) against the judgment dated 11.12.2003 of the Punjab & Haryana High Court in R.S.A. No.4184 of 2002.

2. A charge-sheet dated 28.4.1994 was issued by the Appellant Bank to the respondent alleging that when he was posted as the Branch Manager of appellant’s Kalanwali Branch, Sirsa, Haryana, he had received cash payments tendered by two customers of the Bank, for being credited to their loan accounts, and temporarily misappropriated such amounts and had belatedly deposited them to the borrowers’ accounts (after about five months in one case and two and half months in another). The said acts amounted to a misconduct, violative of Rule 50(4) of the State Bank of India Officers Service Rules (‘Service Rules’ for short). An enquiry was held in regard to the said charge. The Enquiry Officer submitted his report dated 11.11.1994 holding that the charge was proved. The Disciplinary Authority furnished a copy of the said report to the respondent and gave him an opportunity to show cause in the matter.

3. Rule 68(3) of the Service Rules required, where the Disciplinary Authority was of the opinion that a major penalty is to be imposed, and where he was lower in rank to the Appointing Authority (in respect of the category of officers to which the delinquent officer belonged), that he should submit to the Appointing Authority, the records of the enquiry together with his recommendations regarding the penalty that may be imposed, and the Appointing Authority should make the order imposing the penalty, which in his opinion was appropriate. In view of the above rule, the Disciplinary Authority after considering the inquiry records and the representation of the respondent, made a recommendation on 2.5.1995 to the Appointing Authority to impose the penalty of ‘removal from service’ on the respondent. The Appointing Authority considered the entire material and concurred with the recommendation of the Disciplinary Authority and made an order dated 3.5.1995 imposing the penalty of removal from service, which was communicated to the Respondent by letter dated 30.6.1995 of the Disciplinary Authority.

4. The appeal and Revision (Review) filed by the Respondent were dismissed on 29.11.1995 and 27.11.1996. The respondent thereafter filed Civil Suit No.158 of 1998 on the file of the Civil Judge, Senior Division, Jind, for a declaration that the order of removal dated 30.6.1995 as also the orders of the Appellate Authority and Reviewing Authority were arbitrary and illegal. He also prayed that the said orders be set aside with a direction to take him back into service with all consequential benefits. The suit was resisted by the appellant-bank. After trial, the suit was decreed on 19.4.2003. The Trial Court found that there was no violation of principles of natural justice in conducting the enquiry and the order holding the respondent guilty of misconduct was proper. The trial court however found that the Disciplinary Authority, by his earlier note dated 18.1.1995, had recommended imposition of the penalty of reduction of pay of respondent by four stages in his time scale and the Appointing Authority had agreed with the said recommendation on 18.1.1995. According to the trail court, the said order was a final order of punishment by the Appointing Authority; and the Appointing Authority had thereafter sought the advice of the Bank’s Chief Vigilance Officer, and acting on such advice, had changed his earlier decision and imposed a higher punishment by way of removal from service, by order dated 3.5.1995 (communicated on 30.6.1995). The trial court was of the view that the second order imposing penalty was passed by the Appointing Authority “on extraneous reasons after taking advice of the Chief Vigilance Officer”, and that rendered the order of removal illegal, null and void. The trial court therefore set aside the order of removal dated 30.6.1995 as also the orders dated 29.11.95 and 27.11.1996 of the Appellate Authority and reviewing authority affirming the order of removal. It directed the appellant Bank to reinstate the respondent with continuity of service and all consequential benefits except back-wages. The Trial Court reserved liberty to the appellant to pass a fresh order imposing appropriate penalty on the respondent, other than the penalty of dismissal or removal from service.

5. Feeling aggrieved, both parties filed appeals. Before the First Appellate Court, the respondent did not challenge the finding of the trail court that the domestic enquiry was fair and proper and that his guilt was established. He limited his challenge only to the quantum of punishment (that is, reservation of liberty to the employer to pass a fresh order imposing appropriate penalty) and the denial of back wages. The appellant, in its appeal, contended that the Trial Court, having found that the enquiry was fair and proper and the finding of guilt was justified, ought not to have set aside the order imposing penalty. The two appeals were heard and disposed of by the Additional District Judge, Jind, by a common judgment dated 20.7.2002. The First Appellate Court upheld the decree of the Trial Court, but in addition held that the respondent was entitled to full back wages with interest thereon at 9% per annum. Consequently, the First Appellate Court dismissed the appeal by the appellant and allowed in part the appeal of the respondent.

6. Feeling aggrieved the bank filed the second appeal, which was dismissed by the judgment under appeal. The judgment is short. After referring to the prayer in the suit and the judgments rendered by the courts below, it contains the following reasoning :

“It is not in dispute that originally the punishment proposed against the plaintiff was to bring him lower by four steps. Subsequently on directions issued by the Chief Vigilance Commissioner of the Bank, the punishment was converted to that of dismissal. The plaintiff made a complaint that the aforesaid orders and the material placed before the Chief Vigilance Commissioner were never put to him and as such the order of punishment was violative of principles of natural justice.

The learned courts below found that the contention of the plaintiff was duly substantiated from the record. Accordingly, the punishment orders were set aside with a liberty as noticed above.

Nothing has been shown that the findings recorded by the learned courts below suffer from any infirmity or are contrary to law in any manner.

No question of law, much less any substantial question of law, arises in this appeal.”

7. We find that the High Court misread the findings of the courts below.

The Trial Court held that the Appointing Authority passed the order of removal after taking the advice of the Chief Vigilance Officer. The first appellate court held that the Appointing Authority imposed the penalty of removal on the recommendations of the Chief Vigilance Officer. But the High Court observed that ‘on the directions of the Chief Vigilance Commissioner of the Bank, the punishment was converted to that of dismissal’. This observation contains three errors firstly the penalty of removal was read as dismissal; secondly the communication from the Chief Vigilance Officer, termed as “advice/recommendation” by the courts below, was wrongly read as ‘directions’; and thirdly, the Chief Vigilance Officer of the Bank was wrongly referred to as the Chief Vigilance Commissioner. The High Court also erroneously assumed that plaintiff (respondent herein) had pleaded that the Appointing Authority had placed certain material which was never put to him (the plaintiff), before the Chief Vigilance Commissioner and as such the order of punishment was violative of principles of natural justice. There was no such plea, nor did the courts below record a finding on any such plea.

8. We also find that the High Court completely missed the real points arising for determination. After a cursory wrong reference to the findings of the court below, the High Court wrongly held that the second appeal did not give rise to any substantial question of law, ignoring the several substantial questions of law arising for consideration of the High Court, which were clearly specified in the memorandum of second appeal. We find that the second appeal gave rise to several substantial questions of law including the following :

(i) Whether a direction by the Civil Court to reinstate the respondent, amounted to granting specific performance of a contract of personal service which is barred by section 14 of Specific Relief Act, 1963? (ii) In the absence of a pleading that the order imposing penalty was invalid because the Appointing Authority acted on the advice or recommendation of the Chief Vigilance Officer, and in the absence of any issue in that behalf, could the Courts below hold that the order imposing punishment was illegal on that ground? (iii) Whether an order recorded by the Appointing Authority on an office note, to impose the penalty of reduction in pay, which was neither pronounced, published or communicated, is a final decision which could not be reconsidered or altered, by the Appointing Authority? (iv) Whether the decision of the Appointing Authority imposing penalty can be said to have been influenced by extraneous material, merely because the Chief Vigilance Officer of the Bank requested him to re-examine the proposed penalty ? (v) Whether the Appointing Authority ought to have communicated the advice/recommendation of the Chief Vigilance Officer to the respondent and given him an opportunity to show cause before imposing punishment? If questions (iii) to (v) or any of them is answered in the affirmative and as a consequence if it has to be held that the order of removal was illegal or invalid, then, the second appeal would give rise to several further substantial questions of law. One question would have been whether the civil court could direct the authority empowered to impose penalty, to restrict the punishment to something other than dismissal/removal. Another question would have been whether full back wages with interest could be awarded where the court accepts that the employee was guilty of misconduct of misappropriation. Be that as it may.

9. Before examining the merits of the matter, we may briefly refer to the scope of second appeals as also the procedure for entertaining them, as laid down in section 100 of the Code of Civil Procedure.

What is a substantial question of law? 9.1) Second appeals would lie in cases which involve substantial questions of law. The word ‘substantial’ prefixed to ‘question of law’ does not refer to the stakes involved in the case, nor intended to refer only to questions of law of general importance, but refers to impact or effect of the question of law on the decision in the lis between the parties. ‘Substantial questions of law’ means not only substantial questions of law of general importance, but also substantial question of law arising in a case as between the parties. In the context of section 100 CPC, any question of law which affects the final decision in a case is a substantial question of law as between the parties. A question of law which arises incidentally or collaterally, having no bearing in the final outcome, will not be a substantial question of law. Where there is a clear and settled enunciation on a question of law, by this Court or by the High Court concerned, it cannot be said that the case involves a substantial question of law. It is said that a substantial question of law arises when a question of law, which is not finally settled by this court (or by the concerned High Court so far as the State is concerned), arises for consideration in the case. But this statement has to be understood in the correct perspective. Where there is a clear enunciation of law and the lower court has followed or rightly applied such clear enunciation of law, obviously the case will not be considered as giving rise to a substantial question of law, even if the question of law may be one of general importance. On the other hand, if there is a clear enunciation of law by this Court (or by the concerned High Court), but the lower court had ignored or misinterpreted or misapplied the same, and correct application of the law as declared or enunciated by this Court (or the concerned High Court) would have led to a different decision, the appeal would involve a substantial question of law as between the parties. Even where there is an enunciation of law by this court (or the concerned High Court) and the same has been followed by the lower court, if the appellant is able to persuade the High Court that the enunciated legal position needs reconsideration, alteration, modification or clarification or that there is a need to resolve an apparent conflict between two view points, it can be said that a substantial question of law arises for consideration. There cannot, therefore, be a strait-jacket definition as to when a substantial question of law arises in a case. Be that as it may.

Procedure relating to second appeals 9.2) We may next refer to the procedure relating to second appeals as evident from section 100 read with order 42 Rules 1 and 2, of Code of Civil Procedure :

(a) The appellant should set out in the memorandum of appeal, the substantial questions of law involved in the appeal.

(b) The High Court should entertain the second appeal only if it is satisfied that the case involves a substantial question of law.

(c) While admitting or entertaining the second appeal, the High Court should formulate the substantial questions of law involved in the case.

(d) The second appeal shall be heard on the question/s of law so formulated and the respondent can submit at the hearing that the second appeal does not in fact involve any such questions of law. The Appellant cannot urge any other ground other than the substantial question of law without the leave of the court.

(e) The High Court is at liberty to reformulate the substantial questions of law or frame other substantial question of law, for reasons to be recorded and hear the parties or such reformulated or additional substantial questions of law.

9.3) It is a matter of concern that the scope of second appeals and as also the procedural aspects of second appeals are often ignored by the High Courts. Some of the oft-repeated errors are :

(a) Admitting a second appeal when it does not give rise to a substantial question of law.

(b) Admitting second appeals without formulating substantial question of law.

(c) Admitting second appeals by formulating a standard or mechanical question such as “whether on the facts and circumstances the judgment of the first appellate court calls for interference” as the substantial question of law.

(d) Failing to consider and formulate relevant and appropriate substantial question/s of law involved in the second appeal.

(e) Rejecting second appeals on the ground that the case does not involve any substantial question of law, when the case in fact involves substantial questions of law.

(f) Reformulating the substantial question of law after the conclusion of the hearing, while preparing the judgment, thereby denying an opportunity to the parties to make submissions on the reformulated substantial question of law.

(g) Deciding second appeals by re-appreciating evidence and interfering with findings of fact, ignoring the questions of law.

These lapses or technical errors lead to injustice and also give rise to avoidable further appeals to this court and remands by this court, thereby prolonging the period of litigation. Care should be taken to ensure that the cases not involving substantial questions of law are not entertained, and at the same time ensure that cases involving substantial questions of law are not rejected, as not involving substantial questions of law.

10. In this case, the failure on the part of the High Court to take note of the substantial questions of law involved, has led to unwarranted dismissal of the second appeal and calls for interference. One alternative available to us is to remand the matter to the High Court for formulating the substantial questions of law and then hear and dispose of the appeal. But that is likely to delay the matter further. The questions arising for decision are questions of law. These had been raised in the memorandum of second appeal before the High Court and again referred to in the special leave petition. Elaborate arguments have been addressed on those questions (extracted in para 8 above) by both sides. We are, therefore, of the view that instead of remanding the matter, we should ourselves consider the several questions of law that ought to have been considered by the High Court and decide the matter finally.

Re : Question (i) Enforcement of a contract of personal service.

11. Where the relationship of master and servant is purely contractual, it is well settled that a contract of personal service is not specifically enforceable, having regard to the bar contained in section 14 of the Specific Relief Act, 1963. Even if the termination of the contract of employment (by dismissal or otherwise) is found to be illegal or in breach, the remedy of the employee is only to seek damages and not specific performance. Courts will neither declare such termination to be a nullity nor declare that the contract of employment subsists nor grant the consequential relief of reinstatement.

The three well recognized exceptions to this rule are:

(i) where a civil servant is removed from service in contravention of the provisions of Article 311 of the Constitution of India (or any law made under Article 309);

(ii) where a workman having the protection of Industrial Disputes Act, 1947 is wrongly terminated from service; and (iii) where an employee of a statutory body is terminated from service in breach or violation of any mandatory provision of a statute or statutory rules.

There is thus a clear distinction between public employment governed by statutory rules and private employment governed purely by contract. The test for deciding the nature of relief damages or reinstatement with consequential reliefs is whether the employment is governed purely by contract or by a statute or statutory rules. Even where the employer is a statutory body, where the relationship is purely governed by contract with no element of statutory governance, the contract of personal service will not be specifically enforceable. Conversely, where the employer is a non-statutory body, but the employment is governed by a statute or statutory rules, a declaration that the termination is null and void and that the employee should be reinstated can be granted by courts. (Vide : Dr. S.

Dutt vs. University of Delhi [1958] INSC 73; AIR 1958 SC 1050; Executive Committee of (2) SCR 250; Sirsi Municipality vs. Cecelia Kom Francies Tellis [1973] INSC 12; 1973 (3) SCR 348; Executive Committee of Vaish Degree College vs. Lakshmi Narain [1975] INSC 317; 1976 (2) SCR 1006; Smt. J. Tiwari vs. Smt. Jawala Devi Vidya Mandir AIR 1981 SC 122; and Dipak Kumar Biswas vs. Director of Public Instruction [1987] INSC 73; AIR 1987 SC 1422).

12. In this case the appellant is a statutory body established under the State Bank of India Act, 1955 and the contract of employment was governed by the State Bank of India Officers Service Rules, which are statutory rules framed under section 43(1) of the said Act. The respondent approached the civil court alleging that his removal from service was in violation of the said statutory rules. When an employee of a statutory body whose service is terminated, pleads that such termination is in violation of statutory rules governing his employment, an action for declaration that the termination is invalid and that he is deemed to continue in service is maintainable and will not be barred by section 14 of the Specific Relief Act.

Re : Question (ii) Effect of absence of pleading.

13. The plaint did not contain any plea that the order of removal by the Appointing Authority (Chief General Manager) was vitiated on account of his consulting and acting on the advice of the Chief Vigilance Officer of the Bank. Nor did it contain any allegation that the Appointing Authority acted on extraneous material in passing the order of removal. In the plaint, the challenge to the order of removal was on the ground that the enquiry by the Enquiry Officer was opposed principles of natural justice that is : (i) the charge was vague and not established; (ii) he was not given reasonable opportunity to defend himself; (iii) material witnesses were not examined;

(iv) documents relied on were not formally proved; (v) burden of proof was wrongly placed on him; (vi) findings in the enquiry report were based on surmises and conjectures; and (viii) the enquiry officer was prejudiced. The respondent had also averred that the Appointing Authority had approved the recommendation made by the Disciplinary Authority for imposition of penalty of removal, without application of mind and without giving him a hearing. He alternatively contended that the punishment imposed was severe and disproportionate to the gravity of the proved charge. But there was absolutely no plea with reference to the advice/recommendation of the Chief Vigilance Officer of the Bank. However, during the examination of the Bank’s witness DW-1 (T.S. Negi, Deputy Manager) it was elicited that on 18.1.1995, the Disciplinary Authority had put up a recommendation to impose the penalty of reduction of pay by four stages by taking a lenient view; that the Appointing Authority had by his note dated 18.1.1995 accepted the said recommendation; that subsequently, on 2.2.1995, the Appointing Authority had informed the Chief Vigilance Officer of the Bank about the enquiry and proposed punishment; and that after receiving the comments of the Chief Vigilance Officer, the Appointing Authority on the recommendations of the disciplinary authority had reconsidered the question of punishment and imposed the penalty of removal. The respondent plaintiff did not amend the plaint to include the averments and grounds to challenge the order of removal on the said additional ground. No issue was framed in that behalf. No amount of evidence on a plea that was not put forward in the pleadings can be looked into. In the absence of necessary pleading and issue, neither the trial court nor the appellate court could have considered the contention and recorded a finding thereon.

14. The learned counsel for the respondent submitted that the order of removal was challenged on the ground that it was opposed to principles of natural justice, and the averments in the plaint were sufficient to enable the plaintiff to establish any ground in support of it and it was not necessary to separately plead each and every fact or ground in support of his contention that the order of removal was vitiated.

While there is no need to plead evidence, the grounds of challenge and the facts in support of each ground, will have to be pleaded. In this case, the minimum pleading that was necessary was that the Appointing Authority acted on extraneous material in arriving the decision or acted on the advice or recommendation of an Authority who was not concerned with the Enquiry. In the absence of appropriate pleading on a particular issue, there can be no adjudication of such issue. Adjudication of a dispute by a civil court is significantly different from the exercise of power of judicial review in a writ proceedings by the High Court. In a writ proceedings, the High Court can call for the record of the order challenged, examine the same and pass appropriate orders after giving an opportunity to the State or the statutory authority to explain any particular act or omission. In a civil suit parties are governed by rules of pleadings and there can be no adjudication of an issue in the absence of necessary pleadings. The learned counsel for the respondent submitted that the respondent was unaware of the earlier order dated 18.1.1995 or about the consultation with the Chief Vigilance Officer when he filed the suit and therefore, could not make necessary averments in the plaint in that behalf. But that is no answer. Code of Civil Procedure contains appropriate provisions relating to interrogatories, discovery and inspection (Order XI Rules 1, 12 and 15) to gain access to relevant material available with the other party. A party to a suit should avail those provisions and if any new ground becomes available on the basis of information secured by discovery, a party can amend his pleadings and introduce new facts and grounds which were not known earlier. The difficulty in securing relevant material or ignorance of existence of relevant material will not justify introduction of such material at the stage of evidence in the absence of pleadings relating to a particular aspect to which the material relates. If a party should be permitted to rely on evidence led on an issue/aspect not covered by pleadings, the other side will be put to a disadvantage. For example, in this case, if there had been a plea and issue on the question whether extraneous material was taken into account, the Bank could have examined the Appointing Authority to explain the context in which he informed the Chief Vigilance Officer about the matter or explain how his decision was not dependant upon any extraneous material.

Therefore, the courts below committed a serious error in holding that the order of removal was based on an extraneous material (the advice/recommendation of Chief Vigilance Officer) and therefore, invalid.

15. Where the enquiry was found to be fair and proper and the finding of guilt in the enquiry in respect of a serious charge was found to be valid, in the absence of any other valid ground of challenge, the courts below ought to have held that the penalty of removal from service did not warrant any interference and dismissed the suit. Be that as it may. We will now consider the matter on merits, on the assumption that the averments in the plaint were sufficient to enable the court to consider this issue.

Re : Questions (iii) When did the Appointing Authority became functus officio.

16. Ex.P24 is the note dated 18.1.1995 by which the Disciplinary Authority accepted the finding of guilt recorded arrived at by the Enquiry Officer in regard to the charge against the respondent that he temporarily misappropriated the funds of the customers of the Bank. The Disciplinary Authority though of the view that the respondent deserved a severe punishment, felt that having regard to the length of his service, he should be shown leniency, and therefore, recommended imposition of a lesser punishment of reduction of pay by four stages in the time scale. The Appointing Authority made a note on the same day (18.1.1995) agreeing with the said recommendation. But the said order was not communicated to the respondent. On the other hand, the Disciplinary Authority on reconsideration of the matter put up a fresh note dated 2.5.1995 recommending the penalty of removal and that was accepted by the Appointing Authority on 3.5.1995 and communicated to the respondent on 30.6.1995.

17. The learned counsel for respondent contended that the Appointing Authority became functus officio once he passed the order dated 18.1.1995 agreeing with the penalty proposed by the Disciplinary Authority and cannot thereafter revise/review/modify the said order. Reliance was placed on the English decision Re : VGM Holdings Ltd, reported in 1941 (3) All. ER page 417 wherein it was held that once a Judge has made an order which has been passed and entered, he becomes functus officio and cannot thereafter vary the terms of his order and only a higher court, tribunal can vary it. What is significant is that decision does not say that the Judge becomes functus officio when he passes the order, but only when the order passed is ‘entered’. The term ‘entering judgment’ in English Law refers to the procedure in civil courts in which a judgment is formally recorded by court after it has been given.

18. It is true that once an Authority exercising quasi judicial power, takes a final decision, it cannot review its decision unless the relevant statute or rules permit such review. But the question is as to at what stage, an Authority becomes functus officio in regard to an order made by him.

P. Ramanatha Aiyar’s Advance Law Lexicon (3rd Edition, Vol.2 Pages 1946-47) gives the following illustrative definition of the term ‘functus officio’ :

“Thus a Judge, when he has decided a question brought before him, is functus officio, and cannot review his own decision.”

Black’s Law Dictionary (Sixth Edition Page 673) gives its meaning as follows :

“Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore, of no further force or authority”.

19. We may first refer to the position with reference to civil courts. Order XX of Code of Civil Procedure deals with judgment and decree. Rule 1 explains when a judgment is pronounced. Sub-rule (1) provides that the Court, after the case has been heard, shall pronounce judgment in an open court either at once, or as soon thereafter as may be practicable, and when the judgment is to be pronounced on some future day, the court shall fix a day for that purpose of which due notice shall be given to the parties or their pleaders. Sub-rule (3) provides that the judgment may be pronounced by dictation in an open court to a shorthand writer (if the Judge is specially empowered in this behalf). The proviso thereto provides that where the judgment is pronounced by dictation in open court, the transcript of the judgment so pronounced shall, after making such corrections as may be necessary, be signed by the Judge, bear the date on which it was pronounced and form a part of the record. Rule 3 provides that the judgment shall be dated and signed by the Judge in open court at the time of pronouncing it and when once signed, shall not afterwards be altered or added to save as provided by section 152 or on review. Thus where a judgment is reserved, mere dictation does not amount to pronouncement, but where the judgment is dictated in open court, that itself amounts to pronouncement. But even after such pronouncement by open court dictation, the Judge can make corrections before signing and dating the judgment. Therefore, a Judge becomes functus officio when he pronounces, signs and dates the judgment (subject to section 152 and power of review). The position is different with reference to quasi judicial authorities. While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned. A quasi judicial authority will become functus officio only when its order is pronounced, or published/notified or communicated (put in the course of transmission) to the party concerned.

When an order is made in an office noting in a file but is not pronounced, published or communicated, nothing prevents the Authority from correcting it or altering it for valid reasons. But once the order is pronounced or published or notified or communicated, the Authority will become functus officio. The order dated 18.1.1995 made on an office note, was neither pronounced, nor published/notified nor communicated. Therefore, it cannot be said that the Appointing Authority became functus officio when he signed the note on dated 18.1.1995.

20. Let us next consider whether the decision taken on 18.1.1995 is a final decision. A careful examination shows that the order dated 18.1.1995 was intended only to be tentative and not final. Firstly, the said decision was not communicated to the respondent, nor was any letter or order issued to the respondent imposing the penalty mentioned in the order dated 18.1.1995.

Secondly, the Appointing Authority by letter dated 2.2.1995 (Ex.P23) informed the Chief Vigilance Officer of the Bank about the enquiry against respondent, his decision accepting the findings of the Enquiry Officer, and the proposal to show leniency by imposing only a punishment of reduction of pay by four stages. The Chief Vigilance Officer sent a reply dated 7.2.1995 (Ex.D2) wherein he observed that “by pocketing the money of the customers Sri Goyal has exposed the Bank’s faith reposed in him” and there was no ground for showing leniency. He also expressed the view that the respondent deserved a more severe punishment and requested the appointing authority to re-examine whether respondent should be continued in the post.

Thereafter the Disciplinary Authority reconsidered the entire issue again and put up another note dated 23.3.1995/2.5.1995 to the Appointing Authority proposing the punishment of removal from service. After considering the said recommendation, the Appointing Authority passed the following order on the said note on 3.5.1995 :

“On a dispassionate and objective evaluation of the facts, circumstances of the case, inquiry proceedings and evidence available, I concur with the recommendations of the disciplinary authority mentioned at serial no.4 of the note and have come to the conclusion that the penalty of “removal from Bank’s service” proposed to be inflicted on Sri S.L. Goyal, Officer JMGS-I, is just and appropriate and I, therefore, order imposition of this penalty on the official.”

21. It is thus clear that on 18.1.1995, the Appointing Authority had only tentatively approved the proposal of the disciplinary authority that a lenient view be taken by imposing a penalty of reducing the pay by four stages in the time scale; and that on 3.5.1995, a final decision was taken in regard to the penalty and that final order was communicated to the respondent as per letter dated 30.6.1995. Therefore, the contention that the Appointing Authority had earlier passed a final order on 18.1.1995 and had become functus officio and therefore, he could not charge the said order dated 18.1.1995 is liable to be rejected.

Re : Questions (iv) and (v) Whether the Appointing Authority was influenced by extraneous material.

22. A perusal of the letter dated 2.2.1995 sent by the Appointing Authority to the Chief Vigilance Officer clearly demonstrates that the Appointing Authority did not seek any guidance or advice or directions from the Vigilance Department and that the letter was only by way of ‘intimation’ of factual position. For convenience, we extract below the said letter in entirely ”

“The Chief Vigilance Officer, State Bank of India, Central Office, Bombay.

Dear Sir, Staff : Supervising Shri S.N. Goyal : Officer JMGS I, Kaluana Branch Disciplinary Action.

Further to our letter No.CO/VIG/4266 dated the 19th November, 1994, we advice that the Disciplinary Authority has examined the enquiry proceedings and findings of the Inquiring Authority in the case initiated against Shri S. N. Goyal, Office JMGS I and has agreed with the same.

2. In this connection, copies of the following documents are enclosed for your perusal and record :

(i) Chargesheet issued to the official (ii) Enquiry proceedings (iii) Findings of the Inquiring Authority (iv) Tabular statement showing the charges leveled against the official, findings of the Inquiring Authority, official’s submissions on the findings and Disciplinary Authority’s comments thereon.

(v) Note put up by the Disciplinary Authority to the Appointing Authority viz., the Chief General Manager.

(vi) Bio-data of the Official.

3. In view of the seriousness of the charge proved against Shri S.N.

Goyal, Officer JMGS I, he deserves a severe punishment. The Disciplinary Authority is, however, inclined to take a lenient view in the matter considering the length of service put in by the official in the Bank and also to provide him a chance to reform himself. The Disciplinary Authority is of the view that the ends of justice will be met if the official is brought down by four stages in his time scale in terms of Rule 67 (e) of State Bank of India Officers Service Rules to which I concur in the capacity as the Appointing Authority of the official.

Yours faithfully, Chief General Manager.”

23. The reply dated 7.2.1995 from the Chief Vigilance Officer also makes it clear that he neither issued any direction to the Appointing Authority to impose a higher punishment nor altered the finding regarding guilt. He merely gave his opinion that the gravity of the proved charge did not warrant leniency and therefore, suggested that the quantum of penalty may be examined again. The subsequent note put up by the disciplinary authority on 2.5.1995 and the order passed thereon by the appointing authority on 3.5.1995 imposing the penalty of removal, show that they were on independent consideration of the question. Neither the note dated 2.5.1995 nor the order dated 3.5.1995 refer to the opinion or the view expressed by the Chief Vigilance Officer of the Bank. Nor is there any material to show that the order imposing punishment was on the dictates of the Chief Vigilance Officer. There was no mechanical acceptance of any suggestion or advice by the Chief Vigilance Officer nor consideration of any extraneous material as assumed by the courts below. The Appointing Authority is required to inform the vigilance department in regard to cases involving vigilance angle. The Appointing Authority did so. But he did not seek any instruction, direction, suggestion or advice from the Vigilance Department.

There was also no direction or circular or instruction requiring the Appointing Authority to accept or act upon the suggestions or views of the Chief Vigilance Officer. The Vigilance Department merely gave its comment or view that it was not a fit case for showing leniency and left it to the concerned authority to take a decision on the punishment to be imposed.

So long as the decision was not on the dictates of the Vigilance Department or other outside authority, but on independent consideration, the order of removal cannot be faulted. It cannot be said that either the act of intimating the Vigilance Department about the enquiry or independently re-considering the issue of penalty after receiving the views of the Vigilance Department amounted to be acting on extraneous material, or acting on the advice or recommendation or direction of the Chief Vigilance Officer.

24. The assumption made by the High Court that the Appointing Authority had placed some undisclosed additional material before the Chief Vigilance Officer is without any basis. The Enquiry Officer had found the respondent guilty of the charge on consideration of the evidence. The finding of guilt was accepted by the Disciplinary Authority and the Appointing Authority. This is not a case where any evidence or other material was sent to the vigilance department seeking their decision or views on the question of guilt of the respondent. The issue relating to the respondent’s guilt was neither referred to the Vigilance Department nor did the Vigilance Department give any finding on the question of guilt. When the Disciplinary Authority and the Appointing Authority accepted the finding of guilt recorded by the Enquiry Officer on examining the facts, even before the matter was informed to Vigilance Department, it cannot be said that the said decision was influenced by any extraneous advice from Vigilance Department. The issue on which the Vigilance Department made its comment was on the limited ground whether any leniency should be shown in imposing punishment. No additional facts or material were placed by the Appointing Authority before the Vigilance Department for this purpose. Further the Vigilance Department merely expressed the view that the gravity of the charge did not warrant leniency and the authority should examine the matter. Therefore the assumption by the High Court that the Appointing Authority had placed some material not put to the respondent, before the Chief Vigilance Officer and that the Chief Vigilance Officer had issued any direction to the Appointing Authority on the basis of such material, is baseless.

25. The Disciplinary Authority made available the Enquiry Report to the respondent to enable him to make his submissions on the findings of the Enquiry Officer. The respondent made his submissions in regard to the Enquiry Report. The correspondence between the Appointing Authority and Chief Vigilance Officer of the Bank was not ‘material’ on which the finding regarding guilt/misconduct was based. Such correspondence was subsequent to the Enquiry Report. There was no compulsion or requirement that the Appointing Authority should consult the Chief Vigilance Officer or act as per his recommendations or directions. Nor was there any direction by the Chief Vigilance Officer to impose any specific direction. Therefore non furnishing of copies of the correspondence between the Appointing Authority and the Chief Vigilance Officer to the respondent, did not violate principles of natural justice nor vitiate the order of penalty.

26. The decisions relied on by the respondent do not lay down any proposition of law which requires us to take a different view in the matter.

26.1) In Nagaraj Shivarao Karjagi vs. Syndicate Bank – [1991] INSC 120; 1991 (3) SCC 219, this Court considered a case where the employer Bank referred the matter to the Chief Vigilance Commissioner (for short ‘CVC’) for advice and the Commissioner made a specific recommendation that the employee may be compulsorily retired from service by way of punishment. The impugned directive of the Ministry of Finance directed that the disciplinary authority and appellate authority could not impose a lesser punishment than what was suggested by CVC without its concurrence. The Bank accordingly imposed the penalty of compulsory retirement. This Court held that the advice tendered by the CVC was not binding on the punishing authority and it was not obligatory upon the punishing authority to accept the advice of the CVC.

This Court held that no third party like CVC or Central Government could dictate the disciplinary authority or the appellate authority as to how they should exercise their power and what punishment they should impose on the delinquent officer. This Court also held that the Finance Ministry directive that a punishment lesser than what was recommended by the CVC could not be imposed, was without jurisdiction and contrary to the statutory regulations governing disciplinary matters. The said decision is of no assistance in this case, as there is no directive that the recommendation of the Vigilance Department is mandatory and should be followed while imposing punishment; nor has the Vigilance Department directed the punishing authority to impose any specific punishment; nor has the appointing authority acted on the dictates of the Vigilance Department.

26.2) The next decision relied upon by the respondent is the decision rendered by this Court in State Bank of India vs. D.C. Aggarwal [1993 (1) SCC 13]. In that case, the Enquiry Officer recommended exoneration of the employee. Instead of acting on the recommendation, the Bank directed the Enquiry Officer to submit the report through CVC. The CVC disagreed with the finding of the Enquiry Officer and recorded a finding of guilt and recommended the imposition of major penalty of removal. A copy of the CVC’s recommendation was not furnished to the employee. The disciplinary authority acting on the recommendation of the CVC and agreeing with CVC’s finding of guilt, passed an order but imposed a punishment lesser than what was directed by CVC. This Court held that the order of the disciplinary authority imposing punishment was vitiated as it violated the principles of natural justice by denying the copy of the recommendation of the CVC which was prepared behind his back. The said decision therefore related to CVC examining the facts of the case and arrived at a finding relating to guilt contrary to the finding of the Enquiry Officer and such finding being accepted by the Disciplinary Authority without giving opportunity to the employee to comment upon the CVC Report finding him guilty. In this case as noticed above, the Enquiry Report relating to guilt was not referred to the opinion of the Vigilance Department at all. The Vigilance Department neither expressed any view in regard to the finding of guilt recorded by the Enquiry Officer nor did it re-assess the evidence or arrive at a finding different from that of the Enquiry Officer. It merely opined that the case was not a fit one for showing leniency while imposing punishment and left it to the Appointing Authority to take his own decision in the matter.

Therefore, this decision is also of no assistance.

26.3) Reference was next made to the decision of this Court in Mohd.

Quaramuddin (dead) By LRs. vs. State of AP [1994] INSC 305; [1994 (5) SCC 118]. In that case, the Chief Vigilance Commissioner’s report which formed part of the report of the enquiry and which was taken into consideration by the disciplinary authority was not supplied to the employee. It was held that the omission has vitiated the order of dismissal. The said decision is also of no assistance.

26.4) The last decision relied on by the respondent was UP State Agro 1011). In that case, the report of the Enquiry Officer was in favour of the employee exonerating him of all charges. The Disciplinary Authority invited the comments of the Accounts Officer and relying on the basis of the adverse comments made by such officer, held the employee guilty and terminated him from service. This Court upheld the view of the High Court that the decision of the Disciplinary Authority was vitiated on account of the same being influenced by some extraneous material in the form of adverse comments of the Accounts Officer. That is not the case here.

27. The learned counsel for respondent submitted that as the order of removal was set aside and as the employer’s second appeal was rejected, he should be permitted to support the decision of the courts below by demonstrating that the Enquiry Officer had violated the principles of natural justice and therefore, the order of removal deserves to be set aside. This is not permissible. Though in the suit, the respondent had challenged the enquiry as being opposed to principles of natural justice, and the finding guilt recorded by the Enquiry Officer as being erroneous, he gave up those contentions before the first appellate court, and restricted the challenge to the quantum of punishment and non-grant of back wages. He cannot therefore be permitted to revive the contention that the Enquiry Officer violated the principles of natural justice in conducting the enquiry.

28. At the relevant point of time the respondent was functioning as a Branch Manager. A Bank survives on the trust of its clientele and constituents. The position of the Manager of a Bank is a matter of great trust.

The employees of the Bank in particular the Manager are expected to act with absolute integrity and honesty in handling the funds of the customers/borrowers of the Bank. Any misappropriation, even temporary, of the funds of the Bank or its customers/borrowers constitutes a serious misconduct, inviting severe punishment. When a borrower makes any payment towards a loan, the Manager of the Bank receiving such amount is required to credit it immediately to the borrower’s account. If the matter is to be viewed lightly or leniently it will encourage other Bank employees to indulge in such activities thereby undermining the entire banking system.

The request for reducing the punishment is misconceived and rejected.

29. In view of the above we allow these appeals and set aside the judgments and decrees of the courts below and dismiss the respondent’s suit.

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Dhanani Shoes Ltd. v. State Of Assam And Ors.

ADVOCATES

Dr. A.K Saraf, Mr. D. Baruah, Ms. N. Hawelia, Ms. M.L Gope, Mr. S. Chetia, Mr. A. Goyal and Mr. M. Khan for the petitioner.

Mr. N. Dutta and Mr. D. Saikia for the respondents.

JUDGES

I.A Ansari, J.

ACTS

provisions of the Assam General Sales Tax Act, 1993, (the Act of 1993), Clause (b) of sub-section (2) of section 46 read as follows:46(2)(b). section 74(5)(b) of the Assam Value Added Tax Act, 2003.Ref: section 46(2)(b) of the Assam General Sales Tax Act, 1993, goods.61. Clause (a) of sub-section (5) of the section 74 clause (b) of sub-section (5) of section 74, for clause (b) business.62. Clause (b) of sub-section (5) of section 74 business’.63. Clause (c) of sub-section 5 of section 74 articles 301 to 334 of the Constitution of India. 47, rule 1 of the Code of Civil Procedure (the Code) clauses (a), (b) and (c) of sub section (5) of section 74, provisions of sub section (5)(a)(ii) of section 74 47, rule 1 of our Code of Civil Procedure, 1908, section 74(5)(a), (b) and (c) read as under:74(5)(a). provisions of order 47, rule 1 of the Code, correct,88. ***89. Order 47, rule 1 of the Code

ARTICLE 226 CONSTITUTION OF INDIA clause (b) of sub-section 5 of section 74, clause (b) of sub-section (2) of section 46, provisions contained in section 74(5)(a), provisions contained in section 74(5) provisions of section 74(5)(a), (b) and (c), clause (a) sub-section, (3) of section 74 section 74(5)(a) of the AVAT Act, 2003,

SECTION 34 A INCOME TAX ACT sub-section (5)(a)(ii) of section 74, article 226 of the Constitution provisions of section 74(5)(a). sub-section (3) of section 74 provisions of section 74(5). section 40 and section 74, clause (b) of section 74(5), section 114 of the Code, Central Sales Act, 1956, 47, rule 1 of the Code section 46(2)(b) and (c), sub-section (5)(a)(ii),

COMPANIES ACT 1956 section 74(5)(a)(ii), section 74(5)(b), section 74(5)(c). section 46(2)(b) section 2(34)(d)

1. The petitioner No. 1, namely, M/s. Dhanani Shoes Ltd., is a company registered under the Companies Act, 1956. The petitioner company is registered both under the Central Sales Act, 1956, as well as the Assam Value Added Tax Act, 2003 (‘the Act’). The petitioner company deals in plastic and leather footwear, sports goods, readymade garments and allied business. The petitioner company is distributor, in the entire North-Eastern. India of some classified products, namely, Liberty, Action, Hotshot, Woodland, Levis, Lakhani, etc. The petitioner No. 2, accounts officer of the petitioner company, is the authorized signatory of the company. The petitioner company is engaged in the business of stocking and selling, in wholesale as well as retail, of different varieties of shoes. On 6.2.2008, respondent No. 4, namely, Inspector of Tax, Unit-B, Guwahati, came to inspect the petitioner company’s godown at Dhirenpara, Guwahati, and served, on the petitioner company, a notice, dated 6.2.2008, issued under section 74(1) of the Act, and-demanded that the petitioner company shall produce or cause to be produced all necessary documents related to the books of account, on 6.2.2008 itself, in order to ascertain the taxes payable by the petitioner company.

2. Respondent No. 4 also seized, vide two seizure lists, stock of goods, documents, stock register, other registers and books relating to the business of the petitioner company. At the time of the said seizure, the petitioner company had, in their stock, both plastic as well as leather goods. While the plastic goods are taxable at the rate of 4% of its value, the leather goods are taxable at the rate of 12%.

3. By making a writ application, under article 226 of the Constitution of India, which gave rise to WP(C) No. 1050/2008, the petitioners had impugned the said notice and also seizures of the books of account and goods by the respondent No. 4 on the ground, inter alia, that the notice aforementioned as well as seizures of the goods and also of the books of account were without the authority of law and, hence, without jurisdiction. When the writ petition was taken up for motion hearing, it was submitted, on behalf of the respondents, that the writ petition be taken up for final disposal at the motion stage itself. To the submissions so made, no objection was raised on behalf of the petitioners. The writ petition was accordingly heard for final disposal at the motion stage itself.

4. By judgment and order, dated 11.4.2008, this court upheld, inter alia, the seizure of the goods as having been made by the respondents in terms of the provisions of section 74(5)(a)(ii) of the Act. While so dismissing the writ petition, this court directed that the respondents shall complete, if they have not already completed, the process of verification or enquiry within a period of one week and, upon completion of such verification or enquiry, respondents shall permit the petitioners to obtain release of the seized goods in terms of the provisions contained in section 74(5) and other provisions relevant thereto or connected therewith.

5. Pursuant to the directions issued by this court, as indicated above, a notice, dated 16.4.2008, was issued by the respondent No. 2, namely, Inspector of Taxes, Unit-B, Guwahati.

6. In the impugned notice, the respondent No. 2 has observed to the effect that the verification, carried by the respondents, revealed that the goods were not properly accounted for in the regular books of account inasmuch as the books of account disclosed misclassification of goods in the sense that the goods, which are taxable @ 12.5%, were shown taxable @ 4% for the year 2007–08 and that the petitioners had charged lower rate of tax, i.e, @ 4% on the goods, which were taxable @ 12.5%, and thereby they had evaded payment of tax. In view of such alleged evasion of tax, the petitioners were directed by the notice aforementioned to show cause, in writing, as to why penalty @ three times on the amount of tax evaded be not imposed, the penalty leviable being to the tune of Rs. 1,99,41,570.

7. By making the present review petition, the petitioners have sought for review of the judgment and order, dated 11.4.2008, to the extent that the same had upheld the seizure of the goods. The ground for seeking such a review can be, broadly speaking, divided into two parts, namely, (i) that, the seizure was upheld on a factually incorrect submission made on behalf of the respondents, such incorrect submissions, in the writ petition, having been made on, perhaps, incorrect instructions given to their counsel by the respondents inasmuch as the respondents sought to sustain, in the writ petition, seizure of the goods by contending that the seized goods did not tally with the invoices produced by the petitioners; whereas the seizure was, in fact, made not because of alleged non-production of-invoices, but because of the alleged misclassification of goods and (ii) that even otherwise, the conclusion, reached in the decision aforementioned, to the effect that the seizure, in question, was within the jurisdiction, is an error, which is apparent on the face of the record, inasmuch as the seizure of the goods, in question, in the light of the relevant provisions of the Act, were ex facie without jurisdiction and this becomes clearer, when the events, subsequent to the disposal of the writ petition, are taken into consideration inasmuch as the subsequent notice, dated 16.4.2008, clearly shows that the seizure of the goods had been made on the alleged ground of misclassification of goods and not due to the fact, as had been earlier alleged, that the seized goods did not tally with the invoices produced.

8. By a separate writ petition, made under article 226, the petitioners have also challenged the notice to show-cause, dated 16.4.2008, aforementioned on the ground, inter alia, that this notice too is wholly without jurisdiction inasmuch as section 74(5)(a)(ii), where under the notice has been issued, was not attracted to the facts of the case inasmuch as the goods were seized, as had been contended in the writ petition, on the ground that the seized goods did not tally with the invoices produced; whereas the impugned notice to show-cause reflects that the respondents have abandoned this ground for making seizure and/or for imposing penalty and have, now, sought to impose penalty on the sole ground that the goods had been misclassified in the sense that the goods, which were taxable @ 4% were allegedly shown, in the register/documents, as taxable @ 12.5%.

9. Both the review as well as the writ petition, being insevereable and closely connected with each other, were taken up together for hearing as had been sought for, and agreed to, by the learned counsel, for the parties, and, are, now, being disposed of by this common judgment and order.

10. I have heard Dr. A.K Saraf, learned senior counsel, for the petitioners, and Mr. N. Dutta, learned senior counsel, appearing on behalf of the respondents.

11. Let me, first, deal with the review petition, namely, Review Petition No. 47/2008.

Scope of High Court’s Power of Review

12. Before I enter into the merit of the review petition, it needs to be noted that as regards the scope of the High Court’s power to review its own orders and directions, both the parties have made, somewhat, conflicting submissions and I am, therefore, of the view that in order to appreciate the controversy, which the review petition has raised, it is appropriate that the parameters of a High Court’s power of review is settled before the merit of the grounds, on which the review is sought, are taken up for consideration.

13. As regards the High Court’s power of review, Mr. Dutta has submitted that there is a difference between the power of review and the appellate power of a court. Under the guise of review, a review petitioner, according to Mr. Dutta, cannot seek review of the entire case on merit, for, the merit of an order or of a case can be decided in appeal and not by way of review petition. It is also submitted by Mr. Dutta that a review can be for an error on the face of the record, such error being an error of fact, and not for correction of an error of law inasmuch as an error of law, contends Mr. Dutta, can be corrected by a court of appeal and not by resorting to the power of review. A review, further contends Mr. Dutta, is possible under order 47, rule 1 of the Code of Civil Procedure (‘the Code’) on three specific grounds, namely, (i) discovery of new and important matter or evidence, which, after exercise of due diligence, was not within the knowledge of the person seeking the review or could not be produced by him, when the order, sought to be reviewed, was passed, (ii) mistake or error apparent on the face of the record and (iii) any other sufficient reason. The expression, ‘any other sufficient reason’, submits Mr. Dutta, would mean such a reason, which is ‘analogous’ to the other two reasons as specified hereinbefore. It is not possible, insists Mr. Dutta to review an order for a reason, which is not ‘analogous’ to the two reasons, which order 47, rule lays down as the grounds for review. In support of his submissions, Mr. Dutta places reliance on Aribam Tuleshwar Sharma v. Aribam Pishak Sharma, (1979) 4 SCC 389 : AIR 1979 SC 1047; Meera Bhanja (Smt) v. Nirmala Kumari Choudhury (Smt)., (1995) 1 SCC 170; Dr. Dr. Janak Raj Jai v. H.D Deve Gowda, (1997) 10 SCC 462 and State of Kerala v. PT. Thomas, (2005) 12 SCC 347.

14. At any rate, contends Mr. Dutta, there must be miscarriage of justice or there must be grave and palpable error in order to enable the High Court to review its own order, for, the High Court has the power of review, which inheres in every court of plenary jurisdiction to prevent miscarriage of justice or to correct grave and palpable error committed by it. However, even if the High Court, in a given case, contends Mr. Dutta, is satisfied that there is miscarriage of justice and that there is grave and palpable error committed by it, review is not possible unless the court is further satisfied that there exists one of the three specified grounds, namely, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence, was not within the applicant’s knowledge or could, not be produced by him at the time when the order was passed, or (ii) mistake or error is apparent on the face of the record or (iii) for ‘any other sufficient reason’, such ‘sufficient reason’ being ‘analogous’ to the earlier two grounds as indicated hereinbefore. In no case, submits Mr. Dutta, the power of review can be exercised to correct an erroneous decision on merit.

15. Explaining as to what an error apparent on the face of the record means, Mr. Dutta, referring to the case of Meera Bhanja (Smt) v. Nirmala Kumari Choudhury (Smt)., (1995) 1 SCC 170 and Shivdev Singh & Others v. State Of Punjab & Others, (1963) SC 1909, submits that an error apparent on the face of the record would mean such an order, which would strike one on a mere looking at the record and would not require any long drawn process of reasoning, where there may be conceivably two opinions.

16. While agreeing, broadly, with the above submissions, made on behalf of the respondents, as regards the scope of review jurisdiction of the High Court, Dr. Saraf points out that the three grounds, which, in the light of the provisions of order 47, rule 1 of the Code, were mentioned, in Moran Mar Basselios Catholicos v. Most Rev. Mar Poulose Athanasius, AIR 1954 SC 526, as the only grounds on which alone review was possible, is not a rule of universal application, for, it is, according to Dr. Saraf, permissible to review an order, which is found to have been suffering from mistake of fact or law and, if necessitated, an order can be reviewed by even invoking the doctrine of “actus curiae neminen gravabit”. Hence, in a given case, the court may “review its order, contends Dr. Saraf, on ‘any other sufficient reason’, though such a ‘reason’ may not necessarily be ‘analogous’ to the two grounds specified in order 47, rule 1, namely, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence, was not within the applicant’s knowledge or could not be produced by him at the time, when the order was passed, or (ii) mistake or error, which is apparent on the face of the record. Support for this submission is sought to be derived by Dr. Saraf from the case of Board of Control for Cricket in India v. Netaji Cricket Club, (2005) 4 SCC 741.

17. Referring to Lily Thomas v. Union of India, (2000) 6 SCC 224, Dr. Saraf contends that in this decision, while acknowledging the fact that ‘review’ is the creation of statute and the power of ‘review’ cannot be exercised as an inherent power nor can an appellate power be exercised in the guise of the power of review, the Supreme Court has, nevertheless, clarified that correction of an order by a court cannot be denied if the court finds that the error, pointed out in the review petition, was under a mistake of fact or law and/or that the earlier judgment would not have been passed, but for erroneous assumption of a fact, which, in fact, did not exist and that perpetration of such an erroneous assumption of fact shall result in miscarriage of justice.

18. Relying upon Lily Thomas (supra). Dr. Saraf points out that the decision, in Lily Thomas (supra), further shows that review by a court is possible if the court has taken a decision on the assumption of a fact, which did not really exist, and if the court finds that unless the decision, so taken on erroneous assumption of fact, is interfered with, the order would result into miscarriage of justice. Review is also possible, contends Dr. Saraf, by taking into account a subsequent relevant event. According, to Dr. Saraf, even a misunderstanding by the court of the nature and purport of an undertaking or submission made by a counsel or the court’s misunderstanding, arising out of incorrect instruction given to a counsel, may become a ground for review. In support of this submission, Dr. Saraf places reliance on Board of Control for Cricket in India (supra) and Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni, (2003) 7 SCC 219.

19. Contending that review of an order is possible even to correct interpretation of law, Dr. Saraf, refers to Municipal Board, Pratabgarh v. Mahendra Singh Chawla, (1982) 3 SCC 331; inasmuch as rule of law, points out Dr. Saraf, would stand defeated if a court refuses to review its order even when the court is convinced that its interpretation of law, on a point, was palpably incorrect and that the decision rendered, on the basis of such incorrect interpretation of law, is causing miscarriage of justice. In support of his submission that even an error of law or misinterpretation of law can become, in an appropriate case, a ground for review, Dr. Saraf, relies, once again, on Board of Control for Cricket in India (supra).

20. Let me, now, deal with the correctness or otherwise of the submissions noted above and determine the scope and ambit of the power of review of the High Courts.

21. While considering the scope of the power of review, what needs to be noted is that under Section 114 of the Code, any person, considering himself aggrieved, by a decree or order of a court from which appeal is allowed, but no appeal is preferred, or where there is no provision for appeal against the order or decree, may apply for review of the decree or order, as the case may be, in the court, which made the order or passed the decree. Broadly speaking, thus, under Section 114 of the Code, review of a decree or order is possible if no appeal is provided against such a decree or order or where provisions for appeal exist, but no appeal has been preferred. This is really the substantive power of review. This substantive power of review under section 114 has not laid down any condition as a condition precedent for exercise of the power of review nor has section 114 imposed any fetters on the court’s power to review its decision. No wonder, therefore, that the Apex Court, in Board of Control for Cricket in India (supra), observed:

“We are, furthermore, of the opinion that the jurisdiction of the High Court in entertaining a review application cannot be said to be ex facie bad in law. Section 114 of the Code empowers a court to review its order if the conditions precedent laid down therein are satisfied. The substantive provision of law does not prescribe any limitation on the power of the court except those which are expressly provided in Section 114 of the Code in terms whereof it is empowered to make such order as it thinks fit.”

22. Lest the subtle but real distinction existing between the power of review, on the one hand, and the power of an appellate court, on the other, disappears completely, order 47, rule 1 circumscribes a court’s power of review by specifying the three grounds on which review is possible, the specific grounds being, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence was not within the applicant’s knowledge or could not be produced by him at the time, when the decree or order was passed, (ii) mistake or em apparent on the face of the record and (iii) for ‘any other sufficient reason’.

23. Having taken into account the said three grounds, which order 47, rule 1 embodies as the grounds for review, the Supreme Court, Moran Mar Basselios Catholicos (supra), held that power of review is circumscribed by the three grounds, which have been specified in order 47, rule 1. Explaining the scope of the third ground of review mention in order 47, rule 1, namely, ‘any other sufficient reason’, the Supreme Court, in Moran Mar Basselios Catholicos (supra), held that ‘any other sufficient reason’ cannot be ‘any sufficient reason’, but a reason which is ‘sufficient’ and, at the same time, at least, ‘analogous’ to one of the two reasons as indicated hereinbefore, namely, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence, was not within the applicant’s knowledge or could not be produced by him at the time, when the decree or order was passed and (ii) mistake or error apparent on the face of the record. In short, thus, what Moran Mar Basselios Catholicos (supra) laid down was that the expression, ‘any other sufficient reason’, cannot be construed as ‘any sufficient reason’ and that ‘any sufficient reason’ cannot become a ground for review unless even such ‘sufficient reason’ is ‘analogous’ one of the other two grounds mentioned in order 47, rule 1, namely, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence, was not within the applicant’s knowledge or could not be produced by him at the time, when the decree was passed or (ii) mistake or error apparent on the face of the record.

24. Board of Control for Cricket in India (supra) is one of those cases, which has elaborately dealt with the scope of the power of review, particularly, of the High Courts and, having considered the case of Moran Mar Basselios Catholicos (supra), the Supreme Court has clarified, in no uncertain words, in Board of Control for Cricket in India (supra), that the rule that ‘any other sufficient ground’ must be ‘analogous’ to the other two grounds, as mentioned in order 47, rule 1, is not a rule of universal application. The relevant observations, made, at para 91, in Board of Control for Cricket in India (supra), in this regard, read:

“91. It is true that in Moran Mar Basselios Catholicos v. Most Rev. Mar Poulose Athanasius this court made observations as regards limitations in the application of review of its order stating: [SCR p. 529]

“Before going into the merits of the case it is as well to bear in mind the scope of the application for review which has given rise to the present appeal. It is needless to emphasise that the scope of an application for review is much more restricted than that of an appeal. Under the provisions in the Travancore Code of Civil Procedure which is similar in terms to order 47, rule 1 of our Code of Civil Procedure, 1908, the court of review has only a limited jurisdiction circumscribed by the definitive limits fixed by the language used therein. It may allow a review on three specified grounds, namely (i) discovery of new and Important matter or evidence which, after the exercise of due diligence, was not within the applicant’s knowledge or could not be produced by him at the time when the decree was passed, (ii) mistake or error apparent on the face of the record and (iii) for any other sufficient reason. It has been held by the Judicial Committee that the words ‘any other sufficient reason’ must mean a reason sufficient on grounds, at least analogous to those specified in the rule.”

but the said rule is not universal,

(emphasis is added)

25. I may pause here to point out that when a judgment of the Supreme Court is explained by a subsequent Bench of the Supreme Court, such an explanation of its own judgment by the Supreme Court carries the same authority as does the decision, which has been explained by it. Hence, in the face of the decision, rendered in Board of Control for Cricket in India (supra), it cannot, now be contended be (as has been sought to be done by the respondents) that no ground, other than the grounds mentioned in Moran Mar Basselios Catholicos (supra), can ever become a ground for review of an order or decision by a High Court. In fact, there is plethora of judicial pronouncements of the Supreme Court, which show that there can be exceptional cases, where a deviation from the grounds of review, a propounded in Moran Mar Basselios Catholicos (supra), is possible and one of such cases is the case of Lily Thomas (supra), wherein, having taken into account the facts that (a) the power of review is a creation of statute and not an inherent power, that (b) no power of review can be exercised if not given to a court or Tribunal either specifically or by necessary implication, and that (c) under the guise of review jurisdiction, merit of a decision cannot really be examined, the Supreme Court has, in unequivocal terms, pointed out that justice is, after all, a virtue, which must prevail over all barriers and that the rules, procedures or technicalities of law must, if necessary, bend before justice and that such a situation may arise, when a court finds that it has rendered a decision, which it would not have rendered, but for an assumption of fact, which, in fact, did not exist and its adherence to such a faulty decision would result in miscarriage of justice. In such cases, rules Lily Thomas (supra), nothing court prevent a court from rectifying its own error, because the doctrine of ‘actus curiae neminet gravabit’, (i.e, an act of court shall prejudice none), can be invoked, in such a case, for correcting the error committed by the court.

