M/S. Gujarat Machinery Manufacturers Ltd. v. Collector, Central Excise, Baroda.

S.B. MAJMUDAR, J. Leave granted. By consent of learned advocate of parties this appeal was taken up for final hearing. We have heard the learned advocates of parties. The D appeal is being disposed of by this judgment. This appeal by special leave arises out of the judgment and order of a Division Bench of High Court of Gujarat in Original Jurisdiction Appeal No. 16 of 1994 decided on 12 July 1996. The Division Bench by the said E impugned judgment dismissed the appeal of the appellant and confirmed the order of the learned Single Judge in Company Petition No. 22 of 1994 and s_anctioned a Scheme of Amalgamation of two Public Limited _com- . panies, namely Mafatlal Industries Limited ('MIL' for short) being the transferee-company with which Mafatlal Fine Spinning and Manufacturing Company Limited ('MFL' for short) being the transferor-company was to F be amalgamated. The iearned Single Judge granted requisite sanction to the applicant transferee-company MIL to amalgamate in it the transferor­ compan y MFL under Section: 391(2) of the Companies Act, 1956 (hereinafter referred to as 'the Act'). In order to appreciate the grievance of the appellant who objected to the Scheme moved by the respondent- G company MIL, as ventilated before us by its learned senior counsel Shri Shanti Bhusan, assisted by learned counsel Shri M.J. Thakore, it will be necessary to glance through a few relevant background facts. Background Facts H The respondent-company MIL which was the petitioner before the ... MIHEER H. M.Af<ATLAL v. MAI'A11.AL INDS. LTD. [S.B. MAJMUDAR, J.] 11 learned Single Judge has its registered office at Ahmedabad in Gujarat A State. It was incorporated on 20th January 1913 under the name 'The New Shorrock Spinning & Manufacturing Co. Limited' and its name was sub­ sequently changed to 'Mafatlal Industries Limited' as per the fresh Certifi­ cate of Incorporation dated 24 January 1974 consequent upon change of name, as sanctioned by the Registrar of Companies, Gujarat, Ahmedabad. B The objects of the transferee-company MIL as per its Memorandum of Association, inter a/ia, included activity of carrying on all or any of the businesses such as cotton spinners and doublers, wool, silk, flax, jute and hemp spinners and doublers, linen manufactures, to work spinning and weaving mills, cotton mills, jute mills and mills of any other description. The Authorised Share Capital of the respondent-company was Rs. 100,00,00,000 (Rupees one hundred crores only) divided into 30,05,500 equity shares of Rs. 100 each and 69,94,500 unclassified shares of Rs. 100 each. The subscribed Share Capital of the respondent-company as on 31st March 1993 was Rs. 26.30 crores (Rupees twenty six crores thirty lacs only) divided into 26,90,000 equity shares of Rs. 100 each. The respondent-company commenced the business of textiles and had been carrying on the same since incorporation. The respondent-com­ pany is a large multi-Division, Multi-locational company carryiny on diver­ sified activities including manufacturing and sale textiles, dyes intermediates and chemicals, professional grade connectors, plastic E processing machineries and promoting various companies through Project Promotion Division. The MFL being transferor-company was incorporated on 20th April 1931 under the Baroda State Companies Act and had been carrying on the F busines.s of manufacture and sale of textile piece goods and chemicals. Its registered office was situated at Mafatlal Centre, Nariman Point, Bombay. It was engaged in the manufacture and sale of textiles and fluorines based chemicals. There were three units of the Textiles Division situated at (1) Vejalpur Road, Navsari, (2) Mazagon, Bombay and (3) Lower Parel, Bombay and the unit of the Chemicals Division was situated at Bhestan, G District Surat. The Authorised Share Capital of the transferor-company as on 31st March 1993 was Rs. 30 crores (Rupees thirty crores only) divided into 30,00,000 ordinary shares of Rs. 100 each. The Subscribed Share Capital H 12 SUPREME COURT REPORTS [1996} SUPP. 6 S.C.R. A of the transferor-company as on 31st March 1993 was Rs. 26,25,77,100 (Rupees twenty six crores twenty five lacs seventy seven thousand and one hundred only) divided into 26,25,771 ordinary shares of Rs. 100 each. Subsequent to 31st March 1993 the the transferor-company had allotted 382 ordinary sh:ires of Rs. 100 each. The transferor-company had also B issued and allotted further 1,00,000 ordinary shares of Rs. 100 each at a premium of Rs. 200 per share on conversion of 1,00,000 Partly Convertible Debentures of the face value of Rs. 2,000 each issued to Financial Institu­ tions with effect from 1st February 1994 by the transferor-company. The transferor-company MFL is proposed to be amalgamated with C the respondent-company MIL under the following circumstances and for the following reasons : (1) (2) (3) The proposed amalgamation will pave the way for batter, more efficient and economical control in the running of operation. Economies in administrative and management costs will im­ prove in combined profitability. The amalgamated company will have the benefit of the com­ bined reserves, manufacturing assets, manpower and cashflows of the two companies. The combined technological, managerial and financial resources are expected to enhance the capability of the amalgamated company-to invest in larger and sophisticated projects to ensure rapid growth. ( 4) The amalgamated company will have a strong and large re source base. With a strong resource base, the risk bearing capacity of the amalgamated Company will be substantial. Hitherto, with limited resources and capacity, either company had to forego business opportunities which would otherwise have been profitable to the group. (5) "Exports" have been identified a 'thrust' area for both the companies and response in time to customers needs is con­ sidered to be critical in this area of 'operations. An amal­ gamated company will be strategically better placed to reduce the response time. Customers' confidence in dealing with such 1~- MIHEERH.MAfi\TLAL v. MAf"ATLALINDS. LID. [S.B.MAfMUDAR,J.j 13 a mega company ensures timely delivery of large orders. A (6) The amalgamated company will be able to source and absorb new technology and spend on Research and Development, Market Surveys etc. More comprehensively. (7) More particularly in the Textiles Division, with .5 operating units at the company's disposal, the flexibility in operations will be very much pronounced. The Managers will not be inhibited by capacity constraints and will have the freedom of choosing from various options. (8) Both the companies have been subject to the pressures of raw material price fluctuations and of adverse market conditions in their respective product mix. Hence, the amalgamation will neutralise the adverse effects of contrary business cycles. The operations of one unit will be complementary to the other and a stable profitability will be achieved. The director of the respondent-company MIL and transferor- com­ pany MFL approved the proposal for amalgamation of the MFL with MIL and pursuant to the respective Resolutions passed by them the detailed Scheme of Amalgamation was finalised. The directors of both the com­ panies of the opinion that such amalgamation was in the interest do both the companies. It is pertinent to note at this stage that the appellant who has objected to the amalgamation before the High Court in the present proceedings so far as the amalgamation of the transferee-company is F concerned, is himself one of the directors of the transferor- company being MFL. So far as the transferor-company MFL is concerned as its registered office is located at Bombay the corresponding application on behalf of the transferor-company for sanctioning this very Scheme of Amalgamation was. moved in the Bombay High Court. The appellant at this stage did not object to this very Scheme for amalgamation on behalf of the transferor- G company of which he was one of the directors and party to the Resolution approving the said am;:tlgamation. Learned Single Judge of the Bombay High Court sanctioned the said Scheme on behalf of transferor-company. , It is not in dispute between the parties that Bombay High Court had already sanctioned this very Scheme on behalf of the transferor-company. H 14 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. As the registered office of the transferee-company is located at Ahmedabad the respondent transferee-company had approached the High Court of Gujarat for sanctioning this very Scheme of Amalgamation on behalf of the transferee-company and that application was moved on 8th February 1994. It is at this stage that the appellant who was one of the shareholders. of the transferee-company filed his objection to the Scheme of Amalgamation moved under Section 391 of the Act. Earlier the learned Single Judge directed convening of meeting of equity shareholders of the respondent-company. In the meeting of equity shareholders convened pur­ suant to the order of the High Court, overwhelming majority of the equity shareholders approved the Scheme in the meeting of 22nd January 1994 convened at Premabhai Hall, Bhadra, Ahmedabad. The said meeting was attended by 5522 members present in person or by proxy, holding 20, 48, 513 fully paid equity shares of Rs. 100 each aggregating to Rs. 20,48,51,300. At the said meeting, resolution was passed without modification by the requisite majority as 5298 members holding 19, 36, 964 fully paid equity shares vokd in favour of the Scheme and 143 members holding 86, 061 D fully paid equity shares voted against the Scheme. In short, the said meeting by requisite majority approved the proposed Scheme of Amalgamation and report of the Chairman was submitted to the High Court. Thereafter the respondent-company MIL filed Company Petition No. 22 of 1994 under Section 391(2) of the Act. That application was ordered to be published in local newspapers as well as in the Bombay edition ofthe said newspaper. Notice was also issued to Regional Director, Company Law Board, Western Region, Bombay. In response to the notice issued to the Central Government under Section 394A of the Act the learned Additional Central Government F Standing Counsel appeared before the High Court and submitted to the orders of the Court making it clear that the Central Government is not to make any representation in favour or against the proposed Scheme. Pursuant to the public advertisement only the present appellant, the G shareholder of transferee-company holding 40, 567 share in MIL filed affidavit opposing the Scheme of Amalgamation and Arrangement between the respondent transferee-company MIL and transferor-company MFL of which, as noted earlier, he himself was one of the directors and the High Court of Bombay which sanctioned this very Scheme on behalf of the transferor-company had sanctioned· the Scheme without any objection H being taken by the appellant at that stage. _ __.. ; ... a < <~ MlHEERH.MAFATLAL v. MAFATLALINDS.LTD.(S.B.MAJMUDAR,J.] 15 Nine objections were raised by the appellant against the proposed A Scheme of Amalgamation as shareholder of the transferee-company. At this stage we may not mention all these nine objections as ultimately only four objections have survived for our consideration in the present proceed- ings and to which we will make a detailed reference hereinafter. Suffice it to state at this stage that after a prolonged hearing the learned Single Judge B S.D. Shah, J., over-ruled these objections and by a detailed as exhaustive judgment running over 254 pages covering various aspects of the matters canvassed before him sanctioned the said Scheme moved on behalf of the respondent transferee-company . The Division Bench of the High Court to which the appellant carried C the matter in appeal confirmed the aforesaid decision of the learned Single Judge by well considered Judgment which also ran into 136 pages and that is how the appellant, original objector, is before us in this appeal. Family Hist01y D In order to properly appreciate the grievance of the appellant against the proposed Scheme and his roie as an objector it will be necessary to note the family history of the appellant and two of the directors of the respondent transferee-company who have a comm~n ancestor Mafatlal Gagalbhai. The Family Tree of Mafatlal Gagalbhai projects the following E picture: Family Tree of Maf at/al Gagalblzai Seth Mafatlal Gagalbhai (Died on 19.07.1944) Navinchandra Bhagubhai (Died 31.08.1955) (Died 30.09.1944) Arvind Yogindra Rasesh Hemant Padmanabh (Died on (Died on Hrishikesh Atulya Pradeep 16.08.1971) 29.07.1990) Miheer (Born on 27.05.1958) Pransukhlal (Deceased) (No issues) ·~ A As the aforesaid Family Tree shows, the appellant Miheer is the son of cousin brother of Arvind Navinchandra who is said to be at the helm of affairs of the transferee-company along with his son Hrishikesh. As seen from the Family Tree the common ancestor Mafatlal Gagalbhai who was himself a very astute businessman and entrepreneur had three sons Pran- sukhlal. Navinchandra and Bhagubhai. The eldest son Pransukhlal got out of the family prior to the death of Mafatlal Gagalbhai and he died without leaving any issue. Mafatlal Gagalbhai expired on 19th July 1944 and was survived by his two sons Navinchandra and Bhagubhai. On 30th September 1944, the said Bhagubhai died leaving him surviving Hemant, then aged 9 as his only male issue. On 31st August 1955, Navinchandra Mafatlal died leaving him surviving the three sons. Arvind Mafatlal. Y ogindra Mafatlal and Rasesh mafatlal as his male issues. On 16th August 1971, said Hemant expired leaving behind him only male issue, present objector Miheer, them aged 13. D The said Mafatlal Gagalbhai started different business undertakings and with passage of time, the family of said Mafatlal consisting to Navinchandra and Bhagubhai expanded their business undertakings. The said family held controlli!lg interest in 'different business concerns run throug~ public limited_ or private limited companies and the members of the family were also partners in partnership firms. The pattern which was E maintained throughout was thatthe two sons Navinchandra and Bhagubhai and their families would respectively have an equal interest in companies or in partnership firms. At the time of the death of the said Bhagubhai the said Hemant was just 9 years of age. The business of Mafatlal Group was therefore for all practical purposes managed by the said Navinchandra. At F the time to the death of _Navinchandra the shareholding of.the branch of Hemant Mafatlal in Mafatlal Group of Industries was equal to aggregate shareholding of Arvind Mafatlal, Y ogindra Mafatlal and Rasesh Mafatlal. On the death of Navinchandra, the Mafatlal Group was managed by Arvind Mafatlal, Yogindra Mafatlal, Rasesh Mafatlal and late Hemant Mafatlal. Arvind Mafatlal was, however the eldest male member in the family who G was always looked upon by Yogindra, Rasesh and late Hemant as an elder in the family and respected. On 16th August 1971, Hemant Mafatlal died at the young age of 36 years leaving behind him his widowed mother, his wife, his son Miheer H (then aged 13) and his two daughters (then aged 11 and 6). At that time, MIHEERH.MAFATLAL v. MAFATLALINDS.LTD.[S.B.MAIMUDAR,J.] 17 the Mafatlal family, i.e., the families of Navinchandra and Bhagubhai were A· running 3 apex companies (1) Mafatlal Gagalbhai & Company Private Limited, (2) Surat Cotton Spinning and Weaving Mills Private Limited and (3) Pransukhlal & Company Private Limited. It is the case of Miheer that when his father expired, the New Shorrock Spinning and Manufacturing Co. Limited was being controlled B and managed by Mafatlal Gagalbhai & Co. Limited in which his father and his family had 46.47% shares vis-a-vis 43.66% shares held by the family of Navinchandra Mafatlal. After the death of his father, when Miheer was minor, it was decided to amalgamate Mafatlal Gagalbhai & Co. Pvt. Limited with the New Shorrock Spinning & Manufacturing Co. Limited on C 24th January 1974 January 1974 :.i.nd the name of the company was changed to present name i.e. MIL. According to the appellant Miheer in or around 1979, there were certain disputes and difference amongst Arvind Mafatlal, Yogindra Mafat­ Ial and Rasesh Mafatlal and it was felt that some arrangement should be worked put, whereby there would be a separation and division of the family business concerns amongst the four branches viz. Miheer Branch known as MHM Group, family of Arvind Mafatlal known as ANM Group, family of Y ogindra Mafatlal known as YNM Group and family of Rasesh Mafatlal known as RNM Group. It is his further case that Shri C.C. Chokshi, a reputed chartered accountant was requested to prepare a Scheme for division of family business concerns. According to the appellant. Shri C.C. Chokshi prepared Note dated 23rd February 1979 making six suggestions for the division of Mafatlal Group of Industries into four groups as there were four family groups. The appellant contends that as per the aforesaid family arrangement the transferee-company, i.e., MIL was agreed to be put to his share and the other groups which were holding shares in the said transferee-company were to transfer their share-holdings in favour of the appellant. The appellant contends that however because of some family disputes the appellant fell from the grace of Shri Arvind Mafatlal who was the eldest male member monitoring all these industries belonging to all the G groups of the same family, and consequently the family arrangement was not give effect to and that the transferee-company was not handed over in management to the appellant. On the other hand the case of the other group headed by Shri Arvind H A Mafatlal was to the effect that the said family arrangement of 1979 was given a go-by and the appellant himself agreed to sell his share-holding in the transferee-company MIL in favour of Arvind Mafatlal''.: Group. Num­ ber of litigations took place between the parties in the second half of 1980s. That on 6th April 1987 Arvind Mafatlal filed Suit No. 10 of 1987 in the High Court of .Judicature at Bombay for a declaration that there was a valid, subsisting and binding contract to sell shares held by Rasesh Mafat­ lal, Y ogindra Mafatlal and Miheer Mafatlal, the appellant herein, groups to Shri Arvind Mafatlal's group and for a direction that they should sell that shares at a price to be determined by the arbitrator. In the said suit the appellant Miheer filed a counter-claim praying that the family arran­ gement of 1979 should should be enforced and the share-holding of Shri Arvind Mafatlal's group and other groups in the transferee- company MIL should be sold by way of specific performance to the appellant. The aforesaid suit by Arvind Mafatlal and the counter- claim by the appellant are pending for adjudication in the High Court of Judicature at Bombay. D It is in the background of the aforesaid history of family feud between these warring groups descended from the common ancestor Shri Mafatlal Gagalbhai that the grievance voiced by the appellant in these proceedings has to be appreciated. Rival Contentions As noted earlier though a battle royal was fought between the contesting parties before the learned Single Judge wherein nine objections were raised for adjudication by the appellant, at this stage, the dispute centered round a limited number of contentions which were canvassed for F our consideration by learned senior counsel for the appellant. Four-fold. submissions for opposing the Scheme were canvassed on behalf of the appellant before us by Shri Shanti Bhushan, learned senior counsel. In the first place he contended that the respondent-company while putting the Scheme for approval of the equity shareholders in their meeting did not G disclose the interest of the directors, namely, Shri Arvind Mafatlal and Shri Hrishikesh Mafatlal belonging to the camp of Arvind Mafatlal in the explanatory statement supporting the Scheme and consequently the +.' shareholders were misled and could not come to an informed decision regarding the approval of the said Scheme with the result that the approval by the majority of equity shareholders to the said Scheme has got vitiated; H (2) The Scheme as proposed was unfair to the minority shareholders MIHEERH.MAFATLAL v. MAFATLALINDS.LID.[S.B.MATMUDAR,J.) 19 represented by the appellant and consequently it ought not to have been A sanctioned by the Court; (3) The Scheme was otherwise unfair to ·the equity shareholders as the exchange ratio of equity shares of the transferor and transferee companies was ex facie unreasonable and unfair to the shareholders of the transferee-company MIL in so far as it provides under the Scheme that two equity shares of the transferee company will be • B allotted against five equity shares of the transferor-company at their respective face value of Rs. 100 per share; and ( 4) That the appellant represented a distinct class of equity shareholders so far as the respondent transferee-company is concerned and consequently separate meeting_ so far as his group is concerned should have been convened by the Company Court and as that has not been done the Scheme is liable to be rejected. C As a corollary to the aforesaid contention Shri M.J. Thakore, learned counsel appearing for the appellant in addition submitted that the voting pattern as adopted in the meeting of equity shareholders which had ap­ proved the Scheme by majority, resulted in coercing the minority repre- D sented by the appellant and that has rendered the Scheme unfair and unreasonable and consequently it is required to be rejected. On the other hand learned senior counsel Shri Sorabjee appearing for th respondent transferee-company contended that there was to illegality either procedural or substantive vitiating the Scheme and that there was E no suppression of relevant material from the shareholders when the Scheme was put to vote. That the personal disputes between the worring groups of the family, namely, Arvind Mafatlal on the one hand and the appellant on the other and which were subject-matter of the pending litigation in Bombay High Court had nothing to do with the question of F sanctioning the Scheme for its better economic viability with which the shareholders were concerned and that as the transferor-company and the transferee-company were juristic persons and corporate bodies, while con­ sidering the question of approving the said Scheme such personal disputes between the directors of the transferee-company and the director of trans- G feror-company were completely irrelevant and were out of consideration of the equity shareholders who were not at all c9ncerned with this type of internal feuds and in any case non-disclosure of such disputes had no adverse effect on the decision of the majority share_holders who had approved the Scheme with a thumping majority of about 95% and the appellant who was objecting to the Scheme was in microscopic minority of H 20 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A 5% of the total voting strength. It was also contended by learned senior counsel for the respondent that it is wrong to assume that the transferee­ company was family concerned and was managed by families. That Shri Arvind Mafatlal and Hrishikesh Mafatlal were only two direcfors out of thirteen directors of respondent-company. These eleven directors did not belong to his family. That even shareholding of Arvind Mafatlal's group in the respondent-company was not substantial and on the contrary about 40% shares were held by outside financial institutions. Even otherwise there was no question of any unfairness underlying the proposed Scheme or that in any way it was unfair to the appellant who never cared even to remain present personally at time of the meeting of the equity shareholders to put forward his objections and he only sent proxies who had no right to speak at the meeting. That therefore all these objections which he ultimate­ ly raised before the High Court were an afterthought. It was also contended that there was nothing wrong with the exchange ration as C.C. Chokshi & Co., a firm of reputed chartered accountants, had considered all the pros and cons underlying the Scheme and had suggested the exchange ratio and such an expert opinion was endorsed by another financial institution ICICI. That the appellant had not chosen to controvert this expert opinion by leading any evidence in rebuttal by any other expert in the field who could have suggested the exchange ratio differently. That the appellant's conten- tion that the exchange ratio should have been one share of transferee company against six shares of the transferor company was in the realm of mere conjecture and ipse di.xit. It was not supported by any expert opinion. Consequently the High Court was justified in taking the view both at the stage of learned Single Judge as well as in appeal by the Division Bench that the exchange ratio could not be said to be unfair or unreasonable especially when by as overwhelming majority the equity shareholders ap­ proved the said Scheme along with said exchange ratio and had no objec­ tion to the allotment of two equity shares of the transferee-company in exchange for five equity shares of transferor-company. It was also con­ tended that the appellant himself who was the director of the transferor­ company had approved the same exchange ratio while he acted on behalf G of the transferor-company. He was, therefore, playing hide and seek when it came to the enforcement of the very same exchange ratio at the end of the transferee-company wherein he was not a director but only shareholder of merely 5% shares. H It was next contended that the appellant was also an equity MIHEERH.MAFA1LAL v. MAFA1LALINDS.LTD.(S.B.MAJMUDAR,J.] 21 shareholder and so far as the other equity shareholders were concerned A they constituted the same class as the appellant. That there was no inter se conflict between the rest of the equity shareholders representing 95% of the voting strength which approved the Scheme and the appellant who . ._ represented dissenting 5% votes and consequently there was no question of holding as separate meeting so far as the appellant was concerned. Even · B otherwise such a separate meeting would not have made any impact on the voting pattern projected by the equity shareholders approving the said Scheme by overwhelming majority. Repelling the additional contention canvassed by learned counsel for the appellant it was submitted by Shri Sorabjee learned senior counsel for the respondent that there was no question of coercing any minority by the majority as in the meeting of the C equity shareholders the appellant had not thought fit even to remain present personally and had only got represented through proxy for submit- ting his objection by voting against the Scheme without having any right to address the meeting. Thus the contention regarding alleged suppression by the majority was purely an afterthought especially when in the meeting the D group of Arvind Mafatlal had not represented an absolute majority and 40% of the voting was by financial institutions who had no axe to grind against the appellant and who had voted by keeping in view purely com­ mercial and economic interests of equity shareholders and had approved the Scheme in that light. It was, therefore, submitted that the contention raised on behalf of the appellant deserve to be rejected and the appeal E consequently also deserve to be dismissed. In view of the aforesaid rival contentions the following points arise for our determination : 1. Whether the respondent-company was guilty of hiding the special interest of its director Shri Arvind Mafatlal from the shareholders while circulating the explanatory statement supporting the Scheme and whether thereby the voting by the equity shareholders got vitiated. 2. Whether the Scheme is unfair and unreasonable to the minority G shareholders represented by the appellant. 3. Whether the proposed Scheme of Amalgamation was unfair and amounted to suppression of minority shareholders represented by the appelJant and hence liable to be rejected. H 22 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. 4. Whether separate meeting of minority shareholders represented by the appellant was required to be convened on the basis that the appellant's group represented a special class of equity shareholders. 5. Whether the exchange ratio of two equity shares of MIL for five equity shares of MFL was ex f acie unfair and unreasonable to the equity shareholders of MIL and consequently the Scheme of Amalgamation on that account was liable to be rejected. However before we deal with the aforesaid. points for determination seriatim, it will be necessary to keep in view the limited scope of the C jurisdiction of the Company Court which is called upon to sanction the Scheme of Amalgamation as per the provisions of Section 391 read with Section ~93 of the Act. Scope of inte1ference by the Company Cowt in sanction proceedings The relevant proyisions of the Companies Act, 1956 are found in Chapter V of Part VI dealing with 'Arbitration, Compromises, Arrange­ ments and Reconstructions'. In the present proceedings we will be con­ cerned with Sections 391 and 393 of the Act. The relevant provisions thereof read as under : "391. (1) Where a compromise or arrangement is proposed - (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them; the Court may, on the application of the company, or, ·of any. creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs. (2) If a majority in number representing three-fourths in value of . the creditors, or class of creditors, or members, or class of mem­ bers, as the case may be, present and voting either in person or, H . where proxies are allowed under the rules made u.nder section 643, MIHEER H. MAFATLAL v. MAFATLALINDS. LID. [S.B. MNMUDAR, J.] 23 by proxy, at the meeting, agree to any compromise or arrangement, A the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company : Provided that no order sanctioning any compromise or arran­ gement shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Court, by affidavit or otherwise, all material facts relating to the company, C such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like. 393. (1) Where a meeting of creditors or any class of creditors, or D of members or any class of members, is called under section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement E setting forth the terms of the compromise or arrangement and explaining its effect : and in particular, stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests, F of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons; and (b) in every notice calling the meeting which is given by adver- G tisement, there shall be included either such a statement as aforesaid on a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid." The aforesaid provisions of the Act show that compromise or arrangement H 24 SUPREME C,OURT REPORTS (1996) SUPP. 6 S.C.R. . A can be proposed between a company and its creditors or any class of them or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgama­ tion/merger of one company with another. When such a scheme is put forward by a company for the sanction of the Court in the first instance B the Court has to direct holding of meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme and once the majority in number representing three-fourths in value of creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting c. accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the Court, it would be binding to all creditors. or class of creditors or members or class of membc:rs, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members D such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the Court has· to be satisfied that the company or any other person moving such an application for sanction under sub-section (2) of Section 391 has disclosed all the relevant matters mentioned in the proviso to sub-section (2) of that Section. So far as the meetings of the creditors or members, or their respective classes for whom the Scheme is proposed are concerned, it is enjoined by Section 391(1)(a) that the requisite infor­ mation. as contemplated by the said provision is also required to be placed for consideration of the concerned voters so that the parties concerned before \Vhom the scheme is placed for voting can take an informed and objective decision whether to vote for the scheme or against it. On a conjoint reading of the relevant provisions of Sections 391 and 393 it becomes at once clear that the Company Court which is called upon to sanction such a scheme has not merely to by go by the ipse di.xit of the majority of the shareholders or creditors or their respective classes who G might have voted in favour of the scheme by requisite majority but the Court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which H is required to receive the imprimature of a court of law. No court of law MIHEER H. MAFATLAL v. MAFATLAL INDS. LTD. (S.B. MAJMUDAR, J.] 25 would ever countenance any scheme of compromise or arrangement ar- A rived at between the parties and which might be supported by the requisite majority if the Court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust to the class of shareholder or creditors for whom it is meant. Consequently it cannot be said that a Company Court before whom an application is moved for sanctioning such a scheme which might have got the requisite majority support of the creditors or members or any class of them for whom the scheme is mooted by the concerned company has to act merely as a rubber stamp and must almost automat­ ically put its seal of approval on such a scheme. It is trite to say that once the scheme gets sanctioned by the Court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company Court while putting its seal of approval on the concerned scheme placed for its sanction. It is, of course, true that so far as the Company Court is concerned as per the statutory provisions of Sections 391 and 393 of the Act the question of voidability of the scheme will have to be judged subject to the rider that a D scheme sanctioned by majority will remain binding to a dissenting minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that eXtent absence of their consent will have no effect on the scheme. It can be postulated that even in case of such a Scheme of Compromise and Arrangement put up for sanction of a E Company Court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with required majority vote. F However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinies the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by Section 391 G . , I sub-Section (2). On this aspect. the nature of"compromise or arrangement between the company and the ~creditors and members has to be kept in . view. It is the commercial wisdom of the parties to the scheme who have taken and informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept H 26 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A in view by the Court. The Court certainly would not act as a court of appeal nd sit in judgment over the informed view of the concerned parties to the compromise as the same would be in the realm of corporate and commer­ cial wisdom of the concerned parties. The Court has neithe~ the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company .who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umprie in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervis~ry jurisdiction of the Company Court can also be culled out from the provisions of Section 392 of the Act which reads as under : "392. (1) Where a High Court makes an order under Section 391 sanctioning a compromise or an arrangement in respect of a company, it - (a) shall have power to supervise the carrying out of the com­ promise or arrangement; and (b) may, at the time of making such order or at any time there­ after, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the com­ promise or arrangement. (2) If the Court aforesaid is satisfied that a compromise or arran­ gement sanctioned under section 391 cannot be worked satisfac­ torily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act. (3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under section 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an .. MIHEERH.MAFATLAL v._MAFATLALINDS.LID.[S.B.MAJMUDAR,J.]27 I arrangement." Of course this Section deals with post-sanction supervision. But the said provision itself clearly earmarks the filed in which the sanction of the Court operates. It is obvious that the supervisor cannot ever be treated as the author or a policy maker. Consequently the propriety and the merits of the compromise or arrangement have to be judged by the parties who as sui juris with their open eye and fully informed about the pros and cons of the Scheme arrive at their own reasoned judgment and agree to be bound by such compromise or arrangement. The Court cannot, therefore, undertake the exercise of scrutinising the scheme place for its sanction which a view to finding out whether a better scheme could have been adopted by the parties. This exercise remains only for the parties and is in the realm of commercial democracy permeating the activities of the concerned creditors and members of the company who in the their best commercial and economic interest by majority agree to give green single to such a com­ promise or arrangement. The aforesaid statutory scheme which is clearly D discernible from the relevant provisions of the Act, as seen above, has been subjected to a series of decisions of different High Courts and this Court as well as by the courts in England which had also occasion to consider schemes under pari materia English Company Law. We will briefly refer to the relevant decisions on the point. But before we do so we may also usefully refer to the observations found in the oft-quoted passage in Bucklay E on the Companies Act, 14th Edition. They are as under: "In exercising its power of sanction the Court will see, first that the provisions of the statute have been complied with, second, that the class was fairly represented by those who attended the meeting F and that statutory majority are acting bona fide and are not coerc- ing the minority in order to promote interest adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the ciass concerned and acting in respect of his interest, might reasonably approve. G The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but at the same time, the court Will be slow to differ from the meeting, unless either the class has not been properly consulted, H 28 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. or the meeting has not considered the matter with a view to the interest of the class which it is empowered to bind, or some blot is found in the Scheme." In the case of Re. Alabama, New Orleans Texas and Pacific junction Railway Company reported in 1891 (1) Chancery Division 213 the relevant observations regarding the power and jurisdiction of the Company Court which is called upon to sanction a scheme of arrangement or compromise between the company and its creditor or shareholders were made by Lindley, L.J. as under : "What the court has to do is to see, first of all, that the provisions of that statute have been complied with; and, secondly, that the minority has been-acting bonafide. The court also has to see that the minority is not being overriden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonable be taken by businessmen. The court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bonafide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve it." To the similar ef\¢ct were the observations of Fry, L.J., which read as under: "The next enquiry is-Under what circumstances is the court to sanction a resolution which has been passed approving of a com­ promise or arrangement? I shall not attempt to define what ele­ ments may enter into the consideration of the court beyond this, that I do not doubt for a moment that the Court is bound to ascertain that all the conditions required by the statute l~ve been complied with; it is bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intel- \ MIHEER H. MAFATLAL v. MAFATLALINDS. LID. [S.B. MAJMUDAR, J.] 29 ligent and honest man, who is a member of that class, and acting A alone in respect of his interest as such a member, might approve of it. What other circumstances the court may take into considera- tion I will not attempt to forecast." In Anglo-Continental Supply Co. Ltd., Re. (1992) 2 Ch. 723 Ashtury, J., a century later reiterated the very same propositions as under : "Before giving its sanction to a scheme of arrangement the court will see firstly that the provisions of the statute have been complied with; secondly that the· class was fairly represented by those who attended tile meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and, thirdly, that the arrangement is such as a man of business would reasonably approve." Learned Single Judge of the Calcutta High Court in the case of Re. D Mankam Investments Ltd. and Others (1995) 4 Comp U 330 (Cal.) relying on a catena of decisions of the English Courts and Indian High Courts observed as under on the power and jurisdiction of the Company Court which is called upon to sanction a scheme of merger and amalgamation of companies: E "It is a matter for the shareholders to consider commercially whether amalgamation or merger is beneficial or not. The court is really not concerned with the commercial decision of the shareholders until and unless the court feels that the proposed merger is manifestly unfair or is being proposed unfairly and/or to F defraud the other shareholders. Whethe.r the merged companies will be ultimately benefited or will be able to economise in the matter of expenses is a matter for the shareholders to consider. If three companies are amalgamated, certainly, there will be some economies in the matter of maintaining accounts, filing of returns G and various other matters. However, the court is really not con­ cerned with the exact details of the matter and if the shareholders approved the scheme by the requisite majority, then the court only looks into the scheme as to find out that it is not manifestly unfair and/or is not intended to defraud or do injustice to the other shareholders." H 30 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A We may also in this connection profitably refer to the judgment of this Court in the case of Hindustan Lever Employee's Union v. Hindustan Lever Ltd. and Others, [1995) Supp. 1 SCC 499 wherein a Bench of three learned judges speaking through Sen, J. on behalf of himself and Venkatachaliah, CJ., and with which decision Sahai, J., concurred. Sahai, J., in his concur- ring judgment in the aforesaid case has made the folloWing pertinent observations in this connection in paras 3. and 6 of the Report : "But what was lost sight of was that the jurisdiction of the Court in sanctioning a claim of merger is not to ascertain with mathe­ matical accuracy if the determination satisfied the arithmetical test. A company court does not exercise an appellate jurisdiction. Section 394 casts an obligation on the court to be satisfied that the scheme for amalgamation or merger was not contrary to public interest. The basic principle of such satisfaction is none other than the broad and general principles inherent in any compromise or settlement entered between parties that it should not be unfair or contrary to public policy or unconscionable. In amalgamation of companies, the courts have evolved, the principle. "prudent busi­ ness management test" or that the scheme should not be a device to evade law. But when the court is concerned with a scheme of merger with a subsidiary of a foreign company then test is not only whether the scheme shall result in maximizing profits of the shareholders or whether the interest of employees was protected but it has to ensure that merger shall not ·result in impeding promotion of industry or shall obstruct growth of national economy. Liberalised economic policy is to achieve this goal. The merger, therefore, should not be contrary to this objective. Reliance on English decisions Hoare & Co. Ltd., Re 1933 All ER Rep 105, Ch ·D and Bugle Press Ltd .. Re. 1961 Ch 270 that the power of the court is to be satisfied only whether the provisions .P( .tl!t?. .~f::tJg1xe J?eeru:oi;nplied with· or, that therdassyor classes 1?bfrirl:WI~r.e MIY.:rf!pr.esent1,:;p a1'-P!the .wrangemeqbwas;suthras,a man of 1 r, nu l;>µsjQ.~SliJW.OHl.dirJ(~l>OJ:!(/:b]y ~pprove bt;tween.two1private1e~_mpanies nu ; tµ~YHQ~nCPfi.fieft !ian,4 Jn;J;ay normally; be1:a4her¢d (to ibJ.lt 11when the , > :.Al.:le!;ge!. 1~~~~th :<!-'.:Sl\bsiflU.ry :.Pf <i 1fo.reign;90mpany th¢P, 1 ei:;onomic interest of the country may have to be giYeniiJ)rete<;fence. The MIHEER H. MAFATLAL v. MAFATLALINDS. LTD. [S.B. MAIMUDAR, J.) 31 jurisdiction of the court in this regard is comprehensive." Sen, J ., speaking for himself and Venkatachaliah, CJ., also towed the line indicated by Sahai, J ., about the jurisdiction of the Company Court while sanctioning the scheme and made the following pertinent observations in paragraph 84 at page 528 of the Report : "An argument was also made that as a result of the amalgama- tion, a large share of the market will be captured by HLL. But there is nothing unlawful or illegal about this. The Court will decline to sanction a scheme of merger, if any tax fraud or any other illegality is involved. But that is not the case here. A company may, on its own, grow up to capture a large share of the market. But unless it is shown that there is some illegality or fraud involved in the scheme, the Court cannot decline to sanction a scheme of amalgamation. It has to be borne in mind that this proposal of amalgamation arose out of a sharp decline in the business of TOMCO. Dr. Dhavan has argued that TOMCO is not yet a sick D Company. That may be right, but TOMCO at this rate will become a sick Company, unless something can be done to improve its performance. In the last two years, it has sold its investments and other properties. If this proposal of amalgamation is not sanc­ tioned, the consequence for TOMCO may be very serious. The shareholders, the employees, the creditors will all suffer. The argument that the Company has large assets is really meaningless. Very many cotton mills and jute mills in India have become sick and are on· the verge of liquidation, even though they have large assets. The Scheme has been sanctioned almost unanimously by the shareholders, debenture-holders, secured creditors, unsecured creditors and preference shareholders of both the Companies. There must exist very strong reasons for withholding sanction to such a scheme. Withholding of sanction may turn out to be dis­ astrous for 60,000 shareholders of TOMCO and also a large number of its employees." In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged : 1. The sanctioning court has to see to it that all the requisite statutory H 32 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section ·39l(l)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub- Section (2). 3. That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to leg,itimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by Section 391 sub-Section (1). D 5. That all the requisite material contemplated by the proviso of sub-Section (2) of Section 391 of the Act is placed before the Court by the concerned appllicant seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not E found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the Scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying th~ scheme and can judiciously · X-ray the same. F 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were .not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent. 8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom· the scheme is meant. H 9. Once the aforesaid broad parameters about the requirements of a 34 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. ) A better, more efficient and economic control in the running opera- tions and would lead to economy in the administrative and manage- ment cost, resulting in improving profitability. The amalgamated company will have a strong and large resource funds. The com- I bined Technological Managerial and financial resources would • l. ' B enhance the capability of the amalgamated company to invest in larger and sophisticated projects to ensure rapid growth. The amalgamated company's Textiles Division with five operative units at its disposal will have· flexibility in its operation." ...._ So far as the aforesaid explanatory statement is concerned it gives sufficient c indication regardingJhe pliability and usefulness of the proposed Scheme of Amalgamation of transferor-company MFL with the transferee-company MIL. However the special grievance of the appellant voiced by his learned counsel is to the effect that the real interest underlying the scheme of merger was that of the director Shri Arvind Mafatlal and his group who were at the helm of affairs of the transferee,company. Learned senior counsel Shri Shanti Bhushan in this connection submitted that under Section 393(1)(a) of the Act the company is enjoined to mention in the statement material interest of the director Shri Arvind Mafatlal in the .~ Scheme which is of a special nature as compared to the interest of other shareholders and it was also necessary to mention the effect of the com- E promise and arrangement on such special interest of Shri Arvind Mafatlal and ~s that was not mentioned in the explanatory statement along with which the copy of the Scheme was circulat.ed to the members the majority vote became vitiated. Now a mere look at Section 393(1)(a) shows that the special interest of the director which is required to be brought home to the F voters must satisfy the following requirements of the Section before it can be treated to be a relevant special interest of the director which is required to be communicated to the voters : 1. The director's interest must be a special interest different from the interest of other members who are the voters at the meeting . .) G 2. The compromise or arrangement which is put to vote must have t an effect on such special interest of the director. 3. Such effect must be different from the effect of compromise and arrangement on similar interest of other persons who are called upon to H vote at the meeting. ~ MIHEERH.MAFA11..AL v. MAFA11..ALINDS.LTD. [S.B.MAJMUDAR,J.] 35 When we enquired of Shri Shanti Bhushan, learned senior counsel for the A appellant as to which special interest, according to him, of director Arvind Mafatlal was required to be communicated to the voters as per Section 393(1)(a), he stated that there was a pending litigation between the appel- lant on the one hand Shri Arvind Mafatlal on the other in Bombay High Court. That Shri Arvind Mafatlal had sought a declaration in a pending suit against the appellant that the latter was required to sell off his share-holding in the transferee-company MIL to the plaintiff Arvind Mafatlal who was director of MIL. In this very suit the appellant had filed a counter-claim to the effect that· Shri Arvind Mafatlal and his group was required to transfer their share-holding in the transferee-company in favour of the appellant as per the Family Arrangement of 1979. Shri Shanti C Bhushan in this connection submitted that though the learned Single Judge had taken the view that this type of special interest of director Arvind mafatlal was not relevant and germane to the requirement of Section 393(1)(a), the Division Bench in appeal had taken a contrary view and held that such a special interest was required to be communicated to the equity D shareholders in their meeting as per the said provision. In this connection our attention was invited by Shri Shanti Bhushan to the observation of the Division Bench of the High Court at page 325 of the paper book wherein the Division Bench observed as under : , "Mihir H. Mafatlal was to get exclusive control to MIL to t~e exclusion of Arvind N. Mafatlal and his two brothers. Under the proposed family arrangement M. Fine was to be hived off from MIL and the control and management of the M. Fine was to be held by Arvind N. Mafatlal and that of MIL was tc:i be handed over to objector Mihir H. Mafatlal. This family arrangement has suf- F fered rough weather. Suit No. 1010of1987 was filed by Arvind N. Mafatlal against Mihir H. Mafatlal and others before the Bombay High Court alleging that another agreement subsequent to the said family arrangement has come into existence under which Mihir H. Mafatlal and other brothers of Arvind had agreed to transfer all their holdings in MIL to A.N. Mafatlal, drawing a curtain on the G family arrangement of 1979. Mihir H. Mafatlal has filed counter claim in that suit claiming enforcement of family arrangement of 1979. The said dispute and the outcome thereof will have direct effect on the respective interest of the shares held by AN. Mafatlal, Mihir H. Mafatlal and other members of the Mafatlal family, and H 36 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. trusts. under them." He also invited our attention to the observations of the Division Bench at page 328 of the paper book to the effect that having cons;dered the rival co.ntentions and closely examined the scheme of Section 393, they were unable to sustain the conclusion that the facts about the interests under the alleged family arrangements and the effect of proposed arrangement for amalgamation on such interests were not required to be disclosed under section 393(1)(a). In our view the aforesaid observations of the Division Bench are not C quite apposite in the light of the proposed Scheme of Compromise and arrangement which was sought to be got sanctioned by the Court. On the other hand the learned Single Judge was quite justified in taking the View that this type of interest which was of personal nature so far as director Arvind Mafatlal on the one hand and appellant on the other hand were D concerned was not at all germane to the question relating to sanctioning of the Scheme of Compromise and Arrangement with which the Court was concerned. It is obvious that when a. Scheme of Compromise and Arran­ gement which involves two companies, namely the transferor- company and the transferee-company and their shareholders and creditors is on the anvil of scrutiny before the sanctioning Court, the court has to see that the E interest of the class of creditors or shareholders to whom the Scheme is offered for approval is any way likely to be affected by the suppression of special interest of the director in connection with such a scheme which is on the anvil. Two independent bodies which are represented by their shareholders or creditors as a class, as the case may be, have to take F commercial decisions strictly with a view to seeing that the concerned ' Scheme of Compromise or Arrangement is beneficial to the shareholders or creditors as a class vis-a-vis the company which is a corporate entity in so far as company's relations with these class of creditors and shareholders are concerned. If the special interest which the director has is in any way likely to be affected by the Scheme and if non-disclosure of such an interest G is likely to affect the voting pattern of the class of creditors or shareholders who are called upon to vote on the scheme, then only such special interest of the .director is required to be communicated to the voters as per Section 393(1)(a). We fail to appreciate how the personal family dispute between the appellant on the one hand and Arvind Mafatlal, director of the trans- H feree-company MIL on the other regarding the right to hold shares in the - ..... MIHEER H.MAFAlLAL v. MAFKILALINDS. LID. [S.B. MATMUDAR, J.) 37 company can have any linkage or nexus with the Scheme of Amalgamation A of these two companies which was put to vote before the equity shareholders. It is easy to visualize that if the suit filed by Arvind Mafatlal against the appellant succeeds and the appellant's counter-claim fails then all that would happen is that the appellant will have to sell his share-hold- ing which is only 5% in the transferee-company to the plaintiff Arvind Mafatlal. That. has nothing to do with the equity shareholders as a class which was called upon to decide whether the scheme of merging the transferor-company MFL with the transferee-company was for the benefit of the shareholders as a class. The equity shareholders of the transferee- com pany had to ,decide in their commercial wisdom whether it is worthwhile to have a larger body of shareholders on account of the merger so that apart from the shareholding of the transferee-company its objects would also get diversified and its filed of operation would be enlarged with the prospect of hike in the dividend available to these shareholders after the economic and industrial activities of both the companies so amal­ gamated would get elongated and whether the value of their shares in such D consolidated companies were likely to get a boost in the stock market. This was the commercial decision which the equity shareholders of the trans­ feree-company .had to take. For taking this informed decision they were least concern~d whether 5% share-holding of appellant in the company remained or did not remain with him in future. Consequently if Arvind Mafatlal's suit ultimately succeeded before the Bombay High Court and the appellant lbst in his counter-claim that would have no effect whatsoever on the informed decision which the equity shareholders were called upon to take while approving the scheme in question. Conversely if the appellant succeeded in his counter-claim and direc- F tor Arvind Mafatlal lost in his suit then all that would happen is that Arvind Mafatlal will have to transfer his share- holding and share-holding of his group in favour of appellant so far as the transferee-company is concerned. That future possibility would have no impact on the decision making process which the equity shareholders of transferee-company had to un- G dertake at this stage while approving the Scheme. Consequently such an eventuality was totally irrelevant for being brought to the notice of the equity shareholders before whom the scheme was put to vote. While deciding whether transferor-company should be merged with the trans­ feree-company and the transferee-company's economic and industrial ac­ tivity should be permitted to be enlarged as a result of such merger the H 38 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A equity shareholders were least concerned whether the appellant would purchase in future the share of the present director Arvind Mafatlal or vice versa. That was entirely their personal dispute which was still not adjudi­ cated upon and its decision one way qr the other had no impact on the pattern of voting of the equity shareholders of the respondent-company as a class of prudent businessmen and investors so far as the Scheme was concerned. The Scheme of Compromise and Arrangement which was put to vote was of such a nature that it had no impact or effect on the personal interest of the director Arvind Mafatlal in connection with his present share-holding in the transferee-c()mpany. Consequently it must be held that mention about such an interest was outside the statutory requirements of Section 393(1)(a) as rightly held by the learned Single Judge whose view was erroneously upset by the Division Bench. However in any case we are in entire agreement with the subsequent reasoning of the Division Bench for approving the decision of the learned Single Judge on this aspect, namely, that such non-disclosure of interest had no impact on the voting pattern adopted at the meeting by the equity shareholders who are called upon to approve the scheme. It may also be noted in this connection that the resolution of the equity shareholders approving the Scheme of Amal­ gamation was passed with overwhelming majority by members including through proxies, present and voting. It projected the following picture : In favour Against Total (i) No. of Members 5,298 143 5,441 (ii) No. of valid votes 19,36,964 86,061 20,23,025 From the pattern ofvoting it became apparent that out of 100% of the share capital 75.75 per cent in value participated of which 95.75 per cent voted in favour of the proposed Scheme. Out of 95.75 per cent of the votes in value, a paltry 8.43 per cent votes had been attributed to Arvind Mafatlal group consisting of individuals and trust. 39.45 per cent were the votes attributable to financial institutions which can be said to have no interest other than their own interests as men of business' in considering the proposed Scheme. Over 23 per cent votes have been attributed to public limited companies or private limited companies which held the shares of MIL and in which Arvind Mafatlal was also alleged to have interests. Thus non-mentioning of the private dispute between Arvind Mafatlal and objec- H tor in connection with the holding of shares in the transferee-company had ,_...,..._ 0 · MIHEER H. MAFA'ILAL v. MAFATIAL INDS. LID. (S.B. MAJMUDAR, J.) 39 in fact no impact on the voting pattern of equity shareholders including the A financial institutions which had nothing to do with this personal feud between the warring groups. Consequently the non-mentioning of the pending dispute between the appellant on the one and Arvind Mafatlal on the other which was pending adjudication in the Bombay High Court had in fact no impact whatsoever on the result of the voting undertaken by the B equity shareholders in their class meeting. Thus the requisite statutory majority of votes approving the scheme could not have been adversely affected by the non-mentioning of this pending litigation in the explanatory note even assuming that the Division Bench was right in holding that it was required to ·be informed to the voters as per the requirements of Section 393(1)(a). In either view of the matter, therefore, the non-mentioning of C the pending litigation between. the director of the transferee-company Arvind Mafatlal on the the one hand and the appellant on the other, had no vitiating effect on the majority decision of the equity shareholders who approved the Scheme with overwhelming majority of 95.75 per cent of votes and when the dissenting vote on behalf of the appellant's group was in D microscopic minority of less than 5%. It is also pertinent to note in this connection that appellant who being a party to the civil litigation before the Bombay High Court and who was very much keep to get more share­ holding in transferee-company and who had already filed his counter-claim for enforcing the family arrangement of 1979, had not thought it- fit to remain present in the meeting of equity shareholders and on the contrary E . he got himself represented through proxy who had no night to speak. Thus in substance the appellant himself never though that information about the pendency of the litigation between Arvind Mafatlal, director or the respon­ dent-company and himself was so important that it was required to be brought to the voters' notice even though he had opportunity to do so by F remaining personally present in the meeting for that purpose. It, therefore, clearly appears to be an afterthought when he put forward such an objec- tion for the sake of it at the time of opposing the Scheme which was put for sanction of the Court. It may also be kept in view that the explanatory statement no way G emphasised that it is the management of the transferee-company by Shri Arvind Mafatlal which is going to be better monitored and managed by him after the merger in question. In other words management of the company is not at all a germane consideration for the Scheme. Consequent- ly whether the management remains with Arvind Mafatlal or in future may H .A 40 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. met get changed and go in the hands of the appellant is not a consideration which has any linkage or nexus with the Scheme. Consequently the interest of Arvind Mafatlal in the share-holding or likely future impact thereon by the litigation was de hors the Scheme in question and was not required to be placed before the voters. The first point for determination is, therefore, answered in the negative. Point No. 2 ..,. So far as this point is concerned Shri Shanti Bhushan, learned senior counsel for the appellant, submitted that in modern days corporate bodies even.though public limited companies are mostly controlled by big, influen­ tial and economically powerful families, which have inherited entrepreneurial skill and expertise from earlier generations which had controlled such enterprises in past. That in the present case also the director of the respondent-company Shri Arvirid Mafatlal, the eldest male D member of the family, had descended from the common ancestor Mafatlal Gagalbhai who had established this empire and which has further grown with passage of years. That when such a powerful director who is the eldest male member of the family of the family is at the helm of affairs the minority interest of the appellant who, according to him, was entitled to 50% share in the family concerns as per the 1979 family settlement was likely to be voted out and cornered by the influence of such a towering personality as Arvind Mafatlal in the meeting of equity shareholders. Therefore, unfairness of the Scheme has to be judged also from the point of view of its impact on the minority shareholder who has a common ancestor Mafatlal Gagalbhai and who is sought to be cornered and deprived of his just share in the family concerns. by the machinations of Shri Arvind Mafatlal. The Court has, therefore, to see whether the Scheme of Amalgamation which is sought to be put through at the behest of the director of the respondent-company is fair to the minority group of the appellant who claims 50% share in the family concerns against the director of the respondent-company Shri Arvind Mafatlal and his group. So far as G this submission is concerned Shri Sorabjee, learned senior counsel for the respondent joined issues and submitted that factually there is no basis for such a contention as respondent-company is not controlled by Shri Arvind Mafatlal who is one of the direct.ors along with his son Hrishikesh but there are eleven outside directors and the share-holding of Arvind Mafatlal and H his group is not even 50% even including the share-holding of other ... - _, MJHEERH.MAFATLALv.MAFATLALINDS.LTD.[S.B.MAfMUDAR,J.]41 subsidiary companies in which also Arvind Mafatlal and his group may be A · shareholders. We find considerable force in the aforesaid contention of learned senior counsel for the respondent. The evidence produced in the case shows that out of total majority vote of95.75 per cent which supported the Scheme at the meeting of equity shareholders even according to the pattern disclosed by the appellant himself individual trust controlled by B Arvind Mafatlal and private companies accounted to only 16% of the shares voted in the meeting, about 44% of the share were represented by financial institutions, employees and public taken together and two com­ panies stated to be from Mafatlal group had only 15% share. Consequently it is too much to contend that the voting pattern was dominated by the share-holding of Arvind of Mafatlal and his group when about 40% of the C shares are held by financial institutions which had nothing to do with the internal feuds of director Arvind Mafatlal on the one hand had the appel­ lant-objector on the other. It could not be said that the Scheme as put to vote was in any way unfair to appellant or that the majority shareholders acting as a class had not behave.cl in a bona fide manner for protecting the D interest of the class as a while and were in any way inimical to the appellant. While considering the question of bona fides of the majority voters and whether they were unfair to the appellant it has to be kept in view that bona fides. of the majority acting as a group has to be examined vis-a-vis the Scheme in question and. not the bona fides of the person whose persona!. interest might be different from the interest of the voters as a E class. Bona fide of person can only be relevant if it can be established with reasonable certainty that he represents majority or is controller of majority. Arvind Mafatlal cannot be visited with such a charge. In this connection we may usefully refer to a decision of English Court in the case of Hellenic and General Trust Limited reported in (1976) 1 WLR 123. In that case the F Court was concerned with a Scheme of Arrangement whereunder all the ordinary shares of the company were to be cancelled and new shares were to be issued to Hambros which would make the company as wholly owned subsidiary of Hambros. Holders of such cancelled shares were to be paid by Hambros at 48 pennies. In short it was an arrangement for taking over of the company by Hambros. 53% shares of the Hellenic Company were G held by another company MIT. MIT itself was a wholly owned subsidiary company of Hambros. This situation led the Court to conclude that the subsidiary company of Hambros which was holding such large number of shares placed itself vis-a-vis Hambros in the position of vendor and the 42 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A lifted veil of transaction showed it to be one of acquisition than of amal­ gamation. The aforesaid decision is a pointer to the fact that what was required to be considered while sanctioning the scheme was bona fides of the majority acting as a class and not of single person. It is, therefore, not possible to agree with the coatention of learned senior counsel for the appellant that the majority had acted unfairly to the appellant and had not protected his interest when what was to be protected was the class interest of minority shareholders falling in the same class along with the majority. It is not the contention of the appellant that while voting by majority in favour of the Scheme the majority had acted with any oblique motive to fructify any adverse commercial interest qua him and his group when it consisted of outsiders like financial institutions or that there was any possibility of their surrendering their economic interest in the Scheme at the dictates of shareholder-director Arvind Mafatlal and his group. It is also to be kept in view that the Board of Directors of the respective companies, namely, the transferor-company as well as the transferee-com- D pany had approved the Scheme of Amalgamation before it was put to vote . . The appellant was himself one of the directors of the transferor- company who had no objection to the Scheme of Amalgamation from the point of view of the transferor-company. So far as the transferee-company is con­ cerned though appellant was not a director he was 5% shareholder who did not think it fit to personally remain present at the time of voting and simply relied upon proxy. If he was feeling that the Scheme was unfair to him or was not going to protect his interest as shareholder in the respon­ dent-company nothing prevented· him from remaining present and voicing his grievance before the General Body of the equity shareholders and to apprise them of the alleged pernicious effect of the Scheme. It is, therefore, too late in the day for him to contend that the Scheme was unfair to him and that the family of Arvind Mafatlal had tried to dominate and engineer any adverse pattern of voting at the meeting of the equity shareholders. In 'this connection we tried to know from Shri Shanti Bhushan, learned senior counsel for the appellant as to how the appellant felt that G the Scheme was unfair to him. He submitted that under the Scheme the transferor-company was losing its identity and was getting merged in the transferee-company. That in the pending litigation between the parties in the Bombay High Court if the appellant succeeded in his counter-claim he was likely to get larger share-holding in the transferee- company and if that H was not possible he could have got the complete control of the transferor- r MIHEER H. MAFA1LAL v. MAFA1LALINDS. LID. [S.B. MATMUDAR, J.] 43 company as per the family arrangement. Now once the transferor-company A loses its identity then his counter-claim was likely to be infructuous as the subject-matter of the counter-claim will stand withdrawn from the possible operation of the decree if at all granted in his favour in the counter-claim. This submission was countered by learned senior counsel for the respon­ dent by pointing out that it had no factual basis. That as earlier noted in B the suit pending in Bombay High Court if Arvind Mafatlal succeeded then appellant will have to transfer his even remaining 5% share-holding in transferee-company in favour of Arvind Mafatlal. If on the other hand the appellant succeeded in his counter-claim and Arvind Mafatlal's suit was dismissed then the appellant may get the shares which are at present held by Arvind Mafatlal and his group in the transferee-company. But there is no question of appellant getting any exclusive control of the transferor­ company. Therefore, impact of that litigation one way or the other is going to be totally negative so far as the existence of the transferor-company or otherwise is concerned. We find considerable force in the contention of iearned counsel for the respondent. It is also pertinent to note that if the D appellant felt that the Scheme was unfair inasmuch as he was likely to lose his future interest, if any, and control, if any, in the transferor-company by its merger and loss of identity on account of the Scheme it passes one's comprehension how he as sitting director of the transferor-company ap­ proved of the Scheme, did not object to the Scheme and on the contrary was a party to the resolution of the Board of Directors of transferor-com­ pany to propose the Scheme of its amalgamation with the transferee company. Not only that but even when that Scheme was put for sanction before the Bombay High Court on behalf of the transferor-company the appellant did not object meaning thereby appellant had no objection to the transferor-company losing its identity and getting merged in the transferee­ company pursuant to the proposed Scheme. The appellant's own conduct, therefore, belies his apprehension that the Scheme as proposed was in any was unfair to him or that there were any ma/a fides behind the Scheme attributable to Shri Arvind Mafatlal who is the director of the transferee­ company. The second point for determination, therefore, also is found to be factually not sustainable. It is, therefore, held that the Scheme of G Compromise and Arrangement is neither unfair nor unreasonable to the minority shareholders represented by the appellant. Before parting with the discussion on this point it is also worthwhile to note that apart from the pattern of voting at the meeting of the equity H A shareholders, even the share-holding of the respondent-company belies the submission put forward on behalf of the appellant that Arvind Mafatlal's group dominated the constitution of the company and could control the decisions of the shareholders. The evidence on record shows that the share- holding of ANM Group can be worked out to 30.42% approximate- ly. As against aforesaid share-holding the share-holding of financial institu­ tions and MHM group in MIL would work out to 39.03% and that of appellant's group works out at 29.05% while that of other shareholders would work out to 34.34%. Hence it cannot be said that Arvind Mafatlal is at the helm of affairs of the respondent- company or is in the driver's seat or that his family is the virtual master of respondent-company. This is not a case where it can be urged with any emphasis that the respondent­ company is an alter ego of Arvind Mafatlal who is one of the directors of the company and that he could create a show of the Scheme being apparently beneficial to the shareholders but was in fact concealing any covert and hidden device of augmenting his personal interest and interest of his family which was adverse to the interest of innocent investors and other equity shareholders including the appellant. It is also pertinent to note that fina~cial institutions and statutory corporations held substantive percentage of shares in respondent-company. This class of shareholders who are naturally well informed about the business requirements and economic meeds and the requirements of corporate finance in the light of their personal interest would not have wholly approved the Scheme if it was contrary to the interest of shareholders as a class. Individual personal interest of a minority shareholder like the appellant is absolutely out of consideration when such class meeting acting for the benefit to the whole class of equity shareholders take up the consideration of the Scheme for its approval. Consequently it could not be said that the majority shareholders had sacrificed the class interest of appellant minority shareholders when they voted with overwhelming majority in favour of the Scheme. Point No. 2 is accordingly answered in the negative. That takes us to the consideration of Point No 3 for determination. G Point No. 3 In a way the answer to point No. 2 necessarily results in negativing this point also. Even that apart we fail to appreciate how the Scheme of Amalgamation can be said to be unfair and amounting to suppression of H minority shareholders represented by the appellant. It has to be kept in MIHEERH.MAFAlLAL v. MAFAlLALINDS.LTD.[S.B.MAJMUDAR,J.] 45 view that by this proposed Scheme of Amalgamation the transferor-com- A pany was getting merged in the transferee-company. Now even if it is held that the appellant succeeds in his counter-claim in the suit pending in Bombay High Court and if he is to get the share-holding of Arvind Mafatlal and his group transferred to him so far as transferee- company is con­ cerned, the transferee-company because of the amalgamation will then be B having more diversified activities and if at all according to the appellant because of this future success, if any, in the counter-claim he is going to replace A'l:vind Mafatlal and his group in the management of the respon­ dent-company he would have larger field to operate and larger company to manage. We fair to appreciate as to how such a scheme from any point of view can amount to suppression of appellant's minority interest in the share-holding of the company. This interest is not going to be in any way adversely affected. If at all, his share-holding is going to increase in the respondent-company if his counter-claim succeeds. If his counter-claim fails he will have to get out lock, stock and barrel from the respondent­ company and he will have to wash his hands off the same. In either case D the Scheme of Amalgamation will have no adverse impact on the appellant's interest in the respondent-company. On the other hand the Scheme of Amalgamation is likely to have a move beneficial effect on the appellant's share-holding in the respondent-company if he succeeds in his counter-claim in Bombay High Court. It has to be kept in view that the question of bona fide of the majority shareholders or the alleged suppres­ sion by them of the minority shareholders or their attempt to suffocate their interest has to be judged from the point of view of the class as a whole. Question is whether the majority equity shareholders while acting on behalf of the class as a whole had eXhibited any adverse interest against the appellant's minority shareholders also having similar interest as members F of the same class, while approving the Scheme or had acted with any oblique motive to whittle down such a class interest of the minority. As we have seen earlier no such situation ever existed both at the time when the Scheme of Compromise and arrangement was cleared and proposed by the Board of Directors of both the transferor and transferee companies and G also at the stage when the Scheme was put to vote before the meeting of equity shareholders forming a common class of which the app~llant was also a member though a minority member. Consequently point No. 3 will also have to be answered in the negative on the same lines and for the same reasons on the basis of which point No. 2 is answered. H 46 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Point No. 4 So far as this point is concerned the relevant provis10ns of the · Companies Act to which we have made a reference earlier indicate that the Court has to order under Section 391(1) a meeting of creditors or class of creditors or members or class of members to whom the Scheme of Compromise or Arrangement is offered by the company. The present controversy centers round a meeting of members. Members of the company are shareholders. Part IV of the Companies Act deals with 'Share Capital and Debentures'. Section 82 provides that 'the shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company'. As per Section 86 the share cap.ital of a company limited by shares formed after the commence- ments of this Act, or issued after such commencement, shall be of two kiQds only, namely, equity share capital and preference share capital. So far as the Articles of Association of respondent-company are concerned D they also contemplate two classes of shareholders, namely, equity and preference shareholders. No separate class of equity shareholders is con­ templated either by the Act or by the Articles of Association of respon­ dent-company. Appellant is admittedly an equity sharehoWer. Therefore, he would fall within the same class of equity shareholders whose meeting was convened by the orders of the Company Court. However it ·is vehe­ mently contended by learned counsel for the appellant that because of the family arrangement of 1979 on which he relies he was a special class of ·minority equity shareholder who had separate rights against the director of the company and whose special interest because of the pending litigation between him and the director Shri Arvind Mafatlal was likely to be adver­ sely affected by the Scheme, therefore, a separate meeting had to be convened as he represented a class within the class of equity shareholders. It is difficult to agree with this contention. Even though the Companies Act or the Articles of Association do not provide for such a class within the class of equity shareholders, in a given contingency it may be contended G by a group of shareholders that because of their separate and conflicting interest. vis-a-vis other equity shareholders with whom they formed a wider class, a separate meeting of such separately interested shareholders should have been con~ened. But such is not the case of the appellant. It is not his case that his interest as an equity shareholder in respondent-company is in any way conflicting with the general interest of the equity shareholders as ,. f ' MIHEERH.MAFATLALv.MAFATLALINDS.LTD.[S.B.MATMUDAR,J.]47 a class. Consequently it could no be urged by him with any emphasis that A the General Body of equity shareholders acting as a class while considering the question of approval of the Scheme was likely to take a decision which could adversely affect the commercial interest of the appellant as an equity shareholder. His personal conflict of interests with the director was totally foreign to the scope of class meeting which was convened to consider the Scheme in question as we have seen earlier while considering earlier points for determination. It is also to be ~ept in view that the appellant would have urged with some justification his contention for convening a separate meeting representing for him and his group of dissenting equity shareholders if it was his case that the Scheme of Compromise and Arran­ gement as offered to him and his group was in any way different from the Scheme of Compromise and Arrangement offered to other equity shareholders who also belonged to the same class in the wider sense of the term. On the express language of Section 391(1) it becomes clear that where a compromise or arrangement is proposed between a company and its members or any class of them a meeting of such members or class of D them has to be convened. This clearly presupposes that if the Scheme of Arrangement or Compromise is offered to the members as a class and no separate Scheme is offered to any sub- class of members which has a separate interest and a separate Scheme to consider, no question of holding a separate meeting of such a sub-class would at all survive. Even otherwise it becomes obvious that as minority shareholder if the appellant had to dissent from the Scheme his dissent representing 5% equity share­ holding would have been visible both in a separate meeting if any, of his sub-class or in the composite meeting where also his 5% dissent would get registered by appellant either remaining present in person or through proxy. Consequently when one and the same Scheme is offered to the entire class of equity shareholders for their consideration and when com­ mercial interest of the appellant so far as the Scheme is concerned is in common with other equity shareholders he would have a common cause with them either to accept or to reject the Scheme for commercial point of view. Consequently there was no occasion for convening a separate class G meeting of the minority equity shareholders represented by the appellant and his group as tried to be suggested. It is also to be kept in view that it is not the case of the appellant that any different terms of compromise were offered to persons holding equity shares who were covering by the family arrangement of 1979 or otherwise. In fact the entire proposal of the H 48 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A Scheme of Arrangement was one affecting equally and in the like manner all the existing equity shareholders of the respondent-company. In this connection it is profitable to refer to what the learned author Palmer in his Treatise Company Law 24th Edition, has to say : "What constitutes a class : The Court does not itself consider at this point what classes of creditors or members should be made parties to the scheme. This is for the Company to decide, in accordance with what the scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the judge, unusually on the applicant's request, are sufficient for the ultimate purpose of the section, the risk being that if in the result, and we emphasis the words 'in the result' they reveal inadequacies, the scheme will not be approved. If e.q. rights of ordinary shareholders are to be altered, but those of preference shares are not touched, a meeting of ordinary shareholders will be necessary but not of preference shareholders. If there are different groups within a class the interests of which are different from the rest of the class, or which are to be treated differently under the Scheme, such groups must be treated as separate class for the purpose of the scheme. Moreover, when the Company has decided what classes are necessary parties to the scheme, it may happen that one class will consist of a small number of persons who will all be willing to be bound by the scheme. In that case it is not the practice to hold a meeting of that class, but to make the class a party to the scheme and to obtain the consent of all its members to be bound. It is however, necessary for at least one class meeting to be held in order to give the Court jurisdiction under the Section." It is, therefore, obvious that unless a separate and different type of Scheme of Compromise is offered to a sub-class of a class of creditors or G shareholders otherwise equally circumscribed by the class no separate meeting of such sub-class of the main class of members or creditors is required to be convened. On the facts of the present case the appellant has not been able to make out a case for holding a separate meeting of dissenting minority equity shareholders represented by his. The fourth H point for determination, therefore, is answered in the negative. That takes .... MIHEER H. MAFATLAL v. MAFATLAL INDS. LTD. [S.B. MAJMUDAR, J.] 49 us to the consideration of the last point for determination placed for our A consideration by the learned senior counsel for appellant. Point No. 5 It was submitted that the exchange ratio of equity shareholders so far as the transferee-company is concerned works very unfairly and un­ reasonably to them. As per the proposed Scheme 5 equity shares of transferor-company are to be exchanged for 2 equity shares of transferee­ company. So far as this contention is concerned it has to be kept in view. that before formulating the proposed Scheme of Compromise and Amal­ gamation an expert opinion was obtained by the respondent-company as well as the transferor- company, namely, MFL on whose Board of Direc­ tor~ appellant himself was a members. M/S. C.C. Chokshi & Co., a reputed firm of Chartered Accountants, having considered all the relevant aspects suggested the aforesaid exchange ratio keeping in view the valuation of shares of respective companies. It must at once be stated that valuation of shares is a technical and complex problem which can he appropriately left D to the consideration of experts in the filed of accountancy. Pennington in his 'Principles for Company Law' mentions four factors which had to be kept in mind in the valuation on shares : "(1) Capital Cover, (2) Yield, (3) Earning Capacity, and ( 4) Marketability For arriving at the fair value of share, three well known methods are applied : (1) The manageable profit basis method (the Earning Per Share Method) (2) The networth method or the break value method, anti (3) The market value method." E' So many imponderables enter the exercise of valuation of shares. M/s. C.C. Chokshi & Co. considering all the relevant aspects and obviously keeping H 50 SUPREME COURT REP.ORTS (1996] SUPP. 6 S.C.R. A in view the accounting principles underlying the valuation of shares sug"" gested the said ratio which was found acceptable both by the Board ot Directors of the respondent-company as well as th.e Board of Directors of the transferor-company. That the appellant himself as a director of that transferor-company gave green single to the Scheme and to this very ratio of exchange of shares. But Shri M.J. Thakore, appearing for the appellant submitted that form the point of view of the transferor-company it was very profitable to have two shares of transferee-company against five shares of transferor- company. But the difficulty arises only from the point of view of transferee-company shareholders. According to Shri Thakore the proper exchange ratio would be one share of transferee-company to six shares of transferor-company. It is difficult to appreciate this contention of the appellant. It has to be kept in view that appellant never bothered to personally remain present in the meeting of equity shareholders for point­ ing out the unfairness of this exchange ratio to his brother equity D shareholders who were likely to be affected by the very same ratio as the appellant. His interest at least to that extent was entirely common and parallel to that of other equity shareholders. But he had no time to remain personally present. He sent his proxy only to record his dissent vote which was in microscopic minority of 5% as compared to 95% majority vote. Not only that even before the Court he did not submitted and contrary expert opinion regarding the valuation of shares of transferor and transferee companies for supporting his ipse dixit that the correct ratio would be 6 : 1 so far as transferor .and transferee. companies were concerned. Shri Shanti Bhushan, learned senior counsel for. the appellant having realised this difficulty submitted that at last these proceedings are continuation of proceedings before the High Court, therefore, this Court may now in order to satisfy itself send for the opinion of an expert. It is difficult to agree. The appellant who was propounding this theory of correct exchange ratio had nothing to offer in support of his contention both b~fore the learned Single Judge as well as before the High Court. It has to be kept in view G that the matter was fiercely contested on all permissible points before learned Single Judge. 1:he proceedings were pending before the High Court for more than two years from 8th February 1994 till lZth July 1996 when the Division Bench disposed of the appeal. For all these years neither before the learned Single Judge nor before the High Court in appeal the H appellant thought it fit to request the Court to either call for the report of t , MIHEERH.MAFA1LAL v. MAFA1LALINDS.LID. [S.B.MATMUDAR,J.) 51 any other expert on valuation of shares not did he himself get such report A for placing for consideration of the Court in support of his supposed better ratio. It has also to be kept in view that which exchange ratio is better is in the realm of coinmercial decision of well informed equity shareholders. It is not for the Court to sit in appeal over this value judgment of equity shareholders who are supposed to be men of the world and reasonable B persons who know their own benefit and interest underlying any proposed scheme. With open eyes they have okayed this ratio and the entire Scheme. 40% of the majority shareholders were financial institutions who were supposed to be well versed on the aspect of valuation of shares. They had no objection to the exchange of 2 shares of transferee-company for 5 shares C of transferor company. As stated earlier it was a sort of a package duly · cdnsidering all imponderables and implicit factors which the shareholders had to keep in view for deciding whether to approve the Scheme of Amalgamation or not. The exchange ratio was only one of the itt!ms. They though if fit in their commercial wisdom to ac;cept the Scheme as a whole D along with the exchange ration presumaply in expectation of better profits in years to come when the amalgamated companies would operate and when there would be, according to the shareholders, better. prospects of earning greater dividends. They willingly agreed to give in exchange two shares of transferee-company for five share of transferor-company and made them available to the shareholders of the transferor- company. The E appellant was representing only 5% dissenting shareholders and his object was almost a voice in the wilderness, which did not appeal to the majority of his brother shareholders. Shri Shanti Bhushan, learned senior counsel for the appellant in this connection invited our attention to the obser­ vation of the Division Bench in its judgment at page 375 wherein it has F been observed that "if one were to examine the exactitude of exchange ratio that may be offf'.red fairly on the arithmetic scale by taking into consideration various details, there is some force in what were suggested . by Mr. B.R. Shah on behalf of~e appellant. However, keeping in view the scope of enquiry which the court is required to undertake and with whose G findings we are concerned, it will not be ~ermissible for us in law to undertake this exercise in the facts and circumstances of present case in absence of bona fides". We fail to appreciate how this observation can be of any avail to learned senior conceal for the appellant as all that the Court wanted to suggest was that even assuming that some another exchange ratio H 52 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A can be suggested to be better one, it was for the equity shareholders who acted bona fide in the interest of their class as a whole to accept even a less favourable ratio considering other benefits, that may off set such less favourable ratio once an amalgamation goes through. We wholly concur with this view. In this connection we may also refer to a decision of B Maughm, J., in Re Hoare & Co. (No. 2) case (1933) All ER 105 wherein it was laid down that where statutory majority had accepted the offer the onus must rest on the applicants to satisfy the court that the price offered is unfair. In this connection following pertinent observations were made by . 1 the learned Judge : "The other conclusion I draw is this X X X X X X the court ought to regard the scheme as a fair one inasmuch as it seems me impossible to suppose that the court, in the absence of any strong grounds, is to be entitled to set up its own view of fairness of the scheme in opposition to so very large a majority of shareholders who are concerned. Accordingly, without expressing a final opinion on the matter because there may be special circumstances in special cases, I am unable to see that 11 have any, right to order otherwise in such a case as I have before me, unless it is affirm­ atively established that notwithstanding the views of a very large majority of shareholder, the scheme is unfair." We may also refer to a decision of the Gujarat High Court in Kamala Sugar Mills Limited 55 Company Cases p. 308 dealing with an identical objection about the exchange ratio adopted in the Scheme of Compromise and Arrangement. The Court observed as under : "Once the exchange ratio of the shares of the transferee-company to be allotted to the shareholders of the transferor-company has been worked out by a recognised firm of chartered accountants who are experts in the field of valuation and if no mistake can be pointed out in the said valuation, it is not for the court to substitute its exchange ratio, especially when the same has been accepted without demur by the overwhelming majority of the shareholders of the two companies or to say that the shareholders in their collective wisdom should not have accepted the said exchange ratio on the ground that it will be detrimental to their interest." MIHEERH. MAFATIAL v. MAFATIALINDS. LID. [S.B.MATMUDAR,J.] 53 These observations in our view represent the correct legal position on this A aspect. We may also keep in view that in the present case not only expert like M/s. C.C. Chokshi & Co. had suggested the ratio but another inde­ pendent body ICICI Security & Finance Company Limited reached the "' same conclusion which was conveyed by its letter dated 10th November 1993 to the company approving of the entire Scheme along with suggested B ratio. A mere look at the report of the Chartered Accountants M/s. C.C. Chokshi & Co. shows that various factors underlying the Scheme of Com­ promise and Arrangement were taken into consideration while suggesting the exchange ratio by the said reputed firm of chartered accountants. The said opinion had taken into account the fact that on amalgamation shares C have to be cancelled. Increase in share premium account in equity capital of the MIL will also have to be taken into account as a result of final call made in respect of Bond 1992 issue. It has also taken into account sig­ nificant increase in the paid-up equity of MIL as a result of issue of its Bond in the international market. It has undertaken exercise in calculating D net-worth of two companies. It has also referred to the method of valuation of exchange ratio on the basis of earning per share of the two companies by taking into account five years' working results of the two companies making certain adjustments. Apart from taking into consideration the past results of the two companies, the chartered accountants have taken into account the potentiality of the two companies to earn profit in future, considering existing expansion and modernisation of projected and planned expenditure by the MIL as well as subsidiary and sister concern in hard. It has also taken into account the market price of equity shares of past 24 months, declared dividend by the two companies the overall effect of security scam in the market price, realisable investment and their market value. Taking into consideration multifarious considerations detailed in the report, note was also taken of the fact that MIL held substantial shares of MFL, which shall have to be cancelled on merger of MFL with MIL. :rwo fully paid up equity shares of MIL of Rs. 100 each for every five equity share of Rs. 100 each of MFL, was considered to he G a fair exchange ratio to be offered as term of amalgamation. It was clarified that, 'in absolute terms it would mean that the MIL is keeping considera- tion of equity capital of par value of Rs. 7.77 crores which at the last issue price of share amounts about to Rs. 38.84 crores and which at the correct market price amounts to Rs. 57.4 crores. At the stage of dividend declared H A . for 1992-93, it will result in a cost in terms of distributable profits of Rs. 2.72 crores. For an undertaking in a diversified business activity of textile and chemicals with the tota_l infrastructure, knowhow, technology tie up and range of established products and capacities and potential the aforesaid cost to MIL can be regarded as fair and reasonable'. The aforesaid report of the chartered accountants heavily w~ighed with the transferor-company's Board of Directors which comprised, amongst others, the appellant himself but also the Board of Directors of transferee-company and also weighed with tCe General Body of equity shareholders who approved the Scheme and the ratio with overwhelming majority. No grievance, therefore, can be make by the appellant at the stage of Company Petition proceedings.for demonstrating the ratio to be exfacie unfair and unacceptable .as the appellant would like to have it. Undeterred by this position Shri Thakore, learned counsel for the D appellant in support of his contention that the exchange ratio was ex f acie unfair to the shareholders. ·of the transferee- company, invited our attention • to the statement showing the working results of both the transferor and transferee companies as found at Annexures M and N of Vol. II of the Paper Book at page 534 and 535. He submitted that these statements showing the working results of the company for the last five years ended 31st March 1993 showed that the earning per equity share after deprecia­ tion and tax so far as the respondent-company was concerned was Rs. 30 while earning of transferor-company Mafatlal Fine Spg. & Mfg. Company Limited was only Rs. 7 for the relevant five years. He also invited our attention to the break-up value of the shares of company on the basis of the Balance Sheet as on 31st March 1993 so far as respondent-company was concerned. Annexure 'Q' at page 538 showed value per equity share of Rs. 100 each at Rs. 1,515 while so far as the transferor-company was concerned the break-up value per equity share was Rs.259. That may be so. But as a package deal when the Scheme as a whole is examined and G found to be advantageous to the economic and commercial interest of shareholders as a class only one or two item simplicitor for deciding the exchange ratio cannot tilt the balance as so 'may factors and aspect would enter that exercise. It was undertaken by expert body of chartered account­ ants like M/s. C.C. Chokshi & Co. Before parting with the discussion on H this point it would be apposite to refer to the decision of this Court in t MIHEER H. MAFATLAL v. MAFATLALINDS. LTD. [S.B. MAJMUDAR, J.) 55 Hindustan Lever Employees' Union (supra). In paragraph 41 of the Report A Justice Sen speaking for himself and Venkatachaliah, CJ, and to which Sahai, J concurred has observed that the problem of valuation in the case of amalgamation of two companies has been dealt with by Weinberg and Blank in the book 'Take-overs and Mergers' in which it is stated that some or all of the 8 listed factors will have to be taken into account in determin- B ing the final share exchange ratio. The Court has also approved the fixation of exchange ratio of the shares of the companies on the basis of adoption of combination of two or more well-known methods of valuation of shares out of many such methods. In para 37 of the Report it has been observed that the question is what method should be adopted for arriving at a proper exchange ratio. The usual rule is that shares of the going concern must be taken at quoted market value. This principle was also recognised by this Court in the case of CWT v. Mahadeo lalan, (1973) 3 SCC 157. It is not .the case of the appellant that M/s. C.C. Chokshi & Co. had not taken into consideration the quoted market value of shares of both the companies which were going concerns and which were subjected to the Scheme of D Amalgamation in question. For all these reasons, therefore, there is no substance in this contention canvassed on behalf of the appellant that the exchange ratio was ex f acie unfair to the equity shareholders of the trans­ feree- company. The fifth point for determination is also, therefore, answered in the negative. E Before parting with this appeal we may mention that written submis­ sions comprising of 69 pages have beeµ. submitted by learned counsel for the appellant. We have gone through the written submissions. We may mention that learned counsel for the appellant was permitted to file written submissions spread over 4 to 5 pages while his written submission have gone upto 69 pages. It may also be mentioned that there was an order passed by us 21st August 1996 permitting filing of written statements within two days but the learned counsel for the Appellant has filed written submissions only on 27th August 1996. Therefore, ex f acie his written submissions are not required to be considered. However in order to see that the appellant may not suffer on account of non-consideration of these written submission we have gone through them and have considered them in the interest of justice. But having gone through the same we find that they involve repetition of the main contentions canvassed before us during oral arguments by their learned senior counsel Shri Shanti Bhushan and by H 56 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A their counsel Shri M.J. Thakore. Some additional points also appear to have been raised in the written submissions pertaining to additional objec­ tions which were not pressed before us at the time of oral hearing and, therefore, they obviously cannot be considered in support of the conten­ tions on which the appeal was pressed before us. The written submissions B in connection with the points which were already pressed before us are already dealt with by us while considering the main points for determina­ tion in the earlier part of this judgment and, therefore, it is not necessary to deal with the same once again. These were the only contentions canvassed in support of the points C for determination which have all been answered in the negative. The inevitable result is that the appeal fails and is dismissed. Jn the facts and circumstances of the case, however, there will be no order as to costs. v.s.s. Appeal dismissed. COOCH BEHAR CONTRACTORS' ASSOCIATION AND ORS. ETC. v. STATE OF WEST BENGAL AND ORS. SEPTEMBER 11, 1996 [S.P. BHARUCHA AND K. VENKATASWAMI, JJ.] Sales Tax Law: Bengal Finance (Sales Tax) Act, 1941: Sections 2(c) and 6-D. C Sales TOJ..~Declaration forms-Denial of-To dealers under S.6- D-While advantage of using such forms was available to other dealers-Held: not violative of A1ticle 14 of Constitution-Constitution of India, 1950, A1ticles 14 and 366(29- A). Section 6-D-Scope of-Held : was a complete code so far as dealers in works contract were concemed--Hence, such dealers were not entitled to any concession other than those enumerated in S.6-D. "Contractual transfer p1ice''-Goods supplied to contractor by contrac­ tee and p1ice recovered from colllractor by way of adjustment-Held : value of such goods covered under "contractual transfer p1ice". "Contractual transfer p1ice''-Royalty-Paid by contractor in the execu­ tion of w01*s contract while procuring boulders, e01th etc.-Includibility of-Held : royalty amounted to payment of p1ice for goods obtained from the Govemment Depaltments and used in the works contract-Hence, includible in "contractual tramfer price". "Contractual transfer price''-Cost of'freight and delive1y for canying goods to work site-Includibility of-Question left open. Words and Phrases : "Contractual tram.fer price''-!vleaning of-In the context of Section 6-D of the Bengal Finance (Sales Tax) Act, 1941. The appellants were contractors who executed civil construction , works under different departments of the Central and State Governments as well as Corporations. The Revenue sought to assess the appellants H 57 58 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A under Section 6-D of the Bengal Finance (Sales Tax) Act, 1941. The appellants filed a petition before the Taxation Tribunal challenging such assessment. The Tribunal dismissed the petition. Being aggrieved the appellants preferred the present appeal. On behalf of the appellants it was contended that denial to dealers under Section 6-D c)f the Act the use of declaration forms which had been made available to other dealers was violative of the Constitution; that the value of the stores.and materials supplied by the contractee to the contrac­ tor should not be included in the "contractual transfer price" under Section 6-D of the act; that the royalty paid by the contractor in the execution of works contract while procuring boulders, earth etc. should not be included in the 'contractual transfer price'; and that cost of freight and delivery for carrying goods to the work site should not be included in the 'contractual transfer price'. Dismissing the appeal, this Court HELD : 1.1. Section 6-D of the Bengal Finance (Sales Tax) Act, 1941 is a self-contained code so far as dealers in works contract are concerned. Whatever concessions the Legislature wanted to extend to such dealers were enumerated in clauses (a) to (e) of Section 6-D(2) of the Act. Moreover, E having regard to the non-obstante clause used in Section 6-D, it is clear that no further concession was intended to be extended to the dealers in works contract. As t~ey form a class by themselves, they cannot compare themsel­ ves with other dealers coming under sections 4 or 5 and allege discrimina­ tion to invoke Article 14 of the Constitution of India. [63-H; 64-A-B] . F Gannon Dunkerley and Co. v. State of Rajasthan, [1993) 1 SCC 364, relied on. Builders Association of India and Others v. Union of India and Others, [1989) 2 sec 645, referred to. . 1.2. The Tribunal bas found the contractor has to pay the price of the goods supplied by the contractee by way of adjustment. It is, therefore, clear that goods used in the execution of the works contract stand trans­ ferred from the contractor to the contractee at the time the goods are incorporated in the construction and the value of such goods is covered, H under the 'contractual transfer price'. [65-E; H] COOCHBEH.ARCONTRACTORS'.ASSN. v.ST.ATE[VENKATASWAMI,J.