26. The real theme of the Supreme Court’s decision, in Lily Thomas (supra), is that though the power of review cannot be exercised by a court unless the statute confers such a power and that a statutory power of review can be exercised subject to such limitations as the statute may impose, yet a court is not powerless, in an appropriate and exceptional case, to rectify its error, because ‘an act of court shall prejudice none’ and, hence, in exceptional cases, a court can invoke the doctrine of ‘actus curiae neminem gravabit’ for correcting an error committed by it. The case of Lily Thomas (supra) shows that when a court discovers that a decision, rendered by it, was actually based on assumption of a fact, which was non-existent, and that the court’s adherence to such a decision, which was based on non-existent fact, would result in miscarriage of justice, the court cannot be prevented from rectifying its own error, because an act of court, it is trite, shall prejudice none. The decision, so rendered and the law so laid down in Lily Thomas (supra), have been agreed to in Board of Control for Cricket in India (supra). I may quote, on this aspect, the observations of the Apex Court, in Board of Control for Cricket in India (supra), at para 92, which read as under:

“92. Yet again in Lily Thomas this court has laid down the law in the following terms: [SCC pp. 247-48, para 52]

“52. The dictionary meaning of the word ‘review’ is ‘the act of looking, offer something again with a view to correction or improvement’. It cannot be denied that the review is the creation of a statute. This court in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, held that the power of review is not an inherent power. It must be conferred by law either specifically or by necessary implication. The review is also not an appeal in disguise. It cannot be denied that justice is a virtue which transcends all barriers and the rules or procedures or technicalities of law cannot stand in the way of administration of justice. Law has to bend before justice. If the court finds that the error pointed out in the review petition was under a mistake and the earlier judgment would not have been passed but for erroneous assumption which in fact did not exist and its perpetration shall result in a miscarriage of justice nothing would preclude the court from rectifying the error.”

(emphasis supplied)

27. While pointing out, in Board of Control for Cricket in India (supra), that in exercising the power of review, the court can take into account any subsequent event, the Supreme Court has pointed out that when a court, in the light of the subsequent event, finds that it had committed a mistake in understanding the nature and purport of an undertaking given by a counsel appearing on behalf of a party, the court may rectify its own mistake. One can profitably refer, in this regard, to the following observations made, at para 87, 89, 90 and 93, in Board of Control for Cricket in India (supra):

“87. Indisputably, an undertaking had been given by a learned senior counsel appearing on behalf of the Board. In the impugned order, the Division Bench before whom such undertaking had been given was of the opinion that it was misled. This court having regard to the understanding of such undertaking by the Division Bench does not intend to deal with the effect and purport thereof as we are of the opinion that the Division Bench of the Madras High Court itself is competent therefor. If para 14 of the order of the learned Single Judge is to be taken into consideration, it is possible to contend that the learned Judges of the High Court were correct,

88. ***

89. Order 47, rule 1 of the Code provides for filing an application for review. Such an application for review would be maintainable not only upon discovery of a new and important piece of evidence or when there exists an error apparent on the face of the record but also if the same is necessitated on account of some mistake or for any other sufficient reason.

90. Thus, a mistake on the part of the court which would include a mistake in the nature of the undertaking may also call for a review of the order. An application for review would also be maintainable if there exists, sufficient reason therefor. What would constitute sufficient reason would depend on the facts and circumstances of the case. The words “sufficient reason” in order 47, rule 1 of the Code are wide enough to include a misconception of fact or law by a court or even an advocate. An application for review may be necessitated by way of invoking the doctrine “actus curiae neminem gravabit”.

91. ***

92. ***

93. It is also not correct to contend that the court while exercising its review jurisdiction in any situation whatsoever cannot take into consideration a subsequent event. In a case of this nature when the court accepts its own mistake in understanding the nature and purport of the undertaking given by the learned Senior Counsel appearing on behalf of the Board and its correlation with as to what transpired in the AGN of the Board held on 29.9.2004, the subsequent event may be taken into consideration by the court for the purpose of rectifying its own mistake.”

28. In Board of Control for Cricket in India (supra), the Apex Court has laid down that an application for review would be maintainable if ‘sufficient reasons’ exist therefor. What, in a given case, shall constitute ‘sufficient reason’ would be a question of fact and would, therefore, depend on the facts and circumstances of a given case. What the Supreme Court has pointed out, very clearly, in Board of Control for Cricket in India (supra), is that the words ‘sufficient reason’, which appear in order 47, rule 1, are wide enough to include misconception of fact or law by a court and that even when a mistake of fact or law has crept into a judicial decision due to court’s misunderstanding of the nature of an undertaking given by an advocate, an application for review may be necessary and by invoking the doctrine of ‘actus curiae neminem gravabit’, the court can correct such an error. This, in turn, shows that if, as a result of misunderstanding of fact or law by a court, a mistake has crept in, which the court finds would cause or has caused miscarriage of justice, such an error can, and must be corrected by exercising the power of review and, for this purpose, the doctrine of ‘actus curiae neminem gravabit’ can also be invoked. A mistake, on the part of the court, would include, according to the decision in Board of Control for Cricket in India (supra), a mistake in the nature of the undertaking, which may have been given by a counsel meaning thereby that when a counsel, on a mistaken belief or on an erroneous or incorrect instruction, make a statement and the court acts on such a statement, but, on a review application having been subsequently filed, the court finds that it had misunderstood the counsel’s submission or had got misled by a counsel’s submission or when the court finds that it (court), had proceeded on an assumption of fact, which did not really exist, or when it (court) finds that it had misinterpreted a provision of law or had acted on a misconception of law and that the error, so crept in, was, as a result of subsequent event or otherwise, apparent on the face of the record, and that such error had caused, or would cause, miscarriage of justice, such a reason would be a ‘sufficient reason’ calling for exercise of the power of review.

29. In the light of the decision in Board of Control for Cricket in India (supra), it can no longer be in doubt that it is possible for a court to review its order if it discovers that it had passed an order by misunderstanding the nature of an undertaking given by an advocate or when it finds that a mistake, in the order, has crept in due to incorrect undertaking given by an advocate appearing in a case or when it discovers that its order suffers from misinterpretation of law or from misconception of fact, which may arise due to an incorrect submission made by a counsel as a result of wrong or incorrect instructions received by him from his client or otherwise. In short, in order to do complete justice, it is possible for a court to review its order by invoking the doctrine of ‘actus curiae neminem gravabit’ and thereby rectify the, mistake, which the court might have committed, while interpreting a fact or interpreting a position of law, particularly, when it finds that its judgment has caused, or would cause, miscarriage of justice.

30. In Rajesh D. Darbar (supra), the Supreme Court has pointed out that while exercising the power of review, subsequent events can be taken note of and that in exceptional cases, the court may have to rectify the error committed by it by invoking the doctrine of ‘actus curiae neminem gravabit’, for, an act of a court shall prejudice none. The Supreme Court has, however, pointed out, in Rajesh D. Darbar (supra), that invoking of the doctrine of actus curiae neminem gravabit’ can be in exceptional cases and that every error cannot be rectified on the basis of the principle that an act of the court shall prejudice none.

31. In fact, from the decision in Municipal Board, Pratabgarh (supra), what clearly emerges is that when a High Court acknowledges its error and rectifies its error, which has crept in, what the High Court really does is restore the rule of law and not defeat it. Points out the Apex Court, in Municipal Board, Pratabgarh (supra), that laws cannot be interpreted and enforced divorced from their effect on human beings for whom the laws are meant. Further observed the Supreme Court, in Municipal Board, Pratabgarh (supra), on this aspect of law, thus, “Undoubtedly, rule of law must prevail but as is often said, ‘rule of law must run akin to rule of life. And life of law is not logic but experience’. By pointing out the error which according to us crept into the High Court’s judgment the legal position is restored and the rule of law has been ensured its pristine glory”.

32. From the decisions in Municipal Board, Pratabgarh (supra), Rajesh D. Darbar (supra), Lily Thomas (supra), and Board for Control of Cricket in India (supra), what clearly transpires is that whenever a mistake is committed by a court, because of wrong interpretation of law or because of incorrect assumption of fact or because of misrepresentation of fact by the counsel or when a decision is based on a submission, which might have been made by a counsel on a wrong or incorrect instruction, or when a decision is based on a wrong understanding of a counsel’s submissions or on assumption of existence of a fact, which was actually non-existent, the court shall, if the error is such, which would cause, or has caused, grave miscarriage of justice, review its own order.

33. Coupled with the above, it is equally important to bear in mind that in a given case, when a court finds, on an review application made or otherwise, that its order has been misunderstood and has misled the parties or needs a clarification, it may, and, in an appropriate case, must, clarify its order even if it chooses not to allow the review application. One of such cases is the case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi, (1980) 2 SCC 167, wherein, while holding that when there can be two views of a given situation of fact or law and the court, in its original judgment, has taken the view, which is a possible one, it is not possible to treat such a view as error apparent on the face of the record. Nevertheless, the Supreme Court took the pain, in Northern India Caterers (India) Ltd. (supra), to clarify and restate the position of law by saying that where food is supplied in an eating-house or restaurant and it is established, upon the facts, that the substance of the transaction, evidenced by its dominant object is a sale of food and rendering of service is merely incidental, the transaction would be exigible to sales tax. [See para 9 and 12 of Northern India Caterers (supra)].

34. I may, now, turn to Laxmi Kant Pandey v. Union of India, (2001) 9 SCC 379. The background of the case of Laxmi Kant Pandey (supra) is that a writ petition was taken up by the Apex Court on the basis of a letter addressed by a person complaining of malpractices indulged in by Social Organisations and voluntary Agencies engaged in the work of offering Indian Children in adoption to foreign parents. As the Apex Court found that there was no legislation laying down the principles and norms, which must be adhered to in giving an Indian Child in adoption to foreign parents, the Apex Court passed certain directions. However, subsequent to the issuance of the directions by the Apex Court on this subject, some Social and Child Welfare Agencies, engaged in the placement of children in inter-country adoption, felt that there were certain difficulties in implementing the principles and norms laid down by the Apex Court and accordingly, applications were made by some of such Agencies seeking clarification as well as alteration in the principle and norms, which had been laid down by the Apex Court in this regard. The Apex Court, in Laxmi Kant Pandey (supra), clarified the norms and procedures, which it had laid down earlier on the subject-matter of inter-country adoption. From the decision in Laxmi Kant Pandey (supra) too, one can, easily gather that in a given case, when a court’s decision or direction has been misunderstood by the parties or have created difficulties in carrying out or implementing the directions, the court owes a duty to clarify its decision or order, as the case may be. 2

35. M.C Mehta v. Union of India, (1986) 2 SCC 325, is yet another case, wherein the Supreme Court had, while declining to modify the conditions, which it had imposed by its earlier directions, had, nevertheless clarified as to how the directions given by it earlier shall be carried out. The relevant observations, made in this regard, read:

“………We do not therefore, propose to modify this part of the condition imposed by us. We may, however, make it clear that at least two out of the three representatives who are appointed on the Committee of Workmen by each Union should be workmen who have experience of working in the caustic chlorine plant. We must also clarify, in agreement with the management, that the workmen who are members of the Committee of Workmen should not leave their duty for going on inspection without giving prior intimation to the officer in-charge and they should give at least half an hour’s notice to the officer in-charge so that the essential, functions which they are discharging are not disturbed.”

36. Indeed, Jhareswar Prasad Pal v. Tarakanth Ganguly, (2002) 5 SCC 352, in one such case, wherein the Supreme Court has pointed out that when a judgment or order does not contain any specific direction regarding a particular matter or if there is any ambiguity in the directions issued, in a case, by a court, appropriate it is for the parties to approach the court, which had disposed of the matter, for clarification of the order. The observations, made in this regard, which appear at para 11, read:

“………If the judgment or order does not contain any specific direction regarding a matter or if there is any ambiguity in the directions issued therein then it will be better to direct the parties to approach the court which disposed of the matter for clarification of the order instead of the court exercising contempt jurisdiction taking upon itself the power to decide the original proceeding in a manner not dealt with by the court passing the judgment or order………”

37. The law, on the subject of review, can, in the light of the discussions held, as a whole may be summarized, thus: Ordinarily, a Court or a Tribunal cannot review its order or decision if the statute does not confer on the court or the Tribunal, as the case may be, the power to review its own order. This apart, whatever limitations are imposed by a statute, while conferring the power of review on a court or a Tribunal, the court or the Tribunal, as the case may be, must adhere to the limitations, which the relevant statute may impose on the exercise of such power. Section 114, CPC, which embodies the substantive power of review of a civil court does not impose any limitations on the court’s power to review its order or decision; yet the power of review even by a civil court cannot be unguided and uncanalised, for order 47, rule 1 circumscribes the court’s power of review. Though, at one point of time, it was considered to be a rule of universal application that review by a court of its order is not possible except on two prescribed grounds, namely, (i) discovery of new and important matter or evidence, which, after the exercise of due diligence, was not within the applicant’s knowledge or could not be produced by him at the time, when the decree or order was passed and (ii) mistake or error apparent on the face of the record or any such sufficient ground, which is analogous to the two grounds aforementioned, the subsequent development of law, on the subject of review, has shown that this rule is no longer a rule of universal application. One of the cases, which has helped in the expansion of the court’s power to review its order is the case of Lily Thomas (supra) inasmuch as Lily Thomas (supra) ruled that ordinarily, the power of review, being a creature of statute, cannot be exercised as an inherent power, yet such technicalities of law may have to be bent, in an appropriate case, for the purpose of correcting, an order committed by the court if such an error arises out of a presumption of fact, which was non-existent and when the court finds that its refusal to review its own error would cause, or has caused, grave miscarriage of justice. It is essentially the principle behind the doctrine of ‘actus curiae neminem gravabit’, which has made the court hold, in Municipal Board, Pratapgarh (supra), that when a court corrects and rectifies an error, what it restores is the rule of law and not defeat it. Even Rajesh D Darbar (supra) recognizes that in an exceptional case, a court may have to review its order by invoking the doctrine of ‘actus curiae neminem gravabit’. It is in the backdrop of these developments of law that Board of Control for Cricket in India (supra) has laid down various circumstances in which the power of review can be exercised by the High Court as a court of plenary jurisdiction. In the light of the decision, in Board of Control for Cricket in India (supra), an application for review would be maintainable if ‘sufficient reasons’ exist therefor. What, in a given case, shall constitute ‘sufficient reason’ would be a question of fact and would, therefore, depend on the facts and circumstances of a given case. The words ‘sufficient reason’, which appear in order 47, rule 1, are wide enough to include misconception of fact or law by a court and that even when a mistake of fact or law has crept into a judicial decision due to court’s misunderstanding of the nature of an undertaking given by an advocate, an application for review may be necessary and by invoking the doctrine of ‘actus curiae neminem gravabit’, the court can, indeed, correct such an error. Hence, when, as a result of misunderstanding of fact or law by a court, a mistake has crept in a decision and the court finds that the error is apparent on the face of the record and/or that the error has caused miscarriage of justice or would cause, unless corrected, miscarriage of justice, such an error can, and must, be corrected by exercising the power of review and, for this purpose, the doctrine of ‘actus curiae neminem gravabit’ can also be invoked. Amistake, on the part of the court, would include, according to the decision in Board of Control for Cricket in India (supra), a mistake in the nature of the undertaking, which may have been given by a counsel meaning thereby that when a counsel, on a mistaken belief or on an erroneous or incorrect instruction, makes a statement and the court acts on such a statement, but, on a review application having been subsequently filed, the court finds that it had misunderstood the counsel’s submission or had got misled by a counsel’s submission or when the court finds that it (court) had proceeded on an assumption of fact, which did not really exist, or when it (court) finds that it had misinterpreted a provision of law or had acted on a misconception of law and that the error, so crept in, was, as a result of subsequent event or otherwise, apparent on the face of the record, and that such error had caused, or would cause, miscarriage of justice, such a reason would be a ‘sufficient reason’ calling for exercise of the power of review.

38. Coupled with the above, when a court finds that its decision or order has confounded the parties concerned and has been causing, or has caused, impediments in effective execution or implementation of its directions or in understanding the directions correctly, it is within the ambit of the powers of the court to clarify its order even if the court chooses not to review the order, which it has passed. Tb put it a little differently, even when a court declines to review its decision or order, it can, nevertheless, clarify its order so as to remove ambiguity with which its order may have been suffering from or with a view to removing doubt or confusion, which the order may have created in the minds of the parties concerned.

39. Bearing in mind the parameters of the High Court’s power of review jurisdiction, let me, now, determine as to what rectification, in the present case, the review petitioners are really seeking and what are the grounds on which review has been sought for.

40. The above questions, naturally, take me to the review petitioners’ earlier writ petition, namely, WP(C) No. 1050/2008, wherein the review petitioners (as writ petitioners) had challenged, inter alia, seizure of the goods on the ground that the seizure was without the authority of law and, hence, without jurisdiction.

41. For the purpose of resolving the controversy, it is necessary to take note of the seizure list, in question, so far as the same relate to the ‘grounds of seizure’ and the ‘list of seized goods’. The seizure list is, therefore, reproduced hereinbelow:

“Seizure list

In exercise of power conferred upon me under section 74(5)(a) of the AVAT Act, 2003, Sri D. Khersa, Inspector of Taxes, Guwahati Unit-B, do hereby seize the following goods found at the godown of Ms. Dhanani Shoes Ltd. At Am tola Dhirenpara, Guwahati, from the possession of Sri Abdul Kuddus, S/o Lt. Sher Ali, Godown in-charge of the Ms. Dhanani Shoes Ltd. On today the 6th February, 2008 at 4 P.M on the grounds stated below in presence of witnesses.

Grounds of seizure:— Stock of goods were found not matching with the invoices produced. Goods taxable at the higher rate are found shown as taxable at the lower rate of taxes and thereby causing evasion of taxes payable under the AVAT Act of 2003.

List of goods seized:— Stock of goods found in the stock register which are shown as 4 p.c taxable.

42. Instead of, now, considering anew as to what the rival submissions of the parties on the question of seizure of the goods, in the said writ petition, were, it would be more appropriate to reproduce the relevant: parts of the decision, [rendered, on 11.4.2008, in WP(C) No. 1050/2008], which deal with the rival submissions made on behalf of the parties concerned, how this court had dealt with the questions raised and why this court had, eventually, reached the conclusion that the seizure of the goods, in question, was not in violation of the relevant provisions of law. With these objectives in view, let me, first, point out as to what the rival submissions, on the question of the seizure of goods, were. The relevant submissions, on this aspect of the writ petitioner’s case, as appear at para 8 of the decision, under review, are reproduced hereinbelow:

“8. Assailing the seizure of the goods, Mr. Goswami has contended that under sub-section (5)(a)(ii) of section 74, the power of seizure is exercisable only when the authority concerned has reason to believe that though the goods belong to the dealer, the same have not been accounted for by the dealer in his accounts or registers or other documents maintained in the ordinary course of his business. In the present case, submits Mr. Goswami, a careful reading of the relevant seizure list does not show that the goods, found lying in the godown of the petitioners, had not been accounted for. Thus, the condition precedent, according to Mr. Goswami, for invoking the provisions of sub section (5)(a)(ii) of section 74 did not exist in the present case and, hence, in such circumstances, the exercise of power of seizure of the goods, in question, was without the authority of law and needs to be regarded as arbitrary and without jurisdiction.”

43. Responding to the above aspect of the writ petitioners’ case, the submissions made, on behalf of the respondents, as regards the seizure of the goods, were recorded at para 11 of the decision, which read as follows:—

“11. Regarding the seizure of the books of account, registers, etc., and the seizure of goods, Mr. Saikia submits that the petitioner company has been deliberately misclassifying the leather goods as plastic goods and thereby making payment of sales tax at the rate, of 4%, whereas the tax liable to be paid, in the case of leather goods, is as much as 12%. Thus, on the basis of reliable information received by the respondent No. 4 that the petitioner had been evading payment of Value Added Tax by resorting to misclassification of goods, when respondent No. 4 inspected the petitioner company’s business premises, goods and also documents as well as registers lying there, he cannot be said to have committed any wrong and, on noticing anomalies, when he made the seizure of the books of account, etc., he may be held to be wholly justified. As far as seizure of the goods is concerned, Mr. Saikia submits that the seizure list, made in this regard, clearly shows that the reason for seizure was that the stock of goods did not tally with the invoices; hence, in such circumstances, contends Mr. Saikia, the goods, in question, cannot be said to have been accounted for. In a case of present nature, exercise of power under section 74(5) was, according to Mr. Saikia, justified and may not, therefore, be interfered with.”

44. Reacting to the submissions made, on behalf of the respondents, that the seizure had been made, because of the fact that the stock of goods did not tally with the invoices produced, Mr. Goswami’s submission, as noted in para 12, read as under:

“12. Repelling the above submissions made on behalf of the respondents, Mr. Goswami has contended that if the petitioner company has sold any goods and has not paid requisite tax, the remedy lies not in making seizure under section 74 of the Act; rather, the remedy, in such a case, according to Mr. Goswami, lies in taking resort to section 40 of the Act, which makes provisions for realization of escaped assessment. As far as the goods, in the present case, are concerned, Mr. Goswami submits that there is nothing in the seizure list, to show that the goods had not been accounted for; rather, seizure has taken place, according to Mr. Goswami, on account of the fact that the goods were misclassified. It is further pointed out by Mr. Goswami that the seizure list clearly shows that the goods, found lying in the godown of the petitioner company, were duly accounted for in the stock register and, hence, in such circumstances, if the stock register has been maintained by misclassifying the goods, i.e, the goods, which were of leather, have been shown as plastic goods, it would become a case of escaped assessment. Consequently, the power of seizure, under section 74(5), in such a case, according to Mr. Goswami, could not have been exercised, for, the condition precedent for exercise of such power, under section 74(5), is that the goods have not been accounted for.”

45. From a careful reading of what have been reproduced above, it becomes more than transparent that it was the specific case of the review petitioners, in their earlier writ petition, that the goods had not been seized on the ground that the seized goods had not been accounted for inasmuch as according to the petitioners, entries, with regard to the goods, were, even according to the seizure list, did exist on the stock register, though the entries were allegedly made by misclassifying the goods in the sense that the goods, which are taxable it a higher rate, were shown taxable at a lower rate in the stock register. The further case of the writ petitioners was that contrary to he requirements of section 74(5)(a)(ii), the seizure of the goods, in question, had been made not because of non-existence of any entries in the books of account, stock register or any register or document, but, due to the fact that the stock register reflected that the petitioners had been maintaining the stock register by misclassifying the goods, i.e, he goods, which were of leather, had been shown as plastic goods. In these circumstances, according to Mr. Goswami, as contended in the writ petition, the case against the writ petitioners was, at best, a case of ‘escaped assessment’ and, hence, in such circumstances, the seizure of the goods, in exercise of powers under section 74(5)(a)(ii), was illegal, for, seizure of the goods was possible only when the goods had not been accounted for; whereas, the seizure list shows, according to Mr. Goswami, that entries with regard to the goods did exist in the stock register though such entries suffered, according to the respondents, from misclassification of goods. How the respondents dealt with the submissions so made by the petitioners, in the writ petition, are quite interesting to note and is of great importance.

46. From the submissions as noted at para 11 of the decision, under review, it becomes clear that the respondents sought to sustain the seizure of the goods on the ground that ‘stock of goods did not tally with the invoices produced’ and since the goods were found to have not been tallying with the invoices, the goods, in question, could not have been regarded as having been accounted for and that in such circumstances, exercise of power under section 74(5)(a)(ii) was justified. Notwithstanding the fact the grounds of seizure reflected that seizure was also due to the alleged misclassification of goods, this was not a ground, which was ever pressed into service by the respondents in the writ petition; rather, they abandoned or, at least, avoided seeking to assert that the seizure of the goods was on account of misclassification of goods; significantly, if I may reiterate, what the respondents sought to contend, for the purpose of sustaining the seizure of the goods, was that seizure had taken place due to the fact that the goods did not tally with the invoices produced meaning thereby that since, the goods were not found to have been tallying with the invoices produced, there was no entry in existence with regard to those goods, which were seized, and hence, the goods, so seized, cannot be said to have been accounted for.

47. Thus, the submissions, noted above, clearly reflect that the specific case of the respondents, as set up in the writ petition, was that the goods had been seized, because of the fact that the ‘seized goods did not tally with the invoices produced’. It was never, I may repeat, never the case of the respondents, in the writ petition, that the goods had been seized on both the grounds, namely, that (i) the stock of the goods did not tally with the invoices produced and also that (ii) the goods were misclassified; rather, the sole and lone ground for seeking to sustain the seizure (as had been submitted, before this court, on behalf of the respondents), was that the goods had been seized, because of the fact that ‘the seized goods did not tally with the invoices produced’.

48. With regard to the above aspect of ‘the case, a deeper look into the written submissions, which had been filed on behalf of the State of Assam in the earlier writ petition, would be extremely helpful. The written submissions, on the aspect of the seizure of the goods, read as under:

“(ii) The impugned order dated 6.12.2008 for seizing the goods is also absolutely legal and valid as it was given in exercise of power under section 76(v)(a). Although the writ petitioner has been trying to make out the case for seizure was not valid and no goods were seized which was not accounted in its account, however, from the ground of seizure it clearly mentions inter alia that (i) the stock of goods have found not matching with the invoice provided.

This sole ground of seizure itself makes it a sufficient ground under the section for seizure of goods as it is very clearly reflected that the goods were not properly accounted vis-a-vis the invoice produced.”

49. Thus, what the respondents’ written submissions too reflect is that at no stage of hearing of the writ petition, it had been contended, on behalf of the respondents, that misclassification of goods was one of the grounds on which the seizure of the goods was sustainable. Far from this, the respondents had sought to sustain the seizure by contending that the grounds of seizure clearly mention, inter alia, that the stock of goods did not match with the invoices produced and that this sole ground of seizure is sufficient to sustain the seizure. It was not even faintly indicated or alleged, at any point of time, during the course of hearing of the writ petition, on behalf of the respondents, either orally or in their written statement, that the seizure of the goods were sustainable, or must be sustained, on the ground that there was misclassification of goods in the sense that the goods, which are taxable at higher rate, were shown taxable at a lower rate.

50. In the light of the rival submissions, made before this court, as the same appear in this court’s earlier decision, under review, at para 8, 11 and 12, how this court and why this court had come to take the view that the seizure of goods cannot be interfered with, this court’s observations, made at paras 15, 16, 39, 40 and 41, are relevant and, therefore, reproduced hereinbelow:

“15. A conjoint reading of section 40 and section 74, particularly, subsection (3) thereof, makes it clear that seizure of the accounts, registers, etc., is permissible if the prescribed authority has reasons to believe that the dealer has evaded or is attempting to evade payment of any tax due from him and/or he is keeping or has kept his accounts in such a manner as is likely to cause evasion of tax payable under the Act. What section 40 does is that it empowers the prescribed authority to make assessment of the tax, which has escaped assessment or has been under assessed at a rate lower than the rate at which it is assessable or a deduction has been wrongly allowed or any credit has been wrongly permitted. For the purpose of making the assessment of the income, which has escaped assessment, the prescribed authority may, after giving the dealer a reasonable opportunity of being heard and after making such enquiries as he may consider necessary, proceed to assess, to the best of his judgment, the amount of tax due from the dealer in respect of such turnover. The power vested in an authority, under section 74(3)(a), is really an enabling provision for the prescribed authority to collect materials for the purpose of determining if any income of the dealer has escaped assessment in any manner whatsoever. It cannot, therefore, be said that exercise of power of seizure of the accounts, registers, etc., is not possible for the purpose of ascertaining the income, which has escaped assessment.

16. However, sub-section (5)(a)(ii) of section 74, which relates to seizure of goods, is quite different in nature and scope, because under sub-section (5)(a)(ii), seizure of goods is permissible only when the authority concerned has reason to believe that the goods, found lying in the place of business, belong to the dealer, but have not been accounted for by the dealer in his accounts or registers or other documents maintained in the ordinary course of his business. If this condition precedent is not satisfied, seizure of goods would be wholly without authority. Thus, the jurisdiction to make seizure of goods is acquired only when the goods have not been accounted for.”

39. Turning to the seizure of goods, it needs to be noted that the grounds of seizure, as regard the goods read as under:

“Stock of goods were found not matching with the Invoice produced. Goods taxable at the higher rate are found shown as taxable at the lower rate of taxes and thereby causing evasion of taxes payable under the AVAT Act, 2003.”

40. From a bare reading of the grounds of seizure of goods, as mentioned above, it becomes transparent that the stocks of goods were allegedly found to be not matching with the invoices produced. The allegations, so made against the petitioner company, may or may not be true; but this court, in the present proceeding, has to proceed on the assumption that the allegations are true and, upon such assumption, examine and test if the grounds, assigned for the seizure of the stock, are sustainable in law. Viewed in this light, it becomes clear that when the goods, lying in the godown of the petitioner company, were allegedly found not tallying with the invoices produced by the petitioners’ representative, it cannot be said that ‘the goods had been accounted for by the petitioner company’ in their books of account, registers, etc. In such circumstances, if I may reiterate, the goods, in question, cannot be said to have been accounted for in terms of section 74(5)(a)(ii).

41. Thus, the conditions precedent for exercise of power under section 74(5)(a)(ii) did exist in the present case and, in such circumstances, such seizure, in question, cannot be said to be without jurisdiction or without the authority of law. I may also point out that the grounds of seizure, as far as goods are concerned, are divided into two parts. While the first part reads, “Stock of goods were found not matching with the invoice produced”, the second part states, “goods taxable at the higher rate are found shown as taxable at the lower rate of taxes and thereby causing evasion of taxes payable under the AVAT Act, 2003”. In short, the grounds of seizure of the goods, in question, show that according to what the respondent No. 4 had found, the goods did not tally with the invoices produced. In such circumstances, the goods, in question, cannot be said to be accounted for by the petitioner company. The exercise of power, under section 74(5)(a)(ii) by the respondent No. 4, in such a case, cannot be said to be illegal or without foundation.”

51. There can be no doubt from the emphasized portions of the observations made in paras 15, 16, 39, 40 and 41 of this court’s decision, which is under review, that the sole basis for this court upholding the seizure of the goods was that the goods were found to have not been tallying with the invoices produced, for, the legal inference, in such a situation, was, according to this court, that no entry had existed, with regard to the seized goods, in any of the books of account, registers or documents and consequently, such absence of entry would be construed, within the meaning of section 74(5)(a)(ii), as a case of the goods having not been accounted for. The seizure of the goods, in question, I must hasten to add, was not sustained in the decision, under review, because of the alleged misclassification of the goods, for, this was not a ground, which was pressed into service by the respondents.

52. Bearing in mind what is indicated above, let me, now, come to the ultimate directions, which were passed, by this court in its decision, under review, and the reasons therefor. On this aspect of the case, the relevant observations made, and the directions issued, appearing at paras 45 and 46 of the decision, under review, are reproduced hereinbelow:

“45. In the present case, the seizure was, admittedly, made on 6.2.2008 Over a period of more than two months has already been elapsed since then. It is also the respondents’ case that they have had been carrying on a process of verification for the purpose of determining as to what, if any, income of the petitioner company has escaped assessment due to either incorrect accounting of the goods or due to incorrect maintenance of the account books. In either case, therefore, verification process or the enquiry, which was initiated, needs to be brought to expeditious end, for, this process of verification or enquiry cannot be kept indefinitely pending. Ends of justice, therefore, demand that appropriate directions be issued to the respondents to deal with the matter in such a manner as would uphold the legislative intent embodied in section 74(5).

46. With the above object in view, the respondents are hereby directed to complete, if they have not already completed, the process of verification or enquiry, within a period of one week from today, and, upon completion of such verification or enquiry, respondents shall permit the petitioner to obtain release of the seized goods in terms of the provisions contained in section 74(5) and other provisions relevant thereto or connected therewith.”

53. Following the directions, given in the decision, dated 11.4.2008, the presently impugned notice, dated 16.4.2008, was issued by the Inspector of Taxes, Unit-B, Guwahati. This notice reads as under:

GOVT. OF ASSAM

OFFICE OF THE ASSISTANT COMMISSIONER OF TAXES::UNIT-B

GUWAHATI

M/s. Dhanani Shoes Ltd.,

Amtola, Dhirenpara,

Guwahati-25.

Sub: Notice of show-cause under section 74(5)(b) of the Assam Value Added Tax Act, 2003.

Ref: 1. Seizure list dated 6.2.2008

2. Hon’ble Guwahati High Court Judgment and order dated 11.4.2008 passed in Writ Petition (Civil) No. 1050/2008, Dhanani Shoes Ltd. v. State of Assam.

Whereas consequent upon an enquiry in your godown cum business premises on 6.2.2008, some consignment of taxable goods were seized vide seizure list dated 6.2.2008 due to failure on your part to show evidence in respect of proper accounting of goods.

Whereas subsequent verification of the documents produced by you in support of the seized goods, revealed that it were not properly accounted for in your regular books of account. Showing misclassification of goods which is taxable @ 12.5% were shown taxable (4% for the year 2007–08, further verification revealed that you have charged lower rate of tax 4% on goods which are actually taxable @ 12.5% and thereby evaded tax calculated as under.

Whereas on verification, value of the goods so seized which amounted to Rs. 78,02,241.00 found taxable @ 12.5%, tax involvement thereof is Rs. 97,75,280.00;

Whereas you have shown the seized goods taxable @ 4% which involved tax of Rs. 31,28,090.00;

Thus, you have knowingly prepares and produced incorrect accounts registers and documents and knowingly furnished incorrect information. Also willfully evaded and attempted to evade tax leviable under this act of tax to the tune of Rs. 66,47,190.00 which is arrived at by deducting Rs. 31,28,090.00 from Rs. 97,75,280.00. The acts of contravention of the provision of the act as such quite intentional, as such it deserved penal action as per law.

I, therefore, propose to impose penalty at the rate three times on the tax evaded is on Rs. 66,47,190.00 which comes to Rs. 1,99,41,570.00. Before passing final order in this regard you are, therefore, called upon to show satisfactory causes in writing as to why action contemplated above should not be taken against you.

Your reply to the notice should reach undersigned within 15.5.2008

In issuing this notice judgment and order dated 11.4.2008 of the hon’ble Gauhati High Court in Writ Petition (Civil) No. 1050/2008, Dhanani Shoes Ltd. v. State of Assam was taken into consideration.

Inspector of Taxes,

Unit-B, Guwahati.”

54. Having been served with the impugned notice, dated 16.4.2008, aforementioned, the present review petitioners, as already pointed out above, have sought for review of the conclusion reached by this court, particularly, in para 41 of the decision, to the effect that the exercise of power of seizure of the goods, under section 74(5)(a)(ii), by the respondent No. 2, cannot be said to be illegal or without foundation. What is being pointed out, in order to seek review of the conclusion so reached, is that this conclusion has been reached, on a specific submission, which had been made, orally as well as in writing, on behalf of the respondents, by Mr. Saikia, learned counsel, appearing on behalf of the respondents, during the course of hearing of the writ petition, that the seizure, in question, had been made, because of the reason that the goods, which stood seized, were found to have not tallied with the invoices produced by or on behalf of the petitioners; whereas the submissions, which had been so made on behalf of the respondents, particularly, in their written submission, in the writ petition, have, now, proved to be completely hollow and wholly untrue and incorrect inasmuch as the respondents, in the presently impugned notice, dated 16.4.2008, have dropped the ground of the goods having not tallied with the invoices produced as the ground for seizure of the goods and, instead thereof, what the respondents, now, contend, in the impugned notice, dated 16.4.2008, is that the verification, which they had conducted, before and that after the directions given by this court, in the writ petition, reveal that the seized goods had not been properly accounted for in the regular books of account inasmuch as the books of account allegedly show misclassification of goods, for, the goods, which are taxable @ 12.5%, were shown as taxable @ 4% for the year 2007–2008 and that the petitioners had accordingly charged lower rate of tax on goods, which were actually taxable @ 12.5%, and thereby evaded tax. On these considerations, the respondents, according to the impugned notice, seek to impose penalty at the rate of three times the tax, which the writ petitioners have allegedly evaded to pay.

55. In other words, review of the decision, in question, is sought on the ground that in the writ proceeding, when the attention of this court was specifically drawn, by the writ petitioners, to the seizure list, in question, to show that seizure of the goods had been made due to the alleged misclassification of goods, which could not have been a valid reason for making the seizure under section 74(5)(a)(ii) of the Act, the respondents sought to sustain the seizure, in the writ petition, by contending that since the seized goods were not tallying with the invoices produced, implication was that no entry had been made, with regard to the seized goods, in any of the registers, documents, etc., however, the ground that ‘the seized goods were found to have not been tallying with the invoices produced has, now, been abandoned as is reflected by the impugned notice, dated 16.4.2008, for, the impugned show-cause notice, nowhere, states that entries in respect of the seized goods had not been made in the books of account, registers or documents maintained by the petitioners and/or that the seized goods had not tallied with the invoices produced. This subsequent event, according to the review petitioners, proves correctness of the case, which the writ petitioners had, originally, set up, in their writ petition, by contending that the seizure of the goods was illegal, because the same had been made due to misclassification of goods and not due to the omission to make any entry in any books of account, register or documents.

56. Thus, it is, now, contended, on behalf of the review petitioners, that this court’s conclusion, (reached at para 41 of its decision, which is under review), that the seizure of the goods was legal, has been proved to be factually incorrect in the light of the subsequent development, i.e, the impugned notice, dated 16.4.2008, and this incorrect conclusion is apparent on the face of the record, such incorrect conclusion having been reached due to an incorrect submission made by Mr. Saikia, learned counsel, appearing on behalf of the respondents, and such incorrect submissions had, perhaps, been made due to false assertions made in the seizure list, in question, that the seized goods were found to have not been tallying with the invoices produced. Even otherwise also, points out the review petitioners, the seizure list clearly showed that the goods, which came to be seized, were found to have been entered, in the stock register, as goods taxable @ 4%; and, hence, when the stock of goods were found to have been entered in the stock register, the question of the goods having not been entered into in any register or documents, etc., and thereby the goods not having been accounted for did not arise at all; but this aspect of the matter, according to the review petitioners, had escaped notice of this court, when it pronounced its decision, in the writ petition, on 11.4.2008

57. It is, now, time to note that the impugned notice, dated 16.4.2008, is, indeed, silent and gives not even faintest of indication that penalty is sought to be realized from the petitioners on the ground that the seized goods were found to have not been tallying with the invoices produced; there is, in fact, not even an iota of assertion or material, in the impugned notice, dated 16.4.2008, which can reflect that the seizure is sought to be sustained on the ground that the seized goods were found to have not been tallying with the invoices produced. Far from this, the lone ground on the basis of which penalty is sought to be realized, is that the petitioners have allegedly shown, in their books of account the seized goods as taxable @ 4% and not @ 12.5%.

58. Thus, the very foundation of the decision, which this court had reached in the writ proceeding, on 11.4.2008, stands not only vigorously shaken, but completely withdrawn. As a result of the removal of the basis of the decision reached on 11.4.2008, it becomes crystal clear that unless this court can point out anything else, the earlier decision rendered by this court, on 11.4.2008, with regard to the seizure of goods, must, now, be held, by this court itself, to be incorrect, this incorrectness being apparent on the face of the record. Hence, even if the review petition is not allowed, it is within the ambit of the powers of this court and is, indeed, its duty, in the facts and circumstances of the present case, that it (this court), in the interest of justice, clarifies that the seizure, in question, had been upheld, in its earlier decision, in WP(C) No. 1050/2008 on the sole ground that seizure was shown to have been made, because the stock of goods were found to have not been matching with the invoices produced. This court also owes a duty to the parties concerned to clarify that the seizure of the goods had definitely not been sought to be sustained by the respondents, during the course of hearing of the said writ petition, on the ground that the goods, which are taxable at a higher rate, had been shown taxable at a lower rate and, furthermore, this court, ought to have clarified and must, now, clarify, and, indeed, clarifies that this court had never upheld the seizure, in question, on the ground of alleged misclassification of the goods by the petitioners in the sense that the goods, which are taxable at a higher rate, had been allegedly shown taxable, at a lower rate, by the writ petitioners.

59. Having realized that the basis of the conclusion reached, in the writ petition, as regards the validity of the seizure of the goods, has disappeared, it is, now, sought to be contended, on behalf of the respondents, that the seizure of the goods were made not merely because of the fact that the seized goods did not tally with the invoices produced, but also on the ground that the books of account and the other relevant documents reflected that the leather goods, which are taxable @ 12.5%, were shown as plastic goods and taxable @ 4% and that this misclassification of the goods was one of the grounds for sustaining the seizure of the goods. In order to strengthen this submission, it is, now, argued, on behalf of the respondents, that since section 74(5)(a)(ii) states that seizure can be made, when the goods are not accounted for, what this provision really means is that the goods have not been ‘duly accounted for’ inasmuch as a mere entry, in the stock register or in any other register or document, would, according to the respondents, not be enough unless and until it is also shown that the entries, so made, are factually and legally valid. It is the correctness of this submission, which is, now, required to be tested and determined.

60. In view of the above submissions, made on behalf of the respondents, that the expression, ‘not accounted for’, appearing in section 74(5)(a)(i) of the Act, implies ‘duly accounted for’, ‘properly accounted for’, or ‘validly accounted for’, the question, which one is really required to determine is as to what, in reality and in law, the expression, ‘not accounted for’, appearing in section 74(5)(a)(ii) means and conveys. There can be no doubt, as rightly contended by Dr. Saraf, that section 74(5)(a)(ii) cannot be read wholly independent of, or completely divorced from, section 74(5)(b) and also, if necessary, section 74(5)(c). In order to, therefore, correctly understand the meaning and import of the provisions, contained in clauses (a), (b) and (c) of sub section (5) of section 74, the contents of the provisions, embodied therein, need to be carefully taken note of section 74(5)(a), (b) and (c) read as under:

“74(5)(a). The authority referred to in sub-section (1), shall have the powers to seize any goods,—

(i) which are found in a dealers place of business or vehicle; or

(ii) which, such authority has reason to believe to belong to the dealer and which are found in any place of business or vehicle or any other building or place;

but are not accounted for by the dealer in his accounts or registers or other documents maintained in the ordinary course of his business:

Provided that a list of all the goods seized under this sub-section shall be prepared by such officer and be signed by the officer and not less than two witnesses.

(b) The authority referred to in clause (a) shall as soon as possible, after seizure of the goods under clause (a), serve upon the dealer, a notice to show-cause within a period of thirty days of service of such notice as to why a penalty equal to three times of the amount of tax as may be calculated on the price which such goods would have fetched on their assumed sale in the State, on the date of seizure, be not imposed on him for the dealer’s default in not making entries in respect of such goods in his books of account or registers or other documents, as the case may be, maintained by him in the course of his business.

(c) The authority seizing the goods shall record the statement, if any, given by the owner of the goods or his representative. If the authority referred to in clause (a), after taking into consideration the explanation of the dealer and after giving him a reasonable opportunity of being heard, is satisfied that the entries relating to the said goods were not made in the books of account, registers or other documents of the dealer without any proper justification, such authority shall, pass an order imposing penalty mentioned in clause (b) and direct him to deposit, in addition to the penalty, advance tax calculated on the deemed sale value of the goods at applicable rate of tax on sales of such goods which shall be adjustable with the liability to tax incurred on the purchase or the sale of such goods or the sale of goods manufactured there from and in case he finds otherwise, he shall order release of the goods.”

61. Clause (a) of sub-section (5) of the section 74 empowers the authority to seize any goods found in possession of a dealer, which ‘are not accounted for’ by the dealer in his books of account or registers or other documents maintained in the ordinary course of business.

62. Clause (b) of sub-section (5) of section 74 empowers the seizing authority to issue a notice to the dealer to show-cause as to why penalty (equal to three times of the amount of tax as may be calculated on the price, which such goods would not have fetched on their assumed sale in the state), shall not be imposed on the dealer ‘for his default in not making the entries in respect of such goods in his books of account or registers or other documents, as the case may be, maintained by him in the ordinary course of business’.

63. Clause (c) of sub-section 5 of section 74 empowers the seizing authority to record statement, if any, which the owner of the goods or his representative may offer to make, and, then, if the seizing authority, on taking into account the explanation of the dealer and after giving him a reasonable opportunity of being heard, is satisfied that ‘the entries, relating to the said goods, were not made in the books of account, registers or other documents of the dealer without any proper justification’, such authority shall pass an order imposing penalty mentioned in clause (b) of sub-section 5 of section 74, If, however, the authority finds that the explanation of the dealer, for not making entry relating to the goods in the books of account, registers or other documents, is satisfactory, appropriate order, releasing the goods, shall be passed by the seizing authority.

64. What a combined, but cautious reading of clauses (a), (b) and (c) of sub-section (5) of section 74 shows is that a notice, as envisaged in clause (b), would require a dealer to show-cause as to why penalty shall not be imposed for his default in not making entries, in respect of the goods seized, in his books of account or registers or other documents maintained by him in the ordinary course of his business. Clause (c) shows that if the dealer fails to give any justification for his default in not making entries, he would be penalized. The provisions, so contained in clauses (b) and (c), when read together, clearly convey that penalty is imposable only when no entry has been made in respect of the seized goods in the books of account, register or other documents maintained by the dealer in the ordinary course of his business, and his failure to offer any proper justification for not making the entries.

65. It is, thus, seen that it is not making of any entry whatsoever, as envisaged in clause (b) and (c), which would warrant imposition of penalty. This, in turn, shows that when clause (a) uses expression ‘not accounted for’, it would mean ‘complete absence of entry in the books of account or register or documents maintained by the dealer in his ordinary course of his business’ and not ‘proper, due or valid entry in the books of account or register or documents maintained by the dealer in his ordinary course of his business’. The effect of such construction of clauses (a), (b) and (c) is that if entry can be related to seized goods, seizure of the goods is impermissible. Hence, when a dealer reflects, in his books of account, register or documents, a particular item as taxable, at a rate lower than what it ought to be, seizure of such goods is not possible, for, the goods can be traced with the help of the entries so made. It is only when the goods are not traceable to any of the entries, which may have been made in the books of account, register or documents that seizure of such a goods is possible. Thus, it is complete absence of any entry in respect of the goods, sought to be seized, which can become the foundation for seizure of goods.

66. Since the words ‘books of account, registers or other documents’ have been mentioned in section 74(5), the alternative by use of the word “or”, it implies that entries made in any one of the three documents, i.e, the books of account or registers or other documents, maintained in the ordinary course of business, would be sufficient compliance of the provisions of section 74(5). I am guided to adopt the view from the decision, in Saral Kumar v. State of Haryana, (1996) 2 SCC 291, wherein, while dealing with a situation, where the documents were mentioned, in the alternative, in the relevant statute, the Apex Court held as under:

“It is obvious from a reading of the sub-section that the subsection refers to two sets of documents. The first set of documents are goods carrier record, trip sheet and logbook. They are mentioned in the alternatives which means that production of any one of these three documents would be enough. The subsection proceeds further and says that any of the said three documents should be produced “along with a challan as may be prescribed or cash memorandum or bill as the case may be”. These three documents, viz., challan, cash memorandum and bill may be called second set of documents. These three documents are again mentioned in the alternative, which means that any one of these three documents can be produced. In short, one of the documents from the first set and one of the documents from the second set have to be produced and that would be a sufficient compliance with the requirements of sub-section (2).”

67. What logically follows from the above discussion is that if the entries are found to have been made (in respect of the seized goods) by the dealer in his books of account, registers or other documents (as the case may be), maintained by him in the ordinary course of business, the seizing authority shall release the goods by making appropriate order. It is, thus, complete omission to make entry, which can become the ground for seizure of the goods. In other words, only those goods can be seized in respect whereof, no entry has been made. Thus, it is nonexistence of entry in the books of account, registers or other documents, which can become the ground for seizure of the goods and it is this absence of entries, which is covered by the expression ‘not accounted for’. The ‘non-existence, of entry’ cannot be equated to the expression ‘non-existence of proper or due or valid entries’ nor can the expression ‘not accounted for’ be equated to the expression ‘absence of proper or due or valid entries’.

68. The impression that it is the complete absence of entry and not mere absence of proper or due or valid entry, which can become the foundation for seizure of goods, gets strengthened, when one comes to clause (b) of sub-section (5) of section 74, for clause (b) requires the seizing authority to give a notice to show-cause as to why penalty, as perceived in clause (b), shall not be imposed on the dealer ‘for the dealers default in not making entries’ in respect of such goods in his books of account, registers or any other documents. The expression, ‘for his default in not making entries in respect of such goods’ cannot be equated to ‘for the dealer’s default in not making proper entries or due or valid entries’ in respect of such goods in his books of account or registers or other documents, maintained by him in the course of his business. In other words, clause (b) reinforces the inference that it is the absence of entry and not the deficiency or absence of proper entry or due entry or valid entry in respect of the goods, sought to be seized, which can become the foundation for taking action under section 74(5)(a).

69. Any veil of doubt, which one may entertain in this regard, gets ruptured and, in fact, wholly removed, if one takes a cautious note of the contents of clause (c), for, clause (c) reveals, once again, that the seizing authority, if, after taking into consideration the explanation of the dealer and after giving him a reasonable opportunity of being heard, is satisfied that the entries, relating to the said goods, were not made in the books of account, registers or other documents of the dealer without any proper justification, such authority shall, pass an order imposing penalty mentioned in clause (b) and direct him to deposit, in addition to the penalty, advance tax calculated on the deemed sale value of the goods at applicable rate of tax on sales of such goods, which shall be adjustable with the liability to tax incurred on the purchase or the sale of such goods or the sale of goods manufactured there from. Thus, it is only in the event when “the entries relating to the said goods were not made in the books of account, registers or other documents of the dealer without any proper justification” that the seizing authority receives the jurisdiction to impose penalty and not otherwise. The expression ‘the entries relating to the said goods were not made in the books of account, registers or other documents of the dealer’ would obviously mean complete absence of entries and net the deficiency or absence of proper or due or valid entries. It would be in violation of the rules of interpretation of a statute to forcibly import into, or forcibly read into, any provision of a statute, a word or-an expression, which the Legislature has chosen not to import into or add, for, reading into anything, besides what clauses (a), (b) and (c) reflect, would mean relegislation, which is impermissible in law.

70. On a patient and cautious reading of the provisions contained in section 74(5)(a), there remains no room for doubt that the condition precedent for making seizure of the goods, under section 74(5)(a), is that entries had not been made in respect of the goods in the books of account, registers or other documents maintained in the ordinary course of the business by the dealer. If the entries have been made and with the help of the entries so made, the goods, in controversy, can be identified, it can, by no stretch of imagination, be construed that the entries have not been made in terms of the provisions of section 74(5)(a). If the goods, sought to be seized, are identifiable, because of the brand-name or because of the code number, etc., of the product, it cannot be said, in the face of existence of such an entry in the books of account, registers or documents, that no entries in respect of the goods exist and to a situation of this kind, provisions of section 74(5)(a) would not be attracted.

71. What surfaces from the above discussion is that it is the nonexistence of any entry or complete absence of entries in his books of account, registers or other documents maintained by a dealer in the ordinary course of his business, which can become the foundation or basis for seizure of the goods. The power of seizure of goods, as embodied under section 74(5)(a), cannot be exercised, if there exists an entry in respect of the goods, which are sought to be seized. The purpose of section 74(5)(a) is to ensure that in respect of the goods, which a dealer may have in his possession, there must be some entry in his books of account, registers or other documents, maintained in the ordinary course of the business by the dealer so that the goods can be traced into the stock of the dealer. If, in respect of some goods, a dealer has made no entry in his books of account, registers or other documents, it would not be possible to trace out or identify the goods and such a situation may warrant seizure of such goods.

72. The respondents contend, as already indicated above, that the expression, ‘not accounted for’, which appear in section 74(5)(a), must be construed to mean ‘not validly, properly or duly accounted for’.

73. Is such an interpretation, in the light of the language used in section 75(5)(a) and under the scheme of the Act, sustainable? This question, in turn, brings us to the difference between the powers conferred on a seizing authority, while seizing the goods and while seizing the books of account. The provisions, with regard to seizure of goods and books of account, have been separately made in the Act. I have already reproduced hereinabove the provisions of section 74(5)(a), (b) and (c), which relate to the seizure of goods. As regards the question as to when seizure of the books of account can take place, sub-section (3) of section 74 states as under:

“74(3)(a). If any authority referred to in sub-section (1), has reasons to believe that any dealer has evaded or is attempting to evade the payment of any tax due from him and is keeping or has kept his accounts in such a manner as is likely to cause evasion of tax payable under this Act, such authority may, for reasons to be recorded in writing, seize such accounts, registers, documents including electronic records or computer of the dealer, as may be necessary, and shall grant a receipt for the same and obtain acknowledgement of the receipt so given to him:

Provided that if the dealer or person from whose custody the books of account, registers, documents including electronic records or the computer are seized refuses to give an acknowledgement, such authority may leave the receipt at the premises and record this fact.”

74. A plain reading of clause (a) sub-section, (3) of section 74 makes it clear that when the authority concerned has reason to believe that the dealer has evaded or is attempting to evade payment of tax due from him or is keeping or has kept the accounts in such a manner as is likely to cause evasion of tax payable under the Act, the books of account of the dealer may be seized. However, no such condition has been imposed by sub-section (5)(a) of section 74 of the Act. If entries, in respect of the goods, which is sought to be seized, have been made in the books of account, registers or documents maintained in the ordinary course of business, then, such goods cannot be seized on the plea that the goods have not been ‘properly’ or ‘duly’ or ‘validly’ entered into the books of account, registers or documents or that entries have been made therein in such a manner that the same is likely to cause evasion of tax payable under the Act. That such is the legislative intent, while enacting clause (a) sub-section (5) of section 74 of the Act, becomes all the more clearer, when one takes, in this regard, note of the relevant provisions of the Assam General Sales Tax Act, 1993, (‘the Act of 1993’), which stands replaced by the Act, which is, now, under consideration.

75. It is section 46(2)(b) of the Assam General Sales Tax Act, 1993, which conferred powers on the authorities concerned to seize goods. Clause (b) of sub-section (2) of section 46 read as follows:

“46(2)(b). The authority referred to in clause (a) shall have the power to seize any goods found in any such office, shop, godown, vessel, receptacle, vehicle or any other place of business or building or place as mentioned in clause (a) if such goods are found not properly accounted for or if the said authority has reason to suspect that evasion of tax payable under this Act may take place in respect of the goods.

Provided that a list all goods seized under this clause shall be prepared by such officer and be signed by the officer and the carrier or the bailed or the person in charge of the goods and by not less than two witnesses.”

76. From a microscopic reading of clause (b) of sub-section (2) of section 46, embodied in the Act of 1993, what becomes crystal clear is that the Legislature had given the power of seizure to the authroty concerned if the goods were found to have not been ‘properly accounted for’ or if the authority had reason to suspect that ‘evasion of tax, payable under the Act of 1993, may take place in respect of the goods’. The expressions ‘if such goods are found not properly accounted for’, or, ‘if the said authority has reason to suspect that evasion of tax payable under the Act may take place in respect of the goods’; (which occurred in section 46(2)(b) stand noticeably changed inasmuch as section 74(5)(a) of the present Act does not now require that the goods, in question, must have been ‘properly accounted for’; rather, section 74(5)(a) makes seizure possible only when the goods have not been accounted for in the sense that no entries in the books of account, register or other documents, maintained during the ordinary course of business, has been made. Similarly, seizure of goods, under the Act of 1993, was possible even if the authority concerned had reason to suspect that evasion of tax may take place in respect of the goods, sought to be seized. No such suspicion, as regards the possibility of evasion of tax can, now, under the present Act, be made the foundation for seizure of goods. When the corresponding provisions, as embodied in the Act of 1993, are borne in mind, it becomes abundantly clear that a misclassification of goods could have, undoubtedly, been made a ground for seizure under the old Act of 1993, but not under the present Act, for, the word ‘properly’, which appeared in section 46(2)(b), stands, now, consciously omitted in the present Act.

77. It is interesting to note that even when there were some semblance of authority, under the old Act of 1993, to make seizure of goods if the goods had not been ‘properly accounted for’ or when there was reason to suspect evasion of tax, this High Court, in Santosh Kr. Sarma… v. State Of Assam…Opp. Party., (2005) (3) GLR 425, having considered the scope of the power of seizure of an authority under section 46(a) and (b) of the Act of 1993, observed and held as under:

“The rival submissions advanced on behalf of the parties have received the due and anxious consideration of the court. What must be emphasised at the outset is that the act contemplates exercise of different species of power at different stages leading to the assessment of levy and collection of tax and what is to be exercised by the assessing authority at the stage of final assessment, are powers that are clearly identifiable and distinct from the powers to be exercised at the stage of seizure and imposition of penalty. The petitioner is a registered dealer of goods and, therefore, would be amenable to the requirement of filing of returns and proper assessment thereof at periods contemplated under the Act. The power of seizure and the power of levy of penalty are drastic powers conferred on the authority by the provisions of the Act with a view to prevent leakage of government revenue. In so far as a registered dealer is concerned, if goods either in transit or in stock are not properly accounted for, an inference would arise that there is an attempt at evasion of tax and therefore until and unless the identity of the goods are duly verified and provision is made to ensure that tax due will be paid, the goods should remain under seizure. The yardstick that has to be applied while exercising the aforesaid power is to be found within the four corners of section 46(2)(b) and (c), i.e, that the goods are not properly accounted for. The meaning of the said expression though is capable of being understood in either ways as contended by the learned counsels for the parties, the eventual meaning that should be ascribed will depend on the scheme contemplated by the statute. As already noted, the statute contemplates exercise of different powers at different stages by the various statutory authorities and though all such powers are designed to ensure proper levy and collection of taxes, the manner and extent of such exercise must vary. In case of a registered dealer if the total quantity of goods in stock or in transit are identifiable and the variety thereof is also known, to hold that the goods are not properly accounted for merely because there is a difference of opinion as to the sale price thereof, in the considered view of the court, would be doing violence to the scheme contemplated by the Act. Not only that, it would be inherently dangerous to read any such conferment of power at the stage of seizure in view of the possibility of abuse and misuse and it would be far more reasonable to understand such a conferment of power to have been made by the Legislature at the stage of completion of the quasi judicial act of assessment. When effective remedy can be attempted at the stage of final assessment and the object of the Act, i.e, to ensure due and proper collection of tax can be achieved at the stage of assessment, there is no reason why by a process of judicial interpretation such a power should be conferred to the authority at the stage of seizure. The power to determine the sale price for the purpose of assessment of tax under the Act, in case of a dispute, therefore, must be understood to have been vested in the assessing authority and in so far as a registered dealer like the writ petitioner is concerned, if the quantity of the goods in transit and the variety thereof is known what should be the sale price for the purpose of assessment of tax is a question that must be understood to have been relegated by the statute to the stage of final assessment, a conclusion that appears to be fortified by the provisions contained in the proviso to section 2(34)(d) of the Act.”

78. Thus, even when the words, used in section 46(2)(b) of the Act of 1993, were ‘not properly accounted for’ and even when the goods might have been seized if the authorities had reason to suspect that evasion of tax may takes place in respect of the goods, seizure of such goods was possible, this High Court had held that so long as the goods could be identified and tax payable could be assessed, seizure of goods was not warranted or even permissible.

79. In the case at hand, there is no dispute that goods are identifiable, there is not even slightest indication, in the averments made by the respondents in their affidavit-in-opposition that the goods were, or are, not identifiable. As a corollary, there can be no escape from the conclusion that the goods, in question, stand entered into the stock register and once an entry has been made in the books of accourrt, registers or other documents, maintained in the ordinary course of business, seizure, by taking resort to the provisions of section 74(5)(a), is not legally possible. This inference gets strengthened, when one takes note of the seizure list, in question. The seizure list is, therefore, reproduced once again:

“Seizure list.

In exercise of power conferred upon me under section 74(5)(a) of the AVAT Act, 2003, Sri D. Khersa, Inspector of Taxes, Guwahati Unit-B, do hereby seize the following goods found at the godown of Ms. Dhanani Shoes Ltd. At Am tola Dhirenpara, Guwahati, from the possession of Sri Abdul Kuddus, S/o it Sher Ali, Godown in-charge of the Ms. Dhanani Shoes Ltd. On today the 6th February, 2008 at 4 P.M on the grounds stated below in presence of witnesses.

Grounds of seizure: Stock of goods were found not matching with the invoices produced. Goods taxable at the higher rate are found shown as taxable at the lower rate of taxes and thereby causing evasion of taxes payable under the AVAT Act of 2003.

List of goods seized:— Stock of goods found in the stock register which are shown as 4 p.c taxable.

Sd/- Illegible

6.2.2008

Signature of the person from whom swized.

Witness: 1. Sd/- IllegibleSd/- Illegible. 6.2.2008

2. Sd/- Illegible. 6.2.2008Signature of Seizing Officer

Inspector of Taxes Unit B, Guwahait.”

80. When the list of goods seized, appearing in the seizure list, dated 6.2.2008, is read, it becomes clear that goods, which came to be seized, were, indeed, entered in the stock register as goods taxable @ 4%. It clearly implies that the stock of goods stood entered in the stock register and, therefore, in the face of such entries having been, admittedly, made, in the stock register, it cannot be said that the goods had not been accounted for and, hence, the seizing authority must be held to have acted arbitrarily and illegally in seizing the said goods from the godown of the petitioners. It appears that the seizure was made only on the ground that the goods, which, according to the petitioner, were plastic shoes taxable at the rate of 4 paise in a rupee, were, in the opinion of the seizing authority, not plastic goods and, therefore, taxable at the rate of 12.5% in a rupee. The misclassification of an item cannot be a reason for the seizure of the goods under section 74(5)(a) of the Act. As already pointed out above, the pre-condition for seizing goods, under section 74(5)(a), is that no entry whatsoever has been made in respect of the goods in the books of account or registers or documents.

81. In the present case, seizure have been upheld, if I may reiterate, not on the ground that the dealer had shown the goods in the stock register taxable @ 4% (because the seizure was not even sought to be sustained on this ground by the respondents), but on the ground that the goods seized did not tally with the invoices produced meaning thereby that there was no entry anywhere in respect of the goods, which were seized. It, now, appears, when the list of seized goods, as mentioned in the seizure memo, dated 6.2.2008 is considered, in the light of the impugned notice, dated 16.4.2008, and the averments, now, made by the respondents, that the seizure had taken place not because of the fact that there was no entry in respect thereof in the books of account, stock register or other documents maintained by the petitioner in their ordinary course of business, but because of the reason that in respect of these goods, appropriate rate of tax payable had not been mentioned. No wonder, therefore, that the respondents have now, abandoned their previous stand that no entry had existed in respect of the goods seized and what they, now, contend is that the expression ‘not accounted for’, which appears in section 74(5)(a), must be construed to mean validly, duly or properly accounted for.

82. I have already pointed out as to what the expression ‘not accounted for’, appearing in section 74(5)(a)(ii), means and conveys. In the light of the conclusions, which this court has reached above, there remains no room for doubt that the conditions precedent for making seizure of the goods, in question, were not available at all in the case at hand. Seizure was, therefore, clearly without jurisdiction and ought not to have been upheld by this court.

83. Thus, the decision, under review, suffers from manifest error of law and this error has, undoubtedly, caused serious miscarriage of justice. In fact, it has not even been disputed that if the seizure, in question, is found to be without jurisdiction by the seizing authority, the error needs to be corrected or else, there would be serious miscarriage of justice, for, saleable goods of the petitioners stand seized adversely affecting their business. Situated, thus, this court has no escape but to acknowledge its error in reaching the conclusion, which it had reached, as regards the validity of the seizure, and when this error becomes too transparent and too glaring to be refused to be taken notice of, it becomes the duty of this court to correct the error, which had crept in its decision under review.

84. When the seizure, in question, has, now, been held to be without jurisdiction, it logically follows that the impugned notice to show-cause, dated 16.4.2008, (which is dependent upon the verification carried out on the strength of the seizure of the goods), too suffers from lack of jurisdiction and cannot be sustained. Thus, this court’s finding with regard to its own decision, under review, is sufficient not only to set aside the Seizure, in question, but also the impugned notice to show-cause.

WP(C) No. 1781/2008

85. Bearing in mind what has already been indicated above, let me, now, deal with WP(C) No. 1781/2008, whereby the present petitioners have challenged the validity of the impugned show case notice, dated 16.4.2008 Though, in the light of the decision, reached on the review petition, the impugned notice to show-cause cannot survive, what needs to be pointed out is that the review petitioners have, by way of a separate writ petition, challenged the show-cause notice, dated 16.4.2008, aforementioned and it is this writ petition, which, as indicated above, has given rise to WP(C) No. 1781/2008. The impugned notice is sought to be sustained by the respondents on the ground that the notice had been issued pursuant to the directions given by this court in its earlier decision, under review, and, hence, the notice to show-cause cannot be said to be without jurisdiction. Yet another ground on which the impugned notice is sought to be sustained by the respondents is that the since the, notice in question, gives an opportunity to the present petitioners to show-cause against the proposed penalty, they can, in their reply to the show-cause notice, very well agitate the ground as to whether the authority, which issued the notice, was or was not competent to issue the notice and/or whether the notice itself suffers from lack of jurisdiction. In support of these submissions, reliance is placed on P.N Godavarman v. Union of India, (2000) 10 SCC 494; V.S.T Industries Ltd. v. State of Assam, 2004 (2) GLT 290, and M.S Associates v. Union of India, 2007 (4) GLT 176.

86. While considering the grounds on which the respondents, now, seek to sustain the impugned notice, it needs to be re-emphasised that when the seizure itself has been held to be without jurisdiction, it logically follows, (as already pointed out above), that the impugned show-cause notice cannot survive, for, the notice is nothing, but an extension or after-effect of the seizure, which has already been held to be without jurisdiction. In such circumstances, the impugned notice cannot be sustained and, in consequence thereof, there is no option, but to allow the writ petition, namely, WP(C) No. 1781/2008, whereby the petitioners have put to challenge the show-cause notice, dated 16.4.2008, as a notice having been issued without jurisdiction.

87. Coupled with the above, what may also be pointed out is that the seizure, in question, was made in purported exercise of the powers under section 74(5)(a)(ii). There is also no dispute that the notice, in question, has been issued in exercise of powers under section 74(5)(b). A notice, under clause (b) of section 74(5), can be issued only when there is legally sustainable seizure under section 74(5)(a)(ii). When the seizure itself has been held to be without jurisdiction, the notice, in question, which stands issued under clause (b) of section 74(5), cannot survive on its own or independent of the said seizure. Suspicion of evasion of tax is one of the conditions for seizure of the books of account, registers or documents, but it cannot become a ground for seizure of the goods unless no entry, in respect of the goods, sought to be seized, is found to have been made in the books of account, registers or documents maintained by a dealer in the ordinary course of his business. The seizing authority can assume jurisdiction, under section 74(5)(b), to issue show-cause notice only when the dealer defaults in making entry in respect of the goods in his books of account, registers or other documents as aforementioned.

88. The very fact that the impugned show-cause notice claims that the goods, taxable @ 12.5%, have been shown as taxable @ 4%, it logically implies that the entries in respect of the goods, which were seized, did exist in the books of account, documents or registers, although, in the opinion of the seizing authority, tax would be payable @ 12.5% instead of @4%.

89. What is also equally important to note is that a dealer is free to sell taxable goods without realizing sales tax from his buyer. As far as the dealer is concerned, he would be liable to pay sales tax, which he may or may not have realized from his buyer. Liability to pay sales tax arises only when the dealer sells goods and not before sale takes place. Before sale, the liability is to make entry in the books of account, registers or documents as regard the goods and no more. In the case at hand, the goods, in question, have not been sold and, hence, in such a situation, when the goods stand entered in the sock register, it is not material at what rate the dealer has decided to realize sales tax, for, his liability to pay sales tax would arise only when he sells goods and if he realizes sales tax lesser than what he ought to have had, it is the dealer, who would have to pay requisite sales tax for the goods sold. If a dealer sells goods and does not make payment at the rate at which sales tax is payable, his books of account, register or other documents, which can show entry of the goods and its sale, can be seized and tax can be realized by taking resort to section 74(3).

90. When, in a given case, conditions precedent for assumption of jurisdiction are non-existent, the High Court would be, within the ambits of its powers under article 226, if it strikes down the notice to show-cause, which has been issued by assuming jurisdiction, where conditions precedent for assumption of such jurisdiction did not exist.

91. In the present case, as already, discussed above, the conditions precedent for assumption of jurisdiction to issue show-cause notice under clause (b) of section 74(5) being non-existent, the impugned notice cannot be sustained. To the facts of the present case, the Constitution Bench decision, in Calcutta Discount Co. Ltd. v. ITO, AIR 1961 SC 372, is most appropriate, wherein the Apex Court has held:

“It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences.

92. It needs to be pointed out that in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta, AIR 1961 SC 372, it was contended, on behalf of the State, that since provisions exist in the statute enabling the person, proceeded against, to show-cause against the assessment, which is sought to be made, and when provisions also exist for preferring appeal against the order, which may be passed in the assessment proceeding, there was an alternative remedy available to the person proceeded against and, hence, writ jurisdiction, under article 226, was not invokable. Reacting to the submissions so made, the Constitution Bench pointed out that when the conditions precedent for assumption of jurisdiction, under section 34 of the Income Tax Act, are not satisfied, the High Court would be justified in invoking its jurisdiction under article 226. In fact, leaving no room for doubt, the Apex Court emphasized, in Calcutta Discount Co. Ltd. (supra), that when the Constitution confers on the High Courts the power to give relief, it becomes the duty of the High Court to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. Thus, existence of alternative remedy cannot be construed as a bar to the exercise of jurisdiction under article 226 if a statutory authority exercises a power without satisfying the conditions subject to which exercise of such power is permissible. In such a case, such exercise of power would be treated as an exercise of power without authority of law and without jurisdiction.

93. In the case of Wazir Chand v. State of Himachal Pradesh, AIR 1954 SC 415, the Constitution Bench had, in no uncertain words, held that when seizure is made in the absence of any authority under the law, such a question can be raised in a writ petition and for restoration of goods so seized, a writ, in the nature of mandamus, can be issued.

94. In Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. Ltd., (1972) 2 SCC 560 : AIR 1972 SC 2563, a three Judge Bench of the Supreme Court, while reacting to the question as to whether the Collector, who had issued the impugned notice, did or did not have the authority under the relevant rules, reacted by observing that such a question, i.e, a question as to whether the authority, which issues a notice, has or does not have any authority of law is a question of jurisdiction and when such a question goes to the root of the case and when such a question, can be decided without taking further evidence, a writ petition under article 226 can be entertained.

95. I may also refer to Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1 wherein the Apex Court has clarified the position of law in the following words:

“The power to issue prerogative writs under article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for “any other purpose”.

Under article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.”

96. From what have been observed and laid down, in Whirlpool Corporation (supra), it becomes clear that an alternative remedy is not an absolute bar to the exercise of jurisdiction, under article 226, in, at least, three contingencies, namely, (i) where the writ petition has been filed for the enforcement of any of the fundamental rights, or (ii) where there has been a violation of the principles of natural justice, or (iii) where the order or proceeding is wholly without jurisdiction or where the vires of an enactment is under challenge.

97. In Buishi Yada Motors v. State of Arunachal Pradesh, 2003 (3) GLR 550, this court has held that when a show-cause notice is issued On consideration of assumption of law, which are extraneous and untenable, the same makes the notice without jurisdiction and thereby deserves to be interfered with under article 226 of the Constitution of India. The relevant observations, made in Buishi Yada Motors (supra), read as under:

“What follows from the above discussions and the position of law as laid down by the Apex Court is that an assessing authority can demand even by way of a notice to show-cause payment of alleged unpaid tax only when it is satisfied, on application of its own mind, that such a demand can be raised. This apart, the demand, which is so raised, has to be based on materials, which are prima facie tenable under the law. If the demand raised is contrary to the law or not based on any authority of law, such a demand can be interfered with by the High Court in exercise of its powers under article 226 of the Constitution of India even at the very initial stage, when such a demand is raised. Viewed from this angle, the show-cause notice, which proceeds on the assumptions, namely, (i) that in order to constitute a contract of sale during the course of interstate trade and commerce, the contract must be supported by materials in writing, (ii) the vehicles, in question, could have been sold to only registered dealers and not to individuals and/or (iii) that a declaration in Form-C ought to have been furnished by the petitioner in respect of each sale of vehicle to enable it (i.e, the petitioner) to claim benefits of the notification (Annexure-A), although no such pre-conditions is required to be fulfilled by the petitioner to be able to claim the benefits of the notification (Annexure-A), the very issuance of the show-cause notice is, at its very threshold, being on considerations and assumptions of law, which are extraneous and tin-tenable make the notice without jurisdiction and deserves to be interfered with.”

98. From the decisions referred to above, it becomes clear that it is no longer res integra that when show-cause notice is found to be without jurisdiction and/or found to be issued in excess of jurisdiction or when the notice is found to have been issued without fulfilment of the preconditions laid down by the Legislature for issuance of such notice, High Court, in exercise of its extraordinary power, under the article 226, can interfere with such a notice. In the Union Of India v. Hindalco Industries., (2003) 5 SCC 194, where the High Court had interfered with the show-cause notice, the Supreme Court held that if an authority, which has the jurisdiction in regard to one aspect, launches an enquiry into a matter in respect of which it had no jurisdiction, then, merely because it had, in regard to one aspect, jurisdiction, the court cannot ignore the fact of lack of jurisdiction and allow the Tribunal to proceed in the matter in respect of which it had no jurisdiction to make enquiry. The observations made, in this regard, by the Supreme Court read as under:

“We are unable to accept the contention of the learned counsel for reasons more than one. First, as submitted by Mr. K.K Venugopal, if an authority which has jurisdiction in regard to one aspect takes upon itself to make enquiry into a matter in respect of which it had no jurisdiction then merely because in regard to one aspect it has jurisdiction, the court cannot ignore the fact of lack of jurisdiction and allow the Tribunal to proceed with the matter in respect of which it has no jurisdiction to make inquiry. Secondly, the position, stated above, namely, that valuation once accepted under clause (a) and there being no vitiating factor, no recourse can be had to valuation under clause (b) is a settled position of law. Therefore, at this stage, if the party is directed to go back to the authority, it would be directing it to undergo a futile exercise.”

99. It may be pointed out that in Hindalco Industries Ltd. (supra), the submission, advanced on behalf of the Union of India, that the Apex Court had, in the past, deprecated the practice of entertaining writ petitions at the stage of show-cause notice and, hence, the High Court ought not to have decided the case on merit, at the stage of show-cause notice, was negated by the Apex Court. In fact, in Seimens Ltd. v. State of Maharashtra, (2006) 12 SCC 33, the Apex Court has clearly held that, ordinarily, a writ court may not exercise discretionary jurisdiction by entertaining a writ petition, which questions show-cause notice unless the same appears to be, inter alia, without jurisdiction.

100. Reverting to the cases of P.N Godavarman (supra), V.S.T Industries Ltd. (supra) and M.S Associates (supra), which the respondents rely upon to contend that the present writ petition cannot be entertained at all, it needs to be clarified, and bear repetition, that when this court has upheld, as noted above, that the notice to show-cause is wholly without jurisdiction, it is not really necessary for this court to determine as to whether the alternative remedy, provided to the petitioners, in the form of show-cause notice to the proposed penalty, creates any legal bar to the entertainment of the present writ petition. That an alternative remedy is not a bar to the entertainment of a writ petition, when the action proposed by an authority is without jurisdiction, as already indicated above, is no longer res integra.

101. V.S.T Industries Ltd. (supra) is, in fact, a case, where a notice to show-cause was challenged by filing a miscellaneous application without amending the writ petition. This apart, the show-cause notice, issued in V.S.T Industries Ltd. (supra), aimed at finding out the facts with participation of the assessee; whereas the notice to show-cause, in the present case, is, as already held above, without jurisdiction and when the notice to show-cause suffers from complete lack of jurisdiction, the fact that an opportunity to show-cause has been provided against the proposed penalty is of no real significance. To the facts of the case at hand, therefore, the decision in V.S.T Industries Ltd. (supra) has no application at all.

102. Turning to the case of M.S Associates (supra), it needs to be pointed out that in M.S Associates (supra), a notice to show-cause was issued on the ground that the petitioner therein was rendering business of auxiliary services without obtaining service tax registration. The said notice was challenged on the ground that the Apex Court, in B.R Enterprises v. State of U.P, (1999) 9 SCC 700 : AIR 1999 SC 1867, has held that the State Lotteries cannot be construed to be a trade and business within the meaning of articles 301 to 334 of the Constitution of India. The facts of the case of M.S Associates (supra) too, were, thus, completely different from the facts of the present case. The Apex Court’s decision in RN. Godavarman (supra), which had been relied upon in M.S Associates (supra), is a case, where the Apex Court was dealing with a Special Leave Petition filed against an interim order passed by the High Court on a writ application, whereby show-cause notice was challenged. The Apex Court held that the proceedings, in pursuance of the show-cause notice, may continue, but no final order be passed. The Apex Court’s decision, in P.N Godavarman (supra), is not at all relevant to the facts of the present case.

103. Lastly, it has been contended, on behalf of the respondents, that there is anomaly in the stock of goods seized inasmuch as the figure of the stock seized, as per the seizure list, is different from what is contended in the writ petition. While considering this aspect of the case, it needs to be pointed out that there is no dispute between the parties as regards the number of goods seized inasmuch as the notice to show-cause has been issued on the basis of the stock of goods seized. The petitioners have, in fact, pointed out that the shoes, manufactured by one of the companies, were not seized inasmuch as the said shoes were found to be taxable @ 12.5%. This apart, the present writ petition concerns itself with the seizure of the goods and the notice to show-cause. In these circumstances, when the seizure as well as the notice to show-cause have already been held to be without jurisdiction, any anomaly, in the writ petition, cannot become a ground for validating an illegal seizure and/or the notice aforementioned, which are, otherwise, without jurisdiction.

104. When the Legislature gives power to an authority subject to existence of certain conditions precedent, the authority concerned cannot assume jurisdiction unless the conditions precedent exist. Assumption of jurisdiction by an authority, without the conditions therefor being satisfied, would obviously be a case of the authority acting without jurisdiction. If, however, an authority, while acting within its jurisdiction, makes an error of law, then, it may become a case of exceeding its jurisdiction. While the latter case is a case excess of jurisdiction and maybe corrected by supervisory jurisdiction, the former suffers from complete lack of jurisdiction and can be interfered with, at its very inception, by the superior court, for, the assumption of jurisdiction, without existence of the conditions precedent thereof, would make the decision, to be rendered, otherwise, also, a nullity.

105. If the Legislature enacts a law by stating that a power can be exercised by an authority subject to existence of certain state of affairs, it would logically follow, in such a case, that if the state of affairs, as conceived in the legislation, does not exist, the authority would have no jurisdiction.

106. A writ court cannot allow an authority to proceed with a matter even when an authority has no jurisdiction to proceed with the matter. An authority can exercise jurisdiction only when it has jurisdiction in the matter and not when the authority assumes or exercises jurisdiction, where it had no jurisdiction. In the present case too, since the seizing authority has assumed jurisdiction, as already indicated above, without the existence of conditions precedent therefor, it becomes a case of assumption of jurisdiction, where no jurisdiction exists, and a notice to show-cause, issued on assumption of such jurisdiction, needs to be interfered with and set aside by issuing a writ in the nature of certiorari and, in the given circumstances, it is even possible to issue a writ in the nature of mandamus commanding the seizing authority to release the seized goods, when the seizure suffers from complete lack of jurisdiction.

107. Because of what have been discussed and pointed out above, it is hereby held and clarified that the seizure of the goods, in question, was without jurisdiction and must be set aside and, in consequence, thereof, the notice to show-cause, which stands impugned in the present writ petition, cannot survive and must fail.

108. In the result and for the reasons discussed above, the review petition is allowed. The seizure of the goods, in question, is hereby set aside and quashed and, in consequence thereof the impugned notice to show cause, dated 16.4.2008, is also set aside and quashed.

109. In view of the fact that the seizure as well as the notice aforementioned have been set aside and quashed, the respondents are directed to, forthwith, release the seized goods, in question. With the above observations and directions, this review petition and also the writ petition shall stand disposed of.

110. No costs.

section 74(5)(a)(ii)

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——–

Amitava Lala, J.– This writ petition has been made by the petitioner on 08th August, 2005 praying inter alia as follows:

“A– An order, direction or writ in the nature of Mandamus commanding the respondents to appoint the petitioner in the U.P. Nyayik Sewa Civil Judge (Junior Division) in pursuance to the 2000 examinations conducted by the U.P. Public Service Commission.

B– Such other and further order, direction or writ of suitable nature which this Hon’ble Court may deem fit and proper in the circumstances of the case.

C– An order awarding cost of this petition to the petitioner.”

2. The fact remains that the petitioner belongs to Scheduled Caste category and appeared in U.P. Judicial Service Civil Judge (Junior Division) Examination, 2000. The petitioner’s name was not included in the list of the selected candidates although he had been awarded 530 marks, whereas, the last selected candidate belonging to Schedule Caste category had secured 531 marks. Learned Counsel appearing for the petitioner contended that the last selected Scheduled Caste candidate in the select list, namely, Sri Pooran Chandra even after being selected did not join because he was appointed in Delhi Judicial Service. He further contended that appointment of another Schedule Caste candidate Sri Suresh Kumar Singh was cancelled due to fake Scheduled Caste certificate produced by him. Therefore, according to the petitioner, two vacancies are available in the select list to accommodate the petitioner against one of the existing vacancies of such category. In the writ petition there is no whisper with regard to any arbitrary action on the part of the State or the High Court.

3. On behalf of the High Court, being respondent no. 3 herein, a counter affidavit has been filed categorically mentioning certain facts, which are important in this respect. It has been stated in the counter affidavit that for recruitment to fill up 147 posts of the officers of U.P. Nyayik Sewa i.e. Civil Judge, Junior Division–2000, the same were advertised on 04th March, 2000 in daily newspaper i.e. Northern India Patrika. After holding the examination and interview the State Government vide its letter No. 4351/II/4-2003-32(2)/98 T.C.-2, dated 12th November, 2003 communicated a list of the names of 145 successful candidates to the High Court for indicating the places of posting in the districts. By letter No.283/D.R.(S)/03, dated 10th December, 2003 the High Court communicated to the State Government the places of postings in respect of 138 recruited candidates i.e. Civil Judge, Junior Division, out of 145 selected candidates as six selected candidates were already appointed and working as Civil Judge, Junior Division, on the basis of U.P. Nyayik Sewa Civil Judge, Junior Division, Examination–1999 as well as under the interim order of the Supreme Court and one selected candidate Sri Pradeep Kumar Srivastava had refused to join as he was appointed in Jharkhand Judicial Services. It has been further submitted that out of aforesaid 138 selected candidates, three candidates, namely, Sri Mohd. Wasim Ali, Sri Pooran Chandra and Smt. Alka Gupta did not join and as such their candidatures were cancelled by the Government. Thus, only 135 selected candidates of Civil Judge, Junior Division, have joined their services pursuant to appointment notifications. It has been categorically contended by the respondents that Sri Dinesh Singh, whose name was wrongly excluded from the select list, made a representation. In his representation dated 27th June, 2005 addressed to the Principal Secretary (Law) and Legal Remembrancer, Govt. of U.P., Lucknow as well as to the High Court, Sri Dinesh Singh (the then candidate of Civil Judge, Junior Division, Examination-2000) has brought the following facts:

4. Learned Counsel appearing for the respondent no. 3 contended that from the perusal of the above chart, it appears that Sri Dinesh Singh secured more marks in interview than Sri Mohd. Ghazali. Sri Mohd. Ghazali and Sri Ajai Kumar Dixit were selected and appointed, but besides obtaining more marks in interview than Sri Mohd. Ghazali, he (Dinesh Singh) could not be selected. Subsequently, under the directions of this Court passed in the writ petition filed by Sri Dinesh Singh he was selected as 136th candidate, because the Court in Writ Petition No. 1247 (SB) of 1992 (Manju Trivedi Vs. State and others) has held that if there are equal marks of two or more than two candidates then their placement will be made according to the marks obtained in interview. It has been further stated that the vacancies caused due to not joining by Sri Pooran Chandra, Sri Mohd. Wasim Ali and Smt. Alka Gupta were not included in the recruitment of 347 posts of Civil Judge (Junior Division), i.e. in the recruitment batch of 2003, because at the time of requisition of 347 posts of Civil Judge (Junior Division) the result of 147 posts of Civil Judge (Junior Division) i.e. the recruitment batch of 2000, was not declared. Hence, the aforesaid three vacancies have been included/carried forward to the next recruitment i.e. U.P. Nyayik Sewa Civil Judge (Junior Division) Examination–2006 for 355 posts of Civil Judge (Junior Division).

5. However, Mr. Rameshwar Nath, learned Counsel appearing for the petitioner contended that in view of the judgement reported in 2005 (6) AWC 6015 (Om Prakash Singh Vs. State of U.P. and others) if the posts, for which selections have been made, are not actually filled up by the joining of the candidates who might later have withdrawn, but that the withdrawal or not joining happened before the actual filling up of posts, then the ordinary course to be followed by the public respondents would be to draw upon the unexhausted merit list and give appointment to the persons who are next in order of merit. He also relied upon a judgement of the Single Judge, having its persuasive value, as reported in 2002 (4) AWC 2804 (Trilok Nath Mishra and others Vs. State of U.P. and another) and contended that the action of the respondents is unreasonable, extraneous to the object of preparing list and are arbitrary. A candidate has a constitutional right under Article 14 read with Article 16 of the Constitution of India to be considered for appointment on the available vacancies after going through the process of selection. This right can not be defeated on the ground that some of the candidates in some other selections have filed writ petitions and challenging the number of vacancies, which could not be filled up for various reasons or that it takes a long time. He relied upon a judgement of the Supreme Court reported in JT 2006 (12) SC 105 (Andhra Pradesh Public Service Commission Vs. P. Chandra Mouleesware Reddy and others) to apprise that lapse of seven years in not filling up the vacancies is a good cause. Learned Counsel appearing for the petitioner further contended that in view of another Division Bench judgement of this High Court reported in 1999 (2) AWC 1230 (State of U.P. and others Vs. Ravindra Nath Rai and others) it is no doubt correct that a person on the select panel has no vested right to be appointed to the post for which he has been selected. He has a right to be considered for appointment. But at the same time the appointing authority can not ignore the select panel or decline to make the appointment on its whims. It has also been stated that although there is no provision either statutory or other otherwise to prepare waiting list but preparation of such list cannot be nullified. Learned Counsel for both the parties contended that as per the present rule, select list prepared under sub-rule (3) of Rule 20 of the Uttar Pradesh Judicial Service Rules, 2001 shall lapse after all the vacancies advertised or varied after due notification, are filled up as per sub-rule (2) of Rule 21 of the said Rules. According to the learned Counsel appearing for the petitioner on interpretation of such sub-rule, since their names are not incorporated in the selection of 2003 but in 2006, his right has not been exhausted. To that, learned Counsel appearing for the High Court-respondent no. 3 contended before this Court that both the selections for the year 2003 and 2006 have already been held and results are declared as because result of 2000 examination was not declared prior to recruitment of 2003, the alleged vacancies of Sri Pooran Chand, Sri Mohd. Wasim and Smt. Alka Gupta were not included in the batch of recruitment for the year 2003. On enquiry we have come to know that the recruitment Rules of the year 2001, as aforesaid, was effected from 01st July, 2000 prior to selection of the year 2000 itself.

6. Sri Amit Sthalekar, learned Counsel appearing for the respondent no. 3, cited a decision of the Supreme Court reported in AIR 1988 SC 162 (State of U.P. Vs. Rafiquddin and others) to establish that it is necessary to consider as to how long the list of candidates for a particular examination can be utilized for appointment. There is no expressed provision under the Rule. In absence of any provision in the Rules a reasonable period must be followed during which the appointment on the basis of the result of a particular examination should be made. Due to non-availability of suitable candidates, the appointment to the remaining vacancies could be made on the basis of the result of the subsequent competitive examination and unfilled vacancies of 1970 examination (as therein) could not be filled after five years as subsequent competitive examination of the year 1972 (as therein) and of the year 1973 (as therein) had taken place and the results had been declared. The 1970 examination could not be utilized as a perennial source or inexhaustible reservoir for making appointments indefinitely. Both the parties have relied upon the judgement reported in AIR 1991 SC 1612 (Shankarsan Dash Vs. Union of India), in which it has been held by the Five Judges’ Bench of the Supreme Court that it is not correct to say that if a number of vacancies are notified for appointment and adequate number of candidates are found fit, the successful candidates acquire an indefeasible right to be appointed which can not be legitimately denied. However, a condition has been imposed by the Supreme Court by holding a view that unless an action is in the arbitrary manner. Learned Counsel appearing for the respondent no. 3 also cited a judgement reported in 2001 (6) SCC 380 (All India SC & ST Employees’ Association and another Vs. A. Arthur Jeen and others) to establish that merely because the names of the candidates were included in the panel indicating their provisional selection, they did not acquire any indefeasible right for appointment even against the existing vacancies and the State is under no legal duty to fill up all or any of the vacancies as laid down by the Constitution Bench of the Supreme Court in Shankarsan Dash (supra). During the course of hearing we also found a judgement being 1993 Supp (2) SCC 600 (Jai Singh Dalal and others Vs. State of Haryana and another) in which three Judges’ Bench of the Supreme Court held that law is settled that even candidates selected for appointment have no right to appointment and it is open to the State Government at a subsequent date not to fill up the posts or to resort to fresh selection according to revised criteria.

7. Therefore, in totality what we gather from the discussions are to be jotted down hereunder. This is not a case of any arbitrary or whimsical action nor it has been pleaded anywhere by the petitioner. The petitioner’s case is only based on equity. As because he is only short of one mark and not placed in the select list of the year 2000 against the vacancy created for the Scheduled Caste candidates, he can be easily accommodated even in 2006 as no period is fixed under the Rules for lapsing the select list. According to us, equity is not one way traffic. Equity follows law following the maxim aequitas sequitur legem. In other words, it is moving on the periphery of law and when law allows to enter, forms a zygote. Sometimes in the rarest occasion the law follows equity following the maxim lex aliquando sequitur aequitatem. Such situation is an exceptional situation. Exception can not be the rule. That exceptional circumstance can not be available here particularly when a chance application has been made by the writ petitioner after a period of five years from the original selection in spite of not having been placed in the select list and two successive select lists are exhausted by now. Thus, we do not find any reason to pass any affirmative order in favour of the petitioner. Hence, the writ petition stands dismissed.

8. However, no order is passed as to costs.

(Justice Amitava Lala)
I agree.

(Justice Shishir Kumar)
Dated: 01st February, 2008.
SKT/-

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Decided On: Mar-13-2008

Case Number: W.P. No. 2766 of 2005

Judge: Swatanter Kumar, C.J. and R.M. Borde, J.

Reported in: 2008(5)BomCR284; 2008(4)MhLj471

Appellant: Satpuda Tapi Parisar Sahakari Sakhar Karkhana Ltd.

Respondent: Jagruti Industries and anr.

Appellant Advocate: Anil Kasliwal, Adv., i/b., J.R. Shah, Adv.

Respondent Advocate: P.M. Shah, Sr. Counsel, i/b., Girish Mane, Adv. for Respondent No. 2

Acts: Partnership Act, 1932 – Sections 69; Bombay Public Trusts Act – Sections 51; Bombay Rents Hotel and Lodging House Rates Control Act, 1947 – Sections 28; Code of Civil Procedure (CPC) , 1908 – Sections 9, 9A, 9A(2) and 20 – Order 7, Rules 7 and 11 – Order 14, Rules 1, 1(5), 2, 2(1), 2(2) and 5 – Order 15, Rule 3 – Order 41, Rules 23, 24 and 25; Code of Civil Procedure (CPC) (Amendment) Act, 1999 – Sections 32; Code of Civil Procedure (CPC) (Amendment) Act, 2002 – Sections 16; Code of Civil Procedure (CPC) (Amendment) Act, 1976; Limitation Act – Schedule – Article 113; Transfer of Property Act; Maharashtra Co-operative Societies Act – Sections 91; Maharashtra Code of Civil Procedure (CPC) (Amendment) Act, 1970; Maharashtra Code of Civil Procedure (CPC) (Amendment) Act, 1976; Maharashtra

Judgment:

Swatanter Kumar, C.J.

1. In the case of Ujawalaben Mahindra Shah and Anr. v. Kesharchand Gulabchand and Ors. : 2002(1)MhLj378 , learned single Judge of this Court at Aurangabad Bench took the view that objection with regard to maintainability of a suit, on the plea that the plaintiff, a partnership firm, was not a registered partnership firm and thus the suit was hit by the provisions of Section 69 of the Partnership Act, 1932, was not a pure question of law and thus could not be tried and decided as a preliminary issue. In this case, the objections of the defendants in the suit was that there was no firm in the plaintiffs name registered with the Registrar of Firms at the time of filing of the suit and a firm with the name of ‘M/s Kesharchand Gulabchand Munot’ was in existence and subsequent to the filing of the suit, the plaintiff had approached the Registrar of Firms for deletion of the name ‘Munot’ from the firm’s name. Thus, the suit was not maintainable and the trial Court ought to have taken note of the fact and decided it as a preliminary issue. On the pleadings of the parties in that suit, the following issue was framed.

Does plaintiff prove that it is a registered partnership firm with Registrar of Firms?

The application filed by the defendants in the suit for deciding this issue as a preliminary issue was rejected by the learned trial Court vide its order dated 10th April, 2000 which was impugned before the High Court. The learned single Judge noticed difference of opinion between two learned single Judges’ in the case of Kranti Mohan Guruprasad Mehra and Anr. v. Fatehchand Vasuram Behal 1983 Mh.L.J. 141 and the view of another single Judge in the case of Maharashtra State Warehousing Corporation Limited, Pune v. Bhujang Krishnaji Kohale 1999(3) Mh.L.J. 652, and also discussing the impact of Section 9-A of the Code of Civil Procedure, 1908 (hereinafter referred to as ‘the Code’) by Maharashtra State amendment to the Code held that this issue was not with regard to the jurisdiction of the Court but maintainability of the suit before the Court and as such could not be tried as a preliminary issue at the threshold. Resultantly, the revision application was dismissed.

2. In the case of Arjun Dada Gadage v. Mallapa Gurappa Chougule and Anr. : AIR2003Bom441 , another learned single Judge of the Court, while referring to the cases of Meher Singh v. Deepak Sawhny : 1999(1)BomCR107 and Smithkline Beecham Consumer Healthcare GMBH v. Hindustan Lever Ltd. 2002(1) Mh.L.J. 453 : 2003(2) Bom.L.R. 547, expressed a somewhat divergent view and held that the provisions of Section 9-A of the Code, as applicable to the State of Maharashtra, was not in conflict with the provisions of Order 14 of the Code. In the appeal filed before the Appellate Court, an objection was raised that the presentation of the suit before the Court was barred as the plaintiff had not obtained consent of the Charity Commissioner as required by Section 51 of the Bombay Public Trusts Act. The Appellate Court accepted the contention which resulted in filing the writ petition before the High Court. In the writ petition, the High Court took the view that the trial Court was obliged to decide the issue of jurisdiction before deciding the application for interim relief application. The suit as presented being barred by jurisdiction, the issue ought to have been framed and decided at the very threshold and before deciding the interim relief application. The trial Court was thus directed to decide the issue expeditiously.

3. Somewhat similar view was taken earlier by a single Judge of this Court in the case of Shakuntala Balwant Gadgil v. Shubhada Suhas Kulkarni 1985 Mh.L.J. 77 : 1985(2) Bom.C.R. 231. While referring to Section 9-A of the Code and the objection taken by the defendants in the suit that the suit was not maintainable, the Court had no jurisdiction to try the suit on the ground that the provisions of the Bombay Rents Hotel and Lodging House Rates Control Act, 1947, does not apply to those premises and termination of tenancy was essential. On the pleadings of the parties, the trial Court had framed, amongst others, the following issue.

Whether the plaintiff proves that the Bombay Rents Act is not applicable to the suit premises?

The request of the defendant that the said issue be tried as a preliminary issue expeditiously, the Court even framed an additional issue as to whether the Court had jurisdiction under Section 28 of the Rent Act or its ordinary jurisdiction under the Transfer of Property Act. The application was dismissed by the learned trial Judge. The Court held that the trial Judge had taken a hyper-technical view of the matter, though under Section 9-A of the Code it may not be strictly incumbent upon the Court to try a particular issue as a preliminary issue but the Court should not have lost sight of the fact that the Court always had jurisdiction to treat a particular issue as a preliminary issue if it goes to the root of the jurisdiction of the Court. The question of jurisdiction is to be decided by the Court as it would decide the suit finally and once and for all. In these circumstances, while making the rule absolute and setting aside the order of the learned Judge, the learned single Judge remanded the matter for the issue being tried as a preliminary issue expeditiously.

4. The facts giving rise to the filing of present petition under Article 227 of the Constitution of India before the learned single Judge were that a suit for recovery of Rs. 6,10,748.15 was filed by the plaintiff which was a registered partnership firm. Upon service of summons, the defendants filed their written statement contesting the claim and also took up an objection that the Court had no jurisdiction to decide the suit in view of the provisions of Section 91 of Maharashtra Co-operative Societies Act. Upon pleading of the parties, the Court framed the issues and issue No. 3 read as under:

3. Whether this Court has jurisdiction to decide this suit considering the provisions under Section 91 of the Co-operative Societies Act.

4.1 Thereafter the defendant on 15th June, 2001 filed an application requesting the Court to recast the issues and frame an issue with regard to territorial jurisdiction as the entire transaction had taken place at Nandurbar and the Court at Shrirampur had no territorial jurisdiction to entertain and decide the suit. The defendant also prayed that the issue be tried as a preliminary issue and its determination be done right at the threshold. The trial Court declined the prayer for trying the issue as preliminary issue resulting in filing of the petition before the High Court.

4.2 As already mentioned, the learned single Judge found that the different single Judges of this Court had expressed divergent views and, therefore, referred the following two questions to be answered by the larger Bench.

1. Whether an application for framing of issue regarding jurisdiction whether pecuniary or territorial can be framed at a latter stage and whether the Court is obliged to decide that issue then as preliminary one?

2. Whether the object of introduction of Section 9-A in the Code can be made applicable to the applications that may be filed at latter stage of the suit?

5. As is clear from the above order of reference, the question in regard to the jurisdiction of the Court to decide the suit in face of bar contained in Section 91 of the Maharashtra Co-operative Societies Act was raised. Thereafter, an application was also filed for taking up the issue of territorial jurisdiction as the transaction had taken place at Nandurbar and the Court at Srirampur had no territorial jurisdiction. As the issues were recasted, the defendant had prayed that the issues be treated as preliminary issues. This application was rejected by the learned Civil Judge who accepted the argument of the plaintiff in the suit that the issue of territorial jurisdiction was an issue of mixed question of fact and law and, therefore, could not be tried as a preliminary issue. In view of Section 9-A, Order 14, Rule 2 of the Code and the various judgments cited, the learned single Judge was persuaded to make a reference to the larger Bench referring the above two questions for answering as questions of law.

6. At the very outset, we may dissect the referred questions into different parts so as to provide answer to the questions of law with clarity. Question No. 1 firstly requires the Court to examine whether an application for framing of issues regarding jurisdiction, pecuniary or territorial, can be filed and should the Court frame issue to that effect even at a later stage. Secondly, whether the Court is obliged to decide that issue as a preliminary one. The second question then, therefore, requires the Court to examine and answer the question as to whether provisions of Section 9-A of the Code can be made applicable to such application which is filed at a later stage of the suit.

7. It needs to be examined as to what is the impact of Order 14, Rule 2 which was introduced in the Code on 1st February, 1977. Section 9-A of the Code was introduced by the State of Maharashtra in the year 1970 by the Code of Civil Procedure (Maharashtra Amendment), 1970. However, Maharashtra Amendment Act of 1976 was repealed and Section 9-A was again added in the Code in relation to its application in State of Maharashtra by the Code of Civil Procedure (Maharashtra Amendment) Act, 1977 and the same was published in Maharashtra Government Gazette on 9th December, 1977 after having received the assent of the President of India. The other aspect which the Court is required to advert is in the background of answer to the earlier part as to whether object behind provisions of Section 9-A would be applicable to the applications filed at the subsequent stage.

8. (DDDD of Versus). Before we proceed to discuss the other legal facets of the propositions of law referred for answer, we must notice that the view taken by the learned single Judge of this Court in the case of Arjun Dada (supra) was held to be a correct exposition of law by a Division Bench of this Court in the case of Madhuri Prabhakar Patole v. Aruna Satishchandra Gaikwad (Civil Revision Application No. 54 of 2006) (since reported in : 2008(1)BomCR709 ) where the reference was made by the learned single Judge to a larger Bench on the following issue:

Whether Section 9A of the Code of Civil Procedure, 1908 (hereinafter referred to as CPC) in relation to its applicability in the State of Maharashtra, stands repealed by Section 32 of the Code of Civil Procedure (Amendment Act, 1999) i.e. Central Act No. 46 of 1999 and/or by Section 16 of the Code of Civil Procedure (Amendment) Act, 2002 i.e. Central Act No. 22 of 2002?

The Division Bench held that there was no conflict between the orders under the provisions of Order 14, Rule 2 and Section 9A of the Code and it applied the rule of harmonious construction. The Division Bench held as under:

18. Bare reading of the above mentioned two provisions namely Section 9-A and Order 14, Rule 2 indicate that they are not operating in the same field. The same are required to be invoked at different stages. From opening sentence of Section 9A namely ‘where at the hearing of application relating to ad interim relief in suit, objection to jurisdiction is taken such issue to be decided by the Court as preliminary issue’ and further language, namely, ‘if at the hearing of any application for granting or setting aside the order granting any interim relief, whether by way of stay, injunction, appointment of receiver or otherwise made in any suit, an objection to the jurisdiction of the Court to entertain such suit is taken by way of the parties to the suit, the Court shall proceed to determine at the hearing of such application’ it is clear that Section 9A comes into play much earlier than the stage when suit is required to be dealt with by the provisions of Order 14. In fact, if we see the provisions of Order 14, Rule 2 of Civil Procedure Code then we find that there is nothing in the said provision which specifically says that issue with regard to jurisdiction cannot be tried as preliminary issue at any stage. On the contrary, Order 14, Rule 2(2) makes exception to the main rule and says that when issue both of laws and of facts arise in the same suit and Court is of the opinion that the case or many part thereof may be disposed of on an issue of law only it may try that issue first, if that issue relates to jurisdiction of the Court. So, by no stretch of imagination it can be said that the provision of Section 9A is inconsistent with the provision of Order 14, Rule 2. The main object or the underlying idea under both the provisions is that if the relief claimed cannot be granted on the point of jurisdiction then it is better to decide that issue first. We cannot ignore the fact that there is any specific provision in the Central Act laying down procedure as to what should be done at the time of interim relief if objection is taken on the ground of jurisdiction. If any such specific provision would have been in the said Central Act, then it was possible to compare Maharashtra Amendment in respect of Section 9A with such provision but when we find that there is in fact no similar provision in the Central Act, there is no question of any inconsistency with the provisions of Central Act. Even after going through the entire judgment in Meher Singh v. Deepak Sawhney reported in 1991(1) Bom.C.R. 107, we do not find that it has been held in the said case that the provision of Section 9-A is inconsistent with the provisions of the Central Act. Merely because the Division Bench observed that there is departure from the procedure it wanted to convey inconsistency. On the contrary, the word ‘departure’ is used to convey that there is deviation from earlier procedure. Deviation does not necessarily mean inconsistency..

20. Applying the above principle also it can very well be said that as there was no specific provision in the Central Act for dealing with the objection regarding jurisdiction of the Court, raised at the time of injunction application or receiver application, State of Maharashtra has made the above mentioned provision of Section 9A. So, it cannot be said that it overlaps any of the provisions of the Central Act.

21. It must be noted that when the provisions of Section 9A of Civil Procedure Code is not at all inconsistent with the Central Act there was in fact no need for the State of Maharashtra to obtain assent of the President. However, we find that such assent was obtained earlier only by way of abundant precaution. This is clear even from the 4th recital of the preamble of the Maharashtra Amendment Act, 1977 wherein it is clearly mentioned that to leave no room for any doubt the said provision was being reintroduced. In other words, reintroduction of Section 9A by the State Legislature and action of obtaining assent from the Hon’ble President was on the principle of ‘Abundans cautela non nocet’. So, merely because such assent is not obtained after coming into force the Central Amendment Act of 1999 and Central Amendment Act of 2002, it cannot be said that the provisions of Section 9A stands repealed by virtue of Sections 32 and 16 of the respective Acts because basically the said provision is not at all inconsistent with any of the provisions of Central Act..

23…However, in the case at hand we are of the considered view that basically Section 9A is not at all inconsistent with or repugnant to the provisions of Order 14, Rule 2 of Civil Procedure Code or any other provision of the Central Amendment Act, 1999 or 2002. So, the above cited rulings are of no use to the respondent.

24. Thus, having regard to the position of law and considering the object of Section 9A as well as the object of Order 14, Rule 2 of Civil Procedure Code and applying all the tests to determine as to whether there is any inconsistency between the two statutes, we have no hesitation to hold that Section 9A of Civil Procedure Code, introduced by State of Maharashtra is not at all inconsistent or repugnant with the provisions of Order 14, Rule 2 of the Central Act. On the contrary, it supports and supplements the basic idea of Order 14, Rule 2(2) and provides additional provision to further the cause which does not in any way damages or destroys the provision under Order 14, Rule 2 of the Central Act. We, therefore, endorse the view expressed by the learned Single Judge (Coram : A.M. Khanwilkar, J.) that Section 9A of Civil Procedure Code is not inconsistent with the provision of Order 14, Rule 2 or any other provision in Central Act and as such it cannot be said that Section 9A stands repealed as a result of Sections 32 and 16 of the Central Amendment Act of 1999 and 2002 respectively.

9. The questions of law answered by another Division Bench of this Court in Mehar Singh’s case (supra) can also be usefully referred to at this stage itself. The Court was concerned in that case as to whether the parties to a lis should or should not be granted an opportunity to lead evidence while deciding a preliminary issue as contemplated under Section 9A of the Code of Civil Procedure (Maharashtra Amendment) Act, 1977. While answering that question, the Court also considered the provisions of Order 14, Rule 2 and held as under.

9. The question, therefore is, when the Legislature directs that objection with regard to jurisdiction is to be decided as a preliminary issue at the time of hearing of the application for grant of interim relief or for vacating interim relief or for appointing Receiver, whether the parties should be permitted to lead evidence. In our view, this question is to be considered in the light of Order XIV, Rule 2 of Civil Procedure Code. Order XIV, Rule 2 of the Civil Procedure Code reads as under:

(1) Notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of Sub-rule (2) pronounce judgment on all issues.

(2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that suit first if that issue relates to:

(a) the jurisdiction of the Court, or

(b) a bar to the suit created by any law for the time being in force, and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after the issue has been determined and may deal with the suit in accordance with the decision on that issue.

Sub-rule (1) of Rule 2 specifically provides that notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of Sub-rule (2), pronounce judgment on all issues. The mandate of Order XIV, Rule 2 is to decide, as far as possible, all the issues and pronounce judgment on all issues. However, it is subject to Sub-rule (2), which gives discretion that if the Court is of the opinion that the case or any part thereof can be disposed of on the issue of law only, it may ‘try’ that issue first, if that issue relates to the jurisdiction of the Court or bar to the suit. As against this, Section 9A specifically gives a mandate that notwithstanding anything contained in the Code or in any other law for time being in force, if the objection to jurisdiction of the Court to entertain such suit is taken by any of the parties to the suit, the Court is required to determine the issue as to jurisdiction as a preliminary issue before granting or setting aside the order of interim relief.

10. Section 9A is a departure from the procedure established for deciding the preliminary issue as prescribed under Order XIV, Rule 2 of Civil Procedure Code. On many occasions, it is not always proper to pass an order of hearing the preliminary issue with regard to maintainability of a suit at the time of final hearing of the suit. If such issue is decided at an earlier stage, rights of the parties can be crystallized. As stated earlier, Section 9A is a departure from the procedure prescribed under Order XIV, Rule 2 of the Code of Civil Procedure for achieving that object. For determination of the preliminary issue, which may be mixed question of law and facts, the parties are required to lead evidence. Without permitting the parties to lead evidence the issue of jurisdiction cannot be finally determined. If it was to be decided only for prima facie purpose for granting interim relief, then there was no necessity of adding Section 9A in the Civil Procedure Code. Secondly, on the basis of prima facie determination without proper adjudication, in our view, suit cannot be disposed of. The plaintiff cannot be non-suited on the basis of the averments made in the plaint or in the written statement. If the issue is a pure question of law, then it may be decided without recording evidence, but if it is a mixed question of law and fact, then parties should be permitted to lead evidence on the facts of the case. Question of jurisdiction, even if it is a mixed question of law and fact, it is required to be decided first. For deciding the said issue, the parties are entitled to lead evidence, oral as well as documentary, as that issue is required to be tried and adjudicated finally by the Court. The determination of the said issue is not only for the limited purpose of granting interim relief or vacating interim relief. It is true that this procedure requires piecemeal determination of the suit, but that cannot be avoided because of the mandate of Section 9A.

11. In this view of the matter, the ratio laid down in the case of Dattatraya Jangam v. Jairam Gore reported in 1964 Mh.L.J. 750 : 1964 (66) BLR 645, that ‘the jurisdiction of the Court should ordinarily be determined at the time of institution of a suit when the plaint is filed, that the plea of the defendant will not determine or change the forum’ or that ‘in order to determine which Court has jurisdiction to try a suit, the Court should read the plaint as a whole and ascertain the real nature of the suit and what in substance the plaintiff has asked for’ is not required to be applied in a case where issue with regard to jurisdiction is required to be raised and determined. Raising and determination of the issue would certainly require adjudication as per the procedure prescribed in the Civil Procedure Code that is, after giving an opportunity of leading evidence to both parties. In this view of the matter we are not referring to various other judgments, which lay down that to determine the nature of the suit what is to be looked into is the real substance of the suit and not legal ingenuity in drafting the plaint or that the question of jurisdiction for the prima facie purpose is to be decided by examining the substance of the case in the plaint. The said judgments are only for the purpose of determining whether the Court has jurisdiction at the prima facie stage to try the suit. But if the issue of jurisdiction is required to be raised and finally determined, then it would require giving an opportunity of leading evidence and hearing to both the parties.

12. We would, at this stage, refer to the precise principle laid down by this Court in the case of Fazlehussein v. Yusufally : (1995)ILLJ833Bom , wherein the Court has, after observing that the averments made in the plaint would be sufficient to decide the question of jurisdiction, held as under:

In considering the preliminary issue, the Court must look into the averments in the plaint and consider any objections which the defendant may choose to raise against the maintainability of the action on those averments. The question of jurisdiction which is raised by way of a demurrer has always to be decided on the allegations made in the plaint and not on the contentions that the defendant may raise. It is true that if the jurisdiction of the Court depends upon the proof of a fact and the question as to the existence or otherwise of that fact is canvassed, the parties may lead evidence in support of their respective cases before the preliminary issue as to jurisdiction of the Court is decided.In this view of the matter, we agree with the decision in the case of Kranti Mohan Guruprasad Mehra and Anr. v. Fatehchand Vasuram Behal : AIR1982Bom263 and in the case of Dinyar Behramji Irani v. Kshirsagar Construction Co. Pvt. Ltd. Bombay reported in 1993(2) Mh.L.J. 1812 : 1994(3) BCR 264.

13. In the result we hold that if Section 9A is not added, then at interim stage, the Court is not required to decide the issue of jurisdiction finally and the Court by referring to the averments made in the plaint, would ordinarily determine whether or not the Court has jurisdiction to try the suit. However, it is apparent that Section 9A is added with a specific object to see that objection with regard to jurisdiction of the Court is decided as a preliminary issue. According to the legislature, the practice of granting injunctions, without going into the question of jurisdiction even though raised, has led to grave abuse. Hence the said Section is added to see that issue of jurisdiction is decided as a preliminary issue notwithstanding anything contained in the Civil Procedure Code, including Order XIV, Rule 2. Once the issue is to be decided by raising it as a preliminary issue, it is required to be determined after proper adjudication. Adjudication would required giving of opportunity to the parties to lead evidence, if required.

10. In the light of the above two Division Bench judgments of this Court, we shall now proceed to discuss the scheme under the Civil Procedure Code. The Courts are vested with wide jurisdiction to try all suits of civil nature except the suits of which their cognizance is either expressly or impliedly barred. State of Maharashtra added Section 9-A to the Code with an intention to permit a party to take objection to the jurisdiction of the Court to entertain a suit and the Court is required to proceed to determine the issue as a preliminary issue even before granting or setting aside the order granting the interim relief prayed for in the suit. Besides this, the Section also requires the Court to dispose of such an application expeditiously and shall not to be adjourned to the hearing of the suit. Section 9-A of the Code opens with the non-obstante clause. It is notwithstanding anything contained in the Code or any other law for the time being in force. Sub-section (2) is an exception in terms of which even where pending determination of a preliminary issue as to jurisdiction, the Court may grant interim relief. The objection, in any case, has to be in regard to the jurisdiction of the Court to invoke the provisions of Section 9A of the Code. The object of Section 9-A of the Code is, therefore, to avoid hardship and injustice to a party affected by the grant or otherwise of an interim order when the Court has no jurisdiction to entertain and decide the suit.

(emphasis supplied)

11. Under the scheme of Order 14 of the Code, the issues of fact and issues of law are to be framed with reference to the pleadings of the parties. The provisions of the Code cast an obligation on the Court to frame issues as per the provisions of Order 14 Rule 2. Sub-rule (5) of Rule 1 requires that the Court shall frame and record issues on which the decision is to be made. Sub-rule (1) of Rule 2 of Order 14 contemplates that notwithstanding that a case may be disposed of on a preliminary issue, the Court shall pronounce judgment of all issues. However, this provision is subject to the provisions of Sub-rule (2) of Rule 2. The exception being that where the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first and specifically where it relates to jurisdiction of the Court or a bar to the suit created by law for the time being in force. The Court is further vested with the power that if for that purpose, the Court thinks fit, it may postpone the settlement of other issues until after that issue has been determined and then may proceed to frame and decide other issues arising in the suit. Once issues are framed, the Court is required to apply its mind, whether any of the issues framed by it is required to be tried as a preliminary issue as contemplated under Order 14, Rule 2. In the event the answer is in the affirmative, the Court is required to proceed to decide such an issue and if necessary even by recording evidence and record its finding. In the event it is answered in the negative, the Court shall proceed with the suit in accordance with law and pronounce its judgment on all issues framed by it. Under the provisions of Order 14, Rule 5, the Court has been given the power to amend or even frame additional issues at any time which may be necessary for determining the matter in controversy between the parties before passing a decree. The power of the Court extends even for striking out an issue framed.

12. Order 15, Rule 3 mandates that wherever the parties are at issue on some question of law or fact and issue has been framed by the Court and the Court is satisfied that no further argument or evidence, then the parties can adduce evidence is required upon such of the issues as may be sufficient for the decision of the suit and that no injustice will result from proceeding with the suit forthwith, the Court may proceed to determine such an issue and pronounce judgment accordingly.