}59 N.M. Goel & Co. v .. Sales Tax Officer & Anr., 72 STC 375, relied on. A 2.1. The payment of royalty in the execution of works contract while procuring boulders, earth etc. amounts to payment of price for the goods obtained from the Government Departments and used in the works con­ tract, and covered under 'contractual transfer price'. [66-D] State of Madhya Pradesh v. Orient Paper Mills Ltd., (1977) 2 SCC 77, relied on. 2.2. The Tribunal has not finally disposed of the issue of inclusion of cost of freight and delivery for carrying goods to the work site under 'contractual transfer price' and hence this question if left open. [67-B] C CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5577-79 (NT) of 1990 Etc. From the Judgment and Order dated 26.4.90 of the West Bengal Taxation Tribunal, in R.N. 103 (T), 367 (T) and 34(T) of 1989. D B. Sen and T. Ramachandran, Dilip Sinha, D. Krishan and J. R. Das E for the Respondents. The Judgment of the Court was delivered by VENKATASWAMI, J. Common questions of law arise out of a common judgment of the West Bengal Taxation Tribunal dated 26.4.1990 rendered in RN-30(T), RN-31(T) RN-34(T), RN-103(T), RN-367(T), RN- 138(T), RN-338, RN-339 of 1989. The appellants are contractors and they execute civil construction works including construction of roads and bridges under different depart­ ments of the Central and State Governments as well as respective corpora- G tions. Such works include excavation of earth, drilling, construction of water channel and river bank protection. Sue~ works of contract were not brought under the net of sales tax till the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as "the Act") was amended by the West Bengal Act 4 of 1984 inserting section 60 and amending section 2(c) of the Act. These amendments were pursuant to the 46th Amendment of the H 60 SUPREMECOURTREPORTS [1996]SUPP.6S.C.R. A Constitution of India in the year 1982 inserting clause 29A in Article 366. The constitutional validity of the 46th Amendment inserting clause 29A in Article 366 was challenged and this Court in Builders Association of India and Others v. Union of India and Others, [1989] 2 SCC 645 upheld the constitutionality of the said amendment. As a result of the insertion of section 6D to the Act, all transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract was deemed to be a sale of those goods by the }Jerson making the transfer and the purchase of those goods by the person to whom such transfer was made. The revenue sought to assess the appellants under section 6D of the Act and the appellants aggrieved by such assessm~nts moved the High Court challenging initially the · con­ stitutionality of section 6D and finally confining their challenge to certain limited aspects which we shall refer to hereinafter. The cases were original­ ly filed in the High Court and subsequently were transferred to West D Bengal Taxation Tribunal (hereinafter referred to as "the Tribunal") and the Ttibunal in its detailed judgment repelled every one of the arguments raised on behalf of the. appellants and consequently dismissed the cases. Before us Mr. Jayant Das, learned Senior Counsel for the appellants broadly raised three poi11ts while attacking the assessments under section 6D of the Act. The first contention raised by the learned counsel was that section 6D unjustly discriminates in the matter of grant of declaration forms to the dealers under section 6D and thereby denies the advantage gained by other dealers by using declaration forms and thus it is violative of Article 14 of the Constitution of India. The second contention put forward by the learned counsel was that the value of the stores and materials supplied by the contractee to the contractor for the specific purpose of use in the execution of works contract should not be included in the 'contractual transfer price' under section 6D as according to the learned counsel in such supplies there is no G transfer of property and the property always remains with the contractee. The third submission advanced by the learned counsel for the appellants was that the royalty paid by the contractors in the execution of works contract while procuring boulders, earth etc. should not be included in the 'contractual transfer price'. Another minor point raised by the learned H counsel was that the cost of freight and delivery for carrying goods to the COOCH BEHAR CONTRACTORS' ASSN. v. STATE [VENKATASWAMI, J.] 61 works site should not also be included in the 'contractual transfer price'. ·A Mr. B. Sen, learned Senior Counsel in reply submitted that none of the questions raised by the learned counsel for the appellants remain res integra as they are totally covered either by the decision of this Court in Builders' Association case (supra) or the recent decision of this Court in M/s. Gannon Dunkerley and Co. and Others v. State of Rajasthan and B Others, [1993] 1 SCC 364. In addition to that he also invited our attention to a decision of this Court in the case of State of Madhya Pradesh v. Orient Paper Mills Ltd., (1977] 2 SCC 77 wherein this Court has held that 'royalty' is a feudalistic euphemism for price. So far as the cost of freight and delivery for carrying the goods to the works site is concerned, the learned C counsel invited our attention to the judgment of the Tribunal wherein the Tribunal has not finally decided the issue, but has left open the same for decision with reference to the facts of each case. In view of this overall submission with which we agree we do not feel it necessary to deal elaborately the contentions raised before us. For appreciation of the rival contentions, it is necessary to set out sections 2(c) and 60 of the Act as amended in the year 1984. They read as follows: "2(c) 'dealer' means any person who carries on the business of E selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under section 60 ...... " "60. - Liability to payment of tax on the transfer of property in goods involved in the execution of works contract and rate thereof. F - (1) Notwithstanding anything contained elsewhere in this Act. - (a) any transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract (hereinafter referred to as contractual transfer) shall be deemed G to be a sale of these goods by the person making the transfer and the purchase of those goods by the person to whom such transfer is made; (b) (i) every dealer whose contractual transfer price during. the last year ending on or before the 31st day of March, 1984 exceeds H 62 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. rupees two lakhs shall, in addition to the tax payable by him under section 5 and section 6B, if any, be liable to pay from the 1st day of April, 1984 a tax at the rate specified in sub-section (3) of such part of his contractual ·transfer price. as specified in sub-section (2); (ii) every dealer, other than a dealer referred to in sub-clause (i), whose contractual transfer price during any year ending on or after the 1st day of April, 1984 exceed& rupees two lakhs shall, in addition to the tax payable by him under section 5 and section 6B, if any, be liable to pay from the first day of the year immediately following such year a tax at the rate specified in sub-section (3) of such part of his contractual transfer price as specified in sub-sec­ tion (2); (iii) every dealer who has become liable to pay tax under sub-clause (i) or sub-clause (ii) shall continue to be so liable until the expiry of three consecutive. years during each ·of which the contractual transfer price does not exceed rupees two lakhs and on the expiry of such three years his liability to pay such tax shall cease. (iv) every dealer, whose liability to pay tax has ceased under the provisions of sub-clause (iii), shall, if the contractual transfer price during any year again exceeds rupees two lakhs, be liable to pay from the first day of the year immediately following such year the tax at the rate specified in sub~section (3) of such par~ of this contractual transfer price as specified in sub-section (2); (2) The tax payable under sub-section (1) shall be levied on that part of contractual transfer price of a dealer during any period which remains after deducting therefrom his contractual transfer price during the period on - G (a) contractual ti'.iansfer of goods referred to iii. section 14 of the Central Sales Tax Act, 1956 (74 ·of 1956), on a prior sale whereof in West Bengal due tax under this Act or under the West Bengal Sales Tax Act, 1954 (West. Bengal Act IV of 1954), if such . goods are notified for taxation under that Act, is shown to the H satisfaction of the Commissioner to have been paid; ---( COOCHBEHAR CONTRACTORS' ASSN. v. STATE [VENKATASWAMI, J.] 63 (b) contractual transfer of goods, sales of which are declared A tax-free under section 6; (c) contractual transfer of goods, sales of which are generally · exempt from tax under sub-clause (vi) of clause (a) of sub-section (2) of Section 5; ( d) contractual transfer of .goods, on the purchase of which tax is payable by him under section 6C; (e) such other contractual transfers, as may be prescribed. (3) The tax under this section shall be levied at the rate of four C per centum of such part of the contractual transfer price as specified in sub-section (2). Explanation 1. - In this section, the expression "contractual transfer price", used in relation to any period, shall mean the aggregate of the amounts received or receivable by a dealer during D such period as valuable consideration for the transfer of property in goods used in execution of a works contract, whether or not the amount receivable as valuable consideration for such transfer is separately shown in the works contract, and shall include the value of such goods purchased, manufactured, processed or E procured otherwise by the dealer and the cost of freight or delivery as may be incurred by such dealer for carrying such gooc_ls to the place where these are used in execution of such ·works contact, but shall not include such portion of the aforesaid amounts as may be prescribed. · Explanation 2. - For the purpose. of this section, the expression "goods" include commodities specified for taxation under section 25 of the West Bengal Sales Tax Act, 1954 (West Bengal Act IV of 1954) and, notwithstanding any contained in this Act or in the west Bengal Act IV of 1954), tax shall be levied on such com- G modities under this section." A perusal of section 60 clearly indicates that it is· a self-contained code so far as dealers in works contract are concerned. Whatever conces­ sions the Legislature wanted to extend to such dealers were enumerated in clauses (a) to (e) of sub-section (2) of section 60. Apart from that and H 64 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A having regard to the non obstante clause used in section 6D, it is made clear no further concession was intended to be extended to the dealers in works contract. As they form a class by themselves, they cannot compare themselves with other dealers coming under sections 4 or 5 and allege discrimination to invoke Article 14 of the Constitution of India. The Tribunal has rightly taken a view by holding 'we are satisfied that the contractors, being dealers under section 6D read with section 2(c), have _he<:n appropriately grouped together in one class, distinct and separate from the other classes of dealers. The charge of arbitrariness and un­ reasonableness must fail. The classification cannot be faulted on account of denial of the facility of use of declaration forms, because this class of dealers has been treated and dealt with on a different footing altogether and they are governed by almost a self-contained code envisaged in section 6D.' As rightly pointed out by learned senior counsel for the respondent D Mr. B. Sen, the recent decision of this Court in Gannon Dunkerley and Co. v. State of Rajastlzan, [1993] 1 SCC 364 also supports the view taken by the Tribunal. This Court has observed as follows : "A question has been raised whether it is permissible for the State Legislature to levy tax on deerried sales falling within the ambit of Article 366 (29-A)(b) by prescribing a uniform rate of tax for all goods involved in the execution of a works contract even though different rates of tax are prescribed for sale of such goods. The learned counsel for the contractors have urged that it would not be permissible to impose two different rates of tax in respect of sale of the same article, one rate when the article is sold separately and a different rate when there is deemed sale in connection with the execution of works contract. On behalf of the States it has been submitted that it is permissible for the State to impose a particular rate of tax on all goods involved in the execu­ tion of a works contract which may be different from the rates of tax applicable to those goods when sold separately. In the field of taxation the decisions of this Court have permitted the legislature to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimina­ tion against particular persons or classes. (See : East India Tobacco "' COOCH BEHAR CONTRACTORS'ASSN. v. STATE [VENKATASWAMI, J.] 65 Co. v. State of A.P., P.M. Ashwathanarayana Shetty v. State of A Karnataka, Federation of Hotel & Restaurant Association of India v. Union of India and Kera/a Hotel and Restaurant Association v. State of Kera/a. Imposition of sales tax at different rates depending on the value of the annual turnover was upheld in S. Kodar v. State of Kera/a. Similarly, imposition of purchase tax at different rates B for sugar mills and Khandsari units was upheld in Ganga Sugar Co. v. State of U.P. In our opinion, therefore, it would be permissible for the State Legislature to tax all the goods involved in t~e execution of a works contract at a uniform rate which may be different from the rates applicable to individual goods because the goods which are involved in the execution of the works contract when incorporated in the works can be classified into a separate category for the purpose of imposing the tax and a uniform rate may be prescribed for sale of such goods." In view of the above we hold that there is no discrimination violating D Article 14 of the Constitution as alleged by the learned counsel for the appellants. So far as the second contention urged on behalf of · the learned counsel for the appellant is concerned, the Tribunal on facts has found the contractor has to pay the price of the goods supplied by the contractee by E way of adjustment. This Court in 1989 (2) SCC 645 (supra) has observed as follows: "Ordinarily unless there is a contract to the contrary, in the case. of a works contract the property in the goods used in the p construction of a building passes to the owner. of the land on which the building is constructed, when the goods or materials used are incorporated in the building. The contractor becomes liable to pay the sales tax ordinarily when the goods or materials are so used in the construction of the building and it is not necessary to· wait till G the final bill is prepared.for the entire work." It is, therefore, clear that goods used in the execution of. the works contract stand transferred from the contractor to the contractee at the time the goods are incorporated in the construction. It is also brought to our notice by the learned counsel for the respondents that the principle laid H 66 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A down by this Court in N.M. Goel & Co. v. Sales Tax Officer & Anr., 72 STC 375 squarely applies to the second point raised herein. While considering a similar issue, namely, whether there was sale of goods in view of the contract between the parties whereunder the custody and control of the goods remained with the P.W.D. and goods were only used in the construc- tion under the contract, this Court held that 'in the instant case, by use or consumption of materials in the work of construction, there was passing of the property in the goods to the assessee from the P.W.D. By appropria­ tion and by the agreement, there was a sale as envisaged in terms of clause {10) set out hereinbefore. Therefore, in our opinion, there was a sale which was liable to tax'. Though this case was sought to be distinguished before the Tribunal by contending that that ratio must be treated as one given per incuriam it was rightly rejected by the Tribunal. We are, therefore, in agreement with the conclusion reached by the Tribunal that 'having con­ sidered all aspects of the matter, we hold that a sale within the meaning of section 2{g) of the 1941 Act, namely, a transfer of property in goods D supplied by the owner/contractee to the contractor for use in the execution of a works contract takes place in the cases under our consideration, when such goods are actually used in the construction work, provided prices of such goods are deducted from or adjusted against bills or dues of the contractor'. So far as the third question of payment of royalty is concerned, we do not think there is any substance in that argument. As rightly pointed out by the learned counsel for the respondents that in view of the decision of this Court in Orient Paper Mills (supra) the payment of royalty amounts to payment of price for the goods obtained from the Government depart­ ments and used in the works contract. Regarding the additional minor point, the Tribunal has not finally disposed of the issue and it has left open the issue by observing as follows: "Learned counsel for the applicants did not submit that such inclusion is in anyway bad or unconstitutional. Expenses incurred on account of labour simpliciter surely cannot form a part of the contractual transfer price simply because it is not a value of or valuable consideration for any 'goods' unless such expense amounts to cost of freight or delivery for carrying the goods to the worksite. It will depend on the circumstances in which or the purpose for ,, •. ·- COOCH BEHAR CONIRACTORS'ASSN. v. STATE [VENKA TASW AMI, J.] 67 which labour was employed. On this question we hold accordingly. A Each case shall have to be judged on its own merits and on its peculiar facts. . ..... We, therefore, do not at this stage express any opinion one way or the other on those charges and expenses as to whether or not they will form part of the contractual transfer price." ~ .. In view of the above it is not necessary to go into this issue further. B For the foregoing reasons, we do not think there is any case for interference under Article · 136 of the Constitution. Accordingly, the ap­ peals are dismissed. No costs. v.s.s. Appeals dism1.ssed. C SHRI CHANDER CHINAR BADA AKHARA UDASIN SOCIETY AND ORS. v. STATE OF JAMMU AND KASHMIR AND JRS. SEPTEMBER 11, 1996 [A.M. AHMADI CJ., N.P. SINGH AND B.N. KIRPAL, JJ.] Education-Higher education-Admission to professional colleges: Medical Colleg~Admission-Selection procedure-P1ivate recognised medical college run by society-No rules/guidelines framed by State Govem­ ment for admission-Students seeking admission filed w1it petition before High Court-Complaining that failure on pmt of State Govemment to frame rules/guidelines deprived them of opp01tunity of seeking admission-Society D impleaded as respondent to the said wlit petition-Single Judge of High Cowt constituted Committee for selecting candidates on basis of oral interviews and fixed time schedule for admission-Pursuant to which advertisement issued on 4-10-1995 inviting applications and last date for receipt of applications was 11-12-1995-/nterviews held between 15 and 17-12-1995-Classes com- menced from 26-12-1975-But Division Bench in L.P A. stayed operation of order of Single Judge and directed selection be made on basis of common viva voce examination and that 75% marks for academic qualification and 25% marks for viva voce be allotted-Advertisement in'Jiting applications stipulated that candidate must be pennanent resident of State-Held: orders and directions of Single Judge as well as J?ivision Bench of High Court not consistent with orders and directions issued by Supreme Court-Time Schedule fLXed by Single Judge was perse arbitrary-Percentage of marks secured at stage of higher secondmy examination conducted by different Boards vary and should not f01m basis of selection-Allotment of 25% marks for viva voce examination was unjustified-Condition of eligibility that cmi­ didate must be a pennanent resident of State also unreasonable:-Common G entrance examination must be held and admission made in accordance with Supreme Court's directions in-Vnnikrishnan and subsequent cases. Medical Co/leg~Admission-Plivate recognised medical college-No ntles/guidelines framed by State Govemment-Admission made in accbrd­ H ance with High Cowt's directions-Though such directions not consistent with 68 C.C. BADA v. STATE 69 orders and directions issued by Supreme Court-Held : due to indifferent A attitude of State Government and haste shown by college, the so-called candidates, who were said to have been admitted, were viltually on the roads-But only on equitable grounds, a procedure which was not sanctioned by law would not be approved only to mitigate hardship of such candidates who had sought admissions in the said medical college. B The Appellant-Society had the object of promoting medical educa- tion by establishing medical colleges, hospitals and child welfare· centres. A proposal was submitted to the State Government for setting up a medical college and a private hospital in the State. The State Government allotted land for the proposed medical college and charitable hospital. In C due course temporary recognition to the said medical college was granted by the Medical Council of India. However, no rules/guidelines were framed by the State Government for admissions to the said medical College. Some students seeking admission to the said medical college filed a D writ petition before the High Court complaining that failure on the part of the State Government to frame rules/guidelines to regulate admission to the medical college of the Society had deprived them of the opportunity of seeking admission. The Single Judge of the Big~ Court constituted a Committee for selecting candidates on the basis of oral interviews and fixed a time schedule for admission, pursuant to which an advertisement E was issued on 4-12-1995 inviting applications. The last date for receipt of applications was 11- 12-1995 and interviews were held between 15-12-1995 and 17-12· 1995 and classes commenced from 26-12-1995. The respondents filed a Letters Patent Appeal against the aforesaid F order before the Division Bench which stayed the operation of the order of the Single Judge. The Division Bench directed that selection be made on basis of common viva voce entrance examination and no common entrance written examination be held. A direction was also given that out of 100 marks awarded for selection of the candidates, 75% shall be for academic qualification and 25% shall be for common entrance viva voce G examination. Pursuant to the direction given by the Division Bench an advertisement was issued by the State Government notifying conditions of eligibility for admission to the said medical college. One of the conditions was the candidate must be a permanent resident of the State. There was no such condition laid down by the Division Bench. Being aggrieved the H 70 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A appellant-Society preferred the present appeal. Dismissing the appeal, this Court HELD : 1.1. Orders and directions of the Single Judge as well as Division Bench of the High Court are not consistent with the orders and B directions issued by this Court indicating the procedure for admission in private medical colleges. The time schedule fixed by the Single Judge was perse arbitrary. The percentage of marks secured by different applicants at different types of examinations at the higher secondary stage cannot be treated as uniform. Some of such examinations are conducted at the state C level, others at the national level including (he Indian School Certificate examination. The percentage secured at different examinations are bound to vary according to the standard applied by such examining bodies, which is well known. As such a common entrance examination has to be held. The allotment of 25% marks for viva voce examination is unjustified. A fresh advertisement shall be issued inviting applications and admission must be made in accordance with this Court's orders/directions issued in Unnikrishnan and subsequent cases. [77-D] J.P. Unnilaishnan v. State of A.P. & Ors., [1993] 1 SCC 645, followed. Ajay Hasia v. Khalid Mujib Sehravadi & Ors., AIR (1981) SC 487; T.MA. Pai Foundation & Ors. v. State of Kamataka, [1993] 4 SCC 276; Manipal Academy of Higher Education v. State of Kamataka & Ors., [1994) 2 SCC 201 and T.MA. Pai Foundation and Ors. v. State of Kamataka and Ors., [1995) 5 SCC 220, referred to. 1.2. Due to the indifferent attitude of the State Government and haste shown by the appellant-Society, the so-called selected candidates, who are said to have been admitted, are virtually on the roads. But only on equitable grounds, a procedure which is. not sanctioned by law cannot be approved only to mitigate the hardship of such candidates who have G sought admissions in the medical college aforesaid. [77-B-C]° CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11915-17 of 1996 Etc. From the Judgment and Order dated 22.3.96 of the Jammu & H Kashmir High Court in L.P.A. (W) Nos. 307, 312/95 and 8of1996. \ C.C.BADA v. STAIB[N.P.SINGH,J.] 71 Dhruv Mehta and S.K. Mehta for the Appellants. H.N. Salve, E.M.S. Anam and Subhash Sharma and Rajeev Sharma for the Respondents. The following Judgment/Order of the Court was delivered : N.P. SINGH, J. Leave granted. Appellant No. 1 Shri Chander Chinar Bada Akhara Udasin Society (hereinafter referred to as the Society) is a society registered under the J & K Society Registration Act, the primary object being to promote medical education by establishing medical colleges, hospitals and child welfare centres. A proposal was submitted to the State Government for setting up a medical college and a private hospital in Jammu, in the year 1988. The State Government allotted 356 kanals of land for the proposed medical college and charitable hospital. A further allotment of 250 kanals of land is said to have been made by the State Government. The State Government D recommended to the Jammu University for grant of affiliation to the proposed medical college to be set up by the society. The State Govern­ ment also requested the Medical Council of India to grant approval/recog­ nition to the said medical college. Inspection was made by the representatives of the Medical Council of India in respect of infrastructure including the teaching facilities. In due course temporary recognition of the institution was granted. It is said that the Society approached the State Government to issue necessary guidelines and to frame· rules to regulate the admissions to the medical college established by the Society. The Society in its communication undertook to make admissions in accordance with the directions of the Supreme Court of India in the case of J.P. Un11ik1islman v. State of A.P. & Ors., (1993] 1 SCC 645 and other directions issued by this Court. The last such communication was addressed by the Society to the State Government on 17.10.1995 saying that although it had got recognition from the Government of India, but no rules/regulations were being framed by the State Government for admissions to the said G medical college. The State Government had issued an advertisement on 6.7.1995 inviting applications from eligible candidates for appearing at the entrance test for admission to the two government medical colleges. But while iSsuing such advertisement the State Government did not invite applica- H 72 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A tions for the admission into the medical college of the Society. In the brochure published by the State Government for information to the can­ didates, who may be willing to seek admission, nothing was said about the medical college in question, which was necessary in view of the judgments and orders of this Court for filling up the 'merit seats' and the 'payment _, • . seats'. It is further the case· of the Society that when people of the State of J & K learnt about the medical college of the Society, they approached the management for seeking admission and some applications were also sub­ mitted to the management. However, no action was taken on such applica­ tions, as no instructions had been received from the State Government. Some students seeking admission in the medical college in question, filed a writ petition before the High Court of J ammu & Kashmir making a grievance in respect of failure on the part of the State Government to frame necessary rules/guidelines to regulate admission to the medical D college of the society which had deprived them -of the opportunity of seeking admission against the 'merit seats' or the 'payment seats'. The appellant-society was impleaded as a respondent to the said writ petition. Counte~ affidavit was filed on their behalf. All necessary records and information were placed before ~he High Court. Inspite of the several E opportunities being given to the State Government, no affidavit on their . behalf was filed. By an order dated 27.11.1995, the learned single Judge constituted a Cqmmittee consisting of : "(a) Mr. Justice J.N. Bhat, (Rtd.) Judge of J & K High Court: Chairman. (b) Mr. A.M. Watali, former member J & K Public Service Commission : Member. (c) Dr. Krishan Lal Gupta, Former Director, Health Services, J & K State: Member. (d) Prof. Vidya Nath Gupta, formerly Prof. and Head, Depart­ ment of Hindi, University of Jammu: Member." C.C.BADA v. STATE[N.P.SINGH,J.) 73 A direction was giveµ to the said committee to immediately proceed A with the selection process for admission of students in the 1st year MBBS course of the said medical college. An option was given to invite or call for applications by publication through recognised modes including issuance of an advertisement in at least one leading newspaper having wide circula- tion. In the order, the learned Judge observed that the selection Committee may conduct oral interviews of the candidates for short-listing the ap­ plicants on basis of their inter se merit. The first meeting of the aforesaid Committee is said to have been held on.29.11.1995. An advertisement was issued on 4.12.1995 inviting applications from eligible candidates in respect of the following four catregories :- "(a) 50% merit seats from permanent resident of the State of J&K; (b) 20% payment seats from permanent resident of the State of J&K; (c) 15% payment seats from candidates outside the State of J&K; and ( d) 15% from NRl's and foreigners." The advertisement was published in the Indian Express in its issue dated 4.12.1995. In the said advertisement, 11.12.1995 was fixed as the last date for receipt of the applications saying "that the interviews of the candidates shall be held between 15.12.1995 and 17.12.1995. It is the case of the Society that after the interviews were so held, a merit list was prepared on basis of the percentage of marks secured by the applicants at the Higher Secon­ dary School Examination or equivalent examinations and the marks secured at the interview. The report of the Selection Committee was forwarded on 19.12.1995, which was placed on the notice board on 20.12.1995. Candidates so selected were admitted between 20.12.1995 to 26.12.1995. The teaching commenced from 26.12.1995. A Letters Patent Appeal against the order dated 27.11.1995, aforesaid of the learned single Judge, had been filed on behalf of the State Government, which was listed before the Division Bench on 27.12.1995. On the basis of the caveat filed on behalf of the Society, the parties were heard on the aforesaid date. After hearing the parties, the appeal filed on behalf H 74 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A of the State Government, was admitted and the operation of the order of the learned single Judge was stayed. Ultimately, the Appeal filed on behalf of the State and the appeals filed on behalf of others were allowed on 22.3.1996. The order of the learned single Judge was set aside. The pre~ent, appeals have been filed against the said judgment of the Division Bench. From the judgment of the Division Bench, it shall appear that after " taking into consideration the different aspects of the controversy as well as the predicament of the students who claimed to have been admitted in the medical college aforesaid, the following directions were given : "To conclude, considering these several aspects, we make the following orders : (1) These appeals are allowed. The order of the learned Single Judge passed on OWP No. 379/1995 dated November 27, 1995 is set aside. (2) We issue a writ of Mandamus to the State Govt. to issue a Notification calling for application from the eligible candidates in the prescribed form for appearing in the common viva voce entrance examination. There shall be no common entrance written examination. Notification calling for applications shall be publish­ ed in one local Daily Vernacular language and in one daily widely circulated English newspaper providing enough time. The Writ petitioners, the contesting respondents, the appellants of the LP As who have already applied need not apply once again except those who have not applied. (3) The last date for receiving the applications in the prescribed form shall be 5th April, 1996. Applications received after the date fixed above either by post or by hand would not be entertained. (4) The Roll Nos. to the eligible candidates shall be supplied by the 8th April, 1996. The date for holding the common entrance viva voce examination is fixed as 10th April, 1996. (5) The competent Authority shall make selection and an­ nounce the results on or before 17th April, 1996. The selection list . so prepared shall be got published in atleast two leading local H dailies of .Srinagar and Jammu and it shall also be displayed at the ·r - C.C.BADA v.STATE[N.P.SINGH,J.] 75 office of Competent Authority, Entrance Examination in J ammu A and Srinagar. ( 6) Out of 100 marks awarded for selection of the candidates, 75% shall be for academic qualification and 25% shall be for common Entrance viva voce Examination. (7) The number of 100 seats shall be filled up by selecting candidates from the order of merit. (8) At least 50% of the seats out of the 100 seats shall be filled up by the nominet!s of the Govt. or University as the case may be, C hereinafter referred to as "free seats". These students shall be selected on the basis of merit determined on the basis of merit list by such criteria as may be determined by the Competent Authority or appropriate Authority as the case may be. The remaining 50% of the seats (payment seats) shall be filled up by those candidates who are prepared to pay the fee prescribed therefor and who have D complied with the instructions regarding deposit and furnishing of cash security/Bank guarantee for the balance of the amount. The allotment of students against payment seats shall also be done on the basis of inter se merit determined on the same basis as in the case of free seats. (9) In so far as the reservation of the seats. for persons claiming constitutionally permissible reserved, the SRO issued by the State of J&K in relation to the reservation of seats shall be followed. (10) In so far as the fixation of the scale of fee payable by these F students, the State Govt. shall constitute a committee within a period of ten days and that committee shall fix the scale of fee payable by the students in accordance with the guidelines con­ tained in the scheme of Unnikrislman J.P. AIR (1993) SC 2173." It is apparent from the order aforesaid that a writ of mandamus was issued G to the state Government to inyite applications from eligible candidates in prescribed form for app~aring in the common viva voce entrance examina­ tion. However, there is a specific direction that no common entrance written examination shall be held. 5th April, 1996 was as the last date for receiving the applications in the prescribed form. Thereafter a time · H 76 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A schedule was prescribed in respect of common viva voce entrance examina­ tion, selection and announcement of the result. A direction was also given that out of 100 marks awarded for selection of the candidates, 75% shall be for academic qualification and 25% shall be for common entrance viva voce examination. According to the appellant-society, there was no justification on the part of the Division Bench to interfere with the directions given by the learned single Judge, which were just and proper. It was pointed out that under the predicament under which the appellant-society and the ap­ plicants had been placed because of the inaction on the part of the State Government, the learned single Judge had no option but to constitute a Committee of persons mentioned above for selecting the applicants for admission in order to save them from losing an academic session, for no fault of theirs. It is true ·that when the Society requested the State Government to frame necessary rules/guidelines to regulate the admissions in the medical college of the society, the State Government should have taken appropriate and immediate steps and there was no sense in shelving the said issue by ignoring it outright. The learned counsel, who appeared on behalf of the State, could not give any explanation as to why the necessary guidelines were not issued to the society in respect of the admissions in the medical college aforesaid. But the fact remains that the learned Single Judge on the writ petition filed on behalf of the students adopted a procedure and fixed a time schedule in respect of admission of the applicants, which are not consistent with the orders and directions issued by this Court in different cases, indicating the procedure for admission in private medical colleges. There is no dispute that the advertisement inviting applications from eligible candidates was issued on 4.12.1995 and 11.12.1995 was fixed as the last date for receipt of the such applications i.e. within a week, which according to us, was perse an arbitrary time limit fixed for receipt of the G applications. It is said that the interviews were held between 15.12.1995 and 17.12.1995 and the selection list was forwarded on 19.12.1995. The selected candidates are said to have been admitted between 20.12.1995 and 26.12.1995 and classes are said to have commenced since 26.12.1995 itself. Admittedly, the Division Bench passed an interim order staying the opera­ tion of the judgment of the single Judge only the next day i.e. 27.12.1995. H In this background, it is difficult to accept the claim made on behalf of the C.C.BADA v. STATE(N.P.SINGH,J.] 77 Society as well as applicants who are said to have been admitted in the said A medical college, that their studies coinmenced since 26.12.1995 and as such on equitable grounds they should be allowed to pursue their studies. It is unfortunate that due to the indifferent attitude of the State Government and haste shown by the appellant-society, the so-called selected candidates, who are said to have been admitted, are virtually on the roads. But only on equitable grounds, a procedure which is not sanc­ tioned by law cannot be approved only to mitigate the hardship of .such candidates who have sought admissions in the . medical college aforesaid. But at the same time many of the directions given by the Division Bench also cannot be approved. It has directed that selection be made on basis of common viva voce entrance examination and no common entrance written examination be held. According to the direction of the Division Bench, 75% marks have been allotted for academic qualification and 25% marks for the viva voce examination. It need not be pointed out that the percentage of marks secured by different applicants at different types of D examinations at the higher secondary stage cannot be treated as uniform. Some of such examinations are conducted at the state level, others at the national level including the Indian School Certificate examination. The percentage secured at different examinations are bound to vary according to the standard applied by such examining bodies, which is well known. As such a common entrance examination has to be held. The counsel appear­ ing for the parties could not justify the awarding of 25% marks for viva voce examination in view of the several judgments of this Court in connec­ tion with admission in educational institutions; one such judgment being from the State of J&K itself in the case of Ajay Hasia Etc. v. Khalid Mujib Sehravadi and Others Etc.; AIR (1981) SC 487 = (1981) 1 SCC 722. The learned counsel appearing on behalf of the State informed the Court that pursuant to the direction given by the Division Bench, an advertisement was issued on 27.3.1996 by the State Government, notifying the conditions of eligibility for admission in the said medical college. From G the said advertisement it appears that one of the conditions is that the candidate must be permanent resident of J & K. There was no such direction given by the Division Bench. Apart from that any such condition is not consistent with the different judgments and orders of this Court. Mr. Verma, learned senior counsel, immediately offered to rectify the same and to abide by any direction given by this Court. H 78 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. Taking all the facts and circumstances into consideration, we are of the view that for one reason or the other, now it is not possible to complete the admission in the said medical college for the session which has already commenced. As such the only reasonable course shall be that a (resh advertisement be issued for the next academic session in accordance with law in the light of directions given by this· Court in the cases of J.P. Unnik1ishnan v. State of AP & Ors. (supra), T.MA. Pai Foundantion & Ors. v. State of Kamataka, [1993] 4 SCC 276; Manipal Academy of Higher Education v. State ofKamataka & Ors.; [1994] 2 SCC 201 and in the case of T.MA. Pai Foundation and Ors. v. State of Kamataka and Ors., [1995] 5 SCC 220. The advertisement inviting applications should be given proper publicity and thereafter the seats should be ear-marked and allotted in terms of the judgments aforesaid which prescribe the procedure for admis- sion by the private medical colleges. Seats shall also be reserved for NRI within the percentage fixed in those judgments. The State Government shall extend all cooperation and help so that proper selections are made D as per directions of this Court and the appellant-society which was estab­ lished the medical college is able to pursue its goal by making the medical college functional, which shall be in the interest of the State of J & K itself. The learned counsel appearing for the State of J & K assured this Court that all necessary steps shall be taken promptly. E In the result, the appeals are dismissed but at the same time in view of the directions given above, it has to be held that we are not approving the directions given by the Division Bench. Now, the steps have to be taken by the appellant-society and the State Government in accordance with the different directions given by this Court for admission in the private medical p colleges. There shall be no orders as to cost. v.s.s. Appeals dismissed. N.P. SINGH, J. Leave granted. Civil Appeals are disposed of in terms of the judgment of this Court in the case of Shri Chander Chinar Bada Akhara Udasin Society and Ors. v. The_ State of J & Kand Ors., (Civil Appeal Nos. 11915-17of1996@ SLP (C) Nos. 7924-7926 of 1996) delivered today. H v.s.s. Appeals disposed of. ' . - ,,,. • • AHMEDABAD URBAN DEVELOPMENT AUTHORITY A v. MANILAL GORDHANDAS AND ORS. SEPTEMBER 11, 1996 [AM. AHMADI, CJ. N.P. SINGH AND SUJATA V. MANOHAR, JJ.] Gujarat Town Planning and Urban Development Act, 1976 : Sections 17(1)(c), 9 to 17, 20 and 124. Town Pla1111i11g-Development Plan-Sanction of-State Govemment accorded sa11ction to Draft Development Plan submitted by Mu11icipal Cor­ poration under Bombay Town Planning Act, 1954-Subsequently 1976 Act came into force and repealed earlier Bombay A ct-{]rban Development Authority submitted Development Plan to State Govemment for sanction which covered area included in Draft Development Plan submitted by D Municipal C01poratio11-Held : sanction of Plan submitted by Municipal Corporation without co11sideli11g Pla11 submitted by Urban Development Authority was without application of mind-Provisions of Bombay Act incon­ sistent with provisions of Gujarat Act-Therefore, deeming fiction in S.124(2) would not apply and Plan submitted under repealed Act not deemed to be submitted u11der Gujarat Act-Final development pla11 i11 respect of area withi11 C01poration came into force on date of sam;tio11 of draft developme11t plan submitted under Gujarat Act-Hence, pe1iod of 10 years mentioned liz S.20(2) must be computed from that date-Bombay Town Pla11ning Act, 1954. Administrative Law : Judicial review-Mala fide excercise of power--Held: It must be shown that power was excercised with ulte1ior motive only to defeat statutory rights of perso11s biterested. G The Bombay Town Planning Act, 1954 regulated the town planning activity within the area falling within the jurisdiction of the local authority in the State including the Municipal Corporation. On 15.1.1976 the Cor­ poration submitted a revised development plan for tbe area falling within the limits of the Corporation to the State Government for its sanction. On H 79 .... 80 SUPREME COURTREPORTS (1996) SUPP. 6 S.C.R. A 19.6.1976 the Gujarat Town Planning and Urban Development Act was enacted which came into force on 30.1.1978. On that very date Ahmedabad Urban Development Authority (AUDA) was constituted under Section 22 of the said Act. Section 124(1) of the said Act repealed the Bombay Town Planning Act, 1954. B By a notification dated 12.8.1983 the State Government sanctioned the revised development plan submitted on 15.1.1976 by the Corporation under the Bombay Town Planning Act, 1954. AUDA prepared a draft development plan in accordance with the provisions of the Gujarat Town Planning Act and submitted to the State Government for sanction on C 23-7-1981. It also included the area covered by the Corporation. The State Government sanctioned the draft development plan submitted on 23.7.1981 by the appellant AUDA on 2.11.1987 including for the areas within the Corporation in respect of which the draft development had been sanc­ tioned by the State Government by aforesaid notification dated 12.8.1983. D According to the writ petitioners respondents, as the draft develop- ment plan which had been submitted. on 15.1.1976 and sanctioned on 12.8.1983 by a notification saying that the sanction plan would come into force with effect from 16.9.1983, the period of 10 years as specified in Section 20(2) of the Gujarat Town Planning Act would have to be counted E with effect from 16.9.1983 so far as the area covered by notification dated 12.8.1983 was concerned. They claimed that within the aforesaid period of 10 years from coming into force of the final development plan neither t~e lands in question covered by that notification were acquired by agreement nor any proceedings under the Land Acquisition Act, 1894 were com­ menced. Thereafter, they issued notices and on expiry of the period of six F months from the date of service of such notices it was claimed on their behalf that the designation of the land had lapsed. This found favour with the High Court. Being aggrieved the appellant-ADDA preferred the present appeal. G Allowing the appeal, this Court HELD : 1.1. The State Government could not have sanctioned the draft development plan submitted by the Municipal Corporation on 12.8.1983 because the Gujarat Town Planning Urban Development Act, . 1976 had come into force on 30.1.1978, and Section 124(2) of the Gujarat H Town Planning Act shall not save the plan submitted by the Corporation, AHMEDABAD URBAN DEV. AlJTHORITY v. MANUAL GORDHANDAS 81 provisions of Sections 9 to 17 of Gujarat Town Planning Act being incon- A sistent with Sections 7 to 10 of the Bombay Town Planning Act, 1954. The · State Government after coming int(, force of the Gujarat Town Planning Act should have ignored the draft development plan submitted by the Corporation on 15.1.1976. This was also necessary because a special Act, Gujarat Town Planning Act had been enacted on 19.6.1976 with the sole B object to develop the urban area of the State in accordance with the provisions of the said Act. [98-G-H; 99-A-B] 1.2. From a mere comparison of the relevant Sections under the Bombay To"11 Planning Act, 1954 with the provisions of the Gujarat Town Planning Act it shall appear that the relevant provisions of the Gujarat C Town Planning Act are inconsistent with the provisions of Bombay Town Planning Act. Provisions of Sections 7 to 10 of Bombay Town Planning Act are inconsistent with Sections 9 to 17 of the Gujarat Town Planning Act. As such after coming into force of Gujarat Town Planning Act on 30.1.1978 State Government was required to follow provisions of Sections 9 to 17 of D the Gujarat Town Planning Act. Section 124(2) of Gujarat Town Planning Act was of no help when the plan submitted by Corporation was sanctioned on 12.8.1983. That could have been done if the provisions of the Gujarat Town Planning Act had been consistent with the provisions of Bombay Town Planning Act. [94-G; 95-E] 1.3. There was a complete lack of application of ~ind on the part of the State Government when the draft development plan submitted on 15.1.1976 by the Corporation was sanctioned under the provisions of the Gujarat Town Planning Act on 12.8.1983, overlooking the fact that in the meantime a comprehensive draft development plan had been prepared by F the appellant and had been submitted on 23.7.1981 for sanction of the State Government. When Section 17(1) vests power in the State Government to sanction the draft development plan, the said statutory power should not be exercised in a casual manner without proper application of mind. The facts of the present case clearly depict how the State Government has exercised the power under Section 17(l)(c) of the Gujarat Town planning G Act without proper application of mind. It appears the notification dated 12.8.1983 has· been issued being completely oblivious and ignorant of the submission of a draft development plan by the appellant in the meantime on 23.7.1981 covering those areas also. If the State Government was conscious of the fact that later a more comprehensive draft development . H 82 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A plan had been submitted by the appellant, there was no reason to sanction the draft development plan submitted by the Corporation which had lost . jurisdiction over ·the area for which the draft development plan had been prepared. (93-G-H; 94-A~E) 2.l. The State Government. should not have Qiken note of the plan submitted on 15.1.1976 by the Corporation after the repeal of the Bombay Town Planning Act on 30.1.1978 and coming into .force of the new Gujarat Town Planning Act. There was no occasion to ignore the comprehensive plan submitted by AUDA vested With the power to submit such plan and to sanction the draft plan submitted by the Corporation. After coming into C force of the Gujarat Town, Planning Act on 30.1.1978 the State Government could not have sanctioned a plan submitted by the Corporation when the AUDA had already submitted a draft development plan even <:overing those areas under the Gujarat Town Planning Act. (96-B-D] 2.2. When power has been vested in the appellant to prepare a draft developnient plan and there being no bar to include in the said draft development plan even area for which an earlier draft development plan had already been sanctioned, then the draft development plan which was sanctioned and notified on 2.11.1987 shall be deemed to be the final development plan within the meaning of Section 20 of the Gujarat Town Planning Act. As such the period of 10 years has to be calculated and counted With reference to 3.12.1987 the date when such final development plan was to come into force. (97-D-E) 3. The possibility of misuse of such power does not arise because if p such power is exercised With ulter~or motive and With an object to defeat the statutory right of persons interested, courts Will be perfectly justified in nullifying such actions of area development authorities. But in the present case the draft development plan had been submitted by the appel­ lant as early as on 23.7.1981 much before the draft development plan submitted by the Corporation was sanctioned on 12.8.1983. There is no G scope for attributing any bad faith or malice on the part of the appellant or the State Government in the facts and circumstances of the present case. The writ petitioners - respondents did not take such a stand that the State Government approved the draft development plan submitted by the appellant ·on 2.11.1987 only to defeat the right which was to accrue to the H · land owners or persons interested in the next few years. (98-A-C] -~ • AHMEDABAD URBAN DEV. AUlHORITY v. MANILALGORDHANDAS (N.P. SINGH, J.) '83 CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 11935- A 11943 of 1996. From the Judgment and Order dated 1.8.95 of the Gujarat High Court in L.P.A. No. ~96, 300, 301-02, 299, 294"95, 297 and 298 of 1995. S.N. Shelat, Additipnal Advocate General, Gujarat, S.K. Dholakia, Soli J. Sorabjee, Anil B. Divan, Ashok H. Desai, S.H. Sanjanwala, Harish N. Salve, P.S. Poti and R.P. Bhatt, Sr. Advs., V.K. Bhatt, D.S. Nanavati, A.K. Agarwal, A. Chinnasamy, Y. Adhyaru, Ms. Alka Agarwal, V.D. Khanna, Mrs. Nirmala Gupta, H.S. parihar, Kuldeep S. Parihar, P.H. Parekh, E.R. Kumar, G.E. Desai, C.G. Sharma, Sandeep Parekh, A.J. Patel, C. Patel, S. Parekh, H. D. Raval, Anip Sachthey, C.D. Singh, N.N. Munshi, A.P. Medh, A. Mehrotra, A. K. Pandey, C.C. Bhalja, A.K. Pandey, A. Mehrotra, C.C. Bhalja, Ms. Tanuja Sheel and Ms .. Reema Bhandari for the appearing parties. The Judgment of the Court was delivered by N.P. SINGH, J. Leave granted. These appeals have been filed on behalf of the Ahmedabad Urban Development Authority for setting aside the order passed by the High E Court of Gujarat dismissing the Letters Patent Appeals filed on behalf of the appellants, against the judgment of the single Judge of the said High Court in different writ petitions. The writ petitions had been allowed saying that the sanction accorded by the Notification dated 12.8.1983, by the State of Gujarat in exercise of powers conferred 011 it by clause ( c) of sub-section (1) of Section 17 of the Gujarat Town Planning and Urban Development Act, 1976 had lapsed after the expiry of period of 10 years and because of service of notice by the concerned land owners in accordance with sub-sec- tion (2) of Section 20 of the said Act, as during this period neither the lands in question were acquired by agreement nor proceedings under the Land Acquisition Act, 1894 were cbmmenced. The Bombay Town Planning Act, 1954 regulated the town planning activity within the area falling within the jurisdiction of the local authorities in the State of Gujarat including the Ahmedabad Municipal Corporation (hereinafter referred to as the "Corporation"). On 15.1.1976 the Corpora- tion submitted a revised development plan to the State Government for the H 84 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A area falling within the limits of the Corporation for sanction of the State Government. Section 7 of the Bombay Town Planning Act provides that the details of the proposals for designating the use of the land for the purposes such as (1) residential (2) industrial (3) commercial and (4) agricultural as well as proposals regarding designation of and for public purposes such as parks, play-grounds, recreation grounds, open spaces, schools, markets and for institutions should be indicated in the develop­ ment plan. Section 8 prescribes, the particulars which have to be submitted to the State Government along with the development plan. In view of Section 9 within 2 months from the date of publication of the aforesaid · development plan any member of the public has a right to communicate in writing to the local authority any suggestion relating to such plan which has to be considered at any time before submitting the development plan to the State Government. On receipt of the development plan under Section 8, the State Government under Section 10 can sanction such development plan including with modifications if any. Such sanction shall be notified in D official gazette and thereafter the development plan so sanctioned shall be called "the final development plan" which shall come into force on such date as the State Government may specify in the notification issued. The Corporation submitted the development plan to the State Government for sanction on 15.1.1976. On 19.6.1976 the Gujarat Town Planning and Urban Development Act, 1976 (hereinafter referred to as the Gujarat Town Planning Act) was enacted, which came in force on 30.1.1978 and the Bombay Town Planning Act was repealed since that date. On 30.1.1978 itself in exercise of the power under Section 22, the Ahmedabad Urban development Authority (hereinafter referred to as the AUDA) was con­ stituted and the power to prepare development plan in respect of even the areas which were the part and parcel of the Corporation vested in AUDA since that date. The preamble of the Gujarat Town Planning Act says "an Act to consolidate and amend the law relating to the making and execution of development plans and town planning schemes in the State of Gujarat". G Section 7 specifies the functions of the development authority which in­ cludes to undertake the preparation of development plans under the provisions of the. said Act for the development area and to undertake the preparation of town planning schemes under the provisions of the said Act; to control the development activities. Section 9 provides that as soon as H may be after the constitution of an area development authority as in the - AHMEDABADURBANDEV.AUIBORITY v.MANILALGORDHANDAS(N.P.SINGH,J.) 85 present case AUDA, for any development area such authority shall not A later than three years after the declaration of such area as a development area or within such time as the State Government may, from time to time extend "prepare and submit to the State Government a draft development plan for the whole or any part of the development area" in accordance with the provisions of the said Act. In view of Section 10 of that Act a copy of the draft development plan as prepared under Section 9 in respect of any area has to be kept open for inspection by the public. Section 12 requires such draft development plan to indicate the manner in which the use of the lands in the area covered by it shall be regulated and shall also indicate the manner in which the development therein shall be carried out. The relevant portion of sub-section (2) of Section 12 is as follows : "12(2) In particular, it shall provide, so far as may be necessary, for all or any of the following matters, namely : (a) proposals for designating the use of the land for residential, industrial, co~mercial, agricultural and recreational purpose; D (b) proposals for the reservation of land for public purposes, such as schools, colleges and other educational institutions, medi­ cal and public health institutions, markets, social welfare and cultural institutions, theatres and places for public entertainment, public assembly, museums, art galleries, religious buildings, play­ grounds, stadia, open spaces, dairies and for such _other purposes as may, from time to time, be specified by the State Government; (c) ............................................................... .. ( d) transport and communications, such as roads, highways, parkways, railways, waterways, canals and airport, including their extension and development; (e) ............................................................... .. (t) ································································· (g) ................................................................ . (h) ................................................................ . 86 SUPREME COURT REPORTS [ 1996]SUPP. 6 S.C.R. (i) .......................................... , ..................... . G) ································································· (k) proposals for the reservation of land for the purpose of Union, any State, local authority or any other authority or body established by or under· any law for the time being in force; (1) ................................................................ . (m) ................................................................. . (n) provision for preventing or removing pollution of water or air caused by the discharge of waste or other means as a result of the use of land; (o) ................................................................. " Because of Section 13 such authority after "the draft development plan is prepared and submitted to the State Government under Section 9", shall publish it in the official gazette and in such other manner as may be prescribed along with a notice in a prescribed manner inviting suggestions or objections from any person with respect to the development plan within a period of two months from the date of its publication. Sub-section (2) of Section 13 prescribes the particulars which have to be published alongwith the draft development plan. Objections or suggestions communicated in writing within the period specified has to be considered and· if necessary the draft development plan may be modified. If the modifications made by the authority in the draft development ptan are of extensive or substantial nature the said authority has to publish the said modifications in the official gazette along with the notice in prescribed manner inviting suggestions or objections from any person with respect to the proposed modifications within a period of two months from the date of publication of the said notice, which is required by Section 15. Section 16 provides that after the development plan is published as aforesaid and the objections or sugges- G tions thereto, if any, are received, the authority shall within a period of six months from the date of the publication of the draft development plan under Section 13 "submit to the State Government for its sanction the draft development plan and the regulations with the modifications, if any, made thereof under Sections 14 or 15". The particulars published under sub-sec­ H tion (2) of Section 13 and the suggestions or objections received under ., AHMEDABAD URBAN DEV. AUIBORITY v. MANIJ.ALGORDHANDAS [N.P.SINGii,J:) 87 Sections 14 or 15 have also to be submitted to the State Government along A with the draft development plan because of sub- section (2) of Section 16. Section 17(1) which is relevant for the pr.esent case is as follows : "17.(l)(a) On receipt of the draft development plan under section 16, the State Government may, by notification, - (i) sanction the draft development plan and the regulations so received, within the prescribed period, for the whole of the area covered by the plan or separately for any part thereof, either without modifications, or subject to such modifications, as it may consider proper; or (ii) return the draft development plan and the regulations to the area development authority or, as the .case may be, to the authorised officer, for modifying the plan and the regulations in s~ch manner as it may direct. · Provided that, where the State Government is of opinion that substantial modifications in the draft development plan and regula­ tions are necesary, the State Government may, instead of returning them to the area development authority or, as the case may be, the authorised officer under this sub-clause, publish the modifica­ tions so considered necesary in the Official Gazette alongwith a notice in the prescribed manner inviting suggestions or objections from any person with respect to' the proposed modifications within a period of two months from the date of publication of such notice; or (iii) refuse to accord sanction to the draft development plan· and the regulations and direct the area development authority or the authorised Officer to prepare a fresh development plan under the provisions of this Act. (b) Where a development plan and regulations are returned to an area development authority, or, as the· case may be, the authorised. officer under sub-clause (ii) of clause (a), the .area development authority, or, as the case may be, the authorised· officer, shall carry out the modifications therein as directed by the State 'Government and then submit them as so modified to the · H · 88 SUPREME COURT REPORTS l 1996) SUPP. 6 S.C.R. State Government for sanction; and the State Government shall thereupon sanction them after satisfying itself that the modifica­ tions suggested have been duly carried out therein. (c) Where the State Government has published the modifica­ tions considered necessary in a draft development plan as required under the proviso to sub-clause (ii) of clause (a), the State Govern­ ment shall, before according sanction to the draft development plan and the regulations, take into consideration the suggestions or objections that may have been recieved thereto, and thereafter accord sanction to the draft development plan and the regulations in such modified form as it may consider fit. (d) The sanction accorded under clause (b) or clause (c) shall be notified by the State Government in the Official Gazette and the draft development plan together with the regulations so sanc­ tioned shall be called the final development plan. ( e) The final development plan shall come into force on such date as the State Government may specify in the notification issued under clause ( d) : Provided that the date so specified shall not be earlier than one month from the date of publication of such notification . . The State Government under the aforesaid sub-section (1) of .section 17, may sanction the draft development plan forwarded by development authority either without modifications or subject to such modifications. Section 20 provides : "20.(1) The area development authority or any other authority for whose purpose land is designated in the final development plan for any purpose specified in clause (b ), clause ( d), clause (k) or clause (n) of sub-section (2) of section 12, may acquire the land either by agreement or under the provisions of the Land Acquisi­ tion Act, 1894. (2) If the land referred to in sub-section (1) is not acquired by agreement within a period of ten years from the date of the corning into force of the final development plan or if proceedings under the Land Acquisition Act, 1894 are not commenced within such AHMEDABAD URBAN DEV. AUIBORITY v. MANilALGORDHANDAS [N.P. SINGH, J.) 89 period, the owner or any person interested in the land may serve A a notice on the authority concerned requiring it to acquire the land and if within six months from the date of service of such notice the land is not acquired or no steps are commenced for its acquisition, the designation of the land as aforesaid shall be deemed to have lapsed. On a plain reading, sub-section (1) of Section 20 requires the area develop­ ment authority for whose purpose land is designated in the final develop­ ment plan for any purpose specified in clauses (b), (d), (k) or clause (n) of sub-section (2) of Section 12 to acquire the land either by agreement or under the provisions of the Land Acquisition Act. If such land is not C acquired by agreement within the period of 10 years from the date of the "coming into force of the final development plan" or if the proceedings under the Land Acquisition Act are not commenced within such period, the owner or any person interested in the land may serve a notice on the authority concerned requiring it to acquire the land. If within period of six D months from the date of the service of the notice the land is not acquired or no steps are taken for its acquisition, the designation of the land as aforesaid shall be deemed to have lapsed. Sub-section (1) of Section 124 repeals the Bombay Town Planning Act, 1954 but because of sub-section (2) of the said Section 124 not­ withstanding such repeal anything done or any action taken, including any declaration of intent.ion to make a development plan or town planning scheme, any draft development plan or draft town planning scheme pub­ lished by a local authority, any application made to the State Government for the sanction of any draft development plan or draft town planning scheme, any, sanction given by the State Government to the draft develop­ ment plan or draft town planning scheme shall in so far as it is not inconsistent with the provisions of the Gujarat Town Planning Act shall have effect in relation thereto. (emphasis supplied) G As already mentioned above on 15.1.1976 the Corporation under the provisions of the Bombay Town Planning Act, 1954 had submitted a revised development plan to the State Government for the area falling within the limits of the Corporation for sanction of the State Government. But on 19.6.1976, the Gujarat Town planning Act was enacted which came into H 90 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A force with effect from 30.1.1978. On that very date AUDA was constituted under Section 22 of the said Act. Because of sub-section (1) of SectiOn 124 it shall be deemed that the Bombay Town Planning Act was repealed with effect from 30.1.1978, when the Gujarat Town Planning Act came into force. Section 9 required AUDA to prepare and submit to the State Government a draft development plan within three years from the decla­ ration of the areas as development areas. A draft development plan was prepared by AUDA for the entire area under its jurisdiction which in­ cluded the area covered by the Corporation and was submitted to the State Government for its sanction on 23.7.1981. On 12.8.1983 a notificatio~ ,.was issued by the State Government saying: "WHEREAS the Ahmedabad Municipal Corporation (hereinafter referred to as "the said Municipal Corporation) has prepared a "Draft Revised Development Plan (hereinafter referred to as the said" Draft Revised Development Plan") in respect of the lands within the jurisdiction of the said Municipal Corporation under the provisions of the Bombay Town Planning Act, 1954 and advertisement regarding publication of the said draft revised Development Plan and calling; objections and suggestions in the said draft revised development plan was published in the Part II of the Gujarat Government Gazette dated 15th January, 1976; I AND WHEREAS the government of Gujarat had considered it necessary to make modifications (hereinafter referred to as "the said modifications") in the said draft revised Development Plan which was submitted by the said Municipal Corporation to the State Government for sanction under the provisions of the Gujarat Town Planing and Urban Development Act, 1976; NOW, THEREFORE, in exercise of the powers conferred by clause (c) of sub-section (1) of section 17 of the Gujarat Town Planning and Urban Development· Act, 1976, the Government of Gujarat hereby; (a) finalises the said modifications; (b) sanctions the said draft revised development plan and the AHMEDABAD URBAN DEV. AUTHORITY v. MANll.ALGORDHANDAS [N.P. SINGH,J.j 91 regulations thereto subject to the modifications so finalised and as A set out in the schedule appended hereto; and (c) specifies the 16th September, 1983 as the date on which the final development plan shall come into force." From the aforesaid notification itself it is apparent that the State Govern- . ment purported to sanction the draft revised development plan submitted on 15.1.1976 by the Corporation under the provisions of the Bombay Town Planning Act and State Government specified 16.9.1983 as the date on which the said final development plan shall come into force. There is no dispute that when AUDA prepared a draft development plan in accordance with the provisions of the Gujarat Town Planning Act and submitted to the State Government for sanction on 23.7.1981 it also included the area and the draft plan with modifications already submitted by the Corporation on 15.1.1976. It is the case of the AUDA that it was considered necessary to include even that area in the draft development D plan prepared by the appellant, because by that time the draft development plan which had been submitted by the Corporation had not been sanc­ tioned by the State Government. The State Government sanctioned the draft development plan submitted on 23.7.1981 by the appellant AUDA on 2.11.1987 including for the areas within the Corporation in respect of which E the draft development had been sanctioned by the State Government by aforesaid notification dated 12.8.1983. According to the writ petitioners-respondents, as the draft develop­ ment plan which had been submitted on 15.1.1976 and sanctioned on 12.8.1983 by a notification saying that the sanction plan shall come into F force with effect from 16.9.1983, the period of 10 years as specified in sub-section (2) of Section 20 of the Gujarat Town Planning Act shall have to be counted with effect from 16.9.1983 so far the area covered by notification dated 12.8.1983 is concerned. They claimed that within the aforesaid period ,of 10 years from coming into force of the final develop- G ment plan neither the lands in question covered by that notification were acquired by agreement nor any proceedings under the Land Acquisition Act were commenced. Thereafter, they issued notices and on expiry of the period of six months from the date of seryice of such notices it was claimed on their behalf that the designation of the land had lapsed. This has found favour with the High Court which has been questioned before this Court. H 92 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. It may be pointed out that although the aforesaid notification dated 12.8.1983 was issued under the provisions of Clause (c) sub-section (1) of Section 17 of the Gujarat Town Planning Act, admittedly the said draft plan had neither been prepared in accordance with the provi;ions of Gujarat Town Planning Act nor submitted by AUDA the appellant. In the notification itself it has been specifically mentioned that the Corporation had prepared the said draft revised development plan under the provisions of the Bombay Town Planning Act and submitted the same to the State Government on 15.1.1976. It has been further said that the State Govern­ ment had considered it necessary to make modifications in the said draft revised development plan which was submitted by the Corporation to the State Government and thereafter sanction was being accorded. We are not able to appreciate as to why and how the draft revised development plan which had been submitted by the Corporation on 15.1.1976 was sanctioned and notified on 12.8.1983, when in the meantime the Gujarat Town Plan­ ning Act had come into force with effect from 30.1.1978 which had juris- D diction even over the area in respect of which the Corporation had submitted the draft development plan on 15.1.1976. Apart from that before the aforesaid notification dated 12.8.1983 was issued, the appellant had submitted its draft development plan prepared in accordance with the provisions of the Gujarat Town Planning Act to the State Government for sanction, covering even the area which had been included in the draft development plan submitted by the Corporation on 15.1.1976 along with the much larger area for which th~ draft development plan was prepared by the appellant. In normal course, the State Government should not have taken note of the draft development plan submitted by the Corporation on 15.1.1976 which remained pending before the State Government and in the meantime the Gujarat Town Planning Act came into force and a more comprehensive draft development plan prepared by the appellant had been submitted to the State Government covering even the· area for which the Corporation had submitted a draft developmenf plan. On behalf of the respondents it was pointed out that when the appellant had submitted the G draft development plan on 23.7.1981 including the area for which the draft development plan had been submitted by the Corporation, it was open to the State Government to sanction the draft development plan only in part, covering the area for which the draft development plan had been submitted earlier, while exercising power under Section 17(1)(a)(i) which says that H the State Government may by notification sanction the draft development AHMEDABAD URBAN DFV. AUlHORITY v. MANII.ALGORDHANDAS [N.P. SINGH, J.) 93 plan for the "whole area covered by the plan or separately for any part A thereof'. This argument could have been accepted if in the notification dated 12.8.1983 the State Government had referred to the draft develop- ment plan submitted by the appellant on 23.7.1981 and had specifically said that it was sanctioning only part of the said plan by that notification. In the notification dated 12.8.1983, no notice has been taken of the draft develop- B ment plan submitted by the appellant on 23.7.1981, covering even the areas in respect whereof the draft development plan had been prepared by the Corporation. As such it is a futile contention that by notification dated ... ~ 12.8.1983 part of the draft development plan submitted by the appellant on 23.7.1981 had been sanctioned by the State Government in exercise of the c powers under Section 17(1)(a)(i). _,( I It was then submitted that as the draft development plan had been submitted by the Corporation to the State Government before the Bombay Town Planning Act stood repealed on coming into force of the Gujarat Town Planning Act on 30.1.1978, because of sub- section (2) of Section 124 D aforesaid it was open to the State Government to sanction that plan. On proper reading of sub- section (2) it appears, that it shall be deemed that the said draft ·development plan was pending before the State Government because of sub~section (2) of Section 124. There is a deeming fiction in sub-section (2) of Section 124 saying that any application made to the State E Government for sanction of any draft development plan shall "be deemed to have been done or taken under the corresponding provisions of this Act". It shall only keep the draft development plan submitted by the Corporation pending for consideration by the State Government because it shall be deemed that it has been submitted to the State Government F under the provisions of the Gujarat Town Planning Act. But before sanctioning the said plan the State Government was required to examine - the said draft development plan along with the draft development plan prepared and submitted by the appellant AUDA in the meantime. It can be said that there was complete lack of application of mind on the part of G the State Government when the draft development plan submitted on 15.1.1976 by the Corporation was sanctioned under the provisions of the Gujarat Town Planning Act on 12.8.1983, overlooking the fact that in the meantime a comprehensive draft development plan had been prepared by ,, the appellant and had been submitted on 23.7.1981 for sanction of the State Government. When Secrion 17(1) vests power in the State Government to H A sanction the draft development Plan, the said statutory Power should not be exercised in a casual manner without proper application of mind. The fac~s of the present case clearly depict how the State Government has exercised the power under Section 17(1)(c) of the Gujarat Town planning Act without proper application of mind. It appears the notification dated B 12.8.1983 has been issued being completely oblivi.:ius and ignorant of the submission of a draft development plan. by the appellant in the meantime on 23.7.1981 covering those areas also. lnspite of repeated queries from the counsel who appeared for the writ petitioner-responc!ents, they could not explain as to how while sanctioning the draft development plan sub- C mitted on 15.1.76 by the Corporation, there is no mention in the notification in question about the submission of a draft development plan by the appellant covering those very areas. Why the State Government was sanctioning the plan submitted on 15.1.1976 ignoring the more comprehen­ sive and detailed draft developmeat plan for a· much larger area including the area for which the draft development plan had been submitted on D 15.1.1976 by the Corporation? If the State Government was conscious of the fact that later a more comprehensive draft development plan had been submitted by the appellant, there was no reason to sanction the · draft development plan submitted by the Corporation which had lost jurisdiction over the area for which the draft development plan had been prepared. E The draft development plan submitted by the Corporation had been sanc­ tioned on 12.8.1983 without proper application of mind is obvious from the fact that admittedly later the State Government on 2.11.1987 sanctioned by notification issued under Section 17(1)(i)(c) of the Gujarat Town planning Act,. the draft development plan submitted by the appellant on 23.7.1981 F including the area for which the draft development plan had been sub­ mitted by the Corporation on 15.1.1976. Apart from that from a mere compadson of the relevant Sections under the Bombay Town Planning Act with the provisions of the Gujarat G Town Planning Act it shall appear that the relevant provisions of the Gujarat Town Planning Act are inconsistent with the provisions of Bom­ bay Town Planning Act. Section 12 of the Gujarat Town Planning Act covers a much wider field of the development and the object for develop­ ment is not as limited as Section 7 of the Bombay Town Planning Act. H Section 12 takes note of the factors and objects for which provisions have t0 be made in the draft development plan. Keeping in view the modern >­ ·• It AHMEDABADURBANDEV.AUTIIORITY v.MANII.ALGORDHANDAS(N.P.SINGH,J.) 95 requirements for an urban development provisions have been made for A zoological gardens, green belts, natural reserves sanctuaries, railways, waterways canals, airport, water supply, drainage, sewage disposal, public utility amenities including supply of electricity and gas. It also contemplates preservation, conservation and development of natural scenery and landscape, places of historical, architectural interest. It provides for con- B trolling and regulating the use and development of land within the developed area including imposition conditions and restrictions in regard to the open space to be maintained for buildings, the percentage of building area for a plot, the location, number, size, height, number of storeys, parking spaces etc. It conceives provision for preventing or remov­ ing pollution of water or air caused by discharge of waste or other means as a result of the use of land. All this was not in Section 7 of the Bombay Town Planning Act prescribing the contents of the development plan. Similarly, the procedure prescribed for sanction of a draft development plan under Sections 13 to 17 of the Gujarat Town Planning Act are not D consistent with Sections 8 to 10 of Bombay Town Planning Act. It has to be held that provisions of Sections 7 to 10 of Bombay Town Planning Act are inconsistent with Sections 9 to 17 of .the Gujarat Town Planning Act. As such after coming into force of Gujarat Town Planning Act on 30.1.1978 State Government was required .to follow provisions of Sections 9 to 17 of E the Gujarat Town Planning Act. Sub-section (2) of Section 124 of Gujarat Town Planning Act was of no help when the plan submitted by Corporation was sanctioned on 12.8.1983. That could have been done if the provisions of the Gujarat Town Planning Act had been consistent with the provisions of Bombay Town Planning Act. Sub- section (2) of Section 124 says : "Notwithstanding such repeal, anything done or any action taken (including any declaration of intention to make a development plan or town planning scheme, any draft development plan or draft town planning scheme published by a local authority, any application made to the State Government for the Sanction of any draft development plan or draft town planning scheme, any, sanction G given by the State Government to the draft development plan ...... . shall, in so far as it is not in consistent with the provisions of this Act, be deemed to have been done or taken under the correspond- ing provisions, of this Act, and the provisions of this Act shall have H 96 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. effect in relation thereto." (emphasis supplied) Provisions and procedures under Sections 7 to 10 of the Bombay Town Planning Act are different from the provisions and procedures in respect of preparation of a development plan under the Gujarat Town Planning Act. In this background the State Government should not have taken note of the Plan submitted on 15.1.1976 by the Corporation after the repeal of the Bombay Town Planning Act on 30.1.1978 and coming in force of the new Gujarat Town Planning Act. There was no occasion to ignore the C comprehensive plan submitted by AUDA vested with the power to submit such plan and to sanction the draft plan submitted by the Corporation. According to us, after coming into force of the Gujarat Town Planning Act on 31.1.1978 State Government could not have sanctioned a plan submitted by the Corporation when the AUDA had already submitted a draft D development plan even covering those areas under the Gujarat Town Planning Act. To prepare a scheme for the development of an urban agglomeration in the present days is a very complex issue and any development authority as well as the State Go\-ernment which is· the sanctioning authority has to apply its mind on the details of such development plans. During the last few decades an urban development has assumed unprecedented impor­ tance because of the population migration from rural areas to urban areas and cry for a roof and fresh air. In such urban areas the orderly growth of the cities has to be enforced through proper development plans. For every city as was done in Ahmedabad in the present case, development authorities have been constituted who can prepare comprehensive develop­ ment plans keeping not only the present requirement but even the require­ ments for the 21st century in view. If the development in such areas are not carried on the well known principle, most of.the cities will be converted G into slums sooner or later. There was a time when a ci~y meant only residential area and commercial complex including industrial centres. But the whole concept has changed. While planning an urban area not only the residential, institutional, industrial and commercial, aspects have to be seen but also provisions have to be made in respect of zoological gardens, green H belts, natural reserves, sanctuaries, highways, parkways, Waterways, airport, t- AHMEDABAD URBAN DEV. AUTIIORITY v. MANII.ALGORDfL\NDAS [N.P. SINGH,J.) 97 ···drainage, sewage disposal. The development authority has also to reserve · A land for community facilities and services and for prevention of pollution of water or air caused by the discharge of waste or other means as a result of the use of land. From a bare reference to sub-section (2) of Section 12 .. · it shall appear that framers of the Gujarat Town Planning Act have conceived the new requirements for a proper development of an urban B area. As in the present case the only question which is to be answered is as to with effect from which date 10 years period shall be counted, it has to be decided as to which date shall be deemed to be the date of coming into force of the final development plan, so far the area within the Cor- C poration is concerned. The notification dated 2.11.1987 had been issued by the State Government covering the area notified on 12.8.1983 several years before the issuance of notices by the writ petitioners. The notification dated 2.11.1987 was neither questioned by the writ petitioners-respondents nor could have been questioned, according to us. When p9wer has been vested D in the appellant to prepare a draft development plan and there being no bar to include in the said draft development plan even area for which an earlier draft development plan had already been sanctioned, then the draft development plan which was sanctioned and notified on 2.11.1987 shall be deemed to be the final development plan within the meaning of Section 20 E of the Gujarat Town Planning Act. As such the period of 10 years has to be calcu.lated and counted with reference to 3.12.1987 the date when su.ch final development plan was to come into force. On behalf of the writ petitioners it was pointed out that if it is held that period of 10 years is to be counted with reference to 3.12.1987 then the right which has been provided to the land owners or the persons interested by sub-section (2) of Section 20 to give notice after the expiry of the period of 10 years from coming into force of the final development plan, can be defeated by any area development authority by notifying a fresh draft development plan just on expiry of the final plan including fresh G areas. In other words any area development authority on verge of the eXpiry of the period of 10 years of a final development plan, may include that area into another draft development plan along with other area to defeat the right which had accrued or was likely to accrue to the land owners or the persons interested under sub-section (2) of Section 20. If such power is H A exercised with ulterior mo~ive and with an object to defeat the statutory right of persons interested, courts will be perfectly justified in nullifying such actions of area development authorities. But in the present case as has been pointed out above the draft development plan had been submitted by the appellant as early as on 23.7.1981 much before the draft develop- ment plan submitted by the Corporation was sanctioned on 12.8.1983. There is no scope for attributing any bad faith or malice on the part of the appellant or the State Government in the facts and circumstances of the present case. In all fairness none of the counsel appearing for the writ-petitioners-respondents took such a stand that the State Government approved the draft development plan submitted by the appellant on 2.11.1987 only to defeat the right which was to accrue to the land owners or persons interested in the next few years. We are not inclined to accept the submission made on behalf of the respondents that the effect of the sanctions given on 12.8.1983 and D 2.11.1987 shall be that two final development plans had come into force. The effect of sanction given on 2.11.1987 shall be that the State Govern­ ment had sanctioned the comprehensive draft plan prepared by the appel­ lant with the area in respect of which State Government had purported to accord sanction on 12.8.1983. The respondents could not point ou~ as to E how this sanction of the State Government given by notification dated 2.11.1987 shall be illegal, invalid and not sanctioned by law. In the present case the draft development plai:i was submitted on 23.7.1981 by the appel­ lant which was sanctioned on 2.11.1987. Then it shall be deemed that the area in respect of which separate draft development plan had been sanc- tioned on 12.8.1983 merged and became part and parcel of the scheme and plan which had been submitted by the appellant AUDA on 23.7.1981 and which was sanctioned on 2.11.1987. It will be deemed that the final plan came in force with effect from 3.12.1987, even in respect of area which was covered by the notification dated 12.8.1983. We have already held that the State Government could not have sanctioned the draft development plan submitted by Corporation on 12.8.1983 because the Gujarat Town Planning Act had come in force on 30.1.1978 and sub-section (2) of Section 124 of the Gujarat Town Planning Act shall not save the plan submitted by the Corporation, provisions of H Sections 9 to 17 of Gujarat Town Planning Act being inconsistent with AHMEDABAD URBAN DEV. AUTIIORITY v. MANIIALGORDHANDAS [N.P. SINGH, J.] 99 Section 7 to 10 of the Bombay Town Planning Act. The State Government A after coming into force of •the Gujarat Town Planning Act should have ignored the draft development plan submitted by the Corporation on 15.1.1976. This was also necessary because a special Act, Gujarat Town Planning Act had been enacted on 19.6.1976 with the sole object to develop the urban areas of the State in accQrdance with the provisions of the .said Act. Accordingly, the appeals are allowed. The Judgments of the High Court are set aside and the writ petitions are dismissed. There shall be no orders for costs. v.s.s. Appeals allowed. A DEPUTY COLLECTOR, MINICOY AND ORS. v. NA V ADIGOTHI MOHAMMED AND ORS. SEPTEMBER 11, 1996 B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.] Tenancy and Land Laws : Laccadive, Minicoy and Amindivi Islands Revenue and Tenancy C Regulation, 1965: Section 121. South Pandaram Land-Allotment of-To inhabitants-Such in­ habitants had only collective right of collection of coconuts and enjoyment thereof through their Mooppans as Trustees-Neither the Mooppans nor the inhabitants had right over the land or coconut trees-Mooppans as trustees D exercised this collective right arbitrarily-Hence notices issued for allotment of separate plots of land to inhabitants-Mooppans challenged these notices claiming 1ight of occupancy on ground of they being in occupation of said land on behalf of inhabitants prior to commencement of Reguiation-High Court allowed the claim-Held : High Court e"ed in granting right of oc- E cupancy to Mooppans-ln the circumstances of the case, Regulations, Rules and notices were valid-Lakshadweep Land Revenue and Tenancy (Allot­ ment of Pandaram Land) Rules, 1979-Constitution of India, 1950, Article 240. The inhabitants of the South Pandaram Land collected coconuts p from the trees for which purpose they were getting some remuneration in kind but at no point of time they had any vested right to the trees or the land on which the trees stood. After sometime this right was conferred as a collective right in favour of the inhabitants for enjoyment thereof through the respondents- Mooppans as trustees. When the Moppans as trustees arbitrarily exercised this collective right, the appellants G promuglated Laccadive, Minicoy and Amindive Islands Revenue and Tenancy Regulation, 1965 under Article 240 of the Constitution of India. The appellants issued notices for allotting separate plots of land to the inhabitants in accordance with Lakshadweep Land Revenue and Tenancy (Allotment of Pandaram Land) Rules, 1979 framed under Section 121 of H the Regulations. 100 DY. COLLECTOR MINI COY v. NAV ADIGOTIII MOHAMMED 101 The respondents-Mooppans filed writ applications before the High A Court challenging the aforesaid notices for allotment of plots which were dismissed by the Single Judge. On appeal the Division Bench held that the respondents-Mooppans were in occupation of the Pandaram Lands at the commencement of the Regulation on behalf of the inhabitants and, there­ fore, they were entitled to their claim of right of occupancy over the land B in question. The Division Bench also held that the notices issued under the Rules were only applicable in respect of fresh lands and would not divest the persons who had already acquired right of occupancy. Accord­ ingly, the Division Bench allowed the writ appeals. Being aggrieved the appellants preferred the present appeal. Allowing the appeal, this Court HELD : 1. There is no infirmity with the Laccadive, Minicoy and Amindivi Islands Revenue and Tenancy Regulations, 1965 as well as the Lakshadweep Land Revenue and Tenancy (Allotment of Pandaram Land) Rules, 1979 framed thereunder and it has been so framed in exercise of D power conferred under Article 240 of the Constitution for the peace, progress and good government of the Lakshadweep group of Islands. The Regulations and the Rules sub-serve the purpose for which power has been conferred on the President under Article 240 of the Constitution and the Regulation and the Rules would achieve the object of allotting specific part E of the land in favour of each individual, so that, the Mooppans will not be able to exploit the individuals. The Division Bench of the High Court was wholly in error in granting right of occupancy in favour of the respondents and in quashing the impugned notices issued by the Administrator in exercise of his power under the Regulation and the Rules framed there­ under. [105-A-C; DJ CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 11907- 11910 of 1996. From the Judgment and Order dated 8.2.84 of the Kerala High Court G in W.A. Nos. 525~26, 547 and 550 of 1981. P.A. Chowdhary, S.P. Singh and B. Krishna Prasad for the Appel­ lants. A.S. Nambiar, Ms. Shanta Vasudevan and P.K. Manohar for the H A Respondents. The Judgment of the Court was delivered by PATTANAIK, J~ Leave granted. These appeals by special leave are directed against the judgment of the Division Bench of the Kerala High Court dated 8th February, 1984 in Writ Appeal No.525/81 and batch. Notices were issued under the Lakshad­ weep Land Revenue and Tenancy (Allotment of Pandaram Land) Rules, 1979 (hereinafter referred to as 'Rules') and challenging those notices the respondents herem filed writ applications. The learned Single Judge dis­ missed the writ applications. In appeal the Division Bench of the High Court by the impugned judgment quashed notices issued and allowed the writ appeals filed and thus these appeals by special leave. The case of the appellants is that South Pandaram Lands are the D Government lands. Before the Minicoy Island came under the British Rule the Raja of Cannanore was enjoying the usufruct of the coconut trees standing on the South Pandaram Lands. The inh~bitants of the Islands were getting some mamul for collecting and stacking the coconuts. After the British Rule the inhabitants of the Islands continued to collect the coconuts from the trees and for that purpose they are getting some remuneration in kind but at no point of time they had any right to the trees or the land on which the trees stood. Sometimes prior to 1942 the Govern­ ment evolved a scheme conferring rights to the inhabitants of the Island to collect and enjoy the fruits from the coconut trees. After India became independent when Five Year Plan was implemented, on the representation of the people of Minicoy a new ·scheme was proposed and under that scheme the inhabitants were permitted not only to collect the coconuts falling from the trees but also to pluck the nuts from the trees itself. And after this right was conferred as a collective right in favour of inhabitants through their Moopppans, the Mooppan thus as a trustee for all the villagers had the right to enjoy usufruct of the coconut trees for himself as G well as for all the villagers together and the Mooppan was distributing the coconuts amongst the villagers. While the Mooppans continued to enjoy usufruct of the coconut trees for themselves as well as for the villager!', gradually a demand for abolition of Mooppans system began. The ad­ ministration considering the grievances of the villagers finally thought of H granting separate plots and land individually to the inhabitants and ul- DY. COLLECTORMINICOY v. NAVADIGOTIIIMOHAMMED (PATIANAIK, J.) 103 timately Laccadive, Minicoy and Amindivi Islands Revenue and Tenancy A Regulation, ·1965 (hereinafter referred to as the 'Regulation') was promul­ gated under Article 240 of the Constitution of India. The Administrator thereafter framed Rules in exercise of power conferred under Section 121 of the Regulation. It is the further case of the appellants that the people of Minicoy Island never had any vested right on the land on which the B coconut trees stood though they were enjoying the right of collection of yield of the coconut trees standing on the South Pandaram Land and there fore they cannot be held to have acquired right of occupancy. In accord­ ance with the Rules framed under the Regulation notices having been issued by the appropriate authority for allotting different parts of South Pandaram Land to different persons, writ applications came to be filed by C the respondents herein contending inter alia that they have acquired right of occupancy being in occupation of South Pandaram Lands prior to the Regulation coming into force and therefore the notices issued under the Rules would deprive them of their right of occupancy. The learned Single Judge on consideration of the relevant provisions of the Regulation and D the rights enjoyed by the Mooppans in respect of the usufruct of the coconut trees came to hold that no right of occupancy accrued in favour of the Mooppans under Sections 83 and 84 of the Regulation. It was also further found that the Mooppans as well as the inhabitants of the Island merely enjoyed a right of plucking coconuts from the trees without having any right over the land or the trees itself and therefore they cannot be held E to be in occupation of the land in question and their claim of right of occupancy is unsustainable. With these findings the writ applications having been dismissed, the respondents preferred appeals to the Division Bench. The Division Bench by the impugned judgment came to hold that the Mooppans were in occupation of the Pandaram Lands at the commence- F ment of the Regulation on behalf of the inhabitants of the village and therefore they are entitled to their claim of right of occupancy over the land in question. The notices issued by the appropriate authority under the 1979 Rules can only be applicable in respect of fresh lands and will not divest the persons who have already acquired right of occupancy. Accord­ ingly, the Division Bench allowed the writ appeals and hence these appeals G by special leave. Mr. Chowdhary, the learned senior counsel appearing for the appel­ lants contended that in view of the limited right of collection of coconuts from the trees conferred upon the Mooppans and the inhabitants of the H A village without any right over the Land on which the trees stood, the Division Bench of the High Court was wholly in error to hold that they were in occupation of the land prior to Regulation coming into force. He further contended that the Mooppan of the village had been conferred certain privileges as he was representing the interest of village community B at large. The Mooppans were acting as trustees but as complaints received from several villagers the Government decided to confer individual rights on the inhabitants under the Regulation and therefore there is no infirmity with the notices issued. Mr. Nambiar, the learned senior counsel appearing for the respondents on the other hand contended that the Lakshadweep group of Islands have its own peculiar concept of rights and the Mooppans C were merely representing the entire village community. There was total unity of enjoyment and the Moopans and the villagers had absolute right over the coconut trees and therefore the Division Bench rightly held that they held the right of occupancy which right can't be taken away by the Regulation or the Rules framed thereunder. In view of the rival submissions at the Bar the question that arises for consideration is whether the Division Bench of the High Court was right in its conclusion that the Mooppans and the villagers can be said to have acquired the right of occupancy over the land on which the coconut trees stood prior to Regulation coming into force? If it is held that right of occupancy had accrued in their favour then that right cannot be taken away by the administration in exercise of its power under the Regulation and Rules framed thereunder. But on examination of the materials on record and the history of the bundle of rights which the inhabitants of these Islands were enjoying, it is crystal clear that there was no demarcation of any individual property. The villagers through their Mooppans were initial­ ly getting some remuneration for collecting and stacking coconuts. In course of time. they got the right to pluck coconuts from the trees but no specific individual had any specific right over any specific tree and it was a case of collective right of collection and enjoyment of the fruits through their Mooppans. Mooppan was acting as the trustee and was equality G distributing the usufruct of the coconut trees. At no point of time either the Moopans or any individual villager had an iota of right over the land or the coconut trees standing thereon. This being the position, it is difficult to accept the conclusion of the Division Bench of the High Court that the respondents had acquired a right of occupancy prior to the Regulation coming into force. Further the so-calle9 collective rights which were being H exercised by the Mooppans on behalf of the villagers as trustees were DY. COLLECTOR MINICOY v. NA VADIGOIBI MOHAMMED (PATIANAIK,J.j 105 complained of when the Mooppans started arbitrarily exercising their A power. After due enquiry the government decided to confer right of occupancy over specific parts of land in favour of each individual in accordance with the Regulation and the Rules framed thereunder. We see no infirmity with the Regulation as well as the Rules framed thereunder and it has been of framed in exercise of power conferred under Article 240 of the Constitution for the peace, progress and good government of the Lakshadweep group of Islands. The Regulation and the Rules sub-serve the purpose for which power has been conferred on the President under Article 240 of the Constitution and the Regulation and the Rules would achieve the object of allotting specific parts of the land in favour of each individual, so that, the Mooppans will not be able to exploit the individuals. In view of our aforesaid conclusion we have no hesitation to hold that the Division Bench of the High Court was wholly in error in granting right of occupancy in favour of the respondents and in quashing the impugned notices issued by the Administrator in exercise of his power under the Regulation and the Rules framed thereunder. Appeals are accordingly D allowed. The judgment of the Division Bench of the High Court in Writ Appeal No. 525/81 and batch is set aside. Writ applications filed by the respondents stand dismissed. There will be no order as to costs. v.s.s. Appeal allowed. E A M/S. GUJARAT MACHINERY MANUFACTURERS LTD. v. COLLECTOR, CENTRAL EXCISE, BARODA. SEPTEMBER 11, 1996 B (S.P. BHARUCHA AND K. VENKATASWAMI, JJ.] Central Excises & Salt Act, 1944: •, First Schedule-Tariff Item 23A(4), general item 68-Frit-Assistant C Collector accepting the claim of assessee and classifying it under general item 68-Collector setting aside the order and classifying flit as other glass failing under Item 23-A(4) and demanding difference in duty-Tribunal upholding the reclassification but limited levy of duty for six months prior to the notice by Tribwia1-0n appeal held, since no notice was issued to the assessee by the Collector before the reclassification, the orders of the Collector and the D Tribunal directing the assessees to pay the short-levied duty bad in law--Hence set aside. CIVIL APPELLATE JURISDICTION : CiVil Appeal No. 117 of 1984. From the Judgment and Order dated 10.6.83 of the Customs Excise and Gold (Control) Appellate Tribunal in A. No. E.D. (SB) (T) A. No. 139 of 1982-D. D.A. Dave, Sunil Dogra, A. Roy, S. Shroff for S.A. Shroff & Co. for F the Appellants. Joseph Vellappally and V.K. Verma for the Respondent. The following Order of the Court was delivered : G We are concerned in this appeal against an order of the Customs, Excise and Gold (Control) Appellate Tribunal (the "Tribunal") with a commodity called frit, which is manufactured by the appellants. With the introduction into Tariff Item 23-A( 4) of the words "glass and", it read "other glass and glassware including tableware". The Collector H of Central Excise issued to the appellants a notice under Section 45-A of 106 GUJ. MACHINERY MANUFACTURERS LID. v. COLLECTOR, CENTRAL EXCISE 107 the Central Excise and Salt Act on 4th November, J..981, asking them to A show cause why frit should not be classified under sub-item ( 4) of Item 23-A with effect from 1st March, 1979, and the order of the Assistant Collector accepting that classification under the general Item 68 be revised accordingly. The appellants showed cause. The collector by his order dated 3.12.1981 made the notice absolute. He set aside the Assistant Collector's order. He ordered that frit 'is hereby classified as other glass falling within B the purview of Item 23-A( 4) of the First Schedule'. He further ordered that the appellants 'shall pay the duty of excise at the appropriate leviable rate on frit glass manufactured and cleared by them as applicable to Item 23-A(4) of the said First Schedule or the difference in duty, as the case may be'. The appellants preferred a revlSlon appl:cation to the Central Government which came to be transferred to the Tribunal when it was .. onstituted. The Tribunal considered the evidence that had been placed on record by the appellants and upheld the classification of frit as "other D glass" within the meaning of Item 23-A( 4). It was contended before the Tribunal that no notice had been issued to the appellants in regard to the recovery of any short-levied duty pursuant to such re-classification and that, therefore, no demand in this behalf could have been made or sus­ tained. The Tribunal stated that the show-cause notice dated 4th Novem- ber, 1981, no doubt did not, in terms, ask the appellants to show cause E why recovery of the short-levied duty should not be made, but, once the Collector came to the conclusion and ordered the re-classification of frit under Item 23-A(4), he was right in demanding the payment of differential duty. However, the recovery thereof could be made only in respect of the period of six months preceding the date of the order, i.e., 30th April, 1982, F as determined with regard to the provisions of Rule 11 or Section llA. The Excise authorities were directed to re-calculate the amount of the short levy in the light of the Tribunals' order and communicate the appropriate figure to the appellants. It is unnecessary to go into the aspect of classification because the G new Tarif expressly provides for the classification of frit and because we are of the view that no notice for the recovery of short-levied duty as required by Section 35A was given to the appellants. The relevant provisions of Section 35A read thus :- H "S.35A.-Revision by Board \lr Collector.- 1 ..................................................... . 2. The Collector of Central Excise may, of his own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under this Act or the rules made thereunder by a Central Excise Officer subordinate to him (not being a decision or order passed on appeal under Section 35) for the purpose of satisfying himself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as he thinks fit. 3(a) No decision or order under this section shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if he so desires, of being heard in his defence. . (b) Where the Board or, as the case may be, the Collector of Central Excise is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section llA." Sub-section (2) of Section 35A empowers a Collector of Central Excise, suo motu or otherwise, to revise any decision or order made by a F Central Excise officer subordinate to him. If he is satisfied as to its incorrectness, illegality or impropriety, he may pass such order thereon as he thinks fit. By reason of clause (a) of sub-section (3), no decision or order may be so varied as to prejudicially affect any person unless that person has been given a reasonable opportunity of making a representation and, if so desired, of being heard. Clause (b) of sub-section (3) applies when G duty which has not been levied or has been short-levied or has been erroneously refunded is sought to be recovered. In such event, no order in this behalf can be made unless the person who would have to pay is a) given notice to show cause against "it", that is, against being required to pay; and b) the notice is given within the time limit specified in Section H llA. , GUJ. MACHINERY MANUFACfURERS LTD. v. COLLF.CIOR, CEN1RAL EXCISE 109 The order of the Collector under Section 35A gave to the appellants A no notice that he proposed to make an order that would require them to pay the duty which might be found to have been short-levied if the frit was found to be classifiable under Item 23-A(4). The orders of the Collector and of the tribunal, insofar as they required the appellants to pay the short-levied duty, even though limited to the period of six months prior to B the date of the notice by the Tribunal, are bad in law. In the result, the appeal is allowed. The order of the Tribunal is set aside insofar as it directs the Central Excise authorities to recalculate the amount of the short levy in the light of its observation that recovery of the short levied duty could be made in respect of the period of six months C preceding the date of the Collector's order and requires the appellants to pay such sum. In the event that any part of such sum has been recovered, the same shall be returned to the appellants. There shall be no order as to costs. D G.N. Appeal allowed. ··- A J.S. PARIHAR v. GANPAT DUGGAR AND ORS. SEPTEMBER 11, 1996 B [K. RAMASWAMY, FAIZAN UDDll\J" AND G.B. PATTANAIK, JJ.] Service Law : Rajastha.n Civil Engineering Services (Public Health C Branch}-Seniority list of Engineers--Prepared with retrospective ef­ f ect~uashed by the High Court with a direction to prepare the seniority list afresh-Fresh seni01ity list prepared--Contempt proceedings initiated-Single Judge giving directions-Appeal by State-Division Bench holding that appeal not maintainable under S.19 of the contempt of Courts Act but as a Letters Patent Appeal-Set aside the directions of Single Judge-On appeal, held the D Single Judge was exercising his jurisdiction to consider the matter on merits in contempt proceedings, which is not pennissible-Division Bench rightly exercised its power under S.18 of the Rajasthan High Court Ordinance to co1Tect the mistake committ~d by the Single Judge-Since Division Bench already seized of the matter it was not necessary for the State to go in appeal. Contempt of Courts Act. 1971. Ss.12, 19-Contempt proceedings-Single Judge going into merits of the case and giving directions-Not pennissible-Division Bench of High Court exercising power under, S.18 of Rajasthan High Court Ordinance to co17"ect the mistake committed by Single Judge-Held, the Division Bench justified in doing so, since appeal under S.19 not maintainable-Rajasthan High Cowt Ordinance-S.18. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12494-96 of 1996. From the Judgment and Order dated 3.4.96 of the Rajasthan High Court in D.B.C.S.A. No. 1-2 of 1995 and D.B.C.L~ .to A. No. 40 of 1995. Sushil K. Jain for the Appellant. H Aruneshwar Gupta for the Respondent. 110 .. ' . J.S. PARIHAR v. GANPATDUGGAR 111 The following Order of the Court was delivered : A We have heard the counsel on both sides. Leave granted. l These appeals by special leave arise from the order of the Division B Bench dated April 3, 1996 made in Special Civil Appeal Nos. 1 & 2 of 1995. The facts are not in dispute. The controversy relates to the prepara- tion of the seniority list of the engineers in Rajasthan Civil Engineering Services (Public Health Branch). In W.P. No. 560n9 by order dated October 6, 1988 the Division. Bench of the High Court declared the C seniority list prepared with retrospective effect in terms of the amended Rules as unconstitutional; it accordingly quashed the list and directed preparation of the seniority list afresh to determine the inter se seniority on that basis and to grant promotion to the appellants within the specified time. The same order came to be reiterated by order of another Division Bench dated September 9, 1989 made in W.P. No. 1074/80. It was further D reiterated in the order dated March 22, 1990. When the seniority list came to be prepared, the contempt proceedings were initiated under Section 12 of the Contempt of Courts Act, 1971 (for short the "Act"). The learned single Judge on consideration of the merits in the seniority held that the respondents had not wilfully disobeyed the orders of the Court and gave directions as under : "In Gyaneshwar's case, only retrospectivity of these amendments was challenged and, therefore, it was felt by the learned Judges of the Division Bench that retrospectivity of these amendments has already been held to be ultra vires in Kai/ash Chand Goyal's case F and so, it had not been declared as such afresh. In that case, the notifications whereby amendments were introduced were not chal­ lenged but only their retrospectivity was challenged and, therefore, the decision of this Court in Gyaneshwar's case does not hold the field. The controversy raised in this case is squarely covered by the decision of this Court in Kai/ash Chand Goyal's _case (supra) and G in Kai/ash Ozand Goyal's case, the impugned notifications An­ nexures 5 to 6 have been quashed in their entirety and so,k the seniority of the petitioner has to be determined on the basiS of the directions given by this Court in Kai/ash Chand Goyal's case (supra) and promotions have to be accorded accordingly. Of H 112 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. course, it appears quite just and reasonable that the non­ petitioners did not intend to disobey the directions given by this Court on account of the legal advice that has been tendered to them and on account of certain interpretations put to the judgment rendered in Kailash Chand Goyal's case (supra) on the basis of Gyaneshwar's case (supra) and as son1e confusion prevailed with the non petitioners on account of that, they could not comply this order. However, the non- petitioners are directed to comply with the order of this Court dated 22.3.1990 by giving effect to the ratio of the decision that has been rendered by a Division Bench of this Court in Kai/ash Chand Goyal's case (supra) and the seniority list should be prepared as directed in the judgment in Kai/ash Chand Goyal's case (supra) and promotions should be accorded according­ ly. If this order is not complied with within a peliod of six months from today, the petitioner will be free to move a contempt petition afresh against the non-petitioners." The State had filed appeal against these directions. A preliminary objection was taken on the maintainability of the appeal and also argu­ ments were advanced. The Division Bench while holding the appeal as not maintainable under Section 19 of the Act, held that the appeal would be maintainable as a Letter Patent Appeal as the direction issued by the learned single Judge would be a Judgment within the meaning of Clause (18) of the Rajasthan High Court Ordinance. Accordingly the Division Bench set aside the directions issued by the learned single Judge. Thus these appeals by special leave. The question is : whether an appeal against the directions issued by the learned single Judge is maintainable under Section 19 of the Act? Section 19 of the Act envisages that "an appeal shall lie as of right from any order or decision of High Court in the exercise of its jurisdiction to punish for contempt where the order or decision is that of a single Judge, G to a bench of not less than two Judges of the Court". Therefore, an appeal would lie under Section 19 then an order in exercise of the jurisdiction of the High Court punishing the contemner has been passed. In this case, the finding was that the respondents had not wilfully disobeyed the order. So, . there is no order punishing the respondent for violation of the orders of H the High Court. Accordingly, an appeal under Section 19 would not lie. .. - J.S. PARIHAR v. GANPATDUGGAR 113 The question then is : whether the Division Bench )Vas right in setting A aside the direction issued by the learned single Judge to redraw the seniority list. It is contended by Mr. S.K. Jain, learned counsel appearing for the appellant, that unless the learned Judge goes into the correctness of the decision taken by the Government in preparation of the seniority list in the light of the law laid down by three Benches, the learned Judge cannot come to a conclusion whether or not the respondent had wilfully or deliberately disobeyed the orders of the Court as defined under Section 2(b) of the Act. Therefore, the learned single Judge of the High Court necessarily has to go into the merits of that question. We do not find that the contention is well founded. It is seen that, admittedly, the respondents had prepared the seniority list on 2.7.1991 Subsequently promotions came to be made. The question is : whether seniority list is open to review in the contempt proceedings to find out, whether it is in conformity with the directions issued by the earlier Benches. It is seen that once there is an order passed by the Government on the basis of the directions issued by the Court, there arises a fresh cause of action to seek redressal in an D appropriate forum. The preparation of the seniority list may be wrong or may be right or may or may not be in conformity with the directions. But that would be a fresh cause of action for the aggrieved party to avail of the opportunity of judicial review. But that cannot be considered to be the wilful violation of the order. After re-exercising the judicial review in contempt proceedings, afresh direction by the learned single Judge cannot be given to redraw the seniority list. In other words, the learned Judge was exercising the jurisdiction to consider the matter on merits in the contempt proceedings. It would not be permissible under Section 12 of the Act. Therefore, the Division Bench has exercised the power under Section 18 of the Rajasthan High Court Ordinance being a judgment or order of the single Judge, the Division Bench corrected the mistake committed by the learned single Judge, Therefore, it may not be necessary for the State to file an appeal in this Court against the judgment of the learned single Judge when the matter was already seized of the Division Bench. The appeals are accordingly dismissed. It may be open to the ag- G grieved party to assail the correctness of the seniority list prepared by the State Government, if it is not in incomformity with the directions issued by the High Court, if they so advised, in an appropriate forum. No costs. G.N. Appeals dismissed. H A SH. S.K. V AISH v. UNION OF INDIA AND ORS. SEPTEMBER 11, 1996 B (K. RAMASWAl~A:Y, FAIZAN UDDIN AND G.B. PAITANAIK, JJ.) Service Law : Efficiency Bar-Crossing of-Employee kept under suspension and C disciplinary proceedings initiated against him-Punishment of compulsory retirement imposed-On appeal, department directed that the punishment be treated pwtly as suspension and pa1tly in service-Tribunal directing that the ·employee be treated as on duty for all pwposes including pay and allowan-. ces--It also held that DPC had considered his case for efficiency bar and found him not fit and therefore the employee not entitled to cross efficiency D ba~n appeal held, after reinstatement the employee had hardly worked for three months--Foi· three successive years there were adverse entlies against him--OPC recommended that he was unfit to cross efficiency ba1-Tribuna/ accepted the position-Hence no inteiference called for. -F CIVIL APPELLATE JURISDI,CTION: Special Leave Petition (C) No. 19774 of 1996. From the Judgment and Order dated 15.2.96 of the Central Ad­ ministrative Tribunal, Delhi in: O.A. No. 978 of 1992. Sant Lal, Pradeep Kumar and B.S. Gupta for the Petitioner. The following Order of the Court was delivered : ·-~ Delay condoned. This Special Leave Petition has been filed against the order dated G February 15, 19% made in OA. No. 978/92 of th'e CAT, Principal Bench, New Delhi. The admitted position is that the petitioner after his promotion as Assistant Engineer in Telecom Engineering Service Group 'B' on April 16, 1979 was kept under suspension and disciplinary proceedings were initiated against him. On June 30, 1986, punishment was imposed· by way H of compulsory retirement. The same came to be challenged by way of an 114 S. K. V AISH v. U.0.1: 115 appeal. On appeal, the Department directed that the punishment be A treated partly as suspension and partly as in service by proceeding~ dated February 16, 1979. When the petitioner challenged the same in O.A. No. 1690/90, by order dated February 14, 1992, the samf was allowed and direction was given to treat him as on duty for all purposes including pay and allowances. After reinstatement, the petitioner retired from service on attaining superannuation on ·May 31, 1992. He had prior to that filed representation for crossing his efficiency bar. In the impugned order, the Tribunal has held that the D.P.C. had considered his case for efficiency bar and found him not fit and, therefore, he is not entitled to the relief. Thus, this special leave petition. It is contended by the learned counsel for the petitioner that when he was reinstated into service the efficiency bar was required to be considered after taking into account his subsequent record. What was stated was adverse entries for the year 1979-80, 1980-81-1981-82. There was no reconsideration in the light of the direction issued by the Ministry in D the letter dated September 18, 1991 in O.M. No. 7(28)/EIIl/91 that all pending cases should be considered to bring the pending cases of the employee so as to bring them on par with the scale of pay recommended by the 4th Pay Commission. The petitioner had given a representation but the same was not considered; even direction given to produce the record was not followed. Therefore, the Tribunal ought to have drawn adverse E inference against the Government and should have directed that he was entitled to cross the efficiency bar. He also contended that the sealed cover procedure as is invogue should have been adopted for crossing the efficien- cy bar and kept pending when the departmental enquiry was pending against him. F We find no force in the contention. The petitioner has not brought to our notice any circular issued by the Government and it is obviously incongruous for the reason that in the event of the petitioner's disciplinary proceedings becoming final the exercise to consider the question of cross- G ing the efficiency bar would be fruitless. It would be unnecessary to consider the case for efficiency bitr. It would be only in the event of his being reinstated in the service that the question of consi~eration of his crossing the efficiency bar would arise. Therefore, the sealed cover pro~e­ dure in consideration of question of efficacy bar does not apply. It is seen that after the representation was made by the petitioner on June 8, 1990, H 116 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A the matter was referred for consideration by the D.P.C. D.P.C. had met on .January 21, 1992 and considered the record of the petitioner. After reinstatement, he had hardly worked for three months. It would appear that for three successive years, there were adverse e..ntries against the petitioner. Consequently. DPC as considering the record of the petitioner B which was available, recommended that he was unfit to cross efficiency bar. The same came to be informed to the petitioner vide letter dated February 7, 1992. The Tribunal also had accepted this position. Under these cir­ cumstances, we do not find any illegality in the order passed by the Tribunal warranting issue of notice. C The special leave petitiion is dismissed. G.N. Petition dismissed. ·- ,_ - < PRAMOD LAHUDAS MESHRAM A v. STATE OF MAHARASHTRA AND ORS. SEPTEMBER 11, 1996 [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B Service Law : Selection-Post of Oversear/Junior Engineer (Civil Enginee1ing)-Ad­ ve1tisement-On the basis of recommendation letter from Member-Secret01y C 3 candidates appointed on probation for one yea~Services of the said candidates tenninated on the basis that the earlier letters canied unauthorised reconunendatiims-W!it Petition filed in High Cowt challenging the tennina- tion orders dismissed-On appeal held the letter$ of recommendation were not auth01ised and according to mies-Therefore the cancellation of the said appointments could not be found fault with-State Govemment directed to D refer the matter to appropriate State CID enquiry to make an independent investigation into the matter and to find out as to who were responsible for such malpractice and to launch approp1iate C1iminal prosecution against the culprits. CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) No. 19775 of 1996. From the Judgment and Order dated 6.3.96 of the Bombay High Court in W.P. No. 885 of 1993. AK. Sanghi and S.V. Deshpande for the appearing parties. The following Order of the Court was delivered : Delay condoned. F· The petitioner complains that he being a qualified candidate with G Diploma in Engineering and Secondary Education had applied for the post of Oversear/Junior Engineer (Civil Engineering) as per the advertisement dated April 30, 1991 published in daily 'Tarun Bharat' on May 2, 1991. The advertisement indicated that of the 3 posts, two were reserved for backward classes and one was for general candidates. Petitioner being a H 117 118 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A reserved class, hailing from che Scheduled Caste, received letter of appoint­ ments from the Chief Executive Officer, Zilla Parishad, Gadchiroli; in letter No. PWB/Estt-1/1108/1/93 dated March 31, 1993 it was stated that a recommendation had been made by Member Secretary, Regional Subor­ dinate Service Seleccion Board, Nagpur in their letter No. RSB,:Nag/1210/M-792/PS-l/92 dated June 15, 1992 that 3 candidates were selected. The names had been repeated and as regards the petitioner, his recommendation letter No. RSB/N~g/1160/M-792/1992/PS-I dated July 31, 1992/7.8.92 was said to be issued by the Member Secretary selecting the petitioner as Junior Engineer (Civil). Pursuant thereto, he came to be appointed as a Junior Engineer with probation for one year. After comple­ tion of nine months service, he received the letter dated November 16, 1992 stating therein that the above letters carried unauthorised recommenda­ tions; therefore, the services of the petitioner were terminated. The order of the Chief Executive Officer, Zilla Parishad, Gadchiroli was impugned by the petitioner and others in the W.P. No. 885/93 in the High Court of Bombay, Nagpur Bench claiming that they had been regularly appointed to the posts which were advertised; therefore, their services could not be terminated during t~e probation period without affording opportunity of hearing in the enquiry. The High Court has dismissed the writ petition. Thus, this special leave petition. Shri A.K. Sanghi, learned counsel for the petitioners has contended that when the posts were advertised and the candidates were found eligible, it does not mandate that there should be an interview and selection. Obviously, the Service Selection Board having found the petitioner to be eligible and qualified, recommended him and was accordingly appointed p as Junior Engineer, when it was sought to be cancelled on a letter written by Member Secretary of the Service Selection Board, they are entitled to be heard. No such opportunity has ever been given before cancellation of their appointments. It was, therefore, violative of principles of natural justice. We find no force in the contention. It is seen that on their own admission they have merely applied for the post pursuant to an advertise- G ment made for the selection. It is the case of the Selection Board that a regular selection has to be made and selecting the eligible candidates, recommendation for appointment would be made. Therefore, the letter can be said to have conveyed that the recommendations were not authorised and according to the rules; such being the admitted position, we do not H find any fault to cat).cel the appointments. Under those circumstances, we P.LMESHRAM v.STATE 119 do not find any illegality in the action taken by the respondents. However, such things will not be permitted to be kept under the carpet. The State Government is directed to refer the matter to the appropriate State CBI enquiry and the concerned Inspector would make an independent inves­ tigation into the matter to find out as to who were responsible for such mal- practice committed and it will be open to take appropriate criminal prosecution launched against the culprits. The SLP is dismissed. This order to be communicated to the D.G.P., Maharasht~a. G.N. Petition dismissed . A BABU SINGH BAINS ETC. v. UNION OF INDIA AND ORS. ETC. SEl'TEMBER 11, 1996 B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] Capital of Punjab (Development & Regulations) Act, 1952 : Section 8-A-PresC1ibed in-built procedure of gi,ving an opportunity and right to ad­ duce evidence--Consideration thereof by the Estate Officer before resumption C and to pass reasoned order which is subject to an appeal before the Chief Administrato1~Also subject to judicial review under A1t, 226-Resumption is not only in case of non-payment of dues under the sale but also for violations of the conditions of the sale, the ntles, regulations and other relevant condi­ tions applicable in that behalf-Hence the provision is not violative of A1t. 14-Constitution of India, A1t, 14. Ram Pwi v. Chief Commissi01te1; Chandigad1, AIR (1982) P&H 301 and Magan/al Chhagganlal (P) Ltd. v. Municipal C01poration of Greater Bombay & Ors., AIR (1974) SC 2009, relied on. Jagdish Chand v. State of Punjab, AIR (1972) SC 2587 and Nonhem E India Caterers (Pvt.) Ltd. v. State of Punjab & Anr., AIR (1967) SC 1581, referred to. Chandigarh (Sale of Sites and Buildings) (Amendment) Rules, 1979: Rule 11-D-Application under the proviso-Making of-Inordinate delay of 13 years--Condonation of-Explanation for the delay that the appel­ lant was carrying on litigation but was not properly advised at the appropriate stages to avail the remedies-Appellant landed himself in trouble on account of his own conducrffigh Coult rightly pointed out that there was no proper explanation for the inordinate delay-Hence no inteiference called for. Chandigarh Administration v. Johnson Paints, [1996] 3 SCALE 680 and R.C. Chawla v. State of Haryana & Ors., JT (1996) 1 SC 633, referred to. CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal H No. 12931 of 1996 Etc. 120 BABU SINGH BAINS v. U.O.l . 121 . From the Judgment and order dated 27.1.93 of the Punjab and A Haryana High Court in C.W.P. No. 14183 of 1992. M.S. Gujral, S.K. Bagga, Swaraj Kaushal, V.N. Ganpule, Sr. Adv. Sarup Singh, Dr. Meera Agarwal, R.C. Mishra, Mahabir Singh, Altamesh Rein, Subhash Sharma, M.R. Vij, N.P. Sharma, M.S. Tanuj Bagga, Seeraj Bagga, Mrs. S. Bagga, Ms. Kamini Jaiswal, (Ms. Kusum Chaudhary and B.K. prasad) Advs. (NP), Ms. Shruti Pandey, Ms. Mukti Sinha, Ms. Indu Malhotra, Satish K. Agnihotri, Ashok Singh, Ashok K. Mahajan and Mahabir Singh for the appearing parties. The following Orders of the Court was delivered : C.A. No. 12931/96 @ SLP No. 4559/93 & WP. No. 520/94. Application for impleadment is dismissed. Leave granted in the special leave petition. The City of beauty, Chandigarh, carefully architectured and meticulously executed as a modal city in India by famous architect, Shri Le. Corbursier; when it was getting desideration compounded by disfigura­ tion of beauty and elegance, statutory regulations 1:tepped in to stamp out erosion and to restore its natural environment. These cases are instances of blatent misusage of the buildings or plots in the planned structures. This appeal by special leave arises from the order of the Division Bench of the Punjab & Haryana High Court made on January 27, 1993 in C.W.P. No. 14183/92 upholding the order of the Estate Officer who refused to condone the delay in making application under Rule 11-D of the Chandigarh (Sale of Sites and Buildings) (Amendment) Rules, 1979 (for short, the "Rules"). The writ petition under Article 32 of the Constitution was filed by the petitioner challenging the validity of Section SA of the Capital of G Punjab (Development & Regulation) Act, 1952 (Punjab Act of 1952) (for short, the "Act"). The facts are long and tendentious. Suffice it to state, in nutshell, that the appellant/petitioner having had the allotment of free hold plot in residential Sector 21-A, viz., bearing House No. 341 in Street 'D' had H !<. 122 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A constructed a double-storeyed house. He had used it as Blue Star Guest House, contrary to the regulations. Consequently, a notice of resumption under Section 8 of the Act was given to the appellant/petitioner. After following the procedure prescribed thereunder, the resumption order came to be passed on October 17, 1977. The revision against that order came to be dismissed on August 28, 1978. Thus the resumption order had become final. Subsequently, notice under Section 5 of the Public Premises Act was issued to the appellant/petitioner for taking possession of the land. Those proceedings also ultimately culminated in the judgment of this Court made in C.A. No. 3102/81 on March 13, 1992. Therein, this court had given an opportunity to the appellant/petitioner to argue afresh on merits of resumption but he could not point out any invalidity in the resumption order. Accordingly, the resumption was upheld. Even on the ground of eviction also this Court had upheld the order on merits thus : "Learned counsel for the appellant was unable to point out any infirmity whatsoever of order passed by the Estate Officer under the Eviction Act. In. view of the circumstances, we find no force in this appeal and it is accordingly dismissed." However, one year's time was given to the appellant/petitioner to vacate the premises subject to his giving an undertaking. Since he had not filed the undertaking within the prescribed time, it is not in dispute, possession was taken. Thus the resumption order as well as order of eviction became final and conclusive against the appellant/petitioner. i-Iis right, title and interest in the said property stood divested and the Chan- digarh Administration became owner thereof. The appellant/petitioner then filed an application on April 6, 1992 and April 9, 1992 under Rule 11-D of the Rules. The Estate Officer dismissed the petition giving elaborate reasons in support thereof. The High Court in the impugned order thereunder has pointed out that the appellant/petitioner has not given any satisfactory explanation for the delay of 13 years in filing the G application and no fault could be found with the order passed by the Estate Officer. Thus this appeal by special leave and the writ petition. When the matter came up for hearing before a Bench of two learned Judges, by order dated February 14, 1995 reference was made to a three­ H Judge Bench. to consider the validity of Section SA of the Act and the i ..... BABU SINGH BAINS v. U.O.l. 123 que~tion of resumption since it has got a vital bearing on the right to A property held by a defaulter. Thus these cases have come up before this Bench. It has been very strenuously argued by Shri Swaroop Singh, learned counsel for the appellant with painstaking efforts, realising the tight spot B in which the appellant was placed, that the appellant though had used the house partly for residence and partly for non-residential purpose, (which we need not enter upon for adjudication) Section 8A of the Act would be invoked only when the instalments of purchase price of the site, or other dues were not paid by the purchaser. On their due discharge, power under Section 8A gets exhausted. For the violation of the rule for misuser of the C property, there is no power under Section 8A of the Act to resume the property. Such power would be available and be invoked only when avail- able under any State law. The only remedy provided under Section 15 of . the Act is to stop misusage without invoking the power of resumption, laying prosecution under Section 15 and to collect the penalty. The power D under Section 8A cannot be resorted to in case of misuse; such invocation of power would be an arbitrary exercise of power violating Article 14 of the Constitution. It is also contended that the appellant has been using all legal recourse open to redress his legal injury and was diligently prosecut- ing the remedies available under the law. There was no need for him to challenge the resumption order in any court of law for the reason, that the E resumption at one point of time was only divestiture of the title but not of dispossession from the property. When his possession was sought to be interdicted by having him ejected from the premises, he had challenged the eviction order which was ultimately upheld by this Court. Thereafter, the appellant had availed of the right and remedy provided in Rule 11-D of F the Rules and that, therefore, this was the proper explanation in filing the application at a belated point of time. The Estate Officer and the High Court have committed error of law in not considering the delay from this proper perspective. He further contended that the appellant/petitioner having invested huge money in construction of double-storeyed building, he cannot be visited with the penalty of divestiture of title to and ejectment G of him from the said property. When penalty could be collected under Section 15, the recourse for eviction was bad in law. So, he availed of the right as provided in Rule 11-D of the Rules. The exercise of the power of the Estates Officer in refusing to condone the delay and not re-transferring the property is vitiated by manifest error of law warranting interference. H 124 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. Mrs. Kamini Jaiswal, learned counsel for the respondent, has argued that the resumption and eviction order having become final, it is no longer open to the appellant/petitioner to challenge the validity of Section 8A. In fact, the validity of Section 8A was dealt with and upheld by majority of the Full Bench of the High Court in Ram Pwi v. Chief Commissioner, Chandigarh, AIR (1982) P&H 301. When this Court had given an oppor­ tunity to the appellant/petitioner to point out illegality, if any, in the action taken under Section 8A of the Act, he could not satisfy this Court as to any invalidity thereof. Under these circumstances, he cannot be permitted 1 to raise these contentions in the writ petition. He is not entitled to chal- lenge the validity of Section 8A in the writ petition since his remedy has already been closed by the orders of this Court. She also contended that the action for resumption was taken to maintain the ecology sanitation and beauty of the city constructed as per the design and planning, as a model city. Contravention of the scheme renders the beauty of the city irre­ versible. The appropriate course open to the authorities is to resume the D land and prevent such misuser. The appellant/petitioner having allowed all the options closed to him, it is no longer open to him now to challenge the validity of Section 8A of the Act at this belated stage. Even otherwise, Section 8A is ultra vires the Act as it seeks to sustain the purpose and policy of the Act which otherwise would be rendered ineffective and toothless. She further contends that he having slept over for 13 years, the appellant cannot be permitted to file an application under Rule 11-D of the Rules. He has no right as such. He has only benefit of making an application. It is a discretionary relief available to him under the Rules to be considered by the Estate Officer. In view of the background of the case, the Estate Officer had considered the totality of the facts and given elaborate reasons for refusing to condone the delay and to re-transfer of the property. In support thereof, she relies upon the judgment of this Court in Chandigarh Ad­ ministration v. Johnson Paints, (1996) 3 SCALE 680. The High Court also has given cogent reasons for refusing to grant the relief sought for. Accord­ ingly, no case has been made out warranting interference. In view of the diverse contentions raised, the only question is; whether the appellant/petitioner is entitled to avail of the remedy under Article 32 of the Constitution? But for the reference made by the Bench of two learned Judges, we would have straightaway held that the doors to a litigant citizen under Article 32 of the Constitution are closed fast and H writ petition is not maintainable _since it amounts to reviewing the order .. BABU SINGH BAINS v. U.0.1 125 passed by this Court in C.A. No. 3102/81 March 13, 1992. It is settled law A that once an order passed on merits by this Court exercising the power under Article 136 has become final, no writ petition under Article 32 on the self-same issue is maintainable. Though the resumption order was not challenged, this Court had permitted the appellant to convince this Court as to the invalidity of the resumption order passed under Section 8A but B he could not point out any invalidity nor did he raise any contention as regards the validity of Section 8A. Therefore, the principle of constructive res judicata stands fast in his way to raise the same contention once over. However, since the two-Judge Bench has made the reference in this behalf, it is necessary to briefly deal with the contentions raised by Sri Swaroop Singh, learned counsel for the appellant. C After unsuccessful challenge to Section 9 of the Act under Article 226 before the Full Bench of the Punjab & Haryana High Court, on appeal, this Court in Jagdish Chand v. State of Punjab, AIR (1972) SC 2587 had declared that Section 9 was invalid since the purchaser had already paid D the entire consideration amount and thereafter the power under Section 9 was not available for resuming the property. Consequently, the Parliament amended the Act and introduced Section 8A deleting Section 9 and 11 of the Act. The Statement of Objects in that behalf read as under : "The Supreme Court in Jagdish Chand Radhey Shyam v. State of E Punjab, Civil (Appeal No. 1099 of 1967) declared Section 9 of the Capital of Punjab (Development and Regulation) Act, 1952 (Pun- jab Act XXVII of 1952), as in force in the Union Territory of Chandigarh, as being violative of Articles 14 and 19(1)(t) of the Constitution and held that the Central Government is not entitled F to resume the site or building transferred under Section 3 of that Act, or to forfeit the money paid in respect of such transfer under the said Section 9. The main ground on which the Supreme Cowt had based its conclusions was that there is nothing in the Act to guide the exercise of power by the Govemment as to when and how any of the methods for recovering the amount of consideration in a1rears G specified in Sections 3, 8 and 9 of the Act, will be chosen. (Emphasis supplied). 2. The decision of the Supreme Court has created several practical difficulties in administering the provisions of the Act. H Further, the situation created by the decision of the Supreme Court , is already having an adverse effect on the regulation and develop­ ment of the entire city of Chandigarh, which has been planned and developed with great care and at considerable expense over the past several years. It is, therefore, essential to remove the objections pointed out by the Supreme Court by amending the Act retrospectively from the 1st of Novembe1; 1966 being the date on which the Union Territory of Chandigarh was formed, and to validate the actions taken under the impugned provisions of the Act (Emphasis sup­ plied). 3. The Bill seeks to achieve the aforesaid objection." (emphasis supplied) A reading thereof would clearly indicate the animation of the Legis­ lature that the aforesaid decision of this Court was causing inconvenience D for preventing misuser of the property defeating the scheme of the Act. Therefore, it necessitated to amend the Act and bring on statute Section BA for resumption of the property used in violation of the conditions of the sale, provisions of the Act and the Rules made in that behalf. Majority of the Full Bench in Ram Puri's case (supra) had considered the effect of Section BA and held in paragraph 66 thus : "66. Adverting specifically to Sec. BA the restrictions for the exercise of the powers yested thereby exist not only in the express provision thereof, but are equally discernible from t;l}I{ larger purpose of the Act, its preamble as also the other sectiohithereof when read with the statutory rules framed thereunder. The larger purpose of the planed development and regulation of the new capital city, as spelled out in the preamble of the Act, is the fixed Pole Star to which the ultimate exercise of the power of resumption under Section BA is hitched. What deserves highlighting herein is that this power of resumption under Section B-A is merely a discretionary and an enabling power. The statute does not lay down any mandate that it must necessarily be exercised in a particular situation. In sub- section (1) thereof it is first in the discretion of the Estate Officer that he may issue a notice to show cause why an order of resumption of site or building may not be made. Equally under sub-section (2) after considering the cause shown against such a notice it is optional for the Estate Officer to order .. BABU SINGH BAINS v. U.O.I. 127 such resumption or not. The word used in both the sub-sections A is 'may' and not 'shall'. Mr. Anand Swaroop rightly pointed out that this power of resumption is indeed the last arrow in the quiver of a number of sanctions to enforce the planned development and the regulation of the capital and to be only resorted to in a'£iituation commensurate with its necessary exercise. To put it in plain lan­ guage it is not mandatory for the authority to order resumption, but only in extreme cases it enables it to do so when the other powers and sanctions to enforce the purpose of the Act have failed, or in the circumstances it is the only remedial power which can be applied. Therefore, it is farcical and imaginary to assume that the authority would necessarily use this power arbitrarily and whimsically and that they will use this hammer to swat a fly. As Section 8-A now stands (in sharp distinction to the deleted Section 9) it mandatorily required a notice to show cause to the person concerned whenever the exercise of this power is contemplated. Not only is such a person entitled to have a reasonable opportunity of contesting such a notice, but the law in terms confers on him D the power to lead evidence in support of his stand. The mandate as laid on the Estate Officer is to record his reasons in case he orders resumption. Apart from these inbuilt safeguards under Section 8-A, it is the statutory rules which provide for an appeal against the order of resumption by the Estate Officer, to the Chief Administrator. It is thereafter that the rules zealously provide for E a revision to the Chief Commissioner, who is the executive head of the Union Territories. Obviously in a proper case, the right to approach the Court under Article 226 of the Constitution of India is equally open. 68. In conclude, in the larger conspectus of the purposes of the Act itself, its preamble; the setting in which it is placed along with the supplementary sections of the Act and the rules framed there­ under it has to be held that the enabling power of resumption conferred thereby is only a reasonable restriction on the fundamen- tal right to hold, acquire and dispose of property and is, therefore, G in no way violative of Article 19(1)(f)." Accordingly, the Full Bench had held that Section 8-A was brought on statute which a view to bring it in conformity with the purpose the Act seeks to subserve. Learned couns~l for the appellant relied upon the H 128 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. minority judgment of learned Judge. It would, however, appear that the learned Judge, with due respect, sought to set the clock back to the Amendment by constructing the meaning of the words 'forfeiture' and 'resumption' and the consequential effect on general principles of law without giving needed effect to the object of the Amendment. Once the statute occupied the field and gave power to resume the land or building subject to the conditions mentioned therein, the general principles of resumption and other principles considered therein absolutely remained no more relevant. The majority judgment has rightly focussed the question in the correct perspective and had held that Section 8-A is valid in law and, therefore, not violative of Article 14. In N01them India Caterers (Pvt.) Ltd. v. State of Punjab & Anr., AIR (1967) SC 1581, this Court had held that when there are two modes of procedure, one being more drastic and harsher than the other without any guidelines, invocation of the former was violative of Article 14 which was reversed by a larger Bench in Magan/al Chhagganlal (P) Ltd. v. Municipal C01poration of Greater Bombay & Ors., AIR (1974) SC 2009 knocking the bottom of the ·plea of constitutional D invalidity of Section 8-A on the anvil of Article 14. Though softer course under Section 15 was available, Section SA does not become invalid on that score. Section 9 has been deleted and procedural safeguards have been provided in Section 8-A. Therefore, Section 8-A, having provided fair procedure, does not become arbitrary and violative of Article 14. E For these reasons and also for the reasons given in the majority judgment, we are of the view that Section 8-A is not violative. of Article 14 since it has prescribed an in-built procedure of giving an opportunity and right to adduce evidence and consideration thereof by the Estate Officer before resumption and to pass a reasoned order in support thereof. The F order is also subject to an appeal before the Chief Administrator. It permissible, within circumscribed paramaters, appellate order may be sub­ ject to judicial review under Article 226. Since this procedure was not available under Section 9 ef the Act, this Court had declared it as ultra vires of Article 14. The vice pointed out by this Court in Jagdish Chander's case (supra) has been cured by introducing Section 8-A. It would, there- G fore, be clear that the resumption under Section 8-A is not only in case of non-payment of dues under the sale but for violation of the conditions of the sale, the rules, regulations and other relevant conditions applicable in that behalf. Therefore, we do not find any invalidity in Section 8-A. H It is then to be seen : whether the appellant's application under Rule - BABU SINGH BAINS v. U.O.I. 129 11-D of the Rules has not been considered in proper perspective by the A Estate Officer and whether any illegality has been committed by the High Court by not interfering therewith. Having considered the reasoning given by the Estate Officer in his order and the conclusion reached by the High Court, we do not think that they have committed any illegality in refusing to condone the delay. This Cohrt has pointed out inlolmson Paints's case (supra) in paragraph 6 that ~nee the original allotment stands cancelled B and resumption by the Estate Officer becomes final, the allottee has no right to the allotment of the site or building. Rule 11-D deals with only discretionary power given to the Estate Officer. It does not clothe the. former allottee with any right to reallotment. The power under Rule 11-D is only discretionary; he may give the benefit to the former transferee C subject to fulfilment of the conditions mentioned therein which includes power to refuse to order reallotment. In fact, this Court has doubted the wisdom behind Rule 11-D of reopening the issue once over through back door entry under Rule 11-D, after the entire process of resumption has become final and received quiteous. It would be a constant sprout of corruption and abuse of Rule 11-D for diverse reasons which in the interest D of smooth administration need to remove the irritant. However, we need not dwell upon it any further as it is not necessary for the purpose of deciding the question in this case. Suffice it to state that Rule 11-D is only an enabling provision to make an application. The Estate Officer has discretion to re-grant the land or building which stood already resumed and vested in the State. Of course, he cannot arbitrarily reject the petition; E he has to give reasons in support thereof as contemplated in Rule 11-D itself. Thus considered, the High Court has rightly pointed out that the appellant has not given any proper explanation for inordinate delay of 13 years in not making the application. It is true that the appellant was carrying on the litigation but was not properly advised at the appropriate stages to avail the remedies; he landed himself in trouble on account of his own conduct. Considered from this perspective, having regard to the facts in this case, we do not think that it is a case warranting interference. The appeal and the writ petition accordingly stand dismissed. No costs. IW.P. (C) No. 412/96 The writ petition is dismissed as withdrawn. 130 SUPREME COURT RE,PORTS [1996] SUPP. 6 S.C.R. A CA. Nos. 12936-37/96 (@ SLP (C) Nos. 8118-19/90 Leave granted. These appeals by special leave arise from the judgment and order of the High. Court of Punjab and Haryana at Chandigarh made on January B i.5, 1990 and March 16, 1990 in Review Petition No. 45 of 1990 and CWP No. 8266. of 1988. Admittedly the appellants, though doctors, are using the premises for nursing home/clinic. Admittedly, the premises are located in residential zone. Therefore, it would clearly be a contravention of the rule by misuser of the house for non-residential purpose. Accordingly we do not find any illegality in the action taken by the respondents. However, six months' time is granted to the appellants to stop the misuser. The appellants should give · an undertaking before the Estate Officer within four weeks from today that they would .stop misuser on expiry of six months from to-day. In case they D do not stop misuser on expiry of six months, the Estate Officer is entitled to resume the property without any further order or action. For misuser, in lieu of resumption, the Estate Officer may impose any reasonable penalty which the appellants shall pay. The appeals are accordingly disposed of. No costs. CA. Nos. 12932-33/96 (@ SLP (C) Nos. 15376-77/90 Application for intervention is dismissed. Leave granted. These appeals by special leave arise form the judgment and order of the High Court of Punjab & Haryana made on January 25, 1990 and March 16, 1990 in Review Petition No. 49/90 and CWP No. 8317/88. The appellant is using part of the prope~ty for non-residential pur- G pose, viz.; a shop and, therefore, it is clear case of conversion of user of \ the property from residential to non-residential. The action taken. by the authorities is perfectly legal. However, we give six months' time to the appellant to stop the misuser. He should give an undertaking to the Estate Officer within one month from .today that he would stop misuser within H six months from today. If he continues the misuser even after expiry of six - BABU SINGH BAINS v. U.O.L 131 months from today or any time thereafter, the Estate Officer is at liberty A to resume the property without any further order or proceedings. Similarly the Estate Officer is at liberty to impose any reasonable penalty for misuser which the appellant shall pay over. The appeals are accordingly ordered. No costs. CA. No. /96 (@ SLP (C) No. 12491/90 Leave granted. This appeal by special leave arises out of the judgment and order of · the High Court of Punjab & Haryana made on March 16, 1990 in Review C Petition No. 47/90 and W.P. No. 5576/88. The appeal filed against the main writ petition has already been disposed of by this Court in R.C. Chawla v. State of Haryana & Ors., JT (1996) 1 SC 633. The appeal is disposed of in terms of decision in R.C. Chawla's case. D No. costs. CA. Nos. 12947-48/1996 (@ SLP (C) Nos. 12389-90/1650 of 1990 and CA. Nos. 12952-53/96@ S.L.P. (C) Nos. 14-15/91 Leave granted. These appeals by special leave arise out of the judgment and order of the High Court of Punjab and Haryana made on March 16, 1990 and January 25, 1990 in Review Petition No. 46/90 in W.P. 5258/88 and other matters. Admittedly, the appellants were using the premises for non- residen- tial purpose in a residential area. Therefore, the authorities were well within their power to issue notice for resumption of the properties. How­ ever, pending disposal of these matters, the appellants have stated that they F· had already stopped misuser an year ago. The appellants should file an affidavit before the Estate Officer stating that they have already stopped G J misuser of the premiseS. On such an affidavit being filed, it would be open to the Estate Officer to have it verified whether they have already stopped the misuser. If they have already stopped misuser, the order of resumption may be revoked. If they have not, the order passed by this Court would not be of any help to the appellants. The order of resumption would stand H A upheld. The Estate Officer may six any reasonable penalty for misuse and . the appellants shall pay over the same. If they were to repe.at .the misuser, the Estate Officer would be free to resume the property witho1:1t taking any recourse to fresh proceedings. The appeals are accordingly disposed of. No costs. CA. Nos. 12949, 12934-35, 12955, 12938-43, 12945-46/96@ S.L.P. (C) Nos. 885/91, 15393-94, 7960, 9174-79 & 11578-79/90 Leave granted. C These appeals by special leave arises from the judgment and order of the High Court of Punjab and Haryana made on January 25, 1990 in CWP No. 1162/89 and other matters. The appellants, admittedly, have been using the residential premises D for non-residential purpose converting it into a shop contrary to the conditions of the sale and also the Rules. Thereby, it is a clear case of misuser of the premises. However, an opportunity is given to the appellants to stop the misuser within six months from today and pay reasonable penalty levied by Estate Officer on misuser. They should file an undertak- ing before the Estate Officer within one month from today that.they would stop the misuser within six months from today. On expiry of six months, it would be open to the Estate Officer to verify whether the appellants ·have stopped the misuser. If they would have not, the resumption o:rder would get revived and thereafter it would be open to the Estate Officer to deal with the property in accordance with law without further reference to the appellants or taking any further action in this behalf. If the misuser is repeated, he would free to resume the property without further proceed­ ings. Reasonable penalty may be fixed and the appellants shall pay over the same. The. appeals are accordingly disposed of. No costs. W.P. 250/96 This writ petition filed by the petitioners challenging the resumption orders passed by the Estate Officer for contravention of the conditions of the sale. Therefore, it would be open to the petitioners, to avail of remedy, H if any, available under the law. _J BABU SINGH BAINS v. U.0.1. 133 The writ petition is accordingly dismissed. One month's time is given A to the petitioner to approach the High Court. In the meanwhile, status quo as on to-day shall be maintained. Civil Appeal No. 12954 of 1996. ORDER Leave granted. This appeal by special leave arises against the judgment dated August 31, 1990, made in W.P. No. 3278/81 by the High Court of Bombay. The admitted facts are that the appellants had from the Government 4 C acres of land on April 5, 1946 for construction of Ayurvedic Karkhana in the industrial zone subject to the following conditions : "(a) The land (and the building to be constructed thereon) should be used for the purpose for which it is granted, viz. Manufacture D and sale of Ayurvedic Medicines, and conducting an Ayurvedic School or College, and an Ayurvedic Hospital. (b) The management of the Shahu Aryopushadhi Karkhana should agree to abide by all the building rules and regulations of the Kolhapur Municipal Borough; and E (c) The management should also agree to purify its discharges to such extent as may be laid down by the Municipality from time to time and let them out in the Municipal drains and sewage at such intervals and at such times as may be fixed by the Municipality from time to time." F On inspection made by the Collector, he found that 1 Hectare 29 acres of land allotted to him was to be vacant; that he had the information that the appellant was attempting to alienate the property; and that the appellants had not used the assigned land in compliance of the three conditions enumerated hereinbefore. Therefore, notice was given to the G appellant as to why the land could not be resumed; If not reply was not received within 10 days from the date of the receipt of the letter, it was to be presumed that the appellants had no cause or grievance for resumption of the land by the Government. After passage of two years, they gave reply on February 5, 1980. An order came to be passed after consideration of H 134 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A the submissions made by the appellants on September 5, 1981 rejecting the contentions opposing presumption of the land. Calling that order in ques­ tion, they filed a writ petition in the High Court. The High Court in. the above writ petition has dismissed the same. Shri V.N. Ganpule, learned senior counsel appearing for the appel- lants, contended that under the provisions of the Maharashtra Land Revenue Code, the Collector has no power to resume the land and that, therefore, the action,.taken by the Collector is without authority of law. We find no force in the contention. Admittedly, the Collector being the Chief Executive, Revenue Head of the District and the property being situated within Kohlapur District, he had the competence to inspect the land; he found that the land was not used for the purpose for which the grant was made under the' Government Grant Act. Consequently, when he noticed that there was a breach of the covenants in the grant, a notice was issued to the appellants as to why the lands granted in their favour should not be resumed. He had power and competence to initiate the action for cancel- D lation of grant and for resumption thereof. Even belated show cause notice was duly considered by the District Collector who refused to accede to the request made to him. Consequently, the resumption became valid. The High Court, therefore, has not committed any error of law in this behalf. E It was also contended in the High Court that subsequent to the resumption order passed by the Collector followed by actual resumption, the Government have passed a resolution on November 21, 1987 for re-grant subject to the conditions mentioned thereunder, we do not have the advantage to see the grounds on which the re-grant was sought to be made etc. However, the High Court refused to go into that question. It may F be open to the appellants to make an application to the District Collector and it is for the District Collector to consider and dispose it of according to law. It is stated by the appellants that they had already made a repre­ sentation before the Commissioner and it was not considered. It is seen that the direction was to make representation before the Collector and not G the Commissioner. It was a misconceived action taken by the appellants. He did not avail of the remedy as directed by the High Court. Therefore, l we cannot go into that question. ~ The appeal is· accordingly dis\l}issed. No costs. H G.N. Petition and Appeal dismissed. Q THECANTONMENTBOARD,MATHURA v. KRISHNA BRICKS AND LIME FACTORY SEPTEMBER 12, 1996 [N.P. SINGH AND S.B. MAJMUDAR, JJ.] Cantonments Act, 1924: Section 60. Imposition of Tax-By cantonment Board-On trades and call­ ings-Rate of tax-Held : must be within the ceiling limit fixed by Art. 276(2)-S. 60 linked Board's power to impose tax with that of any Municipality in the State where Cantonment was situated-Since power of municipality was subject to ceiling fixed by Art. 276(2), Board's power was also subject to such ceilin~Hence, Board did not have unlimited taxing power-U.P. Municipalities Act, 1916, S. 128(1)(ii}-Constitution of India, 1950, Art. 276(2). The respondent was the owner of a brick kiln and was carrying on the business of manufacturing and selling of bricks. A suit was filed by the respondent for restraining the appellant~Board from realising tax at the rate of 0.75p per thousand bricks by raising it from 0.19p per thousand E bricks. It was contended by respondent that it neither derived any ad­ vantage from the Board nor any service was provided by the Board to it. As such, the realisation of the tax at the aforesaid rate was in contraven- tion and in violation of Section 60 of the Cantonments Act, 1924 read with Section 128(1)(ii) of the U.P. Municipalities Act, 1916. The suit was dis­ missed and the judgment was affirmed in first appeal. However, in second F appeal, the High Court came to the conclusion that the ceiling and restric- tion imposed by Article 276(2) of the Constitution, as applicable to the State, any municipal, district board, local board or other local authority within such State in respect of imposition of taxes on professions, trades and callings, was applicable even on the Board which had been established G under the aforesaid Cantonments Act. On that finding the notification raising the rate of tax was declared to be invalid being hit by Article 276(2) of the Constitution. Being aggrieved the appellant-Board preferred the present appeal. Dismissing the appeal, this Court 135 HELD : 1.1. Article 276 of the Constitution within a prescribed limit, enables the legislature of the State to make law for imposition of taxes on income for the benefit of the State or municipality, district board, local board to other local authority from professions, trades, callings saying that such law shall not be invalid on the ground_ that it relates to a tax on income. In view of Article 276, no law of legislature of a State relating to imposition of taxes for the benefit of the State or of a municipality, district board, local board, or other local authority therein in respect of professions', trades, callings shall be valid, if it provides the total amount payable in respect of any one person to the State, exceeding the limit fixed by Article 276tl) of the Constitution. [144-C] 1.2. In the instant case the impugned notification imposing enhanced tax of 0.75p per thousand bricks on brick-kiln owners was issued by the Cantonment Board under Section 60 of the Cantonments Act, 1924. As such the said notification shall not be deemed to have been issued in exercise of power under a law enacted by the legislature of the State for the objects D mentioned in Article 276. Section 60 of the Cantonments Act, prescribes two conditions for imposition of tax by the Board. Firstly, that there must be a previous sanction of the Central Government and secondly that only such tax can be imposed within any cantonment which under any enactment for the time being in force may be imposed in any municipality in the State E wherein such cantonment is situated. The framers of the Cantonment Act did not desire to delegate and authorise the Board to impose any tax. {144-E-G] 1.3. In exer~ise of power under Section 128(1) (ii) of the U.P. Municipalities Act, 1916, the Municipal Board of any municipality within the State could impose a tax on trades and callings carried on within the municipal limits. Therefore, any Board within the State can also impose such tax within the cantonment area because of Section 60 of Cantonments Act. When Section 60 links the power to impose tax with any enactment for the time being in force in respect of any municipality in the State where the cantonment is situated, then it shall be deemed that it has also prescribed the limit of the ceiling of such tax with reference to the said enactment in force in respect of any municipality in that State. The Board cannot have unlimited power without any ceiling to tax on professions, trades or callings being carried on within the cantonment area. If it is held otherwise, it will lead to an anomalous position, so far the nature of tax is H concerned, because of Section 60 the power of the Board is circumscribed ; CANI'ONMENTBOARD v.KRISHNABRICKSANDUMEFACTORY(N.P.SJNGH,J.J 137 with reference to any enactment for the time being in force in respect of A municipality in that State whereas the rate of such tax which is more vital, has been left to the discretion of the Board. But the Board cannot excercise unlimited taxing power under Section 60 on the plea that any such tax including the rate thereof had to be first sanctioned by the Central Govern­ ment. [145-F; H] Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR (1966) SC 249 and Mahapalika of the City of Agra v. The Agra Brick Kiln Owners Association and Anr., [1976) 3 SCC 42, relied on. Madan Lal v. Cantonment Board, Mathura, (1978) All W 1147; Narain C and Anr. v. Cantonment Board, Nasirabad, AIR (1963) Raj 190 and Hiralal & Anr. v. Union of India & Anr., (1977,) Tax L.R. 2051, approved. Mis. Punjab Lime and Lime-Stone Co., Dehradzm v. Cantonment Board, Delzaradun & Anr., AIR (1967) All 15, overruled. Poona City Municipal C01poration Case, AIR (1965) SC 555, cited. CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 799-802 of 1981. From the J udginent and Order dated 20.10. 78 of the Allahabad High E Court in S.A. Nos. 347-350 of 1978. K.N. Shukla, Ms. Binu Tamta and C.V. Subba for the the Appellant. M.P. Shorawala for the Respondent. The Judgment of the Court was delivered by: N.P. SINGH, J. These appeals have been filed on behalf of the cantonment Board, Mathura (hereinafter referred to as the 'Board') for setting aside the judgment of the Allahabad High Court, declaring notifica- G tion dated 22.11.1958, by which tax at the rate of 0. 75 p. per thousand bricks had been fixed by the Board within the cantonment area as invalid. The respondent is the owner of a brick kiln and was carrying on the business of manufacturing and selling of bricks. A suit was filed on behalf of the said respondent for restraining the appellant-Board from realising H 138 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A tax form the said respondent at the rate of 0.75 per thousand of bricks. It was alleged that previously the Board was realising the tax from the manufacturers of bricks at the rate of 0.19 per thousand. But by impugned notification, it raised the rate of the tax at 0.75 per thousand of bricks. It was alleged and asserted that the respondent as the manufacturer of bricks was neither &riving any advantage from the Board nor any service was being provided by the Board. As such, the realisation of the tax at the aforesaid rate was in contravention and in violation of Section 60 of the Cantonments Act, 1924 read with Section 128(1)(ii) of the U.P. Municipalities Act, 1916. The suit filed on behalf of the respondent was dismissed by the Trial Court. That judgment was affirmed by the Court of Appeal. However, on second appeal being filed on behalf of the said respondent, the High Court came to the conclusion that the ceiling and restriction imposed by Article 276(2) of the Constitution, as applicable to the State, any municipal, district board, local board or other local authority within such state in respect of imposition of taxes on professions, trades and callings, was applicable even on the Board which had been established under the aforesaid Cantonments Act. On that finding the notification was declared to be invalid being hit by Article 276(2) of the Constitution. Section 3 of the Cantonments Act provides that the Central Govern­ ment may, by notification in the Official Gazette, declare any place or places in which any part of the Forces is quartered or which, being in the vicinity of any such place or places, is or are required for the service of such forces to be a cantonment for the purposes of the said Act and may by a like notification, declare that any cantonment shall cease to be a cantonment. In view of sub-section (4) of Section 3 Central Government may, by notification in the Official Gazette, direct that any place declared a cantonment under sub-section (1) the provisions of any enactment relat­ ing to local self-Government other than this Act shall have effect only to such extent or subject to such modifications, or that any authority con­ stituted under any such enactment shall exercise authority only to such extent, as may be specified in the notification. Section 6 provides that when G by a notification under Section 3, any cantonment ceases to be a canton­ ment, the local area comprised therein shall immediately be placed under the control of a local authority, the balance of the cantonment fund and other property vesting in the Board shall also vest in such local authority, and the liabilities of the Board shall be transferred to such local authority. H Similarly, Section 7 and 8 make provisions in respect of cantonment fund \ CANTONMENT BOARD v. KRISHNA BRICKS AND LlME FACTORY [N.P. SINGH, J.) 139 and its property which is placed under the control of some other local A authority, in view of the notification under Section 4, because of which any local area forming part of cantonment ceases to be under the control of a particular Board. Section 60 of the Cantonments Act provides : General Power of taxation - (1) The Boardkay, with the previous sanction of the Central Government, impose in any cantonment any tax which under any enactment for the time being in force, may be impose in any municipality in the State wherein such cantonment is situated : (2) Any tax imposed under this section shall take effect from the C date of its notification in the Official Gazette or where any later date is specified in this behalf in the notification, from such later date. Because of aforesaid Section 60 the Board may with previous sanction of D the Central Government impose in any cantonment, any tax 'which under any enactment for the time being in force, may be imposed in any municipality in the State where such cantonment is situated'. For imposing any tax in exercise of the power under Section 60, two conditions have to be fulfilled and complied with (1) there must be a previous sanction of the Central Government to impose such tax and (ii) the tax to be imposed must E be such which under any enactment for the time being in force may be imposed in any municipality in the State wherein such cantonment is situated. So far the municipality within any State is concerned, its power to impose a tax in respect of professions, trades or callings is governed and controlled by Article 276 of the Constitution, which says : "Taxes on professions, trades, callings and employments - (1) Notwithstanding anything in article 246, no law of the Legisla- G ture of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income. (2) The total amount payable in respect of any one person to the H 140 SUPREME COURT REPORTS. [1996] SUPP. 6 S.C.R. State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shalt not exceed two thousand and five hundred rupees per annum. (3) The power of the Legislature of a State to make laws as aforesaid with respect to taxes on p;ofessiens, trades, callings and employritents shall not be construed as limiting in any way the power of Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and employments." There is a non-obstante clause in Article 276(1) of the Constitution saying that notwithstanding anything contained in Article 246 no Jaw made by the legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board, or other local authority therein in D respect of professions, tradings, callings or employments shall be invalid on the ground that it relates to a tax on income. Having said so a ceiling on the amount of tax has been imposed by Article 276(2), which was Rs. 250 earlier and has been raised to Rs. 2,500 by the Constitution (Sixtieth Amendment) Act, 1988 with effect from 20.12.1988. In the case of Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR 1966 SC E 249 = [1965) 3 SCR 499 a Constitution Bench in its majority judgment said: "Before we deal with these cases it is necessary to point out the rational upon which S. 142-A of the Govt. of India Act, 1935 was enacted and on which Art. 276 of the Constitution now rests. It is that the legislative spheres of the Provinces and the Centre came to be clearly demarcated in regard to items falling within Lists I and II of Schedule VII of the Govt. of India Act and now to those falling within the same lists of Schedule VII of the Constitution. Taxes on professions, trades callings and employments are taxes on income and are thus outside the provincial and now State - lists and belong exclusively to Parliament and before that to the Central Legislature. Yet under a large number of laws enacted before the Govt. of India Act, 1935 came into force, power was conferred on local Governments and local authorities to impose taxes on such activities. This was obviously in conflict with S. 100 of the Govt. of I I CANTONMENT BOARD v. KRISHNA BRICKS AND LlMEFACIORY [N.P.SINGH,J.) 141 India Act. When this was realised S. 142-A was enacted by the A. British Parliament which saved the power conferred by pre- exist- ing laws but limited the amount payable to Rs. 50 after 31st March, 1939. A saving was made, however, of pre-existing laws subject to certain conditions with which we are not concerned. The provisions of this section have been substantially reproduced in Article 276 B of the Constitution with the modification that the upper limit of -such tax payable per annum would be Rs. 250 instead of Rs. 50. A tax can be recovered only if it is 'payable' and it would be payable only after it is assessed. It is, therefore, futile to contend that the ban placed by the aforesaid provisions extends only to recoveries and not to an earlier stage. C (emphasis supplied) We may further observe that where there is an express prohibi­ tion in a statute against a local authority from imposing a tax, as for instance, the recovery in the Statute construed by this Court in the Poona City Municipal Corporation case, C.A. No. 582 of 1961, date 5.5.1964: (AIR 1965 SC 555) (supra) or where a prohibition can be implied - whether it be with regard to an item of taxation E or with regard to the rate of tax or the quantum of tax payable by an individual assessee - the action of a local authority or of any of its instrumentalities in transgressing that prohibition must be regarded as being in excess of its jurisdiction. Here there is a prohibition in S. 142-A of the Government of India Act and now F in Art. 276 of the Constitution, which precludes a State Legislature from making a law enabling a local authority to impose a tax on "professions, trades, callings and employments" in excess of Rs. 250 per annum. These provisions have to be read in the A~t or to be deemed by implication to be there as the Constitution is the G paramount law to which all other laws are subject as was the Government of India Act, 1935 before January 26, 1950. If, there- fore, after the date specified. in S. 142-A of the Government of India Act or after the commencement of the Constitution a local authority or any of its instrumentalities imposed or imposes a tax which is in excess of the permissible amount, it would be exceeding H 142 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. its jurisdiction and a provision like S. 84(3) of the Act will not bar the jurisdiction of a civil Court to entertain a suit instituted by a person from whom it is collected for the repayment of the money recovered from him in excess of the permissible amount.. ........ Here since the Assessing Officer had no authority to levy a tax beyond what S. 142-A of the Government of India Act, 1935 permitted or what Art. 276 permits his proceedings are void in so fa~ as they purport to levy a tax in excess of the permissible amount and authorise its collection and the assessment order is no answer to the suit for the recovery of the excess amount. To this .::xtent, even the order of assessment cannot obtain the protection of S. 84(3) of the Act and, therefore, the appellant's suit is maintainable." Again in the case of Malzapalika of the city of Agra v. The Agra Brick Kiln Owners Association and Anotl!CI; ( 1976) 3 SCC 42, the scope of Article 276(2) was considered by this Court in connection with the aforesaid U.P. Municipalities Act, 1916. The State Government issued a notification in the D year 1947 imposing a tax under Section 128(1)(ii) of the said Act, at the rate of 14 annas per thousand bricks. Brick kiln owners who were effected by the said notification filed a suit for declaration that the tax was void as such could not be realised in view of Section 142-A of the Government of India Act, 1935 and Article 276 of the Constitution. This Court said : "The Government of India Act, 1935, certainly set a maximum on t~e tax on trades and callings and we agree that the High Court was right in holding that the Municipal Board's light to levy tax under the notification Ex. H could be valid up to Rs. 50 per year and, to the extent it went beyond that limit, was void. So, we affirm the High Court' holding for the period upto January 26, 1960 that no sum higher than Rs. 50 as set out in the Government of India Act, 1935 can be exacted under Section 128 of Act II of 1916. From the Raj to the Republic was a big break in constitutional law, but there was some continuity maintained. A certain ceiling on taxes on professions. trades, callings and employments had been set by Article 276 of one Constitution of India, but this maximum was not Rs. 50 as in the Government of India Act, 1935 but Rs. 250. CANTONMENTBOARD v.KRISHNABRICKSANDLIMEFACIDRY[N.P.SINGH,J.) 143 Inevitably it follows that during the post- constitution period noth- A ing by way of taxes on trades or callings above the limit so set is recoverable and hence the maximum levy form each person under the notification issued under Act II of 1916 rises to Rs. 250. This does not mean that anything beyond Rs. 250 (the tax freeze under Article 276(2) can be levied. No. The constitutional maxi­ mum prevails as it covers all taxes on trade or calling even today. Therefore, until Parliament makes any other law, as contemplated in the proviso to Section 172 of the Adhiniyam, the maximum of C Rs. 250 binds. We have to read down the notification Exhibit H for the post-Constitution period, i~ tune and conformity with the Constitution and uphold its validity to the extent of constitutional permissibility." In the case of Mahapalika of Agra v. Agra blick Kiln Owners Association D (supra) the validity of a notification issued under Section 128(1)(ii) of the U.P. Municipalities Act, 1916 in respect of Agra Municipal Board imposing a tax on brick manufacturers at the rate of 14 annas per thousand bricks was considered by this Court and it was held that any such notification must conform and fulfil the requirement of the ceiling fixed by Article E 276(2) of the Constitution. In view of Article 276, it has to be held that no law of legislature of a State relating to imposition of taxes for the benefit of the State _or of a municipality, district board, local board, or other local authority therein in respect of professions, trades, callings shall be valid, if it provides the total F amount payable in respect of any one person to the State or to any one municipality, district board, local board, or other local authority in the State, exceeding the limit fixed by Article 276(2) of the Constitution. Now the question which is to be answered is whether the ceiling prescribed by Article 276(2) of the Constitution shall also be applicable to G Board which has been established under the Cantonments Act. It need not be pointed out ~hat the Board has been established under Cantonments Act which is a Central Act. So far Article 276 is concerned, it relates to the power of the legislature of a State to make law for the benefit of the State or of a municipality, district board, local board or other local H 144 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. authority in respect of taxes on professions, trades, callings saying that it shall not be invalid on the ground that it relates to tax. on income. But at the same time, by Article 276(2) a ceiling has been fixed in respect of the amount payable to the State, or anyone municipality, district board, local board or other local authority in the State. This was necessary because the power to tax on income has been provided under Entry No. 82 of List I in the Seventh Schedule and only Parliament can ena;;t a law in respect thereof. The State legislature cannot make a law in respect of taxes on the income of individuals within the State. It can be said that Article 276 of the Constitution within a prescribed limit, enables the legislature of a State to make law for imposition of taxes on income for the benefit of the State or municipality, district board, local board or other local authority from professions, trades, callings saying that such law shall not be invalid on the ground that it relates to a tax on income. So far the Board is concerned which has been established under the Cantonments Act, has issued the impugned notification in exercise of the power under Section 60 of the Cantonments Act. As such the said notifica­ tion shall not be deemed to have been issued exercise of power under a law enacted by the legislature of the_ State for the objects mentioned in Article 276. To that extent, we are not in agreement with the opinion expressed by the learned Judge of the High Court. Whether the provisions of Article 276 shall be applicable has to be examined by construing the scope of Section 60 of the Cantonments Act. Section 60 of the Canton­ ments Act, prescribes two conditions for imposition of tax. by the Board. Firstly, that there must be a previous sanction of the Central Government and secondly .that only such tax can be imposed within any cantonment which under any enactment for the time being in force may be imposed in any municipality in the State wherein such cantonment is situated. The framers of the Cantonment Act did not desire to delegate and authorise the Board to impose any tax. The power of the Board to impose a tax was circumscribed by prescribing a limitation that the Board may impose in the cantonment any tax which under any enactment for the time being in force, may be imposed in any municipality in the State wherein such cantonment is situated. · Section 128(1)(ii) of the U.P. Municipalities Act, 1916 provides : "A tax on trades and callings carried on within the municipal limits .. CA!fi;ONMENTBOARD v. KRISHNABRICKSANDUMEFACTORY(N.P.SINGH,J.] 145 and deriving special advantages from, or imposing special burdens A o~, municipal services." J• I ' In exercise of power under Section 128(1)(ii), the Municipal Board of any ., . . . . . . . municipality within the State of Uttar Pradesh could impose a tax on trades and callings carried on with~n the municipal limits. Therefore, any .Board .-~i4~~ .the ·state oJ U.P. can also impose such tax within t~r cantonment area because of Section 60 of the Cantonments Act. In view of the clear . ( ~ -: . . .and unambiguous provision of Section 60, the learned counsel appearing . ·fQr the·<\P.pellant-Board did not contest this position. But according to him, it does not mean, that Board is also bound by the rates of the taxes so . imposed by the municipality or the local board within that State. It can prescribed its own rates of taxes on the trades and callings. According to us, it is difficult to accept this contention. If the framers of the Constitution did not give this liberty and latit)..lde to the legislature of a State in respect of' taxes on professions, trades or callings for benefit of the State or municipality, district board, local board· or other authority under Article 276 of the Constitution, how an unlimited power so far the rate of tax is concerned, can be conceded in favour of the Board which is a creature and · · authority established under the Cantonments Act? When Section 60 links the power to impose tax with any enactment for the time being in force in respect of any municipality in the State where the cantonment is situated, then it shall be deemed that it has also prescribed the limit of the ceiling ' of suth tax with reference to the said enactment in force in fosp~ct of any municipality in that State. If it is held otherwise, it will lead to an anomalous position; so far the nature of tax is concerned, because of Section 60 the powbr of the Board· is· circumscribed with reference to any enactment for the 'tin\e being in force in respect of municipality in that State whereas so 1 faf ihe 'rate of such tax which is more vital, has been left t~ 'the discFetion of the Board. • j j ~ , I( • I ~ . ,, On .b~halLof: the appellant-Board .it was p,pinted out that the Board .D ,,. c(!.nnQl1 ~~ercise.,arbitrary power. under Section _60 because any such tax -,_;including the rate th,ereof, has to be_first sanctioned by the._ Central Govern- G ,. , rnent, According .~o us, because of Article 279 .if ~he State legislature cannot ~ hta?(, on, pr9fes.sipps trades or cal~ings for the benefit of the State, .. municipality, district boan,l, local board or other local authority, beyond 1,Jhe limit,prei;;cribed by Article 276(2) as it amounts to tax on income, then >lhow,it.can be,,held that the Board 1hii$,Unli!llited power without any ceiling 1 H 146 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A to tax on professions, trades or callings being carried on within the canton­ ment area? When Section 60 provides that Board may with Previous · sanction of the Central Government impose in any cantonment any tax which under any enactment for the time being in force may be imposed in any municipality in the State wherein such cantonment is situated, such restriction shall not be only in respect of the nature of the tax, but also in respect of the ceiling on rates prescribed under the enactment, relating to the municipality. On behalf of the appellant, reference was made to the judgment of Allahabad High Court in the case of Mis. Punjab Lime and Lime-stone Co., Dehradun v. Cantonment Board, Dehradun and Anotlw; AIR (1967) Al­ lahabad 15. A learned Judge in connection with Section 60 of the Canton­ ments Act said : "Section 60 of the Cantonments Act nowhere says that Canton­ ment Boards can levy taxes which can be levied by municipalities · subject to the same limitatioris. It simply provides that the taxes which are realisable by Municipal Boards are also realisable by Cantonment Boards. This does not mean that the limitations on the powers of Municipal Boards to levy thdr taxes must also be applied to taxes levied by Cantonment Boards." A contrary view was expressed in the case of Madan Lal v. Canton­ ment Board, Mathura, (1978) All L.J. 1147 by a learned Judge of the same High Court saying that Cantonment Board while imposing a tax on per thousand of bricks must fix the maximum limit which does not contravene the provisions of Article 276 of the Constitution. A Division Bench of Rajasthan High Court in the case of Narain and Another v. Cantonment Board, Nasirabad, AIR (1963) Rajasthan 190 said : "Considering section 60 of the Act, we may point out that the legislature empowering the respondent to levy and collect taxes used the word "impose only and evidently, therefore, the terms should be taken lo have been used in a wider sense. Besides the object and purport underlying section 60 appears to be that the taxes to be imposed by the respondent (Cantonment Board) should be consistent with and should conform to the State laws relating to imposition of taxes by the local authorities. Section 60 further does not ref er to State laws in force at a particular point of time CMTONMENTBOARD v.KRISHNABRICKSANDLIMEFACIDRY(N.P.SINGH,J.) 147 but the State laws gen~ally as might be from time to time have A been referred to. It will be hardly in keeping with the object and policy underlying section 60 that the respondent should be per­ mitted to continue taxes in contravention of State laws. The term "impose" should, therefore, be taken to have been used in wider sense in sectiQn 60 and that being so, the respondent cannot collect taxes in contravention of State laws." B In the case of Hira Lal and Another v. Union of India and Another, (1972) Tax L.R. 2051, the Himachal Pradesh High Court has also come to the conclusion that under Section 60 of the Cantonments Act, while imposing a profession tax, Article 276(2) of the Constitution cannot be violated. Accordingly, the appeals fail and are dismissed. There shall be no C order as to costs. v.s.s. Appeals dismissed. , F. /' . , K.C.P. LIMITED ' ' ~ . ..., ·~ ' . . . . '• 'v. ' .-. ' '. THEJ~,RE§~DiNG OFFI.CER,f;\ND o~s. ··-· ,l ,;I. . ' : · . . ·· -~ I . ·t ' ; . ,. . • . [AM. AHMAm;·a., S.B. MAJMUDAR AND B.N: KlRPAL, JJ.] • 1 , • • , •n ·~ . ~ Labour Law: IndustlialDisputes Act, 1947: Sections 2(k) & (p), 2-A and 18(1). Settlement-Otlwwise than in conciliation proceedings-Dispute be­ tween employer compal.ly and workmen-Resulted in dismissal of certain workmen-Sole recognised and representative trade u11ion pa,1Jic,ippf~4 ,in conciliation proceedings on behalf of ail workmen including the dismissed ones who co1ttini1ed to be members of trade union-Conciliation proceediitgs ultimately f ailed-Pursua11t to which industlial dispute raised under S. 2(k)-No industlial dispute raised under S. 2-A by dismissed workmen­ Dwing pe11de11cy of dispute before Labour Cowt, the said trade union and employer anived at settlemeni:-.Option either to accept reinstatement with co11tinuity in se1vice without back wages or accept a specified lwnpsum amount with other mo1ietmy be11efits-Some dismissed workmen did not approve settlement-But trade union entered into settlement on behalf of all dismissed workmen including the dissenting 011es-Howeve1; Labour Court declined to pass award iii tenns of settlement-Held : settlement was not ex facie, unjust or un.fai1~77ierefore, it was binding even on such dismissed workmen who did not approve the settlement-Hence, Labour Cowt should have passed an award in tenns of settlement and should not have continued the industdal dispute in relation to dismissed workmen who did not approve settlement. Settlement-Othe1wise than in conciliation proceedings-Ce1tain dis­ pute between employer company and workmen led to go slow, stdke and lock G out-Disciplina1y action against 29 workmen for va1ious acts of misconduct resulted i.u-tll.ejr dismissal-Subsequently, settlement anived at between employer anti-trade union-Option either to accept reinstatement with con­ tinuity in se1vice without back wages or accept a specified lwnpsum amount with other nwnet01y benefits-All stdking workmen other than dismissed ones H reinstated without back wages-Held : In the circumstances of the case, the 148 KC.P. LID. v. PRESIDING OFFICER 149 tenns oj seitlemen't relating to proposed reinstatement of dismissed workmen A without. back wages neither unfair nor unjust. The appellant-Company had an Engineering Unit where it manufac­ tured inachinery and employed about 500 workmen. Respondent No. 2 was the only recognised and a representative trade union of all the workmen in the said establishment. Certain disputes between the appellant and the workmen led to go slow, strike and lock out declared by the appellant-Com­ pany. Disciplinary action against 29 workmen for various acts of miscon­ du~t l'esulted in "their ·m~missal: The respondent No. 2~trade union participated iri the concilation proceedings on behalf of all workmen inclu~ng the ·dismissed ones, which ultimately failed. An industrial dis­ pute under SectiOn 2(k) of the Industrial Disputes Act, 1947 was raised by the r~sl.iondent No:'. 2~trade union on behalf of the said 29 workmen. However, none of the said 29 workmen raised industrial dispute in their • r,. • ·~ I f. ' . ~~ J • • ·-· • individual "capacity under Section 2-A of the Act. · ·During the pendency of the said industrial dispute before the Labour D Court the said trade union entered into a settlement with the appellant­ Company under Section 18(1) of the Act otherwise than in the course of conciliation proceedings on behalf of all the said 29 dismissed workmen giving option to either accept reinstatement with continuity of service without back wages or accept a specified lumpsum amount with other E monetary benefits. However, 12 workmen out of the said 29 workmen did not accept the aforesaid settlement. The Labour Court·declined to pass an award in terms -of the settlement on the ground that the 12 workmen had not approved the settlement and ·industrial dispute in respect of them would continue and proceed furthe1·. However, out of the said 29 workmen, 17 workmen had agreed to abide by the terms or the settlement and were F reinstated in exercise of'their·option. The 12 workmen were members of the respandent No. 2-trade union who were acting on their behalf and still continued to be members of the union. ;I The appellant-Company filed a writ petition before the High Court G challenging the decision of the Labour Court.to continue the dispute in connection with the said 12 workmen. The High Court dismissed the writ petition. Hence this appeal. ..jl I\ lt.l'·, • . . , On behalf of the appellant-Company it was contended that when respondent No. 2-Union had espoused the cause of all the 29 dismissed H 150 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A workmen, and the reference was made under Section 2(k) of the Act, the union which represented all the workmen including the said 12 workmen was entitled to act on behalf of all of them and enter into a settlement;. and that under these circumstances individual workmen had no independent right to contest their dismissal orders and were bound by the settlement B which was not in any way ex facie, unfair or unjust. Allowing the appeal, this Court HELD : 1.1. The settlement arrived at by the respondent No. 2-union with the appellant-company was not in the course of conciliation proceed- C ings. Therefore, it would be binding under Section 18(1) of the Industrial Disputes Act, 1947 to the parties to the agreement, namely, the appellant­ company on the one hand and respondent No. 2-union representing all the 29 dismissed employees, who were its members and on whose behalf it had raised the industrial dispute under Section 2(k) of the Act, on the other. The D settlement was duly signed by both the parties. Under these circumstances, respondent Nos. 3to14 (in all 12 workmen) also would be ordinarily bound by this settlement entered into by thefr representative union \'tith the com­ pany unless it is shown tl)at the said settlement was ex-facie, unfair unjust or malafide. No. such case could be even alleged much less made out by the dissenting respondent Nos. 3 to 14 before the trial court. The entire in- E dustrial dispute was raised by respondent No. 2-union on behalf of all the 29 dismissed workmen and as it was not an industrial dispute covered by Section 2A of the Act whereunder individual dismissed workman could come in the arena of contest, it could not be held, as wrongly assumed by the Labour Court that this settlement was not entered into under Section 18(1) F of the Act by these dissenting workmen when the respondent-union did represent them from beginning to-end and is still representing them as they are members of the union at present. Tue terms of the settlement cannot be considered to be in any way ex-facie, unjust or unfair and that the said settlement consequently must be held to be binding on these contesting workmen also. Hence, the entire industri.al dispu~e should have been dis- G posed of in the light of this settlement and an award in terms of the settlement should have been passed by the first respondent-court in the case of respondents 3 to 14 also. [157~C-D; 157-F-H] Ram Prasad Vishwakanna v. The Chaimian, Industrial Tribunal, H [1961] 3 SCR 196; lferbertsons Ltd. v. The Workmen of Herbertsons Ltd. & KC.P. LID. v. PRESIDING Ofl!CER [S.B. MAJ MUD AR, J.] 151 Ors., AIR (1977) SC 322 and Banmi Refilwy Pragatisheel Shannik Parishad A v. Indian Oil C01poration, [1991) 1 SCC 4, relied on. 1.2. The relief of reinstatement without back wages could not be said to be unreasonable as all other workmen also lost their back wages only because they they supported the cause of these 29 colleagues of theirs and ·/ I I B hence there was no reason why the workmen who indulged in the acts or misconduct and who were also to be taken in service should not also lose, their wages. Relief of reinstatement was made available to respondents 3 to 14 on the same line as it was made available to their 17 remaining colleagues who were covered by the very same settlement and who accepted the same. Such a package deal entered into by respondent No. 2 in the best C interest of these workmen could not be said to be unfair or unjust from any angle. On the contrary, if the back wages were given to them, then the remaining workmen against whom there was no disciplinary action or any alleged misconduct and who had also lost wages only because they were in sympathy with these 29 dismissed workmen would have stood dis- criminated against. Consequently, it is not possible to agree with the contention of the respondent Nos. 3 to 14 that the said settlement was in any way unfair or unjust. [162-F-H; 163-A; BJ CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11944 of 1996. From the Judgment and Order dated 4.4.95 of the Madras High Court in W.A. No. 1186 of 1993. N.B. Shetye, V. Balaji and A.T.M. Sampath for the Appellant. V.G. Pragasam, M.A. Krishnamoorthy and M.A. Chinnasamy for the Respondents. The Judgment of the Court was delivered by S.B. MAJMUDAR, J. Leave granted. This appeal by special leave arises out of the judgment and order dated 4th April, 1995 of the High Court of Judicature at Madras in Writ Appeal No. 1186 of 1993. A Division Bench of the High Court dismissed the appeal of the appellant company and confirmed the judgment and order of the learned Single Judge in writ petition No. 611 of 1993 dismiss- H A ing ·the sanie'. 'I ·' A few relevant facts leading to this appeal deserve to ,be noted at the ''. . ;. •. ; .• .1 - -1..,'. z : ' • , ; 'I' j • .. •.1. ~1 t'-, I -'~I :-; I • • ; • : 1 c. : outset. The appellant ts havmg an Engmeering Umt at Tiruvottiyur, Madras ,. . . • -·,-.: • ~. 1 ' - .. ' ,.- i ... ~ ... ~ ~ I I ,tlhl IJ ;';" ":i»d·-~n .. •t"•,)f"l'" , •• ol where it manufactures machinery for sugar, cement and alhed industries ~-~.1< .· , ... ; .. ~ . · ,·'.;·'. ~11·i:. . .. tj; _1;;.a,_·, Jr~!~· J·q[ffl~~'. f'-1!' t".Hl ',f'!l.~b;~v B' '. a~d ~~pl9~~ ~b~u,t ?op,:-;o.~¥~en. R,~sp,?~?f~~I~~·. ~ ,~~J·~~~;o~~¥/;f~pll~§:?~iii and a representar1ve umon of all th~ workm,en ~orkmg .m the said, estab- ••. ~. :1 .-: Sn 1 .( .. ·, .. . -.• ·.r.-... ·~ J•L .1:.l ;. 4~• ·p·:!.t ... •r':l.'°'' d~l.J Dt•r !~}Ul)."j• 1 .. uh hshment. In the past alJ mdustnal disputes were settled by the appellant c6m~~~ 1 6~· i~~ '~asi~' 'qi '1~ng th~~ 'settl~~~~t~· ~~i 1 i~~d 1 iht~ '~th'i~e: ?~~ii ret~n<leiit unio~~ 'ike lasl 1 of\'.¥1li~h'~~~· d~t~d 1 Q~ce~~et3(( 1991.!dl ... " t;~Hf~ '..~·. nt::·t '.h.c ~n~nLi ~ "".' 'h.tit~(", ·n'j .. !fl .d l)-: t: ·IV<J .... Jll ;~if'! .-''JU:,;~··Jh1·) c') 1"'' 1 Ikseptembe~: l990 When' tHe 1ihue 1of Bb'b'uido~· tlil fina6cia'i'ye~¥j; 1989-9o''"was' 1 uiideV~onsiderktio'i{ th~ ;wo~kin'en ''af the''iri~hHlb~··or··ziili' 1 ' respoiia~ht uniort"resorte~ to go ~16w' insisting· tlie app'e1i~Ht i~ i paHhoie'" bonus 1 eveii though''as · coritende(l by' tii'e' app~llan(tirtdef'lii~ prdvisiciil~ ·Sf · th'e, faYfueiit1 of 'B.otius 1 A1<:i: "only 'diinirilliili. bonus 1 ohi'.33% '<Wriib"b.~riici' ;j' ..-sh i~·~~·:f .. ~ ... :-r ~t1.r-· •. ·: '1..~ •• t h'l .. "' ~. •tl !'' ·j • j·~t .:t.i,, 1.;~, +:.i:1t· wages was payable for ~he financial year 1989-90. The go slow resorted to D . b{the 1 \~ori<Ihen re~uit~d iri'totai' stoppag~'~fw6ritalid 1 ~H 1 ~1i'eg~d 1 iiibg~I ' •. • ... i ~ .. • ). • ·• ,t ,,... ~,., · • ; • :~ ~ ·. ~ .• '- .t. , .... ~---; ~ ill •·1 0~11•u""'~~t1, > strike on 'and'from OCtober 26,' 1990. It is. the case of .the appellant tliat iii view of the deteriorating situa'tio'n 'a~d 'tith: ·~; ~J\J';to" pr~te~t 11 pe~sb~h1'' securi}Y qf th.e §upervisory an~l M~n;;1.~e~i~l, s~~ff, ~t 1_h<;tg·: ~~ ~,t;clar7 ,a1 lock out on October 30, 1990. The appellant also chargesheeted 29 workmen , E including respondents 3 to 14 herein on November 5, 1990 for various acts of misconduct allegedly committed by them between ~eptemher 25, .1990 and October 29, 1990 when the workmen had resorte~ to go slow and other '­ alleged violent acts of misconduct. ; . . i I .. • 1 The explanation given by 29 workmen having not been found satis- F . ') factory, the appellant. decided- to hold 'inquiry~ into' .-the ;charges inv61ved against the said 29 workmen. Inquiries were conducted by the two 'tetired'.>' District Judges and during the inquiries all the 29 workmen participated in the inquiry proceedings which contii1ued froni .i'itnuary8,1991 to August 21, 1992. , On October 31, 1990 the Government of Tamil Nadu intervened and !~;:·-·f_' : <. •,::,•,':J!': ·~ 1 I .J~. '_'r., '. '.; I .1 ! JI f' ·~( 1 , .. '~ p .t I imti~~e~. co.ncihation pr9,ce~dings to. bring, about s..ettlem,ent ,in_ !e&P.ect. of !t.""•,·.· 1 .,.~l•a.1 . .,.-.,.~.~ .• ·, (·,lt.H,l .• 1 • j,,l~ .• 0Ji·L+..01"t1 the pending dispqtes including lock out .. As no settlement could take .place durii{g' concili~tiOn ~~~ceedings, .the Co~citi~tio~ Office~ submltt~d report: L~\ ·, ,lt' 1! ~ .. I · ,• . J;,;f. ; i;._·· l,•jfj: If ,I ; .'! ~c I .~ i .i ·a· ·. 1 . J to t~~i !,\pptopr~ate q?v.ern~er-t '.op,. Amil 9,, .19~L On ¥,~y 7, .~9?1 .~~~., H Government of Tamil Nadu issued three different orders referring certain KC.P·. LTD. v. PRESIDING OFFICER [S.B. MAJMlIDAR,J.] 153 , - indu_strial disputes for adjudication. G.O. No. 485 was in respect of revision A of scale of pay, revision of dearness allowance, revision of house rent allowance etc. By G.O. No. 486 the Government of Tamil Nadu declined to refer cer~in disputes .such ~as leave facility, housing scheme, medical facilities etc. for adjudication. by giving.reasons in: the said G.O. No. 486. The third G.O. ,No. 487 was issued under Section 10-B of the Industrial Disputes -Act, 1947 (hereinafter referred to s 'the Act') . directing the appellant to lift lock out on or before 13.5.1991 and allow all except 29 ·, workmen to resume work. In the. said G.O. No. 487 the ·appellant was directed to maintain status quo obtaining prior to the date of.the lock out.·• in regard to the terms and conditions of service and the appellant was further directed to· complete inquiry proceedings against 29 workmen on or before 10.6.1991 a:hd: to pay 'them full wages during the' period- of disciplinary proceedings. In the saio G.O. No. 487 the workmen •were· directed to niallitain norinal'production ·which they whe giving prior to -the · ! date of the High Court order an'd also to maintain di~cipline in the-f~cf6ry. : - i ' By August 19, 1991 inquiries' in respect of all the 29 workmen were completed and on the basis of the findings by the Inquiry Officer and other extenuating circllmstances, the 29 workmen were dismissed from service betweellK 23.8."t991 to 1~16.1991. . I In a meeting held before the Joint Comll).issioner of Labour on E October 4, 1991 between the appellant and the 2nd respondent, an agree­ ment was reached on the qua~tum of increase in wages: recoverable advance and issue· of bonus for the years 1989-90 and 1990-91. It was fur,ther agreed that th~ 1 issue of 'nc)n-employment of 29· dismissed workmen wouta be' discussed sepa~ately ·and on that basis all workin~n except the F saia 29 workmin ~~eed to resume work in a phased manne~ _not later than October 12, 1991 although the lock out was lifted on May 13, l991. - ' · 1; ,, Subsequer1tly, a settlemell.t was _arrived at between the appellant a¥d '"\ the 2i;id responc1ent ~nder Section 12(~) of the Act wherein it was agreed G ' ' th~t the is~ue of, non;~mployment of 29 d_ismis&ed workmen w_ould _be . discussedip. the. pr~ceeciip.gs to be initiated by the Joint Labour C::ommis- sioner as ~arly as possible. T~e- J9int Labour Commissioner held m~etings, bety.;een !~uary 8, 199~ and March 6, 19_9~ ap.d as no settlement coµld ,be, reached report with regard to failure of t}ie conciliation proceedings '¥as submitted to the Government of Tamil Nadu which by order dated H 'l .A 154 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. 13.5.1992 referred the issue of non-employment of 29 workmen for ad­ judication to the 1st respondent. The said reference was registered as l.D. No. 708 of 1992 on the file of the 1st respondent. ~- The said industrial dispute was referred for adjudication pursuant to the demand espoused by all the workmen and raised by the 2nd respondent union under Section 2(k) of the Act. All the said 29 workmen who were members of the union had also authorised the 2nd respondent to represent them before the Conciliation Officer whereafter reference was made to the 1st respondent. None of the said 29 workmen raised industrial dispute in their individual capacity under Section 2A of the Act. It appears that thereafter the appellant company on the one hand and second respondent - union on the other held discussions regarding non-employment of 29 workmen: Ultimately on 7th November, 1992 an understanding was reached between the appellant and the 2nd respondent - union that option would be given to the said 29 workmen either to accept D reinstatement without backwages or a lumpsum amount of Rs. 75,000 with other monetary benefit may be accepted by the concerned workmen: Respondent Nos. 3 to 14 (in all 12 workmen) out of these 29 workmen did not accept the proposed settlement and accordingly ad­ dressed a letter to the Commissioner of Labour on 2nd December, 1992. Thereafter, the 2nd respondent entered into a settlement with the appellant company under Section 18(i) of the Act on behalf of all the 29 workmen whose industrial dispute with regard to non-employment was espoused and raised by it under Section 2(k) of the Act. On 14th December, 1992 a comprehensive settlement was arrived at and signed by the appellant and the 2nd respondent - union. Copies of the said settlement were also forw2.rded to various authorities as contemplated under the provisions of the Act and Ru'le thereunder. A joint memorandum signed by respondent No. 2 and the appellant company was filed before the Presiding Officer. First Additional Labour G Court, Madras, respondent No. 1 herein, before whom the industrial dispute was pending for adjudica!ion. It was requested that an award in terms of the settlement may be passed in the pending industrial dispute reference No. 708of1992. However, respondent No. 1, by his order dated 28th December, 1992 declined to make an award in terms of the settlement H dated 14th December, 1992 on the ground that the respondent Nos. 3 to K.C.P. LTD. v. PRESIDING OFFICER [S.B. MAJMUDAR,J.] 155 14 had not approved the settlement and therefore industrial dispute in A respect of these respondents will continue and proceed further. It may be stated that out of the 29 dismissed workmen in connection with . whose dismissal, respondent No. 2 - union had raised the industrial dispute under Section 2(k} of the Act., 17 workmen had already agreed to abide by the terms of the settlement and had got reinstated in exercise of their option. Only the remaining 12 dismissed workmen, respondent Nos. 3 to 14 herein. proceeded with the dispute and did not agree to the terms of the settlement even though admittedly they were members of the respondent No. 2 - union who wa.s acting on their behalf and even till date they have continued to be the members of the said union. As the 1st respondent decided to continue the reference in connec- tion with respondent Nos. 3 to 14, the appellant company filed Writ Petition No. 611 of 1993 before the Madras High Court. As seen earlier, the learned Single Judge by his Judgment and order dated 29th September. 1993 dismissed the said Writ petition. The appellant thereafter moved the D Division Bench of the High Court in appeal which also got dismissed on 4th April, 1995 an"d that is how the appellant company has moved this appeal on special leave. Learned counsel for the appellant company vehemently submitted that when respondent No. 2 - union had espoused the cause of all the 29 E dismissed workmen, and the reference was got made by it under Section 2(k) of the Act, the union which represented all the workmen including the dismissed respondents 3 to 14 was entitled to act on behalf of all of them by way of collective bargaining and could legitimately enter into the settle­ ment which was for the benefit of all concerned workmen. Under these F circumstances, individual workmen had no independent right to contest their dismissal orders and were bound by the settlement which was not shown by them to be in any way ex-facie, unfair or unjust; that it was a package deal entered into by respondent No. 2 - union with the appellant company and in such a collective industrial bargaining there was always G give and take; that there were no exceptional grounds for rejecting such a settlement which was for the benefit of all concerned workmen and the Labour Court ought to have acted upon the same. Consequently, the order of the Labour Court refusing to act upon the said settlement so far as respondent Nos. 3 to 14 are concerned, was patently erroneous in law and hence, the order of the learned Single Judge of the High Court confirming H 156 SUPREME COURT REPORTS [i996j SUPP: 6 S.C.R. such order of respondent No. 1 and 'further order of the Divisio~ B~~~hl also equally suffered from pat~nt errors of l~~. ln ~~pport of thes~, sub~ , missions, various decisions of this Court' 'were 'died to which we wili 1 r~fe~ 1 . . ~-' ~ . :• . ' ( .,/ -. ; ~. . . u a little later. H Learned counsel fO'r· respondent Nos'. j to 14 ori' tlie ·otl~dr 'hand . B submitted 'that though these respondents w~}e admittedly ·fhemBers ~f ! t~e L respondiri(~ ufliort, tlief haH Ii.or acrept~d iilhgrms' of th:e'!~eit16~eiit'ano 1 ' the said s~ttlem~h.t '\v'as'Mt biAciing on'ihenr;' that iH;fa 1 tt:l~b&'irmh1{t6 'tlie' ie.l:rnb<l ·cc1unseVa 0 s1etttetneirt\Jas arrivea' 1 at by'Ve~pOn'lterir N'<r2·,. · uiiion not on behalf of these contesting workmen'lhit only fck the 'iefuaffiing 17 C · ·workmen who had ac:cept~d the settlemep.t by givirg it in wr,iting to the i:_ 1' l· ,..., ·11,~rf 1 ,'.Li·'J1i;i"' .. t·~,,~,.,.,. .. ! Preside11t of respondent No, 2 · uniori. He also tried to suomit that in any j~ >\• ' ' ! 1 • ll""'·I -'"! · I }..: (}! Cl~· 1;~ ·l '· !:,O case, the settlement was ncit fafr 'and just as the workmen were: required to givb 'up" all the bac.:k wages ~~eri tliough tngy were gi~~n r6instateinent with ·i.'• • ~ ,·· I, 1,. ~ '-,J~. !i 11' i~",I, '~ 1'1'1 ,,. 'i ·J· •·f, ,. continuity of service and t:J:iey were' farther' required to give a letter in 'I 1 ·, - "·t~ (~ j-', i' • t fll\r/'~)~r _f.1 f ' ·_ . j D t f wrj,tin~· t? the Manage~ent,~fat~~g t~?t .trey,_wa,u~~ ~~qujt themselves in an orderly manner and would assure that they would not give a room for any m1sc~n~uct and dis~l.plina~y acti6~ i~· future: It wa~'s'ubWiitted that under these circumstances the contesting respondents were e~'titled to insist that ; · their dispute should be adjudicated on merits by the Labour Court. .,j:J•, •.1, ' ,j •' ' t I lj • • (! .1 l '• •' I -' E H:aiing given our aniious consideration to these rival submissiOris, we find thafthe 'terink of th~ settlement cann6t be·considered to be' in any way· 1 ex~fdi:ie; tlnjbst .or unfair and that the'said 'settleili.ent 'consequently must b~ · held to be biu'Ciing dn thes.e contesting workmen a:lso. - ·. · '1' · ' · • .! i '~: ; : 1 j ! f i ,, ~. • ~: ' • ... . ' 1 ·:It has to be; I<ept in. ·view that the :industriai dispute was ta:is'ed 'Dy . F respo'rident Nd. 2 ~ri Jnioii ·on behalf of all 'th-e· 29 ·wo~km:en· ·\vho were· , disinlsse·<l fioni service ~by 'the app~ltaiit" company: It \Jas an iiiaristrial' 7 dispute' as defined::by Sectioh.2.(k)·ofthe Act'taised by the uniotl:\)ii behalf· of its n1embers. Respondent Nos. r3 tiV1:'4"were . at 'the, 'tekvaht tihl'e,;,•1 ; 1members of the union and even till date they cciritinue 'to be 1 t~e :members ' G ofthe sponsoring union. This was not ~a reference r~is~d'by a dis~issed. employee as per·secti6n'2A. of tKe :Act. Conseque'ntly, ·as pe'r'Se~tfoii 36 { · • 1 .. , · ~ , · • • · . • , j-.. .• -- ,_ -· . • , i • '. ·u. -; 1 , , 1 of . the Act, it was respondent No. 2 union which was. 'in charge of tlie • "~ n ·. -" ·· ·, · Jii! ;,~- I•. ·' :·- Ur l{ _;I "\ 1 •• ·••. t' procee<l,~gs_ari.d could repres~nt an the29,dismissed.workmen on whose . l .... liJ. ~,, •, !"' •.••.' ! ; -. ·f~. r. ~~ 1·; '.I , ,~f.i 1 _, 1 rt;.J H be~~l~l~~ 1 di~p)lte ~~~ rais>ed by ~tJYh~~ 1 fh~ said, 11ni9n}1a,yi11g; c9nsi?e~ed . H the pros and cons of the situation, entered into the settlement on behalf of l(.C,P.LID. v. PRESIDINGOFFICER[S.B.MAJMUDAR,J.J 157 I, • , ~ · all the workmen for whom it had taken cudgels unless the said settlement A < ,~l , ' ,,, I ( , was found.to ex- facie, unjust or unfair it could not be gone behind by these · respo~?ents who, can' ~e said to be parties t~ the same through their representative union - respondent No. 2. In this connection a reference is ,also ~~q~ired to be made t.o Se,ction 18(1) of the Act which lays down as under: B "A settle~ent arriv~d at by agreement between the employer and workman. otherwise than in the course of conciliation proceeding shall be binding on. the parties to the agreement." It is not in dispute that the settlement arrived at by respondent No. C 2 - union with the appellant company was not in the course of conciliation proceedings. Therefore, it would' be binding to the parties to the agree­ ment, namely, the appellant company on the one hand and respondent No. · 2 ~ union representing all the 29 dismissed employees, who were its members and on whose behalf it had raisea the industrial dispute under D Section·2(k) of the Act, on the other. f~ I } ; ' f 1 l~ ' : · .!~ Section 2(p) of the Act .defines a settlement to mean a settlement arrived at in the course of_ conciliation proceedings and includes a written agreement between the employer and workmen arrived at otherwise than E in the course of conciliation proceedings where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof ha~ been. sent to an officer authorised in this behalf by the appropriate, Government and the Conciliati9n Officer. ' I It, is .. also ~o~ in dispute that parties to the settlement were the· t F 1.appellant conipany on th~ one hand and respondent No. 2 - . union on tl}e. other,_ which acted_ on .qehalf of all .the 29. dismissed workmen for .• ~horn refenmce,.w._a~ pending in the, I.abour C,qurt I_t was duly .signe,d by both these parties. Under these circumstances, respondent Nos, 3 to 14 also would be ordinarily bound by this settlement entered into by their: ' G r_epreseptath:'e.u11i911: ~ti! t~e compa!J,y it.is shown that the said settlement was..: ex-facie, unfair,· ,unjust ·or malafide. No such case could .. be even alleged ,much less,made.·out by the.dissent~ng respondent Nos. 3 tgi 14 before the..trial, court.. It is interesting to note. that.before the Labour .·. CoutHhe,only argument put forward.on behalf of respondent Nos. 3 to·' H 158 SUPREME CoURT REPORTS [1996) SUPP. 6 S.C.R. A 14 was that they were not parties to the settlement and therefore, it was not binding on them. Once it is kept in view thii.t the entire industrial dispute was raised by respondent No. 2 union on behalf of all the 29 dismissed workmen and as it was not an industrial dispute covered by Section 2A whereunder individual dismissed workman could come in the B arena of contest, it could not be held, as wrongly assumed by the Labour Court that this settlement was not entered into •mder Section 18(1) of the Act by these dissenting workmen when the respondent - union did represent them from beginning to end and is still representing them as they are members of the union even at present. In the case of Ram Prasad C Vishwakanna v. The Chainnan, lndustlial Tlibzmal, [1961) 3 SCR 196 a Bench of three Hon'ble Judges of this Court had an occasion to consider the effect of a settlement entered into by the union of workmen which had espoused the cause of its members by raising an industrial dispute under Section 2(k) of the Act and the further question whether under D these circumstances an individual workman had any independent locus standi in proceedings before the reference court. Rejecting the contention on behalf of the individual workman, it was observed by ·oas Gupta., J. speaking for the Court that the concerned workman was not entitled to separate representation when already represented by the Secretary of the union which espoused his cause. A dispute between an individual E workman and an employer cannot be an industrial dispute as defined in Section 2(k) of the Act unless it is taken up by a union of ~orkmen or by a considerable number of workmen. When an individu.al workman becomes a party to a dispute under the Act he is a party, not inde- pendently of the union which has espoused his cause. It was further observed that although no general rule can be laid down in the matter, the ordinary rule should be that representation by an officer of the trade union should continue throughout the proceedings in the absence of exceptional circumstances justifying other representation of the workman concerned. It is true that the said decision was rendered prior to the insertion of Section 2-A in the Act by which individual workmen were also given a fight to raise industrial dispute in case of discharge, dismissal or retrench­ ment or otherwise termination of service. It is also true that the present H controversy has arisen after the coming into operation of Section 2-A but KC.P. LTD. v. PRESIDING OFFICER [S.B. MAIMUDAR,J.] 159 as noted earlier the industrial dispute raised for 29 dismissed workmen was A raised by the union - respondent No. 2 under Section 2(k) of the Act and there was no reference under Section 2-A of the Act, so far as respondent nos. 3 to 14 are concerned. In the case of Herbe1tsons Ltd. v. 771e Workmen of Herbensons Ltd. and Ors., AIR (1977) SC 322 another Bench of three learned Judges of this Court considered the effect of a settlement arrived at by recognised union of majority of workers pending appeal to Supreme Court. It was observed by Goswami, J., speaking for the Court that when a recognised union negotiates with an employer the workers as individuals do not come into the picture. It is not necessary that each individual worker should know the implications of the settlement since a recognised union, which is expected to protect the legitimate interests of labour enters into a settlement in the best interests of labour. This would be the normal rule. There may be exceptional cases where there may be allegations of ma/a fides, fraud or even corruption or other inducements. But in tl1e absence of such allega- D tions a settlement in the course of collective bargaining is entitled to due weight and consideration. In connection with the justness and fairness of the settlement it was observed that this has to be considered in the light of the conditions that were in force at the time of the reference. When, therefore, negotiations lake place which have to be encouraged. particularly between labour and employer in the interest of industrial peace and well-being, there is always give and take. The settlement has to be taken as a package deal and when labour has gained in the matter of wages and if there is some reduction in the matter of dearness allowance so far as the award is concerned, it cannot be said that the settlement as a whole is unfair and unjust. It was further observed that it is not possible to scan the settlement in bits and pieces and hold some parts good and acceptable and others bad. Unless it can be demonstrated that the objectionable portion is such that it completely outweights all the other advantages gained the Court will be slow to hold G a settlement as unfair and unjust. The settlement has to be accepted or rejected as a whole. It has to be kept in view that under the Scheme of labour legislations like the Act in the present case, collective bargaining and the principle of industrial democracy t>ermiate the relations between the management on H 160 , A the one hand and the union which resorts.to collective bargaining on behalf '6('it~' 1 fuembers- workmen ~ith 'thelUci~kaiJdierif'6n 'the' other. 'siich a . ' 'tblle~tiv~' bargaining whlc;h inay result 1 i~' 1 jtist 'all1d f~ir ''sbttl~m~n't would · • •'f . ''' ' ' r · f · JI,.• ./ 1 ,I ~1 11 ., ~ I /' ;" ·' "r 7 always be beneficial to the managemenca:s well as to the oody of workmen and society at large as there would b~ indtistri~l 'p'eace 1 'an~ ttlntjullity B pursuant to such settlement a.nd; w~if~i~W~I.~. ~~.oi? ~1!:?e~~~s~~'Y social strife and tribulation on the one hand and promote industrial and commer- . , .·' ,!l - ·~· ...-'1 l:;n;.,f~.i· '.:--~ It'\.·,~, _:nl1 1. · .~r ~ cial development on tpe -~ther ~~!1~·, Keepmg m, .~ew ,t\le aforesaid salient -,;i /,1) _ n. l' I, ·'. 10 JI t. J )a L [_1(,.).I ·fl features of the Act the settlement. whidi is sought to,oe impugned has to be scanned and scrutinised: 's~itlg~enr ~f '1a~o 1 tfr '<li~~utes 'by '<liiect negotiation and collective bargaini'1,1g is1~l~ayi t~ ·be pref6rred for 1t'ls' the c best guarantee of industrial peace' \Vhidl'is 'tl-i'e aim of aihegislatio~~ ,for ·f. I ,. . settlement of labour disputes. In order to bring about such a settlement more easily and to make it more wci}k'able ·ifod effectiv~ ifni~y"riO't'be always possible or necessary thgt\hcli\i· settlement 'is hrfi~e1d at %'the course of conciliation proce~airibL~\thiCh ·m~y tie 'fhe 1 first' step'lto~a~ds D · 'r~solvlng the industrial llisp~tc: \~hitli _ niaY. 1 b'ti ·'lingering 'between , the l : · • employers and theit workmen 'tepresenteU' oy th~ih.iriions but' even if· at that stage: such settlement dJes ..Vat. thke ·pfaee a:iid 'the industrial disj>Ute gets referred for adjudication, even pending such'disputes; the·par.ties fan arrive at amicable settlement which may be binding to the parties to the settlement unlike settlement l ~irived a'( Cluririg! !contili'ation pr'ohe~dings E which may be binding not 6'nl)it~ 'the 1 part'iesJt~· the shtt!ein'efit but' everi, to the entire labour force working in th'e coli'cerned''6rgahisatfon even tliough they may not be members of the uni6n' which might have entered into settlement during conciliation proceedings. The differe1we between the _ I l'f f' '' ' .,. I• ,..f , ' settlement arrived at under the Act during conciliation proce·edings · by F " parti~s and the settlement arr~~e~}t_'·o~~er~s(t~~n. :.~u,ri~g c?~'t~li~t.ion proceedings has been succinctly br.ought ciut by the decision of thi's Court in Barauni Refi1\J,!y 'Pragatisheel' slt'/aiiiik Palishad Etc. Et~. V. b;didn Oil ~ , ~ 1, ! , . ~ ·, · ' · . , r ; . '"" . . • .. J .1 l • • • • .. J ir , 't , · 1 1 1 L" .. · <I. C01poi·dtion Ltd. ~tc. 'Etc.; [199~) 1 SCC, 4 wnerein Alimadi, J ... (as His ·~~'·'· i· ....... '.)· _J '1."; ,.d'·•l··t: 4 ·ttt 1 ~.J)')!;4-i: ~ ... ·/· •-';,ri.·c~·o·1·~i1tJr~ Lordship then ~as) spoke for the Court to the followmg effect : ,~liL"'h?.1 f1;1"..> l: ft,.r;J ,·l,.iJ' .. , n1i(t1·1rJ ·:;·f{IL~l1• L·· (<J1; ·d 1 h.o11! t·;JJ.~lfr1.,,ra-;b --QL!tui IJ! ·,J<1f..- · ·i !tf.t:t n ·,·; ) : i:i b·..;IHt. 1-1 ~"'-';.h--lrh~l:;t ... ;';HJ1 · · .. d~! t!h 1.;1l:H.1¥/J11" L· :r1 D'.lfj'J'.; .. 11 .~~yHl~m-.e1?-.~S W~1?Jyi~i9 i~~? s~o!~~!e~~~i~J" ,.ip~~lyJi) ,~h?se arrived at outside the conciliation proceedin~~ [~E<'.ti~p. i}§~i))_ ~rd (ii) those arrived at in the course of conciliation proceedings ~r;, ,; , .:. · ,1 .~S~c.:~k~~ l8(~)r A. set!Jt:~P~.1Y4~!~~·J?e~ongs;t~ .the;first,c:at~gory has i, ; ·, lr, -.... , .Nn};it~~ 1 ~ppli~~~!9µ,in Jh~t it1 IJl_er~ly _b~n<!s thf .pjir~i~~ ~~- tl,t~, agr_ee­ i 1H~,, 1,r ,,, _,,pl~pt1 ~,Utra s~gtcnwJJ:.t,_~r.riveci at;jp, ,tJi~ .sou~~;i9f S9n~i!i_atipn KC.P. LID. v. PRESIDING OFFICER [S.B. MAJMUDAR, J.] 161 proceedings with a recognised majority union has extended ap- A plication as it will be binding on all workmen of the establishment, even those who belong to the minority union which had objected to the same. To that extent it departs from the ordinary law of contract. The object obviously is to uphold the sanctity of settle­ ments reached with the active assistance of the Conciliation Officer B and to discourage an indiVidual employee or a minority union from scuttling the settlement. There is an underlying assumption that a settlement reached with the help of the Concilition Officer must be fair and reasonable and can, therefore, safely be made binding not only on the workmen belonging to the union signing the settlement but also on the others. That is why a settlement arrived C at in the course of conciliation proceedings is put on par with an award made by an adjudicatory authority.' As in the present case the settlement arrived at between the parties was not during conciliation proceedings, it would remain binding to parties D to the settlement as per Section 18(1) of the Act. But as we have seen above, respondent No. 2 union while entering into that settlement acted on behalf of all the 29 dismissed workmen who were its members including the present respondent nos. 3 to 14 who are also its members as noted earlier. We have also seen earlier that the Labour Court had erred in taking the view that respondents 3 to 14 were not parties to the said settlement as individually they had no locus standi and they were represented by their union respondent no. 2 which had signed the settlement on behalf of its members for whom the dispute was raised by the union. Nothing could be alleged by respondents 3 to 14 to the effect that the said settlement was in any way unjust or unfair or was a ma/a fide one. There were no exceptional circumstances to reject this settlement qua even the contesting respon­ dents. However, as learned counsel for the respondent-workmen tried to faintly suggest to that effect we have carefully gone through the circumstan- ces which are brought on record which had led to the settlement. It may be noted that about 500 workmen had gone on strike and that had resulted G in the lock-out by the appellant company and ultimately disciplinary action was initiated against 29 workmen who had indulged into various acts of misconduct. It is for these 29 workmen who were ultimately dismissed from service that the respondent-union had raised a dispute under Section 2(k) of the Act on their behalf. Earlier the remaining workmen had gone on H 162 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A strike for nearly 5 months Ultimately. the strike was withdrawn; lock-out was lifted and broad understanding was reached between the appellant company and the workmen represented by their union whereby it was agreed that 29 workmen, who were dismissed, would be either given Rs. 75,000 as compensation or reinstatement with continuity of service without B back wages and the concerned workmen should express apology for mis­ conduct and also assure good conduct in future. Out of 29 workmen for whom the industrial dispute was raised 17 workmen agreed and accepted this settlement and joined the service C Remaining 12 workmen (respondent Nos, 3 to 14) have not agreed to the said settlement. It is under these circumstances that the settlement arrived at by the union on behalf of all of them has to be scrutinised. It has clearly transpired on the record of this case that all the 500 workmen excluding 29 dismissed workmen had espoused the cause of these dismissed workmen and had struck the work. Ultimately, when they were reinstated in service D leaving aside the 29 workmen for whom industrial dispute lingered on, all the remaining workmen lost their wages from_20.10.1990 to 12.5.1991 and also from 13.5.1991 to 6.10.1991. They lost their wages because they were expressing sympathy for their 29 colleagues who were facing disciplinary action and even for these 29 workmen respondent no. 2 union entered into E a settlement so that they could be reinstated in service with continuity of service or could walk out from service with Rs. 75,000 and other monetary benefits. All that was agreed to by the union as a condition for reinstate­ ment was that the workmen would give up back wages and had to sign a written undertaking to behave properly in future. In our view there was F nothing unreasonable or unfair in these terms of settlement. The relief of reinstatement without back wages could not be said to be unreasonable as for nearly 12 months all the other workmen lost their back wages only because they supported the cause of these 29 colleagues of theirs and hence there was no reason why the workmen who indulged in the acts of miscon­ duct and who were also to be taken in service should not lose their wages G for 12 months. Relief of reinstatement was made available to respondents 3 to 14 on the same line as it was made available to their 17 remaining colleagues who were covered by the very same settlement and who ac­ cepted the relief of settlement without back wages or a lumpsum compen­ sation of Rs. 75,000 and other monetary benefits in lieu of that. In our view H such a package deal entered into by respondent no. 2 in the best interest K.C.P.LTD. v. PRESIDINGOFFICER(S.B.MAJMUDAR,J.] 163 of these workmen could not be said to be unfair or unjust from any angle. A On the contrary, it the back wages were given to them, then the remaining workmen against whom there was no disciplinary action or any alleged misconduct and who had also lost wages for 12 months only because they were in sympathy with these 29 dismissed workmen would have stood discriminated against. Consequently, it is not possible to agree with the B learned counsel for respondent nos. 3 to 14 that the said settlement was in any way unfair or unjust. Once this conclusion is reached it is obvious that the entire industrial dispute should have been disposed of in the light of this settlement and an award in terms of the settlement should have been passed by the first respondent-court in the case of respondents 3 to 14 also. Consequently, the judgment and order of the Division Bench of the High C Court dated 4th April, 1995 and the order of learned Single Judge dated 29th September, 1993 are quashed and set aside. The writ petition filed by the appellant company will stand allowed with a direction to the first respondent-Labour Court to pass award in terms of the settlement dated 14th December, 1992 by treating it to be binding to respondent nos. 3 to D 14 also. Learned counsel for these respondents ultimately submitted that the time during which the concerned workmen had to exercise their option as per the terms of the settlement is now over and the appellant company may not make available the said option to them. His apprehension on behalf of E the respondents was set at rest by learned counsel for the appellant company who stated that the appellant company is·willing to make available the option to these respondent nos. 3 to 14 to either accept reinstatement with continuity of service without back wages on their executing the writing as per the said settlement or to be paid Rs. 75,000 each in addition to F gratuity as per the payment of Gratuity Act, wages for unavailed leave and bonus, if any payable. In view of this fair stand taken by the appellant company it is directed that if the respondent nos. 3 to 14 exercise their option as per the proce- G dure laid down in the settlement dated 14th December 1992 either to get reinstatement without back wages for the period of non-employment and · with continuity of service or to accept a lumpsum monetary compensation as laid down in the settlement within a period of 8 weeks from today, the appellant company will ad upon the said option exercised by th~ said workmen and shall give appropriate benefit of the option as per the H 164 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A settlement to the concerned workmen. As the period of lumpsum payment of Rs. 75,000 by instalments (as laid down by the settlement) is already over, it is directed that if any of the concerned workmen-respondents 3 to 14 exercises the option of receiving the lumpsum arnoun: of Rs. 75,000 in lieu of the reinstatement, a sum of Rs. 40,000 out of the said amount shall B be paid to the concerned workmen within 15 days of the exercises of su<;:h option and the balance of the Rs. 35,000 with other monetary benefits as indicated in the settlement shall be paid to the concerned workmen within a further period of 2 months thereafter. The appeal is allowed in the aforesaid terms. In the facts and C circumstances of the case, there shall be no order as to costs. v.s.s . Appeal allowed. AKHIL BHARTIYA SOSHIT KARAMCHARI SANGH, A THROUGH ITS SECRETARY AND ANR. v. UNION OF INDIA THROUGH ITS SECRETARY, MINISTRY OF RAILWAYS AND ORS. SEPTEMBER 12, 1996 (K. RAMASWAMY AND G.B. PAITANAIK, JJ.] ' Se1Vice Law : Seniority-By tlze time a se11ior perso11 belo11gi11g to the general categ01y gets promoted to the higher grade if the junior perso11 belo11ging to a rese1ved categ01y who had been promoted to still higher grade-Question of granti11g seniority to the general category ca11didate i11 the promoted category could 11ot aris~Roster 111ea11t for rese1Ved category candidate followed-No barf or D filling up vacancies in the ge11eral categ01y even i11 favour of candidate belonging to rese1ved catego1y if such ca11didate is entitled to the same on the basis of his ge11eral seniority. R.K. Sabha1wal & Ors. v. State of Punjab & Ors., [1995) 2 SCC 745; Union of India & Ors. v. Vi1pal Singh Clzauhan & Ors., [1995) 6 SCC 684; E Ma11agi11g Director EC/ Hyderabad & Ors. v. B. Kanmakar & Ors., [1993) 4 SCC 727; U11ion of India v. Mohd: Ramzan Khan, [1991) 1 SCC 580; Indian Administrative Se1Vice (S.C.S.) v. Union of India & Ors., [1993) Supp. l SCC 730; Mohd. Slmjat Ali & Ors. v. Union of India & Ors., [1975) 1 SCR 449; Mohd. Bhakar v. Krishna Reddy, (1970) SLR 768; State of Mysore v. G.B. Purohit, (1967) SLR 753); Ramchandra Shankar Deodhar v. State of F Maharashtra, [1974) 1 SCC 317 and Syed Khalid Rizvi & Ors. v. Union of India & Ors., [1993] Supp. 3 SCC 575, relied on. CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) No. 16812 of 1996 G • From the Judgment and Order dated 30.4.96 of the Central Ad­ ministrative Tribunal, Allahabad Bench in O.A. No. 304 of of 1992. Rajeev Dhawan, Manoj Goel and Ms. Abha R. Sharma for the Petitioners. H 165 166 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A The following Order of the Court was delivered : G.B. PATIANAIK, J. Special Leave Petition was listed before us on 6th September, 1996 and the same was dismissed but it was indicated that the reasoned order will follow and accordingly this order is being passed. ' ' The question for consideration is whether the Central Administrative Tribunal, Allahabad Bench, committed any error in dismissing the O.As. filed before it on interpretation of the different circulars issued by the Railways and following the constitution Bench decision of this Court in R.K Sabh01wal's & Ors. v. State of Punjab & Ors., (1995) 2 SCC 745, on the question of promotion of a reserved category candidate on the basis of his normal seniority in the cadre from which he is being promoted. Petitioner Nos. 1 and 2 filed O.A. No. 304 of 1992 challenging the promotion of Shri A.S. Rana, respondent No. 6 to the post of D.S.K.-1 D made on 26.2.1991. The case of the petitioners was that petitioner No. 2 joined the Railways as a Jr. Clerk on 4.12.1956 and was promoted as Sr. Clerk on 1.4.1966. He was promoted to D.S.K.-III on 16.10.1978 and further promoted to D.S.K.-11 on 24.3.1989. The respondent No. 6 belong­ ing to the reserved category was appointed in the Railways as Jr. Clerk on 30.10.1983 and was promoted as Sr. Clerk on 16.8.1984. He was promoted as D.S.K.-III on 26.11.1986. The said respondent No. 6 was promoted earlier to petitioner No. 2 to the cadre of D.S.K.-11 on 8.10.1987, in view of the post available in the cadre of D.S.K.- II for the reserve category people. When the question of promotion to cadre of D.S.K.-1 came up for consideration against the vacancies meant for general category said respon­ dent No. 6 Shri Rana was promoted on 26.2.1991 on the basis of his accelerated seniority, he having taken advantage of accelerated promotion being a member of the reserved category. The petitioner No. 2 filed a representation before the authorities making the grievance·that respondent · No. 6 could not have been promoted to a post meant for general category and the authorities illegally promoted him. but not being successful therein, G challenged the promotion of respondent No. 6 before the Tribunal. The railway administration filed their counter-affidavit before the Tribpnal · taking several technical objections regarding the maintainability of the proceedings at the behest of the association. So far as the merits of the case are concerned, it was contended that no doubt respondent No. 6 had H been promoted to the cadre of D.S.K.- III and D.S.K.-11 against the AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.O.I. 167 reserved vacancy following the roster but so far as promotion to the cadre A of D.S.K.-1 is concerned he was considered against a vacant post in the general category on the basis of his normal seniority and ultimately he has . been promoted in accordance with the circulars issued by the railway administration and in accordance with the law laid down by this Court in SabhalWal's case (supra). The Tribunal following the decisions of this Court in Sabha1Wal's case as well as Virpal Singh Chauhan's case rejected B the application on the conclusion that the alleged promotion of respondent No. 6 was much prior to the decision of this Court in SabhalWal's case in the year 1995 and promotion already made cannot be interfered. Dr. Rajiv Dhawan appearing for the petitioners, however, vehement- C ly contended that the accelerated promotion of a reserve category can­ didate cannot confer on him the seniority in the promotion cadre and therefore the impugned promotion of respondent No. 6 made in February, 1991 to the cadre of D.S.K.