13. Under Order 41, Rule 25, power is conferred on the Appellate Court to frame additional issues. The legislative intent and purpose behind this is that the party can raise an objection at any stage of the proceedings. The expression ‘Court’ obviously includes Appellate or Revisional Court. Under the provisions of Rules 23 and 25 of Order 41 of the Code, the Appellate Court has the power to frame additional issues or where it reverses, the finding recorded in a decree on a preliminary issue to remand the matter for determination of all issues in accordance with law. In other words, the Appellate Court has similar powers like the trial Court.

14. The legislative scheme of the Code behind these provisions is that issues of fact and law, for valid reasons, can be raised at any stage in terms of the statutory provision before passing of a decree by a trial Court and even before the Appellate Court. If, in the opinion of the Court, the issue arises and requires determination as a preliminary issue or an issue to be tried with the regular suit, the Court shall order accordingly. All the above provisions of the Code and for that matter even Section 9-A of the Code spells a specific obligation upon the Court to frame issues. It also gives the Court wide discretion to be exercised in consonance with the settled principles to decide, whether an issue ought or ought not to be framed as a preliminary issue and if framed, whether such an issue should or should not be decided at the threshold and/or along with other issues. Section 9-A of the Code, however, makes out a somewhat exception to the procedure stated under Order 14 of the Code in relation to framing of issues and trying to the extent that such an objection could be raised by a defendant at the hearing of an application for setting aside an interim relief relating to stay, injunction, appointment of Receiver or otherwise and raise an objection with regard to jurisdiction of the Court at the very threshold. Such an objection essentially must be raised at the very initial stage and once such an objection is raised, the law requires that the Court shall proceed to determine the issue in regard to jurisdiction as a preliminary issue. But this specific demand of the legislature is also to the exception contained in Section 9-A of the Code. Of course, the Court is expected not to shift the determination of the issue of jurisdiction along with the hearing of the suit. The purpose being that the point of jurisdiction raised at the very initial stage of hearing of injunction application should be decided at the threshold without taking recourse to the regular proceedings in the suit.

15. Both the Division Benches of this Court in the case of Meher Singh (supra) and Madhuri Prabhakar Patole (supra) have enunciated the principles which, with respect, we follow. The adoption of the reasoning given in those two judgments would certainly help us to answer the questions referred more effectively.

16. Under Order XIV, Rule 1 of the Code of Civil Procedure, the term ‘issue’ has been explained and the issue would arise when a material proposition of fact and law is affirmed by one party and denied by the other. Thus, the base of any issue is an affirmation by one and denial by the other. The issues could be of fact and/or of law. However, no provision of the Code either explains or defines the expression ‘preliminary issue’. The Law Lexicon, Second Edition 1997 explains the word ‘issue’ as sending or causing to go forth; the act of passing out, and explains the word ‘preliminary’ as introductory; initiatory; preceding; temporary; provisional; as preliminary examination, injunction, articles of peace, etc. The Black’s Law Dictionary also explains the same meaning of the word ‘preliminary’. The very connotation of the expression ‘preliminary’, therefore, indicates initial or primary stage.

17. The preliminary issue would be one which is framed on the pleadings of the parties and requires to be looked into and to which the Court should apply its mind at the preliminary/initial stage. In contradistinction to fuller it is more important and an essential stage. There has not been much variation in the judicial view prior to the amendment of 1976 in the Code of Civil Procedure. The issues with regard to the jurisdiction were tried as preliminary issues and preferably at the initial stage itself. Prior to the amendments, the Court was to form and express an opinion as to whether the case can be disposed of on the issue of law and the Court first to decide the preliminary issue at that stage and was not to postpone it till the determination of all issues and passing of the judgment delivered by the Court. After 1976, a question of jurisdiction may be a pure question of law, or mixed question of law and fact depending upon the facts of each case. Once the Court forms an opinion that issue of law on which the entire suit could be disposed of and should be treated as preliminary issue, it has a discretion to try that issue or to postpone the final determination of the issue along with other issues.

18. Under the amended provisions, the law requires the Court to form an opinion and exercise its judicial discretion to dispose of the preliminary issues, particularly, in relation to jurisdiction or bar to the suit created by any other law, the Court may dispose of the suit on that issue alone. In and : AIR1992Ker305 , the Court stated that the Code has not defined the term ‘issue of law’. Normally, if answer to an issue is determinable on the basis of some principle of law, that issue is called an issue of law. If the parties want to lead evidence on an issue, it ceases to be an issue of law. Under the old rule all the issues of law were required to be tried as preliminary issues but according to the amended rule only some kinds of issues can be tried as preliminary issues. Thus a discretion has been given to the Court to try or not try an issue as a preliminary issue. Where the Court forms an opinion that the issue raised, that is regarding the jurisdiction of the Court or even bar of law, by which suit is precluded from being entertained, the Court would normally treat it as preliminary issue. Section 9-A only adds the further condition to it that the Court shall decide the issue of jurisdiction at an early stage that is while an application for relief of injunction, Receiver etc. As specified in that provision is pending before the Court. Such an issue is not required to be deferred to the final determination of the suit subject to again opinion and satisfaction of the Court under Sub-section (2) of Section 9-A of the Code.

19. Another aspect which needs to be clarified at this stage itself is that maintainability of a suit is distinct from institution of the suit being barred under any law or when the Court lacks inherent jurisdiction to entertain and decide the suit. For example, the question of limitation is not bar to the institution of the suit but essentially, is a principle which would frustrate the claim as being barred by time.

20. The Supreme Court in the case of : [1964]1SCR495 had clearly enunciated the principle that where a decree was passed in a suit which was barred by time, it would not be a nullity, as a Court has jurisdiction to entertain to decide the suit. While the lack of territorial or pecuniary jurisdiction of the Court and bars contemplated under Order VII, Rule 11 read with Order XIV Sub-rule (2) are the cases where the Court would be exercising the powers without jurisdiction or that the very institution of the suit in that Court was prohibited by other law. Normally, the later class of cases would be based on a question of law and even if they are based upon the mixed question of fact and law, the Courts would normally be inclined to decide such a issue as preliminary issue at the initial stage itself. The Division Bench judgment of this Court in Madhuri Prabhakar Patole ‘s case (supra) has clearly stated that there is no inconsistency or repugnancy in the provisions of Section 9-A of the Code with the provisions of Order XIV, Rule 2 of the Code. In fact, Section 9-A supports the basic idea of Order XIV, Rule 2 and provides additional provisions to further cause which does not, in any way, damage or destroy the object of the provisions.

21. Even in the case of Maharashtra State Warehousing Corporation Ltd. Pune v. Bujang Krishnaji Kohale 1999(3) Mh.L.J. 652, the Single Judge of this Court had taken the view that under Order XIV, Rule 2 of the Code, the discretionary power vested in the Court to form an opinion as to whether an issue should or should not be treated and tried as preliminary issue despite the fact that it is a mixed question of fact and law.

22. In its recent judgment in Ramesh B. Desai and Ors. v. Bipin Vadilal Mehta and Ors. : AIR2006SC3672 , the Supreme Court held that the question of limitation is and can be a mixed question of fact and law and such questions could be decided by the Court at the preliminary stage if the facts of the suit are clear and applying the principle of demurrer, the issue could be decided as a preliminary issue. With reference to the provisions of Order VII, Rule 11, the Court held as under:

13. Sub-rule (2) of Order 14, Rule 2, Civil Procedure Code lays down that where issues both of law and of fact arise in the same suit, and the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to (a) the jurisdiction of the Court, or (b) a bar to the suit created by any law for the time being in force. The provisions of this Rule came up for consideration before this Court in Major S.S. Khanna v. Brig. F.J. Dillon and it was held as under: (SCR p. 421)

Under Order 14, Rule 2, Code of Civil Procedure where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. The jurisdiction to try issues of law apart from the issues of fact may be exercised only where in the opinion of the Court the whole suit may be disposed of on the issues of law alone, but the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as preliminary issues. Normally all the issues in a suit should be tried by the Court; not to do so, especially when the decision on issues even of law depend upon the decision of issues of fact, would result in a lopsided trial of the suit.

Though there has been a slight amendment in the language of Order 14, Rule 2, Civil Procedure Code by the amending Act, 1976 but the principle enunciated in the abovequoted decision still holds good and there can be no departure from the principle that the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as a preliminary issue and where the decision on issue of law depends upon decision of fact, it cannot be tried as a preliminary issue.

15. The principle underlying Clause (d) of Order 7, Rule 11 is no different. We will refer here to a recent decision of this Court rendered in Popat and Kotecha Property v. State Bank of India Staff Assn. Where it was held as under in para 10 of the report: (SCC p. 515)

10. Clause (d) of Order 7, Rule 7 speaks of suit, as appears from the statement in the plaint to be barred by any law. Disputed questions cannot be decided at the time of considering an application filed under Order 7, Rule 11, Civil Procedure Code. Clause (d) of Rule 11 of Order 7 applies in those cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force.

19. A plea of limitation cannot be decided as an abstract principle of law divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact. A plea of limitation is a mixed question of law and fact. The question whether the words ‘barred by law’ occurring in Order 7, Rule 11(d), Civil Procedure Code would also include the ground that it is barred by law of limitation has been recently considered by a two-Judge Bench of this Court to which one of us was a member (Ashok Bhan, J.) in Balasaria Construction (P) Ltd. v. Hanuman Seva Trust it was held: (SCC p. 661, Para 8)

8. After hearing Counsel for the parties, going through the plaint, application under Order 7, Rule 11(d), Civil Procedure Code and the judgments of the trial Court and the High Court, we are of the opinion that the present suit could not be dismissed as barred by limitation without proper pleadings, framing of an issue of limitation and taking of evidence. Question of limitation is a mixed question of law and fact. Ex facie in the present case on the reading of the plaint it cannot be held that the suit is barred by time.

This principle would be equally applicable to a company petition. Therefore, unless it becomes apparent from the reading of the company petition that the same is barred by limitation the petition cannot be rejected under Order 7, Rule 11(d), Indian Penal Code.

23. Somewhat similar view was taken by the Supreme Court in the case of Gunwantbhai Mulchand Shah and Ors. v. Anton Ellis Farel and Ors. : AIR2006SC1556 , that issue of limitation is a mixed question of law and fact and in the facts of that case, insofar as it relates to the prayer for a perpetual injunction restraining the defendants from interfering with the possession of the plaintiffs cannot be held to be barred by limitation. It may be noticed that a suit for injunction would be governed by Article 113 of the Limitation Act and cause of action, for the said relief arises when the right to sue accrues. It would depend upon facts and circumstances before the Court deciding when the right accrued, on the pleadings and the evidence in the case.

24. Single Judge of this Court in the case of Shraddha Associates, Pune and Anr. v. St. Patrick’s Town Co-operative Housing Society Ltd. and Ors. : 2003(3)BomCR814 took the view that issue regarding the fact of bar of limitation can be disposed of as preliminary issue under Order XIV, Rule 2 only in case they can be disposed of as an issue of law and not otherwise.

25. In the case of Dattatraya Krishna v. Jairam Ganesh Gore 1964 Mh.L.J. 750, the Full Bench of this Court prior to insertion of Section 9-A to the Code took the view that jurisdiction of the Court should be determined at the time of institution of the suit when the plaint is filed as defendant’s claim will not alter or change the forum. It is held-

4. Those are the provisions of law which have to be considered in deciding the questions which we have formulated for our consideration. The first question which arises in this connection is whether the jurisdiction of the Special Court depends on the plaintiffs case as made out in the plaint or whether the contentions raised by the defendant are also to be taken into consideration. This question has been finally settled by the Supreme Court in two cases, Raizada Topandas v. Gorakhram (1) and Vasudev v. Board of Liquidators (2). In the former case the Supreme Court approved the view taken by this Court in Govindram Salamatrai v. Dharampal (3) and Jaswantlal v. ‘Western Comp., India’ (4), that the jurisdiction of the Court should ordinarily be determined at the time of the institution of a suit when the plaint is filed, that the plea of the defendant will not determine or change the forum and that in order to decide whether a suit comes within the purview of Section 28 of the Rent Act the exclusive jurisdiction of the Court arises only if the person invoking the jurisdiction of the Court alleges that the other party is a tenant or a landlord and the question is one which is referred to in Section 28, where the person so invoking does not set up the claim that the other party is a tenant or a landlord, the defendant is not entitled to displace the jurisdiction of the ordinary Court by an allegation that he stands in that relation qua the other and on the ground that Court has no jurisdiction to try the suit or proceeding or an application.

26. In another Single Judge judgment of this Court in fedroline Anthoney Joseph v. Vinod Vishanji Dharod : 2002(5)BomCR582 , it is stated that Section 9-A of the Code is a departure from the procedure for deciding a preliminary issue under Order 14, Rule 2 because it is prefaced by a non-obstante clause and once prerequisites of Section 9-A are satisfied, the Court is obliged to decide the application at the stage indicated in the provision itself.

27. As spelled out in the judgment of the Full Bench of this Court in Dattatraya Krishna v. Jairam Ganesh Gore 1964 Mh.L.J. 750, jurisdiction of the Court should ordinarily be determined at the time of the institution of suit, the Full Bench has indicted that the issue in regard to the jurisdiction should be raised and decided at the earliest stage. Describing the scope and effect of Section 9-A of the Code of Civil Procedure, the Supreme Court in the case of Tayabhai M. Bagasarwalla and Anr. v. Hind Rubber Industries Pvt. Ltd. and Ors. : [1997]2SCR152 , held that objection as to the jurisdiction is to be decided by the Court as a preliminary issue but such a mandate would not prevent the Court from passing interim order while the decision on question of jurisdiction is pending. The Court held as under:

16. According to this section, if an objection is raised to the jurisdiction of the Court at the hearing of an application for grant of, or for vacating, interim relief, the Court should determine that issue in the first instance as a preliminary issue before granting or setting aside the relief already granted. An application raising objection to the jurisdiction to the Court is directed to be heard with all expedition. Sub-rule (2), however, says that the command in Sub-rule (1) does not preclude the Court from granting such interim relief as it may consider necessary pending the decision on the question of jurisdiction. In our opinion, the provision merely states the obvious. It makes explicit what is implicit in law. Just because an objection to the jurisdiction is raised, the Court does not become helpless forthwith nor does it become incompetent to grant the interim relief. It can. At the same time, it should also decide the objection to jurisdiction at the earliest possible moment. This is the general principle and this is what Section 9-A reiterates. Take this very case. The plaintiff asked for temporary injunction. An ad interim injunction was granted. Then the defendants came forward objecting to the grant of injunction and also raising an objection to the jurisdiction of the Court. The Court overruled the objection as to jurisdiction and made the interim injunction absolute. The defendants filed an appeal against the decision on the question of jurisdiction. While that appeal was pending, several other interim orders were passed both by the Civil Court as well as by the High Court. Ultimately, no doubt, the High Court has found that the Civil Court had no jurisdiction to entertain the suit but all this took about six years. Can it be said that orders passed by the Civil Court and the High Court during this period of six years were all non est and that it is open to the defendants to flout them merrily, without fear of any consequence. Admittedly, this could not be done until the High Court’s decision on the question of jurisdiction. The question is whether the said decision of the High Court means that no person can be punished for flouting or disobeying the interim/interlocutory orders while they were in force, i.e., for violation and disobedience committed prior to the decision of the High Court on the question of jurisdiction. Holding that by virtue of the said decision of the High Court (on the question of jurisdiction), no one can be punished thereafter for disobedience or violation of the interim orders committed prior to the said decision of the High Court, would indeed be subversive of the Rule of Law and would seriously erode the dignity and the authority of the Courts. We must repeat that this is not even a case where a suit was filed in the wrong Court knowingly or only with a view to snatch an interim order. As pointed out hereinabove, the suit was filed in the Civil Court bona fide. We are of the opinion that in such a case the defendants cannot escape the consequences of their disobedience and violation of the interim injunction committed by them prior to the High Court’s decision on the question of jurisdiction.

28. The correct principle, therefore, is the one recognized and reiterated in Section 9-A to wit, where an objection to jurisdiction of a Civil Court is raised to entertain a suit and to pass any interim orders therein, the Court should decide the question of jurisdiction in the first instance but that does not mean that pending the decision on the question of jurisdiction, the Court has no jurisdiction to pass interim orders as may be called for in the facts and circumstances of the case. A mere objection to jurisdiction does not instantly disable the Court from passing any interim orders. It can yet pass appropriate orders. At the same time, it should also decide the question of jurisdiction at the earliest possible time. The interim orders so passed are orders within jurisdiction when passed and effective till the Court decides that it has no jurisdiction when passed and effective till the Court decides that it has no jurisdiction to entertain the suit. These interim orders undoubtedly come to an end with the decision that this Court had no jurisdiction. It is open to the Court to modify these orders while holding that it has no jurisdiction to try the suit. Indeed, in certain situations, it would be its duty to modify such orders or make appropriate directions. For example, take a case, where a party has been dispossessed from the suit property by appointing a receiver or otherwise; in such a case, the Court should, while holding that it has no jurisdiction to entertain the suit, put back the party in the position he was on the date of suit. But this power or obligation has nothing to do with the proposition that while in force, these orders have to be obeyed and their violation can be punished even after the question of jurisdiction is decided against the plaintiff provided the violation is committed before the decision of the Court on the question of jurisdiction.

28. The view that preliminary objections and at least, which in the opinion of the Court, are issues of law should be decided at the threshold also find support from the observations of the Supreme Court in the case of Pearlite Liner (P) Ltd. v. Manorama Sirsi : (2004)ILLJ1041SC , where again while making reference to the provision of Order VII, Rule 11, the Court held as under:

10. The question arises as to whether in the background of the facts already stated, such reliefs can be granted to the plaintiff. Unless there is a term to the contrary in the contract of service, a transfer order is a normal incidence of service. Further, it is to be considered that if the plaintiff does not comply with the transfer order, it may ultimately lead to termination of service. Therefore, a declaration that the transfer order is illegal and void, in fact amounts to imposing the plaintiff on the defendant in spite of the fact that the plaintiff allegedly does not obey order of her superiors in the management of the defendant Company. Such a relief cannot be granted. Next relief sought in the plaint is for a declaration that she continues to be in service of the defendant Company. Such a declaration again amounts to enforcing a contract of personal service which is barred under the law. The third relief sought by the plaintiff is a permanent injunction to restrain the defendant from holding an enquiry against her. If the management feels that the plaintiff is not complying with its directions it has a right to decide to hold an enquiry against her. The management cannot be restrained from exercising its discretion in this behalf. Ultimately, this relief, if granted, would indirectly mean that the Court is assisting the plaintiff in continuing with her employment with the defendant Company, which is nothing but enforcing a contract of personal service. Thus, none of the reliefs sought in the plaint can be granted to the plaintiff under the law. The question then arises as to whether such a suit should be allowed to continue and go for trial. The answer in our view is clear, that is, such a suit should be thrown out at the threshold. Why should a suit which is bound to be dismissed for want of jurisdiction of a Court to grant the reliefs prayed for, be tried at all? Accordingly, we hold that the trial Court was absolutely right in rejecting the plaint and the lower Appellate Court rightly affirmed the decision of the trial Court in this behalf. The High Court was clearly in error in passing the impugned judgment whereby the suit was restored and remanded to the trial Court for being decided on merits. The judgment of the High Court is hereby set aside and the judgments of the Courts below, that is, the trial Court and the lower Appellate Court are restored. The plaint in the suit stands rejected.

29. In the case of Bahrein Petroleum Co. Ltd. v. P.J. Pappu and Anr. : (1966)IILLJ144SC , the Supreme Court stated that question in relation to the territorial jurisdiction to try the suit under Section 20 of the Code should be decided earlier and even it was open to the defendant to waive this objection and if they do so, they cannot subsequently take the objection.

30. We have already noticed and, in fact, we have no reasons to differ with the view expressed in Madhuri Prabhakar ‘s case (supra) by the Division Bench of this Court that Order 14, Rule 2 and Section 9-A of the Code were not in conflict with or repugnant to each other. On the contrary, they both fall in the ambit of procedural law and to be adopted by the Courts in consonance with the legislative intent. Similar is the view expressed by the other Division Bench in the case of Meher Singh (supra) holding that Section 9-A is added with a specific object that objection in regard to jurisdiction should be taken and decided as a preliminary issue, notwithstanding the provisions of Order 14, Rule 2 of the Code. The view expressed in this judgment is in line with the view taken by a Full Bench of this Court in the case of Dattatraya Jangam (supra) where the Court directed that issue of jurisdiction should be decided at the initial stage itself so as to ensure conclusion of the proceedings rather than their prolongment, in case such issue of jurisdiction is directed to be decided along with the merits of the case at the final stage. Where the issue is of jurisdiction or bar to the institution of the suit, such issues should be decided at the initial stage. Wherever an objection is filed under the provisions of Section 9-A of the Code, the Court is expected to deal with such issue of jurisdiction at the first instance and is not permitted to club it with the decision of the suit on merits. These provisions are to be given harmonious construction to achieve the ends of justice in expeditious disposal of the suit. A legislative intent behind Section 9-A as well as Order 14, Rule 2 is to truncate the prolonged procedure of law wherever the issue of jurisdiction relating to pecuniary or territorial and even a bar to the institution of the suit going to the root of the jurisdiction of the Court is raised. The intention is to save the time of the Court, avoid inconvenience to the parties and to ensure that if the Court has no jurisdiction to try and decide the suit, the parties may receive such an order at the earliest rather than coming to such a conclusion at the end of the suit after the prolonged litigation. To decide an issue at the very threshold, the question of territorial and pecuniary jurisdiction and for that matter lack of jurisdiction resulting from a bar to the very institution of the suit, would normally have to be determined with reference to the plea of demur. The person raising an objection would have to take the averments in the pleadings on its face value or establish by way of proper pleadings or defence that the Court lack jurisdiction. The question relating to jurisdiction would be a question of law or a mixed question of law, and fact, depending on the facts and circumstances of the case. Such an objection can be raised at any stage, subject to the exceptions provided in law. Except where the defendant could waive and actually waives an objection, the same could not be taken at any subsequent stage of the suit. The Court would include Appellate Court as appeal would be continuation of a suit. This point of view can also be supported by the provisions of Order 41, Rule 24 and 25.

31. The language of Order 14, Rule 2 does not mandate any stage at which an application can be filed by the party raising an objection in regard to the jurisdiction of the Court or a bar to the suit created by any law. Objections of this kind could be taken up at any stage but, as already indicated in this judgment, the precedents require that they should be taken at the initial stage of the suit itself. Once such an objection is taken at the initial stage, it enables the Court to form its opinion and exercise its discretion, whether such an issue claimed relates to jurisdiction of the Court or bar to the suit under any law and also whether such an issue should be treated as a preliminary issue. In the event, the opinion of the Court is in the affirmative and its determination would dispose of the suit itself, in that event, the Court should decide such an issue at the very first instance. However, if the objection is taken at a belated stage the Court would have to examine the effect thereof with regard to the facts of each case. Suffice it to note that once an issue is raised the Court is expected to form its opinion and exercise its discretion as per the scheme of the Code and the precedents enunciating the principles governing exercise of such jurisdiction. Section 9A is a departure from the procedure for deciding a preliminary issue under Order 14, Rule 2.

32. Another judgment of a Division Bench of this Court in the case of Jagdish Hari Thatte and Ors. v. Municipal Corporation of Greater Bombay and Anr. 2007(1) Bom.C.R. 577, was also brought to our notice, where on a reference made, the Court took the following view:

Incidentally, it must be noted that recording of findings on all issues while deciding the matter finally after the time the parties have adduced evidence is not dependent on the nature of the final order that is to be passed, means whether finally the suit is to be dismissed on the ground of jurisdiction or whether plaint is to be returned. Whatever be the order, when the same is to be passed finally after the parties have led evidence on all issues, then it is necessary for the Court to decide other issues on merits even if the Court comes to the conclusion that it lacks jurisdiction.

The Division Bench, while coming to the above conclusions, had referred to the provisions of Section 9-A and Order 14, Rule 2. It is apparent that both the stages contemplated under Section 9-A as well as Order 14, Rule 2(2) are an exception to Order 14, Rule 2(1) which makes it obligatory upon the Court to record finding on all issues. It has already been noticed by us, with reference to the various judgments of this Court as well as the Supreme Court, that Section 9A contemplates a stage of deciding a preliminary issue during the pendency of interlocutory applications, that too, for the limited reliefs indicated in that section. Order 14, Rule 2 vests discretion with the Court to decide the issue of jurisdiction raised at the initial stage at the threshold of the proceedings, if the facts and circumstances of the case so require. Once both these stages are over and parties lead evidence on all issues, then obviously the Court is required to record findings on all the issues including the issue of jurisdiction as contemplated under Order 14, Rule 2(1).

33. Discussing the scheme under Section 9A and Order 14, Rule 2 of the Code of Civil Procedure, a Division Bench of this Court in the case of ICICI Limited, Mumbai v. Sri Durga Bansal Fertilizers Ltd. and Ors. : AIR1999Bom402 , which, it appears, was not brought to the notice of the learned Single Bench, impressed upon the need of final decision on issue of jurisdiction by affording opportunity to the parties as the primary object behind both these provisions was to avoid multiplicity of litigation. The Court held as under:

The stage at which the objection raised under Section 9-A of the Code of Civil Procedure is to be considered stands concluded by a Division Bench judgment of this Court in Meher Singh v. Deepak Sawhny and Anr. reported in : 1999(1)BomCR107 . It has been held that Section 9-A has been added to see that issue of jurisdiction is decided as a preliminary issue notwithstanding anything contained in the Code of Civil Procedure, including Order XIV, Rule 2. The Court had further held that once the issue is to be decided by raising it as a preliminary issue, it is required to be determined after proper adjudication. Adjudication would require giving of opportunity to the parties to lead evidence, if required..

10. Under these circumstances, we are of the considered view that when question about the territorial jurisdiction is raised either in an application seeking revocation of leave under Clause XII of the Letters Patent or on an application under Section 9-A of the Code of Civil Procedure, the appropriate procedure to follow is to finally decide the said question by giving opportunity to the parties, if facts and circumstances of the case so require, to lead evidence. Such a course would avoid multiplicity of proceedings and would also be in consonance with the provisions of Section 9 and/or Order XIV, Rule 2 of the Code of Civil Procedure and Clause XII of the Letters Patent. It would also avoid examination of the same question twice over. It is, however, a different matter if the parties agree that for all purposes, the question of jurisdiction may be decided only prima facie and that it should be left to be finally determined at the trial of the suit along with the other issues on merits. As already noticed, in the present case, such a concession was not forthcoming from the defendants.

34. No statute can provide for all situations when legislature enacts a law. It may neither be feasible nor comprehensible to legislate a law which could operate as a straight-jacket formula for all classes, situations and stage of proceedings. It is also neither permissible nor proper for the Court to provide a strait-jacket formula regulating exercise of statutory powers. The provisions of Section 9A of the Code are prefaced with a non-obstate clause. These provisions, as applicable in the State of Maharashtra, are required to be enforced in preference to any other provisions contained in the Code and even any other law for the time being in force. When the provisions of Section 9A can be invoked is reflected in the language of the Section itself. In consonance with the law aforestated in different judgments of this Court, it is essential that an application for injunction or for vacating injunction or grant of such other relief or even an application for setting-aside the orders as spelt out under these provisions, should be pending before the Court. In the proceeding, an objection in regard to the jurisdiction of the Court ought to be taken by the parties who desire to have such issue determined at the initial stage itself. In that event, the Court is expected to deal with the application by framing a preliminary issue of jurisdiction and after granting the parties an opportunity even to lead evidence to decide such an issue at the first instance and not to defer it for determination along with the suit. Thus, it is obvious that once ail application for the relief of injunction, appointment of Court receiver, stay, etc; has been finally decided by the Court in accordance with law, the rigours of Section 9A would lose their significance and statutory application. Thereafter, the test applicable would be that of Order 14, Rule 2 of the Code, where the Court is to form an opinion as to whether along with other issues, the issue relating to the jurisdiction or bar to the maintainability of the suit under any other law should or should not be treated as preliminary issue. Whether it should be decided preferably at the initial stage or along with all issues relating to the merits of the case, is injudicial discretion of the Court. This judicial discretion of the Court is then in no way controlled by the provisions of Section 9A of the Code as the stage indicated by the legislative mandate under Section 9A is over. Similar power obviously could be exercised by the Appellate Court as well. We have already noticed that the consistent view of this Court has been that there is no conflict between the provisions of Section 9A and Order 14, Rule 2 of the Code. On their correct and harmonious interpretation, the said provisions are intended to achieve the same object i.e. expeditious disposal of the preliminary issue relating to the jurisdiction of the Court.

35. The expression ‘jurisdiction of the Court’, in addition to territorial or pecuniary jurisdiction, will also take in its ambit and scope the cases relating to lack of inherent jurisdiction of the Court. For example, if filing of the suit before the Civil Court is barred by any law for the time being in force and such an objection is taken by the defendant under the provisions of Order 7, Rule 11(d), it will be a question which goes to the very root of Courts jurisdiction to entertain and try the suit and, therefore, it should be decided at the threshold. Such a matter could be determined from the averments made in the plaint and the suit, therefore, would be liable to be dismissed at the very initial stage itself. This, besides being a question of law, goes to the very root of the matter relating to the jurisdiction of the Court. For such a purpose, the Court has to examine the plaint and the documents filed in support of the suit claim. Unlike the provisions of law of procedure, which are normally directory, the provisions of Section 9A are mandatory while the provisions of Order 14, Rule 2 are to be exercised in the judicial discretion of the Court. Thus, Section 9A operates at a particular stage of the proceedings of the suit while the provisions of Order 14, Rule 2 are attracted at any stage of the suit. Such a view would be in fact in conformity with the view taken by the earlier Benches of this Court by applying the principle of harmonious construction to both these provisions.

36. In view of the above discussion, we answer the questions as follows:

(i) An application for framing of issue relating to jurisdiction of the Court can be filed at any stage of the proceedings in the suit. The provisions of Section 9-A of the Code are attracted only when the conditions stated in that provision are satisfied at the time when question of jurisdiction is raised before the Court. Once the stage contemplated under Section 9-A of the Code is over (i.e. the application for interim orders has been decided), then these provisions lose their mandatory character and significance. Whereafter the application for framing an issue relating to jurisdiction and its determination in accordance with law would be controlled by the provisions of Order 14, Rule 2 of the Code.

(ii) However, if an application for grant or vacation of reliefs specified under Section 9-A of the Code has already been decided by the Court of competent jurisdiction, in that event, the proceedings in the suit would be controlled by the provisions of Order 14, Rule 2 of the Code. The formation of opinion and exercise of discretion by the Court cannot be regulated by any strait-jacket formula and essentially it must be left in the discretion of the Court, depending on the facts and circumstances of a given case. The Court will obviously exercise such jurisdiction applying the well accepted canons of civil jurisprudence. In other words and construed objectively, the provisions of Section 9-A are not mandatory and subject to what has been stated above, it may not be necessary for the Court to decide the issue at the threshold. If the application for interim relief is pending, Section 9-A of the Code will operate with – all its rigour and irrespective of the stage of such application.

We accordingly answer the reference and direct that the matter now be placed before the Court for disposal in accordance with law.

The post Satpuda Tapi Parisar Sahakari Sakhar Karkhana Ltd. Vs. Jagruti Industries and anr. appeared first on B&B Associates LLP.

Bail Application No. 1627/2008

Judgment delivered on: 04.8.2008
Chander Bhan and Anr. …… Petitioners
Through: Mr. Rajesh Khanna Adv.
Versus
State ….. Respondent
Through: Mr. Pawan Sharma APP

HON’BLE MR. JUSTICE KAILASH GAMBHIR

1. Whether the Reporters of local papers may be allowed to see the judgment? yes

2. To be referred to Reporter or not? yes

3. Whether the judgment should be reported in the Digest? yes

KAILASH GAMBHIR, J. (Oral)

By way of the present petition the petitioners who are parents- in-law of the complainant seek grant of anticipatory bail.
Mr. Sharma counsel for the State submits that allegations are serious in nature against the petitioners, therefore, the petitioners do not deserve grant of anticipatory bail.
Complainant is present in the court. She states that there is no possibility of her going back to the matrimonial home. However, the complainant is not averse to the matter being sent before the mediation cell. Let the matter be sent to the Mediation Cell, Rohini Court, Delhi for exploring the possibility of amicable settlement between the parties.
Let the parties appear before the Mediation Cell, Rohini Court, Delhi on 11.8.2008 at 4.00 P.M.
List the matter before the court on 23.9.2008.
Till then the petitioners shall not be arrested.
Before parting with this case, I deem it expedient and in the larger interest of saving matrimony of the couples and to restore peace between the two hostile families of husband and wife who once must have celebrated the marriage of couple with great zeal, fervor and enthusiasm but when faced with many facets and stark realities of life entangled themselves to fight a long drawn legal battle instead of building confidence, trust, understanding, mutual respect for each other and their respective families.
The offence of cruelty by husband or relatives of husband (Section 498-A) was added in 1986 to curb the vise of subjecting women to coerce them or their relatives to meet unlawful demands for dowry.
Since its enactment, this provision has been subjected to systematic and sustained attack. It has been called unfair and responsible for the victimisation of husbands by their wives and her relatives. No doubt there may be many deserving cases where women are being subjected to mental and physical cruelty at the hands of the avaricious in-laws. But such cases have to be distinguished from other cases where merely due to trivial fights and ego clashes the matrimony is facing disaster.
What is not comprehended by young minds while invoking the provisions of the likes of Section 498-A and 406 of IPC is that these provisions to a large extent have done incalculable harm in breaking matrimony of the couples.
Despite the western culture influencing the young minds of our country, still it has been seen that Indian families value their own age old traditions and culture, where, mutual respect, character and morals are still kept at a very high pedestal.
It has been noticed in diverse cases, where the brides and their family members in litigation find the doors of conciliation shut from the side of groom and his family members only on account of there having suffered the wrath of Police harassment first at the stage when matter is pending before crime against women cell and thereafter at the time of seeking grant of anticipatory or regular bail and then the ordeal of long drawn trial.
Daily, matters come before this court seeking bail and for quashing of FIR?s registered under Sections 498A/406 of the IPC. This court is of the view that it is essential to lay down some broad guidelines and to give directions in such matters in order to salvage and save the institution of marriage and matrimonial homes of the couples.

Guidelines:

1. Social workers/NGO
There is no iota of doubt that most of the complaints are filed in the heat of the moment over trifling fights and ego clashes. It is also a matter of common knowledge that in their tussle and ongoing hostility the hapless children are the worst victims. Before a wife moves to file a complaint with the Women Cell, a lot of persuasion and conciliation is required.
(a) The Delhi Legal Service Authority, National Commission for Women, NGO?s and social worker?s working for upliftment of women should set up a desk in crime against women cell to provide them with conciliation services, so that before the State machinery is set in motion, the matter is amicably settled at that very stage. But, if ultimately even after efforts put by the social workers reconciliation seems not possible then the matter should be undertaken by the police officials of Crime against Women cell and there also, serious efforts should be made to settle the matter amicably.

2. Police Authorities:
(a) Pursuant to directions given by the Apex Court, the Commissioner of Police, Delhi vide Standing Order No. 330/2007 had already issued guidelines for arrest in the dowry cases registered under Sections 498-A/406 IPC and the said guidelines should be followed by the Delhi Police strictly and scrupulously.
(i) No case under Section 498-A/406 IPC should be registered without the prior approval of DCP/Addl. DCP.
(ii) Arrest of main accused should be made only after thorough investigation has been conducted and with the prior approval of the ACP/DCP.
(iii) Arrest of the collateral accused such as father-in-law, mother-in-law, brother-in-law or sister-in-law etc should only be made after prior approval of DCP on file.
(b) Police should also depute a well trained and a well behaved staff in all the crime against women cells especially the lady officers, all well equipped with the abilities of perseverance, persuasion, patience and forbearance.
(c) FIR in such cases should not be registered in a routine manner.
(d) The endeavor of the Police should be to scrutinize complaints very carefully and then register FIR.
(e) The FIR should be registered only against those persons against whom there are strong allegations of causing any kind of physical or mental cruelty as well as breach of trust.
(f) All possible efforts should be made, before recommending registration of any FIR, for reconciliation and in case it is found that there is no possibility of settlement, then necessary steps in the first instance be taken to ensure return of stridhan and dowry articles etc. by the accused party to the complainant.

3. Lawyers:
Lawyers also have a great responsibility in this regard.
(a) While drafting pleadings/complaints, the lawyers should not unnecessarily suggest incorporation of wild allegations, or in character assassination of any of the parties or their family members whatever the case may be.
(b) Lawyers are also to endeavour to bring about amicable settlement between the parties as they are expected to discharge sacred duty as social engineers in such cases instead of making them target for monetary considerations by multiplying their cases.

4. Courts:
Subordinate courts, be it trying civil or criminal cases concerning bail, maintenance, custody, divorce or other related matters shall in the first instance, in every case where it is possible so to do consistently with the nature and circumstances of the case, to make every endeavour to bring about reconciliation between the parties.
a) The first endeavor should be for possible reunion and restitution of the parties and as a last endeavor to bring about peaceful separation.
b) If possible extra time should be devoted to such matters to restore peace in the lives of rival parties be it by re-uniting them or even in case of their parting ways.
c) Conciliatory proceedings by the court should preferably be held in camera to avoid embarrassment.
d) Wherever, the courts are overburdened with the work, necessary assistance of Mediation and Conciliation cells should be sought.
Apart from above directions it would not be out of place to ask parties also to themselves adopt a conciliatory approach without intervention of any outside agency and unless there are very compelling reasons, steps for launching prosecution against any spouse or his/her in-laws be not initiated just in a huff, anger, desperation or frustration.

DASTI.

KAILASH GAMBHIR, J
August 04, 2008

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Nikhil Merchant …Appellant
Vs.
Central Bureau of Investigation & Anr …Respondent(s)

J U D G M E N T

Altamas Kabir, J.

1. Leave granted.

2. Central Bureau of Investigation (hereinafter referred to as “CBI”) filed a charge sheet against five accused persons under Section 120B read with Sections 420, 467, 468, 471A Indian Penal Code read with Sections 5(2) and 5(1)(d) of the Prevention of Corruption Act, 1947 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. In the said charge sheet, the appellant herein was made accused No.3 and the Company, in respect of which he was the former Managing Director, M/s. Neemuch Emballage Ltd., Mumbai, was made the accused No.4. The other three accused are officials of the Andhra Bank.

3. The accused No.4-Company was granted financial assistance by the Andhra Bank, Opera House Branch under various facilities. On account of default in repayment of the loans, the Bank filed a suit for recovery of the amount payable and in addition, on 19th December, 1995, a complaint was made by the General Manager and the Chief Vigilance Officer of the Bank on the basis whereof investigations were undertaken by the CBI, which filed the above-mentioned charge sheet in the Court of the Special Judge on 30th December, 1998. The allegations under the charge sheet indicate that the accused persons conspired with each other in fraudulently diverting the funds of the Andhra Bank. Offences alleging forgery were also included in the charge sheet. The above-mentioned suit between the Company and the Bank, to which the appellant herein was also a party, was disposed of on a compromise arrived at between the parties which was reduced into writing, and was filed in the suit. On the basis of the consent terms, the suit was compromised upon the defendants agreeing to pay the amounts due as per the schedule mentioned in the consent terms. What is of importance in this case is clause 11 of the consent terms, which reads as follows:-
“Clause 11. Agreed that save as aforesaid neither party has any claim against the other and parties do hereby withdraw all the allegations and counter allegations made against each other.”

4. Consequent upon the compromise of the suit and having regard to the contents of Clause 11 of the consent terms, the appellant herein filed an application for discharge from the criminal complaint, in respect of which charge sheet had been filed by the CBI. The said application was rejected by the Special Judge (CBI), Greater Bombay, by his order dated 11th December, 2002, which came to be challenged by the appellant before the Bombay High Court in Cr.R.A. No.49/2005, along with several other writ petitions filed by the other accused.

5. Before the High Court, it was urged that since the subject matter of the dispute had been settled between the appellant and the Bank, it would be unreasonable to continue with the criminal proceedings which had been commenced on a complaint filed on behalf of the Bank having particular regard to clause 11 of the consent terms by which the parties had withdrawn all claims against each other. It was submitted that the learned Special Judge had erred in rejecting the appellant’s prayer for discharge from the criminal case. In support of the aforesaid contentions made on behalf of the appellant before the High Court, reference was made to the decision of this Court in the case of Central Bureau of Investigation vs. Duncans Agro Industries Ltd., [1996 (5) SCC 591] wherein on the basis of facts similar to the facts of this case, this Court had held that even if an offence of cheating is prima facie made out, such offence is a compoundable offence and compromise decrees passed in the suits instituted by the Bank, for all intents and purposes, amount to compounding of the offence of cheating. This Court accordingly, upheld the order of the High Court quashing the criminal complaint after the civil action had been compromised between the parties.

6. Apart from the said decision, reliance was also placed on another decision of this Court in the case of B.S. Joshi and Ors. Vs. State of Haryana & Anr., [2003(4) SCC 675] wherein while dealing with the proceedings under Sections 498-A and 406 Indian Penal Code involving matrimonial disputes and offences, this Court held that even though the provisions of Section 320 of the Code of Criminal Procedure would not apply to such offences, which are not compoundable it did not limit or affect the powers under Section 482 and the powers conferred on the High Courts and the Supreme Court under Articles 226 and 136 of the Constitution of India. Referring to the decision of this Court in State of Haryana vs Bhajan Lal, [1992 Suppl. (1) SCC 335] this Court observed that the categories indicated in the said case which warranted exercise of power under Section 482 CrPC were only illustrative and not exhaustive. This Court ultimately held that the High Court in exercise of its inherent powers can quash criminal proceedings or a FIR or complaint and Section 320 CrPC does not limit or affect the power of the High Court under Section 482 of the Code.

7. After considering the said decision in the light of the submissions made on behalf of the respective parties, the High Court took the view that in the Duncans Agro case (supra) this Court was considering the situation involving Section 420 IPC which was compoundable under Section 320(2) CrPC, while in the instant case, the charge sheet was also under Sections 467, 468, 471-A IPC along with the provisions of the Prevention of Corruption Act, which were noncompoundable. The High Court, therefore, held that neither of the said two cases would have application to the facts of this case and rejected the appellant’s prayer for discharge from the criminal cases.

8. This appeal has been filed against the said order of the High Court rejecting the appellant’s prayer for discharge from the criminal complaint.

9. Appearing for the appellant, Mr. R. Nariman, learned senior advocate, submitted that the appellant was not the direct beneficiary of the loans which had been granted by the complainant Bank, but had stood guarantee for the same in his capacity as the Managing Director of the Company to whom such loans had been advanced. Mr. Nariman submitted that while the loans were said to have been advanced to the CompanyAccused No.4 between 1986 and 1989, the suit for recovery of the unpaid dues was filed by the Andhra Bank in 1992 and two years thereafter the complaint was lodged by the Bank on 19th September, 1994 and the charge sheet was filed by the CBI four years later on 30th December, 1998. Thereafter, the suit filed by the Bank for the recovery of its dues was compromised by a consent decree on 12th October, 2000, and in view of clause 11 of the consent terms, apart from the said suit, all other actions, including the criminal proceedings, also stood compounded. In support of his aforesaid submissions, Mr. Nariman also relied on the decision rendered by this Court in the Duncans Agro case (supra) and B.S. Joshi’s case (supra) and submitted that the High Court had erred in coming to a finding that the said two decisions had no application to the case in hand.

10. Mr. Nariman submitted that paragraph 2 of the Judgment in the Duncans Agro case (supra) would clearly indicate that the offences disclosed in the first of the two FIRs attracted the provisions of Section 120B read with Sections 409, 420, 467, 468 and 471 IPC. It was not that the High Court was considering the case only under Section 420 IPC which was compoundable. Mr. Nariman submitted that it is such misreading of the judgment which has led the High court to commit an error in its decision under challenge. Mr. Nariman urged that the decision in B.S. Joshi’s case (supra) squarely covers the facts of this case also since in exercise of inherent powers, this Court could transcend the limitation imposed under Section 320 CrPC and pass orders quashing criminal proceedings or FIR or complaint even where non- compoundable offences were involved.

11. Mr. Nariman submitted that since the disputes out of which the criminal proceeding has arisen have been compromised between the appellant and the Bank, continuing with the compliant would only amount to misuse of the process of Court.

12. In addition to his above submissions Mr. Nariman submitted that after the chargesheet was filed by the CBI on 30.12.1998, no further steps have been taken in the matter and that even charges have not been framed. He submitted that the proceedings were stayed by this Court on the SLP filed by the appellant only on 3.1.2006. He also submitted that even the Bank had not taken any action against its employees against whom chargesheet had been filed. He urged that from the manner in which the entire matter has been pursued no other object has been sought to be achieved except to harass the appellant for the last 14 years when the initial complaint was lodged by the Bank.

13. It was lastly submitted by Mr. Nariman that, in any event, the contents of the chargesheet and the allegations made therein, at best make out a case for cheating and not forgery and consequently both the Duncans Agro Industries case (supra) and B.S.Joshi’s case (supra) would apply to the facts of the case and the proceedings were liable to be quashed.

14. The learned Additional Solicitor General, Mr. A.Sharan, on the other hand, submitted that neither of the aforesaid two cases have any application to the facts of the instant case and the appellant had erroneously relied on the same. The learned Additional Solicitor General submitted that the CBI had filed chargesheet against the appellant under Section 120-B read with Sections 420,467, 468, 471 IPC and also under Sections 5(2) read with Section 5(1)(d) of the Prevention of Corruption Act, 1947 and Sections 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

15. The learned Additional Solicitor General submitted that apart from Section 420 IPC the appellant had been charged with other offences in the chargesheet as indicated hereinabove, most of which being offences under the IPC as also the Prevention of Corruption Act, were non-compoundable. It was urged that in the Duncans Agro Industries case (supra)the Court had proceeded on the basis that the charge against the accused was one only under Section 420 IPC and a decision was rendered accordingly, despite the fact that the chargesheet also included offences under Sections 468 and 471 IPC which were noncompoundable. It was urged that the decision in B.S. Joshi’s case (supra) does not also help the case of the appellant since what was being considered therein was whether the High Court had jurisdiction to exercise authority in a writ petition where the Court was not shackled by the restrictive provisions of Section 320 of the Code of Criminal Procedure. The learned Additional Solicitor General while not disputing the position that in the Duncans Agro case (supra) the Court had referred to the chargesheet against the appellant which included charges under Sections 468 and 471 IPC, also submitted that the ultimate decision was rendered only in the context of Section 420 IPC and not the other noncompoundable sections. He also submitted that the allegations contained in the chargesheet in the present case not only made out an offence of cheating, but also of forgery on account of the various documents which had been prepared under the signature of the appellant showing inflated stocks to induce the Bank to provide additional credit facility and funds which it would not have otherwise been legally entitled to.

16. Rebutting the submissions made on behalf of the appellant, the learned Additional Solicitor General referred to the provisions of Sections 463 and 464 IPC which relate to the definition of “forgery” and “the making of a false document”. He pointed out that under the definition of forgery in Section 463 any person making any false document or false electronic record or part of a document or electronic record with intent to cause damage or injury to the public or to any person or to support any claim or title or to cause any person to part with any property or to enter into any expressed or implied contract or with intent to commit fraud or that fraud may be committed, commits forgery. Referring to Section 464 he submitted that a person is said to make a false document or false electronic record who dishonestly or fraudulently, inter alia, makes, signs, seals or executes a document or part of a document with the intention of causing it to be believed that such document was made, signed, sealed, executed, transmitted or affixed by or by authority of a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed. The learned Additional Solicitor General submitted that in the instant case the preparation of such a false document with the intention of cheating comes squarely within the definition of forgery under Section 463 IPC.

17. It was urged that all the ingredients of offences committed under Sections 468 and 471 as also Section 420 IPC are made out in the chargesheet, and hence, even if the matter was compromised between the parties, the criminal proceedings could not be compounded on that basis since the offences involved also include non-compoundable offences.

18. It was urged that even if no steps have been taken by the CBI since the chargesheet was filed in 1998, the same would not be a ground for quashing the criminal proceedings once the chargesheet had been filed. He submitted that in view of the decision of this Court in Supreme Court Bar Association vs Union of India (1998) 4 SCC 409, this Court would possibly not be justified in giving directions in the instant case even under Article 142 of the Constitution, since the Constitution Bench had held that in exercise of its plenary powers under Article 142 this Court could not ignore any substantive statutory provision dealing with the subject. It is a residuary power, supplementary and complementary to the powers specifically conferred on the Supreme Court by statutes, exercisable to do complete justice between the parties where it is just and equitable to do so. It was further observed that the power under Article 142 of the Constitution was vested in the Supreme Court to prevent any obstruction to the stream of justice.

19. The learned Additional Solicitor General submitted that the power under Article 142 is to be exercised sparingly and only in rare and exceptional cases and in the absence of any exceptional circumstances the appeal was liable to be dismissed.

20. Having carefully considered the facts of the case and the submissions of learned counsel in regard thereto, we are of the view that, although, technically there is force in the submissions made by the learned Additional Solicitor General, the facts of the case warrant interference in these proceedings.

21. The basic intention of the accused in this case appears to have been to misrepresent the financial status of the company, M/s Neemuch Emballage Limited, Mumbai, in order to avail of credit facilities to an extent to which the company was not entitled. In other words, the main intention of the company and its officers was to cheat the Bank and induce it to part with additional amounts of credit to which the company was not otherwise entitled.

22. Despite the ingredients and the factual content of an offence of cheating punishable under Section 420 IPC, the same has been made compoundable under Sub-section (2) of Section 320 Cr.P.C. with the leave of the Court. Of course, forgery has not been included as one of the compoundable offences, but it is in such cases that the principle enunciated in B.S. Joshi’s case (supra) becomes relevant.

23. In the instant case, the disputes between the Company and the Bank have been set at rest on the basis of the compromise arrived at by them whereunder the dues of the Bank have been cleared and the Bank does not appear to have any further claim against the Company. What, however, remains is the fact that certain documents were alleged to have been created by the appellant herein in order to avail of credit facilities beyond the limit to which the Company was entitled. The dispute involved herein has overtones of a civil dispute with certain criminal facets. The question which is required to be answered in this case is whether the power which independently lies with this Court to quash the criminal proceedings pursuant to the compromise arrived at, should at all be exercised?

24. On an overall view of the facts as indicated hereinabove and keeping in mind the decision of this Court in B.S. Joshi’s case (supra) and the compromise arrived at between the Company and the Bank as also clause 11 of the consent terms filed in the suit filed by the Bank, we are satisfied that this is a fit case where technicality should not be allowed to stand in the way in the quashing of the criminal proceedings, since, in our view, the continuance of the same after the compromise arrived at between the parties would be a futile exercise.

25. We, therefore, set aside the order passed by the High Court dismissing the petitioner’s revision application No.49 of 2003 in Special Case No.80 of 1998 and quash the proceedings against the appellant. The appeal is accordingly allowed.

……………….J
(ALTAMAS KABIR)
……………….J
(MARKANDEY KATJU)

New Delhi
Dated: 20.8.2008

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Natco Pharma Limited …Appellant(s)
Versus
Union of India & Ors. …Respondent(s)

O R D E R

Leave granted.

A piquant situation has arisen in this case on account of absence of Technical Member in the Intellectual Property Appellant Board (IPAB) constituted under the provisions of Section 116 of the Patents Act, 1970.

On 2 nd April, 2007, Central Government appointed S.Chandrasekaran as Technical Member (Patent) of IPAB vide notification of even date. On 3 rd April, 2007, notification was issued notifying 2 nd April, 2007 as the date for transfer of appeals pending before any High Court to IPAB. The appeals were transferred to the IPAB by the High Court vide its order dated 4th April, 2007.

On 16th June, 2007, Misc. Petition Nos.1 and 2 of 2007 were filed by respondent No.4 herein before IPAB praying for the appointment of another Technical Member in place of S.Chandrasekaran on the ground that the said Member had earlier filed an affidavit in the matter taking a particular position in the dispute which has a direct bearing on the case in hand.

It is under these peculiar facts and circumstances of the case and, particularly, in view of the fact that the controversy involved before IPAB is concerning crystal modification of a N-Phenyl-2-Pyrimidineamine derivative and since the dispute is regarding patentability of the process as well as the product that we are of the view that such complicated disputes need to be resolved by IPAB which must have a Technical Member in it.

In the above facts and circumstances of this case only and without making our order a precedent for future cases, we called for a panel/list of Controllers duly qualified under Section 116 of the Patents Act, as amended by the Patents (Amendment) Act, 2006.

From that list submitted to us, we have opted for the name of Dr.P.C.Chakraborti, Deputy Controller of Patents & Designs, who holds postgraduate degree of M.Sc.(Chemistry) as well as Ph.D.

We, accordingly, direct that all preliminaries will be completed by the parties in the month of October, 2008 and the IPAB duly reconstituted under our orders, which would include Dr. P.C.Chakraborti, would hear and decide the pending Appeal Nos.TA/001/2007/PT/CH to TA/005/2007/PT/CH preferably in the month of November, 2008. We direct the IPAB to list the above Appeals before it for directions on 3 rd November, 2008. The matter will be heard and disposed of on dayto-day basis.

As a special case, Dr.P.C.Chakraborti will continue to be the Member of the said Board till the hearing and final disposal of the said appeals. He will be the Member of the IPAB only for the said Appeals. He will be paid remuneration payable to the Technical Member of IPAB, namely, salary of Rs.86,286/- per month with other perquisites as mentioned in the annexure to this order. This annexure has been given to us by the Union of India. It is also made clear that Dr.P.C.Chakraborti, who is presently Deputy Controller of Patents and Designs, will not be entitled to draw his salary for the aforestated period as Deputy Controller of Patents and Designs but, he would be entitled to protection of his seniority and other incidental benefits.

We hope that the Board would preferably dispose of the Appeals within one month, if possible, from the date of the commencement of hearing.

Both sides have accepted the name of Dr.P.C.Chakraborti to act as Technical Member in the above Appeals.

Civil Appeals are disposed of accordingly, with no order as to costs.

……………….J.
(S.H. KAPADIA)
……………….J.
(B. SUDERSHAN REDDY)

New Delhi,
October 01, 2008.

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s).1323-1337/2008
(From the judgement and order dated 13/11/2007 in WP Nos. 26676 to 26680 of 2007 & MP Nos.1 & 2 of 2007 of the HIGH COURT OF MADRAS)

NATCO PHARMA LIMITED Petitioner(s)
VERSUS
UNION OF INDIA & ORS. Respondent(s)

(With prayer for interim relief and office report)
Date: 01/10/2008 These Petitions were called on for hearing today.

CORAM :
HON’BLE MR. JUSTICE S.H. KAPADIA
HON’BLE MR. JUSTICE B. SUDERSHAN REDDY

For Petitioner(s) Ms. Rajeshwari Hariharan, Adv.
Mr. S. Hariharan, Adv.

For Respondent(s)
No.4: Mr. Shanti Bhushan, Sr.Adv.
Ms. Arpita Sawhney, Adv.
Mr. Sanjay Kumar, Adv.
Mr. Sukhdev, Adv.
Ms. Meenakshi Arora, Adv.
R.Nos.1-3: Mr. B.S. Chahar, Sr.Adv.
Mrs. Anita Sahani, Adv.
Mrs. Anil Katiyar, Adv.
Mr. D.S. Mahra, Adv.
R.No.8: Ms. Rukhsana Choudhury, Adv.
Ms. S. Pratibha, Adv.
Ms. Sivangi Roy, Adv.

UPON hearing counsel the Court made the following

O R D E R

Leave granted.
Civil Appeal are disposed of with no order as to costs, in terms of the signed order.

(N. ANNAPURNA)
COURT MASTER

(VIJAY DHAWAN)
COURT MASTER

(Signed order is placed on file)
Note: Copy of the order be given by Friday.

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CASE NO.: Writ Petition (civil) 265 of 2006

PETITIONER: Ashoka Kumar Thakur

RESPONDENT: Union of India and Ors

DATE OF JUDGMENT: 10/04/2008

BENCH: Dr. ARIJIT PASAYAT & C.K. THAKKER

JUDGMENT: J U D G M E N T

WRIT PETITION (CIVIL) NO. 265 OF 2006

(With WP (C) Nos. 269/2006, 598/2006, 29/2007, 35/2007, 53/2007 Contempt Petition (C)No.112/2007 in WP ) No.265/2006, 336/2007, 313/2007, 335/2007, 231/2007, 425/2007 and 428/2007)

Dr. ARIJIT PASAYAT, J

1. The issues involved in the present writ petitions have far reaching consequences and in essence pose several questions of seminal importance. In essence, they raise questions which have no easy answers. The complexity can be gauged from the fact that on one hand the petitioners have questioned the logic of providing reservations/quotas for a class of people whom they described as “unidentifiable” or “undetermined” while the respondents justify their action by labelling them as measures taken for upliftment of vast majority of people who have suffered social humiliation and sneer for the social backwardness. Complex questions like whether the expressions ‘class’ and ‘castes’ are synonyms, whether reservations provide the only solution for social empowerment measures, alleged lack of concern for the economically weaker group of citizens are some of the basic issues which need to be addressed. It has been emphatically highlighted by the petitioners that when the ultimate objective is classless and casteless in Indian democracy, there is no question of unendingly providing the reservation and that too without any definite data regarding backwardness. In essence, they contend that these measures perpetuate backwardness and do not remove them. On the epicenter of challenge is the Central Educational Institutions (Reservation in Admission) Act 2006 (in short the ‘Act’) and the 93rd Amendment to the Constitution of India, 1950 (in short the ‘Constitution’). Interestingly, both the petitioners and the respondents rely strongly on certain observations made by this Court in Indra Sawhney v. Union of India 1992 (Suppl. 3) SCC 217 (commonly known as ‘Indra Sawhney No.1’)

2. When the writ petitions were placed before a Bench of two Judges, considering the importance of the matter they were referred to be heard by a larger bench and certain questions which arise for consideration were formulated. That is how these cases are before this Bench.

3. Arguments have been advanced by both the sides as to whether Constitution contemplates casteless society. While the respondents submit that the Constitution really does not think of a casteless society, it prohibits untouchability in the background of Article 17. It has to be noted that both in Articles 15 and 16 the stress is on non-discrimination on the ground of castes. The Preamble of the Constitution also throws light on this aspect. Ultimately if the social status of a man goes in the higher direction because of his education, the difference in status gets obliterated. Education is a great levellor. In that sense, the ultimate object is that every Indian citizen should have the social status which is not inferior to another and that would be obliteration of the difference in status. The ultimate objective is to see that no person gets discriminated because of his caste. If that be so, it would not be right to say that the ultimate objective is not the casteless society.

4. Various Articles of the Constitution of India and the Preamble provide an insight to the monumental document i.e.

the Constitution of India. Article 14 guarantees equality before the law in addition to equal protection of law. Article 15(1) mandates that there shall not be any discrimination against any citizen on the grounds of religion, caste, sex, race, or place of birth. Article 16(1) makes the fundamental right of equality specific relating to job opportunities. Article 16(2) significantly speaks of government employment by providing that no citizen shall be ineligible only on the grounds of religion, race, caste, sex, descent, place of birth or any of them or discriminated against in respect of any employment or office under the State.

Article 16(4) is an important provision which empowers the State permitting the provision for the reservation of appointments and posts in favour of any backward class of citizens which in the opinion of the State is not adequately represented in the services of the State. The stress is on backwardness of the citizens and inadequate representation in the services under the State.

5. If one takes a walk on the pathway relating to the views expressed by this Court in the matter of reservation or quotas for the other backward classes one comes across many milestones. Some of them were noted extensively in Indra Sawhney No.1. They are: The State of Madras v. Sm.

Champakam Dorairajan & Anr. [1951] INSC 25; (AIR 1951 SC 226), Minor A Peeriakaruppan v. Sobha Joseph [1971] INSC 12; (1971 (1) SCC 38), The State of Andhra Pradesh and Ors. v. U.S.V. Balram, etc. [1972] INSC 31; (1972 (1) SCC 660), Shri Janki Prasad Parimoo and Ors. v. State of Jammu and Kashmir and Ors. (1973(1) SCC 420), State of Uttar Pradesh and Ors. v. Pradip Tandon and Ors. [1974] INSC 245; (1975 (1) SCC 267), State of Kerala and Anr. v. N.M. Thomas and Ors.

(1976(2) SCC 310), Kumari K.S. Jayashree and Anr. v. The State of Kerala and Anr. [1976] INSC 187; (1976 (3) SCC 730), K.C. Vasanth Kumar and Anr. v. State of Karnataka (1985 (Supp) SCC 714) and Indra Sawhney v. Union of India and Ors. (2000 (1) SCC 168) (known as Indra Sawhney No.2).

6. Two recent decisions have also been highlighted by the parties. They are M. Nagaraj and Ors. v. Union of India and Ors. (2006 (8) SCC 212) and Nair Service Society v. State of Kerala (2007 (4) SCC 1). It is to be noted that some of the arguments which have been raised relate to broad principles of law and the jurisprudential approach. They are the applicability of the foreign decisions, more particularly, the decisions of the American Courts. They relate to the principles of strict scrutiny and narrow tailoring.

7. Learned counsel for the petitioners have stressed on these decisions to show as to what should be the approach in matters relating to social empowerment. Learned counsel for the respondents have however submitted that the approach is to be different because the problems before the American Courts essentially related to individual rights while the Indian Courts are more concerned with group rights i.e. rights of class of citizens. We shall deal with this in some length later.

8. The other issue which was hotly contested related to the exclusion of the creamy layer.

9. One of the major challenges raised by the petitioners is based on the allegation that there is no acceptable data for fixing the percentage of other backward classes. This has been highlighted to show that there is no rational basis for fixing the percentage of reservation at 27% for the other backward classes. It is pointed out that the figures appear to have been culled out from some survey done more than seven decades back i.e. 1931 to be precise. Thereafter, there seems to be no definite data to know the actual percentage. It is pointed out that in Indra Sawhney No.1 (supra) this Court had laid considerable stress on having a Commission to identify and determine the criteria for determining the socially and educationally backward classes. Very little appears to have been done. It is surprising, it was contended, that there has been not even a single case of exclusion but on the other hand more than 250 new castes/sub-castes have been added. This shows that there is really no serious attempt to identify the other backward classes. On the other hand, there has been over-jealous anxiety to include more number of people so that they can get the benefits of reservations/quotas and this has been termed as “vote bank politics”. It is highlighted that even when a serious matter relating to adoption of the Act was under consideration there was hardly any discussion and every political party was exhibiting its anxiety to get the Statute passed. Crocodile tears were shed to show lip sympathy for the backwardness of the people. In reality, the object was to give a wrong impression to the people that they were concerned about the backwardness of the people and they were the ‘Messiahs’ of the poor and the down trodden. In reality, in their hearts the ultimate object was to grab more votes. The lack of seriousness of the debate exhibits that the debate was nothing but a red-herring to divert attention from the sinister, politically motivated design masked by the “tearful” faces of the people masquerading as champions of the poor and down trodden. It is pointed out that contrary to what was being projected by the parties when the discussions were going on, in an impassioned speech by late Rajeev Gandhi who was the leader of opposition at an earlier point of time, the fallacies in adopting the Mandal Report were highlighted. It is surprising, it is submitted, that those very people who were the champions of anti-reservation and anti- quota as members of opposition, have done summersault and were saying just the opposite. It is pointed out that when one member Shri P.C. Alexandar exhibited real courage and highlighted the fallacies in the stand taken, his view appears to have been lightly brushed aside and the Statute hustled through. It is also submitted that the objectivity and sanctity of the report submitted in the Parliament commonly known as “Oversight Committee Report” has been lightly brushed aside.

This only indicates that there was no serious debate about the consequences. The foresight of late Rajiv Gandhi in saying that the country will be divided on caste basis and that would lead to disaster has been prophetically proved to be correct and it is a reality. It is submitted that the enactment has created a sharp divide amongst the citizens of the country and it has not even an iota of good results flowing from it. On the contrary, the country will be divided sharply leading to social unrest and caste-wars. It is pointed out that in the recent past such caste wars have resulted in large scale loss of life and destruction of public properties.

10. The relevance of the parliamentary debate or the speech of the Minister has been highlighted by this Court in many cases. It is a settled position in law that there can be only limited use of the parliamentary debate. The Courts should not normally critically analyse the proceedings of Parliament.

This flows from a very fundamental aspect i.e. mutual respect of the Parliament and the Judiciary for each other. Each of these great institutions in a democracy operates in different fields. It is not expected that one wing of democracy would criticize the manner of functioning of another wing. That would be against the basic desirability of mutual respect. Any opinion or comment or criticism about the manner of functioning of one by the other would be not only undesirable but imperatively avoidable. The citizens of this country expect a great deal from the Parliament and the Judiciary. It is but natural that the people of this country would be disappointed and dis-heartened and their hopes will be shattered if instead of showing respect for each other, there is mudslinging, unwanted criticism or impermissible criticism about the manner of functioning or the rationale of a decision or a view taken. In this context, it would be relevant to take note of what this Court said in Builders Association of India v. Union of India and Ors. (1995 Supp (1) SCC 41), and K. Nagaraj and Ors. v. State of Andhra Pradesh and Anr. [1985] INSC 8; (1985 (1) SCC 523).

In State of Mysore v. R.V. Bidap (1974 (3) SCC 337), it was observed as follows:

“5. Anglo-American jurisprudence, unlike other systems, has generally frowned upon the use of parliamentary debates and press discussions as throwing light upon the meaning of statutory provisions. Willes, J. in Miller v. Tayler, [1769] 4 Burri, 2303, 2332., stated that the sense and meaning of an Act of Parliament must be collected from what it says when passed into law, and not from the history of changes it underwent in the House where it took its rise. That history is not known to the other House or to the Sovereign. In Assam Railways and Trading Company Ltd. v. I.R.C., [1934] UKHL TC_18_509; [1935] A.C. 445 at p. 458, Lord Writ in the Privy Council said :

“It is clear that the language of a Minister of the Crown in proposing in Parliament a measure which eventually becomes law is inadmissible and the report of commissioners is even more removed from value as evidence of intention, because it does not follow that their recommendations were accepted.”

The rule of grammatical construction has been accepted in India before and after Independence. In the State of Travancore- Cochin and Ors. v. Bombay Company Ltd., Alleppey, (AIR 1952 S.C. 366), Chief Justice Patanjali Sastri delivering the judgment of the Court, said :- “It remains only to point out that the use made by the learned Judges below of the speeches made by the members of the Constituent Assembly in the course of the debates on the draft Constitution is unwarranted. That this form of extrinsic aid to the interpretation of statutes is not admissible has been generally accepted in England, and the same rule has been observed in the construction of Indian statutes- see Administrator-General of Bengal v. Prem Lal Mullick, 22 Ind. Appl.

107 (P.C.) at p. 118. The reason behind the rule was explained by one of us in Gopalan v. State of Madras, [1950] INSC 14; (1950) S.C.R. 88 thus :

A speech made in the course of the debate on a bill could at best be indicative of the subjective intent of the speaker, but it could not reflect the inarticulate mental process lying behind the majority vote which carried the bill. Nor is it reasonable to assume that the minds of all those legislators were in accord”.

Or, as it is more tersely put in an American case- “Those who did not speak may not have agreed with those who did; and those who spoke might differ from each other- United States v. Trans-Missouri Freight Association, (1897) 169 U.S. 290 at p.

318 (sic).

This rule of exclusion has not always been adhered to in America, and sometimes distinction is made between using such material to ascertain the purpose of a statute and using it for ascertaining its meaning. It would seem that the rule is adopted in Canada and Australia-see Craies on Statute Law, 5th Edn. p. 122 (pp. 368-9)”.

11. In the American jurisdiction, a more natural note has sometimes been struck. Mr. Justice Frankfurter was of the view that- “If the purpose of construction is the ascertainment of meaning, nothing that is logically relevant should be excluded, and yet, the Rule of Exclusion, which is generally followed in England, insists that, in interpreting statutes, the proceedings in the Legislatures, including speeches delivered when the statute was discussed and adopted, cannot be cited in courts.”

12. Crawford on Statutory Construction at page 388 notes that- “The judicial opinion on this point is certainly not quite uniform and there are American decisions to the effect that the general history of a statute and the various steps leading up to an enactment including amendments or modifications of the original bill and reports of Legislative Committees can be looked at for ascertaining the intention of the legislature where it is in doubt; but they hold definitely that the legislative history is inadmissible when there is no obscurity in the meaning of the statute.”

The Rule of Exclusion has been criticised by jurists as artificial. The trend of academic opinion and the practice in the European system suggest that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. Recently, an eminent Indian jurist has reviewed the legal position and expressed his agreement with Julius Stone and Justice Frankfurter. Of course, nobody suggests that such extrinsic materials should be decisive but they must be admissible. Authorship and interpretation must mutually illumine and interact. There is authority for the proposition that resort may be had to these sources with great caution and only when incongruities and ambiguities are to be resolved. A.K. Gopalan v. State of Madras [1950] INSC 14; (1950 SCR 88). There is a strong case for whittling down the Rule of Exclusion followed in the British courts and for less apologetic reference to legislative proceedings and like materials to read the meaning of the words of a statute. Where it is plain, the language prevails, but where there is obscurity or lack of harmony with other provisions and in other special circumstances, it may be legitimate to take external assistance such as the object of the provisions, the mischief sought to be remedied, the social context, the words of the authors and other allied matters. The law of statutory construction is a strategic branch of jurisprudence which must, it may be felt, respond to the great social changes but a conclusive pronouncement on the particular point arising here need not detain us because nothing decisive as between the alternative interpretations flows from a reliance on the Constituent Assembly proceedings or the broad purposes of the statutory scheme.

13. One thing however needs to be noted here that mere short length of debate cannot and does not become a ground for invalidity of the decision and the reverse is also not true.

14. Elaborate arguments have been advanced about the applicability of the foreign decisions, more particularly, the American Courts. It is to be noted that the American cases which have been highlighted by the petitioners relate essentially to strict classification, strict scrutiny and narrow tailoring. This issue is of considerable importance when so much debate is taking place about respect being shown by courts of a country to a decision of another country. The factual scenario and the basic issues involved in the cases sometimes throw light on the controversy. It has been rightly contended by Mr. Vahanvati and Mr. Gopal Subramanium that there is a conceptual difference between the cases decided by the American Supreme Court and the cases at hand. In Saurabh Chaudri and Ors. v. Union of India and Ors. (2003 (11) SCC 146) it was held that the logic of strict classification and strict scrutiny does not have much relevance in the cases of the nature at hand. If one looks at the different Statutes in India, Article 14 of the Constitution is conceptually different from 14th Amendment to the American Constitution as was noted in State of West Bengal vs. Anwar Ali Sarkar [1952] INSC 1; (1952 SCR 284) and State of Bombay and Anr. v. F.N. Balsara (1952 SCR 682). In Anwar Ali’s case (supra) at pages 363 and 364 it was noted as follows:

“I find it impossible to read these portions of the Constitution without regard to the background out of which they arose. I cannot blot out their history and omit from consideration the brooding spirit of the times.

They are not just dull, lifeless words static and hide- bound as in some mummified manuscript, but, living flames intended to give life to a great nation and order its being, tongues of dynamic fire, potent to mould the future as well as guide the present. The Constitution must, in my judgment, be left elastic enough to meet from time to time the altering conditions of a changing world with its shifting emphasis and differing needs. I feel therefore that in each case judges must look straight into the heart of things and regard the facts of each case concretely much as a jury would do; and yet, not quite as a jury, for we are considering here a matter of law and not just one of fact; Do these “laws” which have been called in question offend a still greater law before which even they must bow?

99. Doing that, what is the history of these provisions? They arose out of the fight for freedom in this land and are but the endeavour to compress into a few pregnant phrases some of the main attributes of a sovereign democratic republic as seen through Indian eyes. There was present to the collective mind of the Constituent Assembly, reflecting the mood of the peoples of India, the memory of grim trials by hastily constituted tribunals with novel forms of procedure set forth in Ordinances promulgated in haste because of what was then felt to be the urgent necessities of the moment. Without casting the slightest reflection of the judges and the Courts so constituted, the fact remains that when these tribunals were declared invalid and the same persons were retired in the ordinary Courts, many were acquitted, many who had been sentenced to death were absolved. That was not the fault of the judges but of the imperfect tools with which they were compelled to work.

The whole proceedings were repugnant to the peoples of this land, and to my mind, article 14 is but a reflex of this mood.

100. What I am concerned to see is not whether there is absolute equality in any academical sense of the term but whether the collective conscience of a sovereign democratic republic can regard the impugned law, contrasted with the ordinary law of the land, as the sort of substantially equal treatment which men of resolute minds and unbiased views can regard as right and proper in a democracy of the kind we have proclaimed ourselves to be. Such views must take into consideration the practical necessities of government, the right to alter the laws and many other facts, but in the forefront must remain the freedom of the individual from unjust and unequal treatment, unequal in the broad sense in which a democracy would view it. In my opinion, ‘law’ as used in Article 14 does not mean the “legal precepts which are actually recognised and applied in tribunals of a given time and place” but “the more general body of doctrine and tradition from which those precepts are chiefly drawn, and by which we criticise, them.”

15. It needs no emphasis that the formal equality concept came to be recognized in U.S.A. after about 10 years of its inception. In the first phase of the U.S.A. Constitutional Law there was only affirmative action but in the Indian Constitution right from the beginning affirmative action has been provided, for example, provisions made for Scheduled Castes and Schedules Tribes. A distinction has been noted in para 640 of Indra Sawhney No.1. Articles 38(1) and 38(2) read with Article 46 of the Constitution make the position clear that the State is charged with the duty to secure interests of the weaker sections of the people and minimize the inequalities in income. The Constitution from its inception contained Article 17 which abolishes untouchability.

16. In this context the following paras need to be noted.

17. In Minerva Mills Ltd. and Ors. v. Union of India and Ors.

[1980] INSC 141; (1980) 3 SCC 625) in para 63 it was held as follows:

“63. The learned Attorney General argues that the State is under an obligation to take steps for promoting the welfare of the people by bringing about a social order in which social, economic and political justice shall inform all the institutions of the national life. He says that the deprivation of some of the fundamental rights for the purpose of achieving this goal cannot possibly amount to a destruction of the basic structure of the Constitution. We are unable to accept this contention. The principles enunciated in Part IV are not the proclaimed monopoly of democracies alone. They are common to all polities, democratic or authoritarian. Every State is goal-oriented and claims to strive for securing the welfare of its people. The distinction between the different forms of Government consists in that a real democracy will endeavour to achieve its objectives through the discipline of fundamental freedoms like those conferred by Articles14 and 19. Those are the most elementary freedoms without which a free democracy is impossible and which must therefore be preserved at all costs.

Besides, as observed by Brandies, J., the need to protect liberty is the greatest when Government’s purposes are beneficent. If the discipline of Article 14 is withdrawn and if immunity from the operation of that article is conferred, not only on laws passed by the Parliament but on laws passed by the State Legislatures also, the political pressures exercised by numerically large groups can tear the country asunder by leaving it to the legislature to pick and choose favoured areas and favourite classes for preferential treatment.”

18. In His Holiness Kesavananda Bharati Sripadagalvaru v.

State of Kerala and Anr. (1973 (4) SCC 225) it was held as under:

“531. According to Mr. Palkhivala, the test of the true width of a power is not how probable it is that it may be exercised but what can possibly be done under it; that the abuse or misuse of power is entirely irrelevant; that the question of the extent of the power cannot be mixed up with the question of its exercise and that when the real question is as to the width of the power, expectation that it will never be used is as wholly irrelevant as an imminent danger of its use. The court does not decide what is the best and what is the worst. It merely decides what can possibly be done under a power if the words conferring it are so construed as to have an unbounded and limitless width, as claimed on behalf of the respondents.

532. It is difficult to accede to the submission on behalf of the respondents that while considering the consequences with reference to the width of an amending power contained in a Constitution any question of its abuse is involved. It is not for the courts to enter into the wisdom or policy of a particular provision in a Constitution or a statute. That is for the Constitution makers or for the parliament or the legislature. But that the real consequences can be taken into account while judging the width of the power is well settled. The Court cannot ignore the consequences to which a particular construction can lead while ascertaining the limits of the provisions granting the power. According to the learned Attorney General, the declaration in the preamble to our Constitution about the resolve of the people of India to constitute it into a Sovereign, Democratic Republic is only a declaration of an intention which was made in 1947 and it is open to the amending body now under Article 368 to change the Sovereign Democratics Republic into some other kind of polity. This by itself shows the consequence of accepting the construction sought to be put on the material words in that article for finding out the ambit and width of the power conferred by it.”

19. In Sajan Singh v. Maharashtra Sugar Mills Ltd. (AIR 1965 SC 845) it was held as follows:

“6. It is obvious that the fundamental rights enshrined in Part III are not included in the proviso, and so, if Parliament intends to amend any of the provisions contained in Articles 12 to 35 which are included in Part III, it is not necessary to take recourse to the proviso and to satisfy the additional requirements prescribed by it. Thus far, there is no difficulty. But in considering the scope of Art. 368, it is necessary to remember that Art.

226, which is included in Chapter V of Part VI of the Constitution, is one of the constitutional provisions which fall under clause (b) of the proviso; and so, it is clear that if Parliament intends to amend the provisions of Art. 226, the bill proposing to make such an amendment must satisfy the requirements of the proviso. The question which calls for our decision is : what would be the requirement about making an amendment in a constitutional provision contained in Part III, if as a result of the said amendment, the powers conferred on the High Courts under Art. 226 are likely to be affected? The petitioners contend that since it appears that the powers prescribed by Art. 226 are likely to be affected by the intended amendment of the provisions contained in Part III, the bill introduced for the purpose of making such an amendment, must attract the proviso, and as the impugned Act has admittedly not gone through the procedure prescribed by the proviso, it is invalid; and that raises the question about the construction of the provisions contained in Art. 368 and the relation between the substantive part of Art.

368 with its proviso.

8. On the other hand, if the substantive part of Art. 368 is very liberally and generously construed and it is held that even substantial modification of the fundamental rights which may make a very serious and substantial inroad on the powers of the High Courts under Art. 226 can be made without invoking the proviso, it may deprive clause (b) of the proviso of its substance. In other words, in construing both the parts of Art. 368, the rule of harmonious construction requires that if the direct effect of the amendment of fundamental rights is to make a substantial inroad on the High Courts’ powers under Art.

226, it would become necessary to consider whether the proviso would cover such a case or not. If the effect of the amendment made in the fundamental rights on the powers of the High Courts prescribed by Art. 226, is indirect, incidental, or is otherwise of an insignificant order, it may be that the proviso will not apply.

The proviso would apply where the amendment in question seeks to make any change, inter alia, in Art. 226, and the question in such a case would be : does the amendment seek to make a change in the provisions of Art. 226? The answer to this question would depend upon the effect of the amendment made in the fundamental rights.

9. In dealing with constitutional questions of this character, courts generally adopt a test which is described as the pith and substance test. In Attorney-General for Ontario v.

Reciprocal Insurers ([1924] A.C. 328), the Privy Council was called upon to consider the validity of the Reciprocal Insurance Act, 1922 (12 & 13 Geo. 5, Ont., c. 62) and s. 508c which had been added to the Criminal Code of Canada by ss. 7 & 8 Geo. 5, c. 29 Dom. Mr.

Justice Duff, who spoke for the Privy Council, observed that in an enquiry like the one with which the Privy Council was concerned in that case, “it has been formally laid down in judgments of this Board, that in such an inquiry the Courts must ascertain the ‘true nature and character’ of the enactment :

Citizens’ Insurance Co. of Canada v. Parsons ([1881] 7 AC 96); its ‘pith and substance’ :

Union Colliery Co. of British Columbia Ltd. v.

Bryden ([1899] A.C. 580); and it is the result of this investigation, not the form alone, which the statute may have assumed under the hand of the draughtsman, that will determine within which of the categories of subject matters mentioned in ss. 91 and 92 the legislation falls; and for this purpose the legislation must be ‘scrutinised in its entirety’ : “Great West Saddlery Co. v. The King” ([1921] 2 A.C.

91,117). It is not necessary to multiply authorities in support of the proposition that in considering the constitutional validity of the impugned Act, it would be relevant to inquire what the pith and substance of the impugned Act is. This legal position can be taken to be established by the decisions of this Court which have consistently adopted the view expressed by Justice Duff, to which we have just referred.

14. Thus, it would be seen that the genesis of the amendments made by Parliament in 1951 by adding Articles 31A and 31B to the Constitution, clearly is to assist the State Legislatures in this country to give effect to the economic policy in which the party in power passionately believes to bring about much needed agrarian reform. It is with the same object that the second amendment was made by Parliament in 1955, and as we have just indicated, the object underlying the amendment made by the impugned Act is also the same. Parliament desires that agrarian reform in a broad and comprehensive sense must be introduced in the interests of a very large section of Indian citizens who live in villages and whose financial prospects are integrally connected with the pursuit of progressive agrarian policy. Thus, if the pith and substance test is applied to the amendment made by the impugned Act, it would be clear that Parliament is seeking to amend fundamental rights solely with the object of removing any possible obstacle in the fulfilment of the socio-economic policy in which the party in power believes. If that be so, the effect of the amendment on the area over which the High Courts’ powers prescribed by Art. 226 operate, is incidental and in the present case can be described as of an insignificant order. The impugned Act does not purport to change the provisions of Art. 226 and it cannot be said even to have that effect directly or in any appreciable measure. That is why we think that the argument that the impugned Act falls under the proviso, cannot be sustained. It is an Act the object of which is to amend the relevant Articles in Part III which confer fundamental rights on citizens and as such it falls under the substantive part of Art.

368 and does not attract the provisions of clause (b) of the proviso. If the effect of the amendment made in the fundamental rights on Art. 226 is direct and not incidental and is of a very significant order, different considerations may perhaps arise. But in the present case, there is no occasion to entertain or weigh the said considerations. Therefore the main contention raised by the petitioners and the interveners against the validity of the impugned Act must be rejected.”

20. In Kihoto Hollohan v. Zachillhu and Ors. (1992 Supp. (2) SCC 651) it was observed as follows:

“61. The propositions that fell for consideration in Sankari Prasad Singh’s and Sajjan Singh’s cases are indeed different. There the jurisdiction and power of the Courts under Articles 136 and 226 were not sought to be taken away nor was there any change brought about in those provisions either “in terms or in effect”, since the very rights which could be adjudicated under and enforced by the Courts were themselves taken away by the Constitution. The result was that there was no area for the jurisdiction of the Courts to operate upon. Matters are entirely different in the context of paragraph 7. Indeed the aforesaid cases, by necessary implication support the point urged for the petitioners. The changes in Chapter IV of Part V and Chapter V of Part VI envisaged by the proviso need not be direct. The change could be either “in terms of or in effect”. It is not necessary to change the language of Articles 136 and 226 of the Constitution to attract the proviso. If in effect these Articles are rendered ineffective and made inapplicable where these articles could otherwise have been invoked or would, but for Paragraph 7, have operated there is `in effect’ a change in those provisions attracting the proviso. Indeed this position was recognised in Sajjan Singh’s case (supra) where it was observed:

“If the effect of the amendment made in the fundamental rights on Article 226 is direct and not incidental and is of a very significant order, different considerations may perhaps arise.”

62. In the present cases, though the amendment does not bring in any change directly in the language of Article 136, 226 and 227 of the Constitution, however, in effect paragraph 7 curtails the operation of those Articles respecting matters falling under the Tenth Schedule. There is a change in the effect in Article 136, 226 and 227 within the meaning of clause (b) of the proviso to Article 368(2). Paragraph 7, therefore, attracts the proviso and ratification was necessary. Accordingly, on Point B, we hold:

“That having regard to the background and evolution of the principles underlying the Constitution (52nd Amendment) Act, 1985, in so far as it seeks to introduce the Tenth Schedule in the Constitution of India, the provisions of Paragraph 7 of the Tenth Schedule of the constitution in terms and in effect bring about a change in the operation and effect to Articles 136, 226 and 227 of the Constitution of India and, therefore, the amendment would require to be ratified in accordance with the proviso to sub-Article (2) of Article 368 of the Constitution of India.”

21. In Shri Sarwan Singh and Anr. v. Shri Kasturi Lal [1976] INSC 327; (1977 (1) SCC 750) it was observed as follows:

“20. Speaking generally, the object and purpose of a legislation assume greater relevance if the language of the law is obscure and ambiguous. But, it must be stated that we have referred to the object of the provisions newly introduced into the Delhi Rent Act in 1975 not for seeking light from it for resolving in ambiguity, for there is none, but for a different purpose altogether. When two or more laws operate in the same field and each contains a non obstante clause stating that its provisions will override those of any other law, stimulating and incisive problems of interpretation arise. Since statutory interpretation has no conventional protocol, cases of such conflict have to be decided in reference to the object and purpose of the laws under consideration. A piquant situation, like the one before us, arose in Shri Ram Narain v.

Simla Banking & Industrial Co. Ltd. competing statutes being the Banking Companies Act, 1949 as amended by Act 52 of 1953, and the Displaced Persons (Debts Adjustment) Act, 1951. Section 45A of the Banking Companies Act, which was introduced by the amending Act of 1953, and Section 3 of the Displaced Persons Act 1951 contained such a non obstante clause, providing that certain provisions would have effect “notwithstanding anything inconsistent therewith contained in any other law for the time being in force”. This Court resolved the conflict by considering the object and purpose of the two laws and giving precedence to the Banking Companies Act by observing : “It is, therefore, desirable to determine the overriding effect of one or the other of the relevant provisions in these two Acts, in a given case, on much broader considerations of the purpose and policy underlying the two Acts and the clear intendment conveyed by the language of the relevant provisions therein.” (p. 615) As indicated by us, the special and specific purpose which motivated the enactment of Section 14A and Chapter IIIA of the Delhi Rent Act would be wholly frustrated if the provisions of the Slum Clearance Act requiring permission of the competent authority were to prevail over them. Therefore, the newly introduced provisions of the Delhi Rent Act must hold the field and be given full effect despite anything to the contrary contained in the Slum Clearance Act.

21. For resolving such inter se conflicts, one other test may also be applied though the persuasive force of such a test is but one of the factors which combine to give a, fair meaning to the language of the law. That test is that the later enactment must prevail over the earlier one. Section 14A and Chapter IIIA having been enacted with effect from December 1, 1975 are later enactments in reference to Section 19 of the Slum Clearance Act which, in Its present form, was placed on the statute book with effect from February 28, 1965 and in reference to Section 39 of the same Act, which came into force in 1956 when the Act itself was passed.

The legislature gave overriding effect to Section 14A and Chapter IIIA with the knowledge that Sections 19 and 39 of the Slum Clearance Act contained non obstante clauses of equal efficacy. Therefore the later enactment must prevail over the former. The same test was mentioned with approval by this Court in Shri Ram Narain’s case at page 615.

23. The argument of implied repeal has also no substance in it because our reason for according priority to the provisions of the Delhi Rent Act is not that the Slum Clearance Act stands impliedly repealed protanto. Bearing in mind the language of the two laws, their object and purpose, and the fact that one of them is later in point of time and was enacted with the knowledge of the non obstante clauses in the earlier law, we have come to the conclusion that the provisions of Section 14A and Chapter IIIA of the Rent Control Act must prevail over those contained in Sections 19 and 39 of the Slum Clearance Act.

22. In J.K. Cotton Spinning and weaving co. Ltd. v. State of U.P. and Anr. (1961 (3) SCR 185) it was observed as under:

“There will be complete harmony however if we hold instead that clause 5(a) will apply in all other cases of proposed dismissal or discharge except where an inquiry is pending within the meaning of clause 23. We reach the same result by applying another well known rule of construction that general provisions yield to special provisions. The learned Attorney- General seemed to suggest that while this rule of construction is applicable to resolve the conflict between the general provision in one Act and the special provision in another Act, the rule cannot apply in resolving a conflict between general and special provisions in the same legislative instrument. This suggestion does not find support in either principle or authority. The rule that general provisions should yield to specific provisions is not an arbitrary principle made by lawyers and judges but springs from the common understanding of men and women that when the same person gives two directions one covering a large number of matters in general and another to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect. In Pretty v. Solly [(1859-53 ER 1032) (quoted in Craies on Statute Law at p. 205, 5th Edition) Romilly, M.

R. mentioned the rule thus :- “The rule is, that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply”. The rule has been applied as between different provisions of the same statute in numerous cases some of which only need be mentioned : De Winton v. Brecon [(1858) 28 L.J. Ch. 598], Churchill v.

Crease [(1828) 5 Bing. 177], United States v. Chase [(1889) [1890] USSC 156; 135 U.S. 255] and Carroll v. Greenwich Ins. Co. [(1905) 199 U.S.

401].”

23. In R.M.D. Chamarbaugwalla v. UOI [1957] INSC 32; (1957 SCR 930) it was held as under:

“The question whether a statute which is void in part is to be treated as void in toto, or whether it is capable of enforcement as to that part which is valid is one which can arise only with reference to laws enacted by bodies which do not possess unlimited powers of legislation, as, for example, the legislatures in a Federal Union. The limitation on their powers may be of two kinds: It may be with reference to the subject-matter on which they could legislate, as, for example, the topics enumerated in the Lists in the Seventh Schedule in the Indian Constitution, ss. 91 and 92 of the Canadian Constitution, and s. 51 of the Australian Constitution; or it may be with reference to the character of the legislation which they could enact in respect of subjects assigned to them, as for example, in relation to the fundamental rights guaranteed in Part III of the Constitution and similar constitutionally protected rights in the American and other Constitutions. When a legislature whose authority is subject to limitations aforesaid enacts a law which is wholly in excess of its powers, it is entirely void and must be completely ignored. But where the legislation falls in part within the area allotted to it and in part outside it, it is undoubtedly void as to the latter; but does it on that account become necessarily void in its entirety? The answer to this question must depend on whether what is valid could be separated from what is invalid, and that is a question which has to be decided by the court on a consideration of the provisions of the Act. This is a principle well established in American Jurisprudence, Vide Cooley’s Constitutional Limitations, Vol. I, Chap.

VII, Crawford on Statutory Construction, Chap. 16 and Sutherland on Statutory Construction, 3rd Edn, Vol. 2, Chap. 24. It has also been applied by the Privy Council in deciding on the validity of laws enacted by the legislatures of Australia and Canada, Vide Attorney-General for the Commonwealth of Australia v. Colonial Sugar Refining Company Limited [[1914] A.C. 237] and Attorney-General for Alberta v. Attorney-General for Canada [L.R.

[1947] A.C. 503]. It was approved by the Federal Court in In re Hindu Women’s Rights to Property Act [[1941] F.C.R. 12] and adopted by this Court in The State of Bombay and another v. F. N. Balsara [[1951] S.C.R. 682] and The State of Bombay v. The United Motors (India) Ltd., and others [[1953] S.C.R. 1069]. These decisions are relied on by Mr. Seervai as being decisive in his favour. Mr.

Palkhiwala disputes this position, and maintains that on the decision of the Privy Council in Punjab Province v. Daulat Singh and others [[1946] F.C.R. 1] and of the decisions of this Court in Romesh Thappar v. State of Madras [[1950] S.C.R.

594] and Chintaman Rao v. State of Madhya Pradesh [[1950] S.C.R. 759], the question must be answered in this favour.

We must now examine the precise scope of these decisions.

The resulting position may thus be stated :

When a statute is in part void, it will be enforced as regards the rest, if that is severable from what is invalid. It is immaterial for the purpose of this rule whether the invalidity of the statute arises by reason of its subject-matter being outside the competence of the legislature or by reason of its provisions contravening constitutional prohibitions.

That being the position in law, it is now necessary to consider whether the impugned provisions are severable in their application to competitions of a gambling character, assuming of course that the definition of ‘prize competition’ in s. 2(d) is wide enough to include also competitions involving skill to a substantial degree. It will be useful for the determination of this question to refer to certain rules of construction laid down by the American Courts, where the question of severability has been the subject of consideration in numerous authorities. They may be summarised as follows :

1. In determining whether the valid parts of a statute are separable from the invalid parts thereof, it is the intention of the legislature that is the determining factor.

The test to be applied is whether the legislature would have enacted the valid part if it had known that the rest of the statute was invalid. Vide Corpus Juris Secundum, Vol. 82, p. 156; Sutherland on Statutory Construction, Vol. 2, pp. 176-177.

2. If the valid and invalid provisions are so inextricably mixed up that they cannot be separated from one another, then the invalidity of a portion must result in the invalidity of the Act in its entirety. On the other hand, if they are so distinct and separate that after striking out what is invalid, what remains is in itself a complete code independent of the rest, then it will be upheld notwithstanding that the rest has become unenforceable. Vide Cooley’s Constitutional Limitations, Vol. 1 at pp.

360-361; Crawford on Statutory Construction, pp. 217-218.

3. Even when the provisions which are valid are distinct and separate from those which are invalid, if they all form part of a single scheme which is intended to be operative as a whole, then also the invalidity of a part will result in the failure of the whole. Vide Crawford on Statutory Construction, pp.

218-219.

4. Likewise, when the valid and invalid parts of a statute are independent and do not form part of a scheme but what is left after omitting the invalid portion is so thin and truncated as to be in substance different from what it was when it emerged out of the legislature, then also it will be rejected in its entirety.

5. The separability of the valid and invalid provisions of a statute does not depend on whether the law is enacted in the same section or different sections; (Vide Cooley’s Constitutional Limitations, Vol. 1, pp. 361- 362); it is not the form, but the substance of the matter that is material, and that has to be ascertained on an examination of the Act as a whole and of the setting of the relevant provisions therein.

6. If after the invalid portion is expunged from the statute what remains cannot be enforced without making alterations and modifications therein, then the whole of it must be struck down as void, as otherwise it will amount to judicial legislation. Vide Sutherland on Statutory Construction, Vol.

2, p. 194.

7. In determining the legislative intent on the question of separability, it will be legitimate to take into account the history of the legislation, its object, the title and the preamble to it. Vide Sutherland on Statutory Construction, Vol. 2, pp. 177- 178.”

24. In AIIMS Students Union v. AIIMS (2002 (1) SCC 428) in para 35 it was observed as follows:

“35. The principle of institutional continuity while seeking admission to higher levels of study as propounded by the learned counsel for the appellants though argued at length does not have much room available for innovative judicial zeal to play, for the ground already stands almost occupied by a set of precedents, more so when we are dealing with professional or technical courses of study. It would suffice to have a brief resume thereof noticing the details wherever necessary”.

It was again highlighted in para 44 as follows:

“44. When protective discrimination for promotion of equalisation is pleaded, the burden is one the party who seeks to justify the ex facie deviation from equality. The basic rule is equality of opportunity for every person in the country, which is a constitutional guarantee. A candidate who gets more marks than another is entitled to preference for admission. Merit must be the test when choosing the best, according to this rule of equal chance for equal marks. This proposition has greater importance when we reach the higher levels and education like post-graduate courses. Reservation, as an exception, may be justified subject to discharging the burden of proving justification in favour of the class which must be educationally handicapped-the reservation geared up to getting over the handicap. The rationale of reservation in the case of medical students must be removal of regional or class inadequacy or like disadvantage. Even there the quantum of reservation should not be excessive or societally injurious. The higher the level of the speciality the lesser the role of reservation.”

25. A bare reading of the provision goes to show that the burden is on the person who justifies deviation from equality.

26. Even then, this doctrine was upheld by the Supreme Court of U.S.A. in Plessy v. Ferguson [1896] USSC 151; (163 U.S. 537(1896).

This case involved a challenge to a Louisiana statute that provided for equal but separate accommodations for black and white passengers in trains. The Court rejected the challenge.

Justice Brown famously observed:

If one race be inferior to the other socially, the constitution of the United States cannot put them upon the same plane. (163 U.S. at 552)

27. He held that racial segregation was a reasonable exercise of State police power for the promotion of the public good and upheld the law.

28. Thus, even in this second phase, affirmative action was never truly initiated  the country was still struggling to establish even a formally equal society.

29. At the same time, another very important development in its constitutional law was taking place, which would later have a serious impact on affirmative action programmes. This was the birth of the doctrine of strict scrutiny.

30. ‘Strict scrutiny’ is one of the three standards for judicial review of legislative and administrative action developed in the United States, the other being “rational basis” and “intermediate scrutiny”.

31. The origin of this standard can be traced to the decision in United States v Carolene Products [1938] USSC 104; (304 U.S. 144 (1938).

The question before the Court was whether the Filled Milk Act, 1923 which prohibited the shipment in interstate commerce of skimmed milk compounded with any fat or oil other than milk fat, so as to resemble milk or cream, transcended the power of Congress to regulate inter state commerce or infringed the Fifth Amendment. Justice Harlan Stone, writing the opinion for the Court, upheld the law, holding that the existence of facts supporting the legislative judgment was to be presumed, for regulatory legislation affecting ordinary commercial transactions was not to be pronounced unconstitutional unless in the light of the facts made known or generally assumed it was of such a character as to preclude the assumption that it rested upon some rational basis within the knowledge and experience of the legislators. However, he added what has been described as “the most celebrated footnote in constitutional law”.

“There may be narrower scope for operation of the presumption of constitutionality when legislation appears on its face to be within a specific prohibition of the Constitution, such as those of the first ten Amendments, which are deemed equally specific when held to be embraced within the Fourteenth.”

32. What the Court was saying was that economic legislation would be judged by a standard of “rational basis”  so long as the law was a rational way of furthering a legitimate governmental purpose, it was valid. However, where the legislation “on its face” appeared to be violating any of the fundamental rights, a more exacting standard would be applied.

33. The precise term “strict scrutiny” was used by the Court for the first time in Skinner v. Oklahoma [1942] USSC 129; (316 U.S. 535 (1942).

The Oklahoma Habitual Criminal Sterilisation Act provided for vasectomy to be performed on any person convicted two or more times for crimes amounting to “felonies involving moral turpitude”. Justice Douglas, giving the opinion of the Court, described the statute as violating the right to have offspring  “a right which is basic to the perpetuation of a race”. The question before the Court was whether this statute violated the 14th Amendment. Holding that it did, Justice Douglas observed:

“Strict scrutiny of the classification which a State makes in a sterilization law is essential, lest unwittingly or otherwise invidious discriminations are made against groups or types of individuals in violation of the constitutional guarantee of just and equal laws.”

34. In India there has to be collective commitment for upliftment of those who needed it. In that sense, the question again comes back to the basic issue as to whether the action taken by the Government can be upheld after making judicial scrutiny. Much assistance is not available to the petitioners from the American decisions.

35. It is to be noted that the doctrine of separation as is prevalent in the American Society is not of much consequence in the Indian scenario. It needs to be clarified that the expression ‘strict scrutiny’ has also been used by the Indian Courts in Narendra Kumar and Ors. v. Union of India and Ors.

[1959] INSC 147; (1960 (2) SCR 375) but it appears to have been used in different context. What really appears to be the intention for the use of the expression is “careful and deeper scrutiny” and not in the sense of strict scrutiny of the provisions as is prevalent in the American jurisprudence. It is used in different sense. The application appears to be in technical sense in the American Courts, for example, Regents of University of California v. Allan Bakke [1978] USSC 145; (438 U.S. 265).

36. Some of the judgments of American Courts throwing light on the controversy need to be noted:

37. In Allan Bakke’s case (supra) it was held as follows:

“Hence, the purpose of helping certain groups whom the faculty of the Davis Medical School perceived as victims of “societal discrimination” does not justify a classification that imposes disadvantages upon persons like respondent, who bear no responsibility for whatever harm the beneficiaries of the special admissions”.

“The fatal flaw in petitioner’s preferential program is its disregard of individual rights as guaranteed by the Fourteenth Amendment.

Shelley v. Kraemer, 334 US, at 22[1948] USSC 63; , 92 L Ed 1161, 68 S Ct 836, 3 ALRd 441. Such rights are not absolute. But when a State’s distribution of benefits or imposition of burdens hinges on ancestry or the color of a person’s skin or ancestry, that individual is entitled to a demonstration that the challenged classification is necessary to promote a substantial state interest. Petitioner has failed to carry this burden.”

38. In Grutter v. Bollinger [2003] USSC 4657; (539 U.S. 306) it was held as follows:

[21, 22a] “We acknowledge that “there are serious problems of justice connected with the idea of preference itself.” Bakke, 438 US, at 298[1978] USSC 145; , 57 L Ed 2d 750, 98 S Ct 2733 (opinion of Powell, J). Narrow tailoring, therefore, requires that a race-conscious admissions program not unduly harm members of any racial group.

Even remedial race-based governmental action generally “remains subject to continuing oversight to assure that it will work the least harm possible to other innocent persons competing for the benefit.” Id., at 308[1978] USSC 145; , 57 L Ed 2d 750, 98 S Ct 2733. To be narrowly tailored, a race-conscious admissions program must not “unduly burden individuals who are not members of the favored racial and ethnic groups.” Metro Broadcasting, Inc. v. FCC, [1990] USSC 131; 497 Us 547, 630[1990] USSC 131; , 111 L Ed 2d 445, 110 S Ct 2997 (1990) (O’ Connor, J., dissenting).

[22b, 23] We are satisfied that the Law School’s admissions program does not.

Because the Law School considers “all pertinent elements of diversity,” it can (and does) select non-minority applicants who have greater potential to enhance student body diversity over underrepresented minority applicants. See Bakke, supra, at 317[1978] USSC 145; , 57 L Ed 2d 750, 98 S Ct 2733 (opinion of Powell, J). As Justice Powell recognized in Bakke, so long as a race-conscious admissions program uses race as a “plus” factor in the context of individualized consideration, a rejected applicant “will not have been foreclosed from all consideration for that seat simply because he was not the right color or had the wrong surname  His qualifications would have been weighed fairly and competitively, and he would have no basis to complain of unequal treatment under the Fourteenth Amendment.”

438 US, at 318[1978] USSC 145; , 57 L Ed 2d 750, 98 S Ct 2733.

[13f, 22C] We agree that, in the context of its individualized inquiry into the possible diversity contributions of all applicants, the Law School’s race-conscious admissions program does not unduly harm nonminority applicants.

[24, 25a, 26] We are mindful, however, that “[a] core purpose of the Fourteenth Amendment was to do away with all governmentally imposed discrimination based on race” Palmore v Sidoti, [1984] USSC 86; [539 US 342] 466 US 429, 432[1984] USSC 86; , 80 L Ed 2d, 421, 104 s Ct 1879 (1984). Accordingly, race-conscious admissions policies must be limited in time.

This requirement reflects that racial classifications, however, compelling their goals are potentially so dangerous that they may be employed no more broadly than the interest demands. Enshrining a permanent justification for racial preferences would offend this fundamental equal protection principle.

We see no reason to exempt race-conscious admissions programs from the requirement that all governmental use of race must have a logical end point. The Law School, too, concedes that all “race-conscious programs must have reasonable durational limits.” Brief for Respondent Bollinger et al. 32. [25b] In the context of higher education, the durational requirement can be met by sunset provisions in race-conscious admissions policies and periodic reviews to determine whether racial preferences are still necessary to achieve student body diversity. Universities in California, Florida, and Washington State, where racial preferences in admissions are prohibited by state law, are currently engaged in experimenting with a wide variety of alternative approaches. Universities in other States can and should draw on the most promising aspects of these race-neutral alternatives as they develop. Cf. United States v. Lopez, [1995] USSC 42; 514 US 549, 581[1995] USSC 42; , 131 L Ed 2d 626, 115 S Ct 1624 (1995) (Kennedy, J., concurring) (“[T] he States may perform their role as laboratories for experimentation to devise various solutions where the best solution is far from clear”). The requirement that all race-conscious admissions programs have a termination point “assure[s] all citizens that the deviation from the norm of equal treatment of all racial and ethnic groups is a temporary matter, a measure taken in the service of the goal of equality itself.” Richmond v. J.A. Croson Co., 488 US, at 510[1989] USSC 15; , 102 L Ed 2d 854, 109 S Ct 706 (plurality opinion); see also Nathanson & Bartnik. The Constitutionality of Preferential Treatment for Minority Applicants to Professional Schools, [539 US 343] 58 Chicago Bar Rec. 282, 293 (May-June 1977) (“It would be a sad day indeed, were America to become a quota- ridden society, with each identifiable minority assigned proportional representation in every desirable walk of life. But that is not the rationale for programs of preferential treatment; the acid test of their justification will be their efficacy in eliminating the need for any racial or ethnic preferences at all.”

39. The provisions of the American Constitution in United States relating to formal equality concept do not appear to have operated from the beginning of the American Constitution.

40. Although even under the 1919 and 1935 Government of India Acts the rights of certain class of people like Scheduled Castes, Scheduled Tribes and the deprived classes have been recognized, in America, the rights have been conferred on individuals and so much on the groups. The freedoms contemplated by the Indian Constitution originally related to seven categories which presently stand at six after the property rights were deleted. The stand of Mr. Vahanvati and Mr. Gopal Subramanium is that the logic of strict scrutiny, compelling the Government and narrow tailoring do not have relevance so far as the present case is concerned.

41. In Thomas’s case (supra) it was clearly noticed by this Court that American conditions do not apply adequately for the Indian scenario. Unlike U.S.A., the targeted beneficiaries are alien to our Constitution. In India cognizance has been taken constitutionally. The victims of untouchability, identifying social and economic backwardness have been accepted as permissible measures. However, the question how long they can be continued is another aspect which shall be dealt with separately. Rationality in that sense is a measure for the special provisions. But the question that still needs to be addressed is whether these groups are really identifiable.

While formulating the policy all factors need not be specifically expressed but there must be some criteria to identify social and educational backwardness.

42. In A.K. Roy v. Union of India [1981] INSC 209; (1982 (1) SCC 271) it was noted as follows:

“8. We are not, as we cannot be, unmindful of the danger to people’s liberties which comes in any community from what is called the tyranny of the majority. Uncontrolled power in the executive is a great enemy of freedom and therefore, eternal vigilance is necessary in the realm of liberty. But we cannot transplant, in the Indian context and conditions, principles which took birth in other soils, without a careful examination of their relevance to the interpretation of our Constitution. No two Constitutions are alike, for it is not mere words that make a Constitution. It is the history of a people which lends colour and meaning to its Constitution. We must therefore turn inevitably to the historical origin of the ordinance making power conferred by our Constitution and consider the scope of that power in the light of the restraints by which that power is hedged. Neither in England nor in the United States of America does the executive enjoy anything like the power to issue ordinances. In India, that power has a historical origin and the executive, at all times, has resorted to it freely as and when it considered it necessary to do so. One of the larger States in India has manifested its addiction to that power by making an overgenerous use of it  so generous indeed, that ordinances which lapsed by efflux of time were renewed successively by a chain of kindred creatures, one after another. And, the ordinances embrace everything under the sun, from Prince to pauper and crimes to contracts.

The Union Government too, so we are informed passed about 200 Ordinances between 1960 and 1980, out of which 19 were passed in 1980”.

43. One of the grey areas focused by learned counsel for the petitioners and the respondents is the ever perplexing question “how long”. The respondents say that so long as the problems of backwardness exist they can be continued. The petitioners have highlighted that notwithstanding the concerns shown in Indra Sawhney No.1 and in a large number of cases that the reservations are not meant to be a permanent feature there is a case for concern. Admittedly, there is no deletion from the list of other backward classes. It goes on increasing. Learned counsel for the respondents have stated that in large number of cases where applications were made for inclusion they have been turned down. But that is no answer to the question as to why and how there has been no exclusion. Is it that backwardness has increased instead of decreasing. If the answer is ‘yes’, as contended by the respondents, then one is bound to raise eyebrows as to the effectiveness of providing reservations or quotas.

44. The ultimate object is to bring those who are disadvantaged to a level where they no longer continue to be dis-advantaged. It needs no emphasis that individual rights are superior to the social rights. All fundamental rights are to be read together. The inequalities are to be removed. Yet the fact that there has been no exclusion raises a doubt about the real concern to remove inequality.

45. The ultimate objective is to bring people to a particular level so that there can be equality of opportunity. In that context, one has to keep in view the justice and redress principles. There should not be mere equality in law but equality in fact.

46. The necessary ingredients of equality essentially involve equalization of unequals. Linked with this question the problem posed by the petitioners is whether reservation is the only way to equalize unequals? There are several methods and modes. If reservation really does not work as contended by the petitioners, then the alternative methods can be adopted. It is the stand of the respondents that not only reservations but other incentives like free lodging and boarding facilities have been provided in some States.

47. Learned counsel for the respondents have stated that the measures under challenge are nothing but a much needed leap towards attainment of the objectives. If it is true, the leap has to end somewhere. It cannot hang in the air as there is nothing immortal in this world; much less, a progressive measure purportedly intended to benefit the other backward classes. If after nearly six decades the objectives have not been achieved, necessarily the need for its continuance warrants deliberations. It is to be noted that some of the provisions were intended to be replaced after a decade but have continued. It indirectly shows that backwardness appears to have purportedly increased and not diminished. It would therefore be rational and logical to restrict operation of the impugned Statute for a period of 10 years from its inception.

48. At this juncture, report of the Oversight Committee throws considerable light on the controversy. Some parts of the Report need to be noted.

This report seeks to expand the provision of Higher Education while at the same time ensuring social inclusion and academic excellence. A society which excludes a significant section of its population from access to higher education cannot be said to be providing equality of opportunity.

Equally, if academic excellence gets compromised in the process of expansion, it would lose its competitive edge in the emerging knowledge society  an edge which can propel India into a position of global leadership.

Page X and XI of the report A simpler way of implementing reservations was to steamroll our way through, in the name of social equity, regardless of its impact on quality and excellence. We have deliberately chosen the more difficult way which delivers equity in a manner that enhances excellence i.e. by making concomitant investments in faculty & infrastructure and by bringing much needed governance related reforms involving institutional, financial and administrative autonomy and process re-engineering in our Higher Educational Governance system. It is easy to equalize by “mindlessly leveling everyone down to lowest common-denominator”. Our effort has been to create an upward moving equalization process- where the disabilities are overcome by the erstwhile excluded sections and the system brings out the best in them.

Besides the many out of the box innovative ideas concerning faculty and infrastructure related issues, I believe three of our recommendations, which cut horizontally across the five groups, are critical to the establishment of the goal of an “inclusive society, in pursuit of excellence”. These four programmes are considered by the Oversight Committee to be integral to the above vision and should be considered to be inseverable part of our core recommendations. (page-x) We have to acknowledge that the challenges facing us in the entire education sector are enormous and in the Tertiary Education Sector these can be met, only if both public and private funding to educational institutions increased several fold. The need for private participation in this mammoth task cannot be over-emphasized but market forces themselves cannot deliver justice.

The relative importance of public vs. private funding is brought out very strongly by Joseph Stiglitz when he opined “I had studied the failures of both markets and governments, and was not so naove to think that the government could remedy every failure. Neither was I so foolish as to believe that markets by themselves solved every societal problem. Inequality, unemployment, pollution:

these are all important issues in which Government has to take an importance role.”

“Expansion, Inclusion and Excellence” has been our credo. They have remained the abiding theme guiding all our deliberations. I will be failing in my duty if the Oversight Committee does not acknowledge the source of inspiration for our deliberations. It is the Prime Minister’s speech giving the overpowering vision of the “need to create the second wave of nation building” which has inspired us in our thoughts and deliberations. I would also like to express my gratitude to Hon’ble HRD Minister, Sri Arjun Singhji for his affection and guidance right through. (Page-xi) Treatment of the creamy Layer (Chapter IV- Report of Oversight Committee Vol.-I)

4.2 (b) The true benefit of reservations will be realized only when the high school enrolment of OBCs, especially in rural areas, increases significantly. Attention will need to be paid to this issue in the coming years.

Chapter VI- Estimate of Resources required for the expansion

6.1 In overall terms, the total estimated expenditure on the expansion has now been assessed by the five Sub-Groups in their final reports at Rs.18,197.83 crore, as compared to the amount of Rs.16,563.34 crore, that was included by the Oversight Committee in its interim report. The summary statement of additional student strength, faculty required and estimates of recurring and non-recurring expenditure that have been projected by the Groups are as at Table 6.1 and the year-wise break up is at table 6.2.

6.3 The Committee in its discussions with the individual Groups, had stressed the need to estimate the additional infrastructure and manpower that would be required after taking into account the slack, if any, in the existing facilities as also the scope for using IT as a resource multiplier.

While the Groups seems to have accepted this in principle, their expenditure projections, and the norms on which they are based seems to have just extrapolated past trends. The Committee has had some input regarding global trends and the best practices being followed in the world’s leading institutions. Based on this, and in consultation with experts, the Committee has developed a plan for a “Gyan Vahini” project, as has been explained in an earlier Chapter in this report. The total expenditure on this component of the expansion and upgradation project would be Rs.1752 crore in 5 years. Apart from significantly enhancing the quality of instruction and learning, and brining it close to the best levels in the world, this investment will certainly contribute to efficiency and to reducing the conventional costs of the higher education system.

Summary Statement of Expenditure Requirements (As given in the Final Reports of the Groups) Sector No. of Instns.

Existing Student Intake Annual Addl.

Student Intake Addl.

Facility Required Non Recurring Ex.

Recur ring Exp.

(5Yrs) Total Exp.

In 5 Yrs.

Agricu lture 5 825 454 187 102.75 92.71 195.46 Central Univers ities 17 92011 49689 6609 2702.11 2455.

92 5158.

03 Manag ement 7 1791 966 139 511.32 177.

48 688.

80 Medic al 11 993 565 N.A.

1783.98 1027.

69 2811.

67 Engin eering 38 29671 16440 4919 5503.83 3840.

04 9343.

87 Grand Total 125291 68114 11854 10603.99 7593.

84 18197.

83 Chapter VII- The Way Forward

7.1 As indicated earlier in this report, this opportunity for expansion, inclusion and excellence should only be the beginning of a larger process, which is to build a knowledge society in India and allow the country to take its rightful place in the comity of nations. Our recent economic growth and the values of knowledge and education carried forward by a billion diverse people, point to India’s potential future as a knowledge society. Other countries that visualize a similar future have planned massive investments in order to enhance both the quality and quantity of higher education and research. China, for example, has made substantial increase in its allocation of resources of higher education. In the first phase, China has provided a grant of US $ 125 million to each of the 10 leading universities and US $ 225 million to Beijing and Tsinghua Universities. In the second phase, China proposes to provide additional grants to 30 universities, with the objective of having 100 high quality universities in China in the 21st century and with 15% of the citizens in the age group 18-22 receiving tertiary education.