-1 must be held to be invalid and inoperative and Tribunal committed gross error in rejecting the O.A. We find no force D in the aforesaid contention. In Sabha1Wal's case this Court was considering the question of promotion and the filling up of the post in the promoted cadre and the implementation of the rosters indicating the reserved point. In explaining legal position this Court held that the "running account" is to operate only till the quota provided under the impugned instructions is reached and not thereafter. The vacancies arising in the cadre, after the E initial posts are filled, will pose no difficulty. As and when there is a vacancy whether permanent or temporary in a particular post the same has to be filled from amongst the category to which the post belonged in the roster but in the event or non-availability of a reserve candidate at the roster point it would be open to the State Government to carry forward F the point in a just and fair manner. Having indicated the law as above it was categorically held that the principle should operate only prospectively. In further elaborating the point of computation of the percentage of reservation this Court further held : "When a percentage of reservation is fixed in respect of a particular G cadre and the roster indicates the reserve points, it has to be taken that the posts shown at the reserve points are to be filled from amongst the members of reserved categories and the candidates belonging to the general category are not entitled to be considered for the reserved posts. On the other hand the reserved category ' H candidates can compete for the non-reserve posts and in the event of their appointment to the said posts their number cannot be added and taken into consideration for working out the percentage of reservation. Article 16(4) of the Constitution of India permits the State Government to make any provision for the reservation of appointments or posts in favour of any Backward Class of citizens which, in the opinion of the State is not adequately repre­ sented in the Services under the State. It is, therefore, incumbent on the State Government to reach a conclusion that the Backward Class/Classes for which the reservation is made is not adequat~ly represented in the State Services. While doing so the State Govern­ ment may take the total population of a particular Backward Class and its representation in the State Services. When the State Government after doing the necessary exercise makes the reserva­ tion and provides the extent of percentage of posts to be reserved for the said Backward Class then the percentage has to be followed strictly. The prescribed percentage cannot be varied or changed simply because some of the members of the Backward Class have already been appointed/promoted against the general seats. As mentioned above the roster point which is reserved for a Backward Class has to be filled by way of appointment/promotion of the member of the said class. No general category candidate can be appointed against a slot in the roster which is reserved for the Backward Class. The fact that considerable number of members of a Backward Class have been appointed/promoted against general seats in the State Services may be a relevant factor for the State Government to review the question of continuing reservation for the said class but so long as the instructions/rules providing certain percentage of reservations for the Backward Classes are operative the same have to he followed. Despite any number of appointees/promotees belonging to the Backward Classes against the general category posts the given percentage has to be provided in addition." In the case of Union of India & Ors. v. Virpal Singh Chauhan & Ors., [1995] 6 SCC 684, this Court again considered the case of accelerated promotion and inter se seniority between a general and reserve candidate in the promoted category and after considering the several circulars issued H by the railway administration, held : 1 .. AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.0.1. 169 "Hence, the seniority between the reserved category candidates A and general candidates in the promoted category shall continue to be governed by their panel position. We have discussed herein­ before the meaning of the expression 'panel' and held that in case of non-selection posts, no 'panel' is prepared of or is necessary to be prepared. If so, the question arises, what did the circular/letter dated 31.8.1982 mean when it spoke of seniority being governed by the panel position? In our opinion, it should mean the panel prepared by the selecting authority at the time of selection for Grade 'C'. It is the seniority in this panel which must be reflected in each of the higher grades. This means that while the rule of reservation gives accelerated promotion, it does not give the ac­ celerated - or what may be called, the consequential - seniority. There is, however, orie situation where this rule my not have any practical relevance. In a given case, it may happen that by the time the senior general candidate gets prompted to the higher grade, the junior reserved category candidate (who was promoted to the D said higher grade earlier) may have got promoted to yet higher grade. In other words, by the time the senior general category candidates enters, say, Grade 'B', his junior Scheduled Caste/Scheduled Tribe candidate is promoted to Grade 'A'. It is obvious that in such a case, the rule evolved in the aforesaid circulars does not avail the senior general candidate for there can E be no question of any seniority as between, say, a person in 'B' grade and a person in 'A' grade." This Court in Chauhan's case accepted the direction in Sabh01wal's case that appointments according to roster already made prior to the F judgment in Sabh01wal's case are legal and valid. In effect, they were declared legal and valid and direction was given to determine seniority in the light of the principles laid down therein. It was held that when the panel/select list was prepared at the time of making selections for promo- tion to the selection post it would be that panel and not the panel/select list prepared at the time of appointment to the initial grade that would G determine the seniority to the posts. It would obviously apply to future case in accordance with the rule, the subject matter of the interpretation in the judgment in Chauhan 's case. Therefore, the two judgment became effective from the date of the decision in Sabh01wal's case. All appointments made prior to that date being legal and valid including right to seniority in H 170 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A promoted post or cadre, they require to be given effect to. In Managing Direct01; ECIL, Hyderabad & Ors. v. B. Kanmakar & Ors., [1993] 4 SCC 727 the Constitution Bench considered the scope of prospective operation of the judgment and held that as on the date of the judgment the order of dismissal or action taken prior to the date of the judgment, as held in Union of India v. Mohd. Ramzan Khan, [1991] 1 SCC 580 could not be reopened. The Judgment will be prospective in nature, i.e., it will be operative from the date when it is made; if the copy of the enquiry was not supplied to the delinquent officer, from that date the order or action would get vitiated under Article 311(2) of the Constitution. In Indian Administrative Service (S.C.S.) v. Union of India & Ors., [1993] Supp. 1 SCC 730 at 745-46 in paragraph 14 and 15, a Bench of three Judges had held that there is a distinction between right and interest. No one has a vested right to promotion or seniority, but an officer has an D interest to seniority acquired by working out the rules. It could be taken away only by operation of.valid law. In Mohd. Shujat Ali & Ors. v. Union of India & Ors., (1975] 1 SCR 449 a Constitution Bench had held a rule which confas a right of actual promotion or a right to be considered for promotion, is a rule prescribing condition of the service. Another Constitution Bench in Mohd. Bhakar v. Klishna Reddy, (1970) SLR 768 had held that any rule which affects the promotion of a person relates to his condition "Of service and is not arbitrary or unconstitutional. In State of Mysore v. G.B. Purohit, (1967) SLR 753, another Bench of three Judges had held that the rule which merely affects chances of promotion cannot he regarded as varying a condition of service. Chances of promotion are not condition of service, which principle was reiter:ited in another Constitution Bench judgement in Ramchandra Shankar Deodhar v. State of Maharashtra, (1974] 1 SCC 317. In Syed Khalid Rizvi & Ors. v. Union of India & Ors., (1993] Supp. 3 SCC 575, another Bench of three Judges referred with approval and relied on these cases and had held in para 31 at page 602 that no employee has a right to promotion but he has only the right to be considered for promotion according to rules. Chances of promotion are not conditions of service and are defeasible. An illustration was given as regards the inter se claim between general candidate and a reserved candidate and their right to H seniority in the promotional post. When a reserved candidate was AKHILBHARTIYASOSHITKARAMCHARISANGHv. U.O.l. 171 promoted according to the roster and got promotion to a higher post, it A was observed that such a reserved candidate having scaled a march over the senior general candidate to higher service, the senior general candidate in the lower cadre who was subsequently promoted to the higher cadre cannot claim seniority over the reserved candidate. In P.S. Ghalaut v. State of Haryana & Ors., (1995] 5 SCC 625, a Bench of two Judges has held that in fixing inter se seniority as per the roster, order of merit prepared by the Public Service Commission gets displaced and the reserved candidate gets seniority over the general candidate in accordance with the roster, though the general candidate has been recom­ mended by the Public Service Commission to be more meritorious. It was C held that when the roster is maintained to give effect to the constitutional policy of reservation in respect of places reserved for reserved candidates and fitted the general candidates and reserved candidates according to roster, the changed order of merit invariably gets affected which is not arbitrary or unconstitutional. D Thus by the time a senior person belonging to the general category gets promoted to the higher grade if the junior person belonging to a reserved category who had been pr.omokd to the said higher grade earlier has been promoted to still higher grade, question of granting seniority to the general category candidate in the promoted category could not arise. E This being the position, and the promotion of respondent No. 6 to D.S.K.-1 having been made as early as in February, 1991 much prior to the judgment of this Court in Sabharwal's case as well as Vbpal Singh Chauhan's case, the Tribunal was wholly justified in rejecting the O.A. filed before it. That apart in a particular cadre after following the roster meant for reserved F category candidate, there is absolutely no bar for filling up the vacancies in the general category even in favour of candidate belonging to the reserved category if the said reserved category candidate is entitled to the same on the basis of his general seniority, No materials have been placed before us to hold that the promotion of respondent No 6 was not on the basis of his general seniority in D.S.K.-11. In the aforesaid premises, we find G no substance in the contention of Dr. Rajiv Dhawan and the special leave petition must fail. G.N. Petition dismissed. GAJRAJ SINGH ETC. v. STATE TRANSPORT APPELLATE TRIBUNAL AND ORS. ETC. SEPTEMBER 12, 1996 [K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.] Motor Vehicles Act, 1988: Sections 217(2)(a) & (b) and (4), and 70, 72 and 81. C Stage caniage pennit-Granted under repealed Act of 1939-Pennit valid till commencement of new Act-Pennit renewed under new Act which came into force on 1.7.1989-Validity of-Saving under S.217(2)(a) or (b )--<:onditions precedent for applicability of-Held : grant of pennit under new Act not a vested or accrl(ed right but only a p1ivilege-Provisions of repealed Act inconsistent with those of new Act as regards renewal-Hence, D S.217(2)(a) or (b) not attracted-Pennit granted under repealed Act stood expired on 1. 7.1989 unless application for renewal pending under S.58 of repealed Act-If no application was pending fresh application must be made under S.70 of new Act for grant of pennit-S.6 of General Clauses Act applicable. · Stage Caniage Pemzit-Renewal-Grant of-Nature-Explained. Stage Caniage Pennit-Sclzeme approved and published under Chapter IV-A of repealed Act of 1939-Such pennits held by named private operators-Scheme continued after commencement of new Act on F 1.7.1989-Held: Scheme was self-contained and self-operative and law by itself and saved by S.217(2)(a)-Rights of such named private operators alone for grant or renewal of their pennits preserved-Such a right was not violative of Art. 14 on ground of invidious discrimination-Procedure for grant or renewal of pennit laid down-Motor Vehicles Act, 1939, Ss.68-F(l-D) & G 68-F( 1-F). General Clauses Act, 1897 : Section 6. Repeal of Act-Effect of-Held : Obliterated the Act completely from record of Parliament as if it never existed except for transactions past and H closed. 172 ' GATRAJ SINGH v. STATE 173 Repeal of Act-Followed simultaneously by fresh legislation on same A subject-Held : S.6 would be applicable unless new legislation manifested contrmy or inconsistell( intention-Hence, Court had to ascerlain such incom­ patibility from relevant p01tions of new Act. Inte1pretation of Statutes : Interpretation-Subsidiary' rnles of-Legal fiction-Meaning and effect of-Explained. Administrative Law : Repealed Act-Right acquired or accrued unde,-..Per­ mit/licence-Grant of renewal of-Held: amounted to fresh grant-Discretion given by Statute-To be exercised on basis of rules of reason and justice and not arbitr01ily-Subject to rejection of application for renewal for reasons to be recorded-Hence, right to renewal of pennit was not a vested or accrued right but only a privilege-General Clauses Act, 1897, S.6(c). The appellant was granted a stage carriage permit on the route under Section 47(3) of the Motor Vehicles Act, 1939 (Repealed Act) for a period of 3 years. The said permit was renewed under Section 81 of the Motor Vehicles Act, 1988 (which came into force on 1.7.1989) for a further E period of 5 years and a second renewal was also granted. The respondents bad applied under Section 70 of the Act for· grant of stage carriage permits under Section 72 of the Act on the' route which intersected a part of the route on which the appellant was operating his stage carriage. Despite objections raised by the appellant, the State transport Authority (STA) granted permits to them which were challenged in the revision petition F filed under Section 90 of the Act before the State Transport Appellate Tribunal (STAT). The STAT dismissed the revision petition on the ground that the renewal of the permit granted to the appellant was not valid in law as the appellant did not get a new permit under the Act. The High Court dismissed the writ petition filed by the appellant. Hence this appeal. G On behalf of the appellant it was contended that the renewal of the permit of the appellant granted under the Repealed Act was a permit under the Act and its operation was saved by Section 217(2)(a) read with sub-section (4) thereof and Section 6 of the General Clauses Act, 1897; therefore, the second renewal of the permit granted under Section 81 of H 174 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A the Act which was renewable under Section 68-F(l-D) of Chapter IV-A Qf , the Repealed Act was valid in law; that there was no need for the appellant to obtain a fresh permit under the Act as the renewal was a continuation of the original permit which was a vested right; that Section 217(2)(b) of the Act would be applicable only if the permit was inconsistent with the B provisions of the Act in which case the life of the permit granted under the Repealed Act got extended for the balance period of the permit; and that since the appellant was not paid compensation, he was entitled to renewal of permits as a matter of right. On behalf of the respondents it was contended that the scheme of C the Act was inconsistent with the scheme of operation in the Repealed Act; that the STA or the Regional Transport Authority as the case may be, would be devoid of power and jurisdiction to grant permit under the act; that under Section 217(2)(b) of the Act the permit was valid only for the unexpired period granted under the Repealed Act; that between the dates . of application for permit and its grant the Act provided for grant of D temporary permits; that any grant of permit should only be consistent with the provisions of the Act; and that the Repealed Act continued to remain in operation in spite of its express repeal by Section 217(1) of the Act. Disposing of the appeal, this Court HELD: 1.1. Ex abundenti cautela clauses (a) to (e) of Section 217(2) of the Motor Vehicles Act, 1988 elaborate the enumeration of rights. They would apply to specific rights given to an individual upon· the happening of one or other of the events specified in the statute. Section 217(2)(a) of the Act gives an elongated operation as regards all transactions, which F being consistent with the provisions of the Act should be deemed to have been issued, made, granted, done or taken under the corresponding provisions of the Act. [198-C-D] · 1.2. By operation of Section 217(4) of the Act read with Section 217(2), Section 6 of the General Clauses Act, 1897 (GC Act) steps in and G the proceedings initiated before Motor Vehicles Act, 1939 (the Repealed Act) was repealed, would be continued and concluded under the Act as if the Act was not enacted. However, four things would emerge from its operation. First there must exist a corresponding provision under the Act pari materia with the Repealed Act; secondly, that the order or permit H granted must exist and be in operation as on 1.7.1989-the day on which ·- GAJRAJ SINGHv. STATE 175 the Act had come into force; thirdly, it must not be inconsistent with the A provisions of the Act; and fourthly some positive acts should have been done before 1.7.1989 to further secure any right. All the four conditions should be satisfied as conditions precedent for application of Section 6 of the GC Act by operation of Section 217(4) and then Section 217(2)(a) steps in and starts operation thereof. (199-B-G] B 1.3. This may be angulated from yet another legal perspective, name- ly, consequences that would flow from the meaning of the word 'renewal' of a permit under Section 81 of the Act. Grant of renewal is a fresh grant though it breaths life into the operation of the previous lease or licence granted as per existing appropriate provisions of the Act, rules of orders C or acts intra vires or as per the law in operation as on the date of renewal. Grant of renewal under Section 81 is a discretion given to the State Transport Authority (STA) or Regional Transport Authority (RTA) sub· ject to the conditions and the requirement of law. Discretion given by a statute connotes making a choice between competing considerations ac· cording to rules of reason and justice and not arbitrary or whim but legal D and regular. Sections 70 and 71 read with Section 81 of the Act do indicate that grant of permit or renewal thereof is not a matter of right or course. It is subject of rejection for reasons to be recorded in support thereof. Therefore, right to renewal of a permit under Section 81 is not a vested or accrued right but a privilege to get renewal according to law in operation and after compliance with the pre-conditions and abiding the law. There is a distinction between right acquired or accrued, and privilege, hope and expectation to get a right. A right to apply for renewal and to get a favourable order would not be deemed to be a right accrued unless some positive acts are done, before repeal of the Repealed Act or corresponding law to secure that right of renewal. (199-H; 200-E-H] Provash Chandra Dalui & Anr. v. Bishwanath Banerjee & Anr., (1989] Supp. 1. SCC 487; Ambika Quarry Works v. State of Gujarat, (1987] 1 SCC 213; Rural Litigation and Entitlement Kendra v. State of U.P., [1989] Supp. 1 SCC 504; State of M.P. & Ors. v. Krishnadas Tikaram, [1995] Supp. 1 SCC G 587 and Gujarat Electricity Board v. Shanti/al, AIR (1969) SC 239 relied on. Black's Law Dictionary, p.1296 and P. Ramanatha Aiyar's "The Law Lexicon" (Reprint Edition 1987), referred to. 2.1. If no action under the Repealed Act was set in motion before H 176 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A 1.7.1989, by valid application for renewal of a permit, there was no right · acquired or accrued to pursue the remedy untler the Act. The privilege to obtain renewal of a permit is not an accrued right. Section 58(2) of the Repealed Act gives, as stated supra, preferential right to a holder of a permit for renewal thereof. Section 71 of the Act gives preferential right in B favour of State Transport Undertaking (STU) for grant of permit in Chapter V which is not available under the Repealed Act. Therefore, even for grant of a permit or a renewal under Section 72 or 81, the STU is entitled to preferential right over the private citizens .. Thereby, the Act manifests intention inconsistent with and incompatible to that in Chapter IV of the Repealed Act. Similarly, even on the approved routes under a Scheme framed in Chapter IV-A, an execution has been carved out in the scheme with a non-obstante clause in favour of STU, which is a self-opera­ tive law by itself. The rights of the existing operators for renewal thereof , under Section 68F(ID) under the Repealed Act were saved. But, under the Act, Chapter VI does not speak of renewal of the permits to the private D operators, though permits were saved in the scheme itself. Chapter VI manifested inconsistency in its operation from the law in Chapter IV A of the Repealed Act. Similarly, other provisions are inconsistent with those in the Repealed Act. Therefore, Section 217(2)(a) would not get attracted, even if it were to apply to grant of permit being a "thing done" as contended E by the appellant. Let it be said that a permit is preceded by an order granting permit by the concerned RTA or STA, as the case may be, under the Repealed Act. The said order stands merged with the grant of permit and gets exhausted. [202-C-H] p 2.2. By operations of Section 217(2)(b) of the Act a permit granted under the Repealed Act shall continue to have the same operation under the Act under the same terms and conditions and for the same period, as if the Repealed Act was in operation and as if the Act had not been passed. This is the fiction of law by which, though the Repealed Act was wiped out, its operation gets revived. The intention, thereby, appears to be that the G Act breaths life into the dead permits etc •. and allows full play to the permits granted under the Repealed Act, even if inconsistent, till their · period expired by eftlux of time. Any other view would tantamount to allowing the Repealed Act to remain in operation in perpetuity simul­ taneously with the operation of the Act. Both cannot co-exist in the same H shelter. [203-A] GAJRAJ SINGH v. STA TF 177 State of Punjab v. Mohar Singh, (1955] 1 SCR 893 and Universal A Imp01ts Agency & Anr. v. The Chief Controller of Imports and Exports & Ors., [1961) 1 SCR 305, held inapplicable. D. Nataraja Mudaliar v. The State Transport Auth01ity, Madras, [1978] 4 sec 290, referred to. 2.3. It must, therefore, be held that grant of renewal of the stage carriage permit should necessarily be preceded by a grant of a permit to stage carriage under Section 72, in accordance with the procedure laid down in Sections 70 and 71. This should be made before the expiry of the period prescribed in the permit granted under the Repealed act. Therefore, C for stage carriage permits granted under Chapter IV of the Repealed Act, if they stand to expire or expired after 1-7-1989 without any pending ap­ plication for renewal having been made under Section 58 as on 1-7-1989, fresh applications under Section 70 should be filed and after consideration under Section 71, permits be obtained as per law under Section 72. If there is any delay to obtain permits pending consideration, by operation of D providing stage carriage service, Section 87 gives power to grant temporary permit without following the procedure laid down in Section 70. The argu­ ment of arbitrariness, discrimination or avoidable inconvenience to the holders of permits etc. under the Repealed Act and to the travelling public would be hypothetical and without force. [203-H; 204-A-D] E Mithilesh Garg & Ors. v. Union of India & Ors., [1992] 1 SCC 168, relied on. 3.1. Section 68F (lD) and Section 68F (lF) of the Repealed Act had prescribed that renewal of the p,ermits granted to the private operators and F STU should be renewed under the scheme; similar provision does not find place in Chapter VI of the Act. Rules do prescribe procedure to apply for renewal by the private operators as well as STU but the rules or procedure do not confer substantive right to renewal of the permits granted under the scheme; when Chapter VI is Sub silentio, rules cannot travel beyond the Act. G [205-C-DJ 3.2. However, the approved scheme under the Repealed act or in the Act is a self-contained and self-operated scheme. It is a law by itself. The schemes published under the Repealed Act are saved by Section 217(2)(a) of the Act. Therefore, until they are modified or cancelled under Section H 178 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. 102, the scheme should continue to be in operation in the notified area, route or part thereof. The right to apply for and obtain permit in the notified scheme was totally frozen to the private operators giving exclusive right to the STU to apply for and obtain permits to run the stage carriages or additional service under Section 101 of the Act on the notified area, route or a part thereof and none else. With a non-obstante clause in Section 101, the right to apply for and obtain temporary permits under Section 87 by private operators was taken away. There is no need for STU to obtain such permits, as an intimation to concerned RTA of its providing such additional service on special occasions like fair or religious gatherings for conveyance of passangers, is sufficient. Yet the scheme itself saved and preserved the rights of the named existing operators in respect of overlap­ ping routes in the specified permits, subject to the corridor restrictions of picking up and setting down the passengers en route the prescribed prohibited route. They became entitled to run their stage carriages subject to the law. Though,. their permits are saved, the named operators being D private operators, the Parliament appear to have thought that there was no necessity to expressly retain in Chapter VI itself their right of renewal as the same was already provided in Section 81 of the Act corresponding to Section 68F(1D) of Chapter IV-A of the Repealed Act. There is no express indication of their rights being taken away under the Act; nor it is so by necessary implication. [206-G-H; 207-A-F] 33. Thus the rights of the existing named operators saved in the appropriate approved schemes in respect of specified permits were not desti::oyed. By necessary implication of Section 104, they were saved. they became entitled to avail of their right to apply for grant of permit in F accordance with the procedure prescribed under Sections 70 and 71 and to obtain permit under Section 72, before the expiry of the permit or renewed permit saved under the approved scheme and should obtain permit afresh to ply their stage carriages before expiry of the period mentioned therein; periodical renewals from time to time should be obtained under Section 81 of the Act in accordance with the operation of G the law. The RTA or STA, as the case may be, should consider and may grant permits or renewal of permits as per law or rejection thereof for reasons to be recorded in that behalf. [209-H; 210-A-C] Krishan Kumar v. State of Rajasthan & Ors., [1991) 4 SCC 258, relied H on. GAJl~I SINGH v. STATE 179 3.4. The contention that such a construction creates and brings A about invidious discrimination offending Article 14 of the Constitution is without force. Section 217(2)(a) read with Section 217(4) of the Act manifest the distinction between acts done or actions taken consistent with the provisions of the repealed Act but inconsistent with the Act. The Act saves only acts done or actio(\S taken etc. which are consistent with the provisions. By implication, all inconsistent acts done or actions taken, except those c.ompleted and closed, would not be considered to be done or taken under the Act and consequently could not be operative under the Act. They are obliterated completely from statute as if they never existed except to the extent of limited operation provided in the appropriate clauses in Section 217(2) of the Act. (211-D-E-F] 3.5. Acco~dingly, the na11:1ed transport operators whose permits were saved in the relevant scheme shall apply for permits under Sections 70 and 71 and obtain permits afresh under Section 72 of the Act before the expiry of the period mentioned in the permit issued either under Section 47 or D Section 48 or renewal under Section 58 or Section 68F (lD) of the Repealed Act. No third party/private operators are entitled to apply for permits on the same notified route or part thereof, nor are they entitled to compete with them for grant of permit, since the right of all other private operators to apply for and operate in the approved notified area, route or a part E thereof, has been frozen. The right is reserved only in relation to the named operators and that too for specified permit, and none else. Along with the application under Section 70 filed for grant of permit under Section 72 or renewal under Section 81 made by the named holder of a specified permit in an approved scheme, he should enclose an authenticated copy of the approved scheme, the details of the route on which he was plying his stage F carriage with corridor restrictions on over lapping routes. the RTA or STA, as the case may be, should verify the original scheme under which the named operator, whose specified permit was saved, whether he is entitled to ply the stage carriage in the approved scheme with the condition of the corridor restrictions on the notified scheme and if so to what extent. What G is the dura~ion of his right~saved in the approved scheme? Whether he had plied his stage carriage on complying with the law in force? His right to permit under Section 72 or renewal under Section 81 cannot be higher than the original right saved in the approved scheme. The STU also should be heard in that behalf, in 1·elation to grant of stage carriage permit or renewal thereof, the appropriate authority may grant or reject; in the latter event, H 180 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. for reasons to be recorded in support of the rejection. The authorities should consider their applications in accordance with the law and the prescribed procedure and may grant new permits under section 72 and later on before the ex11iry thereof, to renew it in accordance with the proce­ dure prescribed in Sections 80 and 81, that too, on compliance with law, until the scheme is duly modified or cancelled in accordance with law. This right is available exclusively to the named private operators and that too in respect of the specified permits and with same restrictions continued in the scheme and none else and no more. [211-H; 212-A-E] 3.6. Since the appellants had obtained permits by mistake of the law C and misconception of law on the part of the competent authorities applied under Section 81 and had been granted renewal of their respective permits under Section 81 after· t.7.1989, such grant of renewal of the permits should be treated to be temporary permits under Section 87 of the Act. Therefore, the private operators, be they covered by Chapter V or VI, should apply for and obtain afresh permits before the expiry of the period D mentioned in their respective permits or renewed for consideration under Section 71 and grant under Section 72 of the permits afresh consistently with Section 2(31~ of the Act. Such permit alone would be a permit defined in Section 2(31)ofthe Act. Therefore, before expiry thereof, they shall apply for and the concerned STNRTA may grant or refuse renewals of permit E for reasons to be recorded under Section 81 of the Act. [212-F-H; 213-A] Secreta1y, Qui/on Distt. Motor Transp01t Workers' Cooperative Society Ltd. v. Regi-onal Transp01t Auth01ity & Ors., [1994) Supp. 3 SCC 210, af­ firmed. F M/s. Gurcharan Singh Baldev Singh v. Yashwant Singh & Ors., [1992) sec 428, held inapplicable. Mysore State Road Transp01t Co1poration v. Mysore State Transpo1t Appellate T1ibunal, [1974) 2 SCC 750; Adarash Travels Bus Se1vice &Anr. v. G State of U.P. & Ors., [1985) 4 SCC 557; T.V. Nataraj & 01:f. v. State of Kamataka & Ors., [19941. 2 SCC 32; Ram Krishna Venna & Ors. v. State of U.P. & Ors., [1992] 2 SCC 620 and Nisar Ahmad & Ors. v. State of U.P. & Ors., [1994] Supp. 3 SCC 640, referred to .. 4.1. Whenever an Act is repealed it must be considered, except as to H transactions past and closed, as if it had never Existed. The effect thereof GAJRAJ SINGH v. STATE 181 is to obliterate the Act completely from the record of the Parliament as if A it had never been passed, it never existed except for the purpose of those actions which were commenced, prosecuted and concluded while it was existing law. Repeal is not a matter of mere form but is of substance de11ending on the intention of the Legislature. If the intention indicated either expressly or by necessary implication in the subsequent statute was B to abrogate or wipe off the former enactment wholly or in part, then it would be a case of total or pro tanto repeal. [193-B-C] India Tobacco Co. Ltd. v. The Commercial Tax Office1; Bhavanipore & Ors., [1975] 3 SCC 512, relied on. 4.2. When there is a repeal and simultaneous re-enactment, Section 6 of the GC Act would be applicable in such cases unless the new legislation manifests intention inconsistent with or contrary to the application of the section. Such incompatibility would have to be ascertained from all relevant provisions of the new Act. Therefore, when the repeal is followed by a fresh legislation on the same subject, the Court would undoubtedly D have to look to the provisions of the new act only for the purpose of determining whether the new Act indicates different intention. The object of repeal and re-enactment is to obliterate the Repealed Act and to get rid of certain obsolete matters. [193-D-E] Bishambhar Nath Kohli & Ors. v. State of U.P. & Ors., AIR (1966) SC 573, relied on. Crawford's Inte1pretation of Law (1989), pp. 626, 627, 657; G.P. Singh: "P1inciples of Statuto1y Inte1pretation", (Sixth Edn.), 1996, pp. 413, 418; Jagdish Swamp : "Legislation and Inte1pretation ", (1974) Edn.), p. 539; Maxwell On the Inte1pretation of Statutes, (12th. Edn.) p. 17; Sutherland Statuto1y Construction", (3rd. Edn.) Vol. 1 paras 2043 to 2045; Francis Benion's Statutory Inte1pretatio11, (Second Edn.) p. 210 and Randall: "Car­ dinal Rules of Legal Interpretation", (3rd. Edn.), A.E., 1924, pp. 531-32, referred to. Brown v. Mc. Lachian, (1872), LR. 4 PC 543; In re Busfield, (1886) 32 Ch. D 123; Hume v. Some1ton, (1890) 25 QBD 239 and In re R., (1906) 1 Ch. 730, cited. 5. Legal fiction is one which is not an actual reality and which the H 182 SUllREME COURT REPORTS (1996] SUPP. 6 S.C.R. A law recognises and the court accepts as a reality. Therefore, in case of legal fiction the court believes something to exist which in reality does not exist. It is nothing but a presumption of the existence of the State of affairs which in actuality is non-existent. The effect of such a legal fiction is that a position which otherwise would not obtain is deemed to obtain under the circumstances. [192-C-D] CIVIL APPELLATE/ORIQINAL JURISDICTION: Civil Appeal No. 2003 of 1996 Etc. From the Judgment and Order dated 13.10.95 of the Allahabad High Court in C.W.P. No. 26132 of 1995. H.N. Salve, S.K. Dhaon, Rani Chhabra, V.P. Gupta, S.C. Garg, Rachna Srivastava, Abha Jain, Gaurav Jain, Vijay K. Mehta, Ms. Nirmala Gupta, Pramod Swarup, Anil Karnwal, Krishan Singh Chauhan, A.K. Goel for the appearing parties. The Judgment of the Court was delivered by K. RAMASWAMY, J. Common questions of law have arisen in all these cases. The facts in Gajaraj Singh's case are sufficient for disposal of all these cases. Though notices were served on respondents, Shri Goel appeared for the State and Shri Pramod Swarup for the UPSRTU, none is appearing in other cases. In 1988, the appellant was granted a stage carriage permit on the Meerut-Baraut route under Section 47(3) of the Motor Vehicles Act, 1939 p ( 4 of 1939) (for short, the 'Repealed Act') for a period of 3 years. The Motor vehicles act, 1988 (59 of 1988) (for short, the 'Act') came into force w.e.f. July 1, 1989. The said p·ermit was renewed under Section 81 of the Act in 1991 for a further period of 5 years and the second renewal was granted in 1995. Respondents 3 to 17 had applied under Section 70 for grant of stage carriage permits under Section 72 on the Meerut-Gangoh G route which intersects part of the route on which the appellant was operat­ ing his stage carriage. Despite objections raised by the appellant, the State Transport Authority (for short, 'STA') granted permits to them on Novem­ ber 23, 1992 which came be challenged by the appellants in revision filed under Section 90 before the State Transport Appellate Tribunal (for short, H 'STAT'). The respondents questioned the appellant's locus standi under GATRAJ SINGH v. STATE (K. RAMASWAMY, J.] 183 the preliminary objection that the renewal granted under Section 81 to the appellant was void. By order dated August 9, 1995, the STAT upheld the ·. preliminary objection and held that the appellant has no locus standi to object the grant of permits to the respondents, since the renewal of the permit granted to the appellant was not valid in law as he had not got any new permit under the Act. The High Court in the impugned judgment dated October 13, 1995 made in Writ Petition No. 26132of1995 has upheld the order of the STAT. Thus, this appeal by special leave. Shri K.K. Venugopal, learned senior counsel for the appellant, con­ tended that the renewal of the permit of the appellant granted under the Repealed Act is a permit under the Act and its operation was saved by C Section 217(2)(a) read with sub-section (4) thereof. Therefore, the second renewal granted under Section 81 was valid in law. There was no need for the appellant to obtain a fresh permit under the Act as the renewal is a continuation of the original permit which is a vested right. The effect of saving provisions in Section 217(2)(a) is to allow all the permits granted D under the Repealed Act to continue after renewal under the Act. Section 217(2)(a) and sub-section (4), thus, obviate the need to obtain fresh permit under the Act and, therefore, it would be unnecessary. In support thereof, he placed strong reliance on M/s. Gurcharan Singh Baldev Singh v. Yash­ want Singh & Ors., [1992] 1 SCC 428. He further contended that this Court in Secret01y Quillon Distt. Motor Transp01t Workers' Cooperative Society Ltd E v. Regional Transp01t Auth01ity & Ors., [1994] Supp. (3) SCC 210 did not intend to lay down that after the Act came into force, all the holders of stage carriage permits granted tinder the Repealed Act would be required to obtain fresh permits under the Act. Section 6 of the General Clauses Act (for short, the 'GC Act') read with Section 217(2)(a) and (4) saves F operation of all those permits which were alive when the Act came into force. Consequently, renewals granted under Section 81 were valid. For contra construction, an argument of inconvenience was forcefully projected. He argued that Section 217(2)(b) would be applicable only if the permit is inconsistent with the provisions of the Act in which event the life of the permit granted under the Repealed Act gets extended only for G the balance period of permit. Shri S.K. Dhaon, learned Counsel appearing in C.A.@ SLP (C) No. 27335/95, contended that the permits granted to the existing· operators under the nationalised scheme in Chapter IV-A of the Repealed Act are H 184 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A not required to be renewed under Section 81 of the Act as they have already been saved being existing permits. So the need to obtain fresh permits under the Act would be inconsistent with the scheme of the Repealed Act as well as the Act. Shri Venugopal buttressed the contention emphasising that the renewal is only a continuation of the existing permit granted under the Repealed Act. The need for fresh permit arises only if the renewal is inconsistent with the provisions of the Act. Therefore, the view of the High Court is clearly not sust~inable in law. In support thereof, Shri Venugopal placed strong reliance on D. Nataraja Mudaliar v. The State Transport Auth01ity, Madras, (1978) 4 SCC 290; State of Punjab v. Mohar Singh, (1955) 1 SCR 893 and M/s. Universal Imp01ts Agency & Anr. v. Tlze Chief Controller of Imp01ts and Exp01ts & Ors. (1961) 1 SCR 305. Shri Harish N. Salve, appearing for some of the existing operators in the nationalised schemes, contended that they were not paid compensation since permits in their names were saved with corridor restrictions. They are, therefore, entitled to renewal of permits as a matter of right. Shri Adrash Kumar Goel, learned counsel for the state, resisted the contentions. According to him, the scheme of the Act in many a provision is inconsistent with the scheme of operation in the Repealed Act. When the Legislature manifested its intention as to its inconsistency in the opera- tion of the Act with the provisions of the Repealed Act, the STA or the Regional Transport Authority (for short, 'RTA'), as the case may be, would be devoid of power and jurisdiction to grant renewal of permit under the Act. Consequently, the erstwhile holders of permits are required to obtain fresh permits under the Act. The Repealed Act has been saved only to the extent of validating, under Section 217(2)(b ), the continuation of the permit for the unexpired period granted under the Repealed act. The owner of the vehicle, thereby, became entitled. to operate, for the balance period, stage carriage on the respective route. On its expiry, the erstwhile holder of the permit ceases to have the permit under the Act until he obtains afresh stage carriage permit under the Act. To obviate the difficulty of running the stage carriage between the date of application for permit and G the date of grant, the Act provides for grant of temporary permits. There is no hiatus in the operation in that behalf and any grant of permit or renewal should only be consistent with the provisions of the Act. Other­ wise, the Repealed Act continues to remain in operation, in spite of its express repeal by Section 217(1) of the Act. The ratio of this Court in H Secretary, Quillan Dist1ict Motor Transp01t Worker's Cooperative Society ' . GATRAJ SINGH v. STATE [K RAMASWAMY, J.] 185 Ltd.'s case (for short, 'Quillon's case) would be applicable to the situation. A The ratio in Gzirnchara11 Singh's case (supra) would be applicable only to a pending application for renewal filed before the Act came into force which would be disposed of by operation of Section 217(2)(a) as saved by Section 217( 4) of the Act. If so understood, there is no inconsistency in the ratio of the aforesaid two decisions of this Court and the operation of the provisions of the two Acts. We issued notice to Shri Promod Swamp to appear on behalf of STUs and argue on the question of renewal of permits covered by the schemes. He contended that they are not entitled to renewal under Chapter VI of the Act. Chapter V does not apply to them. Therefore, they have no C right to apply or obtain permit under Section 72 or renewal under Section 81. We may make it clear at this juncture that when the .cases had come up for admission and Shri Venugopal had pointed out to plausible misap- D prehension in the operation of the the ratio laid down by this Court in the above two cases, we had referred the matter to three Judge Bench. Thus, the matter has come before this Bench. The question for consideration is : whether the holder of a stage carriage permit under the Repealed Act is required to obtain fresh permit or a renewal of the permit as per the provision of the Act? To appreciate the contentions in proper perspective, it would be profitable to refer to the provisions of the Act, extent of their operation and their inconsistency with the provision in the Repealed Act so as to focus the tiue intentment and operation of the Act. Section 2(31) of the Act defines "pennit" to mean a pennit issued by the State or Regional Tra11sp01t Auth01ity or an a11tlz01ity presC1ibed in this behalf under the Act (emphasis supplied) authorising the use of motor vehicle as a !ransport vehicle. "Transport vehicle" has been defined under Section 2( 47) to mean a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle. "Stage G carriage" has been defined under Section 2(40) .to mean motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey. "Route" has been defined under Section 2(38) to mean a line of travel which specifies the highway which may be traversed by a motor vehicle H 186 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A between one terminus and another. "Public service vehicle" has been defined by Section 2(35) to mean any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a maxicab, a motorcab, contract carriage, and stage carriage. These defini­ tions similarly had found place in the Repealed Act with slight variations. Chapter V of the Act under the heading "Control of transport vehicle" regulates use of, or permission for use of, the vehicles and the necessity to obtain permits in that behalf by an owner of motor vehicle. Section 66 enjoins every owner of a motor vehicle to obtain permit and no owner shall use the motor vehicle as stage carriage except in accordance with the conditions of the permit granted or countersigned by the prescribed authority for its use in the public place. The manner in which the vehicle should be used gets regulated by the conditions of the permit, the rules and the law; the details thereof are not material. Section 67 empowers the State Government to control road transport. Section 68 enumerates the manner in which the RTA or the STA or other authorities under the Act would exercise the powers and perform functioi1s specified under the Act. Section 69 enjoins the owner of a vehicle to make applica­ tion for permit. Section 70 specifies the procedure for making an application to obtain stage carriage permit and· the conditions subject to which the application is required to be dealt with. Section 71 prescribes the proce­ dure for ·sT A or RT A to consider such applications for grant of stage carriage permits. It envisages, under sub-section (3) thereof, that subject to the number of vehicles, road conditions and the relevant matters, the State Government shall, by a notification, direct an STA or RTA to limit the number of stage carriages generally or of any specified, type as may be fixed and specified in the notification, operating on city routes in towns with a population of not less than five lakhs. Its, operation is subject to clause (b) and (c) thereof. The proviso to sub-section (3) of Section 71 envisages that other conditions being equal, preference shall be given to G applications for permits from (1) State transport undertakings; (ii) co­ operative societies registered or deemed to have been registered under any enactment for the time being in force; (iii) ex-servicemen; and (vi) any other class or category of persons, as the State Government may, for reasons to be recorded in writing, consider necessary. On other routes, H except town service, no restrictions are imposed unlike in Section 47{3) of GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 187 the Repealed Act to grant stage carriage permits. Section 72 empowers the A RTA or ST A to decide an application for grant of a permit to operate a Stage carriage with any one or more of the conditions enumerated under sub- section (2) thereof or the rules or conditions attached to the permit. Section 80 prescribes procedure to apply for and grant of renewal of permits. Sub-section (2) envisages that on an application made under B sub-section (1) at any time, the STA or RTA or any prescribed authority under Section 66, shall not ordinarily refuse to grant an application for pemiit of any kind made under the Act. (emphasis supplied). The proviso lifts the embargo of sub-section (2) and permits summary refusal of the application, if such a grant would have the effect of "increasing the number of stage C carriages as fixed and specified in a notification" under Section 71(3)(a) or of the contract carriages as fixed and specified in a notification under Section 74(3)(a). Under the proviso to Section 71(1), prior to its amend­ ment thereof by Section 23 of Amendment Act 54 of 1994, the RTA/STA was prohibited to grant permit for a route of 50 kilometers or less to all juristic persons and to grant permit "only to an individual or a State D Transport undertaking". The Amendment became operative from Novem- ber 14, 1994 and the above prohibition no longer operates. Section 81 regulates renewal of permits and duration thereof. Sub­ section (1) visualises that a permit, other than a temporary permit issued under Section 87 or special permit issued under Section 88(8), shall be E effective from the date of issuance or renewal thereof for a period of 5 years. Under the proviso, the period of countersigned permit is coterminus with the validity of the primary permit. Sub-section (2) prescribes the limitation within which an application for renewal should be made before expiry of original grant or renewal. Sub-section (3) gives discretion to F condone the delay in making the application for the grounds mentioned thereunder. Sub-section (4) enumerates grounds for refusal of renewal of a permit for one or more of the grounds enumerated thereunder. The terms and conditions subject to which stage carriage permit is required to be renewed are different from those of Section 58 of the repealed Act except the procedural part. Sub-section (2) of Section 58 of the Repealed G Act gives preferential freatment for renewal of a permit in favour of the holder of the permit, while Section 81 of the Act does not give such preferential right to renewal. On the other hand, if the permits granted under Section 72 exceed the limit prescribed by the State Government for town service, there would be danger of refusal or renewal subject to giving H A reasons in support thereof. Equally, in relation to other routes, discretion is given to reject renewal of a permit for reasons to be recorded in the order. Chapter VI deals with special provisions relating to State Transport Undertakings (for short, 'STU') which is equivalent to Chapter IV-A of the Repealed Act. By operation of Section 98, Chapter VI and the rules and orders made thereunder shall have overriding effect over the inconsis­ tent provisions contained in Chapter V or in any other law for the time being in force or in any instrument having effect by virtue of any such law. The STU shall provide an efficient, adequate, economical and properly co- C ordinated road transport service on the notified area or route or portion thereof to the exclusion of the private operators except as exempted in the scheme itself which itself is a self-operative law. The details are not material for the purpose of this case except that under the said Chapter, there is no specific provision, like Section 68F(1D) for renewal in favour of any person or any class in relation to an area or route or portion thereof D covered by such scheme for renewal, or Section 68F(1E) in favour of STU. Section 217 repeals the existing laws and provides savings from its operation. Sub-section (1) specifically repeals Act 4 of 1939 and any law corresponding to that Act in force in any State before July 1, 1989. E Sub-section (2) with a non obstante clause provides certain savings as provided thereunder : Clause (a) of Section 217(2) provides that notwithstanding the repeal of act 4 of 1939 or any other analogous enactments in operation, any notification issued, rule, regulation made, order passed or notice issued or F any appointment or declaration made, or exemption granted or any con­ fiscation made, or any penalty or fine imposed, any forfeiture, cancellation or any other thing done (emphasis supplied) or any other action taken under the Repealed Act and in force immediately before July 1, 1989 shall, so far as it is not inconsistent with the provisions of the Act (emphasis supplied) G be deemed to have been issued, made, granted, done or taken under the corresponding provision of the Act. In other words, clause (a) saves such of those enumerated events under the Repealed Act which are consistent with the provisions in the Act. Clause (b) of Section 217(2) provides that any certificate of fitness H or registration or licence or pemiit (emphasis supplied) issued or granted GAJRAT SINGH v. STATE (K. RAMASWAMY, J.] 189 under the repealed enactment shall continue to have effect after such A commencement under "the same conditions and for the same period" as if the Act had not been passed (emphasis supplied). In an emphatic manner, the saving provision provides that, notwithstanding the repeal of Act 4 of 1939 or any corresponding law, the permit issued under the Repealed Act should continue to operate proprio vigore till its life expires under the same B conditions and for the same period as if the Act was not passed. Other clauses are not relevant. Hence they are not dealt with. Clause ( e) deals with the scheme under Section 68-C or under the corresponding law in operation, which shall be disposed of under Section 100 of the Act. Similarly, temporary permits issued under sub-section (1-A) C of Section 68F of the Repealed Act or under the corresponding provisions shall, because of use of clause (f), continue to remain in force until approved scheme under Chapter VI of the Act is published. The omission to provide similar right of renewal of permanent permit like one available under Section 68F(1D) to a private operator or to STU under Section D 68(1F) is significant and deliberate. It should be presumed that the Parlia­ ment having made similar provision in Section 81 for renewal of permits issued in Chapter V of the Act, the omission thereof in Chapter VI in relation to the private operators manifests the intention of the Parliament that the right to obtain stage carriage permit, contract carriage permit or E temporary permit on the notified area or route or a portion thereof has been frozen to all private operators except to the extent of the right to ply stage carriage on the basis of the permits saved under Chapter IV-A of the Repealed Act. Therefore, the result would be that even the private operators whose permits were saved also would have limited operation under Section 217(2)(b) to ply their stage carriages for the unexpired period only. So, limited validity of permits to run stage carriages etc. on the nationalised routes or notified area or portion thereof in the approved scheme was saved so that the holder of the stage carriage permits will have full course of unexpired life of the permits granted under the Repealed Act. In other words, Section 217(2)(b) breathed limited life into all permits G granted under the repealed Act except those granted to STU under approved or draft schemes to run its full course. It was so manifested by Section 217(4) and Section 6 of the GC Act. The operation of law in Chapter IV A of the Repealed Act as declared by this Court would be of much assistance for interpretation in this behalf. H 190 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. · In Mysore State Road Transport Corporation v. Mysore State Transp01t Appellate Tlibunal, (1974) 2 SCC 750, it was held that no licence can be granted to any private operator whose route traversed or over­ lapped any part of a notified route or routes as prohibited in Chapter IV-A of the Repealed Act. An applicant seeking grant of a permit on a route which overlapped even on a portion of a notified route was held to be not entitled to the grant of the permit. In Adarsh Travels Bus Service and Another v. State of U.P. & Ors, [1985) 4 SCC 557, a Constitution Bench of this Court approved the above law and had held that under Sections 68FF, 68B, 68C, 68D read with Section 2 (28A), once a scheme was published under Section 68D in relation to any area or a route or portion thereof, C whether to the exclusion, complete or partial, of other persons or other­ wise, no person other than the .State Transport Undertaking may operate on the notified area or notified route except as provided in the scheme itself. No private operator can operate his vehicle on any portion of the notified are or notified route unless authorised to do so by terms of the D scheme itself. Therefore, corridor shelter was impermissible on a notified area, route or a portion of the route. It was further held that unless the scheme provides for exempting operators already having permit for com­ mon sector from the scheme by incorporating appropriate conditional clauses in the scheme to enable them to ply their vehicles over common sectors without picking up or setting down passengers on the common E sectors, it was not open to the RT A or STA to grant permits on the notified area or notified route providing corridor shelter. In T.V. Nataraj & Ors. v. State of Kamataka & Ors., (1994) 2 SCC 32, a Bench of two Judges of this Court considered the integrity of the route, p the effect of the notification of the scheme under Section 68C of the Repealed Act and held that on publication of the approved scheme under Section 68A, the private operators were excluded, utiless saved· by the scheme itself, to operate on an approved area or route by obtaining· permits to run the stage carriage on the approved route under the Scheme. In the absence of any express exemption in the Scheme, the exclusion of the G private operators to operate the stage carriage on the approved scheme is total and complete. It was only for the State Government to take steps to put vehicles on approved schemes so as to avoid any inconvenience to the travelling public. H In Ram Krishna Venna & Ors. v. State of U.P. & Ors., [1992) 2 SCC GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 191 620 another Bench of two Judges had considered the scheme of Chapter A IV-A of the Repealed Act and Sections 80 and 98 of the Act. It was held that the scheme published under Section 68D of the Repealed Act (Chap- ter VI of the Act) is a law and it has over-riding effect over chapter IV of the repealed Act (Chapter V of the Act). The scheme operates against everyone unless it is modified. It excluded private operators from the notified area or notified route or a portion thereof covered under the scheme except to the extent saved under the scheme itself. The right of the private operators to apply for and to obtain permits under Chapter IV of the Repealed Act (Chapter V of the Act) had been totally frozen and prohibited. The result was that on the approved nationalised route or area, the private operators were totally prohibited to obtain permits under Section 72 or renewal under Section 81 of the Act to ply their stage carriages. This ratio was reiterated by another Bench in Nisar Ahmad & Ors. v. State of U.P. & Ors., [1994) Supp. 3 SCC 460 holding that the approved scheme is a law by itself and everyone, whether or not party to the earlier order of this Court K.K. Venna's case, was bound by the law D laid down and directions given by this Court under Article 142(2) of the Constitution. It is seen that Chapter VI of the Act empowers STU to frame schemes which have over-riding effect, by operation of Section 98, on Chapter V and other laws. Section 101 with a non obstante clause gives E power to the STU to operate additional services for the conveyance of the passengers on special occasions such as to and from fairs and religious gatherings. Section 102 empowers the State Government to modify or cancel the approved scheme only in the public inter.;st. Section 103 gives exclusive right to the STU to apply for and obtain stage carriage permits F or goods carriage permits or contract carriage permits in respect of a notified area or notified route or portion thereof. Section 104 prohibits STA or RTA to grant any permit except in accordance with the scheme. Thus, private operators whose named permits were saved from the scheme, became entitled to operate their stage carriages subject to corridor restric­ tions of picking up on up and setting down the passangers enroute on the G overlapped route. It would, thus, be clear that there is no provis10n like Section 68F(1D) of the Repealed Act to obtain renewal of a permit saved under the scheme to private operators. In contrast, sub-section (2) of Section 103 H gives power to the STA or RTA, on application made by the STU under Section (1) thereof, either to grant any other permit or reject a pending application or to cancel an existing permit or to modify the terms of an existing permit in the manner indicated in clause (c) of sub-section (2) of Section 103. It would, thereby, indicate the inconsistency with the provisions contained in Chapter IVA of the Repealed Act. Whenever an Act is repealed it must b_e considered, except as to transaction past and closed, as if it had never existed. The effect thereof is to obliternte the Act completely from the record of the Parliament as if it had never been passed, it never existed except for the purpose of those C actions which were commenced, prosecuted and concluded while it was existing law. Legal fiction is one which is not an actual reality and which the law recognises and the court accepts as a reality. Therefore, in case of legal fiction the court believes something to exist which in reality does not exist. It is nothing but a presumption of the existence of the state of affairs D which in actuality is non- existent. The effect of such a legal fiction is that a position which otherwise would not obtain is deemed to obtain under the circumstances. Therefore, when Section 217(1) of the Act repealed Act 4 of 1939 w.e.f. July 1, 1989, the law in Act 4 of 1939 in effect came to be non-existent except as regards the transactions, past and closed or saved. In Crawford's Interpretation of Law (1989) at page 626, it is stated that "(A)n express repeal will operate to abrogate an existing law, unless there is some indication to the contrary, such as a saving clause. Even existing rights and pending litigation, both civil and criminal, may be affected although it is not an uncommon practice to use the saving clause in order to preserve existing rights and to exempt pending litigation". At page 627, it is stated that "(M)oreover, where a repealing clause expressly refers to a portion of a prior Act, the remainder of such Act will not usually be repealed, as a presumption is raised that no further repeal is necessary, unless there is irreconcilable inconsistency between them. In like manner, if the repealing clause is by its terms confined to a particular Act, quoted G by title, it will not be extended to an act upon a different subject". Section 6 of the GC Act enumerates, inter alia, that where the Act repeals any enactment, unless a different intention appears, the repeal shall not (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b). affect the previous operation of any enactment so repealed H or anything duly done or suffered thereunder; or (c) affect any right, ( GAJRAJ SINGH v. STATE [K RAMASWAMY, J.] 193 privilege, obligation or liability acquired, accrued or incurred under any A enactment so repealed, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced. In India Tobacco Co. Ltd. v. The Commercial Tax Officer, Bhavanipore & Ors., [1975) 3 SCC 512 at 517 in paras 6 and 11, a Bench of three Judges had held that repeal connotes abrogation and obliteration of one statute by another from the statute book as completely as if it had ~ever been passed. When an Act is repealed, it must be considered, except as to transactions past and closed, as if it had never existed. Repeal is not a matter of mere form but is of substance, depending on the intention of the Legislature. If the intention indicated either expressly or by necessary implication in the subsequent statute was to abrogate or wipe off the former enactment wholly or in part, C then it would be a case of total or pro tanto repeal. When there is a repeal and simultaneous re-enactment, Section 6 of the GC Act would apply to such a case unless contrary intention can be gathered from the repealing Act. Section 6 would be applicable in such D cases unless the new legislation manifests intention inconsistent with or contrary to the application of the section. Such incompatibility would have to be-ascertained from all relevant provisions of the new Act. Therefore, when the repeal is followed by a fresh legislation on the same subject, the Court would undoubtedly have to look to the provisions of the new Act only for the purpose of determining whether the new Act indicates dif- E ferent intention. The object of repeal and re- enactment is to obliterate the Repealed Act and to get rid of certain obsolete matters. On "Saving of rights acquired", in the Principles of Statutory Inter­ pretation by G.P. Singh [(Sixth Edition) - 1996) at page 413, the learned F author has stated that the effect of clauses (c) to (e) of Section 6 of GC Act is, speaking briefly, to prevent the obliteration of a statute in spite of its repeal to keep intact rights acquired or accrued and liabilities incurred during its operation and permit continuance or institution of any legal proceedings or recourse to any remedy which may have been available before the repeal for. enforcement of such rights and liabilities. At page G 418, the learned author has stated that the privilege to get an extension of a licence under an enactment is not an accrued right and no application can be filed after the repeal of the enactment for renewal of the licence. In Legislation and Interpretation by Jagdish Swarup (1974 Ed.) at page 539, it is stated that the power to take advantage of an enactment may H 194 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A without impropriety be termed as a "right", but the question is whether it is a "right accrued". A mere right (assuming it to be properly so called) existing in the members of the community or any of them to take advantage of an amendment, without any act done by an individual towards availing himself of that right, cannot properly be deemed a "right accrued". B In Bishambhar Nath Kohli & Ors. v. State of Uttar Pradesh & Ors., AIR 1966 SC 573 a Constitution Bench of this Court was to consider application of Section 6 of the GC Act to Section 27 of the Administration of Evacuee Property Act, 1950. Regarding saving of rights accrued there­ under by operation of Section 6 of the GC Act ~his Court, after an C elaborate consideration, had held that by Section 58 (3) of the Administra­ tion of Evacuee Property Act the Legislature had not expressed any reservation in the application of that section and none can be implied. The order of the Deputy Custodian was declared final by operation of Section 30(6) of Ordinance 1of1949, but the liability was subject to the provisions D of sub-sections (1) to (5) of Section 30. If fictionally order is deemed to have been passed under Act 31 of 1950 (Administration of Evacuee Property Act) as if the Act were in operation on October 12, 1949, it is difficult to escape the conclusion that the order would be subject to the appellate or revisional jurisdiction of the authorities who have the appellate or revisional power by virtue of provisions conferring those powers and E which must also be deemed to have been in force on the date when the impugned order was passed. It was held that Section 6 was inapplicable to revive the Act that became final. The question, therefore, is: what rights were preserved by saving F provisions in Section 217(2) of the Act? In Crawford's Statutory Interpreta­ tion it is stated under Section 322 at page 657 thus : "Often the legislature instead of simply amending a pre-existing statute, will repeal the old statute in its entirety and by the same enactment re-enact all or certain portions of the pre-existing law. Of course, the problem created by this sort of legislative action involves mainly the effect of the repeal upon rights and liabilities which accrued under the original statute. Are those rights and liabilities destroyed or preserved? The authorities are divided as to the effect of simultaneous repeals and re-enactments, some adhere to the view that the right and liabilities accruing under the ·- ( GAJRAJSINGHv. STAIB[K RAMASWAMY,J.) 195 repealed act ~e destroyed, since the statute from which they A sprung has actually terminated, even though for only a very short period of time. Others, and they seem to be in the majority, refuse to accept this view of the situation, and consequently maintrun that all rights and liabilities which have accrued under the original statute are preserved and may be enforced, since the re-enactment neutralizes the repeal, thereby continuing the law in force without interruption. Logically, the former attitude is correct, for the old statute does cease to exist as an independent enactment, but all practical considerations favour the majority view. This is so even where the statute involved is a penal act." In Maxwell on the Interpretation of Statutes (12th Ed.) it is stated at page 17 that the effect of repealing Acts passed after August 30, 1889, is now dealt with by Section 38(2) of the Interpretation Act. Such repealing Acts are, unless the contrary intention appears, not to ..... " (b) affect the previous operation of any enactment so repealed or anything duly done or D suffered under any enactment so repealed; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under any enactment so repealed; or ( d) affect any penalty, forfeiture, or punishment incurred in respect of any offence committed against any enactment so repealed; or ( e) affect any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment E as aforesaid". In Sutherland Statutory Construction (3rd Edition) Vol. I by Horack, in paras 2043 to 2045, it is stated that : "Under common law principles of construction and interpreta- tion all rights, liabilities, penalties, forfeitures and offences which are of purely statutory derivation and unknown to the common law are effaced by the repeal of the statute which granted then, irrespective of their accrual. Likewise, where a common law prin­ ciple is abrogated, its effective existence is destroyed both as to G past actions and to pending proceedings. However, a right of a common law nature which is further embodied in statutory terms exists as an enforceable right exclusive of the statute declaratory of it, and therefore the right is not expunged by the repeal of the statute. H 196 SUPREME COURT REPORTS . (1996] SUPP. 6 S.C.R. Since the effect of a repeal is to obliterate the stattik and to . destroy its effective operation in futuro, or to suspend the opera­ tion of the common law when it is a common law: principle which is abrogated, any proceedings which have not culminated in a final judgment prior to the repeal are abated at the consummation of the repeal. When, however, the repeal does not contemplate either · a substantive common law or statutory right, but merely the pro­ cedure prescribed to secure the enforcement of the .right, the right itself is not annulled but remains in existence e~orced by applying the new procedure. Effect on vested rights Under. common law principles of construction and interpreta­ tion the repeal of a statute or the abrogation of a common law principle operates to divest all the rights accruing under .. the · repealed statute or the abrogated common law, and to halt all proceedings not concluded prior to the repeal.. However, .a right which has become vested is not dependent upon the common law or the statute under which it was acquired for its assertion, but has an independent existence. Consequently, the repeal of the statute . or the abrogation of the common law from which it originated does not efface a vested right, but it remains enforceable without regard to the repeal. In. order to become vested, the right must be a contract right, a property right, or a right arising from a transaction in the nature of a contract which· has become perfected to the degree that the continued existence of the statute cannot further enhance its ac­ quisition. Effect up On inchoate rights Rights of action which are dependent upon a statute, and which are still inchoate and not reduced to possession or perfected by final judgment, are lost ·by the repeal of the statute from which they stem. This rule of construction.is simply a.restatement of the common law principle of construction that the repeal of a statute operates to divest all· rights accruing under the repealed statute and all proceedings not concluded prior to the repeal, since inchoate rights are by definition not vested rights such as to escape GArRAJ SINGH v. STATE [K RAMASWAMY, J.j 197 the common law rule of effacement. The inchoate rights are but A an incident to the statute and fall with its repeal." In Francis Bennion's Statutory Interpretation (Second Edition) it is stated at page 210 thus : · "Where an Act passed after 1978 repeals and re- enacts as If enactment (with or without modification) then, unless the contrary intention appears, anything done, or having effect as if done.under the enactment repealed, in so far as it could have been done under the provision re-enacted, has effect as if done under that provision." C In Cardinal Rules of Legal Interpretation (3rd Edition) by Randall, A.E., 1924, it is stated at page 531-32 thus : "Their lordships ........ conceived that, in dealing with a statute which professes merely to repeal a former statute of limited opera- D tion, and to re-enact its provisions in an amended form, they are not necessarily to presume·an intention to extend the operation of those provisions to classes of persons not previously subject to them unless the contrary is shown, but that they are to determine on a fair construction of the whole statute, considered with refer­ ence to the surrounding circumstances, whether such an intention E existed.". Brown v. Mc. Lachlan, [1872) L.R. 4 P.C. 543, at p.550; 42 L.J.P.C. 18, at p.23, Sir W. Colville, delivering the judgment of the Judicial Committee. "Where you have a repeal, and you have also a saving clause, F you have to consider whether the substituted enactment contains anything incompatible with the previously existing enactment. The question is, Aye or No, is there incompatibility between the two? And in those cases the judges, in holding that there was a saying clause large enough to annul the repeal, said .that you must see . whether the true effect was to substitute something incompatible G with the enactment in the Act repealed; and that if you ·found something in the repealing Act incompatible with the general enactments in the repealed Act, then you must treat the jurisdiction under the repealed Act as pro tanto wiped out. That is settled by the cases of In re Busfield (1886), 32 Ch. D. 123; 55 L.J. Ch. 467; H 198 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. and Hume v. Sonwton, [1890], 25 Q.B.D. 239; 59 L.J. Q.B. 420." - In re R., (1906) 1 Ch. 730, at p. 736; 75 L.J. Ch. 421, at p. 423, Collins,_ M.R." It is already seen that the operation of sub-section (1) of Section 217 is to obliterate the Act 4 of 1939 and any corresponding law in force in any State from operation with effect from 1st July, 1989, However, repeal shall not affect any right or liability acquired, accrued or incurred. Sub-section (2) enumerates and saves from the obliteration of Act 4 of 1939 and corresponding law by fiction with its non obstante clause. Ex abwidenti cautela clauses (a) to (3) elaborate the enumeration of rights. They would apply to specific rights given to an individual upon the happening of one or other of the events specified in the statute. Clause (a) preserves con- tinued operation of any notification, rules, regulations, order or notice issued etc. and any appointment ·or declaration made etc. under the Repealed Act in force immediately before July 1, 1989. Those enumerated D acts or actions shall be deemed to have been issued, made, granted, done or taken under the corresponding provisions of the Act which are not inconsistellt with the provisions of the Act. In other words, Section 217(2) (a) gives an elongated operation as regards all transactions, which being consistent with the provisions of the Act should be deemed to have been issued, made, granted, done or taken under the corresponding provisions of the Act. Existence of the corresponding provisions similar to the repealed provisions is a condition precedent. If the operation of the provisions in the Act is inconsistent and incompatible, it gets obliterated and the earlier provisions no longer revive or survive. If anologous provision in the Repealed Act does not find place in the Act, the rights accrued or acquired thereunder would not continue under the Act unless fresh rights are acquired under the Act. By operation of clause (b ), any certificate of fitness of a motor vehicle or its registration or licence issued or permit granted under the repealed enactments, shall continue to have effect after such commencement under G the same conditions and for the same period as if this Act had not been passed. In other words, a permit granted under the Repealed Act 4 of 1939 shall continue to have the same operation under the Act under the same terms and conditions and for the same period, as if the Repealed Act was in operation and as if the Act had not been passed. This is the fiction of H law by which, though Act 4 of 1939 was wiped out, its operation gets . ... - GATRAJ SINGH v. STATE [K. RAMASWAMY, J.] 199 revived. The intention, thereby, appears to be that the Act breaths life into A the dead permits etc., and allows full play to the permits granted under the Repealed Act, even if inconsistent, till their period expired by efflux of time. On expiry of the period of permit granted under Act 4 of 1939 or corresponding law, what would be the consequence is the question? It is true, as contended by Shri Venugopal, that by operation of sub-section ( 4) of Section 217, read with clause (a) of sub- section (2) of Section 217, Section 6 of the GC Act steps in and the conjoint operation thereof leaves no manner of doubt that the notification issued, rules or regulations made, orders passed, notice issued, or any appointment or a declaration made, exemption granted or any confiscation made or any penalty or fine imposed in or any other thing done or any other action taken under the repealed enactment in force immediately before such commencement shall, as far as it is not inconsistent with the provisions of the Act, be deemed to have been corresponding issued, made, granted, done or taken under the Act and their operation thereby gets saved by appropriate clause in Section 6 D of the GC Act read with Section 217(2)(a) to (e) of Act. In other words, proceedings initiated before Act 4 of 1939 was repealed, would be con­ tinued and concluded under the Act as if the Act was not enacted. However, four things would emerge from its operation. First there must exist a corresponding provision under the Act pari materia with the Repealed Act; secondly, that the order or permit granted must exist and E be in operation as on July 1, 1989 - the day on which the Act had come into force; thirdly, it must not be inconsistent with the provisions of the Act; and fourthly some positive acts should have been done before July 1, 1989 to further secure any right. All the four conditions should be satisfied as conditions precedent for application of Section 6 of the GC Act by operation of sub-section (4) of Section 217 and then clause (a) of sub-sec­ tion (2) of Section 217 steps in and starts operation thereof. We are concerned with permits, let it be said that a permit is preceded by an order granting permit by the concerned RT A or ST A, as the case may be, under the Repealed Act. The said order stands merged with the grant of permit and gets exhausted. G This may be angulated from yet another legal perspective, namely, consequences that would flow from the meaning of the word 'renewal' of a permit under Section 81 of the Act. Black's Law Dictionary defines the word 'renewal' at page 1296 thus : H 200 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. "The act of renewing or reviving. A revival or rehabilitation of an expiring subject; that which is made anew or re-established. The substitution of a new right or obligation for another of the same nature. A change of something old to something new. To grant or obtain extension of;" In P. Ramanatha Aiyar's "The Law Lexicon" (Reprint Edition 1987), the word 'renewal' is defined at page 1107 to mean "a change of something old for something new. The renewal of a 'license' means a new license granted by way of renewal". the renewal of a negotiable bill or note is regarded simply as a prolongation of the original contract. The office of a "renewal", as it is termed, of a life policy, is to prevent discontinuance or forfeiture. In Provaslz Chandra Dalui & Anr. v. Bisawanath B01wjee & Anr., [1989) Supp. 1 SCC 487 at 496 in para 14, this Court drew the distinction D between the meaning of the words extension and renewal. It was held that a distinction between extension and renewal is chiefly that in the case of renewal, a new lease is required while in the case of extension the same lease continues in force during additional period by the performance of stipulated act. In other words, the word 'extension' when used in its proper and usual sense in connection with a lease, means prolongation of the lease. It is settled law that grant of renewal is a fresh grant though it breaths · life into the operation of the pervious lease or licence granted as per existing appropriate provisions of the Act, rules, or orders or acts intra F vires or as per the law in operation as on the date of renewal. The right to get renewal of a permit under the Act is not a vested right but a privilege subject to fulfilment of the conditions precedent enumerated under the Act. Under Section 58 of the Repealed Aet, renewal of a permit is a preferential right and refusal thereof is an exception. But the Act expresses different intention. Sections 66, 70, 71 and 80 prescribe procedure for G making application and compliance of the conditions mentioned therein. Existence of the provisions of the Act consistent with the Repealed Act is a pre-condition.· Grant of renewal under Section 81 is a discretion given to the authority (STA or RTA) subject to the conditions and the requirement of law. Discretion given by a statute connotes making a choice between H competing considerations according to rules of reason and justice and not - - GAIRAJ SINGH v. STATE [K. RAMASWAMY, J.J 201 arbitrary or whim but legal and regular. Sections 70 and 71 read with A Section 81 do indicate that grant of permit or renewal thereof is not a maller of right of course. It is subject of rejection for reasons to be recorded in support thereof. Therefore, right to renewal of a permit under Section 81 is not a vested or accrued right but a privilege to get renewal according to law in operation and after compliance with the pre-conditions B and abiding the law. In Ambika Quany workis V. State of Gujarat, [1987] 1 sec 213 this Court was to deal with right to renewal of a mining lease under the Gujarat Mines and minerals Concessions Rules. When the renewal of the lease was not !,l'fanted, due to statutory embargo created by Section 2 of the Forest C (Conservation) Act, 1980, this Court had held that though the right to renewal was in accordance with the rules, with the interposition of the Act for conservation of the forests, it puts an embargo on the right to renewal. Therefore, the refusal to grant renewal of lease was upheld. In Rural Litigation and Entitlement Kendra v. State of U.P., [1989) D Supp. 1 SCC 504 at 523-24 after considering the above ratio, it was held that though the lessees of the mines were entitled to apply for renewal as per the law and clauses in the lease, this Court prohibited obtaining of renewals applying Section 2 of the Forests (Conversation) Act, 1980. In State of M.P. & Ors. v . .KJishnadas Tikaram, (1995) Supp. 1 SCC 587 this Court had held that it is settled law that renewal is a fresh· grant and must be granted consistent with law in operation as onthat date. In that case, it was held that renewal of mining lease in the forest area for extraction of minerals under the Mining and Mineral Concessions Rules should be consistent with Forest (Conservation) Act, 1980. Section 2 mandates the State Government to obtain prior approval of the Central Government, renewal granted without. prior approval was subsequently cancelled. When its validity was questioned, the High Court set aside the order. On appeal, this Court reversed the High Court's order and had held that the. Government was not precluded to cancel the renewal of the lease G granted without obtaining prior approval of the Central Government. The order of cancellation was, therefore, upheld. There is a distinction between right acquired or accrued, ·and privilege, hope and expectation to get a right, as rightly pointed out by the High Court in the impugned judgment. A right to apply for renewal and H 202 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A to get a favourable order would not be deemed to be a right accrued unless some positive acts are done. before repeal of Act 4 of 1939 or correspond­ ing law to secure that right of renewal. In Gujarat Elect1icity Board v. Shanti/al, AIR (1969) SC 239, this Court had pointed out that before Section 71 of the Electricity Supply Act was amended, the appellant had issued a notice under Section 7 thereof, exercising the option to purchase the undertaking. It was held that a right to purchase the electrical under­ taking which had accrued to the Electricity Board was saved by Section 6 of the GC Act. So, if no action under the Repealed Act was set in motion before .July 1, 1989, by a valid application for renewal of a permit, there was no right acquired or accrued to pursue the remedy under the Act. The privilege to obtain renewal of a permit is not an accrued right. Section 58(2) of the Repealed Act gives, as stated supra, preferential right to a holder of a permit for renewal thereof. Section 71 of the Act gives D preferential right in favour of STU for grant of permit in Chapter V which is not available under the Repealed Act. Therefore, even for grant of a permit or a renewal under Section 72 or 81, the STU is entitled to preferential right over the private citizens. Thereby, the Act manifests intention inconsistent with and incompatible to that in Chapter IV of the Repealed Act. Similarly, even on the approved routes under a scheme framed in Chapter IV A, an exception has been carved out in the scheme with a non obstante clause in favour of STU, which is a self-operative law by itself. The rights of the existing operators for renewal thereof under Section 68F(1D) under the repealed Act were saved. But, under the Act, Chapter VI does not speak of renewal of the permits to the private operators, though permits were saved in the scheme itself. In other words, Chapter VI manifested inconsistency in its operation from the law in Chapter IV A of the Repealed Act. Similarly, other provisions are incon­ sistent with those in Act 4 of 1939 which exist in the Act as are apparent but they are not relevant for our present propose and hence need no elaboration. Therefore, clause (a) of sub-section (2) would not get at- G tracted, even if it were to apply to grant of permit being a "thing done" as contended by Shri Venugopal. So, any permit issued to operate a stage carriage under the Repealed Act would survive, by virtue of clause (b) of sub-section (2) of Section 217 of the Act by fictional operation of law; and this would be on the same conditions and for the same period mentioned H under the Repealed Act, as if the Act was not enacted. Any other view l GAfRAJ SINGHv. STA'lE [K.RAMASWAMY,J.) 203 would tantamount to allowing the Repealed Act to remain in operation in A perpetuity simultaneously with the operation of the Act. Both cannot co-exist in the same shelter. In State of Punjab v. Mohar Singh, (1955] SCR 893 the facts were that the respondent filed a claim as an evacuee under EP (Registration of Land Claims) Act, 1948. The claim was investigated into and it was found to be false; it _was held to be an offence under the Act. At the trial, on his confession, the respondent was convicted and was sentenced to imprison­ ment. On suo motzt revision, the District Magistrate found the sentence to be inadequate and referred the case to the High Court to be dealt with under Section 437, Cr. P.C. The High Court found that since the Ordinance was repealed, he could not be convicted under Section 7 of the Act. This Court, on appeal reversed the decision and upheld the conviction applying Section 6 of the GC Act. Interpreting that section, this Court had held that the words "anything done" occurring in Section 11 of 1948 Ordinance did not mean act done by a person but an official act done by the authority in exercise of the powers conferred by or under the Ordinance. Far from D helping the appellants, the ratio would apply to official acts done or orders issued etc. covered by Section 217(2)(a) of the Act. As stated earlier, after permit was in fact issued, the order passed by STA or RTA out lived its purpose and grant of the permit and its operation was saved to the extent provided in clause (b) of Section 217(2). The ratio of M/s. Universal Imports Agency and Anr. v. The Chief Controller of Imp01ts and Exp01ts & Ors., (1961) 1 SCR 305 also is not of assistance to the appellants. Therein, before the Government of India issued notification applying the French Establishments' (Application of Laws) Order, 1954 to the territory of Pondicherry, tl).e appellant had F entered into a contract with the foreign buyers for the import of the goods which, after the said Order came into force, were imported into Pondicher- ry. The question therein was whether Section 6 of the GC Act would apply, Majority of three Judges, dissented by minority opinion of two Judges, had held that the words "things done" in para 6 of the French Establishments' G (Application of Laws) Order was comprehensive enough to take within its ambit not only things done but also the effect of the legal consequences flowing therefrom. The ratio is not at all applicable to the facts of this case. We, therefore hold that grant of renewal of the stage carriage permit should necessarily be preceded by a grant of a permit to stage carriage H I ' 204 SUPREME COURT REPORTS [ 1996) SUPP. 6 S.C.R. A under Section 72, in accordance with the procedure laid down in Sectio~s 70 and 71. This should be made before the expiry of the period prescribed in the permit granted under the Repealed Act. Therefore; for stage car­ riage permits granted under Chapter IV of the Repealed Act, if they stand to expire or expired after 1st July, 1989, without any pending application for renewal havirig been made under Section 58 as on 1st July, 1989, fresh applications under Section 70 should be filed and after consideration under Section 71, permits be obtained as per law under Section 72. If there is any delay to obtain permits pending consideration, by operation of Section 76, to avoid hiatus in continued operation of providing stage carriage service, Section 87 gives power to grant temporary permit withoQt following the procedure laid down in Section 70. In Mithilesh Garg & Ors. v .. Union of India & Ors., [1992] 1 SCC 168, this Court had laid down different criteria for grant of inter-region, intra-region and interstate permits under the Act under Section 88 and 80 of the Act which did not find place in the Repealed Act. It was held that such distinction was neither discriminatory D nor violative of Article 14 of the Constitution. Thus considered, the argument of arbitrariness, discrimination or avoidable inconvenience to the holders of permits etc. under the Repealed Act and to the travelling public would be hypothetical and without force. The appeals arising out of SLP Nos. 924/96, 1913/96, 27355/95 relate E to renewal of state carriage permits of the appellants, whose permits were saved under the nationalised schemes. It is an admitted position that before the Act had come into force on July 1," 1989 they had their permits saved by the schemes approved and published under Chapter IVA of the Repealed Act and renewable under Section 68F (ID) of the Repealed Act F and were renewed under Section 81 of the Act without obtaining fresh permits under the Act. The extreme contention of Sri S.K. Dha~n was that the definition of "permit" under Section 2(31) of the Act is so wide as to include permits granted under the Repealed Act and the approval and publication of the schemes under Section 68D of Chapter IYA of the Repealed Act stands nullified since there is. no saving thereof under the G Act. Therefore, every one is free to obtain permits under the nationalised scheme after expiry of the period for which the permit was granted under the Repealed Act. We firid it difficult to give acceptance to this extreme contention. It is settled la~ that the scheme approved u,nder Chapter IV A, . which is equivalent to Chapter VI of the Act, is a· self contained and. H self-operative scheme and is a law by itself. The scheme operateSto the · GAJRAJ SINGH v. STATE [K RAMASWAMY, J.) 205 exclusion of private operators with non-obstante clause that the STU should A obtain permits to run stage carriages in the notified area, routes or a portion thereof to provide coordinated efficient, adequate and economical road transport service. Thereby the right to apply for and obtain a stage carriage permit has been frozen to all private operators, except as saved under the· scheme itself. Until the scheme gets modified or cancelled by B the State it would continues to be in operation. We find no inconsistency under the Repealed Act and the Act in this behalf. Resultantly, all schemes remain operative under Section 217.(2)(a) of the Act. The question, therefore, is: Whether a private operator saved under the scheme is not liable to get permits under Section 72 and renewal of the C permits under Section 81 of the Act? It is true that Section 68F(1D) and Section 68F (lF) of the Repealed Act had prescribed that renewal of the permits granted to the private operators and STU should be .renewed under the scheme; similar provision does not find place in Chapter VI of the Act. Rules do prescribe procedure to apply for renewal by the private D operators as well as STU but the rules or procedure do not confer substantive right to renewal of the p_ermits granted under the scheme; when ch&pter VI is sub Silentio, rules cannot travel beyond the Act. The question, therefore, is: whether the named holder of a specified stage carriage permit has the right of renewal under the Act after the expiry E of the period mentioned in the permit granted under the Repealed Act? ·Did the Parliament intend to put an end to and denude the right of a private named operator to operate the .stage carriage, or to that extent the right to apply for and obtain permit under Sections 70 to 72 or renewal under Section 81 was preserved? p Two views are plausible under the Scheme of the Act. The first is that after the expiry of the permit or renewed permit under the Repealed Act, the named private operator saved under the scheme gets denuded of his right of renewal of his permit under the Act, since "permit" defined G under Section 2(31) would mean permit granted under tlte Act, which occasion does not arise as the field, occupied by the exclusive right to operate stage carriages was given to STU. Thereby, he ceases thereafter to have any right to ply stage carriages, though saved under the self operative scheme which continues to be in existence after the Act came into force. The other view is that the rights of the private named operators whose H 206 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A specified permits were saved under the respective schemes, were not expressly taken away under the Act. Being private operators, they would be entitled to avail of the right and remedy given in Chapter V of the Act, with exclusion of other private competitors. Thereby they should apply for and obtain permit afresh under Section 72 and renewal thereafter under Section 81. In this behalf, it is relevant to noLe the contention of S/Shri Venugopal and Salve. Their contention is that in the scheme, such named operators whose specified permits were mentioned in the scheme alone were given exclusive rights to ply their stage carriages on the named routes subject to corridor restrictions mentioned in the scheme. Other persons whose permits were nationalised were paid compensation under the Repealed Act or under Section 105 of the Act but the appellants were not paid compensation as their permits were saved. By operation of Section 217 (2)(e) and Section 100 of the Act, even pending schemes should be finalised under the Act within the limitation prescribed therein. Until its finalisation, the existing operators are allowed to ply their vehicles and to D obtain temporary permits. This would indicate the legislative intention that the Act did not intend to destroy the rights, saved under the respective schemes, of the named operators in respect of the specified permits. The contention of Mr. Pramod Swarup for U.P.S.R.T.U. is that after the expiry of the period mentioned in the permits granted to the named operators of the specified permits, they lost their right to renewal of their permits since the right to renewal, similar to Section 68F(1D ), does not find place in Chapter VI. The grant of renewal to them, unless modified by the scheme under Section 102 of the Act, is inconsistent and, therefore, the private operators are not entitled to the renewal of their permits. The exclusive right, thereby, was given to the STU to ply their stage carriages, goods carriages or contract carriages so as to avoid inconvenience and hardship to the travelling public. After giving careful and anxious consideration to the respective contentions, we find that there is some force in the contention of the respec:tive counsel for the appellants. It bears repetition to state that the G approved scheme under the repealed Act or in the Act is a self-contained and self-operative scheme. It is a law by itself. The schemes published under the Repealed Act, as held earlier, are saved by Section 217(2)(a) of the Act. Therefore, until they are modified or cancelled under Section 102, the scheme should continue to be in operation in the notified area, route H or part thereof. The right to apply for and obtain permit in the notified GATRAJSINGHv. STA1E[K.RAMASWAMY,J.) W7 scheme was totally frozen to the private operators giving exclusive right to the STU to apply for and obtain permits to run the stage carriages or additional service under Section 101 of the Act on the notified area, route or a ,part thereof and none else. With a non obstante clause in Section 101, the right to apply for and obtain temporary permits under Section 87 by private operators was taken away. There is no need for STU to obtain such B permits, as an intimation to concerned RTA of its providing such addition- al service oh special occasion like fair or religious gatherings for con­ veyance of passengers, is sufficient. Yet the scheme itself saved and preserved the rights of the named existing operators in respect of over lapping routes in the specified permits, subject to the corridor restrictions of picking up and setting down the passengers en route the prescribed C prohibited route. They became entitled to run their stage carriages subject to the law. Though, their permits are saved, the named operators being private operators, the Parliament appear to have thought that there was no necessity to expressly retain in Chapter VI itself their right of renewal as the same was already provided in Section 81 of the Act corresponding to D Section 68F(1D) of Chapter IV-A of the Repealed Act. The reason ap­ pears to be obvious. Every private operators falls within the field covered by Chapter V of the Act. It would seem that the Parliament is of the view that the named operators,be.ing saved under the schemes, are entitled to apply for and obtain necessary permit or renewal thereof to ply their stage E carriages only on overlapped routes subject to the corridor restrictions mentioned in the scheme itself. It may be stated that we do not find any express indication of their rights being taken away under the Act; nor do we find it by necessary implication in that behalf and to that effect. This view does justice also to all concerned. As far as the STU is concerned, they having had the monopoly to ply stage carriages, goods carriages, contract carriages or special services in the notified areas or route or part thereof under the scheme, it was thought unnecessary to bother them to obtain renewal of permits for of stage carriages etc. Section 101 itself provides for such an intention. Resultantly, G the Legislature appears to have obviated the need to obtain periodical renewals of permits for stage carriages etc. run by the STU. Parliament was aware of the need to obtain the renewal of permits by the STU under Section 68F (lF) of the Repealed Act and absence of such a provision in the Act is further eloquent and self-explanatory. H A In Krishan Kumar v. State of Rajasthan & Ors., [1991) 4 SCC 258, a contention was raised that since Section 100( 4) of the Act prescribes limitation within which the State Government should hear and consider the objections on the draft scheme, finalise the scheme and publish the same in the official Gazette, after the· Act had come into force, the limitation" of one year stood lapsed. Though Section 217(2)(e) empowers the State Government to finalise the pending draft schemes, they stood lapsed from the date on which draft scheme was published. The contention was rejected by this Court for the obvious reason that the Repealed Act did not prescribed any limitation to finalise the draft scheme as indicated in sub-section ( 4) of Section 100 of the Act. As years rolled by from tlie date C of publication of draft scheme for finalisation, the Parlialhent for the first time prescribed limitation in Section 100( 4) putting a fetter on the exercise of the power of the Government in approving the draft scheme and publication thereof after complying with the ~equirements of law. The right of the private operators and the remedy of finalisation of the draft scheme D .· were harmoniqusly interpreted by this Court and it held that the limitation of one year starts running from the ,date the Act had come into force, namely, July 1, 1989. We are of the view that same harmonious interpreta­ tion is required to be adopted in this case al~o. Applying the same har­ monious interpretation, we hold that the rights of nanied.private operators to apply for and obtain permits. and renewal of me specified stage carriage E permits are saved and they alone are eligible to avail of that right and remedy under Chapter V of the Act, while preserving monopoly of the STU in Chapter VI. In Chapter V, permits are required to be obtained on non- F nationalised routes. The STU ~so has the right to apply for and obtain permits to run the stage carriages, goods carriages or contract carriages on permits, as the case may be, and in some instances the preferential right under the Act is given to the STU. In respect of permits had under the Repealed Act or the Act, the need to apply for and obtain renewals of the G stage carriage permits, goods carriages or contract carriage permits for plying on non~nationalised routes was to comply with the procedure prescribed in Chapter V, which should be adhered to. This is in relation to non nationalised routes only. But as regards the approved schemes, in Chapter VI or continued schemes saved by section 217(2)(a) read with sub-section ( 4) read with Chapter IV A of the Repealed Act, there is no H need for STU to obtain periodical renewals of permits of stage carriages, J GATRAJSINGHv. STATE[K RAMASWAMY,J.) 209 contract carriages, or goods carriages in respect of the notified area, route A or portion thereof, notwithstanding anything contained in Chapter V. The STU retains its exclusive right to ply the stage carriages or special service or goods carriage or contract carriage on the notified area or route or part thereof, until the scheme is duly modified or cancelled in accordance with law prescribed in Section 102 "of Chapter VI. B It is required to be stated that along with the application under Section 70 filed for grant of permit under Section 72 or renewal under Section 81 made by the named holder of a specified permit in an approved scheme, he should enclose an authenticated copy of the approved scheme, the details of the route on which he was plying his stage carriage with C corridor restrictions. The RTA or STA, as the case may be, should verify the regional scheme under which the named operator, whose specified permit was saved, whether he is entitled to ply the stage carriage in the approved scheme with the condition of the corridor restrictions imposed in the notified scheme and if so to what extent. What is the duration of his right saved in the approved scheme? Whether he had plied his stage D carriage on complying with the law in force? His right to permit under Section 72 or renewal under Section 81 cannot be higher than the original right saved in the approved scheme. The STU also should be heard in that behalf. On consideration of these and all other relevant facts in relation to grant of stage carriage permit or renewal thereof, the appropriate authority E may grant or reject. In the later event, for reasons to be recorded m support of the rejection. In Mithilesh Garg's case (supra) a Bench of three Judges considered the right of the existing operators in conformity with Article 19(1)(g) of the Constitution and the procedure prescribed under the liberal policy for F grant of permits to the new entrants, while continuing the same right to existing operators under the new provisions in the Act. It was harmoniously interpreted and this Court had held that there was no cause for complaint by the existing operators when the liberal policy had given right to apply for and obtain permits under Chapter V on the non-nationalised routes to augment facility to the travelling public. Section 104 does not stand in the G way of the named private operaters whose specified permits were/are saved in that behalf. On the contrary, it would say "except in accordance with the provisions of the scheme." Thus considered, we are of the view that the rights of the existing H 210 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A named operators saved in the appropriate approved schemes in respect of specified permits were not destroyed. By necessary implication of Section 104, they were saved. They became entitled to avail of their right to apply for grant of permit in accordance with the procedure prescribed under Sections 70 and 71 and to obtain permit under Section 72, before the expiry of the permit or renewed permit saved under the approved scheme and should obtain permit afresh to ply their stage carriages before expiry of the period mentioned therein; periodical renewals froni time to time should be obtained under Section 81 of the Act in accordance with the operation of the law. The RTA or STA, as the case may be, should consider and may grant permits or renewal of permits as per law or rejection thereof for reasons to be recorded in that behalf. It is true that some renewals of stage carriage permits to the hold~rs of permits or renewed permits under the Repealed Act were granted under Section 81. Some of them are still in operation. With a view to prevent D hiatus in operational efficacy we would declare that though renewals of state carriage permits were granted under Section 81, they must be deemed to be temporary permits granted under Section 87, till regular permits are granted or refused. The ratio of Gwucltaran's case (supra), does not help the appellants. Therein the application for renewal of stage carriage permit under Section 58(2) of the Repealed act was pending consideration as on 1st July, 1989. Consequently, Section 6 of the GC Act saved its operation. This Court had, therefore, held that applications for renewal filed under Section 58 of the Repealed Act must be disposed of under Section 80 read with Section 81 of the Act. However, it is stated that disposal must be taken to be, not of a permit granted under the Act, but one under deemed fiction. There would be no further fiction of law created under the Act to be a deemed renewal of permit under the Act. In Quillan's case (supra) this Court did not have the occasion to consider the effectof Section 6 of the GC Act and clause (a) of sub-section G (2) of Section 217 since the case fell under clause (b). Therein, the proviso to unamended Section 71(1) prohibited the Society to obtain a permit. Consequently, it could not obtain renewal of stage carriage permit, being inconsistent with the provisions of the Act It was held that the stage carriage permit issued under the Repealed Act would remain operative for the period for which it was granted as if the Act had not been passed. After H its expiry, the appellant therein was required to obtain a permit under -...... - GAJRAJ SINGH v. STATE [K. RAMASWAMY, J.] 211 Section 72 of the Act. Thereby, it was held that the Society was not entitled A to the renewal under Section 81 of the Act. In view of the consideration of the operation of the relevant provisions mentioned hereinbefore, there is no conflict between Gurcharan Singh 's case and Quillon 's case. the inter­ pretation in Quilon's case is also consistent with the consideration herein­ before made. The next contention of S~ri Venugopal is that the Act intends that all permits issued under the Repealed Act would be continued under the Act and be given effect in toto so long as such of those permits or certificates or licences are not inconsistent with the provisions of the Act. To that extent, their operations are saved giving. limited operation under C clause (b) of sub-section (2) of Section 217. However, notifications etc. issued under the Repealed Act and saved by clause (a) of sub-section (2) of Section 217, as mentioned earlier, are distinct from the permits issued in furtherance of the orders passed by the STA or RTA, as the case may be. The further contention that such a construction creates and brings D about invidious discrimination offending Article 14 of the Constitution is without force. Section 217(2)(a) read with Section 217(4) of the Act manifest the distinction between the acts done or actions taken consistent with the provisions of the Repealed Act but inconsistent with Act. The Act saves only acts done or actions taken etc. which are consistent with the provisions. By implication, all inconsistent acts done or actions taken, E except those completed and closed, would not be considered to be done or taken under the Act and consequently could not be operative under the Act. They are obliterated completely from statute as if they never existed except to the extent of limited operation provided in the appropriate clauses in sub-section (2) of Section 217 of the Act. F Accordingly, we hold that the named transport operators whose permits were saved in the relevant scheme shall apply for permits under Sections 70 and 71 and obtain permits afresh under Section 72 of the Act before the expiry of the period mentioned in the permit issued either under G Section 47 or Section 48 or renewal under Section 58 or Section 68F(1D) of the Repealed Act. No third party/private operators are entitled to apply for permits on the same notified route or part thereof, nor are they entitled to compete with them for grant of permit, since the right of all other private operators to apply for and operate in the approved notified area, route or a part thereof, has been frozen. The right is reserved only in relation to the H 212 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A named operators and that too for specified permit, and none else. Along with the application under Section 70 filed for grant of permit under Section 72 or renewal under Section 81 made by the named holder of a · specified permit in an approved scheme, he should enclose an authenti­ cated copy of the approved scheme, the details of the route on which he was plying his stage carriage with corridor restrictions on over lapping routes. The RTA or STA, as the case may be, should verify the original scheme under which the named operator, whose specified permit was saved, whether he is entitled to ply the stage carriage in the approved scheme with the condition of the corridor restriction on the notified scheme and if so to what extent. What is the duration of his right saved in C the approved scheme? Whether he had plied his stage carriage on comply­ ing with the law in force? His right to permit under Section 72 or renewal under Section 81 cannot be higher than the original right saved in the approved scheme. The STU also should be heard in that behalf. On consideration of these and all other relevant facts in relation to grant of D stage carriage permit or renewal thereof, the appropriate authority may grant or reject; in the later event, for reasons to be recorded in support of the rejection. The authorities should consider their applications in accord­ ance with the law and the prescribed procedure and may grant new permits under Section 72 and later on before the expiry thereof, to renew it in accerdance with the procedure prescribed in Sections 80 and 81, that too E on compliance with law, until the scheme is duly modified or cancelled in accordance with law. We reiterate that this right is available exclusively to the named private operators and that too in respect of the specified permits and with same restrictions continued in the scheme none else and no more. F Since the appellants had obtained permits by mistake of the law and misconception of law on the part of the competent authorities applied under Section 81 and had been granted renewal of their respective permits under Section 81 after July 1, 1989, such grant of renewal of the permit should be treated to be temporary permits under Section 87 of the Act. Therefore, the private operators, be they covered by Chapter V or VI, G should apply for and obtain afresh permits before the expiry of the period mentioned in their respective permits or renewed for consideration under Section 71 and grant under Section 72 of the permits afresh consistently with Section 2(31) of the Act. Such permit alone would be a permit defined in Section 2 (31) of the Act. Thereafter, before expiry thereof, they shall H apply for and the concerned STNRTA person authority may grant or ..... t-- GAJRAJ SINGH v. STATE [K. RAMASWAMY, J.] 213 refuse renewals of permit for reasons to be recorded under Section 81 of A the Act. This interpretation of the law would relieve undue hardship to all the operators and at the same time it would also be consistent with the scheme of the Act to subserve the rights and protection provided under the Act so as to avoid rigour in the operation of the law. B Thus considered, for the reasons given above, the view taken by the High Court is in conformity with law but subject to above modification in 1 the judgment. The appeals and the writ petition are accordingly disposed of but, C under the circumstances, without costs. v.s.s. Appeal and petition disposed of. A BIKRAM SINGH AND ORS. v. THE LAND ACQUISITION COLLECTOR AND ORS. SEPTEMBER 12, 1996 B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] Income Tax Act, 1961 : Sections 4,5, 194-A-lnterest received as income on the delayed pay­ C ment of compensation detennined under S.28 or 31 of Land Acquisition Act-Held : It is revenue receipt exigible to tax under S.4-S.194A not applicable as it relates to deduction of tax at source. Land Acquisition Act, 1894 : Sections 28,31-Jnterest received as income on the delayed payment of compensation-ls a revenue receipt exigible to tax under S.4 of the Income Tax Act, 1961. Dr. Sham/al Nanlla v. Commissioner of Income tax, Jamnm, 53 ITR 151; TMK Gvoindaraju Chetty v. Commissioner of Income-tax, Madras, 66 ITR 465; Rama Rai & Ors. v. CIT Andhra Pradesh, 181 ITR 400 and K.S. Krishna Rao v. CIT, A.P., 181 ITR 408, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12497- 12500 of 1996. From the Judgment and Order dated 13.12.91 of the Punjab & Haryana High Court in C.W.P. Nos. 10558, 10556, 11495 and 10557of1991. K. G. Bhagat, S.S. Dahiya, Kamal Baid and G.G. Singh for the Appellants. R.R. Misra, Ms. Lakshmi Iyengar and Anil Srivastava for the Respondents. The following Order of the Court was delivered : H Leave granted. 