7.2 India has suffered in the past because of severe under investment in higher education. This has been caused partly by the thinking that looks at primary and higher education in an either or manner. It is very clear however that large public investment is needed in both sectors. As Prime Minister Dr. Manmohan Singh said, while launching the Knowledge Commission, “At the bottom of the knowledge pyramid, the challenge is one of improving access to primary education. At the top of the pyramid there is need to make our institutions of higher education and research world class. The time has come for India to embark on a second wave of nation building. Denied this investment, the youth will become a social and economic liability.

49. It was emphasized by learned counsel for the petitioners that the massive financial burden question finds no place in the parliamentary debate. In response, Mr. Vahanvati has submitted that before the Parliamentary Standing Committee, the report of the Oversight Committee was available. When the Oversight Committee’s report was discussed in detail, needless to say the financial aspect was also considered.

50. It has been highlighted by Mr. P.P. Rao that unmindful of the duty to focus on primary and elementary education, large sums of money are intended to be used for implementation of Statute. Various figures and datas have been highlighted to show that there is really no concern for the primary and elementary education. Repelling these contentions Mr.

Vahanvati has highlighted that there is no laxity so far as primary and elementary education is concerned. He has referred to voluminous details relating to Sarva Shiksha Abhiyan. It is contended that uniform policy of elementary education and the progress made upto 31.3.2007 shows the concern of the Government to translate into reality the constitutional objective of providing adequate education to all citizens. It is true that there has been considerable effort in this regard. But one question still remains to be answered.

There has to be balancing of priorities. Mr. Vahanvati has said that this balancing is prerogative of the Government. It is true that Government has a large area of discretion in choosing its priorities. But one factor cannot be lost sight of. The fundamental stress has to be on elementary education. If that is done, as a consequence there would be reduction in the need for spending more money on higher education. Stress on primary and elementary education would be a leap forward towards higher education. There has been considerable number of drop outs in the higher classes. This is a reality in spite of all steps which the Government claims to have adopted to ensure that every child of a particular age group has education as warranted by the Constitution as a fundamental right.

51. Unni Krishnan, J.P. and Ors. v. State of A.P. and Ors.

(1993 (1) SCC 645) emphasized on the importance of education in the following words:

“166. In Bandhua Mukti Morcha this Court held that the right to life guaranteed by Article 21 does take in “educational facilities”. (The relevant portion has been quoted herein before). Having regard to the fundamental significance of education to the life of, an individual and the nation, and adopting the reasoning and logic adopted in the earlier decisions of this Court referred to herein before, we hold, agreeing with the statement in Bandhua Mukti Morcha, that right to education is implicit in and flows from the right to life guaranteed by Article 21. That the right to education has been treated as one of transcendental importance in the life of an individual has been recognised not only in this country since thousands of years, but all over the world. In Mohini Jain, the impatience of education has been duly and rightly stressed.

The relevant observations have already been set out in para 7 herein before. In particular, we agree with the observation that without education being provided to the citizens of this country, the objectives set forth in the Preamble to the Constitution cannot be achieved. The Constitution would fail. We do not think that the importance of education could have been better emphasised than in the above words. The importance of education was emphasised in the “Neethishatakam’ by Bhartruhari (First Century B.C. in the following words:

Translation:

Education is the special manifestation of man; Education is the treasure which can be preserved without the fear of loss;

Education secures material pleasure, happiness and fame;

Education is the teacher of the teacher;

Education is God incarnate;

Education secures honour at the hands of the State, not money.

A man without education is equal to animal.

168. In Brown v. Board of Education [1954] USSC 42; (347 US 483 (1954) Earl Warren, C.J., speaking for the U.S. Supreme Court emphasized the right to education in the following words:

“Today, education is perhaps the most important function of State and local governmentsIt is required in the performance of our most basic responsibilities, even service in the armed forces. It is the very foundation of good citizenship.

Today it is the principal instrument in awakening the child to cultural values, in preparing him for later professional training, and in helping him to adjust normally to his environment. In these days, it is doubtful any child may reasonably be expected to succeed in life if he is denied the opportunity of an education.”

52. Observations of this Court in AIIMS Students’ Union case (supra) highlight the importance of higher education and the modalities to be adopted for ensuring excellence are in the following words:

“58. The Preamble to the Constitution of India secures, as one of its objects, fraternity assuring the dignity of the individual and the unity and integrity of the nation to ‘we he people of India’. Reservation unless protected by the constitution itself, as given to us by the founding fathers and as adopted by the people of India, is sub-version of fraternity, unity and integrity and dignity of the individual. While dealing with Directive Principles of State Policy, Article 46 is taken note of often by overlooking Articles 41 and 47. Article 41 obliges the State inter alia to make effective provision for securing the right to work and right to education. Any reservation in favour of one, to the extent of reservation, is an inroad on the right of others to work and to learn.

Article 47 recognises the improvement of public health as one of the primary duties of the State. Public health can be improved by having the best of doctors, specialists and super specialists. Under-graduate level is a primary or basic level of education in medical sciences wherein reservation can be understood as the fulfilment of societal obligation of the State towards the weaker segments of the society. Beyond this, a reservation is a reversion or diversion from the performance of primary duty of the State.

Permissible reservation at the lowest or primary rung is a step in the direction of assimilating the lesser fortunates in mainstream of society by bringing them to the level of others which they cannot achieve unless protectively pushed. Once that is done the protection needs to be withdrawn in the own interest of protectees so that they develop strength and feel confident of stepping on higher rungs on their own legs shedding the crutches. Pushing the protection of reservation beyond the primary level betrays bigwigs’ desire to keep the crippled crippled for ever.

Rabindra Nath Tagore’s vision of a free India cannot be complete unless “knowledge is free”

and “tireless striving stretches its arms towards perfection”. Almost a quarter century after the people of India have given the Constitution unto themselves, a chapter on fundamental duties came to be incorporated in the Constitution. Fundamental duties, as defined in Article 51A, are not made enforceable by a writ of court just as the fundamental rights are, but it cannot be lost sight of that ‘duties’ in Part IVA – Article 51A are prefixed by the same word ‘fundamental’ which was prefixed by the founding fathers of the Constitution to ‘rights’ in Part III. Every citizen of India is fundamentally obliged to develop the scientific temper and humanism.

He is fundamentally duty bound to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievements. State is, all the citizens placed together and hence though Article 51A does not expressly cast any fundamental duty on the State, the fact remains that the duty of every citizen of India is the collective duty of the Sate. Any reservation, apart from being sustainable on the constitutional anvil, must also be reasonable to be permissible. In assessing the reasonability one of the factors to be taken into consideration would be — whether the character and quantum of reservation would stall or accelerate achieving the ultimate goal of excellence enabling the nation constantly rising to higher levels. In the era of globalisation, where the nation as a whole has to compete with other nations of the world so as to survive, excellence cannot be given an unreasonable go by and certainly not compromised in its entirety. Fundamental duties, though not enforceable by a writ of the court, yet provide a valuable guide and aid to interpretation of constitutional and legal issues. In case of doubt or choice, people’s wish as manifested through Article 51A, can serve as a guide not only for resolving the issue but also for constructing or moulding the relief to be given by the courts. Constitutional enactment of fundamental duties, if it has to have any meaning, must be used by courts as a tool to tab, even a taboo, on State action drifting away from constitutional values”.

53. Respondents have vehemently contended that the concept of creamy layer may have relevance for the purpose of Article 16(4), but is really inconsequential so far as Articles 15(4) and 15(5) are concerned. It is submitted that Article 16(4) is relatable to inadequate representation in Government services and in that context the well to do in the socially and educationally backward classes have to be excluded in view of the decisions of this Court. But that logic cannot apply to the present dispute which relates to admissions to educational institutions. Before considering the question as to the desirability of excluding ‘creamy layer’ the concept of creamy layer needs to be focused upon. Observations of this Court in various cases on this concept need to be noted.

54. In N.M. Thomas’s case (supra) at page 363, it was inter alia observed as follows :

“124. A word of sociological caution. In the light of experience, here and elsewhere, the danger of “reservation”, it seems to me, is threefold. Its benefits, by and large, are snatched away by the top creamy layer of the “backward” caste or class, thus keeping the weakest among the weak always weak and leaving the fortunate layers to consume the whole cake. Secondly, this claim is overplayed extravagantly in democracy by large and vocal groups whose burden of backwardness has been substantially lightened by the march of time and measures of better education and more opportunities of employment, but wish to wear the “weaker section” label as a means to score over their near-equals formally categorised as the upper brackets. Lastly, a lasting solution to the problem comes only from improvement of social environment, added educational facilities and cross- fertilisation of castes by inter-caste and inter- class marriages sponsored as a massive State programme, and this solution is calculatedly hidden from view by the higher “backward”

groups with a vested interest in the plums of backwardism. But social science research, not judicial impressionism, will alone tell the whole truth and a constant process of objective re-evaluation of progress registered by the “underdog” categories is essential lest a once deserving “reservation” should be degraded into “reverse discrimination”. Innovations in administrative strategy to help the really untouched, most backward classes also emerge from such socio-legal studies and audit exercises, if dispassionately made. In fact, research conducted by the A.N. Sinha Institute of Social Studies, Patna, has revealed a dual society among harijans, a tiny elite gobbling up the benefits and the darker layers sleeping distances away from the special concessions.

For them, Articles 46 and 335 remain a “noble romance”, the bonanza going to the “higher”

harijans. I mention this in the present case because lower division clerks are likely to be drawn from the lowest levels of harijan humanity and promotion prospects being accelerated by withdrawing, for a time, “test”

qualifications for this category may perhaps delve deeper. An equalitarian breakthrough in a hierarchical structure has to use many weapons and Rule 13/AA perhaps is one.

Xx xx xx 139. It is platitudinous constitutional law that Articles 14 to 16 are a common code of guaranteed equality, the first laying down the broad doctrine, the other two applying it to sensitive areas historically important and politically polemical in a climate of communalism and jobbery.

55. In Vasant Kumar’s case (supra) at page 732 the view was re-iterated in the following words :

“24. In order to appreciate the view point advanced by Mr Desai which appeals to me both for its indepth study of the problem, and a fresh outlook on this vexed problem, at the outset let me take a look at the futuristic view of the Indian Society as envisaged in the Constitution. No one is left in any doubt that the future Indian Society was to be casteless and classless. Pandit Jawaharlal Nehru the first Prime Minister of India said that Mahatma Gandhi has shaken the foundations of caste and the masses have been powerfully affected. But an even greater power than Gandhi is at work, the conditions of modern life  and it seems at last this hoary and tenacious ralic of past times must die.

Mahatma Gandhi, the Father of the Nation said, “The caste system as we know is an anachronism. It must go if both Hinduism and India are to live and grow from day to day”. In its onward march towards realising the constitutional goal, every attempt has to be made to destroy caste stratification. Article 38(2) enjoins the State to strive to minimise the inequality in income and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations. Article 46 enjoins duty to promote with special care the educational and economic interests of the weaker sections of the people, and in particular of the Scheduled Castes and Scheduled Tribes, and shall protect them from social injustice and all forms of exploitation.

Continued retention of the division of the society into various castes simultaneously introduces inequality of status. And this inequality in status is largely responsible for retaining inequality in facilities and opportunities, ultimately resulting in bringing into existence an economically depressed class for transcending caste structure and caste barrier. The society therefore was to be classless casteless society. In order to set up such a society, steps have to be taken to weaken and progressively eliminate caste structure. Unfortunately, the movement is in the reverse gear. Caste stratification has become more rigid to some extent, and where concessions and preferred treatment schemes are introduced for economically disadvantaged classes, identifiable by caste label, the caste structure unfortunately received a fresh lease of life. In fact there is a mad rush for being recognized as belonging to a caste which by its nomenclature would be included in the list of socially and educationally backward classes. To illustrate:

Bakshi Commission in Gujarat recognized as many as 82 castes as being socially and educationally backward. On the publication of its report, Government of Gujarat received representations by members of those castes who had not made any representation to the Bakshi Commission for treating them as socially and educationally backward. This phenomenon was noticed by Mandal Commission when it observed: “Whereas the Commission has tried to make the State-wise lists of OBCs as comprehensive as possible, it is quite likely that several synonymy of the castes listed as backward have been left out. Certain castes are known by a number of synonymy which vary from one region to the other and their complete coverage is almost impossible”. Mandal Commission found a way out by recommending that if a particular caste has been listed as backward then all its synonyms whether mentioned in the State lists or not should also be treated as backward.

Gujarat Government was forced to appoint a second commission known as Rane Commission. Rane Commission took note of the fact that there was an organised effort for being considered socially and educationally backward castes. Rane Commission recalled the observations in Balaji case that “Social backwardness is on the ultimate analysis the result of poverty to a very large extent”. The Commission noticed that some of the castes just for the sake of being considered as socially and educationally backward, have degraded themselves to such an extent that, they had no hesitation in attributing different types of vices to and associating other factors indicative of backwardness, with their castes. The Commission noted that the malaise requires to be remedied. The Commission therefore, devised a method for determining socially and educationally backward classes without reference to caste, beneficial to all sections of people irrespective of the caste to which they belong. The Commission came to an irrefutable conclusion that amongst certain castes and communities or class of people, only lower income groups amongst them are socially and educationally backward. We may recall here a trite observation in case of N.M. Thomas which reads as under (SCC pg.363 para 124):

“A word of sociological caution. In the light of experience, here and elsewhere, the danger of ‘reservation’, it seems to me, is threefold. Its benefits, by and large, are snatched away by the top creamy layer of the ‘backward’ caste or class, thus keeping the weakest among the weak always weak and leaving the fortunate layers to consume the whole cake. Secondly, this claim is overplayed extravagantly in democracy by large and vocal groups whose burden of backwardness has been substantially lightened by the march of time and measures of better education and more opportunities of employment, but wish to wear the ‘weaker section’ label as a means to score over their near-equals formally categorised as the upper brackets.”

25. A few other aspects for rejecting caste as the basis for identifying social and educational backwardness may be briefly noted. If State patronage for preferred treatment accepts caste as the only insignia for determining social and educational backwardness, the danger looms large that this approach alone would legitimise and perpetuate caste system. It does not go well with our proclaimed secular character as enshrined in the Preamble to the Constitution. The assumption that all members of same caste a re equally socially and educationally backward is not well-founded. Such an approach provides an over-simplification of a complex problem of identifying the social and educational backwardness. The Chairman of the Backward Classes Commission, set up in 1953, after having finalised the report, concluded that “it would have been better if we could determine the criteria of backwardness on principles other than caste”. Lastly it is recognised without dissent that the caste based reservation has been usurped by the economically well-placed section in the same caste. To illustrate, it may be pointed that some years ago, I came across a petition for special leave against the decision of the Punjab and Haryana High Court in which the reservation of 2= per cent for admission to medical and engineering colleges in favour of Majhabi Sikhs was challenged by none other than the upper crust of the members of the Scheduled castes amongst Sikhs in Punjab, proving that the labeled weak exploits the really weaker. Add to this, the findings of the Research Planning Scheme of sociologists assisting the Mandal Commission when it observed: “while determining the criteria of socially and educationally backward classes, social backwardness should be considered to be the critical element and educational backwardness to be the linked element though not necessarily derived from the former”. The team ultimately concluded that “social backwardness refers to ascribed status, and it considered social backwardness as the critical element and educational backwardness to be the linked though not derived element”. The attempt is to identify socially and educationally backward classes of citizens. The caste, as is understood in Hindu Society, is unknown to Muslims, Christians, Parsis, Jews etc. Caste criterion would not furnish a reliable yardstick to identify socially and educationally backward group in the aforementioned communities though economic backwardness would.

28. Reservation in one or other form has been there for decades. If a survey is made with reference to families in various castes considered to be socially and educationally backward, about the benefits of preferred treatment, it would unmistakably show that the benefits of reservations are snatched away by the top creamy layer of the backward castes.

This has to be avoided at any cost.

56. Significantly in Indra Sawhney No.1 it was emphatically noted as follows:

“520. Society does not remain static. The industrialisation and the urbanisation which necessarily followed in its wake, the advance on political, social and economic fronts made particularly after the commencement of the Constitution, the social reform movements of the last several decades, the spread of education and the advantages of the special provisions including reservations secured so far, have all undoubtedly seen at least some individuals and families in the backward classes, however small in number, gaining sufficient means to develop their capacities to compete with others in every field. That is an undeniable fact. Legally, therefore, they are not entitled to be any longer called as part of the backward classes whatever their original birthmark. It can further hardly be argued that once a backward class, always a backward class. That would defeat the very purpose of the special provisions made in the Constitution for the advancement of the backward classes, and for enabling them to come to the level of and to compete with the forward classes, as equal citizens. On the other hand, to continue to confer upon such advanced sections from the backward classes the special benefits, would amount to treating equals unequally violating the equality provisions of the Constitution. Secondly, to rank them with the rest of the backward classes would equally violate the right to equality of the rest in those classes, since it would amount to treating the unequals equally. What is more, it will lead to perverting the objectives of the special constitutional provisions since the forwards among the backward classes will thereby be enabled to lap up all the special benefits to the exclusion and at the cost of the rest in those classes, thus keeping the rest in perpetual backwardness. The object of the special constitutional provisions is not to uplift a few individuals and families in the backward classes but to ensure the advancement of the backward classes as a whole. Hence, taking out the forwards from among the backward classes is not only permissible but obligatory under the Constitution. However, it is necessary to add that just as the backwardness of the backward groups cannot be measured in terms of the forwardness of the forward groups, so also the forwardness of the forwards among the backward classes cannot be measured in terms of the backwardness of the backward sections of the said classes. It has to be judged on the basis of the social capacities gained by them to compete with the forward classes. So long as the individuals belonging to the backward classes do not develop sufficient capacities of their own to compete with others, they can hardly be classified as forward.

xx xx xx 629. More backward and backward is an illusion. No constitutional exercise is called for it. What is required is practical approach to the problem. The collectivity or the group may be backward class but the individuals from that class may have achieved the social status or economic affluence. Disentitle them from claiming reservation. Therefore, while reserving posts for backward classes, the departments should make a condition precedent that every candidate must disclose the annual income of the parents beyond which one could not be considered to be backward. What should be that limit can be determined by the appropriate State. Income apart, provision should be made that wards of those backward classes of persons who have achieved a particular status in society either political or social or economic or if their parents are in higher services then such individuals should be precluded to avoid monopolisation of the services reserved for backward classes by a few. Creamy layer, thus, shall stand eliminated. And once a group or collectivity itself is found to have achieved the constitutional objective then it should be excluded from the list of backward class.

Therefore, (1) No reservation can be made on economic criteria.

(2) It may be under Article 16(4) if such class satisfies the test of inadequate representation.

(3) Exclusion of creamy layer is a social purpose. Any legislative or executive action to remove such persons individually or collectively cannot be constitutionally invalid.

Xx xx xx 790. ‘Means-test’ in this discussion signifies imposition of an income limit, for the purpose of excluding persons (from the backward class) whose income is above the said limit. This submission is very often referred to as the “creamy layer” argument. Petitioners submit that some members of the designated backward classes are highly advanced socially as well as economically and educationally. It is submitted that they constitute the forward section of that particular backward class  as forward as any other forward class member  and that they are lapping up all the benefits of reservations meant for that class, without allowing the benefits to reach the truly backward members of that class. These persons are by no means backward and with them a class cannot be treated as backward. It is pointed out that since Jayasree almost every decision has accepted the validity of this submission.

791. On the other hand, the learned counsel for the States of Bihar, Tamil Nadu, Kerala and other counsel for respondents strongly oppose any such distinction. It is submitted that once a class is identified as a backward class after applying the relevant criteria including the economic one, it is not permissible to apply the economic criteria once again and sub-divide a backward class into two sub-categories.

Counsel for the State of Tamil Nadu submitted further that at one stage (in July 1979) the State o f Tamil Nadu did indeed prescribe such an income limit but had to delete it in view of the practical difficulties encountered and also in view of the representations received. In this behalf, the learned counsel invited our attention to Chapter 7-H (pages 60 to 62) of the Ambashankar Commission (Tamil Nadu Second Backward Classes Commission) Report. According to the respondents the argument of ‘creamy layer’ is but a mere ruse, a trick, to deprive the backward classes of the benefit of reservations. It is submitted that no member of backward class has come forward with this plea and that it ill becomes the members of forward classes to raise this point.

Strong reliance is placed upon the observations of Chinnappa Reddy, J in Vasanth kumar to the following effect (SCC p.763, para 72) ” .. .. One must, however, enter a caveat to the criticism that the benefits of reservation are often snatched away by the top creamy layer of backward class or caste. That a few of the seats and posts reserved for backward classes are snatched away by the more fortunate among them is not to say that reservation is not necessary. This is bound to happen in a competitive society such as ours. Are not the unreserved seats and posts snatched away, in the same way, by the top creamy layer of society itself? Seats reserved for the backward classes are taken away by the top layers amongst them on the same principle of merit on which the unreserved seats are taken away by the top layers of society. How can it be bad if reserved seats and posts are snatched away by the creamy layer of backward classes, if such snatching away of unreserved posts by the top creamy layer of society itself is not bad?”

792. In our opinion, it is not a question of permissibility or desirability of such test but one of proper and more appropriate identification of a class  a backward class.

The very concept of a class denotes a number of persons having certain common traits which distinguish them from the others. In a backward class under clause (4) of Article 16, if the connecting link is the social backwardness, it should broadly be the same in a given class. If some of the members are far too advanced socially (which in the context, necessarily means economically and, may also mean educationally) the connecting thread between them and the remaining class snaps.

They would be misfits in the class. After excluding them alone, would the class be a compact class. In fact, such exclusion benefits the truly backward. Difficulty, however, really lies in drawing the line  how and where to draw the line? For, while drawing the line, it should be ensured that it does not result in taking away with one hand what is given by the other. The basis of exclusion should not merely be economic, unless, of course, the economic advancement is so high that it necessarily means social advancement. Let us illustrate the point. A member of backward class, say a member of carpenter caste, goes to Middle East and works there as a carpenter. If you take his annual income in rupees, it would be fairly high from the Indian standard. Is he to be excluded from the Backward Class? Are his children in India to be deprived of the benefit of Article 16(4)? Situation may, however, be different, if he rises so high economically as to become  say a factory owner himself. In such a situation, his social status also rises. He himself would be in a position to provide employment to others. In such a case, his income is merely a measure of his social status. Even otherwise there are several practical difficulties too in imposing an income ceiling. For example, annual income of Rs.36,000 may not count for much in a city like Bombay, Delhi or Calcutta whereas it may be a handsome income in rural India anywhere. The line to be drawn must be a realistic one. Another question would be, should such a line be uniform for the entire country or a given State or should it differ from rural to urban areas and so on. Further, income from agriculture may be difficult to assess and, therefore, in the case of agriculturists, the line may have to be drawn with reference to the extent of holding. While the income of a person can be taken as a measure of his social advancement, the limit to be prescribed should not be such as to result in taking away with one hand what is given with the other. The income limit must be such as to mean and signify social advancement. At the same time, it must be recognised that there are certain positions, the occupants of which can be treated as socially advanced without any further enquiry. For example, if a member of a designated backward class becomes a member of IAS or IPS or any other All India Service, his status is society (social status) rises; he is no longer socially disadvantaged. His children get full opportunity to realize their potential. They are in no way handicapped in the race of life.

793. Keeping in mind all these considerations, we direct the Government of India to specify the basis of exclusion  whether on the basis of income, extent of holding or otherwise  of ‘creamy layer’. This shall be done as early as possible, but not exceeding four months. On such specification persons falling within the net of exclusionary rule shall cease to be the members of the Other Backward Classes (covered by the expression ‘backward class of citizens’) for the purpose of Article 16(4). The impugned Office Memorandums dated August 13, 1990 and September 25, 1991 shall be implemented subject only to such specification and exclusion of socially advanced persons from the backward classes contemplated by the said O.M. In other words, after the expiry of four months from today, the implementation of the said O.M. shall be subject to the exclusion of the ‘creamy layer’ in accordance with the criteria to be specified by the Government of India and not otherwise”.

57. In Indra Sawhney v. Union of India (1996) 6 SCC 506) at page 508) it was noted as follows :

“3. Thereafter the matter again came up before the Court on 20-3-1995. Finding that the State of Kerala has not taken any steps, this Court issued notice to show cause why action should not be taken for non-compliance of this Court’s order. Again the matter came up on 10-7- 1995. Even on that date no report of compliance was submitted to the Court;

instead an affidavit sworn to by the Chief Secretary to the State was handed over explaining the circumstances why the implementation of the judgment was delayed.

xx xx xx

5. In the circumstances, out of sheer exhaustion and having regard to the fact that the constitutionality of the Kerala Act 16 of 1995 is pending disposal before this Court, we have decided to get the information ourselves regarding “creamy layer” issue through a High Level Committee.

6. Accordingly, we request the learned Chief Justice of the Kerala High Court to appoint a retired Judge of the High Court to be the Chairman of the High Level Committee who will induct not more than 4 members from various walks of life to identify the “creamy layer” among “the designated other backward classes” in Kerala State in the light of the ruling of this Court in Mandal case and forward the report to this Court within 3 months from the date of receipt of this order.”

58. In Indra Sawhney No. 2 it was observed as follows:

“7. Our Constitution is wedded to the concept of equality and equality is a basic feature.

Under Article 15(2), there is a prohibition that the State shall not discriminate against any citizen on the grounds only of religion, race, caste, sex and place of birth or any of them. It is equally true that ours is a caste-ridden society. Still, it is a constitutional mandate not to discriminate on the basis of caste alone.

Provisions can be made for the upliftment of socially and educationally backward classes, Scheduled Castes or Scheduled Tribes or for women and children. Article 16(4) empowers the States for making any provision for reservation in appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State.

Reservation is permissible ( i ) in favour of any backward class of citizens; and ( ii ) if it is not adequately represented in services under the State.

8. Caste only cannot be the basis for reservation. Reservation can be for a backward class citizen of a particular caste. Therefore, from that caste, the creamy layer and the non- backward class of citizens are to be excluded.

If the caste is to be taken into consideration then for finding out the socially and economically backward class, the creamy layer of the caste is to be eliminated for granting benefit of reservation, because that creamy layer cannot be termed as socially and economically backward. These questions are exhaustively dealt with by a nine-Judge Bench of this Court in Indra Sawhney v. Union of India and it has been specially held that “only caste” cannot be the basis for reservation.

9. Inclusion of castes in the list of backward classes cannot be mechanical and cannot be done without adequate relevant data. Nor can it be done for extraneous reasons Likewise, periodic examination of a backward class could lead to its exclusion if it ceases to be socially backward or if it is adequately represented in the services. Once backward, always backward is not acceptable. In any case, the “creamy layer” has no place in the reservation system.

10. If forward classes are mechanically included in the list of backward classes or if the creamy layer among backward classes is not excluded, then the benefits of reservation will not reach the really backward among the backward classes. Most of the benefits will then be knocked away by the forward castes and the creamy layer. That will leave the truly backward, backward forever.

xx xx xx

13. In Indra Sawhney on the question of exclusion of the “creamy layer” from the backward classes, there was agreement among eight out of the nine learned Judges of this Court. There were five separate judgments in this behalf which required the “creamy layer”

to be identified and excluded.

xx xx xx

22. As appears from the judgments of six out of the eight Judges, viz. Jeevan Reddy (for himself and three others), Sawant and Sahai, JJ.  (i.e. six learned Judges out of nine),  they specifically refer to those in higher services like IAS, IPS and All India Services or near about as persons who have reached a higher level of social advancement and economic status and therefore as a matter of law, such persons are declared not entitled to be treated as backward. They are to be treated as creamy layer “without further inquiry”.

Likewise, persons living in sufficient affluence who are able to provide employment to others are to be treated as having reached a higher social status on account of their affluence, and therefore outside the backward class. Those holding higher levels of agricultural landholdings or getting income from property, beyond a limit, have to be excluded from the backward classes. This, in our opinion, is a judicial ” declaration ” made by this Court.

Xx xx xx

27. As the “creamy layer” in the backward class is to be treated “on a par” with the forward classes and is not entitled to benefits of reservation, it is obvious that if the “creamy layer” is not excluded, there will be discrimination and violation of Articles 14 and 16(1) inasmuch as equals (forwards and creamy layer of backward classes) cannot be treated unequally . Again, non-exclusion of creamy layer will also be violative of Articles 14, 16(1) and 16(4) of the Constitution of India since unequals (the creamy layer) cannot be treated as equals , that is to say, equal to the rest of the backward class. These twin aspects of discrimination are specifically elucidated in the judgment of Sawant, J. where the learned Judge stated as follows: (SCC p. 553, para 520) “To continue to confer upon such advanced sections special benefits, would amount to treating equals unequally.

Secondly, to rank them with the rest of the backward classes would amount to treating the unequals equally.”

Thus, any executive or legislative action refusing to exclude the creamy layer from the benefits of reservation will be violative of Articles 14 and 16(1) and also of Article 16(4).

We shall examine the validity of Sections 3, 4 and 6 in the light of the above principle.

Xx xx xx

64. The Preamble to the Constitution of India emphasises the principle of equality as basic to our Constitution. In Kesavananda Bharati v.

State of Kerala it was ruled that even constitutional amendments which offended the basic structure of the Constitution would be ultra vires the basic structure. Sikri, C.J. laid stress on the basic features enumerated in the Preamble to the Constitution and said that there were other basic features too which could be gathered from the constitutional scheme (para 506-A of SCC). Equality was one of the basic features referred to in the Preamble to our Constitution. Shelat and Grover, JJ. also referred to the basic rights referred to in the Preamble. They specifically referred to equality (paras 520 and 535-A of SCC). Hegde and Shelat, JJ. also referred to the Preamble (paras 648, 652). Ray, J. (as he then was) also did so (para 886). Jaganmohan Reddy, J. too referred to the Preamble and the equality doctrine (para 1159). Khanna, J.

accepted this position (para 1471). Mathew, J.

referred to equality as a basic feature (para 1621). Dwivedi, J. (paras 1882, 1883) and Chandrachud, J. (as he then was) (see para 2086) accepted this position.

65. What we mean to say is that Parliament and the legislature in this country cannot transgress the basic feature of the Constitution, namely, the principle of equality enshrined in Article 14 of which Article 16(1) is a facet. Whether the creamy layer is not excluded or whether forward castes get included in the list of backward classes , the position will be the same, namely, that there will be a breach not only of Article 14 but of the basic structure of the Constitution. The non-exclusion of the creamy layer or the inclusion of forward castes in the list of backward classes will, therefore, be totally illegal. Such an illegality offending the root of the Constitution of India cannot be allowed to be perpetuated even by constitutional amendment. The Kerala Legislature is, therefore, least competent to perpetuate such an illegal discrimination. What even Parliament cannot do, the Kerala Legislature cannot achieve.”

59. Though in M. Nagaraj’s case (supra) some observations of general nature have been made so far as the applicability of the principles to Scheduled Castes and Scheduled Tribes are concerned, really that case did not concern with Scheduled Castes and Scheduled Tribes. Similar is the position here. The focus on the identity test in M. Nagaraj’s case (supra) is unexceptionable. At paras 80 and 110, it was noted as follows:

“80. Before concluding, we may refer to the judgment of this Court in M.G.

Badappanavar. In that case the facts were as follows. Appellants were general candidates.

They contended that when they and the reserved candidates were appointed at Level-1 and junior reserved candidates got promoted earlier on the basis of roster- points to Level-2 and again by way of roster-points to Level-3, and when the senior general candidate got promoted to Level-3, then the general candidate would become senior to the reserved candidate at Level-3. At Level-3, the reserved candidate should have been considered along with the senior general candidate for promotion to Level-4. In support of their contention, appellants relied upon the judgment of the Constitution Bench in Ajit Singh (II). The above contentions raised by the appellants were rejected by the tribunal.

Therefore, the general candidates came to this Court in appeal. This Court found on facts that the Service Rule concerned did not contemplate computation of seniority in respect of roster promotions. Placing reliance on the judgment of this Court in Ajit Singh (I) and in Virpal Singh, this Court held that roster promotions were meant only for the limited purpose of due representation of backward classes at various levels of service and, therefore, such roster promotions did not confer consequential seniority to the roster- point promotee. In Ajit Singh (II) , the circular which gave seniority to the roster-point promotees was held to be violative of Articles 14 and 16. It was further held in M.G.

Badappanavar that equality is the basic feature of the Constitution and any treatment of equals as unequals or any treatment of unequals as equals violated the basic structure of the Constitution. For this proposition, this Court placed reliance on the judgment in Indra Sawhney while holding that if creamy layer among backward classes were given some benefits as backward classes, it will amount to equals being treated unequals. Applying the creamy layer test, this Court held that if roster-point promotees are given consequential seniority, it will violate the equality principle which is part of the basic structure of the Constitution and in which event, even Article 16(4A) cannot be of any help to the reserved category candidates. This is the only judgment of this Court delivered by three-Judge bench saying that if roster-point promotees are given the benefit of consequential seniority, it will result in violation of equality principle which is part of the basic structure of the Constitution.

Accordingly, the judgment of the tribunal was set aside.

xx xx xx 110. As stated above, the boundaries of the width of the power, namely, the ceiling-limit of 50% (the numerical benchmark), the principle of creamy layer, the compelling reasons, namely, backwardness, inadequacy of representation and the overall administrative efficiency are not obliterated by the impugned amendments. At the appropriate time, we have to consider the law as enacted by various States providing for reservation if challenged.

At that time we have to see whether limitations on the exercise of power are violated. The State is free to exercise its discretion of providing for reservation subject to limitation, namely, that there must exist compelling reasons of backwardness, inadequacy of representation in a class of post(s) keeping in mind the overall administrative efficiency. It is made clear that even if the State has reasons to make reservation, as stated above, if the impugned law violates any of the above substantive limits on the width of the power the same would be liable to be set aside.”

60. There is an interesting article by an author dealing with Affirmative Action which reads as follows:

“In his much referred to speech on 26 November 1949, Dr. Ambedkar said that India was wanting in its recognition of the principle of fraternity. What does fraternity mean? Fraternity means a sense of common brotherhood of all Indians – of India being one people. The virtues of liberty by themselves do not create fraternity. This is why several liberal theorists are unsure about whether or not state interventions should be allowed for when the issue of overcoming disprivileges are concerned. The central concern then is how to inculcate a sense of `common brotherhood’ among people with divergent histories and who occupy vastly different positions in the economic and social structure of a society.

Before we go further on discussing the specifics of caste and reservations in India it is worth recording that liberty and equality can sometimes be contradictorily positioned. This is why it is important for democracy to redress these community-based grievances within a framework that does not violate liberal principles. While the individual needs to be protected, there are individuals in certain groups and communities that need safeguards and support as well. After all it must be remembered that communities do not create citizens, but that there are citizens within communities. Also, while it is rather risky to say that communities have rights, there is no doubt at all that within liberal democracies, individuals have rights. Indeed, these rights were secured historically so that individuals did not have to be burdened by community and ascriptive pressures on them.

The rationale behind affirmative action is that it releases suppressed talents and expands the pool of social assets in society for the general good. If today we are looking for a justification for affirmative action in this fashion, several decades ago it was precisely this enlarging of the social pool of talents that recommended equal treatment for women. As L.T. Hobhouse argued then that when women are repressed then there is a loss of all the elements in the common stock which the free play of the woman’s mind would contribute. By increasing the sum of realized talents in society individuals can actually gain greater inter-subjectivity in their everyday lives. As the set of resemblances between them is now so much larger, they can practice, pace Rawls, the moral precept of participating in one another’s fate. In this process, fraternal values of citizenship gain materiality and fulfilment. It should be recognized that fraternity can only come about through a basic set of resemblances between citizens. This conception of resemblances is about citizens being equally able to avail of institutional facilities that ensure their acquisition of those skills that are considered to be socially valuable. In other words, social opportunities exist for individual self-expansion, and it is only individuals now who can exclude themselves. If grinding poverty comes in the way of acquiring such socially valuable skills, then those blocks should be met by developmental interventions such as the anti- poverty programmes. But on no account should the removal of poverty be made synonymous with reservations. Reservations are only meant to create a measure of confidence and dignity among those who didn’t dare dream of an alternative life. But that alone cannot create structural conditions that address the root causes of poverty.

If quality education and the imparting of socially valuable skills are provided across the board through reservations, then that would take care of the complaint that affirmative action is largely about the equality of results.

Rawls’ principle of justice as fairness only says that offices should be open to all. But what if people do not qualify for these offices because their potentialities have remained unrealized on account of inadequate qualifications arising from a history of discrimination compounded by poverty, or, indeed, because of sub- standard education? Does it mean that, through positive discrimination and reservations, they should be given these jobs anyway regardless of the welfare of institutions? In this connection, Andre Beteille’s warning that affirmative action should be sensitive to institutional well-being as well needs to be recalled. Beteille sifted between the various imperatives that different organizations are subsumed under and accordingly advised a careful calibration of reservations such that these provisions of performance do not undermine efficiency of performance. The resemblances that are being advocated in the context of affirmative action should not be interpreted in terms of homogeneous `sameness’. Sameness is what medieval religious fundamentalists aim for. On the other hand, the set of resemblances in a constitutional democracy enhances equality and not sameness by providing identical opportunities to all for self-expression and development. Citizenship is not about the sameness of lifestyles or of income. Marshall’s notion of citizenship as a status that tends towards equality should be interpreted in this light. According to Marshall, the equality that citizenship guarantees should be the foundation on which other kinds of differences can develop.

It will no doubt be the case that differences will exist even after a minimum set of resemblances is established. But these will no longer be outcomes of the accidents of birth. When diversity exists outside of choice then that is not a state of affairs that a democratic society can rejoice in. Affirmative action is instrumental in enlarging the scope of difference and diversity, but it succeeds in doing so by first ensuring that citizens resemble one another at a very critical level namely in their ability to acquire socially valuable skills.

Affirmative action gets somewhat complicated in India on account of caste politics.

Undeniably, India is the most stratified society in the world. Over and above caste differentiations there are huge income disparities, religious and community differences that are deeply engraved into everyday social relations. No doubt, the nature of caste and community interactions has changed over time, but considerations along ascriptive lines still remain important markers, both at the public and private domains.

Not only are we now confronted by identity assertions of earthy peasant castes, that were earlier ranked as lowly shudras (or menials), but also, of those who, till recently, were called ‘untouchables’. Now we also know that none of these castes had ever ideologically accepted their degraded status. Yet they lived out their humble lives quietly for generations for fear of offending the privileged strata.

We now know more of their origin tales that boast of the elevated positions they once held before an unsuspected chicanery, a lost war, or a mercurial god, demoted them to lowly rungs in popular perceptions. Today these tales are an important source of symbolic energy for caste mobilizations and identity assertions. Now that the Mandal recommendations are in place, reservations are not just for the Scheduled Castes and Tribes, but for the so-called other Backward Castes as well. While there are a large number of castes listed as Backward, the demand for reservations for this category has been spearheaded by the class of owner-cultivators, or peasant proprietors. Before we assess Mandal reforms it would be useful to know how these peasant castes emerged.

After the zamindari abolition came into effect, adult franchise and land-to-the-tiller programme together forced the earlier landed castes slowly to cede ground in the villages.

Soon, however, traditional peasant castes such as the Ahirs, Kurmis, Koeris, Lodhs, Rajputs and Jats began to dominate the political scape of northern India. In the southern State of Tamil Nadu, the Vanniyars and Thevars have become assertive, and in Karnataka control was wrested in the mid-1950s from the traditional rural elite within the Congress Party by the Vokkaligas and Linagayats.

xx xx xx In pursuance of Article 340 of the Constitution, the Kalelkar Commission was set up in 1955 but it could not come to any satisfactory conclusion about who should be legitimately considered as OBCs. The Mandal Commission came into existence in 1980 and it promptly came up with a long list of 3,743 backward castes on the basis of social, economic and educational backwardness. The Mandal Commission’s recommendations were implemented in 1990 by the then Prime Minister VP Singh. This meant that a further 29 per cent of seats in educational institutions and government jobs would now be reserved for OBCs.

The implementation of reservations for OBCs set off a furore of protests, including a few suicides, all over the country by those who are considered to be members of forward castes. Many felt that reservations for OBCs were not warranted for two reasons. First, this would make India a caste society by law; and, second, because many of those who are considered as OBCs are really quite powerful and dominant in rural India. The obvious reference was to Jats and Yadavs. A majority of social anthropologists wrote against reservations for OBCs primarily on these grounds. Andre Beteille’s criticism of the Mandal Commission recommendations was widely commented upon. He distinguishes between reservations for OBCs following Mandal recommendations and the reservations that were already granted in the Constitution for Scheduled Castes and Tribes. While provisions for Scheduled Castes and Tribes were with the intention of reaching towards greater equality, reservations for OBCs were really to bring about a balance of power on the calculus of caste. The kind of deprivations that ex-untouchables (Scheduled Castes) and Adivasis (Scheduled Tribes) encountered for centuries can in no way be compared to the traditional condition of the OBCs. Besides, many OBCs are quite powerful in rural India, both economically and politically. In fact, the Mandal Commission recommendations were actually giving in to a powerful rural lobby that did not really care for equality of opportunities as much as it did for equality of results.

xx xx xx There are two considerations that escape many uncritical applications of affirmative action. First, affirmative action must resist any tendency whereby its beneficiaries become vested interests. And secondly, it must eventually seek its own dissolution. While the second may be far away, it is by paying attention to the first issue that it is possible for affirmative action to eventually annihilate itself. Paradoxical as it may appear, but when this happens it is then that positive discrimination has finally triumphed.

Affirmative action fails to reach this final destination when it is inconsistently applied, or when its beneficiaries form vested interest bloc within a democratic electoral system on the basis of ascriptive identity alone. The latter poses a stronger practical and intellectual challenge to the policy of affirmative action. As long as historical disprivileges and economic backwardness go together and the relationship between them is statistically very strong, colour or caste membership can act as ready reckoners for targeting beneficiaries of affirmative action. This, however, does not mean that membership in these communities should advantage individuals in perpetuity once they are able to develop the minimum set of resemblances. Therefore, as and when those who belong to targeted categories for affirmative action acquire socially useful talents and attributes, they should contribute them to the society as a whole, and not employ them only for sectional advantages.

Consequently, those who benefit from this policy owe it to society to put their newly acquired social talents back into the collective social pool. This would mean that they would automatically fall outside the scope of affirmative action programme in the future.

The net would no longer cover them as they already have socially useful assets. Indeed the society will be richer and better endowed on account of it as the beneficiaries of affirmative action will now begin to contribute to the social pool of talents. This would both release and add to social and material resources required for continuing with the policy aimed at the enhancement of resemblances. As a result, society will progressively acquire a higher strike rate with the policy of affirmative action by reaching out to those who have thus far fallen outside its ambit. By increasing the number of those who possess the minimum set of resemblances, the society has now a larger wealth of talents in a variety of fields and specialities than it had before. This is how affirmative action, which is aimed at the historically most disadvantaged sections, ultimately improves the lot of everybody in society. If, on the other hand, either colour or race, which are only ready reckoners, become permanent considerations, without taking into account biographical profiles of actual and potential beneficiaries, then that would inhibit fraternity and sow seeds of permanent divisions in society.

Affirmative action begins by placing the assets of the better off in a collective pool, not for redistribution, but to create the infrastructure that is needed to enhance the minimum set of resemblances necessary for substantive citizenship. With the help of this capital, socially valuable assets are now created in sites where there were none. This measure has a strong practical dimension for out of this collective pooling new assets are being created. The creation of such new assets is possible because the initial pooling of assets of the privileged section allows the society to underwrite the expenses incurred for the establishment of certain baseline similarities in society as a whole. As the most important feature in this case is not one’s ascriptive badge, but the creation of socially valuable assets, it is expected that those who have been the beneficiaries of the scheme will gradually slip out of the net. They will cease to receive from the collective pool and instead will begin to contribute to it. As far as public policy is concerned they are no long members of certain designated castes or communities. They are now simply citizens.

In passing it is worth putting in perspective that the difference between reservations in India and affirmative action in America is that the former talks about extirpating caste whereas the latter is interested primarily in representing races. If the accent is on representation then the ascriptive factor becomes a permanent badge that can never be overcome. Again, Americans believe in race representation, not in quotas, and in not sacrificing standards for social justice. But the great similarity between the two forms of preferential policy is that in both cases it is the public sector where positive discrimination is effectively realized. In America, the State encourages private sector units to employ people of diverse backgrounds without specifying quotas for different races. If these enterprises can show a fair racial mix then they can get preferential contracts from the government. The State cannot force any private sector unit to implement affirmative action. It is a combination of goodwill and rewards that takes affirmative action forward in the private sector of America. For example, Bob Jones University does not receive any public money and, therefore, it refuses to accept affirmative action, even of the most muted kind. It is only when organizations depend on state funding, or when they want to be rewarded by the State, that policy of affirmative action comes to life.”

61. It has been rightly observed in Indra Sawhney No. 2 (supra) whether creamy layer is not excluded or whether forward classes can be excluded in the list of backward classes, the position would be the same and there will be breach not only of Article 14 but of the basic structure of the Constitution. As was rightly observed in the said case, non exclusion of the creamy layer or inclusion of forward castes in the lists of backward classes will be totally illegal. The illegality offends the roots and foundation of the Constitution and cannot be allowed to be perpetuated.

62. In Nair Service Society’s case (supra) this Court observed as follows:

“54. This Court, thus, has categorically laid down the law that determination of creamy layer is a part of the constitutional scheme.”

63. In our view, even non exclusion of the creamy layer for the purpose of admission to the educational institutions cannot be countenanced. It is inconceivable that a person who belongs to the creamy layer is socially and educationally backward. The backward status vanishes when somebody becomes part of the creamy layer.

64. In Vasant Kumar’s case (supra) it was aptly described that the benefits of reservation are snatched away by the top creamy layer of the backward classes and this has to be avoided at any cost. By inclusion of the creamy layer or in other words non inclusion thereof a fresh lease of life to those who should have been left out is given. Their continuance would mean keeping weakest amongst the weak always weak and leaving the fortunate ones to enjoy the benefits. If the ultimate aim is a casteless and classless society in line with the dream of the Constitution framers that has to be chewed out. As Father of the Nation had once said if the caste system as we know is an anchronism, then it must go. There is a feeling and it cannot be said without reason that reservation hits at the root of this belief and instead of its obliteration there is perceivable perpetuation. It is true that obliteration cannot be done immediately or within a short span of time but that is no answer to the lack of seriousness in seeking obliteration.

65. In Indra Sawhney No.1 (supra) the following observations on the question of giving priority over reservation are of significance. It was held:

“293. Preference without reservation may be adopted in favour of the chosen classes of citizens by prescribing for them a longer period for passing a test or by awarding additional marks or granting other advantages like relaxation of age or other minimum requirements. (See the preferential treatment in State of Kerala and Anr. v. N.M. Thomas and Ors. [1975] INSC 224; (1976) 1 SCR 906). Furthermore, it would be within the discretion of the State to provide financial assistance to such persons by way of grant, scholarships, fee concessions etc.

Such preferences or advantages are like temporary crutches for additional support to enable the members of the backward and other disadvantaged classes to march forward and compete with the rest of the people. These preferences are extended to them because of their inability otherwise to compete effectively in open selections on the basis of merits for appointment to posts in public services and the like or for selection to academic courses.

Such preferences can be extended to all disadvantaged classes of citizens, whether or not they are victims of prior discrimination.

What qualifies persons for preference is backwardness or disadvantage of any kind which the State has a responsibility to ameliorate. The blind and the deaf, the dumb and the maimed, and other handicapped persons qualify for preference. So do all other classes of citizens who are at a comparative disadvantage for whatever reason, and whether or not they are victims of prior discrimination. All these persons may be beneficiaries of preferences short of reservation. Any such preference, although discriminatory on its face, may be justified as a benign classification for affirmative action warranted by a compelling state interest.

294. In addition to such preferences, quotas may be provided exclusively reserving posts in public services or seats in academic institutions for backward people entitled to such protection. Reservation is intended to redress backwardness of a higher degree.

Reservation prima facie is the very antithesis of a free and open selection. It is a discriminatory exclusion of the disfavoured classes of meritorious candidates: M.R. Balaji (supra). It is not a case of merely providing an advantage or a concession or preference in favour of the backward classes and other disadvantaged groups. It is not even a handicap to disadvantage the forward classes so as to attain a measure of qualitative or relative equality between the two groups.

Reservation which excludes from consideration all those persons falling outside the specially favoured groups, irrespective of merits and qualifications, is much more positive and drastic a discrimination – albeit to achieve the same end of qualitative equality – but unless strictly and narrowly tailored to a compelling constitutional mandate, it is unlikely to qualify as a benign discrimination. Unlike in the case of other affirmative action programmes, backwardness by itself is not sufficient to warrant reservation. What qualifies for reservation is backwardness which is the result of identified past discrimination and which is comparable to that of the Scheduled Castes and the Scheduled Tribes. Reservation is a remedial action specially addressed to the ill effects stemming from historical discrimination. To ignore this vital distinction between affirmative action short of reservation and reservation by a predetermined quota as a remedy for past inequities is to ignore the special characteristic of the constitutional grant of power specially addressed to the constitutionally recognised backwardness.

xx xx xx 319. Reservation should be avoided except in extreme cases of acute backwardness resulting from prior discrimination as in the case of the Scheduled Castes and the Scheduled Tribes and other classes of persons in comparable positions. In all other cases, preferential treatment short of reservation can be adopted.

Any such action, though in some respects discriminatory, is permissible on the basis of a legitimate classification rationally related to the attainment of equality in all its aspects.

Xx xx xx 323 (16). In the final analysis, poverty which is the ultimate result of inequities and which is the immediate cause and effect of backwardness has to be eradicated not merely by reservation as aforesaid, but by free medical aid, free elementary education, scholarships for higher education and other financial support, free housing, self- employment and settlement schemes, effective implementation of land reforms, strict and impartial operation of the law-enforcing machinery, industrialization, construction of roads, bridges, culverts, canals, markets, introduction of transport, free supply of water, electricity and other ameliorative measures particularly in areas densely populated by backward classes of citizens.

(underlined for emphasis)

66. Following observations in M.R. Balaji v. State of Mysore (AIR 1963 SC 649) are also relevant:

“In this connection, it is necessary to remember that the reservation made by the impugned order is in regard to admission in the seats of higher education in the State. It is well-known that as a result of the awakening caused by political freedom, all classes of citizens are showing a growing desire to give their children higher university education and so, the Universities are called upon to face the challenge of this growing demand. While it is necessary that the demand for higher education which is thus increasing from year to year must be adequately met and properly channelised, we cannot overlook the fact that in meeting that demand standards of higher education in Universities must not be lowered.

The large demand for education may be met by starting larger number of educational institutions vocational schools and polytechnics. But it would be against the national interest to exclude from the portals of our Universities qualified and competent students on the ground that all the seats in the Universities are reserved for weaker elements in society. As has been observed by the University Education Commission, “he indeed must be blind who does not see that mighty as are the political changes, far deeper are the fundamental questions which will be decided by what happens in the universities”

(p. 32). Therefore, in considering the question about the propriety of the reservation made by the impugned order, we cannot lose sight of the fact that the reservation is made in respect of higher university education. The demand for technicians, scientists, doctors, economists, engineers and experts for the further economic advancement of the country is so great that it would cause grave prejudice to national interests if considerations of merit are completely excluded by whole-sale reservation of seats in all Technical, Medical or Engineering colleges or institutions of that kind. Therefore, considerations of national interest and the interests of the community or society as a whole cannot be ignored in determining the question as to whether the special provision contemplated by Art. 15(4) can be special provision which excludes the rest of the society altogether. In this connection, it would be relevant to mention that the University Education Commission which considered the problem of the assistance to backward communities, had observed that the percentage of reservation shall not exceed a third of the total number of seats, and it has added that the principle of reservation may be adopted for a period of ten years. (p. 53).

We have already noticed that the Central Government in its communication to the State has suggested that reservation for backward classes, Scheduled Castes and Scheduled Tribes may be up to 25% with marginal adjustments not exceeding 10% in exceptional cases.

The learned Advocate-General has suggested that reservation of a large number of seats for the weaker sections of the society would not affect either the depth or efficiency of scholarship at all, and in support of this argument, he has relied on the observations made by the Backward Classes Commission that it found no complaint in the States of Madras, Andhra, Travancore-Cochin and Mysore where the system of recruiting candidates from other Backward Classes to the reserve quota has been in vogue for several decades. The Committee further observed that the representatives of the upper classes did not complain about any lack of efficiency in the offices recruited by reservation (p. 135).

This opinion, however, is plainly inconsistent with what is bound to be the inevitable consequence of reservation in higher university education. If admission to professional and technical colleges is unduly liberalised it would be idle to contend that the quality of our graduates will not suffer. That is not to say that reservation should not be adopted;

reservation should and must be adopted to advance the prospects of the weaker sections of society, but in providing for special measures in that behalf care should be taken not to exclude admission to higher educational centres to deserving and qualified candidates of other communities. A special provision contemplated by Art. 15(4) like reservation of posts and appointments contemplated by Art.

16(4) must be within reasonable limits. The interests of weaker sections of society which are a first charge on the states and the Centres have to be adjusted with the interests of the community as a whole. The adjustment of these competing claims is undoubtedly a difficult matter, but if under the guise of making a special provision, a State reserves practically all the seats available in all the colleges, that clearly would be subverting the object of Art. 15(4). In this matter again, we are reluctant to say definitely what would be a proper provision to make. Speaking generally and in a broad way, a special provision should be less than 50%; how much less than 50% would depend upon the relevant prevailing circumstances in each case. In this particular case it is remarkable that when the State issued its order on July 10, 1961, it emphatically expressed its opinion that the reservation of 68% recommended by the Nagan Gowda Committee would not be in the larger interests of the State. What happened between July 10, 1961, and July 31, 1962, does not appear on the record. But the State changed its mind and adopted the recommendation of the Committee ignoring its earlier decision that the said recommendation was contrary to the larger interests of the State. In our opinion, when the State makes a special provision for the advancement of the weaker sections of society specified in Art. 15(4) it has to approach its task objectively and in a rational manner. Undoubtedly, it has to take reasonable and even generous steps to help the advancement of weaker elements; the extent of the problem must be weighted, the requirements of the community at large must be borne in mind and a formula must be evolved which would strike a reasonable balance between the several relevant considerations. Therefore, we are satisfied that the reservation of 68% directed by the impugned order is plainly inconsistent with Art. 15(4).

The petitioners contend that having regard to the infirmities in the impugned order, action of the State in issuing the said order amounts to a fraud on the Constitutional power conferred on the State by Art. 15(4).

This argument is well-founded, and must be upheld. When it is said about an executive action that it is a fraud on the Constitution, it does not necessarily mean that the action is actuated by mala fides. An executive action which is patently and plainly outside the limits of the constitutional authority conferred on the State in that behalf is struck down as being ultra vires the State’s authority. If, on the other hand, the executive action does not patently or overtly transgress the authority conferred on it by the Constitution, but the transgression is covert or latent, the said action is struck down as being a fraud on the relevant constitutional power. It is in this connection that courts often consider the substance of the matter and not its form and in ascertaining the substance of the matter, the appearance or the cloak, or the veil of the executive action is carefully scrutinized and if it appears that notwithstanding the appearance, the cloak or the veil of the executive action, in substance and in truth the constitutional power has been transgressed, the impugned action is struck down as a fraud on the Constitution. We have already noticed that the impugned order in the present case has categorised the Backward Classes on the sole basis of caste which, in our opinion, is not permitted by Art. 15(4); and we have also held that the reservation of 68% made by the impugned order is plainly inconsistent with the concept of the special provision authorised by Art. 15(4). Therefore, it follows that the impugned order is a fraud on the Constitutional power conferred on the State by Art. 15(4). The learned Advocate-General has made an earnest and strong plea before us that we should not strike down the order, but should strike down only such portions of the order which appear to us to be unconstitutional on the doctrine of severability. He has urged that since 1958, the State has had to make five orders to deal with the problem of advancing the lot of the Backward Classes and the State is anxious that the implementation of the impugned order should not be completely prohibited or stopped. We do not see how it would be possible to sever the invalid provisions of the impugned order. If the categorisation of the Backward Classes is invalid, this Court cannot and would not attempt the task of enumerating the said categories; and if the percentage of reservation is improper and outside Art. 15(4), this Court would not attempt to lay down definitely and in an inflexible manner as to what would be the proper percentage to reserve. In this connection, it may be relevant to refer to one fact on which the petitioners have strongly relied. It is urged for them that the method adopted by the Government of Maharashtra in exercising its power under Art. 15(4) is a proper method to adopt. It appears that the Maharashtra Government has decided to afford financial assistance, and make monetary grants to students seeking higher education where it is shown that the annual income of their families is below a prescribed minimum. The said scheme is not before us and we are not called upon to express any opinion on it. However, we may observe that if any State adopts such a measure, it may afford relief to and assist the advancement of the Backward Classes in the State, because backwardness, social and educational, is ultimately and primarily due to poverty. An attempt can also be made to start newer and more educational institutions, polytechnics, vocational institutions and even rural Universities and thereby create more opportunities for higher education. This dual attack on the problem posed by the weakness of backward communities can claim to proceed on a rational, broad and scientific approach which is consistent with, and true to, the noble ideal of a secular welfare democratic State set up by the Constitution of this country. Such an approach can be supplemented, if necessary by providing special provision by way of reservation to aid the Backward classes and Scheduled castes and Tribes. It may well be that there may be other ways and means of achieving the same result. In our country where social and economic conditions differ from State to State, it would be idle to expect absolute uniformity of approach; but in taking executive action to implement the policy of Art.