214 - BIKRAM SINGH v. lAND ACQN. COLLECTOR 215 We have heard learned counsel on both sides. A This appeal by special leave arises from the judgment of the High court of Punjab & Haryana made in CWP Nos. 1558/91 and batch on December 13, 1991. The admitted facts are that the appellants had received notice on July 31, 1991 for payment of income-tax on the delayed interest B amount recovered under the Land Acquisition Act, 1894 (for short, the "LA Act"). calling that notice in question, they filed writ petitions. The High Court relying upon decisions of this Court dismissed the petitions with a finding as under : "This now leads us to the consideration of the question whether interest paid on the amount of compensation for compulsory acquisition of land is "income" and, therefore, taxable under. the Act. Matters which have to be considered for awarding compen­ sation for compufaory acquisition of land are enumerated in section 23 of the Land Acquisition Act. While sub- section (2) of that D section provides for payment of certain solatium for acquisition of compulsory nature, interest is not included as an item of compen­ sation. Instead, interest is payable by force of section 34 of the Act, if compensation is not paid or depositeq on or before taking possession of the land. By force of section 28 also, the court, on a reference if it enhances the co~pen~ation offered by the Collector E is entitled to award interest on the amount of such enhanced compensation. Section 28 a:lso provides that the court, on a refer­ ence, shall award interest on the amount of enhanced compensa- tion. It will thus appear from the text of section 34 of the Land Acquisition Act that interest is not payable as compensation but F is paid if the compensation is not paid before taking possession of the land. Interest is thus payable because of the deprivation of the possession of that land before compensation for compulsory ac­ quisition of that land is paid. This position is now well- settled. In Dr. Sham/al Nam/a v. CIT, (1964) 53 ITR 151 SC ; AIR (1964) SC 1878, the observation is that interest has to be paid on the amount G awarded from the time the Collector takes possession until the amount is paid or deposited. Interest is not an item of compensa- tion nor is it consideration for acquisition of land. Payment of interest has been provided for separately under section 34 of the Land Acquisition Act. This is so because interest is paid after the H 216 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. compensation has been determined. It is something in addition to the capital amount though it arises out of it. It has expressly been held that interest under section 34 of Land Acquisition Act is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but is given to him for the deprivation of the use of the money representing the compensation for the land acquired. This interest under section 34 of the Land Acquisition Act is thus paid for the delayed payment of the compensation amount and, therefore, a revenue receipt liable to tax under the Income-tax Act. The Supreme Court expressly dis­ tinguished the decision of the Privy Council in Inglewood Pulp and Paper Co. Ltd. v. New Brnnswick Electric Power Commission, AIR (1928) PC 287. This decision of the Privy Council as also the decision in Abhay Singh Surana v. Secretary, Ministry of Com­ munication, AIR (1987) SC 2177 are authorities only for the proposition that interest is payable on the amount of compensation determined either under the Land Acquisition Act or under the Requisition and Acquisition of Immovable Property Act, 1952. Neither of these authorities consid{'.red the question of exigibility of such interest to income-tax. This principle in Narnla's case (1964) 53 ITR 151 SC has subsequently been applied by the Supreme Court in a later decision in T.N.K. Govindaraju Chetty v. CIT, (1967) 66 ITR ·465 also, where the property was acquired under the Requisition and Acquisition of Immovable Property Act which did not make any specific provision for the award of interest on the amount of compensation, the application of sections 28 and 34 of the Land Acquisition Act, 1894, dealing with the pa~ent of interest on the amount awarded ·as compensation could not be deemed to be excluded. When the owner of property was dispos­ sessed pursuant to an order for compulsory acquisition, an agree­ ment that the acquiring authority will pay interest on the amount of compensation was implied. It has been expressly held that the view in Sham/al Narula's case (1964) 53 ITR 151 SC, that the interest received is chargeable to tax as income, will apply if interest is payable under the terms of an agreement, express or implied, and the court or the arbitrator gives effect to the terms of the agreement and awards interest which has been agreed to be paid. It has, therefore,to be held that the amount received as BIKRAM SINGH v. LAND ACQN. COLLECTOR 217 interest on the amount of compensation assessed under the Land A Acquisition Act or under the Requisition and Acquisition of Im­ movable Property Act is income taxable under the Income Tax Act. Certainly, it is not agricultural income since it is neither rent nor revenue derived from the land used for agricultural purposes It is, therefore, not exempt from income-tax under section 10(1) of the Income-tax Act as agricultural income. The Land Acqui~i.­ tion Collector is, therefore, perfectly justified in retaining the amount of interest payable to the holders of agricultural lands compulsorily acquired in terms of section 194A of the Act. The Land Acquisition Collector is also justified in demanding the sum paid on account of interest under section 194A of the Act. The C notices issued and challenged in these petitions are, therefore, valid and perfectly justified." The question for consideration is : whether the delayed interest on the compensation paid under the Land Acquisition Act is chargeable to D income tax under Sections 4 & 5 of the Income Tax Act, 1961 (for short the "Act") It is contended for the appellants that "interest"-has been defined under Section 2 (28A) as: "Interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or E other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." Under Section 194A dealing with "interest on securities" provides as under: · F "194A. (1) Any person, not being an individual or a Hindu un­ divided family, who is responsible for paying to a resident any income by·way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of G payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income- tax thereon at the rates in force. Explanation-For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether H C. 218 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. called "Interest payable account" or "SuspeJ!Se account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly." In the circular issued by the Board of Direct Taxes, the concept of "interest" defined under Section 2(28A) has been explained with the added explanation as under : "The terms "interest" has been defined in new clause (28A) inserted in Section 2 of the Income-Tax Act with a view to removing doubts about the true character of fees or other charges paid in respect of moneys borrowed or in respect of the credit facilities which have not been utilised. The definition is very wide and covers interest payable in any manner in respect of loans, debts, deposits, claims and other similar rights or obligations. It also includes any service fees · or other charges in respect of such loans, debts, depo~its, etc. as also fees in the nature of commitment charges on unutilised portion of credit facilities. This definition will be ap­ plicable for all purposes of the Income-tax Act.: Relying upon these three provision, it is contended that the definition of "interest" is confined only to money-lending business between debtor and the creditor and if the creditor receives any amount by way of interest from the debtor, it is in the nature of a receipt of income on a charge paid in respect of money borrowed or in respect of the credit facility given which have been utilised and, therefore, the definition would be applicable only when the money is lent by a creditor and received by the debtor. Then only interest is chargeable to income-tax. When interest is paid either under Section 34 or Section 28 of the LA Act, it is only a payment in considera­ tion of loss of enjoyment of the possession by the owner. It is not by way of any charge on compensation determined under Section 23(1). Therefore, it is not exigible to income tax. We find no force in the contention. The controversy is no longer res integra. This question was considered elaborately by this Court in Dr. Shamlal Narula v. Commissioner of Income­ tax, Jammu 53 ITR 151. Therein K. Subba Rao, J. as he then was, con­ sidered the earlier case law on the concept of "interest" laid down by the H Privy Council and all other cases and had held at page 158 as under : \ - BIKRAM SINGH v. lAND ACQN. COLLECTOR 219 "In a case where title passes to the State, the Statutory interest A provided thereafter can only be regarded either as representing the profit which the owner of the land might have made I he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he B has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, there­ fore, is a revenue receipt liable to tax under the Income-tax Act". This position of law has been consistently reiterated by this Court in the case of TMK Govindaraju Chetty v. Commissioner of Income Tax, Madras, 66 ITR 465; Rama Rai & Ors. v. CIT, Andhra Pradesh, 181 ITR 400 and K.S. Krishna Rao v. CIT, A.P., (181) ITR 408. Thus by a catena of judicial pronouncements, it is settled law that the interest received on D delayed payment of the compensation is a revenue receipt exigible to income tax. It is true that in amending the definition of "interest" in Section 2(28A), interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes anv service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect E of any credit facility which has not been utilised. It is seen that the word "interest" for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would F be deemed interest. That was explained by the Board in the circular referred to hereinbefore. But the question is: whether the interest on delayed payinent on the acquisition of the immovable property under the Acquisition Act would G not be exigible to income-tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. H 220 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would me~n that the interest received as income on the delayed payment of the compensa­ tion determined under Section 28 or 31 of the Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax under Section 4 of the Income-Tax Act. Section 194A of the Act has no applica­ tion for the purpose of this case as it encompasses deduction of the income tax at the source. However the appellants are entitled to spread over the income for the period for whieh payment came to be made so as to compute the income for assessing tax for the relevant accounting ye<!.r. Under these circumstances, we do not think that there is any error of law committed by the High Court in the Judgment under appeal war­ ranting interference The appeals are accordingly dismissed. But in the circumstances without costs. G.N. Appeals dismissed. STATE OF RAJASTHAN AND ORS. A v D.R. LAXMI AND ORS. SEPTEMBER 12, 1996 [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B Land Acquisition Act, 1894: Section 4( 1 )-Does 11ot e11visage specification of the nature of the land as to whether it is waste or arable la11d when the 11otification is published. C Section 17(4)-11wugh lands situated ill Urban areas, Urban Land Ceili11g Act recognises the existence of a151icultural lands within urban ag­ gelomeration-Wlien the lands were capable of raising crops, they remain to be anzble lands-Hence exercise of power under S.17(4) by the Govemment was not bad in law. Sections 4(1), 6, 16, 17(2) & 48-Absence of publication of the sub­ stance of the notification in the locality-Wliether re11ders the proceedings void--Held, conduct of parties to be considered--After possession was taken, the lands stood vested in the State free from all e11cumbra11ces-11ierefore the title validly vested i11 the Govemme11t cannot be divested-Moreover deter­ mination of compe11sation attained finality-Also it was not a case to shift the date for the detennination of compensation--Court should be loathe to quash the notification. Co11Stitution of India, 1950 : Art. 226-Extraordinmy jurisdictio11-Discretionary powers-Exercise of-All relevant factors to be taken i11to pra151natic consideration-Land Ac­ quisition proceedings-Award passed and has become final--Land also vested in Govemme11t-Fili11g of writ petition after inordinate delay-In such circumstances Cowt should be loathe to quash the notifications. G lshwarlal Girdharilal Joshi v. State of Gujarat, [1968) 2 SCR 267, followed. Sanjeevanagar Medical & Health Employees' Co-operative Society v. Mohd. Abdul Wahab & Ors., [1996) 3 SCC 600; Satendra Prasad lain v. State H 221 222 SUPREME COURT REPORTS {1996) SUPP. 6 S.C.R. A of U.P., (1993] 4 SCC 369 and Municipal Corporation of Greater Bombay v. Industrial Development & Investment Co. (P) Ltd., C.A. No. 282 of 1989 decided on 6.9.96, relied on. Nutakki Sesharatanam v. Sub-Collector, L.A. Vijayawada, (1992] 1 sec 114, dissented from. Ujjain Vikas Pradhikaran v. Raj Kumar Jolui & Ors., (1992] 1 SCC 328, distinguished. Raja Anand Brahma Shah v. 17ie State of Utt~r Pradesh & Ors., AIR (1967) SC 1081 and M.P. Housing Board v. Mohd. Shafi & Ors., [1992] 2 c sec 168, referred to. ''Administrative Law" by H.W.R. Wade (7th Edition) pages 342-43 referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2411 of D 1993. From the Judgment and Order dated 2.9.85 of the Rajasthan High Court in D.B.C.W.P. No. 602 of 1978. Aruneshwar Gupta for the Appellants. Rajinder Sachhar, H.K.Puri, Ujjwal Banerjee and Rajesh Srivastava, for the Respondent. Ms. Niranjana Singh for Ms. Sushma Suri for the Respondent Nos. 5-6. The following Order of the Court was delivered : This appeal by special leave arises from the Division Bench judgment of the High Court of Rajasthan made on September 2, 1985 in W.P. No. G 602/78. The admitted facts are that the notification under Section 4(1) of the Land Acquisition Act, 1894 (1 of 1894) (for short, the 'Act') was published in the State Gazette on March 23, 1977 acquiring 31.28 acres of land for defence purpose. Enquiry under Section 5-A was dispensed with in exercise of the power under Section 17(4) of the Act and declaration under Section 6 was published on April 28, 1976. Possession was taken on H May 19, 1977. The award was passed under Section 11 on March 21, 1978. STATE v. D.R. IAXMI 223 The reference under Section 18 was sought and made in March 1978 to A Civil Court for enhancement of the compensation. In September 1978, the respondent filed writ petition in the High Court seeking to quash the notification under Section 4(1) and the declaration under Section 6. The learned single Judge referred the matter to the Division Bench. The Division Bench has held that the acquired land is not an arable or waste land and, therefore, the exercise of the power under Section 17(4) of the B Act was bad in law. Substance of the notification under Section 4(1) was not published in the locality. The notification under Section 4(1) did not mention that it was a waste or arable land. On these grounds, the learned judges have quashed the notification. Thus, this appeal by special leave. Shri Aruneshwar Gupta, learned counsel for the appellants, has contended that the view of the High Court is clearly erroneous. It is not necessary that the notification under Section 4(1) should contain a decla­ ration that the needed land is a waste or arable land. The finding that it is neither waste nor arable land is not correct so long a the land is capable D of cultivation. If no cultivation was made it would still be arable land. Therefore, the view that it is neither waste nor arable land is not correct. It is difficult to accept that the entire six acres of land which is now claimed by the respondents was within the compound wall as found by the High Court. The view that substance of the notification was not published in the locality was not correct in law without any further discussion on facts or E legal principles. Even the finding cannot be well supported by any material on record; in law the High Court was wrong in intereferring under Article 226 of the Constitution~ Shri Rajinder Sachar, learned senior counsel for the respondents, contended that since the substance of the notification under Section 4(1) was not published which is mandatory, the notification F under Section 4(1), and declaration under Section 6 could be challenged at any time even after the award was made or possession was taken. Since publication of the notification under Section 4(1) is the foundation for taking further steps for the acquisition, procedural steps required under the Act should be followed. The substance of the notification under Section 4(1) was not published in the locality. So all the proceedings which had G subsequently been taken place stand nullified. Therefore, the Court would in an appropriate case grant the declaration including to quash the award and future steps. He also contended that it would be difficult to accept that the lands are arable lands, if not waste land. The finding that the land is arable land is based on consideration of the material on record. Therefore, H A it is not arable land. Further, it is contended that the respondent had stated in the High Court that he was prepared to accept the compensation provided the date of notification under Section 4(1) was shifted to four or five years later to the actual date of the notification under Section 4(1) published on March 23, 1977. He would stand by the same offer and, B therefore, it is not a case warranting interference. The questions, therefore, are: (1) whethe1· the notification under Section 4(1) should contain the declaration that the lands are waste or arable lands; (2) whether the exercise of the power under Section 17( 4) was vitiated by the finding that the lands were not capable of cultivation C being situated in urban area; (3) whether the substance of the notification published under Section 4(1) was not published in the locality;_ if it not complied with, when the entire acquisition proceedings had become final, whether the High Court was justified in exercising the power under Article 226? It is not necessary to recapitulate all the facts narrated above. Suffice D it to state that after the reference was made to the Civil Court, it passed an award under Section 26 which was challenged by the State by filing an appeal under Section 54 against the enhanced compensation. Thereby, the respondents had accepted the award. The State feeling aggrieved by the enhanced compensation, filed an appeal in the High Court. The High E Court, by judgments dated May 5, 1982 and September 23, 1982, dismissed the appeals which became final. Thus, the acquisition proceedings became final. The question, therefore, as said above is : whether the High <;;ourt is justified in interfering with these matters? Section 4(1) of the Act does not require to specify the nature of the land, i.e. whether it is arable or waste land. The object of the publication of the notification under Section 4(1) was that (1) the land is needed for a public purpose or is likely to be needed; (2) the officers of the State are authorised to enter upon the land and carry on measurement etc.; and (3) the owner/interested person was G put on notice that any encumbrance hereafter would not bind the State. Therefore, Section 4(1) does not envisage specification of the nature of the land, i.e. whether it is waste or arable land, when the same was published. The view, therefore, of the High Court that the notification under Section 4(1) should contain a declaration of- the nature of the land is clearly H erroneous. STATE v. D.R. LAXMI 225 Second question whether the land is waste or arable, is a mixed A question of facts and law. It depends upon the facts in each case. In this case, it is seen that on their own showing, the land of an extent of 6 acres belonging to the respondents was sought to be acquired along with other vast extent of land. It consists of open land as well as building and the servant quarters. The award of the Land Acquisition Officer has been placed before us. The building was not acquired for the public purpose but only servant quarters came to be acquired. From this background, the question arises: whether the land is arable .land? This question was con­ sidered by a Bench of three Judges in Ishwarlal Girdharilal Joshi v. State of Gujarat, (1968] 2 SCR 267. After elaborate consideration of the various judgments of the High Courts and dictionary meaning of the words "arable" in that behalf, this Court has relied thus : "There is no definition of the word 'arable' in the original Land Acquisition Act. A local amendment includes garden lands in the expression. Now lands are of different kinds: there is waste-land D desert-land, pasture-land, meadow-land, grass-land, wood-land, marshy-land, hilly-land, etc. and arable land. The Oxford biction- ary gives the meaning or 'arable' as capable of being ploughed; fit for tillage; opposed to pasture-land or wood land and gives the root as arable is in Latin. The learned Judges have unfortunately not given sufficient attention to the kinds of land and the contrast E mentioned with the meaning. Waste- land comes from the Latin vastitas or vastus (empty, desolate, without trees or grass or build­ ings). It was always usual to contrast vastus within incultus (uncul­ tivated) as in the phrase 'to lay waste' ( agri vastate). A meadow or pasture-land is pratum and arable is arvum and Cicero spoke F of prata et a1va (meadow and arable lands). Grass-land is not meadow or pasture- land and in Latin is known as campus as for example the well- known Campus Martius at Rome, where the comitia (assembly of the Roman people) used to meet. Woodlands is silvae, nemora or saltus." This was considered also by the Constitution Bench in Raja Anand Brahma Shah v. The State of Uttar Pradesh & Ors., AIR 1967 SC 1081. In that case, the acquired lands were mineral lands for mining purpose. Therefore, the question arose: whether they were arable lands? On the facts of this case, the Constitution bench came to the conclusion that since H 226 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A they were not arable lands, the exercise of the power under Section 17( 4) was not justified in law. In view of the fact that the Act itself has considered as to when the land could be considered to be arable land, as explained by this Court, the interpretation put up in lshwar Lal's case is in the correct perspective. The Court has power to consider the question in that light. In considering the question whether the land is arable or waste, dictionary meaning does not help the Court to solve the problem. Pragmatic ap­ proach is required to be adopted in considering the question on the facts in each case. Though the lands in this case were situated in urban area, the urban Land Ceiling Act itself recognises existence of the agricultural lands within the urban agglomeration and they are dealt with accordingly. When the lands were capable of raising crops, they remained to be arable lands. Therefore, the exercise of the power under Section 17(4) by the Govern- ment was not bad in law. On facts, it is an arable land capable to cultiva­ tion. It is seen that it being a small area comprising servant quarter as part of a large area, including six areas of respondent's lands, it cannot be said D that the rest of the · 1and is occupied by the buildings ·or is within the compound though situated in urban area. The view of the High Court, therefore, was clearly erroneous. The question is: whether the absence of the publication of the substance of the notification in the locality renders the entire proceedings void? We need not dilate upon the question whether local publication of substance of Section 4(1) notification is mandatory or directory. Since this Court has consistently taken the view that compliance of the requirement of the publication of the notification under Section 4(1) in the Gazette as well as publication of the substance of the notification in the locality now under the Amended Act in the newspaper, is mandatory requirement. As the facts are not in controversy, as mentioned in the judgment of the High Court, the substance of the notification was not published in the locality; we proceed on the premise that second step, namely, publication of the substance of the notification in the locality, was not taken. The question G then is : whether Section 4(1) notification and Section 6 declaration are required to be quashed? In this regard, we have to consider the conduct of the parties and the effect thereof. Under the Scheme of the Act, After . the possession of the land was taken either under Section 17(2) or Section 16, the land stands vested in the State free from all encumbrances. There­ after, there is no provision under the Act to divest the title which was H validly vested in the State. Under Section 48(1) before possession is taken, - STATE v. D.R. LAXMI 227 the State Government is empowered to withdraw from the acquisition by A its publication in the Gazette. In this regard, a three-Judge Bench of this Court has considered the question in Sanjeevanagar Medical & Health Employees' Co-operative Society v. Mohd. Abdul Wahab & Ors., [1996] 3 sec 600 and held in paragraph 12 thus : "That apart, as facts disclose, the award wa,s made on 24.U.1980 and the writ petition was filed on 9.8.1982. It is not in dispute that compensation was deposited in the Court of the Subordinat~ Judge. It is asserted by the appellant Society that possession of the land was delivered to it and the land had been divided and allotted to its members for construction of houses and that construction of C some houses had been commenced by the date the writ petition was filed. It would be obvious that the question of division of the ·properties among its m(!mbers and allotment of the respective plots to them would arise only after the Land Acquisition Officer had taken possession of the acquired land and handed it over to the D appellant Society. By operation of Section 16, the land stood vested in the State free from all encumbrances. In Satendra Prasad Jain v. State of U.P., [1993] 4 SCC 369, the question arose: whether notification under Section 4(1) and the declaration under Section 6 gets lapsed if the award is not made within two years as envisaged under Section 11-A? A Bench of three Judges had held that once possession w;;i.s taken and the land vested in the government, title tc the land so vested in the State is subject only to determination of compensation and to pay the same to the owner. Divesting the title to the land statutorily vested in the Government and reverting the same to the owner is not contemplated under the Act. Only Section 48(1) gives power to withdraw from acquisition that too before possession is taken. That question did not arise in this case. The property under acquisition having been vested in the appel­ lants, in the absence of any power under the Act to have the title of the appellants divested except by exercise of the power under Section 48(1), valid title cannot be defeated. The exercise of the G power to quash the notification under Section 4(1) and the decla­ ration under Section 6 would lead to incongruity. Therefore, the High Court under those circumstances should not have interfered with the acquisition and quashed the notification and declaration under Sections 4 and 6 respectively. Considered from either H 228 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. perspective, we are of the view that the High Court was wrong in allowing the writ petition." In Satinder Prasad Jain's case another Bench of three Judges had held that though award under Section 11-A was not made within two years after the Amendment Act 68 of 1984 came into force, the title having been vested in the State, the notification under Section 4(1) and declaration under Section 6 do not get lapsed and non-compliance of statutory provisions does not have the effect of divesting the title of the land vested in the Government free from all encumbrances. Recently, another Bench of this Court in Municipal Corporation of Grater Bombay v. Industrial Deve/Opment & Investment Co. (P) Ltd., C.A. No. 282 of 1989 decided on September 6, 1996 re-examined the entire case law and had held that once the land was vested in the State; the Court was not justified in interfering with the notification published under ap- D propriate provisions of the Act. Delay in challenging the notification was fatal and writ petition entails with dismissal on grounds of laches. It is thus, well settled law that when there is inordinate delay in filing the writ petition and when all steps taken in the acquisition proceedings have become final, the Court should be loathe to quash the notifications. The High Cour.t has, no doubt, discretionary powers under Article 226 of the constitution to quash the notification under Section 4(1) and declaration under Section 6. But it should be exercised taking all relevant factors into pragmatic consideration. When the award was passed and possession was taken, the Court shoul~ not have exercised its power to quash the award which is a material factor to be taken into consideration before exercising the power under Article 226. The fact that no third party rights were crated in the case, is hardly a ground for interference. The Division Bench of the High Court was not right in interfering with the discretion exercised by the learned single Judge dismissing the writ petition or the ground of laches. Reliance was placed by Shri Sachhar on M.P. Housing Board v. Mohd. Shafi & Ors., [1992] 2 SCC 168 in particular paragraph 8, wherein it was held G that compliance of the requirements is mandatory and non-compliance thereof renders all subsequent proceedings connected therewith unexcep­ tionably illegal; but the question is what will be its effect. That was not the question in that case, since no award had come to be passed in Nutakki Sesharatanam v. Sub-Collector, LA., Vijayawada, [1992] 1 SCC 114 a H two-Judge Bench of this Court had held that if the requirements of Section 1( STATE v. D.R. LAXMI 229 4 are not complied with, all proceedings had become invalid and possession A was directed to be re-delivered to the appellant. We are of the view that the ratio therein is not correctly laid down. The question whether violation of the mandatory provisions renders the result of the action as void or voidable has been succingly considered in "Administrative Law" by H.W.R. Wade (7th Edition) at page 342-43 thus : "The truth of the matter is that the Court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be hypothetically a nullity, but the court may refuse to quash it because of the plantiffs's lack of standing, because he does not deserve a discre- C tionary remedy, because he has waived his rights, or for some other legal reason. In any such case the 'void' order remains effective and is, in reality, valid. It follows that an order may be void for one purpose and valid for another; and that it may be void against one person· but valid against another. A common case where an D order, however void, becomes valid is where a statutory time limit expires after which its validity cannot be questioned. The statute does not say that the void order shall be valid; but by cutting of legal remedies it produces that result." The order or action, if ultra vires the power, it becomes void and it does not confer any right. But the action need not necessarily set at naught in all events. Though the order may be void, if the party does not approach the Court within reasonable time, which is always a question of fact and have the order invalidated or acquiesced or waived, the discretion of the Court has to be exercised in a reasonable manner. When the discretion has been conferred on the Court, the Court may in appropriate case decline to grant the relief, even if it holds that the order was void. The net result is that extraordinary jurisdiction of the Court may not be exercised in such circumstances. It is seen that the acquisition has become final and not only possession had already been taken but reference was also sought for; the G award of the Court under Section 26 enhancing the compensation was also accepted. The order of the appellate court had also become final. Under those circumstances, the acquisition proceedings having become final and the compensation determined also having become final, the High Court was highly unjustified in interfering with and in quashing the notification under Section 4 (1) and declaration under Section 6. H 230 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. It is true that the respondent had offered to accept the compensation by s.hifting the date of the notification by 4 to 5 years from the date of the notification under Section 4(1). For this view, reliance was placed by Shri Sacher on the judgment of this Court in Ujjain Vikas Pradhikaran v. Raj Kumar Johri & Ors. (1992) 1 SCC 328 where this Court had allowed the shifting of the date for the determination of the compensation. In that case since the award had not been passed, this Court had given the direction but in this case award determining the compensation has attained finality. it is not a case to shift the date for the determination of the compensation. Thus considered, we are of the view that the High Court was not justified in interfering with the notification and declaration under Section 4(1) and 6. The appeal is accordingly allowed. The judgment of the High Court stands set aside. The writ petition stands dismissed but, in the circumstan­ ces, without costs. D G.N. Appeal allowed. BASANT KUMAR ETC. A v. UNION OF INDIA ETC. SEPTEMBER 12, 1996 [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] B La11d Acquisition Act, 1894 : Compensation-Award-All lands can11ot a11d should 11ot be classified as possessed of same market value-Burde11 on claimant to prove market C value-Cowts should adopt realistic standards a11d pragmatic approach in evaluation of the evidence-Doctline of equality i11 detenni11ation a11d pay­ me11t of same compensation for all claimants involved in the same 11otifica- tioit is not good plinciple-Deductio11 towards providing amenities like roads, pad:s, electlicity, sewages water facilities etc.-High Cozat not justified in adopting ad-hoc pli11ciple-Claima11ts e11titled to e11ha11ced compensation, D interest on enhanced compensatio11 at the rate of 6% per annum and 15% solatiwn on the enhanced compensation from the date of taking possession till the date of deposit into Cowt. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4327 of E 1991 Etc. Etc. From the Judgment and Order dated 8.7.91 of the Delhi High Court in L.P.A. No. 97 of 1980. P.C." Jain, N.K. Jain and Ms. Sheela Goal for the Appellants. F The following Order of the Court was delivered : These appeals by special leave arise from the judgment of the Division Bertch of the High ~ourtof Delhi made on July 8, 1996.in Letters Patent Appeal No. 97/80 and other cases. G Notification under Section 4(1) of the Land Acquisition Act, 1894 (1 of 1894) (for short, the 'Act') was published on October 24, 1961 acquiring a larg.: extent of 1669 bighas 18 biswas of land for the planried development of Delhi. The said lands are situated in revenue estate of Posangipur. The H 231 232 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Land Acquisition Officer categorised the lands into two blocks - Block A and Block B. He assessed the compensation at the rate of Rs. 1400 per bigha for Block A and Rs. 1200 per bigha for Block B. On reference under Section 18, the Additional District Judge by his award and decree dated March 8, 1968 enhanced the compensation to Rs. 3050 per bigha. On B Regular First Appeal, the learned Single Judge dismissed the appeal confirming the award of the reference Court. When the LP A was filed, the Division Bench held that the LP A did not lie. In Balbir Singh v. Union of India, in RFA No. 214/68 by judgment dated may 14, 1980, the sanie was taken on merits in the appeal. Similar is the case in SLP (C) No. 17055/92 relating to Chhajju in RFA No. 65/69 of the even number dated May 14, 1980. Thus, these appeal by special leave. The extent of the land involved in Basant KumaT's case, viz., CA No. D 4327/91 is not clear as no one is appearing for the appellant. But as regards the appeal of Chhajju, his lands are of an extent of 37 bighas 10 biswas in which his share is 01ie-half. As regards Balbir Singh's lands, he has 66 bighas, 10 biswas in which he has l/3rd share. The question for considera­ tion is : what will be the reasonable compensation which the lands under E acquisition were capable to secure as on the date of the notification? Shri N.C. Jain, the learned senior counse:l appearing for the appel­ lants, contended that in RFA No. 55/70 Raghuvir Singh v. Union of India, arising out of the same notification, another Division Bench of the High Court had determined the compensation at the rate of Rs. 8700 per bigha and less Rs. 500 per bigha for the notified lands; and similar was the view taken by another Bench of that Court in LP A No. 137 /80 and batch decided on April 19, 1991 titled Chet Ram & Ors. v. Union of India, all these lands being situated in the same village, the appellants are also entitled to the same rate of compensation. The Union of India has not filed any appeals G against those cases. The lands are possessed of same potential value and, therefore, the appellants are entitled to the same compensation. We had adjourned the case on the last occasion, as no one appeared for the Union of India; Since, even today, no one is appearing for the Union of India, we have taken assistance of Shri Jain and have waded through the entire H material evidence. The question is : whether the appellants are entitled to ;.- BASANTKR. v. U.0.1. 233 the same compensation as was determined by the High Court in the A appeals arising out of Raghuvir Singh's and Chet Ram's case? It has been firmly settled law by beed role of decisions of this Court that the Judge determining the compensation under Section 23(1) should sit in the arm chair of a willing prudent purchaser in an open market and see whether he would offer the same amount proposed to be fixed as market value as B a willing and prudent buyer for the same or similar land, i.e., land possess- ing all the advantageous features and to the same extent. This test should always be kept in view and answered affirmatively, taking into considera- tion all relevant facts and circumstances. If feats of imagination are allowed to sway, he out steps his domain or judicial decision and lands in miscon- C duct amenable to disciplinary law. We have gone through the record and judgment in Chet Ram case and Raghuvir Singh case decided by the two division Benches. The learned Judges have adopted the principle that the entire lands in the village shall be treated as one unit and the compensation shall uniformly be determined on that basis. The principle is wholly unsus- D tainable in law and cannot be a valid ground for determination of compen­ sation. It is common knowledge that even in the same village, no two lands command same market value. The lands abutting main road or national highway command higher market value and as the location goes backward, market value of interior land would be less even for same kind of lands. It is a settled legal position that the lands possessed of only similar poten- E tiality or the value with similar advantages offer comparable parity of the value; It is common ·knowledge that the lands in the village spread over the vast extent. In this case, it is seen that land is as vast as admeasuring 1669 bighas, 18 biswas of land in the village. So, all lands cannot and should not be classified as possessed of same market value. Burden is always on the F claimant to prove the market value and the Court should adopt realistic standards and pragmatic approach in evaluation of the evidence. No doubt, each individual had different parcels of the land out of the vast land. If that principle is accepted, as propounded by the High Court, irrespective of the quality of the land, all will be entitled to the same compensation. That G principle is not the correct approach in law. The doctrine of equality in determination and payment of same compensation for all claimants involved in the same notification is not good principle acceptable for the aforestated reasons. When both the lands are proved to be possessed of same advantages, features etc., the only equal compensation is permis- H 'f A sible. It is then to be seen that the learned Judges have further pointed out that when the amount claimed in the High Court in appeal under Section 54 was more them what was determined by the reference Court; to what extent of the said amount, as claimed in appeal, could be granted was the test laid down. It is also opyicmsly on illegal principal. What has to be determined under Section 23(1) 'is the market value prevailing as on the date of notification published under Section 4(1) but not what was claimed by the parties even pursuant to notice under Section 10 or its reference under Section 18 or grounds of appeal under Section 54. Prior to Amend- C ment Act 68/84 under Section 22(1), the Court had no power to grant higher than was claimed under notice in Section 9 and 10. But now it stood deleted. Even the estimate of the market value given by the claimant is not decisive. Therefore, the principle laid down by the Court in the said two cases is obviously illegal and cannot form a legal basis. Though these D judgments became final, we cannot repeat, on principle of parity, the same illegality. It is true, as pointed out by the High Court and also stressed v~ry vehemently by Shri Jain, that compensation cannot be determined on the E basis of the face of the claimants or the status of the claimants. Compen­ sation requires to be determined for the land acquired and not on the basis of the status of the person from whom the land was acquired. In Raghbir Singh's case as the lands acquired were developed ones, Rs. 9,000 and Rs. 8700 per bigha were determined. It is settled legal position that if the land is already developed then what has to be seen is the nature of development and money expanded by the developer and as to what was the market value prevailing on that basis as on the date of notification, and what was the situation of the acquired land on that date; all these and other relevant facts have to be taken into consideration and then market value should be determined. Merely because a land is developed or developing land, it G would not be that some compensation is to be adopted to determine the market value for the entire land. as a ·developed land. If it is to be developed, it is settled legal position that at least l/3rd of the compensation has to be deducted towards providing amenities, like roads, parks, electricity, sewage, water facilities etc. This Court had upheld deduction of H even 60% towards development charges. The High Court, therefore, was BASANTKR.v. U.0.1. 235 also not right in adopting ad hoc principle. A The question then is : what would be the reasonable compensation which the lands of appellants were capable to secure as on the date of notification? It is seen that the appellants have produced two sale transactions; in respect of land acquired in September 1961 the market B price fetched was not more than Rs. 3250 per bigha; for land acquired in the year 1958 the market value fetched was about Rs. 5000 per bigha. We do not have any material indicating as to what were the reasons behind the sale in respect of those sale deeds and the nature and situation of that land. Under these circumstances, the reference Court rightly had C not placed reliance on the 1958 sale transactions since the appellants have not produced any evider.ce on record to show whether the lands of the appellants were developed and fit for construction of the houses. There­ fore, what we have to consider is that the lands are agricultural lands and possess potential for being used for building pl,lrposes only in future D which is not relevant. Therefore, since the lands as on the date of notification were agricultural lands, the value has rightly been determined on the bigha basis instead of yards basis. Since the appellants have produced sale deeds indicating the maximum which was secured, viz., Rs. 3,250 per bigha, necessarily, the appellants would be entitled to the E maximum rate of Rs. 3, 250 per bigha. The next question is : whether the LP A would lie against the judg­ ment of the learned single Judge? It is settled legal position that under Section 54 of the Land Acquisition Act, the appeal would lie to the High Court; when the appeal on the basis of the pecuniary value was decided by a single Judge necessarily, it being the judgment of the single Judge, an appeal would lie to the same Court in the form of LP A to Division Bench. The Division Bench was not right in holding that the LP A would not lie to the High Court against the judgment of the single Judge. To that extent, G the view of the High Court is not correct. The judgment in cases of Chet Ram and R,aghbir Singh proceeded on wrong principles of law and deter­ mined the compensation. We do not approve of the views as correct and, therefore, we cannot base the same market value to be the market value for the lands under consideration. H 236 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. The appellants are entitled to the enhanced compensation at the rate of Rs. 3,250 per bigha and interest on enhanced compensation at the rate of 6% per annum from the date of taking possession till the date of deposit into court. They are ai.so entitled to 15% solatium on the enhanced com­ pensation from the date of taking possession till the date of deposit. The appeals are accordingly allowed, but in the circumstances, without costs. G.N. Appeals allowed . JAHAR SINGH A v. UNION OF INDIA AND OTHERS SEPTEMBER 13, 1996 B [M.K. MUKHARJEE AND S.P. KURDUKAR, JJ.] Se1Vice Law: Appointme11t-Appella11t after obtaining the due pennission appeared in the examination for the post of accou11ta11t and qualified-His ca11didature C was cancelled on the grou11d of bei11g L.D. C. and for orga11isatio11al in­ eligibility-Held, C01icellation of the candidature illegal-Other siinilarly :situated persons allowed to appear-Contrary and conflicting stands in op­ posing the appeal only to fore stall the claim of the appellant-Appellant e11titled to all the consequential be11efits upon his having been declared D successful. The appellant, an employee of the Savings Bank Control Organisa· tion (SBCO), Uttar Pradesh Circle, under the Ministry of Communica· tions, appeared in the examination held for appointment of Accountants in the Post Office and Railway Mail Service and qualified. lnspite of his being (fUalified, he did not get any appointment as an Accountant but on the other hand he was intimated by Assistant Director General, New Delhi vide letter dated July 23rd, 1993 addressed to ADDS (Rectt.) U.P. Circle that as the appellant was working as Lower Division Clerk (LDC) in the SBCO, he was not eligible to appear in the aforesaid examination and his candidature be immediately cancelled. The representation of the appellant against the cancellation of his candidature having been rejected by the Director General of Post, New Delhi, the appellant approached the Central Administrative Tribunal. Before the Tribunal the respondent contested the claim of the appellant on the ground mentioned in letter dated 23rd July, G 1993 and also on the ground that there was a separation of cadre of Assistants of SBCO from that of the PO and RMS. The Tribunal held that the respondents were not justified in cancelling his candidature and set . aside the order dated 23rd July, 1993. But the Tribunal did not grant the main relief of appointment for the reason that there was separation of cadres of Assistants of SBCO from those PO and RMS. H 237 238 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A The appellant moved this Court in appeal. The respondents con- tested on the ground that the appellant was not eligible as he was an L.D.C. and that the permission was granted inadvertantly as there was organisa­ tional ineligibility of the appellant to appear in the examination due to seperation of cadres. Allowing the appeal, this Court HELD : 1. The respondents have taken different and contradictory stands and filed affidavits making patently incorrect and untrue state­ ments only to forestall the claim of the appellant. [242-A] 2. The cancellation of the candidature of the appellant on the ground that he was LDC (SBCO) is unfounded which is apparent from the letter dated 23rd July, 1993 itself, wherein the respondent mentioned the desig­ nation of the appellant as P.A. and not LDC, as well as from the affidavit filed in this Court by the respondent on March 29th, 1996 wherein it was D stated that the appellant was Postal Assistant in Savings Bank Control Organisation. [242-B-C] 3. The plea of organisational ineligibility of the appellant to appear in the examination is also without any substance, as the respondent allowed E two P.As. of the SBCO to appear in the examination held in the year 1993 for appointment as Accountant. Therefore, the rule and the circular shown by the respondent disentitling the 8ppellant to appear in the examination due to seperation of cadres has no substance. [242-H; 243-G] 4. The impugned order dated 23rd July, 1993 is quashed and the F respondents are directed to grant all the benefits to the appellant conse­ quent upon his having been declared successful in the examination held on 22nd May 1992 for the post of Accountant in P.O. and RMS and this direction has to be complied by 31st October, 1996. [244-A-B] G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11929 of 1996. From the Judgment and Order dated 23.2.96 of the Central Ad­ ministrative Tribunal, Allahabad in O.A. No. 403 of 1994. H S. Muralidhar and Ms. Neeru Vaid for the Appellant. .. JAHARSINGHv. U.0.1.(M.K.MUKHERJEE,J.] 239 P.A. Chaudhary and C.V. Subba Rao for the Respondents. The Judgment of the Court was delivered by M.K. MUKHERJEE, J. Special leave granted. Heard the learned counsel for the parties. At all material times the appellant was - and still is - an employee of Savings Bank Control Organisation (SBCO), Uttar Pradesh Circle, under the Ministry of Communications, Department of Posts, New Delhi. In May 1992 while working in the Agra Head Post Office he appeared in the examination held for appointment of Accountants in the Post Office (PO) C and Railway Mail Services (RMS); and the Senior Superintendent of Post Offices, Agra Division, Agra vide his letter No. 82/Exam/po and RMS/Ac­ countant/92 dated November 30, 1992 informed him that he had qualified for that post. The appellant, however, did not get any appointment to the post of Accountant in spite of his such qualification and, on the contrary, on August 26, 1993, he received a copy of a letter dated July 23, 1993 sent D by Shri AK. Kaushal, an Assistant Director General in the office of the Director General (Posts), New Delhi, to Shri jagdamba Singh, ADOS (Rectt.) attached to the office of the Chief Post Master General, U.P. Circle, intimating him that as he (the appellant) was working in SBCO as an LDC (Lower Division Clerk) he was not eligible to appear for the PO E and RMS Accountant examination and his candidature may be cancelled immediately, Since this letter has an important hearing on this appeal we quote the same in extenso : "AK. KAUSHAL ASSIT. DIR. GENL. (SPN) F 141-230/92-SPB-II 23.7.93 Dear Shri Singh, Please refer to your d.o. letter No. Rectt. JM- 67/May-92/3 G dated 4.5.93 regarding posting of Shri Jahar Singh, SBCO Agra H.P.O. as Accountant. 2. The mater has been examined. Since Shri Jahar Singh was working in SBCO as an LDC he was not eligible to appear for the PO & RMS Accountant Exam as per rules. The candidature of H 240 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. Shri J ahar Singh may be cancelled immediately and he cannot, therefore, be considered for appointment as an Accountant. With best wishes, Shri Jagdamba Singh, AD.O.S. (Rectt.) 0/o the Chief Postmaster General, U.P. Circle, LUCKNOW Copy to: 1. The PMG Agra Region, Agra. Yours sincerely, (AK. KAUSHAL) 2, Shri Jahar Singh, PA (SBCO) Agra H.P.O. with reference to his letter dated 28.3.1993 addressed to Member (D), Department of Posts, Oak Bhavan, New Delhi, (AK. KAUSHAL) Asst. Director General (SPN)" (emphasis supplied) Against such cancellation of his candidature the appellant made a representation to the Director General of Posts, New Delhi which was rejected. He then filed an original application in the Central Administrative F Tribunal. (CAT) Allahabad Bench wherein he asserted that though his initial appointment in 1983 was as in LDC in SBCO since August 1, 1991 he was working there as a Postal Assistant (PA) and the permission that " was granted to him to appear in the examination for appointment as an Accountant was unqualified - and not provisional. He, therefore, submitted G that the respondents were not justified in rejecting his claim for appoint­ ment to that post after his success in the examination. In contesting the application the respondents reiterated that the appellant was working as an LDC at the time he appeared for the examina­ tion. The other contention that was raised on their behalf was that even H the PAs of SBCO acquired an identity of its own after it (SBCO) was \ , JAHARSINGHv. U.O.l. [MK MUKHERTEE,J.] 241 reorganised with effect from August 1, 1991 with a different. and distinct A channel of promotion which. did not entitle them to become Accountants in PO and RMS under the extant Rules. In disposing of the application the Tribunal observed that though from the admitted facts of the case it was apparent that the appellant was allowed to appear in the examination for appointment as an Accountant B • I by mistake as he belonged to a separate cadre, the respondents were not justified in cancelling his candidature as he was a bona fide candidate and there was no lapse on his part. It further observed that no rules or circulars were brought to its notice which empowered the respondents to cancel his candidature. Accordingly, the Tribunal set aside the order dated July 23, C 1993 cancelling the candidature of the appellant as an Accountant and all orders made pursuant thereto. Inspite thereof, the Tribunal did not grant the relief sought for by the appellant on the ground that he had become ineligible for promotion to the post of Accountant by virtue of separation of cadres of Assistants of SBCO from those PO and RMS. Dissatisfied with D the above order the appellant filed a review application contending that after having quashed the order of cancellation of his candidature the Tribunal was not justified in refusing him the consequential relief of being appointed as an Accountant in PO and RMS. The Tribunal, however, rejected the application observing that even a defective reasoning of an E order could not be made the basis for setting aside the same in review. Hence this appeal at the instance of the appellant. Besides, reiterating the contentions raised before the Tribunal Mr. Murlidharan, the learned counsel appearing for the appellant submitted, relying upon the averments made by the appellant in the supplementary affidavit he filed in this Court, that the contention of the respondents that P As of SBCO were not eligible for appointment to the post of Accountants in PO and RMS was patently untrue for in the following year (1993) also PAs of SBCO were permitted to appear in the examination held for the above post. In opposing the above contentions Mr. Chaudhary, the learned G Senior counsel appearing for the respondents, assailed the finding of the Tribunal that the cancellation of the appellant's candidature was improper but supported the other finding of the Tribunal that the appellant was not entitled to the post of Accountant in the PO and RMS, as SBCO has a distinct identity and separate channel of promotion. H 242 SUPREME COURT REPORTS [1996) SUPP. 6.S.C.R. A To appreciate the respective contentions· of the parties we have carefully gone through the entire materials on reeord and the only con­ clusion we draw therefrom is that the respondents have taken different and contradictory stands only to forestall the claim of the appellant and Shri Kaushal, who has filed affidavits on their behalf, has made patently incor­ rect and untrue statements therein. From a cursory glance of the letter dated July 23, 1993 written by Sri Kaushal (reproduced earlier) it is apparent that the only ground that was canvassed by the respondents to cancel the candidature of the appellant was tha.t he was working in SBCO as LDC. In the affidavit that Shri C Kaushal filed in this Court on December 9, 1995 while opposing the special leave petition of the appellant, he reiterated : "He (the appellant) wrongly mentioned in his. application (obvious­ ly referring to his application seeking permission to appear in the examination) that he was Postal Assistant and inadvertently he was allowed to sit in the examination. When it was realised that the permission given to him was contrary to the rules it was rightly cancelled and naturally he was not entitled to any consequential benefits." That the above stand of the respondents, as put forward through the affidavit of Shri Kaushal, is unfounded will be apparent, first from the letter dated July 23, 1993 itself wherein, while indicating that a copy of the letter was being forwarded. to the appellant his designation was shown as 'PA (SBCO) Agra HPO' - and not LDC - and secondly, from the following statement made by Shri Kaushal in paragraph 3 of his affidavit filed in this Court on March 29, 1996: "It is submitted that the petitioner Sri Jahar Singh is a postal assistant in Savings Bank Control Organisation ......... " ·Since the post the appellant was holding was made the sole basis for G cancelling his candidature - as the letter dated July 23, 1993 clearly demonstrates - the above discussion of ours would have been sufficient to allow this appeal but as later on the respondents took the organisational ineligibility of the appellant to appear in the examination as a further ground for such cancellation we may advert to the same. In canvassing this H ground it has been stated by Shri Kaushal in the affidavit filed ori Decem- JAHAR SINGH v. U.O.I. [M.K MUKHERJEE,J.] 243 ber 9, 1995 as under: A "It is further submitted that according to Rule 273 of the Postal Manual Vol. IV Postal Assistants and Sorting Assistants, Railway Mail Service are eligigle for appearing in the examination of Post Office and Railway !Mail Service Accountants. The petitioner B belongs to Savings Bank Control Organisation Unit of Post Office and thus he was not entitled to appear in the said examination held in May, 1992. The petitioner (the appellant) was inadvertently pennitted because on his application f onn he had written his desig­ nation as Postal Assistant, SBCO." (emphasis supplied) Apart from the above Rule, reliance has also been placed on a circular dated July 26, 1991 issued by the Assistant Director General, Government of India, Ministry of Communications, Department of Posts, .D which refers to the proposed reorganisation of the SBCO with effect from August 1, 1991, and particular emphasis laid on Para (viii) thereof which reads that "consequent upon reorganisation, the distinct identity of the SBCO will be maintained and Postal Assistants (SBCO) will not be inter­ changeable with the Postal Assistants of the Post Office." The above additional ground of the respondents so far it seeks to justify the cancellation of the candidature of the appellant as an Account­ ant even after he was given permission to appear in the examination in which he came successful is also without any substance. The averment in the above quoted paragraph that the permission was 'inadvertently' granted F because the appellant had wrote in his application form that his designation was P.A., SBCO is patently incorrect for on the showing of the respondents (as discussed earlier) the appellant was holding that post. Besides, in spite of the above Rules and Circular, two PAs of SBCO, Auraiya Office, namely Satya Prakash and H.C. Ram were permitted to appear in the PO and RMS examination held in the year 1993 for appointment of Accountants G as will be evident from the supplementary affidavit filed by the appellant on February 23, 1996. It is pertinent to mention here that in the affidavit that Shri Kaushal filed later on March 29, 1996, he did not dispute the above assertion of the appellant, nor give any explanation as to why such permission was granted to them in spite of the above Rules and Circular. H 244 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. For the foregoing discussion we quash the impugned order dated July 23, 1993 and direct the respondents to grant all the benefits which the appellant would be entitled to consequent upon his having been declared successful in the examination held on May 22, 1992 for the post of Ac­ countant in PO and RMS. This direction should be complied with by October 31, 1996. The appeal is thus allowed with costs, qnantified at Rs. 5,000. H.K. Appeal allowed. . tr: SAHIB SINGH v. STATE OF PUNJAB SEPTEMBER 13, 1996 [M.K. MUKHERJEE AND S.P. KURDUKAR, JJ.] Criminal Law : Tennrist and Disntptive Activities (Prevention) Act, 1987: Section 5. Revolver and six live c01t1idges--Recovery of-No independent people of locality witnessed search-Anns and ammwiition allegedly recovered from accused not packeted and sealed-No evidence to indicate with whom revolv­ er was after its seizure till it was sent to Anns Expe1t-Held : In the cir­ cwnstances of the case, accused was entitled to benefit of reasonable doubt-Anned Act, S. 25. The appellant was convicted and sentenced under Section 25 of the Arms, 1959 and Section 5 of the Terrorists and Disruptive Activities (Prevention) Act, 1987. Hence this appeal According to the prosecution, the appellant was apprehended on E suspicion and on search by police officers a revolver with six live cartridges were recovered from the bag the appellant was holding in his right hand. On behalf of the appellant it was contended that no independent people of the locality were called upon by prosecution to witness the search; that the Designated Court was not justified in solely relying upon the F. evidence of police officers in convicting the appellant; that the _arms and ammunition recovered from the appellant were not packeted and sealed; and that there was no evidence to indicate with whom the revolver was after its seizure till it was sent to the Arms Expert. G Allowing the appeal, this Court HELD : 1. Before conducting a search the concerned_ police officer is required to call upon some independent and respectable people of the locality to witness the search. In a given case it may so happen that no such person is available or, even if available, is not willing to be a party H 245 246 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A to such search. It may also be that after joining the search, such persons later on turn hostile. In any of these eventualities the evidence of the police officers who conducted the search cannot be disbelieved solely on the ground that no independent and respectable witness was examined to prove the search but if it is found - as in the present case - that no attempt was even made by the concerned police officer to join with him some persons of the locality who were admittedly available to witness the recovery, it would affect the weight of evidence of the police officer, though not its admissibility. The arms and ammunitions allegedly recovered from the appellant and seized were not packeted and sealed. There was no evidence to indicate with whom the revolver was after its seizure till it was sent to the Arms Expert for testing. This missing link also weakens the prosecution case. For all these infirmities the appellant is entitled to the benefit of reasonable doubt. [247-F-H; 248-A-B] Ama1jit Singh v. State of Punjab, [1995) Supp. 3 SCC 217, relied on. D CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 61of1992. From the Judgment and Order dated 21.12.91. of the Designated Court, Amritsar, in S.C. No. 61 of 1991. E Ms. Naresh Bakshi for the Appellant. Ms. Rupinder Wasu for R.S. Suri for the Respondent. The Judgment of th~ Court was delivered by F M.K. MUKHERJEE,_ J. This appeal is directed against the judgment and order dated December 21, 1991 rendered by the Additional Judge, Designated Court, Amritsar in Sessions Case No. 21 of 1991 convicting and sentencing the appellant under Section 25 of the Arms Act, 1959 and Section 5 of the Terrorists and Disruptive Activities (Prevention) Act, 1987. According to the prosecution case on May 12, 1990 at or about 12.30 P.M. when Inspector Gurmit Chand of Chheharata Police Station (P.W. 3) along with Sub-Inspector Rattan Lal (P.W. 2) and other police officials were on patrol duty near Bole-di-Bambi they apprehended the appellant on suspicion and on search recovered a revolver with six live cartridges H from the bag he was holding in his right hand. I 1 - ; SAHIB SINGH v. STATE [MK MUKHERJEE, J.] 247 The appellant pleaded not guilty to the above accusation and his A defence.was that he was falsely implicated at the instance of his neighbour Sewa Singh. To prove its case, prosecution examined four witnesses of whom Manohar Lal (P.W. 1), a clerk in the office of the District Magistrate, B Amritsar, proved the sanction accorded for prosecution of the appellant under the Arms Act; P.Ws. 2 and 3 spoke about the arrest of the appellant and the recovery of the revolver and the cartridges from him and Sital Singh (P.W. 4), an Armourer, claimed to have mechanically tested the revolver and found it in working order. Accepting their evidence the learned Judge recorded the impugned order of conviction and sentence, C It was first contended on behalf of the appellant that since no independent witness was examined by the prosecution to prove the alleged recovery of the arms and ammunitions from the appellant the designated Court was not justified in convicting him relying solely upon the evidence D of the two police officers. It was next contended that since no evidence was led by the prosecution to prove that the offensive articles were packeted and sealed after their seizure the possibility of tampering with them could not be ruled out. It was lastly contended that from the test • !port of P.W. 4 (Ex. PF) it would appear that one Head Constable Baita Singh produced the revolver before him (P.W. 4) but neither he was examined nor any other E witness to explain how he (the constable) got the revolver from P.W. 3. Having gone through the record we find much substance in each of the above contentions. Before conducting a search the concerned police officer is required to call upon some independent and respectable people F of the lo.::ality to witness the search. In a given case it may so happen that no such person is available or, even if available, is not willing to be a party to such search. It may also be that after joining the search, such persons later on turn hostile. In any of these eventualities the evidence of the police officers who conducted the search cannot be disbelieved solely on the G ground that no independent and respectable witn~ss was examined to prove the search but if it is found - as in the present case - that no attempt was even made by the concerned police officer to join with him some persons of the locality who were admittedly available to witness the recovery, it would affect the weight of evidence of the Police Officer, though not its admissibility. We next find from the record that the arms H 248 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A and ammunitions allegedly recovered from the appellant and seized were not packeted and sealed. InA111a1jit Singh v. State of Punjab, [1995] 3 SCC 217 this Court has observed that non-sealing of the revolver at the spot is a serious infirmity because the possibility of tampering with the weapon cannot be ruled out. From the record we further find that there is no B evidence to indicate with whom the revolver was after its seizure by P.W. 3 till it was sent to the Arms Expert for testing through constable Baita Singh. This missing link also weakens the prosecution .case. For all these I infirmities we are of the view, that the appellant is entitled to the benefit of reasonable doubt. C We, therefore, allow this appeal and set aside the conviction and sentence against the appellant. The appellant, who is on bail, is discharged from his bail bonds. Fine, if paid, be refunded to him. V.S.S. Appeal allowed. - ,. , DEVINDER A v. STATE OF HARYANA SEPTEMBER 13, 1996 [M.K. MUKHERJEE AND S.P. KURDUKAR, JJ.] Indian Penal Code, 1860-Section 302: Code of Criminal Procedure, 1973, Section 157-Circumstances for benefit of doubt-Non-disclosure of the names of the accused at the earliest C opportunity-Delay in sending the special report to the Magistrate-Benefit of doubt can be given to the accused-:4nns Act, 1959-Ss. 25, 27-TADA Act, s. 6. At about 9.00 A.M. on 26th July, 1986 the appellant was alleged to D have given two blows to the victim with knife-one on the left side of the chest and the other on the abdomen, in presence of two eye witnesses, who carried the injured to the Hospital, where he was examined by the doctor, who certified that at the time of admission the victim was fully conscious. The medico-legal report contained the name of his father, address, occup­ tation and an account as to how the injuries were caused to him. The A.S.I. E recorded the statement of P.W. 10 in the Hospital at 2.40 P.M. and the same was treated as FIR and a case under section 307 was registered. The injured succumbed to his injuries the next day at about 11.30 A.M. and on his death the case was converted to section 302 IPC and then only a special report was sent to the Magistrate. Charges were framed against the F accused under section 302 IPC and unde1 section 25 and 27 of the Arms Act 1959 read with Section 6 of TADA for unlawful possesion and user of a spring activated knife. The Designated Court, relying upon the testimony of the eye witnesses held the accused guilty of the charges and convicted him, against which the present appeal was moved before this Court. Allowing the appeal, this Court HELD : 1.1. Though apparently there is no reason to disbelieve the two eye witnesses, yet there are certain underlying circumstances due to which, benefit of reasonable doubt can be given to the appellant. [253·B; C] H 249 250 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. • 1.2. According to the prosecution, after the infliction of the injuries, the victim was immediately taken to the hospital where he was examined and ·a medico-legal report was prepared which contained all material particulars like parentage, occupation, 'and an account as to how the injuries were received, except the name of the assailant. Obviously these material particulars had been furnished either by the victim himself or by the eye witnesses present. In this view of the matter, it was expected that if the appellant was really the assailant, then his name would have been disclosed by all or any one of them. Legitimately it can be inferred that at the earliest available opportunity the name of the appellant was not disclosed. [253-C-E] 1.3. No special report in respect of the registration of the case was sent· to the Magistrate on the day of occurrence and it was forwarded to the Magistrate only after the case was converted to one under section 302 IPC consequent upon the death of the victim on July 27, 1986 and was received in Magistrate's office at 10 P.M. This glaring circumstance indi- D cates that the FIR did not see the light of the day till the death of the victim and the version of the prosecution that the FIR was recorded on July 26, 1986 is not t111e. [253-G-H; 254-A] CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 446of1987. From the Judgment and Order dated 26.7.86 of the Designated Court, Rohtak, Haty~a in Sessions Case No. 550 of 1986. ' Ms. Rajni Anand (AC.) for the Appellant. Prem Malhotra for the Respondent. The Judgment of the Court was delivered by M.K. MUKHERJEE, J. The subject matter of challenge in this appeal is the judgment and order dated May 30, 1987 rendered by the G Designated Court, Rohtak, while disposing of Sessions Case No. 550 of 1986 and Arms Act Case No. 551 of 1986. By the impugned judgment and order the Court convicted and sentenced the appellant Devinder @ Pappy under Section 302 IPC and Sections 25 and 27 of the Arms Act, 1959 read with Section 6 of Terrorist and disruptive Activities (Prevention) Act, 1985 H ('TADA' for short). ·' DEVINDER v. STATE [M.K. MUKHERJEE, J.) 251 ' 2. Shorn of details the prosecution case is as under : (a) Ramphal A (the deceased) used to sell vegetables from his shop-cum- residence in the Janta Colony, Rohtak city. On July 26, 1986 at or about 9 AM. the appellant went to his shop and asked for some vegetables on credit. Ramphal told the appellant that as he had not paid his earlier dues he would not oblige him any more. Since such refusal of Ramphal was in the B presence of two others, namely, Jagdish (P.W. 10) and Satbir Singh (P.W . . 11), the appellant felt insulted and left in a huff. (b) About twenty minutes thereafter the appellant came back with a knife and remarked that he would teacfl him (Ramphal) a lesson for insulting him in the presence of others. Ramphal, who was then cooking, C stood up and attempted to escape. He however could not succeed in his attempt as the appellant gave him two blt>ws with the knife - one of the left side of the chest and the other on the abdomen. Jagdish and Satbir Singh, who were there still then, and one U mesh, who reached there by chance, witnessed the assault. (<;:) Jagdish and Umesh then carried Ramphal in a rickshaw to the Medical College Hospital, Rohtak where he was examined by Dr. Sushil Kumar Jain (P.W. 5) first, After examination, Dr. Jain sent a medico legal report (Ex. PS) and a mkka (Ex. PD) to the Police Post attached to the hospital where an entry in terms thereof was made by Constable Mangal E Singh (P.W. 1) in the daily diary book at 1.45 P.M. (Ex. PE). ( d) In the me.~time, however, - at 11.30 AM. to be precise - the City Police Station, R,qhtak had received a telephonic message from the above Police Post abo~t the admission of Ramphal in the hospital with injuries on his person and, after recording that message in the daily dairy F book (Ex; PF), ASI Tota Ram (P.W. 12) had left for the hospital. Reaching there he found Jagdish present and recorded him statement (Ex. PZ) at 2.40 P .M. which was treated as the FIR. After forwarding the statement to the Police Station for registering a case, Tota Ram took up investigation and went to the spot. He prepared a rough site plan and seized some G blood-stained earth therefrom in the presence of Jagdish and Satbir. ( e) Ramphal, who was admitted as an indoor patient in the hospital, was operated upon by Dr. Pradeep Kumar (P.W. 7) for his injuries but he succumbed to them on the following day i.e. July 27, 1986 at 11.30 AM. On receipt of that information the case which was earlier registered against H 252 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A the appellant under Section 307 l.P.C. was converted into one under Section 302 1.P.C. and a special Report (Ex. PH) was sent to the local Magistrate, ASI Tota Ram then went to the hospital and after holding inquest upon the dead body of Ramphal, sent it for autopsy which was performed by Dr. M.K. Bishnoi (P.W. 9). (f) In course of the investigation the appellant was arrested on July 29, 1986 and pursuant to a statement made by him to Tota Ram on July 31, 1986 (Ex. PEE) a spring activated knife concealed under the bricks in 1 a deserted kotha towards the southern boundary wall of Hanuman Park, Rohtak was recovered in the presence of Jagdish (P.W. 10) and Daya Chand. After recovery of the knife a separate case was registered against the appellant under the Arms Act, 1959 read with Section 6 of TADA. (g) The blood-stained earth recovered from the spot, the shirt removed from the dead body of Ramphal and the knife recovered pursuant to the statement of the appellant were sent to the Forensic Science D Laboratory (F.S.L.), Madhuban for chemical examination and human blood was detected on all those articles on such examination. On comple­ tion of the inves.tigation ASI Tota Ram submitted two separate charge­ sheets against the appellant; one under Section 302 l.P.C. for the murder of Ramphal on July 26, 1986 and the other under Section 25 and 27 of the E Arms Act, 1959 read with Section 6 of TADA for un_lawful possession and user of a spring actuated knife. 3. The two cases arising out of the above charge-sheets were clubbed and tried together and were disposed of by the impugned judgment in the manner indicated above. 4. The appellant pleaded not guilty to the charges levelled against him and his defence was that at the instance of Jagdish and Ramphal he was falsely implicated in the case as he had, three days prior to the alleged murder of Ramphal, a quarrel with Jagdish and Umesh over their mis- G behaviour in their locality under the influence of liquor. 5. In support of their respective cases prosecution examined twelve witnesses and the defence one. 6. To sustain the charge of murder levelled against the appellant the H prosecution rested its case principally upon the ocular version of J agdish DEVINDER v. STAIB [M.K. MUKHERJEE,J.) 253 (P.W. 10) and Satbir (P.W. 11). The Designated Court found them to be A the most probable and natural witnesses and as their evidence stood amply corroborated by the evidence of the doctors, the recovery of the knife pursuant to the statement of the appellant, and the report of the Forensic Science Laboratory held the appellant guilty of both the charges levelled against him. B 7. Having carefully gone through the entire materials on record, we are unable to sustain the impugned judgment. Though apparently there is not reason to disbelieve the two eye witnesses, there are certain underlying circumstances which persuade us to give the benefit of reasonable doubt to the appellant. According to the prosecution case - and as testified by C Jagdish - immediately after the assault Ramphal was taken to the hospital by him (Jagdish) and Umesh (not examined), who were present at the time of the assault. Dr. Jain testified that at the time of admission Ramphal was fully conscious and his blood pressure and pulse were normal. From the medico legal report (Ex. PS) that the doctor sent to the police after D examining Ramphal we find that apart from his name, the father's name of Ramphal, his address, his occupation and an account as to how the injuries were caused find place. Obviously all these particulars had been furnished by Ramphal, and/or Jagdish and Umesh, who had accompanied him. In that context it was expected, if really the appellant was the assailant, that his name would be disclosed by all or any of them while furnishing the E cause of the injuries. It can, therefore, be legitimately inferred that at the earliest available opportunity the name of the appellant was not disclosed. 8. It was, however, contended by Mr. Malhotra appearing on behalf of the respondent that since the F.I.R. was lodged by Jagdish with F promptitude and therein the name of the appellant as the assailant had been mentioned, non-disclosure of his name earlier before the doctor, whq was under no statutory obligation to record the name of the assailant, was of no moment. If the F.I.R. was recorded at 2.40 P.M. (on July 26, 1986) as indicated therein we might have persuaded ourselves to accept the contention of Mr. Malhotra but we find, suprisingly enough, that no special G report in respect of the registration of the case was sent to the Magistrate on that day; and, indeed, as the evidence on record unmistakably shows that it was forwarded to the Magistrate only after the case was converted to one under Section 302 IPC consequent upon the death of Raniphal on July 27,_1986 and received in his office at 10 P.M. This glaring circumstance H 254 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A prompts us to hold that the F.I.R. did not see the light of the day till the death of Ramphal and the version of the prosecut on that the F.I.R. was recorded on July 26, 1986 is not true. 9. For the foregoing discussion the prosecution case as presented before the Court cannot be accepted. We, therefore, allow this appeal, set B aside the conviction and sentence recorded against the appellant and acquit him. The appellant, who is in jail, be released forthwith unless wanted in connection with some other case. H.K. Appeal allowed. ALL INDIA STATE BANK OFFICERS FEDERATION AND ORS. A v. UNION OF INDIA AND ORS. SEPTEMBER 13, 1996 [.T.S. VERMA AND B.N. KIRPAL, JJ.] Service Law : State Bank of India Officers (Detenni11atio11 of Tenns and Conditions of Service) Order, 1979: Paragraph 17. Promoti01r-Ca11didates--From post of Senior Managemeizt Grade Scale V to Top Executive Grade Scale VI in State Bank of India-Zone of consideration--Omission to limit number of candidate-Validity of--Origiizally minimum two years' se1vice in the previous grade/scale required D and zone of co11sideration limited to three to four times the number of vacancies-However, promotional policy dated 7.3.1989 discontinued limita- tio11 of zone of consideration a11d raised mi11imum se1vice from two to four years-Held: promotio11al policy not illegaf-State Ba11k of I11dia (Supe1vising Staff) Se1vice Rules, 197~State Bank of1ndia Act, 195~Ss. 17 and 43. Promoti01r-Candidates-From Senior Management Grade Scale V to Top Executive Grade Scale VI-Eligibility of-Promotional polity dated 7.3.1989-Modification in nonns of-Held: promotional policy not ar­ bitrary-Eligibility 1101111s made on realistic basis-To choose best talents to man critical positions-Cozm could not sit in appeal to decide what was good F for Bank. Promotion-From Senior Management Grade Scale V to Top Execu- tive Grade Scale VI-Inte1view-Candidates-Number of-Guidelines dated 23.6.1986 issued under Regn. 17-Limited 11umber of candidates to be inter­ viewed to three to four times of vacancies-Applicability of-Held : applicable G 011/y to Nationalised Banks and not to State Bank of l11dia--Furthe1111ore, said guidelines could not be regarded as directions under Sectio11 18 of State Bank of India Act-Govemment of India, Mi11istry of Fi11a11ce Guidelines dated 23.6.1986-0fficers Se1vice Regulations Regn. 17-Banking Regulation Act; 1949. H 255 256 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. Pronwtion--4:andidate~From Senior Management Grade Scale V to Top Executive Grade Scale VI-Eligibility of-Promotional policy dated 7.3.1989-Modification in 1wmzs of-Made by Central Board of State Bank of India-Allegedly motivated to benefit certain candidate~onditions precedent for such allegations to succee~Held : person making such allega­ tion must conclusively show that intended benefici01ies wielded influence over all members of Board-Neither this condition fulfilled nor Chairnian or Directors impleade~Hence, petitioners could not be allowed to raise said allegations of mala [ides. Promotion--4:andidate~From Senior Management Grade Scale V to C Top Executive Grade Scale VI--4:onsideration of past record~Absence of unif 01111 appraisal system-Annual Confidential Rep01ts-Replaced by assign­ ment appraisal system throughout the Bank not simultaneously but in a phased manner from 1986 to 1990-Consequently, in case of some officers annual confidential rep01ts considered while in case of others assignment D appraisal reports considered-Held: absence of wzifornz appraisal system did not vitiate selection--4:onsideration of two types of repolts did not result in discrimination--4:onstitution of India, 1950, Alt. 14. Promotion--4:andidate~From Senior Management Grade Scale V to Top Executive Grade Scale VI-Past record for period which exceeded min- E imum length of service in post immediately below--Co11sideration of-Whether vali~Held : consideration of peifomzance of six years while minimum service for eligibility was four years did not cause prejudice to any officer. Promotion--4:andidate~From Senior Management Grade Scale V to F Top Executive Grade Scale VI--lnterview-Prescribed minimum 60% marks as eligibility criterion-Validity of-Held : inte1view marks represented only 25% of aggregate mar~No exaggerated weightage given to marks prescribed in interview. G Practice and Procedure : Affidavit-False allegation in--4:hallenge of promotion to Top Execu­ tive Grade Scale VI in State Bank of India in writ petition by petitione,­ F ederation-ln rejoinder affidavit, the then President of petitioner-Federa­ tion deposed that in fact only V, an officer of B01zk, had allotted marks on H the individual promotion appraisal f onns on basis of which list of candidates ALL INDIA STATE BANK OFFICERS FEDERATION v. U.O.l. 257 - prepared and signed by three members of Screening Committee-Supreme A Court directed the then President to verify on affidavit the said allegation specifying precise source of inf onnation-Supreme Co wt also wamed that if allegation was found false that also would have its own consequences-Presi- dent filed additional affidavit deposing that he derived inf onnation from V himself and another officer of Bank-Cliief General Manager (Personnel) of B ' Bank as well as two officen~ refe1Ted to in said additional affidavit, filed their own affidavits denying said allegation-Fwthennore, allegation not substan- tiated by photo copies of appraisal fonns of promotees-Held : In such circumstances, said allegation in rejoinder affidavit of the then President absolutely false-Tiie then President already apologised to Supreme Cowt for some mis-statements in an earlier affidavit-Supreme Court expressed its c disapproval and anguish over that matter-But did not dismiss petition in view of off er of Bank to contest the case on nwits-Since the then President once again made false statements in his affidavit despite said observations of Supreme Cowt, he dese1ved to be prosecuted-Howeve1; since he was no longer President of Federation and since prosecution might take fwther time, D instead of direct~ng him to be prosecuted, the petition dismissed with costs, quantified at Rs. 20,000 of which Rs. 10,000 to be paid by him personal- • ly-Constitution of India, 1950, A1t. 32-'-Judicial strictures. The petitioner-Federation filed a writ petition before this Court E challenging the new promotional policy framed by the respondent-Bank on 7 3.1989 relating to the promotion from the post of Senior Management Grade Scale V' to Top Executive Grade Scale VI. The said Policy was framed by the Central Board under paragraph 17 of the State Bank of India Officers (Determination of Terms and Conditions of Service) Order, 1979 which had been framed under Section 43 of the State Bank of India F Act, 1955. The State Bank of India (Supervising Staff) Service Rules, 1975 framed under Section 43 of the Act, dealt with various grade and scales of officers, conduct rules, salary, seniority, promotion, etc. From 1975 on- wards the Central Board approved a promotion policy under which assign- ment appraisals and interviews were made the two components of the G selection procedure. According to the petitioners zone of consideration from amongst the eligible officers had been varying from time to time. From 8.6.1982 onwards two years' service in the previous grade/scale became a condition of eligibility for promotion but the zone of considera- ., tion was limited to three to four times the number of vacancies. In the policy framed on 7.3.1989 the Central Board made three modifications H \ 258 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A which were as follows : (i) The minimum service in the previous grade/scale for being eligible for promotion was raised to four years. (ii) The maximum marks for interview and performance appraisal B were refixed as 50 and 150 instead of 100 and 100 respectively. (iii) The limitation of the zone of consideration was discontinued. From 1986 onwards the system of writing of annual confidential reports was substituted by a new appraisal system in which the appraisee c got an opportunity of writing self appraisal. However, this new system was not introduced throughout the Bank simultaneously but was completed in a phased manner only in 1990. The main contention of the petitioners was that it was unreasonable D not to limit the zone of consideration to three to fqur times of the number of vacancies. It was further contended by the petitioners that the change in the policy was completely arbitrary and without any reason; that the guidelines dated 23.6.1986 issued by the Government of India, Ministry of Finance under Regulation 17 of the Officers Service Regulations men- tioned that the number of persons to be considered for promotion from one scale to another should normally be restricted to three or four times the number of vacancies; that the promotion policy should not have been in conflict with the said guidelines; that the change in policy in 1989 was motivated with a view to benefiting respondents 4 and 5; that uniform system of appraising the work was not followed in that in case of some F employees annual confidential reports were considered and in case of others assignment appraisal reports were considered which had caused prejudice to a section of the employees of the Bank; that with the change in the eligibility norm to four years instead of the actual five/six service there was a need for reducing the consideration of period of appraisal from six years to four years; that as this had not been done the junior officers who were considered were at an advantageuus position because their performance in Scale V as well as in the lower Scale IV was considered whereas in the case of senior officers their performance in Scale V alone was considered because they had rendered more than five to six years service in that grade; that prescribing of 60 per cent marks for the H interview as an eligibility craeria was arbitrary, unfair and unjust; and ~ ,_ ' ~ ALL INDIA STATE BANK OFFICERS FEDERATION v. U.0.1. 259 that the percentage of marks in the viva voce examination should not have A not more than 15 per cent. Dismissing the petition, this Court HELD : 1. Having a reasonable eligibility condition, as four years in the present case, 8'ay become meaningless if all the eligible officers are not B considered for promotion. By increasing the number of years from two to four the field has been somewhat restricted and considering that selection has to be made only on the basis of merit, it is not unreasonable to give an opportunity to all the eligible officers to compete with each other and for the best persons to be selected. Therefore, it cannot be held that the C change of the policy brought by the Board in its meeting on 7.3.1989 in this regard is in any way bad in law. [271-G-H] Asliok Kumar Yadav v. State of Haryana, [1985) 4 SCC 417; VJ. Thomas & Ors. v. Union of India & Ors., [1985] Supp. SCC 7 and S.B. Mathur & Ors, v. Chief Justice of Delhi High Court, [1989] Supp. 1 SCC 34, D held inapplicable. 2. There is nothing wrong if the bank devised a policy defining the eligibility norms on a realistic basis and devised a system whereby the best available talent would be chosen to man the critical positions. Keeping this objective in view t~e changes in the promotion policy have been made. It is always for the employer to see how to promote and utilise the best talent available in the organisation. The promotion policy originally framed in the year 1975 has been amended from time to time. The changes have now been made in 1989 keeping in mind the requirement of the bank and based on the experience of the bank in regard to making selection for promotion. The changes so made cannot be regarded as arbitrary and the Court cannot sit in appeal and decide as to what is good for the institution. Under the new policy the petitioners are also eligible for consideration and they cannot have any grievance because certain persons who were eligible under the old policy, but in practice were not considered for promotion, are now G considered under the new policy. The object of the new policy seems to be not only to redress the injustice to those officers resulting on account of the difference between the rules and the practice but also with the object of selecting the best talent for the top executive posts. [274-H; 275-A-C] 3. The guidelines in question have been issued by the Government H 260 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A under the Regulations framed under the Banking Regulations Act, 1949 which Act does not apply to the State Bank of India. The said guidelines dated 23.6.1986 are addressed to the Chief Executi•:es of twenty nationalised banks and only a copy of the same was marked to the Chairman of the respondent bank. Furthermore as far as State Bank of India is concerned paragraph 17 of the State Bank of India Officers (Determination of Terms and Conditions of Service) Order, 1979 em· powers the Central Board or the Executive Committee to lay down a policy regarding promotion to all grades of officers in the Bank. The aforesaid guidelines which have been issued expressly relate to the nationalised banks, and not to the State Bank of India, and cannot be regarded as directions which are issued under Section 18 of the State Bank of India Act, 1955 as was sought to be suggested by the petitioners. [272-C-F] 4.1. The modification was approved by the Chairman and all the Directors who were present in the meeting of the Board. For an a!Iegation of ma/a fide to succeed it must be conclusively shown that respondents 4 D and 5 wielded influence over all the members of the Board who were present in the said meeting. No such allegation has been made. The decision to modify the promotion policy was taken by a competent authority, namely, the Central Board in a duly constituted meeting held on 7.3.1989 and it is not possible to accept that this change in the policy was brought about E solely with a view to help respondents 4 and 5. [274-C-D] 4.2. Moreover, the person against whom mala fides are alleged must be made a party to the proceeding. The allegation that p.olicy was amended with a view to benefit respondents 4 and 5 would amount to the petitioners contending that the Board of Directors of the Bank sought to favour F respondents 4 and 5 and, therefore, agreed to the proposal put before it. Neither the Chairman nor the Directors, who were present in the said meeting, have been impleaded as respondents. This being so the petitioners cannot be allowed to raise the allegations of Mala fide. [274-E-F] 5. It is no doubt that in the case of some employees annual confiden· G tial reports were considered and in the case of other employees assignment appraisal reports were considered. However, this cannot be a gdod ground for holding that the selection is vitiated. No particulars have been given in the writ petition in order to show that the officers in whose case that annual confidential reports were considered had suffered a disadvantage. Each H report of an officer, whether an annual confidential report or assignment ALL INDIA STATE BANK OFFICERS FEDERATION v. U.O.I. 261 appraisal report, bad to be considered on its own and the performance A assessed. There is nothing to suggest that such assessment on the basis of the annual confidential report or the assignment appraisal report could not have been given. It is, therefore not possible to hold that the considera· tion of two types of reports had resulted in any discrimination. (275-G; 276-C-D-E] B 6. The procedure of considering the assignments in respect of the positions held during the past six years was in vogue even when the eligibility criteria was two years which has how been revised to four years. Furthermore even in the case of some senior officers the assignments would cover a portion of their tenure as Scale IV officers. In considering such C reports what has to be seen is whether the assignment targets which are set have been satisfactorily met or not. It would not be very material as to in which scale the officer was while adjudging this aspect. Normally in order to assess the merit of an officer a period covering three assignments was considered to be necessary. This being so six years annual assignment reports had to be considered and such consideration could not be said to D have caused any prejudice to any officer. This contention, therefore, is without any substance. (277-F; G; HJ 7.1. There can be no rigid or hard and fast rule that the interview marks can only be 15 per cent and no more. The percentage of marks for E viva voce or interview which can be regarded as unreasonable will depend on the facts of each case. What the interview or viva voce marks should be, may vary from service to service and the office or position or the purpose for which the interview is to be held. But the interview marks should not be so high as to give an authority unchecked scope to manipulate or act in an arbitrary manner while making selection. Where merit can be best F judged by holding an interview there such marks may be high but each case will have to be judged on its own facts. Interview marks may be the minimal in such cases as relating to admission to a college. (278-B-C-D] Periakarnpan v. State of Tamil Nadu, [1971] 1SCC38 and Ajay Hasia G v. Kalid Mujib Sehrawardi, (1981] 1 SCC 722, relied on. 7.2. In the present case, the interview marks represent only 25 per cent of the aggregate, i.e. 200 marks. In order to be eligible a candidate is required to obtain 60 per cent of these fifty marks. Considering the fact that the selection has to be made for appointment to the top executive H A cadre and keeping in view the job requirements and the nature of respon­ sibility the bank has raised the minimum qualifying percentage from 50 per cent to 60 per cent. At the same time the total number of interview marks have been reduced from 100 to 50. Under the circumstances it cannot be contended that exaggerated weightage has been given to the B marks to be obtained in the interview. [279-G-H; 280-A] Lila Dhar v. State of Rajasthan, [1981] 4 SCC 159; State of U.P. v. Rafiquddin, [1987] Supp. SCC 401 and Mehmood Alam Tariq & Ors. v. State of Rajasthan & Ors., (1988] 3 SCC 241, relied on. C 8.1. In the rejoinder affidavit the then President of the petitioner- Federation deposed that in fact only V, an officer of the Bank had allotted the marks on the individual promotion appraisal forms on the basis of which a list of candidates was pr~pared by three members of the Screening Committee. This Court directed the then President to verify on affidavit D specifying the precise source of information from which the said allega­ tion was derived. This Court also warned that if the allegation was found • false that also would have its own consequences. The then President filed an additional affidavit deposing that he had derived the information from V himself and another officer of the Bank. The Chief General Manager (Personnel) of the Bank as well as the two officers, referred to in the said E additional affidavit, filed their own affidavits, denying the said allegation. Furthermore, the allegation was not substantiated by photo copies of the appraisal forms of the promotees. In such circumstances, the said allega­ tion in the rejoinder affidavit of the then President of the petitioner­ Federation is absolutely false. [280-A] 8.2. The then President had alre;ldy "tendered an unqualified appol­ ogy" to this Court for some mis-statements made in an earlier affidavit. This Court expressed its disapproval and anguish over that matter but did not dismiss the petition in view of the offer of the respondent-Bank to contest the case on merits. Since the then President had once again made G false statements in his affidavit despite the said observations of this Court he deserved to be prosecuted for having committed perjury. However, since he is no longer the President of the Federation and considering that prosecution may take further time, instead of directing him to be prosecuted, this writ petition is dismissed with costs which are quantified H at Rs. 20,000 of which Rs. 10,000 will be paid by him personally. [284-E-F] ', - ALLINDIASfATEBANKOFFICERSFEDERATIONv. U.O.L [KIRPAL,J.) 263 CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 507 of A '1989. (Under Article 32 of the Constitution of India.) WITH Writ Petition (C) No. 1260 of 1989. Under Article 32 of the Constitution of India. Rajinder Sachher, R. Vasudevan, D.S. Chauhan, K.D. Saini for Lawyers Inn for the Petitioners. C Dr. AF. Julian and A Mariarputham for the Petitioner. Shanti Bhushan, Shanti Swamp Sharma, Sanjay Kapur, Rajiv Kapur, AV. Rangam and A Ranganathan for the Respondents. The Judgment of the Court was delivered by D KIRPAL, J. The All India State Bank Officers Federation, which is registered as a trade union of the officers of the State Bank of India working throughout the country, is seeking to challenge a new promotional policy framed by the respondent bank on 7th March, 1989 relating to the E promotion from the post of Senior Management Grade Scale V to Top Executive Grade Scale VI. The respondent bank was established by the State Bank of India Act, 1955 (for short 'the Act') and according to Section 17 of the said Act its Management is entrusted to the Central Board constituted under the Act. F Under Section 43 of the said Act the Bank is empowered to appoint such number of officers, advisers and employees as it considers necessary or desirable for the efficient performance of its functions. Sub-section (1) of Section 43 gives the bank the power to determine the terms and conditions of the appointment of such persons. G The bank framed State Bank of India (Supervising Staff) Service Rules, 1975, in exercise of its powers under Section 43 of the Act. These rules deal with various grades and scales of officers, conduct rules, salary, seniority, promotion etc. Again, under Section 43 of the Act, the Central Board of the bank framed the State Bank of India Officers (Determination H 264 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A of Terms and Conditions of Service) Order 1979 (hereinafter referred to as 'DTCS Order'). This Order deal~ with various grades and scales of officers, salary perquisites, appointments, probation, confirmation, promo­ tio~, age of retirement rules, terminal benefits etc. The grades and scales of officers are as follow : "From 1.10.79 (consequent upon revision of service conditions) Junior Management Grade I and all officer Gr. II Middle Management Grade Scale II Middle Management Grade Scale II.I Senior Management Grade Scale IV Senior Management Grade Scale IV-A Senior Management Grade Scale V Top Executive Grade Scale VI General Managers Top Executive Grade Scale VII Chief General Managers From 1.2.84 (consequent upon wage revision) Junior Management Gr. I Middle Management Grade Scale II Middle Management Grade Scale III Senior Management Grade Scale IV Senior Management Grade Scale V Top Executive Grade Scale VI Dy. General Manager Top Executive Grade Scale VII - General Managers Top Executive Grade Special Scale I-Chief General Managers Top Executive Grade Special Top Executive Grade Special Scale I Dy. Managing Directors Seale II- Dy. Managing Directors" Paragraph 17 of the DTCS Order specifically deals with promotion of staff and is as under : "Promotions to all grades of officers in the Bank shall be made - -· ALLINDIASTA1EBANKOFFICERSFEDERA110Nv. U.0.1. (KIRPAL,J.) 265 in accordance with the policy laid down by the Central Board or A the Executive Committee from time to time." In exercise of the powers under this paragraph the Central Board of the Bank has, from time to time, been determining the policy for promotion to various grades of scales of officers. The policy for promotion from Senior Management Grade Scale V to Top Executive Grade Scale VI, with which we are concerned in the present petition, and Top Executive Grade Scale VI to Top Executive Grade Scale VII was framed by the Central Board in its meeting held on 28th November, 1975. Prior to 1975 the promotion policy which was in force for promotion to Top Executive Grade Scale VI and to Scale VII did not provide for any selection proce­ dure. From 1975 onwards the Central Board approved a promotion policy under which assignment appraisals and interviews were made the two components of the selection procedure. Ac,cording to the petitioners zone of consideration from amongst the eligible officers had been varying from time to time. Generally the Bank had been following a ratio of 1 : 3 or 1 : D 4 between the number of vacancies and the number of candidates. The Central Board at its meeting held on 8th June, 1982 approved a modifica- tion in the promotion policy in terms of which officers with two years service in Senior Management Grade Scale V were to be eligible for promotion to Top Executive Grade Scale VI and officers with two years service in Top Executive Grade Scale VI were to be eligible for promotion to Top Executive Grade Scale VII. It is an admitted fact that as the zone of consideration was restricted to three to four times the number of vacancies, the candidates who were actually considered for promotion to Top Executive Grade Scale had put in a minimum five to six years of service in Scale IV, even though the minimum eligibility condition was of only two years service. In its meeting held on 7th March, 1989, the Central Board of the Bank made two modifications in the then existing policy which were as · follow: G (i) The eligibility criterion for consideration for promotion to Top Executive Grade Scale VI was refixed at four years service in the previous grade/scale, instead of the existing two years service. (ii) Previously evaluation of the eligible officers was done by allot­ ment of marks on the performance appraisal and interview. An aggregate H A of 200 marks were being allotted; 100 marks used to be allotted for performance appraisal and another 100 marks for interview. The qualifying marks both for performance appraisal and interview were 60 per cent. Now as a result of the modification made on 7th March, 1989 out of the aggregate of 200 marks, 150 marks were now allotted for performance B appraisal (in lieu of the earlier 100 marks) and 50 marks (in lieu of the earlier 100 marks) had been allotted for interview. The qualifying marks for performance appraisal had been changed from 60 per cent to 80 per cent, while the qualifying marks for interview remained unaltered at 60 per cent. C The manner in which the performance has been appraised has also undergone a change from time to time. Since long there had been in force a system of writing annual confidential reports. Since 1974 or 1975 a system of assignment appraisal was also introduced by the bank. In the year 1986, according to the petitioners, the bank brought about further change in the D system of performance appraisal. The old system of writing of annual confidential reports was substituted by a new and more open and par­ ticipatary appraisal system. According to the writ petition in this new system the appraisee got an opportunity of writing self appraisal. However, this new system was not introduced throughout the bank simultaneously. The old system of recording of annual confidential reports remained in E position till that was gradually replaced by the self appraisal system. We were informed that now since 1990 the system invoked is ortly that of self appraisal and the old system of writing annual confidential reports no longer exists. The writ petition has been filed challenging the aforesaid modifica­ tion in the promotion policy which was approved by the Central Board in its meeting held on 7th March, 1989. There are various grounds of attack to the resolution approving the new promotion policy. It is also the case of the petitioners that the manner in which the process of promotion has been undertaken was defective. The main thrust of arguments of Mr. Rajindar Sachar, learned senior counsel appearing on behalf of the petitioners, was that it was unreasonable not to limit the zone of consideration to three to four times the number of vacancies. As a result of the new policy, it was submitted, a much larger H number of relatively junior officers have been considered and promoted. ALLINDIASfA'IEBANKOFFICERSFEDERATIONv. U.O.I. (KIRPAL,J.] 267 In order to show that injustice had been done to senior eligible officers, as A a result of the change in the policy, our attention was drawn to the following statement with regard to the filling up of 58 vacancies in Scale VII on selection made in 1989 : No. of officers No. of officers No. of who qualified who qualified officers B with 70% marks with 60% marks promot in the past in the interview ed . performance Total number of officers considered c under the impugned policy and belonging to 270 104 58 the 1982, 1983 1984 and left over of earlier batches. D 498 Number of officers belonging to the 1982 and left over of earlier 102 62 16 batches out of the total E of 498 officers considered. 