15(4), it is necessary for the States to remember that the policy which is intended to be implemented is the policy which has been declared by Art. 46 and the preamble of the Constitution. It is for the attainment of social and economic justice Art. 15(4) authorises the making of special provisions for the advancement of the communities there contemplated even if such provisions may be inconsistent with the fundamental rights guaranteed under Art. 15 or 29(2). The context, therefore, requires that the executive action taken by the State must be based on an objective approach, free from all extraneous pressures. The said action is intended to do social and economic justice and must be taken in a manner that justice is and should be done.

Whilst we are dealing with this question, it would be relevant to add to that the provisions of Art. 15(4) are similar to those of Art. 16(4) which fell to be considered in the case of The General Manager, Southern Railway v. Rangachari [1961] INSC 198; (1962 (2) SCR 586). In that case, the majority decision of this Court held that the power of reservation which is conferred on the State under Art. 16(4) can be exercised by the State in a proper case not only by providing for reservation of appointments, but also by providing for reservation of selection posts. This conclusion was reached on the basis that it served to give effect to the intention of the Constitution makers to make adequate safeguards for the advancement of Backward Classes and to secure their adequate representation in the Services. The judgment shows that the only point which was raised for the decision of this Court in that case was whether the reservation made was outside Art. 16(4) and that posed the bare question about the construction of Art. 16(4). The propriety, the reasonableness or the wisdom of the impugned order was not questioned because it was not the respondent’s case that if the order was justified under Art. 16(4), it was a fraud on the Constitution. Even so, it was pointed out in the judgment that the efficiency of administration is of such a paramount importance that it would be unwise and impermissible to make any reservation at the cost of efficiency of administration; that, it was stated, was undoubtedly the effect of Art. 335.

Therefore, what is true in regard to Art. 15(4) is equally true in regard to Art. 16(4). There can be no doubt that the Constitution-makers assumed, as they were entitled to, that while making adequate reservation under Art. 16(4), care would be taken not to provide for unreasonable, excessive or extravagant reservation, for that would, by eliminating general competition in a large field and by creating wide-spread dissatisfaction amongst the employees, materially affect efficiency.

Therefore, like the special provision improperly made under Art. 15(4), reservation made under Art. 16(4) beyond the permissible and legitimate limits would be liable to be challenged as a fraud on the Constitution. In this connection it is necessary to emphasize that Art. 15(4) is an enabling provision; it does not impose an obligation, but merely leaves it to the discretion of the appropriate government to take suitable action, if necessary.”

67. To similar effect is the view expressed in K.C. Vasanth Kumar’s case (supra) at para 150:

“At this stage it should be made clear that if on a fresh determination some castes or communities have to go out of the list of backward classes prepared for Article 15(4) and Article 16(4) the Government may still pursue the policy of amelioration of weaker sections of the population amongst them in accordance with the directive principle contained in article 46 of the Constitution.

There are in all castes and communities poor people who if they are given adequate opportunity and training may be able to compete successfully with persons belonging to richer classes. The Government may provide for them liberal grants of scholarships, free studentship, free boarding and lodging facilities, free uniforms, free mid day meals etc.

to make the life of poor students comfortable.

The Government may also provide extra tutorial facilities, stationery and books free of costs and library facilities. These and other steps should be taken in the lower classes so that by the time a student appears for the qualifying examination he may be able to attain a high degree of proficiency in his studies.”

It has also been noted as follows:

“I wish to add that the doctrine of protective discrimination embodied in Article 15(4) and 16(4) and the mandate of Article 29(2) cannot be stretched beyond a particular limit. The State exists to serve its people. There are some services where expertise and skill are of the essence. For example, a hospital run by the State serves the ailing members of the public who need medical aid. Medical services directly affect and deal with the health and life of the populace. Profession expertise, born of knowledge and experience, of a high degree of technical knowledge and operation skill is required of pilots and aviation engineers. The lives of citizens depend on such persons.

There are other similar fields of governmental activity where professional, technological, scientific or other special skill is called for. In such services or posts under the Union or State, we think where can be no room for reservation of posts; merit alone must be the sole and decisive consideration for appointments.”

(underlined for emphasis)

68. Lengthy arguments have been advanced as to the seriousness in identifying the backward classes. On the basis of Indra Sawhney No.1’s judgment, the Government of India issued orders in respect of reservations of appointments or on posts under the Government of India in favour of backward classes of citizens. It was the subject matter of challenge in Indra Sawhney No.1. In its judgment dated 16.11.1992 this Court directed the Government to constitute a permanent body by 15.3.1993 for entertaining and examining and recommending upon requests made for inclusion or complaints of over inclusion and under inclusion in the lists of backward classes of citizens.

69. Constituent Assembly Debates 1951 have also relevance for adjudicating the controversy. The following portion needs to be extracted:

70. Parliamentary Standing Committee Report at paras 36, 37 and 46 read as follows:

“36. The committee notes that there is a major limitation on data about the social economic and educational profile of our population in general and about OBCs in particular. The last caste-based census in India was done in 1931. Accordingly there are no periodic data available on the demographic spread of OBCs and their access to amenities. Even the Mandal Commission had used the 1931 Census data. Whatever limited data are available, pertain to surveys conducted by NSSO from 1998-99 onwards, which are only ‘sample surveys’.

37. The Committee found that there exists no accepted mechanism/criteria to group the people into different categories. As a result, existing list of backward castes/communities are termed in some cases, as inaccurate.

Besides, any regular process of review is also not in place. Such a review implies both ‘inclusion’ and ‘exclusion’. The Committee, therefore, emphasizes the need for taking urgent measures/steps for identifying and removing all such lacunae and removing all such lacunae and problems by putting in place scientific and objective mechanism/benchmarks for this purpose.

xx xx xx

46. There have been suggestions/counter- suggestions on the issue of exclusion of the ‘creamy layer amongst OBCs in the proposed legislation. On the one hand, it was argued that the concept of creamy layer did not apply in the case of reservation in admission. It was pointed out that the debate on the exclusion of the creamy layer was misplaced as the Supreme Court’s observation regarding the exclusion of the creamy layer within the SCs and STs from the purview of reservation was only for public employment and promotion.

The other view in this regard was that the inclusion of the creamy layer in reservation would defeat the very purpose of providing reservation to the backward classes. It was also stated that the exclusion of the creamy layer would ensure that the intended benefits of the reservation reach to the really deserving among the backward classes. It was further stated that this in itself would not suffice and should be supplemented by categorization of the backward classes in various groups depending upon their degree of backwardness and apportioning of appropriate percentage of reservation to each group. It was also brought to the committee that similar experiments in States of Andhra Pradesh, Kerala, Karnataka, Tamil Nadu, Maharashtra etc. have, in fact, stood the test of time and yielded the desired results.”

71. One of the petitioners “Youth for Equality” had filed a representation before the Parliamentary Committee giving certain important data. Relevant portions read as follows:

“TOP WITHOUT BASE
The condition of infrastructure and staff at the primary and secondary level is of some concern and the government – especially the Ministry for Human Resource and Development which has proposed increased reservations, should work towards improvement in this area for “Real” affirmative action. According to the National Institute of Educational Planning and Administration (in 2003) the state of affairs at the primary level was as under:- (i) In 62 996 schools in country do not have school building and are operating in tents or under the trees.

(ii) In 70,739 Primary Schools – No class room.

(iii) In 95,003 primary Schools – Single Class room.

(iv) In 8,269 Primary Schools  No teacher (v) In 1,15,267 Primary schools -Single teacher (vi) In more than 60,000 schools the pupil :

Teacher ratio is greater than 100 :1 while the acceptable ratio is less than 40:1.

(vii) In 84,848 schools  No black board (viii) In More than 1 00 000 Schools – No electricity.

Apart from the above, according to the NCERT (In 1998), Only 34.6% of Govt. Schools had safe Drinking water, 13.2% had urinal and 4.9% had urinals for girls and only 6.0% had a lavatory. While the government promises a spending of about 6% of GDP for the development of education, the reality has been to the contrary. The Government spending in the years was as under:

2000-2001 4.1% 2001-2002 4.3% 2002-2004 3.8% 2004-2005 3.5%

72. The National Commission for Backward Classes Act, 1993 (in short ‘Backward Classes Act’) was accordingly enacted. Few provisions of this Act need to be noted.

73. Section 2 (c) defines lists as follows:

“Lists means lists prepared by the Government of India from time to time for purposes of making provisions for the reservation of appointments or posts in favour of backward classes of citizens which, in the opinion of that Government, are not adequately represented in the services under the Government of India and any local or other authority within the territory of India or under the control of the Government of India”.

74. Important provisions are Sections 9 and 10 which read as follows:

“9. Functions of the Commission (1) The Commission shall examine requests for inclusion of any class of citizens as a backward class in such lists and hear complaints of over-inclusion or under inclusion of any backward class in such lists and tender such advice to the Central Government as it deems appropriate.

(2) The advice of the Commission shall ordinarily be binding upon the Central Government.

10. Powers of the Commission- The Commission shall, while performing its functions under sub-section (1) of Section 9, have all the powers of a civil court trying a suit and in particular, in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person from any part of India and examining him on oath;

(b) requiring the discovery and production of any document;

(c) receiving evidence on affidavits;

(d) requisitioning any public record or copy thereof from any court of office;

(e) issuing commissions for the examination of witnesses and documents;

and (f) any other matter which may be prescribed.”

75. A periodic revision of the lists by the Central Government is a statutory mandate. Petitioners have highlighted that there is no exclusion and on the other hand there has been inclusion. On the question of castes enumeration it is emphasized that 1931 Census was not the basis for identification of other backward classes. In fact the central OBC List is not drawn up on the basis of 1931 Census. Each State has different modalities for identification. Only for the purpose of quantum the population provides a foundation.

76. It needs no emphasis that if ultimately and indisputably the constitutional goal is the casteless and classless society, there has to be more effective implementation of the Backward Classes Act. The exercise required to be undertaken under Section 11 of the said Act is not intended to be a routine exercise and also not an exercise in futility. It has to be not only effective but also result oriented. The petitioners have highlighted the lack of seriousness of the Government in carrying out the exercise. Voluminous datas have been brought on record in this regard. With reference to the reports of the Commission, learned counsel for the respondents on the other hand have stressed on the fact that the Commission has been working with all sincerity and with the object of effectively implementing the Backward Classes Act. One thing needs to be noted here. Concrete data about the number of backward classes in the country does not appear to be available. The survey conducted by the National Sample Survey reveals that the percentage is not 52% as is highlighted by the respondents.

77. Section 2(g) of the Act is relevant in this regard. It reads as follows:

“Other Backward Classes” means the class or classes of citizens who are socially and educationally backward, and are so determined by the Central Government.”

78. At this juncture, it is to be noted that the Backward Classes Act in order to be wholly functional mandates determination by the Central Government of the backward classes for whom the Statute is intended. Undisputedly, such determination has not been done. The plea is that for more than half a century enough attention has not been given for the benefit of the other backward classes in the matter of admissions to higher educational institutions. That cannot be a ground to act with hurry and with un-determined datas. It may be as rightly contended by learned counsel for the respondents that the percentage can certainly be not less than 27%. But that is no answer to the important question as to the identity test. In the background loom the socially and economically backward class of citizens. Poverty knows no caste. Poor has no caste. It is an unfortunate class. It is a matter of common knowledge that the institution of caste is a peculiarity of Indian institution when there is considerable controversy amongst the scholars as to how the caste system originated in this country. Originally, there were four main castes known as Varnas . But gradually castes and sub-castes multiplied as the social fabric expanded with the absorption of different groups of people who belong to various cults and professing different religious faiths. The caste system in its earlier stage was quite elastic but in course of time it gradually hardened into a rigid framework based upon heredity. The inevitable result was social inequality. At some point of time occupation was the background for determination of castes.

May be, at some point of time it depended on the income of the individual. But it appears to have taken disastrous turn with difference of status of various castes. But passage of time shows that the occupational label has lost much of its significance. But at the same time, the poor and down trodden who belong to the caste of their own were the founders of poor. In Indra Sawhney No.1 this factor was noticed.

79. It is said that one must take life in ones stride, let today embrace the past with remembrance and the future with longing.

80. Don’t look for the path far away, the path exists under your feet.

81. What is past and what cannot be prevented should not be grieved for.

82. With reference to the Office Memorandum which provides for preference in favour of “poorer sections” over other members of the backward classes, the expression was held to be relatable to those who are socially and economically more backward. The use of the word ‘poorer’ in the context was held to be a measure of the social backwardness. It is therefore unmistakenly recognized that economic backwardness is a factor which can never be lost sight of. There are only two families in the world; the haves and the have nots said Miquel De Cervantes Don Qutxote de ta Mancha. Tolstoy has emphatically said “We will do anything for the poor man anything but get of his back” (quoted in Huntington Philanthrophy and Morality).

83. William Cobbett had said “to be poor and independent is very nearly an impossibility. (See His book ‘Advise to Young Men’). We cannot turn Nelson’s eye to the poor, those covered by all encompassing expression “economically backward classes”.

84. Should this class of people be kept out of the mainstream of governmental priorities and policies because they belong to a particular caste? As noted above, the poor have no caste. A person belonging to a higher caste should not be made to suffer for what his forefathers had done several generations back.

85. Franklin D Roosevelt in a speech in 1940 had said “It is an unfortunate human failing that a full pocket book often groans more loudly than an empty stomach”. The haves and the have nots have to co-exist. If the creamy layer has to be excluded the economically backward classes have to be included. That would be social balancing and that would be giving true meaning of the objectives of the Constitution.

Social empowerment cannot be and is certainly not a measure for only socially and educationally backward classes. It also has to be for the socially and economically backward classes.

Unless this balance, which is very delicate, is maintained the system inevitably will develop a crack and this crack may after a certain point of time be difficult to be joined. Instead of lightening the society from castes or classes it will be over burdened and a point of time may come when we shall not be able to bear the burden any further. Timely steps in this regard will save the Indian society and democracy from a catastrophe of collapse because of something which the Constitution wants to obliterate.

86. On the question of time period for the reservation, it is submitted that length of the leap to be provided depends upon the gap to be filled. It is fairly accepted by learned counsel for the respondents that as and when castes reach a higher level it is to be excluded from the zone of consideration.

It is further submitted that traditional occupation is being pursued by persons belonging to some castes and the system still subsists and has not broken down. In the absence of alternative occupation which may not be lucrative, the persons who used to previously carry on the traditional occupation find it difficult to take up any other occupation.

87. It has been averred that consequent to several efforts, India has made enormous progress in terms of increase in institutions, teachers and students in elementary education.

But despite all the efforts large population of the children in the country still remain out of school.

88. One of the contentions is that by passage of time prolonged reservation becomes illicit. In Motor General Traders and Anr. v. State of Andhra Pradesh and Ors. [1983] INSC 165; (1984 (1) SCC 222) following observations were made:

“16. What may be unobjectionable as a transitional or temporary measure at an initial stage can still become discriminatory and hence violative of Article 14 of the Constitution if it is persisted in over a long period without any justification. The trend of decisions of this Court on the above question may be traced thus. In Bhaiyalal Shukla v. State of Madhya Pradesh [1962] Supp. 2 S.C.R. 257 one of the contentions urged was that the levy of sales tax in the area which was formerly known as Vindhya Pradesh (a Part ‘C’ State) on building materials used in a works contract was discriminatory after the merger of that area in the new State of Madhya Pradesh which was formed on November 1,1956 under the States Reorganisation Act, 1956 as the sale of building materials in a works contract was not subject to any levy of sales tax in another part of the same new State namely the area which was formerly part of the area known as State of Madhya Pradesh (the Central Provinces and Berar area). That contention was rejected by this Court with the following observations at pages 274-275 :

The laws in different portions of the new State of Madhya Pradesh were enacted by different Legislatures, and under Section 119 of the States Reorganisation Act all laws inforce are to continue until repealed or altered by the appropriate Legislature. We have already held that the sales tax law in Vindhya Pradesh was validly enacted, and it brought its validity with it under Section 119 of the States Reorganisation Act, when it became a part of the State of Madhya Pradesh. Thereafter, the different laws in different parts of Madhya Pradesh can be sustained on the ground that the differentiation arises from historical reasons, and a geographical classification based on historical reasons has been upheld by this Court in M.K. Prithi Rajji v. The State of Rajasthan (Civil Appeal No. 327 of 1956 decided on November 2, 1960) and again in The State of Madhya Pradesh v.

The Gwalior Sugar Co. Ltd. (Civil Appeals Nos. 98 and 99 of 1957 decided on November 30, 1960). The latter case is important, because the sugarcane cess levied in the former Gwalior State but not in the rest of Madhya Bharat of which it formed a part, was challenged on the same ground as here, but was upheld as not affected by Article14. We, therefore, reject this argument.

89. In N.M. Thomas’s case (supra) the parameters of various clauses of Article 16 were highlighted as follows:

“37. The rule of equality within Articles 14 and 16(1) will not be violated by a rule which will ensure equality of representation in the services for unrepresented classes after satisfying the basic needs of efficiency of administration. Article 16(2) rules out some basis of classification including race, caste, descent, place of birth etc. Article 16(4) clarifies and explains that classification on the basis of backwardness does not fall within Article 16(2) and is legitimate for the purposes of Article 16(1). If preference shall be given to a particular under-represented community other than a backward class or under- represented State in an All India Service such a rule will contravene Article 16(2). A similar rule giving preference to an under-represented backward community is valid and will not contravene Articles 14, 16(1) and 16(2). Article 16(4) removes any doubt in this respect.

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44. Our Constitution aims at equality of status and opportunity for all citizens including those who are socially, economically and educationally backward. The claims of members of backward classes require adequate representation in legislative and executive bodies. If members of Scheduled Castes and Tribes, who are said by this Court to be backward classes, can maintain minimum necessary requirement of administrative efficiency, not only representation but also preference may be given to them to enforce equality and to eliminate inequality. Articles 15(4) and 16(4) bring out the position of backward classes to merit equality. Special provisions are made for the advancement of backward classes and reservations of appointments and posts for them to secure adequate representation. These provisions will bring out the content of equality guaranteed by Articles 14, 15(1) and 16(1). The basic concept of equality is equality of opportunity for appointment. Preferential treatment for members of backward classes with due regard to administrative efficiency alone can mean equality of opportunity for all citizens. Equality under Article 16 could not have a different content from equality under Article 14. Equality of opportunity for unequals can only mean aggravation of inequality. Equality of opportunity admits discrimination with reason and prohibits discrimination without reason. Discrimination with reasons means rational classification for differential treatment having nexus to the Constitutionally permissible object.

Preferential representation for the backward classes in services with due regard to administrative efficiency is permissible object and backward classes are a rational classification recognised by our Constitution.

Therefore, differential treatment in standards of selection is within the concept of equality.

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56. If we are all to be treated in the same manner, this must carry with it the important requirement that none of us should be better or worse in upbringing, education, than any one else which is an unattainable ideal for human beings of anything like the sort we now see. Some people maintain that the concept of equality of opportunity is an unsatisfactory concept For, a complete formulation of it renders it incompatible with any form of human society. Take for instance, the case of equality of opportunity for education. This equality cannot start in schools and hence requires uniform treatment in families which is an evident impossibility. To remedy this, all children might be brought up in state nurseries, but, to achieve the purpose, the nurseries would have to be run on vigorously uniform lines. Could we guarantee equality of opportunity to the young even in those circumstances? The idea is well expressed by Laski:

‘Equality means, in the second place, that adequate opportunities are laid open to all. By adequate opportunities we cannot imply equal opportunities in a sense that implies identity of original chance. The native endowments of men are by no means equal. Children who are brought up in an atmosphere where things of the mind are accounted highly are bound to start the race of life with advantages no legislation can secure. Parental character will inevitably affect profoundly the equality of the children whom it touches.

So long, therefore, as the family endures – and there seems little reason to anticipate or to desire its disappearance – the varying environments it will create make the notion of equal opportunities a fantastic one’.

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60. Bernard A.O. Williams, in his article ‘The Idea of Equality” (supra) gives an illustration of the working of the principle of equality of opportunity:

‘Suppose that in a certain society great prestige is attached to membership of a warrior class, the duties of which require great physical strength. This class has in the past been recruited from certain wealthy families only, but egalitarian reformers achieve a change in the rules, by which warriors are recruited from all sections of the society, on the result of a suitable competition. The effect of this, however, is that the wealthy families still provide virtually all the warriors, because the rest of the populace is so undernourished by reason of poverty that their physical strength is inferior to that of the wealthy and well nourished. The reformers protest that equality of opportunity has not really been achieved;

the wealthy reply that in fact it has, and that the poor now have the opportunity of becoming warriors – it is just bad luck that their characteristics are such that they do not pass the test- “We are not”, they might say, “excluding anyone for being poor; we exclude people for being weak, and it is unfortunate that those who are poor are also weak’.

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67. Today, the political theory which acknowledges the obligation of government under Part IV of the Constitution to provide jobs, medical care, old age pension, etc., extends to human rights and imposes an affirmative obligation to promote equality and liberty. The force of the idea of a state with obligation to help the weaker sections of its members seems to have increasing influence in Constitutional law. The idea finds expression in a number of cases in America involving social discrimination and also in the decisions requiring the state to offset the effects of poverty by providing counsel, transcript of appeal, expert witnesses, etc. Today, the sense that government has affirmative responsibility for elimination of inequalities, social, economic or otherwise, is one of the dominant forces in Constitutional law. While special concessions for the under-privileged have been easily permitted, they have not traditionally been required. Decisions in the areas of criminal procedure, voting rights and education in America suggest that the traditional approach may not be completely adequate. In these areas, the inquiry whether equality has been achieved no longer ends with numerical equality; rather the equality clause has been held to require resort to a standard of proportional equality which requires the state, in framing legislation, to take into account the private inequalities of wealth, of education and other circumstances.

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89. The ultimate reason for the demand of equality for the members of backward classes is a moral perspective which affirms the intrinsic value of all human beings and calls for a society which provides these conditions of life which men need for development of their varying capacities. It is an assertion of human equality in the sense that it manifests an equal concern for the well being of all men. On the one hand it involves a demand for the removal of those obstacles and impediments which stand in the way of the development of human capacities, that is, it is a call for the abolition of unjustifiable inequalities. On the other hand, the demand itself gets its sense and moral driving force from the recognition that “the poorest he that is in England hath a life to live, as the greatest he”.

90. `Equality’ and `excellence’ are two conflicting claims difficult to be reconciled. The Constitution, in order to ensure true equality provides for special treatment to socially and educationally backward classes of citizens which is obviously desirable for providing social justice, though at the cost of merit. However, the Constitution does not provide at all for ‘institutional reservation.’ Therefore, it’s constitutionality is to be judged on the touchstone of Article 14. A large number of cases cropped up in this area concerning the institutional preference for admission into postgraduate medical education and super specialties. The judiciary came forward and laid down detailed principles covering the need of such preference and to limit the extent of such reservation in view of the importance of merit in the context of national interest and international importance of universal excellence in super specialties.

91. It is to be noted that the foundation for fixing 27% appears to be the view that 52% of the population belong to OBC. There is no supportable data for this proposition. In fact, different Commissions at different points of time have different figures. It is the stand of the respondents that no Commission has fixed the percentage below 52% and, therefore, there is nothing wrong in fixing the percentage at 27%. This is not the correct approach. It may be that in no case the percentage of persons belonging to OBC is less than 27% but supposing in a given case considering the fact that the actual percentage is 40% a figure less than 27% should have been fixed. The Commission set out pursuant to the directions of this Court seems to have somewhat acted on the petitions filed by the people claiming exclusion or inclusion. That was not the real purpose of this Court’s decision to direct appointment of Commission. The very purpose was to identify the classes.

This was the exercise which was to be undertaken apart from considering the applications for inclusion or exclusion as the case may be. As has been conceded at the beginning of the case affirmative action is not under challenge. Affirmative action is nothing but a crucial component of social justice in the constitutional dispensation but at the same time it has to be kept in view that the same does not infringe the principles of equality of which it is a part and/or unreasonably restraint or restrict other fundamental freedoms and that it does not violate the basic structure of the Constitution.

92. It needs no emphasis that Articles 15(4), 15(5) and 16(4) have to comply with the requirements of Article 14 and the discipline imposed in several other provisions like Articles 15(4)(a) and 15(4)(b), though, they form a part of the equality concept, each of which is so found in our Constitution.

93. It is a well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent.

94. Words and phrases are symbols that stimulate mental references to referents. The object of interpreting a statute is to ascertain the intention of the Legislature enacting it. (See Institute of Chartered Accountants of India v. M/s Price Waterhouse and Anr. (AIR 1998 SC 74). The intention of the Legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as meaningless has to be avoided. As observed in Crawford v.

Spooner [1846] EngR 1209; (1846 (6) Moore PC 1 ), Courts, cannot aid the Legislatures’ defective phrasing of an Act, we cannot add or mend, and by construction make up deficiencies which are left there. (See The State of Gujarat and Ors. v. Dilipbhai Nathjibhai Patel and Anr. (JT 1998 (2) SC 253). It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. (See Stock v. Frank Jones (Tiptan) Ltd. (1978 1 All ER 948 (HL). Rules of interpretation do not permit Courts to do so, unless the provision as it stands is meaningless or of doubtful meaning. Courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. (Per Lord Loreburn L.C. in Vickers Sons and Maxim Ltd.

v. Evans (1910) AC 445 (HL), quoted in Jamma Masjid, Mercara v. Kodimaniandra Deviah and Ors.(AIR 1962 SC 847).

95. The question is not what may be supposed and has been intended but what has been said. “Statutes should be construed not as theorems of Euclid”. Judge Learned Hand said, “but words must be construed with some imagination of the purposes which lie behind them”. (See Lenigh Valley Coal Co. v. Yensavage 218 FR 547). The view was re-iterated in Union of India and Ors. v. Filip Tiago De Gama of Vedem Vasco De Gama (AIR 1990 SC 981).

96. In D.R. Venkatchalam and Ors. etc. v. Dy. Transport Commissioner and Ors. etc. [1976] INSC 322; (AIR 1977 SC 842), it was observed that Courts must avoid the danger of a priori determination of the meaning of a provision based on their own pre-conceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted.

They are not entitled to usurp legislative function under the disguise of interpretation.

97. While interpreting a provision the Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary.

(See Commissioner of Sales Tax, M.P. v. Popular Trading Company, Ujjain (2000 (5) SCC 511). The legislative casus omissus cannot be supplied by judicial interpretative process.

98. Two principles of construction  one relating to casus omissus and the other in regard to reading the statute as a whole  appear to be well settled. Under the first principle a casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. “An intention to produce an unreasonable result”, said Danackwerts, L.J. in Artemiou v.

Procopiou (1966 1 QB 878), “is not to be imputed to a statute if there is some other construction available”. Where to apply words literally would “defeat the obvious intention of the legislature and produce a wholly unreasonable result” we must “do some violence to the words” and so achieve that obvious intention and produce a rational construction. (Per Lord Reid in Luke v. IRC (1963 AC 557) where at p. 577 he also observed: “this is not a new problem, though our standard of drafting is such that it rarely emerges”.

99. It is then true that, “when the words of a law extend not to an inconvenience rarely happening, but due to those which often happen, it is good reason not to strain the words further than they reach, by saying it is casus omissus, and that the law intended quae frequentius accidunt.” “But,” on the other hand, “it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as if it happened more frequently, because it happens but seldom” (See Fenton v.

Hampton (1858) XI Moore, P.C. 347). A casus omissus ought not to be created by interpretation, save in some case of strong necessity. Where, however, a casus omissus does really occur, either through the inadvertence of the legislature, or on the principle quod semel aut bis existit praeterunt legislatores (legislators says pass over that which happens only once or twice), the rule is that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute – Casus omissus et oblivioni datus dispositioni communis juris relinquitur; “a casus omissus,”

observed Buller, J. in Jones v. Smart (1 T.R. 52), “can in no case be supplied by a court of law, for that would be to make laws.”

100. The golden rule for construing wills, statutes, and, in fact, all written instruments has been thus stated: “The grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further” (See Grey v. Pearson [1857] EngR 335; (1857 (6) H.L. Cas. 61). The latter part of this “golden rule” must, however, be applied with much caution. “if,” remarked Jervis, C.J., “the precise words used are plain and unambiguous in our judgment, we are bound to construe them in their ordinary sense, even though it lead, in our view of the case, to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure. But we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning” (See Abley v. Dale [1851] EngR 600; 11, C.B. 378).

101. Classifications on the basis of castes in the long run has tendency of inherently becoming pernicious. Therefore, the test of reasonableness has to apply. When the object is elimination of castes and not perpetuation to achieve the goal of casteless society and a society free from discrimination of castes judicial review within the permissible limits is not ruled out. But at the same time compelling State interest can be considered while assessing backwardness. The impact of poverty on backwardness cannot be lost sight of. Economic liberation and freedom are also important. In Nagaraj’s case (supra) it was inter alia observed as follows:

“44. The above three concepts are independent variable concepts. The application of these concepts in public employment depends upon quantifiable data in each case.

Equality in law is different from equality in fact. When we construe Article 16(4), it is equality in fact which plays the dominant role.

Backward Classes seek justice. General class in public employment seeks equity. The difficulty comes in when the third variable comes in, namely, efficiency in service. In the issue of reservation, we are being asked to find a stable equilibrium between justice to the backwards, equity for the forwards and efficiency for the entire system. Equity and justice in the above context are hard concepts.

However, if you add efficiency to equity and justice, the problem arises in the context of the reservation. This problem has to be examined, therefore, on the facts of each case. Therefore, Article 16(4) has to be construed in the light of Article 335 of the Constitution. Inadequacy in representation and backwardness of the Scheduled Castes and Scheduled Tribes are circumstances which enable the State Government to act under Article 16(4) of the Constitution. However, as held by this Court the limitations on the discretion of the Government in the matter of reservation under Article 16(4) as well as Article 16(4-A) come in the form of Article 335 of the Constitution.

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46. The point which we are emphasising is that ultimately the present controversy is regarding the exercise of the power by the State Government depending upon the fact situation in each case. Therefore, “vesting of the power” by an enabling provision may be constitutionally valid and yet “exercise of the power” by the State in a given case may be arbitrary, particularly, if the State fails to identify and measure backwardness and inadequacy keeping in mind the efficiency of service as required under Article 335.

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48. It is the equality “in fact” which has to be decided looking at the ground reality.

Balancing comes in where the question concerns the extent of reservation. If the extent of reservation goes beyond cut-off point then it results in reverse discrimination. Anti- discrimination legislation has a tendency of pushing towards de facto reservation.

Therefore, a numerical benchmark is the surest immunity against charges of discrimination.

49. Reservation is necessary for transcending caste and not for perpetuating it. Reservation has to be used in a limited sense otherwise it will perpetuate casteism in the country.

Reservation is underwritten by a special justification. Equality in Article 16(1) is individual-specific whereas reservation in Article 16(4) and Article 16(4-A) is enabling.

The discretion of the State is, however, subject to the existence of “backwardness” and “inadequacy of representation” in public employment. Backwardness has to be based on objective factors whereas inadequacy has to factually exist. This is where judicial review comes in. However, whether reservation in a given case is desirable or not, as a policy, is not for us to decide as long as the parameters mentioned in Articles 16(4) and 16(4-A) are maintained. As stated above, equity, justice and merit (Article 335)/efficiency are variables which can only be identified and measured by the State. Therefore, in each case, a contextual case has to be made out depending upon different circumstances which may exist State- wise.

xx xx xx 102. In the matter of application of the principle of basic structure, twin tests have to be satisfied, namely, the “width test” and the test of “identity”. As stated hereinabove, the concept of the “catch-up” rule and “consequential seniority” are not constitutional requirements. They are not implicit in clauses (1) and (4) of Article 16. They are not constitutional limitations. They are concepts derived from service jurisprudence. They are not constitutional principles. They are not axioms like, secularism, federalism, etc.

Obliteration of these concepts or insertion of these concepts does not change the equality code indicated by Articles 14, 15 and 16 of the Constitution. Clause (1) of Article 16 cannot prevent the State from taking cognizance of the compelling interests of Backward Classes in the society. Clauses (1) and (4) of Article 16 are restatements of the principle of equality under Article 14. Clause (4) of Article 16 refers to affirmative action by way of reservation.

Clause (4) of Article 16, however, states that the appropriate Government is free to provide for reservation in cases where it is satisfied on the basis of quantifiable data that Backward Class is inadequately represented in the services. Therefore, in every case where the State decides to provide for reservation there must exist two circumstances, namely, “backwardness” and “inadequacy of representation”. As stated above, equity, justice and efficiency are variable factors.

These factors are context-specific. There is no fixed yardstick to identify and measure these three factors, it will depend on the facts and circumstances of each case. These are the limitations on the mode of the exercise of power by the State. None of these limitations have been removed by the impugned amendments. If the State concerned fails to identify and measure backwardness, inadequacy and overall administrative efficiency then in that event the provision for reservation would be invalid. These amendments do not alter the structure of Articles 14, 15 and 16 (equity code). The parameters mentioned in Article 16(4) are retained. Clause (4-A) is derived from clause (4) of Article 16. Clause (4-A) is confined to SCs and STs alone. Therefore, the present case does not change the identity of the Constitution. The word “amendment” connotes change. The question iswhether the impugned amendments discard the original Constitution. It was vehemently urged on behalf of the petitioners that the Statement of Objects and Reasons indicates that the impugned amendments have been promulgated by Parliament to overrule the decisions of this Court. We do not find any merit in this argument. Under Article 141 of the Constitution the pronouncement of this Court is the law of the land. The judgments of this Court in Virpal Singh, Ajit Singh (I), Ajit Singh (II) and Indra Sawhney were judgments delivered by this Court which enunciated the law of the land. It is that law which is sought to be changed by the impugned constitutional amendments. The impugned constitutional amendments are enabling in nature. They leave it to the States to provide for reservation.

It is well settled that Parliament while enacting a law does not provide content to the “right”.

The content is provided by the judgments of the Supreme Court. If the appropriate Government enacts a law providing for reservation without keeping in mind the parameters in Article 16(4) and Article 335 then this Court will certainly set aside and strike down such legislation. Applying the “width test”, we do not find obliteration of any of the constitutional limitations. Applying the test of “identity”, we do not find any alteration in the existing structure of the equality code.

As stated above, none of the axioms like secularism, federalism, etc. which are overarching principles have been violated by the impugned constitutional amendments.

Equality has two facets “formal equality” and “proportional equality”. Proportional equality is equality “in fact” whereas formal equality is equality “in law”. Formal equality exists in the rule of law. In the case of proportional equality the State is expected to take affirmative steps in favour of disadvantaged sections of the society within the framework of liberal democracy. Egalitarian equality is proportional equality.

xx xx xx 107. It is important to bear in mind the nature of constitutional amendments. They are curative by nature. Article 16(4) provides for reservation for Backward Classes in cases of inadequate representation in public employment. Article 16(4) is enacted as a remedy for the past historical discriminations against a social class. The object in enacting the enabling provisions like Articles 16(4), 16(4-A) and 16(4-B) is that the State is empowered to identify and recognise the compelling interests. If the State has quantifiable data to show backwardness and inadequacy then the State can make reservations in promotions keeping in mind maintenance of efficiency which is held to be a constitutional limitation on the discretion of the State in making reservation as indicated by Article 335. As stated above, the concepts of efficiency, backwardness, inadequacy of representation are required to be identified and measured. That exercise depends on availability of data. That exercise depends on numerous factors. It is for this reason that enabling provisions are required to be made because each competing claim seeks to achieve certain goals. How best one should optimise these conflicting claims can only be done by the administration in the context of local prevailing conditions in public employment.

This is amply demonstrated by the various decisions of this Court discussed hereinabove.

Therefore, there is a basic difference between “equality in law” and “equality in fact” (see Affirmative Action by William Darity). If Articles 16(4-A) and 16(4-B) flow from Article 16(4) and if Article 16(4) is an enabling provision then Articles 16(4-A) and 16(4-B) are also enabling provisions. As long as the boundaries mentioned in Article 16(4), namely, backwardness, inadequacy and efficiency of administration are retained in Articles 16(4-A) and 16(4-B) as controlling factors, we cannot attribute constitutional invalidity to these enabling provisions. However, when the State fails to identify and implement the controlling factors then excessiveness comes in, which is to be decided on the facts of each case. In a given case, where excessiveness results in reverse discrimination, this Court has to examine individual cases and decide the matter in accordance with law. This is the theory of “guided power”. We may once again repeat that equality is not violated by mere conferment of power but it is breached by arbitrary exercise of the power conferred”.

102. In Minerva Mills Ltd. v. Union of India [1980] INSC 141; (1980) 3 SCC 625) it was observed as follows:

“57. This is not mere semantics. The edifice of our Constitution is built upon the concepts crystallised in the preamble. We resolved to constitute ourselves into a Socialist State which carried with it the obligation to secure to our people justice  social, economic and political. We, therefore, put Part IV into our Constitution containing directive principles of State policy which specify the socialistic goal to be achieved. We promised to our people a democratic polity which carries with it the obligation of securing to the people liberty of thought, expression, belief, faith and worship;

equality of status and of opportunity and the assurance that the dignity of the individual will at all costs be preserved. We, therefore, put Part III in our Constitution conferring those rights on the people. Those rights are not an end in themselves but are the means to an end. The end is specified in Part IV. Therefore, the rights conferred by Part III are subject to reasonable restrictions and the Constitution provides that enforcement of some of them may, in stated uncommon circumstances, be suspended. But just as the rights conferred by Part III would be without a radar and a compass if they were not geared to an ideal, in the same manner the attainment of the ideals set out in Part IV would become a pretence for tyranny if the price to be paid for achieving that ideal is human freedoms. One of the faiths of our founding fathers was the purity of means. Indeed, under our law, even a dacoit who has committed a murder cannot be put to death in the exercise of right of self-defence after he has made good his escape. So great is the insistence of civilised laws on the purity of means. The goals set out in Part IV have, therefore, to be achieved without the abrogation of the means provided for by Part III. It is in this sense that Parts III and IV together constitute the core of our Constitution and, combine to form its conscience. Anything that destroys the balance between the two parts will ipso facto destroy an essential element of the basic structure of our Constitution”.

103. The view was affirmed in T.M.A. Pai Foundation and Ors.

v. State of Karnataka and Ors. (2002 (8) SCC 481) 104. It has been highlighted that Articles 15(4) and 15(5) are irreconcilable. It is pointed out that Article 30 is not intended to pamper any class of people, but is intended to assure minorities regarding the right to establish. In that sense, Article 19(1)(g) is applicable. The said right is an inalienable and sacrosanct right. According to Mr. Venugopal, Article 15(5) carved out an area from Article 15(4). Article 29(2) has to be read into Article 15(5) as Articles 15(4) and 15(5) operated side by side. As a result of Article 15(5) by special provision minorities unaided rights are excluded. Article 30 does not relate to any special right for protection against majority and it cannot be termed to be any higher right and, therefore, Article 19(1)(g) restriction is not there. The object is not to create inequality.

105. It is pointed out that both Articles 15(4) and 15(5) begin with non obstante provision. Article 15(5) is a later introduction. It is stated that Article 15(1) has to prevail over Article 15(4) and the right given to certain class of people in Article 15(4) gets eliminated because of Article 15(5).

106. Provisions of the Constitution have to be read harmoniously and no part can be treated to be redundant. In our considered view both the provisions operate in different areas though there may be some amount of overlapping but that does not in any way lead to the conclusion that Article 15(5) takes away what is provided in Article 15(4).

107. A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim ut res magis valeat quam pereat i.e. a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties. [See Broom’s Legal Maxims (10th Edn.), p. 361, Craies on Statutes (7th Edn.), p. 95 and Maxwell on Statutes (11th Edn.).

108. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object unless crucial omission or clear direction makes that end unattainable. (See Whitney v. IRC (1926 AC 37) at p. 52 referred to in CIT v. S. Teja Singh (AIR 1959 SC 352) and Gursahai Saigal v. CIT (AIR 1963 SC 1062).

109. The courts will have to reject that construction which will defeat the plain intention of the legislature even though there may be some inexactitude in the language used.

(See Salmon v. Duncombe (1886) 11AC 627 at p.634, Curtis v.

Stovin (1889) 22 QBD 513) referred to in S. Teja Singh case .) 110. If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result. (See Nokes v. Doncaster Amalgamated Collieries (1940 (3) All ER 549) referred to in Pye v. Minister for Lands for NSW (1954) 3 All ER 514. The principles indicated in the said cases were reiterated by this Court in Mohan Kumar Singhania v.

Union of India (1992 Supp (1) SCC 594).

111. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute.

112. The court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with other parts of the law and the setting in which the clause to be interpreted occurs. (See R.S. Raghunath v. State of Karnataka [1991] INSC 256; (1992) 1 SCC 335) Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head- on clash between two sections of the same Act. (See Sultana Begum v. Prem Chand Jain 1997 (1) SCC 373.) 113. Whenever it is possible to do so, it must be done to construe the provisions which appear to conflict so that they harmonise. It should not be lightly assumed that Parliament had given with one hand what it took away with the other.

114. The provisions of one section of the statute cannot be used to defeat those of another unless it is impossible to effect reconciliation between them. Thus a construction that reduces one of the provisions to a “useless lumber” or “dead letter” is not a harmonized construction. To harmonise is not to destroy.

115. The Constitution of India is not intended to be static. It is by its very nature dynamic. It is a living and organic thing. It is an instrument which has greatest value to be construed. “Ut Res Valeat Potius Quam Pereat” (the construction should be preferred which makes the machinery workable). Our Constitution reflects the beliefs and political aspirations of those who had framed it. It is therefore desirable that while considering the question as to whether 27% fixed for the other backward classes to be maintained without definite data the rights of those who belong to the unfortunate categories of other economic backward classes deserve to be concerned, else there shall be no definite determination of number of other backward classes. While fixing the measure for creamy layer it would not be difficult also to fix the norms for the socially and economically backward classes rather the latter exercise would be easier to undertake.

116. In Indra Sawhney’s No.1 the desirability of excluding some posts from the zone of reservation was highlighted. It was also emphasized that periodic review of policy of reservation was imperative. It was inter-alia observed as follows:

“838. While on Article 335, we are of the opinion that there are certain services and positions where either on account of the nature of duties attached to them or the level (in the hierarchy) at which they obtain, merit as explained hereinabove, alone counts. In such situations, it may not be advisable to provide for reservations. For example technical posts in research and development organizations/departments/institutions, in specialties and super-specialties in medicine, Engineering and other such courses in physical sciences and mathematics in defence services and in the establishment connected therewith. Similarly, in the case of posts at the higher echelons e.g. Professors (in Education), Pilots in Indian Airlines and Air India, Scientists and Technicians in Nuclear and Space application, provision for reservation would not be advisable.

xx xx xx 840. We may point out that the services/posts enumerated above, on account of their nature and duties attached, are such as call for highest level of intelligence, skill and excellence. Some of them are second level and third level posts in the ascending order.

Hence, they form a category apart.

Reservation therein may not be consistent with “efficiency of administration” contemplated by Article 335.

xx xx xx 859. “We may summarise our answers to the various questions dealt with and answered hereinabove;

(1) (a) It is not necessary that the ‘provision’ under Article 16(4) should necessarily be made by the Parliament/Legislature. Such a provision can be made by the Executive also. Local bodies, statutory Corporations and other instrumentalities of the State falling under Article 12 of the Constitution are themselves competent to make such a provision, if so advised.

(b) An executive order making a provision under Article 16(4) is enforceable the moment it is made and issued.

(2) (a) Clause (4) of Article 16 is not an exception to clause (1). It is an instance and an illustration of the classification inherent in clause (1).

(b) Article 16(4) is exhaustive of the subject of reservation in favour of backward class of citizens, as explained in this judgment.

(c) Reservations can also be provided under clause (1) of Article

16. It is not confined to extending of preferences, concessions or exemptions alone. These reservations, if any, made under clause (1) have to be so adjusted and implemented as not to exceed the level of representation prescribed for ‘backward class of citizens’  as explained in this judgment.

3. (a) A caste can be and quite often is a social class in India. If it is backward socially, it would be a backward class for the purposes of Article 16(4). Among non-Hindus, there are several occupational groups, sets and denominations, which for historical reasons are socially backward. They too represent backward, social collectivities for the purposes of Article 16(4).

(b) Neither the Constitution nor the law prescribes the procedure or method of identification of backward classes. Nor is it possible or advisable for the court to lay down any such procedure or method. It must be left to the authority appointed to identify.

It can adopt such method/procedure as it thinks convenient and so long as its survey covers the entire populace, no objection can be taken to it.

Identification of the backward classes can certainly be done with reference to castes among, and alongwith, other occupational groups, classes and sections of people. One can start the process either with occupational groups or with castes or with some other groups. Thus one can start the process with castes, wherever they are found, apply the criteria (evolved for determining backwardness) and find out whether it satisfy the criteria.

If it does-what emerges is a “backward class of citizens” within the meaning of and for the purposes of Article 16(4). Similar process can be adopted in the case of other occupational groups, communities and classes so as to cover the entire populace. The central idea and overall objective should be to consider all available groups, sections and classes in society. Since caste represents an existing, identifiable social group/class encompassing an overwhelming minority of the country’s population, one can well begin with it and then go to other groups, sections and classes.

(c) It is not correct to say that the backward class of citizens contemplated in Article 16(4) is the same as the socially and educationally backward classes referred to in Article 15(4). It is much wider. The accent in Article 16(4) is on social backwardness. Of course, social, educational and economic backwardness are closely inter- twined in the Indian context.

(d) ‘Creamy layer’ can be, and must be excluded.

(e) It is not necessary for a class to be designated as a backward class that it is situated similarly to the Scheduled Castes/Scheduled Tribes.

f) The adequacy of representation of a particular class in the services under the State is a matter within the subjective satisfaction of the appropriate Government. The judicial scrutiny in that behalf is the same as in other matters within the subjective satisfaction of an authority.

(4) (a) A backward class of citizens cannot be identified only and exclusively with reference to economic criteria.

(b) It is, of course, permissible for the Government or other authority to identify a backward class of citizens on the basis of occupation cum income, without reference to caste, if it is so advised.

5. There is no constitutional bar to classify the backward classes of citizens into backward and more backward categories.

6. (a) and (b) The reservations contemplated in clause (4) of Article 16 should not exceed 50%. While 50% shall be the rule, it is necessary not to put out of consideration certain extra ordinary situation inherent in the great diversity of this country and the people.

117. In Vasanth Kumar’s case (supra) at para 2(4), it was observed as follows:

“2(4). The policy of reservations in employment, education and legislative institutions should be reviewed every five years or so. That will at once afford an opportunity (i) to the State to rectify distortions arising out of particular facets of the reservation policy and (ii) to the people, both backward and non- backward, to ventilate their views in a public debate on the practical impact of the policy of reservations.”

118. In State of A.P. & Anr. v. P. Sagar (1968 (3) SCR 595) at para 15, it was observed as follows:

“Article 15 guarantees by the first clause a fundamental right of far-reaching importance to the public generally. Within certain defined limits an exception has been engrafted upon the guarantee of the freedom in cl. (1), but being in the nature of an exception, the conditions which justify departure must be strictly shown to exist. When a dispute is raised before a Court that a particular law which is inconsistent with the guarantee against discrimination is valid on the plea that it is permitted under clause (4) of Art. 15 the assertion by the State that the officers of the State had taken into consideration the criteria which had been adopted by the Courts for determining who the socially and educationally backward classes of the Society are, or that the authorities had acted in good faith in determining the socially and educationally backward classes of citizens, would not be sufficient to sustain the validity of the claim.

The Courts of the country are invested with the power to determine the validity of the law which infringes the fundamental rights of citizens and others and when a question arises whether a law which prima facie infringes a guaranteed fundamental right is within an exception, the validity of that law has to be determined by the Courts on materials placed before them. By merely asserting that the law was made after full consideration of the relevant evidence and criteria which have a bearing thereon, and was within the exception, the jurisdiction of the Courts to determine whether by making the law a fundamental right has been infringed is not excluded.”

119. Significant observations were made in Kumari K.S.

Jayasree and Anr. v. The State of Kerala and Anr. [1976] INSC 187; (1976 (3) SCC 730 ). At para 22 it was noted as follows:

.”The problem of determining who are socially and educationally backward classes is undoubtedly not simple. Sociological and economic considerations come into play in evolving proper criteria for its determination.

This is the function of the State. The Court’s jurisdiction is to decide whether the tests applied are valid. If it appears that tests applied are proper and valid the classification of socially and educationally backward classes based on the tests will have to be consistent with the requirements of Article 15(4). The Commission has found on applying the relevant tests that the lower income group of the communities named in Appendix VIII of the Report constitute the socially and educationally backward classes. In dealing with the question as to whether any class of citizens is socially backward or not, it may not be irrelevant to consider the caste of the said group of citizens. It is necessary to remember that special provision is contemplated for classes of citizens and not for individual citizens as such, and so though the caste of the group of citizen may be relevant, its importance should not be exaggerated. If the classification is based solely on caste of the citizen, it may not be logical. Social backwardness is the result of poverty to a very large extent. Caste and poverty are both relevant for determining the backwardness.

But neither caste alone nor poverty alone will be the determining tests. When the Commission has determined a class to be socially and educationally backward it is not on the basis of income alone, and the determination is based on the relevant criteria laid down by the Court. Evidence and material are placed before the Commission. Article 15(4) which speaks of backwardness of classes of citizens indicates that the accent is on classes of citizens. Article 15(4) also speaks of Scheduled Castes and Scheduled Tribes.

Therefore, socially and educationally backward classes of citizens in Article 15(4) cannot be equated with castes. In R. Chitralekha and Anr. v. State of Mysore and Ors. ( [1964] INSC 20; 1964 (6) SCR 368 ) this Court said that the classification of backward classes based on economic conditions and occupations does not offend Article 15(4).”

120. Further, in Minor A. Peeriakaruppan, Sobha Joseph v.

State of Tamil Nadu and Ors. [1971] INSC 12; (1971 (1) SCC 38) at para 29 it was observed as follows:

“Rajendran’s case [1968] INSC 10; (1968 (2) SCR 786) is an authority for the proposition that the classification of backward classes on the basis of castes is within the purview of Article 15(4) if those castes are shown to be socially and educationally backward. No further material has been placed before us to show that the reservation for backward classes with which we are herein concerned is not in accordance with Article 15(4). There is no gainsaying the fact the there are numerous castes in this country which are socially and educationally backward. To ignore their existence is to ignore the facts of life. Hence we are unable to uphold the contention that impugned reservation is not in accordance with Article 15(4). But all the same the Government should not proceed on the basis that once a class is considered as a backward class it should continue to be backward class for all times. Such an approach would defeat the very purpose of the reservation because once a class reaches a stage of progress which some modern writers call as take off stage then competition is necessary for their future progress. The Government should always keep under review the question of reservation of seats and only the classes which are really socially and educationally backward should be allowed to have the benefit of reservation. Reservation of seats should not be allowed to become a vested interest. The fact that candidates of backward classes have secured about 50% of the seats in the general pool does show that the time has come for a de novo comprehensive examination of the question. It must be remembered that the Government’s decision in this regard is open to judicial review.”

121. It has been highlighted that the Act has been made applicable to Central Educational Institutions established, maintained or aided by the Central Government. Central Educational Institutions have been defined in Section 2(d) as follows:

“2(d) Central Educational Institution” means- (i) a university established or incorporated by or under a Central Act;

(ii) an institution of national importance set up by an Act of Parliament;

(iii) an institution, declared as a deemed University under Section 3 of the University Grants Commission Act, 1956 and maintained by or receiving aid from the Central Government;

(iv) an institution maintained by or receiving aid from the Central Government, whether directly or indirectly, and affiliated to an institution referred to in clause (i) or clause (ii), or a constituent unit of an institution referred to in clause (iii);

(v) an educational institution set up by the Central Government under the Societies Registration Act, 1860.”

122. It is pointed out that there cannot be any reservations in respect of super specialities and institutions imparting education of highly complex subjects. The example of All India Institute of Medical Sciences has been given. It has been pointed out that its status as an institution for super speciality has been judicially recognized. It needs to be noted that in terms of Section 4(b) of the Act certain educational institutions have been excluded from the operation of the Act.

123. The Act has been made inapplicable to them. It is to be noted that in the said provision, institutions of research, institutions of excellence, institutions of national and strategic importance have been specified in the Schedule to the Act.

The proviso permits the Central Government as and when considered necessary to amend the Schedule. In other words, on an appropriate case being presented and established before the Central Government that the Institution is of excellence and/or a research institute and/or an institution of national and strategic importance, the Central Government can amend the Schedule and include such institution in the Schedule. In other words, it is permissible for the petitioners and anybody else to highlight to the Government about the desirability to include an Institution in the Schedule of the Act.

124. One of the major issues highlighted by Mr. P.P. Rao was that in several cases the matriculation standard of education was considered to be the measure for measuring backwardness. It is, therefore, submitted that when at least half of the persons belonging to a particular caste have reached the matriculation level of education, they cannot be considered to be educationally backward any longer. It is therefore submitted that if that be taken as a yardstick for measuring backwardness then the reservation of seats for technical education or in higher studies cannot be sustained.

It has also been highlighted that the shift of emphasis from primary and basic education to higher education is against the constitutional mandate making education compulsory in terms of Article 21-A of the Constitution. It is not correct to contend that in fixing the priorities the Government is the best Judge as contended by the respondents. It may be correct in matters relating to simple policy decisions but when the constitutional mandate is under consideration the underlying object has also to be kept in view. In this context reference is made to Article 46 of the Constitution. It is in that background pointed out by learned counsel for the petitioners that what cannot be lost sight of is the fact that is the foundation for basic, elementary and primary education. The educational backwardness can be obliterated when at least half of the persons belonging to a particular caste come up to a matriculation level.

125. There is substance in this plea. It is not merely the existence of schemes but the effective implementation of the schemes that is important. It is to be noted that financial constraint cannot be a ground to deny fundamental rights and the provision for the schemes and the utilization of the funds are also relevant factors. It appears that better coordination between the funds provider and the utiliser is necessary. It is suggested that putting stress on cut off limit by shifting from matriculation to Class XII level education as a benchmark of gauging educational backwardness will be a step in the right direction. Though as rightly contended by Mr. P.P. Rao that in several decisions, for example, M.R. Balaji’s case (supra), Balram’s case (supra) and Kumari K.S. Jayasree’s case (supra) the secondary education was taken to be the benchmark, ground reality cannot be lost sight of that with the limited availability of jobs and the spiraling increase in population, secondary or matriculation examination can no longer be considered to be an appropriate bench mark. It has to be at the most graduation. But the question arises whether technical education can be included while considering educational backwardness. A delicate balancing has to be done in this regard. While technical education cannot be the sole criteria for gauging educational backwardness it definitely will form part of 50 per cent norms fixed by this Court. Slightly variable plus or minus would be the appropriate standard to gauge educational backwardness.

126. One of the grey areas which have been highlighted by learned counsel for the petitioners is that caste is not a substitute for class and nevertheless the two terms are not synonyms. Much of the argument in this regard is centred round the paragraphs 782 and 783 of Indra Sawhney No.1 (supra). The same read as under:

“782. Coming back to the question of identification, the fact remains that one has to begin somewhere  with some group, class or section. There is no set or recognised method.

There is no law or other statutory instrument prescribing the methodology. The ultimate idea is to survey the entire populace. If so, one can well begin with castes, which represent explicit identifiable social classes/groupings, more particularly when Article 16(4) seeks to ameliorate social backwardness. What is unconstitutional with it, more so when caste, occupation poverty and social backwardness are so closely intertwined in our society? [Individual survey is out of question, since Article 16(4) speaks of class protection and not individual protection]. This does not mean that one can wind up the process of identification with the castes. Besides castes (whether found among Hindus or others) there may be other communities, groups, classes and denominations which may qualify as backward class of citizens. For example, in a particular State, Muslim community as a whole may be found socially backward. (As a matter of fact, they are so treated in the State of Karnataka as well as in the State of Kerala by their respective State Governments). Similarly, certain sections and denominations among Christians in Kerala who were included among backward communities notified in the former princely State of Travancore as far back as in 1935 may also be surveyed and so on and so forth. Any authority entrusted with the task of identifying backward classes may well start with the castes. It can take caste ‘A’, apply the criteria of backwardness evolved by it to that caste and determine whether it qualifies as a backward class or not. If it does qualify, what emerges is a backward class, for the purposes of clause (4) of Article 16. The concept of ‘caste’ in this behalf is not confined to castes among Hindus. It extends to castes, wherever they obtain as a fact, irrespective of religious sanction for such practice. Having exhausted the castes or simultaneously with it, the authority may take up for consideration other occupational groups, communities and classes. For example, it may take up the Muslim community (after excluding those sections, castes and groups, if any, who have already been considered) and find out whether it can be characterised as a backward class in that State or region, as the case may be. The approach may differ from State to State since the conditions in each State may differ from State to State since the conditions in each State may differ. Nay, even within a State, conditions may differ from region to region.

Similarly, Christians may also be considered. If in a given place, like Kerala, there are several denominations, sections or divisions, each of these groups may separately be considered. In this manner, all the classes among the populace will be covered and that is the central idea. The effort should be to consider all the available groups, sections and classes of society in whichever order one proceeds. Since caste represents an existing, identifiable, social group spread over an over whelming majority of the country’s population, we say one may well begin with castes, if one so chooses, and then go to other groups, sections and classes.

We may say, at this stage, that we broadly commend the approach and methodology adopted by the Justice O. Chinnappa Reddy Commission in this respect.

783. We do not mean to suggest  we may reiterate  that the procedure indicated hereinabove is the only procedure or method/approach to be adopted. Indeed, there is no such thing as a standard or model procedure/approach. It is for the authority (appointed to identify) to adopt such approach and procedure as it thinks appropriate, and so long as the approach adopted by it is fair and adequate, the court has no say in the matter.

The only object of the discussion in the preceding para is to emphasise that if a Commission/Authority begins its process of identification with castes (among Hindus) and occupational groupings among others, it cannot by that reason alone be said to be constitutionally or legally bad. We must also say that there is no rule of law that a test to be applied for identifying backward classes should be only one and/or uniform. In a vast country like India, it is simply not practicable.

If the real object is to discover and locate backwardness, and if such backwardness is found in a caste, it can be treated as backward; if it is found in any other group, section or class, they too can be treated as backward.”

127. On a closer reading of the paragraphs it appears that this Court took note of the fact that several religions do not have any caste. Therefore, the first sentence of para`782 lays emphasis to begin somewhere  with some group, class or section. It also states that there is no set or recognized method and there is no law or other statutory instrument prescribing the methodology. In this context, it has also been stated that one can well begin with castes which represent explicit identifiable social classes or groupings. Therefore, the emphasis was on beginning with castes which represent as explicit identifiable social classes or grouping. Again in paragraph 783, it has been stated that in a vast country like India it is simply not practicable to fix the test for identifying backward classes. In that background it was held that if the real objective is to discover and locate the real backwardness and if such backwardness is found in a caste it can be considered as backwardness. Similarly if it is found in any other group, section or class they too can be treated as backward. The intention therefore is clear that if caste is found to be backward it can certainly be treated as backward.

To give any other meaning would be adding or subtracting to what has been specifically stated in the decision.

128. It is also relevant to take note of certain earlier decisions referred to in Indra Sawhney No.1 case (supra) which throw beacon light on the issue. They are as under:

1. M.R. Balaji v. State of Mysore,1963 Supp (1) SCR 439 “Article 15(4) authorises the State to make a special provision for the advancement of any socially and educationally backward classes of citizens, as distinguished from the Scheduled Castes and Scheduled Tribes. No doubt, special provision can be made for both categories of citizens, but in specifying the categories, the first category is distinguished from the second. Sub-clauses (24) and (25) of Article 366 define Scheduled Castes and Scheduled Tribes respectively, but there is no clause defining socially and educationally backward classes of citizens, and so, in determining the question as to whether a particular provision has been validly made under Article 15(4) or not, the first question which falls to be determined is whether the State has validly determined who should be included in these Backward Classes. It seems fairly clear that the backward classes of citizens for whom special provision is authorised to be made are, by Article 15(4) itself, treated as being similar to the Scheduled Castes and Scheduled Tribes. Scheduled Castes and Scheduled Tribes which have been defined were known to be backward and the Constitution-makers felt no doubt that special provision had to be made for their advancement. It was realised that in the Indian Society there were other classes of citizens who were equally, or may be somewhat less, backward than the Scheduled Castes and Tribes and it was thought that some special provision ought to be made even for them.

Let us take the question of social backwardness first. By what test should it be decided whether a particular class is socially backward or not? The group of citizens to whom Article 15(4) applies are described as “classes of citizens”, not as castes of citizens. A class, according to the dictionary meaning, shows division of society according to status, rank or caste. In the Hindu social structure, caste unfortunately plays an important part in determining the status of the citizen. Though according to sociologists and vedic scholars, the caste system may have originally begun on occupational or functional basis, in course of time, it became rigid and inflexible. The history of the growth of caste system shows that its original functional and occupational basis was later over-burdened with considerations of purity based on ritual concepts, and that led to its ramifications which introduced inflexibility and rigidity. This artificial growth inevitably tended to create a feeling of superiority and inferiority, and to foster narrow caste loyalties.

Therefore, in dealing with the question as to whether any class of citizens is socially backward or not, it may not be irrelevant to consider the caste of the said group of citizens.

In this connection it is, however, necessary to bear in mind that the special provision is contemplated for classes of citizens and not for individual citizens as such, and so, though the caste of the group of citizens may be relevant, its importance should not be exaggerated. If the classification of backward classes of citizens was based solely on the caste of the citizen, it may not always be logical and may perhaps contain the vice of perpetuating the castes themselves.

xx xx xx Besides, if the caste of the group of citizens was made the sole basis for determining the social backwardness of the said group, that test would inevitably break down in relation to many sections of Indian society which do not recognise castes in the conventional sense known to Hindu society.

How is one going to decide whether Muslims, Christians or Jains, or even Lingayats are socially backward or not? The test of castes would be inapplicable to those groups, but that would hardly justify the exclusion of these groups in toto from the operation of Article 15(4). It is not unlikely that in some States some Muslims or Christians or Jains forming groups may be socially backward. That is why we think that though castes in relation to Hindus may be a relevant factor to consider in determining the social backwardness of groups or classes of citizens, it cannot be made the sole or the dominant test in that behalf. Social backwardness is on the ultimate analysis the result of poverty to a very large extent. The classes of citizens who are deplorably poor automatically become socially backward. They do not enjoy a status in society and have, therefore, to be content to take a backward seat. It is true that social backwardness which results from poverty is likely to be aggravated by considerations of caste to which the poor citizens may belong, but that only shows the relevance of both caste and poverty in determining the backwardness of citizens.

2. R. Chitralekha v State of Mysore [1964] INSC 20; AIR 1964 SC 1823 Justice Subba Rao referred to the observations in M.R. Balaji v. State of Mysore and observed:

“15. Two principles stand out prominently from the said observations, namely, (i) the caste of a group of citizens may be a relevant circumstance in ascertaining their social backwardness; and (ii) though it is a relevant factor to determine the social backwardness of a class of citizens, it cannot be the dole or dominant test in that behalf. The observations extracted in the judgment of the High Court appear to be in conduct with the observations of this Court. While this Court said that caste is only a relevant circumstance and that it cannot be the dominant test in ascertaining the backwardness of a class of citizens, the High Court said that it is an important basis in determining the class of backward Hindus and that the Government should have adopted caste as one of the tests. As the said observations made by the High Court may lead to some confusion in the mind of the authority concerned who may be entrusted with the duty of prescribing the rules for ascertaining the backwardness of classes of citizens within the meaning of Art. 15(4) of the Constitution, we would hasten to make it clear that caste is only a relevant circumstance in ascertaining the backwardness of a class and there is nothing in the judgment of this Court which precludes the authority concerned from determining the social backwardness of a group of citizens if it can do so without reference to caste. While this Court has not excluded caste from ascertaining the backwardness of a class of citizens, it has not made it one of the compelling circumstances affording a basis for the ascertainment of backwardness of a class. To put it differently, the authority concerned may take caste into consideration in ascertaining the backwardness of a group of persons; but, if it does not, its order will not be bad on that account, if it can ascertain the backwardness of a group of persons on the basis of other relevant criteria.

19The important factor to be noticed in Art. 15(4) is that it does not speak of castes, but only speaks of classes. If the makers of the Constitution intended to take castes also as units of social and educational backwardness, they would have said so as they have said in the case of the Scheduled Castes and the Scheduled Tribes. Though it may be suggested that the wider expression “classes” is used in clause (4) of Art. 15 as there are communities without castes, if the intention was to equate classes with castes, nothing prevented the makers of the Constitution from using the expression “backward classes or castes”. The juxtaposition of the expression “backward classes” and “Scheduled Castes” in Art. 15(4) also leads to a reasonable inference that the expression “classes” is not synonymous with castes. It may be that for ascertaining whether a particular citizen or a group of citizens belong to a backward class or not, his or their caste may have some relevance, but it cannot be either the sole or the dominant criterion for ascertaining the class to which he or they belong.

20. This interpretation will carry out the intention of the Constitution expressed in the aforesaid Articles. It helps the really backward classes instead of promoting the interests of individuals or groups who, though they belong to a particular caste a majority whereof is socially and educationally backward, really belong to a class which is socially and educationally advanced. To illustrate, take a caste in a State which is numerically the largest therein. It may be that though a majority of the people in that caste are socially and educationally backward, an effective minority may be socially and educationally far more advanced than another small sub-caste the total number of which is far less than the said minority. If we interpret the expression “classes” as “castes”, the object of the Constitution will be frustrated and the people who do not deserve any adventitious aid may get it to the exclusion of those who really deserve. This anomaly will not arise if, without equating caste with class, caste is taken as only one of the considerations to ascertain whether a person belongs to a backward class or not. On the other hand, if the entire sub- caste, by and large, is backward, it may be included in the Scheduled Castes by following the appropriate procedure laid down by the Constitution.

21. We do not intend to lay down any inflexible rule for the Government to follow.

The laying down of criteria for ascertainment of social and educational backwardness of a class is a complex problem depending upon many circumstances which may vary from State to State and even from place to place in a State.

But what we intend to emphasize is that under no circumstances a “class” can be equated to a “caste”, though the caste of an individual or a group of individual may be considered along with other relevant factors in putting him in a particular class. We would also like to make it clear that if in a given situation caste is excluded in ascertaining a class within the meaning of Art. 15(4) of the Constitution, it does not vitiate the classification if it satisfied other tests.

3. Minor P. Rajendran v State of Madras (1968 (2) SCR 787) “The first challenge is to r. 5 on the ground that it violates Art. 15 of the Constitution.

Article 15 forbids discrimination against any citizen on the grounds only of religion, race, caste, sex, place of birth or any of them. At the same time Art. 15(4) inter alia permits the State to make any special provision for the advancement of any socially and educationally backward classes of citizens. The contention is that the list of socially and educationally backward classes for whom reservation is made under r. 5 is nothing but a list of certain castes. Therefore, reservation in favour of certain castes based only on caste considerations violates Art. 15(1), which prohibits discrimination on the ground o caste only. Now if the reservation in question had been based only on caste and had not taken into account the social and educational backwardness of the caste in question, it would be violative of Art. 15(1). But it must not be forgotten that a caste is also a class of citizens and if the caste as a whole is socially and educationally backward reservation can be made in favour of such a caste on the ground that it is a socially and educationally backward class of citizens within the meaning of Art.

15(4). Reference in this connection may be made to the observations of this Court in M. R.

Balaji v. State of Mysore ([1963] Supp. 1 S.C.R.

439 at p. 459-460) to the effect that it was not irrelevant to consider the caste of a class of citizens in determining their social and educational backwardness. It was further observed that though the caste of a class of citizens may be relevant its importance should not be exaggerated; and if classification of backward classes of citizens was based solely on the caste of the citizen, it might be open to objection. It is true that in the present cases the list of socially and educationally backward classes has been specified by caste. But that does not necessarily mean that caste was the sole consideration and that persons belonging to these castes are also not a class of socially and educationally backward citizens. In its reply, the State of Madras has given the history as to how this list of backward classes was made, starting from the year 1906 and how the list has been kept upto date and necessary amendments made therein. It has also been stated that the main criterion for inclusion in the list was the social and educational backwardness of the caste based on occupations pursued by these castes.

Because the members of the caste as a whole were found to be socially and educationally backward, they were put in the list. The matter was finally examined after the Constitution came into force in the light of the provisions contained in Art. 15(4). As it was found that members of these castes as a whole were educationally and socially backward, the list which had been coming on from as far back as 1906 was finally adopted for purposes of Art.

15(4). In short the case of the State of Madras is that the castes included in the list are only a compendious indication of the class of people in those castes and these classes of people had been put in the list for the purpose of Art.

15(4) because they had been found to be socially and educationally backward.

This is the position as explained in the Affidavit filed on behalf of the State of Madras.

On the other hand the only thing stated in the petitions is that as the list is based on caste alone it is violative of Art. 15(1). In view however of the explanation given by the State of Madras, which has not been controverted by any rejoinder, it must be accepted that though the list shows certain castes, the members of those castes are really classes of educationally and socially backward citizens. No attempt was made on behalf of the petitioners/appellant to show that any caste mentioned in this list was not educationally and socially backward. No such averment was made in the affidavit in support of their cases, nor was any attempt made to traverse the case put forward on behalf of the State of Madras by filing a rejoinder affidavit to show that even one of the castes included in the list was not educationally and socially backward. In this state of the pleadings, we must come to the conclusion that though the list is prepared caste-wise, the castes included therein are as a whole educationally and socially backward and therefore the list is not violate of Art. 15. The challenge to r. 5 must therefore fail.

4) State of Andhra Pradesh v P. Sagar (1968 (3) SCR 595) “In the context in which it occurs the expression “class” means a homogeneous section of the people grouped together because of certain likenesses or common traits and who are identifiable by some common attributes such as status, rank, occupation, residence in a locality, race, religion and the like. In determining whether a particular section forms a class, caste cannot be excluded altogether. But in the determination of a class a test solely based upon the caste or community cannot also be accepted. By cl. (1) Art. 15 prohibits the State from discriminating against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them.

By cl. (3) of Art. 15 the State is, notwithstanding the provision contained in cl.

(1), permitted to make special provision for women and children. By cl. (4) a special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and Scheduled Tribes is outside the purview of cl. (1). But cl.

(4) is an exception to cl. (1). Being an exception, it cannot be extended so as in effect to destroy the guarantee of cl. (1). The Parliament has by enacting cl. (4) attempted to balance as against the right of equality of citizens the special necessities of the weaker sections of the people by allowing a provision to be made for their advancement. In order that effect may be given to cl. (4), it must appear that the beneficiaries of the special provision are classes which are backward socially and educationally and they are other that the Scheduled Castes and Scheduled Tribes, and that the provision made is for their advancement.”

5. Minor A. Peeriakaruppan (Minor) v.

State of T.N.[1971] INSC 12; , (1971) 1 SCC 38 :

“25. A caste has always been recognized as a class. In construing the expression “classes of His Majesty’s subject” found in Section 153- A of the Indian Penal Code, Wassoodew, J., observed in Narayan Vasudev v. Emperor AIR 1940 Bomb 379 “In my opinion, the expression ‘classes of His Majesty’s subjects’ in Section 153-A of the Code is used in restrictive sense as denoting a collection of individuals or groups bearing a common and exclusive designation and also possessing common and exclusive characteristics which may be associated with their origin, race or religion, and that the term ‘class’ within that section carries with it the idea of numerical strength so large as could be grouped in a single homogeneous community.”

26. In para 10, Chapter V of the Backward Classes Commission’s Report, it is observed:

“We tried to avoid caste but we find it difficult to ignore caste in the present prevailing conditions. We wish it were easy to dissociate caste from social backwardness at the present juncture. In modern time anybody can take to any profession.

The Brahman taking to tailoring, does not become a tailor by caste, nor is his social status lowered as a Brahman. A Brahman may be a seller of boots and shoes, and yet his social status is not lowered thereby. Social backwardness, therefore, is not today due to the particular profession of a person, but we cannot escape caste in considering the social backwardness in India.

In para 11 of that Report it is stated:

“It is not wrong to assume that social backwardness has largely contributed to the educational backwardness of a large number of social groups.”

27. Finally in para 13, the committee concludes with following observations:

“All this goes to prove that social backwardness is mainly based on racial, tribal, caste and denominational differences.”

28. The validity of the impugned list of backward classes came up for consideration before this Court in Rajendran case and this is what this Court observed therein:

“The contention is that the list of socially and educationally backward classes for whom reservation is made under Rule 5 nothing but a list of certain castes. Therefore, reservation in favour of certain castes based only on caste considerations violates Article 15(1), which prohibits discrimination on the ground of caste only. Now if the reservation in question had been based only on caste and had not taken into account the social and educational backwardness of the justice in question, it would be violative of Article 15(1). But it must not be forgotten that a caste is also a class of citizens and if the caste as a whole is socially and educationally backward, reservation can be made in favour of such a caste on the ground that it is a socially and educationally backward class of citizens within the meaning of Article 15(4).”

29. Rajendran case is an authority for the proposition that the classification of backward classes on the basis of castes is within the purview of Article 15(4) if those castes are shown to be socially and educationally backward. No further material has been placed before us to show that the reservation for backward classes with which we are herein concerned is not in accordance with Article 15(4). There is no gainsaying the fact that there are numerous castes in this country which are socially and educationally backward. To ignore their existence is to ignore the facts of life. Hence we are unable to uphold the contention that the impugned reservation is not in accordance with Article 15(4). But all the same the Government should not proceed on the basis that once a class is considered as a backward class it should continue to be backward class for all times. Such an approach would defeat the very purpose of the reservation because once a class reaches a stage of progress which some modern writers call as take off stage then competition is necessary for their future progress. The Government should always keep under review the question of reservation of seats and only the classes which are really socially and educationally backward should be allowed to have the benefit of reservation. Reservation of seats should not be allowed to become a vested interest. The fact that candidates of backward classes have secured about 50% of the seats in the general pool does show that the time has come for a de novo comprehensive examination of the question. It must be remembered that the Government’s decision in this regard is open to judicial review.”

6. State of A.P. v. U.S.V. Balram, [1972] INSC 31; (1972) 1 SCC 660, at page 685 :

“82In the determination of a class to be grouped as backward, a test solely based upon caste or community cannot be accepted as valid. But, in our opinion, though Directive Principles contained in Article 46 cannot be enforced by courts. Article 15(4) will have to be given effect to in order to assist the weaker sections of the citizens, as the State has been charged with such a duty. No doubt, we are aware that any provision made under this clause must be within the well defined limits and should not be on the basis of caste alone.

But it should not also be missed that a caste is also a class of citizens and that a caste as such may be socially and educationally backward. If after collecting the necessary data, it is found that the caste as a whole is socially and educationally backward, in our opinion, the reservation made of such persons will have to be upheld notwithstanding the fact that a few individuals in that group may be both socially and educationally above the general average. There is no gainsaying the fact that there are numerous castes in the country, which are socially and educationally backward and therefore a suitable provision will have to be made by the State, as charged in Article 15(4) to safeguard their interest”.

xx xx xx

94. To conclude, though prima facie the list of Backward Classes which is under attack before us may be considered to be on the basis of caste, a closer examination will clearly show that it is only a description of the group following the particular occupations or professions, exhaustively referred to by the Commission. Even on the assumption that the list is based exclusively on caste, it is clear from the materials before the Commission and the reasons given by it in its report that the entire caste is socially and educationally backward and therefore their inclusion in the list of Backward Classes is warranted by Article 15(4). The groups mentioned therein have been included in the list of Backward Classes as they satisfy the various tests, which have been laid down by this Court for ascertaining the social and educational backwardness of a class.”

7. Janki Prasad Parimoo v. State of J&K, [1973] INSC 6; (1973) 1 SCC 420, at page 432 :

“22. Article 15(4) speaks about “socially and educationally backward classes of citizens”

while Article 16(4) speaks only of “any backward class citizens”. However, it is now settled that the expression “backward class of citizens” in Article 16(4) means the same thing as the expression “any socially and educationally backward class of citizens” in Article 15(4). In order to qualify for being called a “backward class citizen” he must be a member of a socially and educationally backward class. It is social and educational backwardness of a class which is material for the purposes of both Articles 15(4) and 16(4).”

xx xx xx

24. It is not merely the educational backwardness or the social backwardness which makes a class of citizens backward; the class identified as a class as above must be both educationally and socially backward. In India social and educational backwardness is further associated with economic backwardness and it is observed in Balaji case referred to above that backwardness, socially and educationally, is ultimately and primarily due to proverty. But if proverty is the exclusive test, a very large proportion of the population in India would have to be regarded as socially and educationally backward, and if reservations are made only on the ground of economic considerations, an untenable situation may arise. Even in sectors which are recognised as socially and educationally advanced there are large pockets of poverty. In this country except for a small percentage of the population the people are generally poor  some being more poor, others less poor.

Therefore, when a social investigator tries to identify socially and educationally backward classes, he may do it with confidence that they are bound to be poor. His chief concern is, therefore, to determine whether the class or group is socially and educationally backward.

Though the two words “socially” and “educationally” are used cumulatively for the purpose of describing the backward class, one may find that if a class as a whole is educationally advanced it is generally also socially advanced because of the reformative effect of education on that class. The words “advanced” and “backward” are only relative terms  there being several layers or strata of classes, hovering between “advanced” and “backward”, and the difficult task is which class can be recognised out of these several layers as been socially and educationally backward.”

25..Indeed all sectors in the rural areas deserve encouragement but whereas the former by their enthusiasm for education can get on without special treatment, the latter require to be goaded into the social stream by positive efforts by the State. That accounts for the raison-d’etre of the principle explained in Balaji case which pointed out that backward classes for whose improvement special provision was contemplated by Article 15(4) must be comparable to Scheduled Castes and Scheduled Tribes who are standing examples of backwardness socially and educationally. If those examples are steadily kept before the mind the difficulty in determining which other classes should be ranked as backward classes will be considerably eased.”

8. State of Kerala v. N.M. Thomas, [1975] INSC 224; (1976) 2 SCC 310, at page 367 :

“135. We may clear the clog of Article 16(2) as it stems from a confusion about caste in the terminology of scheduled castes and scheduled tribes. This latter expression has been defined in Articles 341 and 342. A bare reading brings out the quintessential concept that they (sic there) are no castes in the Hindu fold but an amalgam of castes, races, groups, tribes, communities or parts thereof found on investigation to be the lowliest and in need of massive State aid and notified as such by the President. To confuse this backwardmost social composition with castes is to commit a constitutional error, misled by a compendious appellation. So that, to protect harijans is not to prejudice any caste but to promote citizen solidarity. Article 16(2) is out of the way and to extend protective discrimination to this mixed bag of tribes, races, groups, communities and non-castes outside the four-fold Hindu division is not to compromise with the acceleration of castelessness enshrined in the sub-article. The discerning sense of the Indian Corpus Juris has generally regarded scheduled castes and scheduled tribes, not as caste but as a large backward group deserving of societal compassion…”

9. State of U.P. v. Pradip Tandon, [1974] INSC 245; (1975) 1 SCC 267, at page 273 :

“14. Article 15(4) speaks of socially and educationally backward classes of citizens. The State described the rural, hill and Uttrakhand areas as socially and educationally backward areas. The Constitution does not enable the State to bring socially and educationally backward areas within the protection of Article 15(4). The Attorney-General however submitted that the affidavit evidence established the rural, hill and Uttrakhand areas to have socially and educationally backward classes of citizens. The backwardness contemplated under Article 15(4) is both social and educational. Article 15(4) speaks of backwardness of classes of citizens. The accent is on classes of citizens.

Article 15(4) also speaks of Scheduled Castes and Scheduled Tribes. Therefore, socially and educationally backward classes of citizens in Article 15(4) could not be equated with castes.

In M.R. Balaji v. State of Mysore and State of A.P. v. Sagar this Court held that classification of backwardness on the basis of castes would violate both Articles 15(1) and 15(4).

15. Broadly stated, neither caste nor race nor religion can be made the basis of classification for the purposes of determining social and educational backwardness within the meaning of Article 15(4). When Article 15(1) forbids discrimination on grounds only of religion, race, caste, caste cannot be made one of the criteria for determining social and educational backwardness. If caste or religion is recognised as a criterion of social and educational backwardness Article 15(4) will stultify Article 15(1). It is true that Article 15(1) forbids discrimination only on the ground of religion, race, caste, but when a classification takes recourse to caste as one of the criteria in determining socially and educationally backward classes the expression “classes” in that case violates the rule of expressio unius est exclusio alterius. The socially and educationally backward classes of citizens are groups other than groups based on caste.

16. The expression “socially and educationally backward classes” in Article 15(4) was explained in Balaji case to be comparable to Scheduled Castes and Scheduled Tribes. The reason is that the Scheduled Castes and Scheduled Tribes illustrated social and educational backwardness. It is difficult to define the expression “socially and educationally backward classes of citizens”. The traditional unchanging occupations of citizens may contribute to social and educational backwardness. The place of habitation and its environment is also a determining factor in judging the social and educational backwardness.

17. The expression “classes of citizens”

indicates a homogeneous section of the people who are grouped together because of certain likenesses and common traits and who are identifiable by some common attributes. The homogeneity of the class of citizens is social and educational backwardness. Neither caste nor religion nor place of birth will be the uniform element of common attributes to make them a class of citizens.”

10. K.S. Jayasree (Kumari) v. State of Kerala, [1976] INSC 187; (1976) 3 SCC 730, at page 733 :

“13. Backward classes for whose improvement special provisions are contemplated by Article 15(4) are in the matter of their backwardness comparable to scheduled castes and scheduled tribes. This Court has emphasised in decisions that the backwardness under Article 15(4) must be both social and educational. In ascertaining social backwardness of a class of citizens, the caste of a citizen cannot be the sole or dominant test. Just as caste is not the sole or dominant test, similarly poverty is not the decisive and determining factor of social backwardness.

xx xx xx

21. In ascertaining social backwardness of a class of citizens it may not be irrelevant to consider the caste of the group of citizens.

Caste cannot however be made the sole or dominant test. Social backwardness is in the ultimate analysis the result of poverty to a large extent. Social backwardness which results from poverty is likely to be aggravated by considerations of their caste. This shows the relevance of both caste and poverty in determining the backwardness of citizens.

Poverty by itself is not the determining factor of social backwardness. Poverty is relevant in the context of social backwardness. The commission found that the lower income group constitutes socially and educationally backward classes. The basis of the reservation is not income but social and educational backwardness determined on the basis of relevant criteria. If any classification of backward classes of citizens is based solely on the caste of the citizen it will perpetuate the vice of caste system. Again, if the classification is based solely on poverty it will not be logical.

The society is taking steps for uplift of the people. In such a task groups or classes who are socially and educationally backward are helped by the society. That is the philosophy of our Constitution. It is in this context that social backwardness which results from poverty is likely to be magnified by caste considerations. Occupations, place of habitation may also be relevant factors in determining who are socially and educationally backward classes. Social and economic considerations come into operation in solving the problem and evolving the proper criteria of determining which classes are socially and educationally backward. That is why our Constitution provided for special consideration of socially and educationally backward classes of citizens as also scheduled castes and tribes.

It is only by directing the society and the State to offer them all facilities for social and educational uplift that the problem is solved. It is in that context that the commission in the present case found that income of the classes of citizens mentioned in Appendix VIII was a relevant factor in determining their social and educational backwardness.”

129. In Chitrelekha’s case (supra) it was stated that the caste is the starting point. This is subject of course to the parameters that if the caste itself satisfies the test of backwardness which is implicit and inherent as noted in para 782 of Indra Sawhney No.1 (supra). In that case caste becomes the relevant factor. The view expressed in Chitralekha’s case (supra) was not dissented from in Indra Sawhney No.1 (supra).

In fact Justice Jeevan Reddy in the majority judgment in Indra Sawhney No.1 (supra) referred to Chitrelekha’s case (supra) at para 704. As noted above in para 782 of Indra Sawhney No.1 (supra) it has not been held that caste is class. In the said paragraph it has been stated that individual survey is out of question since Article 16(4) speaks of class protection and not individual protection. In that context also it has been said that it does not mean that one can wind up the process of identification for the castes. It has also been emphasized in the said paragraph that having exhausted the castes or simultaneously with it, the authority may take up for consideration other occupational groups, communities and classes. If caste is a substitute for class, the question of any simultaneous consideration of others does not arise.

Therefore, the Court observed that one may well begin with castes if one chooses and then go to other groups, sections and classes. If the Court meant to substitute the word caste with class the question of going to other classes would not arise.

130. Reference may also be made to Akhil Bharatiya Soshit Karamchari Sangh (Railway) v. Union of India (UOI) and Ors.

(1981(1) SCC 246) where at para 22 it was noted as follows:

“This is not mere harmonious statutory construction of Article 16(1) and (4) but insightful perception of our constitutional culture, reflecting the current of resurgent India bent on making, out of a sick and stratified society of inequality and poverty, a brave new Bharat. If freedom, justice and equal opportunity to unfold one’s own personality, belong alike to bhangi and brahmin, prince and pauper, if the panchama proletariat is to feel the social transformation Article 16(4) promises, the State must apply equalising techniques which will enlarge their opportunities and thereby progressively diminish the need for props. The success of State action under Article 16(4) consists in the speed with which result-oriented reservation withers away as, no longer a need, not in the everwidening and everlasting operation of an exception [Article 16(4)] as if it were a super- fundamental right to continue backward all the time. To lend immortality to the reservation policy is to defeat its raison de’etre; to politicise this provision for communal support and Party ends is to subvert the solemn undertaking of Article16(1), to casteify ‘reservation’ even beyond the dismal groups of backward-most people, euphemistically described as SC & ST, is to run a grave constitutional risk. Caste, ipso facto, is not class in a secular State.”

131. Much emphasis has been laid on the use of the word ‘only’. It is to be noted that while the respondents contend that where it is demonstrated that caste is not the only consideration the permissible provision will operate.

Reference was made to Venkataraman’s case (supra). As has been rightly contended by learned counsel for the petitioners the true effect of the word ‘only’ has been clarified in the decision itself.

132. It is unnecessary to decide as it has been contended by learned counsel for the petitioners whether the concept of strict scrutiny is a measure of judicial scrutiny as highlighted by the conditions in India. It is submitted that label is not relevant.

133. The ultimate object is the eradication of castes and that is the foundation for reservation. While considering the method adopted for eradication by adopting the process of reservation indirectly the facet of strict scrutiny comes in. The strict scrutiny test was applied in the background of Article 19 vis-`-vis compelling State needs. The principle was recognized in Chintaman Rao v. The State of Madhya Pradesh [1950] INSC 29; (1950 SCR 759). It was inter-alia quoted as follows:

“The question for decision is whether the statute under the guise of protecting public interests arbitrarily interferes with private business and imposes unreasonable and unnecessarily restrictive regulations upon lawful occupation; in other words, whether the total prohibition of carrying on the business of manufacture of bidis within the agricultural season amounts to a reasonable restriction on the fundamental rights mentioned in article 19 (1)(g) of the Constitution. Unless it is shown that there is a reasonable relation of the provisions of the Act to the purpose in view, the right of freedom of occupation and business cannot be curtailed by it.

The phrase “reasonable restriction”

connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public.

The word “reasonable” implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by clause (6) of Article19, it must be held to be wanting in that quality”.

134. Again in State of Madras v. V.G. Row (AIR 1952 SC 196) it was observed as follows:

“13. Before proceeding to consider this question we think it right to point out, what is sometimes overlooked, that our Constitution contains express provisions for judicial review of legislation as to its conformity with the constitution unlike as in America where the Supreme Court has assumed extensive power of reviewing legislative acts under cover of the widely interpreted “due process” clause in the Fifth and Fourteenth Amendments. If, then, the courts in this country face up to such important and none too easy task, it is not out of any desire to tilt at legislative authority in a crusader’s spirit, but in discharge of a duty plainly laid upon them by the Constitution.

This is especially true as regards the “fundamental rights” as to which this Court has been assigned the role of a sentinel on the qui vive. While the Court naturally attaches great weight to the legislative judgment, it cannot dessert its own duty to determine finally the constitutionality of an impugned statute. We have ventured on these obvious remarks because it appears to have been suggested in some quarters that the courts in the new set up are out to seek clashes with the legislatures in the country”.

135. At the outset, it may be pointed out that the stand of petitioners is that the primary consideration in selection of candidates for admission to the higher educational institutions must be merit. The object of any rules, which may be made for regulating admissions to such institutions therefore, must be to secure the best and most meritorious students. The national interest and the demand of universal excellence may even override the interests of the weaker sections. In this context, Krishna Iyer J aptly observed:

“To sympathise mawkishly with the weaker sections by selecting substandard candidates, is to punish society as a whole by denying the prospect of excellence, say, in hospital service.

Even the poorest, when stricken by critical illness, needs the attention of super-skilled specialists not humdrum second rates”.

136. Thus, the interest of no person, class or region can be higher than that of the nation. The philosophy and pragmatism of universal excellence through equality of opportunity for education and advancement across the nation is part of the constitutional creed. It is, therefore, the best and most meritorious students that must be selected for admission to technical institutions and medical colleges and no citizen can be regarded as outsider in the constitutional set-up without serious detriment to the `unity and integrity’ of the nation. The Supreme Court has laid down that so far as admissions to post graduate course such as MS, MD and the like are concerned, it would be imminently desirable not to provide for any reservation based on residence or institutional preference. However, a certain percentage of seats are allowed to be reserved on the ground of institutional preference. But even in this regard, so far as super specialties such as neurosurgery and cardiology are concerned there should be no reservation at all even on the basis of institutional preference and admissions should be granted purely on all-India basis.

Further, classification made on the basis of super-specialties may serve the interests of the nation better, though interests of individual states may to a small extent, be affected.

137. The need of a region or institution cannot prevail at the highest scale of specialty where the best skill or talent must be hand-picked by selecting them according to capability. At the level of Ph.D., M.D. or levels of higher proficiency where international measure of talent is made, where losing one great scientist or technologist in the making is a national loss, the considerations we have expanded upon as important, lose their potency.

138. The inevitable conclusion is that the impugned Statute can be operative only after excluding the creamy layer from identifiable OBCs. There has to be periodic review of the classes who can be covered by the Statute. The periodicity should be five years. To strike constitutional balance there is need for making provision for suitable percentage for socially and economically backward classes in the 27% fixed.

I 139. To sum up, the conclusions are as follows:

(1) For implementation of the impugned Statute creamy layer must be excluded.

(2) There must be periodic review as to the desirability of continuing operation of the Statute. This shall be done once in every five years.

(3) The Central Government shall examine as to the desirability of fixing a cut off marks in respect of the candidates belonging to the Other Backward Classes (OBCs). By way of illustration it can be indicated that five marks grace can be extended to such candidates below the minimum eligibility marks fixed for general categories of students. This would ensure quality and merit would not suffer. If any seats remain vacant after adopting such norms they shall be filled up by candidates from general categories.

(4) So far as determination of backward classes is concerned, a Notification should be issued by the Union of India. This can be done only after exclusion of the creamy layer for which necessary data must be obtained by the Central Government from the State Governments and Union Territories. Such Notification is open to challenge on the ground of wrongful exclusion or inclusion.

Norms must be fixed keeping in view the peculiar features in different States and Union Territories.

(5) There has to be proper identification of Other Backward Classes (OBCs.). For identifying backward classes, the Commission set up pursuant to the directions of this Court in Indra Sawhney No.1 has to work more effectively and not merely decide applications for inclusion or exclusion of castes. While determining backwardness, graduation (not technical graduation) or professional shall be the standard test yardstick for measuring backwardness.

(6) To strike the constitutional balance it is necessary and desirable to ear-mark certain percentage of seats out of permissible limit of 27% for socially and economically backward classes.

(7) In the Constitution for the purposes of both Articles 15 and 16, caste is not synonyms with class and this is clear from the paragraphs 782 and 783 of Indra Sawhney No.1. However, when creamy layer is excluded from the caste, the same becomes an identifiable class for the purpose of Articles 15 and 16.

(8) Stress has to be on primary and secondary education so that proper foundation for higher education can be effectively laid.

(9) So far as the constitutional amendments are concerned:

(i) Articles 16(1) and 16(4) have to be harmoniously construed. The one is not an exception to the other.

(ii) Articles 15(4) and 15(5) operate in different fields. Article 15(5) does not render Article 15(4) inactive or inoperative.

(10) While interpreting the constitutional provisions, foreign decisions do not have great determinative value. They may provide materials for deciding the question regarding constitutionality. In that sense, the strict scrutiny test is not applicable and indepth scrutiny has to be made to decide the constitutionality or otherwise, of a statute.

(11) If material is shown to the Central Government that the Institution deserves to be included in the Schedule, the Central Government must take an appropriate decision on the basis of materials placed and on examining the concerned issues as to whether Institution deserves to be included in the Schedule.

(12) Challenge relating to private un-aided educational institutions has not been examined because no such institution has laid any challenge. It is to be noted that the petitioners have made submissions in the background of Article 19(6) of the Constitution. Since none of the affected institutions have made any challenge we do not propose to consider it necessary to express any opinion or decide on the question.

140. In view of the above-said conclusions, the writ petitions and the Contempt Petition (Civil) No.112/2007 in W.P. (C) No.265/2006 are disposed of.

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IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (C) NO. 369 OF 2008

Baby Manji Yamada ….Petitioner
Versus
Union of India & Anr. ….Respondents

JUDGMENT

Dr. ARIJIT PASAYAT, J.

1. This petition under Article 32 of the Constitution of India, 1950 (hereinafter for short ‘the Constitution’) raises some important questions.

2. Essentially challenge is to certain directions given by a Division Bench of the Rajasthan High Court relating to production/custody of a child Manji Yamada. Emiko Yamada, claiming to be grandmother of the child, has filed this petition. The Writ Petition before the Rajasthan High Court was filed by M/s. SATYA, stated to be an NG0, the opposite party No. 3 in this petition. The D.B. Habeas Corpus Writ Petition No. 7829 of 2008 was filed by M/s. SATYA wherein the Union of India through Ministry of Home Affairs, State of Rajasthan through the Principal Secretary, The Director General of Police, Government of Rajasthan and the Superintendent of Police Jaipur City (East), Jaipur were made the parties. There is no dispute about Baby Manji Yamada having been given birth by a surrogate mother. It is stated that the biological parents Dr. Yuki Yamada and Dr. Ikufumi Yamada came to India in 2007 and had chosen a surrogate mother in Anand, Gujarat and a surrogacy agreement was entered into between the biological father and biological mother on one side and the surrogate mother on the other side. It appears from some of the statements made that there were matrimonial discords between the biological parents. The child was born on 25 th July, 2008. On 3rd August, 2008 the child was moved to Arya Hospital in Jaipur following a law and order situation in Gujarat and she was being provided with much needed care including being breastfed by a woman. It is stated by the petitioner that the genetic father Dr. Ifukumi Yamada had to return to Japan due to expiration of his visa. It is also stated that the Municipality at Anand has issued a Birth Certificate indicating the name of the genetic father.

3. Stand of respondent No. 3 was that there is no law governing surrogation in India and in the name of surrogation lot of irregularities are being committed. According to it, in the name of surrogacy a money making racket is being perpetuated. It is also the stand of the said respondent that the Union of India should enforce stringent laws relating to surrogacy. The present petitioner has questioned the locus standi of respondent No. 3 to file a habeas corpus petition. It is pointed out that though custody of the child was being asked for but there was not even an indication as to in whose alleged illegal custody the child was. It is stated that though the petition before the High Court was styled as a “Public Interest Litigation” there was no element of public interest involved. Learned counsel for respondent No. 3 with reference to the counteraffidavit filed in this Court had highlighted certain aspects relating to surrogacy. The learned Solicitor General has taken exception to certain statements made in the said counter affidavit and has submitted that the petition before the High Court was not in good faith and was certainly not in public interest.

4. We need not go into the locus standi of respondent No. 3 and/or whether bonafides are involved or not. It is to be noted that the Commissions For Protection of Child Rights Act, 2005 (hereinafter for short ‘the Act’) has been enacted for the constitution of a National Commission and State Commissions for protection of child rights and children’s courts for providing speedy trial of offences against children or of violation of child rights and for matters connected therewith or incidental thereto. Section 13 which appears in Chapter III of the Act is of considerable importance. The same reads as follows:

“13. Functions of Commission.
(1) The Commission shall perform all or any of the following functions, namely:-
(a) examine and review the safeguards provided by or under any law for the time being in force for the protection of child rights and recommend measures for their effective implementation;

(b) present to the Central Government, annually and at such other intervals, as the Commission may deem fit, reports upon the working of those safeguards;

(c) inquire into violation of child rights and recommend initiation of proceedings in such cases;

(d) examine all factors that inhibit the enjoyment of rights of children affected by terrorism, communal violence, riots, natural disaster, domestic violence, HIV/AIDS, trafficking, maltreatment, torture and exploitation, pornography and prostitution and recommend appropriate remedial measures.

(e) look into the matters relating to children in need of special care and protection including children in distress, marginalized and disadvantaged children, children in conflict with law, juveniles, children without family and children of prisoners and recommend appropriate remedial measures;

(f) study treaties and other international instruments and undertake periodical review of existing policies, programmes and other activities on child rights and make recommendations for their effective implementation in the best interest of children;

(g) Undertake and promote research in the field of child rights;

(h) spread child rights literacy among various sections of the society and promote awareness of the safeguards available for protection of these rights through publications, the media, seminars and other available means;

(i) inspect or cause to be inspected any juvenile custodial home, or any other place of residence or institution meant for children, under the control of the Central Government or any State Government or any other authority, including any institution run by a social organisation; where children are detained or lodged for the purpose of treatment, reformation or protection and take up with these authorities for remedial action, if found necessary;

(j) inquire into complaints and take suo motu notice of matters relating to, –

(i) deprivation and violation of child rights;
(ii) non-implementation of laws providing for protection and development of children;
(iii)non-compliance of policy decisions, guidelines or instructions aimed at mitigating hardships to and ensuring welfare of the children and to provide relief to such children, or take up the issues arising out of such matters with appropriate authorities; and

(k) such other functions as it may consider necessary for the promotion of child rights and any other matter incidental to the above functions

2) The Commission shall not inquire into any matter which is pending before a State Commission or any other Commission duly constituted under any law for the time being in force.”

5. Surrogacy is a well known method of reproduction whereby a woman agrees to become pregnant for the purpose of gestating and giving birth to a child she will not raise but hand over to a contracted party. She may be the child’s genetic mother (the more traditional form for surrogacy) or she may be, as a gestational carrier, carry the pregnancy to delivery after having been implanted with an embryo. In some cases surrogacy is the only available option for parents who wish to have a child that is biologically related to them.

The word “surrogate”, from Latin “subrogare”, means “appointed to act in the place of”. The intended parent(s) is the individual or couple who intends to rear the child after its birth.

6. In “traditional surrogacy” (also known as the Straight method) the surrogate is pregnant with her own biological child, but this child was conceived with the intention of relinquishing the child to be raised by others; by the biological father and possibly his spouse or partner, either male or female. The child may be conceived via home artificial insemination using fresh of frozen sperm or impregnated via IUI (intrauterine insemination), or ICI (intra cervical insemination) which is performed at a fertility clinic.’

7. In “gestational surrogacy” (also know as the Host method) the surrogate becomes pregnant via embryo transfer with a child of which she is not the biological mother. She may have made an arrangement to relinquish it to the biological mother or father to raise, or to a parent who is themselves unrelated to the child (e. g. because the child was conceived using egg donation, germ donation or is the result of a donated embryo). The surrogate mother may be called the gestational carrier.

8. “Altruistic surrogacy” is a situation where the surrogate receives no financial reward for her pregnancy or the relinquishment of the child (although usually all expenses related to the pregnancy and birth are paid by the intended parents such as medical expenses, maternity clothing, and other related expenses).

9. “Commercial surrogacy” is a form of surrogacy in which a gestational carrier is paid to carry a child to maturity in her womb and is usually resorted to by well off infertile couples who can afford the cost involved or people who save and borrow in order to complete their dream of being parents. This medical procedure is legal in several countries including in India where due to excellent medical infrastructure, high international demand and ready availability of poor surrogates it is reaching industry proportions. Commercial surrogacy is sometimes referred to by the emotionally charged and potentially offensive terms “wombs for rent”, “outsourced pregnancies” or “baby farms”.

10. Intended parents may arrange a surrogate pregnancy because a woman who intends to parent is infertile in such a way that she cannot carry a pregnancy to term. Examples include a woman who has had a hysterectomy, has a uterine malformation, has had recurrent pregnancy loss or has a healthy condition that makes it dangerous for her to be pregnant. A female intending parent may also be fertile and healthy, but unwilling to undergo pregnancy.

11. Alternatively, the intended parent may be a single male or a male homosexual couple.

12. Surrogates may be relatives, friends, or previous strangers. Many surrogate arrangements are made through agencies that help match up intended parents with women who want to be surrogates for a fee. The agencies often help manage the complex medical and legal aspects involved. Surrogacy arrangements can also be made independently. In compensated surrogacies the amount a surrogate receives varies widely from almost nothing above expenses to over $ 30,000. Careful screening is needed to assure their health as the gestational carrier incurs potential obstetrical risks.

13. In the present case, if any action is to be taken that has to be taken by the Commission. It has a right to inquire into complaints and even to take suo motu notice of matters relating to, (i) deprivation and violation of child rights (ii) non-implementation of laws providing for protection and development of children and (iii) non-compliance of policy decisions, guidelines or instructions aimed at mitigating hardships to and ensuring welfare of the children and to provide relief to such children, or take up the issues arising out of such matters with appropriate authorities.

14. It appears that till now no complaint has been made by anybody relating to the child, the petitioner in this Court.

15. We, therefore, dispose of this writ petition with a direction that if any person has any grievance, the same can be ventilated before the Commission constituted under the Act. It needs no emphasis that the Commission has to take into account various aspects necessary to be taken note of.

16. Another grievance of the petitioner is that the permission to travel so far as the child is concerned including issuance of a Passport is under consideration of the Central Government; but no orders have been passed in that regard. The other prayer in the petition is with regard to an extension of the visa of the grandmother of the child requesting for such an order.

17. Learned Solicitor General, on instructions, stated that if a comprehensive application, as required under law, is filed within a week, the same shall be disposed of expeditiously and not later than four weeks from the date of receipt of such application. If the petitioner has any grievance in relation to the order to be passed by the Central Government, such remedy, as is available in law may be availed.

18. The writ petition is accordingly disposed of without any order as to costs. All proceedings pending in any High Court relating to the matter which we have dealt with in this petition shall stand disposed of because of this order.

……………….J.
(Dr. ARIJIT PASAYAT)

……………….J.
(Dr. MUKUNDAKAM SHARMA)

New Delhi:
September 29, 2008

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IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1449 OF 2003

M/s. Shankar Finance & Investments ……Appellant
Versus
State of Andhra Pradesh & Ors. ……Respondents

ORDER

R. V. Raveendran J.

The complainant in a proceedings under section 138 of the Negotiable Instruments Act, 1881 (‘Act’ for short), challenges in this appeal by special leave, the order dated 21.8.2002 passed by the Andhra Pradesh High Court in Criminal Petition No.1737 of 2001 holding that the complaint signed by a Power of Attorney holder was not maintainable.

2. The appellant – complainant filed a complaint dated 2.4.1996 against respondents 2 to 4 herein (namely M/s Speciality Aqua Ventures Ltd, its Managing Director and Chairman arrayed as accused 1, 2 and 3) alleging that a cheque for Rs.12,40,000/- issued by the third respondent (on behalf of respondents 2 to 4) was dishonoured. Respondents 2 and 4 filed an application seeking discharge. The said petition was dismissed by the learned Magistrate by order dated 17.12.1998. The Revision filed by them against the order of the learned Magistrate was rejected by the Sessions Court on 12.2.2001. Thereafter, the fourth respondent herein (third accused) filed a petition under section 482 Cr.PC for quashing the proceedings. The fourth respondent contended that he could not be arrayed as an accused as the cheque was issued by the third respondent in his individual capacity. The High Court allowed the said petition on a different ground, by order dated 21.8.2002, and quashed the complaint as against the fourth respondent. It held that the complaint was not signed by the payee, that is, the sole proprietor of the payee concern, but was signed by his Power of Attorney Holder and that was not permissible.

3. The said order of the High Court is challenged in this appeal by special leave. By interim orders dated 28.11.2003 and 2.4.2004, this Court stayed the operation of the order of the learned Single Judge and directed that the case should be proceeded with.

4. The question that arises for our consideration is whether the complaint under section 138 of the Act signed by a Attorney holder is not maintainable.

5. Section 190 of Code of Criminal Procedure (‘Code’ for short) enables a Magistrate to take cognizance of an offence upon receiving a complaint of facts which constitutes such offence. Section 200 of the Code requires the Magistrate taking cognizance of an offence on complaint, to examine upon oath the complainant and the witness present, if any. Section 142 of the Act provides that notwithstanding anything contained in the Code, no Court shall take cognizance of any offence punishable under section 138 of the Act except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque.

6. In MMTC Ltd. vs. MEDCHL Chemicals & Pharma (P) Ltd. – 2002 (1) SCC 234, a complaint was filed by MMTC Ltd. through the Manager of its Regional Office. Subsequently, the Manager was substituted by Dy. General Manager who was duly authorized. The High Court held that the complaint was not maintainable as it was signed and presented by a person, who was neither an authorized agent nor a person empowered under the articles of association or by any resolution of the Board to do so. It held that only the Executive Director of MMTC Ltd had the authority to institute legal proceedings. Reversing the said decision, this Court held :

“In our view the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that a complaint under section 138 can be made by the payee or the holder in due course of the said cheque. The two complaints, in question, are by the appellant company who is the payee of the two cheques.

This Court has as far back as in the case of Vishwa Mitter v. O.P. Poddar – (1983) 4 SCC 701, held that it is clear that anyone can set the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It has been held that no court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the complainant requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the Statute. In the present case, the only eligibility criteria prescribed by Section 142 is that the complaint must be by the payee or the holder in due course. This criteria is satisfied as the complaint is in the name and on behalf of the appellant company.”

(Emphasis supplied)

Referring to the decision in Associated Cement Co. Ltd. v. Keshvanand [1998 (1) SCC 687], this Court held :

“It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission of the court for sending any other person to represent the company in the court. Thus, even presuming that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground.”

7. The payee of the cheque is M/s Shankar Finance & Investments. The complaint is filed by “M/s Shankar Finance & Investments, a proprietary concern of Sri Atmakuri Sankara Rao, represented by its power of Attorney Holder Sri Thamada Satyanarayana”. It is therefore evident that the complaint is in the name of and on behalf of the payee. Section 142(a) of the Act requires that no Court shall take cognizance of any offence punishable under section 138 except upon a complaint made in writing by the payee. Thus the two requirements are that (a) the complaint should be made in writing (in contradistinction from an oral complaint); and (b) the complainant should be the payee (or the holder in due course, where the payee has endorsed the cheque in favour of someone else). The payee, as noticed above, is M/s Shankar Finance & Investments. Once the complaint is in the name of the ‘payee’ and is in writing, the requirements of section 142 are fulfilled. Who should represent the payee where the payee is a company, or how the payee should be represented where payee is a sole proprietary concern, is not a matter that is governed by section 142, but by the general law.

8. As contrasted from a company incorporated under the Companies Act, 1956 which is a legal entity distinct from its shareholders, a proprietary concern is not a legal entity distinct from its proprietor. A proprietary concern is nothing but an individual trading under a trade name. In civil law where an individual carries on business in a name or style other than his own name, he cannot sue in the trading name but must sue in his own name, though others can sue him in the trading name. Therefore, if the appellant in this case had to file a civil suit, the proper description of plaintiff should be “Atmakuri Sankara Rao carrying on business under the name and style of M/s Shankar Finance & Investments, a sole proprietary concern”. But we are not dealing with a civil suit. We are dealing with a criminal complaint to which the special requirements of section 142 of the Act apply. Section 142 requires that the complainant should be payee. The payee is M/s Shankar Finance & Investments. Therefore in a criminal complaint relating to an offence under section 138 of the Act, it is permissible to lodge the complaint in the name of the proprietary concern itself.

9. The next question is where a proprietary concern carries on business through an attorney holder, whether the attorney holder can lodge the complaint? The attorney holder is the agent of the grantor. When the grantor authorizes the Attorney Holder to initiate legal proceedings and the attorney holder accordingly initiates legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor represented by his attorney holder, and not by the attorney holder in his personal capacity. Therefore where the payee is a proprietary concern, the complaint can be filed :
(i) by the proprietor of the proprietary concern, describing himself as the sole proprietor of the ‘payee’;
(ii) The proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor; and
(iii) the proprietor or the proprietary concern represented by the attorneyholder under a power of attorney executed by the sole proprietor. It follows that in this case the complaint could have been validly filed by describing the complainant in any one of the following four methods :

“Atmakuri Shankara Rao, sole proprietor of M/s. Shankar Finance & Investments”
Or
“M/s. Shankar Finance & Investments a sole proprietary concern represented by its proprietor Atmakuri Shankara Rao”
Or
“Atmakuri Shankara Rao, sole proprietor of M/s. Shankar Finance & Investments, represented by his Attorney Holder Thamak Satyanarayana”
Or
“M/s. Shankar Finance & Investments, a proprietary concern of Atmakuri Shankara Rao, represented by his Attorney Holder Thamada Satyanarayana”.

What would have been improper is for the Attorney holder Thamada Satyanarayana to file the complaint in his own name as if he was the complainant.

10. This Court has always recognized that the power of attorney holder can initiate criminal proceedings on behalf of his Principal. In Ram Chander Prasad Sharma v. State of Bihar and Anr. [AIR 1967 SC 349], the prosecution was commenced in regard to tampering of electric meter seals, with a charge sheet submitted by the police after investigation on a first information report by one Bhattacharya, Mains Superintendent of Patna Electric Supply Co. (‘PES Co.’ for short). An objection was raised by the accused that the prosecution was incompetent as it was not launched by a person competent to do so. The said objection was based on section 50 of the Indian Electricity Act, 1910, which provided that no prosecution shall be instituted against any person for any offence against that Act or any rule, licence or order thereunder, except at the instance of the Government or an Electric Inspector, or of a person aggrieved by the same. This Court held :

“… The P.E.S. Co., however, is a body corporate and must act only through its directors or officers. Here we have the evidence of Ramaswami to the effect that he held a general power of attorney from the P.E.S. Co., and that he was specifically empowered thereunder to act on behalf of P.E.S. Co., in all legal proceedings. The evidence shows that it was at his instance that Bhattacharya launched that first information report and, therefore, it would follow that the law was set in motion by the “person aggrieved”. The objection based on Section 50 must, therefore, be held to be untenable.”

(emphasis supplied)

11. The assumption of the High Court that where the payee is a proprietary concern, the complaint can be signed only by the proprietor of the proprietary concern and not by a Power of Attorney holder of the proprietor, is not sound. It is not in dispute that in this case a power of attorney has been granted by Atmakuri Shankara Rao, as Proprietor of M/s Shankar Finance & Investments in favour of Thamada Satyanarayana and the same was produced along with the complaint. The description of the complainant is as under :

“M/s Shankar Finance and Investments, (a proprietary concern of Sri Atmakuri Sankara Rao S/o Late Sri A. B. Rama Murthy, Hindu, aged about 65 years), having its office at Flat No.3B, Third Floor, Maharaja Towers. Vishakhapatnam – 3 represented by its Power of Attorney Holder Sri Thamada Satyanarayana, S/o Late Adinarayana, Hindu, aged 50 years, Service, residing at MIG-B-230, Sagarnagar, VUDA Layout, Vishakhapatnam – 43.”

The said description is proper and therefore, the complaint has been duly filed by the payee.

12. The High Court has referred to the fact that the sworn statement before the learned Magistrate was of the attorney holder of the payee and not by the payee in person. According to the tenor of the order of the High Court, this was also irregular. But we find nothing irregular in such a procedure. It is now well settled that the object of section 200 of the Code in providing for examination of the complainant and his witnesses by the court is to satisfy itself about the existence of a prima facie case against the person accused of the offence and to ensure that such person is not harassed by false and vexatious complaints by issue of process; (See Nirmaljit Singh Hoon v. State of West Bengal – 1973 (3) SCC 753). Where the proprietor of the proprietary concern has personal knowledge of the transaction and the proprietor has signed the complaint, he has to be examined under section 200 of the Code. A power of attorney holder of the complainant who does not have personal knowledge, cannot be examined. But where the attorney holder of the complainant is in charge of the business of the payeecomplainant and the Attorney holder alone is personally aware of the transactions, and the complaint is signed by the attorney holder on behalf of the payee-complainant, there is no reason why the attorney holder cannot be examined as the complainant. We may, in this connection, refer to the decision of this Court in Janki Vashdeo Bhojwani v. Indusind Bank Ltd. [2005 (2) SCC 217], where the scope of an attorney holder ‘acting’ on behalf of the principal in a civil suit governed by Code of Civil Procedure was examined. This Court observed:

“Order 3 Rules 1 and 2 CPC empower the holder of power of attorney to “act” on behalf of the principal. In our view the word “acts” employed in Order 3 Rules 1 and 2 CPC confines only to in respect of “acts” done by them power-of-attorney holder in exercise of power granted by the instrument. The term “acts” would not include deposing in place and instead of the principal. In other words, if the power-of-attorney holder has rendered some “acts” in pursuance of power of attorney, he may depose for the principal in respect of such acts, but he cannot depose for the principal for the acts done by the principal and not by him. Similarly, he cannot depose for the principal in respect of the matter of which only the principal can have a personal knowledge and in respect of which the principal is entitled to be cross-examined.”

[Emphasis supplied]

The principle underlying the said observations will apply to cases under section 138 of the Act. In regard to business transactions of companies, partnerships or proprietary concerns, many a time the authorized agent or attorney holder may be the only person having personal knowledge of the particular transaction; and if the authorized agent or attorney-holder has signed the complaint, it will be absurd to say that he should not be examined under section 200 of the Code, and only the Secretary of the company or the partner of the firm or the proprietor of a concern, who did not have personal knowledge of the transaction, should be examined. Of course, where the cheque is drawn in the name of the proprietor of a proprietary concern, but an employee of such concern (who is not an attorney holder) has knowledge of the transaction, the payee as complainant and the employee who has knowledge of the transaction, may both have to be examined. Be that as it may. In this case we find no infirmity.

13. We, accordingly, allow this appeal, set aside the impugned order dated 21.8.2002 and direct the learned Magistrate to proceed with the complaint as already directed by the interim order.

……J
[R. V. Raveendran]

……J
[P. Sathasivam]

New Delhi;
June 26, 2008.

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