212 The contention on behalf of the petitioners was that eligible candidates p after the 1982 batch should not have been considered and if the zone of consideration had been limited to three to four times then the filed of choice would have been restricted and only those officers who were in Scale V in the year 1982 or earlier would have been considered and promoted. In support of his contention that doing away with the zone of consideration was not reasonable, reliance was placed on the decision of G this Court in the case of Ashok Kumar Yadav v. State of Haryana, [1985) 4 sec 417. Ashok Kumar Yadav's case was concerned with the recruitments made by the Haryana Public Service Commission to 61 posts in Haryana H 268 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A Civil Service (Executive) and other allied services. The relevant rules provided that a competitive examination was to be held consisting of written examination in different papers having an aggregate of 700 marks ahd a vive voce examination carrying 200 marks. The rules, inter alia, further provided that no candidate was eligible to appear in the vive voce B test unless he obtained 45 per cent marks in aggregate in all the subjects. In response to the said advertisement 6000 candidates applied and ap­ peared for the written examination and out of these over 1300 secured 45 per cent marks and had thus qualified for being called for the interview or the vive voce examination. Though originally the recruitment was only for C 61 posts but during the time when the selection process was under way a total number of 119 posts became available. The Haryana Public Service Commission invited all the 1300 and odd candidates who had qualified for the viva voce test and the interview lasted for almost half a year. On the basis of the total marks obtained in the written examination as well as viva voce test 119 candidates were selected and recommended by the Commis- D sion to the State Government. Some of the candidates who were not selected filed a writ petition in the Punjab and Haryana High Court challenging the said selection. Five of the selected candidates, including Ashok Kumar, were impleaded as respondents. E The Division Bench of the High Court allowed the writ petition and held that the Haryana Public Service Commission should not have called for interview all the candidates who had obtained more than 45 per cent marks in the written examination and the number of candidates to be called for interview should not have exceeded twice or thrice the number of vacancies required to be filled. This was one of the grounds on which the selection of Ashok Kumar and other candidates was quashed. Thereupon appeals were filed by Ashok Kumar Yadav and the State of Haryana. Their appeal was allowed by this Court and the selection made by the Haryana Public Service Commission was upheld. While dealing with the submissions relating to the Haryana Public Service Commission calling the 1300 and G odd candidates for viva voce test, who had secured 45 per cent or more marks in the written examination for only 61 seats, it was observed by this Court that merely because minimum qualification for eligibility to appear at the viva voce test for a candidate was to obtain at least 45 per cent marks in the aggregate in the written examination the Haryana Public Service H Comn1ission was under no obligation to call for viva voce test all the ALLlNDIASTAIBBANKOFFICERSFEDERATIONv. U.0.1. [KIRPAL,J.) 269 . candidates who satisfied the minimum eligibility requirements. It was open A to the Commission to call for viva voce test a limited number of candidates who figured at the top of the list. After referring to Kothari Committee's Report on "Recruitment Policy and Selection Methods for the Civil Service Examination" at page 447 it was observed as follows : "We are therefore of the view that where there is a composite test consisting of a written examination followed by a viva voce test, the number of candidates to be called for interview in order of the marks obtained in the written examination, should not exceed twice or at the highest, thrice the number of vacancies to be filled. The Haryana Public Service Commission in the present case called for C interview all candidates numbering over 1300 who satisfied the minimum eligibility requirement by securing a minimum of 45% marks in the written examination and this was certainly not right, but we may point out that in doing so, the Haryana Public Service Commission could not be said to be actuated by any mala fide or D oblique motive, because it was common ground between the par- ties that this was the practice which was being consistently followed by the Haryana Public Service Commission over the years and what was done in this case was nothing exceptional." Relying upon the aforesaid passage it was strongly contended by Mr. Sachar that the policy of 7th March, 1989 which did away with the concept of zone of consideration was clearly contrary lo the aforesaid observations of this Court in As/wk Kumar Yadav's case. In our opinion Aslzok Kumar Yadav's case can be of no assistance to the petitioners. It is no doubt true that this Court did make the aforesaid observation that the number of candidates to be called for interview should not exceed twice or at the highest thrice the number of vacancies to be filled. Nevertheless after making this observation the Court posed a ques- tion as to "whether this had any invalidating effect on the selections made G by the Haryana Public Service Commission". The answer to this was provided in the subsequent paragraph in the following words "We do not think that the selection made by the Haryana Public Service Commission could be said to be vitiated merely on the ground that as many as 1300 and more candidates representing more than twenty times the number of H 270 SUPREME COURT REPORTS [1996} SUPP. 6 S.C.R. A available vacancies were called for mterview, though on the view taken by us that was not the right course to follow and not more than twice or at the highest thrice the number of candidates shoulcl have been called for the interview. Something more than merely calling an unduly large number of candidates for interview must be shown in order to invalidate the B selections made." It is clear from the aforesaid that this Court 'Vas of the opinion that while it was desirable that the number of candidates who were called for viva voce examination should not be unduly large but it did not agree with the conclusion of the High Court that calling large number of candidates C invalidated the selection. In other words not having a restricted zone of consideration was not regarded as illegal or bad in law. An unduly large number of candidates to be intervie~ed may make it impossible to carry out a satisfactory viva voce test and the interview may tend to be casual, superficial or sloppy. The above quoted observations are only words of D caution lest the viva voce test be reduced to farce. Notwithstanding the fact that the Court did not approve of a large number of candidates being called for interview, nevertheless the selections so made by the Haryana Public Service Commission were not invalidated by this Court and the judgment of the High Court was set aside and tl!e selection made was upheld. Whereas in As/wk Kumar Yadav's case for 61 vacancies, which were originally notified, 1300 and 9dd candidates were called for viva voce examination and this Court held that this was not invalid, in the present case for 58 vacancies only 498 eligible officers were considered for promo­ tion. Applying the ratio of decision of As/wk Kumar Yadav's case to the facts of the present case it cannot be said that the policy of considering all the eligible officers for promotion, without having a restricted zone of consideration is in any way bad in law. In fact in this manner no eligible officer can have a grievance, which may be legitimate, that he was not considered even though he was eligible. Our attention was also drawn to the case of V.J. Thomas and Ors. v. Union of India and Ors., [1985] Supp. SCC 7. The decision in this case has no application here because there the Court was concerned with a case where it was held that if the vacancies were few, and the candidates were "' H disproportionately large in number, department could make a classification AU...INDIASfA1EBANKOFFICERSFEDERATIONv. U.0.1. (K.IRPAL,J.] 271 amongst eligible candidates on the basis of their lenght of experience so as A to restrict the examination only for those having longer service leaving others to appear in the next examination. Similarly the decision in S.B. Mathur and Ors. v. Chief Justice of Delhi High Court and Ors., [1989] Supp. 1 SCC 34 holding that the zone of consideration or field of choice can be limited to a multiple of number of vacancies, on the basis of seniority, has B no application to the point in issue here. In fact the Court referred to the decision in Ashok Kumar Yadav's case (supra) and, in principle to the observation on which reliance has been placed by Mr. Sachar, and in was observed at page 51 para 19 as under : "The Bench however, went on to hold that, in its view, merely C because the Haryana Public Service Commission had called all the 1300 candidates who obtained 45 per cent or more marks in the written examination to appear in the interview that did not in­ validate the selection made. This decision points out that the minimmn eligibility qualification has to be kept distinct from the D -zone of consideration and even if there are a large number of candidates who satisfy the minimum eligibility requirement it is not always required that they should be included in the zone of consideration, it being open to the authority concerned to restrict the zone of considera!ion amongst the eligible candidates in any E reasonable manner." Our attention has not been drawn to any decision or observation of this Court which has taken a contrary view. Having a reasonable eligibility condition, as four years in the present case, may become meaningless if all the eligible officers are not considered for promotion. By increasing the F numbers of years from two to four the field has been somewhat restricted and considering that selection has to be made only on the basis of merit, it is not unreasonable to give an opportunity to all the eligible officers to compete with each other and for the best persons to be selected. Moreover, this case relates to in-service promotion while Ashok Kumar Yadav was a G case of direct recruitment. We are, therefore, unable to agree with the petitioners that the charge of the policy brought by the Board in its meeting on 7th March, 1989 in this regard is in any way bad in law. It was then contended that on 23rd June, 1986 the Government of India, Ministry of Finance, had issued guidelines under Regulation 17 of H 272 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A the Officers Service Regulation. In the said guidelines it was mentioned that the number of persons to be considered for promotion from one scale to another should normally be restricted to three to four times the numbers of vacancies for which the promotions are being considered. The modifica­ tion on 7th March, 1989 in the promotion policy, it was submitted, should B not have been done in a way which was in conflid with the said guidelines and, therefore, doing away with the zone of consideration was not war­ ranted. We do not find any merit in this contention, for more reasons than one. Firstly, these guidelines have been issued by the Government under C the Regulations framed under the Banking Regulations Act, which Act does not apply to the State Bank of India. The said letter of 23rd June, 1986, enclosing the guidelines, is addressed to the Chief Executives of twenty nationalised banks and only a Copy of the same was marked to the Chairman of the respondent bank. As far as the State Bank of India is D concerned the central Government can issue directions under Section 18 of the State Bank of India Act, 1955 and no directions in this behalf have been issued. Furthermore as far as State Bank of India is concerned paragraph 17 of the DTCS Order of 1979, which has been quoted earlier, empowers the Central Board or the Executive Committee to lay down a policy regarding promotions to all grades of officers in the Bank. The E aforesaid guidelines which have be~n issued expressly relate to the nationalised banks, and not to the State Bank of India, and cannot be regarded as directions which are issued under Section 18 of the State Bank of India Act, as was sought to be suggested by the counsel for the petitioners. It was then contended by Mr. Sachar that the change in the policy in 1989 was motivated with a view to benefit respondents 4 and 5 . .The allegation in the writ petition in this regard was that respondent No. 4 was working as Chief Officer (Industrial Relations) in the central office of the bank and was of 1984 batch officer in scale IV. Respondent No. 5 was also G a scale V officer of 1983 batch and was working as Private Secretary to the Chairman of the Bank at Central Office, Bombay. It was alleged that on account of the positions so held they wielded a lot of power in determining the personal policies of the bank. These respondents, it was alleged, succeeded in getting some imaginary hardships of junior scale IV officers H highlighted in the conference of Chief General Managers held in January, ALLINDlASfATEBANKOFFICERSl<".EDERATIONv. U.0.1. [KIRPAL,J.] 273 1988. In proof of the influence which respondents 4 and 5 had, it was A submitted· that the memorandum dated 2nd March, 1989 containing the proposal for the amendment in the promotion policy was not included as an agenda item of the meeting of the Central Board which was to be held on 7th March, 1989, and was not circulated in advance. This memorandum was presented before the Boai;d as a table item and the Chairman, it was B contended, ought not to have allowed the introduction of this memoran­ dum without its being included as a regular item on the agenda. The allegations relating to mala ft.des so made in the writ petition have been denied in the affidavit failed on behalf of the respondent bank. It has been explained therein that the Chief General Managers and other C top ex:!wtives are concerned with the development of human resources. As such, all po!icy matters, before being formulated, are discussed with Chief General Managers at an appropriate forum. It is after such a con­ ference was held that various suggestions and views had emerged. They were examined by a group headed by a Senior Managing Director and D other !'eni.or functionaries. A report submitted by the group was then examin.?d by the Central Management Committee of the bank which decided that the recommendations of the Cadre Management Group, relating to promotions to Top Executive Grade Scale VI and VII, be accepted and shuuld be implemented from the current year itself. This decision was taken by the Central Management Committee in late E February, 1939. As certain vacancies in these Scales VI and VII: d been identified, the Central Management Committee felt that these positions should be fitted up as early as possible so that important positions in the bank do not remain vacant. On 2Jd March, 1989 the Deputy Managing Director (Pc,rsonnel and Systems) prepared and signed a memorandum F seeking the approval of the Central Board of the said policy. A meeting of the Central Board had already been fixed for 7th March, 1989 and the next meeting was expected to be held after one and a half on two months. With a view to t;xpedite the consideration of the change in the policy the Deputy Managing Director sent the memorandum to the Managing Director and the Chairman. The Chairman and the Managing Director agreed that the G memorandum be put to the Central Board at its meeting to be held on 7th March, 1989. By that time the usual agenda items fixed earlier for the Central Board meeting had already been circulated. It was in these cir­ cumstances that the item was placed as a table item at the Central Board meeting held on 7th March, 1989 with the consent of the Chairman and H 274 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A the Directors who were present at the meeting. It was also denied that the policy had been modified wit~ a vi~w to help respondents 4 and 5. Allega­ tions of mala fides were denied. In view of the aforesaid explanation of the respondent bank, which we see no re~son to disbelieve, it is clear that the petitioners have made baseless and reckless allegations of mala fide. Respondents 4 and 5 ob­ viously had no direct or indirect wle to play either in the formulation of the policy or in the memorandum being placed as a table item to be taken up for consideration in the meeting held on 7th March, 1989. The modifica­ . tion was approved by the Chairman and all the Directors who were present C in the meeting of the Board. For an allegation of mala fide to succeed it must be conclusively shown that respondents 4 and 5 wielded influence over all the members of the Board who were present in the said meeting. No such allegation has been made. The decision to modify the promotion policy was taken by a competent authority, namely, the Central Board in a D duly constituted meeting held on 7th March, 1989 and we are unable to accept that this charge in the policy was brought about solely with a view to help respondents 4 and 5. There is yet another reason why this contention of the petitioners must fail. It is now settled law that the person against whom ma/a fides are alleged must be made a party to the proceeding. The allegation that the policy was amended with a view to benefit respondents 4 and 5 would amount to the petitioners contending that the Board of Directors of the Bank sought to favour respondents 4 and 5 and, therefore, agreed to the proposal put before it. Neither the Chairman nor the Directors, who present in the said meeting, have been impleaded as respondents. This being so the petitioners cannot be allowed to raise the allegations of mala fide, which allegations, in fact, are without merit. It was also submitted that the change in the Policy was completely arbitrary and without any reason. We are unable to accept this contention. G The respondent bank is a business organisation and it must identify the best available talent in the organisation for.holding challenging assignments in the top executive grades. There is nothing wrong if the bank devised a policy defining the eligibility norms on a realistic basis and devised a system whereby the best available talent would be chosen to man the critical H positions. Keeping this objective in view the changes in the promotion ALLINDIASTATEBANKOFFICERSFEDERATIONv. U.0.1 [KIRPAL,J.) 275 policy have been made. It is always for the employer to see how to promote A and utilise the best 'talent available in the organisation. The promotion policy originally framed in the year 1975 has been amended from time to time. The changes have now been made in 1989 keeping in mind the requirement of the bank and based on the experience of the bank in regard to making selection for promotion. The changes so made cannot be regarded as arbitrary and the Court cannot sit in appeal and decide as to what is good for the institution. Under, the new policy the petitioners are also eligible for consideration and they cannot have any grievance because certain persons who were eligible under the old policy, but in practice were not considered for promotion, are now considered under the new policy. The object of the new policy seems to be not only to redress the injustice to those officers resulting on account of the difference between the rules and the practice but also with the object of selecting the best talent for the top executive posts. It was next contended that a uniform system of appraising the work D was not followed which has caused prejudice to a section of the employees of the bank. Prior to April 1986 appraisal used to be on the basis of the annual confidential reports. With effect from April, 1986 a new system known as annual appraisal system was introduced. Under the new system the appraisal report states with the writing by 1.n employee himself, which is called self appraisal. It is then forwarded to the superior authorities who E record their own remarks on the performance of the employee concerned. At already noticed this self appraisal system was not applicable in respect of all the candidates. The comparative merit was assessed by taking into consideration the annual confideRtial reports in the case of some employees and the new performance appraisal reports in the case of others. F Alleging that this has caused prejudice to those employees whose annual confidential reports were considered the submission made was that the procedure so adopted was discriminating. It is no doubt true that in the case of some employees annual confidential reports were considered and in the case of other employees G assignment appraisal reports were considered. In our opinion, however, this cannot be a good ground for holding that the selection is vitiated. Firstly, no particulars have been given is the writ petition in order to show that officers in whose case the annual confidential reports were con~idered and suffered a disadvantage. If the petitioners were serious in raising this H 276 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A contention they would have given particulars as to how many of the 58 officers who were selected were those in whose case annual confidential reports were considered and how many were those in whose case the assignment appraisal reports were considered. In the absence of this basic fact it cannot be presumed thatthe section of the employees whose annual . confidential reports were considered had suffered a disadvantage. Further­ more confronted with the situation whether the performance of the officer · was recorded in two different types of reports the managements had, as of necessity, to consider the same and evaluate them. Even though the assign­ ment appraisal reporting system may be an improvement in the existing system of writing annual confidential reports, the performance of the officer concerned could have been determined from the annual confiden­ tial reports. In fact this was being done before the gradual introduction of appraisal reporting system. Each report of an officer, whether an annual confidential report or assignment appraisal report, had to. be considered on its own and the performance assessed. It is only if they received 70 per D cent marks on the basis of this assessment that they were eligible for being called for the interview. There is nothing to suggest that such assessment, and assignment of marks, on the basis of the annual confidential report on the assignment appraisal report could not have been given. it is, therefore, not possible to hold that the consideration of two types of reports had resulted in any discrimination. ln reply the respondent bank in its affidavit has explained as follows: ~ "So far as assignment appraisal are eoncerned the assignment in respect of positions held during the past 6 years are assessed irrespective of the posts held. This has been followed even under AILINDIASfA1EBANKOFFICERSFEDERATIONv. U.0.1. (KIRPAL,J.] 277 the pre-revised promotion policy, i.e., when eligibility criterion was A 2 years of same continued even when officers were considered after 516 years. For the impugned promotion as well the same thing has been followed. There was no need to reduce the period of assign­ ment. Appraisal to be considered from 6 years to 4 years. It is reiterated that the Annual Confidential reports for 5 years and B Assignment Appraisal for 6 years irrespective of the assignment held have been uniformly assessed in respect of officers. Since 5 years Annual Confidential Reports were to be considered, reports starting from as on 31.12.84 to 31.12.88 on thereafter were con­ sidered in respect of all officers. As such, even in respect of an officer in Senior Management Grade Scale V of 1.8.84 batch C reports as Scale V have only been assessed. So far as the Assign­ ment Appraisal Reports are concerned, it is submitted that, an assignment covers generally a period of two to three years. Since the last 6 years assignment appraisal is taken into consideration, the oldest assignment will relate to the year 1983 assignment would D normally cover a period commencing from 1980-81: Thus even in respect of a 1.8.82 batch Scale V officer, assignment could and would cover a portion of his assignment as Scale IV officer. Thus the contention that respondent Nos. 4 and 5 (or other Scale V offic~rs of 1.8.83 and 1.8.84 batches) have got any special ad- vantages are not well founded." E The aforesaid explanation clearly shows that the procedure of con­ sidering the assignments in respect of the positions held during ~e past six years was in vogue even when the eligibility criteria was two years which has now been revised to four years. Furthermore even in the ca~e of some F senior officers the assignments would cover a portion of their tenure as Scale IV officers. In considering such reports what has to be seen is whether the assignment targets which are set have been satisfactqrily met or not. It would not be very material as to in which scale the officer was while adjudging this aspect. It was submitted by Mr. Shanti Bhushan, learned senior counsel appearing for the respondents that each assignment G covers two years. Normally in order to assess the merit of an officer a period covering three assignments was considered to be necessary .. This being so six years annual assignment reports had to be considered and we do not find that such consideration could have caused any prejudice to any officer. This contention, therefore, is without any substance. H 278 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A It was also contended that prescribing of 60 per· cent marks for the interview as an eligibility criteria was arbitrary, unfair and unjust. It was further submitted that the percentage of marks in viva voce examination should not have been more than 15 per cent. We do not find any merit in this contention. There can be no rigid or hard and fast rule that the interview marks can only be 15 per cent and no more. The percentage of marks for viva voce or interview which can be regarded as unreasonable will depend on.the facts of each case. Decisions of this Court show that no rigid rule, relating to percentage of marks for interview of general universal application can .or has been laid down. What the interview on viva voce marks should be may vary from service to service and the office or position or the purpose for which the interview is to be held. But the interview marks should not be so high as to give an authority unchecked scope to manipulate or act in an arbitrary manner while making selection. Where merit can be best judged by holding an interview there D such marks may be high but each case will have to be judged on its own facts. Interview marks may be the minimal in such cases as relating to admission to a college as held by this Court in Periakarnpan v. State of Tamil Nadu, [1971] 1 SCC 38 and Ajay Rasia v. Khalid Mujib Sehrawardi, [1981] 1 SCC 722. In Lila Dhar v. State of Rajasthan, [1981] 4 SCC 159 this Court, on the other hand, held that in some cases relating to recruitment E from amongst persons of matured personality holding of an interview may be the only way subject to basic and essential requirements being satisfied. The following observations in this regard made in Lila Dhar's case are very apposite: "There are of course, many services to which recruitment is made from younger candidates whose personalities are on the threshold of development and who show signs of great promise, and the discerning may in an interview test, catch a glimse of the future personality. It the case of such services, where sound selection must combine academic ability with personality promise, some weight has to be given, though not much too great a weight, to the interview test. There cannot be any rule of thumb regarding the precise weight to be given. It must vary from service to service according to the requirements of the service, the minimum qualifications prescribed, the age group from which the selection is to be made, the body to which the task of holding the interview ALL INDIA SfAIB BANK OFFICERS FEDERATION v. U.0.1. (KIRP AL, J.) 279 testis proposed to be entrusted and a host of other factors. It is A a matter for determination by experts. It is a matter for research. It is not for courts to pronounce upon it unless exaggerated weight has been given with proven or obvious oblique motives. The Kothari Committee also suggested that in view of the obvious importance of the subject, it may be examined in detail by the Research Unit of the Union Public Service Commission. (emphasis supplied)" Again in the State of U.P. v. Rafiquddin Ors., [1987) Supp. SCC 401 dealing with a case relating to U.P. Civil Service (Judicial Branch) Rules, 1951 the prescription of 35 per cent qualifying minimum marks for viva C voce test was upheld. In this connection it was observed that if any minimum marks either in the written test or in viva voce test are fixed by the Public Service Commission so as to determine the suitability of a candidate the same has to be respected. It is not necessary to multiply the number of cases in this regard D except to notice the decision of this Court in Mehmood Alam Taliq and Ors. v. State of Rajasthan and Ors., [1988] 3 SCC 241. This case related to recruitment by the Public Service Commission to certain branches of service under the State by a scheme of competitive examination. The Division Bench of the Rajasthan High Court had declared the rules which E required that a candidate must secure a minimum of 33 per cent of the marks prescribed for the viva voce examination as being unconstitutional. While allowing the appeal arising from the said judgment this Court held that considering the nature of the services for which the recruitment was to be made the provision in the rules requiring the candidate to obtain a minimum of 33 per cent of marks in viva voce test could not be regarded F as bad in law. Applying the ratio of the aforesaid decisions in this case we find that the interview marks represent only 25 per cent of the aggregate, i.e., 200 marks. In order to be eligible a candidate is required to obtain 60 per cent G of these fifty marks. Considering the fact that the selection has to be made for appointment to the top executive cadre and keeping in view the job requirements and the nature of responsibility the bank has raised ti~~ minimum qualifying percentage from 50 per cent to 60 per cent. At the same time the total number of interview marks have been reduced from 100 to 50. Under the circumstances it cannot be contended that exag- H 280 SUPREME COURT REPORTS 11996] SUPP. 6 S.C.R. A gerated \\'~ight has been given to the marks to be obtained in the interview. As already noticed the process of selection contemplates the assess­ ment of the annuai reports. In the rejoinded affidavit filed by one Sh. Urned Singh, the then President of the petitioner Federation, it was conteded as follows: "In fact iri the impugned promotions only one person Shri V.K. Mehrotra, General Manager has allotted marks on the individual promotion appraisal forms. A list of candidates was prepared and the marks allotted by Shri Mehrotra were copied and then the list was got signed by the three Deputy Managing Directors. This can be ascertained form the records itself." In view of the aforesaid averment this Court in its order dated 27th July, 1990 noted that this was a very serious allegation and as the Court did not firid from the affidavit the basis on which this allegation was made, D it directed Sh. Urned Singh "to verify on affidavit this allegation and to state specifically whether the allegations have been made on his personal knowledge or on the basis of information believed to be true and the preuse (sic) source of the information from whom the information was derived will have to be specifically stated as otherwise credence whatever can be given E to allegation of this type. If the allegation is to be found false that also will have its own consequences." By this order the Court also required that the file containing the photo copies of the appraisal records of all the persons promoted should be tendered in the Registry and the same was required . to be kept by the Registrar in a sealed cover. F ·Pursuant to the aforesaid order a further affidavit dated 10th August, 1990 was filed in this Court by Sh. Urned Singh. In paragraph 2 of this affidavit he stated that the averments made by him in his rejoinder affidavit were based on the information derived by him from Sh. V.K. Mehrotra and one Sh. R.P. Rastogi, the then Deputy General Manager, Central Office, Bombay. Elaborating this it was stated that the deponent had met Sh. V.K. G Mehrotra in the room of the P.A. to the General Manager (Planning), State. Bank of India, New Delhi on or around 28th April, 1989. It is at that time Sh. V.K. Mehrotra is alleged to have informed Sh. Urned Sing that he had been called by the Central Office in connection with the awarding of marks for promotion appraisals. It was further stated in this affidavit of Sh. Urned H Singh that Sh. R.P. Rastogi had told him that marks on the individual ( ALLINDIASTAIBBANKOFFICERSFEDERATIONv. U.0.1. [KIRPAL,J.J 281 promotion appraisal forms were awarded by Sh. V.K. Mehrotra and the A statement of marks in respect of various candidates was signed by the Screening Committee comprising of the three Deputy Managing Directors. In response to the aforesaid additional affidavit of Sh. Urned Singh a counter affidavit dated 12th October, 1990 of Sh. M.N. Sheorey, Chief General Manager (Personnel) of the respondent bank was filed. In this B affidavit Sh. Sheorey stated that Sh. Umed Singh was incorrect in stating that Sh. V.K. Mehrotra had allotted marks on individual appraisal forms. Explaining the procedure which was actually followed Sh. Sheorey, in paragraphs 4 and 5 of this affidavit observed as follows : ''That in March 1989 an office order to the following effect had been issued by the Chairman of the State Bank of India which is being set out hereunder : "As per the extant procedure, the recommendations received from the Circles and Central Office departments, for promo- D tion to Top Executive Grade Scale, VI and VII are processed by Personnel Department, as per the laid down norms. Thereafter, the officers who fulfil the norms are called for interview. From the current year, it is proposed to have a second stage screening of all these reports after they are E processed by the Personnel Department. The list of the offi­ cials to be interviewed will be finalised thereafter. The com­ mittee comprising Shri B. Gupta, Deputy Managing Director (OSD), Shri M.C. Sharma, Dy. Managing Director (Agricul- ture & Rural Banking), and Shri B.K. Mazmudar, Deputy Managing Director (Personnel & Systems) will be the mem- F hers of the Screening Committee. The necessary secretarial support will be provided by the Chief General Manager (Personnel & HRD)." Each and every promotion appraisal form was scrutinised by the Screening Committee consisting of 3 Deputy Managing Directors G and it was the Screening Committee which used to finally deter­ mine the marks to be given to different officers in respect of each promotion appraisal form. What the deponent as Chief General Manager (Personnel and HRD), since redesignated as Chief General Manager (Personnel), did was to provide assistance to the H 282 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. deliberations of the Screening Committee. The final marksheet was accordingly signed by all the 3 members of the Screening Commit­ tee. It is submited that, I, as Chief General Manager, Personnel and HRD, in view of about 500 candidates' appraisal forms being involved, had taken assistance in arranging/processing the papers from Shri R.P. Rastogi who was the Dy. General Manager (Per­ sonnel Administration) as also Shri V.K. Mehrotra·who had earlier been the Chief Officer (presently known as Dy. General Manager) of Personnel Administration Dept. before putting them up to the Screening Committee." Along with this an, affidavit of Sh. V.K. Mehrotra was also filed where, while referring to the earlier statement of Sh. Urned Singh alleging that Sh. V.K. Mehrotra had allotted marks on the individual promotion appraisal forms, it was categorically stated that the said statement was absolutely D false. Sh. R.P. Rastogi, another officer mentioned in the affidavit of Sh. Urned Singh, has also filed an affidavit in this connection in which he has stated as follows : "Mr. Urned Singh never asked me at any time any question relating to the processing of the promotion papers nor told me anything as to what Mehrotra told him. These allegations are pure figments of deponent's imagination. With regard to furt~er allegation that I told the deponent that while marks on the individual promotion forms were awarded by Shri V.K. Mehrotra these were copied in a separate paper and signed by three Deputy Managing Directors, firstly. I never told anything to Mr. Urned Singh and secondly the second fact itself is not true." The photo copies of the documents including the appraisal forms which have been filed in Court have also been examined by us. No docu- G ment in these two volumes which have been filed has been shown to us to be in the handwriting of Sh. V.K. Mehrotra. In other words the documents so filed do not show that Sh. V.K. Mehrotra had any role, as alleged, to play in awarding marks on the individual appraisal forms. Furthermore the affidavits filed by Mr: Sheorey, Sh. Mehrotra and Sh. Rastogi clearly belie the allegations made by Sh. Urned Singh in his rejoind.er affidavit. There H is no reason as to why the affidavits filed by these senior officers of the ALLINDIASTAlEBANKOFFICERSFEDERATIUNv. U.0.I. [KIRPAL,J.J 283 bank should be di~believed. This is more so when we find that the allega- A tion with regard to Sh. Mehrotra has been made at a late stage. The writ petition was filed in this Court on 21st April, 1.989. The alleged conversa- tion between Sh. Urned Singh and Sh. V.K. Mehrotra is stated to have taken place on or about 28th April, 1989. It is not till the filing of the rejoinder affidavit on 23rd October, 1989 that an allegation regarding B alleged conversation with Sh. V.K. Mehrotra was made in this Court. If such a conversation, as alleged, had taken place one would have expected the petitioners to approach the Court at the earliest either with a view to amend the writ petition or to file an additional affidavit making allegations raised in the rejoinder affidavit and thereby giving an opportunity to the respondents to file the reply. This conduct of Sh. Urned Singh shows that C the bald allegation regarding Sh. V.K. Mehrotra assigning the marks, as contained in the rejoinder affidavit, is an afterthought. We have, therefore, no hesitation in coming to the conclusion that the averments made by Sh. Urned Singh in his rejoinder affidavit of 23:td October, 1989 and the further affidavit of 10th August 1990 with regard to Sh. V.K. Mehrotra are ab­ solutely false. While on this subject it will be pertinent to note that the D respondents in their counter affidavit had taken an objection to the effect that the writ petition should be dismissed because the petitioners had suppressed certain material facts from this Court and had also tried to abuse the process of the Court, attention of the Bench of this Court was drawn to the affidavits of Sh. Urned Singh which had been filed in this case. E In the order dated 16th April, 1990, the Bench went into the question as to whether some of the statements made in the writ petition as well as in the affidavit are correct or not. It also took note of an affidavit filed by Sh. Urned Singh in which he had purported to "tender an unqualified appol­ ogy." for some mis-statements made in an earlier affidavit. Ultimately the Bench came to the conclusion that "apart from mis-statements in the F affidavit filed before this Court, the petitioner Federation has clearly resorted to tactics which can only be described as abuse of the process of the Court." The Bench also further expressed its anguish in the following words: "We have set out the facts in this case at some length and passed G a detailed order because we are deeply grieved to come across such conduct on the part of an association, which claims to repre- sent high placed officers of a premier bank of this country. One expects such officers to fight their battles fairly and squarely and not to stoop low to gain, what can only be, temporary victories by H 284 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. keeping away material facts from the Court. It is common knowledge that, of late, statements are being made in petitio~s and affidavits recklessly and without proper verification not to speak of dishonest and deliberate mis-statements. We, therefore, take this opportunity to record our strong and emphatic disapproval of the conduct of the petitioners in this case and hope that this will be a lesson to the present petitioner as well as to other litigants and that atleast in future people will act more truthfully and with a greater sense of responsibility." The petition was not dismissed on account of mis-statements and suppres­ sion of material facts because of the concession made by the counsel for the bank that he was appearing for a public sector undertaking and was prepared to contest the petition on merits and that the preliminary objec­ tion was primarily intended to bring to the notice of the court the conduct of the petitioners in this regard. It is indeed unfortunate that despite the aforesaid observations made by the Bench in its order dated 16th April, 1990, Sh. Urned Singh has not batted an eye lid and has, once again made false statements in his affidavit dated 10th August, 1990. Normally we would have ordered the prosecution of Sh. Urned Singh for having committed perjury. We are, however, in­ formed that he is no longer the President of the Federation and considering that prosecution may take further time, it will not be practical to initiate such proceedings in this connection ~t this stage. For the aforesaid reasons this writ petition is dismissed with costs which are quantified at Rs. 20,000 of which Rs. 10,000 will be paid by Sh. Urned Singh personally. Writ Petition No. 1260 of 1989 For the reasons stated in the judgment in writ petition No. 507 of G 1989, this writ petition is also dismissed. v.s.s. Petitions dismissed. -11 KESHUB MAHINDRA A v. STATE OF M.P. SEPTEMBER 13, 1996 (AM. AHMADI, CJ. AND S.B. MAJMUDAR, J.] B Criminal Law : Criminal Procedure Code, 1973 : Sections 227, 228, 397 and 482. Criminal Proceedings-Quashing of-Bhopal Gas Tragedy-Leakage c of highly toxic MIC gas from storage tank of plant resulting in huge loss of human lives-Permanent/temporary injuries or total/pa1tial disablement and loss of cattle lives-Charges framed against personnel who handle plant substantively under Sec. 304 Part II, 324 324 and 429 !PC r/w. S. 3~ /PC-According to Expert Committee Report escape of gas on account of D defective plant and lack and supervision by accused led to accident-Held: material available on record prima facie did not connect accused with offences with which they were charged-Hence, these charges quashed and set asid~However, prima f acie charge under S. 304-A !PC made out:-Since originally case registered under S. 304-A, charges could be framed there­ w1der-T1ial Court, could also consider on material led by prosecution whether charges could be franted under Ss. 336, 337 and 338 /PC. Penal Code, 1860: Sections 299 and 304 Part II-Ingredients of-Accused must have done an act which caused death of a person with knowledge that by such act he was likely to cause death. Sections 324 and 326-Ingredients and applicability of-Accused must commit act with knowledge that by such act he was likely to cause hurt or grievous hurt to victim. Sections 425 and 429-Ingredients and applicability of S. 429-/f com­ mission of 'mischief as defined in S. 425 by accused was not made out S. 429 could not be invoked. Constitution of India, 1950 : Anicle 142. 285 A. 286 SUPREME COURT REPORTS [ 1996] SUPP. 6 S.C.R. Crimi11al Proceedings-Quashing of-Charges framed against accused quashed by Supreme Court as offences alleged not prima facie made out-However, Supreme Cowt in exercise of power under A1ticle 142 could direct framing of charge for another offence under which case was initially registered and as regards to which counsel for pmties addressed the Cowt with view to avoiding multiplicity of proceedings. A grim tragedy of unprecedented nature occu17"ed on the f atefu.l 11ight when a ltigltly dangerous and to;xic gas called MIC escaped from a tank from the factory belonging to accused No. 12-Union Carbide India Limited resulting in huge loss of human lives, permanent/temporary injwies or C total/pa1tial disablement and loss of cattle lives. This ghastly tragedy had come to be known as 'Bhopal Gas Tragedy'. According to the Expe1t Committee Repolt the lethal gas MIC escaped both on account of defective plant which was operated under the control of the D appellants-Accused and their lack of supe1vision which led to the accident. Charges were framed against the appellants-Accused who were actually handling the Pla1tt (accused Nos. 2 to 9 ), substantively under Section 304 Pa1t II, 324, 326 and 429 read with Section 35 of the India11 Penal Code,1860. Aggrieved by the aforesaid charges the appellant-accused moved Criminal Revision Applications before the High Co wt under Sections 397 and 382 of E the Oiminal Procedure Code, 1973, which was dismissed. Hence this appeal. On behalf ofthe·appellants-accused it was contended that as per the chargesheet and supporting material there was no prim a f acie case that the accused were guilty of the offence under Sections 304-A, 324, 326 and F 429 read with Section 35 of the IPC; that there was no proximate act of the negligence on the part of the accused which had resulted in the accidental tragedy; that none of !he accused could be held criminally liable for the accident; and that the charges framed against the accused were required to be quashed. G On behalf of the respondent-State it was contended that there was ample material produced by the prosecution in support of the chargesheet; that the Expert Committee Report had clearly indicated the causes of the accident and the defects found in the running of the plant at the relevant time; and that there was sufficient material to prim a f acie indicate that H the accused were liable to be prosecuted. \> KESHUB MAHINDRA v. STATE 2B7 Allowing the appeal in part, this Court HELD : 1. It is clear from Sections 227 and 228 of the Criminal Procedure Code, 1973 that while exercising jurisdiction under Section 482 Cr.P.C. when the High Court is called upon to quash the charge pursuant to which proceedings at the stage of trial are pending, and even when the B High Court is called upon to quash proceedings pursuant to complaint, only a prima facie appraisal of the allegations made in the complaint and the material in support thereof has to be done and the Court has no jurisdiction to go into the merits of the allegations as that stage would come when the trial proceeds. It is, therefore, necessary to keep in view the limited jurisdiction available to the Court regarding the permissible C scrutiny of the prosecution case as revealed from the chargesheet and material supporting the same framing charges against the present ac­ cused. [302-A; B; C; G] Niranjan Singh Karam Singh Punjabi v. Jitendra Bhimraj Bijja & Ors., D AIR (1990) SC 1962 and State of U.P. v. O.P. Shanna, (1996) 2 SCALE 356, relied on. 2. Before any charge under Section 304 Part II of the India Penal Code, 1860 can be framed, the material on record must at least prim a f acie show that the accused is guilty of culpable homicide and the act allegedly E committed by him must amount to culpable homicide. In view of Section 229 of the IPC the material relied upon by the prosecution for framing a charge under Section 304 Part II must at least plima f acie indicate that the accused had done an act which had caused death with at least such a knowledge that he was by such act likely to cause death. The entire material F which the prosecution relied upon before the Trial Court for framing the charge cannot support such a charge unless it indicates plima f acie that on that fateful night the plant was run by the concerned accused with the knowledge that such running of the plant was likely to cause deaths of human beings. Mere act of running a plant as per the permission granted by the authorities would not be a criminal act. Even assuming that it was G a defective plant and it was dealing with a very toxic and hazardous substance like MIC the mere act of storing such a material by the accused in tank could not even prim a f acie suggest that the concerned accused thereby had knowledge that they were likely to cause death of human beings. In fairness to prosecution it was not suggested and could not be H 288 SUPREME COURT REPORTS l1996] SUPP.6S.C.R. A suggested that the accused had an intention to kill any human being while operating the plant. Taking the entire material on its face value and assuming it to represent correct factual position in connection with the operation of the plant on tha.t fateful night it could not be said that the said material even prima f acie called for framing of a charge against the B concerned accused under Section 304 Part II, IPC on the spacious plea that the said act of the accused amounted b culpable homicide because the operation of the plant on that night ultimately resulted in deaths of number of human beings and cattle. When on the material produced by the prosecution no charge could be framed against any of the accused under Section 304 Part II there would remain no occasion to press in C service the applicability of Section 35, IPC in support of such a charge for those accused who were not actually concerned with the running of the plant, namely accused Nos. 2, 3, 4, and 12. [323-E] Adam Ali Taluqdar & Ors. v. King-Emperor, AIR (1927) Cal. 324, held D inapplicable. 3.1. For applicability of Sections 324 and 326 of the IPC the material relied upon by the prosecution in support of such charges must show that the concerned accused had committed the act complained of at least with the knowledge that by such act he was likely to cause hurt or grievous hurt E to the victim. The material pressed in service by the prosecution for fram­ ing such charges against the accused falls short of indicating that the act of ruQning the plant on that fateful night which in its turn involved stpring and utilising highly dangerous and volatile substance like MIC in this storage tank could not even prima f ticie be said to have been done with the knowledge that by such act itself simple hurt or grievous hurt was likely to be caused to any one. Consequently on such material even charge under Sections 324 and 326, IPC could not have been framed against the con­ cerned accused. Once this conclusion is reached there would also remain no occasion to press in service against the accused Nos. 2, 3, 4 as well as 12, the charge under Section 35 IPC which the prosecution sought to press G in service along with substantive Sections 324 and 326 IPC. In fact on the material as placed by the prosecution in support of these charges if a charge under Section 304 Part II cannot be framed then on the parity of reasoning no charge under Sections 324 and 326 could also be framed. [324-A-EJ H 3.2. Before Section 429 IPC is pressed in service the material relied ( 4 KESHUBMAHINDRAv. STATE 289 upon by the prosecution must indicate even prima f acie that the concerned A accused by running the plant on that fateful night had knowledge that by running such plant they were likely to cause wrongful loss or damage to the public or to any person. The material produced by the prosecution does not even plima f acie indicate how by running such a plant wherein highly dangerous and volatile subs~nce like MIC was stored in tank the accused had the knowledge that· by 'that act alone they were likely to destroy anybody's property or cause wrongful loss or damage to any person. Once the applicability of Section 425, IPC dealing with 'mischier is ruled out on such material there would remain no occasion to invoke Section 429 which for its applicability requires the prosecution to show in the first instance any material against the concerned accused indicating the commission of C mischief by the accused. Therefore, on the material pressed in service by the prosecution for framing charges against the accused no charge could have been framed against the concerned accused either under Section 304 Part II or under Section 324, 326 or 429, IPC with or without the aid of Section 35, IPC. On these findings all the charges will have to be quashed. (325-A·CJ D 3.3. On the finding that the material pressed in service by the prosecution does not indicaie even prima f acie that the accused were guilty of an offence of culpable homicide and, therefore, Section 304 Part II was out of picture, Section 304-A on this very finding can straightaway get attracted at least plima facie. Because of the operation of the defective plant on that fateful night a highly dangerous and volatile substance like MIC got converted into poisonous gas which snuffed off the lives of thousands of human beings and maimed other thousands and killed number of animals and that all happened, as seen at least plima f acie the material led by the prosecution on record, because of rash and negligent act on the part of the accused who were in-charge of the plant. The material led by the prosecution shows that there were not only structural defects but even operational defects in the working of the plant on that fateful night which resulted into this grim tragedy. Even though, therefore, these accused cannot be charged for offences under Section 304 Part II, the material led against them by the prosecution at least p1ima f acie showed G that the accused were guilty of rash or negligent acts not amounting to culpable homicide and by that act caused death of large number of pers~ns. 3.4. It is true that though originally the criminal case was registered H 290 SUPREME COURT REPORTS l1996] SUPP. 6 S.C.R. A for an offence under Section 304-A of the IPC the Central Bureau of Inves­ tigation which· took up the investigation thought it proper to press in service Section 304 Part II and Sections 324, 326 and 429 of the IPC. Charges under these Sections have been found to be unsustainable on the material produced by the prosecution on record in support of these char- ges. However that does not mean that on the material as it stands on record the accused cannot even p1ima f acie be alleged to have committed any criminal offence for which they can be called upon to face the trial and that they should get a clean chit and clear walk-over. On the question whether on this material Section 304-A could be invoked or not, counsel for the appellants as well as Addi. Solicitor General for the respondent-State did address this Court, therefore, the Court can and should, with a view to avoid multiplicity of proceedi.ngs, exercise its powers under Article 142 of the Constitution and decide whether the material led by the prosecution can prima facie support charges under Section 304-A against the concerned accused. Question of proof of rashness and negligence will arise at the stage of trial after full evidence is led by the prosecution and even by the accused D side if at all they choose to do so and in the light of that evidence the question would arise whether the charge as framed is made out by the prosecution against the concerned accused. The aforesaid conclusion, therefore, would make out a plima f acie case against accused Nos. 5, 6, 7, 8 and 9 who were in actual charge of running of the plant and would require E them to face the trial for charge under Section 304-A of the IPC. [329-E] State of Gujarat v. Haidarali Kalubai, [1976] 1 SCC 889; Ambala/ D. Bhatt v. State of Gujarat, [1972] 3 SCC 525; Sulemim Rehiman Mulani & Anr. v. State of Maharashtra, [1968] 2 SCR 515 and Kurban Hussain Mohammedali Rangwalla v. State of Maharashtra, [1965] 2 SCR 622, held F inapplicable. 4.1. So far as the remaining accused Nos. 2, 3, 4 and 12 are concerned the material produced on record clearly indicates at least plima facie that they being at the helm of affairs have to face this charge for the alleged G negligence and rashness of their subordinates who actually operated the plant on that fateful night and for that purpose Section 35 of the IPC would also prim a f acie get attracted against them. A mere look at that Section shows that if the act alleged against these accused becomes criminal on account of their sharing common knowledge about the defective running of plant by the remaining accused who represented them on spot and who had H to carry out their directions from them and who were otherwise required to ·' ' KESHUB MAHINDRA v. STATE 291 supervise their activity. Section 35 of the IPC could at least prima f acie be A invoked against accused 2, 3, 4, and 12 to be read with Section 304-A, IPC. Consequently on the material led by the prosecution against the accused at this stage a p1ima f acie case was made out by the prosecution for framing charges against accused Nos. 2, 3, 4 and 12 under Section 304-A read with Section 35 IPC while su~stantive charges under Section 304-A could be B framed against accused ~os. 5, 6, 7, 8 and 9. (329-F; G] Esso Standard Inc. v. Udltaram Bhagwandas Japanwalla, (1973) 45 Comp. Cas. 16, held inapplicable. 4.2. However, from the material which is produced on record there C is a possibility of considering a further question whether charges under Sections 336, 337 and 338 of the IPC with or without the aid of Section 35 can be framed against the concerned accused. As none of the parties have addressed this Court on these aspects this question is left open for consideration of the Tria' Judge who may after hearing the parties decide whether on the material' as led by prosecution on record at this stage, D charges, if any, can also be framed under Sections 336, 337 and 338of the IPC with or without the aid of Section 35 of the IPC. [331-C; 332-A] 4.3. On the material led by the prosecution appropriate charges which are required to be framed against the concerned accused are under E Section 304-A, IPC so far as the accused Nos. 5, 6, 7, 8 and 9 are concerned wh!le so far. as accused Nos. 2, 3, 4 and 12 are concerned charges under Section 304-A read with Section 35 IPC will have to be framed. As these offences are triable by the court of Judicial Magistrate 1st Class, the Sessions Case shall be transferred to the Court of the Chief Judicial Magistrate, 1st Class who will proceed with thetrial in accordance with.law F and frame appropriate charges under Section 304-A with or without the aid of Section 35, as the case may be, against the concerned accused. [332-B-C] CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 1672 of 1996 Etc. Etc. From the Judgment and Order dated 1.8.95 of the Madhya Pradesh High Court in Crl. R. No. 237 of 1993. Asok H. Desai and K.K. Desai, A.K. Desai, K.J. John and Palkar for the Appellant in Crl.A. No.1672/96. H 292 SUPREME COURT REPORTS [1996) SUPP 1 • 6 S.C.R. A Prasad Dakephalkar, P.H. Parekh and Ms. Bina Madhavan for the Appellant in Crl.A. Nos. 1673, 1675 and 1674/96. Altaf Ahmad, Additional Solicitor General, P. Parmeswaran and S.A. Matto for the Respondent. The Judgment of the Court was delivered by S.B. MAJMUDAR, J. Leave granted in all these Special Leave Petitions. In these appeals the concerned appellant-accused have brought in challenge the order dated 8th April 1993 passed by the Court of 9th C Additional Sessions Judge, Bhopal in Sessions Trial No. 257 of 1992 whereby the learned Sessions Judge framed charges against the appellants in appeals arising out of S.L.P. (Crl.) Nos. 3900 of 1995, 3901of1995 and 3953 of 1995 under Sections 304 Part II, 326, 324 and 429 read with Section 35 of the Indian Penal Code (for short 'IPC' ') and framed charges under D Sections 304 Part II, 326, 324 and 309 against the appellants in appeal arising out of S.L.P. (Crl.) No. 3932 of 1995. They had also challenged the orders of the High Court of Madhya Pradesh at J abalpur in Criminal Revision Application Nos. 237/93, 238/93, 312/93 and 311/93 whereby these charges were sustained. Appeal arising out of S.L.P. (Crl.) No. 3900of1995 is moved by Shri Keshub Mahindra who is accused No. 2 before the E Sessions Court. Appeal arising out of S.L.P. (Crl.) t'io. 3901 of 1995 is moved by Shri V.P. Gokhale who is accused No. 3 in the same case. Appeal arising out of S.L.P. (Crl.) No. 3953 of 1995 is moved by Kishore Kamdar who is accused No. 4 in the said case while the last appeal arising out of S.L.P. (Crl.) No. 3932of1995 is moved by six accused being Shri J. Mukund F accused No. 5, Dr. R.B. Roy Choudhary accused No. 6, Shri S.P. Chaud­ hary accused No. 7, Shri K.V. Setty accused No. 8, Shri S.I. Qureshi accused No. 9 and Union Carbide India Limited ('UCTL' for short) accused No. 12 in the same case pending before the Sessions Court at Bhopal. The concerned appellants had moved the High Court of Madhya Pradesh at J abalpur under Sections 397 and 482 of the Code of Criminal G Procedure (Cr.P.C.) for quashing the aforesaid charges . . With a view to highlighting the grievances of the appellants a few relevant facts deserve to be noted at the outset. H Introductory Facts KESHUB MAHINDRA v. STATE (S.B. MAJMUDAR, J.] 293 A grim tragedy of unprecedented nature occurred at Bhopal on the A night intervening 2nd December 1984 and 3rd December 1984 wherein between 0030 hours and 0045 hours a highly dangerous and toxic gas called MIC escaped from tank No. E610 from the Bhopal factory belonging to accused No. 12 UCIL. As a result of this leakage 3828 human beings lost their lives while permanent injuries were caused to 18922 human beings, tei:nporary disablement was suffered by 7172 human beings, temporary disablement caused by permanent injury was suffered by 1313 persons while permanent partial disablement was suffered by 2680 persons, While 40 human beings suffered from permanent total disablement and the death toll of animals amounted to 2544. This ghastly tragedy has come to be known as 'Bhopal Gas Tragedy'. After the gas leakage Criminal Case No. 1104 of 1984 was registered at the Police Station Hanumanganj, Bhopal on 3rd December 1984 by the Station House Officer sou motu. This case was registered under Section 304-A, IPC. In the said case 12 accused were indicted. Accused No. 1 was Shri Warren Anderson who was the Chairman of Union Carbide Corporation. The said concern was also indicted as D accused No. 10. Accused No. 2 Keshub Mahindra was the r:hairman of UCIL which in its turn was shown as accused No. 12. Accused No. 3 V.P. Gokhale was shown as an accused in his capacity as Managing Director of UCIL. Kishore Kamdar who was the Vice President and Incharge of A.P. Division of UCIL was shown as accused No. 4. Shri J. Mukund the Works E Manager of the Bhopal Plant was joined as accused No. 5. Dr. R.B. Roy Choudhary who was Assistant Works Manager, A.P. Division, UCIL at Bhopal was joined as accused No. 6. Accused No. 7. was Shri S.P. Choud­ hary, Production Manager of the Bhopal Plant. Shri K.V. Shetty, Plant Superintendent of the said Bhopal plant was accused No. 8. Shri S.I. F Qureshi was shown as accused No. 9. He was Production Assistant at the said Bhopal plant. Out of the above accused persons accused Nos. 5, 6, 7, 8 and 9 were stationed at Bhopal and were incharge of the Bhopal Plant itself. On the registration of the aforesaid Crime Case the Station House . Officer, Bhopal, arrested five employees of the factory, namely, accused Nos. 5 to 9 and they were kept in police custody. Accused Nos. 1, 2 and 3 were arrested on 7th December 1984. Out of them accused No. 1 Shri Warren Anderson was released on bail the same day. On 6th of December H 294 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A 1984 the case was handed over to the CBI. On completion of investigation the chargesheet was presented by the CBI in the Court of CJM, Bhopal on 1st December 1987. In the present proceedings we are not concerned with the question of compensation payable to the gas-disaster victims at Bhopal and the various steps taken by the Government of India in this connection. We, therefore, do not dilate on these aspects. Suffice it is to state that by earlier orders of this Court dated 14th February 1989 and 15th February 1989 all criminal proceedings relating to and arising out of the Bhopal Gas Disaster were quashed by this Court. As a result the proceedings in the present case C which were then pending in the Committal Court stood terminated. How­ ever the said order was reviewed by this Court on 3rd October 1991 and the above criminal proceedings were restored. After their restoration the case was committed to the Court of Sessions. Commitment was made by order dated 30th April 1992. On the case being committed to the Court of D Sessions it was registered as Sessions Trial Case No. 237 of 1992 as aforesaid. It appears that trial of the criminal case against accused No. 1 Warren Anderson, accused no. 10 UCC and accused No. 11 Union Car­ bide (Eastern) -Inc., Hongkong had to be segregated and split up as the concerned accused were absconding. The trial proceeded against remain- ing accused Nos. 2 to 9 and 12. In the light of the supporting material produced by the prosecution before the Sessions Court along with the chargesheet and its contents the Sessions Court was requested by the prosecution to frame appropriate charges against the concerned accused against whom the trial had to proceed. After hearing the prosecution as well as the learned counsel for the concerned accused the learned 9th Additional Sessions Judge, Bhopal passed order dated 8th April 1993 framing charges against the concerned accused. As these charges have been seriously brought into challenge it would be apposite to reproduce the charges as framed by the learned Trial Judge against the concerned accused. So far as accused No. 2 Keshub Mahindra is concerned four charges were framed against him as under : "Firstly : That on or about the night intervening 2nd and 3rd December, 1984 at Bhopal, the Capital of M.P. co-accused persons S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.B. Choudhary/KV. Setty and S.I. Qureshi committed culpable homicide not amounting to murder by causing death of 3828 or KE.SHUB MAHINDRA v. STATE [S.B. MATMUDAR, J.) 295 more human beings by allowing the highly toxic gas known by the A name of MIC to escape from tank No. 610 of AP. Division plant of UCIL knowing that it was likely to cause deaths and you sharing this common knowlege with them did not do anything to avoid the said escape of gas thus you thereby committed on each courts an offence punishable under Sec. 304 (II) R/W Sec. 35 of the IPC and within the cognizance of the Court of Session. Secondly: That on the above date and at the above place, above co-accused persons by allowing to escape from the above tank the corrosive substance known by the name of MIC gas, knowing that it was likely to cause grevious hurts, thus voluntarily (as defined U/S 39 IPC) caused grevious hurts to 21694 or more human beings and you sharing this common knowledge with them .did not do anything to avoid the said escape of gas thus you thereby com­ mitted on each count an offence punishable under section 326 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions. 17tirdly : That on the above date and at the above place, co-accused persons by allowing to escape from the above tank the corrosive substance known by the name of MIC gas knowing that it was likely to cause hurts, thus voluntarily (ai defined Under Sec. 39 IPC) caused hurts to 8485 or more human beings and you sharing this E common knowledge with them did not do anything to avoid the said escape of gas, thus you the_reby committed on each count an offence punishable U/S 324 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions. Fourthly : That on the above date and at the above place the above F accused persons by allowing MIC gas to escape from the above tank knowing that it was likely to cause death of animals, com­ mitted mischief by killing thereby 2544 or more animals of various descriptions each valuing more than Rs. 50 and you sharing this common knowledge with them did not do anything to avoid the G said escape of gas, thus you thereby committed on each count an offence punishable U/S 429 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions." Charges framed against accused No. 3 V.P. Gokhale were identical with the charges framed against accused No. 2. H 296 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. Charges framed against accused No. 4 Kishore Kamdar ran as under: "Firstly : That on or about the. night intervening 2nd and 3rd December, 1984 at Bhopal, the Capital of M.P. co-accused persons S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.P. Choudhary/KV. Shetty and S.I. Qureshi committed culpable homicide not amounting to murder by causing death of 3828 or more human beings by allowing the highly toxic gas known by the name of MIC to escape from tank No. 610 of A.P. Division Plan1 of UCIL knowing that this common knowledge with them did not do any thing to avoid escape of gas thus you thereby committed on each count an offence punishable U/S 304(II) R/W Sec. 35 of the I.P.C. arid within the cognizance of the court of Sessions. Secondly : That on the above date and at the above place, above co-accused persons by allowing to escape from the above tank the corrosive substance known by the name of MIC gas, knowing that it was likely to cause grevious hurts, thus voluntarily (as defined U/S 39 IPC) caused grevious hurts to 21694 or more human beings and you sharing this common knowledge with them did not do anything to avoid the said escape of gas, thus you thereby com­ mitted on each count an offence punishable U/S 326 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions. 17iirdly : That on the above date and at the above place, above co-accused persons by allowing to escape from the above tank the corrosive substance known by the name of MIC gas, knowing that it was likely to cause hurts, thus voluntarily (as defined U/S. 39 IPC) caused hurts to 8485 or more human beings and you sharing this common knowledge with them did not do anything to avoid the said escape of gas, thus you thereby committed on each count an offence punishable U/S. 324 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions. Fowthly: That on the above date and at the above place, the above co-accused persons by allowing MIC gas to escape from the above tank knowing that it was likely to cause death of animals, com­ mitted mischief by killing thereby 2544 or more animals of various descriptions each valuing more than Rs. 50 and you sharing this common knowledge with them did not do any thing to avoid the KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 297 said escape of gas, thus you thereby committed on each count an A· offence punishable U/S. 429 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions." Charges framed against accused No 5 J. Mukund were as under: "Firstly : That you on or about the night intervening 2nd and 3rd December, 1984 at Bhopal, the capital of M.P. committed culpable homicide not amounting to murder by causing death of 3828 or more human beings by allowing the highly toxic gas known by the name of MIC to escape from tank No. 610 of A.P. Division Plant of UCIL, knowing that it was likely to cause deaths and you thereby C committed on each count an offence punishable U/S 304(II) l.P.C. and within the cognizance of the court of Sessions. Secondly : That you on the above date and at the above place by allowing to escape from tank No. 610 of the A.P. Division Plant D of UCIL, a corrosive substance known by the name of MIC gas, knowing that it was likely to cause grevious hurts, thus voluntarily (as defined U/S. 39 IPC) caused grevious hurts to 21694 or more human beings and, thereby committed on each count an offence punishable U/S. 326 IPC and within the cognizance of the Court of Sessions. E Third(v : That on the above date and at the above place by allowing to escape from tank No. 610 of A.P. Division Plant of UCIL, a corrosive substance known by the name of MIC gas, knowing that it was likely to cause hurts, thus voluntarily (as defined U/S. 39 F IPC) caused hurts to 8485 or more human beings and thereby committed on each count an offence punishable U/S. 324 l.P.C. and within the cognizance of the Court of Sessions. Fourthly : That on the above date and at the place by allowing to G escape from tank No. 610 of the A.P. Division Plant of UCIL, knowing that it was likely to cause death of animals, committed mischief by killing thereby 2544 or more animals of various descrip­ tions each valuing more than Rs. 50 and thereby committed on each count an offence punishable U/S. 429 IPC and within the cognizance of the Court of Sessions." H 298 SUPREME COURT REPORTS 11996) SUPP. 6 S.C.R. Identical charges were framed against accused No. 6 R.B. Roy Choudhary, accused No. 7 S.P. Choudhary, accused No. 8 K.V. Shetty and accused No. 9 S.I. Qureshi while UCIL, Calcutta accused No. 12 had to face the following charges : "Firstly : That on or about the night intervening 2nd and 3rd December, 1984 at Bhopal, the Capital ofM.P. co-accused persons S/Shri Kishore Kamdar/J. Mukund/R.B. Roy Choudhary/S.P. Choudhary/K. V. Shetty and SJ. Qureshi committed culpable homicide not amounting to murder by causing death of 3828 or more human beings by allowing the highly toxic gas known by the name of MIC to escape from tank No. 610 of AP. Division Plant of UCIL knowing that it was likely to cause deaths and you sharing this common knowledge with them did not do any thing to avoid the said escape of gas thus you thereby committed on each count an offence punishable U/S 304(11) R/W Sec. 35 of the I.P.C. and within the cognizance of the court of Sessions. Secondly : That on the above date and at the above place, above co-accused persons by allowing to escape from the above tank the corrosive substance known by the name or MIC gas, knowing that it was likely to cause grevious hurts, thus voluntarily (as defined UIS 39 IPC) caused grevious hurts to 21694 or more human beings and you sharing this common knowledge with them did not do anything to avoid the said escape of gas, thus you thereby com­ mitted on each count an offence punishable U/S. 326 R/W Sec. 35 IPC and within the cognizance of Court of Sessions. 17zirdly : That on the above date and at the above place, above co-accused persons by allowing to escape from the above tank the corrosive substance known by the name of MIC gas, knowing that it was likely to cause hurts, thus voluntarily (as defined U/S. 39 IPC} caused hurts to 8485 or more human beings and you sharing this common knowledge with them did not do anything to avoid the said escape of gas, thus ym1 thereby committed on each count an offence punishable U/S. 324 R/W Sec. 35 IPC and within the cognizance of the Court of Sessions. Fowthly: That on the above.date and at the above place, the above co-accused persons by allowing MIC gas to escape from the above .... ; KESHUB MAHINDRA v. STATE [S.B. MAJMUDAR,J.] 299 tank knowing that it was likely to cause death of animals, com- A mitted mischief by killing thereby 2544 or more animals of various descriptions each valuing more than Rs. 50 and you sharing this common knowledge with them did not do any thing to avoid the said escape of gas, thus you thereby committed on each count an offence punishable U/S. 429 R/W. Sec. 35 IPC and within the B cognizance of the Court of Sessions." All these accused being aggrieved by the aforesaid charges framed by the learned Sessions Judge approached the High Court of Madhya Pradesh at Jabalpur in Criminal Revision Applications moved under Sec­ tions 397 and 482 of the Cr.P.C. as noted earlier. The High Court of C Madhya Pradesh by common judgment in three Criminal Revising Applica­ tions Nos. 237/93, 238/93 and 312/93 moved by accused Nos. 2, 3 and 4 respectively, was pleased to dismiss the same by upholding the charges framed against these accused. Similarly Criminal Revision Application No. 311/93 moved by accused No. 5 J. Mukund, accused No. 6 R.B. Roy D Choudhary, accused No. 7 S.P. Choudhary, accused No. 8 K.V. Shetty, accused No. 9 S.I. Qureshi and accused No. 12 UCIL was also dismissed by a separate order of even date. It is under these circumstances that the concerned accused are in appeal before us on special leave. Learned senior counsel Shri Ashok Desai appearing for accused No. E 2 Keshub Mahindra, learned senior counsel Shri Nariman, appearing for accused No. 3 V.P. Gokhale and learned senior counsel Shri Rajendra Singh, appearing for the remaining accused vehemently contended that taking the case of the prosecution at the highest as reflected by the contents of the chargesheet and the supporting material it could not be even prima F f acie said that the concerned accused were guilty of offence of culpable homicide not amounting to murder as envisaged by Section 304 Part II, IPC with which they are charged. That there was no question of the concerned accused having done any act on that fateful night at Bhopal which was done with the knowledge that they were likely by such act to G cause death and consequently they could not have been charged on the material produced by the prosecution before the Trial Court at this stage of the trial for the offence of culpable homicide not amounting to murder. It was also submitted that on the same reasoning they could not have been charged for offence under S~ctloii 326 IPC for voluntarily causing grievous hurt or for that matter for ·the offence under Section 324 for voluntarily H 300 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A causing hurt by dangerous means. It was also contended that on the same parity of reasoning no case is made out against the concerned accused under Section 429 IPC for having committed mischief by killing, poisoning or maiming any animals. It was also submitted that so far as accused Nos. 2, 3 and 4 were concerned they were stationed at Bombay and they were B not concerned with the day to day working of the Plant at Bhopal. Conse­ quently there was no question of framing any charge against them for the aforesaid offences read with Section 35 of IPC as there was no evidence whatsoever for even alleging against these accused that they had any criminal knowledge in connection with the misshap that occurred on that fateful night at Bhopal. It was also contended by the aforesaid learned C senior counsel that even lesser charge under Section 304-A, IPC also could not have been framed on this material as nothing was alleged by the prosecution at this stage about any proximate act of the negligence on the part of the concerned accused which had resulted into this accidental tragedy. That if at all it ·was an unfortunate accident which had taken heavy D toll of human lives and cattle wealth, however, none of the accused could be held criminally liable for the said accident. It was, therefore, contended that the charges as framed against the concerned accused are required to be quashed and the High Court had erred in not exercising its jurisdiction in that behalf. E On the other hand learned Additional Solicitor General Shri Altaf Ahmed submitted that there was ample material produced by the prosecu­ tion in support of the chargesheet which clearly indicated that all the concerned accused shared common criminal knowledge about the potential danger of escape of the lethal gas MIC both on account of defective plant F which was operated under their control and supervision at Bhopal and also on account of the operational shortcomings detected by the Expert Com­ mittee which had gone into the causes of this unfortunate accident, namely, Vardarajan Committee which was constituted by the Government of India for that purpose. That the report of the Scientific and Industrial Research team had clearly indicated the causes of this tragedy and the defects found G in the running of the Plant at the relevant time. That this material indicated that all the accused were properly charged for the offences alleged against them and that the court at this stage was not concerned with the t'nrth or falsity of the allegations with which the prosecution has charged them. That at this stage only enquiry into the prima f acie nature of the allegations H supporting these charges has to be made and if there is any material to· KESHUBMAHINDRAv.STATE(S.B.MAJMUDAR,J.] 301 prim a f acie indicate that the concerned accused were liable to be A prosecuted for the charges with which they are indicated the trial is required to be permitted to proceed further and should not be nipped in the bud as the appellants would like to have it. In support of the respective contentions learned senior counsel for the appellants as well as learned Additional Solicitor General relied upon various decisions of this Court to B which we will make a reference at appropriate stage in latter part of this judgment. Before we deal with the nature of the material produced by the prosecution before the Trial Court for framing the charges against the concerned accused it will be necessary to keep in view the limited nature C of the jurisdiction available to the court for deciding whether the charges framed are legally sustainable on the basis of the material available at this stage. Section 227 of the Cr.P.C. lays down that, 'if, upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and prosecution in this behalf, the D Judge considers that there is not sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for so doing'. On the other hand as enjoined by Section 228, if after such con­ sideration and hearing as aforesaid the Judge is of opinion that there is ground for presii'I:ning that the accused has committed an offence, then subject to the procedure laid down by sub-sections (a) and (b) of the said E Section the charge shall be framed in writing against the accused. In the case of Niranjan Singh Karam Singh Punjabi v. Jitendra Bhimraj Bijja & Ors., AIR (1990) SC 1962, one of. us A.M. Ahmadi, J. (as His Lordship then was) speaking for the Division Bench of this Court in this connection observed as under : F "It seems wel\ ~ettled that at the Ss. 227-228 stage i.e., stage of framing the charge, the Court is required to evaluate the material and documents on record with a view to finding out if the facts emerging therefrom taken at their face value disclose the existence G of all the ingredients constituting the alleged offence. The Court may for this limited purpose sift the evidence as it cannot be expected even at that initial stage to accept all that prosecution states as gospel truth even if it is opposed to common sense or the broad probabilities of the case." H 302 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A It is also well settled that while exercising jurisdiction under Section 482 ... Cr.P.C. when the High Court is called upon to quash the charge pursuant to which proceedings at the stage of trial are pending, and even when the High Court is called upon to quash proceedings pursuant to complaint, only a plima f acie appraisal of the allegations mqde in the complaint and B the material in support thereof has to be done and the Court has jurisdic­ tion to go into the merits of the allegations as that stage would come when the trial proceeds. In this connection we may usefully refer to a judgment rendered by a Bench of three learned Judges of this Court in the case of State of U.P. v. O.P. Shanna, (1996) 2 SCALE 356. Relying on earlier decisions of this Court the Bench in the aforesaid case made the following C pertinent observations in paragraphs 11 and 12 of the Report : "The question then is : whether the High Court is right in its exercise of inherent power under Section 482 Cr.P.C.? This Court in State of Himachal Pradesh v. Pirthi Chand &Anr., (Crl. A. 1752 of 1995) decided on November 30, 1995 held as under : 'It is thus settled law that the exercise of inherent power of the High Court is an exceptional on~ Great care should be taken by the High Court before embarking to scrutinise the FIR/charge-sheet/complaint. In deciding whether the case is rarest of rare cases to scuttle the prosecution in its inception, it first has to get into the grip of the matter whether the allegations constitute the offence. It must be remembered that FIR is only an initiation to move the machinery and to investigate into cognisable offence. After the investigation is conducted and the charge-sheet is laid the prosecution produces the statements of the witnesses recorded under Section 161 of the Code in support of the charge-sheet. At that stage it is not the function of the court to weigh the pros and cons of the prosecution case or to consider necessity of strict compliance of the provisions which are considered mandatory and its effect of non-compliance. It would be done after the trial is concluded. The Court has to p1ima f acie consider from the averments in the charge-sheet and the statements of witnesses on the record in support thereof whether court could take cognizance of the offence, on that evidence and proceed further with the trial. If it reaches a KESHUB MAHINDRAv. STATE [S.B. MAJMUDAR,J.] 303 conclusion that no cognisable offence is made out no furthf?r A act could be done except to quash the charge sheet. But only in exceptional cases. i.e. in rarest of rare cases of mala fide initiation of the proceedings to wreak private vengeance process of criminal is availed of in laying a complaint or FIR itself does not disclose at all any cognisable offence - the B court may embark upon the consideration thereof and exer- cise the power. In State of Bihar v. Rajendra Agrawal/a, (Cd.A. No. 66 of 1996) C decided on January 18, 1996, this Court observed as under : 'It has been held by this Court in several cases that the inherent power of the court under Section 482 of the Code of Criminal Procedure should be very sparingly and cautious- ly used only when the court comes to the conclusion that D there would be manifest injustice or there would be abuse of the process of the court if such power is not exercised. So far as the order of cognizance by a Magistrate is concerned, the inherent power can be exercised when the allegations in the First Information Report or the complaint together with the E other materials collected during investigation taken at their face value, do no~ constitute the offence alleged. At that stage it is not open for the court either to shift the evidence or appreciate the evidence and come tn the conclusion that no prima facie case is made out."' Keeping in view the aforesaid well settled limited jurisdiction regarding the permissible scrutiny of the prosecution case as revealed from the char­ gesheet and the material supporting the same for framing charges against the present accused we will now proceed to examine the available material on record of the case which has resulted into the framing of the impugned G charges against the appellant-accused. Material in Support of the prosecution case In the first place we may glance through the relevant recitals in the chargesheet presented by the agency before the court which has resulted H 304 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A into the framing of the impugned charges. The said chargesheet is found at page 1 of the compilation in appeal arising out of S.L.P. (Crl.) No. 3900/95. As noted earlier the chargesheet indicts 12 accused out of which the present 9 appellants in these four appeals are accused Nos. 2 to 9 and 12 respectively. In column 5 of the chargesheet are found listed main findings of the investigating agency in connection with this unfortunate tragedy. The relevant recitals therein read as under : "Union Carbide India Ltd., the majority share holding in which is held by U.C.C., USA, was running a factory at Bhopal for the manufacture of pesticides. The main chemical from which the pesticide Sevin was manufactured was Methyl Isocynate (CII3N = C-0) which was also being manufactured in the same factory and was being stored in underground tanks. The factory is presently not functioning. 2. Ori the night of 2nd/3rd December, 1984 from about 0034 to 0045 hrs. (on 3rd December, 1984) onwards, MIC started to escape from tank No. 610 in the factory in large quantities causing the death of thousands of human beings and animals .... and injuring also the health of many thousands of human beings and animals. 3. Crime No. 1104/84 was registered at Police Station, Hanuman­ ganj, Bhopal, on 3rd December, 1984, by the S.H.O., Shri Surinder Singh Thakur. Inspector who observed people dying around the factory of Union Carbide India Ltd. Bhopal (UCIL) due to escape of some gas from the factory. He registered the case suo moto under Section 304A IPC. There was no information available at that stage from anyone in the factory. Based on enquiries made by him during the course of the day, five employees of the factory (AS to A9) were arrested and kept in police custody. Accused No. 1 Shri Warren Anderson was arrested alongwith accused No. 2 & 3 on 7th December, 1984. Shri Warren Anderson was released on bail the same day by the 1.0. After completing the required legal formalities, C.B.I. (D.P.S.E.) registered a case on 6th December, 1984 as RC-3/84-CIU(I) U/S 304A IPC and received the records of the case from the local police on 9th December, 1984 alongwith A2, A3 and AS to A9 in police custody from the Madhya Pradesh Police. KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.] 305 4. Investigation has revealed that the Union Carbide Corporation A ·is a company with headquarters in U.S.A. having affiliate and subsidiary companies throughout the world. There subsidiaries were supervised by four regional offices which were controlled by UCC, USA UCIL is a subsidiary of UCC, USA Union Carbide Eastern Inc. with· its office in Hongkong is the regional office of UCC, USA which controlled UCIL, India besides others. UCC, USA get incorporated in India on 20th June, 1934, a Company known as the Eveready Company (India) Ltd. under the Indian Companies Act (Act VII) of 1913 with the Registrar of Joint Stock Companies, Bengal. The Name of the Company was further changed w.e.f. 24th December. 1959 into Union Carbide India Ltd. under the Indian Companies, 1956. The UCC was a majority shareholder (50.9%) in UCIL. UCC was nominating its own Direc- tors to the Board of Directors of the UCIL and was ex~rcising strict financial, administrative and technical control on the Union Carbide India Limited. Thus, all major decisions were taken under D the orders of the Union Carbide Corporation to America. The evidence collected during the investigation proves that UCC was in total control of all the activities of UCIL. 5. The ~nvestigation of this case was dependent on highly scientific and technical evaluation of the events which led to the escape of E MIC gas from the UCIL plant at Bhopal. The Government of India therefore constituted, immediately after the incident, a team headed by Dr. S. Varadarjan, then D.G./C.S.LR. to study all the scientific\~nd technical aspects and submit their report. Dr. M. Sriram, Chief Research and Development Manager, Hindustan Organic Chemicals, Rasayani, District Ralgad (Maharashtra), was member as well as the co-ordinator of the Scientific Team. Dr. Varadarajan submitted the report in December, 1985. A further back up report was submitted by the C.S.I.R. in May, 1987. These reports furnish, inter alia, the causes that led to the incident. 6. Investigation has revealed that UCIL started importing Sevin from the UCC, USA in December, 1960. They were marketing this Sevin after adding dilutants etc. Subsequently, they decided to manufacture Sevin in their plant at Bhopal itself and accordingly created necessary facilities for production of Sevin MIC as the H 306 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. basic raw material. To start with; they were importing MIC in 200 litres capacity stainless steel drums from the UCC Plant in West Virginia, USA Subsequently UCC and UCIL decided to manufac­ ture MIC in their factory at Bhopal itself. 7. At that stage on 13th November, 1973, UCC and UCIL entered into an agreement entitled Foreign Collaboration Agreement ac­ cording to which the best manufacturing information then available from or to Union Carbide had to be provided for the factory in India. This necessitated UCC supplying the design, knowhow and safety measures for the production, storage and use of MIC which ought to have been an improvement on the factory of UCC at West Virginia based on the experience gained there. Investigation has however disclosed that the factory at Bhopal was deficient in many safety aspects. The design, know-how and safety measures were provided by the Union Carbide Corporation, USA and the erec­ tion and commissioning of the plant was done under the strict control of the experts of UCC. The Indians in this plant were only working under their di~ections. 8. After an initial period of profits, the UCIL factory was running in loss. The loss for the first 10 months of 1984 amounted to Rs. 5,03,39,000. Due to this, U.C.E. Hongkong directed UCIL vide their letter dated 26 October, 1984 that the factory at Bhopal should be closed down and sold to any available buyer. As no buyer became available in India, UCE, Hongkong directed UCIL to prepare an estimate for dismantling the factory and shipping it to Indonesia or Brazil where they probably had some buyers. These estimates were completed towards the end of November, 1984. 9. The investigation conducted by the C.B.I., the report of the scientific team established by Government of India and in par­ ticular the literature and manuals etc. regarding MIC of Union Carbide Corporation itself prove that MIC is reactive, toxic, volatile and flammable. It is a highly hazardous and lethal material by all means of contact and is a poison. Skin contact with MIC can cause severe burns. MIC can also seriously injure the eyes even in its concentrations. Exposure to MIC is extremely irritating and would cause chest pain, coughing, choking and even pulmonary KF.SHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 307 " edema. On thermal composition, MIC would produce hydrogen A cyanide, nitrogen oxide, carbon monoxide and/or carbon dioxide. 10. MIC has to be stored and handled in stainless steel of types 304 or 316, namely, good quality stainless steel. Using any other material could be pangerous. In particular, iron o; steel, aluminium, zinc or galvanized iron, copper or tin or their alloys could not be used for purposes of storage, transfer/transmission of MIC. This would mean that even the pipes and valves carrying MIC had also got to be of the prescribed stainless steel. In other words, at no stage should MIC be allowed to come into contact with any of the metals mentioned above. 11. The tanks storing MIC, have to be, for reasons of safety, twice the volume of the MIC to be stored. It was also advised by UCC itself that an empty tank should also be kept available at all times for transferring MIC from its storage tank to the stand by tank on D occasions of emergency. MIC has to be stored in the tanks under pressure by using nitrogen wh~ch does not react with MIC. The temperature of the tank with MIC has to be maintained below 15 degree celsius and preferably at about 0 degree celsius. The storage system and the transfer lines have to be free of any contaminants as even trace quantities of contaminants are sufficient to initiate E reaction which could become runaway reaction. On reaction set- ting in, there could be dangerous and rapid trimerization. The induction period could vary from several hours to several days. The heat generated could cause reaction of explosive violence. In particular, water reacts exothermically to produce heat and carbon F dioxide. Consequently, the pressure in the tank will rise rapidly if MIC is contaminated with water. The reaction may begin slowly, especially if there is no agitation, but it will become violent. UCC itself states that with bulk systems contamination is more likely than with tightly sealed drums. All these properties of MIC show that despite all the safety precautions that could be taken, storage G of large quantities of MIC in big tanks was fraught with consider­ able risk. 12. Investigation 'has disclosed that at the time when the incident took place there were thee partially buried tanks in the factory at H 308 SUPREME COURT REPORTS l 1996) SUPP. 6 S.C.R. Bhopal. These were numbered E 610. E 611 and E 619. MIC was being stored generally in the tanks E 610 and E 611. E 619 was supposed to be the stand by tank. In the normal running of the factory, MIC from E 610 and E 611 was being transferred to the Sevin plant through stainless steel pipe lines. MIC is kept under pressure by nitrogen which is supplied by a carbon steel header common to all the storage tanks. There is a strainer in the nitrogen line. Subsequent to the strainer the pipe is of carbon steel and leads to make up control valve (DMV) which also has a body of carbon steel. These carbon steel parts could get exposed to MIC vapours and get corroded, providing a source of contaminant which could enter the MIC storage tank and cause dangerous reactions in the MIC. During the normal working of the factory, MIC fumes and other gases that escape pass first through a pipe line called Process Vent Header (PVH) of 2" diameter. The escaping gases were carried by the PVH line to a Vent Gas Scrubber (VGS) containing alkali solution which would neutralize the escaping gases and release them into the atmosphere. Another escape line of such gases that was provided from the tanks was the Relief Valve Vent Header (RVVH) of 4"diameter. Normal pres­ sure of the MIC tank is shown by a pressure indicator. When the pressure in the tank exceeded 40 psig, a rupture disc (RJ?) leading to a safety relief valve (SR V) had to break and the said SR V in the R VVH line open automatically to allow the escaping gas to travel through the RVVH line to the VGS for neutralization. 13. Investigation has shown that the PVH and R VVH pipe lines as well as the valves therein were of carbon steel. Besides, on account of design defect these lines also allowed back flow of the alkali solution from the VGS to travel upto the MIC tanks. 14. A very essential requirement was that the MIC tanks in the factory had to be kept under pressure of the order of 1 Kg./cm2g by using nitrogen, a gas that does not react with MIC. However, MIC in tank No. 610 was stored under nearly atmospheric pressure from 22nd October, 1984 and attempts to pressurize it on 30th November and 1st December, 1984 failed. The design of the plant ought not have allowed such a contingency to happen at all. The tank being under nearly atmospheric pressure, free passage was ·' KE.SHUB MAHINDRA v. STATE [S.B. MAIMUDAR, J. J 309 available for the entry of back flow of the solution from the VGS A into the tank. According to the report of Dr. Varadarajan Com­ mittee, about 500 Kgs. water with contaminants could enter tank 610 through RVVH/PVH lines. The water that entered RVVH at the time of water flushing along with backed up alkali solution from the VGS already present could find its way into the tank 610 through the RVVH/PVH lines via the blow down DMV or through the SRV and RD. 15. The first indication of any reaction in the tanks comes through the pressure and temperature indicators. The thermowell and temperature transmitting lines were out of order throughout and C no temperature was being recorded for quite sometime. Pressure was also being recorded at the end of each shift of 8 hours duration instead every 2 hours as was being done earlier. 16 ............ . 17. On 2nd December, 1984 before 10.45 PM no deviation was noticed in the pressure of tank No. 610. Soon thereafter, in the night shift, some operators notice9 leakage of water and gases and gases from the MIC structure and they informed the Control Room. The Control Room operator saw that the pressure had suddenlly gone up in tank No. 610 .. Some staff in the Illrd shift including S/Shri R.K. Kamparia, C.N. Sen and Saumen Dey check- ed the pressure indicator on ·the tank E 610 and found that the pressure had gone out of range. The factory staff tried to control the situation but they failed. Even tank E 619 which had to be kept empty for emergency transfers was found to contain MIC and therefore when the reaction started, transfer thereto from tank 610 was not possible. The staff on duty immediately informed senior officials of UCIL at Bhopal about the escape of MIC. During all these developments and even thereafter the Union Carbide offi­ cials at Bhopal did not give any information to the residents or any G local authority about the serious dangers to which the pf. Jple were exposed and regarding which the said officials had full knowledge. On the other hand, what was initially mentioned was ammonia gas had escaped." Thereafter are listed the findings of the Scientific Team made by Dr. H A Vardarajan indicating the causes that had resulted in the toxic gas leakage causing its heavy toll. In para 20 of the chargesheet the following findings of the investigation conducted by the C.B.I. have been noted : "20. The investigation conducted by the C.B.I. has proved the following aspects : (i) MIC is a highly dangerous and toxic poison. (ii) Storing huge quantity of MIC in large tanks was undesirable and dangerous as the capacity and actual production in the Sevin C plant did not require such a huge quantity to be stored. Only adequate quantity of MIC should have been stored, that too in small separate stainless steel drums. · (iii) The VGS that had been provided in the design was capable of neutralising only 13 tonnes of MIC per hour and proved to be D totally inadequate to neutralise the large quantities of MIC that escaped from tank No. E 610. When the two tanks (610 and 611) themselves had been designed for storing a total of about 90 tonnes of MIC, proportionately large capacity VGS should have been furnished in the design and erected rather than VGS that was E actually provided. (iv) Due to the design defect, there was back flow of alkali solution from the VGS to the tanks which had been drained in the past by the staff of UCIL. Infact, even after the incident, such draining was done from the PVH and RVVH lines. (v) Whereas the MIC tanks had to be constantly kept under pressure using nitrogen, the design permitted the MIC tanks not being under pressure in certain contingencies. (vi) The refrigeration system that had been provided was inade­ quate and inefficient. No alternate stand by system was provided. (vii) Neither the UCC nor the UCIL took any steps to apprise the local administration authorities or the local public about the con­ sequences of exposure of MIC or the gases produced by its reaction and the medical steps to be taken immediately. KESHUB MAHINDRAv. STATE [S.B. MNMUDAR,J.] 311 21. Apart from these design defects, the further lapses that were A committed were : (a) Invariable storing MIC in the tanks which was much more than the 50% capacity of the tanks which had been prescribed. (b) Not taking any adequate remedial action to prevent back flow B of solution from VGS into the RVVH and PVH lines. This alkali solution/water, therefore, used to be drained. (c) Not maintaining the temperature of the MIC tanks at the preferred temperature of 0 degree celsius but at ambient tempera­ tures which were much higher. ( d) Putting a slip blind in the PVH line and connecting the PVH line with a jumper line to the RVVH line. (e) Not taking any immediate remedial action when tank No. E D 610 did not maintain pressure from 22nd October, 1984 onwards. (t) When the gas escaped in such large quantities, not setting out an immediate alarm to warn the public and publicise the medical treatment that had to be given immediately." It was also recited that if these lapses had not occurred, still the incident would have taken place due to the basic defects in the design supplied by the UCC whose experts supervised the erection and commissioning of the plant itself. The lapses only helped to aggravate the consequences of the incident. Thereafter referring to the indications obtainable from the evidence collected during the investigation regarding the knowledge of the F accused about the defective functioning of the plant the following pertinent recitals are found in paragraph 23 and 24 of the chargesheet : "23. The evidence collected during the investigation proves that the accused persons had the knowledge that by the various acts of commission and omission in the design and running of the MIC G based plant, death and injury of various degrees could be caused to a large number of human beings and animals. All the accused persons joined in such acts of omission and commission with such common knowledge. This resulted in the incident on the night of 2nd/3rd December, 1984 which caused the death immediately and H 312 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. till date of about 2850 human beings and about 3000 animals. The number of affected persons is more than 5,00,000. The ailments damaged respirator tract function, gastro intestinal functions, mas­ cular weakness, forgetfulness etc. 24. The investigation has established that S/Shri Warren Anderson, then Chairman, Union Carbide Corporation, USA: Keshub Mahindra, then Chairman, UCIL Bombay; Vijay Gokhle, then Managing Director and presently Chairman-cum-Managing Direc­ tor, UCIL, Bombay; Kishore Kamdar, then Vice President In­ charge, AP. Division, UCIL, Bombay; J. Mukund, then Works Manager, AP. Division, UCIL, Bhopal, Dr. R.B. Roy Choudhary, then Asstt. Works Manager, AP. Division, UCIL, Bhopal, S.P. Choudhary, then Production Manager, AP. Division, UCIL, Bhopal; K.V. Setty, Plant Superintendent, AP. Division, Bhopal; S.I. Qureshi, Production Assistant, AP. Division, UCIL, Bhopal; the Union Carbide Corporation. U.S.A.; Union Carbide Eastern Inc. Hongkong and Union Carbide India Limited, Calcutta have committed offences punishable Under Sections 304, 326, 324, 429 IPC r/w Section 35 IPC." E Along with this chargesheet a detailed abstract was filed supported by documentary evidence to show how the conclusions reached by the inves­ tigating agency were supported by this documentary evidence. In this abstract it was recited that in that plant there were no facilities for collecting MIC produced separately in each shift and the material is F directly laid into the storage tanks without batchwise analysis. It was also found that there are no on-line analysers. Similarly, nitrogen from a neigh­ bouring factory is fed directly into the storage tanks, without full inter­ mediate storage and quality determination. Carbon ~teel sections are used in the connectors to the storage tanks. Copper tubes are used in connectors to the level instruments of the tank. The system of instruments for alarm G to indicate sudden increase in temperature are not suited to the conditions of operation. Only a single refrigeration system for cooling of MIC in two tanks was installed and it had not been operated for some considerable time. MIC has the combination of properties of very high reactivity with minimum contaminants, ready volatility to become gas and very high in- H halation toxicity. The installed facilities provided for disposal of unstable -- K.ESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.j 313 liquid MIC in alkali or for the neutralisation of gaseous emissions from A violent reaction, on examination are found to be not capable of meeting the objectives of such disposal in a very short time of two hours. The abstract also recited that the ingress of about 500 kg. of water alone, was not the sole cause of the escape of a huge quantity of toxic gas. In this connection the following averments found in the abstract were relied upon by the prosecution. : B "The ingress of about 500 kg. of water alone, without metallic contaminants, would have led to a reaction with three to four tonnes of MIC and gradual rise in temperature to 70 degree celsius, below the boiling point of MIC at the safety valve pressure. The C very rapid explosive rise in temperature and pressure in the tank 610, implies conditions for a run-away trimerisation reaction al­ ready existed. Ingress of water and reaction with MIC would generate carbondioxide evolution and cause mixing. The storage tank conditions would then equal those in a well mixed reactor, D supplied with heat. Once initiated, the trimerisation reaction had features of auto-catalytic and auto- thermal reactions and tempera­ tures increased rapidly to 250 degree celsius. The relief valve design could not permit free flow of large quantities of gases at the level at which they were generated and therefore further reactions continued. E The presence of sodium at levels of 50 to 90 ppm in the samples from residues of tank 610 indicates ingress of some alkali, possibly derived from the Vent Gas Scrubb~r Accumulator. It is known that the tank 610 could not be pressured with nitrogen at any time after F 22 October, 1984. The contents of tank 610 were virtually at atmospheric pressure from that date providing opportunities for entry of metal contaminants. From a perusal of the reports of the events of the night cf 2/3 December, 1984, it appears during the cleaning of choked filters with water in the Relief Valve Vent G Header, such water perhaps mixed with alkali from Vent Gas Scrubber Accumulator, could have entered the non pressurised tank and may have carried some metallic contaminants from the carbon steel portions of header pipelines. The rapid rise in temperature necessitates onset of metal catalysed polymerisation and could not result from water alone. The presence of H 314 SUPREME COURT REPORTS (1996] SUPP.6S.C.R. choloroform has no influence whatsoever in initiating or accelerat­ ing the run-away reactions. The quantum of leakage is related not · to the quantum of water but to the amount of MIC stored in a single container. If 42 tonnes of MIC had been stored in 210 stainless steel drums instead of_ a single tank, leakage by reactions or spillage would be no more than one fifth of tonne." Reliance was also placed on the brochure for showing that for manufacture of Sevin, a very volatile and dangerous raw material, MIC had to be stored in large quantities and that raw material was not properly kept under cooling conditions and if coming in contact with water or any other C pollutant had a tendency to create extremely toxic gas which once it escapes would necessarily create disaster to the human beings and even cattle which come in its contact. It has to be stated in fairness to learned senior counsel for the appellants that they also did not challenge the fact that MIC was a very highly volatile and dangerous material which had to D be properly kept so that it may not spell disaster once it gets converted into poisonous gas and if such gas escapes from the factory. However their only contention was whether there was any prim a f acie evidence to show that the appellants or any one of them was in any way responsible for this unfortunate accident, which in their view was an act of God for which no human being was responsible. The learned Addl. Solicitor General Shri Altaf Ahmed has also invited our attention to document D-159 a brochure of UCC, USA which stated that if MIC is contaminated with water it may become violent. He also invited our attention to D-195 which is a circular giving company p information about definitions of 'subsidiary and associate companies'. This was relied upon to show that UCIL was a subsidiary company of UCC, USA. Additional D-9 was relied upon which was a copy of the application for grant of industrial licence for manufacture of MIC based pesticides with foreign collaboration of UCC, USA, to show that UCL authorities were well aware regarding the ·Iiazardous nature of MIC which they were G handling in collaboration with UCC, USA and the safety measures which were required to be undertaken. Letter D-191 dated 26.10.1984 written by R. Nagarajan of UCEI to Shri K.S. Kamdar was relied upon to show that Shri Kamdar was requested to give feasibility report for dismantling of the , MIC Plant, Bhopal and the shipment thereof abroad and the cost estimate H involved in such an undertaking. Reply of Shri Kanidar at D-19 dated K.ESHUBMAHINDRAv.STATE(S.B.MAJMUDAR,J.] 315 29.11.1984 was also relied upon to show the cost estimate prepared for A dismantling and shipping of the Sevin/MIC Unit from Bhopal. These documents were relied upon to indicate that by the closing months of 1984 this plant had become useless and had to be scrapped and shifted and that showed lack of interest of the management and those operating the plant in the safe working of the plant which was no longer profit making and was B almost a dead burden to them and this had resulted, according to the prosecution, in illegal omission on their part in taking necessary safety measures for containing the hazardous MIC within the confines of factory premises. D-216 was a statement showing loss to MIC Unit from 1981 to 1984 which showed huge financial loss suffered by the company in running the said plant. Thereafter the learned Additional Solicitor General placed C strong reliance on document D-205 which was Operational Safety Survey Report conducted by team of experts of UCC. This document showed that a number of deficiencies in the maintenance of MIC Unit were pointed out by experts as early as in 1982. Ti1e said report is styled as Operational Safety Survey Co, MIC and SEVIN Units Union Carbide India Limited, D Bhopal Plant. It is dated 28th July 1982. The covering letter addressed to Shri J. Mukund accused No. 5, the then Works Manager of the Bhopal Plant recites that the team was very impressed with the quality of operating and work procedures developed over the past few years. However it sought to bring to the attention of the addressee in connection with the equipment and mechanical deficiencies described in the report and suggested that E continued efforts in the area of procedures, training and enforcement were necessary for contributing substantially to the on-going safety efforts at the Bhopal Plant. It was indicated that there were potentials for release of toxic materials in the phosgene/MIC unit and storage areas, either due to equipment failure, operating problems or maintenance problems. There F were potentials for contaminations, overpressure, or overfilling of the SEVIN MIC feed tank. At M.2.1. were noted several conditions for opera- tion of the unit that presented serious potential for sizeable releases of toxic materials. They were listed us under : "(a) Leakage of phosgene and choloroform from the PSS feed and G quench feed filter head assemblies. (b) Breakage of small lines or connections, either because of inadequate line strength, installation of long unsupported nipples, or corrosion. Examples cited included quench pump H 316 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. drain and vent connections, HCI Scrubber pump drains, and MRS and pyrolyzer tails pump drains and vents. (It should be noted that several of these lines were originally schedule 10 nickel piping, and have been replaced, for the most part.) (c) Possible failure of the pyrolyzer calandria vapor line due to erosion/corrosion. ( d) Mechanical pump seal failures, caused by improper seal design (on the Glit pumps,· for instance) or inadequate control of replacement materials. ( e) Release of material at unexpected places due to improper evacuation jet operation or open evacuation drops." Regarding the operation of MIC Feed Tank at Sevin which was the basic source of the Bhopal Gas tragedy the Expert Committee Report indicated D the dismal situation then existing even _in 1982 in paragraph M.4.2. of the Report as under : "(a) It appears that it would be possible to contaminate the tank with material from the vent gas scrubber. Although the ar­ rangement of lines connecting the tank and vent scrubber appears to be adequate to prevent back flow of liquid, it appears possible to back reactive quantities of water vapors and other gases from the scrubber to the feed tank wheµ it is depressurized. (b) Location of the tank inside a room and lack of water spray protection facilities create a situation where a toxic and flammable vapor cloud could be formed and confined without provision for knockdown or dispersal. There is mechanical ventilation in the room, b'..lt the same circumstances that could result in a leak or overfill (power failure, for instance) could result in the ventilation being inoperative. Also, it appears that a sizeable spill would not be readily dispersed by the system. ( c) There is some question about the adequacy of the tank relief valve to relieve a runaway reaction or fire exposure, par- H ticularly since the tank has been enlarged. KE.SHUB MAHINDRA v. STATE [S.B. MAJMUDAR, J.) 317 ( d) Manual control of filling of the tank, with no instrumentation A backup, creates a possibility of accidental overfilling." Even that apart after the Bhopal Gas tragedy as stated earlier a scientific team of experts headed by Dr. V ardarajan inspected the plant on spot and tried to find out the reasons for this tragedy. At page 81 of the Report after listing various defects in the working of the plant especially with reference B to storage tank and the instrumentation and control system the committee in paragraph 4.3 of the Report which is D-164 on the record of the Trial Court observed as under : "MIC is kept under a pressure of nitrogen which is supplied by a C carbon steel header common to all the storage tanks. There is a strainer in the nitrogen line. Subsequent to the strainer the pipe is of carbon steel and leads to make-up DMV which also has as body of carbon steel. Similarly, the blowdown DMV is also of carbon steel body. These carbon steel parts may be exposed to MIC - vapours and get corroded, providing a source of contaminant D which can enter the MIC storage tank." At paragraph 4.4 dealing with 'Instrumentation°and Control System' it was observed in the Report of the Vardarajan Committee as under: "4.4. Instrumentation and Control System : The pressure in the MIC tank increases rapidly if MIC is con­ taminated with water. There is no high pressure alarm to alert the operator about the build-up of pressure. There is a graphite rupture disc between the tank and the safety F valve. This graphite rupture disc may break because of pressure surges even under normal conditions. !here is no provision for an alarm to bring such a breakage of rupture disc to the attention of the operator. For the storage of a lethal chemical such as MIC, two instru­ ments in parallel (one for controVindication and another for alarm) G are normally provided. No such provision is made. For example, quite often the level readings have not been recorded, reportedly because the level system used to be out of order very often due to choking problems. In fact, after the event, since the only level monitoring system provided for tank 611 was not functioning, it was not possible to ascertain the exact quantity of MIC in that H 318 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. tank. An additional level measuring system would have helped in such a situation. Ingress of contaminants or water can start a reaction with MIC which begin slowly and produce a rise in temperature of the tank contents. However, the range of the temperature transmitter provided was only -25 degree celsius to + 25 degree celsius, with a high alarm setting at + 11 degree celsius. The contents of the tank were being stored at ambient temperature, which varies approximately from + 15 degree celsius to + 40 degree celsius at Bhopal. The temperature of MIC in the storage tanks for most part of the year was higher than the high temperature alaram setting. i.e. + 11 degree celsius. Indeed the temperature of material in the tank was higher than the maximum of the range of the temperature transmitter, i.e. + 25 decree celsius. In such circumstances the actual temperature was not known and the transmitter was of no value. Further, provision of "rate of rise in temperature" alarm would have invited the operator's attention to the start of such a re.action. No such provision was made." In connection with refrigeration the Committee observed in paragraph 4.5 of the Report as under : 4.5 Reftigeration : There is only one common compressor and chiller system for all the three MIC storage tanks. For such a hazardous material as MIC, where maintaining it at a low temperature is considered very important, a spare compressor and chiller system would have ensured proper chilling even when the main compressor and chiller system is under repairs or maintenance. This provision of spare compressor and chiller has not been made." At paragraph 5 of the Report is found an analysis of the events which led to G the disaster out of the gas escape on that fateful night and the summary of the conclusion is found in the last sub-paragraph of para 5. It reads as under : "In retrospect, it appears the factors that led to the toxic gas leakage and its heavy toll existed in the unique properties of very high reactivity, volatility and inhalation toxicity of MI<;. The need- H less storage of large quantities of, the material in very large size KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.) 319 containers for inordinately long periods as well as insufficient A caution in design, in choice of materials of construction and in provision of measuring and alarm instruments, together with the inadequate controls on systems of storage and on quality of stored materials as well as lack of necessary facilities for quick effective disposal of material exhibiting instability, led to the accident. These factors contributed to guidelines and practices in operations and maintenance. Thus the combination of conditions for the accident were inherent and extant. A small input of integrated scientific analysis of the chemistry, design and controls relevant to the manufacture would have had an enormously beneficial influence in altering this combination of conditions, and in avoiding or C lessening considerably the extent of damage of December, 1984 at Bhopal." In addition to the aforesaid documentary evidence the learned Additional Solicitor General also relied upon D-157 being Memorandum of Associa- tion and Articles of Association of Mis Ever Ready Company (India) D Private Limited subsequently changed to M/s Union Carbide India Limited showing accused No. 2 Keshub Mahindra as the Chairman. Various annual reports were pressed in service to show how accused No. 2 Keshub Mahindra presided over the meetings and how accused No. 3, V.P. Gok­ hale worked as whole-time Director. This was relied upon to show that E these accused even though stationed at Bombay shared the criminal knowledge of the other personnel of the company who were actually handling the Bhopal plant being accused Nos. 5 to 9. It was submitted relying on aforesaid material and also the statements of Arjun Singh, Mohan Singh and Ram Lal and other statements of persons working in the plant which were recorded during investigation that all the accused had F criminal knowledge regarding the defective working of the plant at Bhopal and as the Plant was to be dismantled and shifted out of India the powers that monitored the plant were no longer interested in its safe keeping and by their illegal omissions to take appropriate steps for safe working of the plant and for the safe keeping of such dangerous material like MIC which G they were handling at Bhopal, they were rightly charged for the concerned offences by the learned Trial Judge and that the High Court was right in refusing to interfere with the framing of these charges. In this connection it was pointed that as the material showed no transfer of MIC from the strorage tanks to the production line could take place since November 22, 1984 due to the defective system. Still no remedial measures were taken. H 320 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A That the report of Vardarajan Committee showed that a relief valve vent header and process valve header were joined together by putting a 'U' type flexible hose jumber line. Therefore, according to him, this resulted in back flow of alkalin solution from the VGS to the storage tanks leading to a chain of reactions. B It was next submitted that despite the recommendations in the report of the operational Safety Survey conducted at Bhopal Plant by experts from United States during May 1982 and despite various deficiencies of serious and minor nature being pointed out no remedial steps were taken. Even during the Safety Survey leakages from MIC plant area h~d been C noticed. Deficiency in safety valve and absence of fixec water sprayers in the MIC Plant area had been particularly pointed out. Thus the gas had leaked from the storage tank due to a chain chemical r~action. That the material led before the Trial Court at the stage of framing of charge clearly indicated that. there was possibility of ingress of water and other con­ taminants from the R VVH or during cleaning of the valve due to rupturing D the disc valve which had resulted into this grim tragedy. It was next contended that the material led by the prosecution at this stage at least prima f acie showed that all the accused were fully responsible for t1:te conduct of the plant and they shared the criminal knowledge about the acts of commission and omission on the part of those of the accused who were E actually handling the plant and supeivising its working on that fateful night at Bhopal. That accused R. Choudhary, J. Mukund, S.P. Choudhary, K.V. Shetty and S.I. Qureshi who were actively associated with the working of the plant at Bhopal were directly concerned with the incident as they were in full knowledge of the deficiencies in the plant. Similarly accused Keshub, Mahindra, V.P. Gokhale and Kishore Kamdar too had full knowledge of F the defects in the plant at Bhopal and therefore, they also shared the criminal liability based on criminal knowledge about the acts of commission and omission in connection with the operation of the said plant at Bhopal. That all the accused had full knowledge of the hazardous nature of the MIC manufactured as an intermediate product in Bhopal plant, defects in the design of the plant lack of safety measures, but still they had taken to G precautionary steps to avoid this unfortunate accident. Learned senior counsel for the appellant-accused on the other hand submitted that even if taking the material available on record at this stage on its face value the short question is whether any charge could have been H framed against the accused under Section 304 Part 11, IPC with or without KESHUBMAHINDRAv.STATE[S.B.MATMUDAR,J.] 321 the aid of Section 35, IPC and even for that matter any charges could have A been framed under Sections 326, 324 or 429 with or without the aid of Section 35 of IPC. We may at once state that both the learned Sessions Judge as well as the High Court have taken the view on the aforesaid material that a plima f acie case has been made out by the prosecution requiring a~cused to face the aforesaid charges and the trial of the accused B on these charges cannot be cut short or nipped in the bud in the light of the aforesaid material which has to be accepted as plima f acie true and reliable at this preliminary stage of framing of charges. It, therefore, become necessary for us now to address ourselves on this moot question. As noted earlier the main charge framed against all C these accused is under Section 304 Part II, IPC. So far as accused Nos. 2, 3, 4 and 12 are concerned they are also charged with offences under Sections 326, 324, IPC and 429 IPC read with Section 35 IPC while accused 5 to 9 are, charged substantially with these offences also. We shall first deal with the charges framed against the concerned accused under the main D provisions of Section 304 Part II, IPC. A look at Section 304 Part II shows that the concerned accused can be charged under that provision for an · offence of culpabl6. homicide not amounting to murder and when being so charged ifit is alleged that the act to the concerned accused is done with the knowledge that it is likely to cause death but without any intention to cause death or to cause such bodily injury as is likely to cause death the E charge offences would fall under Section 304 Part II. However before any charge under Section 304 Part II can be framed, the material on record must at least prima f acie show that the accused is guilty of culpable homicide and the act allegedly committed by him must amount to culpable homicide. However, if the material relied upon for framing such a charge F against the concerned accused falls short of even prim a f acie indicating that the accused appeared to be guilty of an offence of culpable homicide Section 304 Part I or Part II would get out of the picture. In this connection we have to keep in view Section 299 of the Indian Penal Code which defines culpable homicide. It lays down that, 'whoever causes death by doing an act with the intention of causing death, or with the intention of causing G such bodily injury as is likely to cause death, or _with the knowledge that he is likely by such act to cause death, commits the offence of culpable homicide'. Consequently the material relied upon by the prosecution for framing a charge under Section 304 Part II must at least prima f acie indicate that the accused had done an act which had caused death with at H 322 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A least such a knowledge that he was by such act likely to cause death. The entire material which the prosecution relied upon before the Trial Court for framing the charge and to which we have made a detailed reference earlier, in our view, cannot support such a charge unless it indicates plima facie that on that fateful night when the plant-was run at Bhopal it was run B by the concerned accused with the knowledge that such running of the plant was likely to cause deaths of human beings. It cannot be disputed that mere act of running a plant as per the permission granted by the authorities would not be a criminal act. Even assuming that it was a defective plant and it was dealing with a very toxic and hazardous substance like MIC the mere act of storing such a material by the accused in tank C No. 610 could not even plima facie suggest that the concerned accused thereby had knowledge that they were likely to cause death of human beings. In fairness to prosecution it was not suggested and could not be suggested that the accused had an intention to kill any human being while operating the plant. Similarly on the aforesaid material placed on record D it could not be even plima f acie suggested by the prosecution that any of the accused had a knowledge that by operating the plant on that fateful night whereat such dangerous and highly volatile substance like MIC was stored they had the knowledge that by this very act itself they were likely to cause death of any human being. Consequently in our view taking the E entire material as aforesaid on its face value and assuming it to represent correct factual position in connection with the operation of the plant at Bhopal on that fateful night it could not be said that the said material even plima facie called for framing of a charge against the concerned accused under Section 304 Part II, IPC on the spacious plea the said act of the F accused amounted to culpable homicide only because the operation of the plant on that night ultimately resulted in deaths of number of human beings and cattle. It is also pertinent to note that when the complaint was original­ ly filed suo motu by the police authorities at Bhopal and the criminal case was registered at the police station Hanumanganj, Bhopal as case No. 1104/84 it was registered uncle~ Section 304-A of the IPC. We will come to G that provision a little later. Suffice it to say at this stage that on the entire material produced by the prosecution in support of the charge it could not be said even plima f acie that it made the accused liable to face the charge under Section 304 Part II. In this connection we may refer to a decision of t~e Calcutta High Court to which our attention was drawn by learned H senior counsel Shri Rajendra Singh for the appellants. In the case of Adam KESHUB MAHINDRA v. STATE [S.B. MATMUDAR, J. J 323 Ali Taluqdar and Ors. v. King-Empem1; AIR (1927) Calcutta 324 a Division A Bench of the Calcutta High Court made the following pertinent observa­ tions while interpreting Section 304 Part II read with Section 34 IPC : "Although to constitute an offence under S. 304, Part 2, there must be no intention of _:causing death or such injury as the offender knew was likely to cause death, there must still be a common intention to do an act with the knowledge that it is likely to cause death though without the intention of causing death. Each of the assailants may know that the act, they are jointly doing, is one that is likely to cause death but have no intention of causing death, yet they may certainly have the common intention to do that act and therefore S. 34 can apply to a case under S. 304, Part 2." Once we reach the conclusion that the material produced by the prosecu­ tion before the Trial Court at the stage of framing of charges did not even prim a f acie connect the accused with any act done with the knowledge that by that act it~elf deaths of human beings would be caused the accused D could not be even charged for culpable homicide and consequently there would be no question of attracting Section 304 Part II against the con­ cerned accused on such material. When on the material produced by the prosecution no charge could be framed against any of the accused under Section 304 Part II there would remain no occasion to press in service the applicability of Section 35, IPC in support of such a charge for those E accused who were not actually concerned with the running of the plant at Bhopal, namely, accused Nos. 2, 3, 4 and 12. We may now turn to the charges framed against the concerned accused- appellanty under Sections 324 and 326 of the IPC. Section 324 F deals with 'voluntarily causing hurt by dangerous weapons or means' while Section 326 deals with 'voluntarily causing grievous hurt by dangerous weapons or means". Both these sections for their application require material against the accused on the basis of which it could be said that the accused had voluntarily caused such hurt or grievous hurt, as the case may be. Section 321 defines 'voluntarily causing hurt' and provides that, G 'whoever does any act with the intention of thereby causing hurt to any person, or with the knowledge that he is likely thereby to cause hurt to any person, and does thereby cause hurt to any person, is said "voluntarily to cause hurt". Similarly Section 322 deals with 'voluntarily causing grievous hurt' and lays down that, 'whoever voluntarily causes hurt, if the hurt which H 324 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A he intends to cause or knows himself to be likely to cause is grievous hurt, and if the hurt which he causes is grievous hurt, is said "voluntarily to cause grievous hurt". For applicability of these Sections the material relied upon by the prosecution in support of such charges must show that the con­ cerned accused had committed the act complained of at least with the B knowledge that by such act he was likely to cause hurt or grievous hurt to the victim. We have already indicated hereinabove that the material pressed in service by the prosecution for framing such charges against the accused falls short of indicating that the act of running the plant on that fateful night at Bhopal which in its turn involved storing and utilising highly dangerous and volatile substance like MIC in their storage tank No. 610 C could not even prima f acie be said to have been done with the knowledge that by such act itself simple hurt or giievous hurt was likely to be caused to any one. Consequently on such material even charge under Sections 324 and 326, IPC could not have been framed against the concerned accused. Once this conclusion is reached there would also reinain Iio occasion to D . press in service against the absentee accused Nos. 2: 3, 4 as well as, i2 Section 35 IPC which the prosecution sought to press in service along with substantive Sections 324 and 326 IPC. In fact on the material as placed by the prosecution in support of these charges if a charge under Section 304 . Part II cannot be framed then on the parity of reasoning no, charge under E Sections 324 and 326 could also be framed. That takes us to Section 429, IPC which deals with 'mischief by killing or maiming cattle, etc., of any value or any animal of the value of fifty rupees'. For application of this Section the material must indicate that the concerned accused had com­ mitted mischief in the first place. The term 'mischief is defined by Section 425 IPC. It lays down that, 'whoever, with intent to cause, or knowing that F he is likely to cause, wrongful loss or damage to the public or to any person, or in the situation thereof as destroys or diminishes its value or utility, or affects it injuriously, commits "mischief'". Before the said Section is pressed in service the material relied upon by the prosecution must indicate even prim a f acie that the concerned accused by running the plant at Bhopal on G that fateful night had knowledge that by running such plant they were likely to cause wrongful loss or damage to the public or to any person. It is difficult to appreciate how said provision can be pressed in service on the basis of the material ref erred to hereinabove which does not whisper or even prima facie indicate how by running such a plant wherein highly H dangerous and volatile substance like MIC was stored in tank No. 610 the KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.) 325 accused had the knowledge that by that act alone they were likely to A destroy anybody's property or cause wrongful loss or damage to any person. Once the applicability of Section 425, IPC dealing with 'mischief' is ruled out on such material there would remain no occasion to invoke Section 429 which for its applicability requires the prosecution to show in the first instance any material against the concerned accused indicating the B commission of mischief by the accused. In our view, therefore, on the material pressed in service by the prosecution for framing charges against the accused no charge could have been framed against the concerned accused either under Section 304 Part II or under Section 324, 326 or 429, IPC with or without the aid of Section 35, IPC. On these findings of ours the appeals will be required to be allowed and all these charges will have C to be quashed. However this is not the end of the matter. There still remains the question as to whether any other charge can be framed against the con­ cerned accused for any of the offences under the Indian Penal Code on D the basis of the very same material relied upon by the prosecution for framing appropriate charges against the accused. It is true that though originally the criminal case was registered for an offence under Section 304-A of the IPC the Central Bureau of Investigation which took up the investigation thought it proper to press in service Section 304 Part II and Sections 324, 326 and 429 of the IPC. Charges under these Sections have E been found by us to be unsustainable on the material produced by the prosecution on record in support of these charges. However that does not mean that on the material as it stands on record the accused cannot even plima f acie be alleged to have committed any criminal offence for which they can be called upon to face the trial and that they should get a clean F chit and clear walk-over. In our view the prosecution on the material as aforesaid had made out a plima facie case against the accused for being tried under Section 304-A of the IPC which reads as under: "304-A. Causing death by negligence. - Whoever causes the death of any person by doing any rash or negligent act not amounting to G culpable homicide shall be punished with imprisonment of either description for the term which may extend to two years, or fine, or with both". On our finding that the material pressed in service by the prosecution does H A not indicate even prima f acie that the accused were guilty of an offence of culpable homicide and, therefore, Section 304 Part II was out of picture, Section 304-A on this very finding can straightaway get attracted at least p1ima facie. It cannot be disputed that because of the operation of the defective plant at Bhopal on that fateful night a highly dangerous and B volatile substance like MIC got converted into poisonous gas which snuffed off the lives of thousands of human beings and maimed other thousands and killed number of ~nimals and that all happened, as seen at least prima f acie the material led by the prosecution on record, because of rash and negligent act on the part of the accused who were in-charge of the plant at Bhopal. Even though, therefore, these acq1sed cannot be charged for C offences under Section 304 Part II the material led against them by the prosecution at least prim a f acie showed that lhe accused were guilty of rash or negligent acts not amounting to culpable homicide and by that act caused death of large number of persons. We may mention that on the question whether on this material Section 304-A could be invoked or not, D learned senior counsel for the appellants as well as learned Addl. Solicitor General for the respondent-State did address us and, therefore, we can and should, with a view to avoid multiplicity of proceedings, exercise our powers under Article 142 of the Constitution and decide whether the material led by the prosecution can prima f acie support charges under Section 304-A against concemed accused. In the case of State of Gujarat v. E Haidarali Kalublzai, [1976] 1 SCC 889 it was laid down by this Court as under: "Section 304-A by its own definition totally excludes the ingredients of Section 299 or Section 300 I.P.C. Doing an act with the intent - to kill a person or knowledge that doing of an act was likely to cause a person's death are ingredients of the offence of culpable homicide. When intent or knowledge as described above is the direct motivating force of the act complained of, Section 304-A has to make room for the graver and more serious charge of culpable homicide." < On the facts found in that case it was held that the prosecution evidence did not make out a case of any wilful or deliberate act on the part of the accused in order to cause the death of the deceased by driving the truck in the way he did. Whether the prosecution brings home the charge under H Section 304- A or not will, of course, have to be decided in the light of the K.ESHUB MAHINDRAv. STATE [S.B. MAJMUDAR,J.J 327 evidence that may be led in the trial against the accused who is required A to face the charge under Section 304-A. But for framing such a charge the material on record must at this stage be assumed to be representing a true version of the event. For repelling the applicability of Section 304-A, learned senior counsel for the appellants pressed in service decision in the case of Ambalal D. Bhatt v. The State of Gujarat, [1972] 3 SCC 525. The following observations in the aforesaid judgment were pressed in service : B "(i) In a prosecution for an offence under Section 304- A of I.P.C., the court has to examine whether the alleged act of the accused is the direct result of a rash and negligent act and that act was the proximate and efficient cause of the death without intervention of C other's negligence. The mere fact that an accused contravenes certain rules or regulations in doing of an act does not establish an offence under Section 304-A, l.P.C. The act causing deaths must be the causa causans; it is not D enough that it may have been the causa sine qua. non. The court has to determine whether the act of the accused is the causa causans or has there been a cause intervening which has broken the chain of causation so as to make the act of the accused, though a negligent one, not the immediate cause or whether it amounts to an act or gross negligence or recklessly negligent conduct. The E fact that twelve lives have been lost, however shocking and regret­ table it may be, ought not to allow the mind boggle while appreciat - ing the evidence." It was submitted that the material must prima f acie show that the alleged F act of the accused was the direct result of rash and negligent act. In this connection we .must observe that the material led by the prosecution to which we have made a detailed reference earlier prima f acie shows that there were not only structural defects but even operational defects in the working of the plant on that fateful night which resulted into this grim G tragedy. Consequently a prima facie case is made out for framing charges under Section 304-A against the concerned accused. If ultimately on the evidence led by the prosecution and even by the defence if at all they choose to led evidence in rebuttal, it is found that that act complained of was not the proximate and efficient cause of death and intervention of other's negligence had taken place the accused may get acquittal after H 328 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A facing the full fledged trial. But that stage has yet not come. It would, therefore, be premature at this stage to say as to. what would be the ultimate result of the trial once the accused are made to face such a trial. But it cannot be said that on the material led by the prosecution at this stage even the case of culpable negligence of rashness is also not made out at least B plima f acie against the concerned accused and the trial should be nipped in the bud even for such a charge. Our attention was also invited by learned senior counsel for the appellants in support of their contention that the material on· record does not plima f acie make out a case for framing a charge under Section 304-A, IPC. The following observations of Hegde, J. speaking for a Bench of three learned Judges in the case of Suleman C Rehiman Mulani & Ors. v. State of Maharashtra, [1968] 2 SCR 515, were pressed in service: "The requirements of s. 304-A I.P.C. are that the death of any person must have been caused by the accused by doing any rash or negligent act. In other words, there must be proof that the rash or negligent act of the accused was the proximate cause of the death. There must be direct nexus between the death of a person and the rash or negligent act of the accused. There is no presump­ tion in law that a person who possesses only a learner's licence or possesses no licence at all does not know driving. For various reasons, not excluding sheer indifference, he might not have taken a regular licence. The prosecution evidence that first appellant had driven the jeep to various places on the day previous to the occurrence was a· proof of the fact that he knew driving." Even that decision cannot be of any avail to the appellants for the simple F reason that question of proof of rashness and negligence will arise at the stage of trial after full evidence is led by the prosecution and even by the accused side if at all they choose to do so and in the light of that evidence the question would arise whether the charge as framed is made out by the prosecution against the concerned accused. At present we are concerned G with the short question as to whether on the material led by the prosecution at this stage a case is made out for framing under Section 304-A, IPC or not? It cannot be gainsaid that the voluminous evidence led by th,e prosecu­ tion in this connection at least prima facie shows that the concerned accused who operated the plant on that fateful night at Bhopal could be alleged to be at least guilty of rash and negligent act in the way this highly H volatile substance MIC was handled by them and which ultimately escaped KESHUBMAHINDRAv.STATE[S.B.MNMUDAR,J.] 329 in vapourous form and extinguished the lives of thousands of human beings A and animals apart from causing serious bodily injuries to thousands of others. Our attention in this connection was also invited by learned senior counsel for the appellants to the case of Kurban Hussein Mohammeda/i Rangwa/la v. State of Maharashtra, (1965] 2 SCR 622. It was submitted relying on the said deCision that for punishing an accused under Sections 304-A and 285 of the IPC it was required to be shown that because of the alleged rash and negligent act death must result and death must be the direct and proximate result. It that case on evidence led at the full fledged trial the question arose whether the charge was made out. All these judgments on which learned senior counsel for the appellants placed reliance, therefore, could have applicability for judging the culpability of C the concerned accused after they face the trial and entire evidence is led in the case against them. However for framing charge under Section 304-A on the aforesaid material it cannot be said that the said material even prima f acie did not point out the culpability of the concerned accused in running a defective plant having number of operational defects and in being prima f acie guilty of illegal omissions to take safety measures in running such a D limping plant on that fateful night which resulted into this colossal tragedy. The aforesaid conclusion of ours, therefore, would make out a prim a f acie case against accused nos. ~' 6, 7, 8 and 9 who were in actual charge of running of the Bhopal plant and would require them to face the trial fr : charge under Section 304-A of the IPC. So far as the remaining accused nos. 2, 3, 4 and 12 are concerned the material produced on record clearly indicates at least prima f acie that they being at the helm of affairs have to face this charge for the alleged negligence and rashness of their subordinates who actually operated the plant on that fateful night at Bhopal and for that purpose Section 35 of the F IPC would also prima f acie get attracted against them. A mere look at that Section shows that if the act alleged against these accused becomes criminal on account of their sharing c'Jmmon knowledge about the def ec- tive running of plant at Bhopal by the remaining accused who represented them on spot and who had to carry out their directions from them and who G were otherwise required to supervise their activity, Section 35 of the IPC could at least prim a f acie be invoked against accused 2, 3, 4 and 12 to be read with Section 304-A, IPC. Consequently we find that on the material led by the prosecution against the accused at this stage a prima f acie case was made out by the prosecution for framing charges against accused Nos. 330 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A 2, 3, 4 and 12 under Section 304-A read with Section 35 IPC while substantive charges under Section 304-A could be framed against accused Nos. 5, 6, 7, 8 and 9. In this connection Shri Desai, learned senior counsel for the appellants vehemently submitted that the High Court was in error in invoking Section 35 against the concerned accused. Placing reliance on B Esso Standard Inc. v. Udltaram Bhagwandas Japanwalla, [1975] 45 Comp. Cas. 16 he submitted that, that was a case in which for the individual acts of the directors of the company the company was sought to be made liable by invoking the principle of corporate liability based on the doctrine of directing mind and will. Shri Desai submitted that this was a converse case where for the act of the company which is a corporate body being accused C No. 12 the individual directors are sought to be roped in. The aforesaid contention of Shri Desai cannot be of any avail at this stage for the simple reason that whether on facts such converse case is made out or not in the light of aforesaid decision will depend upon the evidence that may be led at the stage of trial. But this would not rule out framing of appropriate D charge against the appellants if there is prim a f acie material against them which in our view has been made available by the prosecution before the Trial Court for framing such a charge against the concerned accused. Shri Ashok Desai, learned senior counsel then submitted that the material led by the prosecution does not even remotely indicate that E accused no. 2 who was at Bombay could have shared any knowledge with persons at Bhopal who were actually operating the plant. When from the documentary evidence produced by the prosecution it isprima facie indi­ cated that the accused at the helm of affairs was in the apex position enabling him to know the shortcomings of the working of the plant at · F Bhopal. Whether he actually shared knowledge or not will be a question of evidence and proof to be resolved at the stage of trial. However from the material available on record it cannot be said that the prosecution had not prim a f acie made out a case for attracting Section 35, IPC so far as the present accused are concerned. However we must add a caution. We must note that wh~tever we have observed at this stage in connection with the G material produced by the prosecution for framing charges against the accused is strictly confined to this limited question. Whether the accused are found actually guilty of the charges framed against them or not will strictly depend upon the evidence that may be led at the stage of trial and the court will have to decide the culpability of the concerned accused, if H any, strictly confined to the evidence that may be led at the stage of trial. KESHUBMAHINDRAv.STATE[S.B.MAJMUDAR,J.] 331 Our present observations, therefore, should not be treated to have even A remotely suggested that in fact the accused are guilty of the offences with which they are liable to be charged pursuant to our present order. Conse­ quently on the material as produced by the prosecution on record charges under Section 304-A read with Section 35 IPC can be framed against accused nos. 2, 3, 4 and 12. We direct the appropriate Trial Court to frame charges as aforesaid against the concerned accused. B However in our view from the material which is produced on record there is a possibility of considering a further question whether charges under Sections 336, 337 and 338 of the IPC with or without the aid of Section 35 can be framed against the concerned accused. They read as C under: "336. Act endangering life or personal safety of others. - Whoever does any act so rashly or negligently as to endanger human life or the personal safety of others, shall be punished with imprisonment of either description for a term which may extend to three months, D or with fine which may extend to two hundred and fifty rupees, or with both. 337. Causing hurt by act endangering life or personal safety of others. - Whoever causes hurt to any person by doing any act so E rashly or negligently as to endanger human life, or the personal safety of others, shall be punished with imprisonment of either description for a term which may extend to six months, or with fine which may extend to five hundred rupees, or with both. 338. Causing grievous hurt by act endangering life or personal F safety of others. - Whoever causes grievous hurt to any person by doing any act so rashly or negligently as to endanger human life, or the personal safety of others, shall be punished with imprison­ ment of either description for a term which may extend to two years, or with fine which may extend to one thousand rupees, or G with both." As none of the parties have addressed us on these aspects we leave this question for consideration of the learned Trial Judge who may after hearing the parties decide wht<ther on the material as led by the prosecu- tion on record at this stage charges, if any, can also be framed under H I. 332 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Sections 336, 337 and 338 of the IPC with or without the aid of Section 35 of the IPC. We express no opinion on this aspect and leave it open to the Trial Court to address itself on this question. As· a result of the aforesaid discussion it is held that on the material led by the prosecution appropriate charges which are required to be B framed against the concerned accused are under Section 304-A, IPC so far as the accused Nos. 5, 6, 7, 8 and 9 concerned while so far as accused nos. 2, 3, 4 and 12 are concerned charges under Section 304-A read with Section 35 IPC will have to be framed. As these offences are triable by the court of Judicial Magistrate 1st Class, Bhopal the Sessions Case shall be trans- C ferred to the Court of the Chief Judicial Magistrate, 1st Class, Bhopal who will proceed with the trial in accordance with law and frame appropriate charges under Section 304-A with or without the aid of Section 35, as the case may be, against the concerned accused as indicated hereinabove. In the result the appeals filed by the concerned accused partially D succeed to the aforesaid extent. Charges framed against them under Sec­ tions 304 Part 11, 324, 326 and 429, IPC with or without the aid of Section 35, as the case may be, are quashed and set aside. Instead it is directed that the appropriate Trial Court shall frame charges against these accused as indicated in the judgment. The appropriate Trial Court to which the E case will stand transferred is also directed to consider the further question whether charges should be framed under Sections 336, 337 and 338 of the IPC with or without taking the aid of Section 35, IPC after hearing the concerned parties. On that aspect we expri~ss no opinion. Orders accord­ ingly. v.s.s. Appeal allowed. SANKALCHAN JAYCHANDBHAI PA'FEL AND ORS. A v. VITHALBHAI JAYCHANDBHAI PATEL AND ORS. SEPTEMBER 13, 1996 [K. RAMASWAMY AND G.B. PATTAN~ JJ.] B Bombay Revenue Jurisdiction Act : Section I I-Whether a bar to entertaining a civil suit-Held, there is a prohibition on the Civil Court to entertain any suit against the Government C on account of any act or omission of any Revenue Officer-But there is no prohibition on private pa1ties inter se to avail of the remedy of the suit provided under CPC-Hence Civil Suit is maintainable-Code of Civil Pro-. cedure-:-Section 9. ·CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 12808-09 D of 1996. From the Judgment and order dated 30.6.95 of the Gujarat High ·Court in M.C.A. No. 656 of 1995. Yashank Adharya, Braj K. Misra and Ejaz Maqbool for the Appel- E lants. The following Order of the Court was delivered : Leave granted. These appeals by special leave arise from the order of the learned single Judge of the High Court of Gujarat, originally made on March 23, 1995 in Order No. 40/95 and in MCA No. 656/95 on June 30, 1995. The facts are fairly not in dispute. The admitted position is that the G appellant and the respondent had jointly purchased the suit schedule property. It would appear that there was a partition between them as co-owners on March 20, 1982. Subsequently, it would appear that mutation was effected in the revenue record on July 21, 1982 to the extent of the property that had fallen to the share of the appellant who claims to have a further effected partition between the appellant and his children on July H 333 A 24, 1986. It is the case of the appellant th.at the respondent filed an appeal under Section 11 of the Bombay Revenue Jurisdiction Act which was dismissed by the appellate Court on March 9, 1994. Without availing of the further right of revision as provided thereunder, he filed the civil suit in the Court seeking declaration of his title to the property anq perpetual B injunction. Initially, the trial Court refused to grant injunction. But, on appeal, the District Judge had granted injunction pendi11g the suit restrain­ ing the appellant from alienating the property. The revision was dismissed by the High Court. Review petition was also dismissed. Thus, these appeals by special leave. C The primary question raised by Mr. Yashank Adharyu, learned counsel for the appellant, is that Section 11 is a bar on entertaining the suit. The High Court, therefore, was not right in restraining the appellant from alienating the property without deciding jurisdiction issue, i.e., whether the suit itselfis maintainable. In support thereof, he placed strong . reliance on a judgment of a single Judge of the Gujarat High Court in D Rukmanibai v. The State of Gujarat, (1960) 1 GLR 1791. The question, therefore, is : whether Section 11 is a bar for maintainability of the suit? It is seen that the bar of Section 37 of the Bombay Land Revenue Code would be only as against the lands vesting in or befonging to the State. Therefore, it has not relevance to the inter se claims of the private parties. The High E Court, therefore, was not right in relying on Section 37. Section 11 of the Bombay Revenue Jurisdiction Act reads as under: "11. Suits not to be entertained unless plaintiff has exhausted right of appeal. - No Civil Court shall entertain any suit (against the Government) on account of any act or omission of any Revenue Officer Unless the plaintiff first proves that previously to bring his suits he has presented all such appeals allowed by the law for the time being in force, a within the period of limitation allowed for bringing such suits it was possible to present." A reading of the section would clearly indicate that there is a prohibition on the civil Court to entertain any suit against the Government, no account of any act or omission of any Revenue Officer, unless the plaintiff first proves that he previously brought it by way of an appeal before the competent authority and within the time prescribed. Without H availing of that remedy, he cannot present the suit against the State. The SJ.PATELv. VJ.PATEL 335 question is : whether Section 11 applies to the inter se claim of the private A parties? It would be seen that learned single Judge has construed Section 11 of the Bombay Revenue Jurisdiction Act, and concluded that Section 11 prohibits entertainment of the suit between private parties unless the plaintiff has exhausted right of appeal or revision prescribed therein and available to him before he resorts to the suit challenging the order passed B by the Revenue Officer. A reading of Section 11 does not indicate any prohibition on private parties inter se to avail of the remedy of a suit provided under the Code of Civil Procedure, 1908 (CPC). Section 9 or CPC does not expressly or by necessary implication, prohibits the jurisdic- tion of the civil Court to entertain the suit based on title. It is settled law that mutation entries are only to enable the State to collect revenues from the persons in possession and enjoyment of property and that the right, title and interest as to the property should be established de horse the entries. Entries are only one of the modes of proof of the enjoyment of the property. Mutation entries do not create any title or interest therein. Therefore, the view taken by the learned Single Judge, with D due respect, is not correct in law. The civil suit is clearly maintainable. The High Court rightly granted injunction restraining the appellants from alienating the land. Even otherwise, Section 52 of the Transfer of Property Act /is pendense always stands in the way of purchaser of the land subject to the result in revision. E Under these circumstances, we do not find any illegality in the order of the high Court warranting interference. · The appeals accordingly dismissed. No costs. G.N. Appeals dismissed. F A JUDHISTIR MOHANTY v. STATE OF ORISSA AND ORS. SEPTEMBER 13, 1996 B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.] Service Law: Scale of pa)~Entitlement of higher scale of pay-Employee working as C jail Supe1intendent in leave rese1ve-Making representation for transfer to a patticular place-Grant of the request-Though he was holding a Class II post he was adjusted against a Class-/ post-Claim for higher scale of pay-Held not justified since it was· a request trans[ er and he was accommodated in a higher post, he is not entitled to higher scale of pay than the scale of pay attached to his post. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12858 of 1996. From. the Judgment and Order dated 26.4.88 of the Orissa Ad­ E ministrative Tribunal in M.P. No. 281/1988 in T.A. No. 29/87 (OJC No. 2540 of 1984. Mr. Y.P. Rao for the Appellant. Mr. P.N. Misra for the Respondents. The following Order of the Court was delivered : Delay condoned. Leave granted. We have heard learned counsel on both sides. This appeal by special leave arises from the two orders dated April 26, 1988 of the Administrative Tribunal at Bhubaneswar made in T.A. No. 29/87 (OJC No .. 2540/84) transferred from the High Court and M.P. No. H 281/88. 336 J. MOHANTY v. STATE 337 The admitted position is that the appellant, while working as Super- A intendent of Jail in leave reserve in the Head Officer of LG. (prisons) made a representation on February 5, 1978 to the Chief Minister stating that he had no house of his own and had recently secured a site at Behrampur. He wanted to settle down at Behrampur. He had served the Department for more than 37 years. His children were prosecuting studies hear Behrampur. B if he is transferred to Behrampur Of near about Behrampur, he would be able to construct the house and settle him down after retirement at Behrampur. Taking that representation into consideration, the Govern­ ment granted sanction on January 27, 1978 directing that he was trans­ ferred and posted as Superintendent of Jail at Circle Jail at Behrampur. By proceedings dated January 27, 1978, the Government have sanctioned two posts of Superintendent of Jail for Circle Jail at Behrampur in the pay scale of Rs; 850-1450 with D.A. In one of the above sanctioned posted, the appellant came to be adjusted by proceedings dated March 28, 1978 and it is not in dispute that he worked during the period from April 1, 1978 to October 31, 1978 the date on which he attained superannuation and retired D from service. The writ petition filed in the High Court was subsequently transferred to the Tribunal. Though there is no mention as regards his entitlement to the payment of the salary in the post of Superintendent referred to hereinbefore, the same was not paid to him for the reason that he was transferred and posted to the said post at his request. It is the E contention of Shri Y. Prabhakara.Rao, learned counsel for the appellant, that since he was asked to discharge that duty for the said period, he is entitled to the payment of the salary. Plima facie, we are impressed with the arguments addressed by Shri Y.P. Rao, but it is pointed by Shri Misra, learned counsel appearing for the State, that the Superintendent leave reserve is only Class II post whereas the Superintendent of the Circle is Class I post. Since the appellant made a request for adjustment of him at Behrampur and since there was no other post equivalent to Class II available, he came to be adjusted in that post at request. Therefore, he was not eligible to the scale of pay attached to the post. We are in agreement with Shri Misra, learned counsel for the State. It is a settled position that G if the Government, for want of candidate, directs an officer in the lower cadre to perform the duties of the post in the higher cadre, during that period, necessary incumbent would be entitled to the payment of salary attached to the post if the incumbent performed the duties in that post. Similarly where concerned officer is on promotion from lower cadre to the H A higher cadre, though on ad hoc or even temporary basis, the incumbent would be entitled to the payment of the salary attached to the post for the period of his discharging the duty in that post. In this case, neither would be is applicable. At request, he was transferred and thought orc~er dos not speak of, but the fact remains and is not disputed that the order came to B be passed pursuant to a representation made by the appellant to the Chief Minister. It was obviously on that basis that direction was issued by the Chief Minister's Office and the transfer order came to be made to accom­ modate him, before his retirement, at Behrampur where he had proposed to construct the house. Since there was no equivalent post of Grade II category, necessarily he was accommodated in that post. Consequently he C is not entitled to the higher scale of pay than to which he was entitled as Superintendent Leave Reserve on which post he would otherwise have retired. The appeal 1s accordingly dismissed, but m the circumstances, without costs. G.N. Appeal dismissed. KULDIP SINGH A v. STATE OF PUNJAB AND OTHERS SEPTEMBER 16, 1996 [B.P. JEEVAN REDDY AND K.S. PARIPOORANAN, JJ.) B Service Law-Punjab Police Act 1861 : Punjab Police Rules, 1934-Section 7-Rules 16.1and16.24-Powerof dismissal and enquiry. C Constitution of India, 1950-Article 311(2)(b)(3)-Condition precedent to dispensing with the enquiry-Satisfaction of the disciplina1y authority recorded on proper assessment of facts and circumstances-The decision of the disciplinary authority is final but subject to judicial review-The decision D of the disciplinary authority, confinned by the appellate auth01ity not to hold enquiry against the appellant, helping the te"orists-High Court satisfied with the view-Supreme Court would not interfere and take a different view. Evidence Act, 187~Sections 25 and 26-Confessions made to the police officer-Relevancy in departmental enquiry-If accepted as voluntary E and tJUe by disciplinary authority and the appellate authority-Supreme Court would not go into the question-Strict rules of evidence not applicable to departmental enquiry-Principles of natural justice and rules governing the enquiry must be followed. The Senior Superintendent of Police, invoking proviso(b) of Article 311(2) of the Constitution and the Punjab Police Rule 16.1 read with Section 7 of the Punjab Police Act, 1861, dismissed the appellant, a Head Constable, who was helping the terrorists. The satisfaction of the Senior Superintendent of Police for not holding the enquiry was that the cir· cumstances were such that it was not reasonably practicable to hold an G enquiry against the appellant, as no witness was likely to depose against him due to fear of life. The appeal preferred by the appellant was rejected by the Inspector General of Police. The High Court also rejected his appeal holding that there were sufficient materials before the disciplinary authority for not holding the enquiry. The appellant moved this court H 339 340 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A challenging that except the confession made to the police during interroga­ tion, there was no other material against him warranting his dismissal and that he was acquitted by the Designated Court. Dismissing the appeal, this Court B HELD : 1. Though according to sections 25 and 26 of the Evidence Act, the confession made before or while in custody of a police officer is not admissible, it is well-settled that these rules do not apply to departmental enquiry. Even the evidence recovered or discovered as a result of illegal search is relevant in India departing from the law of United C States. The fact that the confession was made to the police, may not be of much consequence for the reason that strict rules of evidence do not apply to the departmental enquiry and as such the appellant's confession is relevant. In departmental enquiry, it would perhaps be permissible for the authorities to prove that the appellant did make such a confession during the course of interrogation and it would be for the disciplinary authority D to decide whether it was voluntary or not. The disciplinary authority is entitled to act upon such statement if it is voluntary and true. Once the disciplinary authority as well as the appellate authority conclude that the confession made by the appellant is voluntary, this court would not go into the question of its being voluntary or not. [345-H] 2. Undoubtedly, there is no other material except the confesion of the appellant. There is also the fact that the appellant was acquitted by the designated court, however, the High Court has opined that there were en~ugh materials before the appropriate authority upon which it could come to a reasonable conclusion that it was not reasonable practicable to hold an enquiry as contemplated by clause (2) of Article 311 of the constitution. Nothing has been shown to justify the taking of a contrary view at this stage. Once proviso(b) of Article 311(2) is held to have been validly invoked, the only ground left with the concerned Govt. servant is to impugn the punishment actually awarded as being unwarranted. In the G instant case, the punishment awarded to the appellant cannot be said to be excessive. [346-B-E] KuTUma v. The Queen, (1955) A.C. 197, referred to. Union of India v. Tulsi Ram Patel, [1985) Suppl. 2 SCR 131; Pooran H Mal v. Director of Insvection, [1974) 1 SCC 345; State of Mysore v. S.S. KULDIP SINGH v. STAIB (B.P.JEEVAN REDDY, J.] 341 Makapur, AIR (1963) SC 375 and The State of Assam v. S.K Dass, AIR A , (1970) SC 255, relied on. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12313 of 1996. From the Judgment and Order dated 10.12.93 of the Punjab & B Haryana High Court in C.W.P. No. 14895 of 1993. R.S. Sodhi for the Appellant. Manoj Swarup for the Respondents. The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J. Leave granted. This appeal arises from the judgment of the Punjab and Haryana High Court dismissing the writ petition filed by the appellant. The appel- D lant was a Head Constable of Police in the service of the Punjab Govern­ ment. He has been dismissed from service without holding an enquiry as contemplated by clause (2) of Article 311 of the Constitution of India. The Senior Superintendent of Police (S.S.P.), Tarn Taran has invoked proviso (b) appended to the said clause (2), dispensing with the enquiry on the E ground that it is not reasonably practicable to hold such an enquiry in the case of the appellant. The order of dismissal is dated February 21, 1992. The appeal preferred by the appellant was dismissed by the Inspector General of Police, Border Range, Amritsar on June 22, 1993. The order or dismissal and the appellate order affirming it were questioned by . the appellant by way of a writ petition in the punjab and Haryana High Court which too has failed, as stated above. The order of dismissal passed by the S.S.P., Tarn Taran, reads: "Whereas Head Constable Kuldip Singh No. 2874!fT of this dis- trict has been found indulging in activities prejudicial to the effi- G cient functioning of the Police force. He has very close. links with extremists and helping them by providing information of the Police Department. And whereas it is established that Head Constable Kuldip Singh No. 2874!fT is mixed up with the extremists and had been H found responsible for supplying information relating to the Police Department. And whereas in the interest of maintenance of law and general administration and retention of Head Constable Kuldip Singh No. 2874ffT of Police District Tarn Taran is considered undesirable. And whereas I am satisfied that the circumstances of the case such that if is not reasonably practicable to hold an enquiry in the manner provided in Punjab Police Rules 16.24 because no witness is likely to depose against him due to fear of injury of his Iif e. Now, therefore, I Ajit Singh, Senior Superintendent of Police, Tarn in exercise of the powers vested in me by virtue of the provisions of the Punjab Police Rules 16.1 read with Section 7 of the Police Act, 1861 and Article 311(2) of the Constitution of India, do hereby dismiss from service the Head Constable Kuldip Singh No. 2874ffT with effect from 21.2.1992." On Appeal, the appellate authority found that the appellant did have links with the terrorists and was mixed up with them and he was supplying secret information of the police department to terrorists which was creating E hindrance in the smooth functioning of the police department. The appel­ late authority also found that it was impossible to conduct an enquiry against the appellant because nobody would come forward to depose against such "militant police official". The appellate authority also referred to the fact that the appellant was interrogated in a case, FIR No. 210/90, and that during interrogation he admitted that he was having links with F Major Singh Shahid and Sital Singh Jakhar and was working for them. It further stated in its order that the appellant was preparing to murder some senior police officers while taking advantage of his position. The High Court found that the reasons given by the S.S.P. for G dispensing with the enquiry were acceptable and that the satisfaction recorded by him cannot be said to be unjustified or unwarranted. The High Court was also of the opinion that there was sufficient material before the disciplinary authority to conclude that it was not expedient to hold a regular enquiry against the appellant. H In this appeal, it is contended by Sri R.S. Sodhi, learned counsel for the J KULDIPSINGHv. STATE[B.P.JEEVANREDDY,J.] 343 appellant, that except the alleged admission/confession of the appellant made A before the police officers during interrogation in FIR No. 219/90, there is no other material upon which the disciplinary authority could have concluded that the dismissal of the appellant was warranted. He submitte4 that such an admission/confession is inadmissible in law and, therefore, cannot constitute the basis of an order of dismissal. The learned counsel also submitted that no material has been placed by the disciplinary authority before the court upon which it was satisfied that it was not expedient to hold a disciplinary enquiry against the appellant as contemplated by clause (2) of Article 311. The learned counsel also brought to our notice that though the appellant was prosecuted and tried before the designated court, Amritsar under Terrorists and Disruptive Activities Act in connection with the crime in FIR No. 219/90, he has been acquitted by the said court. On the other hand, the learned counsel for respondents supported the reasoning and conclusion of the High Court as also the action of the authorities. D At our direction made on April 22, 1996 in this matter, the learned counsel for the State has produced the original record relating to the appellant's dismissal along with translated copies of the relevant document. The first document placed before us by the learned counsel for the State E is the copy of the FIR No. 219/90 dated November 24, 1990. It is based upon the statement of. Head constable Hardev Singh, who was posted as gunman with Sri Harjit Singh, Superintendent of Police (S.P.) (Opera­ tions). The F.I.R. speaks of the jeep (in which the said S.P. was travelling along with certain police personnel) being blown up killing the said S.P. F and few other police officials. The next document placed before us is the case diary pertaining to the said crime containing the statement of the appellant, Kuldip Singh. In his statement, Kuldip Singh, did clearly state about his association with certain named militants, the plot laid by them to kill Sri Harjit Singh, Superintendent of Police, Tarn Taran by placing a bomb and the manner in which they carried out the said plot. He also G stated that he and his militant companions planned to plant a bomb in the office of S.S.P, Tarn Taran but that the police officers came to know of the said plan, thus foiling their plan. The learned counsel for the State of Punjab did concede that except the aforesaid statement of admission/con­ fession of the appellant, there was no other material on which the appellant could be held guilty of conduct warranting dismissal from service. H 344 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Proviso (b) to Article 311(2) says that the enquiry contemplated by clause (2) need not be held "where the authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such enquiry". Clause (3) of Article 311 expressly provides that "if, in respect B of any such person as aforesaid, the question arises whether it is reasonably practicable to hold such enquiry as is referred to in clause (2), the decision thereon of the authority empowered to dismiss or remove such person or to reduce him in rank shall be final". These provisions have been the subject­ matter of consideration by a Constitution Bench of this Court in Union of India v. Tulsi Ram Patel, [1985) Suppl. 2 S.C.R 131. It would be appropriate C to no tic'? _a few relevant holdings in the said judgment: "Before denying a government servant his constitutional right to an enquiry, the first consideration would be whether the conduct of the concerned government servant is such as justifies the penalty of dismissal, removal or reduction in rank. Once that conclusion is reached and the condition specified in the relevant clause of the second proviso is satisfied, that proviso becomes applicable and the government servant is not entitled to an enquiry (p.205) ..... It would also not be reasonably practicable to hold the enquiry where an atmosphere of violence or of general indiscipline and insubor­ dination prevails, and it is immaterial whether the concerned government servant is or is not a party to bringing about such an atmosphere ..... The reasonable practicability of holding an inquiry · is a matter of assessment to be made by the disciplinary authority. Such authority is generally on the spot and knows what is happen­ ing. It is because the disciplinary authority is the best Judge of this That clause (3) of Article 311 makes the decision of the disciplinary authority on this question final... ... The finality given to the decision of the disciplinary authority by Article 311(3) is not binding upon the court so far as its power of judicial review is concerned (p.270) ....... Where a government servant is dismissed, removed or reduced in rank by applying clause (b) or an analogous provision of the service rules and he approaches either the High Court under Article 226 or this Court under Article 32, the court will interfere on grounds well established in law for the exercise of power of judicial review in matters where administrative discretion is exer­ cised. It will consider whether clause (b) or an analogous provision in the service rules was properly applied or not... .. In examining ' KULDIP SINGH v. STATE [B.P. JEEV AN REDDY, J.] 345 the relevancy of the reasons, the court will consider the situation A which according to the disciplinary authority made it come to the conclusion that it was not reasonably practicable to hold the inquiry ..... In considering the relevancy of the reasons given by the disciplinary authority, the court will not, however, sit in judgment over them like a court of first appeal; (p.273-274)." The judgment also stresses that very often a person dealt with under any of the three clauses in the second proviso to Article 311(2) has a right of appeal where the correctness of the decision taken by the aj>prop~iate authority will be subject to reView - apart, of course, from the remedy of judicial review provided in the Constitution. C Now coming to the main contention of the learned counsel for the appellant, it is true that a confession or admission of guilt made by a person accused of an offence before, or while in the custody of, a police officer is not admissible in a court of law according to Sections 25 and 26 of Evidence Act but it is equally well settled that these rules of evidence do D not apply to departmental enquiries - See State of Mysore v. S.S. Makapur, A.LR. (1963) S.C. 375 and State of Assam v. S.K. Das, A.LR. (1970) S.C. 1255 - wherein the only test is compliance with the principles of natural justice - and, of course, compliance with the rules governing the enquiries, if any. In this context, it is well to remember that in India, evidence recovered or discovered as a result of an illegal search is held relevant E departing from the law in the United States. We may refer to the following observations of the Judicial Committee of the Privy Council in Kuntma v. 11ie Queen, (1955) A.C. 197, quoted approvingly by the Constitution Bench of this Court in Pooran Mal v. Director of Inspection, [1974] 1 S.C.C. 345 at 256: "The test to be applied, both in civil and in criminal cases, in considering whether evidence is admissible is whether it is relevant to the matters in issue. If it is, it admissible, and the Court is not concemed with how it was obtained.'' In this sense, if the appellant's confession is relevant, the fact that it was made to the police or while in the custody of the police may not be of much consequence for the reason that strict rules of Evidence Act do not apply to departmentaVdisciplinary enquiries. In a departmental enquiry, it would perhaps be permissible for the authorities to prove that the appellant did make such a confession admission during the course of interrogation H 346 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A and it would be for the disciplinary authority to decide whether it is a voluntary confession/admission or not. If the disciplinary authority comes to the conclusion that the statement was indeed voluntary and true, he may well be entitled to act upon the said statement. Here, the authorities say that they were satisfied about the truth of the appellant's confession. There is undoubtedly no other material. There is also the fact that the appellant has been acquitted by the designated court. We must say that the facts of this case did present us with a difficult choice. The fact, however, remains that the High Court has opined that there was enough material before the appropriate authority upon which it could come to a reasonable conclusion that it was not reasonably practicable to hold an enquiry as contemplated C by clause (2) of Article 311. Nothing has been brought to our notice to persuade us not to accept the said finding nf the High Court. Even a copy of the r:ounter filed by the respondents in the High Court is not placed before us. Once proviso (b) is held to have been validly invoked, the government servant concerned is left with no legitimate ground to impugn the action except perhaps to say that the facts said to have been found D against him do not warrant the punishment actually awarded. So far as the present case is concerned, if one believes that the confession made by the appellant was voluntary and true, the punishment awarded cannot be said to be excessive. The appellant along with some others caused the death of the Superintendent of Police and a few other police officials. It must be remembered that we are dealing with a situation obtaining in Punjab during E the years 1990-91. Moreover, the appellate authority has also agreed with the disciplinary authority that there were good grounds for coming to the conclusion that it was not reasonably practicable to hold a disciplinary enquiry against the appellant and that the appellant was guilty of the crime confessed by him. There is no allegation of malafides levelled against the F appellate authority. The disciplinary and the appellate authorities are the men on the spot and we have no reason to believe that their decision has not been arrived at fairly. The High Court is also satisfied with the reasons for which the disiciplinary enquiry was dispensed with. In the face of all these circumstances, it is not possible for us to take a different view at this stage. It is not permissible for us to go into the question whether the G confession made by the appellant is voluntary or not, once it has been accepted as voluntary by the disciplinary authority and the appellate authority. The appeal accordingly fails and is dismissed. No costs. H H.K. Appeal dismissed. THE PATIALA CENTRAL COOPERATIVE BANK LTD. A v. THE PATIALA CENTRAL COOPERATIVE BANK EMPLOYEES UNION AND ANR. ETC. SEPTEMBER 16, 1996 [B.P. JEEVAN REDDY, S.C. SEN AND S.B. MAJMUDAR, JJ.} Labour Law-Industrial Disputes Act, 1947-Section 19--Agree­ ment-Termination of-Agreement Validly terminated Under Section C 19(2)-Effect and Scope-Terms of the agreement can not be enforced after the agreement is validly terminated under Section 19(2). Punjab Co-operative Societies Act 1961-Section 84-B-Bar on pay­ ment of Deamess Allowance at a higher rate than the rate admissible to the Government employees drawing the same p~alidity-Not ultravires the D State Legislature-It is a valid legislation. On the basis of a charter of demands of the respondents, a Union of the petitioner Bank, a comprehensive agreement dated May 28, 1973 ~as executed inter alia providiqg the fixation of pay scales after classifying the various categories of staff, Fixation Formula providing for pay rise, provision for dearness allowances, travel allowance, house rent 'allowance, city compensation allowance and various other allowances. As a matter of fact, the agreement embraced all aspects of the service condition. The agreement dated May 28, 1973 was valid for a period of four years and came to end on 31st March, 1977. On the expiry of the agreement, a dispute F arose between the parties interalia about the payment of Dearness Al­ lowance in terms of the agreement dated 28th May, 1973. The Union asserted that the aforesaid agreement is binding even after the period mentioned in the agreement and the agreement can not be unilaterally repudiated as per the provisions of S.19(2) of the Industrial Disputes Act, G 1947. The respondent Union also claimed that as no notice terminating the, agreement had been given by the petitioner bank, the agreement continued. to be in force and was binding upon the petitioner and the payment of Dearness Allowance specified in the agreement can not be avoided by the petitioner'. The respondent Union also contended that the introduction of Section 84-B by amending Act, 1981, in the Punjab Co-Operative Societies H 347 348 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Act, 1961, inter alia providing that the Dearness Allowance at a higher rate than admissible to the Government Employee with the same pay rate shall not be admissible to an employee of the co-operative society, can not in any way abrogate an agreement protected by the provisions of the In­ dustrial Disputes Act. B The respondent Union filed a Writ Petition in the High Court·and besides reiterating their earlier stands, challenged the virus of Section 84-B of the Punjab Co-operative Societies Act, 1961 as being violative of Section 19 of the Industrial Disputes Act, for the reason that the Punjab Cooperative Societies Act is a general Act and it can not curtail or control C the specific provisions of the Industrial Disputes Act, in any manner whatsoever. The High Court held that Section 84-B of the Punjab Coopera­ tive Societies Act was violative of the Industrial Disputes Act and also ultravires the State Legislature of Punjab. The amended Section 84-B could not take away the effect of settlement dated 28th May, 1973 and the agreement/settlement could continue to be subsisting, and binding between D the parties and class III and IV employees of the petitioner bank were held entitled to claim Dearness Pay in terms of the 1973 agreement. The High Court further held that service condition of an employee can not be changed in any of the matter mentioned in Fourth Schedule without giving notice under Section 19(2) of the Industrial Dispute Act and this being so, E the unilateral withdrawal of city compensatory allowance and dearness allowance by the Bank affected the service condition of the respondent and attracted the mandatory condition of Section 9-A of the Industrial Dispute Act. In appeal to this Court, the respondent in their counter affidavit did not dispute the factual aspect of the case including the issuance of notice dated 25.2.1978 terminating the ~greement dated 28th May, 1973 issued by the petitioner. Allowing the appeal, this Court HELD : (Per Sen, J.) 1. It is not in dispute that notice was given on 25th Feb. 1978, terminating the agreement dt. 28th May, 1973 and the agreement was validly terminated by the Management and the same ceased to operate from that date. [362-C] 2. In view of the admitted fact that the pay scales and other benefits PATIALACENTRALOO-OP. BANK LTD. v. PA11ALACEN1RALCO-OP. BANK EMPLOYEES UNION 349 of the employees had been drastically revised upwards at all levels than A what was given by the agreement dated 28.5.1973, the employees can not claim that Dearness Allowance formula of the agreement must remain intact, but at the same time the drastic changes in every other part of the agreement dated 28.5.1973 will continue in force for the benefit of the employees. [358-D] B 3. Section 84-B of the Punjab Co-Operative Societies Act, 1961 (inserted by Amendment Act 26 of 1981) places a bar on payment of Dearness Allowance at a rate higher . than the rate admissible to the employees of the Government drawing the same pay. This provision is made applicable to all the employees of the Co-operative societies in C Punjab. It specifically states that inspite of any s.tatutory provisions to the contrary, or any agreement Dearness Allowance can be paid upto the rate fixed by the Government for corresponding pay of the Government Ser­ vant. (362-D] 4. Section 19(2) of the Industrial Dispute Act, merely provides even if the period of agreement has expired the terms of agreement will continue to be in force unless determined in the manner laid down in Section 19(2) of the Act. The provisions of Section 19(2) make an agreement between the employer and the employees binding. It also lays down the period during E which it shall be binding. It also provides the manner in. which the agreement can be terminatt:d inter parties. It does not follow from this provision that a competent legislature can not legislate on any matter which forms part of the agreement. Nor does Section 19 have the effect of validating any infirmity in the agreement. If the agreement is contrary to F any law or if the agreement can not be implemented without violating any provision of law, than the agreement can not be enforced at all. There is nothing in sub-section (2) of Section 19 to suggest that even such agree­ ment will continue to be binding upon the employers and the employees and enforceable against express provision of law. If after the agreement has been entered into, any law is passed and the agreement can not be G enforced without violating that law, then clearly the agreement can not be enforced. The law will prevail. Sub Section (2) of Section 19 merely extends the period during which the agreement will be enforced, but it does not provide that the agreement will be valid and binding notwithstanding any law to the contrary. [360-F-H; 361-A-B] H 350 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A Per JEEVAN REDDY, J. (Concurring) : So far as the validity of Section 84-B of the Punjab Co-operative Societies Act, 1961 is concerned, it is enough to say that once the settlement between the parties was held to have been validly terminated by the management, there was no occasion for the High Court to have con­ sidered the validity of the said section and/or to have declared it void. The judgment of the High Court declaring section 84-B as void and illegal is accordingly set aside. [361-E] Per_MAJMUDAR, J. (partly concurring): 1.1. In view of the finding that the agreement dated 28th May, 1973 was validly terminated by the Management on 25.2.1978 and the same had ceased to operate from that day, no further question survives for con­ sideration, namely whether section 84-B of the Punjab Co-operative Societies Act, 1961 is repugnant to the provisions of Sections 9A and 19(2) D of the Industrial Disputes Act, which is a central legislation. The High Court has taken the view ignoring the factual position that the agreement in question had stood terminated with effect from 25th Feb. 1978. It was not open to the High Court to consider the validity of Section 84-B on the admitted facts of the case. The finding of the High Court declaring Section E 84-B as ultravires of the State Legislature on account of its repugnancy to Sections 9A and 19(2) of the Industrial Disputes Act is set aside. No occasion arises for this Court, nor did it arise for_ the High Court to go into the Legislative competence of the State Legislature in enacting Section 84-B and to examine and pronounce upon the said question. Tll.e.question of virus of Section 84-B is kept open for consideration in an appropriate F case. [363-A-B] .. 1.2. The view that Section 84-B will operate even de- hors the binding agreement under section 19(2) of the Industrial Disputes Act, is not concurred with. No opinion is expressed on this question, as it does not G arise for consideration in the present case. [363-C] . CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4390 of 1988 Etc. From the Judgment and Order dated 28.4.88 of the Punjab & H Haryana High Court in C.W.P. No. 2193of1983. PATIALACEN1RALCO-OP.BANKL1D.v.PATIALACEN'IRALCO-OP.BANKFMPLOYEESUNION 351 G.K. Chatrath, Advocate General, S.S. Kang, Dy. Adv. General, A (Punjab) H.S. Munjral, G.K. Bansal, Arvind Kumar, Ms. LaxmiArvind and · T.S. Arora for the Appellant. AK. Sen and Rajinder Sachar and P.P. Singh for the Respondents. The following Judgment/Orders of the Court were delivered by B SEN, J. The Patiala Central Cooperative Bank Ltd., the appellant herein, is a Cooperative Bank registered under the provisions of Punjab Cooperative Societies Act, 1961. The Patiala Central Cooperative Bank Employees Union, the respondent No. 1 herein, is a Union of the employees of the appellapt-Bank working at various places in different C branches of the Bank. On 13.11.1972, the Union submitted a charter of demands culminating in an agreement between the Bank and the Union on 28.5.1973. This agreement was ~o be in force upto 31st March 1977. The agreement reached on 28.5.1973 provided for a number of things D like fixation of pay-scales after classifying the various categories of staff. It also provided for Fixation Formula providing for pay rise in the revised pay scales. There was also a provision for payment of dearness allowance, travel allowance, house rent allowance, city compensatory allowance and various other allowances. Provisions have been made for cycle and car allowance, children allowance and special. allowances, if any. Provisions E were also made for uniforms, provident fund, gratuity, over time allowance and also fixation of strength and rules providing quota for promotion to various po~t.§)11 the future. The agreement also provided for loans to be given for purchase of scooter/motor cycle/cycle upto a ceiling of Rs. 15,000 for Central Cooperative Banks and Rs. 30,000 for Apex Cooperative Banks F per annum. The agreement concluded with General Conditions which were as under: "GENERAL CONDITIONS (i) The existing facilities given to employees on the Punjab State Cooperative Bank may continue. G (ii) This settlement will remain in force for a period of four years, i.e., upto 31.3.1977. (iii) A copy of this settlement may be sent to the Labour Commis- sioner, Punjab for necessary confirmation. H 352 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. (iv) Anomalies,. if any, shall be discussed in the joint meeting of the signatories." In order to appreciate the argument advanced in this case, lt is necessary to set out the pay scales and the provisions relating to dearness B allowance as agreed upon in the settlement:- Category of Staff Present grades Revised Revised after merger Grades grades after of grades DP merger of D .P. w.e.f. 1.2.1968 c a. Subordinate Staff Peons and Chowkidar in 75-140 75-165 122-5-162-6 all the C.Bs. 216-7-258 Daftri 95-160 100-170 147-6-195-7 230-8-270 D Drivers 120-170 120-170 190-7-267-8 b. Clerical Jr. Staff Clerks A Class Banks 140-315 150-350 240-10-300- 425-15-470 B Class Banks 130-270 140-315 210-10-300- 400-15-430 E C Class Banks 115-265 140-315 Senior Clerks A Class Banks 170-360 190-385 280-12112-380- F 16-485-20-505 B Class Banks 155-335} 170-360 260-10-280-12112 C Class Baks 149-315} 380-15-485 c. Supe1Visory staff Junior Accountant 245-480 245-510 365-15-490-20- G 590-25-640 Junior Accountant 220-420} B Class Banks 190-380} 245-480 365-12112-380- 15-500-20-620 H Regarding the staff in the Common Cadre· also, new grades will be t" -t PATIAI.ACENTRALCO-OP. BANK LTD." PATIAI.ACENTRALCO-OP. BANK EMPLOYEES UNION 353 framed after merging D.P., in their present pays. The new grades will be A as under: Senior Accountants 275-530 385-15-480-20-590-25-665 Assistant Managers 375-690 485-20-525-25-725-30-815 Managers 475-930 595-30-745-35-955-40-1075 B Fixation Fonnula All employees may be given a pay rise of 5% of their -pay in the revised scales mentioned above and may be fixed at the next higher stages after adding 5% to their present basic pay including Dearness Pay. In the C case of subordinate staff, however, one additional increment may also be given over and above the above mentioned benefits. Dearness Allowance. As mentioned above, the D.P. is to be merged in the revised grades. D The D.A. and interim relief which the employees are getting at present will together form the D.A. This D.A. may be linked with the All India Consumers Price Index number (Base Year 1960: 100) in such a way that any further rise in the Index number niay be reflected to D.A. to the extent of 100% in the case of subordinate staff and 75% in case of the other staff. E No additional D.A. will be made unless the Index number increases by at least four points (quarterly average). The rate of D.A. being paid at present will be converted into per­ centage rates mentioned below for various categories of staff. This percent- age has been worked out on the basis of the current D.A. plus relief, rates, F rounded off in such a way that the rate can be divided by four in the case of subordinate staff and by three in the case of others : Category of Staff Percentage rate of DA. Peons and Chowkidars 56 G Drivers 40 Daftry 44 Clerk 33 Senior Clerk-I 27 Senior Clerk-II 30 H 354 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. Junior Accountants and Senior Accountants Assistant Managers and Managers 24. 18 It is certified that any increase/decrease in the Index number after 31.3.1973 shall be added/reduced in the percentage rate mentioned above at the rate of 100% in the case of subordinate staff and 75% in the case of others. TA. and DA. T.A. and D.A. rules as applicable at present to common cadre employees be applied to all the employees. This was a comprehensive agreement reached between the Employees' Union and the management. It is not an agreement relating to D payment of Dearness Allowance only.· The agreement was valid for a period of four years and came to be end on 31st March, 1977. After the agreement came to an end, disputes and differences cropped up between the employees and the management inter alia about the payment of Dear­ ness Allowance in terms of the aforesaid agreement. The case of the employees is that the agreement cannot be repudiated unilaterally even E though the period of four years mentioned irt the agreement expired on 31st March, 1977. It has been contended that the agreement will continue to be binding even after the expiry of the period mentioned in the agree­ ment expired on 31st March, 1977, by virtue of the provisions of sub-section (2) of Section 19 of the Industrial Disputes Act, 1947. Section 19 lays down that a settlement shall come into operation on such date as is agreed upon by the parties to the dispute, and if no date is agreed upon, on the cl;,at:e on which the memorandum of the settlement is signed by the parties to the ,, dispute. Sub-section (2) of Section 19 provides that if any settlement has been reached between the workers and the management, that shall be binding not only for the agreed period, but also shall continue to be binding G on the parties after the expiry of the period mentioned in the agreement "until the expiry of two months from the date on which a notice in writing of an intention to terminate the settlement is given by one of the parties to the other party or parties to the settlement." The case of the employees is that no such notice was given, and, H therefore, the agreement continues to be force and binding upon the PA11Al.A CEN1RAL <X>-OP. BANK LTD. v. PA11Al.A CENTRAL <X>-OP. BANK EMPLOYEES UNION 355 management. The duty to pay Dearness Allowance at the rate specified in ~ the agreement cannot be avoided by the management by any device. It has been further contended that Section 84-B, which was intro­ duced in the Punjab Cooperative Societies Act, 1961 by which it was laid down that "no employee of a cooperative society shall be paid dearness allowance at a rate higher tha~ that admissible to the employees of the Government drawing pay at the same rate", cannot in any way abrogate an agreement protected by the provisions of the Industrial Disputes Act. On behalf of the employees; a writ petition was filed in the High Court under Article 226 challenging the validity of Section 84-B. The case C of the employees is that by virtue of Section 19 of the Industrial Disputes Act, the agreement between the management and the employees cannot be altered except in the manner laid down in the Act. Such agreements have been given statutory force and they cannot be altered by the management on its own without following the procedure of law. Similarly, the State D Government cannot give any directions as to the manner of working out of the a~eement or abridge or modify the contents of the agreement in any manner whatever. Industrial Disputes Act being a special Act relating to industrial disputes and, in particular, about the relationship between the management and the employees, the agreement reached under that Act cannot be varied or abrogated by the management unilaterally. It was E further contended that the Punjab Cooperative Societies Act, 1961 is a general Act relating to Cooperative Societies and it cannot curtail or control the specific provisions of Industrial Disputes Act which is a special Act, in any manner whatever. It was held by the Division Bench of the Punjab High Court that Section 84-B of the Punjab Cooperative Societies Act, 1961, which was introduced by the Amending Act of 1981, could not take away the effect of the settlement dated 28th May, 1973 which was subsisting and binding on the date of Amendment Act came into force. Section 84-B of the J>unjab Cooperative Societies Act was violative of the provisions of Section 19 of G the Industrial Disputes Act, 1947. It was further held by the High Court that change in condition of service of the employees could not be made in respect of any of the matters mentioned in the Fourth Schedule, without giving a prior notice in the manner prescribed by Section 19(2) of the Act. It was held that unilateral withdrawal of the City compensatory allowance H 356 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A by the employer of the workmen affected their conditions of service and attracted mandatory provisions of Section 9-A. On the same analogy unilateral withdrawal of dearness pay from the workmen affected the condition of service of Class III and Class IV employees of the Co-opera­ tive Banks. Since the'provisions of Section 9-A of the Industrial Disputes B Act, 1947 had not been complied with, the changes brought about in the service conditions of the employees were of no consequence. It was, therefore, held that the respondents would continue to be benefited by the terms of the settlement dated 28th May, 1973 as before. Section 84-B of the Punjab Cooperative Societies Act, 1961 was held to be ultra vires of the State Legislature of Punjab and quashed. It was further held that the C settlement dated 28th May, 1973 would continue to be valid and binding between the parties and Class III and Class IV employees of the Coopera­ tive Banks were held entitled to claim dearness pay in terms of the aforesaid settlement. D On behalf of the appellant, it has been contended that an important factual aspect has been totally ignored by the High Court in this case. It was contended on behalf of the appellant before the High Court that a notice under Section Section 19(2) of the Industrial Disputes Act (p.4 of the Writ Petition) was duly issued by the (appellant and served upon the employees. The High Court has failed to deal with this aspect of the case E altogether. It has been stated in paragraph 2 of the Special Leave Petitidn that it was specifically stipulated in the agreement that the agreement was valid for a period of four years and would cease to be effective after the expiry of 31st March, 1977. As there was no Board of Directors and the administration was being run by the Administrator, as per provisions of F Section 27 of the Punjab Cooperative Societies Act, the Administrator issued a notice under Section 19(2) of the Industrial Disputes Act for terminating the agreement dated 28.5.1973 which had expired on 31.3.1977. The notice was issued on 25.2.1978. It has been alleged after this, the Board of Directors of the Bank had ratified the notice by Resolution No. 7 at its meeting held on 9.4.1978. In the counter affidavit filed on behalf of the Employees' Union, affirmed by Malinderjit Singh, General Secretary of the Employees' Union; it has been stated that since the facts of the case as pleaded in the Special Leave Petition are not disputed and the whole matter relates to pure H questions of law for decision, it is not necessary for the deponent to answer .. PATIAI..A CEN1RALCO-OP. BANK LTD. v. PATIAl..A CENffiAL CO-OP. BANK EMPLOYEES UNION 357 parawise the petition. In view of the submissions made above and the two A decisions of this Hon'ble Court referred to in the affidavit, the appeals may be dismissed with costs. In other words, the (act that notice was given on 25.2.1978 terminat­ ing the agreement dated 28.5.1973 is not in dispute. However, the case need not be decided on the technicality of the pleadings only. After expiration of the term of the agreement dated 28.5.1973 on 31.3.1977, the agreement has not been continued unaltered. If the legal contention on behalf of the petitioner is upheld and if it be held that the agreement dated 28.5.1973 is still continuing by virtue of the C provisions of sub-section (2) of Section 19, then the entire agreement including the clause relating to the Dearness Allowance will have to be tr7ated as still in force. The pay scales and other terms and conditions relating to employment have been drastically revised upwards after the expiration of the agreement dated 28.5.1973. From the chart of salaries, furnished by the appellants, it appears that the pay scales have been revised D upward in the following manner : Category of Position as on Position as on Position as on Post 4.6.81 1.10.81 1.1.86 Rs. Rs. Rs. PEON 525.32 605.84 1144.60 JR. CLERK 820.95 917.30 1838.34 SR. CLERK 943.68 1109.32 2117.69 NOTE : No minimum benefit and Interim Relief has been included while fixing pay as on 1.10.1981 and 1.1.1986. There is some dispute as to the exact quantum of the enhancement but there is no dispute that the salaries payable under the agreement dated 28.5.1973 have been drastically revised upwards at all levels thereafter. Another point that has been made on behalf of the appellants which is of substance is that in fixing pay of the Bank employees consequent upon the revision of pay scales, the same formula which was applied for fixation of pay scales of Punjab Government employees has been adopted. The Bank employees have been given the benefits of proficiency step-up, master H 358 SUPREME COUR)' REPORTS [1996) SUPP. 6 S.C.R. A scales and stepping up of pay of senior equivalent to the junior as allowed by the Punjab Government to its employees. All these changes have brought about substantial benefits to the employees of the Bank. In the background of these facts, the employees cannot claim dearness allowance in terms of the agreement dated 28.5.1973. That agreement has been given B up for much better terms and conditions and also subsequent revision of pay. The employees cannot be heard to say that they will enjoy all the subsequent benefits given by the revision of pay scales, but dearness allowance must be given in accordance with the formula contained in the agreement dated 28.5.1973. It is not the case of the employees that the agreement dated 28.5.1973 will have to be enforced in full. There is some dispute as to the exact amount of the benefit conferred by the various revisions in pay scales but there is no dispute that the pay scales and other benefits now given are much better and higher than what was given by the agreement dated 28.5.1973. No one wants to go back to that agreement so far as the pay scales are concerned. I fail to see how in D the context of these facts, the employees can urge that Dearness Allowance formula of that agreement must remain in tact but at the same time the drastic changes in every other part of the agreement date9 28.5.1973 will continue in force for the benefit of the employees. E In view of the aforesaid, it is unnecessary to go into other questions raised in this case. But since the question of validity and scope of Section 84-B of the Punjab Cooperative Societies Act, 1961 has be~n raised that question will have to be examined. Sectiol). 84-B was inserted by Amend­ ment Act 26 of 1981. The section is as under : F "84-B. Dearness Allowance - Notwithstanding anything in this Act or any other law for the time being in force, or any agreement, settlement or award, no employee of a Co-operative Society shall be paid dearness allowance at a rate higher than that admissible to the employees of the Government drawing pay at the same rate." G This section places a bar. on payment of Dearness Allowance at a rate higher than the rate admissible to the employees of the Government drawing the same pay. This provision will apply to all the employees of all the Cooperative Societies in the State of Punjab. This provision has been specifically made applicable notwithstanding, inter alia any other law for H the time being in force or any agreement, settlement or award. - PATIALACEN'IRALCO.OP.BANKL1D.v.PATIALACENIRALCO.OP.BANKEMPLOYEESUNION 359 Prima facie, there is no reason to hold that this provision will not A apply to the agreement dated 28.5.1973 assuming that that agreement was still in force on the date Section 84-B was introduced in the statute. It has been contended that Industrial Disputes Act is a complete Code relating to industrial disputes and, therefore, by the general provisions of the Punjab Cooperative Societies Act, 1961, the applicability and scope of the provisions of Industrial Disputes Act cannot be whittled down. B I am unable to uphold this contention because sub-section (2) of Section 19 of the Industrial Disputes Act merely provides that even if the period of the agreement has expired, the terms of the agreement will continue to be in force unless determined in the manner laid down in C sub-section (2) of Section 19. It does not have the effect of invalidating any legislation altering the terms of the agreement after the period of agree­ ment comes to an end. The agreement provided for payment of Dearness Allowance higher than what was provided by the Government to its employees. Section 84-B specifically stated that in spite of any statutory D provision to the contrary, or any agreement, Dearness Allowance can only be paid upto the rate fixed by the Government for corresponding pay of the Government Servants. There is nothing in the wording of Section 19 of the Industrial Disputes Act which supports this contention of the employees. Section 19 E reads as under : "19. Period of operation of settlements and awards. - (1) A settlement shall come into operation on such date and is agreed upon by the parties to the dispute, and if no date is F agreed upon, on the date on which the memorandum of the settlement is signed by the parties to the dispute. (2) Such settlement shall be binding for such period as is agreed upon by the parties, and if no such period is agreed upon, G for a period of six months from the date on which the memorandum of settlement is signed by the parties to the dispute, and shall continue to be binding on the parties after the expiry of the period aforesaid, until the expiry of two months from the date on which a notice is writing of an intention to terminate the settlement is given by one of the H 360 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. parties to the other party or parties to the settlement." 'Settlement' has been defined in Section 2(p) as under : "2(p) 'settlement' means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorised In this behalf by the appropriate Government and the conciliation officer." A written agreement between the employer and workmen may con­ stitute a settlement in the circumstances mentioned in Section 2(p ). But Section 19 lays down that such agreement shall come into operation on the agreed date between the parties to the settlement or if the date is not agree upon, on the date on which the settlement is signed by the parties. That is D the starting point. Sub-section (2) provides {or the period during which the s'ettlement will be in force. It shall be binding during the period agreed upon by the parties. If no such period is agreed upon, then the settlement will be valid for a period of six months from the date on which . the settlement was signed by the parties and shall continue to be binding after. E the expiry of the aforesaid period. The settlement can be brought to an end by serving a notice in writing by one of the parties to the other party of its intention to terminate the settlement. If such a ·notice is given, the settlement will remain in force for two nionths from the date on which the notice of termination is given. F The provisions of Section 19(2) make an agreement between the employers and the employees binding. It also lays down the period during which it shall be binding. It also provides the manner in which the agree­ ment can be terminated inter parties. It does not follow from this provision that a competent legislature cannot legislate on any matter which forms ,...... part of the agreement. Nor does Section 19 have the effect of validating J any infirmity in the agreement. If the agreement is CO!J.trary to any. law or if the agreement cannot be implemented without violating any proVision of law, then the agreement cannot be enforced at all. There is nothing in sub-section (2) of Section 19 to suggest that even such an agreement will continue to be binding upon the employers and the employees and enfor- H ceable against express provision of law. If after the agreement has been ( PATIALACEN1RALOO-OP.BANKL1D.v.PA11ALACENIRALOO-OP.BANKFMPLOYEESUNJON 361 entered into, any law is passed and the agreement cannot be enforced A without violating that law, then clearly the agreement cannot be enforced. The law will prevail. Sub-section (2) of Section 19 merely extends that period during which the agreement will be . enforced, but it does not provide that the agreement will be valid and binding·notwithstanding any law to the con- B trary. For all these reasons, this appeal is allowed. The order under appeal is set aside. There will be no order at to costs. Civil Appeal No. 4074 of 1988 and Civil Appeal Nos. 4075-76 of 1988. In view of the judgment in Civil AppeaJ No. 4390 of 1988, the above appeals .are also allowed. There will be no order as to costs. I respectfully agree with the conclusions arrived at by my leamed h D brot er Sen, J. So far as the· validity of Section 84-B of the Punjab Cooperative Societies Act, 1961 is concerned, it is enough to say that once the settle­ ment between the parties was held to have been validly terminated by the management, there was no occasion for the High Court to have considered E the validity of the said section and/or to have declared it void. The judgment of the High Court declaring Section 84-B as void and illegal is accordingly set aside herewith. Accordingly, I agree with the final orders proposed by learned brothers Sen and Majmudar, JJ. F S.B. MAJMUDAR, J. I have gone through the judgment prepared by my esteemed learned brother Sen, J. I am in entire agreement with the finding reached by learned brother Sen, J., that the Agreement governed by the provisions of Industrial Disputes Act, 1947 (hereinafter referred to G as 'the Act') dated 28th May 1973 which had a life of four years, expired on 31st March 1977 and thereafter even though its effects continued as per Section 19 sub-Section (2) of the Act and were binding on the parties, the entire agreement including the clause relating to dearness allowance was terminated by one of the parties to the Agreement, namely, the Central Cooperative Bank when the administrator appointed under Section 28 of H 362 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A the Punjab Cooperative Societies Act, 1961 issued a notice dated 25th February 1978 under Section 19(2) of the Act for terminating the said Agreement and when the said termination was ratified by the Directors of the Bank by Resolution No. 7 at the meeting of the Board of Directors . . ~- held on 9th. April 197~uently that agreement ceased to. operate B thereafter. I also res~lly agree with the finding of my learned brother that this aspect of the case was nof disputed on behalf of the Employees' union in the counter affidavit affirmed by f>4aninderjit Singh, Joint Secretary of the Employees Union and consequently the fact that notice was given on 25th February 1978 terminating the Agreement dated 28th May 1973 is not in dispute. However on the aforesaid finding reached by my learned brother on the facts of this case and to which I respectfully agree, in my view, no further question survives for consideration in the present litigation between the parties, namely, whether Section 84-B of the Punjab Cooperative D Societies Act, 1961 inserted by Punjab Legislature by Amending Act 26 of 1981 was repugnant to the provisions of Sections 9A and 19(2) of the Industrial Disputes Act which was a Central Legislation. The High Court has taken the view, ignoring the factual position that the Agreement in . question had stood terminated with effect from 25th February 1978, that · Section 84-B was repugnant to the aforesaid provisions of the Act and as E the enactment of the said Section was covered by Entry 22 of the Concur­ rer.~ List ill of Schedule VII of the Constitution of India dealing with 'Trade Unions, Industrial and Labour Disputes', the said provision to the extent of repugnancy became void as per Article 251 read with Article 254 of the Constitution of India as admittedly the said provision inserted by F Amending 26 of 1981 was not reserved by the State Legislature for con­ sideration of the President and had not received his assent as required by Article 254 sub-Article (2) of the Constitution. In my opinion the said exercise was not open to the High Court on the admitted facts of the present case. That even under Section 19(2) of the Act the said Agreement had ceased to operate from 25th February 1978 and consequently there G remained no question of any repugnancy of Section 84-B on the one hand and Sections 9A and 19(2) of the Industrial Disputes Act on the other. In short that question did not arise for consideration of the High Court on the aforesaid well established facts on record. In my view once this factual conclusion is arrived at as rightly arrived at by my learned brother Sen, J ., H no occasion arises for this Court nor did it arise for the High Court to go PATIALACEN1RALCO-OP.BANKLTD.v.PATIALACEN'IRALCO-OP.BANKEMPLOYEESUNION 363 into the legislative competence of the State Legislature in enacting Section A 84-B and to examine and pronounce upon the said question. On this short ground, therefore, I would set aside the decision of the High Court declaring Section 84-B as ultra vires the State Legislature on account of repugnancy of Section 84-B with the provisions of Sections 9A and 19(2) of the Industrial Disputes Act. The appeal of the bank is required to be allowed on this short ground keeping the question of vires of Section 84-B open for consideration in an appropriate case. However, with great respect I do not concur with the view of my learned brother Sen, J ., that the said Section will operate even de hors the binding agreement under Section 19(2) of the Act. On this aspect I would express no opinion as that question, in my view, does not arise for consideration on the facts of the present case. I, however, agree with the final conclusion to which my learned brother Sen, J .,-h:rs--reached that appeals are required to be allowed, but on the aforesaid different reasoning. In view of the opinions delivered today, the appeals are allowed and the judgment of the High Court is set aside subject to the observations D made in our opinions. No orders as to costs. H.K. Appeals allowed. A DELHI DEVELOPMENT AUTHORITY v. KANWAR KUMAR MEHTA AND ORS. ETC. SEPTEMBER 16, 1996 B [K. RAMASWAMY AND G.B. PATTANAIK, JJ.) Urban Development : Land allotted by Delhi Development Authority-Delay in developing C the lands due to High Court's stay order on the land acquisition-On equit} DDA charging escalation at 16.62% per annum-High Court ordering escala­ tion to be charged at the same 7% p.a. the rate of interest which DDA pays to unsuccessjitl applican~n appea~ held, escalation charged at 16.62% per annum justified, DDA to adjust the 7% p.a. interest on the deposits from D the date ·of original draw till the communication of letters of allotment. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 13053 of 1996 Etc. From the Judgment and order dated 265.95 of the Delhi High Court E in C.W.P. No. 5329 of 1993. Arun Jately and V.B. Saharya for the Appellant. M. Shekhar, Bimal Roy Jad, Devendra Singh, S.M. Garg, N. Shekhar, F Ms. Arnita Gupta and Ms. Chandra Kumari for the Respondents. The following Order of the Court was delivered : Delay condoned .. G Leave granted. We have heard learned counsel of both sides. The question of law that arises for consideration in these appeals is: whether the High Court was right in directing calculation of interest @ 7% H of the escalation charges on the principle of equity? 364 D.DA v. K.K. MEHTA 365 The facts of the case are not in dispute. On March 27, 1991 draw of A plots was made for allotment of 5000 plots in Sectors 23 and 24 of Rohini Scheme in Delhi. Between 6th April, 1991 and March 27, 1991, around 3000 orders of allotment came to be issued. Only Woo persons are yet to be issued of the allotment letters. It is settled law that the rate of plot is as is prevailing on the date of communication of the allotment letter. B Before the letters of allotment was communicated to the rest of the suceessful applicant, the owners of the lands acquired under the notifica- tion issued under Section 4(1) had approached the High Court and had stay of further proceedings. Consequently, the issuance of the letters of allotment was stopped. Subsequently, the stay was vacated on August 4, C 1992 and it is stated in the counter-affidavit that the owners had ap­ proached this Court by way of appeal and in September 1992 this Court had dismissed the special leave petitions. In the meanwhile, the Govern­ ment of India have pre-determined the cost of the land for allotment of the acquired land for the year 1993-94 effective from April 1, 1993 to March 31, 1994 at Rs. 2675.29 per square mtr. The ODA evolved the D principle of calculating the cost of developmental charges at par with cost of living index rate which admittedly worked out to 16.62% per annum. On that basis, it had worked out the cost of plot at the rate of Rs. 1579.71 per square mtr. On the basis thereof, they recalculated the cost of allotment and issued letter of allotment to the reEpondents. The respondents came E to challenge that order in the High Court. The impugned judgment made on August 11, 1995 in C.W.P. No. 196/94 was declared invalid. The Division Bench of the High Court has ultimately held that when the DDA seeks equity, it must also do equity. When the claimants have been directed to bear interest only at the rate of 7% per annum oa the amount deposited by them towards advance payment deposited adjustable of the successful bidders and refund is made to the unsuccessful applicants with the same rate of interest, the DDA should equally charge the escalation charges at the rate of 7% per annum. Therefore, directions to deposit the costs of plot at 16.62% per annum as escalation cost is unjust in law. / Mr. Arun Jaitley, learned senior counsel appearing for ODA, has contended that the DOA, with a view to do justice to the claimants, have not demanded the rate of charges prevailing as on the date of allotment as determined by the Government of India namely, Rs. 2675.79 per square H 366 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A metre and instead worked oQt special equity by enhancing the cost of escalation charges at 16.62% per annum as per the cost of living index. The High Court was not justified in giving the direction to charge the escalation only at the rate of 7% per annum. We find force in the contention. Though Shri M. Shekhar and Shri Bimal Roy Jad, learned counsel appearing for B the respondents, have contended that the ODA has not produced any material to show that the escalation cost would be at the rate of 16.62 and that there is no evidence to show that between the date of the stay by the High Court and th~ date of the demand, this amount has been expended for developmental charges bythe DDA. That point was not raised before C the High Court, the appellant is not entitled tO raise the contention. We find no force in the contention. It is the very basis on which the appellant has justified their demand in the High Court which was also accepted by the High Court, on the basis of which, it proceeded that due to grant of stay by the High Court the escalation charges have increased for improve­ ments effected. Consequently they worked out the escalation charges ap- D plying the special equity namely, the basis of living costs of index which admittedly was 16.62% per annum. Under those circumstances, we are of the view that the basis on which all parties have proceeded and the High Court has accepted was E that the escalation charges for improvements have been worked out at 16.2% per annum. On that basis re-calculation came to be made and the pre-determined rate value was determined at the ra~e of Rs. 1579.71 per square yard. The direction of the High Court, that they have to pay, while working out equity at 7%, is not based on any rational principle. The High F Court lost sight of the fact that the appellant had spent money for develop­ ment of the plots and to meet the cost demand in allotment letters was made at reduced rate. It is also stated that the two allottees who were in the low priority· list in 1991 had same benefit of pre 1991 rates and the same be extended to the respondents. Though this contention was not raised in the High Court, nor the High Court had advantage of it, we are G of the view that it has no legal foundation is a mistaken allotment to them in 1991 is no ground to allot to respondent at the same rate. . The appellants are, however, directed to charge the rate of interest at 7% on the deposits made by the respondents till the date of the letter H of allotment. Time for payment of the amount at the rate of Rs. 1579.71 D.DA v. K.K. MEHTA 367 per square metre is extended for six months and the appellant is directed A to deduct the difference of the rate of interest on the deposit amount at 7% from the date of the original draw till the date of communication of the letters of allotment. The appeals are accordingly allowed. The order of the High Court B is set aside, but iri the circumstanees, without costs. G.N. Appeals allowed. A RAJASTHAN CO-OPERATIVE DIARY FEDERATION LTD. v. SH. MAHA LAXMI MINGRATE MARKETING SERVICE PVT. LTD. AND ORS. SEPTEMBER 17, 1996 (M.M. PUNCHHI AND SUJATA V. MANOHAR, JJ.] Constitution of India, 1950: A1ticles 226, 136-Writ Petition-Disputed questions of fact-Maintainability of-Govemment Co11tract---Letter of Intent C issued inf avour of contractor-Contractor did not fulfil conditions stipulated in Letter of I11tent-Subsequently, Letter of Intent cancel/ed---Colltractor i11- cu1Ted heavy expenses in anticipation of contract-Held: whether contractor incu1Ted heavy expenses in allticipation of contract and was entitled to recover the same were disputed questions off act-Such disputed questions off act D could neither be examined by High Court in writ petition nor by Supreme Court in appeal. Administrative Law : Natural justice-Pre-decisional hearing--Govemment Contract---Letter E' of Intent issued in favour of contractor-Letter of Intent specified submission of i1Tevocable bank guarantee of Rs. 15 lakhs within a stipulated date, execution of agreement within that date and submission of profit and loss account and balance sheet for the past year before execution of agree­ ment-Contractor did ll'Jt fulfil conditions but issued advertisement inco1Tect­ ly describing itself as sole selling agent Letter of Intent ca11ce/led without giving F opportunity of healing to contractor--Held : cancellation of letter of Intent not arbitrary-Reasons being gennane to the decision to cancel Letter of Intent, extraneous circumstances could not be relied upon to hold decision ma/a fide--l11 the circumsta11ces of the case;.pre-decisional hearing was not required to be given. G A Letter of Intent was issued by the appellant in favour of respon­ dent No. 1 for appointment as selling agent of appellant's products. The conditions stipulated in the Letter of Intent were submission of an ir­ revocable bank guarantee of Rs. 15 lakhs within a specified date, execution of an agreement within that date, submission of profit and loss account H and balance sheet for the past year before execution of the agreement. 368 RAJ. CO-OP. DIARY FEDERATION LID. v. M.I...M MICTG. SERV!CEPVf. LID. 369 However, respondent No. 1 did not fulfil the conditions of the Letter of A Intent but issued an advertisement in which respondent No. 1 incorrectly described itself as the sole selling agent of the appellant. For these reasons the appellant cancelled the Letter of Intent. Respondent No. 1 filed a ~it petition before the High Court chal­ lenging the revocation of the Letter of Intent. The High Court allowed the · petition on the ground that the appellant had acted arbitrarily with mala fide intention and had violated the principles of natural justice in not giving a hearing to respondent No. 1 before cancelling the Letter of Iiltent. Being aggrieved the appellant preferred the present appeal. On behalf of respondent No. 1 it was contended that in anticipation of entering into a contact with the appellant,"(espondent No. 1 incurred heavy expenses and that respon~ent No. 1 wa~ entitled to recover them from the appellant. Allowing the appeal, this Court HELD 1.1. The appellant, as a prudent businessman is entitled to satisfy itself about the financial position of the party whom the appellant is appointing as its selling agent. If respondent No. 1 has not submitted the requisite documents in this connection and has held itself out as the E sole selling agent when to its knowledge, there was no intention of appoint- ing respondent No. 1 as the sole selling agent, these are valid circumstan- ces which the appellant can take into account in deciding whether to enter into a contract and bind itself legally with respondent No. 1 or not. In these circumstances, if the letter of intent has been cancelled it cannot be considered as arbitrary action on the part of the appellant violative of any F Fundamental Rights of respondent No. 1. [373-A-C] 1.2. When the reasons for cancellation are clearly set out in the cancellation letter and are germane to the decision not to enter into a contract with respondent No.1, the extraneous circumstances relied on by G respondent No. 1 cannot make the decision mala fide. [373-D] 1.3. The doctrine of audi alteram partem cannot also be imported in these circumstances. If the conduct of respondent No. 1 was such that it did not inspire any confidence in the appellant, the appellant was entitled to decline entering into any legal relationship with respondent No. 1 as its H 370 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A selling agent. The Letter of Intent merely expressed an intention to enter into a contract. If the conditions stipulated in the Letter of Intent were not fulfilled by respondent No.I, and if the conduct of respondent No.I ~s otherwise not such as would generate confidence, the appellant was entitled to withdraw the Letter of Intent. There was no biding legal relationship B . between th~ appellant and respondent No. I at this stage and the appellant was entitled to look at the totality of circumstances in deciding whether to enter into a binding contract with respondent No. I or not. (373-E-F-G] 2. The statement of respondent No. I that it incurred heavy expenses in anticipation of entering into a contract with the appellant has to be C established on evidence. A writ petition is not an appropriate proceeding if any claim for damages based on disputed facts is required to be estab­ lished. This Court would also not pronounce on the question whether, in anticipation of entering into a contract, a party which incurs expenses, can recover them from the other party if that. other party ultimately, rightly declines to enter into a contract. [373-H; 374-A] CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2679·of 199i From the Judgment and Order dated 7.8.91 of the Rajasthan High E Court in D.V.C.S.A. No. 169 of 1991. Sudhir Gupta, Shahil Rezvi and Aruneshwar Gupta for the Appel- lant. H.N. Salve and S.V. Deshpande for Respondents. The Judgment of the Court was delivered by MRS. SUJATA V. MANOHAR, J. The appellant, Rajasthan Co­ operative Dairy Federation Ltd.; issued an advertisement inviting applica­ tions for selling agents for its various products for the territories of G Rajasthan, Punjab, Haryana, Himachal Pradesh arid Delhi, on or about 19th of November, 1988. Seventy applications were received. by the appel­ lant. Ultimately, on 1st June, 1990, a letter of Intent was issued by the appellant in favour of respondent No. 1 for appointing respondent No. 1 as the selling agent of the appellant for marketing of Saras Brand Dairy H Products, inter alia, on the following terms~ RAJ.CO.OP.DIARY FEDERATION LID.>< M.I...M. MICTO.SERVIC.Bi'Vr. LID. (MRS.MANOHAR,J.J 371 "(1) that you will sign an agreement on non-judicial stamp paper A of Rs. 5 with RCDF ~nd this arrangement will be enforceable from the date legally executed contract has come into being . . (2) ........................................... . (3) .................... L.. The goods will be issued to you against ir- B revocable bank guarantee on furnishing from schedule bank on 15 days credit basis ....... (sic). You are requested to submit irrevocable bank guarantee for an amount of Rs. 15 lacs in favour of RCDF, Jaipur. . This letter duly signed by you must reach GM(M&P) by 5th of June, 1990 and call on us for execution of the agreement .on 12.6.1990 (sic). You are also requested to take preparatory action for starting D work within effect from 21st June, 1990 and also submit us imme­ diately the market plan for taking further action at your end." Respondent No. 1, by its letter of 1st of June, 1990, acknowledged receipt of the Letter of Intent. The letter also noted that the agreement was to be signed on 12th of June, 1990 and that respondent No. 1 was going E ahead, inter alia, with arranging an irrevocable bank guarantee from a scheduled bank. The letter contained a request to the appellant to release an advertisement announcing the appointment of respondent No.1 as the selling agent. The appellant, however, did not release any such an adver­ tisement. Respondent No. 1, however, issued an advertisement in which F respondent No.1 incorrectly described itself as the sole selling agent and further wrongly indicated that it was also the sole selling agent for Polypack Mille. The appellant protested against wrong statement in the advertisement. Tb¥ contract was not signed on 12th of June, 1990. The respondent did not attend on that date and asked for some time. The irrevocable bank G guarantee for Rs. 15 lacs was also not submitted by respondent No. 1. The appellant, by its letter of 16th July, 1990, cancelled the Letter of Intent. In the letter, the appellant pointed out that the Letter of Intent issued to respondent No. 1 was conditional on his fulfilling certain obligation as a condition precedent to entering into a contract. The conditions, inter alia, H 372 SUPREME COURT REPORTS (1996) SUPP. 6 S.CR. A were, (1) submission of an irrevocable bank guarantee of Rs. 15 lacs by 12th of June, 1990; and (2) execution of an agreement with the appellant by 12th of june, 1990. Beside these two conditions, respondent No. 1 had also promised to submit to the appellant its profit & loss account and balance-sheet for the past year before the execution of the agreement. B Respondent No. 1 had not done so. The letter also referred to the un­ authorised advertisement issued by respondent No. 1 wro_ngly describing itself as the sole selling agent of the appellant and stated that in these circumstances, since respondent No. 1 had failed to fulfil its obligations within the stipulated period, the Letter of Intent was revoked. A telegram C of the same date to the same effect was also sent to respondent No. 1. Respondent No.1 filed a writ petition challenging the revocation cf the Letter of Intent. The writ petition was allowed. The High Court upheid the contention of respondent No. 1 that the reasons given by the appellant for cancellation of the Letter of Intent were not valid. The cancellation of D the Letter of Intent was mala fide inasmuch as there were questions asked in the Legislative Assembly about the appointment of respondent No. 1 as . . a selling agent of the appellant because respondent No. 1 was the brother- in-law of the then Chief Minister. The High Court further said that the appellant had acted arbitrarily in cancelling the Letter of Intent and had E violated the principles of natural justice in not giving a hearing to respon- ' dent No. 1 before cancelling the Letter of Intent. An Appeal filed by the ~ppellant before the Division Bench of the High Court aISo fail~d. Hence the appellant has come before this court by way of present appeal. F In its letter of 16th of July, 1990 cancelling the Letter of Intent issued in favour of respondent No. 1, the appellant had given several reasons for cancelling the Letter of Intent. Respondent No. 1 had not submitted to the appellant its profit and loss account and balance-sheet for the previous year as requested by the appellant. Respondent No. 1 had wrongly held itself out as the sole selling agent of the appellant. These are clearly circumstan- G ces which are relevant to the cancellation of the Letter of Intent. Also the Letter of Intent clearly set out the conditions which respondent No. 1 had to fulfil. One such condition was submitting an irrevocable bank guarantee for Rs. 15 lacs. This was also not done. Respondent No. 1 contends that it had informed the appellant that· it would submit the bank guarantee within H three days of the signing of the contract. The appellant, however, is within -· RAJ. CO.OP. DIARY FEDERATION LID. v. MLM MIITG.SERVICE PVI'. LID. [MRS. MANOHAR,J.) 373 its rights in insisting that the bank guarantee should be suhmitted before A the contract is signed. The appellant, as a prudent businessman is entitled to satisfy itself about the financial position of the party whom the appellant is appointing as its selling agent. If respondent No. 1 has not submitted the requisite documents in this connection and has held itself out as the sole selling agent when to its knowledge, there was no intention of appointing respondent No. 1 as the sole selling agent, these are valid circumstances which the appellant can take into account in deciding whether to enter into a contract and bind itself legally with respondent No.l or not. In these circumstances, if the contact has been cancelled it cannot be considered as arbitrary action on the part of the appellant violative of any Fundamental Rights of respondent No. 1. Respondent No. 1 has tried to rely upon certain extraneous cir­ cumstances to allege mala fides on the part of the appellant in cancelling the Letter of Intent. When the reasons for cancellation are clearly set out in the cancellation letter and are germane to the decision not to enter into D a contract with respondent No. 1 we fail to see how thee extraneous . circumstances can make the decision mala fide. The High Court was also not right in importing the doctrine· of audi a/teram partem in these circumstances. If the conduct of respondent No. 1 was such that it did not inspire any confidence in the appellant, the appellant was entitled t<;> decline entering into any legal relationship with respondent No. 1 as its selling agent. The Letter of Intent merely expressed an intention to enter into a contact. If the conditions stipulated in the Latter of Intent were not fulfilled by respondent No. 1 and if the conduct of respondent Nc>.l was otherwise not such as would generate confidence, the appellant was entitled to withdraw the Letter of Intent. There was no binding legal relationship between the appellant and respondent No. 1 at this stage and the appellant was entitled to look at the totality of cir­ cumstance in deciding whether to enter into a binding contact with respon- dent No. 1 or not. G Respondent No. 1 contends that in anticipation ·of entering into· a contract with the appellant, respondent No.1 incurred heavy expenses. This statement of respondent No.l has to be established on evidence. A writ petition is not an appropriate proceeding if any claim for damages based H 374 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A on disputed facts is required to be established. We do not wish to pronounce on the question whether, in anticipation of entering into a contract, a party which incurs expenses, can recover them from the other party if that other party ultimately, rightly declines to enter into a contract. The appeal is, therefore, allowed. The judgment and order of the High Court is set aside and the writ petition is dismissed. In the cir­ cumstances, there will be no order as to costs. V.S.S. Appeal allowed. "" STATE OF PUNJAB A v. M/S. YOGINDER SHARMA ONKAR RAI & CO. AND ORS. SEPTEMBER 17, 1996 [S.P. BHARUCHA AND K. VENKATASWAMI, JJ.) B Constitution of India, 1950: Article 226-Administrative Law-Auction of liquor vends-High Court reversing order of Financial Commissioner reject- ing the allegedly unsuccessful bidder's representation-Held, Financial Commissioner's conclusion were reasonable and he was not biased; the High C Court was in e1ror and its judgment was based on conjectures impennissib/e where the fact-finding auth01ity's conclusion is neither perverse nor w1- reaso11ab/~Administrative Law-Constitution of India, Article 14. Practice and Procedur~Writ petition challenging public auction of liquor vends-Held, petitioner must prove bonafides by depositing a substan- D tial portion of what he says he will bid; only if such deposit is made should the auction be set side and re-auction ordered-Constitution of India, A1ticle 226. On March 11, 1996 a public auction of liquor vends of Group Nos. E 108 to 111 in Khanna Circle, District Ludhiana, Punjab for the year 1996-?7 took place. The respondent challenged the auction in a_ writ petition which was disposed of by the High Court with a direction to the Financial Commissioner to treat the writ petition as a representation and give the respondent an opportunity of being heard before passing ap­ propriate orders. F The Financial Commissioner while rejecting the representation of the respondent concluded that the respondent had not given a bid of Rs. 4.21 crores for Group No. 108 or a bid of Rs. 3.50 crores for Group No. 111 as alleged by him; that it was next to impossible that 34 bank drafts could have G been prepared on the day of the auction in banks at Khanna and Mandi Gobind Garb situated 40-50 kms. away from the site of the auction; that bid of the respondent for Group No. 108 being Rs. 50 lakhs more than the ' successful bid and that for Group No. 111 being Rs. 45 lakhs more than the successful bid, it was hard to believe that the Collector who was present at the site did not intervene; that the independent observers had in their H 375 376 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A reports made no mention of the alleged higher bids and had stated that the auctions were fair and without favouritism; that there. was no evidence that the auction had been stage-managed. While the writ petition by another petitioner challenging the Finan­ cial Commissioner's order was dismissed by one Division bench stating B that there was no infirmity the~n, the respondent's writ petition challeng­ ing the same order was allowed by another Division Bench of the High Court. The Division Bench here held that the respondent being the highest bidder was wrongly shown to have not participated in the bid. It held that the Financial Commissioner's conclusions were based on conjectures and C it passed strictures on his conduct. All the four groups were directed to be re-auctioned. In case the writ petitioner did not participate in the re-auc­ tion and there was no other bidder making the same offer as that of the successful bidders, the writ petitions would be deemed to be dismissed. The State of Punjab and the successful bidders appeal to this Court. Allowing the appeals, this Court HELD : 1.1 .. The Division Bench of the High Court was in error in reaching the conclusion that the auction was not properly and fairly held. The Financial Commissioner's conciusion in his report were reasonable. E The remarks made by the Division Bench about him are not justified. There was nothing in his order to indicate that he was in any way biased. [389-H; 390-A] 1.2. The judgment of the Division Bench was based upon conjectures and surmises and inferences more tenuous than those it found the Finan- F cial. Commissioner guilty of. Such conjectures and surmises were imper­ missible in a judgment upon a writ petition under· Article 226 where the fact-finding authority had arrived at a conclusion which was not perverse or so unreasonable that, upon the record, it could not have been reached. [388-H; 389-A] G 2.t. The respondent's story did not ring true. or the twelve to thirteen hundred persons present in the pandal, not one independent observer had stated on affidavit that the respondent had made bids far larger than the successful bids but they had been ignored. [389-F] 2.2. The order of the High Court was not a workable or well thought H out one. The finality of auctions must also be recognised to be in the interest STA1Ev. YOGINDERSHARMAONKARRAI(BHARUCHA,J.) 377 of the exchequer. If auctions are set aside and re-auctions ordered on Jess A than satisfactory material, the loss of the exchequer would be far greater. [390-B] Mis. Rajshila v.State of U.P., [1993) Supp 1 SCC 477, referred to. 2.3. In cases where there was real need to set aside an auction, he B who challenged it must be required to prove his bonafides before the auction is set aside by depositing a substantial portion of what he said he would bid. It was only if the deposit was made that the auction should be set aside and a re-auction ordered. [390-G] CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7992 of C 1996 Etc. From the Judgment and Order dated 8.5.96 of the Punjab & Haryana High Court in C.W.P. No. 5007of1996. M.L. Sarin, Advocate General, Punjab, Soli J. Sorabjee, Dushyant D D. Dave, D.P .. Gupta, S. BhoUmik, Atul Sharma, Manoj Swarup, P.H .. Parekh, Amit Dhingra, E.R. Kumar, G.K. Benerji, Mohan Jain, Ms. Nan- dini Gore, Pradeep Mishra, V.C. Rishi, Ms. Mukta Sharma and Goodwill Indeevar for the appearing parties. The Judgment of the Court was delivered by BHARUCHA, J. These are appeals against the judgment and order dated 8th May, 1996, of a Division Bench of the High Court of Punjab & Haryana, passed upon a writ petition filed by the first respondent, M/s. Yoginder Sharma Onkar Rai & Co. The subject matter of the writ petition was the auction of liquor vends of Group Nos. 108 to 111 in Khanna Circle, District Ludhiana, State of Punjab for the year 1996-97. The First appeal is by the State of Punjab. The other appeals are by the successful bidders. The auction took place on 11th March, 1996. On 18th March, 1996, the first respondent filed an earlier writ petition (Writ Petition no. G 4047/1996) before the High Court challenging the auction. Thereon the Division bench ordered : "After hearing the learned counsel for the parties and perusing the record we are of the opinion that the points raised by the petitioners do require a consideration by the competent authority H 378 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. authorised a reject the higher bid offered and the auction held. The disputed questions of facts raised in this litigation can also better be appreciated by such authority. xxx xxx xxx In view of the facts and circumstances of the case, this petition is disposed of with the following directions: {i) That Shri Y.S. Ratra, Financial Commissioner, Taxation shall treat this writ petition as representation/revision in terms of Rule 36(18) of the Rules filed before him to determine the legality of the bids in auction held in favour of the private respondents. (ii) The parties shall be given an opportunity of being heard before passing the appropriate orders." Consequential directions were also given. The Financial Commissioner heard the parties as directed by the High Court and rejected the representation/revision filed by the first respondent. He noted various circumstances on the basis of which he came to the conclusion that the first respondent had not given a bid of Rs. 4.21 E crores for Group no. 108 or a bid of Rs. 3.50 crores for Group no.111. The Financial Commissioner found that the possession of a receipt for entry into the auction pandal did not mean that the first respondent had made a bid unless it was shown from the bid sheet that its name was recorded thereo~. Being a sitting licensee for the last 4 or 5 years did not give the F licensee any right to get the vend again unless he bid for it in open auction. Not much reliance could be placed on newspaper report, as the Supreme Court had held that newspaper reports had no evidentiary value but were only hearsay evidence. That a bank counter had been opened in the pandal did not bar the successful bidders from depositing the requisite amount of 15% of the bid money in the Government Treasury at Khanna in the stated G time. In the pandal there was 1200-1300 persons. They were not all bidders. Being the first auction of liquor vends in the State for the given year, licensees from other districts had come to see the trends and make a market survey. That only 2 or 3 bidders had given bids for a particular vend was, therefore, not noteworthy. Though the partners of S.P. Kalia and Co. H and Puneet Kalia and Co. were relations there was no reason why they STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.] 379 should not bid against each other. It was next to impossible that 34 drafts A could have been prepared on the day of the auction in banks at Khanna and Mandi Gobind Garh which would reach the pandal by 11 a.m. con­ sidering the fact that the banks opened at 10 a.m. at Khanna and Mandi Gobid Garh, which was approximately 40-50 kms. from the site of the auction at Ludhiana. It was more likely that all this would take 2 hours. This indicated that the first respondent did not have adequate funds to deposit 15% of the bid money at the fall of the hammer and, therefore, did not bid at all. Note was taken of the pattern of bidding. For Group no. 108 the initial bid was for Rs. 3.55 crores, the next was Rs. 3.65 crores, then 3.68 crores, then Rs. 3.70 and the successful bid was of Rs. 3.71 crores. Thus the tend of the rise was Rs. 10 lacs in the first instance, then Rs. 3 lacs, then Rs. 2 lacs and, lastly, Rs. 1 lac. The case of the first respondent was that it bid Rs. 4.21 crores, that is to say, there was a rise of Rs. 50 lacs over the last bid. Substantially similar was the position in regard to Group No. 111 where there was allegedly a rise of Rs. 45 lacs. It was hard to believe that the Collector, who was present at the auction, would not have D intervened in these circumstances. No evidence was forthcoming that any- , thing spectacular had happened in the pandal. The first respondent had not approached any of the senior officers who were in the city in connec- tion with the auction. The mere mention during the argument that it had approached the Excise and Taxation Commissioner and told him its case E and that he said he would look into the matter was an after -thought. If the difference between the successful bids and the allegedly higher bids was really of Rs. 50 lacs and Rs. ·45 lacs respectively, the first respondent should have put it in writing and the Excise and Taxation Commissioner would have taken cognizance. The telegram sent by the first respondent was 4 days after the auction. There were telegrams under different names but they were all similarly worded and no mention was made therein of the amounts of the allegedly higher bids, but merely that a lower bid had been accepted despite a higher bid. Due credence had to be given to the reports of the two independent observers nominated by the Excise and Taxation Commissioner and the Deputy Commissioner of the District who were . G present at the pandal. No mention had been made of the alleged higher bids in the observers' reports, which stated that the auctions were fair and there was no favouritism. The decision of the State Government not to allow S.K. Ralhan, Deputy Excise and Taxation Commissioner, Patiala Division, to conduct auctions in other districts of Patiala Division was H 380 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A based on administrative grounds and the matter was under consideration. There was· no evidence that the auction had been stage-managed. The claim of the first respondent was, therefore, without any basis, an after­ thought and not based on any concrete evidence. The order of the Financial Commissioner was passed consequent upon three writ petitions. The petitioner in one of three writ petitions did not carry the matter to the H~gh Court. The writ petitioner in another writ petition filed a second writ petition challenging the order; it came up before another Division Bench which, on 9th April, 1996, passed the following order : "We find no infirmity in the detailed order, Annexure P-9, passed by the Financial Commissioner, (Taxation), Punjab. All the points raised before us have been dealt with in detail by the Financial Commissioner and we concur with the findings recorded by him. Dismissed." The writ. petitioner in the third writ petition was the first respondent and it filed the present writ petition (No. 5007/96) impugning the Financial ComQJ.issioner's order on 6th April, 1996. This writ petition was disposed E of by the judgment and order under appeal. The Division Bench noted therein the case of the first respondent that it had offered Rs. 4.21 crores for Group no. · 108 as against the successful bid of Rs. 3.71 crores which had been wrongly accepted, thereby putting the public exchequer to loss of Rs. 50 lacs. Similarly, for Group F no. 111, the first respondent had Qffered Rs. 3.5 crores but the bid of Rs. 3.!}5 crores was accepted, thus putting the exchequer to a loss of Rs. 45 lacs. Though the representatives of the first respondent were present at the time of the auction, their presence and the bids offered by them were not recorded. It was the said S.K. Ralhan who had not accepted the higher l:>ids offered by the firs respondent without any basis or assigning any valid G reason. The first respondent had raised a hue and cry, which met with deaf ears. The first respondent, through its partner, Yoginder Sharma, had approached the Excise and Taxation Commissioner. and brought to his notice the arbitrary, capricious, illegal and unconstitutional auction on the ·part of the said S.K Ralhan, but no action was taken. The denials of the H respondents before the High Court were noted, including those of the said STATEv. YOGINDERSHARMAONKARRAI(BHARUCHA,J.) 381 SK Ralhan. The order on the earlier writ petition (No. 4872/96) was set A out in extenso. The Division Bench then enumerated the circumstances which had led the Financial Commissioner to reject the representation or revision of the first respondent (as set out above). The validity of the auction was challenged by the first respondent on three grounds. The first and. second grounds related to the provisions of the Punjab Excise Act and B the Punjab Liquor Licence Rules and the term and conditions of the Auction notice. (These grounds were rejected and need not detain us.) The third ground, which was accepted; was set out thus : "(iii) The petitioner, despite being the highest bidder, was wrongly shown to have not participated in the bid. The learned counsel has referred to various circumstances, which, according to him, show the bonafides of the petitioner in bidding in the auction and having been present on the spot". The Division Bench stated that, in support of his submission that the first D respondent had offered a higher bid, its counsel had referred to various circumstances and submitted .that the cumulative effect thereof proved the presence and participation of the first respondent in th~ auction, which had not been taken note of. The ci.rcumstances enumerated by the first respon­ dent and "probabilised to have been proved" were set out by the Division Bench. The first circumstance was the receipt for entry into the auction E panda!; this, according to the Division Bench, established that the first respondent had decided to participate in the auction. The second cir­ cumstances was that the representatives of the first respondent were in possession of bank drafts worth Rs. 1.90 crores besides cash in the sum of Rs'. 10 lacs on the date of the auction "for the purpose of bidding in the p auction". The factum of bank drafts was not disputed. The Financial Commissioner' observations in regard to the bank drafts were then set out and the Division Bench observe : "The .conclusions arrived at by the Financial Commissioner, Taxa- G tion, are based upon conjecturers nd apparently observed with pale eyes. It is not improbable to obtain 34 drafts prepared from a banlc at Khanna and Mandi Govindgarh on the same day and before the time of auction. It is not uncommon that the banks have been providing special services to their customers particularly having huge monetary dealings. The Financial Commissioner, Taxation, H 382 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. has not referred to any special knowledge of banking system and · has arrived at the aforesaid conclusion without ascertaining the true position from the concerned bank." According to the Division Bench, if drafts for such a huge amount had B been issued, the same demonstrated the bona fide intention of the first respondent to participate in the auction. Again, it was "fully established" that the first respondents' representatives were in possession of the bank drafts on the relevant date, which showed their intention to participate in the auction. The provisions of Rule 36 (17), though they could not be made the basis for quashing the auction proceedings, were relevant to show the C biased treatment given to the first respondent. Whether the first respon­ dent had raised the ple'1. or not, it was for the authorities to explain the omission in not ·mentioning the pre-determined license fee, which might have become the basis for accepting or rejecting the bid offered by a particular bidder. It was intrigliing and not explained as to why such an D omission was allowed in the case of Group No. 108 and 11 only and not in the case of any other group auctioned on 'the same day or thereafter. The first respondent had taken steps for participation in the auction by obtaining an entry slip and by procuring bank drafts, which led to the irresistible conclusion that it was not only a spectator. The affidavits of the partners of the first respondent showed that they were present at the time E of the auction and had participated in it, but their presence was not taken note of. Press report also suggested that the auction was not free from suspicion. Some extracts of these press reports were set out. It was then said by the Division Bench that it was true that press reports could not be made the basis for holding the auction illegal or contrary to the law; F however, "in drawing inferences, the circumstances of the press reports cannot be completely ignored, ......... ".The telegrams aforementioned also could not be completely ignored. The mere omission of details therein could not be made the basis for rejecting them. It was not a coincidence that immediately after the auction was concluded on 11th March, 1996, the said S.K. Ralhan had been transferred. His transfer suggested, prima facie, G the satisfaction of the authorities that he had not been fair in holding the auction. It was worth mentioning that the successful bidders had not denied the allegations made against them and it was, therefore, proved that the persons participating in the auction were hand in glove with each other with the object of putting the State exchequer to loss. "The cumulative H effect", the High Court held, "of the aforesaid discussion clearly and STAIB v. YOGINDER SHARMA ONKAR RAI (BHARUCHA, J.) 383 unequivocally leads to the conclusion that the auction with respect to A groups No. 108 and 11 held on 11th March, 1996, was neither fair, nor proper. The petitioners were wrongly deprived of their right of participa­ tion in the bid and the State exchequer was subjected to huge loss, which in no case is lesser then Rs. 95 lacs." As far as the Financial Commissioner was concerned, the High Court E said: "Least we say about Shri Ratra, better it would be. We were interested in the job of adjudication of the rival claims of the parties, presuming him to be an independent and impartial person, C keeping in view the status of the post he is holding. During arguments, a· reference has been made to Annexure PS2, a press report dated 12th March, 1996, which shows that Shri Ratra had gone to· the press with the claim that outcome of the auction had allegedly been better than the expected rise of 12 to 13 per cent. D . At that time, it was not brought to our notice that Shri Ratra had already taken a stand with respect to the matter in dispute and, presumably, could not have given any other finding than the one, which is incorporated in Annexure P 66. Omission on the part of the parties to bring to our notice the commitments made by Shri Ratra has resulted in the reference being made to him." E Ultimately, in the High Court's view, the substance of the circumstan­ ces in the context of the allegations made, clearly suggested that the auction was not fairly and properly held, with the result that the State exchequer had been subjected to a huge loss. The High Court thereupon passed the p following order, which must be quoted in extenso : "Under the circumstances, the writ petition is allowed and the auction held on March 11, 1996, with respect to group Nos. 108 and 111 vide annexures _P 44 and P 47 is quashed. Consequently, the auction of group Nos. 109, 110 and protection vend of Kotla G Azner {Fatehgarh Sahib) in favour of the successful bidders of group Nos. 108 and 111 shall also stand quashed. This judgment would become effective from May 16, 1996, and the private respon­ dents are allowed to continue their business until the mid-night of May 15, 1996. H 384 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. In view of the detailed discussion made above, the order of the Financial· Commissioner, Taxation, Punjab (Annexure P.66) is quashed for the remaining period of 10 and a· half month com­ mencing with effect from 16.5.1996 to 31.3.1977. All the four groups, i.e., Nos. 108 to Ul and protection vend of Kotla Azner (Fatehgarh Sahib), are directed to ·be re-auctioned positively before May 15, 1996, at the cost of the petitioners, after due publicity and advertisement. The petitioners, private respondents .· and all other shall be permitted to participate in the bid, which shall be strictly held in accordance with the provisions of Rules 36 of the Punjab Liquor Licence Rules. All snch persons, who enter the venue for the purpose of bid, shall be directed to sign a separate paper sheet, recording the.if attendance and the bid shall be supervised by an officer, not below the rank of Financial Commissioner. After pre-determining the licence-fee, first bid for group No. 108 shall be deemed to be Rs. 4.21 crores offered by the petitioners and for group No. 111, the first bid shall be deemed. to be of Rs. 3.50 crores, offered by the petitioners. After deducting the proportionate fee for the period commenc­ ing from l.4;1996 to 15.5.1996, the balance amount of fee, if deposited by the respondent/successful bidders, shall be refunded to them after May 15, 1996. The petitioners shall deposit a sum of Rs. one lac within two days, out of which the expenditure for re-holding of the auction shall be adjusted aud the balance amount paid back to them after completion of the process of auction. In the new auction, Shri S.K. Ralhan Deputy Excise and Taxa­ tion Commissioner and Shri Y.S. Ratra, Financial Commissioner, Taxation shall not be associated in any manner. In case, the petitioners, opt not to participate in the new auction bid and no other bidder offers ·the bid for the amount already offered by the private resp<!mdents-successful bidders, this petition shall be deemed to have been dismissed with costs of rupees one lac to be paid to the privat,e respondents. However, on the com- •' STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.) 385 pletion of the fresh process of auction, the private respondents A shall be liable to pay a sum of Rs. 10,000 as costs which shall be deposited in the State Treasury." Learned counsel for the appellants submitted that questions of fact were involved. At the hearing of the earlier writ petition this had been B recognised by the Division Bench and the first respondent had been reference to the Financial Commissioner treating the writ petition as a representation or revision under the statutory provision. The order of the Financial Commissioner was reasonable in its appreciation of the facts. The Division Bench had not found it to be perverse. The Division Bench, therefore, was not entitled to reverse it. In any event, the judgment of the C Division Bench was based upon conjectures and the order that was passed by it was erroneous and unworkable. Learned counsel for the first respondents drew our attention to its case that in the auction pandal itself its partners had met the Excise and D Taxation Commissioner and told him their grievance and the Excise and Taxation Commissioner had assured them that the matter would be looked into. Learned counsel referred to the press reports which stated that the Excise and Taxation Minister of Punjab had said that while there was no report with the State Government on the alleged irregularities during the auction of liquor vends, it had come to the notice of the State Government E that the auction of some liquor vends in Ludhiana were conducted in a manner contrary to the interests of the revenue and that, on the basis of a representation, the State Government had relieved the Deputy Excise and Taxation Commissioner in charge of the Patiala Division of the respon­ sibility of conducting auctions for the remaining districts of the Division. F A copy of the order relieving the said S.K. Ralhan was pointed out. Learned counsel submitted that, even so, the Financial Commis$ioner in his report had stated that the decision of the State Government not to allow the said S.K. Ralhan to conduct auctions in the remaining districts of Patiala Division was based on administrative grounds. Learned counsel G submitted that there was, thus evidence to show that the auction had not been conducted fairly and in the prescribed manner. The Financial Com­ missioner in his report had stated that it was hard to believe that the Collector would not have intervened when bids of R. 50 and 45 lacs respectively over the next highest bids had been made. Learned counsel submitted that the Financial Commissioner himself should have accepted H 386 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A the higher bids of the first respondent. The first respondent was even now prepared to deposit 15% of the required deposit for the remaining hall of the term and secure the balance. Learned counsel relied upon the judg- . ment of this Court in M/s. Rajshila v. State of U.P. and Ors., [1993] Supp. 1 S.C.C. 477. This was a case where the appellant oould not participa:te in B the auction of the exclusive right to collect tolls on a bridge owing to a strike in Government offices. The appellant had to run from pillar to post to fulfil the precondition of a security deposit which, in view of the involved procedure, was rendered impossible of fulfilment. The appellant had tendered cash security of Rs. 7 lacs on the date of the auction and sought permission to participate, but the request had been turned down. Upon C this, the appellant had given an application signifying its willingness to offer Rs. 86 lakhs per year as against the accepted bid of Rs. 75 lacs per year. After hearing counsel, this Court was persuaded to take the view that the ends of justice would be met by an order directing a re-auction subject to certain conditions, the first being that the appellant should, with a view to D establishing its readiness and willingness to stand by the offer of Rs. 86 lacs per year, deposit a sum of Rs. 25 lacs on or before the stated date. If the sum of Rs. 25 lacs was deposited, the contract in favour of the successful bidder would stand set aside. Learned counsel submitted that the present was a case where the ends of justice required that the judgment and order under appeal be maintained subject to such conditions as this Court might E deem fit to impose. The question that goes to the root of these appeals is : did the first respondent make bids at the auction of Rs. 50 and Rs. 45 lacs respectively over the successful bids for Group nos. 108 and 111? This is a question of fact: It was rightly referred to the Financial Commissioner under the statutory provision by the Division Bench in its order on the earlier writ petition. On the order passed by the Financial Commissioner the High Court could interfere in a writ petition under Article 226 only if it found it to be perverse, that is to say, if it found its G conclusions such as could not reasonably have been arrived at upon tlie record. The Division Bench in the order under appeal has not so held, specifically or impliedly. The order of the Financial Commissioner is not perverse or un­ H reasonable. He was right in concluding that the fact that the first respon- ~, ' IV- )• STATEv. YOGINDERSHARMAONKARRAI[BHARUCH.A,J.] 387 dent had entered the auction pandal did not established that it had made A a bid. His views about the drafts procured by the first respondent from the banks at Khanna and Mandi Gobindgarh ar not unreasonable, for, or­ dinarily, a prospective bidder would not cut it so fine. He would ordinarily obtain the required bank drafts before the auction date and not wait to do so with only an hour or so to spare. No extraordinary circumstances have B been adverted to by the first resf ondent which required it to obtain the drafts only on the morning of the auction from banks which were a sizeable distance from its site. The pattern of bidding referred to by the Financial Commissioner is very telling. It is unlikely that when the bid is rising by Rs. 10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it should suddenly rise by Rs. 50 lacs and Rs. 45 lacs respectively. The Financial Commissioner was justified in rejecting the case of the first respondent that it had approached the Excise and Taxation Commissioner and spoken to him about what had happened for this was mentioned only in the course of the argument before him. It also germane for the Financial Commissioner to observe that no higher revenue officials had been approached by the first respondent, as D also to point out that the observers' reports did not speak of any ir­ regularity. They would certainly have done so had a bid which was Rs. 50 lacs more than the successful bid been ignored; there would have been a conmotion in the auction_ pandal and this would have been mentioned in the reports. The Financial Commissioner pointed out, and rightly, that the telegram sent by the first respondent was four days after the auction. There were other telegrams, similarly worded but under different names. In all the telegrams no mention had been made of the quantum of the higher bid but merely that a lower bid had been accepted against a higher bid. The Financial Commissioner noted that two partnerships had bid against each other but commented, with some justification, that the mere fact that their partners were relations did not make for a rigged auction. The Division Bench castigated the Financial Commissioner for his report and stated that his conclusions were "based upon conjectures and apparently observed with pale eyes". It said that "it is not improbable" to G obtain 34 drafts prepared from a bank at Khanna and Mandi Gobindgarh on the same day and before the time of auction. It is "not uncommon" that banks provide special services to their customers, particularly if they have huge monetary dealings. The Financial Commissioner had not referred to any special knowledge of the banking system and had arrived at his conclusions without ascertaining the true position from the concerned H 388 SUPREME QOURT REPORTS (1996) SUPP. 6 S.C.R. A bank The Division Bench did not state its authority for its statements about banking practice. The Division Bench found that "it was fully established" that first respondent's representatives were in possession of the bank drafts, "which showed petitioners' intention of participation in the auction". The Division Bench took the view that the revenue authorities were obliged to explain -why the pre-determined license fee had not been mentioned and that it was intriguing "why such an omission was allowed in case of Group No. 108 and 111 only and not with respect to any other group auction on the same day or thereafter". In fact, it appears that this omission took place not only C with regard to Group nos. 108 and 111 but with regard to all auctions in Ludhiana-I. The fact that first respondent had taken steps for participation the auction by obtaining an entry slip and by procuring bank drafts led the Division Bench "to the irresistible conclusion that they were not only spectators". The affidavits of the partners of the first respondent also D showed that they were present at the time of the ·auction and had par­ tic~pated in it but their presence had not been taken note of. Extracts of press reports were set out in the judgment and the Division Bench noted that while they could not be made a basis for holding an auction illegal or contrary to the law, "in drawing inferences" the press reports could not be ignored. The mere omission of giving details in the telegrams was not a E reason to reject them. It was not a coincidence that the said S.K Ralhan had been transferred, after the auction on 11th March, 1996, was concluded and it suggested, prima facie, that the authorities had been satisfied that he had not been fair in holding auction. The Division Bench found that the successful bidders had not specifically denied the allegations of relation- .G ship between their partners and their inter-action in the auction; it was, therefore, proved that they "were hands in glove with each other with the object of putting the State exchequer to loss". As a matter of fact, the allegations are denied by the successful bidders in their affidavits. The cumulative effect clearly and unequivocally led the Division Bench to the conclusion that the auction with respect to Group nos. 108 and 111 was neither fair nor proper, the first respondent had been wrongly deprived or its right of participation therein and the State exchequer had been sub­ jected to a loss of not less than Rs. 95 lacs. We are constrained to observe that the judgment of the Division H Bench is based upon conjectures and inferences more tenuous than those STATEv. YOGINDERSHARMAONKARRAl[BHARUCHA,J.) 389 it found the Financial Commissioner guilty of. Such conjectures and in- A ferences are impermissible in a judgment upon a writ petition under Article 226 where the fact-finding authority has arrived at a conclusion which is not perverse or so unreasonable that, upon the record, it could not have been reached. The basic question which cannot be lost sight of is : did the first respondent make bids.at the auction of Rs. 50 and Rs. 45 lacs respectively over the successful bids for Group nos. 108 and 111? Securing Group no. 108 and 111 was so important for the first respondent, it would have us be\ieve, that it raised the bids by the staggering sums of Rs. 50 and -Rs. 45 lakhs respectively. If it did, the previous rises having been of the order of C Rs. 10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it would have attracted the attent~on of some, if not most, of the twelve to thirteen hundred persons in the auction pandal. It would be a brave auctioneer indeed who would, in J.b.e circumstances, ignore such bids. The partners of the first respondent would not in the ordinary course of human conduct have let it pass without D stout, long and loud protests. They would have attracted notice, and support. But, according to the oral submissions of the first respondent's counsel before the Financial Commissioner, the first respondent's partners were satisfied with an oral complaint to the Excise and Taxation Commis­ sioner and his assurance that he would look into the matter. In the ordinary course of events, one would have expected a bidder making such large bids E which are ignored to shoot off notices in all directions. All we have are telegrams sent four days after the auction which do not mention the enormous difference between the bids. Of the twelve to thirteen hundred persons present in the pandal, not one independent observer has stated on affidavit that the first respondent had made bids far larger than the F successful bids but they had been ignored. To our ears the first respondent's story does not ring true. As we have already held, the Financial Commissioner's conclusions in his report were reasonable. The remarks made by the Division Bench about him were not justified. As Financial Commissioner, he spoke to the G Press about the outcome of the auctions generally. This was in the perfor­ mance of his duties. In any event, we do not see in his orders anything.that indicates that he was in any way biased. The Division Bench was, in the circumstances, in error in reaching H 390 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A the conclusion that the auction was not fairly and properly held with the result that the State exchequer had been subjected to a huge loss. In any event, loss to the exchequer is a factor which may be taken into account in genuine cases, as it was in the case of M/s. Rajshila cited by learned counsel for the first respondent. At the same time, the finality of auctions must also B be recognised to be in the interests of the exchequer. If auctions are set aside and re-auctions ordered on less than satisfactory material, the loss of the exchequer would be far greater. This brings us to the form of the order that the Division Bench passed. We have quoted it above in extenso. It quashes the auction. It C directs re-auction for the balance of the term. It directs that for Group no. 108 the first bid "shall be deemed to be Rs. 4.21 crores" as offered by the first respondent, and for Group no. 111 the first bid "shall be deemed to be of Rs. 3.50 crores" as offered by it. Th.e order then directs that in case the first respondent opts not to participate in the fresh auction and no other bidder offers a bid of the amount equivalent to the earlier successful D bid, "this petition shall be deemed to have been dismissed". It is a very difficult order to appreciate. If at the fresh auc~ion the first respondent does not bid and no other bidder offers a bid equivalent to the earlier successful bid and the writ petition is to stand dismissed, what E is the State Government's authority for holding the fresh auction? Whether or not the first respondent bids or somebody else bids an amount equivalent to the earlier succe~sful bid can be known only after the fresh auction is held. If at that stage the petition is to stand dismissed, there is no authority for holding the fresh auction. Secondly, if at the fresh auction the first respondent does not bid and no other bidder offers 3; bid F equivalent to the earlier successful bid, it must mean that the earlier successful bidder is no longer interested; but, by reason of the dismissal of the writ petition, he remains bound by his earlier bid. This is not a workable or well thought out order. G In cases were there is real need to set aside an auction, he who challenges it must be required to prove his bona Ji.des before the auction is set aside by depositing a substantial portion of what he says he will bid. It is only if the deposit is made that the auction should be set aside and a re-auction ordered. H The Division Bench would have done well to follow the order STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.] 391 (quoted above) already passed by another Division Bench upon a writ A petition impugning the same order of the Financial Commissioner. The appeals are allowed. The judgment and order under appeal is set aside. The writ petition filed by the first respondent is dismissed. The first respondent shall pay to the appellant in each of the three appeals the costs of the appeal, quantified in .the sum of Rs. 25,000. B .S.M. Appeals allowed. A UNIVERSITY GRANTS COMMISSION ETC. v. SADHANA CHAUDHARY AND ORS. SEPTEMBER 17, 1996 B [S.C. AGRAWAL AND G.T. NANAVATI, JJ.] University Grants Commission Act, 1956. University Grants Commission (Qualifications Required of a Person to C be Appointed to the Teaching Staff of a University and Institutions Affiliated to it) Regulations 1991. Appointment of Lecturers-Exemptio11 granted to various categories of candidates from appea1ing in the Nation vide eligi.bility test by circulars dated Feb. 10, 1993, June 15, 1993 and notification dated June 21, 95 issued by D UGC-Validity of. Constitlltion of lndi~Artic/e 14-Right to equality-Cut off dates as prescribed by circular:. dated Feb 10, 93 June 15, 1993 and notification dated June 21, 1995 issued by UGC granting exemptio11 to various categories of E candidates from appearing in the eligi.bility test for appointment to the post of lecturer:,~Held, not violative of liglit to equality as such. UGC framed University Grants Commission (Qualification re­ quired of a person to be appointed to the teaching staff of a university and institutions affiliated to it) Regulations 1982 in exercise of powers conferred by S. 26(1)(e) of the Act laying down the minimum qualifica­ tions for the purpose of appointment as university lecturer and college lecturer. On recommendations of Mehrotra committee and the Vice Chan- G cellors Conference, UGC framed (Qualification required of a person to be appointed to the teaching staff of a university and Institutions affiliated to it) Regulations. The 1991 regulations laid down that for the purpose of appointment to the post of lecturers in University & colleges a candidate should have good academic record with at least 55% marks H or an equivalent grade at master's level in the relevant subject from an 392 U.G.C. v. S. CHAUDHARY 393 IDdian University or an equivalent degree from a foreign University. A Candidates besides fulfilling the above qualifications should have cleared the eligibility test for lecturers conducted by UGC, CSIR or similar test accredited by the UGC. The rational of the eligibility test prescribed by 1991 Regulations was upheld by this Court in University of Delhi v. Raj Singh and Ors., [1994] Supp. 3 SCC 516. B UGC issued circulars on 15.2.93 and June 15, 1993 by which exemption was granted to 4 categories of candidates from appearing in the eligibility· test viz. • candidates who have passed UGC/CSIR J.R.F. examination, candidates who have already been awarded Ph. D. Degree, C candidates who have already been awarded M.Phil degree upto 31st, December 1992, and those who will submit their Ph.D. thesis upto 31st December 1993. The 1991 Regulations were further amended on 21.6.95 stipulating that candidates who have submitted thesis or passed M.Phil. examination by 31st December 1993 are exempted from the eligibility test for lecturer conducted by UGC, CSIR or similar test accredited by the UGC. Haryana Public Service Commission issued advertisement on Jan. 23, 1995 inviting applications for 200 tP.mporary posts of lecturers (College Cadre) in Haryana Educational Services (Group B) prescribing that along with the essential qualifications the candidates should have cleared the eligibility test for leCtureship conducted by UGC, CSIR or similar test accredited by the UGC. However the said condition was not applicable to the candidates who had been awarded M.Phil degree upto 31st December 1992 and who have .submitted Ph.D. thesis upto December 31, 1993. The candidates who were awarded M.Phil degree in December 1993 approached High Court by way of a writ petition assailing the cut off dates fixed by the advertisement dated January 23, 1995. Allowing the G writ petition High Court held that the cut off dates fixed by the advertisement were unjust and not based on any rationale in as much as it amounts to creation of an artificial class amongst the eligible candidates though similarly situated, as the cut off dates fixed are far earlier to the date of the advertisement dated January 23, 1995. The High H 394 SU~REME COURT REPORTS (1996] SUPP. 6 s.c.~. A Court directed the Haryana Public Service Commission to issue a corrigendum extending the dates as prescribed in advertisement dated January 23, 1995 upto December 31, 1994. It further directed HPSC to ensure in future that as and when any such advertisement is issued that should bear in mind that the eligibility dates be not far off from the B date of advertisement. Bihar State University Service Commission on Nov. 22, 1993 issued advertisement inviting applications for appointment to the post of lecturers in various Universities of Bihar. However the .said advertise­ ment did not prescribe that the candidates should have cleared the C national eligibility test conducted by UGC. Candidates from State of Bihar who had cleared the eligibility test as prescribed by UGC filed Writ Petition challenging the Advertisement issued by Bihar State University Commission on the ground that the D qualifications prescribed in the advertisement were not in consonance with the qualifications prescribed by UGC. High Court allowed the writ Petition and held that only the candidates who had passed national eligibility test in terms of the UGC E regulations could be considered by the Bi~ar State University Commis­ sion. Bihar State University (Second amendment) Ordinance 1994 and Patna University (Third amendment) Ordinance, 1994 were promulgated F which laid down that a candidate who has submitted Ph.D. thesis by December 31, 1993 or has got a degree of M.Phil before December 31, 1992 will be exempted from appearing in the eligibility test of lec­ turers/Junior Research fellow conducted by UGC/CSIR. Consequently the Bihar State University Commission issued a G corrigendum dated December 25, 1994 to the advertisement dated Nov. 22, 1993 to this effect. The said ordinances as well as the circulars dated Feb. 10, 1993 and June l:i, 1993 issued by the UGC were challenged by way of Writ petition. The High Court held that UGC was within its jurisdiCtion in issuing guidelines for the appointment of lecturers in H Universities & colleges & Chancellor was also within his Jurisdiction in U.G.C.v.S.CHAUDHARY 395 promulgating the ordinance. Hence this appeal by Special Leave. A The questions before this Court were;- (i) whether the cut off dates fixed under the circular & notification wer valid. (ii) whether the exemption from clearing eligibility test or equivalent examination under the said circular and notification is valid. It was contended by UGC that the circulars were in the nature of transitional provisions. Disposing of the appeals, this court HELD : 1.1. Exemption granted by the amendment introduced in the 1991 Regulations by circulars dated February 10, 1993, June 15, 1993 and by notification dated June 21, 1995 is not violative of the right to equality D guaranteed under article 14 of the Constitution as such candidates con­ stitute a distinct class who could be treated separately in so far as the requirements of clearing the eligibility test is concerned. Such a classifica- tion of candidates for the purpose of applicability of the requirement of clearing the eligibility test has a rational basis which has a reasonable E nexus with the·object sought to be achieved by the 1991 Regulations, i.e. clearing of National Eligibility test for appointment to post of lecturers in various universities so as to remove disparties in the standards of ex­ amination at the Masters level between different universities. [408-F-G] 1.2. It is settled law that the choice of date as a basis for classification F cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. When it is seen that a line or a point there must be and there is no mathematical or logical way of fixing it precisely, the decision of the legislature or its delegate must be accepted unless it can G be said that it is very wide of the reasonable mark. [406-C-D] 1.3. In the instant cases the cut off dates fixed cannot be held to be carpicious or whimsical or wide of the reasonable mark. [406-C-D] Union of India & Anr. v. Mis. Paramesltwaran Match Works Ltd., H 396 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A [1975) 2 SCR 573 and Dr. (Mrs. Sushma Shanna Etc. Etc. v. State of Rajasthan & Ors., [1985) 3 SCR 243, relied on. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12284 of 1996 etc. B From the Judgment and Order dated the 21st March, 1995 of the. High Court of Punjab and Haryana in Civil Writ Petition No. 2252 of 1995. M.K. Banerjee, S.B. Sanyal, Gaurav Banerjee, Navin Prakash, A.K. Pandey, B.B. Singh, A.O. Sikri, Ashok K. Mahajan and R.S. Suri for the C appearing parties. The Judgment of the Court was delivered by S.C. AGARWAL, J. Special leave granted in both the special leave petitions. These appeals raise questions relating to grant of exemption from the provisions contained in the University Grants Commission (Qualifica­ tions Required of a Person to be Appointed to the Teaching Staff of a University and Institutions Affiliated to it) Regulations, 1991 (hereinafter E referred to as 'the 1991 Regulations') which require that for appointment on the post of lecturer in universities and colleges the candidate should have cleared the eligibility test for lecturers conducted by the University Grants Commission ( hereinafter referred to as 'the UGC'), Council of Scientific and Industrial Research (for short 'CSIR') or similar test ac­ credited by the UGC. The UGC has been established under the University Grants Com­ mission Act, 1956 (hereinafter referred to as 'the Act) which was enacted by Padiament to make provisions for the co- ordination and determination of standards in Universities. One of the functions entrusted to the UGC under the Act is to recommend to any University the measures necessary G for the improvement of University education and advise the University upon the action to be taken for the purpose of implementing such recom­ mendation (Section 12(d)). The UGC has been empowered to make regulations consistent with the Act and the rules made thereunder defining the qualifications that should ordinarily be required of any person to be H appointed to the teaching staff of the University, having regard to the U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.] 397 branch of education in which he is expected to give instruction. [Section A 26(1)(e)]. In exercise of the powers conferred by Section 26(1)(e), the UGC made the University Grants Commission (Qualifications Required of a Person to be Appointed to the Teaching Staff of a University and Institutions Affiliated to it Regulations, 1982 (hereinafter referred to as 'the 1982 Regulations') whereby qualifications were prescribed for appointment B to a teaching post in the University or in any of the institutions including constituent or affiliated colleges recognised under clause (f) of Section 2 of the Act or in an institution deemed to be a University under Section 3 of the Act. Under the 1982 Regulations the minimum qualifications prescribed for appointment to the post of University lecturers were (i) a Doctorate's Degree or Research work of equally high standard; and (ii) a C good academic record with at least second class ( C in the seven point scale) Master's degree in a relevant subject from an Indian University or an equivalent degree from a foreign University. For college lecturers the minimum qualifications prescribed were (i) an M.Phil degree or a recog­ nised degree beyond the Master's level or published work indicating the D capacity of a candidate for independent research work; and (ii) good academic record with at least second class ( C in the seven point scale) Master's degree in a relevant subject from an Indian University or an equivalent degree from a foreign university. In its report dated March 23, 1985, the National Commission on E Teachers II, after observing that standards of performance varied from university to university, expressed the view that it must be ensured that every citizen aspiring to be a teacher at the tertiary level, i.e., a lecturer, qualified in terms of a national yardstick. The Commission recommended that the UGC should incorporate the passing of one of the national tests F at least in grade B + on a seven point scale in its regulations laying down the minimum qualifications of teachers and that this should come into force within two years. Thereafter, in 1986, the UGC appointed a Committee under the Chairmanship of Prof. R.C. Mehrotra (for short 'the Mehrotra Committee') to examine the structure of emoluments and conditions of service of University and college teachers and to make recommendations G in this behalf having regard to the necessity of attracting and retaining talented persons in the teaching profession and providing advancement and opportunities to teachers of Universities and colleges. The Mehrotra Com­ mittee was of the view that, in order to ensure quality of new entrants to the teaching profession, all aspirants for the post of lecturer in a University H 398 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A or college should have passed a national qualifying examination since such a test would have the merit of removing disparities in standards of examina­ tion at the Master's level between different Universities and, as a result, · local influence would be minimised and the eligibility zone for recruitment would become wider. The Mehrotra Committee recommended the follow- B ing minimum qualifications for appointment to the post of Lecturer : "(i) Qualifying at the National Test conducted for the purpose by the UGC or any other agency approved by the (JGC. (ii) Master's degree with at least fifty-five percent marks or its equivalent grade and good academic record. The minimum qualifications mentioned above should not be relaxed even for :::andidates possession M.Phil, Ph.D qualification at the time of recruitment." D After examining the various recommendations contained in the report of the Mehrotra Committee and the recommendations made by the U GC, the Government of India prepared a scheme for revision of pay scales of Teachers in the Universities and Colleges and other measures for maintenance of standards in higher education and, by letter dated June 17, 1987, the Government of India forwarded the said scheme to the Education E Secretaries of all the State and Union Territories with a request to formu­ late detailed proposals for the implementation of the scheme on the lines indicated in the said letter. The said scheme was revised by the Central Government in 1988. The original scheme as well as the revised scheme required that only those candidates who, besides fulfilling the minimum F academic qualifications prescribed for the post of Lecturer, have qualified in a comprehensive test, to be specially conducted for the purpose, will be eligible for appointment as Lecturers. In 1989 a conference of Vice-Chancellors was held under the auspices of the UGC and one of the major recommendations made in the G said conference was : "The National level test to determine the eligibility for lecturers be conducted. When the State Government conducts such tests, while accrediting them caution be exercised." H Keeping in view the said recommendations the UGC made the 1991 , U.G.C. v. S. CHAUDHARY [S.C.AGRA WAL,J.J 399 Regulations which were notified vide notification dated September 19, A 1991. The 1991 Regulations superseded the 1982 Regulations and prescribed the following minimum qualifications for the post of lecturers in universities and colleges : "Good academic record with at least 55% marks or an equivalent grade at Master's level in the relevant subject from an India B University or an equivalent degree from a foreign University. Candidates besides fulfilling the above qualifications should have cleared the eligibility test for lecturers conducted by UGC, CSIR or similar test accredited by the UGC." C By Circular dated February 10, 1993 the UGC granted exemption from appearing in the eligibility test to following categories : 1. All candidates who have passed UGC/CSIR J.R.F. Examina- tion. D 2. All candidates who have already been awarded Ph.D degree. 3. All candidates who have already been awarded M.Phil degree upto 31st March, 1991. 4. All candidates who will submit their Ph.D thesis upto 31st December, 1993. By circular dated June 15, 1993 in respect of candidates falling in category (3) exemption from appearing in the eligibility test was extended to candidates who had been awarded M.Phil degree upto December 31, 1992. By a notification dated June 21, 1995 the 1991 Regulations have been amended and the following proviso has been added below the requirement regarding clearing the eligibility test for appointment on the post of Lec­ turer: "Provided that candidates who have submitted Ph.D thesis or passed,the M.Phil examination by 31st December, 1993 are ex­ empted from the eligibility test for lecturers conduct by UGC, CSIR or similar test accredited by the UGC." The requirement regarding clearing the eligibility test for appoint- H 400 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A ment on the post of Lecturer as prescribed by the UGC under the 1991 Regulations came up for consideration before this Court in University of Delhi v. Raj Singh and Ors., (1994) Supp. 3 SCC 516. After taking note of the report of the National Commission on Teachers II, the Mehrotra Committee report and the recommendations of the Vice-Chancellors' con- B ference held in 1989, the Court has observed: "It is very important to note that a duty is cast upon the Commission {the UGC) to take 'all such steps as it may think fit for the determination and maintenance of standards of teaching'. These are very wide-ranging powers. Such powers, in our view, would comprehend the power to require those who possess the educa­ tional qualifications required for holding the post of lecturer in Universities and colleges to appear for a written test, the passing of which would establish that they possess the minimal proficiency for holding such post. The need for such test is demonstrated by the reports of the commissions and committees of educationists referred to above which take note of the disparities in the standards of education in the various Universities in the country. It is patent that the holder of a postgraduate degree from one University is not necessarily of the same standard as the holder of the same postgraduate degree from another University. That is the rational of the test prescribed by the said Regulations." (pp. 5321 533) We may now briefly refer to the facts of these two cases. F Civil Appeal No. of 1996 (@ S.L.P. (C) No. 16220/1995) On January 23, 1995, the Haryana Public Service Commission issued an advertisement inviting applications for 200 t~mporary posts of Lecturers {College cadre) in various subjects in Haryana Educational Service {Group 'B). In the said advertisement it was prescribed that candidates besides G fulfilling the essential qualifications mentioned therein in the respective subjects should have cleared the eligibility test for lectureship conducted by the UGC, CSIR or similar test accredited by the UGC. The said condition was, however, not applicable to candidates mentioned in clauses (a) to {d) 'Jf paragraph 5. Clause (b) covered those who had been awarded H M.Phil degree upto December 31, 1992 and clause (c) covered candidates '. U.G.C. v. S.CHAUDHARY(S.C.AGRAWAL,J.] 401 who had submitted their Ph.D thesis upto December 31, 1993. Sadhana Chaudhary and Aarti Ahluwalia, respondents Nos. 1 and 2, had joined M. Phil course of Punjab University for the session 1991-92. Sadhana Chaudhary submitted her thesis on January 25, 1993, the viva voice test was held some time in November, 1993 and the M. Phil degree was awarded to her on December 14, 1993. Aarti Ahluwalia submitted her B thesis on October 7, 1992, the viva voice test was held in December, 1993 and she was awarded M.Phil degree on December 14, 1993. Since they had been awarded the M.Phil degree after December 31, 1992, they were not given exemption from clearing the eligibility test as per the requirement of the advertisement. They approached the High Court of Punjab and C Haryana by filing a writ petition (Civil Writ Petition No. 2252 of 1995) wherein they assailed the cut off dated, i.e., December 31, 1992, as fixed in paragraph 5(b) of the advertisement regarding exemption given to . candidates who have been awarded M.Phil degrees from the eligibility .test. The grievance of both the writ petitioners was 11iat for the purpose of giving exemption from eligibility test for candidates who had obtained M.Phil degrees the cut off date, i.e., December 31, 1992, has been fixed arbitrarily and that there is no rational basis in confining the exemption to candidates who had been awarded M.Phil degrees upto December 31, 1992 in an advertisement issued in January 1995 because as between Decembe.r E 31, 1992 to Decerber 1994 many candidates might have obtained M.Phil degrees. · The exemption for clearing the eligibility test under clauses (a) to (d) of paragraph 5 of the advertisement was based on the Circulars of the UGC F dated February 10, 1993 and June 15, 1993 referred to earlier. It appears that the UGC did not appear in response to the notice issued by the High Court on the writ petition filed by respondents Nos. 1 and 2 and the State of Haryana and the Haryana Public Service Commission, who contested the said writ petition, could not off er any explanation for the said provision in the advertisement. In the absence of any explanation having been G offered for fixing December 31, 1992 as the cut off date for grant of exemption to candidates having M.Phil degree, the High Court, by its judgment dated March 21, 1995, allowed the writ petition of respondents Nos. 1 and 2 on the view that cut off dates prescribed in paragraph 5(b) and (c) of the advertisement in respect of candidates who had acquired H 402 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A M.Phil degree or submitted the Ph.D thesis are totally unjust and based on no rationale inasmuch as it amounts to creation of an artificial class amongst the eligible candidates though similarly sit~ated, i.e., having ob­ tained M.Phil degree after December 31, 1992., or having submitted Ph.D thesis after December 31, 1993 respectively and that cut off dates, i.e., B December 31, 1992 for M.Phil degree and December 31, 1993 in case of submission of Ph.D thesis, are far earlier to the date of the advertisement dated January 23, 1995. According to the High Court, it would not be necessary to appear in the eligibility test for the candidates who have applied or/are applying for the Lecturers' post pursuant to the advertise­ ment dated January 23, 1995 if they have obtained M.Phil degrees or C submitted Ph.D thesis before December 31, 1994, i.e., prior to the date of the publication of advertisement dated January 23, 1995. On that view the High Court directed the Haryana Public Service Commission and State of Haryana to issue a corrigendum extending the dates in paragraph 5(b) and (c) of the advertisement dated January 23, 1995 upto December 31, 1994 D and further directed that in future also they should ensure that as and when any such advertisement is issued, they will bear in mind that the eligibility dates be not far off from the date of advertisement. Civil Appeal No. of 1996 (@ S.L.P. (C) No. 27375/1995) On November 22, 1993, the Bihar State University Service Commis­ sion issued an advertisement inviting application is for appointment on the post of Lecturers in various universities in Bihar. The said advertisement did not prescribe that the candidates should have cleared the national F- eligibility test conducted by the UGC. Some of the ·candidates who had qualified in the national eligibility test filed a writ petition (C.WJ.C. No. 321 of 1994) in the Patna High Court wherein it was alleged that the qualifications that were prescribed in the advertisement were not in con­ sonance with the qualifications prescribed by the UGC whereunder it is necessary that the candidates should have passed the eligibility test. The G said writ petition was allowed by the High Court by judgment dated March 9, 1994 whereby it was held that the applications of only those candidates who had passed national eligibility examination in terms of the regulations framed by the UGC could be considered by the Bihar State University Service Commission. A Review Petition was filed against the said judgment H by the Bihar State University Service Commission and by order dated April ..... U.G.C. v. S.CHAUDHARY[S.C.AGRAWAL,J.] 403 27, 1994 the High Court clarified that the Bihar State University Service A Commission should consider the candidature of such persons who were eligible to be considered in terms of regulations framed by the UGC. Thereafter the Governor of Bihar promulgated Bihar State University (Second Amendment) Ordinance, 1994 and Patna university (Third Amendment) Ordinance, 1994 on December 8, 1994 where by provisions B was made regarding relaxation of the minimum qualification for appoint­ ment on the post of Lecturer in university/constituent colleges and a candidate who has got a degree of Ph.D in the concerned subject and/or has submitted his thesis for Ph.D by December 31, 1993 and/or has got a degree of M.Phil before December 31, 1992 has been made eligib!e for appointment as Lecturer without having passed the Bihar Eligibility Test or the Eligibility Test of Lecturer/Junior Research Fellow (JRF) conducted by the UGC/CSIR. Thereafter the Bihar State University Service Commis- sion issued a Corrigendum dated December 25, 1994 in the advertisement dated November 22, 1993 whereby it was indicated that all candidates who have already done M.Phil upto December 31, 1992 or who have done or D submitted the Ph.D thesis upto December 31, 1993 or have qualified the National Eligibility Test (NET)/JRF Test of UGC/CSIR would be ex­ empted from appearing at the Bihar Eligibility Test to be conducted by Bihar State University Service Commission. Thereupon the writ petition (C.W.J.C. No. 744 of 1995) which has given rise. to this appeal was filed in the Patna High Court by the appellan~s herein. In the said writ petition the validity of the provisions contained in the aforementioned Ordinances dated December 8, 1994 promulgated by the Governor of Bihar regarding relaxation of the minimum qualification for appointment on the post of lecturer as well as the Corrigendum dated December 25, 1994 issued by the Bihar State University Service Commis- sion and the Circulars dated February 10, 1993 and June 15, 1993 issued by the UGC were challenged. The appellants sought_ a direction that the • E post of Lecturers be filled by only those persons who have cleared the National Eligibility Test or its equivalent examination. During the Penden- G cy of the said'writ petition in the High Court, the Bihar State University Service Commission conducted the Bihar Eligibility Test on June 18, 1995. On June 21, 1995, the UGC issued a notification amending· the 1991 Regulations to which reference has already been made earlier. By the impugned judgment dated June 27, 1995 the High Court has held that H 404 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A UGC was within its jurisdiction in issuing guidelines for the appointment of Lecturers in the Universities and colleges in the State of Bihar and the Chancellor was also within his jurisdiction in promulgating the Ordinances in consonance thereto. Feeling aggrieved by the said judgment of the High Court the appellants have filed this appeal. B During the course of arguments it was pointed out that both the Ordinances referred to above which were promulgated by the Governor of Bihar on December 8, 1994 have since been replaced by enactments of the State Legislature, viz., Bihar Acts Nos. 12 and 13 of 1995. lt has also been pointed out that the Bihar Eligibility Test for Lecturership that was con- C ducted by the Bihar State University Service Commission on June 18, 1995 has been granted accreditation by the UGC on February 12, 1996 and future tests to be held in .the period 1995-97 have also been accredited by the UGC with certain recommendations. D Both these appeals raise questions regarding validity of the circulars of the UGC dated February 10, 1993 and June 15, 1993 as well as the notification dated June 21, 1995 amending the 1991 Regulations. In Civil Appeal arising out of Special Leave Petition (C) No. 16220 of 1995 the question is whether the cut off dates fixed under the said Circulars and • notification in respect of candidates who have obtained M.Phil degree or E have submitted their Ph.D thesis were valid. In Civil Appeal arising out of Special Leave Petition (C) No. 27375 of 1995 the question is whether the exemption from clearing the eligibility test or equivalent examination under the said Circulars and notification is valid. This appeal also involves the question regarding validity of the two Ordinances tha~ were promul- F gated by the Governor of Bihar on December 8, 1994 and the legislative enactment replacing the Ordinances. Shri Milon K. Banerjee, the learned senior counsel appearing for the UGC, has submitted that the Circulars dated February 10, 1993 and June 15, 1993 were in the nature of transitional provisions which became neces- G sary as a result of imposing the requirement regarding clearing the eligibility test by a candidate for appointment on the post of Lecturer under the 1991 Regulations. The learned counsel has pointed out that under the 1982 Regulations, which were superseded by the 1991 Regulations, a person possessing Ph.D degree was eligible for appointment on the post of H Lecturer in the University and a person possessing M.Phil degree was U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.) 405 eligible for appointment on the post of Lecturer in the college. This A position was altered by the 1991 Regulations and candidates having good academic record with it least 55% marks or an equivalent grade at Master's degree level in the relevant subject became eligible for appointment on the post of Lecturers in universities or colleges provided they had cleared the eligibility test for Lecturers conducted by the UGC, CSIR or similar test B accredited by the l)GC. A Ph.Dor M.Phil degree is no longer an essential qualification for such appointments. There were a number of persons who had obtained Ph.D and M.Phil degrees or had joined the Ph.D or M.Phil degree courses prior to the issuance of the 1991 Regulations in the light of the minimum qualifications that were prescribed in the 1982 Regulations. The Circulars dated February 10; 1993 and June 21, 1993 were issued to C mitigate the resultant hardship to such persons on account of the introduc- tion of the requirement of clearing the eligibility test in the 1991 Regula­ tions. By Circular dated February 10, 1993 exemption from this requirement was granted to candidates who had already been awarded the Ph.D degree as well as to candidates who would submit their Ph.D thesis D upto December 31, 1993. As regards candidates having obtained M.Phil degree, by Circular dated February 10, 1993, the exemption was initially confined to those who had already been awarded M.Phil degree upto March 31, 1991. Subsequently it was felt that there were candidates who had joined the M.Phil course prior to issuance of the 1991 Regulations but had not obtained the M.Phil degree till then and, therefore, by Circular dated June 15, 1993, the date of obtaining the M.Phil degree was extended from march 31, 1991 to December 31, 1992 under the eXpectation that by that date those persons would be able to complete the M.Phil course and obtain M.Phil degree. Shri Banerjee has contended that both these Cir­ culars dated February 10, 1993 and June 21, 1993 have now ceased to have any significance in view of the notification dated June 21, 1995 wereby the 1991 Regulations have been amended and it has been prescribed that candidates who have submitted Ph.D. thesis or passed the M.Phil examina- tion by December 31, 1993 are exempted-from eligibility test for Lecturers conducted by UGC/CSIR or similar test accredited by the UGC. The G submission is that after the aforesaid amendment in the 1991 Regulations the only question that is left for' consideration is whether the cut off date (December 31, 1993) prescribed in the 1991 Regulations, as amended, can be held to be arbitrary. Shri Banerjee has urged that having regard to the time that is normally taken by a candidate who had registered for the Ph.D H A degree or had joined M.Phil course prior to the making of the 1991 Regulations, the fixation of December 31, 1993 as the cut off date cannot be held to be arbitrary or unreasonable. Shri Banerjee, in this context, has placed reliance on the decision of this Court in Union of India & Anr. v. M/s. Parameshwaran Match Works Ltd., (1975] 2 SCR 573; and Dr. (Mrs.) B Sushma Shanna Etc. Etc. v. State of Rajasthan & Ors., (1985] 3 SCR 243. We find considerable force in the aforesaid submissions of Shri Banerjee. It is settled law that the choice of a date as a basis for classifica­ tion cannot always be dubbed as arbitrary even if no particular reason is forth coming for the choice unless it is shown to be capricious or whimsical C in the circumstances. When it is seen that a line or a point there must be and there is no mathematical or logical way of fixing it precisely, the decision of t!ie legislature or its delegate must be accepted unless it can be said that it is very wide of the reasonable mark. (See : Union of India & Anr. v. M/s. Parameshwaran Match Works Ltd., (1975] 2 SCR 573, at p. 579; D and Dr. (Mrs.) Susluna Shanna Etc. Etc. v. State of Rajasthan & Ors., (1985] 3 SCR 243, at p. 269. In the present case, the date, December 31, 1993, as fixed by notification dated June 21, 1995, in the matter of grant of exemp­ tion from the eligibility test for appointment on the post of lecturer has a ·reasonable basis keeping in view the time taken in submitting the Ph.D E thesis or obtaining M.Phil degree by candidates who had undertaken the study for Ph.D or M.Phil degree prior to the issuance of the 1991 Regula­ tions and the date, December 31, 1993 cannot be held to be capricious or whimsical or wide of the reasonable mark. The High Court of Punjab and Haryana has proceeded on the basis that the cut off date for the purpose F of granting exemption from eligibility test should have nexus with the date of the advertisement inviting applications for appointment on the post of Lecturers. The High Court was in error in taking this view. The exemption from eligibility test that has been granted under paragraph 5 of the adver­ tisement dated January 23, 1995 is relatable to the introduction of the requirement of eligibility test in the 1991 Regulations. The object underly- G ing the grant of exemption is to mitigate the resultant hardship to can­ didates who had registered for Ph.D degree or had joined the course for M.Phil degree on the basis of the minimum qualifications prescribed under the 1982 Regulations. The validity of the fixation of cut off date for the purpose of grant of exemption from the eligibility test has to be considered H with reference to the date of issuance of the 1991 regulations and not with U.G.C. v. S.CHAUDHARY[S.C.AGRAWAL,J.] 407 reference to the date of advertisement inviting applications for appoint- A ment on the post of Lecturers. We are, therefore, unable to uphold the direction of the High Court that it would not be necessary to appear in the eligibility test for candidates who have applied or/are applying for the Lecturers posts pursuant to the advertisement dated January 23, 1995 if they have obtained M.Phil degrees or submitted Ph.D thesis before Decem- B her 31, 1994, i.e., prior to the date of the publication or advertisement dated January 23, l995 and the further directi.on to the Haryana Public Service Commission and State of Haryana to ensure that as and when any such advertisement is issued, they would bear in mind that the eligibility dates be not far off from the date of advertisement. The exemption from C the requirement regarding clearing the eligibility test has to be confined within the limits indicated in the amendment introduced in the 1991 Regulations by notification dated June 21, 1995. Respondents Nos. 1 and 2 who had moved the High Court by filing the writ petition obtained their M.Phil degrees prior to December 31, 1993. They would be entitled to exemption from clearing the eligibility test under the terms of the notifica- D tion dated June 15, 1995. The decision of the High Court, in so far as it relates to the said respondents, is not required to be disturbed and is, therefore, maintained. We may now come to the validity of the exemption from the require­ ment regarding clearing the eligibility test that has been granted under the Circulars dated February 10, 1993 and June 15, 1995 and the notification dated June 21, 1995. Shri S.B. Sanyal; the learned senior counsel appearing for the appellants in Civil Appeal arising out of S.L.P. (C) No. 27375 of 1995, has submitted that having regard to the report of the National Commission on Teachers II and the report of the Mehrotra Committee, which form the basis for introducing this requirement by the UGC in the 1991 Regulations, there is no rational basis for granting exemption from the eligibility test to candidate who had submitted Ph.D thesis or passed the M.Phil examination by December 31, 1993. We find no merit in this contention. Prior to the making of the 1991 Regulations there was no G statutory requirement regarding clearing the eligibility test for the purpose of appointment on the post of Lecturer. Such a requirement was intro- • duced for the first time by the 1991 Regulations. At the time when the 1991 Regulations were made the provisions contained in the 1982 Regulations had given rise to a legitimate expectation that a person having a Ph.D or H 408 SUPREME COURT REPORTS [1996) SUPP. 6 S.C : .. A M.Phil degree and having good academic record as prescribed under the 1982 Regulations would be eligible for appointment on the post of Lecturer without anything more. While intrqducing the. requirement of clearing the eligibility test in the 1991 Regulations, the UGC did not intend to deprive the persons who had obtained M.Phil degree or Ph.D degree prior to the B making of the 1991 Regulations of their legitimate expectation in the matter of appointment on the post of Lecturer in universities or colleges. It was also felt that the said. requirement in the 1991 Regulations should not operate to the prejudice of persons who, having regard to the qualifications prescribed in the 1982 Regulations, had registered for the Ph.D degree or had joined study for M.Phil degree course prior to making of the 1991 C Regulations and, therefore, provision was made for granting exemption to such candidates with the condition that they should have passed M.Phil examination or should have submitted Ph.D thesis by a garticular date. In so far as the date of submission of Ph.D thesis is concerned, the said date, i.e., December 31, 1993, has remained unchanged in the Circulars dated D February 10, 1993 and June 15, 1993 and the notification dated June 21, 1995. For M.Phil degree the date was, however, changed from March 31, 1991 to December 31, 1992 by Circular dated June 15, 1993 and from December 31, 1992 to December 31, 1993 by notification dated June 21, 1995. The amendment in the 1991 Regulations that has been made by the E notification dated June 21, 1995, in substances, postpones the date of applicability of the requirement regarding clearing the eligibility test in the 1991 Regulations till December 31, 1993 in respect of candidates who had joined the M.Phil course or registered for Ph.D degree. Such candidates constitute a distinct class who could be treated separately in so far as the requirement of clearing the eligibility test was concerned. Such a classifica- F tion of the candidates for the purpose of applicability of the requirement of clearing the eligibility test has a rational basis which has a reasonable nexus with the object sought to be achieved by the 1991 Regulations. We are, therefore, unable to hold that the exemption that has been granted by the amendment introduced in the 1991 regulations by notification dated G June 21, 1995 is violative of the right to equality guaranteed under Article 14 of the Constitution. . . Shri Sanyal has also raised the question regarding the validity of the two Ordinances promulgated by the Governor of Bihar on December 8, 1994 and the legislative enactments which have now replaced the Ordinan- U.G.C. v. S. CHAUDHARY [S.C.AGRAWAL,J.] 409 ces and has urged that since the 1991 Regulations that have been made by A the U GC in exercise of the power conferred under Section 26 of the Act which has been enacted by Parliament under Entry 66 of List I (Union List) of the Seventh Schedule to the Constitution, the Bihar State Legisla­ ture was not competent to legislate in this field and the legislation enacted by the Bihar State Legislature is ultra vires the legislative powers conferred B on the Bihar State Legislature under the Constitution and that the Patna High Court was in error in upholding the validity of the Ordinances. We do not consider it necessary to go into this question. The grievance of the appellants in their writ petition before the High Court was against the corrigendum dated December 25, 1994 issued by Bihar State University C Service Commission whereby it was prescribed as under : "The candidates who have already done M.Phil upto 31st decem­ ber, 1992 or who have done or submitted Ph.D thesis upto 31st December, 1993 or have qualified i_ll the NET/JRF Tests of UGC/CSIR are exempted from appearing at the BET to be con- D ducted by Bihar State University Service Commission." This grant of exemption was in accord with the Circulars dated February 10, 1993 and June 15, 1993 that had been issued by the UGC. As noticed earlier Bihar Eligibility Test that was conducted by Bihar State E University Service Commission on June 18, 1995 has been accredited by the UGC on February 12, 1996 and further tests to be held in the period 1995-1997 have also been accredited with certain recommendations. The grant of exemption from the eligibility test in the Corrigendum, therefore, does not run contrary to the requirement prescribed by the U GC in the 1991 Regulations read with Circulars dated February 10, 1993 and June 15, 1993 which were applicable at that time. The question regarding validity of the two Ordinances and the legislative enactments replacing them is, therefore, left open. In the result, Civil Appeal arising out of S.L.P.(C) No. 27375of1995 G is dismissed. Civil Appeal arising out of S.L.P. (C) No. 16220 of 1995 is partly allowed to the extent that the direction given by. the High Court of Punjab and Haryana that it would not be necessary to appear in the eligibility test for candidates who have applied or/are applying for the lecturers' posts pursuant to the advertisement dated January 23, 1995, if H 410 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A they have obtained M.Phil degrees or submitted Ph.D thesis before Decem­ ber 31, 1994, i.e., prior to the date of the publication of advertisement, and further directing the Haryana Public Service Commission and State of Haryana to ensure that as and when any such advertisement is issued, they would bear in mind that the eligibility dates be not far off from the date B of advertisement, are set aside and it is declared that the exemption from eligibility test for the purpose of appointment on the post Lecturer will have to be confined to candidates fulfilling the requirements in the 1991 Regulations as amended by notification dated June 21, 1995. The direction given by the High Court of Punjab and Haryana in so far as respondents Nos. 1 and 2 are concerned is not disturbed. c No orders as to costs. S.S. C.A. No. 12308/96 dismissed. C.A. No. 12284/96 partly allowed. IN RE : HARUAI SINGH AND ANR. A IN RE : VUA Y KUMAR SEPTEMBER 17, 1996 (KULDEEP SINGH AND FAIZAN UDDIN, JJ.] Constitution of India: Article 19(J)(a). Freedom of press part of freedom of speech and eJ.pression-Mother of all liberties in a democratic society-Freedom of press is not absolutely unlimited and unfettered-Element of responsibility must be present in the C conscience of the Joumalists--Rights of press to be recognised with its duties and responsibilities towards the society-Newspaper publishing improper and false news must be punished by cowt of law. Common cause a regd. society filed a writ petition against alleged misuse and arbitrary exercise of discretionary power by the Petroleum and D Natural Gas Ministry in relation to allotment of retail outlets for petroleum products and LPG Dealership from discretionary quota. During the pendency of writ petition a Box news under caption "pumps for all" was published in the Sunday Tribune on March 10, 1996 stating that Petroleum Minister has made 17 allotments of petrol pumps and gas agencies to relatives of the then Prime Minister Narasimha Rao out of his discretionary quota though. the allotment under this caD only be made to the weaker section of the society and war-widows. It also stated that two children of Lok Sabha Speaker Shiv Raj Patil and two sons of a Senior Judge of Supreme Court have also been favoured. Similar News item was also published in Hindi Newspaper Punjab Kesari dated March 10, 1996 which stated that 17 relatives of the Prime Minister Narasimha Rao have been allotted petrol pumps or gas agencies out of the discretionary quota. Then it went on to add that the list includes names of two sons of Mr. Ahmadi, Chief Justice of India. G Notice was issued by the Supreme Court to the Secretary, Ministry of Petroleum and Natural Gas. In his affidavit dated March 20, 1996 he stated that since the allegations regarding allotment under the discretion­ ary quota in favour of two sons of senior Judge of Supreme Court are vague and in the absence of specific names it is difficult to deal with the same. On H 411 ·' 412 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. A the request of Additional Solicitor General time was granted to file further affidavit of a respvnsible officer and it was further directed that relevant files be produced in Court. Joint Secretary in the Ministry of Petroleum and Natural Gas, Govt. of India in his affidavit dated March 28, 1996 categorically stated that there B was no allotment in favour of son/sons of any Supreme Court Judge. Since the allegations were completely false, contempt proceedings were initiated again~t the Editors and Publishers of the Sunday Tribune, Chandigarh and the Punjab Kesari, Jalandhar and show cause notices were issued to them. Editor of ''The Sunday Tribune" Hari Jai Singh filed affidavit admit­ ting that the news item published in Sunday Tribune dated March 10, 1996 with regard to the allotment of petrol outlets to the sons of Senior Judge of the Supreme Court was not correct and therefore tendered unqualified D apology and prayed for mercy and pardon. He further stated that it was an inadvertent publication as the news item was supplied by an experienced journalist Dina Nath Misra who is a journalist of 30 years standing. He submitted that he has the highest respect for the Judiciary in general and to this Court in particular and E tendered his unqualified apology with a feeling of remorse. It was further submitted that an apology was already published in the Tribune dated May 10, 1996. Similarly affidavit was also filed by Publisher of the Tribune Lt. Col. S.L. Dheer, tendering his apology and prayed for mercy and pardon due .to Bonafide Mistake. F Vijay Kumar Chopra, Editor and Publisher of Punjab Kesari, Jalandhar also filed his affidavit and stated that news item was published on the basis of report sent by a senior Journalist which due to inadvertence escaped the attention of the Editor. And an apology was carried out prominently in the Newspaper on April 7, 1996. He also tendered his un- G conditional and unqualified apology. Thereafter a contempt notice was issued to Dina Nath Misra and he ·.~. filed an affidavit on August 1, 1996 and admitted that a capsule item about the allotment of Petrol Pumps to the sons of senior Judge of the Supreme Court was not factually correct and he tendered his unqualified apology for H the lapse that he had committed. INRE:HARIJAISINGH INRE: VDAYKR. 413 He filed additional affidavit on Aug. 29, 1996 and admitted that he A' has committed a grievous error in writing news items which have no basis and again offered his unconditional apology. Disposing of the contempt petitions, this Court HELD : 1. Freedom of press is an essential pre-requisite of a democratic form of Govt. The freedom of press is a part of the freedom of B the speech and expression as envisaged in Article 19 (1) (a) of the Constitu- tion of India. The freedom of press is regarded as the mother of all liberties in a democratic society. [ 419-G, 420-A] Indian Express Newspaper v •. Union of India, [1985] 1 SCR 641 and C Indian Express Newspaper v. Union of India, AIR (1986) SC 872, relied upon. 2. In a democratic set up there has to be an active and intelligent participation of the people in all spheres and affairs of their community as well as the State. The primary function of the press is to provide D comprehensive and objective information of all aspects of country's politi- cal, social, economic and cultural life. It has an educative and mobilising role to play. It plays an important role in moulding public opinion and can be an instrument of social change. [ 420-D, 420-F] 3. But it has to be remembered that freedom of press is not absolute, unlimited and unfettered at all times and in all circumstances as giving an unrestricted freedom of speech and expression would amount to an uncontrolled licence. If it were wholly free even from reasonable restraints it would lead to disorder and anarchy. The freedom is not to be misunderstood as to be a press free to disregard its duty to be responsible. In fact the element of responsibility must be present in the conscience of the journalists. IIi an organised society, the rights of the press have to be recognised with its duties and responsibilities towards the society. Public order, decency, morality and such other things must be safeguarded. The protective cover of press freedom must not be thrown open for wrong G doings. If a newspaper publishes what is improper, mischievously false or illegal and absues its liberty it must be punished by Court of law. [420-H, 421-A-B] 4. Editors of a Newspaper or a Journal have a greater responsibility to guard against untruthful news and publications. Certain restrictions H 414 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R A are essential for preservation of the freedom-of the press itself. (421-B-D] 5. It is the duty of true and responsible Journalist to inform people with accurate and impartial news after dispassionate evaluation of facts and information received by them. (421-D-E] B 6. In the instant case neither the printer, nor the editor and reporter took necessary care in publishing the news item of an allegation of a serious nature having great repercussion causing embarrassment to this Court. Such an irresponsible conduct of Editor, Publisher and Reporter is distinctly opposed to the high professional standards. Even the ordinary C care was not resorted to by the contemners in publishing such a false news item. This cannot be regarded as a public service but a disservice to the public by misguiding them with a false news. [421-G-H, 422-A] 7. This Court is not hypersensitive in matters relating to contempt of courts and has always shown magnanimity in accepting apology. Fair criticism within the parameters of law is always welcome in democratic system. But the news item in the present case is neither fair nor made in good faith but wholly false and explanation given is far from satisfactory. However the written unconditional apology tendered by Bari Jai Singh, Editor of Sunday Tribune, Ft. Col. H.L. Dheer, Publisher and Editor of E the· Sunday Tribune and Vijay Kumar Chopra, Editor and Publisher of Punjab Kesari is accepted with the warning that they should be careful in future. (422-B-D, 422-G] 8. As for Dina Nath Mishra, he being a very experienced fournalist, F should have taken extra care to verify the correctness and if he had done so there would not have been any difficulty in coming to know that information supplied to him had absolutely no legs to stand and was patently false and the publication would have been avoided which not only caused embarrassment to this Court but conveyed a wrong message to the public at large jeopardizing the faith of the illiterate masses in our G judiciary. He committed a serious mistake but, his sincere repentence and unconditional apology are accepted. [422-G, H, 423-A] 9. The contemners will publish in the front page of their respective newspaper in a box; their respective apologies, specifically mentioning that H the said news item were absolutely incorrecfand false. (423-CJ 1 . INRE:HARIJAISINGH INRE: VJJAYKR.(FAIZANUDDIN,J.] 415 CIVIL ORIGINAL JURISDICTION : Contempt Petition Nos. 206- A 207of1996. IN Writ Petition (C) No. 26 of 1995. (Under Article 32 of the Constitution of India.) In-Person for Petitioner. K.T.S. Tulsi, Additional Solicitor General, Ram Jethmalani and Ash­ wini Kumar, Prashant Bhushan, P.H. Parekh, Arvind Sharma, Sameer C Parekh, Ms. Bina Madhavan and K.S. Chauhan for the appearing parties. The Judgment of the Court was delivered by FAIZAN UDDIN, J. When this Court was seized of, Writ Petition filed by the "Common Cause, A Registered Society'' with regard to the D alleged misuse and arbitrary exercise of discretionary power by the Petroleum and Natural Gas Ministry in relation to the allotment of retail outlets for Petroleum products and L.P.G. Dealership, from discretionary quota, a news item in box with a caption ''Pumps for all" was published in the daily newspaper "The Sunday Tribune" dated March 10, 1996 which is E reproduced hereunder : "Pumps for all! Believe it or not, Petroleum Minister Satish Sharma has made 17 allotments of petrol pumps and gas agencies to relatives of Prime F Minister Narasimha Rao out of his discretionary quota. Allotments in this category can only be made to members of the weaker sections of society and war widows, yet five of the Prime Minister's grandchildren have been favoured as have been five of his nephews from the family of V. Rajeshwar Rao, MP. Besides, three wards G of his brother Manohar Rao, two relatives of P. Venkata Rao and the son of A VR Krishnamurthy whose family lives with the Prime Minister have been allocated petrol 'pumps and gas agencies. Similarly, Rao's daughter, Vani Devi, who is the official hostess has a petrol pump allotted in the name of her daughter Jyotiriyai. She was also favoured by the Airport Authority of India which H released a prime piece of land located in Begum.pet area to her for just Rs. 3 lakh. The market value is stated , to be over Rs. 1 crore. It has been registered in the name of Shri Jai Balaji Agency, However, the Prime Minister's kin are not the only ones who have benefited from these allotments. Two children of Lok Sabha Speaker Shivraj Patil have also been favoured as have the two sons of a senior judge of the Supreme Court. Interestingly; the Supreme Court had recently asked the government to supply a list of all discretionary allotments made by the ministry. However, the Min­ ister has so far managed to withhold this crucial document. But it has hardly helped as the list has been leaked by Sharma's own men." A similar news item was also published in the Hindi newspaper "Punjab Kesari" dated March 10, 1996; the English translation of which is as follows: "17 Poor Members of the family of the Prime Minister Out of the short out ways of becoming rich, one way is to obtain Petrol Pump or Gas Agency. But the power to allot the same lies with the Petroleum Minister. He has the discretionary powers to allot petrol pump or gas agencies in charity. This power of doing such charities. has been entrusted in some special cases which include the people belonging to the poor, backward classes and the wives of those who were killed in the war. But all those persons to whom these agencies have been allotted by the Petroleum Minister Capt. Satish Sharma turned out to be a scam in itself. The matter was referred to the Supreme Court in which the Govern­ ment was directed to submit a list. The Petroleum Minister sup­ pressed the list. The list was demanded in the Parliament. But the list was not presented. Now the list has been leaked out from the Petroleum Ministry. Believe it, there are 17 relatives of the Prime Minister Narsimaha Rao in that list. Five persons are his grand­ sons and grand-daughters. Five others are the members of the family of V. Rajeshwar Rao. He is a Member of Parli~-ient and_ the relative of the Prime Minister, Manohar Rao is the brother of Narasimha Rao. These agencies were also allotted to his three' children. There is one more relative - P. Venkatrao. Two allottees t- INRE:HARUAISINGH INRE: VIJAYKR.[FAIZANUDDIN,J.] 417 have been found in his family. One is A.V.R. Krishna Murty who A resides in the residence of the Prime Minister. He has also been allotted the Agency at the Bolaram Road at Sikandrabad. But the most interested story is of Jyotiramal. Narasimha Rao is his real grand maternal father. The authorised hostess of the Prime Minister's residence is Vani Devi who is the daughter of the Prime Minister and mother of Jyotirmal. Their agency is situated at Begumpet under the name and style "Shri Sai Balalji Agency". The land of 2000 Sq. M. of the Indian Aviation Authority was given to Sri Sai Balaji Agency merely for rupees three lakhs. Presently, the cost of this land is more than one crore. The Petroleum Minister also allotted the agencies to the two children of Shivraj Patil, Speaker of the Lok Sabha. You should not be astonished if you find the names of two sons of Mr. Ahmadi, Chief Justice of India in the list of the discretionary quota. Otherwise the names of such poor and back- D ward person are also available in this list. Since, the aforesaid news items contained an allegation that two sons of a senior Judge of the Supreme Court and two sons of the Chief Justice of India were also favoured with the allotment of petrol outlets from the discretionary quota of Ministry and therefore, by our Order dated March E 13, 1996, we issued a notice to the Secretary, Ministry of Petroleum and Natural Gas to file an affidavit offering his comments and response to the facts stated in the aforesaid two news items. Pursuant to the said notice, Shri Vijay L. Kelkar, Secretary in the Ministry of Petroleum and Natural Gas, Government of India, filed his affidavit dated March 20, 1996 stating F that since the allegation regarding allotment under the discretionary quota in favour of two sons of a senior judge of the Supreme Court are vague and in the absence of specific names, it is difficult to deal with the same. Thereafter when the matter again came up before this Court on March 21, 1996, Shri Altaf Ahmad, learned Additional Solicitor General stated that G he would look into the records and file further affidavit of a responsible officer giving response to the other allegations regarding ~elationship of VIPs. We, therefore, granted time for the purpose and at the same time directed the relevant files to be produced in Court. It was thereafter that Shri Devi Dayal, Joint secretary in the Ministry of Petroleum and Natural Gas, Government of India filed his affidavit dated March 26, 1996. In H 418 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R. A paragraph 5 of his affidavit, he made a categorical statement that there is no allotment in favour of son/sons of any Supreme Court Judge. After · verification at records and affidavits referred to above, we found that the news items referred to above were patently false and, therefore, by our Order dated March 27, 1996, we initiated contempt proceedings against B the Editors and Publishers of the daily "The Sunday Tribune" Chandigarh and "The Punjab Kesari", Jalandhar and issued notices to them to show cause why they may not be punished for the contempt of this Court. In response to the contempt notice, Shri Hari Jaisingh, the Editor of "The Sunday Tribune" filed an affidavit dated June 24, 1996 admitting that C the news item published in "The Sunday tribune" dated March 10, 1996 with regard to the allotment of petrol outlets to the sons of a senior Judge. of the Supreme Court was not correct and, therefore, tendered unqualified apology and has prayed for mercy and pardon. He has stated that it wa~ an inadvertent publication made bona fide on the faith that the iten: D supplied by an experienced journalist, Shri Dina Nath Misra, who i~ generally reliable would not be factually incorrect. It has been stated t~at Dina Nath Misra is a journalist of standing for over 30 years and there have been no complaints about the correctness of the material contributed by him and believing the said item of news to be correct it was published without any further scrutiny in a good faith. He has submitted that he has E the highest respect for the judiciary in general and to this Court in particular and rendered his unqualified apology with a feeling of remorse. He has submitted that since it was noticed that the news item was not correct, an apology was already published by him in the Tribune dated May 10, 1996 and necessary instructions to all members of the editorial staff F were issued to be careful and assuring the factual accuracy of all legal reports. Lt. Col. S.L. Dheer (Retd.), the Publisher of "The Tribune", in response to the contempt notice has also filed his affidavit dated June 27, 1996 more or less in the same terms as. the one filed by Shri Hari J aisingh G and has tendered his apology and prayed for mercy and pardon due to the bonafide mistake. In response to the contempt notice, Shri Vijay Kumar Chopra, Editor and Publisher of daily "Punjab Kesari" Jalandhar has also filed affidavit H dated June 29, 1996 stating that the news item in the daily "Punjab Kesari" r ; - INRE:HARIJAISINGH INRE: VIJAYKR.[FAIZANUDDlN,J.] 419 referred to above was published on the basis of the news report sent by a A senior journalist which due to inadvertence escaped the attention of the Editor. He has stated that immediately after the incorrectness of the news item was noticed a contradiction and apology was carried out prominently in the issue of the Paper dated April 7, 1996. He has stated that the said news item was not actuated by any malice tow&rds the judiciary and that the mistake was bonafide. He has also tendered his unconditional and unqualified apology. On being apprised that the news items referred to above found to be false which were published on the basis of the information and material supplied by the journalist/reporter Dina Nath Misra to "The Sunday C Tribune" and "Punjab Kesari", we issued a similar contempt notice to Dina Nath Misra by our Order dated July 9; 1996. The journalist Dina Nath Misra in his affidavit dated August 1, 1996 admitted to have written a capsule item about the allotment of petrol pumps to the sons of a senior Judge of the Supreme Court which was not factually correct and he has, D therefore, tendered his unqualified apology for the lapse that he had committed. He has stated that he has been a journalist for about 4 decades and is known for his integrity and commitment towards the professionalism. He has further stated that a highly reliable source who had earlier given many reliable informations to the deponent gave this information also which was believed by him to be true, but it turned out to be incorrect. He E has stated various other facts to show :that the mistake was bonafide, but we find the said excuses and explanations to be not acceptable at all. He has, however, expressed his deep repentance and tendered unqualified apology and seeks forgiveness for this honest and inadvertent blunder. In yet another additional affidavit dated August 29, 1996, he has reiterated F the said facts and admitted that he has committed a grievous error in writing news items which have absqlutely no basis, and has again offered unconditional apolo&ry to Hon'sble the Chief Justice as well as to this Court. It may be relevant here to recall that the freedom of Press has always been regarded as an essential pre-requisite of a Democratic form of G Government. It has been regarded as a necessity for the mental health and the well being of the society. It is also considered necessary for the full development of the personality of the individual. It is said that without the freedom of press truth cannot be attained. The freedom of press is a part of the freedom of the speech and expression as envisaged in Article H 420 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A 19(1)(a) of the Constitution of India. Thus, the freedom of the press is included in the fundamental right of freedom of expression. The freedom of Press is regarded as "the mother of all other liberties" in a democratic society. Further, the importance and the necessity of having a free press in a democratic Constitution like ours was immensely stressed in several landmark judgments of this Court. The case of Indian &press Newspaper v. Union of India, [1985] 1 SCR 641, is one of such judgments rendered by Venkataramiah, J. (as he then was). Again in another case of Indian Express Newspaper v. Union of India, AIR (1986) SC 872. A.P. Sen, J. (as he then was) described the right to freedom of the press as a pillar of individual liberty which has been unfailingly guarded by the Courts. It is thus needless to emphasise that a free and healthy press is indispensable to the functioning of a true demo(:racy. In a democratic set-up, there has to be an active and intelligent participation of the people in all spheres and affairs of their community as well as the State. It is their right to be kept informed about current political, social, economic and D cultural life as well as the burning topics and important issues of the day in order to enable them to consider and form broad opinion about the same and the way in which they are being managed, tackled and administered by the Government and i,ts functionaries. To achieve this objective the people need a clear and truthful account of events, so that they may form E their own opinion and offer their own comments and view points on such matters and issues and select their further course of action. The primary function, therefore, of the press is to provide comprehensive and objective information of all a·spects of the country's political, social, economic and cultural life. It has an educative and mobilising role to play. It plays an important role in •moulding public opinion and can be an instrument of F social change. It may be pointed out here that Mahatama Gandhi in his autobiography has stated that one of the objectives of the newspaper is to understand the proper feelings of the people and give expression to it; another is to arouse among the people certain desirable sentiments; and the third is to fearlessly express popular defects. It, therefore, turns out that the press should have the right to present anything which it thinks fit G for publication. But it has to be remembered that freedom of press is not absolute, unlimited and unfettered at all times and in all circumstances as giving an u11rest1icted freedom of the speech and expression would amount to an H uncontrolled licence. If it were wholly free even from reasonable restraints it INRE_:HARIJAISINUH lNRE: VIJAYKR.[FAIZANUDDIN,J.] 421 would lead to disorder and anarchy. The freedom is, not to be misunderstood A as to be a press free to disregard its duty to be reasonable. Inf act, the element of responsibility must be present in the conscience of the joumalists. In an organised society, the rights of the press have to be recognised with its duties and responsibilities towards the society. Public orde1; decency, morality and such other things must be safeguarded. The protective cover of press freedom must not be thrown open for wrong doings. If a new~paper publishes what is improper, mischievously false or illegal and abuses its liberty it must be punished by Cowt of Law. The Editor of a Newspaper or a journal has a greater responsibility to guard against untruthful news and publications for the simple reason that his utterances have a far greater circulation and impact than the utterances or an individual and by reason of their appear­ ing in print, they are likely to be believed by the ignorant. That being so, certain restrictions are essential even for preservation of the freedom of the press itself. To quote from the rep01t of Mons Lopez to the Economic and Social Council of the United Nations "if it is tme that human progress is impossible without freedom, then it is no less tme that ordin01y human D progress is impossible without a measure of regulation and discipline". It is the duty of a true and responsible journalist to strive to inform the people with accurate and impartial presentation of news and their views after dispassionate evaluation of the facts and information received by them and to be published as a news item. The presentation of the news should be truthful, objective and comprehensive without any false and distorted expression. In the present case, as w~ have noticed above, neither printer, published nor the editor and reporter took the necessary care in evaluating the correctness and credibility of the information published by them as the F news items in the newspapers referred to above in respect of an allegation of a very serious nature having great repercussion causing an embarras­ ment to this Courts. An Editor is a person who controls the selection of the matter which is to be published in a particular issue of the newspaper. The Editor and Publisher are liable for illegal and false matter which is published in their newspaper. Such an irresponsible conduct and attitude G on the part of the editor, publisher and the reporter cannot be said to be done in good faith, but distinctly opposed to the high professional stand­ ards as even a slightest enquiry or a simple verification of the alleged statement about grant of Petrol outlets to the two sons of a senior Judge of the Supreme Court, out of discretionary quota, which is found to be H 422 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A patently false would have revealed the truth. But it appears that even the . ordinary care was not resorted to by the contemners in publishing such a false news items. This caMot be regarded as a public service, but a dis-service to the public by misguiding them with a false news. Obviously, this cannot be regarded as something done in good faith. 1 . But it may be pointed out that various judgments and pronounce­ ments of this Court, bear testimony to the fact that this Court is not hypersensitive in matters relating to contempt of Courts and has always shown magnanimity in accepting the apology on being satisfied that the error made in the publication was without any malice or without any C intention of dis-respect towards the Courts or towards any member of the judiciary. This Court has always entertained fair criticism of the judgments and orders or about the person of a Judge. Fair criticism within the parameters of law is always welcome in a democratic system. But the news items with which we are concerned can neither be said to be fair or made D in good faith but wholly false and the explanation given is far from satisfactory. Shri Hari Jaisingh, Editor of the Sunday Tribune and Lt. Col. H.L. Dheer, Publisher as well as Vijay Kumar Chopra. Editor and Publish­ er of daily Punjab Kesari have taken the stand that they had taken the news items to be correct on the basis of the information supplied by a very senior senior journalist of long standing Dina Nath Misra. But this cannot be accepted as a valid excuse. It may be stated that at common Law, absence of intention or knowledge about the correctness of the contents of the matter published (for example as in the present case, on the basis of information received from the journalist I reporter) will be of no avail for the editors and publishers for contempt of Court but for determining the quantum of punishment which may be awarded. Thus they cannot escape the responsibility for being careless in publishing it without caring to verify the correctness. However, since they have not only expressed repentance on the incident but have expressed their sincere written unconditional apology, we accept the same with the warning that they should be very careful in future. As regards the case of Dina Nath Misra, we find he acted G in gross carelessness. Being a very experienced journalist of long standing it was his duty while publishing the news item relating to the members of the apex Court, to have taken extra care to verify the correctness and if he had done so, we are sure there would not have been any difficulty in coming to know that the information supplied to him had absolutely no legs to H stand and was catently false and the publication would have been avoided INRE:HARIJAISINGH.INRE: VUAYKR[FAIZANUDDIN,lr- 423. which not only caused great embarrassment to this Court but conveyed a A wrong message to the public at large jeopardizing the faith of the illeterate masses in our judiciary. Shri Dina Nath Misra has no doubt committed a serious mistake but he has realised bis mistake and expressed sincere repentance and has tendered unconditional apology for th~ same. He was present in the Court and virtually looked to be gloomy and felt\epentant B of what he had done. We think this sufferance itself is sufficient punishment for him. He being a senior journalist and an aged person and,· the~efore, . taking ·a .lenient view of the matter, we accept bis apology also. We, · however, direct that the contemners will publish in the front page of their respective newspapers within a box their respective apologies specifically · mentioning that the said news items were absolutely incorrect and false. C . This may be done within two weeks. The Contempt Petition Nos. 206-207 of 1996 are disposed of accordingly. S.S. Petitions disposed of. A MIS. SHAPERS CONSTRUCTION (P) LTD. AND ANR. v. AIRPORT AUTHORITY OF INDIA AND ANR. SEPTEMBER 17, 1996 [K. RAMASWAMY AND G.B. PATTANAIK, JJ.) Tender Form-Condition enVisaging completion of particular type of work on the date of application-Party had done major part of such work but not completed on the date of application-Hence tender form refused-Party C filing a writ petition and High Court ordering issue of tender form-On appeal held since on the date of application admittedly such work was not completed, the pre-condition is not satisfied-Hence the High Court was right in finally dismissing the writ petition. New Horiwns Ltd. & Ors. v. Union of India & Ors., (1995] 1 SCC 478, D distinguished. CIVIL APPELLATE JURISDICTION : Special Leave Petition (C) No. 181~1-22 of 1996. From the Judgment and Order dated 8.8.96 of the Madhya Pradesh E High Court in W.P. No. 2164/96 and L.PA. No. 138of1996. G.C. Gupta and Shiv Sagar Tiwari for the Petitioners. The following Order of the Court was delivered : F The petitioners have filed these special leave petitions against the order of the Division Bench of the High Court of M.P. at Jabalpur made on August 14, 1996 in LPA No. 138/96. The learned single Judge as well as the Division Bench dismissed the writ petitions in which the petitioners had sought direction to the respondents to give the tender form on the G ground that they had satisfied Condition No. 2 of the Tender Conditions. Pursuant to the interim order passed by the High Court, the petitioner submitted their tender forms. But, at the final hearing, the writ petitions came to be dismissed. Thus, these special leave petitions. It is contended for the petitioners that they have past experience in H execution of the national highway. They have two contracts of more than 424 SHAPERS CON1N. (P) LTD. v. AIRPORT AUUIORITY OF INDIA 425 required amount specified in the tender conditions, 42% of Rs. 4 crores A and Rs. 6 crores respectively. The certificates issued by the competent engineers, namely Executive Engineer and the Superintending Engineer would show that the petitioners have been satisfactorily performing their duties in execution of the work. The petitioners, after securing the con­ tracts, have executed major part of the work within the scheduled time granted under. the contracts. Therefore, the failure to give tender form at B the inception and consideration thereof after the interim direction is violative of their fundamental right to compete in the tender for the further contract. The question is : whether the view taken by the High Court is wrong in law? Tender Condition No. 2 envisages as under: "The tenderer who wish to apply shall have satisfactorily completed at least two runway/ National highway, preferably rigid pavement works involving considerable earth filling each of value Rs. 400 lakhs or one work of Rs. 600 Ic.khs during the last five years and have annual turn over of Rs. 500 lakhs in each (1992-93, 1993-94 D & 1994-95) and should possess computerised hot mix plant and concrete batching plant for executing asphaltic and rigid pavement works." A reading of this condition would clearly indicate that the tenderers who wish to apply shall have satisfactorily completed at least two run- E way/National highway, preferably rigid pavement works involving consider- able earth filling, each valuing Rs. 400 lakhs and one work of Rs. 600 lakhs during the last five years and have annual turn over of Rs. 500 lakhs in each of the last three years {1992-93, 1993-94 and 1994-95). He should possess computerised hot mix plant and concrete batching plant for executing F asphaltic and rigid pavement works. It is true, as contended by the petitioners, that the Tender Condition would indicate that they had completed at least two runway/National highway, preferably rigid pavement works. He contends that the comple- tion of the work is different from tendering the contracts for execution of G the work. They had two contracts as envisaged thereunder; though they had not totally completed the same, major part of the work had been completed. Therefore, they have fulfilled the conditions prescribed there­ under. The petitioners, thereby, could not be denied of their right to compete in, apply for and be considered for assignment of the work under H 426 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R. A the tenders now in dispute. We find no force in the contention. The condition envisages that he shall have satisfactorily completed. The word 'completed' would indicate that as on the date of application for the tenders, he should have completed at least two runway/National high­ way works, preferably rigid pavement works involving considerable earth B filling. In other words, the completion of the work of at least two run- ' way/National highway is a pre-condition. On their own admission, they had not completed, though the major part of the work as professed by them is completed. Under these circumstances, the view taken by the High Court cannot be said to be unwarranted. The learned counsel placed strong reliance on the judgment of this Court in New H01izons Ltd. & 01:f. v. Union of India & Ors., [1995] 1 SCC 478, in particular, paragraphs, 21 and 22 in support thereof. This case relates to previous experience and the question therein was : whether the previous experience would be considered after submitting the tenders or D before submitting the tenders? This Court had held that the question would arise only after the submission of the tender. In support of consideration of the tender thereof, the previous experience would play an important role for awarding the -contract. In that case, this Court considered and held that at the inception, the tender forms cannot be refused on the ground that he had not proved the previous experience. That question has no relevance to the facts in these petitions. Und<:;r these circumstances, as stated earlier, the completion of the work of at least two runway/National highway works is a pre-condition for submitting the application. On their own admission, since the petitioners had not completed the works in hand, we cannot find any illegality in respondents not giving the tender forms nor in non-con­ sideration of their cases pursuant to the interim direction given by the High Court. ·The petitions are accordingly dismissed. G.N. Petitions dismissed.